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 nameand carrying on business in Hong Kong as HTSC)

(Stock Code: 6886)

RESULTS ANNOUNCEMENT FOR THE YEAR ENDED DECEMBER 31, 2020

The Board hereby announces the audited results of the Company and its subsidiaries for the year ended December 31, 2020. This announcement contains the full text of the annual results announcement of the Company for 2020, which is in compliance with the requirements of the Hong Kong Listing Rules for the information set out in the preliminary announcement of annual results.

PUBLISHMENT OF THE ANNUAL RESULTS ANNOUNCEMENT AND THE ANNUAL REPORT

This results announcement of the Company will be published on the websites of The Stock Exchange of Hong Kong Limited atwww.hkexnews.hkand of the Company at www.htsc.com.cn, respectively.

The annual report of the Company for 2020 will be (i) dispatched to the shareholders of H Shares; and (ii) published on the websites of the Company and The Stock Exchange of Hong Kong Limited on or before April 30, 2021.

DEFINITIONS

Unless the context otherwise requires, capitalized terms used in this announcement shall have the same meanings as those defined in the section headed "Definitions" in this announcement.

By order of the Board

Zhang Hui

Joint Company Secretary

Jiangsu, the PRC, March 23, 2021

As at the date of this announcement, the Board comprises Mr. Zhang Wei, Mr. Zhou Yi and Mr. Zhu Xuebo as executive Directors; Mr. Ding Feng, Mr. Chen Yongbing, Mr. Ke Xiang, Ms. Hu Xiao and Mr. Wang Tao as non-executive Directors; and Mr. Chen Chuanming, Mr. Lee Chi Ming, Ms. Liu Yan, Mr. Chen Zhibin and Mr. Wang Jianwen as independent non-executive Directors.

CONTENTS

ImportantNotice ........................................................... 3

Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

CEO'sLetter .............................................................. 11

CompanyProfile ........................................................... 15

SummaryoftheCompany'sBusiness ........................................... 27

Management Discussion and Analysis and Report of the Board . . . . . . . . . . . . . . . . . . . . . . . 40

MajorEvents .............................................................. 112

ChangesinOrdinarySharesandShareholders .................................... 149

Directors, Supervisors, Senior Management and Staff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169

CorporateGovernance ....................................................... 199

CorporateBonds ........................................................... 270

IndexofDocumentsforInspection ............................................. 282

Information Disclosure of Securities Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 283

AppendixIMainBusinessQualifications ........................................ 284

Appendix II List of Branch Offices and Securities Branches . . . . . . . . . . . . . . . . . . . . . . . . . 289

AppendixIIIInformationDisclosuresIndex ...................................... 309

Financial Report

IMPORTANT NOTICE

The Board of Directors, the Supervisory Committee, Directors, Supervisors and senior management of the Company undertake that the information in this annual report is true, accurate and complete and contains no false record, misleading statement or material omission, and assume individual and joint legal liabilities to the information in this report.

This report was considered and approved at the fourteenth meeting of the fifth session of the Board of the Company.

Director(s) absent from the meeting

Position of absentName of absentReasons for absenceName of proxy

Director

Director

Director Director

Ke Xiang Wang TaoBusiness engagement Business engagement

Chen Yongbing

Zhang Wei

None of the Directors and Supervisors had objections towards this report.

The annual financial report prepared in accordance with the CASBE and the IFRS was audited by KPMG Huazhen LLP and KPMG, respectively, which issued a standard unqualified audit report to the Company.

Zhang Wei, the person in charge of the Company, Jiao Xiaoning, the person in charge of accounting, and Fei Lei, the officer in charge of the accounting office of the Company (head of accounting department), hereby warrant and guarantee that the financial report contained in the annual report is true, accurate and complete.

The profit distribution proposal or the reserve capitalization proposal for the Reporting Period considered by the Board.

According to the 2020 annual financial statements of the Company, the net profit of the Parent Company for 2020 reached RMB5,923,763,424.27. According to relevant provisions of the Company Law, Securities Law, Financial Rules for Financial Enterprises ( ږፄΆุৌਕ஝ۆ') and the Articles of Association of the Company, the Company had appropriated 10% statutory surplus reserve, 10% general risk reserve and 10% trading risk reserve of RMB1,777,129,027.29 in total, after which the profit available for distribution for the year was RMB4,146,634,396.98.

Plus the balance of undistributed profit in previous years, the accumulated profit available for distribution to investors as at the end of 2020 was RMB17,604,448,446.99.

According to relevant requirements of the CSRC, gains arising from the fair value changes in distributable profit of securities companies shall not be used for cash distribution to shareholders. As at the end of December 2020, the accumulated fair value changes in distributable profit of the Parent Company were RMB2,807,531,731.31, after deduction of which as required, the profit of the Parent Company available for distribution to investors in cash amounted to RMB14,796,916,715.68.

After comprehensive consideration of factors such as the interests of shareholders and the development of the Company, the 2020 profit distribution proposal of the Company is as follows:

  • 1. The Company will distribute cash dividend of RMB4.00 (tax inclusive) per 10 shares based on the Company's existing total share capital of 9,076,650,000 shares after deducting the A Shares deposited in the special account for securities repurchase and temporarily not used in the equity incentive scheme (the number of shares under the equity incentive scheme is calculated at the maximum number of restricted shares under the equity incentive scheme as considered and approved at the 2021 first extraordinary general meeting of the Company), with the total cash dividend of RMB3,612,609,402.00 (tax inclusive). The actual total amount of payment will be calculated based on the total number of shares that will be entitled to the dividend distribution on the record date for the implementation of the distribution plan by the Company. The remaining profit available for distribution to investors will be carried forward to the next year.

  • 2. Cash dividend is denominated and declared in RMB and paid to holders of A Shares (including the depositary of GDRs) and the investors of Southbound Trading in RMB and to holders of H Shares (excluding the investors of Southbound Trading) in HKD. The actual distribution amount in HKD shall be calculated at the rate of average basic exchange rate of RMB against HKD issued by the PBOC five business days prior to the date of the 2020 Annual General Meeting of the Company.

Forward-looking statements including future plans and development strategies involved in this annual report do not constitute the Company's substantive commitments to investors.

The investors are advised to pay attention to investment risks.

There is no non-operating misappropriation of funds of the Company by any controlling shareholders and their related parties during the Reporting Period.

The Company has not provided any external guarantees in violation of the stipulated decision-making procedures during the Reporting Period.

During the Reporting Period, there exits no such circumstance that more than half of the Directors could not guarantee the authenticity, accuracy and integrity of the annual report disclosed by the Company.

The report is prepared by the Company in both Chinese and English. In the event of any inconsistency, the Chinese version shall prevail.

Warning on Major Risks

General economic and political conditions such as macroeconomy and monetary policies, laws and regulations influencing financial and securities industries, rising and falling trends in commercial and financial industries, inflation, exchange rate fluctuations, availability of long and short-term market capital sources, funds raising costs and interest rate levels and fluctuations may have an impact on the Company's business. Besides, like other companies in the securities industry, inherent risks in the securities market, such as market volatility and trading volume, may also affect the Company's business. The Company cannot guarantee the sustainability of favorable politics, economy and market conditions.

Main risks in business operation faced by the Company include: policy risks from national macro-control measures, changes in laws, regulations, relevant regulatory policies and transaction rules in securities industry, which will adversely influence the business of securities companies; compliance risks from business management or professional activities violating laws, regulations or codes, which cause the Company being punished by laws, being taken regulatory measures, suffering from property loss or reputation loss; legal risks from failure to abide by provisions and requirements in laws and regulations, which make the Company face litigations, compensation, and fines and suffer from loss; market risks from fluctuations in market prices (interest rates, exchange rates, stock prices, commodity prices, etc.), which make the Company suffer from loss in assets; credit risks from default of products or debt issuers or counterparties (customers), which make the Company suffer from loss; liquidity risks from inability to obtain sufficient funds at reasonable cost to pay matured debts, fulfil other payment obligations and satisfy the capital needs for normal business; information and technology risks such as various technical failure or data leakage of the Company's information system from internal and external reasons, which consequently cause loss as the information system is impossible to guarantee the stability, high-efficiency and safety of transactions and business management in business realization, response speed, processing capacity, data encryption and so on; operational risks from incomplete or problematic internal procedures, personnel or systems or external incidents, which cause loss; reputation risks from business operation, management and other behaviors or external incidents which lead to negative judgement on the Company from relevant media; money laundering risk from the utilization of the Company's products or services by criminals to engage in money laundering activities which lead to negative effects on the Company's legal, reputation, compliance, operation and other aspects. Besides, with the advancement of the Company's internationalization strategy, the Company's business will enter the United States, the United Kingdom, Hong Kong and other countries and regions, and the Company will face more complex market environment and regulatory requirements.

DEFINITIONS

In this report, unless the context otherwise requires, the following terms and expressions have the meanings set forth below:

DEFINITIONS OF CAPITALIZED TERMS AND EXPRESSIONS

A Share(s)

domestic share(s) in the share capital of the Company with

nominal value of RMB1.00 each, which are listed on the Shanghai

Stock Exchange and traded in RMB

AoP

Assets on Platform

APP

application

Articles of Association

the articles of association of the Company, as amended,

supplemented or otherwise modified from time to time

AssetMark

AssetMark Financial Holdings, Inc.

Bank of Jiangsu

Bank of Jiangsu Co., Ltd. ϪᘽვБٰ΅Ϟࠢʮ̡

Board or Board of Directors

the board of Directors of the Company

CAGR

compound annual growth rate

CASBE

the China Accounting Standards for Business Enterprises€ʕ਷Ά

ุึࠇ๟ۆ

China or the PRC

the People's Republic of China, excluding, for the purpose of this

annual report, Hong Kong, Macau Special Administrative Region

and Taiwan

China Southern Asset

China Southern Asset Management Co., Ltd. ی˙ਿږ၍ଣٰ΅

Management

Ϟࠢʮ̡

Communications Holding

Jiangsu Communications Holding Co., Ltd. ϪᘽʹஷછٰϞࠢʮ

̡

Company Law

Company Law of the People's Republic of China ( ʕശɛ͏΍ձ

਷ʮ̡ج'), as amended from time to time

CSI 300 Index

an index consisting of 300 index sample stocks which are most

representative selected by the Shanghai Stock Exchange and

Shenzhen Stock Exchange jointly with the scale and liquidity as

the basic standards

CSRC

the China Securities Regulatory Commission€ʕ਷ᗇՎ္ຖ၍ଣ

։ࡰึ

Director(s)

director(s) of the Company

FICC

fixed income, currency and commodity

6

Fintech

financial technology

Futures IB Business

a business activity in which securities firms, as commissioned by futures companies, introduce clients to participate in futures transactions of futures companies and provide other related services

GDR

global depository receipt

Govtor Capital

Group, Our Group, we or us

Govtor Capital Group Co., Ltd. Ϫᘽ৷߅Ҧҳ༟ණྠϞࠢʮ̡ the Company and its subsidiaries, and their respective predecessors

Guoxin Group

H Share(s)

Jiangsu Guoxin Investment Group Limited€Ϫᘽ޲਷ڦණྠϞ ࠢʮ̡dformerly known as Jiangsu Guoxin Asset Management

Group Limited€Ϫᘽ޲਷ڦ༟ପ၍ଣණྠϞࠢʮ̡

foreign share(s) in the share capital of the Company with nominal value of RMB1.00 each, which are listed on the Hong Kong Stock Exchange and traded in HK dollars

HKEX

HK$, HKD or HK dollars

Hong Kong Exchanges and Clearing Limited€࠰ಥʹ׸ʿഐၑה

Ϟࠢʮ̡

the lawful currency of Hong Kong

Hong Kong

the Hong Kong Special Administrative Region of the PRC

Hong Kong Stock Exchange

The Stock Exchange of Hong Kong Limited€࠰ಥᑌΥʹ׸הϞ ࠢʮ̡

HTSC, Huatai Securities, our

Company, Company or Parent Company

a joint stock company incorporated in the PRC with limited liability under the corporate name 華泰證券股份有限ʮ̡ (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 registered non-Hong Kong company under Part 16 of the Companies Ordinance under the Chinese approved name of "ശइʬɞɞʬٰ΅Ϟࠢʮ̡" and English name of "Huatai Securities Co., Ltd."; the H Shares of which have been listed on the main board of Hong Kong Stock Exchange since June 1, 2015 (Stock Code: 6886); the A Shares of which have been listed on SSE since February 26, 2010 (Stock Code: 601688); and the global depository receipts of which have been listed on the London Stock Exchange plc since June 2019 (Symbol: HTSC), unless the context otherwise requires, including its predecessor

Huatai Asset ManagementHuatai Securities (Shanghai) Asset Management Co., Ltd. ശइ ᗇՎ€ɪऎ༟ପ၍ଣϞࠢʮ̡, a wholly-owned subsidiary of the Company

Huatai Financial Holdings

Huatai Financial Holdings (Hong Kong) Limited€ശइږፄ

(Hong Kong)

છٰ€࠰ಥϞࠢʮ̡, a wholly-owned subsidiary of Huatai

International

Huatai Futures

Huatai Futures Co., Ltd. ശइಂ஬Ϟࠢʮ̡, a holding

subsidiary of the Company

Huatai Innovative Investment

Huatai Innovative Investment Co., Ltd. ശइ௴อҳ༟Ϟࠢʮ

̡, a wholly-owned subsidiary of the Company

Huatai International

Huatai International Financial Holdings Company Limited€ശ

इ਷ყږፄછٰϞࠢʮ̡, a wholly-owned subsidiary of the

Company

Huatai-PineBridge

Huatai-PineBridge Fund Management Co., Ltd. ശइݡ๿ਿږ၍

ଣϞࠢʮ̡

Huatai Purple Gold Investment

Huatai Purple Gold Investment Co., Ltd. ശइഓږҳ༟Ϟࠢப΂

ʮ̡, a wholly-owned subsidiary of the Company

Huatai Securities (USA)

Huatai Securities (USA), Inc. ശइᗇՎ€ߕ਷Ϟࠢʮ̡, a

wholly-owned subsidiary of Huatai International

Huatai United Securities

Huatai United Securities Co., Ltd. ശइᑌΥᗇՎϞࠢப΂ʮ̡,

a holding subsidiary of the Company

IFRS

the International Financial Reporting Standards

IPO

the initial public offering

IT

information technology

Jiangsu Equity Exchange

Jiangsu Equity Exchange Co., Ltd. Ϫᘽٰᛆʹ׸ʕːϞࠢப΂

ʮ̡, a holding subsidiary of the Company

Jiangsu SASAC

State-owned Assets Supervision and Administration Commission

of Jiangsu Provincial Government Ϫᘽ޲ִ݁਷Ϟ༟ପ္ຖ၍

ଣ։ࡰึ

Jiangsu Securities

Jiangsu Securities Regulatory Bureau of the CSRC€ʕ਷ᗇ္ึ

Regulatory Bureau

Ϫᘽ္၍҅

Listing Rules or Hong

the Rules Governing the Listing of Securities on The Stock

Kong Listing Rules

Exchange of Hong Kong Limited (as amended, supplemented or

otherwise modified from time to time)

London Stock Exchange

the London Stock Exchange plc€ࡐ౱ᗇՎʹ׸ה

or LSE

Model Code

the Model Code for Securities Transactions by Directors of Listed

Issuers as set out in Appendix 10 to the Hong Kong Listing Rules

MSCI

Morgan Stanley Capital International Index

NEEQ

the National Equities Exchange and Quotations for medium and

small-sized enterprises

NMAU

the number of monthly active users

OTC

over-the-counter

PBOC

the People's Bank of China

QDII

qualified domestic institutional investor

QFII

qualified foreign institutional investor

Reporting Period

the year ended December 31, 2020

Securities and Futures

the Securities and Futures Ordinance (Chapter 571 of the Laws

Ordinance or SFO

of Hong Kong), as amended, supplemented or otherwise modified

from time to time

SFC

the Securities and Futures Commission of Hong Kong€࠰ಥᗇՎ

ʿಂ஬ԫਕ္࿀։ࡰึ

Shanghai Brilliance

Shanghai Brilliance Credit Rating & Investors Service Co., Ltd.

€ɪऎอ˰ߏ༟ڦ൙Пҳ༟؂ਕϞࠢʮ̡

Shanghai Clearing House

the Interbank Market Clearing House Co., Ltd. ვБග̹ఙ૶ၑ

הٰ΅Ϟࠢʮ̡

Shanghai Stock Exchange or

the Shanghai Stock Exchange€ɪऎᗇՎʹ׸ה

SSE

Shenzhen Stock Exchange

the Shenzhen Stock Exchange€ଉέᗇՎʹ׸ה

9

SSE 50 Index

an index consisting of 50 index sample stocks with large scale

and good liquidity, which are most representative in the securities

market of Shanghai selected by the Shanghai Stock Exchange

SSF

the National Council for Social Security Fund of the PRC€Ό਷

ٟึڭღਿږଣԫึ

STAR Market

science and technology innovation board of SSE

Supervisor(s)

supervisor(s) of the Company

Supervisory Committee

the supervisory committee of the Company

TAMP

Turn-key Asset Management Platform, a technological platform

providing services such as investment products and strategies,

assets portfolio management, customer relationship management

and asset custody, as well as corporate operation

USD or US dollar

the lawful currency of the United States of America

VAR

value at risk

%

per cent.

In the 2020 Annual Report, any discrepancies between the total shown and the sum of the amounts listed are due to rounding; and any discrepancies in the change percentages of an item are due to the difference of currency unit of the item.

CEO'S LETTER

Dear Shareholders:

The past year was difficult and extraordinary. The COVID-19 epidemic brought far-reaching effects on the economic operation and social communications, but new opportunities were under breeding in the accelerated transformation. In particular, China's economy recovered first and the capital market has become a core hub for smoothing "dual circulation" in its 30th anniversary of establishment, leading a new round of reform and opening-up.

We have been fortunate to grow and develop with China's capital market. This year also marks the 30th anniversary of our establishment. We have been advancing with the trends of times, braving in strategic pilots and reshaping ourselves fundamentally and seized strategic opportunities such as the wave of mobile internet and digitalization and the reform and opening-up of the capital market, achieving the leapfrog development from a local securities firm to an international securities group listed in Shanghai, Hong Kong and London and becoming a leading securities firm with distinctive technological features.

The technology-empowered "two-pronged" development strategy of wealth management and institutional services, which was officially determined two years ago, has become a core driving force for reshaping our business systems and operation models and the business model, innovation led by digital transformation started to release value. As of the end of 2020, total assets of the Group amounted to RMB716,751 million, representing a year-on-year increase of 27.49%, and the net assets reached RMB132,312 million, representing a year-on-year increase of 5.30%; in 2020, the Group recorded revenue and other income of RMB40,534 million, representing a year-on-year increase of 24.96% and a profit for the year attributable to shareholders of the Company of RMB10,822 million, representing a year-on-year increase of 20.22%.

Standing at the new starting point of the 30th anniversary, we are firmly convinced that technology is a key variant in breaking traditions and triggering the reform of business models. We will continue to deepen the technology-empowered "two-pronged" strategy, refine the full-service chain system with the platform-based and ecological development philosophy and build unique brand and competitiveness.

I. Customers are the origin of all thoughts and acts

Looking back, we have prospectively initiated the internet-based strategy and consistently implemented it in the digital transformation. In essence, we always consider customers as the origin of thoughts and acts.

For retail customers, those born in the 1980s and 1990s and other new generations are growing into core forces in investment and wealth management. They have strong self-awareness and distinctive individualities and are willing to act with "confidants" and pay for what they really love. Accordingly, leveraging on the integration of "ZhangLe Fortune Path" (ပᆀৌబஷ), "ZhangLe Global" (ပᆀΌଢஷ) APPs and the cloud platform for investment advisory services, we linked domestic and overseas businesses. While acquiring customers massively, we paid more attention to customer operation and focused on the provision of personalized services to make customers feel that they are always "understood" to win their loyalty and become their "confidants" on investment and wealth management. We launched the fund investment advisory business to speed up in conversion towards the perspective of buyers and provide personalized asset allocation services for the benefits of customers. We have more than 17 million customers with customer assets of nearly RMB4.8 trillion. We can only continuously advance towards the target of a national wealth management brand through the virtuous cycle of "flows" and "retention".

For institutional customers, as an economy with a super large scale, China provides a broad platform for the rising of new economies. Capitals facilitate outstanding enterprises in in-depth development and breed industrial leaders in the future. With the acceleration in market differentiation, the capability of leading institutes to pool resources will be significantly enhanced, which will place higher expectations on financial services. We deeply feel that only by leveraging on our comprehensive capability in industrial accumulation, plan innovation, integrated services, platform-based supports and global execution can we help customers grasp industrial trends and seize market opportunities with cutting-edge choices in line with their growth cycle. We have taken root in big health, TMT, big consumption and other new economic industries for years and established leading industrial ecosystems through the high-efficient integration of industrial researches, investment banking, equity investment, corporate finance, wealth management and other domestic and overseas resources. Based on our unique advantages in M&As and reorganizations, GDRs and other industries, we have established long-term partnership with various outstanding enterprises. We have developed various benchmark projects in the market and fostered various growth enterprises with high quality.

II. Platform-based development accelerates innovation in business models

We have been exploring how to establish a brand new business model with digital thoughts and create differentiated value for more customers in perceiving and understanding customers. We gradually have a clear direction through practice: integrating full-business chain resources based on the integration of advanced technology platforms and efficiently empowering customers driven by data; achieving ecological development through open platforms and achieving mutual accomplishment with partners in diversified financial scenarios.

Firstly, the productivity of platforms can only be released through accumulating and sharing digital grassroots capabilities. In recent years, we have continuously achieved breakthroughs in AI empowerment, data middle office, speed trading and the construction of credit research platforms. In particular, we have deeply applied natural language processing, knowledge graph, machine learning and other AI technologies in research, investment banking and investment trading and other business sectors and consistently improved the operation efficiency under core financial scenarios. The data middle office with the integration of data asset management, data development, financial computing and analysis and modeling facilitated the business transformation and innovation driven by data and algorithms. Under the support of the fundamental capabilities of such platforms, the "Xing Zhi" (Бٝ) APP developed with our focus for institutional customer services achieved rapid iteration. Through various online businesses, we accumulated customer data from multi-dimensions and spatially explored customer demands based on the data to promote the transformation of service models.

Secondly, the business logic in the digital times has evolved from competition to co-existence. We believe that only joint building and sharing based on open platforms can break restrictions on the closed-loop business development and only the participation of various parties can maximize the value of platforms and network and improve the efficiency in resources allocation. We officially released the first open-ended securities lending and trading platform in the entire market in the middle of last year, which efficiently links suppliers of securities and demanders, provides all-round and one-stop services for platform participants and established outstanding competitive advantages in the strategic business of securities lending. Meanwhile, the integrated service platform for the PB business and the big trading platform for the FICC business are exploring new business models with all-win results through opening and development.

Certainly, an open platform requires the integration of forces of more outstanding fintech partners to extend the resources and growth boundaries of each other. We are building an technological ecosystem with a new industrial investment pattern of "capital participation + business cooperation + strategic synergy" and carrying out deployments on full categories and scenarios covering from the new-generation IT infrastructure to digital platform instruments and front-end applications with diversified partners. We wish to integrate technical innovation, scenario-based applications and ecological cooperation and build robust digital products and solutions.

III. Empowerment organizations support the sustainable development

The final implementation of the reform of business models depends on the support of organizational reform. Based on the standard of whether it is convenient for customers, we are speeding up the transformation from a functional organization to an empowerment organization with linkage and sharing, coordinated and joint creation and prompt and efficient services.

We fully utilize technology to help employees expand career boundaries, release them from low-value and repeated work and focus on high-value and individualized services and links to consistently enhance their professional capabilities. We are also leveraging on platforms to break organizational barriers and continuously stimulate the vitality of market-based organizations through the implementation of the professional manager system and equity incentive plans for core employees. Nowadays, more and more young people with individuality, initiatives and innovation have joined us and more and more employees born in 1980s and 1990s have grown as business cadres. Under the support of platforms and systems, it has become a common sense to keep open, inclusive, respectful and diversified thoughts within the Company. We hope that employees can not only devote to their work but also achieve the sustainable development of themselves under such an organization and atmosphere.

We also encourage employees to contribute to social and community development. We have been consistently supporting the sustainable development of society and nature for years. In particular, we focus on the ecological protection along the Yangtze River, rural education and other public welfare projects and inject responsibility and undertaking in the core spirit of organizations. We have established and improved the ESG (environmental, social and governance) governance structure and the implementation systems at the corporate level and have included the ESG into the scope of due diligence. We actively practice responsible investment, explore ecological and environmental access and other cutting-edge issues in ESG investment to promote financial input in charity with professional capabilities.

Over the past 30 years, the strong sense of mission towards customers, shareholders and the society has been stimulating us to rush out of the comfort zone and explore cutting-edge areas. As China embarks on a new journey in modernization construction and the capital market opens up to reform with more firmly steps, more and more new things and areas are emerging in the unprecedented vast field. The future is still full of unknowns, but on the other side of that unknowns are infinite possibilities. Focusing on serving customers as the origin and continuously releasing the power of technology, we expect to write more inspiring tales in the following decade.

CEO: Zhou Yi

March 23, 2021

COMPANY PROFILE

I.

COMPANY INFORMATION

Chinese name of the Company

華泰證券股份有限ʮ̡

Abbreviation of Chinese name of the Company

ശइᗇՎ

English name of the Company

HUATAI SECURITIES CO., LTD.

Abbreviation of English name of the Company

HTSC

Legal representative of the Company

Zhang Wei

Chief Executive Officer and chairman of the

Zhou Yi

Executive Committee of the Company

Authorized representatives of the Company

Zhou Yi, Zhang Hui

Registered capital and net capital of the Company

Unit: Yuan Currency: RMB

As at the end of the

As at the end of the

Reporting Period

previous year

Registered capital

9,076,650,000.00

9,076,650,000.00

Net capital

67,909,921,047.21

64,580,658,850.91

Note: The net capital as at the end of the previous year has been restated according to the Calculation Standard for Risk Control Indicators of Securities Companies (Announcement [2020] No. 10 of the CSRC) ( ᗇՎ ʮ̡ࠬᎈછՓܸᅺࠇၑᅺ๟஝֛'€ᗇ္ึʮѓ[2020]10).

Qualifications of each of the business lines of the Company

According to the business license issued by Jiangsu Provincial Market Regulation Administration, the business scope of the Company includes: securities brokerage, proprietary trading of securities, securities underwriting (limited to underwriting of government bonds, debt financing instruments of non-financial enterprises and financial bonds (including policy financial bonds) only), securities investment consulting, intermediary introduction business for futures companies, margin financing and securities lending business, agency sale of financial products, agency sale of securities investment funds, custodian for securities investment funds, agency services for gold and other precious metals spot contracts and proprietary business for spot gold contracts, stock options market making business, other business activities approved by the CSRC. (Projects that need to be approved by law shall be carried out upon approval by relevant authorities)

Please refer to "Appendix I: Main Business Qualifications" in this report for the main business qualifications of the Company.

II.

CONTACT

Secretary of the Board

Name

Zhang Hui

Address

11/F, Building 1, No. 228 Middle Jiangdong Road, Nanjing,

Jiangsu Province, the PRC

Tel. No.

025-83387793, 83387780, 83389157

Fax

025-83387784

Email

zhanghui@htsc.com

During the Reporting Period, Ms. Qiao Fei resigned from the Company's securities affairs representative due to personal reasons. The Board of Directors of the Company will appoint relevant persons who meet the qualifications to serve as the Company's securities affairs representative in accordance with relevant regulations.

Name

Address

III. BASIC INFORMATION

Registered address of the

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

Company

the PRC

Postal codes of registered

210019

address of the Company

Office address of the Company

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

the PRC

Postal codes of office address

210019

of the Company

Principal place of business in

Room 4201, 42/F, The Center, 99 Queen's Road Central,

Hong Kong

Hong Kong

Company website

http://www.htsc.com.cn

Email

boardoffice@htsc.com

Main exchange

025-83389999

Customer service hotline

95597 or 4008895597

Company fax

025-83387784

Business License Unified

91320000704041011J

Social Credit Code

Brief of Index inclusion

SSE 50, CSI 300, MSCI China Share Index, HSCASUSB

Index of changes during

No changes during the Reporting Period

the Reporting Period

16

Joint company secretary

Joint company secretary

Zhang Hui

Kwong Yin Ping Yvonne

11/F, Building 1, No. 228

40th Floor, Dah Sing

Middle Jiangdong Road,

Financial Centre,

Nanjing, Jiangsu Province,

No. 248 Queen's Road East,

the PRC

Wanchai, Hong Kong

IV. INFORMATION DISCLOSURE AND LOCATION FOR INSPECTION OF

DOCUMENTS

Name of newspapers selected

by the Company for

information disclosure Website designated by the

CSRC for publication of

annual report

Website designated by the

Hong Kong Stock Exchange

for publication of

annual report

Website designated by the

London Stock Exchange

for publication of

annual report

Location for inspection of

annual report of the

Company (A Share) Location for inspection of

annual report of the

Company (H Share) Index of changes during the

Reporting Period

China Securities Journal, Shanghai Securities News,

Securities Times, Securities Dailyhttp://www.sse.com.cn

http://www.hkexnews.hkhttps://www.londonstockexchange.comNo. 228 Middle Jiangdong Road, Nanjing, Jiangsu Province, the PRC; Shanghai Stock Exchange

No. 228 Middle Jiangdong Road, Nanjing, Jiangsu Province, the PRC; Room 4201, 42/F, The Center, 99 Queen's Road

Central, Hong Kong

No changes during the Reporting Period

V.

SHARES/DEPOSITORY RECEIPTS OF THE COMPANY

Type of

shares/depository

Stock exchange for

receipts

listing Stock name

Stock code

A Share

Shanghai Stock Exchange ശइᗇՎ

601688

H Share

6886

GDR

Hong Kong Stock Exchange

London Stock Exchange

* Stock name before change: Nil

HTSC

Huatai Securities Co., Ltd. HTSC

VI. OTHER INFORMATION OF THE COMPANY

(I) Historical development of the Company, mainly including the reorganization and capital increases in the previous years

The predecessor of the Company was Jiangsu Securities Company€Ϫᘽ޲ᗇՎʮ̡, which was established in December 1990 as approved by the headquarters of the PBOC, obtained the business license on April 9, 1991, and officially opened for business on May 26, 1991. In 1994, the Economic Reform Commission of Jiangsu Province approved the conversion of the Company to be a directional stock raising company. In June 1997, the Company changed its name to "ϪᘽᗇՎϞࠢப΂ʮ̡" (Jiangsu Securities Co., Ltd.). In March 1999, the Company changed its name to "華泰證券有限 責任公司" (Huatai Securities Limited Liability Company), and approved by the CSRC, the Company was converted into "華泰證券股份有限ʮ̡" (Huatai Securities Co., Ltd.) in its entirety on November 29, 2007. On December 7, 2007, the Company completed the business registration for such changes. In July 2009, the Company acquired Xintai Securities Co., Ltd. ڦइᗇՎϞࠢப΂ʮ̡. In February 2010, the Company was successfully listed on the Shanghai Stock Exchange. In June 2015, the Company was listed on the Main Board of the Hong Kong Stock Exchange. In June 2019, the GDR issued by the Company was listed and traded on the Main Market of the London Stock Exchange.

Major capital increases of the Company:

When it was established on April 9, 1991, the registered capital of the Company was RMB10,000,000.

The registered capital of the Company increased to RMB202,000,000 in June 1994.

The registered capital of the Company increased to RMB404,000,000 in June 1997.

The registered capital of the Company increased to RMB828,000,000 in May 1998.

The registered capital of the Company increased to RMB850,320,000 in December 1999.

The registered capital of the Company increased to RMB2,200,000,000 in April 2001.

The registered capital of the Company increased to RMB4,500,000,000 in November 2007.

The registered capital of the Company increased to RMB4,815,438,725 on July 30, 2009.

In February 2010, the Company completed its initial public offering of 784,561,275 RMB-denominated ordinary shares (A Shares) on the Shanghai Stock Exchange, after which the Company's registered capital was RMB5,600,000,000.

In June 2015, the Company completed its listing on the Main Board of the Hong Kong Stock Exchange and commenced trading. After the exercise of the over-allotment option, the Company issued 1,562,768,800 H Shares in total, and the total share capital of the Company changed to RMB7,162,768,800. Due to the issuance and listing of H Shares, the relevant state-owned shareholders transferred 156,276,880 state-owned shares (A Shares) of the Company held by them to SSF in the form of H Shares, on the basis of 10% of the number of H Shares issued this time. The changes in share capital structure of the Company were as follows: 5,443,723,120 A Shares, which accounted for 76% of the total number of shares; and 1,719,045,680 H Shares, which accounted for 24% of the total number of shares.

In August 2018, the Company completed the non-public issuance of 1,088,731,200 RMB-denominated ordinary shares (A Shares) by way of "Non-Public Issuance to Specific Investors", after which the Company's registered capital was RMB8,251,500,000. The changes in share capital structure of the Company were as follows: 6,532,454,320 A Shares, which accounted for 79% of the total number of shares; and 1,719,045,680 H Shares, which accounted for 21% of the total number of shares.

In June 2019, the GDR issued by the Company was listed and traded on the Main Market of the London Stock Exchange. After the exercise of the over-allotment option, the Company issued 82,515,000 GDR in total, representing the underlying securities of 825,150,000 A Shares, after which the Company's registered capital was RMB9,076,650,000. The changes in share capital structure of the Company were as follows: 7,357,604,320 A Shares, which accounted for 81% of the total number of shares; and 1,719,045,680 H Shares, which accounted for 19% of the total number of shares.

(II) Organization Structure of the Company

Organization Structure of HTSC

Of ce of the Supervisory

-CommitteeSupervisory Committee

General Meeting

Compliance and Risk

Management Committee

Audit CommitteeOf ce of the Board of DirectorsBoard of Directors

Development Strategy Committee

Nomination Committee

Senior Management

Remuneration and Appraisal Committee

Branches

Network Finance Department

Department

Wealth Management

Department

Financial Products

Research Institute

Asset Custody Department

Debt Financing Department

Department

Sales and Trading

Department

Finance and Securities

Department

Securities Investment

Department

Financial Innovation

Fixed Income Department

Operating Center

DepartmentInformation Technology

DepartmentCapital Operation

DepartmentDigital Operation

DepartmentRisk Management

Department

Compliance and Legal

Inspection Department

DepartmentHuman Resources

Department

Planning and Finance

General Of ce

Department

Strategy and Development

Development

Party-mass WorkGeneral Affairs DepartmentSecurities Branches

Wholly-owned

SubsidiariesHolding SubsidiariesParticipating Subsidiaries

Management Co., Ltd.

Huatai Securities (Shanghai) Asset

Company LimitedHuatai International Financial HoldingsHuatai Purple Gold Investment Co., Ltd.

Huatai Innovation Investment Co., Ltd.

Huatai United Securities Co., Ltd.

Huatai Futures Co., Ltd.

Jiangsu Equity Exchange Co., Ltd.

China Southern Asset Management Co., Ltd.

Co., Ltd.

Huatai-PineBridge Fund Management

Bank of Jiangsu Co., Ltd.

E-Capital Transfer Co., Ltd.

(III) Number and Distribution of Securities Branches and Other Branches of the

Company

As of the end of the Reporting Period, the Company has 28 branch offices and 243 securities branches. For details of the number and distribution of branch offices and securities branches of the Company, please refer to "Appendix II: List of Branch Offices and Securities Branches" in this report.

Provinces,

Number ofProvinces,

Number ofProvinces,

Number ofMunicipalities and SecuritiesMunicipalities and SecuritiesMunicipalities and SecuritiesRegions

BranchesRegions

BranchesRegions

Branches

Anhui Province

5

Beijing

6

Inner Mongolia

3

Autonomous RegionHebei Province Guangxi Zhuang

1 2

Fujian Province Hainan Province

4 2

Guangdong Province 23

Shanxi Province 1

Autonomous

Region

Henan Province

Hubei Province

3 29

Heilongjiang Province Hunan Province

5 3

Jilin Province 3

Jiangxi Province 2

Provinces,

Number of

Provinces,

Number of

Provinces,

Number of

Municipalities and

Securities

Municipalities and

Securities

Municipalities and

Securities

Regions

Branches

Regions

Branches

Regions

Branches

Jiangsu Province

95

Liaoning Province

7

Shandong Province

7

Shanghai

15

Sichuan Province

7

Guizhou Province

1

Chongqing

1

Tianjin

4

Gansu Province

1

Shaanxi Province

2

Qinghai Province

1

Xinjiang Uygur

1

Autonomous

Region

Ningxia Hui

1

Zhejiang Province

8

Autonomous

Region

VII. OTHER INFORMATION

(I)Accounting Firms

Accounting firm engaged by the Company (domestic)NameOffice addressName of the signatory accountant

KPMG Huazhen LLP

8/F, KPMG Tower, Oriental Plaza, 1 East Chang'an Avenue, Dongcheng District, Beijing, the PRC

Cheng Hailiang, Qian RuwenAccounting firm engaged by the Company (Hong Kong)

Name

Office address

Name of the signatory accountant

KPMG

Registered PIE Auditor under the Hong Kong Financial Reporting Council Ordinance

8th Floor, Prince's Building, 10 Chater Road, Central, Hong Kong

Lee Lok Man

Accounting firm engaged by the Company (United Kingdom)

Name

Office addressName of the signatory accountant

KPMG Huazhen LLP

8/F, KPMG Tower, Oriental Plaza, 1 East Chang'an Avenue, Dongcheng District, Beijing, the PRC

Cheng Hailiang

(II) Legal Advisors

Legal advisor engaged

by the Company

(domestic)

Name

Office addressKing & Wood Mallesons

18th Floor, East Tower, World Financial Center, No. 1, Middle East 3rd Ring Road, Chaoyang District, Beijing, the PRC

Legal advisor engaged by the Company (overseas)

(III) Share registrars

Share registrar for A

Share

Name

Office addressNameOffice address

Clifford Chance

27/F, Jardine House 1 Connaught Place, Central, Hong KongChina Securities Depository and Clearing Corporation Limited, Shanghai Branch

No. 188 Yanggao South Road, Pudong New Area, Shanghai, the PRC

Share registrar for H

Share

Name

Office address

Computershare Hong Kong Investor Services Limited

17M Floor, Hopewell Center, 183 Queen's Road East,Wanchai, Hong Kong

VIII.KEY ACCOUNTING DATA AND FINANCIAL INDICATORS

(I)Key Accounting Data and Financial Indicators for the Past Three Years

Unit: Thousand YuanCurrency: RMB

Increase/

Total amount of other comprehensive income after tax this year

Profit of this year-attributable to shareholders of the Company Net cash (used in)/generated from operating activities

Total revenue and other gains Profit before income tax

Item

2020

2019

decrease (%)

2018

40,534,436

32,436,781

24.96

24,506,734

13,504,376

11,585,965

16.56

6,448,671

10,822,497

9,001,644

20.23

5,032,738

(13,868,924)

(3,594,637)

285.82

28,457,782

(539,317)

634,281

(185.03)

(549,839)

Unit: Thousand YuanCurrency: RMB

At the end of 2020

At the end of 2019

Increase/ decrease

Item

(%)At the end of 2018

  • Total assets 716,751,235 562,180,638

  • Total liabilities 584,439,200 436,525,930

    Total equity attributable to shareholders of the

  • Company 129,071,500 122,537,479

  • Total equities 132,312,035 125,654,708

Total share capital (shares)

Key financial indicators

Key financial indicators

9,076,650,000 9,076,650,000

  • 27.49 368,665,874

  • 33.88 263,916,270

  • 5.33 103,393,577

  • 5.30 104,749,604 - 8,251,500,000

Increase/ decrease

2020

2019

(%) 2018

Basic earnings per share (RMB/share)

Diluted earnings per share (RMB/share)

ROE (%)

Debt-to-assets ratio (%)Net assets attributable to the Company's shareholders per share (RMB/share)

1.20 1.19 8.61

1.04 1.03

15.38 0.66

15.53 0.66

7.94 Increase 5.32 of 0.67 percentage point

77.20

73.40 Increase 66.12 of 3.80 percentage points

14.22

13.50

5.33 12.53

Note: Debt-to-assets ratio = (total liabilities-accounts payable to brokerage clients)/(total assets-accounts payable to brokerage clients)

Net Capital of the Parent Company and Risk Control Indexes

Unit: Yuan Currency: RMB

As of the end of the

As of the end of the

Item

Reporting Period

previous year

Net capital

67,909,921,047.21

64,580,658,850.91

Net assets

111,971,511,426.66

110,256,065,952.24

Risk coverage ratio (%)

236.68

350.95

Net capital/net assets (%)

60.65

58.57

Net capital/liabilities (%)

21.86

26.73

Net assets/liabilities (%)

36.04

45.64

Value of proprietary equity securities and derivatives/net

capital (%)

49.91

56.82

Value of proprietary non-equity securities and derivatives/net

capital (%)

296.70

275.33

Core net capital

62,909,921,047.21

63,180,658,850.91

Supplementary net capital

5,000,000,000.00

1,400,000,000.00

Total risk capital provision

28,693,100,276.16

18,401,667,343.37

Total on-balance and off-balance assets

333,759,265,959.88

269,063,029,278.95

Capital leverage ratio (%)

21.08

26.81

Liquidity coverage ratio (%)

230.31

357.58

Net stable funding ratio (%)

130.22

142.38

Note: The net capital and relevant percentage as at the end of the previous year have been restated according to the Calculation Standard for Risk Control Indicators of Securities Companies (Announcement [2020] No. 10 of the CSRC) ( ᗇՎʮ̡ࠬᎈછՓܸᅺࠇၑᅺ๟஝֛'€ᗇ္ึʮ ѓ[2020]10).

(II) Key Accounting Data and Financial Indicators for the Past Five Years

The financial conditions for the past five years are as follows:

1. Profitability

Unit: Thousand Yuan Currency: RMB

Item

2020

2019

2018

2017

2016

Total revenue and other gains

40,534,436

32,436,781

24,506,734

31,323,372

24,631,628

Total expenses

31,233,707

23,577,265

19,017,372

20,278,706

16,492,187

Share of profits of associates

and joint ventures

4,203,647

2,726,449

959,309

539,978

453,987

Profit before income tax

13,504,376

11,585,965

6,448,671

11,584,644

8,593,428

Profit of this year-attributable to

shareholders of the Company

10,822,497

9,001,644

5,032,738

9,276,520

6,270,612

24

  • 2. Assets

    Unit: Thousand Yuan Currency: RMB

    Item

    December 31,2020

    December 31,2019

    December 31,2018

    December 31, 2017

    December 31, 2016

    Total assets Total liabilities

    Accounts payable to brokerage clients

    Total equity attributable to shareholders of the Company Total equity

    Total share capital (shares)

    716,751,235 584,439,200 136,387,634 129,071,500 132,312,035 9,076,650,000

    562,180,638 436,525,930 89,817,920 122,537,479 125,654,708 9,076,650,000

    368,665,874 263,916,270 59,492,176 103,393,577 104,749,604 8,251,500,000

    • 381,482,540 401,450,397

    • 292,892,628 315,790,200

    • 67,335,545 92,728,837

    • 87,335,938 84,357,457

    • 88,589,912 85,660,197

    7,162,768,800

    7,162,768,800

  • 3. Key Financial Indicators

    Item

    2020

    2019

    2018

    2017 2016

    Dividend per share (RMB)

    Basic earnings per share

(RMB/share)

Dilutive earnings per share

(RMB/share)

ROE (%)

Debt-to-assets ratio (%) note 2

0.40 1.20 1.19 8.61 77.20

0.30 1.04 1.03 7.94 73.40

0.60 note 1

- 0.50

0.66 0.66 5.32 66.12

1.30 0.88

1.30 0.88

10.56 7.73

71.80 72.25

Net assets attributable to

shareholders of the Company

per share (RMB/share)

14.22

13.50

12.53

12.19 11.78

Note 1: According to the resolution passed at the 2018 first extraordinary general meeting of the Company, the Company has implemented the 2018 interim profit distribution plan by distributing a cash dividend of RMB3.00 (tax included) per 10 shares based on the total share capital of 8,251,500,000 shares, with a total cash dividend of RMB2,475,450,000.00. Meanwhile, according to the resolution passed at the 2018 Annual General Meeting of the Company, the Company has implemented the 2018 annual profit distribution plan by distributing a cash dividend of RMB3.00 (tax included) per 10 shares based on the total share capital of 9,076,650,000 shares, with a total cash dividend of RMB2,722,995,000.00.

Note 2: Debt-to-assets ratio = (total liabilities-accounts payable to brokerage clients)/(total assets-accounts payable to brokerage clients)

IX. DIFFERENCES IN FINANCIAL DATA PREPARED IN ACCORDANCE WITH DOMESTIC AND FOREIGN ACCOUNTING STANDARDS

There is no difference between the net profit for 2020 and 2019 and the net assets as of December 31, 2020 and 2019 set out in the consolidated financial statements prepared in accordance with the CASBE and in the consolidated financial statements prepared in accordance with the IFRSs.

X. ITEMS MEASURED UNDER FAIR VALUE

Unit: Thousand Yuan Currency: RMB

Effect on theBalance at

profit of theName of items

Financial assets at fair value through profit or

  • loss 252,795,672 291,807,112

    Financial assets at fair value through other

  • comprehensive income 12,357,975 15,946,372

    Financial liabilities at fair value through profit

  • or loss 7,380,183 15,381,530

Derivative financial instruments Total

the end of last Balance at the

Change in the

current period

year end of the year

current period

in amount

39,011,440

29,410,896

3,588,397

199,683

8,001,347

(1,377,131)

(6,683,115)

(17,868,464)

43,918,069

10,364,984

579,642 273,113,472

(6,103,473) 317,031,541

SUMMARY OF THE COMPANY'S BUSINESS

I. DESCRIPTIONS OF OUR PRINCIPAL BUSINESSES, OPERATION MODELS AND INDUSTRY CONDITIONS DURING THE REPORTING PERIOD

The Group is a leading technology-driven securities group in China, with a highly collaborative business model, a cutting-edge digital platform and an extensive and engaging customer base. Our principal businesses comprise wealth management business, institutional services business, investment management business and international business. The Group constructs a client-based organizational mechanism, provides comprehensive securities and financial services for individual and institutional clients through an organic online-offline synergy, and aims to become a leading investment bank with strong domestic advantages and global influence.

1. Wealth management business

We provide customers with diversified wealth management services, including securities, futures and options brokerage, financial products sales, and capital-based intermediary business through mobile APP, professional PC platform, subsidiaries and securities futures branch offices, Huatai International and its affiliated overseas subsidiaries, in the mode of online and offline, domestic and overseas linkage. For securities, futures and options brokerage, we mainly execute trades on behalf of our clients in stocks, funds, bonds, futures and options, etc. to provide trading services. For financial products sales business, we mainly provide customers with a variety of financial products sales services and asset allocation services, and the related financial products are managed by the Group and other financial institutions. In respect of capital-based intermediary business, we provide diversified financing services including margin financing and securities lending as well as stock pledged lending. Key performance drivers to wealth management business include fee and commission income, interest income, etc.

2. Institutional services business

With institutional sales serving as a link, we integrate investment banking, institutional investor services and investment trading resources to provide various types of corporate and institutional clients with all-round comprehensive financial services, which mainly include investment banking business, prime brokerage business, research and institutional sales business and investment and trading business.

(1) Investment banking business primarily consists of equity underwriting, debt underwriting, financial advisory, OTC business, etc. For equity underwriting business, we provide IPO and equity refinancing services for our clients. For debt underwriting business, we provide various types of bond financing services for our clients. For financial advisory business, we provide clients with mergers-oriented financial advisory services based on industrial layout with a strategic point of view. For OTC business, we provide clients with NEEQ listing and follow-on financing services, and relevant OTC businesses engaged in by Jiangsu Equity Exchange. Key performance drivers to investment banking include underwriting and sponsorship fees, advisory fees, etc.

  • (2) Prime brokerage business mainly includes the provision of asset custody and fund services for private and public funds, including settlement, liquidation, reporting and valuation. In addition, it also provides margin trading, sales of financial products and other value-added services for clients of prime brokerage. Key performance drivers to prime brokerage business include fees for fund custody and service business.

  • (3) Research and institutional sales business mainly consists of research business and institutional sales business. For research business, we provide various professional research services for clients. For institutional sales business, we promote and sell securities products and services to clients. Key performance drivers to research and institutional sales business include incomes from services concerning various research and financial products.

  • (4) Investment and trading business mainly includes equity trading, FICC trading and OTC derivative transaction. The Group conducts equity, FICC and other financial instruments transactions with its own funds, and reduces investment risks and increases returns through various trading strategies and techniques. At the same time, in order to meet customers' needs for investment and financing as well as risk management, we also engage in market making business and OTC derivatives business. In terms of equity trading, we invest and trade stocks, ETFs and derivatives, and engage in market making services for financial products. In terms of FICC trading, we invest and trade all kinds of FICC and derivatives in the inter-bank and exchange bond markets, and engage in the inter-bank bond market and bond connect market making services. In terms of OTC derivative transactions, we develop and trade OTC financial products for customers, mainly including equity return swaps, OTC options and structured notes. Key performance drivers to investment and trading business include various investment incomes from equity, FICC products and derivatives, etc.

  • 3. Investment management business

We accept fund entrustment from clients, develop and provide various financial products for our clients and manage their assets through our professional investment and research platform as well as our substantial client base, effectively satisfying their investment and financing needs. Our investment management business mainly consists of asset management for securities firms, private equity fund management and asset management for fund companies. For asset management business for securities firms, we participate in the operation of asset management business for securities companies through our wholly-owned subsidiary Huatai Asset Management; such business includes collective asset management business, single asset management business, specialized asset management business and public offering fund management, which is operated on a differentiated basis from our public offering fund management business for fund companies under the Group. For private equity fund management business, we operate private equity funds business, which includes investment and management of private equity funds, through our wholly-owned subsidiary Huatai Purple Gold Investment. For asset management business for fund companies, the Group holds non-controlling interests in two public offering fund management companies, namely China Southern Asset Management and Huatai-PineBridge, through which we participate in the operation of asset management business for fund companies. Key performance drivers to asset management business include management fee, performance fee, investment income, etc.

4. International business

We enforce full-scope cross-border linkage and collaboration to better meet the diversified financial demands of domestic clients to "go global" and of overseas clients to "come into China", establishing a cross-border integrated financial service platform. The Group operates international business covering various countries and regions including Hong Kong and the United States through its wholly-owned subsidiary Huatai International, and the wholly-owned subsidiaries of Huatai International including Huatai Financial Holdings (Hong Kong), AssetMark and Huatai Securities (USA).

The Hong Kong business of the Group is mainly operated by Huatai Financial Holdings (Hong Kong), a wholly-owned subsidiary of Huatai International, which mainly includes investment banking, private wealth management and retail services, FICC, equity derivatives, cross-border and structured financing, research and stock sales and asset management. For investment banking business, we provide both Chinese and international customers with equity and debt underwriting and sponsoring services, as well as financial advisory services. In September 2019, Huatai Financial Holdings (Hong Kong) obtained the membership of the London Stock Exchange, and completed the registration as a UK Cross-border Conversion Agency for Shanghai-London Stock Connect GDRs on the Shanghai Stock Exchange, thus capable of providing clients with the whole-process services of the issuance and trade of GDRs. In December 2020, Huatai Financial Holdings (Hong Kong) has obtained the qualification as market maker of London Stock Exchange. For private wealth management and retail services, we provide clients with brokerage, margin and wealth management services covering different asset classes around the world. For FICC business, we carry out various investments and transactions of FICC and derivatives with our own funds in an appropriate amount, and provide FICC solutions covering sales, trading and market making services for all kinds of institutional clients. For equity derivatives business, we carry out cross-border stock derivatives trading, design and sales business, and provide various equity capital intermediary services for clients. For cross-border and structured financing business, we provide customized solutions to meet clients' needs for leveraged buyout, strategic M&A, pre-listing financing, business expansion and others. For research and stock sales business, we provide integrated research and sales services (both in and out of China) covering all industries for global institutional customers. For asset management business, we provide investment portfolio and fund management services for international investors.

The Group completed the acquisition of AssetMark in 2016. AssetMark is a leading turn-key asset management platform in the United States and a third-party financial service institution that provides a series of services and an advanced and convenient technology platform for investment advisors in respect of investment strategies and asset portfolios management, customer relations management and asset custody. In July 2019, AssetMark completed its listing on the New York Stock Exchange in the United States.

In September 2018, Huatai Securities (USA) was registered in Delaware, USA as a foreign wholly-owned subsidiary of Huatai international, aiming to promote the development of international business. In June 2019, upon approval from the US Financial Industry Regulatory Authority, Huatai Securities (USA) obtained the US broker-dealer license for carrying out broker-dealer businesses such as securities underwriting, securities brokerage for institutional investors and M&A financial advisory in the United States.

Key performance drivers to international business include brokerage commission, underwriting sponsorship fee, advisory fee, interest income and asset management fee.

II. AWARDS AND HONORS

(I) Key awards and honors of the Group

The election of "2020 Golden Bull Award in Chinese Securities Industry" ("2020ʕ਷ᗇՎุږˬ ᆤ") by China Securities Journal:

The Company was awarded "Golden Bull Award for Top Ten Securities Companies" ("ɤɽږˬᗇ Վʮ̡"), "Golden Bull Award for Social Responsibility of Securities Companies" ("ᗇՎʮ̡ٟึ ப΂ږˬᆤ"), "Golden Bull Award for Cultural Construction of Securities Companies" ("ᗇՎʮ ̡˖ʷܔணږˬᆤ"), "Golden Bull Award for Financial Technology of Securities Companies" ("ᗇ Վʮ̡ږፄ߅Ҧږˬᆤ") and "Golden Bull Award for Wealth Management Team" ("ږˬৌబ၍ ଣྠඟ")

The selection of "2020 China Golden Tripod Award" ("2020ʕ਷ږཻᆤ") organized by National Business Daily:

The Company was awarded "Prize for Innovation in Financial Technology in 2020" ("2020ϋܓږ ፄ߅Ҧ௴อᆤ") and the "Special Prize for Contribution to Epidemic Prevention in 2020" ("2020ϋ ܓҤޥ্ᘠतйᆤ") and other prizes

The "Forum on Selection of ESG Cases of Chinese Enterprises in 2020" ("2020ϋܓʕ਷Άุ ESG ࣩԷ൙፯ሞእ") organized by Cailian Press€ৌᑌٟ:

The Company was awarded "Prize for ESG Corporate Governance Case of Chinese Enterprises in 2020" ("2020ϋʕ਷Άุ ESG ʮ̡طଣࣩԷᆤ")

(II) Key awards and honors of the business segments of the Company

Wealth management businessShanghai Stock Exchange:

The Company was awarded the "2019 Ten Best Options Brokers" ("2019ϋ ܓɤԳಂᛆ຾ߏਠ ")

The data from Analysys:

"ZhangLe Fortune Path" ("ပᆀৌబ ஷ") ranked top in the industry in terms of NMAU by the end of 2020

The selection of "2020 Junding Award for Investment Banks & Brokerage in China" ("2020 ʕ਷ਜҳ༟ვБ & ຾ߏุਕਠёཻᆤ") organized by Quanshang China (Վਠʕ਷) of Securities Times:

The Company was awarded the "2020 Junding Award for All-round Securities Brokers in China" ("2020ʕ

The selection of the "Fifth Session of Securities Firm APP List for Sina Finance in 2019" ("2019 ϋୋʞ֣อ ईৌ຾Վਠ APP ࠬථ࿮") hosted by Sina Finance:

"ZhangLe Fortune Path" ("ပᆀৌబ ஷ") was awarded the "APP Award For Five-year Outstanding Development" ("ʞϋ௫̈೯࢝ APP"), "Top 10 APP

਷ਜΌঐᗇՎ຾ߏਠёཻᆤ"), "2020 Award of the Year" ("ϋܓɤԳ APP")Junding Award for Retail Securitiesand "Best User Service APP Award"

Brokers in China" ("2020ʕ਷ਜཧ ("௰Գ͜˒؂ਕ APP") ਯᗇՎ຾ߏਠёཻᆤ"), and "2020

Junding Award for Investor Education Team in China" ("2020ʕ਷ਜҳ༟٫ ઺ԃྠඟёཻᆤ")

"Asian Private Banker China Wealth

Awards" ("ԭݲӷɛვБ࢕ʕ਷ৌ బᆤ") organized by Asian Private Banker:

The Company was awarded "Best Securities Broker in China" ("ʕ਷௰

ԳᗇՎ຾ߏਠ ")

"2020 Chinese Financial Institutions Gold Medal List • the Golden Dragon Prize" ("2020ʕ਷ږፄዚ࿴ږ೐࿮ږ Ꮂᆤ") organized by Financial News:

The Company was awarded the "Best Securities Company in Margin Financing and Securities Lending Innovation of the Year" ("ϋܓ௰Գፄ ༟ፄՎ௴อᗇՎʮ̡")

The selection of "2020 Junding Award for Securities APP in China" ("2020 ʕ਷ᗇՎุ APP ёཻᆤ") organized by Quanshang China (Վਠʕ਷) of Securities Times:

"ZhangLe Global" ("ပᆀΌଢஷ") was awarded the "2020 Junding Award for Hong Kong-and U.S.-listed Securities Companies APP in the Chinese Securities Industry" ("2020ʕ਷ᗇՎุ ಥߕٰՎਠ APP ёཻᆤ")

Institutional services businessShanghai Stock Exchange:

Huatai United Securities was awarded the "2019 Excellent Trust Manager"

Shenzhen Stock Exchange:

Huatai United Securities was awarded the "Outstanding Innovative Agency

("2019 ϋܓᎴӸաৄ၍ଣɛ") and for Fixed-Income Business" ("ᎴӸո "2019 Outstanding Underwriter of ֛ϗूุਕ௴อዚ࿴")

Corporate Bonds" ("2019ϋܓʮ̡ව

ՎᎴӸוቖਠ ")

The selection of "The 13th New Fortune Best Investment Bank" ("ୋɤ

The selection of "2020 Junding Award ɧ֣อৌబ௰ԳҳБ") held by Newfor Investment Banks & Brokerage in China" ("2020 ʕ਷ਜҳ༟ვБ & ຾ߏุਕਠёཻᆤ") organized by Quanshang China (Վਠʕ਷) of Securities Times:

Huatai United Securities was awarded the "2020 Junding Award for All-round Investment Bank in China"

Fortune:

Huatai United Securities was awarded the "Best Domestic Investment Bank" ("͉ɺ௰ԳҳБ"), "Best Investment Bank in Equity Underwriting" ("௰Գٰ ᛆוቖҳБ"), "Best Investment Bank in Bond Underwriting" ("௰Գවᛆו ቖҳБ"), "Best Investment Bank in

("2020 ʕ਷ਜΌঐҳБёཻᆤ"), Mergers and Acquisitions" ("௰ԳԻᒅ

"2020 Junding Award for STAR

ҳБ"), "Best Refinancing InvestmentMarket Investment Bank in China" Bank" ("௰ԳΎፄ༟ҳБ"), "Best ("2020 ʕ਷ਜ߅௴ؐҳБёཻᆤ"), IPO Investment Bank" ("௰Գ IPO ҳ

"2020 Junding Award for SME Board Investment Bank in China" ("2020

Б"), "Best Investment Bank in Serving Overseas Markets" ("ऎ̮̹ఙঐɢ௰

ʕ਷ਜʕʃؐҳБёཻᆤ ") and ԳҳБ"), "Most Innovative Investment "2020 Junding Award for Main Board Bank" ("௰Ո௴อঐɢҳБ"), "BestInvestment Bank in China" ("2020ʕ ਷ਜ˴ؐҳБёཻᆤ"), etc.

STAR Market Investment Bank" ("௰ Գ߅௴ؐҳБ"), etc.

The selection of "2020 China Golden Tripod Award" ("2020 ʕ਷ږཻᆤ") organized by National Business Daily:

The selection of "Institutional Investor

  • • Caixin All-China Research Team

Awards" in 2020:

Huatai United Securities was awarded the "Best Sponsor Serving New

The Company won "Best Analyst Team (Mainland) No. 1" ("௰Գʱؓࢪྠඟ

Economies in 2020" ("2020ϋܓ؂ਕ €ɽ௔ୋɓΤ"), "Best Analyst Team

อ຾᏶௰Գڭᑥዚ࿴")

The selection of "Best Corporate

(Overseas) No. 7" ("௰Գʱؓࢪྠඟ €ऎ̮ୋɖΤ"), "Best Sales Teams (Mainland) No. 2" ("௰Գቖਯྠඟ

Finance and Investment Banking €ɽ௔ୋɚΤ"), "Best Sales TeamsAwards of China in 2020" ("2020 ʕ

(Overseas) No. 7" ("௰Գቖਯྠඟ€ऎ

਷௰Գʮ̡ږፄʿҳ༟ვБɽᆤ ") ̮ୋɖΤ") and other prizes organized by Asiamoney:

Huatai United Securities was awarded the "Securities Company with Best Domestic M&A Advisory" ("௰Գྤ ʫԻᒅᚥਪՎਠ ")

"The China Awards" ("ʕ਷ɽᆤ")selection organized by Structured Retail Products ( ഐ࿴ʷཧਯପۜ'):

The Company was awarded the "Best Product of the Year" ("ϋܓ௰Գପۜ")

Investment management businessSecurities Times:

Huatai Asset Management was awarded "2020 Junding Award for Securities Companies on Asset

China Securities Journal:

China Southern Asset Management was awarded "Golden Bull Fund Company for Passive Investment of 2019" ("2019

Management in China" ("2020ʕ਷༟ ϋ஗ਗҳ༟ږˬਿږʮ̡")

ପ၍ଣՎਠёཻᆤ"), "2020 Junding

Award for Fixed-Income Investment Team in China" ("2020ʕ਷ոϗᗳҳ ༟ྠඟёཻᆤ") and "2020 Junding Award for Top 10 Innovative Asset Management/Fund/OTC Products"

Huatai-PineBridge Fund Management was awarded "Golden Bull Fund Company for Passive Investment" ("஗ਗҳ༟ږ ˬਿږʮ̡") and "Golden Bull Fund Company for Quantitative Investment"

("2020 ɤɽ௴อ༟၍ Ŋ ਿږ ŊOTC ("ඎʷҳ༟ږˬਿږʮ̡") ପۜёཻᆤ")

The selection of "2020 China Golden Tripod Award" ("2020 ʕ਷ږཻᆤ") organized by National Business Daily:

Huatai Asset Management was

Shanghai Securities News:China Southern Asset Management was awarded "2019 Golden Fund • Fund Management Company for Passive Investment Award" ("2019ϋܓږਿږ

awarded "2020 Most Trustworthy ஗ਗҳ༟ਿږ၍ଣʮ̡ᆤ")

Securities Companies on Asset

Management by Investors" ("2020

Huatai-PineBridge Fund Management

ϋܓ௰աҳ༟٫ڦ፠Վਠ༟၍ ") was awarded "Golden Fund • Fundand "Best Fixed-Income AssetManagement Company for PassiveManagement Team in 2020" ("2020ϋ Investment" ("ږਿږ஗ਗҳ༟ਿږ၍

ܓ௰Գոϗ༟၍ྠඟ")

ଣʮ̡")

The selection of "2020 Yinghua Prize for Securities Companies on Asset Management" ("2020 ʕ਷Վਠ༟၍ ߵശᆤ") organized by China Fund News:

China Fund News:

Huatai-PineBridge Fund Management was awarded "Yinghua Prize for Best Active Quantitative Fund Company in 2019" ("ߵശᆤʘ2019 ϋܓ௰Գ˴ਗ

Huatai Asset Management was ඎʷਿږʮ̡")

awarded the "Prize for Best ABS

Securities Companies on Asset Management" ("௰Գ ABS ᗳՎਠ༟ ၍ᆤ"), the "Prize for Best Innovative Product of Securities Companies on Asset Management" ("௰ԳՎਠ༟၍

Asia Asset Management:

China Southern Asset Management was awarded "China Asset Management Financial Technology Innovation

௴อପۜᆤ") and the "Prize for Best Award" ("ʕ਷༟ପ၍ଣږፄ߅Ҧ௴

Fixed-Income Securities Companies on Asset Management" ("௰Գոϗᗳ

Վਠ༟၍ᆤ")

อᆤ") and "Prize for Domestic RMB Bonds in China (3-Year)" ("ʕ਷ྤʫɛ ͏࿆වՎᆤ(3 ϋಂ")

The selection of "ChinaVenture Awards for 2019" ("ҳʕ 2019 ϋܓ࿮") held by ChinaVenture Investment:

www. simuwang.com:

Huatai Futures was awarded the "2019 Most Trustworthy Financial Institution Asset Management Award" ("2019ϋܓ

Huatai Purple Gold Investment was ௰࠽੻ڦ፠ږፄዚ࿴༟၍ᆤ")

awarded "The Best Chinese Private

Equity Investment Institutions Top 10" ("ʕ਷௰Գʕ༟ӷ෍ٰᛆҳ༟ ዚ࿴ TOP10"), "The Best Chinese Subsidiaries of Brokers for Private Funds TOP 10" ("ʕ਷௰ԳՎਠӷ ෍ਿږɿʮ̡ TOP10"), "The Best Institutions for Investment in Medical Services TOP 10" ("௰Գᔼᐕ؂ਕჯ ਹҳ༟ዚ࿴TOP10") and "The Best Institutions for Investment in Medical Devices TOP 10" ("௰Գᔼᐕኜ૛ჯ ਹҳ༟ዚ࿴ TOP10"), etc.

International business

The selection of "Annual Awards" (" ϋܓᆤධ ") organized by PDI (Private Debt Investor), an internationally renowned private debt industry magazine:

Huatai International was awarded "The Best Private Debt Institutional Investor in Asia-Pacific Region of 2019" ("2019ϋܓԭ˄ήਜ௰Գӷ෍ වҳ༟ዚ࿴")

The selection of "AAA National Award" organized by The Asset:

Huatai International was awarded the "Best Corporate and InstitutionalThe paid-in capital of Huatai Financial Holdings (Hong Kong) amounted to HK$8.8 billion, and its capital scale ranked among the top in Hong Kong

"The Selection of Third Session of FinTech Awards" held by ETnet, the professional financial information platform:

Huatai Financial Holdings (Hong Kong) was awarded the "Outstanding Wealth Management Network Cloud-based Application Solution" ("௫̈ ৌబ၍ଣၣഖථ၌Ꮠ͜˙ࣩ") and

"Outstanding Wealth Management Network Security Solution" ("௫̈ৌబ

Advisor (securities firm) in Hong ၍ଣၣഖτΌ˙ࣩ") Kong" ("࠰ಥήਜ௰ԳΆุʿዚ࿴ᚥ

ਪ€Վਠᗳ") and "Best Private Debt Adviser in Hong Kong" ("࠰ಥήਜ௰ Գӷ෍වᚥਪ"), etc.

The Selection of "2020 Financial Institution Awards" ("2020 ږፄዚ ࿴ɽᆤ") organized by Bloomberg Businessweek/Chinese Edition:

Huatai International was awarded the "Corporate Financing Excellence Award" (" Άุፄ༟ՙ൳ɽᆤ ") and "Risk Management Excellence Award" ("ࠬᎈ၍ଣ௫̈ɽᆤ")

Cerulli Associates and other public information:

As of the end of the third quarter of 2020, AssetMark occupied a market share of 11.0% in the TAMP industry in the United States, ranking the third

III. ANALYSIS OF CORE COMPETITIVENESSES DURING THE REPORTING PERIOD

(I) A technology-driven pioneer in China's securities industry transformation

The Group has been maintaining a high level of resources investment in information technology for many years and is committed to thoroughly transforming its business and management model with digital thinking and platforms. It strove to build a leading self-developed system for information technology research and development, equip the front, middle and back offices with technological devices through all-round technology empowerment, and create business model innovation driven by digitalization and advantages of the whole business chain with platform-based support. Meanwhile, with equity investment serving as a link, the Group focused on outstanding technological innovation companies to accelerate the construction of the fintech ecosystem and actively establish presence in cutting-edge sectors, such as big data, artificial intelligence, blockchain, cloud computing, Robotic Process Automation security and 5G. In the field of wealth management, the Group constantly developed and strengthened the mobile finance strategy, built personalized wealth management platforms with the aim of mobilization, digitalization and intellectualization to meet the wealth management demands of Chinese people all over the world; and built a strong middle platform system to empower first-line employees to effectively increase customer size and activity. In the field of institutional services, research, investment banking and other services on "Xing Zhi"€Бٝ, our self-developed digital platform serving institutional customers, have received awareness and attention from an increasing number of institutional customers, facilitating the efficient interaction between institutional customers and business resources. Securities Lending Path€ፄՎஷ, credit analysis management system (CAMS system) and INCOS cloud platform combined all links of institutional services, continuously improving service efficiency and extending customer ecology. Meanwhile, leveraging on various advanced trading platforms developed by the Company, it continued to advance the platform-based and integrated operation of the trading business and build core trading capabilities. During the Reporting Period, "ZhangLe Global" (ပᆀΌଢஷ) platform was upgraded to promote innovation in business models and customer services, providing investors with a better global investment experience; Securities Lending Path€ፄՎஷ, the first open-ended online securities lending trading platform on the market, was released to create convenient and efficient online securities leading platform for market participants. The technical competency and talent team the Group developed through independent research and development over the years have laid a solid foundation for the building of platform-based and systematic competitive advantages.

(II) The open digital wealth management platform provides efficient and professional services to mass customers

The Group has built one of the most active wealth management platforms among China's securities industry with more than 17 million customers. Drawing on advanced wealth management service system and experiences at home and abroad, the Group accelerated the development of wealth management business from product, service, procedure, technology platform and other aspects. The Group's wealth management business has formed a platform-based development model driven by its headquarters. The Group launched "ZhangLe Fortune Path"€ပᆀৌబஷ, a mobile service platform, for our clients, and "AORTA", a cloud platform, for investment advisor. The two platforms strengthened their functions, deepened their coordination, and efficiently and accurately empowered first-line investment advisors through iterations and upgrades. As of the end of the Reporting Period, the cumulative download volume of "ZhangLe Fortune Path"€ပᆀৌబஷ exceeded 58 million. According to the statistics of Analysys, the NMAU of "ZhangLe Fortune Path"€ပᆀৌబஷexceeded 9.11 million as at the end of December 2020, ranking the first among all APPs of securities companies. During the Reporting Period, the Group became one of the first batch of securities companies which obtained the pilot qualification for fund investment advisory business and officially introduced "ZhangLe Star Investment"€ပᆀ݋ҳ, the fund investment advisory service based on the "people + platform" investment advisory service system. The Group actively proceeded the development of investment advisor team and capacity for wealth management services. According to statistics from the Securities Association of China, investment advisors of the Parent Company accounted for over 32% of its total staff as of the end of the Reporting Period.

(III) First-class investment banking business with systematic services for clients and high-quality development

Facing new patterns of the economic and social development, the Group fully seized the opportunities in economic transformation and upgrading and the capital market reform led by the registration-based IPO system and continued to speed up in industrial layout and optimize the team structure. It deeply implemented the "customer-oriented" business concept and actively developed the "ecosystem" with investment banking customers as the center. Leveraging on the big platform covering the whole business chain, the Group continuously enhanced the linkage and cooperation between the investment banking business and various business lines of the Group to build an ecosystem for institutional customer services with the integration of "buyers + sellers + research institutes". The Group constantly provided new and old customers with domestic and overseas integrated professional investment banking services and successfully developed and introduced quality customers in key industries while going deep into the industry. For the M&A and restructuring business, the Group focused on advancing benchmark large-scale and innovativeprojects and actively explored continuous services for customers, maintaining its leading position in the industry. The Group maintained its leading advantage in the STAR Market. As of the end of the Reporting Period, it has accepted a total of 44 enterprises in the STAR Market, ranking the second in the market. Since 2012, the Group's total number of mergers and acquisitions and reorganization transactions approved by and registered with the CSRC reached 141, ranking the first in the market. During the Reporting Period, the Group's lead-underwriting amount of full variety bonds was RMB566.963 billion, ranking the fifth in the industry and representing an increase of 68.92% compared with that of the previous year. The full implementation of the registration-based IPO system and the increase in the proportion of direct financing will be the theme of the capital market in 2021. The increasingly active mergers and acquisitions and financing activities will bring valuable opportunities to the Group.

(IV) Comprehensive asset management platform with both scale and innovation advantages

Relying on the large customer base and advantage in the whole business chain resources, the Group has established one of the leading asset management platforms in the industry by giving full play to its abilities in exploring investment bank assets, risk pricing and product design. The total amount of assets under asset management business ranked in the forefront of the industry with continuous improvement in the capability and scale of active management. Our management products cover major asset categories forming a product system with a considerable scale and wide coverage, which helped the Group build significant operational advantages and market influence. The Group focuses on the characteristics of brokers, systematically created "basic products + specialized products", strengthened the two-way driving of the Group and established the output model of asset-end products to broaden the size of products and meet different needs of the Group, retail customers and high-net-worth customers in the market for product forms and risk return. Meanwhile, through customized services featuring multiple assets and multiple strategies, the Group has provided a basket of customized comprehensive financial services for institutional customers, which met customers' needs for product forms, liquidity and returns through competitive fixed-income products as well as featured products such as FoF and MoM. The Group is a leader of ABS product designs in the industry, and has set a benchmark for the industry through constant innovation in underlying assets, transaction structure and other aspects. It has issued multiple notes in areas such as epidemic control and prevention, and green finance to support real economy projects, with the business scale continuously ranking the forefront of the industry.

(V) Acceleration in global layout and cross-border linkage to create new opportunities for development

The Group always adheres to the strategy of constantly expanding its international business layout along with the international development of customers, and offers global resources to its customers through continuous deepening of integrated cross-border linkage, serving the overseas expansion of Chinese customers and the domestic investment of international investors in better ways. During the Reporting Period, the international rating agency Standard & Poor's maintained a positive rating outlook for the Company and its subsidiary Huatai International, and assigned a "BBB" long-term issuer credit rating and an "A-2" short-term issuer credit rating. During the Reporting Period, leveraging on the Group's domestic resources, Huatai International took full advantage of the cross-border business platform established and rapidly expanded its cross-border business through effective domestic and overseas linkage. Meanwhile, it promoted the healthy development of various businesses and established a cross-border service ecosystem held by Chinese securities companies. At the same time, the completed the consolidation of the current Hong Kong business lines and developed a "4+1" business platform system with the equity business platform, the fixed-income business platform, the individual financial business platform, the fund business platform and the flagship investment banking business. As of the end of the Reporting Period, the asset size of Huatai International exceeded HK$100 billion. The comprehensive strength continues being promoted and ranked at the forefront of Chinese securities companies in Hong Kong. The Group relied on the advantages of domestic and overseas linkage of investment banks and its own successful GDR issuance experience, served as a joint global coordinator and joint bookrunner to help CPIC and Yangtze Power successfully implement GDR issuance and successfully listed on the London Stock Exchange, maintaining its absolute advantages in the GDR industry. Meanwhile, Huatai International obtained the qualification as a market maker on GDR during the year, the only financial institute obtained the qualification in Asia, which laid solid foundation for business development in U.K. and further consolidated and enhanced the ability of the Company to conduct international development and participate in mainstream international capital markets. During the Reporting Period, Huatai International participated in and completed 23 IPO projects and ranked the fourth among Chinese securities companies in Hong Kong in terms of the amount sponsored. In addition, AssetMark has always maintained operational independence, kept a steady growth in the size of its managed assets with its leading business model and advanced technology platform, and consolidated industry leadership, constantly increasing the Group's international business revenue.

(VI) Comprehensive risk management featuring professional and platform advantages

The Group has established a comprehensive risk management system with "high engagement, full coverage and deep penetration" as the core idea, and with "collectivization, specialization and platformization" as the main approach. The Group has a sound risk management culture and clear risk management objectives, and "stability" is always an important part of the core values of the Group. The Group has accumulatively established an effective risk management framework, procedures and measures that adapt to the international development of the Company's businesses, and continued to promote the systematic coverage and penetration as well as specialized, concentrated and unified management of the risks of each subsidiary. The Group focused on developing the abilities of professional forward-looking risk evaluation and dynamic monitoring and early warning, went deep into the business to identify risks in advance, monitored and alerted risks in a timely manner, and responded to and dealt with risks promptly. The Group attached great importance to technology-driven risk management capabilities and efficiency improvements, and adopted digital thinking to create a centralized, time-efficient, quantitative and penetrating risk management technology platform. Through the platform, risk management is empowered to achieve group-wide risk management that is visible, measurable and controllable. During the Reporting Period, the Group became one of the first six securities companies included in the scope of the consolidated supervision pilot.

(VII)Top-ranking talent team and diversified shareholding structure

The consistent development of marketized systems and mechanisms is a key driving force for the continuous transformation and transcendence of the Group. The Group's professional manager system has been under implementation for one year, and it has realized the contractualization, marketization and professionalization of the management team. The new operation and management team has broad vision, rich experience and strong business capabilities, and is leading the Company to open up a new development situation. The Group is deeply rooted in the corporate culture gene of "technology empowerment, innovation and initiative", and continuously enriches and deepens the cultural connotation of "openness, inclusiveness, innovation, struggle and responsibility", accumulating lasting power and vitality for the in-depth promotion of the "two-pronged" (ᕐቃᚨਗ) strategy. The Group has established and improved a mechanism for the selection and appointment of talents based on ability and contribution, established a market-oriented employment mechanism and compensation incentive mechanism and actively advanced the share incentive plan towards core and cadre employees. Focusing on the operation and development needs, the Company introduced outstanding domestic and overseas young talents, fintech talents in particular, through market-based channels to enhance talent reserves and build an international talent team towards the future. High-end talents, innovative talents, cross-boundary talents and international talents successively joined the Group, and a career-long, three-dimensional and practical dynamic training system was applied to keep meeting the demands of employees. Since 2018, the Group has started the reformation of mixed ownership and brought in important strategic investors, established a more diversified shareholding structure. The diversified and balanced structure of shareholders and the Board has effectively enhanced the transparency of the corporate governance and bringing new concepts and new strategic resources for the Group's future development.

MANAGEMENT DISCUSSION AND ANALYSIS AND REPORT OF THE BOARD

I. MANAGEMENT DISCUSSION AND ANALYSIS

Unit: Thousand Yuan Currency: RMB

Year-on-year change of Year-on-yearSegmentSegment revenue and other income

Segment expensesSegment Segment profitresultsmargin (%)segment revenue change of and other segment income (%) expenses (%)

Year-on-year change of segment profit margin (%)

Wealth management business Institutional services business Investment management business International business

19,477,433

(14,213,154)

5,264,279

27.03

37.71 41.32

Decrease of 1.86 percentage points

10,524,711

(6,426,891)

4,109,806

39.05

25.78

  • 20.93 Increase of 2.46 percentage points

    4,070,097

    (1,756,231)

    4,989,036

    122.58

    (6.82)

  • 22.89 Increase of 16.70 percentage points

    5,550,607

    • (5,290,461) 260,083

      4.69

      37.10

  • 34.10 Increase of 2.14 percentage points

    Others (including offset) Segment total

    911,588

    • (3,546,970) (1,118,828)

      (122.73)

      (39.58)

  • 25.29 Decrease of 103.53 percentage points

    40,534,436

    • (31,233,707) 13,504,376

    33.32

    24.96

  • 32.47 Decrease of 2.40 percentage points

(I)

Wealth management business

1.

Market environment and industry trend of wealth management business

(1)

The space for development in the wealth management industry in China was broad, and

professional institutions powered by mature service systems will usher in development

opportunities

The wealth management industry has ushered in an important period full of opportunities for development, due to the continuous release of the potential of China's real economy, the steady advancement of financial supply-side structural reforms, the continuous accumulation of national wealth, the increasing supply of financial investment products, the demand increase in residents' investment and the continuous optimization of asset allocation structures. According to the statistics of China Merchants Bank's Private Wealth Report, as of the end of 2019, the overall scale of investable assets held by individuals in China may have exceeded RMB200 trillion, an increase of 5.26% from the end of 2018; the number of high-net-worth individuals with personal investable assets of over RMB10 million was approximately 2.2 million, an increase of 11.68% from the end of 2018. The sudden outbreak of COVID-19 pandemic brought many uncertainties to the wealth management industry, and also accelerated the progress of the industry's transformation and upgrading, prompting wealth management institutions to continuously improve their comprehensive financial services and expertise in wealth management. Under the background of market-wide registration reform, capital market expansion, increased industry penetration rate in wealth management and people's optimized financial asset allocation, etc., wealth management institutions that focus on building a sound wealth management business system, adhere to a customer-centric service concept, and pay attention to customer's full life cycle, full category product, services and asset allocation are expected to continue to expand their competitive advantages and serve customers' multiple financial business needs.

(2) Changes in clients' demands and market competition trends continuously promoted the wealth management transformation of securities companies

With the continuous introduction of a series of market-oriented reforms in the capital market, the continuous expansion of the new pattern of two-way opening of the financial market, the accelerated penetration of Fintech into the securities industry, and the increasingly fierce market competition, the traditional profit model and operating mode of securities companies are facing disruptive challenge, which has facilitated them to transform themselves from providing traditional channel services to comprehensive wealth management business and integrated financial services. Building a wealth management service model under the new ecosystem has become an important direction for the strategic transformation of securities companies. During the Reporting Period, the domestic stock market index showed a trend of wide fluctuations. With the gradual weakening of the impact of the epidemic and the recovery of social and economic activities, the Shanghai Composite Index rose by 13.87%, the Shenzhen Component Index rose by 38.73%, and the ChiNext Index rose by 64.96%; in terms of major international indexes, the S&P 500 rose by 16.26%, the Nasdaq rose by 43.64%, while the FTSE 100 fell by 14.34%. In the context of increased external uncertainties faced by the capital market, gradually matured regulatory policies and market mechanisms, enriching variety of investment products, and rising demand for wealth management of high-net-worth individuals, clients have paid more attention to the asset allocation capabilities and the value of professional services of wealth management institutions. The expansion of the pilot fund investment advisory business will also accelerate the transformation of the wealth management industry to investment advisory business model from buyers' perspective. Financial institutions would gain an advantage in future competition by firmly making breakthroughs in the transformation towards wealth management, continuously improving professional capabilities, fully tapping and leveraging its own advantages in asset allocation of main categories in the cross-market, cross-product, and cross-industry, and providing customers with a full range of services.

(3) The increasingly widespread application of Fintech led the iterative upgrade of the wealth management industry

In recent years, securities companies have proactively grasped the new trend of technological development, by empowering all links of the wealth management business value chain through Fintech application innovation, building a platform-based and systematic new wealth management service model, so as to realize the synergy, integration and sharing of internal and external resources of the Group. Moreover, securities companies continued to optimize customer experience, reduce operating costs, improve operating efficiency, and effectively enhance the effectiveness of securities companies in providing customers with professional, intelligent, and integrated financial services. With the continuous deepening of the application of Fintech in wealth management business, Fintech has become a basic driving force to evolution of the financial ecosystem and a strategic commanding height for competition in the securities industry. In particular, the epidemic prevention and control since the beginning of 2020 has given rise to the demand for online financial services, providing an opportunity for the digital and intelligent transformation and development of the securities industry. The inevitable choice of a large domestic securities company to achieve digital transformation and build differentiated competitive advantages and a new business model is to continue to increase investment in technological innovation, promote the iterative update of Fintech, promote the in-depth integration of Fintech and business, make full use of Fintech to explore the potential value of data, and provide customers with comprehensive wealth management services. The application of Fintech will help securities companies transform into a diversified wealth management model.

2. Operational measures and achievements of wealth management business

(1) Securities, futures and options brokerage business

During the Reporting Period, in adherence to the values centering on customers' demand, following the concept of technology empowerment, the Group continuously improved platform-based service quality, strengthened digital operation and management capabilities, and created functions like multi-dimensional and intelligent potential customer mining, customer acquisition conversion and asset allocation, and developed professional abilities that create value for customers in an all-round way, thus further consolidating and enhancing core competitiveness, and effectively contributing to the systematic development of wealth management business. It also continued to build a professional customer-acquisition investment consultant team, comprehensively enhanced the professional capabilities with asset allocation services as the core, upgraded the iterative one-stop investment consultant work cloud platform, efficiently and accurately empowered first-line investment consultants to improve the efficiency of investment consulting services and work efficiency, so as to promote large-scale and specialized customer development, and achieve steady growth in customer scale and customer assets.

The Group continuously enriched and improved various functions and services of "Zhangle Fortune Path" (ပᆀৌబஷ), including technological innovations of the construction of wealth management financial scenes, the development of intelligent tools, and differentiated market transactions. It also established a technology platform around the new trend of customer wealth management to comprehensively improve the quality of customer service. During the Reporting Period, "Zhangle Fortune Path" (ပᆀৌబஷ) had a download volume of 7.8559 million, with a cumulative download volume of 58.0625 million since its launch; the number of accounts opened by mobile terminal customers was 3.2290 million, accounting for 99.72% of all accounts; 94.27% of trading customers used "Zhangle Fortune Path" (ပᆀৌబஷ) to conduct transactions. According to the statistics of Analysys think tank, during the Reporting Period, the average monthly activity of "Zhangle Fortune Path" (ပᆀৌబஷ) was 8,896,600. As of the end of the Reporting Period, the monthly activity was 9,115,300, ranking first among securities company apps, which means "Zhangle Fortune Path" (ပᆀৌబஷ) has continued to play its important role as the core platform carrier of the Company's wealth management business. At the same time, the Group officially launched the "Zhangle Global" (ပᆀΌଢஷ) to explore the innovation of global transaction service models, and be committed to providing customers with one-stop investment management services for global assets. During the Reporting Period, the "Zhangle Global" (ပᆀΌଢஷ) had a download volume of 520,100. As of the end of the Reporting Period, the monthly activity was 88,700.

The Group further strengthened its advantages in trading services based on advanced platforms. According to the statistics of members of the Shanghai and Shenzhen Stock Exchanges, the Group's equity and fund trading volume totaled RMB34.19 trillion, ranking the first place in the industry. As of the end of the Reporting Period, according to internal statistics, the total assets of client accounts reached RMB4.74 trillion.

Data of agency sales amount

Currency: RMB

2020

2019

Agency sales amount

Agency sales amount

Type of securities

(in RMB100 million)

Type of securities

(in RMB100 million)

Stocks

316,393.11

Stocks

194,042.61

Funds

25,494.38

Funds

11,659.88

Debentures

345,299.16

Debentures

311,035.42

Total

687,186.65

Total

516,737.91

Note: In view of the fact that Wind Information no longer collects and publishes its member trading volume data, the data of trading volume in 2019 and 2020 are cited from the Shanghai and Shenzhen Stock Exchange members' statistics in which the fund data do not include trading volume of money market funds on the Shanghai Stock Exchange.

During the Reporting Period, the Southbound Trading business went steadily, with the number of clients increasing steadily and the services continuing to be deepened. For the Southbound Trading business under Shanghai-Hong Kong Stock Connect, there were 56,400 authorized users in total. For the Southbound Trading business under Shenzhen-Hong Kong Stock Connect, there were 60,200 authorized users in total. In terms of stock options brokerage business, the Group has continued to improve the hierarchical trading platform system, actively built the core trading system, and focused on improving the ability to serve professional customers, and therefore the business has continued to maintain its market leading edge. According to the statistics of the Shanghai Stock Exchange, the Group's stock option brokerage business at the Shanghai Stock Exchange ranked the first place in the industry in terms of trading volume and market share in 2020.

For the futures brokerage business, Huatai Futures continued to optimize its outlet layout. As of the end of the Reporting Period, there were 9 branches and 41 futures branches in total covering 4 municipalities directly under the Central Government and 16 provinces in China, being the agent of 87 types of futures. During the Reporting Period, Huatai Futures (excluding clearing members) realized an agency trading volume of 659,438,600 lots with a transaction amount of RMB45,662,311 million. The Group's futures IB business increased consistently, with 224 securities branches permitted to be engaged in futures IB business and the total number of futures IB business customers reaching 43,929 as of the end of the Reporting Period.

(2) Financial product sales business

During the Reporting Period, the Group comprehensively promoted the business development of financial products centered on customer needs. With the help of enhanced professional capabilities and digital empowerment, it also continuously strengthened its business brand value, enhanced customer profit experience, met customers' multi-level wealth management needs, integrated internal and external product resources, implemented multi-dimensional product introduction management models, created a diversified financial product and strategic product system, and improved the supply of high-quality products and differentiated product service models. In addition, it continuously optimized research services such as research on large-scale assets, asset allocation and portfolio construction, continued to improve the full-process management model for the entire life cycle of financial products, and enhanced the customer service capabilities of investment consultants. According to internal statistics, the number of financial products held (except for the cash management product "Tian Tian Fa" (˂˂೯)) was 6,160, and their sales scale (except for the cash management product "Tian Tian Fa" (˂˂೯)) was RMB705.331 billion, which has increased significantly.

During the Reporting Period, the Group obtained the qualification for pilot fund investment advisory business, and then actively promoted business development by launching the "Zhangle Investment" (ပᆀ݋ҳ) fund investment advisory service brand, to accelerate the transformation of investment advisory services oriented to buyers instead of seller itself, thus effectively improving customer asset allocation service capabilities. The Group has focused on strengthening digital empowerment by building a product business digitised platform based on product integrated management and operation platform, product investment research system and intelligent investment advisory system, etc., with an aim to promote platform-based product evaluation and integrated operation service, and enhance its overall business efficiency and capability. In addition, it also continued to optimize the after-sales service process and content, strengthen the management selection mechanism, and strictly keep an eye on product compliance and risk control management.

(3) Capital-based intermediary business

During the Reporting Period, the Group comprehensively deepened cooperation across the entire business chain, continued to tap customer needs, built a matrix customer service system, led digital transformation through platform construction, innovated business operation models, enhanced differentiated and professional service capabilities, to consolidate business competition advantage. To quickly respond to market changes and regulatory requirements, it improved the marketing service system, implemented risk management and control throughout the process, improved risk management efficiency, promoted the high-quality development of capital intermediary business, thereby continuing to expand brand influence. The Group released "Securities Lending Path" (ፄՎஷ) as the first open-ended online securities lending and trading platform in the entire market, opening up a new mode of digital operation in the securities lending industry, efficiently connecting the supplier and demander of securities, and is committed to providing platform participants with all-dimensional one-stop services. During the Reporting Period, benefiting from the revived enthusiasm for credit transactions in the A-share market, the capital-based intermediary business of the Group showed good development momentum, the scale of margin financing and securities lending business increased greatly. The market share continued to increase, the securities lending business developed rapidly, and the stock pledged repurchase business structure was optimized to make business risks controllable. According to the regulatory statement data, as of the end of the Reporting Period, the balance of margin financing and securities lending business of the Company was RMB124.123 billion, with a year-on-year increase of 84.91% and a market share of 7.67%, and the integral maintenance guarantee ratio was 302.93%. Among them, the balance ofsecurities lending business was RMB25.410 billion, with a year-on-year increase of 984.97% and a market share of 18.55%. The pending repurchase balance of stock pledged repurchase business was RMB31.456 billion in total, with an average fulfillment guarantee ratio of 287.46%. Among them, the pending repurchase balance of on-balance-sheet business was RMB6.476 billion, with an average fulfillment guarantee ratio of 269.33%; while the pending repurchase balance of off-balance-sheet business was RMB24.980 billion.

3. Prospect of wealth management business for 2021

Wealth management business undertakes significant responsibilities in gathering client resources and assets on a large scale, providing a solid base for customer value exploration and creation. In 2021, the Group will strengthen its digital operation and management, further improve the customer-oriented technology platform and the one-stop cloud platform for investment advisors, and optimize the business system integrating online and offline resources. With integrated platform empowerment as the core, with a professional investment advisory team and a competitive financial product system as wings, the Group will acquire new customers and motivate existing customers, and strive to enhance its professional capability to attract customer assets and make value for customers.

For wealth management business, the Group will continue to adapt to market changes, take advantage of its market leading customer size and the sound full-service business chain, adhere to the bottom line of compliance, promote high-quality business development with the intelligent, digital, targeted and professional online and offline synergy. In terms of the fund investment advisory business, the Group will emphasize the strategic positioning of the business, upgrade business processes and investment portfolio strategies starting from customer benefits, strengthen service perception, explore diversified cooperation models to provide customers with professional services; based on the combination of customer needs and asset allocation strategies, create a diversified financial product and strategic product system, improve differentiated service models, and improve product sales capabilities through systematic operation, process management, and high-quality output; create an intelligent and open one-stop investment advisory work cloud platform, improve the integrated operating investment advisory service system, strengthen the technological empowerment of the investment advisory team, continue to optimize outstanding investment advisory service models, so as to comprehensively improve the efficiency of investment advisory services; continue to promote technology empowerment and platform-driven concept, and move forward the construction of the intelligent interactive digital platform system of full-range products, full-cycle processes, oriented to all customers of the Group and focusing on the life cycle of customer asset allocation, by which the Group could concentrate professional resources and digital capabilities on the platform, create differentiated competitive advantages and benchmark service experience, and effectively contribute to the systematic development of wealth management business.

In terms of the financial product sales business, the Group will continue to improve professional capabilities including asset research, portfolio allocation and product evaluation, introduce external high-quality products, explore new product models, build a multi-level product supply matrix system, improve marketing support and continuing service content, and strengthen our response to customer needs and resource integration capabilities, and ultimately continue to expand business scale and customer base. At the same time, the Group will strengthen digital empowerment, build a core financial product platform that integrates asset research, strategic research and development, product evaluation, and combined production to provide effective support for the development of financial product businesses.

In terms of capital-based intermediary business, the Group will continue to be customer-oriented, comprehensively strengthen risk management and control capabilities, enrich customer service from other dimensions, innovate product design and operation models, develop credit business customer groups, and further consolidate industry leading advantages. It will also integrated resources from various parties to promote the construction of the "Securities Lending Path" (ፄՎ ஷ) platform system, increase customer strategy research, improve professional investor service capabilities, create an integrated securities pool at home and abroad, on and off the market, continue to expand the brand influence of the Securities Lending Path, and build a new ecology of stock pledge business that meets the needs of customers for comprehensive financing services.

(II)

Institutional services business

1.

Market environment and industry trend of institutional services business

(1)

Economic transformation and upgrading and the comprehensive deepening reform

of the capital market have provided strategic opportunities for the development of

institutional services business

As China's economy shifts to high-quality development, the supply-side structural reform and the innovation-driven development strategy are further advanced, the capital market has embarked on a new stage of comprehensive deepening reform, in which the market vitality and driving force will be further released, the institutional service business will have an opportunity to achieve leap-forward development, providing institutional clients with a full range of high-quality comprehensive financial services will become an important manifestation of the core competitiveness of securities companies. In recent years, in the context of the officially implementation of the new Securities Law, the steadily promotion of the market-oriented allocation of capital factors, the continuously improvement of the STAR Market, the accelerated adoption of the registration system reform of the ChiNext, the adjustment and optimization of refinancing rules, and the deepening reform of NEEQ Select and the market-wide registration reform about to implement, which presents the investment banking business of securities companies high-level transformation strategic opportunities, securities companies with outstanding business capabilities and rich project reserves will achieve more progresses in business and income. In the future, with the continuous improvement of our country's multi-level capital market system, the ability of the capital market to serve technological innovation and the real economy will be greatly enhanced. The securities industry is expected to expand the financing channels of new economy and technological innovation enterprises, support the integration and upgrading of traditional industrial resources, attract high-quality companies to return to domestic market, and enrich the varieties of capital market products and broaden business boundaries. Securities companies with the ability to better capture macroeconomic trends and create long-term value for their clients will face more business opportunities.

(2) The development trend of institutionalization, increased concentration, and internationalization of market participants have set higher standards for institutional services business of securities companies

Institutional investors are becoming the main force in the market, with the continuous development of domestic and foreign professional institutional investors, the marketization operation of domestic social security funds, insurance funds, and bank wealth management funds, the lowering market entry barriers for foreign capital, the increased participation of individual investors in securities market investment through asset management products, the development and application of new technologies, the accelerated process of institutionalization of the capital market, and continuously increased market value of the stock held by institutional investors and their contribution. In particular, driven by the policy orientation to promote the development of equity funds and benefited from a series of reform, the issuance of equity funds has increased significantly and the allocation of investors' equity assets has increased gradually. All these have shown a general trend for capital markets to usher in an era of institutional investors. In addition, in the context of the accelerated formation of a new pattern of high-level two-way opening of the capital market, the classified supervision of securities companies and the establishment of aircraft carrier-level securities companies, the institutional service business will put forward higher requirements on securities companies' capabilities in comprehensive service, capital strength, pricing, research, and institutional sales. And the trend of leading companies acquiring more business resources will become increasingly prominent. In the future, systematic institutional service advantages and differentiated and international institutional service capabilities will become the key competitiveness for the development of securities companies, and large securities companies with a solid institutional client base will certainly have more development opportunities.

(3) The sustainable development of institutional services business of securities companies requires strong risk management capabilities as the foundation

In the context of the continuous spread of the global epidemic, the slowdown of macroeconomic growth, the deepening of financial supply-side structural reforms, the continuous advancement of the construction of a multi-level capital market system, the increasing diversification of financial market tools, and the continuous strengthening of domestic and foreign market connection, the manifestations and transmission channels of financial risks are becoming more and more complex. To deal with this, securities companies must improve risk supervision mechanisms, improve risk management systems, standardize risk management procedures, establish risk identification and evaluation systems, etc., to comprehensively improve risk management capabilities, effectively prevent, manage and defuse financial risks and enhance core competitive advantages.

The prevention and management of financial risks requires securities companies to continue to improve the professional and platform-based comprehensive risk management mechanism to achieve centralized monitoring and analysis of risk information and full-process management and control. While defusing financial risks requires securities companies to effectively utilize the financial derivatives market while possessing strong capital strength. With the continuous improvement of the basic system of the capital market and the enrichment of financial products and risk management tools, the risk management function of the capital market has been further brought into play, and the compliance and risk management to the sustainable development of various securities companies' businesses has become increasingly important. Based on the continuous improvement in professional capabilities such as valuation, pricing and trading, securities companies should provide a full range of on-exchange and OTC derivatives trading services and seize new opportunities in the high-end development of institutional services business coupled with their unique risk management service value and differentiated financial product innovation and design capability.

2. Operational measures and achievements of institutional services business

(1) Investment banking business

During the Reporting Period, the Group fully seized the opportunities presented in the capital market reform led by the economic transformation and upgrading and the registration system. By continuing to promote the entire business chain strategy, improving the customer-centric integrated operation system as a large investment bank, accelerating the industry layout, optimizing the team structure, it effectively strengthened cross-market execution and service capabilities, and explored business opportunities based on the actual needs of key customers and capital strategies, and further enhanced the market position and brand advantages of its investment banking business.

Consolidated data

Categories

Currency: RMB

Times of lead

Lead underwriting amount

Lead underwriting income

underwriting (time)

(in RMB10 thousand)

(in RMB10 thousand)

Accumulated

Accumulated

Accumulated

of Issuance

Current Period

over the years

Current Period

over the years

Current Period

over the years

Issue of new shares

21

195

2,362,713.87

14,870,580.20

153,933.98

691,477.39

Additional issue

of shares

35

216

5,972,602.47

34,850,434.22

49,561.01

268,878.68

Allotment of shares

1

32

518,109.69

1,666,857.72

1,092.93

21,132.88

Issue of bonds

861

1,905

42,735,137.69

138,127,110.41

82,194.38

421,865.66

Total

918

2,348

51,588,563.72

189,514,982.55

286,782.30

1,403,354.61

Note: The above data are from the regulatory statements, while the statistical caliber is the issuance completion date of the project; preferred shares are included in the additional newly issued shares; bonds issuance includes treasury bonds, enterprise bonds, corporate bonds (including exchangeable bonds), convertible bonds, short-term financing bonds and medium-term notes, etc., but it excludes asset-backed securitization projects.

Ǻ

Equity underwriting business

During the Reporting Period, in terms of equity underwriting business, the Group focused on key areas, conducted forward-looking layout of growth industries, and strived to improve domestic and overseas integrated comprehensive service capabilities. At the same time, it actively reserved projects under the STAR market and ChiNext registration system, and therefore achieving comprehensive results in its business layout. According to the statistics from Wind information, the Group's equity lead underwriting amount (including the initial public offering, follow-on offering, allotment of shares, preferred shares, convertible bonds, exchangeable bonds) was RMB147.546 billion, ranking the third in the industry. According to the statistics of the Shanghai Stock Exchange, as of the end of the Reporting Period, the accumulated number of companies in the STAR Market sponsored by the Group was 44, ranking the second in the industry.

ǻ

Bonds underwriting business

During the Reporting Period, besides strict risk control, the bonds underwriting business gave full play to its all-license edge and all-round business advantages of equity-debt linkage, continuously consolidated business channels, promoted innovation-driven strategy, improved customer hierarchical management, and created a stable customer development system, expanded the quality customer base, and launched high-quality projects, seeking an improvement on top of its solid position in the industry. According to the statistics from Wind information, the Group's lead-underwriting amount of full variety bonds was RMB566.963 billion, ranking the fifth in the industry.

Ǽ

Financial advisory business

During the Reporting Period, in terms of the M&A and restructuring, the financial advisory business maintained the leading position in the industry by focusing on the promotion of benchmark large-scale projects and innovative projects, continuously improved capabilities on its industry research, the identification of high-value transaction opportunity and deal-making, and developed customer continuous services, thus further consolidating and enhancing business reputation. Among 9 institutions that are registered with and approved by the CSRC to conduct M&A transactions, the Company ranked second in the industry with a transaction amount of

RMB50.419 billion, which also ranked the second in the industry.

ǽ

OTC business

During the Reporting Period, the NEEQ business actively adapted to market conditions and strategic deployment adjustments, and promoted the reform of investment banking service system based on the whole industry chain. As of the end of the Reporting Period, the Group provided supervision services for 39 listed companies, 3 targeted placements for 3 listed companies with a total amount raised of RMB769 million, and financial advisory services for 1 listed company. Jiangsu Equity Exchange, a holding subsidiary of the Group, continued to strengthen the construction of compliance and risk control systems, regulated the development of convertible bond business, actively explored new business models, continued to expand financing service methods, adhered to the empowerment of Fintech through strengthening the application of new technologies, so as to provide comprehensive financial services for small, medium and micro enterprises. As of the end of the Reporting Period, the Group has had 8,602 enterprises listed and displayed, 136 enterprises under custody, 246 membership units, and 75,770 investors of all types, and it raised RMB12.404 billion million for enterprises through financing during the Reporting Period.

(2) Prime brokerage (PB) business

During the Reporting Period, in terms of PB business, the Group moved forward the systematic development, reshaped the customer-oriented full-chain service system centered on the comprehensive financial service needs of the customer's full life cycle, carried out market development and operation guarantee in an orderly manner, expanded basic financial functions, enriched the content of services it provided, optimized the customer structure and business structure, and at the same time continued to promote the construction of an integrated service platform for internal and external customers, continuously improved system functions, and promoted digital transformation and operational efficiency. As of the end of the Reporting Period, the Group had 5,309 fund products in custody and the total size of fund in custody reached RMB245.827 billion. There were 6,481 fund products we provide fund administration services to (including 747 products from our asset management subsidiary), of which the service scale reached RMB906.733 billion (including the business scale of asset management subsidiary of RMB567.483 billion).

(3) Research and institutional sales business

During the Reporting Period, in terms of research business, the Group continued to improve the professional talent team and personnel training system, promote the transformation of business models, strengthen the refined management of customer services, rationally allocate research business resources, improve the effectiveness of research service docking, and enhance the right to determine the price of business. It also continued to promote the construction of an intelligent research platform supported by RIS and the "Xing Zhi" (Бٝ) platform, to innovate service models, strengthen research quality management, vigorously promote the online operation of research products and services, and effectively improve the participation experience of institutional customers. The Group aimed to build an integrated domestic and overseas business operation structure and product production platform, create a product management system that adapts to international strategies, in order to meet the two-way, multi-level professional research service needs of customers at home and abroad. Relying on the advantages of the full-service chain, in terms of the institutional sales business, the Group has actively integrated business resources, given full play to the synergies, implemented classification and hierarchical management of institutional investors, digged in-depth various business needs, fully promoted the upgrade of business models and capabilities, and continued to optimize the "Xing Zhi" (Бٝ) APP service platform for institutional customers, institutional customer CRM system and other digital platform functions, creating a one-stop integrated financial service model. The Group has actively carried out various forms of research service activities, including releasing 6,572 research reports, organizing 15,019 roadshow services, holding online investment meetings and other service activities, organizing 923 thematic tele-conferences, and holding 4 thematic offline meetings. During the Reporting Period, the volume of sub-position transactions for the public fund was approximately RMB1,125.354 billion.

(4) Investment and trading business

Ǻ

Equity trading business

During the Reporting Period, the Group made ongoing efforts to resolutely promote business transformation to a trading business model, stuck to the de-directionalization, actively explored diversified trading strategic means, continuously accelerated the expansion of innovative business models, consistently enriched the business structure and built sustainable equity investment and trading systems with core competitiveness. The Group built a comprehensive market monitoring system, dynamically monitored market characteristics, actively explored the rules of market operation, monitored and followed active market themes, effectively identified market opportunities and risks and supported the development of trading business. The Group attached great importance to the research & application of advanced technologies such as big data and artificial intelligence, actively build integrated business platform and the big data transaction business system with great varieties, multi cycles and strategies, improved the fundamentals quantitative trading model of macro hedging transactions, and promoted the improvement of its transaction scale and profitability.

ǻ

FICC trading business

During the Reporting Period, the Group constantly built the customer-oriented FICC service system with transaction as the core, set up a cross-variety and cross-market product line, and promoted the upgrade and iteration of the business system through the two-way driver of institutional customer service and financial product supply. In terms of fixed-income proprietary investment business, it comprehensively used a variety of trading strategies such as derivative portfolios, leveraged spreads, and macro hedging of bulk assets, actively seized opportunities in pricing deviations and valuation repair to achieve steady growth in proprietary investment income; continued to promote the construction of the HEADS large trading platform and the development of the CAMS (credit analysis management system), and to enhance the platform-based investment and transaction capabilities and risk management capabilities systematically. As for bulk commodity business and foreign exchange business, the Group actively promoted strategic trading research, accelerated the development of cross-border commodity trading systems and product creation, in order to build core investment trading and pricing capabilities, and improve profitability.

Ǽ

OTC derivatives trading business

During the Reporting Period, the Group strived to build a customer-centric over-the-counter derivatives business system, comprehensively improved business operation efficiency with a digital transformation strategy, and continued to improve business innovation capabilities, product design and pricing capabilities, deal-making and risk hedging capabilities, deeply connecting institutional service systems and customer needs to create an institutional customer financial ecosystem with the advantages of systematic institutional services and differentiated institutional service capabilities. The new trading volume of OTC derivatives ranked among the top in the industry. As of the end of the Reporting Period, the Group had 2,642 income swap transaction businesses with a notional principal of RMB50.954 billion; the Group had 672 OTC option trading businesses with total notional principal of RMB36.245 billion. During the Reporting Period, the Group issued 3,716 private placement products through the China Securities Internet System and OTC market, with a total amount of RMB87.089 billion.

3. Prospect of institutional services business for 2021

The institutional services business is the base for an advanced business area for creating differentiated core strengths and first-class investment banking, as well as a key to consolidating and enhancing the Group's industry leading position. In 2021, the Group will continue to promote the systemic service model, accelerate the construction of digital services platforms for institutions, give full play to the advantages of "investment banking gene + full business chain", strengthen business synergy mechanisms, further enhance pricing capabilities and transaction capabilities, and build a more efficient and competitive institutional services ecosystem.

For investment banking business, we will actively grasp the market and policy opportunities, continue to follow the business philosophy of being "customer-centric", realize diversified and integrated full coverage of top customers, and adhere to the strategy of "platform empowerment + technology empowerment"; with the development direction of industry focus, regional layout and customer demand exploration, the Group will strengthen domestic and overseas, on-exchange and OTC cross-market synergy, enhance the quality control ability of the whole process to comprehensively improve the full-range product service ability and the comprehensive quick response ability, and build a big "ecosystem" with investment banks around top customers in the industry. In terms of equity underwriting business, the Group will continue to grasp the opportunities under registration system, focus on development in key regions and go deep into the industry, increase the number of high-quality customers, and strengthen cross-border linkages to truly empower customers in the introduction of domestic and foreign capital and the allocation of domestic and foreign resources; in terms of bond underwriting business, the Group has continued to achieve the overall coverage of different types of customers and the business improvement through the breakthroughs of some financial institutions, to strengthen professional layout, and exert more efforts in the marketing and development in key regions, key products, and key issuers; in terms of financial advisory business, the Group will continue to explore domestic and foreign M&A opportunities based on industrial logic, and to enhance industry research, high value trading discovery and deal-making capability.

For prime brokerage business, we will constantly optimize the function of an integrated professional institutional service platform, continue to promote the construction of intelligent business operation system, optimize service paths and processes, continuously increase the capacity and efficiency of operational service, effectively improve customer stickiness, while actively exploring new business models to broaden the boundaries of business development, and strengthen business collaboration and professional service capabilities at the same time.

For research and institutional sales business, we will continue to improve the integrated domestic and overseas business system, continuously enhance the pool of professional talents, fully explore and analyze the needs of various institutional clients, implement the customer-driven and product-driven customer service matrix, deeply implement the digital operation strategy of the full business chain, actively promote the two-way empowerment of the systematic work platform and the business, and strive to improve the capability of comprehensive financial services for institutional clients.

For investment trading business, we will continue to build platform-based and systematic investment and trading capabilities, practically upgrade to the goal of mastering asset pricing rights and productization of trading capabilities, actively build future-oriented core competitiveness, and further promote diversification of profit models. For the equity trading business, the Group will further expand and innovate business models, continue to improve the differentiated strategy system, enrich product varieties, optimize the market monitoring system, consolidate core trading capabilities, actively build an integrated platform system, comprehensively promoted the digitalization of business capacities, and improve business scale and profitability; for FICC trading business, the Group will further develop the CAMS credit analysis management system and the FICC large trading platform integrating investment transactions, risk management and performance evaluation, systematically build FICC product lines, enrich and optimize the product varieties and structure, actively guide customer needs, and continuously enhance investment and trading capacities; for OTC derivatives trading business, the Group will continue to optimize product structure, innovate business models, implement digital operation transformation, strengthen the development capacities of intelligent hedging strategy, and focus on improving the comprehensive capacities of providing financial service to institutional customer base.

(III) Investment management business

1. Market environment and industry trend of investment management business

(1) Asset management business entered into a new stage of returning to the origin with normative development

With the continuous improvement of the legal system of the asset management industry, the process of de-channelization of asset management business, the transformation of selling financial products as per their net worth, and the elimination of regulatory arbitrage continues to advance. China's asset management industry has embarked on a new journey of returning to its original intention of founding, standardizing development, and in-depth integration. The reshaping of the industry's competitive landscape is accelerating. Various asset management institutions will actively seek new business development directions and strategic layouts, and continue to build a full-range, rich and complete product system, and investment strategies with a global perspective. In the context of unified supervision of the asset management industry, asset management institutions with a relatively high proportion of channel businesses are facing greater business pressure, and securities companies urgently need to transform to active management and create differentiated core competitiveness. According to the statistics from Asset Management Association of China, as of the end of the fourth quarter of 2020, the total amount of asset management business of fund management companies and their subsidiaries, securities companies, futures companies and private fund management institutions was approximately RMB58.99 trillion, among which, the amount of private asset management business of securities companies and their subsidiaries was RMB8.55 trillion. For the asset management business of large comprehensive securities companies, they will continue to improve investment management, asset allocation and product creation capacities, build a professional asset management platform to integrate high-quality business resources, fully transform to seek active management and other ways of organic growth, and commit to providing customers with multi-level and comprehensive high-quality investment products, asset allocation and overall financial solutions based on the in-depth understanding of client needs and structural changes as well as the collaboration of full business chain and integrated professional advantages.

(2) Private equity fundraising and investment amount remained sluggish with intense industry competition and increasingly advantages of top companies

Affected by factors such as the global spread of the COVID-19 pandemic, the decline in macroeconomic growth, the promulgation of new regulations on asset management, and the tightening of supervision over private equity, the private equity market is facing severe challenges, reflected by the trend that market funding difficulties continue to increase, and the number of investment cases continues to decline and the scale of the financing and investment market of private equity remains low. At the same time, competition for high-quality projects was fierce, and there was increasing advantages in top tier institutions. Market funds were gathering to top tier institutions, which have strong professional capabilities and resource integration capabilities, and the industry reshuffle has intensified. According to the statistics from Zero2IPO Research Center private placement department, in 2020, 2,600 new funds were raised in the private equity fundraising market, with a fundraising amount of RMB940.429 billion, representing a decrease of 7.41% over 2019; and there were 3,328 investment cases in the private equity investment market, with an investment amount of RMB679.574 billion, representing an increase of 14.41% over 2019. In the long run, with the comprehensive deepening of the reform of the capital market, the multi-level market system has gradually improved. Especially in the context of implementing the reform of the ChiNext registration-based IPO system, the continuous improvement of the STAR market system and the implementation of the future market-wide registration system, the capital market will play a more important role in promoting innovative capital, in the formation of an innovative economy and other respects. There's much room for the future growth of private equity investment business. But the securities company's private equity investment business will rely on professional investment management capabilities and the advantages of the entire business chain. We will actively create new business features and differentiated competitive advantages, thus effectively improving the efficiency of serving real economy.

2. Operational measures and achievements of investment management business

(1) Asset management business of securities companies

During the Reporting Period, Huatai Asset Management, a wholly-owned subsidiary of the Group, strictly followed the new asset management rules. Capitalizing on the advantage of full-service business chain resources, it focused on building a digital and ecological operation model, comprehensively improved investment and research capability, pricing capabilities and risk control efficiency, actively cultivated sustainable, high-quality, and high-value-added business models, and continuously strengthened active investment management capabilities to provide customers with a full life cycle, comprehensive financial service solutions for the entire business chain. According to the statistics from the Asset Management Association of China as of the end of the fourth quarter of 2020, the private asset management scale of Huatai Asset Management averaged RMB484.858 billion on a monthly basis, ranking the fourth in the industry, while its private active asset management averaged RMB264.728 billion on a monthly basis, ranking the fourth in the industry. According to the statistics from Wind information, the issuance scale of enterprises' ABS (asset securitization) of Huatai Asset Management during the Reporting Period was RMB93.172 billion, ranking the fourth in the industry.

During the Reporting Period, for asset management business of securities companies, we focused on asset identification and risk control capabilities. Leveraging on the product design capabilities and the pricing advantages, we strictly controlled the quality of underlying assets, stepped up efforts in business innovation, actively transformed to active management, paid attention to the scale and quality of asset management, and continuously improved the brand effect. The collective asset management business developed steadily, further enriching the net worth product series. A total of 195 collective asset management plans were under management and the total management scale was RMB132.484 billion. In respect of the single asset management business, we continuously promoted business transformation and actively explored net worth entrusted business. Earnings were steady with regard to active investment management accounts. A total of 428 single asset management plans were under management and the total management scale was RMB308.713 billion. In respect of specialized asset management business, we continued to maintain its development advantage, with the issuance number and scale of enterprise asset securitization projects ranking in the forefront of the industry. A total of 127 specialized asset management plans were under management and the total management scale was RMB126.286 billion. In respect of the public fund management business, we actively built and enriched product lines, created net-value wealth management solutions for investors with different liquidity needs, issued and established 8 public funds and managed 17 public fund products in total with aggregated management scale of RMB24.071 billion.

The table below sets forth the scale and income of the securities companies' asset management business:

Currency: RMB

2020 2019

Entrusted scale (in Net income (in Entrusted scale (inNet income (inItem

RMB100 million) RMB10 thousand) RMB100 million) RMB10 thousand)

Collective asset management business Single asset management business

Specialized asset management business Public fund management business

1,324.84 3,087.13 1,262.86

240.71

153,409.49 34,960.34 9,839.69 13,327.56

1,474.18 133,529.53

4,438.82 33,043.78

1,116.24 9,516.18

227.37 3,716.09

Note: The above data are from the regulatory statements.

(2) Private equity fund management business

During the Reporting Period, the private equity fund management business actively adapted to regulatory changes. The Group continuously optimized the business structure system, continued to focus on industry positioning, strengthened the in-depth layout of key areas, seized the opportunities arisen in the capital market such as the reform of the STAR Market and the ChiNext registration system, gave full play to the advantages of the Group as a large platform, actively promoted the raising of equity investment funds and fund of funds, so as to strengthen the professional development of business. As of the end of the Reporting Period, Huatai Purple Gold Investment and its secondary subsidiaries as managers have filed a total of 22 private equity investment funds with the Asset Management Association of China (AMAC), with a total subscription amount of RMB47.765 billion and a total paid-up capital of RMB40.373 billion. During the Reporting Period, the above-mentioned private equity investment funds implemented a total of 32 investment projects with a total investment amount of RMB2,817,148,000, all of which were equity investment projects. According to the statistics of the AMAC, as of the fourth quarter of 2020, Huatai Purple Gold Investment ranked the second in the industry in terms of average monthly scale of private equity.

(3) Asset management business of fund companies

During the Reporting Period, with adherence to equal emphasis on compliance management and business development, fund companies under the Group actively adapted to regulatory trends and market changes, continued to consolidate the areas of strength, increased the proportion of equity funds, continued to promote business innovation, expanded business areas and optimized the layout of product lines, focused on improving the construction of intelligent systems, and further improving market competitiveness and reputation. As for asset management business of China Southern Asset Management, as of the end of the Reporting Period, the total assets managed by China Southern Asset Management amounted to RMB1,198.272 billion. Specifically, China Southern Asset Management managed a total of 233 funds in its mutual funds business, the total asset size of which amounted to RMB807.973 billion, and the total asset size of private funds business amounted to RMB390.299 billion. As for asset management by Huatai-PineBridge, as of the end of the Reporting Period, the total assets managed by Huatai-PineBridge amounted to RMB185.443 billion. Specifically, Huatai-PineBridge managed a total of 77 funds in its mutual funds business, the total asset size of which amounted to RMB162.289 billion, and the total asset size of private funds business amounted to RMB23.154 billion. (The profit or loss from equity investments of China Southern Asset Management and Huatai-PineBridge were included under other segments in the segment report)

(4) Asset management business of futures companies

During the Reporting Period, complying with the industry supervision trend, Huatai Futures, a holding subsidiary of the Group, focused on improving compliance and risk control management, actively built a diversified business system, promoted the transformation to active management business, technology empowerment, the digital operation system, so as to continuously improve its professional services and intelligent management and secure rapid growth in business scale. As of the end of the Reporting Period, Huatai Futures managed a total of 26 asset management plans which were in the duration period. The total asset management scale was RMB1,846,227,500, and the futures equity scale was RMB440,313,500.

(5) Alternative investment business

The Group carried out alternative investment business through its wholly-owned subsidiary Huatai Innovative Investment. During the Reporting Period, Huatai Innovative Investment continued to improve its internal management system and mechanism, focused on fintech equity investment and the co-investment business of the STAR Market, and steadily explored the co-investment business of the ChiNext and the strategic placement business of the NEEQ according to regulatory requirements and business layout. As of the end of the Reporting Period, there were 27 subsisting investment projects with an investment scale of RMB1,209.3546 million. The investment attributes include co-investment on the STAR Market, equity investment and asset management plan investment.

3. Prospect of investment management business for 2021

The investment management business provides a professional platform for the Group's financial product innovation and client asset management. It plays the dual strategic roles of asset manager and product supplier, and shoulders the mission of building a competitive financial product line and assisting in the transformation of wealth management. In 2021, the Group will fully rely on the resource advantage of the full business chain to create a diversified product system to meet the differentiated needs of clients, expand the scale of quality and influential products and businesses, actively build new advantages in investment management business and continuously strengthen its leading position in the industry.

The asset management business of securities companies will comprehensively strengthen the professional capabilities of compliance and risk control, coordinate the resources of the entire business chain, focus on technological empowerment, and allow digital transformation to drive the reshaping of the business system and the management processes, and actively promote the development of business platforms; deeply explore the needs of internal customers, secure more external customers, systematically build and enrich the product system, optimize the business structure, enhance differentiated asset acquisition capabilities and asset pricing capabilities, in order to comprehensively improve active investment management capabilities and investment performance, and to consolidate market positions and brand value.

In respect of private equity fund management business, we will grasp the opportunities of capital market reform, give full play to the business advantages of the whole industry chain of the Group, rely on its good management capability and historical results, combine the resource allocation of various funds such as industrial funds, M&A funds, and parent funds, as well as the investment and research advantages of key industries, continuously increase its investment efforts, and actively create first-class industry influence; we will continue to improve the construction of digital systems, and accelerate the digital transformation of work processes and realize the unified operation and management of funds through systemization, platformization and digitization.

In respect of the asset management business of fund companies, we will continue to enhance risk prevention and control and talent team building, continuously optimize investment decision-making and linkage mechanisms, continue to promote new business exploration and new product development, actively expand market and customer service boundary, increase efforts in the reform of Fintech to lead business development and management, and strive to enhance investment research professional capabilities to effectively enhance our overall asset management scale, and vigorously improve our investment performance.

In respect of the asset management business of futures companies, we will, on the basis of strengthened internal management and compliance risk control, implement the full business chain development strategies, continuously promote all-dimensional collaboration, vigorously promote the construction of a systematic platform, enhance the quality of Fintech services, actively explore diversified active management development models, and continue to build core competitiveness in investment management.

In respect of alternative investment business, we will constantly improve a new investment management and business development model, continuously optimize business operation procedures, actively seize investment opportunities, and prudently promote the development of equity investment, the co-investment of the STAR Market, and other new businesses, and steadily improve capital usage efficiency and return on assets.

(IV) International business

1. Market environment and industry trend of international business

(1) The two-way opening up of capital market accelerated the internationalization of securities industry, and clients' demand for cross-border services promoted the international service capabilities of securities companies

With the removal of restrictions on the proportion of foreign ownership in the securities industry, the optimization of the Shanghai-Shenzhen-Hong Kong Stock Connect mechanism, the expansion of the Shanghai-London Stock Connect business, the improvement of QFII and RQFII system rules, the inclusion of A-shares in important overseas market indexes and its increased weight and the improvement of domestic securities investment management requirements on foreign institutional investors, the interconnection between domestic and foreign markets has been increased, forming a new pattern of high-level two-way opening of the capital market, and in return bringing historic and major opportunities for the development of the securities industry and the internationalization of securities companies will also further advance. Currently, as clients' demands for cross-border integrated financial services are growing, and the global asset allocation continues to increase, international business has become a front field for large securities companies to expand development space, increase new profit growth points and promote business structure upgrading. Securities companies should seize the new opportunities for capital market development brought about by the all-round opening up, give full play to their professional and customer resource advantages, build a platform for synergistic resources at home and abroad, establish long-term cross-border linkage mechanisms and internal collaborative incentive mechanisms, and continuously improve cross-border customer service. While meeting the needs of the real economy with multiple varieties, cross-regional global resource layout and asset allocation, we should enhance international operation and management capabilities.

(2) Good growth momentum of the "independent" channel of the US wealth management industry is favorable for the long-term development of the TAMP market

From the perspective of the overall industry development, the current wealth management industry in the US mainly consists of the "independent" channel (registered investment advisors, hybrid and the independent broker-dealers, insurance broker-dealers etc.) and the "traditional" channel (national and regional broker-dealers, bank broker-dealers and wirehouse advisors, etc.). In the wealth management industry, the market share of the "independent" channel grows faster than that of the "traditional" channel and such trend sustains. According to the statistics of PriceMetrix, 69% of the investment advisors' revenue came from management fees in 2019, which was a record level relative to commissions. From the perspective of business development trend, the funds from investors are being transferred to investment products with lower cost and fees. The TAMP industry can keep empowering and fueling the wealth management business through leading Fintech development, which can bring the cost advantage of scale to customers and help them grasp booming development opportunities. According to the statistics of Cerulli Associates, from 2014 to 2019, the CAGR of the TAMP market was 11.4%, which was significantly higher than that of the overall investment advisory market, which was 4.8% for the same period.

2. Operational measures and achievements of international business

During the Reporting Period, as the Group's holding platform for international business, Huatai International was fully integrated into the full business chain system of the Group. It enhanced the cross-border linkage of resources and deeply promoted the construction of cross-border financial product platform, so as to provide a full range of cross-border integrated financial services for domestic and foreign customers. As of the end of the Reporting Period, total asset size of Huatai International exceeded HK$100 billion, ranking it among the first class of Chinese-funded securities firms in Hong Kong with its comprehensive strength continuing to improve.

(1) Business in Hong Kong

Huatai Financial Holdings (Hong Kong) adhered to the original business of the brokerage firm, with cross-border business as the starting point, built a comprehensive sales and transaction business platform to provide systematic financial services for institutions, individuals and corporate customers; and completed the integration of existing business lines during the Reporting Period to form a business platform system including fixed income business platform, equity business platform, personal financial platform, fund platform and flagship investment banking business. The number of newly opened institutional accounts and individual investors have both increased significantly. For the investment banking business, the Group has leveraged the advantages of domestic and foreign integration and cross-border linkage, to broaden financing channels for customers, and provide domestic and foreign equity and bond services; for FICC business, the Group has actively built a business collaborative development system and is committed to platform-based business development. At the same time, with the goal of de-directionalization, the Group has reduced the impact of market volatility, continued to improve the ability of investment management, and provided overseas financial products for domestic and foreign investors; for the equity derivatives business, the Group has utilized the advantages of the Group platform to provide customers with domestic and overseas multi-asset varieties, and comprehensive financial services of the entire business chain; for the stock sales and transactions business, the Group has provided one-stop cross-border comprehensive financial services for domestic and foreign institutional investors. During the Reporting Period, the business strategy of focusing on cash stock transactions, Synthetic transactions and QFII transactions has achieved fruitful results, making the Group the first batch of brokers to participate in all types and scenarios of QFII/RQFII lending and borrowing transactions; for retail and online financial businesses, the Group has actively promoted the online technology platform "Zhangle Global" (ပᆀΌଢஷ) to achieve platform-based large-scale customer acquisition, and continuously improved customer loyalty and value realization, building a wealth management platform that serves global Chinese communities; for the private wealth management business, the Group has intensified its effort in product development, actively carried out product sales, deepened domestic and foreign cooperation, and made full use of the advantages of the Group's customer system to provide comprehensive financial services throughout the life cycle; for the fund business, the Group has continued to implement the "investment linkage" (ҳ ҳᑌਗ) policy, obtained high-quality project resources, promoted the setting up of the fund of invested projects, and established two major private equity funds of the Greater Bay Area Fund and the China Concept Stock Return Fund; in respect of asset management business, the Group continued to strengthen cross-border linkages at home and abroad, actively developed asset management products to provide clients with investment portfolio and fund management services and constantly optimized client asset allocation.

During the Reporting Period, Huatai Financial Holdings (Hong Kong) maintained healthy and balanced business development. As of the end of the Reporting Period, Huatai Financial Holdings (Hong Kong) had a paid-in capital of HK$8.8 billion, and such capital scale was among the forefront of the industry in Hong Kong. As for securities trading, Huatai Financial Holdings (Hong Kong) achieved the total assets under custody of HK$58.382 billion and the total stocks trading volume of HK$151.900 billion; as for advising on securities, it provided research reports and advisory services for customers; as for advising on corporate finance, it participated in 23 IPO projects and 43 bond issue projects with the total amount of trading and issuance of about HK$40.196 billion, and continued to maintain its dominant position in the GDR field and took the lead in completing the issuance of Yangtze Power and CPIC project at the same time; as for financing for securities deposits, the accumulated credit amount was HK$1.756 billion; as for providing assets management, it achieved a total amount of funds under custody of HK$581.814 billion (including the scale of funds under custody of AssetMark). Besides, during the Reporting Period, Huatai Financial Holdings (Hong Kong) also completed 8 financial advisory projects. In December 2020, Huatai Financial Holdings (Hong Kong) became the first Asian financial institution to obtain the qualification of LSE to be a market maker.

(2) AssetMark

AssetMark's mission is to make a difference in the lives of independent investment advisors and the investors they serve. The highlights of AssetMark's core business include fully integrated platform with compelling technology, personalised and scalable services and curated investment function. Such clear business strategies guided AssetMark to define its short-term and long-term goals. AssetMark designs and aligns its strategies to things that matter most to advisors and that differentiate it in the TAMP marketplace. According to Cerulli Associates and other public information, as of the end of the third quarter of 2020, AssetMark's market share in the US TAMP industry was 11.0%, ranking the third in the industry.

As of the end of the Reporting Period, the total platform assets of AssetMark reached USD74.520 billion, representing an increase of approximately 20.96% from the end of 2019; the AssetMark platform served an aggregate of 8,454 independent investment advisors, representing an increase of approximately 6.23% from the end of 2019; the total investor households served by the AssetMark platform reached nearly 187,000, representing an increase of approximately 15.03% from the end of 2019. During the Reporting Period, 743 independent investment advisors signed new contracts with AssetMark.

(3) Huatai Securities (USA)

With the US broker-dealer license approved by the Financial Industry Regulatory Authority, Huatai Securities (USA) was eligible to conduct broker-dealer business in the US in 2019, including securities underwriting, securities brokerage for institutional investors, M&A and financial advisory, etc., and in 2020, it obtained qualification for proprietary trading, further expanding its business qualifications. During the Reporting Period, Huatai Securities (U.S.) continued to improve its system and platform construction to introduce US institutional investors, focused on consulting, securities distribution and trading businesses. Upon these measures, online cross-border stock trading platforms have been put into operation, investment banking continued to be promoted, and the cross-border linkage and coordination mechanism of U.S. domestic businesses and domestic and Hong Kong businesses has been continuously optimized, and business development has achieved good results.

3. Prospect of international business for 2021

International business shoulders the strategic mission of deepening cross-border development of the full business chain as well as the key to expanding room for development and creating new profit growth. The Group firmly promotes the deepening of international strategic layout. In 2021, the Group will seize the strategic opportunity of the accelerated two-way opening-up of the capital market, deepen the cross-border integrated management mechanism, strengthen the effective linkage of teams, platforms and resources, continuously expand the size of cross-border customers and business scale, optimize the structure of assets and liabilities and the revenue structure and comprehensively enhance the competitiveness and influence of international business.

Huatai International will enhance the resource integration function of the international business holding platform, continue to improve the risk internal control system, further promote fintech empowerment, focus on promoting the integrated construction of cross-border management and control, continuously improve the business platform system, closely focus on customers' needs for financial services, strengthen the cross-border linkage of the full business chain resources in different categories and levels, improve professional service system and service capabilities, and deeply expand room and potential for the development of international business.

Huatai Financial Holdings (Hong Kong) will continue to focus on customer needs and provide customers with one-stop financial services through implementing business strategies such as domestic and overseas integration, equity and debt integration, complementation of institutional business and retail business, and first-level and second-level linkage. For investment banking business, the Group will utilize the advantages of domestic and foreign integration and A+H+GDR listing experience to strengthen the linkage between domestic and foreign teams, and concentrate resources to promote project development; for FICC business, the Group will seize market opportunities to bring out its professional advantages, and achieve cross-border two-way business development to provide customers with one-stop services; for equity derivatives business, it will continue to enrich product varieties, build a financial product platform that spans domestic and foreign markets, and meet customers' needs for cross-border financial services; for stock sales and trading business, the Group will focus on the development of prime brokerage (PB) business to increase the coverage and penetration rate of institutional customers; for retail and online financial business, the Group will continue to improve the function of "Zhangle Global" (ပᆀΌଢஷ), and carry out hierarchical marketing of customers to improve customer development efficiency; for private wealth management business, it will focus on customer needs, strengthen domestic and foreign cooperation, increase product development and release, and continue to improve product and service capabilities; for fund business, it will actively introduce third-party funds, give full play to its professional design and execution capabilities in investment and financing products, and increase return on capital by improving asset distribution capabilities; for the asset management business, it will strengthen coordination and cooperation, to fully tap the advantages of business resources, strengthen investment research capabilities, thus effectively meeting the needs of asset management business.

AssetMark will apply its corporate values to all aspects of business development in adherence to its core strategy, holding onto the core business highlights, continue to build an integrated technology platform, improve customizable and scaled services, and strengthen advanced investment management capabilities. AssetMark will continue to deepen cooperation with the existing investment advisors, increase platform assets, and further expand the investment consulting customer base by leveraging sales techniques. AssetMark will actively expand relevant customer channels, including small registered investment advisory (RIA) channels, bank trust channels, insurance business channels, etc., strive to promote scale-based business, focus on increasing the scale of business under custody, and actively optimize the overall operating environment while promoting the implementation of responsibilities of public companies. In addition, AssetMark will continue to focus on high-quality strategic M&A opportunities to promote extensive growth.

Huatai Securities (USA) will further improve the team building and infrastructure construction, continuously expand its customer base and service scope for international institutions, continuously maintain the business relationship with US institutional investors and provide all-dimensional services to meet their demands for asset allocation. Meanwhile, it will strengthen the linkage and collaboration with domestic and Hong Kong business teams, fully tap into new business opportunities, actively develop new products and consistently open up space for business development.

(V) Business innovation and its effects on the Company's business performance, future development and risk control

During the Reporting Period, the Company constantly conducted business innovation activities, promoted the innovation of new businesses, new products, services and management modes, and constantly improved its innovation ability. The development of innovative business is a supplement to the existing product lines and business scope, which can effectively release business space, expand client resources and revenue sources, enhance profitability, as well as improve customer structure and business model, meet customers' full and diversified business needs, and further enhance brand influence.

The Company improved the new business risk assessment mechanism, strengthened the quality control management of the Group's new business risk assessment and automatic control of the assessment process, enhanced the quality control over the implementation of the new business process and the implementation of the new business follow-up assessment mechanism, and boosted the effectiveness of the operation of the new business assessment mechanism.

The Company actively responded to the reform of the ChiNext Market. For the relaxing of restrictions on growth and decline, being subjects of margin financing and securities lending on the first trading day after listing and other changes, the Company comprehensively analyzed the risks and impacts on margin financing and securities lending and the stock pledge business, studied and improved concentration restrictions on the ChiNext Market, margin call and mandatory liquidation mechanism, risk tracking and back-tracing mechanism and other risk prevention measures to ensure that all businesses could be carried out constantly and steadily on the premise that related risks are measurable, controllable and bearable.

The Company actively promoted the construction of integrated platform "Securities Lending Path" €ፄՎஷ. Through comprehensive analysis of major risks in all links in the platform construction and business scenarios, the Company studied and designed the risk management and control mechanism ancillary to businesses covering all links such as access, trading and operation to guarantee the stable and orderly operation of the integrated business and platform.

The Company actively promoted the transformation of wealth management and obtained the first pilot qualification as a brokerage firm for fund investment advisory services. The Company established and perfected its business management system and specially formulated business compliance and risk management measures, and established an integrated front, middle and back risk control mechanism covering multi-level division of labor, centralized and unified decision-making, front-end control of key indicators, multi-person review of important links, real-time monitoring and disposal of business operations, and regular verification and evaluation to ensure the smooth launch of business.

II.

MAJOR OPERATIONS DURING THE REPORTING PERIOD

As of December 31, 2020, on a consolidated basis, total assets of the Group amounted to RMB716,751,235 thousand, representing a year-on-year increase of 27.49%; total equity attributable to shareholders of the Company amounted to RMB129,071,500 thousand, representing a year-on-year increase of 5.33%; total revenue and other income amounted to RMB40,534,436 thousand, representing a year-on-year increase of 24.96%; and profit for the year attributable to shareholders of the Company amounted to RMB10,822,497 thousand, representing a year-on-year increase of 20.23%.

(I)

MAIN BUSINESSES ANALYSIS

1.

Analysis table of the changes in relevant items of the income statement and the cash

flow statement

Item

Unit: Thousand Yuan Currency: RMB

Amount for Amount for the current the same period Change period of last year percentage (%)

Total revenue and other income

40,534,436

32,436,781

24.96

Total expenses

(31,233,707)

(23,577,265)

32.47

Profit before income tax

13,504,376

11,585,965

16.56

Profit for the year attributable to the

shareholders of the Company

10,822,497

9,001,644

20.23

Net cash used in operating activities

(13,868,924)

(3,594,637)

285.82

Net cash used in investing activities

(13,451,545)

(3,943,473)

241.11

Net cash generated from financing activities

26,850,070

35,669,120

(24.72)

Net (decrease)/increase in cash and

cash equivalents

(470,399)

28,131,010

(101.67)

2. Income and other gains

As of December 31, 2020, the Group recorded income and other gains of RMB40,534 million, representing a year-on-year increase of 24.96%, which was mainly attributable to the increase in fee and commission income and interest income, in which:

  • (1) Fee and commission income recorded a year-on-year increase of 41.86% to RMB18,458 million, accounting for 45.54%, mainly due to the increase in commission income from brokerage business and charges income from investment banking business.

  • (2) Interest income recorded a year-on-year increase of 26.27% to RMB10,964 million, accounting for 27.05%, mainly due to the increase in the Group's income from margin financing and securities lending business.

  • (3) Net investment gains recorded a year-on-year increase of 10.67% to RMB10,160 million, accounting for 25.06%, mainly due to the increase in revenue from the Group's investment business.

  • (4) Other income and gains recorded a year-on-year decrease of 39.01% to RMB953 million, accounting for 2.35%, mainly due to the increase in exchange losses.

Unit: Thousand Yuan Currency: RMB

Fee and commission income

Interest income

Net investment gains

Other income and gains

Total revenue and other income

2020

2019

Item

Amount

Ratio

Amount

Ratio

18,457,811

45.54%

13,011,269

40.11%

5,446,542

41.86%

10,963,881

27.05%

8,682,693

26.77%

2,281,188

26.27%

10,159,587

25.06%

9,179,944

28.30%

979,643

10.67%

953,157

2.35%

1,562,875

4.82%

(609,718)

(39.01)%

40,534,436

100.00%

32,436,781

100.00%

8,097,655

24.96%

66

Increase/decrease Amount Ratio

3. Total expenses

As of December 31, 2020, the Group's total expenses were RMB31,234 million, representing a year-on-year increase of 32.47%, mainly due to the increase in staff costs and interest expenses, in which:

  • (1) Fee and commission expenses amounted to RMB4,849 million, representing a year-on-year increase of 30.23%, mainly due to the increase in expenses from securities brokerage business.

  • (2) Interest expenses amounted to RMB8,359 million, representing a year-on-year increase of 27.40%, mainly due to the increase in the relevant finance costs during the Reporting Period as a result of the larger debt financing scale as compared to the same period of last year.

  • (3) Staff costs amounted to RMB10,404 million, representing a year-on-year increase of 35.23%, mainly due to the increase in accrued staff costs as a result of the income growth in the Group.

  • (4) Other expenses mainly include depreciation and amortisation expenses, tax and surcharges as well as (reversal of)/provision for asset impairment loss and other operating expenses.

Unit: Thousand Yuan Currency: RMB

2020

2019

Amount

Ratio

Amount

Ratio

Fee and commission expenses

(4,849,322)

15.53%

(3,723,642)

15.79%

(1,125,680)

30.23%

Interest expenses

(8,358,703)

26.76%

(6,561,019)

27.83%

(1,797,684)

27.40%

Staff cost

(10,403,649)

33.31%

(7,693,154)

32.63%

(2,710,495)

35.23%

Depreciation and

amortisation expenses

(1,341,384)

4.29%

(1,197,068)

5.08%

(144,316)

12.06%

Tax and surcharges

(209,157)

0.67%

(151,890)

0.64%

(57,267)

37.70%

Other operating expenses

(4,765,630)

15.26%

(3,533,560)

14.99%

(1,232,070)

34.87%

Impairment loss on

financial assets

(1,306,208)

4.18%

(719,549)

3.05%

(586,659)

81.53%

Other asset impairment

(loss)/reversal

346

-

2,617

(0.01)%

(2,271)

(86.78)%

Total expenses

(31,233,707)

100.00%

(23,577,265)

100.00%

(7,656,442)

32.47%

67

Increase/Decrease Amount Ratio

Item

4. Analysis of income and other gains and expenses

(1) Analysis of segment income and other gains

Unit: Thousand Yuan Currency: RMB

Increase or decrease in

Percentage of

Segment

Percentage of

percentage of total

total segment

income

total segment

segment income and

Segment income

income and

and other gains

income and

other gains as

and other gains

other gains

for the same

other gains for

compared to

for the current

for the current

period of last

the same period

the same period

Business segment

period

period (%)

year

of last year (%)

of last year

Wealth management

19,477,433

48.05

14,143,760

43.60

Increase of 4.45

business

percentage points

Institutional services

10,524,711

25.96

8,367,659

25.80

Increase of 0.16

business

percentage point

Investment

4,070,097

10.04

4,367,993

13.47

Decrease of 3.43

management

percentage points

business

International

5,550,607

13.69

4,048,517

12.48

Increase of 1.21

business

percentage points

Others (including

911,588

2.26

1,508,852

4.65

Decrease of 2.39

offset)

percentage points

During the Reporting Period, on a consolidated basis, the Group recorded income and other gains of RMB40,534,436 thousand in total, representing a year-on-year increase of 24.96%. Among the principal business segments, income and other gains from wealth management, institutional services, investment management and international business increased year-on-year by RMB5,333,673 thousand, RMB2,157,052 thousand, RMB-297,896 thousand and RMB1,502,090 thousand, respectively.

In terms of income structure, the business structure of the Group has continued to be optimized. The income from wealth management business accounted for 48.05% of the Group's revenue, representing an increase in proportion of 4.45 percentage points, mainly because the Group's margin financing and securities lending recorded significant increase and the business transformation continued to advance due to the active trading of the stock market for the whole year; the income from international business accounted for 13.69% of the Group's revenue, representing an increase in proportion of 1.21 percentage points, mainly attributable to the improved results of Huatai Financial Holdings (Hong Kong) and the good performance of AssetMark; benefited from the good performance of the investment and trading business and the effectiveness of institutional integration services, the institutional service business contributed 25.96% of the Group's revenue; and due to the forward-looking layout of the Group's private equity investment and innovation investment in big health and technology industries, the investment management business contributed 10.04% of the Group's revenue.

(2) Statement of analysis on segment expenses

Unit: Thousand Yuan Currency: RMB

Percentage of total segmentSegmentPercentage of total segmentSegment expenses for the expenses for the expenses for theBusiness segmentexpenses for the current period

current period (%)

same period of last yearsame period of last year (%)

Increase or decrease in percentage of total segment expenses as compared to the same period of last year

Wealth management business Institutional services business Investment management business International business Others (including offset)

(14,213,154)

(6,426,891)

(1,756,231)

45.51 20.58 5.62

(10,057,458)

  • 42.66 Increase of 2.85 percentage points

    (5,314,444)

  • 22.54 Decrease of 1.96 percentage points

    (1,429,079)

  • 6.06 Decrease of 0.44 percentage point

    (5,290,461)

    (3,546,970)

    16.94 11.35

    (3,945,267)

  • 16.73 Increase of 0.21 percentage point

    (2,831,017)

  • 12.01 Decrease of 0.66 percentage point

In terms of expenses of each business segment as a percentage of total expenses of the Group, expenses of wealth management business segment increased by 2.85 percentage points, mainly due to the increase in fee expenses of brokerage business and interest expenses; expenses of international business increased by 0.21 percentage point while expenses of institutional services business segment and investment management business segment decreased by 1.96 percentage points and 0.44 percentage point, respectively.

5. Cash flow

Unit: Thousand Yuan Currency: RMB

Amount for the

Amount for the

same period

current period

of last year

Net cash used in operating activities

(13,868,924)

(3,594,637)

285.82

Net cash used in investing activities

(13,451,545)

(3,943,473)

241.11

Net cash generated from financing activities

26,850,070

35,669,120

(24.72)

Net (decrease)/increase in cash and cash

equivalents

(470,399)

28,131,010

(101.67)

Amount of increase or decrease

ItemPercentage of increase or decrease (%)

(10,274,287) (9,508,072) (8,819,050)

(28,601,409)

During the Reporting Period, the net decrease of cash and cash equivalent of the Group was RMB470,399 thousand, in which:

  • (1) Net cash used in operating activities was RMB13,868,924 thousand, mainly due to the increase in credit business scale.

  • (2) Net cash used in investing activities was RMB13,451,545 thousand, mainly due to the increased investment scale in financial products.

(3)Net cash generated from financing activities was RMB26,850,070 thousand, mainly because the issuance size of GDRs for the last year was larger while there is none of equity financing during the current year in terms of equity financing.

6.

Detailed description of significant changes in components or sources of the Group's profit

Unit: Thousand YuanCurrency: RMB

ItemAmount for the current periodAmount for the same period of last yearYear-on-year change (%)

Principal reason

Total revenue and other gains Total expensesOperating profit

Profit before income tax

Profit for the year

Among which: profit for the year attributable to shareholders of the Company Total assets

Total liabilitiesTotal shareholders' equity

40,534,436

(31,233,707)

9,300,729 13,504,376 10,870,446 10,822,497

716,751,235

584,439,200

132,312,035

32,436,781

(23,577,265)

8,859,516 11,585,965 9,057,213 9,001,644

562,180,638

436,525,930

125,654,708

  • 24.96 Increase in fee and commission income and net investment gains

  • 32.47 Increase in interest expenses, staff costs and fee and commission expenses

  • 4.98 Increase in total revenue and other gains

  • 16.56 Increase in total revenue and other gains

  • 20.02 Increase in total revenue and other gains

  • 20.23 Increase in total revenue and other gains

  • 27.49 Increase in cash held on behalf of brokerage clients and margin accounts receivable

  • 33.88 Increase in accounts payable to brokerage clients and other liabilities

  • 5.30 Profit retention for the year

(II)

Analysis of key items of consolidated statement of financial position

1.

General Description of Consolidated Statement of Financial Position

Unit: Thousand YuanCurrency: RMB

As at December 31, 2020

As at December 31, 2019

Increase/decrease

Non-current assets

Property and equipment

Investment properties

Goodwill

Other intangible assets

Interest in associates

Interest in joint ventures

Debt investment at amortised cost

Financial assets at fair value through

other comprehensive income

Financial assets at fair value through

profit or loss

Refundable deposits

Deferred tax assets

Other non-current assets

Total non-current assets

Current assets

Accounts receivable

Other receivables and prepayments

Margin accounts receivable

Debt investment at amortised cost

Financial assets held under

resale agreements

Financial assets at fair value through

profit or loss

Financial assets at fair value through other

comprehensive income

Derivative financial assets

Clearing settlement funds

Cash held on behalf of brokerage clients

Cash and bank balances

Total current assets

Total assets

Item

Amount

Ratio

Amount

Ratio

Amount

Ratio

5,014,084

0.70%

4,668,116

0.83%

345,968

7.41%

408,338

0.06%

527,089

0.09%

(118,751)

(22.53)%

2,260,945

0.32%

2,333,862

0.42%

(72,917)

(3.12)%

5,276,069

0.74%

5,711,457

1.02%

(435,388)

(7.62)%

17,691,161

2.47%

14,974,547

2.66%

2,716,614

18.14%

1,641,846

0.23%

664,458

0.12%

977,388

147.10%

19,230,660

2.68%

15,128,953

2.69%

4,101,707

27.11%

14,401,106

2.01%

11,232,633

2.00%

3,168,473

28.21%

9,229,523

1.29%

6,966,333

1.24%

2,263,190

32.49%

24,763,790

3.46%

12,653,540

2.25%

12,110,250

95.71%

339,502

0.05%

202,825

0.04%

136,677

67.39%

283,320

0.02%

260,669

0.05%

22,651

8.69%

100,540,344

14.03%

75,324,482

13.40%

25,215,862

33.48%

9,095,561

1.27%

5,511,168

0.98%

3,584,393

65.04%

1,131,408

0.16%

880,271

0.16%

251,137

28.53%

102,574,007

14.31%

69,006,280

12.27%

33,567,727

48.64%

11,180,848

1.56%

4,610,805

0.82%

6,570,043

142.49%

19,536,413

2.73%

18,466,280

3.28%

1,070,133

5.80%

282,577,589

39.42%

245,829,339

43.73%

36,748,250

14.95%

1,545,266

0.22%

1,125,342

0.20%

419,924

37.32%

7,295,357

1.02%

1,858,041

0.33%

5,437,316

292.64%

6,988,396

0.98%

6,755,604

1.20%

232,792

3.45%

124,635,007

17.39%

82,959,838

14.76%

41,675,169

50.24%

49,651,039

6.91%

49,853,188

8.87%

(202,149)

(0.41)%

616,210,891

85.97%

486,856,156

86.60%

129,354,735

26.57%

716,751,235

100.00%

562,180,638

100.00%

154,570,597

27.49%

71

Item

Amount

Ratio

Amount

Ratio

Ratio

Current liabilities

Short-term bank loans

11,299,859

1.93%

5,724,131

1.31%

97.41%

Short-term debt instruments issued

43,951,388

7.52%

46,425,196

10.64%

(2,473,808)

(5.33)%

Placements from other financial

institutions

4,815,236

0.82%

11,362,598

2.60%

(6,547,362)

(57.62)%

Accounts payable to brokerage clients

136,387,634

23.34%

89,817,920

20.58%

46,569,714

51.85%

Employee benefits payable

4,156,895

0.71%

2,573,753

0.59%

1,583,142

61.51%

Other payables and accruals

105,880,311

18.12%

86,836,626

19.89%

19,043,685

21.93%

Contract liabilities

92,366

0.02%

19,179

-

73,187

381.60%

Current tax liabilities

1,275,589

0.22%

388,154

0.09%

887,435

228.63%

Financial assets sold under repurchase

agreements

139,899,968

23.94%

109,719,045

25.13%

30,180,923

27.51%

Financial liabilities at fair value through

profit or loss

12,196,234

2.09%

4,689,620

1.07%

7,506,614

160.07%

Derivative financial liabilities

13,398,830

2.29%

1,278,399

0.29%

12,120,431

948.09%

Long-term bonds due within one year

11,428,893

1.95%

14,716,533

3.37%

(3,287,640)

(22.34)%

Total current liabilities

484,783,203

82.95%

373,551,154

85.57%

111,232,049

29.78%

Net current assets

131,427,688

-

113,305,002

-

18,122,686

15.99%

Total assets less current liabilities

231,968,032

-

188,629,484

-

43,338,548

22.98%

Non-current liabilities

Long-term bonds

85,624,295

14.65%

49,899,825

11.43%

35,724,470

71.59%

Long-term bank loans

475,414

0.08%

850,997

0.19%

(375,583)

(44.13)%

Non-current employee benefits payable

6,974,615

1.19%

6,360,633

1.46%

613,982

9.65%

Deferred tax liabilities

2,545,647

0.44%

2,566,800

0.59%

(21,153)

(0.82)%

Financial liabilities at fair value through

profit or loss

3,185,296

0.55%

2,690,563

0.62%

494,733

18.39%

Other payables and accruals

850,730

0.14%

605,958

0.14%

244,772

40.39%

Total non-current liabilities

99,655,997

17.05%

62,974,776

14.43%

36,681,221

58.25%

Net assets

132,312,035

100.00%

125,654,708

100.00%

6,657,327

5.30%

Shareholders' equity

Share capital

9,076,650

6.86%

9,076,650

7.22%

-

-

Treasury share

(1,626,546)

(1.23)%

-

-

(1,626,546)

-

Reserves

92,622,778

70.00%

90,282,418

71.85%

2,340,360

2.59%

Retained profits

28,998,618

21.92%

23,178,411

18.45%

5,820,207

25.11%

Total equity attributable to

shareholders of the Company

129,071,500

97.55%

122,537,479

97.52%

6,534,021

5.33%

Non-controlling interests

3,240,535

2.45%

3,117,229

2.48%

123,306

3.96%

Total shareholders' equity

132,312,035

100.00%

125,654,708

100.00%

6,657,327

5.30%

72

Increase/decrease Amount

As at December 31, 2020

As at December 31, 2019

5,575,728

As of December 31, 2020, total non-current assets of the Group amounted to RMB100,540 million, representing an increase of RMB25,216 million as compared to the beginning of the year, which was mainly due to the increase of RMB12,110 million in refundable deposits, and the increase in debt investment at amortised cost, financial assets at fair value through other comprehensive income and financial assets at fair value through profit or loss of RMB4,102 million, RMB3,168 million and RMB2,263 million, respectively, as compared to the beginning of the year. As of December 31, 2020, total non-current liabilities of the Group amounted to RMB99,656 million, representing an increase of RMB36,681 million as compared to the beginning of the year, which was mainly due to the increase in long-term bonds of RMB35,724 million.

As of December 31, 2020, total current assets of the Group amounted to RMB616,211 million, representing an increase of RMB129,355 million as compared to the beginning of the year, which was mainly due to the increase in cash held on behalf of brokerage clients of RMB41,675 million. As of December 31, 2020, total current liabilities of the Group amounted to RMB484,783 million, representing an increase of RMB111,232 million as compared to the beginning of the year, which was mainly due to the increase in accounts payable to brokerage clients of RMB46,570 million, the increase in financial assets sold under repurchase agreements and other payables and accruals of RMB30,181 million and RMB19,044 million, respectively.

2. Major restricted assets as of the end of the Reporting Period

As of the end of the Reporting Period, major restricted assets of the Group totaled RMB160,534,113 thousand, including cash and bank balances, margin accounts receivable, financial assets at fair value through profit or loss, financial assets at fair value through other comprehensive income, and debt investment at amortised cost. Except for the above assets, no prime assets of the Group were seized, detained, frozen, mortgaged or pledged so that they could or could not be realized, or could not be used to pay the debts only under a certain condition. There was no circumstance or arrangement under which the prime assets were occupied, used or benefited or the disposal of them was limited.

3. Description of changes in the measurement of assets measured at fair value and prime assets

Fair value refers to the price received for selling one asset or the price payable for transferring one liability by a market participant in an orderly transaction on the measurement date.

When estimating the fair value, the Group considers the characteristics that the market participants consider when they price the related assets or liabilities on the measurement date (including the asset status and the limitation on selling or using the assets), and adopts the currently available valuation techniques that are supported by adequate available data and other information. The main valuation techniques used include market approach, income approach and cost approach.

The impact of gains and losses of changes in fair value on the Group's profit during the Reporting Period is as follows:

Unit: Thousand Yuan Currency: RMB

Impact on profit Impact on profitItem

for 2020 for 2019

Financial assets at fair value through profit or loss

5,633,455

3,948,813

Financial liabilities at fair value through profit or loss

(954,692)

(451,295)

Derivative financial instruments

(7,426,886)

(1,440,211)

Total

(2,748,124)

2,057,306

4. Structure and quality of assets

As of December 31, 2020, total shareholders' equity of the Group amounted to RMB132,312 million, representing an increase of RMB6,657 million or 5.30% as compared to that of the end of 2019, which was mainly due to the effects of profit retention plus the distribution of dividends and share repurchase by the Group during the Reporting Period.

The asset structure of the Group continued to optimize and our assets quality and liquidity remained sound. As of December 31, 2020, total assets of the Group amounted to RMB716,751 million, representing an increase of RMB154,571 million or 27.49% as compared to the beginning of the year. Specifically, cash and bank balances, cash held on behalf of brokerage clients and clearing settlement funds amounted to RMB181,274 million, accounting for 25.29% of the total assets; margin accounts receivable amounted to RMB102,574 million, accounting for 14.31% of the total assets; financial assets at fair value through profit or loss amounted to RMB291,807 million, accounting for 40.71% of the total assets; debt investment at amortisation cost and financial assets at fair value through other comprehensive income amounted to RMB46,358 million, accounting for 6.47% of the total assets; property and equipment, investment properties and other intangible assets accounted for 1.49% of the total assets. Most of the assets have strong cashability. The Group's assets have strong liquidity and the asset structure is reasonable.

During the Reporting Period, the Group's debt-to-assets ratio has increased. As of December 31, 2020, the liabilities of the Group amounted to RMB584,439 million, representing an increase of RMB147,913 million or 33.88%, mainly due to the increase in securities brokerage services. The debt-to-assets ratio was 77.20% (excluding the impact of customer funds), representing an increase of 3.80 percentage points as compared to the beginning of the year. During the Reporting Period, the structure of the liabilities of the Group has been adjusted. Long-term bonds increased by RMB35,724 million as compared to the beginning of the year, and financial assets sold under repurchase agreements increased by RMB30,181 million as compared to the beginning of the year.

As of December 31, 2020, the Group obtained funds through borrowings and debt financing instruments. As of the end of the Reporting Period, total principal of the placements from other financial institutions of the Group amounted to RMB157,595 million. Details are shown as follows:

Currency: RMB

As of

December

Borrowings and debt financing plans

31, 2020

Placement from China Securities Finance Corporation Limited

-

Placement from other financial institutions

4,815,236

Short-term bank loans

11,299,859

Short-term debt instruments issued

43,951,388

Long-term bank loans

475,414

Long-term bonds

97,053,188

Total principal

157,595,085

Unit: Thousand Yuan

Borrowings and debt-financing with a financing maturity of more than one year were RMB97,529 million, accounting for 61.89%. Among them, programs with a financing maturity of one to two years were RMB14,354 million, those with a financing maturity of two to five years were RMB77,004 million and those with a financing maturity of more than five years were RMB6,171 million. Borrowings and debt-financing with a financing maturity of less than one year were RMB60,066 million, accounting for 38.11%.

As of December 31, 2020, the Group's borrowings and debt financing with fixed interest rate were RMB157,120 million. In particular, the balance of short-term bank loans was RMB11,300 million; the balance of placement from other financial institutions was RMB4,815 million; the balance of income receipts with fixed interest rate was RMB20,416 million; short-term financing bonds were RMB5,007 million; the balance of corporate bonds was RMB101,453 million; the balance of subordinated debts was RMB7,919 million; and the balance of foreign debts was RMB6,210 million.

As of December 31, 2020, cash and cash equivalents of the Group amounted to RMB67,646 million, of which RMB cash and cash equivalents accounted for 83.02%.

As of December 31, 2020, among the Group's short-term bank loans, RMB105 million were pledge borrowings and RMB11,195 million were credit borrowings.

As of December 31, 2020, all of the Group's long-term bank loans were credit borrowings.

5. Analysis of profitability

In 2020, the COVID-19 epidemic has had a significant impact around the globe. The Group firmly implemented the "two-pronged" (ᕐቃᚨਗ) development strategy of wealth management and institutional services, and enhanced its digital operation capability with technology empowerment. Its main businesses have been growing steadily throughout the year and its comprehensive strength soundly ranked in the forefront of the industry. The market rankings of the Group's key business indicators in terms of stock fund trading volume and financing balance were in leading positions in the industry. The Group achieved a rapid development in international business and its general profitability remained stable.

6. Explanations on the changes in the scope of consolidation of the statements

For details of the explanations on the changes in the scope of consolidation of the statements of the Group, please refer to Note 24 to the financial statements of this report headed "Investment in Subsidiaries".

7. Analysis of income tax policy

During the Reporting Period, the Company's income tax was subject to the Corporate Income Tax Law of the PRC ( ʕശɛ͏΍ձ਷Άุה੻೼ج') and the Enforcement Regulations of Corporate Income Tax Law of the PRC ( ʕശɛ͏΍ձ਷Άุה੻೼جྼ݄ૢԷ'). The calculation and payment methods of the income tax shall be subject to the Announcement of the State Administration of Taxation on Issuing the Measures for the Consolidated Collection of Corporate Income Tax on Trans-regional Business Operations (GJSWZJGG [2012] No. 57) ( ਷࢕೼ਕᐼ҅ ᗫ׵Ι೯<༨ήਜ຾ᐄිᐼॶ೼Άุה੻೼ᅄϗ၍ଣ፬ج>ٙʮѓ'(਷࢕೼ਕᐼ҅ʮѓ[2012]57)). The income tax rate applicable to the Company and its domestic subsidiaries is 25%. The Company enjoys the preferential policy of calculating and deducting research and development expenses, and the profit tax rate applicable to the Hong Kong subsidiary of the Company is 16.5%. Other overseas subsidiaries of the Company are subject to income taxes at tax rates applicable in their jurisdictions.

8. Analysis of financing channels and financing capacity

Financing channelsIn terms of financing methods, the Company has two financing channels, equity financing and debt financing. In terms of financing maturity, the Company's short-term financing channels mainly included credit lending via interbank market, bond repurchasing via interbank market and stock exchange market, issuing short-term financing bills, short-term corporate bonds, short-term subordinated debt and income credential, carrying out income rights financing in relation to margin financing and securities lending from banks and other financial institutions, and asset securitization, etc., and the Company's medium and long-term financing channels included issuing corporate bonds, long-term subordinated debt and equity refinancing, etc. After years of effective efforts, the Company explored and established a short, medium and long-term financing platform with new financing tools and multiple financing channels, which played a key role in the rapid development process of the Company's business. At the same time, the Company can also introduce foreign currency funds through the issuance of overseas bonds and medium-term notes to support its business development.

Liquidity management The Company has always attached great importance to liquidity policies and measures management. As for funds management, it adhered to the principle of "full amount concentrated, allocated in a unified way, valued by classification and monitored timely". In terms of management and development strategies, it paid attention to matching business scale with liabilities. Based on reasonable asset allocation and diversified debt financing, the Company ensured reasonable matching of duration, scale of assets liabilities and proper liquidity.

The Company followed the general principles of comprehensiveness, prudency, predictiveness according to the centralized management and hierarchical prevention and control management model, continuously improved and optimized a liquidity risk management system appropriate to the Company's strategy, and implemented liquidity risk management with the preference for "steadiness and safety" (ᖢ਄τΌ). The Company ensured no liquidity risk that would cause significant impacts on sustainable operation, so as to fully guarantee the steady and safe development of the business of the Company.

In order to ensure its liquidity, the Company has adopted various measures mainly including: 1) constantly improving the capital planning system, strengthening the management of capital position and cash flow monitoring, and built a daytime liquidity monitoring system so as to ensure the security of daytime liquidity; 2) strengthening the management for the matching between durations of assets and liabilities and establishing high-quality current asset reserves, in order to enhance the diversity and stability of financing; 3) continuously improving the liquidity management platform, and achieving improved timeliness and accuracy for optimizing and identification, measurement, monitoring and controlling on liquidity risks through information system, in order to ensure that the liquidity risks are measurable, controllable and tolerable; 4) analyzing supervisory indicators of cash flow and liquidity risk under certain stress scenarios to evaluate the tolerance level of the Company for liquidity risks and analyzing the stress test results to constantly improve the Company's response capacity for liquidity risks; 5) leveraging the consolidation supervision to strengthen the subsidiary liquidity risk guidance, improving the subsidiaries' liquidity risk management ability and exploring an intergroup liquidity contingency system; 6) organizing the formulation, exercise and evaluation of a liquidity risk contingency plan, in order to improve the Company's emergency capacity for liquidity risks; and 7) improving the liquidity risk reporting system, so as to ensure that the management is able to keep abreast of the Group's liquidity risk level and management situation.

Analysis of financing capability and financing strategy

The Company operated in compliance with regulations, enjoyed sound reputation as well as strong capital strength, profitability and debt repayment ability, maintained good cooperation relationships with commercial banks, had sufficient bank credit with the credit line increasing steadily, and possessed strong short-term and medium-to-long term financing abilities. As a listed securities dealer, the Company can also meet the fund demand for long-term development by means such as equity refinancing.

Taking into consideration both liquidity and profitability, the Company held a certain amount of fixed-income products. Interest rate changes will bring direct impact to the interest income of the cash and the market price and investment income of the bond investment held by the Company. Margin financing and securities lending and other capital intermediary business, corporate debt financing and other businesses which directly relate to interest rates may directly impact corresponding interest income and financing interest expenses. At the same time, the Company's stock investment was also indirectly affected by interest rate changes. In addition, as the Company has registered overseas subsidiaries whose capital is contributed in foreign currency, the Company holds foreign currency funds and assets, and the changes of exchange rate will have certain impact on the Company's financial situation.

To maintain the liquidity of the Company's assets and rate of return, the Company's own capital was uniformly managed by Capital Operation Department in accordance with a sound management system and corresponding business processes. The Company optimized the distribution of assets and liabilities structure by timely adjusting all kinds of asset structure, strengthened the research on the interest rate and exchange rate market, and used appropriate interest rate, exchange rate and other derivative financial tools to avoid risks and reduce the influence of these factors.

Contingencies and their impacts on the financial situation of the Company

-

(III)

Analysis of industry operation

For details, please refer to "Management Discussion and Analysis and Report of the Board" in this report.

(IV)

Analysis of investments

1. Overall analysis of external equity investments

As of the end of the Reporting Period, long-term equity investments of the Group amounted to RMB19.333 billion, representing an increase of RMB3.694 billion or 23.62% as compared to RMB15.639 billion as at the beginning of the period. For details of the overall situation of the Group's external equity investment, please refer to Note 25 headed "Interest in associates" and Note 26 headed "Interest in joint ventures" to the financial statements in this report.

  • (1) The Company had no significant equity investment

  • (2) The Company had no significant non-equity investment

  • (3) Financial assets measured at fair value

Financial assets at fair value through profit or loss

Financial assets at fair value through other comprehensive income Derivative financial instruments Total

Currency: RMB

The changed

amount of fair

Balance at

Balance at

value during the

the end of

the end of

Reporting

Item

last year

this year

Period

252,795,672

291,807,112

5,633,455

12,357,975

15,946,372

579,642

(6,103,473)

265,733,289

301,650,011

80

(9,281)

Unit: Thousand Yuan

Investment income during the Reporting

Period

23,777,441

263,479

(10,441,578) (7,461,234)

13,326,582 (1,564,300)

2.

Information about the use of raised funds

(1)

Overview of the use of raised funds

Ǻ

Overview of the use of funds raised from the issuance of A Shares

(a)

Information about the use of funds raised from the Initial Public Offering of A Shares

Under the Approval for the Initial Public Offering by Huatai Securities Co., Ltd. (Zheng Jian Xu Ke [2010] No. 138) ( ᗫ׵ࣨࡘ華泰證券股份有限公司࠯ϣʮක೯Бٰୃٙҭᔧ'(ᗇ္஢̙ [2010]138)) issued by the CSRC, the Company publicly issued 784,561,275 RMB denominated ordinary shares to the public on February 9, 2010, each with a nominal value of RMB1.00 at an offering price of RMB20.00, and the total amount of funds raised was RMB15,691,225,500.00. The raised funds after deducting the underwriting fee and sponsoring fee of RMB130 million were RMB15,561,225,500.00, which were all in place on February 12, 2010, and verified by Jiangsu Talent Certified Public Accountants with the capital verification report of "Tian Heng Yan Zi (2010) No. 009". As of December 31, 2012, all the principal of the funds raised from the IPO were used up and the accumulative amount of RMB15.681 billion of the raised funds (including interest of raised funds of RMB119,808,200) were used. All of the accounts designated for the use of raised funds of the Company have been cancelled with settlement of interests.

(b) Information about the use of funds raised from the Non-Public Issuance of A Shares

Upon the Approval for the Non-Public Issuance of Shares by Huatai Securities Co., Ltd. (Zheng Jian Xu Ke [2018] No. 315) ( ᗫ׵ࣨࡘ華泰證券股份有限公司ڢʮක೯Бٰୃٙҭᔧ'(ᗇ ္஢̙[2018]315)) issued by the CSRC, the Company completed the non-public issuance of 1,088,731,200 RMB denominated ordinary shares (A Shares) in July 2018, each with a nominal value of RMB1.00 at an offering price of RMB13.05 and the total amount of funds raised was RMB14,207,942,160.00. After deducting the issuing fees of RMB74,736,488.79 related to the non-public offering (including underwriting sponsorship fee, attorney fee, accountant fee, information disclosure fee, issuance registration fee, stamp duty and other fees), the net funds raised were RMB14,133,205,671.21, which were all in place on July 31, 2018 and were verified by KPMG Huazhen LLP with the capital verification report (KPMG Huazhen Yan Zi No. 1800286). As of December 31, 2019, all the funds raised from the Non-Public Issuance of the Company were used up and the accumulative amount of RMB14,184,000,000 of the raised funds (including interest thereon) were used. Accounts designated for the use of raised funds of the Company have been cancelled.

ǻ

Overview of the use of funds raised from the issuance of H Shares

Approved by the CSRC, the Company completed the issuance of H Shares in 2015. Funds raised from the issuance of H Shares were verified by KPMG Huazhen LLP, and KPMG capital verification report (YZ No. 1501031) was issued.

According to the Capital Verification Report issued by KPMG Huazhen LLP, the net funds raised from the initial public issuance of H Shares in 2015 were RMB30,587,689,604.94 (excluding related listing fees), and raised funds after deducting the underwriting and issuing fees were

RMB30,015,054,696.76.

As of the end of this report, the Company, with respect to its IPO on the Hong Kong Stock Exchange and the issuance of new shares by partially exercising the overallotment option, has used raised funds of: RMB18,352,613,762.96 for capital intermediary business such as developing margin financing and securities lending; RMB3,058,768,960.49 for expanding investment and transaction businesses; RMB3,058,768,960.49 for capital increase in Huatai Purple Gold Investment and Huatai Asset Management; RMB3,658,509,634.22 for expanding overseas business; and RMB2,537,384,983.29 for daily operation and other general enterprise purposes. As of December 31, 2020, planned use of the Company's funds raised from H Share issuance was consistent with that disclosed in the prospectus with no change. The funds raised by the Company from the issuance of H Shares had been used and the relevant account had been cancelled.

Ǽ

Overview of the use of funds raised from the issuance of GDR

Upon the Approval for Issuance and Admission of Global Depository Receipts on London Stock Exchange by Huatai Securities Co., Ltd. (Zheng Jian Xu Ke [2018] No. 1993) ( ᗫ׵ࣨࡘ華泰 證券股份有限公司೯БΌଢπৄኯᗇԨίࡐ౱ᗇՎʹ׸הɪ̹ٙҭᔧ'( ᗇ္஢̙[2018]1993)) issued by the CSRC, the Company completed the total issuance of 82,515,000 GDRs in June 2019, each of which at an offering price of USD20.50 and the total amount of funds raised was USD1,691,557,500.00. After deducting the issuing fees of USD39,961,513.72 related to the GDR offering, the net funds raised were USD1,651,595,986.28, equivalent to RMB11,313,036,931.20 at the central parity of RMB against the U.S. dollar on the date when transferred to the account. The abovementioned funds raised were all in place on June 28, 2019 and were verified by KPMG Huazhen LLP and the capital verification report was issued (KPMG Huazhen Yan Zi No. 1900393).

As of the end of the Reporting Period, the Company, with respect to its GDRs, has used raised funds of: RMB3,547,720,085.15, calculated at actual exchange rate on the date of settlement for continuous investment in the existing main businesses, deeply cultivating the business sectors such as wealth management, institutional services and investment management, and further promoting the business transformation and upgrading; RMB1,000,000,000.00, calculated at actual exchange rate on the date of settlement of foreign currency, for supplementing working capital and meeting general enterprise purposes; USD994,212,858.59 for supporting the internal and external growth of international business, and expanding overseas strategic layout. Apart from the above uses, surplus of the Company's proceeds of RMB128,629,875.52 (including interest of raised funds, exchange gains/losses and outstanding issuing fees, at the exchange rate at the end of the Reporting Period) was not used and was put into the special bank account of the Company. As of December 31, 2020, planned use of the Company's funds raised from the issuance of GDRs was consistent with that agreed in the GDR prospectus with no change. The Company plans to arrange for the use of the remaining funds raised from the issuance of GDR by the end of 2021.

Overview of the use of raised funds

Unit: Ten Thousand Yuan Currency: RMB

Raising yearRaising methodTotal amount of raised funds

Total amount of raised funds used in the Reporting PeriodTotal amount of raised funds used accumulativelyTotal amount of raised funds yet to be used

Usage and whereabouts of raised funds unused

  • 2019 GDR offering

    1,131,303.69

    693,582.77

    1,145,595.39

    8,072.85

  • 2018 Non-Public offering (A Shares)

  • 2015 Initial public offering (H Shares)

  • 2010 Initial public offering (A Shares)

Total -

1,420,794.22 3,058,768.96 1,556,122.55 7,166,989.42

-

60,033.85

Notes to the overview of the use of raised funds

- 753,616.62 -

1,418,421.26 3,066,604.63 1,568,103.37 7,198,724.65

- - - 8,072.85

Supplementing working capital and meeting general enterprise purposes -

- - -

  • (2) There was no commitment in raised funds of the Company during the Reporting Period

  • (3) There were no changes in projects funded by raised funds of the Company during the Reporting Period

  • 3. Projects not funded by raised funds

During the Reporting Period, the Company did not have any project funded by non-raised funds whose total investment was more than 10% of the audited net assets of the Company as at the end of the previous year.

  • (V) There was no Sales of Significant Assets or Equities by the Company during the Reporting Period

  • (VI) There was no Bankruptcy or Restructuring, Merger or Division, Major Disposal, Acquisition, Replacement or Stripping of Assets or Reorganization of Other Companies by the Company during the Reporting Period

Unit: Ten Thousand Yuan Currency: RMB

Net profit

62,224.09

Total profit

83,138.48

Operating revenue

308,090.03

Net assets

408,533.18

Total assets

763,190.56

Registered capital

99,748.00

Telephone No.

010-56839300

ResponsibleDate ofestablishment person

Jiang YuSeptember 5, 1997

(VII) Analysis of Key Subsidiaries

Address

401, Building B7, Qianhai Shenzhen-Hong Kong Fund Town, No. 128 Guiwan Fifth Road, Nanshan Street, Qianhai Shenzhen-Hong Kong Cooperation Zone, Shenzhen, the PRC

Shareholding percentage of the Company

99.92%Main businesses: securities underwriting and sponsorship (excluding treasury bonds, non-financial corporate debt financing instruments and financial bond underwriting); financial advisory for securities trading and investment related activities; other businesses approved by the CSRC.

162,378.94 122,612.49

312,802.37 235,000.54

246,805.94

826,568.56

990,242.47

260,000.00

021-28972188

Cui ChunOctober 16, 2014

Room 1222, 6 Jilong Road, China (Shanghai) Pilot Free Trade Zone

Company name

Huatai United Securities Co., Ltd.

Huatai Securities (Shanghai) 100% Asset Management Co., Ltd.

Main businesses: securities asset management; publicly offered securities investment funds management. (Businesses that need to be approved by law shall be carried out upon the approval of relevant authorities).

321,482.81

1,086,709.87

1,519,728.42

600,000.00

025-83389999

180 Hanzhong Road, Nanjing, Jiangsu Province, August 12, 2008 Cao Qun the PRC

Huatai Purple Gold Investment 100% Co., Ltd.

Main businesses: equity investment, debt investment, other fund investments associated with equity investment and debt investment; investment consulting and investment management for equity investment and debt investment, and financial consulting. (Businesses that need to be approved by law shall be carried out upon the approval of relevant authorities).

28,205.80 21,703.92

46,344.97 35,069.30

393,020.19

56,813.40

1,095,744.34

220,609.13

9,402,172.50

266,615.60

HK$8,800,000,002.00

350,000.00

Wang Lei 852-36586000

April 5, 2017

Room 5808-12, 58/F, The Center, 99 Queen's Road Central, Hong Kong

Huatai International Financial 100% Holdings Company LimitedMain businesses: holding company.

Room 1501, 15/F, Block 28, Fengsheng Hutong, November 21, Sun Ying 010-63211166

2013

Xicheng District, Beijing, the PRCHuatai Innovative Investment 100% Co., Ltd.

Main businesses: project investment, investment management, sale of precious metal, hotel management; the followings are permitted to be operated only by branches: accommodation, catering services, sale of foods, fitness services, swimming pool, laundry collection, typing and copying, motor vehicle public parking services, conference services, undertaking exhibitions, tourism information consultation, ticket agent service. (1. Public fund-raising shall not be conducted without approval by relevant authorities; 2. trading activities of securities products and financial derivatives shall not be publicly carried out; 3. no loans shall be granted; 4. no guarantee shall be provided to any other enterprises except for its invested enterprises; promises shall not be made to investors that the principal of their investments will not be subject to any loss or that they will get a minimum return; enterprises shall independently select business items and carry out operations according to law; businesses that need to be approved by law shall be carried out in accordance with the approved contents upon the approval of relevant authorities; business activities classified as prohibited or restricted items by industrial policies of this city shall not be carried out).

Net profitTotal profit

30,537.30 22,057.21

Operating revenue

223,248.17

Net assets

297,502.24

Total assets

4,284,262.69

Registered capital

160,900.00

Telephone No.

020-83901155

ResponsibleDate ofestablishment person

Hu ZhiJuly 10, 1995

Address

20/F, Li Feng Building, 761 Dongfeng Eastern Road, Yuexiu District, Guangzhou, the PRC

Shareholding percentage of the Company

60%Main businesses: commodities futures brokerage, financial futures brokerage, futures investment consultancy, asset management and fund sales. (Businesses that need to be approved by law shall be carried out upon the approval of relevant authorities).

6,091.28 4,456.82

10,961.84

35,818.20

46,117.69

20,000.00

025-89620288

Li YunJuly 4, 2013

11/F, 188 Lushan Road, Nanjing, Jiangsu Province, the PRC

52%Main businesses: provision of premises, facilities and services for approved listing, registration, custody, trading, financing, settlement, transfer, dividend distribution and pledge of equity interests, bonds, assets and related financial products and financial derivatives of unlisted companies, organization and monitoring of trading activities, issuance of market information, trading of listed products in the trading market as an agent, and provision of consultation services for market participants. (Businesses that need to be approved by law shall be carried out upon the approval of relevant authorities).

194,368.41 148,410.68

36,447.08 27,151.09

562,963.86

112,383.02

784,104.85

126,032.68

1,200,924.63

192,946.38

36,172.00

0755-82763888

March 6, 1998 Zhang

Haibo

32-42/F, Fund Mansion, 5999 Yitian Road, Lianhua Street, Futian District, Shenzhen, the PRC

41.16%Main businesses: fund raising, fund sales, asset management and other businesses approved by the securities regulatory authority under the State Council.

20,000.00

021-38601777

November 18, Jia Bo 2004

17/F, Building 1, Shanghai Zendai Wudaokou Square, Lane 1199, Minsheng Road, China (Shanghai) Pilot Free Trade Zone

49%

Company name

Huatai Futures Co., Ltd.

Jiangsu Equity Exchange Co., Ltd.

China Southern Asset Management Co., Ltd.

Huatai-PineBridge Fund Management Co., Ltd.

Net profit

1,506,600.00

Total profit

1,674,800.00

Operating revenue

5,202,600.00

Net assets

17,803,800.00

Total assets

233,789,300.00

Registered capital

1,154,445.00

Telephone No.

025-52890919

ResponsibleDate ofestablishment person

AddressShareholding percentage of the Company

Main businesses: fund raising, fund sales, asset management and other businesses approved by the CSRC.

Xia PingJanuary 22, 2007

26 Zhonghua Road, Nanjing, Jiangsu Province, the PRC

5.54%Main businesses: deposits taking from the general public; granting short-term, medium-term and long-term loans; handling domestic settlements; handing acceptance and discounting of negotiable instruments; issuing financial bonds; acting as an agent for the issue, honoring and underwriting of government bonds and underwriting of short-term commercial papers; buying and selling government bonds, financial bonds, corporate bonds; engaging in interbank lending; providing letter of credit services and guaranty; acting as an agent for receipts/payments and insurance business, wealth management, fund sales, precious metal sales, receipts/payments and custody of collective fund trust scheme; provision of safe deposit boxes; handing entrusted deposits and loans; bank card services; foreign currency deposits; foreign currency loans; foreign exchange remittances; currency exchange; settlement and sales of foreign exchange, acting as an agent for forward settlement and sales of foreign exchange; international settlement; proprietary trading and agency for trading of foreign exchange; interbank foreign exchange lending; trading or acting as an agent for trading in foreign currency securities other than stocks; credit investigation, consultation and witness services; online banking, and other services approved by the banking regulatory bodies and relevant authorities. (Businesses that need to be approved by law shall be carried out upon the approval of relevant authorities).

Company name

Bank of Jiangsu Co., Ltd.

Notes: 1. Due to the death of Mr. Zhang Haibo, chairman of China Southern Asset Management, in February 2021, the board of directors of China Southern Asset

Management decided that Mr. Yang Xiaosong, director and general manager of China Southern Asset Management, would serve as the chairman of the board until the date when the board of China Southern Asset Management elects a new chairman.

2. In December 2020, the Bank of Jiangsu placed three A shares for every ten shares to all A shareholders whose names are in the register of shareholders after the trading hours on the record date. In the same month, the Bank of Jiangsu released the Announcement on Results of Rights Issue. After clearing by the Shanghai Branch of China Securities Depository and Clearing Corporation Limited, the Bank of Jiangsu issued a total of 3,225 million shares by way of rights issue, accounting for 93.12% of the total rights shares to be issued. The shareholding proportion of the Company is 5.63% based on the results of rights issue. The new shares of the Bank of Jiangsu issued by way of rights issue were listed for trading on the SSE in January 2021. The financial data of the Bank of Jiangsu was extracted from its express report of 2020 annual results. The data of net assets represents owner's equity attributable to shareholders of the listing company, and the data of net profit represents net profit attributable to shareholders of the listing company.

(VIII) Structured entities controlled by the Company

The structured entities consolidated by the Group mainly refer to the asset management plans with the Group as the manager or investment advisor and the investor. The Group carries out a comprehensive assessment of whether the Group will be significantly affected by variable returns due to the return which the Group is entitled to for the shares held by it and its remuneration as the manager or investment advisor of the asset management plan, and according to which, determines whether the Group is the main responsible person for the asset management plan. As at December 31, 2020, the Group has consolidated 47 structured entities whose assets reached RMB96,479,001,599.21 in total. The amount of the trading financial assets, which embodies the equity of the Group in the above consolidated structured entities, was RMB34,831,430,075.35.

(IX)

Other information

1.

Establishment and disposal of subsidiaries by the Company during the Reporting Period

(1)

Establishment and disposal of subsidiaries by the Company during the Reporting Period

For details of the establishment and disposal of subsidiaries by the Company during the Reporting Period, please refer to Note 24 to the financial statements of this report headed "Investment in Subsidiaries".

(2) The Company's participation in the allotment issuance of Bank of Jiangsu during the Reporting Period

In order to further enhance the ability of serving local economic and social development and the ability of sustainable development, and create more value for shareholders, Jiangsu Bank, the Company's shareholder, intends to supplement core Tier 1 capital through allotment. During the Reporting Period, according to the China Securities Regulatory Commission's Approval on the Allotment of Bank of Jiangsu Co., Ltd., Bank of Jiangsu actively pushed forward the allotment issuance of A-share. The Company participated in the allotment at a ratio of 3 new shares for every 10 shares it holds, and was allotted 192 million unrestricted shares. Upon the issuance, Bank of Jiangsu holds 5.63% of the Company's shares.

2. The establishment and disposal of the Company's branches and securities branches during the Reporting Period

During the Reporting Period, the Company relocated 2 branches, and no branches were newly established or cancelled; 27 securities branches were relocated, and no securities branches were newly established or cancelled.

As of the end of the Reporting Period, the Company has 28 branch offices and 243 securities branches. For details, please refer to "Appendix II: List of Branch Offices and Securities Branches" in this report.

(1)Changes in names of branches during the Reporting Period

No.

Name before change

Name after change

Address after name changedIssue Date of License

1

Huai'an Branch of Huatai Securities

Securities Branch of Huatai Securities in East Huahai, Huai'an

9/F, Building 1, No. 18 East Huahai, Huai'an

March 17, 2020

2

Jiangyin Branch of Huatai Securities

Securities Branch of Huatai Securities in Futai Road, Jiangyin

5/F, New Baiye Square, No. 8 Futai Road, Jiangyin

March 17, 2020

(2)Relocation of branches during the Reporting Period

No.

Name of branchesAddress after relocation

Issue Date of License

  • 1 Huatai Securities Zhenjiang Branch

    Rooms 101, 201, 301, Block 1, Huangshan Yaju, No. 6 Huangshannan Road, Zhenjiang City, Jiangsu Province

    September 14, 2020

  • 2 Huatai Securities Yancheng Branch

    Room 201, Building 6, Financial City, No.5 Century Avenue, Yancheng City

  • (3) Changes in names of securities branches during the Reporting Period

No.

Name before change

Name after change

Address after name changed

October 17, 2020

Issue Date of License

1

Securities Branch of Huatai Securities in Qianfoshan, Jinan

Securities Branch of Huatai Securities in Jingshi Road, Jinan

Rooms C106 & C108, Zone C, 1F and rooms B200, B202 & 206, Zone B, 2F, Huate Plaza, No. 17703, Jingshi Road, Lixia District, Jinan City

September 25, 2020

(4)Relocation of securities branches during the Reporting PeriodNo.

Name of Securities Branches before RelocationName of Securities Branches after RelocationAddress after RelocationIssue Date of License

  • 1 Securities Branch of Huatai Securities in Raffles Square, Huangpu District, ShanghaiSecurities Branch of Huatai Securities in Raffles Square, Huangpu District, Shanghai

    Room 5003-05 (The actual floor is 4403A, 4403B, 4404), No. 268 Middle Tibet Road, Huangpu District, Shanghai

    January 16, 2020

  • 2 Securities Branch of Huatai Securities in Middle Guangzhou Avenue, Guangzhou

    Securities Branch of Huatai Securities in Middle Guangzhou Avenue, Guangzhou

    Room 103, and Room 3205, 3206 No. 307 Middle Guangzhou Avenue, Yuexiu District, Guangzhou

    January 17, 2020

  • 3 Securities Branch of Huatai Securities in Ningxia Road, QingdaoSecurities Branch of Huatai Securities in Hong Kong West Road, Qingdao

    No. 79 Hong Kong West Road, Shinan District, Qingdao, Shandong Province

    February 24, 2020

  • 4 Securities Branch of Huatai Securities in Huafei Road, Ma'anshanSecurities Branch of Huatai Securities in Hudong Middle Road, Ma'anshanNo. 1046, Hudong Middle Road, Huashan District, Ma'anshan CityMarch 9, 2020

  • 5 Securities Branch of Huatai Securities in Wenhua Avenue, Xinjian, NanchangSecurities Branch of Huatai Securities in Fenghezhong Avenue, Nanchang

    North side of Room 104 and Room 204, No. 2 Commerce Building, Xinghehui Business Center, 1333 Fenghezhong Avenue, Honggutan New District, Nanchang, Jiangxi

    March 17, 2020

  • 6 Securities Branch of Huatai Securities in Tianfu Avenue, Xipu, Chengdu

Securities Branch of Huatai Securities in Shixili, Xipu, Chengdu

Annex 13, 14 of No. 68, Yuanlin Road, Xipu Town, Pidu District, Chengdu City

March 3, 2020

No.

Name of Securities Branches before RelocationName of Securities Branches after RelocationAddress after RelocationIssue Date of License

  • 7 Securities Branch of Huatai Securities in Chunhui Road, ChongqingSecurities Branch of Huatai Securities in Jiangbeizui, Chongqing

    Room 1503, 15/F, Unit 2, No.9 Huixianyan Square, Jiangbei District, Chongqing

    April 14, 2020

  • 8 Securities Branch of Huatai Securities in Gangtie Main Street, BaotouSecurities Branch of Huatai Securities in Gangtie Main Street, Baotou

    Building 2, No.15 Gangtie Main Street, Qiangshan District, Baotou City, Inner Mongolia

    April 22, 2020

  • 9 Securities Branch of Huatai Securities in Jinhai Middle Road, DongtaiSecurities Branch of Huatai Securities in Middle Hailing, Dongtai

    Rooms 8017 & 8018, Building 3, Shangye New Village, No. 78 Middle Hailing, Dongtai

    April 26, 2020

  • 10 Securities Branch of Huatai Securities in Xiahe Road, XiamenSecurities Branch of Huatai Securities in Xiahe Road, Xiamen

    Rooms 201 and 202, Unit One, Block B, CCRE Building, No. 668 Xiahe Road, Siming District, Xiamen

    March 19, 2020

  • 11 Securities Branch of Huatai Securities in Shuixian Avenue, ZhangzhouSecurities Branch of Huatai Securities in Shuixian Avenue, Zhangzhou

    Rooms 101, 403 and 404, Block B, No. 88 Shuixian Avenue, Longwen District, Zhangzhou City, Fujian Province

    January 20, 2020

  • 12 Securities Branch of Huatai Securities in Xidi 3rd Road, WuzhouSecurities Branch of Huatai Securities in Xidi 3rd Road, Wuzhou

    No. 1 of 1/F and Rooms 2801-2809 of 28/F, No. 19 Xidi 3rd Road, Wuzhou City

    May 11, 2020

  • 13 Securities Branch of Huatai Securities in Huaihe Avenue, TonglingSecurities Branch of Huatai Securities in Huaihe Avenue, Tongling

Shop No. 142 of 1/F and No. 203A of 2/F, Huijin Building, Tongling Trade Building, Middle Section of Huaihe Avenue, Tongguan District, Tongling, Anhui Province

May 9, 2020

No.

Name of Securities Branches before RelocationName of Securities Branches after RelocationAddress after RelocationIssue Date of License

  • 14 Securities Branch of Huatai Securities in Dongmen Street, Jintan

    Securities Branch of Huatai Securities in Nanhuan First Road, Jintan

    No. 109-112, Building 1, Binhe Xingcheng, Jintan District, Changzhou City

    May 28, 2020

  • 15 Securities Branch of Huatai Securities in Xiandai Avenue, SuzhouSecurities Branch of Huatai Securities in East Suzhou Avenue, Suzhou

    29A, Modern Media Plaza, No. 265 East Suzhou Avenue, Suzhou Industrial Park

    June 30, 2020

  • 16 Securities Branch of Huatai Securities in Tonghu Road, GaoyouSecurities Branch of Huatai Securities in Pinghuai Road, Gaoyou, Yangzhou

    No. 37 Pinghuai Road, GaoyouJuly 6, 2020

  • 17 Securities Branch of Huatai Securities in Longcheng Road, Jiangdu, YangzhouSecurities Branch of Huatai Securities in Longchuannan Road, Jiangdu, Yangzhou

    Rooms 220, 222, 226 for commercial business, Longchuan Road, Cosco Europe City, Fairy Town, Jiangdu District, Yangzhou City

    July 10, 2020

  • 18 Securities Branch of Huatai Securities in Huangge North Road, Longgang, Shenzhen

    Securities Branch of Huatai Securities in Longgang Avenue, Shenzhen

    102S, Block 2, Vanke Times Square, Shangjing Community, Longcheng Street, Longgang District, Shenzhen City (the junction of Longgang Avenue and Longcheng Avenue)

    July 15, 2020

  • 19 The Second Securities Branch of Huatai Securities in Zhongshan North Road, Nanjing

    Securities Branch of Huatai Securities in HTSC Building, Zhongshan East Road, Nanjing

    Room 7W4, No. 90 Zhongshan East Road, Qinhuai District, Nanjing

    August 12, 2020

  • 20 Securities Branch of Huatai Securities in Shaoshan North Road, ChangshaSecurities Branch of Huatai Securities in Furong Middle Road, Changsha

Units 30028-30032, Fuxing Commercial Square, No. 303, Section 1, Furong Middle Road, Kaifu District, Changsha, Hunan Province

September 22, 2020

No.

Name of Securities Branches before RelocationName of Securities Branches after RelocationAddress after RelocationIssue Date of License

  • 21 Securities Branch of Huatai Securities in Chibi Avenue, HuanggangSecurities Branch of Huatai Securities in Dongmen Road, Huanggang

    Shops 101 & 102 at 1/F and No. 201 at 2/F, Block 8, No. 91-36 Dongmen Road, Huangzhou District, Huanggang City, Hubei Province

    September 27, 2020

  • 22 Securities Branch of Huatai Securities in Zhujiang Road, ShantouSecurities Branch of Huatai Securities in Changping Road, Shantou

    Rooms 103 and 202, North Tower, China Resources Building, No. 95 Changping Road, Longhu District, Shantou City, Guangdong Province

    September 30, 2020

  • 23 Securities Branch of Huatai Securities in Zhonghua North Street, ShijiazhuangSecurities Branch of Huatai Securities in Ziqiang Road, Shijiazhuang

    Unit 0-103A, Commercial Podium (1/F) of Office Building T1/T2, Zhongjiao Finance Center, No. 118 Ziqiang Road, Qiaoxi District, Shijiazhuang City, Hebei Province

    October 16, 2020

  • 24 Securities Branch of Huatai Securities in South Hanxin Road, Huaian District, HuaianSecurities Branch of Huatai Securities in Xiangyu Avenue, Huaian District, Huaian

    No. 1007 Xiangyu Avenue, Huaian District, Huaian

    October 27, 2020

  • 25 Securities Branch of Huatai Securities in Shizhou Avenue, Enshi

    Securities Branch of Huatai Securities in Jingui Avenue, Enshi

    No. 15, Jingui Avenue, Enshi City, Hubei Province

    November 2, 2020

  • 26 Securities Branch of Huatai Securities in Changban Road, Dangyang

    Securities Branch of Huatai Securities in Zilong Road, Dangyang

    No. 59, Zilong Road, Dangyang City, Hubei Province

    November 2, 2020

  • 27 Securities Branch of Huatai Securities in Xiangyang Avenue, Binhai, Yancheng

Securities Branch of Huatai Securities in Hongxing South Lane, Binhai, Yancheng

Rooms 15-103 and 15-104 of Commercial Building 15 and Commercial Office Building 16, Lvdu Jiayuan, No. 29 Hongxing South Lane, Dongkan Street, Binhai County

November 3, 2020

3. Standardization of accounts such as unqualified accounts, judicially frozen accounts, risk disposal accounts, and pure fund accounts

As at December 31, 2020, the Company had 4,153 unqualified securities accounts, 2,493 judicially frozen securities accounts, 85,446 risk disposal securities accounts, and 724,318 pure capital accounts.

Account standardization has reached the following quality standards: (1) Except for restricted use of dormant securities accounts, remaining unqualified securities accounts, judicially frozen accounts, risk disposal accounts, etc., the accounts engaging in normal trading activities are all qualified accounts. (2) Regular comparison of funds and securities account information was made to verify the consistency of key information such as customer names and numbers to prevent the addition of unqualified accounts. Key information inconsistencies due to special circumstances such as differences in information rules between the depository bank and the registered company or unusual word processing have been explained on a case-by-case basis.

Relevant measures for long-term and standardized management of accounts: the daily management of accounts was strengthened and the real-name system requirements for account business was strictly implemented. Through face recognition technology, combined with ID card readers, public security network verification, mobile phone number verification by relevant operator, the Group has strengthened investor identity information identification, continued to innovate account management measures and improve standard long-term management mechanisms of accounts. It further improved the customer file management system, built a unified management platform by protocol, strengthened the management of business handling files of customer accounts through Internet channels, and continued to do its best in the physical and electronic management of customer account business files.

III. DISCUSSION AND ANALYSIS OF THE COMPANY'S FUTURE DEVELOPMENT

(I) Competition landscape and trend of the industry

At present, the long-term upward trend of China's economy continues to consolidate. Under the major strategic deployment of accelerating the establishment of a new "dual circulation" development pattern in which domestic economic cycle plays a leading role while international economic cycle remains its extension and supplement, the capital market, as an important tool for residents' asset allocation and wealth preservation and appreciation, will play an important role, and the securities industry will also embrace new major development opportunities.

First, the comprehensive deepening of the reform of the capital market will provide a broader development space for the securities industry. In recent years, the comprehensive deepening reform of the capital market has accelerated, and market-oriented reform measures have been implemented one after another. The new Securities Law has also systematically revised and improved a series of basic systems. Under the policy background of comprehensively implementing the registration system reform, increasing the proportion of direct financing, and establishing a normalized delisting mechanism, the capital market will have greater development room and higher resource allocation efficiency in terms of facilitating the circulation of capital, technology and the real economy. China's securities industry enjoys broad prospects for development, and at the same time, faces the pressure of improving quality and efficiency, transforming and upgrading.

Second, the new pattern of high-level two-way opening up will drive the securities industry to transform in the direction of high-quality development. Under the policy of accelerating the opening of securities industry to the outside world, the industry will usher in a stage of high-level competition in which domestic and foreign capital, state-owned institutions and private institutions compete on the same stage, and there will be further adjustment and differentiation in the industry's competitive landscape. Oriented by customer needs, we will accelerate the promotion of innovative business, expand the depth and breadth of our business and services, build a systematic and platform-based comprehensive strength, and transform to a comprehensive financial service provider with complete business chain, industrial chain and service chain. This way has become the only way for large securities companies to achieve high-quality development and build a first-class investment bank.

Third, digital and intelligent transformation will reshape the business operation model and service ecology of the securities industry. In recent years, with the in-depth advancement of a new round of technological revolution and industrial transformation, leading financial institutions at home and abroad have increased investment in technological innovation, seized the development opportunities brought about by Fintech empowerment, actively deployed the Fintech ecosystem, and promoted a comprehensive upgrade of the customer service system to create a differentiated competitive advantage. In-depth promotion of business development and digital and intelligent operation of the business management system, and the mutual promotion and complementation of Fintech and business development, will become an effective way to transform the traditional business and business model of securities companies and enhance their comprehensive financial service capabilities.

(II) The Company's development strategy

  • 1. Strategic vision: Striving to become a first-class investment bank with both domestic advantages and global influence, and a financial institution with international competitiveness, brand influence and system importance.

  • 2. Values and operation philosophy: By adhering to the core values of "high efficiency, integrity, stability and innovation" and committing to the operation philosophy of "centered on customer services, oriented by customers' needs and purposed on customer satisfaction", to be accountable to all clients, shareholders, staff and society to achieve harmony and unity.

  • 3. Strategic measures: Deeply developing an all-rounded business chain; implementing high-quality innovation and development; enhancing Fintech empowerment; comprehensively strengthening group governance and improving its pace in international business development.

(III) Business operation plan

Please refer to "Management Discussion and Analysis and Report of the Board" in this report.

(IV) The Company's capital needs to sustain the current business and complete the ongoing investment projects

As of the end of the Reporting Period, the Company was at the forefront of the industry in terms of total assets, net assets, net capital and other indicators. The Company has built an assets & liabilities and liquidity management system that not only meets the Company's strategy and regulatory requirements but is also favourable for the development of businesses through constantly optimizing allocation of assets and liabilities. During the Reporting Period, the Company enhanced the management of capital, liabilities and business within the industry, improved its financing ability, optimized the structure of assets and liabilities and lower the financing costs by constantly expanding the financing sources and various bond financing channels. The Company realized liquidity matching of major assets and liabilities by enhancing the liquidity arrangement of assets to guarantee the balance of gross volume and reasonable structure of the assets and liabilities of the Company and realize dynamic equilibrium of security, mobility and profitability, so as to ensure that the capital strength of the Company matches its status in the industry.

(V) Potential risks (including the implementation of overall risk management and the investment in compliance risk control and information technology)

1. Overview of risk management

The Company attached great importance to risk management. According to regulatory requirements and the actual situation of its business development, the Company established a relatively comprehensive overall risk management system based on the core concepts of full staff engagement, full coverage and full penetration. The Company has a solid and effective risk management framework with clearly defined responsibilities and staff at all levels performing their duties effectively; the Company worked out a risk appetite and tolerance system, which is organically integrated with the development strategy, and a multi-level risk management system covering the whole Company; in addition, the Company vigorously promoted the construction of group-wide risk-management technology system and established centralized, time-based, quantitative and penetrable pillars for risk management technologies, to improve the effectiveness of risk management of the Group and further strengthen the Group's overall risk identification, quantitative evaluation and risk control capabilities. The Company incorporated its subsidiaries into the overall risk management system of the Group, explored the construction of effective risk management model for subsidiaries, vigorously deepened the management mindset of centralized and unified professional risk lines, and built a professional risk management system meeting the business development requirements of the Group. The overall risk management system of the Company ran effectively, which earnestly guaranteed the continuous and healthy development of various businesses of the Company.

During the Reporting Period, focusing on strengthening business risk management, improving the risk control system, and promoting digital transformation, the Company comprehensively pushed forward various risk management tasks. The Company strengthened its risk management and control in key businesses and areas by thoroughly investigating the sources of business risks, formulating intensified management and control measures, and clarifying bottom-line requirements. The Company continued to improve the construction of a comprehensive risk management system, and further optimized the risk management organizational structure, processes and measures. The Company also adhered to technology empowerment, vigorously advanced the construction of a digital risk management platform and the fourth phase of the Group's comprehensive risk management platform, to continuously improve the Company's risk identification, early warning and discovery, measurement monitoring and risk management and control capabilities.

During the Reporting Period, the Company received a notice from the China Securities Regulatory Commission, agreeing it to formally implement the pilot projects of consolidated statement supervision. The Company will, in accordance with relevant regulatory regulations and requirements, do a good job in the pilot projects of consolidated statement supervision to improve the Group's risk management system on an on-going basis, and to develop risk management capabilities that can match its business development, whereby ensuring the Company's sound development.

2. Risk management structure

Board of Directors

(Compliance and

Risk Management Committee)Supervisory Committee

Chief Risk Of cer Senior Management

RiskManagement

Department

CapitalOperation

Department

InformationTechnology

Department

StrategicDevelopment

Department

OtherProfessional RiskManagement

Departments

Other Departments

AllBranches

AllSubsidiaries

The risk management organizational structure of the Company covers five major parts: the Board and Compliance and Risk Management Committee; Supervisory Committee; the Senior Management and Risk Control Committee; Risk Management Department and various professional risk management departments; other departments, branches and subsidiaries.

The Board is ultimately responsible for the overall risk management and is responsible for reviewing and approving the basic system relating to the overall risk management of the Company, approving the risk appetite, risk tolerance and major risk limits of the Company, and reviewing periodic risk assessment reports of the Company. The Compliance and Risk Management Committee is set up by the Board to undertake risk management responsibilities including reviewing and making recommendations on overall risk management targets and fundamental policies; evaluating and making recommendations on the risks of major decisions which require the Board's review, as well as the solutions to these risks; reviewing and making recommendations on risk assessment reports which require the Board's review.

The Supervisory Committee of the Company is responsible for supervising overall risk management, supervising and inspecting the Board and the senior management on the performance of their duties of risk management, and urging them to make rectifications. Based on the authorization and approval of the Board and the operation objectives of the Company, the senior management is specifically responsible for the implementation of risk management and assumes the primary responsibility for overall risk management. Upon authorization of the senior management, the Risk Control Committee under the senior management is mainly responsible for the decision-making on risk management matters in the course of operation and authorizing on risk undertakings in various business lines. Chief risk officer of the Company is responsible for leading the overall risk management of the Company.

The Company appoints the risk management department to perform the overall risk management duties and take the lead in managing the market risk, credit risk and operational risk of the Company; appoints the capital operation department to take the lead in managing the liquidity risk of the Company; appoints the information technology department to take the lead in managing the information technology risk of the Company; and appoints the strategic development department to take the lead in managing the reputation risk of the Company. Other departments, branches and subsidiaries of the Company are responsible for the management of various risks in their respective lines, implementing various policies, procedures and measures formulated by the Company and various leading professional risk management departments, accepting guidance from various leading risk management departments and assigning the risk management duties and implementation responsibilities. The audit department incorporates overall risk management into the audit scope, makes independent and objective review and evaluation on the adequacy and effectiveness of overall risk management, and is responsible for taking the lead or entrusting external professional institutions to evaluate the overall risk management system of the Company regularly.

3. Market Risk

Market risk refers to the risk of asset loss of the Company resulting from fluctuations in risk factors, including stock prices, interest rates, exchange rates and commodities.

During the Reporting Period, in the face of the global economic turmoil caused by the outbreak of the COVID-19 pandemic, the uncertainty brought about by the US election and frequent domestic credit default incidents, the Company adhered to the concept of creating value through transactions, controlling risks through hedging in controlling risk exposures, and managed the market risk of holding assets through various risks control measures. In terms of equity securities investment, the Company took the initiative to control equity asset positions through quantitative models and investment research analysis, flexibly adjusted hedging positions according to market changes, and actively explored trading opportunities while ensuring the downside risks of assets were controllable. At the same time, the Company has strengthened the management system of investment targets by removing potential risk targets from the transaction whitelist in a timely manner, which has effectively prevented "black swan" (ල˂ᕰ) risks. In respect of fixed-income securities investment, the Company leveraged interest rate derivatives such as interest rate swap and treasury bond futures to effectively hedge against market risks, and earned excess earnings through various carry trades while controlling the overall investment portfolio duration and basis point value. In respect of derivatives business, the Company adopted market neutral strategy for both OTC derivatives business and market making business for exchange-traded options, controlled the Greeks values (such as Delta, Gamma and Vega) exposure risks within acceptable limits, and created profit opportunities based on controllable risks. In respect of OTC derivatives business, the Company established management standards such as incorporating targets into transaction list, performance guarantee ratio of counterparty, the liquidity and concentration of transaction targets, etc., to effectively prevent market risks and counterparty default risk.

Market Value at Risk (VAR) of the Company

Currency: RMB

Forward-looking Period: 1 day; Confidence: 95%; Historical Analogical Method; Unit (Ten Thousand Yuan)

The Company

The Group

As at As at

As at As at

the end of the end of

the end of the end of

2020 2019

2020 2019

Equity-sensitive Financial Instruments

6,711

3,974

14,726

6,066

Interest-sensitive Financial Instruments

4,887

6,218

6,498

6,314

Commodity-sensitive Financial Instruments

153

273

236

588

Overall Portfolio Risk Value

8,844

7,093

18,691

9,058

Source: Internal statistics of the Company

During the Reporting Period, Sequence Descriptive Statistics of Market Value at Risk (VAR) of the Company

Currency: RMB

Forward-looking Period: 1 day; Confidence: 95%; Historical Analogical Method; Unit (Ten Thousand Yuan)

At

At

the beginning of

the end of

Maximum

Minimum

the period

the period

value

value

The Group

9,069

18,691

20,775

7,507

The Company

7,570

8,844

12,259

4,711

Source: Internal statistics of the Company

4. Credit risk

Credit risk refers to the risk of asset loss of the Company resulting from the default of a product or bond issuer or counterparty (customer).

In terms of financing business, the Company implemented strict customer and target management, continuous dynamic monitoring, timely risk resolution and other full-process control measures to control business credit risks. During the Reporting Period, benefiting from the overall rebound in the market, the Company's margin financing and securities lending business has grown significantly. The Company has implemented strict risk control procedures and measures to keep the amount to be recovered for the margin financing and securities lending business remained at a low level. Meanwhile, the Company revised the provision plan for the business this year, providing provisions for related risk items; in addition, the Company prudently carried out stock pledge business, and strengthened substantive risk review to strictly control business risk exposure. In terms of bond investment business, the Company has established a unified management system for issuers, through which it can achieve aggregate monitoring of the total investment of the same issuer in all business units of the Group, and implemented bottom-line control over credit bond investment in key industries. At the same time, it steadily promoted the credit analysis management system (CAMS system), and improved the unified internal evaluation system, to enhance the Group's overall risk identification and management capabilities. In response to the frequent occurrence of market credit bond defaults during the Reporting Period, the Company conducted a comprehensive investigation of the credit bond investment holdings of its own and entrusted funds to prevent business risks in a timely manner. In terms of guarantee settlementbusiness, the Company explored to strengthen its customer qualification management system and access standards, continued to improve front-end management and control of risk indicator design and promoted systematic construction, and strengthened the management and control capabilities of risk handling and transmission. In terms of counterparty management, during the Reporting Period, the Company promoted the establishment of a unified management system for counterparties by further expanding the coverage of the unified management of counterparty credit lines at the Group level to form a group-wide counterparty list management plan, while promoting the systematic construction of management and control measures to strictly control business risk exposure. At the same time, the Company promoted the systematic construction of the Group's unified customer penetration management system, comprehensively sorted out credit risk points, strengthened the bottom-line management and control measures, put in place the customer ESG risk management mechanism, consolidated the unified management system for credit risks, and improved the ability to deal with the external complicated credit environment, therefore providing strong risk control guarantee support for the development of various credit businesses.

5. Liquidity risk

Liquidity risk refers to the risk that the Company cannot obtain sufficient funds at reasonable costs in time to repay due debts, perform other payment obligations and meet the capital requirements for carrying out ordinary businesses.

The Company has always attached importance to liquidity safety, preferred a "sound and safe" liquidity risk endurance, followed the general principle of comprehensiveness, importance, applicability, effectiveness, prudence and foresight, and continued to strengthen the identification, measurement, monitoring and control mechanisms of liquidity risks through a management model of centralized management and hierarchical prevention and control, to improve the Company's liquidity risk management capability. The Company has established a liquidity indicator analysis framework including cash flow, and appropriately set risk limits and implemented daily monitoring through the information technology system, to improve the monitoring frequency and control of liquidity risks. At the same time, the Company continued to improve the capital planning system by strengthening capital position management and establishing a liquidity day-time monitoring system to keep abreast of capital usage in daily business and day-time payment progress in a timely manner, further moving forward the frontline of liquidity risk prevention and control. The Company regularly and occasionally conducted special stress tests on liquidity risks to assess the Company's liquidity risk tolerance under stress from the perspective of cash flow and liquidity indicators, and took targeted measures to improve the Company's liquidity risk resilience. In order to ensure that liquidity needs can be met in a timely manner under stress, the Company has established high-quality liquid asset reserve of an appropriate scale based on risk preferences. At the same time, it has expanded its debt financing channels and quotas from multiple perspectives, and continued to improve the Company's emergency financing capabilities. In addition, the Company took the formal implementation of the pilot project of consolidated statement supervision as a starting point to further strengthen the guidance on liquidity risks of subsidiaries, with a view to improving their liquidity risk management capabilities, and in an attempt to establish an inter-group liquidity emergency system. During the Reporting Period, the Company's liquidity coverage ratio (LCR) and net stable funding ratio (NSFR) continued to remain at a level that can meet regulatory requirement and far beyond the requirement.

100

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Huatai Securities Co. Ltd. published this content on 23 March 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 23 March 2021 12:04:00 UTC.