[Definitions](index=4&type=section&id=%E7%AC%AC%E4%B8%80%E7%AF%80%20%E9%87%8B%E7%BE%A9) [Definitions of Common Terms](index=4&type=section&id=%E5%B8%B8%E7%94%A8%E8%A9%9E%E8%AA%9E%E9%87%8B%E7%BE%A9) This section defines common terms used in the report, ensuring a clear understanding of professional terminology and company-specific designations, covering key terms like laws, regulatory bodies, exchanges, company entities, and reporting periods - The report defines common laws and regulatory bodies such as the Company Law, Securities Law, China Securities Regulatory Commission, Hong Kong Securities and Futures Commission, Shanghai Stock Exchange, and Shenzhen Stock Exchange[7](index=7&type=chunk) - "The Company," "Company," and "The Group" all refer to China Merchants Securities Co., Ltd. and its controlled subsidiaries[7](index=7&type=chunk) - "The Reporting Period," "Reporting Period," and "Current Period" refer to the period from January 1, 2020, to June 30, 2020[8](index=8&type=chunk) [Company Profile and Key Financial Indicators](index=6&type=section&id=%E7%AC%AC%E4%BA%8C%E7%AF%80%20%E5%85%AC%E5%8F%B8%E7%B0%A1%E4%BB%8B%E5%92%8C%E4%B8%BB%E8%A6%81%E8%B2%A1%E5%8B%99%E6%8C%87%E6%A8%99) [I. Company Information](index=6&type=section&id=%E4%B8%80%E3%80%81%E5%85%AC%E5%8F%B8%E4%BF%A1%E6%81%AF) This section provides the company's basic information, including its Chinese name, legal representative, general manager, registered capital, and net capital, along with a detailed list of business qualifications held by the company and its major subsidiaries in domestic and international markets - The company's Chinese name is China Merchants Securities Co., Ltd., with Huo Da as the legal representative and Xiong Jiantao as the general manager[10](index=10&type=chunk) Registered Capital and Net Capital (Unit: RMB Yuan) | Indicator | End of Current Reporting Period | End of Prior Year | | :--- | :--- | :--- | | Registered Capital | 6,699,409,329.00 | 6,699,409,329.00 | | Net Capital (Parent Company) | 46,947,218,141.08 | 48,651,440,529.94 | - The company holds over 70 business qualifications, including stock index option market making, foreign exchange settlement and sales, participation in STAR Market margin trading and securities lending, OTC option market making, and Bond Connect "Northbound Trading" market making[13](index=13&type=chunk)[14](index=14&type=chunk)[16](index=16&type=chunk) - CMS International holds multiple business qualifications approved by the Hong Kong Securities and Futures Commission, such as futures contract trading, asset management, and securities trading[20](index=20&type=chunk) - China Merchants Futures holds various business qualifications, including commodity futures brokerage, financial futures brokerage, futures investment consulting, and market making[21](index=21&type=chunk) [II. Contact Persons and Information](index=13&type=section&id=%E4%BA%8C%E3%80%81%E8%81%AF%E7%B9%AB%E4%BA%BA%E5%92%8C%E8%81%AF%E7%B9%AB%E6%96%B9%E5%BC%8F) This section provides the names, contact addresses, telephone numbers, fax numbers, and email addresses of the company's Board Secretary, Securities Affairs Representative, and Joint Company Secretary for internal and external communication - The Board Secretary is Wu Huifeng, the Securities Affairs Representative is Luo Li, and the Joint Company Secretary is Kuang Yanping[24](index=24&type=chunk) - The company's email address is IR@cmschina.com.cn[24](index=24&type=chunk) [III. Brief Introduction to Changes in Basic Information](index=14&type=section&id=%E4%B8%89%E3%80%81%E5%9F%BA%E6%9C%AC%E6%83%85%E6%B3%81%E8%AE%8A%E6%9B%B4%E7%B0%A1%E4%BB%8B) This section outlines the company's basic information, including its registered address, office address, Hong Kong business address, company website, and email address, noting no changes in registration during the reporting period - The company's registered address and office address are both at 111 Fuhua 1st Road, Futian Street, Futian District, Shenzhen[25](index=25&type=chunk) - There were no changes in the company's registration during the reporting period[25](index=25&type=chunk) [IV. Brief Introduction to Changes in Information Disclosure and Document Storage Locations](index=14&type=section&id=%E5%9B%9B%E3%80%81%E4%BF%A1%E6%81%AF%E6%8A%AB%E9%9C%B2%E5%8F%8A%E5%82%99%E7%BD%AE%E5%9C%B0%E9%BB%9E%E8%AE%8A%E6%9B%B4%E6%83%85%E6%B3%81%E7%B0%A1%E4%BB%8B) This section lists the company's selected newspapers for information disclosure, designated website addresses, and the location for storing the semi-annual report, stating no changes occurred during the reporting period - The company's selected newspapers for information disclosure are China Securities Journal, Shanghai Securities News, Securities Times, and Securities Daily[26](index=26&type=chunk) - The designated website addresses for the semi-annual report are http://www.sse.com.cn for the China Securities Regulatory Commission and http://www.hkexnews.hk for the Hong Kong Stock Exchange[26](index=26&type=chunk) - The company's semi-annual report is stored at 111 Fuhua 1st Road, Futian Street, Futian District, Shenzhen, with no changes during the reporting period[26](index=26&type=chunk) [V. Company Stock Overview](index=15&type=section&id=%E4%BA%94%E3%80%81%E5%85%AC%E5%8F%B8%E8%82%A1%E7%A5%A8%E7%B0%A1%E6%B3%81) This section briefly introduces the company's A-shares and H-shares, including their listing exchanges, stock abbreviations, and stock codes, indicating the company is an A+H share listed company Company Stock Overview | Stock Type | Listing Exchange | Stock Abbreviation | Stock Code | | :--- | :--- | :--- | :--- | | A-share | Shanghai Stock Exchange | China Merchants Securities | 600999 | | H-share | Hong Kong Stock Exchange | China Merchants Securities | 6099 | [VI. Other Relevant Information](index=15&type=section&id=%E5%85%AD%E3%80%81%E5%85%B6%E4%BB%96%E6%9C%89%E9%97%9C%E8%B3%87%E6%96%99) This section lists the names and office addresses of the company's domestic and international accounting firms, legal advisors, and A-share and H-share registrars, providing key information on the company's external partners - The company's domestic accounting firm is Deloitte Touche Tohmatsu Certified Public Accountants LLP, and its international firm is Deloitte Touche Tohmatsu[28](index=28&type=chunk) - The company's domestic legal counsel is Jingtian & Gongcheng Law Firm (Shenzhen), and its international counsel is Clifford Chance[28](index=28&type=chunk) - The A-share registrar is China Securities Depository and Clearing Corporation Limited Shanghai Branch, and the H-share registrar is Hong Kong Registrars Limited[28](index=28&type=chunk) [VII. Key Accounting Data and Financial Indicators](index=16&type=section&id=%E4%B8%83%E3%80%81%E5%85%AC%E5%8F%B8%E4%B8%BB%E8%A6%81%E6%9C%83%E8%A8%88%E6%95%B8%E6%93%9A%E5%92%8C%E8%B2%A1%E5%8B%99%E6%8C%87%E6%A8%99) This section comprehensively presents the company's key accounting data and financial indicators at the end of the reporting period, including revenue, profit, asset and liability status, as well as earnings per share and return on net assets, reflecting the company's overall financial performance and profitability in the first half of the year [(1) Key Accounting Data](index=16&type=section&id=%28%E4%B8%80%29%20%E4%B8%BB%E8%A6%81%E6%9C%83%E8%A8%88%E6%95%B8%E6%93%9A) During the reporting period, the company's total revenue and other income increased by 28.40% year-on-year, profit attributable to shareholders increased by 23.73% year-on-year, total assets and total liabilities both saw significant growth, but net cash flow from operating activities turned negative Key Accounting Data (Unit: RMB Thousand Yuan) | Indicator | Current Reporting Period | Prior Period | Change from Prior Period (%) | | :--- | :--- | :--- | :--- | | Total Revenue and Other Income | 15,105,849 | 11,764,843 | 28.40 | | Profit Attributable to Shareholders for the Period | 4,333,834 | 3,502,759 | 23.73 | | Profit Attributable to Shareholders for the Period (Excluding Non-recurring Items) | 4,331,841 | 3,515,477 | 23.22 | | Net Cash Flow from Operating Activities | -6,743,330 | 7,132,020 | -194.55 | | Other Comprehensive Income (Expense) | -225,549 | 251,074 | -189.83 | | **Total Assets (End of Period)** | **422,987,267** | **381,771,889** | **10.80** | | Total Liabilities (End of Period) | 333,478,740 | 296,644,038 | 12.42 | | Equity Attributable to Shareholders (End of Period) | 89,422,811 | 85,048,321 | 5.14 | | Total Equity (End of Period) | 89,508,527 | 85,127,851 | 5.15 | [(2) Key Financial Indicators](index=17&type=section&id=%28%E4%BA%8C%29%20%E4%B8%BB%E8%A6%81%E8%B2%A1%E5%8B%99%E6%8C%87%E6%A8%99) The company's key financial indicators performed well, with basic earnings per share and weighted average return on net assets both achieving significant growth, reflecting improved profitability; earnings per share has been adjusted for share capital changes following the A+H share rights issue plan Key Financial Indicators | Key Financial Indicator | Current Reporting Period | Prior Period (Adjusted) | Change from Prior Period (%) | | :--- | :--- | :--- | :--- | | Basic Earnings Per Share (Yuan/share) | 0.50 | 0.39 | 27.09 | | Diluted Earnings Per Share (Yuan/share) | 0.50 | 0.39 | 27.09 | | Basic Earnings Per Share (Excluding Non-recurring Items) (Yuan/share) | 0.50 | 0.39 | 26.50 | | Weighted Average Return on Net Assets (%) | 5.45 | 4.61 | Increased by 0.84 percentage points | | Weighted Average Return on Net Assets (Excluding Non-recurring Items) (%) | 5.45 | 4.63 | Increased by 0.82 percentage points | - Earnings per share has been adjusted based on the change in total shares after the company's A+H share rights issue in July and August 2020[32](index=32&type=chunk) [(3) Net Capital and Risk Control Indicators of the Parent Company](index=18&type=section&id=%28%E4%B8%89%29%20%E6%AF%8D%E5%85%AC%E5%8F%B8%E7%9A%84%E6%B7%A8%E8%B3%87%E6%9C%AC%E5%8F%8A%E9%A2%A8%E9%9A%AA%E6%8E%A7%E5%88%B6%E6%8C%87%E6%A8%99) The parent company's net capital slightly decreased, but net assets increased; key risk control indicators such as risk coverage ratio and liquidity coverage ratio remained healthy, while the capital leverage ratio increased, indicating good overall risk control capabilities Net Capital and Risk Control Indicators of the Parent Company (Unit: RMB Yuan) | Item | End of Current Reporting Period | End of Prior Year | | :--- | :--- | | Net Capital | 46,947,218,141.08 | 48,651,440,529.94 | | Net Assets | 81,797,651,467.79 | 78,190,124,913.63 | | Total Risk Capital Reserves | 19,898,313,608.86 | 20,227,306,973.01 | | Total On- and Off-Balance Sheet Assets | 234,697,180,955.81 | 309,933,814,118.10 | | Risk Coverage Ratio (%) | 235.94 | 240.52 | | Capital Leverage Ratio (%) | 18.30 | 13.44 | | Liquidity Coverage Ratio (%) | 237.35 | 222.67 | | Net Stable Funding Ratio (%) | 156.48 | 157.77 | | Net Capital / Net Assets (%) | 57.39 | 62.22 | | Net Capital / Liabilities (%) | 19.64 | 22.26 | | Net Assets / Liabilities (%) | 34.21 | 35.78 | | Proprietary Equity Securities and Derivatives / Net Capital (%) | 31.35 | 32.50 | | Proprietary Non-Equity Securities and Derivatives / Net Capital (%) | 365.96 | 329.96 | [Business Overview](index=19&type=section&id=%E7%AC%AC%E4%B8%89%E7%AF%80%20%E5%85%AC%E5%8F%B8%E6%A5%AD%E5%8B%99%E6%A6%82%E8%A6%81) [I. Description of the Company's Main Businesses, Operating Model, and Industry Conditions during the Reporting Period](index=19&type=section&id=%E4%B8%80%E3%80%81%E5%A0%B1%E5%91%8A%E6%9C%9F%E5%85%A7%E5%85%AC%E5%8F%B8%E6%89%80%E5%81%B7%E4%BA%8B%E7%9A%84%E4%B8%BB%E8%A6%81%E6%A5%AD%E5%8B%99%E3%80%81%E7%B6%93%E7%87%9F%E6%A8%A1%E5%BC%8F%E5%8F%8A%E8%A1%8C%E6%A5%AD%E6%83%85%E6%B3%81%E8%AA%AA%E6%98%8E) This section outlines the company's four main business segments, which provide diversified financial products and services with a customer-centric approach, and analyzes the development of the securities industry in the first half of 2020, including stock index movements, trading volume growth, and a significant increase in IPO financing [(1) Main Businesses and Operating Model of the Company during the Reporting Period](index=19&type=section&id=%EF%BC%88%E4%B8%80%EF%BC%89%E5%A0%B1%E5%91%8A%E6%9C%9F%E5%85%A7%E5%85%AC%E5%8F%B8%E5%BE%9E%E4%BA%8B%E7%9A%84%E4%B8%BB%E8%A6%81%E6%A5%AD%E5%8B%99%E5%8F%8A%E7%B6%93%E7%87%9F%E6%A8%A1%E5%BC%8F) The company adopts a customer-centric approach, offering diverse and comprehensive financial products and services, primarily categorized into wealth management and institutional business, investment banking, investment management, and investment and trading, covering brokerage, investment banking, asset management, and proprietary trading - The company's main businesses include wealth management and institutional business (brokerage, capital intermediary), investment banking (equity and debt financing, financial advisory), investment management (asset management, equity investment), and investment and trading (proprietary investment, market making)[37](index=37&type=chunk) [(2) Development of the Industry and Market to which the Company Belongs during the Reporting Period](index=19&type=section&id=%EF%BC%88%E4%BA%8C%EF%BC%89%E5%A0%B1%E5%91%8A%E6%9C%9F%E5%85%A7%E5%85%AC%E5%8F%B8%E6%89%80%E5%B1%AC%E8%A1%8C%E6%A5%AD%E5%8F%8A%E5%B8%82%E5%A0%B4%E7%9A%84%E7%99%BC%E5%B1%95%E6%83%85%E6%B3%81) In the first half of 2020, the Shenzhen Component Index and ChiNext Index rose, with average daily stock and fund trading volume in Shanghai and Shenzhen increasing by 29.92% year-on-year; IPO financing in the primary market surged by 134.85%, and total bond issuance grew by 35.43%, leading to double-digit growth in the securities industry's total revenue and net profit - In the first half of the year, the Shanghai Composite Index fell by 2.15%, the Shenzhen Component Index rose by 14.97%, and the ChiNext Index rose by 35.60%[38](index=38&type=chunk) - The average daily trading volume of stocks and funds in Shanghai and Shenzhen reached **RMB 790.9 billion**, a year-on-year increase of **29.92%**[38](index=38&type=chunk) - IPO financing in the primary market amounted to **RMB 143.628 billion**, a year-on-year increase of **134.85%**; total bond issuance reached **RMB 17.94 trillion**, a year-on-year increase of **35.43%**[38](index=38&type=chunk) - The securities industry's total revenue was **RMB 213.404 billion**, a year-on-year increase of **19.26%**; net profit was **RMB 83.147 billion**, a year-on-year increase of **24.73%**[40](index=40&type=chunk) [II. Analysis of Core Competencies during the Reporting Period](index=20&type=section&id=%E4%BA%8C%E3%80%81%E5%A0%B1%E5%91%8A%E6%9C%9F%E5%85%A7%E6%A0%B8%E5%BF%83%E7%AB%B6%E7%88%AD%E5%8A%9B%E5%88%86%E6%9E%90) The company's core competencies include continuous stable operations, comprehensive platform service capabilities, a solid brokerage business foundation, excellent institutional client services, stable corporate client services, and a strong "China Merchants" brand with robust shareholder backing; during the reporting period, the company's various businesses ranked among the top in the industry, achieving significant performance growth - The company has maintained the highest rating of "AA" in the securities company classification evaluation for 13 consecutive years[41](index=41&type=chunk) - The company possesses comprehensive platform and full industry chain service capabilities, with a balanced business structure and solid development foundation[41](index=41&type=chunk) - During the reporting period, the company achieved total revenue and other income of **RMB 15.106 billion**, a year-on-year increase of **28.40%**; net profit attributable to the parent company was **RMB 4.334 billion**, a year-on-year increase of **23.73%**[41](index=41&type=chunk) - The company ranked 3rd in net income from securities brokerage (including seat leasing), 7th in net income from financial product sales, 6th in interest income from margin financing and securities lending, and 8th in net income from investment banking[41](index=41&type=chunk) - The company ranked 1st among securities firms in the number of private equity and public fund custodians, and 2nd in the scale of compliant entrusted funds[41](index=41&type=chunk) [Board of Directors' Report](index=21&type=section&id=%E7%AC%AC%E5%9B%9B%E7%AF%80%20%E8%91%A3%E4%BA%8B%E6%9C%83%E5%A0%B1%E5%91%8A) [I. Discussion and Analysis of Operating Performance](index=21&type=section&id=%E4%B8%80%E3%80%81%E7%B6%93%E7%87%9F%E6%83%85%E6%B3%81%E8%A8%8E%E8%AB%96%E8%88%87%E5%88%86%E6%9E%90) In the first half of 2020, amidst the COVID-19 pandemic and a complex market environment, the company managed both epidemic prevention and business development, achieving performance that outpaced the market and peers; the company deepened reforms and innovations, maintained stable operations, and made significant progress in capital operations, including implementing an employee stock ownership plan and completing an A+H share rights issue, significantly enhancing its capital strength - Despite the impact of the epidemic, the company's performance outpaced the market and peers[42](index=42&type=chunk) - The company deeply promoted reform and innovation, with the "Six-Ability" mechanism implemented, becoming one of the first six securities companies to pilot consolidated supervision[42](index=42&type=chunk) - The company became the first securities company to successfully implement an employee stock ownership plan under the new regulations from three ministries[42](index=42&type=chunk) - In August 2020, the company completed its A+H share rights issue, raising a net total of **RMB 14.821 billion**, significantly enhancing its capital strength[42](index=42&type=chunk) [II. Main Operating Performance during the Reporting Period](index=22&type=section&id=%E4%BA%8C%E3%80%81%E5%A0%B1%E5%91%8A%E6%9C%9F%E5%85%A7%E4%B8%BB%E8%A6%81%E7%B6%93%E7%87%9F%E6%83%85%E6%B3%81) This section details the company's operating performance across its four main business segments: wealth management and institutional business, investment banking, investment management, and investment and trading; it also provides an in-depth analysis of financial statements, investment status, and major controlled and associate companies, while outlining the operating strategy for the second half of 2020 [(1) Analysis of Main Businesses](index=22&type=section&id=%EF%BC%88%E4%B8%80%EF%BC%89%E4%B8%BB%E7%87%9F%E6%A5%AD%E5%8B%99%E5%88%86%E6%9E%90) The company's four main business segments made positive progress during the reporting period: wealth management and institutional business significantly increased market share and client base through technology empowerment and product innovation; investment banking maintained competitiveness in equity and debt underwriting by seizing registration-based IPO opportunities; investment management saw growth in actively managed assets and stable fund management performance; and investment and trading achieved stable returns in a complex market; the company maintains a cautiously optimistic outlook for the second half of the year, continuing to strengthen online services, business synergy, and financial technology innovation [1. Wealth Management and Institutional Business](index=22&type=section&id=1%E3%80%81%20%E8%B2%A1%E5%AF%8C%E7%AE%A1%E7%90%86%E5%92%8C%E6%A9%9F%E6%A7%8B%E6%A5%AD%E5%8B%99) The company's wealth management and institutional businesses developed synergistically, with technology empowerment and product innovation driving its net income from securities brokerage market share to 3rd in the industry; capital intermediary business scale grew steadily with prudent risk control, institutional client comprehensive service system continuously improved, and custody and outsourcing business maintained an industry-leading position - In the first half of the year, the market share of net income from securities brokerage was **4.81%**, ranking 3rd in the industry, an improvement of 4 places compared to 2019[45](index=45&type=chunk) - The company's APP monthly active users reached **3.7863 million**, an increase of **25.33%** from the end of 2019[46](index=46&type=chunk) - Net income from agency sales of financial products increased by **126.71%** year-on-year; the scale of agency sales of wealth management products was **RMB 501.773 billion**, a year-on-year increase of **8.09%**[46](index=46&type=chunk) - As of the end of June 2020, the company's cumulative stock option account opening market share was **8.77%**, ranking 1st in the industry[47](index=47&type=chunk) - As of the end of June 2020, the company's margin financing and securities lending balance was **RMB 58.138 billion**, an increase of **12.98%** from the end of 2019[49](index=49&type=chunk) - As of the end of June 2020, the company's total number of custody and outsourcing products was **22,254**, with a scale of **RMB 2.454392 trillion**, representing increases of **9.57%** and **8.10%** respectively from the end of 2019[57](index=57&type=chunk) - The company's number of private equity fund custody products and public fund custody products has ranked first in the securities industry for 6 consecutive years[57](index=57&type=chunk) [2. Investment Banking Business](index=26&type=section&id=2%E3%80%81%20%E6%8A%95%E8%B3%87%E9%8A%80%E8%A1%8C%E6%A5%AD%E5%8B%99) The company's investment banking business performed across equity underwriting, debt underwriting, and financial advisory; in the first half of the year, A-share equity lead underwriting amount and number ranked among the top in the industry, with outstanding performance in STAR Market IPO underwriting; total bond underwriting scale decreased, but the company actively responded to national calls to support the issuance of epidemic prevention bonds; M&A market activity declined, but the company's disclosed M&A transaction amount ranked 7th in the industry; overseas investment banking consolidated new economy advantages, with rapid development in Hong Kong IPO underwriting and bond underwriting - In the first half of 2020, the company's A-share equity lead underwriting amount and number ranked 8th and 9th in the industry, respectively, with IPO underwriting amount and number ranking 6th and 8th[60](index=60&type=chunk) - STAR Market IPO underwriting amount was **RMB 2.507 billion**, ranking 7th in the industry[60](index=60&type=chunk) Equity Underwriting (Unit: RMB Billion Yuan) | Item | Lead Underwriting Amount H1 2020 | Number of Issues (units) | Lead Underwriting Amount H1 2019 | Number of Issues (units) | | :--- | :--- | :--- | :--- | :--- | | Initial Public Offering | 5.796 | 6 | 4.479 | 5 | | Refinancing Issuance | 4.873 | 6 | 4.195 | 6 | | **Total** | **10.669** | **12** | **8.674** | **11** | - In the first half of the year, the company's lead underwriting bond amount was **RMB 150.081 billion**, ranking 9th in the industry, of which asset-backed securities underwriting amount was **RMB 47.242 billion**, ranking 5th[63](index=63&type=chunk) Bond Underwriting (Unit: RMB Billion Yuan) | Item | Lead Underwriting Amount H1 2020 | Number of Issues (units) | Lead Underwriting Amount H1 2019 | Number of Issues (units) | | :--- | :--- | :--- | :--- | :--- | | Corporate Bonds | 0.625 | 2 | 1.000 | 1 | | Company Bonds | 21.333 | 53 | 23.816 | 42 | | Financial Bonds | 50.872 | 27 | 57.492 | 29 | | Short-term Financing Bills | 5.320 | 11 | 2.235 | 7 | | Medium-term Notes | 7.864 | 21 | 4.096 | 13 | | Targeted Instruments | 8.525 | 15 | 4.357 | 16 | | Exchangeable Bonds | 3.999 | 4 | 3.000 | 1 | | Asset-backed Securities | 47.242 | 130 | 102.543 | 168 | | Other | 4.300 | 271 | 1.390 | 102 | | **Total** | **150.081** | **534** | **199.930** | **379** | - The company's disclosed M&A transactions totaled 3, with a transaction amount of **RMB 11.891 billion**, ranking 7th in the industry[66](index=66&type=chunk) - CMS International completed 4 Hong Kong market IPO underwriting projects, raising **USD 160 million**, ranking 7th among Chinese securities firms[67](index=67&type=chunk) [3. Investment Management](index=30&type=section&id=3%E3%80%81%20%E6%8A%95%E8%B3%87%E7%AE%A1%E7%90%86) The company's investment management business developed across securities asset management, private equity fund management, and fund management; China Merchants Asset Management intensified its active management transformation, with steady growth in asset management scale and ranking 2nd in total compliant entrusted funds; the private equity investment market was impacted by the epidemic, but China Merchants Zhiyuan Capital made significant progress in fundraising, investment, management, and exit; associate companies Bosera Asset Management and China Merchants Fund maintained their leading positions in public fund management scale - China Merchants Asset Management's asset management scale was **RMB 703.317 billion**, with the average monthly scale of private active management assets increasing by **70.72%** year-on-year[69](index=69&type=chunk) - China Merchants Asset Management ranked 2nd in total compliant entrusted funds, an improvement of 2 places from 2019[69](index=69&type=chunk) Asset Management Scale and Net Income (Unit: RMB Billion Yuan) | Category | Asset Management Scale (H1 2020) | End of 2019 | Net Income (H1 2020) | H1 2019 | | :--- | :--- | :--- | :--- | :--- | | Collective Asset Management | 116.230 | 132.586 | 0.364 | 0.362 | | Single Asset Management | 524.229 | 486.662 | 0.149 | 0.099 | | Special Asset Management | 62.858 | 67.959 | 0.013 | 0.006 | | **Total** | **703.317** | **687.207** | **0.526** | **0.467** | - In the first half of the year, China Merchants Zhiyuan Capital completed the establishment of 3 new funds, raising nearly **RMB 3 billion**; investment amount exceeded **RMB 1.7 billion**; project exit amount exceeded **RMB 1.6 billion**[72](index=72&type=chunk) - Bosera Asset Management's asset management scale was **RMB 1.215 trillion**, of which public fund management scale was **RMB 702.9 billion**, with non-money market public fund scale ranking 4th in the industry[74](index=74&type=chunk) - China Merchants Fund's asset management scale was **RMB 604.8 billion**, of which public fund asset management scale was **RMB 405.2 billion**, with non-money market public fund scale ranking 10th in the industry[75](index=75&type=chunk) [4. Investment and Trading](index=34&type=section&id=4%E3%80%81%20%E6%8A%95%E8%B3%87%E5%8F%8A%E4%BA%A4%E6%98%93) The company's investment and trading business covers equities, fixed income securities, commodities, alternative investments, and derivative financial instruments; in the first half of the year, equity proprietary trading adhered to risk control priority, achieving stable returns through diversified strategies; fixed income investments achieved excellent performance in a complex market; the company actively expanded neutral strategy businesses such as fund market making, exchange-traded option market making, OTC derivatives trading, and commodity trading, and has obtained foreign exchange business qualifications, with trading volume ranking among the top securities firms - The company's equity proprietary trading business adhered to the principle of risk control priority, achieving relatively stable returns through diversified strategies[77](index=77&type=chunk) - The company's market-making products exceeded **6,000**, ranking among the top in the industry[77](index=77&type=chunk) - Fixed income investments achieved excellent investment performance, with investment returns significantly outperforming market benchmarks[77](index=77&type=chunk) - The company has obtained foreign exchange business qualifications and established a professional foreign exchange trading team, with trading volume ranking among the top securities firms[77](index=77&type=chunk) [5. Outlook for the Second Half of 2020](index=35&type=section&id=5%E3%80%81%202020%E5%B9%B4%E4%B8%8B%E5%8D%8A%E5%B9%B4%E5%B1%95%E6%9C%9B) Looking ahead to the second half of 2020, the company will actively adapt to the normalized epidemic prevention and control, focusing on the transformation and development of its four major business segments: wealth management, investment banking, investment management, and investment and trading; the company will strengthen online marketing, platform construction, risk control, product innovation, and financial technology empowerment to enhance comprehensive competitiveness and strive to achieve its annual operating targets - In the second half of the year, the company will strengthen online marketing and service capabilities, promote leapfrog development of wealth management business, and increase its revenue contribution[78](index=78&type=chunk) - Investment banking business will leverage organizational structure adjustments and resource integration to enhance the comprehensive contribution of investment banking services[78](index=78&type=chunk) - Investment management business will intensify active management transformation, continuously innovate, enrich product lines, and build a distinctive private equity investment business system[78](index=78&type=chunk) - Investment and trading business will strengthen the overall coordination role of the financial market investment headquarters, expand the scale of neutral strategy businesses, and accelerate the development of cross-border investment businesses[80](index=80&type=chunk) - The company will accelerate financial technology innovation, enhance digitalization, and make financial technology a significant differentiated competitive advantage for the company[80](index=80&type=chunk) [(2) Financial Statement Analysis](index=36&type=section&id=%EF%BC%88%E4%BA%8C%EF%BC%89%E8%B2%A1%E5%8B%99%E5%A0%B1%E8%A1%A8%E5%88%86%E6%9E%90) This section provides a detailed analysis of the company's profitability, asset-liability structure, and cash flow for the first half of 2020; the company's revenue and net profit both achieved significant growth, but net cash flow from operating activities was negative; total assets and total liabilities both increased, with a slight rise in the proprietary asset-liability ratio; net cash flow from financing activities significantly increased, primarily due to bond issuance [1. Analysis of the Company's Profitability during the Reporting Period](index=36&type=section&id=1.%20%E5%A0%B1%E5%91%8A%E6%9C%9F%E5%85%AC%E5%8F%B8%E7%9B%88%E5%88%A9%E6%83%85%E6%B3%81%E5%88%86%E6%9E%90) In the first half of 2020, the company's total revenue and other income amounted to **RMB 15.106 billion**, a year-on-year increase of **28.4%**, and net profit attributable to shareholders was **RMB 4.334 billion**, a year-on-year increase of **23.73%**; fee and commission income, interest income, net investment income, and other income all grew, with a significant increase in commodity income; total expenses increased by **29.87%** year-on-year, mainly due to increased commodity trading costs and employee costs Total Revenue and Other Income (Unit: RMB Thousand Yuan) | Item | Amount (Current Period) | Proportion (Current Period) | Amount (Prior Period) | Proportion (Prior Period) | Change in Amount | Percentage | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Fee and Commission Income | 5,441,628 | 36.02% | 4,355,041 | 37.02% | 1,086,587 | 24.95% | | Interest Income | 4,547,633 | 30.11% | 3,932,263 | 33.42% | 615,370 | 15.65% | | Net Investment Income | 3,098,145 | 20.51% | 3,000,239 | 25.50% | 97,906 | 3.26% | | Other Income and Gains | 2,018,443 | 13.36% | 477,300 | 4.06% | 1,541,143 | 322.89% | | **Total Revenue and Other Income** | **15,105,849** | **100.00%** | **11,764,843** | **100.00%** | **3,341,006** | **28.40%** | Total Expenses (Unit: RMB Thousand Yuan) | Item | Amount (Current Period) | Proportion | Amount (Prior Period) | Proportion | Change in Amount | Percentage | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Depreciation and Amortization | 287,706 | 2.80% | 257,599 | 3.26% | 30,107 | 11.69% | | Employee Costs | 3,220,142 | 31.39% | 2,905,213 | 36.78% | 314,929 | 10.84% | | Fee and Commission Expenses | 919,701 | 8.96% | 762,073 | 9.65% | 157,628 | 20.68% | | Interest Expenses | 3,146,048 | 30.66% | 2,917,925 | 36.94% | 228,123 | 7.82% | | Taxes and Surcharges | 59,613 | 0.58% | 45,451 | 0.58% | 14,162 | 31.16% | | Other Operating Expenses | 2,545,345 | 24.81% | 1,041,861 | 13.19% | 1,503,484 | 144.31% | | Impairment Losses | 81,016 | 0.79% | -30,238 | -0.38% | 111,254 | - | | **Total Expenses** | **10,259,571** | - | **7,899,884** | - | **2,359,687** | **29.87%** | - From a business segment perspective, wealth management and institutional business, investment banking, and investment and trading businesses saw year-on-year revenue growth, while investment management business revenue decreased year-on-year, and other business revenue significantly increased by **245.79%** year-on-year[88](index=88&type=chunk) [2. Balance Sheet Analysis](index=38&type=section&id=2.%20%E8%B3%87%E7%94%A2%E8%B2%A0%E5%82%B5%E5%88%86%E6%9E%90) As of the end of June 2020, the company's equity attributable to the parent company's shareholders was **RMB 89.423 billion**, an increase of **5.14%** from the end of 2019; total assets and total liabilities both achieved double-digit growth, with the increase in financial assets at fair value through profit or loss and advances to customers being the main reasons for asset growth; the proprietary asset-liability ratio slightly increased to **74.09%** - As of the end of June 2020, the company's equity attributable to the parent company's shareholders was **RMB 89.423 billion**, an increase of **5.14%** from the end of 2019[89](index=89&type=chunk) - The company's total assets were **RMB 422.987 billion**, an increase of **RMB 41.215 billion** from the end of 2019, a growth of **10.80%**[89](index=89&type=chunk) - The company's total liabilities were **RMB 333.479 billion**, an increase of **RMB 36.835 billion** from the end of 2019, a growth of **12.42%**[90](index=90&type=chunk) - As of June 30, 2020, the company's proprietary asset-liability ratio was **74.09%**, an increase of **0.69 percentage points** from the end of 2019[90](index=90&type=chunk) [3. Cash Flow Situation](index=39&type=section&id=3.%20%E7%8F%BE%E9%87%91%E6%B5%81%E9%87%8F%E6%83%85%E6%B3%81) In the first half of 2020, the company's net increase in cash and cash equivalents was **RMB 1.091 billion**; net cash flow from operating activities was negative **RMB 6.743 billion**, a significant decrease from the prior period; net cash flow from investing activities slightly decreased; net cash flow from financing activities was **RMB 3.918 billion**, a significant increase from the prior period, mainly due to bond issuance and short-term financing payables Cash Flow Situation (Unit: RMB Thousand Yuan) | Item | Current Period | Prior Period | Change in Amount | Change Percentage | | :--- | :--- | :--- | :--- | :--- | | Net Cash Flow from Operating Activities | -6,743,330 | 7,132,020 | -13,875,350 | -194.55% | | Net Cash Flow from Investing Activities | 3,915,670 | 4,245,889 | -330,219 | -7.78% | | Net Cash Flow from Financing Activities | 3,918,495 | -5,742,821 | 9,661,316 | – | | Net Increase in Cash and Cash Equivalents | 1,090,835 | 5,635,088 | -4,544,253 | -80.64% | - Net cash flow from operating activities was negative **RMB 6.743 billion**, primarily due to an increase of **RMB 12.664 billion** in financial assets purchased under resale agreements, a decrease of **RMB 24.710 billion** in financial assets at fair value through profit or loss, and a decrease of **RMB 20.674 billion** in financial assets sold under repurchase agreements[91](index=91&type=chunk) - Net cash flow from financing activities increased by **RMB 9.661 billion**, mainly due to a year-on-year increase of **RMB 29.492 billion** from bond issuance and short-term financing payables[93](index=93&type=chunk) [(3) Analysis of Investment Status](index=40&type=section&id=%EF%BC%88%E4%B8%89%EF%BC%89%E6%8A%95%E8%B3%87%E7%8B%80%E6%B3%81%E5%88%86%E6%9E%90) During the reporting period, the company had no new external equity investments; the company's investments in associate companies Bosera Asset Management and China Merchants Fund contributed significant profit or loss; the total amount of financial assets measured at fair value increased compared to the end of the prior year, reflecting the company's investment activities in the financial market [1. Overall Analysis of External Equity Investments](index=40&type=section&id=1%E3%80%81%20%E5%B0%8D%E5%A4%96%E8%82%A1%E6%AC%8A%E6%8A%95%E8%B3%87%E7%B8%BD%E9%AB%94%E5%88%86%E6%9E%90) During the reporting period, the company had no new external equity investments; the company holds equity in Bosera Asset Management and China Merchants Fund, with these two associate companies contributing a total of **RMB 446.5444 million** in profit or loss to the company during the reporting period; the total amount of financial assets measured at fair value increased compared to the end of the prior year, with net investment income from financial assets at fair value through profit or loss amounting to **RMB 2.9949666 billion** - During the reporting period, the company had no new external equity investments[93](index=93&type=chunk) Equity Holdings in Financial Enterprises (Unit: RMB Ten Thousand Yuan) | Name of Held Entity | Carrying Amount at End of Period | Profit or Loss for Reporting Period | | :--- | :--- | :--- | | Bosera Asset Management | 521,817.76 | 24,498.63 | | China Merchants Fund | 266,034.55 | 20,155.81 | | **Total** | **787,852.31** | **44,654.44** | Financial Assets Measured at Fair Value (Unit: RMB Ten Thousand Yuan) | Item Name | Fair Value at End of Current Reporting Period | Investment Income / Interest Income for Current Reporting Period | | :--- | :--- | :--- | | Financial Assets at Fair Value Through Profit or Loss | 14,895,407.98 | 299,496.66 | | Debt Instruments at Fair Value Through Other Comprehensive Income | 4,295,614.28 | 121,065.07 | | Equity Instruments at Fair Value Through Other Comprehensive Income | 684,920.23 | 0.00 | | Derivative Financial Assets | 361,728.50 | - | | Derivative Financial Liabilities | 355,715.79 | -18,601.09 | | Financial Liabilities at Fair Value Through Profit or Loss | 1,827,761.31 | -47,321.62 | [(4) Analysis of Major Controlled and Associate Companies](index=41&type=section&id=%EF%BC%88%E5%9B%9B%EF%BC%89%E4%B8%BB%E8%A6%81%E6%8E%A7%E8%82%A1%E5%8F%83%E8%82%A1%E5%85%AC%E5%8F%B8%E5%88%86%E6%9E%90) This section analyzes the financial performance of the company's major controlled subsidiaries and associate companies; China Merchants Asset Management, China Merchants Futures, and China Merchants Securities Investment Co., Ltd. achieved net profit growth during the reporting period, with China Merchants Securities Investment Co., Ltd. seeing a significant increase in net profit; China Merchants Securities International Co., Limited and China Merchants Zhiyuan Capital Investment Co., Ltd. experienced a decrease in net profit; associate companies Bosera Asset Management and China Merchants Fund both achieved stable operating revenue and net profit, contributing good investment returns to the company [1. Analysis of Controlled Subsidiaries](index=41&type=section&id=1%E3%80%81%20%E6%8E%A7%E8%82%A1%E5%AD%90%E5%85%AC%E5%8F%B8%E5%88%86%E6%9E%90) China Merchants Asset Management, China Merchants Futures, and China Merchants Securities Investment Co., Ltd. achieved net profit growth during the reporting period, with China Merchants Securities Investment Co., Ltd.'s net profit increasing from **RMB 21.51 million** to **RMB 232.09 million**; China Merchants Securities International Co., Limited and China Merchants Zhiyuan Capital Investment Co., Ltd. experienced a decrease in net profit, with CMS International turning from profit to loss Financial Data of Controlled Subsidiaries (Unit: RMB Ten Thousand Yuan / HKD) | Subsidiary Name | Item | H1 2020 / End | H1 2019 / End | | :--- | :--- | :--- | :--- | | China Merchants Securities Asset Management Co., Ltd. | Net Profit | 37,875 | 33,594 | | China Merchants Securities International Co., Limited | Net Profit | -8,322 (HKD) | 15,521 (HKD) | | China Merchants Futures Co., Ltd. | Net Profit | 7,995 | 6,395 | | China Merchants Zhiyuan Capital Investment Co., Ltd. | Net Profit Attributable to Parent Company | 3,329 | 27,890 | | China Merchants Securities Investment Co., Ltd. | Net Profit | 23,209 | 2,151 | [2. Analysis of Associate Companies](index=44&type=section&id=2%E3%80%81%20%E5%8F%83%E8%82%A1%E5%AD%90%E5%85%AC%E5%B8%82%E5%88%86%E6%9E%90) Associate companies Bosera Asset Management and China Merchants Fund both achieved stable operating revenue and net profit during the reporting period; Bosera Asset Management's operating revenue increased by **12.23%** year-on-year, and net profit increased by **3.59%** year-on-year; China Merchants Fund's operating revenue increased by **7.11%** year-on-year, while net profit slightly decreased Financial Data of Associate Companies (Unit: RMB Ten Thousand Yuan) | Subsidiary Name | Item | H1 2020 / End | H1 2019 / End | | :--- | :--- | :--- | :--- | | Bosera Asset Management Co., Ltd. | Operating Revenue | 185,034 | 164,847 | | | Net Profit | 49,997 | 48,261 | | China Merchants Fund Management Co., Ltd. | Operating Revenue | 139,194 | 129,957 | | | Net Profit | 44,791 | 45,626 | [(5) Information on Structured Entities Controlled by the Company](index=45&type=section&id=%EF%BC%88%E4%BA%94%EF%BC%89%E5%85%AC%E5%8F%B8%E6%8E%A7%E5%88%B6%E7%9A%84%E7%B5%90%E6%A7%8B%E5%8C%96%E4%B8%BB%E9%AB%94%E6%83%85%E6%B3%81) As of June 30, 2020, the company consolidated 12 structured entities with total assets of **RMB 7.097 billion**, primarily collective asset management plans, limited partnerships, and funds; the company, as manager and investor, assesses the impact of variable returns to determine if it is the primary beneficiary - As of June 30, 2020, the Group consolidated **12 structured entities**, with total assets of **RMB 7.097 billion**[112](index=112&type=chunk) - The Group's interests in these consolidated structured entities are primarily reflected in financial assets measured at fair value through profit or loss, totaling **RMB 6.809 billion**[112](index=112&type=chunk) [III. Other Disclosure Matters](index=45&type=section&id=%E4%B8%89%20%E5%85%B6%E4%BB%96%E6%8A%AB%E9%9C%B2%E4%BA%8B%E9%A0%85) This section details the company's risk management overview, market risk, credit risk, operational risk, and liquidity risk, along with their respective countermeasures; the company has established a comprehensive risk management framework, institutional system, and quantitative indicators, emphasizing risk management culture and information system development to ensure long-term stable operation [1. Overview of Risk Management](index=45&type=section&id=1%E3%80%81%20%E9%A2%A8%E9%9A%AA%E7%AE%A1%E7%90%86%E6%A6%82%E6%B3%81) The company has established a five-tier risk management framework comprising the Board of Directors, Board of Supervisors, senior management, risk management committee, risk management functional departments, and business units, along with three lines of defense, to ensure the effective operation of its comprehensive risk management system; the company has also developed a quantitative indicator system for risk appetite, tolerance, economic capital, and risk limits, and enhances risk management through stress testing and information systems - The company has established a five-tier risk management framework consisting of the Board of Directors, Board of Supervisors, senior management, risk management committee, risk management-related functional departments, and other departments/branches/wholly-owned subsidiaries[114](index=114&type=chunk) - The company has established three lines of defense for risk management: self-control by various departments and branches, professional management by risk management-related functional departments, and post-event supervision and evaluation by the Audit Department[117](index=117&type=chunk) - The company has established a quantitative risk management indicator system covering risk appetite, risk tolerance, economic capital, and risk limits[120](index=120&type=chunk) - The company has built an intelligent integrated group risk management platform to achieve T+1 day, and gradually real-time, cross-border, global, multi-currency risk transparency management for the parent company and its subsidiaries[122](index=122&type=chunk) [2. Market Risk and Countermeasures](index=50&type=section&id=2%E3%80%81%20%E5%B8%82%E5%A0%B4%E9%A2%A8%E9%9A%AA%E5%8F%8A%E5%85%B6%E6%87%89%E5%B0%8D%E6%8E%AA%E6%96%BD) The company's market risk primarily stems from adverse price movements in investment portfolios such as equities, interest rates, commodities, foreign exchange, and equity projects; the company controls market risk through a comprehensive, multi-currency, cross-market unified management system, as well as holistic and specific management approaches; the main risk measurement tool is VaR, supplemented by stress testing and sensitivity analysis, while also establishing a multi-level risk limit management system - The company's market risks primarily include equity, interest rate, commodity, foreign exchange, and equity project risks[123](index=123&type=chunk) - The company adopts a comprehensive, multi-currency, cross-market unified market risk management system, as well as holistic and specific market risk management approaches[124](index=124&type=chunk) - The company uses VaR as the primary tool for risk measurement, supplemented by stress testing and sensitivity analysis[126](index=126&type=chunk)[127](index=127&type=chunk)[130](index=130&type=chunk)[131](index=131&type=chunk) - The company has established a multi-level risk limit indicator system across various business departments, business lines, and trading strategies[132](index=132&type=chunk) [3. Credit Risk and Countermeasures](index=53&type=section&id=3%E3%80%81%20%E4%BF%A1%E7%94%A8%E9%A2%A8%E9%9A%AA%E5%8F%8A%E5%85%B6%E6%87%89%E5%B0%8D%E6%8E%AA%E6%96%BD) The company's credit risk primarily arises from client defaults in financing businesses, issuer defaults in bonds and credit products, counterparty non-performance in OTC derivatives, and client settlement defaults in brokerage business; the company manages credit risk comprehensively through a prudent and proactive credit risk management culture, a full-process institutional system, a limit-centric risk policy system, internal credit ratings, collateral quantitative management, and credit risk measurement models; at the end of the reporting period, the company's domestic and overseas bond investment credit risk exposure remained at a reasonable level - The company's credit risk primarily stems from margin financing and securities lending, stock pledge repurchase, bonds, trust products, OTC derivatives trading, and brokerage business[135](index=135&type=chunk) - The company manages credit risk using various methods, including credit risk limits, internal credit ratings, collateral quantitative management, and credit risk measurement models[137](index=137&type=chunk) Company's Domestic and Overseas Bond Investment Credit Risk Exposure at End of Reporting Period (Unit: RMB Ten Thousand Yuan) | Rating | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | **Domestic Bonds** | | | | China Sovereign Credit | 7,285,594 | 5,487,568 | | AAA | 6,081,351 | 7,522,352 | | AA+ | 783,364 | 817,432 | | AA | 248,458 | 252,896 | | Below AA- | 4,705 | 899 | | A-1 | 40,381 | 30,722 | | Unrated | 52,986 | 57,026 | | **Subtotal** | **14,496,839** | **14,168,895** | | **Overseas Bonds** | | | | China Sovereign Credit | 239 | 267 | | A | 40,926 | 95,175 | | B | 270,114 | 459,871 | | Unrated | 5,039 | 7,440 | | **Subtotal** | **316,318** | **562,753** | | **Total** | **14,813,157** | **14,731,648** | [4. Operational Risk and Countermeasures](index=57&type=section&id=4%E3%80%81%20%E6%93%8D%E4%BD%9C%E9%A2%A8%E9%9A%AA%E5%8F%8A%E5%85%B6%E6%87%89%E5%B0%8D%E6%8E%AA%E6%96%BD) Operational risk arises from inadequate or failed internal processes, people, systems, or external events, primarily manifesting as seven types of incidents: internal fraud, external fraud, employment practices and workplace safety, client/product/business activities, damage to physical assets, business disruption and system failures, and execution/delivery and process management; the company continuously strengthens operational risk management by establishing a comprehensive management system, self-assessment of operational risks and controls, key indicator monitoring, and collection of event loss data - Operational risk refers to the risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events[147](index=147&type=chunk) - Operational risk events primarily manifest in seven categories: internal fraud, external fraud, employment practices and workplace safety, clients/products/business activities, damage to physical assets, business disruption and system failures, and execution/delivery and process management[147](index=147&type=chunk) - The company forms a complete operational risk management cycle through pre-event operational risk identification, full business process monitoring, and post-event collection of operational risk loss information[148](index=148&type=chunk) [5. Liquidity Risk and Countermeasures](index=58&type=section&id=5%E3%80%81%20%E6%B5%81%E5%8B%95%E6%80%A7%E9%A2%A8%E9%9A%AA%E5%8F%8A%E5%85%B6%E6%87%89%E5%B0%8D%E6%8E%AA%E6%96%BD) Liquidity risk refers to the company's inability to obtain sufficient funds in a timely manner at a reasonable cost to repay debts and meet business needs; the company actively prevents and manages liquidity risk by establishing a reserve of high-quality liquid assets, a minimum reserve system, a liquidity emergency management plan, fund gap management, and expanding financing channels, ensuring safe and stable operations - The company's liquidity risk primarily refers to the risk of being unable to obtain sufficient funds in a timely manner at a reasonable cost to repay maturing debts, fulfill other payment obligations, and meet other funding needs for normal business operations[149](index=149&type=chunk) - The company has established a reserve of high-quality liquid assets and a minimum reserve limit system, and formulated a liquidity emergency management plan[151](index=151&type=chunk) - The company actively conducts fund gap management, utilizing management tools such as cash flow gaps, sensitivity analysis, and stress testing[151](index=151&type=chunk) - The company continuously expands financing channels and balances debt maturity distribution to avoid risks arising from overly concentrated financing channels or concentrated debt maturities[151](index=151&type=chunk) [Significant Matters](index=59&type=section&id=%E7%AC%AC%E4%BA%94%E7%AF%80%20%E9%87%8D%E8%A6%81%E4%BA%8B%E9%A0%85) [I. Overview of General Meetings of Shareholders](index=59&type=section&id=%E4%B8%80%E3%80%81%E8%82%A1%E6%9D%B1%E5%A4%A7%E6%9C%83%E6%83%85%E6%B3%81%E7%B0%A1%E4%BB%8B) This section briefly introduces the company's general meetings of shareholders held during the reporting period, including the first extraordinary general meeting of shareholders in 2020 and the 2019 annual general meeting, and specifies the designated websites and disclosure dates for resolutions General Meetings of Shareholders | Session | Date of Meeting | Query Index for Designated Website where Resolutions were Published | Disclosure Date of Resolutions | | :--- | :--- | :--- | :--- | | First Extraordinary General Meeting of Shareholders 2020 | January 15, 2020 | Hong Kong Stock Exchange website | January 15, 2020 | | 2019 Annual General Meeting, First A-share Class Meeting 2020, and First H-share Class Meeting 2020 | May 19, 2020 | Hong Kong Stock Exchange website | May 19, 2020 | [II. Profit Distribution or Capital Reserve Conversion Plan](index=59&type=section&id=%E4%BA%8C%E3%80%81%E5%88%A9%E6%BD%A4%E5%88%86%E9%85%8D%E6%88%96%E8%B3%87%E6%9C%AC%E5%85%AC%E7%A9%8D%E9%87%91%E8%BD%89%E5%A2%9E%E9%A0%90%E6%A1%88) This section discloses the company's profit distribution plan for the first half of 2020, proposing a cash dividend of **RMB 3.35** (tax inclusive) per 10 shares, with no bonus shares or capital reserve conversion; this plan is subject to approval by the general meeting of shareholders - The company's profit distribution plan for the first half of 2020 is: a cash dividend of **RMB 3.35** (tax inclusive) per 10 shares, with no bonus shares and no capital reserve conversion to share capital[153](index=153&type=chunk) - Based on the total number of shares of 8,696,526,806 after the company's A+H share rights issue, the total profit distributed is **RMB 2,913,336,480.01**[3](index=3&type=chunk) [III. Fulfillment of Commitments](index=60&type=section&id=%E4%B8%89%E3%80%81%E6%89%BF%E8%AB%BE%E4%BA%8B%E9%A0%85%E5%B1%A5%E8%A1%8C%E6%83%85%E6%B3%81) This section discloses the fulfillment of commitments made by the company's actual controller, shareholders, and related parties during or continuing into the reporting period, primarily concerning avoiding horizontal competition and refinancing-related commitments, all of which have been fulfilled in a timely manner - Jiesheng Investment and China Merchants Group have issued a "Commitment Letter to Avoid Horizontal Competition," pledging not to engage in businesses that directly compete with the company's main business, and have fulfilled this commitment in a timely manner[155](index=155&type=chunk) - Zhaorong Investment, Jiesheng Investment, and Best Winner Investment Limited committed to fully subscribe for the allocable shares in the rights issue plan in cash, and have fulfilled this commitment in a timely manner[157](index=157&type=chunk) - China Merchants Group and COSCO Shipping committed not to reduce their shareholdings in the company during periods of abnormal stock price fluctuations and to increase their holdings opportunistically in compliance with laws and regulations, which they have fulfilled in a timely manner[157](index=157&type=chunk) [IV. Appointment and Dismissal of Accounting Firms](index=62&type=section&id=%E5%9B%9B%E3%80%81%E8%81%98%E4%BB%BB%E3%80%81%E8%A7%A3%E8%81%98%E6%9C%83%E8%A8%88%E5%B8%AB%E4%BA%8B%E5%8B%99%E6%83%85%E6%B3%81) This section states that the company's 2019 Annual General Meeting approved the re-appointment of Deloitte (including Deloitte Touche Tohmatsu Certified Public Accountants LLP and Deloitte Touche Tohmatsu) as the company's financial report and internal control auditors for 2020 - The company's 2019 Annual General Meeting decided to re-appoint Deloitte (including Deloitte Touche Tohmatsu Certified Public Accountants LLP and Deloitte Touche Tohmatsu) as the company's auditors for 2020[159](index=159&type=chunk) [V. Significant Litigation and Arbitration Matters](index=62&type=section&id=%E4%BA%94%E3%80%81%E9%87%8D%E5%A4%A7%E8%A8%B4%E8%A8%9F%E3%80%81%E4%BB%B2%E8%A3%81%E4%BA%8B%E9%A0%85) This section notes that litigation matters exceeding **RMB 50 million** during the reporting period have been disclosed in relevant announcements on the Hong Kong Stock Exchange website, without providing specific details - Significant litigation matters exceeding **RMB 50 million** during the reporting period are detailed in the company's relevant announcements published on the Hong Kong Stock Exchange website on April 13, May 8, and May 14, 2020[160](index=160&type=chunk) [VI. Penalties and Rectification for Listed Company, its Directors, Supervisors, Senior Management, Controlling Shareholder, Actual Controller, and Acquirer](index=63&type=section&id=%E5%85%AD%E3%80%81%E4%B8%8A%E5%B8%82%E5%85%AC%E5%8F%B8%E5%8F%8A%E5%85%B6%E8%91%A3%E4%BA%8B%E3%80%81%E7%9B%A3%E4%BA%8B%E3%80%81%E9%AB%98%E7%B4%9A%E7%AE%A1%E7%90%86%E4%BA%BA%E5%93%A1%E3%80%81%E6%8E%A7%E8%82%A1%E8%82%A1%E6%9D%B1%E3%80%81%E5%AF%A6%E9%9A%9B%E6%8E%A7%E5%88%B6%E4%BA%BA%E3%80%81%E6%94%B6%E8%B3%BC%E4%BA%BA%E8%99%95%E7%BD%B0%E5%8F%8A%E6%95%B4%E6%94%B9%E6%83%85%E6%B3%81) This section discloses that the company's Changchun Renmin Avenue Securities Business Department was fined **RMB 220,000** by the Changchun Central Sub-branch of the People's Bank of China for failing to fulfill customer identity verification obligations; the company has promptly completed rectification and strengthened customer information identification and risk classification efforts - The company's Changchun Renmin Avenue Securities Business Department was fined **RMB 220,000** by the Changchun Central Sub-branch of the People's Bank of China for failing to fulfill customer identity verification obligations[161](index=161&type=chunk) - The company has promptly required the business department to strengthen customer identity verification and has completed all rectification as required by the People's Bank of China[161](index=161&type=chunk) [VII. Explanation of the Integrity Status of the Company, its Controlling Shareholder, and Actual Controller during the Reporting Period](index=63&type=section&id=%E4%B8%83%E3%80%81%E5%A0%B1%E5%91%8A%E6%9C%9F%E5%85%A7%E5%85%AC%E5%8F%B8%E5%8F%8A%E5%85%B6%E6%8E%A7%E8%82%A1%E8%82%A1%E6%9D%B1%E3%80%81%E5%AF%A6%E9%9A%9B%E6%8E%A7%E5%88%B6%E4%BA%BA%E8%AA%A0%E4%BF%A1%E7%8B%80%E6%B3%81%E7%9A%84%E8%AA%AA%E6%98%8E) This section states that the company, its controlling shareholder, and actual controller had no unfulfilled effective court judgments or large overdue debts during the reporting period, demonstrating their good integrity status - The company, its controlling shareholder, and actual controller had no unfulfilled effective court judgments and no large overdue debts during the reporting period[162](index=162&type=chunk) [VIII. Information on the Company's Equity Incentive Plan, Employee Stock Ownership Plan, or Other Employee Incentive Measures and their Impact](index=63&type=section&id=%E5%85%AB%E3%80%81%E5%85%AC%E5%8F%B8%E8%82%A1%E6%AC%8A%E6%BF%80%E5%8B%B5%E8%A8%88%E5%8A%83%E3%80%81%E5%93%A1%E5%B7%A5%E6%8C%81%E8%82%A1%E8%A8%88%E5%8A%83%E6%88%96%E5%85%B6%E4%BB%96%E5%93%A1%E5%B7%A5%E6%BF%80%E5%8B%B5%E6%8E%AA%E6%96%BD%E7%9A%84%E6%83%85%E5%85%B5%E5%8F%8A%E5%85%B6%E5%BD%B1%E9%9F%BF) This section details the implementation of the company's employee stock ownership plan; as of March 3, 2020, the plan completed the transfer of **40,020,780 A-shares**, representing **0.5974%** of the company's total share capital, with 995 participants and a 36-month lock-up period; after the subsequent rights issue, the employee stock ownership plan's holdings increased to **52,026,381 shares**, accounting for **0.5982%** of the total share capital - The company's employee stock ownership plan completed the stock transfer procedures on March 3, 2020, holding **40,020,780** of the company's A-shares, accounting for **0.5974%** of the company's total share capital, with a total of **995** participants[164](index=164&type=chunk) - The lock-up period for the employee stock ownership plan's target shares is **36 months**, calculated from March 6, 2020[164](index=164&type=chunk) - After the company's A+H share rights issue was completed from July to August 2020, the company's employee stock ownership plan held **52,026,381** of the company's A-shares, accounting for **0.5982%** of the company's total share capital[164](index=164&type=chunk) [IX. Significant Contracts and their Fulfillment](index=64&type=section&id=%E4%B9%9D%E3%80%81%E9%87%8D%E5%A4%A7%E5%90%88%E5%90%8C%E5%8F%8A%E5%85%B6%E5%B1%A5%E8%A1%8C%E6%83%85%E5%86%B5) This section discloses the company's guarantees to its subsidiaries; as of the end of the reporting period, the total outstanding guarantee amount to subsidiaries was **RMB 4.333 billion**, representing **4.85%** of the company's net assets, primarily including a net capital guarantee commitment for China Merchants Asset Management and guarantees provided by CMS International for its subsidiaries Guarantee Information (Unit: RMB Billion Yuan) | Item | Amount | | :--- | :--- | | Total Outstanding Guarantees to Subsidiaries at End of Reporting Period (B) | 4.33 | | Total Guarantees (A+B) | 4.33 | | Total Guarantees as % of Company's Net Assets | 4.85 | | Of which: Guarantees to Shareholders, Actual Controllers, and Related Parties (C) | 0 | | Debt Guarantees Provided Directly or Indirectly to Guaranteed Entities with Debt-to-Asset Ratio Exceeding 70% (D) | 0.285 | | Amount of Total Guarantees Exceeding 50% of Net Assets (E) | 0 | | Total of the Above Three Guarantee Amounts (C+D+E) | 0.285 | - The company provided a total net capital guarantee of **RMB 3.5 billion** for China Merchants Asset Management[165](index=165&type=chunk) - CMS International provided guarantees totaling approximately **RMB 8.603 billion** (of which financing-related was approximately **RMB 2.091 billion**) for its wholly-owned subsidiaries[165](index=165&type=chunk) [X. Listed Company's Poverty Alleviation Efforts](index=65&type=section&id=%E5%8D%81%E3%80%81%E4%B8%8A%E5%B8%82%E5%85%AC%E5%8F%B8%E6%89%B6%E8%B2%A7%E5%B7%A5%E4%BD%9C%E6%83%85%E5%86%B5) The company actively fulfills its precise poverty alleviation social responsibility, adopting institutionalized poverty alleviation as its fundamental strategy, focusing on industrial, financial, consumer, educational, and health poverty alleviation; during the reporting period, the company achieved significant results in educational, financial, consumer, health, and employment poverty alleviation, with its paired assistance counties, Shitai County in Anhui and Neixiang County in Henan, successfully lifted out of poverty; the company will continue to deepen cooperation with its paired assistance counties to support their social and economic development - The company's fundamental strategy for precise poverty alleviation is institutionalized poverty alleviation, focusing on self-sufficiency rather than mere aid[167](index=167&type=chunk) - The company primarily employs industrial poverty alleviation, financial poverty alleviation, consumer poverty alleviation, and educational public welfare poverty alleviation[167](index=167&type=chunk) - The company assisted Yuhetian in successfully listing on the A-share market; this company is located in Yuexi County, a national-level poverty-stricken county[170](index=170&type=chunk) - The company's wholly-owned subsidiary, China Merchants Futures, participated in the Shanghai Futures Exchange's Baoting County "Insurance + Futures" project, benefiting **8,782 households**, including **2,877 registered impoverished households**[170](index=170&type=chunk) - The "China Red Cross Society · China Merchants Securities Bo'ai Fund" established by the company urgently procured 8 monitoring negative pressure ambulances and donated them to relevant medical institutions in Hubei Province, with 5 donated to national-level poverty-stricken counties[172](index=172&type=chunk) - In April and May 2020, Shitai County in Anhui and Neixiang County in Henan successively shed their national-level poverty-stricken county status, with both counties receiving the company's paired assistance successfully completing their poverty alleviation tasks[177](index=177&type=chunk) [XI. Environmental Information](index=68&type=section&id=%E5%8D%81%E4%B8%80%E3%80%81%E7%92%B0%E5%A2%83%E4%BF%A1%E6%81%AF%E6%83%85%E5%86%B5) This section states that the company, as a non-key pollutant-discharging entity, will disclose its environmental information in its annual social responsibility report - The company will disclose environmental information in its annual social responsibility report[179](index=179&type=chunk) [XII. Explanation of Other Significant Matters](index=68&type=section&id=%E5%8D%81%E4%BA%8C%E3%80%81%E5%85%B6%E4%BB%96%E9%87%8D%E5%A4%A7%E4%BA%8B%E9%A0%85%E7%9A%84%E8%AA%AA%E6%98%8E) This section explains that the company's accounting policies, estimates, and methods have changed, primarily due to the adoption of simplified methods in the Ministry of Finance's "Accounting Treatment Provisions for Rent Concessions Related to the COVID-19 Epidemic," but the impact on current profit or loss is not significant - The company adopted the simplified method in the Ministry of Finance's "Accounting Treatment Provisions for Rent Concessions Related to the COVID-19 Epidemic," and the use of this simplified method did not have a significant impact on current profit or loss[179](index=179&type=chunk) [XIII. Investor Relations Activities during the Reporting Period](index=69&type=section&id=%E5%8D%81%E4%B8%89%E3%80%81%E5%A0%B1%E5%91%8A%E6%9