Section I Definitions [1.1 Definitions of Common Terms](index=4&type=section&id=1.1%20Definitions%20of%20Common%20Terms) This chapter defines key terms such as company names, group scope, reporting period, and major subsidiaries to ensure clarity throughout the report - The Company, Company, Founder Securities refer to Founder Securities Co., Ltd[7](index=7&type=chunk) - The Group refers to Founder Securities Co., Ltd. and all subsidiaries within the scope of consolidated financial statements[7](index=7&type=chunk) - The Reporting Period refers to January 1, 2020, to June 30, 2020[7](index=7&type=chunk) - Major subsidiaries include Founder Underwriting & Sponsorship, Founder Hesheng Investment, Founder CIFCO Futures, Founder Fubon Fund, etc[7](index=7&type=chunk) Section II Company Profile and Key Financial Indicators [2.1 Company Information](index=5&type=section&id=2.1%20Company%20Information) This section details Founder Securities' basic information, including its legal representative, capital, and extensive business qualifications as a comprehensive securities firm - The company's Chinese name is Founder Securities Co., Ltd., abbreviated as Founder Securities[8](index=8&type=chunk) - The legal representative is Shi Hua, and the director of the company's Executive Committee is He Yagang[8](index=8&type=chunk) Comparison of Registered Capital and Net Capital | Indicator | As of Jun 30, 2020 (CNY) | As of Dec 31, 2019 (CNY) | | :--- | :--- | :--- | | Registered Capital (CNY) | 8,232,101,395.00 | 8,232,101,395.00 | | Net Capital (CNY) | 20,622,589,033.89 | 20,903,236,065.74 | - The company holds **27 individual business qualifications**, including securities brokerage, investment consulting, proprietary trading, asset management, and margin financing and securities lending[9](index=9&type=chunk)[10](index=10&type=chunk) [2.2 Key Accounting Data and Financial Indicators](index=7&type=section&id=2.2%20Key%20Accounting%20Data%20and%20Financial%20Indicators) This section presents the company's consolidated and parent financial data for H1 2020, highlighting changes in revenue, net profit, and compliance with risk control indicators Consolidated Key Accounting Data (Jan-Jun 2020 vs Jan-Jun 2019) | Item | Current Period (Jan-Jun 2020) (CNY) | Prior Period (Jan-Jun 2019) (CNY) | Change (%) | | :--- | :--- | :--- | :--- | | Operating Revenue | 3,392,945,977.69 | 3,588,331,627.34 | -5.45 | | Operating Profit | 932,669,957.82 | 931,676,724.11 | 0.11 | | Net Profit Attributable to Shareholders of Listed Company | 641,612,762.39 | 763,412,372.22 | -15.95 | | Net Cash Flow from Operating Activities | 4,987,911,780.71 | 21,354,388,167.54 | -76.64 | Consolidated Key Financial Indicators (Jun 30, 2020 vs Dec 31, 2019) | Item | As of Jun 30, 2020 (CNY) | As of Dec 31, 2019 (CNY) | Change (%) | | :--- | :--- | :--- | :--- | | Total Assets | 128,087,648,977.67 | 136,595,190,001.95 | -6.23 | | Total Liabilities | 88,450,087,263.59 | 97,114,809,390.97 | -8.92 | | Total Equity Attributable to Shareholders of Listed Company | 39,056,650,974.95 | 38,551,805,514.29 | 1.31 | | Asset-Liability Ratio | 55.59% | 62.23% | decreased by 6.64 percentage points | Parent Company Net Capital and Risk Control Indicators (Jun 30, 2020 vs Dec 31, 2019) | Item | As of Jun 30, 2020 (CNY) | As of Dec 31, 2019 (CNY) | | :--- | :--- | :--- | | Net Capital | 20,622,589,033.89 | 20,903,236,065.74 | | Risk Coverage Ratio (%) | 270.88 | 259.00 | | Capital Leverage Ratio (%) | 25.98 | 23.49 | | Liquidity Coverage Ratio (%) | 216.40 | 221.52 | | Net Stable Funding Ratio (%) | 140.89 | 130.45 | [2.3 Non-Recurring Gains and Losses Items and Amounts](index=12&type=section&id=2.3%20Non-Recurring%20Gains%20and%20Losses%20Items%20and%20Amounts) This section details the company's non-recurring gains and losses for the period, which resulted in a negative total primarily due to other non-operating income and expenses Non-Recurring Gains and Losses Items (Jan-Jun 2020) | Non-Recurring Gains and Losses Item | Amount (CNY) | | :--- | :--- | | Gains and Losses on Disposal of Non-Current Assets | 1,889,838.71 | | Government Subsidies Included in Current Profit and Loss | 17,149,069.71 | | Other Non-Operating Income and Expenses Apart from the Above | -46,995,400.97 | | Impact on Minority Shareholders' Equity | -169,255.90 | | Income Tax Impact | 6,968,427.84 | | **Total** | **-21,157,320.61** | [2.4 Items Measured at Fair Value](index=12&type=section&id=2.4%20Items%20Measured%20at%20Fair%20Value) This section details financial assets and liabilities measured at fair value, noting a significant period-end decrease and a positive impact on current profit Items Measured at Fair Value (Jun 30, 2020 vs Dec 31, 2019) | Item | As of Jun 30, 2020 (CNY) | As of Dec 31, 2019 (CNY) | Current Period Change (CNY) | Impact on Current Period Profit (CNY) | | :--- | :--- | :--- | :--- | :--- | | Derivative Financial Instruments | 12,024,436.23 | -217,347,917.55 | 229,372,353.78 | -92,022,561.05 | | Trading Financial Assets | 24,968,936,035.11 | 29,503,157,282.29 | -4,534,221,247.18 | 265,505,721.07 | | Other Debt Investments | 14,916,362,785.32 | 24,901,391,747.20 | -9,985,028,961.88 | 517,145,049.53 | | Trading Financial Liabilities | 6,023,695,008.61 | 11,982,384,656.09 | -5,958,689,647.48 | -120,537,061.87 | | **Total** | **50,985,353,898.47** | **71,382,946,926.92** | **-20,397,593,028.45** | **570,091,147.68** | Section III Business Overview [3.1 Description of Main Businesses, Operating Model, and Industry Conditions During the Reporting Period](index=13&type=section&id=3.1%20Description%20of%20Main%20Businesses%2C%20Operating%20Model%2C%20and%20Industry%20Conditions%20During%20the%20Reporting%20Period) This section outlines Founder Securities' four core business segments, operating models, and the H1 2020 capital market environment, including COVID-19 impacts and reform opportunities - The Group's main businesses are divided into four segments: wealth management, institutional business and investment banking, investment and trading, and asset management[24](index=24&type=chunk) - Wealth management business provides securities and futures brokerage, margin financing and securities lending, options, and other services through branch networks and internet financial platforms, charging commissions or fees[24](index=24&type=chunk) - In H1 2020, the A-share market showed a structural trend, with the Shanghai Composite Index falling by **2.15%**, the Shenzhen Component Index rising by **14.97%**, and the ChiNext Index rising by **36%**[25](index=25&type=chunk) - The primary market benefited from policies like the registration-based IPO system, with **128 new shares issued**, a **104% year-on-year increase**, and **IPO financing amounting to CNY 143.6 billion**, a **134% year-on-year increase**[26](index=26&type=chunk) [3.2 Explanation of Significant Changes in the Company's Major Assets During the Reporting Period](index=14&type=section&id=3.2%20Explanation%20of%20Significant%20Changes%20in%20the%20Company%27s%20Major%20Assets%20During%20the%20Reporting%20Period) This section explains the decrease in total assets at period-end and details the reasons for changes in major assets, primarily linked to market conditions and business scale - As of June 2020, the Group's total assets were **CNY 128.088 billion**, a **6.23% decrease** from the end of the previous year[27](index=27&type=chunk) - Monetary funds increased by **11.45% to CNY 36.528 billion**, settlement reserves increased by **7.59% to CNY 7.43 billion**, and funds lent increased by **7.94% to CNY 21.893 billion**, primarily due to changes in client deposits, reserves, and margin financing and securities lending scale influenced by market conditions[27](index=27&type=chunk) - Trading financial assets decreased by **15.37% to CNY 24.969 billion**, and other debt investments decreased by **40.10% to CNY 14.916 billion**, primarily due to changes in the company's holdings of financial assets influenced by market conditions[27](index=27&type=chunk) - Financial assets purchased under resale agreements decreased by **35.18% to CNY 2.498 billion**, primarily due to a decrease in stock pledge business scale[27](index=27&type=chunk) [3.3 Analysis of Core Competencies During the Reporting Period](index=14&type=section&id=3.3%20Analysis%20of%20Core%20Competencies%20During%20the%20Reporting%20Period) This section outlines Founder Securities' eight core competencies, encompassing strategic clarity, efficient management, extensive network, advanced fintech, and robust risk control - The Group has formulated its strategic goals and initiatives for the next three years (2020-2022), aiming to become a large comprehensive securities firm with stable business development, efficient operations, distinct features, significant influence, and certain international competitiveness[28](index=28&type=chunk) - The company has established an Executive Committee as its highest operational management body, implementing a refined, standardized, flat, and differentiated branch management model[29](index=29&type=chunk) - As of the end of the reporting period, the Group has **338 securities branches** and **24 regional branches** covering 28 provinces (municipalities, autonomous regions) nationwide[30](index=30&type=chunk) - The company continues to strengthen its financial technology, with its self-developed "Xiaofang" APP showing continuous and significant growth in daily active users, ranking **4th** among securities firm APPs[31](index=31&type=chunk)[32](index=32&type=chunk) - The Group's compliance and risk management capabilities have been elevated to a strategic level, with a significant increase in company-wide compliance awareness and all risk indicators meeting regulatory requirements[36](index=36&type=chunk) Section IV Discussion and Analysis of Operations [4.1 Discussion and Analysis of Operations](index=16&type=section&id=4.1%20Discussion%20and%20Analysis%20of%20Operations) This section reviews H1 2020 operations, noting decreased revenue and net profit but increased operating profit, with all business segments adapting to complex market conditions - As of the end of the reporting period, the Group's total assets were **CNY 128.088 billion**, a **6.23% decrease** from the end of the previous year; net assets were **CNY 39.638 billion**, a **0.40% increase** from the end of the previous year[37](index=37&type=chunk) - Operating revenue reached **CNY 3.393 billion**, a **5.45% decrease** year-on-year; operating profit was **CNY 933 million**, a **0.11% increase** year-on-year; net profit attributable to shareholders of the listed company was **CNY 642 million**, a **15.95% decrease** year-on-year[37](index=37&type=chunk) - Brokerage business acquired **430,000 new clients**, bringing the total client count to **11.55 million**; net income from agency securities trading business was **CNY 1.358 billion**, a **10.98% year-on-year increase**; investment advisory business income was **CNY 184 million**, a **50.44% year-on-year increase**[38](index=38&type=chunk) - Asset management business had a total entrusted asset scale of **CNY 160.556 billion**, generating net fee and commission income of **CNY 171.4584 million**[39](index=39&type=chunk)[40](index=40&type=chunk) - Proprietary trading business achieved operating revenue of **CNY 550.3147 million**; credit business generated interest income of **CNY 737.0784 million**; financial product distribution sales reached **CNY 249.738 billion**, generating distribution income of **CNY 84.0883 million**[41](index=41&type=chunk)[42](index=42&type=chunk)[45](index=45&type=chunk) [4.2 Analysis of Main Business](index=18&type=section&id=4.2%20Analysis%20of%20Main%20Business) This section analyzes main business financial performance, detailing income/expense changes, cash flow, cost structure, and regional revenue/profit, highlighting segment and area characteristics Changes in Key Financial Items (Jan-Jun 2020 vs Jan-Jun 2019) | Item | Jan-Jun 2020 (CNY) | Jan-Jun 2019 (CNY) | Change (%) | Explanation of Change | | :--- | :--- | :--- | :--- | :--- | | Operating Revenue | 3,392,945,977.69 | 3,588,331,627.34 | -5.45% | Primarily due to the business transformation of Founder CIFCO Futures' wholly-owned subsidiary, which ceased its spot business | | Investment Income | 781,561,859.05 | 1,041,473,649.93 | -24.96% | Primarily due to a decrease in investment income influenced by market conditions during the period | | Net Cash Flow from Operating Activities | 4,987,911,780.71 | 21,354,388,167.54 | -76.64% | Primarily due to a decrease in funds borrowed and sell-back repurchase business | - Net cash flow from operating activities was **CNY 4.988 billion**, a **CNY 16.366 billion decrease** compared to the same period in 2019, primarily due to cash outflows from repurchase business and funds borrowed[48](index=48&type=chunk) Composition of Operating Costs (Jan-Jun 2020 vs Jan-Jun 2019) | Business Category | Current Period Amount (CNY 10,000) | Current Period % of Total Cost | Prior Period Amount (CNY 10,000) | Prior Period % of Total Cost | Current Period % Change from Prior Period | | :--- | :--- | :--- | :--- | :--- | :--- | | Brokerage and Credit Trading | 109,830.19 | 44.64% | 130,217.55 | 49.02% | -15.66% | | Proprietary Investment | -6,431.22 | -2.61% | 8,873.30 | 3.34% | -172.48% | | Headquarters and Others | 121,773.10 | 49.50% | 97,814.27 | 36.81% | 24.49% | | **Total** | **246,027.60** | **100.00%** | **265,665.49** | **100.00%** | **-7.39%** | Business and Management Expenses (Jan-Jun 2020 vs Jan-Jun 2019) | Item | Current Period Amount (CNY 10,000) | Current Period % of Business and Management Expenses | Prior Period Amount (CNY 10,000) | Prior Period % of Business and Management Expenses | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | | Staff Costs | 146,968.34 | 69.01% | 143,721.48 | 68.68% | 2.26% | | Amortization of Long-Term Deferred Expenses | 3,792.46 | 1.78% | 2,036.04 | 0.97% | 86.27% | | Electronic Equipment Operating Expenses | 1,984.62 | 0.93% | 1,099.48 | 0.53% | 80.51% | | **Total** | **212,979.91** | **100.00%** | **209,250.66** | **100.00%** | **1.78%** | Main Business by Industry (Jan-Jun 2020) | Item | Operating Revenue (CNY 10,000) | Operating Cost (CNY 10,000) | Operating Profit Margin | Operating Revenue Change from Prior Period | Operating Cost Change from Prior Period | Operating Profit Margin Change from Prior Period | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Brokerage and Credit Trading | 265,881.76 | 109,830.19 | 58.69% | -1.75% | -15.66% | 6.81% | | Proprietary Investment | 59,645.52 | -6,431.22 | 110.78% | -12.93% | -172.48% | 23.74% | | Asset Management | 17,517.38 | 5,154.19 | 70.58% | -47.44% | -32.31% | -6.58% | | Investment Banking | 29,843.36 | 15,701.34 | 47.39% | 9.61% | -25.75% | 25.06% | | **Total** | **339,294.60** | **246,027.60** | **27.49%** | **-5.45%** | **-7.39%** | **1.53%** | Geographical Distribution of Operating Revenue (Jan-Jun 2020) | Region | Number of Branches | Operating Revenue (CNY) | Change (%) | | :--- | :--- | :--- | :--- | | Hunan Province | 103 | 565,777,671.93 | 11.45% | | Zhejiang Province | 56 | 258,718,886.16 | 13.59% | | Beijing Municipality | 10 | 74,470,903.48 | 29.93% | | **Branch Subtotal** | **338** | **1,359,486,698.84** | **13.47%** | Geographical Distribution of Operating Profit (Jan-Jun 2020) | Region | Number of Branches | Operating Profit (CNY) | Change (%) | | :--- | :--- | :--- | :--- | | Hunan Province | 103 | 356,361,118.60 | 16.08% | | Zhejiang Province | 56 | 148,755,547.53 | 29.51% | | Beijing Municipality | 10 | 40,469,115.87 | 99.57% | | **Branch Subtotal** | **338** | **747,049,945.62** | **30.76%** | [4.3 Analysis of Assets and Liabilities](index=22&type=section&id=4.3%20Analysis%20of%20Assets%20and%20Liabilities) This section analyzes asset and liability composition and changes, explaining key item fluctuations, highlighting asset quality, risk control compliance, and restricted assets Changes in Major Assets (Jun 30, 2020 vs Dec 31, 2019) | Item Name | As of Jun 30, 2020 (CNY) | As of Dec 31, 2019 (CNY) | Change (%) | Reason for Change | | :--- | :--- | :--- | :--- | :--- | | Monetary Funds | 36,528,098,977.91 | 32,774,928,025.34 | 11.45% | Increase in client deposits | | Funds Lent | 21,892,686,180.67 | 20,282,441,857.80 | 7.94% | Increase in funds lent | | Financial Assets Purchased Under Resale Agreements | 2,497,672,175.45 | 3,853,273,932.37 | -35.18% | Decrease in stock pledge business scale | | Trading Financial Assets | 24,968,936,035.11 | 29,503,157,282.29 | -15.37% | Decrease in trading financial assets held | | Other Debt Investments | 14,916,362,785.32 | 24,901,391,747.20 | -40.10% | Decrease in other debt investments held | | Long-Term Equity Investments | 697,069,929.75 | 0.00 | Not applicable | Conversion to equity method accounting for Credit Suisse Founder | Changes in Major Liabilities (Jun 30, 2020 vs Dec 31, 2019) | Item Name | As of Jun 30, 2020 (CNY) | As of Dec 31, 2019 (CNY) | Change (%) | Reason for Change | | :--- | :--- | :--- | :--- | :--- | | Short-Term Financing Payables | 7,498,601,505.94 | 2,017,503,661.39 | 271.68% | Increase in scale of income certificates | | Funds Borrowed | 2,005,166,666.65 | 5,915,946,944.42 | -66.11% | Decrease in re-lending funds borrowed | | Trading Financial Liabilities | 6,023,695,008.61 | 11,982,384,656.09 | -49.73% | Consolidated structured products ended | | Client Funds for Securities Trading | 29,668,754,126.94 | 25,111,795,977.07 | 18.15% | Increase in client funds for securities trading influenced by market conditions | | Bonds Payable | 15,351,474,655.37 | 19,939,519,050.91 | -23.01% | Maturity and repayment of corporate bonds | - After deducting client trading settlement funds, the Group's total assets were **CNY 88.855 billion**, a **13.66% decrease** from the end of the previous year; the asset-liability ratio was **55.59%**[60](index=60&type=chunk) - The parent company's net capital was **CNY 20.623 billion**, risk coverage ratio **270.88%**, capital leverage ratio **25.98%**, liquidity coverage ratio **216.40%**, and net stable funding ratio **140.89%**, with all risk control indicators meeting regulatory requirements[60](index=60&type=chunk) Major Restricted Assets (Jun 30, 2020) | Item | Amount (CNY) | Reason for Restriction | | :--- | :--- | :--- | | Monetary Funds | 67,596,545.52 | Fixed deposits for general risk reserves of fund business, securities subscription funds | | Funds Lent | 2,348,958,980.85 | Pledged for OTC agreement repurchase business | | Trading Financial Assets | 4,460,316,480.35 | Pledged for bond repurchase business, pledged for borrowing funds business, pledged for quotation repurchase business, collateral for re-lending business, restricted shares, ST shares, lent securities, funds held for less than 3 years | | Other Debt Investments | 12,065,925,483.96 | Pledged for bond repurchase business, pledged for quotation repurchase business, pledged for borrowing funds business, pledged as substitute for futures account margin | | **Total** | **18,942,797,490.68** | | [4.4 Analysis of Investment Status](index=24&type=section&id=4.4%20Analysis%20of%20Investment%20Status) This section analyzes external equity investments, noting a significant increase in the reporting period, and details fair value financial assets and their profit impact - Investment amount during the reporting period was **CNY 568.64 million**, compared to **CNY 0** in the same period last year, with the change percentage not applicable[64](index=64&type=chunk) - Investee company names include Founder Securities Investment, Founder HK Financial Holdings, and Credit Suisse Founder[64](index=64&type=chunk) Financial Assets Measured at Fair Value (Jun 30, 2020 vs Dec 31, 2019) | Item Name | As of Jun 30, 2020 (CNY) | As of Dec 31, 2019 (CNY) | Current Period Change (CNY) | Impact on Current Period Profit (CNY) | | :--- | :--- | :--- | :--- | :--- | | Trading Financial Assets | 24,968,936,035.11 | 29,503,157,282.29 | -4,534,221,247.18 | 265,505,721.07 | | Other Debt Investments | 14,916,362,785.32 | 24,901,391,747.20 | -9,985,028,961.88 | 517,145,049.53 | | Other Equity Instrument Investments | 4,892,961,244.51 | 5,041,986,770.20 | -149,025,525.69 | — | | Derivative Financial Instruments | 12,024,436.23 | -217,347,917.55 | 229,372,353.78 | -92,022,561.05 | [4.5 Analysis of Major Controlled and Investee Companies](index=26&type=section&id=4.5%20Analysis%20of%20Major%20Controlled%20and%20Investee%20Companies) This section analyzes the operating performance of major subsidiaries, highlighting strong results from some and challenges for others, with Credit Suisse Founder no longer consolidated - Founder Underwriting & Sponsorship achieved operating revenue of **CNY 321.4274 million**, net profit of **CNY 83.7917 million**, and completed bond underwriting of **CNY 36.554 billion**[69](index=69&type=chunk) - Founder Hesheng Investment achieved operating revenue of **CNY 47.968 million**, net profit of **CNY 21.9937 million**, and newly established **2 private equity funds** with a total scale of **CNY 5.501 billion**[70](index=70&type=chunk) - Founder Securities Investment achieved operating revenue of **CNY 46.1404 million**, net profit of **CNY 25.6791 million**, completed **13 equity investment projects**, with a cumulative investment scale of **CNY 1.0275249 billion**[71](index=71&type=chunk) - Founder HK Financial Holdings achieved operating revenue of **-CNY 224.6564 million** and net profit of **-CNY 271.5615 million**, primarily impacted by investment income and fair value changes in fixed income proprietary trading[72](index=72&type=chunk) - Founder CIFCO Futures achieved operating revenue of **CNY 286.2708 million**, net profit of **CNY 59.9545 million**, with brokerage business fee income increasing by **31.05%** year-on-year, and asset management business AUM increasing by **298.09%** year-on-year[73](index=73&type=chunk)[74](index=74&type=chunk) - Credit Suisse Founder achieved operating revenue of **CNY 61.0576 million** and net profit of **-CNY 36.4033 million**. As of **June 1, 2020**, Credit Suisse Founder is no longer included in the company's consolidated financial statements[76](index=76&type=chunk) [4.6 Information on Structured Entities Controlled by the Company](index=28&type=section&id=4.6%20Information%20on%20Structured%20Entities%20Controlled%20by%20the%20Company) This section details the company's controlled structured entities, consolidating 11 asset management plans with total assets of **CNY 8.961 billion** at period-end - As of **June 30, 2020**, the company consolidated **11 structured entities**, primarily including asset management plans[77](index=77&type=chunk) - The total assets of the aforementioned consolidated structured entities amounted to **CNY 8.961 billion**[77](index=77&type=chunk) Section V Significant Matters [5.1 Brief Introduction to Shareholder Meetings](index=34&type=section&id=5.1%20Brief%20Introduction%20to%20Shareholder%20Meetings) This section briefly introduces the 2019 Annual General Meeting held on May 20, 2020, with resolutions duly disclosed - The 2019 Annual General Meeting was held on **May 20, 2020**[93](index=93&type=chunk) - Resolutions were published on the Shanghai Stock Exchange website www.sse.com.cn, with a disclosure date of **May 21, 2020**[93](index=93&type=chunk) [5.2 Profit Distribution or Capital Reserve Conversion Plan](index=34&type=section&id=5.2%20Profit%20Distribution%20or%20Capital%20Reserve%20Conversion%20Plan) This section confirms no proposed profit distribution or capital reserve conversion plan for the reporting period - The proposed profit distribution or capital reserve conversion plan for this half-year is "None"[94](index=94&type=chunk) [5.3 Fulfillment of Commitments](index=34&type=section&id=5.3%20Fulfillment%20of%20Commitments) This section details the fulfillment of commitments by the company and related parties, noting most were met, but asset integrity commitments with Zhengquan Holdings are in forced execution - Peking University, PKU Asset Management Co., Ltd., and Founder Group all committed to resolving horizontal competition issues, which remain long-term effective and have been timely and strictly fulfilled[95](index=95&type=chunk) - Founder Securities committed to resolving horizontal competition with Credit Suisse Founder, with the transaction completed on **June 1, 2020**, and Credit Suisse Founder no longer consolidated, fully resolving the horizontal competition issue[97](index=97&type=chunk) - Regarding Zhengquan Holdings' commitment to the asset integrity of China Minzu Securities, item 4, due to the long-term inability to transfer trading financial assets, the company has filed a lawsuit and obtained a partial compensation judgment, but Zhengquan Holdings has not yet fulfilled its payment obligations, and the company has applied for forced execution[98](index=98&type=chunk) [5.4 Appointment and Dismissal of Accounting Firms](index=38&type=section&id=5.4%20Appointment%20and%20Dismissal%20of%20Accounting%20Firms) This section reports the 2019 Annual General Meeting approved Shinewing Certified Public Accountants as the company's 2020 auditor and internal control auditor - On **May 20, 2020**, the company's 2019 Annual General Meeting approved the appointment of Shinewing Certified Public Accountants (Special General Partnership) as the company's 2020 auditor and internal control auditor, with total audit fees not exceeding **CNY 1.43 million**[99](index=99&type=chunk) [5.5 Bankruptcy Reorganization Matters](index=38&type=section&id=5.5%20Bankruptcy%20Reorganization%20Matters) This section confirms no bankruptcy reorganization matters for the company during the reporting period - The company had no bankruptcy reorganization matters during this reporting period[100](index=100&type=chunk) [5.6 Major Litigation and Arbitration Matters](index=38&type=section&id=5.6%20Major%20Litigation%20and%20Arbitration%20Matters) This section reports no major litigation reaching disclosure standards, but details progress on several lawsuits exceeding **CNY 10 million**, involving margin financing, Zhengquan Holdings, and bond trading disputes - The company had no major litigation or arbitration matters reaching the disclosure standard of the "Shanghai Stock Exchange Listing Rules" during this reporting period[100](index=100&type=chunk) - In the company's lawsuit against Cai Mengjun for margin financing and securities lending transaction disputes, Cai Mengjun was ordered to repay principal of **CNY 16,534,564.41** plus interest due to margin financing and securities lending default, with the second instance upholding the original judgment[104](index=104&type=chunk)[105](index=105&type=chunk) - In the company's lawsuit against Zhengquan Holdings regarding disputes related to the company, the company sued Zhengquan Holdings for disguised capital withdrawal, demanding the return of dividends and cessation of shareholder rights; the Hunan High Court ruled in favor of ceasing shareholder rights but rejected the claims for dividend return and interest compensation; both parties have appealed, and the Supreme People's Court is hearing the second instance[106](index=106&type=chunk)[108](index=108&type=chunk) - In China Minzu Securities' lawsuit against Shandong Shanshui Company for bond transaction disputes, Shandong Shanshui defaulted on bonds, and China Minzu Securities has recovered all principal and interest through a settlement agreement[109](index=109&type=chunk)[110](index=110&type=chunk) [5.7 Penalties and Rectification for Listed Company, Directors, Supervisors, Senior Management, Controlling Shareholders, Actual Controllers, and Acquirers](index=42&type=section&id=5.7%20Penalties%20and%20Rectification%20for%20Listed%20Company%2C%20Directors%2C%20Supervisors%2C%20Senior%20Management%2C%20Controlling%20Shareholders%2C%20Actual%20Controllers%2C%20and%20Acquirers) This section confirms no penalties or rectification for the company, its directors, supervisors, senior management, controlling shareholders, actual controllers, or acquirers during the reporting period - The company, its directors, supervisors, senior management, controlling shareholders, actual controllers, and acquirers had no penalties or rectification situations during this reporting period[110](index=110&type=chunk) [5.8 Explanation of the Integrity Status of the Company, its Controlling Shareholders, and Actual Controllers During the Reporting Period](index=42&type=section&id=5.8%20Explanation%20of%20the%20Integrity%20Status%20of%20the%20Company%2C%20its%20Controlling%20Shareholders%2C%20and%20Actual%20Controllers%20During%20the%20Reporting%20Period) This section discloses that controlling shareholder Founder Group was ruled to undergo reorganization during the period, which is currently ongoing - In **February 2020**, the Beijing No. 1 Intermediate People's Court ruled for the reorganization of Founder Group; in **July 2020**, it ruled for the substantive consolidated reorganization of Founder Group and five other companies, with the reorganization currently ongoing[111](index=111&type=chunk) [5.9 Information on the Company's Equity Incentive Plans, Employee Stock Ownership Plans, or Other Employee Incentive Measures and Their Impact](index=42&type=section&id=5.9%20Information%20on%20the%20Company%27s%20Equity%20Incentive%20Plans%2C%20Employee%20Stock%20Ownership%20Plans%2C%20or%20Other%20Employee%20Incentive%20Measures%20and%20Their%20Impact) This section confirms no equity incentive plans, employee stock ownership plans, or other employee incentive measures were implemented during the reporting period - The company had no equity incentive plans, employee stock ownership plans, or other employee incentive measures during this reporting period[111](index=111&type=chunk) [5.10 Major Related Party Transactions](index=43&type=section&id=5.10%20Major%20Related%20Party%20Transactions) This section discloses major related party transactions, including estimated and actual daily operating transactions and specific acquisitions like advertising rights - The company's board of directors approved the resolution on the confirmation of 2019 annual ordinary related party transaction amounts and the estimation of 2020 annual ordinary related party transaction amounts, with an estimated total of **CNY 200 million** for 2020[112](index=112&type=chunk) - The company signed agreements with Beijing Hangxiang Advertising Co., Ltd., Shanghai Jinghuicheng, and PKU Founder Finance to acquire advertising rights and related obligations for the Capital Airport T3 terminal express train, with a related party transaction amount of **CNY 28.9019 million**[113](index=113&type=chunk)[114](index=114&type=chunk) - During this reporting period, the company had no related party transactions involving asset or equity acquisition/disposal, no major related party transactions involving joint external investments, and no related party creditor-debtor relationships[115](index=115&type=chunk) [5.11 Major Contracts and Their Fulfillment](index=44&type=section&id=5.11%20Major%20Contracts%20and%20Their%20Fulfillment) This section confirms no entrustment, contracting, or leasing matters, but details external guarantees to subsidiaries totaling **CNY 2.434 billion**, or **6.14%** of net assets - The company had no entrustment, contracting, or leasing matters during this reporting period[115](index=115&type=chunk) - As of the end of the reporting period, the total guarantee balance for subsidiaries was **CNY 2.434 billion**, accounting for **6.14%** of the company's net assets[120](index=120&type=chunk) - The company provided a net capital guarantee commitment of **CNY 1 billion** for its wholly-owned subsidiary Founder Underwriting & Sponsorship[120](index=120&type=chunk) - Founder HK Financial Holdings provided guarantees for its wholly-owned subsidiaries, with a guarantee balance of **USD 202.49 million** at the end of the reporting period[120](index=120&type=chunk) [5.12 Listed Company's Poverty Alleviation Work](index=46&type=section&id=5.12%20Listed%20Company%27s%20Poverty%20Alleviation%20Work) This section details the company's H1 2020 targeted poverty alleviation efforts, including planning, implementation, achievements, and future plans, utilizing multi-dimensional measures to support poverty-stricken areas - The Group formulated and released the "Poverty Alleviation Work Plan (2017-2020)", continuously deepening targeted poverty alleviation business and actively promoting the implementation of the "2+3" targeted poverty alleviation model[121](index=121&type=chunk) - In H1 2020, the Group focused on financial and industrial poverty alleviation, complemented by educational, public welfare, and consumption-based poverty alleviation, to support county-level poverty eradication[122](index=122&type=chunk) Achievements in Targeted Poverty Alleviation (H1 2020) | Indicator | Quantity and Implementation Status | | :--- | :--- | | Funds | 10.12825 million CNY | | Number of Poor Students Supported | 164 people | | Social Poverty Alleviation | 7.91265 million CNY | | Other Projects | 2.2156 million CNY (4 consumption-based poverty alleviation projects) | - The company was selected as one of the **50 '2019 Best Cases of Chinese Enterprises in Poverty Alleviation'** by the State Council Leading Group Office of Poverty Alleviation and Development, and received the 'Outstanding Contribution in 2019' award from the China Foundation for Poverty Alleviation[123](index=123&type=chunk) - Subsequent targeted poverty alleviation plans will strengthen the poverty alleviation project library with the concept of "wealth creation", conduct educational poverty alleviation through the "Wisdom & Wealth" lecture series, enhance consumption-based poverty alleviation with "Gathering Love for Prosperity", and leverage public welfare poverty alleviation with "Boundless Good Deeds, Boundless Love"[129](index=129&type=chunk)[130](index=130&type=chunk) [5.13 Convertible Corporate Bonds](index=48&type=section&id=5.13%20Convertible%20Corporate%20Bonds) This section confirms no convertible corporate bonds for the company during the reporting period - The company had no convertible corporate bonds during this reporting period[131](index=131&type=chunk) [5.14 Environmental Information](index=48&type=section&id=5.14%20Environmental%20Information) This section states the company is not a key pollutant-discharging unit, emphasizing its commitment to energy conservation, environmental protection, and green office practices - The company and its subsidiaries are not classified as key pollutant-discharging units by environmental protection authorities[131](index=131&type=chunk) - The company values energy conservation and environmental protection, diligently implements national environmental laws and regulations such as the "Environmental Protection Law", promotes energy saving, and fosters a green office environment[132](index=132&type=chunk) [5.15 Explanation of Other Significant Matters](index=49&type=section&id=5.15%20Explanation%20of%20Other%20Significant%20Matters) This section discloses other significant matters, including subsidiary capital increases, asset impairment provisions, and judicial freezing/unfreezing of controlling shareholder shares, impacting financial position and equity structure - Founder HK Financial Holdings completed a capital increase equivalent to **CNY 200 million** in HKD, changing its registered capital to **HKD 718,657,378**[134](index=134&type=chunk) - Founder Securities Investment's registered capital changed from **CNY 900 million** to **CNY 1.5 billion**, with the company having increased capital by **CNY 350 million**[135](index=135&type=chunk) - Founder Underwriting & Sponsorship's registered capital changed from **CNY 800 million** to **CNY 1.4 billion**; Founder CIFCO Futures' registered capital changed from **CNY 421.94771892 million** to **CNY 1.005 billion**[136](index=136&type=chunk)[137](index=137&type=chunk) - The company provided a net capital guarantee commitment of **CNY 1 billion** for Founder Underwriting & Sponsorship, with a one-year term[138](index=138&type=chunk) - In Q1 2020, various credit impairment losses and provisions for liquidity support to asset management plans totaled **CNY 351.1701 million**, impacting Q1 2020 net profit by **-CNY 263.3776 million**[139](index=139&type=chunk) - Founder Group's **1,109,609,852 shares** in the company and their accrued benefits were judicially rotationally frozen, with some later unfrozen; as of the report disclosure date, the cumulative frozen shares accounted for **48.57%** of its total holdings and **13.48%** of the company's total share capital[140](index=140&type=chunk)[141](index=141&type=chunk) Section VI Changes in Ordinary Shares and Shareholder Information [6.1 Changes in Share Capital](index=52&type=section&id=6.1%20Changes%20in%20Share%20Capital) This section reports no changes in share capital or structure, but details the completed sale of treasury stock, with proceeds supplementing working capital - As of the end of the reporting period, the company's total share capital was **8,232,101,395 shares**, all of which are unrestricted tradable A-shares, with no changes during the reporting period[142](index=142&type=chunk) - The company completed its share repurchase plan on **April 10, 2019**, repurchasing a total of **11,150,255 shares**, accounting for **0.14%** of the total share capital, using **CNY 57.8059 million**[142](index=142&type=chunk) - As of **June 23, 2020**, all **11,150,255 repurchased shares** have been sold, with an average transaction price of **CNY 7.22/share**, and total proceeds of **CNY 80.4513 million** used to supplement the company's working capital[142](index=142&type=chunk) [6.2 Shareholder Information](index=53&type=section&id=6.2%20Shareholder%20Information) This section discloses the total shareholders and top ten shareholders' holdings at period-end, including share status and nature, noting the court ruling on Zhengquan Holdings' shares - Total number of shareholders at the end of the reporting period was **202,292**[143](index=143&type=chunk) Top Ten Shareholders' Shareholding (Jun 30, 2020) | Shareholder Name | Period-End Shareholding (Shares) | Percentage (%) | Share Status | Pledged or Frozen Shares (Shares) | Shareholder Nature | | :--- | :--- | :--- | :--- | :--- | :--- | | Peking University Founder Group Co., Ltd. | 2,284,609,852 | 27.75 | Pledged | 1,109,609,852 | State-owned Legal Person | | Beijing Zhengquan Holdings Co., Ltd. | 1,799,591,164 | 21.86 | Frozen | 1,799,591,164 | Domestic Non-State-owned Legal Person | | Hong Kong Securities Clearing Company Limited | 1,469,112,518 | 17.85 | None | 0 | Unknown | | China Securities Finance Corporation Limited | 261,985,096 | 3.18 | None | 0 | State-owned Legal Person | | Harbin Hatou Investment Co., Ltd. | 197,556,999 | 2.40 | None | 0 | State-owned Legal Person | | Central Huijin Asset Management Co., Ltd. | 138,731,200 | 1.69 | None | 0 | State-owned Legal Person | | Leshan State-owned Assets Investment and Operation (Group) Co., Ltd. | 105,955,845 | 1.29 | Pledged | 40,000,000 | State-owned Legal Person | | Founder Industrial Holdings Co., Ltd. | 78,627,162 | 0.96 | None | 0 | State-owned Legal Person | | China Construction Bank Co., Ltd. - Guotai CSI All Share Securities Company ETF | 58,097,459 | 0.71 | None | 0 | Unknown | | Bosera Fund - Agricultural Bank of China - Bosera CSI Financial Asset Management Plan | 53,580,300 | 0.65 | None | 0 | Unknown | - The Dalian Intermediate People's Court ruled to offset **709,886,375 shares** of the company held by Zhengquan Holdings against the civil claims of Guotong Trust against Zhengquan Holdings; the related share change still requires approval from the China Securities Regulatory Commission[146](index=146&type=chunk) Section VII Preferred Shares Related Information [7.1 Preferred Shares Related Information](index=55&type=section&id=7.1%20Preferred%20Shares%20Related%20Information) This section confirms no preferred shares related information for the company during the reporting period - The company had no preferred shares related information during this reporting period[147](index=147&type=chunk) Section VIII Information on Directors, Supervisors, and Senior Management [8.1 Changes in Shareholdings](index=56&type=section&id=8.1%20Changes%20in%20Shareholdings) This section reports no changes in shareholdings for current or resigned directors, supervisors, and senior management, nor were equity incentives granted - There were no changes in the shareholdings of current and resigned directors, supervisors, and senior management during the reporting period[148](index=148&type=chunk) - Directors, supervisors, and senior management were not granted equity incentives during the reporting period[148](index=148&type=chunk) [8.2 Changes in Company Directors, Supervisors, and Senior Management](index=56&type=section&id=8.2%20Changes%20in%20Company%20Directors%2C%20Supervisors%2C%20and%20Senior%20Management) This section discloses changes in directors, supervisors, and senior management during the period, mainly concerning Executive Committee appointments - On **August 14, 2020**, the company held its Sixth Meeting of the Fourth Board of Directors, appointing Mr. He Yagang, Mr. Gao Li, Mr. Sun Bin, Mr. Yin Lei, Mr. Wu Ke, Mr. Jiang Zhijun, and Mr. Xu Zibing as members of the company's Executive Committee[150](index=150&type=chunk) - Mr. He Yagang was appointed Director of the Executive Committee, and Mr. Gao Li as Deputy Director of the Executive Committee; Mr. Gao Li was appointed President, Mr. Sun Bin as Chief Compliance Officer, and Mr. He Yagang as Board Secretary[150](index=150&type=chunk) Section IX Corporate Bonds Related Information [9.1 Basic Information on Corporate Bonds](index=57&type=section&id=9.1%20Basic%20Information%20on%20Corporate%20Bonds) This section lists basic information for non-publicly issued bonds, including names, codes, dates, balances, and rates, noting timely repayment for some Non-Publicly Issued Bonds (Partial) | Bond Name | Abbreviation | Code | Issue Date | Maturity Date | Bond Balance (CNY 10,000) | Interest Rate | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Founder Securities Co., Ltd. 2017 Non-Public Issuance Subordinated Bonds (Tranche 1) | 17 Founder C1 | 145812 | 2017/9/19 | 2020/9/19 | 190,000 | 5.70% | | Founder Securities Co., Ltd. 2017 Non-Public Issuance Subordinated Bonds (Tranche 2) | 17 Founder C2 | 145842 | 2017/10/12 | 2020/10/12 | 222,000 | 5.70% | | Founder Securities Co., Ltd. 2019 Non-Public Issuance Corporate Bonds (Tranche 1) | 19 Founder F1 | 151205 | 2019/2/27 | 2022/2/27 | 250,000 | 4.71% | | Founder Securities Co., Ltd. 2019 Non-Public Issuance Subordinated Bonds (Tranche 1) | 19 Founder C1 | 151470 | 2019/4/24 | 2021/4/24 | 156,000 | 4.80% | - **18 Founder F1** has been fully and timely repaid[153](index=153&type=chunk) [9.2 Use of Corporate Bond Proceeds](index=58&type=section&id=9.2%20Use%20of%20Corporate%20Bond%20Proceeds) This section confirms all bond proceeds were used as agreed in offering circulars, primarily for working capital or debt repayment - The proceeds from all bonds issued by the company have been fully utilized, and after deducting issuance and related expenses, all were used to supplement the company's working capital or repay maturing debts, consistent with the uses, plans, and other agreements specified in the offering circular[155](index=155&type=chunk) [9.3 Corporate Bond Rating Status](index=58&type=section&id=9.3%20Corporate%20Bond%20Rating%20Status) This section discloses the company's bond credit ratings, with Lianhe Credit Rating Co., Ltd. assigning an **AAA** corporate rating (stable outlook) and bond ratings of **AA+** or **AAA** - Lianhe Credit Rating Co., Ltd. assigned an **AAA** corporate credit rating to the company, with a stable outlook[156](index=156&type=chunk)[157](index=157&type=chunk) - The bond credit ratings for "**17 Founder C1**", "**17 Founder C2**", and "**19 Founder C1**" are **AA+**[156](index=156&type=chunk)[157](index=157&type=chunk) - The bond credit rating for "**19 Founder F1**" is **AAA**[157](index=157&type=chunk) [9.4 Corporate Bond Enhancement Mechanisms, Repayment Plans, and Other Related Matters During the Reporting Period](index=59&type=section&id=9.4%20Corporate%20Bond%20Enhancement%20Mechanisms%2C%20Repayment%20Plans%2C%20and%20Other%20Related%20Matters%20During%20the%20Reporting%20Period) This section confirms timely interest and principal repayment for all bonds, demonstrating good repayment capability, supported by capital accumulation, profitability, and operating cash flow - During the reporting period, the company timely fulfilled its annual interest payment and principal and interest repayment obligations for all bonds, demonstrating good repayment capability[158](index=158&type=chunk) - Repayment funds primarily originate from the company's capital accumulation, daily profit accumulation, and cash flow generated from operating activities[158](index=158&type=chunk) [9.5 Corporate Bondholders' Meeting Convening Status](index=59&type=section&id=9.5%20Corporate%20Bondholders%27%20Meeting%20Convening%20Status) This section confirms no bondholders' meetings were convened by the company in H1 2020 - The company did not convene any bondholders' meetings in H1 2020[159](index=159&type=chunk) [9.6 Corporate Bond Trustee Performance](index=60&type=section&id=9.6%20Corporate%20Bond%20Trustee%20Performance) This section reports that bond trustees Wanhe Securities and Jinyuan Securities fulfilled their duties by issuing 2019 annual trustee performance reports - Wanhe Securities Co., Ltd., as the trustee for multiple bond tranches, issued its 2019 annual trustee performance report[159](index=159&type=chunk) - Jinyuan Securities Co., Ltd., as the trustee for **19 Founder C1**, issued its 2019 annual trustee performance report[159](index=159&type=chunk) [9.7 Key Accounting Data and Financial Indicators as of Period-End and Prior Year-End (or Current Period and Prior Period)](index=60&type=section&id=9.7%20Key%20Accounting%20Data%20and%20Financial%20Indicators%20as%20of%20Period-End%20and%20Prior%20Year-End%20(or%20Current%20Period%20and%20Prior%20Period)) This section presents key accounting data and financial indicators, showing a decreased asset-liability ratio and increased EBITDA interest coverage, reflecting improved solvency Key Financial Indicators (Jun 30, 2020 vs Dec 31, 2019) | Item | As of Jun 30, 2020 | As of Dec 31, 2019 | Change (%) | Explanation of Change | | :--- | :--- | :--- | :--- | :--- | | Current Ratio | 2.20 | 2.02 | 8.91 | | | Asset-Liability Ratio | 55.59% | 62.23% | decreased by 6.64 percentage points | | | EBITDA Interest Coverage Ratio | 2.19 | 1.81 | 20.99 | Primarily due to a decrease in debt scale during the period | | Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) | 1,863,247,946.02 | 2,272,232,070.09 | -18.00 | Primarily due to a decrease in debt scale during the period | [9.8 Interest Payment and Repayment Status of Other Bonds and Debt Financing Instruments](index=61&type=section&id=9.8%20Interest%20Payment%20and%20Repayment%20Status%20of%20Other%20Bonds%20and%20Debt%20Financing%20Instruments) This section confirms timely principal and interest payments on all other debt financing instruments, including interbank borrowings, repurchases, and income certificates - In H1 2020, the company's other debt financing instruments included interbank borrowings, bond outright repurchase, bond pledged repurchase, income certificates, asset income rights transfer, and re-lending[162](index=162&type=chunk) - The company timely paid principal and interest on all its financings[162](index=162&type=chunk) [9.9 Bank Credit Facilities During the Reporting Period](index=61&type=section&id=9.9%20Bank%20Credit%20Facilities%20During%20the%20Reporting%20Period) This section discloses the company's bank credit facilities, totaling **CNY 30.44 billion** in comprehensive credit, with **CNY 25.59 billion** available - As of **June 30, 2020**, the company had cumulatively obtained comprehensive credit lines totaling **CNY 30.44 billion** from **23 banking institutions**[163](index=163&type=chunk) - Currently, **CNY 4.85 billion** of the credit line has been utilized, with a remaining available credit line of **CNY 25.59 billion**[163](index=163&type=chunk) [9.10 Fulfillment of Corporate Bond Offering Circular Agreements and Commitments During the Reporting Period](index=61&type=section&id=9.10%20Fulfillment%20of%20Corporate%20Bond%20Offering%20Circular%20Agreements%20and%20Commitments%20During%20the%20Reporting%20Period) This section confirms strict compliance with all corporate bond offering circular agreements and commitments, including proceeds use, interest payments, and information disclosure - During the reporting period, the company strictly fulfilled all agreements and commitments in the offering circulars for each bond tranche, used proceeds compliantly, timely paid corporate bond interest, and regularly disclosed company information at the agreed locations and times[164](index=164&type=chunk) [9.11 Impact of Significant Matters on Company Operations and Solvency](index=61&type=section&id=9.11%20Impact%20of%20Significant%20Matters%20on%20Company%20Operations%20and%20Solvency) This section states that disclosed significant matters will not materially adversely impact daily operations or overall solvency - The significant matters disclosed by the company will not affect its daily operations, nor will they have a material adverse impact on its overall solvency[165](index=165&type=chunk) Section X Financial Report [10.1 Audit Report](index=62&type=section&id=10.1%20Audit%20Report) This section confirms that this half-year report has not been audited by an accounting firm - This half-year report has not been audited by an accounting firm[3](index=3&type=chunk) [10.2 Financial Statements](index=62&type=section&id=10.2%20Financial%20Statements) This section indicates that financial statements, including consolidated and parent balance sheets, income statements, cash flow statements, and equity changes, are appended - Financial statements (attached) include consolidated and parent company balance sheets, income statements, cash flow statements, and statements of changes in shareholders' equity[166](index=166&type=chunk)[169](index=169&type=chunk)[171](index=171&type=chunk)[173](index=173&type=chunk)[175](index=175&type=chunk)[177](index=177&type=chunk)[179](index=179&type=chunk)[181](index=181&type=chunk)[183](index=183&type=chunk)[185](index=185&type=chunk)[187](index=187&type=chunk)[189](index=189&type=chunk) [10.3 Notes to Financial Statements](index=62&type=section&id=10.3%20Notes%20to%20Financial%20Statements) This section provides detailed notes to the financial statements, covering basic company information, accounting policies, consolidation scope, taxes, major financial items, related party transactions, and risk management - The notes to the financial statements provide detailed disclosures on the company's basic information, accounting policies, consolidation scope, taxes, annotations for major financial items, related party transactions, contingencies, commitments, post-balance sheet events, and risk management[190](index=190&type=chunk)[192](index=192&type=chunk)[193](index=193&type=chunk)[194](index=194&type=chunk)[266](index=266&type=chunk)[273](index=273&type=chunk)[436](index=436&type=chunk)[437](index=437&type=chunk)[445](index=445&type=chunk)[455](index=455&type=chunk)[469](index=469&type=chunk)[471](index=471&type=chunk)[473](index=473&type=chunk)[476](index=476&type=chunk)[502](index=502&type=chunk)[529](index=529&type=chunk)[595](index=595&type=chunk) [10.3.1 Company's Basic Information](index=82&type=section&id=10.3.1%20Company%27s%20Basic%20Information) This subsection outlines the company's history, current registered capital, total shares, and organizational structure, including subsidiaries, branches, and employee count - The company's predecessor was Zhejiang Securities Co., Ltd., which was wholly converted into a joint-stock company in **2010** and listed on the Shanghai Stock Exchange in **2011**[190](index=190&type=chunk) - Current registered capital is **CNY 8.232101395 billion**, with a total of **8.232101395 billion shares**, all of which are tradable shares[191](index=191&type=chunk) - As of **June 30, 2020**, the company has **6 second-tier subsidiaries**, **24 branches**, **338 securities brokerage offices**, and **6,734 employees**[191](index=191&type=chunk) [10.3.2 Scope of Consolidated Financial Statements](index=83&type=section&id=10.3.2%20Scope%20of%20Consolidated%20Financial%20Statements) This subsection defines the scope of the Group's consolidated financial statements, including directly or indirectly controlled subsidiaries - The Group's consolidated financial statements include directly or indirectly controlled subsidiaries, such as Founder Hesheng Investment, Founder Securities Investment, Founder CIFCO Futures, Founder Underwriting & Sponsorship, Founder Fubon Fund, Founder HK Financial Holdings, and their controlled companies[192](index=192&type=chunk) [10.3.3 Basis of Preparation of Financial Statements](index=83&type=section&id=10.3.3%20Basis%20of%20Preparation%20of%20Financial%20Statements) This subsection explains that the financial statements are prepared on a going concern basis, adhering to relevant accounting standards - The financial statements are prepared on a going concern basis, in accordance with the "Accounting Standards for Business Enterprises" and relevant regulations issued by the Ministry of Finance[193](index=193&type=chunk) - The Group has a recent history of profitable operations and financial resources to support it, making the preparation of financial statements on a going concern basis reasonable[194](index=194&type=chunk) [10.3.4 Company's Major Accounting Policies and Accounting Estimates](index=83&type=section&id=10.3.4%20Company%27s%20Major%20Accounting%20Policies%20and%20Accounting%20Estimates) This subsection details the company's significant accounting policies and estimates, including financial instrument recognition, measurement, impairment, and the adoption of new revenue standards - These financial statements comply with the requirements of Accounting Standards for Business Enterprises, truly and completely reflecting the financial position, operating results, and cash flows of the Company and the Group[195](index=195&type=chunk) - The accounting period runs from **January 1 to December 31** of the Gregorian calendar, with Renminbi as the functional currency[195](index=195&type=chunk)[196](index=196&type=chunk) - Detailed accounting methods for initial recognition and classification, subsequent measurement, impairment, and derecognition of financial instruments are elaborated[203](index=203&type=chunk)[205](index=205&type=chunk)[207](index=207&type=chunk)[208](index=208&type=chunk)[209](index=209&type=chunk)[210](index=210&type=chunk)[211](index=211&type=chunk)[212](index=212&type=chunk)[213](index=213&type=chunk)[214](index=214&type=chunk)[215](index=215&type=chunk)[216](index=216&type=chunk)[217](index=217&type=chunk)[218](index=218&type=chunk)[219](index=219&type=chunk) - The Group has adopted the new revenue standards for preparing its 2020 financial statements, and this change does not have a significant impact on the Group's financial statements[264](index=264&type=chunk) [10.3.5 Taxes](index=106&type=section&id=10.3.5%20Taxes) This subsection lists the main types of taxes and their applicable rates for the company and its subsidiaries - Major tax types and rates include Value-Added Tax (**6%**, **3%**), Property Tax (**1.2%**, **12%**), Urban Maintenance and Construction Tax (**7%**, **5%**), Education Surcharge (**3%**), Local Education Surcharge (**1%**, **1.5%**, **2%**, **3%**), and Corporate Income Tax (**9%**, **16.5%**, **25%**)[266](index=266&type=chunk) - Subsidiary Founder Hesheng Investment applies a **9%** corporate income tax rate[272](index=272&type=chunk) [10.3.6 Notes to Major Items in Consolidated Financial Statements](index=108&type=section&id=10.3.6%20Notes%20to%20Major%20Items%20in%20Consolidated%20Financial%20Statements) This subsection provides detailed annotations for major items in the consolidated financial statements, including monetary funds, funds lent, trading financial assets, short-term financing payables, bonds payable, and key revenue figures - Monetary funds at period-end amounted to **CNY 36,528,098,977.91**, of which client deposits were **CNY 29,751,794,225.93**[274](index=274&type=chunk) - Funds lent at period-end amounted to **CNY 21,892,686,180.67**, primarily for margin financing and securities lending business[283](index=283&type=chunk) - Trading financial assets at period-end amounted to **CNY 24,968,936,035.11**, primarily including bonds, funds, and stocks[311](index=311&type=chunk) - Short-term financing payables at period-end amounted to **CNY 7,498,601,505.94**, primarily due to an increase in the scale of income certificates[348](index=348&type=chunk) - Bonds payable at period-end amounted to **CNY 15,351,474,655.37**, primarily including subordinated bonds, corporate bonds, and income certificates[370](index=370&type=chunk) - Operating revenue for the current period reached **CNY 3,392,945,977.69**, net fee and commission income was **CNY 2,336,317,689.69**, and investment income was **CNY 781,561,859.05**[393](index=393&type=chunk)[395](index=395&type=chunk)[400](index=400&type=chunk) [10.3.7 Changes in Consolidation Scope](index=150&type=section&id=10.3.7%20Changes%20in%20Consolidation%20Scope) This subsection explains the change in the company's consolidation scope, specifically the exclusion of Credit Suisse Founder due to a change in ownership structure - As of **June 1, 2020**, the company no longer consolidates Credit Suisse Founder, as Credit Suisse's shareholding increased to **51.00%** after capital injection, while the company's shareholding decreased to **49.00%**[436](index=436&type=chunk) - The company's equity interest in Credit Suisse Founder is accounted for as a long-term equity investment using the equity method[436](index=436&type=chunk) [10.3.8 Interests in Other Entities](index=150&type=section&id=10.3.8%20Interests%20in%20Other%20Entities) This subsection details the Group's interests in other entities, including important subsidiaries and managed unconsolidated structured entities - The Group owns important subsidiaries such as Founder CIFCO Futures, Founder Fubon Fund, and Founder Underwriting & Sponsorship[437](index=437&type=chunk) - Founder CIFCO Futures has a minority shareholder stake of **7.56%**, with profit/loss attributable to minority shareholders of **CNY 45.3256 million** for the current period[438](index=438&type=chunk) - Founder Fubon Fund has a minority shareholder stake of **33.30%**, with profit/loss attributable to minority shareholders of **-CNY 0.3156 million** for the current period[438](index=438&type=chunk) - The total assets of unconsolidated structured entities managed by the company amounted to **CNY 155,137,405,572.58**[442](index=442&type=chunk) [10.3.9 Disclosure of Fair Value](index=152&type=section&id=10.3.9%20Disclosure%20of%20Fair%20Value) This subsection describes the Group's approach to fair value measurement and discloses the total amounts of financial assets and liabilities measured at fair value - The Group determines and discloses the fair value of financial instruments based on Level 1, Level 2, and Level 3 inputs[445](index=445&type=chunk) - Total financial assets continuously measured at fair value amounted to **CNY 44,968,155,233.93**, of which trading financial assets were **CNY 24,968,936,035.11**[446](index=446&type=chunk)[448](index=448&type=chunk) - Total liabilities continuously measured at fair value amounted to **CNY 6,030,191,352.68**, primarily trading financial liabilities[448](index=448&type=chunk) - The Group's financial instruments valued using Level 3 inputs primarily include equity investments measured at fair value[452](index=452&type=chunk) [10.3.10 Related Party Relationships and Transactions](index=156&type=section&id=10.3.10%20Related%20Party%20Relationships%20and%20Transactions) This subsection identifies the company's controlling shareholder and ultimate controller, and details significant related party transactions, including procurement of goods/services and compensation to key management personnel - The controlling shareholder is Peking University Founder Group Co., Ltd., and the ultimate controlling party is Peking University[456](index=456&type=chunk) - Related party transactions for purchasing goods/receiving services in the current period include receiving services from Peking University for **CNY 1,165,048.54** and purchasing insurance from PKU Founder Life Insurance Co., Ltd. for **CNY 1,163,474.75**[459](index=459&type=chunk)[460](index=460&type=chunk) - The total remuneration paid by the company to key management personnel was **CNY 16.2413 million**[464](index=464&type=chunk) - The Group donated **CNY 8,112,650.00** to Hunan Founder Securities Huiai Public Welfare Foundation[464](index=464&type=chunk) [10.3.11 Contingent Matters](index=159&type=section&id=10.3.11%20Contingent%20Matters) This subsection describes the company's contingent matters, primarily investor lawsuits related to securities misrepresentation liability, including the status of resolved and newly accepted cases - The company is involved in investor lawsuits concerning securities misrepresentation liability disputes; **1,323 prior cases** have received first-instance judgments, rulings, or mediation, with **853 cases concluded**, and some plaintiffs applying for retrial[470](index=470&type=chunk) - The company received **807 newly accepted securities misrepresentation liability dispute cases** from the Changsha Intermediate People's Court, of which **629 cases** reached settlement agreements, with the company's total compensation amounting to **CNY 34.6698 million**[470](index=470&type=chunk) [10.3.12 Commitments](index=160&type=section&id=10.3.12%20Commitments) This subsection discloses the Group's future irrevocable minimum lease payments - The Group's total irrevocable minimum lease payments to be paid in future years amount to **CNY 686,058,050.82**[472](index=472&type=chunk) [10.3.13 Post-Balance Sheet Events](index=161&type=section&id=10.3.13%20Post-Balance%20Sheet%20Events) This subsection details significant events occurring after the balance sheet date, including bond repurchases, litigation-related payments, and a loan-linked structured note default - Founder HK Financial Holdings' wholly-owned subsidiary, First FZ Bond Limited, repurchased offshore bonds with a face value of **USD 88.71 million** between **June 15, 2020, and June 29, 2020**, and cancelled them in July[473](index=473&type=chunk) - From the reporting date to the disclosure date, the company incurred compensation payments of **CNY 33,721,600.92** due to litigation[474](index=474&type=chunk) - Founder Asset Management (Hong Kong) Limited, a subsidiary of Founder HK Financial Holdings, invested in the loan-linked structured note COSCIC 7 08/11/20, which matured on **August 11, 2020**, with the underlying loan defaulting, totaling **USD 26,779,167.50** in principal and interest[475](index=475&type=chunk) [10.3.14 Risk Management](index=161&type=section&id=10.3.14%20Risk%20Management) This subsection describes the Group's comprehensive risk management framework, covering credit, market, liquidity, and operational risks, including governance structure, risk assessment, and mitigation strategies - The Group has established comprehensive and systematic risk control policies and procedures, covering credit risk, market risk, liquidity risk, and operational risk[476](index=476&type=chunk) - The risk governance organizational structure includes the Board of Directors, Board Risk Control Committee, Executive Committee, Risk Management Committee, Chief Risk Officer, Risk Management Department, Audit Department, and various business functional departments[478](index=478&type=chunk) - Credit risk primarily arises from client defaults in credit businesses such as margin finan

Financial Performance - Net profit attributable to shareholders for the first nine months of 2018 was CNY 454.56 million, a decrease of 65.84% year-on-year[7]. - Operating revenue for the first nine months of 2018 was CNY 3.71 billion, down 21.31% from the same period in 2017[7]. - Basic earnings per share for the first nine months of 2018 were CNY 0.06, a decrease of 62.50% year-on-year[7]. - The weighted average return on equity decreased by 2.45 percentage points to 1.21% for the first nine months of 2018[7]. - As of September 30, 2018, the net profit decreased by 64.35% to RMB 474,479,553.72 compared to RMB 1,330,869,698.52 in the same period of 2017[15]. - The total profit decreased by 66.15% to RMB 592,415,439.79 from RMB 1,749,943,406.87 year-on-year[15]. - The company reported a 71.16% decline in net interest income, dropping to RMB 250,482,011.43 from RMB 868,459,146.44[15]. - Net profit for the first nine months of 2018 was ¥474.48 million, down from ¥1.33 billion in the same period of 2017, a decrease of about 64.5%[44]. - Operating income for Q3 2018 was ¥1.40 billion, a decline of 19.7% compared to ¥1.74 billion in Q3 2017[44]. - Net commission and fee income decreased to ¥686.55 million from ¥1.09 billion year-over-year, a drop of approximately 37%[44]. - Total comprehensive income for Q3 2018 was ¥483,691,007.59, compared to ¥761,027,701.96 in Q3 2017, indicating a decrease of approximately 36.5%[49]. Cash Flow and Assets - The net cash flow from operating activities for the first nine months of 2018 was negative CNY 7.29 billion, a decline of 253.21% compared to the previous year[7]. - The company’s available-for-sale financial assets increased by 67.26% to RMB 43,379,307,544.21 from RMB 25,934,888,641.44[15]. - The company’s liabilities from bonds payable increased by 32.95% to RMB 35,192,900,000.00 from RMB 26,470,160,000.00[15]. - The total cash inflow from financing activities was 5,087,273,455.19 RMB, compared to 6,509,202,720.88 RMB in the previous year[56]. - The net cash flow from operating activities for Q3 2018 was -7,294,235,271.16 RMB, a significant decline compared to the previous year's net cash flow of 4,760,911,577.19 RMB[53]. - Cash and cash equivalents at the end of Q3 2018 stood at 33,246,713,652.76 RMB, down from 35,480,061,092.69 RMB at the end of Q3 2017[53]. - The company reported a significant increase in cash paid for other operating activities, which rose to 22,222,867,155.23 RMB from 3,208,239,027.30 RMB year-over-year[53]. Shareholder Information - The total number of shareholders as of the report date was 208,655[10]. - The largest shareholder, Peking University Founder Group, held 27.75% of the shares, with 1.11 billion shares pledged[11]. - The company approved a share repurchase plan, allowing for the buyback of 12 million to 30 million A-shares with a budget of up to ¥100 million to align the stock price with its intrinsic value[25]. Legal and Governance - The company is involved in ongoing litigation regarding shareholder disputes, with new claims being added against a major shareholder for unfulfilled commitments related to mergers and acquisitions[23]. - The company has not yet received formal communication regarding a court ruling that could positively impact its financial status if funds are recovered[25]. - The company’s board of directors has confirmed that all decisions regarding asset impairment provisions comply with legal regulations and do not harm the interests of minority shareholders[22]. - The company is actively monitoring legal proceedings that may affect its financial health and is prepared to act on any favorable outcomes[25]. - The company appointed Mr. Shi Hua as the new chairman and legal representative, with the change officially registered on September 14, 2018[24]. Strategic Developments - The company has not disclosed any new product or technology developments, market expansion, or acquisition strategies in this report[6]. - The company completed a capital increase of RMB 400 million in its subsidiary, increasing its ownership from 90.62% to 92.44%[17]. - The company recognized an asset impairment provision for the first half of 2018, reflecting a prudent approach in accordance with accounting standards, which helps to accurately represent the financial condition and operating results[22]. - The company’s strategic development committees have been restructured under the new chairman to enhance risk control and strategic planning[24].

Financial Performance - For the first three quarters of 2018, the company's operating revenue was RMB 375,009.49 million, a decrease of 20.42% compared to RMB 471,226.45 million in the same period of 2017[4] - The net profit attributable to shareholders of the listed company for the same period was RMB 49,643.53 million, down 62.69% from RMB 133,063.04 million year-on-year[4] - The company's operating profit decreased by 61.10%, from RMB 176,298.60 million in 2017 to RMB 68,583.89 million in 2018[4] - The basic earnings per share decreased to RMB 0.06, down 62.50% from RMB 0.16 in the previous year[4] - The weighted average return on equity was 1.32%, a decrease of 2.34 percentage points from 3.66% in 2017[4] Asset and Equity Position - The total assets as of September 30, 2018, were RMB 15,477,672.70 million, reflecting a 4.34% increase from RMB 14,833,626.15 million at the end of 2017[4] - The total equity attributable to shareholders increased by 1.40% to RMB 3,795,346.39 million as of September 30, 2018, compared to RMB 3,742,871.89 million at the end of 2017[4] Investment and Market Conditions - The company reported a significant loss in proprietary investments due to the continuous decline in the stock market, leading to substantial impairment provisions in credit business[5] Business Stability and Caution - The company maintains a stable development across various business segments, with a strong liquidity position and asset structure[5] - Investors are advised to be cautious as the financial data presented are preliminary and may differ from the final figures in the third-quarter report[6]