2013 Summarized Annual Report of Qilu Bank Co., Ltd.
(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.) Ⅰ. General Introduction
()Ⅰ Legal Name in Chinese：齐鲁银行股份有限公司 (Abbreviation: 齐鲁银行 ) Legal Name in English: QiLu Bank Co., Ltd. (Ⅱ ) Legal Representative: Wang Xiaochun (Ⅲ ) Secretary of the Board of Directors: Mao Fangzhu Address: No.176 Shunhe Street, Shizhong District, Jinan City, Shandong Province Tel: 0531-86075850 Fax: 0531-86923511 Email: [email protected] ()Ⅳ Registered Capital: RMB 2,368,750,000 ()Ⅴ 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 Customer service telephone number: 4006096588 (Ⅵ) Business of the Bank: RMB business: deposit-taking, short-term lending, medium-term lending and long-term lending, domestic clearing, bill discounting, financial institution bond issuances, certificate treasury bond distribution, early repayment and underwriting, government bond transactions, inter-bank placements and acceptances, bank guarantees, payment and collection agency, insurance agency business, deposit boxes services, entrusted loans services etc. Foreign currency business: deposit-taking and lending, remittance, currency exchange, international settlements, inter-bank placements and acceptances, bill discounting and acceptance, bank guarantees, foreign currency settlement and clearance etc. (Ⅶ) Newspapers for Information Disclosure: Financial News Website for Information Disclosure: http://www.qlbchina.com Place where copies of the annual report are available at: The Board of Directors' Office of the Bank (Ⅶ) Other Relevant Information
1 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: Ernst &Young Hua Ming LLP Auditors’ Address: Level 16, Ernst & Young Tower, Oriental Plaza No.1, East Changan Avenue, Dong Cheng District, Beijing, China
2 II. Financial Highlights
（I） Main Profit Indicators for the Reporting Period (Group) Unit (RMB thousand) Item Amount Profit Before Tax 1,250,123 Net Profit 1,011,124 Operating Income 2,833,600 Operating Expense 1,582,174 Operating Profit 1,251,426 Investment Income 98,565 Non-Operating Profit -1,302 Net Cash Flow from Operating Activities 1,855,775 Net Cash Flow from Operating Activities per Share (yuan / share) 0.78
（II）Main Financial Data and Indicators of past 3 Years as at the End of the Reporting Period (Group) Unit (RMB thousand) Item 2013 2012 2011 Operating Income 2,833,600 2,461,728 2,119,490 Total Assets 94,003,628 83,679,665 77,279,391 Deposits Balance 83,299,419 71,330,840 66,112,588 Loans Balance 53,546,833 47,056,564 43,443,836 Shareholders’ Equity 6,001,599 5,327,536 4,401,377 Earnings per Share (yuan / share) 0.427 0.363 0.333 Net Assets Value per Share (yuan / share) 2.534 2.249 1.858 Cost to Income Ratio (%) 36.12 37.55 43.85 Return on Equity (%) 17.85 17.68 19.63 Cost-Benefit Ratio (%) 30.97 29.45 26.9
Note: The balance of deposits and loans were calculated according to the statistical caliber of CBRC and The People’s Bank of China.
3 III. Risk Management
(I) Supplementary Financial Data as at the End of the Reporting Period (Group) Unit (%) Item Criteria As at the end of 2013 Capital Adequacy Ratio ≥10.5 11.64 Tier One Capital Adequacy Ratio ≥8.5 9.44 Core Tier One Capital Adequacy Ratio ≥7.5 9.44
Liquidity Ratio RMB ≥25 43.27 Foreign Currency ≥25 95.84
Loan / Deposit Ratio RMB ≤75 64.31 Foreign Currency ≤75 57.75
Borrowing/Lending to Deposit Borrowing to Deposit Ratio ≤8 0.00 Ratio Lending to Deposit Ratio ≤8 0.00 Non-Performing Loan Ratio ≤5 0.96 Interest Collection Ratio 98.27 Ratio of Single Largest Borrower’s Loan Against Net Capital ≤10 5.07 Ratio of Top 10 Borrowers’ Loan Against Net Capital ≤50 42.31
(II) Distribution of Loans by Main Industry (Group) Unit (RMB thousand,%) Category of Industry Balance Percentage (%)
Manufacturing 9,385,956 17.61 Wholesale and Retail 9,208,435 17.29 Building and Construction 3,028,902 5.69 Real Estates 1,518,873 2.85 Leasing and Business Services 1,209,352 2.27 Total 24,351,518 45.71
4 (III) Loans Granted to Top 10 Borrowers Unit (RMB thousand,%) As a As a percentage Serial Outstanding Percentage Name of Borrower of Total number Loan of Net Outstanding Capital Loans Shandong yongan real estate development co., 1 349,980 0.65 5.07 LTD 2 Shandong shenghua rubber casting co., LTD 304,500 0.57 4.41 Tianjin station construction and installation 3 302,990 0.57 4.39 engineering co., LTD 4 Wanda Dept Store Co.,Ltd. 300,000 0.56 4.34 5 Tianjin jun edge constant coal sales co., LTD 300,000 0.56 4.34 6 Yanzhou Coal Mining Company Llimited 298,000 0.56 4.31 Weishanhu Mining(Group)Co.,Ltd,Shandong 7 280,000 0.52 4.05 Province Shandong Shuide Building Materials Sales 8 277,000 0.52 4.01 Co.,Ltd. 9 Ji'nan Municipal Public Utilities Bureau 260,000 0.49 3.76 Jinan Binhe District Construction Investment 10 250,000 0.47 3.62 Group Co., LTD Total 2,922,470 5.46 42.31
Note: The balance of loans were calculated according to the statistical caliber of CBRC and The People’s Bank of China. (Ⅳ ) The Classification Method of Loan Risks and the Structure of Various NPLs i. Classification Method of Loan Risks The Bank has formulated its risk-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. The Bank divides both on-and off-balance-sheet assets into 5 classes: Pass, Special-mention, Substandard, Doubtful and Loss, in which last three classes are deemed to be NPLs (Non-performing Loans). The core definitions of the credit assets set out in the Bank’s detailed rules for 5-tier classification of credit assets 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 loan in full and in a timely manner. Special-mention: Although borrowers are able to service their loan’s principals and interests currently, repayments may be affected by existing unfavorable factors. Substandard: Borrowers’ ability to service their loans are questionable. Borrowers are not able to pay
5 back the principals and interests only by their normal revenues. Certain losses may be incurred even when guarantees are invoked. Doubtful: Borrowers are unable to fully pay back the principals and interests 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 (Group) Unit: (RMB thousand, %) As a Change for As a Change for Percentage Closing Opening the Period Percentage of the Period Type of the Balance Balance (Increase+, the Closing (Increase+, Opening Decrease-) Balance Decrease- ) Balance Pass Loans 52,874,709 45,791,895 +7,082,814 98.75 97.31 +1.44 Special 156,964 722,229 -565,265 0.29 1.54 -1.25 Mention Loans Substandard 184,934 99,828 +85,106 0.34 0.21 +0.13 Loans Doubtful Loans 309,343 436,832 -127,489 0.58 0.93 -0.35 Loss Loans 20,883 5,780 15,103 0.04 0.01 +0.03 Total NPLs 515,160 542,440 -27,280 0.96 1.15 -0.19 Total Loans 53,546,833 47,056,564 6,490,269 100 100
Note: The statistical method used was consistent with that applied in the reports to regulators. (Ⅴ) Changes of Provision for Loans (Group) Unit (RMB thousand) Write-up Due to Opening Closing Item Provision Write-up Write-Off Rise in Balance Balance Discounted Value Loan Provision 1,650,504 343,952 26,938 172,268 7,473 1,841,653 （VI）Impairment Provision for Investments, Pledged Assets and Other Assets (Group) Unit (RMB thousand) Item Opening Balance Closing Balance Impairment Provision for Inter-bank Balances 19,503 19,503 Impairment Provision for Loans and 9,043 30,511 Receivable investments Provision for Other Receivables 52,251 47,462 Impairment Provision for Pledged Assets 23,098 22,232
6 (VII) Pledged Assets (Group) Unit (RMB thousand, %) Type Closing Balance Percentage Real Estates 583,358 99.92 Machinery 0 0 Shareholding 00 Others 449 0.08 Total 583,807 100
（VIII）Main External Equity Investments (the Bank) Unit (RMB thousand, %) Amount of Investment as Share External Investments at the End of the Reporting Proportion Period Zhangqiu Qilu Village Bank Co., Ltd. 25,500 51.00 Bank of Jining Co., Ltd. 629,548 18.41 Bank of Dezhou Co., Ltd. 127,012 4.76 Shandong City Commercial Bank Association Co，Ltd. 20,000 4.60 City Commercial Banks’ Funds Clearing Center 400 1.33 China UnionPay Co.，Ltd. 8,135 0.27 Total 810,595
Note: Bank of Dezhou Co., Ltd. and Bank of Jining Co., Ltd. are accounted with equity method and Zhangqiu Qilu Village Bank Co., Ltd. is subject to consolidation method. All the other equity investments are accounted with cost method. (IX) Off-Balance Sheet Items that may have significant influence on the Financial Position and Operating Results i. Letters of Guarantee (L/Gs) Issued As at the end of the reporting period, the balance of L/Gs issued was RMB501.62 million ii. Letters of Credit (L/Cs) Issued As at the end of the reporting period, the balance of L/Cs issued was RMB4088.52million. iii. Banker's Acceptance Bills Issued As at the end of the reporting period, the balance of banker's acceptance bills issued was RMB 26243.12 million. (X) Risk Management of Credits Granted to Group Clients We strictly implement 7 Clients> in areas of identifying group clients, credit risk management, information management and risk warning. We established 8 products. (4) Implementing Unified Credit System The Bank has implemented Unified Credit System since February 2013, and realized the unified credit management of group clients and single corporate clients. (5) Regulating interbank credit management The Bank has appointed management department and set up the post for the review and approval of inter credit. It has regulated the process of application, review and approval. The Bank has started to develop interbank credit management system. (6) Regulating investment banking management. The Bank has developed ‘Administrative Measures of Qilu Bank Assets Business of Non-standardized Creditor's right’ to promote the development of investment banking. (7) Strengthening Post-loan Management The Bank has continued to strengthen the early-warning management by The Enterprise Risk Management System (ERMS) and formed the mechanism of regular treatment and monitoring. The Bank has enhanced the supervision and inspection work, such as investigating the risk of steel trade and catering industry, large credit business. The Bank has strengthened on-site inspection of large credit customer and severe risk customer. (8) Strengthening the credit rating management. The Bank has adjusted the rating system of credit risk rating from 9 levels to 15 levels, to improve the rating accuracy and the quality of basic data. (9) Improving the management of related transactions. The Bank has completed the system of related transaction management. The Bank has regulated the review and approval process of significant related transactions. ii. Operation Risk Management (1) Completing the reconstruction of collateral management system The Bank has completed the establishment of the collateral management system and transferring work of the stored collateral data. The Bank has established a comprehensive, accurate and standardized collateral database, to effectively prevent different kinds of operational risk like false account. (2) Promoting the work on centralized loan review The Bank has realized the centralized loan review of all credit business recovering all branches. The Bank has continuously optimized and regulated the process of bank acceptance bill to improve processing efficiency. (3) Improving the Files Management 9 The Bank has amended credit files management measures, gradually implemented centralized management of credit files. (4) Establishing and enhancing basic management system of operation line The Bank had completed the framework construction of operations management from branch (sub-branch) to headquarters, and improved the supervision and inspection system of operational risk, including combing operational risks, perfecting early-warning rules and adjusting the supervision standard etc. (5) Strengthening the E-banking Risk Management The Bank has taken measures to guarantee the customer’s transaction security by strengthening the group fund management, certification and authorization management. The Bank has used risk early-warning and anti-fraud system to identify and handle the risk information. The Bank has implemented self-service devices transformation and carried out special inspections of E-banking business. iii. Market Risk Management (1) Managing market risk limit. The Bank has determined and strictly implemented all kinds of market risk limits, and carried out risk early-warning management. (2) Enhancing supervision of middle office staff The Bank has daily monitored market risk index, accounts profit and loss, all kinds of risk limit used, and supervised price rationality and business license compliance. The Bank has brought the foreign exchange business and rediscount business into the middle range of monitoring. (3) Strengthening the risk management of financial business According to the financial services regulations, the Bank has strengthened supervision of financial business operation mode. The Bank has improved the financial business risk rating system. (4) Intensifying the market risk management measures. The Bank has established exception reporting system, established the table financial market system permissions, and periodically checked related system operation log. ⅳ. Liquidity Risk Management (1) Improving the liquidity risk management system. The Bank has made ‘limit management pilot program of cash flow and maturity mismatch’, ‘Qilu bank liquidity risk emergency management measures’. (2) Executing regular stress testing work The Bank has closely monitored liquidity gap and systemic risk of the open market liquidity, and completed the reports of the liquidity risk management and liquidity stress test on time. (3) Actively responding to liquidity risk 10 In 2013, the Bank has maintained the stable liquidity by risk early-warning and rediscount, re-lending and other measures. ⅴ. Compliance Risk Management (1) Authorization management According to the business requirements, the Bank has timely adjusted the annual authorization. The Bank has made "the examination and approval procedures for special authorization", to standardize special authorization process. The bank has strengthened the daily management of authorization. (2) Strengthening the construction of internal control system The Bank has issued the ‘Qilu Bank outline of the internal control management(Provisional)’, revised ‘compliance checking implementation details’, revised compliance inspection process; formulated ‘2013 annual branch business compliance and management assessment methods’, ‘internal rectification work management approach’etc. (3) Regulating non-credit case management. The Bank has revised ‘the management approach of non-credit classes litigation, arbitration’ to regulate the litigation, arbitration management. ⅵ. Information Technology Risk Management (1) Improving the management system of information technology risk The Bank has improved information technology risk map, key risk indicators, assessed and monitored risks, and issued assessment report and monitoring report. (2) The Bank has developed the information technology development plan, and completed the construction of Zhangqiu disaster recovery center, and formulated ‘information technology outsourcing risk management policy’ to improve the risk management mechanism of outsourcing, and construct data desensitization system. (3) Strengthening the security and risk protection of E-banking The Bank has implemented on-site assessment of information security of portal website, online banking system, the core business system with professional agencies, and carried out the permeability test of internet. ⅶ. Reputational Risk Management According to the management system of reputation risk, the Bank has enhanced the reputation risk management, to actively fulfill the social responsibilities, and earnestly safeguard the lawful rights and interests of consumers. The relevant public opinion is stable, and the Bank's reputation and image has been continuously improved. (XII) Main Policy Measures and Results of NPLs Management During the reporting period, the Bank has continued to perfect the system of the disposal of NPLs, and 11 continuously improved standardization level of NPLs management, and paid attention to risk control of the loans with problems and hidden dangers to control NPLs growth. The Bank has strengthened the scheduling of non-performing assets management to promote the disposal of NPLs. The Bank has continued to enhance the cooperation with the judicial organs at all levels, to make greater efforts to the litigation and collection of NPLs. During the reporting period, the Bank has disposed the NPLs of 350.73 million Yuan in total, and declined the balance and proportion of NPLs. (XIII) Constituents and Management of Capital i. The calculation scope of capital adequacy ratio includes QiLu Bank and the financial institutions invested by QLB directly or indirectly according to ‘The Capital Management of Commercial Bank’ which was put into trial use by CBRC in the beginning of 2013. ii. Results of Capital Adequacy Ratio Measurement The following two tables disclose measurement results of capital adequacy ratio in two calibers set by CBRC in different regulation phase. (1) According to ‘Measures for the Management of Capital Adequacy Ratio of Commercial Bank’ which was put into effect by CBRC in 2004 and was amended in 2007 (Group) Unit (RMB thousand) Closing Opening Changes for Item balance balance the Period Core Capital 6,001,389 5,327,326 674,063 Core Capital Deductions 457,776 340,291 117,485 Net Core Capital 5,543,613 4,987,035 556,578 Supplementary Capital 1,235,468 1,171,213 64,255 Measurable Value of Supplementary Capital 1,235,468 1,171,213 64,255 Deductions 915,552 680,582 234,970 Net Capital 6,321,305 5,817,957 503,348 Risk Weighted Assets 52,785,083 44,511,498 8,273,585 Of which: On-balance sheet items 41,486,056 35,269,867 6,216,189 Off-balance sheet items 11,299,027 9,241,631 2,057,396 Capital Adequacy Ratio (%) 11.98 13.07 -1.09 Core Capital Adequacy Ratio (%) 10.50 11.20 -0.70 (2) According to ‘The Capital Management of Commercial Bank’ which was put into trial use by CBRC in the beginning of 2013 (Group) 12 Item Closing balance Net Capital 6,907,326 Core Tier One Capital 5,999,293 Core Tier One Capital Deductions 398,048 Net Core Tier One Capital 5,601,245 Other Tier One Capital 296 Other Tier One Capital Deductions 0 Net Tier One Capital 5,601,541 Tier II Capital 1,305,785 Tier II Capital Deductions 0 Credit Risk Weighted Assets 54,586,388 Market Risk Weighted Assets 116,580 Operational Risk Weighted Assets 4,630,234 Risk Weighted Assets 59,333,202 Core Tier One Capital Adequacy Ratio 9.44 Tier One Capital Adequacy Ratio 9.44 Capital Adequacy Ratio 11.64 Note: ‘The Capital Management of Commercial Bank’ which was put into trial use by CBRC in the beginning of 2013 and therefore no beginning period data is available. iii. Measurement of Risk Weighted Assets The risk weighted assets of our banks are measured according to ‘The Capital Management of Commercial Bank’. The credit risk weighted assets are measured by weight method of which each asset is assumed a regulatory risk weight. The market risk weighted assets are measured by standard method and the operational risk weighted assets are measured by basic indicator method. The measurement results are listed in the preceding tables. IV. Introduction of Implementing the New Capital Management Method Originated by CBRC in 2013 During the reporting period, according to the arrangement and requirements of CBRC and its Shandong branch, our bank draft ‘Implementation scheme of new capital management method of QLB’ , of which we set down our bank’s institution constituents, duties assumptions and other concrete arrangement, and appointed related department to calculate, monitor and analyze capital adequacy ratio regularly. We also lay down the three year capital management plan from 2013 to 2015 and set out to investigate the related policy of capital management. A timetable for measurement of credit risk was set down by related 13 departments and an ICCAP was carried out for the first time according to requirements of new capital management method. In order to cultivate and add experts in the capital management field, we held several training classes related to the new capital management method during the reporting period. 14 IV. Changes of Shareholding and Related-party Transactions (I) Changes of Shareholding Unit (shares) Changes for the Nature of the Share Before Change period (Increase+, After Change Decrease-) Shares Held by State 557,500,000 +313,957 557,813,957 Shares Held by Domestic Legal Entities 1,199,815,405 -313,957 1,199,501,448 Shares Held by Foreign Entities 473,750,000 0 473,750,000 Shares Held by Natural Persons 137,684,595 0 137,684,595 Total 2,368,750,000 0 2,368,750,000 (II) Information of Shareholders i. The Top 10 Shareholders and their Shareholdings as at the End of the Reporting Period Commonwealth Bank of Australia held 473.75 million shares which accounted for 20% of the total shares；Jinan State-owned Assets Operation Co., Ltd. held 422.50 million shares (17.84%); Jigang Group Co., Ltd. held 117 million shares (4.94%); Jinan City Economic Development Investment Co., Ltd. held 115.313957 million shares (4.87%); Shandong Jianbang Investment Management Co., Ltd. held 106 million shares (4.47%); Rizhao Steel Holding Group Co., Ltd. held 100 million shares (4.22%); Shandong Tri-cel Estates Co., Ltd. held 99 million shares (4.18%); China National Heavy Duty Truck Group Co., Ltd. held 70.50 million shares (2.98%); Zhongrun Futai Investment Co., Ltd. held 45 million shares (1.90%) and Huasheng Jiangquan Group Co., Ltd. held 40 million shares (1.69%). ii. Transfer of Shares by the Top 10 Shareholders During the reporting period, 45 million shares held by Jin’an Investment Co., Ltd. were transferred to Zhongrun Futai Investment Co., Ltd. and the transfer was completed within the reporting period. 313957 shares held by Jinan Fuquan Real Estate Co., Ltd. Were awared by Jinan Lixia People’s Court to Jinan City Economic Development Investment Co., Ltd. and the transfer was completed within the reporting period. (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: 154.50 million shares held by Jinan State-owned Assets Operation Co., Ltd., 105.50 million shares held by Jinan City Economic Development Investment Co., Ltd., 95.4 million shares held by Shandong Jianbang Investment Management Co., Ltd., 89 million shares held by Shandong Tri-cel Estates Co., Ltd., 36 million shares held by Huasheng Jiangquan Group Co., Ltd., totaling 480.4 million shares. At the end of the reporting period, no shares of the top 10 shareholders of the bank were frozen. 15 (IV) Significant Related-party Transactions ignificant Related-party Transactions Related Risk Amount Shareholders Name of Borrower Business type Exposu of credit re Shandong Luye Ruibao Electric Banker’Acceptance bill 16,003.9 14,873.9 Automation Co., Ltd. Jigang Group Heavy Machinery Banker’Acceptance bill 4,000 4,000 Co.,Ltd Banker’Acceptance Shandong Ductile Iron Pipes Co., LTD 11,236.7 7,000 Jigang Group bill、letter of guarantee Co.,Ltd Group co., LTD., Jinan Steel Banker’Acceptance bill 65,350 45,745 Supermarket Jinan Iron and Steel Co., LTD., Loan 185,000 185,000 Shandong Branch Jinan International Engineering & Banker’Acceptance bill 16,300 9,780 Technology Co.,Ltd Shandong Kaiwen Technology Loan 80,000 80,000 Vocational College Shandong Tri-cel Technology Loan 60,000 60,000 Development Company Jinan Qisheng Digital Technology Tri-cel Real Loan 150,000 150,000 Estate Group Co.,Ltd. Co., LTD Shandong Kevin Info Tech Co.,Ltd. Loan 148,000 148,000 Shandong Rong Bao Zhai cultural Loan、letter of 156,492 150,000 investment industry co. , ltd. guarantee Shandong Tri-cel Estates Co.,Ltd. Banker’Acceptance bill 175,000 0 Shandong Honglu metal materials Loan 17,900 17,900 Co.,Ltd Shandong Yongdao Investment Loan 24,000 24,000 Co.,Ltd. Jinan Runan Construction Co.,Ltd Loan 19,000 19,000 Shandong Jianbang Investment Banker’Acceptance bill 108,000 54,000 Shandong management Co.,Ltd. Jianbang Shandong Ruide Economic Loan 75,000 75,000 Investment Development Co.,Ltd. management Jinan Tuojian Trade Co.,Ltd Loan 28,000 28,000 Co.,Ltd. Jinnan Bituo Trade Co.,Ltd. Banker’Acceptance bill 155,000 79,500 handong Forster Trade Co.,Ltd Loan 80,000 80,000 Shandong Taicun Trade Co.,Ltd Loan 28,000 28,000 Shandong Puhua Trade Co.,Ltd Loan 47,000 47,000 Rizhao Steel usance letter of 217,506. 195,755. Holding Group Rizhao Steel Holding Group co., LTD credit 66 99 co., LTD (V) NPLs of Shareholders and Affiliated Companies As of the end of 2013, the non-performing loans of Bank’s shareholders and its affiliated companies 16 were as follows: ⅰ. Jinan city Licheng District Comprehensive Development Corporation of Urban Construction holds 1,896,654 shares, which accounts for 0.08%. As at the end of 2013, the company’s loan balance (principal) was RMB35.07 million that the principal is expired, and debt interest is RMB 6,133,247.27. The loan was classified as substandard loan, and it has been on litigation. ⅱ. The Yellow River Auto-Parts Factory of Shandong Kuangshan Holding Company holds 204,471 shares, which accounts for 0.0086%. As at the end of 2013, the company’s loan balance (principal) was RMB670 thousand with no overdue interest and the loan was classified as substandard loan, and it is not on litigation up to the end of reporting period. ⅲ. Jinan city Huaiyin District Aluminum Paste Factory holds 127,794 shares, which accounts for 0.0054%. As at the end of 2013, the company’s loan balance (principal) was RMB170 thousand with no overdue interest and the loan was classified as substandard loan, and it is not on litigation up to the end of reporting period. 17 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, the Bank continued to improve the effectiveness of its corporate governance structure and strengthened the Bank’s corporate governance mechanism. i. Shareholders and Shareholders’ Meeting During the reporting period, the Bank held the 2012 Annual Shareholders’ Meeting and 2013 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 5 Independent Directors, 4 Executive Directors and 4 Shareholder Directors. The number and composition of directors of the Board of Directors met the requirements of the related laws and regulations. During the reporting period, the Board of Directors held 13 meetings and listened to the reporting on operations and risk management regularly and resolved the major operational management issues timely. 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, and the Chairpersonships of Related-party Transactions Control and Risk Management Committee, Nomination and Remuneration Committee, 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, actively provided constructive suggestions to the Board of Directors. iii. Supervisors, Board of Supervisors and its Specialized Committees The Board of Supervisors consisted of 9 members, of which there were 3 External Supervisors, 3 Employee Supervisors and 3 Shareholder Supervisors. The number and composition of directors of the Board of Supervisors met the requirements of the related laws and regulations. During the reporting period, the Board of Supervisors held 6 meetings. All supervisors remained highly responsible for the shareholders, diligently fulfilled their various supervisory duties and protected the legitimate interests of the shareholders and the relevant stakeholders effectively. Nomination Committee, Risk Monitoring Committee and 18 Financial Monitoring Committee were set up under the Board of Supervisors, and the Chairpersonships of the 3 specialized committees were all assumed by External Supervisors. During the reporting period, the 3 specialized committees, in accordance with their own working rules, carried out their work conscientiously and provided the Board of Supervisors with good service to enable 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, 1 Executive Vice President, 5 Vice Presidents and 1 Chief Information Officer. Under the Executive Management, there were committees including the Assets and Liabilities Management Committee (ALCO), Credit Approval Committee, Risk Management Executive Committee, Innovation Committee, Sales and Marketing Steering Committee, Service Committee, Management Refinement Steering Committee and Financial Review Committee. During the reporting period, the Executive Management conscientiously carried out the resolutions of the Board of Directors, executed the budget for the year and completed the operational assignments for the year. v. Information Disclosure and Investor Relationship Management During the reporting period, the Bank published the summarized 2012 Annual Report in Financial News and released the summarized 2010, 2011, 2012 Annual Report, both in English and Chinese, on the Bank’s official website (http://www.qlbchina.com). Meanwhile, the Bank released the 2010, 2011, 2012 Annual Report on www.chinamoney.com and www.chinabond.com. Furthermore, the printed copies of 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 kept on contacting with investors through the external website, investors’ mailbox, telephone and face to face inquiries, supplying service for investor. (II) The Organizational Structure of the Bank and its Branches ⅰ. The Organizational Structure of the Bank 19 Corporate Banking Dept. Related Party Transactions Control and Risk Small Enterprises Banking Dept. Management Committee Nomination and Remuneration Committee Retail Banking Dept. Audit Committee Financail Market Dept. Internal Audit Dept. Strategy Committee International Banking Dept. Electronic Banking Dept. Board of Directors’ Office Risk Management Dept. Executive Management Credit Approval Dept. Board of Directors Board of Directors Compliance Dept. Discipline Inspection Office Shareholders’ Meeting Operations Dept. IT Dept. Human Resources Dept. Fi Committee Credit Approval Management Refinement Management M Planning & Finance Dept. nanc Innovation Executive Committee Assets and Liabilities a S Board of Supervisors Board of Supervisors Steerin Steerin n S Risk Management ales and Marketing age ervice i a General Office l R m g g ev e Committee Committee nt C i C ew ommittee Administration & Security Dept. Co ommittee C mmitt omm Party & Union Office ee itt ee Liaocheng Branch( 6 sub-branches) Tianjin Branch ( 5sub-branch) Nomination Committee Risk Monitoring Committee Qingdao Branch (3 sub-branch) Financial Monitoring Committee Beiyuan Sub-Branch(8 sub-branches) Board of Supervisors’ Office DuandianSub-Branch(7 sub-branches) DonghuanSub-Branch(5 sub-branches) GanshiqiaoSub-Branch(6 sub-branches) 20 Gaoxin Sub-Branch (5 sub-branches) Huayuan Sub-Branch (5 sub-branches) Jianshelu Sub-Branch (6 sub-branches) LishandongluSub-Branch(5 sub-branches) QianfoshanSub-Branch(7 sub-branches) Straight Sub-Branch ( 6 sub-branches) ⅱ. Branches and Sub-branches of the Bank are as follows: The Bank presently has 86 branches, including 3 branches and 83 sub-branches. The branches consisted of Liaocheng Branch, Tianjin Branch and Qingdao Branch, under which 14 sub-branches were established. There were 69 sub-branches in Jinan, 9 of which are directly managed by the Head Office and banking Dept. No. Name Address 1 Head Office No.176 Shunhe Street, Shizhong District, Jinan South-west corner of the crossroad of Dongchang Road and Weiyu 2 Liaocheng Branch Road, Liaocheng , Shandong Province 3 Liaocheng Chiping Sub-Branch No.115 Yudong Road, Chiping County, Shandong Province No.511 Guandao Street, Huashengyuan Community, Gaotang 4 Liaocheng Gaotang Sub-Branch Country, Liaocheng , Shandong Province No.54,Dongchang Road, Liaocheng Economic &Technological 5 Liaocheng Kaifaqu Sub-Branch Development Area, Liaocheng 6 Liaocheng Linqing Sub-Branch No.2009 Gulou East Street, Linqing , Shandong Province 7 Liaocheng Yanggu Sub-branch No. 145 Gushan Road, Yanggu County, Shandong Province 8 Liaocheng Shenxian Sub-branch No.98 Shenting Road,Shen County，ShandongProvince 9 Tianjin Branch No.37&39 Youyibei Road, Hexi Distinct, Tianjin 2175,2176,1193 and 1194 Room,No.1 & 2 & 3 Building, 10 Tianjin Beichen Sub-Branch Changying Commercial Plaza, northwest corner of the crossroad of Jingjin Road and Longzhou Road, Beichen District,Tianjin 101,201,301 Room，Unit 5, No.1 Building, 101,201,301 Room, 11 Tianjin Huayuan Sub-Branch Unit 6, No.1 Building, Caizi Community, Western part of the North of Yashi Road, Nankai District ,Tianjin No.3 and 4,Ground Floor, Binheyanyuan 4,north of Jingu Road 12 Tianjin Jinnan Sub-Branch and west of Xianshuigu Yueya River,Jinnan District ,Tianjin 1st and 2nd floor,Hailan Building,west of Lianmeng Road and 13 Tianjin Jinghai Sub-Branch north of Jingwen Road,Jinghai Town,Jinghai County, Tianjin 104A, 204 Room, No.39 east of 3rd Avenue, Binhai New 14 Tianjin Kaifaqu Sub-Branch District, Economic & Technological Development Zone, Tianjin 1st and 3rd Floor,Crowne Plaza, No.76 Xianggang Zhong 15 Qingdao Branch Road,Shinan District, Qingdao Qingdao Jinjijishukaifa No.443 Changjiangdong Road, Economic and Technological 16 Sub-Branch Development Zone,Qingdao 17 Qingdao Jimo Sub-Branch No.1115,1117 Lan'ao Road,Jimo District, Qingdao 18 Qingdao Laixi Sub-Branch No.12,Chongqing Middle Road，Laixi District，Qingdao 21 19 Jinan Gaoxin Sub-Branch No.746 Xinyu Road, High-tech Development Zone, Jinan 20 Jinan Dianchang Sub-Branch No.164 Gongyebei Road, Licheng District, Jinan West Front of Qingnian Street, Jigang New Village, Licheng 21 Jinan Jigang Sub-Branch District, Jinan Zone B-C, 1st floor, Area B Yike Production Base, the Crossroad 22 Jinan Jingshidonglu Sub-Branch of Jingshidong Road and Shunhua Road, Gaoxin District, Jinan 108&109&110 Room,Unit 1, No. 38 Building, 23 Jinan Shunhuabei Sub-Branch Xinshenghuojiayuan Community, west of Xinyubei Road,Gaoxin District, Jinan 24 Jinan Jiefangdonglu Sub-Branch No.27 Jiefangdong Road,Lixia District,Jinan 25 Jinan Duandian Sub-Branch No. 28366 Jingshi Road, Huaiyin District, Jinan 26 Jinan Chengxi Sub-Branch No.190 Zhangzhuang Road, Huaiyin District, Jinan 27 Jinan Huaiyin Sub-Branch No.573 Jingqi Road, Huaiyin District, Jinan 28 Jinan Jingqilu Sub-Branch No.425 Jingshi Road, Huaiyin District, Jinan 29 Jinan Keji Sub-Branch No.555 Jingsi Road, Huaiyin District, Jinan Jinan Minyingkejiyuan 30 No. 2666 Erhuandong Road, Huaiyin District, Jinan Sub-Branch 31 Jinan Xishichang Sub-Branch No.575 Jinger Road, Huaiyin District, Jinan 32 Jinan Zhangzhuang Sub-Branch No.191 Zhangzhuang Road, Huaiyin District , Jinan No.3966 Donghuan International Square, Erhuandong Road, 33 Jinan Donghuan Sub-Branch Licheng District, Jinan 34 Jinan Chengdong Sub-Branch Unit 1, No.6 Huaxin Road, Licheng District, Jinan 35 Jinan Daqiaolu Sub-Branch No.78 Daqiao Road, Licheng District, Jinan 36 Jinan Gongyebeilu Sub-Branch No.303 Gongyebei Road, Licheng District, Jinan 37 Jinan Honglou Sub-Branch Unit 1, No.1 Honglounan Road, Licheng District, Jinan 38 Jinan Licheng Sub-Branch No.41 Honglouxi Road, Licheng District, Jinan 39 Jinan Qianfoshan Sub-Branch No.2 Yanzishanxi Road , Lixia District, Jinan ZhongRunShijiCheng ,No.13777 Jingshi Road, Lixia District, 40 Jinan Erhuandonglu Sub-Branch Jinan 1st floor and 2nd floor, Block B, Sanqing Fengrun Building, 41 Jinan Gongyenanlu Sub-Branch No.100 Gongyenan Road, Lixia District, Jinan 42 Jinan Kaiyuan Branch No.55 Huanshan Road, Lixia District, Jinan 43 Jinan Luoyuandajie Sub-Branch No.61 Luoyuan Avenue, Lixia District, Jinan 44 Jinan Shandalu Sub-Branch No.185 Shanda Road, Lixia District, Jinan 45 Jinan Wendong Sub-Branch Unit 2, No.242 Shanda Road, Lixia District, Jinan 46 Jinan Yanshan Sub-Branch Dashuntianchengshangdu, No.5 Jiefang Road, Lixia District, Jinan 47 Jinan Huayuan Sub-Branch No.59 Lishan Road, Lixia District, Jinan 48 Jinan Daminghu Sub-Branch No.1 Baobei Road, Lixia District, Jinan 49 Jinan Lishanbeilu Sub-Branch No.4 Lishanbei Road, Tianqiao District, Jinan 22 106 Room , Block C2, Lishanmingjun, No.173 Lishan Road, Lixia 50 Jinan Lixia Sub-Branch District, Jinan 51 Jinan Liuhang Sub-Branch No.226 Beiyuan Avenue, Tianqiao District, Jinan Jinan Minghudonglu 52 No.12 Minghudong Road ,Lixia District, Jinan Sub-Branch 53 Jinan Lishandonglu Sub-Branch No.112 Jiefang Road, Lixia District, Jinan 54 Jinan Beitan Sub-Branch No.15 Yingxian Street, Tianqiao District, Jinan 55 Jinan Chaoshanjie Sub-Branch No.59 Chaoshan Street, Lixia District, Jinan 56 Jinan Jiefanglu Sub-Branch No. 159 Jiefang Road, Lixia District, Jinan 57 Jinan Shunjing Sub-Branch No.59 Heihuquanxi Road, Lixia District, Jinan 58 Jinan Wenxi Sub-Branch No.3 Qianfoshan Road, Lixia District, Jinan 59 Jinan Ganshiqiao Sub-Branch No.87 Jingqi Road, Shizhong District, Jinan No.14 Building, No.227 Jingqiweiyi Road, Shizhong District, 60 Jinan Jingqiweier Sub-Branch Jinan Jinan Minshengdajie 61 No.74 Minsheng Avenue, Shizhong District, Jinan Sub-Branch 62 Jinan Shizhong Sub-Branch No.131 Jinger Road, Shizhong District, Jinan Jinan Yingxiongshan 63 Unit 12,No.58 Ma'anshan Road, Shizhong District, Jinan Sub-Branch No.3 Store , Weidongxindu Community, No.57 Shungeng Road, 64 Jinan Shunnan Sub-Branch Shizhong District, Jinan 65 Jinan Wanzixiang Sub-Branch No. 333 Jinger Road, Huaiyin District, Jinan 66 Jinan Jianshelu Sub-Branch No.1 Liuchangshan Road, Shizhong District, Jinan 67 Jinan Chengnan Sub-Branch No.222&223&224, Yingxiongshan Road, Shizhong District, Jinan 68 Jinan Guangming Sub-Branch No.53 Yingxiongshan Road, Shizhong District, Jinan 69 Jinan Nanjiao Sub-Branch No.306 Yingxiongshan Road, Shizhong District, Jinan 70 Jinan Shuanglong Sub-Branch Middle Section of Nanwaihuan Road, Shizhong District, Jinan Jinan Wangguanzhuang 71 Unit 9, No.73 Jiwei Road, Shizhong District, Jinan Sub-Branch Jinan Yangguangxinlu 72 No.19 Yangguangxin Road, Huaiyin District, Jinan Sub-Branch 73 Jinan Beiyuan Sub-Branch No.548 Beiyuan Avenue ,Tianqiao District, Jinan 74 Jinan Jinniu Sub-Branch No.153 Wuyingshanzhong Road, Tianqiao District, Jinan No.1 Building ,Zone 2 Shidaizongbujidi, No.15 Lanxiang Road, 75 Jinan Lanxianglu Sub-Branch Tianqiao District, Jinan 76 Jinan Luokou Sub-Branch Unit 1,No.87 Jiluo Road,Tianqiao District, Jinan 77 Jinan Qinghe Sub-Branch No.483 Beiyuan Avenue, Tianqiao District, Jinan 78 Jinan Tianqiao Sub-Branch Unit 1, No.38 Wuyingshandong Road, Tianqiao District, Jinan 79 Jinan Wuyingshan Sub-Branch No.15 Shifan Road, Tianqiao District, Jinan 80 Jinan Wuyingtan Sub-Branch No.50 Wuyingshanzhong Road, Tianqiao District, Jinan 23 Jinan New Material Industry No.1 Yuxing Road,the National Raod 308,Sangxindian 81 Park Sub-Branch County,Tianqiao District,Jinan 82 Jinan Quancheng Sub-Branch No.176 , Shunhe Street ,Shizhong District,Jinan 83 Jinan Pingyin Sub-Branch Unit 2,No.23 Fuqian Street, Pingyin County, Jinan 84 Jinan Shanghe Sub-Branch No.1 Minghui Road,Shanghe County, Jinan 85 Jinan Changqing Sub-Branch No.999 Bingu Street, Changqing Distinct, Jinan 86 Jinan Jiyang Sub-Branch No.180 Kaiyuan Street, Jiyang County, Jinan 87 Jinan Zhangqiu Sub-Branch No.76 Huiquan Road, Zhangqiu (III) Status of Directors, Supervisors, Senior Executives and Employees during the Reporting Period i. Profile of Directors, Supervisors and Senior Executives Shareholding Remunerate Position Name Gender Age Company and Position （No. of d or Not Shares） Party Secretary and Wang Chairperson (Directors) Female 53 Chairperson of Board of Yes 0 Xiaochun Directors of Qilu Bank Huang President and Vice Party Vice Chairperson (Directors) Male 50 Yes 0 Jiadong Secretary of Qilu Bank Hu Vice Party Secretary of Executive Director Male 56 Yes 0 Xiaomeng Qilu Bank Vice President & Mao Executive Director Male 48 Secretary of Board of Yes 138,919 Fangzhu Directors of Qilu Bank Professor of Accounting Department of School of Independent Director Chen Xiao Male 50 Economics and Yes 0 Management of Tsinghua University Professor of Guanghua Zhang Independent Director Male 47 School of Management of Yes 0 Yichi Peking University Chairperson of Board of Lu Directors of Shenzhen Independent Director Male 58 No 0 Zhongnan New Industry Venture Capital Limited Company Dean of the Center of Huang Shareholder Director Male 51 Economic Research No 0 Shaoan Shandong University Audit Department Senior specialist of Shandong Shareholder Director Li Wuling Female 63 Branch of China No 0 Construction Bank (Retired) Director of Jinan government investment Shareholder Director Wang Yi Male 51 No 0 and financing anagement office 24 Michael Senior asia advisor of Shareholder Director Charles Male 43 Commonwealth Bank of No 0 Blomfield Australia Chairperson of Board of Bi Shareholder Director Male 57 Directors of Jigang Yes Zhichao GroupCo., Ltd. Chairperson of Board of Directors of Shandong Shareholder Director Chen Jian Male 52 Yes 0 Jianbang Investment Management Co., Ltd. Wang Chairperson of Board of Chairperson (Supervisors) Male 56 Yes 0 Jianjun Supervisors of Qilu Bank Chief Audit Officer of Qilu Bank & Chairperson Zhang Employee Supervisor Female 52 of Board of Directors of Yes 50,000 Haiyan Zhangqiu Qilu Village Bank General Mananger of Employee Supervisor Liu Xia Female 44 legal & compliance dept Yes 90,000 of Qilu Bank Chairperson of Board of Shao Directors of China Gold External Supervisor Male 61 No 0 Changnian Coin Incorporation (Retired) Executive Vice Dean of School of Finance of Shandong University of Zhang External Supervisor Male 50 Finance and Economics Yes 0 Zhiyuan & Dean of Shandong Regional Economic Research Institute Professor of school of Economics of Central External Supervisor Li Tao Male 36 No 0 University of Finance and Economics General manager of Capital operations Hu Shareholder Supervisor Male 40 Department of Rizhao No 0 Wenming Steel Holding Group Co., Ltd. President of Shandong Wu Shareholder Supervisor Male 50 Tri-cel Estates Group Yes 0 Lichun Co., Ltd. General Manager of Shareholder Supervisor Li Mingji Male 48 Zhongrun Resources Yes 0 Investment Corporation Zhao Executive Vice President Executive Vice President Male 52 Yes 164,107 Xuejin of Qilu Bank Secretary of Disciplinary Secretary of Disciplinary Zhang Inspection Committee & Inspection Committee & Male 48 Yes 286,359 Changping Chairman of the Trade Chairman of the Labor Union Union Chai Vice Presidet of Qilu Vice President Male 51 Yes 70,000 Chuanzao Bank 25 Xu Vice President of Qilu Vice President Male 43 Yes 0 Yedong Bank Vice President of Qilu Vice President Zhanghua Male 47 Yes 150,000 Bank Vice President of Qilu Vice President Cui Xiang Female 51 Yes 249,000 Bank Zhang Chief Information Officer Chief Information Officer Male 54 Yes 50,000 Diandong of Qilu Bank Note: 1. The part of ‘Changes of Directors, Supervisors and Senior Executives During the Reporting Period’ is in the ‘(Ⅴ) Changes of Directors, Supervisors and Senior Executives During the Reporting Period’. 2. Huang Jiadong’s qualification of Vice Chairperson , Mao Fangzhu’s qualification of Vice President, Zhang Hua’s qualification of Vice President, Cui Xiang’s qualification of Vice President were applied to the regulator for approval and has not yet been approved by the end of the reporting period. ii. Areas of Responsibilities of Executive Management Year of Position Name Areas of Responsibilities Experience Responsible for the Bank's overall executive management, assist in the management of Cadres＆ Personnel work, In charge of the Discipline President Huang Jiadong 32 Inspection, Corporate Banking Dept. and General Office. Take an alternative management role in the Banking Operation business for Executive Vice President Zhao Xuejin. Assist in the strategic transformation. In Charge of Retail Banking Dept., Electronic Banking Dept. and Executive Vice the leader office of Community Bank Transformation. Zhao Xuejin 32 President Take an alternative management role in the management of Small Enterprises Banking business for Vice President Xu Yedong. In charge of Inrenational Business and Administration Vice President Chai Chuanzao 28 and Security Dept. In charge of Planning ＆ Finance Dept., assume the secretary of the Board of Directors (concurrent). Play the part of A and B in the Planning ＆ Finance Vice President Mao Fangzhu 28 business. Take an alternative management role in the Planning ＆ Finance business for Vice President Cui Xiang. Vice President Xu Yedong 23 In charge of Small Enterprises Banking Dept. In charge of Risk Management Dept., Credit VicePresident Zhang Hua 28 Approval Dept.and Compliance Dept, assume the director of Credit Approval Committee. In charge of Financial Market Dept. and Operations Dept.. Play the part of A and B in the Operations Vice President Cui Xiang 35 business. Take an alternative management role in the Operations business for Vice President Mao Fangzhu. 26 Chief Information Zhang Diandong 19 In charge of IT Dept. Officer iii. Employees Profile At the end of the reporting period, the company had 2311 employees, of which, 349 employees with master's degree (15.10%), 1641 employees with bachelor’s degree (71%), 261 employees with junior college degree (11.29%), 60 employees below secondary and vocational qualifications(2.59%). There were 561 employees with middle and senior professional technical qualifications (24.28%) and 665 employees with junior professional technical qualifications (28.78%). (Ⅳ ) The Remuneration of Directors, Supervisors and Senior Executives To meet the needs of competition, the Bank established a ‘give priority to efficiency, giving consideration to fairness’ pay system which are combined with fixed salary, variable salary and welfare benefits. On the basis of considerating fairness, in order to outstanding performance oriented, the bank has taken more efforts to increase the salaries of the frontline staff and the operational staff. During the reporting period, a total of 16 persons (including directors (except Independent Directors，Shareholder Directors), supervisors (except External Supervisors，Shareholder Supervisors) and senior executives, were remunerated by the Bank (including the former Vice Party Secretary Wang Hongye, the former Secretary of Disciplinary Inspection Committee Li Yingchun), and the amount of remunerations (after tax) paid for the reporting period was RMB9.93 million. The actual allowances (after tax) received by the Independent Directors (4 people) were RMB752.4 thousand. The actual allowances (after tax) received by the Shareholder Directors (3 people) were RMB50 thousand. The actual allowances (after tax) received by the External Supervisors (3 people) were RMB220 thousand. The actual allowances (after tax) received by the Shareholder Supervisors (2 people) were RMB33thousand. (Ⅴ) Changes of Directors, Supervisors and Senior Executives During the Reporting Period i. On 17 January 2013, Shareholder Director Zhang Liang resigned from the board. ii. During the reporting period, the Board of Directors and the Board of Supervisors were re-elected. The 2013 First Interim Shareholders’ Meeting which was held on 26 December 2013 elected Wang Xiaochun, Hu Xiaomeng, Huang Jiadong, Mao Fangzhu, Chen Xiao, Zhang Yichi, Huang Shaoan, Lu Zhongnan, Li Wuling, Wang Yi, Michael Charles Blomfield, Bi Zhichao, Chen Jian as Directors of the 6th Board of Directors, in which Wang Xiaochun, Hu Xiaomeng, Huang Jiadong, Mao Fangzhu are Executive Directors, Chen Xiao, Zhang Yichi, Huang Shaoan, Lu Zhongnan, Li Wuling are Independent Directors, Wang Yi, Michael Charles Blomfield, Bi Zhichao, Chen Jian are Shareholder Directors. The 2013 First Interim Shareholders’ Meeting elected Zhang Zhiyuan, Shao Changnian, Li Tao, Hu Wenming, Wu Lichun, Li Mingji as Supervisors of the 6th Board of Supervisors, in which Zhang Zhiyuan, Shao Changnian, Li 27 Tao are External Supervisors, Hu Wenming, Wu Lichun, Li Mingji are Shareholder Supervisors. The 1st meeting of the 4th Employees Congress of the Bank convened on 13 Decemeber 2013 elected Wang Jianjun, Zhang Haiyan, and Liu Xia as employee supervisor. During the reporting period, Shi Jianping, Liu Feng, Wang Xiaodong were no longer the Independent Directors of the bank, Zhao Mingkui was no longer the Shareholder Directors, Hu Jinyan, Su Yuhai were no longer the External Supervisors of the bank. iii. The 1st meeting of the 6th Board of Directors which was held on 26 December 2013 elected Wang Xiaochun as Chairperson of the 6th Board of Directors, elected Huang Jiadong as Vice Chairperson of the 6th Board of Directors, agreed to appoint Huang Jiadong as President of the Bank, agreed to appoint Zhao Xuejin as Executive Vice President of the Bank, agreed to appoint Chai Chuanzao, Mao Fangzhu, Xu Yedong, Zhang Hua, Cui Xiang as Vice Presidents of the Bank, agreed to appoint Mao Fangzhu as Secretary of the Board of Directors (concurrent), agreed to appoint Zhang Haiyan as Chief Audit Officer (CAO), agreed to appoint Zhang Diandong as Chief Information Officer (CIO). The 1st meeting of the 6th Board of Supervisors which was held on 26 December 2013 elected Wang Jianjun as Chairperson of the 6th Board of Supervisors. Ⅳ. Proposed by the president of Qilu bank, the 31th meeting of the 5th Board of Directors agreed to remove Jia Hanzhong and Zhang Zhigao from the vice president of Qilu bank. During the reporting period, Wang Hongye was no longer the Vice Party Secretary of Qilu Bank for exceeding the age requirement. Li Yingchun was no longer the Secretary of Disciplinary Inspection Committee of Qilu bank for exceeding the age requirement. Zhang Changping worked as Secretary of Disciplinary Inspection Committee of Qilu bank. (VI) Shareholders’ Meeting The 2012 Annual Shareholders’ Meeting was held on 28 March 2013 on the 3rd floor in the first conference room of Qilu Bank Building at No.176, Shunhe Street, Shizhong District, Jinan City. 54 shareholders and representatives of the shareholders attended the meeting representing 1,948,571,674 shares, 82.26% of the total shareholding. The meeting was convened by the 5th 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 2012; agreed to the work report of the Board of Supervisors for 2012; agreed to the financial statements report for 2010, 2011 and 2012; agreed to the financial budget proposal for 2013; agreed to the profit appropriation and dividend distribution proposals for 2010, 2011 and 2012. The 2013 First Interim Shareholders’ Meeting was held on 26 December 2013 on the 3rd floor in the first conference room of Qilu Bank Building at No.176, Shunhe Street, Shizhong District, Jinan City. 38 shareholders and representatives of the shareholders attended the meeting representing 2,022,841,253 28 shares, 85.40% of the total shareholding. The meeting was convened by the 5th Board of Directors of the Bank. The following resolutions were deliberated and passed by voting: elected Wang Xiaochun, Hu Xiaomeng, Huang Jiadong, Mao Fangzhu, Chen Xiao, Zhang Yichi, Huang Shaoan, Lu Zhongnan, Li Wuling, Wang Yi, Michael Charles Blomfield, Bi Zhichao, Chen Jian as the Directors of the 6th Board of Directors, in which Wang Xiaochun, Hu Xiaomeng, Huang Jiadong, Mao Fangzhu are Executive Directors of the 6th Board of Directors, Chen Xiao, Zhang Yichi, Huang Shaoan, Lu Zhongnan, Li Wuling are Independent Directors of the 6th Board of Directors, Wang Yi, Michael Charles Blomfield, Bi Zhichao, Chen Jian are Shareholder Directors of the 6th Board of Directors. The 2013 First Interim Shareholders’ Meeting elected Zhang Zhiyuan, Shao Changnian, Li Tao, Hu Wenming, Wu Lichun, Li Mingji as the Supervisors of the 6th Board of Supervisors in which Zhang Zhiyuan, Shao Changnian, Li Tao are External Supervisors of the 6th Board of Supervisors, Hu Wenming, Wu Lichun, Li Mingji are Shareholder Supervisors of the 6th Board of Supervisors. (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 The 24th meeting of the 5th Board of Directors was held on 20 February 2013 by means of telecommunication and the following resolution was passed: agreed to the proposal of Jin’an Investment Co., Ltd. transferred 45 million shares of Bank to Zhongrunfutai Investment Co.,Ltd. . The 25th meeting of the 5th Board of Directors was held on 7 March, 2013 in the conference room on the 16th floor of Qilu Bank Building at No. 176 Shunhe Street, Shizhong District, Jinan City. 11 out of 12 directors attended the meeting. The meeting was chaired by Wang Xiaochun and the following resolutions were passed: agreed to the work report of the Board of Directors for 2012 and submission of the proposal to the Shareholders’ Meeting for approval; agreed to the ‘General Policy of Operation and Management in 2013 of the Board of the Directors’; agreed to the 2012 operation work report and the business operations plan of 2013; agreed to the audit and financial statements report for the year 2010, 2011 and 2012 and submission of the proposal to the Shareholders’ Meeting for approval; agreed to the financial budget proposal for 2013 and submission of the proposal to the Shareholders’ Meeting for approval; agreed to the profit appropriation and dividend distribution proposals for 2010, 2011 and 2012 and submission of the proposal to the Shareholders’ Meeting for approval; agreed to the proposed agenda for 2012 Shareholders’ Meeting; agreed to the implementation proposal for the disclosure of 2010, 2011 and 2012 annual report; agreed to the proposal for the adjustment amount of write-off; agreed to the audit plan for year 2013. The 26th meeting of the 5th Board of Directors was held on 28 March, 2013 in the conference room on the 16th floor of Qilu Bank Building at No. 176 Shunhe Street, Shizhong District, Jinan City. 10 out of 29 12 directors attended the meeting. The meeting was chaired by Wang Xiaochun and the following resolutions were passed: agreed to the 2010, 2011 and 2012 Annual Report of Qilu Bank Co., Ltd. and its summary; agreed to the framework of capital adequacy ratio standard plan of 2013-2018, and authorized to the Chairperson to be responsible for the revision in specific and submission to CBRC; agreed to the proposal for applying the Market Risk Limit for year 2013 of Qilu Bank Co., Ltd. The 27th meeting of the 5th Board of Directors was held on 15 April 2013 by means of telecommunication and the following resolution was passed: agreed to the proposal of Related-party Transaction with Shandong Jianbang Investment Management Co., Ltd. The 28th meeting of the 5th Board of Directors was held on 17 May 2013 by means of telecommunication and the following resolution was passed: agreed to the proposal of Credits Granted Business expired and renew of Shandong Jianbang Investment Management Co., Ltd. and its Related-party enterprises. The 29th meeting of the 5th Board of Directors was held on 26 June 2013 by means of telecommunication and the following resolutions were passed: agreed to the proposal of ‘the Capital Plan 2013-2015 of Qilu Bank Co., Ltd.’ and the proposal of Shandong Fanyada Guarantee Co.,Ltd. transferred 10 million shares of Bank to Yantai Hua’an Group Co.,Ltd.. The 30th meeting of the 5th Board of Directors was held on 5 July 2013 by means of telecommunication and the following resolution was passed: agreed to the proposal of Related-party Transaction with Shandong Tri-cel Estates Co., Ltd. The 31st meeting of the 5th Board of Directors was held on 30 July 2013 in the conference room on the 16th floor of Qilu Bank Building at No. 176 Shunhe Street, Shizhong District, Jinan City. 10 out of 12 directors attended the meeting. The meeting was chaired by Wang Xiaochun and the following resolutions were passed: agreed to the proposal of dismissing the position of Jia Hanzhong, Zhang Zhigao; agreed to ‘Information Technology Development Plan 2013-2016’; agreed to ‘Key Accounting Regulations of Qilu Bank Co., Ltd.’; agreed to the ‘2013 Performance Appraisal Measures of the Senior Management of Qilu Bank Co., Ltd.’; agreed to ‘the Performance Appraisal Measures of Internal Audit Department and Board of Directors’ Office’; agreed to the proposal of the Banking Department reformation 2013; agreed to the proposal for appointing Ernst & Young Hua Ming LLP to be the auditor for the Bank’s 2013 annual report; agreed to the ‘ Supervision Measures for the passed resolution of Board of Directors and Board of Supervisors of Qilu Bank Co., Ltd. (Temporary)’. The 32nd meeting of the 5th Board of Directors was held on 12 August 2013 by means of telecommunication and the following resolution was passed: agreed to the proposal of the whole Credits Granted Business of Jigang Group Co., Ltd. and its related-party enterprises. 30 The 33rd meeting of the 5th Board of Directors was held on 25 November 2013 in the conference room on the 16th floor of Qilu Bank Building at No. 176 Shunhe Street, Shizhong District, Jinan City. 10 out of 12 directors attended the meeting. The meeting was chaired by Wang Xiaochun and the following resolutions were passed: agreed to the proposal for write-off for 2013; agreed to the proposal for write-off of the 2013 receivables; agreed to the proposal of the whole Credits Granted Business applyment of Shandong Tri-cel Estates Co., Ltd. and its related-party enterprises; agreed to revision of ‘Measures of the disclosure of Qilu Bank Co., Ltd.’; agreed to the ‘Internal Controls Management Outline of Qilu Bank Co., Ltd. (Temporary)’; agreed to the implementation proposal of replacement of the Board of Directors and Board of Supervisors; agreed to the proposal of purchasing office building of Liaocheng Branch, and authorized the Executive Management to be responsible for commiting Board of Directors’ suggestion and project implementation. The 34th meeting of the 5th Board of Directors was held on 11 December 2013 by means of telecommunication and the following resolution was passed: agreed to the proposal of the director candidates of the 6th Board of Directors of Qilu Bank Co., Ltd., and proposed agenda for 2013 First Provisional Shareholders’ Meeting. The 35th meeting of the 5th Board of Directors was held on 24 December 2013 by means of telecommunication and the following resolution was passed: agreed to the proposal of Significant Related-party Transactions of General Manager of Zhongrun Resources Investment Corporation and the Development Plan for 2013 Branches and Sub-branches of the Bank. The 1st meeting of the 6th Board of Directors was held on 26 December 2013 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 Wang Xiaochun and the following resolutions were passed: elected Wang Xiaochun as the Chairperson of the Board of Directors, elected Huang Jiadong as Vice Chairperson of the Board of Directors, agreed to appoint Huang Jiadong as the President and be going to expire by the term of the 6th Board of Directors; agreed to appoint Zhao Xuejin as Executive Vice President, Chai Chuanzao, Mao Fangzhu, Xu Yedong, Zhang Hua, Cui Xiang as Vice President, Zhang Diandong as Chief Information Officer, Xu Yedong’s term of the position was until 31 August 2014 according to the termination of his transfer agreement, others’ appointment was settled on the term of the 6th Board of Directors; agreed to appoint Mao Fangzhu as the Secretary of the Board of Directors of Qilu Bank(concurrent), Zhang Haiyan as Chief Audit Officer, Wu Hongwen as General Manager of Internal Audit Dept. to the expiry date of the 6th Board of Directors; agreed to the proposal for Specialized Committees of Board of Directors and its composition; agreed to set up Strategy Committee of the 6th Board of Directors which Chairpersonship was assumed by Wang Xiaochun and consisted of 12 31 members, i.e. Huang Jiadong, Hu Xiaomeng, Mao Fangzhu, Chen Xiao, Zhang Yichi, Huang Shaoan, Lu Zhongnan, Li Wuling, Wang Yi, Michael Charles Blomfield, Bi Zhichao, Chen Jian, and the committee’s Office was Board of Directors’ Office and the General Manager is the head of Committee Office; agreed to set up Nomination and Remuneration Committee of the 6th Board of Directors which Chairpersonship was assumed by Zhang Yichi and consisted of 5 members, i.e. Hu Xiaomeng, Chen Xiao, Huang Shaoan, Lu Zhongnan, Li Wuling, Committee Office was set up in Human Resources Dept. and the General Manager of Human Resources Dept. is the head of Committee Office; agreed to set up Related-party Transactions Control and Risk Management Committee of the 6th Board of Directors which Chairpersonship was assumed by Li Wuling and consisted of 6 members, i.e. Chen Xiao, Zhang Yichi, Huang Shaoan, Lu Zhongnan, Michael Charles Blomfield, Chen Jian, Committee Office was set up in Risk Management Dept. and the General Manager of Risk Management Dept. is the head of Committee Office; agreed to set up Audit Committee of the 6th Board of Directors which Chairpersonship was assumed by Chen Xiao and consisted of 6 members, i.e. Mao Fangzhu, Zhang Yichi, Huang Shaoan, Lu Zhongnan, Li Wuling, Michael Charles Blomfield, Committee Office was set up in Internal Audit Dept. and General Manager of Internal Audit Dept. is the head of Committee Office; agreed to set up Board of Directors’ Office of the 6th Board of Directors which Chairpersonship was assumed by Hu Jinliang. 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 conscientiously carried out the resolutions of the Shareholders’ Meeting, and eventually completed the operational assignments. 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 6 meetings, the Audit Committee held 3 meetings, the Nomination and Remuneration Committee held 4 meetings, and the Strategy Committee held 2 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 Director. 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 12 11 1 0 Liu Feng 12 12 0 0 Chen Xiao 13 13 0 0 Zhang Yichi 13 11 2 0 32 Wang Xiaodong 12 12 0 0 Huang Shaoan 1 1 0 0 Lu Zhongnan 1 1 0 0 Li Wuling 1 1 0 0 Note: (1) During the reporting period, Independent Directors of the 5th Board of Directors Shi Jianping, Liu Feng, and Wang Xiaodong’s term of office had expired, and they should attend 12 meetings of Board of Directors. (2) During the reporting period, Huang Shaoan, Lu Zhongnan and Li Wuling were elected as Independent Directors by the 2013 First Provisional Shareholders’ Meeting, and they should attend 1 meeting of Board of Directors’ Meetings. (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 attended, or held, or observed by the Board of Supervisors: On 28 March 2013, members of the Board of Supervisors attended the 2012 Annual Shareholders’ Meeting. On 26 December 2013, members of the Board of Supervisors attended the first Provisional Shareholders’ Meeting of 2013. On 7 March 2013, the 15th meeting of the 5th Board of Supervisors was held in the conference room on the 17th floor of Qilu Bank Building at No.176 Shunhe Street, Shizhong District,Jinan City. 7 out of 8 supervisors were present. The meeting was presided by Wang Jianjun and passed the following resolutions: agreed to the performance appraisal’s results of the jobs of the Board of Directors for the year 2012; agreed to the performance appraisal’s results of the jobs of the Executive Management for the year 2012; agreed to the performance appraisal’s results of the jobs of the Directors for the year 2012; agreed to the performance appraisal’s results of the jobs of the members of the Executive Management for the year 2012; agreed to the Work Report for the year 2012; agreed to the Work Plan for the year 2013. On 28 March 2013, the 16th meeting of the 5th Board of Supervisors was held in the conference room on the 17th floor of Qilu Bank Building at No.176 Shunhe Street, Shizhong District,Jinan City. 7 out of 8 supervisors were present. Members of the Board of Supervisors attended the 26th meeting of the 5th Board of Directors as non–voting delegates,. On 30 July 2013, the 17th meeting of the 5th Board of Supervisors was held in the conference room on the 12th floor of Qilu Bank Building at No.176 Shunhe Street, Shizhong District,Jinan City.7 out of 8 33 supervisors were present. The meeting was presided by Wang Jianjun and passed the following resolutions: agreed to the Approach of Resolution Supervising of Board of Directors and Board of Supervisors; agreed to the Approach of performance appraisal of the jobs for the members of the Executive Management; agreed to the revised Approach of performance appraisal of the jobs for the Board of Directors; agreed to the revised Approach of performance appraisal of the jobs for the Executive Management; agreed to the revised Work Approach of the Contacts of Board of Supervisors; agreed to the Performance Appraisal Report about liquidity risk management. On 25 November 2013, the 18th meeting of the 5th Board of Supervisors was held in the conference room on the 12th floor of Qilu Bank Building at No.176 Shunhe Street, Shizhong District,Jinan City. All of the 8 supervisors were present. The meeting was presided by Wang Jianjun and passed the following resolutions :agreed to the investigation Report of sub-branch of the risk oversight Committee; agreed to the Execution Plan for Change of the 5th Board of Directors and Board of Supervisors . On 10 December 2013, the 19th meeting of the 5th Board of Supervisors was held by means of telecommunication. The meeting passed the following resolution: agreed to the Candidates proposal of Non employee Supervisors of the 6th Board of Supervisors. On 26 December 2013, the 1st meeting of the 6th Board of Supervisors was held in the conference room on the 12th floor of Qilu Bank Building at No.176 Shunhe Street, Shizhong District,Jinan.7 out of 8 supervisors were present. The meeting was presided by Wang Jianjun, and passed the following resolutions: agreed to the Proposal of the election of Chairman of the Board of Supervisors; and agreed to the proposal of establishing Specialized Committees of the 6th Board of Supervisors. On 7 March 2013, the members of Board of Supervisors, as non–voting delegates, attended the 25th meeting of the 5th Board of Directors. On 28 March 2013, the members of Board of Supervisors, as non–voting delegates, attended the 26th meeting of the 5th Board of Directors. On 30 July 2013, the members of Board of Supervisors, as non–voting delegates, attended the 31th meeting of the 5th Board of Directors. On 25 December 2013, the members of Board of Supervisors, as non–voting delegates, attended the 33th meeting of the 5th Board of Directors. On 26 December 2013, the members of Board of Supervisors, as non–voting delegates, attended the 1st meeting of the 6th Board of Directors. ii. The Meetings of Specialized Committees of the Board of Supervisors during the Reporting Period During the reporting period, the Nomination Committee held 2 meetings, the Risk Oversight Committee held 1meeting. The committees were able to deliberate on the items under their respective 34 responsibilities according to the working regulations of the various specialized committees and then submitted them to the Board of Supervisors. iii. Conclusion of Special Inspection of the Board of Supervisors during the Reporting Period On 19 July 2013, the Board of Supervisors made an performance appraisal about liquidity risk management of the Board of Directors and the Executive Management of the first half year of 2013, and put proposals of strengthening the liquidity risk management policy revision, perfecting the liquidity risk management information system construction, and urged the Board of Directors and the Executive Management to perform the liquidity risk management duties. On 11 November 2013, the Board of Supervisors made a site investigation on two sub-branches about developing, controlling, risk managing, and transforming. Base on the investigation, the proposals about strengthening managing ability, perfecting team building, quickening transforming about community bank, and so on. These proposals played a positive role on deepening the transformation. ⅳ. Work of External Supervisors during the Reporting Period Number of Board of Personal Attendance by Absence Name of External Supervisors’ Meetings to Attendance Supervisors Proxy（times） （times） Attend（times） （times） Hu Jinyan 5 3 2 0 Su Yuhai 5 5 0 0 Zhang Zhiyuan 6 5 1 0 Shao Changnian 1 1 0 0 Li Tao 1 1 0 0 Note: (1) During the reporting period, the external supervisors of the 5th Board of Supervisors Hujinyan and Suyuhai‘s term of office had expired, and they should attend 5 meetings of Board of Supervisors. (2) During the reporting period, Shao Changnian and Litao were elected as external supervisors by the 2013 First Provisional Shareholders’ Meeting, and they should attend 1 meeting of Board of Directors’ Meetings. v. 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 condition, 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: (1) Supervision on Operating Legally of the Bank 35 During the reporting period, the Bank intensified the contact with the Banking Regulatory Bureau, strengthened the internal controls and system execution, and operated legally and managed properly with true and fair operating results, and the decision making procedures were legal and valid. There was no detection of behaviors of breaking laws, statutes and the Memorandum and Articles of Association, or harming the shareholders’ interest by the Directors and the Executive Management of the Bank when performing their duties. (2) Supervision on Financial Condition of the Bank During the reporting period, the financial report of the bank has been audited by Ernst and Young Hua Ming LLP and received unqualified audit report. And the report truly and fairly reflects the financial position and the operating results of the bank. (3) Supervision on Execution of the Resolutions of the Shareholders’ Meetings During the reporting period, the members of the Board of Supervisors attended the Board of Directors and the Shareholders’ meeting, and did not raise any objection to any of the reports and proposals submitted to the Shareholders’ Meetings by the Board of Directors, and supervising the executing of the resolution of the Shareholders’ meeting, and concluded that the Board of Directors seriously carried out the relevant resolutions of the Shareholders’ Meetings. (IX) The Major Business Operations Plan of 2013 The business operation plans of 2014 are to realize 25% growth rate of total assets to reach RMB 117 billion at the end of 2014, to achieve year-end deposit balance of RMB 103.5 billion which is 25% more than that of 2013.The average deposit is expected to be RMB 89.5 billion which is 20% more than that of 2013.The target ratio of Non-Performing loan in 2014 will be less than 1%. The operating profit of 2014 is expected to be RMB 2.005 billion. The provision coverage ratio will be maintained about 350% and the capital adequacy ratio will be no less than 10.6%。 VI. Key Events （Ⅰ）During the reporting period, whether the Bank was involved in any litigation and arbitration events , legal case which had a material impact on the operating activities During the reporting period, the Bank was not involved in any litigation and arbitration events, legal case 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 During the reporting period, the Bank did not have any major acquisition, merger or sale of assets 36 events. (Ⅲ ) During the reporting period, whether the Bank had any significant custody, guarantee, commitment, management of entrustment assets During the reporting period, the Bank did not have any 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 37 VII. Important Notice The Board of Directors, the Board of Supervisors, Directors, Supervisors and Senior Executives hereby assure that there are no false records and misleading statements or major omissions in the report, and undertake responsibility jointly and severally that the contents of the report are true, accurate and complete. The 3rd meeting of the 6th Board of Directors of the Bank deliberated and approved the annual report on 10 April 2014. The Chairperson, Wang Xiaochun, the President, Huang Jiadong and the Vice President charge for Finance, Mao Fangzhu, General Management of Planning ＆ Finance Dept, Gao Yongsheng, hereby assure that the financial reporting of the annual report is true and complete. All relevant figures in the 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 Ernst & Young Hua Ming LLP 38 QILU BANK COMPANY LIMITED CONSOLIDATED BALANCE SHEET 31 DECEMBER 2013 (All amounts expressed in RMB yuan unless otherwise stated) English translation for reference only Assets 31 December 2013 31 December 2012 Cash and balances with the central bank 18,496,984,798 16,545,979,186 Due from banks 1,968,719,314 2,228,667,671 Placements with banks - 50,000,000 Financial assets, held-for-trading 425,177,307 49,965,586 Reverse repurchase agreements 1,816,564,000 360,000,000 Interest receivables 385,269,487 314,074,173 Loans and advances to customers 51,431,892,077 45,061,030,833 Financial assets, available-for-sale (“AFS”) 8,254,519,808 9,275,477,395 Financial assets, held-to-maturity (“HTM”) 5,787,395,746 5,857,750,393 Investments classified as loans and receivables 2,244,805,178 904,659,784 Investment properties 30,456,264 38,196,818 Fixed assets and construction in progress 497,798,538 509,460,831 Intangible assets 16,791,327 19,572,918 Long term equity investments 785,095,216 642,384,839 Deferred income tax assets 597,052,863 562,560,764 Long-term prepaid expenses 31,472,459 31,622,014 Other assets 1,233,633,838 1,228,261,500 TOTAL ASSETS 94,003,628,220 83,679,664,705 QILU BANK COMPANY LIMITED CONSOLIDATED BALANCE SHEET(CONTINUED) 31 DECEMBER 2013 (All amounts expressed in RMB yuan unless otherwise stated) English translation for reference only Liabilities and Shareholders’ equity 31 December 2013 31 December 2012 Liabilities: Due to central bank 1,284,505,159 489,724,451 Due to banks and other financial institutions 398,056,890 1,204,249,211 Financial liabilities, held-for-trading 207,000,000 - Repurchase agreements 382,200,000 4,194,900,000 Due to customers 83,284,922,839 70,401,197,244 Employee benefits payable 290,241,790 227,103,220 Taxes payable 65,555,968 50,627,886 Bonds payable 700,000,000 700,000,000 Interest payable 1,051,246,995 690,425,265 Provision 96,672,256 93,102,288 Other liabilities 241,627,760 300,799,087 TOTAL LIABILITIES 88,002,029,657 78,352,128,652 Shareholders’ equity: Share capital 2,368,750,000 2,368,750,000 Capital reserve 1,301,388,460 1,571,650,630 Surplus reserve 403,526,415 295,377,252 General reserve 864,421,084 657,006,346 Retained profits 1,039,886,511 413,210,937 Equity attributable to equity holders of the parent company 5,977,972,470 5,305,995,165 Non-controlling interests 23,626,093 21,540,888 TOTAL SHAREHOLDERS’ EQUITY 6,001,598,563 5,327,536,053 TOTAL LIABILITIES AND EQUITY 94,003,628,220 83,679,664,705 QILU BANK COMPANY LIMITED CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2013 (All amounts expressed in RMB yuan unless otherwise stated) English translation for reference only 2013 2012 I. Operating income 2,833,599,629 2,461,728,236 Interest income 4,395,085,695 4,026,420,206 Interest expense (1,842,448,081) (1,741,062,149 ) Net interest income 2,552,637,614 2,285,358,057 Fee and commission income 194,546,764 120,572,721 Fee and commission expense ( 32,434,989) ( 30,032,526 ) Net fee and commission income 162,111,775 90,540,195 Investment income 98,565,392 53,247,638 Including: Share of profits of associates 96,060,917 17,000,000 Fair value losses ( 8,974,293) ( 55,670 ) Foreign exchange gains 13,462,838 14,123,543 Other operating income 15,796,303 18,514,473 II. Operating expense (1,582,174,088) (1,335,544,706 ) Business tax and surcharges ( 192,164,299) ( 185,464,057 ) Operating and administrative expenses (1,017,975,980) ( 918,619,935 ) Impairment losses on assets ( 366,607,877) ( 225,624,600 ) Other operating expenses ( 5,425,932) ( 5,836,114 ) III. Operating profit 1,251,425,541 1,126,183,530 Non-operating income 13,799,514 14,464,512 Non-operating expenses ( 15,101,689) ( 73,088,289 ) IV. Profit before tax 1,250,123,366 1,067,559,753 Less: Income tax ( 238,999,856) ( 207,281,200 ) V. Profit for the year 1,011,123,510 860,278,553 Attributable to: Equity holders of the parent company 1,009,038,305 861,465,567 Non-controlling interests 2,085,205 ( 1,187,014 ) VI. Other comprehensive income ( 270,262,170) 65,880,354 VII. Total comprehensive income 740,861,340 926,158,907 Attributable to: Equity holders of the parent company 738,776,135 927,345,921 Non-controlling interests 2,085,205 ( 1,187,014 ) QILU BANK COMPANY LIMITED CONSOLIDATED STATEMENT OF CASH FLOW FOR THE YEAR ENDED 31 DECEMBER 2013 (All amounts expressed in RMB yuan unless otherwise stated) English translation for reference only 2013 2012 1 Cash flows from operating activities Net increase in due to customers, banks and other financial institutions 12,077,533,274 5,238,500,222 Net increase in due to central bank 794,780,708 - Net increase in financial liabilities held-for-trading 207,000,000 - Net decrease in financial asset held-for-trading - 213,803 Net decrease in reverse repurchase agreements 60,000,000 232,664,000 Net increase in repurchase agreements - 136,822,212 Interest received 4,316,236,508 3,985,380,328 Fee and commission received 194,546,764 120,572,721 Cash received relating to other operating activities 158,862,771 593,467,478 Subtotal of cash inflows 17,808,960,025 10,307,620,764 Net decrease in due to central bank - ( 149,668,250 ) Net increase in loans and advances to customers ( 6,734,277,640 ) ( 4,911,198,441 ) Net increase in due from central bank and other banks ( 2,136,623,559 ) ( 1,659,891,953 ) Net increase in financial asset held-for-trading ( 384,186,015 ) - Net decrease in repurchase agreements ( 3,812,700,000 ) - Interest paid ( 1,441,026,350 ) ( 1,638,064,823 ) Fee and commission paid ( 32,434,989 ) ( 30,032,526 ) Cash paid to employees ( 471,627,389 ) ( 445,347,806 ) Payment of taxes ( 452,007,786 ) ( 286,603,196 ) Cash paid relating to other operating activities ( 488,301,205) ( 345,608,900 ) Subtotal of cash outflows (15,953,184,933 ) ( 9,466,415,895 ) Net cash flows from operating activities 1,855,775,092 841,204,869 2 Cash flows from investing activities Net cash received from disposals of investments 4,127,566,902 3,833,164,717 Net cash received from disposals of fixed assets, intangible assets and other non-current assets 9,147,575 848,131 Dividends received 30,476,034 32,080,000 Subtotal of cash inflows 4,167,190,511 3,866,092,848 Purchase of investments ( 4,731,174,279 ) ( 3,849,742,402 ) Purchase of fixed assets, intangible assets and other non-current assets ( 97,787,439 ) ( 72,915,166 ) Subtotal of cash outflows ( 4,828,961,718 ) ( 3,922,657,568 ) Net cash flows from investing activities ( 661,771,207 ) ( 56,564,720 ) QILU BANK COMPANY LIMITED CONSOLIDATED STATEMENT OF CASH FLOW(CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2013 (All amounts expressed in RMB yuan unless otherwise stated) English translation for reference only 2013 2012 3 Net cash flows from financing activities Dividends and interests paid ( 174,122,087 ) ( 40,775,032 ) Subtotal of cash outflows ( 174,122,087 ) ( 40,775,032 ) Net cash flows from financing activities ( 174,122,087 ) ( 40,775,032 ) 4 Effect of foreign exchange rate changes on cash and cash equivalents 1,115,899 13,091,332 5 Net increase in cash and cash equivalents 1,020,997,697 756,956,449 Add: Cash and cash equivalents at beginning of the year 6,564,244,033 5,807,287,584 6 Cash and cash equivalents at end of the year 7,585,241,730 6,564,244,033