If you are in any doubt as to any aspect of this prospectus or as to the action to be taken, you should consult a licensed securities dealer, bank manager, solicitor,professional accountant or other professional adviser.

If you have sold or transferred all of your H Shares (as defined herein) in the Company (as defined herein) (other than those ex-rights) or all of your Nil Paid HRights (as defined herein), you should at once hand this prospectus and the accompanying Provisional Allotment Letter (as defined herein) and Excess ApplicationForm (as defined herein) to the purchaser or transferee or the bank, the licensed securities dealer or other agent through whom the sale or transfer was effected fortransmission to the purchaser or transferee.

Subject to the granting of the listing of and permission to deal in the Nil Paid H Rights and the H Rights Shares (as defined herein) on the Hong Kong Stock Exchange(as defined herein) as well as compliance with the stock admission requirements of HKSCC (as defined herein), the Nil Paid H Rights and the H Rights Shares willbe accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS (as defined herein) with effect from the respective commencement datesof dealings in the Nil Paid H Rights and the H Rights Shares or such other dates as determined by HKSCC. Settlement of transactions between participants of theHong Kong Stock Exchange on any trading day is required to take place in CCASS on the second trading day thereafter. All activities under CCASS are subject tothe “General Rules of CCASS” and the “CCASS Operational Procedures” in effect from time to time.

H Shareholders with registered addresses in any of the Specified Territories (as defined herein) and the Beneficial H Shareholders (as defined herein) who are residentsof the Specified Territories are referred to the important information set out in the sections headed “Letter from the Board − (III) H Share Rights Issue − ExcludedH Shareholders” and “Letter form the Board − (III) H Share Rights Issue − Limited categories of persons in the Specified Territories who may be able to take uptheir Nil Paid H Rights to subscribe for the H Rights Shares under the H Share Rights Issue”.

Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take no responsibilityfor the contents of this prospectus, the Provisional Allotment Letter and the Excess Application Form, make no representation as to their accuracy or completenessand expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of these documents.The securities have not been registered under the U.S. Securities Act of 1933, as amended, (the “U.S. Securities Act”) or the laws of any state in the United States,and may not be offered or sold within the United States, absent registration or an exemption from the registration requirements of the U.S. Securities Act andapplicable state laws. There is no intention to register any portion of the rights issue or any securities described herein in the United States or to conduct a publicoffering of securities in the United States.

招商銀行股份有限公司CHINA MERCHANTS BANK CO., LTD.

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

(Stock Code: 03968)

PROPOSED H SHARE RIGHTS ISSUE OF 680,423,172 H SHARESON THE BASIS OF 1.74 H RIGHTS SHARES

FOR EVERY 10 EXISTING H SHARESAT HK$11.68 PER H RIGHTS SHARE

PAYABLE IN FULL ON ACCEPTANCE

China Merchants Finance Holdings

Shareholder Underwriter

Joint Global CoordinatorJoint Lead Underwriter

Joint Global Coordinator

Joint Lead UnderwriterJoint Global CoordinatorJoint Lead Underwriter

Joint Global CoordinatorJoint Lead Underwriter

(in alphabetical order)

Joint Lead Underwriter Joint Lead Underwriter Financial Adviser

A copy of this prospectus, together with copies of the Provisional Allotment Letter and the Excess Application Form and (where applicable) the documents specifiedin the paragraph headed “Statutory and General Information − 9. Documents Delivered to the Registrar of Companies” in Appendix III to this prospectus have beenregistered by the Registrar of Companies in Hong Kong as required by Section 342C of the Hong Kong Companies Ordinance. The Securities and Futures Commissionand the Registrar of Companies in Hong Kong take no responsibility for the contents of any of these documents.

Dealings in the securities of the Company and the Nil Paid H Rights and the H Rights Shares may be settled through CCASS and you should consult a licensedsecurities dealer, bank manager, solicitor, professional accountant or other professional adviser for details of the settlement arrangements and how such arrangementsmay affect your rights and interests. Existing H Shares (as defined herein) have been dealt in on an ex-rights basis from Thursday, 29 August 2013. Dealings in theNil Paid H Rights will take place from Monday, 9 September 2013 to Monday, 16 September 2013 (both days inclusive).

The latest time for acceptance of and payment for the H Rights Shares is 4:00 p.m. on Thursday, 19 September 2013. Further details on the expected timetablefor the H Share Rights Issue (as defined herein) are set out in the section headed “Expected Timetable” in this prospectus. The procedure for acceptance or transferof H Rights Shares is set out in the paragraph headed “Letter from the Board − (III) H Share Rights Issue − Procedures for Acceptance or Transfer.”

The H Share Rights Issue is conditional upon the fulfillment of the conditions set out in the paragraphs headed “Letter from the Board − (III) H Share RightsIssue − Conditions of the H Share Rights Issue.” If the conditions of the H Share Rights Issue are not fulfilled, the H Share Rights Issue will not proceed.

The H Share Rights Issue will proceed on a fully underwritten basis. The Underwriting Agreement (as defined herein) contains provisions entitling the JointGlobal Coordinators (as defined herein) (on behalf of the Underwriters) by notice in writing to terminate the Underwriting Agreement on or prior to theLatest Time for Termination (as defined herein) on the occurrence of certain events, as set out in the section headed “Letter from the Board − (III) H ShareRights Issue − Termination of the Underwriting Agreement”. If the Underwriting Agreement does not become unconditional or if it is terminated inaccordance with the terms thereof, the H Share Rights Issue will not proceed. Shareholders’ and potential investors’ attention is also drawn to the paragraphheaded “Letter from the Board − (III) H Share Rights Issue − Warning of the Risks of Dealing in the H Rights Shares and the Nil Paid H Rights”.Shareholders and potential investors in the Company should therefore exercise caution when dealing in the H Rights Shares or the Nil Paid H Rights. If indoubt, Shareholders and potential investors are recommended to consult their professional advisers.

THIS PROSPECTUS IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

5 September 2013

The H Share Rights Issue is conditional upon the Underwriting Agreement becoming unconditionaland not being terminated. Furthermore, if the conditions of the H Share Rights Issue are not fulfilled,the H Share Rights Issue will not proceed, in which case, a further announcement will be made by theCompany at the relevant time. It should also be noted that the H Shares have been dealt with on anex-rights basis from Thursday, 29 August 2013 and that dealings in the Nil Paid H Rights will take place

from Monday, 9 September 2013 to Monday, 16 September 2013 (both days inclusive). Such dealings will

take place when the conditions of the H Share Rights Issue remain unfulfilled. Any person dealing in the

securities of the Company up to the date on which such condition is fulfilled or waived and any person

dealing in the Nil Paid H Rights from Monday, 9 September 2013 to Monday, 16 September 2013 (being

the first and last day of dealings in the Nil Paid H Rights respectively) will accordingly bear the risk that

the H Share Rights Issue may not become unconditional and may not proceed. Any person dealing or

contemplating any dealing in the securities of the Company, the Nil Paid H Rights and/or the H Rights

Shares during this period who is in any doubt about his or her position is recommended to consult his

or her own professional adviser.

EXCEPT AS OTHERWISE SET OUT HEREIN, THE H SHARE RIGHTS ISSUE DESCRIBED IN

THIS PROSPECTUS IS NOT BEING MADE TO H SHAREHOLDERS, BENEFICIAL H

SHAREHOLDERS OR INVESTORS IN THE SPECIFIED TERRITORIES. This prospectus does not

constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to acquire, the

Nil Paid H Rights or the H Rights Shares or to take up any entitlements to the Nil Paid H Rights or the H Rights

Shares in any jurisdiction in which such an offer or solicitation is unlawful. None of the Nil Paid H Rights,

the H Rights Shares, this prospectus, the Provisional Allotment Letter and the Excess Application Form will

be registered under the securities laws of any of the Specified Territories and none of the Nil Paid H Rights,

the H Rights Shares, this prospectus, the Provisional Allotment Letter and the Excess Application Form will

qualify for distribution under any of the relevant securities laws of any of the Specified Territories (other than

pursuant to any applicable exceptions as agreed by the Company). Accordingly, the Nil Paid H Rights and the

H Rights Shares may not be offered, sold, pledged, taken up, resold, renounced, transferred or delivered,

directly or indirectly, into or within any of the Specified Territories absent registration or qualification under

the respective securities laws of such Specified Territories, or exemption from the registration or qualification

requirement under applicable rules of such Specified Territories.

Each person acquiring the Nil Paid H Rights and/or H Rights Shares under the H Share Rights Issue will

be deemed by his acquisition of the Nil Paid H Rights and/or H Rights Shares to confirm, that he is aware of

the restrictions on offers and sales of the Nil Paid H Rights and/or H Rights Shares described in this prospectus.

H Shareholders with registered addresses in any of the Specified Territories and Beneficial H

Shareholders who are residents of the Specified Territories are referred to the sections of this prospectus

headed “Letter from the Board − (III) H Share Rights Issue − Excluded H Shareholders” and “Letter from the

Board − (III) H Share Rights Issue − Limited categories of persons in the Specified Territories who may be

able to take up their Nil Paid H Rights to subscribe for the H Rights Shares under the H Share Rights Issue.”

For a description of certain restrictions regarding the take-up of the Nil Paid H Rights for, and the

offering and sale of, the H Rights Shares, see the section headed “Information about this Prospectus and the

H Share Rights Issue — Restrictions on the Use of this Prospectus and the Offer and Sales of Securities.”

NOTICE TO AUSTRALIAN INVESTORS

This prospectus is not a disclosure document under Chapter 6D of the Corporations Act 2001 (Cth) (the

“Australian Corporations Act”) and has not been and will not be lodged with the Australian Securities and

Investments Commission as a disclosure document for the purposes of Chapter 6D of the Australian

Corporations Act and does not purport to include the information required of a disclosure document under

Chapter 6D of the Australian Corporations Act.

Our Nil Paid H Rights and/or H Rights Shares may not be directly or indirectly offered for subscription

or purchased or sold, and no invitations to subscribe for or buy our Nil Paid H Rights and/or H Rights Shares

may be issued, and no draft or definitive offering circular, advertisement or other offering material relating to

any of our Nil Paid H Rights and/or H Rights Shares may be distributed in Australia except where disclosure

to investors is not required under Chapter 6D of the Australian Corporations Act or is otherwise in compliance

with all applicable Australian laws and regulations.

As any offer of our Nil Paid H Rights and/or H Rights Shares under this prospectus will be made without

disclosure in Australia under Chapter 6D of the Australian Corporations Act, the offer of our Nil Paid H Rights

NOTICES

– i –

and/or H Rights Shares for resale in Australia within 12 months may, under section 707 of the Australian

Corporations Act, require disclosure to investors under Chapter 6D if none of the exemptions in section 708

apply to that resale. Accordingly, any person who acquires our Nil Paid H Rights and/or H Rights Shares

pursuant to this prospectus should not, within 12 months of acquisition of our Nil Paid H Rights and/or H

Rights Shares, offer, transfer, assign or otherwise alienate those Nil Paid H Rights and/or H Rights Shares to

investors in Australia except in circumstances where disclosure to investors is not required under Chapter 6D

of the Australian Corporations Act or unless a compliant disclosure document is prepared and lodged with the

Australian Securities and Investments Commission.

We are not licensed to provide financial product advice in relation to the Nil Paid H Rights and/or H

Rights Shares. There is no cooling-off regime that applies in respect of your acquisition of the Nil Paid H

Rights and/or H Rights Shares. This prospectus is intended to provide general information only and has been

prepared without taking into account any particular person’s objectives, financial situation or needs. Investors

should, before acting on this information, consider the appropriateness of this information having regard to

their personal objectives, financial situation or needs. Investors should review and consider the contents of this

prospectus and obtain financial advice specific to their situation before making any decision to make an

application for our Nil Paid H Rights and/or H Rights Shares.

NOTICE RELATING TO INVESTORS IN BERMUDA

The offer of the Nil Paid H Rights and/or H Rights Shares is not calculated to result, directly or

indirectly, in Nil Paid H Rights and/or H Rights Shares becoming available to persons other than persons whose

ordinary business involves the acquisition, disposal or holding of shares (as defined in section 25(1) of the

Companies Act 1981), whether as principal or agent, and no invitation has been or will be made by or on behalf

of the Company to anyone considered as resident in Bermuda for exchange control purposes, or otherwise to

the public in Bermuda, to subscribe for any of the Nil Paid H Rights and/or H Rights Shares.

NOTICE TO CANADIAN INVESTORS

The Nil Paid H Rights and H Rights Shares will not be distributed in Canada. Any resale of our Nil Paid

H Rights and/or H Rights Shares in Canada must be made under applicable securities laws which will vary

depending on the relevant jurisdiction, and which may require resales to be made under available statutory

registration and prospectus exemptions, under a discretionary exemption granted by the applicable Canadian

securities regulatory authority or in a transaction not subject to securities legislation in Canada. Purchasers are

advised to seek legal advice prior to any resale of our Nil Paid H Rights and/or H Rights Shares.

NOTICE TO INVESTORS IN CHILE

The investment described in this prospectus has not been offered, sold or delivered and will not be

offered, sold or delivered, at any time, directly or indirectly in Chile in a manner that would constitute a public

offering, public advertisement or in any similar manner. This prospectus and Nil Paid H Rights and/or H Rights

Shares have not been, and will not be, registered with or approved by the Chilean Registry of Securities or the

Superintendency of Securities and Insurance for public offer, distribution or otherwise, in Chile. This

prospectus and any other offering materials relating to the offer of our Nil Paid H Rights and/or H Rights

Shares, as well as information contained therein (i) may not be supplied to the public in Chile or used in

connection with any offer for subscription of our Nil Paid H Rights and/or H Rights Shares to the public in

Chile, (ii) are intended for the original recipient only and may not be provided to any other person; and (iii)

are not for circulation in Chile, are intended for the original recipients only and may not be reproduced or

distributed to, or used by, any other person or for any other purpose.

NOTICE TO EUROPEAN ECONOMIC AREA INVESTORS

This prospectus has been prepared on the basis that all offers of Nil Paid H Rights and/or H Rights

Shares will be made pursuant to an exemption under the Directive 2003/71/EC of the European Parliament and

the Council of 4 November 2003 on the prospectus to be published when securities are offered to the public

or admitted to trading (the “Prospectus Directive”), as implemented in member states of the European

Economic Area (“EEA”), from the requirement to produce a prospectus for offers of Nil Paid H Rights and/or

H Rights Shares. Neither the Company nor the underwriters have authorised, nor will they authorise, the

making of any offer of Nil Paid H Rights and/or H Rights Shares through any financial intermediary, other than

offers made by the underwriters which constitute the final placement of the Nil Paid H Rights and/or H Rights

Shares contemplated in this prospectus.

NOTICES

– ii –

In relation to each member state of the EEA which has implemented the Prospectus Directive (each, a

“relevant member state”), with effect from and including the date on which the Prospectus Directive was

implemented in that relevant member state (the “relevant implementation date”) no Nil Paid H Rights and/or

H Rights Shares have been offered or will be offered pursuant to the H Share Rights Issue to the public in that

relevant member state prior to the publication of a prospectus in relation to the Nil Paid H Rights and/or H

Rights Shares which has been approved by the competent authority in the relevant member state or, where

appropriate, approved in another relevant member state and notified to the competent authority in the relevant

member state, all in accordance with the Prospectus Directive, except that with effect from and including the

relevant implementation date, offers of Nil Paid H Rights and/or H Rights Shares may be made to the public

in that relevant member state at any time:

(a) to legal entities which are authorised or regulated to operate in the financial markets or, if not so

authorised or regulated, whose corporate purpose is solely to invest in securities;

(b) to any legal entity which has two or more of (i) an average of at least 250 employees during the

last financial year; (ii) a total balance sheet of more than C43 million; and (iii) an annual turnover

of more than C50 million, as shown in its last annual or consolidated accounts; or

(c) in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that

no such offer of Nil Paid H Rights and/or H Rights Shares shall result in a requirement for the

publication by the Company or any underwriter of a prospectus pursuant to Article 3 of the

Prospectus Directive.

For this purpose, the expression “an offer of any Nil Paid H Rights and/or H Rights Shares to the public”

in relation to any Nil Paid H Rights and/or H Rights Shares in any relevant member state means the

communication in any form and by any means of sufficient information on the terms of the H Share Rights

Issue and any Nil Paid H Rights and/or H Rights Shares to be offered so as to enable an investor to decide to

acquire any Nil Paid H Rights and/or H Rights Shares as the same may be varied in that relevant member state

by any measure implementing the Prospectus Directive in that relevant member state.

In the case of any Nil Paid H Rights and/or H Rights Shares being offered to a financial intermediary

as that term is used in Article 3(2) of the Prospectus Directive, such financial intermediary will also be deemed

to have represented, acknowledged and agreed that the Nil Paid H Rights and/or H Rights Shares acquired by

it in the H Share Rights Issue have not been acquired on a nondiscretionary basis on behalf of, nor have they

been acquired with a view to their offer or resale to, persons in circumstances which may give rise to an offer

of any Nil Paid H Rights and/or H Rights Shares to the public other than their offer or resale in a relevant

member state to qualified investors as so defined or in circumstances in which the prior consent of the

Company and the underwriters has been obtained to each such proposed offer or resale.

NOTICE TO JAPANESE INVESTORS

Registration for public offering of our Nil Paid H Rights and/or H Rights Shares in Japan has not been

and will not be made under the Financial Instruments and Exchange Law of Japan. Accordingly, our Nil Paid

H Rights and/or the H Rights Shares may not be offered or sold, directly or indirectly, in Japan or to or for

the benefit of any resident of Japan, except pursuant to an exemption from the registration requirements of, and

otherwise in compliance with the Financial Instruments and Exchange Law of Japan and any other applicable

laws and regulations in Japan. As used in this paragraph, a “resident of Japan” includes any person residing

in Japan, any corporation or other entity organised under the laws of Japan.

NOTICE TO INVESTORS IN MACAU

Our Nil Paid H Rights and/or H Rights Shares may not be promoted, distributed, sold, delivered or

offered in Macau to any Macau residents or entities except under the terms of and in compliance with the

Macau Financial System Act and any other laws in Macau that may apply to the promotion, distribution, sale,

delivery or offer of our Nil Paid H Rights and/or H Rights Shares in Macau. Our Nil Paid H Rights and/or H

Rights Shares are not registered or otherwise authorized for public offer under the Macau Financial System Act

and any other laws in Macau, thus may not be promoted, distributed, sold, delivered or offered in Macau,

unless such actions are made by credit or other financial institutions duly licensed in Macau and upon their

communication to the Macau Monetary Authority.

NOTICE TO MALAYSIAN INVESTORS

This prospectus has not been and will not be registered as a prospectus with the Malaysian Securities

Commission (“SC”) under the Capital Markets and Services Act 2007 (“CMSA”). This prospectus will not be

NOTICES

– iii –

deposited as an information memorandum with the SC. Accordingly, this prospectus and any other document

or material in connection with the issue or offer for sale, or invitation for acquisition of the Nil Paid H Rights

and/or H Rights Shares shall not be circulated nor distributed, nor may the Nil Paid H Rights and/or H Rights

Shares be issued, offered or sold, or be made subject of an invitation for acquisition, whether directly or

indirectly, to any person in Malaysia, other than to the persons specified in sections 229(l)(b) or 230(l)(b) or

schedules 6 or 7 of the CMSA.

The approval of the SC has not been sought and, consequently, the Nil Paid H Rights and/or H Rights

Shares may not be made available, or offered for acquisition, nor may any invitation to acquire the Nil Paid

H Rights and/or H Rights Shares, whether directly or indirectly, be issued to any person in Malaysia unless

such issue, offer or invitation is exempted from the requirement for the approval of the SC by virtue of

schedule 5 to the CMSA.

NOTICE TO NEW ZEALAND INVESTORS

This prospectus and the information contained in or accompanying this prospectus are not, and are under

no circumstances to be construed as, an offer of securities for subscription to any person resident or domiciled

in New Zealand in terms of the Securities Act 1978 (N.Z.). This prospectus and the information contained in

or accompanying this prospectus may be provided to any person resident or domiciled in New Zealand for his,

her or its information only and any offer is not capable of acceptance by any person resident or domiciled in

New Zealand.

NOTICE TO INVESTORS IN THE PHILIPPINES

Our Nil Paid H Rights and/or H Rights Shares have not been and will not be registered with the

Securities and Exchange Commission under the Securities Regulation Code. Accordingly, our Nil Paid H

Rights and/or H Rights Shares may not be offered or sold, directly or indirectly, in the Philippines or to or for

the benefit of any resident of the Philippines, except if such offer or sale qualifies as an exempt transaction

or is otherwise in compliance with the applicable registration requirements under the Code. As used in this

paragraph, a “resident of the Philippines” includes any person residing in the Philippines, any corporation or

other entity organized under the laws of the Philippines.

NOTICE TO PRC INVESTORS

This prospectus does not constitute a public offer of the Nil Paid H Rights and/or H Rights Shares,

whether by way of sale or subscription, in the PRC. According to relevant PRC laws and regulations, the Nil

Paid H Rights and/or the H Rights Shares are not being offered and may not be offered or sold directly or

indirectly in the PRC to, or for the benefit of, legal or natural persons of the PRC other than MOF, SSF and

QDIIs.

Notwithstanding what is stated in the preceding paragraph above, MOF, SSF and QDIIs may be able to

take up their rights under the H Share Rights Issue, provided that they fulfil the requirements under relevant

PRC laws and regulations.

In each case, we reserve the absolute discretion in determining whether to allow such participation as

well as the identities of the persons who may be allowed to do so.

NOTICE TO SINGAPORE INVESTORS

This prospectus and any other materials relating to the H Share Rights Issue have not been, and will not

be, lodged or registered as a prospectus in Singapore with the Monetary Authority of Singapore. Accordingly,

this prospectus and any other document or materials in connection with the offer or sale, or invitation for

subscription or purchase, or the allotment and issuance of the Nil Paid H Rights and/or H Rights Shares in

connection with the H Share Rights Issue, may not be issued, circulated or distributed, nor may the Nil Paid

H Rights and/or H Rights Shares be offered or sold, or be made the subject of an invitation for subscription

or purchase, or be allotted or issued, whether directly or indirectly, to persons in Singapore except pursuant

to and in accordance with the exemption in Section 273(1)(cd) of the Securities and Futures Act, Cap 289 of

Singapore (“SFA”) or any other exemptions as set out in Part XIII, Division 1, Subdivision 4 of the SFA.

This prospectus has been given to you on the basis that you are an existing shareholder of us. In the event

that you are not an existing shareholder of us, please return this prospectus immediately. You may not forward

or circulate this prospectus to any other person in Singapore.

NOTICES

– iv –

Any offer is not made to you with a view to the Nil Paid H Rights and/or H Rights Shares being

subsequently offered for sale to any other party. There are on-sale restrictions in Singapore that may be

applicable to investors who acquire the Nil Paid H Rights and/or H Rights Shares. As such, investors are

advised to acquaint themselves with the SFA provisions relating to on-sale restrictions in Singapore and

comply accordingly.

NOTICE TO SWISS INVESTORS

This prospectus does not constitute a public offering prospectus as the term is understood pursuant to

Article 652a and/or 115b of the Swiss Code of Obligations. We have not applied for a listing of the Nil Paid

H Rights and/or H Rights Shares on the SIX Swiss Exchange and consequently, the information presented in

this prospectus does not claim to, and does not necessarily, comply with the disclosure standards of the listing

rules of the SIX Swiss Exchange and corresponding prospectus schemes annexed to the listing rules of the SIX

Swiss Exchange.

There will be no public offer of the Nil Paid H Rights and/or H Rights Shares in Switzerland. This

document is being communicated in or from Switzerland to a small number of selected investors only, without

any public offer and only to investors who do not purchase the Nil Paid H Rights and/or H Rights Shares with

the intention to distribute them to the public. Each copy of this document is addressed to a specifically named

recipient and may not be passed on to third parties.

NOTICE TO INVESTORS IN TAIWAN

The Nil Paid H Rights and/or H Rights Shares have not been and will not be registered with the Financial

Supervisory Commission (“FSC”) of Taiwan pursuant to relevant securities laws and regulations of Taiwan and

may not be offered or sold in Taiwan in the event that any such offer or sale would constitute an offer as defined

under the Securities and Exchange Act of Taiwan and require the registration thereof or report thereon with or

to the FSC. No individual or entity in Taiwan has been authorised to offer, sell or otherwise advise on the offer

or sale of the Nil Paid H Rights and/or H Rights Shares in Taiwan.

NOTICE TO INVESTORS IN THAILAND

This prospectus has not been and will not be registered as a prospectus with the Securities and Exchange

Commission of Thailand (“SEC”) under the Securities and Exchange Act B.E. 2535 (as amended). This

prospectus will not be deposited as an information memorandum with the SEC. Accordingly, this prospectus

and any other document or material in connection with the issue or offer for sale, or invitation for acquisition

of the Nil Paid H Rights and/or H Rights Shares shall not be circulated nor distributed, or may the Nil Paid

H Rights and/or H Rights Shares be issued, offered or sold, or be made the subject of an invitation for

acquisition, whether directly or indirectly, to any person in Thailand, other than to the existing Shareholders

who are entitled to such Nil Paid H Rights and/or H Rights Shares.

NOTICE TO INVESTORS IN THE UNITED KINGDOM

This prospectus has not been delivered for approval to the Financial Services Authority (“FSA”) in the

United Kingdom or to an authorised person within the meaning of Financial Services and Markets Act 2000,

as amended (“FSMA”). No approved prospectus within the meaning of section 85 of FSMA or of the Directive

2003/71/EC of the European Parliament and the Council of 4 November 2003 on the prospectus to be published

when securities are offered to the public or admitted to trading (“Prospectus Directive”) has been published

or is intended to be published in relation to the H Share Rights Issue. Accordingly, this prospectus may not be

offered to persons in the United Kingdom except in circumstances which will not result in an offer to the public

in the United Kingdom in contravention of section 85(1) of FSMA.

Within the United Kingdom, this prospectus is only being addressed and distributed to persons to whom

interests may lawfully be promoted pursuant to section 21 of FSMA. In particular, this prospectus may be

addressed and distributed only to (a) persons to whom article 43 of the Financial Services and Markets Act

2000 (Financial Promotion) Order 2005 (“FPO”) applies or (b) persons to whom it may be lawfully

communicated (together being referred to as “Relevant Persons”). This communication must not be acted on

or relied on by persons who are not Relevant Persons. Any investment or investment activity to which this

communication relates is available only to Relevant Persons and will be engaged in only with Relevant

Persons.

NOTICES

– v –

NOTICE TO US INVESTORS

The Provisional Allotment Letter, the Excess Application Form, the Nil Paid H Rights and the H Rights

Shares have not been and will not be registered under the U.S. Securities Act or securities laws of any state

or territory of the United States and may not be offered, sold, taken up, resold, renounced, transferred,

delivered, directly or indirectly, in or into the United States, except pursuant to an effective registration

statement or in accordance with an applicable exemption from, or in a transaction not subject to, the

registration requirements of the U.S. Securities Act and in compliance with any applicable securities laws of

the states or other jurisdictions of the United States.

The Provisional Allotment Letter, the Excess Application Form, the Nil Paid H Rights and the H

Rights Shares have not been approved or disapproved by the U.S. Securities and Exchange Commission,

any state securities commission in the United States or any U.S. regulatory authority, nor have any the

foregoing authorities passed upon or endorsed the merits the offering the Provisional Allotment Letter,

the Excess Application Form, the Nil Paid H Rights and the H Rights Shares or the accuracy or adequacy

of this document. Any representation to the contrary is a criminal offence in the United States.

Subject to certain exceptions, none of this prospectus, the Provisional Allotment Letter and the Excess

Application Form constitutes, will constitute, or forms or will form, part of any offer to sell or a solicitation

of an offer to buy the Nil Paid H Rights and/or the H Rights Shares to any person with a registered address,

or who is located, in the United States, or an offer to sell or a solicitation of an offer to buy the Nil Paid H

Rights and/or the H Rights Shares by any person in any circumstances in which such offer or solicitation is

unlawful. The Nil Paid H Rights and the H Rights Shares are being offered outside the United States in

accordance with Regulation S under the U.S. Securities Act.

In addition, until 40 days after the commencement the H Share Rights Issue, or the procurement of

purchasers by the Underwriters of the H Rights Shares not initially taken up, any offer, sale or transfer of the

Nil Paid H Rights or the H Rights Shares in or into the United States by a dealer (whether or not participating

in the H Share Rights Issue) may violate the registration requirements of the U.S. Securities Act unless made

in accordance with an applicable exemption from the registration requirements of the U.S. Securities Act.

The Underwriters may arrange for the offer of the H Rights Shares not taken up in the H Share Rights

Issue only outside the United States in accordance with Regulation S under the U.S. Securities Act. Each

purchaser or subscriber of H Rights Shares being offered and sold outside the United States will be deemed

to have represented and agreed, among other things, that the purchaser or subscriber is acquiring the H Rights

Shares in an offshore transaction meeting the requirements of Regulation S under the U.S. Securities Act.

Any person (other than the QIBs referred to in the immediate following paragraph) purchasing or taking

up the Nil Paid H Rights or subscribing for or accepting the H Rights Shares will be required to represent,

among others, that such person

(i) is not within the United States;

(ii) is not in any jurisdiction in which it is unlawful to make or accept an offer to acquire the Nil Paid

H Rights or the H Rights Shares;

(iii) is not doing so for the account of any person who is located in the United States, unless

(a) the instruction to take up was received from a person outside the United States; and

(b) the person giving such instruction has confirmed that (x) it has the authority to give such

instruction, and (y) either (A) has investment discretion over such account or (B) is an

investment manager or investment company that it is acquiring the H Rights Shares in an

“offshore transaction” within the meaning of Regulation S under the U.S. Securities Act

and who is not otherwise a U.S. Person within the meaning and meeting the requirements of

Regulation S under the U.S. Securities Act; and

(iv) is not acquiring the Nil Paid H Rights or the H Rights Shares with a view to the offer, sale, resale,

transfer, delivery or distribution, directly or indirectly, of any such Nil Paid H Rights or H Rights

Shares into the United States or any other jurisdiction referred to in (ii) above.

NOTICES

– vi –

Notwithstanding the representations above, the Company may offer the Nil Paid H Rights and H Rights

Shares in the United States to a limited number of persons who the Company reasonably believes to be QIBs

in transactions exempt from registration requirements under the U.S. Securities Act, provided that such persons

fulfill relevant requirements to the satisfaction of the Company.

NOTICE TO NEW HAMPSHIRE RESIDENTS

Neither the fact that a registration statement or an application for a license has been filed under Chapter

421-B of the New Hampshire Revised Statutes (“RSA 421-B”) with the State of New Hampshire nor the fact

that a security is effectively registered or a person is licensed in the State of New Hampshire constitutes a

finding by the Secretary of State of New Hampshire that any document filed under RSA 421-B is true, complete

and not misleading. Neither any such fact nor the fact that an exemption or exception is available for a security

or a transaction means that the Secretary of State has passed in any way upon the merits or qualifications of,

or recommended or given approval to, any person, security or transaction. It is unlawful to make, or cause to

be made, to any prospective purchaser, customer or client any representation inconsistent with the provisions

of this paragraph.

FORWARD-LOOKING STATEMENTS

All statements in this prospectus other than statements of historical fact are forward-looking statements.

In some cases, forward-looking statements may be identified by the use of words such as “might,” “may,”

“could,” “would,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “plan,” “seek,” “continue,”

“illustration,” “projection” or similar expressions and the negative thereof. Forward-looking statements in this

prospectus include, without limitation, statements in respect of the Group’s business strategies, product

offerings, market position, competition, financial prospects, performance, liquidity and capital resources, as

well as statements regarding trends in the relevant industries and markets in which the Group operates,

technological advances, financial and economic developments, legal and regulatory changes and their

interpretation and enforcement.

The forward-looking statements in this prospectus are based on management’s present expectations

about future events. Management’s present expectations reflect numerous assumptions regarding the Group’s

strategy, operations, industry, developments in the credit and other financial markets and trading environment.

By their nature, they are subject to known and unknown risks and uncertainties, which could cause actual

results and future events to differ materially from those implied or expressed by forward-looking statements.

Should one or more of these risks or uncertainties materialise, or should any assumptions underlying

forward-looking statements prove to be incorrect, the Group’s actual results could differ materially from those

expressed or implied by forward-looking statements. Additional risks not known to the Group or that the Group

does not currently consider material could also cause the events and trends discussed in this prospectus not to

occur, and the estimates, illustrations and projections of financial performance not to be realised.

Prospective investors are cautioned that forward-looking statements speak only as of the date of

publication of this prospectus. Except as required by applicable law, the Group does not undertake, and

expressly disclaims, any duty to revise any forward-looking statement in this prospectus, be it as a result of

new information, future events or otherwise.

ARBITRATION OF DISPUTES

If you have a claim against or dispute with us, a director, supervisor, president or other senior executive

officer of ours, a holder of our Nil Paid Rights or H Rights Shares, or a holder of our A Shares or rights to

subscribe to our A Shares relating to any rights or obligations conferred or imposed by our articles of

association or by the PRC Company Law and related regulations concerning our affairs or with respect to the

transfer of our Shares, our articles of association require you to submit the dispute or claim to either the China

International Economic and Trade Arbitration Commission (“CIETAC”), or the Hong Kong International

Arbitration Centre (“HKIAC”), for arbitration. Our articles of association further provide that the arbitral

award will be final and conclusive and binding on all parties.

NOTICES

– vii –

EXPECTED TIMETABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

SUMMARY OF THE RIGHTS ISSUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

GROUNDS FOR TERMINATION OF THE UNDERWRITING AGREEMENT . . . . . . . . . . . 11

RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

INFORMATION ABOUT THIS PROSPECTUS AND

THE H SHARE RIGHTS ISSUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

BUSINESS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

RISK MANAGEMENT AND INTERNAL CONTROL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71

DIRECTORS, SUPERVISORS AND PARTIES INVOLVED

IN THE H SHARE RIGHTS ISSUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83

CORPORATE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90

LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91

(I) Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91

(II) The Rights Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92

(III) H Share Rights Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93

(IV) A Share Rights Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116

(V) Shareholding Structure of the Company prior to and upon completion

of the Rights Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118

(VI) Reasons for the Rights Issue and Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . 119

(VII) Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120

APPENDIX I − FINANCIAL INFORMATION OF THE GROUP . . . . . . . . . . . . . . I-1

APPENDIX II − UNAUDITED PRO FORMA FINANCIAL INFORMATION OF

THE GROUP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-1

APPENDIX III − STATUTORY AND GENERAL INFORMATION . . . . . . . . . . . . . . III-1

CONTENTS

– viii –

Expected H Share Rights Issue Timetable

Last day of dealings in H Shares on a cum-rights basis . . . . . . . . . . . . . . . .Wednesday, 28 August 2013

First day of dealings in H Shares on an ex-rights basis . . . . . . . . . . . . . . . . . .Thursday, 29 August 2013

Latest time for lodging transfer of H Shares in order

to qualify for the H Share Rights Issue . . . . . . . . . . . . . . . . . . . . .4:30 p.m., Friday, 30 August 2013

Register of the H Shareholders closed . . . . . . . . . . . . . . . . . . . . . . . . . . Monday, 2 September 2013 to

Tuesday, 3 September 2013

(both days inclusive)

H Share Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Tuesday, 3 September 2013

Register of the H Shareholders re-opens . . . . . . . . . . . . . . . . . . . . . . . .Wednesday, 4 September 2013

Despatch of Prospectus Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Thursday, 5 September 2013

First day of dealings in Nil Paid H Rights . . . . . . . . . . . . . . . . . . . . . . . . .Monday, 9 September 2013

Latest time for splitting Provisional Allotment Letters . . . . . . .4:30 p.m., Wednesday, 11 September 2013

Last day of dealings in Nil Paid H Rights . . . . . . . . . . . . . . . . . . . . . . . .Monday, 16 September 2013

Latest time for acceptance of and payment for

H Rights Shares and application and payment for

excess H Rights Shares . . . . . . . . . . . . . . . . . . . . . . . . . . .4:00 p.m., Thursday, 19 September 2013

Latest time for the termination of the Underwriting

Agreement and for the H Share Rights Issue to

become unconditional . . . . . . . . . . . . . . . . . . . . . . . . . . .5:00 p.m., Wednesday, 25 September 2013

Announcement of results of acceptance of and

excess applications for H Rights Shares . . . . . . . . . . . . . . . . . . . . . . .Thursday, 26 September 2013

Despatch of certificates for H Rights Shares . . . . . . . . . . . . . . . . . . . . . . .Monday, 30 September 2013

Despatch of refund cheques in respect of wholly or partially

unsuccessful applications for excess H Rights Shares . . . . . . . . . . . . . . .Monday, 30 September 2013

Commencement of dealings in H Rights Shares in fully-paid form . .9:00 a.m., Wednesday, 2 October 2013

All times and dates herein refer to Hong Kong local time and dates. Shareholders should note that the

dates or deadlines specified in the expected timetable of the H Share Rights Issue as set out above, and in

other parts of this prospectus, are indicative only and may be changed by the Board (or its authorised

delegates). In the event any special circumstances arise, the Board (or its delegates) may extend, or make

adjustment to, the timetable if it considers appropriate. Any such extension or adjustment to the expected

timetable will be announced and notified to the Shareholders and the Hong Kong Stock Exchange as and

when appropriate.

EXPECTED TIMETABLE

– 1 –

Effect of Bad Weather on the Latest Time for Acceptance of and Payment for H Rights Shares and

Application and payment for Excess H Rights Shares

The latest time for acceptance of and payment for H Rights Shares and application and payment for

excess H Rights Shares will not take place if there is a tropical cyclone warning signal no. 8 or above or a

“black” rainstorm warning:

(i) in force in Hong Kong at any local time before 12:00 noon and no longer in force after 12:00 noon

on Thursday, 19 September 2013. Instead the latest time for acceptance of and payment for H

Rights Shares and application and payment for excess H Rights Shares will be extended to 5:00

p.m. on the same Business Day;

(ii) in force in Hong Kong at any local time between 12:00 noon and 4:00 p.m. on Thursday, 19

September 2013. Instead the latest time for acceptance of and payment for H Rights Shares and

application and payment for excess H Rights Shares will be rescheduled to 4:00 p.m. on the

following Business Day which does not have either of those warnings in force at any time between

9:00 a.m. and 4:00 p.m.

If the latest time for acceptance of and payment for H Rights Shares and application and payment for

excess H Rights Shares does not take place on Thursday, 19 September 2013, the dates mentioned in the section

headed “Expected Timetable” above may be affected. An announcement will be made by the Company in such

event.

EXPECTED TIMETABLE

– 2 –

In this prospectus, unless the context requires otherwise, the following terms and expressions shall have

the following meanings:

”A Rights Share(s)” the new A Share(s) proposed to be allotted and issued to the

Qualifying A Shareholders pursuant to the A Share Rights Issue

“A Share(s)” PRC-listed domestic share(s) of par value of RMB1.00 each in the

registered capital of the Company

“A Share Record Date” Tuesday, 27 August 2013, or such other date determined by the

Board by reference to which entitlements of the Qualifying A

Shareholder(s) to the A Share Rights Issue are determined

“A Share Rights Issue” the proposed issue of up to 3,073,906,773 A Rights Shares at the

Subscription Price on the basis of 1.74 A Rights Shares for every

10 existing A Shares held on the A Share Record Date

“A Share Rights Issue Prospectus” the prospectus dated 23 August 2013, which is in Chinese,

containing the details of the A Share Rights Issue published by the

Company on the website of the Shanghai Stock Exchange

(www.sse.com.cn) and the website of the Hong Kong Stock

Exchange (www.hkexnews.hk)

“A Shareholder(s)” holder(s) of the A Shares

“A Shareholders Class Meeting” the 2011 first class meeting of the A Shareholders held on Friday,

9 September 2011 on which, among other matters, the Rights Issue

was considered and approved

“Acceptance Date” Thursday, 19 September 2013, being the latest date for acceptance

of and payment for the H Rights Shares and for application and

payment for the excess H Rights Shares, provided that if on such

date a storm warning (being a tropical cyclone warning signal

number 8 or above or a “black” rainstorm warning signal issued in

Hong Kong) is issued in Hong Kong at any time between 12:00

p.m. and 4:00 p.m. then references to the “Acceptance Date” shall

mean the first Business Day thereafter on which no such storm

warning remains issued at any time between 12:00 p.m. and 4:00

p.m.

“Announcement” the announcement of the Company dated 23 August 2013 in

relation to the proposed H Share Rights Issue and A Share Rights

Issue

“Articles” the articles of association of the Company, as amended from time

to time

“Basel II” the Revised Basel Capital Framework promulgated in June 2004

“Beneficial H Shareholder(s)” any beneficial owner(s) of H Shares whose H Shares are registered

in the register of members of the Company in the name(s) of a

registered H Shareholder/Shareholders

DEFINITIONS

– 3 –

“Board” or “Board of Directors” the board of directors of the Company

“Business Day” any day other than Saturday or Sunday on which commercial banks

and financial institutions in Hong Kong are open for business

“CAGR” compound annual growth rate

“CBRC” China Banking Regulatory Commission

“CCASS” the Central Clearing and Settlement System established and

operated by Hong Kong Securities Clearing Company Limited

“CCASS Participant” a person admitted by HKSCC as a participant of CCASS

“CICC” China International Capital Corporation Limited

“CICCHKS” China International Capital Corporation Hong Kong Securities

Limited

“Citi” or “Financial Adviser” Citigroup Global Markets Asia Limited

“CM Group” China Merchants Group Limited

“CM Securities” China Merchants Securities Co., Ltd.

“CM Securities (HK)” China Merchants Securities (HK) Co., Limited

“CMBI” CMB International Capital Limited, a wholly owned subsidiary of

CMB International Capital Corporation Ltd, which is a wholly-

owned subsidiary of the Company

“CMFH” China Merchants Finance Holdings Co., Ltd.

“Company,” “we,” “us,” “our” or

“Bank”

China Merchants Bank Co., Ltd. (招商銀行股份有限公司), a joint

stock limited company incorporated under the laws of the PRC, the

H Shares of which are listed on the Hong Kong Stock Exchange

and the A Shares of which are listed on the Shanghai Stock

Exchange

“CSRC” China Securities Regulatory Commission

“Director(s)” the director(s) of the Company

“EGM” the 2011 first extraordinary general meeting of the Shareholders

held on Friday, 9 September 2011 on which, among other matters,

the Rights Issue was considered and approved

“Excess Application Form(s)” or

“EAF(s)”

application form(s) for excess H Rights Shares

DEFINITIONS

– 4 –

“Excluded H Shareholder(s)” H Shareholder(s) whose name(s) appeared in the H Shareholders’

register of the Company at the close of business on the H Share

Record Date and whose address(es) as shown in such register is/are

in any of the Specified Territories, except for those H Shareholders

with addresses in the U.S., Australia, the PRC, the Philippines or

Switzerland who fulfil the relevant requirements to the satisfaction

of the Company and the relevant requirements as specified in this

Prospectus; and any H Shareholders or Beneficial H Shareholders

at that time who are otherwise known by the Company to be

resident in any of the Specified Territories, except for those H

Shareholders or Beneficial H Shareholders resident in the U.S.,

Australia, the PRC, the Philippines or Switzerland who fulfil the

relevant requirements to the satisfaction of the Company and the

relevant requirements as specified in this Prospectus

“GDP” gross domestic product

“Goldman Sachs” Goldman Sachs (Asia) L.L.C.

“Group” the Company and its subsidiaries

“GSGH” Goldman Sachs Gao Hua Securities Co., Ltd.

“H Rights Share(s)” the new H Share(s) proposed to be allotted and issued to the

Qualifying H Shareholders pursuant to the H Share Rights Issue

“H Share(s)” overseas listed foreign share(s) of par value of RMB1.00 each in

the registered capital of the Company

“H Share Record Date” Tuesday, 3 September 2013, or such other date determined by the

Board by reference to which entitlements to the H Share Rights

Issue are to be determined

“H Share Registrar” Computershare Hong Kong Investor Services Limited at Shops

1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East,

Wanchai, Hong Kong, being the Company’s registrar of the H

Shares

“H Share Rights Issue” the issue of 680,423,172 H Rights Shares at the Subscription Price

on the basis of 1.74 H Rights Shares for every 10 existing H Shares

held on the H Share Record Date

“H Share Rights Issue Prospectus” this prospectus to be issued to the H Shareholders in respect of the

H Share Rights Issue containing details of the H Share Rights Issue

“H Shareholder(s)” holder(s) of H Shares

“H Shareholders Class Meeting” the 2011 first class meeting of the H Shareholders held on Friday,

9 September 2011 on which, among other matters, the Rights Issue

was considered and approved

“HK$” Hong Kong dollar, the lawful currency of Hong Kong

DEFINITIONS

– 5 –

“HKSCC” Hong Kong Securities Clearing Company Limited

“Hong Kong” the Hong Kong Special Administrative Region of the PRC

“Hong Kong Companies Ordinance” the Companies Ordinance (Chapter 32 of the Laws of Hong Kong)

as amended, supplemented or otherwise modified from time to time

“Hong Kong Listing Rules” the Rules Governing the Listing of Securities on The Stock

Exchange of Hong Kong Limited

“Hong Kong Stock Exchange” The Stock Exchange of Hong Kong Limited

“IAS 39” International Accounting Standard 39 “Financial Instruments:

Recognition and Measurement” and its interpretations by the IASB

“IASB” the International Accounting Standards Board

“IFRS” International Financial Reporting Standards promulgated by the

IASB, which includes International Accounting Standards and their

interpretations

“IFRSIC” the IFRS Interpretations Committee

“Intermediary” in relation to a Beneficial H Shareholder whose H Shares are

deposited in CCASS and registered in the name of HKSCC

Nominees Limited, means the Beneficial H Shareholder’s broker,

custodian, nominee or other relevant person who is a CCASS

Participant or who has deposited the Beneficial H Shareholder’s H

Shares with a CCASS Participant

“Joint Global Coordinators” CICCHKS, Citi, Goldman Sachs and UBS (in alphabetical order)

“Joint Lead Underwriters” CICCHKS, Citi, CM Securities (HK), CMBI, Goldman Sachs and

UBS (in alphabetical order)

“Joint Stock Commercial Banks” China CITIC Bank, China Everbright Bank, Huaxia Bank, China

Guangfa Bank, Ping An Bank, Shanghai Pudong Development

Bank, Industrial Bank, China Minsheng Bank, Evergrowing Bank,

China Zheshang Bank, China Bohai Bank and our Bank

“Large Commercial Banks” Industrial and Commercial Bank of China, Agricultural Bank of

China, China Construction Bank, Bank of China, Bank of

Communications

“Latest Practicable Date” 30 August 2013, being the latest practicable date to determine

certain information as set forth herein prior to the printing of this

prospectus

“Latest Time for Termination” 5:00 p.m. on Wednesday, 25 September 2013

“Listing Committee” the listing committee of the Hong Kong Stock Exchange

DEFINITIONS

– 6 –

“MOF” Ministry of Finance of the PRC

“NDRC” National Development and Reform Commission of the PRC

“Negotiated Deposits” (i) deposits from PRC and foreign insurance companies with an

amount no less than RMB30 million and a term exceeding five

years, (ii) deposits from the SSF with an amount no less than

RMB0.5 billion and a term exceeding five years, or (iii) deposits

with a term exceeding five years in individual endowment

insurance accounts managed by provincial social insurance

authorities which have completed or are undergoing a pilot scheme

to reform individual endowment insurance accounts

“Nil Paid H Rights” rights to subscribe for H Rights Shares (in the form of H Rights

Shares in nil-paid form) before the Subscription Price is paid

“Non-PRC Resident Enterprise

Shareholder”

any Shareholder incorporated under the laws of, and having its

management office located in, a jurisdiction other than the PRC

which has established office in the PRC and has income sourced

from the PRC

“PBOC” The People’s Bank of China

“PRC” or “China” the People’s Republic of China, and for the purposes of this

prospectus only, excluding Hong Kong, Macau and Taiwan

“PRC Company Law” the Company Law of the PRC (中華人民共和國公司法), as

amended, supplemented or otherwise modified from time to time

“PRC GAAP” the Accounting Standards for Business Enterprises and other

relevant regulations issued by the regulatory bodies of the PRC

“Price Determination Date” Thursday, 22 August 2013, the date on which the Subscription

Price was fixed for the purposes of the Rights Issue, being the last

trading day of Shares immediately before the date of the

Announcement

“Prospectus Documents” the H Share Rights Issue Prospectus, the Provisional Allotment

Letter and the Excess Application Form

“Provisional Allotment Letter(s)” or

“PAL(s)”

provisional allotment letter(s) for the H Rights Shares

“QDII(s)” qualified domestic institutional investor(s) in the PRC

“QIBs” qualified institutional buyers as defined in Rule 144A under the

U.S. Securities Act

“Qualifying A Shareholder(s)” A Shareholder(s) whose name(s) appear(s) on the register of

members of the Company on the A Share Record Date

DEFINITIONS

– 7 –

“Qualifying H Shareholder(s)” H Shareholder(s), other than the Excluded H Shareholder(s), whose

name(s) appear(s) on the H Shareholders’ register of the Company

on the H Share Record Date

“Receiving Banks” Wing Lung Bank Limited and Bank of China (Hong Kong) Limited

“Record Date” the H Share Record Date and/or the A Share Record Date

“Rights Issue” the A Share Rights Issue and the H Share Rights Issue

“Rights Share(s)” the H Rights Share(s) and the A Rights Share(s)

“RMB” or “Renminbi” the lawful currency of the PRC

“SAFE” State Administration of Foreign Exchange of the PRC

“Second Transformation” the second transformation strategy proposed by the Bank in 2009

“SFO” the Securities and Futures Ordinance (Chapter 571 of the Laws of

Hong Kong), as amended, supplemented or otherwise modified

from time to time

“Shanghai Stock Exchange” The Shanghai Stock Exchange

“Share(s)” Share(s) with a par value of RMB1.00 each in the Company,

including A Share(s) and H Share(s)

“Shareholder Underwriter” CMFH

“Shareholders” the holder(s) of Shares

“Special Regulations” the Special Regulations of the State Council on the Overseas

Offering and Listing of Shares by Joint Stock Limited Companies

(國務院關於股份有限公司境外募集股份及上市的特別規定) issued

by the State Council on 4 August 1994, as amended, supplemented

or otherwise modified from time to time

“Specified Territories” Australia, Bermuda, Canada, Chile, Japan, Macau, Malaysia, the

Philippines, the PRC, Switzerland and the US

“SSF” National Council for Social Securities Fund

“State Council” State Council of the PRC

“Subscription Price” RMB9.29 for each A Rights Share and HK$11.68 for each H Rights

Share

“subsidiary(ies)” has the meaning ascribed thereto in the Hong Kong Listing Rules

“substantial shareholder(s)” has the meaning ascribed thereto in the Hong Kong Listing Rules

“Supervisor(s)” the supervisor(s) of the Company

DEFINITIONS

– 8 –

“trading day” with respect to A Shares, means a day on which the Shanghai Stock

Exchange is open for dealing or trading in securities, and with

respect to H Shares, means a day on which the Hong Kong Stock

Exchange is open for dealing or trading in securities

“UBS” UBS AG, Hong Kong Branch

“Undertaking Letter” the irrevocable undertaking dated 22 August 2013 to the Company

and the Joint Global Coordinators by CM Group

“Underwriters” the Shareholder Underwriter and the Joint Lead Underwriters

“Underwriting Agreement” the underwriting agreement dated 22 August 2013 and entered into

between the Company and the Underwriters in relation to the H

Share Rights Issue

“US,” “U.S.” or “United States” the United States of America

“U.S. Securities Act” the U.S. Securities Act of 1933, as amended

“Voting Results Announcement” an announcement of the Company dated 9 September 2011 in

relation to the voting results of the EGM, the A Shareholders Class

Meeting and H Shareholders Class Meeting

“Wing Lung Bank” or

“Wing Lung Bank Limited”

Wing Lung Bank Limited

“Wing Lung Group” Wing Lung Bank Limited and its consolidated subsidiaries

“%” per cent

Unless otherwise specified in this prospectus, translations of RMB into HK$ are made in this prospectus

for illustration only, at the rate of RMB0.79558 to HK$1. No representation is made that any amounts in RMB

could have been or could be converted at that rate or at any other rates or at all.

In addition, unless otherwise specified in this prospectus, all amounts or value in this prospectus are

denominated in Renminbi.

DEFINITIONS

– 9 –

The following information is derived from, and should be read in conjunction with, the full text of this

prospectus.

H Share Rights Issue Statistics

Basis of H Share Rights Issue : 1.74 H Rights Shares for every 10 existing H Shares held on theH Share Record Date by the Qualifying H Shareholders

Number of H Shares in issue as ofthe Latest Practicable Date

: 3,910,478,000

Number of H Rights Sharesproposed to be issued (assumingthe number of H Shares in issueon the H Share Record Dateremains the same as the LatestPracticable Date)

: 680,423,172

Subscription Price forthe H Rights Shares

: HK$11.68 per H Rights Share

Shareholder Underwriter : CMFH

Joint Global Coordinators(H Share Rights Issue)(in alphabetical order)

: CICCHKS, Citi, Goldman Sachs and UBS

Joint Lead Underwriters(in alphabetical order)

: CICCHKS, Citi, CM Securities (HK), CMBI, Goldman Sachsand UBS

Financial Adviser : Citi

A Share Rights Issue Statistics

Basis of A Share Rights Issue : 1.74 A Rights Shares for every 10 existing A Shares held on theA Share Record Date by the Qualifying A Shareholders

Number of A Shares in issue priorto the A Share Rights Issue

: 17,666,130,885

Number of A Rights Sharesproposed to be issued (assumingthe number of A Shares in issueon the A Share Record Dateremains the same as the LatestPracticable Date)

: 3,073,906,773

Joint sponsors(in alphabetical order)

: CICC and GSGH

Joint lead underwriters(in alphabetical order)

: CICC and GSGH

Financial adviser : CM Securities

Subscription Price forthe A Rights Shares

: RMB9.29 per A Rights Share

SUMMARY OF THE RIGHTS ISSUE

– 10 –

The Underwriting Agreement shall terminate without further act or deed if any of the conditions

precedent to the obligations of the Underwriters shall not have been satisfied when and as required by the

Underwriting Agreement to be satisfied (unless otherwise waived or modified by the Joint Global

Coordinators).

The rights (save as otherwise provided in the Underwriting Agreement) and obligations of the

Underwriters shall be subject to termination in the absolute discretion of the Joint Global Coordinators and

after consultation with the Company with immediate effect, at any time prior to the Latest Time for

Termination if since the time of execution of the Underwriting Agreement, there shall have developed,

occurred, happened or come into effect any change in or affecting the business, general affairs, prospects,

results of operations, position or condition, financial or otherwise, of the Company and the other members of

the Group, taken as a whole, the effect of which change, development, event or circumstance is, individually

or in the aggregate in the joint and absolute judgment of the Joint Global Coordinators (on behalf of the

Underwriters) and after consultation with the Company, so material and adverse as to make it or likely to make

it impracticable or inadvisable to proceed with the H Share Rights Issue or the delivery of the H Rights Shares

on the terms and in the manner contemplated in the H Share Rights Issue Prospectus.

At any time prior to the Latest Time for Termination if since the time of execution of the Underwriting

Agreement, there shall have developed, occurred, happened or come into effect any change in or affecting the

business, general affairs, prospects, results of operations, position or condition, financial or otherwise, of any

Underwriter or any Underwriter and the other members of such Underwriter’s group, taken as a whole, the

effect of which change, development, event or circumstance is, individually or in the aggregate in the absolute

judgment of the Company and after consultation with such Underwriter, so material and adverse as to make

it or likely to make it impracticable or inadvisable for such Underwriter or Underwriters to fulfil its or their

respective obligations under the Underwriting Agreement, the rights (save as otherwise provided in the

Underwriting Agreement) and obligations of such Underwriter or Underwriters shall be subject to termination

in the absolute discretion of the Bank and after consultation with such Underwriter or Underwriters with

immediate effect without affecting the rights and obligations of the other Underwriters under the Underwriting

Agreement.

In the event that the Joint Global Coordinators (on behalf of the Underwriters) exercise their right under

the Underwriting Agreement to terminate the Underwriting Agreement, their underwriting obligations will

cease and the H Share Rights Issue will not proceed, in which case, a further announcement will be made by

the Company at the relevant time.

Warning of the Risks of Dealing in the H Rights Shares and the Nil Paid H Rights

Existing H Shares have been dealt on an ex-rights basis from Thursday, 29 August 2013. Dealings in the

Nil Paid H Rights are expected to take place from Monday, 9 September 2013 to Monday, 16 September 2013

(both days inclusive). If the conditions of the H Share Rights Issue (please refer to the section headed “Letter

from the Board — Conditions of the H Share Rights Issue”) are not fulfilled, the H Share Rights Issue will

not proceed.

The Underwriting Agreement contains provisions entitling the Joint Global Coordinators (on behalf of

the Underwriters) by notice in writing to terminate the Underwriting Agreement upon occurrence of certain

events described above. In the event that the Underwriting Agreement does not become unconditional or if it

is terminated in accordance with the terms thereof, the H Share Rights Issue will not proceed.

Any dealing in the H Rights Shares or the Nil Paid H Rights is at the investor’s own risk. If in any doubt,

investors are recommended to consult their professional advisers.

GROUNDS FOR TERMINATION OF THE UNDERWRITING AGREEMENT

– 11 –

You should carefully consider, in addition to the other information contained in this prospectus,

the risks described below before making an investment decision. The occurrence of any of the following

events could harm us. If these events occur, the trading prices of our H Shares and the Nil Paid H Rights

could decline, and you may lose all or part of your investment. Additional risks not currently known to

us or that we now deem immaterial may also harm us and have a material adverse effect on your

investment.

RISKS RELATING TO OUR BUSINESS

If we are unable to effectively maintain the quality of our loan portfolio, our financial condition, results

of operations and profitability could be materially and adversely affected.

As of 31 December 2010, 2011 and 2012 and 30 June 2013, our non-performing loan ratio was 0.68%,

0.56%, 0.61% and 0.71%, respectively, and the overall quality of our assets remained stable. As of 31

December 2010, 2011 and 2012 and 30 June 2013, overdue loans represented 0.85%, 0.83%, 1.12% and 1.41%,

respectively, of our total loans and advances. We cannot assure you that the quality of our loan portfolio will

not deteriorate in the future. The quality of our loan portfolio may deteriorate for various reasons, including

those beyond our control. For instance, a slowdown in economic growth in the PRC could have an adverse

effect on the operations, financial condition, liquidity and prospects of our borrowers and thus adversely affect

the ability of our borrowers to service their outstanding debt. The effectiveness of our credit risk management

policies, procedures and systems also affects the quality of our loan portfolio. Any material deficiencies in,

or failure in the effective implementation of, such policies, procedures and systems could result in a significant

deterioration in the quality of our loan portfolio which could, in turn, materially and adversely affect our

financial condition, results of operations and profitability.

If our borrowers fail to perform their repayment obligations, or if the collaterals or guarantees

supporting such repayment obligations are insufficient to cover the repayment amounts, we may not be

able to fully recover the amounts owed to us, which could have a material adverse effect on our asset

quality, financial condition and results of operations.

A certain portion of our loans are credit loans that are not secured by collateral or guaranteed by third

parties. Therefore, if our borrowers’ operating or financial condition deteriorates or is affected by other factors,

their ability to repay these loans may be severely compromised. As a result, we may suffer, and may need to

record additional allowances for, impairment losses and our profitability may be materially reduced.

A certain portion of our loans are backed by guarantees provided by parties related to the borrowers or

by other third parties. These loans may not be secured by collateral. A significant deterioration in the financial

condition of these guarantors could expose us to the risk of being unable to fully recover the amounts owed

to us in the event of default by our borrowers. Moreover, we are subject to the risk that a court could, under

certain circumstances, determine these guarantees to be invalid or unenforceable, and that we therefore may

not enforce our rights under these guarantees.

For loans secured by collateral, the value of any collateral could fluctuate due to macroeconomic

changes and other factors that are beyond our control. For example, a slowdown in the growth of the PRC

economy may result in a decline in the value of real estate, which could result in a decline in the value of real

estate collateral to a level below the outstanding balance of the corresponding loans. A decline in the value of

the collateral supporting our loans may also increase our impairment losses.

As of 30 June 2013, the balance of our unsecured loans, guaranteed loans, collateralized loans and

pledged loans were RMB418,259 million, RMB468,783 million, RMB883,975 million and RMB260,381

million, respectively, accounting for 19.94%, 22.34%, 42.13% and 12.41%, respectively, of our total loans and

advances. In addition, the balance of discounted bills accounted for 3.18% of our total loans and advances as

of 30 June 2013.

If our borrowers fail to perform their repayment obligations, or if the collaterals or guarantees supporting

such repayment obligations are insufficient to cover the repayment amounts, we may not be able to fully

recover the amounts owed to us, and our asset quality, financial condition and results of operations could be

materially and adversely affected.

RISK FACTORS

– 12 –

Our borrowers are concentrated in certain industries and regions in the PRC, and a significant downturn

in those industries or regions could have a material adverse effect on our financial condition and results

of operations.

As of 31 December 2010, 2011 and 2012 and 30 June 2013, our loans and advances to the (i)

manufacturing, (ii) wholesale and retail, (iii) transportation, storage and postal services, (iv) real estate and (v)

electric power, gas and water industries totaled RMB676,778 million, RMB797,240 million, RMB919,161

million and RMB1,018,830 million, respectively, representing approximately 77.7%, 80.2%, 79.7% and

79.7%, respectively, of our total corporate loans. If any of these industries experiences a significant downturn,

or if there are changes in certain macroeconomic industrial policies, our asset quality, financial condition and

results of operations could be materially and adversely affected.

As of 31 December 2010, 2011 and 2012 and 30 June 2013, the loans and advances originated from our

branches in the Yangtze River Delta, the Bohai Rim, and the Pearl River Delta and West Side of Taiwan Strait

totaled RMB808,757 million, RMB887,535 million, RMB986,143 million and RMB1,051,300 million,

respectively, representing 56.5%, 54.1%, 51.8% and 50.1%, respectively, of our total loans and advances. A

significant economic downturn in any of these regions, or any inaccuracies in our assessment of the credit risks

related to borrowers located in or having substantial operations in these regions, could result in lower demand

for our loans or more non-performing loans, which could have a material adverse effect on our asset quality,

financial condition and results of operations.

Our real estate-related loans are subject to risks associated with the real estate market.

Our real estate loan portfolio includes corporate loans to real estate developers and personal housing

loans to retail customers. These loans are subject to risks associated with macroeconomic controls, changes in

supply and demand in the property market and fluctuations in property prices. As of 30 June 2013,

RMB105,572 million, or 5.0%, of our total loans and advances were corporate loans to real estate developers,

and RMB314,268 million, or 41.8%, of our retail loans were personal housing loans. As of 30 June 2013, these

two types of real estate-related loans together accounted for 20.0% of our total loans and advances, and the

non-performing loan ratio of our corporate loans to real estate developers and that of our personal housing

loans were 0.58% and 0.30%, respectively.

The PRC government has imposed in recent years, and may continue to impose, macroeconomic

measures aimed at curbing the rapid increase in property prices. Such measures may adversely affect the

financial condition, liquidity and repayment ability of our customers in the real estate sector and may reduce

the demand for personal housing loans in the PRC. In addition, if property prices in the PRC decrease

substantially, the asset quality of our corporate loans to real estate developers and that of our personal housing

loans may deteriorate significantly and the growth in our real estate-related loans may slow down significantly.

The value of real estate collateral may also decline, which would in turn reduce the amount recoverable in the

event of a borrower default.

Any long-term and material adjustments in the real estate market resulting from fluctuations in the

macroeconomic situations of the PRC or any adverse changes in the relevant policies from the government or

other factors may materially and adversely affect our asset quality and growth of loans relating to the real

estate industry, which may in turn materially and adversely affect our overall asset quality, financial condition

and results of operations.

We are subject to risks associated with our strategic focus on small and micro enterprise businesses.

We consider the expansion of our small and micro enterprise loan portfolio a key business strategy. As

of 30 June 2013, our small and micro enterprise loans (based on the Bank’s classification) totaled RMB525,314

million, an increase of RMB147,764 million, or 39.14%, as compared to the beginning of 2013, and accounted

for 28.95% of our domestic general loans (excluding discounted bills), representing an increase of 6.36

percentage points from the beginning of 2013. As of 30 June 2013, we had extended RMB270,202 million in

loans to small enterprises, an increase of 34.82% as compared to the beginning of 2013, which accounted for

25.09% of our domestic corporate loans, representing an increase of 5.04 percentage points from the beginning

RISK FACTORS

– 13 –

of 2013. Meanwhile, loans in the amount of RMB255,112 million were extended to micro enterprises,

representing an increase of 44.02% from the beginning of 2013. As of 30 June 2013, loans extended to micro

enterprises, as a percentage of our retail loans, increased by 8.22 percentage points from the beginning of 2013,

to 34.58%. Compared to loans to larger-scale enterprises, our small and micro enterprise businesses are

generally more vulnerable to economic slowdowns, macroeconomic policy changes, international trade

barriers, insufficient working capital, rising operating costs, RMB appreciation and natural disasters, among

other things. As such, we cannot assure you that we will be able to maintain the risk exposure of our small and

micro enterprise loan portfolio. Any deterioration in this portfolio could materially and adversely affect our

asset quality, financial condition and results of operations.

We are subject to risks associated with loans to local government financing vehicles.

We face substantial credit risks relating to our loans to local government financing vehicles, which may

be affected by such factors as the unpredictability of borrowers’ cash flows for repayment, longer loan tenor

and concentration of maturity dates. In recent years, the State Council, the CBRC and the PBOC, along with

several other PRC regulatory authorities, promulgated a series of notices, guidances and other regulatory

documents directing PRC banks and other financial institutions to strengthen their risk management measures

for loans to local government financing vehicles. Although we have complied with these regulatory

requirements and have taken measures to limit our risks, we cannot assure you that these measures will reduce

our risks in the event that the local government financing vehicles default.

As of 31 December 2012, the total balance of our loans to local government financing vehicles was

RMB90,456 million, accounting for 5.1% of our total loans and advances. We have converted RMB30,515

million of our loans to local government financing vehicles into corporate loans. The remainder of our loans

to local government financing vehicles was approximately RMB59,941 million, accounting for 3.4% of our

total loans and advances. 98.99% of the loans to local government financing vehicles are fully or substantially

covered by borrowers’ cash flows. Uncovered or semi-covered loans represented approximately 1.01% of loans

to local government financing vehicles. Furthermore, the balance of our non-performing loans to local

government financing vehicles was RMB151 million, and our non-performing loan ratio for such loans was

0.17%. The allowance coverage ratio of non-performing loans to local government financing vehicles was

2,558.08% and the allowance ratio of loans to local government financing vehicles was 4.26%.

Any unfavorable developments in macroeconomic conditions, or adverse changes in policies by PRC

regulatory authorities, may also materially and adversely affect the debt repayment capabilities of local

government financing vehicles, which could, in turn, have a material adverse effect on our asset quality,

financial condition and results of operations.

We are subject to risks associated with loans to “high pollution, high energy consumption and excess

capacity” industries.

In recent years, the PRC government has implemented a series of stringent state policies to regulate

“high pollution, high energy consumption and excess capacity” industries. As a result, these industries could

face significant challenges, such as macroeconomic policy restrictions, structural reform of industries, supply

chain pressure, increased expenditures on environmental protection, increased costs, slowdowns in inventory

turnover, reduced profit margins and cash flow shortfalls. At the same time, as the CBRC requires commercial

banks to reduce their loans to high energy consumption and high pollution enterprises and enterprises that are

not in line with industry policies, additional loans to these enterprises may result in increased risks. Although

we have adopted measures to control our risk exposure to these industries in line with CBRC requirements, we

cannot assure you that the financial condition and operations of certain enterprises within these industries, to

which we have extended loans, will not deteriorate. Any deterioration in the financial condition and operations

of these enterprises may materially and adversely affect their debt repayment capabilities, which could in turn

materially and adversely reduce our revenues and profitability. As of 31 December 2012, the balance of our

loans to companies operating in “high pollution, high energy consumption and excess capacity” industries was

RMB133,983 million, representing 13.0% of our corporate loans and advances, with a non-performing loan

ratio of 0.45%.

RISK FACTORS

– 14 –

The growth rate of our loan portfolio may decrease.

Our net loans and advances (after deduction of provision for impairment losses) increased by 46.4%

from RMB1,402.2 billion as of 31 December 2010 to RMB2,052.6 billion as of 30 June 2013. In light of

economic fluctuations, changes in monetary policy and capital requirements, the continuing strategic

transformation of our business and the enhanced capital restraint mechanism, we have taken initiatives to

maintain an appropriate increase of loans, promote loan structure adjustments and focus on the development

of our small and micro enterprise loan businesses in order to lower capital consumption and improve our

economic performance. Therefore, we expect the growth of our loan portfolio to slow down to a certain extent

in the future, which may adversely affect our business, financial condition and results of operations.

We are subject to risks related to our off-balance sheet commitments and guarantees.

We provide commitment and guarantee services to our customers, which consist mainly of credit

commitments, capital commitments, operating lease commitments and bank acceptances with credit

commitments representing a significant portion of such commitments and guarantees. These commitments and

guarantees have not been included in our balance sheet. As of 30 June 2013, the balance of our credit

commitments was RMB839,142 million. We are subject to credit risks associated with these commitments and

guarantees. While we do not expect to fulfill all, or even a majority, of our commitments and guarantees before

they expire, we could be required to fulfill some of them if our customers are unable to perform their

obligations. If this happens, we cannot assure you that the relevant customers will honor the terms of the

commitments or guarantees and adequately compensate us. If we are required to fulfill, and if our customers

fail to compensate us for the amounts we pay under, such commitments or guarantees, our business, financial

condition and results of operations could be materially and adversely affected.

We may have to increase our impairment losses in order to cover future actual losses to our loan

portfolio.

As of 30 June 2013, our provision for impairment losses on loans was RMB45,479 million, the coverage

ratio of non-performing loans was 304.72% and the allowance ratio of loans was 2.17%. The allowance ratio

of loans was below the new regulatory requirement of 2.5% mandated by the CBRC. We need to make

additional provision for impairment losses within the time period required under the new regulations

requirement, which may materially and adversely affect our financial condition and results of operations.

Our provision for impairment losses is based on our current assessment of, and expectations for, various

factors affecting the quality of our loan portfolio. These factors include the historical losses incurred on similar

loan portfolios, our borrowers’ financial condition, repayment ability and repayment intention, the realizable

value of any collateral and the ability of any guarantor to fulfill its obligations, our credit policies and the

implementation of such policies, the PRC economy, government macroeconomic policies, interest rates,

exchange rates and the overall legal and regulatory environment. Many of these factors are subject to changes

that are beyond our control. We cannot assure you that the actual development of these factors will always be

in line with our assessments and expectations. If our assessments of, and expectations for, these factors differ

from the actual developments, or if the quality of our loan portfolio does not meet our expectations, our

provision for impairment losses may need to be increased significantly and our financial condition and results

of operations may be materially and adversely affected.

Our loan classification and provisioning policies may be different in certain respects from those

applicable to banks in other jurisdictions.

We classify our loans using a five-category loan classification system in accordance with the guidelines

set forth by the CBRC. We recognize any related provisions pursuant to this classification system. We perform

such assessment, determination and recognition using the concept of impairment under IAS 39. For our

corporate loans classified as substandard or lower, we make an assessment on the impairment allowance on an

individual loan basis. For our performing corporate loans and all of our retail loans, we make a collective

assessment based on our historical loan loss experience. Our loan classification and provisioning policies may

differ in certain respects from those of banks incorporated in certain other jurisdictions. As such, our loan

RISK FACTORS

– 15 –

classification as well as our provision for impairment losses, as determined under our loan classification and

provisioning policies, may differ from those of banks incorporated in other jurisdictions and it may be difficult

to compare our past performance and financial condition with banks in other jurisdictions.

Future amendments to accounting standards and interpretive guidance relating to impairment of

financial assets made by IASB may require us to change our provisioning practice.

We assess our financial assets carried at amortised cost, including loans and advances, for impairment

under IAS 39. In November 2009, the International Accounting Standards Board (“IASB”) issued for public

comment an Exposure Draft — Financial instruments: Amortised Cost and Impairment (“the Exposure Draft”).

If adopted, the Exposure Draft could result in the replacement of the incurred loss model under IAS 39 with

an expected loss model, which could impact our current provisioning practices. In January 2011, the IASB

issued a supplement to the Exposure Draft for public comment. The IASB issued a further revised set of

proposals for public comment in March 2013. In a meeting dated 24 July 2013, IASB decided to postpone the

originally proposed effective date of 1 January 2015, and it is unclear when the final pronouncement will

become effective. Any future amendments to, or new standards relating to, financial asset impairment

accounting standards may require us to change our current provisioning practice, which could have an adverse

effect on our financial condition and results of operations.

We are subject to liquidity risks.

As of 30 June 2013, our liabilities with maturity dates within three months accounted for 71.9% of our

total liabilities, while our assets with a remaining life of more than three months accounted for 74.4% of our

total assets, which resulted in a mismatch in our asset-liability portfolio. While a large proportion of our

demand deposits are placed for over three years, we may face liquidity risks if a large portion of demand

deposits are withdrawn at the same time.

Customer deposits are the major source of our funding. As of 30 June 2013, our customer deposits

totaled RMB2,797,578 million, having increased by 10.5% from 31 December 2012. However, many factors

affect the amount of deposits, some of which are beyond our control. These include, for example, the economic

and political environment, other available investment options and changes in retail customers’ saving habits.

If the increase in our customer deposits fails to meet our funding requirements, we may have to seek other

sources of funding at higher cost and on less attractive terms. In addition, our ability to obtain additional funds

may be affected by deteriorations in market conditions or disruptions of the financial markets. We may face

significant liquidity risk if we fail to obtain required funds in a timely manner.

We are subject to interest rate, exchange rate and other market risks.

We face interest rate, exchange rate and other market risks. Interest rate risks faced by our banking

accounts arise primarily from basis risk and risks associated with repricing assets and liabilities. Exchange rate

risks arise primarily from structural risk exposure associated with foreign exchange capital and fixed assets in

foreign currency and interest rate exposure associated with transactions is relatively small. Our trading

accounts face primarily interest rate risks and exchange rate risks. Furthermore, although we have started using

derivative instruments to hedge these market risks, only limited risk management tools are available to us

because the derivatives market in the PRC is still in the process of developing.

Though we have taken various steps, such as adjusting our assets and liabilities structure, using

off-balance sheet derivative instruments to hedge risks and improving our pricing mechanism, we cannot

assure you that these measures will enable us to effectively respond to the trend of interest rate liberalization.

Almost all of our assets and income are denominated in Renminbi. If the Renminbi appreciates against

the US dollar or other currencies, our assets or income denominated in other currencies may decrease in value

when they are converted into Renminbi. As of 31 December 2012, 9.86% of our total assets and 10.14% of our

total liabilities were denominated in foreign currencies. If the exchange rates of all foreign currencies changed

by 1% in a direction that is adverse to us, with all other variables being constant, our net capital would decrease

by 0.0007%.

RISK FACTORS

– 16 –

The exchange rate between Renminbi and US dollar fluctuates from time to time and is affected by

various factors such as changes in political and economic environments and fiscal, monetary and exchange

policies in the PRC and throughout the world. Any future changes in the exchange rate between Renminbi, US

dollar and other foreign currencies may materially and adversely affect our financial condition and results of

operations. In addition, we participate in trading and investment activities involving certain financial

instruments both in the PRC and overseas, which may also be materially and adversely affected by fluctuations

in interest rates and exchange rates.

In addition, we enter into financial derivatives in domestic and international derivative markets, mainly

over-the-counter interest rate and exchange rate derivatives, primarily in connection with our risk management

products sold to customers at our branches and sub-branches and for proprietary trading and risk management

purposes. Although we enter into netting agreements with certain counterparties in order to mitigate our

exposure to credit risks of these counterparties from financial derivatives, we cannot assure you that all

counterparties to which we are exposed significant credit risks will honor the relevant derivative contracts

when due. As such, our financial condition and results of operations may be materially and adversely affected

by transactions in derivative instruments.

We cannot assure you that our risk management and internal control policies and procedures will help

us avoid and protect us against all risks.

While we have adopted many risk management and internal control policies and procedures, we cannot

assure you that these policies and procedures will be adequate to detect, avoid, or protect us against all

identified and unidentified risks. Please see “Risk Management and Internal Control.” In addition, we cannot

assure you that our employees will be able to consistently comply with or correctly apply these policies and

procedures. The implementation of our risk management and internal control measures also depends on the

operation and improvement of our information technology systems. If we are ineffective in improving our risk

management and internal control policies and procedures, or if the intended results of such policies and

procedures are not achieved, our business, financial condition and results of operations, as well as the asset

quality of our loan portfolio and our profitability, may be materially and adversely affected.

We are subject to risks relating to our information technology infrastructure.

Our business operations depend to a large extent on the proper functioning and continuous improvement

of information technology infrastructure. Our information technology infrastructure is critical to our business

operations, including customer service, transaction processing, accounting, risk management and financial

control. We have implemented a series of security management and technological measures to provide quality

network security. We have also separated our business and office networks to protect our business system

against viruses and other malicious activities. In addition, we back up data for our key data processing systems

and have established a backup system to carry on principal functions in the event of a catastrophe or a failure

of our primary information technology systems. However, we cannot assure you that our systems will not face

malicious attacks, computer viruses, software bugs, mishandling or improper activities in the future, nor can

we assure you that our systems will not be materially disrupted or that our operating data will not be lost or

damaged as a consequence thereof. If we experience illegal system intrusions, malicious attacks, lost or

damaged data, security flaws in our software, hardware, or other equipment, or otherwise fail to adequately

improve or upgrade our information technology systems, and if we fail to meet increased demand from our

customers on the variety and quality of our products and services, our business, financial condition and results

of operations may be materially and adversely affected.

We may not be able to detect and prevent fraud or other misconduct committed by our employees or

third parties.

Although we have continually increased our efforts to detect and prevent employee and third party fraud

or other misconduct, it is not always possible to detect or prevent such activities, and the precautions we take

may not be effective in all cases, or at all. Fraud and other misconducts by employees or third parties could

subject us to financial losses and sanctions imposed by governmental authorities, and could severely harm our

reputation. Employee misconducts may include, but are not limited to, improper extensions of credit, improper

RISK FACTORS

– 17 –

accounting, theft, embezzlement or misappropriation of customer funds, mishandling of customer deposits and

settlements of payment transactions and acceptance of bribes. Third party misconducts may include, but are

not limited to, fraud, theft, robbery and certain armed crimes. Failure to detect and prevent fraud or other

misconducts committed by our employees or third parties in a timely manner may have a material adverse

effect on our reputation, business, financial condition and results of operations.

We cannot assure you that we will always be able to prevent or detect money laundering or other illegal

or improper activities.

We are committed to improving our internal controls aimed at detecting and preventing the use of our

banking network for illegal or improper activities. Due to a number of restraints placed on us, we may not be

able to eliminate the possibility that certain organizations or individuals may use our banking network to

engage in money laundering or other illegal or improper activities. To the extent that we fail to detect or

prevent such activities, the relevant government agencies have the power and authority to impose fines and

other penalties on us. In addition, our reputation may be severely damaged and our business, financial

condition and results of operations may be materially and adversely affected.

We cannot assure you that we will always be able to fully comply with applicable PRC and overseas

regulatory requirements and guidelines.

We must comply with various regulatory requirements and guidelines. We have devoted substantial

efforts to effectively implement and comply with these requirements and guidelines. However, we cannot

assure you that we will be able to comply with all applicable requirements and guidelines at all times. If

material sanctions, fines and other penalties are imposed on us, our business, financial condition, results of

operations and reputation may be materially and adversely affected.

Our overseas branches and other institutions are required to comply with the local laws and rules of their

respective jurisdictions, as well as relevant regulatory requirements promulgated by their respective local

regulators. We cannot assure you that all of our overseas institutions will be able to comply with all aspects

of all applicable legal and regulatory requirements at all times. If we fail to comply with the requirements of

regulators in those jurisdictions in which we operate our overseas businesses, our businesses in those

jurisdictions may be materially disrupted.

Our expanding range of products and services exposes us to new risks.

Our past business expansion has significantly contributed to our operating results, but has also exposed

us to certain risks and challenges:

• we may not have sufficient experience or expertise in certain new businesses and may not be able

to compete effectively in those areas;

• our customers may not always accept our products and services;

• we may not be able to hire additional qualified personnel in a timely manner;

• we may fail to obtain regulatory approval to launch new products or services; and

• we may not be successful in enhancing our risk management and internal control capabilities, and

our information technology systems, to support a broader range of products and services.

Due to these risks and challenges, our new products and services may not be able to achieve their

intended returns, and our revenues and profitability could be materially reduced.

Furthermore, if we cannot make timely decisions to enter into new business areas or launch new products

or services to meet growing demand, we may not be able to maintain our existing market share, and we may

even lose customers. As a result, our business, financial condition and results of operations may be materially

and adversely affected.

RISK FACTORS

– 18 –

We may be unable to meet regulatory requirements relating to capital adequacy.

We are committed to ensuring compliance with capital adequacy standards in order to support our

development and implement of our strategic corporate plan. As of 30 June 2013, the Group’s capital adequacy

ratio and tier one capital adequacy ratio were 10.72% and 8.00%, respectively, and the Bank’s capital adequacy

ratio and tier one capital adequacy ratio were 10.43% and 7.73%, respectively. This rights issuance is expected

to increase capital adequacy for both the Group and the Bank. However, certain adverse developments,

including changes in guidance for the calculation of capital adequacy ratios for commercial banks and

increases in the applicable minimum capital adequacy ratios, could cause the Group’s and the Bank’s capital

adequacy ratios to fall short of regulatory requirements. Our ability to raise tier one capital and supplementary

capital is also constrained by other factors, including our business, financial condition and results of

operations, our credit rating, requisite regulatory approvals, regulations governing the mechanism for

replenishing capital base for commercial banks, capital market conditions and domestic and international

economic, political and other conditions.

In recent years, the CBRC has promulgated a number of rules and guidelines on the capital adequacy

requirement for commercial banks. In April 2011, the CBRC issued guidelines for implementing Basel III

requirements in its Guidelines for Implementing New Regulatory Standards in the PRC Banking Industry (the

“Guidelines”) (中國銀行業實施新監管標準的指導意見). The CBRC outlined its proposal for higher capital

adequacy ratios and additional regulations for leverage ratio, liquidity and loan loss provisions. In August

2011, the CBRC issued new Administrative Measures for Commercial Banks’ Capital (for Public Comments)

(the “Administrative Measures”) (《商業銀行資本管理辦法(徵求意見稿)》), which was a complete revision of

the Measures for the Management of Commercial Banks’ Capital Adequacy Ratios (《商業銀行資本充足率管理辦法》) and proposed new regulatory requirements for the definition of capital, the calculation of

risk-weighted assets, the supervision and inspection and other aspects of the capital adequacy. In June 2012,

the CBRC promulgated the new Measures for the Management of Capital Adequacy Ratios for Commercial

Banks (trial implementation) (《商業銀行資本管理辦法(試行)》), or the New Capital Adequacy Measures,

which became effective on 1 January 2013. Changes in the above regulations may lead to changes in the

Group’s or the Bank’s capital adequacy ratios. We cannot assure you that the Group or the Bank will be able

to meet all other future capital adequacy requirements.

If we fail to meet the minimum capital adequacy requirements, the regulatory authorities may take

certain corrective actions against us, including restricting the growth of our loan assets, temporarily

suspending our operating activities and restricting our ability to pay dividends. These actions could materially

and adversely affect our reputation, financial condition and results of operations.

We cannot assure you that we will always be able to meet the regulatory requirements for allowance

ratio.

We adopt provisioning policies that both comply with regulatory requirements and are prudent and

sufficient for our business operations. We believe our current provisioning for losses on loans suits the

structure and quality of our risk assets. As of 30 June 2013, we had an allowance ratio of 2.17%, which was

in compliance with the prevailing regulatory requirements. In April 2011, the CBRC issued the Guidelines,

which require banks to strengthen their supervision of provisioning for losses on loans and establish

supervisory standards for allowance ratios and allowance coverage ratios, including an allowance ratio of no

less than 2.5%. The new standards became effective on 1 January 2012 and require compliance by

“systematically important banks” by the end of 2013. For “non-systematically important banks”, regulators

have allowed different transition periods, while encouraging early compliance. For banks with strong

profit-making capabilities that require relatively less additional provisioning for losses, compliance is required

by the end of 2016, and for banks with weak profit-making capabilities that require relatively more additional

provisioning for losses, compliance is required by the end of 2018. On 27 July 2011, the CBRC promulgated

the Administrative Measures for the Provisioning of Loan Losses for Commercial Banks (《商業銀行貸款損失標準管理辦法》). The new measures, which became effective on 1 January 2012, also require commercial

banks to maintain an allowance ratio of no less than 2.5%, and the transition periods are the same as those for

the Guidelines.

RISK FACTORS

– 19 –

As of the date of this prospectus, the CBRC has not officially listed our Group as a “systematically

important bank.” Therefore, we should meet the requirements by no later than the end of 2016. Based on our

financial condition as of 30 June 2013, an increase in our allowance ratio of loans to 2.5% would result in an

increase of our provision for impairment losses on loans by RMB6,973 million, representing approximately

3.7% of our total profit before tax for the five years ending 31 December 2012. As such, we expect that meeting

the requirements by the end of 2016 will not have a material adverse effect on our financials or results of

operations.

Pursuant to the Midterm Plan for Capital Management (2011 Amendment) of China Merchants Bank, our

goal is to improve our allowance coverage ratio from 2011 to 2015 and gradually meet the relevant

requirements. In order to improve our allowance coverage ratio, capital management and risk management, we

have set out detailed strategies to assure our compliance with capital, allowance coverage ratio and other

requirements. These strategies include, but are not limited to, improving management structure, standardizing

the management processes, effectively using various management tools, enhancing performance appraisal, and

promoting infrastructure construction.

Nevertheless, we cannot rule out the possibility that various factors may result in our noncompliance

with the new allowance coverage ratio requirements. Such factors include, but are not limited to, the possibility

that the CBRC will deem us to be a “systematically important bank” because our asset size places us among

the top commercial banks. In that case, our deadline for meeting the allowance coverage ratio requirements will

consequently be advanced.

If we fail to meet the regulatory requirements for allowance coverage ratio, the regulatory authorities

may take certain corrective actions against us, including issuing risk alerts, requesting us to take reformative

measures and imposing other regulatory constraints on us pursuant to the Banking Industry Supervision Law

of the People’s Republic of China (中華人民共和國銀行業監督管理法).

We have expanded our business into jurisdictions other than the PRC, which has increased the

complexity of the risks that we face.

In recent years, we have taken actions to expand our international operations. In October 2008, our New

York branch commenced operations. We completed the acquisition of Wing Lung Bank in January 2009, our

London representative office commenced operations in July 2009, and our Taipei representative office

officially opened in June 2011. These international operations expose us to various new risks. For example, the

loan portfolios of our international branches include foreign currency-denominated loans to PRC companies

engaged in international trade. This loan business may suffer losses due to defaults caused by failures in the

execution of foreign trade agreements, trade protectionism and our inexperience with various aspects of the

economic and legal frameworks of overseas markets, among other things. Adverse market conditions in these

international jurisdictions may also result in mark-to-market and realized losses on the investment assets at fair

value held by our overseas branches and increases in their funding costs.

Furthermore, despite our efforts to comply with applicable regulations in all the jurisdictions in which

we operate, we could still fail to comply with regulations in certain jurisdictions. Regulators have the power

to bring administrative or judicial proceedings against us or our employees, representatives, agents and third

party service providers. This could result in the suspension or revocation of one or more of our licenses, cease

and desist orders, fines, civil penalties, criminal penalties, or other disciplinary actions. In addition, the recent

global financial crisis is expected to lead to significant regulatory changes in various jurisdictions, including

those in which we have operations. These changes may affect areas such as capital and liquidity ratios,

cross-border capital flows and consumer protection. We may not be able to estimate the extent and impact of

such changes, which could have a material adverse effect on our business operations, capital adequacy and

profitability. If we are unable to effectively manage the risks resulting from our international expansion, our

business and reputation, as well as our financial condition and results of operations, may be adversely affected.

RISK FACTORS

– 20 –

We are subject to risks relating to our owned and leased properties.

As of 31 December 2012, we owned approximately 927 properties with an aggregate gross floor area of

approximately 528,500 square meters in the PRC, including 35 properties, with an aggregate gross floor area

of approximately 24,800 square meters, for which we do not have the complete set of legally effective title

certificates. If authorities or any other third parties legally terminate our rights to those properties with title

defects, we may be forced to relocate the operations we conduct on the affected properties, which could

adversely affect our operations.

As of 31 December 2012, we leased approximately 2,511 properties, with an aggregate gross floor area

of approximately 1,555,800 square meters, including 562 properties with an aggregate gross floor area of

approximately 295,900 square meters for which the lessors were unable to provide title certificates, documents

evidencing the property owners’ authorization or consent to the lease or to subletting, lease registration

certificates, or licenses for property leasing. Therefore, we cannot assure you that the lessors have the right to

lease such properties. If the lessors do not have the right to lease such properties, third parties may be able to

challenge the validity of these leases and relevant authorities may support such claims. Therefore, we may be

forced to relocate the operations we conduct on the affected properties, which could adversely affect our

operations.

Our largest shareholder and its parent company are able to exercise significant influence over us.

As of the Latest Practicable Date, our largest shareholder, China Merchants Steam Navigation Company

Ltd., held approximately 12.48% of our outstanding shares. Its parent company, China Merchants Group, and

the subsidiaries of China Merchants Group held approximately 18.71% of our outstanding shares. Accordingly,

even while fully complying with our articles of association and applicable laws and regulations, China

Merchants Steam Navigation Company Ltd. and its parent company may be able to exercise significant

influence over our business, including matters relating to:

• the timing and amount of dividend distributions;

• the issuance of new securities;

• the nomination and election of directors and supervisors;

• our business strategies and policies;

• amendments to our articles of association; and

• any plans relating to mergers, acquisitions, joint ventures, investments or divestitures.

If the interests of China Merchants Steam Navigation Company Ltd. and its parent company diverge

from those of our other shareholders on any of the above matters, our decisions on those matters may not be

in the best interests of our other shareholders.

We are subject to risks relating to U.S. sanctions.

The United States currently imposes a series of international sanctions on designated countries, areas,

entities and individuals. These sanctions typically apply to U.S. persons, but may also have extraterritorial

effect on non-U.S. persons located outside the United States. For example, financial institutions in the United

Stated may be prohibited from opening correspondent bank accounts for the affected non-U.S. persons.

We took measures to ensure strict compliance with applicable laws and regulations to avoid transactions

that may violate the international sanctions. For instance, our branch in the United States has promulgated

internal policies with respect to anti-money laundering and sanctions administered by the U.S. Treasury

Department’s Office of Foreign Assets Control, or OFAC, to ensure compliance with the relevant laws and

RISK FACTORS

– 21 –

regulations. If it was determined that we violated the international sections administered by the United States,

we could be subject to penalties from the United States government and our reputation, businesses in the

United States and transactions with U.S. persons could be materially and adversely affected.

We may not be able to hire, train or retain a sufficient number of qualified staff.

The quality of most of our services depends on the quality of our professional staff. The Group devotes

considerable resources to recruiting and training personnel. Although we have implemented H Share stock

appreciation rights incentive plan for our senior management personnel, the Group faces increased competition

in recruiting and retaining individuals, including senior management, because other banks are competing for

the same pool of qualified employees. In addition, our employees may resign at any time and may seek to divert

customer relationships that they developed while working for us. The loss of members of our senior

management team, or of experienced staff, may have a material adverse effect on our business and results of

operations.

RISKS RELATING TO THE BANKING INDUSTRY IN THE PRC

We face intense competition in the PRC banking industry, as well as competition from alternative

corporate financing and investment channels.

Competition in the PRC banking industry continues to intensify. The Group faces competition from the

Large Commercial Banks, other Joint Stock Commercial Banks, city commercial banks and foreign banks in

the PRC. The Large Commercial Banks generally have much larger customer and deposit bases, more extensive

distribution networks and greater capital strength than the Group has. These banks were historically wholly

owned by the PRC government and some of them have, in the past, received capital injections or other support

from the PRC government in connection with their disposal of non-performing loans. All of these banks have

been restructured into joint stock companies and all of them are currently listed on the Hong Kong Stock

Exchange and the Shanghai Stock Exchange. In terms of management and business strategies, we are more

comparable with other Joint Stock Commercial Banks, which typically have a smaller customer base and

deposit base than Large Commercial Banks. We compete with other Joint Stock Commercial Banks in terms

of variety, price and quality of products and services and geographical coverage. In addition, we also compete

against city commercial banks from certain major cities that have been expanding their geographical coverage.

In addition, in line with the PRC’s commitments for accession to the WTO, the PRC removed regulatory

restrictions on the geographical presence, customer base and operating licensing of foreign invested

commercial banks in December 2006. Since then, the Group has experienced increased competition from

foreign invested commercial banks. Recently, a number of well-known foreign banks have expanded their

presence in the PRC. Furthermore, the Mainland and Hong Kong Closer Economic Partnership Arrangement

(內地與香港關於建立更緊密經貿關係的安排), the Mainland and Macau Closer Economic Partnership

Arrangement (內地與澳門關於建立更緊密經貿關係的安排) and the Cross-Straits Economic Cooperation

Framework Agreement (海峽兩岸經濟合作框架協議) permit small-scale banks from Hong Kong, Macau and

Taiwan to operate in the PRC, further increasing competition in the PRC banking industry.

Moreover, the PRC government has, in recent years, implemented a series of measures designed to

further liberalize the banking industry, including measures related to interest rates and non-interest-based

products and services, which changed the basis on which the Group is able to compete with other banks for

customers.

The Group competes with many of our competitors for substantially the same loan, deposit and

intermediary business customers. Such competition may adversely affect our business and prospects because

it could:

• reduce our market share in our principal products and services;

• slow the growth of our loan and deposit portfolios and other products and services;

• decrease our interest income or increase our interest expenses, which may reduce our net interest

income;

RISK FACTORS

– 22 –

• reduce our non-interest income;

• increase our non-interest expenses, such as marketing expenses;

• adversely affect our asset quality; and

• increase competition for recruiting and retaining senior management and qualified professional

personnel.

The Group may also face direct competition from alternative corporate financing channels, such as

securities issuances in domestic and international capital markets. The domestic securities markets have

expanded and grown in recent years. If a substantial number of our customers choose alternative corporate

financing channels to fund their capital needs, our interest income, financial condition and results of operations

may be adversely affected.

The Group also faces competition from alternative investment opportunities offered by PRC capital

markets. As the PRC stock and bond markets continue to develop and become a more direct and attractive

investment alternative for investors, our deposit customers may select equity and debt securities investment

opportunities, which may reduce our deposits and adversely affect our business, financial condition and results

of operations.

Our business and operations are highly regulated, and our business, financial condition, results of

operations and future prospects may be materially and adversely affected by significant regulatory

changes or other governmental policies, including the interpretation and application of such policies.

Our business and operations are directly affected by changes in the policies, laws and regulations

relating to the banking industry in the PRC, including those that may affect the extent to which the Group can

engage in certain businesses and the types and amount of fees we can charge as well as by changes in other

governmental policies. The PRC’s bank regulatory regime is currently undergoing significant changes, some

of which apply to us and may result in additional costs or restrictions on our activities. The Group cannot

assure you that the policies, laws and regulations governing the banking industry will not change in the future

or that any such changes will not materially and adversely affect our business, financial condition and results

of operations, nor can the Group assure you that the Group will be able to adapt to all such changes in a timely

manner. In addition, there may be uncertainties regarding the interpretation and application of new policies,

laws and regulations. Failure to comply with the applicable policies, laws and regulations may result in fines

and restrictions on our activities, which could also have a significant impact on our business.

Our financial condition and results of operations may be materially and adversely affected by changes

in interest rates.

As with most commercial banks, the results of our operations depend to a large extent on our net interest

income. In 2010, 2011, 2012 and the first six months of 2013, our net interest income represented 79.5%,

78.9%, 77.7% and 73.9%, respectively, of our operating income. Adjustments by the PBOC to benchmark

interest rates on loans or deposits, or changes in market interest rates, could affect our financial condition and

results of operations. For example, changes in interest rates could affect the interest rates the Group charges

on interest-earning assets and pays on interest-bearing liabilities, and such changes could narrow our net

interest margin, which would reduce our net interest income. In addition, an increase in interest rates may

reduce overall demand for loans, adversely affect the growth of our loan portfolio and increase the risk of

customer default. Furthermore, an increase in interest rates may decrease the value of our fixed income

investment portfolio and raise our funding costs. Therefore, changes in interest rates may materially and

adversely affect our net interest income, the growth of our lending business, our results of operations and our

financial condition.

RISK FACTORS

– 23 –

Our results of operations may be materially and adversely affected if the PBOC further liberalizes its

regulation of interest rates.

The PBOC regulates interest rates for RMB-denominated loans and deposits in the PRC. In recent years,

the PBOC has adopted reform measures to liberalize the PRC’s interest rate regime. For example, in 2000, the

PBOC substantially liberalized interest rates for foreign-currency denominated loans and deposits. In October

2004, the PBOC eliminated restrictions on the maximum interest rate for RMB-denominated loans and the

minimum interest rate for RMB-denominated deposits. In January 2007, the PBOC launched the Shanghai

Interbank Offered Rate (“Shibor”), to further liberalize interest rates and create a benchmark interest rate

system specifically for the money market in the PRC. In July 2013, the PBOC removed the floor on lending

rates, the control on discounted bill rates and the ceiling of rural credit cooperatives’ lending rates. Under

current PBOC regulations, commercial banks in the PRC can freely determine interest rates of loans, but

cannot set interest rates above 110% of the relevant PBOC benchmark interest rates for RMB-denominated

deposits. We cannot assure you that the PBOC will not further liberalize the existing interest rate restrictions

on RMB-denominated deposits. If the existing regulations were substantially liberalized or eliminated,

competition in the PRC banking industry would likely intensify as PRC commercial banks seek to offer more

attractive rates to customers. Further liberalization by the PBOC could result in a narrowing of the spread in

the average interest rates between RMB-denominated loans and RMB-denominated deposits, which could have

a material adverse effect on our results of operations.

A significant decrease in the value of a particular type of investment may have a material adverse effect

on our financial condition and results of operations.

Due to PRC regulatory restrictions on the types of investments that a PRC commercial bank can make,

substantially all of our RMB-denominated investment assets are concentrated in limited types of investments,

such as PRC government bonds, bonds issued by PRC policy banks, bonds and subordinated notes issued by

PRC commercial banks, PBOC bills and commercial paper issued by qualified domestic corporations. These

restrictions limit our ability to diversify our investment portfolio and seek investment returns comparable to

that of banks in certain other countries. They also limit our ability to manage our liquidity in the same manner

as banks in certain other countries. In addition, the Group is exposed to risks associated with the concentration

of issuers of our RMB-denominated investment assets. For example, any deterioration of the financial

condition of commercial banks in the PRC would increase the risks associated with holding their bonds and

subordinated notes.

The effectiveness of our credit management system depends on the quality and scope of information

available in the PRC credit information database.

The national database for personal credit information developed by the PBOC has been in operation

since January 2006, and the national database for corporate credit information has been in operation since the

second half of 2006. Due to the limited history of these databases, and the fact that the PRC’s information

infrastructure is still at a developing stage, national credit information databases are generally underdeveloped

and unable to provide complete credit information on many credit applicants. Therefore, we are unable to

assess the credit risk associated with particular customers based on complete, accurate or reliable information.

As a result, we are limited in our ability to effectively detect and manage our credit risk.

We cannot assure you of the accuracy or comparability of facts, forecasts and statistics derived from

official government publications contained in this Prospectus with respect to the PRC, its economy or its

banking industry.

Certain facts, forecasts and statistics in this Prospectus relating to the PRC, the PRC economy and the

PRC and global banking industries (including our market share information) are derived from various official

government publications. However, we cannot guarantee the quality and reliability of such publications. In

addition, these facts, forecasts and statistics have not been independently verified by us, may not be consistent

with other information compiled within or outside the PRC and may not be complete or up-to-date. While we

have taken reasonable care in extracting and reproducing the information from the relevant sources, we make

no representation as to the accuracy of these facts, forecasts and statistics. Further, as the means of collecting

RISK FACTORS

– 24 –

information may be flawed or ineffective, or there might be discrepancies between this information and market

conventions, these facts, forecasts and other statistics may be inaccurate or may not be comparable from period

to period or comparable to facts, forecasts or statistics produced for other economies. You should not unduly

rely upon them.

Investments in commercial banks in the PRC are subject to ownership restrictions that may adversely

affect the value of your investment.

Investments in commercial banks in the PRC are subject to a number of ownership restrictions. For

example, prior approval from the CBRC is required for any person or entity to hold 5% or more of the

registered capital or total issued shares of a commercial bank in the PRC. If a shareholder of a commercial bank

in the PRC increases its shareholding above the 5% threshold without obtaining the CBRC’s prior approval,

the shareholder may be subject to CBRC sanctions, which include correction of the misconduct, fines and

confiscation of related earnings. In addition, under the PRC Company Law, we may not extend loans that use

our shares as collateral and, according to our articles of association, any shareholder who owns more than 5%

of our domestic shares must file a report with the Board of Directors on the date such shareholder pledges its

shares to any lender as collateral. Future changes in ownership restrictions imposed by the PRC government

may materially and adversely affect the value of your investment.

RISKS RELATING TO THE PRC

The PRC’s economic, political and social conditions, as well as government policies, could affect our

business.

A substantial majority of our business, assets and operations are located in the PRC. Accordingly, our

financial condition, results of operations and business prospects are, to a significant degree, subject to

economic, political and legal developments in the PRC. The PRC economy differs from the economies of most

developed countries in many respects, including the levels of government involvement, development, growth

rate, control of foreign exchange and allocation of resources.

The PRC economy has historically been a planned economy. A substantial portion of productive assets

in the PRC is still owned by the PRC government. The government also exercises significant control over

economic growth by allocating resources, setting monetary policy and providing preferential treatment to

particular industries or companies. In recent years, the government has implemented economic reform

measures to introduce market forces and establish sound corporate governance in business enterprises. Such

economic reform measures may be adjusted, modified or applied inconsistently from industry to industry, or

across different regions of the country. As a result, we may not benefit from certain of such measures.

The PRC government has the power to implement macroeconomic control measures that affect the PRC

economy. The government has implemented various measures in an effort to control the growth rate of certain

industries and to limit inflation. For example, in response to decreased growth resulting in part from the global

financial crisis and economic slowdown that began in September 2008, the PRC government began to

implement a series of expansionary macroeconomic measures including the announcement of an RMB4.0

trillion economic stimulus package and the reduction of benchmark interest rates. Some of these measures may

materially and adversely affect our financial condition, results of operations and asset quality. For example,

decreases in the PBOC benchmark interest rates in 2008 resulted in the narrowing of our net interest margin

and a decrease in our net interest income between 2008 and 2009, which adversely affected our profitability.

In 2011, when the PRC was confronted with the problem of high inflation, the PRC government implemented

monetary tightening policies, including interest rate hikes and Reserve Requirement Ratio increases, in order

to curb inflation. However, in June 2012, the PBOC decreased its benchmark interest rate and loosened

controls on lending and deposit rates, in order to combat a deepening slowdown in the PRC economy. We

cannot assure you that the PRC government will not implement policy measures in the future that may

adversely impact the PRC economy in general and the PRC banking industry in particular. If implemented,

such measures could have a material adverse effect on our business, financial condition and results of

operations.

RISK FACTORS

– 25 –

The PRC has been one of the world’s fastest growing economies, as measured by GDP, in recent years.

However, the PRC may not be able to sustain its growth rate. During the recent global financial crisis and

economic slowdown, the PRC’s GDP growth also slowed down. If the PRC economy experiences a reduction

in its growth rate or a significant downturn, the unfavorable business environment and economic conditions

could negatively impact the ability or willingness of our customers to repay their loans and may also reduce

demand for our banking services. Our financial condition, results of operations and future business prospects

may be materially and adversely affected.

The PRC legal system could limit the legal protections available to you.

We are organized under the laws of the PRC. The PRC legal system is based on written statutes. Since

the late 1970s, the PRC government has promulgated laws and regulations dealing with economic matters, such

as the issuance and trading of securities, shareholder rights, foreign investment, corporate organization and

governance, commerce, taxation and trade. However, many of these laws and regulations are relatively new,

will continue to evolve, are subject to different interpretations and may be inconsistently enforced. In addition,

there is a limited number of published court decisions that may be cited for reference, and such cases have

limited precedential value because they are not binding on subsequent cases. These uncertainties relating to the

interpretation of PRC laws and regulations can affect the legal remedies and protections available to you and

may adversely affect the value of your investment.

You may experience difficulties in effecting service of legal process and enforcing judgments against us

and our management.

We are a bank incorporated under the laws of the PRC, and substantially all of our businesses, assets and

operations are located in the PRC. In addition, a substantial majority of our directors, supervisors and

executive officers reside in the PRC, and substantially all of their assets are located in the PRC. As a result,

it may not be possible to effect service of process within the United States or elsewhere outside the PRC upon

us, our directors, supervisors or executive officers. This also applies to matters arising under U.S. federal

securities laws or applicable state securities laws. Moreover, the PRC does not have treaties providing for the

reciprocal recognition and enforcement of judgments from courts in the United States, the United Kingdom,

Japan and many other countries. In addition, Hong Kong has no arrangement with the United States for

reciprocal enforcement of judgments. As a result, recognition and enforcement in the PRC or Hong Kong of

judgments from courts in the United States and many other jurisdictions may be difficult or impossible.

Although we are subject to the Hong Kong Listing Rules and the Hong Kong Codes on Takeovers and Mergers

and Share Repurchases, the holders of H Shares will not be able to bring actions on the basis of violations of

the Hong Kong Listing Rules and must rely, instead, on the Hong Kong Exchange to enforce its rules. The

Hong Kong Listing Rules and Hong Kong Codes on Takeovers and Mergers and Share Repurchases do not have

the force of law in Hong Kong.

You may be subject to PRC income taxation.

Under the applicable PRC tax laws, dividends paid to, and gains realized through the sale or transfer by

other means of H shares by, non-PRC resident individual holders of H shares are both subject to PRC

individual income tax at a rate of 20%. Under the applicable PRC tax laws, dividends paid to, and gains

realized through the sale or transfer by other means of H shares by, non-PRC resident enterprise holders of H

shares are both subject to PRC enterprise income tax at a rate of 10%.

Pursuant to the Circular on Questions Concerning Tax on the Profits Earned by Foreign Invested

Enterprises, Foreign Enterprises and Individual Foreigners from the Transfer of Shares (Equity Interests) and

on Dividend Income (Guo Shui Fa [1993] No. 045) (《關於外商投資企業、外國企業和外籍個人取得股票(股權)轉讓收益和股息所得稅收問題的通知》(國稅發[1993]045號)) issued by the SAT, non-PRC resident

individual holders of H shares were temporarily exempted from PRC individual income tax on dividends paid

by PRC domestic enterprises that issued such H shares. However, such circular was repealed by the

Announcement on the List of Fully or Partially Invalid and Repealed Tax Regulatory Documents (《關於公佈全文失效廢止、部分條款失效廢止的稅收規範性文件目錄的公告》) dated 4 January 2011.

RISK FACTORS

– 26 –

Pursuant to the Circular on Questions Concerning the Collection of Individual Income Tax following the

Repeal of Guo Shui Fa [1993]045 (《關於國稅發[1993]045號文件廢止後有關個人所得稅徵管問題的通知》)

dated 28 June 2011 issued by the SAT, dividends paid by H share issuers to a non-PRC resident individual

holder of H shares are subject to PRC individual income tax at a rate determined by applicable tax treaties or

arrangements between the PRC and the specific jurisdiction in which the shareholder resides. Such tax rates

range from 5% to 20%. The Circular further provides that, pursuant to relevant tax treaties and arrangements,

the tax rate applicable to dividend income is generally 10%. Therefore, share issuers can withhold 10% of

dividends without seeking prior consent from competent tax authorities. Any shareholder residing in a

jurisdiction where the tax rate for H share dividends stipulated in relevant tax treaties or arrangements is lower

than 10% is entitled to a refund of the excess tax withheld. However, such refund is subject to approval by the

competent tax authority. For shareholders residing in jurisdictions where the tax rate for H share dividends

stipulated in relevant tax treaties or arrangements is more than 10% but less than 20%, H share issuers will

withhold the individual income tax at the actual tax rate without seeking prior consent from competent tax

authorities. For shareholders residing in jurisdictions where the tax rate for H share dividends stipulated in the

relevant tax treaties or arrangements is 20%, or where there is no relevant tax treaty or arrangement with the

PRC, H share companies shall withhold the individual income tax at a rate of 20%. Such arrangements have

also been addressed in a letter issued by the SAT to the Hong Kong Inland Revenue Department dated 28 June

2011. The letter explicitly provides that Hong Kong resident individuals shall be subject to a tax rate of 10%

on the dividend income they receive from H share issuers. In view of this, we will withhold 10% of any

dividend to be distributed to non-PRC resident individual holders of H Shares as individual income tax, unless

otherwise specified by the relevant requirements and procedures of PRC tax authorities.

Despite the above arrangements, there are significant uncertainties as to the interpretation and

application of applicable PRC tax laws and rules due to a number of reasons, including the relatively short

history of such laws and rules and the possibility that relevant preferential tax treatments will be revoked in

the future. In the latter case, all foreign individual holders of H shares will be subject to PRC individual income

tax at a flat rate of 20%.

According to the PRC Enterprise Income Tax Law (《中華人民共和國企業所得稅法》) and the

implementation rules thereof, non-PRC resident enterprises that do not have any establishment or premises

within the PRC are subject to enterprise income tax at a rate of 10% on any income generated within the PRC.

Furthermore, pursuant to the Notice of Withholding and Payment of Enterprise Income Tax for PRC Resident

Enterprises Paying Dividends to Overseas Non-resident Enterprise Shareholders of H Shares (《關於中國居民企業向境外H股非居民企業股東派發股息代扣代繳企業所得稅有關問題的通知》) issued by the SAT on 6

November 2008, PRC resident enterprises are required to withhold enterprise income tax at a flat rate of 10%

on dividend distributions to overseas non-PRC resident enterprise holders of H shares for the year 2008 and

beyond.

In addition, it is also unclear whether and how PRC tax authorities will collect the PRC individual

income tax and enterprise income tax on gains realized by non-PRC resident holders of H shares through the

sale, or transfer by other means, of those shares and such tax has not been collected by PRC tax authorities

in practice. Considering these uncertainties, non-PRC resident holders of our H Shares should be aware that

they may be obligated to pay PRC income tax on dividends paid by us and gains realized through the sale, or

transfer by other means, of H shares.

Payment of dividends is subject to restrictions under PRC law.

We generally pay dividends out of our distributable profit for a given year and any accumulated

distributable profit from prior years. Distributable profit for a given year refers to the lower of net profit for

the year as determined under PRC GAAP or under IFRS, less any recovery of accumulated losses, required

appropriations to statutory surplus reserve and regulatory general reserve, and any discretionary appropriating

to reserves. As a result, even in years when we record a profit, we may not have sufficient distributable profit

to make dividend distributions. Furthermore, we may not be able to pay any dividends in a given year if (i)

we do not have distributable profit as determined under PRC GAAP, even if we had generated profit as

determined under IFRS or (ii) we do not have distributable profit under IFRS, even if we had generated profit

as determined under PRC GAAP. In addition, the CBRC has discretionary authority to prohibit any bank that

has a capital adequacy ratio below 8% or a core capital adequacy ratio below 4%, or has violated certain other

PRC banking regulations, from paying dividends and other forms of distributions.

RISK FACTORS

– 27 –

We are subject to PRC government controls on currency conversion and future movements in exchange

rates.

We receive a substantial majority of our income in Renminbi, which is currently not a freely convertible

currency. A portion of this income must be converted into other currencies in order to meet our foreign

currency obligations. For example, we may need to obtain foreign currency to pay any declared dividends on

our H Shares.

Under the PRC’s existing foreign exchange regulations, by complying with certain procedural

requirements, we can pay dividends in foreign currencies without prior approval from the SAFE. However, the

PRC government may, at its discretion, take measures to restrict access to foreign currencies for current

account transactions under certain circumstances. This would restrict our ability to pay dividends in foreign

currencies to holders of our H Shares.

The value of the Renminbi against the U.S. dollar and other currencies fluctuates and is affected by

changes in PRC and international political and economic conditions, among other things. Since 1994, the

conversion of Renminbi into foreign currencies, including Hong Kong and U.S. dollars, has been based on rates

set by the PBOC. These rates are set daily based on the previous business day’s interbank foreign exchange

market rates and the prevailing exchange rate of the international financial markets. From 1994 to 20 July

2005, the official exchange rate for the conversion of Renminbi to U.S. dollars was generally stable. On 21

July 2005, the PRC government adopted a more flexibly managed floating exchange rate system to allow the

value of the Renminbi to fluctuate within a regulated band based on market supply and demand and with

reference to a basket of currencies. On the same day, the value of the Renminbi appreciated by approximately

2% against the U.S. dollar. In August 2008, the PRC announced a change to a managed floating exchange rate

regime based on market supply and demand. In view of further economic and political developments, the

PBOC further reformed the RMB exchange rate regime on 19 June 2010 by increasing its flexibility.

Any appreciation of the Renminbi against the U.S. dollar or any other foreign currencies may result in

a decrease in the value of our foreign currency-denominated assets. Conversely, any devaluation of the

Renminbi may adversely affect the value of, and any dividends payable on, our H Shares in foreign currencies.

As of 31 December 2012, 9.86% of our assets and 10.14% of our liabilities were denominated in foreign

currencies. We are also currently required to obtain approval from the SAFE before converting significant sums

of foreign currencies into Renminbi. All of these factors could materially and adversely affect our financial

condition, results of operations and compliance with capital adequacy ratios and operational ratios.

RISKS RELATING TO THE RIGHTS ISSUE

Unless you exercise all of the Nil Paid H Rights initially allotted to you, this offering will dilute your

investment and proportionate ownership interest in us.

If you choose not to fully exercise your allotted Nil Paid H Rights, your proportional ownership and

voting interest in the bank will be diluted. Even if you elect to sell your Nil Paid H Rights prior to the

expiration of the applicable trading period, or such Nil Paid H Rights are sold on your behalf, the consideration

you receive may be insufficient to compensate you fully for the dilution of your proportional ownership and

voting interest in the bank.

The market price of H Shares may fluctuate and may fall below the Subscription Price prior to the

expiration of the subscription period.

Once you exercise your Nil Paid H Rights pursuant to this offering, you may not revoke the exercise.

Although the Subscription Price of HK$11.68 for the H Rights Shares represents a discount to the closing price

of HK$14.18 at the Price Determination Date, market prices may fall below the Subscription Price prior to the

expiration of the subscription period as a result of global or PRC economic or political conditions, the market’s

perception of the likelihood of completion of this offering, regulatory changes affecting our operations and

adverse changes in our financial performance. Many of these factors are out of our control. If you take your

Nil Paid H Rights and the market price of our H Shares falls below the Subscription Price on the date the H

RISK FACTORS

– 28 –

Rights Shares are issued to you, then you will have purchased those shares at above the market price. Any

decrease in market prices may continue after the completion of this offering and, as a result, you may not be

able to sell such H Rights Shares at a price equal to or greater than the Subscription Price.

Characteristics of the A Share and H Share markets may differ.

Our A Shares have been listed and traded on the Shanghai Stock Exchange since April 2002 while our

H Shares have been listed and traded on the Hong Kong Stock Exchange since September 2006. This Rights

Issue consists of both our A Share Rights Issue and our H Share Rights Issue. Without approval from the

relevant regulatory authorities, our A Shares and H Shares are neither interchangeable nor fungible, and there

is no trading or settlement between the A share and H share markets. The A share and H share markets have

different trading characteristics (including trading volume and liquidity) and investor bases (including different

levels of retail and institutional participation). As a result of these differences, the trading price of our A Shares

and H Shares may not be the same. Moreover, fluctuations in our A Share price may affect our H Share price,

and vice versa. Because of the differences between the A share and H share markets, changes in the prices of

our A Shares may not be indicative of the price trend of our H Shares. You should, therefore, not place undue

reliance on the recent trading history of our A Shares and the progress or results of the A Share Rights Issue

when evaluating the H Share Rights Issue.

An active trading market for the Nil Paid H Rights may not develop on the HKSE or any other

over-the-counter trading market and, even if a market does develop, the trading price of the Nil Paid H

Shares may fluctuate.

A trading period has been set for the Nil Paid H Rights from Monday, 9 September 2013 to Monday, 16

September (both days inclusive). We cannot assure you that an active trading market in the Nil Paid H Rights

on the HKSE or any other over-the-counter trading market will develop during the applicable trading period.

Even if active markets develop, the trading price of the Nil Paid H Rights may be volatile and subject to the

same factors that affect the price of our H Shares. See “— The market price of H Shares may fluctuate and

may fall below the Subscription Price prior to the expiration of the subscription period.”

The Subscription Price is not an indication of our underlying value.

The Subscription Price was determined by reference to the closing price of our H Shares on the Price

Determination Date, which was the last trading day before the Announcement. Consistent with the customary

practice for a rights issue, the Subscription Price was set at a discount to the market price of our H Shares at

the time. The Subscription Price does not bear a direct relationship to past operations, cash flow, earnings,

financial condition or any other established criteria for value, and you should not consider the Subscription

Price to be an indication of our underlying value.

Future sales or perceived sales of substantial amounts of our H Shares in the public market, or the

conversion of our A Shares to H Shares, could have a material adverse effect on the prevailing market

price of our H Shares and our ability to raise capital in the future.

The market price of our H Shares could decline as a result of future sales of substantial amounts of our

H Shares, or other securities relating to our H Shares, in the public market; the issuance of new H Shares; or

the perception that such sales or issuances may occur. Future sales, or perceived sales, of substantial amounts

of our H Shares could also materially and adversely affect our ability to raise capital in the future at a time

and at a price favorable to us, and our shareholders would experience dilution in their holdings upon the

issuance or sale of additional securities in the future.

Further, according to the stipulations by the CSRC and our articles of association, our A Shares may be

transferred to overseas investors, and such transferred shares may be listed or traded on an overseas stock

exchange, provided certain conditions are met and certain procedures are completed. Conversion of a

substantial number of our A Shares to H Shares, or the perception that such conversion may occur, could

adversely affect the price of our H Shares.

RISK FACTORS

– 29 –

Dividends distributed in the past may not be indicative of our dividend policy in the future.

The cash dividend distributed for 2012 was RMB0.63 per share. Any future declaration of dividends will

be proposed by our Board of Directors, and the amount of any dividends will depend on various factors,

including our results of operations, financial condition, future business prospects and other factors that our

board may determine to be important. We cannot guarantee if and when we will pay dividends in the future.

You may not be able to participate in future rights issues and may experience dilution of your holdings.

We may, from time to time, continue to distribute rights to our shareholders, including rights to acquire

securities. We will not distribute the securities to which these rights relate to holders of our H Shares unless

such securities are either exempt from registration under the U.S. Securities Act or are registered under the

U.S. Securities Act. There can be no assurance that we will be able to establish an exemption from registration

under the U.S. Securities Act, and we are under no obligation to file a registration statement with respect to

these securities or to endeavour to have a registration statement declared effective under the U.S. Securities

Act. Accordingly, holders of our H Shares may be unable to participate in rights offerings and may experience

dilution of their holdings as a result. In addition, if we are unable to sell rights that are not exercised or not

distributed or if the sale is not lawful or reasonably practicable, we will allow the rights to lapse, in which case

holders of our H Shares will receive no value for these rights.

Our corporate disclosure standards may differ from those of other jurisdictions.

We are subject to the disclosure requirements under the Hong Kong Listing Rules. These disclosure

requirements differ in certain respects from those applicable to companies in certain other countries, including

the United States. There may be less publicly available information about public companies listed in Hong

Kong, such as our Group, than is regularly made available by public companies in other countries, including

the United States.

We strongly caution you not to place any reliance on any information contained in articles in the press

or other media regarding us and the H Share Rights Issue.

Prior to the publication of this prospectus, there has been press and media coverage regarding us and the

H Share Rights Issue, which included certain financial information, financial projections, historical trading

prices of our H Share and A share and other information about us that do not appear in our prospectus. We have

not authorized the disclosure of any such information in the press or media. We do not accept any responsibility

for any such press or media coverage or the accuracy or completeness of any such information. We make no

representation as to the appropriateness, accuracy, completeness or reliability of any such information or

publication. To the extent that any such information appearing in publications other than this prospectus is

inconsistent or conflicts with the information contained in this prospectus, we disclaim it. Accordingly,

prospective investors should not rely on any such information. In making your decision as to whether to take

up or purchase our Nil Paid H Rights and/or subscribe for H Rights Shares, you should rely only on the

financial, operational and other information included in this prospectus.

RISK FACTORS

– 30 –

DIRECTORS’ RESPONSIBILITY FOR THE CONTENTS OF THIS PROSPECTUS

This prospectus, for which the Directors of the Group collectively and individually accept full

responsibility, includes particulars given in compliance with the Hong Kong Listing Rules for the purpose of

giving information with regard to the Group. The Directors, having made all reasonable enquiries, confirm that

to the best of their knowledge and belief the information contained in this prospectus is accurate and complete

in all material respects and not misleading or deceptive, and there are no other matters the omission of which

would make any statement herein or this prospectus misleading.

APPROVAL OF THE CBRC AND THE CSRC

The CBRC has given its written approval dated 29 September 2011 in respect of the Rights Issue. The

Company received CSRC’s written approval ([2013] no. 950) in respect of the A Share Rights Issue and written

approval ([2013] no. 1072) in respect of the H Share Rights Issue. In granting such approval, neither the CBRC

nor the CSRC accepts any responsibility for the financial soundness of the Company, nor for the accuracy of

any of the statements made or opinions expressed in this prospectus or in the Provisional Allotment Letter or

the Excess Application Form.

UNDERWRITING

The H Share Rights Issue is arranged by the Joint Global Coordinators. The H Share Rights Issue is fully

underwritten by the Underwriters, details of the underwriting arrangements are set out under the section headed

“Letter from the Board — III. H Share Rights Issue — H Share Underwriting Arrangement.”

RESTRICTIONS ON THE USE OF THIS PROSPECTUS AND THE OFFER AND SALES OF

SECURITIES

No action has been taken to permit a public offering of the Nil Paid H Rights and/or H Rights Shares,

other than in Hong Kong, or the distribution of this prospectus in any jurisdiction other than Hong Kong.

Accordingly, this prospectus may not be used for the purpose of, and does not constitute, an offer or invitation

in any jurisdiction or in any circumstances in which such an offer or invitation is not authorised or to any

person to whom it is unlawful to make such an offer or invitation. The distribution of this prospectus and the

offering of the Nil Paid H Rights and/or H Rights Shares in other jurisdictions are subject to restrictions and

may not be made except as permitted under the applicable securities laws of such jurisdictions pursuant to

registration with or authorisation by the relevant securities regulatory authorities or an exemption therefrom.

Each person acquiring the Nil Paid H Rights and/or H Rights Shares under the H Share Rights Issue will be

required to confirm, or be deemed by his/her/its acquisition of the Nil Paid H Rights and/or H Rights Shares

to confirm, that he/she/it is aware of the restrictions on offers and sales of the Nil Paid H Rights and/or H

Rights Shares described in this prospectus.

APPLICATION FOR LISTING ON THE HONG KONG STOCK EXCHANGE

The Company has applied to the Listing Committee of the Hong Kong Stock Exchange for the listing

of, and permission to deal in, the Nil Paid H Rights and/or the H Rights Shares.

The A Shares are listed and traded on the Shanghai Stock Exchange and the H Shares are listed and

traded on the Hong Kong Stock Exchange.

PROFESSIONAL TAX ADVICE RECOMMENDED

If you are unsure about the taxation implications of subscribing for, purchasing, holding, exercising or

dealing in the Nil Paid H Rights or H Rights Shares, or the receipt of proceeds with respect to the sale thereof,

you should consult an expert.

It is emphasised that none of the Company, the Underwriters, their respective directors, nor any other

parties involved in the H Share Rights Issue accepts responsibility for any tax effects on, or liabilities of, any

person resulting from subscribing for, purchasing, holding, exercising or disposing of the Nil Paid H Rights

or the H Rights Shares or the receipt of proceeds with respect to the sale thereof.

INFORMATION ABOUT THIS PROSPECTUS AND THE H SHARE RIGHTS ISSUE

– 31 –

H SHARE REGISTER AND STAMP DUTY

All of the H Shares have been or will be registered on the Company’s H Share register maintained in

Hong Kong. Dealings in the H Shares registered on the Company’s H Share register will be subject to Hong

Kong stamp duty.

REGISTRATION OF SUBSCRIPTION, PURCHASE AND TRANSFER OF H SHARES

Each acquirer of the H Rights Shares agrees with the Company and each of the Shareholders, and the

Company agrees with each of the Shareholders, to observe and comply with the PRC Company Law, the

Special Regulations and the articles of association of the Company.

Each acquirer of the H Rights Shares agrees with the Company, each of the Shareholders, Directors,

Supervisors, managers and officers, and the Company, acting for itself and for each of its Directors,

Supervisors, managers and officers, agrees with each of the Shareholders, to refer all differences and claims

arising from its articles of association or any rights or obligations conferred or imposed by the PRC Company

Law or other relevant laws and administrative regulations concerning its affairs to arbitration in accordance

with its articles of association, and any reference to arbitration shall be deemed to authorise the arbitration

tribunal to conduct hearings in open session and to publish its award. Such arbitration shall be final and

conclusive.

Each acquirer of the H Rights Shares agrees with the Company and each of the Shareholders that the H

Rights Shares are freely transferable by the holders thereof. Each acquirer of the H Rights Shares authorises

the Company to enter into a contract on his behalf with each of the Company’s directors and officers whereby

such directors and officers undertake to observe and comply with their obligations to the Shareholders as

stipulated in the Articles of the Company.

INFORMATION ABOUT THIS PROSPECTUS AND THE H SHARE RIGHTS ISSUE

– 32 –

We are a Joint Stock Commercial Bank operating primarily in the PRC, providing, through our branches

and subsidiaries, a wide range of banking products and services to individual and institutional customers

throughout the country.

Founded in 1987 and headquartered in Shenzhen, China, and with domestic business as our primary

business, we operate our banking business through our efficient network mainly in the relatively affluent

regions of the PRC, including the Yangtze River Delta, the Pearl River Delta and West Side of Taiwan Strait,

and the Bohai Rim, as well as some medium-sized and large cities in other regions. As of 30 June 2013, we

had 105 branches, 867 sub-branches, two exclusive branch-level operation centres (one branch-level Credit

Card Centre and one branch-level Small Enterprise Credit Centre), a representative office, 2,190 self-service

centres, 9,116 self-service machines (including 2,593 ATMs and 6,523 self-service deposit and withdrawal

machines) and a wholly owned subsidiary, CMB Financial Leasing Co., Ltd., in more than 110 cities across

the PRC. As of 30 June 2013, we had two subsidiaries in Hong Kong, Wing Lung Bank Limited and CMB

International Capital Corporation Ltd., a branch office in Hong Kong, a branch and a representative office in

New York and a representative office in each of London and Taipei. We are also preparing to launch a branch

in Singapore.

As of 30 June 2013, the Group’s total assets and total liabilities were RMB3,810,629 million and

RMB3,598,131 million, respectively. The Group’s operating income in 2010, 2011, 2012 and the first six

months of 2013 was RMB71,692 million, RMB96,603 million, RMB113,754 million and RMB64,186 million,

respectively, and the Group’s net profit in 2010, 2011, 2012 and the first six months of 2013 was RMB25,769

million, RMB36,127 million, RMB45,277 million and RMB26,266 million, respectively.

All our financial and operating data set forth in the section headed “Business” refer to those of the Bank,

unless otherwise indicated.

OUR COMPETITIVENESS IN THE INDUSTRY

Our Competitive Position

We compete mainly with commercial banks and other financial institutions in the PRC. Our major

competitors include the Large Commercial Banks and Joint Stock Commercial Banks. We also compete with

city commercial banks, foreign-invested banks operating in the PRC and the rapidly growing non-banking

financial institutions.

We provide customers with various wholesale and retail banking products and services, and engage in

various treasury activities. We believe that our innovative products and services are popular among customers

in the PRC. In particular, a number of our products and services, such as our “All-in-one Card” multi-function

debit card, our “All-in-one Net” online banking services, our dual-currency credit card, our “Go Fortune |

Corporate Banking,” “Sunflower Wealth Management” and private banking services are all well known in the

market. In recent years, we have won domestic and international awards and honors in recognition of our

outstanding operational management, continuous product innovation and corporate culture, including the

following:

Financial Times and Roland Berger Strategy Consultants: we were named the “Best Commercial

Bank (最佳商業銀行)” and the “Best Retail Bank (最佳零售銀行)” of the “Excellent Chinese Bank

Award in the Financial Times of the U.K. 2010”; in addition, we were named the “Best Private Bank in

China (中國最佳私人銀行)” in 2010, 2011 and 2012 by Financial Times;

The Wall Street Journal Asia: we were on the list of the “200 Most Esteemed Enterprises in Asia”

in 2010, ranking No. 2 among the most esteemed enterprises in the PRC and being the only banking

institution on the top ten list;

Euromoney: we were named the “Best Private Bank in China Region (中國區最佳私人銀行)” in

2010 and 2013, and received multiple recognitions, including “Best Customer Relationship Management

(最佳客戶關係管理),” “Best Investment Portfolio (最佳投資產品組合),” and “Best Ultra High-end

Customer Service (最佳超高端客戶服務)” in 2013;

BUSINESS

– 33 –

The Banker: with total tier-one capital of US$19,324 million, we ranked 60th (and 6th among all

PRC banks) on the list of “Global Top 1,000 Banks in 2011 (全球1000家大銀行)” in terms of tier-one

capital, up by 21 as compared with the 2010 ranking;

Asiamoney: we are a seven-time winner of “China’s Best Local Cash Management Bank (中國本土最佳現金管理銀行),” most recently in 2010, 2011 and 2012 and were named “China’s Best Private

Band (中國最佳私人銀行)” in 2012;

The Asset: we were named “The Best Custody Bank in the PRC (中國最佳託管專業銀行)” in 2010,

2011 and 2012, “China’s Best Private Bank (中國最佳私人銀行)” in 2010, 2011 and 2012 and “China’s

Best Cash Management Bank (中國最佳現金管理銀行)” in 2011 and 2012;

Private Banker International Magazine of Singapore: we were named the “Best Private Bank in

the PRC (中國區最佳私人銀行)” in 2011, 2012 and 2013;

FinanceAsia: we were named the “Best Bank (最佳銀行)” in 2012, and were named as having the

“Best Company Management (最佳公司管理),” “Best Corporate Governance (最佳公司治理),” “Best

Investor Relationship (最佳投資者關係)” in 2010 and “Best Social Responsibility (最佳企業社會責任)”

in 2010;

The Asian Banker Magazine: we were named “The Best Joint Stock Retail Banker in the PRC (中國最佳股份制零售銀行)” in 2010, 2011, 2012 and 2013, being a nine-time winner and one of the award’s

most frequent financial institution winners; we also won “China’s Best Retail Bank (中國最佳零售銀行)” in 2012, “Best Wealth Management Product in the PRC (中國最佳財富管理產品)” in 2011 and

2012, “Best Credit Card Product in the PRC (中國最佳信用卡產品)” in 2011, “China’s Best Mobile Bank

Product (中國最佳手機銀行產品)” in 2013, and “China’s Excellent SME Banking Business (中國優秀中小企業銀行業務)” in 2013;

Global Finance: we were named “China’s Best Retail Bank (中國最佳零售銀行)” in 2010, “Best

Consumer Bank (最佳消費者銀行)” in 2011 and 2012 and “China’s Best Small- and Medium-Sized

Enterprise Loan Bank (中國最佳中小企業貸款銀行)” in 2010;

IR Global Rankings: we were awarded the “Best Investor Relations Award in China Region

(A-share listed company) (中國區(A股上市公司)最佳投資者關係)” in 2011;

“Survey of Preferred Brand Names of Chinese Multimillionaires” conducted by Hurun Report: we

were named “The Most Preferred RMB Wealth Management Bank (最青睞人民幣理財銀行)” by high-

net-worth individuals in the PRC for the sixth time in 2010 and “The Most Preferred Credit Card Issuer

(最青睞信用卡發卡銀行)” by multi-millionaires in the PRC for the ninth time in 2013 and were named

“The Most Preferred Domestic Private Bank (最青睞國內私人銀行)” by high-net-worth individuals in

the PRC in 2011 and 2013;

The Banker: we received the “Top Ten Marketing of Financial Products Award (十佳金融產品營銷獎)” for the marketing of the “Golden Life Enterprise Annuity” product (“金色人生企業年金”產品營銷案例), as well as the “Top Ten Innovative Financial Product Award (十佳金融產品創新獎)” for the

marketing of our “Universiade” financial services (“大運”金融服務營銷案例) and our new “Cross-

Border RMB Interbank Platform” business (“跨境人民幣銀銀平台”新業務) in the “2012 China Financial

Innovation Awards (2012中國金融創新獎),” and we were awarded the “Best Corporate Image Award (最佳企業形象獎)” and the “Best Corporate Social Responsibility Award (最佳企業社會責任獎)” at the

“2011 China Financial Marketing Award (中國金融營銷獎)” ceremony in 2011, and were the only bank

to win two awards in that year;

The Chinese Academy of Social Science: we received the “‘Excellent Competitiveness’ Innovative

Financial Product Brand Award (卓越競爭力金融創新產品品牌獎),” and were named an “‘Excellent

Competitiveness’ Cash Management Bank (卓越競爭力現金管理銀行)” and “‘Excellent

Competitiveness’ Brand Building Bank (卓越競爭力品牌建設銀行)” in 2012, and we ranked first in

terms of brand development potential and customer support, according to the 2011 Chart of the China

Financial Enterprise Brand Competitiveness Index; and

BUSINESS

– 34 –

China Association of Small and Medium Enterprises: we were awarded the “2011 Excellence in

Service Products for SMEs (2011年度優秀中小企業服務產品大獎)” at the Fifth China SME Festival.

In July 2012, we were listed for the first time and ranked 498th on the Fortune magazine list of the Top

500 Global Companies for 2012.

Our Competitive Strengths

Stable and Outstanding Corporate Governance Under the Leadership of Our Experienced Management

Team

We are the first PRC commercial bank established wholly by corporate shareholders and the first Joint

Stock Commercial Bank listed both on a PRC stock exchange and an overseas stock exchange. As such, we

have adhered to our principle of maximizing shareholder value and returns, and are committed to establishing

a sound and stable corporate governance system. Over the years, we have established a comprehensive

corporate governance structure consisting of shareholders’ general meetings, a board of directors, a board of

supervisors and an independent director system. We believe that we have established effective decision-

making, operational and internal control systems. Our investor relationship management focuses on

information disclosure and transparency. In the “World’s Best Bank (全球最佳銀行)” competition held in 2012

by The Asset, we received the “Best Corporate Governance — Platinum Award (最佳公司治理獎 — 白金大獎).” In the “Best Asian Corporation Awards 2010 (2010亞洲最佳企業評選)” presented by FinanceAsia

magazine, we won four major awards, including “Best Company Management (最佳公司管理),” “Best

Corporate Governance (最佳公司治理),” “Best Investor Relations (最佳投資者關係)” and “Best Corporate

Social Responsibility (最佳企業社會責任).” In the “Corporate Governance Assessment Summary Report on

the Top 100 Chinese Listed Companies for 2010 (2010年中國上市公司100強公司治理評價)” jointly released

by Protiviti China and Research Centre of Corporate Governance under the World Economics and Politics

Institute of the Chinese Academy of Social Sciences, we ranked first on both the “Top 20 Companies for

Corporate Governance 2010 (2010年度中國上市公司治理評價20強)” and “Top 10 Listed Financial Companies

for Corporate Governance 2010 (2010年度金融業上市公司治理評價10強).”

Continuous Innovation as the Core Driver of Business Growth

Adhering to our business philosophy of “we are here just for you” and “change as the situation does,”

we are persistent with continuous innovation in business practices, internal management, products and services

and information technology as market conditions and needs of our customers change.

We were one of the first PRC commercial banks to transform, through our Second Transformation, into

using a capital- and resource-efficient business model. We were also an early-mover among all PRC

commercial banks to management of our customers by segment, including, for example, classification of our

retail banking customers into “All-in-one Card” ordinary card customers, “All-in-one Card” gold card

customers, Sunflower customers, Diamond-card customers and private banking customers based on a

customer’s total assets maintained at our bank. We were also one of the first PRC commercial banks to

construct an e-banking platform, to manage our SME business through an SME finance department (including

small enterprise finance departments at the branch level), and a small enterprise credit centre that are dedicated

to our SME business, to introduce the Electronic Commercial Draft System, or ECDS, to adopt innovative

practices for our bill discounting business, and to shift the focus of our credit card business from scale of the

business to value contribution.

With respect to internal management, we were one of the market leaders in implementing internal funds

transfer pricing, or FTP, adopting economic capital management, refining risk-pricing management, employing

management accounting in earnings assessments and performance appraisals, and promoting the

implementation of Basel II.

We spearheaded the launch of various products and services by PRC commercial banks. Our

multi-function debit card under the brand name of “All-in-one Card,” our comprehensive online banking

service platform under the brand name of “All-in-one Net,” our dual-currency credit card, our “Go Fortune |

BUSINESS

– 35 –

Corporate Banking” corporate banking products and services, and our “Sunflower Wealth Management”

private banking services are also among the first of their kinds in the PRC. The market-leading position of our

retail banking business is partly attributable to the first-mover advantage we gained from pioneering the launch

of several key retail banking products, such as our “All-in-one Card” debit card and our credit card products.

We are committed to devoting more resources to product innovation in wealth management, personal credit,

SME financial services, cash management, trade financing, interbank business, assets custody services, annuity

finance, offshore services, investment banking and cross-border financial services to gain competitive

advantages over our competitors in these areas. Meanwhile, we strive to offer international-standard financial

services in connection with our service innovation, and have been able to maintain a leading position in outlet

design, channel development, service process, competency of account managers and customer relationship

management.

Since our inception, we have been pursuing a development strategy that focuses on supporting

innovation in financial products and services with innovation in technology. For instance, our e-banking is a

leading “virtual” banking service channel in the PRC, our pioneering “All-in-one Card,” “All-in-one Net” and

dual-currency credit card all contain high-tech features, and we are the first PRC commercial bank to launch

a data warehouse project. We were one of the first PRC commercial banks to introduce a nationwide centralized

customer service centre, a cross-bank cash management platform and a self-developed ECDS. We have

commenced the construction of a next-generation information technology system to further enhance our

competitive advantage.

Well-Recognized Corporate Image and Continuously Growing Brand Value

“China Merchants Bank” has become a prominent brand name for financial services, which is

attributable to the continuing technical innovation of our products, high-quality customer service, proven

operating results and leading management principles. The continuous growth of our brand value is well

recognized as we continued to received awards in 2010, 2011 and 2012. We were recognized by the Financial

Times of the United Kingdom as one of the world-class brand names of the PRC, ranking first among all

commercial banks in terms of both price-to-book-value ratio and growth in brand value. In addition, we ranked

24th in the “World’s 600 Most Reputable Companies” published by Forbes. In 2011, we ranked ninth among

the top 50 Chinese brands, with a brand value of RMB27,560 million, according to “Best China Brands 2011,”

published by Interbrand. We ranked 56th among the World’s Top 1,000 Banks (in terms of core capital in 2011)

by The Banker, a British financial magazine. We ranked 14th among the “BrandZ” Most Valuable Chinese

Brands of 2012 as by Millward Brown, with a brand value of US$6.8 billion, and 5th among all Chinese

banking institutions after the Big Four state-owned banks. At the Sixth High-Level Forum for the Market Value

Management of Chinese Listed Companies (第六屆中國上市公司市值管理高峰論壇), we received the “Top

100 Chinese Listed Companies in 2012 with the Most Capital Brand Value (2012年度中國上市公司資本品牌價值百強)” award, with a capital brand value of RMB96.16 billion (ranked 1st), the “Top 100 Chinese Listed

Companies in 2012 in Market Value Management (2012年度中國上市公司市值管理百強)” and the “Top 100

Chinese Listed Companies in 2012 with the Most Capital Brand Premium (2012年度中國上市公司資本品牌溢價百強)” awards. We ranked 498th on the Fortune magazine Top 500 Global Companies in 2012. Case studies

featuring our Bank have been used in course materials in several prestigious universities at home and abroad,

including Harvard University in the United States, the International Institute for Management Development in

Lausanne, Switzerland, and Peking University and Tsinghua University in the PRC.

Advanced and Comprehensive Risk Management Leading to Consistently High Asset Quality

Since our establishment, we have consistently emphasized prudence in operational management and, at

the same time, promoted the value of risk management. We have formed a risk management culture and

philosophy that features proactive and prudent risk management as well as participation in risk management

at all levels of the Bank. We have, in recent years, devoted considerable resources to the establishment of a

comprehensive independent and balanced risk management system, as well as the implementation of firm-wide

risk identification, quantification, monitoring, and management policies and procedures, to maximize our

risk-adjusted returns.

BUSINESS

– 36 –

We have undertaken to optimize our credit risk management process and strengthen our fundamental risk

management capabilities over the past few years. Specifically, we have (i) established a specialized team of

credit approval officers and risk managers, (ii) implemented a credit approval mechanism where each credit

approval requires authorization by two credit approval officers at the same level, in order to enhance both the

prudence and efficiency of credit approvals, (iii) constructed a risk-warning system designed to identify

portfolio and individual risks at an early stage and proactively exited certain potentially risky areas, (iv)

mapped the affiliate relationships of companies within corporate groups to strengthen the risk management of

group borrowers, (v) developed a new-generation credit risk management system that features real-time

monitoring and paperless electronic operational platforms and (vi) built an internal credit rating system that

we expect to gradually cover substantially all of our corporate and retail customers. In addition, we have also

improved and upgraded our facility rating system and have gradually applied the rating results to customer

qualification, credit approval, credit authorization, risk pricing, performance assessment, post-lending

management and other procedures.

We measure market risks, including interest rate risk, exchange rate risk and liquidity risk, using

advanced financial tools. We started to centrally manage our market risks using an internal fund transfer

pricing system in as early as 2006. In 2010, we became one of the first PRC commercial banks to adopt hedge

accounting under the relevant accounting principles to account for our hedging activities in relation to the

management of the interest rate risk of our banking account, and we established a system for the management

of interest rate risk, exchange rate risk and liquidity risk that emphasizes quota management.

We have been strengthening our operational risk management by improving our management structure,

establishing specialized departments and enhancing staff training, review and discipline. Our multi-layer

management structure, which consists of three lines of defense, and our management tools and systems all help

strengthen our internal control and compliance risk management.

Our reputation risk management system, which is now in full operation, coordinates reactions to

reputational incidents across the Bank among different departments and business lines as such incidents unfold.

We also plan to continuously strengthen our reputation risk management capabilities by improving our overall

risk assessment and management.

We actively applied to the CBRC to become one of the pilot banks in the PRC to implement Basel II.

To this end, we have made considerable efforts and progress in constructing an information-based platform and

introducing advanced rating methods and risk measurement, which in turn significantly contributed to our risk

management and assets and liabilities management. In recent years, our non-performing loan ratio has been

stable. As of 31 December 2012, the balance of our non-performing loans and our non-performing loan ratio

were RMB11,388 million and 0.65%, respectively, and as of 30 June 2013, our non-performing loan ratio was

0.77%, which placed us ahead of most listed PRC commercial banks in terms of asset quality.

First Mover in Establishing a Capital-Efficient and Sustainable Business Model and an Industry-

Leading Comprehensive Capital Management System

We were among the first PRC commercial banks to pursue balanced development in terms of efficiency,

quality and scale. We have endeavored to achieve sustainable development through the establishment of a

comprehensive capital management system and the strategic transformation of our business into one that

focuses on capital constraints and efficiency.

In 2009, in response to multiple external challenges, including increasingly stringent regulatory

constraints on capital, rapid development of direct financing and steady liberalization of interest rates, we led

our domestic peers in the transformation of our operating model by launching our Second Transformation. At

the same time, we continued to push forward with our first business transformation, which emphasized our

retail banking business, non-interest income business and SME business. The objective of our Second

Transformation is to transform our growth strategy from a model that relies heavily on capital resources to one

that seeks to optimize operational and capital efficiency through improving management capabilities,

informational and technological advancement and employee productivity. Through the Second Transformation,

we aim to reduce capital consumption, improve risk pricing capabilities, control financing costs, increase

customer value and enhance risk controls.

BUSINESS

– 37 –

We have developed a comprehensive capital management system that fully covers regulatory capital

management, economic capital management and book-value capital management. With respect to regulatory

capital management, we focus on matching our capital adequacy ratio with our level of risks and

risk-management capability, so as to achieve comprehensive and effective assets and liabilities management to

meet the continuing regulatory and internal capital adequacy requirements. With respect to economic capital

management, we established our economic capital management system in 2005. We have continuously

optimized the methodologies to quantify economic capital, and have implemented structural adjustments and

business transformation through capital allocation, added weightings to indicators that relate to capital

efficiency, such as EVA and RAROC, in our performance review, optimized the industry and customer mix of

our loan portfolio, improved the portfolio risk-return profile, and formed an evaluation system that emphasizes

capital efficiency. With respect to book-value capital management, we have actively explored the optimal

capital planning and budgeting model and different types of capital instruments, continuously improved the

amount and structure of our capital, and achieved a position where the capital generated from our business

operations could meet the capital requirements of our future business growth.

We have made significant achievements in the implementation of our Second Transformation since 2010.

For instance, (1) our capital efficiency has been stable, as evidenced by our return on average equity, or ROAE,

which reached 23.60% in the first six months of 2013, and our risk-adjusted return on capital after tax, or

RAROC, which reached 21.25% in the same period; (2) the risk pricing of our loan portfolio has been stable,

and the floating range of weighted average interest rates of our new RMB corporate loans (weighted at actual

amounts) in the first six months of 2013 was 12.46% higher than such rate in 2012 by 0.66 percentage points,

while the floating range of weighted average interest rates of our new RMB retail loans (weighted at actual

amounts) in the first six months of 2013 was 30.11% higher than such rate in 2012 by 7.16 percentage points;

(3) our operating efficiency continued to improve, as our cost-to-income ratio decreased by 4.51 percentage

points from 2012 to 31.64% in the first six months of 2013, annualized profit per capita before tax increased

by 12.40% from 2012 to RMB1.36 million in the first six months of 2013, and annualized profit per outlet

before tax increased by 11.15% from 2012 to RMB67.68 million in the first six months of 2013; (4) the share

of high-value contribution customers in our customer mix increased, and the number of Sunflower (i.e., retail

customers with monthly daily average total assets of RMB500,000 or above) or higher-tier customers as of 30

June 2013 increased by 9.76% from 1 January 2013, and the number of our private banking customers as of

30 June 2013 increased by 15.82% from 1 January 2013; and (5) our asset quality remains stable, as our

non-performing loan allowance coverage ratio was 299.72% as of 30 June 2013, representing a decrease of

52.75 percentage points from 31 December 2012, our non-performing loan ratio was 0.77% as of 30 June 2013,

representing an increase of 0.12 percentage points from 31 December 2012, our special mention ratio was

1.07% as of 30 June 2013, representing an increase of 0.03 percentage points from 31 December 2012, and our

credit costs were 0.51%, representing an increase of 0.2 percentage points from 31 December 2012.

With the implementation of the Second Transformation, we intend to continue to maximize our return

on capital, grow our business in a capital-efficient manner, and improve our operating efficiency to increase

our return on equity and the Bank’s value and to solidify our competitive advantages.

Leading Comprehensive Retail Banking Business

We have adopted a growth strategy for retail banking to cope with the trends of financial

disintermediation and interest rate liberalization in the PRC banking sector. This strategy has helped us occupy

a strong leading position in the PRC retail banking industry. Our main competitive strengths in retail banking

business include: a solid customer base with improving customer structure, operating efficiency, coordinated

institutional advantage, professional operational capabilities and advanced management skills, and a

deep-rooted retail banking culture and prestigious brand name. Such competitive strengths are well recognized.

We are a nine-time winner of the “Best Joint Stock Retail Bank in the PRC” award presented by The Asian

Banker magazine, and a four-time winner of the “Best Retail Bank Award,” and we have been named “China’s

Best Private Bank (中國最佳私人銀行)” multiple times by Euromoney, Asiamoney, Private Banker and The

Asset.

BUSINESS

– 38 –

Our comprehensive retail banking management system consists of systems for our wealth management

business, private banking business, personal lending business, and credit card business, as well as for channel

management and operational management. After years of development, we have developed a comprehensive

retail banking product offering, which caters to the various needs of customers of different ages and income

levels, and covers domestic and overseas markets, foreign currency, bond and securities products and services.

In addition, we have established a comprehensive and coordinated retail banking service network that covers

physical outlets, direct banking, online banking and mobile banking.

Our retail banking business has a solid customer base, which is well recognized in the industry. We focus

on developing and maintaining target customers, as well as establishing and optimizing our refined customer

management system. We classify our retail customers, based on assets under our management, into

“All-in-one” ordinary card customers, “All-in-one” gold card customers, Sunflower customers, Diamond-class

customers and private banking customers. For customers in different classes, we provide differentiated

products and services, adopt differentiated marketing measures and offer differentiated asset allocation

strategies. In addition to a growing customer base, we also make efforts in optimizing our customer mix. As

of 30 June 2013, our retail profit before tax accounted for 36.73% of our total profit before tax, and the balance

of assets of Sunflower and higher-tier customers under our management increased by 11.87% from 31

December 2012 to RMB1,870.4 billion, accounting for 72.12% of the balance of assets of all retail customers

under our management. The average deposit amount in “All-in-one Card” reached RMB11,700.

We are committed to developing our retail loan business, which is a relatively capital-efficient business.

As of 30 June 2013, the balance of our retail loans was RMB737,647 million, accounting for 38.32% of our

total loans and advances. The quality of our retail loans remains stable. The non-performing loan ratio of our

retail loans was 0.33%, 0.31%, 0.48% and 0.59% as of 31 December 2010, 2011 and 2012 and 30 June 2013,

respectively.

We strive to become the best wealth-management bank in the PRC by focusing on customer asset

management to capture the strong demand for personal wealth management services. We provide personalized

wealth management services to satisfy the needs of different customers while maintaining prudent and

effective risk control. The competitive strength of our wealth management business rests on our first-mover

advantage in providing customer-interest-oriented services, customer segregation in customer services and

management, specialized retail banking capability and a strong wealth management brand name. For instance,

we offer customized wealth management services packages that are designed for the needs of regular

customers, assets allocation consultation services for middle- to high-end customers, and customized products

and services for top-class customers that suit their individual needs. We were one of the first PRC commercial

banks to offer exclusive and customer-oriented wealth management services for middle- to high-end retail

customers through our well-regarded Sunflower VIP rooms and Sunflower wealth management centres. We

also aim to utilize the platform of Wing Lung Bank as our overseas wealth management centre, to offer

one-stop service for domestic customers who demand overseas wealth management services.

With years of accumulation of high-net-worth individual customers and experience in servicing these

customers, we are an early mover in the private banking business in the PRC. The philosophy of our private

banking business, adopted when we launched the business, is “your family prosperity is our business.” We

define private banking customers as those whose total assets under our management are no less than RMB10

million. Our comprehensive, personalized and discreet private banking service offers customized investment

planning for private banking customers. We are among the first PRC banks to introduce global asset allocation

models that are tailored to the needs of PRC domestic private banking customers, so as to enrich and expand

investment alternatives for our private banking customers. We and Bain & Company jointly issued “The Report

on Chinese Private Wealth for 2011,” which is an in-depth research report on the demand of high-end

customers that closely tracks the PRC private wealth management market. In 2012, we were awarded “The Best

Bank for Private Banking” by Singaporean magazine Private Banker International, “China’s Best Domestic

Private Bank” by Asiamoney, “China’s Best Private Bank” by The Asset, and “China’s Best Private Bank” by

Financial Times. As of 30 June 2013, we had 30 private banking centres in the PRC. The total number of our

private banking customers grew to 22,606, while total assets of our private banking customers under our

management increased to RMB509.8 billion as of 30 June 2013.

BUSINESS

– 39 –

Leading Credit Card Brand and First Mover in Transformation of Credit Card Business Model

Since the launch of our first dual-currency credit card in December 2002, we have been a leader in the

PRC credit card market and have successfully built relationships with a number of customers, merchants and

partners. Our credit card business leads in the local markets of nearly 30 major cities in the PRC in terms of

brand influence, customer satisfaction and innovation. 2012 marked the 10th anniversary of our first issuance

of credit cards. In those ten years, we were the pioneer of the PRC credit card market in many ways: we issued

the first dual-currency credit card in the PRC under international standards, we were the first bank to introduce

RMB repayment for overseas consumption, first to introduce interest-free instalment repayment, and first to

introduce reward plans with permanent reward points. We also actively seized the opportunities presented by

the onset of the mobile Internet era by innovating and launching the “Mobile Wallet” product, the “Pocket

Life” mobile client, mobile applications terminals, new media communication and other mobile services. In the

“2011 Survey of Preferred Brand Names of Chinese Multimillionaires” published by Hurun Report, we became

a nine-time winner of “The Most Preferred Credit Card Issuer” by millionaires in the PRC. According to a

survey by a consulting firm, our credit card services have been considered the most satisfactory among all

credit card services in the PRC for many years. According to data released by China UnionPay, in 2012, our

credit cards business ranked first among all banks in the PRC in terms of the number of interbank transactions,

the monthly average transaction value per card, and the value of overseas transactions. In addition, our credit

card business was chosen by Harvard Business School as a case study as part of its MBA curriculum on account

of our excellent development and management strategies in this business, and we are regarded as a leader in

the credit card market of the PRC.

In recent years, competition in the PRC credit card market has intensified. An increasing number of card

issuers compete for market share. To increase our competitive edge in this market, in 2008, we led the market

in transforming to a refined business model that targets particular groups of customers based on customer value

and that emphasizes the balance of risk and return. We aim to maximize customer value through diversified

product and service offerings and have laid the foundation for a sustainable business model that focuses on

value and efficiency.

Since the commencement of such transformation, our credit card business has shown strong growth

momentum. In the first six months of 2013, the monthly average transaction value per active card was

RMB3,064, showing a steady increase in our transaction value per active card. Cumulative transaction turnover

of our credit card business in the first six months of 2013 was RMB418.0 billion. Credit card interest income

and non-interest income in the first six months of 2013 were RMB3,896 million and RMB3,468 million

respectively, representing an increase of 36.13% and 42.42%, respectively, as compared with the first six

months of 2012. As of 30 June 2013, our credit card non-performing loan ratio was 1.01%, representing a

decrease of 0.05 percentage points from 31 December 2012.

Specialized and Prudent Small and Micro Enterprise Businesses

We consider small and micro enterprises a target customer vital to our business. This determination is

based on three factors: the external environment, constraints, and changes in market demand. Given the

external environment, specifically, the dual trends of financial disintermediation and interest rate

liberalization, banks must focus on increasing asset prices in order to counter the effects of declining interest

spreads, and the development of small and micro enterprise clients is one point for breakthrough. In terms of

constraints, small and micro enterprises, which typically have lower capital consumption and higher yields

compared with large and medium-sized enterprises, may help banks increase their capital efficiency and market

capitalization. In terms of market demand, the ongoing economic transformation of China has resulted in a

large number of small and micro enterprises, whose funding needs are often unmet since financial services

catering to small and micro enterprises are still in their infancy, presenting us with significant opportunities

for development. Therefore, we have adopted a development strategy of focusing on services for small and

micro enterprises and establishing our brand as a provider of such services by vigorously adjusting our credit

asset structure and establishing a professionalized operational system for this purpose.

BUSINESS

– 40 –

In an important move in offering specialized credit services for small and micro enterprises, we set up

the CMB Small Enterprise Credit Centre in Suzhou in June 2008, the first banking unit specializing in small

enterprise credit business in the PRC. The centre’s business focuses on offering a broad range of financing

services, including credit, guarantees, and collateralized and pledged loans with a credit amount not exceeding

RMB10 million. After five years of operation, the centre has granted loans in an aggregated amount of over

RMB136.6 billion and supported more than 10,000 small enterprises. As the first licensed institution

specializing in small enterprises, we have developed a market-leading, professionalized operational model in

the area of small enterprise business, which we have replicated and implemented in our branches across the

PRC. In addition, we carried out a series of measures to execute this strategy, including accelerating the reform

of our wholesale banking business line, as well as integrating financial services to small and micro enterprises

with credit exposures below RMB5 million into our retail banking business line. Taking into account the fact

that the funding needs of small and micro enterprises tend to be relatively short-term, small in amount, high

in frequency and on short notice, we have set up at the head office level a centralized retail loans operation

center and a “factory-style” lending pipeline for small and micro enterprise borrowers, and innovated

procedures for small and micro enterprise loans. With the establishment of the credit “factory,” the retail loans

operation center at our head office is responsible for the approval and issuance of loans, while our branches

focus on marketing and customer investigation, which has greatly enhanced the efficiency of our customer

managers.

In 2013, we were named “China’s Excellent SME Banking Business (中國優秀中小企業銀行業務)” at

the “2013 Retail Financial Service Excellence Award (2013零售金融服務卓越大獎)” selection held by Asian

Banker Magazine. In 2012, we were named the “Best Brand in Small and Micro Enterprise Finance (最佳小微企業金融品牌)” at the Annual Meeting of Chinese Retail Banks and the Fifth Award Ceremony for China’s

Most Respected Banks and Best Retail Banks (中國零售銀行年會暨「第五屆」中國最受尊敬銀行暨最佳零售銀行頒獎) held by Money Weekly. In 2011, we received the “Excellent SME Service Products Award (優秀中小企業服務產品大獎)” at the Fifth China SME Festival held by the China SME Association. As of 30 June

2013, the total volume of small and micro enterprise loans (based on the Bank’s classification) was

RMB525,314 million, representing an increase of RMB147,764 million, or 39.14%, as compared to the

beginning of 2013 and accounting for 28.95% of our domestic general loans (excluding discounted bills). In

particular, the total volume of small enterprise loans was RMB270,202 million, accounting for 25.09% of our

domestic corporate loans, and the balance of micro enterprise loans was RMB255,112 million, accounting for

34.58% of our retail loans. Meanwhile, the non-performing loan ratio for small and micro enterprise loans

remained at a relatively low level. The non-performing loan ratio for small enterprise loans and micro

enterprise loans was 1.48% and 0.60%, respectively.

Rapidly Growing Non-Interest Income Business with Diversified Product Offerings

We strive to optimize our income structure by developing our non-interest income business, which has

low risk and low capital consumption. Our non-interest income has experienced rapid growth in recent years,

which is a result of contributions from both the wholesale banking business and the retail banking business.

In wholesale banking, our non-interest income business has extended from currency and credit markets

to securities and precious metal markets, and from corporate operations to financial institutions. We have

extended our emerging wholesale banking non-interest income business into new areas, including debt

financing instruments underwriting, financial advisory services, asset custody, corporate wealth management,

wealth management for financial institutions, third-party custody, online corporate banking, cash management,

business cards, annuity finance, and precious metal operations leasing.

In retail banking, the structure of our client base continued to improve and the percentage of high-value

customers continued to increase as we further adjusted our business structure. In addition, our wealth

management system and comprehensive wealth management services, which have undergone continuous

improvements and innovation, have helped our personal wealth management services gain a good reputation

among our customers and have been key drivers for the rapid growth of our private banking business, which

in turn contributed to steady and rapid growth in our retail non-interest net income. Sources of retail

non-interest income include bank card commission fees, commissions from distributing fund and insurance

products, wealth management fees, trustee agency services fees and commissions from distributing precious

metals.

BUSINESS

– 41 –

We believe in balancing innovation and convention in the traditional banking industry as well as

balancing moderately high yields and close-to-market yields. We continue to be a market leader in the wealth

management area and receive broad recognition from institutions and investors. In the first six months of 2013,

we launched 1,815 wealth management products. The sales volume of our wealth management products in the

first six months of 2013 was RMB2,500 billion. The value of our wealth management products as of 30 June

2013 was RMB399,937 million, and the volume of our proprietary investment portfolio was RMB595,128

million. According to the “CNBenefit Report on Wealth Management Capability of Banks 2012” jointly

released by CNBenefit and the Research Institute for Trust & Wealth Management at the Southwestern

University of Finance and Economics, we ranked first in terms of overall competence of wealth management

services ranked among the top three in terms of profitability, risk control and disclosure compliance. We also

ranked first in overall wealth management capability in the “2010 Best Wealth Management Products” survey

jointly sponsored by the Economic Observer and Wind Information on account of the number of wealth

management products issued, innovative design of structure, excellent ability to achieve revenue, rigorous risk

control system and considerable experience in offering wealth management services.

In 2010, 2011, 2012 and the first six months of 2013, our non-interest income was RMB13,152 million,

RMB18,430 million, RMB23,042 million and RMB15,185 million, respectively, accounting for 19.20%,

19.95%, 21.25% and 24.93%, respectively, of our operating income, which were relatively high percentages

compared to other publicly listed PRC banks.

Featured Wholesale Banking Business with Strong Growth Potential

Our wholesale banking businesses provide a full range of products and services catering to the wealth

management needs of our customers and have strong growth potential in a number of business areas.

In 2010, we launched the “Qian Ying Zhan Yi (千鷹展翼)” Program, an incubation program targeting

innovative and high-growth enterprises. The program focuses on supporting the rapid growth of target

enterprises, and is aimed at fostering a customer base that potentially could have strong demand for financial

services in the future. We offer such enterprises various comprehensive financial services solutions covering

ten aspects of the operation and financial management of an enterprise, such as financing, cash management,

treasury services, supply chain management, cross-border trade and investment, IPO advisory and employee

incentive scheme planning. In particular, we partner with private equity funds to facilitate equity financing as

a fund-raising alternative to IPOs. As of 30 June 2013, the “Qian Ying Zhan Yi” program served 12,852

innovative growth enterprises, and the total loan balance reached RMB110.0 billion. Since 2011, a total of 147

enterprises supported by the “Qian Ying Zhan Yi” program have been listed on domestic or overseas stock

markets and the amount of IPO proceeds under the Bank’s custody was close to RMB30 billion. Of these 147

enterprises, 109 were listed on the SME Board and ChiNext. In 2012, 45 enterprises, or 35% of all the

enterprises listed on the SME Board and ChiNext in 2012, opened IPO proceeds custody accounts with our

Bank, which made us the market leader among all domestic banks.

We are a leader in the cash management business among the PRC commercial banks, with a leading cash

management product portfolio in the PRC domestic market. We are a seven-time winner of “China’s Best

Domestic Cash Management Bank,” awarded by Asia Money, and “China’s Best Cash Management Bank,”

jointly awarded by the Chinese journals Economic Observer, CFO and China Business.

Our overseas business is competitive and we have established a broad overseas business network,

including our Hong Kong branch, our New York branch, Wing Lung Bank, CMB International Capital

Corporation Ltd., and our offshore banking department, all of which facilitate our cross-border financial

services. We were one of the first banks to engage in offshore banking with more than twenty years of operation

experience. The brand name of our offshore banking and the superior results we have achieved over the years

have given us a distinct advantage over the other three PRC banks qualified for offshore business and we

ranked first among the four banks in terms of several operating indicators. In the international factoring

business, we were awarded three individual world championships presented by Factors Chain International: the

International Factoring Marketing Award, the Growth for Global Export Factoring Operator Award and the Best

Export Factoring Operator Award. We ranked first in the PRC for several years in the export factoring service

quality evaluation, and received the Seventh Financial Innovation Award of Shenzhen in 2011. We have also

set a number of milestones in cross-border Renminbi business, such as the first Guangdong-Hong Kong

BUSINESS

– 42 –

cross-border Renminbi settlement, the first cross-border Renminbi settlement by clearing bank and the first

cross-border Renminbi direct investment. In recent years, the cross-border financial platform has grown

rapidly. In recent years, the Bank has enriched its “Cross-Border Finance” brand with three products, namely

“Shang Mao Tong (商貿通),” “Zi Ben Tong (資本通)” and “Cai Fu Tong (財富通).” The Bank has also been

able to leverage its integrated onshore, offshore and overseas network of branches as well as its overseas

correspondent bank network to consolidate internal resources, develop featured products, be innovative in

service offerings, improve operating systems and construct a system that bridges onshore and offshore

transactions, domestic and international operations, Renminbi and other currencies, and investment and

commercial banks, to create our competitive advantage in cross-border financial services.

We have a top-ranking custody business in terms of overall competitiveness among national Joint Stock

Commercial Banks. The assets under the Bank’s custody has exceeded RMB1 trillion, and we are a market

leader among the joint-stock custodian banks in terms of each major indicator. Our “6S” custody brand has

earned a good reputation in the PRC banking industry. Our custody business has won a number of awards,

including “Best Professional Custody Bank in the PRC,” awarded by Securities Times (《證券時報》), and

“The Best Joint-Stock Bank in the Assets Custody Market in the PRC,” awarded by Economy Magazine Press

(《經濟雜誌社》). We have also won “Best Custody Specialist,” awarded by The Asset, for three consecutive

years. In 2011, we were named “The Best Custody Bank for Venture Capital and Private Equity Firms in 2011”

by 21st Century Business Herald (《21世紀經濟報導》).

Our investment banking business has become a major growth driver for our new wholesale banking

services. In the first six months of 2013, income from our investment banking business was RMB1,139 million,

and we underwrote debt financing instruments in the principal amount of RMB73,421 million. In 2012, we won

several awards granted by Securities Times (《證券時報》), the “Best Bank with Investment Banking

Division,” “Best Bond Underwriter,” “Best Financial Advisor” and “Best Innovative Bank with Investment

Banking Division” awards, and were the only Joint Stock Commercial Bank to win the “Best Bank with

Investment Banking Division” award.

We also vigorously developed our industry-leading, high capital return discounted bills business. We

issued the first electronic commercial draft in the PRC, which signaled the entry of the PRC’s commercial draft

system into a paperless era. In 2010, we won three awards for our discounted bills business, including the

“Outstanding Contribution Award for Building Electronic Commercial Draft System,” presented by the

People’s Bank of China. In 2012, the pricing of our discounted bills business was the fourth highest in the PRC

banking industry, while our aggregate amount of direct discounting ranked second, and the aggregate amount

of direct drafts discounting ranked first among peers.

Leading E-Banking Service Channels Offering Convenient and Efficient Services

We attach great importance to the innovation and improvement of our e-channels, continuously improve

our online and direct banking functions to supplement our physical channels, and proactively explore the

development of mobile financial services. The Bank was the first bank in China to introduce the concept of

a mobile Internet finance portal, designed a “one-stop” open platform for mobile banking and launched mobile

wallet services for both mobile terminals and SIM cards. We ranked high among all domestic banks in terms

of the number of downloads made by our mobile and iPad banking users, maintained a leading position in terms

of customer experience, were able to expand our products and services coverage, and were highly recognized

by customers. As our target client base is comparatively young, we focus on channeling our customers to use

our online banking services. The utilization rate of our online banking services is relatively high, which helped

alleviate the burden of our physical outlets. In the first six months of 2013, the number of transactions

conducted through our retail e-banking channels accounted for 91.85% of our total retail banking transactions

capable of being transacted online, the number of transactions conducted through our corporate e-banking

channels accounted for 57.49% of our total wholesale banking transactions capable of being transacted online,

and the number of online corporate banking settlements accounted for 90.27% of all wholesale banking

settlement transactions capable of being transacted online.

We have developed different online banking interfaces targeting different customer groups. These

interfaces include an online retail banking public interface, an online retail banking professional interface, and

an online corporate banking interface branded as “U-BANK” all of these interfaces are highly recognized. In

BUSINESS

– 43 –

recent years, we have won many awards for our e-banking services, including “China Users’ Favorite Internet

Bank,” “Award for Significant Technology Achievements in Chinese E-banking for the Past Decade,” “Best

Internet Bank” and “Best Internet Bank Brand Award.” As of 30 June 2013, the professional interface of our

retail online banking platform had 13.84 million active users. In the first six months of 2013, the number of

online retail banking transactions accounted for 88.23% of our total retail banking transactions capable of

being transacted online. 491.33 million transactions were conducted through our online retail banking

platform, and the aggregate transaction value reached RMB9,130 billion, including 378.13 million online

payment transactions with an aggregate transaction value of RMB170.6 billion. In the first six months of 2013,

23.45 million transactions were conducted through our online corporate banking platform U-BANK, and the

aggregate transaction value reached RMB15,290 billion.

Our direct banking operates under a brand-new transformational banking service model. Our direct

banking channel, through which our direct banking customer service managers provide customers with

real-time, comprehensive, fast and professional banking services, investment and wealth management

consultations, one-stop loan service as well as sale of products, is an innovative banking service. In the first

six months of 2013, 3,639,600 transactions were conducted through our direct banking, with the transaction

value reaching RMB416,115 million, and the sales of various types of funds (including monetary funds), trusts

and wealth management products amounted to RMB173,149 million. In the first six months of 2013, the

aggregate principal amount of loans granted online amounted to RMB9,794 million, and as of 30 June 2013,

the balance of loans granted online was RMB11,197 million.

The Bank’s mobile banking service maintained rapid growth as of 30 June 2013. We were the first bank

to launch a mobile corporate banking interface that provides services in five major categories: account inquiry,

payment, settlement, investment and wealth management. We also took the lead in the PRC by launching

“CMB Wallet,” which provides the most advanced mobile payment services that combine bank cards with

mobile phones. As of 30 June 2013, we had 12,434,000 signed mobile banking contracts, with 4,237,900 active

customers. The cumulative number of transactions (excluding mobile payment) was 17,222,800, and the

aggregate transaction value reached RMB420,800 million. The total number of mobile payments was

69,961,000, and the aggregate transaction value for mobile payments was RMB12,719 million.

Progressive Penetration of International Market and Continuous Improvement in Comprehensive

Operation Platform

We have reinforced our competitive strength by progressively penetrating international markets,

diversifying our business operations, improving our customer service and expanding our sources of income.

Development of the international business is a key business strategy in our medium- to long-term plan.

We strive to provide high quality cross-border financial services to Chinese enterprises that are expanding their

international operations. In recent years, we have been successful in building our service network in overseas

markets where Chinese enterprises are active, such as Hong Kong, Taiwan, the United States and Europe. We

currently have one branch and a wholly owned subsidiary, CMB International Capital Corporation Ltd., in

Hong Kong. We have maintained a representative office in New York for many years. In October 2008, we

opened our New York branch, becoming the first PRC bank to obtain the necessary license from the U.S. Board

of Governors of the Federal Reserve since the enactment of The Foreign Bank Supervision Enhancement Act

of 1991. In addition, we completed the acquisition of Wing Lung Bank in 2008. As of 30 June 2013, Wing Lung

Bank had 44 outlets in Hong Kong, 4 branches, sub-branches or representative offices in the PRC, and one

branch in each of Macau, Los Angeles and the Cayman Islands. We opened our London representative office

in July 2009. In March 2011, we registered our representative office in Taipei, which officially opened in June

2011. We are one of the first three PRC banks that have been approved to conduct business in Taiwan. We are

also preparing to open a Singapore branch, and the Board has approved a proposal to set up a Luxembourg

branch.

We have been enhancing our non-banking financial services — such as investment banking, financial

leasing and fund management — through our subsidiaries and affiliates, such as CMB International Capital

Corporation, CMB Financial Leasing and China Merchants Fund Management. In addition, by acquiring Wing

Lung Bank, we indirectly acquired the subsidiaries of Wing Lung Bank, including Wing Lung Securities, Wing

Lung Insurance, Wing Lung Trust and Wing Lung Custody, which together helped us further expand our

integrated financial services platform in Hong Kong.

BUSINESS

– 44 –

BUSINESS OPERATIONS OF THE BANK

Our main business lines include wholesale banking, retail banking, financial market business and other

businesses. The following table sets forth the operating income of each business line for the periods indicated:

Year ended 31 December Six months ended 30 June

2010 2011 2012 2012 2013

Amount % of total Amount % of total Amount % of total Amount % of total Amount % of total

(unaudited) (unaudited)

(in millions of RMB, except percentages)

Wholesalebanking 41,493 60.58% 60,058 65.00% 65,371 60.28% 33,944 62.15% 35,528 58.33%

Retail banking 25,636 37.43 36,082 39.05 46,718 43.08 22,115 40.49 26,897 44.16

Financial market 2,247 3.28 (2,912) (3.15) (2,669) (2.46) (856) (1.57) (1,181) (1.94)

Others(1) (886) (1.29) (836) (0.90) (975) (0.90) (585) (1.07) (335) (0.55)

Total 68,490 100.00% 92,392 100.00% 108,445 100.00% 54,618 100.00% 60,909 100.00%

(1) Include insurance underwriting income, insurance agency income, income from securities and future brokerage services, equityinvestment income and head office income that is not directly attributable, or cannot be allocated, to any business line on a reasonablebasis.

Wholesale Banking

Following our motto of “we are here just for you,” we provide wholesale banking services under our “Go

Fortune | Corporate Banking” brand and are committed to building a win-win relationship between us and our

corporate customers by helping our corporate customers reach the next level in their development. We offer

comprehensive, diversified and quality wholesale banking products and services, including loans (including

trade finance), bill acceptance and discounting, deposits, settlement, guarantee and commitment, agency and

trust, investment banking, corporate wealth management and wealth management for financial institutions,

asset custody, third-party custody, annuity finance, cash management and other banking businesses to

corporate customers, financial institutions, government agencies and other institutions. We were one of the first

commercial banks in the PRC to provide online corporate banking services.

As of 30 June 2013, the balance of our corporate loans was RMB1,128,869 million, representing 58.6%

of our total loans and advances to customers; the balance of our discounted bills was RMB58,311 million,

representing 3.0% of our total loans and advances to customers; and the balance of our corporate client deposits

was RMB1,721,487 million, representing 64.1% of the total deposits from customers. In 2010, 2011, 2012 and

the first six months of 2013, income from our wholesale banking business was RMB41,493 million,

RMB60,058 million, RMB65,371 million and RMB35,528 million, respectively, accounting for 60.6%, 65.0%,

60.3% and 58.3%, respectively, of our operating income.

Products and Services

Corporate Loans

Our corporate loan products include working capital loans, fixed asset loans, trade finance and other loan

products such as corporate mortgage loans. Our corporate loans are usually secured by collateral or guarantees,

and credit loans are typically extended only to quality customers that are operating in certain preferred

industries. We proactively provide quality loan service, give priority to industries undergoing structural

optimization and upgrading, traditionally competitive industries, strategic emerging industries, modern service

industries and green industries, and place strong emphasis on providing superior products and services to our

customers. We restrict our lending to those sectors that are subject to significant macro-economic controls,

such as the real estate industry, local government financing platforms and industries characterized by “high

pollution, high energy consumption and excess capacity.”

As of 30 June 2013, our corporate loans totaled RMB1,128,869 million, representing 58.6% of our total

loans and advances to customers. Our corporate loans are primarily RMB loans and short-term loans with a

maturity of less than one year.

BUSINESS

– 45 –

The following table sets forth our corporate loan portfolio by types of loan as of the dates indicated:

As of 31 December As of 30 June

2010 2011 2012 2013

Amount % of total Amount % of total Amount % of total Amount % of total

(unaudited)

(in millions of RMB, except percentages)

Workingcapitalloans 488,351 60.87% 561,330 62.09% 667,399 64.57% 693,420 61.43%

Fixed assetloans 256,091 31.92 266,391 29.47 259,914 25.15 259,293 22.97

Trade finance 46,838 5.84 63,557 7.03 90,943 8.80 157,995 14.00

Others(1) 11,047 1.37 12,713 1.41 15,289 1.48 18,161 1.60

Total 802,327 100.00% 903,991 100.00% 1,033,545 100.00% 1,128,869 100.00%

(1) Consists primarily of corporate mortgage loans, including overdue discounted bills.

Working capital loans. A majority of our corporate loans are working capital loans. We provide working

capital loans to our corporate customers primarily to satisfy their working capital needs. Our working capital

loans usually have a maturity of one year or less, but may have a maturity of up to three years. As of 31

December 2010, 2011 and 2012 and 30 June 2013, working capital loans accounted for 60.9%, 62.1%, 64.6%

and 61.4%, respectively, of our total corporate loans.

Fixed asset loans. We offer various fixed asset loans to finance our customers’ development,

construction of infrastructure, and acquisition of machinery and equipment. Our fixed asset loans typically

have a maturity ranging from three to ten years. As of 31 December 2010, 2011 and 2012 and 30 June 2013,

the balance of our fixed asset loans represented 31.9%, 29.5%, 25.1% and 23.0%, respectively, of our total

corporate loans.

Trade finance. We offer a variety of trade finance products and services to our customers engaged in

domestic and international trade. Our domestic trade finance products and services mainly include factoring

and the negotiation and payment of domestic letters of credit, and our international trade finance products and

services mainly include import trade finance products such as import letters of credit, import bill purchasing,

and export trade finance products such as packing loans, export bill purchasing, forfeiting and export factoring

financing. We also offer innovative and diverse trade financing products, such as export credit insurance

finance and export buyer’s credit. As of 31 December 2010, 2011 and 2012 and 30 June 2013, the balance of

our trade financing products represented 5.8%, 7.0%, 8.8% and 14.0%, respectively, of our total corporate

loans.

Bill Discounting

Bill discounting is a short-term financing product. We purchase bills at a discount from bill holders

before the expiry dates in order to provide liquidity to the bill holders. We generally accept bills with a

remaining maturity of less than six months, and accept primarily bank acceptance bills and commercial

acceptance bills with high credit ratings. We may re-discount these bills with either the PBOC or other

financial institutions authorized to engage in the bill discounting business.

As of 31 December 2010, 2011 and 2012 and 30 June 2013, the balance of our discounted bills

represented 4.5%, 4.5%, 3.1% and 3.0%, respectively, of our total loans and advances to customers. As of 30

June 2013, we had a balance of RMB58,311 million in discounted bills. Discounted bank acceptance bills

totaled RMB55,507 million as of the same date, representing 95.2% of our total discounted bills.

SME Loans

We consider the development of our SME business a key focus of our strategy. We operate our SME

business through our branches as well as our Small Enterprise Credit Centre. Since 2010, we intensified our

BUSINESS

– 46 –

effort to set up special outlets and applied the successful experience of our Small Enterprise Credit Centre to

our branches to further enhance the capacity and quality of our comprehensive SME financial services. We also

achieved diversification of our SME financing products through product innovation by launching featured

products, such as subsidized loans, loans designated for transformation of scientific and technological

achievements, loans secured by pledges of intangible assets and industrial cluster loans. Meanwhile, we

continued to strengthen our risk management by adopting various measures, including further improving the

credit report process and enhancing the efficiency of double endorsement for credit approval, adjusting credit

approval procedures to facilitate remote credit approval, establishing an efficient and flexible post-loan

management system, implementing an accountability system and continuing to improve risk control and

strengthening the risk management of SME loans. As of 30 June 2013, under the standard set by the National

Bureau of Statistics with respect to the classification of SMEs, the total balance of our corporate loans to

domestic SMEs amounted to RMB605,344 million, representing 56.2% of our total domestic corporate loans.

The non-performing loan ratio of SME loans was 1.46%.

Small Enterprise Credit Centre

As an important step to implement the specialization of the SME credit services, we established our

Small Enterprise Credit Centre in Suzhou on 18 June 2008, which reports directly to our headquarters. We are

the first commercial bank in the PRC to set up a dedicated business unit for small enterprises. Our Small

Enterprise Credit Centre offers credits, guarantees, mortgages, pledges and other types of financing with a

value of less than RMB10 million to small enterprises. The customers are mainly manufacturers with less than

RMB100 million in annual sales revenue and trading companies with less than RMB200 million in annual sales

revenue. In particular, the Small Enterprise Credit Centre is specialized in providing support to small

enterprises in accessories manufacturing, modern services, and consumer products manufacturing sectors.

In response to the “short-term, small-sized, frequent and urgent” nature of small enterprise financing, our

Small Enterprise Credit Centre focuses on developing cluster loan products that are capable of batch

processing and have introduced cluster loan products based on existing products, including “Textile Industry

Cluster Loan (織造行業集群貸)”, “Paper Industry Cluster Loan (造紙行業集群貸)”, and “Jewelcrafting

Industry Cluster Loan (珠寶加工行業集群貸)”. As of 30 June 2013, the Small Enterprise Credit Centre had a

loan balance of RMB42,289 million and 6,091 borrowers, the average loan balance granted by our relationship

managers was RMB152 million, and the average number of customers under our management was 218,000.

Within a period of five years since its commencement of operations, the Small Enterprise Credit Centre has

provided financial support to more than 10,000 small enterprises and the cumulative amount of loans granted

by the credit centre exceeded RMB136.6 billion.

Corporate Client Deposits

We offer demand deposits, time deposits, notice deposits, notice deposits with automatic renewal and

negotiated deposits to our corporate customers. We attach great importance to enhancing the return on

corporate client deposits and strive to develop innovative businesses such as online corporate banking and cash

management services and improve the effectiveness of our marketing efforts to broaden our sources of deposit.

These efforts have enabled us to obtain a significant amount of low-cost corporate deposits. In the meantime,

we also seek to obtain a moderate amount of long-term deposits to further improve our corporate deposits

structure in response to changes in the market environment and in order to meet the requirement of liquidity

management. As of 30 June 2013, demand deposits represented 49.0% of our corporate deposits. Our relatively

high proportion of demand deposits helps reduce our interest expenses on deposits. As of 30 June 2013, the

balance of our corporate deposits was RMB1,721,487 million.

Corporate Non-Interest Income Business

We provide our corporate customers with a variety of non-interest income products and services. We

strive to promote the development of emerging businesses, such as debt instrument underwriting, financial

advisory, asset custody, corporate wealth management, wealth management for financial institutions, third

party custody, online corporate banking, cash management, corporate cards, annuity finance and precious metal

operating leases and other fee- and commission-based services. In the meantime, we have been able to maintain

the growth of our traditional fee- and commission-based services, including domestic and international

settlement, acceptance, guarantee and commitments. We also have a diversified portfolio of businesses that

BUSINESS

– 47 –

generate non-interest income. In 2010, 2011, 2012 and the first six months of 2013, our net non-interest income

from wholesale banking business was RMB6,598 million, RMB10,217 million, RMB10,450 million and

RMB6,777 million, respectively, representing 50.2%, 55.4%, 45.4% and 44.6%, respectively, of our total net

non-interest income.

Cash management business. Our cash management business is of fundamental and strategic importance,

as it will allow us to cope with the challenges posed by interest rate liberalization. We offer a variety of

financial products and portfolio services, including account management, payment and collection management,

centralized cash management and liquidity management services, to our corporate customers. We also tailor

our cash management solutions to the needs of our corporate customers. Our cash management business is

supported by our online corporate banking platform, which consists of platforms for cash management, supply

chain financing and financial e-commerce businesses. The main products of our cash management business

include interbank cash management, cash pool, fund transfer within a group client, online bills and online

customs clearance services.

We are a pioneer among PRC commercial banks in providing cash management services. We have been

able to steadily expand our customer base and increase our income from our cash management business by

actively managing our customer base, cultivating distribution channels and creating innovative products. Our

cash management business has enabled us to develop and lock in our growing base of customers, obtain

low-cost deposits and cross-sell other corporate and retail products.

Our cash management business is a seven-time winner of “China’s Best Domestic Cash Management

Bank (中國本土最佳現金管理銀行)” award by Asia Money. Our cash management business has also won

awards over the years from Euro Finance, The Asset, The Economic Observer and China Business.

As of 30 June 2013, 265,044 customers had used our cash management services. The cash management

business sustained healthy growth, with over 300 corporate customers using our cross-bank cash management

products to manage over 10,000 companies. With a firm focus on core customers on the industrial chain, the

transaction value of our electronic supply chain financing business increased rapidly with transaction value of

over RMB500 billion during the year and the number of customers on the financial e-commerce platform has

exceeded 10,000. The balance of deposits from non-borrowing cash management customers exceeded RMB700

billion, accounting for over 70% of deposits from all of the Bank’s non-borrowing customers. Deposits from

non-borrowing small enterprises that used our cash management as a percentage of all deposits also increased

steadily. In the first six months of 2013, the fee and commission income from our cash management business

reached RMB760 million, representing an increase of 79.46% as compared with the first six months of 2012.

Asset management business. We provide comprehensive wealth management services to corporate

customers, including cash deposits, credit, wealth management products and investment portfolios to assist in

the assets and liabilities and liquidity management of our corporate customers and to meet their financing

needs at various stages. The investment orientation of our corporate wealth management products includes

treasury bonds traded on the interbank bonds market, central bank notes, financial bonds and other financial

assets. The corporate wealth management business has played an important role in strengthening our

non-interest income, attracting new customers and enhancing our brand recognition. In the first six months of

2013, the transaction volume of our corporate wealth management business was RMB649,600 million and

income from sales of corporate wealth management products was RMB637 million.

Settlement services. We provide domestic and international settlement services and foreign exchange

settlement services to corporate customers.

Our domestic settlement services include settlements through cash, bank drafts, cashier’s checks, checks

and other negotiable instruments. We also provide collection and payment services to our corporate customers.

Our electronic settlement services allow our customers to make tax and other payments via the Internet in a

secure, fast and convenient manner.

Our international settlement services include settlements through international wire transfer, collection

and letter of credit. We also provide online international wire transfer and online application for letters of credit

to our corporate customers. In 2012 and the first six months of 2013, the Bank completed US$331,696 million

and US$187,579 million worth of international settlements, and RMB168,927 million and RMB124,803

million worth of cross-border Renminbi settlements, respectively.

BUSINESS

– 48 –

We provide foreign exchange settlement services between RMB and major freely convertible currencies,

including spot foreign exchange settlement and forward foreign exchange settlement services, to our corporate

and retail customers. We manage our foreign currency exchange risk exposure arising from the provision of

these services by hedging through internal transactions and seeking coverage in the domestic interbank market.

In 2012 and the first six months of 2013, the Bank completed US$116,309 million and US$59,021 million

worth of foreign exchange settlement transactions, respectively.

Asset custody services. We provide a variety of custody services, including securities investment fund

custody services, asset custody services for certain customers of fund management companies, asset custody

services for customers of securities companies, bank wealth management products custody services, corporate

annuity funds custody services, trust asset custody services, insurance custody services, QFII custody services,

QDII custody services, custody services for the National Social Security Fund, customer fund custody services,

and inheritance custody services.

We are one of the leading national Joint Stock Commercial Banks in terms of the overall competitiveness

of custody services. We acted as the custodian bank for “CMB Fund Treasure (招商基金寶),” one of the first

fund of funds in the PRC. We also partnered with asset management companies in March 2008 to provide

customized and comprehensive asset management services through the first domestic “1+N” asset management

scheme. Under this scheme, we act as the custodian of customers’ investment accounts maintained with us;

recommend asset management companies to those customers; monitor the investments managed by our partner

asset management companies; and provide payment, settlement, asset valuation and accounting services to

customers. We served as the custodian of the first investment product that invested in non-tradable shares that

became tradable in June 2008, served as the custodian of the first trust of trusts, or TOT, product in August

2009, which is a parent trust under which the entrusted funds are invested into different sub-trusts to generate

returns. We also served as the custodian of the first public welfare charity foundation, One Foundation, in

January 2012. We were among the first to introduce the trustee mechanisms into the entire procedure of the

operation of welfare charity foundations, and the first to adopt an open and transparent procedure for the

management of welfare charity foundations. In addition, we continued to optimize the trustee procedures

through centralized batch processing based on different business types, which helped to significantly enhance

the efficiency of the trusteeship and prevent and control operation risks. As of 30 June 2013, the balance of

the Bank’s assets under custody was RMB1,440 billion, and the Bank’s custody business recorded an income

of RMB654 million in 2012. We were named “Best Professional Custody Bank in China” by The Asset for three

consecutive years. In the first six months of 2013, the total revenue from custody services reached RMB521

million, representing an increase of 48.9% as compared to the first six months of 2012.

Annuity finance business. Our annuity finance business mainly consists of corporate annuity plans and

talent retention plans. Our licenses enable us to provide trust service, account management service and fund

custody service for corporate annuities. The corporate annuity plans we manage include plans funded by a

single company and plans funded by multiple companies. We provide investment advisory services to corporate

welfare funds, deferred payment and book-keeping services in connection with talent retention plans. We are

determined to solidify the market position of our annuity products under our “Golden Life (金色人生)” brand

name, enhance marketing through and collaboration with other financial institutions, and improve our product

design and asset allocation capabilities, to better serve our customers. We have also been cooperating with

other banks, pension funds and fund management companies to broaden our sales channels. We also cross-sell

annuity products through our retail banking business. In 2012, we were awarded the “Bank Technology

Development Award (銀行科技發展獎)” by PBOC, the “Top 10 Financial Products Marketing Award (十佳金融產品營銷獎)” by the Bankers, “2012 China Financial Brand ‘Golden Elephant Award’ Top 10 Marketing

Events (2012中國金融品牌“金象獎”十大營銷事件)” by the Money Weekly, and were named the “Best

Corporate Annuity Bank” by the Global Entrepreneur.

Investment banking business. Our investment banking business mainly includes debt financing

instrument underwriting services and financial advisory services.

We are qualified to underwrite debt financing instruments for non-financial institutions in the PRC’s

interbank bond market. We focus not only on expanding our market presence among large, state-owned

enterprises, leading regional enterprises and industry-leading enterprises, but also on market presence among

quality SMEs.

BUSINESS

– 49 –

We have a specialized financial advisory team that provides financial advisory services relating to

mergers and acquisitions, debt issuance, private placements, equity financing and project financing. We won

several awards, including winning the “Best Bank in Investment Banking (最佳銀行投行)” award as the only

Joint Stock Commercial Bank winner in the “Outstanding Investment Banks in the PRC in 2012 (2012中國區優秀投行)” competition organized by Securities Times. In 2010, 2011, 2012 and the first six months of 2013,

total revenue from our investment banking business was RMB1,043 million, RMB1,917 million, RMB1,336

million and RMB1,139 million, respectively, and the underwriting value of our debt financing instruments was

RMB83,098 million, RMB117,500 million, RMB132,665 million, and RMB73,421 million, respectively.

Corporate card. Corporate cards are credit cards issued to the employees in large and medium-sized

enterprises, government agencies and public-sector institutions that provide customers with payment,

procurement and expenditure management solutions, assist enterprises to save travel expenses, improve

compliance management and centralized control of travel expenses, as well as provide employees with

high-value add-on benefits. We market our corporate cards through coordinated marketing efforts between our

wholesale and retail banking departments. The Bank issued 899,000 corporate cards as of 30 June 2013. Total

fee and commission income from corporate cards amounted to RMB51,765,900 in the first six months of 2013,

representing an increase of 17.91% as compared with the first six months of 2012. This included non-interest

income from domestic transactions in the amount of RMB36.073 million, non-interest income from overseas

transactions in the amount of RMB9,031,900 and fee and commission income from business travels in the

amount of RMB6,661,000.

Offshore Banking Business

We were one of the first PRC commercial banks to provide offshore banking services and have been

providing offshore banking services for 24 years. Our offshore banking products mainly consist of remittance,

collection, letters of credit, letters of guarantee, foreign exchange trading and credit certification. Products

jointly offered by our onshore and offshore businesses mainly consist of accepting guarantees by domestic

enterprises to secure loans granted to overseas entities, accepting guarantees by overseas entities to secure

loans granted to domestic enterprises, onshore and offshore back-to-back letters of credit, back-to-back letters

of credit with other banks, entrusted issuance of offshore letters of credit, entrusted offshore financing, onshore

and offshore cross-linked factoring, onshore and offshore cross-linked documentary bills and cross-linked

letters of guarantee.

In recognition of the trend of globalization in the world economy, our offshore banking business targets

PRC companies interested in outbound investments and actively markets our onshore and offshore cross-linked

financial products currently to companies with cross-border operations. Our offshore banking services

currently cover more than 80 countries and regions across the world. We have the largest market share in

offshore banking services in terms of such main business indicators as offshore deposits and offshore net

non-interest income.

As of 30 June 2013, we had 23,700 offshore customers, and our deposits from offshore customers and

balance of offshore trade financing reached US$8,404 million and US$3,405 million, respectively. Our asset

quality remained sound, and there was no new overdue loans or new non-performing loans in the first six

months of 2013. The cumulative net non-interest income was US$52.70 million in the first six months of 2013.

Businesses with Financial Institutions

Our financial institution businesses mainly consist of such assets and liabilities businesses as deposits

from, placements from and balances with banks and reverse credit assets and beneficiary interests purchased

under repurchase agreements. In recent years, we have also actively developed such new businesses as

third-party custodian services for margin financing and securities lending businesses; “Yinhe Wealth

Management (銀和理財),” which is our wealth management services targeting banks; “Yi Jin Tong (一金通)”

gold transaction services and cross-border RMB clearing agency services with banks.

As of 30 June 2013, the balance of the Group’s interbank liabilities was RMB344,566 million

representing an increase of 36.12% as compared with 1 January 2013. As of 30 June 2013, the balance of the

Group’s interbank assets, which consisted of deposits with banks, placements with banks and financial assets

and beneficiary interests purchased under reverse repurchase agreements amounted to RMB137,693 million

representing a decrease of 48.35%, as compared with 1 January 2013.

BUSINESS

– 50 –

We serve as the third-party custodian bank for investors who deposit funds with us for settlement of

securities trading transactions. Our third-party custodian services provide us with a stable and low-cost source

of deposits. Since 2007, domestic securities firms have been required to seek third-party custodian services.

Since 2009, we have consistently ranked first among Joint Stock Commercial Banks in terms of the number

of third-party custodian customers. Despite a downward trend in the PRC securities investment market in 2011,

we had 3.86 million third-party custodian customers as of 30 June 2013 and the amount of funds under custody

reached RMB44,238 million. As of 30 June 2013, the wealth management products we sold through the

interbank channel amounted to RMB68,930 million. As of 30 June 2013, we had 59 clearing accounts in

connection with our cross-border RMB agency clearing business for financial institutions, with the total

clearing amount reaching RMB128,916 million, and had cooperation with 49 securities firms in connection

with margin financing and securities lending businesses.

Online Corporate Banking Business

We were the first PRC bank to provide online corporate banking services. Our online corporate banking

platform, U-BANK, plays an important role in our provision of electronic financial services to our corporate

customers. We have established our competitive advantage in the PRC in the e-banking channel, developed a

low-cost and comprehensive cross-sales capability that can substantially replace the traditional channels, and

have made a variety of wholesale banking products and services, including account management, payment,

settlement, online borrowing, trade finance and investment appreciation, available online.

Our U-BANK platform has improved over the years and has become one of the most prominent and

advanced online financial service platforms in terms of comprehensiveness, stability and security.

Our U-BANK customer base has been growing steadily over the past few years. As of 30 June 2013, we

had over 60,000 small enterprise customers that handled all of their settlement transactions online, which

completed a total of 3.45 million transactions with an aggregate value of over RMB800 billion in the first six

months of 2013.

Customer Base

As of 30 June 2013, we had a customer base of 516,100 corporate depositors and 40,200 corporate

borrowers, of which 68,251 were high-value wholesale customers with an overall value contribution of over

RMB100,000 each. Our customers include industry leaders and large enterprise groups in the PRC, government

agencies, financial institutions, and Fortune 500 companies. We have also actively increased the proportion of

small and micro enterprise customers in our overall customer base to balance the return and risk profile of our

loan portfolio. We manage our corporate customers by categories based on their overall value contribution to

our business and such indicators as risk-adjusted return on capital, or RAROC, and devote more resources to

developing small and micro enterprise customers that contribute more, or have a greater potential to contribute,

to our business.

Our corporate borrowers are mainly from the (i) manufacturing, (ii) wholesale and retail, (iii)

transportation, storage and postal services, (iv) real estate and (v) power, gas and water production and supply

industries. As of 31 December 2010, 2011 and 2012 and 30 June 2013, loans extended to these industries

accounted for 77.6%, 80.1%, 80.1% and 80.1%, respectively, of our total corporate loans. We closely monitor

changes in the macro-economic environment, industry cycle and other changes in each industry, and adjust our

industry lending policies accordingly. Loans to each of these principal industries as a percent of our total

corporate loans have remained stable over the past few years.

Geographically, we focus our lending and further expansion in the Yangtze River Delta, the Pearl River

Delta and West Side of Taiwan Strait, and the Bohai Rim. As of 31 December 2010, 2011 and 2012 and 30 June

2013, the balance of our loans to these regions accounted for 60.1%, 58.0%, 56.0% and 54.6%, respectively,

of our total corporate loans.

BUSINESS

– 51 –

Marketing

We market our products and services through our head office, branches and sub-branches. Depending on

the products, customers and regions concerned, we adopt either a firm-wide marketing strategy or a

region-specific marketing strategy. Our head office is responsible for formulating the overall strategy,

designing a firm-wide marketing plan for our wholesale banking business, and setting the marketing guidelines

for our wholesale banking business based on industry, geographical location, customer and product. Our

branches and sub-branches are responsible for developing and implementing detailed wholesale banking

marketing plans customized to local needs, based on guidelines from the head office.

We differentiate our marketing strategies based on the characteristics and risk profiles of our customers.

For financing to large customers or governmental agencies, we seek to coordinate our marketing efforts at both

the head office level and the branch level. For instance, we have a professional team of group customer

managers at the head office, which is primarily in charge of designing and marketing banking solutions to large

corporate groups. For SME customers, we tailor our marketing initiatives based on type of business and

geographical location. In recent years, we launched a “Qian Ying Zhan Yi (千鷹展翼)” program to address the

various financial needs of innovative and high-growth enterprises. We also partner with well-known private

equity funds in the PRC to jointly provide financial solutions to SMEs. Our Small Enterprise Credit Centre also

cooperates with local governments, industry and commerce federations, chambers of commerce and trade

associations to promote our SME business.

We are committed to building a prestigious brand for our products and services, which we believe will

help improve the results of our marketing efforts. To this end, we are in the process of integrating our

wholesale banking products and services under a unified “Go Fortune | Corporate Banking” brand, and have

launched large-scale campaigns to promote this brand in order to increase awareness of our brand and enhance

our corporate image.

Retail Banking

We offer a wide range of retail banking products and services, including loans, deposits, debit cards,

investment and wealth management products, insurance agency services, fund agency services, trust agency

services, precious metals trading services, foreign currency trading and foreign exchange services, to our retail

customers. Our “All-in-one Card (一卡通)”, credit card, “Sunflower Wealth Management (金葵花理財)”,

personal online banking, “i Wealth Management (i理財)”, private banking, “Easy Consumption (消費易)” and

“Easy Facility (週轉易)” have all won widespread recognition among our customers. We provide these

products and services to our customers through our branches and sub-branches, self-service centres, online

banking, direct banking and mobile banking.

We regard retail banking as a key business line to grow, and have applied our Second Transformation

strategies to retail banking by further enhancing management capabilities, optimizing workflows and

cultivating customer relationships, with a goal to increase income, improve risk-pricing capabilities and

increase the competitiveness of our retail banking business.

As of 30 June 2013, the total balance of our retail loans reached RMB737,647 million, accounting for

38.3% of our total loans and advances to customers, and the total balance of our retail deposits reached

RMB962,288 million, accounting for 35.9% of our total customer deposits. In 2010, 2011, 2012 and the first

six months of 2013, net income from our retail banking business was RMB25,636 million, RMB36,082 million,

RMB46,718 million and RMB26,897 million, respectively, accounting for 37.4%, 39.1%, 43.1% and 44.2%,

respectively, of our net operating income in the corresponding period.

We formally established a Retail Banking Headquarters in 2010, which will play an important role in

integrating our retail banking resources, improving the specialized management of our retail banking business,

refining our retail management capabilities and promoting the vertical and streamlined management of our

retail banking business.

BUSINESS

– 52 –

Products and Services

Retail Loans

We provide a variety of loan products, including personal housing loans, personal operating loans, credit

cards receivables and other personal loans, to our retail banking customers. In recent years, we have focused

not only on personal housing loans, but also on other loan products, such as personal commercial property

loans, personal consumption loans and personal operating loans. We have also diversified our product portfolio

to include fixed interest rate products, flexible monthly payment products, flexible consumption loans and

flexible revolving credit facility products, which we believe have helped improve significantly the profitability

of our retail loan business. We have also been optimizing our retail loan workflows, and have centralized the

middle- and back-office functions of our retail banking business, including building a remote loan service

platform, in an effort to improve customer satisfaction, enhance operation efficiency and reduce operating

costs.

Our retail loans have experienced a significant growth in balance over the past few years. We have also

been able to improve our risk-pricing capabilities while maintaining the asset quality of our retail loans. As

of 31 December 2010, 2011 and 2012 and 30 June 2013, the balance of our retail loans was RMB482,736

million, RMB556,935 million, RMB671,900 million and RMB737,647 million, respectively. We ranked fifth

in terms of the balance and increase of retail loans only after the Big Four state-owned commercial banks, and

first in terms of the growth amount and growth rate in personal operating loans. As of 31 December 2010, 2011

and 2012 and 30 June 2013, the non-performing loan ratio of our retail loans remained at a relatively low level

at 0.34%, 0.31%, 0.48% and 0.59%, respectively. In the first six months of 2013, the floating range of weighted

average interest rates of our new RMB retail loans (weighted at actual amounts) increased by 7.16 percentage

points to 30.11% as compared with 2012.

Small and Micro Enterprise Loans

In response to nationwide initiatives to support the development of small and micro enterprises, we

followed the examples of leading banks in the world and reclassified into the retail banking business line the

overall financial and management services targeted at small and micro enterprise customers with single credit

extensions of less than RMB5 million. We have been promoting the development of our small and micro

enterprise businesses through four major areas of innovation. First, we promoted product innovation for small

and micro enterprise businesses by launching six standardized products — “Secured Loans (抵押貸),”

“Ancillary Loans (配套貸),” “AUM Credit Loans (AUM信用貸),” “POS Loans (POS貸),” “Small Amount

Credit Loans (小額信用貸)” and “Supply, Sales and Turnover Loans (供銷流量貸)” — as well as the “Business

All-in-one Cards (生意一卡通),” a special financial service instrument encompassing such functions as

finance, settlement and consumption for small and micro enterprises to better address the various financing

needs of small and micro enterprises. Second, we have implemented an innovative, centralized loan approval

model. Under this model, middle- and back-office operations, such as the input of loan information and the

approval of loans, are centralized at our head office, which would allow us to significantly shorten the loan

approval cycle and grant loans within two working days upon receipt of the complete application documents.

Third, we have developed electronic loan-granting into a new channel and have been accepting loan

applications via telephone and the Internet, or by proactively reaching out to target shortlisted customers.

Finally, we have employed technical innovations, including quantitative risk management tools, an assessment

scorecard model and a decision-making system, to facilitate unified risk management of loans to small and

micro enterprises.

As of 30 June 2013, the Bank’s personal operating loans amounted to RMB255,112 million, representing

an increase of 44.02% from 31 December 2012. As of 30 June 2013, personal operating loans accounted for

34.58% of our retail loans, an increase of 8.22 percentage points from 31 December 2012, and the

non-performing loan ratio for retail loans was 0.59%.

Retail Deposits

Our retail deposit products mainly consist of demand, time and call deposits. We currently offer RMB

time deposit products for terms of three months to five years and foreign currency time deposit products for

terms of one month to two years. We also offer a variety of other time deposit products, including monthly

BUSINESS

– 53 –

savings deposit plans, monthly withdrawal plans and flexible-term deposits. Call deposits have higher interest

rates than demand deposits, and the advance notice required of call deposits is typically one day or seven days.

Our retail deposits are primarily RMB-denominated deposits.

As of 31 December 2010, 2011 and 2012 and 30 June 2013, the balance of our retail deposits reached

RMB650,369 million, RMB751,294 million, RMB863,770 million and RMB962,288 million, respectively, and

demand deposits accounted for 60.2%, 58.3%, 58.3% and 59.3%, respectively, of our total retail deposits.

Retail Non-Interest Income Business

We offer a variety of non-interest income retail banking services, including bank cards, personal wealth

management, fund agency services, insurance agency services, trust agency services, precious metals trading

services, foreign currency trading and foreign exchange services, bill collection and payment services, deposit

box services and transfer and remittance services. We have been able to achieve steady and rapid growth in

our retail banking non-interest income due to the implementation of our retail banking strategy, improved

management of our retail banking business, growth in our retail customer base, especially in high-end

customers, and continuous product and service innovations.

In 2012 and the first six months of 2013, our retail non-interest income was RMB12,303 million and

RMB7,907 million, respectively, accounting for 26.3% and 29.4%, respectively, of the net income from retail

banking business and 53.4% and 52.1%, respectively, of our total net non-interest income. In particular, fee

and commission income from our retail wealth management business was RMB5,322 million and RMB3,711

million, respectively, accounting for 46.0% and 49.1%, respectively, of the net fee and commission income

from our retail banking business.

Wealth Management

We are committed to developing wealth management business, and providing customers with different

product mixes and personalized services based on the total assets they have under our management.

Capitalizing on the continuous improvements in our wealth management system and in our comprehensive

wealth management services, we enjoy a reputation among retail customers for providing good wealth

management services. In order to enhance customer experience, we took the lead in the industry and

established a multi-level service system for high-end customers, providing differentiated services, such as

Sunflower, Diamond and private banking. We provide high-end customers with comprehensive personalized

wealth management services, including the services of dedicated customer relationship manager; provision of

dedicated service areas, such as private banking and wealth management centres, VIP Rooms and counters,

timely delivery of wealth management information and discount privileges for certain products and services.

Our wealth management customers may also enjoy value-added services provided by our partners, including

airports, hotels, restaurants, shopping centres and fitness clubs in the PRC.

As of 30 June 2013, we had a total of 30 private banking centres in addition to the existing Sunflower

wealth management centres and Sunflower VIP rooms, which has helped to further improve our high-end

customer services.

Personal Wealth Management

We have a mature personal wealth management business that offers a wide range of investment products

with predictable return and manageable risk for our customers. We have launched “Ri Ri Jin (日日金)” highly

liquid wealth management products; a series of fixed-income products, such as “Sui Yue Liu Jin (歲月流金),”

“Dai Li Tao Jin (貸裏淘金)” and “Dian Dai Cheng Jin (點貸成金),” which are designed to cater to customers

with different risk/return profiles; “Jing Yi Qiu Jing (精藝求金)” net-worth wealth management products;

structured wealth management products, such as a hybrid product of stocks and debts and wealth management

products for investment in overseas capital markets.

Agency Sales of Fund Products

We distribute various equity investment fund products as an agent for fund management companies. We

distribute such products under the brand name “Bank-Fund Express (銀基通)” through various channels,

including branches and sub-branches, online banking, mobile banking and direct banking.

BUSINESS

– 54 –

Agency Sales of Insurance Polices

We distribute insurance policies on behalf of insurance companies. We distribute them under the brand

name “Bank-Insurance Express (銀保通)” through various channels, including branches and sub-branches,

online banking and direct banking.

Agency Sales of Trust Products

We distribute trust products on behalf of trust companies. We distribute such products under the brand

name “Bank-Trust Express (銀信通)” through our private banking centres, wealth management centres and

other outlets.

In 2012 and the first six months of 2013, the cumulative sales of personal wealth management products

in the Bank’s financial management business reached RMB3,056,697 million and RMB1,755,100 million,

respectively, of which RMB341,500 million and RMB170,700 million, respectively, came from the sale of

open-ended mutual funds, RMB44.3 billion and RMB30.6 billion, respectively, from standard premiums for

the distribution of third-party insurance policies, and RMB5,322 million and RMB3,711 million, respectively,

from fee and commission income from our retail wealth management business. For fee and commission income

from our retail wealth management business in 2012 and the first six months of 2013, RMB1,797 million and

RMB1,226 million, respectively, came from the distribution of third-party trust plans, RMB1,141 million and

RMB783 million, respectively, from the distribution of mutual funds, RMB1,421 million and RMB1,009

million, respectively from the distribution of third-party insurance policies, and RMB963 million and RMB693

million, respectively, from the issuance of wealth management products.

Private Banking Business

We offer private banking services to high-end customers with total assets of RMB10 million or more

under our management. Adhering to the motto of “it’s our job to build you an everlasting fortune,” our local

senior customer service managers work with our globally recruited investment experts to provide our

high-value customers with exclusive, tailor-made investment plans and comprehensive, personalized wealth

management services.

We aim to promote continuous improvement of our management capability and rapid development of our

private banking business by enhancing the efficiency of our private banking centres, continuing to improve our

product offerings, and further strengthening our competitive edge in investment consultation services. We offer

a wide range of products and have launched private equity funds, open-ended equity investment funds, funds

custody plans, artwork investments and wine futures investments, in an effort to meet customers’ diverse

needs. We are committed to improving the professional competence of our private banking services. By

providing systematic and professional market research and analysis reports to customer service managers and

private banking customers, we provide these customers with guidance on their portfolio optimization in a

changing financial market environment. We also conduct induction training for private banking customer

service managers and organize advanced courses on private banking, all aimed at building up a team of

professional investment consultants and a market analysis platform. We were one of the first banks in the PRC

to introduce a global assets allocation model that is tailored to the needs of high-end PRC customers and

provides more alternatives and better asset allocation for private banking customers. We have issued two

reports jointly with Bain & Company on PRC private wealth since 2010. These reports involved continuous

monitoring of the PRC private wealth market. We launched the “Family Office (家庭工作室)” service targeted

at ultra-high-net-worth customers to offer a full range of diversified family asset management services,

including trust, equity, real estate, domestic and overseas investments, finance, taxation, inheritance and asset

segregation.

As of 30 June 2013, we had established 30 private banking centres in 24 major cities across the country,

further strengthening the coverage of our private banking customers. We had a total of 22,606 private banking

customers. As of 30 June 2013, the total assets of private banking customers under our management reached

RMB509,800 million.

BUSINESS

– 55 –

Bank Cards

We provide our retail banking customers with a full range of bank card products and services. Our debit

cards include the regular “All-in-one Card,” the “All-in-one Gold Card,” Sunflower cards, diamond cards and

private banking cards, and our credit cards include regular, gold, platinum and infinite credit cards. Holders

of our bank cards have access to both our own network and the UnionPay network within the PRC and abroad.

All-in-one Card

Our All-in-one Card was one of the first bank cards in the PRC’s banking industry to have a

multi-account management function, which consolidates the management of various customer accounts,

including demand and time deposits, RMB and foreign currency accounts, and savings and wealth management

accounts. Our customers can effect payments and settlements, make investments, perform wealth management

functions and manage personal loans by using our All-in-one Card over the counter, on self-service machines,

or through online banking, direct banking or other channels. All our All-in-one Cards are accepted on the

global networks of China UnionPay, VISA and MasterCard.

We are committed to enhancing the functions, particularly the wealth management functions, of our

All-in-one Cards. Through the Second Transformation, we have gradually optimized our customer base by

increasing our percentage of high-end customers while maintaining steady growth in new card issuance. We

differentiate our services to different categories of customers based on their total assets maintained with us,

and issue different types of debit cards. For instance, we issue All-in-one General Cards, All-in-one Gold Cards

to customers with a monthly daily average total asset level of RMB50,000 or above, Sunflower Cards to

customers with a monthly daily average total asset level of RMB500,000 or above, diamond cards to customers

with a monthly daily average total asset level of RMB5 million or above and private banking cards to

customers with a monthly daily average total asset level of RMB10 million or above. Other additional services

to our high-end debit card holders include priority banking services, preferential foreign exchange conversion

rates and reduced fees and charges. In particular, we have dedicated customer relationship managers who

provide a broad range of wealth management and investment consulting services to holders of our Sunflower

Cards, diamond cards and private banking cards.

As of 30 June 2013, we had approximately 64.77 million All-in-one Cards in issuance. As of 30 June

2013, the balance of deposits in our All-in-one Cards was RMB758,475 million, accounting for 78.8% of our

total retail deposits, and the deposit balance per card was over RMB11,700. In 2012 and the first six months

of 2013, transaction value of All-in-one Card via POS were RMB418.4 billion and RMB266.6 billion,

respectively.

Credit Cards

In addition to the functions of regular credit cards, our credit cards have a wide range of value-added

features, such as credit card spending, cash advance, revolving credit, instalment repayment, mail-orders and

“Easy Auto Loan (車購易).” After years of development, we have established efficiency and value as the core

components of our credit card business and achieved steady growth in our customer base, as well as improved

customer experience and increased profitability.

The year 2012 marked the tenth anniversary of the issuance of CMB credit cards. We remained

committed to our credit card business vision of being “the best provider of payment services, the expert in

consumer finance and the leader in diversified marketing platforms in China.” We continuously pushed forward

management reform and built a competitive edge for CMB credit cards through comprehensive innovation,

thus making significant progress in operation transformation. In 2012, we proactively capitalized on

opportunities brought about by Internet-based mobile applications and launched a number of new mobile

services, such as “CMB Mobile Wallet (手機錢包),” new “CMB Life (掌上生活)” mobile user terminals,

mobile application terminals and new media communications. We also consolidated our high-value customer

base, focused on expanding high-value customer groups, optimized our product mix and vigorously launched

new credit cards, such as American Express Centurion Cards (美國運通黑金卡), China UnionPay Platinum

Cards (銀聯白金卡) and Sina Microblogging Celebrity Cards (新浪微博達人卡). We have integrated our

BUSINESS

– 56 –

internal and external marketing resources, capitalized on the tenth anniversary of CMB credit cards to launch

various promotional activities and improve our marketing efficiency, and continuously launched various

tourism-based promotional activities revolving around the themes of “Extraordinary Sanya (非常三亞),”

“Extraordinary Hong Kong and Macao (非常港澳)” and “Extraordinary USA (非常美國).” In the meantime, we

continued to enforce credit limits, enhance internal controls, promote the balanced development of risk and

income, optimize our customer service channels, ensure service quality and improve service efficiency. We

have proactively refined our operation and management model and improved the operating efficiency of our

credit card business, thereby maintaining positive momentum for our credit card business.

As of 30 June 2013, the Bank had issued 47.68 million credit cards and the total number of active cards

was 23.44 million. In 2012 and the first six months of 2013, income from our credit card business amounted

to RMB11,716 million and RMB7,364 million, respectively, which mainly consisted of interest income from

revolving credit, POS fee income, annual fee income, cash advance service charges, and fee income from

instalment repayment of credit card loans, agency sales of insurance products and other value added services.

The cumulative transaction value for the first six months of 2013 was RMB418.0 billion and the average

transaction value per month per active card was RMB3,064, and the revolving balance as a percentage of the

balance of credit card receivables was 33.2%.

Online Retail Banking

Our online retail banking system provides various services such as account inquiry, fee payment, online

transfer and remittance transactions, credit card management, loan applications, foreign currency services, sale

of securities investment funds and government bonds, financial analysis services and asset management

services. Our retail banking customers can conduct online banking transactions 24 hours a day, seven days a

week. We have extended our online banking services to mobile phones and PDAs. Our retail online banking

business has been developing rapidly, and we have focused on expanding and improving our online banking

network, which is highly recognized and has relieved the pressure on the Bank’s business outlets.

As of 30 June 2013, the professional edition of our retail online banking had 13.84 million users, and

88.23% of all transactions that may be conducted through the professional edition of our retail online banking

occurred online. In 2012 and the first six months of 2013, the total number of retail online banking transactions

was 736 million and 491 million, respectively, and the cumulative transaction amount was RMB15,200 billion

and RMB9,130 billion, respectively. Specifically, the total number of online payment transactions was 550

million and 378 million, respectively, and the cumulative value of online payments was RMB216,700 million

and 170,592 million, respectively. All these have helped reduce the service pressure on our physical outlets

significantly.

Customer Base

We have been committed to developing quality customers, solidifying our customer base, revising and

optimizing our customer mix and improving customer management. Middle- to high-end customers who hold

our “All-in-one Card” and credit cards, especially Gold Card, Sunflower, Diamond, Platinum Credit Card and

private banking customers, provide a solid foundation for the sustainable development of our retail banking

and wealth management businesses. According to “The Report on PRC Private Wealth for 2012,” jointly issued

by the Bank and the Boston Consulting Group, the aggregate assets available for investment by PRC

individuals were more than RMB73 trillion in 2012 and the number of high-net-worth families reached 1.74

million as of 31 December 2012. We intend to continue to expand our market share in the middle- to high-end

customer market.

As of 30 June 2013, the Bank had 56.53 million retail customers, of whom one million were Sunflower

or higher-tier customers. The balance of total deposits from Sunflower and higher-tier customers was

RMB452.0 billion, and the value of assets of Sunflower and higher-tier customers’ under our management was

RMB1,870.4 billion, accounting for 72.1% of the value of retail customers’ total assets under management.

BUSINESS

– 57 –

Marketing

We believe that building a distinguished brand name is one of our most important marketing strategies

for attracting and retaining customers. We are committed to brand building for our products and services and

to striving to increase market penetration with our advertising campaigns. Our head office and branches usually

work together on a campaign, which is often under a unified theme. We also conduct direct marketing activities

at appropriate times. Major marketing campaigns, such as “Sunflower” Cup National Creative Paintings

Contest for Children, “Sunflower” Cup National Piano Contest for Children, the “i-Wealth” Fund Investment

Simulation Contest and “The Fifth Wealth Management Education Community Tour in Universities,” were

successfully launched in recent years. Such brand building efforts were effective in forging closer relations

with our customers. We also distributed promotional materials to employees of large enterprises and

institutions.

We employ various marketing tactics to promote our credit cards. We market our credit cards to potential

customers mainly through joint promotion efforts by our Credit Card Centre and branches, and via television

and online advertising, telemarketing, direct mailing, co-promotion activities with our co-brand or affiliate

partners, promotional brochures and other marketing methods. Our brands, such as the “All-in-one Card (一卡通),” “All-in-one Net (一網通)” and credit cards, currently enjoy relatively high recognition in the market.

We have further strengthened our service network for high-end customers. As of 30 June 2013, we had

30 private banking centres. All of these have significantly improved the service system for our high-net-worth

customers. We also deploy appropriate marketing tools for different products. For example, we offer retail loan

products with a variety of features and repayment options, such as fixed interest rate, optional monthly

repayment and revolving credit, as well as products under our “Easy Consumption” and “Easy Facility” brands.

In particular, we believe that our “Easy Consumption” products have helped us establish a brand advantage in

personal consumption loans.

Financial Market Business

Our financial market business primarily consists of money market transactions, securities investment,

securities trading and treasury transactions conducted on behalf of our customers. In 2012 and the first six

months of 2013, 2,463 and 1,815 wealth management products were launched with a total sales value of

RMB4,370 billion and RMB2,500 billion, respectively. As of 30 June 2013, the balance of wealth management

products under management was RMB399,937 million, average daily balance of wealth management products

under management in the first six months of 2013 was RMB538,828 million, and the balance of the Bank’s

proprietary investments was RMB595,128 million.

Money Market Transactions

Our money market transactions primarily consist of (1) short-term borrowings from and lending to other

domestic and foreign banks and non-banking financial institutions, (2) sales of securities under repurchase

agreements (often referred to as repurchase transactions) and (3) purchases of securities under resale

agreements (often referred to as reverse repurchase transactions). Most securities underlying our repurchase

transactions and reverse repurchase agreements are zero risk-weighted bonds. As of 31 December 2012, we

were a net lender in our RMB money market transactions, with a net receivable of RMB24,416 million.

Investment and Trading in Securities

We classify our investment in securities and other assets into four types based on accounting treatment:

(1) financial assets at fair value mark-to-market, (2) available-for-sale financial assets, (3) held-to-maturity

securities, and (4) investment receivables. We gain profits from financial assets at fair value mark-to-market

by purchasing and selling various highly liquid debt securities. We set up strict restrictions on stop-loss orders,

securities category and duration requirements for such investments. As to the other types, our investment goal

is primarily to seek stable investment returns. We formulate investment plans and allocate investments in these

securities based on our review of interest rates, exchange rates, credit, liquidity and other risks. As of 30 June

2013, our outstanding balance on the four types of investments was RMB19,121 million, RMB288,058 million,

RMB193,285 million and RMB89,589 million, respectively.

BUSINESS

– 58 –

We actively positioned ourselves as a market maker. Our interbank bond transactions in 2012 and 2011

amounted to RMB2.70 trillion and RMB2.43 trillion, respectively, and the total transactions effected via

bilateral quotations amounted to RMB30,970 million and RMB9,660 million, respectively. We provided

quotations for a daily average of over 14 and 13 types of bonds in 2012 and 2011, respectively. With respect

to market making transactions in foreign exchange settlements, we became a market maker for spot, forward

and swap transactions on the interbank foreign exchange market in 2007 and provided ample liquidity to the

domestic foreign exchange settlements.

Treasury Transactions Conducted on Behalf of Customers

Leveraging on our operational capability in financial market businesses, we provide corporations, retail

customers and other financial institutions with various wealth management products of modest risk designed

and operated by ourselves. We have developed and launched products covering all major asset categories,

including fixed income, equity, commodity, net-value and structured product, QDII and alternative

investments, thus establishing a relatively comprehensive portfolio of wealth management products. In 2010,

2011, 2012 and the first six months of 2013, we have allocated more resources in developing fixed income

wealth management products; optimized six major series of fixed income products, namely the “Daily Wealth

(日日金),” “Sui Yue Liu Jin (歲月流金),” “Dai Li Tao Jin (貸里淘金),” “Dian Dai Cheng Jin (點貸成金),” “Yi

Nuo Qian Jin (一諾千金)” and “Jing Yi Qiu Jin (精藝求金),” and further developed sub-products specifically

designed for different customer segments within each of the above series. As interest rate liberalization

progressed in China and the regulatory authorities continued to strengthen regulatory requirements on proper

accounting and the liquidity and credit risks of banks’ wealth management businesses, we concentrated our

efforts on developing net-value products and structured products, and continued to explore market demands

and improve investment returns, thus laying a solid foundation for the transformation of its wealth management

business. We also successfully launched various innovative wealth management products, such as priority

rating securities investment products, convertible bond investment products, stock index futures arbitrage

products, public benefit products with the theme of carbon emissions, products relating to children’s charity

funds and “Zhao-zhao Jin (朝招金),” “Rui Yuan (睿遠),” “Private Arbitrage (私人套利),” “A-share Index Links

(A股指數掛鈎),” etc. According to the “CNBenefit Report on Wealth Management Capability of Banks 2012,”

jointly released by CNBenefit and the Research Institute for Trust & Wealth Management at the Southwestern

University of Finance and Economics, our wealth management capability continued to rank first. In particular,

the profitability, risk control capability and disclosure compliance ranked among the top three. We ranked first

with regard to the comprehensive strengths of wealth management in the selection of “2010 Best Wealth

Management Products,” sponsored jointly by Economic Observer and Wind Information.

We provide a full range of services — acting as a broker of foreign exchange product trading and

precious metals trading on behalf of our individual and corporate customers. Our services include spot and

forward foreign exchange settlement services, spot and forward foreign exchange trading services for corporate

customers, foreign exchange settlement services, spot foreign exchange trading services, foreign exchange

option trading services and gold trading services for individual customers. We were one of the first PRC

commercial banks to offer 24-hour, real-time foreign exchange options trading services from Monday through

Friday. With respect to our precious metal trading services, we offered gold warrant products, domestic and

overseas silver arbitrage trading, gold arbitrage trading for secured earnings and London gold placement

trading services and were able to secure new sources of profit while meeting customers’ risk protection and

funding needs. In 2012, our spot foreign exchange settlements amounted to US$110,000 million, the volume

of our foreign exchange trading on behalf of customers reached US$9,600 million, and our nominal principal

amount of foreign exchange options trading on behalf of customers reached US$7,700 million.

We also provide our corporate customers with customized derivative products, and provide non-financial

institutions and small financial institutions with settlement agency services. We also participate in interbank

bond market transactions as agencies for such institutions and provide account-related services in connection

with our customers’ bond custodian accounts. We act as an agent for our customers in bond repurchase, spot

trading and other related settlement services.

BUSINESS

– 59 –

In addition, we have been acting as an agent for QFIIs in connection with their investments in RMB

bonds since early 2011, and have opened accounts for a number of QFIIs. As of 31 December 2012, we had

purchased, as an agent for our customers, RMB bonds with an aggregate value of RMB9.2 billion.

PRODUCTS AND SERVICES PRICING

Products and Services Pricing in the PRC Banking Industry

Interest Rates for Loans and Deposits

Commercial banks in the PRC are required to determine their interest rates for RMB-denominated

deposits within the permitted range of the PBOC benchmark interest rates and were, before 20 July 2013,

required to determine their interest rates for RMB-denominated loans within the permitted range of the PBOC

benchmark interest rates. The following table sets forth the PBOC benchmark interest rates for RMB-

denominated loans since 28 April 2006:

Date of Adjustment

Six months

or less

Six months

to one year

(including

one year)

One to

three years

(including

three

years)

Three to

five years

(including

five years)

More than

five years

(Interest rate per annum %)

28 April 2006 5.40 5.85 6.03 6.12 6.39

19 August 2006 5.58 6.12 6.30 6.48 6.84

18 March 2007 5.67 6.39 6.57 6.75 7.11

19 May 2007 5.85 6.57 6.75 6.93 7.20

21 July 2007 6.03 6.84 7.02 7.20 7.38

22 August 2007 6.21 7.02 7.20 7.38 7.56

15 September 2007 6.48 7.29 7.47 7.65 7.83

21 December 2007 6.57 7.47 7.56 7.74 7.83

16 September 2008 6.21 7.20 7.29 7.56 7.74

9 October 2008 6.12 6.93 7.02 7.29 7.47

30 October 2008 6.03 6.66 6.75 7.02 7.20

27 November 2008 5.04 5.58 5.67 5.94 6.12

23 December 2008 4.86 5.31 5.40 5.76 5.94

20 October 2010 5.10 5.56 5.60 5.96 6.14

26 December 2010 5.35 5.81 5.85 6.22 6.40

9 February 2011 5.60 6.06 6.10 6.45 6.60

6 April 2011 5.85 6.31 6.40 6.65 6.80

7 July 2011 6.10 6.56 6.65 6.90 7.05

8 June 2012 5.85 6.31 6.40 6.65 6.80

6 July 2012 5.60 6.00 6.15 6.40 6.55

BUSINESS

– 60 –

The following table sets forth the PBOC benchmark interest rates for RMB-denominated deposits since

19 August 2006:

Date of Adjustment

Demand

deposits

Time deposits

Three

months

Six

months

One

year

Two

years

Three

years

Five

years

(Interest rate per annum %)

19 August 2006 0.72 1.80 2.25 2.52 3.06 3.69 4.14

18 March 2007 0.72 1.98 2.43 2.79 3.33 3.96 4.41

19 May 2007 0.72 2.07 2.61 3.06 3.69 4.41 4.95

21 July 2007 0.81 2.34 2.88 3.33 3.96 4.68 5.22

22 August 2007 0.81 2.61 3.15 3.60 4.23 4.95 5.49

15 September 2007 0.81 2.88 3.42 3.87 4.50 5.22 5.76

21 December 2007 0.72 3.33 3.78 4.14 4.68 5.40 5.85

9 October 2008 0.72 3.15 3.51 3.87 4.41 5.13 5.58

30 October 2008 0.72 2.88 3.24 3.60 4.14 4.77 5.13

27 November 2008 0.36 1.98 2.25 2.52 3.06 3.60 3.87

23 December 2008 0.36 1.71 1.98 2.25 2.79 3.33 3.60

20 October 2010 0.36 1.91 2.20 2.50 3.25 3.85 4.20

26 December 2010 0.36 2.25 2.50 2.75 3.55 4.15 4.55

9 February 2011 0.40 2.60 2.80 3.00 3.90 4.50 5.00

6 April 2011 0.50 2.85 3.05 3.25 4.15 4.75 5.25

7 July 2011 0.50 3.10 3.30 3.50 4.40 5.00 5.50

8 June 2012 0.40 2.85 3.05 3.25 4.10 4.65 5.10

6 July 2012 0.35 2.60 2.80 3.00 3.75 4.25 4.75

In recent years, the PBOC has gradually liberalized its restrictions on interest rates for loans and deposits

and commercial banks have been given more discretion in determining interest rates for their RMB-

denominated loans and deposits. The following table sets forth the permitted range of interest rates for

RMB-denominated loans and deposits during the respective period:

Loans since

20 July 2013

Loans from

6 July 2012 to

19 July 2013

Deposits since

8 June 2012

Maximum interest rates None None (up to 230% of

the PBOC benchmark

interest rates for

rural and urban credit

cooperatives)

No higher than 110%

of the PBOC

benchmark interest

rates, except for

negotiated deposits

Minimum interest rates None (except for

interest rates for

residential mortgage

loans, which cannot

be lower than 70% of

the prevailing PBOC

benchmark interest

rates)(1)

Not lower than 70%

of the PBOC

benchmark interest

rates

None

(1) From 17 March 2005 to 18 August 2006, the regulatory requirements on interest rates for residential mortgage loans were thesame as for other loans; from 19 August 2006 to 26 October 2008, minimum interest rates for residential mortgage loans wereadjusted from 90% to 85% of the benchmark rates for loans; since 27 October 2008, interest rates for residential mortgageloans have been adjusted to not lower than 70% of the PBOC benchmark interest rates; since 17 April 2010, for familiespurchasing their second residential units through mortgage loans, the loan interest rates shall not be less than 1.1 times thebenchmark rates, and for families purchasing their third residential units through mortgage loans, even higher loan interestrates shall be levied, which will be determined by commercial banks based on their respective risk management principles.

BUSINESS

– 61 –

Beginning 1 January 2004, commercial banks were allowed to negotiate with borrowers to adjust interest

rates on medium- to long-term loans (with terms longer than one year) to either (i) adjust the loan rates on a

monthly, quarterly or yearly basis, or (ii) adopt a fixed interest rate during the contract period.

In addition, beginning 29 October 2004, commercial banks were allowed to set interest rates for their

RMB-denominated deposits (except for negotiated deposits) within the range of the relevant PBOC benchmark.

In addition, beginning 17 March 2005, the PBOC lifted its control over interest rates for deposits offered by

financial institutions, which allowed for negotiations between the institutions and their clients on special

interest rates.

Interest rates offered for foreign currency-denominated deposits and loans are generally not subject to

any restriction, except that interest rates offered for U.S. dollar-, Hong Kong dollar-, Japanese Yen- or

Euro-denominated deposits with a value of less than US$3 million or the equivalent and a term no longer than

one year shall not be higher than the interest rates announced by the PBOC.

Pricing for Fee- and Commission-based Products and Services

Under the Provisional Measures on Pricing of Commercial Banking Services (商業銀行服務價格管理暫行辦法) jointly promulgated by the CBRC and the NDRC, which came into effect on 1 October 2003, fee- and

commission-based products and services that are subject to governmental pricing guidelines include Renminbi

settlement services — such as bank drafts, bank acceptance drafts, promissory notes, checks, remittances and

entrusted collections payments, and other services specified by the CBRC and the NDRC. Fees for other fee-

and commission-based products and services are determined by commercial banks based on market conditions.

Commercial banks are required to report to the CBRC at least 15 business days prior to the implementation

of any new fee schedules and to post such fee schedules at their business premises at least ten business days

before the new fee schedules become effective.

Pricing Policies for Our Products and Services

We have established an interest rate management system for our Renminbi and foreign currency-

denominated deposits and loans businesses within the current framework of macro interest rate policies. This

system determines pricing based on our market yield curve in line with our overall business strategy and is

subject to multi-tiered authorization and approval.

We conduct interest rate management based on the principles of “scientific pricing, type-specific

guidance, flexible adjustment and hierarchical authority.” “Scientific pricing” refers to our pricing method for

interest rates for local and foreign currencies, which is based on target return rates while taking into account

our relationship with customers as well as various cost-benefit factors. “Type-specific guidance” means our

businesses (either Renminbi or foreign currency) are subject to categorized management and pricing guidance

depending on national policies and our management needs. “Flexible adjustment” refers to our policy of

altering the pricing of our products and services based on target return rates in light of market conditions and

the status of our business development. “Hierarchical authority” means each level of our management system

is delegated a certain amount of interest rate management authority, and each business line and sub-branch can

implement interest rate management within their respective authority.

Loans

We determine the interest rates of our Renminbi and foreign currency-denominated loan products in

accordance with the regulatory requirements of the PBOC. We also take into consideration the borrower’s

financial condition, the value of the collateral, the purpose and duration of loans, the cost of loans, credit and

other risks, the expected return, our market position and our competitors’ prices, among other things.

We began using economic capital management tools in 2006 and fully implemented Renminbi and

foreign currency fund transfer pricing in 2007. We have developed and launched our pricing management

system, which we can use to determine consolidated income and return on our products and services, and which

is also designed to offer our customers the ability to view selections of our services and pricings based on their

preferences.

BUSINESS

– 62 –

In addition, we have taken various measures to improve the theory, methods, procedures, tools and

evaluation of our pricing of risks, including (i) improving the theory behind and mechanism for risk pricing,

and gradually strengthening the correlation between pricing levels and risks; (ii) continuously raising

awareness of risk pricing and pricing ability, improving the rules for differential pricing and the analysis for

pricing and customer income, and working out customized pricing strategies for different customers; and (iii)

improving assessment of, publicity for and training on pricing, setting a definite and specific objective on

pricing, and incorporating the corporate and retail loan pricing enhancement plans prepared by our branches

into our budget management and evaluation system at all levels.

Deposits

Under current PRC laws, rules and regulations, interest rates on our RMB-denominated demand deposits

and regular time deposits are not allowed to exceed 110% of the relevant PBOC benchmark interest rates. We

generally price our demand and regular time deposits at the relevant PBOC benchmark interest rates. We

determine the interest rates for negotiated deposits based primarily on our assets and liabilities management

policies and the market interest rate. In order to control funding cost, we only negotiate and take negotiated

deposits in the head office. The PBOC has liberalized interest rates charged on RMB-denominated lending and

deposits between financial institutions and we are permitted to negotiate such interest rates with other financial

institutions. In addition, we are permitted to negotiate the interest rates on foreign currency-denominated

deposits other than those denominated in U.S. dollars, HK dollars, Japanese Yen and Euros with a value of less

than US$3 million or the equivalent and a term no longer than one year. The interest rates for such deposits

shall not exceed the interest rates announced by the PBOC for small foreign currency deposits.

Pricing for Fee- and Commission-based Products and Services

We price our fee- and commission-based products and services based on our estimated costs and in

compliance with the regulatory requirements. Before applying these prices, we will comply with the relevant

procedures for reporting and public announcement, and answer inquiries from counters, telephone and via

Internet. In addition to formulating the China Merchants Bank’s Regulations on the Price Management of

Financial Services, we have established price management committees for fee- and commission-based

businesses at our head office and branches, and service pricing management offices for the management of

daily service pricing. Furthermore, we have also established a multiple-layer supervision and inspection

mechanism.

DISTRIBUTION NETWORK

We deliver our products and services through our multi-channel distribution network, consisting of both

a nationwide branch network and the rapidly developing e-banking channels.

Branch Network

Our branches are primarily located in the more economically developed regions of the PRC, such as the

Yangtze River Delta, the Pearl River Delta and West Side of Taiwan Strait, and the Bohai Rim. We also

strategically place branches in certain large and medium-sized cities in other regions in the PRC. As of 30 June

2013, we had 105 branches, 867 sub-branches, one branch-level Credit Card Centre, one branch-level Small

Enterprise Credit Centre, 2,190 self-service centres and 9,116 self-service cash machines, including 2,593

ATMs, and 6,523 self-service deposit and withdrawal machines in over 110 cities in the PRC. We also have

a wholly owned subsidiary, CMB Financial Leasing Co., Ltd. in Hong Kong. We operate overseas primarily

through our subsidiaries, Wing Lung Bank Limited and CMB International Capital Corporation Ltd., among

others, as well as our Hong Kong branch. We also have a branch in New York. In addition, we have

representative offices in New York, London and Taipei, and we are in the process of establishing a branch in

Singapore.

BUSINESS

– 63 –

The following table sets forth the number of our branch outlets (excluding subsidiaries) by geographical

region as of 30 June 2013:

Region

Number of

branch outlets % of total

The PRC Head Office and Special Outlets 3 0.3

Yangtze River Delta 216 22.0

Pearl River Delta and West Side of

Taiwan Strait 203 20.7

Bohai Rim 164 16.7

Western Region 167 17.1

Central Region 152 15.5

Northeast Region 71 7.2

Overseas Hong Kong branch 1 0.1

Taipei representative office 1 0.1

New York branch and representative

office in the United States 2 0.2

London representative office 1 0.1

Total 981 100.0

The Bank will continue to adhere to the basic principles of “controlling development pace, emphasizing

efficiency, ensuring quality and prioritizing key issues” and expand the coverage of its network. It will focus

on developing second-tier branches and sub-branches at the county level, continuously expanding the coverage

of its intra-city sub-branches and self-service equipment in urban areas, and steadily proceeding with the

construction of its branches and representative offices. As for its regional plans, the Bank will penetrate deeper

into the three largest markets — the Yangtze River Delta, Pearl River Delta and Bohai Rim — to further

strengthen its development advantage, thus enhancing its competitiveness in these key regions.

Overseas Branches

Hong Kong Branch

Our Hong Kong branch, established in 2002, mainly provides wholesale banking and retail banking

services. Wholesale banking services include loans and deposits, remittance, factoring, international trade

facilities and settlement, initiating or participating in syndicated loans, and participating in interbank funds,

bonds and foreign exchange trading. Retail banking services mainly include providing cross-border electronic

banking services for individual customers from Hong Kong and the PRC. The featured products of our retail

banking services are the Hong Kong all-in-one card and Hong Kong bank-securities express. Hong Kong

all-in-one cardholders may withdraw cash from ATMs and make payments via POS through China UnionPay,

Hong Kong JETCO and EPS in Hong Kong, the PRC and overseas, and may enjoy counter and online

remittance services at those locations. Hong Kong bank-securities express cardholders may trade in Hong

Kong stocks through online and direct banking, enjoying an unparalleled ease and convenience in investment

and wealth management.

New York Branch

Our New York branch, established in 2008, offers tailored services for PRC companies going outbound

from the PRC and U.S. enterprises investing in the PRC market. The services provided by the New York branch

mainly consist of corporate deposits and loans, project and trade financing, mergers and acquisitions financing,

financial advisory, cash management, U.S. dollar clearing and online banking. Since its establishment, our New

York branch has actively expanded its asset business, developed liabilities and treasury businesses, improved

its clearing and payment businesses, U.S. dollar clearing and trade clearing businesses and enhanced its risk

BUSINESS

– 64 –

management. As a result, the New York branch has diversified its business offerings and service methods and

its business operations have become more mature.

Electronic Banking

We have expanded and improved our e-banking channels, including self-service, online, direct and

mobile banking and have effectively reduced the workload of our branches. In the first six months of 2013,

the number of transactions conducted through our retail e-banking channels accounted for 91.85% of our total

retail banking transactions capable of being transacted online, while the number of transactions conducted

through our corporate e-banking channels accounted for 57.49% of our total wholesale banking transactions

capable of being transacted online and the number of online corporate banking settlements accounted for

90.27% of all wholesale banking settlements transactions capable of being transacted online.

Self-Service Banking

Our self-service banking facilities include ATMs, cash recycling systems, or CRSs, and self-service

terminals. Through these self-service centres, our customers are able to conduct various transactions, including

deposits and withdrawals, account inquiries, bank transfers and bill payments. As of 30 June 2013, we had

2,190 self-service centres and 9,116 self-service cash machines, including 2,593 ATMs and 6,523 self-service

deposit and withdrawal machines.

Online Banking

Online banking includes online corporate and online personal banking. For details on our online

corporate banking, please refer to the section headed “Business — Wholesale Banking — Products and

Services — Online Corporate Banking.” For details on our personal online banking, please refer to the section

headed “Business — Retail Banking — Products and Services — Personal Online Banking.”

Direct Banking

Our direct banking business mainly consists of telephone banking and remote banking services, which

provides services through various channels, including telephone, short messages services, emails, faxes, online

interaction, virtual communities and micro blogs. It provides around-the-clock services to our 60 million retail

and wholesale customers. Services provided in our direct banking business include basis retail services, VIP

value-added services, fast and easy wealth management services, online banking, securities investment,

individual loans, financial and foreign exchange services for travels overseas and wholesale banking services.

In 2010, our bank launched the first online banking service among all domestic banks and introduced such

pioneering products as online loan services and online wealth management services. We have also undertaken

initiatives to improve our client services, client relationships and discovery of client values by actively using

resources from both direct banking and traditional banking businesses, and have established a three-dimension

service structure that consists of direct banking, outlets and e-banking services.

Our direct banking service represents another reform on the service model of our bank. Our remote

relationship managers provide customers with real-time, comprehensive, rapid and professional services in

respect of all types of bank transactions, as well as investment and financial advisory services, one-stop loan

services and product sales. As of the end of 2012, our direct banking center has more than 2,300 staff members

that provide remote banking services and conduct customer relationship management. In 2012, our

staff-attended direct banking services provided through telephone, online banking, All-in-one Net, i wealth

management neighborhood, 95555 mailbox, Weibo, Baidu Zhidao, centralized review of foreign exchange, and

complaint handling reached 73.78 million times.

Mobile Banking

Mobile banking is one of our e-banking services provided to customers via mobile Internet. Our mobile

banking service, with its all-in-one card and credit card function, provides customers with a variety of services,

including account and transaction inquiries; password management; loss reporting; all-in-one card, credit card

and deposit book transfers, account transfers, transfers to other banks, transfers between time deposit and

current accounts, banking-securities transfers, setting up automatic repayment and repayment details inquiries.

BUSINESS

– 65 –

We have established three mobile banking platforms, including iPhone and Android versions and

website-based applications. The number of mobile banking users and trading volume has increased rapidly,

resulting in a booming mobile payment business. As of 30 June 2013, the cumulative client downloads had

exceeded 10 million, we had more than 12.43 million contracted mobile banking customers with 4.24 million

being active customers, and 17.22 million cumulative transactions (excluding mobile payment), and our

cumulative transaction amount had reached RMB420,800 million. As of the same date, we had accumulated

69.96 million mobile payment transactions and our cumulative transaction amount was RMB12,719 million.

BUSINESSES OF WING LUNG GROUP AND OTHER SUBSIDIARIES

Wing Lung Group

Founded in 1933, Wing Lung Bank Limited, or WLB, is one of the oldest local Chinese-owned banks

in Hong Kong. WLB provides banking services to the public following its motto of “progress with prudence,

service with sincerity.” As of 30 June 2013, WLB had HK$1,500 million of registered capital.

WLB and its wholly owned subsidiaries — Wing Lung Insurance, Wing Lung Finance, Wing Lung

Securities, Wing Lung Trustee, Wing Lung Property Management and Wing Lung Futures, among others —

collectively comprise Wing Lung Group, or WL Group. The principal businesses of WL Group include

deposit-taking, lending, credit cards, documentary bills, foreign exchange, futures and securities brokering,

wealth management services, insurance, financial leasing, property trustee and nominees and custodian

services.

As of 30 June 2013, the total assets of WL Group amounted to HK$210,936 million, total equity

attributable to shareholders amounted to HK$18,253 million, total deposits amounted to HK$144,195 million

and total advances to customers, including trade bills, amounted to HK$121,430 million. In 2012 and the first

six months of 2013, net profits attributable to WL Group shareholders amounted to HK$2,131 million and

HK$1,291 million, respectively, of which net interest income was HK$2,504 million and HK$1,360 million,

respectively, and net non-interest income was HK$1,211 million and HK$651 million, respectively. As of 30

June 2013, WL Group’s capital adequacy ratio and core capital adequacy ratio were 13.83% and 9.08%

respectively, and the average liquidity ratio was 40.61%, all above the regulatory requirements.

As of 30 June 2013, WLB had 1,696 employees, of which 1,502 were in Hong Kong, 139 in the PRC,

38 in Macau and 17 overseas.

Products and Services

Wholesale Banking

WL Group provides large corporate customers with wholesale banking products and services, including

corporate loans, documentary bills, foreign exchange, trust, money transfer, credit cards, corporate deposits

and insurance. In recent years, WL Group has been devoted to offering such products and services as accepting

guarantees from domestic enterprises as security for loans granted to overseas entities, syndicated loans,

corporate loans and bilateral loans to enterprises in the PRC and Hong Kong. In order to expand its income

sources, WL Group has actively expanded its non-interest income business and strengthened the business

coordination between WLB’s corporate finance and commercial banking activities by promoting offshore

RMB-denominated bonds and wealth management products as well as acting as the receiving bank for initial

public offerings and the dividend paying bank for listed companies. WL Group has also strengthened its

cooperation with the Bank’s branches in the PRC to provide one-stop financial services to customers in Hong

Kong and the PRC and broaden its customer base. Moreover, WL Group has also focused on promoting the

cross-selling of its products to increase its overall profits.

As of 31 December 2012, the balance of outstanding corporate loans of WL Group was HK$38,074

million.

BUSINESS

– 66 –

Commercial Banking

The main products of the commercial banking business of WL Group consist of SME loans, accounts

receivable loans and Financing Passage for SMEs in Hong Kong and the Mainland (中港中小企業融資通).

Major customers of commercial banking business are local SMEs in Hong Kong and the Hong Kong

subsidiaries of PRC corporations. WL Group has explored cross-border business by cooperating with the Bank.

Recently, WL Group launched several major commercial banking products and services, including the SME

financing guarantee scheme; usance letters of credit and Renminbi non-delivery forward contracts; its

cross-border Renminbi and discounted notes financing guarantee business, which it developed in cooperation

with us, and equipment financing.

As of 31 December 2012, the balance of WL Group’s commercial banking loans was HK$7,223 million.

Retail Banking

WL Group’s retail banking business consists primarily of mortgages, personal loans, credit cards, wealth

management services and securities services. Driven by the Second Transformation, WL Group has focused on

developing its non-interest income business to obtain non-interest income from securities, insurance and

wealth management services. In addition, WL Group regularly offers products and services across different

business lines to increase profits from its retail banking business by increasing cooperation and interaction

between its various departments. For example, when its credit card centre launched a promotion for credit cards

under the “family concept,” its deposit department correspondingly promoted children’s deposit saving

products. WL Group targets the general public for its retail banking business, and increasingly focuses on

attracting more high-net-worth customers to maximize profitability.

Mortgage and Personal Loan Business. To secure its market share, WL Group formulated a flexible and

competitive lending strategy in response to market changes. Demand for conventional mortgage lending was

adversely affected by both the prudential supervisory measures for mortgage lending repeatedly introduced by

the Hong Kong Government and hikes in the stamp duties levied on property transactions, which were

introduced in 2012 to dampen speculation in real estate. Hence, WLB adjusted its business development

strategy for retail loans and introduced packages for the “Purchase of the First Property” that were favorable

to consumers and aimed at the non-residential property mortgage market. Meanwhile, WLB developed credit

loan products, such as the “Small Enterprise Unsecured Overdraft Facility” for SMEs, comprehensive banking

services for small and micro enterprises, and personal loan services for professionals and individuals. Loan

facilities secured by funds and bonds were also launched in late 2012. As of 31 December 2012, the balance

of WLB’s loans amounted to HK$26,039 million, of which residential mortgage loans accounted for HK$8,381

million.

Credit cards. WL Group has continued to improve its credit card products and services, and has launched

credit card products targeting high-end customers. Since the issuance of the world’s first diamond credit card,

“Luxe Visa Infinite,” and the first “World MasterCard for Business” in greater China, WL Group has steadily

increased the number of its high-end customers. WLB has launched “CUP (China UnionPay) Dual Currency

Credit Card,” which allows cardholders to settle transactions in the PRC in RMB and transactions outside the

PRC in Hong Kong dollars; its Hong Kong dollar account also supports different forms of flexible cash

withdrawals. In addition, WLB and CMB jointly launched the “Dual Bank Logo Credit Card,” which is

imprinted with the names and logos of both CMB and WLB and allows WLB cardholders to enjoy the benefits

of CMB’s contracted merchants and promotions. As of 30 June 2013, WLB has issued over 250,000 credit

cards, and its credit card receivables amounted to HK$303 million. In the first six months of 2013, payments

made through credit cards issued by WL Group reached HK$2,655 million.

Wealth management. In recent years, WL Group has promoted its “Sunflower” wealth management

services, which provide a comprehensive financial service platform to customers. In 2012, WLB officially

introduced “Wing Lung Private Wealth Management” and established the Wing Lung Private Wealth

Management Centre to provide a full range of professional financial services to high-end customers in the PRC

and Hong Kong. To attract high-end customers in the PRC, WL Group enhanced its coordination with the

Bank’s domestic branches, especially those in the Pearl River Delta region, through activities such as

BUSINESS

– 67 –

organizing investment immigration road shows and inviting high-end customers of the Bank to participate in

dedicated marketing functions in Hong Kong in order to introduce the Bank’s professional wealth management

services and promote WLB’s corporate image.

In 2012 and the first six months of 2013, the income from WL Group’s wealth management business was

approximately HK$48.98 million and HK$36.32 million, respectively.

Securities and Insurance Business. WL Group conducted its securities business through its subsidiary,

Wing Lung Securities Limited. In 2012 and the first six months of 2013, Wing Lung Securities Limited realized

brokerage commission and related income of HK$131 million and HK$80.41 million, respectively.

WL Group conducted its insurance business through its subsidiary, Wing Lung Insurance Company

Limited, which realized a gross premium income of HK$756 million and HK$412 million, respectively, in

2012 and the first six months of 2013. Total insurance claims in 2012 and the first six months of 2013

amounted to HK$398 million and HK$209 million, respectively. Wing Lung Insurance reported steady

improvement in its operating results in 2012 and the first six months of 2013.

Treasury Business

WL Group’s treasury business mainly consists of its foreign exchange and capital utilization businesses.

WL Group’s income from its foreign exchange business mainly comes from spot exchange transactions and

foreign currency exchanges and options. WL Group actively participated in RMB-related transactions and

expanded its customer base for non-trading RMB accounts to increase transaction volume and related income.

As for its capital utilization business, WL Group financed short-term capital and provided liquidity for its own

business development through its operation in Hong Kong’s interbank market.

WL Group undertook long-term investments in debt instruments to obtain steady interest income. Its

investment portfolio consists mainly of government bonds, bonds issued by international financial

organizations and bonds issued by commercial banks. As of 30 June 2013, WL Group’s debt securities

investment amounted to HK$28,552 million and its foreign currency (including Hong Kong dollar) debt

securities investment amounted to HK$20,086 million. Over 77% of its foreign currency (including Hong Kong

dollar) debt securities were rated A3 or above and were exposed to comparatively low risk. In 2012 and the

first six months of 2013, revenue from its foreign exchange trading business amounted to HK$79.62 million

and HK$52.23 million, respectively, and revenue from its foreign money exchanges amounted to HK$66.29

million and HK$36.30 million, respectively. In future, WLB will seize opportunities in RMB-related business

by actively participating in RMB-related transactions and expanding its non-trade-based RMB client base so

as to increase transaction value and related revenue.

Domestic and Overseas Branches

Domestic and overseas branches refer to the branches of WL Group that carry out their businesses in

countries or regions outside of Hong Kong. WLB is increasing the construction and renovation of branches to

extend its branch network. As of 30 June 2013, WL Group had 44 branches in Hong Kong, four branches and

representative offices in the PRC, one branch in Macau, one branch in Los Angeles and one in the Cayman

Islands.

The branches and representative offices of WLB in the PRC are located in Shenzhen, Shanghai and

Guangzhou. WLB’s Shenzhen branch, Nanshan sub-branch and Shanghai branch are licensed to engage in

RMB-related and foreign currency businesses, including corporate loans, trade finance, financing security,

personal housing mortgages, and special financing and solutions for multi-national enterprises, in accordance

with the requirements of the CBRC. These branches may accept time deposits of no less than RMB1 million

from PRC residents. WLB’s representative office in Guangzhou only provides consultation services. As of 31

December 2012, the total amount of loans to customers granted by WLB’s PRC branches amounted to

HK$10,217 million.

WLB’s Macau branch is fully licensed to operate in Macau (except that financial products trading

services are subject to approval from and reporting to the relevant regulatory authorities). The Macau branch

also engages in offshore businesses, such as investment and the provision of loans to customers outside Macau.

BUSINESS

– 68 –

WL Group has one overseas branch in Los Angeles, and one in the Cayman Islands. The Los Angeles

branch provides commercial mortgage loans, trade finance, syndicated loans and other commercial banking

services.

Financial Institutions Business

WL Group’s financial institutions department was founded in 2009. Its clearing and interbank asset

businesses have become new sources of income for WL Group. WL Group’s financial institutions business

consists of international clearing and settlement (in Hong Kong and U.S. dollars), trade finance, financial

market trading, cross-border RMB settlement and other businesses in China and Hong Kong.

Ongoing Integration with WLB

After acquiring WLB, the Bank attached great importance to business integration and prepared a detailed

integration plan. In 2012, the Bank continued to further the consolidation of its domestic and overseas

businesses, strengthen its key competencies, promote the active and steady integration of WLB and take further

steps to facilitate the sustainable and healthy development of all of WLB’s businesses and enhance WLB’s

profitability.

The Bank and WLB seized opportunities in cross-border financing. To accommodate clients with

domestic and overseas businesses, the Bank and WLB worked together in various areas, such as accepting

guarantees from domestic enterprises as security for loans granted to overseas entities, accepting guarantees

from overseas entities as security for loans granted to domestic enterprises, international settlement, trade

finance, financial market trading, acting as a receiving bank for IPOs, dividend distribution for listed

companies, import bill advances by overseas institutions (海外代付), cross-border Renminbi trade settlement,

issuance of Renminbi bonds, export collection, documentary bills, witnessing account openings, Sunflower

Wealth Management, the Professional Investor Program, the Capital Investment Entrant Scheme and sharing

merchant offers for their credit card businesses. WLB has also actively established its cross-border financing

business and gained competitive advantage by establishing five platforms: its overseas wealth management,

cross-border corporate finance service, small and micro enterprise financial services, small and medium bank

offshore financial services and comprehensive operations platforms. The WLB Private Wealth Management

Center officially commenced operations in March 2012, and is dedicated to providing superior, private and

professional wealth management services to its high-end customers in both the PRC and Hong Kong. Wing

Lung Asset Management Limited was officially established and was licensed by Hong Kong’s SFC to conduct

an asset management business. Wing Lung Opportunities Fund, the first long-short hedge fund issued by WLB,

has been operating smoothly. As of 30 June 2013, our branches within the PRC have successfully referred

corporate customers to WLB, resulting in deposits of HK$16,031 million and loans of HK$59,684 million. The

Bank has successfully referred individual customers to WLB, resulting in retail deposits of HK$3,037 million

and loans of HK$369 million; the balance of customer assets under management amounted to HK$5,848

million.

Based on our business development needs, and with the guidance of a new management philosophy and

the support and assistance of the Bank, the operation and management of WLB has improved significantly. The

organizational management system is advancing steadily towards more “customer-centric” retail service and

substantive progress has been made in the re-engineering of the Operations Centre. E-banking service

capability has also improved, as evidenced by the centralization of the “telephone service center,” the

launching of WLB’s iPhone App, the availability of an online subscription channel for initial public offering

funds and the smooth progress of the second stage of our online corporate banking services, consumer banking

services, Android App and disaster back-up system. WLB and CMB have continued to reinforce cooperation

in risk management, and WLB is actively promoting implementation of Basel II. WLB’s performance

management and planned finance management standards have also improved. An IT system is being rolled out

to establish an integrated service platform featuring cross-border services, and the second stage of core system

replacement has progressed steadily. With the completion of the new data center, upgrading of the business and

IT-based management systems have also garnered encouraging results.

BUSINESS

– 69 –

Other Subsidiaries and Associates

CMB Financial Leasing

CMB Financial Leasing, or CMBFL, is our wholly owned subsidiary. In compliance with national

industrial policies, CMBFL provides financial leasing for large and medium equipment for the transportation,

construction, power, mining and manufacturing sectors, as well as for SMEs. It responds to the varying needs

of customers from all over the PRC in the areas of equipment acquisition, sales promotion, asset restructuring,

tax liabilities and improvement of financial structure. Its financial leasing services include capital and

commodity financing, asset management and financial advising.

CMBFL, established in Shanghai on 23 April 2008 with registered capital of RMB4.0 billion and 113

employees, was one of the first five pilot bank-affiliated financial leasing firms approved by the PRC State

Council. Since its establishment, CMBFL has actively implemented a professional business development

model, established a comprehensive risk management system and maintained a culture of teamwork. As of 30

June 2013, CMBFL had total assets of RMB69,568 million and net assets of RMB6,396 million. CMBFL’s net

profit was RMB675 million in the first six months of 2013. As of 31 December 2012, CMBFL had total assets

of RMB55,891 million and net assets of RMB5,722 million. CMBFL’s net profit was RMB908 million in 2012.

CMB International Capital Corporation

CMB International Capital Corporation (“CMBICC”), established in 1993, is our wholly owned

subsidiary in Hong Kong. CMBICC is principally engaged in investment banking, securities brokering and

asset management through its subsidiaries. As of 30 June 2013, CMBICC had an issued share capital of

HK$250 million and 77 employees.

In recent years, CMBICC has increased its business development and expanded its investment banking

business. CMBICC, through its subsidiaries, has successfully sponsored several companies’ initial public

offerings and listings on the Hong Kong Stock Exchange, and has developed its brokerage and asset

management businesses. As of 30 June 2013, CMBICC had total assets of HK$885 million and net assets of

HK$653 million. In the first six months of 2013, operating income and net profit of CMBICC was HK$271

million and HK$172 million, respectively. As of 31 December 2012, CMBICC had total assets of HK$703

million and net assets of HK$483 million. In 2012, operating income and net profit of CMBICC was HK$236

million and HK$80.33 million, respectively.

China Merchants Fund Management Co., Ltd.

China Merchants Fund Management Co., Ltd. (“CMFM”), established on 27 December 2002 with

registered capital of RMB210 million, was the first Sino-foreign fund management joint venture approved by

the CSRC. As of 30 June 2013, we had a 33.4% equity interest in CMFM. CMFM’s business includes fund

establishment, fund management and other business operations approved by the CSRC.

As of 30 June 2013, CMFM had total assets of RMB892 million and net assets of RMB673 million with

203 employees. CMFM operates 32 open-ended mutual funds, four social security portfolios, 13 annuity

portfolios, 29 private wealth management portfolios and one QFII portfolio. The total assets under

management amounted to RMB83,152 million as of 30 June 2013. In the first six months of 2013, CMFM

realized operating income of RMB315 million and a net profit of RMB80 million.

We entered into a share transfer agreement with ING Assets Management B.V. on 24 October 2012.

Pursuant to the share transfer agreement, we proposed to purchase 21.6% of the equity interests in CMFM held

by ING Assets Management B.V. Upon completion of the proposed transfer, our shareholding in CMFM would

increase from 33.4% to 55%. The proposed acquisition has been approved by CBRC and CSRC and we are in

the process of assisting CMFM to complete relevant procedures, including amendment of registration with the

State Administration for Industry and Commerce. Upon completion of the proposed transfer, CMFM will

become our majority-owned subsidiary.

BUSINESS

– 70 –

OVERVIEW

A key aspect of our Second Transformation is ensuring effective risk management. Our three objectives

for risk management are (i) to achieve stability in key risk management indicators, such as our non-performing

loan and non-performing loan allowance coverage ratios, both to ensure compliance with regulatory

requirements and to meet our internal management needs for the Second Transformation; (ii) to effectively

manage systematic risks and large credit risk exposures in order to improve our adaptability to economic

cycles; and (iii) to enhance our capital efficiency and overall competitiveness to create value for our

shareholders in the long term.

In recent years, we have implemented our Second Transformation based on the principles of

comprehensiveness, professionalism, independence and checks and balances. We have accelerated the

development of a risk management system that is focused on risk-adjusted value creation and have actively

explored comprehensive risk management structures and operational mechanisms. We have also gradually

established a leading comprehensive risk management structure that is based on our corporate culture,

guidance by our strategies, a panoramic perspective, focus on long-term effectiveness and a firm grounding in

real circumstances.

We have implemented whole-process optimization and fundamental and comprehensive improvements to

our credit risk management, which have enabled us to maintain stable asset quality and make sufficient

provisions for impairment loss. We have been able to implement measures for market risk management to

ensure liquidity and to keep bank account interest rate risk and foreign exchange risk within approved limits,

and our risks associated with our financial market business are at acceptable levels. We have also strengthened

our capital management, our capital adequacy ratio has continued to comply with regulatory requirements and

the objectives set forth in our capital plan, and our return on capital has improved. We have taken steps to

prevent and manage operational, compliance, IT system and reputational risks and enhance risk management

awareness and capabilities. There have been no major incidents relating to operational risks, non-compliance,

legal proceedings or the functioning and stable operation of our IT system. Our management of risks related

to financial consolidation and strategic development has also progressed smoothly.

In recent years, we have markedly improved our risk management and our asset quality has generally

remained stable and has had a leading position in the PRC banking industry. As of 31 December 2010, 2011

and 2012 and 30 June 2013, the Group’s non-performing loan ratios were 0.68%, 0.56%, 0.61% and 0.71%,

respectively.

Since 2007, we have sought to improve our risk management through various initiatives, including the

following:

Consistently Improving Our Comprehensive Risk Management Organizational System to Establish a

Comprehensive Unified Risk Reporting Mechanism

• We have formulated three objectives for risk management and instilled a risk management culture of

proactive and prudent risk management at all levels of the Bank;

• We have improved our comprehensive risk management framework by establishing a system under

which the Credit Risk Management Department coordinates with each specialized risk management

department to regularly submit consolidated risk management reports on us (the Bank) and the Group

to the risk management committee of the Group and the Risk and Capital Management Committee of our

Board of Directors;

• We have established compliance management committees at our head office and branches, and specified

the responsibilities of and staffing requirements for compliance management departments at both levels,

to effectively identify and manage compliance risk and ensure compliance with applicable laws and

regulations;

• We have established an Operational Risk Management Department at our head office to enhance the

independence and professionalism of our operational risk management; and

• We have established a Market Risk Management Department at our head office to enhance the

independence of our market risk management.

RISK MANAGEMENT AND INTERNAL CONTROL

– 71 –

Promoting Whole-Process Optimization and Fundamental and Comprehensive Improvement in Credit

Risk Management to Enhance Our Credit Extension Competitiveness

• We have improved our credit risk management process by optimizing five key steps: credit origination,

due diligence, credit review and approval, disbursement and post-disbursement management;

• We have set up a loan pre-approval process for business development initiatives and encouraged

cooperation between risk managers and relationship managers to ensure the accuracy and completeness

of pre-approval investigation and the quality of credit reports;

• We have added a credit review process to the credit approval stage to ensure the accuracy and

completeness of credit application materials, and require that two credit approval officers review each

credit approval in an effort to streamline the approval process and enhance both the prudence and

efficiency of credit approvals;

• We have been gradually introducing a streamlined, paperless and standardized system for loan

disbursement in order to improve efficiency and quality, properly allocate staffing, and reduce

operational costs;

• We have integrated post-disbursement management procedures, including post-disbursement review, risk

alerts, risk classification and provisioning for impairments, in order to enhance our comprehensive

post-disbursement risk management and control capabilities;

• We have improved our credit approval processes for large and medium enterprises and small enterprises,

and we have conducted further market research and customer profiling in order to build a top-down

approach for our small enterprise loan business featuring “centralized business development, batch

processing and portfolio management”; and

• Under the guidance of the head office, each of our branches and subsidiaries has improved its risk

management through team building, establishment of procedures, implementation of new loan

regulations, data quality, system development, quantified management, group customer management,

risk alerts, categorized provisioning for impairments and accountability for write-offs. In 2011, we

implemented a risky assets recovery system that calls for coordination between our head office and

branches in order to enhance our ability to collect or otherwise dispose of risky assets.

Consistently Enhancing Credit Risk Management

• We are constantly researching industry policies and making dynamic adjustments to our annual credit

strategies. In 2013, the Group’s guiding credit strategies are to actively push forward the adoption of a

sustainable development business model for small enterprises; balance risk, return and cost; grant credit

facilities to high-value customers; manage and control systemic risks associated with loans in large

amounts to private company groups; support the development of emerging financing businesses and

innovative growth enterprises; improve credit policies for local government financing vehicles and the

real estate industry; promote green credit; control risks associated with enterprises in “high pollution and

high energy consumption” industries; and improve resource allocation and optimize the Group’s

investment portfolio;

• We have strengthened risk management for loans to company groups by focusing on company affiliations

and implementing centralized credit approval in order to guard against systemic risks. In addition, we

have amended the Credit Extension of China Merchants Bank to Company Groups to perform credit limit

management, centralized credit extension management and concentration monitoring of company group

customers at the consolidated Group level, by unifying all corporate credit extensions and personal

operating loans to the same company group by our consolidated entities, including CMBFL and WLB,

under the Group’s centralized credit limit management and conducting category management based on

their risk classifications.

RISK MANAGEMENT AND INTERNAL CONTROL

– 72 –

• We have begun implementing a credit risk alert management system focused on risk monitoring, control

and supervision; developed a risk alert management system and formulated a complete set of procedures

to mitigate risks in a timely and effective manner. These procedures include inspection of early warnings,

identification of risky customers and execution of remedial measures based on internal and external

information jointly conducted by the head office and branches;

• We have proactively improved our credit inspection methods and procedures and focused on on-site

inspections of key businesses and branches to ensure our compliance with applicable laws and

regulations and an accurate assessment of our asset quality;

• We have further refined our classification of financial asset risks based on quantitative risk parameters.

Our ten-category classification system has been successful in pilot trials. The system uses quantitative

risk parameters, such as customer rating, debt rating and overdue period, to improve the accuracy and

timeliness of our risk classifications;

• We have continued to improve our model for calculating allowance for impairment loss in accordance

with PRC accounting standards and regulatory requirements and have made sufficient provisions for

impairment loss based on historical data and changes in the macro-economic environment; and

• We have begun to manage credit asset portfolios in an effort to explore a capital-efficient model for

credit asset management.

Improving Various Risk Management Systems to Standardize Risk Management Procedures

• In compliance with the Three Rules and One Guideline promulgated by the CBRC, we have formulated

the Fixed Asset Loan Administration Measures of China Merchants Bank, the Project Financing

Administration Measures of China Merchants Bank, the Fixed Asset Loan Administration Guidelines of

China Merchants Bank, the Working Capital Loan Administration Measures of China Merchants Bank

and the Personal Loan Administration Measures of China Merchants Bank in order to enhance

monitoring and control of borrowers’ use of proceeds;

• We have formulated the Liquidity Risk Management Measures of China Merchants Bank, the Bank

Account Interest Rate Risk Management Measures of China Merchants Bank, the Exchange Rate Risk

Management Measures (2012 Revision) of China Merchants Bank, the Bank Account Interest Rate Risk

Measurement Measures of China Merchants Bank and the Bank Account Market Risk Hedging

Procedures of China Merchants Bank in order to improve our market and liquidity risk management

systems as well as credit limit system. We have also improved our analyses of market and liquidity risks

by using gap analysis, scenario analysis, stress testing and other quantitative methods, which has enabled

us to make forecasts of our net interest income and net interest margin on a rolling basis. Moreover, we

have improved our treasury management system by implementing a dynamic management strategy for

assets and liabilities and our market and liquidity risks;

• We have formulated the Operational Risk Management Measures of China Merchants Bank and

corresponding management policies to further improve our operational risk management system and

standardize operational risk management procedures;

• We have formulated the Compliance Risk Management Plans for 2012 of China Merchants Bank to

strengthen compliance risk management for the key areas of our business and new businesses. We have

also conducted compliance tests and inspections and have established a long-term compliance risk

management system;

• We have formulated and issued the Strategic Risk Management Measures of China Merchants Bank,

which defines the aims, organizational system and responsibilities of strategic risk management and sets

processes for strategic risk identification and assessment, risk monitoring and control and risk reporting;

RISK MANAGEMENT AND INTERNAL CONTROL

– 73 –

• We have formulated the Reputation Risk Management Measures of China Merchants Bank, established

a bank-wide reputation risk management system and governance structure and set up reputation risk

management mechanisms and methods, management procedures and tools, risk classifications and

ratings, incident response protocols and post-incident review and accountability in order to further

improve our reputation risk management; and

• In compliance with management and regulatory requirements, we have issued revised versions of the

Trading Portfolio Market Risk Management Guidance of China Merchants Bank, the Financial

Instrument Fair Value Calculation Measures of China Merchants Bank and the Bond and Derivative

Classification Measures of China Merchants Bank. We have also formulated and issued the Management

Measures for Counterparty Credit Risk Exposure in Derivative Transactions of China Merchants Bank,

which makes us one of the few domestic banks to have explored the measurement of counterparty credit

risk exposure.

Introducing Advanced Risk Measurement and Management Tools to Improve Our Risk Management

System

• We have built an internal credit rating system that covers both corporate and retail customers. We have

also improved our facility rating system and used rating results in customer qualification, credit

approval, credit authorization, risk pricing, performance assessment, classification-based provisioning,

post-disbursement management and other procedures;

• We have developed and continuously improved our new-generation credit risk management system,

featuring real time monitoring and a paperless, electronic operating platform;

• We have been implementing and improving our internal fund transfer pricing system to centralize our

market risk management at the head office through internal transfer pricing;

• We have adopted an Asset and Liability Management System to measure interest rate risk and used

quantitative tools to analyze that risk, thus improving our interest rate risk management;

• We have adopted a Liquidity Risk Management System to measure liquidity risk and used quantitative

tools to analyze that risk, thus improving our liquidity risk management;

• We have developed and applied a set of operational risk management tools that cover such key functions

as operational risk identification, evaluation, monitoring and control;

• We have reformed our IT management, established a more comprehensive IT process and risk

management systems and issued the IT Risk Management Policies of China Merchants Bank in order to

enhance our IT management capabilities;

• We have fully implemented the Numerix Valuation System to establish valuation models for complex

products in order to accurately value such products. Also, in order to meet Basel III’s management

requirements for counterparty credit risk exposure, we introduced Numerix’s counterparty credit risk

exposure metering module;

• We have introduced more scenarios for stress testing for market risks, adopted comprehensive stress test

scenarios that cover various kinds of market risks and made daily testing part of our daily monitoring

and management of risks; and

• We have continued with the development of our financial market business risk management system, and

have started to introduce such system into the daily monitoring and approval process in our financial

business, which has enabled us to enhance efficiency and refine our management.

Promoting the Implementation of Basel II

• We have established a Basel II Implementation Office in connection with the full-scale planning and

implementation of Basel II;

RISK MANAGEMENT AND INTERNAL CONTROL

– 74 –

• In 2009, we completed fourteen projects related to Basel II, including improvements to the credit risk,

market risk, operational risk, data management and IT systems;

• In 2010, the CBRC conducted a preliminary appraisal of our implementation of Basel II. The preliminary

appraisal letter recognized our progress in expanding risk management functions, improving risk

management policies and procedures, improving risk quantification management tools and building risk

management expertise;

• In 2011, the CBRC conducted a formal appraisal of our implementation of Basel II. The appraisal

conclusion recognized (i) the development of a relatively comprehensive risk management system for

credit risks, market risks and operational risks and (ii) improvements in our risk management structure,

and refined management, data quality and application of the system to the business operations;

• In 2012, the CBRC conducted a re-evaluation of our implementation of Basel II. An opinion letter was

issued in February 2013, which noted that we actively promoted the formulation and implementation of

advanced methods for capital measurement; our corporate governance mechanism was satisfactory; our

risk management system was relatively robust; our management policies, goals, regime and procedures

were relatively clear; our data quality monitoring system was quite effective; our information system was

quite complete; verification and audits were satisfactory; our risk-weighted assets measurement was

quite accurate and our coverage ratio under the advanced method for risk-weighted assets measurement

was in compliance with regulatory requirements; and

• We have submitted a formal application to the CBRC for the implementation of Basel II (advanced

methods for capital measurement). We are taking corrective actions in response to issues raised in the

CBRC opinion letter and we are in discussions with the CBRC to expedite its approval.

Continuously Strengthening Risk Management Team Building and Improving Our Supervision and

Evaluation Mechanisms

• We have been continuously professionalizing our wholesale banking Loan Approval Committee by

promoting the training, and improving the professional skills, of loan approval professionals;

• We have built a professional team of risk managers by promoting coordination between risk managers

and relationship managers, improving risk management training and improving risk managers’

professional skills;

• We have made risk management a performance evaluation metric for our branches and sub-branches;

• We have made asset quality an important performance evaluation metric for our senior management and

employees; and

• We have reinforced the inspection function of our internal audit and conducted audits with an emphasis

on high-risk businesses.

RISK MANAGEMENT AND INTERNAL CONTROL

– 75 –

RIS

KM

AN

AG

EM

EN

TS

TR

UC

TU

RE

Th

ed

iag

ram

belo

wse

tsfo

rth

ou

rri

skm

an

ag

em

en

tst

ructu

re:

Audit

Man

agem

ent

Co

mm

itte

e(I

nte

rnal

aud

it)

Co

mpli

ance

Man

agem

ent

Co

mm

itte

e(C

om

pli

ance

ris

km

anag

emen

t)

The

rele

van

t

busi

nes

s u

nit

s in

the

Hea

d O

f!ce

, al

l

bra

nch

es a

nd

sub-b

ranch

es

Com

plia

nce

risk

&an

ti-m

oney

lau

nder

ing

man

agem

ent

Leg

al a

nd C

ompl

ianc

eD

epar

tmen

t

The

rele

van

t

busi

nes

s u

nit

s in

the

Hea

d O

f!ce

, al

l

bra

nch

es a

nd

sub-b

ranch

es

Inte

rnal

audit

Audit

Dep

artm

ent

Bu

sines

s u

nit

s an

d

bra

nch

es &

sub-b

ran

ches

Audit

& S

uper

vis

ion

Man

agem

ent

Exec

uti

ve

Of!

ce

Boar

d o

f D

irec

tors

Boar

d o

f S

uper

vis

ors

Ris

k a

nd C

apit

al

Man

agem

ent

Co

mm

itte

e

Rel

ated

Par

ty

Tra

nsa

ctio

ns

Co

ntr

ol

Co

mm

itte

e

Str

ateg

y C

om

mit

tee

Audit

Co

mm

itte

e

Sen

ior

man

agem

ent

level

Dep

artm

ent

lev

el

Ris

k C

ontr

ol

Co

mm

itte

e(C

redit

ris

k

man

agem

ent)

Ass

ets

and L

iabil

itie

sM

anag

emen

tC

om

mit

tee

(Liq

uid

ity &

mar

ket

risk

man

agem

ent)

Inte

rnal

Co

ntr

ols

C

om

mit

tee

(Inte

rnal

co

ntr

ols

)

The

rele

van

t

busi

nes

s u

nit

s in

the

Hea

d O

f!ce

, al

l

bra

nch

es a

nd

sub-b

ranch

es

The

rele

van

t

busi

nes

s u

nit

s in

the

Hea

d O

f!ce

, al

l

bra

nch

es a

nd

sub-b

ranch

es

The

rele

van

t

busi

nes

s u

nit

s in

the

Hea

d O

f!ce

, al

l

bra

nch

es a

nd

sub-b

ranch

es

Liq

uid

ity &

mar

ket

ris

ks

Pla

nnin

g a

nd

Fin

ance

Dep

artm

ent

Dep

artm

ent

for

Mar

ket

Ris

kM

anag

emen

t

Leg

al a

nd C

ompl

ianc

e D

epar

tmen

t

Aud

it D

epar

tmen

t

Insp

ecti

on a

ndS

ecur

ity

Dep

artm

ent

Hum

an R

esou

rce

Dep

artm

ent

Bo

ard l

evel

Cre

dit

ris

ks

Cre

dit

Ris

k M

anag

emen

tD

epar

tmen

t

Cre

dit

App

rov

al

Dep

artm

ent

Bas

el I

I Im

ple

men

tati

on

Of!

ce

Sp

ecia

l A

sset

Man

agem

ent

Cen

tre

RISK MANAGEMENT AND INTERNAL CONTROL

– 76 –

CREDIT RISK MANAGEMENT

Credit risk refers to the risk that a borrower or a counterparty may be unable or unwilling to meet its

obligations to us pursuant to negotiated terms and conditions. Our credit risk mainly derives from credit,

investment, financing and other businesses, both on and off our balance sheet. We endeavor to establish an

independent and balanced credit risk management system and implement bank-wide policies and procedures

for credit risk identification, measurement, monitoring and management in order to maintain a balance between

risk and return.

The Risk Control Committee at our head office is our highest authority for credit risk management. The

Risk Control Committee is responsible for evaluating and determining the most significant bank-wide risk

management policies among those strategies, policies and limits approved by the Board. We subject different

credit extension businesses to different levels of risk review based on their risk exposure and limitations on

authorities. The decision-making entities include the head office’s Loan Assessment Committee and

Professional Committee of Loan Assessment as well as the branch offices’ Risk Control Committees and

Professional Committees of Loan Assessment.

Our credit risk management follows a five-step process: credit origination, due diligence, credit

approval, loan disbursement and post-disbursement management. We have also developed advanced

quantitative analytical tools and a risk management system that covers the entire credit extension process,

including formulation of credit policies, access approval, credit approval, credit administration, credit

inspection, risk alerts, management of company group customers, accountability management, non-performing

asset liquidation, classification-based provisioning and internal credit ratings.

As required by the CBRC, we classify our outstanding loans based on a five-category classification

system. For internal management purposes, we further classify our outstanding loans into ten categories based

on our assessment of borrowers’ repayment capabilities, the status of guarantees and collateral and overdue

period. Our account managers and risk control officers perform the preliminary loan classification (to the

extent that they are authorised to), which is reviewed by branch-level credit risk management departments.

Over the past few years, we have been further solidifying our credit risk management capabilities by

refining our credit policies, streamlining internal rules and regulations, implementing a risk pricing

management system, centralizing credit extensions to company group customers and promoting the use of

quantitative risk management tools, among other things. In particular, we have been improving our

management of important risk areas pursuant to CBRC requirements. For instance, we have re-assessed and

limited our risk exposure to local government financing vehicles by closely monitoring their use of funds,

categorizing and restructuring certain loans to them and disposing of certain other high-risk loans to them. We

have also taken measures to reduce loans to local government financing vehicles and, in certain circumstances,

have withdrawn approved loans made to them. We have also been tightening our credit policies relating to the

real estate industry and limiting the growth rate and total amount of loans granted to that industry. We have

also been limiting loans to “high pollution, high energy consumption and excess capacity” and other high-risk

sectors. As a result of all these efforts, we have been able to achieve satisfactory results in loan collection and

improvements in asset quality.

RISK MANAGEMENT AND INTERNAL CONTROL

– 77 –

MARKET RISK

Market risk is the risk that movements or adverse changes in market factors may result in losses for a

bank or negatively affect a bank’s on- and off-balance sheet positions, profitability or economic value. Such

market conditions include interest rates, exchange rates, equity prices, commodity prices and share prices, as

well as related market rates, prices, fluctuations and correlations. The principal types of market risks affecting

us are interest rate risk, exchange rate risk and liquidity risk.

We have established a multilevel market risk management structure consisting of our Board of Directors,

our senior management and our market risk management departments to carry out market risk management

functions. Our Board of Directors is ultimately responsible for market risk management, while our Assets and

Liabilities Management Committee is responsible for formulating and supervising the implementation of

market risk management policies and procedures as well as deliberating on major market risk management

issues. The Executive Office is authorised by our Board of Directors to make market risk management

decisions. The Planning and Finance Department is responsible for the centralized management of our market

risk. The Basel II Implementation Office independently verifies market risk measurement models and the Audit

Department regularly audits our market risk management.

Market Risk Management for Bank Accounts

Interest Rate Risk Management

Bank account interest rate risk is the risk that unfavorable interest rate fluctuations or mismatches in the

maturity dates of our assets and liabilities may cause damage to our overall profitability or the economic value

of our bank accounts.

Throughout our history, we have focused on the management of bank account interest rate risk. In 2003,

we were among the first PRC commercial banks to adopt assets and liabilities management and initiate internal

funds transfer pricing projects. We have established a modern interest rate risk management framework, which

uses various techniques — including position limits, bank-wide fund transfer pricing, simulated interest

scenario analysis, re-pricing gap analysis, duration analysis and stress testing — to identify and measure our

interest rate risk exposure.

Our Assets and Liabilities Management Committee monitors our interest rate positions against our

established thresholds and reports its findings to our Board on a monthly basis. Over the years, we have

improved our treasury operations by holding regular meetings to streamline workflow and assign

responsibilities, which have helped us identify causes of interest rate risk, formulate risk control measures and

hedge interest rate risk using interest rate derivatives and other derivative instruments.

We proactively manage our interest rate risk and have formulated and implemented appropriate plans to

hedge such risk. We have adjusted our balance sheet asset mix and interest rate characteristics and integrated

our interest rate risk management with our fund transfer pricing and product pricing.

Exchange Rate Risk Management

Exchange rate risk refers to the risk that a bank may incur losses due to unfavorable fluctuations in

foreign exchange rates or foreign exchange derivatives. Our primary source of exchange rate risk arises from

the mismatch in our holdings of foreign currency-denominated assets and liabilities. We manage the mismatch

of our assets and liabilities and control our exchange rate risk exposure by matching currencies when we source

and deploy funds.

We use foreign exchange gap analysis, scenario analysis, stress testing, value-at-risk and other methods

to measure and analyze exchange rate risk. To mitigate this risk, we also regularly adjust our foreign exchange

exposure based on trends in foreign exchange rates.

RISK MANAGEMENT AND INTERNAL CONTROL

– 78 –

Liquidity Risk Management

Liquidity risk refers to the risk that a bank, though solvent, may be unable to obtain sufficient funding

at a reasonable cost or in a timely manner to fund its asset portfolio or fulfill its repayment obligations. Our

liquidity risk management aims to ensure we have sufficient funds to meet anticipated and unanticipated

funding needs under both ordinary and extraordinary circumstances (including increase in loans, withdrawal

of deposits, payment of debt obligations at maturity and changes in irrevocable off-balance sheet

commitments), and to provide a stable liquidity environment and facilitate interaction between liquidity risk

management and our business development.

We adhere to the principles of stable and prudent liquidity risk management and aim to properly and

accurately identify, measure, monitor and control liquidity risks in connection with the various aspects of our

business to ensure that we have sufficient capital, both under normal conditions and under pressure, to respond

to increases in our assets and payment of debt obligations at maturity.

Liquidity risk management matters are considered and resolved by the Executive Office, the Assets and

Liabilities Management Committee or the Planning and Finance Department, depending on the significance of

the risk. The Executive Office and the Assets and Liabilities Management Committee are responsible for

decisions relating to major amendments to our liquidity risk management policies, whereas the Planning and

Finance Department is mainly responsible for implementing liquidity risk management strategies, internal

funds transfer pricing strategies and other related matters. Our interest risk, exchange rate risk liquidity risk

consolidation management system currently covers the entire Group. We have formulated a standardized

procedure for consolidation management in connection with bank account foreign exchange risks and have

stipulated risk management quota and objectives for key subsidiaries.

We manage our liquidity risk in the following ways: (i) centralization of liquidity risk management

authority at our head office; (ii) close monitoring of our daily liquidity positions, monthly liquidity ratio and

liquidity gap ratio, and stress testing to assess our ability to meet liquidity needs under extreme circumstances;

(iii) establishing a liquidity risk alert system and contingency plan to manage any liquidity crises; (iv)

developing our own liquidity risk management system to monitor daily changes in our liquidity gap as well

as developing our account position system, our treasury business management system and the liquidity

management functions of the second generation PBOC system; and (v) improving liquidity risk management

on a consolidated basis by establishing a unified approach to monitoring and measuring of liquidity risk,

periodically collecting liquidity risk information from our consolidated entities and regularly analyzing our

liquidity risk since the third quarter of 2010.

Market Risk Management for the Trading Book

We manage the market risk associated with our trading book in accordance with the principle of

prudence and only assume risks within the limits set by our Board of Directors. We adopt a conservative

approach when considering new business opportunities involving risks that are difficult to quantify or assess,

or involving high-risk emerging countries or markets.

We have established a comprehensive market risk management and policy framework — which clearly

defines the organizational structure and functions of market risk management for our trading book — and have

formulated a set of market risk management procedures. Our market risk management measures include the

adoption of position limits, monitoring and reporting, quantitative measuring and provisioning of capital. We

have consistently adopted a prudent approach to setting limits by adjusting our trading book authorization

limits and position limits based on a balance of risk and return and have engaged an independent team to

monitor those limits. We use various indicators to monitor and manage market risk associated with our trading

book. These indicators include exposure limits, stop-loss limits, sensitivity limits and value-at-risk limits.

We proactively manage market risk associated with our trading book and have maintained our overall

market risk at a satisfactory level.

RISK MANAGEMENT AND INTERNAL CONTROL

– 79 –

OPERATIONAL RISK MANAGEMENT

Operational risk refers to the risks to our operations resulting from inadequate or failed internal control

procedures, human errors, IT system failures or external events. To improve the capabilities and effectiveness

of our operational risk management, we aim to improve our operational risk management infrastructure,

including management structures, key processes, management tools, management systems and quantification

of capital changes.

To effectively manage our operational risks, we have adopted a bank-wide operational risk management

process to continuously and effectively identify, assess, measure, control, mitigate, monitor and report

operational risks: (i) establishing a bank-wide operational risk management framework with a coordinated,

multilevel operational risk management system and clearly defined responsibilities; (ii) formulating and

issuing the Operational Risk Management Policies of China Merchants Bank and related measures to further

improve our operational risk management system and standardize the relevant procedures; (iii) developing

tools for operational risk management, promoting the application of such tools for our key business lines, and

addressing such key processes as the identification, evaluation, monitoring and control of operational risk; (iv)

completing our operational risk management system, further enhancing electronic operations of our operational

risk management; (v) further improving the framework and methodology of our operational risk management,

operational risk evaluation system and management personnel; (vi) promoting the application of risk

management tools, improving the identification, assessment and monitoring of operational risks in key areas,

establishing an action plan management system and improving the operational risk reporting system; (vii)

performing quantitative measurements of the capital positions at both the Group level and the Bank level

pursuant to the “Standard Measurements” requirement of the CBRC’s Guidelines on the Measurement of

Commercial Banks’ Operational Risk Regulatory Capital (trial implementation), and including operational

risks into our economic capital management.

COMPLIANCE RISK MANAGEMENT

Compliance risk refers to the risk of legal sanctions, regulatory penalties, material financial losses or

reputational damage resulting from a bank’s failure to comply with applicable laws, rules, regulations and

industry standards. Our Board of Directors is ultimately responsible for our compliance risk management. The

Board’s Risk and Capital Management Committee is authorized to supervise compliance risk management. The

head office’s Compliance Management Committee is the highest compliance risk management authority at our

senior management level.

In compliance with the principles and requirements of the CBRC’s Guidelines on Commercial Banks’

Compliance Risk Management and the Basel Committee’s Banks and Internal Compliance Departments (銀行與銀行內部合規部門), we have established a comprehensive and effective compliance risk management

framework consisting of a Compliance Management Committee, compliance head, compliance officers, legal

and compliance departments at the head office and branches, and compliance supervisors at the branch and

sub-branch management levels. In order to realize effective management and control of our compliance risk,

we have implemented a three-tier compliance risk management structure and dual reporting mechanism, and

have sought to improve our risk management techniques and procedures through continuous improvement of

our compliance risk management system.

We continue to promote a bank-wide culture of disciplined compliance and to improve our compliance

risk management. We improve our employees’ compliance risk awareness through compliance training and

education and we improve our risk management by adopting new technologies, upgrading our compliance risk

database and establishing compliance risk monitoring and alerts. Our efforts have deepened our staff’s

understanding of the relevant laws, regulations and policies and enabled them to manage complex compliance

risks associated with innovative products and large financing projects. We review key sources of compliance

risk, perform compliance checks and tests and promote bank-wide identification and assessment of compliance

risk.

RISK MANAGEMENT AND INTERNAL CONTROL

– 80 –

REPUTATIONAL RISK MANAGEMENT

Reputational risk is the risk of negative publicity arising from operations, management, other activities,

or external events.

Reputational risk management is an important part of our corporate management and overall risk

management system, and covers all of our activities and business operations. We have established a

reputational risk management system, with a Group-wide governance structure and periodic assessment

mechanism, and we have formulated reputational risk management policies to mitigate reputational risk and

respond to, and minimise the negative impact of, any incidents.

ANTI-MONEY LAUNDERING MANAGEMENT

We regard the prevention of money laundering as our social and legal responsibilities and attach great

importance to anti-money laundering management. We have established risk-based anti-money laundering

policies, rules and procedures and have designated employees at both the head office and branch levels to

full-time and part-time anti-money laundering positions to ensure our compliance with anti-money laundering

laws and regulations. We have also established rules and procedures for client identification, client risk

profiling, transaction monitoring, record keeping and anti-money laundering training. In addition, we have also

developed a name filtering system and transaction monitoring system to provide technical support to our

anti-money laundering work. Our anti-money laundering training sessions held in various forms and at

different levels also help enhance all our employees’ awareness of and skills in anti-money laundering related

work and responsibilities.

COUNTRY RISK MANAGEMENT

Country risk refers to the risk of business or other losses to a bank due to economic, political or social

changes or incidents in a country or region. Such changes or incidents may result in borrowers or debtors in

that country or region being unable or refusing to discharge their repayment obligations to us. Country risk may

be triggered by economic deterioration, social or political upheaval, asset nationalization or confiscation,

refusal of a government to pay foreign debt, foreign exchange control, currency depreciation or other

situations. In 2011, pursuant to the CBRC’s Guidelines on Country Risk Management by Banking Institutions,

we formulated Country Risk Management Measures and the Implementing Rules for Country Risk Limits and

Impairment Provisions of China Merchants Bank. These measures and rules address country risk management

from the perspective of our organizational structure, management responsibilities, risk measurement and

evaluation, risk rating, credit limit management, provision making, statistical monitoring and information

technology support. We evaluate country risk based on external ratings and the social and economic conditions

of countries and regions. We then make impairment provisions on extended loans and adjust our credit policies,

credit limit policies, overseas development strategies and risk monitoring policies based on our evaluations.

CAPITAL MANAGEMENT

We have developed a comprehensive capital management system that covers regulatory capital

management, economic capital management and book-value capital management. We have also established a

clearly-delineated capital management structure consisting of the Board of Directors, the relevant board

committees, our senior management, our capital management department and implementation department.

Pursuant to the Measures on the Administration of Commercial Banks’ Capital Adequacy Ratios, the

Provisional Guidance on Consolidated Supervision of Commercial Banks and other regulations and guidelines

issued by the CBRC, we have formulated the Regulations on Capital Management of China Merchants Bank

to regulate planning, deployment, raising, supervision, assessment, examination and reporting and other

management activities with respect to capital.

We strive to maintain a capital management system that operates effectively, maintains a reasonable

capital adequacy ratio, satisfies regulatory and internal fund adequacy requirements and matches capital

requirements, risk level and risk management capability. We have established a management system that

focuses on capital management and have improved our resource allocation and operational management

systems, as well as our capital utilisation efficiency, thus maximizing shareholder returns. We employ various

capital management tools to optimize the amount and structure of our capital, and control our capital funding

costs.

RISK MANAGEMENT AND INTERNAL CONTROL

– 81 –

IMPLEMENTATION OF BASEL II

In February 2007, the CBRC released its “Guidelines on the PRC Banking Sector’s Implementation of

Basel II,” pursuant to which the CBRC would regulate a first batch of commercial banks under the Basel II

Framework starting in 2010, and in no event later than 2013. Consistent with our goal of becoming a

world-class bank and our need to improve our operations and management, we have been proactively seeking

to become one of the first commercial banks that the CBRC approves to implement Basel II.

In December 2011, a formal appraisal panel for the implementation of Basel II from the CBRC

conducted an on-site inspection of the Bank. In November 2012, the panel conducted another on-site

re-inspection of the Bank. The panel issued a formal opinion letter in February 2013, which recognized that

we actively promoted the formulation and implementation of advanced methods for capital measurement, our

corporate governance mechanism was satisfactory, our risk management system was relatively robust, our

management policies, goals, regime and procedures were relatively clear, our data quality monitoring system

was quite effective, our information system was quite complete, verification and audits were satisfactory, our

risk-weighted assets measurement was quite accurate and our coverage ratio under the advanced method for

risk-weighted assets measurement was in compliance with regulatory requirements. At the moment, we are

taking corrective actions in response to certain issues identified in the CBRC’s opinion letter and we are in

discussion with the CBRC and in preparation of application documents to expedite its approval.

INTERNAL CONTROLS

Internal Control System

We place great importance on the maintenance and the completeness of our internal control system. Our

internal control system is set up in accordance with the PRC Company Law, the PRC Securities Law and

regulations stipulated by CSRC, CBRC, Shanghai Stock Exchange and Hong Kong Stock Exchange

regulations, which include the Internal Control Guidelines for Commercial Banks, the Shanghai Stock

Exchange Guidelines for the Internal Controls of Listed Companies and the Basic Principles for the Internal

Control of Enterprises. Our internal control system covers our businesses and operations, such as credit

extension, capital, accounting, retail banking, exchange trading, credit card business, and IT, among others,

and covers credit risk, market risk, liquidity risk, operational risk and compliance risk, among others. We

endeavor to ensure the implementation of the internal control system through inspection, supervision and

training. We continuously improve the effectiveness and adequacy of our internal control system in order to

promote our prudent operation and sustainable development. There have been no material internal violations

since 2008. As of 30 June 2013, our internal control system complied in all material respects with regulations

promulgated under the Basic Principles of the Internal Control of Enterprises and the Internal Control

Guidelines for Commercial Banks.

Internal Control Structure and Responsibilities

Pursuant to the relevant laws, rules and regulations, we have established a corporate governance

structure with effective checks and balances and constructive interaction among the Board of Directors, the

Board of Supervisors and senior management. The Board of Directors is responsible for ensuring that we

maintain and implement an adequate and effective internal control system. The Board of Supervisors is

responsible for supervising the Board of Directors and senior management in the establishment and

implementation of internal controls. Senior management is responsible for the daily management of our

internal controls.

Our internal control system is structured with well-defined responsibilities for each department and all

levels of employees. We have established internal control committees at the head office and branches to study,

decide and consult on significant matters and management measures. Each of our departments is responsible

for establishing and executing its own internal control system. Our Audit Department is responsible for

monitoring and assessing each business line and branch. All levels of management are responsible for

implementing and monitoring the internal control system within their own domains. All employees are

responsible for providing feedback on significant matters relating to our internal control measures and their

implementation.

RISK MANAGEMENT AND INTERNAL CONTROL

– 82 –

Directors

Name Business Address Nationality

Non-executive Directors

Mr. FU Yuning, Chairman China Merchants Bank Tower

No. 7088 Shennan Boulevard

Shenzhen 518040

China

Chinese

Mr. WEI Jiafu, Vice Chairman China Merchants Bank Tower

No. 7088 Shennan Boulevard

Shenzhen 518040

China

Chinese

Mr. LI Yinquan China Merchants Bank Tower

No. 7088 Shennan Boulevard

Shenzhen 518040

China

Chinese

Mr. FU Gangfeng China Merchants Bank Tower

No. 7088 Shennan Boulevard

Shenzhen 518040

China

Chinese

Ms. SUN Yueying China Merchants Bank Tower

No. 7088 Shennan Boulevard

Shenzhen 518040

China

Chinese

Mr. WANG Daxiong China Merchants Bank Tower

No. 7088 Shennan Boulevard

Shenzhen 518040

China

Chinese

Mr. FU Junyuan China Merchants Bank Tower

No. 7088 Shennan Boulevard

Shenzhen 518040

China

Chinese

Mr. HONG Xiaoyuan China Merchants Bank Tower

No. 7088 Shennan Boulevard

Shenzhen 518040

China

Chinese

Mr. XIONG Xianliang China Merchants Bank Tower

No. 7088 Shennan Boulevard

Shenzhen 518040

China

Chinese

DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE H SHARE RIGHTS ISSUE

– 83 –

Name Business Address Nationality

Executive Directors

Mr. ZHANG Guanghua,Vice Chairman

China Merchants Bank TowerNo. 7088 Shennan BoulevardShenzhen 518040China

Chinese

Mr. TIAN Huiyu, President Note 1 China Merchants Bank TowerNo. 7088 Shennan BoulevardShenzhen 518040China

Chinese

Mr. LI Hao,Senior Executive Vice Presidentand Chief Financial Officer

China Merchants Bank TowerNo. 7088 Shennan BoulevardShenzhen 518040China

Chinese

Independent Non-executive Directors

Mr. YI Xiqun Note 2 China Merchants Bank TowerNo. 7088 Shennan BoulevardShenzhen 518040China

Chinese

Mr. WONG Kwai Lam China Merchants Bank TowerNo. 7088 Shennan BoulevardShenzhen 518040China

Hong Kong

Ms. YAN Lan Note 2 China Merchants Bank TowerNo. 7088 Shennan BoulevardShenzhen 518040China

French

Mr. PAN Chengwei China Merchants Bank TowerNo. 7088 Shennan BoulevardShenzhen 518040China

Chinese

Ms. PAN Yingli China Merchants Bank TowerNo. 7088 Shennan BoulevardShenzhen 518040China

Chinese

Ms. GUO Xuemeng China Merchants Bank TowerNo. 7088 Shennan BoulevardShenzhen 518040China

Chinese

Notes:

1. Mr. Tian’s qualification as the President is subject to approval by China banking regulatory authorities.

2. Mr. Xu Shanda and Mr. Shan Weijian were elected as Independent Non-Executive Directors at the 2012 Annual General Meeting of

the Company (their qualifications are subject to approvals by the banking regulator(s) in the PRC). Pursuant to relevant regulatory

requirements, before the approvals of the qualification of Mr. Xu Shanda and Mr. Shan Weijian are obtained, Mr. Yi Xiqun and Ms.

Yan Lan, both being Independent Non-Executive Directors of the Eighth Session of the Board of Directors, will continue to perform

the duties of Independent Non-Executive Directors in the Board and the specialised committees thereunder.

DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE H SHARE RIGHTS ISSUE

– 84 –

Name Business Address Nationality

Supervisors

Mr. HAN Mingzhi China Merchants Bank Tower

No. 7088 Shennan Boulevard

Shenzhen 518040

China

Chinese

Mr. ZHU Genlin China Merchants Bank Tower

No. 7088 Shennan Boulevard

Shenzhen 518040

China

Chinese

Mr. AN Luming China Merchants Bank Tower

No. 7088 Shennan Boulevard

Shenzhen 518040

China

Chinese

Mr. LIU Zhengxi China Merchants Bank Tower

No. 7088 Shennan Boulevard

Shenzhen 518040

China

Chinese

Mr. PENG Zhijian China Merchants Bank Tower

No. 7088 Shennan Boulevard

Shenzhen 518040

China

Chinese

Mr. PAN Ji China Merchants Bank Tower

No. 7088 Shennan Boulevard

Shenzhen 518040

China

Chinese

Mr. SHI Rongyao China Merchants Bank Tower

No. 7088 Shennan Boulevard

Shenzhen 518040

China

Chinese

Mr. YU Yong China Merchants Bank Tower

No. 7088 Shennan Boulevard

Shenzhen 518040

China

Chinese

Mr. GUAN Qizhi China Merchants Bank Tower

No. 7088 Shennan Boulevard

Shenzhen 518040

China

Chinese

DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE H SHARE RIGHTS ISSUE

– 85 –

Name Business Address Nationality

Senior Management

Mr. TIAN Huiyu China Merchants Bank Tower

No. 7088 Shennan Boulevard

Shenzhen 518040

China

Chinese

Mr. ZHANG Guanghua China Merchants Bank Tower

No. 7088 Shennan Boulevard

Shenzhen 518040

China

Chinese

Mr. LI Hao China Merchants Bank Tower

No. 7088 Shennan Boulevard

Shenzhen 518040

China

Chinese

Mr. TANG Zhihong China Merchants Bank Tower

No. 7088 Shennan Boulevard

Shenzhen 518040

China

Chinese

Ms. YIN Fenglan Note 3 China Merchants Bank Tower

No. 7088 Shennan Boulevard

Shenzhen 518040

China

Chinese

Mr. DING Wei China Merchants Bank Tower

No. 7088 Shennan Boulevard

Shenzhen 518040

China

Chinese

Mr. ZHU Qi China Merchants Bank Tower

No. 7088 Shennan Boulevard

Shenzhen 518040

China

Chinese

Mr. TANG Xiaoqing China Merchants Bank Tower

No. 7088 Shennan Boulevard

Shenzhen 518040

China

Chinese

Mr. WANG Qingbin China Merchants Bank Tower

No. 7088 Shennan Boulevard

Shenzhen 518040

China

Chinese

Mr. XU Shiqing China Merchants Bank Tower

No. 7088 Shennan Boulevard

Shenzhen 518040

China

Chinese

Note:

3. According to the resolutions passed at the 1st meeting of the Ninth Session of the Board of Directors of the Company, Ms. Yin Fenglan

ceased to serve as the Executive Vice President of the Company in July 2013 as she reached the statutory retirement age. A formal

announcement will be published when the approval from the CBRC is obtained.

DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE H SHARE RIGHTS ISSUE

– 86 –

Parties Involved

Shareholder Underwriter China Merchants Finance Holdings Co., Ltd.

27/F, China Merchants Tower

Shun Tak Centre

168-200 Connaught Road Central

Hong Kong

Joint Global Coordinators

(in alphabetical order)

China International Capital Corporation Hong Kong

Securities Limited

29th Floor

One International Finance Centre

1 Harbour View Street

Central

Hong Kong

Citigroup Global Markets Asia Limited

50th Floor, Citibank Tower

Citibank Plaza

3 Garden Road

Central

Hong Kong

Goldman Sachs (Asia) L.L.C.

68/F, Cheung Kong Centre

2 Queen’s Road Central

Hong Kong

UBS AG, Hong Kong Branch

52nd Floor, Two International Finance Centre

8 Finance Street

Central

Hong Kong

DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE H SHARE RIGHTS ISSUE

– 87 –

Joint Lead Underwriters

(in alphabetical order)

China International Capital Corporation Hong Kong

Securities Limited

29th Floor

One International Finance Centre

1 Harbour View Street

Central

Hong Kong

Citigroup Global Markets Asia Limited

50th Floor, Citibank Tower

Citibank Plaza

3 Garden Road

Central

Hong Kong

China Merchants Securities (HK) Co., Limited

48/F., One Exchange Square

Central, Hong Kong

CMB International Capital Limited

Units 1803-4

18/F, Bank of America Tower

12 Harcourt Road

Central, Hong Kong

Goldman Sachs (Asia) L.L.C.

68/F, Cheung Kong Centre

2 Queen’s Road Central

Hong Kong

UBS AG, Hong Kong Branch

52nd Floor, Two International Finance Centre

8 Finance Street

Central, Hong Kong

Financial Adviser Citigroup Global Markets Asia Limited

50th Floor, Citibank Tower

Citibank Plaza

3 Garden Road

Central

Hong Kong

DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE H SHARE RIGHTS ISSUE

– 88 –

Legal Advisers to the Company As to Hong Kong law

Herbert Smith Freehills

23rd Floor

Gloucester Tower

15 Queen’s Road Central

Hong Kong

As to United States law

Sullivan & Cromwell LLP

28th Floor, Nine Queen’s Road Central

Hong Kong

As to PRC law

Jun He Law Offices

20th Floor

China Resources Building

Beijing

China

Legal Advisers to the

Underwriters

As to Hong Kong law and United States laws

Freshfields Bruckhaus Deringer

11th Floor

Two Exchange Square

8 Connaught Place

Central

Hong Kong

As to PRC law

Commerce & Finance Law Offices

6th Floor

NCI Tower

A12 Jianguomenwai Avenue

Beijing

China

Auditors and Reporting

Accountants

KPMG

Certified Public Accountants

8th Floor

Prince’s Building

10 Chater Road

Central

Hong Kong

Receiving Bank Wing Lung Bank Limited

45 Des Voeux Road

Central, Hong Kong

Bank of China (Hong Kong) Limited

1 Garden Road

Hong Kong

DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE H SHARE RIGHTS ISSUE

– 89 –

Registered Office China Merchants Bank Tower

No. 7088 Shennan Boulevard

Shenzhen 518040

China

Principal Place of Business in Hong Kong 21st Floor

Bank of America Tower

12 Harcourt Road

Central

Hong Kong

Legal Representative Fu Yuning

Authorised Representatives TIAN Huiyu

LI Hao

Company Secretaries XU Shiqing

SENG SZE Ka Mee, Natalia

(FCIS, FCS(PE), FHKIoD)

H Share Registrar and Transfer Office Computershare Hong Kong Investor

Services Limited

Shops 1712-1716

17th Floor

Hopewell Centre

183 Queen’s Road East

Wanchai

Hong Kong

CORPORATE INFORMATION

– 90 –

招商銀行股份有限公司CHINA MERCHANTS BANK CO., LTD.

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

(Stock Code: 03968)

Non-executive Directors:

Mr. Fu Yuning

Mr. Wei Jiafu

Mr. Li Yinquan

Mr. Fu Gangfeng

Ms. Sun Yueying

Mr. Wang Daxiong

Mr. Fu Junyuan

Mr. Hong Xiaoyuan

Mr. Xiong Xianliang

Executive Directors:

Mr. Zhang Guanghua

Mr. Tian Huiyu

Mr. Li Hao

Independent Non-executive Directors:

Mr. Yi Xiqun

Mr. Wong Kwai Lam

Ms. Yan Lan

Mr. Pan Chengwei

Ms. Pan Yingli

Ms. Guo Xuemeng

Registered address:

China Merchants Bank Tower

No. 7088 Shennan Boulevard

Shenzhen 518040

China

Principal place of business

in Hong Kong:

21st Floor, Bank of America Tower

12 Harcourt Road

Central

Hong Kong

5 September 2013

To the Qualifying H Shareholders and,

for information purposes only, the Excluded H Shareholders other than U.S. persons

Dear Sirs,

PROPOSED H SHARE RIGHTS ISSUE OF 680,423,172 H SHARESON THE BASIS OF 1.74 H RIGHTS SHARES

FOR EVERY 10 EXISTING H SHARESAT HK$11.68 PER H RIGHTS SHARE

PAYABLE IN FULL ON ACCEPTANCE

(I) INTRODUCTION

Reference is made to the EGM, the A Shareholders Class Meeting and H Shareholders Class Meeting

held on Friday, 9 September 2011 on which, among other matters, the Rights Issue, the A Share Rights Issue

and the H Share Rights Issue were considered, respectively. As disclosed in the Voting Results Announcement,

the resolutions to approve the Rights Issue, the A Share Rights Issue and the H Share Rights Issue were duly

passed at the EGM, the A Shareholders Class Meeting and the H Shareholders Class Meeting, respectively.

The CBRC has given its written approval dated 29 September 2011 in respect of the Rights Issue. The

Company has recently received CSRC’s written approval (Zhengjianxuke [2013] No. 950) in respect of the A

Share Rights Issue and written approval (Zhengjianxuke [2013] No. 1072) in respect of the H Share Rights

Issue.

LETTER FROM THE BOARD

– 91 –

Pursuant to the authorisation granted to the Board at the EGM, the A Shareholders Class Meeting and

the H Shareholders Class Meeting, respectively (the validity period of relevant resolutions have duly been

extended pursuant to the 2012 first extraordinary general meeting, the 2012 first class meeting of A

Shareholders and the 2012 first class meeting of the H Shareholders of the Company, respectively, held on 7

September 2012), the Board has finalised the terms of the Rights Issue as set out in this prospectus.

A summary of the major terms and the expected timetable of the H Share Rights Issue are set forth in

this prospectus. The H Shareholders’ register was closed from Monday, 2 September 2013 to Tuesday, 3

September 2013, both days inclusive. The last day of dealings in the H Shares on a cum-right basis was

Wednesday, 28 August 2013 and the H Shares were dealt with on an ex-rights basis from Thursday, 29 August

2013. To qualify for the subscription of the H Rights Shares, an H Shareholder must be registered as a member

of the Company at the close of business on Tuesday, 3 September 2013 and must not be an Excluded H

Shareholder.

The H Share Rights Issue will be fully underwritten by the Underwriters on the terms and conditions set

out under the Underwriting Agreement.

The A Share Rights Issue Prospectus, containing the detailed terms of the A Share Rights Issue, which

is in Chinese, has been made available on the websites of the Hong Kong Stock Exchange (www.hkexnews.hk)

and Shanghai Stock Exchange (www.sse.com.cn) from 22 August 2013. Neither A Share Rights Issue

Prospectus, which is in Chinese, nor any other information on either of the above websites is incorporated in

this prospectus. A summary of the major terms and the expected timetable of the A Share Rights Issue are set

forth herein for information purposes only.

The H Share Rights Issue is conditional upon the fulfilment of the conditions set out under the section

headed “Conditions of the H Share Rights Issue” in this prospectus. If the conditions of the H Share Rights

Issue are not duly fulfilled, the H Share Rights Issue will not proceed. The Underwriting Agreement

contains provisions entitling the Joint Global Coordinators (on behalf of the Underwriters) by notice in

writing to terminate the Underwriting Agreement upon occurrence of certain events. In the event that

the Underwriting Agreement does not become unconditional or if it is terminated in accordance with the

terms thereof, the H Share Rights Issue will not proceed. Shareholders’ and potential investors’ attention

is drawn to the section headed “Letter from the Board — (III) H Share Rights Issue — Termination of

the Underwriting Agreement — Warning of the Risks of Dealing in the H Rights Shares and the Nil Paid

H Rights” in this prospectus. If in any doubt, Shareholders and investors are recommended to consult

their professional advisers.

The purpose of this prospectus is to provide you with, among other matters, further details of the H Share

Rights Issue including information on dealing in, transfer and acceptance of the Nil Paid H Rights and the H

Rights Shares, the procedure for the acceptance of provisional allotments of the H Rights Shares and

application for excess H Rights Shares, and certain financial and other information in respect of the Group.

(II) THE RIGHTS ISSUE

The Rights Issue is conducted on the basis of 1.74 Rights Shares for every 10 existing Shares held by

the Shareholders on the Record Date. The Subscription Price of the A Rights Shares and the H Rights Shares

will be the same after exchange rate adjustment.

The Subscription Prices of RMB9.29 (equivalent to approximately HK$11.68) per A Rights Share and

HK$11.68 per H Rights Share were determined by the Board (or its authorised delegates) in consultation with

the joint sponsors for the A Share Rights Issue and the Joint Lead Underwriters for the H Share Rights Issue

on the Price Determination Date based on a discount to market trading prices having regard to the trading

prices of the A Shares and the H Shares on the secondary markets.

The Subscription Prices of RMB9.29 per A Rights Share and HK$11.68 per H Rights Share are not less

than RMB9.29 (equivalent to approximately HK$11.68), being the latest audited net asset value per Share as

stated in the audited consolidated financial statements of the Company as of 31 December 2012 prepared under

PRC GAAP (on the basis of the total number of Shares in issue as of 31 December 2012).

LETTER FROM THE BOARD

– 92 –

Proceeds from the Rights Issue

The Rights Issue, consisting of the A Share Rights Issue and the H Share Rights Issue, will raise (i) gross

proceeds in an aggregate amount of approximately RMB34,879.3 million (equivalent to approximately

HK$43,841.4 million) (assuming full subscription for the A Rights Shares) or RMB26,312.4 million

(equivalent to approximately HK$33,073.2 million) (assuming 70% subscription for the A Rights Shares); and

(ii) net proceeds (after deducting all the costs and expenses incidental to the Rights Issue) in an aggregate

amount of approximately RMB34,704.3 million (equivalent to approximately HK$43,621.4 million) (assuming

full subscription for the A Rights Shares) or RMB26,137.4 million (equivalent to approximately HK$32,853.2

million) (assuming 70% subscription for the A Rights Shares), on the basis of the Subscription Price of

RMB9.29 per A Rights Share and HK$11.68 per H Rights Share.

(III) H SHARE RIGHTS ISSUE

The H Share Rights Issue is subject to the fulfilment of the conditions as set out under the section headed

“Conditions of the H Share Rights Issue” of this prospectus.

Terms of the H Share Rights Issue are as follows:

H Share Rights Issue Statistics

Basis of H Share Rights Issue : 1.74 H Rights Shares for every 10 existing H Shares held on the

H Share Record Date by the Qualifying H Shareholders

Number of H Shares in issue as of

the Latest Practicable Date

: 3,910,478,000

Number of H Rights Shares

proposed to be issued (assuming

the number of H Shares in issue

on the H Share Record Date

remains the same as the Latest

Practicable Date)

: 680,423,172

Subscription Price for the H Rights

Shares

: HK$11.68 per H Rights Share

Shareholder Underwriter : CMFH

Joint Global Coordinators (H Share

Rights Issue) (in alphabetical

order)

: CICCHKS, Citi, Goldman Sachs and UBS

Joint Lead Underwriters (in

alphabetical order)

: CICCHKS, Citi, CM Securities (HK), CMBI, Goldman Sachs

and UBS

Financial Adviser : Citi

The Company has no outstanding convertible securities or warrants in issue, which confer any right to

subscribe for, convert or exchange into the H Shares, as of the Latest Practicable Date.

Pursuant to the Undertaking Letter, CM Group has irrevocably and unconditionally undertaken, inter

alia, that it will, and will procure its associates who hold H Shares to, subscribe for the H Rights Shares

provisionally allotted to them upon and subject to the terms and conditions of the Undertaking Letter.

LETTER FROM THE BOARD

– 93 –

CM Group, through China Merchants Steam Navigation Co., Ltd., is a promoter and substantial

shareholder of the Company and is therefore a connected person of the Company for the purpose of Chapter

14A of the Hong Kong Listing Rules. Pursuant to Rule 14A.31(3)(c) of the Hong Kong Listing Rules, the

above undertakings of CM Group is exempt from the requirements of reporting, announcement and

independent shareholders’ approval.

Basis of Entitlement

Subject to the fulfillment of the conditions set out under the section headed “Conditions of the H Share

Rights Issue,” Qualifying H Shareholders will be entitled to Nil Paid H Rights to subscribe for 1.74 H Rights

Shares for every 10 existing H Shares held on the H Share Record Date at the Subscription Price of HK$11.68

for each H Rights Share payable in full on acceptance, constituting a total of up to 680,423,172 H Shares,

representing approximately 17.40% of the Company’s existing issued H Shares capital as of the Latest

Practicable Date and approximately 14.82% of the enlarged issued H Share capital of the Company

immediately after the H Share Rights Issue (assuming the number of H Shares in issue on the H Share Record

Date remains the same as the Latest Practicable Date).

Qualifying H Shareholders

To qualify for the subscription of the H Rights Shares, an H Shareholder must be registered as a member

of the Company at the close of business on the H Share Record Date and must not be an Excluded H

Shareholder.

Distribution of this prospectus and the other Prospectus Documents

The Prospectus Documents, consisting of the H Share Rights Issue Prospectus, the Provisional Allotment

Letters and the Excess Application Forms, will be despatched to the Qualifying H Shareholders only. For the

Excluded H Shareholders, the Company will, to the extent reasonably practicable and legally permitted, send

the H Share Rights Issue Prospectus to them for their information purposes only. The Provisional Allotment

Letters and the Excess Application Forms will not be sent to the Excluded H Shareholders (see section below

headed “Excluded H Shareholders”).

This prospectus will not be sent to any H Shareholders or Beneficial H Shareholders in the Specified

Territories except to those H Shareholders or Beneficial H Shareholders who satisfy relevant requirements to

the satisfaction of the Company.

Distribution of this prospectus and the other Prospectus Documents into jurisdiction other than Hong

Kong may be restricted by law. Persons into whose possession the Prospectus Documents (including, without

limitation, agents, custodians, nominees and trustees) should inform themselves of and observe any such

restriction. Any failure to comply with such restriction may constitute a violation of the securities laws of any

such jurisdiction. Any H Shareholder or Beneficial H Shareholder who is in any doubt as to his/her/its position

should consult an appropriate professional adviser without delay. In particular, subject to certain exceptions as

determined by the Company, this prospectus should not be distributed, forwarded to or transmitted in, into or

from any of the Specified Territories with or without the Provisional Allotment Letter or the Excess

Application Form.

It is the responsibility of any person (including but not limited to agent, custodian, nominee, and trustee)

outside Hong Kong wishing to make an application for the H Rights Shares to satisfy himself as to the full

observance of the laws and regulations of the relevant territory or jurisdiction, including the obtaining of any

governmental or other consents and to pay any taxes, duties and other amounts required to be paid in such

territory or jurisdiction in connection therewith. Any acceptance of the offer of the Rights Shares by any person

will be deemed to constitute a representation and warranty from such person to the Bank that these local laws

and requirements have been fully complied with. Shareholders should consult their professional advisers if in

doubt.

The Prospectus Documents will not be registered under the applicable securities legislation of any

jurisdiction other than Hong Kong.

LETTER FROM THE BOARD

– 94 –

Excluded H Shareholders

Excluded H Shareholders are those H Shareholders with registered addresses in, or who are otherwise

known by the Company to be residents of, places outside Hong Kong and in respect of whom the Directors,

based on enquiries made by the Directors, consider it necessary or expedient to not offer the H Rights Shares

on account either of the legal restrictions under the laws of the relevant place in which the H Shareholder is

located or the requirements of the relevant regulatory body or stock exchange in that place.

The Board has made enquiries regarding the legal restrictions under the applicable securities legislation

of the Specific Territories and the requirements of the relevant regulatory bodies or stock exchanges with

respect to the offer of the H Rights Shares to the H Shareholders in those territories. Having considered the

circumstances, the Directors have formed the view that, other than subject to certain limited exceptions as

described below, it is necessary or expedient to restrict the ability of H Shareholders in the Specified Territories

to take up their rights under the H Share Rights Issue due to the time and costs involved in the registration or

filing of this prospectus and/or approval required by the relevant authorities in those territories and/or

additional steps the Company and H Shareholders need to take to comply with the local legal requirements

and/or other requirements to be satisfied in order to comply with relevant local legal or regulatory requirements

in those territories.

Accordingly, for the purposes of the H Share Rights Issue, the Excluded H Shareholders are:

(a) H Shareholders whose name(s) appeared in the register of members of the Company at the close

of business on the H Share Record Date and whose address(es) as shown in such register is/are in

any of the Specified Territories, except for those H Shareholders with addresses in the US,

Australia, the PRC, the Philippines or Switzerland who fulfil the relevant requirements to the

satisfaction of the Company; and

(b) any H Shareholders or Beneficial H Shareholders at that time who are otherwise known by the

Company to be resident in any of the Specified Territories, except for those H Shareholders or

Beneficial H Shareholders resident in the US, Australia, the PRC, the Philippines or Switzerland

who fulfil the relevant requirements to the satisfaction of the Company.

Notwithstanding any other provision in this prospectus or the Provisional Allotment Letter or the Excess

Application Form, the Company reserves the right to permit any H Shareholder to take up his/her/its rights if

the Company, in its absolute discretion, is satisfied that the transaction in question is exempt from or not

subject to the legislation or regulations giving rise to the restrictions in question.

Receipt of this prospectus and/or a Provisional Allotment Letter and/or an Excess Application Form or

the crediting of Nil Paid H Rights to a stock account in CCASS does not and will not constitute an offer in

those jurisdictions in which it would be illegal to make an offer and, in those circumstances, this prospectus

and/or a Provisional Allotment Letter and/or an Excess Application Form must be treated as sent for

information only and should not be copied or redistributed. Persons (including, without limitation, agents,

custodians, nominees and trustees) who receive a copy of this prospectus and/or a Provisional Allotment Letter

and/or an Excess Application Form or whose stock account in CCASS is credited with Nil Paid H Rights should

not, in connection with the H Shares Rights Issue, distribute or send the same in, into or from, or transfer Nil

Paid H Rights to any person in, into or from, any of the Specified Territories. If a Provisional Allotment Letter

or an Excess Application Form or a credit of Nil Paid H Rights in CCASS is received by any person in any

such territory, or by his/her/its agent or nominee, he/she/it should not seek to take up the rights referred to in

the Provisional Allotment Letter or transfer the Provisional Allotment Letter (or apply for any excess H Rights

Shares under the Excess Application Form) or transfer the Nil Paid H Rights in CCASS unless the Company

determines that such actions would not violate applicable legal or regulatory requirements. Any person

(including, without limitation, custodians, nominees and trustees) who does forward this prospectus or a

Provisional Allotment Letter or an Excess Application Form in, into or from any Specified Territory (whether

under a contractual or legal obligation or otherwise) should draw the recipient’s attention to the contents of

this section.

LETTER FROM THE BOARD

– 95 –

Arrangements will be made for the Nil Paid H Rights of Excluded H Shareholders who hold their

existing H Shares in certificated form to be provisionally allotted to a nominee or nominees appointed by the

Company for the benefit of the Excluded H Shareholders and, if a premium (net of expenses) can be obtained,

to be sold by the nominee on such Excluded H Shareholders’ behalf on the Hong Kong Stock Exchange as soon

as practicable after the commencement of the dealings in the Nil Paid H Rights. The proceeds of such sale, less

expenses, will be divided on a pro rata basis and paid to the Excluded H Shareholders, provided that individual

amounts of HK$100 or less will be paid to the Company for its own benefit. With respect to Excluded H

Shareholders who hold interests in H Shares through CCASS, their nominees, custodians or other

intermediaries may sell, on such Excluded H Shareholders’ behalf, their entitlements to the Nil Paid H Rights

in compliance with the “General Rules of CCASS” and the “CCASS Operational Procedures” in effect from

time to time and applicable securities laws and distribute the proceeds thereof as appropriate. Any H Rights

Shares in respect of unsold entitlements of Excluded H Shareholders, together with any H Rights Shares in

respect of Nil Paid H Rights not taken up by the Qualifying H Shareholders or otherwise not subscribed for

by transferees of Nil Paid H Rights, will be made available for excess application on Excess Application Forms

by Qualifying H Shareholders.

Limited categories of persons in the Specified Territories who may be able to take up their Nil Paid

H Rights to subscribe for the H Rights Shares under the H Share Rights Issue

Notwithstanding what is said in the section headed “Excluded H Shareholders” above, the following

limited categories of persons in the Specified Territories may be able to take up their rights under the H Share

Rights Issue:

(1) H Shareholders or Beneficial H Shareholders within the United States are generally Excluded H

Shareholders, except for a limited number of H Shareholders and Beneficial H Shareholders in the

United States who the Company reasonably believes are QIBs who may be able to take up their

Nil Paid H Rights to subscribe for H Rights Shares being offered in the H Share Rights Issue in

transactions conducted in accordance with an applicable exemption from the registration

requirements under the U.S. Securities Act, provided that they fulfil relevant requirements to the

satisfaction of the Company.

(2) H Shareholders or Beneficial H Shareholders in Australia are generally Excluded H Shareholders,

however, a limited number of H Shareholders and Beneficial H Shareholders in Australia who the

Company reasonably believes are exempted investors for the purposes of the Australian

Corporations Act may be able to take up their Nil Paid H Rights to subscribe for the H Rights

Shares being offered in the H Share Rights Issue in transactions exempt from registration or

disclosure requirement under the Australian Corporations Act or other applicable Australian laws

and regulations, provided that they fulfil the relevant requirements to the satisfaction of the

Company.

(3) H Shareholders or Beneficial H Shareholders in the PRC are generally Excluded Shareholders.

However, MOF, SSF and QDIIs may be able to take up their Nil Paid H Rights to subscribe for

H Rights Shares being offered under the H Share Rights Issue, provided that they fulfil the

requirements under the relevant PRC laws and regulations to the satisfaction of the Company.

(4) H Shareholders or Beneficial H Shareholders in the Philippines are generally Excluded H

Shareholders, however, a limited number of H Shareholders and Beneficial H Shareholders in the

Philippines who the Company reasonably believes are either “qualified individual buyers” or

“qualified institutional buyers” within the meaning of subsection 10.1(1)(vi) of the Philippines

Securities Regulation Code (“SRC”) may be able to take up their Nil Paid H Rights to subscribe

for H Rights Shares being offered in the H Share Rights Issue in transactions exempt from

registration requirements under the SRC, provided they fulfil relevant requirements to the

satisfaction of the Company.

LETTER FROM THE BOARD

– 96 –

(5) H Shareholders or Beneficial H Shareholders in Switzerland are generally Excluded Shareholders.

However, the Nil Paid H Rights and/or H Rights Shares may be offered or sold to a small number

of selected investors in Switzerland, without any public offer and only to investors who do not

purchase the Nil Paid H Rights and/or H Rights Shares with the intention to distribute them to the

public, provided that they fulfil the relevant requirements to the satisfaction of the Company.

In each case, the Company reserves the absolute discretion in determining whether to allow such

participation as well as the identity of the persons who may be allowed to do so.

Procedures for Acceptance or Transfer

General

Any person (including, without limitation, agents, nominees and trustees) wishing to take up his/her/its

rights under the H Share Rights Issue must satisfy himself/herself/itself as to full observance of the applicable

laws of any relevant territory including obtaining any requisite governmental or other consents, observing any

other requisite formalities and paying any issue, transfer or other taxes due in such territories. The attention

of H Shareholders with registered addresses in any of the Specified Territories or holding H Shares on behalf

of persons with such addresses is drawn to the sections above headed “Excluded H Shareholders” and “Limited

categories of persons in the Specified Territories who may be able to take up their Nil Paid H Rights to

subscribe for the H Rights Shares under the H Share Rights Issue.”

Each subscriber (including, without limitation, agents, nominees and trustees) of H Rights Shares being

offered and sold outside the US will be deemed (by accepting delivery of this prospectus) to have given each

of the following representations and warranties to the Company and the Underwriters and to any person acting

on their behalf, unless in their sole discretion the Company and the Underwriters waive such requirement:

• He/she/it was a H Shareholder as of the H Share Record Date, or he/she/it lawfully acquired or

may lawfully acquire the Nil Paid H Rights, directly or indirectly, from such a person;

• He/she/it may lawfully be offered, take up, obtain, subscribe for and receive the Nil Paid H Rights

and/or the H Rights Shares in the jurisdiction in which he/she/it resides or is currently located;

• Subject to certain exceptions, he/she/it is not resident or located in, or a citizen of, the US;

• Subject to certain exceptions, he/she/it is not accepting an offer to acquire or take up the Nil Paid

H Rights or H Rights Shares on a non-discretionary basis for a person who is resident or located

in, or a citizen of the US at the time the instruction to accept was given;

• He/she/it is not taking up for the account of any person as a dealer or other professional fiduciary,

organized, incorporated, or, if an individual resident in the US, unless:

(a) the instruction to take up was received from a person outside the US and

(b) the person giving such instruction has confirmed that (x) it has the authority to give such

instruction, and (y) either (A) has investment discretion over such account or (B) is an

investment manager or investment company that it is acquiring the H Rights Shares in an

“offshore transaction” within the meaning of Regulation S under the U.S. Securities Act;

• He/she/it is acquiring the Nil Paid H Rights and/or the H Rights Shares in an “offshore

transaction” as defined in Regulation S under the U.S. Securities Act;

• He/she/it has not been offered the H Rights Shares by means of any “directed selling efforts” as

defined in Regulation S under the U.S. Securities Act;

• He/she/it is not acquiring Nil Paid H Rights or H Rights Shares with a view to the offer, sale,

transfer, delivery or distribution, directly or indirectly, of such Nil Paid H Rights or H Rights

Shares into the US; and

LETTER FROM THE BOARD

– 97 –

• He/she/it understands that neither the Nil Paid H Rights nor the H Rights Shares have been or will

be registered under the U.S. Securities Act or with any securities regulatory authority of any state,

territory, or possession of the US and the Nil Paid H Rights or H Rights Shares are being

distributed and offered outside the US in reliance on Regulation S of the U.S. Securities Act.

Consequently he/she/it understands the Nil Paid H Rights or H Rights Shares may not be offered,

sold, pledged or otherwise transferred in or into the U.S., except pursuant to an effective

registration statement or in accordance with an applicable exemption from, or in transactions not

subject to, the registration requirements of the U.S. Securities Act.

For the avoidance of doubt, HKSCC Nominees Limited, who subscribes the H Rights Shares on behalf

of CCASS Participant is not subject to the above representations and warranties.

Each subscriber (including, without limitation, agents, nominees and trustees) of H Rights Shares being

offered and sold within the US will be deemed (by accepting delivery of this prospectus) to have given each

of the following representations and warranties to the Company and to any person acting on their behalf, unless

in its sole discretion the Company waives such requirement:

• He/she/it (i) is a QIB, (ii) is aware, and the person for whose account he/she/it is acquiring such

Nil Paid H Rights or H Rights Shares has been advised, that the sale to he/she/it may be made in

accordance with an applicable exemption from the registration requirements of the U.S. Securities

Act, (iii) is acquiring the Nil Paid H Rights or H Rights Shares for his/her/its own account or for

the account of a QIB with respect to which he/she/it invests on a discretionary basis, as the case

may be, and (iv) is not acquiring the Nil Paid H Rights or H Rights Shares with a view to the

further distribution of such Nil Paid Rights or H Rights Shares;

• He/she/it understands that the Nil Paid H Rights and H Rights Shares are being offered in a

transaction not involving any public offering in the United States within the meaning of the

Securities Act, that the Nil Paid H Rights or H Rights Shares have not been and will not be

registered under the Securities Act or any securities laws of the United States or other jurisdictions

of the United States and that if in the future he/she/it decides to offer, resell, pledge or otherwise

transfer any of the Nil Paid H Rights or H Rights Shares, such Nil Paid H Rights or H Rights

Shares may be offered, resold, pledged or otherwise transferred only (A)(i) in the United States

to a person whom he/she/it reasonably believes is a QIB in a transaction meeting the requirements

of Rule 144A; (ii) in an offshore transaction in accordance with Regulation S under the Securities

Act; (iii) pursuant to an exemption from registration under the Securities Act provided by Rule 144

thereunder (if available); or (iv) pursuant to an effective registration statement under the Securities

Act, and (B) in each case, in accordance with all applicable securities laws of any State or other

jurisdictions of the United States. He/she/it acknowledges that the Nil Paid H Rights or H Rights

Shares (whether in physical, certificated form or uncertificated form) are “restricted securities”

within the meaning of Rule 144(a)(3) under the Securities Act and that no representation is made

as to the availability of the exemption provided by Rule 144 under the Securities Act for any resale

of Nil Paid H Rights or H Rights Shares;

• He/she/it will not deposit the Nil Paid H Rights or H Rights Shares, or cause any Nil Paid H Rights

or H Rights Shares to be deposited, into any unrestricted depositary receipt facility established or

maintained by a depositary bank relating to the Nil Paid H Rights or H Rights Shares, unless or

until the Nil Paid H Rights or H Rights Shares are no longer deemed “restricted securities” within

the meaning of Rule 144(a)(3) under the Securities Act;

• any offer, sale, pledge or other transfer made other than in compliance with the above stated

restrictions shall not be recognized by us in respect of the Nil Paid H Rights or H Rights Shares;

and

• He/she/it will notify and will be deemed to have notified, and each subsequent holder is required

to notify and will be deemed to have notified, any purchaser of the Nil Paid H Rights or H Rights

Shares from you or such subsequent holder of these resale restrictions, if then applicable.

LETTER FROM THE BOARD

– 98 –

Action to be taken by Qualifying H Shareholders

Subscription for all H Rights Shares provisionally allotted

For each Qualifying H Shareholder, a Provisional Allotment Letter is enclosed with this prospectuswhich entitles the Qualifying H Shareholder(s) to whom it is addressed to subscribe for the number of the HRights Shares shown thereon. If a Qualifying H Shareholder wishes to take up his/her/its right to subscribe forany or all the H Rights Shares provisionally allotted to him/her/it as specified in the Provisional AllotmentLetter, he/she/it must lodge the Provisional Allotment Letter in accordance with the instructions printedthereon, together with a remittance for the full amount payable on acceptance, at any designated branches ofWing Lung Bank Limited or Bank of China (Hong Kong) Limited as mentioned below by no later than 4:00p.m. on Thursday, 19 September 2013 or such later time and/or date as may be agreed to between the Companyand the Joint Global Coordinators.

(1) Wing Lung Bank Limited

Branch Name Address

Hong Kong Island 1. Head Office 45 Des Voeux Road Central,Hong Kong

2. North Point Branch 361 King’s Road, North Point,Hong Kong

Kowloon 3. Mongkok Branch B/F Wing Lung Bank Centre,636 Nathan Road,Mongkok, Kowloon

4. Tsim Sha Tsui Branch 4 Carnarvon Road, Tsim Sha Tsui,Kowloon

New Territories 5. Tsuen Wan Branch 251 Sha Tsui Road, Tsuen Wan,New Territories

(2) Bank of China (Hong Kong) Limited

Branch Name Address

Hong Kong Island 1. Connaught Road CentralBranch

13-14 Connaught Road Central,Hong Kong

2. Wan Chai (Wu ChungHouse) Branch

213 Queen’s Road East, Wan Chai,Hong Kong

Kowloon 3. Kwun Tong Branch 20-24 Yue Man Square,Kwun Tong, Kowloon

New Territories 4. Tuen Mun San Hui Branch G13-G14 Eldo Court,Heung Sze Wui Road,Tuen Mun, New Territories

5. Lucky Plaza Branch Lucky Plaza, Wang Pok Street,Shatin, New Territories

A Provisional Allotment Letter can be lodged from Thursday, 5 September 2013 to Thursday, 19September 2013 (both days inclusive) at these times or such later time and/or date as may be agreed to betweenthe Company and the Joint Global Coordinators:

Monday to Friday: 9:00 a.m. to 5:00 p.m.;Saturday: 9:00 a.m. to 1:00 p.m.; andAcceptance Date (Thursday, 19

September 2013):9:00 a.m. to 4:00 p.m.

Unless otherwise agreed by the Company, all remittances must be in Hong Kong dollars and by chequeor cashier order. Cheques must be drawn on an account with, and cashier orders must be issued by, a licensedbank in Hong Kong and made payable to “Bank of China (Hong Kong) Nominees Limited — CMB —PAL” and must be crossed.

LETTER FROM THE BOARD

– 99 –

It should be noted that unless the Provisional Allotment Letter, together with the appropriate remittance,

has been lodged at the designated branches of Wing Lung Bank Limited or Bank of China (Hong Kong)

Limited, by 4:00 p.m. on the Acceptance Date, whether by the original allottee or any person in whose favour

the rights have been validly transferred, that provisional allotment and all rights thereunder will be deemed to

have been declined and will be cancelled. The Company may, at its discretion, treat a Provisional Allotment

Letter as valid and binding on the person(s) by whom or on whose behalf it is lodged even if not completed

in accordance with the relevant instructions.

All cheques and cashier’s orders will be presented for payment following receipt and all interest earned

on such monies will be retained for the benefit of the Company. Any Provisional Allotment Letter in respect

of which the cheque or cashier’s order is dishonoured on first presentation is liable to be rejected, and in that

event the provisional allotment and all rights thereunder will be deemed to have been declined and will be

cancelled. If the Joint Global Coordinators (on behalf of the Underwriters) exercise their right to terminate the

Underwriting Agreement before the Latest Time for Termination, the monies received in respect of the relevant

provisional allotments will be returned to the relevant persons without interest and by means of cheques

despatched by ordinary post at the risk of such persons on or about Monday, 30 September 2013.

Transfers and “splitting” of Nil Paid H Rights

The Nil Paid H Rights can be traded on the Hong Kong Stock Exchange. A Qualifying H Shareholder

can accept all of his/her/its provisional allotment of H Rights Shares, or sell all of his/her/its provisional

allotment on the Hong Kong Stock Exchange or accept only part of his/her/its provisional allotment and sell

the remaining part on the Hong Kong Stock Exchange.

If a Qualifying H Shareholder wishes to accept only part of his/her/its provisional allotment or transfer

a part of his/her/its Nil Paid H Rights provisionally allotted to him/her/it under the Provisional Allotment

Letter or to transfer his/her/their Nil Paid H Rights to more than one person, the entire Provisional Allotment

Letter must be surrendered and lodged for cancellation together with a covering letter stating clearly the

number of split Provisional Allotment Letters required and the number of Nil Paid H Rights to be comprised

in each split Provisional Allotment Letter (which, in aggregate, should be equal to the number of H Rights

Shares provisionally allotted to such holder as stated in Box B of the original Provisional Allotment Letter),

by no later than 4:30 p.m. on Wednesday, 11 September 2013 to the H Share Registrar, Computershare Hong

Kong Investor Services Limited, at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East,

Wanchai, Hong Kong, who will cancel the original Provisional Allotment Letter and issue new Provisional

Allotment Letters in the denominations required. This process is commonly known as “splitting” the Nil Paid

H Rights.

Having “split” the Nil Paid H Rights, a Qualifying H Shareholder who wishes to accept the provisional

allotment of H Rights Shares represented by a new Provisional Allotment Letter should do so in accordance

with the instructions given above in relation to the subscription for all the H Rights Shares provisionally

allotted.

If a Qualifying H Shareholder wishes to transfer all of his/her/its Nil Paid H Rights under a Provisional

Allotment Letter (or a split Provisional Allotment Letter, as the case may be) to another person, he/she/it

should complete and sign the “Form of Transfer” (Form B) in the Provisional Allotment Letter and hand the

Provisional Allotment Letter to the person to or through whom he/she/it is transferring his/her/its Nil Paid H

Rights. The transferee must then complete and sign the “Form of Transfer” (Form B) in the Provisional

Allotment Letter and lodge the Provisional Allotment Letter intact together with a remittance for the full

amount payable on acceptance with the designated branches of Wing Lung Bank Limited or Bank of China

(Hong Kong) Limited by no later than 4:00 p.m. on the Acceptance Date.

It should be noted that Hong Kong stamp duty is payable in connection with the transfer of your Nil Paid

H Rights to the transferee(s) and the acceptance by the transferee(s) of such rights.

The Company reserves the right to refuse to register any transfer in favour of any person in respect of

which the Company believes such transfer may violate applicable legal or regulatory requirements.

LETTER FROM THE BOARD

– 100 –

All cheques and cashier’s orders will be presented for payment immediately following receipt and all

interest earned on such monies will be retained for the benefit of the Company. Any Provisional Allotment

Letter in respect of which the accompanying cheque or cashier’s order is not honoured on first presentation

is liable to be rejected, and in that event the relevant provisional allotment and all rights thereunder will be

deemed to have been declined and will be cancelled.

You must pay the exact amount payable upon application for the H Rights Shares by cheque or cashier’s

order or any method agreed by the Company. Underpaid applications will be rejected.

In the event of overpaid application, a refund cheque will be made out to you only if the overpaid amount

is HK$100 or above.

All enquiries in connection with the Provisional Allotment Letter should be addressed to the Company’s

H Share Registrar at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.

Important notice and representations and warranties relating to Qualifying H Shareholders in the Specified

Territories

As described above, H Shareholders with registered addresses in the Specified Territories are only

permitted to take up their rights under the H Share Rights Issue if they fulfil relevant requirements to the

satisfaction of the Company.

Any Qualifying H Shareholder accepting and/or transferring a Provisional Allotment Letter or requesting

registration of the H Rights Shares comprised therein represents and warrants to the Company that, except

where proof has been provided to the satisfaction of the Company that such person’s use of the Provisional

Allotment Letter will not result in the contravention of any applicable legal requirement in any jurisdiction:

(i) such person is not accepting and/ or transferring the Provisional Allotment Letter to, or requesting

registration of the relevant Nil Paid H Rights or the H Rights Shares from, any of the Specified Territories;

(ii) such person is not in any of the Specified Territories or in any territory in which it is otherwise unlawful

to make or accept an offer to acquire the Nil Paid H Rights or the H Rights Shares or to use the Provisional

Allotment Letter in any manner in which such person has used or will use it; (iii) such person is not acting on

a non-discretionary basis for a person resident in any of the Specified Territories at the time the instruction to

accept or transfer was given; and (iv) such person is not acquiring the Nil Paid H Rights or the H Rights Shares

with a view to the offer, sale, resale, transfer, delivery or distribution, directly or indirectly, of any such Nil

Paid H Rights or H Rights Shares into any of the Specified Territories.

The Company may treat as invalid any acceptance or purported acceptance of the allotment of H Rights

Shares comprised in, or transfer or purported transfer of, a Provisional Allotment Letter if it: (a) appears to the

Company to have been executed in, or despatched from, any of the Specified Territories and the acceptance

may involve a breach of the laws of the relevant Specified Territory or the acceptance is otherwise in a manner

which may involve a breach of the laws of any jurisdiction or if it or its agents believe the same may violate

any applicable legal or regulatory requirement; (b) provides an address in any of the Specified Territories for

delivery of definitive share certificates for H Rights Shares and such delivery would be unlawful or provides

an address for delivery of definitive share certificates in any other jurisdiction outside Hong Kong in which

it would be unlawful to deliver such certificates; or (c) purports to exclude the representation and/or warranty

required by the paragraph immediately above.

Action to be taken by Beneficial H Shareholders whose H Shares are held by a registered H Shareholder

(other than in CCASS)

Subscription for H Rights Shares provisionally allotted and transfers and “splitting” of Nil Paid H Rights

If you are a Beneficial H Shareholder whose H Shares are registered in the name of a registered H

Shareholder and you wish to subscribe for the H Rights Shares provisionally allotted to you, or sell your Nil

Paid H Rights or “split” your Nil Paid H Rights and accept part of your provisional allotment and sell the

remaining part, you should contact the registered H Shareholder and provide the registered H Shareholder with

LETTER FROM THE BOARD

– 101 –

instructions or make arrangements with the registered H Shareholder in relation to the acceptance, transfer

and/or “splitting” of the rights to subscribe for the H Rights Shares which have been provisionally allotted in

respect of the H Shares in which you are beneficially interested.

Such instructions and/or arrangements should be given or made in advance of the relevant dates stated

in the section headed “Expected Timetable” and otherwise in accordance with the requirements of the

registered H Shareholder in order to allow the registered H Shareholder sufficient time to ensure that your

instructions are given effect.

Important notice and representations and warranties relating to Beneficial H Shareholders in the Specified

Territories whose H Shares are held by a registered H Shareholder (other than CCASS)

As described above, Beneficial H Shareholders resident in the Specified Territories are only permitted

to take up their rights under the H Share Rights Issue if they fulfil relevant requirements to the satisfaction of

the Company.

Any Beneficial H Shareholder accepting and/or transferring a Provisional Allotment Letter or requesting

registration of the H Rights Shares comprised therein represents and warrants to the Company that, except

where proof has been provided to the satisfaction of the Company that such person’s use of the Provisional

Allotment Letter will not result in the contravention of any applicable legal requirement in any jurisdiction:

(i) such person is not accepting and/ or renouncing the Provisional Allotment Letter, or requesting registration

of the relevant Nil Paid H Rights or the H Rights Shares from within any of the Specified Territories; (ii) such

person is not in any of the Specified Territories or in any territory in which it is otherwise unlawful to make

or accept an offer to acquire the Nil Paid H Rights or the H Rights Shares or to use the Provisional Allotment

Letter in any manner in which such person has used or will use it; (iii) such person is not acting on a

non-discretionary basis for a person resident in any of the Specified Territories at the time the instruction to

accept or transfer was given; and (iv) such person is not acquiring the Nil Paid H Rights or the H Rights Shares

with a view to the offer, sale, resale, transfer, delivery or distribution, directly or indirectly, of any such Nil

Paid H Rights or H Rights Shares into any of the Specified Territories.

The Company may treat as invalid any acceptance or purported acceptance of the allotment of H Rights

Shares comprised in, or transfer or purported transfer of, a Provisional Allotment Letter if it: (a) appears to the

Company to have been executed in, or despatched from, any of the Specified Territories and the acceptance

may involve a breach of the laws of the relevant Specified Territory or the acceptance is otherwise in a manner

which may involve a breach of the laws of any jurisdiction or if it or its agents believe the same may violate

any applicable legal or regulatory requirement; (b) provides an address in any of the Specified Territories for

delivery of definitive share certificates for H Rights Shares and such delivery would be unlawful or provides

an address for delivery of definitive share certificates in any other jurisdiction outside Hong Kong in which

it would be unlawful to deliver such certificates; or (c) purports to exclude the representation and/or warranty

required by the paragraph immediately above.

Action to be taken by Beneficial H Shareholders holding interests in H Shares through CCASS

Subscription for H Rights Shares provisionally allotted and transfers and “splitting” of Nil Paid H Rights

If you are a Beneficial H Shareholder whose H Shares are deposited in CCASS and registered in the

name of HKSCC Nominees Limited, and you wish to subscribe for the H Rights Shares provisionally allotted

to you, or sell your Nil Paid H Rights or “split” your Nil Paid H Rights and accept part of your provisional

allotment and sell the remaining part, you should (unless you are a CCASS Participant) contact your

Intermediary and provide your Intermediary with instructions or make arrangements with your Intermediary in

relation to the acceptance, transfer and/ or “splitting” of the Nil Paid H Rights.

LETTER FROM THE BOARD

– 102 –

Such instructions and/or arrangements should be given or made in advance of the relevant dates stated

in the section headed “Expected Timetable” and otherwise in accordance with the requirements of your

Intermediary in order to allow your Intermediary sufficient time to ensure that your instructions are given

effect. The procedure for acceptance, transfer and/or “splitting” by CCASS Participants of the H Rights Shares

provisionally allotted to CCASS stock accounts in respect of the H Shares registered in the name of HKSCC

Nominees Limited shall be in accordance with the “General Rules of CCASS,” the “CCASS Operational

Procedures” and any other requirements of CCASS.

Beneficial H Shareholders who are CCASS Participants should contact CCASS and provide CCASS with

instructions or make arrangements with CCASS in relation to the manner in which such Beneficial H

Shareholders’ interests in H Rights Shares should be dealt with.

Important notice and representations and warranties relating to Beneficial H Shareholders in the Specified

Territories holding interests in H Shares through CCASS

As described above, Beneficial H Shareholders resident in any of the Specified Territories are only

permitted to take up their rights under the H Share Rights Issue if they fulfil relevant requirements to the

satisfaction of the Company.

Any Beneficial H Shareholder holding interests in H Shares through CCASS and any CCASS Participant

who makes a valid acceptance and/or transfer in accordance with the procedures set out above represents and

warrants to the Company that, except where proof has been provided to the satisfaction of the Company that

such person’s acceptance will not result in the contravention of any applicable legal requirement in any

jurisdiction: (i) such person is not in any of the Specified Territories or in any territory in which it is otherwise

unlawful to make or accept an offer to acquire the Nil Paid H Rights or the H Rights Shares; (ii) such person

is not acting on a non-discretionary basis for a person located within any of the Specified Territories at the time

the instruction to accept was given; and (iii) such person is not acquiring the Nil Paid H Rights or the H Rights

Shares with a view to the offer, sale, resale, transfer, delivery or distribution, directly or indirectly, of any such

Nil Paid H Rights or the H Rights Shares into any of the Specified Territories.

The Company may treat as invalid any instruction which appears to the Company to have been

despatched from any of the Specified Territories and which may involve a breach of the laws of the relevant

Specified Territory or any instruction which otherwise appears to the Company may involve a breach of the

laws of any jurisdiction; or if the Company or its agents believes the same may violate any applicable legal

or regulatory requirement; or which purports to exclude the representation and/or warranty required by the

paragraph immediately above.

Contingency Plan

In the event that subscription level of the H Share Rights Issue is substantially higher than expected,

Wing Lung Bank Limited and Bank of China (Hong Kong) Limited shall, at the request of the Company in

consultation with the Joint Global Coordinators, jointly open up to six additional branches to collect and

process application and subscription monies within the offer period for the H Share Rights Issue. The Company

will make a separate announcement if such arrangement is made.

If necessary, the H Share Registrar will assign additional trained staff at the designated branches of Wing

Lung Bank Limited and Bank of China (Hong Kong) Limited to assist the H Shareholders to fill in the

applications for the H Rights Shares or the excess H Rights Shares and to answer their enquiries.

The Company, with the assistance of the Joint Global Coordinators, the Underwriters and the H

Share Registrar, will monitor the H Share Rights Issue and ensure that the H Share Rights Issue will be

conducted in a fair and orderly manner. In the event any special circumstances arise, the Board may

extend, or make adjustment to, the timetable of the H Share Rights Issue if it considers appropriate.

LETTER FROM THE BOARD

– 103 –

Effect of Bad Weather on Latest Time for Acceptance of and Payment for H Rights Shares and Application

and Payment for Excess H Rights Shares

The latest time for acceptance of and payment for H Rights Shares and application and payment for

excess H Rights Shares will not take place if there is a tropical cyclone warning signal no. 8 or above, or a

“black” rainstorm warning:

(i) in force in Hong Kong at any local time before 12:00 noon and no longer in force after 12:00 noon

on Thursday, 19 September 2013. Instead the latest time for acceptance of and any payment for

H Rights Shares and application and payment for excess H Rights Shares will be extended to 5:00

p.m. on the same Business Day;

(ii) in force in Hong Kong at any local time between 12:00 noon and 4:00 p.m. on Thursday, 19

September 2013. Instead the latest time for acceptance of and payment for H Rights Shares and

application and payment for excess H Rights Shares will be rescheduled to 4:00 p.m. on the

following Business Day which does not have either of those warnings in force at any time between

9:00 a.m. and 4:00 p.m.

If the latest time for acceptance of and payment for H Rights Shares and application and payment for

excess H Rights Shares does not take place on Thursday, 19 September 2013, the dates mentioned in the section

headed “Expected Timetable” above may be affected. An announcement will be made by the Company in such

event.

Subscription Price for the H Rights Shares

The Subscription Price of HK$11.68 per H Rights Share is payable in full when a Qualifying H

Shareholder takes up the relevant Nil Paid H Rights or applies for excess H Rights Shares or when a transferee

of the Nil Paid H Rights subscribes for the H Rights Shares.

The Subscription Price of HK$11.68 per H Rights Share represents:

(i) a discount of approximately 17.6% to the closing price of HK$14.18 per H Share as quoted on the

Hong Kong Stock Exchange on the Price Determination Date;

(ii) a discount of approximately 18.0% to the average closing price of HK$14.24 per H Share as

quoted on the Hong Kong Stock Exchange for the five consecutive trading days up to and

including the Price Determination Date;

(iii) a discount of approximately 15.6% to the average closing price of HK$13.84 per H Share as

quoted on the Hong Kong Stock Exchange for the ten consecutive trading days up to and including

the Price Determination Date;

(iv) a discount of approximately 13.1% to the average closing price of HK$13.44 per H Share as

quoted on the Hong Kong Stock Exchange for the 20 consecutive trading days up to and including

the Price Determination Date; and

(v) a discount of approximately 15.4% to the theoretical ex-right price of HK$13.81 per H Share based

on the closing price of HK$14.18 per H Share as quoted on the Hong Kong Stock Exchange on

the Price Determination Date.

Status of the H Rights Shares

The H Rights Shares, when subscribed for and fully paid, will rank pari passu in all respects with the

H Shares then in issue. Holders of fully paid H Rights Shares will be entitled to receive all future dividends

and distributions which are declared, made or paid after the date of allotment and issue of the H Rights Shares.

LETTER FROM THE BOARD

– 104 –

Fractional Entitlements

The entitlements of Qualifying H Shareholders will be rounded down to the nearest whole number and

fractional entitlements to H Rights Shares will not be provisionally allotted to the Qualifying H Shareholders.

The Nil Paid H Rights representing the aggregate of all the fractions of H Rights Shares (rounded down to the

nearest whole number) will be provisionally allotted to a nominee appointed by the Company and, if a premium

(net of expenses) can be obtained, will be sold by the nominee on the Company’s behalf in the market as soon

as practicable after the commencement of dealing in the Nil Paid H Rights and the net proceeds of such sale

will be retained by the Company for its own benefit. Any H Rights Shares in respect of the unsold fractional

entitlements will be made available for excess application by the Qualifying H Shareholders.

Application for Excess H Rights Shares

Qualifying H Shareholders may apply, by way of excess applications, for H Rights Shares in respect of

any unsold entitlements of the Excluded H Shareholders, any unsold fractional entitlements to the H Rights

Shares and Nil Paid H Rights not taken up by Qualifying H Shareholders or otherwise subscribed for by

transferees of the Nil Paid H Rights.

Action to be taken by Qualifying H Shareholders who wish to apply for excess H Rights Shares

Excess H Rights Shares application procedures

Applications for excess H Rights Shares should be made only by Qualifying H Shareholders and only

by completing an Excess Application Form and lodging the same with a separate remittance for the amount

payable on application in respect of the excess H Rights Shares being applied for at the designated branches

of Wing Lung Bank Limited or Bank of China (Hong Kong) Limited as mentioned below no later than 4:00

p.m. on Thursday, 19 September 2013 or such later time and/or date as may be agreed between the Company

and the Joint Global Coordinators.

(1) Wing Lung Bank Limited

Branch Name Address

Hong Kong Island 1. Head Office 45 Des Voeux Road Central,

Hong Kong

2. North Point Branch 361 King’s Road, North Point,

Hong Kong

Kowloon 3. Mongkok Branch B/F Wing Lung Bank Centre,

636 Nathan Road,

Mongkok, Kowloon

4. Tsim Sha Tsui Branch 4 Carnarvon Road, Tsim Sha Tsui,

Kowloon

New Territories 5. Tsuen Wan Branch 251 Sha Tsui Road, Tsuen Wan,

New Territories

LETTER FROM THE BOARD

– 105 –

(2) Bank of China (Hong Kong) Limited

Branch Name Address

Hong Kong Island 1. Connaught Road Central

Branch

13-14 Connaught Road Central,

Hong Kong

2. Wan Chai (Wu Chung

House) Branch

213 Queen’s Road East, Wan Chai,

Hong Kong

Kowloon 3. Kwun Tong Branch 20-24 Yue Man Square,

Kwun Tong, Kowloon

New Territories 4. Tuen Mun San Hui Branch G13-G14 Eldo Court,

Heung Sze Wui Road,

Tuen Mun, New Territories

5. Lucky Plaza Branch Lucky Plaza, Wang Pok Street,

Shatin, New Territories

An Excess Application Form can be lodged from Thursday, 5 September 2013 to Thursday, 19 September

2013 (both days inclusive) at these times:

Monday to Friday: 9:00 a.m. to 5:00 p.m.;Saturday: 9:00 a.m. to 1:00 p.m.; andAcceptance Date (Thursday, 19

September 2013):

9:00 a.m. to 4:00 p.m.

Unless otherwise agreed by the Company, all remittances must be in Hong Kong dollars and by cheque

or cashier order. Cheques must be drawn on an account with, and cashier orders must be issued by, a licensed

bank in Hong Kong and made payable to “Bank of China (Hong Kong) Nominees Limited — CMB — EAF”

and must be crossed. The Directors will allocate the excess H Rights Shares (if any) at their discretion on a

fair and equitable basis, according to the principle that any excess H Rights Shares will be allocated to

Qualifying H Shareholders who apply for them on a pro rata basis by reference to the number of excess H

Rights Shares applied for but no reference will be made to H Rights Shares comprised in applications by PAL

or the existing number of Shares held by Qualifying H Shareholders. If the aggregate number of H Rights

Shares not taken up by the Qualifying H Shareholders under PALs is greater than the aggregate number of

excess H Rights Shares applied for through EAFs, the Directors will allocate to each Qualifying H Shareholder

who applies for excess H Rights Shares in full application. No preference will be given to topping up odd lots

to whole board lots.

H Shareholders with their H Shares held by a nominee company should note that the Board will regard

the nominee company as a single H Shareholder in accordance with the H Shareholders’ register of the

Company. Accordingly, the H Shareholders should note that the aforesaid arrangement in relation to the

allocation of excess H Rights Shares will not be extended to beneficial owners individually.

Applications for excess H Rights Shares should be made only by Qualifying H Shareholders and by

completing an Excess Application Form.

Excess Application Forms with a separate remittance for the amount payable on application in respect

of the excess H Rights Shares being applied for shall be lodged at the designated branches of Wing Lung Bank

Limited or Bank of China (Hong Kong) Limited as mentioned above no later than 4:00 p.m. on Thursday, 19

September 2013 or such later time and/or date as may be agreed between the Company and the Joint Global

Coordinators.

LETTER FROM THE BOARD

– 106 –

If no excess H Rights Shares are allotted and issued to a Qualifying H Shareholder, the amount tendered

on application is expected to be refunded to that Qualifying H Shareholder in full without any interest by

means of cheque(s) despatched by ordinary post and at the risk of such shareholder on or about Monday, 30

September 2013. If the number of excess H Rights Shares allotted and issued to a Qualifying H Shareholder

is less than that applied for, the surplus application monies are also expected to be refunded to such shareholder

without any interest by means of cheque(s) despatched by ordinary post and at the risk of such shareholder on

or about Monday, 30 September 2013.

If the Joint Global Coordinators (on behalf of the Underwriters) exercise the right to terminate their

obligations or if the conditions precedent under the Underwriting Agreement are not fulfilled before the Latest

Time for Termination, the monies received in respect of relevant applications for excess H Rights Shares will

be returned to the relevant persons without interest, by means of cheque(s) to be despatched by ordinary post

at the risk of such persons on or about Monday, 30 September 2013.

All cheques or cashier’s orders will be presented for payment following receipt and all interest earned

on such monies will be retained for the benefit of the Company. Any Excess Application Form in respect of

which a cheque or cashier’s order is dishonoured on first presentation is liable to be rejected. The Excess

Application Form is for use only by the person(s) to whom it is addressed and is not transferable. All

documents, including cheques or cashier’s orders for amounts due, will be sent at the risk of the persons

entitled thereto to their registered addresses by the H Share Registrar. The Company may, at its discretion, treat

an Excess Application Form as valid and binding on the person(s) by whom or on whose behalf it is lodged

even if not completed in accordance with the relevant instructions.

You must pay the exact amount payable upon application for the H Rights Shares by cheque or cashier’s

order or any method agreed by the Company. Underpaid application will be rejected.

In the event of overpaid application, a refund cheque will be made out to you only if the overpaid amount

is HK$100 or above.

All enquiries in connection with the Excess Application Form should be addressed to the Company’s H

Share Registrar at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.

Important notice and representations and warranties relating to Qualifying H Shareholders in the Specified

Territories

What is set out under the heading “Important notice and representations and warranties relating to

Qualifying H Shareholders in the Specified Territories” above in the section headed “Procedures for

Acceptance or Transfer” also applies to applications for excess H Rights Shares, with appropriate changes to

reflect that the context is an application for excess H Rights Shares.

Action to be taken by Beneficial H Shareholders whose H Shares are held by a registered H Shareholder

(other than H Shares deposited in CCASS) who wish to apply for excess H Rights Shares

Excess H Rights Shares application procedures

If you are a Beneficial H Shareholder whose H Shares are registered in the name of a registered H

Shareholder and you wish to apply for excess H Rights Shares, you should contact the registered H Shareholder

and provide the registered H Shareholder with instructions or make arrangements with the registered H

Shareholder in relation to such application. Such instructions and/or arrangements should be given or made in

advance of the latest time for application and payment for excess H Rights Shares stated in the section headed

“Expected Timetable” and otherwise in accordance with the requirements of the registered H Shareholder, in

order to allow the registered H Shareholder sufficient time to ensure that your instructions are given effect.

LETTER FROM THE BOARD

– 107 –

Important notice and representations and warranties relating to Beneficial H Shareholders in the Specified

Territories whose H Shares are held by a registered H Shareholder (other than CCASS)

What is set out under the heading “Important notice and representations and warranties relating to

Beneficial H Shareholders in the Specified Territories whose H Shares are held by a registered H Shareholder

(other than CCASS)” in the section headed “Procedures for Acceptance or Transfer” also applies to

applications for excess H Rights Shares, with appropriate changes to reflect that the context is an application

for excess H Rights Shares.

Action to be taken by Beneficial H Shareholders holding interest in H Shares through CCASS who wish

to apply for excess H Rights Shares

Excess H Rights Shares application procedures

If you are a Beneficial H Shareholder whose H Shares are deposited in CCASS and registered in the

name of HKSCC Nominees Limited, and you wish to apply for excess H Rights Shares, you should (unless you

are a CCASS Participant) contact your Intermediary and provide your Intermediary with instructions or make

arrangements with your Intermediary in relation to the application for excess H Rights Shares. Such

instructions and/or arrangements should be given or made in advance of the date stated in the section headed

“Expected Timetable” as the latest time for application and payment for excess H Rights Shares and otherwise

in accordance with the requirements of your Intermediary, in order to allow your Intermediary sufficient time

to ensure that your instructions are given effect.

The procedures for application for excess H Rights Shares by Beneficial H Shareholders who are CCASS

Participants shall be in accordance with the “General Rules of CCASS,” the “CCASS Operational Procedures”

and any other requirements of CCASS. Beneficial H Shareholders who are CCASS Participants should contact

CCASS to provide CCASS with instructions or make arrangements with CCASS in relation to any applications

for excess H Rights Shares.

Important notice and representations and warranties relating to Beneficial H Shareholders in the Specified

Territories holding interests in H Shares through CCASS

What is set out under the section above headed “Procedures for Acceptance or Transfer — Important

notice and representations and warranties relating to Beneficial H Shareholders in the Specified Territories

holding interests in H Shares through CCASS” also applies to applications for excess H Rights Shares, with

appropriate changes to reflect that the context is an application for excess H Rights Shares.

Conditions of the H Share Rights Issue

The H Share Rights Issue is conditional upon the fulfilment of the following matters:

(i) the approval of the Rights Issue by the Shareholders at the EGM;

(ii) the approval of the Rights Issue at the H Shareholders Class Meeting and the A Shareholders Class

Meeting, respectively;

(iii) the approval of the CBRC for the Rights Issue;

(iv) the approval of the CSRC for the Rights Issue;

(v) the Listing Committee of the Hong Kong Stock Exchange agreeing to grant approval for the listing

of, and permission to deal in, the Nil Paid H Rights and the H Rights Shares, either unconditionally

or subject to such conditions which the Company accepts and the satisfaction of such conditions

(if any) by no later than the date of posting of the H Share Rights Prospectus; and

(vi) the delivery to the Hong Kong Stock Exchange and filing and registration of all documents in

relation to the H Share Rights Issue as required by law to be filed and registered with the Registrar

of Companies in Hong Kong.

LETTER FROM THE BOARD

– 108 –

None of the above conditions for completion of the H Share Rights Issue may be waived by the

Company. As of the Latest Practicable Date, the conditions under (i) to (iv) above have been fulfilled. If any

of the above conditions is not satisfied, the H Share Rights Issue will not proceed.

Please note that the H Share Rights Issue will proceed on a fully underwritten basis in accordance with

Rule 7.19 of the Hong Kong Listing Rules. Please refer to the section headed “H Share Underwriting

Arrangement” for details of the underwriting arrangement. In the event that the Underwriting Agreement

does not become unconditional or if it is terminated in accordance with the terms thereof, the H Share

Rights Issue will not proceed.

Application for Listing/Dealing arrangements

Application has been made to the Hong Kong Stock Exchange for the listing of, and permission to deal

in, the Nil Paid H Rights and the H Rights Shares. Dealings in the Nil Paid H Rights and the H Rights Shares

will be subject to the payment of stamp duty, Hong Kong Stock Exchange trading fee, Securities and Futures

Commission transaction levy or any other applicable fees and charges in Hong Kong. The board lot size of Nil

Paid H Rights and the H Rights Shares is 500 Nil Paid H Rights and H Rights Shares, respectively.

Subject to the granting of listing of, and permission to deal in, the Nil Paid H Rights and the H Rights

Shares on the Hong Kong Stock Exchange, and subject to compliance with the stock admission requirements

of HKSCC, the Nil Paid H Rights and the H Rights Shares will be accepted as eligible securities by HKSCC

for deposit, clearance and settlement in CCASS with effect from the respective commencement dates of

dealings in the Nil Paid H Rights and the H Rights Shares on the Hong Kong Stock Exchange or such other

dates as determined by HKSCC. Settlement of transactions between participants of the Hong Kong Stock

Exchange on any trading day is required to take place in CCASS on the second trading day thereafter. All

activities under CCASS are subject to the “General Rules of CCASS” and the “CCASS Operational

Procedures” in effect from time to time.

Please note that without approval from the relevant regulatory authorities, the H Rights Shares and the

A Rights Shares are neither interchangeable nor fungible, and there is no trading or settlement between the A

share and the H share markets.

H Share Rights Issue Underwriting Arrangement

The H Share Rights Issue will be conducted on a fully underwritten basis in accordance with Rule 7.19

of the Hong Kong Listing Rules. Details on the underwriting arrangements in relation to the H Share Rights

Issue are set out below:

The Underwriting Agreement

Date: 22 August 2013

Shareholder Underwriter: CMFH

Joint Lead Underwriters (in

alphabetical order):

CICCHKS, Citi, CM Securities (HK), CMBI, Goldman Sachs and

UBS

To the best of the Directors’ knowledge, information and belief,

having made all reasonable enquiries, each of CICCHKS, Citi,

Goldman Sachs and UBS is a third party independent of the

Company and its connected persons (as defined in the Hong Kong

Listing Rules)

LETTER FROM THE BOARD

– 109 –

Total number of H Rights Shares

underwritten:

The Underwriters have agreed to fully underwrite up to

680,423,172 H Rights Shares not taken up by the Qualifying H

Shareholders pursuant to the Underwriting Agreement in the

following manner:

(i) the Shareholder Underwriter will purchase or procure

purchasers for the first of such number up to 136,084,634 H

Rights Shares, or 20.00% of the total number of H Rights

Shares that are not taken up by the Qualifying H

Shareholders; and

(ii) the other Underwriters (excluding the Shareholder

Underwriter) will purchase or procure purchasers for all

remaining H Rights Shares not taken in proportion to their

respective purchase obligations.

CM Group, through China Merchants Steam Navigation Co., Ltd., is a substantial shareholder of the

Company. CMFH is a wholly owned subsidiary of CM Group and is therefore a connected person of the

Company for the purpose of Chapter 14A of the Hong Kong Listing Rules. The transaction of CMFH acting

as the Shareholder Underwriter for an issue of securities by the Company is exempt from the requirements of

reporting, announcement and independent shareholders’ approval pursuant to Rule 14A.31(3)(c) of the Hong

Kong Listing Rules. It is not in the ordinary course of business of CMFH to underwrite shares.

CMFH, in addition to its underwriting obligation, has undertaken to the Company and the other

Underwriters that it will subscribe or procure for subscription of not more than 136,084,634 H Rights Shares

by way of excess application for H Rights Shares.

CM Securities (HK) is a wholly owned subsidiary of CM Securities and CM Group is a controlling

shareholder of CM Securities. CM Securities (HK) is therefore a connected person of the Company for the

purpose of Chapter 14A of the Hong Kong Listing Rules. The transaction of CM Securities (HK) acting as one

of the Joint Lead Underwriters for an issue of securities by the Company is exempt from the requirements of

reporting, announcement and independent shareholders’ approval pursuant to Rule 14A.31(3)(c) of the Hong

Kong Listing Rules.

CMBI is a wholly owned subsidiary of CMB International Capital Corporation Ltd, which is a wholly

owned subsidiary of the Company.

Conditions of the Underwriting Agreement

The underwriting obligations of the Joint Lead Underwriters and the Shareholder Underwriter under the

Underwriting Agreement are conditional upon the following conditions:

(a) the H Rights Shares being provisionally allotted by the authorized representatives of the Board on

the terms set out in the Prospectus Documents to the Qualifying H Shareholders;

(b) the Company having delivered to the Joint Global Coordinators (on behalf of the Underwriters) (in

form and substance satisfactory to them) the documents listed therein by the times and dates

specified therein;

(c) since the time of execution of the Underwriting Agreement, there shall not have developed,

occurred, happened or come into effect any of the following:

(i) a suspension or material limitation (including, without limitation, any minimum or

maximum price limit or range but excluding suspensions or material limitations resulting

from technical causes) in or on trading in securities generally on the Hong Kong Stock

Exchange, the Shenzhen Stock Exchange or the Shanghai Stock Exchange;

LETTER FROM THE BOARD

– 110 –

(ii) a suspension or material limitation (including, without limitation, any minimum or

maximum price limit or range but excluding suspensions or material limitations resulting

from technical causes) in or on trading in any securities of the Company listed or quoted on

a stock exchange (other than the Shanghai Stock Exchange);

(iii) a general moratorium on commercial banking activities declared by relevant authorities in

Hong Kong or the PRC;

(iv) a material disruption in commercial banking or securities settlement or clearance services

in Hong Kong or the PRC;

(v) any event or circumstance in the nature of force majeure that are reasonably unpredictable,

uncontrollable or unavoidable (including, without limitation, acts of government, acts of

war, acts of God), in each case, involving or affecting Hong Kong or the PRC; or

(vi) any outbreak or escalation of hostilities, or any change in financial, political or economic

conditions, currency exchange rates or controls or any calamity or crisis, in each case

involving or affecting Hong Kong, the PRC or the international financial markets that, in the

Joint Global Coordinators’ reasonable judgment after consultation with the Company, is

material and adverse and which, singly or together with any other event specified in clauses

(v) and (vi), makes it, in the Joint Global Coordinators’ reasonable judgment after

consultation with the Company, impracticable or inadvisable to proceed with the H Share

Rights Issue or the delivery of the H Rights Shares on the terms and in the manner

contemplated in the H Share Rights Issue Prospectus;

(d) the approval of the H Share Rights Issue granted by CBRC being valid and not having been

withdrawn or revoked;

(e) the approval of the H Share Rights Issue granted by CSRC being valid and not having been

withdrawn or revoked;

(f) the delivery of the Prospectus Documents to the Hong Kong Stock Exchange not later than 11:00

a.m. on the Business Day before the Prospectus Date and the issue by the Hong Kong Stock

Exchange of a certificate of authorization of registration before 3:00 p.m. or such later time as

agreed by the Hong Kong Stock Exchange on the Business Day before the Prospectus Date;

(g) the Registrar of Companies in Hong Kong registering the Prospectus Documents and having all the

documents required by the provisions of section 342C of the Companies Ordinance on or before

the despatch of the H Share Rights Issue Prospectus;

(h) the grant of listing of and permission to deal in the Nil Paid H Rights and the H Rights Shares

(either unconditional or subject only to allotment and despatch of the share certificates in respect

thereof) by the Hong Kong Stock Exchange and dealings in the Nil Paid H Rights and the H Rights

Shares being allowed by the Hong Kong Stock Exchange (and such listing and permission not

subsequently being withdrawn or revoked);

(i) delivery of the Undertaking Letter to the Company and the Joint Lead Underwriters, and CM

Group having performed all its obligations under the Undertaking Letter;

(j) posting of the Prospectus Documents to the Qualifying H Shareholders on or before the date the

Prospectus Documents are despatched or such later date to be agreed with the Joint Global

Coordinators and the posting, to the extent reasonably practicable and legally permitted, of the H

Share Rights Issue Prospectus for information purposes only to the Excluded H Shareholder;

provided that the H Share Rights Issue Prospectus shall not be posted to Excluded Shareholders

who are known by the Company to be resident in the United States;

(k) the joint sponsors for the A Share Rights Issue shall have confirmed to Joint Global Coordinators

the substantial completion of the A Share Rights Issue at or prior to the Prospectus Date (with at

least 70% of the A Rights Shares being validly subscribed);

LETTER FROM THE BOARD

– 111 –

(l) no matter having arisen prior to the Latest Time for Termination which might reasonably be

expected to give rise to an indemnification claim under the Underwriting Agreement and which,

in any such case, the Joint Global Coordinators and the Joint Lead Underwriters consider in their

absolute discretion, as applicable, (acting in good faith), to be material in the context of the H

Share Rights Issue or the underwriting of the H Share Rights Issue;

(m) all the respective representations and warranties and other statements in the Underwriting

Agreement on the part of the Company being true and accurate and not misleading at and as of

the date of the Underwriting Agreement, the Prospectus Date, as of the time of sale agreed in the

Underwriting Agreement with respect to the Joint Global Coordinators’ efforts to procure

purchasers for the H Rights Shares not taken up, and as of the Latest Time for Termination as if

they had been repeated by reference to the facts and circumstances then existing; and

(n) the performance by the Company of all its obligations under the Underwriting Agreement.

If the conditions of the Underwriting Agreement are not duly satisfied and/or waived (where applicable)

by the Joint Global Coordinators, when and as required by the Underwriting Agreement to be satisfied (unless

otherwise waived or modified by the Joint Global Coordinators), or if the Underwriting Agreement shall be

terminated as described below, save in respect of certain rights and obligations under the Underwriting

Agreement, all liabilities of the parties under the Underwriting Agreement will cease. In such circumstances,

the Company shall, pursuant to the Underwriting Agreement and subject to certain deduction or limitation

specified thereunder, remain liable to pay certain expenses incurred by the Company or on behalf of the

Company but shall not be liable to pay to any of the Underwriters the underwriting commissions thereunder.

The Joint Global Coordinators have the right either: (i) to waive any condition specified above (except

the conditions specified in Section (a), (d) and (e)), or (ii) to extend the deadline for the fulfillment of any

condition in such manner as specified in the Underwriting Agreement.

If the Underwriting Agreement does not become unconditional or is terminated, the H Share Rights Issue

will not proceed.

Termination of the Underwriting Agreement

The Underwriting Agreement shall terminate without further act or deed if any of the conditions

precedent to the obligations of the Underwriters shall not have been satisfied when and as required by the

Underwriting Agreement to be satisfied (unless otherwise waived or modified by the Joint Global

Coordinators).

The rights (save as otherwise provided in the Underwriting Agreement) and obligations of the

Underwriters shall be subject to termination in the absolute discretion of the Joint Global Coordinators and

after consultation with the Company with immediate effect, at any time prior to the Latest Time for

Termination if since the time of execution of the Underwriting Agreement, there shall have developed,

occurred, happened or come into effect any change in or affecting the business, general affairs, prospects,

results of operations, position or condition, financial or otherwise, of the Company and the other members of

the Group, taken as a whole, the effect of which change, development, event or circumstance is, individually

or in the aggregate in the joint and absolute judgment of the Joint Global Coordinators (on behalf of the

Underwriters) and after consultation with the Company, so material and adverse as to make it or likely to make

it impracticable or inadvisable to proceed with the H Share Rights Issue or the delivery of the H Rights Shares

on the terms and in the manner contemplated in the H Share Rights Issue Prospectus.

At any time prior to the Latest Time for Termination if since the time of execution of the Underwriting

Agreement, there shall have developed, occurred, happened or come into effect any change in or affecting the

business, general affairs, prospects, results of operations, position or condition, financial or otherwise, of any

Underwriter or any Underwriter and the other members of such Underwriter’s group, taken as a whole, the

effect of which change, development, event or circumstance is, individually or in the aggregate in the absolute

judgment of the Company and after consultation with such Underwriter, so material and adverse as to make

LETTER FROM THE BOARD

– 112 –

it or likely to make it impracticable or inadvisable for such Underwriter or Underwriters to fulfil its or their

respective obligations under the Underwriting Agreement, the rights (save as otherwise provided in the

Underwriting Agreement) and obligations of such Underwriter or Underwriters shall be subject to termination

in the absolute discretion of the Bank and after consultation with such Underwriter or Underwriters with

immediate effect without affecting the rights and obligations of the other Underwriters under the Underwriting

Agreement.

In the event that the Joint Global Coordinators (on behalf of the Underwriters) exercise their right under

the Underwriting Agreement to terminate the Underwriting Agreement, their underwriting obligations will

cease and the H Share Rights Issue will not proceed, in which case, a further announcement will be made by

the Company at the relevant time.

Lock-up Undertakings

Pursuant to the Underwriting Agreement, the Company has undertaken to the Underwriters that:

(i) except for (A) the H Rights Shares to be allotted and issued pursuant to the H Share Rights Issue

and the A Rights Shares to be allotted and issued pursuant to the A Share Rights Issue; (B) any

H Shares or other securities or rights issued or granted under existing share schemes or pursuant

to the exercise of existing rights of subscription or conversion and (C) the issue of bonds

denominated in RMB; or

(ii) without the prior written consent of the Joint Global Coordinators (and which may not be

unreasonably withheld),

from the date of the Underwriting Agreement up to 60 days after the first day of trading of the H Rights Shares

on the Hong Kong Stock Exchange, the Company will not (A) allot or issue or sell, or offer to allot or issue

or sell, accept subscription for, pledge, lend, mortgage, assign, charge, purchase any option or contract to sell,

or grant any option, right or warrant to subscribe for or purchase or lend or otherwise dispose of (either

conditionally or unconditionally, or directly or indirectly, or otherwise) any Shares or other equity securities

of the Company or any interests therein (including but not limited to any securities convertible into or

exercisable or exchangeable for any Shares or which carry rights to subscribe for or purchase or receive

Shares), or deposit Shares with a depositary in connection with the issue of depositary receipts, or (B) enter

into a transaction (including, without limitation, a swap or other derivative transaction) that transfers, in whole

or in part, any of the economic consequences of ownership of any Shares or such securities of the Company

or any interest therein or has an effect on the market in the Shares similar to that of a sale of interest in Shares

or repurchase any Shares, or (C) enter into any transaction with the same economic effect as any transaction

described in (A) or (B) above, or (D) offer or agree or contract or announce any intention to enter into or effect

any such transaction described in (A), (B) or (C) above whether any of the foregoing transactions described

in (A), (B) or (C) above is to be settled by delivery of Shares or such other securities, in cash or otherwise;

provided, however, that the foregoing restrictions shall not apply to (i) any issuance of stock dividends, (ii)

the application of any capital reserve to issue Shares, (iii) the execution of customer orders to trade any Shares

or (iv) the grant of H Share appreciation rights under or the exercise of H Share appreciation rights by any

holders thereof under the Company’s existing H Share appreciation rights incentive scheme.

Shareholder Undertakings

As of the Latest Practicable Date, CM Group, a substantial shareholder of the Company, held (via its

subsidiaries) 3,994,369,074 A Shares and 42,857,691 H Shares, representing approximately 22.61% of the

entire issued A Share capital and approximately 1.10% of the entire issued H Share capital of the Company,

respectively.

Pursuant to the Undertaking Letter, CM Group has irrevocably and unconditionally undertaken to the

Company and the Joint Global Coordinators, among other things:

(i) not to, and to procure its associates (as defined in The Code on Takeovers and Mergers of Hong

Kong) not to, from the date of the Undertaking Letter to the commencement of dealing in the H

Rights Shares in fully-paid form or the date on which the H Share Rights Issue lapses or is

withdrawn, whichever is earlier:

LETTER FROM THE BOARD

– 113 –

(a) sell, transfer, charge, encumber, grant any option over or otherwise dispose of any interest,

or contract or agree to sell, transfer, charge, encumber, grant any option over or otherwise

dispose of any interest over, any H Shares; or

(b) sell, transfer, charge, encumber, grant any option over or otherwise dispose of any interest,

or contract or agree to sell, transfer, charge, encumber, grant any option over or otherwise

dispose of any interest over, any Nil Paid H Rights or H Rights Shares; or

(c) enter into any transaction with the same economic effect as any transaction specified in

paragraphs (a) and (b) above; or

(d) offer to or agree to or announce any intention to effect any transaction specified in

paragraphs (a) and (b) above; and

(ii) to and to procure its associates to:

(a) subscribe for 7,457,238 H Rights Shares to be provisionally allotted to it or its associates

upon and subject to the terms and conditions of the H Share Rights Issue as soon as

practicable and not later than the Latest Time for Acceptance of and payment for the H

Rights Shares;

(b) not withdraw or revoke the subscription or application referred to in paragraph (a) above;

and

(c) take all actions necessary to give effect to the subscription and application referred to in

paragraph (a) above.

(iii) without the prior written consent of the Company and the Joint Global Coordinators, not to, and

will procure its associates not to, at any time during the period commencing on the date of the

Undertaking Letter and ending on, and including, the date that is 90 days after the commencement

of dealing in H Rights Shares in fully-paid form (the Lock-up Period):

(a) sell, transfer, charge, encumber, grant any option over or otherwise dispose of any interest,

or contract or agree to sell, transfer, charge, encumber, grant any option over or otherwise

dispose of any interest, over any H Shares; or

(b) enter into any swap or other arrangement that transfers to another, in whole or in part, any

of the economic consequences of ownership of H Shares or any interest therein; or

(c) enter into any transaction with the same economic effect as any transaction specified in

paragraphs (a) and (b) above; or

(d) offer to or agree to or announce any intention to effect any transaction specified in

paragraphs (a) and (b) above.

Save for the undertaking from CM Group, the Company has not obtained undertakings from any other

H Shareholders that they will subscribe for any or all of the H Rights Shares to be provisionally allotted to

them.

Warning of the Risks of Dealing in the H Rights Shares and the Nil Paid H Rights

Existing H Shares are expected to be dealt on an ex-rights basis from Thursday, 29 August 2013.

Dealings in the Nil Paid H Rights are expected to take place from Monday, 9 September 2013 to Monday, 16

September 2013 (both days inclusive). If the conditions of the H Share Rights Issue (please refer to the section

headed “Conditions of the H Share Rights Issue”) are not fulfilled, the H Share Rights Issue will not proceed.

LETTER FROM THE BOARD

– 114 –

The Underwriting Agreement contains provisions entitling the Joint Global Coordinators by notice in

writing to terminate the Underwriting Agreement upon occurrence of certain events. In the event that the

Underwriting Agreement does not become unconditional or if it is terminated in accordance with the terms

thereof, the H Share Rights Issue will not proceed.

Any H Shareholder or other person dealing in H Shares up to the date on which all the conditions to

which the H Share Rights Issue is subject are fulfilled (and the date on which the Joint Global Coordinators’

right of termination of the Underwriting Agreement has ceased) and any person dealing in the Nil Paid H

Rights during the period from Monday, 9 September 2013 to Monday, 16 September 2013 (both days inclusive)

will bear the risk that the H Share Rights Issue may not become unconditional or may not proceed. If in any

doubt, investors are recommended to consult their professional advisers.

Any dealing in the H Rights Shares or the Nil Paid H Rights is at the investor’s own risk. If in any doubt,

investors are recommended to consult their professional advisers.

Despatch of H Share Certificates and the Refund Cheques for the H Share Rights Issue

Subject to the fulfillment of the conditions of the H Share Rights Issue, it is expected that the certificates

for the H Rights Shares and the refund cheque(s) in respect of wholly or partly unsuccessful applications for

excess H Rights Shares (if any) will be despatched by ordinary post to the allottees and those entitled thereto,

at their own risk, to their registered addresses by the H Share Registrar on or about Monday, 30 September

2013.

Taxation

Qualifying H Shareholders are advised to consult their professional advisers if they are in any doubt as

to the taxation implications of the receipt, purchase, holding, exercising, disposing of or dealing in the Nil Paid

H Rights and/or the H Rights Shares and, regarding the Excluded H Shareholders, their receipt of the net

proceeds, if any, from sales of the Nil Paid H Rights on their behalf.

It is emphasized that none of the Company, the Directors or any other parties involved in the H Share

Rights Issue accepts responsibility for any tax effects or liabilities of holders of the H Shares resulting from

the receipt, purchase, holding, exercising, disposing of, or dealing in the Nil Paid H Rights and/or the H Rights

Shares or receipt of such net proceeds.

Proceeds from the H Share Rights Issue

The H Share Rights Issue is estimated to raise (i) gross proceeds in an aggregate amount of

approximately HK$7,947.3 million (equivalent to approximately RMB6,322.7 million); and (ii) net proceeds

(after deducting all the costs and expenses incidental to the H Share Rights Issue) in an aggregate amount of

approximately HK$7,833.3 million (equivalent to approximately RMB6,232.0 million).

LETTER FROM THE BOARD

– 115 –

(IV) A SHARE RIGHTS ISSUE

Details of the A Share Rights Issue are as follows:

A Share Rights Issue Statistics

Basis of A Share Rights Issue : 1.74 A Rights Shares for every 10 existing A Shares held on the

A Share Record Date by the Qualifying A Shareholders

Number of A Shares in issue prior

to the A Share Rights Issue

: 17,666,130,885

Number of A Rights Shares

proposed to be issued (assuming

the number of A Shares in issue

on the A Share Record Date

remains the same as the Latest

Practicable Date)

: 3,073,906,773

Joint sponsors (in alphabetical

order)

: CICC and GSGH

Joint lead underwriters

(in alphabetical order)

: CICC and GSGH

Financial adviser : CM Securities

Subscription Price for the A Rights

Shares

: RMB9.29 per A Rights Share

Basis of Entitlement

Subject to the fulfillment of the conditions set out under the section headed “Conditions of the A Share

Rights Issue,” Qualifying A Shareholders will be entitled to subscribe for 1.74 A Rights Shares for every 10

existing A Shares held on the A Share Record Date at the Subscription Price of RMB9.29, for each A Rights

Share payable in full on acceptance.

Qualifying A Shareholders

In order to qualify for the A Share Rights Issue, an A Shareholder must be registered as an A Shareholder

of the Company on the A Share Record Date.

Expected Timetable of A Share Rights Issue

• CBRC granting approval for the A Share Rights Issue Thursday, 29 September 2011

• CSRC granting approval for the A Share Rights Issue Friday, 19 July 2013

• Publication of the A Share Rights Issue Prospectus on the website

of the Shanghai Stock Exchange Friday, 23 August 2013

• On-line Roadshow Monday, 26 August 2013

• A Share Record Date Tuesday, 27 August 2013

LETTER FROM THE BOARD

– 116 –

• Commencement of the A Share Rights Issue Wednesday, 28 August 2013

• Suspension of trading in the A Shares on the Shanghai Stock

Exchange Wednesday, 28 August 2013

• First day for acceptance of and payment for the A Rights Shares Wednesday, 28 August 2013

• Close of the A Share Rights Issue Tuesday, 3 September 2013

• Last day for payment for the A Rights Shares Tuesday, 3 September 2013

• Verification of the payment for subscription for the A Rights Shares Wednesday, 4 September 2013

• Announcement of results of the A Share Rights Issue Thursday, 5 September 2013

• Resumption of trading in the A Shares on the Shanghai Stock

Exchange Thursday, 5 September 2013

Shareholders should note that the dates specified in the expected timetable of the A Share Rights Issue

as set out above, and in other parts of this prospectus, are indicative only and may be changed by the Board.

Any such change to the expected timetable will be announced and notified to the Shareholders as and when

appropriate.

The listing of, and the date of commencement of dealing in, the A Rights Shares will be subject to

further determination by the relevant PRC regulatory authority. A further announcement will be made

by the Company as and when such details are available.

Conditions of the A Share Rights Issue

The A Share Rights Issue is conditional upon the fulfilment of each of the following matters:

(i) the approval of the Rights Issue by the Shareholders at the EGM;

(ii) the approval of the Rights Issue at the A Shareholders Class Meeting and H Shareholders Class

Meeting, respectively;

(iii) the approval of the CBRC for the Rights Issue;

(iv) the approval of the CSRC for the Rights Issue;

(v) the subscription of the A Rights Shares by the A Shareholders being at least 70% of the A Share

Rights Issue.

None of the above conditions for the completion of the A Share Rights Issue may be waived by the

Company. As of the Latest Practicable Date, the conditions set out in (i) to (iv) above have been fulfilled. If

any of the above conditions is not fulfilled, the A Share Rights Issue will not proceed.

A Share Rights Issue to be Conducted on a Non-Underwritten Basis

The A Share Rights Issue will be conducted on a non-underwritten basis as required under the applicable

PRC laws and regulations. Under the applicable PRC laws and regulations and as classified by the CSRC, the

A Share Rights Issue may only proceed if the subscription level of the A Rights Shares is at least 70% of the

A Share Rights Issue. The rights to subscribe for the A Shares which are not taken up will lapse and no new

A Shares will be issued or allotted pursuant to such rights.

Application for Listing

Application has been made to the Shanghai Stock Exchange for the listing of the A Rights Shares.

LETTER FROM THE BOARD

– 117 –

Proceeds from the A Share Rights Issue

The A Share Rights Issue will raise (i) gross proceeds in an aggregate amount of approximately

RMB28,556.6 million equivalent to approximately HK$35,894.1 million (assuming full subscription for the A

Rights Shares) or RMB19,989.6 million equivalent to approximately HK$25,125.8 million (assuming 70%

subscription for the A Rights Shares); and (ii) net proceeds (after deducting all the costs and expenses

incidental to the A Share Rights Issue) in an aggregate amount of approximately RMB28,472.3 million

equivalent to approximately HK$35,788.1 million (assuming full subscription for the A Rights Shares) or

RMB19,905.3 million equivalent to approximately HK$25,019.9 million (assuming 70% subscription for the

A Rights Shares).

A Share Rights Issue Prospectus

The A Share Rights Issue Prospectus, which is in Chinese, is available for public inspection on the

websites of Hong Kong Stock Exchange (www.hkexnews.hk) and Shanghai Stock Exchange (www.sse.com.cn)

as from 22 August 2013. Neither the A Share Rights Issue Prospectus nor any other information on either of

the above websites is incorporated in this prospectus.

(V) SHAREHOLDING STRUCTURE OF THE COMPANY PRIOR TO AND UPON COMPLETION

OF THE RIGHTS ISSUE

The following table sets out the Company’s shareholding structure prior to and upon completion of the

Rights Issue (assuming (i) the Rights Issue is conducted on the basis of 1.74 Rights Shares for every 10

existing Shares with full subscription for the A Rights Shares and the H Rights Shares; and (ii) there are no

other changes in the issued share capital of the Company between the Latest Practicable Date and the Record

Date):

Immediately after completion of the Rights Issue

Existing shareholding

structure as of the Latest

Practicable Date

Assuming all the H Rights

Shares are taken up by the

Qualifying H Shareholders

Assuming no H Rights Shares

are taken up by the

Qualifying H Shareholders

other than CM Group and its

associates

Number of

Shares

Percentage

of Issued

Shares

Number of

Shares

Percentage

of Issued

Shares

Number of

Shares

Percentage

of Issued

Shares

CM Group and its

associates

H Shares 42,857,691 0.20% 50,314,929 0.20% 246,984,643

(Note 1)

0.98%

(Note 1)

A Shares 3,994,369,074 18.51% 4,689,389,292 18.51% 4,689,389,292 18.51%

Supervisor (A Shares) 20,000 0.0001% 23,480 0.0001% 23,480 0.0001%

Underwriters (other than

CMFH and CM Securities

(HK)) for H Shares — — — — 476,296,220 1.88%

Other Shareholders (being

public Shareholders)

H Shares 3,867,620,309 17.93% 4,540,586,243 17.93% 3,867,620,309 15.27%

A Shares 13,671,741,811 63.36% 16,050,624,886 63.36% 16,050,624,886 63.36%

Total 21,576,608,885 100.00% 25,330,938,830 100.00% 25,330,938,830 100.00%

Note 1: Including the H Rights Shares taken up by CMFH and CM Securities (HK) as Shareholder Underwriter and Joint Lead

Underwriter, respectively.

LETTER FROM THE BOARD

– 118 –

The following table sets out the Company’s shareholding structure prior to and upon completion of the

Rights Issue (assuming (i) the Rights Issue is conducted on the basis of 1.74 Rights Shares for every 10

existing Shares with 70% subscription level for the A Rights Shares and full subscription of the H Rights

Shares; and (ii) there are no other changes in the issued share capital of the Company between the Latest

Practicable Date and the Record Date):

Immediately after completion of the Rights Issue

Existing shareholding

structure as of the Latest

Practicable Date

Assuming all the H Rights

Shares are taken up by the

Qualifying H Shareholders

Assuming no H Rights Shares

are taken up by the

Qualifying H Shareholders

other than CM Group and its

associates

Number of

Shares

Percentage

of Issued

Shares

Number of

Shares

Percentage

of Issued

Shares

Number of

Shares

Percentage

of Issued

Shares

CM Group and associates

H Shares 42,857,691 0.20% 50,314,929 0.21% 246,984,643

(Note 1)

1.01%

(Note 1)

A Shares 3,994,369,074 18.51% 4,480,883,227 18.36% 4,480,883,227 18.36%

Supervisor (A Shares) 20,000 0.0001% 22,436 0.0001% 22,436 0.0001%

Underwriters (other than

CMFH and CM Securities

(HK)) for H Shares — — — — 476,296,220 1.95%

Other Shareholders (being

public Shareholders)

H Shares 3,867,620,309 17.93% 4,540,586,243 18.60% 3,867,620,309 15.85%

A Shares 13,671,741,811 63.36% 15,336,959,964 62.83% 15,336,959,964 62.83%

Total 21,576,608,885 100.00% 24,408,766,799 100.00% 24,408,766,799 100.00%

Note 1: Including the H Rights Shares taken up by CMFH and CM Securities (HK) as Shareholder Underwriter and Joint Lead

Underwriter, respectively.

Upon the completion of the Rights Issue, the Company will be able to comply with the public float

requirement as set out under Rule 8.08(1) of the Hong Kong Listing Rules. The Company has not engaged in

any equity fund raising activities in the past 12 months from the Latest Practicable Date.

(VI) REASONS FOR THE RIGHTS ISSUE AND USE OF PROCEEDS

The purpose of the Rights Issue is to improve the core capital adequacy ratio of the Company to support

the continuing development and growth of its business. All the net proceeds (after deducting all the cost and

expenses incidental to the Rights Issue) to be raised by the Rights Issue in an aggregate amount of

approximately RMB34,704.3 million (equivalent to approximately HK$43,621.4 million) (assuming full

subscription for the A Rights Shares) or RMB26,137.4 million (equivalent to approximately HK$32,853.2

million) (assuming 70% subscription for the A Rights Shares) will be applied towards such purpose.

After taking into consideration of various means to raise funding commonly adopted by PRC commercial

banks, the Directors consider that the Rights Issue is an appropriate mean of raising funding to improve the

core capital adequacy ratio of the Company in the present circumstances and the terms of the Rights Issue are

fair and reasonable and in the best interests of the Company and the Shareholders as a whole.

LETTER FROM THE BOARD

– 119 –

(VII) ADDITIONAL INFORMATION

Your attention is also drawn to the additional information set out in the appendices to this prospectus.

H Shareholder Hotline

If you have questions in relation to the H Share Rights Issue, please telephone the H Shareholder hotline

on (852) 2862 8633 during business hours from 9:00 a.m. to 6:00 p.m., Monday to Friday (other than public

holidays).

Yours faithfully,

By Order of the Board

CHINA MERCHANTS BANK CO., LTD.

FU YUNING

Chairman

LETTER FROM THE BOARD

– 120 –

(1) SUMMARY OF FINANCIAL INFORMATION

An unqualified opinion with respect to the audit of the financial statements of the Group has been issued

for each of the three years ended 31 December 2012. A summary of the financial results of the Group prepared

under International Financial Reporting Standards (“IFRS”) as derived from the annual reports of the Group

for the three years ended 31 December 2012 and the interim report of the Group for the six months ended 30

June 2013 are set forth below:

Year ended 31 December Six months ended 30 June

2010 2011 2012 2012 2013

(unaudited) (unaudited)

(in millions of RMB, except percentages and per share data)

Results for the period

Net operating income 71,756 96,666 113,818 57,261 64,212

Operating expenses 32,634 40,889 48,350 22,146 24,238

Impairment losses on assets 5,501 8,350 5,583 4,144 4,959

Profit before tax 33,343 47,122 59,564 30,821 34,848

Net profit attributable to the

Bank’s shareholders 25,769 36,129 45,273 23,374 26,271

Per share (RMB)

Basic earnings 1.23 1.67 2.10 1.08 1.22

Diluted earnings 1.23 1.67 2.10 1.08 1.22

Period-end net assets attributable

to the Bank’s shareholders 6.21 7.65 9.29 8.40 9.84

Scale indicators as of the end

of the period

Share capital 21,577 21,577 21,577 21,577 21,577

Total shareholders’ equity 134,006 164,882 200,401 181,362 212,498

Total liabilities 2,268,501 2,629,941 3,207,698 3,141,339 3,598,131

of which: Deposits from

customers 1,897,178 2,220,060 2,532,444 2,456,436 2,797,578

Total assets 2,402,507 2,794,823 3,408,099 3,322,701 3,810,629

of which: Total loans and

advances to customers 1,431,451 1,641,075 1,904,463 1,783,903 2,098,078

Key financial ratios (%)

Return on average assets (after

tax) attributable to the Bank’s

shareholders1 1.15 1.39 1.46 1.53 1.46

Return on average equity

(after tax) attributable to the

Bank’s shareholders2 22.73 24.17 24.78 27.00 25.46

Cost-to-income ratio3 39.69 36.00 35.84 32.13 31.34

Non-performing loan ratio 0.68 0.56 0.61 0.56 0.71

Core capital adequacy ratio4 8.04 8.22 8.34 8.32 8.00

Capital adequacy ratio4 11.47 11.53 11.41 11.55 10.72

Notes:

1. Represents net profit attributable to the Bank’s shareholders for the period as a percentage of the average of total assets at the

beginning and end of the period, annualised.

2. Represents net profit attributable to the Bank’s shareholders for the period as a percentage of the average of total equity attributable

to the Bank’s shareholders at the beginning and end of the period, annualised.

3. Calculated by dividing operating expenses (excluding business tax and surcharges) by net operating income.

4. Calculated in accordance with the guidelines issued by CBRC. The core capital adequacy ratio and capital adequacy ratio as of 30

June 2013 and 31 December 2012 were calculated in accordance with the Administrative Measures for the Capital of Commercial

Banks (Trial Implementation). Core capital adequacy ratio for these periods means tier one capital adequacy ratio.

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

– I-1 –

(2) AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED 31

DECEMBER 2012, 2011 AND 2010 AND UNAUDITED CONSOLIDATED FINANCIAL

STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2013 AND 2012

The audited consolidated financial statements of the Group prepared in accordance with IFRS for the

years ended 31 December 2011 and 2010, together with the accompanying notes (the “2011 and 2010 Financial

Statements”), are included on pages 184 to 346 of the Group’s annual report for the year 2011 (the “2011

Annual Report”). The audited consolidated financial statements of the Group prepared in accordance with

IFRS for the years ended 31 December 2012 and 2011, together with the accompanying notes (the “2012 and

2011 Financial Statements”), are included on pages 148 to 313 of the Group’s annual report for the year 2012

(the “2012 Annual Report”). The unaudited consolidated financial statements of the Group prepared in

accordance with IFRS for the six months ended 30 June 2013 and 2012, together with the accompanying notes

(the “2013 and 2012 Interim Financial Statements”), are included on pages 95 to 170 of the Group’s interim

report for the six months ended 30 June 2013 (the “2013 Interim Report”). The 2011 and 2010 Financial

Statements (but not any other part of the 2011 Annual Report), the 2012 and 2011 Financial Statements (but

not any other part of the 2012 Annual Report) and the 2013 and 2012 Interim Financial Statements (but not

any other part of the 2013 Interim Report) are incorporated by reference into this prospectus and form part of

this prospectus. The 2011 Annual Report, the 2012 Annual Report and the 2013 Interim Report were released

on the website of the Hong Kong Stock Exchange (www.hkexnews.hk) and the website of the Company

(www.cmbchina.com) under “Investor Relations − Announcements” on 12 April 2012, 14 April 2013 and 16

August 2013, respectively, and have also been dispatched to holders of H Shares of the Company. The

information contained in these websites is not a part of this prospectus.

(3) RESULTS OF OPERATIONS

OVERVIEW

The Group’s net profit attributable to the Bank’s shareholders in 2010, 2011, 2012 and the first six

months of 2013 was RMB25,769 million, RMB36,129 million, RMB45,273 million and RMB26,271 million,

respectively. Net profit attributable to the Banks’ shareholders increased by 12.39% from the first six months

of 2012 to the first six months of 2013, mainly due to (i) an increase in revenue by 12.1% to RMB64,186

million, including an increase in net interest income by 8.7% to RMB47,441 million, and an increase in net

non-interest income by 23.2% to RMB16,745 million and (ii) a slower and moderate increase in our expenses,

including operating expenses, which increased by 9.45% to RMB24,238 million as compared with the first six

months of 2012. ROAA and ROAE attributable to the Bank’s shareholders for the first six months of 2013 were

1.46% and 25.46%, respectively, having decreased slightly from 1.53% and 27.00% for the first six months of

2012, respectively. Net profit attributable to the Bank’s shareholders increased by 25.31% from 2011 to 2012,

mainly due to (i) a steady increase in net interest income as a result of the improvement in asset structure and

the increase in assets; (ii) a decrease in the cost-to-income ratio, which was attributable to the further

standardization and refinement of the Group’s financial management, and (iii) steady growth in the Group’s

net fee and commission income as a result of the Group’s effort to further develop its non-interest income

business to capitalize on customers’ demand for comprehensive wealth management and the increased turnover

rate of capital resulting from increased consumer demand. Net profit attributable to the Bank’s shareholders

increased by 40.2% from 2010 to 2011, primarily due to a steady increase in the Group’s net interest income

as a result of the tightening of monetary policy and continued increase in the PBOC benchmark interest rate,

as well as improvements in the Group’s risk asset pricing capabilities.

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

– I-2 –

The following table sets forth the principal income statement items of the Group for the periods

indicated:

Year ended 31 December Six months ended 30 June

2010 2011 2012 2012 2013

(unaudited) (unaudited)

(in millions of RMB)

Net interest income 57,076 76,307 88,374 43,641 47,441

Net fee and commission income 11,330 15,628 19,739 9,732 14,164

Other net income 2,933 4,294 5,227 3,664 2,361

Insurance operating income 353 374 414 197 220

Total operating income 71,692 96,603 113,754 57,234 64,186

Operating expenses (including

business tax and surcharges) (32,634) (40,889) (48,350) (22,146) (24,238)

Provision for insurance claims (278) (305) (321) (150) (167)

Operating profit before

provisions 38,780 55,409 65,083 34,938 39,781

Impairment losses on assets (5,501) (8,350) (5,583) (4,144) (4,959)

Share of profits of associates 48 49 31 18 17

Share of profits of jointly

controlled entities 16 14 33 9 9

Profit before tax 33,343 47,122 59,564 30,821 34,848

Income tax (7,574) (10,995) (14,287) (7,448) (8,582)

Net profit 25,769 36,127 45,277 23,373 26,266

Net profit attributable to the

Bank’s shareholders 25,769 36,129 45,273 23,374 26,271

(I) Net interest income

Net interest income is the largest component of the Group’s operating income. In 2010, 2011, 2012 and

the first six months of 2013, net interest income accounted for 79.6%, 79.0%, 77.7% and 73.9%, respectively,

of the total operating income of the Group. The following table sets forth the interest income, interest expense

and net interest income of the Group for the periods indicated:

Year ended 31 December Six months ended 30 June

2010 2011 2012 2012 2013

(unaudited) (unaudited)

(in millions of RMB)

Interest income 84,513 121,245 150,101 73,819 80,383

Interest expense (27,437) (44,938) (61,727) (30,178) (32,942)

Net interest income 57,076 76,307 88,374 43,641 47,441

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

– I-3 –

In the first six months of 2013, the Group’s net interest income reached RMB47,441 million,

representing an increase of 8.7% as compared with the first six months of 2012, mainly attributable to an

increase in interest-earning assets. The Group’s net interest income increased by 15.8% from RMB76,307

million in 2011 to RMB88,374 million in 2012, mainly due to (i) an increase in the yield of interest-earning

assets as a result of improved customer structure and an optimized structure of interest-earning assets and (ii)

a steady increase in the volume of interest-earning assets. The Group’s net interest income increased by 33.7%

from RMB57,076 million in 2010 to RMB76,307 million in 2011. The increase primarily reflected the growth

in the Group’s business in 2011, the continued increase in the benchmark interest rate by the PBOC since

October 2010, as well as the Group’s efforts to accelerate the increase in net interest income by further

improving its loan pricing capabilities, optimizing loan structures and strengthening controls over the cost of

debt.

The following tables set forth, for the periods indicated, the average balance of the Group’s

interest-earning assets and interest-bearing liabilities, the related interest income or expense and the related

average yield or cost:

Six months ended 30 June

2012 2013

Average

balance(1)

Interest

income/

expense

Annualized

average

yield/cost

(%)

Average

balance(1)

Interest

income/

expense

Annualized

average

yield/cost

(%)

(in millions of RMB, except percentages)

Interest-earning Assets

Loans and advances 1,708,151 56,831 6.69% 2,007,856 60,707 6.10%

Debt investments 407,538 7,669 3.78 459,140 8,644 3.80

Balances with central bank 407,023 3,108 1.54 459,717 3,519 1.54

Placements with banks and

other financial institutions 295,953 6,211 4.22 384,960 7,513 3.94

Total interest-earning assets

and interest income 2,818,665 73,819 5.27 3,311,673 80,383 4.89

Interest-bearing Liabilities

Deposits from customers 2,136,299 20,316 1.91 2,510,044 23,031 1.85

Placements from banks and

other financial institutions 438,078 8,573 3.94 486,231 8,158 3.38

Issued debt 53,448 1,289 4.85 71,446 1,753 4.95

Total interest-bearing

liabilities and interest

expense 2,627,825 30,178 2.31 3,067,721 32,942 2.17

Net interest income — 43,641 — — 47,441 —

Net interest spread(2) — — 2.96 — — 2.72

Net interest margin(3) — — 3.11 — — 2.89

(1) Represents the average of the daily balance.

(2) Represents the difference between the average yield of total interest-earning assets and the average cost of total interest-bearing

liabilities.

(3) Represents the net interest income divided by the average balance of total interest-earning assets.

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

– I-4 –

Year ended 31 December

2010 2011 2012

Average

balance(1)

Interest

income/

expense

Average

yield/cost

(%)

Average

balance(1)

Interest

income/

expense

Average

yield/ cost

(%)

Average

balance(1)

Interest

income/

expense

Average

yield/cost

(%)

(in millions of RMB, except percentages)

Interest-earning Assets

Loans and advances 1,371,641 66,842 4.87% 1,544,580 93,837 6.08% 1,770,103 115,926 6.55%

Debt investments 318,471 9,178 2.88 359,388 12,568 3.50 424,382 15,944 3.76

Balances with central bank 246,000 3,546 1.44 350,505 5,312 1.52 415,349 6,392 1.54

Placements with banks and

other financial institutions 214,503 4,947 2.31 235,241 9,528 4.05 311,589 11,839 3.80

Total interest-earning assets

and interest income 2,150,615 84,513 3.93 2,489,714 121,245 4.87 2,921,423 150,101 5.14

Interest-bearing Liabilities

Deposits from customers 1,672,500 20,724 1.24 1,961,112 32,111 1.64 2,214,822 42,308 1.91

Placements from banks and

other financial institutions 295,820 4,842 1.64 329,108 10,958 3.33 449,871 16,648 3.70

Issued debt 40,082 1,871 4.67 38,495 1,869 4.86 56,843 2,771 4.87

Total interest-bearing

liabilities and interest

expense 2,008,402 27,437 1.37 2,328,715 44,938 1.93 2,721,536 61,727 2.27

Net interest income — 57,076 — — 76,307 — — 88,374 —

Net interest spread(2) — — 2.56 — — 2.94 — — 2.87

Net interest margin(3) — — 2.65 — — 3.06 — — 3.03

(1) Represents the average of the daily balance.

(2) Represents the difference between the average yield of total interest-earning assets and the average cost of total interest-bearing

liabilities.

(3) Represents the net interest income divided by the average balance of total interest-earning assets.

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

– I-5 –

The following table sets forth, for the periods indicated, a breakdown of changes in interest income and

interest expenses due to changes in volume of assets and liabilities and interest rate (changes in volume of

assets and liabilities are measured by changes in average balances, while changes in interest rate are measured

by changes in the average interest rates):

Year ended 31 December Six months ended 30 June

2011 compared with 2010 2012 compared with 2011 2013 compared with 2012

Increase/(decrease) due to Increase/(decrease) due to Increase/(decrease) due to

Volume Interest rate

Increase/

(decrease) Volume Interest rate

Increase/

(decrease) Volume Interest rate

Increase/

(decrease)

(unaudited) (unaudited)

(in millions of RMB)

Assets

Loans and advances 8,422 18,573 26,995 14,829 7,260 22,089 8,874 (4,998) 3,876

Debt investments 1,178 2,212 3,390 2,442 934 3,376 935 40 975

Balances with central bank 1,505 261 1,766 1,010 70 1,080 411 — 411

Placements with banks and

other financial institutions 479 4,102 4,581 2,899 (588) 2,311 1,713 (411) 1,302

Changes in interest

income 11,584 25,148 36,732 21,180 7,676 28,856 11,933 (5,369) 6,564

Liabilities

Deposits from customers 3,579 7,808 11,387 4,902 5,295 10,197 3,351 (636) 2,715

Placements from banks and

other financial institutions 546 5,570 6,116 4,472 1,218 5,690 802 (1,217) (415)

Issued debt (74) 72 (2) 898 4 902 437 27 464

Changes in interest

expense 4,051 13,450 17,501 10,272 6,517 16,789 4,590 (1,826) 2,764

Changes in net interest

income 7,533 11,698 19,231 10,908 1,159 12,067 7,343 (3,543) 3,800

1. Interest income

The Group’s interest income comprises interest income from loans and advances, debt investments, balances with the

central bank and placements with banks and other financial institutions.

In the first six months of 2013, the Group’s interest income reached RMB80,383 million, representing an increase of

8.9% as compared with the first six months of 2012, mainly due to an increase in interest-earning assets. Interest income

from loans and advances remains the largest component of the Group’s interest income.

The Group’s interest income increased by 23.8% from RMB121,245 million in 2011 to RMB150,101 million in 2012,

primarily due to an increase in yield on interest-earning assets as well as the growth in the size of interest-earning assets.

Interest income from loans and advances is still the largest component of the Group’s interest income. The Group’s interest

income increased by 43.5% from RMB84,513 million in 2010 to RMB121,245 million in 2011, mainly due to (i) the growth

in the size of interest-earning assets, which caused the Group’s interest income to grow by RMB11,584 million in 2011, and

(ii) an increase in yield on interest-earning assets, which caused the Group’s interest income to grow by RMB25,148 million

in 2011.

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

– I-6 –

(1) Interest income from loans and advances

Interest income from loans and advances is the largest component of the Group’s interest income, accounting for

79.1%, 77.4%, 77.2% and 75.5% of its total interest income in 2010, 2011, 2012 and the first six months of 2013,

respectively.

The following table sets forth the average balance, interest income and average yield of each component of loans and

advances of the Group for the periods indicated:

Year ended 31 December Six months ended 30 June

2010 2011 2012 2012 2013

Average

balance

Interest

income

Average

yield (%)

Average

balance

Interest

income

Average

yield (%)

Average

balance

Interest

income

Average

yield (%)

Average

balance

Interest

income

Average

yield (%)

Average

balance

Interest

income

Average

yield (%)

(unaudited) (unaudited)

(in millions of RMB, except percentages)

Corporate loans 800,990 39,723 4.96% 942,607 56,020 5.94% 1,072,195 68,719 6.41% 1,040,131 33,963 6.57% 1,207,366 34,972 5.84%

Discounted bills 126,204 4,693 3.72 70,988 5,675 7.99 88,968 5,904 6.64 91,657 3,396 7.45 91,237 2,323 5.13

Retail loans 444,447 22,426 5.05 530,985 32,142 6.05 608,940 41,303 6.78 576,363 19,472 6.79 709,253 23,412 6.66

Total 1,371,641 66,842 4.87% 1,544,580 93,837 6.08% 1,770,103 115,926 6.55% 1,708,151 56,831 6.69% 2,007,856 60,707 6.10%

In the first six months of 2013, interest income from loans and advances reached RMB60,707 million,

representing an increase of RMB3,876 million, or 6.82%, as compared with the first six months of 2012. In

the first six months of 2013, the annualized average yield on the Group’s loans and advances was 6.10%,

representing a decrease of 59 basis points, as compared with the first six months of 2012. In the first six months

of 2013, the average balance of short-term loans was RMB1,007,450 million, interest income from short-term

loans was RMB32,163 million and the annualized average yield on short-term loans was 6.44%; the average

balance of medium- to long-term term loans was RMB842,735 million, interest income from medium- to

long-term loans was RMB25,298 million and the annualized average yield on medium- to long-term loans was

6.05%.

Interest income from loans and advances increased by RMB22,089 million, or 23.5%, from RMB93,837

million in 2011 to RMB115,926 million in 2012, primarily due to an improvement in the Group’s loan structure

and the continued improvement in the Group’s risk pricing capabilities for loans. The average yield on the

Group’s loans and advances was 6.55% in 2012, representing an increase of 47 basis points from 2011. In 2012,

the average balance of short-term loans was RMB819,483 million, interest income from short-term loans was

RMB57,830 million and the average yield on short-term loans was 7.06%; the average balance of medium- to

long-term loans was RMB821,469 million, interest income from medium- to long-term loans was RMB52,563

million and the average yield on medium- to long-term loans was 6.40%. Interest income from loans and

advances increased by 40.4% from RMB66,842 million in 2010 to RMB93,837 million in 2011, mainly due

to continued improvements in the Group’s loan risk pricing capabilities and the increase in the PBOC

benchmark interest rate. The average yield on loans and advances in 2011 was 6.08%, representing an increase

of 121 basis points from 2010.

(i) Interest income from corporate loans

Interest income from corporate loans is an important component of the Group’s interest income from

loans and advances. In the first six months of 2013, the Group’s interest income from corporate loans reached

RMB34,972 million, representing an increase of 3.0% from RMB33,963 million in the first six months of 2012,

mainly due to the expansion of our corporate loan portfolio. In the first six months of 2013, the Group’s

annualized average yield on corporate loans was 5.84%, representing a decrease of 73 basis points from the

first six months of 2012.

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

– I-7 –

The Group’s interest income from corporate loans increased by 22.7% from RMB56,020 million in 2011

to RMB68,719 million in 2012, primarily due to the continued improvement in the Group’s pricing capabilities

for corporate loans. The average yield of corporate loans was 6.41% in 2012, representing an increase of 47

basis points from 2011. The Group’s interest income from corporate loans increased by 41.0% from

RMB39,723 million in 2010 to RMB56,020 million in 2011. The increase in interest income from corporate

loans was mainly attributable to (i) an increase in the Group’s overall interest income, as a result of the

continued increase in the benchmark interest rate set by the PBOC since October 2010; (ii) improvements in

the Group’s pricing capabilities for corporate loans, which resulted in an increase in the average yield of

corporate loans by 98 basis points to 5.94% in 2011 compared to 2010; and (iii) improvements in the Group’s

loan structure, which the Group believes will enable it to further develop its small- and medium-sized

enterprise business as part of its key strategic business initiatives and to further increase its capital efficiency

and profitability.

(ii) Interest income from discounted bills

In the first six months of 2013, the Group’s interest income from discounted bills decreased by 31.6%

to RMB2,323 million from RMB3,396 million in the first six months of 2012, primarily due to (i) intense

competition in the discounted bill market and the general decrease in interest rates in the discounted bill

market, which resulted in a decrease of 150 basis points in the average interest rate in the discounted bill

market in the first six months of 2013 as compared to the first six months of 2012, which was largely

attributable to a stable but loosening monetary policy and a general decrease in the demand for loans in the

first quarter; and (ii) our efforts to support the real economy by adjusting our loan portfolio and increasing the

extension of loans, which resulted in a decrease of RMB12.89 billion in the balance of discounted bills as of

30 June 2013 as compared with 30 June 2012, a decrease by 0.5% in the average balance of our discounted

bills from RMB91,657 million in the first six months of 2012 to RMB91,237 million in the first six months

of 2013, and a decrease in the annualized average yield on discounted bills from 7.45% in the first six months

of 2012 to 5.13% in the first six months of 2013.

The Group’s interest income from discounted bills increased by 4.0% from 2011 to 2012, primarily due

to growth in the Group’s discounted bills business. The average balance of the Group’s discounted bills

increased by 25.3% from RMB70,988 million in 2011 to RMB88,968 million in 2012. The average yield of

discounted bills decreased from 7.99% in 2011 to 6.64% in 2012. The Group’s interest income from discounted

bills increased by 20.9% from RMB4,693 million in 2010 to RMB5,675 million in 2011. The increase in

interest income from discounted bills was mainly attributable to an increase in the overall yield on the Group’s

discounted bills portfolio, which increased to 7.99% in 2011 from 3.72% in 2010, as the Group took advantage

of the favorable market condition of increasing PBOC benchmark interest rates by increasing the proportion

of discounted bills with higher yields in its asset portfolio.

(iii) Interest income from retail loans

Driven by the Group’s business strategy to develop its retail banking business, interest income from the

Group’s retail loans increased from 2010 to the first six months of 2013.

In the first six months of 2013, interest income from the Group’s retail loans increased by 20.2% to

RMB23,412 million as compared with the first six months of 2012, mainly due to the expansion in our retail

loans. In the first six months of 2013, the average balance of the Group’s retail loans increased by

RMB132,890 million, or 23.06%, to RMB709,253 million, as compared with the first six months of 2012. The

annualized average yield of the Group’s retail loans decreased slightly from 6.79% in the first six months of

2012 to 6.66% in the first six months of 2013, which was mainly due to the two consecutive decreases in

interest rates by the PBOC in 2012. The interest rates of our retail loans decreased at a slower pace than the

benchmark interest rate of the PBOC.

In 2010, 2011 and 2012, the interest income from retail loans of the Group was RMB22,426 million,

RMB32,142 million and RMB41,303 million, respectively. Interest income from retail loans increased by

28.5% from 2011 to 2012, mainly due to the Group’s efforts to actively improve its retail loan risk pricing

capabilities and speed up the adjustment of its retail loan structure by promoting loans to small and micro

businesses in which the Group has relatively higher pricing capabilities. The balance of personal business loans

increased by 101.3% from 2011 to 2012, and as a percentage of retail loans, increased by 10.67 percentage

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

– I-8 –

points compared to 2011. The average yield of the Group’s retail loans increased from 6.05% in 2011 to 6.78%

in 2012. Interest income from retail loans increased by 43.3% from 2010 to 2011, primarily due to the

continued increase in the benchmark interest rate set by the PBOC since 2010 and efforts of the Group in recent

years to (i) expand its retail loan business, (ii) continue the development of a diversified retail loan business,

(iii) further improve retail loan risk pricing capabilities and return on capital and (iv) further develop personal

consumption loan and personal business loan businesses, among other non-housing loans, while at the same

time developing its personal housing loan business, all of which, as a result, contributed to the increase in the

Group’s retail loan profitability.

(2) Interest income from debt investments

In 2010, 2011, 2012 and the first six months of 2013, interest income from debt investments of the Group

accounted for 10.9%, 10.4%, 10.6% and 10.8%, respectively of the Group’s interest income. In the first six

months of 2013, the interest income from the Group’s debt investment increased by 12.7% to RMB8,644

million as compared with RMB7,669 million in the first six months of 2012. The annualized average yield on

the Group’s debt investments increased from 3.78% in the first six months of 2012 to 3.80% in the first six

months of 2013.

In 2010, 2011 and 2012, the interest income from debt investments of the Group was RMB9,178 million,

RMB12,568 million and RMB15,944 million, respectively, representing an increase of 36.9% from 2010 to

2011 and an increase of 26.9% from 2011 to 2012. The increase in interest income from debt investments

during these periods was mainly attributable to the increase in the average balance of interest-earning assets

of the Group’s debt investments from 2010 to 2012. The increase in interest income from debt investments was

also attributable to the increases in the average yield on the Group’s debt investments, which increased to

3.76% in 2012, representing an increase of 88 basis points and 26 basis points from 2010 and 2011,

respectively.

(3) Interest income from deposits with the central bank

The Group’s interest income from deposits with the central bank consists primarily of interest income

from statutory deposit reserves and interest income from surplus deposit reserves. In the first six months of

2013, the Group’s interest income from deposits with the central bank was RMB3,519 million, representing

an increase of 13.2% from RMB3,108 million in the first six months of 2012, which was mainly due to the

increase in the average balance of the Group’s deposits with the central bank.

The Group’s interest income from deposits with the central bank was RMB3,546 million, RMB5,312

million and RMB6,392 million in 2010, 2011 and 2012, respectively, representing an increase of 49.8% from

2010 to 2011 and an increase of 20.3% from 2011 to 2012. The increase in interest income from deposits during

these periods was mainly attributable to increases in the average balance of deposits placed with the PBOC

from 2010 to 2012, principally as a result of the growth in the balance of the Group’s deposits and the

continued increase in PBOC reserve requirements applicable to financial institutions in the PRC.

(4) Interest income from deposits and placements with banks and other financial institutions

Interest income from deposits and placements with banks and other financial institutions consists

primarily of interest income from deposits with banks and other financial institutions, placements with banks

and other financial institutions, and financial assets held under resale agreements. In 2010, 2011, 2012 and the

first six months of 2013, the Group’s interest income from deposits and placements with banks and other

institutions accounted for 5.9%, 7.9%, 7.9% and 9.3% of its interest income, respectively. In the first six

months of 2013, interest income from deposits and placements with banks and other financial institutions was

RMB7,513 million, representing an increase of 21.0% from RMB6,211 million in the first six months of 2012,

which was mainly due to the increase in the average balance of the deposits with banks and other financial

institutions.

In 2010, 2011 and 2012, the Group’s interest income from deposits and placements with banks and other

financial institutions was RMB4,947 million, RMB9,528 million and RMB11,839 million, respectively. The

Group’s interest income from deposits and placements with banks and other financial institutions increased by

24.3% from 2011 to 2012, primarily due to an increase in the average balance of the Group’s deposits and

placements with banks and other financial institutions. The Group’s interest income from deposits and

placements with banks and other financial institutions increased by 92.6% from 2010 to 2011, mainly due to

higher average yields on the Group’s deposits and placements with banks and other financial institutions,

which increased by 174 basis points from 2010 to 2011 as a result of the increase in market interest rates.

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

– I-9 –

2. Interest expense

The Group’s interest expense consists of interest expense on deposits from customers, interest expense

on deposits and placements from banks and other financial institutions, and interest expense on outstanding

debts.

In the first six months of 2013, the Group’s interest expense reached RMB32,942 million, representing

an increase of RMB2,764 million, or 9.2%, as compared with the first six months of 2012, mainly due to an

increase in interest-bearing liabilities. The Group’s annualized average cost of interest-bearing liabilities

decreased from 2.31% in the first six months of 2012 to 2.17% in the first six months of 2013.

The Group’s interest expense increased by 37.4% from RMB44,938 million in 2011 to RMB61,727

million in 2012, primarily due to the structural change and an increase in the average balance of

interest-bearing liabilities. The average cost of interest-bearing liabilities increased from 1.93% in 2011 to

2.27% in 2012, mainly due to intensified competition in the banking industry, customers’ increased use of time

deposits, the Group’s active incurrence of debts such as the issuance of financial bonds, as well as the increase

in the industry average cost of debt resulting from rising market interest rates. The Group’s interest expense

increased by 63.8% from RMB27,437 million in 2010 to RMB44,938 million in 2011, mainly due to an

increase in the average cost of interest-bearing liabilities as a result of the continued increase in the benchmark

interest rate set by the PBOC since 2010. The Group’s average cost of interest-bearing liabilities increased

from 1.37% in 2010 to 1.93% in 2011.

(1) Interest expense on deposits from customers

Interest expense on deposits from customers is the largest component of the Group’s interest expense.

In 2010, 2011, 2012 and the first six months of 2013, the Group’s interest expense on deposits from customers

accounted for 75.5%, 71.5%, 68.5% and 69.9%, respectively, of its interest expense.

The following table sets forth the Group’s average balance, interest expense and average cost for

corporate and retail deposits by product type for the periods indicated:

Six months ended 30 June

2012 2013

Average

balance

Interest

expense

Annualized

Average

cost (%)

Average

balance

Interest

expense

Annualized

Average

cost (%)

(In millions of RMB, except percentages)

Corporate deposits

Demand 668,860 2,554 0.77% 745,708 2,593 0.70%

Time 689,495 11,299 3.30 856,162 13,269 3.13

Subtotal 1,358,355 13,853 2.05 1,601,870 15,862 2.00

Retail deposits

Demand 451,438 1,296 0.58 525,164 1,347 0.52

Time 326,506 5,167 3.18 383,010 5,822 3.07

Subtotal 777,944 6,463 1.67 908,174 7,169 1.59

Total deposits from

customers 2,136,299 20,316 1.91% 2,510,044 23,031 1.85%

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

– I-10 –

Year ended 31 December

2010 2011 2012

Average

balance

Interest

expense

Average

cost (%)

Average

balance

Interest

expense

Average

cost (%)

Average

balance

Interest

expense

Average

cost (%)

(In millions of RMB, except percentages)

Corporate deposits

Demand 560,923 3,516 0.63% 652,815 4,789 0.73% 684,050 5,061 0.74%

Time 476,989 9,392 1.97 602,728 16,654 2.76 727,811 23,900 3.28

Subtotal 1,037,912 12,908 1.24 1,255,543 21,443 1.71 1,411,861 28,961 2.05

Retail deposits

Demand 357,082 1,842 0.52 409,431 2,478 0.61 461,912 2,659 0.58

Time 277,506 5,974 2.15 296,138 8,190 2.77 341,049 10,688 3.13

Subtotal 634,588 7,816 1.23 705,569 10,668 1.51 802,961 13,347 1.66

Total deposits from

customers 1,672,500 20,724 1.24% 1,961,112 32,111 1.64% 2,214,822 42,308 1.91%

In the first six months of 2013, the Group’s interest expense on deposits from customers was

RMB23,031 million, representing an increase of RMB2,715 million, or 13.4%, as compared with the first six

months of 2012, which was mainly due to an increase of 17.5% in the average balance of deposits from

customers. The annualized average cost of deposits from customers decreased by 6 basis points from the first

six months of 2012.

Interest expense on deposits from customers increased by RMB10,197 million, or 31.8% from

RMB32,111 million in 2011 to RMB42,308 million in 2012, mainly due to (i) an increase in the average

balance of deposits from customers by 12.9% compared to 2011 and (ii) an increase of 27 basis points in the

average cost on deposits compared to 2011. The increase in the average cost on deposits was primarily

attributable to (i) the accelerated interest rate liberalization by the PBOC, which resulted in a wider floating

range of interest rates for deposits and loans, (ii) customers’ increased use of time deposits due to the diversion

of deposits to the capital markets and wealth management products, although the Group was able to maintain

its advantage in the cost on deposits due to its relatively high proportion of demand deposits compared with

other banks, and (iii) the Group’s efforts to actively incur, at a moderate level, treasury time deposits and

agreement deposits to enhance liquidity management and stabilize the source of funding. Interest expense on

deposits from customers increased by 54.9% from RMB20,724 in 2010 to RMB32,111 in 2011, primarily due

to an increase in the average balance of deposits from customers by 17.3% compared to 2010 and an increase

of 40 basis points in the average cost on deposit rates compared to 2010.

(i) Interest expense on corporate deposits

Interest expense on corporate deposits represents a significant portion of the Group’s total interest

expense on deposits from customers, accounting for 62.3%, 66.8%, 68.5% and 68.9% of interest expense on

deposits from customers in 2010, 2011, 2012 and the first six months of 2013, respectively. The Group’s

interest expense on corporate deposits increased by 14.5% to RMB15,862 million in the first six months of

2013, mainly due to an increase of 17.9% in the average balance of deposits from corporate customers.

The Group’s interest expense on corporate deposits increased by 35.1% from RMB21,443 million in

2011 to RMB28,961 million in 2012, mainly due to a 12.5% increase in the average balance of corporate

deposits, and an increase of 34 basis points in the average cost of corporate deposits. The Group’s interest

expense on corporate deposits increased by 66.1% from RMB12,908 million in 2010 to RMB21,443 million

in 2011, primarily due to (i) an increase of 21.0% in the average balance of corporate deposits and (ii) increases

in the average cost of deposit for demand deposits and time deposits of 10 basis points and 79 basis points,

respectively, consistent with the continued increase in the PBOC benchmark interest rate since 2010.

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

– I-11 –

(ii) Interest expense on retail deposits

The retail deposit products of the Group mainly consist of demand and time deposits. Retail deposits are

a significant source of low-cost funding for the Group. In the first six months of 2013, the Group actively

coped with the complicated market conditions and widened its customer base, expanded the channels for the

sourcing of savings deposits and optimized the allocation of customer assets, and succeeded in maintaining

stable growth in retail customer deposits. In the first six months of 2013, the Group’s interest expense on retail

deposits increased by 10.9% to RMB7,169 million as compared with the first six months of 2012, primarily

due to a 16.7% increase in the average balance of retail deposits.

The Group’s interest expense on retail deposits increased by 25.1% from RMB10,668 million in 2011

to RMB13,347 million in 2012, primarily as a result of a 13.8% increase in the average balance of retail

deposits and an increase of 15 basis points in the average deposit rate for retail deposits. The Group’s interest

expense on retail deposits increased by 36.5% from RMB7,816 million in 2010 to RMB10,668 million in 2011,

mainly due to the steady expansion of the Group’s retail customer base and the scale of the retail deposit

balance, which increased by 11.2% to RMB705,569 million in 2011, as well as an increase in the average

deposit rate for retail deposits, which increased by 28 basis points to 1.51% in 2011 as a result of the continued

increase in the PBOC benchmark interest rate since 2010.

(2) Interest expense on placements from banks and other financial institutions

Interest expense on placements from banks and other financial institutions includes interest expense on

placements from banks and other financial institutions, interest expense on inter-bank borrowing and interest

expense on repurchase agreements. The Group’s interest expense on placements from banks and other financial

institutions in 2010, 2011, 2012 and the first six months of 2013 accounted for 17.6%, 24.4%, 27.0% and

24.8% of the Group’s total interest expense, respectively.

In the first six months of 2013, the Group’s interest expense on placements from banks and other

financial institutions decreased by RMB415 million to RMB8,158 million from RMB8,573 million in the first

six months of 2012, primarily due to a decrease of 56 basis points in the average cost on an annualized basis.

The Group’s interest expense on placements from banks and other financial institutions increased by

RMB5,690 million from RMB10,958 million in 2011 to RMB16,648 million in 2012, primarily due to an

increase of 36.7% in the average balance of placements from banks and other financial institutions and an

increase of 37 basis points in the average cost. The Group’s interest expense on placements from banks and

other financial institutions increased by 126.3% from RMB4,842 million in 2010 to RMB10,958 million in

2011, mainly due to the increase in market interest rates.

(3) Interest expense on issued debts

In 2010, 2011, 2012 and the first six months of 2013, the Group’s interest expense on issued debts was

RMB1,871 million, RMB1,869 million, RMB2,771 million and RMB1,753 million, respectively, accounted for

6.8%, 4.2%, 4.5% and 5.3%, respectively, of the Group’s interest expense.

In the first six months of 2013, interest expense on issued debts of the Group increased by 36.0% to

RMB1,753 million from RMB1,289 million for the first six months of 2012, mainly due to a 33.7% increase

in issued debts in the first six months of 2013 as compared with the first six months of 2012 and an increase

of 10 basis points in the average cost on an annualized basis.

Interest expense on issued debts of the Group increased by 48.3% from 2011 to 2012, mainly due to an

increase of 47.7% in the amount of issued debts compared to 2011.

3. Net interest margin and interest spread

Net interest margin is the ratio of net interest income to the average balance of total interest-earning

assets. Net interest spread represents the difference in the average yield of interest-earning assets and the

average cost of interest-earning liabilities.

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

– I-12 –

(1) Net interest margin

The Group’s annualized net interest margin decreased by 22 basis points to 2.89% as compared with the

first six months of 2012, mainly due to a decrease of 59 basis points in the yield on general loans as compared

with the first six months of 2012 and the resulting decrease of 30 basis points in the net interest margin, which

were attributable to a combination of factors, including the re-pricing of loans against the backdrop of the

decrease in interest rates as well as the increase in the amount of foreign currency loans. Our re-pricing of

deposits and the increase in the interest spread between placements from banks and other financial institutions

and placements with banks and other financial institutions helped offset the decrease in net interest margin.

The Group’s net interest margin decreased by 3 basis points from 3.06% in 2011 to 3.03% in 2012, mainly

due to the decrease in the PBOC benchmark interest rate as well as the PBOC’s policy to widen the floating range

for the interest rates of loans. In addition, the Group proactively coped with the trend of interest rate liberalization

and financial disintermediation, vigorously pushed forward the Second Transformation, and undertook measures to

ensure the stabilization of the net interest margin to further increase net interest income. These measures include:

(i) enhancing our customer base, adjusting customer structure and strengthening our support to small enterprises and

small and micro enterprise customers; (ii) establishing a loan risk pricing mechanism and improving deposit

differentiation pricing capabilities to increase risk return, and (iii) proactively applying management accounting and

further promoting refined management to enhance cross-selling capabilities and utilization of internal sources. In

2012, the Group’s average yield on interest-earning assets increased by 27 basis points compared to 2011, whereas

the Group’s average cost of interest-bearing liabilities increased by 34 basis points compared to 2011. The net

interest margin of the Group in 2010 and 2011 was 2.65% and 3.06%, respectively. The 41-basis-point increase from

2010 to 2011 was primarily due to the increases in the PBOC benchmark interest rates since October 2010.

(2) Net interest spread

Primarily due to the foregoing factors, in 2010, 2011, 2012 and the first six months of 2013, the net

interest spread of the Group was 2.56%, 2.94%, 2.87% and 2.72%, respectively.

(II) NET NON-INTEREST INCOME

The net non-interest income of the Group mainly consists of net fee and commission income and other

net income. In 2010, 2011, 2012 and the first six months of 2013, net non-interest income accounted for 20.5%,

21.1%, 22.4% and 26.1%, respectively, of the Group’s operating income.

The following table sets forth the principal components of the Group’s net non-interest income during

the periods indicated:

Year ended 31 December

Six months ended

30 June

2010 2011 2012 2012 2013

(in millions of RMB)

Fee and commission income 12,409 16,924 21,167 10,411 15,083

Fee and commission expenses (1,079) (1,296) (1,428) (679) (919)

Net fee and commission income 11,330 15,628 19,739 9,732 14,164

Other net income 2,933 4,294 5,227 3,664 2,361

Insurance operation income 353 374 414 197 220

Share of profits of associates and

jointly controlled entities 64 63 64 27 26

Total non-interest income, net 14,680 20,359 25,444 13,620 16,771

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

– I-13 –

In the first six months of 2013, the Group’s net non-interest income increased by RMB3,151 million as

compared with the first six months of 2012, or 23.14%, to RMB16,771 million, of which net non-interest

income from retail banking business increased by 46.03% as compared with the first six months of 2012, to

RMB8,023 million, accounting for 47.84% of the Group’s net non-interest income, and net non-interest income

from wholesale banking business increased by 7.82% as compared with the first six months of 2012, to

RMB7,691 million, accounting for 45.86% of the Group’s net non-interest.

The Group’s net non-interest income increased by RMB5,085 million, or 25.0%, from RMB20,359

million in 2011 to RMB25,444 million in 2012, primarily due to (i) rapid growth in income generated from

the Group’s wealth management and asset management businesses, as a result of the increase in agency sale

of trust and insurance products and supply of wealth management products and services in response to

customers’ demand for comprehensive wealth management services, (ii) the rapid increase in income generated

from the Group’s credit card installment and Internet banking businesses, as a result of the Group’s taking

advantage of an increased turnover rate of capital due to increased demand in consumer consumption and

improved service channels; and (iii) rapid growth in the Group’s return on bill spread, as a result of the Group’s

increased efforts to expand its bills business and increase its bills turnover rate by taking advantage of the

declining interest rates on bills. The Group’s net non-interest income increased by 38.7% from RMB14,680

million in 2010 to RMB20,359 million in 2011, mainly due to the Group’s achievement in vigorously

developing fee- and commission-based businesses and increasing non-interest income.

1. Net fee and commission income

Net fee and commission income mainly consists of bank card fees, agency service fees and settlement

and clearing fees. In 2010, 2011, 2012 and the first six months of 2013, the net fee and commission income

of the Group accounted for 77.2%, 76.8%, 77.6% and 84.5%, respectively, of its net non-interest income.

The following table sets forth the principal components of the Group’s net fee and commission income

during the periods indicated:

Year ended 31 December As of 30 June

2010 2011 2012 2012 2013

(in millions of RMB)

Fee and commission income

Bank card fees 3,710 4,359 5,825 2,621 3,730

Settlement and clearing fees 1,386 2,042 2,211 1,088 1,250

Agency service fees 3,062 3,400 3,924 1,975 2,640

Commissions from credit

commitment and loan business 1,114 1,563 2,229 1,186 1,436

Commissions from custody and

other trustee businesses 1,793 3,032 4,594 2,333 3,456

Others 1,344 2,528 2,384 1,208 2,571

Total 12,409 16,924 21,167 10,411 15,083

Fee and commission expense (1,079) (1,296) (1,428) (679) (919)

Net fee and commission income 11,330 15,628 19,739 9,732 14,164

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

– I-14 –

In the first six months of 2013, the Group’s net fee and commission income increased by RMB4,432

million, or 45.5%, mainly due to the increase in commission fee from custody and other trustee business, bank

card fees, financial advisory fees and agency service fees.

The Group’s net fee and commission income increased by RMB4,111 million, or 26.3% from

RMB15,628 million in 2011 to RMB19,739 million in 2012, primarily due to the increase in commission

income from custody and other trustee businesses, bank card fees and commission income from the credit

commitment and loan business. The Group’s net fee and commission income increased by RMB4,298 million,

or 37.9% from RMB11,330 million in 2010 to RMB15,628 million in 2011, mainly due to the growth of

custody and other trustee businesses and increase in commission income from the credit commitment and loan

business, remittance and settlement fees and bank card fees.

(1) Income from bank card fees

Changes in the Group’s income from bank card fees are mainly driven by the number of credit cards

issued and the transaction volume of credit cards. Since the transformation of our credit card business in 2008,

our growth strategy migrated from a model that focused on rapidly expanding the number of new customers

to a model that focused on the development of a targeted customer base and a balance of risk and return. As

a result, our credit card business now focuses more on per-card contribution and cross-selling than on the

number of cards issued, which has led to the change in our income from bank card fees.

In the first six months of 2013, the Group’s income from bank card fees increased by RMB1,109 million,

or 42.3%, to RMB3,730 million, as compared with the first six months of 2012.

The Group’s income from bank card fees increased by RMB1,466 million, or 33.6% from RMB4,359

million in 2011 to RMB5,825 million in 2012, mainly due to increases in income from the credit card

installment business and credit card POS transactions. The Group’s income from bank card fees increased by

RMB649 million, or 17.5% from RMB3,710 million in 2010 to 4,359 million in 2011, mainly due to an

increase in the number of credit cards issued, the transaction volume of credit cards and income from credit

card POS transaction.

(2) Income from remittance and settlement fees

Income from remittance and settlement fees had been relatively stable in 2010, 2011, 2012 and the first

six months of 2013.

In the first six months of 2013, the Group’s income from remittance and settlement fees increased by

RMB162 million, or 14.9%, as compared with the first six months of 2012, mainly due to the stable increase

in the volume of remittance and settlement transactions.

The Group’s income from remittance and settlement fees increased by RMB169 million, or 8.3% from

RMB2,042 million in 2011 to RMB2,211 million in 2012, mainly due to an increase in the volume of

remittance and settlement transactions. The Group’s income from remittance and settlement fees increased by

47.3% from RMB1,386 million in 2010 to RMB2,042 million in 2011.

(3) Income from agency service fees

In the first six months of 2013, the Group’s income from agency service fees increased by RMB665

million, or 33.7%, to RMB2,640 million as compared with the first six months of 2012, mainly due to the stable

increase in insurance agency and fund agency businesses.

In 2012, the Group’s income from agency service fees was RMB3,924 million, representing an increase

of RMB524 million, or 15.4% from RMB3,400 million for 2011, mainly due to the fast growth of income from

agency sales of insurance and debt underwriting. The Group’s income from agency service fees was RMB3,062

million and RMB3,400 million in 2010 and 2011, respectively, representing an 11.0% increase from 2010 to

2011. The increase was primarily attributable to the development of the Group’s fund agency, securities agency

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

– I-15 –

and insurance agency businesses and underwriting of short-term corporate finance bonds, in light of the general

recovery trend of the domestic capital markets after the global financial crisis in 2008, and the increase in the

transaction volume of the Group’s remittance and settlement business as a result of the steady expansion of

business scale and the customer base.

(4) Commission income from credit commitment and loan business

In the first six months of 2013, the Group’s commission income from its credit commitment and loan

business increased by RMB250 million, or 21.1%, to RMB1,436 million as compared with the first six months

of 2012, mainly due to the stable increase in international guarantees, domestic letters of credit and factoring

businesses.

The Group’s commission income from the credit commitment and loan business increased by RMB666

million, or 42.6% from RMB1,563 million in 2011 to RMB2,229 million in 2012, mainly due to the rapid

increase in fees from financial leasing, domestic letters of credit and international guarantees and factoring

businesses. In 2011, the commission income from the credit commitment and loan business of the Group was

RMB1,563 million, representing an increase of 40.3% from RMB1,114 million in 2010, primarily due to the

increase in fees from retail loans and other commitment businesses.

(5) Commission income from custody and other trustee businesses

In the first six months of 2013, the Group’s commission income from custody and other trustee

businesses increased by RMB1,123 million, or 48.1%, to RMB3,456 million as compared with the first six

months of 2012, mainly due to the rapid growth of income from the Group’s wealth management business, such

as the trustee wealth management business, as a result of the increased sales of wealth management products.

The Group’s commission income from custody and other trustee businesses increased by RMB1,562

million, or 51.5%, from RMB3,032 million in 2011 to RMB4,594 million in 2012, mainly due to the rapid

growth of income from the Group’s wealth management business, such as the trustee wealth management

business, as a result of the increased sales of wealth management products in response to customers’ demand

for comprehensive wealth management products. In 2012, fees generated from agency sales of trusts were

RMB1,868 million, representing an increase of RMB1,022 million compared to 2011, and fees generated from

sales of trustee wealth management products were RMB1,853 million, representing an increase of RMB432

million compared to 2011. In 2011, the commission income from custody and other trustee businesses of the

Group was RMB3,032 million, representing an increase of 69.1% from RMB1,793 million in 2010, primarily

due to the increase in income from the entrusted wealth management business as well as fees from trust agency

services.

(6) Fee and commission expense

Fee and commission expense is mainly and directly related to the number of credit cards issued,

transaction volume through POS machines and transaction volume of precious metals.

In the first six months of 2013, the Group’s fee and commission expense increased by 35.3% to RMB919

million as compared with RMB679 million in the first six months of 2012, driven mainly by increases in the

issuance and transaction volume of credit cards.

The Group’s fee and commission expense increased by 10.2% from RMB1,296 million in 2011 to

RMB1,428 million in 2012, mainly driven by the growth in the number of credit cards issued, transaction

volume through POS machines and transaction volume of precious metals. In 2011, the fee and commission

expense of the Group was RMB1,296 million, representing an increase of 20.1% from RMB1,079 million in

2010, driven primarily by the issuance volume and transaction volume of credit cards.

2. Other net income

Other net income of the Group mainly consists of net trading gains, net gain on financial instruments at

fair value through profit or loss, net gain on disposal of available-for-sale financial assets, distributions from

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

– I-16 –

investment in funds, net gain on disposal and retirement of fixed assets, rental income and bills spread income.

Changes in other net income were primarily due to changes in unrealized gains or losses of various financial

instruments and changes in exchange rates.

The following table sets forth the principal components of other net income of the Group for the periods

indicated:

Year ended 31 December Six months ended 30 June

2010 2011 2012 2012 2013

(in millions of RMB)

Net gain/(loss) arising from:

— Foreign currency dealings 1,356 1,516 1,296 836 714

— Securities, derivatives and

other trading activities 591 656 425 338 395

Net gain/(loss) on financial

instruments at fair value

through profit or loss (172) 27 180 165 (472)

Net gain/(loss) on disposal of

available-for-sale financial

assets 151 (250) 78 112 114

Gain from fund investments 15 22 24 16 12

Rental income 217 281 318 53 190

Bills spread income(1) 593 1,791 2,766 1,997 1,252

Others 182 251 140 147 156

Total other net income 2,933 4,294 5,227 3,664 2,361

(1) The Group changed the accounting policy for recognition of income from sales of bills in June 2010. After the revision, when a buyout

discounted bill is transferred out, the difference between the unamortized discounted interest income and the re-discounting cost is

treated as spread income, which was treated as interest income before the revision. The Bank believes the new accounting policy more

accurately reflects the nature of the business.

In the first six months of 2013, total other net income of the Group decreased by 35.6% from RMB3,664

million in the first six months of 2012 to RMB2,361 million. Total other net income of the Group increased

by 21.7% from RMB4,294 million in 2011 to RMB5,227 million in 2012. Total other net income increased by

46.4% from RMB2,933 million in 2010 to RMB4,294 million in 2011. The considerable fluctuations in the

Group’s other net income were due to the considerable fluctuations on profits or losses on the changes in fair

value of financial instruments, tradable financial instruments and derivatives categorized as financial

instruments at fair value through profit or loss, reflecting the impact of fluctuating market conditions in recent

years on the affected assets.

(III) OPERATING EXPENSES

Operating expenses of the Group consist primarily of staff costs, business tax and surcharges,

depreciation expenses, rental expenses and other general and administrative expenses.

In the first six months of 2013, operation expenses of the Group increased at a slower pace than

operating income, and increased by 9.45% to RMB24,238 million as compared to the first six months of 2012,

and cost-to-income ratio was 31.3%, representing a decrease of 0.79 percentage points, as compared with the

first six months of 2012.

In 2010, 2011 and 2012, the Group’s operating expenses were RMB32,634 million, RMB40,889 million

and RMB48,350 million, respectively. The increase in these periods was primarily due to the growth of the

Group’s business scale as well as the strategic expansion of its business network. In 2010, 2011 and 2012, the

cost-to-income ratio was 39.7%, 36.0% and 35.8%, respectively. The decrease in the cost-to-income ratio in

these periods was mainly as a result of the improvement in the Group’s standardized and refined cost

management.

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

– I-17 –

The following table sets forth the principal components of operating expenses of the Group for theperiods indicated:

Year ended 31 DecemberSix months ended

30 June

2010 2011 2012 2012 2013

(in millions of RMB, except percentages)

Staff costs 16,002 20,316 23,932 11,678 12,714Business tax and surcharges 4,153 6,091 7,555 3,749 4,116Fixed assets and investment

property depreciation 2,497 2,612 2,924 1,383 1,626Rental expenses 1,936 2,193 2,462 1,184 1,344Other general and administrative

expenses 8,046 9,677 11,477 4,152 4,438

Total operating expenses 32,634 40,889 48,350 22,146 24,238

Cost-to-income ratio(%)(1) 39.7% 36.0% 35.8% 32.1% 31.3%

(1) Cost-to-income ratio = operating expenses/operating income.

1. Staff costs

Staff costs consist of salaries, bonuses and staff welfare, retirement benefit costs, housing allowances

and other costs. In 2010, 2011, 2012 and the first six months of 2013, the Group’s staff costs accounted for

49.0%, 49.7%, 49.5% and 52.5% of total operating expenses, respectively.

The following table sets forth the principal components of the Group’s staff costs for the periods

indicated:

Year ended 31 December

2010 2011 2012

(in millions of RMB)

Salaries, bonuses and staff welfare 12,785 16,736 19,711

Retirement benefit costs 1,671 1,808 2,129

Housing allowances 843 1,002 1,174

Other 703 770 918

Total staff costs 16,002 20,316 23,932

The Group’s staff costs in the first six months of 2013 were RMB12,714 million, representing an

increase of 8.9% from RMB11,678 million in the first six months of 2012. In 2012, the Group’s staff costs were

RMB23,932 million, representing an increase of 17.8% from RMB20,316 million in 2011. In 2011, the Group’s

staff costs were RMB20,316 million, representing an increase of 27.0% from RMB16,002 million for 2010.

The increase in these periods was mainly due to increased headcount along with business expansion.

2. Fix assets depreciation

In the first six months of 2013, the Group’s depreciation of fix assets and investment property increased

by 17.6% to RMB1,626 million from RMB1,383 million in the first six months of 2012. In 2010, 2011 and

2012, the Group’s depreciation of fix assets and investment property was RMB2,497 million, RMB2,612

million and RMB2,924 million, respectively, representing an increase of 11.9% from 2011 to 2012 and an

increase of 4.6% from 2010 to 2011.

3. Rental expenses

The Group’s rental expenses in the first six months of 2013 were RMB1,344 million, representing an

increase of 13.5% from RMB1,184 million in the first six months of 2012. In 2012, the rental expenses of the

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

– I-18 –

Group were RMB2,462 million, representing an increase of 12.3% from RMB2,193 million in 2011. In 2011,

the rental expenses of the Group were RMB2,193 million, representing an increase of 13.3% from RMB1,936

million in 2010. The increase in these periods was primarily due to the continued addition of branches and

offices to support business development and the continued increase in average rental costs for the Group’s

outlets.

4. Other general and administrative expenses

In the first six months of 2013, other general and administrative expenses of the Group increased by

6.9% to RMB4,438 million from RMB4,152 million in the first six months of 2012. In 2012, other general and

administrative expenses of the Group were RMB11,477 million, representing an increase of 18.6% from 2011.

In 2011, other general and administrative expenses of the Group were RMB9,677 million, representing an

increase of 20.3% from RMB8,046 million in 2010. The increase in these periods was mainly due to the

continuing expansion of business scale and the sales network of the Group.

(IV) BUSINESS TAX AND SURCHARGES

Business tax and surcharges consist primarily of business tax, urban maintenance and construction taxes,

education surcharges and other surcharges. The Group’s business tax and surcharges in the first six months of

2013 were RMB4,116 million, representing an increase of 9.8% from RMB3,749 million in the first six months

of 2012. In 2010, 2011 and 2012, business tax and surcharges of the Group were RMB4,153 million,

RMB6,091 million and RMB7,555 million, respectively. The 24.0% increase from 2011 to 2012 was primarily

due to the increase in the business scale and operating income of the Group.

(V) IMPAIRMENT LOSSES ON ASSETS

Impairment losses on assets of the Group consist of impairment losses on loans and impairment losses

on other assets. The Group’s impairment losses on assets in the first six months of 2013 were RMB4,959

million, representing an increase of 19.7% from RMB4,144 million in the first six months of 2012. The

Group’s impairment losses on assets were RMB5,583 million in 2012, representing a decrease of 33.1% from

RMB8,350 million in 2011. In 2011, impairment losses on assets of the Group were RMB8,350 million,

representing an increase of 51.8% from RMB5,501 million in 2010.

The following table sets forth the principal components of impairment losses on assets of the Group for

the periods indicated:

Year ended 31 December

Six months ended

30 June

2010 2011 2012 2012 2013

(in millions of RMB)

Provision/(release) for

impairment losses on

assets on:

Loans and advances 5,570 8,199 5,491 4,087 4,975

Placements with banks and other

financial institutions — 77 (2) — —

Investments (13) 78 29 — —

Other (56) (4) 65 57 (16)

Total provision for impairment

losses 5,501 8,350 5,583 4,144 4,959

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

– I-19 –

Impairment losses on loans and advances constituted the largest proportion of the Group’s impairment

losses on assets. In 2010, 2011, 2012 and the first six months of 2013, impairment losses on loans accounted

for 101.3%, 98.2%, 98.4% and 100.3%, respectively, of the total impairment losses on assets of the Group.

The Group’s impairment losses on loans in the first six months of 2013 were RMB4,975 million,

representing an increase of 21.7% as compared with the first six months of 2012, which was mainly due to the

expansion in our loan portfolio and the increase in the provision for impairment losses in connection with a

general decrease in the quality of assets.

In 2012, impairment losses on loans were RMB5,491 million, representing a decrease of 33.0% from

RMB8,199 million in 2011, which was primarily due to the decrease in the balance, as well as the improvement

in structure, of loans to local government financing vehicles and real estate companies. In 2011, impairment

losses on loans were RMB8,199 million, representing an increase of 47.2% from RMB5,570 million in 2010,

which was mainly because the Group increased the provision for impairment losses on loans to local

government financing platforms as well as loans to PRC real estate companies in line with the principle of

prudence. Furthermore, in order to comply with the requirements of CBRC, the Group has made provisions for

impairment losses on assets exposed to country-specific risks and provision for impairment losses on

bank-trust wealth management cooperative products.

(VI) INCOME TAX EXPENSES

The following table sets forth the major components of income tax expenses of the Group for the periods

indicated:

Year ended 31 December

Six months ended

30 June

2010 2011 2012 2012 2013

(in millions of RMB)

Current income tax 8,114 12,232 14,742 7,941 8,540

Deferred income tax (540) (1,237) (455) (493) 42

Over provision for prior years — — — — —

Total 7,574 10,995 14,287 7,448 8,582

The Group’s income tax expenses in the first six months of 2013 were RMB8,582 million, representing

an increase of 15.2% from RMB7,448 million in the first six months of 2012, which was mainly due to the

increase in our profit before tax.

In 2012, income tax expenses of the Group were RMB14,287 million, representing an increase of 29.9%

from RMB10,995 million in 2011, which was mainly attributable to the rapid growth in the Group’s profit before

tax as well as an increase of 0.66 percentage point in its effective tax rate to 23.99% in 2012 compared to 2011.

In 2011, income tax expenses of the Group were RMB10,995 million, representing an increase of 45.2% from

RMB7,574 million in 2010. This increase was primarily due to a significant increase in the Group’s profit before

tax and an increase of 0.6 percent point in the effective tax rate to 23.3%, compared with 2010.

(5) ASSETS AND LIABILITIES

(I) Assets

As of 31 December 2010, 2011, 2012 and 30 June 2013, the Group’s total assets were RMB2,402,507

million, RMB2,794,823 million, RMB3,408,099 million and RMB3,810,629 million, respectively. Increases in

the Group’s total assets in 2011 and 2012 were primarily attributable to increases in the Group’s loans and

advances to customers, investments and cash and balances with the central bank. The following table sets forth

the components of the Group’s total assets as of the dates indicated:

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

– I-20 –

As of 31 December As of 30 June

2010 2011 2012 2013

Amount

% of

total Amount

% of

total Amount

% of

total Amount

% of

total

(in millions of RMB, except percentages)

Total loans and advances

to customers 1,431,451 59.58% 1,641,075 58.71% 1,904,463 55.88% 2,098,078 55.06%

Provision for

impairment losses on

loans (29,291) (1.22) (36,704) (1.31) (41,138) (1.21) (45,479) (1.19)

Net loans and advances

to customers 1,402,160 58.36 1,604,371 57.40 1,863,325 54.67 2,052,599 53.87

Investments 394,176 16.41 460,948 16.49 520,446 15.27 617,804 16.21

Cash, precious metals

and balances with

banks and other

financial institutions 38,211 1.59 73,771 2.64 293,612 8.62 65,135 1.71

Balances with central

bank 285,705 11.89 397,579 14.22 458,673 13.46 470,489 12.35

Placement with banks

and other financial

institutions 235,464 9.80 205,356 7.35 210,385 6.17 523,035 13.73

Investments in

associates and joint

ventures 443 0.02 456 0.02 455 0.01 456 0.01

Fix assets and

investment property 18,397 0.77 19,210 0.69 22,030 0.64 22,178 0.58

Intangible assets 2,620 0.11 2,605 0.09 2,851 0.09 2,897 0.08

Deferred tax assets 3,706 0.15 4,342 0.16 4,993 0.15 5,062 0.13

Goodwill 9,598 0.40 9,598 0.34 9,598 0.28 9,598 0.25

Other assets 12,027 0.50 16,587 0.60 21,731 0.64 41,376 1.08

Total assets 2,402,507 100.00% 2,794,823 100.00% 3,408,099 100.00% 3,810,629 100.00%

Unless otherwise indicated, loans and advances in the following discussion represent total loans and

advances of the Group before deduction of allowances for impairment losses.

1. Loans and Advances to Customers

As of 31 December 2010, 2011 and 2012 and 30 June 2013, the Group’s total loans and advances to

customers accounted for 59.6%, 58.7%, 55.9% and 55.1%, respectively, of the Group’s total assets.

The Group’s total loans and advances to customers increased by 10.2% from RMB1,904,463 million as

of 31 December 2012 to RMB2,098,078 million as of 30 June 2013. The Group’s total loans and advances to

customers increased by 16.0% from RMB1,641,075 million as of 31 December 2011 to RMB1,904,463 million

as of 31 December 2012. The Group’s total loans and advances to customers increased by 14.6% from

RMB1,431,451 million as of 31 December 2010 to RMB1,641,075 million as of 31 December 2011.

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

– I-21 –

(1) Loans and advances to customers by product types

The following table sets forth the Group’s loans and advances to customers by product types as of the

dates indicated:

As of 31 December As of 30 June

2010 2011 2012 2013

Amount

% of

total Amount

% of

total Amount

% of

total Amount

% of

total

(in millions of RMB, except percentages)

Corporate loans 870,515 60.81% 994,041 60.57% 1,152,837 60.53% 1,278,770 60.95%

Discounted bills 64,948 4.54 75,826 4.62 64,842 3.41 66,680 3.18

Retail loans 495,988 34.65 571,208 34.81 686,784 36.06 752,628 35.87

Total loans and advances 1,431,451 100.00% 1,641,075 100.00% 1,904,463 100.00% 2,098,078 100.00%

Corporate loans are the largest component of the Group’s loans and advances to customers. Corporate

loans accounted for 60.8%, 60.6%, 60.5% and 61.0%, respectively, of the Group’s total loans and advances to

customers as of 31 December 2010, 2011 and 2012 and 30 June 2013. Corporate loans as a percentage of the

Group’s total loans and advances from 2010 to 2012 maintained at a stable level with a slight decrease,

primarily because the Group, in light of the macroeconomic conditions and regulatory requirements and

applying RAROC and overall contribution as standards, controlled and adjusted the amount and structure of

its loan portfolio, conducted systematic risk controls and achieved improvements in its corporate loans mix and

risk return.

The Group has been committed to the development of its low-loss, low-capital consumption bill

financing business, and has adjusted the scale of its bill financing business based on the Group’s lending

schedule. The Group has also enhanced the comprehensive return on its bill assets by optimizing its bill

structure, centralizing operations, increasing turnover and profiting through increasing the amount of bills

serviced, among other measures. As of 31 December 2010, 2011 and 2012 and 30 June 2013, discounted bills

accounted for 4.5%, 4.6%, 3.4% and 3.2%, respectively, of the Group’s loans and advances to customers. The

amount of discounted bills as a percentage of the Group’s total loans and advances in 2011 was comparable

to that in 2010 and remained stable. The amount of discounted bills as a percentage of the Group’s total loans

and advances decreased in 2012, compared to 2011, mainly due to the increased rate of turnover of discounted

bills to capture spread income as a result of the tightening in the credit markets and the Group’s efforts in

innovating its discounted bill business model. These actions had, in turn, reduced the balance of our discounted

bills as of the end of 2012. Nevertheless, the volume of our accumulated bill financing business still led

industry peers in 2012, and the comprehensive return on bill assets increased significantly during that period.

The amount of discounted bills as a percentage of the Group’s total loans and advances to customers in the first

six months of 2013 remained stable as compared with that in 2012.

As a commercial bank with an industry-leading retail banking business, the Group has been committed

to implementing its retail banking strategies and promoting the development of its retail loans business. As of

31 December 2010, 2011 and 2012 and 30 June 2013, retail loans accounted for 34.7%, 34.8%, 36.1% and

35.9%, respectively, of the Group’s total loans and advances to customers. From 2010 to 2012, the balance of

the Group’s retail loans continued to grow, mainly due to (i) the Group’s efforts in speeding up the

diversification of retail loans under the Second Transformation by gradually expanding the proportion of

high-yield personal operating loans while maintaining its personal housing loans business and (ii) the increase

in the percentage of credit card loans as a result of the Group’s continued implementation of its refined

development strategy for its credit card business to increase the usage of credit cards by valued customers.

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

– I-22 –

1. Corporate loans

The Group’s corporate loans increased by 14.2% from RMB870,515 million as of 31 December 2010 to

RMB994,041 million as of 31 December 2011, further increased by 16.0% to RMB1,152,837 million as of 31

December 2012, and further increased by 10.9% to RMB1,278,770 million as of 30 June 2013.

The following table sets forth a breakdown of the Group’s corporate loans by product types as of the

dates indicated:

As of 31 December As of 30 June

2010 2011 2012 2013

Amount

% of

total Amount

% of

total Amount

% of

total Amount

% of

total

(in millions of RMB, except percentages)

Working capital loans 516,749 59.36% 596,490 60.01% 707,806 61.40% 745,285 58.28%

Fixed asset loans 273,056 31.37 282,995 28.47 277,737 24.09 275,984 21.58

Trade finance 48,563 5.58 69,333 6.97 100,804 8.74 171,794 13.43

Others(1) 32,147 3.69 45,223 4.55 66,490 5.77 85,707 6.71

Total corporate

loans 870,515 100.00% 994,041 100.00% 1,152,837 100.00% 1,278,770 100.00%

(1) Consists primarily of corporate mortgage loans and includes overdue discounted bills.

As of 31 December 2010, 2011 and 2012 and 30 June 2013, working capital loans were the largest

component of the Group’s corporate loans. As of 31 December 2010, 2011 and 2012 and 30 June 2013, working

capital loans as a percentage of the Group’s corporate loans were 59.4%, 60.0%, 61.4% and 58.3%,

respectively, and fixed asset loans as a percentage of the Group’s corporate loans were 31.4%, 28.5%, 24.1%

and 21.6%, respectively. Fixed asset loans as a percentage of the Group’s corporate loans decreased from the

beginning of 2010 to 30 June 2013, primarily due to the effects of the Group’s efforts in optimizing the product

structure of corporate loans by tightening control over mid- and long-term fixed assets loans, as well as

optimizing the management of project construction cycle, business cycle, cash flow and repayment plans and

product structure of corporate loans.

As of 31 December 2010, 2011 and 2012 and 30 June 2013, trade finance amounted to RMB48,563

million, RMB69,333 million, RMB100,804 million and RMB171,794 million, respectively, accounting for

5.6%, 7.0%, 8.7% and 13.4%, respectively, of the Group’s total corporate loans. Trade finance as a percentage

of the Group’s corporate loans increased as the PRC’s international trade volume experienced a significant

growth over this period, and the Group was able to significantly grow its trade finance business by focusing

on trade financing, supply chain financing and other businesses with financing needs that are short in duration

and trade financing with a high turnover rate.

Other corporate loans consist primarily of corporate mortgage loans. As of 31 December 2010, 2011 and

2012 and 30 June 2013, other corporate loans were RMB32,147 million, RMB45,223 million, RMB66,490

million and RMB85,707 million, respectively, accounting for 3.7%, 4.6%, 5.8% and 6.7%, respectively, of the

Group’s total corporate loans. Other corporate loans increased as a percentage of the Group’s corporate loans,

which was consistent with the Group’s continuing efforts to diversify the product and service offerings of its

corporate lending business to accommodate the various needs of its corporate customers.

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

– I-23 –

The following table sets forth a breakdown of the Group’s corporate loans by industry as of the dates

indicated:

As of 31 December As of 30 June

2010 2011 2012(2) 2013

Amount

% of

total Amount

% of

total Amount

% of

total Amount

% of

total

(in millions of RMB, except percentages)

Manufacturing 253,454 29.12% 307,972 30.98% 364,904 31.65% 401,206 31.37%

Wholesale and retail 116,068 13.33 169,491 17.05 223,672 19.40 290,825 22.74

Transportation,

storage and postal

services 131,555 15.11 140,950 14.18 143,051 12.41 142,040 11.11

Real estate 113,182 13.00 112,818 11.35 108,453 9.41 105,572 8.26

Generation and supply

of electric power,

heat, gas and water 62,519 7.18 66,009 6.64 79,081 6.86 79,187 6.19

Construction 33,781 3.88 44,036 4.43 59,393 5.15 65,090 5.09

Leasing and

commercial services 50,174 5.77 37,568 3.78 31,949 2.77 33,504 2.62

Water, environment

and public utilities

management 31,894 3.66 33,752 3.40 29,208 2.53 28,087 2.20

Mining 28,702 3.30 36,979 3.72 54,507 4.74 59,721 4.67

Information

transmission,

computer service

and software 7,290 0.84 10,726 1.08 11,921 1.03 13,890 1.09

Others(1) 41,896 4.81 33,740 3.39 46,698 4.05 59,648 4.66

Total corporate

loans 870,515 100.00% 994,041 100.00% 1,152,837 100.00% 1,278,770 100.00%

(1) Consists primarily of agriculture, forestry, animal husbandry, fishery, accommodation and catering, health care, social security, social

welfare and other industries.

(2) The Bank adopted the new industrial classification for national economic activities (GT/T4754-2011) and retroactively adjusted the

statistics as of 31 December 2012 under the new standard.

In 2013, the Group proactively adopted a sustainable development business model for its small

enterprise business by granting credit facilities to high-value customers in the real economy, growth enterprises

and environmentally friendly industries and steadily building up its new financing businesses. The Group

improved its policies for loans relating to local government financing vehicles and the real estate industry,

adopted measures to reduce exposure to systemic risks relating to high-risk areas, industry with excess capacity

and large group customers. The Group has also improved the allocation of credit assets to optimize its credit

portfolio and to achieve an overall balance between its risk exposure and costs and benefits. In 2010, 2011,

2012 and the first six months of 2013, the Group achieved balanced increase and optimization of its industry

credit lending structure. Loans to customers in the (i) manufacturing, (ii) wholesale and retail, (iii)

transportation, storage and postal service, (iv) real estate and (v) electricity, gas and water production and

supply industries represent the largest components of the Group’s corporate loans. As of 31 December 2010,

2011 and 2012 and 30 June 2013, the balance of loans to corporate customers in these five industries accounted

for 77.7%, 80.2%, 79.7% and 79.7%, respectively, of the Group’s total corporate loans. Loans granted to these

five industries as a percentage of corporate loans remained relatively stable, while loans to the transportation,

storage and postal services and real estate industries as a percentage of corporate loans decreased.

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

– I-24 –

2. Discounted bills

The discounted bills business has been one of the Group’s areas of focus in recent years due to its

relatively low risk and high liquidity nature and limited capital consumption.

The following table sets forth the Group’s discounted bills by obligor as of the dates indicated:

As of 31 December As of 30 June

2010 2011 2012 2013

Amount

% of

total Amount

% of

total Amount

% of

total Amount

% of

total

(in millions of RMB, except percentages)

Bank acceptance bills 58,727 90.42% 73,198 96.53% 62,554 96.47% 63,162 94.72%

Commercial

acceptance bills 6,221 9.58 2,628 3.47 2,288 3.53 3,518 5.28

Total discounted

bills 64,948 100.00% 75,826 100.00% 64,842 100.00% 66,680 100.00%

Bank acceptance bills represent a substantial majority of the Group’s discounted bills portfolio. As of 31

December 2010, 2011 and 2012 and 30 June 2013, bank acceptance bills accounted for 90.4%, 96.5%, 96.5%

and 94.7%, respectively, of the Group’s total discounted bills. Bank acceptance bills as a percentage of the

Group’s total discounted bills between 31 December 2010 and 30 June 2013 remained relatively stable, mainly

due to the Group’s efforts to optimize the product mix of discounted bills by increasing the proportion of bank

acceptance bills, which typically carry lower credit risk weight, as a result of the Group’s implementation of

strategies to transform its business to a capital-efficient model.

3. Retail Loans

The following table sets forth the Group’s retail loans by product type as of the dates indicated:

As of 31 December As of 30 June

2010 2011 2012 2013

Amount

% of

total Amount

% of

total Amount

% of

total Amount

% of

total

(in millions of RMB, except percentages)

Personal housing

loans 298,997 60.28% 323,640 56.66% 335,746 48.89% 314,268 41.76%

Credit card

receivables 54,916 11.07 73,305 12.83 106,519 15.51 123,513 16.41

Personal operating

loans 64,609 13.03 90,429 15.83 182,012 26.50 260,088 34.56

Other personal

loans(1) 77,466 15.62 83,834 14.68 62,507 9.10 54,759 7.27

Total retail loans 495,988 100.00% 571,208 100.00% 686,784 100.00% 752,628 100.00%

(1) Consists primarily of retail loans secured by automobile loans, household renovation loans, education loans, general consumption

loans and retail loans secured by monetary assets.

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

– I-25 –

A majority of the Group’s retail loans are personal housing loans. As of 31 December 2010, 2011 and

2012 and 30 June 2013, personal housing loans were RMB298,997 million, RMB323,640 million,

RMB335,746 million and RMB314,268 million, respectively, accounting for 60.3%, 56.7%, 48.9% and 41.8%,

respectively, of the Group’s total retail loans. Personal housing loans as a percentage of retail loans had been

decreasing between 31 December 2010 and 30 June 2013, mainly because, in light of the decrease in the market

trading volume of personal housing under the PRC government’s policies to cool down the real estate market,

the Group focused on diversifying its retail loan product offerings to follow market needs.

As of 31 December 2010, 2011 and 2012 and 30 June 2013, the balance of the Group’s credit card

receivables was RMB54,916 million, RMB73,305 million, RMB106,519 million and RMB123,513 million,

respectively, accounting for 11.1%, 12.8%, 15.5% and 16.4%, respectively, of the total retail loans. The

continued growth in credit card receivables as a percentage of total retail loans was mainly due to an increase

in the number of credit cards issued and the customer base, as well as the Group’s implementation of the

refined development strategy and continued efforts in tapping customer value by increasing the proportion of

credit card revolving balances.

As of 31 December 2010, 2011 and 2012 and 30 June 2013, operating loans were RMB64,609 million,

RMB90,429 million, RMB182,012 million and RMB260,088 million, respectively, accounting for 13.0%,

15.8%, 26.5% and 34.6%, respectively, of the Group’s total retail loans. The increase in personal operating

loans as a percentage of total retail loans was mainly due to the Group’s efforts to push forward its strategy

focused on the small and micro enterprises businesses by actively marketing personal operating loans, which

typically have higher yield, in order to optimize asset mix and improve the capital return on its retail loan

portfolio.

(2) Loans and advances to customers by geographical region

The following table sets forth the geographical distribution of the Group’s loans and advances based on

the location of the branches that extended the loans as of the dates indicated:

As of 31 December As of 30 June

2010 2011 2012 2013

Amount

% of

total Amount

% of

total Amount

% of

total Amount

% of

total

(in millions of RMB, except percentages)

Head Office 94,149 6.58% 131,692 8.02% 176,736 9.28% 201,438 9.60%

Yangtze River Delta 350,522 24.49 376,084 22.92 401,335 21.07 421,036 20.07

Bohai Rim 225,999 15.79 247,249 15.07 282,158 14.82 302,786 14.43

Pearl River Delta and

West Side of

Taiwan Strait 232,236 16.22 264,202 16.10 302,650 15.89 327,478 15.61

Northeastern China 83,462 5.83 95,552 5.82 104,387 5.48 118,133 5.63

Central China 158,873 11.10 180,229 10.98 209,435 11.00 230,365 10.98

Western China 179,784 12.56 210,829 12.85 249,786 13.12 271,700 12.95

Overseas 21,076 1.47 24,055 1.46 34,055 1.79 51,891 2.47

Subsidiaries 85,350 5.96 111,183 6.78 143,921 7.55 173,251 8.26

Total loans and

advances 1,431,451 100.00% 1,641,075 100.00% 1,904,463 100.00% 2,098,078 100.00%

The Group’s loans and advances are mainly concentrated in Yangtze River Delta, the Bohai Rim, and the

Pearl River Delta and the West Side of Taiwan Strait. As of 31 December 2010, 2011 and 2012 and 30 June

2013, loans and advances extended to these three regions accounted for 56.5%, 54.1%, 51.8% and 50.1%,

respectively, of the Group’s total loans and advances. The decrease in loans and advances to these regions as

a percentage of the Group’s total loans and advances from 31 December 2010 to 30 June 2013 was primarily

due to the Group’s adjustment in its regional credit policies to scientifically allocate its credit resources by, on

the one hand, increasing credit extensions to central and western regions of China in support of the national

development strategies for those regions, and on the other hand, strictly controlling credit extensions to

high-risk regions to avoid risk exposures to these regions.

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

– I-26 –

(3) Loans and advances to customers by collateral

The following table sets forth the Group’s loans and advances to customers by collateral as of the dates

indicated:

As of 31 December As of 30 June

2010 2011 2012 2013

Amount

% of

total Amount

% of

total Amount

% of

total Amount

% of

total

(in millions of RMB, except percentages)

Unsecured loans 306,669 21.42% 335,863 20.47% 393,596 20.67% 418,259 19.94%

Guaranteed loans 362,528 25.33 397,218 24.20 457,914 24.04 468,783 22.34

Loans secured by

collateral 608,136 42.48 697,758 42.52 807,496 42.40 883,975 42.13

Loans secured by

pledges 89,170 6.23 134,410 8.19 180,615 9.49 260,381 12.41

Discounted bills 64,948 4.54 75,826 4.62 64,842 3.40 66,680 3.18

Total loans and

advances 1,431,451 100.00% 1,641,075 100.00% 1,904,463 100.00% 2,098,078 100.00%

As of 31 December 2010, 2011 and 2012 and 30 June 2013, the Group’s loans secured by collateral or

pledges accounted for 48.7%, 50.7%, 51.9% and 54.5%, respectively, of its total loans and advances. The

gradual increase in loans secured by collateral or pledges as a percentage of the Group’s total loans and

advances was mainly due to improvements in the Group’s asset quality and the ability to manage credit risks,

as a result of the implementation of risk control measures, including enhanced requirements for collateral, and

reflected increased risks in the macroeconomic environment.

(4) Borrower concentration

The following table sets forth loans and advances to the Group’s ten largest single borrowers as of 30

June 2013. All such loans and advances were classified as “normal” as of that date. As of the date of this

prospectus, the Group has complied with all applicable regulatory requirements with respect to borrower

concentration:

As of 30 June 2013

Industry Amount

% of total

loans

% of net

capital(1)

(in millions of RMB, except percentages)

Borrower A Transportation, storage and postal services 6,233 0.30% 2.31%

Borrower B Transportation, storage and postal services 5,000 0.24 1.86

Borrower C Transportation, storage and postal services 4,128 0.20 1.53

Borrower D Production and supply of electric power,

heat, gas and water

4,000 0.19 1.48

Borrower E Wholesale and retail sales 3,669 0.17 1.36

Borrower F Wholesale and retail sales 2,981 0.14 1.11

Borrower G Manufacturing 2,977 0.14 1.10

Borrower H Mining 2,927 0.14 1.09

Borrower I Transportation, storage and postal services 2,877 0.14 1.07

Borrower J Transportation, storage and postal services 2,700 0.13 1.00

Total 37,492 1.79% 13.91%

(1) Loans as a percentage of the Group’s net capital is calculated in accordance with the CBRC’s statutory requirements, and net capital

is calculated as the sum of core capital and supplementary capital minus deductions.

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

– I-27 –

2. Asset quality of loans and advances

The Group measures and manages the asset quality of its loans and advances using a five-category loan

classification system in compliance with the applicable CBRC’s requirements. The following table sets forth

the distribution of the Group’s loans and advances in each category as of the dates indicated:

As of 31 December As of 30 June

2010 2011 2012 2013

Amount

% of

total Amount

% of

total Amount

% of

total Amount

% of

total

(in millions of RMB, except percentages)

Normal 1,407,546 98.33% 1,614,941 98.41% 1,873,280 98.37% 2,060,208 98.20%

Special mention 14,219 0.99 16,961 1.03 19,489 1.02 22,945 1.09

Subtotal 1,421,765 99.32 1,631,902 99.44 1,892,769 99.39 2,083,153 99.29

Substandard 2,730 0.19 3,186 0.20 5,281 0.28 7,364 0.35

Doubtful 2,659 0.19 2,146 0.13 3,064 0.16 4,071 0.19

Loss 4,297 0.30 3,841 0.23 3,349 0.17 3,490 0.17

Subtotal of non-

performing loans 9,686 0.68 9,173 0.56 11,694 0.61 14,925 0.71

Total loans and

advances 1,431,451 100.00% 1,641,075 100.00% 1,904,463 100.00% 2,098,078 100.00%

The Group’s non-performing loans were RMB9,686 million, RMB9,173 million, RMB11,694 million

and RMB14,925 million as of 31 December 2010, 2011 and 2012 and 30 June 2013, respectively. As of the

same dates, the non-performing loan ratio was 0.68%, 0.56%, 0.61% and 0.71%, respectively. Since 2012,

impacted by changes in the external operating environment, the Group’s asset quality was under serious

challenges. However, the Group managed to prevent and control risks by taking proactive measures, including

accelerating the collection and recovery processes for non-performing loans. The Group’s non-performing loan

ratio as of 30 June 2013 increased slightly by 0.1 percentage points as compared to 31 December 2012, and

the non-performing ratio as of 31 December 2012 slightly increased by 0.05 percentage points as compared to

31 December 2011, mainly due to the increase in percentages of substandard and doubtful loans. In addition,

the proportion of loans and advances classified as loss as of 31 December 2012 slightly decreased as compared

to 31 December 2011, primarily attributable to the Group’s accelerated write-off process. As of 30 June 2013,

the proportion of loans and advances classified as special mention maintained at a stable level and increased

by 0.07 percentage points as compared to 31 December 2012.

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

– I-28 –

(1) Non-Performing Loans by Product Type

As of 31 December As of 30 June

2010 2011 2012 2013

Non-

performing

loan

amount

% of

total

Non-

performing

loan

ratio(1)

Non-

performing

loan

amount

% of

total

Non-

performing

loan

ratio(1)

Non-

performing

loan

amount

% of

total

Non-

performing

loan

ratio(1)

Non-

performing

loan

amount

% of

total

Non-

performing

loan

ratio(1)

(in millions of RMB, except percentages)

Corporate loans

Working capital loans 5,734 59.20% 1.11% 5,458 59.50% 0.92% 6,149 52.58% 0.87% 7,597 50.90% 1.02%

Fixed asset loans 1,326 13.69 0.49 999 10.89 0.35 680 5.82 0.24 754 5.05 0.27

Trade finance 465 4.80 0.96 497 5.42 0.72 650 5.56 0.64 702 4.71 0.41

Others(2) 491 5.07 1.53 441 4.81 0.98 925 7.91 1.39 1,463 9.80 1.71

Subtotal 8,016 82.76 0.92 7,395 80.62 0.74 8,404 71.87 0.73 10,516 70.46 0.82

Retail loans

Personal housing loans 428 4.42 0.14 389 4.24 0.12 733 6.27 0.22 935 6.26 0.30

Credit card receivables 1,040 10.74 1.89 1,021 11.13 1.39 1,136 9.71 1.07 1,254 8.40 1.02

Personal operating

loans 62 0.64 0.10 149 1.62 0.16 822 7.03 0.45 1,533 10.27 0.59

Other personal loans(3) 140 1.44 0.18 219 2.39 0.26 599 5.12 0.96 687 4.61 1.25

Subtotal 1,670 17.24 0.34 1,778 19.38 0.31 3,290 28.13 0.48 4,409 29.54 0.59

Total non-performing

loans 9,686 100.00% 0.68% 9,173 100.00% 0.56% 11,694 100.00% 0.61% 14,925 100.00% 0.71%

(1) Calculated as the aggregate amount of non-performing loans in each product type divided by the total loans and advances in such

product type.

(2) Consists primarily of corporate mortgage loans, including overdue discounted bills.

(3) Consists primarily of automobile loans, household renovation loans, education loans, general consumer loans and retail loans secured

by monetary assets.

As of 31 December 2010, 2011 and 2012 and 30 June 2013, the Group’s total corporate non-performing

loans were RMB8,016 million, RMB7,395 million, RMB8,404 million and RMB10,516 million, respectively,

and the non-performing loan ratios for corporate loans were 0.92%, 0.74%, 0.73% and 0.82%, respectively, as

of 31 December 2010, 2011 and 2012 and 30 June 2013, respectively. The non-performing loan ratios remained

stable. In 2010, 2011, 2012 and the first six months of 2013, working capital loans, which represented a

significant portion of the Group’s total loans and advances to customers, were the largest component of

non-performing loans. As of 31 December 2010, 2011 and 2012 and 30 June 2013, the Group’s non-performing

working capital loans were RMB5,734 million, RMB5,458 million, RMB6,149 million and RMB7,597 million,

respectively, and the non-performing loan ratio of its working capital loans was 1.11%, 0.92%, 0.87% and

1.02%, respectively. The decrease in the non-performing loan ratio of the Group’s working capital loans from

31 December 2010 to 31 December 2011 and the slight increase of such non-performing loan ratio from 31

December 2012 to 30 June 2013 were mainly a result of the Group’s continued efforts to improve its credit

risk system and to limit its credit extension to high-risk customers, as well as the Group’s efforts in the

collection and write-off of non-performing loans.

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

– I-29 –

As of 31 December 2010, 2011 and 2012 and 30 June 2013, the Group’s total non-performing retail loans

were RMB1,670 million, RMB1,778 million, RMB3,290 million and RMB4,409 million, respectively, and the

non-performing loan ratio of retail loans was 0.34%, 0.31%, 0.48% and 0.59%, respectively. The increases in

both the absolute amount and the non-performing loan ratio of the Group’s retail loans in the first six months

of 2013 were mainly due to the deterioration of certain retail customers’ loan repayment capabilities and credit

standing as a result of the changes in external operating environment, as well as the increases in

non-performing personal housing loans, credit card receivables and personal operating loans as a result of the

impact of real estate control policies.

(2) Non-performing corporate loans by industry

As of 31 December As of 30 June

2010 2011 2012 2013

Non-

performing

loan

amount

% of

total

Non-

performing

loan

ratio(1)

Non-

performing

loan

amount

% of

total

Non-

performing

loan

ratio(1)

Non-

performing

loan

amount

% of

total

Non-

performing

loan

ratio(1)

Non-

performing

loan

amount

% of

total

Non-

performing

loan

ratio(1)

(in millions of RMB, except percentages)

Manufacturing 2,680 33.43% 1.06% 2,682 36.27% 0.87% 3,623 43.11% 0.99% 4,788 45.53% 1.19%

Wholesale and retail 1,711 21.34 1.47 1,713 23.16 1.01 2,401 28.57 1.07 3,558 33.83 1.22

Transportation, storage

and postal services 852 10.63 0.65 958 12.95 0.68 484 5.76 0.34 470 4.47 0.33

Property development 896 11.18 0.79 824 11.14 0.73 711 8.46 0.66 610 5.80 0.58

Production and supply of

electric power, heat,

gas and water 411 5.13 0.66 334 4.52 0.51 408 4.85 0.50 241 2.29 0.29

Construction 217 2.71 0.64 134 1.81 0.30 170 2.02 0.28 240 2.28 0.36

Leasing and commercial

services 439 5.48 0.87 136 1.84 0.36 112 1.33 0.35 138 1.31 0.41

Water, environment and

public utilities 61 0.76 0.19 1 0.01 — 1 0.01 — 1 0.01 —

Mining — — — — — — — — — — — —

Information transmission,

computer service and

software 162 2.02 2.22 70 0.95 0.65 93 1.11 0.78 75 0.71 0.54

Others(2) 587 7.32 1.40 543 7.35 1.61 401 4.78 0.93 395 3.77 0.74

Total corporate

non-performing

loans 8,016 100.00% 0.92% 7,395 100.00% 0.74% 8,404 100.00% 0.73% 10,516 100.00% 0.82%

(1) Calculated as an amount of non-performing loans in a category divided by the total loans and advances in such category.

(2) Consists primarily of agriculture, forestry, animal husbandry, fishery, accommodation and catering, health care, social security, social

welfare and other industries.

As of 31 December 2010, 2011 and 2012 and 30 June 2013, the Group’s non-performing loan ratio of

loans to the real estate industry was 0.79%, 0.73%, 0.66% and 0.58%, respectively. The decrease over the years

was mainly due to the Group’s tightened control of loans to the real estate industry, including centralized

approvals of real estate loans at the headquarters, enhanced screening of loan applicants from the real estate

industry and limitation of risk exposure to the real estate industry in general. The increase in the Group’s

non-performing corporate loans in the first six months of 2013 was mainly attributable to loans to

manufacturing and wholesale and retail industries, which in aggregate accounted for 71.9% of the increase in

non-performing corporate loans.

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

– I-30 –

(3) Distribution of Non-Performing Loans by Geographical Region

As of 31 December As of 30 June

2010 2011 2012 2013

Region

Non-

performing

loan

amount

% of

total

Non-

performing

loan

ratio(1)

Non-

performing

loan

amount

% of

total

Non-

performing

loan

ratio(1)

Non-

performing

loan

amount

% of

total

Non-

performing

loan

ratio(1)

Non-

performing

loan

amount

% of

total

Non-

performing

loan

ratio(1)

(in millions of RMB, except percentages)

Head office 2,238 23.11% 2.38% 2,040 22.24% 1.55% 2,569 21.97% 1.45% 3,090 20.70% 1.53%

Yangtze River Delta 2,140 22.09 0.61 2,448 26.69 0.65 4,210 36.00 1.05 5,756 38.57 1.37

Bohai Rim 833 8.60 0.37 760 8.29 0.31 1,016 8.69 0.36 1,091 7.31 0.36

Pearl River Delta and

West Side of Taiwan

Strait 1,226 12.66 0.53 1,080 11.77 0.41 1,555 13.30 0.51 2,056 13.78 0.63

Northeastern China 371 3.83 0.44 323 3.52 0.34 373 3.19 0.36 422 2.83 0.36

Central China 1,183 12.21 0.74 1,145 12.48 0.64 1,024 8.76 0.49 1,415 9.48 0.61

Western China 1,306 13.48 0.73 1,068 11.64 0.51 619 5.29 0.25 912 6.11 0.34

Overseas 32 0.33 0.15 27 0.29 0.11 22 0.19 0.06 18 0.12 0.03

Subsidiaries 357 3.69 0.42 282 3.08 0.25 306 2.61 0.21 165 1.10 0.10

Total non-performing

loans 9,686 100.00% 0.68% 9,173 100.00% 0.56% 11,694 100.00% 0.61% 14,925 100.00% 0.71%

(1) Calculated as the aggregate amount of non-performing loans in each region divided by the total loans in such region.

As of 30 June 2013, the amount of non-performing loans originated from Central China and Western

China as a percentage of total non-performing loans remained stable as compared with the beginning of 2013,

while the amount of non-performing loans originated from the Yangtze River Delta region as a percentage of

total non-performing loans decreased by one percentage point as compared with the beginning of 2013. In the

first six months of 2013, due to the economic slowdown, 47.85% of the increase in the Group’s non-performing

loans originated from Yangtze River Delta region, while the Group’s asset quality in other regions remained

stable.

The non-performing loan ratio of loans originated in the head office was significantly higher than in

other geographical regions as of 31 December 2010, 2011 and 2012 and 30 June 2013, mainly because the

non-performing loans originated in Shenzhen were centrally managed at the Special Asset Management Centre

at the Group’s headquarters. In recent years, the Group increased efforts to recover non-performing loans. As

of 31 December 2010, 2011, 2012 and 30 June 2013, the non-performing loans originated in the head office

were RMB2,238 million, RMB2,040 million, RMB2,569 million and RMB3,090 million, respectively, while

the non-performing loan ratios of loans originated in the head office were 2.38%, 1.55%, 1.45% and 1.53%,

respectively. The decrease in the ratios of non-performing loans originated in the headquarters reflected the

Group’s enhanced credit risk management capabilities.

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

– I-31 –

(4) Ten borrowers with the largest non-performing loans

The following table sets forth the ten single borrowers with the largest amount of non-performing loans

as of the dates indicated:

31 December 2012

Industry of the Borrower Amount

% of total

non-

performing

loans

% of total

net capital(1)

(in millions of RMB, except percentages)

Borrower A Property development 252 2.15% 0.10%

Borrower B Accommodation and catering 199 1.70 0.08

Borrower C Others(2) 142 1.21 0.06

Borrower D Production and supply of electric

power, gas and water 134 1.15 0.05

Borrower E Transportation, storage and postal

services 104 0.89 0.04

Borrower F Production and supply of electric

power, gas and water 102 0.87 0.04

Borrower G Manufacturing 93 0.80 0.04

Borrower H Transportation, storage and postal

services 90 0.77 0.04

Borrower I Manufacturing 85 0.73 0.03

Borrower J Manufacturing 85 0.73 0.03

Total 1,286 11.00% 0.51%

(1) Loans as a percentage of the Group’s net capital is calculated in accordance with the CBRC’s requirements, and net capital is

calculated as the sum of core capital and supplementary capital minus deductions.

(2) Others are personal loans.

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

– I-32 –

(5) Overdue loans and advances

The following table sets forth the Group’s current and overdue loans and advances to customers as of

the dates indicated:

As of 31 December As of 30 June

2010 2011 2012 2013

Amount

% of

total Amount

% of

total Amount

% of

total Amount

% of

total

(in millions of RMB, except percentages)

Current loans 1,419,292 99.15% 1,627,454 99.17% 1,883,063 98.88% 2,068,581 98.59%

Overdue loans

Overdue for no more

than 3 months 4,395 0.31 6,456 0.39 10,987 0.57 15,773 0.76

Overdue for more

than 3 months but

less than 1 year 947 0.06 1,005 0.06 4,550 0.24 6,544 0.31

Overdue for more

than 1 year but less

than 3 years 2,570 0.18 2,241 0.14 2,016 0.11 3,830 0.18

Overdue for more

than 3 years 4,247 0.30 3,919 0.24 3,847 0.20 3,350 0.16

Subtotal of overdue

loans 12,159 0.85 13,621 0.83 21,400 1.12 29,497 1.41

Total loans and

advances 1,431,451 100.00% 1,641,075 100.00% 1,904,463 100.00% 2,098,078 100.00%

Since 2012, the increase in the Group’s total loans and advances overdue is primarily due to an increase

in the retail loans overdue less than three months. As of 31 December 2011, the Group’s total loans and

advances overdue for no more than three months increased as compared to 31 December 2010, mainly due to

an increase in the retail loans overdue less than one month that are classified as special mention.

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

– I-33 –

3. Allowance for impairment losses on loans and advances to customers

(1) Allowance for Impairment Losses on Loans and Advances by Loan Classification

The following table sets forth the allocation of the Group’s allowance for impairment losses by loan

classification category as of the dates indicated:

As of 31 December

2010 2011 2012

Five-category loan

classification Allowance % of total

Loan

allowance

coverage

ratio Allowance % of total

Loan

allowance

coverage

ratio Allowance % of total

Loan

allowance

coverage

ratio

(in millions of RMB, except percentages)

Normal and special mention 22,026 75.20% 1.55% 30,189 82.25% 1.85% 34,202 83.14% 1.81%

Substandard 994 3.39 36.41 1,107 3.02 34.75 1,622 3.94 30.71

Doubtful 1,973 6.74 74.20 1,567 4.27 73.02 1,966 4.78 64.16

Loss 4,298 14.67 100.00 3,841 10.46 100.00 3,348 8.14 99.97

Total 29,291 100.00% 2.05% 36,704 100.00% 2.24% 41,138 100.00% 2.16%

Non-performing loan

allowance coverage ratio 302.4% 400.13% 351.79%

In 2010, 2011, 2012 and the first six months of 2013, the Group implemented a prudent allowance policy for

impairment losses on loans. Allowance for impairment losses on loans and advances consists of collectively

assessed allowance and individually assessed allowance. The Group performs collective assessment to determine

the allowance for impairment losses based primarily on the historical loan loss ratio as well as the macroeconomic

conditions. The Group’s total allowance for impairment losses on loans and advances increased by 25.3% from

RMB29,291 million as of 31 December 2010 to RMB36,704 million as of 31 December 2011 and by 12.1% to

RMB41,138 million as of 31 December 2012. As of 31 December 2010, 2011 and 2012, the Group’s non-performing

loan allowance coverage ratios were 302.41%, 400.13% and 351.79%, respectively. The steady increase in the

non-performing loan allowance coverage ratio was mainly due to the increase in the balance of impairment losses

on loans and advances with the increase in loans extended by our Group, and the decrease in our non-performing

loan ratio resulting from our improvement in credit risk management and implementation of loan recovery and

write-off measures. In addition, the Group increased portfolio allowances for loans made to the local government

financing platforms, real estate development, country-specific risk assets and off-balance sheet trust wealth

management products, in accordance with regulatory requirements.

The following table sets forth the changes to the allowance for impairment losses on loans to customers

in the periods indicated:

Year ended 31 DecemberAs of 30

June

2010 2011 2012 2013

(in millions of RMB)

Balance at the beginning of the period 24,005 29,291 36,704 41,138Charge for the period 6,241 9,048 6,276 5,341Release for the period (671) (849) (785) (366)Unwinding of discount on impaired

loans(1) (110) (136) (215) (167)Recoveries of loans and advances

previously written off 48 65 65 32Write-offs (152) (583) (891) (448)Transfers in/out 34 — 13 —Foreign exchange rate movements (104) (132) (29) (51)

Balance at the end of the period 29,291 36,704 41,138 45,479

(1) Refers to accumulated interest income associated with loans that had been previously impaired but have increased in value over time.

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

– I-34 –

(2) Allowance for impairment losses on loans by product types

As of 31 December

2010 2011 2012

Allowance

Loan

allowance

coverage

ratio (%) Allowance

Loan

allowance

coverage

ratio (%) Allowance

Loan

allowance

coverage

ratio (%)

(in millions of RMB, except percentages)

Corporate loans

Normal and special mention 17,268 2.00% 24,784 2.51% 26,972 2.36%

Substandard 919 37.28 993 35.35 1,254 31.96

Doubtful 1,839 75.59 1,418 74.55 1,602 67.71

Loss 3,118 100.00 2,684 100.00 2,113 99.95

Total corporate loans 23,144 2.66 29,879 3.01 31,941 2.77

Subtotal of

non-performing loans 5,876 73.30 5,095 68.90 4,969 59.13

Non-performing loan

allowance coverage ratio for

corporate loans 288.72 404.04 380.07

Retail loans

Normal and special mention 4,632 0.94 5,351 0.94 7,183 1.05

Substandard 75 28.30 114 30.24 368 27.12

Doubtful 134 59.29 149 61.07 364 52.15

Loss 1,180 100.00 1,157 100.00 1,235 100.00

Total retail loans 6,021 1.21 6,771 1.19 9,150 1.33

Subtotal of

non-performing loans 1,389 83.17 1,420 79.87 1,967 59.79

Non-performing loan

allowance coverage ratio for

retail loans 360.54 380.82 278.12

Discounted bills

Normal and special mention 126 0.19 54 0.07 47 0.07

Subtotal of non-performing

loans — — — — — —

Total allowance for

impairment losses on

loans and advances 29,291 2.05 36,704 2.24 41,138 2.16

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

– I-35 –

In 2010, 2011 and 2012, allowance for impairment losses on corporate loans represented the largest

component of the total allowance for impairment losses on loans and advances of the Group. As of 31

December 2010, 2011 and 2012, the Group’s total allowance for impairment losses on corporate loans

increased by 29.1% from RMB23,144 million as of 31 December 2010 to RMB29,879 million as of 31

December 2011, and by 6.9% to RMB31,941 million as of 31 December 2012. As of 31 December 2010, 2011

and 2012, the Group’s non-performing loan allowance coverage ratio for corporate loans was 288.72%,

404.04% and 380.07%, respectively.

As of 31 December 2010, 2011 and 2012, the Group’s total allowance for impairment losses on retail

loans increased by 12.5% from RMB6,021 million as of 31 December 2010 to RMB6,771 million as of 31

December 2011 and by 35.1% to RMB9,150 million as of 31 December 2012. As of 31 December 2010, 2011

and 2012, the Group’s non-performing loan allowance coverage ratio for retail loans was 360.54%, 380.82%

and 278.12%, respectively.

4. Investments

The investment portfolio of the Group consists of listed and non-listed securities denominated in

Renminbi and foreign currencies, including financial assets at fair value through profit or loss, derivatives,

available-for-sale investments, held-to-maturity securities and investment receivables. In 2010, 2011, 2012 and

the first six months of 2013, the Group adjusted its investment portfolio based primarily on changes in

economic conditions and government policies as well as the Group’s needs with respect to portfolio

composition.

Investments are presented in net amounts after deducting allowance for impairment losses on such

investments in the balance sheets of the Group and the Bank. Unless otherwise specified, investments herein

represent the total amounts before deducting allowance for impairment losses on investments.

As of 31 December 2010, 2011 and 2012 and 30 June 2013, investments of the Group accounted for

16.4%, 16.5%, 15.3% and 16.2%, respectively, of its total assets. The following table sets forth the components

of the Group’s investments as of the dates indicated:

As of 31 December As of 30 June

2010 2011 2012 2013

Amount

% of

total Amount

% of

total Amount

% of

total Amount

% of

total

(in millions of RMB, except percentages)

Financial assets at fair

value through profit

or loss 16,967 4.31% 17,417 3.78% 27,464 5.28% 27,503 4.45%

Available-for-sale

investments 272,370 69.10 275,860 59.85 285,344 54.83 304,958 49.36

Held-to-maturity

securities 97,614 24.76 145,586 31.58 175,417 33.70 196,841 31.86

Investment

receivables 7,225 1.83 22,085 4.79 32,221 6.19 88,502 14.33

Total investments 394,176 100.00% 460,948 100.00% 520,446 100.00% 617,804 100.00%

The Group’s total investments increased by 16.9% from RMB394,176 million as of 31 December 2010

to RMB460,948 million as of 31 December 2011 and by 12.9% to RMB520,446 million as of 31 December

2012 and by 18.7% to RMB617,804 million as of 30 June 2013.

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

– I-36 –

In 2010, 2011, 2012 and the first six months of 2013, available-for-sale investments remained the largest

component of investments mainly due to the requirement of assets and liabilities allocation and improving

operating performance. Available-for-sale investments mainly consist of PRC government bonds, bonds issued

by the PBOC, bonds issued by policy banks and bonds issued by commercial banks and other financial

institutions. As of 31 December 2010, 2011, 2012 and 30 June 2013, the Group’s available-for-sale investments

accounted for 69.1%, 59.9%, 54.8% and 49.4%, respectively, of its total investments.

(1) Financial assets at fair value through profit or loss

In 2010, 2011, 2012 and the first six months of 2013, the Group adjusted its investment portfolio of

financial assets at fair value through profit or loss taking into consideration market liquidity and other

conditions. As of 31 December 2010, 2011, 2012 and 30 June 2013, the Group’s financial assets at fair value

through profit or loss were RMB16,967 million, RMB17,417 million, RMB27,464 million and RMB27,503

million, respectively, accounting for 4.3%, 3.8%, 5.3% and 4.5%, respectively, of its total investments. The

following table sets forth the components of the Group’s financial assets at fair value through profit or loss

as of the dates indicated:

As of 31 December As of 30 June

2010 2011 2012 2013

Amount

% of

total Amount

% of

total Amount

% of

total Amount

% of

total

(in millions of RMB, except percentages)

Bonds issued by PRC

government 1,467 8.65% 1,113 6.39% 1,519 5.53% 3,199 11.63%

Bonds issued by the

PBOC 54 0.32 33 0.19 23 0.08 79 0.29

Bonds issued by

policy banks 357 2.10 1,139 6.54 3,946 14.37 1,093 3.97

Bonds issued by

commercial banks

and other financial

institutions 2,685 15.82 3,374 19.37 15,489 56.40 6,379 23.19

Others(1) 12,404 73.11 11,758 67.51 6,487 23.62 16,753 60.92

Total financial

assets at fair

value through

profit or loss 16,967 100.00% 17,417 100.00% 27,464 100.00% 27,503 100.00%

(1) Consist primarily of other bonds, equity investments, investments in funds, paper precious metals and derivative financial instruments.

(2) Available-for-sale investments

We hold available-for-sale investments as needed for assets and liabilities allocation and liquidity

management. In 2010, 2011, 2012 and the first six months of 2013, available-for-sale investment remained the

largest component of investments.

The Group’s available-for-sale investments increased by 1.3% from RMB272,370 million as of 31

December 2010 to RMB275,860 million as of 31 December 2011 and by 3.4% to RMB285,344 million as of

31 December 2012 and by 6.9% to RMB304,958 million as of 30 June 2013. As of 31 December 2010, 2011

and 2012 and 30 June 2013, the Group’s available-for-sale investments accounted for 69.1%, 59.9%, 54.8%

and 49.4% of total investments. The decrease of the Group’s available-for-sale investments as a percentage of

total investments was primarily due to the Group’s efforts to adjust and optimize its investment structure in

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

– I-37 –

accordance with its investment strategies, which were formulated on the basis of the Group’s research on and

tracking of various factors such as macroeconomic conditions at home and abroad, monetary policies, capital

market conditions and CPI movements.

The following table sets forth the major components of the available-for-sale investments of the Group

as of the dates indicated:

As of 31 December As of 30 June

2010 2011 2012 2013

Amount

% of

total Amount

% of

total Amount

% of

total Amount

% of

total

(in millions of RMB, except percentages)

Bonds issued by PRC

government 27,533 10.11% 24,434 8.86% 29,829 10.45% 31,444 10.31%

Bonds issued by the

PBOC 18,970 6.96 15,245 5.53 5,928 2.08 1,682 0.55

Bonds issued by

policy banks 43,493 15.97 46,149 16.73 39,270 13.76 39,294 12.89

Bonds issued by

commercial banks

and other financial

institutions 105,388 38.69 106,379 38.56 108,712 38.10 117,797 38.63

Others(1) 76,986 28.27 83,653 30.32 101,605 35.61 114,741 37.62

Total available-for-

sale financial

assets 272,370 100.00% 275,860 100.00% 285,344 100.00% 304,958 100.00%

(1) Consists of other bonds, equity investments and investments in funds.

(3) Held-to-maturity investments

The Group’s held-to-maturity investments mainly consist of PRC government bonds, bonds issued by the

PBOC, bonds issued by policy banks, bonds issued by commercial banks and other financial institutions and

other debt securities, which the Group strategically held as long-term investments. The Group’s held-to-

maturity investments increased by 49.1% from RMB97,614 million as of 31 December 2010 to RMB145,586

million as of 31 December 2011, by 20.5% to RMB175,417 million as of 31 December 2012, and by 12.2%

to RMB196,841 million as of 30 June 2013. The growth in the Group’s held-to-maturity investments in 2012

was primarily attributable to the Group’s relatively low position in such investments at the beginning of the

period, as well as an increase in the Group’s medium- and long-term fixed-rate bonds, which mainly consist

of bonds issued by the PRC government and bonds issued by policy banks and commercial banks, during

periods of high yield on bonds, as a result of the Group’s need to moderately increase the duration of its

investment portfolio in order to meet its banking book interest rate risk management requirements. The

relatively fast increase in the Group’s held-to-maturity investments in 2011 was mainly due to an increase in

the Group’s medium- and long-term fixed-rate bonds during periods of high yield on bonds in the second and

third quarters of 2011, as a result of the Group’s need to moderately increase the duration of its investment

portfolio in order to meet its banking book interest rate risk management requirements. As of 31 December

2010, 2011 and 2012 and 30 June 2013, the Group’s held-to-maturity investments accounted for 24.8%, 31.6%,

33.7% and 31.9%, respectively, of its total investments.

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

– I-38 –

The following table sets forth the components of the held-to-maturity investments of the Group as of the

dates indicated:

As of 31 December As of 30 June

2010 2011 2012 2013

Amount

% of

total Amount

% of

total Amount

% of

total Amount

% of

total

(in millions of RMB, except percentages)

Bonds issued by PRC

government 45,069 46.08% 67,998 46.65% 74,780 42.59% 77,357 39.26%

Bonds issued by the

PBOC 12,945 13.24 15,359 10.54 15,373 8.76 6,450 3.27

Bonds issued by

policy banks 4,172 4.27 10,345 7.10 10,503 5.98 17,634 8.95

Bonds issued by

commercial banks

and other financial

institutions 32,988 33.73 49,874 34.22 70,444 40.12 90,322 45.85

Other debt securities 2,620 2.68 2,184 1.49 4,491 2.55 5,250 2.67

Total held-to-

maturity

investments 97,794 100.00% 145,760 100.00% 175,591 100.00% 197,013 100.00%

Less: provision for

impairment (180) (174) (174) (172)

Net held-to-maturity

investments 97,614 145,586 175,417 196,841

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

– I-39 –

(4) Investment receivables

Investment receivables held by the Group mainly include unlisted certificated bonds issued by the PRCgovernment and other bonds and debts that do not have market values in China or abroad. The Group’sinvestment receivables increased by 205.7% from RMB7,225 million as of 31 December 2010 to RMB22,085million as of 31 December 2011, by 45.9% to RMB32,221 million as of 31 December 2012, and by 174.7%to RMB88,502 million as of 30 June 2013. The rapid increase in the first six months of 2013 was primarilydue to the increase in the Group’s investment in trust beneficiary rights business, and the rapid increase in 2011and 2012 was primarily due to an increase in the Group’s investment in bonds that do not have market values.As of 31 December 2010, 2011 and 2012 and 30 June 2013, the Group’s investment receivables accounted for1.8%, 4.8%, 6.2% and 14.3%, respectively, of its total investments. The following table sets forth thecomponents of the Group’s investment receivables as of the dates indicated:

As of 31 December As of 30 June

2010 2011 2012 2013

Amount% oftotal Amount

% oftotal Amount

% oftotal Amount

% oftotal

(unaudited)(in millions of RMB, except percentages)

Bonds issued by PRCgovernment 5,291 72.63% 3,714 16.77% 1,769 5.48% 1,187 1.34%

Bonds issued bycommercial banksand other financialinstitutions 1,994 27.37 7,282 32.88 11,422 35.38 9,972 11.26

Other debt securities — — 11,152 50.35 19,093 59.14 19,429 21.94

Insurance assetsmanagement plan — — — — — — 12,080 13.64

Trust beneficiaryrights and others — — — — — — 45,898 51.82

Total investmentreceivables 7,285 100.00% 22,148 100.00% 32,284 100.00% 88,566 100.00%

Less: provision forimpairments (60) (63) (63) (64)

Investmentreceivables, net 7,225 22,085 32,221 88,502

(5) Maturity profile of investment portfolio as of 30 June 2013

The following table sets forth the maturity profile of the Group’s investment portfolio as of 30 June

2013:

Immediately

due

Within 1

month

After 1

month but

within 3

months

After 3

months but

within 1

year

After 1

year but

within 5

years

After 5

years Indefinite Total

(unaudited)

(in millions of RMB)

Financial assets at fair value

through profit or loss 3,906 1,170 2,325 3,150 11,194 680 5,078 27,503

Available-for-sale investments 7 17,785 31,130 55,884 166,635 32,074 1,443 304,958

Held-to-maturity securities — 2,854 8,235 7,971 57,404 120,377 — 196,841

Investment receivables — 24,848 2,406 31,683 18,387 11,178 — 88,502

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

– I-40 –

(6) Carrying value and fair value

All investment securities and other financial assets classified as financial assets at fair value throughprofit or loss and available-for-sale investments are stated at market value or fair value. Since there is noestablished market for the investment receivables, which mainly include PBOC bonds and PRC governmentbonds held by the Group and the Group expects to realize the full face value of these receivables at maturity,the Group does not assess market value or fair value of these receivables.

The following table sets forth the carrying value and the market value of the held-to-maturity listedinvestments in the Group’s investment portfolio as of the dates indicated:

As of 31 December As of 30 June

2010 2011 2012 2013

(unaudited)

Carrying

value

Fair

value

Carrying

value

Fair

value

Carrying

value

Fair

value

Carrying

value

Fair

value

(in millions of RMB)

Held-to-maturitylisted investments 94,546 93,429 144,754 146,739 173,850 173,941 194,245 195,252

5. Other components of the assets of the Group

Other components of the assets of the Group consist of: (i) cash and balances with banks and otherfinancial institutions; (ii) balances with central bank; (iii) placements with banks and other financialinstitutions; and (iv) other assets.

The following table shows the other components of the assets of the Group as of the dates indicated.

As of 31 December As of 30 June

2010 2011 2012 2013

(unaudited)

(in millions of RMB)

Cash and balances with banks and otherfinancial institutions 38,211 73,771 293,612 65,135

Balances with central bank 285,705 397,579 458,673 470,489Placements with banks and other financial

institutions 235,464 205,356 210,385 523,035

Other assets:Investment in associates and joint ventures 443 456 455 456Fixed assets 18,397 19,210 22,030 22,178Intangible assets 2,620 2,605 2,851 2,897Deferred income tax assets 3,706 4,342 4,993 5,062Goodwill 9,598 9,598 9,598 9,598Others 12,027 16,587 21,731 41,376

Total other components of the assets of theGroup 606,171 729,504 1,024,328 1,140,226

Cash and balances with banks and other financial institutions consist primarily of cash, precious metals,and RMB-denominated and foreign currency-denominated deposits with other banks. As of 31 December 2010,2011 and 2012 and 30 June 2013, cash and balances with banks and other financial institutions wereRMB38,211 million, RMB73,771 million, RMB293,612 million and RMB65,135 million, respectively. In2010, 2011 and 2012, the amount of cash and balances with banks and other financial institutions increasedas the Group adjusted its strategy for business with banks and other financial institutions based on its liquidityposition, and increased cash and balances with banks and other financial institutions at acceptable liquiditylevels.

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

– I-41 –

Balances with central bank consist primarily of statutory deposit reserves and surplus deposit reserves.Statutory deposit reserves are deposit reserves that were required to be placed with the PBOC pursuant to therelevant regulations, which are not available for daily business uses, and the surplus deposit reserves placedwith the PBOC are mainly for settlement purposes. The Group’s balances with central bank increased by 39.2%from RMB285,705 million as of 31 December 2010 to RMB397,579 million as of 31 December 2011, by 15.4%to RMB458,673 million as of 31 December 2012, then by 2.6% to RMB470,498 as of 30 June 2013. Theincrease from 31 December 2010 to 31 December 2011 was mainly due to changes in the statutory depositreserves ratio and increases in the balance of the Group’s deposits from customers.

Placements with banks and other financial institutions consist primarily of placements with other banksand financial institutions through currency markets, and financial assets held under resale agreements. TheGroup’s placements with banks and other financial institutions increased by 148.6% from RMB210,385 millionas of 31 December 2012 to RMB523,035 million as of 30 June 2013. The Group’s placements with banks andother financial institutions increased by 2.4% from RMB205,356 million as of 31 December 2011 toRMB210,385 million as of 31 December 2012. The Group’s placements with banks and other financialinstitutions decreased by 12.8% to RMB205,356 million as of 31 December 2011 compared to RMB235,464million as of 31 December 2010. The Group’s placements with banks and other financial institutions fluctuatedas the Group made adjustments to its strategy for business with banks and other financial institutions basedon its liquidity position, and increased or decreased its placements with banks and other financial institutionsas its liquidity position changed.

Other assets consist primarily of investments in associates and joint ventures, fixed assets, intangibleassets, deferred income tax assets, goodwill and interest receivable, among others. As of 31 December 2010,2011 and 2012, other assets of the Group were RMB46,791 million, RMB52,798 million and RMB61,658million, respectively.

(II) Liabilities

The total liabilities of the Group increased by 15.9% from RMB2,268,501 million as of 31 December2010 to RMB2,629,941 million as of 31 December 2011, by 22.0% from RMB2,629,961 million as of 31December 2011 to RMB3,207,698 million as of 31 December 2012 and by 12.2% to RMB3,598,131 millionas of 30 June 2013. The higher increase in the end of 2012 as compared with 2011 was mainly attributable tothe steady growth in customer deposits, deposits from banks and other financial institutions, placements frombanks and other financial institutions and amounts sold under repurchase agreements.

The following table sets forth the principal components of the liabilities of the Group both in absoluteamounts and as a percentage of its total liabilities as of the dates indicated:

As of 31 December As of 30 June

2010 2011 2012 2013

Amount

% oftotal

liabilities Amount

% oftotal

liabilities Amount

% oftotal

liabilities Amount

% oftotal

liabilities

(unaudited)

(in millions of RMB, except percentages)

Deposits fromcustomers 1,897,178 83.63% 2,220,060 84.41% 2,532,444 78.95% 2,797,578 77.75%

Deposits from banksand other financialinstitutions 203,011 8.95 205,699 7.82 258,692 8.06 350,117 9.73

Placements frombanks and otherfinancialinstitutions 79,012 3.48 109,548 4.17 267,768 8.35 250,360 6.96

Debt securities issued 36,285 1.60 46,167 1.76 77,111 2.40 88,784 2.47Other liabilities(1) 53,015 2.34 48,467 1.84 71,683 2.24 111,292 3.09

Total liabilities 2,268,501 100.00% 2,629,941 100.00% 3,207,698 100.00% 3,598,131 100.00%

(1) Other liabilities consist of tradable financial liabilities, financial liabilities at fair value through profit or loss, derivative financial

liabilities, wages payable, taxes payable, interest payable, deferred income tax liabilities and other liabilities.

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

– I-42 –

1. Deposits from customers

Deposits from customers represent the Group’s primary source of funding. As of 31 December 2010,

2011 and 2012 and 30 June 2013, the Group’s deposits from customers accounted for 83.6%, 84.4%, 78.9%

and 77.8%, respectively, of its total liabilities. Deposits from customers of the Group increased by 17.0% from

RMB1,897,178 million as of 31 December 2010 to RMB2,220,060 million as of 31 December 2011, by 14.1%

to RMB2,532,444 million as of 31 December 2012 and by 10.5% to RMB2,797,578 million as of 30 June 2013.

The increase in deposits from customers of the Group during this period was mainly due to the Group’s efforts

to expand its deposit business to increase this source of funding.

(1) Breakdown of deposits from customers by business types

The following table sets forth the Group’s deposits from customers by business types as of the dates

indicated:

As of 31 December As of 30 June

2010 2011 2012 2013

Amount % of total Amount % of total Amount % of total Amount % of total

(unaudited)

(in millions of RMB, except percentages)

Deposits from corporate

customers 1,193,579 62.91% 1,416,770 63.82% 1,606,941 63.45% 1,775,677 63.47%

Deposits from retail

customers 703,599 37.09 803,290 36.18 925,503 36.55 1,021,901 36.53

Total 1,897,178 100.00% 2,220,060 100.00% 2,532,444 100.00% 2,797,578 100.00%

Corporate deposits represent a majority of the Group’s deposits from customers. As of 31 December

2010, 2011 and 2012 and 30 June 2013, corporate deposits accounted for 62.9%, 63.8%, 63.5% and 63.5%,

respectively, of total deposits from customers. As of 31 December of 2010, 2011 and 2012 and 30 June 2013,

retail deposits accounted for 37.1%, 36.2%, 36.5% and 36.5% of total deposits from customers. In 2010, 2011,

2012 and the first six months of 2013, the Group’s retail deposits as a percentage of total deposits from

customers remained at a stable level, which has been at a relatively high level as compared to other national

commercial banks in China.

(2) Breakdown of deposits from customers by product type

As of 31 December As of 30 June

2010 2011 2012 2013

Amount % of total Amount % of total Amount % of total Amount % of total

(unaudited)

(in millions of RMB, except percentages)

Demand deposits 1,078,835 56.87% 1,211,592 54.57% 1,322,547 52.22% 1,444,200 51.62%

Time deposits 818,343 43.13 1,008,468 45.43 1,209,897 47.78 1,353,378 48.38

Total 1,897,178 100.00% 2,220,060 100.00% 2,532,444 100.00% 2,797,578 100.00%

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

– I-43 –

In 2010, 2011, 2012 and the first six months of 2013, the Group focused on increasing yields on deposits

from customers and maintained a relatively high demand deposits to total deposits ratio as compared to other

PRC domestic banks. There has been a general trend of increase in time deposits and long-term deposits,

especially for deposits from corporate customers, mainly due to factors such as interest rate liberalization and

pre-existing expectations of reduction in interest rate. Demand deposits from corporate customers as of 30 June

2013, as a percentage of the total deposits, decreased by 1.0%, as compared with the beginning of 2013. As

of 31 December 2012, the Group’s time deposits and demand deposits accounted for 47.8% and 52.2%,

respectively, of the total deposits. Demand deposits as a percentage of total deposits slightly decreased from

31 December 2011 to 31 December 2012, mainly due to the expectations of falling interest rates in 2012, which

resulted in a greater demand from customers for time deposits. As of 31 December 2011, the Group’s time

deposits and demand deposits accounted for 45.4% and 54.6%, respectively, of the total deposits. Demand

deposits as a percentage of total deposits decreased slightly from 31 December 2010 to 31 December 2011,

primarily due to a general customer preference for time deposits over demand deposits, as there was a smaller

increase in the interest rate of demand deposits compared to time deposits.

(3) Breakdown of deposits by geographical region

The Group allocates the geographical distribution of deposits based on the location of the branch that

takes the deposits. The following table sets forth the geographical distribution of the Group’s deposits from

customers as of the dates indicated:

As of 31 December

2010 2011 2012

Amount % of total Amount % of total Amount % of total

(in millions of RMB, except percentages)

Head office 112,852 5.95% 187,227 8.43% 228,873 9.04%

Yangtze River Delta 412,838 21.76 461,438 20.79 508,650 20.09

Bohai Rim 340,997 17.97 388,822 17.51 455,401 17.98

Pearl River Delta and West

Side of Taiwan Strait 375,228 19.78 429,155 19.33 477,448 18.85

Northeast region 113,023 5.96 116,668 5.26 133,576 5.27

Central region 193,726 10.21 218,405 9.84 264,516 10.45

Western region 233,574 12.31 271,966 12.25 305,863 12.08

Overseas 26,675 1.41 53,159 2.39 52,147 2.06

Subsidiaries 88,265 4.65 93,220 4.20 105,970 4.18

Total 1,897,178 100.00% 2,220,060 100.00% 2,532,444 100.00%

Note: Subsidiary deposits are included in the “Subsidiaries” category.

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

– I-44 –

(4) Breakdown of deposits by remaining maturity

The following table sets forth a breakdown of the Group’s deposits by remaining maturity as of 30 June

2013:

Deposits from customers

Amount

% of total

deposits

(unaudited)

(in millions of RMB, except percentages)

Repayable on demand 1,452,327 51.91%

Within 1 month 294,725 10.54

After 1 month but within 3 months 287,663 10.28

After 3 months but within 1 year 526,184 18.81

After 1 year but within 5 years 235,890 8.43

After 5 years 789 0.03

Total 2,797,578 100.00%

2. Deposits and placements from banks and other financial institutions

As of 31 December 2010, 2011 and 2012 and 30 June 2013, the Group’s deposits and placements from

banks and other financial institutions were RMB282,023 million, RMB315,247 million, RMB526,460 million

and RMB600,477 million, respectively, representing an increase of 11.8% from 31 December 2010 to 31

December 2011, 67.0% from 31 December 2011 to 31 December 2012, and 14.1% from 31 December 2012 to

30 June 2013. The increase in the Group’s deposits and placements from banks and other financial institutions

since 2012 was primarily attributable to the Group’s adjustment in its strategy for business with banks and

other financial institutions to ensure its liquidity and strengthen pricing guidance, by flexibly adjusting the

amount of deposits and placements from banks and other financial institutions based on assets contribution by

these institutions and the Group’s liquidity management requirements.

3. Debt securities issued

As of 31 December As of 30 June

2010 2011 2012 2013

Amount % of total Amount % of total Amount % of total Amount % of total

(unaudited)

(in millions of RMB, except percentages)

Certificates of deposit

issued 5,053 13.93% 14,980 32.45% 13,013 16.88% 22,730 25.60%

Subordinated notes

issued 31,232 86.07 31,187 67.55 44,124 57.22 44,077 49.65

Long-term debt

securities issued — — — — 19,974 25.90 21,977 24.75

Total 36,285 100.00% 46,167 100.00% 77,111 100.00% 88,784 100.00%

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

– I-45 –

(1) Subordinated notes issued

Type of notes Term Date of issue

Annual fixed

interest rate

(%)

Nominal

value Carrying amount

(in

millions) As of 31 December

As of 30

June

2010 2011 2012 2013

(in millions)

Fixed rate notes 120 months 4 September 2008 5.70 (for the first 5

years); 8.70 (from

the 6th year

onwards, if the notes

are not redeemed)

RMB19,000 18,977 18,985 18,994 18,998

Fixed rate notes 180 months 4 September 2008 5.90 (for the first 10

years); 8.90 (from

the 11th year

onwards, if the notes

are not redeemed)

RMB 7,000 6,988 6,989 6,990 6,991

Floating rate notes 120 months 4 September 2008 R(1)+1.53% (for the

first 5 years);

R(1)+4.53% (from 6

years onwards, if the

notes are not called

by the Bank)

RMB 4,000 3,995 3,997 3,999 4,000

Fixed rate notes 180 months 28 December

2012

5.20 (for the first 10

years); 5.20 (from

the 11th year

onwards, if the notes

are not redeemed)

RMB11,700 — — 11,700 11,685

Fixed rate notes(3) 144 months 28 December

2009

5.70 HK$ 1,500 1,272 1,216 1,206 1,187

Fixed to floating

rate notes

120 months 6 November 2012 3.50 (for the first 5

years); T(2) + 2.80%

(from the 6th year

onwards, if the notes

are not redeemed)

US$ 200 — — 1,235 1,216

Total RMB41,700 31,232 31,187 44,124 44,077

HK$ 1,500

US$ 200

(1) R represents the 1-year fixed deposit rate published by the PBOC. As of 4 September 2008, 2009, 2010, 2011 and 2012, the benchmark

interest rate was 4.14%, 2.25%, 2.25%, 3.50% and 3.00%, respectively.

(2) T represents the 5-year US Treasury Note rate.

(3) Issued by Wing Lung Bank.

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

– I-46 –

4. Other liabilities

Other liabilities consist of financial liabilities held for trading, financial liabilities at fair value through

profit or loss, derivative financial liabilities, taxes payable, deferred income tax liabilities and other liabilities.

The following table sets forth the principal components of the Group’s other liabilities as of the dates

indicated:

As of 31 December

As of

30 June

2010 2011 2012 2013

(unaudited)

(in millions of RMB)

Trading financial liabilities 188 360 284 142

Financial liabilities at fair value through

profit or loss 1,165 4,364 6,570 28,665

Derivative financial liabilities 1,821 1,469 2,745 12,322

Tax payable 4,972 7,112 6,679 7,377

Deferred income tax liabilities 924 844 813 787

Others 43,945 34,318 54,592 61,999

Total 53,015 48,467 71,683 111,292

(7) WORKING CAPITAL

Rule 9.20(1), Rule 11.06 and paragraph 30 of Appendix 1B of the Hong Kong Listing Rules require a

prospectus to include a statement by the directors that, in their opinion, the working capital available to the

Company is sufficient or, if not, how it is proposed to provide the additional working capital that the Directors

consider to be necessary.

The Company is of the view that the traditional concept of “working capital” does not apply to a banking

business such as the Company and a statement on working capital sufficiency would not provide significant

information for Shareholders and the Company’s investors. For a banking business, the capital adequacy ratio

is a better indicator of solvency. The Company, as a bank incorporated in the PRC, is regulated by the CBRC,

the PBOC and other regulators. The CBRC has imposed minimum capital adequacy requirements on

commercial banks operating in the PRC. The Company is subject to capital adequacy requirements as

promulgated by the CBRC and the information disclosed in this prospectus clearly demonstrates that the

Company has complied with and remains in compliance with the capital adequacy requirements imposed by

the Company’s regulators. Accordingly, the Company is of the view that, notwithstanding the absence of a

statement on working capital sufficiency, the inclusion of information regarding the Company’s capital

adequacy ratios for the three years ended 31 December 2012 and the six months ended 30 June 2013 in this

prospectus does provide sufficient information for the Shareholders and the Company’s investors to properly

assess the H Share Rights Issue. In view of the above and the extensive resources required to provide for such

a statement, the Hong Kong Stock Exchange has granted the Company a waiver from complying with the

working capital statement requirements under Rule 9.20(1), Rule 11.06 and paragraph 30 of Appendix 1B of

the Hong Kong Listing Rules.

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

– I-47 –

(8) INDEBTEDNESS STATEMENT

The following table sets forth the Group’s indebtedness at the close of business on 31 July 2013, being

the latest practicable date for the purpose of this indebtedness statement prior to the printing of this prospectus:

Indebtedness

As at 31 July 2013, the Group had the following indebtedness, which were unguaranteed and unsecured:

(a) In September 2008 and December 2012, the Bank issued a total of RMB41.7 billion in

subordinated notes, comprising 10-year fixed rate notes with a nominal value of RMB19 billion,

15-year fixed rate notes with a nominal value of RMB7 billion, 10-year floating rate notes with

a nominal value of RMB4 billion issued in September 2008, and 15-year fixed rate notes with a

nominal value of RMB11.7 billion issued in December 2012;

(b) In March 2012, the Bank issued a total of RMB20 billion in financial bonds, comprising 5-year

fixed rate notes with a nominal value of RMB6.5 billion and 5-year floating rate notes with a

nominal value of RMB13.5 billion;

(c) Between May 2010 and July 2013, the Bank issued 1-month to 7-year certificates of deposit, with

aggregate nominal values of RMB1.235 billion, HK$6.423 billion and US$1.160 billion,

respectively;

(d) In December 2009, Wing Lung Bank issued 12-year subordinated notes with a nominal value of

HK$1.5 billion; in November 2012, Wing Lung Bank issued 10-year subordinated notes with a

nominal value of US$0.2 billion;

(e) Between March 2011 and July 2013, Wing Lung Bank issued 3-month to 5-year certificates of

deposit, with aggregate nominal values of RMB8.571 billion, HK$1.679 billion and US$0.8762

billion, respectively; and

(f) In June and July 2013, CMB Financial Leasing Co., Ltd. issued a total of RMB4 billion in

financial bonds, comprising 3-year fixed rate notes with a nominal value of RMB2 billion and

5-year fixed rate notes with a nominal value of RMB2 billion.

The Group also had deposits and money market takings from customers and other banks and balances

under repurchase agreements, as well as direct credit substitutes, transaction-related contingencies, trade-

related contingencies and other commitments that arose from the normal course of banking business carried

out by the Group.

Except as disclosed above, as at 31 July 2013, the Group did not have any outstanding mortgages,

charges, debentures, or other loan capital (issued or agreed to be issued), bank overdrafts, loans, liabilities

under acceptance or other similar indebtedness, hire purchase and finance lease commitments or any

guarantees, or other material contingent liabilities.

The Group’s directors have confirmed that there has not been any material change in the indebtedness

or contingent liabilities of the Group since 31 July 2013.

(9) FINANCIAL AND TRADING PROSPECTS

Our financial and trading prospects are affected by ongoing changes, complexities and uncertainties in

the economic and financial environment, both in the PRC and elsewhere, and such changes, complexities and

uncertainties will continue to pose challenges for us in terms of business development, risk prevention,

profitability and internal management. In response to these challenges, in the second half of the year, we will

continue to drive forward the Second Transformation by focusing on the development of key areas in our retail

business and wholesale business and strengthening our risk management.

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

– I-48 –

For illustrative purpose, the financial information prepared in accordance with paragraph 4.29 of the

Hong Kong Listing Rules is set out here to provide prospective investors with further information about how

the financial information of the Company might be affected by completion of the Rights Issue as if the Rights

Issue had been completed on 31 December 2013. The statement has been prepared for illustrative purpose only

and because of its nature, it may not give a true picture of the Company’s financial condition on the completion

of the Rights Issue.

(A) UNAUDITED PRO FORMA ADJUSTED NET TANGIBLE ASSETS

Statement of unaudited pro forma adjusted consolidate net tangible assets of the Group

Statement of unaudited pro forma adjusted consolidated net tangible assets of the Group attributable to

equity holders of the Company (“Unaudited Pro Forma Financial Information”) was prepared by the directors

of the Company in accordance with rule 4.29 of the Listing Rules, to illustrate the impact of the proposed

Rights Issue on the consolidated net tangible assets of the Group, assuming that the Rights Issue had taken

place on 30 June 2013.

The Unaudited Pro Forma Financial Information of the Group was prepared based on the unaudited

consolidated net assets of the Group attributable to the equity holders of the Company as at 30 June 2013 which

is extracted from the Group’s unaudited consolidated financial statements for the six months ended 30 June

2013 as set forth in the Group’s published interim report for the six month ended 30 June 2013, after taking

into consideration of the unaudited pro forma adjustments as described in the accompanying notes.

The Unaudited Pro Forma Financial Information was prepared for illustrative purposes only. As a result

of its hypothetical nature, it may not give a true view of the consolidated net tangible assets of the Group on

the date of preparation or any future date after the Rights Issue.

Rights shares to be issued

on the basis of 1.74 shares

for every 10 shares held

Number of

shares in

issue

in RMB

million RMB/share

million

shares

The unaudited consolidated net assets of the

Group as at 30 June 2013 attributable to

the equity holders of the Company Note 1 212,498 9.85 21,577Note 4

Less: adjustments on goodwill, intangible

assets and non-controlling interest Note 2 (12,650) — —

The consolidated net tangible assets of the

Group as at 30 June 2013 attributable to

the equity holders of the Company 199,848 9.26 21,577

Estimated net proceeds from the Rights Issue Note 3 34,704 — 3,754Note 5

The unaudited pro forma adjusted net

tangible assets of the Group as at 30 June

2013 attributable to the equity holders of

the Company after completion of the

Rights Issue 234,552 9.26 25,331

Note 1: the consolidated net assets of the Group as at 30 June 2013 attributable to the equity holders of the Company, as extracted from

the unaudited consolidated financial statements of the Group for the six months ended 30 June 2013.

Note 2: as at 30 June 2013, the goodwill and other intangible assets of the Group were RMB9,598 million and RMB2,897 million

respectively, and the non-controlling interest was RMB155 million.

Note 3: the estimated net proceeds from the A+H Rights Issue was determined after deducting the relevant transaction fee and other

expenses expected to be payable by the Bank of approximately RMB175 million.

APPENDIX II UNAUDITED PRO FORMA FINANCIAL

INFORMATION OF THE GROUP

– II-1 –

Noted 4: the number of shares used to calculate the unaudited pro forma adjusted consolidated net tangible assets per share attributable to

the equity holders of the Company as at 30 June 2013 and before completion of the Rights Issue, being 21,576,608,885 shares

in issue on the Record Date.

Note 5: the number of shares used to calculate the unaudited pro forma adjusted consolidated net tangible assets per share attributable to

the equity holders of the Company after completion of the Rights Issue, being 25,330,938,831 shares (among these shares, the

Rights Issue of 3,754,329,946 Rights Shares is calculated on 21,576,608,885 shares in issue on the Record Date and on the basis

of 1.74 H Rights Shares for every 10 existing H shares in respect of the Rights Issue).

Note 6: no adjustment has been made to reflect any trading results or other transactions of the Group entered into subsequent to 30 June

2013.

APPENDIX II UNAUDITED PRO FORMA FINANCIAL

INFORMATION OF THE GROUP

– II-2 –

(B) REPORT FROM THE REPORTING ACCOUNTANTS ON UNAUDITED PRO FORMA

FINANCIAL INFORMATION OF THE GROUP

The following is the text of a report received from the reporting accountants, KPMG, Certified Public

Accountants, Hong Kong, prepared for the purpose of incorporation in this prospectus, in respect of the

unaudited pro forma financial information of the Group.

INDEPENDENT REPORTING ACCOUNTANTS’ ASSURANCE REPORT ON THE COMPILATION

OF PRO FORMA FINANCIAL INFORMATION

TO THE DIRECTORS OF CHINA MERCHANTS BANK CO., LTD.

We have completed our assurance engagement to report on the compilation of pro forma financial

information of China Merchants Bank Co., Ltd. (the “Bank”) and its subsidiaries (collectively the “Group”)

by the directors of the Bank (the “Directors”) for illustrative purposes only. The unaudited pro forma financial

information consists of the unaudited pro forma statement of adjusted net tangible assets as at 30 June 2013

and related notes as set out on pages II-1 to II-2 in Part II of Appendix II to the prospectus dated 5 September

2013 (the “Prospectus”) issued by the Bank. The applicable criteria on the basis of which the Directors have

compiled the pro forma financial information are described in II-1 to II-2 in Part II of Appendix II to the

Prospectus.

The pro forma financial information has been compiled by the Directors to illustrate the impact of the

proposed offering of the ordinary shares of the Bank (the “Global Offering”) on the Group’s financial position

as at 30 June 2013 as if the Global Offering had taken place at 30 June 2013. As part of this process,

information about the Group’s financial position as at 30 June 2013 has been extracted by the Directors from

the Group’s historical financial statements included in the Group’s published unaudited interim report for the

six months ended 30 June 2013.

Directors’ Responsibilities for the Pro Forma Financial Information

The Directors are responsible for compiling the pro forma financial information in accordance with

paragraph 4.29 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited

(the “Listing Rules”) and with reference to Accounting Guideline 7 “Preparation of Pro Forma Financial

Information for Inclusion in Investment Circulars” (“AG 7”) issued by the Hong Kong Institute of Certified

Public Accountants (“HKICPA”).

Reporting Accountants’ Responsibilities

Our responsibility is to express an opinion, as required by paragraph 4.29(7) of the Listing Rules, on the

pro forma financial information and to report our opinion to you. We do not accept any responsibility for any

reports previously given by us on any financial information used in the compilation of the pro forma financial

information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

We conducted our engagement in accordance with Hong Kong Standard on Assurance Engagements

(“HKSAE”) 3420 “Assurance Engagements to Report on the Compilation of Pro Forma Financial Information

Included in a Prospectus” issued by the HKICPA. This standard requires that the reporting accountants comply

with ethical requirements and plan and perform procedures to obtain reasonable assurance about whether the

Directors have compiled the pro forma financial information in accordance with paragraph 4.29 of the Listing

Rules, and with reference to AG 7 issued by the HKICPA.

For purpose of this engagement, we are not responsible for updating or reissuing any reports or opinions

on any historical financial information used in compiling the pro forma financial information, nor have we, in

the course of this engagement, performed an audit or review of the financial information used in compiling the

pro forma financial information.

The purpose of pro forma financial information included in an investment circular is solely to illustrate

the impact of a significant event or transaction on unadjusted financial information of the Group as if the event

APPENDIX II UNAUDITED PRO FORMA FINANCIAL

INFORMATION OF THE GROUP

– II-3 –

had occurred or the transaction had been undertaken at an earlier date selected for purposes of the illustration.

Accordingly, we do not provide any assurance that the actual outcome of events or transactions as at 30 June

2013 would have been as presented.

A reasonable assurance engagement to report on whether the pro forma financial information has been

properly compiled on the basis of the applicable criteria involves performing procedures to assess whether the

applicable criteria used by the Directors in the compilation of the pro forma financial information provide a

reasonable basis for presenting the significant effects directly attributable to the event or transaction, and to

obtain sufficient appropriate evidence about whether:

• the related pro forma adjustments give appropriate effect to those criteria; and

• the pro forma financial information reflects the proper application of those adjustments to the

unadjusted financial information.

The procedures selected depend on the reporting accountants’ judgement, having regard to the reporting

accountants’ understanding of the nature of the Group, the event or transaction in respect of which the pro

forma financial information has been compiled, and other relevant engagement circumstances.

The engagement also involves evaluating the overall presentation of the pro forma financial information.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our

opinion.

Our procedures on the pro forma financial information have not been carried out in accordance with

attestation standards or other standards and practices generally accepted in the United States of America,

auditing standards of the Public Company Accounting Oversight Board (United States) or any overseas

standards and accordingly should not be relied upon as if they had been carried out in accordance with those

standards and practices.

We make no comments regarding the reasonableness of the amount of net proceeds from the issuance

of the Bank’s shares, the application of those net proceeds, or whether such use will actually take place as

described in the section headed “Use of Proceeds” in the Prospectus.

Opinion

In our opinion:

a) the pro forma financial information has been properly compiled on the basis stated;

b) such basis is consistent with the accounting policies of the Group, and

c) the adjustments are appropriate for the purposes of the pro forma financial information as

disclosed pursuant to paragraph 4.29(1) of the Listing Rule.

KPMG

Certified Public Accountants

8th Floor, Prince’s Building

10 Chater Road

Central, Hong Kong

5 September 2013

APPENDIX II UNAUDITED PRO FORMA FINANCIAL

INFORMATION OF THE GROUP

– II-4 –

1. RESPONSIBILITY STATEMENT

This prospectus, for which the directors of the Group collectively and individually accept full

responsibility, includes particulars given in compliance with the Hong Kong Listing Rules for the purpose of

giving information with regard to the Group. The Directors, having made all reasonable enquiries, confirm that

to the best of their knowledge and belief the information contained in this prospectus is accurate and complete

in all material respects and not misleading or deceptive, and there are no other matters the omission of which

would make any statement herein or this prospectus misleading.

2. PARTICULARS OF DIRECTORS, SUPERVISORS AND MEMBERS OF SENIOR MANAGEMENT

Non-Executive Directors

Mr. Fu Yuning, aged 56, Chairman and non-executive Director of the Company. He has been a

director of the Company since March 1999 and has been the Chairman of the Company since October

2010. Mr. Fu obtained a doctorate degree from Brunel University, the United Kingdom. Mr. Fu is a

member of the Twelfth National Committee of the Chinese People’s Political Consultative Conference.

He has been the chairman of China Merchants Group Ltd. since August 2010. Mr. Fu concurrently holds

the posts as the chairman of China Merchants Holdings (International) Co., Ltd. (a company listed on

the Hong Kong Stock Exchange), and an independent non-executive director of Li & Fung Limited (a

company listed on the Hong Kong Stock Exchange), and a General Committee Member of the Hong

Kong General Chamber of Commerce. He is also the chairman of China Nanshan Development (Group)

Inc.

Mr. Wei Jiafu, aged 63, vice Chairman and non-executive Director of the Company. He has been

the vice Chairman of the Company since April 2001. He obtained a doctorate degree from Tianjin

University. He is a member of the sixteenth and seventeenth sessions of Chinese Communist Party

Central Committee for Discipline Inspection. Mr. Wei is the chairman of the board of COSCO (Hong

Kong) Group Ltd. He is also the chairman of China Association of Trade in Services and China

Shipowners Mutual Assurance Association. He is also a member of the Committee of Boao Forum for

Asia Commission, the 21st Century Committee for China-Japan Friendship, China National MBA

Education Supervisory Committee, Harvard Business School Asia-Pacific Advisory Board, and an

adviser of the Panama Canal Authority. He had been the president of China Ocean Shipping (Group)

Company from November 1998 to August 2011, and the chairman of China Ocean Shipping (Group)

Company from August 2011 to July 2013.

Mr. Li Yinquan, aged 58, non-executive Director of the Company. He has been a director of the

Company since April 2001. He obtained a master’s degree in economics in the Graduate School of the

People’s Bank of China and a master’s degree in finance in FINAFRICA, Italy, and is a senior

economist. Mr. Li is a deputy of the Twelfth National People’s Congress of Hong Kong Special

Administrative Region. He is the vice president of China Merchants Group Ltd., Chairman of China

Merchants Finance Holdings Company Limited, Chairman of China Merchants China Direct Investments

Limited (a company listed on the Hong Kong Stock Exchange) and vice chairman of China Merchants

Capital Investment Co., Ltd.. He is also a director of China Merchants Holdings (International) Co., Ltd.

(a company listed on the Hong Kong Stock Exchange). He was the chief financial officer, vice president

and chief financial officer of China Merchants Group Ltd.

Mr. Fu Gangfeng, aged 46, non-executive Director of the Company. He has been a director of the

Company since August 2010. He obtained a bachelor’s degree in finance and accounting and a master’s

degree in business administration from Xi’an Highway College and is a senior accountant. He has been

the chief financial officer of China Merchants Group Ltd. He also serves as a director of China

Merchants Securities Co., Ltd. (a company listed on the Shanghai Stock Exchange) and China Merchants

Energy Shipping Company Co., Ltd. (a company listed on the Shanghai Stock Exchange). He was the

deputy director of the Shekou ZhongHua Certified Public Accountants, the director of the chief

accountant office and deputy chief accountant of China Merchants Shekou Industrial Zone Co., Ltd.

respectively, and the chief financial officer of China Merchants Shekou Holdings Co. Ltd. and China

Merchants Shekou Industrial Zone Co., Ltd., and the general manager of the finance division of China

Merchants Group Ltd.

APPENDIX III STATUTORY AND GENERAL INFORMATION

– III-1 –

Ms. Sun Yueying, aged 55, non-executive Director of the Company. She has been a director of the

Company since April 2001. She is an university graduate and is a senior accountant. She has been the

chief accountant of China Ocean Shipping (Group) Company since December 2000. She has also been

a non-executive director of China COSCO Holdings Company Ltd. (a company listed on the Hong Kong

Stock Exchange and the Shanghai Stock Exchange), the chairman of COSCO Finance Co., Ltd. and a

director of China Merchants Securities Co., Ltd. (a company listed on the Shanghai Stock Exchange).

Mr. Wang Daxiong, aged 52, non-executive Director of the Company. He has been a director of

the Company since March 1998. He holds an EMBA degree and is a senior accountant. He has been the

deputy general manager of China Shipping (Group) Company since August 2011. He has also been a

non-executive director of China Shipping Container Lines Company Ltd. (a company listed on the Hong

Kong Stock Exchange and the Shanghai Stock Exchange), an executive director of China Shipping

Development Co., Ltd. (a company listed on the Hong Kong Stock Exchange and the Shanghai Stock

Exchange) and the chairman of the Board of China Shipping (Hainan) Haisheng Shipping and Enterprise

Co., Ltd. (a company listed on the Shanghai Stock Exchange). He successively served as the vice

president and chief accountant of China Shipping (Group) Company from 1997 to 2011.

Mr. Fu Junyuan, aged 52, non-executive Director of the Company. He has been a director of the

Company since March 2000. He obtained a doctorate degree in management and is a senior accountant.

He has been the executive director and chief financial officer of China Communications Construction

Ltd. (a company listed on the Hong Kong Stock Exchange) since September 2006. He has also been the

chairman of CCCC Finance Company Limited and the vice chairman of Jiang Tai Insurance Broker Co.,

Ltd.. He was the chief accountant of China Harbour Engineering (Group) Ltd. from October 1996 to

September 2005, and the chief accountant of China Communications Construction (Group) Ltd. from

September 2005 to September 2006.

Mr. Hong Xiaoyuan, aged 50, non-executive Director of the Company. He has been a director of

the Company since June 2007. He obtained a master’s degree in economics from Peking University and

a master’s degree in science from Australian National University. Since September 2011, he has been an

Executive Assistant President of China Merchants Group Ltd. and the General Manager of China

Merchants Finance Holdings Company Ltd. since May 2007. He is also the chairman of China Merchants

China Investment Management Ltd., China Merchants Kunlun Equity Investment Fund Management

Co., Ltd. (招商昆侖股權投資管理有限公司), Houlder Insurance Brokers Far East Ltd., China Merchants

Finance Investment Holdings Co., Ltd., China Merchants Insurance Co., Ltd. and China Merchants

Holdings (U.K.) Co., Ltd.. He had also served as the director of China Merchants Securities Co., Ltd.

(a company listed on the Shanghai Stock Exchange), China Merchants China Direct Investments Ltd. (a

company listed on the Hong Kong Stock Exchange), Morgan Stanley Huaxin Fund Management

Company Ltd. and Great Wall Securities Co., Ltd.

Mr. Xiong Xianliang, aged 45, non-executive Director of the Company. He has been a director

of the Company since July 2012. He obtained a doctorate degree in economics from Nankai University

and is a researcher. He is currently the general manager of the Strategic Research Department of China

Merchants Group Limited, and a standing committee member of the Youth Federation of the Central

Government Departments. He was a director of the Industry Department of the Development Research

Center of the State Council, deputy director of the Planning Committee and deputy director of the

Western Development Office of Chongqing, deputy group leader of the Comprehensive Group of the

Western Development Office of the State Council and inspector of the Research Office of the State

Council.

Executive Directors

Mr. Zhang Guanghua, aged 56, Vice Chairman and executive Director of the Company. He has

been an executive director of the Company since June 2007, and has been the Vice Chairman of the

Company since August 2013. Mr. Zhang obtained a doctorate degree in economics and is a senior

economist. He is also the vice chairman of the Board of Directors of Wing Lung Bank Limited, the

chairman of CIGNA & CMC Life Insurance Co., Ltd., the chairman of China Merchants Fund

Management Co., Ltd. and the chairman of CMB Financial Leasing Co., Ltd.. He is a director of the

APPENDIX III STATUTORY AND GENERAL INFORMATION

– III-2 –

Standing Council of China Society for Finance and Banking, the deputy chairman of Guangdong Societyfor Finance and Banking, a member of the Fifth Committee of China Council for the Promotion ofInternational Trade and an adjunct professor at Southwestern University of Finance and Economics andJilin University. From September 2002 to April 2007, he served as the president of GuangdongDevelopment Bank, and from April 2007 to May 2013, he acted as an executive vice president of theCompany.

Mr. Tian Huiyu, aged 47, executive Director of the Company and was appointed as President ofthe Company at the 1st meeting of the ninth session of the Board of Directors of the Company (hisqualification for serving as president is subject to approval by the CBRC). He obtained his bachelor’sdegree in infrastructure finance and credit from Shanghai University of Finance and Economics and hismaster’s degree in public management from Columbia University, is a senior economist. From March2011 to April 2011, he acted as the controller of retail banking of China Construction Bank Corporation(a company listed in Hong Kong and Shanghai) and concurrently as head of Beijing Branch of ChinaConstruction Bank Corporation. He served as the controller of retail banking and general manager ofBeijing Branch of China Construction Bank Corporation from April 2011 to May 2013. He servedconsecutively as deputy general manager of Shanghai Branch of China Construction Bank Corporation,head and general manager of Shenzhen Branch of China Construction Bank Corporation from December2006 to March 2011, vice president of Shanghai Bank from July 2003 to December 2006, and vicepresident of Trust Investment Branch of China Cinda Asset Management Co., Ltd from July 1998 to July2003.

Mr. Li Hao, aged 54, executive Director, Senior Executive Vice President and Chief FinancialOfficer of the Company. He joined the Company in May 1997 and has been an executive vice presidentof the Company since March 2002, and Chief Financial Officer since March 2007. He has served as anexecutive director of the Company since June 2007, and has acted as Senior Executive Vice Presidentof the Company since May 2013. Mr. Li obtained a master’s degree in business administration and is asenior accountant. He is also a non-executive director of Wing Lung Bank Limited. He has been anexecutive assistant President and subsequently an executive vice President of the Company. He was thepresident of the Shanghai Branch of the Company from April 2000 to March 2002.

Independent Non-executive Directors

Mr. Yi Xiqun Note 1, aged 65, independent non-executive Director of the Company. He has beenan independent non-executive Director of the Company since October 2007. He obtained a master’sdegree in economics management engineering from Tsinghua University. He is currently the vicepresident of China Association of Private Equity and the vice president and the first alternate chairmanof Beijing Association of Private Equity. He concurrently acts as an independent non-executive directorof SOHO China Ltd. (a company listed on the Hong Kong Stock Exchange), Zheshang Jinhui Trust Co.,

Ltd. and Asian Capital (Corporate Finance) Limited, the president of Capital Enterprises Association (京城企業協會會長), the vice president of China Association for the Promotion of Industrial Development,

and a member of Zhong Guancun Advisory Committee. He had been the president of Beijing Holdings

Ltd., the chairman of the board of directors of Beijing Enterprises Holdings Ltd. (a company listed on

the Hong Kong Stock Exchange) and the president of Beijing Enterprises Group Company Ltd., the

president of Beijing Private Equity Investment & Development Fund Management Co., Ltd. and the

chairman of Bowei Capital.

Mr. Wong Kwai Lam, aged 64, independent non-executive Director of the Company. He has been

an independent non-executive Director of the Company since July 2011. He obtained a bachelor degree

from the Chinese University of Hong Kong and Ph. D from Leicester University, England. He is the

chairman of IncitAdv Consultants Ltd. and a director of Opera Hong Kong, member of the Strategic

Investment Society of the Chinese University of Hong Kong, and member of the Board of Trustee and

the Strategic Investment Society of New Asia College of the Chinese University of Hong Kong. He also

serves as the manager of Prosperity Real Estate Investment Trust and independent non-executive director

of K. Wah International Holdings Limited (a company listed on the Hong Kong Stock Exchange), an

independent non-executive director of Langham Hospitality Investments Limited (a company listed on

the Hong Kong Stock Exchange), an independent non-executive director of LHIL Manager Limited and

a member of the Hospital Governing Committee of Prince of Wales Hospital located in Shatin, Hong

Kong. He once serviced at Merrill Lynch (Asia Pacific) Limited from May 1993 to August 2009, and

acted as the managing director and head of Asia Pacific Investment Banking and managing director and

chairman of Asia Pacific Investment Banking. Mr. Wong used to be a member of Advisory Committee

under the Securities and Futures Commission in Hong Kong and its committee on Real Estate Investment

Trusts and a member of the China Committee to the Hong Kong Trade Development Council.

APPENDIX III STATUTORY AND GENERAL INFORMATION

– III-3 –

Ms. Yan Lan Note 1, aged 56, independent non-executive Director of the Company. She has been

an independent non-executive Director of the Company since June 2007. She obtained a bachelor’s

degree in French language and literature from Beijing Foreign Studies University, a master’s degree in

international law from Peking University, a doctorate degree in international law from Graduate Institute

of International Studies in Geneva, and has been managing director of Lazard Ltd. and the president of

Greater China Investment Banking. She has served as the chief representative in the Beijing Office of

Gide Loyrette et Nouel from 1998 to April 2011. She has also been vice chairlady of Chinese Arts Fund,

chairlady of China Heritage Protection Fund (NGO), an adviser of France’s foreign trade and the

honorary consul of the Principality of Monaco in Beijing.

Mr. Pan Chengwei, aged 67, independent non-executive Director of the Company. He has been

an independent non-executive Director of the Company since July 2012. He graduated from Cadre

Institute under the Ministry of Transport with an associate bachelor’s degree and is an accountant. Mr.

Pan started his career in 1965 and retired in November 2008. He consecutively served as the head of

finance department of China Ocean Shipping Company, the general manager of finance department of

China Ocean Shipping (Group) Company, the general manager of finance department of COSCO (Hong

Kong) Group Limited, the general manager of COSCO (H.K.) Property Development Limited, the

general manager of COSCO (H.K.) Industry and Trade Holdings Ltd., the chief representative of

Shenzhen representative office of COSCO HK Group, the general manager of COSCO (Cayman) Fortune

Holding Co., Ltd. and its Hong Kong branch, and the compliance manager of the Fuel Oil Futures

Department of China Ocean Shipping (Group) Company. He is currently an independent non-executive

director of Shenzhen Nanshan Power Station Co. Ltd. (a company listed on the Shenzhen Stock

Exchange), and an independent non-executive director of China International Marine Containers (Group)

Co., Ltd.

Ms. Pan Yingli, aged 58, independent non-executive Director of the Company. She has been an

independent non-executive Director of the Company since November 2011. She holds a Bachelor’s

degree in Economics from East China Normal University, a Master’s degree in Economics from

Shanghai University of Finance and Economics and a Doctor’s degree in World Economics from East

China Normal University. Ms. Pan has taught at East China Normal University as associate professor,

a professor and a tutor of doctorate candidates since 1984, and had also been an invited expert of

Shanghai Municipal Government on decision-making consultation (1998-2007). She joined Shanghai

Jiao Tong University in November 2005. She is currently a director of Research Center for Global

Finance of Shanghai Jiao Tong University, a professor and a tutor of doctorate candidates in Finance at

Antai College of Economics and Management of Shanghai Jiao Tong University, vice president of

Shanghai World Economy Association, vice president of Shanghai Institute of International Financial

Centers, chief expert of Pan Yingli (International Financial Center Construction) Studio at Shanghai

Institute of Development Strategies under Development Research Center of Shanghai Municipal

Government, and an independent supervisor of China Shipping Container Lines Company Limited (a

company listed on the Hong Kong Stock Exchange and the Shanghai Stock Exchange).

Ms. Guo Xuemeng, aged 46, independent non-executive Director of the Company. She has been

an independent non-executive Director of the Company since July 2012. She holds a Master’s degree in

accounting of the economics department from Northern Jiaotong University (renamed as Beijing

Jiaotong University in 2003) and a Doctor’s degree in economics of School of Economics and

Management from Beijing Jiaotong University. She is currently a professor, a tutor of doctorate

candidates and a vice dean of the School of Economics and Management of Beijing Jiaotong University,

a secretary general of Transportation and Economics Committee of China Communication and

Transportation Association, a director of Railway Accounting Association (鐵道會計學會直屬學會理事),

an independent director of Gvitech Corporation (偉景行科技股份有限公司), and an independent director

of Beijing Bode Communication Equipment Co., Ltd. (北京博得交通設備股份有限公司). From July

2001 to July 2007, she successively served as the deputy secretary of the CCP committee of the School

of Economics and Management of Beijing Jiaotong University and a deputy director of general office

of that school.

Note:

1. Mr. Xu Shanda and Mr. Shan Weijian were elected as independent non-executive Directors at the 2012 Annual GeneralMeeting of the Company (their qualifications are subject to approvals by the banking regulator(s) in the PRC). Pursuant torelevant regulatory requirements, before the approvals of the qualification of Mr. Xu Shanda and Mr. Shan Weijian areobtained, Mr. Yi Xiqun and Ms. Yan Lan, both being independent non-executive Directors of the Eighth Session of the Boardof Directors, will continue to perform the duties of independent non-executive Directors in the Board and the specialisedcommittees thereunder.

APPENDIX III STATUTORY AND GENERAL INFORMATION

– III-4 –

Supervisors

Mr. Han Mingzhi, aged 58, the chairman and an employee Representative Supervisor of the Board

of Supervisors of the Company, has been the Chairman of the Board of Supervisors of the Company since

August 2010. He holds a Master’s Degree in International Economics from The Johns Hopkins

University and is a senior economist. He concurrently serves as executive director of the seventh council

of China Society for Finance and Banking. He had been the Deputy Executive Director for China in the

International Monetary Fund from 1996 to 1998, deputy executive director of the International

Department of the People’s Bank of China (“PBOC”) from 1999 to 2003, and deputy executive director

of the International Department of China Banking Regulatory Commission from 2003 to June 2010.

Mr. Zhu Genlin, aged 57, shareholder representative Supervisor of the Company, Director of the

Company from April 2001 to May 2003, and Supervisor of the Company since May 2003. Mr. Zhu

graduated from Shanghai University of Finance and Economics and obtained a master’s degree in

economics. He is a senior economist and associate researcher. He has been the chief financial officer of

Shanghai Automotive Industry Corporation (Group) from February 2002 to August 2010, the vice

president of Shanghai Automotive Industry Corporation (Group) from August 2010 to January 2012 and

the vice president of SAIC Motor Corporation Limited (a company listed on the Shanghai Stock

Exchange) since January 2012. He is currently the chairman of the Board of Supervisors of Shanghai

Foundation for Promotion of Transformation of Scientific and Technological Achievements, the deputy

chairman of Shanghai Cost Study Society, Shanghai Creative Industry Centre, the general manager of

Shanghai Automotive Group (Beijing) Co., Ltd., the chairman of China Automotive Industry Investment

and Development Co., Ltd., the chairman of Shanghai Automotive Asset Management Co., Ltd., the

president of Shanghai Creative Industry Investment Corp., the vice chairman of Board of Supervisors of

Shenyin & Wanguo Securities Co., Ltd. and a director of Changjiang Pension Insurance Co., Ltd..

Mr. An Luming, aged 53, shareholder representative Supervisor of the Company. He has been a

Supervisor of the Company since May 2012. Mr. An graduated from Beijing Institute of Economics

majoring in political economics and is a senior economist. He joined China National Offshore Oil

Corporation in 1995, and had served as the chief of the Corporate Management Office (企業管理處) of

the Corporate Policy Research Department, the chief of the System Reform Department of the Corporate

Reform Office, the Restructure and Listing Manager of the Corporate Reform Office, general manager

assistant and deputy general manager of Zhonghai Trust and Investment Co., Ltd., and the deputy general

manager of the Asset Management Department of the China National Offshare Oil Corporation, the

deputy general manager of the Financial Asset Department of China National Offshare Oil Corporation.

From December 2011 to present, Mr. An has acted as the general manager of the CNOOC Investment

Holding Co., Ltd.

Mr. Liu Zhengxi, aged 50, shareholder representative Supervisor of the Company. He has been

a Supervisor of the Company since May 2012. He graduated from the Hangzhou Institute of Commerce

majoring in enterprise management. Mr. Liu served as a section officer, the deputy director of the

Planning and Finance Division and the deputy director of the Labor Wage Division of Shandong

Provincial Department of Labor and Social Security from 2000 to 2004, he had also served as the deputy

director and the director of the Distribution Department and the Head of the Capital Operation and Gains

Management Department of State-owned Assets Supervision and Administration Commission of

Shandong Province from 2004 to 2011. From March 2011 to present, Mr. Liu has acted as the vice

president of Shandong State-owned Assets Investment Holding Co., Ltd.

Mr. Peng Zhijian, aged 64, external Supervisor of the Company. He has been a Supervisor of the

Company since October 2011. He holds a Master’s degree in Financial Investment from Guangxi Normal

University and is a senior economist. He serves as the independent non-executive director of Dongguan

Trust Co., Ltd., and the external supervisor of Ping An Insurance (Group) Company of China, Ltd.. He

has previously served as the deputy governor, governor of PBOC Guangxi Branch, the deputy governor

of PBOC Guangzhou Regional Branch, the governor of PBOC Shenzhen Central Branch, the governor

of PBOC Wuhan Regional Branch and the head of the State Administration of Foreign Exchange Hubei

Bureau, and the governor of Guangdong Regulatory Bureau of CBRC.

APPENDIX III STATUTORY AND GENERAL INFORMATION

– III-5 –

Mr. Pan Ji, aged 64, external Supervisor of the Company. He has been a Supervisor of the

Company since May 2011. He graduated in Labour Economics from Beijing Institute of Economics. He

previously served as the supervisor (at director-general level) of the Board of Supervisors of the previous

State-owned Assets Supervision and Administration Commission under the State Council. He

successively served as the vice director of the Cadre Division Office of the Labour and Personnel

Bureau, the deputy head of Planning and Recruitment Department, the vice director, office head, the

chief of the Central Committee, the assistant inspector (at deputy director-general level) of the

Recruitment Office of the Examination & Recruitment Department of the Ministry of Personnel, the

assistant to Commissioner and office head of the Investigating Commissioner Office under the State

Council, the supervisor and office head of the Board of Supervisors of the Central Enterprises Work

Committee, and the supervisor (at deputy director-general level) of the Board of Supervisors of the

State-owned Assets Supervision and Administration Commission under the State Council.

Mr. Shi Rongyao, aged 62, external Supervisor of the Company. He has been a Supervisor of the

Company since May 2013. He graduated from the Department of Management Science and Engineering

of the Harbin Institute of Technology with a master’s degree. He successively served as a secretary and

the deputy director of the General Office of the State Planning Commission from June 1991 to September

1995, the deputy director of the Planning Commission of Hebei Province from September 1995 to May

1997, the director of the Office of Foreign Co-operation of the People’s Government of Hebei Province,

the governor of Investment Co-operation Bureau and the deputy director of the Planning Commission of

Hebei Province from May 1997 to November 2000, the director of the General Office of the State

Development & Planning Commission from November 2000 to March 2003, the director of the General

Office of National Development and Reform Commission from April 2003 to February 2012. From

March 2012 to present, he has acted as the chairman of China Development Zone Association.

Mr. Yu Yong, aged 51, an employee representative Supervisor of the Company. He has been a

Supervisor of the Company since May 2013. He is a postgraduate and a senior economist. He had been

a Vice Dean of the Beijing Branch of the PBOC. He joined Beijing Branch of the Company in March

1994 and successively served as General Manager of the Planning and Treasury Department of Beijing

Branch, Assistant President of Chongqing Branch, Vice President of Tianjin Branch, etc. He also served

as President of Dalian Branch from September 2003 to February 2009 and President of Nanning Branch

from February 2009 to January 2013. He has been a Deputy Director of the Labor Union of the Company

since January 2013.

Mr. Guan Qizhi, aged 48, an employee representative Supervisor of the Company. He has been

a Supervisor of the Company since May 2013. He is a university graduate. He joined Lanzhou Branch

of the Company in February 1996 and successively served as Assistant Director of the General Office,

the Deputy Director of the General Office, the Director of the General Office and General Manager of

the Human Resources Department, Assistant President and Vice President of Lanzhou Branch. He also

served as Vice President of Urumqi Branch (in charge of daily management) from September 2006 to

July 2008, President of Urumqi Branch from July 2008 to June 2009 and President of Lanzhou Branch

from July 2009 to January 2013. He has been a Deputy Secretary of the Disciplinary Committee, Chief

Officer of the Disciplinary Committee Office, General Manager of the Inspection and Security

Department of the Company since January 2013.

Senior Management

Mr. Tian Huiyu, aged 47, executive Director and the President of the Company. Mr. Tian’s

qualification as the President is subject to approval by China banking regulatory authorities. Please refer

to Mr. Tian’s biography under the paragraph headed “Executive Directors” above.

Mr. Zhang Guanghua, aged 56, executive Director and Vice Chairman of the Company. Please

refer to Mr. Zhang’s biography under the paragraph headed “Executive Directors” above.

Mr. Li Hao, aged 54, executive Director, Senior Executive Vice President and Chief Financial

Officer of the Company. Please refer to Mr. Li’s biography under the paragraph headed “Executive

Directors” above.

APPENDIX III STATUTORY AND GENERAL INFORMATION

– III-6 –

Mr. Tang Zhihong, aged 53, executive vice President of the Company. Mr. Tang graduated from

Jilin University and is a senior economist. He joined the Company in May 1995. He successively served

as the executive vice President of the Shenyang Branch, the deputy head of the Shenzhen Administration

Unit, the executive President of the Lanzhou Branch, the executive President of the Shanghai Branch,

head of the Shenzhen Administration Unit, and executive assistant President of the head office. He has

been executive vice President of the Company since April 2006.

Ms. Yin Fenglan Note 2, aged 60. Ms. Yin obtained a master’s degree in Economics and is a senior

economist. She acted as executive vice President of the Company from April 2006 to July 2013. She

joined the Company in May 1994. She successively served as the executive vice President and later the

executive President of the Beijing Branch, and an executive assistant President of the head office and

at the same time the executive President of the Beijing Branch.

Mr. Ding Wei, aged 56, executive vice President of the Company. Mr. Ding is a graduate and

associate researcher. He joined the Company in December 1996. He successively served as the director

of the General Office and the general manager of the Operation Department of Hangzhou Branch, the

executive assistant President and the executive vice President of Hangzhou Branch, the executive

President of Nanchang sub-branch, the executive President of Nanchang Branch, and the general

manager of the Human Resources Department of the Head Office, and an executive assistant President

of the Head Office. He has served as executive vice President of the Company since April 2008. He is

concurrently a director of CIGNA & CMC Life Insurance Company Ltd. and China UnionPay Co., Ltd.

Mr. Zhu Qi, aged 53, executive vice President of the Company. Mr. Zhu holds a master’s degree

in economics. He joined the Company in August 2008, and he has been executive Director and chief

executive officer of Wing Lung Bank since September 2008. He has been the executive vice President

of the Company since December 2008. He worked in the Industrial and Commercial Bank of China from

1986 to 2008, and successively served as the executive vice President and executive President of

Industrial and Commercial Bank of China Ltd., Hong Kong Branch, a director, managing director and

the chief executive officer of Industrial and Commercial Bank of China (Asia) Ltd., the chairman of

Chinese Mercantile Bank and an independent non-executive director of Great Eagle Holdings Limited.

Mr. Tang Xiaoqing, aged 59, executive vice President of the Company. Mr. Tang obtained a

doctorate degree in economics from Zhongnan Finance and Economics University. He is a senior

economist. He has acted as executive vice President of the Company since April 2012. He joined the

Company in November 2008 and acted as the Secretary of the Party Discipline Committee. Before

joining the Company, Mr. Tang serviced as deputy chief, chief, deputy director, director and other

positions in Chinese Academy of Sciences, State Planning Commission, Agricultural Bank of China, the

People’s Bank of China and China Banking Regulatory Commission and other authorities. He worked

in the CBRC from March 2003 to December 2008, and successively served as a deputy director of its

Cooperative Finance Supervision Department, the secretary of the CPC committee and director of CBRC

Inner Mongolia Bureau, the secretary of the CPC committee and director of CBRC Shanxi Bureau, the

director of the Banking Regulatory Department I of CBRC and the director of its Finance and

Accounting Department.

Mr. Wang Qingbin, aged 56, executive vice President of the Company. He is a graduate from

Chinese Academy of Social Sciences with a Master’s degree and also a senior economist. He joined the

Company in May 2000 and successively served as the executive President of Jinan Branch and Shanghai

Branch. He has been executive assistant President of the Head Office since May 2009 and has been

executive vice President of the Company since June 2011, and the chairman of CMB International

Capital Corporation Limited since July 2012.

Mr. Xu Shiqing, aged 52, the President of the Hong Kong Branch of the Company. He was

appointed as the Secretary of the Board of Directors (his qualification is subject to approval by the

CBRC) and Joint Company Secretary at the 1st meeting of the ninth session of the Board of Directors

of the Company. He graduated from the Department of Mathematics of Tianjin University and obtained

Note:

2. According to a resolution passed at the 1st meeting of the Ninth Session of the Board of Directors of the Company, Ms. Yin

Fenglan ceased to serve as the Executive Vice President of the Company in July 2013 as she reached the statutory retirement

age. A formal announcement will be published when the approval from the CBRC is obtained.

APPENDIX III STATUTORY AND GENERAL INFORMATION

– III-7 –

a Master degree in Economics from Nanjing University. He was also a doctor of philosophy in Business

Administration of the Southern California University and a senior economist. He joined the Company

in 1993. Mr. Xu held various positions such as the Executive Assistant to the director of the General

Office of the Head Office, Assistant General Manager of International Business Department of the Head

Office, Deputy General Manager of International Business Department, Deputy General Manager of

Offshore Business Department of the Head Office, executive assistant President of the Fuzhou Branch,

Deputy General Manager of the Planning and Treasury Department of the Head Office, the

person-in-charge of Custodian Department of the Head Office, the General Manager of Planning and

Financial Department and Custodian Department of the Head Office, General Manager of Planning and

Financial Department of the Head Office, General Manager of Strategic Development Department and

Overseas Development Department of the Head Office.

3. SHARE CAPITAL

(a) The registered share capital of the Bank as of the Latest Practicable Date wasRMB21,576,608,885.

(b) The issued share capital of the Bank as of the Latest Practicable Date was 21,576,608,885 shares,with a par value of RMB1.00 each.

(c) The issued share capital of the Bank as of the Latest Practicable Date was, and immediatelyfollowing completion of the Rights Issue will be as follows:

Number ofShares Amount

(RMB)

As of the Latest Practicable Date:

A Shares 17,666,130,885 17,666,130,885H Shares 3,910,478,000 3,910,478,000

Number of A Shares(1) and H Sharesimmediately upon completion of the Rights Issue:

A Shares 20,740,037,658(1) 20,740,037,658(1)

H Shares 4,590,901,172(2) 4,590,901,172(2)

Total: 25,330,938,830 25,330,938,830

Notes:

(1) Assuming the A Share Rights Issue becomes unconditional and the A Rights Shares are fully subscribed for and no

further A Shares are issued by the Bank.

(2) Assuming the H Share Rights Issue becomes unconditional and the H Rights Shares are fully subscribed for and no

further H Shares are issued by the Bank.

(d) All A Shares and H Shares presently in issue rank pari passu in all respects including, as regardsvoting, dividends, distributions and return of capital.

(e) The H Rights Shares to be allotted and issued pursuant to the H Share Rights Issue will, whenissued and fully paid, rank pari passu in all respects with the H Shares then in issue including, asregards voting, dividends, distributions and return of capital.

(f) The H Shares in issue are listed on the Hong Kong Stock Exchange. The A Shares in issue arelisted on the Shanghai Stock Exchange. Save as disclosed above, no part of the share capital orany other securities of the Company is listed or dealt in on any stock exchange and no applicationis being made or is currently proposed or sought for the Shares or the Rights Shares or any othersecurities of the Company to be listed or dealt in on any other stock exchange.

(g) As of the Latest Practicable Date, save as disclosed in this section, the Company was not a partyto any agreement to issue new Shares and none of the members of the Group had any otheroutstanding options or convertible securities.

APPENDIX III STATUTORY AND GENERAL INFORMATION

– III-8 –

4. DISCLOSURE OF INTERESTS

(a) Directors’ and Supervisors’ Interests

As of the Latest Practicable Date, the following Director(s) or Supervisor(s) or chief executive(s)

of the Company had interests or short positions in the Shares, convertible securities, warrants, options,

derivatives, underlying Shares or debentures of the Company or any of its associated corporations

(within the meaning of Part XV of the SFO) which are required to be notified to the Company and the

Hong Kong Stock Exchange pursuant to the provisions under Divisions 7 and 8 of Part XV of the SFO

(including the interests and short positions which the Directors, Supervisors and chief executives are

deemed or taken to have under Sections 344 and 345 of the SFO) or the Model Code for Securities

Transactions by Directors of Listed Companies, or which are required to be, pursuant to Section 352 of

the SFO, entered in the register referred to herein:

Name Position

Class of

shares

Long/short

position Capacity No. of shares

Percentage of

the relevant

class of

shares in

issue

Percentage of

all the issued

shares

(%) (%)

Peng Zhijian Supervisor A Long position Beneficial

Owner

20,000 0.00011 0.00009

(b) Substantial Shareholders and persons having notifiable interests or short positions pursuant to

Divisions 2 and 3 of Part XV of the SFO

Save as disclosed in this section 4 (b), the Directors or Supervisors or chief executives of the

Company are not aware of any other person (other than (i) the Directors, Supervisors and chief

executives of the Company, and (ii) member of the Group) who, as of the Latest Practicable Date, had

interests or short positions in the Shares, convertible securities, warrants, options, derivatives,

underlying Shares or debentures of the Company which would fall to be disclosed to the Company under

the provisions of Divisions 2 and 3 of Part XV of the SFO or were interested, directly or indirectly, in

10% or more of the nominal value of any class of share capital carrying rights to vote in all

circumstances at general meetings of any other member of the Group.

The following persons, as of the Latest Practicable Date, had interests or short positions in the

Shares, the underlying Shares which would fall to be disclosed to the Company under the provisions of

Divisions 2 and 3 of Part XV of the SFO:

Name of

Substantial Shareholder

Class of

shares

Long/short

position Capacity

No. of

shares Notes

Percentage of

the relevant

class of shares

in issue

Percentage of

all issued

shares

(%) (%)

China Merchants Group Ltd. A Long Interest of controlled

corporation

3,886,912,452# 1 22.00 18.01

China Merchants Steam

Navigation Co. Ltd.

A Long Beneficial owner 2,675,612,600 1 15.15 12.40

China Merchants Finance

Investment Holdings Co. Ltd.

A Long Beneficial owner 18,177,752# 1

Long Interest of controlled

corporation

1,193,122,100 1

1,211,299,852# 6.86 5.61

APPENDIX III STATUTORY AND GENERAL INFORMATION

– III-9 –

Name of

Substantial Shareholder

Class of

shares

Long/short

position Capacity

No. of

shares Notes

Percentage of

the relevant

class of shares

in issue

Percentage of

all issued

shares

(%) (%)

Shenzhen Yan Qing Investment

and Development Company Ltd.

A Long Beneficial owner 636,788,489 1

Long Interest of controlled

corporation

556,333,611 1

1,193,122,100 6.75 5.53

China Ocean Shipping (Group)

Company

A Long Beneficial owner 1,284,140,156# 7.27 5.95

China Shipping (Group) Company A Long Beneficial owner 258,470,781

Long Interest of controlled

corporation

695,697,834

954,168,615 2 5.40 4.42

Sino Life Insurance Co., Ltd. A Long Beneficial owner 893,866,590 5.06 4.14

Templeton Asset Management Ltd. H Long Investment manager 429,972,565 11.00 1.99

JPMorgan Chase & Co. H Long Beneficial owner 18,907,286

Long Investment manager 164,424,712

Long Custodian 137,909,070

321,241,068 3 8.21 1.49

Short Beneficial owner 7,590,333 3 0.19 0.04

BlackRock, Inc H Long Interest of controlled

corporation

280,238,112 4 7.17 1.30

Short Interest of controlled

corporation

716,500 4 0.02 0.003

# The above numbers of shares were recorded in interests disclosure forms completed by the relevant

substantial shareholders before the Latest Practicable Date. During the period from the date on which the

respective substantial shareholders submitted the said forms up to the Latest Practicable Date, there were

some updates to the aforesaid numbers of shares.

Notes:

(1) As at the Latest Practicable Date, China Merchants Group Ltd. was deemed to hold interests in a total of 3,994,369,074

A shares (Long position) and 42,857,691 H shares (Long position) in the Company by virtue of its control over the

following corporations, which held direct interests in the Company:

(1.1) China Merchants Steam Navigation Co. Ltd. held 2,675,612,600 A shares (Long position) in the Company.

China Merchants Steam Navigation Co. Ltd. was a wholly owned subsidiary of China Merchants Group Ltd..

As at the Latest Practicable Date, the actual number of A shares held by China Merchants Steam Navigation

Co. Ltd. was 2,693,717,481.

(1.2) China Merchants Finance Investment Holdings Co. Ltd. held 18,177,752 A shares (Long position) in the

Company. China Merchants Finance Investment Holdings Co. Ltd. was owned as to 90% and 10% by China

Merchants Group Ltd. and China Merchants Steam Navigation Co. Ltd., referred to in (1.1) above,

respectively. As at the Latest Practicable Date, the actual number of A shares held by China Merchants Finance

Investment Holdings Co. Ltd. was 107,529,493.

(1.3) Shenzhen Yan Qing Investment and Development Company Ltd. held 636,788,489 A shares (Long position)

in the Company. Shenzhen Yan Qing Investment and Development Company Ltd. was owned as to 51% and

49% by China Merchants Finance Investment Holdings Co. Ltd., referred to in (1.2) above, and China

Merchants Group Ltd. respectively.

(1.4) Shenzhen Chu Yuan Investment and Development Company Ltd. held 556,333,611 A shares (Long position)

in the Company. Shenzhen Chu Yuan Investment and Development Company Ltd. was owned as to 50% by

each of China Merchants Finance Investment Holdings Co. Ltd., referred to in (1.2) above, and Shenzhen Yan

Qing Investment and Development Company Ltd., referred to in (1.3) above, respectively.

(1.5) Best Winner Investment Limited held 42,857,691 H shares (Long position) in the Company. Best Winner

Investment Limited was an indirectly wholly owned subsidiary of China Merchants Group Limited.

APPENDIX III STATUTORY AND GENERAL INFORMATION

– III-10 –

(2) China Shipping (Group) Company held interest in a total of 954,168,615 A shares (Long position) in the Company by

virtue of its direct interest in 258,470,781 A shares (Long position) in the Company and interest in 695,697,834 A

shares (Long position) in the Company by virtue of its wholly owned subsidiaries:

(2.1) Guangzhou Maritime Transport (Group) Company Limited directly held 631,287,834 A shares (Long position)

in the Company; and

(2.2) Shanghai Shipping (Group) Company directly held 64,410,000 A shares (Long position) in the Company.

(3) JPMorgan Chase & Co. was deemed to hold interests in a total of 321,241,068 H shares (Long position) and 7,590,333

H shares (Short position) in the Company by virtue of its control over the following corporations:

(3.1) JPMorgan Chase Bank, N.A. held 158,560,124 H shares (Long position) in the Company. JPMorgan Chase

Bank, N.A. was a wholly owned subsidiary of JPMorgan Chase & Co..

(3.2) J.P. Morgan Whitefriars Inc. held 11,533,365 H shares (Long position) and 6,813,722 H shares (Short position)

in the Company. J.P. Morgan Whitefriars Inc. was an indirect wholly owned subsidiary of JPMorgan Chase &

Co..

(3.3) J.P. Morgan Investment Management Inc. held 48,704,255 H shares (Long position) in the Company. J.P.

Morgan Investment Management Inc. was an indirect wholly owned subsidiary of JPMorgan Chase & Co..

(3.4) JPMorgan Asset Management (UK) Limited held 92,079,386 H shares (Long position) in the Company.

JPMorgan Asset Management (UK) Limited was an indirect wholly owned subsidiary of JPMorgan Chase &

Co..

(3.5) JPMorgan Asset Management (Taiwan) Limited held 2,330,282 H shares (Long position) in the Company.

JPMorgan Asset Management (Taiwan) Limited was an indirect wholly owned subsidiary of JPMorgan Chase

& Co..

(3.6) JPMorgan Asset Management (Japan) Limited held 655,235 H shares (Long position) in the Company.

JPMorgan Asset Management (Japan) Limited was an indirect wholly owned subsidiary of JPMorgan Chase

& Co..

(3.7) J.P. Morgan Clearing Corp held 496,029 H shares (Long position) in the Company. J.P. Morgan Clearing Corp

was an indirect wholly owned subsidiary of JPMorgan Chase & Co..

(3.8) J.P. Morgan Securities plc held 6,877,892 H shares (Long position) and 55,000 H shares (Short position) in

the Company. J.P. Morgan Securities plc was owned as to 98.95% by J.P. Morgan Chase International

Holdings, which in turn was an indirect wholly owned subsidiary of JPMorgan Chase & Co..

(3.9) J.P. Morgan Whitefriars (UK) held 721,611 H shares (Short position) in the Company. J.P. Morgan Whitefriars

(UK) was owned as to 99.99% by J.P. Morgan Whitefriars Inc., referred to in (3.2) above.

(3.10) JF Asset Management Limited held 4,500 H shares (Short position) in the Company. JF Asset Management

Limited was an indirect wholly owned subsidiary of JPMorgan Chase & Co..

The entire interest and short position of JPMorgan Chase & Co. in the Company included a lending pool of

137,909,070 H shares. Besides, 4,819,196 H shares (Long position) and 7,590,333 H shares (Short position) were held

through derivatives as follows:

90,000 H shares (Long position) and

115,000 H shares (Short position)

— through physically settled derivatives (on exchange)

842,500 H shares (Short position) — through cash settled derivatives (on exchange)

721,611 H shares (Short position) — through physically settled derivatives (off exchange)

4,729,196 H shares (Long position) and

5,911,222 H shares (Short position)

— through cash settled derivatives (off exchange)

(4) BlackRock, Inc. had a long position in 280,238,112 H shares (in which 483,000 H shares were held through cash

settled derivatives (on exchange) and a short position in 716,500 H shares of the Company by virtue of its control over

a number of wholly owned subsidiaries.

Save as disclosed above, the Company is not aware of any other person (other than the Directors,

Supervisors and chief executives (as defined in the Hong Kong Listing Rules) of the Company) having

any interests or short positions in the shares and underlying shares of the Company as at the Latest

Practicable Date as recorded in the register required to be kept by the Company pursuant to Section 336

of the SFO.

APPENDIX III STATUTORY AND GENERAL INFORMATION

– III-11 –

(c) None of the Directors or Supervisors or expert named in the section headed “Expert” in this

Appendix, had any interest, direct or indirect, in any assets which have been, since the date to

which the latest published audited accounts of the Company were made up, acquired or disposed

of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or

leased to any member of the Group.

(d) As of the Latest Practicable Date, none of the Directors or Supervisors or expert named in the

section headed “Expert” in this Appendix, was materially interested in any contract or arrangement

which was significant in relation to the business of the Group taken as a whole.

(e) Upon completion of the Rights Issue, it is expected that CM Group will be legal person who hold

A Shares or, through its subsidiaries, H Shares which will constitute more than 10% of the existing

issued share capital of the Company.

CM Group is a conglomerate engages in transportation and related infrastructure financial

investment and asset management and property development business. Its address is at 40/F.,

China Merchants Tower, Shun Tak Centre, 168-200 Connaught Road Central, Hong Kong. As of

the Latest Practicable Date, CM Group holds (via its subsidiaries) 3,994,369,074 A Shares and

42,857,691 H Shares, respectively, representing in aggregate approximately 18.71% of the total

issue share capital of the Company.

5. FOREIGN EXCHANGE RESTRICTION

Set out below are restrictions affecting the remittance of profits or repatriation of capital into Hong Kong

from outside Hong Kong:

(I) PRC enterprises (including foreign-invested enterprises) which require foreign transaction relating

to current account items may, without the approval of SAFE effect payment into foreign exchange

accounts at the designated foreign exchange banks if the enterprises have valid proof of such

requirements. Foreign-invested enterprises which require foreign exchange for the distribution of

profits to their shareholders and PRC enterprises which in accordance with regulations are

required to pay dividends to shareholders in foreign exchange (like us), may, on the strength of

shareholders’ general meeting resolutions on the distribution of profits, effect payment from their

foreign exchange accounts or convert and pay at the designated foreign exchange banks; and

(II) convertibility of foreign exchange in respect of capital account items, including direct investments

and capital contributions, is still subject to restrictions, and in most cases prior approval from

SAFE must be obtained.

6. LITIGATION

As of the Latest Practicable Date, so far as the Company is aware, no member of the Group was engaged

in any material litigation or arbitration and there was no material litigation or claim known to the Directors

to be pending or threatened by or against any member of the Group.

7. SERVICE CONTRACTS

As of the Latest Practicable Date, none of the Directors or Supervisors had entered into any existing or

proposed service contracts with any member of the Group which does not expire or is not terminable by any

member of the Group within one year without payment of compensation, other than statutory compensation.

APPENDIX III STATUTORY AND GENERAL INFORMATION

– III-12 –

8. EXPERT

The following is the qualification of the expert who has given its opinion which is contained in this

prospectus:

Name Qualification Nature of report Date

KPMG Certified Public Accountants Report on the unaudited pro

forma financial information

of the Group

5 September 2013

KPMG has given and has not withdrawn its written consent to the issue of this prospectus with the

inclusion of its report and references to its name in the form and context in which they appear. As of the Latest

Practicable Date, KPMG did not have any shareholding in any member of the Group or the right (whether

legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member

of the Group.

9. DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES

The Prospectus Documents and the written consent of KPMG as referred to under the paragraph headed

“Expert” in this appendix have been registered by the Registrar of Companies in Hong Kong as required by

Section 342C of the Hong Kong Companies Ordinance.

10. MATERIAL CONTRACTS

Set out below is information on the material contracts, not being contracts entered into in the ordinary

course of business, which were entered into by the Company during the two years immediately preceding the

date of this Prospectus and up to the Latest Practicable Date:

(a) a purchase agreement between the Company and Financial Street Holdings Co., Ltd. dated 28 May

2013 in relation to the purchase of No.4 Office Building of Financial Centre, Yuetan South Street,

Beijing, the PRC in total consideration of RMB3,902 million;

(b) an equity transfer agreement between the Company and ING Asset Management B.V. dated 24

October 2012, pursuant to which the Company shall acquire a 21.6% equity interest in China

Merchants Fund Management Co., Ltd. in a consideration of C63,567,567.57;

(c) the Underwriting Agreement; and

(d) the Undertaking Letter.

11. MATERIAL ADVERSE CHANGES

Save as disclosed in this prospectus, the Directors are not aware of any material adverse change in the

financial or trading position of the Group since 31 December 2012, the date to which the latest published

audited accounts of the Group were made up.

12. GENERAL

(a) The expenses in connection with the A Share Rights Issue and the H Share Rights Issue, including

the financial advisory fee, underwriting commission, printing, registration, translation, legal and

accounting charges, are estimated to amount to approximately RMB175 million (equivalent to

approximately HK$220 million) and will be payable by the Company.

(b) As of the Latest Practicable Date, none of the Directors or Supervisors had any interest, direct or

indirect, in any assets which had been acquired or disposed of by or leased to any member of the

APPENDIX III STATUTORY AND GENERAL INFORMATION

– III-13 –

Group since 31 December 2012 (being the date to which the latest published audited financial

statements of the Company were made up) or proposed to be so acquired, disposed of or leased

to any member of the Group.

(c) In any event of any inconsistency, the English language text of this document shall prevail over

the Chinese language text.

13. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the office of Herbert Smith

Freehills at 23/F, Gloucester Tower, The Landmark, 15 Queen’s Road Central, Hong Kong during normal

business hours from the date of this prospectus up to and including 19 September 2013:

(a) the memorandum and articles of association of the Company;

(b) the audited financial statements of the Group for the three years ended 31 December 2010, 2011

and 2012;

(c) the unaudited financial statements of the Group for the six months ended 30 June 2013;

(d) the letter from KPMG on the unaudited pro forma financial information as set out in Appendix II

to this prospectus;

(e) the material contracts referred to in the section headed “Material Contracts” in this Appendix;

(f) the written consent referred to in the section headed “Expert” in this Appendix;

(g) the announcement of the Company dated 18 July 2011 in relation to, among other things, the

Rights Issue;

(h) a circular of the Company dated 25 July 2011 in relation to, among other things, the Rights Issue;

(i) a circular of the Company dated 23 July 2012 in relation to, among other things, extension of the

validity of the resolution in respect of the Rights Issue; and

(j) this prospectus.

APPENDIX III STATUTORY AND GENERAL INFORMATION

– III-14 –