China Merchants Securities : ANNOUNCEMENT - (1) CONTINUING CONNECTED TRANSACTION IN RELATION TO THE ADMINISTRATIVE PROCUREMENT FRAMEWORK AGREEMENT AND (2) PROPOSED DISTRIBUTION OF 2020 INTERIM DIVIDEND

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

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

(Stock Code: 6099)

ANNOUNCEMENT

1. CONTINUING CONNECTED TRANSACTION IN RELATION TO THE ADMINISTRATIVE PROCUREMENT FRAMEWORK AGREEMENT

AND

(2) PROPOSED DISTRIBUTION OF 2020 INTERIM DIVIDEND

Reference is made to the Company's announcement dated May 21, 2019 in relation to, among other things, the Previous Administrative Procurement Framework Agreement dated May 21, 2019 entered into between the Company and China Merchants Group.

THE NEW ADMINISTRATIVE PROCUREMENT FRAMEWORK AGREEMENT

The Board is pleased to announce that, in order to improve the overall management of the Company's self-owned properties and to enhance the synergy with the business of property management entities under China Merchants Group, on August 28, 2020, the Company and China Merchants Group entered into the New Administrative Procurement Framework Agreement, pursuant to which, the Group will procure various types of administrative and office supplies, comprehensive property management services, canteen operation services and renovation services related to its daily operating activities from China Merchants Group and/or its associates in the ordinary course of business for a term from the date of the New Administrative Procurement Framework Agreement to December 31, 2021.

- 1 -

IMPLICATIONS UNDER THE LISTING RULES

China Merchants Group is a controlling shareholder of the Company. As at the date of this announcement, China Merchants Group indirectly holds approximately 44.17% in aggregate of the equity interest of the Company. Accordingly, China Merchants Group and its associates are connected persons of the Company under the Listing Rules, and the transactions contemplated under the New Administrative Procurement Framework Agreement constitute continuing connected transactions of the Company under Chapter 14A of the Listing Rules.

As the highest applicable percentage ratio in respect of the transactions contemplated under the New Administrative Procurement Framework Agreement exceeds 0.1% but is less than 5%, the transactions contemplated under the New Administrative Procurement Framework Agreement are subject to the reporting, announcement and annual review requirements but are exempt from the independent shareholders' approval requirement under Chapter 14A of the Listing Rules.

PROPOSED DISTRIBUTION OF 2020 INTERIM DIVIDEND

On August 28, 2020, the Board has proposed to pay an interim dividend of RMB3.35 (tax inclusive) for every ten (10) Shares (the "2020 Interim Dividend") to the holders of A Shares and H Shares of the Company for the six months ended June 30, 2020, subject to the approval by the shareholders of the Company at the extraordinary general meeting of the Company (the "EGM").

The Board is pleased to announce that, in order to improve the overall management of the Company's self-owned properties and to enhance the synergy with the business of property management entities under China Merchants Group, on August 28, 2020, the Company and China Merchants Group entered into the New Administrative Procurement Framework Agreement, pursuant to which, the Group will procure various types of administrative and office supplies and comprehensive administrative services related to its daily operating activities from China Merchants Group and/or its associates in the ordinary course of business for a term from the date of the New Administrative Procurement Framework Agreement to December 31, 2021.

- 2 -

The principal terms of the New Administrative Procurement Framework Agreement are set out as follows:

THE NEW ADMINISTRATIVE PROCUREMENT FRAMEWORK AGREEMENT

Date

August 28, 2020

Parties

1. The Company; and
2. China Merchants Group

Term

Date of the New Administrative Procurement Framework Agreement to December 31, 2021

Scope

Pursuant to the New Administrative Procurement Framework Agreement, the Group will procure various types of administrative and office supplies and comprehensive administrative services related to its daily operating activities from China Merchants Group and/or its associates, including (but not limited to):

1. the Group will procure various types of administrative and office supplies from China Merchants Group and/or its associates;
2. the Group will commission China Merchants Group and/or its associates to provide comprehensive property management services for the Company's self-owned properties;
3. the Group will commission China Merchants Group and/or its associates to provide operation service for employee canteen; and
4. the Group will commission China Merchants Group and/or its associates to provide renovation service for the Company.

- 3 -

Pricing Basis

1. Procurement of administrative and office supplies
   The procurement prices shall be determined based on the prevailing market prices, or with reference to general market prices normally adopted for the transactions with independent third parties in respect of similar products for the time being.
2. Comprehensive property management services, Canteen operation service and Renovation service

The commission fees for comprehensive property management services, canteen operation service and renovation service shall be determined based on the prevailing market prices and relevant laws and regulations, if any.

Historical Figures

The approximate historical figures of administrative procurement fees between the Group and China Merchants Group and/or its associates for the three years ended December 31, 2019 were nil, RMB10.6051 million and RMB17.9022 million, respectively.

Proposed Annual Caps

The proposed annual caps of the administrative procurement fees charged by China Merchants Group and/or its associates under the New Administrative Procurement Framework Agreement for the years ending December 31, 2020 and 2021 are as follows:

	Annual caps (RMB0'000)
	For the year ending	For the year ending
	December 31,	December 31,
	2020	2021
Administrative procurement fees	4,575	7,150

In determining the proposed annual caps, the Board has taken into account the following major factors, including but not limited to:

• the historical figures of the administrative procurement fees for the year ended December 31, 2018 and 2019;

- 4 -

• the future demands of the Group for procurement of comprehensive property management services, canteen operation service and renovation service;
• the trend of market prices for the comprehensive property management services, canteen operation service and renovation service; and
• buffer required for higher transaction amounts due to, among others, inflation, potential business expansion and the advancement and replacement of equipment from time to time.

MISCELLANEOUS

The Company and China Merchants Group agreed that pursuant to Rule 14A.54 of the Listing Rules, if at any time during the term of the New Administrative Procurement Framework Agreement, the total transaction amount may or is expected to exceed the proposed annual caps, the Group shall fulfil all applicable and necessary regulatory obligations under the Listing Rules as soon as possible. Before the fulfilment of all relevant regulatory requirements, both parties agreed to use their best efforts to prevent the aggregated transaction amount for such year from exceeding the relevant monetary cap. Otherwise, the execution of relevant transactions under the New Administrative Procurement Framework Agreement shall be suspended.

I N T E R N A L C O N T R O L M E A S U R E S O F C O N T I N U I N G C O N N E C T E D TRANSACTIONS

To safeguard the interests of the Shareholders as a whole, including minority Shareholders, the Group has implemented internal approval and monitoring procedures for its connected transactions, which include but are not limited to the following:

• in order to ensure that the prices for the goods and services to be procured under the New Administrative Procurement Framework Agreement are more favourable to the Group than those quoted by independent suppliers, such procurement prices will be determined pursuant to the requirements set out in the management measures for procurement and invitation to tender of the Group.

- 5 -

• before considering placing a purchase order with China Merchants Group and/or its associates, the Group will select suppliers and determine the relevant terms of the procurements through inquiry, tender and bidding and other procedures, determine qualified suppliers based on the categories of the services or products to be procured, the monetary amount involved and the specific nature of the procurement and carry out the procurement through public tender, invitation to tender, inquiry and other means. The procurement management department and procurement evaluation team of the Group will review and assess the price and other terms offered by the candidates with a view to ensure the quality, reliability, and service standards of the relevant administrative and office supplies and comprehensive administrative services and that the fees in connection with the administrative and office supplies and comprehensive administrative services payable by the Group to China Merchants Group and/or its associates are fair and reasonable and comparable to those offered by independent third party suppliers. In any event, any offer from China Merchants Group and/or its associates has to pass such selection process before they could be selected and accepted as the Group's supplier.
• the Group has internal guidelines which provide additional approval procedures, including prior assessment and approval by independent Directors before the matter is submitted for consideration by the Board for transactions exceeding certain monetary amounts.

The Company's independent non-executive Directors and auditors will conduct annual review on the continuing connected transactions of the Group (including the rates offered by China Merchants Group and/or its associates) and provide annual confirmations in accordance with the Listing Rules, that the relevant transactions are conducted in the ordinary and usual course of business of the Group and in accordance with their corresponding agreement, the terms of which are fair and reasonable and in the interests of the Shareholders as a whole, on normal commercial terms or better and in accordance with the pricing policy of the Group.

REASONS FOR AND BENEFITS OF ENTERING INTO THE TRANSACTIONS

The Directors (including independent non-executive Directors) believe that:

1. entering into the New Administrative Procurement Framework Agreement can help the Group manage, in a more effective manner, various types of administrative and office supplies, comprehensive property management services, canteen operation services and renovation services provided by China Merchants Group and/or its associates;

- 6 -

1. due to the historical and long-term cooperation relationship between the Group and China Merchants Group as well as the wide scope of industries and geographical areas in which China Merchants Group operates, the services described in the scope of the New Administrative Procurement Framework Agreement required during the ordinary course of business and operation of the Group, could be provided to the Group by China Merchants Group and/or its associates;
2. such transactions will create synergy by integrating the strengths of the Group and China Merchants Group and/or its associates, which will reduce the overall operating costs and daily expenses and in turn improve the profitability and enhance the Company's leading position in the securities industry; and
3. such transactions will provide China Merchants Group and/or its associates with opportunities to better understand the operations of the Group, which in turn will enable China Merchants Group and/or its associates to render more expedient and efficient service and/or provide better products to the Group when compared to those services and/ or products provided by independent third parties.

BOARD CONFIRMATION

The Board (including the independent non-executive Directors) is of the view that the New Administrative Procurement Framework Agreement was: (i) entered into in the ordinary and usual course of business of the Company; (ii) on normal commercial terms (in accordance with the terms determined after arm's length negotiation or no less favourable than those offered by the Company to independent third parties); and (iii) its terms and the proposed annual caps are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Pursuant to Rule 14A.68(8) of the Listing Rules, as HUO Da, SU Min, SU Jian, XIONG Xianliang, XIONG Jiantao, PENG Lei and GAO Hong are Directors connected to China Merchants Group, they have abstained from voting on the board resolutions in respect of the entering into of the New Administrative Procurement Framework Agreement and the transactions contemplated thereunder (including the proposed annual caps). The relevant resolutions were voted and approved by Directors who are not connected to the transactions contemplated under the New Administrative Procurement Framework Agreement.

GENERAL INFORMATION OF THE COMPANY AND CHINA MERCHANTS GROUP

The Company is a joint stock company incorporated in the PRC with limited liability, the domestic shares of which are listed on the Shanghai Stock Exchange and the H Shares of which are listed on the Main Board of the Stock Exchange.

- 7 -

The Group mainly engages in wealth management and institutional business, investment banking business, investment management business, and investment and trading business. China Merchants Group is a large-scale conglomerate with diversified businesses incorporated in the PRC and directly administered by Stated-owned Assets Supervision and Administration Commission of the State Council. At present, the Group mainly focuses on three core industries: comprehensive transportation, featured finance, holistic development and operation of residential communities and industrial parks. It has also been engaging in the transformation from these three primary industries to the three platforms of industrial management, financial services, and investment and capital operation.

IMPLICATIONS UNDER THE LISTING RULES

China Merchants Group is a controlling shareholder of the Company. As at the date of this announcement, China Merchants Group indirectly holds approximately 44.17% in aggregate of the equity interest of the Company. Accordingly, China Merchants Group and its associates are connected persons of the Company under the Listing Rules, and the transactions contemplated under the New Administrative Procurement Framework Agreement constitute continuing connected transactions of the Company under Chapter 14A of the Listing Rules.

As the highest applicable percentage ratio in respect of the transactions contemplated under the New Administrative Procurement Framework Agreement exceeds 0.1% but is less than 5%, the transactions contemplated under the New Administrative Procurement Framework Agreement are subject to the reporting, announcement and annual review requirements but are exempt from the independent shareholders' approval requirement under Chapter 14A of the Listing Rules.

PROPOSED DISTRIBUTION OF 2020 INTERIM DIVIDEND

On August 28, 2020, the Board has proposed to pay the 2020 Interim Dividend of RMB3.35 (tax inclusive) for every ten(10) Shares to the holders of A Shares and H Shares of the Company for the six months ended June 30, 2020, subject to the approval by the shareholders of the Company at the EGM, 2020. A circular containing, among other things, details about the proposed distribution of the 2020 Interim Dividend and the period of closure of the H share register of members of the Company, together with a notice convening the EGM, will be despatched to the Shareholders as soon as practicable.

- 8 -

DEFINITIONS

In this announcement, the following terms and expressions shall have the following meanings:

"associate(s)"	has the meaning ascribed to this term under the Listing
	Rules
"Board" or "Board of Directors"	the board of Directors of the Company
"China Merchants Group"	China Merchants Group Limited (招商局集團有限公司),
	a state-owned enterprise established in the PRC in October
	1986, which is directly administered by State-owned
	Assets Supervision and Administration Commission of
	the State Council and is a controlling shareholder of the
	Company
"Company"	China Merchants Securities Co., Ltd., a joint stock
	company incorporated in the PRC with limited liability,
	the H Shares and domestic shares of which are listed on
	the Main Board of the Stock Exchange (stock code: 6099)
	and on the Shanghai Stock Exchange (stock code: 600999),
	respectively
"connected person(s)"	has the meaning ascribed to this term under the Listing
	Rules
"controlling shareholder(s)"	has the meaning ascribed to this term under the Listing
	Rules
"Director(s)"	director(s) of the Company
"Group"	the Company and its subsidiaries
"H Shares"	overseas-listed foreign shares in the share capital of the
	Company with nominal value of RMB1.00 each
"Hong Kong"	the Hong Kong Special Administrative Region of the PRC
"Listing Rules"	the Rules Governing the Listing of Securities on the Stock
	Exchange
	- 9 -

"New Administrative Procurement	the new administrative procurement framework agreement
Framework Agreement"	entered into between the Company and China Merchants
	Group on August 28, 2020
"PRC"	the People's Republic of China, and for the purposes of
	this announcement only, excluding Hong Kong, the Macau
	Special Administrative Region of the People's Republic of
	China and Taiwan
"Previous Administrative	the administrative procurement framework agreement
Procurement Framework	entered into between the Company and China Merchants
Agreement"	Group on May 21, 2019
"RMB"	Renminbi, the lawful currency of the PRC
"Share(s)"	the ordinary share(s) in the share capital of the Company
	with a nominal value of RMB1.00 each
"Shareholder(s)"	the shareholder(s) of the Company
"Stock Exchange"	The Stock Exchange of Hong Kong Limited
"%"	per cent.
	By order of the Board of Directors
	China Merchants Securities Co., Ltd.
	HUO Da
	Chairman
Shenzhen, the PRC
August 28, 2020

As at the date of this announcement, the executive directors of the Company are Mr. HUO Da and Mr. XIONG Jiantao; the non-executive directors of the Company are Ms. SU Min, Mr. SU Jian, Mr. XIONG Xianliang, Ms. PENG Lei, Mr. GAO Hong, Mr. HUANG Jian, Mr. WANG Daxiong and Mr. WANG Wen; and the independent non-executive directors of the Company are Mr. XIANG Hua, Mr. XIAO Houfa, Mr. XIONG Wei, Mr. HU Honggao and Mr. WONG Ti.

- 10 -