LUZHENG FUTURES : ANNOUNCEMENT CONTINUING CONNECTED TRANSACTIONS (1) FINANCIAL SERVICES FRAMEWORK AGREEMENT WITH ZHONGTAI SECURITIES (2) RISK MANAGEMENT SERVICES FRAMEWORK AGREEMENT WITH SHANDONG STEEL

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LUZHENG FUTURES Company Limited

魯 証 期 貨 股 份 有 限 公 司

(A joint stock company incorporated in the People's Republic of China with limited liability)

(Stock Code: 01461)

ANNOUNCEMENT

CONTINUING CONNECTED TRANSACTIONS

1. FINANCIAL SERVICES FRAMEWORK AGREEMENT WITH ZHONGTAI SECURITIES
2. RISK MANAGEMENT SERVICES FRAMEWORK

AGREEMENT WITH SHANDONG STEEL

FINANCIAL SERVICES FRAMEWORK AGREEMENT WITH ZHONGTAI SECURITIES

Reference is made to the announcement of the Company dated 26 April 2019 in relation to, inter alia, the Former Financial Services Framework Agreement entered into between the Company and Zhongtai Securities and its annual caps.

As disclosed in the announcement of the Company dated 26 April 2019, the Company and Zhongtai Securities entered into the Former Financial Services Framework Agreement and set the respective annual caps on related non-exempt continuing connected transactions for 2019, 2020 and 2021. As the corresponding annual caps under the Former Financial Services Framework Agreement will expire on 31 December 2021, and the Group will continue to conduct certain continuing connected transactions under the Former Financial Services Framework Agreement subsequent to 31 December 2021, the Company shall continue to comply with the requirements under Chapter 14A of the Listing Rules in relation to continuing connected transactions. Therefore, the Company entered into the Financial Services Framework Agreement with Zhongtai Securities on 10 May 2021 (after trading hours) and proposed the annual caps for 2022, 2023 and 2024 under the Financial Services Framework Agreement.

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RISK MANAGEMENT SERVICES FRAMEWORK AGREEMENT WITH SHANDONG STEEL

Reference is made to the announcement of the Company dated 26 April 2019 in relation to, inter alia, the Former Risk Management Services Framework Agreement entered into between the Company and Shandong Steel and its annual caps.

As disclosed in the announcement of the Company dated 26 April 2019, the Company and Shandong Steel entered into the Former Risk Management Services Framework Agreement and set the respective annual caps on related non-exempt continuing connected transactions for 2020, 2021 and 2022. The corresponding annual caps under the Former Risk Management Services Framework Agreement will expire on 31 December 2022. As the Company intends to adjust the caps of the premium to be paid between the Group and Shandong Steel and/ or its associates under the Former Risk Management Services Framework Agreement, and conduct swap transactions with Shandong Steel and/or its associates, the Company shall continue to comply with the requirements under Chapter 14A of the Listing Rules in relation to continuing connected transactions. Therefore, the Company entered into the Risk Management Services Framework Agreement with Shandong Steel on 10 May 2021 (after trading hours) and proposed the annual caps for 2021, 2022 and 2023 under the Risk Management Services Framework Agreement. The Former Risk Management Services Framework Agreement will be terminated immediately once the Risk Management Services Framework Agreement comes into effect.

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1. FINANCIAL SERVICES FRAMEWORK AGREEMENT WITH ZHONGTAI SECURITIES

1. Background
   Reference is made to the announcement of the Company dated 26 April 2019 in relation to, inter alia, the non-exempt continuing connected transactions under the Former Financial Services Framework Agreement entered into between the Company and Zhongtai Securities and its annual caps. As disclosed in the announcement of the Company dated 26 April 2019, pursuant to the Former Financial Services Framework Agreement, Zhongtai Securities and/ or its associates regularly provide various financial services to the Group in the ordinary and usual course of business of the Group. The aforesaid services mainly include the IB services provided by Zhongtai Securities and/or its associates to the Group, the asset management schemes purchased by the Group in which Zhongtai Securities and/or its associates act as the manager, the securities brokerage and other financial services received by the Group from Zhongtai Securities and/or its associates.
   As the corresponding annual caps under the Former Financial Services Framework Agreement will expire on 31 December 2021, and the Group will continue to conduct certain continuing connected transactions under the Former Financial Services Framework Agreement subsequent to 31 December 2021, the Company shall continue to comply with the requirements under Chapter 14A of the Listing Rules in relation to continuing connected transactions. Therefore, the Company entered into the Financial Services Framework Agreement with Zhongtai Securities on 10 May 2021 (after trading hours) and proposed the annual caps for 2022, 2023 and 2024 under the Financial Services Framework Agreement. Pursuant to the agreement, Zhongtai Securities and/or its associates will regularly provide various financial services to the Group, mainly including the IB services, asset management schemes, securities brokerage and other financial services. The term of the Financial Services Framework Agreement is three years with effect from 1 January 2022 and will expire on 31 December 2024. The Company will comply with the reporting, announcement and Independent Shareholders' approval requirements under Chapter 14A of the Listing Rules in respect of the continuing connected transactions over the next three years.

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(2) Details of the agreement

Date:	10 May 2021
Parties:	Zhongtai Securities
	The Company

1. Acceptance of IB services provided by Zhongtai Securities and/or its associates

Principal terms

In the Company's ordinary and usual course of business, Zhongtai Securities and/or its associates provide IB services to the Company, and introduces potential clients to the Company for participation in the Company's futures brokerage businesses. In addition, Zhongtai Securities and/or its associates will also provide the following services to such clients introduced to the Company: (i) assisting such clients in opening accounts;

1. the provision of latest market information about futures, option and other derivative markets as well as trading facilities to such clients; (iii) assisting such clients in risk control and management; and (iv) other related financial services. Zhongtai Securities and/or its associates will charge commissions on the Company for the provision of such IB services.

Reasons for and benefits of the transaction

The Company (as a futures company) could effectively share the relatively abundant customer resources of Zhongtai Securities and/or its associates through the acceptance of IB services provided by Zhongtai Securities (as a securities company). Besides, both Zhongtai Securities and the Company could effectively achieve synergies while enhancing the Company's customer service capabilities as well as increasing operating income. In addition, Zhongtai Securities and/or its associates have been providing IB services to the Company for consecutive years and have developed a deep understanding of the Company's business needs. As such, the continuous provision of such services by Zhongtai Securities and/or its associates to the Company will foster the development of the Company's futures brokerage business.

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Pricing terms

1. The commission charged by Zhongtai Securities and/or its associates for the provision of IB services to the Company will be 60% of the handling fee income generated from such clients introduced by Zhongtai Securities and/or its associates (the "Commission Split"). Based on the enquires on futures commission splits made to other futures companies which conduct IB services with securities companies, the Company is of the opinion that the Commission Split of 60% falls within the reasonable market range and is in line with market practice;
2. The handling fee income equals the handling fee received from such clients, with deduction of the trading and clearing fees paid to the futures exchanges in the PRC, including but not limited to, Shanghai Futures Exchange, Zhengzhou Commodity Exchange, Dalian Commodity Exchange, China Financial Futures Exchange and Shanghai International Energy Exchange; and
3. The Commission Split of 60% has been determined based on arm's-length negotiation between Zhongtai Securities and the Company with reference to the prevailing market commission rates for IB businesses and on normal commercial terms, and is in line with market practice.

Historical amounts

The commissions received by Zhongtai Securities and/or its associates for the provision of IB services to the Company for the two years ended 31 December 2019 and 2020 and the three months ended 31 March 2021 were RMB8,905 thousand, RMB10,247 thousand and RMB3,228 thousand (unaudited), respectively; the commission split for the IB services provided by Zhongtai Securities and/or its associates to the Company was 60%.

Annual caps

The maximum aggregate annual amounts in respect of the commissions received by Zhongtai Securities and/or its associates for the provision of IB services to the Company for the three years ending 31 December 2022, 2023 and 2024 shall not exceed the caps set out below:

	Proposed annual caps
	for the year ending 31 December
		(RMB'000)
Year	2022	2023	2024
Commissions	26,000	31,250	37,500

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