Report Overview [Important Notice](index=1&type=section&id=Important%20Content%20Notice) The board of directors, supervisory board, and senior management assure the truthfulness, accuracy, and completeness of the quarterly report content, with unaudited financial statements for this quarter - The company's board of directors, supervisory board, and senior management assume legal responsibility for the truthfulness, accuracy, and completeness of the quarterly report content[3](index=3&type=chunk) - The financial statements for this quarter are unaudited[3](index=3&type=chunk) Key Financial Data [Key Accounting Data and Financial Indicators](index=1&type=section&id=%28I%29Key%20Accounting%20Data%20and%20Financial%20Indicators) Year-to-date revenue and net profit attributable to shareholders increased, but Q3 net profit declined by 25.34%; operating cash flow significantly grew by 66.11% Key Accounting Data and Financial Indicators (Year-to-Date) | Item | Year-to-Date Amount (Yuan) | Period-over-Period Change (%) | | :--- | :--- | :--- | | Operating Revenue | 6,458,626,853.43 | 12.82 | | Net Profit Attributable to Shareholders of Listed Company | 1,928,277,072.19 | 30.08 | | Net Profit Attributable to Shareholders of Listed Company Excluding Non-recurring Gains and Losses | 1,911,745,485.76 | 26.89 | | Net Cash Flow from Operating Activities | 10,079,184,742.16 | 66.11 | | Basic Earnings Per Share (Yuan/share) | 0.23 | 27.78 | | Diluted Earnings Per Share (Yuan/share) | 0.23 | 27.78 | | Weighted Average Return on Net Assets (%) | 4.76 | Increased by 0.98 percentage points | | Total Assets | 148,507,421,704.99 | 20.49 | | Owners' Equity Attributable to Shareholders of Listed Company | 41,398,515,209.32 | 4.49 | Key Financial Indicators (Q3) | Item | Current Period Amount (Yuan) | Period-over-Period Change (%) | | :--- | :--- | :--- | | Operating Revenue | 2,378,677,004.88 | 2.02 | | Net Profit Attributable to Shareholders of Listed Company | 627,729,913.06 | -25.34 | | Net Profit Attributable to Shareholders of Listed Company Excluding Non-recurring Gains and Losses | 606,937,762.65 | -28.07 | | Basic Earnings Per Share (Yuan/share) | 0.07 | -30.00 | | Diluted Earnings Per Share (Yuan/share) | 0.07 | -30.00 | | Weighted Average Return on Net Assets (%) | 1.52 | Decreased by 0.60 percentage points | [Non-recurring Gains and Losses](index=2&type=section&id=%28II%29Non-recurring%20Gains%20and%20Losses%20and%20Amounts) Non-recurring gains and losses totaled 20.79 million Yuan for the quarter and 16.53 million Yuan year-to-date, primarily from government subsidies and other non-operating items Non-recurring Gains and Losses and Amounts | Item | Current Period Amount (Yuan) | Year-to-Date Amount (Yuan) | | :--- | :--- | :--- | | Gains and losses from disposal of non-current assets | -1,266,877.31 | -1,491,462.57 | | Government subsidies recognized in current profit or loss | 5,481,448.27 | 11,686,058.37 | | Other non-operating income and expenses apart from the above | 23,214,052.24 | 14,978,405.49 | | Less: Income tax impact | 6,495,563.23 | 8,333,071.13 | | Minority interest impact (after tax) | 140,909.56 | 308,343.73 | | **Total** | **20,792,150.41** | **16,531,586.43** | [Analysis of Financial Indicator Changes](index=2&type=section&id=%28III%29Changes%20and%20Reasons%20for%20Key%20Accounting%20Data%20and%20Financial%20Indicators) Year-to-date net interest income increased by 42% due to higher interest from other debt investments and financing, while investment banking fees and investment income declined due to reduced project revenue and consolidated structured entity investment income; operating cash flow surged by 66.11% from changes in client funds, financial assets, and repurchase scale Year-to-Date Changes and Reasons for Key Financial Indicators | Item Name | Year-to-Date Amount (Yuan) | Prior Year Same Period (Yuan) | Change Ratio (%) | Primary Reasons | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | 1,616,945,225.89 | 1,138,695,422.06 | 42.00 | Increase in interest income from other debt investments and financing business | | Net Fee and Commission Income from Investment Banking Business | 311,111,424.70 | 499,732,198.25 | -37.74 | Decrease in investment banking project income | | Investment Income | 553,741,091.27 | 1,083,191,077.57 | -48.88 | Decrease in investment income from consolidated structured entities | | Gains from Changes in Fair Value | -9,539,353.22 | -582,957,505.98 | Not Applicable | Changes in fair value of financial instruments held for trading | | Non-operating Income | 27,802,540.11 | 7,807,049.46 | 256.12 | Receipt of litigation-related deposits | | Non-operating Expenses | 20,308,913.59 | 64,521,076.80 | -68.52 | Prior period pending litigation | | Income Tax Expense | 648,444,255.71 | 416,019,696.41 | 55.87 | Increase in taxable income | | Net Profit | 1,971,689,767.97 | 1,498,160,830.44 | 31.61 | Market conditions impacting brokerage business and subsidiary earnings | | Total Comprehensive Income | 1,845,822,256.58 | 1,311,021,934.29 | 40.79 | Market conditions impacting brokerage business and subsidiary earnings, and fair value changes of financial investment instruments | | Net Cash Flow from Operating Activities | 10,079,184,742.16 | 6,067,925,139.80 | 66.11 | Changes in client fund scale, financial asset scale, and repurchase scale | Changes and Reasons for Key Balance Sheet Items (End of Reporting Period) | Item Name | End of Current Period (Yuan) | End of Prior Year (Yuan) | Change Ratio (%) | Primary Reasons | | :--- | :--- | :--- | :--- | :--- | | Accounts Receivable | 3,142,959,488.17 | 469,132,776.49 | 569.95 | Increase in pledged deposits receivable and clearing receivables | | Financial Assets Held Under Resale Agreements | 690,607,542.90 | 1,487,479,876.71 | -53.57 | Decrease in stock pledge repurchase scale | | Other Debt Investments | 32,752,958,167.50 | 14,190,249,453.69 | 130.81 | Increase in financial asset investment scale | | Other Equity Instrument Investments | 0 | 5,156,843,276.17 | -100.00 | Decrease in financial asset investment scale | | Right-of-Use Assets | 654,123,669.71 | Not Applicable | Not Applicable | Adoption of new lease standards | | Short-term Borrowings | 172,582,476.53 | 317,783,132.80 | -45.69 | Repayment of short-term borrowings | | Financial Liabilities Held for Trading | 50,037,235.85 | 4,806,183,918.95 | -98.96 | Decrease in consolidated structured product scale | | Financial Assets Sold Under Repurchase Agreements | 31,691,078,233.23 | 13,332,074,099.80 | 137.71 | Increase in bond pledge repurchase and income rights transfer repurchase scale | | Accounts Payable | 15,785,888,089.71 | 11,075,970,165.60 | 42.52 | Increase in payable margin deposits | | Lease Liabilities | 607,639,620.15 | Not Applicable | Not Applicable | Adoption of new lease standards | | Other Liabilities | 1,266,394,787.14 | 583,621,533.21 | 116.99 | Increase in payable deposits | | Other Comprehensive Income | 100,297,898.09 | 226,165,409.48 | -55.65 | Fair

[Definitions](index=4&type=section&id=%E7%AC%AC%E4%B8%80%E8%8A%82%20%E9%87%8A%E4%B9%89) This section provides definitions of key terms used throughout the report [Company Profile and Key Financial Indicators](index=5&type=section&id=%E7%AC%AC%E4%BA%8C%E8%8A%82%20%E5%85%AC%E5%8F%B8%E7%AE%80%E4%BB%8B%E5%92%8C%E4%B8%BB%E8%A6%81%E8%B4%A2%E5%8A%A1%E6%8C%87%E6%A0%87) This section provides an overview of the company's basic information and key financial performance metrics [Company Information](index=5&type=section&id=%E4%B8%80%E3%80%81%20%E5%85%AC%E5%8F%B8%E4%BF%A1%E6%81%AF) Founder Securities Co., Ltd. is a comprehensive securities company with full business licenses, led by legal representative Shi Hua and registered capital of RMB 8.232 billion - The company holds comprehensive business qualifications, covering **53 licenses** including securities brokerage, investment banking, asset management, futures, and fund sales[10](index=10&type=chunk)[11](index=11&type=chunk) Company Basic Information | Item | Information | | :--- | :--- | | **Chinese Name** | Founder Securities Co., Ltd. | | **Stock Abbreviation** | Founder Securities | | **Stock Code** | 601901 | | **Listing Exchange** | Shanghai Stock Exchange | | **Legal Representative** | Shi Hua | | **Registered Capital** | 8,232,101,395.00 RMB | [Key Accounting Data and Financial Indicators](index=7&type=section&id=%E4%B8%83%E3%80%81%20%E5%85%AC%E5%8F%B8%E4%B8%BB%E8%A6%81%E4%BC%9A%E8%AE%A1%E6%95%B0%E6%8D%AE%E5%92%8C%E8%B4%A2%E5%8A%A1%E6%8C%87%E6%A0%87) In the first half of 2021, the company achieved strong performance growth with operating revenue up 20.25% and net profit attributable to shareholders surging by 102.70%, while total assets grew by 16.06% Key Accounting Data for H1 2021 (Consolidated Statements) | Key Indicator | Jan-Jun 2021 | Jan-Jun 2020 | YoY Change (%) | | :--- | :--- | :--- | :--- | | **Operating Revenue (RMB)** | 4,079,949,848.55 | 3,392,945,977.69 | 20.25% | | **Operating Profit (RMB)** | 1,698,333,862.46 | 932,669,957.82 | 82.09% | | **Net Profit Attributable to Parent (RMB)** | 1,300,547,159.13 | 641,612,762.39 | 102.70% | | **Net Profit Attributable to Parent (Excl. Non-recurring Items) (RMB)** | 1,304,807,723.11 | 662,770,083.00 | 96.87% | | **Net Cash Flow from Operating Activities (RMB)** | 5,485,626,407.41 | 4,987,911,780.71 | 9.98% | Key Financial Indicators for H1 2021 (Consolidated Statements) | Key Indicator | Jan-Jun 2021 | Jan-Jun 2020 | Change | | :--- | :--- | :--- | :--- | | **Basic EPS (RMB/share)** | 0.16 | 0.08 | 100.00% | | **Weighted Average ROE (%)** | 3.24 | 1.66 | Increased by 1.58 percentage points | Balance Sheet Key Data (Consolidated Statements) | Key Indicator | Jun 30, 2021 | Dec 31, 2020 | Change from Prior Year-End (%) | | :--- | :--- | :--- | :--- | | **Total Assets (RMB)** | 143,049,097,757.91 | 123,256,369,688.39 | 16.06% | | **Owners' Equity Attributable to Parent (RMB)** | 40,707,839,886.82 | 39,620,740,244.32 | 2.74% | Parent Company Core Risk Control Indicators | Key Indicator | Jun 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | **Net Capital (RMB)** | 22,918,642,968.41 | 20,958,329,450.55 | | **Risk Coverage Ratio (%)** | 340.48 | 337.16 | | **Capital Leverage Ratio (%)** | 24.19 | 27.30 | | **Liquidity Coverage Ratio (%)** | 138.99 | 154.60 | | **Net Stable Funding Ratio (%)** | 134.57 | 142.08 | [Management Discussion and Analysis](index=10&type=section&id=%E7%AC%AC%E4%B8%89%E8%8A%82%20%E7%AE%A1%E7%90%86%E5%B1%82%E8%AE%A8%E8%AE%BA%E4%B8%8E%E5%88%86%E6%9E%90) This section provides an in-depth analysis of the company's industry, business operations, core competencies, and financial performance [Industry and Main Business Overview during the Reporting Period](index=10&type=section&id=%E4%B8%80%E3%80%81%E6%8A%A5%E5%91%8A%E6%9C%9F%E5%86%85%E5%85%AC%E5%8F%B8%E6%89%80%E5%B1%9E%E8%A1%8C%E4%B8%9A%E5%8F%8A%E4%B8%BB%E8%90%A5%E4%B8%9A%E5%8A%A1%E6%83%85%E5%86%B5%E8%AF%B4%E6%98%8E) In H1 2021, the securities industry experienced high prosperity, benefiting the company's five main business segments, which maintained leading positions in wealth management and fund market-making - The company's main businesses encompass **five segments**: wealth management, investment banking, asset management, institutional services, and investment and trading, providing comprehensive financial services to clients[23](index=23&type=chunk) - In H1 2021, A-share market activity was robust, with stock and fund transaction volume reaching **RMB 115.73 trillion**, a 22.21% year-on-year increase; margin financing and securities lending balance reached **RMB 1.68 trillion**, up 29.99% from the beginning of the year, fostering a favorable environment for brokerage business development[24](index=24&type=chunk) - The company's wealth management business ranks among the **top tier in the industry**, with over **12 million clients** and an industry ranking of **8th**; its self-developed "Xiaofang" APP's monthly active users rank **4th** in the industry[25](index=25&type=chunk) - The company's fund market-making business is industry-leading, ranking **2nd** in the industry by the number of market-making funds[26](index=26&type=chunk) [Analysis of Core Competencies during the Reporting Period](index=11&type=section&id=%E4%BA%8C%E3%80%81%E6%8A%A5%E5%91%8A%E6%9C%9F%E5%86%85%E6%A0%B8%E5%BF%83%E7%AB%9E%E4%BA%89%E5%8A%9B%E5%88%86%E6%9E%90) The company's core competencies include strong comprehensive strength, leading wealth management, optimized business model, excellent talent, and robust compliance and risk control - The company demonstrates strong comprehensive strength, with its **total assets, net assets, and operating revenue** all ranking among the **top 20** in the industry in 2020[27](index=27&type=chunk) - Wealth management business is a flagship for the company, with multiple key indicators such as **total client count, number of branches, and APP monthly active users** consistently ranking in the **top tier** of the industry[28](index=28&type=chunk) - The company has received an **A-class regulatory rating** from the China Securities Regulatory Commission for **4 consecutive years**, indicating robust compliance and risk control capabilities[29](index=29&type=chunk) [Discussion and Analysis of Operating Performance](index=13&type=section&id=%E4%B8%89%E3%80%81%E7%BB%8F%E8%90%A5%E6%83%85%E5%86%B5%E7%9A%84%E8%AE%A8%E8%AE%BA%E4%B8%8E%E5%88%86%E6%9E%90) In H1 2021, the company maintained stable operations despite shareholder restructuring, achieving significant financial improvements, including a 102.70% increase in net profit attributable to the parent Overall Operating Performance for H1 2021 | Indicator | Amount (Billion RMB) | YoY Growth | | :--- | :--- | :--- | | **Operating Revenue** | 40.80 | 20.25% | | **Operating Profit** | 16.98 | 82.09% | | **Net Profit Attributable to Parent** | 13.01 | 102.70% | - Despite some impact on the company's financing and business expansion due to the controlling shareholder's restructuring, the company's operations and team remained stable, with internal and external environments gradually improving[30](index=30&type=chunk) [Wealth Management Business](index=13&type=section&id=%EF%BC%88%E4%B8%80%EF%BC%89%E8%B4%A2%E5%AF%8C%E7%AE%A1%E7%90%86%E4%B8%9A%E5%8A%A1) Wealth management, a core business, performed strongly in H1 2021, with significant growth in brokerage, investment advisory, and financial product distribution income - Net income from securities brokerage business reached **RMB 1.826 billion**, a **13.34%** year-on-year increase; total clients exceeded **12.7 million**, ranking **8th** in the industry; Xiaofang APP's monthly active users rank **4th** in the industry[31](index=31&type=chunk) - Financial product distribution income was **RMB 245 million**, surging by **191.06%** year-on-year, with sales of equity private products increasing by **357.00%** year-on-year[31](index=31&type=chunk) - Futures brokerage fee income reached **RMB 312 million**, a **85.77%** year-on-year increase; clients' average daily equity grew by **36.84%** year-on-year[32](index=32&type=chunk) [Investment Banking Business](index=14&type=section&id=%EF%BC%88%E4%BA%8C%EF%BC%89%E6%8A%95%E8%B5%84%E9%93%B6%E8%A1%8C%E4%B8%9A%E5%8A%A1) In the reporting period, investment banking business generated RMB 177 million in revenue, with equity underwriting at RMB 1.655 billion and bond underwriting at RMB 19.03 billion Investment Banking Business Revenue Composition for H1 2021 | Business Type | Underwriting Scale (Billion RMB) | Business Revenue (Million RMB) | | :--- | :--- | :--- | | **Equity Business** | 1.655 | 36.67 | | **Bond Business** | 19.03 | 140.26 | [Asset Management Business](index=14&type=section&id=%EF%BC%88%E4%B8%89%EF%BC%89%E8%B5%84%E4%BA%A7%E7%AE%A1%E7%90%86%E4%B8%9A%E5%8A%A1) Asset management business achieved significant active management transformation, with securities asset management equity scale growing by 60% and private equity net profit surging by 438.15% - Securities asset management business firmly pursued active management transformation, with equity scale reaching **RMB 5.684 billion**, a **60.00%** increase[34](index=34&type=chunk) - Private equity funds (Founder Hesheng) performed exceptionally, achieving a net profit of **RMB 118 million**, a **438.15%** year-on-year increase[35](index=35&type=chunk) - Public funds (Founder Fubon) equity fund scale reached **RMB 8.122 billion**, a **226.05%** year-on-year increase[35](index=35&type=chunk) [Institutional Services Business](index=15&type=section&id=%EF%BC%88%E5%9B%9B%EF%BC%89%E6%9C%BA%E6%9E%84%E6%9C%8D%E5%8A%A1%E4%B8%9A%E5%8A%A1) Institutional services business experienced rapid growth, with research commission income reaching a historical high and private comprehensive services revenue surging by 240.75% - Research business achieved commission income of **RMB 170 million**, setting a new historical high[37](index=37&type=chunk) - Private comprehensive business income reached **RMB 136 million**, a **240.75%** year-on-year increase[37](index=37&type=chunk) [Investment and Trading Business](index=16&type=section&id=%EF%BC%88%E4%BA%94%EF%BC%89%E6%8A%95%E8%B5%84%E4%B8%8E%E4%BA%A4%E6%98%93%E4%B8%9A%E5%8A%A1) Investment and trading businesses diversified, with strong performance in equity and fixed income, and fund market-making maintaining an industry-leading position - Fund market-making business maintained its industry-leading position, providing market-making services for **215 fund products**, accounting for **44.42%** of the total ETF market, with business revenue of **RMB 100 million**, a **7.00%** year-on-year increase[38](index=38&type=chunk) - Bond investment advisory business achieved significant growth, leading the industry in both client numbers and assets under management[38](index=38&type=chunk) [Key Operating Performance during the Reporting Period](index=17&type=section&id=%E5%9B%9B%E3%80%81%E6%8A%A5%E5%91%8A%E6%9C%9F%E5%86%85%E4%B8%BB%E8%A6%81%E7%BB%8F%E8%90%A5%E6%83%85%E5%86%B5) The company's net profit surged by 105.20% due to favorable market conditions and increased subsidiary earnings, while investment banking fees declined and fixed income activities increased Financial Statement Key Item Variation Analysis | Key Indicator | Current Period | Prior Period | Change (%) | Explanation of Change | | :--- | :--- | :--- | :--- | :--- | | **Net Interest Income** | 930,725,013.28 RMB | 711,080,276.50 RMB | 30.89% | Primarily due to changes in liability structure during the current period | | **Net Investment Banking Fee and Commission Income** | 195,437,295.90 RMB | 302,820,279.29 RMB | -35.46% | Primarily due to a decrease in investment banking project income during the current period | | **Credit Impairment Losses** | 118,444,624.28 RMB | 302,835,323.81 RMB | -60.89% | Primarily due to credit impairment losses recognized in the prior period | | **Net Profit** | 1,340,352,747.57 RMB | 653,197,942.24 RMB | 105.20% | Primarily due to market conditions impacting brokerage business and increased subsidiary earnings during the current period | Balance Sheet Key Item Variation Analysis | Item | Current Period End | Prior Period End | Change (%) | Explanation of Change | | :--- | :--- | :--- | :--- | :--- | | **Other Debt Investments** | 29,358,951,942.46 RMB | 14,190,249,453.69 RMB | 106.90% | Primarily due to an increase in financial asset investment scale during the current period | | **Financial Assets Sold Under Repurchase Agreements** | 27,797,522,291.52 RMB | 13,332,074,099.80 RMB | 108.50% | Primarily due to an increase in bond pledged repurchase and income right transfer repurchase scale during the current period | [Analysis of Major Holding and Participating Companies](index=21&type=section&id=%E5%85%AD)%20%E4%B8%BB%E8%A6%81%E6%8E%A7%E8%82%A1%E5%8F%82%E8%82%A1%E5%85%AC%E5%8F%B8%E5%88%86%E6%9E%90) In H1 2021, major subsidiaries generally performed well, with Founder Hesheng Investment and Founder Securities Investment showing outstanding net profit, while some entities incurred losses Major Subsidiary Operating Performance for H1 2021 (Unit: Million RMB) | Holding Company Name | Net Assets | Operating Revenue | Net Profit | | :--- | :--- | :--- | :--- | | **Founder Underwriting & Sponsorship** | 3,178.84 | 208.79 | 30.30 | | **Founder Hesheng Investment** | 2,280.26 | 166.21 | 118.36 | | **Founder Securities Investment** | 1,354.45 | 134.18 | 97.78 | | **Founder Mid-term Futures** | 1,515.55 | 461.67 | 121.26 | | **Founder Fubon Fund** | 438.02 | 76.88 | -5.80 | | **Founder Hong Kong Financial Holdings** | 177.44 | -87.20 | -108.98 | | **Credit Suisse Securities (Participating)** | 1,503.30 | 242.31 | 32.50 | [Potential Risks Faced](index=22&type=section&id=(%E4%B8%80)%20%E5%8F%AF%E8%83%BD%E9%9D%A2%E5%AF%B9%E7%9A%84%E9%A3%8E%E9%99%A9) The company manages primary risks including credit, liquidity, market, and operational risks through a comprehensive risk management system with established controls and monitoring [1. Credit Risk](index=22&type=section&id=1%E3%80%81%E4%BF%A1%E7%94%A8%E9%A3%8E%E9%99%A9) Credit risk primarily stems from client defaults in credit businesses and issuer defaults in bond investments, managed through various control measures, with overall risk controllable Credit Business Performance Guarantee Levels | Credit Business | Jun 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | **Average Maintenance Guarantee Ratio for Margin Financing and Securities Lending Clients** | 311.99% | 320.44% | | **Average Performance Guarantee Ratio for Stock Pledge Repurchase Clients** | 186.25% | 125.66% | Credit Risk Exposure (Unit: RMB) | Financial Asset Category | Jun 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | **Funds Lent Out** | 27,159,977,441.91 | 23,952,491,443.95 | | **Other Debt Investments** | 29,358,951,942.46 | 14,190,249,453.69 | | **Financial Assets Purchased Under Resale Agreements** | 1,467,681,999.14 | 1,487,479,876.71 | | **Total Credit Risk Exposure** | **122,885,893,058.74** | **101,443,923,402.87** | [3. Market Risk](index=24&type=section&id=3%E3%80%81%E5%B8%82%E5%9C%BA%E9%A3%8E%E9%99%A9) Market risk, encompassing interest rate, exchange rate, and equity price risks, is managed through size, duration, and stop-loss limits, with equity VaR at RMB 68 million Bond Portfolio Interest Rate Risk Indicators | Date | Modified Duration (Years) | Basis Point Value (Million RMB) | | :--- | :--- | :--- | | **Jun 30, 2021** | 1.98 | 6.96 | | **Dec 31, 2020** | 1.22 | 3.05 | - The VaR (Value at Risk) for equity securities holdings (99% confidence level, 1-day holding period) was **RMB 68 million**[65](index=65&type=chunk) - Sensitivity analysis indicates that a 5% change in the fair value of the company's financial instruments would result in a **6.05%** corresponding change in the company's net assets[66](index=66&type=chunk) [Corporate Governance](index=28&type=section&id=%E7%AC%AC%E5%9B%9B%E8%8A%82%20%E5%85%AC%E5%8F%B8%E6%B2%BB%E7%90%86) This section details the company's corporate governance structure, including shareholder meetings and changes in directors, supervisors, and senior management [Overview of Shareholder Meetings](index=28&type=section&id=%E4%B8%80%E3%80%81%20%E8%82%A1%E4%B8%9C%E5%A4%A7%E4%BC%9A%E6%83%85%E5%86%B5%E7%AE%80%E4%BB%8B) During the reporting period, the company held two shareholder meetings, approving key proposals and experiencing a change in independent directors - During the reporting period, the company held the **first extraordinary general meeting of shareholders in 2021** and the **2020 annual general meeting of shareholders**[69](index=69&type=chunk) - There was a change in independent directors: Mr. Ye Lin resigned, and **Ms. Cao Shinan** was elected as an independent director of the company's fourth board of directors on **May 18, 2021**[70](index=70&type=chunk) [Environmental and Social Responsibility](index=30&type=section&id=%E7%AC%AC%E4%BA%94%E8%8A%82%20%E7%8E%AF%E5%A2%83%E4%B8%8E%E7%A4%BE%E4%BC%9A%E8%B4%A3%E4%BB%BB) This section outlines the company's commitment and actions regarding environmental protection and social responsibility initiatives [Environmental Information](index=30&type=section&id=%E4%B8%80%E3%80%81%20%E7%8E%AF%E5%A2%83%E4%BF%A1%E6%81%AF%E6%83%85%E5%86%B5) The company actively fulfills its environmental and social responsibilities through measures like waste sorting, energy conservation, and promoting poverty alleviation linked to rural revitalization - The company implemented various measures to protect the environment and reduce carbon emissions, including **waste sorting, water and electricity conservation, paperless office, and reducing fuel consumption for official vehicles**[74](index=74&type=chunk)[75](index=75&type=chunk) - The company continuously promotes the alignment of its poverty alleviation model with rural revitalization, fulfilling its social responsibilities through **industrial funds, strategic cooperation, public welfare projects, and consumption-based poverty alleviation**[76](index=76&type=chunk) [Significant Matters](index=32&type=section&id=%E7%AC%AC%E5%85%AD%E8%8A%82%20%E9%87%8D%E8%A6%81%E4%BA%8B%E9%A1%B9) This section highlights critical events and developments, including the controlling shareholder's restructuring and major litigation cases [Explanation of the Integrity Status of the Company, its Controlling Shareholder, and Actual Controller during the Reporting Period](index=37&type=section&id=%E4%B9%9D%E3%80%81%20%E6%8A%A5%E5%91%8A%E6%9C%9F%E5%86%85%E5%85%AC%E5%8F%B8%E5%8F%8A%E5%85%B6%E6%8E%A7%E8%82%A1%E8%82%A1%E4%B8%9C%E3%80%81%E5%AE%9E%E9%99%85%E6%8E%A7%E5%88%B6%E4%BA%BA%E8%AF%9A%E4%BF%A1%E7%8A%B6%E5%86%B5%E7%9A%84%E8%AF%B4%E6%98%8E) The most significant matter was the controlling shareholder's bankruptcy reorganization, which will lead to a change in the company's indirect control to Ping An and a shift to no actual controller, pending regulatory approval - On **July 5, 2021**, the court ruled to approve the reorganization plan of the controlling shareholder, Peking University Founder Group[87](index=87&type=chunk) - According to the reorganization plan, the company's controlling shareholder is proposed to change to the "New Founder Group," and **Ping An Life Insurance Company of China, Ltd. or its wholly-owned entity** will become the controlling shareholder of New Founder Group, thereby enabling **Ping An to indirectly control the company**[87](index=87&type=chunk)[103](index=103&type=chunk) - This equity change will result in the company's actual controller changing from Peking University to **no actual controller**, but the change is still subject to approval by the China Securities Regulatory Commission[103](index=103&type=chunk)[448](index=448&type=chunk) [Major Litigation and Arbitration Matters](index=36&type=section&id=%E4%B8%83%E3%80%81%20%E9%87%8D%E5%A4%A7%E8%AF%89%E8%AE%BC%E3%80%81%E4%BB%B2%E8%A3%81%E4%BA%8B%E9%A1%B9) During the reporting period, the company had no major litigation or arbitration matters, with most securities misrepresentation cases settled and recourse sought from Founder Group - During the reporting period, there were **no major litigation or arbitration matters** as defined in the Listing Rules[82](index=82&type=chunk) - Lawsuits involving amounts exceeding **RMB 10 million** primarily concerned routine business disputes such as margin financing and securities lending, stock pledges, contract disputes, and securities misrepresentation[83](index=83&type=chunk) - Out of **2,992 securities misrepresentation cases** arising from the failure to disclose shareholder related-party relationships, most have been settled according to judgments or mediation, with cumulative compensation amounting to approximately **RMB 146 million**, and the company has filed a claim with Founder Group to exercise its right of recourse[90](index=90&type=chunk)[439](index=439&type=chunk) [Share Changes and Shareholder Information](index=42&type=section&id=%E7%AC%AC%E4%B8%83%E8%8A%82%20%E8%82%A1%E4%BB%BD%E5%8F%98%E5%8A%A8%E5%8F%8A%E8%82%A1%E4%B8%9C%E6%83%85%E5%86%B5) This section provides details on changes in the company's shares and information about its shareholders [Top Ten Shareholders and Top Ten Circulating Shareholders (or Non-Restricted Shareholders) as of the End of the Reporting Period](index=42&type=section&id=(%E4%BA%8C)%20%E6%88%AA%E6%AD%A2%E6%8A%A5%E5%91%8A%E6%9C%9F%E6%9C%AB%E5%89%8D%E5%8D%81%E5%90%8D%E8%82%A1%E4%B8%9C%E3%80%81%E5%89%8D%E5%8D%81%E5%90%8D%E6%B5%81%E9%80%9A%E8%82%A1%E4%B8%9C%EF%BC%88%E6%88%96%E6%97%A0%E9%99%90%E5%94%AE%E6%9D%A1%E4%BB%B6%E8%82%A1%E4%B8%9C%EF%BC%89%E6%8C%81%E8%82%A1%E6%83%85%E5%86%B5%E8%A1%A8) As of the reporting period end, the company's share structure remained unchanged, with Peking University Founder Group and Beijing Zhengquan Holdings as top shareholders, both with frozen shares Top Ten Shareholders (as of June 30, 2021) | Shareholder Name | Number of Shares Held | Percentage (%) | Share Status | | :--- | :--- | :--- | :--- | | **Peking University Founder Group Co., Ltd.** | 2,284,609,852 | 27.75 | Frozen | | **Beijing Zhengquan Holdings Co., Ltd.** | 1,799,591,164 | 21.86 | Frozen | | **Hong Kong Securities Clearing Company Limited** | 1,449,267,847 | 17.61 | Unrestricted | | **Harbin Hatou Investment Co., Ltd.** | 194,086,999 | 2.36 | Unrestricted | | **China Securities Finance Corporation Limited** | 139,461,318 | 1.69 | Unrestricted | | **Central Huijin Asset Management Co., Ltd.** | 138,731,200 | 1.69 | Unrestricted | - Shares held by the first largest shareholder, **Peking University Founder Group**, and the second largest shareholder, **Beijing Zhengquan Holdings**, were both judicially frozen[98](index=98&type=chunk) [Preferred Shares Related Information](index=45&type=section&id=%E7%AC%AC%E5%85%AB%E8%8A%82%20%E4%BC%98%E5%85%88%E8%82%A1%E7%9B%B8%E5%85%B3%E6%83%85%E5%86%B5) This section provides information regarding the company's preferred shares [Preferred Shares Related Information](index=45&type=section&id=%E7%AC%AC%E5%85%AB%E8%8A%82%20%E4%BC%98%E5%85%88%E8%82%A1%E7%9B%B8%E5%85%B3%E6%83%85%E5%86%B5) During the reporting period, the company had no preferred shares related information - The company has **no preferred shares**[104](index=104&type=chunk) [Bonds Related Information](index=46&type=section&id=%E7%AC%AC%E4%B9%9D%E8%8A%82%20%E5%80%BA%E5%88%B8%E7%9B%B8%E5%85%B3%E6%83%85%E5%86%B5) This section provides details on the company's outstanding bonds and their repayment status [1. Basic Information on Corporate Bonds](index=46&type=section&id=1.%20%E5%85%AC%E5%8F%B8%E5%80%BA%E5%88%B8%E5%9F%BA%E6%9C%AC%E6%83%85%E5%86%B5) As of the reporting period, the company had two outstanding non-public corporate bonds totaling RMB 3.1 billion, maintaining an AAA credit rating with strengthened debt-paying ability Outstanding Corporate Bonds Basic Information (Unit: Million RMB) | Bond Abbreviation | Code | Issue Date | Maturity Date | Bond Balance | Interest Rate (%) | | :--- | :--- | :--- | :--- | :--- | :--- | | **19 Founder F1** | 151205 | 2019/2/27 | 2022/2/27 | 2,500 | 4.71 | | **19 Founder F2** | 151290 | 2019/3/21 | 2022/3/21 | 600 | 4.65 | - United Credit Rating Co., Ltd. maintained an **AAA credit rating** for the company's entity and relevant bond issues on June 28, 2021, with a **stable outlook**[108](index=108&type=chunk) Key Debt-Paying Ability Financial Indicators | Key Indicator | Current Reporting Period (Jan-Jun 2021) | Prior Period (Jan-Jun 2020) | Change | | :--- | :--- | :--- | :--- | | **Interest Coverage Ratio** | 3.35 | 2.04 | Increased by 64.22% | | **EBITDA Interest Coverage Ratio** | 3.61 | 2.19 | Increased by 64.84% | [Financial Report](index=49&type=section&id=%E7%AC%AC%E5%8D%81%E8%8A%82%20%E8%B4%A2%E5%8A%A1%E6%8A%A5%E5%91%8A) This section includes the company's unaudited 2021 semi-annual consolidated and parent company financial statements, along with detailed notes covering key accounting policies, changes, and significant events [Financial Statements](index=49&type=section&id=%E4%BA%8C%E3%80%81%20%E8%B4%A2%E5%8A%A1%E6%8A%A5%E8%A1%A8) This section presents the company's consolidated and parent company balance sheets as of June 30, 2021, and the income statement, cash flow statement, and statement of changes in owners' equity for H1 2021 [Notes to Financial Statements](index=67&type=section&id=%E8%B4%A2%E5%8A%A1%E6%8A%A5%E8%A1%A8%E9%99%84%E6%B3%A8) The notes detail financial statement preparation, accounting policies, and major items, including new lease standards, financial instruments, related party transactions, and the controlling shareholder's restructuring - The company adopted **new lease standards** from January 1, 2021, retrospectively adjusting opening financial statements to recognize right-of-use assets and lease liabilities, which increased total assets and liabilities but had **no significant impact on owners' equity and net profit**[218](index=218&type=chunk)[219](index=219&type=chunk) - The notes extensively disclose the reorganization progress of the controlling shareholder, **Peking University Founder Group**, a matter that may lead to a change in the company's control, with **Ping An intending to indirectly control the company**[447](index=447&type=chunk)[448](index=448&type=chunk) - The notes also reveal the progress of the **RMB 2.05 billion payment matter** from former China Minzu Securities; as of the report date, the amount has not been fully recovered, and a **bad debt provision of RMB 522.45 million** has been made[450](index=450&type=chunk)[492](index=492&type=chunk) [Securities Company Information Disclosure](index=197&type=section&id=%E7%AC%AC%E5%8D%81%E4%B8%80%E8%8A%82%20%E8%AF%81%E5%88%B8%E5%85%AC%E5%8F%B8%E4%BF%A1%E6%8A%AB%E9%9C%B2) This section provides information on the company's administrative licenses and regulatory ratings [Regulatory Classification Results for the Company](index=197&type=section&id=%E4%BA%8C%E3%80%81%20%E7%9B%91%E7%AE%A1%E9%83%A8%E9%97%A8%E5%AF%B9%E5%85%AC%E5%8F%B8%E7%9A%84%E5%88%86%E7%B1%BB%E7%BB%93%E6%9E%9C) During the reporting period, the company obtained administrative approval to expand its business scope and received an A-class A-level regulatory rating for three consecutive years - On **January 22, 2021**, the company obtained administrative approval from the Hunan Securities Regulatory Bureau to **expand its business scope**[573](index=573&type=chunk) - The company received an **A-class A-level regulatory classification result** for **three consecutive years** (2019, 2020, 2021)[573](index=573&type=chunk)

[Definitions](index=11&type=section&id=Item%201.%20Definitions) This chapter defines key company entity abbreviations, common terms, and professional terminology used in the report, providing a foundation for understanding its content - This chapter defines key company entity abbreviations, common terms, and professional terminology, providing a basis for understanding the report's content, including **Founder Securities** (the Company) and **Founder Group** (controlling shareholder) and its subsidiaries[10](index=10&type=chunk) [Company Profile and Key Financial Indicators](index=12&type=section&id=Item%202.%20Company%20Profile%20and%20Key%20Financial%20Indicators) This section provides an overview of the company's basic information, historical development, organizational structure, and key financial performance over the past three years [Company Information](index=12&type=section&id=I.%20Company%20Information) This chapter provides Founder Securities' basic business information, including names, legal representative, registered and net capital, and lists **54 securities and futures-related business qualifications** Registered Capital and Net Capital (As of December 31, 2020) | Indicator | Year-end 2020 (CNY) | Year-end 2019 (CNY) | | :--- | :--- | :--- | | Registered Capital | 8,232,101,395.00 | 8,232,101,395.00 | | Net Capital | 20,958,329,450.55 | 20,903,236,065.74 | - The company possesses comprehensive business qualifications, covering multiple licenses in securities brokerage, investment consulting, asset management, underwriting and sponsorship, margin financing and securities lending, futures brokerage, and Hong Kong market operations, totaling **54 items**[11](index=11&type=chunk)[12](index=12&type=chunk) [Other Company Information](index=14&type=section&id=VI.%20Other%20Company%20Information) This chapter outlines the company's historical evolution, organizational structure, and branch network, detailing its transformation into a nationwide comprehensive securities firm with **6 major subsidiaries** and **372 branches** - Key milestones in the company's development include renaming to **Founder Securities in 2003**, absorbing and merging with Taiyang Securities in **2008**, listing on the Shanghai Stock Exchange in **2011**, and acquiring China Minzu Securities in **2014**[22](index=22&type=chunk)[26](index=26&type=chunk)[27](index=27&type=chunk)[25](index=25&type=chunk) - The group's organizational structure centers around the executive committee, with various business and functional departments, providing diversified financial services through **6 domestic and overseas holding subsidiaries**, including Founder Underwriting & Sponsorship, Founder Hesheng Investment, Founder Mid-term Futures, Founder Securities Investment, Founder Fubon Fund, and Founder Hong Kong Financial Holdings[32](index=32&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk)[35](index=35&type=chunk) - As of year-end 2020, the company operated **347 securities branches** and **25 sub-branches**, forming an extensive nationwide business network[39](index=39&type=chunk) [Key Accounting Data and Financial Indicators for the Past Three Years](index=19&type=section&id=VIII.%20Key%20Accounting%20Data%20and%20Financial%20Indicators%20for%20the%20Past%20Three%20Years) During the reporting period, the company achieved steady operational growth, with **operating revenue of CNY 7.542 billion** and **net profit attributable to parent company shareholders of CNY 1.096 billion** in 2020, while maintaining robust financial health with all risk control indicators meeting regulatory requirements Key Accounting Data for the Past Three Years (Consolidated Statements) | Indicator | 2020 (CNY) | 2019 (CNY) | YoY Change (%) | 2018 (CNY) | | :--- | :--- | :--- | :--- | :--- | | **Operating Revenue** | 7,541,809,241.46 | 6,594,941,981.46 | 14.36 | 5,722,593,356.59 | | **Operating Profit** | 1,598,955,369.10 | 1,105,519,767.03 | 44.63 | 875,574,918.89 | | **Net Profit Attributable to Parent Company Shareholders** | 1,096,492,270.90 | 1,007,595,631.59 | 8.82 | 661,365,890.51 | | **Net Cash Flow from Operating Activities** | 7,560,165,073.16 | 25,308,338,518.16 | -70.13 | -6,389,566,460.98 | | **Total Assets (Period-end)** | 123,256,369,688.39 | 136,595,190,001.95 | -9.77 | 148,221,762,529.66 | | **Equity Attributable to Parent Company Shareholders (Period-end)** | 39,620,740,244.32 | 38,551,805,514.29 | 2.77 | 37,753,056,946.74 | Key Financial Indicators | Indicator | 2020 | 2019 | Change | 2018 | | :--- | :--- | :--- | :--- | :--- | | Basic Earnings Per Share (CNY/share) | 0.13 | 0.12 | 8.33% | 0.08 | | Weighted Average Return on Net Assets (%) | 2.81 | 2.65 | Increased by 0.16 percentage points | 1.76 | | Net Assets Per Share Attributable to Parent Company Shareholders (CNY/share) | 4.81 | 4.68 | 2.78% | 4.59 | Parent Company Net Capital and Key Risk Control Indicators (Year-end 2020) | Indicator | Value | Regulatory Standard | | :--- | :--- | :--- | | Net Capital (CNY) | 20,958,329,450.55 | - | | Risk Coverage Ratio (%) | 337.16 | ≥100% | | Capital Leverage Ratio (%) | 27.30 | ≥8% | | Liquidity Coverage Ratio (%) | 154.60 | ≥100% | | Net Stable Funding Ratio (%) | 142.08 | ≥100% | [Quarterly Financial Data](index=25&type=section&id=X.%20Key%20Quarterly%20Financial%20Data%20for%202020) The company's 2020 performance showed quarterly fluctuations, with the **third quarter being the strongest** in net profit attributable to parent company shareholders, while the **fourth quarter recorded a loss** Key Quarterly Financial Data for 2020 (Unit: CNY) | Item | Q1 | Q2 | Q3 | Q4 | | :--- | :--- | :--- | :--- | :--- | | Operating Revenue | 1,935,684,801.34 | 1,457,261,176.35 | 2,331,597,482.31 | 1,817,265,781.46 | | Net Profit Attributable to Parent Company Shareholders | 378,859,238.84 | 262,753,523.55 | 840,813,744.87 | -385,934,236.36 | | Net Cash Flow from Operating Activities | 8,740,684,768.57 | -3,752,772,987.86 | 1,080,013,359.09 | 1,492,239,933.36 | [Business Overview](index=27&type=section&id=Item%203.%20Business%20Overview) This section outlines the company's main business segments, operating model, industry conditions, significant asset changes, and core competitive advantages [Description of Company's Main Businesses, Operating Model and Industry Conditions During the Reporting Period](index=27&type=section&id=I.%20Description%20of%20Company's%20Main%20Businesses%2C%20Operating%20Model%20and%20Industry%20Conditions%20During%20the%20Reporting%20Period) The company's main businesses are divided into five segments: wealth management, investment banking, asset management, institutional services, and investment and trading, benefiting from capital market reforms and favorable liquidity conditions in 2020 - The group's main businesses are divided into **five major segments**: wealth management, investment banking, asset management, institutional services, and investment and trading[55](index=55&type=chunk) - In 2020, capital market reforms deepened, with IPO and refinancing amounts increasing by **74.69%** and **41.67%** year-on-year, respectively, while A-share annual trading volume grew by **62%** and margin financing and securities lending balances increased by **59%**, creating a favorable environment for securities firm business development[56](index=56&type=chunk) [Explanation of Significant Changes in Company's Major Assets During the Reporting Period](index=29&type=section&id=II.%20Explanation%20of%20Significant%20Changes%20in%20Company's%20Major%20Assets%20During%20the%20Reporting%20Period) As of year-end 2020, the company's total assets decreased by **9.77%** to **CNY 123.256 billion**, primarily due to adjustments in financial asset investment scale, while margin financing and securities lending balances increased Major Asset Item Changes (Year-end 2020 vs Year-end 2019) | Asset Item | Year-end 2020 (CNY Billion) | Change from Previous Year-end (%) | Primary Reason | | :--- | :--- | :--- | :--- | | **Total Assets** | **123.256** | **-9.77** | - | | Funds Lent Out | 23.952 | +18.09 | Increase in margin financing and securities lending scale | | Financial Assets Held for Trading | 20.906 | -29.14 | Decrease in financial asset investment scale | | Other Debt Investments | 14.190 | -43.01 | Decrease in financial asset investment scale | | Financial Assets Purchased Under Resale Agreements | 1.487 | -61.40 | Decrease in stock pledge and bond repurchase scale | [Analysis of Core Competencies During the Reporting Period](index=29&type=section&id=III.%20Analysis%20of%20Core%20Competencies%20During%20the%20Reporting%20Period) The company's core competencies include strong comprehensive strength, leading wealth management, optimized business models, excellent professional talent, and robust compliance and risk control capabilities - The company demonstrates strong comprehensive strength, with its **total assets, net assets, and operating revenue ranking 19th, 15th, and 19th** in the industry in 2020, respectively[63](index=63&type=chunk) - Its wealth management business is industry-leading, serving **over 12 million customers** and operating **407 branches**, with core indicators such as mobile APP monthly active users and product sales ranking in the top tier of the industry[64](index=64&type=chunk) - The company has developed a synergistic business model where wealth management drives other businesses, and financial technology and research drive wealth management, investment and trading, and institutional services, leading to **balanced development across its five major business segments**[65](index=65&type=chunk) - The company has received an **A-class rating from the CSRC for three consecutive years**, and its subsidiary Founder Mid-term Futures has been rated **AA for eight consecutive years**, demonstrating robust compliance and risk control capabilities[67](index=67&type=chunk) [Discussion and Analysis of Operations](index=30&type=section&id=Item%204.%20Discussion%20and%20Analysis%20of%20Operations) This section discusses the company's operational performance, financial condition, future development strategies, and comprehensive risk management implementation [Discussion and Analysis of Operations](index=30&type=section&id=I.%20Discussion%20and%20Analysis%20of%20Operations) In 2020, despite challenges from its controlling shareholder's restructuring, the company achieved **operating revenue of CNY 7.542 billion** (up **14.36%**) and **net profit attributable to parent company shareholders of CNY 1.096 billion** (up **8.82%**), driven by strong wealth management and record-high investment banking performance 2020 Key Operating Performance | Indicator | 2020 (CNY Billion) | YoY Growth (%) | | :--- | :--- | :--- | | Operating Revenue | 7.542 | 14.36 | | Operating Profit | 1.599 | 44.63 | | Net Profit Attributable to Parent Company Shareholders | 1.096 | 8.82 | - Wealth Management Business: Net income from securities brokerage business reached **CNY 3.689 billion**, a **51.67%** year-on-year increase; the "Xiaofang APP" ranked **4th** in the industry for monthly active users; total customer count exceeded **12 million**, ranking **6th** in the industry[69](index=69&type=chunk) - Investment Banking Business: Achieved operating revenue of **CNY 0.604 billion**, a new historical high; equity underwriting scale reached **CNY 3.65 billion**, up **142%** year-on-year; bond underwriting scale reached **CNY 75.034 billion**, with corporate bonds and enterprise bonds ranking **16th** in the industry[76](index=76&type=chunk)[77](index=77&type=chunk)[78](index=78&type=chunk) - Asset Management Business: Total entrusted asset scale reached **CNY 127.382 billion**; active management transformation showed significant results, with equity product scale growing **6.36 times** to **CNY 3.552 billion**, and channel-based products reduced by **over CNY 50 billion**[80](index=80&type=chunk)[82](index=82&type=chunk) - Investment and Trading Business: Fund market-making business revenue reached **CNY 0.145 billion**, a **135%** year-on-year increase, and the company was rated as an "**AA-grade ETF lead market maker**" by the Shanghai and Shenzhen Stock Exchanges[88](index=88&type=chunk) [Key Operating Conditions During the Reporting Period](index=36&type=section&id=II.%20Key%20Operating%20Conditions%20During%20the%20Reporting%20Period) This chapter analyzes the company's financial position and operating results, highlighting a **42.73% increase in net fee and commission income** as the main driver of revenue growth, while total assets and liabilities decreased due to active compression of financial asset investments and debt Profit Statement Key Item Variation Analysis | Item | Current Period (CNY) | Prior Year Period (CNY) | Change (%) | Primary Reason | | :--- | :--- | :--- | :--- | :--- | | Net Fee and Commission Income | 5,238,940,907.22 | 3,670,492,803.69 | 42.73 | Increase in brokerage and investment banking business income | | Investment Income | 1,254,728,040.03 | 1,918,070,762.16 | -34.58 | Decrease in proprietary trading and other business income | | Credit Impairment Losses | 969,932,834.64 | 469,342,916.18 | 106.66 | Increase in credit impairment provisions for financial assets | | Net Cash Flow from Operating Activities | 7,560,165,073.16 | 25,308,338,518.16 | -70.13 | Changes in scale of financial assets, repurchases, and interbank borrowings | Balance Sheet Key Item Variation Analysis | Item | Current Period End (CNY) | Prior Period End (CNY) | Change (%) | Primary Reason | | :--- | :--- | :--- | :--- | :--- | | Financial Assets Purchased Under Resale Agreements | 1,487,479,876.71 | 3,853,273,932.37 | -61.40 | Decrease in stock pledge repurchase scale | | Other Debt Investments | 14,190,249,453.69 | 24,901,391,747.20 | -43.01 | Decrease in financial asset investment scale | | Short-term Financing Payables | 10,719,391,771.17 | 2,017,503,661.39 | 431.32 | Increase in income certificate scale | | Bonds Payable | 6,854,255,985.84 | 19,939,519,050.91 | -65.62 | Maturity and repayment of corporate bonds | - The company's financing channels primarily include bonds, income certificates, re-financing, and interbank borrowing; despite some obstacles from the controlling shareholder's restructuring in 2020, the company secured approximately **CNY 23 billion** in financing by adjusting its strategies, ensuring stable business operations[107](index=107&type=chunk)[109](index=109&type=chunk)[110](index=110&type=chunk) [Discussion and Analysis of Company's Future Development](index=46&type=section&id=III.%20Discussion%20and%20Analysis%20of%20Company's%20Future%20Development) The company aims to become a stable, efficient, and distinctive large-scale comprehensive securities firm, focusing on consolidating wealth management, seizing investment banking opportunities, and strengthening asset management, institutional services, and investment trading, while actively managing credit, liquidity, and market risks - Future Development Strategy: Adhere to a business model that emphasizes **wealth management driving asset management, supporting investment banking, investment and trading, and institutional services**, with financial technology and research driving wealth management, investment and trading, and institutional services, ensuring **balanced and synergistic development across all five major business segments**[124](index=124&type=chunk) - 2021 Operating Plan: Consolidate transaction-based wealth management and expand into asset allocation wealth management; seize opportunities from the registration-based IPO system to achieve leapfrog development in investment banking; pursue active management and scale expansion in asset management; enhance institutional service capabilities; and expand non-directional investment scale[126](index=126&type=chunk)[127](index=127&type=chunk)[128](index=128&type=chunk) - Key Risk Identification: - **Credit Risk**: Primarily arises from client defaults in credit businesses such as margin financing and securities lending, and stock pledges, as well as bond investment default risks - **Liquidity Risk**: Refers to the risk of being unable to obtain sufficient funds in a timely manner at a reasonable cost - **Market Risk**: Refers to the risk of changes in the fair value of financial instruments due to adverse market price movements (equity prices, interest rates, exchange rates)[131](index=131&type=chunk)[135](index=135&type=chunk)[136](index=136&type=chunk) [Implementation of Comprehensive Risk Management](index=53&type=section&id=IV.%20Implementation%20of%20Comprehensive%20Risk%20Management) The company has established a comprehensive risk management system aligned with its development strategy, covering all subsidiaries, business departments, and branches, ensuring risks are measurable, controllable, and acceptable through continuous monitoring, measurement, analysis, and response mechanisms - The company ensures comprehensive risk management through "establishing systems, recruiting talent, implementing systems, and increasing investment," with risk management covering all holding subsidiaries, business departments, branches, and major risk types including credit, market, liquidity, and operational risks[147](index=147&type=chunk)[148](index=148&type=chunk) - The company utilizes various indicators such as **VaR, basis point value, and stress testing** to measure different types of risks and has established a mature internal rating system covering corporate clients in credit risk businesses[150](index=150&type=chunk) [Significant Matters](index=56&type=section&id=Item%205.%20Significant%20Matters) This section details significant corporate events including profit distribution, major litigation, controlling shareholder's integrity status, and other material developments [Proposed Profit Distribution or Capital Reserve Conversion Plan for Ordinary Shares](index=56&type=section&id=I.%20Proposed%20Profit%20Distribution%20or%20Capital%20Reserve%20Conversion%20Plan%20for%20Ordinary%20Shares) The company's 2020 profit distribution plan proposes a cash dividend of **CNY 0.10 per 10 shares** (tax inclusive), totaling no more than **CNY 82.32 million**, with dividends for shareholder Zhengquan Holdings withheld due to capital withdrawal issues Dividend Distribution Plans for the Past Three Years | Dividend Year | Dividend per 10 shares (CNY) (tax inclusive) | Cash Dividend Amount (CNY) (tax inclusive) | Ratio to Net Profit Attributable to Parent Company Shareholders (%) | | :--- | :--- | :--- | :--- | | 2020 | 0.10 | 82,321,013.95 | 7.51 | | 2019 | — | — | — | | 2018 | 0.26 | 213,744,729.63 | 32.32 | - According to the Supreme People's Court's judgment, the cash dividends corresponding to the shares held by shareholder Zhengquan Holdings will not be distributed until its capital withdrawal issue is rectified[158](index=158&type=chunk) [Significant Litigation and Arbitration Matters](index=62&type=section&id=X.%20Significant%20Litigation%20and%20Arbitration%20Matters) During the reporting period, the company and its subsidiaries were involved in multiple litigation and arbitration cases, primarily related to stock pledge repurchase disputes, margin financing and securities lending disputes, and securities misrepresentation liability disputes - Investor lawsuits against the company and Founder Group for securities misrepresentation liability: Arising from the 2017 administrative penalty, Changsha Intermediate People's Court accepted **2,992 cases**, of which **2,978 have been judged or settled** with compensation paid, while a few remaining cases are still pending[172](index=172&type=chunk) - Stock Pledge and Margin Financing & Securities Lending Disputes: Involve multiple client default cases, such as litigation or enforcement cases with Yang Lijie (LeEco), Cai Mengjun, Guangzhou Ruifeng Group, and Changlehui Company, where the company is pursuing debt recovery through legal channels[169](index=169&type=chunk)[171](index=171&type=chunk)[173](index=173&type=chunk) [Explanation of the Integrity Status of the Company, its Controlling Shareholder, and Actual Controller During the Reporting Period](index=64&type=section&id=XII.%20Explanation%20of%20the%20Integrity%20Status%20of%20the%20Company%2C%20its%20Controlling%20Shareholder%2C%20and%20Actual%20Controller%20During%20the%20Reporting%20Period) During the reporting period, the company's controlling shareholder, Peking University Founder Group Co., Ltd., was ruled by the court to undergo restructuring in February 2020, with a consortium of Zhuhai Huafa Group, Ping An Insurance, and Shenzhen TEFA Group confirmed as restructuring investors in January 2021 - In February 2020, the Beijing No. 1 Intermediate People's Court ruled for the restructuring of Founder Group; on January 29, 2021, a consortium comprising **Zhuhai Huafa, China Ping An, and Shenzhen TEFA** was confirmed as the restructuring investor[174](index=174&type=chunk) [Explanation of Other Significant Matters](index=67&type=section&id=XVI.%20Explanation%20of%20Other%20Significant%20Matters) During the reporting period, the company increased capital in several subsidiaries to support business development, including **CNY 0.489 billion** to Founder Hong Kong Financial Holdings, and also provided a guarantee for a **USD 48.5 million** loan for Founder Hong Kong Financial Holdings - Capital increases completed for several subsidiaries: - Founder Hong Kong Financial Holdings: Capital increase of **CNY 0.489 billion**, increasing registered capital to **HKD 1.046 billion** - Founder Securities Investment: Capital increase of **CNY 0.6 billion**, increasing registered capital to **CNY 1.5 billion** - Founder Underwriting & Sponsorship: Capital reserve conversion of **CNY 0.6 billion**, increasing registered capital to **CNY 1.4 billion** - Founder Mid-term Futures: Capital reserve and undistributed profit conversion, increasing registered capital to **CNY 1.005 billion**[184](index=184&type=chunk)[185](index=185&type=chunk)[186](index=186&type=chunk)[187](index=187&type=chunk) - Provided a **margin pledge guarantee** for a **USD 48.5 million** overseas bank loan of its wholly-owned subsidiary, Founder Hong Kong Financial Holdings[189](index=189&type=chunk) [Changes in Ordinary Shares and Shareholder Information](index=76&type=section&id=Item%206.%20Changes%20in%20Ordinary%20Shares%20and%20Shareholder%20Information) This section presents information on changes in ordinary share capital, the company's shareholder structure, and details of its controlling shareholder and actual controller [Changes in Ordinary Share Capital](index=76&type=section&id=I.%20Changes%20in%20Ordinary%20Share%20Capital) During the reporting period, the company's total share capital and capital structure remained unchanged at **8,232,101,395 shares**, all of which are unrestricted tradable A-shares, with all previously repurchased shares sold to supplement working capital - As of year-end 2020, the company's total share capital was **8,232,101,395 shares**, with no changes observed[216](index=216&type=chunk) - By June 23, 2020, the company had sold all previously repurchased **11,150,255 shares** through centralized bidding, generating a total of **CNY 80.45127985 million** to supplement its working capital[217](index=217&type=chunk) [Shareholder and Actual Controller Information](index=77&type=section&id=III.%20Shareholder%20and%20Actual%20Controller%20Information) As of year-end 2020, the company had **175,477 ordinary shareholders**, with its top two shareholders, Peking University Founder Group Co., Ltd. and Beijing Zhengquan Holdings Co., Ltd., having their shares frozen, and Peking University identified as the actual controller Top Ten Shareholders' Shareholding (As of Year-end 2020) | Shareholder Name | Number of Shares Held | Proportion (%) | Share Status | | :--- | :--- | :--- | :--- | | Peking University Founder Group Co., Ltd. | 2,284,609,852 | 27.75 | Frozen | | Beijing Zhengquan Holdings Co., Ltd. | 1,799,591,164 | 21.86 | Frozen | | Hong Kong Securities Clearing Company Limited | 1,474,851,714 | 17.92 | Unrestricted | | China Securities Finance Corporation Limited | 261,985,096 | 3.18 | Unrestricted | | Harbin Hatou Investment Co., Ltd. | 197,556,999 | 2.40 | Unrestricted | - The company's controlling shareholder is **Peking University Founder Group Co., Ltd.**, and its actual controller is **Peking University**[223](index=223&type=chunk) - **8.62%** of the company's shares (**709,886,375 shares**) held by the second-largest shareholder, Zhengquan Holdings, were ruled by the court to be offset to Guotong Trust and will subsequently be distributed to China Cinda, pending CSRC approval for this share transfer[222](index=222&type=chunk) [Directors, Supervisors, Senior Management and Employees](index=84&type=section&id=Item%208.%20Directors%2C%20Supervisors%2C%20Senior%20Management%20and%20Employees) This section provides an overview of the remuneration and shareholdings of directors, supervisors, and senior management, along with detailed employee demographics [Shareholding Changes and Remuneration](index=84&type=section&id=I.%20Shareholding%20Changes%20and%20Remuneration) During the reporting period, all directors, supervisors, and senior management held no company shares, with their total pre-tax remuneration for 2020 amounting to **CNY 34.1011 million**, and some executive compensation subject to deferred payment - During the reporting period, all current and former directors, supervisors, and senior management held **zero shares** at both the beginning and end of the year[238](index=238&type=chunk)[239](index=239&type=chunk) - The total pre-tax remuneration received from the company during the reporting period (attributable to and paid in 2020) amounted to **CNY 34.1011 million**, with Mr. Gao Li, Vice Chairman of the Executive Committee and President, receiving the highest remuneration of **CNY 4.6321 million**[238](index=238&type=chunk)[239](index=239&type=chunk) [Employee Information of Parent Company and Major Subsidiaries](index=94&type=section&id=VII.%20Employee%20Information%20of%20Parent%20Company%20and%20Major%20Subsidiaries) As of year-end 2020, the group had **8,090 employees**, with the parent company accounting for **6,795**, primarily in brokerage, and a significant portion of employees aged 31-40 with bachelor's degrees or higher Employee Composition (As of Year-end 2020) | Category | Composition | Number of People | | :--- | :--- | :--- | | **Total Employees** | **Total On-the-Job Employees** | **8,090** | | Professional Composition | Brokerage Personnel | 5,595 | | | Information Technology Personnel | 340 | | | Investment Banking Personnel | 321 | | Age Composition | 31-40 years old | 3,693 | | | 30 years old (inclusive) and younger | 2,549 | | Education Level | Bachelor's Degree | 5,562 | | | Postgraduate and above | 1,743 | - As of year-end 2020, the company had **3,041 securities brokers**[274](index=274&type=chunk) [Corporate Governance](index=97&type=section&id=Item%209.%20Corporate%20Governance) This section describes the company's corporate governance framework, its compliance with regulatory requirements, and the ongoing development of its compliance management system [Explanation of Corporate Governance](index=97&type=section&id=I.%20Explanation%20of%20Corporate%20Governance) The company has established a governance structure comprising the Shareholders' Meeting, Board of Directors, Board of Supervisors, and management, forming a system of clear responsibilities and standardized operations, with the Board of Directors having five specialized committees - The company's corporate governance structure consists of the Shareholders' Meeting, Board of Directors, Board of Supervisors, and a management team centered around the Executive Committee, ensuring clear responsibilities and mutual checks and balances[276](index=276&type=chunk)[280](index=280&type=chunk) - The Board of Directors comprises **9 directors**, including **3 independent directors**, meeting regulatory requirements, and has **five specialized committees**: Strategy and Development, Risk Control, Audit, Nomination, and Remuneration and Assessment[278](index=278&type=chunk) [Explanation of Company's Compliance Management System Construction](index=103&type=section&id=XII.%20Explanation%20of%20Company's%20Compliance%20Management%20System%20Construction) During the reporting period, the company continuously improved its compliance management system, implementing a "line-of-business compliance officer" mechanism, enhancing branch compliance management, and strengthening risk monitoring and early warning capabilities through informatization and anti-money laundering system optimization - The company updated and improved multiple compliance management systems, including the **Compliance Manual**, **Employee Professional Conduct Guidelines**, and suitability management measures[297](index=297&type=chunk) - Compliance management informatization was advanced, with the compliance management system fully covering subsidiaries, headquarters departments, and branches, and continuously strengthening risk monitoring, early warning, and disposal functions[301](index=301&type=chunk) - During the reporting period, the Compliance Department conducted on-site compliance inspections of **2 headquarters departments** and **45 branches**; the Audit Department completed a total of **354 audit projects**, covering headquarters, subsidiaries, and branches[306](index=306&type=chunk)[307](index=307&type=chunk) [Corporate Bonds Information](index=106&type=section&id=Item%2010.%20Corporate%20Bonds%20Information) This section details the company's outstanding corporate bonds, their repayment status, and recent credit ratings [Basic Information on Corporate Bonds](index=106&type=section&id=I.%20Basic%20Information%20on%20Corporate%20Bonds) As of the end of the reporting period, the company had **3 outstanding non-publicly issued corporate bonds and subordinated bonds**, totaling **CNY 4.66 billion**, and successfully completed the timely and full principal and interest repayment for **5 matured bonds** during the period Outstanding Non-Publicly Issued Corporate Bonds (As of Year-end 2020) | Bond Abbreviation | Code | Maturity Date | Bond Balance (CNY Billion) | Interest Rate (%) | | :--- | :--- | :--- | :--- | :--- | | 19 Founder F1 | 151205 | 2022/2/27 | 2.50 | 4.71 | | 19 Founder F2 | 151290 | 2022/3/21 | 0.60 | 4.65 | | 19 Founder C1 | 151470 | 2021/4/24 | 1.56 | 4.80 | - During the reporting period, the company timely and fully repaid the principal and interest for **5 matured bonds**: "18 Founder C1," "18 Founder F1," "18 Founder F3," "17 Founder C1," and "17 Founder C2"[309](index=309&type=chunk) - The **USD 200 million** overseas bond (FNDSHK) issued by subsidiary Founder Hong Kong Financial Holdings matured on November 16, 2020, with principal and interest fully settled[310](index=310&type=chunk) [Corporate Bond Rating Information](index=107&type=section&id=IV.%20Corporate%20Bond%20Rating%20Information) According to the tracking rating report issued by United Credit Rating Co., Ltd. in June 2020, the company's **main credit rating is AAA with a stable outlook**, and its bond ratings for "19 Founder F1" and "19 Founder C1" are AAA and AA+ respectively, consistent with previous ratings - Main credit rating: **AAA**, with a stable outlook[313](index=313&type=chunk) - Bond credit ratings: "**19 Founder F1**" is **AAA**, and "**19 Founder C1**" is **AA+**[313](index=313&type=chunk) [Financial Report](index=110&type=section&id=Item%2011.%20Financial%20Report) This section contains the independent auditor's report and the company's consolidated financial statements, including balance sheets, income statements, and cash flow statements [Audit Report](index=125&type=section&id=I.%20Audit%20Report) ShineWing Certified Public Accountants (Special General Partnership) issued a standard unqualified audit opinion on the company's 2020 financial report, identifying key audit matters including impairment of financial assets, fair value assessment of Level 3 financial instruments, goodwill impairment testing, and consolidation of structured entities - Audit Opinion Type: **Standard Unqualified Opinion**[340](index=340&type=chunk) - Key Audit Matters: - Impairment of other debt investments, funds lent out, financial assets purchased under resale agreements, and other receivables - Fair value assessment of Level 3 financial instruments - Goodwill impairment testing - Consolidation of structured entities[342](index=342&type=chunk)[345](index=345&type=chunk)[344](index=344&type=chunk)[346](index=346&type=chunk) [Financial Statements](index=129&type=section&id=II.%20Financial%20Statements) The financial statements show that as of year-end 2020, the company's consolidated total assets were **CNY 123.256 billion**, total liabilities **CNY 82.899 billion**, and equity attributable to parent company shareholders **CNY 39.621 billion**, with 2020 operating revenue of **CNY 7.542 billion** and net profit of **CNY 1.198 billion** Consolidated Balance Sheet Key Data (December 31, 2020) | Item | Amount (CNY) | | :--- | :--- | | **Total Assets** | **123,256,369,688.39** | | Funds Lent Out | 23,952,491,443.95 | | Financial Assets Held for Trading | 20,905,910,709.74 | | Other Debt Investments | 14,190,249,453.69 | | **Total Liabilities** | **82,898,959,138.82** | | Client Funds | 27,835,009,932.39 | | Financial Assets Sold Under Repurchase Agreements | 13,332,074,099.80 | | Short-term Financing Payables | 10,719,391,771.17 | | **Total Equity Attributable to Parent Company Shareholders** | **39,620,740,244.32** | Consolidated Income Statement Key Data (2020) | Item | Amount (CNY) | | :--- | :--- | | **Operating Revenue** | **7,541,809,241.46** | | Net Fee and Commission Income | 5,238,940,907.22 | | Net Interest Income | 1,560,455,807.96 | | Investment Income | 1,254,728,040.03 | | Fair Value Change Gains | -619,277,200.12 | | Credit Impairment Losses | 969,932,834.64 | | **Total Profit** | **1,548,030,137.32** | | **Net Profit** | **1,198,143,096.95** | | Net Profit Attributable to Parent Company Shareholders | 1,096,492,270.90 | [Securities Company Information Disclosure](index=111&type=section&id=Item%2013.%20Securities%20Company%20Information%20Disclosure) This section presents the company's regulatory classification results from the past three years, reflecting its compliance and risk management performance [Regulatory Classification Results for the Past Three Years](index=111&type=section&id=II.%20Regulatory%20Classification%20Results%20for%20the%20Past%20Three%20Years) The company consistently received an **A-class A-level classification** from the China Securities Regulatory Commission for **three consecutive years** (2018, 2019, and 2020), indicating its sustained high standards in risk management and compliant operations - The company's regulatory classification results for the past three years (**2018-2020**) have all been **A-class A-level**[324](index=324&type=chunk)