China Merchants Securities : PROPOSED ADOPTION OF THE EMPLOYEE STOCK OWNERSHIP SCHEME

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

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

(Stock Code: 6099)

PROPOSED ADOPTION OF

THE EMPLOYEE STOCK OWNERSHIP SCHEME

EMPLOYEE STOCK OWNERSHIP SCHEME

In order to further consummate the corporate governance structure of the Company, establish and improve the benefit-sharing and risk-sharing mechanism among the Shareholders, the Company and employees, advocate the common and sustainable development concept of the Company and individual, fully arouse the enthusiasm of the Company's senior management and the core talents, attract and retain talents and business backbones, maintain the long-term and near-term interests of the Company, attract various kinds of talents in a more flexible manner, and better promote the Company's long-term, sustainable and healthy development, the relevant resolutions regarding the Employee Stock Ownership Scheme were considered and approved at the 25th meeting of the sixth session of the Board held on October 15, 2019.

The sources of funds of the Scheme shall be derived from the personal legal remuneration and other self-raised funds of the employees obtained in other manners permitted by laws and administrative regulations. The source of Shares under the Employee Stock Ownership Scheme shall be A Shares to be repurchased by the Company using its own funds through the centralized bidding. The total subscription amount of the Scheme participants shall not exceed RMB808 million (inclusive). The final scale of the Scheme will be determined according to the capital scale of employees participating in the Scheme and the specific amount and price of A Shares to be repurchased by the Company. After implementation of the Scheme, the total number of A Shares held under all effective employee stock ownership schemes of the Company shall not, in aggregate, exceed 10% of the Company's total share capital and the number of A Shares corresponding to the entitlements of Employee Stock Ownership Scheme held by any single Holder shall not, in aggregate, exceed 1% of the Company's total share capital.

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IMPLICATIONS UNDER THE LISTING RULES

The Employee Stock Ownership Scheme does not constitute a share option scheme under the Chapter 17 of the Listing Rules.

The Asset Management Agency will become a connected person of the Company if the number of the Subject A Shares held by the Asset Management Agency for the benefit of the connected persons exceeds 30% of the aggregate number of the Subject A Shares held by the Asset Management Agency. The Company will comply with the relevant provisions under the Listing Rules as applicable.

THE EXTRAORDINARY GENERAL MEETING

Pursuant to the relevant PRC laws and regulations, the draft employee stock ownership scheme proposed by the board of directors of a listed company shall be approved at a general meeting. A general meeting of the Company will be convened to consider and approve, if thought fit, the Employee Stock Ownership Scheme and authorize the Board to deal with the relevant matters relating to the Employee Stock Ownership Scheme.

Shareholders and potential investors should note that, the proposed Employee Stock Ownership Scheme may or may not proceed. Accordingly, Shareholders and potential investors are advised to exercise caution when dealing in the Shares.

In order to further consummate the corporate governance structure of the Company, establish

and improve the benefit-sharing and risk-sharing mechanism among the Shareholders, the Company and employees, advocate the common and sustainable development concept of the Company and individual, fully arouse the enthusiasm of the Company's senior management and the core talents, attract and retain talents and business backbones, maintain the long-term and near-term interests of the Company, attract various kinds of talents in a more flexible manner, and better promote the Company's long-term, sustainable and healthy development, the relevant resolutions regarding the Employee Stock Ownership Scheme were considered and approved at the 25th meeting of the sixth session of the Board held on October 15, 2019.

The sources of funds of the Scheme shall be derived from the personal legal remuneration and other self-raised funds of the employees obtained in other manners permitted by laws and administrative regulations. The source of Shares under the Employee Stock Ownership Scheme shall be A Shares to be repurchased by the Company using its own funds through the centralized bidding. The total subscription amount of the Scheme participants shall not exceed RMB808 million (inclusive). The final scale of the Scheme will be determined according to the capital scale of employees participating in the Scheme and the specific amount and price of A Shares to be repurchased by the Company. After implementation of the Scheme, the total number of A Shares held under all effective employee stock ownership schemes of the Company shall not, in aggregate, exceed 10% of the Company's total share capital and the number of A Shares corresponding to the entitlements of Employee Stock Ownership Scheme held by any single Holder shall not, in aggregate, exceed 1% of the Company's total share capital.

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The Employee Stock Ownership Scheme will be formulated in accordance with the Company Law of the PRC, the Securities Law of the PRC, the Guiding Opinions on the Pilot Implementation of Employee Stock Ownership Scheme by Listed Companies and other applicable laws and regulations and normative documents as well as the relevant provisions of the Articles of Association.

EMPLOYEE STOCK OWNERSHIP SCHEME

Principal terms of the Employee Stock Ownership Scheme

Participants:	The selection criteria of the participants of the Scheme are
	formulated on the basis of the job grade of employees in the
	Company and the seniority and performance appraisal results
	with reference to market practice. The definite list will be
	determined according to the employees' employment status
	as of May 31, 2019 and their employment status as of the last
	payment date.
	The participants of the Scheme are Directors, Supervisors,
	senior management, employees at D Level or above and
	other core cadres who have entered into labour contracts with
	the Company and its wholly-owned subsidiaries. The total
	number of participants of the Scheme shall not exceed 1,157.
Number and amount of	The source of Shares under the Employee Stock Ownership
Shares to be subscribed:	Scheme shall be A Shares to be repurchased by the Company
	using its own funds through the centralized bidding. The
	final scale of the Scheme will be determined according to the
	capital scale of employees participating in the Scheme and the
	specific amount and price of the Shares to be repurchased by
	the Company. The total subscription amount shall not exceed
	RMB808 million (inclusive).

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	The entitlements in the Employee Stock Ownership
	Scheme subscribed by the participants of the Scheme and
	the amount of corresponding entitlements shall be subject
	to the actual implementation at that time. Of which, the
	aggregate subscription amount of Directors, Supervisors
	and senior management (being Mr. HUO Da, Mr. XIONG
	Jiantao, Ms. ZHOU Yuhan, Ms. YIN Hongyan, Ms. HE
	Min, Mr. XIONG Zhigang, Ms. DENG Xiaoli, Mr. LI
	Zongjun, Mr. WU Huifeng, Mr. ZHAO Bin, Mr. HU
	Yu, Mr. WU Guangyan, Mr. XIE Jijun) of the Company
	is approximately RMB62 million, and the aggregate
	entitlements in the Employee Stock Ownership Scheme
	available for subscription represents approximately 8% of the
	total entitlements in the Employee Stock Ownership Scheme;
	while the aggregate subscription amount of other employees
	is approximately RMB746 million, and the aggregate
	entitlements in the Employee Stock Ownership Scheme
	available for subscription represents approximately 92%
	of the total entitlements in the Employee Stock Ownership
	Scheme.
Lock-up period:	The lock-up period of the Subject A Shares under the
	Scheme shall be 36 months from the date when the Company
	announces the completion of registration of the Subject A
	Shares. The Subject A Shares under the Scheme will be one-
	off unlocked upon the expiry of the lock-up period.
Term of the Scheme:	The term of the Scheme shall be 10 years from the date when
	the Scheme is considered and approved at the general meeting
	of the Company. The term of the Scheme may be extended
	upon it is considered on the Holders' Meeting of the Scheme
	and approved by the Board. The Employee Stock Ownership
	Scheme shall be automatically terminated if the term of the
	Scheme is not effectively extended upon expiry.

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Disposal of equity interests of the Employee Stock Ownership Scheme:

1. Disposal of the equity interests of the Employee Stock Ownership Scheme

During the term of the Scheme, except in the event that the disposal is otherwise stipulated in the Scheme or required by effective judicial adjudication, the Holders shall neither pledge or secure, create guarantee over, settle debt with, nor transfer or otherwise dispose the entitlements held by them in the Employee Stock Ownership Scheme.

1. The disposal measures for the Holder who is not eligible to participate in the Employee Stock Ownership Scheme during the term of the Scheme

In the event of leaving office, retirement, disability, incapacity, death and other circumstances of the Holder during the lock-up period of the Scheme, no change shall be made to his/her entitlements under the Scheme and the Holder's entitlements in the Employee Stock Ownership Scheme shall be subject to the lock-up period of the Scheme and other relevant arrangements. The above circumstances include:

1. the Holder leaves office due to illness, disability, incapacity or other reasons;
2. the Holder retires due to reaching the age of retirement as set out by the requirement in the PRC;
3. the Holder dies and his/her entitlements under the Scheme shall be inherited by his/her lawful successor.

Upon the expiry of the lock-up period, the above Holder or his/her lawful successor may apply for withdrawal and the Asset Management Agency shall sell the Shares corresponding to the entitlements held by the Holder as stipulated under the Scheme and transfer the proceeds and related income (if any) to the dedicated account for the Employee Stock Ownership Scheme after deducting the relevant expenses in compliance with the laws. The management committee shall allocate the corresponding equities according to the entitlements under the Scheme held by the Holder.

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Subscription by connected person

If any connected persons subscribe for the entitlements in the Employee Stock Ownership Scheme, the Company shall comply with relevant provisions of the Listing Rules as may be applicable, including any reporting, announcement and/or shareholders' approval requirements, unless otherwise exempted under the Listing Rules.

Management of the Employee Stock Ownership Scheme

Management Pattern

The authority of the Employee Stock Ownership Scheme refers to the Holders' Meeting and the Holders can attend the Holders' Meeting and enjoy their voting rights on the Holders' Meeting according to their entitlements in the Employee Stock Ownership Scheme. The Holders' Meeting shall exercise its functions and powers, such as electing and removing members of the management committee and authorizing the management committee to be responsible for the daily management of the Employee Stock Ownership Scheme. A management committee shall be set up under the Holders' Meeting, which shall be responsible for the daily management of the Employee Stock Ownership Scheme, and shall have the right to authorize the Asset Management Agency to exercise the shareholders rights. The management committee comprises of five members and one chairman. All members of the management committee shall be the Holders and elected on the Holders' Meeting.

The Board is responsible for formulating the Scheme and handling other related matters of the Employee Stock Ownership Scheme within the scope authorized by the general meeting.

Asset Management Agency

The Employee Stock Ownership Scheme entrusts the Asset Management Agency to set up the Asset Management Scheme for the investment and operation of the Employee Stock Ownership Scheme. The Asset Management Agency shall carry out shares trading, dividend and interest payment, taxes and fees payment and other related work according to the Asset Management Contract. When purchasing or selling the Subject A Shares, the Asset Management Agency must strictly abide by the market trading rules and the provisions of the CSRC, the HKSFC and the stock exchanges at the places where the securities of the Company were listed concerning the prohibition of shares trading during the sensitive period of information, and is strictly prohibited from using any insider information for trading.

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ASSET MANAGEMENT CONTRACT

In order to manage the assets under the Scheme, the Board is pleased to announce that on October 15, 2019, the Company (on behalf of the Employee Stock Ownership Scheme), China Merchants Securities Asset Management Co., Ltd. (a wholly-owned subsidiary of the Company, as the Asset Management Agency) and China Merchants Bank Co., Ltd., Shenzhen Branch (as the custodian) entered into the Asset Management Contract. Pursuant to the Asset Management Contract, the Asset Management Agency will establish and manage the Asset Management Scheme to hold the relevant interest in assets on behalf of the Scheme.

Principal terms of the Asset Management Contract

Date:	October 15, 2019
Investment objective:	The investment objective is to achieve value preserving and
	appreciation of the entrusted asset with an aim to win stable
	investment returns for asset investors under the premise of
	effectively controlling investment risks. The Asset Management
	Agency shall establish and improve the risk control mechanism and
	decision-making mechanism of investment management with due
	caution and diligence, and provide asset investors with entrusted
	asset management services through applying its professional
	knowledge and skills while regarding the security and stable
	returns of the entrusted asset as the objective of the entrusted
	investment management.
Parties:	(i) the Company (on behalf of the Employee Stock Ownership
	Scheme) (as investor) (the "Investor");
	(ii) China Merchants Securities Asset Management Co., Ltd. (as
	manager) (the "Asset Management Agency"); and
	(iii) China Merchants Bank Co., Ltd., Shenzhen Branch (as
	custodian) (the "Custodian").
Investment orientation:	The Asset Management Scheme mainly invests in the A Shares
	issued by the Company as stipulated in the Employee Stock
	Ownership Scheme. Idle funds can be invested in bank deposits and
	money market funds.

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Investment proportion:	The Asset Management Scheme is an equity product and its
	investment in equity assets recognized by the CSRC and the
	People's Bank of China should be limited within the proportion
	ranging from 80%-100% of the total assets managed under the
	Asset Management Scheme.
Minimum initial scale:	The minimum amount of the Investor to participate in the Asset
	Management Scheme is RMB10 million.
The duty of Custodian:	The Custodian has the duty to supervise the investment scope,
	investment proportion and investment restriction of the entrusted
	asset according to the terms of the Asset Management Contract.
Expenses:	The expenses relating to the asset management business included
	(i)	management fee of the Asset Management Agency;
	(ii)	custodian fee of the Custodian;
	(iii)	trading commission of entrusted assets based on the rate of
		brokerage services;
	(iv)	security trading fees of entrusted assets, including but not
		limited to stamp duty, transfer fee, handling fee, securities
		management fee, etc.;
	(v)	commissioning fees for the opening, usage, conversion,
		cancellation, etc. of special security accounts;
	(vi)	the fees incurred from opening the relevant accounts;
	(vii)	relevant taxes and fees;
	(viii) litigation costs, attorney fees related to the settlement of
		investment disputes;
	(ix)	other expenses that may be charged under entrusted assets in
		accordance with the laws and regulations and the terms of the
		Asset Management Contract.

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Of which, the Asset Management Agency shall charge RMB10,000 per year as the fixed management fee rate, while the Custodian shall charge a custodian fee rate of 0.02% per year. Under normal circumstances, the calculation method of custodian fee for entrusted assets is as follow:

H1 = E × annual custodian fee rate ÷ 365

	H1	represents the daily custodian fee provided
		for entrusted assets
	E	represents the net value of entrusted assets
		for the previous day
Term:	The Asset Management Contract comes into effect from the
	establishment date of the Asset Management Scheme, for a term
	of ten years which may be early terminated depending on market
	conditions and the Asset Management Contract, if so agreed by the
	Asset Management Agency and the Investor.

General Information of the Parties to the Asset Management Contract

The Company is a joint stock company incorporated in the PRC with limited liability, the A Shares and the H Shares of which are listed on the Shanghai Stock Exchange and main board of the Stock Exchange, respectively. The Group is mainly engaged in brokerage and wealth management business, investment bank business, investment management business, investment and trading business.

China Merchants Securities Asset Management Co., Ltd. is a company incorporated in the PRC with limited liability, which is mainly engaged in securities asset management business and it is a wholly-owned subsidiary of the Company.

China Merchants Bank Co., Ltd. is a joint stock company incorporated in the PRC with limited liability, and it is mainly engaged in providing customers with various wholesale and retail banking products and services, and conducting treasury businesses with proprietary purpose and on behalf of customers. As at the date of this announcement, China Merchants Group Limited, the controlling shareholder of the Company, held a total interest of approximately 29.97% in China Merchants Bank Co., Ltd., which is not a connected person of the Company.

Save as disclosed above, to the best knowledge and belief of the Directors having made all reasonable enquiries, the counterparties to the Asset Management Contract and their ultimate beneficial owners are independent third parties to the Group and its connected person.

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BOARD CONFIRMATION

The Board is of the view that the terms of the Employee Stock Ownership Scheme and the Asset Management Contract are on normal commercial terms which are fair and reasonable and in the interests of the Company and the Shareholders as a whole. Mr. HUO Da and Mr. XIONG Jiantao, being the Directors who can participate in the Scheme, have abstained from voting on the relevant Board resolutions. Save as disclosed above, none of the Directors have a material interest in the Employee Stock Ownership Scheme. The relevant resolutions regarding the Employee Stock Ownership Scheme have been voted and approved at the 25th meeting of the sixth session of the Board by Directors who are not connected thereto.

IMPLICATIONS UNDER THE LISTING RULES

The Employee Stock Ownership Scheme does not constitute a share option scheme under the Chapter 17 of the Listing Rules.

The Asset Management Agency will become a connected person of the Company if the number of the Subject A Shares held by the Asset Management Agency for the benefit of the connected persons exceeds 30% of the aggregate number of the Subject A Shares held by the Asset Management Agency. The Company will comply with the relevant provisions under the Listing Rules as applicable.

THE EXTRAORDINARY GENERAL MEETING

Pursuant to the relevant PRC laws and regulations, the draft employee stock ownership scheme proposed by the board of directors of a listed company shall be approved at a general meeting. A general meeting of the Company will be convened to consider and approve, if thought fit, the Employee Stock Ownership Scheme and authorize the Board to deal with the relevant matters relating to the Employee Stock Ownership Scheme.

Shareholders and potential investors should note that, the proposed Employee Stock Ownership Scheme may or may not proceed. Accordingly, Shareholders and potential investors are advised to exercise caution when dealing in the Shares.

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DEFINITIONS

In this announcement, unless the context otherwise requires, the following expressions have the following meanings:

"A Share(s)"	the PRC domestic listed share(s) in the share capital of the
	Company with nominal value of RMB1.00 each, listed on
	the Shanghai Stock Exchange and traded in RMB
"Articles of Association"	the articles of association of the Company
"Asset Management	the asset management agency entrusted by Employee Stock
Agency"	Ownership Scheme
"Asset Management Contract"	the asset management contract entered into among the
	Company (on behalf of the Employee Stock Ownership
	Scheme), China Merchants Securities Asset Management
	Co., Ltd. and China Merchants Bank Co., Ltd., Shenzhen
	Branch on October 15, 2019 in relation to Asset
	Management Scheme
"Asset Management Scheme"	the asset management scheme established by the Asset
	Management Agency entrusted by the Employee Stock
	Ownership Scheme in relation to the Employee Stock
	Ownership Scheme
"Board"	the board of Directors of the Company
"Company"	China Merchants Securities Co., Ltd., a joint stock
	company incorporated in the PRC with limited liability,
	the H Shares and A Shares of which are listed on the
	main board of the Stock Exchange (stock code: 6099) and
	on the Shanghai Stock Exchange (stock code: 600999),
	respectively
"connected person(s)"	has the meaning ascribed to it under the Listing Rules
"controlling shareholder(s)"	has the meaning ascribed to it under the Listing Rules

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"CSRC"	China Securities Regulatory Commission (中國證券監督
	管理委員會)
"Director(s)"	director(s) of the Company
"Employee Stock	the employee stock ownership scheme of the Company
Ownership Scheme"
or "the Scheme"
"H Share(s)"	the overseas-listed foreign share(s) in the capital of the
	Company with nominal value of RMB1.00 each, listed on
	the main board of the Stock Exchange and traded in Hong
	Kong dollars
"HKSFC"	Securities and Futures Commission of Hong Kong
"Holder(s)"	the employee(s) of the Company who actually contribute
	to the Employee Stock Ownership Scheme as stipulated by
	the Employee Stock Ownership Scheme
"Holders' Meeting"	the meeting of the Holders of the Employee Stock
	Ownership Scheme
"Hong Kong"	the Hong Kong Special Administrative Region of the PRC
"Listing Rules"	the Rules Governing the Listing of Securities on the Stock
	Exchange
"PRC"	the People's Republic of China, and for the purposes of
	this announcement only, excluding Hong Kong, the Macau
	Special Administrative Region of the People's Republic of
	China and Taiwan
"RMB"	Renminbi, the lawful currency of the PRC
"Shanghai Stock Exchange"	The Shanghai Stock Exchange Limited
"Share(s)"	A Share(s) and/or H Share(s)

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"Shareholder(s)"	holder(s) of the Company's Share(s)
"Stock Exchange"	The Stock Exchange of Hong Kong Limited
"Subject A Share(s)"	A Share(s) to be purchased and held by virtue of the
	Scheme through legal means
"Supervisor(s)"	the supervisors of the Company
"%"	per cent.

By Order of the Board

China Merchants Securities Co., Ltd.

HUO Da

Chairman

Shenzhen, the PRC

October 15, 2019

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

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