China Merchants Securities : 2020 Environmental, Social and Governance Report

About this Report

This is the thirteenth social responsibility report issued by China Merchants Securities Co., Ltd. ("China Merchants Securities", "the Group", "the Company" or "We") since 2008. The purpose of this report is to disclose to all stakeholders the actions taken by the Com-pany to fulfill its social responsibility and strive for sustainable development, and the results achieved.

Scope of the Report

Scope of the report

China Merchants Securities Corporation headquarters, 12 branches, 259 securi-ties branches, and 5 wholly-owned subsidiaries.

Report period

January 1, 2020 to December 31, 2020 (some contents are retrospective and prospective as appropriate).

Report Period

This is an annually disclosed report.

Basis for preparing the report

The report is prepared in accordance with the principles set out in the "Environmental, Social and Governance Guidelines" in Appendix 27 of the List-ing Rules on the Main Board of The Stock Exchange of Hong Kong Limited.

Report Data Description

The data in the report are mainly derived from the original records of the actual operation of the Company. Unless otherwise specified, the financial data presented in this report are denominated in RMB.

Reporting Principles

Based on the materiality principle, this report identifies and responds to important ESG issues that affect the Company's sustainable development based on data analysis and other work. The process and results of the materiality anal-ysis are described in the "Responsible Governance" section of this report.

With respect to the quantitative principle, the quantitative key performance of the Company's ESG has been disclosed in this report, as detailed in Appendix III "List of Quantitative Disclosures" of this report.

With regard to the principle of consistency, the indicators used in this report are consistent from one reporting period to another to reflect the trend of perfor-mance levels. For performance indicators that require calculation, the basis of calculation and reference standards are stated in this report.

For the principle of balance, this report reflects objective facts and disclos-es both positive and negative indicators.

Report Assurance Method

The company make a public commitment to the truthfulness and reliability of the report, which is self-published and will be subject to third-party review when appropriate.

Report Distribution Format

The report is published in electronic form and can be downloaded fromğ The Shanghai Stock Exchangečhttp://www.sse.com.cnĎ

The Hongkong Stock Exchangečhttp://www.hkexnews.hkĎ The Company's websitečhttp://www.cmschina.comĎ

All contents and data disclosed in this report have been reviewed and approved by the Board of Directors of China Merchants Securities Co.

About the company

China Merchants Securities Company Limit-ed ("China Merchants Securities") is a securities company under the China Merchants Group, which has a history of over 100 years. After more than 20 years of development, it has become a first-class brokerage company with a full license of securities market in China. China Merchants Securities was listed on Shanghai Stock Exchange (code 600999) in November 2009 and listed on Hongkong Stock Exchange (code 06099) in October 2016.

Headquartered in Shenzhen, the company has 259 securities branches and 12 branches in China, as well as subsidiaries in Hong Kong, the United Kingdom, Singapore and South Korea, and wholly owns China Merchants Securities Interna-tional Company Limited, China Merchants Futures Co., Limited, China Merchants Securities Assest Management Co.,Ltd., China Merchants Zhiyuan Capital Investment Co., Ltd. and China Merchants Securites Investment Co., Ltd., and holding equity interest in Bosera Asset Manage-ment Co., Limited, China Merchants Fund Man-agement Co., Ltd.,to build a comprehensive secu-rities service platform with integrated domestic and international business.

regulatory rating under the "A" category for secu-rities firms for 13 consecutive years. With the ability to provide services on a full-function platform and across the entire industry chain, the Company has a balanced business structure and a solid foundation for its overall development, laying a solid foundation for the Company to build its distinctive business and differentiation and provide One-Time services to its clients in the future. Our brokerage business has a solid foun-dation and growing competitiveness, while our institutional client business has excellent com-prehensive service capability and our corporate client business has stable service capability across the entire industry chain. The company has a strong "Merchants" brand and shareholder background, and has a good market reputation.

Operating with a client-oriented approach, China Merchants Securities provides a wide range of financial products and services to individual, institutional and corporate clients, and engages in investment and trading, with its main businesses including wealth management and institutional business, investment banking, investment management, investment and trading. Through years of development, the Company has built up a significant competitive advantage in the market.

The company has been persistent and steady in its operation, and has been granted the "AA"-

With the mission of "helping China's econom-ic restructuring and upgrading, and helping to preserve and increase the value of social wealth", China Merchants Securities abides by the core values of "Family Care, Commitment to the Times; Encourage New Strength, and Commit-ment to the Future" and is committed to building "the best investment bank in China with distinc-tive features, innovation and leadership, quality first, and excellent contribution". The company are committed to building "the best investment bank in China with distinctive features, innovation and leadership, quality first, and excellent contri-bution". The company will achieve customer value growth with excellent financial services, promote the progress of the securities industry, and strive to become an outstanding enterprise with custom-er trust, employee pride, shareholder satisfaction and social respect.

Core Businesses and Services

The Group provides a wide range of customer-focused financial products and services to individuals, institutions and corporations, and engages in investment and trading, following is the core business and servicesğ

The company provides value-added services such as investment consultation, investment portfolio proposal, product sales, account diagnosis, and asset allocation;

The wealth Management and Institutional Business

Provides capital intermediation services to clients (including financing and securities financing business, stock pledge repur-chases, etc.);

And provide investment research, sales and trading, and prime brokerage services to various institutional clients such as funds and insurance companies.

Investment Banking Business

The company provide one-stop domestic and international investment banking services for corporate clients, including equity financing, debt financing, structured financing, New Third Board listing, financial advisory services, etc.

Investment Management Business

Investment and trading business

Trading and market-making of equity securities, fixed income securities, foreign exchange, commodities, alternative investments and derivative financial instruments (including trading and market-making of financial products in the over-the-counter market) with its own capital.

Key words for social responsibility in 2020

Promoting technology empowerment: In 2020, the company will complete 43

Trustworthy To

Clients

innovative projects, launch version 7.0 of the Zhiyuan Yi Hu Tong App, upgrade and optimize the Geetek institutional trading platform, launch a new generation of centralized operation counter system, and launch "Zhaosheng Wealth+" to further enhance customer service capabilities by means of technology.

Pride To Employees

Employee Stock Ownership Plan: During the reporting period, the Company became the first securities company to successfully implement an employee stock ownership plan in accordance with the new regulations of the three minis-tries (the SFC, the SASAC and the Ministry of Finance).

Initiated the "One Heart Project": In 2020, the Company initiated the "One Heart Project" and revised and released the new version of "China Merchants Securities Corporate Culture Consensus" to lead the development of the Compa-ny with a new cultural concept.

Satisfactory To Shareholders

Implementation of change strategy: 2020 is the key year for China Merchants Securities to implement the five-year change strategy. The company is guided by the strategic objectives and further implements five core strategies. The Compa-ny will seriously carry out the special activity of "carrying forward the spirit of Shekou, improving work style and enhancing work efficiency", implement the "Double Hundred Actions" of state-owned enterprise reform and the Group's quality and efficiency improvement project, and promote the further implementa-tion of key reform issues.

Pilot Concurrent Supervision: In March 2020, the Company was approved as one of the first batch of SFC pilot concurrent supervision brokers.

Respectful To Society

Serve the real economy: In 2020, China Merchants Securities actively served the real economy, helped the reform of state-owned enterprises and supported private enterprises. Underpinned by Lingyue PlanThroughout the year of 2020, the Company filed 12 IPO projects on the Science and Technology Innovation Board (including one non-sponsored, joint-underwriting project) and 19 IPO projects on the Growth Enterprise Market (GEM), filing three IPO projects on the New Third Board Selective Tier, and completing the first listing on the New Third Board Selective Tier - The company also completed the IPO of the first listing on the New Third Board Selective Tier market - AVIC Fujitec.

Targeted poverty alleviation: Using various poverty alleviation means such as financial poverty alleviation, education poverty alleviation and consumption poverty alleviation, the company has helped its counterpart counties - Neixiang County in Henan Province and Shitai County in Anhui Province to remove their national-level poverty counties in May 2019 and April 2020 respectively.

Ensure smooth operation of business

Since the outbreak of the new pneumonia epidemic, China Merchants Securities has taken effective measures to ensure the smooth operation of its information system, increase online service support, and ensure the smooth operation of securities services through the "cloud" coordination office, while doing its own work to prevent and control the epidemic. The company will do our best to serve the stable operation of the capital market and protect the rights and interests of investors.

· Ensure the smooth operation of information system

The company fully utilizes the advantages of financial technology, formulates information tech-nology contingency plans in advance, establishes the "two places and three centers" on-duty mecha-nism, strengthens the monitoring of information system with only 1/2 of the usual operation and protection staff, strictly controls the changes, and solves the hidden problems such as micro-securi-ties bandwidth, financing channels, and individual stock options loading in a timely manner. We have withstood the test of trillion dollar market and ensured the continuous and stable operation of the system. The company organized more than 30 departments and subsidiaries to analyze the business impact and emergency disposal under major disasters, and formed the Emergency Plan.

· Provide quality online services

In order to do our best to prevent and control the new pneumonia epidemic and protect the health of our clients, the company actively guides our clients to give priority to off-site services and provide them with convenient online services through various channels such as China Merchants Securities Zhiyuan Yi Hu Tong App, China Merchants Securities Zhiyuan Smart Edition (computer client) and China Merchants Securities official website. At the same time, the Company has devel-oped the "on-site appointment" function, which can effectively divert customers who need to handle business at the counter and avoid the gathering of people.

Photo: Headquarters data center makes full use of digital means to help prevent and control epidemics

Zhiyuan Yi Hu Tong App 7.0 Strongly Supported Online Services During the Epidemic

Version 7.0 APP includes 159 new functions and optimizations, and its performance indicators have been improved to the top of the industry. It fully supports online services such as account opening, quotes, information, trading, business processing, investment research and after-hours analysis, etc. Moreover, CMSPaaS framework developed by China Merchants Securities guarantees the performance experience of APP 7.0 from the bottom. During the epidemic period, the App ran smoothly. Compared with the pre-epidemic period, the number of AI product service users increased by 48% and the service volume increased by 259%, which strongly supported customers to complete business processing and consultation online, and passed the test of billions of quotes after the Spring Festival smoothly to protect user experi-ence.

· To Ensure the Normal Operation

In order to ensure the continuous development of business, the Company's emergency response working group has twice studied the business continuity plan, and has considered and approved the "Emergency Plan for Prevention and Control of Epidemic in China Merchants Securities Headquar-ters Building" and "Emergency Plan for Prevention and Control of Epidemic in China Merchants Securities The company chat Software Technology Park Office Building"; and requested the expan-sion of the emergency response scenario and the formulation of a comprehensive business continui-ty plan in accordance with the requirements for emergency support of system, data, personnel and venue and established a sound long-term mechanism.

The company forward-lookingly launched the combined solution of Cloud Lock, VPN+Desk Cloud and Internet Conference, which strongly supported the trading and related business develop-ment of the business departments of fixed income, derivatives investment, custody and other busi-ness departments as well as the epidemic area sales offices. On average, 835 PC devices and 5,580 cell phone devices worked through the cloud lock every day; the average number of daily users of the financial desktop cloud reached more than 790 during the epidemic, and the cumulative number of Internet video conference and voice teleconference accesses exceeded 90,000, which strongly promoted the resumption of work and production.

Protecting the Health and Safety of Employees

During the period of epidemic prevention and control, the company always put the protection of employees' health in the first place, deployed prevention and control measures in a strict and detailed manner, and adjusted and optimized them in a timely manner according to the development of the epidemic. Through measures such as controlling the movement of staff, managing the office area and controlling the size of on-site office staff, the company made every effort to protect the health and safety of employees.

Table: Measures taken by China Merchants Securities to implement epidemic prevention and control measures

At the beginning of the outbreak, preventive and control measures the company put in place to protect the health of employees

c Control staff movement: according to the changes of the epidemic situation, strictly strengthen the management of business trips and reasonably arrange the staff's itinerary.

c Caring for the health of employees: Implementing employee list management, strictly controlling the size of on-site office staff according to the principle of minimizing the number of employees; opening a commut-er bus for employees to and from work during the epidemic to ensure the safety of employees going to and from work. The office procured various prevention and control supplies through multiple channels, including temperature checkers, masks, disinfectant sprays, hand sanitizer, anti-viral oral solution, etc.; and produced and distributed epidemic prevention and control materials such as the "Epidemic Prevention and Control Practice Manual".

c Do a good job of office area hygiene management: the company's office building to carry out a full range of disinfection, elevators and other high-risk parts of the focus of disinfection, do a good job of office area entrance and exit body temperature testing and access control settings.

c Strengthen the management of staff canteens: control the flow of staff in the company's staff canteens and other staff-intensive areas. Strictly control the itinerary and health condition of the staff in the staff canteen, and increase the frequency of disinfection and disinfection in the staff canteen.

Deployment of overseas epidemic prevention and control

In 2020, the overseas epidemic and the overall security environment are relatively complicated, the company attaches great importance to it, organizing and holding special meetings on overseas epidemic prevention and control for many times, carefully deploying epidemic prevention and control work, implementing emergency plan drills, and doing its best to reduce the impact of overseas epidemic outbreaks on production and operation.

Table: China Merchants Securities Deploys Measures to Prevent and Control Overseas Epidemics

Establishment of local emergency response teams

c The company set up a local emergency response team and formulated a comprehensive emergency response plan to maintain normal business operations and customer service standards to the maximum extent possible, so that key positions are not left vacant, customer needs are responded to, and daily operations are guaranteed.

c Reasonable arrangement of staff work, implementation of a rotation system, some staff adopt telecommuting mode to minimize the risk of epidemic.

Good customer communication and coordination

The company make full use of online communication channels to keep in touch with customers, actively contact poten-tial customers, ensure business continuity, respond to customer needs in a timely manner, and prevent business interrup-tion risks.

Do a good job of information security management

c During the remote office period, the stability of the company's key digital equipment and network facilities is ensured, the information technology emergency handling capability is improved, and the continuous operation of information systems is ensured and the recovery time after interruptions is reduced.

c Strengthen network security and enhance monitoring of the operation of application systems, the company sites and information services.

Manage the daily office workplace

Temperature and trip checks are conducted for all personnel entering the office premises. Telephone or online meetings are used whenever possible. The office is regularly disinfected and ventilated, and employees are regularly provided with the necessary epidemic prevention materials. Advocate for employees to minimize outings, entertainment, dinners and other activities in public places after work hours.

1.1 Responsibility Strategy

Our responsibility goals

Focus on customers, strive to build the best investment bank in China with distinctive features, leading innovation, quality first, and excellent contribution, and continue to enhance the company's responsibility capacity in the process of becoming bigger and stronger.

Our responsibility path

With the mission of "boosting China's economic transformation and upgrading, and helping to preserve and increase the value of social The companyalth", The company insist on the path of scientific development, innovative development, harmonious development, and green development, based on our own operation and management practices, and in the actual operation process, The company demonstrate the height of responsibility awareness, implement the strategy of responsibili-ty work, realize the value of responsibility and To enhance the ability to fulfill our responsibilities. The company should be aggressive and innovative; The company should practice solid internal skills and operate steadily and in compliance; The company should insist on excellence and continue to optimize management; The company should adhere to the core values of "family love and responsi-bility of the times; encourage the new and strong, and strive to achieve a coordinated and balanced development of quality, efficiency and scale of the company.

Our responsibility principles

The company insist on fairness and justice, balancing the relationship between the company and multiple interests that are both interdependent and mutually influential; insist on taking the lead, striving to be proactive and one step ahead of others to show the exemplary effect; insist on the unity of knowledge and action, ensuring a high degree of unity between the company and the concept of responsibility and action and integrating them into business practice; insist on continuous optimiza-tion, constantly improving ourselves and making continuous self-improvement, so that the manage-ment of social responsibility becomes a booster for the company's continuous growth and develop-ment. The company insist on continuous optimization, continuous self-improvement and self-im-provement, so that the management of social responsibility can become a booster for the company's continuous growth and development.

Our responsibility focuses

Harmonize with society, develop with the capital market, and strive to promote the progress of the securities industry. The capital market is the foundation of China Merchants Securities, and the key objective of China Merchants Securities in fulfilling its social responsibility is to take up its responsibility to the capital market by taking up the responsibility of the industry, and to realize the important value of the company in the development and progress of the society by taking up the responsibility of the capital market.

1.2 Responsibility Model

China Merchants Securities is committed to providing superior integrated financial services to domestic and international clients, creating value and driving progress in the capital markets and securities industry. Our value creation focuses on four areas

Trustworthy to clients

The company insist on creating value for our customers and winning their trust and loyalty with our excellent services.

To provide a first-class career development platform, create a fair and harmonious humanistic environment, and realize the common growth of employees and enterprises.

Pride to employees

Satisfactory to shareholders

The company will establish a standardized modern corpo-rate governance structure, operate steadily and manage scientifically to achieve stable asset appreciation and provide sustainable returns to our shareholders.

To enhance the efficiency of social resource allocation and promote economic and social progress; to integrate into society, pay attention to people's livelihood and actively fulfill the obligations of corporate citizenship.

Respectful to society

1.3 Responsibility Management

In formulating the company's strategic planning, China Merchants Securities actively considers the challenges and opportunities of sustainable development, continuously improves the manage-ment of corporate social responsibility, establishes a sound social responsibility management path and management methods, and integrates the concerns of various stakeholders into the company's development to realize the organic cycle of the company's development originating from society and the company's growth feeding society.

The company adopt the management model of "unified leadership, block implementation, strate-gic supervision and systematic review" for our social responsibility work, formulate social responsi-bility work plans, establish social responsibility work targets, and conduct reviews and inspections every year. Each function and business department is responsible for the implementation of social responsibility issues in the company, including the daily collation and reporting of social responsibili-ty information.

1.4 Stakeholder Communication

China Merchants Securities attaches great importance to communication with various stake-holders, and has established a regular communication mechanism with government and regulatory bodies, shareholders, customers, employees, the community and other stakeholders, and through various communication channels and methods, understands the expectations and demands of various stakeholders in a timely manner, and responds to them in a targeted manner, so as to promote the development of the Company in line with the expectations and interests of various stakeholders.

Table: List of Stakeholder Concerns and Communication Channels

Identification and Analysis of Material Issues

Identifying Social Responsibility Issues

cAnalyzing national macro policies and industry hot topics.

cSorting and analyzing the requirements of SSE, HKE x, etc. on relevant social responsibility, ESG management and disclosure.

cAnalyze company strategy and practice focus and identify issues.

Assessing the importance of the issue

cA comprehensive analysis of the materiality of the issues based on stakeholder opinions combined with expert opinions.

cEvaluate the selected issues from two dimensions: importance to stakeholders and importance to China Merchants Securities.

Formation of substantial issue analysis matrix

Based on the evaluation results, The company

construct a matrix for analyzing the importance of

the issues, combine the importance of the issues,

obtain the ranking results of the issues, and

highlight the issues with high materiality in the

report.

ESG Materiality Matrix

2020

Environment,Society and Governance Report

Trustworthy to clients

The company insists on customer focus, continu-ously optimizes our business model, organiza-tion and operation, and continuously innovates our products and services according to customer needs. The company promotes technology empowerment and provides more profession-al and intelligent services to our customers with technological wisdom. The company is committed to protecting the rights and interests of our customers in our products and services, establishing sound complaint chan-nels, protecting the safety of customer information and transactions, and providing professional and quality financial services.

2.1 Financial Technology Empowerment Customer Service

China Merchants Securities attaches great importance to financial technology innovation, accelerates the introduction and cultivation of complex financial technology talent team, continuous-ly increases investment in technology, and uses 1% of the company's annual turnover to set up a dedicated innovation fund for incubating financial technology innovation projects, and completes 43 innovation projects in 2020. The company will continue to explore the application of financial tech-nology to provide more professional and intelligent services to individual, institutional and corporate customers.

2.1.1 Optimize financial services platform

· Individual Clients

In order to meet the wealth management needs of individual clients, China Merchants Securities launched and continuously upgraded the Zhiyuan App in 2016, which supports account opening, quotes, trading, information, decision support and other business functions, and constantly inno-vates service functions with financial technology and big data as the core driving force, and is com-mitted to providing excellent digital and intelligent online services to clients.

In 2020, the company launched the version 7.0 of Zhiyuan Yi Hu Tong App, covering 159 new functions and optimizations. The overall speed of quotes has increased by 4 times, the loading speed of the weak network quotes has increased by more than 10 times, the speed has increased by 2 times, the smoothness of operation has increased by 3 times and the speed of intelligent registration has increased by 4 times. At the same time, by further enriching the core service scene, upgrading the financial column, using rich media form to create investment research content and other innova-tion and optimization, the APP7.0 version of Zhiyuan YI HU TONG comprehensively improves the customer service ability. In 2020, the average monthly activity value of Zhiyuan App exceeded 4.29 million. (Note: Monthly activity data is from Guan Qianfan)

Table: The main function innovation of Zhiyuan Yi Hu Tong APP 7.0

With the main focus on digitalization and intelligence, the company continues to expand its intelligent scenario service capability, launching an intelligent family of six core intelligent products, including intelligent stock selection, intelligent recommendation, intelligent voice assistant and intelligent search, to provide customers with online real-time financial services based on rich scenarios.

New sections such as "Stable Strategies, Hot Topics" have been added to meet different user needs; intelligent technology has been introduced to create a thousand-person, thousand-faceted service experience; online investment advisory services have been added, allowing investment advisors to interact with customers online in real time and respond to their investment allocation needs; the financial details page has also been significantly revamped, optimizing and improving financial products The financial details page has also been significantly revamped to optimize and improve various characteristic data of financial products to help customers understand the detailed information of fund products.

With the help of rich media such as short video, voice and graphics, Zhiyuan Yi Hu Tong APP 7.0 creates new investment research contents with industry influence. In 2020, it will focus on launching special investment research programs such as "Shafa Investment Research Conference" and "New Hot Spots in Science and Technology".

· Institutional Clients

In March 2019, China Merchants Securities released Geetek institutional trading platform, which constitutes an industry-leading overall solution for institutional business. Through a series of special services such as full-service asset management, cross-asset risk control, extremely fast quotes trading and exclusive strategy platform, China Merchants Securities provides One-Time insti-tutional service solutions for institutional clients to meet the ultimate and professional investment needs of institutional investors.

Under the platform, there are a full range of products such as T-master Investment Management

System, X-NES Hardware Quotation System, X-QTS Extreme Trading System, αTurbo Algorithm

Execution Cloud and αBlade Strategy Engineering Assistant System, covering various investment needs of professional investors and creating a superior investment environment for professional investors.

Table: Features and advantages of Geetek's institutional trading platform

Microsecond speed trading

With the X-QTS Extreme Trading System, the core business transaction processing time is as low as 50 microseconds, which is at the industry leading level. For example, a basket of 100 stocks can be executed in 0.005 seconds.

The first algorithmic trading execution cloud has been built, which can unify the execution, management and evaluation of all trading strategies required by custom-ers, including our self-developed trading strategies execution.

The company have established a complete financial service API to access all business services, including securities trading, strategy trading, data services, etc. with a unified interface protocol.

T-master provides clients with the whole process of asset management before, during and after investment, covering four typical application scenarios, including invest-ment analysis, trade execution, risk management and operation management.

It fully supports clients' "personalized" customization, and private equity funds can set parameters and define multi-screen interfaces on the platform according to their own investment strategies and trading habits.

· Corporate Clients

In 2020, the company promoted the construction of technology-based investment banking and put into full use the intelligent investment banking platform to realize the application capabilities of "whole business process management, comprehensive risk control, big data operation management and AI-assisted operation". The company has established the industry's first working draft scoring system, which provides quantitative evaluation of project working drafts based on three indicators: completeness, timeliness and regularity of working drafts, and helps to improve project quality control, covering 1,742 projects.

2.1.2 Promote intelligence operations

In 2020, the Company launched a new generation of centralized counter system to create a standardized, standardized and intelligent counter business process through comprehensive re-en-gineering of the counter business process, integration of intelligent technologies and front-loading of risk control compliance control points. The opening time for individual client general account, individ-ual client credit account, institutional client general account and institutional client credit account was shortened by 43%, 67%, 20% and 67% respectively.

Integrate multiple business processing portals

Integration of electronic signature, electronic seal technology

Integration of OCR recognition, knowledge mapping and other technological elements

Integrating 6 sets of core trading systems, 3 sets of business auditing systems and multiple business processing entrances to realize one system registration and one-stop business processing, avoiding employees from switching between different systems and menus when processing business and improving business processing efficiency and quality.

The paperless signing of customer agreements and electronic storage of customer file data can avoid the bad experience and business errors caused by the manual filling of a large number of business receipts by customers, facilitate the filing and viewing of file data, and reduce the cost of printing and operation of paper receipts.

With the implementation of "automatic identifica-tion and extraction of customer information", customers can enter the information required for business processing in advance through the cell phone APP, effectively reducing the waiting time for customers at the counter.

Table: Key optimizations and innovations of the next-generation centralized operating counter system

2.1.3 Constructing intelligent application system

China Merchants Securities has established a relatively complete intelligent application system. By building an intelligent basic capability platform, such as voice processing, image processing, corpus, information tagging, and machine learning platform, it provides general technical capabilities for flexible intelligent application scenarios. The company have established a real-time big data service center, which can realize real-time big data analysis of customer transaction data by estab-lishing a distributed, stream computing data processing engine and delivering production data in real time, greatly improving the time and efficiency of customers and business operations in obtaining data analysis results.

China Merchants Securities has developed a complete set of technical frameworks from front-end to back-end, covering various scenarios of management and trading. Through this techni-cal framework, not only new web or mobile APP demand scenarios can be quickly implemented, but also a new trading business back-end can be quickly built to provide effective protection for timely response to customer needs and market changes.

2.2 Protecting the rights and interests of clients

China Merchants Securities insists on being "customer-centric" and is committed to providing customers with diversified and multi-level products and service systems, while attaching great impor-tance to the protection of investors' rights and interests. The company match customers with finan-cial products suitable for their risk tolerance through appropriateness management; protect custom-ers' personal information through a comprehensive customer privacy protection mechanism; promote the transformation of modern investment banking services through improved complaint handling; and help investors better understand investment risks and establish rational investment concepts through a variety of investor education activities.

2.2.1 Implementation of Appropriateness Management

The Company attaches great importance to investor suitability management, fully understands the importance and necessity of implementing investor suitability management, and follows relevant systems such as Measures for the Administration of Suitability of Investors in Securities and Futures and Guidelines for the Implementation of Suitability Management of Investors in Securities Opera-tors (for Trial Implementation). Moreover, the Company also formulates Administrative Measures for China Merchants Securities Investor Appropriateness to protect the rights and interests of investors.

2.2.2 Protection of information and transaction security

In order to fully protect customer information and transaction security, China Merchants Securi-ties has formulated relevant management systems or regulations such as the "Company Data Securi-ty Classification and Classification Management Regulations" and "Information System Data Confi-dentiality Management Regulations" to fully protect customer information security and transaction security.

· Protection of customer information security

China Merchants Securities attaches great importance to the management and protection of customer information security, establishing a data security-related system, granting minimum privi-leges in accordance with the needs of the position in the business, establishing corresponding control measures in each part of the process, and strengthening supervision and accountability. The company also raise the awareness of confidentiality among our staff and third-party outsourced personnel, so that our clients can build up their awareness of prevention. Strengthen the use of tech-nology to strengthen the technical protection of customer information security.

Table: Measures taken by China Merchants Securities to protect customer information security through technical measures

From the "defense, monitoring, combat, governance, evaluation" five dimensions of all-round protection, the deployment of complete Internet boundary protection facilities, by a dedicated information security team specifically responsible for network security monitoring, early warning, emergency disposal and other work.

With the help of third-party testing company information system security, and in-depth cooperation with public security, regulatory agencies, industry security vendors, etc., regular arrangements are made to carry out malicious code scanning, penetration testing, equal protection test evaluation and other real-world testing of information systems.

Build security audit system

Monitor and audit the operations of technical staff.

Application-level development of designs to meet control requirements in accordance with business processes.

· Guaranteeing the security of transactions

In order to protect the security of customer assets and information, The company actively inno-vate and continuously improve to provide our customers with safe, thoughtful and convenient online trading services.

Table: Measures to protect the security and stability of trading in China Merchants Securities

The security manage-ment team ensures data security and the implementation of security control measures for customer information through the evaluation of application system security design, source code security audit and pre-launch security evaluation.

Adopting a number of security measures such as IP blacklist, customer number blacklist, and data packet encryption to protect the security of data communication. Customer login will record customer source information, and customer account will be automatically frozen if customer password is continuously wrong.

The company conduct full-link performance pressure test before go-live, and capacity monitoring and analy-sis of full-link after go-live to ensure full-link performance matching and enhance guarantee capability.

2.2.3 Sound Complaint Management

The Company has always attached great importance to the handling of customer complaints and has formulated rules and systems such as the Management Measures for Handling Customer Complaints and the Implementation Rules for Handling Customer Complaints in Securities Broker-age Business of China Merchants Securities, which specify the working principles and timeline in handling complaints. Thus,a closed-loop management of complaints handling is realized.

The Company has clearly defined customer complaint channels such as telephone website at the sales office site, the Company's official website, official microblog and trading software. The company also accepts customer problems and complaints in multiple dimensions and channels through media monitoring and other means to ensure that customer problems are responded to quickly in the primary receiving link.

The Company has established the "Customer Complaint Handling Process", an unified electron-ic complaint handling platform. Through the electronic process, The company have standardized the content of each section of complaint handling, clarified the processing time and efficiency of each section, and promoted the flow of complaint handling traces, report statistics and supervision and inspection. Under the premise of compliance management, the company constantly summarizes customer feedback and optimizes service process, and regularly reports customer complaints to relevant business departments, which facilitates targeted improvement of customer service work by business departments and effectively enhances customer service efficiency and satisfaction. In 2020, the complaint handling response rate was 100% and the complaint handling rate was 93.2%.

Table: 2020 China Merchants Securities Optimization Measures for Customer Opinions and Complaint Feedback Mechanism

Optimize the complaint acceptance referral process and standardize complaint business processing

By abolishing the complaint report form, refining the flow of complaints, reclassifying the types of complaints, pre-designating the functions of branch offices and branches, adding new branches and supervisors of business departments involved in complaints, and re-establishing the process of return visits by complainants and customers under the name of the complainee, The company further improve the complaint handling and processing regulations, and provide more comprehensive system support for complaint handling and management.

It is made clear that the person in charge of the branch is the primary management responsibility of the complaint handling work of the unit, and that the branch and the business department in charge of the complaint shall perform supervisory duties in the complaint handling work, and shall actively follow up the complaint handling to avoid risk spillover, and the branch shall continuously follow up the complaint disputes that are difficult to be handled properly in the short term or have been delayed for a long time, and provide timely feedback to the regulator on the progress of handling, and actively do a good job of communication with the regula-tor. The branch should continue to follow up and provide timely feedback to the regulators on the progress of handling complaints and disputes, and actively communicate with them.

2.2.4 Investor Education

In 2020, in the face of the demand for remote learning of investors under the epidemic preven-tion and control as well as the changes in learning methods in the future, China Merchants Securities re-planned the way to carry out investor education work and actively explored new forms and contents of investment education services to give confidence to investors and escort them.

Table: China Merchants Securities's performance in launching investor activities in 2020

· Strengthening online multi-media investment education publicity

The company actively strengthen the dissemination of investment education knowledge on the WeChat public website and Internet investment education base, and at the same time fully utilize online channels such as the official website, official microblogging, Zhiyuan Yi Hu Tong App and trading system to launch investment education publicity, and create a variety of investment educa-tion products such as live+recorded courses, investment education micro-classes and NiuNiu invest-ment education long diagrams to disseminate the latest business knowledge to investors and help them understand the capital market reform.

· Establishing the "StarElite Investment Academy" investment education brand

In the face of the vast amount of investment information available in the market, In 2020, The company have established the StarElite Investment Academy learning and exchange platform to enable small and medium-sized investors to enjoy the investment research and knowledge resources provided by China Merchants Securities. The "Star Academy" brings together experts in the financial field to provide investors with rich, interesting, objective and practical investment knowledge and experience in a variety of formats.

2020

Environment,Society and Governance Report

Pride to Employees

We always put people first, protect the rights and interests of our employees in accordance with the law, provide them with a well-rounded and competitive remuneration and benefits package, build an equal and diver-sified career development path, construct a science-based and efficient training system, strive to attract and retain the best talents, and actively promote the reciprocal growth of our employees and the company.

3.1 Protect the Rights and Interests of Our Employees

China Merchants Securities strictly complies with relevant laws and regulations, and takes proactive steps to improve equal employment, remuneration and benefits, and care for physical and mental health in order to protect the legitimate rights and interests of its employees.

3.1.1 Ensure Equal Employment Opportunities

China Merchants Securities vigorously adheres to the labor Law of the People's Republic of China, the labor Contract Law of the People's Republic of China, the Regulations on the Promotion of Harmonious labor Relations in the Shenzhen Special Economic Zone and other relevant laws and regulations. labor contracts are signed with all of its employees on the basis of equality and voluntariness, and labor relations are established in compliance with the law. China Merchants Securities respects all employment-related rules and regulations, and actively wards off the occur-rence of forced labor, preventing child labor through effective means in the recruitment process. In matters of recruitment, remuneration, training and promotion, we are firmyly against any discrimi-nation on the grounds of gender, region, ethnicity and religion to ensure that all employees enjoy fair, just and open job opportunities.

3.1.2 Improve remuneration and benefits package

In order to minimize turnover amongst our staff, China Merchants Securities has formulated and made on-going adjustments to a series of remuneration and benefit policies and packages, and aims to offer highly competitive salary and benefits for its employees.

We have put in place a remuneration incentive system commensurate with our stature to enhance the appeal of compensation offers and drive business development. We have optimised the remuneration framework, built closer alignment between our financial performance and bonuses, and stepped up the bonus incentive. We have designed differentiated incentive mechanisms to meet business and market needs, and invested more in the remuneration for core and key talents to better incentivise them.

We continue explorating to implement a long-term incentive mechanism. After the approval of China Merchants Securities' first Extraordinary General Meeting in 2020, The Company's employee stock ownership plan has been implemented, and was formally enforced upon completion of all approval procedures. The implementation of the Employee Share Ownership Scheme further improves the corporate governance structure, and institutes and improves the benefit-sharing and risk-sharing mechanism among shareholders, the company and its employees. At the same time, it will connect the future earnings of employees to the betterment of the market capitalisation of the China Merchants Securities, which will be conducive to motivating employees, unleashing their enterprise to outperform the market and their peers, while continuously boosting the core competi-tiveness of China Merchants Securities and promoting the mutual growth of employees and the com-pany.

In terms of benefits and employee welfare, we have initiated a multi-tier pension insurance framework. It includes social insurance, supplementary medical insurance and corporate annuity plan, which can be mixed and matched to complement each other. This is a comprehensive employee welfare protection system that can address the pressing concerns of its employees.

Table: China Merchants Securities's multi-tier employee pension insurance framework

cIncluding basic pension insurance, basic medical insurance, local supplementary medical insurance, work injury insurance and unemployment insurance.

c100% of our employees have been covered under this insurance.

A corporate annuity plan is formed for employees who have been in our service for a certain number of years to encour-age them to grow together with us and share the fruits of our on-going growth.

3.1.3 Care for physical and mental health

China Merchants Securities follows stringently the labor Law of the People's Republic of China, the Law of the People's Republic of China on Safe Production, the Law of the People's Republic of China on Prevention and Control of Occupational Diseases, the Work Injury Insurance Ordinance and other relevant laws and regulations, and has carried out rules and regulations such as the Regulations on Attendance Management, with every effort made to ensure workplace safety and provide employees with medical check-ups that truly delivers care for the health of its employ-ees.

· Care for staff health

We continue to step our annual health check-up programme for employees, and ensure that they can easily and quickly understand and access the company's wellbeing protection scheme through the insurance benefits brochures, multi-location and multi-format presentations, on-going employee health management activities or live webcasts, a dedicated service and consultation hotline, and creation of a "one-minute clinic" for employees that provides free consultation at the workplace.

· Guarantee workplace safety

China Merchants Securities has launched a dedicated campaign in conjunction with the Group's three-year plan on improving work safety. In 2020, three safety production meetings were held and three safety production inspections were carried out, we have introduced specific execution plans for key sections and areas in the workplace that are prone to problems and hidden dangers; ensured accountabilities at different levels; thoroughly and proactively investigated overlooked spots that might cause physical harm at all departments, branches and wholly-owned subsidiaries of China Merchants Securities; strengthened the treatment and monitoring of potential safety hazards, and made timely rectifications and remedies to any reported problematic incidents so as to forestall any accidents.

· Raise safety awareness

In response to the launch of the national "Safe Production Month", China Merchants Securities actively deployed and extensively mobilised resources to collect information on the safety manage-ment of various departments in order to prevent accidents from occurring. Through a variety of activi-ties and targeted safety training, we have continued to raise safety awareness amongst our staff and equipped employees with better skills to protect their safety.

Table: Measures taken by China Merchants Securities to raise staff safety awareness

3.2 Facilitate Staff Growth

China Merchants Securities attaches great importance to employee' personal growth and the construction of knowledge systems. We firmly believe that employees are a strategic resource to build "the best investment bank in China", and therefore are seeking to help employees advance their professional skills and performance and achieve career development goals by enriching the training content and implementing better talent management.

3.2.1 Talent Management Mechanism

China Merchants Securities continue to bolster talent teams, and accelerate the formation of a market-oriented talent management mechanism that is clear, precise, science-based, orderly and competition-centric. We respect talent, encourage innovation, and strive to inspire everyone to aspire, to strive, to be given opportunities, and to fully develop their talents. We also want to spur more talents to work and start their own businesses, help talents to stand out, and contribute to the success of China Merchants Securities 14th Five-Year Plan and its new five-year strategic plan.

In order to broaden the career path of employees, The company has devised a dual-channel development mechanism that incorporates a business grading system and a managerial duty system by drawing on excellent industry practices and internal management practices. There is no direct correlation between the business grading and the managerial duty system. Employees are encour-aged to progress in the grading system, with a smooth career advancement path and broadened the room for career development.

3.2.2 Rich Training System

China Merchants Securities plans and executes training programmes that are categorised and focused around its five-year transformation strategy and five core strategies. We back up and ensure effective implementation of training through the five pillars of the training: strategy, system, resourc-es, operation and support. We encourage our staff to participate in various professional training and accreditations related to their jobs and provide funding support within the scope of its policy.

· Training Course Framework

Based on the competencies and responsibilities of each position, China Merchants Securities has divided the training course system into "three tier", namely professional courses, management courses and general courses. Building on the training system, this framework combines standardised training with personalised training, and caters training programmes to employees at different stages of their career development. All employees can be covered under the training and education initiative that spans throughout their career.

Table: Staff Training Overview in 2020

Total number of training sessionsTotal staff training hoursTotal number of times staff have attended training sessionsAverage satisfaction rating of training programmes 1

27

526,000

76,000

95.6points

1 ğ Refers to the on-site centralized trainings organized by the Company

Table: China Merchants Securities Training Course Breakdown

We designed more than 20 professional training courses, to which all of our staff is eligible, on investment banking, wealth management, marketing, integrated manage-ment, financial technology, institutional business, innovative business and professional basics to help our employees to learning more about innovation and professional know-how

Management Training Course is designed specifically for high potential employees, incumbent managers and senior executives, which includes topics such as organisation-al change management, financial leadership improvement, management innovative thinking, global finance and cutting-edge finance knowledge, and aims to give managers a comprehensive view on management capabilities and help them improve their ability to drive changes.

General Training focusing more on grassroots staff and their professional skills. It is designed and developed in online and offline formats and offers courses on corporate culture, compliance and risk control, rules and regulations, business processes and vocational skills.

Case : The launch of a series of training programmes on new technologies and digitalisation to help our employees keep up with the changing times

In 2020, in line with the company's strategic objectives and business priorities, and in keeping with China's high-tech development and investment priorities, a series of training programmes related to new technology and digitisation were launched. We invited academics, entrepreneurs and investment experts with tech R&D and industry experience to conduct face-to-face training and dialogues, and gave our employees a better understanding of theoretical knowledge of technology investment, investment analysis and risk identification putting wind in the sail of relevant business of CMS.

· Training Resources

China Merchants Securities continues to better training resources, providing employees with rich learning contents and channels. We have built up various channels and types of training resources, including internally developed courses, externally sourced courses, courses selected from the ZhiBiao and livestreamed courses. We place our focus on tapping into the internal intellec-tual resources and have cultivated a large number of internal lecturers capable of developing and teaching courses, of which more than 500 have been certified. In 2020, we introduced a special rule, the "Management Rules for Internal Lecturers and Course Development", to promote the construc-tion of the lecturer reservoir. 2020 saw the participation of internal lecturers in more than 80% of internal training programmes, and in 2020, in conjunction with the emergence of new learning tech-nologies and e-learning, we also launched empowerment training for internal lecturers, helping them to effectively develop mini-courses and deliver live lectures.

In 2020, against the backdrop of COVID-19, we were not able to deliver any face-to-face train-ing. But in order to support the company's business learning needs during the pandemic, and ensure that the suspension of work during the pandemic did not suspend learning, we accelerated the construction of a new training system (mobile learning platform), which was launched in February. Continued efforts have since been made to improve the platform's functionality, enrich its resources and optimise its operation throughout the year, and take full advantage of the benefits of mobile learning to meet pressing and important learning needs of our employees.

Table: China Merchants Securities's Online Training Highlights in 2020

299,000 hours were spent on online training in 2020, an increase of 30.8% over the previous year.

The number of people who took online and on-site examinations reached 9,169

Table: Status of online and face-to-face training course development

3.3 Deliver on better care to employees

China Merchants Securities brings a variety of initiatives and corporate culture building to enrich the spare time of its employees, enhances the cohesiveness of the company and their sense of belonging to their team, and adds a humanistic touch to the office culture.

3.3.1 Deliver on better care to employees

China Merchants Securities puts a premium on building corporate culture. In 2020, we orga-nized a wide range of activities in an effort to create a positive cultural atmosphere and improve disciple and business management with a particular focus on the "One Heart Project", the "Second (2020) China Merchants Securities Corporate Culture Festival" and the "Promoting the Spirit of Shekou, Improving Discipline and Increase Efficiency".

· Corporate Culture Building

China Merchants Securities puts a premium on building corporate culture. In 2020, we orga-nized a wide range of activities in an effort to create a positive cultural atmosphere and improve disciple and business management with a particular focus on the "One Heart Project", the "Second (2020) China Merchants Securities Corporate Culture Festival" and the "Promoting the Spirit of Shekou, Improving Discipline and Increase Efficiency".

· "One Heart Project"

To meet our strategic needs, China Merchants Securities launched the "One Heart Project" in 2020 and published a new revised version of the "China Merchants Securities Corporate Culture Consensus" to lead the Company into a new era of cultural development with a renewed concept concept. Over the course of the project, we listened extensively to what our staff had to say with two rounds of more than 200 departmental seminars and four inter-departmental workshops held, and nearly 200 essays and more than 300 quotes received, so our Consensus truly reflects the consen-sus of our people. At the same time, the "Good Teammates Covenant'' was developed and published to promote a streamlined and efficient workplace culture.

Photo ğLunchtime concert

· The second (2020) "China Merchants Securities Corporate Culture Festival"

Given of the normalisation of the prevention and control measures of COVID-19, China Merchants Securities staged the second Corporate Culture Festival under the theme of "Warmth and Health", and organized "Rope Jumping Competitions", the "CMS Youth Perspective on the Bay Area", the "CMS Workplace Show", staff music salons, lunchtime concerts, the "CMA Master TikToker" contest and other activities, in addition to football, badminton and basketball games and other sports competitions of trade unions. Each department in the company also ran their own cultural activities, working together to create an uplifting workplace culture.

· A special event "Promoting the Spirit of Shekou, Improving Discipline and Increase Efficiency"

Under the directive of China Merchant Group, we put together special events within the compa-ny to "promote the spirit of Shekou, improve discipline and increase work efficiency". As part of the events, we invited Gu Liji, a veteran leader of Shekou Industrial Zone, to give a lecture on the "Spirit of Shekou", asked each department to participate in the Group's The "Spirit of Shekou" cultural train-ing and study sessions, solicited staff learnings and promotional logans of their writing, broadcast "Spirit of Shekou" on office TVs, e-newsletters, and made public special initiatives in dedicated column on our e-newsletters. Through a series of publicity events, we brought the the "Shekou Spirit" to closer attention of people, and couraged all CMS staff to practice the central tenets of the "Shekou Spirit", namely "Dare to Think, Dare to Speak, Dare to Try, Dare to Make Strides and Dare to be the First in the World".

3.3.2 Work-life balance

The Labor union was set up at the inception of China Merchants Securities. They represent and serve the interests of our employees, and have played an important role as the 'home of employees in the workplace' having set up trade union subgroups in each department and branch office. 100% of our staff are affiliated with the trade union. We care about the employee wellbeing, provide care for those who are ill or in need, send out care packages on holidays, hot summers and cold winters. We also celebrate employees' birthday with cakes provided so they truly feel the love and care from Company.

In 2020, the Labor union acted as the bridge across different associations to maximize their benefits, and actively facilitated the organisation a range of leisure and sports for employees to promote work-life balance.The union organised the "'Rope Jump Competition" and "CMS Workplace Show". The trade union, together with the Research and Development Centre and the Investment Bank Headquarters, organised a variety of activities such as the Chinese New Year Fair. Various associations organised activities such as the China Merchants Securities Cup Basketball League, the 15th China Merchants Securities Fenjin Cup Badminton Tournament and the Corporate Culture Festival Healthy Run. At the same time, in response to COVID-19, The labor union procured and distributed 'care box' that includes disease prevention gear, and sent out Epidemic prevention mate-rials to employees in sales offices in medium and high-risk areas to protect their health.

2020

Environment,Society and Governance Report

Satisfactory to shareholders

We are deeply aware that China Merchants Securi-ties has on its shoulders great expectations of shareholders to maintain and increase the value of their assets and the responsibility of realising long-term values of the shareholders. We will always operate the business in a prudent and standardised fashion, improve corporate gover-nance, pay attention to risk management, deepen internal control and compliance, and work hard to enhance opera-tional performance to live up to the shareholders' trust.

4.1 Corporate governance

We strictly follow through relevant domestic and overseas laws, regulations and regulatory requirements, improve our corporate governance structure on an on-going basis, proactively carry out strategic changes, seek corporate transformation, and continue to create more value for our shareholders.

4.1.1 Five-year transformation strategy

As accelerated transformation of the macro economy and deepening reform of the capital market ushers in a new era, the securities industry is faced with both opportunities and challenges. China Merchants Securities is guided by the strategic vision of "building the best investment bank in China that is competitive internationally''. At the centre of the strategy is an overarching guideline of "quality first, efficiency first, appropriate scale",

Fulfilling these pillars will be key to providing integrated customer services and continuously enhancing our competitiveness. At the same time, we will focus on building the "five core competen-cies", i.e. risk control, technology, talent, synergy and capital, to support the development of our businesses during the planned period.

2020 is a crucial year in China Merchants Securities five-year transformation strategy. We will continue to be guided by our strategic objectives and further follow through our five core strategic pillars. We will take seriously the launch of a special campaign to "promote the Spirit of Shekou, improve discipline and increase work efficiency", and enact the "Double Hundred Actions" for the reform of state-owned enterprises and the China Merchant Group's quality and efficiency improve-ment project, as part of the effort to further promote implementation of key changes. We proceeded with a special rectification task to tackle the issue of "institutionalisation of the headquarters", further clarified the positioning and management model of our headquarters, and concentrated on building a professional, service-oriented and highly efficient headquarters to respond to changes in the market environment more effectively and quickly.

4.1.2 Corporate governance structure

China Merchants Securities has always endeavoured to improve its corporate governance structure and its compliance with the requirements of the Company Law, the Securities Law and the relevant rules and regulations of the China Securities Regulatory Commission, the Hong Kong Secu-rities and Futures Commission and the Hong Kong Stock Exchange. We have a well-functioning corporate governance structure in which the general meeting, the Board of Directors, the Superviso-ry Committee and the management are separate and subject to mutual checks and balances to ensure the company's operation is compliant.

The Company held, within the year, 5 shareholders' general meetings to consider 31 resolutions (double counting for same matters in class shareholders' meeting and non-class shareholders' meet-ing) , among which, one A share class meeting was held to consider 2 resolutions and one H share class meeting was held to consider 2 resolutions; 15 Board meetings to consider 56 resolutions and review 9 reports; 17 meetings of committees under the Board to consider 38 resolutions and review 14 reports; as well as 7 meetings of the Supervisory Committee to consider 18 resolutions and review 4 reports.

4.1.3 Management of investor relations

China Merchants Securities is committed to protecting the interests of investors and uses its best efforts to raise transparency in its daily operations and give investors and potential investors a better understanding of us. We have maintained effective communication with investors through various channels, such as shareholders' meetings, the investor relations section of the Company's website, the E-Interactive of the Shanghai Stock Exchange, analyst meetings, business results presentations and roadshows, one-on-one communication, on-site research, and dedicated investor relations telephone and email list, in order to continue to improve the quality and efficiency of our communication with investors.

In 2020, China Merchants Securities issued a total of 212 A-share announcements and 233 H-share English-Chinese announcements, and engaged with over 1,300 domestic and international investors.

Increased online communication with investors during the pandemic

In 2020, China Merchants Securities overcame the disruption of COVID-19 and main-tained active communication with investors via the internet. In September, we held a confer-ence call with its 2020 interim results analysts, in which senior management and business executives participated and exchanged in-depth information on the company's development strategy, financial performance and various business developments with analysts both inside and outside the company. We held the "China Merchants Securities Annual Online Results Presentation and Cash Dividend Presentation 2019" through the SSE's E-Interactive Platform and took part in the "2020 Reception Day for Investors of Listed Companies in Shenzhen" through p5w.com. We had adequate communication with small and medium-sized investors and received nearly 600 telephone calls from them throughout the year.

4.2 Risk and compliance internal control management

China Merchants Securities has built up a sound corporate governance, and an effective risk management and internal control system to manage the potential risks faced by the company in the securities market.

4.2.1 Comprehensive risk management

China Merchants Securities attaches great significance to risk management and has estab-lished a comprehensive risk management system that is sound and effective, including a soli organi-sational structure for risk management, a multi-level and comprehensive risk management system, a top-down quantitative risk management indicator system, an effective risk assessment, audit, mon-itoring and response mechanism, a cross-market, global and multi-currency intelligent and integrat-ed group risk management platform, and a team of excellent risk management talent.

Multiple business risk assessments during the pandemic

In early 2020, when COVID-19 broke out, China Merchants Securities launched a large number of business risk assessments to analyse the risk situation and key countermeasures in various businesses in response to the impact of the COVID-19, and to provide a basis for the management to make decisions. At the same time, we launched a special risk check for key business areas such as equity pledging, financing and securities financing, and domestic and overseas credit bonds to identify potential risks and pinpoint remedies. During the pandemic, our business operation was stable. The overall risk was under control, the structure was balanced, the quality of assets remained outstanding and no major risks occurred.

· Formally qualified as one of the first batch of securities brokers for consolidated supervision by the SFC

In 2016, China Merchants Securities took the initiative to apply to participate in the pilot scheme of consolidated supervision. Taking the opportunity to promote the pilot scheme, we have executed changes to meet each of the regulatory requirements on consolidated risk management and brought up the Group's risk management capability to a leading level in the industry. After four years of preparation and two rounds of assessment, our risk management capability was unanimously approved by internal and external experts in the industry and we were officially qualified by the SFC as one of the first batch of six securities firms for the pilot scheme of consolidated supervision in March 2020.

· Risk management information system

China Merchants Securities has constructed and continued to optimize the Group's integrated CMS-Risk intelligent risk management platform, which cover all aspects of business management before, during and after the risk trigger, and can analyse various cross-border, globalized and multi-currency risk information between parent and subsidiary companies within T+1 day, as well as displaying the aggregated regulatory indicators under consolidated supervision. Various types of risks can be identified, measured, monitored, evaluated and reported in a timely and effective manner.

In September 2020, the integrated Group-wide CMS-Risk Intelligent risk management platform was awarded the second prize in the Shenzhen Financial Innovation Award by experts.

4.2.2 Compliance and internal control management

Compliance is the foundation of any company. China Merchants Securities is in strict compli-ance with requirements of laws and regulations such as the "Rules for the Administration of Compli-ance of Securities Firms and Securities Investment Fund Management Companies", "Implementation Guidelines for the Administration of Compliance of Securities Firms" and the "Securities and Futures Ordinance of Hong Kong". Continuous efforts have been made to improve its institutional framework, establish a sound compliance management system and implement all compliance and management work in an orderly manner. The organisational structure of the China Merchants Securities compli-ance management comprises the Board of Directors, senior management, the Chief Compliance Officer, the Legal Compliance Department, various departments and branches and subsidiaries. Compliance teams have been assembled across all departments, subsidiaries and branches. In 2020, we amended the Internal Audit System, the Audit Management Regulations and the Code of Ethics for Audit Personnel, and further improved and optimised the internal audit management mech-anism, supervision scope, audit philosophy and requirements for audit personnel.

We took a number of proactive measures to prevent risk of non-compliance, followed the requirements of compliance management, conducted compliance reviews on new products and new business proposals, and carried out compliance monitoring and compliance checks during the course of business development, and continued to build up a compliance culture to effectively support the development of the Company's businesses in a regulateds and timely manner.

· Strengthen business compliance management

China Merchants Securities clearly stipulates that before initiating a new business or new prod-uct, the relevant business departments should submit an application to the upper management. Busi-ness management department, the risk control department and the compliance department will conduct screening at each level before the final approval is granted by the company's leadership in order to safeguard the integrity of the review.

China Merchants Securities pays close attention to external regulatory information, penalties, non-compliance cases and internal compliance matters, reminds business departments of relevant policy changes, potential risks and management loopholes, and can request relevant units to take compliance measures in accordance with regulatory requirements. At the same time, we also use compliance checks to further identify non-compliance in business activities and require rectifications accordingly.

· Consolidated System of Compliance Culture for Risk Control

China Merchants Securities insists on sound risk management and has incorporated risk man-agement and compliance into our corporate culture. We have established "leading professionality in risk management and compliance in the industry" as one of the key qualities we should secure to be the best investment bank in China and underscored risk management and compliance as our lifeline. We also believe that "professional compliance and risk management not only hold an organization's bottom line but also help with business expansion".

With the help of we-media, newsletters, emails, among other channels, we regularly promote our risk management and compliance culture to all employees, explaining regulatory policies and sharing the evaluation criteria of risk management to improve employees' awareness. We have also established a risk management-linked performance appraisal and accountability system that covers all employees to ensure the effectiveness of comprehensive risk management.

In addition, we conduct targeted, focused and frequent legal compliance training of varied forms, with the focus being China's new regulations including the new Securities Law, the Civil Code and the Minutes of the National Courts' Civil and Commercial Trial Work Conference as well as strategic points in our business development. We have produced an annual compilation of securities counterparts' illegal and non-compliant cases and a study of classic cases in the industry, both of which have been distributed to all units and subsidiaries for reflection and self-correction. On top of these, a book entitled Compliance Management at Branches: Practices and Cases has been made with joint efforts of compliance specialists from different branches, which sums up their prac-tice-based experience to guide future work of compliance specialists at branches.

· Chinese Walls

In 2020, aiming at higher quality and efficiency of work, China Merchants Securities pushed ahead with construction of Chinese walls and the conflict of interest management system to prevent improper flow and use of sensitive information and meanwhile reach the aim. This move has laid the foundation for our business innovation and standardization.

Table: China Merchants Securities measures on further constructing Chinese walls and the conflict of interest management system

Adjusted the scope for the restricted list and reviewed the watch/restricted list

China Merchants Securities has adjusted the scope of investment banking business included in the restricted list and conducted a comprehensive review of the watch/restricted list submitted by the investment banking headquarters in accordance with the new Securi-ties Law, the Guidelines on the Chinese Wall System of Securities Companies, the NEEQ reform and other changes in external regula-tions. This measure has further improved the timeliness and accuracy for the management of Chinese wall lists.

Worked out the Measures for the Administration of Practi-tioners' Securities Investment Behavior

Through this measure, China Merchants Securities avoids compli-ance risks caused by individual practitioners' illegal engagement in stock trading and protects the Company's legitimate rights and interests.

Enhanced compliance inspec-tions, reminding and training

Focusing on regulatory concerns regarding the management of Chinese walls, China Merchants Securities has conducted targeted inspections, reminding and training for compliance with the Chinese wall system to identify and avoid compliance risks in time.

· Internal Auditing

Despite the threats posed by the pandemic, China Merchants Securities, with a positive attitude, has turned the crisis into an opportunity for internal auditing, working vigorously towards standardized and normalized offsite auditing. We pursue both risk prevention and value enhance-ment at the same time: first, looking into the depth of issues and the details of risks, guiding the Company's work with detailed, feasible and reasonable advice and improving the Company's system, structure and operations; second, digging deep for wrongdoings and hidden risks, reporting key issues and holding the person in charge accountable, which helps promote standardization of opera-tions; and third, carrying out major tasks in line with the Company's strategy - analyzing the back-ground, identifying the current situation, looking into the future and exploring room for improvement - to increase management efficiency. Meanwhile, we continue to improve our internal audit system and knowledge management system while advancing the strategic upgrade of big data analysis in an orderly manner, so as to facilitate quality and efficient development of our internal auditing.

4.2.3 Anti Money Laundering

China Merchants Securities attaches great importance to anti-money laundering. We have been performing our anti-money laundering obligations conscientiously in compliance with laws and regu-lations such as the Anti-Money Laundering Law of the People's Republic of China and the Measures for the Administration of Financial Institutions' Reporting of High-Value Transactions and Suspicious Transactions, and have been actively improving our systems, arousing employees' awareness and conducting training to meet the requirements concerned.

Table: China Merchants Securities measures on meeting anti-money laundering requirements in 2020

the company launched a serious campaign to prevent money laundering, launched a "3.15" consumer protection and anti money laundering online publicity campaign, launched a special theme anti money laundering campaign month campaign to popularize anti money laundering awareness. the company actively carries out various forms and different levels of anti money laundering training, and improves the anti money laundering level of employees through a series of training.

4.2.4 Anti-Corruption

China Merchants Securities MS abides strictly by laws and regulations such as the Criminal Law of the People's Republic of China and the Law against Unfair Competition of the People's Republic of China. By establishing a sound system, exerting more effort in education of discipline and improv-ing the accountability mechanism, we conduct anti-corruption management for our employees and supply chains to ensure integrity and eliminate unethical practices across all levels of the Company, the Company's wholly-owned subsidiaries and sub-subsidiaries in their business activities. A total of 9,000 participants in anti-corruption training have been recorded in 2020.

Table: China Merchants Securities measures on enhancing anti-corruption management in 2020

Established a sound system

In 2020, China Merchants Securities introduced or revised 14 documents on the Company's disciplinary and supervisory work systems, including the China Merchants Securities Regulations for the Administra-tion of Staff Accountability and the China Merchants Securities Measures for the Administration of Staff Integrity.

Exerted more effort in education of discipline

· China Merchants Securities insists on education first and precaution beforehand, and continues to put more effort in education of discipline.

· China Merchants Securities insists on illustrating regulations and the necessity of discipline with cases and examples to allow employees to be fully aware of the significance of discipline.

Improved the accountability mechanism

· China Merchants Securities attaches importance to enforcement of discipline and holding the right person accountable in a scientific way. We collect criticism and self-criticism based on which we are continuously improved, identify even trivial wrongdoings at an early stage and prevent minor issues from growing serious. We also build reasonably on supervisory recommendations for rectification at the source.

· China Merchants Securities continues to keep the channels for complaint filing and reporting open and standardized. We have introduced the China Merchants Securities Measures for the Administration of Compliant Filing and Reporting for Discipline Inspection and Supervision, according to which we accept, verify and handle the complaints and reports received in an active and attentive manner.

Case: Integrity-Themed Exchange Events

The Audit Department of The Company , along with 26 CMS branches, has conducted 12 integrity-themed exchange events with a total of more than 420 participants. In the events, the department talked about provisions for integrity in the industry from the perspective of our business and explained with examples. This series of events promote the deep integration of integrity self-discipline and business work, effectively implement the company's requirements for integrity risk prevention and control.

4.3 Supplier Management

China Merchants Securities compiles with the Procurement Management System of China Merchants Securities and the Management Regulations of China Merchants Securities Suppliers in accordance with the Tender Law of the People's Republic of China, the Interim Regulations on the Management of Centralized Procurement of State-owned Financial Enterprises, as well as the Procurement Management Rules of China Merchants Group to standardize the entire process of external suppliers' entry, utilization, evaluation, withdrawing, and supervision, and to evaluate suppliers annually.

In 2020, China Merchants Securities strengthened its compliance management and achieved transparent procurement through such measures as system construction and internal control process. The Procurement Management System of China Merchants Securities has been revised, with a new emphasis on optimizing the division of responsibilities, business procedures, and authori-zation of the procurement management. Additionally, it strengthened the control of major procure-ment projects and attached greater importance to the management of the procurement evaluation committee and the assessment process. It also set clear requirements for anti-bribery in procure-ment contracts, and severely combated non-compliance.

China Merchants Securities pays close attention to its suppliers' social responsibilities such as business morality and law observance. The suppliers' legal records, credibility, and ill performances, etc. will be covered in the inspection and evaluation of contract performances. Suppliers with bad behaviors will be seriously dealt with.

2020

Environment,Society and Governance Report

Respectful to society

China Merchants Securities deeply understands that enterprises should shoul-der economic and legal responsibilities. Thus, it should make profits in a transparent way by operat-ing by the law and paying taxes as required. China Merchants Securities actively takes full advan-tage of the resource allocation capability of financial institutions, supports national strate-gies, and serves the development of the real economy. We are deter-mined to take up our moral and charitable responsibili-ties and exhibit our corpo-rate values by helping the poor and the needy, facili-tating education develop-ment, conserving resourc-es, and protecting the environment. It contributes to the wealth creation and sustainable development of society.

5.1 Serve the Real Economy

If the economy is the body, finance will be its bloodline. With the comprehensive launch and in-depth implementation of the capital market reform, the role of the securities industry in serving the real economy has become more prominent. China Merchants Securities closely follows the national development strategy, fully uses its advantages to optimize the resource allocation, innovates its products and services, and serves the development of the real economy.

5.1.1 Coordinate the Regional Development

Accelerate the transformation to a "regional investment bank", strengthen the staff layout in key regions such as Guangdong, Hong Kong, Macao and the Greater Bay Area, as well as the Yangtze River Delta, and visit government units and venture capital institutions in Jiangsu and Zhejiang on several occasions to establish regular cooperation. We also work with CMS's local branches to provide IPO and "Lingyue Program" services for outstanding enterprises.

In 2020, we helped 6 Guangdong, Hong Kong, and Macao enterprises listed in the A-share market, and 5 enterprises from the Central and Delta region listed in the A-share market, namely, VeriSilicon, Jinhong Gas, Zhaolong, AUPU, and EIT Environmental.

Case: Assisting in the Shekou Land Re-organizing Project of CMS

The project was completed through an innovative "land exchange model" to increase the land value and improve the development mechanism of the Mawan area in Qianhai. It also strengthened the foundation for a faster development in Qianhai with the help of a joint venture between the government and the enterprises. Thanks to the China Merchants Bank (CMBC) Shekou, Promote the deep integration of integrity self-discipline and business work, effectively implement the company's requirements for integrity risk prevention and control. was in charge of the project coordination and the intermediary agencies, assisted CMBC Shekou in the design of the transaction structure, capital flow, land demarcation and apprais-al, tax planning, and other major issues, and provided professional advice. The project is conducive to promoting the high-quality development and construction of the Mawan area and consolidating the comprehensive competitiveness of CMBC Shekou in that area.

5.1.2 Support Private Enterprises

The private economy is an important component of the socialist market economy and plays an irreplaceable role in stabilizing growth, promoting innovation, increasing employment and improving people's livelihood. China Merchants Securities has been helping private enterprises with their difficulties by taking into account their actual needs and giving full play to its professional advantag-es.

Assisting Private Enterprise, Antong Holdings, to Successfully Complete Its Restructuring

Antong Holdings Co. (hereinafter referred to as "Antong Holdings"), a listed container logistics company, had a liquidity crisis in 2018 due to the illegal appropriation of funds by its major shareholder, and the amount of guarantees involved was nearly RMB 4 billion. By August 2019, Antong Holdings was on the verge of bankruptcy.

As a financial advisor, China Merchants Securities was deeply involved in the reorganiza-tion of Antong Holdings, and helped Antong Holdings complete the project smoothly and raise a total of RMB 4.527 billion in funds, which enabled then deeply troubled Antong Holdings to "be reborn again". This restructuring has solved the over RMB 13 billion debt crisis of Antong Holdings and its two core subsidiaries holistically and fundamentally; properly solved the issues of outstanding performance compensation, capital occupation, and non-compliance of guarantees; completely eliminated the risk of delisting of Antong due to negative net assets; enabled Antong to continue to develop and enhance its operating strength through the capital market after the restructuring. The successful restructuring of Antong not only protects the interests of thousands of creditors and tens of billions of RMB, but also protects the interests of thousands of A-share investors.

5.1.3 Serving Emerging Industries

China Merchants Securities focuses on semiconductors and biopharmaceuticals, using "Lingyue Program" to coordinate with investment to provide comprehensive financial services like investment and investment banking to outstanding small and medium-sized enterprises with high growth potential as well as science and innovation enterprises. Currently, the number of enterprises joining the "Lingyue Program" has reached hundreds. China Merchants Securities has provided refinancing services for leading enterprises listed in fields of biomedical, new energy and semicon-ductor, such as Autobio Diagnostics Co, Putailai and Nantong Fujitsu Microele, and has contributed to the implementation of the national innovation-driven strategy.

China Merchants Securities Helps VeriSilicon List on the STB

On August 18, 2020, China Merchants Securities sponsored and led the underwriting of the listing of (Shanghai) VeriSilicon Holdings Co., Ltd. ("VeriSilicon") on the SSE's STB. According to the IPnest report, VeriSilicon is the top semiconductor IP provider in China and ranked the seventh worldwide in 2019. With its professional services and excellent service quality, China Merchants Securities helped VeriSilicon become the "No. 1 semiconductor IP stock" on STB.

China Merchants Securities helps Eyebright Medical Tech, an indepen-dent innovation enterprise in ophthalmic medical care, to be listed on the Science and Technology Innovation Board

(Beijing) Eyebright Medical Tech (hereinafter referred to as "Eyebright Medical") is an innovative leader in the field of ophthalmic medicine in China, possessing the core technology and complete independent intellectual property rights of IOLs. The company completed all R&D and manufacturing processes in China, breaking the monopoly of international manufac-turers in the high-end IOL technology and market.

On July 29, 2020, as the sponsor and main underwriter, China Merchants Securities helped Eyebright Medical Tech to be successfully listed on the Science and Technology Innovation Board of The Shanghai Stock Exchange. The funds raised from the public offering were mainly used for capacity expansion and automation enhancement, research and development trials of high-end ophthalmic medical equipment, and high-value consumables, to meet the growing market demands and to improve the level of import substitution.

2020 China Comprehensive Investment Bank Junding Award by Securities Times

5.2 Precise Poverty Alleviation

2020 marks the final and the decisive year of winning the battle against poverty, and it is also the year to achieve the goal of building a moderately prosperous society. China Merchants Securities continues to implement the Decision of the Central Committee of the Communist Party of China and the State Council on Winning the Battle against Poverty (Zhong Fa [2015] No. 34) and the spirit of the Central Working Conference on Poverty Alleviation and Development, actively respond to the call of the state and the SFC, and thoroughly use the characteristics of the securities industry to promote the implementation of precise poverty alleviation and poverty eradication work.

5.2.1 Precise Poverty Alleviation Plan

China Merchants Securities has always seen poverty alleviation as an important responsibility so we make the best of the securities industry's features and carry out targeted poverty alleviation work.

Table: China Merchants Securities's precise poverty poverty alleviation plan

Basic Strategy

Institutionalize poverty alleviation: help them make their own money rather than giving them money.

General Target

Lay focus on connecting two impoverished counties to help them achieve "blood-making function"; encourage impoverished counties to build their own capacity, so that they can lift themselves out of poverty with their own power.

Main Tasks

We make full use of our financial expertise and social resources to help the disadvantaged with major means focused on industry, finance, consumption, education, and public welfare; adhere to the principle of "teaching a man to fish, rather than give him a fish"; help impoverished areas to establish long-term poverty alleviation mechanisms and models based on different characteristics of each region.

Supporting Measure

We attach great importance to coordinating human and financial resources to actively meet the needs of poverty alleviation work; promote and super-vise the regular inspection of the company's work in this regard to ensure a fruitful result.

5.2.2 Precise Poverty Alleviation Practice

In 2020, China Merchants Securities promoted precise poverty alleviation through education, finance, consumption, employment, etc., and made due contributions to the national battle against poverty.

· Education for Poverty Alleviation

Education is a crucial way to stop poverty. China Merchants Securities has effectively consoli-dated the accomplishments of poverty alleviation by optimizing the educational environment and improving schooling conditions in disadvantaged areas.

Table: Overview of China Merchants Securities's investment in education for poverty alleviation

In order to support the construction of grass-roots cultural digital facilities in Shitai

· Poverty Alleviation Through Financial Services

By making the most of our professional expertise as an investment bank and using multiple financing tools in the capital market flexibly, China Merchants Securities has tailored financing plans for businesses at different stages of their strategic development, which helps improve the "financial quotient" of impoverished counties, who, thanks to CMS's efforts, have learned how to fish instead of merely receiving fish directly. Such financial support drives industrial development, which in turn boosts local employment and development.

Under the auspices of CMS's financial platform, Neixiang County of Henan Province and Shitai County of Anhui Province were removed from the poverty list on May 19th, 2019 and April 29th, 2020 respectively. Looking ahead, CMS will continue to play to its strengths as an investment bank and a one-stop platform to provide financial services for Shitai and Neixiang, facilitating the sustained high-quality economic development of these areas in their post-poverty era.

Case: Explore Financing Methods for Muyuan, a Business in the Impoverished Country supported by CMS

With CMS as its lead underwriter, "Huaneng Guicheng Trust-CMS-Muyuan Huirong Supply Chain Phase 1 Asset-backed Special Plan" was successfully issued on June 2, 2020, raising RMB 123 million in total. The program helps Muyuan explore more financing methods, increase its liquidity ratios by managing payables and stock assets, and use its capital more efficiently.

Case: Assist a Business in a Poverty-Stricken County with its IPO

EIT Environmental Development Group Co., Ltd (known as EIT for short) got listed on the Shenzhen Stock Exchange on January 23, 2020. With 34.6 million shares floated at RMB 29.55, a total of RMB 1.02243 billion was raised. CMS acted as the sole sponsor institution and lead underwriter for EIT's IPO.

EIT is located in Yuexi County of Anqing, Anhui Province, a county on SAC's (Securities Association of China) list for poverty-stricken counties that need support. With our profession-al expertise and high-quality services, CMS has succeeded in helping EIT get listed on the stock market.

Case: Help Rubber Farmers in Baoting Fight Poverty by Making Good Use of "Insurance + Futures"

China Merchants Futures, China Merchants Securities 's wholly owned subsidiary, has participated in the Baoting County "Insurance + Futures" Program launched by the Shanghai Futures Exchange. Thanks to the program, returns from 4,500 tonnes of rubber have been guaranteed, benefiting 8,782 rural households, among which 2,877 are households registered as living under the poverty line. The program provides financial support worth RMB 3.6 million and covers all the rubber farmer households living under the poverty line in Baoting.

· Poverty Alleviation Through Consumption

In order to help fight against the COVID-19 pandemic and fulfill the company's social responsi-bilities, China Merchants Securities purchased plateau vegetable packages worth RMB 264 thou-sand from Guizhou's Weining County and donated them to Yuehai and Futian Sub-District Offices in Shenzhen at the end of April, 2020, sending best wishes to officials who were working in the front line of the anti-COVID battle. In addition, on the eve of the Mid-Autumn Festival and the National Day, China Merchants Securities 's trade union purchased plateau apples from Guizhou's Weining County as well as agro products from Hechi and Baise in Guangxi Province (worth RMB 1.337112 million in total) as holiday gifts to China Merchants Securities 's employees.

· Poverty Alleviation Through Employment

In May, 2020, China Merchants Securities launched a campus recruitment program that was specifically open to graduates from poverty-stricken counties supported by China Merchants Group and China Merchants Securities as well as graduates from ethnic minority groups in Xinjiang. An on-site recruitment program was also carried out in Guizhou's Weining County in June, 2020. China Merchants Securities has gone to great lengths to help rural populations fight poverty and help the workforce there go as far as their skills will take them and earn what they deserve.

5.3 Facilitate Ecological Development

Climate change is a challenge and threat to the world as a whole. On September 22nd, 2020, President Xi Jinping solemnly stated at the General Debate of the 75th Session of the United Nations General Assembly that China aims to have CO2 emissions peak before 2030 and achieve carbon neutrality before 2060, demonstrating China's sense of responsibility in climate issues as a super-power. China Merchants Securities has responded vigorously to the authorities' call to work towards the national strategic goals, pooling financial resources to support the development of eco-friendly industries by performing its function as an intermediary in the capital market. China Merchants Secu-rities has implemented the idea of green and low-carbon development in every aspect of the compa-ny's operations. By establishing green workplace, saving energy, reducing emissions and raising environmental awareness, China Merchants Securities has put the idea into practice to play an active part in the efforts towards achieving CO2 emissions peak and carbon neutrality.

5.3.1 Promote Green Finance

The promotion of Green Finance lays a solid foundation for ecological development and plays an important role in supply-side structural reform. China Merchants Securities has actively devel-oped green financial products and services. By assisting environmentally friendly businesses with their IPO and underwriting green bonds, China Merchants Securities diverts financial resources in society into green and environmentally friendly industries so as to contribute to the country's ecologi-cal development.

In 2020, China Merchants Securities assisted environmental (utilities) services businesses, such as GreenTech and EIT, with their IPO, and helped listed companies in the field of renewable energy, including Putailai, Keda Industrial Group and Jiaze New Energy, to further raise RMB 7.037 billion in total, addressing the financing needs of green industries and green projects.

Case: Assist with the Issuance of the First "Bond Connect" Green Financial Bond in Western China

With China Merchants Securities 's assistance, the Chongqing Rural Commercial Bank successfully issued the first "Bond Connect" green financial bond in Western China, which was worth RMB 2 billion in total. Money raised in this round of issuance will be used in credit exten-sion for projects focusing on pollution control and prevention, clean transportation, as well as resource conservation and recycling. It is expected that a total of RMB 5.96116 billion will be provided to 12 projects that have been selected.

Respectful to society

Environment,Society and Governance Report

5.3.2 Carry out Green Operations

In accordance with laws and regulations including the Environmental Protection Law of the People's Republic of China, Law of the People's Republic of China on Conserving Energy and China Merchants Group's Regulations on Energy Saving and Environmental Protection, China Merchants Securities has implemented the idea of green and low-carbon development in the company's day-to-day operations. Our key methods include: 1) design a work plan for energy saving and envi-ronmental protection to reduce energy consumption, use resources more efficiently and lower emis-sions; 2) improve workplace facilities for energy saving and environmental consumption, promote the digitalization of operations and establish a paperless office; 3) spread knowledge about energy saving and environmental protection and raise our employees' environmental awareness.

Table: China Merchants Securities 's initiative for green operations

· Set the AC temperature in offices at an appropriate level, i.e. no less than 26 ¥ in summer;

· Make good use of natural light in offices and meeting rooms so that electric lights can be used as less as possible or, if the situation allows, try not to use them; · Track the amount of water and electricity used in office areas in a timely manner when conducting safety inspections to avoid waste.

· Encourage the employees to use the online OA system in order to reduce the frequency of printing hard copies and sending faxes; · Establish rules for the purchase and allocation of office supplies and follow them strictly. Try to use the most eco-friendly and energy-efficient office equipment.

Conserve Water and ElectricityReduce the Use of Office SuppliesProperly Arrange Business Use of Vehicle

· Arrange the use of vehicles and plan routes in an appropriate manner; · Follow traffic rules and carry out maintenance of vehicles in due course to avoid unnecessary wear and tear and get better fuel economy.

Award Presenters

Awards

New Fortune (journal)

Fourth prize of the Most Creative Investment Banks Award

Fourth prize of the Best IPO Investment Bank Award

Fifth prize of the Best Bond Underwriting Investment Bank Award

Fifth prize of the Best STAR Market Investment Bank Award

Securities Times

2020 China Comprehensive Investment Bank Junding Award

2020 China Main Board Investment Bank Jund-ing Award

2020 China SMEs Board Investment Bank Junding Award

2020 China Financial Advisor Team Junding Award--CMS Investment Bank Headquarters M&A Department

2020 China SMEs Board Projects Junding Award -- Bank of Suzhou IPO project Excellent Wealth Management Institution-- China Merchants Asset Management Co. Ltd. 2020 China Securities Industry APP Function Innovation Junding Award--CMS APP

2020 China Securities Industry Financial Man-agement APPJunding Award--CMS APP 2020 China Securities Industry APP Creative Marketing Junding Award--CMS APP

The Asset

2020 Best Private Fund Custody Institution Award

Global Human Resource Con-ference

2020 China Best HR Management Team

China HR Management Interna-tional Forum

2020 China Best Employer Award

The 6th Future Talent Manage-ment Forum

2020 China Talent Management Innovation Award

Research Association of Ideo-logical and Political Work of China Financial Institutions (RAIPWCFI)

2019-2020 Outstanding Culture Construction Unit of the Financial System of China

Appendix II List of Policies

Laws and RegulationsCompany Policies, Measures and Guidelines

the Law of the PRC on Environ-mental Protection

China Merchants Group

Energy Conservation and Environ-mental Protection Regulations

the Law of the PRC on Energy Conservation

China Merchants Groupthe Law of the PRC on Environ-mental Protection the Law of the PRC on Energy Conservation

Energy Conservation and Environ-mental Protection Regulations China Merchants Group

Energy Conservation and Environ-mental Protection RegulationsB1: EMPLOYMENTthe Labor Law of the PRC

the CMS Attendance Managementthe Labor Contract Law of the PRC Requirementsthe Trade Union Law of the PRC the Employment Ordinance of the Government of Hong Kong

the CMS Internal Management on Trainer and Training Development the Measures of CMS for Staff Recruitment Management

the Production Safety Law of the PRC the Law of the PRC on the Preven-tion and Control of Occupational Diseases the Work-related Injury Insurance Regulations

the CMS Attendance Management Requirements

the Labor Law of the PRC the Employment Ordinance of the Government of Hong Kong the Law of the PRC on Tendering and Bidding

the CMS Internal Management on Trainer and Training Development the CMS Attendance Management Requirements

the China Merchants Group Procurement Management Policythe Implementation Regulations on the China Merchants Group Suppli-the Law of the PRC on Tenders and Bids

Interim Provisions on the Centraler Management Measures the CMS Procurement and Bidding Management MeasuresProcurement Management of State-owned Financial Enterprisesthe CMS Supplier Management Provisions

A. Environment

Appendix III List of Quantitative Data

ESG Index

Unit

2020

2019

2018

2017

Noteğ 1:The denominator of the above data is the total number of employees by the end of the reporting period. 2 ğ The statistical ranges of environmental data are:

The 2017 environment data consist of the full-year data from our Shenzhen headquarter (First Tower), 11 branches, 19 1 securities branches and 5 controlled subsidiaries.

The 2018 environment data consist of the data from our Shenzhen headquarter (CMS Building and First Tower) and IT center, 12 branches, 249 securities branches and 5 controlled subsidiaries.

The 2019 environment data consist of the full-year data from our Shenzhen headquarter (CMS Building) and IT center, 12 branches, 259 securities branches and 5 controlled subsidiaries.

The 2020 environment data consist of the full-year data from our Shenzhen headquarter (CMS Building) and IT center, 12 branches, 259 securities branches and 5 controlled subsidiaries.

3ğEmissions of nitrogen oxides, sulfur oxides, particulate matter calculation method using the The Hong Kong Stock Exchange Limited issued "Appendix II: Environmental Key Performance Guidelines Reporting Guidelines."

4 ğ The list of greenhouse gases includes carbon dioxide, methane and nitrous oxide, mainly from the burning of purchased electricity and fossil fuels. Greenhouse gas emission data are presented according to CO2 equivalent and are accounted for according to the Average CO2 emission factor of China's regional power grid in 2011 and 2012 published by the National Development and Reform Commission of China.

ESG Index

Unit

2020

2019

2018

2017

B.Society

total amount and density of harmful waste produced

general staff turnover rate

%

7.68

9

11

13

Calculation formula: total employee turnover of the reporting period / (total new employees of the reporting period + total employees at the end of last reporting period)

proportion of trained employees: divided according to the type of employment

2 ğ In 2020, China Merchants Securities public welfare donation statistics include 11.426 million yuan in material donations to fight the outbreak of new crown pneumonia, and 1.216 million yuan in charitable donations, so this figure has a higher growth than the previous year.

General DisclosureInformation on:

Pride to Employees

• (a) the policies; and

• (b) compliance with relevant laws and regulations that have a significant impact on the issuer relating to compensation and dismissal, recruitment and promo-tion, working hours, rest periods, equal opportunity, diversity, anti-discrimination, and other benefits and welfare.

KPI B1.1

KPI B1.2

Total workforce by gender, employment type, age group and geographical region. Employee turnover rate by gender, age group and geographical region.

Appendix III List of Quantita-tive Data

Appendix III List of Quantita-tive Data

General DisclosureInformation on:

• (a) the policies; andCare for physical and mental health

  KPI B2.1

  KPI B2.2

• (b) compliance with relevant laws and regulations that have a significant impact on the issuer relating to providing a safe working environment and protecting employees from occupational hazards. Number and rate of work-related fatali-ties occurred in each of the past three years including the reporting year. Lost days due to work injury.

planned to be disclosed in the future

planned to be disclosed in the future

KPI B2.3

Description of occupational health and safety measures adopted, how they are implemented and monitored.

Care for physical and mental health

General DisclosureKPI B3.1

Policies on improving employees' knowl-edge and skills for discharging duties at work. Description of training activities. The percentage of employees trained by gender and employee category (e.g. senior management, middle manage-ment).

Facilitate Staff GrowthAppendix III List of Quantita-tive

B1: Employement

B2: Health and Safety

B3: Development and Training

General Disclosure

B6: Product Responsibility Information on:

• (a) the policies; andTrustworthy to Clients

  KPI B6.1

• (b) compliance with relevant laws and regulations that have a significant impact on the issuer relating to health and safety, advertising, labelling and privacy matters relating to products and services provided and methods of redress. Percentage of total products sold or shipped subject to recalls for safety and health reasons.

KPI B6.2

Number of products and service related complaints received and how they are dealt with.

The Company's financial products need no recalls, so this indicator is not applicable planned to be disclosed in the future

KPI B6.3

Description of practices relating to observing and protecting intellectual property rights.

Risk and compliance internal control managemen

KPI B6.4

Description of quality assurance process and recall procedures.

The Company's financial products need no recalls, so this indicator is not applicableKPI B6.5

Description of consumer data protection and privacy policies, how they are implemented and monitored.

Protecting the rights and interests of clientsGeneral DisclosureInformation on:

• (a) the policies; andRisk and compliance internal control management

  KPI B7.1

• (b) compliance with relevant laws and regulations that have a significant impact on the issuer relating to bribery, extor-tion, fraud and money laundering. Number of concluded legal cases regard-ing corrupt practices brought against the issuer or its employees during the report-ing period and the outcomes of the cases.

Appendix III List of Quantita-tive

B7: Anti-corruption

Aspect, General Disclosure and KPIDescription

Relevant Chapters

KPI B7.2

Description of preventive measures and whistle-blowing procedures, how they are implemented and monitored.

Risk and compliance internal control management

KPI B7.3

Description of anti-corruption training provided to directors and staff.

Risk and compliance internal control managementGeneral Disclosure

B8: Community Investment Policies on community engagement to understand the needs of the communities where the issuer operates and to ensure its activities take into consideration the communities' interests.

Respectful to SocietyKPI B8.1

KPI B8.2

Focus areas of contribution (e.g. educa-tion, environmental concerns, labor needs, health, culture, sport). Resources contributed (e.g. money or time) to the focus area.

Respectful to SocietyAppendix III List of Quantita-tive