Qilu Bank Co.,Ltd. 2009 Summarized Annual Report
Ⅰ. General Introduction
(Ⅰ) Registered Corporate Name in Chinese：齐鲁银行股份有限公司1 (short name: 齐鲁银行 ) Registered Corporate Name in English: Qilu Bank Co., Ltd. (Ⅱ) Legal Representative: Qiu Yunzhang (Ⅲ) Secretary of the Board of Directors: Mao Fangzhu Address: No.176 Shunhe Street, Shizhong District, Jinan City, Shandong Province Tel: 0531-86075850 Fax: 0531-81915514 Email: [email protected] (Ⅳ) Registered Address: No.176 Shunhe Street, Shizhong District, Jinan City Office Address: No.176 Shunhe Street, Shizhong District, Jinan City Postcode: 250001 Website: http://www.qlbchina.com (Ⅴ) Newspapers for Information Disclosure: Financial News Website for Information Disclosure: http://www.qlbchina.com Copies of the annual report are available at: The Board of Directors' Office of the Bank (Ⅵ) Other Relevant Information Date of the Initial Registration: 5 June 1996 Address of the Initial Registration: Shandong Administration for Industry and Commerce Corporate Business License Number: 370000018009391 Tax Registration Number: Ludishuiji Zi No.370103264352296 Auditors: PricewaterhouseCoopers Zhong Tian CPAs Co., Ltd. Auditors’ Address: 11th Floor Pricewaterhouse Coopers Center, 202 Hubin Road, Shanghai City
1 Upon the approval by the banking regulatory authorities on 9 March 2009, the bank changed its name from “Jinan City Commercial Bank Co.,Ltd.” (short name as Jinan City Commercial Bank) to “Qilu Bank Co., Ltd.” (short name as Qilu Bank) and changed its Corporate Business License on 21 April 2009. “Jinan City Commercial Bank Co.,Ltd.” , “Qilu Bank Co., Ltd.” and their short names as referred in the annual report all refer to the same entity.
1 Ⅱ. Financial Highlights
（Ⅰ） Main Profit Indicators for the Reporting Period
Unit (RMB thousand) Item Amount Profit Before Tax 608,632 Net Profit 489,456 Main Operating Profit Before Provision 998,465 Other Operating Income 18,635 Operating Profit 1,017,100 Investment Income 92,201 Non-Operating Profit 1,876 Net Cash Flow from Operating Activities 273,271 Net Cash Flow from Operating Activities per Share (yuan / share) 0.16
（Ⅱ）Main Financial Data and Indicators of 3 Years as at the End of the Reporting Period
Unit (RMB thousand) Item 2009 2008 2007 Main Operating Revenue 2,788,819 2,922,3661 1,895,348 Total Assets 61,788,855 49,544,577 37,973,270 Deposits Balance2 54,655,444 44,442,123 31,668,896
3 Loans Balance2 35,310,065 28,156,467 25,000,635 Shareholders’ Equity 2,814,640 2,670,549 1,900,569 Earnings per Share (yuan / share) 0.293 0.233 0.156 Net Assets Value per Share (yuan / share) 1.687 1.600 1.267 Cost Income Ratio（％） 33.09 28.06 31.67 Return on Equity（％） 17.85 15.36 12.44 Net Profit vs Operating Expenses（％） 22.77 14.90 16.84 Note: 1. In 2009, the bank adjusted the measurement method of fee income, so the main operating revenue for 2008 of 2,920.768 million reported before was similarly adjusted. 2. Deposits and loans data reported were computed in accordance with the statistical method prescribed by the People’s Bank of China and the China Banking Regulatory Commission.
2 （Ⅲ）Capital Structure and its Change for the Reporting Period
Unit (RMB thousand) Item 2009 2008 Core Capital 2,814,640 2,424,793 Core Capital's Deductions 43,277 19,500 Net Core Capital 2,771,363 2,405,293 Supplementary Capital 1,055,140 410,665 Measurable Value of Supplementary Capital 1,055,140 410,665 Deductions 86,554 39,000 Net Capital 3,783,226 2,796,458 Risk Weighted Assets 32,450,806 24,650,877 Of which: On-balance sheet items 28,942,028 20,916,371 Off-balance sheet items 3,508,778 3,734,506
3 Ⅲ. Risk Management
(Ⅰ) Supplementary Financial Data as at the End of the Reporting Period
Unit (%) Item Criteria As at the end of 2009
Capital Adequacy Ratio ≥8 11.66
Core Capital Adequacy Ratio ≥4 8.54
RMB ≥25 50.10 Liquidity Ratio Foreign Currency ≥60 185.03
RMB ≤75 64.75 Loan / Deposit Ratio Foreign Currency ≤75 19.81
Borrowing to Deposit Ratio ≤8 0.27 Borrowing / Lending to Deposit Ratio Lending to Deposit Ratio ≤8 0.10
Non-Performing Loan Ratio 1.99
Interest Collection Ratio 97.46
Ratio of Single Largest Borrower’s Loan Against Net Capital ≤10 6.61
Ratio of Top 10 Borrowers’ Loan Against Net Capital ≤50 47.31
(Ⅱ) Distribution of Loans by Main Industry
Unit (RMB thousand) Category of Industry Balance Percentage (%)
Wholesale and Retail 5,405,192 15.31
Manufacturing 4,185,534 11.86
Real Estates 2,578,551 7.31
Leasing and Business Services 2,526,276 7.16
Building and Construction 1,605,953 4.55
Total 16,301,506 46.19
4 (Ⅲ) Loans Granted to Top 10 Borrowers
Unit (RMB thousand) As a As a percentage of Percentage Serial Outstanding Name of Borrower Total of Net number Loans Outstanding Capital Loans (%) (%) 1 Jinan City Municipal Public Utilities Bureau 250,000 0.71 6.61 Tianjin Soda Plant Tianjin Bohai Chemical 2 200,000 0.57 5.29 Industry Co., Ltd. 3 Jinan Geely Automobile Co., Ltd. 200,000 0.57 5.29
4 Yuncheng Coal Mine, Shangdong Province 180,000 0.51 4.76
5 Shandong Zhongrun Estates Co., Ltd. 175,000 0.50 4.63
6 Tianjin Naile Real Estates Co., Ltd. 175,000 0.50 4.63
7 Jinan Qisheng Digital Technology Co., Ltd. 160,000 0.45 4.23
8 Jinan City Qingyuan Water Business Co., Ltd. 150,000 0.42 3.96
9 Shandong Gold Group Co., Ltd. 150,000 0.42 3.96
10 Tianjin Jinbin Development Co., Ltd. 150,000 0.42 3.96
Total 1,790,000 5.07 47.31
(Ⅳ) The Classification Method of Loan Risks and the Structure of Various NPLs
ⅰ. Classification Method of Loan Risks The Bank has formulated its 5-tier classification method of credit assets based on the China Banking Regulatory Commission’s “Guidelines on Classification of Loan Risks” in order to measure and manage loan risks. In accordance with the “Guidelines on Classification of Loan Risks” and the requirements of the Bank’s 5-tier classification method of credit assets, the Bank divides both on- and off-balance-sheet assets into 5 classes: Pass, Special-mention, Substandard, Doubtful and Loss and the last three classes are deemed to be NPLs (Non-performing Loans). The core definitions of the credit assets set out in “Guidelines on Classification of Loan Risks” are as follows: Pass: Borrowers are able to honor the terms of the contracts and the Bank does not have sufficient reasons to doubt their ability to repay the principals and interests of loans in full and in a timely manner. Special-mention: Although borrowers are able to service their loans’ principals and interests currently, repayments may be affected by existing unfavorable factors.
5 Substandard: Borrowers' ability to service their loans are in question. Borrowers are not able to depend on their normal business revenues to pay back the principals and interests so certain losses may be incurred even when guarantees are invoked. Doubtful: Borrowers are unable to pay back the principals and interests in full and significant losses will be incurred even when guarantees are invoked. Loss: The principals and interests of loans will not be recovered or only a small portion will be recovered after the Bank takes all possible measures or necessary legal procedures. ⅱ. Five-tier Classification of Loans Unit: (RMB thousand) As a As a Change Change for Percentage Percentage for the the Period Closing Opening of the of the Type Period (Increase+, Balance Balance Closing Opening (Increase+, Decrease- ) Balance Balance Decrease-) (%) (%) (%) Pass Loans 33,406,612 26,422,824 +6,983,788 94.61 93.84 +0.77 Special Mention 1,198,915 1,016,537 +182,378 3.40 3.61 -0.21 Loans Substandard 646,948 656,389 -9,441 1.83 2.33 -0.50 Loans Doubtful 57,264 58,771 -1,507 0.16 0.21 -0.05 Loans Loss Loans 326 1,946 -1,620 0.00 0.01 -0.01
Total NPLs 704,538 717,106 -12,568 1.99 2.55 -0.55
Total Loans 35,310,065 28,156,467 +7,153,598
Note: The statistical method used is consistent with that applied in the reports to the CBRC.
(Ⅴ) Change of Provision for Loans
Unit (RMB thousand) Write-back Due Opening Write- Write- Closing Item Provision to Rise in Balance Back Off Balance Discounted Value Loan Provision 1,027,592 482,411 14,993 65,569 48,139 1,411,288
6 （Ⅵ）Impairment Provision for Impairment of Investments, Pledged Assets and Other Assets
Unit (RMB thousand) Item Opening Balance Closing Balance Impairment Provision for Inter-bank Balances 19,503 19,503 Impairment Provision for Pledged Assets 30,749 43,040 Bad Debt Provision for Other Receivables 37,815 44,949 Impairment Provision for Construction in 0708 Progress Impairment Provision for Other Assets 14,423 12,698
(Ⅶ) Pledged Assets
Unit: RMB (thousand) Type Closing Balance Percentage（％） Real Estates 68,700 100 Machinery 0 0 Shareholding 0 0 Others 0 0 Total 68,700 100
（Ⅷ） Main Investments
Unit (RMB thousand) Amount of Investment as at the Shareholding Investments End of the Reporting （％） Period Dezhou City Commercial Bank Co., Ltd. 39,000 5.57 China UnionPay Co., Ltd. 8,135 0.27 City Commercial Banks' Funds Clearing Center 400 1.33 Shandong City Commercial Banks Association Co., Ltd. 10,000 7.14 Total 57,535
(Ⅸ) Off-Balance Sheet Items that may have Material Effect on the Financial Position and Operating Results
ⅰ. Letters of Guarantee (L/Gs) and Letters of Credit (L/Cs) Issued As at the end of the reporting period, the balance of L/Gs issued was RMB613.62 million and the
7 balance of L/Cs issued was RMB305.38 million. ⅱ. Guarantees and Loans Commitment As at the end of the reporting period, there were no outstanding balances of Guarantees and Loans Commitment. ⅲ. Banker's Acceptance Bills Issued As at the end of the reporting period, the balance of banker’s acceptance bills issued was RMB18,546.38 million.
(Ⅹ) Risk Management of Credits Granted to Group Clients
As at the end of the reporting period, among the Bank’s group clients, the amount of credit granted to Shandong Sanlian Group Co., Ltd. was RMB449.94 million which accounted for 11.89% of the net capital of the Bank. The amount of credit granted to Dalian Wanda (Group) Co., Ltd. was RMB300 million which accounted for 7.93% of the net capital of the Bank. The amount of credit granted to Laiwu Iron and Steel Group Co., Ltd. was RMB284.80 million which accounted for 7.53% of the net capital of the Bank, and after deducting the margin, the balance of credit was RMB223.65 million which accounted for 5.91% of the net capital of the Bank. The amount of credit granted to Jigang Group Co., Ltd. was RMB268 million which accounted for 7.08% of the net capital of the Bank, and after deducting the margin, the balance of credit was RMB245.60 million which accounted for 6.49% of the net capital of the Bank.
(Ⅺ) Various Risks Faced by the Bank and Risk Management
ⅰ. Credit Risk Management Credit risks refer to the potential risks suffered by the Bank when the Bank’s debtors or counterparties fail to fulfill their contractual obligations as agreed in the terms of the contract. During the reporting period, faced with the complex and severe economic situation positively, the Bank timely adopted various measures of adjusting its credit policies, improving its credit management processes and quickening the establishment of risk management information system tools, to comprehensively upgrade the level of its credit risk management and capacity. (ⅰ) Implementation of Risk Management Policies In accordance with the requirements of the macroeconomic situation and the executive management, the Bank has established and timely adjusted its credit policies by emphasizing the threshold to credit access, optimizing the credit structure, supporting enterprises conforming to the national industrial policy and high-tech enterprises, supporting quality urban construction projects, supporting quality small and medium sized enterprises and individual customers, and limiting and compressing loans to "the two industries of high pollution and energy consumption and the one of excess capacity”. The Bank has
8 formulated Management Measures for authorization scope and limit, and highlighted differentiation and refinement management. The Bank has issued measures for monitoring of credit funds to effectively monitor the flow of the credit funds. (ⅱ) Optimization of Credit Management Process The Bank has standardized pre-loan investigation and the threshold to credit access, centralized the credit approval authority, reformed the credit approval system, established the credit approval experts pool, raised the degree of credit approval professionalism, improved the loan review committee’s credit examination rules, standardized the credit approval procedures and raised the credit review and approval efficiency. The Bank has strengthened post-loan management, increased strength of supervision and inspection and organized several special loans checks on engineering vehicles mortgage loans, housing mortgage loans, bills discounting business, etc. The Bank has formulated management measures for write-off of bad debts and standardized the process for write-off of bad debts. The Bank has revised the implementation measures for ascertaining and accountability of credit business responsibilities by specifying responsibilities and raising the sense of responsibility of credit staff. (ⅲ) Acceleration of Construction of the Risk Management System and Tools The Bank has further optimized the credit risk management system by improving the automated handling processes for approval, post-loan management and assets classification. The Bank has upgraded the credit inquiry management system and optimized the dual rating system and the small enterprises risk rating system and the individual score card system. The Bank has improved the quality of data collection work, developed the risk management tools such as the financial analysis model for large and medium sized enterprises and the cash-monitoring model for small enterprises, and standardized the ascertaining and monitoring management of affiliated enterprises.
ⅱ. Market Risk Management
Market risks refer to risks of losses suffered by the Bank’s businesses due to adverse changes in market prices (in interest rates, exchange rates, commodity prices, stock prices and other prices). Market risks faced by the Bank primarily include two areas, namely, interest rate risks and exchange rate risks. During the reporting period, the Bank has further improved the construction of market risk management policies and its workflow, strengthened its staffing, focused on strengthening the quantitative analysis of market risk management and continuously raised the proficiency of risk-model-based management. The Bank has strengthened the research and construction capability of models and risk management tools and through the risk models and tools such as VAR (Value at Risk), Pv01 (sensitivity analysis), Stress Testing, Duration and GAP to achieve daily assessment and quantification of the risk of
9 the RMB bond business. The Bank has continuously strengthened accumulation of risk data and preliminarily achieved the market risk regression testing and personalized market risk analysis. A daily, monthly, quarterly and annual market risk reporting system has been established and the Risk Management Department and the Treasury Operations Department have conducted weekly, monthly and quarterly risk analysis routine meetings and dynamically managed and fully grasped the potential market risk problems, moving the management of the market risk toward a more systematic and standardized approach. (ⅰ) Exchange Rate Risk Exchange rate risks are mainly devaluation risks due to the fall of USD exchange rate resulting in losses arising from USDs held by the Bank against the measurement of RMB. In 2009, because the basic tune of the country’s maintaining steady RMB exchange rates remained unchanged, thus the translation risks of the Bank’s foreign exchange capital for the recent period have been quite negligible. (ⅱ) Interest Rate Risk Interest rate risks refer to risks arising from changes in the values of the Bank’s assets and liabilities due to changes of the interest rates of the assets and liabilities which are not held for the same terms or durations. The Bank has monitored daily changes of the various risk indicators such as VAR (Value at Risk), Pv01 (sensitivity analysis), Stress Testing, Duration, GAP and assessed the impact of interest rate changes on the net interest income and the economic value under different interest rate scenarios. As the RMB interest rate risk hedging instruments are underdeveloped and so by the measures of timely adjusting the volume of business, the bond structure and the term structure, the Bank has effectively controlled its interest rate risk to an acceptable level. ⅲ. Liquidity Risk Management Liquidity risks arise when the Bank, though still solvent, is unable to obtain sufficient funds or do so at a reasonable cost to respond to the assets growth or repay the debts when due. During the reporting period, the Bank has continued to improve construction of the liquidity risk management system, and formulated the “Qilu Bank’s Liquidity Risk Management Policies and Procedures”, and fully developed the role of the Assets and Liabilities Management Committee has fully performed its role by strengthening the portfolio of assets and liabilities and the cash flow management, reasonably regulating the matching of the Bank's assets and liabilities, timely adjusting the structure, and protecting the steady growth of deposits. The Bank has continuously strengthened the means of the liquidity risk measurement, regularly performed scenario analyses and stress tests, and put efforts in raising the accuracy and the practicality of the risk management tools. The Bank has proceeded to build the liquidity risk management system and raised the IT level for Liquidity Risk Management. The Bank has strengthened analysis and monitoring of targets by periodically assessing, identifying, measuring,
10 monitoring and controlling liquidity to ensure a safe and stable operation. ⅳ. Operational Risk Management Operational risks refer to risks arise from unsatisfactory or flawed internal procedures, staff and IT systems as well as risks of losses incurred by external events. During the reporting period, the Bank has continued to improve the operational risk management model, and the construction of organizational structure and the operational risk management policies. The Bank has specified and refined the division of tasks of the Risk Management Department and the other relevant departments, and strengthened capability of risk identification, assessment and monitoring at various stages. The Bank has improved the business systems and operational processes and proceeded with data accumulation of operational risk loss events. Self-examination of risk, risk inspection and the evaluation of internal control and internal audit of branches have been strengthened. The Bank has used multi-channel measures such as risk counseling, conferences, discussions, case studies etc. to enhance the Bank staff's operational risk awareness and cultivate a sound risk culture. ⅴ. Compliance Risk Management Compliance risks are defined as risks of legal sanctions, regulatory penalties，material financial losses, or reputational losses that a commercial bank may suffer as a result of its failure to comply with laws and regulations, and standards. During the reporting period, the Bank has continued to improve construction of the compliance management system, formulated the staff compliance manual and regulated staff’s professional conduct. The Bank has revised the system of accountability of responsibility, enhanced accountability for non-compliance and improved the mechanism for errors correction. The Bank has optimized the compliance review process, and ensured that policies, procedures and operational guidelines are in line with requirements of the laws and regulations and the standards. The Bank has strengthened the compliance culture and organized learning contest activities of "learning laws and regulations and promoting compliance". Through compliance trainings and education, compliance consulting, etc., the Bank has continuously enhanced the compliance awareness of the Bank staff and effectively prevented compliance risks. ⅵ. Reputational Risk Management Reputational risks refer to risks arising from the stakeholders’ negative assessment on the Bank due to its operations, management, other acts or reputational events. During the reporting period, the Bank has formulated "Qilu Bank’s Reputational Risk Management Policies and Procedures" and begun to establish the mechanism of reputational risk investigation, the classification of reputational events, and the graded management and processing. The Bank has
11 strengthened the monitoring of public opinions and implemented a spokesman system to ensure that reputational events are handled timely and effectively. The bank has begun to establish and improve a contingency plan for reputational events and raise the ability to respond to reputational events. ⅶ.Information Technology Risk Management In the process of the Bank’s operations, information technology risks refer to the operational, legal or reputational risks resulting from natural factors, human factors, technology gaps or management deficiencies, etc. During the reporting period, the Bank has amended "Qilu Bank Information Technology Risk Management Policies and Procedures", developed measures for management of risk events, graded protection of information system security and management of classified facilities, and further improved the information technology risk management framework and system. The Bank has attempted to formulate the key risk indicators and risk assessment methods, proceeded with the data accumulation of loss events, implemented a regular risk reporting system and improved risk monitoring capability through construction of terminals monitoring and logs auditing systems. The core banking system and the Internet Banking that went live in the year were subject to external audits and security assessments, and a plan for continuous operations of the systems has been established.
(Ⅻ) Main Policy Measures and Results of NPLs Management
During the reporting period, the Bank has revised the "Qilu Bank Co., Ltd.’s Measures for Write-off of Non-Performing Assets", rolled out the online approval system for disposal of non-performing assets and enhanced the proficiency of non-performing assets management process. The Bank has continued to implement centralized management of non-performing assets, strengthened co-operation with all levels of the judiciary, and standardized procedures for disposal of non-performing assets to enhance the degree of standardization of disposal of non-performing assets. Focusing on increasing the disposal efforts of the non-performing assets, the Bank has organized activities for clearing the Bank’s non-performing assets by ways of litigation, cash collection, write-off of bad debts, disposal of mortgage assets, clearance of written-off debts and assignment of debts, accumulatively settled various non-performing assets and problem assets of RMB603 million, and achieved double decline of the total balance and percentage of the non-performing loans as at the end of the year.
12 Ⅳ. Changes of Shareholding and Related-party Transactions
(Ⅰ)Changes of Shareholding
During the reporting period, the Bank decided to increase its share capital by issuing 700 million shares at RMB3.07 per share. At the end of the reporting period, the Share Capital Increase Scheme had already been approved by CBRC, and all other investors had paid up the subscription monies except Commonwealth Bank of Australia (CBA) which would pay after CBRC’s approval. Because all the required banking regulatory approval had not been completed, the Bank’s registered capital had not been changed. During the reporting period, the detailed changes of the shareholding were as follows: Unit (shares) Changes for the Nature of the Share Before Change period (Increase+, After Change Decrease-)
Shares Held by State 100,000,000 +189,500,000 289,500,000 Shares Held by Domestic Legal Entities 1,099,719,554 -190,089,837 909,629,717 Shares Held by Foreign Entities 333,750,000 0 333,750,000 Shares Held by Natural Persons 135,280,446 +589,837 135,870,283 Total 1,668,750,000 0 1,668,750,000
(Ⅱ) Information of Shareholders
ⅰ. The Top 10 Shareholders and their Shareholdings as at the End of the Reporting Period CBA held 333.75 million shares which accounted for 20% of the total shares; Linuo Group Co., Ltd. held 170.5 million shares (10.22%); Jinan State-owned Assets Operation Co., Ltd. held 154.5 million shares (9.26%); Jinan Economic Development Investment Co., Ltd. held 115 million shares (6.89%); Shandong Jianbang Investment Management Co., Ltd. held 75 million shares (4.49%); Shandong Tri-cel Estates Co., Ltd. held 70 million shares (4.19%); Shandong General Cop. of Agricultural Economic Development & Service held 70 million shares (4.19%); Rizhao Steel Holding Group Co., Ltd. held 50 million shares (3.00%); Zhongrun Estates Group Co., Ltd. held 45 million shares (2.70%); and Huasheng Jiangquan Group Co., Ltd. held 40 million shares (2.40%). ⅱ. Transfer of Shares by the Top 10 Shareholders During the reporting period, 60 million shares held by Huasheng Jiangquan Group Co., Ltd. were transferred to Jinan Economic Development Investment Co., Ltd and the transfer was completed within the reporting period after it had been examined and approved by the banking regulatory authority. 60 million
13 shares originally held by Shandong Zhongchen Digital Technology Co., Ltd. and 15 million shares originally held by Shandong Mingde Environment Protection Technology Development Co., Ltd. were transferred to China Western Development Holding Co., Ltd. through mediation by Weifang Intermediate People’s Court. In turn, China Western Development Holding Co., Ltd. transferred the 75 million shares to Jinan State-owned Assets Operation Co., Ltd. Linuo Group Co., Ltd. also transferred 54.5 million shares to Jinan State-owned Assets Operation Co., Ltd. and the two transfers were completed within the reporting period after the changes had been examined and approved by the banking regulatory authority. The original shareholding of Jinan State-Owned Assets Operation Co., Ltd. was 25 million shares and after the transfers, it was 154.5 million. 70 million shares held by Shandong General Cop. of Agricultural Economic Development & Service were awarded by Jinan Intermediate People’s Court to Shandong Sanliyuan Economics and Trade Co., Ltd. through a public auction, the transfer had not been completed within the reporting period as examination and approval by the banking regulatory authority was involved.
(Ⅲ) The Shares of Top 10 Shareholders of the Bank which were Pledged, Held in Custody or Frozen
At the end of the reporting period, shares held by the top 10 shareholders that were pledged were as follows: 84 million held by Linuo Group Co., Ltd., 65 million held by Shandong Jianbang Investment Management Co., Ltd., 70 million held by Shandong Tri-cel Estates Co., Ltd. and 40 million held by Huasheng Jiangquan Group Co., Ltd., totaling 259 million shares. At the end of the reporting period,30 million held by Linuo Group Co., Ltd. and 70 million held by Shandong General Cop. of Agricultural Economic Development & Service, totaling 100 million shares were frozen.
(Ⅳ) Significant Related-party Transactions
Discounting of Banker’s Acceptance Amount Commercial Related Out- Bills Total Counter- of Total Acceptance Bills Share- standing Risk party Tran- Risk holders Loans Risk Exposure sactions Amount Amount Exposu Exposure re Shandong Linuo Linuo New Group Co., 102,000 102,000 0 0 0 0 102,000 Materials Co., Ltd. Ltd. Jinan Hongjitang 13,000 9,000 4,000 2,000 0 0 11,000 Pharmacy Co., Ltd. Jinan Linuo Glasswork 93,140 93,140 0 0 0 0 93,140 Co., Ltd.
14 Jinan Linuo Pharmacy Holdings 30,000 30,000 0 0 0 0 30,000 Group Co., Ltd. Huasheng Linyi Jiangquan Shengquan 170,000 0 0 0 170,000 90,000 90,000 Group Co., Meat Products Ltd. Co., Ltd. Shandong Guoqing Machinery 50,000 50,000 0 0 0 0 50,000 and Electronic Technology Co.,Ltd. Shandong Shandong Tri-cel Kaiwen Estates Technology 20,000 20,000 0 0 0 0 20,000 Co.,Ltd. Vocational College Shandong Tri-cel Technology 60,000 60,000 0 0 0 0 60,000 Development Company Jinan Jinan City Economic Economic Developme Development 30,000 30,000 0 0 0 0 30,000 nt Investment Investment Company Company Total 568,140 394,140 4,000 2,000 170,000 90,000 486,140
(Ⅴ) NPLs of Shareholders and Affiliated Companies
As of the end of 2009, the non-performing loans of Bank's shareholders and its affiliated companies were as follows: ⅰ. Jinan Plastic Industrial Co. Ltd., which held 565,411 shares at 0.034%, has been a shareholder since 1 April 1996. As at the end of 2009, the company’s loan balance (principal) was RMB1.98 million with overdue interest of RMB0.76 million. The loan was classified as doubtful and was under litigation. ⅱ. The Yellow River Auto-Parts Factory of Shandong Kuangshan Holding Company, which held 204,471 shares at 0.0123%, has been a shareholder since 1 April 1996. As at the end of 2009, the company’s loan balance (principal) was RMB0.85 million with no overdue interest and the loan was classified as substandard which was not under litigation. ⅲ. Jinan City Huaiyin District Aluminum Paste Factory, which held 127,794 shares at 0.0077%, has been a shareholder since 1 April 1996. As at the end of 2009, the company’s loan balance (principal) was RMB0.46 million with no overdue interest. The loan was classified as substandard and was not under
15 litigation. ⅳ. Shandong Sanlian Group Co., Ltd., which held 40,000,000 shares at 2.3970%, has been a shareholder since 26 October 2001. As at the end of 2009, the group’s related companies’ total loan balances (principals) were RMB449.94 million with overdue interest of RMB74.14 million. The loans were guaranteed by a land mortgage, and the mortgage procedure was legally completed. The loans were classified as substandard and some of which were under litigation.
16 Ⅴ. Corporate Governance
(Ⅰ) Overview of Corporate Governance
In compliance with the relevant laws and regulations such as “Company Law”, “Commercial Bank Law” and the relevant banking regulations such as “Guidelines on Corporate Governance of Joint-Stock Commercial Banks”, “Guidelines on Independent Directors and External Supervisors Systems for Joint-Stock Commercial Banks” and “Guidelines on Due Diligence of Board of Directors of Joint-Stock Commercial Banks (Trial) ”, the Bank continued to improve its corporate governance structure and strengthened the effectiveness of the Bank’s corporate governance mechanism. During the reporting period, the Bank had optimized its shareholding structure and improved its corporate governance mechanism in accordance with the relevant laws and regulations. In 2009, the bank launched Share Capital Increase Scheme, formulated the “Measures for Accountability of Responsibility of the Directors, Supervisors and Members of Executive Management ”, and revised the “Measures for Performance Appraisal of Supervisors”, the “Measures for Performance Appraisal of the Board of Directors by the Board of Supervisors”, the “Measures for Performance Appraisal of Executive Management by the Board of Supervisors”, the “Measures for Performance Appraisal of Directors”, the “Rules for Resolutions of the Board of Directors’ ”, the “Responsibilities of the Directors, the Board of Directors and its Subsidiary Institutions ” and the “Responsibilities of the Executive Management”. The Bank is highly concerned with risk management and during the reporting period it established the “Policies and Procedures of Reputational Risk Management”, the “Policies and Procedures of Information Science and Technology Risk Management” and the “Policies and Procedures of Liquidity Risk Management”. Together with the implemented policies and procedures of credit risk, market risk, operational risk and compliance risk, the bank has established a comprehensive risk management framework. ⅰ. Shareholders and Shareholders’ Meeting The Bank did not have controlling shareholders. During the reporting period, the Bank held the 2008 Annual Shareholders’ Meeting and the 2009 first Interim Shareholders’ Meeting. The notification, summons, convening and voting procedures of the meeting were complied with the applicable provisions of the “Company Law” and the Memorandum and Articles of Association of the Bank and supported by the legal advice issued by the lawyers on the spot. ⅱ. Directors, Board of Directors and its Specialized Committees The Board of Directors was composed of 13 directors, of which there were 3 Independent Directors, 4 Executive Directors and 6 Shareholder Directors. The number and composition of directors in the Board of Directors met the requirements of the related laws and regulations. During the reporting period, the Board
17 of Directors held 10 meetings and listened to the reporting on operations and risk management regularly. 44 resolutions were passed during the year and timely resolved the major operational management issues. The decision-making process, authorization procedures and voting procedures of the Board of Directors were strictly carried out in accordance with the relevant laws and regulations and the Memorandum and Articles of Association of the Bank. All of the Directors attended the meetings actively and deliberated the issues conscientiously and that protected the interests of the Bank and the shareholders effectively. 4 specialized committees were set up under the Board of Directors, i.e. Related-party Transactions Control and Risk Management Committee, Nomination and Remuneration Committee, Audit Committee and Strategy Committee, among which the chairmanships of specialized committees of Related-party Transactions Control and Risk Management Committee, Nomination and Remuneration Committee, and Audit Committee were assumed by Independent Directors. During the reporting period, the 4 committees diligently performed their duties in accordance with their own working procedures and held 15 meetings in total. Each specialized committee actively provided constructive suggestions for the Board, enhancing its scientific decision-making. ⅲ. Supervisors, Board of Supervisors and its Specialized Committees The Board of Supervisors consisted of 9 members, of which there were 2 External Supervisors, 3 Employee Supervisors and 4 Shareholder Supervisors. During the reporting period, the Board of Supervisors held 4 meetings and passed 10 resolutions. All supervisors remained highly responsible for the shareholders, diligently fulfilled their various supervisory duties and effectively protected the legitimate interests of the shareholders and the relevant stakeholders. Nomination Committee, Risk Monitoring Committee and Financial Monitoring Committee were set up under the Board of Supervisors. The Risk Monitoring Committee and the Financial Monitoring Committee were chaired by External Supervisors. During the reporting period, the 3 specialized committees, in accordance with their own working rules, conscientiously carried out their work and provided the Board of Supervisors with good service, thus enabling the Board of Supervisors to carry out their work effectively. ⅳ. The Executive Management and its Subsidiary Committees The Bank’s Executive Management consisted of 1 President, 5 Vice Presidents，1 Vice President level executive and 1 Assistant President. Under the Executive Management, there were committees including the Assets and Liabilities Management Committee (ALCO), Loan Review and Approval Committee, Risk Management Executive Committee, Innovation Committee, Sales and Marketing Steering Committee, Service Committee and Management Refinement Steering Committee. During the reporting period, the Executive Management conscientiously carried out the resolutions of the Board of Directors, executed the
18 budget for the year and basically completed the operational assignments for the year. ⅴ. Information Disclosure and Investor Relationship Management The Bank continuously improved the timeliness, accuracy and integrity of the information disclosure as required by the applicable regulations. During the reporting period, the Bank published the summarized 2008 Annual Report in Financial News and released the summarized 2008 Annual Report, both in English and Chinese, on the Bank’s official website (http://www.qlbchina.com). Furthermore, the printed copies of 2008 Annual Report were placed at the Board of Directors’ office and every banking halls of the Bank for Investors’ and other stakeholders’ reference. During the reporting period, the Bank set up investor relationship column on its official website, timely released the annual report and the bank’s corporate governance status; disseminating the Bank’s information, opening an investor mailbox and strengthening contact with investors.
(Ⅱ) The Organizational Structure of the Bank and its Branches
ⅰ. The Organizational Structure of the Bank
19 Related Party Transactions Control and Risk Corporate Banking Dept. Management Committee
Nomination and Remuneration Committee Personal Banking Dept.
Audit Committee International Banking Dept. Internal Audit Dept. Strategy Research ＆ Development Funds Operations Dept. Committee Dept.
Board of Directors’ Office Banking Dept.
Credit Approval Dept.
Executive Management Board of Directors Risk Management Dept.
Compliance Dept.
Planning ＆ Finance Dept. Shareholders’ Meeting
Operations Dept.
IT Dept.
＊KD Projects Office
Credit Approval Committee (Temporary Dept.)
Management Refinement M Innovation Committee Assets and Liabilities Executive Committee Board of Supervisors a Sales and Marketing Steerin Steerin Service Committee n Risk Management age Human Resources Dept. m
g g e Committee Committee n
t Discipline Inspection Office
Co mmi General Office ttee
Administration ＆ Security Dept.
Party and Masses Working Nomination Committee Committee
Risk Monitoring Committee Liaocheng Branch ( 2 Financial Monitoring Committee sub-branches)
※Board of Supervisors’ Office Tianjin Branch ( 1 sub-branch)
＊ note: KD is the short name for Core banking system ※Assumed by the Internal Audit Department 66 Sub-Branches (Jinan Area)
20 ⅱ. Branches and Sub-branches of the Bank were as follows: No. Name Address 1 Headquarters No.176, Shunhe Street, Shizhong District, Jinan City The Crossroad of South West Corner of Dongchang Road and 2 Liaocheng Branch Weiyu Road, Liaocheng City 3 Tianjin Branch No.37/39, Youyibei Road, Hexi Distinct, Tianjin City 4 Jinan Beitan Sub-Branch No.15, Yingxian Street, Tianqiao District, Jinan City 5 Jinan Beiyuan Sub-Branch No.56, Fenghuangshan Road, Tianqiao District, Jinan City 6 Jinan Chaoshanjie Sub-Branch No.59, Chaoshan Street, Lixia District, Jinan City 7 Jinan Chenjialou Sub-Branch No.1-3, Building 7, Ji'an Street, Tianqiao District, Jinan City 8 Jinan Changqing Sub-Branch No.999, Bingu Street, Changqing Distinct, Jinan City 9 Jinan Chengdong Sub-Branch No.6-1, Huaxin Road, Licheng District, Jinan City
10 Jinan Chengnan Sub-Branch No.222-224, Yingxiongshan Road, Shizhong District, Jinan City
11 Jinan Chengxi Sub-Branch No.190, Zhangzhuang Road, Huaiyin District, Jinan City 12 Jinan Daguanyuan Sub-Branch No.51, Jingwu Road, Shizhong District, Jinan City 13 Jinan Daminghu Sub-Branch No.166, Minghu Road, Lixia District, Jinan City 14 Jinan Daqiaolu Sub-Branch No.78, Daqiao Road, Licheng District, Jinan City 15 Jinan Dianchang Sub-Branch No.164, Gongyebei Road, Licheng District, Jinan City 16 Jinan Duandian Sub-Branch No.66, Jiyan Road, Huaiyin District, Jinan City No.3966, Donghuan International Square, Erhuandong Road, 17 Jinan Donghuan Sub-Branch Licheng District, Jinan City 18 Jinan Gongyebeilu Sub-Branch No.303, Gongyebeilu Road, Licheng District, Jinan City No.100, Block B Sanqingfengrun Building, Gongyenan Road, Lixia 19 Jinan Gongyenanlu Sub-Branch District, Jinan City 20 Jinan Ganshiqiao Sub-Branch No.87, Jingqi Road, Shizhong District, Jinan City
21 Jinan Gaoxin Sub-Branch No.746, Xinyu Road, High-tech Development Zone, Jinan City
22 Jinan Guangming Sub-Branch No.53, Yingxiongshan Road, Shizhong District, Jinan City 23 Jinan Honglou Sub-Branch No.1-1, Honglounan Road, Licheng District, Jinan City 24 Jinan Huayuan Sub-Branch No.59, Lishan Road, Lixia District, Jinan City 25 Jinan Huaiyin Sub-Branch No.573, Jingqi Road, Huaiyin District, Jinan City
26 Jinan Huaiyuan Sub-Branch No.18, Beixiaoxinzhuangxi Street, Huaiyin District, Jinan City
West Front of Qingnian Street, Jigang New Village, Licheng 27 Jinan Jigang Sub-Branch District, Jinan City
21 28 Jinan Jianshelu Sub-Branch No.1, Liuchangshan Road, Shizhong District, Jinan City 29 Jinan Jiefanglu Sub-Branch No.10, Shimuyuandong Street, Lixia District, Jinan City 30 Jinan Jinniu Sub-Branch No.4, Beima'anshan Road, Tianqiao District, Jinan City 31 Jinan Jingqilu Sub-Branch No.425, Jingshi Road, Huaiyin District, Jinan City
No.227, Building 14, Jingqiweiyi Road, Shizhong District, Jinan 32 Jinan Jingqiweier Sub-Branch City
33 Jinan Jingbaweier Sub-Branch No.176, Daweier Road, Shizhong District, Jinan City
Area B-C, Floor 1, Area B, Yike Production Base, the Crossroad of 34 Jinan Jingshidonglu Sub-Branch Jingshidong Road and Shunhua Road, Gaoxin District, Jinan City
35 Jinan Kaiyuan Branch No.55, Huanshan Road, Lixia District, Jinan City 36 Jinan Keji Sub-Branch No.555, Jingsi Road, Huaiyin District, Jinan City
Building 1, Area 2, Shidaizongbu Base, No.15, Lanxiang Road, 37 Jinan Lanxianglu Sub-Branch Tianqiao District, Jinan City
38 Jinan Licheng Sub-Branch No.41, Honglouxi Road, Licheng District, Jinan City 39 Jinan Lishanbeilu Sub-Branch No.4, Lishanbei Road, Tianqiao District, Jinan City
No.173, Room 106, Block C2, Lishanmingjun, Lishan Road, Lixia 40 Jinan Lixia Sub-Branch District, Jinan City
41 Jinan Luoyuandajie Sub-Branch No.61, Luoyuanda Street, Lixia District, Jinan City 42 Jinan Liuhang Sub-Branch No.226, Beiyuanda Street, Tianqiao District, Jinan City 43 Jinan Luokou Sub-Branch No.87-1, Jiluo Road,Tianqiao District, Jinan City 44 Jinan Minshengdajie Sub-Branch No.74, Minshengda Street, Shizhong District, Jinan City 45 Jinan Minyingkejiyuan Sub-Branch No.1, Sushan Road, Huaiyin District, Jinan City 46 Jinan Nanjiao Sub-Branch No.306, Yingxiongshan Road, Shizhong District, Jinan City 47 Jinan Pingyin Sub-Branch No.23-2, Fuqian Street, Pingyin County, Jinan City 48 Jinan Qianfoshan Sub-Branch No.54, Jingshi Road, Lixia District, Jinan City 49 Jinan Qinghe Sub-Branch No.483, Beiyuanda Street, Tianqiao District, Jinan City 50 Jinan Shandalu Sub-Branch No.185, Shanda Road, Lixia District, Jinan City 51 Jinan Shizhong Sub-Branch No.131, Jinger Road, Shizhong District, Jinan City 52 Jinan Shuanglong Sub-Branch Middle Section of Nanwaihuan Road, Shizhong District, Jinan City 53 Jinan Shungeng Sub-Branch No.6, Shungeng Road, Lixia District, Jinan City 54 Jinan Shunjing Sub-Branch No.59, Heihuquanxi Road, Lixia District, Jinan City 55 Jinan Shunnan Sub-Branch No.57, Shungeng Road, Shizhong District, Jinan City 56 Jinan Tianqiao Sub-Branch No.20, Wuyingshanzhong Road, Tianqiao District, Jinan City 57 Jinan Wanzixiang Sub-Branch No.227, Jingerweisi Road, Shizhong District, Jinan City
22 58 Jinan Wangguanzhuang Sub-Branch No.73-9, Jiwei Road, Shizhong District, Jinan City 59 Jinan Wendong Sub-Branch No.242-2, Shanda Road, Lixia District, Jinan City 60 Jinan Wenxi Sub-Branch No.3, Qianfoshan Road, Lixia District, Jinan City 61 Jinan Wuyingshan Sub-Branch No.15, Shifan Road, Tianqiao District, Jinan City Building 2, No.50, Wuyingshanzhong Road, Tianqiao District, 62 Jinan Wuyingtan Sub-Branch Jinan City 63 Jinan Ximen Sub-Branch No.342, Quancheng Road, Lixia District, Jinan City 64 Jinan Xishichang Sub-Branch No.575, Jinger Road, Huaiyin District, Jinan City 65 Jinan Yanshan Sub-Branch No.5-1, Jiefang Road, Lixia District, Jinan City 66 Jinan Yaojia Sub-Branch No.75, Jiefangdong Road, Lixia District, Jinan City 67 Jinan Yingxiongshan Sub-Branch No.58-12, Ma'anshan Road, Shizhong District, Jinan City 68 Jinan Zhangqiu Sub-Branch No.76, Huiquan Road, Zhangqiu City 69 Jinan Zhangzhuang Sub-Branch No.191, Zhangzhuang Road, Huaiyin District , Jinan City 70 Liaocheng Linqing Sub-Branch No.2009, Guloudong Street, Linqing City, Shandong Province 71 Liaocheng Chiping Sub-Branch No.115, Yudong Road, Chiping County, Shandong Province
No.39 Room 104A, 204, Disanda Street, Binhaixin New District, 72 Tianjin Kaifaqu Sub-Branch Tianjin Economic & Technological Development Zone
(Ⅲ) Directors, Supervisors, Senior Executives and Employees
ⅰ. Profile of Directors, Supervisors and Senior Executives Remunerated Shareholding Position Name Gender Age Company and Position or Not （No. of Shares） Party Secretary and Qiu Chairman Male 56 Chairman of Board of Yes 109,619 Yunzhang Directors of Qilu Bank Chairman of Board of Gao Vice Chairman Male 51 Directors of Linuo Group No 0 Yuankun Co., Ltd. President and Vice Party Executive Director Guo Tao Male 45 Yes 80,000 Secretary of Qilu Bank Wang Vice Party Secretary of Executive Director Male 54 Yes 70,000 Hongye Qilu Bank Mao Secretary of Board of Executive Director Male 44 Yes 138,919 Fangzhu Directors of Qilu Bank Vice President of Central Shi Independent Director Male 48 University of Finance and Yes 0 Jianping Economics Chairman of Board of Directors of Modern Independent Director Liu Feng Male 46 International Financial Yes 0 Planning Standards Co., Ltd.
23 Wang Vice President of Nanjing Independent Director Male 47 Yes 0 Huijin Audit University Group Chief Paul Yan-to Representative, China of Shareholder Director Male 59 No 0 Au Commonwealth Bank of Australia Chairman of Board of Zhao Directors of Jinan Shareholder Director Male 52 No 0 Mingkui State-Owned Assets Operations Co., Ltd. Director of Huasheng Shareholder Director Yu Xiaoyan Female 40 No 0 Jiangquan Group Co., Ltd. Chairman of Board of Directors Shandong Shareholder Director Chen Jian Male 48 No 0 Jianbang Investment Management Co., Ltd. President of Shandong Shareholder Director Wu Lichun Male 46 No 0 Tri-cel Estate s Co., Ltd. Chairman Zhang Chairman of Board of Male 54 Yes 80,000 (Supervisors) Suning Supervisors of Qilu Bank Party Secretary and Vice Chairman Chairman of Board of Wang Jun Male 58 No 0 (Supervisors) Directors of Jigang Group Corporation General Manager of Zhang Employee Supervisor Female 48 Internal Audit Dept. of Yes 50,000 Haiyan Qilu Bank General Manager of Employee Supervisor Liu Yuhua Female 47 Operations Dept. of Qilu Yes 90,000 Bank Vice Director of School of External Supervisor Hu Jinyan Male 43 Economics of Shandong Yes 0 University Vice Director of School of External Supervisor Su Yuhai Male 45 Finance of Shandong Yes 0 University of Finance Head of Finance Dept. of Shareholder Jiang Shandong General Cop. of No Female 50 0 Supervisor Xuefei Agricultural Economic Development & Service Vice General Manager of Shareholder Fang Chao Male 35 Rizhao Steel Holding No 0 Supervisor Group Co., Ltd. General Manager of Shareholder Li Mingji Male 44 Zhongrun Estates Group No 0 Supervisor Co., Ltd. Zhao Vice President of Qilu Vice President Male 48 Yes 164,107 Xuejin Bank Zhang Vice President of Qilu Vice President Male 44 Yes 286,359 Changping Bank Jia Vice President of Qilu Vice President Male 45 Yes 110,000 Hanzhong Bank
24 Zhang Vice President of Qilu Vice President Male 48 Yes 70,000 Zhigao Bank Chai Vice President of Qilu Vice President Male 47 Yes 70,000 Chuanzao Bank Secretary of Secretary of Disciplinary Li Disciplinary Female 55 Inspection Committee of Yes 163,256 Yingchun Inspection Committee Qilu Bank Assistant President of Qilu Assistant President Zhanghua Male 43 Yes 150,000 Bank
25 ⅱ. Areas of Responsibilities of Executive Management Year of Position Name Areas of Responsibilities Experience Responsible for the Bank's overall executive management President Guo Tao 25 and in charge of the Human Resources Dept., Planning ＆ Finance Dept., and the General Office . In Charge of the Corporate Banking Dept., the IT Dept., Vice Zhao 28 the KD Projects Office, cum GM of the Personal Banking President Xuejin Dept. Vice Zhang In Charge of the Banking Dept. cum GM of the 13 President Changping Administration ＆ Security Dept. Vice Jia In Charge of the Risk Management Dept., the Compliance 23 President Hanzhong Dept., cum GM of the Credit Approval Dept. Vice Zhang In charge of the Operations Dept. , the International 28 President Zhigao Banking Dept. , cum GM of the Funds Operations Dept. Vice Chai Responsible for the Tianjin Branch's overall executive 24 President Chuanzao management Secretary of Responsible for Overall Tasks of the Disciplinary Disciplinary Li 16 Inspection Committee and in charge of the Discipline Inspection Yingchun Inspection Office, cum GM of the Human Resources Dept. Committee Assistant Responsible for the Liaocheng Branch's overall executive Zhang Hua 24 President management. ⅲ. Employees Profile At the end of the reporting period, the company had 1,806 employees, of which, 188 employees with master's degree and above 10.4％, 1,493 employees with bachelor’s degree and diploma (82.7％), 125 employees with below secondary and vocational qualifications (6.9％). There were 465 employees with middle and senior professional technical qualifications (25.7 ％ ) and 500 employees with junior professional technical qualifications (27.7％).
(Ⅳ) The Remuneration of Directors, Supervisors and Senior Executives
For the reporting period, a total of 14 persons, including directors (except Independent Directors), supervisors (except External Supervisors) and senior executives, was remunerated by the Bank, and the amount of remunerations (after tax) paid for the reporting period was RMB9.59 million. The actual allowances (after tax) received by the Independent Directors (3 people) were RMB211.68 thousand. The actual allowances (after tax) received by the External Supervisors (2 people) were RMB103.74 thousand.
(Ⅴ) Changes of Directors, Supervisors and Senior Executives during the Reporting Period
On 10 November 2009, the 24th meeting of the 4th Board of Directors agreed to the proposal for the nomination of Mr.Richard F.H Bisset as Vice President of the Bank and the appointment of Mr. Richard F.H Bisset as Vice President of the Bank. On 26 January 2020, the banking regulatory authorities approved
26 his appointment and he was then appointed. (Ⅵ) Shareholders’ Meeting The 2008 Annual Shareholders’ Meeting was held on 11 April 2009 on the 3rd floor in the first conference room of Qilu Bank Building at No.176, Shunhe Street, Shizhong District, Jinan City. 96 shareholders and representatives of the shareholders attended the meeting representing 1,423,061,370 shares, 85.28% of the total shareholding. The meeting was convened by the 4th Board of Directors of the Bank. The following resolutions were deliberated and passed by voting: agreed to the work report of the Board of Directors for 2008; agreed to the work report of the Board of Supervisors for 2008; agreed to the progress report on the financial budget for 2008; agreed to the financial budget proposal for 2009; agreed to the profit appropriation and dividend distribution proposals for 2008; agreed to the “Measures for Ascertaining Responsibility of the Directors, Supervisors and Members of Executive Management of Jinan City Commercial Bank Co., Ltd.”; agreed to the “Proposal Regarding Issuance of Subordinated Debts for Supplementing Subsidiary Capital”, agreed to the issuance of subordinated debts; agreed to the “Proposal for Application for Change of Name of the Bank ”, agreed to the change of name of the Bank from Jinan City Commercial Bank Co., Ltd. (short for “Jinan City Commercial Bank”) to Qilu Bank Co., Ltd. (short for “Qilu Bank”); agreed to the revision of the Memorandum and Articles of Association of the Bank, and agreed to the revised Memorandum and Articles of Association of the Bank. The 2009 First Interim Shareholders’ Meeting was held on 14 October on the 3rd floor in the first conference room of Qilu Bank Building at No.176, Shunhe Street, Shizhong District, Jinan City. There were 91 shareholders and representatives of the shareholders who attended the meeting representing 1,526,491,968 shares, 91.48% of the total shareholding. The meeting was convened by the 4th Board of Directors. The following resolutions were deliberated and passed by voting: agreed to the proposal regarding the share capital increase of Qilu Bank Co., Ltd., the registered capital shall be changed from RMB1,668.75 million to RMB2,368.75 million after the increased capital is in place, the revisions of the contents of the Article Four and the Article Fourteen of the Memorandum and Articles of the Association of the Bank concerning the registered capital and the paid-up capital respectively and agreed to the proposal for requesting the Shareholders’ Meeting for authorizing the Board of Directors to have full authority for handling the share capital increase issue.
(Ⅶ) The Work of the Board of Directors
ⅰ. The Meetings of the Board of Directors and the Major Resolutions Passed during the Reporting Period During the reporting period, the Bank’s Board of Directors held 10 meetings in total, of which 6 were
27 onsite and 4 were by means of telecommunication. The 17th meeting of the 4th Board of Directors was held on 1st March 2009 in the conference room on the 16th floor of Qilu Bank Building at No. 176 Shunhe Street, Shizhong District, Jinan City. 10 out of 13 directors attended the meeting. The meeting was chaired by Qiu Yunzhang, chairman of the Board of Directors and the following resolutions were passed: agreed to the operation work report made by the President; agreed to the report on the progress of the financial budget for 2008 and submission of the report to Shareholders’ Meeting for approval; agreed to the report on the progress of the financial budget for 2008 and submission of the report to Shareholders’ Meeting for approval; agreed to the profit appropriation and dividend distribution scheme for 2008 and submission of the scheme to the Shareholders’ Meeting for approval; agreed to the “Overall Executive Management Policies for the Year 2009 of the Board of Directors of Jinan City Commercial Bank Co., Ltd.; agreed to the “Measures for Ascertaining Responsibility of the Directors, Supervisors and Members of the Executive Management of Jinan City Commercial Bank Co., Ltd.” and submission of the Measures to the Shareholders’ Meeting for approval; agreed to the execution proposal for the remuneration adjustment of the Bank; agreed to the work report of the Board of Directors and submission of the report to the Shareholders’ Meeting for approval; agreed to the proposal for the issuance of subordinated debts for supplementing the subsidiary capital of Jinan City Commercial Bank and the issuance of subordinated debts of RMB1.2 billion and the submission of the proposal to Shareholders’ Meeting for approval; agreed to the proposal for adjusting the duties of some departments in the headquarters; agreed to the execution opinions of Jinan City Commercial Bank on the cooperation between banking and trust businesses; agreed to the arrangement for the disclosure of 2008 annual report; agreed to the amendment proposal of the Memorandum and Articles of Association of the Bank and the submission of the proposal to the Shareholders’ Meeting for approval; agreed to the “2009 Performance Appraisal of Executive Management of Jinan City Commercial Bank”; and agreed to the proposed agenda for 2008 annual Shareholders’ Meeting of Jinan City Commercial Bank. The 18th meeting of the 4th Board of Directors was held on 11 March 2009 by means of telecommunication and the following resolution was passed: the revised “Proposed Agenda for the 2008 Annual Shareholders’ Meeting of Jinan City Commercial Bank Co., Ltd.” The 19th meeting of the 4th Board of Directors was held on 8 April 2009 by means of telecommunication and the following resolutions were passed: agreed to the revised “Measures for Ascertaining Responsibility of Directors, Supervisors and Members of the Executive Management of Jinan City Commercial Bank” and submission of the Measures to the Shareholders’ Meeting for approval; and agreed to the “2008 Annual Report of Jinan City Commercial Bank Co., Ltd.” and its summary. The 20th meeting of the 4th Board of Directors was held on 29 April by means of telecommunication
28 and the following resolution was passed: agreed to the “2009 Branches Development Plan of Jinan City Commercial Bank”. The 21st meeting of 4th Board of Directors was held on 18 July in the conference room on the 16th floor of Qilu Bank Building at No. 176, Shunhe Street, Shizhong District, Jinan City. 11 out of 13 directors attended the meeting. The meeting was chaired by Qiu Yunzhang, Chairman of the Board of Directors and the following resolutions were passed: agreed to the “ Execution Opinions of Qilu Bank Co., Ltd. on Implementing the
29 room of Tianjin Branch, Qilu Bank at the No. 37-39, Youyibei Road, Hexi District, Tianjin City. 10 out of 13 directors attended the meeting. The meeting was chaired by Qiu Yunzhang, Chairman of the Board of Directors and the following resolutions were passed: agreed to the report of the adjustment of annual operating targets on the undertaking that the total bonus should not exceed the level of 2008; agreed to the proposal for appointing PricewaterhouseCoopers Zhongtian CPAs Co., Ltd to be the auditor for the Bank’s 2009 annual financial report; agreed to the proposal for the write-off of the NPLs; agreed to the proposal for the nomination of Mr. Richard F.H Bisset as Vice President of the Bank and the appointment of Mr. Richard F.H Bisset as Vice President of the Bank; agreed to the revised “Development Plan for Year 2008-2010”; agreed to the “Capital Management Plan for Year 2009-2011”; agreed to the “Policies and Procedures of Reputational Risk Management”; agreed to the “Policies and Procedures of Information Science and Technology Risk Management”; agreed to the revised “Rules for Resolutions of the Board of Directors”; agreed to the revised “Responsibilities of the Directors, Board of Directors and its Subsidiary Institutions”; and agreed to the revised “Responsibilities of the Executive Management”. The 25th meeting of the 4th Board of Directors was held on 17 December 2009 in the conference room on the 16th floor of Qilu Bank Building at No. 176, Shunhe Street, Shizhong District, Jinan City. 12 out of 13 directors attended the meeting. The meeting was chaired by Qiu Yunzhang, Chairman of the Board of Directors and the following resolutions were passed: agreed to the “Transformation Reform Execution Arrangement for 2010 of Qilu Bank Co., Ltd.”; agreed to the “Policies and Procedures of the Liquidity Risk Management of Qilu Bank Co., Ltd.”, and agreed to the “Audit Plan for Year 2010 of Qilu Bank Co., Ltd.”. The 26th meeting of the 4th Board of Directors was held on 26 December 2009 by means of telecommunication and the following resolutions were passed: agreed to the proposal for subscription of the Bank’s shares by the Commonwealth Bank of Australia (CBA) and the subscription of 140 million shares of the Bank’s increased share capital by CBA for RMB429.8 million and that the total shares held by CBA after the increase shall be 473.75 million shares representing 20% of the total expanded share capital and the seat in the Board of Directors would remain unchanged to be just one; agreed to the proposal for subscription of the Bank’s shares by Jinan State-owned Assets Operation Co., Ltd. (SOAOC) and the subscription of 268 million shares of the Bank’s increased share capital by SOAOC for RMB822.76 million and that total shares held by Jinan State-owned Assets Operation Co., Ltd. shall be 422.5 million representing 17.84% of total expanded share capital. ⅱ. The Execution of the Resolutions of Shareholders’ Meeting by the Board of Directors during the Reporting Period During the reporting period, the Board of Directors formulated, in accordance with the Shareholders’
30 Meeting, the business plan and enforced the scheme of dividend distribution. Due to the unpredictable and uncontrollable factors resulting from the changes of macro-economy bringing about the tremendous pressure on the achievement of the annual budget target, in accordance with the meeting spirits of CBRC and CBRB, Shandong, after the feasibility study of the executives and according to the principles of pragmatism, strict risk control and steady development, the Board of Directors agreed to adjust the budgeted operating profit before provision from RMB1.1 billion to RMB1.04 billion. Under the adjusted budget, the Bank had basically completed the various operating targets. ⅲ. The Meetings of Specialized Committees of the Board of Directors during the Reporting Period During the reporting period, the Related-party Transactions Control and Risk Management Committee held 8 meetings, the Audit Committee held 4 meetings, the Nomination and Remuneration Committee held 2 meetings, and the Strategy Committee held 1 meeting. The committees were generally able to deliberate on the items under their respective responsibilities according to the working regulations of the various specialized committees and then submitted them to the Board of Directors for approval. ⅳ. The Work of Independent Directors during the Reporting Period Name of Personal Number of Board of Directors’ Attendance by Absence Independent Attendance Meetings to Attend (times) Proxy (times) (times) Director (times)
Shi Jianping 10 9 1 0 Liu Feng 10 10 0 0 Wang Huijin 10 7 3 0
(Ⅷ) The Work of the Board of Supervisors
ⅰ. Meetings of the Board of Supervisors during the Reporting Period During the reporting period, the following meetings were held or attended or observed by the Board of Supervisors: On 11 April 2009, members of the Board of Supervisors attended the 2008 Annual Shareholders’ Meeting. On 14 October 2009, members of the Board of Supervisors attended the 2009 First Interim Shareholders’ Meeting. On 1 March 2009, the 9th Session of the 4th Board of Supervisors’ meeting was held in the conference room on the 15th floor of Qilu Bank Building at No. 176 Shunhe Street, Jinan City. 7 out of 9 supervisors were present. The meeting was presided by Zhang Suning, Chairman of the Board of Supervisors and the following resolutions were passed: agreed to the Work Report for the year 2008 of the Board of Supervisors and its submission to the 2008 Annual Shareholders’ Meeting for review and approval; agreed
31 to the performance appraisal’s results of the jobs of the Board of Directors and the Executive Management for the year 2008; and agreed to the “Measures for Ascertaining Responsibility of the Directors, Supervisors and the Members of Executive Management of Jinan City Commercial Bank Co., Ltd.” On 18 July 2009, the 10th Session of the 4th Board of Supervisors’ meeting was held in the conference room on the 15th floor of Qilu Bank Building at No. 176 Shunhe Street, Jinan City. 8 out of 9 supervisors were present. The meeting was presided by Zhang Suning, Chairman of the Board of Supervisors and the following resolutions were passed: agreed to the revisions of the “Measures for Performance Appraisal of Supervisors of Qilu Bank Co., Ltd.”, the “Measures for Performance Appraisal of the Board of Directors by the Board of Supervisors of Qilu Bank Co., Ltd.” and the “Measures for Performance Appraisal of the Executive Management by the Board of Supervisors of Qilu Bank Co., Ltd.”, and agreed to the proposal for changes to the Board of Supervisors’ institutions and personnel after the rename of the Bank. On 10 November 2009, the 11th Session of the 4th Board of Supervisors’ meeting was held in the second conference room of Tianjin Branch, Qilu Bank at the No. 37-39, Youyibei Road, Hexi District, Tianjin City. 6 out of 9 supervisors were present. The meeting was presided by Zhang Suning, Chairman of the Board of Supervisors and the following resolution was passed: agreed to the “Inquiry Work Report of Supervisors for the Four Sub-Branches in Jinan”. On 17 December 2009, the 12th Session of the 4th Board of Supervisors’ meeting was held in the conference room on the 15th floor of Qilu Bank Building at No. 176 Shunhe Street, Jinan City. 8 out of 9 supervisors were present. The meeting was presided by Zhang Suning, Chairman of the Board of Supervisors and the following resolution was passed: agreed to the “Financial Budget Performance Report for January to November 2009 of Qilu Bank Co., Ltd.” On 1 March 2009, the members of Board of Supervisors attended, as non–voting delegates, the 17th meeting of the 4th Board of Directors. On 18 July 2009, the members of Board of Supervisors attended, as non–voting delegates, the 21st meeting of the 4th Board of Directors. On 5 September 2009, the members of Board of Supervisors attended, as non–voting delegates, the 22nd meeting of the 4th Board of Directors. On 29 September 2009, the members of Board of Supervisors attended, as non–voting delegates, the 23rd meeting of the 4th Board of Directors. On 10 November 2009, the members of Board of Supervisors attended, as non–voting delegates, the 24th meeting of the 4th Board of Directors. On 17 December 2009, the members of Board of Supervisors attended, as non–voting delegates, the
32 25th meeting of the 4th Board of Directors. ⅱ. Conclusion of Special Inspection of the Board of Supervisors during the Reporting Period In 2009, the Board of Supervisors successively carried out on-site inspection of 1 branch outside Jinan and off-site work-inquiry on 4 sub-branches and concluded that: the establishment of the branch outside Jinan had continued to progress and achieved satisfactory results. All sub-branches were fully aware of the issues in managing the credit assets and when the loans were at risk, measures were taken timely to mitigate risks in order to protect the assets. ⅲ. Work of External Supervisors during the Reporting Period Name of Number of Board of Personal Attendance by Absence External Supervisors’ Meetings to Attendance Proxy（times） （times） Supervisors Attend（times） （times） Hu Jinyan 4 4 0 0 Su Yuhai 4 4 0 0
ⅳ. Independent Opinions from the Board of Supervisors on the following issues During the reporting period, for the purpose of protecting the interest of the shareholders and the employees, the Board of Supervisors carried out supervision on the financial position, and the performance of Directors and senior management staff according to the applicable requirements of the Company Law and the Memorandum and Articles of Association of the Bank. The specific details were as follows: (ⅰ) Supervision on Compliance of the Bank’s Operations During the reporting period, the Bank operated legally and managed properly with true and fair operating results and the decision making procedures were legitimate and valid. There was no detection of break of any laws, statutes and the Memorandum and Articles of Association or behaviors that had harmed the shareholders’ interest by the Directors and the Executive Management of the Bank when performing their duties. (ⅱ) Supervision on Financial Position of the Bank After a thorough review of the financial position and the audit report for the year 2009, the Board of Supervisors concluded that the financial report truly and fairly reflects the financial position and the operating results of the Bank. (ⅲ) Supervision on Execution of the Resolutions of the Shareholders’ Meetings During the reporting period, the Board of Supervisors did not raise any objection to any of the reports and proposals submitted to the Shareholders’ Meetings by the Board of Directors and concluded that the Board of Directors fully carried out the relevant resolutions of the Shareholders’ Meetings.
(Ⅸ) The Major Business Operations Plan of 2010
33 The business targets of the Bank for year 2010 are: a total deposit balance of RMB66.7 billion with a year-on-year increase of RMB12 billion or 22%; a total loan balance of RMB43.1billion with a year-on-year increase of RMB7.77 billion or 22%; an operating profit before provision of RMB1,094 million with a year-on year growth of 2.92%; non-performing loans controlled below the balance at the end of previous year with the NPL ratio within 1.7%; maintaining the Loan Loss Provision Ratio and the Loan Provision Coverage Ratio at satisfactory high levels; and key performance indicators meeting the requirements of “Tier 2 Banks” and “Good Banks” stipulated by the China Banking Regulatory Commission and the Shandong Banking Regulatory Bureau respectively.
34 Ⅵ. Key Events
（Ⅰ）During the reporting period, whether the Bank was involved in any litigation and arbitration events which had a material impact on the operating activities
During the reporting period, the Bank was not involved in any litigation or arbitration events which had a material impact on the operating activities.
（Ⅱ）During the reporting period, whether the Bank had any major acquisition, merger or sale of assets events
As of the end of 2009, the Bank sold / transferred two non-performing assets which were as follows: 1.sold non-performing assets of RMB59 million to the Bank’s largest shareholder, the Commonwealth Bank of Australia; 2.transferred debts assets of RMB68 million to Qingdao yong xinyuan estate Co., Ltd..
(Ⅲ) During the reporting period, whether the Bank had any significant custody, guarantee, commitment, management of entrustment assets
During the reporting period, the Bank was not involved in significant custody, guarantee, commitment, management of entrustment assets
(Ⅳ) During the reporting period, whether members of the Board of Directors, members of the Board of Supervisors and the Executives were subject to punishment by the relevant regulatory authorities and judicial authorities
During the reporting period, members of the Board of Directors, members of the Board of Supervisors and the Executives were not subject to punishment by the relevant regulatory authorities and judicial authorities.
35 Ⅶ. Important Notice
The Board of Directors and its directors hereby assure that there are no false records and misleading statements or major omissions in this report, and undertake responsibility jointly and severally that the contents of the report are true, accurate and complete. The 30th meeting of the 4th Board of Directors of the Bank deliberated and approved the annual report on 26th April 2010. The Chairman, Qiu Yunzhang, the President, Guo Tao and the General Manager of Planning and Finance Department, Cui Xiang, hereby assure that the financial reporting of the annual report is true and complete. All relevant figures in this report are consolidated figures of RMB and foreign currencies. The annual report is prepared in Chinese and English. English translation is purely for reference only. Should there be any inconsistencies between them; the report in Chinese shall prevail.
VIII. Balance Sheet, Income Statement, and Cash Flow Statement that were audited by the Auditors of PricewaterhouseCoopers Zhong Tian CPAS Limited Company.
In order to fully understand the financial status of the Bank, please refer to the full audited report, copy of which is kept by the Bank.
36 QILU BANK COMPANY LIMITED
BALANCE SHEET AS AT 31 DECEMBER 2009 (All amounts expressed in RMB unless otherwise stated) [English translation for reference only]
ASSETS 31 December 2009 31 December 2008
Cash and deposits with the central bank 8,638,641,810 9,918,747,602 Deposits with other banks 344,097,623 215,549,671 Placement with other banks 150,222,949 75,180,600 Financial assets, held-for- trading 2,480,803,713 1,106,615,970 Assets purchased under resale agreements 4,452,890,504 744,560,579 Interest receivables 200,569,414 187,462,815 Loans and advances to customers 33,885,228,251 27,783,390,355 Financial assets, available-for- sale (“AFS”) 6,924,444,206 5,865,447,104 Financial assets, held-to- maturity (“HTM”) 1,976,205,897 1,503,334,800 Securities investment classified as loans and receivables 1,613,549,175 1,175,365,294 Investment property 47,553,879 39,596,509 Fixed assets 596,029,286 610,242,101 Intangible assets 48,472,897 20,013,391 Deferred income tax assets 312,609,238 137,192,794 Long-term prepaid expenses 28,465,904 16,830,960 Other assets 89,070,523 145,046,228 TOTAL ASSETS 61,788,855,269 49,544,576,773
QILU BANK COMPANY LIMITED
BALANCE SHEET (continued) AS AT 31 DECEMBER 2009 (All amounts expressed in RMB unless otherwise stated) [English translation for reference only]
LIABILITIES 31 December 2009 31 December 2008
Due to other banks and financial institutions 1,925,707,878 1,509,613,103 Placements from other banks 54,625,600 - Assets sold under repurchase agreements 39,000,000 619,453,940 Deposits by customers 53,660,400,002 43,891,473,082 Employee benefits payable 120,089,586 103,196,084 Taxes payable 145,453,594 115,416,131 Bonds payable 700,000,000 - Interest payable 285,781,193 270,978,779 Contingent liabilities 41,837,506 45,601,392 Other liabilities 2,001,319,953 318,295,628 TOTAL LIABILITIES 58,974,215,312 46,874,028,139
SHAREHOLDERS’ EQUITY
Paid-in capital 1,668,750,000 1,668,750,000 Capital surplus 150,608,021 406,361,206 Surplus reserve 303,829,277 219,769,513 General reservation 358,696,079 76,800,000 Undistributed profit 332,756,580 298,867,915 2,814,639,957 2,670,548,634
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 61,788,855,269 49,544,576,773
QILU BANK COMPANY LIMITED
INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2009 (All amounts expressed in RMB unless otherwise stated) [English translation for reference only]
2009 2008
Interest income 2,719,243,299 2,867,439,463 Interest expense (1,010,622,734) (1,050,951,810) Net interest income 1,708,620,565 1,816,487,653
Fee and commission income 69,575,582 54,927,234 Fee and commission expenses (20,957,179)(10,320,915) Net fee and commission income 48,618,403 44,606,319
Investment income 92,201,135 13,541,974 Fair value (losses)/gains (17,867,641) 16,203,045 Foreign exchange gains/(losses) 7,208,480 (721,081) Other income 20,720,163 18,737,501
Operating income 1,859,501,105 1,908,855,411
Business tax and levies (134,852,270) (147,025,709) General and administrative expenses (613,262,870)(533,525,613) Impairment loss (502,543,923) (760,638,055) Other expenses (2,085,512) (2,087,400)
Operating expense (1,252,744,575) (1,443,276,777)
Operating profit 606,756,530 465,578,634
Non-operating income 2,609,109 4,487,348 Non-operating expenses (733,266) (1,695,838)
Total profit 608,632,373 468,370,144 Less: Income tax (119,176,425) (117,228,445)
Net profit 489,455,948 351,141,699
Other comprehensive income (255,753,185) 261,362,390
Comprehensive income 233,702,763 612,504,089
QILU BANK COMPANY LIMITED
STATEMENT OF CASH FLOW FOR THE YEAR ENDED 31 DECEMBER 2009 (All amounts expressed in RMB unless otherwise stated) [English translation for reference only]
2009 2008
1 Cash flows from operating activities
Net increase in deposits by customers and other banks 10,185,021,695 13,399,239,641 Net increase in placements from other banks 54,625,600 - Net decrease in assets purchased under resale agreements - 83,278,667 Interest received 2,671,103,768 2,641,841,089 Fee and commission received 69,575,582 53,328,672 Cash received relating to other operating activities 267,665,788 69,951,375 Subtotal of cash inflow 13,247,992,433 16,247,639,444
Net increase in loans and advances to customers (6,536,109,272) (3,791,927,909) Net increase in deposits with the central bank and other banks (593,583,168) (1,220,875,583) Net increase in purchasing held-for-trading assets (1,392,055,384) - Net increase in assets sold under repurchase agreements (580,453,940) (2,858,636,322) Net increase in assets purchased under resale agreements (1,781,653,821) - Net increase in placements with other banks - (10,697,121) Interest paid (1,008,549,399) (925,018,717) Fee and commission paid (20,957,179) (8,722,353) Cash paid to employees (321,372,147) (246,700,277) Payment of taxes (179,304,345) (358,857,271) Cash paid relating to other operating activities (560,682,531) (189,944,254) Subtotal of cash outflow (12,974,721,186) (9,611,379,807)
Net cash provided by operating activities 273,271,247 6,636,259,637
QILU BANK COMPANY LIMITED
STATEMENT OF CASH FLOW (continued) FOR THE YEAR ENDED 31 DECEMBER 2009 (All amounts expressed in RMB unless otherwise stated) [English translation for reference only]
2009 2008
2 Cash flows from investing activities
Net cash received from disposals of investments 2,925,290,851 683,614,337 Net cash received from disposals of fixed assets, intangible assets and other non-current assets 11,848,361 6,895,941 Net cash received from returns on investments 89,386,081 113,426,313 Subtotal of cash inflow 3,026,525,293 803,936,591
Net cash paid from purchase of investments (5,236,347,175) (4,597,988,366) Net cash paid from purchase of fixed assets, intangible assets and other non-current assets (83,636,917) (104,809,263) Net cash paid from other investing activities (66,633,863) - Subtotal of cash outflow (5,386,617,955) (4,702,797,629)
Net cash provided by investing activities (2,360,092,662) (3,898,861,038)
3 Net cash flows from financing activities
Cash received from investments 1,719,200,000 261,124,142 Cash received from bonds issued 700,000,000 - Cash received from other financing activities 2,660,000 - Dividends and interests paid (78,379,287) (59,122,981)
Net cash provided by financing activities 2,343,480,713 202,001,161
4 Effect of foreign exchange rate changes on cash and cash equivalents (81,853) (21,609,371)
5 Net increase in cash and cash equivalents 256,577,445 2,917,790,389
Add: Cash and cash equivalents at beginning of year 6,000,048,587 3,082,258,198
6 Cash and cash equivalents at end of year 6,256,626,032 6,000,048,587