Luzhou City Commercial Bank Co., Ltd.* 瀘州市商業銀行股份有限公司* (The “Bank”) (A Joint Stock Company Incorporated in the People’S Republic of China with Limited Liability)

The Stock Exchange of Hong Kong Limited and the Securities and Futures Commission take no responsibility for the contents of this Application Proof, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this Application Proof. Application Proof of Luzhou City Commercial Bank Co., Ltd.* 瀘州市商業銀行股份有限公司* (the “Bank”) (A joint stock company incorporated in the People’s Republic of China with limited liability)

WARNING

The publication of this Application Proof is required by The Stock Exchange of Hong Kong Limited (the “Exchange”)/the Securities and Futures Commission (the “Commission”) solely for the purpose of providing information to the public in Hong Kong.

This Application Proof is in draft form. The information contained in it is incomplete and is subject to change which can be material. By viewing this document, you acknowledge, accept and agree with the Bank, its sponsor, advisors or members of the underwriting syndicate that:

(a) this document is only for the purpose of providing information about the Bank to the public in Hong Kong and not for any other purposes. No investment decision should be based on the information contained in this document;

(b) the publication of this document or supplemental, revised or replacement pages on the Exchange’s website does not give rise to any obligation of the Bank, its sponsor, advisors or members of the underwriting syndicate to proceed with an offering in Hong Kong or any other jurisdiction. There is no assurance that the Bank will proceed with the offering;

(c) the contents of this document or any supplemental, revised or replacement pages may or may not be replicated in full or in part in the actual final listing document;

(d) this document is not the final listing document and may be updated or revised by the Bank from time to time in accordance with the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited;

(e) this document does not constitute a prospectus, offering circular, notice, circular, brochure or advertisement offering to sell any securities to the public in any jurisdiction, nor is it an invitation to the public to make offers to subscribe for or purchase any securities, nor is it calculated to invite offers by the public to subscribe for or purchase any securities;

(f) this document must not be regarded as an inducement to subscribe for or purchase any securities, and no such inducement is intended;

(g) neither the Bank nor any of its affiliates, advisors or members of the underwriting syndicate is offering, or is soliciting offers to buy, any securities in any jurisdiction through the publication of this document;

(h) no application for the securities mentioned in this document should be made by any person nor would such application be accepted;

(i) the Bank has not and will not register the securities referred to in this document under the United States Securities Act of 1933, as amended, or any state securities laws of the United States;

(j) as there may be legal restrictions on the distribution of this document or dissemination of any information contained in this document, you agree to inform yourself about and observe any such restrictions applicable to you; and

(k) the application to which this document relates has not been approved for listing and the Exchange and the Commission may accept, return or reject the application for the subject public offering and/or listing.

If an offer or an invitation is made to the public in Hong Kong in due course, prospective investors are reminded to make their investment decision solely based on the Bank’s prospectus registered with the Registrar of Companies in Hong Kong, copies of which will be distributed to the public during the offer period.

* The Bank is not an authorized institution within the meaning of the Banking Ordinance (Chapter 155 of the Laws of Hong Kong), not subject to the supervision of the Hong Kong Monetary Authority, and not authorized to carry on banking/deposit- taking business in Hong Kong. THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. IMPORTANT

IMPORTANT: If you are in doubt about any information contained in this document you should obtain independent professional advice.

Luzhou City Commercial Bank Co., Ltd.* 瀘州市商業銀行股份有限公司* (A joint stock company incorporated in the People’s Republic of China with limited liability)

[REDACTED] Number of [REDACTED] in the : [REDACTED] H Shares (subject to the [REDACTED] [REDACTED]) Number of [REDACTED] : [REDACTED] H Shares (subject to adjustment and the [REDACTED]) Number of [REDACTED] : [REDACTED] H Shares (subject to adjustment) Maximum [REDACTED] : [REDACTED] Nominal value : RMB1.00 per H Share Stock code : [REDACTED]

Sole Sponsor

[REDACTED]

Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take no responsibility for the contents of this document, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this document. A copy of this document, having attached thereto the documents specified in “Appendix VIII – Documents Delivered to the Registrar of Companies and Available for Inspection”, has been registered by the Registrar of Companies in Hong Kong as required by Section 342C of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Chapter 32 of the Laws of Hong Kong). The Securities and Futures Commission and the Registrar of Companies in Hong Kong take no responsibility for the contents of this document or any other document referred to above. The [REDACTED] is expected to be fixed by agreement between the [REDACTED] (on behalf of the [REDACTED]) and us on the [REDACTED]. The [REDACTED] is expected to be on or around [REDACTED] and, in any event, not later than [REDACTED]. The [REDACTED] will be no more than HK$[REDACTED] per [REDACTED] and is currently expected to be no less than HK$[REDACTED] per [REDACTED] unless otherwise announced. If, for whatever reason, the [REDACTED] is not agreed by [REDACTED], between the [REDACTED] (on behalf of the [REDACTED]) and us, the [REDACTED] (including the [REDACTED]) will not proceed and will lapse. We are incorporated, and all of our businesses are located, in the PRC. [REDACTED] should be aware of the differences in the legal, economic and financial systems between the mainland of the PRC and Hong Kong and that there are different risk factors relating to investment in PRC-incorporated businesses. [REDACTED] should also be aware that the regulatory framework in the PRC is different from the regulatory framework in Hong Kong and should take into consideration the different market nature of our Shares. See “Risk Factors”, “Supervision and Regulation”, “Appendix IV – Summary of Principal Legal and Regulatory Provisions” and “Appendix V – Summary of Articles of Association”. The [REDACTED] (on behalf of the [REDACTED]) may, with our consent reduce the number of [REDACTED] being [REDACTED] under the [REDACTED] and/or the indicative [REDACTED] range stated in this document (which is HK$[REDACTED] to HK$[REDACTED] per H Share) at any time on or prior to the morning of the last day for lodging [REDACTED] under the [REDACTED]. In such a case, notices of the reduction in the number of [REDACTED] and/or the indicated [REDACTED] range will be published in the South China Morning Post (in English) and Hong Kong Economic Times (in Chinese). Such notice will also be available on the websites of the Hong Kong Stock Exchange at www.hkexnews.hk and our Bank at www.lzccb.cn. See “[REDACTED]” and “[REDACTED]”. The obligations of the [REDACTED] under the [REDACTED] are subject to termination by the [REDACTED] (on behalf of the [REDACTED]) if certain grounds arise prior to 8:00 a.m. on the [REDACTED]. See “[REDACTED]”. The [REDACTED] have not been and will not be registered under the [REDACTED], as amended, and may only be offered, sold, pledged or transferred (i) within the United States to [REDACTED] as defined in [REDACTED] or in reliance on another exemption from registration requirements under the [REDACTED], as amended, or (ii) outside the United States in accordance with [REDACTED].

* We are not an authorized institution within the meaning of the Banking Ordinance (Chapter 155 of the Laws of Hong Kong), not subject to the supervision of the Hong Kong Monetary Authority, and not authorized to carry on banking/deposit-taking business in Hong Kong.

[REDACTED] THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. EXPECTED TIMETABLE(1)

[REDACTED]

i THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. EXPECTED TIMETABLE(1)

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ii THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. CONTENTS

IMPORTANT NOTICE TO PROSPECTIVE INVESTORS

This document is issued by Luzhou City Commercial Bank Co., Ltd. solely in connection with the [REDACTED] and the [REDACTED] and does not constitute an offer to sell or a solicitation of an offer to buy any security other than the [REDACTED] by this document to the [REDACTED]. This document may not be used for the purpose of, and does not constitute, an offer or invitation in any other jurisdiction or in any other circumstances. No action has been taken to permit a [REDACTED] of the [REDACTED] in any jurisdiction other than Hong Kong, and no action has been taken to permit the distribution of this document in any jurisdiction other than Hong Kong. The distribution of this document and the [REDACTED] and sale of the [REDACTED] in other jurisdictions are subject to restrictions and may not be made except as permitted under the applicable securities laws of such jurisdictions pursuant to registration with or authorization by the relevant securities regulatory authorities or an exemption therefrom.

You should rely only on the information contained in this document and the [REDACTED] to make your [REDACTED] decision. We have not authorized anyone to provide you with information that is different from what is contained in this document. Any information or representation not made in this document must not be relied on by you as having been authorized by us, the Sole Sponsor, the [REDACTED], the [REDACTED], the [REDACTED], any of our or their respective directors, officers or representatives, or affiliates or any other party involved in the [REDACTED]. Information contained on our website at www.lzccb.cn does not form part of this document.

Page Expected Timetable ...... i

Contents ...... iii

Summary ...... 1

Definitions...... 10

Forward-looking Statements ...... 24

Risk Factors ...... 25

Information about this Document and the [REDACTED]...... 57

Waivers from Strict Compliance with the Listing Rules ...... 62

Directors, Supervisors and Parties Involved in the [REDACTED] ...... 67

Corporate Information ...... 72

Industry Overview ...... 75

Supervision and Regulation...... 83

History and Development ...... 123

Business ...... 133 Risk Management ...... 176

Connected Transactions ...... 216

Directors, Supervisors and Senior Management ...... 219

iii THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. CONTENTS

Page Substantial Shareholders...... 248

Share Capital ...... 252

Assets and Liabilities ...... 256

Financial Information ...... 310

Future Plans and [REDACTED]...... 366

[REDACTED]...... 367

[REDACTED]...... 368

Structure of the [REDACTED]...... 375

How to Apply for Hong Kong [REDACTED] ...... 384

Appendix I – Accountant’s Report ...... I-1

Appendix II – Unaudited Supplementary Financial Information ...... II-1

Appendix III – Unaudited [REDACTED] Financial Information ...... III-1

Appendix IV – Summary of Principal Legal and Regulatory Provisions ...... IV-1

Appendix V – Summary of Articles of Association ...... V-1

Appendix VI – Taxation and Foreign Exchange ...... VI-1

Appendix VII – Statutory and General Information ...... VII-1

Appendix VIII – Documents Delivered to the Registrar of Companies and Available for Inspection ...... VIII-1

iv THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. SUMMARY

This summary aims to give you an overview of the information contained in this document. As it is a summary, it does not contain all the information that may be important to you. You should read the whole document before you decide to invest in the H Shares. There are risks associated with any investment. Some of the particular risks in investing in the H Shares are set out in the section entitled “Risk Factors” of this document. You should read that section carefully before you decide to invest in the H Shares.

OVERVIEW

We are the largest commercial bank in Luzhou, Sichuan Province, in terms of the total assets as of December 31, 2017. We are also the only city commercial bank headquartered in Luzhou. As a State-Controlled local financial institution, we have taken an active part in the financing of local economy, industrial upgrade and urban development in Luzhou over the last 20 years since our establishment in 1997. We seek to build a bank with the core values of learning, transparency, aspiration, collaboration and accountability (學習的銀行,民主的銀行,陽光的銀行,團結的銀行,問責的銀行), and to provide distinctive financial services to customers.

Our branch network has effectively covered all three districts and four counties in Luzhou. In February 2017, we opened our first branch outside Luzhou, the Chengdu branch. As of June 30, 2018, we had 7,256 corporate banking customers and 647,969 retail banking customers. Amid an expansion in both branch network and customer base, our efficient decision-making process and flexible operations enable us to quickly identify and deliver products and services that suit the needs of individual customers and corporates, supporting a continuous and rapid growth of our business.

During the Track Record Period, our total assets increased from RMB31,763.6 million as of December 31, 2015 to RMB70,879.4 million as of December 31, 2017, representing a CAGR of 49.4%, which further increased to RMB74,555.1 million as of June 30, 2018. Our net profit attributable to shareholders increased from RMB451.5 million for the year ended December 31, 2015, to RMB618.7 million for the year ended December 31, 2017, representing a CAGR of 17.1%. Our net profit attributable to shareholders amounted to RMB376.8 million for the six months ended June 30, 2018.

We have managed to maintain outstanding profitability and operational efficiency on the back of a fast growth in our asset base and business scale. In 2017, our return on average assets and return on average equity were 1.00% and 14.83%, respectively, which was 0.08 and 2.27 percentage points higher than the national average over the same period. For the six months ended June 30, 2018, our return on average assets and return on average equity further increased to 1.04% and 16.94%, respectively. As of December 31, 2017, our NPL ratio was 0.99%, which was lower than all H-share listed city commercial banks. As of December 31, 2017, our allowance coverage ratio was 294.49%, which was higher than all H-share listed city commercial banks. As of June 30, 2018, our NPL ratio further decreased to 0.91%, while our allowance coverage ratio amounted to 275.54%.

1 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. SUMMARY

OUR COMPETITIVE STRENGTHS

Our competitive strengths include:

• Well positioned to capture the business opportunities arising from a vibrant local economy, unique geographical location, comprehensive credit system and quality customer base with high credit scoring in Sichuan Province and Luzhou.

• Differentiated retail banking business built on our advantages in the innovation of product and service offerings that target customers’ needs.

• Comprehensive financial solutions for corporate banking customers across Sichuan Province and in Luzhou.

• Prudent and effective risk assessment resulting in outstanding asset quality.

• Experienced leadership with management expertise and a merit-based hiring and reward system.

For details of our strengths, please see “Business – Our Competitive Strengths”.

OUR DEVELOPMENT STRATEGIES

Our vision is to establish a commercial bank with “first-class management, excellent operations, competitive compensation and best brand recognition (一流的團隊,一流的業績,一流的薪酬,一流的口碑)”. We plan to achieve this vision by implementing the following strategies:

• Continue to expand product offerings, and innovate revenue model and marketing techniques.

• Continue to invest in technology infrastructure to support business expansion and product innovation.

• Further optimize our multi-layered branch network and sales channels to serve the real economy.

• Optimize our pricing system, improve comprehensive risk management system and explore innovative capital replenishment methods.

• Continue to optimize our talent pool and maintain a merit-based hiring and reward system.

For details of our strategies, please see “Business – Our Development Strategies”.

SUMMARY HISTORICAL FINANCIAL INFORMATION

You should read the summary historical financial information set forth below in conjunction with our historical financial information included in the Accountant’s Report set forth in Appendix I, which were prepared in accordance with IFRS, and the sections headed “Assets and Liabilities” and “Financial Information”. The statements of comprehensive income for the years ended December 31, 2015, 2016 and 2017 and the six months ended June 30, 2017 and 2018, as well as the statement of financial position as of December 31, 2015, 2016 and 2017 and June 30, 2018 set out below have been derived from Accountant’s Report set forth in Appendix I.

2 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. SUMMARY

We have adopted International Financial Report Standard 9 “Financial Instruments” (“IFRS 9”) since January 1, 2018, resulting in changes in accounting policies. Compared with IAS 39 Financial Instruments (“IAS 39”) that we used to adopt prior to January 1, 2018, the major changes adopted by IFRS 9 are the measurement categories and the approach for classifying financial assets. The classification of financial assets under IFRS 9 requires us to consider the business model and the contractual cash flow characteristics of relevant financial assets to determine classification and subsequent measurement. Further, for financial assets that will be classified as “amortized cost” or “fair value through other comprehensive income” under IFRS 9, we are required to apply a new expected credit loss impairment model, which, as compared to the incurred loss model in IAS 39, uses more forward-looking information instead of an objective evidence of impairment as a precondition for recognizing credit losses.

To illustrate difference between IAS 39 and IFRS 9 and the impact towards our financial results for the six months ended June 30, 2018, we have prepared financial information for the six months ended June 30, 2018 according to IAS 39 and IFRS 9, respectively. The adoption of IFRS 9 for the six months ended June 30, 2018 does not result in any significant impact on the amounts reported in the financial information except that, a 5% of equity increase with effect from January 1, 2018. For details, please see “Financial Information – Critical Accounting Judgments and Key Sources of Estimation Uncertainty – Impact of New Accounting Policies”. Please also see Note 2.1 to the Accountant’s Report in Appendix I.

Our results of operations during the years ended 31 December 2015, 2016 and 2017 may not be indicative of our results of operations for the reporting periods beginning on or after 1 January 2018. Please also see “Risk Factors – Changes in accounting standards or policies may materially affect our financial condition and results of operations”.

3 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. SUMMARY

Selected Data from Statements of Financial Position

The following table sets forth selected data from the statements of financial position as of the dates indicated.

As of December 31, As of June 30, 2015 2016 2017 2018 %of %of %of %of Amount total Amount total Amount total Amount total (in millions of RMB, except percentages) Assets Cash and balances with central bank 4,349.7 13.7% 6,463.7 12.1% 8,145.7 11.5% 7,884.6 10.6% Financial assets held under resale agreements, due from other banks and financial institutions 6,641.9 20.9% 4,971.8 9.3% 13,344.8 18.8% 9,425.0 12.6% Customer loans, net 9,703.4 30.5% 14,159.1 26.6% 18,833.8 26.6% 23,687.5 31.8% Financial investments, net 10,356.8 32.6% 26,598.7 49.9% 28,996.2 40.9% 32,036.5 43.0% Investments in associates 27.6 0.1% 30.5 0.1% 33.0 – 35.3 – Property, plant and equipment 465.3 1.5% 584.0 1.1% 614.8 0.9% 631.8 0.8% Deferred income tax assets 20.1 0.1% 98.8 0.2% 244.3 0.3% 160.2 0.2% Other assets(1) 198.8 0.6% 374.1 0.7% 666.8 0.9% 694.2 0.9% Total assets 31,763.6 100.0% 53,280.7 100.0% 70,879.4 100.0% 74,555.1 100.0% Liabilities Borrowing from central bank 425.0 1.3% 250.0 0.5% 590.0 0.8% 160.0 0.2% Financial assets sold under repurchase agreements, due to other banks and financial institutions 7,079.6 22.3% 12,391.6 23.3% 12,063.9 17.0% 11,342.2 15.2% Customer deposits 20,383.4 64.2% 31,018.8 58.2% 42,145.3 59.5% 44,742.4 60.0% Debt securities issued – – 4,901.4 9.2% 10,775.2 15.2% 12,443.7 16.7% Current tax liabilities 57.5 0.2% 45.1 0.1% 28.8 0.1% 18.8 0.1% Other liabilities(2) 534.0 1.7% 666.3 1.3% 940.5 1.3% 1,285.1 1.6% Total liabilities 28,479.5 89.7% 49,273.2 92.5% 66,543.7 93.9% 69,992.2 93.9% Total equity 3,284.1 10.3% 4,007.4 7.5% 4,335.7 6.1% 4,562.9 6.1% Total liabilities and equity 31,763.6 100.0% 53,280.7 100.0% 70,879.4 100.0% 74,555.1 100.0%

For details, please see “Assets and Liabilities”.

Notes:

(1) Consist primarily of interest receivables, foreclosed assets, prepayment by customers, long-term deferred expenses, investment properties and other receivables. (2) Consist primarily of tax payable, interest payable, dividend payable and liquidation of funds.

4 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. SUMMARY

Selected Data from the Statements of Comprehensive Income

The following table sets forth our statement of comprehensive income for the periods indicated.

For the six months For the year ended December 31, ended June 30, 2015 2016 2017 2017 2018 (unaudited) (in millions of RMB) Interest income 1,444.1 2,020.8 3,328.5 1,509.5 1,807.5 Interest expense (558.9) (865.2) (1,754.1) (807.7) (1,053.3) Net interest income 885.2 1,155.6 1,574.3 701.8 754.2 Fee and commission income 7.7 7.5 8.1 3.7 5.5 Fee and commission expense (5.2) (7.0) (10.0) (3.9) (4.7) Net fee and commission income 2.5 0.5 (1.9) (0.2) 0.8 Net gains on trading activities ––––24.4 Net gains arising from financial investments 40.9 132.9 97.8 63.7 53.7 Other operating income(1) 13.6 17.9 9.7 4.2 6.3 Operating income 942.2 1,307.0 1,680.0 769.5 839.3 Operating expenses (273.2) (437.4) (543.2) (172.3) (215.7) Impairment losses/expected credit losses (89.1) (155.7) (324.8) (218.4) (132.5) Operating profit 579.8 713.9 811.9 378.8 491.1 Share of profits of associates 7.8 2.9 2.5 2.0 2.3 Profit before tax 587.6 716.8 814.5 380.8 493.4 Income tax (136.2) (174.7) (195.8) (92.4) (116.6) Net profit attributable to our shareholders 451.5 542.1 618.7 288.4 376.8

Note: (1) Consists primarily of government grants and subsidies, rental income, gains/(losses) on disposal of non-current assets. Our principal business lines include corporate banking, retail banking, and financial markets. For details of our principal business, please see “Business – Our Business Lines”. The following table sets forth our operating income by segments for the periods indicated.

For the year ended December 31, For the six months ended June 30,

2015 2016 2017 2017 2018

%of %of %of %of %of Amount total Amount total Amount total Amount total Amount total

(in millions of RMB, except for percentages) (unaudited) Corporate banking 308.6 32.8% 428.7 32.8% 532.7 31.7% 262.9 34.2% 273.8 32.6% Retail banking 254.4 27.0% 372.6 28.5% 493.7 29.4% 179.0 23.3% 236.9 28.2% Financial markets 365.6 38.8% 495.4 37.9% 643.7 38.3% 323.4 42.0% 322.4 38.4% Others(1) 13.6 1.4% 10.3 0.8% 9.7 0.6% 4.2 0.5% 6.2 0.7% Total(2) 942.2 100.0% 1,307.0 100.0% 1,680.0 100.0% 769.5 100.0% 839.3 100.0%

Notes: (1) Consists primarily of income that is not directly attributable to any specific business segment. (2) Our operating income from these segments represents the net interest income derived solely from the respective lines of business, which is further added/deducted by net fee and commission income/(expense), net gains/(losses) on trading activities, net gains/(losses) arising from investment securities or other operating income/(expense), as applicable, attributable to the respective lines of business.

5 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. SUMMARY

Selected Financial Ratios The following table sets forth selected profitability indicators for the periods indicated.

For the six months ended For the year ended December 31, June 30, 2015 2016 2017 2017(6) 2018(6) (in millions of RMB, except percentages) Profitability indicators Return on average assets(1) 1.65% 1.27% 1.00% 0.98% 1.04% Return on average equity(2) 19.68% 14.87% 14.83% 14.05% 16.94% Net interest spread(3) 3.57% 3.19% 2.55% 2.41% 2.22% Net interest margin(4) 3.76% 3.24% 2.65% 2.51% 2.30% Cost-to-income ratio(5) 24.27% 31.46% 31.89% 22.10% 24.72%

Notes: (1) Calculated by dividing net profit for the period by the average balance of total assets at the beginning and the end of the period. (2) Calculated by dividing net profit for the period by the average balance of total equity at the beginning and the end of the period. (3) Calculated as the difference between the average yield on total interest-earning assets and the average cost of total interest-bearing liabilities. (4) Calculated by dividing net interest income by the average balance of total interest-earning assets. (5) Calculated by dividing total operating expenses (excluding business tax and surcharges) by total operating income. (6) On an annualized basis. The following table sets forth information relating to certain regulatory indicators as of the dates indicated, calculated in accordance with the requirements of the PRC banking regulatory authorities and applicable accounting standards.

As of As of December 31, June 30, Regulatory requirement 2015 2016 2017 2018 Capital adequacy indicators Core tier-one capital adequacy ratio(1) Ն7.5% 17.53% 12.68% 10.40% 9.35% Tier-one capital adequacy ratio(2) Ն8.5% 17.53% 12.68% 10.40% 9.35% Capital adequacy ratio(3) Ն10.5% 18.58% 13.62% 13.69% 12.19% Asset quality indicators NPL ratio(4) Յ5.0% 0.30% 0.53% 0.99% 0.91% Allowance coverage ratio(5) Ն150.0% 920.63% 486.63% 294.49% 275.54% Allowance to gross loan ratio(6) Ն2.5% 2.75% 2.58% 2.93% 2.50% Other indicators Loan-to-deposit ratio(7) N/A 48.95% 46.86% 46.03% 53.91%

Notes: (1) Calculated by dividing core tier-one capital, net of core tier-one capital deductions, by risk-weighted assets. For the components of core tier-one capital, core tier-one capital deductions and risk-weighted assets under the Capital Administrative Measures, please see “Supervision and Regulation – Supervision over Capital Adequacy – Latest Supervisory Standards Over Capital Adequacy” and “Financial Information – Capital Resources – Capital Adequacy”. (2) Calculated by dividing tier-one capital, net of tier-one capital deductions, by risk-weighted assets. For the components of tier-one capital, tier-one capital deductions and risk-weighted assets under the Capital Administrative Measures, please see “Supervision and Regulation – Supervision over Capital Adequacy – Latest Supervisory Standards Over Capital Adequacy” and “Financial Information – Capital Resources – Capital Adequacy”. (3) Calculated by dividing total capital, net of capital deductions, by risk-weighted assets. For the components of our total capital, capital deductions and risk weighted assets under the Capital Administrative Measures, please see “Supervision and Regulation-Supervision over Capital Adequacy – Latest Supervisory Standards Over Capital Adequacy” and “Financial Information – Capital Resources – Capital Adequacy”. (4) Calculated by dividing total NPLs by gross customer loans. (5) Calculated by dividing total impairment allowance on customer loans by total NPLs. (6) Calculated by dividing total impairment allowance on customer loans by gross customer loans.

6 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. SUMMARY

(7) Calculated by dividing total customer loans by total customer deposits. Prior to October 1, 2015, PRC commercial banks were required to maintain a loan-to-deposit ratio for no higher than 75%. Effective from October 1, 2015, the PRC Commercial Banking Law was amended and the 75% maximum loan-to-deposits ratio was repealed.

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[REDACTED] STATISTICS

The statistics in the following table are based on the assumptions that (i) the [REDACTED] is completed and [REDACTED] H Shares are newly issued in the [REDACTED], (ii) the [REDACTED] for the [REDACTED] is not exercised, and (iii) [REDACTED] Shares are issued and outstanding following the completion of the [REDACTED]:

Based on an Based on an [REDACTED] of [REDACTED] of HK$[REDACTED] HK$[REDACTED] HK$[REDACTED] HK$[REDACTED] Market capitalization million million Unaudited [REDACTED] adjusted net tangible assets per Share (1) RMB[REDACTED](2) RMB[REDACTED](2) (HK$[REDACTED]) (HK$[REDACTED])

Note:

(1) The amount of unaudited [REDACTED] adjusted net tangible assets per share is calculated in accordance with Rule 4.29 of the Listing Rules after the adjustments referred to in “Appendix III – Unaudited [REDACTED] Financial Information”. (2) The estimated [REDACTED] from the [REDACTED] are translated into Renminbi at the rate of RMB0.8709 to HK$1.00. No representation is made that the Hong Kong Dollar amounts have been, could have been or could be converted to Renminbi at that rate or at any other rate.

DIVIDENDS

Our Board of Directors is responsible for submitting proposals in respect of dividend payments, if any, to the Shareholders at a general meeting for approval. The determination of whether to pay dividends and the amount of such dividends is based on our results of operations, cash flows, financial condition, capital adequacy ratios, future business prospects, statutory and regulatory restrictions on the payment of dividends by us and other factors that our Board of Directors considers relevant.

Subject to our Articles of Association and laws and regulations on profit distribution, our Board of Directors will recommend dividend payments to our Shareholders. Under the PRC Company Law and our Articles of Association, all of our Shareholders holding the same class of shares have equal rights to dividends and other distributions proportionate to their shareholding. Pursuant to PRC laws and our Articles of Association, dividends may only be distributed from our distributable profits calculated in accordance with PRC GAAP or IFRS (or the accounting standards of the overseas jurisdictions where our Shares are listed), whichever is lower.

7 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. SUMMARY

In 2016, we had declared and distributed cash dividends of RMB106.7 million for the year ended December 31, 2015. In 2017, we had declared and distributed dividends of cash dividends of RMB54.4 million and stock dividends of RMB188.3 million for the year ended December 31, 2016. In May 2018, we had declared cash dividends in the amount of RMB196.5 million for the year ended December 31, 2017 which have been distributed in July 2018. Besides, according to a resolution approved on July 21, 2017, we declared additional dividends of RMB45.7 million and RMB176.8 million for the year ended 2015 and 2016, respectively, to the existing shareholders on record as of December 31, 2016, which have been distributed in July 2018.

As of the Latest Practicable Date, our declared but unpaid dividends amounted to RMB112.2 million, mainly comprising (i) dividends payable to shareholders that we were unable to contact, and (ii) dividends payable to shareholders who did not timely claim the dividends. We intend to make payment of such declared but undistributed dividends using our internal funds after locating relevant shareholders, according to the relevant PRC laws and regulations.

Dividends paid in prior periods may not be indicative of future dividend payments. We cannot guarantee when, if and in what form or size dividends will be paid in the future. For details on our Bank’s dividends, see “Financial Information – Dividends”.

INFORMATION ON SUBSTANTIAL SHAREHOLDERS

As of the Latest Practicable Date, Luzhou Laojiao Group was interested directly and indirectly in approximately 22.09% of our total issued Shares. Immediately after the [REDACTED] and assuming that the [REDACTED] is not exercised, Luzhou Laojiao Group will be interested in approximately [REDACTED] of our total issued Shares (or approximately [REDACTED]%, assuming that the [REDACTED] is fully exercised).

For details on our Substantial Shareholders, please see “Substantial Shareholders”.

FUTURE PLANS AND USE OF [REDACTED]

Assuming an [REDACTED] of HK$[REDACTED], being the mid-point of the proposed [REDACTED] range, we estimate that the [REDACTED]ofthe[REDACTED] accruing to us (after deduction of [REDACTED] and estimated [REDACTED] payable by us in relation to the [REDACTED]) to be approximately HK$[REDACTED] million, if the [REDACTED]isnot exercised; or approximately HK$[REDACTED] million, if the [REDACTED] is exercised in full. We intend to use the [REDACTED] from the [REDACTED] (after deduction of [REDACTED] and estimated [REDACTED] payable by us in relation to the [REDACTED]) to strengthen our capital base to support the ongoing growth of our business. For more details on our plans for using the [REDACTED]ofthe[REDACTED], please see “Future Plans and Use of [REDACTED]”.

RECENT DEVELOPMENTS

Our business has continued to experience growth since June 30, 2018. Our Directors confirm that there was no material adverse change in our financial or trading position from June 30, 2018 to the date of this document.

8 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. SUMMARY

RISK FACTORS

There are risks associated with any investment and there are certain risks and considerations relating to an [REDACTED] in the Shares. You should read “Risk Factors” carefully before you decide to invest in the [REDACTED].

The major risks relating to an [REDACTED] in the Shares are as follows: (i) if we are unable to effectively maintain the quality of our loan portfolio, our financial condition and results of operations may be materially and adversely affected; (ii) our impairment allowance on customer loans may not be sufficient to cover the actual losses on our loan portfolio in the future; (iii) we face concentration risks from our credit exposure to certain industries, borrowers and geographic regions; (iv) the collateral or guarantees securing our customer loans may not be sufficient or fully realizable; (v) we are exposed to risks arising from loans granted to micro and small enterprises; (vi) our asset quality, financial condition or results of operations may be materially and adversely affected if the repayment ability of LGFVs deteriorates or the government policies affecting LGFVs change; (vii) any significant or protracted downturn in, or change in national policies affecting the real estate market in the PRC may have a material adverse effect on our business, asset quality, financial condition and results of operations; (viii) our loan classification and provisioning policies may be different in certain aspects from those applicable to banks in certain other countries or regions; (ix) further development of interest rate liberalization, the PBoC’s adjustments to the benchmark interest rate, the deposit insurance program and other regulatory changes in the PRC’s banking industry may materially and adversely affect our results of operations; (x) we are subject to risks relating to SPV investments; and (xi) we are subject to risks relating to investments in debt securities.

For details of the risk factors relating to an [REDACTED] in our Shares, please see ‘Risk Factors”.

[REDACTED] EXPENSES

The [REDACTED] expenses to be borne by us are estimated to be approximately RMB[REDACTED] million (equivalent to approximately HK$[REDACTED] million), of which approximately RMB[REDACTED] million (including RMB[REDACTED] million incurred during the Track Record Period and recorded as prepaid expenses in our statement of financial position as of June 30, 2018) will be accounted for as a deduction from equity upon the [REDACTED], and the rest is expected to be charged to our statement of comprehensive income for the year ending December 31, 2018. The [REDACTED] expenses above are the latest practicable estimate for reference only, and the actual amount may differ from this estimate. Our Directors do not expect such [REDACTED] expenses to have a material adverse impact on our results of operations for the year ending December 31, 2018.

9 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DEFINITIONS

In this document, unless the context otherwise requires, the following terms shall have the meanings set out below.

[REDACTED]

“Articles of Association” or our articles of association, the version of which was adopted “Articles” by our Shareholders at the annual general meeting of 2017 held on May 30, 2018 and was approved by CBRC Sichuan Office on August 10, 2018, which will become effective upon the [REDACTED], as amended, supplemented or otherwise modified from time to time

“ATM(s)” automated teller machine(s)

“Bank”, “our Bank”, “we” Luzhou City Commercial Bank Co., Ltd. (瀘州市商業銀行股 or “us” 份有限公司), a joint stock company established on September 15, 1997 in the PRC with limited liability pursuant to the relevant PRC laws and regulations, and, if the context requires, includes its predecessors, branches and sub-branches

“Banking (Disclosure) Rules” the Banking (Disclosure) Rules, Chapter 155M of the Laws of Hong Kong, as amended, supplemented or otherwise modified from time to time

“Banking Ordinance” the Banking Ordinance, Chapter 155 of the Laws of Hong Kong, as amended, supplemented or otherwise modified from time to time

“Basel Accords” Basel I, Basel II and Basel III, collectively

“Basel I” the Basel Capital Accord promulgated in 1988

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

“Basel III” the Revised Basel Capital Accord promulgated in December 2010

“Board” or “Board of the board of Directors of our Bank, where applicable Directors”

“Board of Supervisors” the board of Supervisors of our Bank, where applicable

10 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DEFINITIONS

[REDACTED]

“building ownership building ownership certificates in the PRC (中華人民共和國 certificates” 房屋所有權證)

“Business Day(s)” any day(s) (other than a Saturday, Sunday or public holiday) on which banks in Hong Kong are generally open for normal banking business to the public

“CAGR” compound annual growth rate

“CASBE” the China Accounting Standards for Business Enterprises

“CBIRC” China Banking and Insurance Regulatory Commission (中國銀行保險監督管理委員會), a regulatory authority formed via the merger of the CBRC and CIRC according to the Notice of the State Council regarding the Establishment of Organizations (國務院關於機構設置的通知) (Guo Fa [2018] No. 6) issued by the State Council on March 24, 2018, and, if the context requires, includes its predecessors, namely the CBRC and CIRC

“CBRC” China Banking Regulatory Commission (中國銀行業監督管理委員會), which was merged with the CIRC and formed the CBIRC according to the Notice of the State Council regarding the Establishment of Organizations (國務院關於機構設置的通知) (Guo Fa [2018] No. 6) issued by the State Council on March 24, 2018

“CBRC Luzhou Office” China Banking Regulatory Commission Luzhou Office (中國銀行業監督管理委員會瀘州監管分局)

“CBRC Sichuan Office” China Banking Regulatory Commission Sichuan Office (中國銀行業監督管理委員會四川監管局)

[REDACTED]

11 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DEFINITIONS

[REDACTED]

“Central China” a geographic area which covers six provinces: Henan, Shanxi, Hubei, Anhui, Hunan and Jiangxi

“China” or “PRC” the People’s Republic of China, but for the purpose of this document only and, unless the context otherwise requires, excluding Hong Kong, Macau and Taiwan

“CIRC” China Insurance Regulatory Commission (中國保險監督管理委員會), which was merged with the CBRC and formed the CBIRC according to the Notice of the State Council regarding the Establishment of Organizations (國務院關於機構設置的通知) (Guo Fa [2018] No. 6) issued by the State Council on March 24, 2018

“city commercial banks” city commercial banks established with the approval of CBIRC and other regulatory authorities pursuant to the PRC Company Law and the PRC Commercial Banking Law

“Classification Standards of the Classification Standards of Small and Medium Small and Medium Enterprises (中小企業劃型標準規定) jointly promulgated by Enterprises” the MIIT, NBS, NDRC and MOF on June 18, 2011

“commercial banks” the Large Commercial Banks, the Nationwide Joint-stock Commercial Banks, privately-owned banks, rural commercial banks and foreign banks

“Companies Ordinance” the Companies Ordinance, Chapter 622 of the Laws of Hong Kong, as amended, supplemented or otherwise modified from time to time

“Companies (Winding Up and the Companies (Winding Up and Miscellaneous Provisions) Miscellaneous Provisions) Ordinance, Chapter 32 of the Laws of Hong Kong, as Ordinance” amended, supplemented or otherwise modified from time to time

12 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DEFINITIONS

“Core Indicators (Provisional)” the Core Indicators for the Risk Management of Commercial Banks (Provisional) (商業銀行風險監管核心指標(試行)), as promulgated by the former CBRC on December 31, 2005 and effective on January 1, 2006, as amended, supplemented or otherwise modified from time to time

“Corporate Governance the Guidelines on Corporate Governance of Commercial Guidelines” Banks (商業銀行公司治理指引), as promulgated by the former CBRC on July 19, 2013 and effective on the same date, as amended, supplemented or otherwise modified from time to time

“CSRC” China Securities Regulatory Commission (中國證券監督管理委員會)

“Director(s)” the director(s) of our Bank

“Domestic Shares” ordinary shares issued by our Bank, with a nominal value of RMB1.00 each, which are subscribed for or credited as paid up in Renminbi

“GDP” nominal gross domestic product

“GFA” gross floor area

[REDACTED]

“H Shares” the ordinary shares to be [REDACTED] by the Bank in Hong Kong under the [REDACTED] with a nominal value of RMB1.00 each, which are to be [REDACTED] and [REDACTED] in Hong Kong Dollars and to be [REDACTED] and [REDACTED] on the Hong Kong Stock Exchange

“HKFRS” Hong Kong Financial Reporting Standards

“HKIAC” Hong Kong International Arbitration Centre

13 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DEFINITIONS

“HKMA” Hong Kong Monetary Authority

[REDACTED]

“HK$” or “HKD” or Hong Kong Dollars, the lawful currency of Hong Kong “Hong Kong Dollars”

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

[REDACTED]

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

[REDACTED]

“IFRS” International Financial Reporting Standards and International Accounting Standards (“IAS”), which include the related standards, amendments and interpretations issued by the International Accounting Standards Board (“IASB”)

“independent third party(ies)” a person or entity who is not considered a connected person of our Bank under the Listing Rules

14 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DEFINITIONS

[REDACTED]

“Jiale Real Estate” Jiale Real Estate Co., Ltd. (四川省瀘州市佳樂房地產有限責任公司), a company established in the PRC with limited liability on September 7, 1994 and an indirectly-owned subsidiary of Sichuan Jiale Group

“Land use certificates” land use certificates in the PRC (中華人民共和國國有土地使用證)

“Large Commercial Banks” include Industrial and Commercial Bank of China Limited, China Construction Bank Corporation, Agriculture Bank of China Limited, Bank of China Limited and Bank of Communications Co., Ltd.

“large enterprises” the enterprises other than those classified as medium, small or micro enterprises under the Classification Standards of Small and Medium Enterprises

“Latest Practicable Date” August 21, 2018, being the latest practicable date for the purpose of ascertaining certain information contained in this document prior to its publication

[REDACTED]

“LGFV” being the abbreviation for local government financing vehicles

15 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DEFINITIONS

[REDACTED]

“Listing Rules” the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, as amended, supplemented or otherwise modified from time to time

“Luzhou Industrial Investment Luzhou Industrial Investment Group Co., Ltd. (瀘州市工業 Group” 投資集團有限公司), a company established in the PRC with limited liability on July 5, 2006 and a substantial Shareholder

“Luzhou Laojiao Group” Luzhou Laojiao Group Co., Ltd. (瀘州老窖集團有限責任公司), a company established in the PRC with limited liability on December 21, 2000 and a substantial Shareholder

“Luzhou SASAC” Luzhou State-owned Assets Supervision and Administration Commission (瀘州市國有資產監督管理委員會)

“Luzhou State-owned Assets Luzhou State-owned Assets Operation Co., Ltd. (瀘州國有資 Company” 產經營有限公司), a company established in the PRC with limited liability on December 27, 1999 and a Shareholder of the Bank

“Macau” the Macau Special Administrative Region of the PRC

“Mandatory Provisions” the Mandatory Provisions for Articles of Association of Companies to be Listed Overseas (到境外上市公司章程必備條款), which were promulgated by the former Securities Commission of the State Council and the former State Restructuring Commission on August 27, 1994, effective on the same date, as amended, supplemented or otherwise modified from time to time

“medium enterprises” the enterprises classified as medium enterprises under the Classification Standards of Small and Medium Enterprises. For example, industrial enterprises with fewer than 1,000 employees or operating income of less than RMB400 million shall be classified as SMEs, among which those with 300 or more employees and operating income of RMB20 million or more shall be classified as medium enterprises

16 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DEFINITIONS

“micro enterprises” the enterprises classified as micro enterprises under the Classification Standards of Small and Medium Enterprises. For example, industrial enterprises with fewer than 20 employees or operating income of less than RMB3 million shall be classified as micro enterprises

“MIIT” Ministry of Industry and Information Technology of the PRC (中華人民共和國工業和信息化部)

“MOF” Ministry of Finance of the PRC (中華人民共和國財政部)

“NAO” National Audit Office of the PRC (中華人民共和國審計署)

“Nationwide Joint-stock include China CITIC Bank Corporation Limited, China Commercial Banks” Everbright Bank Co., Ltd., Huaxia Bank Co., Limited, China Guangfa Bank Co., Ltd., Ping An Bank Co., Ltd. (formerly named as Shenzhen Development Bank Co., Ltd.), China Merchants Bank Co., Ltd., Shanghai Pudong Development Bank Co., Ltd., Industrial Bank Co., Ltd., China Minsheng Bank Corp., Ltd., Evergrowing Bank Co., Ltd., China Zheshang Bank Co., Ltd. and China Bohai Bank Co., Ltd.,

“NBS” National Bureau of Statistics of the PRC (中華人民共和國國家統計局)

“NDRC” National Development and Reform Commission of the PRC (中華人民共和國國家發展和改革委員會)

“net capital” core tier-one capital, additional tier-one capital and tier-two capital of a bank less corresponding capital deductions, in each case, as specified in the relevant CBRC regulations

“New Normal” a term refers to a new phase that Chinese economy has entered that is different from the high-speed growth pattern exhibited in the past. The new economic phase features more sustainable, mid-to high-speed growth with higher efficiency and lower costs

“non-performing loan(s)” or for the purposes of this document, is used synonymously “NPL(s)” with “impaired loans” in Note 3.1.6 to the Accountant’s Report in Appendix I to this document

“non-performing loan ratio” or the percentage ratio calculated by dividing non-performing “NPL ratio” loans by total loans

17 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DEFINITIONS

[REDACTED]

“PBoC” People’s Bank of China (中國人民銀行), the central bank of the PRC

“POS” point of sale, a checkout terminal in a shop or any location where a transaction occurs

“PRC Banking Supervision and the Banking Supervision and Regulatory Law of the PRC (中 Regulatory Law” 華人民共和國銀行業監督管理法), which was promulgated by 6th session of the Standing Committee of the 10th National People’s Congress on December 27, 2003 and became effective on February 1, 2004, as amended, supplemented or otherwise modified from time to time

“PRC Commercial Banking the Commercial Banking Law of the PRC (中華人民共和國 Law” 商業銀行法), which was promulgated by the 13th session of the Standing Committee of the 8th National People’s Congress on May 10, 1995 and became effective on July 1, 1995, as amended, supplemented or otherwise modified from time to time

“PRC Company Law” the Company Law of the PRC (中華人民共和國公司法), as enacted by the Standing Committee of the 10th National People’s Congress on October 27, 2005 and became effective on January 1, 2006, as amended, supplemented or otherwise modified from time to time

18 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DEFINITIONS

“PRC GAAP” the PRC Accounting Standards for Business Enterprises (中國企業會計準則) promulgated by MOF on February 15, 2006 and its supplementary regulations, as amended, supplemented or otherwise modified from time to time

“PRC Government” refers to the PRC central government and local governments

“PRC PBoC Law” the Law of the People’s Bank of China of the PRC (中華人民共和國人民銀行法), which was promulgated by the 3rd session of the Standing Committee of the 8th National People’s Congress on March 18, 1995 and became effective on the same date, as amended, supplemented or otherwise modified from time to time

[REDACTED]

“real property right certificates” real property right certificates in the PRC (中華人民共和國不動產權證)

[REDACTED]

“Related Party” or “Related has the meaning ascribed to it under the Administrative Parties” Measures for the Related Party Transactions between the Commercial Banks and their Insiders or Shareholders (商業銀行與內部人和股東關聯交易管理辦法) promulgated by the former CBRC, the PRC GAAP and/or IFRS

“Related Party Transaction(s)” has the meaning ascribed to it under the Administrative Measures for the Related Party Transactions between the Commercial Banks and their Insiders or Shareholders (商業銀行與內部人和股東關聯交易管理辦法) promulgated by the former CBRC, Accounting Standards for Business Enterprises (企業會計準則) promulgated by the MOF, and/or IFRS

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

19 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DEFINITIONS

[REDACTED]

“SAFE” State Administration of Foreign Exchange of the PRC (中華人民共和國國家外匯管理局)

“SAIC” State Administration for Industry and Commerce of the PRC (中華人民共和國國家工商行政管理總局), which was recently changed to General Administration of Market Supervision of the PRC (國家市場監督管理總局) according to the Notice of the State Council regarding the Establishment of Organizations (國務院關於機構設置的通知) (Guo Fa [2018] No. 6) issued by the State Council on March 24, 2018

“Sannong” a short-hand reference to the Chinese pronunciation of the phrase “agriculture, rural areas and farmers (農業,農村和農民)”. The terminology “Sannong” (三農) was initially created to refer to the three rural development issues in China (specifically, agriculture, rural areas and farmers)

“SASAC” State-owned Assets Supervision and Administration Commission of the State Council (中華人民共和國國務院國有資產監督管理委員會)

“SAT” State Administration of Taxation of the PRC (中華人民共和國國家稅務總局)

“Silk Road Economic Belt” a land route designed to connect the PRC with the rest of Asia, Africa and Europe, which was proposed by the PRC government in relation to initiatives for promoting economic cooperation in such region

“SFC” Securities and Futures Commission of Hong Kong

“SFO” the Securities and Futures Ordinance, Chapter 571 of the Laws of Hong Kong, as amended, supplemented or otherwise modified from time to time

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

“Shares” ordinary shares in the share capital of the Bank with a nominal value of RMB1.00 each

“SHIBOR” the Shanghai Interbank Offered Rate, a daily reference rate published by the National Interbank Funding Center

“Sichuan Government” The People’s Government of Sichuan Province (四川省人民政府)

20 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DEFINITIONS

“Sichuan Jiale Group” Sichuan Jiale Enterprise Group Co., Ltd. (四川省佳樂企業集團有限公司), a company established in the PRC with limited liability on September 11, 1998 and a substantial Shareholder

“Sichuan SASAC” State-owned Assets Supervision and Administration Commission of Sichuan Government (四川省政府國有資產監督管理委員會)

“small enterprises” the enterprises classified as small enterprises under the Classification Standards of Small and Medium Enterprises. For example, industrial enterprises with fewer than 300 employees or operating income of less than RMB20 million shall be classified as small or micro enterprises, among which those with 20 or more employees and operating income of RMB3 million or more shall be classified as small enterprises

“Sole Sponsor” CLSA Capital Markets Limited

“Special Regulations” the Special Regulations of the State Council on the Overseas Offering and the Listing of Shares by Joint Stock Limited Companies (國務院關於股份有限公司境外募集股份及上市的特別規定), which was promulgated by the State Council on August 4, 1994, as amended, supplemented or otherwise modified from time to time

“SPV Investment” Investments made by financial institutions in special purpose vehicles, including wealth management products managed by commercial banks, trust plans managed by trust companies, asset management plans and securities investment funds managed by fund management companies and securities firms (including their subsidiaries), asset management products managed by insurance asset management companies, which is defined in Notice on Regulating Interbank Businesses of Financial Institutions (Yin Fa [2014] No. 127) (《關於規範金融機構同業業務的通知》(銀發[2014]127號)) jointly promulgated by PBoC, former CBRC, CSRC, CIRC and SAFE on April 24, 2014

[REDACTED]

“State-Controlled” for purpose of this document, a state-controlled entity refers to that majority owned by state-owned enterprise(s) or PRC government agency(ies)

“State Council” the State Council of the PRC (中華人民共和國國務院)

21 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DEFINITIONS

“subsidiary(ies)” has the meaning ascribed to it under the Listing Rules

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

“Track Record Period” the three years ended December 31, 2015, 2016 and 2017 and the six months ended June 30, 2018

[REDACTED]

“US$”, “USD” or United States dollars, the lawful currency of the United “U.S. dollars” States of America

[REDACTED]

“Western China” a geographic area which covers one municipality: Chongqing; six provinces: Sichuan, Guizhou, Yunnan, Shaanxi, Gansu, and Qinghai; and five autonomous regions: Tibet, Ningxia, Inner Mongolia, Guangxi and Xinjiang

[REDACTED]

“Xinfu Mining Industry Group” Luzhou Xinfu Mining Industry Group Co., Ltd. (瀘州鑫福礦業集團有限公司), a company established in the PRC with limited liability on September 30, 1999 and a substantial Shareholder

“Xinglu Investment Group” Luzhou Xinglu Investment Group Co., Ltd. (瀘州市興瀘投資集團有限公司), a company established in the PRC with limited liability on January 28, 2003 and a Shareholder of the Bank

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“Xinglu Jutai Real Estate” Luzhou Xinglu Jutai Real Estate Co., Ltd. (瀘州興瀘居泰房地產有限公司), a company established in the PRC with limited liability on November 12, 1998 and a Shareholder of the Bank

“Yangtze River Economic Belt” an economic region in the PRC that encompasses Shanghai, Sichuan, Yunan, Chongqing, Hubei, Hunan, Anhui, Jiangsu, Jiangxi, Zhejiang and Guizhou

[REDACTED]

Certain amounts and percentage figures included in this document have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures preceding them.

Unless the context otherwise requires, the terms including “associate(s)”, “close associate(s)”, “connected transaction(s)”, “connected person(s)”, “core connected person(s)” and “substantial shareholder(s)” shall have the meanings ascribed to them under the Listing Rules.

For the purpose of this document, “micro and small customers” refers to our micro and small enterprises customers and individual business owner customers.

For the ease of reference, in this document, unless otherwise indicated, we use the terms “customer loans”, “loans” and “loans to customers” synonymously.

If there are any inconsistencies between the Chinese names of entities or enterprises established in China and their English translations, the Chinese names shall prevail.

23 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. FORWARD-LOOKING STATEMENTS

This document contains certain forward-looking statements and information relating to us that are based on the beliefs of, assumptions made by and information currently available to our management. When used in this document, the words “aim”, “anticipate”, “believe”, “could”, “predict”, “potential”, “continue”, “expect”, “going forward”, “intend”, “may”, “ought to”, “plan”, “project”, “seek”, “should”, “will”, “would” and the negative forms of these words and other similar expressions, as they relate to our Bank or our management, are intended to identify forward-looking statements. Such statements reflect the current views of our Bank’s management with respect to future events, operations, liquidity and capital resources, some of which may not materialize or may change. These statements are subject to certain risks, uncertainties and assumptions, including the other risk factors as described in this document. You are strongly cautioned that reliance on any forward-looking statements involves known and unknown risks and uncertainties. The risks and uncertainties facing our Bank which could affect the accuracy of forward-looking statements include the following:

• our operations and business prospects, including our development plans for our existing and new products and services;

• our business development strategies and initiatives to implement these strategies;

• general economic, market and business conditions in Luzhou, Sichuan Province or the PRC and any changes thereto;

• changes or volatility in interest rates, foreign exchange rates, equity prices or other rates or prices, including those pertaining to the PRC and the industry and markets in which we operate;

• our existing risk management system and our ability to improve such system;

• our dividend policy;

• our financial condition, results of operation and performance;

• the amount and nature of, potential for and future development of our business;

• future developments, trends and conditions in the industry and markets in which the we operate;

• changes to the regulatory environment and general outlook in the industry and markets in which we operate;

• market competition, and the products, actions and developments of competitors;

• general political and economic conditions; and

• capital market developments.

Subject to the requirements of applicable laws, rules and regulations, we do not intend to update or otherwise revise the forward-looking statements in this document, whether as a result of new information, future events or otherwise. As a result of these and other risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this document might not occur in the way we expect, or at all. Accordingly, you should not place undue reliance on any forward-looking information. The forward-looking statements in this document are qualified by reference to the cautionary statements set out in this section.

24 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS

You should carefully consider all of the information in this document, including the risks and uncertainties described below, before making an [REDACTED] in the H Shares. Our business, financial condition and results of operation could be materially and adversely affected by any of these risks. The [REDACTED] of the H Share could significantly decrease due to any of these risks, and you may lose part or even all of your [REDACTED]. You should also pay particular attention to the fact that we are a PRC company and are governed by a legal and regulatory system which in some respects may differ from those prevailing in other countries. For more information concerning the laws and regulatory systems of the PRC and certain related matters discussed below, see “Supervision and Regulation”, “Appendix IV – Summary of Principal Legal and Regulatory Provisions” and “Appendix V – Summary of Articles of Association”.

RISKS RELATING TO OUR LOAN PORTFOLIO If we are unable to effectively maintain the quality of our loan portfolio, our financial condition and results of operations may be materially and adversely affected. Our financial condition and results of operations will be affected by our ability to maintain and improve the quality of our loan portfolio. Our customer loans amounted to RMB9,977.9 million, RMB14,534.5 million, RMB19,401.4 million and RMB24,295.5 million as of December 31, 2015, 2016 and 2017 and June 30, 2018, respectively. As of the same dates, our non-performing loans amounted to RMB29.8 million, RMB77.1 million, RMB192.7 million and RMB220.7 million, respectively, and our NPL ratio was 0.30%, 0.53%, 0.99% and 0.91%, respectively. The quality of our loan portfolio could deteriorate. Deterioration may occur due to a variety of reasons that are beyond our control, including a slowdown of China’s or Sichuan Province’s economy, adverse macroeconomic developments, fluctuation in capital markets, an outbreak of disasters or occurrence of major accidents in China or other regions. Any deterioration in our asset quality may lead to increases in our non-performing loans and prompt us to make provisions for impairment losses, including writing off loans due to impairment, all of which may materially and adversely affect our business, financial condition and results of operations. In particular, in 2015, 2016 and 2017 and in the six months ended June 30, 2018, our impairment losses on customer loans amounted to RMB53.6 million, RMB108.7 million, RMB216.5 million and RMB116.6 million, respectively. There is no assurance that we will be able to effectively mitigate risks associated with losses on customer loans, which are subject to a broad range of factors beyond our control.

Our impairment allowance on customer loans may not be sufficient to cover the actual losses on our loan portfolio in the future. As of December 31, 2015, 2016 and 2017 and June 30, 2018, the balance of our non-performing loans was RMB29.8 million, RMB77.1 million, RMB192.7 million and RMB220.7 million, respectively. Our impairment allowance on customer loans was RMB274.5 million, RMB375.4 million, RMB567.5 million and RMB608.0 million as of December 31, 2015, 2016 and 2017 and June 30, 2018, respectively, and our allowance coverage ratio was 920.63%, 486.63%, 294.49%, and 275.54% respectively. Our allowance to gross loan ratio was 2.75%, 2.58%, 2.93% and 2.50%, respectively, as of the same dates. We determine impairment

25 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS allowance amount based on our assessment of various factors affecting the quality of our loan portfolio. These factors include our borrowers’ operational and financial condition, repayment ability, intention to repay, the realizable value of any collateral and the ability of guarantors of our customers to fulfill their obligations, as well as China’s economic, legal and regulatory environment. For details, please refer to “Assets and Liabilities – Assets – Impairment Allowance on Customer Loans”. Many of these factors are beyond our control, and therefore our assessments and expectations on these factors may differ from their future developments. In addition, our impairment allowance may increase due to future regulatory and accounting policy changes, deviations in loan classification or adoption of a more conservative provisioning practice. Any of the above factors may significantly reduce our profit and materially and adversely affect our business, prospects, financial condition and results of operations.

We face concentration risks from our credit exposure to certain industries, borrowers and geographic regions.

As of December 31, 2015, 2016 and 2017 and June 30, 2018, our corporate loans represented 56.1%, 57.9%, 61.6% and 77.2% of our total customer loans, respectively. As of June 30, 2018, our loans to the real estate, leasing and business service, wholesale and retail, manufacturing and construction industries, which were the top five industries, as of June 30, 2018, from which our corporate loan customers are derived, represented 22.3%, 18.0%, 13.3%, 11.8% and 10.5% of our total corporate loans, respectively. As of June 30, 2018, we did not record any non-performing loans to corporate borrowers in the real estate and leasing and business service industries, and the NPL ratio for loans to corporate borrowers in the wholesale and retail, manufacturing and construction industries was 0.51%, 1.20% and 0.22%, respectively.

Any deterioration in any of the industries where our loans are concentrated or any deterioration in the financial condition or results of operations of our borrowers could undermine the quality of our existing loans and our ability to extend new loans, which in turn could materially and adversely affect our business, financial condition and results of operations.

As of June 30, 2018, loans to our ten largest single borrowers totaled RMB4,134.0 million, representing 69.5% of our regulatory capital, which were all classified as normal. As of the same date, our credit exposure to our ten largest group customers totaled RMB5,481.6 million, representing 92.1% of our regulatory capital. If the quality of any of these loans deteriorates or becomes non-performing, our asset quality could deteriorate significantly, and our financial condition and results of operations could be materially and adversely affected.

Furthermore, our business and operations are primarily concentrated in Sichuan Province. As of June 30, 2018, a majority of our customer loans and our customer deposits originated from Sichuan Province. In addition, most of our business and operations are expected to remain in Sichuan Province for the foreseeable future. Therefore, our continued growth depends to a large extent on the continued growth of Sichuan Province’s economy, and we are exposed to risks arising from concentration of loans extended in Sichuan Province. Any adverse change in the economic development of or any significant natural disaster or catastrophic event occurring in Sichuan Province, or any material adverse change in financial condition of our customers in this region or any party to whom they provide guarantees, may materially and adversely affect our business, financial condition and results of operations.

26 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS

The collateral or guarantees securing our customer loans may not be sufficient or fully realizable.

As of June 30, 2018, 44.0%, 18.4% and 32.4% of our total customer loans were secured by collateral, pledges, and guarantees, respectively. The collateral and pledges securing our customer loans primarily comprised land use rights, buildings and houses, certificates of deposit and other assets. The value of the collateral and pledges securing our loans may fluctuate and decline due to various factors beyond our control, including macroeconomic factors affecting China. For example, a slowdown in the PRC economy may lead to a downturn in the real estate market, which, in turn, may result in declines in the value of the real estate assets securing our loans to levels below the outstanding principal balance of said loans. In addition, we cannot assure you that our assessment of the value of collateral or pledges will be accurate at all times. If the collateral or pledges prove to be insufficient to cover the related loans, we may have to obtain additional collateral or pledges from the borrowers, and there is no assurance that we would be able to obtain the said collateral or pledges on satisfactory terms or at all. Reduction in value of our collateral and pledges or our inability to obtain additional collateral or pledges may result in additional impairment allowance, which may materially and adversely affect our business, financial condition, and results of operations.

In the PRC, the procedures for liquidating or otherwise realizing the value of collateral or pledges may be time-consuming, the value of collateral or pledges may not be fully realized and it may be difficult to enforce claims in respect of such collateral or pledges. In addition, under certain circumstances, other claims may be senior or prior to our claims on the collateral or pledges securing our loans. All of the foregoing factors could adversely affect our ability to realize the value of the collateral or pledges securing our loans in a timely manner, or at all.

The guarantees under our guaranteed loans are generally not backed by collateral or other security interests. In addition, some of the guarantees are provided by affiliates of the relevant borrower, so that certain factors which result in a borrower’s inability to repay a guaranteed loan in full and on time may also affect the guarantor’s ability to fully perform its guarantee obligations and, therefore, expose us to additional risks. Furthermore, we are subject to the risk that a court or any other judicial or government authority may declare a guarantee invalid or fail to enforce such guarantee. We are therefore exposed to the risk that we may not be able to recover all or part of our guaranteed loans. If we are unable to dispose of the assets of borrowers and guarantors or if the guarantors fail to fully perform their guarantee obligations on a timely basis, our business, financial condition, and results of operations may be materially and adversely affected.

As of June 30, 2018, unsecured loans accounted for 5.2% of our total customer loans. We grant such unsecured loans mainly based on our credit evaluation of such customers. We cannot assure you that our credit assessments of such customers are or will be accurate at all times, or that such customers will repay their loans in full and on time. As we have only general claims on the assets of defaulting borrowers under loans not secured by collateral or pledges, we are exposed to risk of losing the entire outstanding amount under such loans, which may adversely affect our business, financial condition and results of operations.

27 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS

We are exposed to risks arising from loans granted to micro and small enterprises.

As of December 31, 2015, 2016 and 2017 and as of June 30, 2018, our loans to micro and small enterprises represented 70.8%, 74.4%, 77.7%, and 69.1%, respectively, of our total corporate loans. We believe that micro and small enterprises are generally more vulnerable to macroeconomic fluctuations than larger enterprises, as they may lack the financial, management or other resources necessary to withstand the adverse effects brought on by economic slowdowns or changes in the regulatory environment. In addition, we may not be able to obtain all of the necessary information on micro and small enterprises for us to assess their credit risks. As of December 31, 2015, 2016 and 2017 and June 30, 2018 our non-performing loan ratio of micro and small enterprise loans was 0.42%, 0.47%, 1.19% and 1.08%, respectively. Our NPL may increase significantly due to the effects on our micro and small enterprise customers caused by economic slowdowns or unfavorable changes in the regulatory environment, which may materially and adversely affect our business, financial condition and results of operations.

Our asset quality, financial condition or results of operations may be materially and adversely affected, if the repayment ability of LGFVs deteriorates or the government policies affecting LGFVs change.

Similar to other commercial banks in the PRC, we have extended loans to LGFVs during the Track Record Period. LGFVs refer to economic entities with independent legal capacity established by local governments as well as other departments and institutions which, through fiscal allocation or injection of assets such as land and equity, are responsible for financing government-sponsored projects. LGFVs typically use loan proceeds to make investments in infrastructure or industrial zone construction, renovation of old districts, or development of public interest projects. They typically repay us with operating cash flows generated from the relevant projects and the local government budget. As of December 31, 2015, the balance of our loans to LGFVs amounted to RMB25.0 million, and we have not extended any credit to any LGFVs after such previous LGFV loan was repaid in 2016.

Apart from granting loans to LGFVs, we also invest in the trust plans or asset management plans where the end borrowers are LGFVs. As of December 31, 2015, 2016 and 2017 and as of June 30, 2018, the balance of our investment in such trust plans and asset management plans amounted to RMB2,545.0 million, RMB1,535.0 million, RMB850.0 million and RMB300.0 million, respectively.

Pursuant to applicable PRC regulations, unless otherwise provided by laws and the State Council, local governments and their departments or organizations and institutions funded primarily by fiscal budget are not permitted to, directly or indirectly, provide guarantees for the financing activities of LGFVs by using either fiscal income or state-owned assets. In addition, many projects sponsored by LGFVs are carried out primarily for public interest purposes and are not necessarily commercially viable and, therefore, the operating cash flows generated from such projects may not be sufficient to cover the principal of and interest on the relevant loans. As a result, the ability of a LGFV to repay its loans may depend, to a significant extent, on its ability to receive financing support from the government, which may not always be available due to the government’s liquidity, budgeting priorities and other considerations.

28 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS

A macroeconomic slowdown, unfavorable changes in governmental policies, the deterioration in the financial condition of local governments, significant decline in property prices or other external factors may undermine the repayment capabilities of relevant LGFVs, which may, in turn, materially and adversely affect our asset quality, financial condition and results of operations. Since 2010, the State Council, CBRC and PBoC, along with several other PRC regulatory authorities, have promulgated a series of notices, guidelines and other regulatory measures that instruct PRC banks and other financial institutions to strengthen their risk management measures regarding loans to LGFVs. For further details, please see “Supervision and Regulation – Regulation on Principal Commercial Banking Activities”. We have adopted measures both on our own initiative and in response to these regulatory directives to control our risk exposure on loans to LGFVs, including implementing credit exposure limits on our loans to LGFVs, strengthening our credit extension and credit monitoring mechanism, and establishing risk alert systems for loans to LGFVs. For details on how we manage risks related to LGFVs, please see “Risk Management – Credit Risk Management – Credit Risk Management for Corporate Loans – Portfolio Management – Credit Risk Management for Loans to LGFVs”. However, there is no assurance that our measures are sufficient to protect us against loss in connection with default by LGFV borrowers, which may materially and adversely affect our asset quality, financial condition and results of operations.

Any significant or protracted downturn in, or change in national policies affecting the real estate market in the PRC may have a material adverse effect on our business, asset quality, financial condition and results of operations.

We are exposed to risks associated with the PRC real estate market, especially from corporate loans to the real estate industry, personal residential loans and other loans secured by real estate. As of December 31, 2015, 2016 and 2017 and June 30, 2018, our loans to corporate borrowers in the real estate industry represented 10.7%, 20.3%, 17.4% and 22.3%, respectively, of our total corporate loans. As of the same dates, our residential mortgage loans represented 55.8%, 50.9%, 45.4% and 44.4%, respectively, of our total personal loans. As of the same dates, loans secured by real estate amounted to 53.3%, 46.2%, 38.8% and 43.5% of our total loans amounts.

The PRC government has imposed, and may continue to impose, macroeconomic policies to regulate the real estate market including imposing value-added tax on the transfer of residential apartments. For details, please see “Supervision and Regulation – Regulation on Principal Commercial Banking Activities”. These measures may slow down the growth of our loans to, and negatively affect the financial condition, liquidity and repayment capabilities of, our customers in the real estate industry. These measures may also reduce the demand for residential mortgage loans in the PRC. In addition, any significant or continued decline in property prices in the PRC may have a material adverse effect on the asset quality of our corporate loans to customers in the real estate industry and personal residential mortgage loans. If the real estate market in the PRC experiences a recession or a prolonged period of downturn, the value of the real estate as collateral for our loans may decrease to a level insufficient to cover the principal of and interest on the loans, which could therefore prevent us from recovering all or part of our principal and interest if the borrower defaults. We cannot guarantee that the measures we have taken to manage these risks will be effective or sufficient to protect us against the foregoing adverse effects.

29 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS

RISKS RELATING TO OUR BUSINESS Our business may not grow at a rate comparable to our growth rate in the past. We have experienced significant growth during the Track Record Period. Our operating income reached RMB942.2 million, RMB1,307.0 million and RMB1,680.0 million for the years ended December 31, 2015, 2016 and 2017, respectively, representing a CAGR of 33.5%. Our operating income reached RMB769.5 million and RMB839.3 million for the six months ended June 30, 2017 and 2018, respectively. Our total assets reached RMB31,763.6 million, RMB53,280.7 million and RMB70,879.4 million, as of December 31, 2015, 2016 and 2017, respectively, representing a CAGR of 49.4%. Our total assets reached RMB74,555.1 million as of June 30, 2018. However, this growth trend reflects only our past performance and may not reflect our performance in the future. The sustainability of our growth depends on a number of factors, many of which are beyond our control, including our ability to offer new products and services to attract new customers, improve our marketing and expand our sales channels. In addition, our growth is closely related to Sichuan Province’s and Luzhou’s economies as well as other macroeconomic factors affecting the PRC and Sichuan Province, including GDP growth, the inflation rate and changes in the banking and financial industry. Furthermore, the effects of changing regulations, competitive conditions and many other factors cannot be fully predicted and may have a material adverse effect on our business, financial condition and results of operations. There is no assurance that we can sustain the growth rate we achieved in the past.

Changes in accounting standards or policies may materially affect our financial condition and results of operations. Financial accounting and reporting standards as well as the relevant interpretation of these standards, which govern the form and content of our financial statements, are subject to changes from time to time. Such changes are beyond our control, can be difficult to predict and may materially impact how we record and report the result of our operations. For example, we may be required to apply a new or a revised standard retroactively, leading to material changes to previously reported financial results. In July 2014, the IASB issued the final version of IFRS 9 – Financial Instruments, which became effective during the year commencing on or after January 1, 2018, and the IASB allowed for early adoption. IFRS 9 replaced IAS 39 – Financial Instruments: Recognition and Measurement. In addition, in October 2017, the IASB introduced early repayment features and the concept of negative compensation (amendments to IFRS 9), which became effective during the year commencing on or after January 1, 2019, and the IASB allowed for early adoption. Since January 1, 2018, we have adopted IFRS 9. Among other things, IFRS 9 adopts a different credit loss model compared with that being used in IAS 39, where a loss event will no longer need to occur before an impairment allowance is recognized. In addition, the impairment model of IFRS 9 demands our management to judge whether there is a significant increase in credit risks in certain assets, and if so, make provisions for a lifetime expected credit losses for those assets rather than setting out allowance in the amount of 12-month expected credit losses. For details of the impact of IFRS 9, please see “Financial Information – Critical Accounting Judgments and Key Sources of Estimation Uncertainty – Impact of New Accounting Policies”. Please also see Note 2.1 to the Appendix I attached to this document. As a result, our results of operations during the years ended December 31, 2015, 2016 and 2017 may not be indicative of our results of operations for the reporting years or periods beginning on or after January 1, 2018. The adoption of IFRS 9 for the six months ended June 30, 2018 does not result in any significant impact on the amounts reported in the financial information except that, a 5% of equity increase with effect from January 1, 2018. Any future changes to our accounting policies may have a material impact on our financial condition and results of operations.

30 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS

If we fail to maintain the growth rate of our customer deposits or our customer deposits decrease substantially, our liquidity, financial conditions and operating results could be materially and adversely affected.

Customer deposits have been our primary funding source. We rely on the growth in customer deposits to expand our loan business and meet other liquidity needs. Decreases in customer deposits will reduce our sources of funding, which, in turn, will reduce our ability to extend new loans while meeting capital and liquidity requirements. In recent years, our deposits have continued to grow. Our total customer deposits amounted to RMB20,383.4 million, RMB31,018.8 million, RMB42,145.3 million and RMB44,742.4 million as of December 31, 2015, 2016 and 2017 and June 30, 2018, respectively. However, there are various factors affecting the growth in our customer deposits, some of which are beyond our control, such as economic and political conditions, the availability of alternative investment products and changes in customers’ preference for savings. In particular, we may not be able to attract or retain adequate corporate deposits under a tightened credit environment, where higher financing costs and difficulty in raising financing may result in increased corporate deposit withdrawals and less willingness and ability of corporates to place deposits. In such a case, our liquidity, operating results and financial conditions may be adversely affected.

There is a mismatch between the maturities of our liabilities and our assets. As of June 30, 2018, 63.0% of our total customer deposits were due within one year. As of the same date, 30.8% of our total customer loans were due within one year. There is no assurance that we will always be able to maintain the growth in our customer deposits at a pace sufficient to support our expanding business.

If we are unable to maintain the growth rates of our customer deposits, or a substantial portion of our customers withdraw their demand deposits or do not roll over their time deposits upon maturity, our ability to meet capital liquidity requirements may be materially and adversely affected and, as a result, we may need to seek funding from alternative sources, which may not be available on reasonable terms or at all. If we cannot seek funding from alternative sources on reasonable terms, our business, financial condition and results of operations may be materially and adversely affected.

We are subject to risks relating to SPV investments.

During the Track Record Period, our SPV investments included investments in trust plans, asset management plans and wealth management products. As of December 31, 2015, 2016, 2017 and June 30, 2018, our SPV investment amounted to RMB7,264.0 million, RMB20,894.6 million, RMB20,179.1 million and RMB20,712.0 million, respectively, accounting for 22.9%, 39.2%, 28.5% and 27.8%, respectively, of our total assets as of the same dates. For the years ended December 31, 2015, 2016 and 2017 and six months ended June 30, 2018, interest income generated from our SPV investments amounted to RMB384.3 million, RMB852.6 million, RMB1,461.6 million and RMB646.0 million, respectively, representing 26.6%, 42.2%, 43.9% and 35.7%, respectively, of our total interest income for the same periods. For details of our SPV investments, please see “Business – Our Business Lines – Financial Markets – Investment Management – SPV Investment”.

31 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS

SPV investment may involve certain risks. Although we have taken a variety of risk management measures, there is no assurance that these measures will fully protect us from credit risks and liquidity risks in relation to our SPV investment. For details of the risk management measures we adopted for our investments in these assets, please see “Risk Management – Credit Risk Management – Credit Risk Management for Our Financial Market Business – Credit Risk Management for Debt Securities Investment and SPV Investment”. For example, we may not be able to receive repayment of principal of, and returns on these SPV investments due to material and adverse changes to the financial condition of the relevant trust companies, securities companies or the ultimate borrowers. In addition, we may not be able to rely on the guarantees and collateral or realize the value of the collateral provided by the ultimate borrowers, as such guarantees and collateral are provided to the trust companies, asset management companies, securities companies and other financial institutions, instead of us. Furthermore, if the agreed-upon return rates of our SPV investment cannot be achieved or the principal of our investments cannot be repaid, we primarily rely on the issuers to reduce our losses and will exercise our rights under the related contracts and guarantees to recover losses from the issuers and the guaranteeing financial institutions (if any). We may not have direct recourse to the ultimate borrowers or their guarantors in the underlying transactions. In addition, as SPV investments are not traded on the interbank market or stock exchanges, and there is not yet an active trading market for them, their liquidity is limited. As a result, our ability to dispose of relevant investments or realize value of relevant investments before their maturity is limited. All of the above-mentioned factors may materially and adversely affect our business, financial condition and results of operations. Furthermore, although PRC regulatory authorities do not currently prohibit commercial banks from participating in SPV investments, there can be no assurance that future changes in regulatory policies will not restrict commercial banks in China, including us, from conducting such transactions. In addition, adverse regulatory developments in relation to these types of investments could cause the value of our investment portfolio to decline and, as a result, may adversely affect our business, financial condition and results of operations.

We are subject to risks relating to investments in debt securities. A significant portion of our investment portfolio is comprised of debt securities. As of December 31, 2015, 2016 and 2017 and June 30, 2018, the balance of our total debt securities investment amounted to RMB3,187.2 million, RMB5,845.5 million, RMB9,064.8 million and RMB11,591.2 million, respectively, which represented 10.0%, 11.0%, 12.8% and 15.5% of our total assets as of the same dates, respectively. Our investment returns on debt securities are affected by a number of factors, many of which are beyond our control, including the interest rate, creditworthiness of the overall market and our counterparties, market liquidity, asset values, as well as other market and economic conditions. Any material change in one or more of these factors could reduce the value of and the gains generated from our debt securities investment portfolio and could have a material adverse effect on our financial condition and results of operations. The value of these debt securities may decrease significantly due to various factors that are beyond our control, including but not limited to (i) the issuer’s failure to make repayment due to bankruptcy, financial difficulties or other reasons, which has been increasing due to the recent slowdown of China’s economic growth; (ii) lack of liquidity; (iii) inflation; (iv) an increase in the current or expected market interest rate or other economic conditions; and (v) changes in relevant government policies. If the value of any debt securities we invest in significantly declines, our asset quality, financial condition and results of operations may be materially and adversely affected.

32 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS

We are subject to risks relating to wealth management products we offer. We started to offer wealth management products to our customers in March 2015. For the years ended December 31, 2015, 2016 and 2017 and the six months ended June 30, 2018, the total amount of the wealth management products we issued amounted to RMB890.0 million, RMB333.5 million, RMB741.0 million and RMB491.4 million, respectively. We invested the proceeds from our wealth management products mainly in debt securities and interbank deposits. During the Track Record Period, the wealth management products we issued consisted of both principal protected and non-principal protected wealth management products. In line with regulatory policies and our business strategy, we have not issued principal-protected wealth management products since 2017. As of June 30, 2018, all of the existing wealth management products we issued were non-principal protected, so we are not liable for any loss suffered by the investors in these products. However, to the extent that investors suffer losses on these wealth management products, our reputation may be damaged, and we may also suffer a loss of business or decrease in deposits. Furthermore, we may eventually bear losses for non-principal protected products if the investors bring lawsuits against us and the court rules that we are liable for inadequate disclosure or any other reason. In addition, the tenor of some of the wealth management products we issued are shorter than those of their underlying assets. The mismatch exposes us to liquidity risk and we examine and monitor the impact of such risk from time to time, and take actions to address the risk as circumstances may require. During the Track Record Period, we did not experience any material mismatch between the wealth management plans we issued and the underlying investments. Furthermore, the PRC regulatory authorities have released regulations to limit the size of commercial banks’ SPV investments with funds raised from wealth management products. Please see “Supervision and Regulation – Regulation on Principal Commercial Banking Activities – Wealth Management Business”. If the PRC regulatory authorities further restrict the wealth management business of PRC commercial banks, our liquidity and profitability could be adversely affected. There is no assurance that we will be able to complete these transactions on commercially acceptable terms, in a timely manner, or at all, and as a result, our business, financial condition and results of operations could be materially and adversely affected.

We face risks and uncertainties associated with the PRC regulations governing the wealth management business of financial institutions. In recent years, the PRC Government has promulgated various rules and regulations to mitigate systemic risks in the financial industry. In particular, in order to, among other things, enhance risk management measures relating to leverage in financial markets and thereby mitigate risks associated with rising asset prices and regulatory arbitrage, the PBoC, CBIRC, CSRC and SAFE jointly issued the Guiding Opinions on Regulating the Asset Management Business of Financial Institutions (關於規範金融機構資產管理業務的指導意見) (the “April 27 Guideline”) on April 27, 2018. This guideline prohibits financial institutions, including banks, from providing investors with guarantees, in any form, for principal and investment returns in relation to wealth management products (“Non-Guarantee Requirements”). In addition, the April 27 Guideline requires banks and other financial institutions to, among other things, manage the products by net value, regulate fund pools, reduce the risks of maturity mismatch, limit debt ratio of products, properly categorize underlying assets based on nature of assets, improve information disclosure on products sales and distribution management, and eliminate the practice of channels for multi-layer embedment (“Other Requirements”). For details on the content of the April 27 Guideline, please also see “Supervision and Regulation – Regulations on Principal Commercial Banking Activities – Securities and Asset Management Business”.

33 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS

In line with restrictions set out in the April 27 Guideline, particularly the Non-Guarantee Requirements and Other Requirements, we are no longer permitted to offer certain wealth management products, which may lead to decreased market demand for our financial market business. Clients accustomed to purchasing wealth management products with guarantees for principal and investment returns may choose to purchase other types of financial products with features that we cannot, or are not licensed to offer, thereby damaging our capacity to attract or retain clients. In addition, to ensure compliance with the Non-Guarantee Requirements and Other Requirements, we may need to increase our administrative expenses and incur other operating expenses to bring our operation and management measures into compliance, which may materially and negatively impact our financial conditions and results of operations. Furthermore, the April 27 Guideline was issued recently and may be subject to interpretation. There is no assurance that the PRC Government will not publish implementation rules with more stringent standards in interpreting the April 27 Guideline, or issue new laws and rules to replace the April 27 Guideline setting out limitations that are costly for us to follow. Such additional rules and interpretations may materially and negatively affect our financial conditions and results of operations.

Further development of interest rate liberalization, the PBoC’s adjustments to the benchmark interest rate, the deposit insurance program and other regulatory changes in the PRC’s banking industry may materially and adversely affect our results of operations. Similar to most PRC commercial banks, our results of operations depend, to a large extent, on our net interest income, which accounted for 94.0%, 88.4%, 93.7% and 89.9% of our operating income for the years ended December 31, 2015, 2016 and 2017 and the six months ended June 30, 2018, respectively. Our net interest income is sensitive to adjustments in the benchmark interest rates set by PBoC. In recent years, PBoC has adjusted the benchmark interest rates several times. See “Supervision and Regulation – Pricing of Products and Services – Interest Rates for Loans and Deposits”. Adjustments by PBoC to the benchmark interest rates on loans or deposits or changes in market interest rates may affect our financial condition and results of operations in different ways. For example, changes in the PBoC benchmark interest rates could affect the average yield on our interest-earning assets to a different extent than the average cost on our interest-bearing liabilities and, therefore, may narrow our net interest margin. Such a change would lead to a decrease in our net interest income, and may materially and adversely affect our results of operations and financial condition. Interest rates in China have been gradually liberalized in recent years. Since June 8, 2012, PBoC has allowed financial institutions to increase the Renminbi deposit interest rate to 110% of the PBoC benchmark interest rate. On July 20, 2013, PBoC abolished the minimum interest rate, which was 70% of the benchmark interest rate, and allowed financial institutions to set lending rates based purely on commercial considerations. Furthermore, on November 22, 2014, PBoC permitted financial institutions to raise the Renminbi deposit interest rate up to 120% of the PBoC benchmark interest rate. The Renminbi deposit interest rate was raised again in March 1, 2015 and May 11, 2015 up to 130% and 150% of the PBoC benchmark interest rates, respectively. On August 26, 2015, the PBoC maintained the interest rate cap of Renminbi demand deposits and time deposits with maturity in less than one year. Then on October 24, 2015, PBoC announced that it would no longer set up a floating ceiling deposit interest rate for commercial banks, signifying the further liberalization of controls on interest rates. Interest rate liberalization may intensify competition in the PRC banking industry, as PRC commercial banks

34 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS may seek to make loans and take deposits with more attractive interest rates, which could narrow the net interest margin of PRC commercial banks, thereby materially and adversely affecting our results of operations. There is no assurance that we will be able to promptly diversify our businesses, adjust the mix of our assets and liabilities and change our pricing to effectively respond to further liberalization of interest rates.

As a crucial step for liberalizing interest rates in China, the Deposit Insurance Regulation was published on February 17, 2015 and came into effect on May 1, 2015. The Deposit Insurance Regulation insures each depositor of a bankrupt bank in an amount up to RMB500,000. Banks are required to pay premiums for the deposit insurance program, which will increase our operating costs and may therefore adversely affect our financial condition and results of operations. It is still uncertain whether the Deposit Insurance Regulation will have a positive or negative impact on the banking industry in China.

We also conduct trading and investment activities involving certain financial instruments. Our income generated from these activities is subject to volatility caused by, among other things, changes in interest rates and foreign exchange rates. For example, increases in interest rates generally cause the value of our fixed income securities portfolio to drop, which may materially and adversely affect our results of operations and financial condition. In addition, the derivatives market in the PRC is still in the early stages of development. As a result, we may not be able to effectively hedge such market risks.

We manage our liquidity partly through short-term borrowing in the interbank market. Our borrowing costs may increase as a result of the fluctuation in interest rates on the interbank market, which may materially and adversely affect our liquidity, financial condition and results of operations.

As of December 31, 2015, 2016 and 2017 and June 30, 2018, the balances of our financial assets sold under repurchase agreements due to other banks and financial institutions accounted for 24.9%, 25.1%, 18.1% and 16.2% of our total liabilities, respectively. According to relevant PRC laws and regulations, including the Notice on Regulating Interbank Businesses of Financial Institutions (關於規範金融機構同業業務的通知) jointly issued by the PBoC, former CBRC, CSRC, CIRC and SAFE on April 24, 2014 (“Interbank Lending Notice”), the net balance of interbank lending of a commercial bank to a single incorporated financial institution (excluding interbank deposits for settlement purposes), after deducting assets with zero risk weight, shall not exceed 50% of its tier-one capital. The balance of interbank borrowing of a commercial bank shall not exceed one third of its total liabilities. We have complied with the Interbank Lending Notice. Subject to the aforementioned laws and regulations and other applicable requirements, we may not be able to acquire sufficient short-term funds from the interbank market at all times, and regulatory authorities may impose further restrictions on interbank business and interbank borrowing. As a result, our funding costs may increase, which may materially and adversely affect our liquidity and profitability.

35 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS

Our current risk management framework, policies and procedures and internal control may not fully protect us from credit, market, liquidity, operational, and other risks. We have established a risk management framework and an internal control system to protect us from various risk exposure. However, as these systems, policies and procedures require constant and ongoing testing and maintenance, there is no assurance that these current systems are fully adequate to protect us from all types of risks. In addition, our risk management capabilities are limited by the information, tools and technologies available to us. Although we have taken various measures to improve and upgrade our overall risk management system, policies and procedures, due to the inherent limitations of our systems, we may not adequately or effectively identify or mitigate our risk exposure in all market environments or against all types of risks. As a result, our risk management methodologies and techniques may not be effective, and we may not be able to manage and control our risks in a timely and appropriate manner, and thereby our asset quality, business, financial condition and results of operations may be materially and adversely affected.

We are subject to risks associated with off-balance sheet commitments. We provide certain off-balance sheet commitments to our customers in the ordinary course of business, consisting of bank acceptances, letters of guarantees, operating lease commitments and capital commitments. Such arrangements are not reflected on our balance sheet, but they constitute contingent assets or contingent liabilities. As of June 30, 2018, our off-balance sheet commitments totaled RMB1,254.7 million. For more details, please see “Financial Information – Off-balance Sheet Commitments”. We are subject to credit risks associated with certain of these off-balance sheet commitments and are required to provide funds when our customers are unable to perform their obligations. If we are unable to recover payment from our customers, our financial condition and results of operations may be materially and adversely affected.

We may have difficulties in meeting capital adequacy requirements in the future. We are subject to capital adequacy regulations set by the CBIRC. Please see “Supervision and Regulation – Supervision over Capital Adequacy”. Pursuant to the requirements of PRC banking regulatory authorities, our capital adequacy ratios for each tier shall remain no lower than the minimum capital adequacy requirements under the Capital Administrative Measures during the transitional implementation period. Calculated in accordance with the Capital Administrative Measures, as of June 30, 2018, our core tier-one capital adequacy ratio, tier-one capital adequacy ratio and capital adequacy ratio all satisfied the requirements of the PRC banking regulatory authorities. The CBIRC may further increase the minimum capital adequacy requirements or change the methodology for calculating regulatory capital or capital adequacy ratios, or we may otherwise be subject to new capital adequacy requirements. Such changes may materially and adversely affect our financial condition and results of operations. Our ability to satisfy the current regulatory capital adequacy requirements could be adversely affected by the deterioration of our financial condition, or the quality of our assets, such as an increase in non-performing loans and a decline in our profitability. If our business growth calls for additional capital in excess of what we are able to generate internally or raise in the capital markets, we may need to seek additional capital by alternative means which may not be available to us on commercially acceptable terms, in a timely manner or at all. Our ability to obtain additional capital may also be restricted by a number of factors, including our future business, financial condition, results of operations and cash flows, conditions prescribed by PRC

36 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS law and regulatory approvals, general market conditions for capital-raising activities by commercial banks and other financial institutions, as well as economic, political and other conditions both within and outside of China. We may face increased compliance and capital costs as a result of these capital requirements. Furthermore, as these capital adequacy requirements place restrictions on the ability of banks to leverage their capital to achieve growth in their loan portfolios, our results of operations may be materially and adversely affected, and our capacity to further grow our business may be constrained. If at any time in the future we fail to meet these capital adequacy requirements, the CBIRC may take a series of measures to sanction us, including, for example, imposing restrictions on our lending and investment activities, restricting the growth of our loans and other assets, limiting our application to launch new businesses or restricting our ability to declare or pay dividends. Such measures may materially and adversely affect our business, financial condition and results of operations.

There are legal defects regarding some of our properties.

As of the Latest Practicable Date, we owned 323 properties with an aggregate GFA of approximately 75,922.84 square meters, which we mainly used as outlets and offices.

We have obtained building ownership certificates and land use certificates or real property ownership certificates for 309 properties with an aggregate GFA of approximately 69,431.09 square meters. Among these properties, for one property with an aggregate GFA of approximately 157.87 square meters, we obtained the relevant building ownership certificate and land use certificate, but the relevant land use right was obtained through allocation. For 14 properties with an aggregate GFA of approximately 6,491.75 square meters, we have not obtained the relevant building ownership certificates or real property right certificates for these properties or have not obtained land use certificates or real property right certificates for the land occupied by these properties. As of the Latest Practicable Date, the aggregate GFA of properties with defective titles accounted for approximately 8.55% of the properties we own. For details on our properties, please see “Business – Properties”. We are committed to using our best efforts to comply with relevant procedures for obtaining land use certificates and/or building ownership certificates for such properties. However, we may not be able to obtain all of these title certificates. There is no assurance that our ownership rights will not be adversely affected in respect of properties for which we are unable to obtain the relevant title certificates. If we were forced to relocate any of the operations we conduct on the affected properties, we may incur additional costs as a result of such relocation.

As of the Latest Practicable Date, we leased 40 properties with an aggregate GFA of approximately 17,733.46 square meters, which we mainly use as business premises. There is no assurance that we will be able to renew such leases on terms acceptable to us upon their expiration or at all. If any of our leases is terminated as a result of challenges by third parties or if we fail to renew them upon expiration, we may be forced to relocate affected branches and sub-branches and incur additional costs associated therewith, and our business, financial condition and results of operation may be adversely affected. For details of our properties including leased properties, please see “Business – Properties”.

37 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS

We face risks and uncertainties associated with national and local government policies and initiatives adopted to promote local economic development. We benefit from favorable policies adopted by the national and local governments to promote the economic development of Sichuan Province and Luzhou. We expect our business to continue to benefit from these favorable government policies and initiatives and the business opportunities presented in connection with local economic growth. However, we cannot guarantee that the PRC Government will maintain its favorable policies in promoting the development of Sichuan Province and Luzhou. Any discontinuation or unfavorable change in such policies may adversely affect our business, financial condition and results of operations. In addition, any new policies issued or to be issued by the national or local government on curbing the spending limit of the local government on its local economic development will adversely affect our business, financial condition and results of operations.

We may not be able to successfully expand our portfolio of products and services. In particular, we may not be able to promote fee-and commission-based businesses and other non-interest income businesses as intended. We have invested in expanding our portfolio of products and services and intend to continue doing so in the future, to enhance our leading market position, capture ever changing market demand and cope with different challenges. During the Track Record Period, net interest income represented 94.0%, 88.4%, 93.7% and 89.9% of our operating income for the years ended December 31, 2015, 2016 and 2017 and for the six months ended June 30, 2018, respectively. The sustainable development of our business depends on, in part, our ability to expand our product and service portfolio to capture customer demand and evolving industry trends. However, the success of this strategy is subject to various factors beyond our control, including general economic conditions, regulatory restrictions and market competition. In particular, we consider fee- and commission-based businesses and other non-interest income business, among other things, the key driver to properly manage challenges and risks associated with interest rate liberalization. As a result of the bank card-related fees we waived or reduced in order to attract more quality customers, implement the national inclusive financial policy and practice the concept of local banks serving the citizens, our revenue from our fee- and commission-based businesses represented only a small portion of our total operating income during the Track Record Period, amounting to RMB7.7 million, RMB7.5 million, RMB8.1 million and RMB5.5 million for the years ended December 31, 2015, 2016 and 2017 and for the six months ended June 30, 2018, respectively. We experienced a continued decrease in net fee and commission income from 2015 to 2017 with a net fee and commission loss of RMB1.9 million in 2017. For the six months ended June 30, 2018, we recorded net fee and commission income of RMB0.8 million. The specific waived or reduced fees included the cost of opening certain IC cards, certain bank cards’ annual fees, ATM cross-bank withdrawal fees, short message service (SMS) fees and online banking and mobile banking transfer handling fees. There is no assurance that we will record increased net fee and commission income in the future and not further net fee and commission losses. In particular, in recent years, many non-bank enterprises or newly established banks with strong internet technology backgrounds have started offering internet finance services crucial to banks value chains, including core areas that are key sources of banks’ revenues, such as payment, wealth management, consumer finance and checking and savings services. Please see the section headed “– The competitive environment in the banking industry is continually evolving in line with advancements in information technology and as a result traditional banking institutions face intensified challenges with respect to electronic banking and internet finance” for more details.

38 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS

Furthermore, the regulatory regimes for certain products and services that generates fee and commission income continue to evolve, particularly those relating to financial markets business. Please also see “– We face risks and uncertainties associated with the PRC regulations governing wealth management business of financial institutions”. There is no assurance that our business will not be materially and adversely affected by continued development of the relevant regulations. Furthermore, if we are unable to obtain relevant regulatory approvals, or comply with relevant banking regulations in relation to the sales and marketing of our new financial products and services, we may be subject to legal proceedings or regulatory sanctions, which in turn could lead to significant financial losses and reputational damages to us. In addition, for products where our income depends on the underlying financing party’s capacity to make timely repayment, we are also subject to inherent risks associated with financial performance or business operations of relevant issuers or owners of underlying assets, which are affected by many factors beyond our control, including general economic conditions and proper compliance with laws and regulations by relevant third parties. We may also be subject to client complaints, negative news coverage and possible litigations which could have an adverse effect on our reputation.

The occurrence of any above-mentioned events may materially and adversely affect our business, financial condition and results of operations.

The effective operation of our business is highly dependent on the proper functioning and improvement of our information technology systems.

Our business largely relies on the secure and efficient operation of our information technology systems, including our internal control, risk management, customer service and other data processing systems, each of which is critical to the sustainable development of our business and our ability to maintain competitiveness. For details of the operation and backup mechanism of our information technology systems, please see “Business – Information Technology”. However, our information technology systems may encounter events beyond our control, including network breakdowns, software bugs, computer virus attacks, intrusion attacks, catastrophic incidents or providers’ failure to provide ongoing maintenance, which could result in a partial or complete failure of our information technology systems and disrupt our business continuity. For example, failure to protect from cyber-attacks can affect the normal operation of our internet banking or mobile banking system, causing suspension of system services, data leakages and other adverse consequences, which may further lead to litigation risks. Although we have configured internet firewall access policies, intrusion detection defense, anti-DDOS network attack mechanisms and other defensive measures, the possibility of being attacked still exists, and our information system is not completely protected from damage. For details of our relevant measures, please see “Risk Management – Information Technology Risk Management”. The occurrence of any of the above mentioned risk events or safety intrusion incidents could materially and adversely affect our business, financial condition and results of operations.

In addition, our ability to remain competitive depends partially on our ability to upgrade our information technology systems in a cost-effective manner in order to address increasing market demands for financial products and services and evolving technology challenges. Any failure to timely develop or upgrade our information technology systems effectively may materially and adversely affect our business conditions, financial condition and results of operations.

39 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS

If we fail to fully comply with various regulatory requirements applicable to us, our reputation could be harmed and our business, financial condition and results of operation could be materially and adversely affected. We are subject to the regulatory requirements and guidelines set forth by various PRC regulatory authorities, such as the CBIRC, PBoC, SAFE, CSRC, MOF, NAO, SAIC and SAT. These laws, regulations, guidelines and regulatory requirements include approvals for banking products and services, market entry, opening of new branches or sub-branches, taxation and accounting policy, risk management, internal control and pricing. These regulatory authorities supervise and spot check banks and have the authority to impose penalties or remediation requirements based on their findings. During the Track Record Period and as of the Latest Practicable Date, we failed to meet certain of the above regulatory requirements causing an aggregated fine of about RMB350,000. For details on the penalties in respect of these failure to meet certain of the regulating requirements during the Track Record Period, please see “Business – Legal and Administrative Proceedings – Regulatory Inspections and Proceedings” and “Supervision and Regulation – Other Operational and Risk Management Ratios”. There is no assurance that we will be able to meet all applicable regulatory requirements and guidelines, or comply with all applicable regulations at all times, or that we will not be subject to sanctions, fines or other penalties in the future as the result of non-compliance. Any failure to comply with applicable requirements, guidelines, or regulations could have a material adverse effect on our business, financial condition and results of operation, and damage our reputation and our ability to grow our business.

Our business, financial condition, results of operations, prospects and the value of your investment may be adversely affected as a result of negative media coverage of us, our senior management or China’s banking industry in general, even if such negative publicity is inaccurate, unsubstantiated or immaterial. Our business reputation is crucial to our success. China’s banking industry continues to be covered extensively and critically by various news media. In recent years, incidents of fraud and issues in relation to non-performing loans, loan quality, capital adequacy, solvency, internal controls, and risk management have been extensively reported by the media. Any negative media coverage about our industry or us, whether accurate or not, may have a material adverse effect on our reputation and will consequently undermine our customers’ confidence. As a result, our business, financial condition, results of operations, prospects and the value of your investment may be materially and adversely affected.

We have entered into outsourcing agreements for information technology services and any difficulties experienced in these arrangements could result in additional expense, loss of customers and income or an interruption of our services. We obtained information technology services by entering into contracts with third-party technology and service providers. In the event that these service providers either fail to provide support service as usual, terminate our contracts or refuse to renew our contracts, our reputation may be damaged. If such an event occurs, although we may pursue new third-party technology and service relationships, it may still disrupt our normal operations, increase the costs of these technology services and divert management’s time and resources. If we are unable to complete a transition to a suitable new service provider on a timely basis, or at all, we could be forced to temporarily or permanently discontinue certain services, which could materially and adversely affect our business, prospects, financial condition and results of operations.

40 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS

We may be involved in legal and other disputes from time to time arising out of our operations. We are currently involved in legal and other disputes arising in our ordinary course of business, which relate to loan extensions. For details, please see “Business – Legal and Administrative Proceedings”. Except as otherwise disclosed in this document, as of the Latest Practicable Date, there is no litigation, arbitration or investigation against us, our employees, management or Directors that would cause a material adverse effect on our business operations or financial results. Furthermore, we may encounter disputes in relation to misappropriation or unauthorized use of our business names or service brand names, or disputes in relation to misappropriation, unauthorized use or registration of our trademarks. There is no assurance that the outcome in any of the litigation/arbitration in which we are involved will be favorable to us, or the judgment in relation to the rejected litigations against us will not be subject to disputes resulting in new litigation, appeal or retrial. Also, we cannot guarantee that any existing or potential investigations will not cause a material adverse effect, or that any future legal disputes we may confront will not result in damages to our reputation, additional operational costs or a diversion of our resources and management’s attention from our business operations, and our business, financial condition and results of operations may be materially and adversely affected.

We may not be able to detect money laundering and other illegal or improper activities on a timely basis, or at all, which could expose us to reputational damages and additional legal or regulatory liability risks. We are required to comply with applicable PRC anti-money laundering and anti-terrorism laws and regulations. These laws and regulations require us to adopt and enforce “know-your-customer” policies and procedures and to report suspicious and large transactions to the relevant regulatory authorities. In light of the complexity of money-laundering activities and other illegal or improper activities, such policies and procedures may not be able to completely eliminate the possibility that other parties use our services to engage in money laundering and other illegal or improper activities. To the extent that we fail to fully comply with applicable anti-money laundering and anti-terrorism laws and regulations, the relevant governmental authorities may impose fines and other penalties on us. In addition, our business and reputation could deteriorate if customers manipulate their transactions with us for money laundering or other illegal or improper purposes. Please see “Risk Management – Legal and Compliance Risk Management” and “Supervision and Regulation – Ownership and Shareholder Restrictions – Anti-money Laundering Regulation”.

We rely on the continuing efforts of our key personnel and may not be able to recruit or retain sufficient qualified staff. Our ability to maintain growth and meet future demands is dependent upon the continued service of our senior management and other key personnel. In particular, our future success depends substantially upon our key personnel’s experience in the banking industry and our business operations as well as their sales and marketing skills. The departure of any member of our key personnel may have a material adverse effect on our business and results of operations. In addition, we may face increasingly fierce competition in recruiting and retaining qualified staff, including senior management, since other banks are competing for the same pool of qualified candidates and our compensation packages may not be as competitive as those of our competitors. There is no assurance that we will be able to recruit or retain qualified staff, or that competition in recruitment will not lead to increases in our employment costs. If we fail to recruit or retain sufficient qualified staff, our business, financial condition and results of operation may be materially and adversely affected.

41 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS

We may not be able to detect and prevent fraud or other misconduct committed by our employees or third parties, and we may be subject to other operational risks.

We are exposed to fraud or other misconduct committed by our employees, customers or other third parties, which could subject us to financial losses, third party claims, regulatory actions or reputational damage. There is no assurance that our internal control policies and procedures will be sufficient to prevent, detect or deter all incidents of fraud and misconduct involving our employees or third parties including mishandling or embezzlement of bills held for resale by our employees, bribery or embezzlement or defaults in making timely repayment. There is no assurance that we will not encounter similar incidents in the future. In addition, while we have enhanced and adopted additional measures to mitigate the risks disclosed our existing risk management measures in “Risk Management – Operational Risk Management”, there is no assurance that we can always prevent, mitigate or identify timely improper acts of employees or third parties against us, such as failure to strictly follow our internal rules and regulations, fraud, stealing, theft of customer information or illegal activities, which may in turn expose us to risks of negative publicity, reputation damage or litigation losses. During the Track Record Period, we were subject to administrative penalties due to failure of certain employees to strictly follow regulatory requirements in making timely responses to clients or conduct sufficient pre-loan due diligence. There is no assurance that we will not encounter similar incidents in the future. Should any of the above mentioned factors occur, our business, financial condition and results of operations could be materially and adversely affected.

RISKS RELATING TO THE PRC BANKING INDUSTRY

We face increasingly intensive competition in China’s banking industry.

The banking industry in China is becoming increasingly competitive. We face competition with PRC and foreign commercial banks in all of our principal lines of business. We principally compete with large state-owned commercial banks, nationwide joint-stock commercial banks, rural commercial banks and other city commercial banks. On July 1, 2013, the General Office of the State Council issued the Guidance Letter Regarding Financial Support for Promoting Economic Restructuring and Transformation (國務院辦公廳關於金融支持經濟結構調整和轉型升級的指導意見), or the Guidance Letter. The Guidance Letter, among other things, encourages investments by private sector capital in financial institutions and the establishment of privately-owned banks. The Guidance Letter provides a policy direction aimed at increasing involvement by private sector capital in the financial industry in China. We may, therefore, face competition from privately-owned banks in the future. Competition between us and foreign financial institutions may intensify in the future. In particular, the lifting of various restrictions on foreign financial institutions conducting business in the PRC may cause us to lose certain existing competitive advantages over foreign financial institutions in the banking markets of Sichuan Province and China. We expect to see greater competition from foreign financial institutions in the future.

We compete with our competitors for substantially the same customers on loans, deposits and fee-and commission-based products and services. Such competition may materially and adversely affect our business and future prospects by, for example, reducing our market share in our principal products and services, reducing our fee and commission income, slowing the growth of our loan or deposit portfolios and their related products and services and increasing competition for senior management talents and qualified professional personnel.

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In addition to competition from other banks and financial institutions, we also face competition from other forms of investment alternatives in China. In recent years, financial disintermediation, which involves investors’ moving funds out of commercial banks and other financial institutions, to direct investments, has increased in China due to the availability of new financial products, the further development of the capital markets, the diversification of customer demand and other factors. Our deposit customers may move their funds deposited with us to invest into stock, debt securities or wealth management products, which may result in a decrease in our customer deposits, the most important source of funds for our lending business, further impacting our net interest income. In addition, due to the development of the capital markets, we may face competition from direct corporate financing, such as the issuance of debt or equity securities in the domestic and international capital markets. If a substantial number of our customers choose alternative ways of financing to meet their funding needs, this may adversely affect our interest income. A decrease in the demand of our corporate banking customers could materially and adversely affect our business, financial condition and results of operations. Furthermore, China’s traditional banking institutions are also facing new challenges from innovations in financial products and technology, such as online wealth management products, third party online payment platforms and Internet financing service platforms. Online wealth management products have attracted a large number of retail banking customers. The growing popularity of third-party online payment platforms, such as Alipay and Tenpay, are challenging bank profits. With the rapid growth in e-commerce, Chinese customers are now paying for a wide range of goods and services online. Although a portion of online transactions are paid for by credit or debit cards issued by banks, third-party payment solutions are becoming popular in China, indicating that Internet companies are playing an increasingly important role in China’s payment system. Like other commercial banks, we also face competition from other types of Internet finance, such as P2P lending and crowd funding. There is no assurance that we will successfully meet the challenges presented by such Internet financing alternatives, and, in the event that we are unable to effectively respond to the changes in the competitive environment of the PRC banking industry, our business, financial condition and results of operations could be materially and adversely affected.

The competitive environment in the banking industry is continually evolving in line with advancements in information technology, and as a result traditional banking institutions face intensified challenges with respect to internet finance. In recent years, Internet-based financial service companies are developing rapidly in China. At present, the major financial services provided by China’s Internet-based financial service companies include online personal loans, third-party online and mobile payment, as well as online and mobile wealth management. China’s commercial banks are facing the challenges with respect to products, technologies and customer experience. Personal loan products provided by Internet-based financial service companies may result in decreased demand of retail banking customers for commercial banks’ loans. Various funds and Internet wealth management products have developed rapidly, which may result in outflows of a large amount of saving deposits from commercial banks and then return to commercial banks in the form of interbank deposits. As a result, commercial banks may experience increased funding costs and narrowed interest margins, and therefore, reduced profitability. With the further development of the Internet, many non-banking financial institutions have started to distribute financial products on Internet platforms, which has affected commercial banks’ fee income for agency services. Competition

43 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS from the lnternet-based financial service industry may materially and adversely affect our business, financial condition, results of operations and prospects. Please also see the section headed “Industry Overview – Industry Trends and Business Drivers – Challenges and Opportunities Arising from Internet Finance”.

The PRC banking industry is highly regulated, and we are susceptible to changes in regulation and government policies. The PRC banking industry is highly regulated and our business could be directly affected by changes in the policies, laws and regulations relating to the PRC banking industry, such as those affecting the specific lines of business in which we operate, or the specific businesses for which we can charge fees, as well as changes in other governmental policies. We are subject to various regulatory requirements and guidelines set forth by the PRC regulatory authorities, which include but are not limited to the CBIRC, PBoC, MOF, NAO, SAT, CSRC, SAFE and their respective local branches. Some of these regulatory authorities conduct periodic and ad hoc inspections, examinations and inquiries on our business operations and compliance with their laws, regulations and guidelines, and some have the authority to impose sanctions, penalties or remediation actions. These laws, regulations and guidelines impose regulatory requirements on banking products and services, market entry, opening of new branches or institutions, tax and accounting policy and pricing. The CBIRC, as the primary banking industry regulator, has promulgated a series of banking regulations and guidelines aimed at improving the operations and risk management of Chinese commercial banks. In particular, since late 2017, in line with the policy to mitigate potential risks in the PRC financial markets, the CBIRC, including its predecessor, the former CBRC, has promulgated a series of rules and regulations enhancing supervision and adding restrictions on various business operations of banks, including entrusted loans and cooperation between banks and trust companies. These regulations encourage banking institutions and other financial institutions to improve their risk management systems, enhance supervision on business operations and adopt more stringent corporate governance measures. The CBIRC’s visions to promote financing services in the real economy and optimize the asset quality of the financial system in China. For details of relevant regulations, please see “Industry Overview – Industry Trend and Business Drivers” and “Supervision and Regulation”. Many of the policies, laws and regulations governing the banking industry or the interpretation thereof may change in the future, and we may not be able to adapt to such changes on a timely basis or at all. Failure to comply with new policies, laws and regulations may result in fines or restrictions on our business. In addition, implementation of relevant laws and regulations may cause us to incur additional costs or expense in business operation, divert our resources and management attention from ordinary business or demand us to engage or retain a large number of personnel with the necessary skills or expertise. We may not be able to cope with these challenges in a timely manner, or at reasonable costs. Occurrence of any of such event could materially and adversely affect our business, financial condition and results of operations.

The rapid growth of the banking industry in China may not be sustainable. The PRC banking industry has experienced rapid growth along with China’s economic development. Banks have historically been, and are likely to remain, the principal domestic financing channel for corporates and the primary choice for savings. We expect the banking industry in the PRC to maintain its growth as a result of the continued growth in the PRC economy and increases in household income, among other factors. Notwithstanding the significant growth in the banking industry in China, it is uncertain whether the banking industry in China can sustain its current rate of growth. A slowdown in the

44 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS growth of the PRC economy or other unfavorable macroeconomic developments and trends in China and other parts of the world could materially and adversely affect the banking industry in China. Due to new risks caused by overcapacity, local government debts and overall economic slowdown, we cannot assure you that the banking industry in the PRC is free from systemic risks. The recent slowdown in China’s economic growth has led to a rise in non-performing loans in the banking industry. In the event that we cannot adapt to such changes, our business, financial condition and results of operations could be materially and adversely affected.

Changes in the PRC interbank market liquidity and volatility in interest rates could significantly increase our borrowing costs and materially and adversely affect our liquidity as well as our financial condition. In order to meet our liquidity needs, we, among other things, borrow short-term funds on the interbank market from time to time. As of June 30, 2018, our financial assets sold under repurchase agreements due to other banks and financial institutions accounted for 16.2% of our total liabilities. Any significant changes in the liquidity and interest rate in the PRC interbank market could have an impact on our financing costs. A market rate system based on SHIBOR has been developed for the PRC interbank market. However, due to the relatively short history of the PRC interbank market, there may be significant volatility in market interest rates. There is no assurance that SHIBOR interest rates will not experience irregular fluctuations or will return to the normal range in the short term after irregular fluctuations in such rates in the future. SHIBOR reflects changes in the interest rates, which may materially affect our cost of borrowing of short-term funds in the interbank market. Any significant volatility in interest rates on the interbank market may have a material and adverse effect on our cost of borrowing short-term funds and our liquidity. For further discussion on risks associated with interbank business, please also see the section headed “– We manage our liquidity partly through short-term borrowing in the interbank market. Our borrowing costs may increase as a result of the fluctuation in interest rates on the interbank market, which may materially and adversely affect our liquidity, financial condition and results of operations.” In addition, severe volatility in market interest rates may also have a significant impact on the value of our assets. For example, a significant increase in market interest rates may lead to a significant decrease in the fair value of our fixed income debt securities, which will have a material and adverse effect on our financial condition and results of operations.

The effectiveness of our credit risk management is affected by the quality and scope of information available in China. Although national credit information databases developed by PBoC have been put into use, national credit information databases in China are generally under-developed, and as such, databases are not able to provide complete credit information on certain credit applicants. Without complete, accurate and reliable information, and until the full implementation and effective operation of comprehensive national credit databases with respect to corporate and individual borrowers, we will have to rely on other publicly available information and our internal resources, which may not be effective in assessing the credit risk associated with a particular customer. Moreover, customary loan contracts in China may not contain the same types of financial and other covenants as other countries or regions, which may prevent us from effectively monitoring changes in the credit standing of our customers in a timely manner. As a result, our ability to effectively manage our credit risk may be limited, which could materially and adversely affect our business, financial condition and results of operations.

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We may be subject to more stringent regulatory requirements in the future, and our Shareholders, including holders of our H Shares, may be subject to voting restrictions due to their pledge of our shares. According to the CBRC Notice on Enhanced Management of Pledge of Equity Interest in Commercial Banks (《中國銀監會關於加強商業銀行股權質押管理的通知》) (the “Notice”) issued by the former CBRC in November 2013, commercial banks are required to stipulate in their articles of association that, for those shareholders that have pledged 50% or more of their equity interests in the bank, their voting rights at general meetings and the voting rights of directors designated by them at board meetings shall be “subject to restrictions” (the “Voting Restrictions”). However, the Notice did not provide clarification or guidance on what restrictions should be imposed or how they should be imposed. To comply with the Notice, we included articles of Voting Restrictions in our draft of Articles of Association, which was adopted and approved at our meeting on October 15, 2014, and later approved by CBRC Sichuan Office on November 19, 2014. According to the Notice and Articles of Association, a shareholder who pledges his equity interest shall notify the board of the bank in advance, while a shareholder, who has a seat on the board of directors or the board of supervisors, or directly, indirectly or jointly holds or controls more than 2% of share capital or voting rights in the bank, pledges his equity interests in the bank, shall make a filing to the board of directors of the bank prior to the pledge. For details on our internal control measures in relation to monitoring and recording share pledges, please see “Supervision and Regulation – Ownership and Shareholder Restrictions – Restrictions on Shareholders”. The PRC authority may issue more stringent rules and regulations from time to time to set restrictions or prohibitions against share pledges made by shareholders who fail to provide the relevant notice or complete the relevant filing prior to the share pledge. In addition, there is no assurance that we will not be required by regulatory authorities to impose the Voting Restrictions on our Shareholders, including holders of our H Shares, in a manner deemed appropriate by such regulatory authorities which, in extreme cases, may involve suspension of the relevant Shareholders’ voting rights.

Investments in commercial banks in China are subject to restrictions that may adversely affect the value of your investment. Investments in commercial banks in China are subject to a number of restrictions. For example, prior approval from the regulatory authorities for the PRC banking industry is required for any person or entity to hold 5% or more of the total capital or total shares of a commercial bank in China, unless otherwise required by the approval authorities. If a shareholder of a commercial bank in China increases its shareholding above the 5% threshold without obtaining prior approval from the regulatory authorities for the PRC banking industry, such shareholder may be subject to sanctions by the regulatory authorities for the PRC banking industry, which includes correction of such misconduct, confiscation of illegal gains or fines. In addition, under the PRC Company Law, we may not extend any loans that use our Shares as collateral. Furthermore, pursuant to the Corporate Governance Guidelines and our Articles of Association, a Shareholder must notify our Board of Directors before pledging our Shares as collateral for itself or others. In addition, Shareholders who have outstanding loans from us exceeding the audited net value of our Shares held by them at the end of the previous financial year are not permitted to pledge our Shares. Our Shareholders (especially the major shareholders) and our Directors designated by them are restricted from voting in Shareholders’ general meetings and Board meetings, respectively, if such Shareholders fail to repay outstanding borrowings when

46 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS due. For the discussion of “substantial shareholder” in this risk factor, refers to (i) shareholders who hold or control over 5% shares, equity or voting rights of such bank; or (ii) shareholders has material influence to relevant bank’s operation and management, even if they do not meet the shareholding requirement set out in the clause above. In determining whether a shareholder has material influence to relevant bank’s operation and management, this regulation takes into account various factors, including their capacity of nominating directors, supervisors or members of senior management, influencing bank’s business decision on management or financial conditions through agreements or other means, and other factors that the CBIRC or its local offices deem appropriate.

According to relevant requirements of the Interim Measures for Management of Commercial Bank Equity (《商業銀行股權管理暫行辦法》) promulgated by the former CBRC on January 5, 2018, no shareholder of a commercial bank may authorize any other person to or accept any other person’s authorization to hold equity of a commercial bank; in the event that the shareholders of a commercial bank intend to transfer their equity therein, the shareholders shall inform the transferees to comply with the laws and regulations as well as requirements promulgated by CBRC; the same investor and its related parties and parties acting in concert shall comply with the shareholding percentage requirement of CBRC, if they decide to invest in a commercial bank; if CBRC or its local offices took steps to control risks and take-overs due to material risk issues or material non-compliance of the commercial bank, shareholders shall actively cooperate with CBRC or its local offices to conduct risks controlling and other relevant actions.

In particular, this regulation sets out that, investor and its related parties and parties acting in concert shall apply for, and obtain the prior approval from the CBIRC or its local offices with authority, if, individually or collectively, (i) they intend to hold over 5% of the total equity interests of a commercial bank of China for the first time, and (ii) each time the equity interest they hold would increase by another 5% of the total equity interest of relevant bank. Administrative approval in relation to acquisition of equity interest of commercial banks through stock market in China or overseas in this regard is only valid for six months. Furthermore, according to this regulation, financial products can invest in shares of listed commercial banks, subject to the restriction that the total number of shares being invested by financial products that are controlled by individual investor, issuer, manager or their respective actual controllers, affiliates or parties acting in concert, shall not exceed 5% of relevant commercial banks. The substantial shareholder of a commercial bank shall not hold shares or equity of such commercial bank though financial products they issue, manage or control through any means. Changes in shareholding restrictions imposed by the PRC government or as provided for in our Articles of Association in the future may materially and adversely affect the value of your investment.

The transition from business tax to value-added tax may adversely affect our financial condition and results of operations.

The PRC Government had been progressively implementing a pilot reform for the transition from business tax to value-added tax in certain regions and for certain industries since 2012. Pursuant to the Notice on the Full Implementation of Pilot Program for Transition from Business Tax to Value-added Tax (《關於全面推開營業稅改徵增值稅試點的通知》, Cai Shui [2016] No. 36) issued by MOF and SAT on March 23, 2016, the pilot program has applied to the financial industry, among others, since May 1, 2016. We started to calculate and pay value-added tax instead of business tax on the same date.

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In addition, the MOF and the SAT issued a Notice on Value-added Tax Policies for Financial, Real Estate Development, Education Ancillary Service and Other Services (《關於明確金融、房地產開發、教育輔助服務等增值稅政策的通知》, Cai Shui [2016] No. 140) on December 21, 2016, the Supplemental Notice on Value-added Tax Policies on Asset Management Products (《關於資管產品增值稅政策有關問題的補充通知》, Cai Shui [2017] No. 2) on January 6, 2017, and Notice on Issues Relating to Value-added Tax on Asset Management Products (《關於資管產品增值稅有關問題的通知》, Cai Shui [2017] No. 56) on June 30, 2017, which may cause significant impact on the value-added tax exposure of financial investment and asset management business of financial enterprises. Given that we have assets in financial investments and that we are managing a number of wealth management products, our operating results may be affected accordingly.

Due to the different basis of value-added tax and business tax, the revenue recognized under the value-added tax regime may be slightly less than that under the business tax regime if total revenue and other tax liabilities remain unchanged. In accordance with the policies on transition from business tax to value-added tax of the financial industry, there is in general a rise in tax burdens on banks from the transition. The increase in tax rate and the change in the basis of taxation will affect our tax burden to a certain extent. Furthermore, as such transition from business tax to value-added tax has been implemented since May 2016, the PRC government may further supplement and amend the relevant policies and rules, and different interpretations may be applied during the implementation of these policies and rules. Therefore, uncertainties remain as to the tax treatment of our income and expenses under the new value-added tax regime. Hence, implementation of measures for transition from business tax to value-added tax may adversely affect our financial condition and results of operations.

Our loan classification and provisioning policies may be different in certain aspects from those applicable to banks in certain other countries or regions.

We established a five-level loan classification system in accordance with the guidelines set forth by the CBRC. The five categories are normal, special mention, substandard, doubtful and loss. In making relevant assessments, we determine and recognize provisions by using the concept of impairment under IAS 39 prior to January 1, 2018, since when, we started to apply IFRS 9 in determining provisions. We are required to apply a new expected credit loss impairment model under IFRS 9, which, as compared to the incurred loss model in IAS 39, uses more forward-looking information instead of objective evidence of impairment as a precondition for recognizing credit losses. Although our loan classification criteria is in compliance with the guidelines set forth by the CBIRC, certain aspects of our loan classification criteria may not be the same as those adopted by other PRC commercial banks. For details on our loan classification criteria, please see “Assets and Liabilities – Assets – Customer loans – Asset Quality of Our Loan Portfolio – Loan Classification Criteria.” As a result, our loan classification as well as our impairment allowance, as determined under our loan classification and provisioning policies, may differ from those that could be reported if we were incorporated in those countries or regions.

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The applicable PRC regulations impose certain limitations on the products in which we may invest, and our ability to seek higher investment returns and diversify our investment portfolio is limited.

Investment by commercial banks in China is subject to a number of restrictions. The investment assets of PRC commercial banks traditionally consist primarily of debt securities issued by the MOF, PBoC, PRC policy banks, PRC commercial banks and corporate entities. In recent years, as a result of changes to the regulatory regimes and market conditions, additional investment products have been introduced to the market, such as trust plans, asset management plans, wealth management products issued by financial institutions, investment funds, asset- backed securities, beneficiary rights in margin financing and beneficiary certificates. However, investments in equity products by commercial banks are still subject to strict restrictions. Restrictions on the ability to diversify the investment portfolio of commercial banks in China (including us) may limit our ability to seek optimal returns.

RISKS RELATING TO THE PRC

China’s economic, political and social conditions, government policies, as well as the global economy may continue to affect our business.

All of our businesses, assets, operations and revenues are located in or derived from our operations in the PRC and, as a result, our business, financial condition and results of operations are subject, to a significant degree, to the economic, political, social and regulatory environment in the PRC. The PRC government regulates the economy and related industries by imposing industrial policies and regulating the PRC’s macro-economy through fiscal and monetary policies.

The PRC economy has undergone a transition from a planned economy to a market-oriented economy. The PRC government has taken various actions to introduce free market forces, to reduce state ownership of productive assets and to promote the establishment of sound corporate governance in business entities. However, a substantial portion of productive assets in the PRC are still owned by the PRC government. In addition, the PRC government continues to play a significant role in regulating the economy and related industries by issuing industrial policies. The PRC government still retains significant control over the PRC’s economic growth through the allocation of resources, its monetary policy and preferential treatment of particular industries or enterprises.

Our performance has been and will continue to be affected by China’s economy, which in turn is influenced by the global economy. The uncertainties relating to the global economy as well as the political environment in various regions of the world will continue to impact China’s economic growth. China’s real GDP growth was 6.9%, 6.7% and 6.9% in 2015, 2016, and 2017, respectively.

We are unable to predict all the risks and uncertainties that we face as a result of current economic, political, social and regulatory developments and many of these risks are beyond our control. All such factors may adversely affect our business and operations as well as our financial performance.

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The legal protections available to you under the PRC legal system may be limited. We are incorporated under the laws of the PRC. The PRC legal system is based on written statutes. Prior court decisions may be adduced for reference but have limited precedential value. Since the late 1970s, the PRC government has promulgated laws and regulations dealing with various economic matters in line with its economic development, such as the issuance and trading of securities, shareholders’ rights, foreign investment, corporate organization and governance, commerce, taxation and trade, with a view to developing a comprehensive system of commercial law. However, as many of these laws and regulations are relatively new and the PRC banking industry continues to evolve, the effect of these laws and regulations on the rights and obligations of the parties involved may involve uncertainty. As a result, the legal protections available to you under the PRC legal system may be limited. Our Articles of Association provide that, apart from disputes over the recognition of Shareholders or the register of Shareholders, disputes between holders of H Shares and us, our Directors, Supervisors or senior management personnel or other Shareholders arising out of our Articles of Association or any rights or obligations conferred or imposed thereupon by the PRC Company Law and related laws and administrative regulations concerning our affairs are to be resolved through arbitration by the China International Economic and Trade Arbitration Commission (“CIETAC”) or the Hong Kong International Arbitration Center. Awards made by the PRC arbitral authorities (including CIETAC) recognized under the Arbitration Ordinance of Hong Kong can be enforced in Hong Kong subject to provisions of the Arbitration Ordinance of Hong Kong. Hong Kong arbitration awards are also enforceable in the PRC, subject to the satisfaction of certain PRC legal requirements. However, we cannot assure you that any action brought in the PRC by holders of H Shares to enforce a Hong Kong arbitral award made in favor of holders of H shares would succeed.

You may experience difficulties in effecting service of legal process and enforcing judgments against us and our management. We are a joint stock company incorporated under the laws of the PRC with limited liability, and substantially all of our assets are located in the PRC. In addition, a majority of our Directors, Supervisors, and all of our senior management personnel reside within the PRC, and substantially all their assets are located within the PRC. As a result, it may not be possible to effect service of process upon us or most of our Directors, Supervisors and senior management personnel within the United States or elsewhere outside the PRC, including with respect to matters arising under the U.S. federal securities laws or applicable state securities laws. Furthermore, the PRC does not have treaties providing for the reciprocal enforcement of judgments of courts with the United States, the United Kingdom, Japan and many other countries. In addition, Hong Kong has no arrangement for the reciprocal enforcement of judgments with the United States. As a result, recognition and enforcement in the PRC or Hong Kong of judgments of a court obtained in the United States and any of the other jurisdictions mentioned above may be difficult or impossible. On July 14, 2006, the Supreme People’s Court of the PRC and the government of the Hong Kong Special Administrative Region entered into the Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters by Courts of the Mainland and the Hong Kong Special Administrative Region Pursuant to Choice of Court Agreements between Parties Concerned (關於內地與香港特別行政區法院相互認可和執行當事人協議管轄的民商事案件判決的安排) (the “Arrangement”). Under the Arrangement, where any designated PRC

50 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS court or any designated Hong Kong court has made an enforceable final judgment requiring payment of money in a civil or commercial case pursuant to a choice of court agreement in writing, any party concerned may apply to the relevant PRC court or Hong Kong court for recognition and enforcement of the judgment. Under the Arrangement, a choice of court agreement in writing refers to an agreement in writing entered into between parties after the effective date of the Arrangement in which a Hong Kong court or a PRC court is expressly selected as the court having sole jurisdiction for the dispute. Therefore, it is not possible to enforce a judgment rendered by a Hong Kong court in the PRC if the parties in dispute have not agreed to enter into a choice of court agreement in writing.

Withholding tax may be imposed on payments on the H Shares. The United States has enacted rules, commonly referred to as “FATCA,” that generally impose a withholding regime with respect to “withholdable payments,” generally U.S. source payments of dividends and interest and, beginning in 2019, gross proceeds from the disposition of property that can produce U.S. source payments, and, in the future, may impose such withholding on “foreign passthru payments” made by a “foreign financial institution” (an “FFI”), unless such FFI complies with certain diligence and reporting requirements. Under current guidance, the term “foreign passthru payment” is not defined and it is therefore not clear whether or to what extent payments on the H Shares would be considered foreign passthru payments. Withholding on foreign passthru payments would not be required with respect to payments on the H Shares made before January 1, 2019. The United States has entered into an intergovernmental agreement (an “IGA”) with Hong Kong (the “Hong Kong IGA”), and has agreed in substance with the PRC to an IGA (the “PRC IGA”), which potentially modifies the FATCA withholding regime described above. Under the FATCA rules and the IGAs, we and our subsidiaries that are treated as FFIs will be subject to the diligence and reporting obligations under FATCA or an applicable IGA. In order to avoid the withholding regime described above, we and each of our subsidiaries intend to comply with the diligence and reporting requirements under FATCA in accordance with relevant laws and regulations, which may affect how we structure our operations and conduct our business. It is not yet clear how the Hong Kong IGA and the PRC IGA will address foreign passthru payments. Prospective investors in the H Shares should consult their tax advisors regarding the potential impact of FATCA, the PRC IGA, the Hong Kong IGA and any non-U.S. legislation implementing FATCA, on their investment in the Shares.

We are subject to PRC laws and regulations on currency conversion, and the fluctuation of the Renminbi exchange rate may materially and adversely affect our ability to pay dividends to holders of H Shares. All of our revenue is denominated in Renminbi, which is not a fully freely-convertible currency. A portion of our revenues must be converted into other currencies in order to meet our foreign currency obligations. For example, we need to obtain foreign currency to make payments of declared dividends, if any, on our H Shares. Under China’s existing laws and regulations on foreign exchange, following the completion of the [REDACTED], we will be able to make dividend payments in foreign currencies by complying with certain procedural requirements and without prior approval from SAFE. However, in the future, the PRC government may, at its discretion, take measures to restrict access to foreign currencies for capital account and current account transactions under certain circumstances, which would limit our ability to exchange Renminbi for other currencies. Therefore, we may not be able to pay dividends in foreign currencies to our H Shares holders.

51 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS

From time to time, the value of the Renminbi against the U.S. dollar and other currencies fluctuates, and is affected by a number of factors, such as changes in China’s and the international community’s political and economic conditions and the fiscal and foreign exchange policies prescribed by the PRC government. On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the Renminbi to the U.S. dollar so that the Renminbi is now permitted to fluctuate in a regulated band that is based on reference to a basket of currencies determined by the PBoC. The PRC government further reformed the Renminbi exchange rate regime in 2012 and 2014. On August 11, 2015, PBoC announced its intention to improve the central parity of the Renminbi against the U.S. dollar by authorizing market-makers to provide parity to the China Foreign Exchange Trading Center with reference to the interbank foreign exchange market closing rate of the previous day, the supply and demand for foreign exchange as well as changes in major international currency exchange rates. On the same day, the central parity of the Renminbi against the U.S. dollar depreciated nearly 1.9% as compared to August 10, 2015, and further depreciated nearly 1.6% on August 12, 2015 as compared to August 11, 2015. With the development of foreign exchange markets and progress towards interest rate liberalization and Renminbi internationalization, the PRC government may in the future announce further reforms to the exchange rate regime. As all of our revenue is denominated in Renminbi, and the [REDACTED] from the [REDACTED] will be received in Hong Kong dollars, any appreciation of the Renminbi against the U.S. dollar, the Hong Kong dollar or any other currencies may result in the decrease in the value of our foreign currency denominated assets and our [REDACTED] from the [REDACTED]. Conversely, any depreciation of the Renminbi may adversely affect the value of, and any dividends payable on, our H Shares in foreign currency. In addition, there are limited instruments available for us to reduce our foreign exchange currency exposure at reasonable costs. We cannot assure you that we will be able to minimize or reduce our foreign currency risk exposure relating to our foreign currency denominated assets. Furthermore, we are also currently required to obtain the approval from SAFE before converting significant amounts of foreign currencies into Renminbi. All of these factors could adversely affect our financial condition and results of operations.

Holders of H Shares may be subject to PRC taxation on dividends paid by us and gains realized through their disposal of our H Shares. Under applicable PRC tax laws, regulations, and statutory documents, non-resident individuals and enterprises are subject to different tax obligations with respect to dividends received from us or gains realized upon the sale or other disposition of our H Shares. Non-PRC resident individuals are generally subject to PRC individual income tax under the Individual Income Tax Law of the PRC (《中華人民共和國個人所得稅法》) at a rate of 20% on their dividends and gains sourced from the PRC unless specifically exempted by the finance authority of the State Council or reduced or eliminated by an applicable income tax treaty or arrangement. We are required to withhold and settle such tax on behalf of the non-resident individuals from dividend payments made to them. According to relevant applicable regulations, domestic non-foreign-invested enterprises issuing shares in Hong Kong may, when distributing dividends, withhold individual income tax at the rate of 10% in general, unless a different rate applies under an applicable tax treaty or arrangement or where the non-resident individuals reside in a jurisdiction that does not have a tax treaty or arrangement with the PRC. Hong Kong investors are not required to pay individual income tax in the PRC on gains realized from public trading of H shares purchased on the same exchange pursuant to the Fourth Protocol of the Arrangement

52 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS between the Mainland and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion (《內地和香港特別行政區關於對所得避免雙重徵稅和防止偷漏稅的安排>第四議定書》) signed on April 1, 2015, effective on December 29, 2015. However, as of the Latest Practicable Date, there remains uncertainty in the interpretation and application of relevant current Chinese tax laws and regulations as to whether gains realized upon disposal of H Shares by non-resident individuals in other jurisdictions are subject to PRC individual income tax if such tax is not exempted pursuant to a tax treaty/arrangement with the PRC.

Non-resident enterprises that do not have establishments or places in the PRC, or have establishments or places in the PRC but their income is not effectively connected to such establishments or places are subject to PRC enterprise income tax at the rate of 10% on dividends received from PRC resident enterprises and gains realized upon disposal of equity interests in PRC resident enterprises pursuant to the Enterprise Income Tax Law of the PRC (《中華人民共和國企業所得稅法》) and its implementation regulations, which may be further reduced or exempted under an applicable income tax treaty or arrangement between the PRC and the jurisdiction where the non-PRC resident enterprise resides. As of the Latest Practicable Date, there are no explicit rules about how to levy tax on gains realized by non-resident enterprise holders of H Shares through the sale or transfer by other means of H Shares.

There remains uncertainty as to how the PRC tax laws, regulations and statutory documents are interpreted and implemented by the PRC tax authorities. PRC tax laws, regulations and statutory documents may also change. If there are any unfavorable changes to applicable tax laws or interpretations or application with respect to such laws, the value of your [REDACTED]in our H Shares may be materially affected.

Please see “Appendix VI – Taxation and Foreign – Exchange”.

Payment of dividends is subject to restrictions under PRC laws.

Under PRC law and our Articles of Association, dividends may be paid only out of distributable profits. Our profit distribution plan is subject to approval by a Shareholders’ general meeting. In addition to the financial statements prepared in accordance with PRC accounting standards and regulations, we will also prepare our financial statements in accordance with IFRS. Our profit after tax available for distribution for a particular financial year shall be the lower of profit after tax as shown in the financial statements prepared under either of the two accounting standards mentioned above. We are prohibited from paying dividends for a given year out of our profit after tax to our Shareholders in proportion to their respective shareholdings before making up any accumulated losses of previous years and making appropriations to the statutory surplus reserve and general reserve as well as discretionary reserve as approved by our Shareholders’ meeting. As a result, we may not have distributable profits to make dividend distributions to our Shareholders, including in respect to periods where we have recorded an accounting profit. Any distributable profits not distributed in a given year may be retained and remain available for distribution in subsequent years. In addition, the CBIRC has the right to restrict dividend payments and other distributions by any bank that has failed to meet statutory capital adequacy ratio requirements or that has violated certain other PRC banking regulations. For more details, please see “Supervision and Regulation – Supervision over Capital Adequacy”.

53 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS

Natural disasters, epidemics, acts of war or terrorism or other factors beyond our control may have a material adverse effect on our business operations, financial condition and results of operations.

Natural disasters, epidemics, acts of war or terrorism or other factors beyond our control may adversely affect the economy, infrastructure and livelihood of the people in the regions where we conduct our business. These regions may be under the threat of flood, earthquake, sandstorm, snowstorm, fire or drought, power shortages or failures, or are susceptible to epidemics, potential wars or terrorist attacks. Serious natural disasters may result in a tremendous loss of lives and injury and destruction of assets and may disrupt our business and operations. Severe communicable disease outbreaks could result in a widespread health crisis that could materially and adversely affect the economy and financial markets. Acts of war or terrorism may also injure our employees, cause loss of lives, disrupt our business network or destroy our markets. Any of these factors and other factors beyond our control could have an adverse effect on the overall business environment, cause uncertainties in the regions where we conduct business, cause our business to suffer in ways that we cannot predict and materially and adversely impact our business, financial condition and results of operations.

We cannot assure you of the accuracy or comparability of facts, forecasts and statistics contained in this document regarding the PRC, the PRC economy or the PRC and global banking industries.

Facts, forecasts and statistics in this document related to the PRC, the PRC economy and the PRC and global banking industries, including our market share information, are derived from various official sources and information published by various government authorities and departments, such as the PBoC, the CBIRC, the NBS, the NDRC or other public sources, which are generally believed to be reliable. However, we cannot guarantee the quality, comparability, and reliability of such material. In addition, these facts, forecasts and statistics have not been independently verified by us or any other parties involved in the [REDACTED], and may not be consistent with information available from other sources, and may not be complete or up to date. We have taken reasonable care in reproducing or extracting information from such sources. However, because of potentially flawed methodologies, discrepancies in market practice and other reasons, these facts, forecasts and other statistics may be inaccurate or may not be comparable from period to period or to facts, forecasts or statistics offered by other economies. Therefore, you should not unduly rely on such information.

RISKS RELATING TO THE [REDACTED]

No prior [REDACTED] for our H Shares exists, an active [REDACTED] market for our H Shares may not develop and their [REDACTED] may fluctuate significantly.

Prior to the [REDACTED], there was no [REDACTED] for our H Shares. There can be no assurance that an active [REDACTED] market for our H Shares will develop and sustain following the [REDACTED]. In addition, the initial [REDACTED] of our H Shares is expected to be fixed by agreement between the [REDACTED] (on behalf of the [REDACTED]) and us, and may not be indicative of the market price of our H Shares following the completion of the [REDACTED]. Moreover, the [REDACTED] and the price of our H Shares may be affected by various factors, including the research reports yet to be released about us prepared by securities and industries analysts or a reduction of their ratings on our H Shares. If an active [REDACTED] for our H Shares does not develop after the [REDACTED], the market price and liquidity of our H Shares could be materially and adversely affected.

54 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS

Future sales or perceived sales of a substantial number of our Shares in [REDACTED] could adversely affect the prevailing market price of our H Shares and our ability to raise capital in the future.

The market price of our H Shares could decline as a result of future sales of a substantial number of our Shares or other securities relating to our Shares in the [REDACTED], or the issuance of new shares or other securities, or the perception that such sales or issuances may occur. Future sales, or anticipated sales, of substantial amounts of our securities, including any future offerings, could also materially and adversely affect our ability to raise capital at a time and on terms favorable to us. In addition, our shareholders may experience dilution in their holdings to the extent we will issue additional securities in future offerings. New equity or equity-linked securities issued by us may also confer rights and privileges that take priority over those conferred by the H Shares.

The conversion of a significant number of Domestic Shares into H Shares may seriously harm the prevailing market price of our H Shares.

Our Domestic Shares can be converted into H Shares, if the conversion and [REDACTED] of H Shares so converted shall have been duly completed pursuant to requisite internal approval processes and approval from the relevant PRC regulatory authorities, including the CSRC. In addition, such conversion and [REDACTED] must, in all aspects, comply with the regulations promulgated by the securities regulatory authority under the State Council and the regulations, requirements and procedures of the Hong Kong Stock Exchange. A vote by the shareholders in separate class meetings is not required for the listing and trading of the converted shares on an overseas stock exchange. If a significant number of Domestic Shares are converted into H Shares, the supply of H Shares may be substantially increased, which could materially and adversely affect the prevailing market price of our H Shares.

As the [REDACTED] of our H Shares is higher than our net tangible asset value per share, you will experience immediate dilution upon such purchase.

The [REDACTED] of our H Shares may be higher than the [REDACTED] adjusted net tangible assets per Share as of June 30, 2018. Therefore, purchasers of our H Shares in the [REDACTED] will experience an immediate dilution in [REDACTED] net tangible assets per Share and our existing Shareholders will receive an increase in the [REDACTED] adjusted net tangible assets per Share of their Shares. In addition, holders of our H Shares may experience a further dilution of their shareholding percentage if the [REDACTED] is exercised or if we obtain additional capital in the future through equity offerings.

Dividends distributed in the past may not be indicative of the amount of dividends that we may distribute in the future.

The amount of dividends we have paid historically is not indicative of our future performance or the amount of dividends that may be paid in the future. Any future declaration of dividends will be proposed by our Board, and the amount of any dividends will depend on various factors, including our financial condition, results of operations, prospects, capital adequacy levels and other factors that our Board may determine to be important. For details of our distributed dividends during the Track Record Period, see “Financial Information – Dividends”. We cannot guarantee if and when we will pay dividends in the future.

55 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS

Since there may be a gap of several Business Days between pricing and [REDACTED] of our H Shares, holders of our H Shares are subject to the risk that the price of our H Shares could fall during the period before [REDACTED] of our H Shares begins.

The [REDACTED] of our H Shares is expected to be determined on the [REDACTED]. However, our H Shares will not commence [REDACTED] on the Hong Kong Stock Exchange until they are delivered, which is expected to be several Business Days after the [REDACTED]. As a result, investors may not be able to sell or otherwise [REDACTED] in our H Shares during that period. Accordingly, holders of our H Shares are subject to the risk that the price of our H Shares could fall before [REDACTED] begins as a result of adverse market conditions or other adverse developments that could occur between the time of sale and the time [REDACTED] begins.

You should only place reliance on information released by us including this document, the [REDACTED] and other formal announcements made with respect to our [REDACTED], and not place any reliance on any information contained in press articles or other media when making your investment decision.

We have not authorized anyone to provide you with information that is not contained in this document and the [REDACTED]. Any financial information, financial projections, valuations and other information purported about us contained in any press articles or other media have not been authorized by us, and we make no representation as to the appropriateness, accuracy, completeness or reliability of any such information or publication, and accordingly do not accept any responsibility for any such press or media coverage or the inaccuracy or incompleteness of any such information. In making your decision as to whether to purchase our H Shares, you should rely only on the information in this document, the [REDACTED] and other formal announcements made with respect to our [REDACTED].

56 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. INFORMATION ABOUT THIS DOCUMENT AND THE [REDACTED]

[REDACTED]

57 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. INFORMATION ABOUT THIS DOCUMENT AND THE [REDACTED]

[REDACTED]

58 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. INFORMATION ABOUT THIS DOCUMENT AND THE [REDACTED]

[REDACTED]

59 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. INFORMATION ABOUT THIS DOCUMENT AND THE [REDACTED]

[REDACTED]

60 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. INFORMATION ABOUT THIS DOCUMENT AND THE [REDACTED]

[REDACTED]

61 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES

In preparation for the [REDACTED], our Bank has applied for[, and the Hong Kong Stock Exchange has granted] the following waivers from strict compliance with the relevant provisions of the Listing Rules:

WAIVER IN RELATION TO MANAGEMENT PRESENCE IN HONG KONG

Pursuant to Rules 8.12 and 19A.15 of the Listing Rules, we must have a sufficient management presence in Hong Kong. This normally means that at least two of our executive Directors must be ordinarily resident in Hong Kong, except as otherwise permitted by the Hong Kong Stock Exchange in its discretion. All of our business operations are located, managed and conducted outside Hong Kong and all of our executive Directors ordinarily reside in the PRC. We consider that it would be impractical and commercially unnecessary to either relocate two executive Directors to Hong Kong or to appoint two additional executive Directors who are ordinarily resident in Hong Kong. Therefore, we do not have, and for the foreseeable future will not have, a sufficient management presence in Hong Kong for the purpose of satisfying the requirements under Rules 8.12 and 19A.15 of the Listing Rules. Accordingly, we have applied for[, and the Hong Kong Stock Exchange has granted,] a waiver from strict compliance with the requirements under Rules 8.12 and 19A.15 of the Listing Rules on the conditions of the following arrangements for maintaining regular communication with the Hong Kong Stock Exchange:

(i) We have appointed Mr. LIU Shirong (“Mr. Liu”) and Ms. So Shuk Yi Betty (“Ms. So”) as our authorised representatives pursuant to Rule 3.05 of the Listing Rules to act as our principal channel of communication with the Hong Kong Stock Exchange. We have provided the Hong Kong Stock Exchange with their contact details, and they can be readily contactable to deal promptly with enquiries from the Hong Kong Stock Exchange, and will also be available to meet with the Hong Kong Stock Exchange to discuss any matters within a reasonable period of time upon request by the Hong Kong Stock Exchange. As and when the Hong Kong Stock Exchange wishes to contact our Directors on any matters, each of our authorised representatives has means to contact all our Directors promptly at all times.

(ii) We have provided the Hong Kong Stock Exchange with the mobile phone numbers, office phone numbers, e-mail addresses and fax numbers of each Director to facilitate communication with the Hong Kong Stock Exchange. Furthermore, each Director who is not ordinarily resident in Hong Kong possesses or can apply for valid travel documents to visit Hong Kong and can meet with the Hong Kong Stock Exchange within a reasonable period of time.

(iii) We have appointed TC Capital International Limited as our compliance adviser pursuant to Rules 3A.19 and 19A.05 of the Listing Rules to act as our additional channel of communication with the Hong Kong Stock Exchange, for a period commencing from the [REDACTED] and ending on the date on which we comply with Rule 13.46 of the Listing Rules in respect of our financial results for the first full financial year commencing after the [REDACTED]. Our compliance adviser will advise on on-going compliance requirements and other issues arising under the Listing Rules and other applicable laws and regulations in Hong Kong after the [REDACTED] and have full access at all times to our authorised representatives and our Directors.

62 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES

WAIVER IN RELATION TO JOINT COMPANY SECRETARIES Pursuant to Rule 8.17 of the Listing Rules, we must appoint a company secretary who satisfies Rule 3.28 of the Listing Rules. Pursuant to Rule 3.28 of the Listing Rules, we must appoint as our company secretary an individual who, by virtue of his or her academic or professional qualifications or relevant experience, is, in the opinion of the Hong Kong Stock Exchange, capable of discharging the functions of company secretary. Pursuant to Note 1 to Rule 3.28 of the Listing Rules, the Hong Kong Stock Exchange considers the following academic or professional qualifications to be acceptable: (i) a Member of The Hong Kong Institute of Chartered Secretaries; (ii) a solicitor or barrister (as defined in the Legal Practitioners Ordinance (Chapter 159 of the Laws of Hong Kong)); and (iii) a certified public accountant (as defined in the Professional Accountants Ordinance (Chapter 50 of the Laws of Hong Kong)). Pursuant to Note 2 to Rule 3.28 of the Listing Rules, in accessing “relevant experience”, the Hong Kong Stock Exchange will consider the individual’s: (i) length of employment with the issuer and other issuers and the roles he or she played; (ii) familiarity with the Listing Rules and other relevant laws and regulations including the SFO, Companies Ordinance, Companies (Winding Up and Miscellaneous Provisions) Ordinance and the Codes on Takeovers and Mergers and Shares Buy-backs; (iii) relevant training taken and/or to be taken in addition to the minimum requirement under Rule 3.29 of the Listing Rules; and (iv) professional qualifications in other jurisdictions. We have appointed Mr. Liu as one of our joint company secretaries. Mr. Liu joined our Bank in October 1997. He has been the secretary to the Board and has been responsible for handling company secretarial matters of our Bank since December 2012. Mr. Liu does not possess the requisite qualifications as required under Rule 3.28 of the Listing Rules. Therefore, we have also appointed Ms. So, who is a Hong Kong resident, as our joint company secretary. Ms. So, is an associate member of The Institute of Chartered Secretaries Administrators in the United Kingdom and The Hong Kong Institute of Chartered Secretaries. Therefore, Ms. So meets the qualification requirements under Note 1 to Rule 3.28 of the Listing Rules and is in compliance with Rule 8.17 of the Listing Rules. For more details of the biographies of Mr. Liu and Ms. So, please see “Directors, Supervisors and Senior Management – Joint Company Secretaries” in this document. Given the important role of the company secretary in the corporate governance of an issuer, particularly in assisting the issuer as well as its directors in complying with the Listing Rules and other applicable laws and regulations of Hong Kong, we have put in place the following arrangements to facilitate Mr. Liu in discharging his function as a company secretary: (i) Ms. So, who satisfies Rule 3.28 of the Listing Rules, will assist Mr. Liu so as to enable him to discharge his duties and responsibilities as a joint company secretary of our Bank. Given Ms. So’s professional qualifications and relevant experience, she will be able to advise both Mr. Liu and our Bank on the relevant requirements of the Listing Rules as well as other applicable laws and regulations of Hong Kong;

63 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES

(ii) Mr. Liu will be assisted by Ms. So, for a period of three years commencing from the [REDACTED], which should be sufficient for him to acquire the relevant experience under Note 2 to Rule 3.28 of the Listing Rules; (iii) we will ensure that Mr. Liu has access to the relevant trainings and support to enable him to familiarize himself with the Listing Rules and the duties required for a company secretary of a Hong Kong listed company, and Mr. Liu has undertaken to attend such trainings; (iv) Ms. So will communicate with Mr. Liu on a regular basis regarding matters in relation to corporate governance, the Listing Rules as well as other applicable laws and regulations of Hong Kong which are relevant to our operations and affairs. Ms. So will work closely with, and provide assistance to Mr. Liu with a view to discharging his duties and responsibilities as a company secretary, including but not limited to organizing the board meetings and shareholders’ meetings; and (v) Mr. Liu and Ms. So will also attend in each financial year no less than 15 hours of relevant professional training to familiarize themselves with the requirements of the Listing Rules and other legal and regulatory requirements of Hong Kong pursuant to Rule 3.29 of the Listing Rules. Both Mr. Liu and Ms. So will be advised by our legal advisors as to Hong Kong law and our compliance adviser as and when appropriate and required. Accordingly, we have applied for[, and the Hong Kong Stock Exchange has granted,] a waiver from strict compliance with the requirements under Rules 8.17 and 3.28 of the Listing Rules, provided that Ms. So will act as a joint company secretary and provide assistance to Mr. Liu. The waiver is valid for an initial period of three years commencing from the [REDACTED], and will be revoked immediately if Ms. So ceases to provide assistance and guidance to Mr. Liu. At the end of the initial three-year period, our Bank will re-evaluate the qualifications and experience of Mr. Liu. Upon the determination of our Bank that no on-going assistance to Mr. Liu is necessary, we will demonstrate to the Hong Kong Stock Exchange that, with the assistance of Ms. So over such three-year period, Mr. Liu has acquired the relevant experience as prescribed in Rule 3.28 of the Listing Rules. The Hong Kong Stock Exchange will then re-evaluate whether any further waiver would be necessary.

WAIVER IN RELATION TO HONG KONG FINANCIAL DISCLOSURE REQUIREMENTS Pursuant to Rule 4.10 of the Listing Rules, the information to be disclosed in respect of Rules 4.04 to 4.09 of the Listing Rules must be in accordance with best practices which is at least that required to be disclosed in respect of those specific matters in the accounts of a company under the HKFRS, IFRS or CASBE in the case of PRC issuers that has adopted CASBE for the preparation of its annual financial statements, and in the case of banking companies, the Guideline on the Application of the Banking (Disclosure) Rules issued by HKMA. As we are engaged in banking activities, pursuant to Rule 4.10 of the Listing Rules, the financial information to be disclosed in this document should include information that is required to be disclosed in respect of those specific matters under the Guideline on the Application of the Banking (Disclosure) Rules. We are currently unable to fully comply with the disclosure requirements under the Banking (Disclosure) Rules for the reasons described below. We believe that the financial disclosure requirements that we are unable to comply with are immaterial to potential investors of our Bank.

64 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES

Our position in relation to disclosures under the Banking (Disclosure) Rules

Reason for a Waiver Expected Section Disclosure in Relation to the Timing for Full No. Requirements(1) Specific Disclosure Proposal for Disclosure Compliance 99 Section information The Bank maintains a All of the Bank’s customer N/A breakdown of customer loans loans are utilized in the PRC by industry sector as set out in instead of in Hong Kong. The the Classification and Codes Bank is subject to the of National Economic supervision of the CBIRC and Industries in the Bank’s loans maintains a breakdown of system for the purpose of customer loans by industry filing returns to the CBIRC. sector based on the classification system as prescribed by the CBIRC, e.g. loans are categorized into corporate loans and personal loans which are further classified into detailed subcategories by industry/ nature. The Bank has disclosed the customer loans by industry sectors in accordance with the management reports prepared based on the CBIRC classification in Note 3 to the Accountant’s Report as set out in Appendix I of this document. The Bank considers the current disclosure to be sufficient to meet HKMA’s disclosure objectives.

102 An authorised The Bank’s accounts are N/A N/A institution shall prepared and denominated in disclose its RMB, which means that the non-HKD currency Bank only discloses non-RMB exposures which currency exposures instead of arise from trading, non-HKD currency exposures. non-trading and structural positions in accordance with the return relating to non-HKD currency positions it submitted to the HKMA pursuant to section 63 of the Banking Ordinance in respect of the annual reporting period.

65 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES

Reason for a Waiver Expected Section Disclosure in Relation to the Timing for Full No. Requirements(1) Specific Disclosure Proposal for Disclosure Compliance 16M Additional annual The computation basis for risks The Bank provides information N/A disclosure to be is promulgated by the CBIRC on relevant capital structure made by an as set out in the Core and information on adequacy authorised institution Indicators (Provisional). level in accordance with the using STC in CBIRC disclosure approach to calculate requirements. The Bank its credit risk for believes that these non-securitization requirements result in exposures. disclosure similar to that required under the Banking (Disclosure) Rules.

Note:

(1) The relevant sections under the Banking (Disclosure) Rules for which we are currently unable to provide the required disclosures. Save for the above, as a financial institution incorporated and based in the PRC, we are required to comply with the regulatory requirements set out by CBIRC and PBoC. Certain provisions of the Banking (Disclosure) Rules require disclosure in respect of our capital structure, capital base (in particular, relating to our level of capital adequacy), cross-border claims, liquidity ratios, PRC non-bank exposures and credit risks. We have maintained and compiled data relating to these matters in accordance with the regulatory requirements of CBIRC and PBoC. We believe that the CBIRC and PBoC requirements attempt to address similar disclosure considerations of the requirements under the Banking (Disclosure) Rules, and the differences between the above disclosure requirements under the two regulatory regimes are minimal and immaterial. If we attempt to comply with such requirements under the Banking (Disclosure) Rules in parallel with the CBIRC and PBoC regulations, we would be required, in our view, to carry out additional work to compile similar information already required and maintained in accordance with the CBIRC and PBoC regulations and will be unduly burdensome for us. As a result, we propose to disclose the information in compliance with the CBIRC and PBoC regulations in this regard, instead of strictly following the disclosure regime provided for under the Banking (Disclosure) Rules, which will result in the compilation of similar data. We are of the view that this document will contain sufficient information for investors to make their fully informed investment decision notwithstanding the differences between the CBIRC and PBoC requirements on the one hand, and the requirements under the Banking (Disclosure) Rules on the other hand. The Sole Sponsor concurs with our view based on the reasons set out above.

Based on the above, we have applied for[, and the Hong Kong Stock Exchange has granted,] a waiver from strict compliance with the requirements under Rule 4.10 of the Listing Rules, such that we will not fully comply with the requirements in respect of the financial disclosure provided for under the Banking (Disclosure) Rules on the condition that we provide alternative disclosure in accordance with the regulatory requirements of CBIRC and PBoC.

66 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE [REDACTED]

Name Residential Address Nationality Executive Directors Mr. YOU Jiang (游江) No. 8, 4/F, Unit 3, Building 4 Chinese (Chairman) No. 38 Beishuncheng Street Jinjiang District Chengdu Sichuan Province the PRC

Mr. XU Xianzhong (徐先忠) No. 23, Building 2 Chinese No. 18 Datong Road Longmatan District Luzhou Sichuan Province the PRC

Mr. LIU Shirong (劉仕榮) No. 1, Building 3 Chinese No. 5 Jinzhu Lane Jiangyang District Luzhou Sichuan Province the PRC

Non-executive Directors Ms. XU Yan (徐燕) No. 66, 17/F, Unit 2 Chinese Peninsula No. 2 Binjiang Road Jiangyang District Luzhou Sichuan Province the PRC

Mr. XIONG Guoming (熊國銘) No. 2, Unit 1, Building 12 Chinese Binjiang Community Committee Nancheng Street Jiangyang District Luzhou Sichuan Province the PRC

Mr. LIU Qi (劉奇) No. 9, Unit 2, Building 8 Chinese No. 9 Danqing Road Jiangyang District Luzhou Sichuan Province the PRC

Mr. DAI Zhiwei (代志偉) 19-1-3, Baizhuyuan, Erzutuan Chinese East Danxia Road Jiangyang District Luzhou Sichuan Province the PRC

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Name Residential Address Nationality Independent Non-executive Directors Mr. LIU Xiaoyu (劉小渝) No. 1, Unit 2, Building 2 Chinese No. 48 Longtouguan Road Jiangyang District Luzhou Sichuan Province the PRC

Mr. GU Ming’an (辜明安) No. 9, Unit 4, Building 22 Chinese No. 55 Guanghua Village Street Qingyang District Chengdu Sichuan Province the PRC

Mr. HUANG Yongqing (黃永慶) Room 602, Unit 4, US Federal Chinese Apartment No. 1 Dongfang East Road Xiaoliangmaqiao Chaoyang District Beijing the PRC

Mr. YE Changqing (葉長青) Flat B, 36/F Chinese Tower 6, Harbour Green 8 Sham Mong Road Tai Kok Tsui, Kowloon Hong Kong

Mr. TANG Baoqi (唐保祺) Room 19A, 19F King Tien Mansion Chinese Horizon Gardens 18D Taikoo Shing Road Taikoo Shing Hong Kong

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SUPERVISORS

Name Residential Address Nationality Ms. YUAN Shihong (袁世泓) No. 17, Unit 3, Building 2 Chinese (Chairwoman) No. 2 Kangle Road Jiangyang District Luzhou Sichuan Province the PRC

Mr. DUAN Xuebin (段學彬) No. 7, Unit 3, Building 4 Chinese No. 3, Section 3 Danqing Road Jiangyang District Luzhou Sichuan Province the PRC

Ms. HUANG Ping (黃萍) No. 5, 19/F, Building 1 Chinese No. 61 Guanyinge Front Street Qingyang District Chengdu Sichuan Province the PRC

Ms. LIU Yongli (劉永麗) No. 1, Building 7 Chinese No. 21 Nanguang Road Longmatan District Luzhou Sichuan Province the PRC

Mr. CHEN Yong (陳勇) No. 8, Unit 1, Building 7 Chinese No. 45 Section 1 Jiucheng Avenue Jiangyang District Luzhou Sichuan Province the PRC

For more information of our Directors and Supervisors, please see the section headed “Directors, Supervisors and Senior Management” of this document.

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PARTIES INVOLVED IN THE [REDACTED]

Sole Sponsor CLSA Capital Markets Limited 18/F, One Pacific Place 88 Queensway Hong Kong

[REDACTED]

Legal Advisors to the Bank As to Hong Kong and United States law: Paul Hastings 21-22/F, Bank of China Tower 1 Garden Road Hong Kong

As to PRC law: JunHe LLP 20/F, China Resources Building 8 Jianguomenbei Avenue Beijing the PRC

Legal Advisors to the Sole Sponsor As to Hong Kong and United States law: and the [REDACTED] Jones Day 31/F, Edinburgh Tower The Landmark 15 Queen’s Road Central Hong Kong

As to PRC law: King & Wood Mallesons 40/F, Tower A Beijing Fortune Plaza 7 Dongsanhuan Zhonglu Chaoyang District Beijing the PRC

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Reporting Accountant and Auditor PricewaterhouseCoopers Certified Public Accountants 22/F, Prince’s Building Central Hong Kong

Compliance Advisor TC Capital International Limited Suite 1903-4, 19/F Tower 6, The Gateway Harbour City 9 Canton Road Tsim Sha Tsui Kowloon Hong Kong

[REDACTED]

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Registered Address and Address No. 1, Section 1 Jiucheng Avenue of Head Office Jiangyang District Luzhou Sichuan Province the PRC

Principal Place of Business in Hong Kong 40th Floor, Sunlight Tower No. 248 Queen’s Road East Wanchai Hong Kong

Website Address www.lzccb.cn (the contents of the website do not form part of this document)

Joint Company Secretaries Mr. LIU Shirong (劉仕榮) No. 1, Building 3 No. 5 Jinzhu Lane Jiangyang District Luzhou Sichuan Province the PRC

Ms. SO Shuk Yi Betty (蘇淑儀) 40th Floor, Sunlight Tower No. 248 Queen’s Road East Wanchai Hong Kong (an associate member of The Hong Kong Institute of Chartered Secretaries and of The Institute of Chartered Secretaries and Administrators)

Authorised Representatives Mr. LIU Shirong (劉仕榮) No. 1, Building 3 No. 5 Jinzhu Lane Jiangyang District Luzhou Sichuan Province the PRC

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Board Committees Audit Committee Mr. LIU Xiaoyu (Chairperson) Ms. XU Yan Mr. GU Ming’an Mr. TANG Baoqi Mr. YE Changqing

Development and Strategy Committee Ms. XU Yan (Chairperson) Mr. YOU Jiang Mr. XIONG Guoming Mr. LIU Qi Mr. DAI Zhiwei

Nomination and Remuneration Committee Mr. GU Ming’an (Chairperson) Mr. YOU Jiang Mr. XIONG Guoming Mr. TANG Baoqi Mr. YE Changqing

Related Party (Connected) Transactions Control Committee Mr. LIU Xiaoyu (Chairperson) Mr. GU Ming’an Mr. HUANG Yongqing Mr. TANG Baoqi Mr. LIU Shirong

Risk Management Committee Mr. XIONG Guoming (Chairperson) Mr. YOU Jiang Mr. LIU Xiaoyu Mr. YE Changqing Mr. LIU Shirong

Consumer Rights Protection Committee Mr. HUANG Yongqing (Chairperson) Mr. YOU Jiang Mr. XU Xianzhong Mr. LIU Xiaoyu Mr. LIU Qi

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[REDACTED]

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This section contains information and statistics relating to the industry in which we operate. We have extracted and derived such information, in part, from data relating to us which were prepared in accordance with IFRS, and from various official or publicly available sources derived from data prepared in accordance with PRC GAAP or other applicable GAAP or accounting standards which may differ from IFRS in certain significant respects. In addition, the information provided by the various official or publicly available sources may not be consistent with the information compiled within or outside China by third parties.

We believe that the sources of information are appropriate sources for such information and have taken reasonable care in extracting and reproducing such information. We have no reason to believe that such information is false or misleading or that any fact has been omitted that would render such information false or misleading. The information has not been independently verified by us, the Sole Sponsor, the [REDACTED], the [REDACTED], the [REDACTED] or any other party involved in the [REDACTED] and no representation is given as to its accuracy. Accordingly, such information should not be unduly relied upon. Our Directors confirm that, after taking reasonable care, as of the Latest Practicable Date, there has been no material adverse change in the market information presented in this section.

NATIONAL AND REGIONAL ECONOMY China’s Economy Over the last forty years since adoption of the Chinese economic reform, China has been one of the world’s fastest growing economies and has become the world’s second largest economy since 2010. According to the NBS, China’s GDP increased at a CAGR of 8.6% from RMB59.5 trillion in 2013 to RMB82.7 trillion in 2017. For the first half year of 2018, China’s GDP reached RMB41.9 trillion, representing an increase of 6.8% over the same time period of 2017. Meanwhile, China’s GDP per capita also grew steadily at a CAGR of 8.0% from RMB43,852 in 2013 to RMB59,660 in 2017. With the rapid growing economy, RMB- denominated loans and RMB-denominated deposits of the PRC banking industry have increased at a CAGR of 13.7% and 12.0%, respectively, from 2013 to 2017.

Sichuan’s Economy Situated at the intersection of Silk Road Economic Belt and Yangtze River Economic Belt, Sichuan Province is known for its large population, abundant resources and high GDP growth. In addition to the advantageous geographic location and the favourable regulatory backdrop, it has also benefited from various policy support in infrastructure construction, trade and economic development and achieved a continued, rapid economic growth in the last few years. On April 1, 2017, the State Council approved the establishment of China (Sichuan) Pilot Free Trade Zone (中國(四川)自由貿易試驗區), which further propelled the transformation of Sichuan Province from an inland province to the forefront of opening up. In 2017, the GDP of Sichuan Province amounted to RMB3,698.0 billion, representing a CAGR of 8.8% between 2013 and 2017 and ranking sixth in China and first among the provinces in Western China. For the six months ended June 30, 2018, the GDP of Sichuan Province amounted to RMB1,832.7 billion, representing a 8.2% increase over the same period last year. This increase is 1.4 percentage points higher than the national average increase between the same periods. In line with the rapid development of

75 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. INDUSTRY OVERVIEW economy, Sichuan Province has also seen steady expansion of its financial industry. For the year ended December 31, 2017, the output of the finance industry amounted to RMB330.3 billion, approximately 8.9% of the total GDP of Sichuan Province, 0.9 percentage points higher than the same period in 2016, and 18.0% of the total GDP from the tertiary sector, 0.5 percentage points higher than the same period in 2017. As of December 31, 2017, financial assets of Sichuan Province amounted to approximately RMB10.0 trillion, the aggregate financing for the economy of Sichuan Province amounted to approximately RMB6,600.0 billion, and total deposits and loans amounted to approximately RMB7,200.0 billion and RMB4,900.0 billion, respectively. As of December 31, 2017, there were 136 companies incorporated in Sichuan Province and listed in the PRC or overseas stock markets, around 2,000 financial institutions in Sichuan Province and 850 institutions engaging in the banking, securities and insurance industry, ranking 1st in both Central and Western China in terms of all these three criteria.

Luzhou’s Economy

Located in the southeast of the Sichuan Province, Luzhou is at the junction of Sichuan Chongqing Yunnan Guizhou and the convergence of the Yangtze River and Tuojiang River. Taking into account its unique geographic location and advanced river-based transportation system, Luzhou is well-positioned to take natural advantage in its economy development. According to the Chengdu and Chongqing City Cluster Development Plan (成渝城市群發展規劃) issued by the NDRC, Luzhou is positioned to be a regional central city in south of Sichuan Province. In 2017, Luzhou became the first prefecture-level city in West China out of a third batch of government endorsed pilot Free Trade Zones, or FTZs, with the launch of Chuannan- Lingang FTZ under the Overall Plan for the China (Sichuan) Pilot FTZ (中國(四川)自由貿易試驗區川南臨港片區). Capitalizing on favorable policies and its relevant geographic advantages, Luzhou expedited the development of three key industrial zones in its jurisdiction, namely, Luzhou Hi-Tech Industrial Development Zone (瀘州國家高新區), Luzhou Yangtze River Economic Development Zone (瀘州長江經濟開發區) and China Liquor Golden Triangular Industrial Zone (中國白酒金三角酒業園區), through which, it managed to further enjoy the benefits of development of Yangtze River Economy Belt promoted by the PRC Government. In 2017, the GDP of Luzhou increased to RMB159.6 billion from RMB114.0 billion in 2013, promoting its ranking in Sichuan Province from the eighth in 2013 to the sixth in 2017, with the annual growth rate ranked first in Sichuan Province consecutively in 2016 and 2017. For the six months ended June 30, 2018, the GDP of Luzhou amounted to RMB82.0 billion, representing a 9.2% increase from that in the six months ended June 30, 2017, with the annual growth rate ranked second in Sichuan Province, which is 2.4 percentage points higher than the national average in China of 6.8%, 1.0 percentage points higher than the average increase in Sichuan Province of 8.2%.

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The table below sets forth GDP, GDP per capita, per capita disposable income of urban households, fixed asset investments and total import and export volume of Luzhou for the years indicated.

For the year ended December 31, CAGR

2013 2014 2015 2016 2017 (2013-2017) GDP (in billions of RMB) 114.05 125.97 135.34 148.19 159.62 8.8% GDP per capita (in RMB) 26,848 29,655 31,714 34,497 37,020 8.4% Per capita disposable income of urban households (in RMB) 22,821 25,240 26,656 28,959 31,449 8.3% Fixed asset investment (in billions of RMB) 86.64 118.10 146.37 173.04 204.21 23.9% Total import and export volume of goods (in millions of US$) 226.54 275.65 313.43 313.29 2,057.08 73.6%

Source: Luzhou Municipal Bureau of Statistics (瀘州市統計局), China Statistical Information Website (中國統計信息網) BANKING INDUSTRY

Overview

China’s commercial banks has maintained its steady growth in the last decade. The following table sets forth certain information of China’s commercial banks as of the dates or for the periods indicated.

As of and for the six months As of and for the year ended December 31, ended June 30, 2013 2014 2015 2016 2017 2018

(in billions of RMB, except percentages) Total assets 118,799.0 134,797.8 155,825.7 181,688.4 196,783.4 203,064.5 Net profit 1,418.0 1,554.8 1,592.6 1,649.0 1,747.7 1,032.2 Return on assets (%) 1.27 1.23 1.10 0.98 0.92 1.03 Allowance coverage ratio (%) 282.70 232.06 181.18 176.40 181.42 178.70 NPL ratio (%) 1.00 1.25 1.67 1.74 1.74 1.86

Source: CBIRC

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The following table sets forth the total assets of different types of commercial banks in the PRC as of the dates indicated.

As of December 31 As of June 30, 2013 2014 2015 2016 2017 2018

(in billions of RMB) Large commercial banks 65,600.5 71,014.1 78,163.0 86,598.2 92,814.5 96,298.4 Joint-stock commercial Banks 26,936.1 31,380.1 36,988.0 43,473.2 44,962.0 45,923.8 City commercial banks 15,177.8 18,084.2 22,680.2 28,237.8 31,721.7 32,328.5 Other types of commercial banks(1) 11,084.6 14,319.4 17,994.5 23,379.2 27,285.2 28,513.8 Total 118,799.0 134,797.8 155,825.7 181,688.4 196,783.4 203,064.5

Source: CBIRC Note:

(1) Comprises rural commercial banks, privately-owned banks and foreign banks.

City Commercial Banks

After more than 21 years of development, city commercial banks have become an important component in China’s banking industry. There were altogether 134 city commercial banks in the PRC as of December 31, 2017. The total assets of PRC city commercial banks almost doubled, from RMB15.18 trillion as of December 31, 2013 to RMB31.72 trillion as of December 31, 2017. Total assets of all city commercial banks in China as a percentage of the total assets of all commercial banks increased from 12.8% as of December 31, 2013 to 16.1% as of December 31, 2017.

With in-depth understanding of local markets and close relationships with local customers, city commercial banks are generally well-positioned to capture opportunities and market trends in local areas. The following table sets forth certain information relating to city commercial banks in China as of the dates or for the periods indicated.

As of and for the six months As of and for the year ended December 31 ended June 30, 2013 2014 2015 2016 2017 2018

(in billions of RMB, except percentages) Total assets 15,177.8 18,084.2 22,680.2 28,237.8 31,721.7 32,328.5 Net profit 164.1 186.0 199.4 224.5 – 140.3 Return on assets (%) – 1.12 0.98 0.88 0.83 0.88 Allowance coverage ratio (%) – 249.33 221.27 219.89 214.48 207.89 NPL ratio (%) 0.88 1.16 1.40 1.48 1.52 1.57

Source: CBIRC

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Luzhou’s Banking Industry As of December 31, 2017, among the commercial banks in Luzhou, we ranked first in terms of total assets. The following table sets forth the data on the scale and outlets of the five largest commercial banks in Luzhou in terms of total assets as of the date indicated.

As of December 31, 2017

Total Total Total number of Total assets liabilities Total loans deposits outlets

(in billions of RMB, except for the number of outlets) Our Bank(1) 70.88 66.54 19.40 42.15 24 Bank A(2) 62.55 58.13 31.44 53.54 228 Bank B(2) 34.07 33.85 4.24 32.72 206 Bank C(2) 31.52 31.71 20.07 30.40 27 Bank D(2) 29.09 28.73 15.72 28.21 55

Sources: CBRC Luzhou Office (1) Audited financial information prepared in accordance with IFRS. (2) Total assets, total liabilities, total loans and total deposits are unaudited and prepared by each bank according to CBRC regulatory standard, which may differ from IFRS financial statement.

INDUSTRY TRENDS AND BUSINESS DRIVERS Economic growth in China and Sichuan Province Our business expansion is affected by the market demands for our financial products and services, which in turn is driven by the general economic condition in China, particularly in regions where our branch network operates. In recent years, while China’s economy steps into the “new normal” amid the economic slowdown and industry restructuring, Sichuan Province, where our business is located, experienced continuous expansion, primarily due to, among other things, favorable policy initiatives and government support. We are of the view that economy in Sichuan Province will keep growing in the near future, resulting in a continued increase in market demands for our products and services of our corporate banking, retailing banking and financial markets businesses. Please also see the section headed “Business – Our Competitive Strengths” and “Risk Factors – If we are unable to effectively maintain the quality of our loan portfolio, our financial position and results of operations may be materially and adversely affected.”

Increasingly Importance of City Commercial Banks in China Unlike large commercial banks and nationwide joint-stock commercial banks, city commercial banks are generally permitted to provide banking services only within certain geographic regions. Guided by policies issued by relevant regulatory authorities, city commercial banks should continue to pursue differentiating and distinctive development strategies, take full advantage of fast decision-making process and flexible operation mechanism, and focus on providing a wider range of financial services to micro and small enterprises together with urban and rural residents in the local areas. In recent years, city commercial banks have been strengthening their capital base through the introduction of strategic investors and initial public offering. In addition, some city commercial banks have, in accordance with regulations, begun developing integrated operations business models, for example establishing consumer finance companies and financial leasing companies.

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According to the CBIRC, during 2013 and 2017, each of the total assets, total liabilities and shareholders’ equity of city commercial banks grew at a CAGR of 20.2%, 20.1%, and 21.7%, higher than the corresponding CAGR of all PRC banking institutions of 12.9%, 12.5%, and 17.5%. Total assets of all city commercial banks in China as a percentage of the total assets of all commercial banks in China increased from 12.8% as of December 31, 2013 to 16.1% as of December 31, 2017.

Strengthened Regulation and Supervision In recent years, the PBoC and the CBIRC have promulgated a series of regulations to enhance the regulation and supervision of China’s banking industry and cultivate an orderly market for competition. These regulations aim to, among other things, strengthen supervision over capital adequacy, enhance risk management, improve modern corporate governance and further enhance the financial services from commercial banks to real economy. For details of relevant regulations, please see the section headed “Supervision and Regulation”. Key requirements of relevant regulations include: • Risk Management Improvement. The PRC banking regulatory institutions launched various rules and regulations to enhance the overall risk management capacity of commercial banks, with specific requirements on timely identification and accurate prediction of risks associated with changes in business model and structure, continuous improvement in overall risk management strategy, and enhancement in risk mitigation capacity through utilizing various capital market instruments. • Stringent Management on Business Operations. Recent regulatory development focused on financial market business, covering two key areas: (i) encouraging banking institutions to optimize loan portfolio and improve credit support to the real economy, and (ii) taking measures to reduce financing costs of the real economy and simplify structure of financial products through decreasing the number of entities involved in fund flow, including decreasing channel-type business (通道業務). • Enhancement in Corporate Governance. Regulatory focus in corporate government is set upon improvement in structure of government covering entire entity, equity and the operations of board of directors and board of supervisors. With the continuous development of the regulatory environment, particularly the trend manifested in the above mentioned rules and regulations, we expect financial institutions in China, including commercial banks, will keep optimizing asset quality and improving risk management system.

Deepening of the Interest Rate Liberalization In the PRC, interest rates on RMB-denominated loans and deposits are set by financial institution with reference to the benchmark interest rates on loans and deposits published and adjusted from time to time by PBoC. In recent years, as part of the government’s efforts to reform the financial system to support a balanced and sustainable growth, China has implemented a series of initiatives to move towards market-based lending and deposits rates. In July 2013, the PBoC abolished the floor rates for RMB-denominated loans (excluding interest rates on residential mortgage loans). In October 2015, the PBoC removed the cap on deposit interest rates for commercial banks. Effective May 1, 2015, The Deposit Insurance Regulations (《存款保險條例》) of the PRC paved the way for a smooth establishment of a deposit insurance system in China which would thereby push ahead the liberalization of the interest rate mechanism.

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Although the on-going interest rate liberalization may give banks greater flexibility in deciding lending and deposits rates, the overall impact of the interest rate reform remains uncertain. The interest rate liberalization may intensify pricing competition in the PRC banking industry, which could reduce their net interest margins and profitability and affect their business performance and results of operations.

Challenges and Opportunities for Banks Arising from Internet Finance

In recent years, Internet-based financial service companies are developing rapidly in China. At present, the major financial services provided by China’s Internet-based financial service companies include online personal loans, third-party online and mobile payment, as well as online and mobile wealth management. These Internet-based financial service companies bring in innovative service models, lower the threshold and the cost of providing financial services for the public, and improve the customer experience. Accordingly, China’s banking financial institutions are facing the challenges with respect to products, technologies and customer experience.

China’s banking industry has capitalized on rapidly developing digital and mobile technology to introduce new businesses, products and service platforms, including the establishment of e-commerce platforms to provide financial services to customers and online sales platforms for financial products. Certain commercial banks have attempted to improve operating efficiency and risk management by utilizing big data technology. By integrating their physical networks and services and electronic banking, banks can provide more convenient traditional banking services and innovative banking products to customers. Application of electronic banking channels such as Internet banking, telephone banking and mobile banking has opened broad new channels for banks to expand their banking businesses. In the meantime, online payment is gradually becoming one of the major payment channels. Expanding user base and increasing demand for mobile banking in China have resulted in comprehensive cooperation between commercial banks and Internet companies in the area of Internet finance, which will become one of the focuses of commercial banks’ transformation.

Increasing Importance of Banking Services to small and micro Enterprises

In recent years, micro and small enterprises have been developing rapidly in the PRC. There were 28 million small and micro enterprises and 62 million individual business owners as of Dec 31, 2017, which constitute more than 90% of market participants, and contribute more than 80% of employment, 70% of inventions, 60% of China’s GDP and 50% of tax income in PRC.

Meanwhile, loans to micro and small enterprises have also grown rapidly. As of December 31, 2017, the balance of loans to micro and small enterprises was RMB30.74 trillion, which increased 15.14% on a year-over-year basis and represented 24.67% of the balance of loans to all enterprises. With the continued development of the capital markets, large enterprises and group customers are expected to transfer part of their financing from commercial banks to capital markets, while micro and small enterprises will become an increasingly important and stable customer base for commercial banks. Encouraged by state policies and actively supported by PRC banking institutions, it is expected that financing services to micro and small enterprises will become a larger part of the overall business of PRC commercial banks and a major driving force for the sustainable growth of corporate banking business.

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Increasing Demand for customized Personal banking products and services

With the rapid growth of the PRC economy, the per capita income of domestic residents in China has been increasing in the past three decades. According to the NBS, urban households’ per capita disposable income increased from RMB26,467 in 2013 to RMB36,396 in 2017, which indicates the growing consumption of domestic residents.

As a result of accumulated personal wealth of domestic residents, PRC customers have been looking for more diversified personal financial products and services. There have been significant growth opportunities in the PRC personal finance market due to the increasing consumer demand for more diversified retail banking products and services, such as residential mortgage loans, credit cards, wealth management services, personal consumer loans and other consumer finance products. We believe that providing quality and customized products and services to retail banking customers will be the significant driving force of our retailing banking business.

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OVERVIEW

The banking industry in the PRC is highly regulated. The current principal regulatory authorities of the PRC banking industry include the CBIRC and the PBoC. The CBIRC is responsible for supervising and regulating banking institutions. The PBoC is responsible for formulating and implementing monetary policies and preparing drafts of important laws and regulations in the banking industry and prudently regulating basic systems. The laws and regulations applicable to the PRC banking industry mainly include the Commercial Banking Law of the PRC (2015 Amendment) (《中華人民共和國商業銀行法(2015修正)》) (the “Commercial Banking Law”), the Law of the People’s Bank of China of the PRC (2003 Amendment) (《中華人民共和國中國人民銀行法(2003修正)》) and the Banking Supervision and Regulatory Law of the PRC (2006 Amendment) (《中華人民共和國銀行業監督管理法(2006修正)》), and relevant regulations, rules and normative documents established thereunder.

PRINCIPAL REGULATORS CBIRC Functions and Powers Established by merging the former CBRC and the CIRC, the CBIRC is an institution directly under the State Council1, and is now the principal regulatory authority for financial institutions of the banking industry in the PRC, responsible for the supervision and regulation of banking institutions operating in the PRC, including commercial banks, urban credit cooperatives, rural credit cooperatives, other deposit-taking financial institutions, policy banks and certain non-banking financial institutions. The CBIRC is also responsible for the supervision and regulation of the entities established by domestic financial institutions outside the PRC and the overseas operations of the above-mentioned banking and non-banking financial institutions. Before the merger of the former CBRC and the former CIRC, the former CBRC exercised the current functions of the CBIRC and was responsible for preparing drafts of important laws and regulations in the banking industry and prudently regulating basic systems.

Examination and Supervision The CBIRC, through its headquarters in Beijing and its bureaus throughout the PRC, monitors the operations of banks and their branches and sub-branches through on-site examinations and off-site surveillance. The CBIRC is authorized to conduct on-site examination on the business activities of the banking institutions and their risk profiles. On-site examinations generally include inspecting a bank’s business premises and electronic data systems, interviewing its employees, senior management and directors for an explanation of significant issues relating to its operations and risk management, as well as reviewing relevant documents and information maintained by the bank. Off-site surveillance generally includes reviewing business reports, financial statements and other reports regularly submitted by banks to the CBIRC.

1 On March 17, 2018, the First Session of the Thirteenth National People’s Congress adopted the Decision of the First Session of the Thirteenth National People’s Congress on the State Council Institutional Reform Proposal (《第十三屆全國人民代表大會第一次會議關於國務院機構改革方案的決定》) and approved the State Council Institutional Reform Proposal (《國務院機構改革方案》). The Proposal specifies “establishing the China Banking and Insurance Regulatory Commission. By integrating the duties of the China Banking Regulatory Commission and the China Insurance Regulatory Commission, the China Banking and Insurance Regulatory Commission is established as an institution directly under the State Council. The duties of the China Banking Regulatory Commission and the China Insurance Regulatory Commission to prepare drafts of important laws and regulations in the banking industry and insurance industry and prudently regulate basic systems will be transferred to the PBoC. The China Banking Regulatory Commission and the China Insurance Regulatory Commission will no longer exist.” On April 8, 2018, the China Banking and Insurance Regulatory Commission was formally established.

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If a banking institution is not in compliance with the relevant banking regulations, the CBIRC is authorized to impose corrective and punitive measures, including imposing fines, ordering the suspension of certain business activities, withholding the approval for engaging in new businesses, imposing restrictions on dividends distribution and other forms of distributions and asset transfers, imposing an order on controlling shareholders to transfer their equity interest or restricting the rights of the relevant shareholders, imposing an order to adjust or restrict the rights of directors and senior management, and withholding the approval for opening of new branches and sub-branches. In extreme cases, when a commercial bank fails to take corrective action within the time period specified by the CBIRC, the CBIRC may order the banking institution to suspend operations and may revoke its operation license. When there is, or is likely to be, a credit crisis within a banking institution, which may materially impact the legitimate interests of depositors and other customers, the CBIRC may take over or procure the restructuring of such banking institution.

PBoC and Inter-departmental Coordination Joint Meeting for Financial Supervision

As the central bank of the PRC, the PBoC is responsible for formulating and implementing monetary policies and maintaining the stability of the PRC financial markets.

On August 15, 2013, the State Council issued the Reply on the Establishment of the Inter-departmental Coordination Joint Meeting System for Financial Supervision (《國務院關於同意建立金融監管協調部際聯席會議制度的批復》), according to which, the PBoC will take the lead at the joint meetings, with the former CBRC, CSRC, the former CIRC and SAFE as the primary members. The NDRC, MOF and other relevant agencies may be invited to attend the joint meetings, when necessary.

On March 17, 2018, the First Session of the Thirteenth National People’s Congress adopted the Decision of the First Session of the Thirteenth National People’s Congress on the State Council Institutional Reform Proposal (《第十三屆全國人民代表大會第一次會議關於國務院機構改革方案的決定》) and approved the State Council Institutional Reform Proposal (《國務院機構改革方案》). According to the Proposal, the duties of the former CBRC and CIRC to prepare drafts of important laws and regulations in the banking industry and the insurance industry and prudently regulate basic systems will be transferred to the PBoC.

Other Regulatory Authorities

In addition to the above regulators, commercial banks in the PRC are also subject to the supervision and regulation by other regulatory authorities, including the SAFE, CSRC, MOF, NAO, NDRC, SAT and SAIC and their authorized branches.

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LICENSING REQUIREMENTS FOR ADMISSION TO THE INDUSTRY Basic Requirements The establishment of a city commercial bank requires the CBIRC’s approval and issuance of a business operation license. Pursuant to relevant provisions of the PRC Commercial Banking Law and Implementation Measures of the CBIRC on Administrative Licensing on Chinese-Funded Commercial Banks (2018 Amendment) (中國銀保監會中資商業銀行行政許可事項實施辦法(2018修正)), an applicant for the establishment of a city commercial bank will generally meet the following conditions: (1) the articles of association must be in compliance with the PRC Commercial Banking Law and the PRC Company Law (《中華人民共和國公司法》); (2) the registered capital must meet the minimum amount in accordance with the PRC Commercial Banking Law, in particular, the minimum amount of registered capital for establishing a city commercial bank shall be RMB100 million; (3) the directors and senior management possess the requisite professional knowledge and business experience; (4) the organizational structure and management system are sound; (5) the business premises, safety and security measures and other business-related facilities meet the requirements; and (6) the information technology structure which satisfies the needs of business operation has been set up, and the information technology system supporting business operation is safe and complies with the relevant laws and regulations, and possesses the technologies and measures to ensure its effectiveness and safety.

Significant Changes City commercial banks are required to obtain approval from the CBIRC or its local offices to undertake significant changes, including: opening, upgrading or closing a branch or sub-branch; change of name of headquarters, a branch or sub-branch; change of registered capital; change of domicile of headquarters, a branch or a sub-branch; change of business scope; change of form of organization; change of shareholders holding 5% or more of the bank’s total capital or shares; qualification licensing of directors and senior management; investments in the equity interest in the bank by an overseas financial organization; investments to establish, participation in or acquisition of a domestic corporate financial organization or an overseas organization; amendments to the articles of association; merge and acquisition; dissolution and bankruptcy.

Shareholder Management The Interim Measures for Management of Commercial Bank Equity (《商業銀行股權管理暫行辦法》) issued by the former CBRC on January 5, 2018 specifies that the relationships among commercial banks’ shareholders and their controlling shareholders, actual controlling persons, related parties, concert parties and ultimate beneficiaries shall be clear and transparent; the shareholding percentage of shareholders and their related parties and concert parties shall be calculated together. The Notice on Further Deepening the Rectification of Market Chaos in the Banking Industry (《關於進一步深化整治銀行業市場亂象的通知》) (the “Notice”) issued by the former CBRC on January 12, 2018 takes regulation of (bank) shareholders’ behaviours as a key point for rectification to improve the corporate governance, including shareholder management, duty performance and evaluation of members from “the shareholders’ general meeting, the Board of Directors, the Board of Supervisors and the senior management” and qualifications of directors, senior management, chief risk officers, chief compliance officers, internal audit officers and financial officers.

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Scope of Business According to relevant provisions of the PRC Commercial Banking Law, commercial banks are permitted to engage in the following activities: (1) taking deposits from the public; (2) extending short-term, medium-term and long-term loans; (3) effecting domestic and overseas payment settlements; (4) accepting and discounting instruments; (5) issuing financial bonds; (6) acting as the issuing agent, payment agent and underwriter of government bonds; (7) trading government bonds and financial bonds; (8) engaging in interbank lending; (9) trading foreign exchange as principal or agent; (10) engaging in bank card business; (11) providing letters of credit and guarantee services; (12) collecting and making payment as agents and acting as insurance agents; (13) providing safe deposit box service; (14) other businesses approved by the banking regulatory authorities under the State Council. The commercial banks’ scope of business shall be provided in their articles of association, which shall be reported to the banking regulatory authorities under the State Council for approval. Meanwhile, subject to approval by the PBoC, commercial banks may engage in settlement and sales of foreign exchange.

Establishment of Branches and Sub-branches According to Implementation Measures of the CBIRC on Administrative Licensing on Chinese-Funded Commercial Banks (2018 Amendment) (中國銀保監會中資商業銀行行政許可事項實施辦法(2018修正)), in order to establish branches, the headquarters of city commercial banks shall submit applications to provincial offices of the CBIRC.

REGULATION ON PRINCIPAL COMMERCIAL BANKING ACTIVITIES Loan business The Administrative Measures on Automobile Loans (《汽車貸款管理辦法》) issued by the PBoC and the former CBRC on August 16, 2004 and amended on August 4, 2015 and October 13, 2017 specifies that the term (including the extension period) of automobile loans shall not exceed five years. In particular, the term (including the extension period) of loans for second-hand vehicles shall not exceed three years and the term of loans to automobile distributors shall not exceed one year. The Guidelines on the Management of Risks of Real Estate Loans Granted by Commercial Banks (《商業銀行房地產貸款風險管理指引》) issued by the former CBRC on August 30, 2004 specifies that commercial banks shall set forth the risk policies on real estate loans and the standards for operation and check of different types of loans, clarify the standards for examination and approval of different types of loans, the operational procedures, risk control, after-loan management, and selection of intermediary institutions, etc. Meanwhile, commercial banks are not allowed to grant land reserve loans to any borrower whose capital is not fully contributed or is seriously insufficient or whose management is irregular or grant any form of loans to any real estate projects without the state-owned land use permit, construction land planning permit, planning permit for construction project and construction permit for construction project. The Guidelines on Project Finance Business (《項目融資業務指引》) promulgated by the former CBRC on July 18, 2009 specifies that banking institutions shall require to set the project assets and/or expected return and other rights eligible for mortgage or pledge as guarantees for project finance loans, and if necessary, the equity of project companies held by project sponsors

86 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. SUPERVISION AND REGULATION may be set as a pledge guarantee for loans. Lenders shall also require to be the claimants first in line to insurance compensation of the commercial insurance bought for projects or take other measures to effectively control rights of insurance indemnities. Banking institutions shall negotiate a special account with borrowers to receive all revenue from financing projects, and monitor such account and promptly find out the causes and take corresponding measures in case of unusual movements.

The Guiding Opinions on Further Supporting the Restructuring and Revitalization of Key Industries and Curbing Overcapacity in Certain Industries through Financial Services (《關於進一步做好金融服務支持重點產業調整振興和抑制部分行業產能過剩的指導意見》) promulgated by the PBoC, the former CBRC, CSRC and the former CIRC on December 22, 2009 provides that for enterprises and projects that comply with the requirements of the plans for restructuring and revitalizing national key industries, meet market entry requirements and conform to the principles of bank credit, credit funds should be guaranteed to be granted in a timely and efficient manner. For projects that fail to comply with national industrial policies, market entry requirements and technical standards, and lack project capital, no credit support shall be provided. For projects in industries with overcapacity, loans shall be strictly examined and approved.

The Interim Measures for the Administration of Working Capital Loans (《流動資金貸款管理暫行辦法》) promulgated by the former CBRC on February 12, 2010 provides that commercial banks shall reasonably assess the borrower’s working capital needs and prudently determine the total amount of working capital loan funds granted to the borrower and the limit of loan amount, and shall not grant working capital loans in excess of the borrower’s actual needs. Commercial banks and borrowers shall clearly stipulate the legal uses of loans. Working capital loans shall not be used for investments in fixed assets, equity investments or fields or purposes where production or operation has been expressly prohibited by the state.

The Interim Measures for the Administration of Personal Loans (《個人貸款管理暫行辦法》) promulgated by the former CBRC on February 12, 2010 provides that personal loan agreements are required to specify the purpose of loan funds. The uses of personal loans shall comply with laws and regulations and relevant state policies. Commercial banks shall not extend personal loans with no designated purpose. Meanwhile, the term and interest rate of personal loans shall comply with relevant state regulations. The lender shall establish a control mechanism for maintaining a reasonable proportion between the borrower’s income and the amount used to repay loan, reasonably determine the amount and term of a loan based on the borrower’s income, debt, expenditure, uses of loan funds and guarantee status, and make sure that the repayment made by the borrower for each installment is within his ability to repay the loan.

The Guidelines on the Risk Management of Risks of Credits Granted by Commercial Banks to Group Borrowers (《商業銀行集團客戶授信業務風險管理指引》) promulgated by the former CBRC on June 4, 2010 requires that the credit balance of a commercial bank to a single group borrower shall not exceed 15% of its net capital; otherwise, the credit extended will be deemed as having exceeded its risk tolerance capacity. If the credit needs of a group borrower exceeds the risk tolerance capacity of a bank, the commercial bank shall take measures to diversify the risks through syndicated loans, loan participation and loan transfer. In line with its prudent supervision requirement, the former CBRC may lower the ratio of the credit balance of a commercial bank to a single group borrower and net capital.

87 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. SUPERVISION AND REGULATION

The Notice of the PBoC and CBRC on Issues Concerning the Improvement of Differentiated Housing Credit Policies (《中國人民銀行、中國銀監會關於完善差別化住房信貸政策有關問題的通知》) issued by the PBoC and the former CBRC on September 29, 2010 requires all commercial banks to suspend the granting of housing loans to families that purchase the third or more residential properties or to non-local residents who are unable to provide evidence of payments of local tax or social security of more than one year. Pursuant to the notice, for a first-time purchaser of any commercial housing property, the minimum down payment ratio is adjusted to 30% or more, while the minimum down payment for a second home buyer is strictly imposed at not less than 50% of the purchase price with the interest rate being no less than 110% of PBoC benchmark interest rates on loans.

The Notice of CBRC on the Publication and Distribution of Green Credit Guidelines (《中國銀監會關於印發綠色信貸指引的通知》) issued by the former CBRC on February 24, 2012 requires banking institutions to effectively identify, measure, monitor and control environmental and social risks in the course of their credit business, and to establish the relevant risk exposure management systems. Banks are also required to explicitly declare their support for green credit, formulate specific guidelines for granting credit facility to restricted industries and industries with material environmental and social risks, carry out flexible differentiated credit granting policies, and implement risk management systems.

The Measures for Administration of Loans for Peasant Households (《農戶貸款管理辦法》) issued by the former CBRC on September 17, 2012 encourage rural financial institutions and other banking institutions which offer peasant household loans to develop agriculture-related loan business, work out relevant business strategies and strengthen their risk management ability in agriculture-related loans, and specify that peasant household loans should be used for purposes specified in laws, regulations and relevant state policies and banking institutions should not grant peasant household loans without a designated use.

The Notice of the General Office of the State Council on Further Regulation and Control of the Real Estate Market (《國務院辦公廳關於繼續做好房地產市場調控工作的通知》) issued by the General Office of the State Council on February 26, 2013 prohibits commercial banks from providing loans for new development projects to real estate developers which have illegal and non-compliance conduct such as hoarding idle land and participating in speculative land trading, withholding property units to limit sales and pushing up property prices. Meanwhile, commercial banks should enhance borrowers’ qualification examination, and investigate the records of family housing registration and borrowers’ credit records in strict accordance with provisions and should not grant loans to borrowers who do not comply with credit policies.

On April 9, 2013, the Guiding Opinions on Strengthening the Risk Control and Management of Loans to Local Financing Vehicles in 2013 (《關於加強2013年地方政府融資平臺貸款風險監管的指導意見》) was issued by the former CBRC, pursuant to which all banks are required to impose aggregate loan limits on LGFVs and the banking institutions as legal persons should not expand the scale of loans to LGFVs. The opinions also require that, for LGFVs with a cash flow coverage ratio lower than 100% or a gearing ratio higher than 80%, the proportion of their loans to the total loans granted by all vehicles of the bank shall not exceed that of the previous year, and the bank shall take measures to gradually reduce disbursements of loans and increase efforts for recovery of loans.

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Pursuant to the requirements of the Opinions of the State Council on Strengthening the Administration of Local Government Debts (《國務院關於加強地方政府性債務管理的意見》) issued by the State Council on September 21, 2014, financial institutions shall not provide financing to or seek guarantee from local governments in violation of applicable laws or regulations. Purchasing of bonds issued by local governments by financial institutions shall be in compliance with regulatory requirements. When providing financing to enterprises whose debt may become the government’s contingent liabilities, financial institutions shall strictly regulate credit management by practicably enhancing risk identification and risk management. Financial institutions shall undertake on their own any consequential losses incurred as a result of providing financing to governments in violation of applicable laws or regulations, and the relevant authorities and persons shall be held legally liable according to laws and regulations, including the Commercial Banking Law and the Banking Supervision and Regulatory Law. Pursuant to the Opinions on Properly Solving Subsequent Financing Issues of the On-going Projects of LGFVs (《關於妥善解決地方政府融資平臺公司在建項目後續融資問題的意見》) issued by the MOF, PBoC and the former CBRC, which were forwarded by the General Office of the State Council on May 11, 2015 and implemented on the same date, local governments at various levels and banking institutions shall observe the principles of controlling the total amount and applying differentiated treatment in supporting the financing needs of existing on-going projects of the financing vehicles to ensure the orderly progress of on-going projects. For loans to on-going projects of financing vehicles, banking institutions are required to make their own decisions, assume risks by themselves and practically perform subsequent financing management based on prudent estimation of the repayment ability of financing vehicles and the revenue from on-going projects and consideration of the debt repayment ability of local governments on a consolidated basis. Banking institutions are required to conscientiously examine the use of loan proceeds, to focus support on the on-going projects of financing vehicles in the areas of, among other things, agricultural irrigation facilities, affordable housing projects and urban rail transit, and ensure that the loans are consistent with the development needs of industries and development plans of industrial parks. On September 29, 2014, the PBoC and the former CBRC issued the Notice on Further Improving Housing Financial Services (《關於進一步做好住房金融服務工作的通知》), which sets the minimum down payment ratio at 30% and the minimum interest rate at 70% of benchmark interest rates on loans for a family purchasing a home for self-use for the first time, with the specific down payment ratio and interest rate to be determined by the banking institutions on their own according to their risk conditions. Banking institutions should apply the policies for first home buyers to families who already own a residence, have fully repaid the relevant residential mortgage loans, and are applying for a loan to purchase another ordinary residential property to improve their living conditions. Furthermore, in cities that have lifted or have not imposed the restrictions for property purchasing, where a family that owns two or more residential properties and has repaid in full all relevant loans and applies for a loan to purchase another residential property, banking institutions shall prudently determine the down payment ratio and the loan interest rate, taking into account the borrower’s ability to make repayment and credit standing. Under the latest audited Guidelines on Risk Management of Mergers and Acquisitions Loans for Commercial Banks (《商業銀行併購貸款風險管理指引》) promulgated by the former CBRC on February 10, 2015, the total balance of merger and acquisition loans approved by a commercial bank is subject to a cap of no more than 50% of its net loan balance for the corresponding fiscal period, the balance of merger and acquisition loans approved by a

89 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. SUPERVISION AND REGULATION commercial bank to an individual borrower may not exceed 5% of the net tier-one capital of the bank for the corresponding fiscal period, a merger and acquisition loan may not exceed 60% of the merger and acquisition transaction price, and the tenor of merger and acquisition loans may not exceed seven years.

On March 30, 2015, the PBoC, MOHURD and the former CBRC issued the Notice on Issues Concerning Individual Housing Loan Policies (《關於個人住房貸款政策有關問題的通知》), which specifies that for families who already own a residence, but have not fully repaid the relevant residential mortgage loans and are applying for a commercial individual housing loan again to purchase another ordinary residential property to improve their living conditions, the minimum down payment ratio is adjusted to not less than 40%, and the specific down payment ratio and interest rate should be reasonably determined by banking institutions according to the borrower’s ability to make repayment and credit standing. For a family under housing provident fund scheme which uses entrusted loans under housing provident fund scheme to purchase the first ordinary residential property, the minimum down payment ratio is 20%. For a family under housing provident fund scheme which already owns a residence, has fully repaid the relevant residential mortgage loans and applies for an entrusted loan under housing provident fund scheme again to purchase another ordinary residential property to improve its living conditions, the minimum down payment ratio is 30%.

The Notice of the PBoC and CBRC on Issues Concerning the Further Improvement of Differentiated Housing Credit Policies (《中國人民銀行、中國銀行業監督管理委員會關於進一步完善差別化住房信貸政策有關問題的通知》) issued by the PBoC and the former CBRC on September 24, 2015 requires that in cities where “restrictions on purchase” have not been implemented, for households which apply for commercial individual housing loans for the purchase of their first residential property, the minimum down payment ratio has been adjusted to not less than 25%.

The Notice of the PBoC and CBRC on Issues concerning Adjustment to the Housing Loan Policies for Individuals (《中國人民銀行、中國銀行業監督管理委員會關於調整個人住房貸款政策有關問題的通知》) issued by the PBoC and the former CBRC on February 1, 2016 requires that in cities where “restrictions on purchase” have not been implemented, for families which apply for commercial individual housing loans for the purchase of their first residential property, the minimum down payment ratio is 25% in principle, with downward floating adjustment of 5 percentage points for all regions; if a family owns a residence, but has not fully repaid the relevant residential mortgage loans and applies for a commercial individual housing loan again to purchase another ordinary residential property to improve its living conditions, the minimum down payment ratio has been adjusted to not less than 30%. In cities where “restrictions on purchase” have been implemented, policy on individual housing loans will be implemented according to its original requirements.

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Entrusted loan business On January 5, 2018, the former CBRC issued the Measures for the Administration of Entrusted Loans of Commercial Banks (《商業銀行委託貸款管理辦法》), which specifies: (1) entrusted loan business is an agency service of a commercial bank. As a trustee, a commercial bank shall provide services based on the principle of matching between responsibilities and benefits, and shall not determine the borrowers for the clients, not participate in loan decisions, not provide guarantee in any form, not determine the guarantors for the borrowers or advance funds to repay the entrusted loan for the borrowers, or directly or indirectly undertake entrusted loans with credit funds or wealth management funds; (2) a commercial bank shall not accept others’ funds under entrusted management, banks’ credit funds, various special funds for specific purposes, other debt funds and funds of which the sources cannot be proven, to grant entrusted loans, except for funds raised from issuance of bonds by a business group and used in the group; (3) the funds shall not be used for production, operation or investment in fields and for purposes prohibited by the state, not be used for investments in bonds, futures, financial derivatives and asset management products, etc., not be used as registered capital or for registration and capital verification and not be used for equity capital investment or capital and share increase; (4) commercial banks shall strictly separate entrusted loan business from their self-operated business and enhance risk isolation and business management. Commercial banks shall set up a sound entrusted loan management information system to ensure the business information is complete, continuous, accurate and traceable; (5) a commercial bank shall not accept any entrusted loan application from a client which is a financial assets management company or an institution engaging in loan business; (6) a commercial bank shall not divert the funds of one client to another.

Foreign Exchange Business Commercial banks are required to obtain approvals from or file with the PBoC, SAFE and the CBIRC or their respective local offices to conduct the business of foreign exchange. Under PRC anti-money laundering laws and regulations, PRC financial institutions are required to report to the Anti-money Laundering Monitoring and Analysis Center any large or suspicious foreign exchange transactions which they handle or find on a timely basis.

Securities and Asset Management Businesses Commercial banks in the PRC are generally prohibited from trading and underwriting equity securities. Commercial banks in the PRC are permitted to: (1) underwrite and deal in Chinese government bonds, financial institution bonds and commercial bonds issued by qualified non-financial institutions; (2) act as agents in securities transactions involving including bonds issued by the Chinese government, financial institutions and other corporate entities; (3) provide institutional and individual investors with comprehensive asset management advisory services; (4) act as financial advisors in connection with large infrastructure projects, mergers and acquisitions and bankruptcy reorganizations; (5) act as custodians for funds, including securities investment funds and corporate annuity funds.

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On April 2, 2013, the CSRC and former CBRC promulgated the Administrative Measures on the Custodian Business for Securities Investment Fund (《證券投資基金託管業務管理辦法》), which provides that a commercial bank may be permitted to engage in the custodian business for securities investment funds, if, (1) such commercial bank has year-end net assets of not less than RMB2.0 billion for each of the previous three financial years and its capital adequacy ratio and other risk control indicators fulfil the relevant regulatory requirements; (2) The persons to be appointed as senior managers of the fund custody department must meet the statutory requirements and at least a half of employees in the department have obtained the qualification to engage in fund business; there should be at least 8 employees to be engaged in fund liquidation, accounting, investment supervision, information disclosure, internal auditing and monitoring and other businesses and they must have obtained the qualification to engage in fund business; specifically, employees working at positions of core businesses such as accounting and supervision should have more than 2 years of experience in custody business; (3) such commercial bank is capable of keeping fund property safe and ensuring the integrity and independence thereof; (4) such commercial bank has a safe and efficient liquidation and settlement system; (5) the fund custody department has a fixed place of business and an independent security monitoring system; (6) the fund custody department has independent technology systems for custody business, including network system, application system, security defending system, and data backup system; (7) such commercial bank has a sound internal audit monitoring system and risk control system; (8) such commercial bank had no records of major violation of laws and rules in the last three years; (9) such commercial bank has a fund custody department and the setup of the department can ensure the integrity and independence of custody business operations; (10) such commercial bank meets other requirements of laws and administrative regulations and set by the CSRC and former CBRC as approved by the State Council. On April 27, 2018, the PBoC, CBIRC, CSRC and SAFE jointly issued the Guiding Opinions on Regulating the Asset Management Business of Financial Institutions (《關於規範金融機構資產管理業務的指導意見》) (the “Opinions”). The Opinions clearly states that, to regulate the asset management business of financial institutions, the regulators should stick to the bottom line of strict risk control, the fundamental goal of serving the real economy, the concept of combining macro-prudential management with micro-prudential regulation, target problem orientation and the basic principles of activeness, prudence and caution, achieve comprehensive and unified regulation of the asset management business of various financial institutions, ensure fair market access and regulation, minimize regulatory arbitrage space, and effectively protect the legitimate rights and interests of financial consumers. It is worth noting that the Opinions have clear provisions on the following: (1) The core elements of standard credit assets. Standard credit assets are characterized by equipartition, tradability, adequate information disclosure, centralized registration, independent trusteeship, fair pricing, and perfect liquidity mechanism, and are traded at interbank market, securities exchange market and other trading markets established with the approval of the State Council. The specific rules for defining standard credit assets shall be formulated by the PBoC and the financial regulatory authorities. Credit assets other than standard credit assets are non-standard credit assets. (2) Public offering products cannot be invested in non-standard credit assets. It is specified in the Opinions that public offering products are mainly invested in standard credit assets and publicly traded stocks and shall not be invested in the equity of unlisted enterprises except as otherwise stipulated by laws, regulations and financial management departments. If permitted by laws, regulations and financial management departments, public offering products can be invested in commodities and financial derivatives.

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(3) Identification of implicit guarantee. The following behaviours are regarded as implicit guarantee: (i) the issuer or manager of asset management products guarantees the principal and return of products in violation of the principle of determining net value based on real fair value, (ii) the principal and return of products are guaranteed through rolling issuance so that the principal, return and risks of asset management products are transferred from one investor to another; (iii) when the asset management products cannot be redeemed as scheduled or it is difficult for them to be redeemed, the financial institution issuing or managing the products raises funds by itself for redemption or entrusts other institutions with redemption; and (iv) other behaviours specified by the financial management departments. (4) Net asset value measurement. Financial institutions shall measure asset management products on net asset value basis. Generation of net asset value shall comply with the Accounting Standards for Business Enterprises, timely reflect the return and risks of the underlying financial assets, be accounted by the trustee agency which then provides a report regularly, and be audited and confirmed by an external audit agency. The audited financial institution should disclose the audit results and submit them to the financial management departments. The principle of fair value measurement should be followed for financial assets and market value measurement is also encouraged. (5) Limitations on multi-layer product structure. It is specified in the Opinions that asset management products can be further invested in asset management products, but the asset management products they invest cannot be reinvested in asset management products other than public offering securities investment funds. (6) Leverage ratio. The leverage of asset management products falls into two categories: debt leverage and graded leverage; regarding debt leverage, the Opinions set a maximum debt ratio (total assets/net assets) of 140%, 200%, 140%, and 200% respectively for asset management products of open public offering, closed public offering, graded private offering and other private offerings, and prohibited financial institutions from using shares of products under entrusted management for collateral financing. Regarding graded leverage, the Opinions prohibited share grading of public offering products and open private offering products. For closed private offering products that can be graded, the grading ratio (priority shares/inferior shares) must not exceed 3:1 for fixed income products, 1:1 for equity products, and 2:1 for commodity and financial derivative products and mixed products.

Insurance Agency Business Commercial banks in the PRC are not permitted to underwrite insurance policies, but are permitted to act as agents to sell insurance products through their distribution networks. Commercial banks that conduct agency sales of insurance products are required to comply with applicable rules issued by the CIRC. On November 1, 2010, the former CBRC promulgated the Notice of the CBRC on Further Strengthening the Compliant Sales and Risk Management of Commercial Banks’ Insurance Agency Business (《中國銀監會關於進一步加強商業銀行代理保險業務合規銷售與風險管理的通知》), which provides that each outlet of a commercial bank may, in principle, cooperate with no more than three insurance companies in a financial year to sell their insurance products. If the outlet cooperates with more than three insurance companies, the outlet must report to the local office of former CBRC.

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On April 25, 2016, the CIRC promulgated the Notice of the CIRC on Matters Relating to the Administrative Licensing of Bancassurance Agencies (《中國保監會關於銀行類保險兼業代理機構行政許可有關事項的通知》), which provides that after a banking institution has obtained the bancassurance agency license, its branches and sub-branches may commence bancassurance agency business under the authorization of legal entities.

Wealth Management Business

On September 24, 2005, the former CBRC promulgated the Interim Measures on Administration of Personal Wealth Management Services of Commercial Banks (《商業銀行個人理財業務管理暫行辦法》), which provides that commercial banks shall have an examination & approval system and a reporting system for personal wealth management business; if commercial banks engage in income-protected wealth management plans, new investment products of income-protected nature designed for personal wealth management business and some other personal wealth management activities for which approval from the former CBRC is required, they must obtain approval from the former CBRC. If they engage in other personal wealth management activities for which approval is not required, they should also report to the former CBRC or its local offices.

In addition to domestic wealth management, on April 17, 2006 the PBoC, former CBRC and SAFE jointly promulgated the Interim Administrative Measures for Commercial Banks to Provide Overseas Financial Management Services (《商業銀行開辦代客境外理財業務管理暫行辦法》), which provides that commercial banks shall seek the approval of the former CBRC before engaging in overseas wealth management activities on behalf of customers. Duly licensed commercial banks engaging in overseas wealth management activities on behalf of customers are permitted to accept entrustment from domestic institutions and individuals to invest overseas in pre-approved financial products.

On March 25, 2013, the former CBRC promulgated the Notice of the CBRC on the Regulation of the Investment and Operation of Wealth Management Business by Commercial Banks (《中國銀監會關於規範商業銀行理財業務投資運作有關問題的通知》), which provides that commercial banks should keep the total amount of wealth management funds invested in Non-standard Credit Assets within a reasonable range, and the balance of wealth management funds invested in Non-standard Credit Assets at any point of time cannot exceed the lower of (i) 35% of the balance of the wealth management products, and (ii) 4% of the commercial bank’s total assets as disclosed in its audit report for the prior year. In addition, commercial banks shall not provide any direct or indirect, explicit or implicit guarantee or buy-back commitments for Non-standard Credit Assets or equity assets financing.

Bills Business

According to relevant provisions of the PRC Commercial Banking Law (《中國商業銀行法》), when commercial banks engage in the settlement business, including bills acceptance, foreign exchange conversion and entrusted fund collection, the commercial banks shall honor the payments and credit receipts to accounts according to the specified timeline and shall not accumulate the bills or cheques or dishonor the cheques in violation of the requirements. Announcement on the prescribed timeline for honoring payments and crediting receipts into the account shall be made.

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Interbank Business

On April 24, 2014, the PBoC, the former CBRC, CSRC, the former CIRC and SAFE jointly promulgated the Notice on Regulating Interbank Businesses of Financial Institutions (《關於規範金融機構同業業務的通知》), which sets out certain requirements in connection with regulating interbank business operations:

(1) the Circular defines and regulates interbank financing and investment businesses, including interbank lending, interbank deposits, interbank borrowing, interbank payments, financial assets held under resale agreements or financial assets sold under repurchase agreements. The Circular also required that interbank businesses (with investment and financing being the core businesses) should be classified into different categories in accordance with business substance, and different interbank businesses should be managed based on the classification;

(2) financial assets held under resale agreements (and financial assets sold under repurchase agreements) shall only include bank acceptance bills, bonds, treasury bills and other types of financial assets with a reasonable fair value and high liquidity that are traded on the interbank market or securities exchange market; the party who sells financial assets under repurchase agreements shall not exclude the financial assets under the business from the balance sheet;

(3) financial institutions that engage in the business of financial assets held under resale agreements (and financial assets sold under repurchase agreements) and interbank investment business shall not accept or provide any direct or indirect, explicit or implicit credit guarantee from or for any third-party financial institutions, except as otherwise permitted by the central government;

(4) financial institutions shall accurately measure risks and set aside capital and make provisions pursuant to the principle of “substance over form” and based on the nature of the underlying assets invested;

(5) financial institutions shall determine the financing term in a reasonable and prudent manner in interbank business. The term of interbank borrowing shall not exceed three years and the term of other interbank financing business shall not exceed one year, and such terms must not be extended beyond their maturity;

(6) the net balance of interbank funds (excluding interbank deposits for settlement purposes) placed by a single commercial bank to another financial institution as a legal person after deducting assets with zero risk-weighting shall not exceed 50% of the bank’s tier-one capital and the balance of interbank funds borrowed by a single commercial bank shall not exceed one third of its total liabilities, which temporarily do not apply to the provincial rural credit cooperatives, secondary credit cooperatives with legal status and village & town banks;

(7) financial institutions engaging in interbank business should establish a sound and compatible risk management system and internal control system and adopt correct methods of accounting treatments.

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Bank-trust Business

On August 5, 2010, the former CBRC issued the Notice of the China Banking Regulatory Commission on Regulating the Relevant Matters on Wealth Management Cooperation between Banks and Trust Companies (《中國銀監會關於規範銀信理財合作業務有關事項的通知》), which requires commercial banks and trust companies to comply with the following requirements in conducting financing-type bank-trust wealth management cooperation: (1) the term of a trust product of a trust company which cooperates with banks in wealth management shall not be less than one year; (2) implement balance ratio management on the financing-type bank-trust wealth management cooperation, i.e. the balance of financing business shall not exceed 30% of the balance of bank-trust wealth management cooperation; (3) trust companies shall not design open trust products; (4) funds for the investment-type bank-trust wealth management cooperation shall, in principle, not be invested in shares of non-listed companies.

On January 13, 2011, the former CBRC promulgated the Notice on Further Regulating the Wealth Management Cooperation between Banks and Trust Companies (《關於進一步規範銀信理財合作業務的通知》), according to which, the commercial banks shall transfer the off- balance-sheet assets concerning bank-trust wealth management cooperation into their balance sheets by the end of 2011. Detailed transfer plans should be submitted to the former CBRC or its provincial offices before January 31, 2011. In principle, the bank-trust cooperation loan balances should be reduced by at least 25% quarterly. Trust companies should not draw dividends if the trust compensation reserves fall below 150% of the non-performing bank-trust loans or 2.5% of the total balance of bank-trust loans.

On November 11, 2017, the former CBRC issued the Notice of the China Banking Regulatory Commission on Regulating the Bank-Trust Business (《中國銀監會關於規範銀信類業務的通知》), according to which, (1) commercial banks shall, in the bank-trust business, include the business with credit risks actually assumed by commercial banks in uniform credit management and carry out the regulatory requirements for the credit concentration ratio under the principle of substance over form; (2) commercial banks shall categorize the bank-trust business of which the credit risks are actually assumed by them, categorize risks according to the risk status of underlying assets under the penetration management requirements, and accurately calculate and withdraw capital and make provision in light of the nature of underlying assets; (3) with respect to bank-trust channel business, commercial banks shall (i) monitor risk based on business substance, (ii) not use trust channels to conceal risks or to circumvent prohibitive regulations on use of funds, classification of assets, reserve provisions and capital occupation, and (iii) not falsely take advantage of channels to place assets off-balance sheet; (4) regarding bank-trust business, commercial banks shall manage trust companies based on a name-list system and prudently select counterparties after fully considering the risk management level and professional investment capacity of trust companies; (5) when conducting bank-trust business, commercial banks shall not illegally invest the trust funds in real estate, LGFVs, stock market, overcapacity and other restricted or prohibited fields.

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Electronic Banking

On January 26, 2006, to strengthen the security and risk management of electronic banking business, the former CBRC promulgated the Administrative Measures Regulating the Electronic Banking Business (《電子銀行業務管理辦法》) and Security Evaluation Guidelines on Electronic Banking (《電子銀行安全評估指引》). All banking institutions applying to establish an electronic banking business should have comprehensive risk management and internal control systems. Banking institutions are not permitted to have major accidents relating to their primary information management system and operations processing system in the year immediately prior to the submission of their application. In addition, all banking institutions conducting electronic banking business must adopt security measures to ensure the confidentiality of information and to prevent the unauthorized use of electronic banking accounts.

The former CBRC promulgated the Notice of the CBRC on Enhancing the Management of Customer Information of Electronic Banking (《中國銀監會關於加強電子銀行客戶資訊管理工作的通知》) on August 9, 2011, which stresses the importance of commercial banks to be committed to the work concerning the security and confidentiality of customer information. Without customers’ authorization, commercial banks may not directly or indirectly provide third-party organizations with the customers’ names, types of certificates, certificate numbers, mobile phone numbers, fixed-line telephone numbers, correspondence addresses and other sensitive information of customers.

Credit Cards

On January 13, 2011, the former CBRC promulgated the Measures for the Supervision and Administration of the Credit Card Business of Commercial Banks (《商業銀行信用卡業務監督管理辦法》), which provides that commercial banks conducting credit card business shall (1) establish effective internal control and risk management systems to monitor the operation of their credit card business, as well as to protect the legitimate interests and personal information of customers; (2) without the authorization of customers, not apply relevant information for other purposes other than credit card business of the Bank; (3) establish and improve the risk management system and internal control system for credit card business, strictly implement authorization management and effectively identify, evaluate, monitor and control business risks; (4) fully disclose relevant information and business risks to cardholders and establish comprehensive mechanisms to handle relevant complaints; (5) get the approval from the former CBRC.

Proprietary Investments

In general, commercial banks in the PRC are prohibited from making domestic investments other than in debt instruments issued by the Chinese government and financial institutions, short-term commercial paper, medium-term notes, corporate bonds, corporate debts, and asset securitization varieties issued by qualified non-financial institutions, and certain derivative products. Unless approved by the Chinese government, commercial banks in the PRC are prohibited from engaging in trust investment and securities businesses, or investing in real estate (other than for their own use) or non-banking financial institutions and enterprises.

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Business of Community Sub-branches and Sub-branches for Small and Micro Enterprises

On December 5, 2013, the former CBRC promulgated the Notice of the Administrative Office of the CBRC on Establishment of Community Sub-branches and SME Sub-branches by Small-and Medium Commercial Banks (《中國銀監會辦公廳關於中小商業銀行設立社區支行、小微支行有關事項的通知》), supporting eligible small and medium commercial banks to set up community sub-branches and sub-branches for small and micro enterprises with their own characteristics on the condition that their risks and costs are manageable. As a special type of sub-branch, the community sub-branches and sub-branches for small and micro enterprises are simply bank outlets that are specially set up to serve community residents and small and micro enterprises. To set up such sub-branches, banks are required to complete relevant administrative examination and approval procedures to obtain the license.

Financing to Small and Micro Enterprises

On October 31, 2014, the State Council issued the Opinions of the State Council on Supporting the Sound Development of Micro and Small Enterprises (《國務院關於扶持小型微型企業健康發展的意見》), which encourages and guides banks to focus on supporting small and micro enterprises as well as regional economic development, and requests banking institutions to separately list credit plans for small and micro enterprises subject to commercial sustainability and effective risk control.

On June 22, 2015, the former CBRC issued the Notice from the CBRC to Further Implement Financial Service Supervising Policy of Small and Micro Enterprises (《中國銀監會關於進一步落實小微企業金融服務監管政策的通知》), which proposes certain requirements on adhering to the problem-oriented principle, ensuring the implementation of policies, clarifying the emphasis of supports, increasing the input of credit and loan, advancing the innovation of loan services, expanding the scope of autonomous refinancing, improving tolerance indicator of non- performing assets, strengthening differentiated assessment, optimizing the allocation of internal resources, improving the service ability, strictly implementing the “two prohibitions and two restrictions” and standardizing service charge for the purpose of implementing each supporting policy and continually improving and deepening financial service to small and micro enterprises.

PRICING OF PRODUCTS AND SERVICES

Interest Rates for Loans and Deposits

In accordance with the PRC Commercial Banking Law, banks shall determine the interest rate for RMB-denominated deposits and loans within the range of benchmark interest rates set by the PBoC. In recent years, the PBoC has gradually liberalized its regulation of interest rates, allowing banks more flexibility to determine the interest rates for RMB-denominated loans and deposits.

On July 20, 2013, the PBoC removed the minimum interest rate requirement for new loans provided by commercial banks. On September 29, 2014, the PBoC and the former CBRC stipulated that the policies for first-time home buyers should apply if a family already owned a residence, had fully repaid the relevant loan, and applied for a loan to purchase another ordinary commercial residence to improve its living condition.

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From 2011 to the Latest Practicable Date, the PBOC has adjusted the benchmark rate for Renminbi-denominated loans and the benchmark rate for Renminbi-denominated deposits 11 times. The table below sets out the PBoC benchmark rates for Renminbi-denominated loans and Renminbi-denominated deposits since 2014.

Annual interest rate:%

Over Over six Over one three months up year up years up Housing fund loans Six to one to three to five months year years years Over five Up to five Over five Date of adjustment or less (inclusive) (inclusive) (inclusive) years years years November 22, 2014 5.60 5.60 6.00 6.00 6.15 3.75 4.25 March 1, 2015 5.35 5.35 5.75 5.75 5.90 3.50 4.00 May 11, 2015 5.10 5.10 5.50 5.50 5.65 3.25 3.75 June 28, 2015 4.85 4.85 5.25 5.25 5.40 3.00 3.50 August 26, 2015 4.60 4.60 5.00 5.00 5.15 2.75 3.25 October 24, 2015 4.35 4.35 4.75 4.75 4.90 2.75 3.25

Annual interest rate:%

Time deposits

Demand Three One Two Date of adjustment deposits months Six months year years Three years November 22, 2014 0.35 2.35 2.55 2.75 3.35 4.00 March 1, 2015 0.35 2.10 2.30 2.50 3.10 3.75 May 11, 2015 0.35 1.85 2.05 2.25 2.85 3.50 June 28, 2015 0.35 1.60 1.80 2.00 2.60 3.25 August 26, 2015 0.35 1.35 1.55 1.75 2.35 3.00 October 24, 2015 0.35 1.10 1.30 1.50 2.10 2.75

Pricing for Fee-and Commission-based Products and Services

The former CBRC and NDRC jointly promulgated the Measures on Pricing of Commercial Banking Services (《商業銀行服務價格管理辦法》) on February 14, 2014, which provides that the pricing of basic banking services that are extensively used by customers and have a significant bearing on the development of the national economy and people’s livelihood shall be guided or determined by the government. Other than those services the pricing for which are guided or determined by the government, for commercial banking services which are priced based on market conditions, the bank is required to make public such prices at least three months prior to the implementation of such prices in accordance with the Administrative Measures on Pricing of Commercial Banking Services (《商業銀行服務價格管理辦法》).

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REQUIRED DEPOSIT RESERVE Commercial banks are required to maintain a percentage of their total deposits as reserves with the PBoC to ensure they have sufficient liquidity to meet customer withdrawals. As of the Latest Practicable Date, our Bank is required to maintain a deposit reserve of 13.5% of our total outstanding Renminbi deposits according to the relevant requirements of the PBoC. The following table sets forth the historical RMB statutory deposit reserve ratios applicable to our Bank since 2015.

Statutory deposit Date of adjustment reserve ratio February 5, 2015 17.0% April 20, 2015 15.5% June 28, 2015 15.5% September 6, 2015 15.0% October 24, 2015 14.0% March 1, 2016 14.5% February 27, 2017 13.5% April 25, 2018 14.0% July 5, 2018 13.5% SUPERVISION OVER CAPITAL ADEQUACY Latest Supervisory Standards Over Capital Adequacy On February 23, 2004, the former CBRC promulgated the Administrative Measures for Capital Adequacy Ratio of Commercial Banks (《商業銀行資本充足率管理辦法》) which became effective on March 1, 2004 and was amended on July 3, 2007. The Administrative Measures for Capital Adequacy Ratio of Commercial Banks stipulates that for a commercial bank the capital adequacy ratio shall not be less than 8% and core capital adequacy ratio shall not be less than 4%. Our Bank shall observe the Administrative Measures for Capital Adequacy Ratio before January 1, 2013. On June 7, 2012, the former CBRC promulgated the Capital Administrative Measures for Commercial Banks (Provisional) (《商業銀行資本管理辦法(試行)》) by reference to Basel III to replace the Administrative Measures for Capital Adequacy Ratio of Commercial Banks (《商業銀行資本充足率管理辦法》). The Capital Administrative Measures for Commercial Banks (Provisional) (《商業銀行資本管理辦法(試行)》) have been in effect since January 1, 2013, according to which, capital adequacy ratios of commercial banks are calculated according to the following formulae: (1) Capital adequacy ratio = (Total capital – corresponding capital deductions)/risk- weighted assets × 100%; (2) Tier-one capital adequacy ratio = (Tier-one capital – corresponding capital deductions) /risk-weighted assets × 100%; (3) Core tier-one capital adequacy ratio = (Core Tier-one capital – corresponding capital deductions)/risk-weighted assets × 100%. According to the relevant provisions of the Capital Administrative Measures for Commercial Banks (Provisional) (《商業銀行資本管理辦法(試行)》), the total capital of commercial banks includes core tier-one capital, other tier-one capital and tier-two capital. Risk-weighted assets of commercial banks include credit risk-weighted assets, market risk- weighted assets and operational risk-weighted assets.

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Regulatory Requirements in respect of Capital Adequacy Ratios

Regulatory requirements in respect of the capital adequacy ratios of commercial banks include the minimum capital requirement, capital conservation buffer requirement, countercyclical capital buffer requirement, additional capital requirement for systematically important banks and capital requirement under the second pillar. The capital adequacy ratio of commercial banks at each tier must meet the following minimum requirements: (1) capital adequacy ratio shall not be lower than 8%; (2) tier-one capital adequacy ratio shall not be lower than 6%; and; and (3) core tier-one capital adequacy ratio shall not be lower than 5%.

Commercial banks are required to calculate and set aside their capital conservation buffer after meeting the minimum capital requirements. The capital reservation buffer is required to be equal to 2.5% of risk-weighted assets and is to be fulfilled by core tier-one capital. Under certain circumstances, commercial banks are required to calculate and set aside capital for meeting countercyclical capital buffer requirements in addition to meeting the minimum capital requirements and the capital reservation buffer requirements. The countercyclical capital buffer is required to be in the range of 0% to 2.5% of risk-weighted assets and to be fulfilled by core tier-one capital.

Meanwhile, systematically important banks are required to calculate and set aside additional capital. Systematically important banks in the PRC are required to calculate and set aside additional capital in an amount equal to 1% of their risk-weighted assets, which is to be fulfilled by core tier-one capital. If a PRC bank is recognized as a global systematically important bank, the additional capital requirement applicable to it cannot be less strict than those requirements generally provided for by the Basel Committee.

Furthermore, the former CBRC has the right to impose more prudent capital requirements under the second pillar framework in order to ensure adequate risk coverage, including: (1) specific capital requirements in respect of certain asset portfolios on the basis of risk assessment; and (2) specific capital requirements on an individual bank according to the results of supervisory inspections.

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Time Limit for Meeting the Requirements

The Capital Administrative Measures for Commercial Banks (Provisional) (CBRC Order [2012] No. 1) provide that commercial banks are required to meet the regulatory requirements on capital adequacy ratios as set forth in those measures before the end of 2018, and where conditions permit, commercial banks are encouraged to meet the requirements ahead of schedule. For commercial banks which cannot continue to meet the requirements on the application of advanced approach for capital measurement as required by these measures, the former CBRC shall be entitled to request them to make rectification within a prescribed time limit. For commercial banks which failed to reach the standard within a prescribed time limit, the former CBRC shall be entitled to cancel their qualification for adopting advanced approach for capital measurement.

To ensure the smooth implementation of the Capital Administrative Measures, on November 30, 2012, the former CBRC promulgated the Notice of the CBRC Regarding the Arrangement of Transition Period of Implementation of the Administrative Measures for the Capital of Commercial Banks (Provisional) (Yin Jian Fa [2012] No. 57) (《中國銀監會關於實施<商業銀行資本管理辦法 (試行)>過渡期安排相關事項的通知》)(銀監發[2012]57號). According to the requirements of this notice, commercial banks shall meet the minimum capital requirements and systematically important banks in the PRC shall meet the additional capital requirements before January 1, 2013. During the transitional period, the capital reservation buffer requirement (2.5%) will be gradually introduced and commercial banks are required to meet the following annual capital adequacy ratio requirement:

As of December 31,

Type of Bank Item 2013 2014 2015 2016 2017 2018 Systematically Core tier-one capital 6.5% 6.9% 7.3% 7.7% 8.1% 8.5% Important Banks adequacy ratio Tier-one capital 7.5% 7.9% 8.3% 8.7% 9.1% 9.5% adequacy ratio Capital adequacy 9.5% 9.9% 10.3% 10.7% 11.1% 11.5% ratio Other Banks Core tier-one capital 5.5% 5.9% 6.3% 6.7% 7.1% 7.5% adequacy ratio Tier-one capital 6.5% 6.9% 7.3% 7.7% 8.1% 8.5% adequacy ratio Capital adequacy 8.5% 8.9% 9.3% 9.7% 10.1% 10.5% ratio

In addition, pursuant to above-mentioned notice, during the transitional period, if commercial banks are required to set up countercyclical capital buffer requirements or regulatory authorities impose capital requirements on an individual bank under the second pillar, the regulatory authorities will prescribe a time limit for meeting the requirements. Commercial banks subject to such additional requirements are required to meet the relevant deadlines.

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Issuance of Tier-Two Capital Bonds

On June 17, 2004, the PBoC and former CBRC jointly promulgated the Measures for Administration on Issuance of Subordinated Bonds of Commercial Banks (《商業銀行次級債券發行管理辦法》) (Notice of the People’s Bank of China and China Banking Regulatory Commission [2004] No. 4). These Measures provide that the liquidation order of the principal and interest of subordinated bonds issued by commercial banks is subordinated to the banks’ other liabilities but are senior to the banks’ equity capital. The issuance of subordinated bonds is subject to the regulation of the PBoC and former CBRC in accordance with law. The former CBRC regulates the qualification for subordinated bonds issued by commercial banks and the method for the inclusion of such subordinated bonds in the supplementary capital. The PBoC regulates the issuance and trading of subordinated bonds in the interbank bond market.

Pursuant to the Capital Administrative Measures for Commercial Banks (Provisional), unqualified tier-two capital instruments issued by a commercial bank before September 12, 2010 may be included in regulatory capital before January 1, 2013, but, from January 1, 2013, such instruments are to be decreased by 10% each year and, from January 1, 2022, such instruments are no longer allowed to be included in regulatory capital. For a tier-two capital instrument issued by a commercial bank between September 12, 2010 and January 1, 2013, if the instrument has no write-down or share conversion clause but meets other criteria for inclusion of the relevant capital instruments, it may be included in regulatory capital before January 1, 2013, but, from January 1, 2013, such instruments are to be decreased by 10% each year and, from January 1, 2022, such instruments are no longer allowed to be included in regulatory capital.

Supervision over Capital Adequacy

The former CBRC is responsible for supervising the capital adequacy of banking institutions in the PRC. It reviews and evaluates banking institutions’ capital adequacy through both on-site examination and off-site surveillance.

Under the Capital Administrative Measures for Commercial Banks (Provisional), commercial banks are classified into four categories based on their capital adequacy, and the former CBRC adopts corresponding actions to these banks, the details of which are set forth below:

Categories Capital adequacy Measures of the former CBRC Grade I Commercial banks which meet all the • To require the commercial bank to capital requirements for capital adequacy enhance analysis and forecast of the ratio, tier-one capital adequacy ratio and reasons for the decline of its capital core tier-one capital adequacy ratio. adequacy ratio;

• To require the commercial bank to formulate a practicable capital adequacy ratio management plan; and

• To require the commercial bank to improve its risk control capability.

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Categories Capital adequacy Measures of the former CBRC Grade II Commercial banks which fail to meet the • To adopt the regulatory measures for second pillar capital requirements but Grade I banks; meet all other capital requirements for capital adequacy ratio, tier-one capital • To hold talks on prudent practice with adequacy ratio and core tier-one capital the board of directors and senior adequacy ratio. management of the commercial bank;

• To issue a regulatory opinion, which must include: the problems identified with the capital management of the commercial bank, the proposed measures for remediation and the opinion on meeting the requirements within the prescribed time limit;

• To require the commercial bank to formulate a practicable capital replenishment plan and the plan for meeting the requirements within the prescribed time limit;

• To increase the frequency of supervision and inspection of the capital adequacy of the commercial bank; and

• To require the commercial bank to take risk-mitigation measures for specific risk areas.

Grade III Commercial banks which meet all the • To adopt the regulatory measures for minimum capital requirements for capital Grade I and II banks; adequacy ratio, tier-one capital adequacy ratio and core tier-one capital adequacy • To restrict the commercial bank from ratio but fail to meet other capital distributing dividends and other requirements. income; • To restrict the commercial bank from granting any form of incentives to directors and senior management;

• To restrict the commercial bank from making equity investments or repurchasing capital instruments;

• To restrict the commercial bank from incurring major capital expenditure; and

• To require the commercial bank to control the growth of risky assets.

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Categories Capital adequacy Measures of the former CBRC Grade IV Commercial banks which fail to meet the • To adopt the regulatory measures for minimum capital requirement for any of Grade I, II and III banks; capital adequacy ratio, tier-one capital adequacy ratio and core tier-one capital • To require the commercial bank to adequacy ratio. significantly downsize risky assets;

• To order the commercial bank to suspend all high-risk asset businesses;

• To restrict or prohibit the commercial bank from establishing new institutions or launching new businesses;

• To require the commercial bank to write down tier-two capital instruments or convert them into ordinary shares;

• To order the commercial bank to change its directors or senior management or restrict their rights;

• To lawfully take over the commercial bank or procure the institutional reorganization of, or even dissolve, the commercial bank; and

• To consider other external factors and take other necessary measures.

Note:

(1) As of June 30, 2018, our Bank was a Grade I bank as shown in the table above.

Introduction of the New Leverage Requirements

In an effort to efficiently control the leverage and maintain the safe and sound operations of commercial banks, the former CBRC promulgated the Administrative Measures on the Leverage Ratio of Commercial Banks (《商業銀行槓桿率管理辦法》) (CBRC Order [2015] No. 1) on January 30, 2015, which came into effect on April 1, 2015.

Pursuant to these measures, commercial banks are required to maintain a leverage ratio not lower than 4%, notwithstanding the consolidation of statements. The formula for calculating the leverage ratio is as follows:

Tier-one capital – Tier-one capital deductions Leverage ratio = × 100% Balance of adjusted on-and-off balance sheet assets

For a commercial bank which fails to meet the minimum leverage ratio, the former CBRC and its local offices may take remedial actions, including requiring the commercial bank to: (i) supplement its tier-one capital within a specified period; (ii) control the growth of its on-and-off balance sheet assets; and (iii) reduce the size of its on-and-off balance sheet assets. If the

105 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. SUPERVISION AND REGULATION commercial bank fails to remediate its non-compliance within the specified period, or its behavior has seriously endangered its sound operation or damaged the legitimate interests of depositors or other clients, the former CBRC and its local offices may take relevant regulatory actions pursuant to the PRC Banking Supervision and Regulatory Law. In addition to the above-mentioned regulatory measures, the former CBRC and its local officers may also impose an administrative penalty upon the commercial bank. The Administrative Measures on the Leverage Ratio of Commercial Banks also provide that systematically important banks are required to meet minimum regulatory requirements before April 1, 2015 when these measures become effective, while other commercial banks are required to meet such requirements before the end of 2016.

Basel Accords The Basel Capital Accord, or Basel I, was introduced by the Basel Committee on Banking Supervision, or the Basel Committee, in 1988. Basel I is a capital measurement system for banks that provides for the implementation of a credit risk measurement framework with a minimum capital adequacy ratio of 8%. Since 1998, the Basel Committee has issued certain proposals for Basel II to replace Basel I. In response to the deficiencies in financial regulation revealed by the 2008 financial crisis, the Basel Committee on Banking Supervision started to advance the global financial regulatory reform in an effort to further strengthen the regulation, supervision and risk management of the banking industry. In such circumstances, Basel III was drafted and then endorsed by G20 Leaders at their November 2010 Seoul summit. On December 16, 2010, Basel III was officially issued by the Basel Committee on Banking Supervision. Basel III (1) strengthens capital adequacy in capital resources, risk-weighted assets and capital ratios by requiring banks to hold more higher-quality capital against more conservatively calculated risk-weighted assets; (2) introduces a new leverage ratio as a backstop to the risk-based capital adequacy ratio requirement, which is aimed at promoting the build-up of buffered capital that can be drawn down in periods of stress; and (3) introduces two new global liquidity standards, which aim to ensure that adequate funding is maintained in case of crisis. In line with the reform of Basel Accords and the implementation of Basel III, on April 27, 2011, the former CBRC promulgated the Guiding Opinions on the Implementation of New Regulatory Standards in China’s Banking Industry (《中國銀監會關於中國銀行業實施新監管標準的指導意見》) (Yin Jian Fa [2010] No. 44), which set out the key targets and principles for the reform of China’s capital regulatory framework. On June 1, 2011, the former CBRC issued the Administrative Measures on the Leverage Ratio of Commercial Banks. On June 7, 2012, the former CBRC issued the Capital Administrative Measures for Commercial Banks (Provisional) which came into effect on January 1, 2013 and abolished the Administrative Measures for Capital Adequacy Ratio of Commercial Banks (《商業銀行資本充足率管理辦法》) and related guidelines. In January 2014, the Basel Committee issued the Leverage Ratio Framework and Disclosure Requirements in the Third Installment of Basel Accords (《第三版巴塞爾協議槓桿率框架和披露要求》), which revised the international rules in relation to leverage ratio. According to the new rules of leverage ratio issued by the Basel Committee, in January 30, 2015, the former CBRC revised the Administrative Measures on the Leverage Ratio of Commercial Banks which was issued on June 1, 2011, and put forward clearer and stricter requirements for the disclosure of leverage ratio of commercial banks.

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LOAN CLASSIFICATION, ALLOWANCES AND WRITE-OFFS Loan Classification On July 3, 2007, the former CBRC issued the Guidelines of Risk-based Classification of Loans (Yin Jian Fa [2007] No. 54) (《貸款風險分類指引》(銀監發[2007]54號)), pursuant to which, commercial banks in China are required to classify the loans by judging the possibility that the debtors could repay in full the loan principals and interests timely in accordance with the five-category loan classification system. The five-category loan classification refers to “normal,” “special mention,” “substandard,” “doubtful” and “loss”. Loans classified as substandard, doubtful or loss are regarded as non-performing. The primary factors for evaluating the repayment ability of borrowers include the borrower’s cash flow, financial conditions and other non-financial factors that affect the loan repayment ability.

Loan Loss Allowance

According to the Guidelines of Risk-based Classification of Loans (《貸款風險分類指引》), loans classified as subordinated, doubtful or loss are regarded as non-performing, for which commercial banks shall make full allowance for loan loss and write off loan loss on a timely manner pursuant to relevant requirements based on loan classification. Under the Guidelines on Bank Loan Loss Allowance (Yin Fa [2002] No. 98) (《銀行貸款損失準備計提指引》(銀發[2002]98號)) promulgated by the PBoC on April 2, 2002, commercial banks are required to make a general loan loss allowance on a quarterly basis and to have a general allowance of not less than 1% of the loan balance at the end of the year. The guidelines provide additional guidance on the proportion of specific allowance for each loan category: 2% for special mention loans; 25% for substandard loans; 50% for doubtful loans and 100% for loss loans. Allowance for losses of substandard and doubtful loans may be set aside within a floating range of 20%. Commercial banks may, on a quarterly basis, make special allowance on their own in accordance with special risk factors, probability of losses and historical experience of loans of different types (such as industries and countries). In accordance with the Administrative Measures for Loan Loss Allowance of Commercial Banks (《商業銀行貸款損失準備管理辦法》) promulgated by the former CBRC on July 27, 2011 and became effective on January 1, 2012, the adequacy ratio of loan loss allowance of commercial banks is assessed based on its allowance to total loan ratio and its allowance to non-performing loan ratio, the benchmarks of which are 2.5% and 150%, respectively. The higher of the two ratios will be taken as the supervisory standard. Systematically important banks identified by banking regulatory authorities are required to reach the standard by the end of 2013, and non-systematically important banks are required to reach such standard by the end of 2016. Those failing to reach the standard by the end of 2016 are required to formulate a plan on how to reach such standard, submit the same to banking regulatory authorities and reach such standard by the end of 2018 at the latest.

Supervision of Loan Classification and Loan Loss Allowance Commercial banks are required to report to the CBIRC information regarding loan classification and loan loss allowance on a regular basis via quarterly report and annual report. Pursuant to the Administrative Measures for Loan Loss Allowance of Commercial Banks that took effect on January 1, 2012, banking regulatory authorities can issue risk notices to a commercial bank and require remediation to be made accordingly if the commercial bank fails

107 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. SUPERVISION AND REGULATION to meet the relevant minimum loan loss allowance standards for consecutive three months. Banking regulatory authorities have the power to take further regulatory actions pursuant to the PRC Banking Supervision and Regulatory Law if such non-compliance lasts for consecutive six months.

Bulk Transfer of Non-performing Assets The MOF and former CBRC promulgated the Administrative Measures for Bulk Transfer of Non-performing Assets of Financial Enterprises (Cai Jin [2012] No. 6) (《金融企業不良資產批量轉讓管理辦法》(財金[2012]6號)) on January 18, 2012, which provide that financial enterprises may carry out bulk transfer of their non-performing credit assets and non-credit assets generated from their business operations to asset management companies, mainly including loans in the substandard, doubtful and loss categories recognized according to statutory processes and standards, written-off book assets, repossessed assets and other non-performing assets. The non-performing assets that may not be bulk transferred include the assets whose debtors or guarantors are state organs, the assets listed in the national enterprise policy-mandated bankruptcy plan upon approval by the State Council, the assets concerning state security and sensitive information in national defense and military industry, personal loans (including various loans with individual as borrowing principal, such as housing loans, car loans, educational loans, credit card overdraft and other consumption loans extended to individuals), the assets subject to transfer terms in borrowing contracts or guarantee contracts, and other assets restricted to transfer by national laws and regulations.

Loan Write-offs Under the regulations issued by the former CBRC, the PBoC and the MOF, commercial banks are required to establish a strict audit and approval process to write off loan losses. In accordance with the Administrative Measures for the Write-off of Bad Debts of Financial Enterprises (2017 Edition) (金融企業呆賬核銷管理辦法(2017年版)) promulgated by the MOF on August 31, 2017 and became effective since October 1, 2017, after the financial institution adopts necessary measures and procedures, loans in compliance with the recognition standards promulgated by the MOF are allowed to be written off following the internal review process of the financial institution.

Allowance and Statutory General Reserve for Impairment Losses On March 30, 2012, the MOF issued the Administrative Measures for the Provisioning for Reserves of Financial Enterprises (Cai Jin[2012] No. 20) (《金融企業準備金計提管理辦法》(財金[2012]20號)), which requires the balance of general reserve to be generally no less than 1.5% of the ending balance of risk-bearing assets of the financial institutions. Financial enterprises that have adopted the standardized approach to calculate the statutory general reserve should temporarily use the following standard risk weightings for credit assets: 1.5% for normal loans, 3% for special mention loans, 30% for substandard loans, 60% for doubtful loans and 100% for loss loans. If the balance of general reserve of a financial enterprise fails to reach 1.5% of the ending balance of risk-bearing assets at one-time, the financial enterprise is allowed to achieve the requirement within a certain period of time, in principle not exceeding five years.

Other Operational and Risk Management Ratios The Administrative Measures for the Capital of Commercial Banks for Trial Implementation and the Core Indicators for the Risk Management of Commercial Banks (Provisional) were promulgated by the former CBRC.

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The table below sets forth the required ratios of the Core Indicators and the ratios of the Bank on an unconsolidated basis under PRC GAAP as of or for the years ended December 31, 2015 and 2016 and 2017 and for the six months ended June 30, 2018.

As of As of December 31, June 30, Requirement Indicator categories Primary indicators Secondary indicators (%) 2015 2016 2017 2018

(%) (%) (%) (%) Risk Level Liquidity Risk Liquidity ratio Ն 25 57.72 44.99 48.42 52.41 Core liabilities ratio Ն 60 50.26 43.30 61.68 60.85 Liquidity gap ratio Ն -10 28.63 0.73 25.33 25.10 Credit risk Non-performing asset Յ 4 0.24 0.10 0.28 0.31 ratio Non-performing Յ 5 0.30 0.53 0.99 0.91 loan ratio Credit exposure to a Յ 15 10.52 9.27 11.71 12.30 single group customer Loan exposure to Յ 10 9.18 9.27 9.92 8.86 the first customer Overall credit exposure Յ 50 10.89 14.92 12.13 16.89 to related parties

Risk Cushion Profitability Cost-to-income ratio Յ 35 24.42 29.66 31.56 24.97 Return on assets Ն 0.6 1.60 1.40 1.13 1.11 Return on equity Ն 11 19.70 16.56 16.21 16.81 Allowance Allowance adequacy Ն 100 712.94 2,265.59 1,068.31 1,322.13 Adequacy ratio for asset losses Allowance adequacy Ն 100 1,168.21 1,776.12 953.30 1,013.35 ratio for loan losses Capital adequacy Capital adequacy ratio Ն 10.5 18.96 13.90 14.52 13.03 Tier-one capital Ն 8.5 17.82 12.85 11.21 10.07 adequacy ratio Core tier-one capital Ն 7.5 17.82 12.85 11.21 10.07 adequacy ratio

In addition, the Core Indicators for the Risk Management of Commercial Banks (Provisional) (《商業銀行風險監管核心指標(試行)》) set out certain other indicators, including ratios relating to interest rate risk sensitivity, loss rate of operational risk and loan migration. However, the specific indicator has not yet been specified, and the CBIRC may formulate regulatory requirements regarding to such ratios in the future.

As of December 31, 2015 and 2016, 2017 and as of June 30, 2018, our core liability ratio was 50.26%, 43.30%, 61.68% and 60.85%, respectively.

As of December 31, 2015 and 2016, 2017 and as of June 30, 2018, our ROA was 1.60%, 1.40%, 1.13% and 1.11%, respectively.

As of December 31, 2015 and 2016, 2017 and as of June 30, 2018, our ROE was 19.70%, 16.56%, 16.21% and 16.81%, respectively.

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Corporate Governance and Internal Controls

Corporate Governance

The PRC Company Law, the PRC Commercial Banking Law and other laws, regulations and regulatory documents provided specific requirements for corporate governance. Among them, the Guidelines on Corporate Governance of Commercial Banks (Yin Jian Fa [2013] No. 34) (《商業銀行公司治理指引》(銀監發[2013]34號)) issued by the former CBRC on July 19, 2013, which requires commercial banks to establish a sound corporate governance system and a clear organizational structure, with management and supervisory powers, functions and responsibilities being clearly split among the board, the supervisory board and the senior management.

As for the composition of the board of directors, according to Guidelines on the Duties of the Board of Directors of Joint Stock Commercial Banks (Provisional) (Yin Jian Hui [2005] No. 61) (《股份制商業銀行董事會盡職指引(試行)》(銀監會[2015]61號)) issued by the former CBRC, a commercial bank with a registered capital exceeding RMB1 billion is required to have at least three independent directors. As for the composition of the supervisory board, according to the Guidelines on the Functioning of Supervisory Board of Commercial Banks (《商業銀行監事會工作指引》) issued by the former CBRC, the proportion of employees representative supervisors or that of external supervisors shall not be less than one-third of the supervisory board of commercial banks. In addition, the Guidelines on Independent Directors and External Supervisors of Joint Stock Commercial Banks (《股份制商業銀行獨立董事和外部監事制度指引》) requires that the board of directors of a commercial bank should have at least two independent directors and the supervisory board should have at least two external supervisors.

Internal Controls

In accordance with the Guidelines on the Corporate Governance of Commercial Banks (Yin Jian Fa [2013] No. 34) (《商業銀行公司治理指引》(銀監發[2013]34號)) promulgated by the former CBRC on July 19, 2013, which provided commercial banks are required to establish an accountability system for a sound internal control environment. Under this system, the board of directors and senior management are required to maintain their respective accountability for the effectiveness of internal control and are required to be liable for material losses caused by a breakdown in internal control. In addition, the supervisory board is required to perform its regulatory functions and responsibilities by supervising directors and senior management, refining the system and rules of internal control and performing its internal control and supervisory obligations. Commercial banks are required to establish a relatively independent department for internal control supervising and evaluating, which may reports directly to the board of directors, supervisory board and senior management on the effectively supervising and evaluating of development of the internal control system and its enforcement.

The Guidelines for the Internal Audit of Commercial Bank(Yin Jian Fa [2016] No. 12) (《商業銀行內部審計指引》(銀監發[2016]12號)) issued by the former CBRC on April 16, 2016, which requires commercial banks to establish an audit committee of the board with at least three members, a majority of whom must be independent directors. Commercial banks are also required to establish independent internal audit departments consisting of sufficient internal auditors, who shall in principle represent 1% or more of the bank’s total number of employees.

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Information Disclosure Requirements Pursuant to the Measures for the Information Disclosure of Commercial Banks (China Banking Regulatory Commission Order [2007] No. 7) (《商業銀行信息披露辦法》(中國銀行業監督管理委員會令2007年第7號)) promulgated and implemented by the former CBRC on July 3, 2007, a PRC commercial bank is required to publish an annual report (including an audited financial statement) within four months of the end of each financial year disclosing its financial position and operational results. The board of directors of the commercial banks shall be responsible for the disclosure of its information. Information disclosure documents include periodical reports, interim reports and other relevant information required by the regulations. The commercial banks shall disclose information via annual reports, website or other methods to facilitate timely access to the disclosed information by the shareholders and other stakeholders. The listed commercial banks shall also disclose information in compliance with the relevant provisions promulgated by the securities regulatory authority.

Related Party Transaction The Administrative Measures on Connected Transactions with Insiders and Shareholders of Commercial Banks (China Banking Regulatory Commission Order [2004] No. 3) (《商業銀行與內部人和股東關聯交易管理辦法》 (中國銀行業監督管理委員會令2004年第3號)) promulgated by the former CBRC on April 2, 2004, which provided stringent and detailed requirements on the related party transactions of PRC commercial banks, requires PRC commercial banks to adhere to the principles of good faith and fairness in conducting related party transactions. PRC commercial banks are not allowed to grant unsecured loans to related parties. Related party transactions of commercial banks are required to be based on commercial principles and on terms no more favorable than similar transactions with non-related parties. These measures set out detailed provisions on the definition of a related party, the form and content of a related party transaction as well as the procedures and principles which must be followed in related party transactions.

RISK MANAGEMENT Since its inception, the former CBRC has published, in addition to guidelines concerning granting loan and credit to certain specific industries and customers and measures in respect of the implementation of Basel Accords, numerous risk management guidelines and rules in an effort to improve the risk management of PRC commercial banks, including operational risk management, market risk management, compliance risk management, liquidity risk management, information technology risk management and a supervisory rating system. For the guidelines concerning loans and credit to certain specific industries and customers and measures in respect of the implementation of Basel Accords, please see the sections headed “– Regulation on Principal Commercial Banking Activities – Lending” and “– Supervision over Capital Adequacy Level – Basel Accords”. The former CBRC also issued the Core Indicators for the Risk Management of Commercial Banks (Provisional) (《商業銀行風險監管核心指標(試行)》)asa basis of supervising the risk management of PRC commercial banks. The former CBRC established requirements for certain ratios relating to risk levels and risk provisions in the Core Indicators for the Risk Management of Commercial Banks (Provisional) (《商業銀行風險監管核心指標(試行)》) and is expected to establish requirements for certain ratios relating to risk mitigation for the purpose of evaluating and monitoring the risks of PRC commercial banks. Please see the section headed “– Other Operational and Risk Management Ratios”. The former CBRC periodically collects data through off-site surveillance to analyze such indicators and evaluate and issue early warnings of the risks on a timely basis.

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Latest Regulatory Requirements of the Banking Regulatory Authorities in China on the Operations and Risk Management of Commercial Banks On March 28, 2017, the former CBRC issued the Notice on the Special Governing of Behaviors of Illegal, Irregularity and Unlawful Conduct in the Banking Industry (Yin Jian Ban Fa [2017] No. 45) (《關於開展銀行業”違法、違規、違章”行為專項治理工作的通知》(銀監辦發[2017]45號)) and the Notice on the Special Governance against Regulatory Arbitrage, Spinning Arbitrage and Related Arbitrage in the Banking Industry (Yin Jian Ban Fa [2017] No. 46) (《關於開展銀行業”監管套利、空轉套利、關聯套利”專項治理工作的通知》(銀監辦發 [2017]46號)), and on April 6, 2017, it issued the Notice of the General Office of the CBRC on Special Administration on Improper Innovation, Improper Trading, Improper Incentives and Improper Fees in the Banking Industry (Yin Jian Ban Fa [2017] No. 53) (《中國銀監會辦公廳關於開展銀行業“不當創新、不當交易、不當激勵、不當收費”專項治理工作的通知》(銀監辦發 [2017]53號)). These documents, based on the objective of further preventing and controlling financial risks, managing financial chaos, urging banking institutions to strengthen compliance management, standardizing business operations, effectively preventing and controlling risks, steadily regulating development and better serving the real economy, comprehensively carried out special governing of behaviors that violate financial laws, regulatory rules and internal regulations, special administration on supervisory arbitrage, spinning arbitrage and related arbitrage and special administration on improper innovation, improper trading, improper incentives and improper fees in banking institutions, and requested banks to perform fully self-examination in respect of the above and regulatory authorities to supervise and inspect banks. In April 2017, the former CBRC successively issued the Guiding Opinions of the CBRC on Improving the Quality and Efficiency of the Banking Industry in Serving the Real Economy (Yin Jian Fa [2017] No. 4) (《中國銀監會關於提升銀行業服務實體經濟質效的指導意見》(銀監發 [2017]4號)), the Notice on Concentrated Rectification of Market Chaos in the Banking Industry (Yin Jian Fa [2017] No. 5) (《關於集中開展銀行業市場亂象整治工作的通知》(銀監發[2017]5 號)) and the Guiding Opinions of the CBRC on Risk Prevention and Control of the Banking Industry (Yin Jian Fa [2017] No. 6) (《中國銀監會關於銀行業風險防控工作的指導意見》(銀監發[2017]6號)) and other documents. In January 2018, the former CBRC issued the Notice of the CBRC on Further Deepening the Rectification of Market Chaos in the Banking Industry (Yin Jian Fa [2018] No. 4) (《中國銀監會關於進一步深化整治銀行業市場亂象的通知》(銀監發 [2018]4號)). These documents regulated the risk control, business management, classified regulation, stable operation, improved service quality and other aspects of banks. On January 12, 2018, the former CBRC issued the Notice on Further Deepening the Rectification of Market Chaos in the Banking Industry (Yin Jian Fa [2018] No. 4) (《關於進一步深化整治銀行業市場亂象的通知》(銀監發[2018]4號)), which marks the following as the key aspects of market rectification in the banking industry for 2018: (1) Corporate governance: shareholders and equity; performance and assessment of the Shareholders’ general meetings, the Board of Directors, the Board of Supervisors and the senior management; performance of Directors and the senior management without approval from regulators of their qualifications; performance of the chief risk officer, the chief compliance officer, the internal audit and financial officer and other personnel without obtaining relevant qualifications that are required to be approved; (2) Behaviors in violation of macro-control policies, with a focus on rectification of violation of credit policies and violation of real estate regulatory policies;

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(3) Shadow banking and cross-financial product risks, with a focus on the governance reform of inter-bank business, wealth management business, off-balance sheet business and cooperative business;

(4) Infringement of financial consumption rights, such as improper selling and improper charges;

(5) Benefit transfer: transferring benefits to Shareholders and related persons;

(6) Illegally carrying out businesses: carrying out deposit and loan business, and bills business illegally, and concealing or disposing of non-performing assets illegally;

(7) Cases and operational risks: out of place of the employee management and internal controls.

Risk Management and Prevention

On April 7, 2017, the former CBRC issued the Guidelines in relation to Risk Management Prevention and Control (關於銀行業風險防控工作的指導意見) (Yin Jian Fa [2017] No. 6), which requires the banks to enhance management on credit risks and liquidity risks, regulate their investment in debt securities, interbank business, cross financing, asset management and agency business, prevent risks in real estate industry and LGFV, and mitigate financial risks associated with internet finance and private finance. On April 26, 2017, the former CBRC issued the Notice to Distribute Guidance on Management of Commercial Bank’s Collaterals and Pledges (關於印發商業銀行押品管理指引的通知) (Yin Jian Fa [2017] No. 16), which requires commercial banks to include its management on collaterals and pledges into its overall risk management system and implement measures to improve relevant governance structure, internal rules and policies, business operation procedures and information system accordingly. On May 23, 2018, the CBIRC promulgated the Administrative Measures on Liquidity Risk Management of Commercial Banks (商業銀行流動性風險管理辦法) (CBIRC Order 2018 No. 3), which requires the commercial banks to establish and optimize their liquidity risk management system, including effective risk management and governance structure for liquidity risks, comprehensive risk management strategies, policies and procedures for liquidity risks, effective management information system to identify, measure, monitor and control liquidity risks, to ensure the liquidity demand can be fulfilled in a timely manner and at reasonable cost.

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Large Risk Exposure Management

On April 24, 2018, the CBIRC promulgated the Measures for the Administration of the Large Risk Exposures of Commercial Banks (《商業銀行大額風險暴露管理辦法》) (hereinafter referred to as “the Administrative Measures”), which came into effect on July 1, 2018. The Administrative Measures defines the meaning of large risk exposures, stipulates the regulatory standards and methods for measurement of such exposures according to the actual situation of banks in China with reference to international regulatory standards, and proposes a set of arrangements and requirements for commercial banks to strengthen large risk exposures management, hence helping promote commercial banks to enhance their centralized risk management, reduce their customer credit concentration and prevent and control systemic risks effectively.

All credit businesses with banks taking its credit risks are included in regulatory framework for large risk exposures, which specifically include six categories: one, the on-balance sheet credit business such as loan, bond investments and deposits with banks; two, business of investment in asset management products or asset securitization products; three, transactions of bond, stock and their derivatives; four, OTC derivatives and securities finance transactions; five, off-balance sheet business such as guarantee and commitments; and six, other businesses that are carried out in accordance with the principle of substance is more important than form and whose credit risks are borne by the commercial banks.

The Administrative Measures have clarified that the balance of commercial bank’s loans to non-interbank single customers shall not exceed 10% of net capital, the risk exposures to non-interbank single customers shall not exceed 15% of net tier-one capital, the risk exposures to a group of non-interbank related customers shall not exceed 20% of net tier-one capital and the risk exposures to interbank single customers or group customers shall not exceed 25% of net tier-one capital, which increased regulatory requirements for a single bank’s risk exposures to a single interbank customer; defined the upper limit of total amount for a single bank’s credit to a single company or group, further standardized interbank business, and helped guide banks to invest more funds in real economy and to gradually get rid of dependence on interbank economy.

The Administrative Measures also put forward four requirements for large risk exposure management of commercial banks: (1) establishing and improving organizational structure for large risk exposure management, making the management responsibilities of the Board, senior management and relevant departments clear, building a working mechanism that connects with each other and checks and balances effectively; (2) formulating management system for large risk exposure and promptly filing to the regulatory authorities; (3) setting internal limits for large risk exposure and continuously monitoring, early warning and controlling according to large risk exposure regulatory requirements as well as with reference to the actual situation of the Bank; and (4) strengthening information system construction and continuously collecting relevant data information to effectively support large risk exposure management.

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Enhancing Overall Management Capacity The CBIRC issued Notice to Distribute Measures for the Administration of Joint Credit Granting by Banking Financial Institutions (Provision) (關於印發銀行業金融機構聯合授信管理辦法(試行)的通知) on May 22, 2018. This notice requires banking institutions to put priority in implementing joint credit grant mechanism with particular focus on its impact to capacity of management and of overall risk, and requirement of, risk management system. According to this notice, banking institutions shall establish and participate in relevant mechanism to work jointly on prevention, identification, warning and solution of risk associated with borrowers, including jointly conducting to closely control monitor development of credit risks of relevant borrower, covering its business operation, financial results, key investment, guarantee obligations to external parties, related party transactions and cross-default status.

Supervisory Rating System On June 19, 2014, the former CBRC promulgated the Internal Guidelines on Supervisory Ratings for Commercial Banks (《商業銀行監管評級內部指引》), which require all commercial banks legally established in China (not applicable to newly-established commercial banks) to be evaluated by the former CBRC based on a supervisory rating system. Under these guidelines, the capital adequacy, asset quality, management quality, profitability, liquidity and exposure to market risk of commercial banks are evaluated and scored by the former CBRC on a continuous basis. Each bank is classified into one of six supervisory rating categories based on the scores. The results of ratings will serve as the basis for the regulatory authorities to implement their classified supervision and supervisory measures. Such supervisory rating system has not been disclosed to the public.

OWNERSHIP AND SHAREHOLDER RESTRICTIONS Regulations on Equity Investment in Banks According to the Measures for the Implementation of Administrative Licensing of Chinese-funded Commercial banks (《中資商業銀行行政許可事項實施辦法》) (CBRC Order [2017] No. 1) promulgated by the former CBRC on October 15, 2013 and amended on July 5, 2017, an application for change by a city commercial bank to modify shareholders that hold no less than 5% of its total amount of capital or shares, or an application by an overseas financial institution to invest in or subscribe for shares shall be handled, examined and decided by the local offices of the former CBRC. An application by a city commercial bank to modify the shareholders that hold not less than 1% but less than 5% of its total amount of capital or shares shall be reported to the local offices of the former CBRC within 10 days after the transfer of the equity. According to the Measures for the Administration of the Investment and Shareholding in Chinese-funded Financial Institutions by Foreign Financial Institutions (《境外金融機構投資入股中資金融機構管理辦法》) (CBRC Order [2003] No. 6), foreign financial institutions fulfilling certain conditions may invest in or hold shares of PRC commercial banks upon approval of the former CBRC. However, no single foreign financial institution may own 20% or more of the equity of such a bank. Moreover, if several foreign financial institutions’ investment in aggregate reaches or exceeds 25% of the total equity interest in a non-listed Chinese-funded financial institution, such non-listed financial institution will be regulated as a foreign-invested financial institution. If several foreign financial institutions’ investment in aggregate reaches or exceeds 25% of the total equity interest in a listed Chinese-funded financial institution, such listed Chinese-funded financial institution will still be regulated as a Chinese-funded financial institution.

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In particular, this regulation sets out that, investor, its related parties and parties acting in concert shall apply for, and obtain the prior approval from the CBIRC or its local offices with authority, if, individually or collectively, (i) they intend to hold over 5% of the total equity interests of a commercial bank of China for the first time, and (ii) each time the equity interest they hold would increase by another 5% of the total equity interest of relevant bank. Administrative approval in relation to acquisition of equity interest of commercial banks through stock market in China or overseas in this regard is only valid for six months. Investor, its related parties and parties acting in concert shall report to the CBIRC or its local offices within ten business days after they, individually or collectively, hold over 1% but less than 5% of equity or shares of a commercial bank.

Regulations on Equity Management of Banks The Interim Measures for Management of Commercial Bank Equity (《商業銀行股權管理暫行辦法》) (CBRC Order [2018] No. 1) was promulgated by the former CBRC on January 5, 2018, which applies to commercial banks established in the People’s Republic of China in accordance with laws and integrates and consolidates the requirements of previous laws and regulations in relation to equity management of commercial banks, requires that equity management of a commercial bank shall conform with the principles of category management, decent quality, clear-cut relations, defined responsibilities, and fairness and transparency. The principal regulations include, but not limited to: (1) the shareholding of shareholders, their related parties and parties acting in concert shall be aggregated for calculation, and a commercial bank shall manage its substantial shareholders, controlling shareholders, actual controllers, related parties, parties acting in concert and ultimate beneficiaries as its own related parties under the transparency principle; (2) substantial shareholders of a commercial bank who hold or control 5% or more of its shares or voting rights, or hold less than 5% of the total capital or total equity but have significant impact on the operations and management of the commercial bank, shall enunciate their shareholding structure to the level of actual controllers and ultimate beneficiaries, and specify their related relationship or acting-in-concert relationship with other shareholders; (3) unless otherwise required by the Measures, the same investor and its related parties and parties acting in concert, as substantial shareholders, shall not invest in more than two commercial banks, or shall not control more than one commercial bank; (4) unless otherwise required by the Measures, substantial shareholders of a commercial bank shall not transfer shareholdings they held and hold shares of the commercial bank by ways of issuing, managing or otherwise controlling financial products within five years from the date of obtaining shareholding; (5) the commercial bank shall strengthen examination on the qualification of its shareholders, verify the information of substantial shareholders and their controlling shareholders, actual controllers, related parties, persons acting in concert and ultimate beneficiaries and follow up the changes thereof, judge the impact from the shareholders on the operation and management of the commercial bank and fully report or disclose relevant information in a timely and accurate manner according to the laws; (6) the commercial bank shall set up an equity custody system, centralizing the equity in a custodian institution that meets the requirements. The specific requirements of the custody shall be otherwise stipulated by the former CBRC; (7) the credit balance granted to individual entities, including the substantial shareholders or their controlling shareholders, actual controllers, related parties, parties acting in concert and ultimate beneficiaries, by the commercial bank shall not exceed 10% of the commercial bank’s net capital. The total credit balance granted to the individual substantial shareholder and its controlling shareholders, actual controllers, related parties, parties acting in concert and ultimate beneficiaries by the commercial bank shall not exceed 15% of the

116 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. SUPERVISION AND REGULATION commercial bank’s net capital; (8) specifying the situations of shareholders’ violations and stipulating that the regulators may take measures including restricting shareholders’ rights and imposing an order on controlling shareholders to transfer their equity; (9) financial products can invest in shares of listed commercial banks, subject to the restriction that the total number of shares being invested by financial products that are controlled by individual investor, issuer, manager or their respective actual controllers, affiliates or parties acting in concert, shall not exceed 5% of relevant commercial banks. The substantial shareholder of a commercial bank shall not hold shares or equity of such commercial bank through financial products they issue, manage or control through any means. For the definition of “substantial shareholder” referred in this section, please see “Risk Factors – Investments in commercial banks in China are subject to restrictions that may adversely affect the value of your investment.”

Restrictions on Shareholders In accordance with the Notice on the Regulation of Internal Staff Shares in Financial Enterprises (《關於規範金融企業內部職工持股的通知》) which was promulgated by the MOF, PBoC and the former CBRC on September 15, 2010, the proportion of internal staff shares shall not exceed 20% of the total share capital, and the proportion of shares held by a single staff shall not exceed 5‰ of the total share capital. In addition, upon issuance of new shares through public offering, the proportion of shares hold by internal staff shall not exceed 10% of the total share capital, and the proportion of shares hold by a single staff shall not exceed 1‰ or 500 thousand shares, whichever is lower. No approval for the PRC Government on proposed public offering will be granted if relevant bank fail to meet these requirements. The Guidelines on Corporate Governance of Commercial Banks impose additional requirements on shareholders of commercial banks. For example, shareholders, especially substantial shareholders, are required to support the reasonable capital planning formulated by the board of directors of a commercial bank so that the capital of the bank can meet the regulatory requirements on an on-going basis. If the capital of a commercial bank fails to meet the regulatory requirements, it is required to develop a capital replenishment plan to increase capital adequacy ratio to meet regulatory requirements within a specified period of time, and its capital is required to be replenished by means of increasing core capital. Under such circumstances, substantial shareholders cannot obstruct capital injection by other shareholders or the participation of new qualified shareholders. If shareholders, especially substantial shareholders, of a PRC commercial bank fail to repay outstanding loans when overdue, the voting rights of such shareholder at the shareholders’ general meetings, as well as the voting rights of the director(s) designated by such shareholder at board meetings, shall be subject to restrictions. In the Interim Measures for Management of Commercial Bank Equity (商業銀行股權管理暫行辦法), the PRC Government sets out further restriction on substantial shareholders of commercial banks in China, such as (i) substantial shareholders shall enjoy its rights and undertake its obligations in strict compliance with relevant laws, regulations, administrative policies and articles of association of the Bank, and shall not improperly interfere the authority of board of directors and senior management team to make decision or manage business operations in the way as authorized by articles of associations; (ii) substantial shareholders shall not bypass board of directors or senior management to directly interfere or influence business operation and management of commercial banks, transfer interest or other action that would damage legal right of deposit customers, the relevant bank, or other shareholders; (iii) substantial shareholders of commercial banks shall establish effective risk isolation mechanism to prevent

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Stringent Management on Business Operations

Recent regulatory development mainly focused on financial market business, covering two key areas: (i) encouraging banking institutions to optimize loan portfolio and improve credit support to real economy, and (ii) taking measures to reduce financing costs of real economy and simplify structure of financial products through decreasing the number of entities involved in flow of fund, including decreasing channel-type business.

Improve the Efficiency to Serve Real Economy

The former CBRC issued the Notice on Carrying out the Special Campaign against the “Inappropriate Innovations, Inappropriate Transactions, Inappropriate Incentives, and Inappropriate Collection of Fees” in the Banking Industry (關於開展銀行業“不當創新、不當交易、不當激勵、不當收費”專項治理工作的通知) on April 6, 2017, which requires banking institutions to focus on development of main business segments and prevention of compliance risks. It also requires banking institutions to adopt stringent measures in regulating business operation, promoting innovation and enhancing risk management and internal control, in line with the general principles of “improving efficiency of serving real economy, effectiveness of financial risks mitigation and protection of investors’ legal rights”. The former CBRC issued the Guidance on Enhancing the Quality and Efficiency of the Banking Sector to Serve the Real Economy (關於提升銀行業服務實體經濟質效的指導意見) on April 7, 2017, which requires banking institutions to focus on serving real economy through (i) ensuring investment funds flow into real economy sectors in line with relevant policies in China by conducting thorough due diligence on ultimate financing parties and underlying assets and simplifying structure of financial products by decreasing the number of entities involved in flow of fund; (ii) innovating products and services with specific features to address demands of enterprises engaging in real economy sector, while ensuring risk management system could properly cover all innovative business where internal control and full disclosure of information shall always be treated with priority. In addition, this guidance requires banking institutions to conduct routine self- investigations and make timely rectifications accordingly.

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New requirements to business conducts

On April 10, 2017, the former CBRC promulgated the Notice on Effectively Covering the Supervision Shortness and Enhancing the Supervision Efficiency (關於切實彌補監管短板提升監管效能的通知)(Yin Jian Fa [2017] No.7). Under this notice, banking institutions heavily rely on interbank business to source fund or has substantial increase in interbank business operations shall conduct stringent inspection on status of maturity mismatch and effectiveness of liquidity management. For banking institutions with large investment in interbank financial products, this notice asks for stringent inspections with particular focus on sufficiency of due diligence towards ultimate financing parties and the amount of provision. In addition, the notice requires banking institutions with substantial exposure to wealth management business operations to conduct stringent inspection on the implementation of “independent management, independent booking and independent accounting (單獨管理、單獨建賬、單獨核算)” and ensure sufficient disclosure on products and associated risks to customers.

On June 21, 2017, the former CBRC promulgated the Notice on Further Regulating the Taking of Public Fund Deposits by Banking Financial Institutions (關於進一步規範銀行業金融機構吸收公款存款行為的通知) (Yin Jian Fa [2017] No.30). The Notice requires the banking institutions to take proper measures in deposit business involving public fund, including enhancement of auditing and supervision of the public fund deposits and prohibition of tunneling, etc. The banking financial institutions shall revitalize existing funds of relevant bank accounts by providing good, efficient and safe services, increase the comprehensive benefit of fund deposits, and improve the preservation and appreciation value of clients’ funds.

On April 27, 2018, the PBoC, CBIRC, CSRC and SAFE jointly issued the Guiding Opinions on Regulating the Asset Management Business of Financial Institutions (關於規範金融機構資產管理業務的指導意見) (No. 106 [2018] of the PBoC), which require financial institutions to adhere to the fundamental objective of serving the real economy, prevent funds from leaving the real economy for the virtual economy to circulate within the financial system, prevent excessively complicated products from intensifying the transmission of the risks among industries, markets, and regions, and develop unified standards and rules directed in priority at problems in asset management business, such as multi-layered nesting, unclear leverage, serious arbitrage, and frequent speculation.

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In addition, the PRC Company Law and relevant rules and regulations promulgated by the former CBRC impose certain restrictions on the ability of a commercial bank’s shareholders to pledge their shares. For example, a commercial bank may not accept its own shares as collateral. According to the Guidelines on Corporate Governance of Commercial Banks: (1) any shareholder of a commercial bank must give prior notice to the board of directors of the bank if it wishes to pledge its shares as collateral; and (2) where the balance of loans extended by a commercial bank to a shareholder exceeds the audited net value of his or her equity for the preceding year, the shareholder cannot use his or her stake in the bank as pledge. On November 14, 2013, the former CBRC promulgated the CBRC Notice on Enhanced Management of Pledge of Equity Interest in Commercial Banks (《中國銀監會關於加強商業銀行股權質押管理的通知》), pursuant to which commercial banks are required to clearly stipulate the following matters in their articles of associations in addition to those as stipulated in the foresaid Guidelines on Corporate Governance: (1) where a shareholder, who has representation on the board of directors or the board of supervisors, or directly, indirectly or jointly holds or controls more than 2% of share capital or voting rights in the bank pledges his equity interests in the bank, it shall make a filing to the board of directors of the bank prior to the pledge. The filing shall state the basic information of the pledge, including the reasons for the pledge, the number of shares involved, the term of pledge and the particulars of the pledgees. Where the board of directors considers the pledge to be materially adverse to the stability of the bank’s shareholding structure, the corporate governance as well as the control of risk and connected transactions, the filing shall not be accepted. The director(s) nominated by a shareholder proposing to pledge his shares in the bank shall abstain from voting at the meeting of the board of directors at which such proposal is considered; (2) upon the registration of pledge of equity interests, the shareholder involved shall provide the bank with the relevant information in relation to the pledge of equity interests in a timely manner, so as to facilitate the bank’s risk management and information disclosure compliance; and (3) where a shareholder pledges 50% or more of his equity interests in the bank, the voting rights of such shareholder at the shareholders’ general meetings, as well as the voting rights of the director(s) designated by such shareholder at board meetings, shall be subject to restrictions.

Pursuant to the requirements under the Notice, when a commercial bank fails to meet the regulatory requirements, PRC regulatory authorities may require the bank to formulate rectification plans and may take corresponding regulatory actions if necessary.

To satisfy the requirements under the Notice, the Bank has amended its articles of association by adding voting restriction provisions which will be subject to the approval of the CBRC Sichuan Office and become effective upon the [REDACTED] of the H Shares.

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Anti-money Laundering Regulation

The PRC Anti-Money Laundering Law (《中國反洗錢法》), which became effective on January 1, 2007, sets out the responsibilities of the relevant financial regulatory authorities regarding anti-money laundering, including formulating anti-money laundering rules and regulations for financial institutions and requires financial institutions to establish sound internal control systems regarding anti-money laundering.

In accordance with the Anti-Money Laundering Regulations for Financial Institutions (《金融機構反洗錢規定》) promulgated by the PBoC on November 14, 2006, PRC commercial banks are required to establish specific bodies for anti-money laundering or designate internal bodies to be responsible for anti-money laundering work. On the same day, the PBoC promulgated the Administrative Measures for the Financial Institutions’ Report of Large-Sum Transactions and Doubtful Transactions (《金融機構大額交易和可疑交易報告管理辦法》) (reamended on December 28, 2016 and July 26, 2018) pursuant to which upon the detection of any suspicious transactions or transactions involving large amounts, commercial banks are required to report the transactions to the China Anti-Money Laundering Monitoring & Analysis Center. Where necessary and pursuant to appropriate judicial proceedings, commercial banks are required to cooperate with government authorities in preventing money laundering activities and in freezing assets. The PBoC supervises and conducts on-site examinations of commercial banks’ compliance with anti-money laundering laws and regulations and may impose penalties for any violations thereof in accordance with the PRC Anti-Money Laundering Law and Anti-Money Laundering Regulations for Financial Institutions.

On June 21, 2007, the PBoC, the former CBRC, the CSRC and the former CIRC jointly issued the Measures on the Administration of Client Identity Identification and Materials and Transaction Recording of Financial Institutions (《金融機構客戶身份識別和客戶身份數據及事務歷史記錄保存管理辦法》), pursuant to which commercial banks are required to establish a customer identification system, record the identities of all customers and the information relating to each transaction, and keep personal transaction records and documents.

On December 9, 2014, the PBoC promulgated the Measures for the Supervision and Administration of the Anti-money Laundering Operations by Financial Institutions (Provisional) (《金融機構反洗錢監督管理辦法(試行)》). Pursuant to the measures, the PBoC is required to establish a regular anti-money laundering information reporting system for financial institutions, and financial institutions are required to report anti-money laundering work related information to PBoC and actively cooperate with PBoC and its branches in supervisory inspections.

Use of Funds

Under the PRC Commercial Banking Law, commercial banks are not permitted to engage in trust investment or securities business, or invest in real property other than for their own use, or invest in non-banking financial institutions and enterprises, unless otherwise approved by the relevant government authorities or otherwise specified in relevant laws and regulations. The use of funds by commercial banks is limited to the following: (1) short-term, medium-term and long-term loans; (2) acceptance and discounts on instruments; (3) interbank deposits; (4) trading of government bonds; (5) trading of bonds issued by financial institutions; (6) investment in banking institutions; and (7) other uses as may be approved by the relevant government authorities.

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REGULATORY AND SHAREHOLDERS’ APPROVALS

The Bank has obtained the Shareholders’ approval for the proposed [REDACTED]. See “Appendix VII – Statutory and General Information – 1. Further Information About Our Bank – D. Resolutions of Our Shareholders” in this document.

The Bank also obtained approvals from CBRC Sichuan Office and CSRC for the [REDACTED] and the application to [REDACTED] the H Shares on the Hong Kong Stock Exchange, on August 10, 2018 and [●], 2018, respectively.

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OUR HISTORY Overview

As approved by PBoC, we were established as a joint stock commercial bank on September 15, 1997 under the name of “Luzhou City United Bank (瀘州城市合作銀行)”, which was established and promoted jointly by Luzhou Municipal Finance Bureau, the then shareholders of eight urban credit cooperatives and two rural credit cooperatives and other corporate shareholders. At the time of establishment, the registered capital of our Bank was RMB100,763,700, divided into 100,763,700 Domestic Shares with a nominal value of RMB1.00 each. On May 8, 1998, the Sichuan Branch of PBoC approved the change of the name of our Bank from “Luzhou City United Bank (瀘州城市合作銀行)” to “Luzhou City Commercial Bank Co., Ltd. (瀘州市商業銀行股份有限公司)”.

Milestones

Key milestones in our development are as follows:

Time Events

September 1997 We were established in Luzhou, Sichuan Province, the PRC.

May 1998 We changed our name from “Luzhou City United Bank (瀘州城市合作銀行)” to “Luzhou City Commercial Bank Co., Ltd. (瀘州市商業銀行股份有限公司)”.

December 2004 We obtained the approval for issuing “Jiucheng Debit Card (酒城借記卡)”.

June 2009 We established the financial service center for small enterprises.

July 2009 Luxian Yuantong Rural Bank Co., Ltd. (瀘縣元通村鎮銀行有限責任公司), which was promoted by our Bank, obtained the approval for commencement of business by CBRC Luzhou Office.

July 2011 Xuyong (敘永) sub-branch, our first county-level sub-branch, commenced operations.

June 2012 Our total assets reached RMB10.0 billion.

December 2014 We managed to cover all three districts and four counties of Luzhou, with Luxian (瀘縣) sub-branch commencing operations.

June 2016 We became a member of the National Market Interest Rate Pricing Self-regulatory Mechanism (全國市場利率定價自律機制).

December 2016 Our total assets reached RMB50.0 billion.

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Time Events

February 2017 Chengdu branch, our first branch outside Luzhou, commenced operations.

February 2017 We successfully issued tier-two capital bonds in an aggregate principal amount of RMB1.0 billion and became the only city commercial bank in Sichuan Province which successfully issued tier-two capital bonds in 2017.

July 2017 The credit rating of our Bank rose to AA according to the credit rating report of a major domestic credit rating agency.

Changes in the Registered Capital of our Bank

At the time of establishment, the registered capital of our Bank was RMB100,763,700, divided into 100,763,700 Domestic Shares with a nominal value of RMB1.00 each. Since the establishment of the Bank, there have been several increases of the share capital of the Bank.

As of the Latest Practicable Date, the registered capital of our Bank was RMB1,637,193,385, divided into 1,637,193,385 Domestic Shares with a nominal value of RMB1.00 per share. The changes in the registered capital of our Bank since its establishment are set forth as follows:

Time Changes in the registered capital May 6, 2008 The registered capital of our Bank was increased from RMB100,763,700 to RMB120,763,700 by issuing and allotting 20,000,000 new Domestic Shares with a nominal value of RMB1.00 each to Xinglu Investment Group.

July 28, 2008 The registered capital of our Bank was increased from RMB120,763,700 to RMB160,763,700 by issuing and allotting 40,000,000 new Domestic Shares with a nominal value of RMB1.00 each to Luzhou State-owned Assets Company.

June 30, 2009 The registered capital of our Bank was increased from RMB160,763,700 to RMB400,763,700 by issuing and allotting 240,000,000 new Domestic Shares with a nominal value of RMB1.00 each to Luzhou Laojiao Group, Xinfu Mining Industry Group and Sichuan Jiale Group.

April 7, 2010 The registered capital of our Bank was increased from RMB400,763,700 to RMB452,763,700 by issuing and allotting 52,000,000 new Domestic Shares with a nominal value of RMB1.00 each to Luzhou Municipal Finance Bureau.

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Time Changes in the registered capital May 29, 2014 Our Bank issued and alloted an aggregate of 271,658,220 stock dividend to the Shareholders recorded on the register of members of our Bank as of December 31, 2013. On May 29, 2014, our Bank’s registered capital was increased from RMB452,763,700 to RMB724,421,920.

December 8, 2015 The registered capital of our Bank was increased from RMB724,421,920 to RMB1,297,618,903 by issuing and allotting 573,196,983 new Domestic Shares with a nominal value of RMB1.00 each to nine then existing corporate Shareholders and 385 then existing individual Shareholders (note 1).

June 29, 2016 The registered capital of our Bank was increased from RMB1,297,618,903 to RMB1,412,371,383 by issuing and allotting 114,752,480 new Domestic Shares with a nominal value of RMB1.00 each to five new investors (note 2).

November 25, 2016 The registered capital of our Bank was increased from RMB1,412,371,383 to RMB1,448,843,840 by issuing and allotting 36,472,457 new Domestic Shares with a nominal value of RMB1.00 each to Anxin Trust Co., Ltd. (安信信託股份有限公司).

April 8, 2018 Our Bank issued and alloted an aggregate of 188,349,545 stock dividend to the Shareholders recorded on the register of members of our Bank as of December 31, 2016. On April 8, 2018, the registered capital of our Bank was increased from RMB1,448,843,840 to RMB1,637,193,385.

Notes: 1. The nine then existing corporate Shareholders include Luzhou Municipal Finance Bureau, Luzhou State-owned Assets Company, Luzhou Laojiao Group, Xinfu Mining Industry Group, Sichuan Jiale Group, Jiale Real Estate, Luzhou Laojiao Co., Ltd. (瀘州老窖股份有限公司), Luzhou Xinglu Financing Guarantee Co., Ltd. (瀘州市興瀘融資擔保有限公司) and Luxian State-owned Assets Management Co., Ltd. (瀘縣國有資產經營有限公司). 2. The five new investors include Xinglu Jutai Real Estate, Anxin Trust Co., Ltd. (安信信託股份有限公司), Luzhou Naxi District Rural Credit Cooperative Association (瀘州市納溪區農村信用社合作聯社), Luzhou Industrial Investment Group and Luzhou Laojiao Qiquan Marketing Southwest Wine Co., Ltd. (瀘州老窖柒泉營銷西南酒業股份有限公司). Though there were certain defects in the regulatory procedures of the above changes in the Bank’s registered capital, our PRC legal advisors, JunHe LLP, are of the view that, because (i) the regulatory authorities are well aware of the previous changes of registered capital of our Bank and there is no dispute or objection raised by any Shareholder on their shareholdings in our Bank as of the Latest Practicable Date, (ii) Sichuan SASAC issued its confirmation on our existing state-owned Shareholders and their shareholdings in our Bank, and (iii) Sichuan Government and People’s Government of Luzhou issued confirmations that the establishment of the Bank and the changes in the share capital of the Bank complied with the relevant PRC laws and regulations in general, and there is no issue on loss of state-owned assets, no material non-compliance with PRC laws and regulations and no material disputes or potential disputes, the defects in the above changes in the Bank’s registered capital have no material and adverse effect on the legality and effectiveness of the changes in the Bank’s registered capital and do not and will not result in any material legal impediment on the [REDACTED] under the relevant PRC laws and regulations.

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Issuance of Bonds

Tier-two capital bonds

As approved by the CBRC Sichuan Office and PBoC, in February 2017, our Bank issued tier-two capital bonds in a principal amount of RMB1.0 billion with a term of 10 years. The annual interest rate of the bonds is 5.5%.

Interbank certificates of deposit

As approved by Chengdu Branch of PBoC, our Bank issued multiple tranches of zero-coupon interbank certificates of deposit in an aggregate amount of RMB5,800 million in 2016 with terms ranging from three months to 12 months and effective interest rates ranging from 2.86% to 5.00% per annum.

As approved by Chengdu Branch of PBoC, our Bank issued multiple tranches of zero-coupon interbank certificates of deposit in an aggregate amount of RMB16,240 million in 2017 with terms ranging from one month to 12 months and effective interest rates ranging from 4.18% to 5.45% per annum.

As approved by Chengdu Branch of PBoC, our Bank issued multiple tranches of zero-coupon interbank certificates of deposit in an aggregate amount of RMB 9,520 million in the six months ended June 30, 2018 with terms ranging from one month to 12 months and effective interest rates ranging from 4.40% to 5.29% per annum.

OUR SHAREHOLDING AND GROUP STRUCTURE

Shareholding Structure

As of the Latest Practicable Date, our Bank had 73 corporate Shareholders with approximately 97.31% interest in the registered capital of our Bank and 1,950 individual Shareholders with approximately 2.69% interest in the registered capital of our Bank. All of these Shareholders are holders of Domestic Shares. The Shareholders directly holding 5% or more of the share capital of our Bank include Luzhou Laojiao Group, Sichuan Jiale Group, Xinfu Mining Industry Group, Luzhou Municipal Finance Bureau, Luzhou State-owned Assets Company and Xinglu Jutai Real Estate, which directly held approximately 19.88%, 16.56%, 16.56%, 9.87%, 8.83% and 5.60% of the share capital of our Bank, respectively.

As of the Latest Practicable Date, our Bank was unable to verify the identity and shareholding of 43 corporate Shareholders and 564 individual Shareholders, which held in aggregate approximately 0.51% and 0.31% of the share capital of our Bank, respectively. The Directors believe that the existence of any of such Shareholders whom our Bank is unable to contact has no material adverse impact on our Bank’s corporate governance, business and operations.

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The following chart sets out the simplified shareholding and group structure of our Bank as of the Latest Practicable Date and immediately prior to the [REDACTED]:

Other Luzhou Luzhou corporate Luzhou Laojiao Sichuan Jiale Xinfu Mining Municipal Industrial (2) and Group(1) Xinglu Investment Group Group(3) Industry Group(4) Finance Investment individual Bureau Group(5) Shareholders(6)

26.40% 24.99% 53% 84.67% 58.64% 70.44% 100%

Luzhou Fundamental Luzhou Xinglu Luzhou Yijia Luzhou Luzhou Laojiao Xinglu Jutai Infrastructure Financing Real Estate State-owned Co., Ltd.(1) Real Estate(2) Construction Guarantee Development Assets Investment Co., Ltd. Co., Ltd. Company(5) Co., Ltd.

92.68%

Jiale Real Estate

19.88% 2.21% 5.60% 2.48% 0.92%0.69% 0.44% 16.56% 16.56% 9.87% 4.49% 8.83% 11.47%

Our Bank

Notes:

(1) Luzhou Laojiao Group, one of our state-owned corporate Shareholders and our single largest Shareholder, is wholly owned by Luzhou SASAC. The business scope of Luzhou Laojiao Group is investment and assets management; investment in wine, food, finance, trade, logistics, education, medical and health, real estate, cultural tourism and internet industry; holding companies services; social economic consultation, business management consultation; business management services; supply chain management services; export and import business and trade agency; production and sale (including online sale) of food; planting and sale (including online sale) of crops.

Luzhou Laojiao Co., Ltd. (瀘州老窖股份有限公司) is a company listed on the Shenzhen Stock Exchange (stock code: 000568) and held directly and indirectly through its wholly-owned subsidiary as to 26.40% by Luzhou Laojiao Group and as to 24.99% by Xinglu Investment Group, being the two largest shareholders of Luzhou Laojiao Co., Ltd. as of December 31, 2017. Luzhou Laojiao Co., Ltd. is a company controlled by Luzhou Laojiao Group. Therefore, Luzhou Laojiao Group directly held approximately 19.88% equity interest in our Bank and indirectly held approximately 2.21% equity interest in our Bank through Luzhou Laojiao Co., Ltd. (2) Xinglu Jutai Real Estate, one of our state-owned corporate Shareholders, is held as to 53% by Xinglu Investment Group and as to 47% by Luzhou Chengnan Construction Investment Co., Ltd. (瀘州市城南建設投資有限公司). Xinglu Investment Group is wholly owned by Luzhou SASAC. The business scope of Xinglu Jutai Real Estate is property development and sale. As of the Latest Practicable Date, Xinglu Investment Group directly held approximately 2.48% equity interest in our Bank. Luzhou Fundamental Infrastructure Construction Investment Co., Ltd. (瀘州市基礎建設投資有限公司), in which Xinglu Investment Group directly and indirectly held approximately 84.67% equity interest, held approximately 0.92% equity interest in our Bank. In addition, Xinglu Investment Group’s subsidiary, Luzhou Xinglu Financing Guarantee Co., Ltd. (瀘州市興瀘融資擔保有限公司), held approximately 0.69% equity interest in our Bank. Luzhou Laojiao Group and Xinglu Investment Group entered into an acting-in-concert agreement (the “Concert Parties Agreement”) with respect to their respective shareholdings in Luzhou Laojiao Co., Ltd. for a term from December 31, 2015 to June 1, 2021. By virtual of the Concert Parties Agreement, Xinglu Investment Group is deemed to be interested in the equity interest held by Luzhou Laojiao Co., Ltd. in our Bank. Therefore, Xinglu Investment Group directly and indirectly held an aggregate of 11.90% equity interest in our Bank. (3) Sichuan Jiale Group directly held approximately 16.56% equity interest in our Bank and indirectly held 0.44% equity interest in our Bank through its indirectly owned subsidiary, Jiale Real Estate. Sichuan Jiale Group, one of our non-state owned corporate Shareholders, is held as to 80% by Mr. Xiong Guoming, one of our non-executive Directors and as to 20% by Ms. Jiang Xiaoying. Mr. Xiong Guoming is the husband of Ms. Jiang Xiaoying. The business scope of Sichuan Jiale Group is investment in construction and installation, accommodation, catering, tourism, electric power development, power supply, financing and agricultural development and corporate management services.

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(4) Xinfu Mining Industry Group, one of our non-state owned corporate Shareholders, is held as to 92% by Sichuan Xinfu Industrial Group Co., Ltd. (四川鑫福產業集團有限公司) and as to 8% by Mr. Lai Dajun (賴大軍). Sichuan Xinfu Industrial Group Co., Ltd. is held as to 60% by Mr. Lai Dafu (賴大福) and as to 40% by Ms. Ge Xiuqiong (葛修瓊). Mr. Lai Dafu (賴大福) is the husband of Ms. Ge Xiuqiong (葛修瓊). To the knowledge of the Bank, Mr. Lai Dajun and Mr. Lai Dafu are brothers. The business scope of Xinfu Mining Industry Group is sale of mineral products (except for those requiring special permits), steel, construction materials, chemical products, hardware, electrical equipment and energy saving products. As of the Latest Practicable Date, all of the Shares held by Xinfu Mining Industry Group were frozen according to court orders. To the best knowledge of the Bank, the relevant courts had not initiated the auction of the Shares held by Xinfu Mining Industry Group in our Bank as of the Latest Practicable Date. (5) Luzhou State-owned Assets Company, one of our state-owned corporate Shareholders, is wholly owned by Luzhou Industrial Investment Group, which is held as to approximately 94.29% by Luzhou SASAC and as to approximately 5.71% by China Agriculture Development Key Construction Fund Co., Ltd. (中國農發重點建設基金有限公司). The business scope of Luzhou State-owned Assets Company mainly includes investment and operation of state-owned assets and state-owned equity. Luzhou Industrial Investment Group directly held approximately 4.49% equity interest in our Bank. Therefore, Luzhou Industrial Investment Group directly and indirectly held an aggregate of 13.32% equity interest in our Bank. The business scope of Luzhou Industrial Investment Group is investment and financing business, non-financing guarantee, assets management, capital operation and consulting services and trade broker and agency (excluding auction). (6) As of the Latest Practicable Date, 61 other corporate Shareholders and 1,950 individual Shareholders held an aggregate of 11.47% equity interest in our Bank with the highest shareholding not exceeding 5.00%. The following chart sets out the simplified shareholding and group structure of our Bank immediately following the completion of the [REDACTED] (assuming the [REDACTED]is not exercised):

Other Luzhou Luzhou corporate [REDACTED] Luzhou Laojiao Sichuan Jiale Xinfu Mining Municipal Industrial Xinglu Investment Group and Shareholders of Group Group Industry Group Finance Investment individual H Shares Bureau Group Shareholders

100%

26.40% 24.99% 53% 84.67% 58.64% 70.44%

Luzhou Xinglu Luzhou Yijia Luzhou Luzhou Fundamental Luzhou Laojiao Financing Real Estate State-owned Xinglu Jutai Infrastructure Co., Ltd. Construction Guarantee Development Assets Real Estate Investment Co., Ltd. Co., Ltd. Company Co., Ltd.

92.68%

Jiale Real Estate

[REDACTED]% [REDACTED]% [REDACTED]% [REDACTED]% [REDACTED]% [REDACTED]% [REDACTED]% [REDACTED]% [REDACTED]% [REDACTED]% [REDACTED]% [REDACTED]% [REDACTED]% [REDACTED]%

Our Bank

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OUR ORGANIZATIONAL STRUCTURE

The following chart sets out our principal organizational and management structure as of the Latest Practicable Date:

Shareholders’ general meeting

Audit committee

Development and strategy committee Audit and supervision committee Board of Board of Directors Supervisors Nomination and remuneration committee Board of Nomination committee Directors

Related party (connected) transactions Office of the Board of Directors Office of the Board of Supervisors control committee Centralized risk management committee Risk management committee Information technology management committee

Consumer rights protection committee Data quality management committee

Marketing management committee Senior management Wealth management business committee

Intermediary business management committee Direct (institutional) customers department Accounting and finance department One branch Business continuity management committee Corporate banking customers department Assets and liabilities management department 25 sub-branches Interest rate management committee Retail banking (bank cards) customers department/ Wealth management department Credit business department Independent approvers committee San Nong business department/ Inclusive finance department Risk management department Financial review committee Internal control and compliance Interbank customers department department/Security department Procurement review (bidding and tendering) committee Financial markets department Operation management department Asset and liquidity management committee Key customers management department Human resources department Internal control and compliance management committee Key customers department I Administration department Institutional management committee Key customers department II Strategic planning department Consumer rights protection committee System development department Target management committee Electronic banking department Innovation management committee IT department Talent management committee Internal audit department Confidentiality management committee Disciplinary inspection department

IT innovation center

Corporate Governance Structure

Our Bank has established a corporate governance structure which comprises the shareholders’ general meeting, the Board of Directors, the Board of Supervisors and the senior management.

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Shareholders’ general meeting

Shareholders’ general meeting is the organ of authority of our Bank. Its principal responsibilities include:

• determining the operation strategies and investment plans of the Bank;

• electing and replacing non-employee representative Directors and Supervisors and determining the remuneration of Directors and Supervisors;

• reviewing and approving the reports of the Board of Directors and the Board of Supervisors;

• reviewing and approving the annual financial budget plans and financial accounting plans;

• reviewing and approving the profit distribution plans and loss recovery plans;

• determining the increase or decrease in the registered capital of the Bank;

• determining the issuance of bonds or other securities and the listing of the Bank;

• determining the merger, spin-offs, dissolution and liquidation or change of corporate form of the Bank;

• amending the Articles of Association;

• reviewing and approving the Board of Supervisors’ evaluation on Directors, the mutual evaluation reports of independent non-executive Directors, the evaluation on Supervisors by the Board of Supervisors and the mutual evaluation reports of external Supervisors;

• listening to the report of the Board of Directors on the investigation opinions of the financial regulatory authorities on the Bank and reviewing the implementation of rectification measures;

• reviewing and approving the share incentive plans;

• reviewing and approving the proposals by Shareholders individually or in aggregate holding 3% or more of the Shares;

• reviewing and approving the terms of reference of each of the Shareholders’ general meeting, the Board of Directors and the Board of Supervisors;

• reviewing and approving matters, such as the equity investment of the Bank, the Bank’s guarantee business, such as external guarantee and letter of guarantee, the Bank’s investment in fixed assets, the disposal and write-off of non-performing assets, and the pledge of assets;

• reviewing and approving the persons who should be recommended by our Bank and other matters (excluding equity investment) of controlled companies and associates of the Bank;

• reviewing and approving the change of raised capital;

• determining the appointment and dismissal of accounting firm;

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• reviewing and approving other matters which should be submitted to the Shareholders’ general meeting for consideration in accordance with relevant laws, administrative regulations, rules, the Listing Rules, the requirements of securities regulatory authorities where the securities of our Bank are [REDACTED], the Articles of Association and other internal requirements.

Board of Directors The Board of Directors is accountable to the Shareholders’ general meeting. Its principal responsibilities include: • convening the Shareholders’ general meeting and reporting to the Shareholders’ general meeting; • implementing the resolutions of the Shareholders’ general meeting; • determining our Bank’s operation plans, investment program and the business development strategies; • formulating the annual financial budget plans, financial accounting plans, risk capital allocation plans, profit distribution plans and loss recovery plans; • formulating the plans for increase or decrease in registered capital, issuance of bonds or other securities and listing of the Bank; • formulating the plans for major acquisition, acquisition of our Bank’s shares or merger, spin-offs, dissolution and change of corporate form of our Bank; • determining matters in respect of the business operation, external investment, acquisition or sale of assets, external guarantee, pledge of assets, entrusting others to manage the Bank’s assets, financial leasing, related party transactions and disposal of non-performing assets within the authorization of the Shareholders’ general meeting; • appointing or dismissing the president, vice presidents, secretary to the Board of Directors and other senior management in accordance with the nomination of the chairman of the Board of Directors and determining the senior managers’ remuneration, reward and punishment; • formulating basic management system and determining our Bank’s detailed rules in relation to business procedures proposed by the senior management; • formulating the proposed amendments to the Articles of Association; • being responsible for the information disclosure of our Bank and the completeness and accuracy of the Bank’s accounting and financial statements; • formulating the Directors’ remuneration and allowances standards program; • listening to the report of the president of our Bank and supervising the president’s work; • determining the risk management and internal control policies of our Bank; • supervising the performance of the senior management, reviewing the evaluation on senior management by management level and the mutual evaluation reports of senior management, organizing the evaluation of the Directors and the mutual evaluation of independent non-executive Directors and reporting the evaluation results to the Board of Supervisors; • periodically evaluating and consummating the corporate governance of the Bank;

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• nominating the Directors’ candidates for next session; • applying to the courts for bankruptcy on behalf of our Bank within the authorization of the Shareholders’ general meeting. The Board of Directors has established six special committees, including audit committee, development and strategy committee, nomination and remuneration committee, related party (connected) transactions control committee, risk management committee and consumer rights protection committee.

Board of Supervisors The Board of Supervisors is accountable to the Shareholders’ general meeting and is mainly responsible for supervising the performance of the Board of Directors and the senior management as well as the financial activities of the Bank. The Board of Supervisors conducts special surveys on specific areas and attends important meetings in order to understand the operation and management of the Bank and provide advisory advice, and also supervise the implementation of such advice from time to time. The Board of Supervisors has established nomination committee and audit and supervision committee.

Senior Management The senior management is responsible for the daily operation of the Bank. The president is accountable to the Board of Directors and could organize and conduct the business management of the Bank within the authorization of the Board of Directors and in accordance with laws, administrative regulations and other rules and the Articles of Association. Our Bank has appointed five vice presidents and other senior management to work with the president of the Bank and perform their respective management responsibilities.

The Party Committee The Bank has established a basic committee for the Communist Party of China (the “CPC”), which shall play a core political role. The committee primarily assumes the following responsibilities: • supervising the implementation of the policies of the CPC and the State in the Bank and implementing the important decisions of higher CPC organizations; • supporting the Shareholders’ general meeting, the Board of Directors, the Board of Supervisors and senior management to perform their respective duties and exercise rights in accordance with laws and regulations and supporting the work of employee representatives’ meeting; • conducting study and discussing the reform, development and stability of the Bank, major business management matters, and major matters involving the employees’ vital interests and providing opinions and recommendations; conducting study and discussing the appointment and dismissal of major employees; discussing other “three importance and one greatness” matters; and conducting study and discussing major matters decided by the Board of Directors and senior management; and • implementing the responsibility system of the CPC construction, conscientiously fulfilling the main responsibility of the CPC’s spirit building, leading and supporting the supervision of the discipline inspection committee, enhancing the construction of the CPC organizations and the members of the CPC in state-owned enterprises and leading the ideological and political work, united front work, and the construction of spiritual civilization, enterprise culture and the Bank’s mass organizations including labor union and the communist youth league.

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OVERVIEW We are the largest commercial bank in Luzhou, Sichuan Province, in terms of the total assets as of December 31, 2017. We are also the only city commercial bank with headquarters in Luzhou. As a State-Controlled local financial institution, we have taken an active part in the financing of local economy, industrial upgrade and urban development in Luzhou over the last 20 years since our establishment in 1997. We seek to build a bank with the core values of learning, transparency, aspiration, collaboration and accountability (學習的銀行,民主的銀行,陽光的銀行,團結的銀行,問責的銀行), and to provide distinctive financial services to customers. Our branch network has effectively covered all three districts and four counties in Luzhou. In February 2017, we opened our first branch outside Luzhou, the Chengdu branch. As of June 30, 2018, we had 7,256 corporate banking customers and 647,969 retail banking customers. Amid an expansion in both branch network and customer base, our efficient decision-making process and flexible operations enable us to quickly identify and deliver products and services that suit the needs of individual customers and corporates, supporting a continuous and rapid growth of our business. During the Track Record Period, our total assets increased from RMB31,763.6 million as of December 31, 2015 to RMB70,879.4 million as of December 31, 2017, representing a CAGR of 49.4%, which further increased to RMB74,555.1 million as of June 30, 2018. Our net profit attributable to shareholders increased from RMB451.5 million for the year ended December 31, 2015, to RMB618.7 million for the year ended December 31, 2017, representing a CAGR of 17.1%. Our net profit attributable to shareholders amounted to RMB376.8 million for the six months ended June 30, 2018. We have managed to maintain outstanding profitability and operational efficiency on the back of a fast growth in our asset base and business scale. In 2017, our return on average assets and return on average equity were 1.00% and 14.83%, respectively, which was 0.08 and 2.27 percentage points higher than the national average over the same period. For the six months ended June 30, 2018, our return on average assets and return on average equity further increased to 1.04% and 16.94%, respectively. As of December 31, 2017, our NPL ratio was 0.99%, which was lower than all H-share listed city commercial banks. As of December 31, 2017, our allowance coverage ratio was 294.49%, which was higher than all H-share listed city commercial banks. As of June 30, 2018, our NPL ratio further decreased to 0.91%, while our allowance coverage ratio amounted to 275.54%. In recognition of our financial performance, management capability, product innovation and corporate governance, we have achieved the following honors and awards: • 2017 The Most Innovative Commercial Bank in Marketing Model (2017年度營銷模式創新銀行) of Gold Kirin Forum of Sina Finance (Sichuan Province) (新浪財經金麒麟 (四川地區)). • 2017 Creditworthy Enterprise (2017年度誠信企業) issued by Luzhou City Leadership Office of Credit System Development (瀘州市社會信用體系建設領導小組辦公室). • Ranked 3rd in 2016 Most Competitive City Commercial Bank with Total Assets less than RMB100 Billion (2016年度資產規模1,000億元以下城市商業銀行競爭力排名第三名)byThe Chinese Banker (中國銀行家) magazine. • 2015 Best Green Credit Award (2015年度最佳綠色金融獎) by Sichuan Banking Association (四川省銀行業協會).

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• Ranked 3rd in 2015 Most Competitive City Commercial Bank with Total Assets less than RMB50 Billion (2015年度資產規模500億元以下城市商業銀行競爭力排名第三名)byThe Chinese Banker (中國銀行家) magazine. • 2015 Top Performer among all Financial Institutions in Sichuan Province (四川省 2015年度地方金融企業績效評價第一名) by Sichuan Provincial Finance Department (四川省財政廳).

OUR COMPETITIVE STRENGTHS Well positioned to capture the business opportunities arising from a vibrant local economy, unique geographical location, comprehensive credit system and quality customer base with high credit scoring in Sichuan Province and Luzhou Situated at the intersection of Silk Road Economic Belt and Yangtze River Economic Belt, Sichuan Province is known for its large population, abundant resources and sizable economy. In addition to advantageous geographic location and favourable regulatory backdrop, it has also benefited from various policy support in infrastructure construction, trade and economic development and achieved a continued, rapid economic growth in the last few years. In 2017, GDP of Sichuan Province amounted to RMB3,698.0 billion, representing a CAGR of 8.8% between 2013 and 2017 and ranked sixth across China and first in Western China. For the six months ended June 30, 2018, the GDP amounted to RMB1,832.7 billion, representing a 8.2% increase over the same period last year, which is 1.4 percentage points higher than the national average increase. Luzhou sits in the southeast of Sichuan Basin, and borders four provinces including Sichuan, Chongqing, Yunnan and Guizhou (川渝滇黔). Its unique geographic location gives it a natural advantage in the region. In NDRC’s Chengdu and Chongqing City Cluster Development Plan (成渝城市群發展規劃), Luzhou is planned to become a city with over 200 sq.km. of downtown area for urban development and more than 2.0 million inhabitants by 2020. Home to Luzhou Port, Luzhou is an important city in the upstream of Yangtze River that connects Chengdu-Chongqing Economic Zone and Nanning-Guiyang-Kunming Economic Zone, and is also a gateway of Sichuan Province to Pan Pearl River Delta and Southeast Asia. In 2017, Luzhou became the first prefecture-level city in Western China out of a third batch of government endorsed pilot Free Trade Zones, or FTZs, with the launch of Chuannan-Lingang FTZ under the Overall Plan for the China (Sichuan) Pilot FTZ (中國(四川)自由貿易試驗區川南臨港片區). In July 2018, the CPC Sichuan Provincial Committee promulgated the Decision to Fully Promote the Quality of Economic Growth (關於全面推動高質量發展的決定), which explicitly endorsed Luzhou to become a regional center at the junction of Sichuan, Chongqing, Yunan and Guizhou (川渝滇黔), and in the south of Chengdu-Chongqing Economic Zone (成渝經濟區). In 2017, the GDP of Luzhou increased to RMB159.6 billion from RMB114.0 billion in 2013, with the year-over-year increase ranked first in Sichuan Province consecutively in 2016 and 2017. For the six months ended June 30, 2018, the GDP of Luzhou amounted to RMB82.0 billion, representing a 9.2% increase from the six months ended June 30, 2017 and ranking second in Sichuan Province. In 2017, the total investment in fixed assets of Luzhou increased by 18.0% from 2016. In 2017, the total retail sales of consumer goods increased by 13.3% from 2016, and the total volume of import and export trade increased by 5.8 times from 2016, both of which ranked first in Sichuan Province. In 2017, the added value of industrial enterprises above designated size increased by 10.9% from 2016, ranking second in Sichuan Province. In

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2017, the per capita disposable income of urban residents in Luzhou was RMB31,449 representing an increase rate of 8.6% over the previous year, which is 0.3 percentage points higher than the national average and 0.2 percentage points higher than the provincial average during the same period. The per capita disposable income of rural residents in Luzhou was RMB13,670 in 2017, representing an increase rate of 9.8% over the previous year, which was 1.2 percentage points higher than the national average and 0.7 percentage points higher than the provincial average during the same period. We believe that the rapid economic growth of Luzhou and the strong increase in residents’ income have laid a solid foundation for our continued growth. Luzhou has managed to maintain a healthy credit score and credit system along a fast economic development. As of December 31, 2017, Luzhou recorded a credit index of 79.23 according to the National Urban Credit Monitoring Platform (全國城市信用監測綜合信用平台), ranked first among all the prefecture-level cities in Sichuan Province. Since our establishment, we have focused on development in Luzhou with a vision to expand our business reach across Sichuan Province. Capitalizing on our leading market position and deep understanding of the local economy, we will be able to effectively identify and capture market opportunities brought about by the expected future economic development in both Sichuan Province and Luzhou.

Differentiated retail banking business built on our advantages in the innovation of product and service offerings that target customers’ needs During the Track Record Period, our retail banking has achieved a tremendous growth. Our retail banking customers has grown by a CAGR of 12.2% from 2015 to 2017, among which high-end customers (with deposits of RMB1.0 million to RMB3.0 million (exclusive)) and high-net-worth customers (with deposits of RMB3.0 million and above) increased by a CAGR of 169.0% and 80.1%, respectively. Our operating income of the retail banking business increased from RMB254.4 million in 2015 to RMB493.7 million in 2017, representing a CAGR of 39.3%. For the six months ended June 30, 2018, our operating income of the retail banking business amounted to RMB236.9 million. Our personal loans increased from RMB3,640.7 million as of December 31, 2015 to RMB4,969.0 million as of December 31, 2017, representing a CAGR of 16.8%. The balance of our personal deposits increased from RMB4,202.0 million as of December 31, 2015 to RMB16,030.4 million as of December 31, 2017, representing a CAGR of 95.3% between 2015 and 2017. As of June 30, 2018, our personal loans and personal deposits further increased to RMB5,368.6 million and RMB19,680.9 million, respectively. We believe the growths in retail banking business and personal deposits is attributed to our ability to accurately analyze the local market demand, and continuously innovate and launch products and services that suit the customer needs. In August 2015, we launched “Kuai Le Jin (快樂金)”, a deposit product that allows fixed deposits of petty cash by installment and withdrawal in lump sum at maturity, targeting retail banking customers without large savings but likely to have large future expenditures. In November 2015, we launched “Yue Yue Hong (月月紅)”, a deposit product which allows our customers to withdraw on a monthly, quarterly or semi-annual basis interest earned from a lump-sum amount of deposits, targeting retail banking customers who have low risk appetite but try to seek better yields on deposits than traditional deposit products. To better serve our customers, we further combined these two products into a “deposits combo” product, allowing customers to deposit their monthly interest earnings from “Yue Yue Hong (月月紅)” into “Kuai Le Jin (快樂金)” to benefit from the accumulation of

135 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. BUSINESS interest earnings. In this way, these products provide us with substantial and sustainable growth in deposits and have helped us attract new retail banking customers. As of June 30, 2018, the aggregate balance of these two products amounted to RMB12,860.8 million. In December 2017, we launched our “Nian Nian Sheng (年年升)” deposit product, where the principal amount is deposited in a lump sum and can be withdrawn in installments after a deposit period of over one year, which together with “Yue Yue Hong (月月紅)” and “Kuai Le Jin (快樂金)”, demonstrate our capacity in making successful innovation in personal deposit products. To further enhance our product portfolios and to better cater to the diverse needs of different groups of retail banking customers, we have launched a series of personal loan products that are well received by customers, such as “Jin Man Lu (金滿瀘)”, a comprehensive credit consumption loan, specifically offered to employees of government agencies, public institutions and large corporations.

In addition to innovation of deposit and loan products, we leveraged our investment expertise in debt securities and money market instruments and launched the “Jin Gui Hua (金桂花)” series of wealth management products, to satisfy demands of quality retail banking customers for wealth management product. Moreover, through collaboration with other institutions we launched a series of products and services, addressing the potential need of high-end retail banking customers in investment, education and medical care, which further expanded our high-end retail banking customer base. As of June 30, 2018, we had approximately 2,000 high-end and high-net-worth retail banking customers in total. To continue the expansion momentum, we partnered with corporates and other institutions to jointly launch a variety of card services. For example, we have entered into a cooperation agreement with a local shopping mall in Luzhou to jointly launch “Lushang Hengtong Card (瀘商恒通卡)”, and with Luzhou Human Resources and Social Security Bureau to launch “Social Security Card (社保卡)”, both of which broaden the reach of our products and services in the daily life of Luzhou residents. In August 2017, we collaborated with a public transportation company in Luzhou to jointly launch “Chang Xing Ba Shu (暢行巴蜀)” card, which can be used as bus pass for commuters and allow relevant customers to access our financial services.

In the last couple of years, apart from product innovation, we have been continuously enhancing our customer experience through technology innovation. We have effectively increased the operating efficiency of our financial services through process optimization, system upgrades and the deployment of service robots in select outlets which substantially shortens the customer wait time and improve customer service quality. Since we launched mobile banking services in 2017, as of June 30, 2018, our banking App has 26,446 registered users with total transaction volume of over RMB2,189.5 million. With the gradual improvement of electronic channels, as of June 30, 2018, transactions processed through our electronic banking channels now account for 87.8% of our total transactions.

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Comprehensive financial solutions for corporate banking customers across Sichuan Province and in Luzhou

Our corporate banking business has laid a solid foundation for our continued business expansion. As of June 30, 2018, corporate loans accounted for 77.2% of our total customer loans, and corporate deposits accounted for 56.0% of our total customer deposits. For the six months ended June 30, 2018, our corporate banking business contributed 32.6% of our operating income. The steady development of our corporate banking business is mainly attributed to our strong customer base comprising both high-quality, large and medium-sized enterprises and micro and small enterprises, for which we strive to offer comprehensive financial solutions utilizing our unique competitive advantages.

By delegating decision-making authority to our branch offices, improving collaboration between risk management and business control points and further digitalizing our operation process, we have managed to further build on our strength in fast decision-making process and flexible operations, and enhance our customer experience. In particular, for quality large corporate banking customers, we assign a dedicated team to study their financial needs, including supply chain financing, overall financial planning and cash management, and offer tailor-made financial solutions, which helps us maintain a large number of loyal, high-quality and sizeable corporate customers and build up our brand. In particular, we are committed to maintaining long-term and in-depth business cooperation with quality corporate banking customers in Luzhou, including state-owned enterprises with strong creditworthiness, leading private enterprises, as well as large and medium-sized corporates with competitive edges in the local economy. As of June 30, 2018, our corporate banking customers spread across various sectors critical to Luzhou’s economy, namely liquor, chemical, manufacturing and energy. We also actively participated in the industrial upgrade and transformation of the Luzhou’s economy and have entered a strategic cooperation agreement with the Luzhou National High-tech Industrial Development Zone Management Committee to conduct in-depth cooperation with enterprises engaging in innovative and high-tech industries, including manufacturers of electronic consumer goods, such as smart phones. According to Luzhou City Center Branch of the PBoC, as of June 30, 2018, we ranked first among all banking institutions in Luzhou in terms of market share of corporate deposits and loans. During the Track Record Period, we served certain Fortune 500 corporations and/or their subsidiaries or affiliates.

Being a commercial bank headquartered in Luzhou, we have established long-term cooperative relationships with government agencies, making us well-positioned in expanding and enhancing our corporate banking business with government agencies and their affiliated enterprises and institutions. During the Track Record Period, we have entered into strategic cooperation agreements with administrative authorities in charge of developing and managing various zones with strategic importance to local economy, including Chuannan Lingang Area of Sichuan Free Trade Zone (四川自由貿易試驗區川南臨港片區), Luzhou (Yangtze River) Economic Development Zone (瀘州(長江)經濟開發區) Luzhou High-tech Industrial Development Zone (瀘州高新技術產業開發區). Through such strategic cooperation, we can quickly seize the potential business opportunities, and provide comprehensive financial services to industrial parks and corporates inside the parks, including credit extending, financing fund settlement and cash management. We are the deposit partner bank for eight finance bureaus within Luzhou, and one of the two banks authorized to support Luzhou’s development of “smart city” and social security system by providing banking services.

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To fulfill the financing needs of micro and small enterprises and relevant business owners, we launched a variety of products, catering to their various demands at different stages of business development. Our key products in this regard include “Chuang Ke Dai (創客貸)”, a loan products designed for entrepreneurs, who are in early stage of their business without sufficient capital; and “Tian Tian Dai (天天貸)” designed to provide convenient revolving financing solutions for micro and small enterprises. These products have helped us gain wide market recognition and accumulate our customer base. In 2017, we won the first prize in the Eighth Competition of SME Account Manager’s Skills in Sichuan Banking Industry (第八屆四川銀行業小微企業客戶經理技能競賽) hosted by the CBRC Sichuan Office. As of June 30, 2018, the loans to small and micro enterprises accounted for 69.1% of our total corporate loans, and the personal business loans accounted for 42.2% of our total personal loans. Between 2015 and 2017, the CAGR of our loans to micro and small enterprises reached 53.0% and the CAGR of personal business loans reached 19.0%, which was 6.9 percentage points and 2.2 percentage points higher than the CAGR of our corporate loans and personal loans during the same period, respectively. As of June 30, 2018, we had more than 1,100 micro and small enterprise loan customers, including over 100 micro and small enterprise owners and over 650 individual business owners.

Prudent and effective risk assessment resulting in outstanding asset quality

Adhering to the principle of taking a comprehensive, balanced, centralized and compliant (全面, 平衡, 集中,合規) approach in risk management, we have established a vertically integrated risk management system with comprehensive risk management rules and policies. Capitalizing on effective risk management measures, efficient execution, and accurate insight and understanding of the PRC economic development and regulatory environment, we managed to effectively monitor, identify, prevent and resolve various risks.

We frontload risk control points to product design, and seek to build up three interlinked and interdependent lines of defense from business checkpoints, risk management to internal controls. We also attach great importance to post-disbursement management, where we require our employees to conduct continuous inspection and monitoring, so that we could timely identify potential risks and take active prevention and mitigation measures timely. We pay particular attention to credit risks and have formulated comprehensive measures in this regard, including stringent rules on ratio of pledge, collateral and guarantees and real-time monitoring systems on pledges and collaterals. As of June 30, 2018, the loans secured by collaterals, pledges or guarantees represented 94.8% of our total customer loans, among which the collateralized or pledged loans represented 62.4% of our total customer loans.

We attach great importance to the use of quantitative indicators and information technology in risk management, and have applied these measures to key sectors of our risk management system, including risk identification, measurement, monitoring, mitigation, control and reporting. To improve our technological strength in risk management, we cooperated with a third party technology company with extensive industry experience to build an anti-fraud platform, utilizing big data analytical technology.

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We strive to optimize our asset portfolio. We have been tightening credit to sectors discouraged by regulatory policies, and strictly controlling credit to parties related to each other or within same group, through which we manage concentration risks and risk exposure to key industries. As of June 30, 2018, 77.2% of our loan portfolios were corporate loans, 22.1% were personal loans, and the remaining 0.7% were discounted bills. As of June 30, 2018, none of our loan customers were in the industries of high pollution and high energy consumption and we have not granted any loans to LGFVs. As of June 30, 2018, loans to the real estate industry accounted for 22.3% of our total corporate loans with no NPL being incurred. As of June 30, 2018, all of our discounted bills were bank acceptance bills that generally have comparatively lower risks.

In managing financial markets business, we have established, and regularly update, an approved list of interbank counterparties based on their capital strength, business operation, financial conditions and regulatory compliance. This approach helps us effectively reduce counterparty risks. We have adopted a prudent principle in making investment decision on debt securities, according to which, we primarily invested in debt securities issued by the PRC Government and the PRC policy banks that generally have comparatively lower risks. In managing SPV investment in credit related financial assets, we adopt the same credit review and approval procedures as we do for our loan extension. During the Track Record Period, we have not experienced any default in our debt securities investment and SPV investment.

We adopt stringent risk management measures, and have implemented prudent policies to recognize loans overdue for more than 90 days as NPLs. We have maintained good asset quality and risk resilience capabilities, while implementing prudent measures to recognize NPLs and making appropriate provisions. As of December 31, 2017, our NPL ratio was 0.99%, which was lower than all H-share listed city commercial banks. As of December 31, 2017, our allowance coverage ratio was 294.49%, which was higher than all H-share listed city commercial banks. As of June 30, 2018, our NPL ratio further decreased to 0.91%, while our allowance coverage ratio amounted to 275.54%.

We consider recovery of NPL of critical value to maximize our capacity of extending credit facilities and optimize utilization of our capital, and have taken a broad range of measures to recover such, including repayment negotiation, legal proceedings, arbitration or disposal. For the year ended December 31, 2017, the gross value we recovered through NPL management work amounted to RMB30.0 million, representing a 180.4% increase from that in 2016. For the six months ended June 30, 2018, the gross value we recovered through NPL management work amounted to RMB63.9 million.

Experienced leadership with management expertise and a merit-based hiring and reward system

We have a management team with strategic vision and rich industry experience. Members of our management team have a diverse work background, and previously held management positions in various bank-related sectors, including state-owned banks, regulatory authorities and government agencies. Mr. YOU Jiang, Chairman of the Board of Directors, has around 23 years of work experience in the banking industry. Prior to joining our Bank, he held key leading positions in various regulatory authorities in financial industry, including branches of the CBRC Sichuan Office and the PBoC. Mr. XU Xianzhong, our president, has around 27 years of experience in the banking industry. Prior to joining our Bank, he worked in Industrial and

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Commercial Bank of China Limited for around 19 years and has extensive experience in banking management. Ms. YUAN Shihong, Chairwoman of the Board of Supervisors, used to work in the Organization Department of the Luzhou CPC Committee and Luxian County CPC Committee. She facilitates the improvement of work efficiency of our internal control, talent development and team building through utilizing her experience in relevant organization departments.

We pay high attention to the acquisition and cultivation of talent and invest in recruiting and training employees, through which, we have built a team of young and promising employees. As of June 30, 2018, around 59.2% of our employees aged 35 or below, and over 77.5% of our employees held bachelor degrees or above. We actively cooperate with management consulting firms and financial and economic colleges to provide systematic and multi-faceted training, covering financial knowledge, business skills, management philosophies, teamwork and leadership. We have established a “Super Team (超能戰隊)” training program with the aim to identify and train talents with the potential to assume management positions. As of June 30, 2018, we have promoted 34 employees to managers or more senior positions through this program. In addition, we have attached importance to establishing a market-oriented incentive mechanism, where compensation for employees has been closely associated with their job performance and results of our Bank. This internal performance appraisal and incentive system have proved to be effective in retaining staff. Furthermore, through improving our training and career development system, as well as the market-oriented incentive mechanism, we have enhanced the attractiveness of our Bank for talent. During the Track Record Period, we only experienced one resignation from employees with manager or above positions. We believe our capable and stable workforce provides a good foundation for the sustainable development of our business.

OUR DEVELOPMENT STRATEGIES

Continue to expand product offerings, and innovate revenue model and marketing techniques

For retail banking business, we plan to continue improving our retail banking product portfolio, expanding the coverage of our agency services on personal financial products and enhancing cross-selling capabilities. We intend to adopt the scenario-based marketing and sales model, and launch more customized products through cooperation with third parties. In particular, we intend to vigorously expand our products and services for high-end customers.

For corporate banking business, we plan to focus on product innovation and launch differentiated products and personalized services that fulfill customer needs.

For financial markets business, we plan to strengthen our cooperation with various financial institutions in compliance with the regulatory requirements and closely monitor the development trend. We plan to establish an appropriate model for cooperation with different financial institutions that go well with our own strategy. We plan to apply for more business licenses and qualifications, so that we could provide customers with multi-dimensional comprehensive financial services.

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Continue to invest in technology infrastructure to support business expansion and product innovation We intend to further upgrade our IT system used in our daily operations to improve online migration of different business lines and optimize our operation efficiency. We also plan to improve the statistical analysis capability of our various operational system to support efficient internal management and decision-making efficiency. We will enhance our own R&D capacity by holding core technologies used in system development, operation and maintenance. We will improve our resource allocation to promote innovation, enhance systems that safeguard business continuity, and make our system be more open and easy for sharing. In order to improve customer experience, we take active approach to apply new technologies in banking business and different operation channels, including exploring direct bank business model, establishing smart outlets, and introducing block chain technology in supply chain financing business.

Further optimize our multi-layered branch network and sales channel to serve the real economy We will continue to optimize the layout of our outlet network in Luzhou, further strengthen the construction of outlets focusing on serving Sannong in county and township area of Luzhou, actively serve the rural revitalization strategy promoted by the PRC Government, and enhance the capacity and scope of our financial services for Sannong. Subject to approval from regulatory authorities, we intend to continue adding outlets outside Luzhou to increase our coverage in Sichuan Province. We plan to continue constructing community financial service systems and implement a pilot program of establishing smart banks. In addition, we are going to introduce more service robots in our outlets to achieve improved operation efficiency and customer experience. We intend to transform our outlets from being settlement business terminals to terminals offering business promotion and customer experience functionalities through these measures. We also plan to strengthen our livelihood financial services for urban residents, micro and small enterprises, and individual business owners.

Optimize our pricing system, improve comprehensive risk management system and explore innovative capital replenishment methods We will further improve internal and external pricing system that involving key functionalities of credit risk assessment, comprehensive cost measurement, comprehensive evaluation on customer and our related strategic orientation. Based on this, we may allocate capital in a more efficient manner to optimize risk-return of our capital. We plan to improve the comprehensive risk management system, to improve risk monitoring and prevention capacity, and optimize risk management workflow and enhance integration of different regulations. We intend to better use our IT systems and advanced risk management measures built upon it to improve risk management efficiency. We plan to explore innovative capital replenishment instruments, including preference shares and capital supplementary bonds, to improve our capital adequacy levels and risk resilience capability.

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Continue to optimize our talent pool and maintain a merit-based hiring and reward system

We plan to further strengthen the staff training programs to provide employees with a platform for career development. We will take innovative training initiatives and seek opportunities to work with reputable colleges, universities and professional institutions to improve our training system. We pay particular attention to trainings on legal knowledge, mentality, information technology skills and teamwork capability of our employees, to help them achieve development in a comprehensive way.

We will continue to improve the merit-based reward system to optimize performance and efficiency of our employees, to maintain our market-leading position and attract and secure new talent in the industry.

OUR BUSINESS LINES

Our principal lines of businesses include corporate banking, retail banking, and financial markets. The following table sets forth our operating income by segments for the periods indicated.

For the year ended December 31, For the six months ended June 30,

2015 2016 2017 2017 2018

%of %of %of %of %of Amount total Amount total Amount total Amount total Amount total

Notes:

(1) Consists primarily of income that is not directly attributable to any specific business segment. (2) Our operating income from these segments represents the net interest income derived solely from the respective lines of business, which is further added/deducted by net fee and commission income/(expense), net gains/(losses) on trading activities, net gains/(losses) arising from investment securities or other operating income/(expense), as applicable, attributable to the respective lines of business.

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Corporate Banking

Overview

We provide our corporate banking customers with a wide range of products and services, including corporate loans, bill discounting and corporate deposits. For the years ended December 31, 2015, 2016 and 2017, operating income from our corporate banking business amounted to RMB308.6 million, RMB428.7 million and RMB532.7 million, respectively, accounting for 32.8%, 32.8% and 31.7%, respectively, of our total operating income for the same periods, and representing a CAGR of 31.4% from 2015 to 2017. For the six months ended June 30, 2018, operating income from our corporate banking business amounted to RMB273.8 million, accounting for 32.6% of our total operating income for the same period. As of June 30, 2018, we had 7,256 corporate banking customers in total. According to Luzhou City Center Branch of the PBoC, as of June 30, 2018, we ranked first among all banking institutions in Luzhou in terms of market share of corporate deposits and corporate loans.

Corporate Loans

The majority of our corporate loan customers are enterprises situated or otherwise having their primary operations in Sichuan Province, in particular Luzhou. Corporate loans have been the largest component of our loan portfolio during the Track Record Period. As of December 31, 2015, 2016 and 2017, our corporate loans amounted to RMB5,596.8 million, RMB8,418.9 million and RMB11,951.2 million, respectively, accounting for 56.1%, 57.9% and 61.6%, respectively, of our total customer loans as of the same dates, and representing a CAGR of 46.1% from 2015 to 2017. As of June 30, 2018, our corporate loans further increased to RMB18,752.1 million, accounting for 77.2% of our total customer loans as of that date.

Distribution of Corporate Loans by Product Type

We provide our corporate banking customers with working capital loans and fixed asset loans. The following table sets forth our corporate loans by product type as of the dates indicated.

As of December 31, As of June 30,

2015 2016 2017 2018

Amount % of total Amount % of total Amount % of total Amount % of total

(in millions of RMB, except percentages) Working capital loans 1,741.0 31.1% 3,522.3 41.8% 4,109.3 34.4% 6,603.2 35.2% Fixed asset loans 3,855.8 68.9% 4,896.6 58.2% 7,841.9 65.6% 12,148.9 64.8% Total corporate loans 5,596.8 100.0% 8,418.9 100.0% 11,951.2 100.0% 18,752.1 100.0%

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Distribution of Corporate Loans by Maturity

In terms of loan maturity, our corporate loans comprise short-term loans and medium-and long-term loans. The following table sets forth our corporate loans by maturity as of the dates indicated.

As of December 31, As of June 30, 2015 2016 2017 2018 Amount % of total Amount % of total Amount % of total Amount % of total (in millions of RMB, except percentages) Short-term loans(1) 2,536.1 45.3% 2,463.7 29.3% 3,112.7 26.0% 5,377.5 28.7% Medium-and long- term loans(2) 3,060.7 54.7% 5,955.2 70.7% 8,838.5 74.0% 13,374.6 71.3% Total corporate loans 5,596.8 100.0% 8,418.9 100.0% 11,951.2 100.0% 18,752.1 100.0%

Notes:

Distribution of Corporate Loans by Customer Types

We provide different loan products and services to our loan customers of various types, industries and sizes. Our corporate loan customers primarily include state-owned and private enterprises that engage in a broad range of industries, including leasing and business services, real estate, wholesale and retail, construction, and manufacturing. For details of the distribution of our corporate loans by industry, please see “Assets and Liabilities – Assets – Customer Loans – Distribution of Corporate Loans by Industry”.

The following table sets forth our corporate loans by customer size as of the dates indicated.

As of December 31, As of June 30,

2015 2016 2017 2018

Amount % of total Amount % of total Amount % of total Amount % of total

(in millions of RMB, except percentages) Micro and small enterprises(1) 3,965.0 70.8% 6,264.2 74.4% 9,278.0 77.7% 12,954.8 69.1% Large and medium enterprises(1) 1,312.9 23.4% 1,997.5 23.7% 2,603.2 21.8% 5,740.0 30.6% Others(2) 318.9 5.7% 157.2 1.9% 70.0 0.6% 57.3 0.3% Total corporate loans 5,596.8 100.0% 8,418.9 100.0% 11,951.2 100.0% 18,752.1 100.0%

Notes:

(1) The classification criteria for large, medium, small and micro enterprises are based on the number of their employees, revenue and total assets stated in the Classification Standards of Small and Medium Enterprises. Please see “Definitions”. (2) Primarily includes loans to public institutions, such as hospitals and schools.

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Loans to Micro and Small Enterprises

We are committed to offering customized and efficient solutions to meet the diverse financing needs of micro and small enterprises. As a substantial number of our micro and small enterprise customers are private and individual business owners, whose financing needs are inextricably connected with the daily operation of their businesses. To better manage and serve these customers, corporate loans to micro and small enterprises and personal business loans, i.e. loans to the owners of micro and small enterprises and individual business owners, are collectively managed by the corporate banking customers department at our headquarters.

In contrast to large and medium enterprises, micro and small enterprises and individual business owners have urgent and frequent financing needs. As a result, we have streamlined the loan origination and evaluation process to offer income tailored financing solutions both small companies and individual business owners. Our client managers leverage their knowledge in the local market to deliver solutions to our customers in a timely manner. To better serve the needs of these micro and small enterprises, we have also set up specialized teams as well as customer service centers for micro and small enterprises.

As of December 31, 2015, 2016 and 2017, our loans to micro and small enterprises amounted to RMB3,965.0 million, RMB6,264.2 million and RMB9,278.0 million, respectively, accounting for 70.8%, 74.4% and 77.7% of our total corporate loans, respectively, as of the same dates, and representing a CAGR of 53.0% from 2015 to 2017. As of June 30, 2018, our loans to micro and small enterprises further increased to RMB12,954.8 million, accounting for 69.1% of our total corporate loans as of the same date.

As of December 31, 2015, 2016 and 2017, our personal business loans amounted to RMB1,424.5 million, RMB1,667.0 million and RMB2,017.9 million, respectively, accounting for 39.1%, 39.8% and 40.6% of our total personal loans, respectively, as of the same dates, and representing a CAGR of 19.0% from 2015 to 2017. As of June 30, 2018, our personal business loans further increased to RMB2,265.8 million, accounting for 42.2% of our total personal loans as of the same date.

During the Track Record Period, we have introduced the following featured loan products to address the financing needs of micro and small enterprises, which have been well received by the market:

•“An Xin Rong (安心融)”: We offer this product to micro and small enterprises, which lack working capital to replenish their business needs, but can provide assets for collateral. We determine relevant loan amounts by taking into account various factors, including the specific collateral, pledges or guarantees provided by a loan applicant and the applicant’s ability to repay. For instance, we evaluate all types of collateral, pledges or guarantees, but only accept collateral backed by commercial properties in good locations with a good surrounding commercial atmosphere, pledges backed by government bonds, bank acceptance bills or other collateral with good liquidity, or guarantees provided by financing guarantee companies recognised by us. The maximum loan amount of this product generally does not exceed RMB5 million with a term of up to three years.

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•“Chuang Ke Dai (創客貸)”: For young entrepreneurs who are in an early stage of their business without sufficient capital, we introduced “Chuang Ke Dai (創客貸)”, an unsecured loan product with a low fixed interest rate. In consideration of the uncertainties inherent in their business operations, we only grant loans to young entrepreneurs recognized by the Communist Youth League of Luzhou (共青團瀘州市委) with guarantees provided by qualified and well-recognized guarantee companies. The term of this loan product ranges from seven months to three years with a maximum loan amount of RMB300,000.

•“Tian Tian Dai (天天貸)”: In August 2017, to better serve the daily financing needs of micro and small enterprises, we introduced “Tian Tian Dai (天天貸)”, a revolving loan product with a maximum term of up to one year and loan amount of up to RMB10 million. Customers can apply to draw proceeds of the loan through short message services (SMS) if the loan amount is RMB300,000 or less.

Loans to Large and Medium Enterprises

Large and medium enterprises are valuable assets to our business operations. Capitalizing on our in-depth knowledge of the local market and economy, we endeavor to design and launch loan products to meet specific needs of our corporate banking customers, particularly customers with strong creditworthiness and engage in industry with strategic importance. We have long-standing relationships with our large and medium corporate banking customers, including state-owned and private enterprises in the four traditional pillar industries of Luzhou.

As of December 31, 2015, 2016 and 2017, our loans to large and medium enterprises amounted to RMB1,312.9 million, RMB1,997.5 million and RMB2,603.2 million, respectively, accounting for 23.4%, 23.7% and 21.8%, respectively, of our total corporate loans as of the same dates, and representing a CAGR of 40.8% from 2015 to 2017. As of June 30, 2018, our loans to large and medium enterprises further increased to RMB5,740.0 million, accounting for 30.6% of our total corporate loans as of the same date.

Bill Discounting

Bill discounting refers to the financial service where customers apply to the bank for discounting of unexpired bank acceptance bills or commercial acceptance bills, and the bank pays the remaining amount to the customers after deducting the discounted interest from the par value. Our bill discounting business effectively supplements our loan products.

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As of December 31, 2015, 2016, 2017 and June 30, 2018, our discounted bills amounted to RMB740.4 million, RMB1,926.9 million, RMB2,481.2 million and RMB174.7 million, respectively, accounting for 7.4%, 13.3%, 12.8% and 0.7%, respectively, of our total customer loans as of the same dates. During the Track Record Period, all of our discounted bills were bank acceptance bills which are generally considered of lower risk. We also operate interbank bill discounting and bill rediscount business in our financial markets business segment.

Corporate Deposits We offer our corporate banking customers time and demand deposits. Our time deposit product has maturities ranging from three months to five years. We also offer negotiated deposit products that have customized interest rates and other terms, through which we have successfully enhanced our capacity to provide our clients with products offering competitive returns and satisfying their day-to-day cash management needs. Our corporate deposit customers primarily include government agencies, public institutions, state-owned enterprises and large private corporations. The following table sets forth our corporate deposits by product type as of the dates indicated.

As of December 31, As of June 30,

2015 2016 2017 2018

Amount % of total Amount % of total Amount % of total Amount % of total

(in millions of RMB, except for percentages) Demand deposits 11,152.1 68.9% 16,953.8 79.4% 20,024.5 76.7% 18,393.9 73.4% Time deposits 5,029.3 31.1% 4,407.9 20.6% 6,090.4 23.3% 6,667.6 26.6% Total corporate deposits 16,181.4 100.0% 21,361.7 100.0% 26,114.9 100.0% 25,061.5 100.0%

In addition to corporate loans and corporate deposit services, we also offer fee-and commission-based products and services for corporate banking customers, consisting of guarantee services and entrusted loan services.

Corporate Banking Customer Base The rapid growth of our corporate banking business is underpinned by our strong customer base. By studying the specific financial needs of corporate banking customers, we have launched a broad range of products and services with specific features targeting selected groups of customers, based on which, we are able to offer comprehensive financial services with customized features to corporate banking customers. Our direct (institutional) customers department (直營(機構)客戶部) at our head office maintains a list of institutional customers, including governmental agencies and departments and key corporate banking customers. We conduct routine research on the business development and financial condition of these key customers, so that we can timely identify and capture potential business opportunities. In particular, by being a local city commercial bank, our comparatively shorter decision-making process enables us to offer a “one customer one scheme (一戶一策)” service model for customers covered by this department. For instance, leveraging our knowledge of details of a relevant

147 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. BUSINESS customer’s business operations and financing preferences, we are able to design and introduce appropriate financial solutions for the suppliers or customers of such corporate banking customer. Furthermore, we designate at least two experienced employees as client managers to work exclusively with each customer named on the list. For certain large enterprise customers, we have also established a special customer information management system, which allows us to closely track our customers’ and their partners’ business transactions with our Bank, thereby enabling us to offer more comprehensive and effective financial consulting and advisory services for them. We believe that these measures help us stand out from industry peers and have substantially enhanced customer loyalty. During the Track Record Period, we served certain Fortune 500 corporations and/or their subsidiaries or affiliates.

To improve our services for micro and small enterprises, we also set up specialized teams as well as micro and small enterprise customer service centers. In addition, we have established a proprietary database, rating model, and system covering various procedures for granting loans to micro and small enterprises, such as customer application, risk review and approval, and post-disbursement management.

As a testimonial to our effective customer management, we have achieved significant growth in our corporate banking customer base during the Track Record Period. We had a total of 4,494, 5,086 and 6,433 corporate banking customers as of December 31, 2015, 2016 and 2017, respectively, representing a CAGR of 19.6% from 2015 to 2017, and the total number of our corporate banking customers further increased to 7,256 as of June 30, 2018.

Retail Banking

Overview

We provide our retail banking customers with a wide range of products and services, including personal loans, personal deposits and card services. For the years ended December 31, 2015, 2016 and 2017, operating income from our retail banking business amounted to RMB254.4 million, RMB372.6 million and RMB493.7 million, respectively, accounting for 27.0%, 28.5% and 29.4%, respectively, of our total operating income for the same periods, and representing a CAGR of 39.3% from 2015 to 2017. For the six months ended June 30, 2018, operating income from our retail banking business amounted to RMB236.9 million, accounting for 28.2% of our total operating income for the same period.

Personal Loans

We provide our customers with various personal loans, including residential mortgage loans, personal business loans, and personal consumption loans. As of December 31, 2015, 2016 and 2017 and June 30, 2018, our personal loans amounted to RMB3,640.7 million, RMB4,188.6 million, RMB4,969.0 million and RMB5,368.6 million, respectively, accounting for 36.5%, 28.8%, 25.6% and 22.1%, of our total customer loans, respectively, as of the same dates.

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The following table sets forth information of our personal loans by product type as of the dates indicated.

As of December 31, As of June 30, 2015 2016 2017 2018 Amount % of total Amount % of total Amount % of total Amount % of total (in millions of RMB, except percentages) Residential mortgage loans 2,030.0 55.8% 2,132.3 50.9% 2,253.9 45.4% 2,383.3 44.4% Personal business loans 1,424.5 39.1% 1,667.0 39.8% 2,017.9 40.6% 2,265.8 42.2% Personal consumption loans 186.3 5.1% 389.3 9.3% 697.2 14.0% 719.5 13.4% Total personal loans 3,640.7 100.0% 4,188.6 100.0% 4,969.0 100.0% 5,368.6 100.0%

Residential Mortgage Loans We provide our retail banking customers with residential mortgage loans for their purchase of new and second-hand residential properties. Residential mortgage loans are secured by the underlying properties being purchased by borrowers and can have a term of up to 30 years. Generally, the residential mortgage loan amount will not exceed 75.0% of the purchase price or appraisal value of the property. As of December 31, 2015, 2016 and 2017 and June 30, 2018, residential mortgage loans amounted to RMB2,030.0 million, RMB2,132.3 million, RMB2,253.9 million and RMB2,383.3 million, respectively, accounting for 55.8%, 50.9%, 45.4% and 44.4%, of our total personal loans, respectively, as of the same dates.

Personal Business Loans We provide personal business loans to owners of private or individual business owner, micro and small enterprises and other retail banking customers to serve their business operation needs, including start-up capital, working capital replenishment and fixed assets purchase. Considering that the capital needs of these business owners are often urgent, frequent and in relatively small amounts, we offer tailor-made products to satisfy their requirements. For details, please see “– Our Business Lines – Corporate Banking – Corporate Loans – Distribution of Corporate Loans by Customer Types – Corporate Loans to Micro and Small Enterprises”.

Personal Consumption Loans We provide personal consumption loans to our retail banking customers for their personal and household consumption needs, such as home renovation, education and purchases of durable consumer goods. As of December 31, 2015, 2016 and 2017 and June 30, 2018, our personal consumption loans amounted to RMB186.3 million, RMB389.3 million, RMB697.2 million and RMB719.5 million, respectively, representing 5.1%, 9.3%, 14.0% and 13.4% of our total personal loans, respectively, as of the same dates. In March 2016, “Sui Xin Dai (隨薪貸)” was launched exclusively to our payroll customers who maintain a good credit history with our Bank. Customers are able to borrow a maximum amount of RMB100,000 with a term of up to five years. Later in June 2016, we introduced “Jin Man Lu (金滿瀘)”, a comprehensive credit consumption loan, specifically offered to employees of government agencies, institutions and large corporations who have good credit records with us. This loan product has a term of up to five years and a maximum loan amount of RMB2.0 million. As of June 30, 2018, we have granted a total of 515 “Jin Man Lu (金滿瀘)” loan products with an aggregated amount of RMB171.5 million.

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Personal Deposits

We offer both traditional and innovative personal deposit products, including basic demand and time deposits, as well as other innovative deposit products such as “Yue Yue Hong (月月紅)” and “Kuai Le Jin (快樂金)”. As of December 31, 2015, 2016, 2017 and June 30, 2018, our total personal deposits amounted to RMB4,202.0 million, RMB9,657.1 million, RMB16,030.4 million and RMB19,680.9 million, respectively, accounting for 20.6%, 31.1%, 38.0% and 44.0% of our total customer deposits, respectively, as of the same dates, and representing a CAGR of 95.3% from 2015 to 2017.

The following table sets forth our personal deposits by terms as of the dates indicated.

As of December 31, As of June 30,

2015 2016 2017 2018

Amount % of total Amount % of total Amount % of total Amount % of total

(in millions of RMB, except percentages) Demand deposits 1,315.3 31.3% 1,804.4 18.7% 2,391.0 14.9% 2,613.7 13.2% Time deposits 2,886.7 68.7% 7,852.7 81.3% 13,639.4 85.1% 17,067.2 86.8% Total personal deposits 4,202.0 100.0% 9,657.1 100.0% 16,030.4 100.0% 19,680.9 100.0%

In order to attract customers who have savings and are looking for a comparatively safer investment and better returns, in November 2015, we started to offer “Yue Yue Hong (月月紅)”, five-year time deposit product from which customers can withdraw interest on a monthly, quarterly or semiannual basis and the principal amount is returned at the end of the term. The minimum principal deposit required for “Yue Yue Hong (月月紅)” is RMB10,000. Customers receive an interest rate that is higher than the benchmark interest rates for five-year time deposit products. Since introduction, “Yue Yue Hong (月月紅)” has become one of our most popular personal deposit products. As of June 30, 2018, it had an aggregate amount of RMB12,348.0 million customer deposits, accounting for approximately 62.8% of our total customer deposits during the same period, and a total of approximately 49,195 personal deposits customers.

In addition, for those who currently may not have a large amount of savings but may incur large household expenditures in the future, in August 2015, we introduced a five-year time deposit product “Kuai Le Jin (快樂金)” with a minimum principal amount of RMB400, which allows customers to deposit any amount each month and withdraw principal plus interest in full when the term matures. As of June 30, 2018, it had customer deposits totaling RMB512.8 million. This product allows our customers to accumulate wealth in small increments.

To better serve the needs of our retail banking customers who would like to have more flexibility on the deposit term, we introduced “Nian Nian Sheng (年年升)”, a product which offers a five year fixed term deposit with flexibility to be withdrawn on demand.

To further attract more potential customers, we launched a “deposits combo”, creatively combining these two signature deposit products together, where customers can deposit their monthly interest from “Yue Yue Hong (月月紅)” into “Kuai Le Jin (快樂金)” and enjoy even higher returns. “Yue Yue Hong (月月紅)” and “Kuai Le Jin (快樂金)” have provided us not only a sustainable source of deposits, but also a broader customer base.

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Card Services We issue debit cards to retail banking customers who open deposit accounts with us under the series of “Jiu Cheng Debit Card (酒城借記卡)” that offer services including deposits and withdrawals, consumption, transfers and remittances, wealth management and others. To broaden the reach of our products and services in the daily life of Luzhou residents and to acquire more customers, we have entered into a cooperation agreement with Luzhou Human Resources and Social Security Bureau (瀘州市人力資源和社會保障局), to launch “Social Security Card (社保卡)” in December 2013. In addition to offering the functions of regular debit cards, this card allows our customers to settle medical insurance, receive insurance benefits, obtain retirement pensions and others. Since its launch, it has become an important source of our retail banking customers. In July 2018, we also entered into a cooperation agreement with a local shopping mall in Luzhou to jointly launch “Lu Shang Heng Tong Card (瀘商恒通卡)”, which is designed to expand our card services into customers’ shopping activities, thereby giving us access to the shopping mall’s customer base. In August 2017, we collaborated with a public transportation company in Luzhou to jointly launch “Chang Xing Ba Shu (暢行巴蜀)” card, which can be used as bus pass for commuters and allow relevant customers to access our financial services. We are a member of China UnionPay, enabling debit cards issued by us to be used in China UnionPay’s network in China and many overseas countries and regions. As of December 31, 2015, 2016 and 2017 and June 30, 2018, we had approximately 393.2 thousand, 452.0 thousand, 506.0 thousand and 605.3 thousand debit card holders, respectively. In 2015, 2016 and 2017, total amount spent through our debit cards was RMB1,314.0 million, RMB1,665.0 million and RMB2,343.0 million, respectively, representing a CAGR of 33.5% from 2015 to 2017. For the six months ended June 30, 2018, total spending amount through our debit cards amounted to RMB1,254.6 million. In addition to card services, we also provide other fee- and commission-based products and services to our retail banking customers, such as agency services for collecting public utility bills and payroll services. We also provide wealth management products to our retail banking customers. For details, please see “– Financial Markets – Wealth Management”.

Retail Banking Customer Base During the Track Record Period, we managed to grow our retail banking customer base. We had approximately 434.4 thousand, 491.2 thousand and 547.0 thousand retail banking customers as of December 31, 2015, 2016 and 2017, respectively, representing a CAGR of 12.2% from 2015 to 2017, and the total number of retail banking customers further increased to 648.0 thousand as of June 30, 2018. We classify our retail banking customers into four categories based on their deposit balances in our Bank, including basic customers (大眾客戶) (with deposits of less than RMB500,000), value customers (優質客戶) (with deposits of RMB500,000 to RMB1,000,000), high-end customers (高端客戶) (with deposits of RMB1,000,000 to RMB3,000,000), and high-net-worth customers (高淨值客戶) (with deposits exceeding RMB3,000,000). As of December 31, 2017, we had 1,375 high-end retail banking customers and 318 high-net-worth retail banking customers, representing a CAGR of 169.0% and 80.1% from 2015 to 2017, respectively. As of June 30, 2018, the number of our high-end retail banking customers and high-net-worth retail banking customers further increased to 1,674 and 323, respectively.

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We believe that attracting a consistent flow of middle-class and wealthy customers is vital to cross-sell and grow our overall business. We have been constantly introducing new products to acquire high-end and high-net-worth customers. As of June 30, 2018, we had 1,584 retail banking customers who had deposits over RMB1.0 million in our “Yue Yue Hong (月月紅)” product, representing 79.3% of our total number of wealth or high-net-worth retail banking customers as of the same date. In addition, we seek to employ client managers with the necessary expertise to provide high-quality services for our high net worth customers. We also invite professional institutions to provide routine training for our client managers on business generation, customer data analysis and integration of back office resources. We are committed to improving the customer experience and laying a foundation for our future private banking services.

In addition, we take a proactive approach to improve the efficiency, quality and user experience of our retail banking services and develop customized products to capture customer demand. In particular, in response to the challenges brought by electronic banking and fintech, we strive to leverage our prevailing competitiveness, deep knowledge of the local economy, and long-term relationships with relevant government agencies and enterprises, to launch various products and services easily accessible from internet terminals and mobile handsets. These products and services are designed to seamlessly integrate into of our customers’ daily transactions and financial needs in daily life, including payment of utility bills, flexible management of idle cash and payment of online purchases of goods. For details please see “– Distribution Network – Electronic Banking Channels – Mobile Banking” and “– Competition”.

Financial Markets

Overview

Our financial markets business consists of money market transactions, investment management and wealth management. For the years ended December 31, 2015, 2016 and 2017, the operating income generated from our financial markets business amounted to RMB365.6 million, RMB495.4 million and RMB643.7 million, respectively, representing a CAGR of 32.7% from 2015 to 2017. For the six months ended June 30, 2018, the operating income generated from our financial markets business amounted to RMB322.4 million.

Money Market Transactions

Our money market transactions primarily consist of: (i) interbank deposits; (ii) interbank placements; and (iii) repurchase and reverse repurchase transactions, primarily involving bills, bonds and interbank certificates of deposit.

Interbank Deposits

As of December 31, 2015, 2016 and 2017 and June 30, 2018, our deposits with banks and other financial institutions was RMB1,723.7 million, RMB2,575.5 million, RMB1,488.3 million and RMB934.7 million, respectively, and our deposits from banks and other financial institutions was RMB6,659.7 million, RMB9,512.9 million, RMB4,788.0 million and RMB4,888.2 million, respectively.

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Interbank Placement

As of December 31, 2015, 2016 and 2017 and June 30, 2018, our placements with banks and other financial institutions was RMB1,275.4 million, RMB15.4 million, RMB14.6 million and RMB1,514.6 million, respectively, and our placements from banks and other financial institutions was RMB420.0 million, RMB1,010.0 million, RMB870.0 million and RMB1,650.0 million, respectively.

Repurchase and Reverse Repurchase Transactions

As of December 31, 2015, 2016 and 2017 and June 30, 2018, our financial assets purchased under resale agreements was RMB3,642.9 million, RMB2,380.9 million, RMB11,841.9 million and RMB6,983.6 million, respectively, and our financial assets sold under repurchase agreements was nil, RMB1,868.8 million, RMB6,405.9 million and RMB4,804.0 million, respectively.

Investment Management

Our investment management business mainly consists of debt securities investment and SPV investment. Debt securities in which we invest include debt securities issued by the PRC central and local government policy banks, commercial banks and corporates. SPV investment refers to our investments in credit related financial assets and other financial assets through SPV.

As of December 31, 2015, 2016 and 2017 and June 30, 2018, our debt securities investment and SPV investment amounted to RMB10,451.2 million, RMB26,740.0 million, RMB29,243.9 million and RMB32,303.2 million, respectively, accounting for 32.9%, 50.2%, 41.3% and 41.2%, respectively, of our total assets, as of the same dates. The following tables set forth a breakdown of the total balance of our debt securities investment and SPV investment as of the dates indicated.

As of December 31, As of June 30,

2015 2016 2017 2018

Amount % of total Amount % of total Amount % of total Amount % of total

(in millions of RMB, except percentages) Debt securities investment 3,187.2 30.5% 5,845.5 21.9% 9,064.8 31.0% 11,591.2 35.9% SPV investment 7,264.0 69.5% 20,894.6 78.1% 20,179.1 69.0% 20,712.0 64.1% Total 10,451.2 100.0% 26,740.0 100.0% 29,243.9 100.0% 32,303.2 100.0%

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Debt Securities Investment

Our debt securities investment comprises investment in debt securities issued by PRC central and local governments, policy banks, commercial banks and corporates. The following table sets forth the breakdown of our debt securities investment as of the dates indicated.

As of December 31, As of June 30,

2015 2016 2017 2018

Amount % of total Amount % of total Amount % of total Amount % of total

(in millions of RMB, except percentages) Debt securities issued by central and local governments 1,752.7 55.0% 1,522.5 26.0% 2,473.1 27.3% 2,524.7 21.8% Debt securities issued by policy banks 1,434.5 45.0% 3,355.8 57.4% 4,803.9 53.0% 6,179.9 53.3% Debt securities issued by commercial banks – – 967.2 16.5% 1,620.2 17.9% 1,275.5 11.0% Debt securities issued by enterprises ––––167.6 1.8% 1,611.1 13.9% Total 3,187.2 100.0% 5,845.5 100.0% 9,064.8 100.0% 11,591.2 100.0%

As of December 31, 2015, 2016 and 2017 and June 30, 2018, our debt securities investment amounted to RMB3,187.2 million, RMB5,845.5 million, RMB9,064.8 million and RMB11,591.2 million, respectively, accounting for 10.0%, 11.0%, 12.8% and 15.5%, respectively, of our total assets as of the same dates. For the years ended December 31, 2015, 2016, 2017 and the six months ended June 30, 2018, interest income generated from our debt securities investment amounted to RMB124.4 million, RMB178.9 million, RMB333.6 million and RMB187.2 million, respectively, accounting for 8.6%, 8.9%, 10.0% and 10.4%, of our total interest income, respectively, for the same periods.

We have a professional debt securities investment team. When investing in debt securities, we conduct scenario analysis through various analytical tools on market risks, such as adverse movement of asset prices and adverse movement of benchmark rates in the market, formulate corresponding contingency plans and make adjustments to our investment strategies in a timely manner. For details, please see “Risk Management – Market Risk Management – Interest Rate Risk – Interest Rate Risk Management”.

SPV Investment

Our SPV investment mainly includes investment in: (i) credit related financial assets, through trust plans and asset management plans, which normally have a single ultimate borrower or financing party; and (ii) other financial assets, primarily including industrial funds, debt securities and money market instruments.

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As of December 31, 2015, 2016 and 2017 and June 30, 2018, our SPV investment amounted to RMB7,264.0 million, RMB20,894.6 million, RMB20,179.1 million and RMB20,712.0 million, respectively, accounting for 22.9%, 39.2%, 28.5% and 27.8%, respectively, of our total assets as of the same dates. For the years ended December 31, 2015, 2016 and 2017 and the six months ended June 30, 2018, interest income generated from our SPV investment amounted to RMB384.3 million, RMB852.6 million, RMB1,461.6 million and RMB833.1 million, respectively, accounting for 26.6%, 42.2%, 43.9% and 46.1%, of our total interest income, respectively, for the same periods.

The following table sets forth the breakdown of our SPV investment by the underlying assets as of the dates indicated.

As of December 31, As of June 30, 2015 2016 2017 2018 Amount % of total Amount % of total Amount % of total Amount % of total (in millions of RMB, except percentages) Credit related financial assets 3,815.0 52.5% 7,539.2 36.1% 8,404.1 41.6% 6,941.5 33.5% Other financial assets 3,449.0 47.5% 13.355.4 63.9% 11,775.0 58.4% 13,770.5 66.5% Total 7,264.0 100.0% 20,894.6 100.0% 20,179.1 100.0% 20,712.0 100.0%

We assess our SPV investment regularly to determine whether there is any objective evidence for impairments, and, if so, the amount of impairment losses. As of June 30, 2018, none of our SPV investment had overdue principal or interest.

During the Track Record Period, all of our counterparties for our SPV investment in credit related financial assets and other financial assets were licensed to conduct their business under applicable laws and regulations.

For details of SPV investment, please see “Assets and Liabilities – Assets – Financial Investments – SPV Investment”.

• SPV investment in credit related financial assets

Our investment in credit related financial assets is primarily made through trust plans or asset management plans where we entrust our counterparties to manage our funds and they then extend credit to the ultimate borrowers/financing parties. The ultimate borrowers’/financing parties’ obligations owed to us as SPV investor are secured by collateral or pledges granted by the financing parties on their properties to the SPV or by an irrevocable joint and several guarantee provided by relevant guarantors to the SPV. For details of the level of collateral of our trust plans and asset management plans, please see “Assets and Liabilities – Assets – Financial Investments – SPV Investment in Credit Related Financial Assets – Distribution of SPV Investment in Credit Related Financial Assets by collateral”. The financing parties use the funds provided by the SPV for business operations, and shall repay the principal as well as agreed-upon financing cost pursuant to the contract terms.

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The following chart illustrates the relationship among the parties involved in our SPV investment in credit assets through trust plans and asset management plans:

Trust companies/ Securities companies/ Fund management companies/ Asset management companies (including their subsidiaries) (Counterparties)

Principal repayment and Principal repayment and agreed-upon returns agreed-upon interest of SPV charges Financing parties Trust Plans/ the Bank (SPV Investment) through custodian Asset Management Plans through custodian (Investor) (credit-related (SPV) financial assets) Provide financing Invest in SPV Secured by pledges, collateral or guarantee (if any)

Financing parties/ other parties providing security

• SPV investment in other financial assets

We mainly invest through trust plans, asset management plans, wealth management products and money market funds managed by counterparties, who then invest our funds in debt securities and money market instruments. Counterparties are obliged to manage our funds according to pre-determined terms including investment period, underlying assets and performance benchmarks.

The following chart illustrates the relationship among the parties involved in our SPV investments in other financial assets.

Trust companies/ Securities companies/ Fund management companies/ Asset management companies/ Commercial banks/ Insurance companies (including their subsidiaries) (Counterparties)

Principal repayment and Principal repayment and agreed-upon returns agreed-upon investment of SPV returns Trust Plans/ Asset Management Plans/ Underlying assets the Bank through custodian through custodian Wealth Management Products/ other financial assets (Investor) Money Market Funds Invest in other Invest in SPV (SPV) financial assets

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Wealth Management

In April 2016, we began to issue non-principal protected wealth management products under the series of “Jin Gui Hua (金桂花)” to our retail banking customers. Each tranche we have introduced has a different maturity term and a different expected rate of return, so as to target a broader range of customers whose wealth management needs may vary. As of the Latest Practicable Date, all of the existing wealth management products issued by us were retail banking products and non-principal protected with floating return.

For the years ended December 31, 2015, 2016, 2017 and the six months ended June 30, 2018, wealth management products issued by us amounted to RMB890.0 million, RMB333.5 million, RMB741.0 million and RMB491.4 million respectively. As of June 30, 2018, we had a total of 5,080 retail wealth management customers. The following table sets forth a breakdown, by size of each tranche, of the cumulative total amount of the wealth management products issued by us during the periods indicated.

For the year ended December 31, For the six months ended June 30, 2015 2016 2017 2018

Number of Number of Number of Number of tranches Amount of tranches Amount of tranches Amount of tranches Amount of issued proceeds issued proceeds issued proceeds issued proceeds

(in millions of RMB, except number of tranches) Up to RMB50 million – – 4 131.7 2 50.0 3 133.8 Over RMB50 million to RMB100 million – – 1 71.8 4 300.0 5 357.6 Over RMB100 million 3 890.0 1 130.0 3 391.0 – – Total 3 890.0 6 333.5 9 741.0 8 491.4

In compliance with the CBIRC’s requirements, we manage all of our wealth management products independently through separate accounts and bookkeeping, with each of our wealth management products earmarked for our underlying investment. Please also see section headed “Supervision and Regulation” for details on recently issued rules on wealth management products.

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Pursuant to the Measures for the Administration of the Sale of Wealth Management Products of Commercial Banks (《商業銀行理財產品銷售管理辦法》) (CBRC Order 2011 No. 5) issued by the former CBRC in 2011, we classify our wealth management products into five categories based on risk levels: Level 1 refers to low risk; Level 2 refers to low-medium risk; Level 3 refers to medium risk; Level 4 refers to medium-high risk and Level 5 refers to high risk. During the Track Record Period, we have only issued Level 1 and Level 2 products with comparatively low risks. The following table sets forth details of the wealth management products issued by us by different levels of risk during the periods indicated.

For the year ended December 31, For the six months ended June 30, 2015 2016 2017 2018

Amount % of total Amount % of total Amount % of total Amount % of total

(in millions of RMB, except for percentages) Risk Level Level 1 890.0 100.0% 130.0 39.0% – – – – Level 2 – – 203.5 61.0% 741.0 100.0% 491.4 100.0 Total 890.0 100.0% 333.5 100.0% 741.0 100.0% 491.4 100.0

We invest the proceeds raised from our wealth management products mainly in debt securities.

During the Track Record Period and as of the Latest Practicable Date, all wealth management products issued by us were performing with the payment of principal and interest duly made without any default. We have not recorded loss on any of our non-principal protected wealth management products.

PRICING

In determining the price of our products and services, we take into account various factors, including cost of funds, management costs, risk exposure and expected yield. We also evaluate the overall market conditions as well as prices for similar products and services offered by our competitors. Our pricing policies and benchmark prices are formulated and determined by our Interest Rate Management Committee (利率管理委員會) at our head office. Our business units determine specific prices for our products and services within their respective authorizations granted by our head office.

Loans

The PBoC regulates the pricing for certain commercial banking products and services such as our RMB-denominated loans. On July 20, 2013, the PBoC removed the interest rate floor on loans from financial institutions and allowed financial institutions to set interest rates based on commercial considerations.

We determine the prices for our loan products based on loan applicants’ financial condition and credit rating, the nature and value of the collateral, the term of the loan, the intended use of loan proceeds and prevailing market conditions. We also consider the funding cost, taxes, management expenses and expected rates of return.

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Deposits

Since October 24, 2015, the interest rates cap on RMB-denominated deposits for financial institutions including commercial banks was removed by the PBoC. We may therefore offer our key corporate banking customers negotiated interest rates for their deposits based on the PBoC prescribed rates as we deem appropriate. The PBoC has liberalized interest rates on interbank placings, and we determine such rates based primarily on our assets and liabilities management policies and the market interest rate. Our interest rate management committee is responsible for the review and monitoring of our deposit pricing policies.

Fee- and Commission-based Products and Services

With respect to fee- and commission- based products and services, we charge our customers pursuant to government guidance prices or market conditions. We adjust the prices of fee- and commission-based products and services based on factors including market conditions, costs of providing the products and services, and prices for similar products and services offered by our competitors. Our revenue from our fee- and commission-based businesses only represented a small portion of our total operating income during the Track Record Period, amounting to RMB7.7 million, RMB7.5 million, RMB8.1 million and RMB5.5 million, for the years ended December 31, 2015, 2016 and 2017 and the six months ended June 30, 2018, respectively. We experienced continued decreases in net fee and commission income from 2015 to 2017 and recorded a net fee and commission expense of RMB1.9 million in 2017, primarily due to certain bank card related fees charged from customers we waived or reduced in order to attract more quality customers. This is in line with the PRC government policy of promoting inclusive finance and our business development strategy of being a local bank that offers favorable services to local residents. We primarily waive or reduce card-related fees in relation to producing and issuing certain IC cards, annual fees, ATM cross-bank withdrawal fees, short message service (SMS) fees, and online banking and mobile banking transfer handling fees. For the six months ended June 30, 2018, our net fee and commission income amounted to RMB0.8 million.

MARKETING

We have adopted a customer-centered approach in operating our business and providing our customers with multi-level and comprehensive banking services. Currently our head office takes the initiative in formulating bank-wide business plans and marketing strategies, whereas each branch and sub-branch carries out plans in their respective regions.

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DISTRIBUTION NETWORK

Branch Network and Self-service Banking Facilities

Our extensive branch network enables us to effectively deliver our products and services and penetrate into local markets. As of June 30, 2018, we had 25 sub-branches covering all three districts and four counties of Luzhou and one branch located in Chengdu. The following map indicates the distribution of our outlets as of June 30, 2018.

Luxian (1)

Longmatan (9)

Jiangyang (10) Hejiang (1)

Naxi (2)

Xuyong (1) Gulin (1)

We are committed to expanding our services coverage strategically. Our Chengdu branch, commencing operation in February 2017, is our very first attempt in exploring new market. In the future, we plan to continue expanding our reach and tapping into new areas beyond Luzhou, in accordance with PRC laws and regulations.

Our self-service banking facilities include ATMs, cash recycling machines, inquiry and payment machines and cards issuance machines. These machines can provide customers with convenient banking services and at the same time allow us to reduce operating costs. Our self-service banking facilities are placed in regions where our outlets are located, and services provided through these facilities include balance inquiry, cash deposit and withdrawal, fund transfer, payment of public utility bills and purchase of wealth management products other services. As of June 30, 2018, we had a total number of 81 self-service banking facilities.

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Electronic Banking Channels

In March 2013, we began offering electronic banking services to complement our branch network and self-service banking facilities. Currently, our electronic channels provide comprehensive financial services through online banking, mobile banking, telephone banking, self-service banking and WeChat banking. For the years ended December 31, 2015, 2016 and 2017 and for the six months ended June 30, 2018, transactions processed through our electronic banking channels accounted for 58.1%, 69.0%, 83.0% and 87.8%, respectively, of our total amount of transactions for the same periods.

Online Banking

Our online banking platform, accessible via our website www.lzccb.cn offers a broad range of financial products and services to both corporate banking and retail banking customers. For corporate banking customers, we provide various services, including account inquiry and management, payment and settlement, payroll services, and money transfer and remittance. For our retail banking customers, we offer account inquiry and management, money transfer and remittances, wealth management products, bill payment and personal loans. As of June 30, 2018, we had a total number of 24,782 online banking customers, including 3,370 corporate banking customers and 21,412 retail banking customers. As of June 30, 2018, an aggregate transaction volume of RMB201,726.8 million was processed through our online banking platform.

Mobile Banking

We began offering our mobile banking services in August 2017. A variety of services are offered through our mobile banking application, including account inquiry and management, money transfer, wealth management products and bill payment. To better secure mobile banking transactions, we provide our customers with a short message services (SMS) notification service, whereby we send them SMS notifications relating to bank account transactions, account safety verification and risk alerts.

As of June 30, 2018, we had 26,446 mobile banking users. As of June 30, 2018, an aggregate transaction volume of RMB2,189.5 million were processed through our mobile banking.

In addition, we opened our official WeChat account in August 2014, which has become an important hub for communications with our customers. Our customers can receive introductions for our latest services and updates on promotions, as well as pay public utility bills by following this account. As of June 30, 2018, our official WeChat account had 51,999 subscribed members in total.

Telephone Banking

Starting in May 2016, we began offering telephone banking services to both retail banking and corporate banking customers, including both automated voice services and teller-operated services through our 24-hour nationwide customer service hotline “0830-96830”. Our services include account inquiries and management, notifications, and emergency reporting on lost and stolen cards.

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INFORMATION TECHNOLOGY

Overview

We believe that information technology is crucial to our business development. An advanced information technology system will greatly improve our efficiency, the quality of our customer service and our ability to control risks. As of the Latest Practicable Date, we had established a resilient, agile and secure information technology infrastructure covering key functions of our operation, including business innovation, transaction processing, customer services, risk management and financial management. We have invested and will continue to invest in the development, maintenance and upgrading of our information technology systems. For the years ended December 31, 2015, 2016 and 2017 and the six months ended June 30, 2018, our capital expenditures on information technology and related equipment were approximately RMB45.2 million, RMB42.3 million, RMB83.2 million and RMB39.0 million, respectively.

Information Technology Management and Team

As of June 30, 2018, our information technology team, comprised of information technology professionals and experts, had 39 employees in total. In addition, we have a sound organizational structure and management system for information technology related work, through which we have strong technology support on all key sectors of our operations, covering risk management, data security, system development and testing, operation and maintenance of our IT system and business continuity.

Information Technology System

We engage reputable third-party service providers to work closely with our in-house information technology team in developing and upgrading our information technology system. As of the Latest Practicable Date, we have completed information technology upgrade for all key functions, including framework infrastructure, credit management, integrated operation, finance and accounting and payment.

We believe that, through engaging third-party vendors with rich industry experience, we can leverage their advanced and mature technology to improve the reliability and efficiency of our system, reducing our staff costs and business handling time and providing a better customer experience. We have built a comprehensive outsourcing management system, allowing us to monitor, manage and control the quality of services through the entire process. The system development department is in charge of managing outsourcing projects and outsourcing staffs as well as controlling the quality of our system and the safety of our development. Our IT department takes charge of our technology infrastructure, application system and information security management. Our information technology management committee is responsible for formulating and implementing strategic plans in relation to information technology as well as reviewing and approving information technology projects. We have comprehensive management guidance over the outsourcing process which is managed by our IT department and our system development department and supervised by our information technology management committee. We adopt strict standards in selecting our outsourcing providers and conduct comprehensive evaluations to such providers, judging them on various factors, including their professional capacity, product maturity, scale of operation, experience and service quality, to ensure that we engage industry-leading products and technologies.

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We adopted various advanced technical means to ensure the security of information technology systems and business operations, and established a same-city backup center and an offsite backup center for disaster recovery which together with our main data center constitute the “two locations, three centers” disaster recovery system, to ensure business continuity in the event of major disruption or failure of our main data center. For details regarding the information technology risk management, please see “Risk Management – Information Technology Risk Management”.

COMPETITION

The banking industry in China has become increasingly competitive. We primarily compete with other commercial banks in Luzhou and Sichuan Province. Please see “Industry Overview – Banking Industry”. We also face competition from other banking institutions. The principal competitive factors in the banking industry include capital strength, risk management, asset quality, reach of distribution network and customer base, brand recognition and scope, as well as quality and pricing of products and services.

The primary factors driving competition for deposits products are customer service, interest rates, fees charged, branch locations and hours, online and mobile banking functionality, and the range of products offered. The primary factors driving competition for loan products are customer service, range of products offered, price, reputation, and quality of execution. We believe that we are a strong player in our markets, however other competitors have advantages over us. Among the advantages that many of these large institutions have over us are their abilities to finance extensive advertising campaigns, maintain extensive branch networks and make larger technology investments, and to offer services which we do not offer.

In response to the aforementioned competitive environment, we plan to expand our service network, further strengthen our influence in the relevant markets, innovate products and services, and improve information technology infrastructure so that we can continue to compete effectively in the commercial banking industry.

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EMPLOYEES Retaining and attracting qualified employees is vital to us. We offer competitive remuneration and are dedicated to investing in the cultivation and development of talent. As of June 30, 2018, we had a total of 612 full-time employees. The following table sets forth the number of our full-time employees by function as of June 30, 2018.

As of June 30, 2018

Number of employees % of total Corporate banking 109 17.8% Retail banking 133 21.7% Financial markets 17 2.8% Teller 107 17.5% Finance and accounting 12 2.0% Risk management, internal audit and legal and compliance 103 16.8% Information technology 39 6.4% Management 56 9.2% Others 36 5.8% Total 612 100.0%

The following table sets forth the total number of our full-time employees by age as of June 30, 2018.

As of June 30, 2018 Number of employees % of total Aged 30 or below 225 36.8% Aged 31 – 35 137 22.4% Aged 36 – 40 64 10.5% Aged 41 – 45 73 11.9% Aged 46 – 50 75 12.2% Aged over 50 38 6.2% Total 612 100.0%

The following table sets forth the total number of our full-time employees by education level as of June 30, 2018.

As of June 30, 2018 Number of employees % of total Master degree and above 69 11.3% Bachelor degree 405 66.2% College/Associate degree and below 138 22.5% Total 612 100.0%

Talents development is the cornerstone of our development. We have established a comprehensive training mechanism, which is comprised of a variety of programs designed for employees at different levels and positions. For our mid-level and senior managers, we actively collaborate with prestigious universities and industry associations in China. We send our mid-level and senior managers to take courses on global and domestic macro-economy and

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PROPERTIES Our head office is located at No. 1, Section 1 Jiucheng Avenue, Jiangyang District, Luzhou, Sichuan, PRC. As of the Latest Practicable Date, we owned a total number of 323 properties with an aggregate GFA of approximately 75,922.84 square meters, which occupied the land with an aggregate area of approximately 20,680.02 square meters and leased 40 properties with an aggregate GFA of approximately 17,733.46 square meters.

Owned Properties Properties As of the Latest Practicable Date, we owned 323 properties with an aggregate GFA of approximately 75,922.84 square meters, which were primarily used for our business and offices, among which: 1. For 308 properties with an aggregate GFA of approximately 69,273.22 square meters (accounting for 91.24% of the aggregate GFA of our owned properties), we had obtained the relevant building ownership certificates or real property right certificates for these properties and the land use certificates or real property right certificates for the land occupied by these properties through grant.

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As advised by our PRC legal advisor, we have legitimate ownership rights of such properties and the land use rights for the land occupied by such properties, and we are entitled to occupy, use, transfer, lease, create a mortgage on or by other means dispose of such properties according to applicable laws.

2. For one property with an aggregate GFA of approximately 157.87 square meters (accounting for 0.21% of the aggregate GFA of our owned properties), we have obtained the relevant building ownership certificate for this property and obtained the land use certificate for the land occupied by this property, through allocation.

As advised by our PRC legal advisor, (i) as we have obtained the building ownership certificate for this property and the land use certificate for the land occupied by this property, there are no material legal obstacles for us to occupy or use such property; (ii) for properties erected in land allocated to us, before we obtain the land use certificate through granting or leasing, we are restricted from transferring, leasing or mortgaging such property. If such property can no longer be used, we believe that it will be able to find comparable properties as alternatives in corresponding areas, and such relocation will not have a material adverse effect on our financial condition or results of operations.

3. For 14 properties with an aggregate GFA of approximately 6,491.75 square meters (accounting for approximately 8.55% of the aggregate GFA of our owned properties), we have not yet obtained the relevant building ownership certificates for these properties and land use certificates for the land occupied by such properties due to reasons, such as lack of documentation or the certificate in process of being obtained.

As advised by our PRC legal advisor, we may not legally occupy, use, transfer, lease, create a mortgage on or by other means dispose of such properties until we obtain the relevant building ownership certificates for these properties and land use certificates for the land occupied by such properties. In the event that any third-party rights holder obtains the building ownership rights for these properties or the land use rights of the land on which such buildings were erected through bringing a claim or legal proceeding, and we are required to relocate, we believe we will be able to find comparable properties as alternatives with full title certificates or legal leases to continue our operations, and such relocation will not have a material adverse effect on our results of operations and financial condition.

During the Track Record Period and as of the Latest Practicable Date, the defective legal titles of the above-mentioned properties did not have any material adverse effect on our business operations. We will make efforts to obtain the building ownership certificates and the land use certificates. Our Directors are of the view that such defective properties will not, individually or in aggregate, have any material adverse effect on our business. If necessary, we believe that it will be able to find comparable properties as alternatives at relatively low cost, and such relocation will not have any material adverse effect on our financial condition or results of operations.

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Leased Properties As of the Latest Practicable Date, we leased 40 properties with an aggregate GFA of approximately 17,733.46 square meters, which were primarily used as business and office space, among which: 1. For 33 properties with an aggregate GFA of approximately 11,560.59 square meters, the lessors have obtained the relevant building ownership certificates or the consent letter from the owners to authorize the lessors to lease or sublease the specific properties. As advised by our PRC legal advisor, these leases are legal and valid. 2. For seven properties with an aggregate GFA of approximately 6,172.87 square meters, the lessors have not obtained the relevant building ownership certificates. For six properties with an aggregate GFA of approximately 5,872.87 square meters, lessors have issued written undertakings stating that the lessors are entitled to lease such properties, and the lessors shall indemnify the lessees if the lessees suffer losses from the defective titles of such properties or property handle all issues arising from the aforesaid situations. As advised by our PRC legal advisor, the lessors are not entitled to lease the properties if they do not have the ownership of such properties. If any third party raises claims against the ownership or leasing rights of such properties, our leasing of such properties may be affected, but we are able to seek indemnification from the lessors based on the relevant laws and regulations as well as their written undertakings. In addition, in certain circumstances where the lessors have entered into multiple lease agreements for one property, we may be considered as a legitimate lessee pursuant to relevant judicial interpretations of applicable PRC laws. We believe that in the event it is not able to continue to use such properties due to the defective titles of such properties, we believe that it will be able to find comparable properties as alternatives at relatively low costs, and such relocation will not have a material adverse effect on our financial condition or results of operations. As of the Latest Practicable Date, we have entered into 40 lease agreements with third-parties, as of the Latest Practicable Date, except for the above-mentioned seven leased properties that the lessor did not provide the building ownership certificate, all of these leasing agreements have been registered with relevant housing administrative authorities, or obtained confirmations issued by the housing registration management centers where the leased properties are located confirming that the local housing authorities do not operate lease registration business.

Property Valuation As of June 30, 2018, we had no single property with a carrying amount of 15.0% or more of our total assets, and on this basis, we are not required by section 5.01A of the Listing Rules to include in this document any valuation report. Pursuant to section 6(2) of the Companies Ordinance (Exemption of Companies and Prospectuses from Compliance with Provisions) Notice, this document is exempt from compliance with the requirements of section 342(1)(b) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance in relation to paragraph 34(2) of the Third Schedule to the Companies (Winding Up and Miscellaneous Provisions) Ordinance, which requires a valuation report with respect to all of our interests in land or buildings.

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PERMITS, LICENSES AND QUALIFICATIONS

Our Directors, as advised by our PRC legal advisors, confirm that, as of the Latest Practicable Date, we have obtained all material licenses, approvals, permits and qualifications from relevant PRC authorities for our operations in China.

INTELLECTUAL PROPERTY RIGHTS

We conduct business under the brand names and logos of “Luzhou City Commercial Bank”, “Luzhou City Commercial Bank Co., Ltd.” and “ ” as well as other brand names and logos. Our intellectual property rights mainly include trademarks, copyrights and Internet domain names. As of June 30, 2018, we held 16 registered trademarks, three copyrights and 16 domain names in the PRC as well as five registered trademarks in Hong Kong. With respect to details of our intellectual property rights, please see “Appendix VII – Statutory and General Information”. We have not been subject to any material infringement of our intellectual property rights or allegations of infringements by third parties during the Track Record Period that would have a material adverse effect on our business, asset quality, financial condition and results of operations.

LEGAL AND ADMINISTRATIVE PROCEEDINGS

Legal Proceedings

We are involved in various claims and lawsuits in the ordinary course of our business from time to time. During the Track Record Period, we were the plaintiff in two legal proceedings with a claim amount of principal exceeding RMB10.0 million, and the aggregate amount of the claimed principal was RMB43.0 million. Both these two legal proceedings were enforcement claims initiated by us to resolve NPLs. As of the Latest Practicable Date, we have obtained favorable ruling or mediation conclusion for these two legal proceedings and enforcement were still in the process. As of the Latest Practicable Date, we were not involved in any legal proceedings with claim principal exceeding RMB10.0 million.

As of the Latest Practicable Date, we did not expect any of our current and pending legal or arbitration proceedings to have, individually or in the aggregate, a material adverse effect on our business, financial condition and result of operations. Please also see “Risk Factors – We may be involved in legal and other disputes from time to time arising out of our operations.”

Regulatory Inspections and Proceedings

We are subject to various regulatory requirements and guidelines promulgated by different PRC regulatory authorities, including the CBIRC, PBoC, SAT, SAIC and NDRC and their respective local branches and offices. Inspections and examinations are carried out by such regulatory authorities in respect of our compliance with legal and regulatory requirements in relation to our business operations, risk management and internal controls. During the Track Record Period, we have been subject to certain administrative penalties, mainly in the form of fines, as a result of these inspections and examinations. These penalties, individually or in the aggregate, do not and will not have a material adverse effect on our financial condition or results of operations, nor will they affect our holding of approvals, permits, authorizations or filings necessary for our business operations.

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Save as disclosed under “– Legal and Administrative Proceedings – Regulatory Inspections and Proceedings”, “– Legal and Administrative Proceedings – Compliance with Core Indicators,” “– Legal and Administrative Proceedings – Anti-Money Laundering” and “– Legal and Administrative Proceedings – Employee Non-compliance,” we have been in compliance with relevant regulatory requirements and guidelines relating to our business operations, risk management, tax compliance and internal controls in all material respects, and there have been no other regulatory inspections or proceedings that may cause material and adverse impact to our business operations or financial results during the Track Record Period and up to the Latest Practicable Date. These inspections and reviews have not identified any major risk or non-compliance events, but have located some deficiencies within our business operations, risk management and internal control, the details of which are set out below. Although these issues have not had any material adverse impact on our business, financial position or results of operations, we have taken improvement and remedial measures to prevent the recurrence of similar incidents in the future.

Administrative Penalties During the Track Record Period and as of the Latest Practicable Date, we have been subject to two administrative penalties imposed by PRC regulatory authorities, causing fines with a total amount of RMB350,000 in relation to following incidents: • We received an inspection report issued by the Luzhou City Central branch of PBoC in August 2016 on various issues and recommendations, for which we took immediate actions to rectify the issues and submitted a remedial report in the same month. An administrative penalty decision arrived in December 2016, which imposed a penalty of RMB50,000 (the “2016 PBoC Penalty”) for our employees’ failure to make timely response to clients’ objection against credit reports. For details, please also see the subsection headed “– Findings of Regulatory Examinations – PBoC.” Other than the administrative penalty decision in December 2016, we have not received any follow-up inspection report or administrative penalty decision. • We received an inspection report issued by the CBRC Luzhou Office in November 2016 on various issues and recommendations, for which we took immediate actions to rectify the issues and submitted a remedial report in December 2016. An administrative penalty decision arrived in June 2017, which imposed a penalty of RMB300,000 (the “2017 CBRC Penalty”) in relation to NPLs where its employees failed to strictly follow pre-loan investigation procedures to collect and review due diligence documents and make appropriate assessment on borrower’s financing needs based borrower’s business scale and other relevant factors. For details, please also see the subsection headed “– Findings of Regulatory Examinations – CBIRC.” Other than the administrative penalty decision in June 2017, we have not received any follow-up inspection report or administrative penalty decision. During the Track Record Period and as of the Latest Practicable Date, we have made timely payment of the fines from the above-mentioned administrative penalties. Save for the non-compliance incidents disclosed under “– Legal and Administrative Proceedings – Regulatory Inspections and Proceedings,” “– Legal and Administrative Proceedings – Compliance with Core Indicators,” “– Legal and Administrative Proceedings – Anti-Money Laundering” and “– Legal and Administrative Proceedings – Employee Non-compliance”, as of the Latest Practicable Date, we have not been subject to any other material administrative penalties.

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We have taken, and intend to continue implementing, the following key steps and measures to rectify the issues identified by the PRC regulatory authorities: • in respect of 2016 PBoC Penalty, to prevent recurrence of similar incidents, we have improved training for employees in charge of credit investigations on proper procedures to make prompt response for objection against credit investigation results and enhanced the accountability regime in this respect. • in respect of 2017 CBRC Penalty, we enhanced training program for our employees on proper due diligence range and procedures, particularly focusing on improvement on their awareness and willingness to complete due diligence on business operations and financial conditions of the loan applicant. In addition, we have also improved cross-checking and routine reviewing system to ensure that we could timely identify and rectify potential issues. Through the above remedial measures, we believe that we have taken appropriate actions to rectify the identified deficiencies. As of the Latest Practicable Date, we have not received any objection to our remedial actions or any request to implement further remedial measures from the regulatory authorities. Furthermore, during the Track Record Period and as of the Latest Practicable Date, we have not experienced any revocation of any approval, license or authorization that is necessary for us to remain in legal existence or conduct ordinary business. In addition, we have not identified any major risk management and internal control weaknesses in connection with the deficiencies identified by the regulatory authorities. Accordingly, we believe that the above deficiencies identified by regulatory authorities will not materially affect our business, financial conditions and results of operations. Our Directors believe that the above administrative penalties did not, individually or in the aggregate, have a material adverse effect on our financial position or results of operations. In preparation for the [REDACTED], we have engaged an independent third-party consulting firm as an internal control consultant (the “Internal Control Consultant”) to perform a review of selected areas of our internal controls over financial reporting in January 2018 (the “Internal Control Review”). The scope of the Internal Control Review performed by the Internal Control Consultant was agreed among us, the Sole Sponsor and the Internal Control Consultant. The selected areas of our internal controls over financial reporting that were reviewed by the Internal Control Consultant included entity-level controls and business process-level controls, including credit, deposit, treasury, financial reporting, human resources, taxation and general controls of information technology. The Internal Control Consultant performed the follow-up reviews in July 2018 to review status of the management actions taken by the Bank to address the findings of the Internal Control Review (the “Follow-up Review”). The Internal Control Consultant did not have any further recommendation in the Follow up Review. The Internal Controls Review and the Follow-up Review were conducted based on information provided by us and no assurance or opinion on internal controls was given by the Internal Control Consultant.

Findings of Regulatory Examinations Certain routine and ad hoc inspections and reviews carried out by PRC regulatory authorities have identified that we have certain deficiencies with respect to our business operations, risk management, anti-money laundering, corporate governance and internal controls, the details of which are set forth below. None of these inspections and reviews have identified any material risk or incidence of non-compliance. We have remedied the identified deficiencies and submitted remedial reports to the relevant regulatory authorities, as per their

170 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. BUSINESS request. During the Track Record Period and up to the Latest Practicable Date, the relevant regulatory authorities have not raised any objection to our remedial measures set out in the remedial reports and adopted by us, nor have the regulatory authorities imposed any material penalties on us. The major inspection and review results and our corresponding remedial measures are summarized below.

CBIRC

The relevant local offices of the CBIRC conduct regular and ad hoc inspections on our operating conditions. Based on these inspections, the relevant local offices of the CBIRC issue inspection reports that include inspection results and guiding opinions. The major issues and guiding opinions raised by the relevant local offices of the CBIRC in their reports to us, and our corresponding remedial measures during the Track Record Period and up to the Latest Practicable Date, are set forth below:

Latest submission of Major issues and/or main recommendations Our primary remedial measures remedial reports Credit risk management

• Failure to conduct to conduct • We improved trainings to, and December 28, 2016 comprehensive review on business performance review of, account and financial situation of certain managers to enhance their capability customers, and failure to track and and motivation in conducting monitor loan proceeds. background check; conducted close monitoring on loan proceeds and • Guiding opinion for us to improve strictly implement internal rules and pre-loan investigation and post- regulation on post-disbursement disbursement management. management; and amended internal rules and regulations on pre-loan investigation and post-loan disbursement management, requiring relevant staff to conduct broader due diligence with stricter standards.

• To further improve risk • We have adopted more stringent May 4, 2017 management measures in relation credit review and approval standards to prevention and management of to improve loan portfolio quality; NPLs, with particular focus on closely monitor changes in credit prevention of rising NPL ratio asset quality and strengthen NPL along with rapid expansion of transfer and disposal. credit asset.

• Failure to apply correct • We have amended policies in relation July 31, 2017 classification to select loan to loan classification and issued products. more stringent rules in this regard; enhanced trainings to employees and supervision of the accuracy of loan classification; improved post- disbursement management and timely adjusted loan classification based on relevant borrower’s business operations and financial conditions.

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Latest submission of Major issues and/or main recommendations Our primary remedial measures remedial reports • To further improve the • We have prepared customized risk September 30, 2017 management of credit-related mitigation plan based on our review business, including strengthening controls on concentration of credit- of relevant borrowers’ situations to related loan business, post- ensure timely repayment. We also disbursement management, and optimized the measures for recognition of allowance. monitoring concentration risks, so that we could closely track and properly manage relevant indicators. In addition, we implemented various measures to enhance the management of credit-related financial assets, including making sufficient provision and strengthen employee accountability.

• Failure to issue comprehensive • We have prepared supplemental rules December 28, 2017 internal rules and regulations and regulations on credit on credit management, bill management, bill discounting and discounting business and interbank interbank business, including business. detailed review and approval procedures on loan extension and bank acceptance bills.

Operational risk management

• Insufficient rules and regulations • We improved our performance September 30, 2017 on performance appraisal and appraisal system in line with relevant remuneration management, regulatory requirements by including failure to incorporate supplementing and enhancing our certain risk indicators into performance review indicators and performance appraisal standards system. In particular, we assigned and failure to set aside adequate more weights to compliance and risk amount of deferred income for management performance in senior management members evaluating the performance of our in line relevant regulatory employees. In addition, we amended requirements. our remuneration management policies to increase the proportion of deferred payment in remuneration plan for senior management.

Liquidity risk management

• Inadequate assessment and • In order to improve liquidity risk February 15, 2017 management of liquidity risks, management, we have (i) prepared resulting in certain liquidity risk more comprehensive internal indicators exceeding regulatory policies and implementation rules in cap in 2016. this regard; (ii) conduct routine stress testing and evaluation to effectively assess our liquidity; (iii) make timely adjustment to liquidity risk management strategy and implementation plan based on results of various tests; and (iv) taken efforts to increase time deposits while reducing long-term loans to improve our liquidity.

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Latest submission of Major issues and/or main recommendations Our primary remedial measures remedial reports Financial markets business

• Inadequate risk management on • We have prepared more detailed February 28, 2018 wealth management business and policies and implementation rules in SPV investment, including relation to wealth management inadequate counterparty business. For counterparty management, inadequate due management, we set out detailed diligence and risk assessment on procedures on credit review, routine investment targets and ultimate inspection and disqualification of financing parties, and failure to counterparties. We also strengthened make complete disclosure on accountability of our staff in charge certain wealth management of wealth management business, products. including requiring our employees to make detailed and unambiguous disclosure on investment targets and make immediate rectification of information disclosure issue identified by the former CBRC.

Corporate governance and internal control

• Failure to strictly implement • We have nominated new director December 28, 2017 corporate governance and internal candidates to ensure compliance with control, including insufficient requirements of Articles of number of directors, inadequate Association; issued tier-2 capital internal audit and management on bond to strengthen capital base, related party transactions, and stringently evaluated capital inadequate control on capital adequacy ratio and further adequacy ratio. standardized capital management procedures; conducted comprehensive internal audit on related party transactions pursuant to regulatory requirements, and implemented more stringent policies and procedures in this regard.

Information technology management

• To enhance information • We have taken various measures to May 4, 2017 technology management system further develop and improve with particular focus on different aspects of our IT system, establishment of comprehensive including issuing internal policies internal policies and procedures and implementation rules regarding and engaging more employees establishment, maintenance and with information technology security of IT system; hiring more expertise. employees with professional background and industry expertise; conducting comprehensive audit on IT related work in accordance with relevant regulatory requirements.

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During the Track Record Period, we made timely submission of reports in relation to implementation of regulatory recommendations included in the inspection reports issued by the relevant local offices of the CBIRC. As of the Latest Practicable Date, we have not received any further objections or relevant material penalties from the relevant local offices of the CBIRC. Pursuant to the inspection reports issued by the relevant local offices of the CBIRC, we believe that there are no material deficiencies in our business operations, corporate governance, internal controls or risk management. We also believe that the above suggestions and recommendations have had no material and adverse impact on our business, financial condition or results of operations, but instead have enabled us to improve and enhance our operation management capabilities and risk control capabilities.

PBoC

The relevant local branches and sub-branches of PBoC conduct ad hoc inspections of our operations from time to time. Based on these inspections, the relevant local branches and sub-branches of PBoC issued inspection reports that included inspection results and guiding opinions.

The major issues and guiding opinions raised by the relevant local branches and sub-branches of PBoC in their reports to us, and our major remedial measures during the Track Record Period and as of the Latest Practicable Date, are set forth below:

Latest submission of Major issues and main recommendations Our primary remedial measures remedial reports • Failure to establish • We established a sound anti-money August 30, 2016 comprehensive internal audit and laundering system covering all the policies on anti-money operations of the Group as well as laundering. control and comprehensive anti- money laundry internal audit policies. In addition, we arranged training for employees to enhance their awareness and understanding of the relevant laws, regulations and implementation procedures.

• Insufficient management on • In order to ensure compliance with August 30, 2016 national treasury business, relevant laws and regulations and to including failure to timely turn effectively prevent recurrence of relevant fund into national similar incidents, we enhanced treasure in accordance with training for employees on applicable laws and regulations, regulations and procedures and failure to make timely filing regarding national treasury on changes of account business, improved supervision and information to relevant regulatory checking mechanism on authorities. implementation of relevant rules and regulations, and enhance reporting and communication with reports.

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Latest submission of Major issues and main recommendations Our primary remedial measures remedial reports • Certain employees fail to strictly • We arranged trainings for August 30, 2016 follow rules and regulation on employees in charge of credit credit investigation, such as investigations on (i) handling failure to make timely respond to clients’ objection against credit client’s objection against credit reports and misunderstanding of report, (ii) laws and regulations of the scope of personal information personal information protection, permitted to collect. and (iii) due diligence and documentation for credit investigation, so as to enhance our capability and awareness as well as the accountability of our Bank.

We timely submitted reports with respect to the implementation of regulatory recommendations included in the inspection reports issued by the relevant local branches and sub-branches of PBoC. As of the Latest Practicable Date, we have not received any further objections or relevant material penalties from the relevant local branches or sub-branches of PBoC. Based on the aforesaid inspection reports issued by relevant local branches and sub-branches of PBoC, we believe that there are no significant deficiencies in our business operations, internal audit and risk management, which may result in a material and adverse impact on our business, financial condition or results of operations.

Compliance with Core Indicators

We are required to comply with various ratios set out in the Core Indicators (Provisional). For details concerning our compliance with the Core Indicators (Provisional) during the Track Record Period, please see “Supervision and Regulation – Other Operational and Risk Management Ratios”. During the Track Record Period, we were not subject to any penalties as a result of non-compliance with any core indicators.

Anti-money Laundering

No material abnormal money laundering incidents have been identified or reported to the senior management during the Track Record Period. For details of our anti-money laundering measures, see “Risk Management – Legal and Compliance Risk Management – Anti-Money Laundering”.

Employee Non-compliance

Save as disclosed in this document, none of our Directors or employees have been involved in any non-compliance incidents that would have a material adverse effect on our business, financial condition or results of operations.

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OVERVIEW

The primary risks in relation to our operations include credit risk, market risk, liquidity risk, operational risk, information technology risk, reputational risk, and legal and compliance risk. We have established an integrated risk management system with comprehensive risk coverage and invested in continuous upgrade and optimization. For details about our risk management structure, please see the sub-section headed “– Risk Management Structure”.

Our Risk Management Objectives and Principles

The overall target of our risk management is to maintain the balance of risks and business development so that we could effectively mitigate risks and develop our business in a sustainable way. To achieve the abovementioned objectives, we have implemented the following principles in our risk management.

• Comprehensiveness. In line with the overall development strategy of the Bank, we intend to continuously improve the comprehensive coverage of our risk management system, with a focus on key risks associated with our business operations. In particular, we focus on strengthening the capability of risk identification, analysis, evaluation and mitigation.

• Balance. We focus on maintaining a balance between business development and risk exposure. In line with this principle, we invest in improving risk management efficiency with a focus on the timely response to evolving market and regulatory conditions, through close cooperation between business team and risk management employees, so that we could maximize return for shareholders with the most cost-efficient risk management.

• Centralization. Our head office prepares and distributes rules and policies on risk management, which are centrally supervised and effectively implemented at each level of our bank through a vertical risk management system. The vertical risk management system is led by vice president in charge of risk management, supported by a reporting and management system throughout our Bank. The head office established a Centralized Risk Management Committee, which leads various special committees at senior management level, and monitors branch and sub-branches’ risk management. Departments responsible for managing, monitoring and evaluating risks maintain high level of independence to ensure the objective implementation of risk management strategy, and report to Board of Directors and senior management directly. In addition, our risk management framework is supported and guided by “San Hui Yi Ceng (三會一層)”, namely the Shareholders’ meeting, the Board of Directors, the Board of Supervisors, and senior management.

• Compliance. We closely follow the development of rules and regulations governing banking and financial industry in China, and set risk management policies and procedures accordingly. We regularly provide trainings to staff in business departments and risk management departments to enhance their awareness of risk and knowledge of recent regulations.

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Risk Management Measures

Based on our risk management principles, we have established a comprehensive risk management organizational structure, comprising (i) the Board of Directors, the Risk Management Committee at the board level and Board of Supervisors; (ii) various special risk management committees at the senior management level that take charge of guidance, support and coordination of risk management work; and (iii) various departments in head office, branches and sub-branches that in charge of daily risk management work.

We have adopted and will continue to improve the implementation of the following measures in line with our risk management objectives.

Credit Risk Management

We closely monitor changes in international and domestic economic environment and government policies to make timely improvement and adjustment on our credit asset structure. We formulate annual guidelines for credit asset disbursement, properly allocate credit resources, efficiently guide industry-specific credit disbursement, manage collaterals and pledges and optimize assets portfolio, so that we could effectively enhance our capabilities of mitigating credit risks. In addition, we process credit approval through both online and offline procedures, covering every key aspect of credit risk management, from application to loan-disbursement. Therefore, we could effectively enhance supervision efficiency and ensure proper implementation of review and verification measures in necessary due diligence work. Furthermore, we have established an independent review and approval system to continuously improve the quality and efficiency of related work and to properly mitigate associated risks.

Liquidity Risk Management

We have established a liquidity risk management system in line with the scale, nature and complexity of our business. Through this system, we could effectively identify, measure, monitor and control our liquidity risks; strengthen our management on liquidity positions, financing and liquid assets; and closely monitor liquidity indicators. We also conduct periodic stress test of liquidity risk and analysis to improve our capability of handling liquidity risk related contingencies.

Operational Risk Management

In establishing and improving our comprehensive operational risk management system, we focus on optimizing the mechanism of supervision and inspection, rectification and accountability, assessment and incentive, as well as continuous evaluation. Through these measures, we managed to ensure, with long-lasting effect, early identification and timely resolution of potential operational risks and to prevent occurrence of litigation or disputes.

Market Risk Management

In response to continuous liberalization of interest rates in China, we have established a sound market risk management system to effectively control interest rate risks, ensuring our pricing system could adapt to evolving market conditions. In particular, we continuously optimize mitigation mechanisms for interbank business related risks and risks associated with transactions and interest rates.

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Information Technology Risk Management

We have established information technology risk management system in accordance with laws and regulations of the banking industry, the standard of financial industry and national standards for the protection of information security. We strive to identify, assess and monitor information technology risks, and to continuously improve our information technology infrastructure.

Reputational Risk Management

We have established a tiered organization framework for reputational risk management. We actively collect, organize, and analyze information in relation to our reputation through different channels, and we have an internal reporting mechanism to timely and effectively report to the head office upon occurrence of material and urgent incidents in our Bank.

Legal and Compliance Risk Management

In order to control legal and compliance risk, we require legal review to be conducted on all businesses and contracts throughout the Bank, enhance management on legal proceedings and compliance, provide routine bank-wide legal training, conduct compliance review on internal policies in relation to operational and managerial activities, and closely monitor legal and compliance risk.

RISK MANAGEMENT FRAMEWORK

We have established a comprehensive bank-wide risk management framework. Our top-down risk management model divides the risk management responsibilities by hierarchy and clearly defines the roles of each department, including the Board of Directors and its special committees, the Board of Supervisors and its audit and supervision committee, the senior management and its special committees, the Risk Management Department, the Internal Audit Department and various other departments relating to risk management at our head office, and the risk management departments at our branches. We have established clear and specific reporting and communication procedures to ensure an efficient and effective coordination among different departments to address various risks, including our branches, various departments relating to risk management and the Risk Management Department.

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As of the date of this document, our organizational structure for risk management is as follows:

Board of Supervisors

Board of Directors Board of Supervisors

Risk Management Related Party (Connected) Audit and Supervision Audit Committee Board of Directors Committee Transactions Committee Committee

Senior Management Centralized Risk Management Committee

Operational Risk Liquidity Risk Reputational Risk Information Technology Centralized Risk Management Credit Risk Management Market Risk Management Management Management Management Risk Management Committee Office Committee Committee Committee Committee Committee Committee

Senior Management in charge Senior Management in charge Senior Management in charge Senior Management in charge Senior Management in charge Senior Management in charge Senior Management in charge of risk management of risk management of risk management of risk management of risk management of risk management of risk management

Head Office Level Risk Management Credit Business Assets and Liabilities Internal Control and Assets and Liabilities Integrated Management Internal Audit IT Department Department Department Management Department Compliance Department Management Department Department Department

Business departments at head office

Branch and Presidents of Sub-branch Level branch/ sub-branch

Risk Management Department at head office and vice president in charge of Risk Management

Management lines Business departments at branch/sub-branch level Reporting lines

Notes:

(1) Our branch has set up a risk management department, which carries out the duties and responsibilities of risk management, credit management and compliance.

(2) As of the Latest Practicable Date, our executive Director and vice president, Mr. LIU Shirong (劉仕榮) was in charge of our risk management.

Board of Directors and its Special Committees

The ultimate responsibility for risk management rests with the Board of Directors. The Board of Directors’ responsibilities include (i) establishing an effective risk management system to ensure compliance with relevant laws and government policies; (ii) setting clear risk tolerance levels and ensuring that the senior management adopts necessary risk management measures; (iii) monitoring and assessing the sufficiency and effectiveness of our risk management system; and (iv) reviewing internal control evaluation reports and identifying significant defects of our risk management system.

Our Board of Directors performs its risk management duties through the Risk Management Committee (風險管理委員會), the Audit Committee (審計委員會) and the Related Party (Connected) Transactions Committee (關聯(連)交易控制委員會), with support from management teams at our head office and branches.

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Risk Management Committee (風險管理委員會) Our Risk Management Committee is primarily responsible for (i) reviewing our internal policies and measures in relation to credit risk, market risk, liquidity risk, operational risk, compliance risk and reputational risk; (ii) supervising our overall management on different types of risks; and (iii) conducting periodic evaluation upon our risk management policies, risk management status and risk tolerance level, and advising on our risk management and internal control improvement. The Risk Management Committee currently consists of five members and is chaired by Mr. XIONG Guoming (熊國銘).

Audit Committee (審計委員會) Our Audit Committee is primarily responsible for (i) reviewing our internal control, compliance and audit policies; (ii) inspecting our accounting policies, financial conditions and financial reporting procedures; (iii) reviewing our financial monitoring and discussing our risk management and internal monitoring system with the senior management; (iv) organizing and leading our annual audit and ensuring the truthfulness, accuracy and completeness of the financial reports; and (v) conducting inspections on our internal control system and auditing major related party/connected transactions. The Audit Committee currently consists of five members and is chaired by Mr. LIU Xiaoyu (劉小渝).

Related Party (Connected) Transactions Committee (關聯(連)交易控制委員會) Our Related Party (Connected) Transactions Committee is primarily responsible for (i) reviewing and approving our related party/connected transactions in accordance with the scope of authorization set by the Board of Directors; (ii) reviewing our related party/connected transactions which require approval of our Board of Directors and Shareholders’ General Meeting, and reporting relevant matters to our Board of Directors; (iii) collecting and organizing information of our Related Parties and connected persons and identifying our Related Parties and connected persons according to relevant laws and regulations; and (iv) inspecting and supervising the status of our related party/connected transactions management and the implementation of relevant internal policies. The Related Party (Connected) Transactions Committee currently consists of five members and is chaired by Mr. LIU Xiaoyu (劉小渝).

Board of Supervisors and its Special Committees Our Board of Supervisors’ responsibilities mainly include (i) reviewing periodic reports, such as quarterly reports, risk analysis reports, and dividend distribution plans prepared by the Board of Directors, information technology risk analysis reports, so that the Board of Supervisors can understand the Bank’s financial and operational conditions; (ii) inspecting and supervising our financial activities, and when necessary, conducting investigations on the Bank’s business operations; (iii) conducting departure audits on Directors, the president and senior management; guiding our Internal Audit Department to perform auditing independently; and auditing the Bank’s business decisions, risk management and internal control; (iv) supervising the Board of Directors and senior management in undertaking their duties; and (v) inquiring the Directors, the chairman of the Board of Directors and the senior management when necessary and requiring timely rectification of behaviors that damage the Bank’s interest, if any.

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Audit and Supervision Committee

Our Audit and Supervision Committee is primarily responsible for (i) advising on the audit and supervision of our financial activities; (ii) advising on the departure audit on Directors and senior management; and (iii) advising on the review of business decisions, risk management and internal control.

Senior Management and its Special Committees

Our senior management’s responsibilities include (i) implementing and executing the Board of Directors’ decisions; (ii) formulating policies, procedures and methods in a systematic way and taking appropriate risk management measures according to the risk tolerance level set by the Board of Directors; (iii) establishing and improving internal organizational structure and ensuring that the internal control duties are effectively performed; (iv) monitoring and evaluating the sufficiency and effectiveness of our risk management system; (v) implementing regulatory authorities’ policies and requests relating to internal control; and (vi) reporting the status of internal control and risk management to the Board of Directors and the Board of Supervisors on a periodic or ad hoc basis. At the senior management level, our comprehensive risk management system consists of Centralized Risk Management Committee and six special committees relating to risk management including the Credit Risk Management Committee (信用風險管理委員會), the Market Risk Management Committee (市場風險管理委員會), the Operational Risk Management Committee (操作風險管理委員會), the Liquidity Risk Management Committee (流動性風險管理委員會), the Reputational Risk Management Committee (聲譽風險管理委員會) and the Information Technology Risk Management Committee (信息科技風險管理委員會).

Centralized Risk Management Committee (全面風險管理委員會) The Centralized Risk Management Committee is primarily responsible for (i) formulating implementation policies and measures for the senior management based on bank-wide risk management guidelines, policies, overall strategies and objectives determined by the Board of Directors; (ii) establishing systems and structures that are necessary for comprehensive risk management, specifying functionalities of the Centralized Risk Management Committee and special committees, and establishing a coordination system and a check-and-balance mechanism among different departments; (iii) reviewing and formulating overall risk management and control plans and programs covering credit risk, market risk, operational risk, liquidity risk, reputational risk, information technology risk; (iv) establishing the structure; reviewing the roles and responsibility of senior management in relation to risk management, reviewing the standard and procedures of comprehensive risk management; (v) reviewing bank-wide risk appetite and risk limits determined by various special committees, and reviewing risk management reports submitted by various special committees; (vi) reviewing and determining our overall asset quality and five-category loan classification; and (vii) reviewing collection, transfer, disposal and write-off of NPLs. The Centralized Risk Management Committee currently consists of 14 members and is chaired by Mr. YOU Jiang(游江).

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Credit Risk Management Committee The Credit Risk Management Committee is primarily responsible for (i) formulating work objectives and plans that conform with our business strategy, taking into account the credit risk management strategies and overall policies determined by the Board; (ii) monitoring and controlling credit risks, reviewing and supervising the implementation of policies, procedures and specific operational instructions of credit risk management, and submitting periodic reports with respect to credit risk management to the Centralized Risk Management Committee; (iii) fully inspecting our credit risk level and management status, preparing contingency plans in a timely manner in the event of material incident; reviewing, analyzing and assessing our overall credit risks and the effectiveness of our control measures on a regular basis; (iv) clearly dividing the credit risk management duties of different departments (branches and sub-branches) and the reporting line, frequency and contents of credit risk reports, and supervising the performance of duties by different departments (branches and sub-branches) to ensure the normal operation of our credit risk management system; and (v) reviewing other matters in relation to our credit risk management. The Credit Risk Management Committee consists of nine members and is chaired by Ms. XIA Yilun (夏義倫).

Market Risk Management Committee The Market Risk Management Committee is primarily responsible for (i) formulating work objectives and plans in line with our business strategy, taking into account the market risk management strategies and overall policies determined by the Board; (ii) monitoring, controlling and reporting on significant movement of market risks in a timely manner, analyzing the cause of the risk and formulating risk prevention measures; (iii) supervising the implementation of policies, procedures and specific operational instructions of market risk management, and submitting periodic reports to the Centralized Risk Management Committee; (iv) coordinating business departments to clearly delineate duties of different departments (branches and sub-branches) in relation to market risk management and the reporting line, frequency and contents of the market risk reports, and supervising the performance of each market risk management duties; (v) reviewing the matters related to our market risk management. The Market Risk Management Committee consists of nine members and is chaired by Mr. YOU Jiang (游江).

Operational Risk Management Committee (操作風險管理委員會) The Operational Risk Management Committee is primarily responsible for (i) reviewing specific measures and provisions for operational risk management; (ii) reviewing annual or quarterly working plans for operational risk management; (iii) reviewing periodic operational risk reports, analyzing potential operational risk, and proposing prevention and control measures; submitting periodic operational risk reports to the Centralized Risk Management Committee, and proposing strategies and policy measures for operational risk management; (iv) establishing measures (including internal control measures) to identify, assess, mitigate and monitor the operational risk as well as the bank-wide reporting procedures; (v) reporting material incidents and operational risks status, analyzing the causes of risks, and formulating risk prevention measures; and (vi) reviewing risk prevention and mitigation policies and relevant measures in response to risks arising from changes in internal procedures, staff and information technology system and external events that caused loss; (vii) other matters which need to be reviewed by the Operational Risk Management Committee.

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The Operational Risk Management Committee consists of eight members and is chaired by Mr. XU Xianzhong (徐先忠).

Liquidity Risk Management Committee (流動性風險管理委員會)

The Liquidity Risk Management Committee is primarily responsible for (i) researching and reviewing strategies, policies and procedures in relation to liquidity risk management, and reporting to the Board for approval; (ii) organizing the implementation of strategies, policies and procedures in relation to liquidity risk management approved by the Risk Management Committee of the Board; (iii) establishing and improving the internal control system in relation to liquidity risk management; (iv) coordinating relevant departments to manage liquidity risk and supervise the implementation; (v) reviewing relevant matters involving the liquidity risk management of the Bank.

The Liquidity Risk Management Committee consists of nine members and is chaired by Ms. XIA Yilun (夏義倫).

Reputational Risk Management Committee (聲譽風險管理委員會)

The Reputational Risk Management Committee is primarily responsible for (i) formulating reputational risk objectives and plans based on our business strategy, taking into account strategies and overall policies determined by the Board; (ii) reviewing and supervising the implementation of policies, procedures and specific operational instructions with respect to reputational risk management, and submitting periodic reports to the Centralized Risk Management Committee; (iii) conducting comprehensive inspection on reputational risk status and its management, with particular attention to significant reputational risk event or incident; reviewing, analyzing and assessing our overall reputational risks and the effectiveness of our control measures on a regular basis; (iv) clearly dividing the reputational risk management duties among different departments, branches and sub-branches and the reporting line, time limit and contents of reputational risk reports, and supervising the performance of reputational risk management duties to ensure the normal operation of our reputational risk management system; and (v) reviewing the matters related to our reputational risk management.

The Reputational Risk Management Committee consists of seven members and is chaired by Mr. LIU Shirong (劉仕榮).

Information Technology Risk Management Committee (信息科技風險管理委員會)

The Information Technology Risk Management Committee is responsible for (i) formulating objectives and plans in line with our business strategy, taking into account strategies and overall policies determined by the Board; (ii) specifying the information technology risk appetite, and reporting to the Centralized Risk Management Committee for review; (iii) monitoring and controlling information technology risks, reviewing and supervising the implementation of policies, procedures and specific operational instructions; (iv) conducting comprehensive inspection on our information technology risk status and relevant management, with particular attention to significant events or matters in this respect; reviewing, analyzing and assessing our overall information technology risks and effectiveness of our control measures; (v) clearly dividing the information technology risk management duties among different departments (branches and sub-branches) and the reporting line, frequency and contents of information technology risk reports, and supervising the performance of information technology

183 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK MANAGEMENT risk management duties by different departments (branches and sub-branches) to ensure the normal operation of our information technology risk management system; and (vi) reviewing the matters related to our information technology risk management.

The Information Technology Risk Management Committee consists of eight members and is chaired by Mr. CHENG Anhua (成安華).

Departments Relating to Risk Management

Departments Relating to Risk Management at Our Head Office

Our head office oversees all risk management activities and supervises risk management at our branches and sub-branches. We have established the following departments at our head office, each being responsible for managing risks in its respective area. The primary duties and responsibilities of these departments are set forth below.

Risk Management Department (風險管理部)

The Risk Management Department at our head office takes charge of the overall coordination of risk management throughout the Bank. Our Risk Management Department is mainly responsible for (i) preparing bank-wide risk management regulations and procedures according to strategies set by the Board, continuously researching on the development of laws and regulations promulgated by regulatory authorities and best practice adopted by industry peers; supervising proper implementation of relevant regulations and procedures; (ii) taking the lead in establishing key risk indicators throughout the Bank to ensure proper implementation of risk identification, monitoring, prevention and mitigation; (iii) analyzing bank-wide risk management status to provide useful reference for the adjustment and delivery of overall risk management policy and operation strategy of the Bank; (iv) supervising risk management in different business operation departments; (v) taking the lead to manage bank-wide NPL collection, litigation and disposal and the write-off of bad debts, including assisting finance and accounting department to determine proper allowance; (vi) continuously monitoring risks and estimating necessary capital to properly manage relevant risks, conducting regular stress test and preparing contingency plan; (vii) managing collateral entitlement provided by clients of the Bank; and (viii) conducting training and evaluation on staff within the department.

Credit Business Department (信貸業務部)

The Credit Business Department at our head office takes lead in organizing credit risk management work throughout the Bank within the overall risk management system. Our Credit Business Department is mainly responsible for (i) formulating bank-wide credit policy and regulations; (ii) conducting compliance audit on credit business handled by different business operation departments within their authorization;(iii) studying and analyzing credit risks relating to various industries and publishing periodic reports; (iv) recommending credit approval authorization plans and conducting dynamic management of such authorization; (v) optimizing the credit approval procedures and setting uniform standards for credit review and approval; (vi) managing matters in relation to independent approvers and daily routine; (vii) conducting internal inspection on credit business; (viii) providing training and guidance on credit business; and (ix) taking the lead in establishing, optimizing and managing the information technology system for credit business.

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Assets and Liabilities Management Department (資產負債管理部) Our Assets and Liabilities Management Department is responsible for the assets and liabilities management of the Bank, takes the lead in liquidity risk management and market risk management throughout the Bank within the comprehensive risk management system, and is primarily in charge of ensuring the structural balance and proper management of our assets and liabilities through comprehensive asset and liability plan, economic capital management and pricing management.

Internal Control and Compliance Department (內控合規部) Our Internal Control and Compliance Department is mainly responsible for (i) conducting research on laws and regulations promulgated by regulatory authorities and tracking best practice adopted by industry peers, and based on which, formulating bank-wide policies relating to internal control, compliance and operational risks and establishing a comprehensive compliance and operational risk management system to optimize the efficiency and effectiveness; (ii) establishing a bank-wide internal control system and promoting staff awareness of internal control; (iii) the bank-wide compliance work, supervising and guiding different departments and branches to comply with relevant laws, regulation and policies; (iv) taking the lead in authorization management, organizing and coordinating with different departments to conduct authorization management, and formulating relevant policies; (v) bank-wide legal affairs; (vi) the management and renewal of various business licenses and permits in relation to our business operations; and (vii) coordinating different departments on anti-money laundering efforts.

Administration Department (綜合管理部) Our Administration Department is mainly responsible for (i) managing our brand promotion and public relations; (ii) leading our bank-wide reputational risk management and handling reputational risk incidents; and (iii) managing bank-wide confidentiality work and monitoring proper use of seals by branch.

IT Department (信息科技部) IT Department is responsible for (i) the thematic review on the information technology risks in relation to information safety, information technology operation and maintenance, certain information technology governance and operation continuity of key information systems; (ii) the mitigation of risks in relation to information security, information technology operation and maintenance, operation continuity of key information systems and certain information technology governance; (iii) recording and reviewing risk indicators monitored manually and reporting to the Risk Management Department.

Risk Management Framework at Our Branches and Sub-branches

Risk Management-related Departments at Our Branches and Sub-branches

The chief risk officer of our Chengdu Branch is in charge of branch risk management with support from the risk management department at the branch, which is responsible for the implementation of policies and procedures issued by the head office. For our sub-branches, the president, or, where applicable, the vice president in charge of risk management takes the lead in the risk management in relevant sub-branches. We require our branch and sub-branches to submit regular reports on risk management to the head office and conduct ad hoc inspections.

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Dual Reporting Line System We adopt a Dual Reporting Line System. The risk management departments at our branches directly report to the Risk Management Department at our head office on quality and results of their work. They also simultaneously report to the presidents of the respective branch/sub- branches.

Risk Monitoring and Alert Leveraging our information technology system and specifically designed mechanism, we closely monitor different types of risks to make timely response, particularly for key risks associated with our daily operations, including credit risk, market risk, liquidity risk and legal and compliance risk. • Credit Risk. We have established an effective credit management system, which covers the entire credit extension process, from application and pre-loan investigation to disbursement of funds and post-loan monitoring. We request our employees to log detailed information about customers and relevant transactions into our credit management system on a timely basis pursuant to our standardized operational procedures. Authorized personnel are allowed to approve the loan applications within their respective limits in this credit management system. In managing post- disbursement risks, we require our personnel to conduct inspections and record data in relation to the most recent statistics, financial performance and research results of relevant parties into our credit management system. Based on these data, we are able to analyze our loan portfolio and prudently manage bank-wide credit risks. • Market Risk. We closely monitor the implementation of our interest rate risk limits. Our Risk Management Department supervises the interbank local currency market business the day after business transaction in accordance with relevant internal policies, primarily by reviewing data generated by a third party database to monitor the material fluctuation of the fair value of active traded debt securities. We also conducted stress test, sensitivity analysis and other applicable method to evaluate our market risks. • Liquidity Risk. Our Assets and Liabilities Management Department monitors the liquidity position on a daily basis, establishes a liquidity monitoring system to calculate and analyze liquidity ratios, and provides risk alerts and reminders in a timely manner. • Operational Risk. We have established an operational risk monitoring system, making routine reports on daily basis and immediate reports upon occurrence of significant incidents. • Information Technology Risk. We have established a self-assessment mechanism on information technology risks, which requires each of our departments to identify, record and evaluate the risks relating to information technology and take proper mitigation measures. We also closely monitor key risk indicators of information technology and issue risk alerts at an early stage. • Reputational Risk. We actively collect, organize, and analyze information in relation to our reputation through our public complaint hotlines, customers’ visits, newspapers, television, radio, online media and other channels. We conduct regular review of our reputational risk and prepare quarterly analysis reports on reputational risk status. In addition, we have established an internal reporting mechanism to ensure timely and

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effective reporting to the headquarters upon the occurrence of material and urgent incidents throughout the Bank. • Legal and Compliance Risk. We closely monitor our key regulatory indicators and the latest development of laws and regulations, evaluate the effectiveness of our internal rules on a regular basis and timely conduct compliance review of our new products.

CREDIT RISK MANAGEMENT Credit risk refers to the risk of loss that may arise from the default by, or downgrade of credit rating of, an obligor or counterparty, or from its reduced capacity of fulfilling its contractual obligations. We are exposed to credit risks primarily associated with our corporate loan business, personal loan business and financial market business. We have built and continually improve a bank-wide credit risk management system to identify, measure, monitor, mitigate, and control risks that arise from our credit business process. We have implemented standardized policies and procedures for credit review and extension management. We also seek to improve our overall credit risk management capabilities through a variety of measures, such as upgrading our credit management system, implementing an asset quality classification management system and further strengthening credit review and supervision.

Credit Policy Guidelines We are dedicated to striking a balance between sound loan growths and maintaining a prudent culture of risk management. We prepared detailed guidance on credit risk management based on the local, domestic and international economic conditions, and the government policies and regulatory requirements. Our guidelines include overall credit policies and guidelines specific to key industries. These guidelines govern our credit extension in various aspects, including industry, customer, product and management. We also adjust our guidelines in a timely manner to respond to changes in government policies, economic environment and our own risk appetite. In formulating our credit policies, we study the macroeconomic environment in Sichuan Province, China and other major countries and analyze the risks and uncertainties that might be relevant to our operations. We also follow closely the updates in local and national economic development plans, financial regulations and monetary policies and adjust our credit guidelines accordingly. For instance, we prioritize extending our credit to industries with relatively low risk, good growth potentials and social benefits according to studies on governmental planning, such as modern agriculture and high-tech industries. We also enhance credit support to micro and small enterprises, labor-intensive enterprises and basic services industries in response to relevant government policies. In the meantime, we adopt a prudent credit extension strategy on, and limit our credit exposure to, industries with unfavorable growth prospects. We have developed credit guidelines to classify credit origination preference into four categories: “supported”, “prudent”, “restricted” and “prohibited”. We allocate with priority our credit resources to the industries in the “supported” category, such as the industries relating to modern services, new information technology and modern agriculture. Based on prudent consideration on the overall portfolio, we provide proper credit support with the industries in the “prudent” category, such as the industries relating to coal mining, liquor production,

187 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK MANAGEMENT aluminum and photovoltaic. The “restricted” category and “prohibited” category include the industries expressly restricted or prohibited by the PRC government, clients with bad credit records and other clients who we believe do not meet the requirements of credit extension. For the “restricted” category and “prohibited” category, we ceased granting new credit facilities and have been gradually reducing the amount of credit extended to the relevant clients. Our credit policies may also vary in different geographical regions based on local situations.

Credit Risk Management for Corporate Loans Our credit risk management procedures for corporate loans include pre-loan investigations, credit review and approval, loan disbursement management, post-disbursement management and non-performing assets management. The following flowchart illustrates the process of the credit risk management for our corporate loan business.

Customer Application

Pre-loan Investigations Pre-loan Investigation

(Note 1) Appraisal of Collateral, Pledges and Guarantees

Pre-loan Examination at the Head Office Level

Pre-loan Examination Pre-loan Examination at the Branch Level

Pre-loan Examination at the Sub-branch Level

Credit Review and Approval Approval at Sub-branches and Branch Level

Approval at the Head Office Level

Execution of Loan Agreement

Loan Disbursement Management Verification of Conditions Precedent

Fund Disbursement

Post-disbursement Inspection

Post-disbursement Management Risk Monitoring and Alert

Collection Management

Loan Classification

Non-performing Assets Management Preservation and Recovery of Non-performing Assets

Note 1: as applicable

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Pre-Loan Investigations

Customer Application and Pre-loan Investigation

After a corporate banking customer submits a credit application, we start our pre-loan investigation process. We require the applicant to provide necessary supporting documents, such as its organizational documents, business certificates and recent financial statements. We also require the applicant to provide its ownership certificates and valuation reports for collateral on secured loan, and the information and relevant supporting documents about its guarantors, if the loan is guaranteed. Our account managers will review relevant documents pursuant to our established criteria and verify their authenticity and effectiveness.

In addition to examing credentials, we also require on-site due diligence as part of our pre-loan investigation. In order to prevent operational risk, we adopt a “two-person investigation” mechanism which requires two account managers to conduct on-site investigations. Each of the two account managers shall visit the borrower’s business premises and inspect their manufacturing equipment, inventories, value-added tax invoices and utility consumption to check their actual business operations.

Our account managers examine the customer’s shareholding structure, credit history, operational status, compliance status, industry development, regulatory environment and financial condition. Our account managers also conduct an analysis of the customer’s use of proceeds and capability for repayment. Based on the preliminary analysis of the customer profile, our account managers prepare a credit investigation report. We require the two account managers to sign the report and they are jointly responsible for the authenticity, completeness and effectiveness of the information in the credit investigation report.

Appraisal of Collateral, Pledges and Guarantees

We conduct collateral appraisal prior to approving an application for secured loans. Our internal policies have specified types of acceptable and non-acceptable collateral, the appraisal procedure and the standard for determining loan-to-value ratio. We require the mortgagers or pledgers to provide detailed information and supporting documents about the collateral that, depending on the type of the mortgagers or pledgers, include (i) the certificates of ownership, and other relevant documents about the collateral; (ii) the business certificate, articles of association and the necessary shareholders’ resolutions or board resolutions for corporate mortgagers or pledgers; and (iii) the identification documents for individual mortgagers or pledgers.

We usually engage qualified third-party appraisers to issue reports on the value of collateral. We review the valuation reports issued by third-party appraisers to determine the value. The valuation is generally valid for a year. Upon the end of the valuation report while the collateral remains valid, we will determine necessity of re-valuation taking into account the conditions of relevant collaterals.

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We determine the loan-to-value ratios of loans by taking into account various factors such as market value and condition. The maximum loan-to-value ratios for the principal types of collateral securing our corporate loans are as follows:

Maximum Loan-to Type of Collateral and pledges Value Ratio Collateral Residential and commercial properties 60% Land use rights for commercial, residential and comprehensive use 50% Land use rights for industrial use 40% Plants, workshops and factories or office and warehouse in non-urban area 40% Rights to use forest, wood and forest land 40% Construction in progress 50% Pledges Security deposits and certificates of deposit (including electronic certificates of deposits) issued by our Bank 100% Certificates of deposit issued by other banks 90% Treasury bonds, bank checks and bank acceptable bills 90% Commercial acceptance bills 80% Debt securities issued by corporations with rating of AA or above 50% Shares and equities 50% Warehouse receipts and bills of lading 50% Receivables 50% Property right from intellectual properties rights including patents and copyrights 30%

For guaranteed loans, we conduct a comprehensive analysis on the guarantors’ background to determine the qualification, capacity, reliability and willingness of the guarantor. We generally require that the borrower and guarantor are jointly liable for our loans. For individual guarantors, we examine their identification documents, supporting documents for repayment abilities such as proof of employment and salary issued by their employers, and other relevant documents. For entity guarantors, we generally require them to provide (i) business certificates, articles of association and other necessary organization documents; (ii) their shareholders’ resolutions or board resolutions approving provision of relevant guarantee and (iii) other documents as requested by us.

Pre-Loan Examination (貸前核查)

Pre-loan examination refers to the verification on the authenticity and validity of the loan application materials and materials collected during the pre-loan investigation process, as well as the examination on applicant’s business operations and guarantees, such as collateral, pledge and guarantee documents. Pre-loan examination procedures include checking the consistency of copies and originals, conducting on-site verification for the business address and operating conditions of the corporate borrowers, and searching the National Enterprise Credit Information Publicity System (國家企業信用信息公示系統) and the List of Untrustworthy Individuals (失信被執行人名單) and verifying basic information of the borrowing company. After examination, the employees will fill out relevant forms in accordance with our internal procedures to provide their opinions on authenticity and validity of relevant material. We have three levels of pre-loan examination, namely head office level, branch level and sub-branch level, applicability of which depends mainly on the amount of the proposed loan.

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Credit Review and Approval

We determine the authority of credit review and approval among different institutions among our Bank based on the loan amount. Moreover, in order to better serve and manage loan applications from our customers, our business departments at head office are authorized to proceed with loan applications within their authorization. In addition, to optimize the balance between business development and risk management, we adjust credit review and approval authority from time to time by taking into account various factors, including location of certain branches or sub-branches and the nature and specification of the relevant collateral.

Credit Review and Approval at the Branch, Sub-branch or Business Departments at Head Office Level

For applications within the approval authority of branches, sub-branches or business departments at head office, the relevant approvers, such as the presidents of the branches and sub-branches and heads of relevant business departments at head office or senior management in charge, are the ultimate person to make the decision. The credit review at this level is generally conducted by employees in charge of credit review by reviewing the documents or information provided by customers, and material obtained during pre-loan investigation. The employees in charge of credit review may require relevant applicants to supplement documents for further review. Generally, upon completion of review, the employees in charge of credit review shall prepare a report to advise key risks and propose risk mitigation measures in relation to this loan application, and submit such report to the credit review and approval group meeting at the branch or sub-branch. The credit review and approval group meeting will determine whether the application could be submitted to the authorized approvers for final review and approval. The authorized approvers are granted a veto right on applications falling within this category.

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Credit Review and Approval at the Head Office Level

For a case with the amount exceeding approval authority of a branch, sub-branch or business departments at head office, the application shall be submitted to the head office through our credit management system, which will be further delivered to the meeting of independent approvers for review. The diagram below sets forth the general review and approval procedure for our corporate loans as of the date of this document:

Presidents of branches or sub-branches make the submission

To be reviewed by relevant personnel of the Credit Business Department at the head office

Application for corporate banking credit Application for corporate banking credit of no less than RMB200.0 million should be of less than RMB200.0 million should be approved by a meeting of at least five independent approvers approved by a meeting of at least five independent approvers comprised of regular, first-level and second-level independent comprised of both regular independent approvers approvers. At least two first-level independent approvers and second-level independent approvers. should attend the meeting.

Authorized approvers(1) may exercise veto right.(2)

Have approval right Have veto right

Notes: (1) Authorized approvers include the chairman of the Board, presidents and vice presidents of the Bank and the branches, heads of departments and presidents of sub-branches, who may exercise veto right according to their respective scope of authorities. (2) Where a major related party transaction is involved, such transaction will be submitted to the Related Party (Connected) Transactions Committee for review, and then submitted to the chairman of the Board of Directors for approval (with the authorization from the Board). Where a non-major related party transaction is involved, such transaction will be filed with the Related Party (Connected) Transactions Committee for record after such transaction is approved by authorized approvers.

Independent approvers refer to the professional employees who are authorized by the chairman of the Board to conduct the review and approval of a case independently. To be specific, an independent approver has the rights to: (i) give opinion on matters including whether to approve a case submitted for review, and such case’s credit limit, term, interest rate, loan type and risk management; (ii) question relevant employees responsible for the origination and ask for explanation and supplemental materials; (iii) require relevant department to examine the case in doubt; (iv) conduct on-site examination for the case; (v) reject the undue interference from heads at various levels or other employees; and (vi) report to authorized approver and give advice. We have three categories of independent approvers, including the first-level independent approvers comprised of our management at our head office or experienced staff with expertise,

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Loan Disbursement Controls

Execution of Loan Agreements

After the approval of a corporate loan application, we enter into a loan agreement and, if applicable, an agreement of collaterals, pledges or guarantees with the borrower and the guarantor using our standard terms. Any deviation from the standard terms must be reviewed and approved by our origination department and other relevant departments, such as the Internal Control and Compliance Department, as well as external legal advisers.

Verification of Conditions Precedent

We have established a standardized operational procedure for corporate loan disbursement. Our relevant business departments at our head office, branches and sub-branches are responsible for the overall management and monitoring of our corporate loan disbursement. Our account managers are responsible for handling the post-approval matters including the registration and insurance of collateral. We require two persons to independently conduct a review of these post-approval matters. Our disbursement reviewers verify the authenticity and reasonableness of disbursement application and other supporting materials submitted by the borrower, check the consistency of use of funds and the condition precedents.

Fund Disbursement

Upon the approval by the disbursement reviewers and authorized approvers, our Bank’s relevant departments at head office, branches or sub-branches will commence the loan disbursement in accordance with required procedures.

Post-disbursement Management

Our post-disbursement management consists of inspection, risk monitoring and alert, maturity and collection management and loan classification.

Post-disbursement Inspection

We conduct follow-up and routine inspections at the post-disbursement stage. We carry out routine inspection on a regular basis by conducting on-site visits, periodical examination and continuous monitoring. The frequency of our routine inspections varies mainly depending on the amount of granted credit as well as the type and classification of loan products. Our account managers are required to conduct routine inspections on customers with loans classified as normal on a quarterly or semi-annual basis, and on customers with loans classified as special mention or below on a more frequent basis. In addition, we may also conduct special inspections on any particular industries, areas, products or customers from time to time. Our account managers are also required to closely monitor the use of loan proceeds and the conditions of collateral.

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During the regular post-disbursement inspection, we check corporate borrowers’ information including but not limited to (i) industry developments and trends; (ii) business operation status including major customers, products and investments; and (iii) financial conditions, especially changes in their sales, profits, inventory, receivables, payables and bank borrowings.

In addition to on-site inspections, we also carry out off-site monitoring by analyzing information from the PBoC’s Credit Inquiry System, National Enterprise Credit Information Publicity System (國家企業信用信息公示系統) and other third party sources including the Internet and media. These resources mainly provide useful basic information, credit history and criminal records of our customers. If we identify any problems, we will take appropriate measures according to the nature and severity of the relevant problem, such as to increase or replace collateral and reducing credit limit.

Risk Monitoring and Alert

We monitor our credit risk both collectively and individually. On collective monitoring level, we analyze the concentration risks in terms of industry, geography and customer base, as well as overall quality of credit assets and risks that may affect certain products. On individual monitoring level, we conduct regular post-disbursement review on quality of single (group) loans covering different factors, including financial and non-financial indicators such as the status of borrower’s operations and businesses, account behavior, operational environment, business prospects and repayment ability, and internal and external credit risk factors such as the abnormal fluctuation of borrower’s stock price and the change of bond rating.

Upon identifying factors that may negatively affect business operations of the borrower, we will take immediate action to classify the risk factors into one of the four types of risk indicators, namely, risk indicator of banking facilities and bank account, risk indicator of borrower’s financial condition, risk indicator of borrower’s non-financial condition and risk indicator of loan guarantee. Upon identification of the risk indicators, the Bank’s head office or risk management department at the branches set out clear guidance for relevant departments to handle the risks and keep monitoring the effect of such measures for risk control purposes.

For risks on collective level, we may take measures including adjusting business structure, optimizing our product mix and setting out new credit limit. For risks on individual level, we may, depending on the loan amount and extent of impact, take measures including adjusting borrower’s credit rating and/or available banking facilities, collecting repayment from the borrower, pursuing recovery from the guarantor, transferring creditor’s rights and initiating litigation.

Maturity and Collection Management

In general, our account managers are required to notify the borrowers of timely repayment by giving borrowers a written notice within 15 days before the due dates of the loans. Within three days before the date of interest settlement, we require our account managers to notify the borrowers to make sufficient deposits into our Bank if the funds in their accounts are not enough to pay relevant interest.

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For overdue loans, we generally require our account managers to periodically send written reminders to the default customers and guarantors, if any, right after the due date and until all the past due principals and interest are paid in full. If we do not receive any receipts of the written reminders, we may collect the payment in person, serve notarized notices or file lawsuits, as appropriate, to toll the statute of limitations. For customers that intend to repay the loans before the due date, we require these customers to submit applications to the origination department at branches or sub-branches.

Loan Classification

Loan classification is an important part of our ongoing loan monitoring. For risk management purposes, we divide our credit assets into five levels in accordance with relevant CBIRC requirements, namely “normal”, “special mention”, “substandard”, “doubtful” and “loss”, and consider the loans classified as “substandard” or below as non-performing loans. The factors we consider in classifying our loans include, without limitation, the repayment ability, records and willingness of the borrowers, the profitability of the underlying projects, the collateral of the loans, the default period of the loans and the legal liabilities of parties in relation to the repayment of the loans.

Our account managers in our branches conduct a preliminary classification for corporate loans based on relevant factors such as borrowers’ repayment ability, repayment history, guarantees and collateral, and submit the results to the authorized approvers at the branch level for their approval, and then submit the classification to our head office for final confirmation. Our head office has the authority to adjust the classification.

We closely monitor the quality of loans and may reclassify our corporate loans based on result of quarterly routine and ad hoc inspection. Any upgrade or downgrade among the five categories must be submitted to the Centralized Risk Management Committee in our head office for final approval. If a factor possibly resulting in downgrade of classification is triggered, our account managers are required to make timely submission of reclassification to the authorized approvers at the branch level, and then such authorized approvers should review and further submit such report to our head office for final approval according to our internal policies.

Non-performing Assets Management

We attach great importance to the management of non-performing assets. The collection center established by the Risk Management Department at our head office is responsible for bank-wide collection and disposal of non-performing assets by our sub-branches. We improve our disposal of non-performing assets through works such as policy establishment, innovation of collection scheme, introduction of professional staff and enhancing the review of collection by our branches and sub-branches.

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We recover non-performing assets through various means, including repayment negotiation, legal proceedings and arbitration. We may also write off non-performing assets according to the requirements of MOF and make tax adjustments according to the MOF rules, the record of which will be filed. We reserve our rights to collect from the debtors and proactively pursue our collection. Repayment Negotiation. We proactively negotiate with debtors with repayment capabilities. We may initiate legal proceedings to accelerate the repayment negotiation with debtors with repayment capabilities but not willing to repay, to shorten the collection time and improve the collection efficiency. Legal proceedings. We initiate legal proceedings, or apply for compulsory execution to collect debts. For cases involving complicated factors, we engage lawyers with extensive experience to enforce debt collection. We expect to enhance our collection leveraging such professionals’ experience and technical skill. Arbitration. We may initiate arbitrations to collect debts which may improve the collection efficiency.

Portfolio Management We have established credit risk management policies on key risk areas including LGFVs, real estate industry and industries with heavy pollution, high energy consumption and overcapacity (兩高一剩).

Credit Risk Management for Loans to LGFVs We impose strict control on credit extension to LGFVs. As of December 31, 2015, the balance of loans we granted to the LGFVs was RMB25.0 million, accounting for 0.4% of our corporate loans and 0.08% of our total assets. We did not grant any loans to the LGFVs as of December 31, 2016 and 2017 and as of June 30, 2018. At present, we do not accept any loan application from the LGFVs.

Credit Risk Management for Loans to Real Estate Industries We extend real estate development loans in accordance with national guidelines and policies for real estate development, relevant laws and regulations, our internal policies as well as the principle of matching “security, liquidity and effectiveness”. We prioritize our support to leading nationwide or regional real estate developers, and prudently support new or small-scaled real estate developers. We also consider the geographic locations and types of the projects and provide tailored financial products to different customers. In terms of project types, we prioritize our support to regular residential property development projects and prudently support commercial property development projects for which we will set strict eligibility requirements. For our real estate development loans, we only extend credit to the borrowers who have obtained all necessary government approvals, permits and certificates and have good credit record. We prohibit any credit extension to real estate development projects (i) the land reserve of which has remained idle for more than a year; (ii) which are significantly overpriced compared to similar properties; (iii) the construction of which is deliberately delayed or suspended, (iv) the capital of which is inadequate or inauthentic; and (v) that are restricted under relevant national government policies, industry policies or macro-control policies.

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As of June 30, 2018, our loans for the real estate industry amounted to RMB4,179.3 million, representing 22.3% of our corporate loans. As of June 30, 2018, we did not have any non-performing loans for the real estate industry.

Credit Risk Management for Loans to Industries with Heavy Pollution, High Energy Consumption or Overcapacity (兩高一剩)

We make differentiated loan approval and credit limitation standards for different industries, customers and projects. We prohibit new credit extensions in any form to entities or projects that are not in compliance with national policies or our own conditions. We set limitation on the credit granted to industries with overcapacity, and strive to reduce our risk exposure to these industries and entities. As of June 30, 2018, we did not have loans granted to enterprises in industries with heavy pollution and high energy consumption, and the balance of our loans to enterprises in industries with overcapacity was approximately RMB72.0 million, accounting for 0.3% of balance of our total loans and none of their manufacturing facilities or manufacturing lines fall within national phased-out or restricted categories. We conducted pre-loan examination on whether its equipment and production technology fall into the outdated production capacity being phased-out in accordance with national policies when extending loans to enterprises in industries with overcapacity. As of June 30, 2018, all of our loans to enterprises in overcapacity industries were classified as “normal”.

Credit Concentration Management

We focused on developing business relationships with strategic customers, mostly large enterprises in Sichuan Province. In order to control the credit concentration risks arising from the expansion of our credit businesses as well as to comply with relevant laws and regulations, we closely monitor the balance of loans granted to the same borrower on quarterly basis to ensure that the loans balance granted to the same borrower does not exceed 10% of the net capital of the Bank. We imposed credit limits on total credit can be granted to a single customer, which we adjust based on national and local laws and regulations, as well as our credit policies.

In recent years, the PRC Government has promulgated a series of regulations with aim to mitigate and prevent concentration of credit risks among the PRC banking industry, including the Measures for the Administration of the Large Exposures of Commercial Banks (商業銀行大額風險暴露管理辦法) and the Administrative Measures for Joint Credit Granting of Banking Financial Institutions (Provisional) (銀行業金融機構聯合授信管理辦法 (試行)) issued by the CBIRC on April 24, 2018 and May 22, 2018, respectively. Please refer to “Risk Factors – The PRC banking industry is highly regulated, and we are susceptible to changes in regulation and government policies.”

After the promulgation of the Measures for the Administration of the Large Exposures of Commercial Banks (商業銀行大額風險暴露管理辦法), we started establishing a system to control large exposure covering bank and non-bank customers. We also set up a series of measures and methods to manage large exposure, including connected customers identification, recognition and monitoring. With respect to the Administrative Measures for Joint Credit Granting of Banking Institutions (Provisional) (銀行業金融機構聯合授信管理辦法(試行)), we conduct investigation on our customers to select customers available for joint credit

197 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK MANAGEMENT granting and at the same time prepare to coordinate with the lead bank to work on the management for joint credit extending after the local regulatory authorities and bankers association release the unified work arrangement for joint credit granting in pilot enterprises. For our credit risk indicator limit, please see “Supervision and Regulation – Other Operational and Risk Management Ratios”.

Credit Risk Management for Personal Loans

Our credit risk management procedures for personal loans include pre-loan investigations, credit review and approval, loan disbursement management and post-disbursement management.

Pre-loan Investigations

Upon receipt of personal loan applications, our account managers conduct due diligence on applicants, through both on-site and off-site investigations. In pre-loan investigations, we primarily take into account the applicants’ basic information, credit history, income, the intended use of proceeds, and the source, methods and ability of repayment as well as the security of the loans. We generally designate two account managers to review the supporting documents and verify the information provided by the applicants. We also require these account managers to conduct interviews in person with the applicants to verify applicants’ true identification, occupation and to examine their financial conditions. Based on due diligence work, our account managers analyze in depth the legitimacy, necessity and rationality of the loan demand, reliability of repayment source and potential risks and other relevant factors. Then they prepare a due diligence report that sets forth their opinions on credit limit, term and interest and other relevant issues of personal loan application.

We also investigate credit record of applicants based on information collected from internal sources, the PBoC or other information sources. For personal loans secured by collateral and pledges, we usually designate a third-party appraiser to verify the value of the collateral and pledges, which is similar to the value of corporate loans. For details, please see the sub-section headed “– Credit Risk Management – Credit Risk Management for Corporate Loans – Appraisal of Collateral, Pledges and Guarantees”. For guaranteed personal loans, we also investigate the guarantors’ background, business operation conditions and guarantee ability.

Credit Review and Approval

We generally determine authority of credit review and approval among different departments within our Bank based on the amount of products to be approved. We routinely adjust standards and structure of authorization based on changes in various elements that may affect our business, including changes to local markets, geographic location of relevant outlets and nature and specification of relevant collateral.

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Credit Approval at the Branch or Sub-branch Level

For application within its authority, the president of relevant branch or sub-branch is the ultimate person to make approval. The credit review at this level is generally initiated by account manager who shall draft an investigation report and upload the report to our credit management system for preliminary review and assessment by the credit review employees. Upon completion of such review, the report will be submitted to credit review and approval committee at respective branch or sub-branch for further review. The president of the branches or sub- branches has the authority to approve the relevant application.

Credit Approval at the Head Office Level

For an application with the amount exceeding authority of a branch or sub-branch, application shall be submitted to the head office by president of relevant branch or sub-branch through our credit management system, which will be further delivered to an independent approvers for review. Relevant approval procedure and limit are same as that of our corporate loans.

Loan Disbursement

The disbursement procedure for personal loans is generally similar to that for our corporate loans. Upon the approval of a personal loan application, we enter into a loan agreement and other ancillary agreements with borrowers. We disburse the funds to personal customers only upon the satisfaction of all the conditions precedent specified in the credit approval and the agreements. For secured loans, we disburse loans only after completion of relevant guarantee procedures or collateral appraisal.

Post-disbursement Management

We conduct routine inspections and special inspections after the disbursement of the loans. We check the use of proceeds by analyzing relevant accounts, examining documentations and conducting on-site investigations. Our inspection requirements vary based on the types and the classification of the loans. We generally conduct routine inspections of customers with loans classified as normal on a quarterly or semi-annual basis, and on customers with loans classified as special mention or as below on a more frequent basis.

We generally check borrowers’ basic information such as marriage status, health conditions and credit history. For personal business loans, we also analyze borrowers’ business and financial conditions and repayment abilities by checking financial statements, business scope, major customers, transaction value and transaction volume. For personal consumption loans, we generally examine borrowers’ total assets, proof of income, tax returns, and other relevant documents to analyze their repayment abilities and use of proceeds. For residential and commercial mortgage loans, in addition to monitoring the change of the borrowers’ repayment abilities, we focus on inspecting the operations and financial condition of the relevant real estate developers, as well as the status of their projects.

Our risk monitoring and alert, loan classification, maturity and collection management and non-performing assets management for personal loans are similar to that for our corporate loans.

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Credit Risk Management for Off-Balance Sheet Businesses We strictly review the underlying business of off-balance sheet transactions and verify the authenticity of the transaction documents. We also require strict compliance with our internal procedures to ensure that no transaction relating to regulatory forbidden products, projects or activities in violation of laws and regulations will be approved.

Related Party Credit Risk Management In order to control the risks arising from Related Party Transactions and ensure the compliance of relevant laws and regulations, we have specified in our internal policies the standards of identifying Related Parties, the review and approval procedures for Related Party Transactions and the reporting and registration requirements for such transactions. We vigorously implement these internal control procedures in our Bank, to identify all our business relationships with the Related Parties and to maintain centralized monitoring and management of the Related Party Transactions. According to our internal policies, none of our credit extensions to the Related Parties shall involve any conflict of interest. The pricing of the Related Party Transactions shall be objective and fair without prejudice to the interests of our Bank and our independent shareholders. If we extend loans to our Related Parties, the interest rates shall be consistent with the market rates and the terms of the loans shall not be more favorable than those for other independent borrowers of the same type during the same period. We continue to optimize our Related Party credit investigation and review and approval processes in order to further reduce the credit risks in relation to our Shareholders and Related Parties.

Credit Risk Management for Our Financial Market Business Our financial market business is exposed to the credit risk associated with money market transactions, investment in debt securities and investment in trust plans, asset management plans and wealth management products. Our Credit Business Department is the primary department for credit risk management of financial market business.

Credit Risk Management for Money Market Transactions We assign an aggregate credit limit to each domestic bank and non-bank financial institutions that we make transactions with. Our Credit Business Department is responsible for conducting comprehensive compliance review on credit applications from interbank customers. Our independent approvers are responsible for reviewing and approving the interbank credit extension, by taking into account various factors including the interbank customers’ qualification and the type, term and amount of credit extension. If the credit extension application is beyond the authorized scope of Credit Business Department, upon approval at the independent approvers’ meeting, the application needs to be submitted to the Centralized Risk Management Committee for final review and approval. We conduct regular evaluation on our interbank customers’ capital strength, business operations, financial condition, compliance with regulatory indicators, proposed cooperation with other parties, risk events and other external factors that could affect their ability to honor their contractual obligations. The regular evaluation on our customers enables us to identify potential risk alert signals and adjust the interbank credit limits in a timely manner. Meanwhile, we also maintain strict eligibility criteria for our counterparties. We only cooperate with counterparties with solid qualification, good reputation and sound performance track record.

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Credit Risk Management for Debt Securities Investment and SPV Investment We have implemented a variety of specific risk management measures to control the risks associated with our investments in different types of products.

Debt Securities Investment We apply the principle of prudence in managing the credit risks arising from our investments in debt securities. For debt securities issued by enterprises, we apply a stringent credit review and approval procedure similar to that for high-risk loans. The ultimate debtors of corporate debt securities are subject to our unified credit line management. Corporate debt securities investment must be first reviewed by the Credit Business Department, and then reviewed and approved at the meeting of independent approvers and subsequently by the authorized approver. We also periodically classify the credit risks of our investment debt securities into five categories, to monitor their impact on our capital adequacy, liquidity and the maturity structure of our assets and liability.

SPV Investment We have established a comprehensive risk management system for our investments in trust plans, asset management plans and wealth management products. We have adopted the following measures to manage the credit risks relating to our investment business. Underlying asset credit risk management. We adopt the same credit risk management standard as in our loan business for SPV investment. For trust plan and asset management plans with a single borrower, we use the same credit review and approval process to evaluate the creditworthiness of the borrower. In addition, we manage credit line for ultimate financing party in a holistic view, which means we set up overall credit line for every borrower we serve, no matter which financing method we provide. Counterparty Management. We implement and maintain a list of approved banks and financial institutions, which is subject to review and update, pursuant to our internal policy named the Measures for the Administration of Granting Credit to Financial Interbank Clients (《金融同業客戶授信管理辦法》). When determining a counterparty, we conduct comprehensive evaluation on a broad range of factors, including but not limited to the potential counterparties’ qualification, operation conditions and credit records, and we will from time to time adjust the list of counterparties based on the evaluation result. Generally, we assign a credit rating for each of these counterparties and classify them into different categories. Due Diligence. We require our business departments to conduct due diligence on the counterparties and the ultimate financing parties or the underlying assets prior to the investment. Our legal advisor will review the relevant contracts and other legal documents to make sure that our interest under the proposed investments is protected. Review and Approval. Investing in trust plans, asset management plans and wealth management products shall be approved by Credit Business Department. Our Interbank Customers Department or other business departments who originate the application should conduct comprehensive due diligence investigation, such as the credit history and the business track records of relevant counterparties, and prepare a relevant report on this matter. After the due diligence investigation, the application should be submitted to the Credit Business Departments for review and approval, who will further submit the application to the meeting of independent approvers for its review. Upon approval of the meeting of independent approvers,

201 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK MANAGEMENT the application should be submitted to the authorized approver for final review and approval. We conduct credit review and risk evaluation in relation to this type of products in a similar way as it does for other types of products, so that we have a centralized control on relevant risks.

Inspections and Monitoring. We require the business origination departments to conduct initial inspections within two days after the fund disbursement and check the flow of funds. We also require our business origination departments to conduct regular inspections at least once a quarter on the financing entities. Our business origination departments inspect the operational status, financial condition, project progress and collateral ownership of the financing entities, make quarterly monitoring reports on post-disbursement management and file such reports for records. Other relevant departments may conduct special inspections on any particular industry, region, product or financing entity if it deems necessary. We actively monitor the financial indicators of these financing entities and issue risk warnings if any material adverse event is discovered.

Classification. We classify our financial assets based on the same standards applicable to our corporate loans. For details, please see “– Credit Risk Management – Credit Risk Management for Corporate Loans – Post-disbursement Management – Loan Classification”.

In addition, we also have implemented certain specific risk management measures for the investments in different types of financial assets.

Trust Plans and Asset Management Plans. Before investing in trust plans or entering into asset management transactions, we conduct due diligence on the trust companies, the asset management companies, the securities companies, the financing parties or other financial institutions issuing asset management plans, and make sure such companies have good market positions, stable operations and good track record. In addition, we perform a comprehensive assessment, review and approval procedure on the plans. We also conduct enhanced management on the trust plans and asset management plans after investing or involving in such plans on a quarterly basis.

Wealth Management Products. We have established a separate review and approval system for investments in wealth management products. Prior to making an investment in wealth management products issued by other PRC banking and financial institutions, we assess the risks associated with such wealth management products by reviewing various factors, including the credit history of the issuing financial institutions and the portfolio investments underlying the wealth management products. We generally invest in wealth management products issued by policy banks and commercial banks with relatively sound asset management capabilities that are directly managed by the same banks.

For our investment in non-principal protected wealth management products, we require the issuing banks to provide us with information concerning the scope of their investments utilizing our funds or a list of assets invested by the issuers for our review. We explicitly prohibit issuing financial institutions from using proceeds of such wealth management products in any manner against relevant laws and our internal policies. We may take legal actions to protect our interest if these counterparties fail to perform such contractual obligations.

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Information Technology System for Credit Risk Management

We are committed to improving our credit risk management with advanced information technology systems through our in-house team and external contractors. Our credit management system enables account managers to efficiently collect and analyze customer data, such as historical transaction records and financial conditions, and provides close monitoring and timely alert on maturity of loans. Our information technology system automatically matches credit applications to relevant approval procedures based on the amount of credit requested, which will reduce the risk of unauthorized approval. Our information technology system automatically identifies group customers so as to effectively control the credit limit of group customers. In addition, our account managers and management departments at all levels can check real-time information of overdue loans through our information technology system to control risk of overdue loans.

MARKET RISK MANAGEMENT

Market risk is the risk of losses to our on-and off-balance sheet businesses arising from movements in the market prices. We are exposed to market risks primarily through the assets and liabilities on our balance sheet and the commitments and guarantees off our balance sheet. The major type of market risks we are exposed to is interest rate risk. The goal of our market risk management is to control the market risk to a tolerable level and to maximize the risk-adjusted returns based on our risk appetite.

We have established a comprehensive market risk management system covering our Board of Directors, Board of Supervisors, senior management, Centralized Risk Management Committee under the senior management, Market Risk Management Committee under the Centralized Risk Management Committee, and business departments including our Risk Management Department, Internal Audit Department, Assets and Liabilities Management Department, Internal Control and Compliance Department and other department in charge of risk management relating to their business.

Our Board of Directors is ultimately responsible for our market risk management. Our Board of Supervisors supervise the performance of duties by our Board of Directors and senior management on market risk management. Our senior management is responsible for formulating, reviewing and supervising the implementation of market risk management strategies, policies and procedures, and monitoring our market risk level and management status. Our Risk Management Committee under the senior management established a Market Risk Centralized Management Committee, which is responsible for reviewing detailed internal rules and regulations on market risk management, studying and predicting changes in market risks, conducting periodic analysis on bank-wide market risks and advising relevant mitigation measures. Our Assets and Liabilities Management Department is responsible for the implementation of bank-wide market risk management policies and measures. Our Internal Audit Department is responsible for supervising and evaluating market risk management to ensure audit and evaluation on the accuracy, reliability, sufficiency and efficiency of the performance of market risk management duties by relevant business departments. Other departments are responsible for implementing our market risk management measures through their daily business operations.

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Our market risk management consists of the identification, measuring, monitoring and control of market risks. We primarily employ risk sensitivity and stress tests in measuring and monitoring market risks. We adopt different quantitative measures to manage various types of market risks in our banking and trading books.

Interest Rate Risk

Interest rate risk arises primarily from fluctuations in the prevailing interest rates and the mismatch in the re-evaluation dates or the maturity dates of our interest rate sensitive on-and off-balance sheet assets and liabilities, which may result in reduction in our net interest income and the value of our assets. The PRC government has gradually liberalized interest rates in China in recent years. Since July 20, 2013, commercial banks have been allowed to set interest rates on loans at their own discretion according their commercial principles. Since October 24, 2015, commercial banks have been allowed to set interest rates for RMB-denominated deposits at their own discretion. As a result of the liberalization of interest rates, the fluctuation of the interest rates has gradually changed from policy-oriented to market-oriented, and therefore subject to more uncertainties.

Impact on Deposits and Loans

Changes in interest rates on our deposits and loans mainly impact our interest rate spread and the value of our loans. As interest rate spread is our main source of operating profit, the PBoC’s adjustments to the benchmark on rates of deposit and loan and the resulting changes of market interest rates will affect our revenue structure and profitability. In particular, in respect of our fixed interest rate businesses, changes in interest rates may lead to changes in our customers’ decisions. When the interest rate increases, our deposit customers may withdraw their deposits early and put them in other savings products for higher interest rate, which will increase our interest expenses. When the interest rate decreases, our loan customers may repay their loans early and apply for new loans with a lower interest rate, which will lower our interest income.

Impact on Debt Securities and Trust plans, Asset Management Plans and Wealth Management Products

The fluctuation of market prices of debt securities and financial assets is correlated to changes in benchmark interest rates and market expectations of future interest rates. The market trend in the last few years indicated that valuation of debt securities, trust plans, asset management plans and wealth management products tend to fall when investors expect the benchmark interest rates or prevailing market interest rates to increase. As a result, an increase in interest rate may result in a decrease in the valuation of our existing assets and our profitability. On the other hand, an increase in interest rate may also lead to tighter liquidity, which may in turn drive up the fund cost of investing in debt securities and trust plans, asset management plans and wealth management products. Given the uncertainties about changes in future market interest rates, there is a risk that the value of our investments may decrease due to our misjudgment in making investment decisions according to our expectations on the future market interest rates.

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Interest Rate Risk Management

We have implemented uniform interest rate management policies and established interest rate management committee, which allow us to manage the interest rate risk. We set the pricing of our deposit and loan products following relevant laws and regulations. We use the PBoC benchmark interest rates, funding costs, asset risks and other indicators as the basis for pricing, and determine the prices of our products by considering the demand and business operations of our customers, the industry in which our customers operate and the prices of their competitors’ products as well as the business relationship between our customers and the Bank.

We periodically conduct sensitivity analysis on interest rates. We analyze the interest rate gap between interest-bearing assets and interest-bearing liabilities on bank accounts and transaction accounts periodically, based on which we guide the business development of the Bank.

We constantly follow the latest development of government economic policies, especially those that have substantial impacts on market interest rates. We continuously monitor and conduct in-depth research on the financial market conditions and macroeconomic conditions, so that we can improve our predictions on the interest rate volatility. Based on the changing trends of market interest rates, we make timely adjustments to the size and structure of assets in response to changes in the market environment so that the maturities of our assets and liabilities can match. For instance, in anticipation of a downward trend in the bond market, we lower our holdings of bond assets to minimize relevant risk. In addition, we strengthen the sales and marketing of long-term deposits so that we obtain stable funds from depositors and therefore reduce the interest risk. We have established various risk management policies for our financial market businesses. For details, please see “Risk Management – Credit Risk Management – Credit Risk Management for Our Financial Market Business”.

Exchange Rate Risk and Management

Exchange rate risk arises primarily from exchange rate fluctuations, as well as mismatches in the currency denomination of our on-and off-balance sheet assets and liabilities and mismatches in the currency positions of our foreign currency transactions, which may result in a loss of profits and a reduction of value of assets. Exchange rate risks faced by banks mainly include trading risk and conversion risk. Trading risk represents the possibility that banks may suffer losses as a result of a change in exchange rate while making payment in foreign currencies. Conversion risk represents the possibility that banks may suffer unrealized losses as a result of changes in exchange rates while converting foreign currencies into the reporting currency.

Exchange Rate Risk Management

As of the date of this document, we had not operated any foreign exchange business nor hold any foreign currency. However, we have put together various policies and operational procedures regarding our foreign exchange businesses, such as foreign currency settlement, sales and payment and foreign currency trading.

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LIQUIDITY RISK MANAGEMENT

Liquidity risk is the risk of failure to obtain sufficient funds in a timely manner or at a reasonable cost to fulfill payment obligations when due. Factors affecting our liquidity include changes in the maturity profiles of our assets and liabilities and the monetary policies of the PBoC, such as changes in the statutory deposit reserve ratio. We are exposed to liquidity risks primarily in our lending, trading and investment activities and in managing our liquidity position. The primary objective of our liquidity risk management is to ensure the availability of adequate funding at all times to fulfill our payment obligations and fund our business operation in a timely manner.

We manage liquidity risk through monitoring the maturities of our assets and liabilities in an effort to ensure we have sufficient funds in a timely manner or at a reasonable cost to fulfill our payment obligations as they become due. We have improved our liquidity risk management by following relevant PRC regulations such as the former CBRC’s announcement of the Administrative Measures for the Liquidity Risk Management of Commercial Banks (Provisional) (<商業銀行流動性風險管理辦法(試行)>) and the Core Indicators for the Risk Management of Commercial Banks (Provisional) (<商業銀行風險監管核心指標(試行)>). We observe the strict regulatory requirements, closely monitor liquidity ratios, formulate crisis management plans, enhance liquidity risk management and regularly apply stress tests. The major measures we have taken to manage liquidity risk include:

• establishing a liquidity risk management system and a organizational structure where our Board of Directors bears the ultimate responsibilities for our liquidity risk management and our senior management is responsible for formulating and reviewing liquidity risk management strategies and policies;

• conducting liquidity risk assessment before launching new products or business lines;

• centralizing cash flow management and position management; monitoring large fund flows and allocation of funds to increase returns on assets;

• improving the liquidity management system and strictly implement the limit control, monitoring liquidity risk through multiple key indicators, such as surplus deposit reserve ratio, liquidity ratio, liquidity coverage ratio, liquidity gap ratio and deposits from top ten customers to total deposits;

• conducting periodic cash flow analysis and quarterly liquidity stress tests to identify potential liquidity risks and develop risk mitigation measures; prepare contingency plan for liquidity risks to ensure the satisfaction of liquidity requirements for any contingency;

• reviewing and updating internal strategies and policies in relation to liquidity risk on an annual basis to satisfy liquidity requirements for any contingency; and

• formulating a liquidity risk contingency plan to satisfy liquidity demand for any contingency, such as default or sudden bankruptcy of counterparties. We closely monitor our liquidity risks and make routine liquidity assessment for the management’s review. Upon occurrence of potential liquidity risks, we would, according to the severity of relevant situations, take corresponding measures.

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OPERATIONAL RISK MANAGEMENT Operational risk is the risk of losses arising from inadequate or defective internal procedures, personnel and information systems, or external events. The primary operational risks we are exposed to include internal and external frauds, misconduct of employees, safety incidents, security failure, business interruptions, information system breakdown, and defects in the execution and settlement of transactions and business process management.

Principles of Our Management of Operational Risks We follow the Guidelines on the Operational Risk Management of Commercial Banks (商業銀行操作風險管理指引) promulgated by the former CBRC and have formed our operational risk management policies. In managing our operational risks, we follow the following key principles: (i) effectiveness: which requires our operational risk management policies to be fully implemented and each of our employees to be bound by our internal control measures; (ii) completeness, which requires our operational risk management to cover each employee in every department and each procedure in every business operation; (iii) prudence, which requires us to prioritize internal control and risk prevention in conducting new business activities; and (iv) cost efficiency, which requires us to identify and focus on significant risks to control the cost of operational risk management.

Three Lines of Defense While the Board of Directors is ultimately responsible for our operational risk management, the senior management leads our day-to-day operational risk management at our Bank. We have established three lines of defense against operational risks. The first line of defense is formed by our head office, branches and sub-branches and our various business departments. The second line of defense includes our Operational Risk Management Department and Internal Control and Compliance Department. Our Internal Control and Compliance Department takes the lead in organizing and analyzing the operational risk management work implemented by our business departments and other relevant departments. Our Internal Control and Compliance Department is also responsible for daily management for the office of the Operational Risk Management Committee. The third line of defense is constituted by our Internal Audit Department, which is responsible for conducting independent valuation of our operational risk management system and its implementation and monitoring the effectiveness of our operational risk management policies.

Standardized Management of Policies and Operational Procedures We continue to optimize our policies and operational procedures, and conduct inspections and monitoring on control points. We have an operational risk management mechanism covering our business processes in our head office, branches and sub-branches. For instance, we have a set of operational manuals that set forth detailed operational procedures for each position. These procedures cover, among others, credit review and approval, loan disbursement and post- disbursement management. We provide a continuous training scheme to strengthen our employees’ skills and require all of our employees to strictly follow these operational procedures in their daily work.

Bottom-Up Operational Risk Reporting System We have established a bottom-up operational risk reporting system, requiring routine reports on our daily operational risk monitoring status and immediate report on significant operational risk incidents.

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Each department, branch and sub-branch should submit quarterly reports on operational risk analysis to the Internal Control and Compliance Department at the head office, who will submit relevant reports to the Risk Management Committee and Risk Management Department for consolidation and further submission to the Board of Directors and the Board of Supervisors. Significant operational risk incidents should be reported on a case-by-case basis, and in principle, level by level. In an emergency case, significant operational risk incidents may be reported directly to a higher level.

Significant operational risk issues identified in the daily self-inspection or special inspection of departments at the head office should be verbally reported in time to the respective department heads, and reported in writing to the Internal Control and Compliance Department. When significant operational risk issues occur in our branches or sub-branches, the president of relevant branch or sub-branch should promptly report to the general manager of the corresponding department at the head office, who will further report to the senior management member in charge of respective department and submit written reports to the Internal Control and Compliance Department. Upon the receipt of a written report, the Internal Control and Compliance Department should report in writing to the Bank’s vice president in charge of the Internal Control and Compliance Department, who further report to the Bank’s president or chairman of the Board of Directors.

Standardized Supervision and Inspection Mechanism

We have formulated inspection plans on internal control and compliance for the entire bank. Combining regulatory requirements and our actual situation, we organize all business lines to conduct inspections on the internal control, compliance and operational risks of important positions, key business links, organizations and staff’s abnormal behaviors, in order to effectively eliminate potential operational risks.

Measures to Further Improve Our Operational Risk Management

We seek to further improve our operational risk management through the following measures:

• Strictly separating the responsibilities of the front, middle and back offices and optimizing operational procedures and risk control procedures;

• Establishing and improving an operational risk evaluation mechanism for new businesses, new products and new systems, and optimizing the relevant policies, procedures and systems based on the evaluation results;

• Establishing key indicator database for operational risks for all business lines to strengthen the base for dynamic operational risk monitoring and risk mitigation measures;

• Strengthening the compliance awareness for our employees through continuous trainings, on-site inspections and off-site monitoring;

• Issuing risk alters for risk incidents and improving operational risk management system; and

• Strengthening three lines of defense through the internal audit systems.

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INFORMATION TECHNOLOGY RISK MANAGEMENT Information technology risks include operational risk, reputational risk, legal risk and other types of risks caused by natural factors, human errors, technical loopholes and management failure arising from our use of information technology. We have set up Information Technology Risk Management Committee, and our Risk Management Department and IT Department at our head office are responsible for managing our information technology risks. We operate our business through an effective risk management system that can identify, assess and monitor information technology risks. We strive to continuously improve our information technology infrastructure and make our information technology management in line with the national standards and regulatory requirements. Our objective is to improve our information technology risk management through development and innovation, so as to strengthen our ability to prevent information technology risks and enhance our overall information technology risk management capabilities. We rely on the performance of our information technology systems for our business operations. As such, disruptions of our information technology may severely damage our business operations. We have established a self-assessment mechanism for information technology risk control which requires each of our departments to identify, register and evaluate the risks relating to information technology and take proper mitigation measures. We also closely monitor key risk indicators and issue risk alerts at the early stage. In addition, we conduct regular trainings for our employees to enhance their awareness on information security and improve the implementation of our information technology risk management.

Information Security Management We have established a complete organizational structure for information security, which covers the security management of actual status, staff, system construction, system operation and maintenance, and terminals. To ensure the security of information technology, we have hired professionals to oversee our information security and established a series of information security management measures to prevent any unauthorized online intrusion, attack, data leakage or third-party tampering on our information system. We also maintain security of our information system through various technologies such as encryption, anti-virus software and firewalls and we continuously update such technologies to enhance information security. In addition, we have established a standardized information security risk monitoring and assessment mechanism, which requires us to carry out periodic internal and external information security risk assessments and enables us to deal with any red flag issues promptly.

Business Continuity Management As part of our business continuity management measures, we have established a “Three Centers at Two Locations” disaster backup and recovery system comprising two local active application-level centers and an off-site data-level disaster recovery center, to ensure the continuity of our operations in the event of any interruption or breakdown of our host computer, storage, internet, database, intra-connection and application systems. We have two local data centers, namely a main data center and a disaster recovery center, both of which are active and application-level and can provide services to third parties at the same time. We have also constructed a data-level disaster recovery center in Chengdu. We have also established detailed contingency plans regarding the potential breakdown of our information system to ensure the continuity of our operations. We conduct annual disaster drill for business continuity for our important businesses.

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Information Technology Audit

We carry out comprehensive internal audits over our information technology risk management at least once every three years in order to safeguard the implementation of our various risk management measures effectively. Our Internal Audit Department formulates, implements and adjusts internal audit plans, inspects and evaluates the comprehensiveness and effectiveness of our information technology and internal control systems and completes the internal audit work pursuant to the audit plans. We may also engage external experts to carry out external audits on our hardware, software, files, and data in order to further identify existing risks associated with our information technology system. The CBRC or its agencies may, when necessary, designates qualified external audit institutions to conduct audits on our information technology system. The authorized audit reports shall take the same effect as those from the CBRC or its agencies upon review and approval by the CBRC. We are required to propose and implement rectifying measures within the time prescribed based on these audit reports.

REPUTATIONAL RISK MANAGEMENT

Reputational risk refers to the risk of negative publicity and comments on the Bank due to our operations, management, and other activities or external events. We already established an effective reputational risk management mechanism to monitor, identify, report, control, and assess our reputational risk, and at the same time manage the entire process of our reputational risk emergency handling, and reduce to the extent possible any loss and negative impact upon our Bank due to such incidents.

We have established a tiered organizational framework for reputational risk management. Our Board of Directors assume the ultimate responsibility of our reputational risk management. Our Reputational Risk Management Committee is responsible for specific reputational risk management, such as formulating internal rules and supervising different departments to undertake their duties in this regard. Our Risk Management Department at the head office is responsible for undertaking management of overall risks, including establishing a bank-wide reputational risk management system, formulating basic internal policies and developing relevant risk identification, evaluation, control, monitoring and reporting system. We also established the Administration Department at our head office to deal with the daily management of reputational risk.

In addition, we also actively collect, organize, and analyze information in relation to our reputation through our public complaint hotlines, customers’ visits, newspapers, television, radio, online media and other channels. By enhancing our relationship with the media, we strive to promote positive publicity and positive feedback on our business operations. We conduct regular review on our reputational risk and prepare quarterly analysis reports in this regard. In the event of any reputational incident, we will set up an emergency leading team, implement the contingency plans and timely resolve any such incident pursuant to our internal workflow. At the same time, we will also manage the press communications and other information publication in order to minimize the adverse impact caused by such incidents. The emergency leading team will closely monitor the implementation of the contingency plans and strengthen the analysis on relevant incidents.

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In addition, we have established an internal reporting mechanism to ensure timely and effective reporting to the head office upon the occurrence of material and urgent incidents throughout the Bank, whereas the involved branch or sub-branch shall make timely reports to Administration Department. The Administration Department shall collect reports and reports to chairman of the Board, president of the Bank, chairman of the Board of Supervisors and other relevant senior management members. Under specific emergency circumstances, the specific branch or sub-branch could report to chairman of the Board, president of the Bank, chairman of the Board of Supervisors and other relevant senior management members directly.

LEGAL AND COMPLIANCE RISK MANAGEMENT

Legal Risk

Legal risk refers to the risk of legal liability arising from violation of laws and regulations, breach of contracts, infringement of legal rights on others or otherwise in connection with any contract or business activities in which we are involved.

Our Internal Control and Compliance Department at the office head and the corresponding departments at the branch level are responsible for management of our legal risk. We carry out legal risk management mainly through the following measures:

• Implementing the legal review system. We require the contracts used for all types of our businesses to be reviewed by our Internal Control and Compliance Department (or its corresponding departments at our branches) and our external legal advisor before executing the same, and only to be used after obtaining the relevant legal opinion.

• We conduct legal review of our businesses to prevent legal risks and ensure the legality of our business activities.

• Formulating house forms/agreements. Our head office formulates house forms/agreements for our frequent business activities and uses them in bank-wide businesses to reduce legal risks.

• Strengthening litigation management. Our head office centralizes our bank-wide litigation management. We analyze and discuss action plan for our litigation case(s) and thus enhance our case management capability to reduce legal risks.

• Periodic legal training. We conduct numerous bank-wide legal trainings periodically every year to enhance the legal knowledge and risk awareness of our personnel.

• Legal risk alert system. For common legal risks in our business operations, we publish legal risk alerts and summarize new regulations affecting our business activities through our internal monthly publications by way to remind our personnel in order to prevent and reduce the occurrence of common legal risk incidents.

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Compliance Risk Compliance risk refers to the risk of being subject to any legal sanctions, regulatory penalties, or significant financial loss and reputational loss as a result of failure to comply with any applicable laws, regulations and rules. The objectives of our compliance risk management are to identify, evaluate and prevent compliance risks by establishing an effective and sound mechanism of compliance risk management, thereby building up a comprehensive risk management mechanism to ensure our compliance with the relevant applicable laws, regulations and rules. Our Board of Directors assume ultimate responsibility for our operational and management activities in compliance with relevant applicable laws and regulations. Our senior management is responsible for formulating compliance policies, whereas the Internal Control and Compliance Department at our head office and the corresponding departments at the branch level assist our senior management in the daily management of our compliance risk. Each of the business lines and business departments is principally responsible for its respective compliance with the applicable laws and regulations and compliance risk management. We have established “three lines of defense” for our compliance risk management work. The first line of defense consists of our business departments at all levels in charge of operating and managing various business lines, and these departments are responsible for their own compliance risk management. The second line of defense consists of our Internal Control and Compliance Department and Risk Management Department. The third line of defense consists of our Internal Audit Department, which is responsible for conducting audits on the performance and effectiveness of our first and second line of defense, and to timely identify and rectify any issues uncovered in relation to our compliance risk management. We carry out compliance risk management mainly through the following measures: • Conducting compliance review on our internal policies on a regular basis and updating and revising our policies according to our studies on governmental policies and regulatory requirements. • Hiring sufficient compliance management personnel with appropriate qualification, experience and expertise to provide adequate support to the compliance related work in each business line and branch. • Conducting periodic and specific evaluation on the risks identified, assessing the likelihood and significance of the damages caused by any legal sanctions and regulatory penalties, and implementing timely amendments to or improvement of relevant internal policies in order to strengthen our compliance risk management. • Conducting compliance inspection on operational and managerial activities of various branches and sub-branches. • Preparing compliance risk management reports and timely rectifies issues identified in the reports. • Incorporating compliance into our performance review system to emphasize the importance of compliance. • Strengthening our compliance management by providing enhanced trainings on legal compliance matters to our personnel to cultivate a compliance culture.

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Risk Management for Wealth Management We offer wealth management products to our retail banking customers and invest the proceeds from such wealth management products in debt securities. Compliance risks and reputational risks may arise from our wealth management business. For compliance risks, we have implemented relevant internal policies to strengthen accurate and adequate disclosure of information to investors in accordance with applicable PRC laws, regulations and regulatory requirements. We are required to disclose information relating to wealth management products to be true, accurate and complete. Our wealth management department shall provide branches and sub-branches with the relevant information disclosed in any announcement in a timely manner and be responsible for the truthfulness, accuracy and completeness of information. Each branch or sub-branch should disclose such information to our customers in timely manner in accordance with the agreed approach, frequency and channel of disclosure. Sales personnel should notify our customers of any significant issues in a timely manner. For reputational risks, we have enhanced and will continue to enhance our product management by conducting various market analyses, identifying suitable investment targets for our counterparties, performing pre-investment due diligence investigations and strictly controlling the proceeds received from the issuance of our wealth management products. We also strive to enhance our post-investment risk management by closely monitoring the mismatch between the maturities of the financial products we sold and the underlying credit assets. To ensure compliance with the former CBRC requirements relating to segregation of accounts, risk isolation, code of conduct and unified management as set forth in the Notice on the Relevant Issues Concerning the Improvement of the Management Organizational Structure of the Banks’ Wealth Management Business (<關於完善銀行理財業務組織管理體系有關事項的通知>) (CBRC Order [2014] No. 35), we have established the Asset Management Business Department as a specialized management department for wealth management products and also established a separate bookkeeping and accounting system for our wealth management products. In order to maintain centralized management, we have also established an asset management system for daily management of our wealth management products. In addition, we have implemented relevant internal policies to ensure accurate accounting recording and adequacy disclosures to investors regarding the underlying assets of the wealth management products issued by our Bank. According to the Measures for the Administration of the Sale of Wealth Management Products of Commercial Banks (<商業銀行理財產品銷售管理辦法>) (CBRC Order [2011] No. 5) issued by the former CBRC in 2011, we classify the wealth management products we issued into five categories based on their risk levels: level PR1 refers to low risk; level PR2 refers to low-medium risk; level PR3 refers to medium risk; level PR4 refers to medium-high risk; and level PR5 refers to high risk. We correlate the risk levels of our wealth management products to the risk tolerance level of our customers. Our customers can purchase wealth management products through our counters, account managers, self-service banking facilities or internet finance. We have formulated internal policies and procedures on the sales and marketing of our wealth management products to ensure the risk levels of wealth management products purchased by our customers matched their own individual risk tolerance level. We conduct a face-to-face customer suitability assessment before customers purchase or commit themselves to any wealth management products from us for the first time. We reassess each customer’s risk tolerance level at least once a year through our counter in outlets or self-service channels. Our customers can only purchase the wealth management products within their risk tolerance level.

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Anti-money Laundering

In line with the PRC Anti-Money Laundering Law and other applicable rules and regulations promulgated by the PBoC, we have established a sound anti-money laundering system with specific work procedures. We have clearly defined the duties and responsibilities of the Board of Directors, the Board of Supervisors, the senior management, the leading group of anti-money laundering, our various departments and our branches and sub-branches at all levels. Currently, the leading group of anti-money laundering in our head office, together with an anti-money laundering office under its supervision, lead our bank-wide anti-money laundering efforts. In addition, the Internal Control and Compliance Department in our head office takes the lead on anti-money laundering works, and is primarily responsible for leading the formulation of relevant internal rules, plans, and the construction of our bank-wide anti-money laundering system as well as assisting relevant anti-money laundering administrative authority or its detached offices in conducting anti-money laundering investigation.

We have developed internal policies and procedures with respect to anti-money laundering which are primarily relating to customer due diligence, transaction record keeping, suspected terrorism financing activities and anti-money laundering classification, and large and suspicious transaction reporting. We systematically conducted customer due diligence and collected relevant information and transaction records pursuant to applicable laws and regulations and our internal policies. We have developed an anti-money laundering system, which enables us to effectively identify, evaluate, monitor, control and report anti-money laundering risks. We also optimize the system and improve our model for identifying suspicious transactions on a continuous basis in order to enhance our ability to report large-amount and suspicious transactions. Pursuant to the latest PBoC regulatory requirements, we study self-monitoring module to improve its effectiveness. We provide frequent trainings to our employees to assist them to understand the latest development about domestic and international anti-money laundering laws.

We have also formulated our Customer Money Laundering Risk Classification Policy to classify our customers into five levels based on their money laundering risk. For newly-acquired customers who have a newly established business relationship with us, we review the customer information and classify their risk levels. We continuously monitor changes in the customer’s situation and their transactional records and adjust their risk levels as appropriate. For high risk customers, we conduct identification recognition semi-annually. We focus on analyzing their source of funds, use of funds, financial condition, operational status, controlling shareholders and controlling persons. We also conduct closer monitoring on their transactional details through our core business system or anti-money laundering system.

Our Bank has established a management system for large and suspicious transaction reporting, and has formulated independent monitoring rules and models according to the requirements set forth by the regulatory authorities. We submit suspicious transaction reports which fulfill the requirements and have gone through the artificial analysis to the Anti-Money Laundering Monitoring Center of PBoC, and we timely file the key suspicious transaction reports to the local PBoC representative as well as public security organizations.

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INTERNAL AUDIT

We consider internal audit essential to the sustainable development of our business operations. The objectives of our internal audit are to facilitate effective implementation of relevant laws and regulations regarding economics and finance, facilitate establishment and continuous improvement of our risk management, internal control and corporate governance system, and monitor performance of our departments and employees in order to achieve the strategic objectives of our Bank. Our Internal Audit Department shall strictly follow the principles of independence and objectives throughout our internal audit work.

We have established an independent internal audit system mainly comprised of the Board of Directors, the Audit Committee and the Internal Audit Department. The Board of Directors undertakes ultimate responsibility to ensure the independence and effectiveness of our internal audit. The Board also set up the Audit Committee to guide and evaluate the internal audit work of the Bank while our head office sets up independent internal audit department. Each branch and sub-branch and their relevant personnel shall accept audit by the Internal Audit Department in accordance with the relevant internal policies. The Internal Audit Department shall report to the Board of Directors, the Board of Supervisors and the senior management on a timely basis. In addition, our Internal Audit Department also reports to the Board of Directors annual audit plans, special audit reports, rectification reports, and upon approval of the Board of Directors, to further submits such plans or reports to relevant regulatory institutions.

Our Internal Audit Department formulates annual internal audit plans based on regulatory requirements as well as our operation, management and business profile, and carried out audit work strictly in accordance with the annual audit plans after such plans were being approved by the Board of Directors. During routine audits, we generally review our operations, information systems, financial reporting and risk management through systematic and standardized internal audit methods, and evaluate the effectiveness of our internal control and corporate governance. We also conduct audits on our exposures to various risks such as credit risk, market risk, operational risk and information technology risk. For the issues or deficiencies identified in audits, the Internal Audit Department shall timely give written notification to the relevant departments and shall supervise their implementation of effective rectification measures.

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CONNECTED TRANSACTIONS Upon the [REDACTED], the transactions we have entered into with our connected persons (as defined in the Listing Rules) will constitute connected transactions for us under Chapter 14A of the Listing Rules. We expect such transactions will continue following the [REDACTED], thereby constituting continuing connected transactions under the Listing Rules.

Exempt Continuing Connected Transactions We are a city commercial bank established in the PRC and regulated by CBIRC and PBoC. We provide commercial banking services and products in our ordinary and usual course of business to members of the public in the PRC, which include our connected persons (such as Directors, Supervisors, substantial Shareholders and/or their respective associates). Set forth below are details of connected transactions between us and our connected persons. These transactions are entered into on normal commercial terms (or commercial terms that are better to us) in the ordinary and usual course of our business, and thus are fully exempt from all reporting, annual review, announcement and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules.

Commercial banking services and products provided in the ordinary and usual course of business – Loans and other credit facilities to connected persons We extend loans and other credit facilities in the ordinary and usual course of business to certain of our connected persons on normal commercial terms (or commercial terms that are better to us) with reference to prevailing market interest rates. We expect that we will continue to provide loans and other credit facilities to our connected persons following the [REDACTED], which will constitute continuing connected transactions for us under Chapter 14A of the Listing Rules. The above loans and other credit facilities provided by us to our connected persons are in the ordinary and usual course of our business and on normal commercial terms (or commercial terms that are better to us) with reference to prevailing market interest rates. Therefore, these transactions will be fully exempt continuing connected transactions under Rule 14A.87(1) of the Listing Rules, namely financial assistance provided by us in our ordinary and usual course of business to a connected person on normal commercial terms (or commercial terms that are better to us), and thus will be fully exempt from all reporting, annual review, announcement and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules.

Commercial banking services and products provided in the ordinary and usual course of business – Deposits taking from connected persons We take deposits in the ordinary and usual course of business from certain of our connected persons at normal interest rates and on normal commercial terms (or commercial terms that are better to us). We expect that our connected persons will continue to place deposits with us following the [REDACTED], which will constitute continuing connected transactions for us under Chapter 14A of the Listing Rules. The deposits placed by our connected persons are on normal commercial terms (or commercial terms that are better to us) with reference to prevailing market interest rates and not secured by our assets. Therefore, these transactions will be fully exempt continuing connected transactions under Rule 14A.90 of the Listing Rules, namely financial assistance received by us from a connected person in the form of deposits on normal commercial terms (or commercial terms that are better to us) and not secured by our assets, and thus will be fully exempt from all reporting, annual review, announcement and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules.

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Commercial banking services and products provided in the ordinary and usual course of business – Other banking services and products to connected persons

We provide other banking services and products in the ordinary and usual course of business to certain of our connected persons on normal commercial terms (or commercial terms that are better to us). We expect that we will continue to provide such banking services and products to our connected persons following the [REDACTED], which will constitute continuing connected transactions under Chapter 14A of the Listing Rules. These transactions are conducted in the ordinary and usual course of our business and on normal commercial terms (or commercial terms that are better to us) and are expected to constitute de minimis transactions under Chapter 14A of the Listing Rules. Therefore, pursuant to Rule 14A.76(1) of the Listing Rules, these transactions will constitute fully exempt continuing connected transactions and will be fully exempt from all reporting, annual review, announcement and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules.

Property leasing agreements with connected persons

Property leasing agreements with Laojiao Real Estate

Our Bank entered into two property leasing agreements with Luzhou Laojiao Real Estate Development Co., Ltd. (瀘州老窖房地產開發有限公司)(“Laojiao Real Estate”), pursuant to which Laojiao Real Estate leased two properties located in Chengdu, Sichuan Province, the PRC to our Bank. Set out below are the major terms of these two property leasing agreements.

Use of the No. Location Construction Leasing term property Rent (sq.m.) (RMB) 1. 22/F, Laojiao Building, No. 198 of 1,146.19 May 1, 2018 – Office 550,171.2 Second Tianfu Street, High-Tech December 31, District, Chengdu, Sichuan Province, 2018 the PRC 2. Units 1206-1208 of 12/F, Laojiao 510.71 May 1, 2018 – Office 245,140.8 Building, No. 198 of Second Tianfu December 31, Street, High-Tech District, Chengdu, 2018 Sichuan Province, the PRC TOTAL 795,312.0

These two property leasing agreements with Liaojiao Real Estate are negotiated on arm’s length basis and are on normal commercial terms. As of the Latest Practicable Date, Luzhou Laojiao Group, a substantial Shareholder, was directly and indirectly interested in 22.09% equity interest in our Bank. Laojiao Real Estate is a wholly-owned subsidiary of Luzhou Laojiao Group and thus will become an associate of Luzhou Laojiao Group and a connected person of our Bank following the completion of the [REDACTED]. As the highest applicable percentage ratios of the above transactions calculated in aggregate are expected to be, less than 0.1%, the continuing transactions contemplated under these two property leasing agreements constitute de minimis transactions, and therefore are exempt from the reporting, annual review, announcement and independent shareholders’ approval requirements pursuant to Rule 14A.76(1) of the Listing Rules.

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Property leasing agreement with Yijia Real Estate

Our Bank entered into a property leasing agreement with Luzhou Yijia Real Estate Development Co., Ltd. (瀘州益佳房地產開發有限公司)(“Yijia Real Estate”), pursuant to which Yijia Real Estate leased a property with a lease area of 171 sq.m. located in Jiangyang District, Luzhou, Sichuan Province, the PRC to our Bank for placing power generation equipment for a term of three years from August 1, 2016 to July 31, 2019. The rentals and other charges of the leased property shall be paid as follows:

• the annual rent shall be RMB69,768, calculated based on RMB34 per sq.m. per month for each of the initial two years from August 1, 2016 to July 31, 2018 and shall be increased by 5% to RMB73,256.4 for the third year; and

• the expenses of utility services and property management services shall be borne by our Bank.

The property leasing agreement with Yijia Real Estate is negotiated on arm’s length basis and is conducted on normal commercial terms. As of the Latest Practicable Date, Sichuan Jiale Group, a substantial Shareholder, directly and indirectly held 17.00% equity interest in our Bank. Yijia Real Estate is held as to 70.44% by Sichuan Jiale Group and thus will become an associate of Sichuan Jiale Group and a connected person of our Bank following the completion of the [REDACTED]. As the highest applicable percentage ratios of the above transaction are expected to be, on an annual basis, less than 0.1%, the continuing transaction contemplated under the property leasing agreement with Yijia Real Estate constitutes de minimis transaction, and therefore is exempt from the reporting, annual review, announcement and independent shareholders’ approval requirements pursuant to Rule 14A.76(1) of the Listing Rules.

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BOARD OF DIRECTORS

Our Board of Directors consists of twelve Directors, including three executive Directors, four non-executive Directors and five independent non-executive Directors. Our Directors are elected for a term of three years and are subject to re-election, provided that the cumulative term of an independent non-executive Director shall not exceed six years in accordance with PRC laws and regulations. The following table sets forth certain information regarding our Directors.

Position(s) held Time of Date of at our Bank joining our appointment as of the Latest Name Age Bank as a Director Practicable Date Responsibilities Executive Directors Mr. YOU Jiang 44 July 2014 August 28, 2014 Executive Director Responsible for the overall (游江) and chairman of the management, strategic Board of Directors planning and business development of our Bank

Mr. XU Xianzhong 49 August 2010 April 29, 2011 Executive Director Responsible for the daily (徐先忠) and president overall operation of our Bank, and in charge of the internal control and compliance department (security department) and internal audit department of our Bank

Mr. LIU Shirong 52 October 1997 February 22, 2010 Executive Director, In charge of the office of (劉仕榮) vice president and the Board of Directors, secretary to the administration department Board of Directors and risk management department of our Bank

Non-executive Directors Ms. XU Yan (徐燕) 52 May 2013 May 17, 2013 Non-executive Responsible for providing Director strategic advice on corporate developments and making recommendations on major operational and managerial decisions of our Bank

Mr. XIONG Guoming 55 February February 22, 2010 Non-executive Responsible for providing (熊國銘) 2010 Director strategic advice on corporate developments and making recommendations on major operational and managerial decisions of our Bank

Mr. LIU Qi (劉奇) 34 November November 29, 2017 Non-executive Responsible for providing 2017 Director strategic advice on corporate developments and making recommendations on major operational and managerial decisions of our Bank

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Position(s) held Time of Date of at our Bank joining our appointment as of the Latest Name Age Bank as a Director Practicable Date Responsibilities Mr. DAI Zhiwei 49 December December 10, 2015 Non-executive Responsible for providing (代志偉) 2015 Director strategic advice on corporate developments and making recommendations on major operational and managerial decisions of our Bank Independent non-executive Directors Mr. LIU Xiaoyu 64 May 2013 May 17, 2013 Independent Responsible for (劉小渝) non-executive supervising and providing Director independent advice on the operation and management of our Bank

Mr. GU Ming’an 52 March 2016 March 18, 2016 Independent non- Responsible for (辜明安) executive Director supervising and providing independent advice on the operation and management of our Bank

Mr. HUANG Yongqing 56 November November 7, 2017 Independent Responsible for (黃永慶) 2017 non-executive supervising and providing Director independent advice on the operation and management of our Bank

Mr. YE Changqing 47 [REDACTED](1) [REDACTED](1) Independent Responsible for (葉長青) non-executive supervising and providing Director independent advice on the operation and management of our Bank

Mr. TANG Baoqi 58 [REDACTED](1) [REDACTED](1) Independent Responsible for (唐保祺) non-executive supervising and providing Director independent advice on the operation and management of our Bank

Note: (1) Mr. Ye Changqing and Mr. Tang Baoqi were approved as independent non-executive Directors of our Bank by the Shareholders’ general meeting on May 30, 2018. The appointment of Mr. Ye Changqing and Mr. Tang Baoqi as independent non-executive Directors is subject to the approval of CBRC Sichuan Office and the [REDACTED] of the H Shares on the Hong Kong Stock Exchange.

Executive Directors Mr. YOU Jiang (游江), aged 44, has been a Director since August 2014 and the chairman of the Board of Directors since December 2014. He is primarily responsible for the overall management, strategic planning and business development of our Bank. Mr. You has around 23 years of experience in the banking industry. Prior to joining our Bank, Mr. You served as the division director (處長) of the First Division of Supervision and Regulation of Small and Medium Rural Financial Institutions of CBRC Sichuan Office (四川銀監局農村中小金融機構監管一處) from September 2013 to June 2014. He worked as the director-general (局長) of CBRC Nanchong Branch (中國銀監會南充監管分局) from May 2011 to September 2013. Mr. You worked as a deputy director-general (副局長) of CBRC Ziyang Branch (中國銀監會資陽監管分局) from December 2007 to April 2009 and then its director- general (局長) from April 2009 to May 2011. Mr. You served as a deputy division director (副

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處長) of the Division of Supervision and Regulation of Cooperative Financial Institutions of CBRC Sichuan Office (四川銀監局合作金融機構監管處) from January 2007 to December 2007, during which period he also worked on secondment as a vice general manager of the risk management department of the Sichuan Provincial Branch of Industrial and Commercial Bank of China Limited (“ICBC”) (中國工商銀行股份有限公司四川省分行) and a vice president of the Chunxi sub-branch of ICBC (中國工商銀行股份有限公司春熙支行) from May 2007 to December 2007. Mr. You worked at CBRC Sichuan Office as a vice office director (辦公室副主任) from January 2005 to January 2007. He worked as a member of the planning group of CBRC Ya’an Branch (中國銀監會雅安監管分局) from November 2003 to February 2004 and then a deputy director-general (副局長) of the CBRC Ya’an Branch (中國銀監會雅安監管分局) from February 2004 to January 2005. Mr. You worked at PBoC Ziyang Central sub-branch (中國人民銀行資陽市中心支行) as the assistant to president from July 2002 to November 2003. Prior to that, Mr. You worked at the secretarial division of the CPC committee office of PBoC Chengdu Branch (中國人民銀行成都分行) as a staff member from December 1998 to January 2000 and then the section chief (科長) from January 2000 to July 2002. He worked at PBoC Sichuan Branch (中國人民銀行四川省分行) as a cadre of the business department from July 1995 to July 1996 and a staff member of the secretarial division of the general office from July 1996 to December 1998. Mr. You obtained a bachelor’s degree in economics, a master’s degree in economics and a doctoral degree in economics from Southwestern University of Finance and Economics (西南財經大學) in Sichuan Province, the PRC, in July 1995, December 2002 and July 2010, respectively. Mr. XU Xianzhong (徐先忠), aged 49, has been a Director since April 2011 and the president of our Bank since August 2011. He is primarily responsible for the daily overall operation of our Bank. He is also in charge of the internal control and compliance department (security department) and internal audit department of our Bank. Mr. Xu has around 27 years of experience in the banking industry. Mr. Xu joined our Bank in August 2010 as a candidate for vice president and was a candidate for president from December 2010 to August 2011. Mr. Xu worked at ICBC for around 19 years before joining our Bank. From March 2009 to August 2010, Mr. Xu served as a vice president of ICBC Neijiang Branch (中國工商銀行股份有限公司內江分行). He worked as a vice president of ICBC Guangyuan Branch (中國工商銀行股份有限公司廣元分行) from February 2006 to March 2009. Mr. Xu worked as the president of ICBC Xuyong Sub-branch (中國工商銀行股份有限公司敘永縣支行) from August 2005 to February 2006. He worked at ICBC Gulin Sub-branch (中國工商銀行股份有限公司古藺縣支行) as a vice president from May 2003 to September 2004 and then the president from September 2004 to August 2005. Prior to that, he worked as a staff at Jiangyang office of ICBC Luzhou Branch (中國工商銀行股份有限公司瀘州市分行江陽分理處) from August 1991 to December 1991, at the ICBC Luzhou Branch Jiangyang sub-branch (中國工商銀行股份有限公司瀘州市分行江陽支行) from January 1992 to August 1998 and then worked successively as a staff of accounting auditing center (會計核算中心) and deputy director (副主任) of auditing center (核算中心) at ICBC Luzhou Branch (中國工商銀行股份有限公司瀘州市分行) from August 1998 to May 2003. Mr. Xu obtained a bachelor of science degree from Xiamen University (廈門大學) in Fujian Province, the PRC, in July 1991. Mr. Xu graduated from the part-time postgraduate course in economic and modern management and obtained a master of laws degree in June 2002 from Southwest China Normal University (西南師範大學) (currently known as Southwest University (西南大學)) in Chongqing, the PRC. Mr. Xu was appraised as a senior economist by the Appraisal and Approval Committee for Professional & Technical Competence of ICBC (中國工商銀行專業技術職務任職資格評審委員會) in August 2005.

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Mr. LIU Shirong (劉仕榮), aged 52, has been a Director since February 2010, a vice president of our Bank since May 2016 and the secretary to the Board of Directors since December 2012. He is primarily in charge of the office of the Board of Directors, administration department and risk management department of our Bank. Mr. Liu has over 25 years of experience in the banking industry. Mr. Liu joined our Bank in October 1997. Mr. Liu served as the head of the office of the Board of Directors from March 2012 to October 2014. Prior to that, he acted as the responsible person of the accounting and finance department of our Bank from November 2011 to March 2012. Mr. Liu worked as the head of the administration office (行政辦公室主任) of our Bank from February 2008 to November 2011. He served as the office head (辦公室主任) of our Bank from September 2005 to February 2008. Mr. Liu worked as the head of the credit management department of our Bank from January 2005 to September 2005. He worked as the president of Binjiang sub-branch (濱江支行) of our Bank from November 2002 to January 2004 and the president of Jiangyangzhonglu sub-branch (江陽中路支行) of our Bank from January 2004 to January 2005. Mr. Liu served as an acting vice president of Tongda sub-branch (通達支行) of our Bank from October 1997 to February 1998 and then its vice president from February 1998 to November 2002. Prior to joining our Bank, Mr. Liu worked at Haikou City Bo’ai Urban Credit Cooperative (海口市博愛城市信用社) and served as a deputy office head (辦公室副主任) and the manager of the credit department from February 1993 to June 1993 and also as a vice head (副主任), the manager of its treasury department and the manager of the credit department from June 1993 to October 1997. Mr. Liu graduated from Luzhou Finance and Trade School (瀘州財貿學校) in the PRC in July 1985, majoring in finance and accounting. He passed the self-taught higher education exams of accounting at junior college level (會計專業專科自學考試) and was approved for graduation by Southwestern University of Finance and Economics (西南財經大學) in Sichuan Province, the PRC, in June 1989. Mr. Liu graduated from the Correspondence Institute of the Central Communist Party School of the CPC (中共中央黨校函授學院) in the PRC in December 2001, majoring in economic management (through correspondence study). Mr. Liu obtained the intermediate level certificate in financial economics conferred by Ministry of Personnel of the PRC (中華人民共和國人事部) (currently known as Ministry of Human Resources and Social Security of the PRC (中華人民共和國人力資源和社會保障部)) in November 2000. He was certified as a senior international finance manager jointly by China Association of Chief Financial Officers (中國總會計師協會), International Financial Management Association (國際財務管理協會), Ministry of Human Resources and Social Security of the PRC (中華人民共和國人力資源和社會保障部) and Research Center of State- owned Assets Supervision and Administration Commission of the State Council (國務院國有資產監督管理委員會研究中心) in February 2013.

Non-executive Directors Ms. XU Yan (徐燕), aged 52, has been a Director since May 2013. She is primarily responsible for providing strategic advice on corporate developments and making recommendations on major operational and managerial decisions of our Bank. Ms. Xu has over 33 years of experience in accounting and financial management. Ms. Xu has been the president assistant of Luzhou Laojiao Group since February 2016, the general manager of the finance management center of Luzhou Laojiao Group since November 2015 and a director of Luzhou Xinglu Water (Group) Co., Ltd., a company listed on the Hong Kong Stock

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Exchange (stock code: 02281) since December 2015. From January 2014 to March 2018, Ms. Xu was a director of Luzhou Laojiao Yongsheng Property Investment Management Co., Ltd. (瀘州老窖永盛置業投資管理有限公司) (currently known as Sichuan Kangrun Investment Group Co., Ltd. (四川康潤投資集團有限公司)). Ms. Xu served as the chairman of the board of directors of Longma Xingda Small Loan Co., Ltd. (龍馬興達小額貸款股份有限公司) from November 2011 to December 2016. Ms. Xu worked at Luzhou Laojiao Group and served as a financial staff from December 2000 to April 2004 and the financial executive, and a deputy head (副主任) and then the head (主任) of the financial center from May 2004 to October 2015. Ms. Xu worked as the financial executive of the Third Branch of Luzhou Laojiao (瀘州老窖股份有限公司第三公司) from January 1999 to November 2000. She served as the financial chief of Luzhou Laojiao Automobile Transportation Company (瀘州老窖汽車運輸公司) from January 1997 to December 1998. Ms. Xu served as the financial manager of Luzhou Laojiao Hotel (瀘州老窖大酒店) from December 1995 to December 1996. Prior to that, Ms. Xu worked as a cashier, cost accounting and payroll staff at Luzhou Laojiao Co., Ltd. (瀘州老窖股份有限公司) from October 1984 to December 1995.

Ms. Xu passed the self-taught higher education exams of accounting at junior college level (會計專業專科自學考試) and was approved for graduation by Southwestern University of Finance and Economics (西南財經大學) in Sichuan Province, the PRC, in December 1992 and graduated from the Correspondence Institute of the Party School of Sichuan Provincial Committee of the CPC (中國共產黨四川省委員會黨校函授學院) in the PRC in December 1999, majoring in finance and accounting through correspondence study. Ms. Xu was certified as a senior international finance manager jointly by China Association of Chief Financial Officers (中國總會計師協會), International Financial Management Association (國際財務管理協會), Ministry of Human Resources and Social Security of the PRC (中華人民共和國人力資源和社會保障部) and Research Center of State-owned Assets Supervision and Administration Commission of the State Council (國務院國有資產監督管理委員會研究中心) in November 2011.

Ms. Xu Yan was previously a director of the companies shown in the table below before their respective deregistration.

Place of Nature of Date of Name of company establishment business Position Status deregistration Luzhou Hengtaichun Trading PRC Wholesale and Director Dissolved and August 21, 2014 Co., Ltd. (瀘州市亨泰醇商 retail of goods deregistered 貿有限公司) Luzhou Shuntai Technology PRC Manufacturing Director Dissolved and March 16, 2010 Development Co., Ltd. (瀘 deregistered 州順泰科技開發有限公司)

Ms. Xu confirmed that the deregistration of each of the above companies was voluntary by the resolutions of the shareholders of the respective companies. The above companies were solvent at the time of deregistration, and she did not incur any debt and/or liabilities because of such deregistration, and that the deregistration did not have any negative effect on our Bank.

Mr. XIONG Guoming (熊國銘), aged 55, has been a Director since February 2010. He is primarily responsible for providing strategic advice on corporate developments and making recommendations on major operational and managerial decisions of our Bank.

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Mr. Xiong has over 23 years of experience in corporate management. Mr. Xiong has been the chairman of the board of directors of Sichuan Jiale Group since September 1998 and held positions at several subsidiaries of Sichuan Jiale Group, including a director of Luzhou Jiaxi Industrial Co., Ltd. (瀘州佳希實業有限公司) since October 2017, the chairman of the board of directors of Luzhou Jiale Assets Management Co., Ltd. (瀘州市佳樂資產管理股份有限公司) since September 2017, the chairman of the board of directors of Hainan Wanjia Culture and Tourism Development Co., Ltd. (海南萬佳文旅發展有限公司) since May 2017, the chairman of the board of directors of Luzhou Jiarun Real Estate Development Co., Ltd. (瀘州佳潤房地產開發有限公司) since March 2014, the chairman of the board of directors of Luzhou Yijia Investment Co., Ltd. (瀘州益佳投資有限公司) since July 2012 and the chairman of the board of directors and the general manager of Luzhou Yijia Real Estate Development Co., Ltd. (瀘州益佳房地產開發有限公司) since January 2011, a director of Chongqing Centennial Jiale Properties Co., Ltd. (重慶百年佳樂置業有限公司) since November 2004, a director of Luzhou Nanyuan Taxi Co., Ltd. (瀘州南苑出租汽車有限公司) since January 2003 and a director of Luzhou Nanyuan Hotel Co., Ltd. (瀘州南苑賓館有限公司) since December 2002. Mr. Xiong has also been a director of Luzhou Rural Commercial Bank Co., Ltd. (瀘州農村商業銀行股份有限公司) since July 2017. Prior to that, Mr. Xiong served as a director of Luzhou Longmatan Rural Commercial Bank Co., Ltd. (瀘州龍馬潭農村商業銀行股份有限公司) (one of the predecessors of Luzhou Rural Commercial Bank Co., Ltd.) from October 2013 to July 2017. Mr. Xiong served as the general manager of Jiale Real Estate from September 1994 to September 1998. Mr. Xiong obtained an executive master’s degree in business administration from Tsinghua University (清華大學) in Beijing, the PRC, in July 2010 and another executive master degree in business administration from Tsinghua University (清華大學) in Beijing, the PRC, in January 2015. Mr. Xiong was approved as a senior engineer by Sichuan Title Reform Leading Group (四川省職改領導小組) in June 1999. Mr. Xiong Guoming was previously the legal representative and a director of the companies shown in the table below before their respective deregistration and/or revocation of business license.

Date of deregistration and/or revocation Place of Nature of of business Name of company establishment business Position Status license Chengdu Jiale Property PRC Wholesale and Legal Business license March 20, 2006 Investment Co., Ltd. (成都 retail of goods representative revoked ) 佳樂置業投資有限公司 and director Luzhou Jiale Water Property PRC No business Legal Dissolved and August 28, 2006 Development Co., Ltd. operation since representative deregistered (瀘州佳樂水務地產開發有限 establishment and director 公司) Luzhou Jiale Water PRC No business Legal Dissolved and August 28, 2006 Technology Development operation since representative deregistered Co., Ltd. (瀘州佳樂水務技 establishment and director 術開發有限公司) Mr. Xiong confirmed that the business license of Chengdu Jiale Property Investment Co., Ltd. (成都佳樂置業投資有限公司) was revoked due to its failure to undergo annual inspection under the relevant PRC regulations because of its unfamiliarity with the relevant laws and regulations.

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Mr. Xiong confirmed that the deregistration of each of Luzhou Jiale Water Property Development Co., Ltd. (瀘州佳樂水務地產開發有限公司) and Luzhou Jiale Water Technology Development Co., Ltd. (瀘州佳樂水務技術開發有限公司) was voluntary by the resolutions of the shareholders of the respective companies. Mr. Xiong confirmed that the above companies never commenced operations, and he did not incur any debt and/or liabilities because of such deregistration/ revocation of business license, and that the deregistration/revocation of business license did not have any negative effect on our Bank. Mr. LIU Qi (劉奇), aged 34, has been a Director since November 2017. He is primarily responsible for providing strategic advice on corporate developments and making recommendations on major operational and managerial decisions of our Bank. Mr. Liu has around 10 years of experience in administrative and corporate management. Mr. Liu has been an executive director and the general manager of Luzhou Industrial Investment Leasing Co., Ltd. (瀘州工投租賃有限公司) since November 2017, a vice general manager of Luzhou Industrial Investment Group and a director and the general manager of Luzhou Industrial Investment Financing Guarantee Co. Ltd. (瀘州工投融資擔保有限公司) since June 2017, a director of Southwest Hospital Investment Co., Ltd. (西南醫療健康產業投資有限公司) since April 2017, and a director of Luzhou Culture and Tourism Investment Group Co., Ltd. (瀘州市文化旅遊發展投資集團有限公司) since September 2016. Mr. Liu served as a director of Luzhou Hejiang Industrial Investment Co., Ltd. (瀘州合江工業投資有限公司) from April 2016 to May 2017. Mr. Liu also held a number of other positions in Luzhou Industrial Investment Group, including the head of the office of the board of directors from June 2015 to November 2017 and the assistant to general manager from May 2016 to November 2017. Mr. Liu served as the principal of Luzhou Section Reforming Leading Group of Sichuan Chemical Engineering Holding Group Co., Ltd. (四川化工控股集團瀘州板塊改革工作領導小組辦公室) from May 2014 to April 2015. Prior to that, he worked at the People’s Government of Lu County (瀘縣人民政府) as a staff member of the office secretary section (辦公室秘書科) from August 2011 to December 2011, a deputy section chief (副科長) of the office secretary section from December 2011 to August 2012, the head (主任) of the supervision and inspection office (督察室) from August 2012 to April 2015 and a deputy office director (辦公室副主任) from July 2013 to April 2015. Mr. Liu served as a staff member, a deputy head (副主任) and organization personnel cadre (組織人事幹事) of Luxian Niutan Town CPC and People’s Government Office (瀘縣牛灘鎮黨政辦公室) from July 2008 to August 2011. Mr. Liu obtained a bachelor’s degree in economics from Xihua University (西華大學)in Sichuan Province, the PRC, in June 2008. Mr. DAI Zhiwei (代志偉), aged 49, has been a Director since December 2015. He is primarily responsible for providing strategic advice on corporate developments and making recommendations on major operational and managerial decisions of our Bank. Mr. Dai has around 28 years of experience in administrative and corporate management. Mr. Dai has been a director of Sichuan Xuda Railway Co., Ltd. (四川敘大鐵路有限責任公司) since September 2016, a director of Sichuan South Express Highway Co., Ltd. (四川南方高速公路股份有限公司) since July 2016, a director of Sichuan Yusheng Wine Industry Investment Management Co., Ltd. (四川宇晟酒業投資管理有限公司) since August 2015, a director and the general manager of Luzhou Chengnan Construction Investment Co., Ltd. (瀘州市城南建設投資有限責任公司) and the general manager of Luzhou Fundamental Infrastructure Construction Investment Co., Ltd. (瀘州市基礎建設投資有限公司) since June 2015, a director of Xinglu

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Investment Group since March 2015 and the general manager of Xinglu Investment Group since April 2015. Mr. Dai served as a member of the standing committee of the CPC and a deputy district chief (副區長) of Naxi district of Luzhou from May 2012 to February 2014 and a deputy secretary (副書記) of CPC committee of Naxi district of Luzhou from February 2014 to March 2015. Mr. Dai worked as a deputy county chief (副縣長) of Hejiang county from November 2007 to May 2012 and a member of the standing committee of the CPC of Hejiang county from October 2011 to May 2012. He worked as the head (主任) of Luzhou Agriculture Development Office (瀘州市農業發展辦公室) from July 2007 to November 2007. Mr. Dai worked at the Agriculture Section of Luzhou Municipal Finance Bureau (瀘州市財政局農業科) as a senior staff member (副主任科員) and then a principal staff member (主任科員) from August 1998 to June 2002, a deputy section chief (副科長) from June 2002 to May 2004 and then the section chief (科長) from May 2004 to July 2007. Mr. Dai worked as a senior staff member (副主任科員) of Luzhou State-owned Assets Bureau (瀘州市國資局) from August 1994 to July 1998. He worked as a staff and then a staff of the Three Investigation Office (三查辦) of Luzhou Municipal Finance Bureau from August 1990 to August 1994.

Mr. Dai obtained a bachelor’s degree in economics from Southwestern University of Finance and Economics (西南財經大學) in Sichuan Province, the PRC, in July 1990.

Independent Non-executive Directors

Mr. LIU Xiaoyu (劉小渝), aged 64, has been an independent non-executive Director since May 2013. He is primarily responsible for supervising and providing independent advice on the operation and management of our Bank.

Mr. Liu has over 37 years of experience in banking industry. Mr. Liu worked at the Agricultural Bank of China Limited (中國農業銀行股份有限公司) for over 32 years. From June 2006 to September 2013, Mr. Liu held a number of positions successively at Agricultural Bank of China Limited Luzhou Branch (中國農業銀行股份有限公司瀘州市分行), including the head of the president’s office from June 2006 to August 2009, a cadre (division-head level) (正處級幹部) of the president’s office from August 2009 to December 2011 and a researcher (division-level) of the president’s office from December 2011 to September 2013. From November 2000 to June 2006, Mr. Liu worked as the president of Agricultural Bank of China Limited Neijiang Branch (中國農業銀行股份有限公司內江分行). From June 1988 to November 2000, Mr. Liu held a number of positions successively at Agricultural Bank of China Limited Luzhou Branch (中國農業銀行股份有限公司瀘州市分行), including the section chief (科長)of the credit section (信貸科) from June 1988 to September 1988, the assistant to president (行長助理) from September 1988 to November 1990, a vice president from November 1990 to June 1997 and then the president from June 1997 to November 2000. From March 1981 to June 1988, Mr. Liu held a number of positions successively at Agricultural Bank of China Limited Lu County Sub-branch (中國農業銀行股份有限公司瀘縣支行), including a credit clerk (信貸員)of Fuji Business Office (福集營業所) from March 1981 to October 1981, an officer (工作員)ofthe agricultural credit section (農業信貸科) from October 1981 to May 1984, a deputy head (副股長) of the agricultural credit department (農業信貸股) from May 1984 to January 1985, a deputy head (副股長) of the planning department (計劃股) from January 1985 to August 1985, and a vice president from August 1985 to June 1988.

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Mr. Liu graduated from Southwest China Normal University (西南師範大學) (currently known as Southwest University (西南大學)) in Chongqing, the PRC, in June 1996, majoring in financial securities through correspondence study. Mr. Liu was certified as senior economist by the appraisal committee of Agricultural Bank of China Limited (中國農業銀行股份有限公司)in November 1993.

Mr. GU Ming’an (辜明安), aged 52, has been an independent non-executive Director since March 2016. He is primarily responsible for supervising and providing independent advice on the operation and management of our Bank.

Mr. Gu has been a teacher in Southwestern University of Finance and Economics (西南財經大學) since 1999 and was promoted to an associate professor in 2002 and then a professor in 2008. Mr. Gu has been an independent director of Sichuan Guoxin Liancheng Assets Management Co., Ltd. (四川省國新聯程資產管理有限公司) (formerly known as Chengdu Guoxin Liancheng Asset Management Co., Ltd. (成都市國新聯程資產管理有限公司)) since September 2017, an independent non-executive director of Luzhou Xinglu Water (Group) Co., Ltd., a company listed on the Hong Kong Stock Exchange (stock code: 2281) since March 2017, an independent director of Sichuan Longchang Rural Commercial Bank Co., Ltd. (四川隆昌農村商業銀行股份有限公司) since March 2016, an independent director of Sichuan Troy Information Technology Co., Ltd. (四川創意信息技術股份有限公司), a company listed on the Shenzhen Stock Exchange (stock code: 300366) since January 2016 and an independent director of Chengdu Hi-Tech Development Co., Ltd. (成都高新發展股份有限公司), a company listed on the Shenzhen Stock Exchange (stock code: 000628) since September 2015. Mr. Gu served as an independent director of Zhejiang Renzhi Co., Ltd. (浙江仁智股份有限公司), a company listed on the Shenzhen Stock Exchange from September 2014 to September 2017. Prior to joining Southwestern University of Finance and Economics (西南財經大學), Mr. Gu worked at Sichuan Light Chemical Industry College (四川輕化工學院) (currently known as Sichuan Light Chemical Industry University (四川輕化工大學)) from July 1993 to July 1999 and worked at Chenguang Chemical Research Institute of Chemical Industry Ministry (化工部晨光化工研究院) (currently known as Zhonghao Chenguang Chemical Research Institute Co., Ltd. (中昊晨光化工研究院有限公司)) from July 1989 to July 1993.

Mr. Gu obtained a bachelor of laws degree from Southwest China Normal University (西南師範大學) (currently known as Southwest University (西南大學)) in Chongqing, the PRC, in July 1989, a master of laws degree from Southwestern University of Political Science & Law (西南政法大學) in Chongqing, the PRC, in July 1999 and the doctoral degree in law from Southwestern University of Finance and Economics (西南財經大學) in Sichuan Province, the PRC, in July 2008.

Mr. HUANG Yongqing (黃永慶), aged 56, has been an independent non-executive Director since November 2017. He is primarily responsible for supervising and providing independent advice on the operation and management of our Bank.

Mr. Huang has around 19 years of experience in law. Mr. Huang has been the head of Beijing Long’an (Chengdu) Law Firm (北京隆安(成都)律師事務所) since July 2016 and a senior partner of Beijing Long’an Law Firm (北京隆安律師事務所) since September 1999.

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Mr. Huang has been a member of the legal advisory board for the overseas Chinese (為僑服務法律顧問團) of the Overseas Chinese Affairs Office of the State Council (國務院僑務辦公室) since December 2017, a vice president of China Trademark Association (中華商標協會) since October 2016, an external lecturer of Tianjin Prosecutors College (天津市檢察官學院) since October 2015, an executive council member of the investment association of the CCTV- Securities News Channel (CCTV證券諮訊頻道) of Central Xinying Digital Media Co., Ltd. (中央新影數字傳媒有限公司) since June 2014, a council member of the Sichuan Enterprise Confederation (四川省企業聯合會) and the Sichuan Enterprise Directors Association (四川省企業家協會) since January 2014, a council member of the council of Jurist magazine of Law School of Renmin University of China (中國人民大學法學院《法學家》雜誌) since May 2009, and the director (所長) of the Futures Law Research Institute of China University of Political Science and Law (中國政法大學期貨法律研究所) since December 1995.

Mr. Huang obtained a bachelor of laws degree from Renmin University of China (中國人民大學) in Beijing, the PRC, in July 1983 and a master of laws degree from China University of Political Science and Law (中國政法大學) in Beijing, the PRC, in July 1986. Mr. Huang obtained the lawyer’s qualification certificate of the PRC in January 1999.

Mr. YE Changqing (葉長青), aged 47, was appointed as our independent non-executive Director on May 30, 2018 which will be subject to the approval of CBRC Sichuan Office and the [REDACTED] of the H Shares on the Hong Kong Stock Exchange. He is primarily responsible for supervising and providing independent advice on the operation and management of our Bank.

Mr. Ye has over 25 years of experience in accounting, financial advisory and investments. Mr. Ye has been an independent director of Baozun Inc., a company listed on the NASDAQ Stock Exchange (stock code: BZUN) since May 2016. Mr. Ye also served as a consultant for CITIC PE Advisors (Hong Kong) Limited (中信產業投資基金(香港)顧問有限公司) from January 2016 to December 2016. Mr. Ye worked at CITIC Fund Management Co., Ltd. (中信產業投資基金管理有限公司) from February 2011 to December 2015 and was the managing director (董事總經理), the chief financial officer and a member of the investment committee when he left. Mr. Ye worked at PricewaterhouseCoopers Zhong Tian LLP (Special General Partnership) (普華永道中天會計師事務所(特殊普通合夥)) from April 1993 to January 2011 and was a partner (合夥人)of the consulting department, the head (主管) of the consulting department of Shanghai office and the head (主管) of the enterprise merger and acquisition department of Shanghai office when he left.

Mr. Ye obtained a bachelor of laws degree from Huazhong University of Technology (華中理工大學) (currently known as Huazhong University of Science and Technology (華中科技大學)), in Hubei Province, the PRC, in July 1992 and further obtained the degree of master of business administration from University of Warwick in the United Kingdom in November 1999. Mr. Ye is a member (non-practising) of Shanghai Institute of Certified Public Accountants.

Mr. TANG Baoqi (唐保祺), aged 58, was appointed as our independent non-executive Director on May 30, 2018 which will be subject to the approval of CBRC Sichuan Office and the [REDACTED] of the H Shares on the Hong Kong Stock Exchange. He is primarily responsible for supervising and providing independent advice on the operation and management of our Bank.

228 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

Mr. Tang has around 19 years of experience in financial industry. Mr. Tang once worked at China CINDA (HK) Holdings Company Limited as a senior manager, the general manager of risk management department and the chief risk officer since February 2000 and was a director when he left China CINDA (HK) Holdings Company Limited in March 2018. Mr. Tang was a non-executive director of China Fortune Financial Group Limited (中國富強金融集團有限公司), a company listed on the Hong Kong Stock Exchange (stock code: 290) from March 2016 to April 2018, a non-executive director of China National Materials Company Limited (中國中材股份有限公司) from July 2011 to July 2016, and an executive director of Silver Grant International Industries Limited (銀建國際實業有限公司), a company listed on the Hong Kong Stock Exchange (stock code: 00171) from March 2008 to July 2011. Mr. Tang worked at the creditors’ rights department (債權部) of China CINDA Asset Management Co., Ltd. (中國信達資產管理股份有限公司), a company listed on the Hong Kong Stock Exchange (stock code: 01359; preference share stock code: 04607) from June 1999 to February 2000.

Mr. Tang obtained a bachelor’s degree in economics from Hubei Institute of Finance and Economics (湖北財經學院) (currently known as Zhongnan University of Economics and Law (中南財經政法大學)) in Hubei Province, the PRC, in July 1983. Mr. Tang was certified as a senior economist by China People’s Construction Bank (中國人民建設銀行) (currently known as China Construction Bank Corporation (中國建設銀行股份有限公司)) in December 1995.

Mr. Tang Baoqi was previously a director of the company shown in the table below before its deregistration.

Place of Nature of Date of Name of company establishment business Position Status deregistration Zhejiang Construction Real PRC Real estate Director Dissolved and November 7, 2011 Estate Development deregistered Co., Ltd. (浙江省建設房地產開發有限公司) Earnsworth Industrial Limited Hong Kong General corporate Director Dissolved and August 20, 2010 (銳偉實業有限公司) affairs deregistered Forever Well Investment Hong Kong Investment Director Dissolved and March 19, 2010 Limited deregistered (建宜投資有限公司) Silverwide International Hong Kong General corporate Director Dissolved and September 23, Limited affairs deregistered 2005 Victory Sign Investment Hong Kong Investment Director Dissolved and October 18, 2007 Limited deregistered

Mr. Tang confirmed that the deregistration of each of the above companies was voluntary by the resolutions of the shareholders of the respective companies. The above companies were solvent at the time of deregistration, and he did not incur any debt and/or liabilities because of such deregistration, and that the deregistration did not have any negative effect on the Bank.

229 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

BOARD OF SUPERVISORS

The PRC Company Law requires a joint stock company to establish a board of supervisors that is responsible for supervising performance of the board of directors and senior management, its financial operations, internal control and risk management. Our Board of Supervisors consists of five Supervisors, including two employees’ representative Supervisors, one shareholders’ representative Supervisor and two external Supervisors. Our Supervisors are elected for a term of three years and may be subject to re-election, and the cumulative term of an external Supervisor shall not exceed six years. The following table sets forth certain information about our Supervisors.

Position(s) held Time of Date of at our Bank joining our appointment as of the Latest Name Age Bank as a Supervisor Practicable Date Responsibilities Ms. YUAN Shihong 48 November January 26, 2016 Chairwoman of the Responsible for (袁世泓) 2015 Board of supervising the Supervisors performance of duties by the Directors and the senior management of our Bank, convening and presiding over the meetings of the Board of Supervisors, organizing the performance of duties of the Board of Supervisors, signing the report of the Board of Supervisors and other important documents, reporting to the Shareholders’ general meeting on behalf of the Board of Supervisors and other duties prescribed by laws, regulations and the Articles of Association or authorized by the Board of Supervisors.

230 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

Position(s) held Time of Date of at our Bank joining our appointment as of the Latest Name Age Bank as a Supervisor Practicable Date Responsibilities Ms. HUANG Ping 61 December December 28, 2012 External Supervisor Responsible for (黃萍) 2012 and the chairwoman supervising the of the audit and performance of duties by supervision the Directors and the committee under the senior management of our Board of Bank, convening and Supervisors presiding over the meetings of the audit and supervision committee of the Board of Supervisors, organizing the performance of duties of the audit and supervision committee of the Board of Supervisors and organizing audit work within the work scope of the Board of Supervisors.

Mr. DUAN Xuebin 53 January 2016 January 26, 2016 External Supervisor Responsible for (段學彬) and chairman of the supervising the nomination performance of duties by committee under the the Directors and the Board of senior management of our Supervisors Bank, convening and presiding over the meetings of the nomination committee of the Board of Supervisors, and organizing the performance of duties of the nomination committee of the Board of Supervisors.

Ms. LIU Yongli 48 July 2002 January 26, 2016 Employees’ Responsible for (劉永麗) representative supervising the Supervisor, the performance of duties by general manager of the Directors and the the risk senior management of our management Bank. department

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Position(s) held Time of Date of at our Bank joining our appointment as of the Latest Name Age Bank as a Supervisor Practicable Date Responsibilities Mr. CHEN Yong 45 July 2002 January 26, 2016 Employees’ Responsible for (陳勇) representative supervising the Supervisor, the vice performance of duties by general manager of the Directors and the the administration senior management of our department and the Bank. vice head of the office of the Board of Directors

Ms. YUAN Shihong (袁世泓), aged 48, has been a Supervisor and the chairwoman of the Board of Supervisors since January 2016. She is primarily responsible for supervising the performance of duties by the Directors and the senior management of the Bank, convening and presiding over the meetings of the Board of Supervisors, organizing the performance of duties of the Board of Supervisors, signing the report of the Board of Supervisors and other important documents, reporting to the Shareholders’ general meeting on behalf of the Board of Supervisors and other duties prescribed by laws, regulations and the Articles of Association or authorized by the Board of Supervisors.

Ms. Yuan has over 25 years of experience in administrative and corporate management. Ms. Yuan worked as a member of the standing committee of and the minister of the Organization Department of the Luxian CPC Committee (中國共產黨瀘縣縣委) from August 2015 to November 2015. From November 2004 to July 2015, Ms. Yuan worked at the Organization Department of the Luzhou CPC Committee (中國共產黨瀘州市委組織部) and served as a senior staff member (副主任科員) from March 2005 to June 2005, a senior staff member (副主任科員) of the second division of cadre (幹部二處) from June 2005 to February 2006, a deputy division director (副處長) of the second division of cadre (幹部二處) from February 2006 to May 2010, a principal staff member (主任科員) of the second division of cadre (幹部二處) from October 2007 to May 2010, a deputy division director (副處長), a principal staff member (主任科員), and then the division director (處長) of the third division of cadre (幹部三處) from May 2010 to June 2014, and a member of the ministry and commission (部務委員) and the section chief (科長)of the third chief of cadre (幹部三科) from June 2014 to July 2015. Prior to that, Ms. Yuan worked as the section chief (科長) of the organization division (組織科) and then a senior staff member (副主任科員) of the Organization Department of the Luzhou Naxi District CPC Committee (中國共產黨瀘州市納溪區委組織部) from July 2002 to November 2004, and a staff member (科員) and then the head of office (辦公室主任) of Sichuan Luzhou Naxi District Labor Bureau (四川省瀘州市納溪區勞動局) from September 1992 to July 2002.

Ms. Yuan graduated from Zhaowuda Mongolian Normal School (昭烏達蒙族師範專科學校) in the PRC, in July 1992, majoring in politics. She passed the national higher education exams of accounting at junior college level (國家高等教育會計專業專科考試) and was approved for graduation by Southwestern University of Finance and Economics (西南財經大學) in Sichuan Province, the PRC, in June 1996. Ms. Yuan graduated from the Correspondence Institute of the Party School of Sichuan Provincial Committee of the CPC (中國共產黨四川省委員會黨校函授學院) in the PRC, in December 2001, majoring in law (through correspondence study). Ms. Yuan passed the examination of banking risk and regulation in June 2018 and obtained the International Certificate in Banking Risk and Regulation issued by Global Association of Risk Professionals.

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Ms. HUANG Ping (黃萍), aged 61, has been an external Supervisor since December 2012 and the chairwoman of the audit and supervision committee under the Board of Supervisors since January 2016. She is primarily responsible for supervising the performance of duties by the Directors and the senior management of the Bank, convening and presiding over the meetings of the audit and supervision committee of the Board of Supervisors, organizing the performance of duties of the audit and supervision committee of the Board of Supervisors and organizing audit work within the work scope of the Board of Supervisors.

Ms. Huang has over 20 years of experience in legal matters. Ms. Huang is a lawyer at Sichuan Chuanda Law Firm (四川川達律師事務所) and joined the firm in August 2007. Ms. Huang worked at Sichuan Lutianhua Co., Ltd. (四川瀘天化股份有限公司), a company listed on the Shenzhen Stock Exchange (stock code: 000912) as a vice general legal counsel from July 2008 to July 2012 and as the director (主任) of the legal affairs office (法律事務室) from August 2009 to July 2012. From March 1998 to September 2009, Ms. Huang worked at Lutianhua (Group) Co., Ltd. (瀘天化(集團)有限責任公司) and successively served as the director (主任)of the legal affairs office (法律事務室), a deputy department head (副部長) of the corporate management department (企業管理部), and a deputy head (副主任) of the general manager’s office (總裁辦公室).

Ms. Huang graduated from Shijiazhuang Management Cadre College of Chemical Engineering Department (化工部石家莊管理幹部學院) (currently known as Hebei Management Cadre College (河北管理幹部學院)) in the PRC, in June 1989, majoring in economic law. Ms. Huang graduated from the top-up program (專科升本科) in law through correspondence study in June 1998 and completed postgraduate study in civil and commercial law at Southwest University of Political Science & Law (西南政法大學) in Chongqing, the PRC, in October 2003. Ms. Huang was granted the qualification of state-owned enterprise band 1 legal adviser by the Sichuan SASAC in July 2012. Ms. Huang obtained the qualification of engineer approved by the Title Reform Group of Sichuan Chemical Engineering Department (四川省化工廳職改組)in February 1993 and obtained the qualification of a senior economist approved by the Sichuan Title Reform Leading Group (四川省職改領導組) in August 2002, respectively. Ms. Huang also obtained the PRC lawyer’s qualification in May 1999 and the qualification for enterprise legal adviser jointly approved by Ministry of Personnel of the PRC (中華人民共和國人事部) (currently known as Ministry of Human Resources and Social Security of the PRC (中華人民共和國人力資源和社會保障部)), State Economic and Trade Commission of the PRC (中華人民共和國國家經濟貿易委員會) and the Ministry of Justice of the PRC (中華人民共和國司法部)in February 1999.

Ms. Huang Ping was previously a supervisor of the company shown in the table below before its deregistration.

Place of Nature of Date of Name of company establishment business Position Status deregistration Sichuan Tiansheng Investment PRC Business services Supervisor Dissolved and October 9, 2009 Co., Ltd. (四川天晟投資有 deregistered 限公司)

Ms. Huang confirmed that the above deregistration was voluntary by the resolutions of the shareholders of the company. The above company was solvent at the time of deregistration, and she did not incur any debt and/or liabilities because of such deregistration, and that the deregistration did not have any negative effect on the Bank.

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Mr. DUAN Xuebin (段學彬), aged 53, has been an external Supervisor and the chairman of the nomination committee under the Board of Supervisors since January 2016. He is primarily responsible for supervising the performance of duties by the Directors and the senior management of the Bank, convening and presiding over the meetings of the nomination committee of the Board of Supervisors, and organizing the performance of duties of the nomination committee of the Board of Supervisors. Mr. Duan has over 20 years of experience in banking industry. He worked at Luzhou Jiangyang Jinxin Small Loan Co., Ltd. (瀘州市江陽區金鑫小額貸款有限公司) as the general manager from March 2015 to April 2016. Mr. Duan worked at Lu County School Enterprise Architecture Engineering Company (瀘縣校辦企業建築工程公司) as a vice general manager from October 2013 to February 2015, re-joined the company afterwards and has been its vice general manager since May 2016. Mr. Duan worked at the Luzhou Branch of Agricultural Bank of China Limited (中國農業銀行股份有限公司瀘州市分行) and served as an intermediate independent credit approver (信貸中級獨立審批人) from January 2011 to April 2013 and then the institutional business customers manager of the business department from April 2013 to September 2013. Mr. Duan worked at the Luzhou Branch of the Agricultural Bank of China Limited (中國農業銀行股份有限公司瀘州市分行) but was seconded as a junior independent approver (初級獨立審批人) at the customers department of Hejiang sub-branch of Agricultural Bank of China Limited (中國農業銀行股份有限公司合江縣支行) from April 2009 to December 2010. From January 1991 to March 2009, Mr. Duan worked at the Hejiang sub-branch of Agricultural Bank of China Limited (中國農業銀行股份有限公司合江縣支行) and served a credit clerk (信貸員) of Daqiao Business Office (大橋營業所) from January 1991 to February 1993, the deputy director (副主任) and then the director (主任) of Baisha Business Office (白沙營業所) from March 1993 to March 2000, the director (主任) of Daqiao Business Office (大橋營業所) from April 2000 to April 2004, and the director (主任) of the customers department from May 2004 to March 2009.

Mr. Duan completed the studies at junior college level (專科) through correspondence study and graduated from Southwestern University of Finance and Economics (西南財經大學)in Sichuan Province, the PRC, in July 1998, majoring in finance. Mr. Duan further completed the undergraduate studies through correspondence study and graduated from Southwestern University of Political Science & Law (西南政法大學) in Chongqing, the PRC, in July 2003, majoring in law.

Ms. LIU Yongli (劉永麗), aged 48, has been an employees’ representative Supervisor since January 2016, and the general manager of the risk management department of our Bank since June 2018. She is primarily responsible for supervising the performance of the Directors and senior management of our Bank. Ms. Liu has over 29 years of experience in banking industry. Ms. Liu has been a supervisor of Luzhou Industrial Investment Group since March 2015. Ms. Liu joined our Bank in July 2002 and served as the principal accountant (主辦會計) of Zhongshan sub-branch (忠山支行)ofour Bank from July 2002 to December 2003, the head (科長) of the financial accounting and technology department (財會科技部) from January 2004 to December 2004, the head (科長)of the operation management department (運行管理部) from January 2005 to February 2008, a vice president of Xiaoshi sub-branch (小市支行) from February 2008 to November 2010, the head of the risk management department from November 2010 to November 2011, the general manager of the internal control and compliance department and the head of the internal audit department from November 2011 to June 2012, the general manager of the risk management department

234 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT from June 2012 to February 2013, the general manager of the credit business department from February 2013 to October 2015 and the general manager of the internal control and compliance department (security department) of our Bank from October 2015 to June 2018. Prior to joining our Bank, Ms. Liu held several positions in human resources, labor relation, planning, credit, statistics and accounting at Hejiang sub-branch of China Construction Bank Corporation (中國建設銀行股份有限公司合江支行) from August 1991 to July 2002. She held positions in savings and post-savings supervision at Gulin sub-branch of China Construction Bank Corporation (中國建設銀行股份有限公司古藺支行) from September 1988 to July 1991.

Ms. Liu passed the self-taught higher education exams of accounting at undergraduate level (會計專業本科高等教育自學考試) and was approved for graduation by Southwestern University of Finance and Economics (西南財經大學) in Sichuan Province, the PRC in June 2007. Ms. Liu was certified as a senior international finance manager jointly by China Association of Chief Financial Officers (中國總會計師協會), International Financial Management Association (國際財務管理協會), Ministry of Human Resources and Social Security of the PRC (中華人民共和國人力資源和社會保障部) and Research Center of State-owned Assets Supervision and Administration Commission of the State Council (國務院國有資產監督管理委員會研究中心)in August 2013. Mr. Liu also obtained the certificate in banking fundamentals (公共基礎證書) granted by the China Banking Association (中國銀行業協會) in October 2007, and the certificate of intermediate level of accounting granted by MOF in May 2002.

Mr. CHEN Yong (陳勇), aged 45, has been an employees’ representative Supervisor since January 2016, the vice general manager of the administration department (綜合管理部)ofour Bank since November 2015 and the vice head of the office of the Board of Directors since May 2015. He is primarily responsible for supervising the performance of the Directors and senior management of our Bank.

Mr. Chen has over 16 years of experience in banking industry. Mr. Chen joined our Bank in July 2002 and successively served as a bank teller from July 2002 to December 2005, the president of Jiale sub-branch (佳樂支行) from January 2006 to December 2007, a business manager at the operation management department (運行管理部) from January 2008 to September 2010, the president of Lianhuachi sub-branch (蓮花池支行) from September 2010 to February 2012, the president of Jiangbei sub-branch (江北支行) from March 2012 to February 2014, and an assistant to president of Xiaoshi sub-branch (小市支行) from February 2014 to May 2015.

Mr. Chen graduated from Chongqing University Internet Education College (重慶大學網絡教育學院) in the PRC, in January 2010, majoring in economics and business administration through long distance learning.

235 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

SENIOR MANAGEMENT The following table sets out certain information regarding our senior management.

Date of Position(s) held Time of appointment as a at our Bank joining our member of senior as of the Latest Name Age Bank management Practicable Date Responsibilities Mr. XU Xianzhong 49 August 2010 August 4, 2011 Executive Director Responsible for daily (徐先忠) and president overall operation of our Bank and in charge of the internal control and compliance department (security department) and internal audit department of our Bank Ms. XIA Yilun 51 November December 31, 2008 Vice president In charge of the assets and (夏義倫) 2008 liabilities management department, accounting and finance department and credit business department of our Bank Mr. LIU Shirong 52 October 1997 May 27, 2016 Executive Director, In charge of the office of (劉仕榮) (as vice president); vice president, and the Board of Directors, December 31, 2012 secretary to the administration department (as secretary to the Board of Directors and risk management Board of Directors) department of our Bank Ms. XUE Xiaoqin 49 October 1997 May 27, 2016 Vice president In charge of the direct (薛曉芹), whose (institutional) customers former name is Xue department and the Defang (薛德芳) interbank customers department of our Bank Mr. CHENG Anhua 48 September July 27, 2017 Vice president and In charge of the operation (成安華) 1998 (as vice president); chief information management department, December 24, 2015 officer system development (as chief department, electronic information officer) banking department, IT department and IT innovation center Mr. YANG Bing 42 April 2016 April 8, 2016 Vice president Responsible for debt (楊冰), whose former investments of trading name is Yang Bin accounts and account for (楊斌) sale, analysis of macroeconomic situation and current policy and guidance on liquidity risk management and in charge of financial markets department

Mr. AI Yong (艾勇) 45 September December 28, 2012 Assistant to In charge of the corporate 1997 president banking customers department, the retail banking (bank cards) customers department and wealth management department of our Bank

For biographical details of Mr. XU Xianzhong (徐先忠) and Mr. LIU Shirong (劉仕榮), please refer to “– Executive Directors” of this section.

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Ms. XIA Yilun (夏義倫), aged 51, has been a vice president of our Bank since December 2008. She is primarily in charge of the assets and liabilities management department, accounting and finance department and credit business department of our Bank. Ms. Xia has over 30 years of experience in banking industry. Prior to joining our Bank, Ms. Xia worked at ICBC from September 1983 to October 2008 and held various positions. Ms. Xia served as a vice president and then the president of Luzhou Zhonggulou sub-branch of ICBC (中國工商銀行股份有限公司瀘州市鐘鼓樓支行) from June 2004 to October 2008. She worked as the head of the accounting business office of the business department and then a vice division director (副處長) of the capital management division of Luzhou Branch of ICBC (中國工商銀行股份有限公司瀘州市分行) from February 2001 to June 2004. From October 2000 to February 2001, Ms. Xia served as the director (主任) of Yinghui Road Savings Bank of ICBC Luzhou Branch (中國工商銀行股份有限公司瀘州市分行迎暉路儲蓄所). She served as the head of the accounting and cashier division of Luxian sub-branch of ICBC (中國工商銀行股份有限公司瀘縣支行) from August 1998 to October 2000 and a vice head (副主任) of Jiangbei office of Luxian sub-branch of ICBC (中國工商銀行股份有限公司瀘縣支行江北分理處) from June 1996 to August 1998. From September 1983 to June 1996, Ms. Xia worked at different departments of Luxian sub-branch of ICBC (中國工商銀行股份有限公司瀘縣支行), including the accounting and cashier section, the accounting unit and the credit unit. Ms. Xia graduated from Sichuan Radio and TV University (四川廣播電視大學) in the PRC, in July 2003, majoring in finance at undergraduate level. Ms. Xia was certified as a senior international finance manager jointly by China Association of Chief Financial Officers (中國總會計師協會), International Financial Management Association (國際財務管理協會), Ministry of Human Resources and Social Security of the PRC (中華人民共和國人力資源和社會保障部) and Research Center of State-owned Assets Supervision and Administration Commission of the State Council (國務院國有資產監督管理委員會研究中心) in August 2013. Ms. Xia obtained the qualification of interbank currency market trader (銀行間本幣市場交易員) granted by China Foreign Exchange Trade System (中國外匯交易中心) and National Interbank Funding Center (全國銀行間同業拆借中心) in September 2011. Ms. XUE Xiaoqin (薛曉芹), aged 49, has been a vice president of our Bank since May 2016. She is primarily in charge of the direct (institutional) customers department and the interbank customers department of our Bank. Ms. Xue has over 30 years of experience in banking industry. Ms. Xue is currently a supervisor of each of Lutianhua (Group) Co., Ltd. (瀘天化(集團)有限責任公司) and Luzhou Laojiao Group. Ms. Xue joined our Bank in October 1997. Ms. Xue was appointed as a candidate for vice president of our Bank from November 2015 to May 2016. Ms. Xue served as the assistant to president of our Bank from December 2012 to November 2015, during which period she also worked as the general manager of the direct customers department from January 2013 to February 2014 and the general manager of the direct (institutional) customers department of our Bank from February 2014 to January 2015. From November 2011 to January 2013, Ms. Xia served as the general manager of the customer marketing department of our Bank. From October 2010 to November 2011, Ms. Xue worked as the responsible person of the customer marketing department of our Bank. She worked as a vice director, the responsible person and then the head of the business department of our Bank from January 2007 to October 2010. Ms. Xue served as an acting vice president (代理副行長) of Anfu sub-branch of our Bank from October 1997 to February 1998, the vice president of Anfu sub-branch of our Bank from February 1998 to May 2000 and then the president of Anfu sub-branch of our Bank from November 2002 to December 2006. From May 2000 to November 2002, she worked as the vice president of Naxi sub-branch of our Bank. Ms. Xue worked at Anfu Urban Credit Cooperative (安富城市信用社) from September 1988 to June 1992 and at Anfu Business Office of Municipal Central Urban Credit Cooperative (市中區城市信用社) from June 1992 to August 1997.

237 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

Ms. Xue graduated from Sichuan Banking School (四川銀行學校) in the PRC, in June 1995, majoring in finance (finance and accounting). Ms. Xue graduated from the Correspondence Institute of the Party School of Sichuan Provincial Committee of the CPC (中國共產黨四川省委員會黨校函授學院) in the PRC, through correspondence study in June 1999, majoring in economics management and in December 2001, majoring in law, respectively. Ms. Xue further obtained a degree of master of business administration from The Open University of Hong Kong through long distance learning in November 2015. Ms. Xue was certified as a senior international finance manager jointly by China Association of Chief Financial Officers (中國總會計師協會), International Financial Management Association (國際財務管理協會), Ministry of Human Resources and Social Security of the PRC (中華人民共和國人力資源和社會保障部) and Research Center of State-owned Assets Supervision and Administration Commission of the State Council (國務院國有資產監督管理委員會研究中心) in August 2013 and was certified as an intermediate economist by Luzhou Title Reform Leading Group (瀘州市職稱改革工作領導小組) in October 1999.

Mr. CHENG Anhua (成安華), aged 48, has been a vice president of our Bank since July 2017 and the chief information officer of our Bank since December 2015. He is primarily in charge of the operation management department, system development department, electronic banking department, IT department and IT innovation center of our Bank.

Mr. Cheng has over 19 years of experience in information technology management. Mr. Cheng joined our Bank in September 1998 and successively acted as the application system administrator of the technology division (科技處) from September 1998 to December 2003, a vice general manager and then a vice head (副部長) of the financial accounting and technology department (財會科技部) from January 2004 to December 2006, a vice head (副部長) and then the head (部長) of the technology department (科技部) (a former department of our Bank) from January 2007 to November 2011, the general manager of the IT department (信息科技部) from November 2011 to January 2014, the general manager of the internal control and compliance department from February 2014 to July 2015, the general manager of the security department from January 2015 to July 2015, and the candidate for the chief information officer from August 2015 to December 2015. Prior to joining our Bank, Mr. Cheng served as a sales person, sales system management and development maintainer and sales planner at Changjiang Hydraulic Parts Factory (currently known as Sichuan Changjiang Hydraulic Parts Co., Ltd. (四川長江液壓件有限責任公司)) from July 1992 to September 1998.

Mr. Cheng obtained a bachelor of science degree from University of Science and Technology of Chengdu (成都科技大學) (currently known as Sichuan University (四川大學)) in Sichuan Province, the PRC, in July 1992 and obtained a master’s degree in engineering from Sichuan University (四川大學) in Sichuan Province, the PRC, in June 2015. Mr. Cheng was granted as a Certified Information Security Professional (註冊信息安全專業人員) by China Information Technology Security Evaluation Center (中國信息安全測評中心) in February 2016. Mr. Cheng was awarded the professional designation of certified internal auditor by The Institute of Internal Auditors in September 2015 and was certified as a certified information systems auditor granted by the Information Systems Audit and Control Association in February 2015. Mr. Cheng was also approved as a senior information system project manager by Sichuan Provincial Human Resources and Social Security Department (四川省人力資源和社會保障廳) in May 2015.

238 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

Mr. YANG Bing (楊冰), aged 42, has been a vice president of our Bank since April 2016. He is primarily responsible for debt investments of trading accounts and account for sale, analysis of macroeconomic situation and currency policy and guidance on liquidity risk management and in charge of our financial markets department.

Mr. Yang has over 15 years of experience in banking industry. He joined our Bank in April 2016. Prior to joining our Bank, Mr. Yang operated his own business. Mr. Yang worked at Nanchong City Commercial Bank Co., Ltd. (南充市商業銀行股份有限公司) (currently known as Sichuan Tianfu Bank Co., Ltd. (四川天府銀行股份有限公司)) as the general manager of the marketing department from December 2001 to June 2009 and the assistant to president from July 2009 to April 2013. Mr. Yang worked at Yilong County sub-branch of PBoC (中國人民銀行儀隴縣支行) from August 1999 to November 2001.

Mr. Yang obtained a bachelor’s degree in economics from Southwestern University of Finance and Economics (西南財經大學) in Sichuan Province, the PRC, in July 1999. Mr. Yang obtained the qualification of national interbank lending market trader (全國銀行間同業拆借市場交易員) granted by National Interbank Funding Center (全國銀行間同業拆借中心) in November 2002.

Mr. Yang Bing was previously a director of the company shown in the table below before its deregistration.

Place of Nature of Date of Name of company establishment business Position Status deregistration Nanchong Gushou Business PRC Corporate Legal Dissolved and November 15, Co., Ltd. (南充固收商務有 marketing representative deregistered 2017 ) 限責任公司 planning, and director market research, operational risk assessment, and business strategy consultant.

Mr. Yang confirmed that the above deregistration was voluntary by the resolutions of the shareholders of the company. The above company was solvent at the time of deregistration, and he did not incur any debt and/or liabilities because of such deregistration, and that the deregistration did not have any negative effect on our Bank.

239 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

Mr. AI Yong (艾勇), aged 45, has been the assistant to president of our Bank since December 2012. He is primarily in charge of corporate banking customers department, the retail banking (bank cards) customers department and wealth management department of our Bank.

Mr. Ai has over 22 years of experience in banking industry. Mr. Ai joined our Bank in September 1997 and successively acted as a deputy director (副主任) (presiding over work) of the business department from September 1997 to March 1999, the deputy division chief of the supervision and audit division (稽核監察處) from April 1999 to July 1999, a deputy director (副主任) of the clearing center from July 1999 to December 1999, a deputy division chief of the finance and accounting division (財務會計處) from December 1999 to December 2001, the division chief of the assets preservation division (資產保全處) from January 2002 to December 2003, the president of Zhongshan sub-branch (忠山支行) from January 2004 to December 2004, the president of Jiangyang sub-branch (江陽支行) from January 2005 to October 2010, the head of the business department from October 2010 to October 2011, and the general manager of the products management department (currently known as the credit business department) from November 2011 to November 2012. Mr. Ai also worked as the general manager of the small and micro customers department of our Bank from February 2014 to January 2015. Prior to that, Mr. Ai served as a deputy head of the business department of Luzhou Zhongshan Urban Credit Cooperative (瀘州市忠山城市信用社) (one of the predecessors of our Bank) from January 1996 to September 1997. Mr. Ai served as an accounting staff at No. 3 engineering division of China No. 5 Metallurgy Construction No. 3 Engineering Company (中國第五冶金建設第三工程公司) from August 1993 to March 1996.

Mr. Ai graduated from Qingdao Institute of Architecture and Engineering (青島建築工程學院) in the PRC, in July 1992, majoring in industrial accounting. Mr. Ai graduated from the Correspondence Institute of the Party School of Sichuan Provincial Committee of the CPC (中國共產黨四川省委員會黨校函授學院) in the PRC, through correspondence study in December 2000, majoring in law. Mr. Ai obtained the qualification of accountant granted by the MOF in May 1997. He was certified as a senior international finance manager jointly by China Association of Chief Financial Officers (中國總會計師協議), International Financial Management Association (國際財務管理協會), Ministry of Human Resources and Social Security of the PRC (中華人民共和國人力資源和社會保障部) and Research Center of State- owned Assets Supervision and Administration Commission of the State Council (國務院國有資產監督管理委員會研究中心) in August 2013.

To the best of the Directors’ knowledge, information and belief, none of our Directors, Supervisors and senior management is related to any other Directors, Supervisors and senior management.

240 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

JOINT COMPANY SECRETARIES

Mr. LIU Shirong (劉仕榮) was appointed as a joint company secretary of our Bank on April 3, 2018. For biographical details of Mr. Liu, please see “– Executive Directors” in this section.

Ms. So Shuk Yi Betty (蘇淑儀), was appointed on August 3, 2018 as one of the joint company secretaries of our Bank. Ms. So currently serves as a vice president of SWCS Corporate Services Group (Hong Kong) Limited, a professional services provider specializing in corporate services. Ms. So has over 20 years of experience in corporate services field.

Ms. So obtained a master of laws degree in Chinese and Comparative Law from the City University of Hong Kong in November 2004 and a master’s degree in business administration from the University of Leicester in July 1999. Ms. So has been an associate member of The Institute of Chartered Secretaries and Administrators and The Hong Kong Institute of Chartered Secretaries since October 1997.

COMMITTEES UNDER THE BOARD OF DIRECTORS

Our Board of Directors currently has the following committees: the audit committee, the development and strategy committee, the nomination and remuneration committee, the related party (connected) transactions control committee, the risk management committee and the consumer rights protection committee. The committees operate in accordance with their respective terms of reference established by our Board of Directors.

Audit Committee

Our Board of Directors has established an audit committee with written terms of reference in compliance with the requirements under the Listing Rules. The audit committee consists of five Directors, being Mr. LIU Xiaoyu, Ms. XU Yan, Mr. GU Ming’an, Mr. TANG Baoqi and Mr. YE Changqing. The chairperson of the audit committee is Mr. LIU Xiaoyu. The primary duties of the audit committee include, among others, the following:

• conducting inspections on our accounting policies, financial condition and financial report procedures;

• responsible for our annual audit work;

• issuing report regarding the truthfulness, accuracy and completeness of the audited financial reports and submitting them to our Board of Directors for review;

• making recommendations on appointment, re-appointment or removal of external auditors;

• conducting inspections on our internal control systems and conducting audit on material related party transactions and connected transactions;

• performing other responsibilities as authorized by our Board of Directors; and

• performing other responsibilities in accordance with applicable laws and regulations.

241 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

Development and Strategy Committee

Our Board of Directors has established a development and strategy committee with written terms of reference. The development and strategy committee consists of five Directors, being Ms. XU Yan, Mr. YOU Jiang, Mr. XIONG Guoming, Mr. LIU Qi and Mr. DAI Zhiwei. The chairperson of the development and strategy committee is Ms. Xu Yan. The primary duties of the development and strategy committee include, among others, the following:

• reviewing our business objectives, investment plans and medium and long term development strategies;

• supervising and inspecting the implementation of our operational plans, investment plans and medium and long term development strategies;

• conducting research and making recommendations on merger, spin-offs, capital increase and decrease and other matters that are material to our development; and

• performing other responsibilities as authorized by our Board of Directors.

Nomination and Remuneration Committee

Our Board has established a nomination and remuneration committee with written terms of reference in compliance with the requirements under the Listing Rules. The nomination and remuneration committee consists of five Directors, being Mr. GU Ming’an, Mr. YOU Jiang, Mr. XIONG Guoming, Mr. TANG Baoqi and Mr. YE Changqing. The chairperson of the nomination and remuneration committee is Mr. Gu Ming’an. The primary duties of the nomination and remuneration committee include, among others, the following:

Nomination Duties

• making recommendations on the size and composition of our Board of Directors in accordance with the business activities, asset size and equity structure of our Bank;

• conducting study on the criteria and procedures for selecting directors and senior management members and making recommendations to our Board of Directors;

• identifying qualified individuals as directors and select or make recommendations to our Board of Directors on selection of individuals nominated for directorships;

• assessing the independence of independent non-executive directors;

• making recommendations to our Board of Directors on the appointment or re- appointment of directors and succession planning for directors, in particular the chairman of our Board of Directors and the president of our Bank; and

• conducting preliminary examination of qualifications of candidates for directorships and senior management positions, and making recommendations to our Board of Directors.

242 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

Remuneration and Appraisal Duties

• contemplating the criteria for appraising directors, conducting assessment and evaluation and making recommendations to our Board of Directors according to our actual condition;

• making recommendations to our Board of Directors on the policy and structure for all directors’ and senior management remuneration and on the establishment of a formal and transparent procedures for developing remuneration policy;

• reviewing and approving the management’s remuneration proposals with reference to the Board of Directors’ corporate goals and objectives;

• making recommendations to our Board of Directors on the remuneration packages of our non-executive Directors;

• reviewing and approving compensation payable to executive directors and senior management for any loss or termination of office to ensure that it is consistent with contractual terms and is otherwise fair and not excessive; and

• reviewing and approving compensation arrangements relating to dismissal or removal of directors for misconduct to ensure that they are consistent with contractual terms and are otherwise reasonable and appropriate.

Related Party (Connected) Transactions Control Committee

Our Board has established a related party (connected) transactions control committee with written terms of reference. The related party (connected) transactions control committee consists of five Directors, being Mr. LIU Xiaoyu, Mr. GU Ming’an, Mr. HUANG Yongqing, Mr. TANG Baoqi and Mr. LIU Shirong. The chairperson of the related party (connected) transactions control committee is Mr. LIU Xiaoyu. The primary duties of the related party (connected) transactions control committee include, among others, the following:

• reviewing and approving related party transactions and connected transactions within the authorization of the Board of Directors;

• reviewing the related party transactions and connected transactions to be submitted to the Board of Directors and Shareholders’ general meeting for consideration and approval and reporting to the Board of Directors;

• collecting and organizing list and information of our related parties and connected persons and identifying our related parties and connected persons;

• examining and supervising control of our related party transactions and connected transactions and implementation of systems in relation to related party transactions and connected transactions by our Directors, Supervisors, senior management, related parties and connected persons and reporting to the Board of Directors;

• performing other responsibilities as authorized by the Board of Directors; and

• performing other responsibilities in accordance with applicable laws and regulations.

243 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

Risk Management Committee

Our Board has established a risk management committee with written terms of reference. The risk management committee consists of five Directors, being Mr. XIONG Guoming, Mr. YOU Jiang, Mr. LIU Xiaoyu, Mr. YE Changqing and Mr. LIU Shirong. The chairperson of the risk management committee is Mr. XIONG Guoming. The primary duties of the risk management committee include, among others, the following:

• reviewing risk management policies, measures and preference in relation to our credit risk, liquidity risk, market risk, operation risk, compliance risk and reputation risk;

• supervising our control over credit risk, liquidity risk, market risk, operation risk, compliance risk and reputation risk by our senior management;

• conducting periodic assessment upon our risk policies, management status and risk tolerance ability, evaluating the working procedures and working proficiency of our internal audit department and advising on improvement of our risk management and internal control;

• performing other responsibilities as authorized by our Board of Directors; and

• performing other responsibilities in accordance with applicable laws and regulations.

Consumer Rights Protection Committee

Our Board has established a consumer rights protection committee with written terms of reference. The consumer rights protection committee consists of five Directors, being Mr. HUANG Yongqing, Mr. YOU Jiang, Mr. XU Xianzhong, Mr. LIU Xiaoyu and Mr. LIU Qi. The chairperson of the consumer rights protection committee is Mr. HUANG Yongqing. The primary duties of the consumer rights protection committee include, among others, the following:

• formulating strategies, policies and objectives of our consumer rights protection work, incorporating contents relating to consumer rights protection into our corporate governance and business development strategies and providing guidance on a general planning level to our senior management to strengthen the construction of our corporate culture of consumer rights protection;

• supervising our senior management to effectively implement consumer rights protection work, periodically listening to our senior management’s special reports on consumer rights protection work, reviewing and approving the special reports and submitting the same to the Board of Directors and making relevant work as important part of information disclosure;

• supervising and evaluating the comprehensiveness, promptness and effectiveness of our consumer rights protection work and the performance of our senior management in this respect;

• reviewing and providing comments on proposals in relation to consumer rights protection to be submitted to the Board of Directors in accordance with our overall strategies; and

• performing other responsibilities as required by consumer rights protection related regulations in the banking industry or as required by the Articles of Association.

244 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

COMMITTEES UNDER THE BOARD OF SUPERVISORS Our Board of Supervisors has established the nomination committee and the audit and supervision Committee. The committees operate in accordance with terms of reference established by our Board of Supervisors.

Nomination Committee Our Board of Supervisors has established a nomination committee with written terms of reference. The nomination committee consists of three Supervisors, being Ms. YUAN Shihong, Mr. DUAN Xuebin and Mr. CHEN Yong. The chairperson of the nomination committee is Mr. DUAN Xuebin. The primary duties of the nomination committee include, among others, the following: • providing recommendations on the size and composition of our Board of Supervisors; • conducting study on the criteria and procedures for selecting supervisors and making recommendations to our Board of Supervisors; • identifying qualified supervisors candidates; • conducting preliminary examination of qualifications and credentials of supervisors candidates nominated by Shareholders, and making recommendations to our Board of Supervisors accordingly; and • other responsibilities as authorized by our Board of Supervisors.

Audit and Supervision Committee Our Board of Supervisors has established an audit and supervision committee with written terms of reference. The audit and supervision committee consists of three Supervisors, being Ms. YUAN Shihong, Ms. HUANG Ping and Ms. LIU Yongli. The chairperson of the audit and supervision committee is Ms. HUANG Ping. The primary duties of the audit and supervision committee include, among others, the following: • formulating proposals for inspecting and supervising our financial activities; • formulating proposals for off-office auditing on Directors and senior management; • formulating proposals for auditing our operational decision, risk management and internal control; and • performing other responsibilities as authorized by our Board of Supervisors.

COMPENSATION OF DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT The compensation and remuneration of our Directors and Supervisors are determined by our Shareholders’ meetings and the compensation and remuneration of members of the senior management are determined by the Board of Directors. We also reimburse them for expenses which are necessary and reasonably incurred in providing services to us or discharging their duties in relation to our operations. When reviewing and determining the specific remuneration packages for our Directors, Supervisors and members of the senior management, our Shareholders’ meetings and the Board of Directors take into consideration factors such as salaries paid by comparable companies, time commitment, level of responsibilities and

245 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT desirability of performance-based remuneration. As required by PRC laws and regulations, we also participate in various defined contribution plans organized by relevant provincial and municipal government authorities and welfare schemes for our employees, including medical insurance, injury insurance, unemployment insurance, pension insurance, maternity insurance, housing provident fund and enterprise annuity. Our Bank offers our executive Directors, employees’ representative Supervisors and senior management members, who are also our employees, compensation in the form of salaries, social security, housing provident fund, enterprise annuity and other benefits. Our independent non-executive Directors and external Supervisors receive fixed compensation. The aggregate amounts of remuneration paid by us to our Directors and Supervisors for the three years ended December 31, 2015, 2016 and 2017 and the six months ended June 30, 2018 were approximately RMB5.3 million, RMB5.6 million, RMB6.3 million and RMB1.3 million, respectively. The aggregate amounts of remuneration paid by us to our five highest paid individuals for the three years ended December 31, 2015, 2016 and 2017 and the six months ended June 30, 2018 were approximately RMB4.9 million, RMB6.5 million, RMB9.9 million and RMB5.8 million respectively. It is estimated that remuneration equivalent to approximately RMB6.5 million in aggregate will be paid to the Directors and Supervisors by our Bank for the year ending December 31, 2018 based on the arrangements in force as of the date of this document. No remuneration was paid by us to our Directors, Supervisors or the five highest paid individuals as inducement to join or upon joining us or as a compensation for loss of office in respect of the three years ended December 31, 2015, 2016 and 2017 and the six months ended June 30, 2018. Furthermore, none of our Directors or Supervisors had waived or agreed to waive any remuneration during the same periods. Save as disclosed above, no other payments have been paid or are payable, in the three years ended December 31, 2015, 2016 and 2017 and the six months ended June 30, 2018, respectively, by us to the Directors or Supervisors.

DIRECTORS’ AND SUPERVISORS’ INTEREST Save as disclosed in this document, each of our Directors, Supervisors and members of the senior management (i) did not hold other positions in our Bank as of the Latest Practicable Date; (ii) had no other relationship with any of our Directors, Supervisors and senior management as of the Latest Practicable Date; and (iii) did not hold any other directorship in listed companies in the three years prior to the Latest Practicable Date. For our Directors’ and Supervisors’ interests in the Domestic Shares within the meaning of Part XV of the SFO, please see Appendix VII – “Statutory and General Information” to this document. As of the Latest Practicable Date, Mr. Xiong Guoming, a non-executive Director of our Bank, is also a non-executive director of Luzhou Rural Commercial Bank Co., Ltd. (瀘州農村商業銀行股份有限公司)(“Luzhou Rural Commercial Bank”). As a non-executive director of Luzhou Rural Commercial Bank, Mr. Xiong Guoming is primarily responsible for participating in making decisions and giving advice on the corporate governance, compliance and risk management of Luzhou Rural Commercial Bank and is not involved in its daily operation and management. Accordingly, the Directors consider that the directorship of Mr. Xiong in Luzhou Rural Commercial Bank does not and is unlikely to give rise to significant competition or conflict of interest between Mr. Xiong and our Bank.

246 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

As of the Latest Practicable Date, Mr. Gu Ming’an, an independent non-executive Director of our Bank, is also an independent director of Sichuan Longchang Rural Commercial Bank Co., Ltd. (四川隆昌農村商業銀行股份有限公司)(“Longchang Rural Commercial Bank”). As an independent director of Longchang Rural Commercial Bank, Mr. Gu is mainly responsible for participating the meetings of its board of directors and providing independent advise on major issues on corporate operation and management to protect the overall interest of Longchang Rural Commercial Bank and its shareholders and is not involved in the daily operation and management of Longchang Rural Commercial Bank. In addition, we have different geographical coverage with Longchang Rural Commercial Bank. We are located in Luzhou, Sichuan Province with one branch in Chengdu. Longchang Rural Commercial Bank is located in Longchang county, Neijiang, Sichuan Province. Accordingly, the Directors consider that there is no actual competition between our Bank and Longchang Rural Commercial Bank.

Save as disclosed herein, none of our Directors are interested in any business, apart from our business, which competes or is likely to compete, either directly or indirectly, with our business which require to be disclosed under Rule 8.10(2) of the Listing Rules.

Save as disclosed herein, to the best of the knowledge, information and belief of our Directors and Supervisors, having made all reasonable inquiries, there were no additional matters with respect to the appointment of our Directors or Supervisors that need to be brought to the attention of the Shareholders and there were no additional information relating to our Directors or Supervisors that are required to be disclosed pursuant to Rules 13.51(2)(h) to (v) of the Listing Rules as of the Latest Practicable Date.

COMPLIANCE ADVISOR

We have appointed TC Capital International Limited as our compliance advisor pursuant to Rule 3A.19 of the Listing Rules, and the compliance advisor will advise our Bank in the following circumstances:

• before the publication of any regulatory announcement, circular or financial report;

• where a transaction, which might be a notifiable or connected transaction, is contemplated, including share issues and share repurchases;

• where our Bank proposes to use the [REDACTED]ofthe[REDACTED] in a manner that is different from that detailed in this document or where our business activities, developments or results deviate from any forecasts, estimates or other information in this document; and

• where the [REDACTED] makes an inquiry of our Bank regarding [REDACTED]or [REDACTED] of our H Shares, the possible development of a [REDACTED]inour H Shares or any other matters.

The terms of the appointment of our compliance advisor will commence on the [REDACTED] and end on the date when we distribute the annual report of our financial results for the first full financial year commencing after the [REDACTED].

247 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. SUBSTANTIAL SHAREHOLDERS

As of the Latest Practicable Date, the total issued share capital of our Bank was RMB1,637,193,385 divided into 1,637,193,385 Domestic Shares with a nominal value of RMB1.00 each. So far as the Directors are aware, immediately following the completion of the [REDACTED], the following persons will have or be deemed or taken to have interests and/or short positions in the Shares or underlying Shares which would be required to be disclosed to the Bank and the Hong Kong Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO or will, directly or indirectly, be interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at our general meetings:

As of the date of the submission of the [REDACTED] of this document (as if the H Shares are Immediately following the Immediately following the [REDACTED] on the completion of the completion of the Hong Kong Stock [REDACTED] (assuming no [REDACTED] (assuming full Exchange) exercise of the [REDACTED]) exercise of the [REDACTED]) Number of Shares directly Approximate Approximate % Approximate % Approximate % Approximate % Name of Nature of Class of or indirectly % of interest in of interest in of the relevant of interest in of the relevant Shareholder interest Shares held our Bank our Bank class of Shares our Bank class of Shares Luzhou Laojiao (1) Beneficial Domestic 325,440,000 19.88% [REDACTED][REDACTED][REDACTED][REDACTED] Group owner Shares Interest in Domestic 36,160,000 2.21% [REDACTED][REDACTED][REDACTED][REDACTED] controlled Shares corporation Sichuan Jiale Beneficial Domestic 271,200,000 16.56% [REDACTED][REDACTED][REDACTED][REDACTED] Group(2) owner Shares Interest in Domestic 7,232,000 0.44% [REDACTED][REDACTED][REDACTED][REDACTED] controlled Shares corporation Xiong Guoming Interest in Domestic 278,432,000 17.00% [REDACTED][REDACTED][REDACTED][REDACTED] (熊國銘)(2) controlled Shares corporations Jiang Xiaoying Interest of Domestic 278,432,000 17.00% [REDACTED][REDACTED][REDACTED][REDACTED] (姜曉英)(2) spouse Shares Xinfu Mining Beneficial Domestic 271,200,000 16.56% [REDACTED][REDACTED][REDACTED][REDACTED] Industry Group owner Shares Sichuan Xinfu Interest in Domestic 271,200,000 16.56% [REDACTED][REDACTED][REDACTED][REDACTED] Industrial controlled Shares Group Co., Ltd. corporation (四川鑫福產業集團有限公司)(3) Lai Dafu (賴大 Interest in Domestic 271,200,000 16.56% [REDACTED][REDACTED][REDACTED][REDACTED] 福)(3) controlled Shares corporations/ Interest of spouse Ge Xiuqiong Interest in Domestic 271,200,000 16.56% [REDACTED][REDACTED][REDACTED][REDACTED] (葛修瓊)(3) controlled Shares corporations/ Interest of spouse

248 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. SUBSTANTIAL SHAREHOLDERS

As of the date of the submission of the [REDACTED] of this document (as if the H Shares are Immediately following the Immediately following the [REDACTED] on the completion of the completion of the Hong Kong Stock [REDACTED] (assuming no [REDACTED] (assuming full Exchange) exercise of the [REDACTED]) exercise of the [REDACTED]) Number of Shares directly Approximate Approximate % Approximate % Approximate % Approximate % Name of Nature of Class of or indirectly % of interest in of interest in of the relevant of interest in of the relevant Shareholder interest Shares held our Bank our Bank class of Shares our Bank class of Shares Luzhou Industrial Beneficial Domestic 73,462,268 4.49% [REDACTED][REDACTED][REDACTED][REDACTED] Investment owner Shares Group(4) Interest in Domestic 144,640,000 8.83% [REDACTED][REDACTED][REDACTED][REDACTED] controlled Shares corporation Xinglu Investment Beneficial Domestic 40,549,462 2.48% [REDACTED][REDACTED][REDACTED][REDACTED] Group(5) owner Shares Interest in Domestic 154,128,384 9.41% [REDACTED][REDACTED][REDACTED][REDACTED] controlled Shares corporations Luzhou Municipal Beneficial Domestic 161,544,800 9.87% [REDACTED][REDACTED][REDACTED][REDACTED] Finance Bureau owner Shares Luzhou State- Beneficial Domestic 144,640,000 8.83% [REDACTED][REDACTED][REDACTED][REDACTED] owned Assets owner Shares Company Xinglu Jutai Real Beneficial Domestic 91,715,862 5.60% [REDACTED][REDACTED][REDACTED][REDACTED] Estate owner Shares Luzhou Chengnan Interest in Domestic 91,715,862 5.60% [REDACTED][REDACTED][REDACTED][REDACTED] Construction controlled Shares Investment corporation Co., Ltd. (瀘州市城南建設投資有限公司)(6) Luzhou Beneficial Domestic 15,006,400 0.92% [REDACTED][REDACTED][REDACTED][REDACTED] Fundamental owner Shares Infrastructure Interest in Domestic 91,715,862 5.60% [REDACTED][REDACTED][REDACTED][REDACTED] Construction controlled Shares Investment corporations Co., Ltd. (瀘州市基礎建設投資有限公司)(6) China Development Interest in Domestic 91,715,862 5.60% [REDACTED][REDACTED][REDACTED][REDACTED] Fund Co., Ltd. controlled Shares (國開發展基金有 corporations 限公司)(6) China Development Interest in Domestic 91,715,862 5.60% [REDACTED][REDACTED][REDACTED][REDACTED] Bank controlled Shares (國家開發銀行)(6) corporations

249 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. SUBSTANTIAL SHAREHOLDERS

Notes: (1) Luzhou Laojiao Group is our largest Shareholder and one of our state-owned Shareholders. It is wholly-owned by Luzhou SASAC. Immediately following the completion of the [REDACTED] (assuming the [REDACTED] is not exercised), Luzhou Laojiao Group directly held [REDACTED] Domestic Shares, representing [REDACTED]% equity interest in our Bank and indirectly held [REDACTED] Domestic Shares, representing [REDACTED]% equity interest in our Bank through its controlled company, Luzhou Laojiao Co., Ltd. (瀘州老窖股份有限公司). By virtue of the SFO, Luzhou Laojiao Group is deemed to be interested in the Domestic Shares held by Luzhou Laojiao Co., Ltd. (2) Mr. Xiong Guoming and Ms. Jiang Xiaoying held 80% and 20% equity interest in Sichuan Jiale Group, respectively. Immediately following the completion of the [REDACTED] (assuming the [REDACTED] is not exercised), Sichuan Jiale Group directly held [REDACTED] Domestic Shares, representing [REDACTED]% equity interest in our Bank and indirectly held [REDACTED] Domestic Shares, representing [REDACTED]% equity interest in our Bank through its subsidiary, Jiale Real Estate. By virtue of the SFO, Sichuan Jiale Group is deemed to be interested in the Domestic Shares held by Jiale Real Estate. Mr. Xiong Guoming is deemed to be interested in the Domestic Shares held by Sichuan Jiale Group and Jiale Real Estate for the purpose of the SFO. Ms. Jiang Xiaoying is the spouse of Mr. Xiong Guoming and is deemed to be interested in the Domestic Shares which are interested by Mr. Xiong Guoming under the SFO.

250 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. SUBSTANTIAL SHAREHOLDERS

(6) Xinglu Jutai Real Estate is held as to 53% by Xinglu Investment Group and as to 47% by Luzhou Chengnan Construction Investment Co., Ltd., in which Luzhou Fundamental Infrastructure Construction Investment Co., Ltd. and China Development Fund Co., Ltd. (國開發展基金有限公司) held 50.82% and 41.18% equity interest, respectively. China Development Fund Co., Ltd. is a wholly-owned subsidiary of China Development Bank. Xinglu Investment Group and Luzhou Xinglu City Development Investment Fund Partnership (Limited partnership) held 45.50% and 39.17% in Luzhou Fundamental Infrastructure Construction Investment Co., Ltd., respectively. The general partner of Luzhou Xinglu City Development Investment Fund Partnership (Limited partnership) is Luzhou Xinglu Equity Investment Fund Management Co., Ltd. (瀘州興瀘股權投資基金管理有限公司), which is held as to 99% by Xinglu Investment Group. By virtue of the SFO, each of Xinglu Investment Group, Luzhou Xinglu Equity Investment Fund Management Co., Ltd., Luzhou Xinglu City Development Investment Fund Partnership (Limited partnership), Luzhou Fundamental Infrastructure Construction Investment Co., Ltd., China Development Fund Co., Ltd., China Development Bank and Luzhou Chengnan Construction Investment Co., Ltd. is deemed to be interested in the Domestic Shares held by Xinglu Jutai Real Estate. Save as disclosed above, the above Shareholders are independent from each other.

251 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. SHARE CAPITAL

As of the Latest Practicable Date, the total issued share capital of our Bank was RMB1,637,193,385 divided into 1,637,193,385 Domestic Shares with a nominal value of RMB1.00 each.

Immediately following completion of the [REDACTED] and assuming the [REDACTED] is not exercised, the total issued share capital of our Bank will be as follows:

Approximate % of Class of Shares Number of Shares share capital Domestic Shares 1,637,193,385 [REDACTED] H Shares to be issued pursuant to the [REDACTED] [REDACTED][REDACTED] Total [REDACTED][REDACTED]

Assuming the [REDACTED] is exercised in full, the total issued share capital of our Bank will be as follows:

SHARES OF OUR BANK

Upon completion of the [REDACTED], our Bank will have two classes of Shares, namely Domestic Shares and H Shares, both of which are ordinary Shares in our share capital. However, the H Shares generally may not be subscribed for by, or traded between, legal or natural persons of the PRC, other than certain qualified domestic institutional investors in the PRC, qualified PRC investors under the Shanghai-Hong Kong Stock Connect and the Shenzhen-Hong Kong Stock Connect, and other persons who are entitled to hold the H Shares pursuant to relevant PRC laws and regulations or upon approval by any competent authorities.

The rights conferred on any class of Shareholders may not be varied or abrogated unless approved by a special resolution of the Shareholders at a Shareholders’ general meeting and by holders of such affected class of Shares at a separate Shareholders’ general meeting. The circumstances which shall be deemed to be a variation or abrogation of the rights of a class of Shareholders are listed in “Appendix V – Summary of Articles of Association”. However, the procedures for approval by separate classes of Shareholders do not apply where: (i) our Bank issues Shares representing no more than 20% of each of the existing issued Domestic Shares and H Shares upon approval by a special resolution of the Shareholders at a Shareholders’ general meeting, either separately or concurrently once every 12 months; (ii) our Bank’s plan to issue Domestic Shares and H Shares at the time of our establishment is implemented within 15 months from the date of approval by the securities regulatory authorities of the State Council; or (iii) Shareholders convert our unlisted Shares into overseas listed Shares for listing and trading abroad upon the approval by the relevant banking regulatory authorities of the State Council and the securities regulatory authorities of the State Council.

252 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. SHARE CAPITAL

RANKING

Pursuant to the Articles of Association, the Domestic Shares and the H Shares are categorized as different classes of Shares. Their differences and the provisions on class rights, the dispatch of notices and financial reports to Shareholders, dispute resolution, registration of Shares on different registers of members, the method of share transfer and appointment of dividend receiving agents are set forth in the Articles of Association and summarized in “Appendix V – Summary of Articles of Association”.

Except for the differences above, the Domestic Shares and the H Shares will rank pari passu with each other in all other respects and, in particular, will rank equally for all dividends or distributions declared, paid or made after the date of this document. All dividends in respect of the H Shares are to be declared in Renminbi and paid by our Bank in Hong Kong dollars whereas all dividends in respect of Domestic Shares are to be paid by our Bank in Renminbi. In addition to cash, dividends may be distributed in the form of shares.

CONVERSION OF THE DOMESTIC SHARES INTO H SHARES

Upon completion of the [REDACTED], the Bank will have two classes of ordinary Shares, namely Domestic Shares and H Shares. All of the Domestic Shares are Shares which are not listed or traded on any stock exchange. Pursuant to the regulations prescribed by the securities regulatory authorities of the State Council and the Articles of Association, the unlisted Shares may be converted into overseas listed Shares. Such converted Shares could be listed or traded on an overseas stock exchange, provided that prior to the conversion and trading of such converted Shares, any requisite internal approval process have been duly completed and the approval from the relevant regulatory authorities, including CSRC, have been obtained. In addition, such conversion and trading shall comply with the regulations prescribed by the securities regulatory authorities of the State Council and the regulations, requirements and procedures prescribed by the relevant overseas stock exchange. If any Domestic Shares are to be converted into H Shares and traded on the Hong Kong Stock Exchange, such conversion will require the approval of the relevant PRC regulatory authorities, including CSRC. The listing and trading of such converted Shares on the Hong Kong Stock Exchange will also require the approval of the Hong Kong Stock Exchange at the time of conversion instead of at the time of our initial [REDACTED] Hong Kong.

Based on the procedures for the conversion of Domestic Shares into H Shares as disclosed below, we may apply for the listing of all or any portion of the Domestic Shares on the Hong Kong Stock Exchange as H Shares before any proposed conversion to ensure that the conversion process can be completed promptly upon notice to the Hong Kong Stock Exchange and delivery of Shares for entry on the [REDACTED]. As any listing of additional Shares after our initial [REDACTED] on the Hong Kong Stock Exchange is ordinarily considered by the Hong Kong Stock Exchange to be a purely administrative matter, it does not require such prior application for listing at the time of our initial [REDACTED] in Hong Kong.

No approval by separate class meeting is required for the listing and trading of such converted Shares on an overseas stock exchange. Any application for listing of the converted Shares on the Hong Kong Stock Exchange after our initial [REDACTED] is subject to prior notification by way of announcement to inform the Shareholders and the public of any proposed conversion.

253 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. SHARE CAPITAL

After all the requisite approvals have been obtained, the relevant Domestic Shares will be withdrawn from the China Securities Depository and Clearing Corporation Limited and our Bank will re-register such Shares on our [REDACTED] maintained in Hong Kong and instruct the [REDACTED] to issue H Share certificates. Registration on our [REDACTED] will be on the conditions that (i) our [REDACTED] lodges with the Hong Kong Stock Exchange a letter confirming the entry of the relevant H Shares on the [REDACTED] and the due dispatch of H Share certificates; and (ii) the admission of the H Shares to be traded on the Hong Kong Stock Exchange complies with the Listing Rules and the General Rules of [REDACTED] and the [REDACTED] Operational Procedures in force from time to time. Until the converted Shares are re-registered on our [REDACTED], such Shares will not be listed as H Shares.

LOCK-UP PERIODS

Pursuant to Article 141 of the PRC Company Law, shares issued prior to any public offering of shares by a company cannot be transferred within one year from the date on which such shares are listed and traded on the relevant stock exchange. As such, the Shares issued by our Bank prior to our [REDACTED] of the H Shares will be subject to such statutory restriction on transfer within a period of one year from the [REDACTED].

Our Directors, Supervisors and members of the senior management shall declare their shareholdings in our Bank and any changes in their shareholdings. Shares transferred by our Directors, Supervisors and members of the senior management each year during their term of office shall not exceed 25% of their total respective shareholdings in our Bank. The Shares that the aforementioned persons held in our Bank cannot be transferred within one year from the date on which the Shares are listed and traded on a stock exchange, nor within half a year after they leave their positions in our Bank. The Articles of Association may contain other restrictions on the transfer of our Shares held by our Directors, Supervisors and members of senior management.

Pursuant to section 2 of paragraph (3) of Article 2 of the Notice on the Regulation of Internal Staff Shares in Financial Enterprises (《關於規範金融企業內部職工持股的通知》), for the regulation of the listing and circulation of internal staff shares and the strengthening of the management of secondary market circulation of such, a financial enterprise (which is listed or will be listed in the future) shall take steps to regulate the secondary market circulation of its internal staff shares which are held by its senior management, or individuals holding more than 50,000 internal staff shares. The aforementioned members of the senior management and individuals shall undertake not to transfer the shares held by them within three years from the date of listing of the financial enterprise. After the lapse of the lock-up period, the shares transferred by each of them in each year shall not exceed 15% of their respective total shareholdings in the financial enterprise. The aggregate number of shares transferred by them within 5 years of the lapse of the lock-up period shall not exceed 50% of their respective total shareholdings in the financial enterprise. Apart from the six-month lockup on our Bank’s issue of Shares and the 12-month lock-up on the controlling shareholders’ disposal of shares, the laws of Hong Kong do not provide for restrictions related to shareholding volume or share transfers.

254 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. SHARE CAPITAL

SHAREHOLDERS’ GENERAL MEETINGS AND CLASS MEETINGS

For details of circumstances under which our Shareholders’ general meeting and Shareholders’ class meeting are required, please see subsections headed “Notice of Meetings and Business to be Conducted Thereat and Change of Rights of Existing Shares or Classes of Shares in Appendix V – Summary of Articles of Association”.

255 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. ASSETS AND LIABILITIES

You should read the discussion and analysis set forth in this section in conjunction with our historical financial information, together with the accompanying notes included in Appendix I attached to this document. Our historical financial information has been prepared in accordance with IFRS. In particular, we have adopted IFRS 9 to replace IAS 39 since January 1, 2018, which resulted in changes in our accounting policies that relate to the recognition, classification and measurement of financial assets and liabilities; derecognition of financial instruments; impairment of financial assets and hedge accounting. For details on differences between IAS 39 and IFRS 9 and the impact of adopting IFRS 9 on our results of operations, please see the section headed “Financial Information – Critical Accounting Judgement and Key Sources of Estimation Uncertainty – Impact of New Accounting Policies”. Please also see Note 2.1 to the Accountant’s Report in Appendix I. The following discussion and analysis contain forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements due to a number of factors, including those set forth in “Forward-Looking Statements” and “Risk Factors”.

ASSETS Our total assets increased by 67.7% from RMB31,763.6 million as of December 31, 2015 to RMB53,280.7 million as of December 31, 2016, and further increased by 33.0% to RMB70,879.4 million as of December 31, 2017, representing a CAGR of 49.4%. As of June 30, 2018, our total assets further increased to RMB74,555.1 million. The increase in our total assets was primarily due to (i) an increase in financial investments as a result of the expansion of our financial market businesses, and (ii) an increase in gross customer loans as a result of the continued growth of our corporate and retail banking businesses. The principal components of our assets consist of (i) net customer loans and (ii) net financial investments, representing 31.8% and 43.0%, respectively, of our total assets as of June 30, 2018. The following table sets forth the components of our total assets as of the dates indicated.

As of December 31, As of June 30, 2015 2016 2017 2018 %of %of %of %of Amount total Amount total Amount total Amount total (in millions of RMB, except percentages) Cash and balances with central bank 4,349.7 13.7% 6,463.7 12.1% 8,145.7 11.5% 7,884.6 10.6% Financial assets held under resale agreements, due from other banks and financial institutions 6,641.9 20.9% 4,971.8 9.3% 13,344.8 18.8% 9,425.0 12.6% Customer loans, gross 9,977.9 31.4% 14,534.5 27.3% 19,401.4 27.4% 24,295.5 32.6% Less: Impairment allowance on customer loans (274.5) (0.9%) (375.4) (0.7%) (567.5) (0.8%) (608.0) (0.8%) Customer loans, net 9,703.4 30.5% 14,159.1 26.6% 18,833.8 26.6% 23,687.5 31.8% Financial investments, gross 10,452.2 32.9% 26,741.0 50.2% 29,244.9 41.2% 32,304.3 43.3% Less: Impairment allowance on financial investments (95.4) (0.3%) (142.3) (0.3%) (248.8) (0.4%) (267.8) (0.4%) Financial investments, net 10,356.8 32.6% 26,598.7 49.9% 28,996.2 40.9% 32,036.5 43.0% Investments in associates 27.6 0.1% 30.5 0.1% 33.0 0.0% 35.3 0.0% Property, plant and equipment 465.3 1.5% 584.0 1.1% 614.8 0.9% 631.8 0.8% Deferred income tax assets 20.1 0.1% 98.8 0.2% 244.3 0.3% 160.2 0.2% Other assets(1) 198.8 0.6% 374.1 0.7% 666.8 0.9% 694.2 0.9% Total assets 31,763.6 100.0% 53,280.7 100.0% 70,879.4 100.0% 74,555.1 100.0%

256 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. ASSETS AND LIABILITIES

Note: (1) Consist primarily of interest receivables, foreclosed assets, prepayment by customers, long-term deferred expenses, investment properties and other receivables.

Customer Loans Customer loans are a substantial component of our assets. Our customer loans, net of impairment allowance, accounted for 30.5%, 26.6%, 26.6% and 31.8% of our total assets as of December 31, 2015, 2016, 2017 and June 30, 2018, respectively. We provide a broad range of loan products to our customers through our distribution network. All of our customer loans are denominated in Renminbi. Except as otherwise indicated, the following discussions are based on our gross customer loans before impairment allowance, rather than net customer loans. Our customer loans are reported net of impairment allowance on our statement of financial position. Our gross customer loans increased by 45.7% from RMB9,977.9 million as of December 31, 2015 to RMB14,534.5 million as of December 31, 2016, and further increased by 33.5% to RMB19,401.4 million as of December 31, 2017, due to the growth in both corporate loan business and personal loan business. As of June 30, 2018, our gross customer loans further increased to RMB24,295.5 million, which was primarily attributable to the continued and stable development of our corporate loan business.

Distribution of Customer Loans by Business Line Our customer loans consist of corporate loans, personal loans and discounted bills. For a description of the loan products we offer, please see “Business – Our Business Lines”. The following table sets forth our customer loans by business line as of the dates indicated.

As of December 31, As of June 30, 2015 2016 2017 2018 %of %of %of %of Amount total Amount total Amount total Amount total (in millions of RMB, except percentages) Corporate loans 5,596.8 56.1% 8,418.9 57.9% 11,951.2 61.6% 18,752.1 77.2% Personal loans 3,640.7 36.5% 4,188.6 28.8% 4,969.0 25.6% 5,368.6 22.1% Discounted bills 740.4 7.4% 1,926.9 13.3% 2,481.2 12.8% 174.7 0.7% Total customer loans 9,977.9 100.0% 14,534.5 100.0% 19,401.4 100.0% 24,295.5 100.0%

Corporate Loans During the Track Record Period, corporate loans were the largest component of our loan portfolio, representing 56.1%, 57.9%, 61.6% and 77.2% of our gross customer loans as of December 31, 2015, 2016 and 2017 and June 30, 2018, respectively. Our corporate loans increased by 50.4% from RMB5,596.8 million as of December 31, 2015 to RMB8,418.9 million as of December 31, 2016, which further increased by 42.0% to RMB11,951.2 million as of December 31, 2017. As of June 30, 2018, our corporate loans amounted to RMB18,752.1 million. The continued increase in our corporate loans during the Track Record Period was primarily due to (i) continued expansion of corporate banking business with an increasing number of quality customers; (ii) improved efficiency in loan approval process, targeted market campaigns and enhanced marketing efforts, more variety of tailor-made credit products as a result of continued process optimization of corporate banking business; and (iii) increased customer base and market demand as result of economic growth in the areas where our Bank operates.

257 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. ASSETS AND LIABILITIES

Distribution of Corporate Loans by Contract Maturity

The majority of our corporate loans were medium-and long-term loans, with a maturity of more than a year. The following table sets forth the distribution of our corporate loans by contract maturity as of the dates indicated.

As of December 31, As of June 30,

2015 2016 2017 2018

%of %of %of %of Amount total Amount total Amount total Amount total

(in millions of RMB, except percentages) Short-term loans(1) 2,536.1 45.3% 2,463.7 29.3% 3,112.7 26.0% 5,377.5 28.7% Medium-and long-term loans(2) 3,060.7 54.7% 5,955.2 70.7% 8,838.5 74.0% 13,374.6 71.3% Total corporate loans 5,596.8 100.0% 8,418.9 100.0% 11,951.2 100.0% 18,752.1 100.0%

Notes:

(1) Under the General Rules of Loans of the PBoC, short-term loans are loans with a maturity of one year or less. (2) Under the General Rules of Loans of the PBoC, medium-and long-term loans are loans which mature in more than one year. Short-term loans accounted for 45.3%, 29.3%, 26.0% and 28.7% of our total corporate loans as of December 31, 2015, 2016 and 2017 and June 30, 2018, respectively.

Medium-and long-term loans accounted for 54.7%, 70.7%, 74.0% and 71.3% of our corporate loans as of December 31, 2015, 2016 and 2017 and June 30, 2018, respectively.

The changes in the maturity structure of our corporate loans during the Track Record Period were primarily market driven.

Distribution of Corporate Loans by Product Type

The following table sets forth the distribution of our corporate loans by product type as of the dates indicated. For details of each type of our corporate loans, please see “Business – Our Business Lines – Corporate Banking – Corporate Loans”.

As of December 31, As of June 30,

2015 2016 2017 2018

%of %of %of %of Amount total Amount total Amount total Amount total

258 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. ASSETS AND LIABILITIES

During the Track Record Period, working capital loans accounted for 31.1%, 41.8%, 34.4% and 35.2% of our total corporate loans as of December 31, 2015, 2016 and 2017 and June 30, 2018, respectively. Our working capital loans increased significantly by 102.3% from RMB1,741.0 million as of December 31, 2015 to RMB3,522.3 million as of December 31, 2016, and by 16.7% to RMB4,109.3 million as of December 31, 2017, and further by 60.7% to RMB6,603.2 million as of June 30, 2018. The continued increase in our working capital loans was primarily due to the mounting demands from a growing customer base as a result of our continued credit support to micro and small enterprises as well as private or individual business owners and enterprise owners to better serve the real economy. Fixed asset loans accounted for 68.9%, 58.2%, 65.6% and 64.8% of our total corporate loans as of December 31, 2015, 2016 and 2017 and June 30, 2018, respectively. Our fixed asset loans increased by 27.0% from RMB3,855.8 million as of December 31, 2015 to RMB4,896.6 million as of December 31, 2016, and further by 60.1% to RMB7,841.9 million as of December 31, 2017. Our fixed asset loans increased by 54.9% in the six months ended June 30, 2018, and amounted to RMB12,148.9 million as of June 30, 2018. The continued increase in our fixed asset loans was primarily due to our increased support for infrastructure and livelihood projects through our extension of fixed asset loans to support the local economy and the development of local enterprises.

Distribution of Corporate Loans by Industry Our corporate loans consist of loans to corporate banking customers in a broad range of industries. The following table sets forth the distribution of our corporate loans by industry classification as of the dates indicated.

As of December 31, As of June 30, 2015 2016 2017 2018 %of %of %of %of Amount total Amount total Amount total Amount total (in millions of RMB, except percentages) Real estate 596.5 10.7% 1,705.7 20.3% 2,077.8 17.4% 4,179.3 22.3% Leasing and business services 752.2 13.4% 654.4 7.8% 2,941.4 24.6% 3,368.6 18.0% Wholesale and retail 1,008.6 18.0% 1,259.4 15.0% 1,087.7 9.1% 2,485.1 13.3% Manufacturing 749.6 13.4% 847.1 10.1% 1,024.0 8.6% 2,207.0 11.8% Construction 466.6 8.3% 1,302.3 15.5% 1,913.5 16.0% 1,976.9 10.5% Water, environment and public utilities 352.2 6.3% 824.6 9.8% 967.2 8.1% 1,370.0 7.3% Education 447.9 8.0% 507.2 6.0% 227.1 1.9% 947.2 5.1% Accommodation and catering 315.7 5.6% 238.9 2.8% 314.7 2.6% 549.7 2.9% Transportation, warehousing and postal services 182.7 3.3% 264.7 3.1% 365.3 3.1% 408.2 2.2% Culture, sports and entertainment 103.0 1.8% 199.2 2.4% 173.0 1.4% 309.2 1.6% Scientific research and technical services 6.8 0.1% 32.8 0.4% 205.3 1.7% 227.5 1.2% Electricity, heating power, gas and water production and supply 64.5 1.2% 170.8 2.0% 144.2 1.2% 163.7 0.9% Agriculture, forestry, animal husbandry and fishery 182.4 3.3% 201.4 2.4% 153.7 1.3% 163.1 0.9% Residential services, community maintenance and other services 39.8 0.7% 88.6 1.1% 200.6 1.7% 67.0 0.4% Others(1) 328.4 6.0% 121.8 1.5% 155.6 1.4% 329.5 1.8% Total corporate loans 5,596.8 100.0% 8,418.9 100.0% 11,951.2 100.0% 18,752.1 100.0%

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Note:

(1) Consist primarily of mining, finance, health and social services, public administration, social security and social organizations, and information transmission, software and information technology services. The aggregate balance of loans to our corporate borrowers in real estate, leasing and business services, wholesale and retail, manufacturing, and construction, being the top five industries in terms of our aggregate corporate loan exposure as of June 30, 2018, collectively accounted for 63.8%, 68.7% and 75.7% and 75.9% of our total corporate loans as of December 31, 2015, 2016 and 2017 and June 30, 2018, respectively.

Our loans to corporate borrowers in the real estate industry accounted for 10.7%, 20.3%, 17.4% and 22.3% of our total corporate loans as of December 31, 2015, 2016 and 2017 and June 30, 2018, respectively. Our loans to real estate corporate borrowers increased by 185.9% from RMB596.5 million as of December 31, 2015 to RMB1,705.7 million as of December 31, 2016, and further increased by 21.8% to RMB2,077.8 million as of December 31, 2017. Our loans to real estate corporate borrowers further increased by 101.1% in the six months ended June 30, 2018 to RMB4,179.3 million as of June 30, 2018. The continued increase in our loans to corporate borrowers in the real estate industry was primarily due to our increased credit extension to quality real estate enterprises and the increased financing demand in line with our expanded business scope after the establishment of our Chengdu Branch.

Our loans to leasing and business services borrowers accounted for 13.4%, 7.8%, 24.6% and 18.0% of our total corporate loans as of December 31, 2015, 2016 and 2017 and June 30, 2018, respectively. Our loans to leasing and business services borrowers decreased by 13.0% from RMB752.2 million as of December 31, 2015 to RMB654.4 million as of December 31, 2016, primarily due to decreased financing demand from corporate borrowers in this industry. Our loans to leasing and business services borrowers increased significantly to RMB2,941.4 million as of December 31, 2017, primarily due to the increased financing demand for infrastructure and municipal projects from corporate borrowers in the leasing and business service industry. As of June 30, 2018, our loans to corporate borrowers in the leasing and business service industry further increased to RMB3,368.6 million mainly because the same reason mentioned above.

Our loans to wholesale and retail borrowers accounted for 18.0%, 15.0%, 9.1% and 13.3% of our total corporate loans as of December 31, 2015, 2016 and 2017 and June 30, 2018, respectively. Our loans to wholesale and retail borrowers increased by 24.9% from RMB1,008.6 million as of December 31, 2015 to RMB1,259.4 million as of December 31, 2016, primarily due to our increased credit support to micro and small enterprises in 2016, many of which happened to be in the wholesale and retail industry. Our loans to wholesale and retail borrowers decreased by 13.6% to RMB1,087.7 million as of December 31, 2017, primarily due to the lack of refinancing demand from certain corporate borrowers in 2017. Our loans to wholesale and retail borrowers increased to RMB2,485.1 million as of June 30, 2018, primarily due to our increased credit extension to certain wholesale and retail borrowers who we believe have better prospects and lower operational risks, and have managed to improved their risk resistance ability and had increasing financing demand.

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Our loans to manufacturing borrowers accounted for 13.4%, 10.1%, 8.6% and 11.8% of our total corporate loans as of December 31, 2015, 2016 and 2017 and June 30, 2018, respectively. Our loans to manufacturing borrowers increased by 13.0% from RMB749.6 million as of December 31, 2015 to RMB847.1 million as of December 31, 2016, and further increased by 20.9% to RMB1,024.0 million as of December 31, 2017. Our loans to manufacturing borrowers increased by 115.5% in the six months ended June 30, 2018 to RMB2,207.0 million as of June 30, 2018. The continued increase in our loans to manufacturing borrowers was primarily due to our active support for the real economy represented by manufacturing industry. Our loans to construction borrowers accounted for 8.3%, 15.5%, 16.0% and 10.5% of our total corporate loans as of December 31, 2015, 2016 and 2017 and June 30, 2018, respectively. Our loans to construction borrowers increased by 179.1% from RMB466.6 million as of December 31, 2015 to RMB1,302.3 million as of December 31, 2016, and further increased by 46.9% to RMB1,913.5 million as of December 31, 2017, primarily due to the increased demand for financing of infrastructure construction for the urbanization of Luzhou. As of June 30, 2018, our loans to corporate borrowers in the construction industry further increased to RMB1,976.9 million, primarily due to the increased financing demand from construction enterprises for large scale infrastructure projects and municipal projects in Luzhou.

Distribution of Corporate Loans by Size of Corporate Borrowers The following table sets forth the distribution of our corporate loans by the size of the borrowers as of the dates indicated.

As of December 31, As of June 30,

2015 2016 2017 2018

%of %of %of %of Amount total Amount total Amount total Amount total

(in millions of RMB, except percentages) Micro and small enterprises(1) 3,965.0 70.8% 6,264.2 74.4% 9,278.0 77.7% 12,954.8 69.1% Medium to large enterprises(1) 1,312.9 23.4% 1,997.5 23.7% 2,603.2 21.8% 5,740.0 30.6% Others(2) 318.9 5.7% 157.2 1.9% 70.0 0.6% 57.3 0.3% Total corporate loans 5,596.8 100.0% 8,418.9 100.0% 11,951.2 100.0% 18,752.1 100.0%

Notes: (1) The classification criteria for micro and small enterprises and, medium to large enterprises are based on the number of their employees, operating income and total assets stated in the Classification Standards of Small and Medium Enterprises. Please see “Definitions”. (2) Primarily includes loans to public institutions such as hospitals and schools. Our loans to micro and small enterprises as a percentage of our corporate loan portfolio accounted for 70.8%, 74.4%, 77.7% and 69.1% as of December 31, 2015, 2016 and 2017 and June 30, 2018, respectively. Our loans to micro and small enterprises increased significantly from RMB3,965.0 million as of December 31, 2015 to RMB6,264.2 million as of December 31, 2016, and further increased by 48.1% to RMB9,278.0 million as of December 31, 2017. Our loans to micro and small enterprises amounted to RMB12,954.8 million as of June 30, 2018. The continued increase in our loans to micro and small enterprises was primarily due to our continuing development of loan business with micro and small enterprises to support the real economy. Our loans to micro and small enterprises as a percentage of our corporate loan

261 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. ASSETS AND LIABILITIES portfolio decreased to 69.1% as of June 30, 2018, mainly because we continuously take various measures aiming at attracting more high-quality medium to large enterprises while striving to develop micro and small enterprise customers.

Loans to medium to large enterprises as a percentage of our total corporate loans accounted for 23.4%, 23.7%, 21.8% and 30.6%, respectively, as of December 31, 2015, 2016 and 2017 and June 30, 2018. Loans to medium to large enterprises significantly increased from RMB1,312.9 million as of December 31, 2015 to RMB1,997.5 million as of December 31, 2016, and further to RMB2,603.2 million as of December 31, 2017. As of June 30, 2018, our loans to medium to large enterprises further increased significantly to RMB5,740.0 million. The continued increase in our loans to medium to large enterprises was primarily due to (i) increases in medium to large enterprise customers, particularly in construction and manufacturing industries, in line with our business expansion, and (ii) increases in large corporate customers which we believe has strong repayment capability, in particular large enterprise customers in education, wholesale and retail industries.

Distribution of Corporate Loans by Exposure Size

The following table sets forth the distribution of our corporate loan exposure to borrowers by size as of the dates indicated.

As of December 31, As of June 30,

2015 2016 2017 2018

%of %of %of %of Amount total Amount total Amount total Amount total

(in millions of RMB, except percentages) Over RMB100 million – – 1,630.0 19.4% 4,354.7 36.4% 9,611.8 51.3% Over RMB50 million to RMB100 million 564.2 10.1% 1,247.9 14.8% 2,109.0 17.6% 2,455.7 13.1% Over RMB10 million to RMB50 million 3,632.0 64.9% 4,008.0 47.6% 3,685.2 30.8% 4,676.9 24.9% Up to RMB10 million 1,400.6 25.0% 1,533.0 18.2% 1,802.3 15.1% 2,007.7 10.8% Total corporate loans 5,596.8 100.0% 8,418.9 100.0% 11,951.2 100.0% 18,752.1 100.0%

Personal Loans

As of December 31, 2015, 2016 and 2017 and June 30, 2018, our personal loans accounted for 36.5%, 28.8%, 25.6% and 22.1% of our total customer loans, respectively.

Our personal loans increased by 15.0% from RMB3,640.7 million as of December 31, 2015 to RMB4,188.6 million as of December 31, 2016, and further increased by 18.6% to RMB4,969.0 million as of December 31, 2017. Our personal loans amounted to RMB5,368.6 million as of June 30, 2018. The continued increase in our personal loans were primarily due to our successful development and marketing of our personal loan business, in particular, personal business loans and personal consumption loans.

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Distribution of Personal Loans by Product Type The table below sets forth our personal loans by product type as of the dates indicated.

As of December 31, As of June 30, 2015 2016 2017 2018 %of %of %of %of Amount total Amount total Amount total Amount total (in millions of RMB, except percentages) Residential mortgage loans 2,030.0 55.8% 2,132.3 50.9% 2,253.9 45.4% 2,383.3 44.4% Personal business loans 1,424.5 39.1% 1,667.0 39.8% 2,017.9 40.6% 2,265.8 42.2% Personal consumption loans 186.3 5.1% 389.3 9.3% 697.2 14.0% 719.5 13.4% Total personal loans 3,640.7 100.0% 4,188.6 100.0% 4,969.0 100.0% 5,368.6 100.0%

Residential mortgage loans as a percentage of our total personal loans decreased from 55.8% as of December 31, 2015 to 50.9% as of December 31, 2016, and further decreased to 45.4% as of December 31, 2017. Residential mortgage loans as a percentage of our total personal loans further decreased to 44.4% as of June 30, 2018. The continued decrease in residential mortgage loans as a percentage of our total loans was primarily due to our control over the proportion of low-margin residential mortgage loans so as to optimize our personal loan portfolio and fully utilize finite credit resources. The percentage of personal business loans to our total personal loan portfolio increased stably, being 39.1%, 39.8%, 40.6% and 42.2% as of December 31, 2015, 2016 and 2017 and June 30, 2018, respectively. The increase primarily resulted from our credit support to micro and small enterprises and individual business owners to encourage innovation from start-ups in accordance with government policies. Personal consumption loans as a percentage of our total personal loans increased from 5.1% as of December 31, 2015 to 9.3% as of December 31, 2016, and further increased to 14.0% as of December 31, 2017. The increase was primarily due to the introduction of various personal consumption loan products, such as “Sui Xin Dai (隨薪貸)” and “Jin Man Lu (金滿瀘)”, to meet different consumer demands. The percentage of personal consumption loans in our total personal loans slightly decreased to 13.4% as of June 30, 2018.

Distribution of Personal Loans by Size of Loans The following table sets forth the distribution of our outstanding personal loans by exposure size as of the dates indicated.

As of December 31, As of June 30, 2015 2016 2017 2018 Amount % of total Amount % of total Amount % of total Amount % of total (in millions of RMB, except percentages) Over RMB5 million 624.4 17.1% 935.7 22.3% 1,169.5 23.5% 1,251.7 23.3% Over RMB500,000 to RMB5 million 808.1 22.2% 995.3 23.8% 1,271.4 25.6% 1,412.9 26.3% Up to RMB500,000 2,208.3 60.7% 2,257.6 53.9% 2,528.1 50.9% 2,704.0 50.4% Total personal loans 3,640.7 100.0% 4,188.6 100.0% 4,969.0 100.0% 5,368.6 100.0%

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Discounted Bills Discounted bills accounted for 7.4%, 13.3%, 12.8% and 0.7% of our total customer loans as of December 31, 2015, 2016 and 2017 and June 30, 2018, respectively. Our discounted bills increased by 160.3% from RMB740.4 million as of December 31, 2015 to RMB1,926.9 million as of December 31, 2016, and further increased by 28.8% to RMB2,481.2 million as of December 31, 2017. The continued increase in our discounted bills was primarily due to our promotion of discounted bills business in response to regulatory policies encouraging electronic commercial draft business. As of June 30, 2018, our discounted bills decreased to RMB174.7 million, primarily due to (i) the successive maturity of our existing discounted bills; and (ii) our reduced holding of discontinued bills to rebalance our credit asset structure, taking into account market competition and our loan balance. During the Track Record Period, all of our discounted bills were bank acceptance bills, which generally have lower credit risks than commercial acceptance bills.

Distribution of Customer Loans by Geographical Region We also classify loans by the geographic location of our branch offices that originated the loans. Our branches or sub-branches generally originate loans to borrowers in the same region. The following table sets forth the distribution of our customer loans by geographic region as of the dates indicated.

As of December 31, As of June 30, 2015 2016 2017 2018 Amount % of total Amount % of total Amount % of total Amount % of total (in millions of RMB, except percentages) Luzhou 9,977.9 100.0% 14,534.5 100.0% 18,020.7 92.9% 21,528.6 88.6% Outside Luzhou ––––1,380.7 7.1% 2,766.8 11.4% Total customer loans 9,977.9 100.0% 14,534.5 100.0% 19,401.4 100.0% 24,295.5 100.0%

Distribution of Customer Loans by Collateral A substantial amount of our customer loans are secured by collateral, pledges or guarantees. As of December 31, 2015, 2016 and 2017 and June 30, 2018, our customer loans secured by collateral, pledges or guarantees amounted to RMB9,551.6 million, RMB13,947.5 million, RMB17,958.6 million and RMB23,033.8 million, representing 95.7%, 96.0%, 92.6% and 94.8% of our total customer loans, respectively. The following table sets forth the distribution of our customer loans by type of collateral as of the dates indicated.

As of December 31, As of June 30, 2015 2016 2017 2018 Amount % of total Amount % of total Amount % of total Amount % of total (in millions of RMB, except percentages) Pledged loans(1) 1,423.4 14.3% 3,637.8 25.0% 5,944.7 30.6% 4,481.3 18.4% Collateralized loans(1) 5,477.2 54.9% 6,968.7 47.9% 7,671.1 39.5% 10,687.8 44.0% Guaranteed loans(1) 2,651.0 26.6% 3,341.0 23.0% 4,342.8 22.4% 7,864.7 32.4% Unsecured loans 426.3 4.3% 587.0 4.0% 1,442.8 7.4% 1,261.7 5.2% Total customer loans 9,977.9 100.0% 14,534.5 100.0% 19,401.4 100.0% 24,295.5 100.0%

Note: (1) Represent the total amount of loans fully or partially secured by collateral, pledges or guarantees in each category. If a loan is secured by more than one form of security interest, the allocation is based on the primary form of security interest.

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During the Track Record Period, a majority of our customer loans were secured by collateral or pledges. As of December 31, 2015, 2016 and 2017 and June 30, 2018, our pledged loans amounted to RMB1,423.4 million, RMB3,637.8 million, RMB5,944.7 million and RMB4,481.3 million, accounting for 14.3%, 25.0%, 30.6% and 18.4% of our gross customer loans, respectively. As of the same dates, our collateralized loans amounted to RMB5,477.2 million, RMB6,968.7 million, RMB7,671.1 million and RMB10,687.8 million, accounting for 54.9%, 47.9%, 39.5% and 44.0% of our customer loans, respectively. In addition, as of December 31, 2015, 2016 and 2017 and June 30, 2018, our guaranteed loans amounted to RMB2,651.0 million, RMB3,341.0 million, RMB4,342.8 million and RMB7,864.7 million, accounting for 26.6%, 23.0%, 22.4% and 32.4% of our total customer loans, respectively. The continued increase in our loans secured by collateral, pledges and guarantees was primarily attributable to the stringent loan conditions imposed by us on borrowers for our risk management.

Our unsecured loans were RMB426.3 million, RMB587.0 million and RMB1,442.8 million as of December 31, 2015, 2016 and 2017, respectively, representing 4.3%, 4.0% and 7.4% of our total customer loans as of the respective dates. The continued increase in our unsecured loans in absolute terms was primarily due to the increase in the number of clients who meet the eligibility for our unsecured loans, such as large state-owned enterprises and creditworthy retail banking customers. Our unsecured loans decreased to RMB1,261.7 million as of June 30, 2018, representing 5.2% of our total customer loans as of the same date, primarily due to the more stringent conditions imposed by us on borrowers so as to enhance our risk management.

Borrowers Concentration

In accordance with applicable PRC banking guidelines, we are subject to a lending limit of 10% of our net capital base to any single borrower. The following table sets forth our loan exposure to our ten largest single borrowers as of the date indicated.

As of June 30, 2018 %ofnet % of total capital Industry Amount loans base(1) Classification (in millions of RMB, except percentages) Borrower A Real estate 567.0 2.3 9.5% Normal Borrower B Accommodation and 500.0 2.1 8.4% Normal catering Borrower C Education 480.0 2.0 8.1% Normal Borrower D Real estate 450.0 1.9 7.6% Normal Borrower E Leasing and business 450.0 1.9 7.6% Normal services Borrower F Manufacturing 427.0 1.8 7.2% Normal Borrower G Water, environment and 330.0 1.4 5.5% Normal public facilities management Borrower H Leasing and business 320.0 1.3 5.4% Normal services Borrower I Scientific research and 310.0 1.3 5.2% Normal technical services Borrower J Manufacturing 300.0 1.2 5.0% Normal Total 4,134.0 17.2 69.5%

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Note:

(1) Represents loan balances as a percentage of our net capital base (also referred to in this document as “regulatory capital”), calculated in accordance with the requirements of the Capital Administration Measures and based on our financial statements prepared in accordance with PRC GAAP. For a calculation of our net capital base as of June 30, 2018, see “Financial Information – Capital Resources – Capital Adequacy”. In accordance with applicable PRC banking guidelines, our credit exposure to any single group customer is limited to not more than 15% of our net capital base. The following table sets forth, as of the date indicated, our credit exposure to our ten largest group customers as of the date indicated.

As of June 30, 2018 %ofnet Credit capital Industry Exposure(1) base(2) Classification (in millions of RMB, except percentages) Group A Accommodation and 787.0 13.2% Normal catering Group B Leasing and 725.0 12.2% Normal business services Group C Water, environment 600.0 10.1% Normal and public facilities management Group D Real estate 567.0 9.5% Normal Group E Leasing and 510.0 8.6% Normal business services Group G Education 480.0 8.1% Normal Group H Real estate 462.6 7.7% Normal Group I Leasing and 450.0 7.5% Normal business services Group J Real estate 450.0 7.5% Normal Group F Manufacturing 450.0 7.5% Normal Total 5,481.6 92.1%

Notes:

(1) Calculated pursuant to the applicable CBRC requirements by (i) adding up all on-balance-sheet credit amounts and off-balance-sheet credit amounts in respect of each group borrower; and (ii) deducting the total amount of security deposits, certificates of deposit and government bonds in respect of each group borrower. (2) Represents credit exposure as a percentage of our net capital base (also referred to in this document as “regulatory capital”), calculated in accordance with the requirements of the Capital Administration Measures and based on our financial statements prepared in accordance with PRC GAAP. For a calculation of our net capital base as of June 30, 2018, see “Financial Information – Capital Resources – Capital Adequacy”.

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Maturity Profile of Loan Portfolio

The following table sets forth our loan products by remaining maturity as of the date indicated.

As of June 30, 2018 Due over Due in 3 months Due over Due in 3 months or up to 1 year up more than Overdue less 12 months to 5 years 5 years Total (in millions of RMB) Corporate loans Working capital loans 22.5 866.7 4,789.5 924.5 – 6,603.2 Fixed asset loans 27.3 58.5 73.0 5,881.5 6,108.6 12,148.9 Sub-total 49.8 925.2 4,862.5 6,806.0 6,108.6 18,752.1 Personal loans Residential mortgage loans – 0.1 3.1 117.6 2,262.5 2,383.3 Personal business loans 26.1 275.4 826.1 1,126.5 11.7 2,265.8 Personal consumption loans 8.5 12.1 23.1 652.1 23.8 708.3 Subtotal 34.6 287.6 24.9 1,896.1 2,298.0 5,368.6 Discounted bills Bank acceptance bills – 174.7–––174.7 Total customer loans 84.4 1,387.5 5,714.8 8,702.1 8,406.6 24,295.5

As of June 30, 2018, our overdue corporate loans and corporate loans due within one year amounted to RMB5,837.5 million, representing 31.1% of our total corporate loans, primarily consisting of working capital loans, which generally have terms of one year or less. As of June 30, 2018, our corporate loans due over one year amounted to RMB12,914.6 million, representing 68.9% of our total corporate loans, consisting primarily of fixed-asset loans, which generally have terms of more than one year.

As of June 30, 2018, our personal loans due over five years amounted to RMB2,298.0 million, representing 42.8% of our total personal loans, consisting primarily of residential mortgage loans, which generally have longer terms.

Loan Interest Rate Profile

In recent years, the PBoC has implemented a series of initiatives to gradually liberalize interest rates and establish a market-based interest rate regime. Prior to July 20, 2013, China’s commercial banks could set interest rates on loans and deposits within a permitted range of PBoC benchmark interest rates. On July 20, 2013, the PBoC removed the lower limits (70% of PBoC benchmark loan interest rates) for loans, allowing financial institutions to freely set interest rates.

Asset Quality of Our Loan Portfolio

We measure and monitor the asset quality of our customer loans through our credit extension system. Pursuant to the Guidelines of Risk-based Classification of Loans (<貸款風險分類指引>) issued by the former CBRC on July 3, 2007, the principal criteria for classifying a loan should be based on the assessment of the borrower’s repayment ability, willingness to repay, and available collateral. We classify our loans using our credit system, in accordance with former CBRC’s guidelines. Please see “Supervision and Regulation – Loan Classification, Allowances and Write-Offs – Loan Classification”.

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Loan Classification Criteria In determining the classification of our loan portfolio, we apply a series of criteria derived from the Guidelines of Risk-based Classification of Loans (《貸款風險分類指引》). These criteria are designed to assess the likelihood of repayment by the borrower and the collectability of the principal and interest on the loan.

Corporate Loans (Excluding Loans to Micro and Small Enterprises) The clarification criteria of our corporate loans (excluding loans to micro and small enterprises) take into consideration of a number of factors to the extent applicable, including but not limited to (i) the borrower’s ability to repay the loans, as measured by the borrower’s cash flows, financial condition, profitability and other non-financial factors affecting the borrower’s repayment ability; (ii) the borrower’s repayment history; (iii) the periods of the loans past due; (iv) the borrower’s repayment intention; (v) the profitability of the underlying project; (vi) the collateral of the loans; (vii) the borrower’s legal responsibility; and (viii) the Bank’s credit management. The key factors for our loan classification are listed below. This is not intended to be an exhaustive list of all factors taken into account in classifying our loans. Please see “Risk Management – Credit Risk Management – Credit Risk Management for Corporate Loans – Post-disbursement Management” for additional information. Normal. Loans are classified as normal only if the borrower can honor the terms of its loans and there is no sufficient reason to doubt its ability to repay principal and interest in full on a timely basis. • the borrower pays the principal and interest under the contract; • the borrower’s operations and business are stable; • the borrower has a good credit history in our Bank; • the borrower’s cash flows from the ordinary course of business are stable and sufficient to service the loan; or • the borrower has strong financing ability and is in a business with good prospect; Special Mention. Loans should be classified as special mention if the borrower is able to service its loans, although repayment may be adversely affected by specific factors, including: • there are adverse changes on certain key financial indicators of the borrower, such as decreases in cash flow and increases in debts to assets ratio; or such financial indicators are clearly lower than the industry level; • loans extension, or past due for a certain period, or such extended loans need to be repaid by other financing methods; • there have been material changes in the borrower’s substantial shareholders, affiliated entities, or parent companies or subsidiaries that may affect the borrower’s repayment ability; • there have been material changes in the borrower’s senior management that may impact the borrower’s repayment ability; • our loan document is incomplete and the missing documents may affect our ability to enforce collectability of the loans;

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• the borrower has used the loan proceeds for a purpose inconsistent with the intended use of the loan proceeds; or • there have been adverse changes in the macro-economic environment, industry, market, or laws and regulations that may adversely affect the borrower’s repayment ability. Substandard. Loans should be classified as substandard if the borrower’s ability to service its loans is in question as it cannot rely entirely on normal business revenues to repay the principal and interest, and losses may ensue even if we invoke the collateral or guarantees. Loans are generally classified as substandard if any of the following circumstances arises: • the principal or any interest payments are overdue for over 90 days; • the loans require restructuring through amendments to repayment terms as a result of the borrower’s deteriorated financial condition or inability to pay; • the borrower is disposing of or selling off major fixed assets used for production or business operation; or • the borrower has encountered continuous financial difficulties, or the underlying project has been significantly delayed resulting in a shortage of cash flows for loan repayment and the borrower’s inability to repay the loan on a timely basis. Doubtful. Loans should be classified as doubtful if the borrower cannot repay the principal and interest in full and significant losses will need to be recognized even if we invoke the collateral or guarantees. Loans in the doubtful category generally demonstrate the following characteristics: • the borrower is experiencing financial losses unable to repay the loan and cannot obtain other funding; • the borrower is unable to make repayment even after receiving funds from the disposal of intangible assets, property, equipment or shares; • the borrower’s production or operations have been suspended or partially suspended, or the infrastructure project financed by our loans has been suspended; or • the loans are still overdue or the borrower is still unable to repay the loans notwithstanding the loan restructuring. Loss. Loans should be classified as loss if only a minimal portion or none of the principal and interest can be recovered after all possible measures have been taken and all legal remedies have been exhausted. Corporate loans in the loss category generally demonstrate the following characteristics: • we have brought legal actions against the borrower to recover the loan, but even after the enforcement of court’s order, we may still encounter a significant loss on the loan; • although the borrower’s operations continue, there is no market for its products and the borrower has become insolvent and incurred significant losses, and is on the verge of bankruptcy, and the government has no plan to bail it out, and it has become clear that the borrower cannot honor its repayment obligations; • the borrower or the guarantor has been declared bankrupt or been dissolved or closed down, and terminated as a legal entity, or had their business licenses revoked, the loans thereof remain unpaid after the pursuit of recovery;

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• serious natural disasters or unforeseen events have resulted in significant losses of the borrower without insurance coverage or the loan remains unpaid in full or in part even after payment on insurance claims and our pursuit of recovery;

• the loans remain unpaid even after the conclusion of a judicial proceeding with respect to the borrower and the guarantor, or the enforcement of the guarantee or foreclosure on the collateral; or

• the action brought against the borrower and the guarantor has lapsed with respect to the statute of limitations, or we have lost the important documents evidencing our credit rights, and the loans remain unpaid after our pursuit of recovery.

Corporate Loans to Micro and Small Enterprises

Corporate loans to micro and small enterprises refer to loans we extend to companies classified as micro and small enterprises, according to the loan classification criteria set forth in Measures for Classifying Small Business Loans (Trial Implementation) (CBRC [2007] No. 63) issued by the former CBRC. We adopt the same loan classification criteria as we set for corporate loans if we can obtain sufficient information for loan classification, and we primarily take into account the length of time by which payments of principal or interest are overdue and the type of collateral if we are unable to obtain more useful information for loan classification.

The following table sets forth the five-level classification of our loans to micro and small enterprises by time for which payments of the principal or interest are overdue and by type of collateral:

Overdue by

Over Current 1-30 days 31-90 days 91-180 days 181-360 days 360 days Pledged loans Normal Normal Normal Substandard Substandard Doubtful Collateralized loans Normal Normal Special Substandard Substandard Doubtful mention Guaranteed loans Normal Normal Special Substandard Doubtful Loss mention Unsecured loans Normal Special Substandard Doubtful Doubtful Loss mention

Personal Loans

Personal loans refer to residential mortgage loans, personal consumption loans, and personal business loans. Residential mortgage loans mainly include loans for purchasing new and second-hand houses. Personal consumption loans mainly include loans for home renovation, purchase of home appliances, furniture and vehicles, and education loans. Personal business loans mainly include loans to private or individual business owners, or owners of micro and small enterprises and other self-employed venture banking customers for business purposes.

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In applying the loan classification criteria to personal consumption loans, we primarily consider the time principal or interest past due and the type of collateral involved. The following table sets forth the classification of our personal consumption loans by the time principal or interest past due and by different types of collateral:

Overdue by

As to personal business loans, we adopt the same loan classification criteria as we set for corporate loans if we can obtain sufficient information for loan classification. We adopt the same loan classification criteria as we set for personal consumption loans with respect to start-up loans for laid-off and unemployed borrowers and to personal business loans if we are unable to obtain sufficient information for loan classification.

Distribution of Loans by Loan Classification

We use the term “NPLs” or “impaired loans” to refer to the loans identified as “impaired customer loans” in Note 20 to our historical financial information included in the Accountant’s Report in Appendix I to this document. Under our credit system, our NPLs are classified as either substandard, doubtful or loss, as applicable. The following table sets forth the distribution of our loan portfolio by our credit classification system as of the dates indicated.

As of December 31, As of June 30, 2015 2016 2017 2018 Amount % of total Amount % of total Amount % of total Amount % of total (in millions of RMB, except percentages) Normal 9,118.1 91.4% 13,730.7 94.5% 18,680.8 96.3% 23,557.5 97% Special mention 830.0 8.3% 726.6 5.0% 527.8 2.7% 517.3 2.1% Sub-total 9,948.1 99.7% 14,457.3 99.5% 19,208.6 99.0% 24,074.8 99.1% Substandard 28.6 0.3% 75.7 0.5% 190.2 1.0% 217.6 0.9% Doubtful 0.7 – 1.2 – 2.4 – 3.0 – Loss 0.5 – 0.1 – 0.1 – 0.1 – Sub-total 29.8 0.3% 77.1 0.5% 192.7 1.0% 220.7 0.9% Total customer loans 9,977.9 100.0% 14,534.5 100.0% 19,401.4 100.0% 24,295.5 100.0% NPL ratio(1) 0.30% 0.53% 0.99% 0.91%

Note:

(1) Calculated by dividing total NPLs by gross customer loans.

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The following table sets forth the distribution of our customer loans by business line and by our credit classification system as of the dates indicated.

As of December 31, As of June 30, 2015 2016 2017 2018 %of %of %of %of Amount total(3) Amount total(3) Amount total(3) Amount total(3) (in millions of RMB, except percentages) Corporate loans Normal 4,867.9 48.8% 7,792.0 53.6% 11,383.1 58.7% 18,164.8 74.8% Special mention 723.9 7.3% 589.2 4.1% 444.2 2.3% 432.2 1.8% Substandard 5.0 0.1% 37.6 0.3% 123.9 0.6% 155.1 0.6% Doubtful –––––––– Loss –––––––– Sub-total 5,596.8 56.1% 8,418.9 57.9% 11,951.2 61.6% 18,752.1 77.2% NPL ratio(1) 0.09% 0.45% 1.04% 0.83% Personal loans Normal 3,509.8 35.2% 4,011.7 27.6% 4,816.6 24.8% 5,217.9 21.4% Special mention 106.1 1.1% 137.4 0.9% 83.6 0.4% 85.1 0.4% Substandard 23.6 0.2% 38.1 0.3% 66.3 0.3% 62.5 0.3% Doubtful 0.7 – 1.2 – 2.4 – 3.0 – Loss 0.5 – 0.1 – 0.1 – 0.1 – Sub-total 3,640.7 36.5% 4,188.6 28.8% 4,969.0 25.6% 5,368.6 22.1% NPL ratio(1) 0.68% 0.94% 1.38% 1.22% Discounted bills Normal 740.4 7.4% 1,926.9 13.3% 2,481.2 12.8% 174.8 0.7% Special mention –––––––– Substandard –––––––– Doubtful –––––––– Loss –––––––– Sub-total 740.4 7.4% 1,926.9 13.3% 2,481.2 12.8% 174.8 0.7% NPL ratio(1) –––– Total customer loans 9,977.9 100.0% 14,534.5 100.0% 19,401.4 100.00% 24,295.5 100.0% NPL ratio(2) 0.30% 0.53% 0.99% 0.91%

Notes:

(1) Calculated by dividing NPLs in each business line by gross customer loans in that business line. (2) Calculated by dividing total NPLs by gross customer loans. (3) Calculated by dividing gross customer loans in each category by total gross customer loans. Our NPL ratio was 0.30%, 0.53%, 0.99% and 0.91% as of December 31, 2015, 2016 and 2017 and June 30, 2018, respectively.

Our NPL ratio increased from 0.30% as of December 31, 2015 to 0.53% as of December 31, 2016, and further increased to 0.99% as of December 31, 2017. The continued increase in our NPL ratio was primarily due to the deteriorated financial conditions and weakened repayment abilities of certain customers which were less competitive and with weak risk resistance ability as a result of the slowdown of the PRC economy. Our NPL ratio decreased to 0.91% as of June 30, 2018, primarily due to our enhanced credit risk management and our NPL collection efforts.

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Loans Classified as Special Mention

As of December 31, 2015, 2016 and 2017 and June 30, 2018, the balance of our customer loans classified as special mention was RMB830.0 million, RMB726.6 million, RMB527.8 million and RMB517.3 million, respectively, representing 8.3%, 5.0%, 2.7% and 2.1%, respectively, of our total customer loans. The percentage of loans classified as special mention to total customer loans decreased from 8.3% as of December 31, 2015 to 5.0% as of December 31, 2016, to 2.7% as of December 31, 2017 and further to 2.1% as of June 30, 2018, primarily because in the Track Record Period we attached great importance to the prevention of credit risk, enhanced management of loans classified as special mention, successfully recovered certain loans and prudently downgraded some loans to substandard or doubtful.

The following table sets forth the distribution of our loans classified as special mention to customers by collateral as of the dates indicated.

As of December 31, As of June 30, 2015 2016 2017 2018 Amount % of total Amount % of total Amount % of total Amount % of total (in millions of RMB, except percentages) Pledged loans – – 6.2 0.9% 0.5 0.1% – – Collateralized loans 343.8 41.4% 412.4 56.8% 184.0 34.9% 92.3 17.9% Guaranteed loans 302.2 36.4% 278.8 38.4% 315.2 59.7% 424.9 82.1% Unsecured loans 184.0 22.2% 29.3 4.0% 28.1 5.3% 0.1 – Total loans of special mention to customers 830.0 100.0% 726.6 100.0% 527.8 100.0% 517.3 100.0%

Changes in Asset Quality of Our Loans

The following table sets forth the changes in our NPLs for the periods indicated.

As of December 31, As of June 30, 2015 2016 2017 2018 (in millions of RMB, except percentages) Beginning of the year/period 24.6 29.8 77.1 192.7 Increases 27.4 64.8 148.2 105.9 Decreases Recovery 21.9 10.7 23.5 19.8 Upgrade 0.3 0.2 – 0.9 Payment in kind – – 6.5 44.1 Write-off – 6.6 2.6 13.1 End of the year/period 29.8 77.1 192.7 220.7 NPL ratio 0.30% 0.53% 0.99% 0.91%

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The following table sets forth the migration ratios of our loan portfolio calculated in accordance with the applicable CBRC requirements for the periods indicated.

For the six months ended For the year ended December 31, June 30, 2015 2016 2017 2018 Normal and special mention loans(1) 0.78% 1.50% 2.08% 0.14% Normal loans(2) 7.62% 9.43% 3.26% 1.93% Special mention loans(3) 0.93% 10.12% 45.44% 15.77% Substandard loans(4) 38.50% – 0.29% 0.64% Doubtful loans(5) 96.65%–––

Notes:

(1) Represent migration ratios of loans classified as normal or special mention which were subsequently downgraded to NPLs. The migration ratio of normal and special mention loans represents a fraction, the numerator of which equals the sum of (i) loans classified as normal at the beginning of the period and downgraded to non-performing loans at the end of the period, and (ii) loans classified as special mention at the beginning date of the period and downgraded to non-performing loans at the end of the period, and the denominator of which equals the sum of (i) the difference between the balance of normal loans at the beginning of the period and the decrease, in the period, in the loans which were classified as normal at the beginning of the period, and (ii) the difference between the balance of special mention loans at the beginning of the period and the decrease in such loans in the period. (2) Represent migration ratio of loans classified as normal which were subsequently downgraded to other classifications. The normal loan migration ratio represents a fraction, the numerator of which equals loans classified as normal at the beginning of the period and downgraded to lower classifications at the end of the period, and the denominator of which equals the difference between the balance of normal loans at the beginning of the period and the decrease in such loans in the period. (3) Represent migration ratio of loans classified as special mention which were subsequently downgraded to NPLs. The special mention loan migration ratio represents a fraction, the numerator of which equals the loans which were classified as special mention at the beginning of the period and downgraded to NPLs at the end of the period, and the denominator of which equals the difference between the balance of special mention loans at the beginning of the period and the decrease in such loans in the period. (4) Represent migration ratio of loans classified as substandard which were subsequently downgraded to doubtful or loss. The substandard loan migration ratio represents a fraction, the numerator of which equals the loans classified as substandard at the beginning of the period and downgraded to doubtful or loss at the end of the period, and the denominator of which equals the difference between the balance of substandard loans at the beginning of the period and the decrease in such loans in the period. (5) Represent migration ratio of loans classified as doubtful which were downgraded to loss. The doubtful loan migration ratio represents a fraction, the numerator of which equals the loans classified as doubtful at the beginning of the period and downgraded to loss at the end of the period, and the denominator of which equals the difference between the balance of doubtful loans at the beginning of the period and the decrease in such loans in the period.

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Distribution of NPLs by Product Type

The following table sets forth the distribution of our NPLs by product type as of the dates indicated.

As of December 31, As of June 30, 2015 2016 2017 2018 %of NPL %of NPL %of NPL %of NPL Amount total ratio(1) Amount total ratio(1) Amount total ratio(1) Amount total ratio(1) (in millions of RMB, except percentages) Corporate loans Working capital loans 5.0 16.8% 0.29% 8.1 10.5% 0.23% 68.6 35.6% 1.67% 107.8 48.9% 1.63% Fixed asset loans – – – 29.5 38.3% 0.60% 55.3 28.7% 0.71% 47.3 21.4% 0.39% Subtotal 5.0 16.8% 0.09% 37.6 48.8% 0.45% 123.9 64.3% 1.04% 155.1 70.3% 0.83% Personal loans Residential mortgage loans 2.6 8.7% 0.13% 2.9 3.8% 0.15% 15.7 8.2% 0.76% 17.7 8.0% 0.81% Personal business loans 20.6 69.1% 1.37% 34.7 45.0% 1.92% 41.4 21.5% 1.87% 36.5 16.5% 1.47% Personal consumption loans 1.6 5.4% 0.81% 1.9 2.5% 0.52% 11.7 6.1% 1.71% 11.4 5.2% 1.61% Subtotal 24.8 83.2% 0.68% 39.5 51.2% 0.94% 68.8 35.7% 1.38% 65.6 29.7% 1.23% Total NPLs 29.8 100.0% 0.30% 77.1 100.0% 0.53% 192.7 100.0% 0.99% 220.7 100.0% 0.91%

Note: (1) Calculated by dividing NPLs in each product type by gross customer loans in that product type. As of December 31, 2015, 2016 and 2017 and June 30, 2018, we did not have any non-performing discounted bills.

Non-performing Corporate Loans Our non-performing corporate loans increased significantly from RMB5.0 million (representing a NPL ratio of 0.09%) as of December 31, 2015 to RMB37.6 million (representing a NPL ratio of 0.45%) as of December 31, 2016, and further to RMB123.9 million (representing a NPL ratio of 1.04%) as of December 31, 2017. Our non-performing corporate loans amounted to RMB155.1 million (representing a NPL ratio of 0.83%) as of June 30, 2018. The continued increase in the amount of our non-performing corporate loans was primarily due to business difficulties and deteriorated repayment abilities of certain corporate banking customers as a result of the adverse impacts from the slowdown of the PRC economy. As of June 30, 2018, the NPL ratio of our corporate loans decreased as compared with that of December 31, 2017, mainly due to our enhanced credit risk prevention, our NPL collection efforts, development customers with good credit records and implementation of strict risk control measures.

Non-performing Personal Loans Our non-performing personal loans increased from RMB24.8 million (representing an NPL ratio of 0.68%) as of December 31, 2015 to RMB39.5 million (representing an NPL ratio of 0.94%) as of December 31, 2016, and further increased by 74.0% to RMB68.8 million (representing an NPL ratio of 1.38%) as of December 31, 2017, primarily due to an increase in our non-performing personal business loans in 2016 and an increase in our non-performing residential mortgage loans in 2017, both of which were caused by the deterioration in the financial conditions and repayment abilities of certain retail banking customers. Our non- performing personal loans decreased to RMB65.6 million (representing an NPL ratio of 1.23%) as of June 30, 2018, primarily due to our enhanced credit risk prevention, our non-performing loans collection efforts, development of good credit customers and implementation of strict risk control.

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Distribution of Non-Performing Corporate Loans by Industry The following table sets forth the distribution of our NPLs to corporate banking customers by industry as of the dates indicated.

As of December 31, As of June 30, 2015 2016 2017 2018 %of NPL %of NPL %of NPL %of NPL Amount total ratio(1) Amount total ratio(1) Amount total ratio(1) Amount total ratio(1) (in millions of RMB, except percentages) Transportation, warehousing and postal services – – – – – – 28.8 23.2% 7.88% 79.8 51.4% 12.60% Accommodation and catering – – – 27.6 73.3% 11.54% 27.3 22.0% 8.67% 27.3 17.6% 2.60% Manufacturing – – – 0.4 1.1% 0.05% 19.8 16.0% 1.93% 27 17.4% 1.20% Wholesale and retail 5.0 100.0% 0.50% 5.0 13.3% 0.40% 39.8 32.1% 3.66% 10 6.4% 0.51% Construction – – – 0.8 2.2% 0.06% – – – 4.5 2.9% 0.22% Agriculture, forestry, animal husbandry and fishery – – – 1.6 4.1% 0.77% 4.3 3.5% 2.80% 4 2.6% 2.20% Electricity, heating power, gas and water production and supply – – – 2.2 6.0% 1.31% 2.1 1.7% 1.48% 2.1 1.4% 1.53% Residential services, community maintenance and other services – – – – – – 1.8 1.4% 0.88% 0.4 0.3% 0.42% Total non-performing corporate loans 5.0 100.0% 0.09% 37.6 100.0% 0.45% 123.9 100.0% 1.04% 155.1 100% 0.83%

Note: (1) Calculated by dividing NPLs in each industry by gross customer loans in that industry. Our non-performing corporate loans consisted primarily of NPLs to corporate borrowers in the transportation, warehousing and postal services industry, the accommodation and catering industry and manufacturing industry.

As of December 31, 2015 and 2016, we did not record any non-performing corporate loan to transportation, warehousing and postal services borrowers. As of December 31, 2017 and June 30, 2018, non-performing corporate loans to transportation, warehousing and postal services borrowers represented 23.2% and 54.1% of our total non-performing corporate loans, respectively. The NPL ratio for our corporate loans in the transportation, warehousing and postal services industry was 7.88% and 12.60% as of December 31, 2017 and June 30, 2018, respectively, primarily due to the adverse impact on the industry by the slowdown of the PRC economy.

As of December 31, 2015, we did not record any non-performing corporate loans to accommodation and catering borrowers. As of December 31, 2016 and 2017 and June 30, 2018, non-performing corporate loans to accommodation and catering borrowers accounted for 73.3%, 22.0% and 17.6% of our total non-performing corporate loans, respectively. The NPL ratio for our corporate loans in the accommodation and catering industry was 11.54%, 8.67% and 2.60% as of December 31, 2016 and 2017 and June 30, 2018, respectively. The decrease was primarily due to our enhanced risk control with respect to credit extension including to borrowers in the industry.

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As of December 31, 2015, we did not record any non-performing corporate loans to manufacturing borrowers. As of December 31, 2016 and 2017 and June 30, 2018, non- performing corporate loans to manufacturing borrowers accounted for 1.1%, 16.0% and 17.4% of our total non-performing corporate loans, respectively. The NPL ratios of manufacturing companies’ loans increased from 0.05% as of December 31, 2016 to 1.93% as of December 31, 2017, primarily due to the adverse impacts from the economic slowdown on certain borrowers in the manufacturing industry. The NPL ratios of manufacturing companies’ loans decreased to 1.20% as of June 30, 2018, mainly due to our enhanced risk control with respect to credit extension including to manufacturing enterprises.

Distribution of NPLs by Geographical Region

All of our non-performing loans as of December 31, 2015, 2016 and 2017 and June 30, 2018 originated in Luzhou, as most of our loans during the Track Record Period originated in Luzhou and our branch outside Luzhou opened in 2017. For the distribution of customer loans by geographical region, please see “– Assets – Customer Loans – Distribution of Customer Loans by Geographical Region”.

Distribution of NPLs by Collateral

The following table sets forth the distribution of our NPLs by types of collateral as of the dates indicated.

As of December 31, As of June 30, 2015 2016 2017 2018 %of NPL %of NPL %of NPL %of NPL Amount total ratio(1) Amount total ratio(1) Amount total ratio(1) Amount total ratio(1) (in millions of RMB, except percentages) Pledged loans – – – – – – 0.3 0.2% 0.01% 0.4 0.2% 0.01% Collateralized loans 13.9 46.7% 0.25% 63.1 81.8% 0.91% 182.6 94.8% 2.38% 183.5 83.2% 1.72% Guaranteed loans 14.5 48.7% 0.55% 13.3 17.2% 0.40% 6.9 3.6% 0.16% 6.7 3.0% 0.09% Unsecured loans 1.4 4.6% 0.32% 0.8 1.0% 0.13% 2.9 1.5% 0.20% 30.1 13.6% 2.38% Total NPLs 29.8 100.0% 0.30% 77.1 100.0% 0.53% 192.7 100.0% 0.99% 220.7 100% 0.91%

Note:

(1) Calculated by dividing NPLs in each product type secured by each type of collateral by gross customer loans secured by that type of collateral. The NPL ratio for our pledged loans increased slightly from nil as of December 31, 2015 and 2016, to 0.01% as of December 31, 2017. As of June 30, 2018, the NPL ratio for our pledged loans remained stable at 0.01%.

The NPL ratio for our collateralized loans increased from 0.25% as of December 31, 2015 to 0.91% as of December 31, 2016, and further to 2.38% as of December 31, 2017. The increase in the NPL ratio of collateralized loans was primarily due to the adverse impacts on the repayment ability of certain borrowers from the slowdown of the PRC economy. The NPL ratio for our collateralized loans decreased to 1.72% as of June 30, 2018, primarily due to our enhanced risk control measures and NPL recovery efforts.

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The NPL ratio for our guaranteed loans decreased from 0.55% as of December 31, 2015 to 0.40% as of December 31, 2016, and further to 0.16% as of December 31, 2017. The NPL ratio for our guaranteed loans amounted to 0.09% as of June 30, 2018. The continued decrease in the NPL ratio for our guaranteed loans was primarily due to (i) improved recovery of non- performing guaranteed loans, and (ii) enhanced risk management with respect to guaranteed loans, such as stringent credit approval requirements.

The NPL ratio for our unsecured loans decreased from 0.32% as of December 31, 2015 to 0.13% as of December 31, 2016, primarily due to our improved management of pre-loan approval and post-disbursement for unsecured loans. The NPL ratio for our unsecured loans increased from 0.13% as of December 31, 2016 to 0.20% as of December 31, 2017, and further increased to 2.38% as of June 30, 2018, primarily due to (i) the deterioration of the repayment ability of certain borrowers, (ii) bankruptcy reorganization of a listed chemical company borrower, the NPL of which represented 89.8% of our total non-performing unsecured loans as of June 30, 2018.

Ten Largest Non-performing Borrowers

The following table sets forth our borrowers with the ten largest NPL balances outstanding as of the date indicated.

As of June 30, 2018 Outstanding %of %ofnet principal total capital Industry amount Classification NPLs base(1) (in millions of RMB, except percentages) Borrower A Transportation, 55.3 Substandard 25.1% 0.9% warehousing and postal services Borrower B Accommodation and 27.3 Substandard 12.4% 0.5% catering Borrower C Manufacturing 27.0 Substandard 12.2% 0.5% Borrower D Transportation, 20.0 Substandard 9.1% 0.3% warehousing and postal services Borrower E N/A(2) 9.5 Substandard 4.3% 0.2% Borrower F Wholesale and retail 9.5 Substandard 4.3% 0.2% Borrower G Wholesale and retail(2) 7.5 Substandard 3.4% 0.1% Borrower H N/A(3) 6.5 Substandard 2.9% 0.1% Borrower I Wholesale and retail(2) 4.8 Substandard 2.2% 0.1% Borrower J Construction 4.5 Substandard 2.0% 0.1% Total 171.9 77.9% 2.9%

Notes:

(1) Represents loan balance as a percentage of our net capital base (also referred to in this document as “regulatory capital”), calculated in accordance with the requirements of the Capital Administration Measures and based on our financial statements prepared in accordance with PRC GAAP. For a calculation of our net capital base as of June 30, 2018, see “Financial Information – Capital Resources – Capital Adequacy.” (2) The borrower is a retail banking customer of our personal business loan products. (3) The borrower is a retail banking customer of our personal consumption loan products.

278 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. ASSETS AND LIABILITIES

Loan Aging Schedule

The following table sets forth our loan aging schedule as of the dates indicated.

As of December 31, As of June 30,

2015 2016 2017 2018

Amount % of total Amount % of total Amount % of total Amount % of total

(in millions of RMB, except percentages) Current loans 9,770.99 97.9% 14,128.13 97.2% 19,165.13 98.8% 23,944.58 98.6% Loans past due for – Up to 3 months(1) 147.92 1.5% 184.06 1.3% 116.10 0.6% 149.84 0.6% – Over 3 months up to 1 year(1) 56.11 0.6% 188.01 1.3% 26.93 0.1% 100.75 0.4% – Over 1 year up to 3 years(1) 2.57 – 33.41 0.2% 90.89 0.5% 93.23 0.4% – Over 3 years(1) 0.28 – 0.85 – 2.31 – 7.07 – Sub-total 206.88 2.1% 406.33 2.8% 236.23 1.2% 350.89 1.4% Total customer loans 9,977.87 100.0% 14,534.46 100.0% 19,401.36 100.0% 24,295.47 100.0%

Note:

(1) Represents the principal amount of the loans on which principal or interest was overdue as of the dates indicated.

Impairment Allowance on Customer Loans

We assess our loans for impairment, determine a level of allowance for impairment losses in accordance with the requirements of IAS 39 before January 1, 2018 and IFRS 9 starting from January 1, 2018. Please see “Financial Information – Critical Accounting Judgments and Key Sources of Estimation Uncertainty – Impact of New Accounting Policies” and Note 2 to our historical financial information included in the Accountant’s Report in Appendix I to this document. Our loans are reported net of impairment allowance on our statements of financial position.

Before January 1, 2018, under the requirements of IAS 39, we used to assess whether objective evidence of impairment existed individually for loans that were individually significant, and individually or collectively for loans that were not individually significant. If we determined that no objective evidence of impairment exists for an individually assessed loans, whether significant or not, such loans were included in a group of loans with similar credit risk characteristics and collectively assessed for impairment. Loans that were individually assessed for impairment and for which an impairment loss was or continued to be recognized were not included in a collective assessment of impairment.

279 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. ASSETS AND LIABILITIES

Starting from January 1, 2018, under the requirements of IFRS 9, we classify our customer loans using a “three-stage” model: (i) Stage 1 (Normal Credit Quality) refers to customer loans that have not had a significant increase in credit risk and expected credit losses in the next 12 months will be recognized; (ii) Stage 2 (Significant Increase in Credit Risk) refers to customer loans that have had a significant increase in credit risk and for which the expected credit losses lifetime will be recognized; (iii) Stage 3 (Credit-impaired) refers to customer loans that have objective evidence of impairment and for which the expected credit losses lifetime will be recognized. We have developed a new expected credit loss impairment model in accordance with IFRS 9 to measure the expected credit losses, taking into account various of factors such as macroscopic index, macroeconomic indicators and macro-financial scenario analysis.

An impairment loss is recognized through profits or losses when there is objective evidence that loans are impaired, and is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the loans’ original effective interest rate. The calculation of the present value of the estimated future cash flows of a collateralized/pledged financial asset reflects the cash flows that may result from foreclosure less costs for obtaining and selling the collateral or pledges.

For further discussion on impairment losses on our customer loans, please see “Financial Information – Results of Operations for the Years Ended December 31, 2015, 2016 and 2017 – Impairment Losses on Assets”, “Financial Information – Results of Operation for the Six Months Ended June 30, 2017 and 2018 – Impairment Losses on Assets” and Note 2 to our historical financial information included in the Accountant’s Report in Appendix I to this document.

280 Distribution of Impairment Allowance by Loan Classification DOCUMENT. IN THIS READ OF BE MUST COVER INFORMATION THE THE ON AND “WARNING” CHANGE TO HEADED SUBJECT SECTION AND THE INCOMPLETE FORM, WITH DRAFT CONJUNCTION IN IS DOCUMENT THIS

The following table sets forth the allocation of our impairment allowance by loan classification category as of the dates indicated.

As of December 31, As of January 1, As of June 30,

2015 2016 2017 2018 2018

Allowance Allowance Allowance Allowance Allowance to gross to gross to gross to gross to gross %of loan %of loan %of loan %of loan %of loan Amount(2) total ratio(1) Amount(2) total ratio(1) Amount(2) total ratio(1) Amount(3) total ratio(1) Amount(3) total ratio(1)

(in millions of RMB, except percentages)

Normal93.4 34.0% 1.02% 243.8 64.9% 1.78% 328.9 57.9% 1.76% 288.3 56.9% LIABILITIES AND ASSETS 1.54% 415.7 68.4% 1.76% Special mention156.8 57.1% 18.89% 82.7 22.0% 11.38% 123.6 21.8% 23.42% 102.9 20.3% 19.50% 104.3 17.2% 20.16% Substandard23.1 8.4% 80.77% 47.8 12.7% 63.14% 112.9 19.9% 59.36% 112.9 22.3% 59.36% 84.9 14.0% 39.02% Doubtful0.7 0.3% 100.00% 0.9 0.2% 75.00% 2.1 0.4% 87.50% 2.1 0.4% 85.59% 3.0 0.5% 100.00% Loss0.5 0.2% 100.00% 0.2 – 100.00% 0.1 – 100.00% 0.1 – 100.00% 0.1 – 100.00%

Total allowance274.5 100.0% 2.75% 375.4 100.0% 2.58% 567.5 100.0% 2.93% 506.3 100.0% 2.61% 608.0 100.0% 2.50% 281

Note:

(1) Calculated by dividing impairment allowance on customer loans in each category by gross customer loans in that category. (2) Measured and recognized in accordance with the requirements of IAS 39. (3) Measured and recognized in accordance with the requirements of IFRS 9. The following table sets forth the allocation of our impairment allowance by business line and by loan classification category as of the DOCUMENT. IN THIS READ OF BE MUST COVER INFORMATION THE THE ON AND “WARNING” CHANGE TO HEADED SUBJECT SECTION AND THE INCOMPLETE FORM, WITH DRAFT CONJUNCTION IN IS DOCUMENT THIS dates indicated.

As of December 31, As of January 1, As of June 30,

2015 2016 2017 2018 2018

(in millions of RMB, except percentages) Corporate loans Normal79.2 28.9% 1.63% 188.3 50.2% 2.42% 263.2 46.4% 2.17% 235.5 46.5% 2.07% 399.2 65.7% 2.20% Special mention144.6 52.7% 19.97% 73.4 19.5% 12.45% 109.0 19.2% 24.53% 85.9 17.0% 19.33% 85.9 14.3% 20.15%

Substandard3.1 1.1% 62.34% 24.1 6.4% 64.15% 86.5 15.2% 69.81% 86.5 17.1% LIABILITIES AND ASSETS 69.81% 69.5 11.5% 44.81% Doubtful–– – –– – –– – –– – –– – Loss–– – –– – –– – –– – –– –

Subtotal226.9 82.7% 4.05% 285.8 76.1% 3.39% 458.7 80.8% 3.84% 407.9 80.6% 3.41% 555.8 91.5% 2.96% Personal loans Normal7.7 2.8% 0.22% 22.2 5.9% 0.59% 27.8 4.9% 0.44% 13.5 2.7% 0.28% 14.4 2.4% 0.28% Special mention12.3 4.5% 11.58% 9.3 2.5% 10.38% 14.6 2.6% 17.35% 17.0 3.4% 20.38% 17.2 2.8% 20.21%

282 Substandard19.9 7.2% 84.73% 23.8 6.3% 43.87% 26.4 4.6% 49.26% 26.4 5.2% 39.81% 15.4 2.5% 24.64% Doubtful0.9 0.3% 98.54% 0.9 0.2% 73.34% 2.1 0.4% 85.64% 2.1 0.4% 85.59% 3.0 0.5% 100.00% Loss0.5 0.2% 100.00% 0.1 – 100.00% 0.1 – 100.00% 0.1 – 100.00% 0.1 – 100.00%

Subtotal41.3 15.0% 1.13% 56.3 15.0% 0.65% 71.0 12.5% 1.42% 59.1 11.7% 1.19% 50.1 8.2% 0.93% Discounted bills Normal6.3 2.3% 0.85% 33.4 8.9% 1.73% 37.80 6.7% 1.52% 39.3 7.8% 1.58% 2.1 0.3% 1.20% Special mention –– – –– – –– – –– – –– – Substandard –– – –– – –– – –– – –– – Doubtful–– – –– – –– – –– – –– – Loss–– – –– – –– – –– – –– –

Subtotal6.3 2.3% 0.85% 33.4 8.9% 1.73% 37.80 6.7% 1.52% 39.3 7.8% 1.58% 2.1 0.3% 1.20%

Total allowance274.5 100.0% 2.75% 375.4 100.0% 2.58% 567.5 100.0% 2.93% 506.3 100.0% 2.61% 608.0 100.0% 2.50%

Note:

(1) Calculated by dividing impairment allowance on customer loans in each category by gross customer loans in that category. (2) Measured and recognized in accordance with the requirements of IAS 39. (3) Measured and recognized in accordance with the requirements of IFRS 9. THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. ASSETS AND LIABILITIES

Changes to Impairment Allowance on Customer Loans

We report net provisions for impairment losses on customer loans on our statement of profit and loss and other comprehensive income. Please see “Financial Information – Results of Operation for the Six Months Ended June 30, 2017 and 2018 – Impairment Losses on Assets” and “Financial Information – Results of Operations for the Years Ended December 31, 2015, 2016 and 2017 – Impairment Losses on Assets”.

The following table sets forth the changes to the impairment allowance on customer loans for the periods indicated.

Amount

(in millions of RMB) As of January 1, 2015 219.4 Charge for the year 53.6 Reversal of discounted. 0.5 Recoveries 2.0 Write-off – As of December 31, 2015 274.5 Charge for the year 108.7 Reversal of discounted (1.3) Recoveries – Write-off (6.6) As of December 31, 2016 375.4 Charge for the year 216.5 Reversal of discounted (4.0) Recoveries 9.8 Write-off (30.2) As of December 31, 2017 567.5 As of January 1, 2018 506.3 Charge for the year 116.6 Reversal of discounted (3.2) Recoveries 1.4 Write-off (13.1) As of June 30, 2018 608.0

Our impairment allowance on customer loans increased by 36.8% from RMB274.5 million as of December 31, 2015 to RMB375.4 million as of December 31, 2016 and further increased by 51.2% to RMB567.5 million as of December 31, 2017. Our impairment allowance on customer loans as of January 1, 2018 is restated to RMB506.3 million, in accordance with IFRS 9, as the expected credit loss model under the new accounting policy considers assumptions and factors (such as default probability and loss given default) differently as compared with the previous accounting policy. Our impairment allowance on customer loans as of June 30, 2018 amounted to RMB608.0 million, the increase in which was generally in line with the growth of our customer loans, setting aside the difference caused by the adoption of the new accounting policies.

283 Distribution of Impairment Allowance by Product Type DOCUMENT. IN THIS READ OF BE MUST COVER INFORMATION THE THE ON AND “WARNING” CHANGE TO HEADED SUBJECT SECTION AND THE INCOMPLETE FORM, WITH DRAFT CONJUNCTION IN IS DOCUMENT THIS

The following table sets forth the distribution of our impairment allowance on customer loans by product type as of the dates indicated.

As of December 31, As of January 1, As of June 30,

2015 2016 2017 2018 2018

Allowance Allowance Allowance Allowance Allowance to gross to gross to gross to gross to gross %of loan %of loan %of loan %of loan %of loan ratio Amount(2) total ratio(1) Amount(2) total ratio(1) Amount(2) total ratio(1) Amount(3) total ratio(1) Amount(3) total (%)(1)

(in millions of RMB, except percentages)

Corporate loans LIABILITIES AND ASSETS Working capital loans 135.3 49.3% 7.77% 139.9 37.3% 3.97% 217.7 38.4% 5.30% 172.6 34.1% 3.30% 227.6 37.5% 3.45% Fixed asset loans 91.6 33.4% 2.38% 145.8 38.9% 2.98% 241.0 42.5% 3.07% 235.3 46.5% 3.50% 328.2 54.0% 2.70%

Subtotal226.9 82.7% 4.05% 285.8 76.1% 3.39% 458.7 80.8% 3.84% 407.9 80.6% 3.41% 555.8 91.4% 2.90% Personal loans Residential mortgage

284 Loans9.2 3.4% 0.45% 16.0 4.3% 0.75% 22.1 3.9% 0.98% 6.9 1.4% 0.31% 5.8 1.0% 0.24% Personal business loans 29.9 10.9% 2.10% 36.7 9.8% 2.20% 38.9 6.9% 1.93% 44.5 8.8% 2.21% 36.4 6.0% 1.61% Personal consumption loans 2.2 0.8% 1.18% 3.6 0.9% 0.92% 10.1 1.8% 1.45% 7.7 1.5% 1.10% 7.8 1.3% 1.08%

Subtotal41.3 15.1% 1.13% 56.3 15.0% 1.34% 71.1 12.5% 1.43% 59.1 11.7% 1.19% 50.1 8.3% 0.93% Discounted bills Bank acceptance bills 6.3 2.3% 0.85% 33.4 8.9% 1.73% 37.8 6.7% 1.52% 39.3 7.8% 1.58% 2.1 0.3% 1.20%

Total allowance for customer loans274.5 100.0% 2.75% 375.4 100.0% 2.58% 567.5 100.0% 2.93% 506.3 100.0% 2.61% 608.0 100.0% 2.50%

Notes:

(1) Calculated by dividing impairment allowance on customer loans in each category by gross customer loans in that category. (2) Measured and recognized in accordance with the requirements of IAS 39. (3) Measured and recognized in accordance with the requirements of IFRS 9. Distribution of Impairment Allowance by Geographic Region DOCUMENT. IN THIS READ OF BE MUST COVER INFORMATION THE THE ON AND “WARNING” CHANGE TO HEADED SUBJECT SECTION AND THE INCOMPLETE FORM, WITH DRAFT CONJUNCTION IN IS DOCUMENT THIS

The following table sets forth the allocation of our impairment allowance on customer loans by geographical region as of the dates indicated.

As of December 31, As of January 1, As of June 30,

2015 2016 2017 2018 2018

(in millions of RMB, except percentages) LIABILITIES AND ASSETS Luzhou274.5 100.0% 2.75% 375.4 100.0% 2.58% 543.5 95.8% 3.02% 429.9 94.9% 2.39% 435.3 71.6% 2.02% Outside Luzhou – – N/A – – N/A 24.0 4.2% 1.74% 76.4 15.1% 5.53% 172.7 28.4% 6.24%

Total allowance 274.5 100.0% 2.75% 375.4 100.0% 2.58% 567.5 100.0% 2.93% 506.3 100.0% 2.61% 608.0 100.0% 2.50% 285 Notes:

(1) Calculated by dividing impairment allowance on customer loans in each region by gross customer loans in that region. (2) Measured and recognized in accordance with the requirements of IAS 39.

(3) Measured and recognized in accordance with the requirements of IFRS 9. THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. ASSETS AND LIABILITIES

Distribution of Impairment Allowance by Assessment Methodology

We began to adopt IFRS 9 on January 1, 2018. Pursuant to this accounting policy, neither collective nor individual assessment methodologies will be used to assess the impairment allowance for customer loans. The following table sets forth the distribution of the impairment allowance for our customer loans by our assessment methodology as of the dates indicated.

As of December 31, As of January 1, As of June 30,

2015 2016 2017 2018 2018

Allowance Allowance Allowance Allowance Allowance to gross to gross to gross to gross to gross loan loan loan loan loan Amount(2) ratio(1) Amount(2) ratio(1) Amount(2) ratio(1) Amount(3) ratio(2) Amount(3) ratio(2)

(in millions of RMB, except percentages) Expected credit losses N/A N/A N/A N/A N/A N/A 506.3 2.61% 608.0 2.50 Collectively assessed 271.4 2.72% 351.3 2.42% 481.0 2.50% N/A N/A N/A N/A Individually assessed 3.1 62.34% 24.1 64.15% 86.5 69.81% N/A N/A N/A N/A Total allowance 274.5 2.75% 375.4 2.58% 567.5 2.93% 506.3 2.61% 608.0 2.50%

Note:

286 Distribution of Impairment Allowance on Corporate Loans by Industry DOCUMENT. IN THIS READ OF BE MUST COVER INFORMATION THE THE ON AND “WARNING” CHANGE TO HEADED SUBJECT SECTION AND THE INCOMPLETE FORM, WITH DRAFT CONJUNCTION IN IS DOCUMENT THIS The following table sets forth the impairment allowance on corporate loans by industry as of the dates indicated.

As of December 31, As of January 1, 2018 As of June 30,

2015 2016 2017 2018 2018

Allowance Allowance Allowance Allowance Allowance to gross to gross to gross to gross to gross %of loan %of loan %of loan %of loan %of loan Amount(3) total ratio(1) Amount(3) total ratio(1) Amount(3) total ratio(1) Amount(4) total ratio(1) Amount(4) total ratio(1)

(in millions of RMB, except percentages) Real estate11.5 5.1% 1.93% 39.6 13.8% 2.32% 50.7 11.0% 2.44% 41.7 10.2% 2.01% 87.6 16.0% 2.10% Manufacturing49.9 22.0% 6.66% 34.9 12.2% 4.12% 66.6 14.4% 6.50% 64.8 15.9% 6.32% 78.4 14.3% 3.55% SESADLIABILITIES AND ASSETS Leasing and business services 36.2 15.9% 4.81% 17.6 6.1% 2.68% 87.1 18.9% 2.96% 58.6 14.4% 1.99% 70.5 12.9% 2.09% Construction29.1 12.8% 6.23% 51.2 17.9% 3.93% 65.0 14.1% 3.40% 52.1 12.8% 2.72% 59.2 10.8% 2.99% Wholesale and retail 30.4 13.4% 3.02% 45.6 15.9% 3.62% 58.0 12.6% 5.33% 58.9 14.4% 5.41% 59.1 10.8% 2.38% Transportation, warehousing and postal services9.5 4.2% 5.21% 22.5 7.9% 8.50% 47.6 10.3% 13.04% 41.9 10.3% 11.48% 45.9 8.4% 11.25% Accommodation and catering 14.8 6.5% 4.69% 29.2 10.2% 12.22% 34.5 7.5% 10.98% 24.4 6.0% 7.73% 34.5 6.3% 6.27%

287 Water, environment and public facilities management 11.0 4.9% 3.14% 5.8 2.0% 0.70% 12.4 2.7% 1.28% 21.6 5.3% 2.32% 31.4 5.7% 2.29% Education9.5 4.2% 2.12% 10.6 3.7% 2.08% 3.6 0.8% 1.58% 5.0 1.2% 2.21% 22.0 4.0% 2.33% Electricity, heating power, gas and water production and supply 1.0 0.5% 1.63% 4.3 1.5% 2.53% 4.1 0.9% 2.86% 3.7 0.9% 2.60% 20.9 3.8% 12.74% Agriculture, forestry, animal husbandry and fishery8.0 3.5% 4.36% 8.6 3.0% 4.28% 13.9 3.0% 9.05% 15.5 3.8% 10.07% 15.8 2.9% 9.68% Culture, sports and entertainment 1.7 0.7% 1.63% 4.3 1.5% 2.17% 4.1 0.9% 2.35% 3.8 0.9% 2.22% 6.3 1.2% 2.04% Scientific research and technical services1.0 0.4% 14.57% 2.2 0.8% 6.79% 6.6 1.4% 3.24% 3.8 0.9% 1.86% 4.3 0.8% 1.87% Residential services, community maintenance and other services 0.6 0.3% 1.63% 0.8 0.3% 0.94% 2.1 0.5% 1.05% 5.2 1.3% 2.61% 1.6 0.3% 2.44% (2) Others12.5 5.5% 3.81% 8.7 3.0% 7.12% 5.4 1.2% 3.59% 7.0 1.7% 4.46% 10.2 1.9% 3.11%

Total allowance for corporate 226.9 loans 100.0% 4.05% 285.8 100.0% 3.39% 461.7 100.0% 3.86% 408.0 100.0% 3.41% 547.8 100.0% 2.92%

Notes: (1) Calculated by dividing impairment allowance on corporate loans in each industry by gross corporate loans in that industry. (2) Consists primarily of mining, finance, health and social services, public administration, social security and social organizations, and information transmission, software and information technology services. (3) Measured and recognized in accordance with the requirements of IAS 39. (4) Measured and recognized in accordance with the requirements of IFRS 9. THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. ASSETS AND LIABILITIES

Financial Investments Financial investments are another important component of our assets, representing 32.6%, 49.9%, 40.9% and 43.0% of our total assets as of December 31, 2015, 2016 and 2017 and June 30, 2018, respectively. Our financial investments, net of impairment allowance, increased significantly from RMB10,356.8 million as of December 31, 2015 to RMB26,598.7 million as of December 31, 2016, and further to RM28,996.2 million as of December 31, 2017. As of June 30, 2018, our financial investments, net of impairment allowance, amounted to RMB32,036.5 million. The continued increase in financial investments, net of impairment allowance, was primarily due to (i) a significant increase in certificates of deposit and other debt securities for the purpose of liquidity management, and (ii) our increased investments in trust plans in our asset portfolio. The following discussion is based on our gross financial investments before taking into account the impairment allowance. Our financial investments are reported net of the impairment allowance on our statement of financial position.

Distribution of Financial Investments by Business Model and Cashflow Characteristics In accordance with IAS 39 which we adopted before January 1, 2018, we classify our financial investments by business model and cashflow characteristics into the following categories (i) financial investments – credit related financial assets, (ii) financial investments – available-for-sale financial assets, and (iii) financial investments – investments classified as receivables. In accordance with IFRS 9 which we adopted starting from January 1, 2018, we classify our financial assets by business model and cashflow characteristics of financial assets into (i) financial investments – fair value through profit or loss, (ii) financial investments – fair value through other comprehensive income, and (iii) financial assets measured at amortized cost, including financial investments – credit related financial assets. The following table sets forth the distribution of our financial investments by business model and cashflow characteristics as of the dates indicated. For further details on the components of each category of our financial investments, see Notes 19 to 24 to our historical financial information included in the Accountant’s Report in Appendix I to this document.

As of December 31, As of January 1, As of June 30, 2015 2016 2017 2018(1) 2018 %of %of %of %of %of Amount total Amount total Amount total Amount total Amount total (in millions of RMB, except percentage) Financial investments – credit related financial assets 3,815.0 36.5% 7,539.2 28.2% 8,404.1 28.7% 8,404.1 28.5% 6,941.5 21.5% Financial investments – amortized cost N/A N/A N/A N/A N/A N/A 16,996.2 57.6% 17,990.9 55.7% Financial investments – fair value through other comprehensive income N/A N/A N/A N/A N/A N/A 1,790.6 6.1% 5,065.7 15.7% Financial investments – fair value through profit or loss N/A N/A N/A N/A N/A N/A 2,311.8 7.8% 2,306.2 7.1% Financial investments – available-for-sale 3,188.2 30.5% 7,557.3 28.3% 11,376.6 38.9% N/A N/A N/A N/A Financial investments – investments classified as receivables 3,449.0 33.0% 11,644.5 43.5% 9,464.3 32.4% N/A N/A N/A N/A

288 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. ASSETS AND LIABILITIES

As of December 31, As of January 1, As of June 30, 2015 2016 2017 2018(1) 2018 %of %of %of %of %of Amount total Amount total Amount total Amount total Amount total (in millions of RMB, except percentage) Financial assets, gross 10,452.2 100.0% 26,741.0 100.0% 29,244.9 100.0% 29,501.6 100.0% 32,304.3 100.0% Less: impairment allowance on financial assets (95.4) (142.3) (248.8) 256.8 (267.8) Financial assets, net 10,356.8 26,598.7 28,996.2 29,245.9 32,036.5

Note: (1) We adopted IFRS 9 starting from January 1, 2018. According to this accounting policy, our financial investments – available-for-sale were re-classified to financial investments – fair value through profit or loss, financial investments – fair value through other comprehensive income and financial investments – amortized cost. Meanwhile, financial investments – investments classified as receivables were re-classified to financial investments – at amortized cost. Our financial investments – credit related financial assets primarily comprise SPV investments in trust plans or asset management plans, the underlying assets of which are entrusted loans. Our financial investments – credit related financial assets significantly increased from RMB3,815.0 million as of December 31, 2015 to RMB7,539.2 million, and further to RMB8,404.1 million as of December 31, 2017, primarily due to investment portfolio rebalance for better asset allocation and higher return. As of June 30, 2018, our financial investments – credit related financial assets decreased to RMB6,941.5 million, primarily because we ceased to invest in certain credit related financial investment products after their maturity in the first half of 2018, in response to the deleveraging policy, setting apart the changes in accounting standards. Our financial investments – amortized cost primarily comprise investment in SPV with underlying assets in private placement bonds and industrial funds, financial bonds, corporate bonds and debt securities issued by local and central governments, the underlying assets of which are private placement bonds and industrial funds. After the adoption of IFRS 9 on January 1, 2018, our financial assets measured at amortized costs increased from RMB16,996.2 million as of January 1, 2018 to RMB17,990.9 million as of June 30, 2018, primarily due to increased investment classified as receivables. Our financial investments – fair value through other comprehensive income primarily comprise financial bonds, corporate bonds and debt securities issued by the central government, which we hold for collection of contractual cash flows and for selling. Our financial investments – fair value through other comprehensive income increased from RMB1,790.6 million as of January 1, 2018 to RMB5,065.7 million as of June 30, 2018, primarily due to our increased investments in the aforementioned corporate debt securities in accordance with our judgment of market trends and liquidity demand. Our financial investments – fair value through profit or loss primarily comprise joint capital investment, trust plans, non-principal protected wealth management products, unlisted equity securities and money market funds, and our objective is not solely to collect the contractual cash flows from them. Our financial investments – fair value through profit or loss slightly decreased from RMB2,311.8 million as of January 1, 2018 to RMB2,306.2 million as of June 30, 2018, primarily due to decrease of wealth management products available in the market in the first half of 2018 that meet our stringent selection standards. The decrease in our investment in wealth management products was partially offset by our increased investment in money market funds, which have good liquidity and low risk. Our financial investments – available-for-sale financial assets primarily consists of debt securities and equity securities. The available-for-sale debt securities consist of debt securities issued by PRC central and local governments, PRC policy banks, PRC commercial banks and

289 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. ASSETS AND LIABILITIES enterprises. The available-for-sale equity securities consist of (i) non-principal protected wealth management products and (ii) unlisted equity securities. Our financial investments – available- for-sale increased significantly from RMB3,188.2 million as of December 31, 2015 to RMB7,557.3 million as of December 31, 2016, and further increased significantly to RMB11,376.6 million as of December 31, 2017, primarily included (i) the non-principal protected wealth management products we started to invest in from 2016, the balance of which as of the end of 2017 was more than that as of the end of 2016; and (ii) our increased investment in corporate debt securities. Our financial investments – available-for-sale have been reclassified to financial investments – fair value through profit or loss, financial investments – fair value through other comprehensive income and financial assets measured at amortized cost due to the adoption of IFRS 9 on January 1, 2018. Our financial investments – investments classified as receivables consist of investment in SPV investment and principal protected wealth management products of which the underlying assets are private placement bonds and industrial funds. Our financial investments – investments classified as receivables increased significantly from RMB3,449.0 million as of December 31, 2015 to RMB11,644.5 million as of December 31, 2016, primarily due to our increased investment in asset management plans, trust plans and wealth management products classified as receivables, which sought to expand our financial market business and diversify our revenue sources. Our financial investments – investments classified as receivables decreased by 18.7% to RMB9,464.3 million as of December 31, 2017, primarily due to adjustments to our investment portfolio, including suspension of sale of certain trust plans, asset management plans and wealth management products, based on investment considerations, market conditions, regulatory requirements and other factors in 2017. Our financial investments – investments classified as receivables have been reclassified to financial assets measured at amortized cost due to adoption of IFRS 9 on January 1, 2018. For details relating to our risk management in connection with our investment in trust plans, asset management plans and wealth management products, please see “Risk Management – Credit Risk Management – Credit Risk Management for Our Financial Market Business – Credit Risk Management for Debt Securities Investment and SPV Investment”.

Distribution of Financial Investments by Remaining Maturities The table below sets forth the distribution of our financial investments by remaining maturities as of the date indicated.

As of June 30, 2018 Due in 3 Due over 3 Due over Due in month or months up 1 year up more than less to 1 year to 5 years 5 years On demand Total (in millions of RMB) Financial investments – credit related financial assets – 867.6 3,895.8 2,080.3 – 6,843.7 Financial investments – fair value through profit or loss 1,281.1 130.0 – – 895.1 2,306.2 Financial investments – fair value through other comprehensive income 677.6 – 2,503.0 1,883.4 – 5,064.1 Financial investments – amortized cost 793.5 2,496.8 10,350.6 4,181.6 – 17,822.5 Total 2,752.2 3,494.4 16,749.4 8,145.3 895.1 32,036.5

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Carrying Value and Fair Value The following table sets forth our financial investments that have different carrying values and fair values.

As of December 31, As of June 30, 2015 2016 2017 2018 Carrying Carrying Carrying Carrying Value Fair Value Value Fair Value Value Fair Value Value Fair Value (in millions of RMB) Financial investments – amortized cost N/A N/A N/A N/A N/A N/A 17,822.5 17,767.2 Financial investments – investments classified as receivables 3,494.4 3,450.9 11,729.6 11,623.3 9,619.3 9,197.1 N/A N/A

Other than the financial investments above, there is no material difference between the carrying value and the fair value of our other financial investments not measured at fair value in our statement of financial position. Distribution of Financial Investments by Investment Vehicle Our financial investments consist primarily of debt securities investment and SPV investment. Our SPV investment refers to investment in financial investments – credit related financial assets through trust plans and asset management plans, as well as investment in other types of financial assets through investment vehicles such as trust plans, asset management plans, wealth management products and money market funds. The following table sets forth the components of our financial investments as of the dates indicated.

As of December 31, As of June 30, 2015 2016 2017 2018 Amount % of total Amount % of total Amount % of total Amount % of total (in millions of RMB, except percentages) Debt securities investment 3,187.2 30.5% 5,845.5 21.9% 9,064.8 31.0% 11,591.2 35.9% SPV investment Financial investments – credit related financial assets Trust plans – – 5,304.2 19.8% 5,371.1 18.4% 4,242.0 13.1% Asset management plans 3,815.0 36.5% 2,235.0 8.4% 3,033.0 10.4% 2,699.5 8.4% Other financial investment Trust plans 1,749.0 16.7% 8,494.5 31.8% 8,211.8 28.1% 8,506.8 26.3% Asset management plans 500.0 4.8% 2,750.0 10.3% 1,252.5 4.3% 3,064.9 9.5% Wealth management products 1,200.0 11.5% 2,110.9 7.9% 2,310.8 8.0% 604.8 1.9% Money market funds ––––––1,564.1 4.8% Others(1) ––––––30.0 0.1% Other financial investments(2) 1.0 – 1.0 – 1.0 – 1.0 – Total financial investments, gross 10,452.2 100.0% 26,741.0 100.0% 29,244.9 100.0% 32,304.3 100.0% Less: impairment allowance (95.4) (142.3) (248.8) (267.8) Total financial investments, net 10,356.8 26,598.7 28,996.2 32,036.5

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Note:

(1) Comprised of joint capital investment. (2) Primarily comprised of investment in unlisted equity securities.

Investment Concentration The table below sets forth the ten largest holdings of financial investments whose carrying values exceed 10% of our total equity as of the date indicated.

As of June 30, 2018 % of total Carrying financial % of total %ofnet Issuer value investments equity capital base (in millions of RMB, except percentage) A 5,914.0 18.5% 129.6% 99.4% B 3,840.1 12.0% 84.2% 64.5% C 3,368.8 10.5% 73.8% 56.6% D 2,524.7 7.9% 55.3% 42.4% E 2,031.1 6.3% 44.5% 34.1% F 1,985.0 6.2% 43.5% 33.4% G 1,883.5 5.9% 41.3% 31.7% H 1,500.0 4.7% 32.9% 25.2% I 740.0 2.3% 16.2% 12.4% J 674.0 2.1% 14.8% 11.3% Total 24,461.2 76.4% 536.1% 411.0%

Debt Securities Investment

Debt securities investment accounted for 30.5%, 21.9%, 31.0% and 35.9% of our total financial investments as of December 31, 2015, 2016 and 2017 and June 30, 2018, respectively. Our debt securities investment consists primarily of investment in debt securities issued by PRC central and local governments, policy banks, commercial banks and enterprises. All of the debt securities we held as of December 31, 2015, 2016 and 2017 and June 30, 2018 were denominated in Renminbi. The following table sets forth the components of our debt securities investment classified by issuer as of the dates indicated.

As of December 31, As of June 30, 2015 2016 2017 2018 Amount % of total Amount % of total Amount % of total Amount % of total (in millions of RMB, except percentages) Debt Securities issued by the central and local government 1,752.7 55.0% 1,522.5 26.0% 2,473.1 27.3% 2,524.7 21.8% Debt securities issued by policy banks 1,434.5 45.0% 3,355.8 57.4% 4,803.9 53.0% 6,179.9 53.3% Debt securities issued by commercial banks – – 967.2 16.5% 1,620.2 17.9% 1,275.6 11.0% Debt securities issued by enterprises ––––167.6 1.8% 1,611.1 13.9% Total debt securities 3,187.2 100.0% 5,845.5 100.0% 9,064.8 100.0% 11,591.2 100.0%

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Debt securities investment increased significantly from RMB3,187.2 million as of December 31, 2015 to RMB5,845.5 million as of December 31, 2016, and further increased significantly to RMB9,064.8 million as of December 31, 2017. Debt securities investment amounted to RMB11,591.2 million as of June 30, 2018. We increased our investment in debt securities to fulfill our daily liquidity management requirement and our profitability demand, given the rapid growth of our assets in recent years.

The debt securities issued by PRC central and local governments decreased by 13.1% from RMB1,752.7 million as of December 31, 2015 to RMB1,522.5 million as of December 31, 2016, primarily due to our decreased investment in certain debt securities issued by PRC central and local governments with relatively long maturity periods in 2016. The debt securities issued by PRC central and local governments increased by 62.4% from RMB1,522.5 million as of December 31, 2016 to RMB2,473.1 million as of December 31, 2017, which further increased to RMB2,524.7 million as of June 30, 2018, primarily due to our liquidity management requirement as such debt securities have good liquidity and low risk.

During the Track Record Period, debt securities issued by policy banks were the largest component of our debt securities portfolio, accounting for 45.0%, 57.4%, 53.0% and 53.3% of our total debt securities portfolio as of December 31, 2015, 2016 and 2017 and June 30, 2018, respectively. Debt securities issued by policy banks increased by 133.9% from RMB1,434.5 million as of December 31, 2015 to RMB3,355.8 million as of December 31, 2016, and further increased by 43.1% to RMB4,803.9 million as of December 31, 2017. Debt securities issued by policy banks amounted to RMB6,179.9 million as of June 30, 2018. The continued increase in the securities issued by PRC policy banks was primarily due to our liquidity management requirement.

We did not hold any debt securities issued by commercial banks as of December 31, 2015. Debt securities issued by commercial banks increased by 67.5% from RMB967.2 million as of December 31, 2016 to RMB1,620.2 million as of December 31, 2017, primarily due to the need for diversification of our assets portfolio. As of June 30, 2018, our investment in debt securities issued by commercial banks decreased to RMB1,275.6 million, primarily due to the maturity of RMB1.7 billion of bonds issued by commercial banks in the first half of 2018, and to a less extent the fact that the total amount of debt securities we invested in this period was less than the amount that matured.

We did not hold any debt securities issued by enterprises as of December 31, 2015 and 2016. Debt securities issued by enterprises increased from RMB167.6 million as of December 31, 2017 to RMB1,611.1 million as of June 30, 2018, primarily due to our increased investment in corporate bonds in 2017 and 2018 which was driven by market conditions asset allocation needs.

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The following table sets forth the balance of our debt securities portfolio by remaining maturity as of the date indicated.

As of June 30, 2018 Due between Due over Due in Due within 3to12 1 year up more than 3 months months to 5 years 5 years Total (in millions of RMB) Debt securities issued by the central and local government – 144.5 1,124.9 1,255.3 2,524.7 Debt securities issued by policy banks – 300.9 3,317.1 2,561.8 6,179.9 Debt securities issued by commercial banks 1,275.5–––1,275.5 Debt securities issued by enterprises – – 1,371.1 240.0 1,611.1 Total debt securities 1,275.5 445.4 5,813.1 4,057.1 11,591.2

The following table sets forth a breakdown of our debt securities investment between fixed interest rates and floating interest rates as of the dates indicated.

As of December 31, As of June 30, 2015 2016 2017 2018

%of %of %of %of Amount total Amount total Amount total Amount total

(in millions of RMB, except percentages) Fixed interest rates 3,093.3 97.1% 4,703.8 80.5% 7,882.9 87.1% 10,378.9 89.5% Floating interest rates 93.9 2.9% 1,141.7 19.5% 1,181.9 13.0% 1,212.3 10.5% Total debt securities 3,187.2 100.0% 5,845.5 100.0% 9,064.8 100.0% 11,591.2 100.0%

SPV Investment in Financial Investments – Credit Related Financial Assets Our investment in credit related financial assets is primarily made through trust plans or asset management plans where we entrust our counterparties to manage our funds and they then extend credit to the ultimate borrowers/financing parties. Please see “Business – Financial Markets Business – Investment Management – SPV Investment”. We did not have any trust plans invested in any financial investments – credit related financial assets as of December 31, 2015. As of December 31, 2016, our trust plans invested in financial investments – credit related financial assets substantially increased to RMB5,304.2 million, primarily due to the diversification of our business and revenue sources. As of December 31, 2017, our trust plans invested in financial investments – credit related financial assets remained stable at RMB5,371.1 million. As of June 30, 2018, our trust plans invested in financial investments – credit related financial assets decreased to RMB4,242.0 million, primarily due to the increased management fees charged by trust companies. Our asset management plans invested in financial investments – credit related financial assets decreased by 41.4% from RMB3,815.0 million as of December 31, 2015 to RMB2,235.0 million as of December 31, 2016, primarily due to our investment portfolio adjustment to reduce the amount of investment in asset management products. As of December 31, 2017, asset management plans invested in financial investments – credit related financial assets increased by 35.6% to RMB3,033.0 million, primarily due to our investment portfolio adjustment as a result of increasing trust management fees. As of June 30, 2018, asset management plans invested in financial investments – credit related financial assets decreased by 11.0% to RMB2,699.5 million.

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Distribution of SPV Investments in Financial Investments – Credit Related Financial Assets by Industry

The following table sets forth, as of June 30, 2018, the distribution of our SPV investment in financial investments – credit related financial assets by industry classification.

As of June 30, 2018 Asset management Trust plans plans Total % of total (in millions of RMB, except for percentages) Real estate 2,577.0 475.0 3,052.0 44.0% Leasing and business service 1,164.0 1,264.5 2,428.5 35.0% Wholesale and retail – 570.0 570.0 8.2% Water, environment protection and public facility management 300.0 150.0 450.0 6.5% Construction 201.0 – 201.0 2.9% Public management, social security and social organization – 150.0 150.0 2.2% Manufacturing – 90.0 90.0 1.3% Total 4,242.0 2,699.5 6,941.5 100.0%

295 Distribution of SPV Investment in Financial Investment – Credit Related Financial Assets by Collateral DOCUMENT. IN THIS READ OF BE MUST COVER INFORMATION THE THE ON AND “WARNING” CHANGE TO HEADED SUBJECT SECTION AND THE INCOMPLETE FORM, WITH DRAFT CONJUNCTION IN IS DOCUMENT THIS

According to relevant agreements we entered into, financing parties, third parties or guarantors are requested to provide security for the payment of principal and interest of our investments in trust plans and asset management plans. The following table sets forth the breakdown of our SPV investment in financial investments – credit related financial assets by collateral type as of the dates indicated.

As of December 31, As of June 30, 2015 2016 2017 2018

Asset Asset Asset Asset Trust management %of Trust management %of Trust management %of Trust management %of plans plans Total total plans plans Total total plans plans Total total plans plans Total total SESADLIABILITIES AND ASSETS (in millions of RMB, except percentages) Secured by pledges – – – – 1,366.0 – 1,366.0 18.1% 1,021.0 1,663.0 2,684.0 31.9% 801.0 1,654.5 2,455.5 35.4%

Secured by collateral – 3,695.0 3,695.0 96.9% 2,718.2 1,835.0 4,553.2 60.4% 1,167.0 1,200.0 2,367.0 28.2% 150.0 875.0 1,025.0 14.8% 296 Secured by guarantee – 120.0 120.0 3.1% – 200.0 200.0 2.7% 1,740.1 80.0 1,820.1 21.7% 1,865.0 80.0 1,945.0 28.0%

Unsecured – – – – 1,220.0 200.0 1,420.0 18.8% 1,443.0 90.0 1,533.0 18.2% 1,426.0 90.0 1,516.0 21.8%

Total – 3,815.0 3,815.0 100.0% 5,304.2 2,235.0 7,539.2 100.0% 5,371.1 3,033.0 8,401.1 100.0% 4,242.0 2,669.5 6,941.5 100.0% THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. ASSETS AND LIABILITIES

Concentration of Trust Plans Invested in Financial Investments – Credit Related Financial Assets The following table sets forth the five largest end borrowers under our trust plans invested in financial investments – credit related financial assets that have a single borrower as of the dates indicated.

As of December 31, 2016 %of trust plans invested in financial investments – credit related financial Industry Amount assets (in millions of RMB, except percentages)

Borrower B Real estate 917.0 17.3% Borrower C Real estate 836.2 15.8% Borrower D Leasing and business services 630.0 11.9% Borrower E Real estate 500.0 9.4% Borrower A Real estate 475.0 9.0% Total 3,358.2 63.3%

As of December 31, 2017 %of trust plans invested in financial investments – credit related financial Industry Amount assets (in millions of RMB, except percentages) Borrower C Real estate 790.1 14.7% Borrower B Real estate 757.0 14.1% Borrower D Leasing and business services 630.0 11.7% Borrower F Real estate 500.0 9.3% Borrower G Real estate 450.0 8.4% Total 3,127.1 58.2%

As of June 30, 2018 %of trust plans invested in financial investments – credit related Industry Amount financial assets (in millions of RMB, except percentages)

Borrower C Real estate 755.0 17.8% Borrower D Leasing and 627.0 14.8% business services Borrower F Real estate 500.0 11.8% Borrower G Real estate 450.0 10.6% Borrower H Leasing and 313.0 7.4% business service Total 2,645.0 62.4%

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The following table sets forth our five largest trust company counterparties invested in financial investments – credit related financial assets as of the dates indicated.

As of December 31, 2016

%of trust plans invested in financial investments Total assets – credit as of Regulatory related December ratings/ financial Nature 31, 2016(1) Credit ratings Amount assets

(in millions of RMB, except percentages)

Company B State-owned 18,965.7 A 2,806.2 52.9% Company D State-owned 7,222.0 A 1,841.0 34.7% Company C State-owned 8,132.3 B 657.0 12.4% Total 5,304.2 100.0%

As of December 31, 2017

%of trust plans invested in financial investments Total assets – credit as of Regulatory related December ratings/ financial Nature 31, 2017(1) Credit ratings Amount assets

(in millions of RMB, except percentages) Company B State-owned 17,164.3 A 2,624.1 48.9% Company D State-owned 7,613.4 A 1,270.0 23.6% Company C State-owned 8,919.9 B 527.0 10.0% Company E Privately-owned 7,067.0 B 500.0 9.3% Company F State-owned Not yet A 450.0 8.4% available as of the Latest Practicable Date Total 5,371.1 100.0%

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As of June 30, 2018

%of trust plans invested in financial investments Total assets – credit as of Regulatory related June 30, ratings/ financial Nature 2018(1) Credit ratings Amount assets

(in millions of RMB, except percentages) Company A State-owned Not yet A 1,932.0 45.5% available as of the Latest Practicable Date Company D State-owned Not yet A 1,050.0 24.8% available as of the Latest Practicable Date Company E Privately-owned Not yet B 500.0 11.8% available as of the Latest Practicable Date Company F State-owned Not yet A 450.0 10.6% available as of the Latest Practicable Date Company G State-owned Not yet N/A 160.0 3.8% available as of the Latest Practicable Date Total 4,092.0 96.5%

Note:

(1) Source: each company’s annual report prepared on an unconsolidated basis.

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Concentration of Asset Management Plans Invested in Financial Investments – Credit Related Financial Assets

The following table sets forth the five largest end borrowers under our asset management plans invested in financial investments – credit related financial assets that have a single borrower as of the dates indicated.

As of December 31, 2015 % of asset management plans invested in financial investments – credit related financial Industry Amount assets (in millions of RMB, except percentages) Borrower A Public management, social 1,750.0 45.9% security and social organizations Borrower B Real estate 350.0 9.2% Borrower C Public management, social 300.0 7.9% security and social organizations Borrower D Leasing and business services 220.0 5.8% Borrower E Public management, social 200.0 5.2% security and social organizations Total 2,820.0 73.9%

As of December 31, 2016 % of asset management plans invested in financial investments – credit related financial Industry Amount assets (in millions of RMB, except percentages)

Borrower A Public management, social 940.0 42.1% security and social organizations Borrower C Public management, social 300.0 13.4% security and social organizations Borrower F Public management, social 200.0 8.9% security and social organizations Borrower G Water, environment and public 200.0 8.9% facilities management Company H Water, environment and public 150.0 6.7% facilities management Total 1,790.0 80.1%

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As of December 31, 2017

% of asset management plans invested in financial investments – credit related financial Industry Amount assets

(in millions of RMB, except percentages)

Borrower A Public management, social 500.0 16.5% security and social organizations Borrower I Leasing and business services 330.0 10.9% Borrower J Wholesale and retail 295.0 9.7% Borrower K Leasing and business services 290.0 9.6% Company L Leasing and business service 288.0 9.5% Total 1,703.0 56.1%

As of June 30, 2018

% of asset management plans invested in financial investments – credit related financial Industry Amount assets

(in millions of RMB, except percentages)

Borrower M Real Estate 475.0 17.6% Company J Wholesale and retail 295.0 10.9% Company K Leasing and business service 290.0 10.7% Company L Leasing and business service 288.0 10.7% Company N Wholesale and retail 275.0 10.2% Total 1,623.0 60.1%

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The following table sets forth our five largest counterparties for asset management plans invested in credit related financial assets as of the dates indicated.

As of December 31, 2015

% of asset management plans invested in financial Total assets investments – as of Regulatory credit related December ratings/ financial Nature 31, 2015(1) Credit ratings Amount assets

(in millions of RMB, except percentages) Company A State-owned 167.8 N/A 3,015.0 79.0% Company B State-owned 55,434.7 A 800.0 21.0% Total 3,815.0 100.0%

As of December 31, 2016

% of asset management plans invested in financial Total assets investments – as of Regulatory credit related December ratings/ financial Nature 31, 2016(1) Credit ratings Amount assets

(in millions of RMB, except percentages) Company A State-owned 150.0 N/A 2,235.0 100.0% Total 2,235.0 100.0%

As of December 31, 2017

% of asset management plans invested in financial Total assets investments – as of Regulatory credit related December ratings/ financial Nature 31, 2017(1) Credit ratings Amount assets

(in millions of RMB, except percentages) Company C State-owned 39,908.1 A 1,663.0 54.8% Company A State-owned 177.0 N/A 1,020.0 33.6% Company D State-owned 127,324.5 A 350.0 11.5% Total 3,033.0 100.0%

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As of June 30, 2018 % of asset management plans invested in financial investments Total assets – credit as of Regulatory related June 30, ratings/ financial Nature 2018(1) Credit ratings Amount assets (in millions of RMB, except percentages) Company C State-owned Not yet A 1,654.5 61.3% available as of the Latest Practicable Date Company E Privately-owned Not yet N/A 475.0 17.6% available as of the Latest Practicable Date Company A State-owned 177.0 N/A 470.0 17.4% Company D State-owned Not yet A 100.0 3.7% available as of the Latest Practicable Date Total 2,699.5 100.0%

SPV Investment in Other Financial Assets We invest in other financial assets primarily through vehicles such as trust plans, asset management plans, wealth management plans and money market funds managed by counterparties, who subsequently invest our assets in a specific investment portfolio, mainly including industrial funds, debt securities and money market products.

Trust plans As of December 31, 2015, 2016 and 2017 and June 30, 2018, trust plans through which we invested in other financial assets amounted to RMB1,749.0 million, RMB8,494.5 million, RMB8,211.8 million and RMB8,506.8 million, respectively. The general increase in trust plans investing in other financial assets during the Track Record Period was primarily due to our efforts to diversify our investment portfolio and revenue sources.

Asset management plans Asset management plans through which we invested in other financial assets increased from RMB500.0 million as of December 31, 2015 to RMB2,750.0 million as of December 31, 2016, as we diversified investment portfolio and revenue sources. Asset management plans through which we invested in other financial assets decreased to RMB1,252.5 million as of December 31, 2017 but increased to RMB3,064.9 million as of June 30, 2018, primarily because we adjusted investment portfolio taking into various factors, including market competition, prevailing market interest rate, customer’s demand and regulatory environment.

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Wealth management products Wealth management products through which we invested in other financial assets increased from RMB1,200.0 million as of December 31, 2015 to RMB2,310.8 million as of December 31, 2017, primarily due to our increased investment in non-principal protected wealth management products launched by banks caused by the significant increase in our customer deposits during the same time period. As of June 30, 2018, wealth management products through which we invested in other financial assets decreased to RMB604.8 million, primarily due to our risk control policies and development strategies. The decrease was also due to decrease in wealth management products in the market that meet our investment selection standard.

Money market fund As of December 31, 2015, 2016 and 2017, we did not invest in any money market fund. As of June 30, 2018, money market funds through which we invested in other financial assets amounted to RMB1,564.1 million.

Other Components of Our Assets Other components of our assets consist primarily of (i) cash and balances with the central bank, (ii) financial assets held under resale agreements due from other banks and financial institutions, (iii) investments in associates, (iv) property, plant and equipment, (v) deferred income tax assets and (vi) other assets. Cash and balances with the central bank consist primarily of cash, statutory deposit reserves, surplus deposit reserves and fiscal deposits. Statutory deposit reserves represent the minimum level of cash deposits that we are required to maintain with PBoC. The minimum level is determined as a percentage of our customer deposits. For details of changes in the statutory deposit reserve ratio, please see the section headed “Supervision and Regulation – Required Deposit Reserve.” Surplus deposit reserves are deposits with PBoC in excess of statutory deposit reserves which we maintain for clearing purposes. As of December 31, 2015, 2016 and 2017, our cash and balances with the central bank amounted to RMB4,349.7 million, RMB6,463.7 million and RMB8,145.7 million, respectively. The increase in our cash and balances with the central bank was primarily due to an increase in our statutory deposit reserves in line with the increase in our customer deposits. Our cash and deposits with the central bank decreased to RMB7,884.6 million as of June 30, 2018, primarily due to the lowered statutory deposit reserve ratio in 2018. Financial assets held under resale agreements, due from other banks and financial institutions consist primarily of (i) our deposits with banks and other financial institutions; (ii) bills held under resale agreements; (iii) securities held under resale agreements; (iv) credit assets held under resale agreements; and (v) our placements with other banks. Our financial assets held under resale agreements due from other banks and financial institutions decreased by 25.1% from RMB6,641.9 million as of December 31, 2015 to RMB4,971.8 million as of December 31, 2016 primarily due to our increased investment in other financial assets such as debt securities and interbank certificates of deposit, instead of financial assets held under resale agreements, due from other banks and other financial institutions, to enhance our profitability by taking advantage of the low interbank interest rate in 2015 and the first three quarter of 2016. Our financial assets held under resale agreements, due from other banks and financial institutions increased significantly from RMB4,971.8 million as of December 31, 2016 to RMB13,344.8 million as of December 31, 2017, primarily due to our increased financial assets held under resale agreements due from other banks and financial institutions in response to the increasing

304 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. ASSETS AND LIABILITIES interbank interest rate. Financial assets held under resale agreements due from other banks and financial institutions decreased to RMB9,425.0 million as of June 30, 2018, primarily due to our reduced financial assets held under resale agreements in accordance with our net asset scale as required by PBoC.

Our investments in associates consist primarily of our investment in a village and township bank. Our investments in associates increased by 10.5% from RMB27.6 million as of December 31, 2015 to RMB30.5 million as of December 31, 2016, and increased by 8.2% to RMB33.0 million as of December 31, 2017, and further increased by 7.0% to RMB35.3 million as of June 30, 2018. As of June 30, 2018, we held a 30% equity interest in Luxian Yuantong County Bank (瀘縣元通村鎮銀行), which provides deposit and loan services to local customers in its village and town.

Our property, plant and equipment increased by 25.5% from RMB465.3 million as of December 31, 2015 to RMB584.0 million as of December 31, 2016, and increased by 5.3% to RMB614.8 million as of December 31, 2017, and further increased by 2.8% to RMB631.8 million as of June 30, 2018, due to construction of our new building and increase in our outlets.

Our deferred tax assets increased by 391.5% from RMB20.1 million as of December 31, 2015 to RMB98.8 million as of December 31, 2016, and increased significantly by 147.3% to RMB244.3 million as of December 31, 2017, primarily due to an increase in our impairment allowance on assets caused by the increase in our customer loans and financial investments. If measured in accordance with IFRS 9 adopted on January 1, 2018, our deferred income tax assets as of December 31, 2017 would be restated as RMB169.2 million. The difference was caused by (i) a RMB64.5 million decrease as certain debt securities will be measured at amortized cost under the new accounting policy and changes in their fair value will not affect other comprehensive income but deferred tax assets; (ii) a RMB10.6 million decrease as the expected credit losses measured under IFRS would be less than the impairment losses measured under IAS 39. As of June 30, 2018, our deferred tax assets further decreased to RMB160.2 million, primarily due to a decrease in the deferred tax assets related to accrued staff costs as in 2018 we settled accrued staff costs payable in 2017; besides the difference brought by the new accounting policy.

Our other assets consist primarily of interest receivables, foreclosed assets, prepayment by customers, long-term deferred expenses, investment real estate and other receivables. Our other assets increased by 88.2% from RMB198.8 million as of December 31, 2015 to RMB374.1 million as of December 31, 2016, and increased by 78.3% to RMB666.8 million as of December 31, 2017, and further increased by 4.1% to RMB694.2 million as of June 30, 2018, which was in line with the growth of the scale of our assets during the Track Record Period.

LIABILITIES AND SOURCES OF FUNDS

Our total liabilities increased by 73.0% from RMB28,479.5 million as of December 31, 2015 to RMB49,273.2 million as of December 31, 2016, and increased by 35.1% to RMB66,543.7 million as of December 31, 2017, and further increased by 5.2% to RMB69,992.2 million as of June 30, 2018, primarily due to an increase in customer deposits and interbank deposits issued and tier-two capital bonds.

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The following table sets forth the components of our total liabilities as of the dates indicated.

As of December 31, As of June 30, 2015 2016 2017 2018 %of %of %of %of Amount total Amount total Amount total Amount total (in millions of RMB, except percentages) Borrowing from central bank 425.0 1.5% 250.0 0.5% 590.0 0.9% 160.0 0.2% Financial assets sold under repurchase agreements, due to other banks and financial institutions 7,079.6 24.9% 12,391.6 25.1% 12,063.9 18.1% 11,342.2 16.2% Customer deposits 20,383.4 71.6% 31,018.8 63.0% 42,145.3 63.3% 44,742.4 63.9% Debt securities issued – – 4,901.4 9.9% 10,775.2 16.2% 12,443.7 17.8% Current tax liabilities and other liabilities(1) 591.5 1.9% 711.4 1.4% 969.3 1.5% 1,303.9 1.9% Total liabilities 28,479.5 100.0% 49,273.2 100.0% 66,543.7 100.0% 69,992.2 100.0%

Note: (1) Other liabilities consist primarily of tax payable, interest payable, dividend payable and liquidation of funds.

Customer Deposits Customer deposits have historically been our primary source of funding, representing 71.6%, 63.0%, 63.3% and 63.9% of our total liabilities as of December 31, 2015, 2016 and 2017 and as of June 30, 2018, respectively. We provide demand and time deposit products to corporate and retail banking customers. The following table sets forth our deposits from corporate and retail banking customers by product type as of the dates indicated.

As of December 31, As of June 30, 2015 2016 2017 2018 %of %of %of %of Amount total Amount total Amount total Amount total (in millions of RMB, except percentages) Corporate deposits Demand 11,152.1 54.7% 16,953.8 54.7% 20,024.5 47.5% 18,393.9 41.1% Time 5,029.3 24.7% 4,407.9 14.2% 6,090.4 14.4% 6,667.6 14.9% Subtotal 16,181.4 79.4% 21,361.7 68.9% 26,114.9 62.0% 25,061.5 56.0% Personal deposits Demand 1,315.3 6.4% 1,804.4 5.8% 2,391.0 5.7% 2,613.7 5.8% Time 2,886.7 14.2% 7,852.7 25.3% 13,639.4 32.4% 17,067.2 38.2% Subtotal 4,202.0 20.6% 9,657.1 31.1% 16,030.4 38.0% 19,680.9 44.0% Total customer deposits 20,383.4 100.0% 31,018.8 100.0% 42,145.3 100.0% 44,742.4 100.0%

Our total customer deposits increased by 52.2% from RMB20,383.4 million as of December 31, 2015 to RMB31,018.8 million as of December 31, 2016, and increased by 35.9% to RMB42,145.3 million as of December 31, 2017, and further increased by 6.2% to RMB44,742.4 million as of June 30, 2018, primarily due to the expansion of our deposit business with enhanced marketing efforts and product innovation to meet different customer demand, such as the introduction of “Kuai Le Jin (快樂金)”, “Yue Yue Hong (月月紅)” and “Nian Nian Sheng (年年升)”.

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Our corporate deposits increased by 32.0% from RMB16,181.4 million as of December 31, 2015 to RMB21,361.7 million as of December 31, 2016, and increased by 22.3% to RMB26,114.9 million as of December 31, 2017, primarily due to our continuous marketing efforts, in particular, the establishment of our Chengdu branch in 2017. Our corporate deposits decreased to RMB25,061.5 million as of June 30, 2018, primarily due to increasingly intense market competition to develop quality corporate banking customers. Our personal deposits increased by 129.8% from RMB4,202.0 million as of December 31, 2015 to RMB9,657.1 million as of December 31, 2016, and increased by 66.0% to RMB16,030.4 million as of December 31, 2017, and further increased by 22.8% to RMB19,680.9 million as of June 30, 2018, primarily due to our successful development of our retail banking business through product innovation and enhanced marketing efforts, such as the introduction of “Kuai Le Jin (快樂金)”, “Yue Yue Hong (月月紅)” and “Nian Nian Sheng (年年升)”. Please see the section headed “Risk Factors – Risks Relating to Our Business – If we fail to maintain the growth rate of our customer deposits or our customer deposits decrease substantially, our liquidity, financial position and operating results could be materially and adversely affected” in this document.

Distribution of Customer Deposits by Geographical Region We classify the geographic distribution of deposits based on the location of the branch or sub-branch taking the deposits. The following table sets forth the distribution of our customer deposits by geographic region as of the dates indicated.

As of December 31, As of June 30, 2015 2016 2017 2018

%of %of %of %of Amount total Amount total Amount total Amount total

(in millions of RMB, except percentages) Luzhou 20,383.4 100.0% 31,018.8 100.0% 38,797.1 92.1% 41,043.5 91.7% Outside Luzhou ––––3,348.2 7.9% 3,698.9 8.3% Total customer deposits 20,383.4 100.0% 31,018.8 100.0% 42,145.3 100.0% 44,742.4 100.0%

Distribution of Customer Deposits by Remaining Maturity The following table sets forth the distribution of our customer deposits by remaining maturity as of the dates indicated.

As of June 30, 2018

Repayable on Due in less than Due over 3 months Due over 1 year up demand 3 months up to 12 months to 5 years Total

%of %of %of %of %of total total total total total Amount deposits Amount deposits Amount deposits Amount deposits Total deposits

(in millions of RMB, except percentages) Corporate deposits 18,914.0 42.3% 825.8 1.8% 4,335.9 9.7% 985.8 2.2% 25,061.5 56.0% Personal deposits 2,615.9 5.8% 370.5 0.8% 1,128.6 2.5% 15,565.9 34.8% 19,680.9 44.0% Total customer deposits 21,529.9 48.1% 1,196.3 2.6% 5,464.5 12.2% 16,551.7 37.0% 44,742.4 100.0%

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During the Track Record Period, a significant portion of our customer deposits were repayable on demand, representing 48.1% of our total customer deposits as of June 30, 2018. As of June 30, 2018, our corporate deposits repayable on demand accounted for 75.5% of our total corporate deposits and personal deposits repayable on demand accounted for 13.3% of our total personal deposits.

Distribution of Corporate Deposits by Size

The following table sets forth the distribution of our corporate deposits, in terms of total balance of deposits from a single corporate banking customer, by size of the deposits as of the dates indicated.

As of December 31, As of June 30, 2015 2016 2017 2018

%of %of %of %of Amount total Amount total Amount total Amount total

(in millions of RMB, except percentages) Less than RMB50 million 2,724.5 17.0% 3,530.9 16.5% 4,268.2 16.3% 5,537.9 22.1% RMB50 million up to less than RMB100 million 1,301.9 8.0% 1,585.8 7.4% 2,006.4 7.7% 3,241.8 12.9% RMB100 million or more 12,155.0 75.1% 16,245.0 76.0% 19,840.2 76.0% 16,281.8 65.0% Total corporate deposits 16,181.4 100.0% 21,361.7 100.0% 26,114.8 100.0% 25,061.5 100.0%

Distribution of Personal Deposits by Size

The following table sets forth the distribution of our personal deposits, in terms of total balance of deposits from a single retail banking customer, by size of the deposits as of the dates indicated.

As of December 31, As of June 30, 2015 2016 2017 2018

%of %of %of %of Amount total Amount total Amount total Amount total

(in millions of RMB, except percentages) Less than RMB100,000 1,264.3 30.1% 1,794.8 18.6% 2,449.7 15.3% 5,448.7 27.7% RMB100,000 up to less than RMB1 million 2,028.0 48.3% 5,280.6 54.7% 9,529.3 59.4% 11,416.9 58.0% RMB1 million or more 909.7 21.7% 2,581.7 26.7% 4,051.3 25.3% 2,815.3 14.3% Total personal deposits 4,202.0 100.0% 9,657.1 100.0% 16,030.4 100.0% 19,680.9 100.0%

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Other Components of Our Liabilities

Other components of our liabilities consisted primarily of (i) financial assets sold under repurchase agreements, due to other banks and financial institutions, (ii) debt securities issued, (iii) borrowing from central bank and (iv) other liabilities.

Our financial assets sold under repurchase agreements, due to other banks and financial institutions increased by 75.0% from RMB7,079.6 million as of December 31, 2015 to RMB12,391.6 million as of December 31, 2016, primarily due to our increased holding of financial assets sold under repurchase agreements, due to other banks and financial institutions in line with the increased cap for our placements from banks and other financial institutions and enhanced cooperation with other banks to diversify our capital sources and fulfil our liability management targets. Our financial assets sold under repurchase agreements, due to other banks and other financial institutions decreased by 2.6% from RMB12,391.6 million as of December 31, 2016 to RMB12,063.9 million as of December 31, 2017, which further decreased by 6.0% to RMB11,342.2 million as of June 30, 2018, as we obtained sufficient capital from other channels including customer deposits.

Debt securities issued consisted primarily of interbank certificates of deposit we issued in 2016 and 2017 and tier-two capital bonds we issued in 2017. For details of our debt securities issued, please see “Financial Information – Capital Resources – Debt – Debt Securities Issued”. Our debt securities issued amounted to nil, RMB4,901.4 million, RMB10,775.2 million and RMB12,443.7 million as of December 31, 2015, 2016 and 2017 and June 30, 2018, respectively.

Our borrowing from central bank decreased by 41.2% from RMB425.0 million as of December 31, 2015 to RMB250.0 million as of December 31, 2016, as we proactively reduced borrowings from central bank in line with our capital requirements for operation. Our borrowing from central bank increased by 136.0% from RMB250.0 million as of December 31, 2016 to RMB590.0 million as of December 31, 2017, as a monetary policy instrument to support our business development. Our borrowing from central bank decreased to RMB160.0 million as of June 30, 2018, as certain of our borrowings from central bank matured in the first half of 2018.

Our other liabilities consisted primarily of tax payable, deferred tax liabilities, interest payable, payment and collection clearance accounts, accrued staff cost, dividend payable and other liabilities. Our other liabilities increased by 20.3% from RMB591.5 million as of December 31, 2015 to RMB711.4 million as of December 31, 2016 primarily due to an increase in interest payable, accrued staff cost and dividend payable, which was partially offset by a decrease in tax payable due to changes in government policies on VAT treatment according to which income derived from holding of non-principal protected financial investments would not be subject to VAT. Our other liabilities further increased by 36.3% to RMB969.3 million as of December 31, 2017, primarily due to an increase in our interest payable, accrued staff cost and tax payable. As of June 30, 2018, our other liabilities increased to RMB1,303.9 million, primarily due to an increase in dividend payable.

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You should read the discussion and analysis set forth in this section in conjunction with our historical financial information, together with the accompanying notes, included in Appendix I to this document. Our historical financial information has been prepared in accordance with IFRS. Capital adequacy ratios discussed in this section are calculated in accordance with applicable CBRC guidelines and based on our financial statements prepared in accordance with PRC GAAP. The following discussion and analysis contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements due to a number of factors, including those set forth in “Forward-Looking Statements” and “Risk Factors”.

OVERVIEW We are the largest commercial bank in Luzhou in terms of total assets as of December 31, 2017. We are also the only city commercial bank with headquarters in Luzhou, Sichuan Province, China. We opened Chengdu branch, our first branch outside of Luzhou, in February 2017. During the Track Record Period, our total assets increased from RMB31,763.6 million as of December 31, 2015 to RMB70,879.4 million as of December 31, 2017, representing a CAGR of 49.4%, which further increased to RMB74,555.1 million as of June 30, 2018. Our net profit attributable to shareholders increased from RMB451.5 million for the year ended December 31, 2015, to RMB618.7 million as of December 31, 2017, representing a CAGR of 17.1%, which further increased to RMB376.8 million for the six months ended June 30, 2018. For the six months ended June 30, 2018, our total customer deposits and customer loans amounted to RMB44,742.4 million and RMB24,295.5 million, respectively. We have matched this rapid business growth with outstanding profitability and operating efficiency. In 2017, our return on average assets and return on average equity was 1.00% and 14.83%, respectively, which was 0.08 and 2.27 percentage points higher than the national average over the same period. For the six months ended June 30, 2018, our return on average assets and return on average equity further increased to 1.04% and 16.94%.

GENERAL FACTORS THAT AFFECT OUR RESULTS OF OPERATIONS Our results of operations and financial condition have been, and will be, affected by various factors including, among others, certain general factors set out below.

Economic Conditions of the PRC, Sichuan Province and Luzhou As a city commercial bank headquartered in Luzhou with business penetration in Sichuan Province, our financial conditions and results of operations are affected by the economic conditions of the PRC, in particular, Sichuan Province and Luzhou, and the macroeconomic policies implemented by the PRC government. From 2013 to 2017, according to the NBS, the PRC’s GDP grew at a CAGR of 8.6% from RMB59.5 trillion in 2013 to RMB82.7 trillion in 2017. The PRC’s economic growth has resulted in a substantial increase in corporate financing activities and individual wealth, which has in turn contributed to the rapid growth of the corporate and retail banking business of PRC city commercial banks. For example, according to the PBoC, from December 31, 2013 to December

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31, 2017, total RMB-denominated loans and RMB-denominated deposits in the PRC banking industry grew at a CAGR of 13.7% and 12.0%, respectively. According to CBIRC, total assets of PRC commercial banks in the banking industry have reached RMB196.8 trillion as of December 31, 2017, representing a CAGR of 13.4% from December 31, 2013.

In addition, the GDP for Sichuan Province amounted to RMB3,698.0 billion in 2017, representing a CAGR of 8.8% from 2013 to 2017, ranking first among all provinces in Western China and sixth among all PRC provinces. For the six months ended June 30, 2018, the GDP of Sichuan Province amounted to RMB1,832.7 billion, representing an 8.2% increase from that for the six months ended June 30, 2017 the growth rate was 1.4 percentage points higher than the national average over the same period. Luzhou’s GDP increased from RMB114.0 billion in 2013 to RMB159.6 billion in 2017, pushing its GDP ranking in Sichuan up to sixth in 2017 from eighth in 2013. In addition, in terms of year-over-year GDP growth rate, Luzhou ranked first in Sichuan Province for both 2016 and 2017. For the six months ended June 30, 2018, GDP of Luzhou amounted to RMB82.0 billion, representing an increase of 9.2% from that in the six months ended June 30, 2017 and ranking second in Sichuan Province in terms of period-over- period GDP growth rate. For details, please see “Industry Overview – National and Regional Economy”. After three decades of rapid development, China’s economy has entered a “new normal” stage, where the economy has transitioned to a stage targeting sustainable growth, emphasizing efficiency and quality, rather than merely quick expansion. In 2017, China’s real GDP growth rate was 6.9%. The slowdown of growth in the overall economy and certain industries in China may affect the results of operations and financial condition of PRC city commercial banks.

Interest Rates Our operating income depends substantially on our net interest income. For the years ended December 31, 2015, 2016 and 2017, and for the six months ended June 30, 2018, our net interest income accounted for 94.0%, 88.4%, 93.7% and 89.9% of our total operating income, respectively. Net interest income is affected by interest rates and the average balances of our interest-earning assets and interest-bearing liabilities. Interest rates applicable to us are affected by many factors that are beyond our control, such as the benchmark interest rates set by the PBoC, domestic and international economic and political conditions, and competition in the PRC banking industry. In the PRC, interest rates on RMB-denominated loans and deposits are set by financial institutions with reference to the benchmark interest rates on loans and deposits published and adjusted from time to time by the PBoC. The PBoC has, in the past few years, made multiple downward adjustments to the benchmark interest rates for deposits and loans. In October 2015, the PBoC further lowered the benchmark interest rates for RMB-denominated one-year deposits and loans. The PBoC’s interest rate adjustments for loans and deposits may be asymmetrical in certain circumstances, which may impact our net interest spread. In recent years, China has continued its interest rate liberalization and moved towards a market-based interest rate regime. Effective from June 8, 2012, the PBoC allowed financial institutions to set interest rates on RMB-denominated deposits up at to 110% of the PBoC benchmark rates. This cap was subsequently raised to 120%, 130% and 150% of the PBoC benchmark rates on November 22, 2014, March 1, 2015 and May 11, 2015, respectively. Effective from August 26, 2015, the PBoC removed the interest rate cap on RMB-denominated time deposits with maturities over one year. Effective from October 24, 2015, the PBoC removed the interest rate cap on RMB-denominated demand deposits as well as time deposits with

311 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. FINANCIAL INFORMATION maturities of less than one year. On July 20, 2013, the PBoC removed the interest rate floor on loans from financial institutions to allow them to set interest rates based on commercial considerations (except for residential mortgage loans where the original floor rate and cap rate remained unchanged and the PRC Government still requires relevant authorities to stringently implement diversified credit policies). The liberalization of interest rates may bring more competition to the PRC banking industry, thereby affecting our business, results of operations and financial condition. In addition, the Chinese government may guide interest rates from time to time in accordance with macroeconomic adjustment targets. For example, on April 25, 2018, in order to guide financial institutions to increase financial support for micro and small enterprises, further stabilize fund flow in the banking system and optimize liquidity, the PBoC decided to lower the RMB deposit reserve ratio by one percentage point for large commercial banks, joint-stock commercial banks, city commercial banks, non-county rural commercial bank and foreign banks.

In addition, the market liquidity and competition may lead to fluctuations in the net interest spread for our interbank businesses. For instance, the average yield of our amount due from other banks and financial institutions was 3.79%, 3.05%, 4.36%, 3.62% and 4.44% in 2015, 2016 and 2017 and in the six months ended June 30, 2017 and 2018, respectively, while the average cost of our financial assets sold under repurchase agreements, due to other banks and financial institutions was 3.96%, 3.80%, 4.11%, 3.60% and 4.33% for the same year/period. As a result, our net interest income may be adversely impacted and our business, results of operations and financial condition may be affected. Please also see “Risk Factors – Risks Relating to the PRC Banking Industry – Further development of interest rate liberalization, the PBoC’s adjustments to the benchmark interest rate, the deposit insurance program and other regulatory changes in the PRC’s banking industry may materially and adversely affect our results of operations”.

Regulatory Environment

The PRC banking industry is highly regulated. PRC city commercial banks are mainly regulated by the CBIRC and PBoC. Additionally, PRC city commercial banks are also subject to the supervision and regulation of other regulatory authorities, including the SAFE, CSRC, MOF, NAO, NDRC, SAT and SAIC and their authorized branches. Please see “Supervision and Regulation – Principal Regulators”.

In recent years, the PRC government has implemented a series of macroeconomic and monetary policies, including (i) adjusting the benchmark interest rates and the PBoC statutory deposit reserve ratios for commercial banks, as well as gradually liberalizing the regulation of interest rates; (ii) adopting a Macro Prudential Assessment (MPA) system to monitor banks’ capital adequacy ratios, assets and liabilities, liquidity, and risk; and (iii) promoting the growth of certain industries, or controlling overcapacity in certain other industries, by issuing industry development guidelines. For example, on March 1, 2016, the PBoC lowered the statutory deposit reserve ratio by 50 basis points for all deposit-taking financial institutions, which lowered banks’ funding costs and increased their liquidity. These macroeconomic and monetary policies have had a significant impact on lending activities of PRC city commercial banks and borrowers’ demand for bank financing, which in turn may affect the business, results of operations and financial condition of PRC city commercial banks, including ours.

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Our business, results of operations and financial condition are affected by changes in PRC banking laws, regulations and policies, such as the scope of business activities PRC city commercial banks are permitted to engage in, interest and fees PRC city commercial banks are allowed to charge, and restrictions imposed by regulatory authorities on PRC city commercial banks in respect of credit extended to borrowers in specific industries or specific loan products.

Development of China’s Capital Markets and Internet Finance

Recently, China has launched a number of initiatives to develop its capital markets, including encouraging enterprises to seek direct financing from the capital markets utilizing different instruments, such as debt securities. These initiatives may affect the results of our corporate banking business. For example, the development of China’s debt capital markets may impact our lending business, as certain corporate banking customers may issue debt securities at lower costs to meet their financing needs and thus have lower demand for bank loans.

Furthermore, our retail banking is experiencing challenges from internet finance companies, particularly the competition arising from the adoption of innovative financial products and technology. Similar to other city commercial banks, we are facing strong challenges from internet finance companies due to various factors, including different regulatory regimes, technological capability, and market penetration units. For instance, products and services offered by online financial product market places and P2P lending platforms may materially and negatively affect market demand for personal loans and personal deposit services from our bank.

Competitive Landscape in the PRC Banking Industry

We compete primarily with commercial banks operating in Sichuan Province and Luzhou, mainly on product offerings and prices, service quality, brand recognition, distribution networks and information technology capabilities. We also mainly face competition from other banking financial institutions in Sichuan Province.

In recent years, certain commercial banks in the PRC have completed initial public offering, which have enabled them to obtain more fundings and access to a wider range of financing sources. Therefore, they can offer more innovative products and higher quality services, and have increased their adaptability in a changing market environment. The increase in competition in the PRC banking industry may affect the pricing of our loans and deposits as well as our fee-and commission-based banking business. Please see “Business – Competition”.

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SELECTED FINANCIAL DATA

The following table sets forth our results of operations for the periods indicated.

For the six months For the year ended December 31, ended June 30,

2015 2016 2017 2017 2018

(unaudited) (in millions of RMB) Interest income 1,444.1 2,020.8 3,328.5 1,509.5 1,807.5 Interest expense (558.9) (865.2) (1,754.1) (807.7) (1,053.3) Net interest income 885.2 1,155.6 1,574.3 701.8 754.2 Fee and commission income 7.7 7.5 8.1 3.7 5.5 Fee and commission expense (5.2) (7.0) (10.0) (3.9) (4.7) Net fee and commission income 2.5 0.5 (1.9) (0.2) 0.8 Net gains on trading activities ––––24.4 Net gains arising from financial investments 40.9 132.9 97.8 63.7 53.7 Other operating income(1) 13.6 17.9 9.7 4.2 6.3 Operating income 942.2 1,307.0 1,680.0 769.5 839.3 Operating expenses (273.2) (437.4) (543.2) (172.3) (215.7) Impairment losses on assets (89.1) (155.7) (324.8) (218.4) (132.5) Operating profit 579.8 713.9 811.9 378.8 491.1 Share of profits of associates 7.8 2.9 2.5 2.0 2.3 Profit before tax 587.6 716.8 814.5 380.8 493.4 Income tax (136.2) (174.7) (195.8) (92.4) (116.6) Net profit attributable to our shareholders 451.5 542.1 618.7 288.4 376.8 Basic earnings per share (RMB/share) 0.52 0.35 0.38 0.18 0.23 Diluted earnings per share (RMB/share) 0.52 0.35 0.38 0.18 0.23

Note: (1) Consists primarily of government grants and subsidies, rental income and gains/(losses) on disposal of non-current assets.

As of December 31, As of June 30,

2015 2016 2017 2018

(in millions of RMB) Total assets 31,763.6 53,280.7 70,879.4 74,555.1 Customer loans, net 9,703.4 14,159.1 18,833.8 23,687.5 Total liabilities 28,479.5 49,273.2 66,543.7 69,992.2 Total customer deposits 20,383.4 31,018.8 42,145.3 44,742.4 Total equity attributable to our shareholders 3,284.1 4,007.4 4,335.7 4,562.9 Net assets per share attributable to our shareholders of ordinary shares (RMB/share) 2.53 2.77 2.65 2.79

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The following table sets forth profitability indicators for the periods indicated.

For the six months For the year ended December 31, ended June 30,

2015 2016 2017 2017(6) 2018(6)

(in millions of RMB, except percentages) Profitability indicators Return on average assets(1) 1.65% 1.27% 1.00% 0.98% 1.04% Return on average equity(2) 19.68% 14.87% 14.83% 14.05% 16.94% Net interest spread(3) 3.57% 3.19% 2.55% 2.41% 2.22% Net interest margin(4) 3.76% 3.24% 2.65% 2.51% 2.30% Cost-to-income ratio(5) 24.27% 31.46% 31.89% 22.10% 24.72%

Notes: (1) Calculated by dividing net profit for the period by the average balance of total assets at the beginning and the end of the period. (2) Calculated by dividing net profit for the period by the average balance of total equity at the beginning and the end of the period. (3) Calculated as the difference between the average yield on total interest-earning assets and the average cost of total interest-bearing liabilities. (4) Calculated by dividing net interest income by the average balance of total interest-earning assets. (5) Calculated by dividing total operating expenses (excluding business tax and surcharges) by total operating income. (6) On an annualized basis. The following table sets forth certain regulatory indicators as of the dates indicated, calculated in accordance with the requirements of the PRC banking regulatory authorities and applicable accounting standards.

Notes: (1) Calculated by dividing core tier-one capital, net of core tier-one capital deductions, by risk-weighted assets. For the components of core tier-one capital, core tier-one capital deductions and risk-weighted assets under the Capital Administrative Measures, please see “Supervision and Regulation – Supervision over Capital Adequacy – Latest Supervisory Standards Over Capital Adequacy” and “– Capital Resources – Capital Adequacy”. (2) Calculated by dividing tier-one capital, net of tier-one capital deductions, by risk-weighted assets. For the components of tier-one capital, tier-one capital deductions and risk-weighted assets under the Capital Administrative Measures, please see “Supervision and Regulation – Supervision over Capital Adequacy – Latest Supervisory Standards Over Capital Adequacy” and “– Capital Resources – Capital Adequacy”. (3) Calculated by dividing total capital, net of capital deductions, by risk-weighted assets. For the components of our total capital, capital deductions and risk weighted assets under the Capital Administrative Measures, please see “Supervision and Regulation – Supervision over Capital Adequacy – Latest Supervisory Standards Over Capital Adequacy” and “– Capital Resources – Capital Adequacy”.

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(4) Calculated by dividing total NPLs by gross customer loans. (5) Calculated by dividing total impairment allowance on customer loans by total NPLs. (6) Calculated by dividing total impairment allowance on customer loans by gross customer loans. (7) Calculated by dividing total customer loans by total customer deposits. Prior to October 1, 2015, PRC commercial banks were required to maintain a loan-to-deposit ratio for no higher than 75%. Effective from October 1, 2015, the PRC Commercial Banking Law was amended and the 75% maximum loan-to-deposits ratio was repealed.

RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2018

For the six months ended June 30, 2017, our net profit amounted to RMB288.4 million according to IAS39.

We have adopted IFRS 9 from January 1, 2018, based on which, for the six months ended June 30, 2018, our net profit amounted to RMB376.8 million. Assuming we apply IAS39 for the six months ended June 30, 2018, our net profit would be adjusted to RMB369.7 million. For details on the differences between IAS 39 and IFRS 9 and the impact of adopting IFRS 9 on our results of operations, please see the subsection headed “– Critical Accounting Judgments and Key Sources of Estimation Uncertainty – Impact of New Accounting Policies”.

The increase in net profit from the six months ended June 30, 2017 to the six months ended June 30, 2018 was mainly caused by an increase in our net interest income, net fee and commission income and net gains on trading activities, which was in line with our business expansion in 2018.

Net Interest Income

Net interest income was the largest component of our operating income, representing 91.2% and 89.9% of our operating income for the six months ended June 30, 2017 and 2018, respectively.

The following table sets forth our interest income, interest expense and net interest income for the periods indicated.

For the six months ended June 30,

2017 2018

(unaudited) (in millions of RMB) Interest income 1,509.5 1,807.5 Interest expense (807.7) (1,053.3) Net interest income 701.8 754.2

Our net interest income increased by 7.5% from RMB701.8 million for the six months ended June 30, 2017 to RMB754.2 million for the six months ended June 30, 2018 primarily because interest income increased by 19.7%, which was partially offset by a 30.4% increase in interest expense. For reasons behind the increase of interest income and interest expenses please see sections below.

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The following table sets forth the average balances of our interest-earning assets and interest-bearing liabilities, the related interest income or expense, and the related average yields on assets or related average cost of liabilities for the periods indicated.

For the six months ended June 30,

2017 2018

Interest Interest Average income/ Average Average income/ Average balance expense yield/cost(1) balance expense yield/cost(1)

(unaudited) (in millions of RMB, except percentages) Interest-earning assets Customer loans 15,164.3 481.0 6.34% 21,324.5 701.4 6.58% Financial investments 27,978.8 850.8 6.08% 27,445.4 833.2 6.07% Financial assets held under resale agreements, due from other banks and financial institutions 7,523.3 136.3 3.62% 9,746.4 216.2 4.44% Cash and balances with central bank(2) 5,152.5 41.4 1.61% 6,972.9 56.7 1.63% Total interest-earning assets 55,818.9 1,509.5 5.41% 65,489.2 1,807.5 5.52% Interest-bearing liabilities Customer deposits 33,488.7 407.0 2.43% 43,391.2 567.0 2.61% Financial assets sold under repurchase agreements, due to other banks and financial institutions 11,178.7 201.4 3.60% 8,343.4 180.8 4.33% Debt securities issued(3) 8,725.9 190.5 4.37% 11,782.1 299.4 5.08% Borrowing from central bank 411.7 8.8 4.27% 340.3 6.1 3.59% Total interest-bearing liabilities 53,805.0 807.7 3.00% 63,857.0 1,053.3 3.30% Net interest income 701.8 754.2 Net interest spread(4) 2.41% 2.22% Net interest margin(5) 2.51% 2.30%

Notes:

(1) Calculated by dividing interest income/expense by average balance, and adjusted on annualized basis. (2) Consists of statutory deposit reserves, surplus deposit reserves and fiscal deposits. (3) Consists of interbank certificates of deposit and tier-two capital bonds issued by us. (4) Calculated as the difference between the average yield on total interest-earning assets and the average cost of total interest-bearing liabilities. (5) Calculated by dividing net interest income by the average balance of total interest-earning assets.

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The following table sets forth the allocation of changes in our interest income and interest expense due to changes in volume and changes in rate for the periods indicated. Changes in volume are measured by changes in the average balances and changes in rate are measured by changes in the average rates. Changes caused by both volume and rate have been allocated to changes in volume.

For the six months ended June 30,

2018 vs. 2017

Increase/(decrease) due to

Net Increase/ Volume(1) Rate(2) (decrease)(3)

(in millions of RMB) Assets Customer loans 202.6 17.8 220.4 Financial investments (16.2) (1.4) (17.6) Financial assets held under resale agreements, due from other banks and financial institutions 49.3 30.6 79.9 Cash and balances with central bank(4) 14.8 0.5 15.3 Changes in interest income 250.5 47.5 298.0 Liabilities Customer deposits 129.4 30.6 160.0 Financial assets sold under repurchase agreements, due to other banks and financial institutions (61.4) 40.8 (20.6) Debt securities issued(5) 77.7 31.2 108.9 Borrowing from central bank (1.3) (1.4) (2.7) Changes in interest expense 144.3 101.3 245.6 Changes in net interest income 106.2 (53.8) 52.4

Notes:

(1) Represents the average balance for the period minus the average balance for the previous period, multiplied by the annualized average yield/cost for the period, with the results divided by two. (2) Represents the annualized average yield/cost for the period minus the annualized average yield/cost for the previous period, multiplied by the average balance for the previous period, with the results divided by two. (3) Represents interest income/expense for the period minus interest income/expense for the previous period. (4) Consists of statutory deposit reserves, surplus deposit reserves and fiscal deposits. (5) Consists of interbank certificates of deposit and tier-two capital bonds issued by us.

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Interest Income

Our interest income increased from RMB1,509.5 million for the six months ended June 30, 2017 to RMB1,807.5 million for the six months ended June 30, 2018, primarily because of (i) an increase in average balance of interest-earning assets from RMB55,818.9 million as of June 30, 2017 to RMB65,489.2 million as of June 30, 2018, and (ii) an increase in average yield of interest-earning assets from 5.41% as of June 30, 2017 to 5.52% as of June 30, 2018. Details on changes in interest income are set forth below.

The following table sets forth a breakdown of our interest income for the periods indicated.

For the six months ended June 30,

2017 2018

Amount % of total Amount % of total

(unaudited) (in millions of RMB, except percentages) Interest income from Customer loans 481.0 31.9% 701.4 38.8% Financial investments 850.8 56.4% 833.2 46.1% Financial assets held under resale agreements, due from other banks and financial institutions 136.3 9.0% 216.2 12.0% Deposit, cash and balances with central bank 41.4 2.7% 56.7 3.1% Total interest income 1,509.5 100.0% 1,807.5 100.0%

Interest Income from Customer loans

For the six months ended June 30, 2017 and 2018, interest income from customer loans represented 31.9% and 38.8% of our interest income for the six months ended June 30, 2017 and 2018, respectively.

The following table sets forth the average balance, interest income and average yield for each component of our customer loans for the periods indicated.

For the six months ended June 30,

2017 2018

Average Interest Average Average Interest Average balance income yield(1) balance income yield(1)

(unaudited) (in millions of RMB, except percentages) Corporate loans 8,782.9 328.6 7.48% 14,581.3 532.9 7.31% Personal loans 4,360.7 123.6 5.67% 5,160.5 147.0 5.70% Discounted bills 2,020.7 28.8 2.85% 1,582.7 21.5 2.72% Total customer loans 15,164.3 481.0 6.34% 21,324.5 701.4 6.58%

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Note:

(1) On an annualized basis. Corporate Loans. Our interest income from corporate loans increased by 62.2% from RMB328.6 million for the six months ended June 30, 2017 to RMB532.9 million for the six months ended June 30, 2018 primarily because the average balance of our corporate loans increased by 66.0% from RMB8,782.9 million for the six months ended June 30, 2017 to RMB14,581.3 million for the six months ended June 30, 2018, which was partially offset by a decrease in the average yield on our corporate loans from 7.48% for the six months ended June 30, 2017 to 7.31% for the six months ended June 30, 2018. The increase in the average balance of our corporate loans was primarily attributable to business expansion, particularly the increase of our loans to borrowers engaging in wholesale and retail and manufacturing industries. The decrease in the average yield on our corporate loans was primarily attributable to (i) market competition, and (ii) our granting of more loans with favorable interest rates to micro and small enterprises in response to relevant policies issued by the PRC Government.

Personal Loans. Our interest income from personal loans increased by 18.9% from RMB123.6 million for the six months ended June 30, 2017 to RMB147.0 million for the six months ended June 30, 2018, primarily because (i) the average balance of personal loans increased by 18.3% from RMB4,360.7 million for the six months ended June 30, 2017 to RMB5,160.5 million for the six months ended June 30, 2018, and (ii) the average yield on personal loans increased from 5.67% for the six months ended June 30, 2017 to 5.70% for the six months ended June 30, 2018. The increase in the average balance of our personal loans was primarily attributable to increases in personal business loans and personal consumption loans. The increase in the average yield on our personal loans was primarily attributable to (1) our efforts to increase personal loan products with high interest rates, and (2) a decrease in residential mortgage loans percentage, which generally have a comparatively lower interest rate.

Discounted Bills. Our interest income from discounted bills decreased by 25.3% from RMB28.8 million for the six months ended June 30, 2017 to RMB21.5 million for the six months ended June 30, 2018 primarily because (i) the average balance of discounted bills decreased by 21.7% from RMB2,020.7 million for the six months ended June 30, 2017 to RMB1,582.7 million for the six months ended June 30, 2018, and (ii) the average yield on discounted bills decreased from 2.85% for the six months ended June 30, 2017 to 2.72% for the six months ended June 30, 2018. The decrease in the average balance of our discounted bills was primarily attributable to (i) the gradual maturity of existing discounted bills, and (ii) our initiative to adjust our credit asset mix, by reducing holdings of discounted bills in light of market competition. The decrease in the average yield of our discounted bills was mainly caused by a decrease in prevailing market interest rates.

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Interest Income from Financial Investments

For the six months ended June 30, 2017 and 2018, our interest income generated from financial investments amounted to RMB850.8 million and RMB833.2 million, respectively, accounting for 56.4% and 46.1% of our total interest income, our interest income from financial instruments had a year-over-year slight decrease of 2.1%. The decrease is primarily due to the decrease in average balance of our financial investments from RMB27,978.8 million for the six months ended June 30, 2017 to RMB27,445.4 million for the six months ended June 30, 2018. The decrease in average yield on our financial investments was primarily attributable to the gradual maturity of financial investments with higher yields, therefore lowering the average yield. The following table sets forth a breakdown of our interest income from our debt securities investment and SPV investment and their respective average yields for the periods indicated.

For the six months ended June 30,

2017 2018

Average Average Amount % of total yield(1) Amount % of total yield(1)

(in millions of RMB, except percentages) Debt securities investment 147.8 17.4% 3.95% 187.2 22.5% 4.06% SPV investment 702.9 82.6% 6.86% 646.0 77.5% 7.09% Total 850.8 100.0% 6.08% 833.2 100.0% 6.07%

Note:

(1) Calculated by dividing (i) our interest income from the corresponding assets in the period, by (ii) the average balance of these assets and adjusted on an annualized basis. For the six months ended June 30, 2017 and 2018, interest income from debt securities investment accounted for 17.4% and 22.5% of our total interest income from financial investments, respectively, and interest income from SPV investment accounted for 82.6% and 77.5% of our total interest from financial investments. The average yield on our debt securities investment increased from 3.95% for the six months ended June 30, 2017 to 4.06% for the six months ended June 30, 2018, mainly because of increased investment in debt securities with comparatively high yield in 2018. The average yield on our SPV investment increased from 6.86% for the six months ended June 30, 2017 to 7.09% for the six months ended June 30, 2018, mainly due to adjustments to our investment portfolio for better returns in line with our business strategy.

Interest Income from Financial Assets Held under Resale Agreements, Due from Other Banks and Financial Institutions

Interest income from financial assets held under resale agreements, due from other banks and financial institutions represented 9.0% and 12.0% of our interest income for the six months ended June 30, 2017 and 2018, respectively.

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Our interest income from financial assets held under resale agreements, due from other banks and financial institutions increased by 58.6% from RMB136.3 million for the six months ended June 30, 2017 to RMB216.2 million for the six months ended June 30, 2018, primarily due to (i) an increase in the average yield on our financial assets held under resale agreements, due from other banks and financial institutions from 3.62% for the six months ended June 30, 2017 to 4.44% for the six months ended June 30, 2018; and (ii) an increase in the average balance of our financial assets held under resale agreements, due from other banks and financial institutions from RMB7,523.3 million for the six months ended June 30, 2017 to RMB9,746.4 million for the six months ended June 30, 2018. The increase in the average balance of our financial assets held under resale agreements, due from other banks and financial institutions was primarily attributable to our asset liability management. The increase in the average yield on our financial assets held under resale agreements, due from other banks and financial institutions was primarily attributable to the increase in market interest rates in the first half of 2018.

Interest Income from Cash and Balances with Central Bank

Our interest-earning cash and balances with the central bank consist primarily of statutory deposit reserves, surplus deposit reserves and fiscal deposits with the PBoC. Statutory deposit reserves represent the minimum level of cash deposits that we are required to maintain at the PBoC, calculated as a percentage of the balance of our overall customer deposits. Surplus deposit reserves are deposits with the PBoC in excess of statutory deposit reserves, which we maintain for liquidity purposes.

Interest income from cash and balances with central bank represented 2.7% and 3.1% of our interest income for the six months ended June 30, 2017 and 2018, respectively. Interest income from cash and balances with central bank increased by 37.0% from RMB41.4 million for the six months ended June 30, 2017 to RMB56.7 million for the six months ended June 30, 2018, primarily because (i) the average balance of our cash and balances with central bank increased by 35.3%, from RMB5,152.5 million for the six months ended June 30, 2017 to RMB6,972.9 million for the six months ended June 30, 2018, and (ii) the average yield of cash and balances with central bank increased slightly, from 1.61% for the six months ended June 30, 2017 to 1.63% for the six months ended June 30, 2018. The increase in average balance of our cash and balances with central bank was mainly attributable to (i) increased statutory deposit reserves resulting from the continued growth in our customer deposits; and (ii) an increase in the amount of surplus deposit reserves to maintain daily operation liquidity. The increase in average yield on the cash and balances with central bank was primarily caused by the increased proportion of statutory deposit reserves which has a higher interest rate in central bank.

Interest Expense

Our interest expense increased by 30.4% from RMB807.7 million for the six months ended June 30, 2017 to RMB1,053.3 million for the six months ended June 30, 2018 primarily because (i) the average balance of interest-bearing liabilities increased by 18.7% from RMB53,805.0 million for the six months ended June 30, 2017 to RMB63,857.0 million for the six months ended June 30, 2018, and (ii) the average cost on interest-bearing liabilities increased to 3.30% for the six months ended June 30, 2018 from 3.00% for the six months ended June 30, 2017. The following table sets forth a breakdown of our interest expense for the periods indicated.

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For the six months ended June 30, 2017 2018 Amount % of total Amount % of total (unaudited) (in millions of RMB, except for percentages) Interest expense on Customer deposits 407.0 50.4% 567.0 53.8% Financial assets held under resale agreements, due from other banks and financial institutions 201.4 24.9% 180.8 17.2% Debt securities issued 190.5 23.6% 299.4 28.4% Borrowing from central bank 8.8 1.1% 6.1 0.6% Total interest expense 807.7 100.0% 1,053.3 100.0%

Interest Expense on Customer Deposits

Customer deposits were our primary source of funding. Our interest expense on customer deposits accounted for 50.4% and 53.8% of our total interest expense for the six months ended June 30, 2017 and 2018, respectively.

The following table sets forth the average balance, interest expense and average cost of our customer deposits by product type for the periods indicated.

For the six months ended June 30, 2017 2018 Average cost Average cost Average Interest (Annualized Average Interest (Annualized balance expense basis) balance expense basis) (unaudited) (in millions of RMB, except percentages) Corporate deposits Demand 16,735.3 112.5 1.34% 19,534.7 135.1 1.38% Time 4,760.7 63.6 2.67% 5,710.5 61.8 2.16% Subtotal 21,496.0 176.1 1.64% 25,245.2 196.9 1.56% Personal deposits Demand 2,117.7 5.8 0.55% 2,607.9 6.5 0.50% Time 9,875.0 225.1 4.56% 15,538.1 363.6 4.68% Subtotal 11,992.7 230.9 3.85% 18,146.0 370.1 4.08% Total customer deposits 33,488.7 407.0 2.43% 43,391.2 567.0 2.61%

Our interest expense on customer deposits increased by 39.3% from RMB407.0 million for the six months ended June 30, 2017 to RMB567.0 million for the six months ended June 30, 2018 primarily because (i) the average cost on customer deposits increased from 2.43% for the six months ended June 30, 2017 to 2.61% for the six months ended June 30, 2018, and (ii) the average balance on customer deposits increased by 29.6% from RMB33,488.7 million for the six months ended June 30, 2017 to RMB43,391.2 million for the six months ended June 30, 2018. The increase in the average balance of customer deposits was primarily due to (i) our efforts to develop deposit business by launching various personal deposit products targeting different retail banking customer groups to attract deposits; and (ii) success in expanding corporate deposits with increased focus on quality customers. The increase in the average cost on customer deposits was primarily attributable to the fact that we offered deposit products with higher yield, such as “Yue Yue Hong (月月紅)”, to attract more clients with increased market competition. For details, please see “Business – Corporate Banking Business – Personal Deposits”.

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Interest Expense on Financial Assets Sold under Repurchase Agreements, Due to Other Banks and Financial Institutions Our interest expense on financial assets sold under repurchase agreements, due to other banks and financial institutions accounted for 24.9% and 17.2% of our total interest expense for the six months ended June 30, 2017 and 2018, respectively. Our interest expense on financial assets sold under repurchase agreements, due to other banks and financial institutions decreased by 10.2% from RMB201.4 million for the six months ended June 30, 2017 to RMB180.8 million for the six months ended June 30, 2018, primarily because the average balance on financial assets sold under repurchase agreements, due to other banks and financial institutions decreased by 25.4% from RMB11,178.7 million for the six months ended June 30, 2017 to RMB8,343.3 million for the six months ended June 30, 2018, the result of which was partially offset by the increase of the average cost on financial assets sold under repurchase agreements, due to other banks and financial institutions from 3.60% for the six months ended June 30, 2017 to 4.33% for the six months ended June 30, 2018. The decrease in the average balance of financial assets sold under repurchase agreements, due to other banks and financial institutions was primarily attributable to the fact that we obtained more funds from deposits to support our business expansion. The increase in the average cost on financial assets sold under repurchase agreements, due to other banks and financial institutions was primarily attributable to the slight increase in market interest rates resulting from tightened market liquidity in the first half of 2018.

Interest Expense on Debt Securities Issued Interest expense on debt securities issued accounted for 23.6% and 28.4% of our interest expense for the six months ended June 30, 2017 and 2018, respectively. Please see “Financial Information – Capital Resources – Debt – Debt Securities Issued”. Our interest expense on debt securities issued increased by 57.2% from RMB190.5 million for the six months ended June 30, 2017 to RMB299.4 million for the six months ended June 30, 2018 primarily because (i) the average balance on debt securities issued increased by 35.0% from RMB8,725.9 million for the six months ended June 30, 2017 to RMB11,782.1 million for the six months ended June 30, 2018, and (ii) the average cost on debt securities issued increased from 4.37% for the six months ended June 30, 2017 to 5.08% for the six months ended June 30, 2018. The increase in the average balance of debt securities issued was primarily attributable to our issuance of interbank certificates of deposit for business needs. The increase in the average cost on debt securities issued was primarily attributable to the slight increase in market interest rates resulting from tightened market liquidity in the first half of 2018.

Interest Expense on Borrowing from Central Bank Our interest expense on borrowing from central bank accounted for 1.1% and 0.6% of our interest expense for the six months ended June 30, 2017 and 2018, respectively. Our interest expense on borrowing from central bank decreased by 30.7% from RMB8.8 million for the six months ended June 30, 2017 to RMB6.1 million for the six months ended June 30, 2018, primarily due to (i) a 17.3% decrease in average balance of borrowing from central bank from RMB411.7 million for the six months ended June 30, 2017 to RMB340.3 million for the six months ended June 30, 2018, and (ii) a decrease in average cost of borrowing from central bank from 4.27% for the six months ended June 30, 2017 to 3.59% for the six months ended June

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30, 2018. The decrease in average balance of borrowing from central bank was mainly because we reduced our borrowings from central bank according to monetary policies and guidance in credit extension from regulatory authorities. The decrease in average cost of borrowing from central bank was mainly attributable to the reduction of lending rates by the PBoC in 2018 because we changed the type of financial assets used as pledge.

Net Interest Spread and Net Interest Margin

Net interest spread is the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities. Net interest margin is the ratio of net interest income to the average balance of total interest-earning assets.

Our net interest spread decreased from 2.41% for the six months ended June 30, 2017 to 2.22% for the six months ended June 30, 2018, primarily because the average cost on interest-bearing liabilities increased from 3.00% for the six months ended June 30, 2017 to 3.30% for the six months ended June 30, 2018, as we offered more personal deposit products with relatively higher interest rates to attract more retail banking customers in response to increases in market competition and market interest rates in 2018. The increase in average cost on interest-bearing liabilities was partially offset by an increase in the average yield on interest-earning assets from 5.41% for the six month ended June 30, 2017 to 5.52% for the six months ended June 30, 2018, which was primarily due to an increase in interest rate on loans we granted with increase in market demand and tight market liquidity in 2018. Our net interest margin decreased from 2.51% in six months ended June 30, 2017 to 2.30% in six months ended June 30, 2018, primarily because the growth in interest expense from interest-bearing assets was higher than the growth in interest income from interest-earning assets.

Net Fee and Commission Income

We recorded a net fee and commission loss of RMB0.2 million for the six months ended June 30, 2017, primarily because we reduced or waived certain bank card related fees in order to attract more quality customers. Our net fee and commission income for the six months ended June 30, 2018 amounted to RMB0.8 million, representing 0.1% of our total operating income for the same period. The following table sets forth, for the years indicated, the principal components of our net fee and commission income.

For the six months ended June 30,

2017 2018

(unaudited) (in millions of RMB) Fee and commission income Bank card service fees 1.1 1.1 Settlement service fees 1.3 1.5 Agency service fees 0.4 0.8 Guarantee service fees 0.4 1.3 Wealth management business service fees 0.4 0.7 Subtotal 3.7 5.5 Fee and commission expenses (3.9) (4.7) Net fee and commission income (0.2) 0.8

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We recorded a net fee and commission loss of RMB0.2 million for the six months ended June 30, 2017, but generated net fee and commission income of RMB0.8 million for the six months ended June 30, 2018, primarily because of a 48.3% increase in fee and commission income from RMB3.7 million for the six months ended June 30, 2017 to RMB5.5 million for the six months ended June 30, 2018, the effect of which was partially offset by a 20.5% increase in fee and commission expenses from RMB3.9 million for the six months ended June 30, 2017 to RMB4.7 million for the six months ended June 30, 2018.

The increase in fee and commission income was mainly caused by an increase in guarantee service fees including off-balance sheet commitment and letters of guarantee business. The increase in fee and commission expenses was mainly caused by an increase in payments to third party institutions in relation to our bank card business, as a result of an increase in both the number of bank cards we issued and the transaction volume associated with relevant bank cards.

Net Gains on Trading Activities

According to IAS 39, our net gains on trading activities was nil for the six months ended June 30, 2017. According to IFRS 9, which we adopted since January 1, 2018, our net gains on trading activities amounted to RMB24.4 million for the six months ended June 30, 2018. The increase in net gains on trading activities was mainly caused by the increase in fair value of certain investments that we made in 2018, including investment in money market funds. Assuming we apply IAS39 for the six months ended June 30, 2018, our net gains on trading activities would be adjusted to RMB27.4 million. For details on differences between IAS 39 and IFRS 9 and the impact of adopting IFRS 9 on our results of operations, please see the subsection headed “– Critical Accounting Judgments and Key Sources of Estimation Uncertainty – Impact of New Accounting Policies”.

Net Gains Arising from Financial Investments

Our net gains arising from financial investments decreased by 15.7% from RMB63.7 million for the six months ended June 30, 2017 to RMB53.7 million for the six months ended June 30, 2018, mainly because we decreased investment in floating-yield wealth management products which have relatively higher yields as part of our strategy on asset portfolio management in 2018.

Other Components of Our Operating Income

Other components of our operating income consisted primarily of government grants and subsidies and rental income. Other components of our operating income was RMB4.2 million and RMB6.3 million for the six months ended June 30, 2017 and 2018, respectively, representing 0.5% and 0.7% of our operating income, respectively.

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Operating Expenses The following table sets forth the principal components of our total operating expenses for the periods indicated.

For the six months ended June 30, 2017 2018 (unaudited) (in millions of RMB) Staff costs 96.8 111.7 Operational and administrative expenses 44.0 67.7 Depreciation and amortization 15.0 19.2 Professional service expenses 5.9 3.6 Business tax and surcharges 2.3 8.2 Others(1) 8.3 5.2 Total operating expenses 172.3 215.7

Note: (1) Consisting primarily of donations, registration and settlement fees for bond transactions. Our operating expenses increased by 25.2% from RMB172.3 million for the six months ended June 30, 2017 to RMB215.7 million for the six months ended June 30, 2018, primarily due to increases in our staff costs, operational and administrative expenses and depreciation and amortization. Our cost-to-income ratio (excluding business tax and surcharges) was 22.10% and 24.72% for the six months ended June 30, 2017 and 2018, respectively. This increase in our cost-to-income ratio was primarily because the increase of our operating expenses outpaced our operating income.

Staff Costs Staff costs were the largest component of our operating expenses, representing 56.2% and 51.8% of our total operating expenses for the six months ended June 30, 2017 and 2018, respectively. The following table sets forth the components of our staff costs for the periods indicated.

For the six months ended June 30,

2017 2018

(unaudited) (in millions of RMB) Salaries 68.8 75.1 Social security 11.1 14.3 Staff welfare 5.5 6.2 Enterprise annuity 4.7 7.4 Housing provident funds 5.5 7.1 Employee education expenses 1.2 1.6 Total staff costs 96.8 111.7

Our staff costs increased by 15.4% from RMB96.8 million for the six months ended June 30, 2017 to RMB111.7 million for the six months ended June 30, 2018, primarily due to an increase in social security, housing provident funds and enterprise annuity expenses as we recruited more employees, especially talent, in connection with the expansion of our business.

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Operational and Administrative Expenses Our operational and administrative expenses primarily consist of office expenses, business marketing expenses and rental and property management expenses. Our operational and administrative expenses increased by 54.0% from RMB44.0 million for the six months ended June 30, 2017 to RMB67.7 million for the six months ended June 30, 2018, primarily due to an increase in our marketing and advertising expenses, equipment maintenance expenses and other general expenses with the expansion of our business.

Depreciation and Amortization Our depreciation and amortization consist primarily of depreciation of our property, plant and equipment and amortization of renovation expenses and software development expenses. Our depreciation and amortization increased by 27.6% from RMB15.0 million for the six months ended June 30, 2017 to RMB19.2 million for the six months ended June 30, 2018, primarily due to (i) an increase in the amortization of renovation expenses for new outlets and our Chengdu branch as well as the depreciation of fixed assets such as office equipment with the continuous expansion of our business; and (ii) an increase in the amortization of software development expenses with our continued investment in information technology.

Impairment Losses on Assets The following table sets forth the principal components of our impairment losses on assets for the periods indicated.

For the six months ended June 30,

2017(1) 2018(1) 2018(2)

(unaudited) (unaudited) (in millions of RMB) Impairment losses/(reversals) on assets: Customer loans 104.2 120.7 116.6 Financial investments 114.2 24.3 15.7 Others – – 0.2 Total 218.4 145.0 132.5

Notes: (1) prepared according to IAS 39. (2) prepared according to IFRS 9. For the six months ended June 30, 2017, we recorded impairment losses on assets of RMB218.4 million. After the adoption of IFRS 9 commencing from January 1, 2018, for the six months ended June 30, 2018, our impairment losses on assets decreased to RMB132.5 million mainly because of (i) reduced amount of provision as compared with 2017 due to changes in accounting policies, and (ii) the decrease in SPV investments in 2018. Assuming we apply IAS39 for the six months ended June 30, 2018, our impairment losses on assets would be adjusted to RMB145.0 million. The adjustment mainly reflects the impact of a different risk evaluation model that IFRS 9 adopts in estimating probability of default, potential loss to be incurred and other relevant factors. For details on differences between IAS 39 and IFRS 9 and the impact of adopting IFRS 9 on our results of operations, please see the subsection headed “– Critical Accounting Judgement and Key Sources of Estimation Uncertainty – Impact of New Accounting Policies”.

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Our impairment losses on customer loans amounted to RMB104.2 million for the six months ended June 30, 2017. For the six months ended June 30, 2018, our impairment losses on customer loans remained relatively stable at RMB116.6 million.

Our impairment losses on financial investments amounted to RMB114.2 million for the six months ended June 30, 2017. For the six months ended June 30, 2018, our impairment losses on financial investments decreased to RMB15.7 million. Other than impacts from accounting policy change with the adoption of IFRS 9 in 2018, decrease in our impairment losses on assets in 2018 was mainly caused by (i) the fact that we made sufficient amount of provisions in 2017 in line with our prudent risk management policy, and (ii) the decrease in SPV investment in 2018 resulting in decrease in impairment losses on financial investments.

Income Tax The following table sets forth the reconciliation between the income tax calculated at the statutory income tax rate applicable to our profit/(loss) before tax and our actual income tax for the periods indicated.

For the six months ended June 30, 2017(2) 2018(2) 2018(3) (unaudited) (unaudited) (in millions of RMB) Profit/(loss) before tax 380.8 480.7 493.4 Income tax calculated at applicable statutory tax rate of 25% 95.2 120.2 123.3 Non-deductible expenses 4.2 5.1 5.1 Non-taxable income(1) (7.0) (11.8) (11.8) Income tax 92.4 113.4 116.6

Notes: (1) Non-taxable income mainly represents interest income from the PRC government bonds, which is non-taxable in accordance with PRC tax regulations. (2) prepared according to IAS 39.

(3) prepared according to IFRS 9.

For the six months ended June 30, 2017, we incurred income tax of RMB92.4 million and our effective income tax rate was 24.3%. We adopted IFRS 9 commencing from January 1, 2018, based on which, for the six months ended June 30, 2018, our income tax amounted to RMB116.6 million, resulting in an effective income tax rate of 23.6%.

Assuming we apply IAS39 for the six months ended June 30, 2018, our income tax would be adjusted to RMB113.4 million. For details on differences between IAS 39 and IFRS 9 and the impact of adopting IFRS 9 on our results of operations, please see the subsection headed “– Critical Accounting Judgments and Key Sources of Estimation Uncertainty – Impact of New Accounting Policies”. The increase in our income tax from the six months ended June 30, 2017 to the six months ended June 30, 2018 was mainly attributable to the increase in our net profit.

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The following table sets forth the components of our income tax expenses for the periods indicated.

For the six months ended June 30,

2017(1) 2018(1) 2018(2)

(unaudited) (unaudited) (in millions of RMB) Current income tax – PRC enterprise income tax 133.0 129.1 119.5 Deferred income tax (40.6) (15.7) (2.9) Total income tax 92.4 113.4 116.6

Notes: (1) prepared according to IAS 39. (2) prepared according to IFRS 9.

RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2015, 2016 AND 2017

Our net profit increased by 20.1% from RMB451.5 million for the year ended December 31, 2015 to RMB542.1 million for the year ended December 31, 2016, and further increased by 14.1% to RMB618.7 million for the year ended December 31, 2017, primarily due to increase in our net interest income for the same periods, in line with the expansion of our operational scale.

Net Interest Income

During the Track Record Period, net interest income was the largest component of our operating income, representing 94.0%, 88.4% and 93.7% of our operating income for the years ended December 31, 2015, 2016 and 2017, respectively.

The following table sets forth our interest income, interest expense and net interest income for the periods indicated.

For the year ended December 31,

2015 2016 2017

(in millions of RMB) Interest income 1,444.1 2,020.8 3,328.5 Interest expense (558.9) (865.2) (1,754.1) Net interest income 885.2 1,155.6 1,574.3

Our net interest income increased by 30.6% from RMB885.2 million in 2015 to RMB1,155.6 million in 2016 with a 39.9% increase in interest income, which was partially offset by a 54.8% increase in interest expense. Our net interest income increased by 36.2% from RMB1,155.6 million in 2016 to RMB1,574.3 million in 2017 with a 64.7% increase in interest income, which was partially offset by an increase in interest expense.

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For the year ended December 31,

2015 2016 2017

Interest Average Interest Average Interest Average Average income/ yield/ Average income/ yield/ Average income/ yield/ balance expense cost(1) balance expense cost(1) balance expense cost(1)

(in millions of RMB, except percentages) Interest-earning assets Customer loans 8,543.4 693.0 8.11% 11,352.7 765.0 6.74% 16,262.4 1,045.9 6.43% Financial investments(2) 6,860.3 508.7 7.42% 14,846.7 1,031.5 6.95% 28,204.2 1,795.2 6.37% Financial assets held under resale agreements, due from other banks and financial institutions 5,269.0 199.8 3.79% 5,351.4 163.1 3.05% 9,205.2 401.4 4.36% Cash and balances with central bank(3) 2,874.5 42.6 1.48% 4,096.7 61.2 1.49% 5,666.3 85.9 1.52% Total interest-earning assets 23,547.2 1,444.1 6.13% 35,647.5 2,020.8 5.67% 59,338.1 3,328.4 5.61% Interest-bearing liabilities Customer deposits 16,338.2 341.6 2.09% 25,640.8 525.2 2.05% 37,225.8 915.4 2.46% Financial assets sold under repurchase agreements, due to other banks and financial institutions 5,072.2 201.0 3.96% 7,973.7 302.7 3.80% 10,050.1 413.1 4.11% Debt securities issued(4) – – – 934.4 28.7 3.07% 9,371.3 405.9 4.33% Borrowing from central bank 418.0 16.3 3.90% 272.6 8.6 3.15% 684.0 19.7 2.88% Total interest-bearing liabilities 21,828.4 558.9 2.56% 34,821.5 865.2 2.48% 57,331.2 1,754.1 3.06% Net interest income 885.2 1,155.6 1,574.3 Net interest spread(5) 3.57% 3.19% 2.55% Net interest margin(6) 3.76% 3.24% 2.65%

Notes:

(1) Calculated by dividing interest income/expense by average balance. (2) Consists of financial investments – available-for-sale and financial investments – investments classified as receivables. (3) Consists of statutory deposit reserves, surplus deposit reserves and fiscal deposits. (4) Consists of interbank certificates of deposit and tier-two capital bonds issued by us. (5) Calculated as the difference between the average yield on total interest-earning assets and the average cost of total interest-bearing liabilities. (6) Calculated by dividing net interest income by the average balance of total interest-earning assets.

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For the year ended December 31,

2016 vs. 2015 2017 vs. 2016

Increase/(decrease) Increase/(decrease) due to Net due to Increase/ Net increase/ Volume(1) Rate(2) (decrease)(3) Volume(1) Rate(2) (decrease)(3)

(in millions of RMB) Assets Customer loans 189.3 (117.3) 72.0 315.8 (34.9) 280.9 Financial investments 554.9 (32.1) 522.8 850.1 (86.4) 763.7 Financial assets held under resale agreements, due from other banks and financial institutions 2.5 (39.2) (36.7) 168.0 70.3 238.3 Cash and balances with central bank(4) 18.3 0.3 18.6 23.8 0.9 24.7 Changes in interest income 765.0 (188.3) 576.7 1,357.7 (50.1) 1,307.6 Liabilities Customer deposits 190.5 (6.9) 183.6 284.9 105.3 390.2 Financial assets sold under repurchase agreements, due to other banks and financial institutions 110.1 (8.4) 101.7 85.3 25.1 110.4 Debt securities issued(5) 28.7 – 28.7 365.4 11.8 377.2 Borrowing from central bank (4.6) (3.1) (7.7) 11.9 (0.8) 11.1 Changes in interest expense 324.7 (18.4) 306.3 747.5 141.6 888.9 Changes in net interest income 440.3 (169.9) 270.4 610.3 (191.6) 418.7

Notes:

(1) Represents the average balance for the year minus the average balance for the previous year, multiplied by the average yield/cost for the year. (2) Represents the average yield/cost for the year minus the average yield/cost for the previous year, multiplied by the average balance for the previous year. (3) Represents interest income/expense for the year minus interest income/expense for the previous year. (4) Consists of statutory deposit reserves, surplus deposit reserves and fiscal deposits. (5) Consists of interbank certificates of deposit and tier-two capital bonds issued by us.

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Interest Income

The following table sets forth a breakdown of our interest income for the periods indicated.

For the year ended December 31,

2015 2016 2017

Amount % of total Amount % of total Amount % of total

(in millions of RMB, except percentages) Interest income from Customer loans 693.0 48.0% 765.0 37.9% 1,045.9 31.4% Financial investments 508.7 35.2% 1,031.5 51.0% 1,795.2 53.9% Financial assets held under resale agreements, due from other banks and other financial institutions 199.8 13.8% 163.1 8.1% 401.4 12.1% Cash and balances with central bank 42.6 3.0% 61.2 3.0% 85.9 2.6% Total interest income 1,444.1 100% 2,020.8 100.0% 3,328.4 100.0%

Our interest income increased by 39.9% from RMB1,444.1 million in 2015 to RMB2,020.8 million in 2016 primarily due to a 51.4% increase in the average balance of interest-earning assets from RMB23,547.2 million in 2015 to RMB35,647.5 million in 2016, which was partially offset by a decrease in the average yield on interest-earning assets from 6.13% in 2015 to 5.67% in 2016. The increase in the average balance of interest-earning assets was primarily attributable to significant increase in both customer loans and financial investments. The decrease in the average yield on interest-earning assets was primarily attributable to decreases in the average yields on our customer loans, financial investments and financial assets held under resale agreement, due from other banks and financial institutions, which mainly resulted from (i) the impact of the benchmark interest rate cuts by the PBoC, and (ii) intensified market competition.

Our interest income increased by 64.7% from RMB2,020.8 million in 2016 to RMB3,328.4 million in 2017 primarily due to a 66.5% increase in the average balance of interest-earning assets from RMB35,647.5 million in 2016 to RMB59,338.1 million in 2017, which was partially offset by a decrease in the average yield on interest-earning assets from 5.67% in 2016 to 5.61% in 2017. The increase in the average balance of interest-earning assets was primarily attributable to increases in the average balances of customer loans, financial investments, and financial assets held under resale agreements, due from other banks and financial institutions due to the continued expansion of our operational scale. The decrease in the average yield on interest- earning assets was primarily attributable to the decrease in the average yield on customer loans and financial investments due to the increased interbank market competition.

Interest Income from Customer loans

During the Track Record Period, interest income from customer loans represented 48.0%, 37.9% and 31.4% of our interest income in 2015, 2016 and 2017, respectively.

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The following table sets forth the average balance, interest income and average yield for each component of our customer loans for the periods indicated.

For the year ended December 31,

2015 2016 2017

Average Interest Average Average Interest Average Average Interest Average balance income yield balance income yield balance income yield

(in millions of RMB, except percentages) Corporate loans 5,039.5 458.5 9.10% 7,602.4 544.3 7.16% 9,806.7 729.8 7.44% Personal loans 3,131.1 226.7 7.24% 3,527.8 217.6 6.17% 4,529.6 262.3 5.79% Discounted bills 372.8 7.8 2.09% 222.4 3.1 1.39% 1,926.1 53.8 2.79% Total customer loans 8,543.4 693.0 8.11% 11,352.7 765.0 6.74% 16,262.4 1,045.9 6.43%

Our interest income from customer loans increased by 10.4% from RMB693.0 million in 2015 to RMB765.0 million in 2016 primarily due to a 32.9% increase in the average balance of total customer loans from RMB8,543.4 million in 2015 to RMB11,352.7 million in 2016, which was offset by a decrease in the average yield on total customer loans from 8.11% in 2015 to 6.74% in 2016.

Our interest income from customer loans increased by 36.7% from RMB765.0 million in 2016 to RMB1,045.9 million in 2017 primarily due to a 43.2% increase in the average balance of total customer loans from RMB11,352.7 million in 2016 to RMB16,262.4 million, partially offset by a decrease in the average yield on total customer loans from 6.74% in 2016 to 6.43% in 2017.

During the Track Record Period, interest income from corporate loans was the largest component of our interest income from customer loans, representing 66.2%, 71.2% and 69.8% of our total interest income from customer loans for 2015, 2016 and 2017, respectively.

Corporate Loans. Our interest income from corporate loans increased by 18.7% from RMB458.5 million in 2015 to RMB544.3 million in 2016 primarily due to a 50.9% increase in the average balance of our corporate loans from RMB5,039.5 million in 2015 to RMB7,602.4 million in 2016, which was partially offset by a decrease in average yield on our corporate loans from 9.10% in 2015 to 7.16% in 2016. The increase in the average balance of our corporate loans was primarily attributable to the increase in loans to micro and small enterprise. The decrease in the average yield on corporate loans was primarily due to the impact of the consecutive interest rate cuts by the PBoC in 2015.

Our interest income from corporate loans increased by 34.1% from RMB544.3 million in 2016 to RMB729.8 million in 2017 primarily due to (i) a 29.0% increase in average balance of our corporate loans from RMB7,602.4 million in 2016 to RMB9,806.7 million in 2017, and (ii) an increase in the average yield on our corporate loans from 7.16% in 2016 to 7.44% in 2017. The increase in the average balance of corporate loans for the same reason mentioned above. The increase in the average yield on our corporate loans was primarily because customers’ demand for bank financing increased.

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Personal Loans. Our interest income from personal loans decreased by 4.0% from RMB226.7 million in 2015 to RMB217.6 million in 2016 primarily due to a decrease in the average yield on our personal loans from 7.24% in 2015 to 6.17% in 2016, which was partially offset by a 12.9% increase in the average balance of our personal loans from RMB3,131.1 million in 2015 to RMB3,527.8 million in 2016. The decrease in the average yield on our personal loans was attributable to (i) the impact of the consecutive interest rate cuts by the PBoC in 2015, and (ii) increased market competition. The increase in the average balance of personal loans was primarily due to the increase in our personal business loans in 2016. Our interest income from personal loans increased by 20.5% from RMB217.6 million in 2016 to RMB 262.3 million in 2017 primarily due to a 28.4% increase in the average balance of our personal loans from RMB3,527.8 million in 2016 to RMB4,529.6 million in 2017, which was partially offset by a decrease in the average yield on our personal loans from 6.17% in 2016 to 5.79% in 2017. The increase in the average balance of our personal loans was attributable to for the same reason mentioned above. The decrease in the average yield on personal loans was primarily due to the impact of intensified market competition. Discounted Bills. Our interest income from discounted bills decreased by 60.3% from RMB7.8 million in 2015 to RMB3.1 million in 2016 primarily due to (i) a decrease in the average yield on our discounted bills from 2.09% in 2015 to 1.39% in 2016, and (ii) a 40.3% decrease in the average balance of our discounted bills from RMB372.8 million in 2015 to RMB222.4 million in 2016. The decrease in the average yield on discounted bills was primarily due to decreased market rates for discounted bills in 2016. The decrease in the average balance of our discounted bills was primarily because we took initiative to adjust asset allocation in view of decrease in then prevailing market interest rate in 2016. Our interest income from discounted bills increased from RMB3.1 million in 2016 to RMB53.8 million in 2017 primarily due to (i) a 766.1% increase in the average balance of our discounted bills from RMB222.4 million in 2016 to RMB1,926.1 million in 2017 and (ii) an increase in the average yield on our discounted bills from 1.39% in 2016 to 2.79% in 2017. We increased the proposition of discounted bill in our credit assets in view of the increase in the average yield on discounted bills primarily due to tightened credit policies in 2017.

Interest Income from Financial Investments For the years ended December 31, 2015, 2016 and 2017, our interest income generated from our financial investments amounted to RMB508.7 million, RMB1,031.5 million and RMB1,795.2 million, respectively, accounting for 35.2%, 51.0% and 53.9% of our total interest income. Our interest income from financial investments increased by 102.8% from RMB508.7 million in 2015 to RMB1,031.5 million in 2016 primarily due to a significant increase in the average balance of our financial investments from RMB6,860.3 million in 2015 to RMB14,846.7 million in 2016, which was partially offset by a decrease in the average yield on our financial investments from 7.42% in 2015 to 6.95% in 2016. The increase in the average balance of our financial investments was primarily due to an increase in our investments in trust plans, debt securities and wealth management products which were in line with our efforts to expand our financial market business. The decrease in the average yield on our financial investments was primarily due to (i) a decrease in market interest rates as a result of the benchmark interest rates cut by the PBoC, and (ii) a substantial increase in the average balance of credit-related financial assets and investments classified as receivables, while the respective yields decreased. Our interest income from financial investments increased by 74.0% from RMB1,031.5 million in 2016 to RMB1,795.2 million in 2017 primarily due to a significant increase in the

335 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. FINANCIAL INFORMATION average balance of our financial investments from RMB14,846.7 million in 2016 to RMB28,204.2 million in 2017, which was partially offset by a decrease in the average yield on our financial investments from 6.95% in 2016 to 6.37% in 2017. The increase in the average balance of our financial investments was primarily due to our efforts to increase in investments classified as receivables. The decrease in the average yield on our financial investments was primarily due to the increase in products as a percentage of credit assets, which have low risk portfolio and low yield.

Financial Assets by Investment Vehicles The following table sets forth a breakdown of our interest income from financial investment by investment vehicle for the years indicated. Our SPV investment refers to investment in financial investments – credit related financial assets through trust plans and asset management plans, as well as investment in other types of financial assets through investment vehicles such as trust plans, asset management plans, wealth management products and money market funds.

For the years ended December 31,

2015 2016 2017

%of Average %of Average %of Average Amount total yield(1) Amount total yield(1) Amount total yield(1)

(in millions of RMB, except percentages) Debt securities investment 124.4 24.4% 4.00% 178.9 17.3% 4.33% 333.6 18.6% 4.00% SPV investment 384.3 75.6% 10.24% 852.6 82.7% 7.96% 1,461.6 81.4% 7.36% Total 508.7 100.0% 7.42% 1,031.5 100.0% 6.95% 1,795.2 100.0% 6.37%

Note: (1) Calculated by dividing (i) our interest income from the corresponding assets, by (ii) the average balance of these assets.

In 2015, 2016 and 2017, our interest income from SPV investment represented 75.6%, 82.7% and 81.4%, respectively, of our total income from our investment business. The average yield on our debt securities investment was 4.00%, 4.33% and 4.00% in 2015, 2016 and 2017, respectively, while the average yield on our SPV investment was 10.24%, 7.96% and 7.36%, respectively. The decrease in average yield on our SPV investments was due to gradual maturity of products with comparatively high yield.

Interest Income from Financial Assets Held Under Resale Agreements, Due from Other Banks and Financial Institutions Interest income from financial assets held under resale agreements, due from other banks and financial institutions represented 13.8%, 8.1% and 12.1% of our interest income in 2015, 2016 and 2017, respectively. Our interest income from financial assets held under resale agreements, due from other banks and financial institutions decreased by 18.4% from RMB199.8 million in 2015 to RMB163.1 million in 2016 primarily due to a decrease in the average yield on our financial assets held under resale agreements, due from other banks and financial institutions from 3.79% in 2015 to 3.05% in 2016, which was partially offset by a 1.6% increase in the average balance of our financial assets held under resale agreements, due from other banks and financial institutions from RMB5,269.0 million in 2015 to RMB5,351.4 million in 2016.

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Our interest income from financial assets held under resale agreements, due from other banks and financial institutions increased by 146.1% from RMB163.1 million in 2016 to RMB401.4 million in 2017 primarily due to (i) a 72.0% increase in the average balance of our financial assets held under resale agreements, due from other banks and financial institutions from RMB5,351.4 million in 2016 to RMB9,205.2 million in 2017 and (ii) an increase in the average yield on our financial assets held under resale agreements, due from other banks and financial institutions from 3.05% in 2016 to 4.36% in 2017.

Interest Income from Cash and Balances with Central Bank

Our cash and balances with central bank consists primarily of statutory deposit reserves, surplus deposit reserves and fiscal deposits with the PBoC. Statutory deposit reserves represent the minimum level of cash deposits that we are required to maintain at the PBoC, calculated as a percentage of the balance of our overall customer deposits. Surplus deposit reserves are deposits with the PBoC in excess of statutory deposit reserves, which we maintain for clearing purposes.

Interest income from cash and balances with central bank represented 3.0%, 3.0% and 2.6% of our interest income in 2015, 2016 and 2017, respectively.

Interest income from cash and balances with central bank increased by 43.7% from RMB42.6 million in 2015 to RMB61.2 million in 2016, primarily because of a 42.5% increase in the average balance of our cash and balances with central bank from RMB2,874.5 million in 2015 to RMB4,096.7 million in 2016. The average yield of cash and balances with central bank remained relatively stable at 1.49% in 2015 and 2016. The increase in average balance of our cash and balances with central bank in 2016 was mainly attributable to increased statutory deposit reserves resulting from (i) continued growth in our customer deposits and (ii) the increase in the statutory deposit reserve ratio applicable to our bank in 2016.

Interest income from cash and balances with central bank increased by 40.4% from RMB61.2 million in 2016 to RMB85.9 million in 2017, primarily because of (i) a 38.3% increase in the average balance of our cash and balances with central bank from RMB4,096.7 million in 2016 to RMB5,666.3 million in 2017, and (ii) the slight increase in average yield of cash and balances with central bank from 1.49% in 2016 to 1.52% in 2017. The increase in average balance of our cash and balances with central bank was mainly attributable to increased statutory deposit reserves resulting from continued growth in our customer deposits. The increase in average yield on cash and balances with central bank was primarily caused by the increased proportion of statutory deposit reserve which has a higher interest rate, in central bank.

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Interest Expense

The following table sets forth a breakdown of our interest expense for the periods indicated.

For the year ended December 31,

2015 2016 2017

Amount % of total Amount % of total Amount % of total

(in millions of RMB, except percentages) Interest expense on Customer deposits 341.6 61.1% 525.2 60.7% 915.4 52.2% Financial assets sold under repurchase agreements, due to other banks and financial institutions 201.0 36.0% 302.7 35.0% 413.1 23.6% Debt securities issued – – 28.7 3.3% 405.9 23.1% Borrowing from central bank 16.3 2.9% 8.6 1.0% 19.7 1.1% Total interest expense 558.9 100% 865.2 100% 1,754.1 100%

Our interest expense increased by 54.8% from RMB558.9 million in 2015 to RMB865.2 million in 2016 primarily due to a 59.9% increase in the average balance of interest-bearing liabilities from RMB21,828.4 million in 2015 to RMB34,821.5 million in 2016, which was partially offset by a decrease in the average cost on interest-bearing liabilities from 2.56% in 2015 to 2.48% in 2016. The increase in the average balance of interest-bearing liabilities was primarily attributable to the increases in the average balance of customer deposits and financial assets sold under repurchase agreement, due to other banks and financial institutions which were in line with our overall business growth. The decrease in the average cost on interest-bearing liabilities was primarily attributable to the impact of consecutive interest rate cuts by the PBoC in 2015.

Our interest expense increased by 102.7% from RMB865.2 million in 2016 to RMB1,754.1 million in 2017 primarily due to (i) a 64.6% increase in the average balance of interest-bearing liabilities from RMB34,821.5 million in 2016 to RMB57,331.2 million in 2017, and (ii) an increase in the average cost of interest-bearing liabilities from 2.48% in 2016 to 3.06% in 2017. The increase in the average balance of interest-bearing liabilities was primarily attributable to increases in debt securities issued. The increase in the average cost of interest-bearing liabilities was primarily attributable to an increase in absolute amount, and as a percentage of our total deposits with competitive interest rates that we offered to attract retail banking customers in response to increased market competition.

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Interest Expense on Customer Deposits

During the Track Record Period, customer deposits were our primary source of funding. Our interest expense on customer deposits accounted for 61.1%, 60.7% and 52.2% of our total interest expense for 2015, 2016 and 2017, respectively.

The following table sets forth the average balance, interest expense and average cost of our customer deposits by product type for the periods indicated.

For the year ended December 31,

2015 2016 2017

Average Interest Average Average Interest Average Average Interest Average balance expense cost balance expense cost balance expense cost

(in millions of RMB, except percentages) Corporate deposits Demand 9,676.4 160.8 1.66% 13,094.7 169.7 1.30% 18,598.2 260.4 1.40% Time 3,378.7 99.4 2.94% 5,303.3 94.5 1.79% 5,127.2 126.0 2.46% Subtotal 13,055.2 260.2 1.99% 18,398.0 264.2 1.44% 23,725.4 386.4 1.63% Personal deposits Demand 998.1 4.9 0.49% 1,479.1 8.4 0.57% 2,221.6 12.0 0.54% Time 2,284.9 76.5 3.35% 5,763.7 252.6 4.38% 11,278.8 517.0 4.58% Subtotal 3,283.0 81.4 2.48% 7,242.8 261.0 3.60% 13,500.4 529.0 3.92% Total deposits from customers 16,338.2 341.6 2.09% 25,640.8 525.2 2.05% 37,225.8 915.4 2.46%

Our interest expense on customer deposits increased by 53.8% from RMB341.6 million in 2015 to RMB525.2 million in 2016, primarily due to a 56.9% increase in our average balance of customer deposits from RMB16,338.2 million in 2015 to RMB25,640.8 million in 2016, which was partially offset by a decrease in our average cost on customer deposits from 2.09% in 2015 to 2.05% in 2016. The increase in our average balance of customer deposits was primarily due to expansion of our corporate banking and retail banking businesses. The decrease in our average cost on customer deposits was primarily due to the impact of the consecutive interest cuts by the PBoC in 2015.

Our interest expense on customer deposits increased by 74.3% from RMB525.2 million in 2016 to RMB915.4 million in 2017 primarily due to (i) an increase in our average cost on customer deposits from 2.05% in 2016 to 2.46% in 2017, and (ii) a 45.2% increase in our average balance of customer deposits from RMB25,640.8 million in 2016 to RMB37,225.8 million in 2017. The increase in our average cost on customer deposits was primarily attributable to the increase in retail banking loan products with competitive interest rates that we offered in order to attract quality retail banking customers in response to increased market competition. The increase in our average balance of customer deposits was primarily due to our continued efforts to develop our deposit business with a focus on attracting more quality customers.

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Interest Expense on Financial Assets Sold Under Repurchase Agreements, Due to Other Banks and Financial Institutions Our interest expense on financial assets sold under repurchase agreements, due to other banks and financial institutions accounted for 36.0%, 35.0% and 23.6% of our interest expense in 2015, 2016 and 2017, respectively. Our interest expense on financial assets sold under repurchase agreements, due to other banks and financial institutions increased by 50.6% from RMB201.0 million in 2015 to RMB302.7 million in 2016 primarily due to a 57.2% increase in average balance of deposits and placements from banks and other financial institutions from RMB5,072.2 million in 2015 to RMB7,973.7 million in 2016, which was partially offset by a decrease in our average cost of financial assets sold under repurchase agreements, due to other banks and financial institutions from 3.96% in 2015 to 3.80% in 2016. The increase in average balance of financial assets sold under repurchase agreements, due to other banks and financial institutions was primarily due to the increase in debt securities sold under repurchase agreements and bills sold under repurchase agreements. The decrease in average cost of financial assets sold under repurchase agreements, due to other banks and financial institutions was primarily due to a decrease in market interest rates as a result of eased market liquidity for the majority of 2016. Our interest expense on financial assets sold under repurchase agreements, due to other banks and financial institutions increased by 36.5% from RMB302.7 million in 2016 to RMB413.1 million in 2017 primarily due to (i) a 26.0% increase in average balance of financial assets sold under repurchase agreements, due to other banks and financial institutions from RMB7,973.7 million in 2016 to RMB10,050.1 million in 2017, and (ii) an increase in average cost of financial assets sold under repurchase agreements, due to other banks and financial institutions from 3.80% in 2016 to 4.11% in 2017. The increase in average balance of financial assets sold under repurchase agreements, due to other banks and financial institutions was primarily due to the increase in the amount due to other banks and financial institutions. The increase in our average cost of financial assets sold under repurchase agreements, due to other banks and financial institutions was primarily due to the increase in market interest rates caused by tightened market liquidity in 2017.

Interest Expense on Debt Securities Issued We did not issue any debt securities in 2015. Interest expense on debt securities issued accounted for 3.3% and 23.1% of our interest expense in 2016 and 2017, respectively. Please see “Financial Information – Capital Resources – Debt – Debt Securities Issued”. We incurred interest expense on debt securities of RMB28.7 million in 2016, primarily because we issued a number of interbank certificates of deposit in 2016. Our interest expense on debt securities issued increased significantly from RMB28.7 million in 2016 to RMB405.9 million in 2017 primarily due to (i) a significant increase in average balance of debt securities issued from RMB934.4 million in 2016 to RMB9,371.3 million in 2017, and (ii) an increase in average cost on debt securities issued from 3.07% in 2016 to 4.33% in 2017. The increase in average balance of debt securities issued was primarily caused by (i) an increase in interbank certificates of deposit issued by us in 2017 to obtain a stable source of funding for our business operations and (ii) our issuance of tier-two capital bonds in 2017 to replenish capital. The increase in our average cost on debt securities issued was primarily due to an increase in the long-term interbank certificates of deposit and tier-two capital bonds issued by us in 2017 which have comparatively higher interest rates, reflecting the relatively higher bond market interest rates in 2017 caused by tightened market liquidity.

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Interest Expense on Borrowing from Central Bank

Our interest expense on borrowing from central bank accounted for 2.9%, 1.0% and 1.1% of our interest expense in 2015, 2016 and 2017, respectively.

Our interest expense on borrowing from central bank decreased by 47.2% from RMB16.3 million in 2015 to RMB8.6 million in 2016, primarily due to (i) a 34.8% decrease in average balance of borrowing from central bank from RMB418.0 million in 2015 to RMB272.6 million in 2016 mainly because we relied more on other sources of funds to support our business expansion; and (ii) a decrease in average cost of borrowing from central bank from 3.90% in 2015 to 3.15% in 2016 as a result of the decrease in benchmark interest rates by central bank.

Our interest expense on borrowing from central bank increased by 129.1% from RMB8.6 million in 2016 to RMB19.7 million in 2017, primarily due to a 150.9% increase in average balance of borrowing from central bank from RMB272.6 million in 2016 to RMB684.0 million in 2017 as we increased borrowings to fund our business expansion, the effect of which was partially offset by the decrease in the average cost of borrowing from central bank from 3.15% in 2016 to 2.88% in 2017 as a result of the continued impact from decreased interest rate set by the PBoC in 2016.

Net Interest Spread and Net Interest Margin

Our net interest spread decreased from 3.57% in 2015 to 3.19% in 2016, primarily because our average yield on interest-earning assets decreased from 6.13% in 2015 to 5.67% in 2016, as a result of consecutive interest rate cuts by the PBoC in 2015 and increased market competition with the interest rate liberalization. Average cost of interest-bearing liabilities slightly decreased from 2.56% in 2015 to 2.48% in 2016 mainly due to the impact of consecutive interest rate cuts by the PBoC in 2015. Our net interest margin decreased from 3.76% in 2015 to 3.24% in 2016 primarily because the decrease in the yield of interest-earning assets was greater than the decrease in the cost of interest-bearing assets.

Our net interest spread further decreased from 3.19% in 2016 to 2.55% in 2017, primarily because our average cost on interest-bearing liabilities increased from 2.48% in 2016 to 3.06% in 2017 mainly as a result of the increase in absolute amount, and as a percentage of our total deposits, of the retail banking loan products with competitive interest rates that we offered in order to attract quality retail banking customers in response to increased market competition. Our average yield on interest-earning assets decreased from 5.67% in 2016 to 5.61% in 2017, which was caused by increased market competition driven by interest rate liberalization. Our net interest margin decreased from 3.24% in 2016 to 2.65% in 2017 primarily because of the increase in the cost of interest-bearing assets and the decrease in the yield of interest-earning assets.

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Net Fee and Commission Income

For the year ended December 31, 2015, our net fee and commission income was RMB2.5 million, representing 0.3% of our total operating income for the same year. In order to attract and retain more quality customers through offering competitive services, including promoting our bank card services, we strategically reduced or waived certain bank card fees chargeable to customers during the Track Record Period. As a result, our net fee and commission income decreased from RMB2.5 million in 2015 to RMB0.5 million in 2016, and we incurred a net fee and commission loss in the amount of RMB1.9 million in 2017. The following table sets forth the principal components of our net fee and commission income for the periods indicated.

For the year ended December 31,

2015 2016 2017

(in millions of RMB) Fee and commission income Bank card service fees 1.6 1.9 2.4 Settlement service fees 1.8 1.8 2.3 Agency service fees 3.8 2.4 1.2 Guarantee service fees – 0.8 1.3 Wealth management business service fee 0.5 0.5 0.9 Subtotal 7.7 7.5 8.1 Fee and commission expenses (5.2) (7.0) (10.0) Net fee and commission income 2.5 0.5 (1.9)

Note: (1) Consists primarily of guarantee service fees, wealth management business fees and other transaction service fees. Our net fee and commission income decreased by 80.0% from RMB2.5 million in 2015 to RMB0.5 million in 2016 primarily due to (i) a 34.6% increase in our fee and commission expenses from RMB5.2 million in 2015 to RMB7.0 million in 2016, and (ii) a 2.6% decrease in fee and commission income from RMB7.7 million in 2015 to RMB7.5 million in 2016. The decrease in our fee and commission income from 2015 to 2016 was mainly attributable to a decrease in agency service fees from RMB3.8 million in 2015 to RMB2.4 million in 2016. The increase in our fee and commission expenses from RMB5.2 million in 2015 to RMB7.0 million in 2016 was mainly caused by an increase in guarantee service fees.

We incurred net fee and commission expense of RMB1.9 million in 2017 primarily due to a 42.9% increase in our fee and commission expenses from RMB7.0 million in 2016 to RMB10.0 million in 2017, which was partially offset by a 8.0% increase in fee and commission income from RMB7.5 million in 2016 to RMB8.1 million in 2017. The increase in our fee and commission income was mainly attributable to an increase in bank card service fees and settlement service fees from 2016 to 2017, primarily as a result of increases in relevant business as we obtained more market recognition for our capacity to offer fee- and commission-based services. The increase of our fee and commission expenses was mainly caused by an increase in both the number of bank cards we offered and the frequency of use of issued cards by customers driven by increased market recognition of our business services. As a result, we incurred more fees to third party settlement institutions, such as UnionPay, in relation to the increased bank card transactions in 2017.

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Net Gains Arising from Financial Investments

We realized net gains arising from financial investments of RMB40.9 million and RMB132.9 million in 2015 and 2016, respectively, primarily because we seized our good grasp of market timing for our disposal of certain debt securities to achieve decent returns. The net gains arising from financial investments we realized decreased by 26.4% from RMB132.9 million in 2016 to RMB97.8 million in 2017, primarily because we chose to reduce our sales of debt securities based on market conditions when the market price of debt securities in China experienced a substantial decrease in 2017.

Other Components of Our Operating Income

Other components of our operating income consisted primarily of government grants and subsidies, rental income, and gains/(losses) on disposal of non-current assets. Other components of our operating income was RMB13.6 million, RMB17.9 million and RMB9.7 million in 2015, 2016 and 2017, respectively, representing 1.4%, 1.4% and 0.6% of our operating income, respectively.

Operating Expenses

The following table sets forth the principal components of our total operating expenses for the periods indicated.

For the year ended December 31,

2015 2016 2017

(in millions of RMB) Staff costs 135.4 230.7 307.9 Operational and administrative expenses 63.1 126.5 155.3 Depreciation and amortization 23.4 24.5 42.0 Professional service expenses 2.0 7.8 12.1 Business tax and surcharges 44.6 26.4 7.8 Others(1) 4.7 21.6 18.1 Total operating expenses 273.2 437.4 543.2

Note:

(1) Consists primarily of donations, registration and settlement fees for bond transactions. Our operating expenses increased by 60.1% from RMB273.2 million in 2015 to RMB437.4 million in 2016, and further increased by 24.2% to RMB543.2 million in 2017, primarily due to increases in our staff costs, operational and administrative expenses and depreciation and amortization.

Our cost-to-income ratio (excluding business tax and surcharges) was 24.27%, 31.46% and 31.89% in 2015, 2016 and 2017, respectively. The increases in our cost-to-income ratio from 2015 to 2017 were primarily because the growth of our operating expenses outpaced the growth of our operating income.

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Staff Costs

During the Track Record Period, staff costs were the largest component of our operating expenses, representing 49.6%, 52.7% and 56.7% of our total operating expenses in 2015, 2016 and 2017, respectively.

The following table sets forth the components of our staff costs for the periods indicated.

For the year ended December 31,

2015 2016 2017

(in millions of RMB) Salaries 103.3 168.7 225.7 Social security 15.6 27.5 35.4 Staff welfare 8.1 13.0 15.2 Enterprise annuity – 8.6 14.1 Housing provident funds 7.6 8.9 11.4 Employee education expenses 0.8 4.0 6.1 Total staff costs 135.4 230.7 307.9

Our staff costs increased by 70.4% from RMB135.4 million in 2015 to RMB230.7 million in 2016, and further increased by 33.5% to RMB307.9 million in 2017. The continued increases in our staff costs were primarily due to increases in salaries, social security and enterprise annuity, as we recruited more employees, particularly to grow our talent pool, in line with the increase in the number of our outlets.

Operational and Administrative Expenses

Our operational and administrative expenses primarily consist of office expenses, rental and property management expenses, business marketing expenses and security expenses. Our operational and administrative expenses increased by 100.5% from RMB63.1 million in 2015 to RMB126.5 million in 2016, and further increased by 22.8% to RMB155.3 million in 2017, primarily due to the increase in business marketing and rental expenses, in addition to expenses associated with the establishment of our Chengdu branch in 2017.

Depreciation and Amortization

Our depreciation and amortization consists primarily of depreciation of our property, plant and equipment and amortization of renovation expenses and software development expenses. Our depreciation and amortization increased by 4.7% from RMB23.4 million in 2015 to RMB24.5 million in 2016, and further increased by 71.4% to RMB42.0 million in 2017 primarily due to (i) an increase in amortization of renovation expenses due to the establishment of our Chengdu branch in 2017, and (ii) an increase in amortization of software development expenses with our continued investment in our information technology system.

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Impairment Losses on Assets

The following table sets forth the principal components of our impairment losses/(reversals) on assets for the periods indicated.

For the year ended December 31,

2015 2016 2017

(in millions of RMB) Impairment losses/(reversals) on assets: Customer loans 53.6 108.7 216.5 Financial investments 35.5 47.0 106.4 Others – – 1.9 Total 89.1 155.7 324.8

Impairment losses on assets increased by 74.7% from RMB89.1 million in 2015 to RMB155.7 million in 2016 primarily due to (i) a 102.8% increase in impairment losses on customer loans from RMB53.6 million in 2015 to RMB108.7 million in 2016, and (ii) a 32.4% increase in impairment losses on financial investments from RMB35.5 million in 2015 to RMB47.0 million in 2016. Impairment losses on assets increased by 108.6% from RMB155.7 million in 2016 to RMB324.8 million in 2017 primarily due to (i) a 99.2% increase in impairment losses on customer loans from RMB108.7 million in 2016 to RMB216.5 million in 2017, (ii) a 26.4% increase in impairment losses on financial investments from RMB47.0 million in 2016 to RMB106.4 million in 2017, and (iii) an increase in impairment losses on other assets from nil in 2016 to RMB1.9 million in 2017.

Impairment losses on customer loans increased by 102.8% from RMB53.6 million in 2015 to RMB108.7 million in 2016, and further increased by 99.2% to RMB216.5 million in 2017, primarily due to continued increases in our gross customer loans and an increase in NPLs. For details on changes in our impairment allowance for loan losses, please see “Assets and Liabilities – Assets – Impairment Allowance on Customer Loans”.

Impairment losses on financial investments increased by 32.4% from RMB35.5 million in 2015 to RMB47.0 million in 2016, and further increased by 126.4% to RMB106.4 million in 2017, primarily due to continued increases in the scale of our financial investments during the Track Record Period.

We did not incur any impairment losses on assets other than customer loans and financial investments in 2015 and 2016. In 2017, we incurred RMB1.9 million of impairment losses on other assets, primarily due to impairment losses on foreclosed assets.

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Income Tax

The following table sets forth the reconciliation between the income tax calculated at the statutory income tax rate applicable to our profit/(loss) before tax and our actual income tax for the periods indicated.

For the year ended December 31,

2015 2016 2017

(in millions of RMB) Profit before tax 587.6 716.8 814.5 Income tax calculated at applicable statutory tax rate of 25% 146.9 179.2 203.6 Non-deductible expenses 6.1 8.6 9.1 Non-taxable income(1) (16.9) (13.1) (16.9) Income tax 136.2 174.7 195.8

Note:

(1) Non-taxable income mainly represents interest income from PRC government bonds, which is non-taxable in accordance with PRC tax regulations. Our income tax expenses increased by 28.3% from RMB136.2 million in 2015 to RMB174.7 million in 2016, and further increased by 12.1% to RMB195.8 million in 2017, primarily due to (i) continued increases in profit before tax during the Track Record Period, (ii) continued increases in our income not deductible for tax purposes during the Track Record Period as a result of our increased impairment losses on assets, and (iii) a decrease in our non-taxable income in 2016 as a result of our decreased investment in debt securities issued by the PRC government in 2016. Our effective income tax rate was 23.2%, 24.4% and 24.0% in 2015, 2016 and 2017, respectively.

The following table sets forth the components of our income tax expenses for the periods indicated.

For the year ended December 31,

2015 2016 2017

(in millions of RMB) Current income tax – PRC enterprise income tax 153.0 207.8 262.6 Deferred income tax (16.8) (33.1) (66.8) Total income tax 136.2 174.7 195.8

Net Profit

Primarily as a result of all the foregoing factors, our net profit increased by 20.1% from RMB451.5 million in 2015 to RMB542.1 million in 2016, and further increased by 14.1% to RMB618.7 million in 2017.

346 SUMMARY OF SEGMENT OPERATING RESULTS DOCUMENT. IN THIS READ OF BE MUST COVER INFORMATION THE THE ON AND “WARNING” CHANGE TO HEADED SUBJECT SECTION AND THE INCOMPLETE FORM, WITH DRAFT CONJUNCTION IN IS DOCUMENT THIS

Summary Business Segment Information

We have three principal business segments: corporate banking, retail banking and financial markets. Please see “Business – Our Principal Business Lines”. The following table sets forth our operating results for each of our principal segments for the periods indicated.

For the year ended December 31, For the six months ended June 30,

2015 2016 2017 2017 2018

CorporateRetailFinancial CorporateRetailFinancial CorporateRetailFinancial CorporateRetailFinancial CorporateRetailFinancial (1) (1) (1) (1) (1) bankingbankingmarkets OthersTotal bankingbankingmarkets OthersTotal bankingbankingmarkets OthersTotal bankingbankingmarkets OthersTotal bankingbankingmarkets OthersTotal

(in millions of RMB, except percentages) IACA INFORMATION FINANCIAL (unaudited) External net interest (2) income/(expense)425.0 (73.5) 533.8 – 885.2 483.2 (243.3) 915.8 – 1,155.6 596.9 (386.4) 1,363.8 – 1,574.3 296.5 (107.4) 512.8 – 701.8 307.4 (173.0) 619.7 – 754.2 Internal net interest (3) (expense)/income(120.1) 329.1 (209.0) – – (65.8) 619.1 (553.3) – – (68.5) 886.4 (817.9) – – (33.6) 286.7 (253.1) – – (35.0) 410.5 (375.5) – 0.0

Net interest income304.9 255.6 324.7 – 885.2 417.4 375.8 362.4 – 1,155.6 528.4 500.0 546.0 – 1,574.3 262.8 179.3 259.7 – 701.8 272.4 237.5 244.3 – 754.2 Net fee and commission

income3.7 (1.2) – – 2.5 3.7 (3.2) – – 0.5 4.3 (6.2) – – (1.9) 0.1 (0.3) – – (0.2) 1.4 (0.6) – – 0.8 347 Net gains on trading

activities– – – – – – – – – – – – – – – – – – – – – – 24.4 – 24.4 Net gains arising from

financial investments – – 40.9 – 40.9 – – 132.9 – 132.9 – – 97.8 – 97.8 – – 63.7 – 63.7 – – 53.7 – 53.7 Other operating income– – – 13.6 13.6 7.6 – – 10.3 17.9 – – – 9.7 9.7 – – – 4.2 4.2 – – – 6.3 6.3

Operating income308.6 254.4 365.6 13.6 942.2 428.7 372.6 495.4 10.3 1,307.0 532.7 493.7 643.7 9.7 1,680.0 262.9 179.0 323.4 4.2 769.5 273.8 236.9 322.4 6.3 839.4

Operating expenses(56.2) (143.3) (69.1) (4.7) (273.3) (73.4) (205.9) (151.7) 6.5 437.4 (78.6) (224.7) (235.1) (4.7) (543.2) (20.7) (43.8) (107.5) (0.3) (172.3) (28.7) (66.2) (120.4) (0.4) (215.7) – Depreciation and amortization(4.8) (12.5) (6.0) – (23.4) (4.3) (12.1) (8.0) – 24.5 (6.3) (18.0) (17.7) – (42.0) (3.0) (1.2) (7.0) – (11.2) (6.3) (2.2) (10.7) – (19.2) – Others(51.3) (130.8) (63.1) (4.7) (249.9) (69.1) (193.8) (143.7) 6.6 413.0 (72.3) (206.8) (217.4) (5.1) (501.6) (17.7) (42.6) (100.5) (0.3) (161.1) (22.4) (64.0) (109.7) – (196.5) Impairment losses on(45.3) assets (8.3) (35.5) – (89.1) (86.2) (22.5) (46.9) – (155.7) (196.5) (20.0) (108.3) – (324.8) (120.9) (15.2) (82.3) – (218.4) (92.2) (16.5) (23.7) – (132.5) Share of profits of associates– – – 7.8 7.8 – – – 2.9 2.9 – – – 2.5 2.5 – – – 2.0 2.0 – – – 2.3 2.3

Profit before tax 207.2 102.7 261.0 16.7 587.6 269.1 144.2 296.7 6.8 716.8 257.6 249.0 300.3 7.6 814.5 121.3 120.0 133.6 5.9 380.8 152.9 154.2 178.2 8.1 493.4

Notes:

(1) Consists primarily of income and expenses that are not directly attributable to any specific segment. (2) Consists of net interest income/(expense) from external clients or activities. (3) Consists of net interest income/(expense) attributable to each segment’s transactions with other segments. THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. FINANCIAL INFORMATION

Operating income from our corporate banking business represented 32.8%, 32.8%, 31.7%, 34.2% and 32.6% of our total operating income in 2015, 2016 and 2017 and for the six months ended June 30, 2017 and 2018, respectively. Operating income from our corporate banking business increased by 38.9% from RMB308.6 million in 2015 to RMB428.7 million in 2016, and further increased by 24.3% to RMB532.7 million in 2017, primarily due to increase in corporate loans. Operating income from our corporate banking business increased by 4.1% from RMB262.9 million for the six months ended June 30, 2017 to RMB273.8 million for the six months ended June 30, 2018, primarily because of increase in corporate loan. In addition, our net fee and commission income of corporate banking business increased significantly from RMB0.1 million in six months ended June 30, 2017 to RMB1.4 million in the six months ended June 30, 2018.

Operating income from our retail banking business represented 27.0%, 28.5%, 29.4%, 23.3% and 28.2% of our total operating income in 2015, 2016 and 2017 and for the six months ended June 30, 2017 and 2018, respectively. Operating income from our retail banking business increased by 46.5% from RMB254.4 million in 2015 to RMB372.6 million in 2016, and further increased by 32.5% to RMB493.7 million in 2017, primarily due to increase in personal business loans. Operating income from our retail banking business increased by 32.3% from RMB179.0 million for the six months ended June 30, 2017 to RMB236.9 million for the six months ended June 30, 2018, primarily because of the same reason mentioned above.

Operating income from our financial markets business represented 38.8%, 37.9%, 38.3%, 42.0% and 38.4% of our total operating income in 2015, 2016, and 2017 and for the six months ended June 30, 2017 and 2018, respectively. The percentage of operating income from our financial markets in our total operating income remained relatively stable.

Summary of Operating Results by Geographic Regions

In presenting information on the basis of geographic regions, operating income is gathered according to the locations of the branches or subsidiaries that generated the income. For the purpose of presentation, we categorize such information by geographic regions. The following table sets forth the total operating income of each of the geographic regions for the periods indicated.

For the years ended December 31, For the six months ended June 30, 2015 2016 2017 2017 2018 %of %of %of %of %of Amount total Amount total Amount total Amount total Amount total (in millions of RMB, except percentages) (unaudited) Luzhou 942.2 100.0% 1,307.0 100.0% 1,649.4 98.2% 772.4 100.4% 813.7 96.9% Outside Luzhou ––––30.6 1.8% (2.9) (0.4%) 25.6 3.1% Total 942.2 100.0% 1,307.0 100.0% 1,680.0 100.0% 769.5 100.0% 839.3 100.0%

Since our establishment in September 1997, we have operated our businesses in Sichuan Province and our head office and other operations in Luzhou have become the largest sources of our operating income. In 2015, 2016 and 2017 and for the six months ended June 30, 2018, operating income from our head office and our other operations in Luzhou accounted for 100.0%, 100.0%, 98.2% and 96.9%, respectively, of our total operating income.

348 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. FINANCIAL INFORMATION

CASH FLOWS

The following table sets forth our cash flows for the years indicated.

For the six months For the years ended December 31, ended June 30,

2015 2016 2017 2017 2018

(in millions of RMB) (unaudited) Net cash generated from/(used in) operating activities 3,815.9 9,682.8 (6,366.3) (1,320.4) 117.4 Net cash (used in)/generated from investing activities (4,709.9) (15,196.4) (453.5) (3,544.6) (1,692.8) Net cash (used in)/generated from financing activities 1,403.9 5,214.1 5,422.4 4,516.0 1,368.6 Net (decrease)/increase in cash and cash equivalents 509.9 (299.5) (1,397.4) (349.0) (206.8)

Cash Flows Generated from/(Used in) Operating Activities

Cash inflows from operating activities are primarily attributable to increases in customer deposits, financial assets sold under repurchase agreements, due to other banks and financial institutions and borrowing from central bank. Cash outflows from operating activities are primarily attributable to increases in customer loans, balances with central bank and financial assets held under resale agreements, due from other banks and financial institutions.

The increase in our customer deposits was RMB5,935.0 million, RMB10,635.4 million, RMB11,126.5 million and RMB2,597.1 million in 2015, 2016 and 2017 and the six months ended June 30, 2018, respectively. We had an increase in financial assets sold under repurchase agreements, due to other banks and financial institutions of RMB639.2 million and RMB5,312.1 million in 2015 and 2016, respectively. We incurred a decrease in financial assets sold under repurchase agreements, due to other banks and financial institutions of RMB327.8 million and RMB721.7 million in 2017 and the six months ended June 30, 2018, respectively. The increase in our borrowing from central bank was RMB25.0 million and RMB340.0 million in 2015 and 2017, respectively. We had a decrease in borrowing from central bank of RMB175.0 and RMB430.0 million for 2016 and six months ended June 30, 2018, respectively.

The increase in our customer loans amounted to RMB2,362.6 million, RMB4,564.5 million, RMB4,901.0 million and RMB4,910.5 million in 2015, 2016 and 2017 and the six months ended June 30, 2018, respectively. For a discussion on increases in our customer loans from December 31, 2015 to December 31, 2017, please see “Assets and Liabilities – Assets – Customer Loans”. We had an increase in balances with central bank of RMB1,925.3 million, RMB1,732.2 million and RMB52.0 million, in 2016 and 2017 and the six months ended June 30, 2018, respectively. We had a decrease in balances with central bank of RMB285.4 million in 2015. The increase in financial assets held under resale agreements, due from other banks and other financial institutions was RMB803.5 million and RMB9,720.1 million in 2015 and 2017, respectively. The decrease in financial assets held under resale agreements, due from other banks and financial institutions was RMB1,181.9 million and RMB4,018.1 million in 2016 and six months ended June 30, 2018, respectively.

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Primarily as a result of the foregoing, our net cash generated from operating activities was RMB3,815.9 million and RMB9,682.8 million in 2015 and 2016, respectively. Our net cash used in operating activities was RMB6,366.3 million in 2017. Our net cash used in operating activities was RMB1,320.4 million for the six months ended June 30, 2017 and our net cash generated from operating activities was RMB117.4 million for the six months ended June 30, 2018.

Cash Flows (Used in)/Generated from Investing Activities

Cash inflows from investing activities are primarily attributable to proceeds from the disposal and redemption of investments. We received cash from the sale and redemption of investments of RMB5,202.0 million, RMB43,590.4 million, RMB33,587.1 million and RMB8,384.9 million in 2015, 2016 and 2017 and the six months ended June 30, 2018, respectively.

Our cash outflows from investing activities are primarily attributable to payments on purchase of investment securities. We used cash of RMB10,189.6 million, RMB59,936.7 million, RMB36,309.3 million and RMB11,079.3 million in 2015, 2016 and 2017 and the six months ended June 30, 2018, respectively, to purchase investment securities.

Cash Flows (Used in)/Generated from Financing Activities

Our cash inflows from financing activities are primarily attributable to proceeds from issuance of shares and proceeds from issued debt securities. Our proceeds from issuance of shares was RMB1,473.1 million and RMB424.9 million in 2015 and 2016, respectively. Our proceeds from issuance of debt securities was RMB5,695.5 million, RMB11,956.2 million and RMB9,520.0 million in 2016 and 2017 and the six months ended June 30, 2018, respectively.

Our cash outflows from financing activities are primarily attributable to repayment for due indebtedness, interest paid on debt securities issued and dividends paid. Our repayment of maturing indebtedness was RMB794.1 million, RMB6,082.4 million and RMB7,851.6 million in 2016 and 2017 and the six months ended June 30, 2018, respectively. Our interest paid in relation to debt securities issued was RMB28.7 million, RMB405.9 million and RMB299.4 million in 2016 and 2017 and the six months ended June 30, 2018, respectively. Our dividends paid was RMB69.2 million, RMB83.5 million, RMB45.6 million and RMB0.4 million in 2015, 2016 and 2017 and the six months ended June 30, 2018, respectively.

LIQUIDITY

We fund our loans and investment portfolios principally through our customer deposits. Although a majority of our customer deposits have been short-term deposits, customer deposits have been, and we believe will continue to be, a stable source of our customer funding. Customer deposits with remaining maturities of less than one year or repayment on demand represented 94.1%, 79.2%, 69.0% and 63.0% of total customer deposits as of December 31, 2015, 2016 and 2017 and June 30, 2018, respectively. For additional information about our short-term liabilities and sources of funds, please see “Assets and Liabilities – Liabilities and Sources of Funds” and “Supervision and Regulation – Other Operational and Risk Management Ratios”.

350 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. FINANCIAL INFORMATION

We manage liquidity by monitoring the maturities of our assets and liabilities in an effort to ensure that we have sufficient funds to meet obligations as they become due. We do not, nor are we required to, maintain cash resources to meet all the demands for cash payments and, based on our experience, a portion of the maturing deposits will be rolled over and continue to remain with us. We have set requirement on the minimum proportion of maturity funds available to meet the demands for cash payment. We have also set the minimum level of interbank and other borrowing facilities in place to meet any unexpected liquidity requirements. Please see “Risk Management – Liquidity Risk Management”.

The following table sets forth, as of June 30, 2018, the remaining maturities of our assets and liabilities.

As of June 30, 2018

Between Between Between More On Less than 1 and 3 and 1 and than Indefinite Overdue demand 1 month 3 months 12 months 5 years 5 years Total

(in millions of RMB) Assets Cash and balances with central bank 6,066.3 – 1,818.3–––––7,884.6 Financial assets held under resale agreements, due from other banks and financial institutions – – 134.7 6,823.2 777.8 1,689.2 – – 9,425.0 Customer loans – 54.4 – 521.6 821.1 5,951.2 8,085.8 8,253.4 23,687.5 Financial investments – – 895.1 2,144.5 607.7 3,494.4 16,749.4 8,145.3 32,036.5 Others(1) 1,521.5–––––––1,521.5 Total assets 7,587.9 54.4 2,848.1 9,489.4 2,206.5 11,134.8 24,835.2 16,398.8 74,555.1 Liabilities Borrowing from central bank –––––160.0 – – 160.0 Financial assets sold under repurchase agreements, due to other banks and financial institutions – – 43.2 4,916.0 1,227.5 5,155.5 – – 11,342.2 Customer deposits 1.0 – 21,528.9 628.5 567.8 5,464.5 16,551.7 – 44,742.4 Debt securities issued – – – 2,054.8 3,847.7 5,541.1 – 1,000.0 12,443.7 Other liabilities(2) 1,303.9–––––––1,303.9 Total liabilities 1,305.0 – 21,572.1 7,599.4 5,643.0 16,321.0 16,551.7 1,000.0 69,992.2 Net position 6,282.9 54.4 (18,724.0) 1,882.1 (3,436.5) (5,186.2) 8,283.5 15,398.8 4,562.9

Notes:

(1) Consists primarily of deferred tax assets and other assets. (2) Consists primarily of deferred tax liabilities and other liabilities.

351 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. FINANCIAL INFORMATION

CAPITAL RESOURCES

Shareholders’ Equity

Our total shareholders’ equity increased by 22.0% from RMB3,284.1 million as of December 31, 2015 to RMB4,007.4 million as of December 31, 2016, and increased by 8.2% to RMB4,335.7 million as of December 31, 2017, and further increased to RMB4,562.9 million as of June 30, 2018. The following table sets forth the components of the changes in our total equity attributable to shareholders for the periods indicated.

Shareholders’ equity (in millions of RMB) As of January 1, 2015 1,285.0 Share capital 573.2 Capital reserve 899.9 Other comprehensive income 147.0 Surplus reserve 45.1 General reserve 171.9 Undistributed profits 162.0 December 31, 2015 3,284.1 Share capital 151.2 Capital reserve 273.7 Other comprehensive income (137.0) Surplus reserve 54.2 General reserve 237.4 Undistributed profits 143.8 As of December 31, 2016 4,007.4 Share capital 188.3 Capital reserve – Other comprehensive income (236.0) Surplus reserve 61.9 General reserve 282.5 Undistributed profits 31.6 As of December 31, 2017 4,335.7 As of January 1, 2018 (in accordance with IFRS 9) 4,560.6 Share capital – Capital reserve – Other comprehensive income 44.3 Surplus reserve – General reserve 155.8 Undistributed profits (197.9) As of June 30, 2018 4,562.9

We have adopted IFRS 9 commencing from January 1, 2018 and have made adjustments to other comprehensive income and undistributed profits according to IFRS 9. For details on differences between IAS 39 and IFRS 9 and the impact of adopting IFRS 9 on our results of operations, please see the subsection headed “– Critical Accounting Judgments and Key Sources of Estimation Uncertainty – Impact of New Accounting Policies.”

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Debt Debt Securities Issued In 2016, we issued a number of interbank certificates of deposit with an aggregate nominal amount of RMB5.8 billion with coupon rates ranging from 2.86% to 5.00% per annum. These negotiable certificates of deposit matured on or before December 14, 2017. In 2017, we issued (i) a number of interbank certificates of deposit with an aggregate nominal amount of RMB16.2 billion with coupon rates ranging from 4.18% to 5.45% per annum, and (ii) tier-two capital bonds with a maturity of ten years, face value of RMB1.0 billion, and a coupon rate of 5.50% per annum. In 2018, we issued a number of interbank certificates of deposit with an aggregate nominal amount of RMB9.5 billion with coupon rates ranging from 4.40% to 5.29% per annum. As of December 31, 2016 and 2017 and June 30, 2018, the book value of the debt securities issued by us was RMB4,901.4 million, RMB10,775.2 million and RMB12,443.7 million, respectively.

Capital Adequacy We are subject to capital adequacy requirements as promulgated by the CBRC. We are required to maintain our capital adequacy ratio above the minimum level required by the CBRC during the transitional period. The following table sets forth, as of the dates indicated, certain information relating to our capital adequacy ratio, calculated in accordance with the Capital Administrative Measures and PRC GAAP.

As of As of December 31, June 30, 2015 2016 2017 2018 (in millions of RMB, except percentage) Core tier-one capital Share capital 1,297.6 1,448.8 1,637.2 1,637.2 Capital reserve 900.9 1,174,6 1,174,6 1,174.6 Surplus reserve 154.4 208.6 270.5 270.5 General risk reserve 171.9 409.3 691.8 691.8 Other comprehensive income 149.4 12.4 223.6 5.8 Retained earnings 609.8 753.6 785.2 783.0 Total core tier-one capital 3,284.1 4,007.4 4,335.7 4,562.9 Net core tier-one capital 3,284.1 4,007.4 4,335.7 4,562.9 Net tier-one capital 3,284.1 4,007.4 4,335.7 4,562.9 Tier-two capital 197.3 298.2 1,374.8 1,387.2 Net capital base(1) 3,481.3 4,305.7 5,710.5 5,950.1 Total risk-weighted assets 18,734.0 31,615.7 41,704.2 48,803.4 Core tier-one capital adequacy ratio 17.53% 12.68% 10.40% 9.35% Tier-one capital adequacy ratio 17.53% 12.68% 10.40% 9.35% Capital adequacy ratio 18.58% 13.62% 13.69% 12.19%

Note: (1) Also referred to in this document as “regulatory capital”. As of December 31, 2015, 2016 and 2017 and June 30, 2018, our core tier-one capital adequacy ratio was 17.53%, 12.68%, 10.40% and 9.35%, respectively. As of the same dates, our tier-one capital adequacy ratio was also 17.53%, 12.68%, 10.40% and 9.35%, respectively, and our capital adequacy ratio was 18.58%, 13.62%, 13.69% and 12.19%, respectively, which were all in compliance with the CBRC requirements.

353 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. FINANCIAL INFORMATION

OFF-BALANCE SHEET COMMITMENTS

Our off-balance sheet commitments consist primarily of bank acceptances, letters of guarantee issued, operating lease commitments and capital commitment. The following table sets forth the contractual amounts of our off-balance sheet commitments as of the dates indicated.

As of As of December 31, June 30,

2015 2016 2017 2018

(in millions of RMB) Bank acceptances 102.5 995.4 1,238.9 710.2 Letters of guarantee 45.9 45.9 573.2 502.5 Operating lease commitments 28.4 39.8 45.0 39.3 Capital commitment 37.8 27.4 42.5 2.7 Total 214.6 1,108.4 1,899.7 1,254.7

Our total off-balance sheet commitments increased significantly from RMB214.6 million as of December 31, 2015 to RMB1,108.4 million as of December 31, 2016 primarily due to a significant increase in our bank acceptances from RMB102.5 million as of December 31, 2015 to RMB995.4 million as of December 31, 2016, which was in line with the expansion of our bank acceptance business. Our total off-balance sheet commitments increased significantly to RMB1,899.7 million as of December 31, 2017 primarily due to (i) a 24.5% increase in our bank acceptances from RMB995.4 million as of December 31, 2016 to RMB1,238.9 million as of December 31, 2017, and (ii) an increase in letters of guarantee issued by us in 2017. As of June 30, 2018, our total off-balance sheet commitments decreased to RMB1,254.7 million.

TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS

The following table sets forth the face value of our known contractual obligations by remaining contract maturity classified into the categories specified below as of December 31, 2017. For the remaining maturities of our assets and liabilities as of June 30, 2018, please see “– Liquidity”.

As of June 30, 2018

Less than Between 1 and More than 1 year 5 years 5 years Total

(in millions of RMB) Certain on-balance sheet contractual obligations Tier-two capital bonds issued – – 1,000.0 1,000.0 Interbank certificates of deposit 11,443.7 – – 11,443.7 Off-balance sheet contractual obligations Bank acceptances 710.2 – – 710.2 Letters of guarantee 502.5 – – 502.5 Total 12,656.4 – 1,000.0 13,656.4

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RELATED PARTY TRANSACTIONS During the Track Record Period, we entered into transactions with certain of our related parties, such as taking deposits from, extending credit facilities to, and providing other banking services to, the related parties. These transactions were conducted on normal commercial terms and in the ordinary course of our business. Our Directors believe that these related party transactions were carried out on an arm’s length basis and would not distort our results of operations during the Track Record Period or cause such results not to be reflective of our future performance. For more details, please see Note 40 to the Accountant’s Report attached hereto as Appendix I to this document.

QUANTITATIVE AND QUALITATIVE ANALYSIS OF MARKET RISK Market risk is the risk of financial loss arising from changes in the value of a financial instrument as a result of changes in interest rates, foreign exchange rates, equity prices and commodity prices and other market changes that affect market risk-sensitive instruments. We are exposed to market risk primarily through the assets and liabilities on our balance sheet, as well as our off-balance sheet commitments and guarantees. The market risks to which we are primarily exposed are interest rate risk.

Interest Rate Risk The primary source of our interest rate risk arises from mismatches in the maturities or repricing periods of our banking book. Maturity mismatches may cause net interest income to be affected by changes in the prevailing level of interest rates. Currently, we primarily use gap analysis and sensitivity analysis to assess our exposure to interest rate risks. In addition, different pricing bases for different assets and liabilities may also lead to interest rate risk for our assets and liabilities within the same repricing period. We manage our interest rate risk exposure primarily by adjusting the maturity profile and repricing pattern of our banking book based on our assessment of potential changes in the interest rate environment.

Repricing Gap Analysis The following table sets forth, as of June 30, 2018, the results of our gap analysis based on the earlier of (i) the next expected repricing dates, and (ii) the final maturity dates for our assets and liabilities.

As of June 30, 2018 Non- Less than 3to 1to Over interest 3 months 12 months 5 years 5 years bearing Total (in millions of RMB) Assets Cash and balances with central bank 7,884.6––––7,884.6 Financial assets held under resale agreements, deposits with banks and other financial institutions 7,735.8 1,689.2–––9,425.0 Customer loans 12,553.0 4,083.6 5,890.6 1,160.3 – 23,687.5 Financial investments 1,471.1 3,364.4 16,749.4 8,145.3 2,306.2 32,036.5 Others(1) ––––1,521.5 1,521.5 Total assets 29,644.4 9,137.2 22,640.0 9,305.6 3,827.8 74,555.1

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As of June 30, 2018 Non- Less than 3to 1to Over interest 3 months 12 months 5 years 5 years bearing Total (in millions of RMB) Liabilities Borrowing from central bank – 160.0–––160.0 Financial assets sold under repurchase agreements, due to other banks and financial institutions 6,186.7 5,155.5–––11,342.2 Customer deposits 22,725.0 5,464.5 16,551.7 – 1.2 44,742.4 Debt securities issued 5,902.6 5,541.1 – 1,000.0 – 12,443.7 Others(2) ––––1,303.9 1,303.9 Total liabilities 34,814.3 16,321.0 16,551.7 1,000.0 1,305.2 69,992.2 Interest rate gap (5,169.9) (7,183.8) 6,088.3 8,305.6 2,522.6 4,562.8

Notes:

(1) Consists primarily of investments in associates, property, plant and equipment, and interest receivables.

(2) Consists primarily of tax payable, interest payable, and other liabilities.

Sensitivity Analysis

We use sensitivity analysis to measure the potential effect of changes in interest rates on our net interest income. The following table sets forth, as of the dates indicated, the results of our interest rate sensitivity analysis based on our assets and liabilities at the same date.

As of December 31, As of June 30, 2015 2016 2017 2018 Net Other Net Other Net Other Net Other interest comprehensive interest comprehensive interest comprehensive interest comprehensive income income income income income income income income (in millions of RMB) + 100 basis- point 47.8 (195.1) 135.9 (223.8) 160.1 (393.7) 171.3 (149.4) - 100 basis- point (47.8) 216.4 (135.9) 237.1 (160.1) 426.7 (171.3) 163.9

Based on our assets and liabilities as of June 30, 2018, if interest rates increase (or decrease) by 100 basis points instantaneously, our net interest income for the year following June 30, 2018 would increase (or decrease) by RMB171.3 million.

We conduct interest rate sensitivity analysis based on the following assumptions: the yield curve moves parallelly following interest rate changes; the asset and liability portfolio has a static interest rate risk structure, and all positions will be retained and rolled over upon maturity. However, the following factors are not taken into account: change of business after the balance sheet date; the impact of interest rate changes on customer behavior; relationships between complex structural products and interest rate changes; the impact of changes in interest rates on market prices; the impact of changes in interest rates on off-balance sheet products; and the impact of risk management approaches.

356 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. FINANCIAL INFORMATION

CAPITAL EXPENDITURES

Our capital expenditures for 2015, 2016 and 2017 and for the six months ended June 30, 2018 were primarily for the acquisition of properties for and renovation of our branches and sub-branches, purchases of self-service banking equipment, and development of our information systems.

Our capital expenditures amounted to RMB408.3 million, RMB153.4 million, RMB130.9 million and RMB47.7 million for 2015, 2016 and 2017 and for the six months ended June 30, 2018, respectively. As of June 30, 2018, we had authorized capital commitments of RMB42.0 million, among which, RMB39.3 million has not been contracted for. The foregoing amounts and purposes may change depending on business conditions.

CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of our accounting policies described in Note 2 of the Accountant’s Report attached as Appendix I to this document, our management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. During the Track Record Period, we consistently adopted these accounting estimates and judgments, and we currently do not expect any significant changes to these estimates in the foreseeable future.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

The following is a description of the key estimation uncertainties and the critical judgments that we have made in the process of applying our accounting policies that have the most significant effect on the amounts recognized in our financial statements and/or in the next twelve months. See also Note 2 to the Accountant’s Report as set out in Appendix I of this document.

Segment Reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the key operating decision-maker. The senior management team represented by the president is our key operating decision-maker.

An operating segment is a component of our Bank which satisfies all of the following conditions: (1) that component can earn revenues and incur expenses from ordinary activities; (2) the component’s operating results are regularly reviewed by the key operating decision-maker to make decisions about resource allocation and performance assessment; (3) relevant financial information for the component is available to us. If two or more operating segments have similar economic characteristics, and certain conditions are satisfied, they may be aggregated into a single operating segment.

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Intra-segment revenue and costs are eliminated. Income and expenses directly associated with each segment are taken into consideration in determining segment performance. The classification of reporting segments is determined based on the operating segments, and the assets and expenses shared by all the segments are allocated according to their scale.

Impairment of financial assets

Except for financial investments – fair value through profit or loss, we assess at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset and that loss event has an impact on the estimated future cash flows of the financial asset which can be reliably estimated.

Assets carried at amortised cost

For loans (including financial investments – credit related financial assets) and financial investments – investments classified as receivables, the amount of a loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognized in profit or loss. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. The calculation of the present value of the estimated future cash flows of a collateralised financial asset reflects the cash flows that may result from foreclosure less costs for obtaining and selling the collateral, whether or not foreclosure is probable.

Fair Value of Financial Instruments

The fair values of quoted investments in active markets are based on current bid prices. If there is no active market for a financial asset, we establish fair value using valuation techniques. These include the use of recent arm’s length transactions, discounted cash flow analysis, option pricing models and other valuation techniques commonly used by market participants.

Impairment on Non-Financial Assets

Fixed assets, investment properties, construction in progress and intangible assets with finite useful lives, among others, are tested for impairment if there is any indication that the assets may be impaired as at the balance sheet date. If the result of the impairment test indicates that the recoverable amount of an asset is less than its carrying amount, a provision for impairment and an impairment loss are recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and the present value of the future cash flows expected to be derived from the asset. Provision for asset impairment is determined and recognized on an individual asset basis. If it is not possible to estimate the recoverable amount of an individual asset, the recoverable amount of a group of assets to which the asset belongs is determined. A group of assets is the smallest group of assets that is able to generate independent cash inflows.

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Goodwill, intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment annually, irrespective of whether there is any indication that the assets may be impaired.

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised as income immediately.

Tax

In the ordinary course of our business, there are certain transactions and activities for which the ultimate tax treatments have uncertainties. In accordance with current tax laws and regulations as well as the policies applied by government authorities in previous years, we make tax estimates on the implementation of new tax laws and regulations as well as events involving uncertainties. Where the final outcome of such tax matters is different from the amounts initially recorded, such difference will affect the current income tax and deferred income tax provisions in the period during which such a determination is made.

Impact of New Accounting Policies

We have adopted IFRS 9 as issued by the IASB since January 1, 2018, which resulted in changes in our accounting policies. IFRS 9 replaces the provisions of IAS 39 that relate to the recognition, classification and measurement of financial assets and liabilities; derecognition of financial instruments; impairment of financial assets and hedge accounting.

The adoption of IFRS 9 for the six months ended June 30, 2018 does not result in any significant impact on the amounts reported in the financial information except that, a 5% of equity increase with effect from January 1, 2018.

The major differences between IFRS 9 and IAS 39 are the measurement categories and the approach for classifying financial assets. The classification of financial assets under IFRS 9 requires us to consider the business model and the contractual cash flow characteristics of financial assets to determine classification and subsequent measurement. Further, for financial assets that will be classified as “amortized cost” or “fair value through other comprehensive income” under IFRS 9, we are required to apply a new expected credit loss impairment model under IFRS 9, which, as compared to the incurred loss model in IAS 39, uses more forward-looking information instead of an objective evidence of impairment as a precondition for recognizing credit losses. Please also see the section headed “Risk Factors – Changes in accounting standards or policies may materially affect our financial condition and results of operations.”

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The table below sets out certain key classification requirements of IFRS 9 that led to changes in classification of certain financial assets held by us.

Discounted bills If the business method of discounted bills is being held to collect the contractual cash flows and sell, the measurement method shall be reclassified from amortized cost to financial investments – fair value through other comprehensive income.

Financial investments Based on cash flow characteristics of certain portions of our financial investments, we reclassified such to financial investments – fair value through profit or loss according to IFRS 9.

Debt instruments A portion of the debt investments held by us were reclassified from financial investments – available-for-sale to financial investments – fair value through other comprehensive income according to IFRS 9, taking into account cash flow characteristics of the relevant investment. Besides the above mentioned reclassifications, IFRS 9 adopts the categories of “measured at amortized cost” and “Fair Value through Other Comprehensive Income”, or FVOCI, to replace categories previously identified as “held to maturity” and “available-for-sale”, without changing measurement basis of these items. To illustrate the difference between IAS 39 and IFRS 9 and their impact on our financial results for the six months ended June 30, 2018, we have prepared financial information for the six months ended June 30, 2018 according to IAS 39 and IFRS 9, respectively.

Six months ended June 30, 2018 Prepared Prepared according to according to IFRS 9 IAS 39 (unaudited) (RMB in million) Interest income 1,807.5 1,807.5 Interest expense (1,053.3) (1,053.3) Net interest income 754.2 754.2 Fee and commission income 5.5 5.5 Fee and commission expense (4.7) (4.7) Net fee and commission income 0.8 0.8 Net gains/(losses) on trading activities 24.4 27.4 Net gains/(losses) arising from financial investments 53.7 53.7 Other operating income 6.3 6.3 Operating income 839.3 842.3 Operating expenses (215.7) (215.7) Impairment losses/Expected credit losses (132.5) (145.0) Operating profit 491.1 481.6 Share of profit of associates 2.3 2.3 Profit before income tax 493.4 483.9 Income tax expense (116.6) (114.2) Net profit 376.8 369.7

Other comprehensive income Financial instruments – fair value through other comprehensive income 59.1 283.5 Less: Related income tax impact (14.8) (70.9) Subtotal 44.3 212.6

Comprehensive income attributable to the shareholders of the Bank 421.1 582.3

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To show the impact of IFRS 9 on our financial results as of December 31, 2017, we include here our financial results as of January 1, 2018 prepared in accordance with IFRS 9. For more details on the effect of the adjustments arising from the adoption of IFRS 9, please also see Note 2.1 to the Accountant’s Report in Appendix I.

As of December 31, As of January 1, 2017 2018 Prepared Prepared according to according to IFRS 39 IAS 9 (unaudited) (RMB in million) Assets Cash and balances with the central bank 8,145.7 8,145.7 Financial assets held under resale agreements, due from other banks and financial institutions 13,344.8 13,341.6 Customer Loans, gross 18,833.8 18,895.0 Financial credit assets 8,279.4 8,276.9 Financial investments at amortized cost N/A 16,867.7 Financial investments at fair value through other comprehensive income N/A 1,789.5 Financial investments at fair value through profit and loss N/A 2,311.8 Financial investments – available-for-sale 11,376.6 N/A Financial investments – investments classified as receivables, gross 9,340.2 N/A Investments in associates 33.0 33.0 Property, plant and equipment 614.8 614.8 Deferred income tax assets 244.3 169.2 Other assets 666.8 666.8 Total assets 70,879.4 71,112.1 Liabilities Borrowings from central bank 590.0 590.0 Financial assets sold under repurchase agreements, due to other banks and financial institutions 12,063.9 12,063.9 Customer deposits 42,145.3 42,145.3 Tax payable 28.8 28.8 Debt securities issued 10,775.2 10,775.2 Other liabilities 940.5 948.2 Total Liabilities 66,543.7 66,551.5 Equities Share capital 1,637.2 1,637.2 Capital reserve 1,174.6 1,174.6 Other reserve 738.7 923.8 Undistributed profit 785.2 825.0 Total equity 4,335.7 4,560.6 Total liabilities and total equity 70,879.4 71,112.1

INDEBTEDNESS As of July 31, 2018 (being the date for the purpose of this indebtedness statement, before this document is printed), we have the following indebtedness: • interbank certificates of deposit in an aggregate principal amount of RMB11.6 billion; • tier-two capital bonds in an aggregate principal amount of RMB1,000.0 million; • customer deposits, borrowing from central bank, and financial assets held under resale agreements, due from other banks and financial institutions that arose from the normal course of our banking business; and

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• loan commitments, bank acceptances, letters of credit and letters of guarantee issued, other commitments and contingencies that arose from our normal course of banking business. Except as disclosed above, we did not have, as of July 31, 2018, any material and outstanding mortgages, charges, debentures, other debt capital (issued or agreed to be issued), bank overdrafts, loans, liabilities under acceptance or other similar indebtedness, hire purchase and finance lease commitments or any guarantees or other material contingent liabilities. Our Directors have confirmed that there has not been any material change in our indebtedness or contingent liabilities since July 31, 2018 up to the date of this document.

RULE 13.13 TO RULE 13.19 OF THE LISTING RULES We confirm that there are no circumstances which will trigger disclosure requirements under Rule 13.13 to Rule 13.19 of the Listing Rules.

DIVIDENDS Our Board of Directors is responsible for submitting proposals in respect of dividend payments, if any, to the Shareholders at a general meeting for approval. The determination of whether to pay dividends and the amount of such dividends is based on our results of operations, cash flows, financial condition, capital adequacy ratios, future business prospects, statutory and regulatory restrictions on the payment of dividends by us and other factors that our Board of Directors considers relevant. Subject to our Articles of Association and laws and regulations on profit distribution by banks, our Board of Directors will recommend dividend payments to our Shareholders. Under the PRC Company Law and our Articles of Association, all of our Shareholders holding the same class of shares have equal rights to dividends and other distributions proportionate to their shareholding. Pursuant to PRC laws and our Articles of Association, dividends may only be distributed from our distributable profits calculated in accordance with PRC GAAP or IFRS (or the accounting standards of the overseas jurisdictions where our Shares are [REDACTED]), whichever is lower. Under PRC laws and our Articles of Association, we may only pay dividends out of our distributable profits. Our distributable profits represents the lower of (i) our net profit attributable to our shareholders for a period plus the distributable profit or net of the accumulated losses, if any, at the beginning of such period as determined under PRC GAAP; (ii) the unconsolidated net profit of our Bank for the period plus distributable profit or net of accumulated losses, if any, at the beginning of such period, as determined under PRC GAAP; (iii) our net profit attributable to our equity holders for the period plus distributable profit or net of accumulated losses, if any, at the beginning of such period, as determined under IFRS; and (iv) the unconsolidated net profit of our Bank for the period plus distributable profit or net of accumulated losses, if any, at the beginning of such period, as determined under IFRS, less: • appropriations we are required to make to the statutory surplus reserve, which is currently 10% of the unconsolidated net profit of our Bank as determined under PRC GAAP, until such reserve reaches an amount equal to 50% of our registered capital; • a general reserve we are required to set aside; and • appropriations to a discretionary surplus reserve as approved by the shareholders in an annual general meeting. Under relevant MOF regulations, we are required to maintain a general reserve of no less than 1.5% of the balance of our risk-bearing assets from our net profit after tax. This general

362 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. FINANCIAL INFORMATION reserve constitutes part of our reserves. As of June 30, 2018, the balance of our general reserve amounted to RMB847.6 million, which was in compliance with the MOF requirements in respect of appropriation of the general reserve.

Any distributable profit that is not distributed in a given year is retained and available for distribution in subsequent years. However, generally we do not pay any dividends in a year in which we do not have any distributable profit in respect of that year. The payment of any dividends by us must also be approved at a shareholders’ general meeting. We are prohibited from making any profit distributions to our Shareholders before recovering our accumulated losses and making appropriations to the statutory surplus reserve, the general reserve, and any discretionary surplus reserve as approved at a shareholders’ general meeting. If we make any profit distributions in violation of these rules, our Shareholders are required to return the amounts they received in such profit distributions to us.

The CBIRC has the authority to prohibit any bank that fails to meet the relevant capital adequacy ratio requirements, or has violated other relevant PRC banking regulations, from paying dividends or making other forms of distributions. As of June 30, 2018, we had a capital adequacy ratio of 12.19%, a tier-one capital adequacy ratio of 9.35% and a core tier-one capital adequacy ratio of 9.35%, which were all in compliance with the relevant CBIRC regulations. Please see “Supervision and Regulation – Supervision Over Capital Adequacy – Regulatory Requirements in respect of Capital Adequacy Ratios” and “Supervision and Regulation – Principal Regulators – CBRC – Examination and Supervision”.

Dividends paid in prior periods may not be indicative of future dividend payments. We cannot guarantee when, if and in what form or size, dividends will be paid in the future.

[REDACTED] EXPENSES

363 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. FINANCIAL INFORMATION for the year ending December 31, 2018. The [REDACTED] expenses above are the latest practicable estimate for reference only, and the actual amount may differ from this estimate. Our Directors do not expect such [REDACTED] expenses to have a material adverse impact on our results of operations for the year ending December 31, 2018.

UNAUDITED [REDACTED] STATEMENT OF ADJUSTED NET TANGIBLE ASSETS

The following unaudited [REDACTED] statement of adjusted net tangible assets is prepared based on our net tangible assets attributable to our Shareholders as of June 30, 2018 derived from our financial information as of June 30, 2018 as set out in the Accountant’s Report set forth in Appendix I to this document, adjusted as described below.

The unaudited [REDACTED] statement of adjusted net tangible assets has been prepared to show the effect on our net tangible assets as of June 30, 2018 as if the [REDACTED] had occurred on June 30, 2018. The unaudited [REDACTED] adjusted net tangible assets per share are calculated in accordance with Rule 4.29 of the Listing Rules.

The unaudited [REDACTED] statement of adjusted net tangible assets has been prepared for illustrative purposes only and, as a result, may not be an accurate reflection of our financial position.

Net tangible [REDACTED] assets adjusted net attributable to Estimated net tangible assets Shareholders of [REDACTED] attributable to the Bank as of from the Shareholders of [REDACTED] adjusted net June 30, 2018 [REDACTED] the Bank tangible assets per share RMB Million RMB Million RMB Million RMB HK$ Note(1) Note(2)/(5) Note(4) Note(4) Note(5) Based on an [REDACTED] of HK$[REDACTED] per share 4,563 [REDACTED][REDACTED][REDACTED][REDACTED] Based on an [REDACTED] of HK$[REDACTED] per share 4,563 [REDACTED][REDACTED][REDACTED][REDACTED]

Notes: (1) The audited net tangible assets attributable to the shareholders of the Bank as at 30 June 2018 is extracted from the Accountant’s Report set out in Appendix I to this document, which is based on the audited net assets attributable to the shareholders of the Bank as at 30 June 2018 as the Bank has no intangible asset as at 30 June 2018. (2) The estimated net [REDACTED] from the [REDACTED] are based on [REDACTED] H Shares to be [REDACTED] pursuant to the [REDACTED] and the [REDACTED] of HK$[REDACTED] per [REDACTED] and HK$[REDACTED] per [REDACTED], being low and high end of the indicative [REDACTED] range, after deduction of the estimated [REDACTED] fees and other related expenses payable by the Bank. (3) The unaudited [REDACTED] net tangible assets per Share is arrived at after the adjustment as described in Note (2) above and on the basis that [REDACTED] Shares were in issue assuming that the [REDACTED] has been completed on 30 June 2018 but take no account of any Shares which may be issued upon the exercise of the [REDACTED]. (4) For the purpose of this unaudited [REDACTED] statement of adjusted net tangible assets, the balance stated in Renminbi are converted into Hong Kong dollars at the rate of HK$1.00 to RMB0.8709. No representation is made that Renminbi amounts have been, could have been or may be converted into Hong Kong dollars, or vice versa, at that rate. (5) No adjustment has been made to the unaudited [REDACTED] adjusted net tangible assets to reflect any trading results or other transactions of the Bank entered into subsequent to 30 June 2018.

RECENT DEVELOPMENTS AND MATERIAL ADVERSE CHANGE

Our Directors confirm that there was no material adverse change in our financial or trading position from June 30, 2018 to the date of this document.

364 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. FINANCIAL INFORMATION

WORKING CAPITAL

Rule 8.21A(1) and Paragraph 36 of Part A of Appendix 1A of the Listing Rules require this document to include a statement by our Directors that, in their opinion, the working capital available to our Bank is sufficient for at least 12 months from the publication of this document or, if not, how it is proposed to provide the additional working capital our Directors consider to be necessary. We are of the view that the traditional concept of “working capital” does not apply to banking businesses such as ours. We are regulated in the PRC by, among others, the PBoC and the CBIRC. These regulatory authorities impose minimum capital adequacy and liquidity requirements on commercial banks operating in the PRC. Rule 8.21A(2) of the Listing Rules provides that such a working capital statement will not be required to be made by an issuer whose business is entirely or substantially that of the provision of financial services, provided that the Hong Kong Stock Exchange is satisfied that the inclusion of such a statement would not provide significant information for investors and the issuer’s solvency and capital adequacy are subject to prudent supervision by another regulatory body. In view of the above, pursuant to Rule 8.21A(2) of the Listing Rules we are not required to include a working capital statement from the directors in this document.

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FUTURE PLANS

See the section entitled “Business – Our Development Strategies” in this document for a detailed description of our future plans.

USE OF [REDACTED]

Assuming an [REDACTED] of HK$[REDACTED], being the low-end of the proposed [REDACTED] range, we estimate that the net [REDACTED]ofthe[REDACTED] accruing to us (after deduction of [REDACTED] commissions and estimated expenses payable by us in relation to the [REDACTED]) to be approximately HK$[REDACTED] million, if the [REDACTED] is not exercised; or approximately HK$[REDACTED] million, if the [REDACTED] is exercised in full.

Assuming an [REDACTED] of HK$[REDACTED], being the mid-point of the proposed [REDACTED] range of HK$[REDACTED] to HK$[REDACTED], we estimate that the net [REDACTED]ofthe[REDACTED] accruing to us (after deduction of [REDACTED] commissions and estimated expenses payable by us in relation to the [REDACTED]) to be approximately HK$[REDACTED] million, if the [REDACTED] is not exercised; or to be approximately HK$[REDACTED] million, if the [REDACTED] is exercised in full.

Assuming an [REDACTED] of HK$[REDACTED], being the high-end of the proposed [REDACTED] range, we estimate that the net [REDACTED]ofthe[REDACTED] accruing to us (after deduction of [REDACTED] commissions and estimated expenses payable by us in relation to the [REDACTED]) to be approximately HK$[REDACTED] million, if the [REDACTED] is not exercised; or to be approximately HK$[REDACTED] million, if the [REDACTED] is exercised in full.

We intend to use the net [REDACTED] from the [REDACTED] (after deduction of [REDACTED] commissions and estimated expenses payable by us in relation to the [REDACTED]) to strengthen our capital base to support the ongoing growth of our business.

366 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. [REDACTED]

[REDACTED]

367 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. [REDACTED]

[REDACTED]

[REDACTED] ARRANGEMENTS AND EXPENSES

[REDACTED]

Grounds for Termination

[REDACTED]

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[REDACTED]

369 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. [REDACTED]

[REDACTED]

Undertakings to the Stock Exchange pursuant to the Listing Rules

Undertakings by Our Bank

[REDACTED]

370 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. [REDACTED]

Undertakings pursuant to the [REDACTED]

Undertakings by Our Bank

[REDACTED]

371 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. [REDACTED]

[REDACTED] Interests in Our Bank

[REDACTED]

Commission and Expenses

According to the [REDACTED], the [REDACTED] will receive an [REDACTED] commission of [●]% of the aggregate [REDACTED] in respect of all of the [REDACTED] under the [REDACTED] (excluding such [REDACTED] reallocated to and from the [REDACTED] pursuant to the [REDACTED]). In addition, we may, at our sole discretion, pay an aggregate incentive fee of up to [REDACTED]% of the aggregate [REDACTED] of all the [REDACTED] finally included in the [REDACTED] to certain [REDACTED]ofthe [REDACTED].

For [REDACTED]tothe[REDACTED], we will pay an [REDACTED] commission at the rate applicable to the [REDACTED] and such commission will be paid to the [REDACTED] (but not the [REDACTED]).

372 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. [REDACTED]

The aggregate commissions and fees (including a discretionary incentive fee), together with the [REDACTED] fees, [REDACTED], the Stock Exchange [REDACTED] fee, legal and other professional fees, printing and other expenses payable by us relating to the [REDACTED] are estimated to amount to approximately HK$[REDACTED] million in total (assuming an [REDACTED] of HK$[REDACTED] per [REDACTED], which is the mid-point of our indicative [REDACTED] range for the [REDACTED] and assuming the [REDACTED]isnot exercised).

Other Services Provided by the [REDACTED]

The [REDACTED] and the [REDACTED] may, in their ordinary course of business provide financing to investors subscribing for the [REDACTED] by this document. Such [REDACTED] and [REDACTED] may enter into hedges and/or dispose of such [REDACTED] in relation to the financing which may have a negative impact on the [REDACTED]oftheH Shares.

Indemnity

[REDACTED]

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[REDACTED]

INDEPENDENCE OF THE SOLE SPONSOR

The sole sponsor satisfies the independence criteria applicable to sponsor set out in Rule 3A.07 of the Listing Rules.

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[REDACTED]

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[REDACTED]

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[REDACTED]

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401 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

The following is the text of a report set out on pages I-1 to I-3, received from the Bank’s reporting accountant, [PricewaterhouseCoopers], Certified Public Accountants, Hong Kong, for the purpose of incorporation in this document. It is prepared and addressed to the directors of the Bank and to the Sole Sponsor pursuant to the requirements of HKSIR 200 Accountants’ Reports on Historical Financial Information in Investment Circulars issued by the Hong Kong Institute of Certified Public Accountants.

[Letterhead of PricewaterhouseCoopers]

[DRAFT]

ACCOUNTANT’S REPORT ON HISTORICAL FINANCIAL INFORMATION TO THE DIRECTORS OF LUZHOU CITY COMMERCIAL BANK CO., LTD. AND CLSA CAPITAL MARKETS LIMITED

Introduction

We report on the historical financial information of Luzhou City Commercial Bank Co., Ltd. (the “Bank”) set out pages I-4 to I-[84], which comprises the statements of financial position as at December 31, 2015, 2016 and 2017 and June 30, 2018, and the statements of comprehensive income, the statements of changes in equity and the statements of cash flows for each of the periods then ended (the “Track Record Period”) and a summary of significant accounting policies and other explanatory information information (together, the “Historical Financial Information”). The Historical Financial Information set out on pages I-4 to I-[84] forms an integral part of this report, which has been prepared for inclusion in the document of the Bank dated [REDACTED] (the “Document”) in connection with the [REDACTED] of H-Shares of the Bank on the Main Board of The Stock Exchange of Hong Kong Limited.

Directors’ responsibility for the Historical Financial Information

The directors of the Bank are responsible for the preparation of Historical Financial Information that gives a true and fair view in accordance with the basis of preparation set out in Note 2.1 to the Historical Financial Information, and for such internal control as the directors determine is necessary to enable the preparation of Historical Financial Information that is free from material misstatement, whether due to fraud or error.

Reporting accountant’s responsibility

Our responsibility is to express an opinion on the Historical Financial Information and to report our opinion to you. We conducted our work in accordance with Hong Kong Standard on Investment Circular Reporting Engagements 200, Accountants’ Reports on Historical Financial Information in Investment Circulars issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”). This standard requires that we comply with ethical standards and plan and perform our work to obtain reasonable assurance about whether the Historical Financial Information is free from material misstatement.

I-1 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

Our work involved performing procedures to obtain evidence about the amounts and disclosures in the Historical Financial Information. The procedures selected depend on the reporting accountant’s judgement, including the assessment of risks of material misstatement of the Historical Financial Information, whether due to fraud or error. In making those risk assessments, the reporting accountant considers internal control relevant to the entity’s preparation of Historical Financial Information that gives a true and fair view in accordance with the basis of preparation set out in Note 2.1 to the Historical Financial Information in order to design procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Our work also included evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the Historical Financial Information.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion

In our opinion, the Historical Financial Information gives, for the purposes of the accountant’s report, a true and fair view of financial position of the Bank as at December 31, 2015, 2016 and 2017 and June 30, 2018 and of its financial performance and its cash flows for the Track Record Period in accordance with the basis of preparation set out in Note 2.1 to the Historical Financial Information.

Review of stub period comparative financial information

We have reviewed the stub period comparative financial information of the Bank which comprises the statements of comprehensive income, changes in equity and cash flows for the six months ended June 30, 2017 and other explanatory information (the “Stub Period Comparative Financial Information”). The directors of the Bank are responsible for the preparation of the Stub Period Comparative Financial Information in accordance with the basis of preparation set out in Note 2.1 to the Historical Financial Information. Our responsibility is to express a conclusion on the Stub Period Comparative Financial Information based on our review. We conducted our review in accordance with International Standard on Review Engagements 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the International Auditing and Assurance Standards Board (“IAASB”). A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Based on our review, nothing has come to our attention that causes us to believe that the Stub Period Comparative Financial Information, for the purposes of the accountant’s report, is not prepared, in all material respects, in accordance with the basis of preparation set out in Note 2.1 to the Historical Financial Information.

I-2 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

REPORT ON MATTERS UNDER THE RULES GOVERNING THE LISTING OF SECURITIES ON THE STOCK EXCHANGE OF HONG KONG LIMITED (THE “LISTING RULES”) AND THE COMPANIES (WINDING UP AND MISCELLANEOUS PROVISIONS) ORDINANCE

Adjustments

In preparing the Historical Financial Information, no adjustments to the Underlying Financial Statements as defined on page I-4 have been made.

Dividends

We refer to note [36] to the Historical Financial Information which contains information about the dividends paid by Luzhou City Commercial Bank Co., Ltd. in respect of the Track Record Period.

[PricewaterhouseCoopers] Certified Public Accountants Hong Kong [Date]

I-3 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

I. HISTORICAL FINANCIAL INFORMATION OF THE BANK Preparation of Historical Financial Information Set out below is the Historical Financial Information which forms an integral part of this accountant’s report. The financial statements of the Bank for the Track Record Period, on which the Historical Financial Information is based, were audited by [PricewaterhouseCoopers] in accordance with International Standards on Auditing issued by the IAASB (“Underlying Financial Statements”). The Historical Financial Information is presented in Renminbi (“RMB”) and all values are rounded to the nearest thousand (RMB’000) except when otherwise indicated.

I-4 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

STATEMENTS OF COMPREHENSIVE INCOME

Six months ended Year ended December 31, June 30, Note 2015 2016 2017 2017 2018 (Unaudited) Interest income 1,444,101 2,020,837 3,328,474 1,509,520 1,807,471 Interest expense (558,900) (865,201) (1,754,139) (807,678) (1,053,308) Net interest income 5 885,201 1,155,636 1,574,335 701,842 754,163 Fee and commission income 7,727 7,495 8,110 3,682 5,461 Fee and commission expense (5,222) (7,000) (10,000) (3,904) (4,690) Net fee and commission income/(expense) 6 2,505 495 (1,890) (222) 771 Net gains on trading activities 7––––24,372 Net gains arising from financial investments 8 40,917 132,940 97,784 63,702 53,748 Other operating income 9 13,557 17,911 9,727 4,153 6,254 Operating income 942,180 1,306,982 1,679,956 769,475 839,308 Operating expenses 10 (273,227) (437,427) (543,168) (172,317) (215,727) Impairment losses/Expected credit losses 13 (89,136) (155,669) (324,846) (218,400) (132,497) Operating profit 579,817 713,886 811,942 378,758 491,084 Share of profit of an associate 25 7,829 2,914 2,544 2,049 2,308 Profit before income tax 587,646 716,800 814,486 380,807 493,392 Income tax expense 14 (136,171) (174,716) (195,783) (92,390) (116,576) Net profit attributable to shareholders of the Bank 451,475 542,084 618,703 288,417 376,816 Other comprehensive income/(losses) Items that may be reclassified subsequently to profit or loss: Financial investments – fair value through other comprehensive income N/A N/A N/A N/A 59,060 changes in fair value through equity – unrealized N/A N/A N/A N/A 47,037 changes in fair value through profit or loss – realized N/A N/A N/A N/A 12,023

Financial investment – Available-for-sale (‘AFS’) 195,968 (182,696) (314,675) (133,435) N/A changes in fair value through equity – unrealized 192,709 (236,828) (314,675) (133,435) N/A changes in fair value through profit or loss – realized 3,259 54,132 N/A N/A N/A Less: Related income tax impact (48,992) 45,674 78,669 33,359 (14,764) Subtotal 40 146,976 (137,022) (236,006) (100,076) 44,296 Total comprehensive income attributable to the shareholders of the Bank 598,451 405,062 382,697 188,341 421,112 Earnings per share for profit attributable to the shareholders of the Bank (expressed in RMB per share) – basic and diluted 15 0.52 0.35 0.38 0.18 0.23

I-5 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

STATEMENTS OF FINANCIAL POSITION

As at As at December 31, June 30,

Note 2015 2016 2017 2018 ASSETS Cash and balances with central bank 16 4,349,737 6,463,704 8,145,703 7,884,603 Financial assets held under resale agreements, due from other banks and financial institutions 17 6,641,946 4,971,831 13,344,757 9,424,962 Customer loans 18 9,703,381 14,159,076 18,833,833 23,687,504 Financial investments – credit related financial assets 19 3,719,625 7,444,368 8,279,379 6,843,679 Financial investments – fair value through profit or loss 20 N/A N/A N/A 2,306,209 Financial investments – fair value through other comprehensive income 21 N/A N/A N/A 5,064,079 Financial investments – Available-for-sale (‘AFS’) 22 3,188,191 7,557,310 11,376,611 N/A Financial investments – amortized cost 23 N/A N/A N/A 17,822,491 Financial investments – investments classified as receivables 24 3,449,000 11,597,005 9,340,174 N/A Investment in an associate 25 27,553 30,467 33,011 35,319 Property, plant and equipment 26 465,293 584,007 614,772 631,845 Deferred income tax assets 31 20,056 98,829 244,306 160,214 Other assets 27 198,847 374,064 666,890 694,166 Total assets 31,763,629 53,280,661 70,879,436 74,555,071 LIABILITIES Borrowings from central bank 425,000 250,000 590,000 160,000 Financial assets sold under repurchase agreements, due to other banks and financial institutions 28 7,079,659 12,391,738 12,063,909 11,342,188 Customer deposits 29 20,383,361 31,018,756 42,145,297 44,742,444 Debt securities issued 30 – 4,901,402 10,775,243 12,443,650 Current tax liabilities 57,504 45,077 28,768 18,754 Other liabilities 33 534,000 666,274 940,504 1,285,181 Total liabilities 28,479,524 49,273,247 66,543,721 69,992,217 EQUITY Equity attributable to shareholders of the Bank Share capital 34 1,297,619 1,448,844 1,637,193 1,637,193 Share premium 34 900,889 1,174,606 1,174,606 1,174,606 Other reserves 35 475,752 630,341 738,689 1,123,864 Retained earnings 609,845 753,623 785,227 627,191 Total equity 3,284,105 4,007,414 4,335,715 4,562,854 Total liabilities and equity 31,763,629 53,280,661 70,879,436 74,555,071

I-6 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

STATEMENTS OF CHANGES IN EQUITY

Equity attributable to shareholders of the Bank

Other reserves

Share Share Surplus General Revaluation Retained capital premium reserve reserve reserve Subtotal earnings Total

(Note 34) (Note 34) (Note 35) (Note 35) (Note 35) Balance at January 1, 2015 724,422 970 109,283 – 2,445 111,728 447,862 1,284,982 Net profit for the year –––– ––451,475 451,475 Other comprehensive income ––––146,976 146,976 – 146,976 Total comprehensive income ––––146,976 146,976 451,475 598,451 Issue of shares (Note 34) 573,197 899,919 – – – – – 1,473,116 Transfer to surplus reserve – – 45,147 – – 45,147 (45,147) – Transfer to general reserve – – – 171,901 – 171,901 (171,901) – Cash dividends (Note 36) –––– ––(72,444) (72,444) Balance at December 31, 2015 1,297,619 900,889 154,430 171,901 149,421 475,752 609,845 3,284,105 Balance at January 1, 2016 1,297,619 900,889 154,430 171,901 149,421 475,752 609,845 3,284,105 Net profit for the year –––– ––542,084 542,084 Other comprehensive losses ––––(137,022) (137,022) – (137,022) Total comprehensive income ––––(137,022) (137,022) 542,084 405,062 Issue of shares (Note 34) 151,225 273,717 – – – – – 424,942 Transfer to surplus reserve – – 54,209 – – 54,209 (54,209) – Transfer to general reserve – – – 237,402 – 237,402 (237,402) – Cash dividends (Note 36) –––– ––(106,695) (106,695) Balance at December 31, 2016 1,448,844 1,174,606 208,639 409,303 12,399 630,341 753,623 4,007,414

I-7 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

Equity attributable to shareholders of the Bank

Other reserves

Share Share Surplus General Revaluation Retained capital premium reserve reserve reserve Subtotal earnings Total

(Note 34) (Note 34) (Note 35) (Note 35) (Note 35) Balance at January 1, 2017 1,448,844 1,174,606 208,639 409,303 12,399 630,341 753,623 4,007,414 Net profit for the year –––– ––618,703 618,703 Other comprehensive losses ––––(236,006) (236,006) – (236,006) Total comprehensive income ––––(236,006) (236,006) 618,703 382,697 Transfer to surplus reserve – – 61,870 – – 61,870 (61,870) – Transfer to general reserve – – – 282,484 – 282,484 (282,484) – Cash dividends (Note 36) –––– ––(54,396) (54,396) Share dividends (Note 34) 188,349––– ––(188,349) – Balance at December 31, 2017 1,637,193 1,174,606 270,509 691,787 (223,607) 738,689 785,227 4,335,715 (Unaudited) Balance at January 1, 2017 1,448,844 1,174,606 208,639 409,303 12,399 630,341 753,623 4,007,414 Net profit for the period –––– ––288,417 288,417 Other comprehensive losses ––––(100,076) (100,076) – (100,076) Total comprehensive income ––––(100,076) (100,076) 288,417 188,341 Transfer to general reserve – – 282,484 – 282,484 (282,484) – Cash dividends (Note 36) –––– ––(54,396) (54,396) Balance at June 30, 2017 1,448,844 1,174,606 208,639 691,787 (87,677) 812,749 705,160 4,141,351 Balance at January 1, 2018 1,637,193 1,174,606 270,509 691,787 (223,607) 738,689 785,227 4,335,715 Effects of applying IFRS9 (Note 2.1.1) ––––185,117 185,117 39,816 224,933 Balance restated at January 1, 2018 1,637,193 1,174,606 270,509 691,787 (38,490) 923,806 825,043 4,560,648 Net profit for the period –––– ––376,816 376,816 Other comprehensive income ––––44,296 44,296 – 44,296 Total comprehensive income ––––44,296 44,296 376,816 421,112 Transfer to general reserve – – – 155,762 – 155,762 (155,762) – Cash dividends (Note 36) –––– ––(418,906) (418,906) Balance at June 30, 2018 1,637,193 1,174,606 270,509 847,549 5,806 1,123,864 627,191 4,562,854

I-8 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

STATEMENTS OF CASH FLOWS

Year ended December 31, Six months ended June 30,

2015 2016 2017 2017 2018

(Unaudited) Cash flows from operating activities: Profit before income tax 587,646 716,800 814,486 380,807 493,392 Adjustments: Depreciation and amortisation 23,388 24,462 41,991 15,041 19,198 Impairment losses/expected credit losses on customer loans 53,636 108,737 216,528 104,185 116,777 Impairment losses/expected credit losses on other assets 35,500 46,932 108,318 114,215 15,720 Net loss/(gain) on disposal of property, plant and equipment and foreclosed assets 47 (8,438) 296 (29) – Net (gains)/losses arising from financial investments (40,917) (132,940) (97,784) (63,702) (53,748) Changes in fair value of financial assets – fair value through profit or loss ––––(24,372) Interest income from financial instruments (626,720) (1,188,631) (2,234,629) (962,062) (1,022,151) Interest expense on debt securities – 28,709 405,912 190,510 299,424 Net change in operating assets: Net decrease/(increase) in balances with central bank 285,361 (1,925,259) (1,732,164) (711,243) (51,999) Net decrease/(increase) in financial assets held under resale agreements, due from banks and other financial institutions (803,584) 1,181,930 (9,720,175) (4,957,886) 4,018,133 Net increase in customer loans (2,362,623) (4,564,482) (4,901,045) (1,823,255) (4,910,482) Net increase in other operating assets (107,007) (449,780) (392,973) (214,520) (444,219) Net change in operating liabilities: Net (decrease)/increase in due to central bank 25,000 (175,000) 340,000 180,000 (430,000) Net (decrease)/increase in financial assets sold under repurchase agreements, due to banks and other financial institutions 639,202 5,312,079 (327,829) (1,694,980) (721,721) Net increase in customer deposits 5,935,010 10,635,395 11,126,540 7,831,036 2,597,147 Net increase in other operating liabilities 324,939 280,092 248,798 415,387 344,791 Income tax paid (152,985) (207,815) (262,591) (123,905) (128,513) Net cash (used in)/generated from operating activities 3,815,893 9,682,791 (6,366,321) (1,320,401) 117,377

I-9 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

Year ended December 31, Six months ended June 30,

2015 2016 2017 2017 2018

(Unaudited) Cash flows from investing activities: Proceeds from disposal of property and equipment, and other long-term assets (627) 7,364 36,891 37,149 7,845 Purchase of property and equipment, and other long-term assets (407,155) (153,398) (130,696) (47,350) (35,503) Interest income arising from financial investment securities 685,519 1,295,931 2,362,545 1,089,978 1,029,267 Purchase of investment securities (10,189,641) (59,936,698) (36,309,289) (30,813,019) (11,079,331) Proceeds from sale and redemption of investments 5,202,051 43,590,400 33,587,094 26,188,598 8,384,896 Net cash used in operating activities (4,709,853) (15,196,401) (453,455) (3,544,644) (1,692,826)

Cash flows from financing activities: Proceeds from issuance of shares 1,473,116 424,942––– Proceeds from issuance of debt securities – 5,695,503 11,956,223 7,241,770 9,520,000 Repayment of debt securities upon maturity – (794,100) (6,082,382) (2,534,326) (7,851,593) Interest paid on debt securities – (28,709) (405,912) (190,510) (299,424) Dividends paid to shareholders (69,188) (83,503) (45,567) (921) (359) Net cash generated from financing activities 1,403,928 5,214,133 5,422,362 4,516,013 1,368,624 Net increase in cash and cash equivalents 509,968 (299,477) (1,397,414) (349,032) (206,825) Cash and cash equivalents at the beginning of the year/period 4,346,583 4,856,551 4,557,074 4,557,074 3,159,660 Cash and cash equivalents at the end of the year/period (Note 41) 4,856,551 4,557,074 3,159,660 4,208,042 2,952,835

I-10 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

NOTES TO THE HISTORICAL FINANCIAL INFORMATION 1 GENERAL INFORMATION With the approval of the People’s Bank of China, the Bank was established on September 15, 1997 as a joint-stock commercial bank under the name of “Luzhou City United Bank (瀘州城市合作銀行)” in accordance with the “Company Law” of China. The Bank was jointly initiated by the shareholders of Luzhou Finance Bureau, eight urban credit cooperatives, two rural credit cooperatives and other new corporate shareholders. On May 8, 1998, the Sichuan Branch of the People’s Bank of China approved the renaming of the Bank from “Luzhou City United Bank (瀘州城市合作銀行)” to “Luzhou City Commercial Bank Co., Ltd. (瀘州市商業銀行股份有限公司)”. The main lines of business of the Bank include company banking, retail banking and financial markets operations.

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies adopted in the preparation of the Historical Financial Information are set out below. These policies have been consistently applied to all the years and periods presented, unless otherwise stated.

2.1 Basis of preparation The Historical Financial Information of the Bank has been prepared in accordance with all applicable International Financial Reporting Standards (“IFRSs”) issued by the International Accounting Standards Board (the “IASB”). The Historical Financial Information has been prepared under the historical cost convention, as modified by the revaluation of available-for-sale financial assets, financial assets at fair value through profit or loss and financial assets at fair value through other comprehensive income which are carried at fair value. The preparation of Historical Financial Information in conformity with IFRSs requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Bank’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the Historical Financial Information are disclosed in Note 4. The Bank’s consolidated structured entities are the Bank’s only subsidiaries and are already measured according to accounting standard applicable to financial instruments. So there is no difference between the Bank’s consolidated historical financial information and its standalone historical financial information.

2.1.1 Changes in accounting policies International Financial Reporting Standard 9 “Financial Instruments” The Bank has adopted International Financial Reporting Standard 9 “Financial Instruments” (“IFRS 9”) as issued by the IASB in July 2014 with a date of transition of January 1, 2018, which resulted in adjustments to the amounts previously recognised as at December 31, 2017. The Bank did not adopt IFRS 9 for the years ended December 31, 2015, 2016 and 2017 and six months ended June 30, 2017. Certain of the Bank’s accounting policies have been changed to comply with the adoption of IFRS 9. IFRS 9 replaces the provisions of IAS 39 Financial Instruments (“IAS 39”) that relate to the recognition, classification and measurement of financial assets and liabilities; derecognition of financial instruments; impairment of financial assets and hedge accounting. IFRS 9 also significantly amends other standards dealing with financial instruments such as IFRS 7 “Financial Instruments-Disclosures”. The Bank adopted IFRS 9 without restating any comparative information as at December 31, 2015, 2016 and 2017 and June 30, 2017. The following table shows the adjustments for each individual line item.

(a) Classification and measurement of financial instruments The measurement category and the carrying amount of financial assets and liabilities in accordance with IAS 39 and IFRS 9 at January 1, 2018 are compared as follows: The Bank Reclassifications and Remeasurements As at As at December 31, ECL January 1, 2017 Reclassifications Remeasurements allowance 2018 Financial assets Cash and balances with central banks 8,145,703 – – – 8,145,703 Financial assets held under resale agreements, due from banks and other financial institutions 13,344,757 – – (3,175) 13,341,582 Customer loans 18,833,833 – – 61,181 18,895,014 Financial investments – credit related financial assets 8,279,379 – – (2,479) 8,276,900 Financial investments – fair value through profit or loss N/A 2,311,836 – – 2,311,836 Financial investments – fair value through other comprehensive income N/A 1,790,596 – (1,110) 1,789,486 Financial investments – available-for- sale 11,376,611 (11,376,611) – – N/A Financial investments – amortized cost N/A 16,614,353 257,781 (4,436) 16,867,698 Financial investments – investments classified as receivables 9,340,174 (9,340,174) – – N/A

I-11 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

Reclassifications and Remeasurements As at As at December 31, ECL January 1, 2017 Reclassifications Remeasurements allowance 2018 Financial assets Other financial assets 514,681 – – – 514,681 Subtotal 69,835,138 – 257,781 49,981 70,142,900 Non-financial assets Deferred income tax assets 244,306 – (64,535) (10,562) 169,209 Other non-financial assets 799,992 – – – 799,992 Subtotal 1,044,298 – (64,535) (10,562) 969,201 Total assets 70,879,436 – 193,246 39,419 71,112,101 Provision – – – 7,732 7,732 Others 66,543,721 – – – 66,543,721 Total liabilities 66,543,721 – – 7,732 66,551,453 Other reserves 738,689 – 185,117 – 923,806 Retained earnings 785,227 – 8,129 31,687 825,043 Other equity 2,811,799 – – – 2,811,799 Total equity 4,335,715 – 193,246 31,687 4,560,648 Total equity and liabilities 70,879,436 – 193,246 39,419 71,112,101

(b) Reconciliation of statement of financial position balances from IAS 39 to IFRS 9 The Bank performed a detailed analysis of its business models for managing financial assets and analysis of their cash flow characteristics. The following table reconciles the carrying amounts of financial assets, from their previous measurement categories in accordance with IAS 39 on December 31, 2017 to their new measurement categories upon transition to IFRS 9 on January 1, 2018: IAS 39 IFRS 9 carrying carrying amount amount As at As at December 31, January 1, 2018 Ref 2017 Reclassifications Remeasurements ECL allowance (restated) At amortized Cost Cash and balances with central banks Opening balance under IAS 39 and closing balance under IFRS 9 8,145,703 – – – 8,145,703 Financial assets held under resale agreements, due from banks and other financial institutions Opening balance under IAS 39 13,344,757 – – – 13,344,757 Remeasurement: ECL allowance – – – (3,175) (3,175) Closing balance under IFRS 9 13,344,757 – – (3,175) 13,341,582 Customer loans Opening balance under IAS 39 18,833,833 – – – 18,833,833 Subtraction: To FVOCI (IFRS 9) (A) – (2,443,400) – – (2,443,400) Remeasurement: ECL allowance for customer loans – – – 62,689 62,689 Closing balance under IFRS 9 18,833,833 (2,443,400) – 62,689 16,453,122 Financial investments – credit related financial assets Opening balance under IAS 39 8,279,379 – – – 8,279,379 Remeasurement: ECL allowance – – – (2,479) (2,479) Closing balance under IFRS 9 8,279,379 – – (2,479) 8,276,900 Financial investments – amortized cost Opening balance under IAS 39 – – ––– Addition: From available-for-sale (C) – 7,274,179 257,781 – 7,531,960 Addition: From investments classified as receivables (D) – 9,340,174 – – 9,340,174 Remeasurement: ECL allowance – – – (4,436) (4,436) Closing balance under IFRS 9 – 16,614,353 257,781 (4,436) 16,867,698 Financial investments – investments classified as receivables Opening balance under IAS 39 9,340,174 – – – 9,340,174 Subtraction: To financial investment – amortized cost (D) – (9,340,174) – – (9,340,174) Closing balance under IFRS 9 9,340,174 (9,340,174) – – –

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IAS 39 IFRS 9 carrying carrying amount amount As at As at December 31, January 1, 2018 Ref 2017 Reclassifications Remeasurements ECL allowance (restated) Total Financial investments – amortized cost 57,943,846 4,830,779 257,781 52,599 63,085,005 At fair value through profit or loss Financial investments – fair value through profit or loss Opening balance under IAS 39 – – ––– Addition: From available-for-sale (B) – 2,311,836 – – 2,311,836 Closing balance under IFRS 9 – 2,311,836 – – 2,311,836 Total financial assets measured at fair value through profit and loss – 2,311,836 – – 2,311,836 Fair value through other comprehensive income (FVOCI) Financial investments – available-for- sale Opening balance under IAS 39 11,376,611 – – – 11,376,611 Subtraction: To financial assets at fair value through profit and loss (B) – (2,311,836) – – (2,311,836) Subtraction: To financial investment – FVOCI (D) – (1,790,596) – – (1,790,596) Subtraction: To Financial investments – amortized cost (C) – (7,274,179) – – (7,274,179) Closing balance under IFRS 9 11,376,611 (11,376,611) – – – Financial investments – FVOCI Opening balance under IAS 39 – – ––– Addition: From financial investments – available-for-sale (D) – 1,790,596 – – 1,790,596 Remeasurement: ECL allowance – – – (1,110) (1,110) Closing balance under IFRS 9 – 1,790,596 – (1,110) 1,789,486 Customer loans Opening balance under IAS 39 – – ––– Addition: From customer loans (IAS 39) (A) – 2,443,400 – (1,508) 2,441,892 Closing balance under IFRS 9 – 2,443,400 – (1,508) 2,441,892 Total financial assets measured at FVOCI 11,376,611 (7,142,615) – (2,618) 4,231,378

The total remeasurement Expected Credit Loss (‘ECL’) of RMB(42,249) thousand was recognised in opening reserves at January 1, 2018. The following explains how applying the new classification requirements of IFRS 9 led to changes in classification of certain financial assets held by the Bank as shown in the table above:

(A) Discounted bills Provided the business method of discounted bills is being held to collect the contractual cash flows and sell, their measurement method are reclassified from amortized cost to fair value through other comprehensive income.

(B) Financial investments The cashflow characteristics of part of the financial investments held by the Bank don’t meet SPPI test. Consequently, these financial assets are reclassified to financial investments – fair value through profit or loss.

(C) Debt instruments Part of the debt investments held by the Bank have been reassessed. The Bank intends to hold these investments to maturity. The cashflow characteristics of these financial contracts meet SPPI test. Consequently, these financial assets are reclassified from financial investments – available-for-sale to financial investments – amortized cost.

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(D) Reclassification from retired categories with no change in measurement In addition to the above, the following debt instruments have been reclassified to new categories under IFRS 9, as their previous categories under IAS 39 were ‘retired’, with no changes to their measurement basis: (i) Those previously classified as held to maturity and now classified as measured at amortized cost. (ii) Those previously classified as available for sale and now classified as measured at FVOCI. For the financial assets that have been reclassified to amortize cost categories, the following table shows their fair value in June 30, 2018 and the original fair value gains and losses will be identified under the assumption that IFRS 9 was not applied.

Transition from financial investments-available-for-sale(IAS39) to financial investments-amortized cost (C) Fair value at June 30, 2018 6,487,396 Fair value gain that would be identified if financial investments were not reclassified for the period 219,786

(c) Reconciliation of impairment allowance balance from IAS 39 to IFRS 9 The following table reconciles the prior period’s closing impairment allowance measured in accordance with the IAS 39 incurred loss model to the new impairment allowance measured in accordance with the IFRS 9 expected loss model (“ECL”) at January 1, 2018:

Loan loss allowance under IAS Loan loss 39/Provision ECL Allowance Measurement category under IAS 37 Reclassification allowance under IFRS 9 FVOCI Customer loans – 37,753 1,508 39,261 Financial investments – FVOCI – – 1,110 1,110 Subtotal – 37,753 2,618 40,371

Amortized cost Financial assets held under resale agreements, due from banks and other financial institutions – – 3,175 3,175 Customer loans 567,523 (37,753) (62,689) 467,081 Financial investments – credit related financial assets 124,671 – 2,479 127,150 Financial investments – amortized cost – 124,096 4,436 128,532 Financial investments – investments classified as receivables 124,096 (124,096) – – Other assets 1,655 – – 1,655 Subtotal 817,945 (37,753) (52,599) 727,593 Total 817,945 – (49,981) 767,964 Off balance sheet guarantees and commitments – – 7,732 7,732

International Financial Reporting Standard 15 “Revenue” The Bank has adopted International Financial Reporting Standard 15 “Revenue” (“IFRS 15”) on January 1, 2018, which replaces relevant standards about recognition, classification and measurement of revenue and cost. The Bank adopted of IFRS 15 and did not restate any comparative information.The adoption of IFRS 15 on January 1, 2018 does not result in any impact on the financial information of current period.

2.1.2 New and revised IFRSs issued but not yet effective The Bank has not adopted the following amendments to IFRSs:

Valid date IFRS 16 Leases 01/01/2019 IFRIC 23 Uncertainty over Income Tax 01/01/2019 IFRS 17 Insurance Contracts 01/01/2021

IFRS 16 IFRS 16 provided the definition, confirmation and measurement of leasing, and established the principle of reporting useful information to the users of the financial statements about the lessor and the lessee. The standard replaces IFRS 17 – leasing and related interpretations.

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IFRS 16 now requires lessees to recognise a lease liability reflecting future lease payments and a right-of-use asset for virtually all lease contracts unless the underlying asset is of low value, in the statement of financial position. Accordingly, a lessee should recognise depreciation of the right-of-use asset and interest on the liability in the statement of comprehensive income, and also classifies cash repayments of the lease liability into principal portion and an interest portion for presentation in the statement of cash flows. The standard will mainly affect the accounting treatment of the bank as a lessee. As at June 30, 2018, the bank has non-cancellable operating lease commitments of RMB18,108 thousand, see note 31. However, the bank has not yet determined to what extent these commitments will result in the recognition of right-of-use assets and liabilities for future payments and how this will affect the bank’s profit and classification of cash flows. Some of the commitments may be covered by the exception for short-term and low-value leases and some commitments may relate to arrangements that will not qualify as leases under IFRS 16. For the lessor, IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17. Accordingly, a lessor continues to classify its leases as operating leases or finance leases, and to account for those two types of leases differently. The bank expects that, as a lessor, there will be no significant impact on the financial information.

IFRIC 23 IFRIC 23 explains how the uncertainty in tax treatment will affect the recognition and measurement of income tax. The date of the interpretation is January 1, 2019. Except the above mentioned impact of IFRS 9, the adoption of the above new IFRSs and amendments to IFRSs issued but not yet effective is not expected to have a material effect on the bank’s operating results, financial position or other comprehensive income.

2.2 Associates Associates are all entities over which the Bank has a significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of the accounting and are initially recognised at cost. The carrying amount is increased or decreased to recognise the investor’s share of the profit or loss of the investee after the date of acquisition. The unrealized profits from the transactions between the Bank and associates are offset by investments percentages in associates. Unless the evidence of assets impairment from such transactions can be provided, the unrealized loss are also offset. The Bank assesses at each financial reporting date whether there is objective evidence that investments in associates are impaired. Impairment losses are recognised for the amounts by which the investments in associates’ carrying amounts exceed its recoverable amounts. The recoverable amounts are the higher of investments in associates’ fair value less costs to sell and value in use.

2.3 Financial Instruments – IAS 39 The bank has adopted International Accounting Standard 39 – Financial Instruments: confirmation and measurement (IAS 39) to confirm and measure financial instruments in 2015, 2016 and 2017. As permitted by the transitional provisions of IFRS 9, the bank elected not to restate comparative figures. Any adjustments to the carrying amounts of financial assets and liabilities at the date of transition were recognised in the opening retained earnings and other reserves of the current period. Consequently, for notes disclosures, the consequential amendments to IFRS 7 disclosures have also only been applied to the current period. The comparative period notes disclosures repeat those disclosures made in the prior year. The Bank’s financial assets are initially measured at fair value and classified into one of the four categories, including financial assets at fair value through profit or loss, held-to-maturity investments, available-for-sale financial assets and investments classified as receivables. Financial investments comprise held-to-maturity investments, available-for-sale financial assets and debt securities classified as investments classified as receivables. All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the market place.

(a) Investments classified as receivables (include credit related financial assets) Investments classified as receivables (include credit related financial assets) are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, other than: (i) those that the entity intends to sell immediately or in the short term, which are classified as held for trading, and those that the entity upon initial recognition designates as at fair value through profit or loss; (ii) those that the entity upon initial recognition designates as available-for-sale; or (iii) those for which the holder may not recover substantially all of its initial investment, other than because of credit deterioration.

(b) Held-to-maturity financial assets Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Bank’s management has the positive intention and ability to hold to maturity. After initial recognition, held-to-maturity is measured at amortized cost using real interest rate method minus any identified impairment loss. The Bank shall not classify any financial assets as held to maturity if the entity has, during the current financial year or during the two preceding financial years, sold or reclassified more than an insignificant amount of held to maturity investments before maturity other than sales or reclassifications due to a significant deterioration in the issuer’s credit worthiness.

(c) Available-for-sale financial assets Available-for-sale investments are non-derivatives that are either designated in this category or not classified in any of the other categories.

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(d) Recognition and valuation of financial assets Purchases and sales of financial assets at fair value through profit or loss, held-to-maturity and available-for-sale are recognised on trade-date, the date on which the Bank commits to purchase or sell the asset. Financial assets are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets at fair value through profit or loss are initially recognised at fair value, and transaction costs are expensed in the statement of comprehensive income. Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Investments classified as receivables and held to maturity investments are carried at amortized cost using the effective interest method. Gains or losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category are presented in profit or loss within the period in which they arise. Dividend income from financial assets at fair value through profit or loss is recognised in profit or loss. Gains or losses arising from changes in the fair value of available for sale financial assets are recognised in other comprehensive income, until the financial asset is derecognised or impaired. At this time, the cumulative gains or losses previously recognised in equity is recognised in profit or loss. Interest earned whilst holding monetary financial assets, including available for sale financial assets, is reported as interest income using the effective interest rate method. The non-priced available-for-sale equity investment in the active market or its fair value cannot be reliably measured. It should be measured according to the cost approach at the final of each report, and less the specified impairment loss. The dividends caused by the available-for-sale equity investment should be accrued in profit or loss when the Bank is endowed with the right to receive dividends.

(e) De-recognition of financial assets The Bank derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. If the Bank neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Bank recognizes its retained interest in the asset and an associated liability for amounts it may have to pay. If the Bank retains substantially all the risks and rewards of ownership of a transferred financial asset, the Bank continues to recognize the financial asset and also recognizes a collateralised borrowing for the proceeds received. On derecognition of a financial asset in entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognized in other comprehensive income and accumulated in equity is recognized in profit or loss.

2.4 Impairment of financial assets – IAS 39 The Bank assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. The criteria that the Bank uses to determine that there is objective evidence of an impairment loss include: • Significant financial difficulty of the issuer or obligor; • A breach of contract, such as a default or delinquency in interest or principal payments; • The lender, for economic or legal reasons relating to the borrower’s financial difficulty, granting to the borrower a concession that the lender would not otherwise consider; • It becoming probable that the borrower will enter bankruptcy or other financial reorganisation; • The disappearance of an active market for that financial asset because of financial difficulties; • Observable data indicating that there is a measurable decrease in the estimated future cash flows from a group of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the Bank, including: adverse changes in the payment status of borrowers in the Bank; and national or local economic conditions that correlate with defaults on the assets in the Bank; • Any significant change with an adverse effect that has taken place in the technological, market, economic or legal environment in which the issuer operates and indicates that the cost of investments in equity instruments may not be recovered; • A significant or prolonged decline in the fair value of equity instrument investments; and • Other objective evidence indicating impairment of the financial asset. The bank firstly makes separate assessment of the existence of an impairment of the financial assets with significant amount, and then make separate or portfolio assessment of the existence of impairment of all other financial assets with unsignificant amount. If there is no evidence indicating that financial assets assessed separately are devalued, the bank will include them in a financial asset group with similar credit risk and make combined impairment assessment no matter how significant the amount is. Assets that are assessed separately and are recognized impairment losses are no longer included in the scope of the combined impairment assessment.

Assets carried at amortized cost For investments classified as receivables category, the amount of a loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in profit or loss. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract.

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The calculation of the present value of the estimated future cash flows of a collateralised financial asset reflects the cash flows that may result from foreclosure less costs for obtaining and selling the collateral, whether or not foreclosure is probable. For the purposes of a collective evaluation of impairment, financial assets are grouped on the basis of similar credit risk characteristics. Those characteristics are relevant to the estimation of future cash flows for groups of such assets by being indicative of the debtors’ ability to pay all amounts due according to the contractual terms of the assets being evaluated. Future cash flows in a group of financial assets that are collectively evaluated for impairment are estimated on the basis of the contractual cash flows of the assets in the group and historical loss experience for assets with credit risk characteristics similar to those in the group. Historical loss experience is adjusted on the basis of current observable data (for example, changes in unemployment rates, property prices, payment status, or other factors indicative of changes in the probability of losses in the Bank) to reflect the effects of current conditions that did not affect the period on which the historical loss experience is based and to remove the effects of conditions in the historical period that do not currently exist. The methodology and assumptions used for estimating future cash flows are reviewed regularly by the Bank to reduce any differences between loss estimates and actual loss experience. When a financial asset is uncollectible, it is written off against the related provision. Such financial asset is written off after all the necessary procedures have been completed and the amount of the loss has been determined. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the previously recognised impairment loss is reversed by adjusting the allowance account. The amount of the reversal is recognised in profit or loss in the impairment charge for credit losses.

2.5 The fair value of financial assets – IAS 39 and IFRS 9 The fair values of quoted investments in active markets are based on current bid prices. If there is no active market for a financial asset, the Bank determines fair value using valuation techniques. These include the use of recent arm’s length transactions, discounted cash flow analysis, option pricing models and other valuation techniques commonly used by market participants.

2.6 Financial liabilities – IAS 39 Financial liabilities are classified into two categories: financial liabilities at fair value through profit or loss and other financial liabilities. All financial liabilities are classified at inception and recognised initially at fair value. All financial liabilities are recognised in the statement of financial position, when and only when, the Bank becomes a party to the contractual provisions of the instrument.

(a) Financial liabilities at fair value through profit or loss A financial liability is classified as held for trading if it is incurred principally for the purpose of repurchasing in the short term. It is carried at fair value and any gains or losses from changes in fair value are recognised in profit or loss.

(b) Other financial liabilities Other financial liabilities are recognised initially at fair value net of transaction costs incurred. Other financial liabilities are subsequently stated at amortized cost, with gain or losses arising from derecognition or amortisation recognized in profit or loss. Financial liabilities are derecognised when they are extinguished − that is, when the obligation is discharged, cancelled or expired.

2.7 Interest income and expense – IAS 39 Interest income and expense are recognised in profit or loss for interest-bearing instruments on an accruals basis using the effective interest method. The effective interest method is a method of calculating the amortized cost of a financial asset or a financial liability and of allocating the interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset or financial liability. When calculating the effective interest rate, the Bank estimates cash flows considering all contractual terms of the financial instrument (for example, prepayment options) but does not consider future credit losses. The calculation includes all fees and points paid or received between parties to the contract, transaction costs and all other premiums or discounts that are an integral part of the effective interest rate. Once a financial asset or a group of similar financial assets has been written down as a result of an impairment loss, interest income is recognised on the written down value using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.

2.8 Financial assets and liabilities – IFRS 9 The bank has adopted IFRS 9 on January 1, 2018 to measure and account for financial instruments.

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At initial recognition, the bank measures a financial asset or financial liability at its fair value plus or minus, in the case of a financial asset or financial liability not at fair value through profit or loss, transaction costs that are incremental and directly attributable to the acquisition or issue of the financial asset or financial liability, such as fees and commissions. Transaction costs of financial assets and financial liabilities carried at fair value through profit or loss are expensed in profit or loss. Immediately after initial recognition, an expected credit loss allowance (ECL) is recognised for financial assets measured at amortized cost and investments in debt instruments measured at FVOCI, which results in an accounting loss being recognised in profit or loss when an asset is newly originated. When the fair value of financial assets and liabilities differs from the transaction price on initial recognition, the entity recognises the difference as follows: (a) When the fair value is evidenced by a quoted price in an active market for an identical asset or liability (i.e. a Level 1 input) or based on a valuation technique that uses only data from observable markets, the difference is recognised as a gain or loss. (b) In all other cases, the difference is deferred and the timing of recognition of deferred day one profit or loss is determined individually. It is either amortized over the life of the instrument, deferred until the instrument’s fair value can be determined using market observable inputs, or realised through settlement.

Measurement methods Amortized cost and effective interest rate The amortized cost is the amount at which the financial asset or financial liability is measured at initial recognition minus the principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity amount and, for financial assets, adjusted for any loss allowance. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial asset or financial liability to the gross carrying amount of a financial asset (i.e. its amortized cost before any impairment allowance) or to the amortized cost of a financial liability. The calculation does not consider expected credit losses and includes transaction costs, premiums or discounts and fees and points paid or received that are integral to the effective interest rate, such as origination fees. For purchased or originated credit-impaired (‘POCI’) financial assets – assets that are credit-impaired at initial recognition – the bank calculates the credit-adjusted effective interest rate, which is calculated based on the amortized cost of the financial asset instead of its gross carrying amount and incorporates the impact of expected credit losses in estimated future cash flows. When the bank revises the estimates of future cash flows, the carrying amount of the respective financial assets or financial liability is adjusted to reflect the new estimate discounted using the original effective interest rate. Any changes are recognised in profit or loss.

Interest income Interest income is calculated by applying the effective interest rate to the gross carrying amount of financial assets, except for: (a) POCI financial assets, for which the original credit-adjusted effective interest rate is applied to the amortized cost of the financial asset. (b) Financial assets that are not ‘POCI’ but have subsequently become credit-impaired (or ‘stage 3’), for which interest revenue is calculated by applying the effective interest rate to their amortized cost (i.e. net of the expected credit loss provision).

Initial recognition and measurement Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions of the instrument. Regular way purchases and sales of financial assets are recognised on trade-date, the date on which the bank commits to purchase or sell the asset. At initial recognition, the bank measures a financial asset or financial liability at its fair value plus or minus, in the case of a financial asset or financial liability not at fair value through profit or loss, transaction costs that are incremental and directly attributable to the acquisition or issue of the financial asset or financial liability, such as fees and commissions. Transaction costs of financial assets and financial liabilities carried at fair value through profit or loss are expensed in profit or loss. Immediately after initial recognition, an expected credit loss allowance (ECL) is recognised for financial assets measured at amortized cost and investments in debt instruments measured at FVOCI, which results in an accounting loss being recognised in profit or loss when an asset is newly originated. When the fair value of financial assets and liabilities differs from the transaction price on initial recognition, the entity recognises the difference as follows: (c) When the fair value is evidenced by a quoted price in an active market for an identical asset or liability (i.e. a Level 1 input) or based on a valuation technique that uses only data from observable markets, the difference is recognised as a gain or loss. (d) In all other cases, the difference is deferred and the timing of recognition of deferred day one profit or loss is determined individually. It is either amortized over the life of the instrument, deferred until the instrument’s fair value can be determined using market observable inputs, or realised through settlement.

I-18 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

2.8.1 Financial assets (i) Classification and subsequent measurement From January 1, 2018, the bank has applied IFRS 9 and classifies its financial assets in the following measurement categories: • Fair value through profit or loss (FVPL); • Fair value through other comprehensive income (FVOCI); or • Amortized cost. The classification requirements for debt and equity instruments are described below:

Debt instruments Debt instruments are those instruments that meet the definition of a financial liability from the issuer’s perspective, such as loans and bonds. Classification and subsequent measurement of debt instruments depend on: (i) The bank’s business model for managing the asset; and (ii) The cash flow characteristics of the asset. Based on these factors, the bank classifies its debt instruments into one of the following three measurement categories: Amortized cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest (‘SPPI’), and that are not designated at FVPL, are measured at amortized cost. The carrying amount of these assets is adjusted by any expected credit loss allowance recognised and measured from these financial assets is included in ‘Interest and similar income’ using the effective interest rate method. Fair value through other comprehensive income (FVOCI): Financial assets that are held for collection of contractual cash flows and for selling the assets, where the assets’ cash flows represent solely payments of principal and interest, and that are not designated at FVPL, are measured at fair value through other comprehensive income (FVOCI). Movements in the carrying amount are taken through OCI, except for the recognition of impairment losses, interest revenue and foreign exchange gains and losses on the instrument’s amortized cost which are recognised in profit or loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in ‘Net gain arising from financial investments’. Interest income from these financial assets is included in ‘Interest income’ using the effective interest rate method. Fair value through profit or loss: Assets that do not meet the criteria for amortized cost or FVOCI are measured at fair value through profit or loss. A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss and is not part of a hedging relationship is recognised in profit or loss and presented in the profit or loss statement within ‘net gains arising from trading activities’ in the period in which it arises, unless it arises from debt instruments that were designated at fair value or which are not held for trading, in which case they are presented separately in ‘Net gain arising from financial investments’. Business model: the business model reflects how the bank manages the assets in order to generate cash flows. That is, whether the bank’s objective is solely to collect the contractual cash flows from the assets or is to collect both the contractual cash flows and cash flows arising from the sale of assets. If neither of these is applicable (e.g. financial assets are held for trading purposes), then the financial assets are classified as part of ‘other’ business model and measured at FVPL. Factors considered by the bank in determining the business model for a group of assets include past experience on how the cash flows for these assets were collected, how the asset’s performance is evaluated and reported to key management personnel, how risks are assessed and managed and how managers are compensated. SPPI: Where the business model is to hold assets to collect contractual cash flows or to collect contractual cash flows and sell, the bank assesses whether the financial instruments’ cash flows represent solely payments of principal and interest (the ‘SPPI test’). In making this assessment, the bank considers whether the contractual cash flows are consistent with a basic lending arrangement i.e. interest includes only consideration for the time value of money, credit risk, other basic lending risks and a profit margin that is consistent with a basic lending arrangement. Where the contractual terms introduce exposure to risk or volatility that are inconsistent with a basic lending arrangement, the related financial asset is classified and measured at fair value through profit or loss. Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest. The Bank reclassifies debt investments when and only when its business model for managing those assets changes. The reclassification takes place from the start of the first reporting period following the change. Such changes are expected to be very infrequent and none occurred during the period.

Equity instruments Equity instruments are instruments that meet the definition of equity from the issuer’s perspective; that is, instruments that do not contain a contractual obligation to pay and that evidence a residual interest in the issuer’s net assets. Examples of equity instruments include basic ordinary shares. The Bank subsequently measures all equity investments at fair value through profit or loss, except where the bank’s management has elected, at initial recognition, to irrevocably designate an equity investment at fair value through other comprehensive income. The bank’s policy is to designate equity investments as FVOCI when those investments are held for purposes other than to generate investment returns. When this election is used, fair value gains and losses are recognised in OCI and are not subsequently reclassified to profit or loss, including on disposal. Dividends, when representing a return on such investments, continue to be recognised in profit or loss as other income when the bank’s right to receive payments is established. Gains and losses on equity investments at fair value through profit or loss are included in the ‘Net trading income’ line in the statement of profit or loss.

I-19 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

(ii) Impairment The bank assesses on a forward-looking basis the expected credit losses (‘ECL’) associated with its debt instrument assets carried at amortized cost and FVOCI and with the exposure arising from loan commitments and financial guarantee contracts. The bank recognises a loss allowance for such losses at each reporting date. The measurement of ECL reflects: • An unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes; • The time value of money; and • Reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions. Please refer to Note 3.1.4.

(iii) Modification of loans The Bank sometimes renegotiates or otherwise modifies the contractual cash flows of customer loans. When this happens, the bank assesses whether or not the new terms are substantially different to the original terms. The bank does this by considering, among others, the following factors: • If the borrower is in financial difficulty, whether the modification merely reduces the contractual cash flows to amounts the borrower is expected to be able to pay. • Whether any substantial new terms are introduced, such as a profit share/equity-based return that substantially affects the risk profile of the loan. • Significant extension of the loan term when the borrower is not in financial difficulty. • Significant change in the interest rate. • Change in the currency the loan is denominated in. • Insertion of collateral, other security or credit enhancements that significantly affect the credit risk associated with the loan. If the terms are substantially different, the Bank derecognises the original financial asset and recognises a ‘new’ asset at fair value and recalculates a new effective interest rate for the asset. The date of renegotiation is consequently considered to be the date of initial recognition for impairment calculation purposes, including for the purpose of determining whether a significant increase in credit risk has occurred. However, the Bank also assesses whether the new financial asset recognised is deemed to be credit-impaired at initial recognition, especially in circumstances where the renegotiation was driven by the debtor being unable to make the originally agreed payments. Differences in the carrying amount are also recognised in profit or loss as a gain or loss on derecognition. If the terms are not substantially different, the renegotiation or modification does not result in derecognition, and the Bank recalculates the gross carrying amount based on the revised cash flows of the financial asset and recognises a modification gain or loss in profit or loss. The new gross carrying amount is recalculated by discounting the modified cash flows at the original effective interest rate (or credit-adjusted effective interest rate for purchased or originated credit-impaired financial assets).

(iv) Derecognition other than on a modification Financial assets, or a portion thereof, are derecognised when the contractual rights to receive the cash flows from the assets have expired, or when they have been transferred and either (i) the Bank transfers substantially all the risks and rewards of ownership, or (ii) the Bank neither transfers nor retains substantially all the risks and rewards of ownership and the Bank has not retained control. The Bank enters into transactions where it retains the contractual rights to receive cash flows from assets but assumes a contractual obligation to pay those cash flows to other entities and transfers substantially all of the risks and rewards. These transactions are accounted for as ‘pass through’ transfers that result in derecognition if the Bank: (i) Has no obligation to make payments unless it collects equivalent amounts from the assets; (ii) Is prohibited from selling or pledging the assets; and (iii) Has an obligation to remit any cash it collects from the assets without material delay. Collateral (shares and bonds) furnished by the bank under standard repurchase agreements and securities lending and borrowing transactions are not derecognised because the bank retains substantially all the risks and rewards on the basis of the predetermined repurchase price, and the criteria for derecognition are therefore not met. This also applies to certain securitisation transactions in which the bank retains a subordinated residual interest. When the contractual rights to receive the cash flows from the assets have been transferred, and the bank neither transfers nor retains substantially all the risks and rewards of ownership, and the bank has retained control of the transferred assets, the bank applies continuing involvement approach.Under this approach, the Bank continues to recognise the transferred asset to the extent of its continuing involvement and recognise the associated liability, to reflect the rights and obligations retained by the Bank. The net carrying amount of the transferred asset and associated liability is: (a) the amortized cost of the rights and obligations retained by the Bank, if the transferred asset is measured at amortized cost; or (b) equal to the fair value of the rights and obligations retained by the Bank when measured on a stand-alone basis, if the transferred asset is measured at fair value.

I-20 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

2.8.2 Financial liabilities (i) Classification and subsequent measurement

In both the current and prior period, financial liabilities are classified as subsequently measured at amortized cost, except for: • Financial liabilities at fair value through profit or loss: this classification is applied to derivatives, financial liabilities held for trading (e.g. short positions in the trading booking) and other financial liabilities designated as such at initial recognition. Gains or losses on financial liabilities designated at fair value through profit or loss are presented partially in other comprehensive income (the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability, which is determined as the amount that is not attributable to changes in market conditions that give rise to market risk) and partially profit or loss (the remaining amount of change in the fair value of the liability). This is unless such a presentation would create, or enlarge, an accounting mismatch, in which case the gains and losses attributable to changes in the credit risk of the liability are also presented in profit or loss; • Financial liabilities arising from the transfer of financial assets which did not qualify for derecognition or when the continuing involvement approach applies. When the transfer of financial asset did not qualify for derecognition, a financial liability is recognised for the consideration received for the transfer. In subsequent periods, the Bank recognises any expense incurred on the financial liability; when continuing involvement approach applies, see note 2.6; and • Financial guarantee contracts and loan commitments.

(ii) Derecognition

Financial liabilities are derecognised when they are extinguished (i.e. when the obligation specified in the contract is discharged, cancelled or expires). The exchange between the bank and its original lenders of debt instruments with substantially different terms, as well as substantial modifications of the terms of existing financial liabilities, are accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. The terms are substantially different if the discounted present value of the cash flows under the new terms, including any fees paid net of any fees received and discounted using the original effective interest rate, is at least 10% different from the discounted present value of the remaining cash flows of the original financial liability. In addition, other qualitative factors, such as the currency that the instrument is denominated in, changes in the type of interest rate, new conversion features attached to the instrument and change in covenants are also taken into consideration. If an exchange of debt instruments or modification of terms is accounted for as an extinguishment, any costs or fees incurred are recognised as part of the gain or loss on the extinguishment. If the exchange or modification is not accounted for as an extinguishment, any costs or fees incurred adjust the carrying amount of the liability and are amortized over the remaining term of the modified liability.

Financial guarantee contracts and loan commitments Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due, in accordance with the terms of a debt instrument. Such financial guarantees are given to banks, financial institutions and others on behalf of customers to secure loans, overdrafts and other banking facilities. Financial guarantee contracts are initially measured at fair value and subsequently measured at the higher of: • The amount of the loss allowance (calculated as described in note 2.8.1); and • The premium received on initial recognition less income recognised in accordance with the principles of IFRS 15. Loan commitments provided by the Bank are measured as the amount of the loss allowance (calculated as described in note 2.8.1). The bank has not provided any commitment to provide loans at a below-market interest rate, or that can be settled net in cash or by delivering or issuing another financial instrument. For loan commitments and financial guarantee contracts, the loss allowance is recognised as a provision. However, for contracts that include both a loan and an undrawn commitment and the Bank cannot separately identify the expected credit losses on the undrawn commitment component from those on the loan component, the expected credit losses on the undrawn commitment are recognised together with the loss allowance for the loan. To the extent that the combined expected credit losses exceed the gross carrying amount of the loan, the expected credit losses are recognised as a provision.

I-21 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

2.9 Fee and commission income The Bank earns fee and commission income from a diverse range of services it provides to its customers. For those services that are provided over a period of time, fee and commission income are recognised over that period. For other services, fee and commission income are recognised when the transactions are completed.

2.10 Dividend income Dividends are recognised when the right to receive payment is established.

2.11 Sale/purchase and repurchase/resale agreements Securities sold subject to a linked repurchase agreements (‘Repos’) with banks and other financial institutions are retained in the financial statements as financial assets held for trading or investment securities, as the Bank still retains substantially all risk and rewards of the ownership of the underlying securities. The related liability is recorded as ‘financial assets sold under repurchase agreements’, due to other banks and financial institutions. Securities and bills purchased under agreements to re-sell (‘Reverse repos’) are not recognised. The receivables are recorded as ‘Financial assets held under resale agreements, due from other banks and financial institutions’. The difference between purchase and sale price is recognised as ‘Interest income’ or ‘Interest expense’ in the income statement over the life of the agreements using the effective interest method.

2.12 Property, plant and equipment The Bank’s fixed assets mainly comprise buildings, motor vehicles, electronic equipment, office equipment and construction in progress. All property, plant and equipment are stated at historical cost less accumulated depreciation and impairment. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in an asset’s carrying amount, only when it is probable that future economic benefits associated with the item will flow to the Bank and the cost of the item can be measured reliably. All other repairs and maintenance costs are charged to income statement during the financial period in which they are incurred. Depreciation is calculated on the straight-line method to write down the cost of such assets to their residual values over their estimated useful lives. The residual values and useful lives of assets are reviewed, and adjusted if appropriate, at each reporting date. Property, plant and equipment are reviewed for impairment at each balance sheet date. Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount. The recoverable amount is the higher of the asset’s fair value less costs to sell and present value of expected future cash flows. Buildings comprise primarily branch office premises and office premises. The estimated useful lives, depreciation rate and estimated residual value rate of buildings, motor vehicles, electronic equipment and office equipment are as follows:

Estimated Estimated residual value Depreciation Type of assets useful lives rate rate Buildings 20 years 5.0% 4.75% Motor vehicles 5 years 5.0% 19.00% Electronic equipment 3 years 5.0% 31.67% Office equipment 5 years 5.0% 19.00%

Construction in progress consists of assets under construction or being installed and is stated at cost. Cost includes equipment cost, cost of construction, installation and other direct costs. Items classified as construction in progress are transferred to property, plant and equipment when such assets are ready for their intended use and begin to account for depreciation. When a fixed asset is disposed or cannot generate economic benefits, it should be derecognized. Gains or losses caused by derecognition(disposal income minus its book value) are accounted for profit or loss of the current period.

2.13 Foreclosed assets

When the Bank’s obligor use foreclosed asset to compensate the principal and interest of loan, foreclosed asset is initially recognised and measured at fair value. When there is evidence indicating that the recoverable amount of the foreclosed assets is lower than the book value, the bank will reduce the book value to the recoverable amount.

I-22 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

2.14 Investment properties

Real estate held by the bank for rental income and not used by the bank is listed as investment properties. Investment properties includes land, housing and buildings. Investment properties are initially measured at cost, including costs that are directly attributable to the properties at the time of acquisition. The Bank adopts the cost model for subsequent measurement of investment properties. The type of assets, estimated useful lives, estimated net residual value, depreciation rate (amortisation rate) and estimated residual value rate of investment properties are as follows:

Estimated Estimated useful lives residual value Depreciation Type of assets (years) rate rate Buildings 20 Years 5.0% 4.75%

Investment properties are reviewed for impairment at each balance sheet date. Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount. The recoverable amount is the higher between the fair value minus the disposal cost and the present value of the expected future cash flow of the asset. When an investment property is sold, transferred, retired or damaged, the Bank recognizes the amount of any proceeds on disposal net of the carrying amount and related taxes in profit or loss for the period.

2.15 Impairment of non-financial assets

At the end of the reporting period or whenever there is an indication that the non-financial assets are impaired, the Bank reviews the carrying amounts of its tangible assets with finite useful lives to determine whether there is any indication that those assets have suffered an impairment loss. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognized in profit or loss immediately. The recoverable amount is the higher between the fair value minus the disposal cost and the present value of the expected future cash flow of the asset. Asset impairment loss is calculated and recognized on the basis of a single asset. If it is difficult to estimate the recoverable amount of a single asset, the recoverable amount of the asset group is determined according to the asset group to which the asset belongs. Asset group is the smallest asset portfolio that can generate cash inflow independently. Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but the increased carrying amount should not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset in prior years. A reversal of an impairment loss is recognized in profit or loss immediately.

2.16 Operating Leases

Leases in which a significant portion of the risk and rewards are retained by the lessor are classified as operating lease. When the Bank is the leasee under an operating lease, rental expenses are charged to ‘Operating expenses’ in the income statement on a straight-line basis over the period of the lease. When the Bank is the leasor under operating leases, the assets subject to the operating lease are accounted for as the Bank’s assets. Rental income is recognised as ‘Other operating income’ in the income statement on a straight-line basis over the lease term net of any incentives given to lessees.

2.17 Cash and cash equivalents

For the purposes of the cash flow statement, cash and cash equivalents comprise balances with less than three months’ maturity from the date of acquisition including: cash, unrestricted balances with central bank and amounts due from banks and other financial institutions.

2.18 Provisions

Provisions are recognised when the Bank has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the risks specific to the obligation, the uncertainties and the time value of money.

I-23 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

2.19 Current and deferred income taxes The tax expense for the period comprises current and deferred income tax. Tax expense is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is recognised in other comprehensive income or equity.

(a) Current income tax The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the reporting date in the countries where the Bank operates and generates taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

(b) Deferred income tax Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. As at the consolidated financial statements date, deferred tax assets and deferred tax liabilities are measured at the tax rates that are expected to apply to the period when the related deferred income tax asset is realised or the deferred income tax liability is settled pursuant to tax laws. The temporary differences primarily arise from impairment allowance for customer loans, impairment allowance for investments classified as receivables, and unrealized gain/loss of available-for-sale assets. Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences and unused tax losses can be utilised. Deferred income tax liabilities are the amounts of income tax payable in respect of taxable temporary differences, which are measured at the amount expected to be paid to the tax authorities in the future. Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

2.20 Share capital Share capital comprises ordinary shares issued.

2.21 Dividend Dividends on ordinary shares are recognized in the period in which they are declared and approved by the Bank’s shareholders.

2.22 Employee benefits Employee benefits refer to the rewards that the Bank offers to its employees for the services they provided or the compensation that is given to dissolve their labour relations. During the accounting period of employees providing services, the Bank will recognize the salary as liabilities and increase the cost of capital or period cost.

(a) Basic Pension Insurance According to the relevant laws and regulations of China, the employees of the Bank have joint the basic social endowment insurance organized by the local labour and social security departments. The Bank has paid the endowment premium to the local social endowment insurance agencies according to the base and proportion in the local requirements for social basic endowment insurance. The social basic endowment insurance mentioned above is accrued to the profit and loss of the current period according to the principle of accrual basis. The labour and social security bureaus will pay the basic social pension benefits to those retired employees.

(b) Annuity Plan Employees in Mainland China who retired after January 1, 2016 participate in the defined contribution plan established (the “Annuity Plan”) by the Bank. The Bank contributes a certain portion of the employees’ gross salaries to the Annuity Plan. Related expenses are recognized in profit or loss when incurred.

2.23 Contingent liability A contingent liability is a possible obligation that arises from past events and whose existence will only be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Bank. It can also be a present obligation arising from past events that is not recognized because it is not probable that an outflow of economic resources will be required or the amount of obligation cannot be measured reliably. A contingent liability is not recognized but is disclosed in the notes to the consolidated financial statements. When a change in the probability of an outflow occurs so that outflow is probable and the amount can be reliably measured, it will then be recognized as a provision.

2.24 Financial guarantee contracts – IAS 39 and IAS 18 Financial guarantee contracts are contracts that require the Bank as the guarantor (the ‘issuer’) to make specified payments to reimburse the beneficiary of the guarantee (the ‘holder’) for a loss the holder incurs when a specified debtor fails to make payment when due in accordance with the terms of a debt instrument. The fair value of the guarantee (being the guarantee fees received) is initially recognised as deferred income in ‘other liabilities’. After initially confirmed, the asset is measured based on the higher one of the following two figures: (1) the amount specified according to IAS 37 Provisions, Contingent Liabilities, and Contingent assets; (2) the initial confirmed amount less the accumulative amortization specified according to IAS 18 Revenue.

I-24 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

2.25 Fiduciary activities

Assets and income arising thereon together with related undertakings to return such assets to customers are excluded from the financial statements where the Bank acts in a fiduciary capacity such as nominee, trustee, custodian or agent. The Bank grants entrusted loans on behalf of third-party lenders. The Bank grants loans to borrowers, as agent, at the direction of the third-party lenders, who fund these loans. The Bank has been contracted by these third-party lenders to manage the administration and collection of these loans on their behalf. The third-party lenders determine both the underwriting criteria for and all terms of the entrusted loans including their purposes, amounts, interest rates, and repayment schedule. The Bank charges a commission related to its activities in connection with the entrusted loans which are recognised ratably over the period the service is provided. The risk of loss is born by the third-party lenders, thus the principle amounts of the entrust loans are recorded on the off-balance sheet.

2.26 Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker is the person or group that allocates resources to and assesses the performance of the operating segments of an entity. The Bank has determined the senior management team represented by the governor as its chief operating decision maker. An operating segment is a component of the Bank with all of the following conditions are satisfied: (1) that component can earn revenues and incur expenses from ordinary activities; (2) the component’s operating results are regularly reviewed by the chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and (3) discrete financial statements for the component is available to the Bank. If two or more operating segments have similar economic characteristics, and certain conditions are satisfied, they may be aggregated into a single operating segment. Intra-segment revenue and costs are eliminated. Income and expenses directly associated with each segment are included in determining segment performance. The classification of reporting segments are based on the operating segments, and the assets and expenses shared by all the segments are allocated according to their scales. The Bank has the following segments: Corporate Banking, Retail Banking, Financial Markets, Unallocated.

3 FINANCIAL RISK MANAGEMENT Overview

The Bank’s business activities expose to a variety of financial risks and those activities involve analysis, evaluation, acceptance and management of some degree of risks or combination of risks. Managing risks are core to the financial business, and operational risks are an inevitable consequence of being in business. The Bank’s aim is therefore to achieve an appropriate balance between risk and return and minimise potential adverse effects on the Bank’s financial performance. The Bank’s risk management policies are designed to identify and analyse these risks, to set appropriate risk limits and controls, and to monitor the risks and adherence to limits by means of reliable and up-to-date information systems. The Bank regularly reviews its risk management policies and systems to reflect changes in markets, products and emerging best practice. The Board of Directors is the highest authority for the Bank’s overall risk management. It exams and approves strategy and measures of risk management and monitors risk management and internal control system. It assesses overall risk based on monitoring information and the risk report of senior management. The Risk Management Committee is responsible for approving risk management policies for the bank. The senior management of the bank is responsible for overall risk management and internal control, formulating and implementing risk management policies and procedures. In addition, the internal audit department is responsible for independent review of risk management and control environment. The Bank is subject to a number of financial risks, primarily including credit risk, interest risk, operation risk and liquidity risk.

3.1 Credit risk

The Bank is exposed to credit risk, which is the risk that a customer or counterparty will be unable to or unwilling to meet its obligations under a contract. Changes in the economy or those in credit quality of a particular industry segment or concentration in the Bank’s portfolio, could result in losses that are different from those provided for at the balance sheet date. Credit risk increases when the counterparties are in the similar geographical or industry segments. Credit exposures arise principally from customer loans, debt securities and due from banks and other financial institutions. There are also credit risk exposures in off-balance sheet financial arrangements such as loan commitments, guarantees, acceptances and letters of credit. Exposure to credit risk is managed through regular analysis of the ability of borrowers to meet interest and principal repayment obligations and by changing these lending limits where appropriate. Exposure to credit risk is also managed in part by obtaining collateral and corporate and personal guarantees.

I-25 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

3.1.1 Credit risk measurement (a) Credit business The Bank measures and manages the quality of its credit assets in accordance with the CBRC’s Guidelines of Risk Classification of Loans and Guidelines of Risk Classification of Micro Enterprises loans (Trial Implementation). The classification of loans is based on the borrowers’ repayment ability, payment history, willing of repayment, guarantee of loans, legal responsibility and loan administration. The Guidelines of Risk Classification of Loans require financial institutions to classify their credit assets into five categories, namely pass, special mention, substandard, doubtful and loss, of which the last three categories are non-performing loans. The Bank monitors the overdue status of its loans to retail customers in managing credit risk. The core definitions of credit asset classifications in ‘Loan Risk Classifications Guiding Principles’ are as follows: Pass: The borrower can fulfil the contracts, and there is insufficient reason to suspect that the principal and interest of loans cannot be repaid in full on time. Special mention: The borrower has the ability to make current payments, but there may be some potential issues that could have adverse impact on the future payments. Substandard: The borrower’s repayment ability has been impaired and their normal income cannot repay the loan principal plus interest in full. Even with execution of guarantee, there may be certain level of loss. Doubtful: The borrower cannot repay the principal plus the interest in full. Even with the execution of guarantee, there will be a significant loss. Loss: After taking consideration of all possible recovery actions or all necessary legal proceedings, the future outcome of recovery is likely to be little or no recovery. Risk management department coordinates the classification of loans. The classification of loans is performed quarterly and adjusted timely. Risk management department summarises the reclassification information justified by related department quarterly and reports to risk management committee for approval. The classification of loans is monitored through credit management system.

(b) Financial market business The Bank manages the credit quality of due from, placements with and loans to banks and other financial institutions considering the size, financial position and the external credit rating of banks and financial institutions. The head office monitors and reviews the credit risk of loans to banks and other financial institutions by counterparties periodically. Limits are placed on different counterparties. For debt securities and other financial market business, the Bank manages the credit risk exposures by setting limits to the external credit ratings of its investments.

3.1.2 Risk limit control and mitigation policies (a) Credit business The Bank takes the same credit risk management control procedure for on and off-balance sheet risk exposures. The risk control procedure of the Bank’s credit risk includes the following: credit policy stipulating, pre-credit investigation, risk assessment, collateral assessment, examination and approval of credit loans, draw-down, post-loan management, management on non-performing loans, due-diligence on non-performing loans. The Bank has established a mechanism of risk warning for credit business, mainly including single customer credit authorisation risk and systematic risk. Unified credit authorisation management is implemented for key customers. Once the maximum exposure of a single customer is determined, the customer’s exposure limit should not exceed its credit limit in the Bank at any time before it achieved new credit limit. The Bank takes action to strengthen controls over credit risk in relation to group customer and related party customer. The Bank places limits in relation to key group customers to control credit risk. The committee of related party transactions is set up under the Board to manage controls on related party transaction. The Bank employs a range of policies and practices to mitigate credit risk. The most traditional of these is taking collateral, which is common practice. Except for few customers with excellent quality, the Bank requires the borrowers provide collateral for loans. The type of collateral mainly includes collateral, pledge and guarantee. The Bank employs property appraisal companies with certificates to evaluate the collateral. The detailed collateral type and amount is determined by credit risk of counterparty or customers. The Bank employs a range of asset evaluation companies to value the collaterals. The Bank generally accepts assets whose value are clear as collaterals, such as national treasury bonds.

(b) Financial market business Financial inter-bank division centralises control over financial market business with hierarchical authorisation from department heads to the president for different business types such as sale, distribution, trade and repurchase of debt securities. The Bank invests debt securities with hierarchical authorisation under the guidelines of asset and liability committee. The Bank sets stop-loss point based on analysis of trend of macroeconomic situation and monetary policy. The Bank places limits for interbank borrowing and lending. The Bank manages the credit risk exposures of interbank borrowing and lending strictly within the limit of regulation and credit authorisation.

I-26 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

The debt security traders regularly review and monitor the changes of market interest and report the market value of debt securities to Financial Interbank Department and Assets Liability Department. If there is any violation of interest rate in the market or any significant credit risk encountered to debtors, the business department responsible for security investment will ask for holding extraordinary asset and liability management meeting to conclude an emergency plan. The debt trader will react according to the plan.

3.1.3 Collateral and guarantee

The Bank has a range of policies and practices intended to mitigate credit risk. The most useful practice is to accept collaterals. The Bank implements guidelines on the acceptability of specific classes of collateral. The maximum loan-to-value ratio origination is determined by the credit business department. The follow-up management of the collateral is carried out by the related business management department. The principal types of collateral for corporate loans and personal loans are as follows:

Maximum Type of Collateral loan-to-value ratio Collaterals Residential and Commercial properties 60% Land use rights for commercial, residential and comprehensive use 50% Land use rights for industrial use 40% Plants, workshops and factories or office and warehouse in non-urban area 40% Forest, trees and woodland usage rights 40% Construction in progress 50% Pledges Security deposits and certificates of deposit (including electronic certificates of deposits) issued by the Bank 100% Certificates of deposit issued by other banks 90% Treasury bonds, bank checks and banker’s acceptance bills 90% Commercial acceptance bills 80% Debt securities issued by corporations with rating of AA or above 50% Shares and equities 50% Warehouse receipts and bills of lading 50% Receivables 50% Property right from intellectual properties rights including patents and copyrights 30%

Mortgage loans to retail customers are generally collateralised by residential properties. Other loans are collateralised according to the nature of the loan. For loans guaranteed by a third party guarantor, the Bank will assess the guarantor’s credit rating, financial condition, credit history and ability to meet obligations. Collateral held as security for financial assets other than customer loans is determined by the nature of the instrument. Debt securities, treasury and other eligible bills are generally unsecured, with the exception of certain asset-backed securities and similar instruments, which are secured by portfolios of financial instruments. Collateral is also held as part of reverse repurchase agreements. Details of collateral accepted and which the Bank is obligated to return are disclosed in Note 39.

3.1.4 Policies for ECL allowance The bank divides financial instruments into 3 stages according to IFRS 9. Stage 1 is “not credit-impaired on initial recognition”, at which the Bank only needs to calculate the ECL in next 12 months. Stage 2 is “financial assets with significant increase in credit risk” and stage 3 is “credit-impaired financial assets”, at which the Bank needs to calculate lifetime ECL.

3 stage classification According to IFRS 9, 3-stage classification criteria need to be clearly specified. For financial instruments, those are “not credit-impaired on initial recognition” will be classified in stage 1 and calculate the 12-month ECL. If “a significant increase in credit risk” is identified, the financial instrument will be moved to stage 2 and calculate the lifetime ECL. If the financial instrument is credit-impaired, the financial instrument will be moved to stage 3.The detailed classification criteria has been set up, and take into consideration of overdue days, etc. The stages are transferable. For example, when the credit risk of financial instruments classified in stage 1 significantly increase, they will be transferred to second stages.

(1) Financial assets with significant increase in credit risk When triggerring one or more of the following quantitative, qualitative or upper bound indicators, the bank considers that the credit risk of financial instruments has increased significantly.

Quantitative standard The principal or interest of the contract is overdue for more than 30 days, but less than 90 days.

I-27 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

Qualitative standard The economic, technological or legal environment in which the debtor is situated will change at the present time or in the near future, thereby adversely affecting the bank. The debtor violated the terms of the contract, such as overdue payment of interest or principal or default. The debtor’s external credit rating (bond rating or issuer rating) is lower than BBB-.

(2) Definition of default and loss incurred. When a financial instrument meets one or more of the following conditions, the bank considers the financial asset as having defaulted, and the criteria are consistent with the definition of the loss incurred

Quantitative standard The principal or interest of the contract is overdue for more than 90 days. The debtor’s external credit rating (bond rating or issuer rating) has broken down.

Qualitative standard The debtor is likely to go bankrupt or carry out other financial restructuring. The issuer of financial instruments assets held by the bank has serious financial difficulties. The bank has made concessions to the debtor in financial difficulty for economic or legal reasons. The market of related financial instruments is deserted due to the debtor’s financial difficulty. The above standards apply to all financial instruments of the bank; the definition of default is consistently applied to the calculation of expected credit losses of the bank, including default probability (PD), exposure at default (EAD) and loss given default (LGD) modeling. When a financial instrument does not meet any definition of default for six consecutive months, the bank no longer regards it as an asset in default (reversal). According to the relevant analysis, the bank has considered the possibility that the financial instruments will be in default again from the reversal under various circumstances, and decided to adopt the six-month observation period.

(3) Measurement of expected credit loss: explanation of parameters, assumptions and estimation techniques. Depending on whether there is a significant increase in credit risk and whether the assets have been impaired, the bank will measure the loss provision for different assets by expected credit losses for 12 months or entire life of the asset. Expected credit loss is the product of probability of default(PD), exposure at default (EAD) and loss given default (LGD) after term adjustment and discount. Related definitions are as follows: Probability of default (PD) refers to the possibility that the borrower will not be able to fulfil his obligations in the next 12 months or throughout the remaining period of existence. The bank builds the migration matrix based on historical data to calculate the 12-month probability of default, and derives the default probability of the entire duration from the 12-month probability of default through the Markov chain model. Loss given default (LGD) is the percentage of risk exposure loss at the time of default. The default loss rate varies depending on the type of counterparty and the availability of collateral or other credit support. Exposure at default (EAD) refers to the amount that the bank should pay when the default occurs in the next 12 months or throughout the remaining life. The bank’s exposure at default is determined by the expected repayment arrangements, and different types of products will vary. For installments and one-time repayments, the bank determines the exposure at default according to the repayment plan stipulated in the contract. The bank determines the expected credit losses by forecasting the probability of default, loss given default and exposure at default of single debt. The bank multiplies the three items and adjusts their duration (if there is no early repayment or breach of contract). This approach can effectively calculate the expected credit losses for future periods, and then discount the results of each period to the report date and add up. The discount rate used in the calculation of expected credit loss is the real interest rate or its approximate value.

Establishment of impairment model The bank has established macro-economic forecast model, along with adjustments from external economy experts. The bank conduct forecasts regularly to establish three economic scenario, optimistic, basic and pessimistic. Basic scenario is defined as the most probable situation, which will become benchmark for other scenarios. Optimistic and pessimistic scenarios are possible scenarios which are better and worse than basic scenario respectively. The impairment model is established through a top down approach. The bank has developed several entity and retail impairment models, including regression models for different macro-economic indicators such as GDP, CPI, benchmark interest rate, M2, etc. and use MERTON formula and historical default information to make ‘forward looking’ adjustments to probability of default to achieve “forward-looking” calculation of provision. For asset portfolios that regression model can not be established, for example, customers’ default rate is extremely low or assets without an appropriate internal rating method, the Bank mainly applies expected loss rate from similar portfolios which regression model have been established so as to increase coverage range of existing impairment models.

I-28 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

3.1.5 Maximum exposure to credit risk before collateral held or other credit enhancements:

As at December 31, 2015 2016 2017 Assets Balances with central bank 4,101,288 6,410,044 8,076,470 Financial assets held under resale agreements, due from other banks and financial institutions 6,641,946 4,971,831 13,344,757 Customer loans – Corporate loans 5,369,939 8,133,110 11,492,441 – Personal loans 3,599,387 4,132,389 4,897,992 – Discounted bills 734,056 1,893,577 2,443,400 Investment securities – credit related financial assets 3,719,625 7,444,368 8,279,379 Investment securities – available-for-sales 3,188,191 5,846,451 9,065,771 Financial investments – investments classified as receivables 3,449,000 11,597,005 9,340,174 Other investment securities 167,472 342,501 514,682 30,970,904 50,771,276 67,455,066 Off-balance sheet exposures Acceptances 102,483 995,363 1,238,938 Financial guarantees 45,850 45,850 573,240

As at June 30, 2018 Non- ECL defaulting defaulted allowance Total Assets Balances with central bank 7,809,344 – – 7,809,344 Financial assets held under resale agreements, due from other banks and financial institutions 9,432,898 – (7,936) 9,424,962 Customer loans – stage 1 23,557,186 – (415,649) 23,141,537 – stage 2 517,635 – (104,316) 413,319 – stage 3 – 220,649 (88,001) 132,648 Financial investments-credit-related financial assets – stage 1 6,941,450 – (97,771) 6,843,679 Financial investments – fair value through profit or loss 2,306,209 – – 2,306,209 Financial investments – fair value through other comprehensive income 5,064,079 – – 5,064,079 Financial investments – amortized cost 17,990,871 – (168,380) 17,822,491 Other financial assets 498,224 – – 498,224 74,117,896 220,649 (882,053) 73,456,492 Off balance sheet guarantees and commitments 1,212,663 – (7,888) 1,204,775

The above table represents a case scenario of the maximum credit risk exposure to the Bank at June 30, 2018, December 31, 2017, December 31, 2016 and December 31, 2015, without taking account of any related collateral or other credit enhancements. For on-balance sheet assets, the exposures above are based on net carrying amounts as reported in the statement of financial position. As shown above, as at June 30, 2018, December 31, 2017, December 31, 2016 and December 31, 2015, the total on-balance sheet exposure derived from customer loans and financial investments were 64.77%, 76.91%, 67.48% and 75.87%, respectively. The management is confident in its ability to continue to control and maintain minimal exposure to credit risk to the Bank from its customer loans based on the followings: • At December 31, 2015, 2016, 2017 and June 30, 2018, the largest portion of personal loan, which is mortgage loan, was backed by collateral; • At December 31, 2015, 2016, 2017 and June 30, 2018, the customer loans portfolio was considered to be neither overdue nor impaired are 97.90%, 97.20%, 98.43% and 98.49%; • RMB5 million in 2015, RMB37.6 million in 2016, RMB1.24 million in 2017 customer loans assessed on an individual basis with an impairment proportion of 0.30%, 0.53%, 0.99% was impaired respectively. The impairment proportion of stage-3 loans is 0.91% in June 30, 2018.

I-29 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

3.1.6 Customer loans

Customer loans are summarised as follows:

As at December 31, 2015 Corporate Discounted loans Personal loans bills Total Neither overdue nor impaired (a) 5,479,793 3,548,202 740,353 9,768,348 Overdue but not impaired (b) 112,000 67,703 – 179,703 Impaired (c) 5,000 24,815 – 29,815 Total 5,596,793 3,640,720 740,353 9,977,866 Less: Collective impairment allowances (223,737) (41,333) (6,298) (271,368) Individual impairment allowances (3,117) – – (3,117) Total allowance (226,854) (41,333) (6,298) (274,485) Net amount 5,369,939 3,599,387 734,055 9,703,381

As at December 31, 2016 Corporate Discounted loans Personal loans bills Total Neither overdue nor impaired (a) 8,144,851 4,055,702 1,926,948 14,127,501 Overdue but not impaired (b) 236,420 93,400 – 329,820 Impaired (c) 37,600 39,540 – 77,140 Total 8,418,871 4,188,642 1,926,948 14,534,461 Less: Collective impairment allowances (261,641) (56,252) (33,372) (351,265) Individual impairment allowances (24,120) – – (24,120) Total allowance (285,761) (56,252) (33,372) (375,385) Net amount 8,133,110 4,132,390 1,893,576 14,159,076

As at December 31, 2017 Corporate Discounted loans Personal loans bills Total Neither overdue nor impaired (a) 11,760,239 4,855,341 2,481,153 19,096,733 Overdue but not impaired (b) 67,000 44,909 – 111,909 Impaired (d) 123,923 68,791 – 192,714 Total 11,951,162 4,969,041 2,481,153 19,401,356 Less: Collective impairment allowances (372,213) (71,050) (37,752) (481,015) Individual impairment allowances (86,508) – – (86,508) Total allowance (458,721) (71,050) (37,752) (567,523) Net amount 11,492,441 4,897,991 2,443,401 18,833,833

As at June 30, 2018 Corporate Discounted loans Personal loans bills Total Stage 1 18,164,850 5,217,593 174,743 23,557,186 Stage 2 432,163 85,472 – 517,635 Stage 3 155,071 65,578 – 220,649 Total 18,752,084 5,368,643 174,743 24,295,470 Less: ECL allowance (555,787) (50,084) (2,095) (607,966) Net amount 18,196,297 5,318,559 172,648 23,687,504

I-30 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

(a) Gross Customer loans neither overdue nor impaired

As at December 31, 2015

Internal classification Pass Special mention Total Corporate loans 4,814,769 665,024 5,479,793 Personal loans 3,464,147 84,055 3,548,202 Discounted bills 740,353 – 740,353 Total 9,019,269 749,079 9,768,348

As at December 31, 2016

Internal classification Pass Special mention Total Corporate loans 7,715,541 429,310 8,144,851 Personal loans 3,957,623 98,079 4,055,702 Discounted bills 1,926,948 – 1,926,948 Total 13,600,112 527,389 14,127,501

As at December 31, 2017

Internal classification Pass Special mention Total Corporate loans 11,383,056 377,183 11,760,239 Personal loans 4,791,507 63,834 4,855,341 Discounted bills 2,481,153 – 2,481,153 Total 18,655,716 441,017 19,096,733

(b) Customer loans overdue but not impaired

Gross amount of customer loans by types of customers that were overdue but not impaired are as follows:

As at December 31, 2015 Overdue up Overdue Overdue Overdue to 30 days 30 – 60 days 60 – 90 days over 90 days Total Corporate loans 42,100 37,900 – 32,000 112,000 Personal loans 42,403 24,060 1,240 – 67,703 Discounted bills ––––– Total 84,503 61,960 1,240 32,000 179,703

As at December 31, 2016 Overdue up Overdue Overdue Overdue to 30 days 30 – 60 days 60 – 90 days over 90 days Total Corporate loans 42,900 51,950 8,770 132,800 236,420 Personal loans 47,186 25,065 5,694 15,455 93,400 Discounted bills ––––– Total 90,086 77,015 14,464 148,255 329,820

As at December 31, 2017 Overdue up Overdue Overdue Overdue to 30 days 30 – 60 days 60 – 90 days over 90 days Total Corporate loans 67,000–––67,000 Personal loans 29,321 12,468 3,120 – 44,909 Discounted bills ––––– Total 96,321 12,468 3,120 – 111,909

I-31 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

Internal classification Stage 1 Stage 2 Total Corporate loans 18,158,850 367,088 18,525,938 Personal loans 5,162,423 66,544 5,228,967 Discounted bills 174,743 – 174,743 Total 23,496,016 433,632 23,929,648

As at June 30, 2018 Overdue up Overdue Overdue Overdue to 30 days 30 – 60 days 60 – 90 days over 90 days Total Corporate loans – stage 1 6,000–––6,000 – stage 2 – 950 64,125 – 65,075 Total 6,000 950 64,125 – 71,075

As at June 30, 2018 Overdue up Overdue Overdue Overdue to 30 days 30 – 60 days 60 – 90 days over 90 days Total Personal loans – stage 1 55,513–––55,513 – stage 2 9,223 6,419 2,943 – 18,585 Total 64,736 6,419 2,943 – 74,098

(d) Customer loans that impaired/stage-3 customer loans

As at December 31, As at June 30, 2015 2016 2017 2018 Impaired loans Corporate loans 5,000 37,600 123,923 N/A Personal loans 24,815 39,540 68,791 N/A 29,815 77,140 192,714 N/A Stage-3 loans Corporate loans N/A N/A N/A 155,071 Personal loans N/A N/A N/A 65,578 Discounted bills N/A N/A N/A – N/A N/A N/A 220,649

The breakdown of the gross amount of individually impaired/Stage-3 customer loans by class, along with the fair value of related collateral held by the Bank as security, are as follows:

As at December 31, As at June 30, 2015 2016 2017 2018 Corporate loans 10,092 81,662 259,455 613,707 Personal loans 16,466 72,484 141,542 157,805 26,558 154,146 400,997 771,512

The amount of the fair value of the collaterals are limited to the credit risk exposure of each loan and advance payment secured. As at December 31, 2017, individually impaired customer loans before taking into consideration the collateral held amounted to RMB123,923 thousand (2016: RMB37,600 thousand, 2015: RMB5,000 thousand). As at June 30, 2018, Stage-3 customer loans before taking into consideration the collateral held amounted to RMB220,649 thousand. The fair value of collaterals is estimated based on the latest available external valuations, the realization experience of the current collaterals and the market conditions.

I-32 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

(e) Restructured customer loans

Restructuring activities include approved debtor repayment plans, modification and deferral of payments. Following restructuring, a previously overdue customer account is reset to a normal status and managed together with other similar accounts. Restructuring policies and practices are based on indicators or criteria which, in the judgment of local management, indicate that payment will most likely continue to be made. These policies are under regular review. Restructuring is most commonly applied to term loans, in particular mid-term and long-term loans.

As at December 31, As at June 30, 2015 2016 2017 2018 Restructured customer loans 4,400 216,940 121,493 162,437

(f) Overdue customer loans by security and overdue date

As at December 31, 2015 Overdue Overdue up 90 days – Overdue Overdue to 90 days 1 year 1 – 3 years over 3 years Total Pledged loans 9,000–––9,000 Collateralised loans 127,463 41,700 1,600 – 170,763 Guaranteed loans 11,000 14,300 200 23 25,523 Unsecured loans 460 110 766 259 1,595 Total 147,923 56,110 2,566 282 206,881

As at December 31, 2016 Overdue Overdue up 90 days – Overdue Overdue to 90 days 1 year 1 – 3 years over 3 years Total Pledged loans 13,010 3,000 – – 16,010 Collateralised loans 98,296 147,468 28,685 – 274,449 Guaranteed loans 71,754 37,400 4,100 850 114,104 Unsecured loans 1,001 140 624 – 1,765 Total 184,061 188,008 33,409 850 406,328

As at December 31, 2017 Overdue Overdue up 90 days – Overdue Overdue to 90 days 1 year 1 – 3 years over 3 years Total Pledged loans 290 340 – – 630 Collateralised loans 48,081 20,697 87,913 1,430 158,121 Guaranteed loans 40,420 3,734 2,850 312 47,316 Unsecured loans 27,310 2,158 129 564 30,161 Total 116,101 26,929 90,892 2,306 236,228

As at June 30, 2018 Overdue Overdue up 90 days – Overdue Overdue to 90 days 1 year 1 – 3 years over 3 years Total Pledged loans 3,590 – 40 – 3,630 Collateralised loans 72,705 69,797 92,570 5,034 240,106 Guaranteed loans 73,449 1,860 363 1,500 77,172 Unsecured loans 100 29,088 259 538 29,985 Total 149,844 100,745 93,232 7,072 350,893

I-33 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

(g) Industry analysis

Concentration risks analysis for customer loans (gross) by economic sectors:

As at December 31, As at June 30, 2015 2016 2017 2018 Amount % Amount % Amount % Amount % Corporate loans Real estate 596,500 5.98 1,705,684 11.74 2,077,794 10.71 4,179,338 17.20 Renting and business activities 752,199 7.54 654,380 4.50 2,941,430 15.16 3,368,610 13.87 Wholesale and retail trade 1,008,550 10.11 1,259,370 8.66 1,087,680 5.61 2,485,099 10.23 Manufacturing 749,620 7.51 847,073 5.83 1,023,967 5.28 2,207,008 9.08 Construction 466,625 4.68 1,302,285 8.96 1,913,529 9.86 1,976,946 8.14 Administration of water conservancy, environment and public facilities 352,200 3.53 824,600 5.67 967,175 4.99 1,369,960 5.64 Education 447,949 4.49 507,199 3.49 227,125 1.17 947,188 3.90 Accommodation and catering 315,650 3.16 238,864 1.64 314,738 1.62 549,738 2.26 Transportation, warehousing and express service 182,650 1.83 264,770 1.82 365,320 1.88 408,220 1.68 Culture, sports and entertainment 103,000 1.03 199,200 1.37 172,950 0.89 309,200 1.27 Scientific research and technology services 6,800 0.07 32,800 0.23 205,300 1.06 227,460 0.94 Agriculture, forestry, animal husbandry and fishery 182,350 1.83 201,448 1.39 153,737 0.79 163,092 0.67 Electricity, heat, gas and water production and supply 64,500 0.65 170,828 1.18 144,233 0.74 163,698 0.67 Household services, repairs and other services 39,800 0.40 88,550 0.61 200,574 1.03 67,013 0.28 Others 328,400 3.29 121,820 0.84 155,610 0.82 329,514 1.35 Total corporate loans 5,596,793 56.10 8,418,871 57.93 11,951,162 61.61 18,752,084 77.18 Residential mortgage loans 2,029,985 20.33 2,132,347 14.66 2,253,924 11.61 2,383,339 9.81 Personal business loans 1,424,462 14.28 1,667,019 11.47 2,017,935 10.40 2,265,800 9.33 Personal consumption loans 186,273 1.87 389,276 2.68 697,182 3.59 719,505 2.96 Total Personal loans 3,640,720 36.48 4,188,642 28.81 4,969,041 25.60 5,368,644 22.10 Discounted bills 740,353 7.42 1,926,948 13.26 2,481,153 12.79 174,743 0.72 Total customer loans 9,977,866 100.00 14,534,461 100.00 19,401,356 100.00 24,295,471 100.00

The concentration risks analysis of customer loans is analyzed based on industry classification of the borrowers.

(h) Type of collateral analysis

Analysis for customer loans (gross) by type of collateral:

As at December 31, As at June 30, 2015 2016 2017 2018 Pledged loans 1,423,388 3,637,813 5,944,666 4,481,326 Collateralised loans 5,477,216 6,968,720 7,671,090 10,687,721 Guaranteed loans 2,650,946 3,340,965 4,342,813 7,864,698 Unsecured loans 426,316 586,963 1,442,787 1,261,726 Total 9,977,866 14,534,461 19,401,356 24,295,471

I-34 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

3.1.7 Investment securities The table below presents an analysis of investment securities by independent rating agencies designation including China Chengxin International Credit Rating Co., Ltd., Dagong Global Credit Rating Co., Ltd., China Lianhe Credit Rating Co., Ltd., Shanghai Fareast Credit Rating Co., Ltd, Shanghai Brilliance Credit Rating & Investors Service Co., Ltd. and Pengyuan Credit Rating Co., Ltd., for RMB securities as at December 31, 2015, 2016, 2017 and June 30, 2018. The rating results of investment securities as following: As at December 31, 2015

Financial Financial investments – investments – credit related investments Financial financial classified as investments – assets receivables available-for-sale Total RMB securities Unrated(a) 3,719,625 3,449,000 3,187,216 10,355,841 Total 3,719,625 3,449,000 3,187,216 10,355,841

As at December 31, 2016

Financial Financial investments – investments – credit related investments Financial financial classified as investments – assets receivables available-for-sale Total RMB securities AA- to AA+ – – 967,177 967,177 Unrated(a) 7,444,368 11,597,005 4,878,299 23,919,672 Total 7,444,368 11,597,005 5,845,476 24,886,849

As at December 31, 2017

Financial Financial investments – investments – credit related investments Financial financial classified as investments – assets receivables available-for-sale Total RMB securities AA- to AA+ – – 1,787,819 1,787,819 Unrated(a) 8,279,379 9,340,174 7,276,956 24,896,509 Total 8,279,379 9,340,174 9,064,775 26,684,328

As at June 30, 2018

Financial Financial investment – investments Financial credit – fair value Financial investments – related through investments amortized financial profit or loss – FVOCI cost assets Total RMB securities AAA – 677,647 49,860 – 727,507 AA- to AA+ – 1,390,964 767,467 – 2,158,431 Unrated(b) 2,306,209 2,995,468 17,005,164 6,843,679 29,150,520 Total 2,306,209 5,064,079 17,822,491 6,843,679 32,036,458

(a) Unrated financial investment mainly include national debt, securities issued by policy banks, wealth management products issued by other commercial banks, monetary fund and financial investments whose bottom financiers are qualified and large state-owned enterprises or private enterprises. As at December 31, 2015, 2016, 2017 and June 30, 2018, there was no overdue debt securities held and individually impaired debt securities. As at December 31, 2015, 2016 and 2017, the impairment provision for investments classified as receivables was RMB0 thousand, RMB47,475 thousand and RMB127,999 thousand. The impairment provision for financial investments- credit related financial assets was RMB95,375 thousand, RMB94,832 thousand and RMB120,768 thousand. As at June 30, 2018, the ECL allowance for financial investments-fair value through other comprehensive income is 1,601 thousand. The ECL allowance for financial investments-amortized cost 168,380 thousand. The ECL allowance for financial assets-credit related financial assets is 97,771 thousand.

I-35 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

Financial investments – investments classified as receivables are summarised as follows:

As at December 31, As at June 30, 2015 2016 2017 2018 Neither overdue nor impaired 3,449,000 11,644,480 9,464,270 N/A Less: Impairment allowances – 47,475 124,096 N/A Net amount 3,449,000 11,597,005 9,340,174 N/A

Financial investments – amortized cost are summarised as follows:

As at December 31, As at June 30, 2015 2016 2017 2018 Stage 1 N/A N/A N/A 17,990,870 Less: ECL allowance N/A N/A N/A 168,380 Net amount N/A N/A N/A 17,822,491

Financial investments – credit related financial assets are summarised as follows:

As at December 31, As at June 30, 2015 2016 2017 2018 Neither overdue nor impaired 3,815,000 7,539,200 8,404,050 N/A Stage 1 N/A N/A N/A 6,941,450 Less: Impairment allowances 95,375 94,832 124,671 N/A Less: ECL allowance N/A N/A N/A 97,771 Net amount 3,719,625 7,444,368 8,279,379 6,843,679

Concentration risks analysis for financial investments – credit related financial assets by economic sectors:

As at December 31, As at June 30, 2015 2016 2017 2018 amount % amount % amount % amount % Financial assets-credit related financial assets Public administration, social security 2,595,000 68.02 1,585,000 21.02 700,000 8.33 150,000 2.16 Real estate 570,000 14.94 3,068,200 40.70 3,222,050 38.34 3,051,950 43.97 Administration of water conservancy, environment and public facilities 350,000 9.17 650,000 8.62 450,000 5.35 450,000 6.48 Renting and business activities 180,000 4.72 1,400,000 18.57 2,966,000 35.29 2,428,500 34.99 Manufacturing 120,000 3.15 120,000 1.59 290,000 3.45 –– Transportation, storage and postal – – 500,000 6.63 – – 90,000 1.30 Construction – – 216,000 2.87 206,000 2.45 201,000 2.90 Wholesale and retail trade –– – – 570,000 6.78 570,000 8.21 Total 3,815,000 100.00 7,539,200 100.00 8,404,050 100.00 6,941,450 100.00

The concentration risks analysis of financial assets-credit related financial assets is analyzed based on industry classification of the borrowers.

3.1.8 Foreclosed assets

As at December 31, As at June 30, 2015 2016 2017 2018 Business properties 18,068 15,500 109,919 163,962 Other properties – – 5,179 3,655 Total 18,068 15,500 115,098 167,617

Foreclosed assets are sold as soon as practicable with the proceeds used to reduce the outstanding indebtedness. The Bank does not generally occupy foreclosed properties for its business use. Foreclosed assets are classified in the statement of financial position as other assets.

3.1.9 Concentration risk analysis for financial assets with credit risk exposure The Bank’s geographical risk is primarily concentrated in Mainland China.

I-36 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

3.2 Market risk 3.2.1 Overview

The Bank takes on exposure to market risks, which is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market rates and prices. Market risks arise from open positions in interest rate, currency and equity products, all of which are exposed to general and specific market movements and changes in the level of volatility of market rates or prices such as interest rates, credit spreads and equity prices. The Bank separates exposures to market risk into either trading or non-trading portfolios. The market risks arising from trading and non-trading activities are monitored by risk management department and assets and liabilities management department. Regular reports are submitted to the Board of Directors and head of each business unit. In accordance with the requirements of the CBRC, the Bank categorises its business into either the trading book or the banking book. The trading book consists of positions in financial instruments held either with trading intent or in order to economically hedge other elements of the trading book or the banking book. The banking book consists of the financial instruments purchased with excess funds and other financial instruments that are not captured in trading book.

3.2.2 Interest rate risk

The bank’s interest rate risk mainly includes cash flow interest rate risk and fair value interest rate risk. Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate due to changes in market interest rates. Fair value interest rate risk is the risk that the market value of a financial instrument will fluctuate due to changes in market interest rates. The interest rate risk of the Bank mainly comes from the interest rate change’s impact on net interest income, which was caused by the mismatch of the interest-rate-sensitive assets and liabilities’ maturity date or the re-pricing date. The Chinese government has gradually liberalized interest rates in recent years. From July 20, 2013, commercial banks can independently determine the interest rate of RMB loans (except individual mortgage loans). From October 24, 2015, commercial banks can independently determine the interest rate of deposits. With the liberalization of interest rates, the interest rate volatility has gradually shifted from policy oriented to market oriented, and therefore faces more uncertainties. The bank has implemented a unified interest rate management policy to manage interest rate risk. The bank complies with relevant laws and regulations to determine price for deposits and loan products. The bank uses the PBOC’s benchmark interest rate, capital cost, asset risk status and other indicators as the pricing benchmark, and takes into account customer needs and business operations, the prices of similar products in the industry and competitors, and the business relationship with the customers to determine the product price. The bank regularly conducts sensitivity analysis on interest rates. The bank regularly analyzes the interest rate gap between interest bearing assets and interest bearing liabilities in bank accounts and transaction accounts, thereby guiding the development of business. The bank pays close attention to the latest development of the government’s economic policies, especially those that have a significant impact on market interest rates. The bank continuously monitor and conduct in-depth research on financial market conditions and macroeconomic conditions, thereby improving the ability to predict interest rate fluctuations. Based on the ever-changing trend of market interest rates, the bank dynamically adjusts the size and structure of assets to cope with changes in the market environment so as to match the maturity of assets and liabilities. For example, when predicting a downward trend in the bond market, the bank will keep bond assets at a low level to minimize the associated risks. In addition, the bank has increased the sales and marketing efforts of long-term deposits, thereby stabilizing capital and reducing interest risk from deposits. The bank has formulated risk management policies for financial market operations. The Bank uses internal management system to monitor and manage the overall interest rate risk of the assets and liabilities under the non-trading book. At the current stage, the Bank manages the interest rate risk mainly through raising suggestion about the re-pricing date of assets and liabilities, setting market risk limit and other methods. The Bank analyses the interest rate gap and assesses the difference between the interest-bearing assets and liabilities which would mature or re-price within certain time period, to provide instruction for the adjustment of interest-bearing assets and liabilities’ re-pricing date. Meanwhile, the Bank controls and manages interest risk by establishing the instruction and authorisation limit of investment portfolio. The Bank’s financial market management conducts real-time market value assessment to monitor the investment risk more accurately. In addition, the Bank embranchments’ interest rate risk for managing using the internal funding transfer-pricing system.

I-37 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

The tables below summarise the Bank’s exposures to interest rate risks. The tables show the Bank’s assets and liabilities at carrying amounts, categorised by the earlier of contractual repricing or maturity dates.

Non- Up to Over interest 1 month 1-3 months 3-12 months 1-5 years 5 years bearing Total As at December 31, 2015 Assets Cash and balances with central bank 4,349,737 – – – – – 4,349,737 Financial assets held under resale agreements, due from other banks and financial institutions 5,121,946 1,400,000 120,000 – – – 6,641,946 Financial investments – available-for-sale – – – 728,747 2,458,469 975 3,188,191 Customer loans 2,498,165 1,232,232 2,717,666 3,006,960 248,358 – 9,703,381 Financial investments – credit related financial assets – – 1,725,750 1,993,875 – – 3,719,625 Financial investments – investments classified as receivables 800,000 1,150,000 1,000,000 499,000 – – 3,449,000 Other financial assets – – – – – 711,749 711,749 Total assets 12,769,848 3,782,232 5,563,416 6,228,582 2,706,827 712,724 31,763,629 Liabilities Due to central bank 425,000 – – – – – 425,000 Financial assets sold under repurchase agreements, due to other banks and financial institutions 2,619,659 2,410,000 2,050,000 – – – 7,079,659 Customer deposits 16,124,973 521,879 2,527,326 1,209,077 – 106 20,383,361 Debt securities issued – – – ––– – Other financial liabilities – – – – – 591,504 591,504 Total liabilities 19,169,632 2,931,879 4,577,326 1,209,077 – 591,610 28,479,524 Total interest sensitivity gap (6,399,784) 850,353 986,090 5,019,505 2,706,827 121,114 3,284,105

Non- Up to Over interest 1 month 1-3 months 3-12 months 1-5 years 5 years bearing Total As at December 31, 2016 Assets Cash and balances with central bank 6,463,704 – – – – – 6,463,704 Financial assets held under resale agreements, due from other banks and financial institutions 3,679,831 1,092,000 200,000 – – – 4,971,831 Financial investments – available-for-sale – – 967,177 2,222,891 2,655,408 1,711,834 7,557,310 Customer loans 3,117,439 1,103,404 5,912,191 2,825,183 1,200,859 – 14,159,076 Financial investments – credit related financial assets – – 2,610,447 3,857,547 976,374 – 7,444,368 Financial investments – investments classified as receivables 1,698,000 2,515,480 1,608,203 4,411,708 1,363,614 – 11,597,005 Other financial assets – – – – – 1,087,367 1,087,367 Total assets 14,958,974 4,710,884 11,298,018 13,317,329 6,196,255 2,799,201 53,280,661 Liabilities Due to central bank – 100,000 150,000 – – – 250,000 Financial assets sold under repurchase agreements, due to other banks and financial institutions 3,886,411 4,142,881 4,302,200 – – 60,246 12,391,738 Customer deposits 21,214,909 954,196 2,395,444 6,451,433 – 2,774 31,018,756 Debt securities issued 498,600 1,588,348 2,814,454 – – – 4,901,402 Other financial liabilities – – – – – 711,351 711,351 Total liabilities 25,599,920 6,785,425 9,662,098 6,451,433 – 774,371 49,273,247 Total interest sensitivity gap (10,630,087) (2,074,541) 1,635,920 6,865,896 6,196,255 2,013,971 4,007,414

I-38 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

Non- Up to Over interest 1 month 1-3 months 3-12 months 1-5 years 5 years bearing Total As at December 31, 2017 Assets Cash and balances with central bank 8,145,703 – – – – – 8,145,703 Financial assets held under resale agreements, due from other banks and financial institutions 9,709,561 2,875,196 760,000 – – – 13,344,757 Financial investments – available-for-sale – 1,620,215 – 3,427,380 4,017,179 2,311,837 11,376,611 Customer loans 7,090,958 808,918 6,082,117 3,709,639 1,142,201 – 18,833,833 Financial investments – credit related financial assets – 197,033 2,508,231 3,419,509 2,154,606 – 8,279,379 Financial investments – investments classified as receivables – 499,927 599,422 6,640,051 1,600,774 – 9,340,174 Other financial assets – – – – – 1,558,979 1,558,979 Total assets 24,946,222 6,001,289 9,949,770 17,196,579 8,914,760 3,870,816 70,879,436 Liabilities Due to central bank 100,000 200,000 290,000 – – – 590,000 Financial assets sold under repurchase agreements, due to other banks and financial institutions 46,989 4,253,770 4,608,890 3,154,260 – – 12,063,909 Customer deposits 24,468,324 1,025,313 3,597,056 13,053,446 – 1,158 42,145,297 Debt securities issued – 2,873,081 6,902,162 – 1,000,000 – 10,775,243 Other financial liabilities – – – – – 969,272 969,272 Total liabilities 24,615,313 8,352,164 15,398,108 16,207,706 1,000,000 970,430 66,543,721 Total interest sensitivity gap 330,909 (2,350,875) (5,448,338) 988,873 7,914,760 2,900,386 4,335,715

Non- Up to Over interest 1 month 1-3 months 3-12 months 1-5 years 5 years bearing Total As at June 30, 2018 Assets Cash and balances with central bank 7,884,603 – – – – – 7,884,603 Financial assets held under resale agreements, due from other banks and financial institutions 6,957,998 777,769 1,689,195 – – – 9,424,962 Financial investments at fair value through profit or loss – – – – – 2,306,209 2,306,209 Financial investments – fair value through other comprehensive income 269,491 408,156 – 2,503,034 1,883,398 – 5,064,079 Customer loans 11,734,974 818,017 4,083,623 5,890,594 1,160,296 – 23,687,504 Financial investments – credit related financial assets – – 867,585 3,895,792 2,080,302 – 6,843,679 Financial investments – amortized cost 743,923 49,500 2,496,811 10,350,612 4,181,645 – 17,822,491 Other financial assets – – – – – 1,521,544 1,521,544 Total assets 27,590,989 2,053,442 9,137,214 22,640,032 9,305,641 3,827,753 74,555,071 Liabilities Due to central bank – – 160,000 – – – 160,000 Financial assets sold under repurchase agreements, due to other banks and financial institutions 4,959,220 1,227,500 5,155,468 – – – 11,342,188 Customer deposits 22,157,209 567,820 5,464,475 16,551,719 – 1,221 44,742,444 Debt securities issued 2,054,848 3,847,711 5,541,091 – 1,000,000 – 12,443,650 Other financial liabilities – – – – – 1,303,935 1,303,935 Total liabilities 29,171,277 5,643,031 16,321,034 16,551,719 1,000,000 1,305,156 69,992,217 Total interest sensitivity gap (1,580,287) (3,589,590) (7,183,820) 6,088,313 8,305,641 2,522,597 4,562,854

I-39 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

3.2.3 Sensitivity tests Interest rate sensitivity test

The result of the interest rate sensitivity tests set out in the table below is based on the following assumptions. The projections assume that yield curves move parallel to the change of interest rate; the assets and liabilities portfolio has a static structure of interest rate; all positions are held and renewed after maturity. But the Bank has not considered the following: changes after the balance sheet date; the impact of interest rate fluctuations on the customers’ behaviors; the complicated relationship between complex structured products and interest rate fluctuations; the impact of interest rate fluctuations on market prices; the impact of interest rate fluctuations on off-balance sheet products; and impact of risk management. On the basis of the above gap analysis on the interest rate, the Bank implemented sensitivity test to analyse the sensitivity of bank’s net interest income against change in interest rate. The table below illustrates the analysis of potential impact on the Bank’s net interest income at June 30, 2018, December 31, 2017, 2016 and 2015 on the assumption of a 100 basis point parallel move of the yield curves on each balance sheet date.

Expected changes of net interest income As at December 31, As at June 30, 2015 2016 2017 2018 + 100 basis point parallel move in all yield curves 47,757 135,885 160,061 171,338 - 100 basis point parallel move in all yield curves (47,757) (135,885) (160,061) (171,338)

The table below illustrates the potential impact of a 100 basis point move on the other comprehensive income of the Bank.

Change of other comprehensive income As at December 31, As at June 30, 2015 2016 2017 2018 + 100 basis point parallel move in all yield curves (195,070) (223,848) (393,742) (149,397) - 100 basis point parallel move in all yield curves 216,390 237,101 426,712 163,944

3.3 Liquidity risk 3.3.1 Overview

Liquidity risk is the risk that the Bank will be unable to meet its payment obligations associated with its financial liabilities when they fall due and to replace funds when they are withdrawn. The consequence may be the failure to meet obligations to repay depositors and fulfill commitments to lend. The Bank’s objective in liquidity management is to ensure the availability of adequate funding to meet its needs to fund deposits withdrawals and other liabilities as they fall due and to ensure that it is able to meet its obligations to fund loan originations and commitments and to take advantage of new investment opportunities. The Bank is exposed to daily calls on its available cash resources from overnight deposits, current accounts, matured deposits, loan draw downs, guarantees and cash deposit hold as collateral. The Board of Directors set the minimum proportion of funds to be made available to meet such calls and the minimum level of interbank and other borrowing facilities that should be in place to cover different levels of unexpected withdrawals. As at June 30, 2018, 14% (December 31, 2017: 13.5%, December 31, 2016: 14.5%, December 31, 2015: 14%) of the Bank’s total RMB-denominated deposits must be deposited with the PBOC.

3.3.2 Liquidity risk management process

The Board of Directors and the liquidity risk management department formulate the policies, strategies, procedures, limits and contingency plans relate to the overall management of liquidity risk according to risk preference. The assets and liabilities management department cooperates with other business department to form a well-organised, fully functional liquidity risk management system. The Bank proactively applies new technology to enhance the involvement of IT in liquidity risk management. The system monitors the liquidity index and exposure, which form a mechanism in regular, automatic liquidity risk assessment, and arrange the banking processes according to current liquidity exposure. The Bank actively modifies the assets and liabilities maturity structure by applying internal fund transfer pricing, while taking control of the limit of the liquidity risk positively by carrying out performance assessment. The bank pays constant attention to its liquidity risk management process, holds the weekly meeting for assets and liabilities integration, enhances and improves liquidity risk related policy timely, eventually achieve its goal in liquidity risk management.

I-40 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

3.3.3 Non-derivative financial liabilities and assets held for managing liquidity risk The table below presents the undiscounted cash flows of the Bank under non-derivative financial liabilities and assets held for managing liquidity risk by remaining contractual maturities at the balance sheet date.

On Up to Over demand 1 month 1-3 months 3-12 months 1-5 years 5 years Indefinite Overdue Total As at December 31, 2015 Liabilities Due to central bank – 425,925 – – – – – – 425,925 Financial assets sold under repurchase agreements, due to other banks and financial institution 94,659 2,534,682 2,455,571 2,121,926 – – – – 7,206,838 Customer deposits 15,028,936 1,686,521 692,750 1,806,856 1,498,928 – – – 20,713,991 Total liabilities (contractual maturity dates) 15,123,595 4,647,128 3,148,321 3,928,782 1,498,928 – – – 28,346,754 Assets Cash and balances with central bank 1,992,835 – – – – – 2,356,902 – 4,349,737 Financial assets held under resale agreements, due from other banks and financial institutions 19,096 5,110,754 1,419,825 124,487 – – – – 6,674,162 Financial investments – Available-for-sale – 5,790 35,345 81,800 1,083,750 2,742,171 975 – 3,949,831 Customer loans – 532,347 1,215,240 3,313,865 3,613,875 4,171,844 – 39,596 12,886,767 Financial investments – credit related financial assets – – – 1,896,657 2,610,813 – – – 4,507,470 Financial investments – investments classified as receivables – 803,599 1,177,649 1,095,397 558,932 – – – 3,635,577 Assets held for managing liquidity risk (contractual maturity dates) 2,011,931 6,452,490 3,848,059 6,512,206 7,867,370 6,914,015 2,357,877 39,596 36,003,544 Position (13,111,664) 1,805,362 699,738 2,583,424 6,368,442 6,914,015 2,357,877 39,596 7,656,790

On Up to Over demand 1 month 1-3 months 3-12 months 1-5 years 5 years Indefinite Overdue Total As at December 31, 2016 Liabilities Due to central bank – – 100,722 152,004 – – – – 252,726 Financial assets sold under repurchase agreements, due to other banks and financial institution 60,246 3,899,575 4,200,151 4,439,104 – – – – 12,599,076 Customer deposits 18,776,800 2,458,319 961,492 2,413,762 6,500,766 – 1,220 – 31,112,359 Debt securities issued – 500,000 1,600,000 2,900,000 – – – – 5,000,000 Total liabilities (contractual maturity dates) 18,837,046 6,857,894 6,862,365 9,904,870 6,500,766 – 1,220 – 48,964,161 Assets Cash and balances with central bank 2,181,543 – – –– – 4,282,161 – 6,463,704 Financial assets held under resale agreements, due from other banks and financial institutions 95,911 3,594,656 1,121,106 206,068 – – – – 5,017,741 Financial investments – available-for-sale – 1,134,976 674,672 1,086,278 2,833,161 2,856,368 975 – 8,586,430 Customer loans – 543,071 1,164,732 4,605,532 6,250,412 6,162,387 – 61,438 18,787,572 Financial investments – credit related financial assets –– – 3,466,260 4,972,422 1,438,962 – – 9,877,644 Financial investments – investments classified as receivables – 1,709,432 2,558,044 989,564 5,391,442 2,604,983 – – 13,253,465 Assets held for managing liquidity risk (contractual maturity dates) 2,277,454 6,982,135 5,518,554 10,353,702 19,447,437 13,062,700 4,283,136 61,438 61,986,556 Position (16,559,592) 124,241 (1,343,811) 448,832 12,946,671 13,062,700 4,281,916 61,438 13,022,395

I-41 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

On Up to Over demand 1 month 1-3 months 3-12 months 1-5 years 5 years Indefinite Overdue Total As at December 31, 2017 Liabilities Due to central bank – 100,175 201,505 296,032 – – – – 597,712 Financial assets sold under repurchase agreements, due to other banks and financial institution 46,989 4,257,700 4,764,884 3,300,055 – – – – 12,369,628 Customer deposits 24,258,420 416,287 1,033,956 3,627,378 13,163,484 – 1,040 – 42,500,565 Debt securities issued – – 2,955,000 7,140,000 220,000 1,275,000 – – 11,590,000 Total liabilities (contractual maturity dates) 24,305,409 4,774,162 8,955,345 14,363,465 13,383,484 1,275,000 1,040 – 67,057,905 Assets Cash and balances with central bank 2,131,378 – – – – – 6,014,325 – 8,145,703 Financial assets held under resale agreements, due from other banks and financial institutions 87,327 9,665,392 2,942,302 787,130 – – – – 13,482,151 Financial investments – available-for-sale – 1,269,562 2,898,480 150,512 4,489,708 4,956,030 996 – 13,765,288 Customer loans – 670,883 849,299 6,049,572 6,961,440 11,204,207 – 96,812 25,832,213 Financial investments – credit related financial assets – – 202,342 2,703,378 4,191,438 3,564,734 – – 10,661,892 Financial investments – investments classified as receivables – – 515,750 624,864 8,250,967 2,702,712 – – 12,094,293 Assets held for managing liquidity risk (contractual maturity dates) 2,218,705 11,605,837 7,408,173 10,315,456 23,893,553 22,427,683 6,015,321 96,812 83,981,540 Position (22,086,704) 6,831,675 (1,547,172) (4,048,009) 10,510,069 21,152,683 6,014,281 96,812 16,923,635

On Up to Over demand 1 month 1-3 months 3-12 months 1-5 years 5 years Indefinite Overdue Total As at June 30, 2018 Liabilities Due to central bank – – 1,300 160,968 – – – – 162,268 Financial assets sold under repurchase agreements, due to other banks and financial institution 43,202 4,933,470 1,251,395 5,382,022 – – – – 11,610,089 Customer deposits 21,574,088 694,614 692,388 6,085,886 19,187,218 – 1,049 – 48,235,242 Debt securities issued – 2,060,000 3,880,000 5,755,000 275,000 1,165,000 – – 13,135,000 Total liabilities (contractual maturity dates) 21,617,290 7,688,084 5,825,083 17,383,876 19,462,218 1,165,000 1,049 – 73,142,600 Assets Cash and balances with central bank 1,818,279 – – – – – 6,066,324 – 7,884,603 Financial assets held under resale agreements, due from other banks and financial institutions 149,313 6,840,481 787,475 1,756,440 – – – – 9,533,709 Financial investments – fair value through profit or loss 895,084 1,139,162 150,000 130,000 – – – – 2,314,246 Financial investments – FVOCI – 270,000 461,920 160,308 3,164,418 2,239,945 – – 6,296,591 Customer loans – 548,265 888,473 6,571,023 10,417,479 14,827,872 – 54,367 33,307,479 Financial investments – credit related financial assets – – – 912,906 4,607,584 3,363,408 – – 8,883,898 Financial investments – amortized cost – 758,491 104,367 2,841,288 12,887,164 6,295,659 – – 22,886,969 Assets held for managing liquidity risk (contractual maturity dates) 2,862,676 9,556,399 2,392,235 12,371,965 31,076,645 26,726,884 6,066,324 54,367 91,107,495 Position (18,754,614) 1,868,315 (3,432,848) (5,011,911) 11,614,426 25,561,884 6,065,275 54,367 17,964,895

Assets available to meet all of the liabilities include cash, balances with central bank, items in the course of collection and treasury; due from other banks and financial institutions; and customer loans. In the normal course of business, a proportion of customer loans contractually repayable within one year will be extended. In addition, certain debt securities have been pledged for liabilities. The Bank would also be able to meet unexpected net cash outflows by selling securities, using credit commitments from other financial institutions, early termination of borrowings from other financial institutions and repurchase agreements and using the mandatory reserve deposits upon the PBOC’s approval.

I-42 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

3.3.4 Maturity analysis The table below analyses the Bank’s assets and liabilities into relevant maturity groupings based on the remaining period at the reporting date to the contractual maturity date.

On Up to Over demand 1 month 1-3 months 3-12 months 1-5 years 5 years Indefinite Overdue Total As at December 31, 2015 Assets Cash and balances with central bank 1,992,835 – – – – – 2,356,902 – 4,349,737 Financial assets held under resale agreements, due from other banks and financial institutions 19,096 5,102,850 1,400,000 120,000 – – – – 6,641,946 Financial investments – available-for-sale – – – – 728,747 2,458,469 975 – 3,188,191 Customer loans – 494,646 1,174,544 3,075,018 2,757,352 2,162,225 – 39,596 9,703,381 Financial investments – credit related financial assets – – – 1,725,750 1,993,875 – – – 3,719,625 Financial investments – investments classified as receivables – 800,000 1,150,000 1,026,550 472,450 – – – 3,449,000 Other assets, including deferred income tax assets – – – – – – 711,749 – 711,749 Total assets 2,011,931 6,397,496 3,724,544 5,947,318 5,952,424 4,620,694 3,069,626 39,596 31,763,629 Liabilities Due to central bank – 425,000 – – – – – – 425,000 Financial assets sold under repurchase agreements, due to other banks and financial institution 94,659 2,525,000 2,410,000 2,050,000 – – – – 7,079,659 Customer deposits 13,323,325 2,801,754 521,879 2,527,326 1,209,077 – – – 20,383,361 Debt securities issued ––– –– –––– Other financial liabilities including deferred income tax liabilities – – – – – – 591,504 – 591,504 Total liabilities 13,417,984 5,751,754 2,931,879 4,577,326 1,209,077 – 591,504 – 28,479,524 Net liquidity gap (11,406,053) 645,742 792,665 1,369,992 4,743,347 4,620,694 2,478,122 39,596 3,284,105

On Up to Over demand 1 month 1-3 months 3-12 months 1-5 years 5 years Indefinite Overdue Total As at December 31, 2016 Assets Cash and balances with central bank 2,181,543 – – – – – 4,282,161 – 6,463,704 Financial assets held under resale agreements, due from other banks and financial institutions 95,911 3,583,920 1,092,000 200,000 – – – – 4,971,831 Financial investments – available-for-sale – 1,110,859 600,000 967,177 2,222,891 2,655,408 975 – 7,557,310 Customer loans – 517,197 1,120,667 4,287,191 4,738,407 3,434,177 – 61,437 14,159,076 Financial investments – credit related financial assets – – – 2,610,447 3,857,547 976,374 – – 7,444,368 Financial investments – investments classified as receivables – 1,698,000 2,515,480 1,608,203 4,411,708 1,363,614 – – 11,597,005 Other assets, including deferred income tax assets – – – – – – 1,087,367 – 1,087,367 Total assets 2,277,454 6,909,976 5,328,147 9,673,018 15,230,553 8,429,573 5,370,503 61,437 53,280,661 Liabilities Due to central bank – – 100,000 150,000 – – – – 250,000 Financial assets sold under repurchase agreements, due to other banks and financial institution 60,246 3,886,411 4,142,881 4,302,200 – – – – 12,391,738 Customer deposits 18,776,800 2,439,663 954,196 2,395,444 6,451,433 – 1,220 – 31,018,756 Debt securities issued – 498,600 1,588,348 2,814,454 – – – – 4,901,402 Other financial liabilities including deferred income tax liabilities – – – – – – 711,351 – 711,351 Total liabilities 18,837,046 6,824,674 6,785,425 9,662,098 6,451,433 – 712,571 – 49,273,247 Net liquidity gap (16,559,592) 85,302 (1,457,278) 10,920 8,779,120 8,429,573 4,657,932 61,437 4,007,414

I-43 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

On Up to Over demand 1 month 1-3 months 3-12 months 1-5 years 5 years Indefinite Overdue Total As at December 31, 2017 Assets Cash and balances with central bank 2,131,378 – – – – – 6,014,325 – 8,145,703 Financial assets held under resale agreements, due from other banks and financial institutions 87,327 9,622,234 2,875,196 760,000 – – – – 13,344,757 Financial investments – available-for-sale – 1,210,841 2,720,215 – 3,427,380 4,017,179 996 – 11,376,611 Customer loans – 640,220 811,683 5,684,534 5,323,110 6,277,474 – 96,812 18,833,833 Financial investments – credit related financial assets – – 197,033 2,508,231 3,419,509 2,154,606 – – 8,279,379 Financial investments – investments classified as receivables – – 499,927 599,422 6,640,051 1,600,774 – – 9,340,174 Other assets, including deferred income tax assets – – – – – – 1,558,979 – 1,558,979 Total assets 2,218,705 11,473,295 7,104,054 9,552,187 18,810,050 14,050,033 7,574,300 96,812 70,879,436 Liabilities Due to central bank – 100,000 200,000 290,000 – – – – 590,000 Financial assets sold under repurchase agreements, due to other banks and financial institution 46,989 4,253,770 4,608,890 3,154,260 – – – – 12,063,909 Customer deposits 24,055,635 412,807 1,025,313 3,597,056 13,053,446 – 1,040 – 42,145,297 Debt securities issued – – 2,873,081 6,902,162 – 1,000,000 – – 10,775,243 Other financial liabilities including deferred income tax liabilities – – – – – – 969,272 – 969,272 Total liabilities 24,102,624 4,766,577 8,707,284 13,943,478 13,053,446 1,000,000 970,312 – 66,543,721 Net liquidity gap (21,883,919) 6,706,718 (1,603,230) (4,391,291) 5,756,604 13,050,033 6,603,988 96,812 4,335,715

On Up to Over demand 1 month 1-3 months 3-12 months 1-5 years 5 years Indefinite Overdue Total As at June 30, 2018 Assets Cash and balances with central bank 1,818,279 – – – – – 6,066,324 – 7,884,603 Financial assets held under resale agreements, due from other banks and financial institutions 134,702 6,823,296 777,769 1,689,195 – – – – 9,424,962 Financial investments – fair value through profit or loss 895,084 1,131,125 150,000 130,000 – – – – 2,306,209 Financial investments – FVOCI – 269,491 408,156 – 2,503,034 1,883,398 – – 5,064,079 Customer loans – 521,592 821,082 5,951,242 8,085,780 8,253,441 – 54,367 23,687,504 Financial investments – credit related financial assets – – – 867,585 3,895,792 2,080,302 – – 6,843,679 Financial investments – amortized cost – 743,923 49,500 2,496,811 10,350,612 4,181,645 – – 17,822,491 Other assets, including deferred income tax assets –– – –– – 1,521,544 – 1,521,544 Total assets 2,848,065 9,489,427 2,206,507 11,134,833 24,835,218 16,398,786 7,587,868 54,367 74,555,071 Liabilities Due to central bank –– – 160,000 – – – – 160,000 Financial assets sold under repurchase agreements, due to other banks and financial institution 43,202 4,916,018 1,227,500 5,155,468 – – – – 11,342,188 Customer deposits 21,528,869 628,512 567,820 5,464,475 16,551,719 – 1,049 – 44,742,444 Debt securities issued – 2,054,848 3,847,711 5,541,091 – 1,000,000 – – 12,443,650 Other financial liabilities including deferred income tax liabilities –– – –– – 1,303,935 – 1,303,935 Total liabilities 21,572,071 7,599,378 5,643,031 16,321,034 16,551,719 1,000,000 1,304,984 – 69,992,217 (18,724,007) 1,882,050 (3,436,525) (5,186,202) 8,283,500 15,398,786 6,282,885 54,367 4,562,854

I-44 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

3.3.5 Off-balance-sheet items

The table below lists the off-balance-sheet statement items of the Bank according to their remaining term to maturity. and also includes the future minimum lease payments under non-cancellable operating leases where the Bank are the lessees. The financial commitments are listed by the earliest maturity date in its notional principal. As at December 31, 2015

Within 1 year 1-5 years Over 5 years Total Acceptances 102,483 – – 102,483 Guarantees 45,850 – – 45,850 Operating lease commitments 6,154 17,831 4,418 28,403 Capital expenditure commitments 15,194 22,647 – 37,841 Total 169,681 40,478 4,418 214,577

As at December 31, 2016

Within 1 year 1-5 years Over 5 years Total Acceptances 934,433 60,930 – 995,363 Guarantees 45,850 – – 45,850 Operating lease commitments 8,315 24,705 6,777 39,797 Capital expenditure commitments 13,891 13,505 – 27,396 Total 1,002,489 99,140 6,777 1,108,406

As at December 31, 2017

Within 1 year 1-5 years Over 5 years Total Acceptances 1,210,628 28,310 – 1,238,938 Guarantees 450,750 122,490 – 573,240 Operating lease commitments 10,994 30,510 3,490 44,994 Capital expenditure commitments 30,185 12,345 – 42,530 Total 1,702,557 193,655 3,490 1,899,702

As at June 30, 2018

Within 1 year 1-5 years Over 5 years Total Acceptances 710,173 – – 710,173 Guarantees 502,490 – – 502,490 Operating lease commitments 7,526 27,703 4,087 39,316 Capital expenditure commitments 1,079 1,639 – 2,718 Total 1,221,268 29,342 4,087 1,254,697

The Bank has no irrevocable loan commitments.

3.4 Fair values of financial assets and liabilities (a) Financial instruments not measured at fair value

The table below summarises the financial assets and liabilities that have difference between carrying amounts (include accrued interest) and fair value as at December 31, 2015, 2016, 2017 and June 30, 2018.

As at December 31, 2015 Carrying amount Fair value Level 1 Level 2 Level 3 Total Financial assets Financial investments – investments classified as receivables 3,494,438 – – 3,450,854 3,450,854

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As at December 31, 2016 Carrying amount Fair value Level 1 Level 2 Level 3 Total Financial assets Financial investments – investments classified as receivables 11,729,576 – – 11,623,258 11,623,258 Financial liabilities Debt securities issued 4,901,402 – 4,887,271 – 4,887,271

As at December 31, 2017 Carrying amount Fair value Level 1 Level 2 Level 3 Total Financial assets Financial investments – investments classified as receivables 9,619,276 – – 9,197,128 9,197,128 Financial liabilities Debt securities issued 10,775,243 – 10,771,304 – 10,771,304

As at June 30, 2018 Carrying amount Fair value Level 1 Level 2 Level 3 Total Financial assets Financial investments – amortized cost 18,117,093 – 6,487,396 11,279,833 17,767,229 Financial investments – credit related financial assets 6,843,679 – – 6,785,970 6,785,970 Financial liabilities Debt securities issued 12,464,294 – 12,458,605 – 12,458,605

Investment securities The fair value for financial investments – credit related financial assets, investments classified as receivables and financial assets – amortized cost is determined based on discounted cash flow model using unobservable discount rates that reflect credit risk and liquidity.

Debt securities issued The fair value of fixed interest bearing debt securities issued is calculated using a discounted cash flow model which is based on a current yield curve appropriate for the remaining term to maturity. Other than above, the carrying values of those financial assets and liabilities not presented at their fair value on the statement of financial position are a reasonable approximation of their fair values. Fair value is measured using a discounted future cash flow model.

(b) Fair value hierarchy IFRS 7 specifies the levels of valuation techniques that based on the inputs of valuation techniques that are observable or not. The observable inputs reflect the market data obtained from independent sources. These two inputs lead to the following fair value hierarchy: • Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities. This level includes listed equity securities, debt instruments in house (e.g. Hongkong stock exchange). • Level 2 – Inputs other than quoted prices included within level 1 that are observable for the assets or liabilities, either directly or indirectly. This level includes the debt instruments dealing in the interbank market. For example, the input parameters of bond yield curves and counterparty credit risk stem from China bond information website and Bloomsbury. • Level 3 – Inputs for the assets or liabilities that are not based on observable market data (that is, unobservable inputs). This level includes equity instruments and structural financial instruments. The Bank determines the fair value of the financial instrument by valuation techniques when it is difficult to obtain quotations from the open market. The main parameters of valuation techniques used in financial instruments includes the price of the bond, interest rate, exchange rate, stock and equity price, volatility level, correlation, prepayment rates, and the credits spreads of counterparty. All of these parameters can be observed and obtained from the open market.

I-46 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

The measurement of the fair value of those asset-backed securities and unlisted equity (private equity) held by the Bank adopts unobservable parameters that may have significant impact on the valuations. Thus, the Bank would better classify these financial instruments to the third level. Management has assessed the influence of macroeconomic factors, the valuation by external appraiser, loss coverage, and many other parameters, so as to examine the correlation between the fair value of third level financial instruments and the above parameters. The Bank has established an internal control system to supervise the exposure of the bank to such financial instruments. Fair values of assets and liabilities are as below:

As at December 31, 2015 Level 1 Level 2 Level 3 Total Investment securities-available-for-sale – Debt securities – 3,187,216 – 3,187,216 – Equity investment – – 975 975 Total – 3,187,216 975 3,188,191

As at December 31, 2016 Level 1 Level 2 Level 3 Total Investment securities-available-for-sale – Debt securities – 5,845,476 – 5,845,476 – Equity investment – – 1,711,834 1,711,834 Total – 5,845,476 1,711,834 7,557,310

As at December 31, 2017 Level 1 Level 2 Level 3 Total Investment securities-available-for-sale – Debt securities – 9,064,774 – 9,064,774 – Equity investment – – 2,311,837 2,311,837 Total – 9,064,774 2,311,837 11,376,611

As at June 30, 2018 Level 1 Level 2 Level 3 Total Customer loans – discounted bills – 172,648 – 172,648 Financial investments – fair value through profit or loss – 1,564,088 742,121 2,306,209 Financial investments – FVOCI – 5,064,079 – 5,064,079 Total – 6,800,815 742,121 7,542,936

Specific valuation techniques used to value financial instruments include: • Quoted market prices or dealer quotes for similar instruments. • Other techniques, such as discounted cash flow analysis, are used to determine fair value for the remaining financial instruments.

Movement of Level-3 valuation methodology

Investment securities-AFS Balance at January 1, 2015 975 Total gains or losses – Other comprehensive income – Balance at December 31, 2015 975 Total gains for the year included in statement of comprehensive income for assets/liabilities held at December 31, 2015 –

Investment securities-AFS Balance at January 1, 2016 975 Total gains or losses – Other comprehensive income 10,859 Purchase of level 3 36,200,000 Maturity of level 3 (34,500,000) Balance at December 31, 2016 1,711,834 Total gains for the year included in statement of comprehensive income for assets/liabilities held at December 31, 2016 –

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Investment securities-AFS Balance at January 1, 2017 1,711,834 Total gains or losses – Other comprehensive income 3 Purchase of level 3 10,600,000 Maturity of level 3 (10,000,000) Balance at December 31, 2017 2,311,837 Total gains for the year included in statement of comprehensive income for assets/liabilities held at December 31, 2017 –

Financial investments – fair value through profit or loss Balance at January 1, 2018 2,310,841 Total gains or losses – Other comprehensive income 1,280 Purchase of level 3 5,680,000 Maturity of level 3 (7,250,000) Balance at June 30, 2018 742,121 Total gains for the period included in statement of comprehensive income for assets/liabilities held at June 30, 2018 35,213

The information of Level-3 Valuation by adopting important, non-observable input as following:

The Bank Non-observable input Fair Valuation Range/Weighted Relationship As at December 31, 2015 values methodology Item average with fair value Investment securities: available-for-sale – Equity investment 975 Cost approach Note 1 Note 1 Note 1

The Bank Non-observable input Fair Valuation Range/Weighted Relationship As at December 31, 2016 values methodology Item average with fair value Investment securities: available-for-sale – Equity investment 975 Cost approach Note 1 Note 1 Note 1 – Wealth management 1,710,859 Return approach Discounted rate 3.4%-3.8% Reverse products

The Bank Non-observable input Fair Valuation Range/Weighted Relationship As at December 31, 2017 values methodology Item average with fair value Investment securities: available-for-sale – Equity investment 996 Cost approach Note 1 Note 1 Note 1 – Wealth management 2,310,841 Return approach Discounted rate 5.3%-6.1% Reverse products

I-48 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

The Bank Non-observable input Fair Valuation Range/Weighted Relationship As at June 30, 2018 values methodology Item average with fair value Financial investments – fair value through profit or loss – Equity investment 996 Market approach Note 1 Note 1 Note 1 – Wealth management 604,823 Return approach Discounted rate 5.3% Reverse products – Joint investment plan 30,000 Refer to recent N/A N/A N/A transactions – Collective trust scheme 106,302 Return approach Discounted rate 6.5% Reverse

Note 1: Available-for-sale equity instruments refer to equity investment to Southern Sichuan Expressway Co. Ltd, Sichuan Tianhua Co. Ltd, and Clearing Center for City Commercial Banks.

3.5 Capital management

The Bank’s objectives when managing capital, which is a broader concept than the ‘equity’ on the face of statement of financial position, are: • To comply with the capital requirements set by the regulators of the banking markets where the entities within the Bank operate; • To safeguard the Bank’s ability to continue as a going concern so that it can continue to provide returns for shareholders and benefits for other stakeholders; and • To maintain a strong capital base to support the development of its business. Capital adequacy ratio and the use of regulatory capital are monitored quarterly by the Bank’s management with employing techniques based on the guidelines developed by the Basel Committee, as implemented by the CBRC, for supervisory purposes. The required information is filed with the CBRC on a quarterly basis. The Bank calculated the capital adequacy ratio based on the Rules for Regulating the Capital Adequacy of Commercial Banks (Trial) issued by CBRC in June, 2012. According to the approach, the Bank calculated the credit risk-weighted assets measurement by the weighted method, market risk-weighted assets measurement by the standard method, and operation risk-weighted assets measurement by the basic indicator method. The CBRC requires commercial banks to meet the requirements of capital adequacy ratios by the end of 2018 in accordance with the Rules for Regulating the Capital Adequacy of Commercial Banks (Trial). For systematically important banks, CBRC requires minimum core tier-one capital adequacy ratio, tier-one capital adequacy ratio and capital adequacy ratio of 8.50%, 9.50% and 11.50% respectively. For non-systematically important banks, CBRC requires corresponding minimum ratios of 7.50%, 8.50% and 10.50%, respectively. At present, the Bank is fully compliant with legal and regulatory requirements. The capital adequacy ratio of 2015, 2016, 2017 and 2018 half year under the Rules for Regulating the Capital Adequacy of Commercial Banks (Trial) is as follows:

As at December 31, As at June 30, 2015 2016 2017 2018 Core capital: 3,481,380 4,305,659 5,710,525 5,950,060 Core Tier 1 Capital total 3,284,106 4,007,415 4,335,716 4,562,854 Tier 2 Capital total 197,274 298,244 1,374,809 1,387,206

Net capital 3,481,380 4,305,659 5,710,525 5,950,060

Total Net Core Tier 1 Capital 3,284,106 4,007,415 4,335,716 4,562,854 Net Tier 1 Capital 3,284,106 4,007,415 4,335,716 4,562,854

Total risk-weighted assets after applying capital base 18,734,048 31,615,692 41,704,197 48,803,427

Core Tier 1 Capital adequacy ratio 17.53% 12.68% 10.40% 9.35% Tier 1 Capital adequacy ratio 17.53% 12.68% 10.40% 9.35% Capital adequacy ratio 18.58% 13.62% 13.69% 12.19%

I-49 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

3.6 Fiduciary activities The Bank provides custody and trustee services to third parties. Those assets that are held in a fiduciary capacity are not included in the financial statements.

As at December 31 As at June 30 2015 2016 2017 2018 Entrust loans 4,900,569 8,350,719 7,332,402 5,800,847

4 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS IN APPLYING ACCOUNTING POLICIES The Bank makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.

(a) Impairment allowances on investments classified as receivables (including financial assets – credit related financial assets) The Bank reviews its investments classified as receivables (including financial assets – credit related financial assets) to assess impairment regularly, unless known circumstances indicating that impairment may have occurred. In determining whether an impairment loss should be recorded in the statement of comprehensive income, the Bank makes judgment as to whether there are evidences indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of loans before the decrease can be identified with a personal loan in that portfolio. These evidences may include observable data indicating that there has been an adverse change in the payment status of borrowers in the loan portfolio, or national or local economic conditions that correlate with defaults on assets in the Bank. The impairment loss for investments classified as receivables (including financial assets – credit related financial assets) that is individually assessed for impairment is the difference between estimated discounted future cash flows and carrying amount. When investments classified as receivables (including financial assets – credit related financial assets) are collectively assessed for impairment, the management uses estimates based on historical loss experience for assets with credit risk characteristics and objective evidence of impairment similar to those in the portfolio when estimating expected future cash flows. The methodology and assumptions used for estimating both the amount and timing of future cash flows are reviewed regularly to reduce any differences between loss estimates and actual loss experience.

(b) ECL allowance of financial assets The bank has adopted IFRS 9 on January 1, 2018 to measure and account for financial instruments. For financial investments – amortized cost, financial investments – fair value through other comprehensive income, financial guarantee contracts and loan commitments, the measurement of expected credit losses uses complex models and a large number of assumptions. These models and assumptions relate to future macroeconomic conditions and borrowers’ credit behavior (e.g. the probability of default and the corresponding losses). According to the requirements of accounting standards, the measurement of expected credit losses involves many critical judgements. For example: Judge the standard of significant increase in credit risk; Select proper models and assumptions of measurement of expected credit losses; For different types of financial instruments, determine the number and weight of forward-looking scenarios to be used in measuring expected credit losses; Divide the measurement of expected credit losses into groups by characteristics of financial instruments, and the items with similar credit risk characteristics are grouped into one combination. For accounting estimation and judgement of the expected credit loss of financial assets, please refer to Note 3.1.4.

(c) Fair value of financial instruments The fair values of financial instruments that are not quoted in active markets are determined by using valuation models (e.g. discounted cash flow model). To the extent practical, only observable data is used in the discounted cash flow model. However, areas such as credit risks (from both parties of transactions), market volatilities and correlations require the management to make estimates. Changes in assumptions about these factors could affect reported fair value of financial instruments.

(d) Income taxes There are certain transactions and activities for which the ultimate tax determination is uncertain during the ordinary course of business. The Bank has made estimates for items of uncertainty and application of new tax legislation taking into account existing tax legislation and past practice. Where the final tax outcomes of these matters are different from the amounts that were initially estimated, such differences will impact the current income tax, deferred income tax, and business tax in the period during which such a determination is made (Note 14).

(e) Held-to-maturity – IAS 39 The bank classifies non-derivative financial assets with fixed or determinable payments and fixed maturity as held-to- maturity. This classification requires significant judgments. In making this judgment, the Bank evaluates its intention and ability to hold such investments to maturity. If the Bank fails to hold these investments to maturity other than for specific circumstances defined in IAS 39, such as selling an insignificant amount close to maturity due to a significant deterioration in the issuer’s credit, or regulatory requirement, it will be required to reclassify the entire portfolio of assets as available-for-sale. The investments would therefore be measured at fair value, not at amortized cost.

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The bank has adopted IFRS 9 on January 1, 2018 to measure and account for financial instruments. For accounting estimation and judgement of the classification and measurement of financial assets, please refer to Note 2.8.

(f) Consolidation of structured entity

Structured entity, refers that when judging the control side of the entity, the key elements to consider are the contracts which the entities’ main activities are based on or the corresponding arrangements rather than the voting rights or similar rights (for example: the voting rights are just associated with administrative matters only). When the Bank acts as asset manager in structured entity, the Bank needs to identify whether it control the entity. There are 3 considerations. (i) Power to the invested entity; (ii) Exposure to variable remuneration of the invested entity; (iii) The ability to use the power to influence the amount of remuneration of the invested entity. If there is any indication that the control elements of the above have changed, the bank will reassess its control over the invested entity. During the evaluation, the Bank considers many factors, such as: the scope of asset manager’s decision-making power, rights held by other parties, Commission levels as management service provider, and any other arrangements (such as direct investment) which could affect the amount of remuneration.

5 NET INTEREST INCOME

Year ended December 31, Six months ended June 30, 2015 2016 2017 2017 2018 (Unaudited) Interest income Balances with central bank 42,603 61,179 85,939 41,408 56,721 Financial assets held under resale agreements, due from other banks and financial institutions 199,825 163,135 401,372 136,345 216,192 Customer loans 693,001 765,032 1,045,916 481,011 701,404 Financial investments – credit related financial assets 307,458 558,909 671,720 207,425 291,993 Financial investments 201,214 472,582 1,123,527 643,331 541,161 1,444,101 2,020,837 3,328,474 1,509,520 1,807,471

Interest expense Due to central bank (16,327) (8,648) (19,700) (8,770) (6,116) Financial assets sold under repurchase agreements, due to other banks and financial institutions (201,016) (302,686) (413,121) (201,422) (180,801) Customer deposits (341,557) (525,158) (915,406) (406,976) (566,967) Debt securities issued – (28,709) (405,912) (190,510) (299,424) (558,900) (865,201) (1,754,139) (807,678) (1,053,308) Net interest income 885,201 1,155,636 1,574,335 701,842 754,163

Year ended December 31, Six months ended June 30, 2015 2016 2017 2017 2018 (Unaudited) Interest income accrued on customer loans individually impaired/stage-3 528 1,320 3,995 2,053 3,225

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6 NET FEE AND COMMISSION INCOME/(EXPENSE)

Year ended December 31, Six months ended June 30, 2015 2016 2017 2017 2018 (Unaudited) Fee and commission income/(expense) Commission income from settlement and agency services 1,846 1,821 2,328 1,279 1,541 Commission income from bank card services 1,602 1,941 2,385 1,112 1,126 Commission income from custodian service 3,768 2,378 1,175 437 771 Commission income from credit commitments 20 828 1,320 420 1,326 Commission income from wealth management agency service 466 515 888 427 688 Other commission income 25 12 14 7 9 7,727 7,495 8,110 3,682 5,461 Fee and commission expense (5,222) (7,000) (10,000) (3,904) (4,690) Net fee and commission income/(expense) 2,505 495 (1,890) (222) 771

7 NET GAINS ON TRADING ACTIVITIES

Year ended December 31, Six months ended June 30, 2015 2016 2017 2017 2018 (Unaudited) Monetary fund ––––27,364 Wealth management products ––––(6,017) Collective trust scheme ––––3,025 ––––24,372

8 NET GAINS ARISING FROM FINANCIAL INVESTMENTS

Year ended December 31, Six months ended June 30, 2015 2016 2017 2017 2018 (Unaudited) Net gains/(losses) arising from de-recognition of available-for- sale financial assets 40,917 132,940 97,784 63,702 N/A Net gains/(losses) arising from de-recognition of FVOCI N/A N/A N/A N/A (10,281) Net gains/(losses) arising from de-recognition of financial investments – fair value through profit or loss N/A N/A N/A N/A 64,029 40,917 132,940 97,784 63,702 53,748

9 OTHER OPERATING INCOME

Year ended December 31, Six months ended June 30, 2015 2016 2017 2017 2018 (Unaudited) Net (loss)/gain on disposal of property, plant and equipment and foreclosed (47) 8,438 (296) 29 – Government grants 7,727 2,566 2,510 754 2,446 Liquidated damages of prepaid loans 1,811 3,253 1,919 1,294 1,358 Rental income from investment properties 3,434 2,789 3,653 2,042 2,237 Other miscellaneous income 632 865 1,941 34 213 13,557 17,911 9,727 4,153 6,254

I-52 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

10 OPERATING EXPENSES

Year ended December 31, Six months ended June 30, 2015 2016 2017 2017 2018 (Unaudited) Staff costs (Note 11) 135,431 230,682 307,902 96,758 111,710 General & administrative expenses 63,102 126,533 155,283 43,975 67,726 Professional fees 1,679 7,441 11,229 5,934 3,648 Auditors’ remuneration 360 400 875 – – Depreciation of property, plant and equipment 23,388 24,462 41,991 15,041 19,198 Tax and surcharges 44,561 26,358 7,794 2,264 8,244 Others 4,706 21,551 18,094 8,345 5,201 273,227 437,427 543,168 172,317 215,727

11 STAFF COSTS

Year ended December 31, Six months ended June 30, 2015 2016 2017 2017 2018 (Unaudited) Salaries and bonuses 103,302 168,697 225,707 68,758 75,127 Pension cost-denied contribution plan 10,419 13,317 16,192 7,830 10,274 Other social security and benefit costs 5,179 14,175 19,215 3,258 4,063 Housing benefits and subsidies 7,581 8,923 11,426 5,529 7,089 Corporate annuity – 8,605 14,053 4,709 7,407 Staff benefits 8,112 12,955 15,198 5,524 6,188 Staff education expenses 838 4,010 6,111 1,150 1,562 135,431 230,682 307,902 96,758 111,710

12 DIRECTORS AND SUPERVISORS’ EMOLUMENTS Top five highest paid individuals’ remunerations are shown as below:

Year ended December 31, Six months ended June 30, 2015 2016 2017 2017 2018 (Unaudited) Salaries 1,372 1,160 2,687 468 1,667 Discretionary bonuses 3,476 5,299 7,090 1,407 4,139 Contribution to pension schemes 65 72 77 33 43 4,913 6,531 9,854 1,908 5,849

The range of senior managements’ remuneration is shown as below:

Number of individuals Year ended December 31, Six months ended June 30, 2015 2016 2017 2017 2018 (Unaudited) HK$ 0 – HK$ 999,999 –––5– HK$ 1,000,000 – HK$ 1,499,999 53––4 HK$ 1,500,000 – HK$ 1,999,999 –23–1 HK$ 3,000,000- HK$ 3,499,999 ––2–– 55555

Five highest paid individuals For the year ended December 31, 2015, five highest paid individuals in the Bank includes two directors, two senior managements, and one individual; For the year December 31, 2016, five highest paid individuals in the Bank includes two directors and three sales management; For the year ended December 31, 2017, five highest paid individuals in the Bank are all sales management; For the six months ended June 30, 2018, five highest paid individuals in the Bank includes two directors and three individuals. The Bank does not pay any remuneration to any director, supervisor or five persons with the highest remuneration to compensate them for bonuses or resignations when they joined or joined the Bank.

I-53 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

Details of the directors’ and supervisors’ emoluments for the year ended December 31, 2015 are as follows:

Contribution Allowances Discretionary to pension Name Salaries and benefits bonuses schemes Total Executive directors You Jiang 348 – 723 13 1,084 Xu Xianzhong 348 10 723 13 1,094 Liu Shirong 256 – 538 13 807

Non-executive directors Xu Yan –10––10 Xiong Guoming 209––29 Lian Jin –10––10 Dai Zhiwei –1––1 Zhao Li 81––9 Liu Xiaoyu 308––38 Xia Yilun 276 5 578 13 872 Huang Yi –6––6 Lai Dafu 205––25 Long Zongzhi 302––32 Gu Ming’an –––––

Supervisors Song Zhengdong 188 – 402 13 603 Huang Xiaorong 150 123 412 13 698 Ge Jian 10–––10 Huang Ping 10–––10 Xiong Yongsheng 10–––10 1,704 190 3,376 78 5,348

(1) In the fourth interim meeting of the fifth conference of the board in 2015, the resignation of Xia Yilun from director was discussed and approved. (2) In the first interim meeting of shareholders in 2015, Dai Zhiwei and Zhao Li were elected as director. (3) The third interim meeting of shareholders in 2015 elected the directors of the fifth session of board; Lai Dafu no long served as shareholder directors; Long Zongzhi no longer served as independent directors; Gu Ming’an served as independent director. Details of the directors’ and supervisors’ emoluments for the year ended December 31, 2016 are as follows:

Contribution Allowances Discretionary to pension Name Salaries and benefits bonuses schemes Total Executive directors You Jiang 353 – 734 14 1,101 Xu Xianzhong 353 7 734 14 1,108 Liu Shirong 279 – 587 15 881

Non-executive directors Xu Yan –7––7 Xiong Guoming 206––26 Lian Jin –6––6 Dai Zhiwei –3––3 Zhao Li 201––21 Liu Xiaoyu 1506––156 Gu Ming’an 1505––155

Supervisors Yuan Shihong 316 – 661 14 991 Huang Ping 80–––80 Duan Xuebin 80–––80 Liu Yongli 231 89 209 14 543 Chen Yong 103 231 121 14 469 2,135 361 3,046 85 5,627

(1) In the first interim shareholders meeting in 2016, Yuan Shihong was elected as shareholder supervisor; Huang Ping and Duan Xuebin were elected as external supervisors; Ge Jian and Xiong Yongsheng no longer served as supervisors.

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(2) In the fourth session of the staff meeting in 2016, Liu Yongli and Chen Yong were elected as staff supervisors; Song Zhengdong and Huang Xiaorong no longer served as supervisors. Details of the directors’ and supervisors’ emoluments for the year ended December 31, 2017 are as follows:

Contribution Allowances Discretionary to pension Name Salaries and benefits bonuses schemes Total Executive directors You Jiang 369 – 771 16 1,156 Xu Xianzhong 369 7 771 16 1,163 Liu Shirong 311 – 655 16 982

Non-executive directors Xu Yan –7––7 Xiong Guoming 205––25 Lian Jin –1––1 Liu Qi –2––2 Dai Zhiwei –7––7 Zhao Li 20–––20 Liu Xiaoyu 1506––156 Gu Ming’an 1507––157 Huang Yongqing 753––78

Supervisors Yuan Shihong 331 – 693 16 1,040 Huang Ping 80–––80 Duan Xuebin 80–––80 Liu Yongli 205 16 471 16 708 Chen Yong 150 65 404 16 635 2,310 126 3,765 96 6,297

(1) In January 2017, Lian Jin resigned as director. In December 2017, Zhao Li resigned as director. (2) In the twenty-first shareholder’s meeting in 2017, Liu Qi was elected as director; Huang Yongqing was added to serve as an independent director. Details of the directors’ and supervisors’ emoluments for the six months ended June 30, 2017 are as follows:

Contribution Allowances Discretionary to pension Name Salaries and benefits bonuses schemes Total (Unaudited) Executive directors You Jiang 175––8183 Xu Xianzhong 175––8186 Liu Shirong 137––8145

Non-executive directors Xu Yan –3––3 Xiong Guoming 102––12 Lian Jin –1––1 Dai Zhiwei –3––3 Zhao Li 10–––10 Liu Xiaoyu 482––50 Gu Ming’an 483––51

Supervisors Yuan Shihong 154––8162 Huang Ping 24–––24 Duan Xuebin 24–––24 Liu Yongli 102 2 50 8 162 Chen Yong 72 5 37 8 122 979 24 87 48 1,138

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Details of the directors’ and supervisors’ emoluments for the six months ended June 30, 2018 are as follows:

Contribution Allowances Discretionary to pension Name Salaries and benefits bonuses schemes Total Executive directors You Jiang 184––9193 Xu Xianzhong 1845–9198 Liu Shirong 154––9163

Non-executive directors Xu Yan –5––5 Xiong Guoming 105––15 Liu Qi –5––5 Dai Zhiwei –5––5 Liu Xiaoyu 485––53 Gu Ming’an 485––53 Huang Yongqing 485––53

Supervisors Yuan Shihong 164––9173 Huang Ping 24–––24 Duan Xuebin 24–––24 Liu Yongli 124 7 64 8 204 Chen Yong 94 7 49 8 158 1,106 54 113 52 1,325

The remuneration shown above represents remuneration received from the Bank by these directors in their capacity as employees of the Bank. Emolument waived by directors during each of the years ended December 31, 2015, 2016, 2017 and six months ended June 30, 2017, 2018:

Year ended December 31, Six months ended June 30, 2015 2016 2017 2017 2018 (Unaudited) Xu Yan 20 20 20 10 10 Lian Jin 20 20 N/A N/A N/A Liu Qi N/A N/A 10 N/A 10 Huang Yi 13 N/A N/A N/A N/A Dai Zhiwei 820201010 Total 61 60 50 20 30

No emoluments were paid by the Bank to the directors as an inducement to join the Bank, or as compensation for loss of office during each of the years ended December 31, 2015, 2016, 2017 and six months ended June 30, 2017, 2018

(a) Directors’ retirement benefits No retirement benefits were paid to the directors of the Bank during each of years ended December 31, 2015, 2016, 2017 and six months ended June 30, 2017, 2018 by a defined contribution plan operated by the Bank in respect of their services as directors of the Bank. Save for the retirement benefits paid to certain directors in respect of their other services in connection with the management of the affairs of the Bank disclosed above, no other retirement benefits were paid to the directors in respect of their other services of the Bank during each of years ended December 31, 2015, 2016, 2017 and six months ended June 30, 2017, 2018.

(b) Directors’ termination benefits None of the directors received or will receive any termination benefits during each of years ended December 31, 2015, 2016, 2017 and six months ended June 30, 2017, 2018.

(c) Consideration provided to third parties for making available directors* services During each of years ended December 31, 2015, 2016, 2017 and six months ended June 30, 2017, 2018, the Bank did not pay any consideration to any third parties for making available the services of themselves as directors of the Bank.

(d) Directors’ material interests in transactions, arrangements or contracts Save for transactions disclosed elsewhere in the notes to the Historical Financial Information, no other significant transactions, arrangements and contracts in relation to the Bank’s business to which the Bank was a party and in which a director of the Bank has a material interest, whether directly or indirectly, subsisted at the end of or at any time during the Track Record Period.

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13 IMPAIRMENT LOSSES/EXPECTED CREDIT LOSSES

Year ended December 31, Six months ended June 30, 2015 2016 2017 2017 2018 (Unaudited) Customer loans impairment losses (Note 18(c)) – Collectively assessed 58,715 87,444 134,605 75,735 N/A – Individually assessed (5,078) 21,293 81,923 28,450 N/A ECL for customer loans at amortized cost N/A N/A N/A N/A 153,787 ECL for customer loans – FVOCI N/A N/A N/A N/A (37,166) Financial investments – credit-related financial assets Impairment losses/ECL 35,499 (543) 29,839 18,162 (29,379) Other financial investment impairment losses/ECL – 47,475 76,599 95,553 45,099 ECL for guarantee commitment N/A N/A N/A N/A 156 Other impairment losses – – 1,880 – – 89,136 155,669 324,846 218,400 132,497

14 INCOME TAX EXPENSE

Year ended December 31, Six months ended June 30, 2015 2016 2017 2017 2018 (Unaudited) Current income tax 152,985 207,815 262,591 133,015 119,517 Deferred income tax (Note 31) (16,814) (33,099) (66,808) (40,625) (2,941) 136,171 174,716 195,783 92,390 116,576

Current income tax is calculated the statutory tax rate of 25% based on the taxable income of estimated assessable profit of the Bank for the respective year as stipulated in PRC tax laws. The difference between the actual income tax charge in the profit or loss and the amounts which would result from applying the enacted tax rate 25% (2015: 25%,2016: 25%,2017: 25%) to profit before income tax can be reconciled as follows:

Year ended December 31, Six months ended June 30, 2015 2016 2017 2017 2018 (Unaudited) Profit before income tax 587,646 716,800 814,486 380,807 493,392

Tax calculated at a tax rate of 25% 146,912 179,200 203,621 95,202 123,348 Tax effect arising from non-taxable income (a) (16,885) (13,101) (16,902) (6,962) (11,830) Tax effect of expenses that are not deductible for tax purposes (b) 6,144 8,617 9,064 4,150 5,058 Income tax expense 136,171 174,716 195,783 92,390 116,576

(a) The Bank’s non-taxable income mainly represents interest income arising from treasury bonds, which is non-taxable in accordance with PRC tax laws. (b) The Bank’s expenses that are not tax deductible for tax purposes mainly represent certain expenditures, such as entertainment expenses etc., which exceed the tax deduction limits pursuant to PRC Laws.

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15 BASIC AND DILUTED EARNINGS PER SHARE (a) Basic earnings per share are calculated by dividing the net profit for the year/period attributable to shareholders of the Bank by the weighted average number of ordinary shares in issue during the year/period.

Year ended December 31, Six months ended June 30, 2015 2016 2017 2017 2018 (Unaudited) Net profit attributable to shareholders of the Bank (RMB’000) 451,475 542,084 618,703 288,417 376,816 Weighted average number of ordinary shares issued (’000) 872,573 1,534,579 1,637,193 1,637,193 1,637,193 Basic earnings per share (in RMB) 0.52 0.35 0.38 0.18 0.23

In December 2015, the Bank issued 573,196,983 ordinary shares, and finished the registration of these shares. The capital of the ordinary shares in the company increase form 724,421,920 shares to 1,297,618,903 shares. In June 2016, the Bank issued 114,752,480 ordinary shares, and finished the registration of these ordinary shares. The capital of the ordinary shares in the company increase form 1,297,618,903 shares to 1,412,371,383 shares. In November 2016, the Bank issued 36,472,457 ordinary shares, and finished the registration of these shares. The capital of the ordinary shares in the company increase form 1,412,371,383 shares to 1,448,843,840 shares. According to the resolutions determined in annual meeting of the Shareholders General Assembly resolutions on July 21, 2017, the Bank distributed additional 1.3 shares per 10 shares as undistributed profits in the profit allocation of 2016. The total dividends reach 188,349,545 shares and the ordinary shares reach 1,637,193,385 shares after transferring. The earnings per share in the period of comparison are recalculated according to the number of adjusted shares.

(b) Diluted earnings per share For the years ended December 31, 2015, 2016 and 2017, and the six months ended June 30, 2018, there was no potential diluted ordinary share, so the diluted earnings per share was the same as the basic earnings per share.

16 CASH AND BALANCES WITH CENTRAL BANK

As at December 31, As at June 30, 2015 2016 2017 2018 Cash 248,449 53,660 69,232 75,259 Mandatory reserve deposits with central bank 2,356,902 4,282,161 6,014,326 6,066,324 Surplus reserve deposits with central bank 1,727,226 2,124,813 2,054,445 1,740,737 Fiscal deposits with central bank 17,160 3,070 7,700 2,283 4,349,737 6,463,704 8,145,703 7,884,603

The Bank is required to place mandatory deposits with central bank. The deposits are calculated based on the amount of deposits placed with the Bank by its customers.

As at December 31, As at June 30, 2015 2016 2017 2018 %%%% Mandatory reserve rate for deposits denominated in RMB 14.00 14.50 13.50 14.00

Mandatory reserve deposits with central bank are not available for use by the Bank in its day to day operations. Surplus reserve deposits are maintained with central bank mainly for liquidity purpose.

17 FINANCIAL ASSETS HELD UNDER RESALE AGREEMENTS, DUE FROM OTHER BANKS AND FINANCIAL INSTITUTIONS

As at December 31, As at June 30, 2015 2016 2017 2018 Securities assets purchased under resale agreements 3,642,850 2,380,920 9,975,858 4,603,683 Notes purchased under resale agreements – – 1,866,006 2,379,902 Placements with other banks and financial institutions 1,275,380 15,380 14,611 1,514,611 Deposits with other banks and financial institutions 1,723,716 2,575,531 1,488,282 934,702 Minus: ECL allowance – – – (7,936) 6,641,946 4,971,831 13,344,757 9,424,962

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18 CUSTOMER LOANS (a) Customer loans

As at December 31, As at June 30, 2015 2016 2017 2018 Customer loans at amortized cost Corporate loans 5,596,793 8,418,871 11,951,162 18,752,084 Personal loans 3,640,720 4,188,642 4,969,041 5,368,643 Discounted bills 740,353 1,926,948 2,481,153 N/A Total customer loans at amortized cost 9,977,866 14,534,461 19,401,356 24,120,727 Less: Allowance for impairment losses (274,485) (375,385) (567,523) N/A – Collectively assessed (271,368) (351,265) (481,015) N/A – Individual assessed (3,117) (24,120) (86,508) N/A Less: ECL allowance N/A N/A N/A (605,871) Net customer loans at amortized cost 9,703,381 14,159,076 18,833,833 23,514,856 Net customer loans – FVOCI N/A N/A N/A 172,648 Net customer loans 9,703,381 14,159,076 18,833,833 23,687,504

(b) Movements on ECL allowance

Corporate Loan Stage 1 Stage 2 Stage 3 12-month Lifetime Lifetime ECL ECL ECL Total Loss allowance as at January 1, 2018 230,905 90,564 86,508 407,977 Provision for impairment/(reversal) 168,095 19,323 (30,161) 157,257 Written-off – – (8,296) (8,296) Transfers: –––– Transfer from Stage 1 to Stage 2 (2,998) 2,998 – – Transfer from Stage 1 to Stage 3 (96) – 96 – Transfer from Stage 2 to Stage 3 – (22,499) 22,499 – Transfer from Stage 3 to Stage 2 –––– Transfer from Stage 2 to Stage 1 3,293 (3,293) – – Transfer from Stage 3 to Stage 1 –––– Recoveries of loans written-off in previous years – – 966 966 Unwind of discount – – (2,118) (2,118) Loss allowance as at June 30, 2018 399,199 87,093 69,494 555,786

Personal Loan Stage 1 Stage 2 Stage 3 12-month Lifetime Lifetime ECL ECL ECL Total Loss allowance as at January 1, 2018 13,439 17,108 28,556 59,103 Provision for impairment/(reversal) 236 2,097 (5,803) (3,470) Written-off – – (4,849) (4,849) Transfers: Transfer from Stage 1 to Stage 2 (82) 82 – – Transfer from Stage 1 to Stage 3 (49) – 49 – Transfer from Stage 2 to Stage 3 – (1,322) 1,322 – Transfer from Stage 3 to Stage 2 – 69 (69) – Transfer from Stage 2 to Stage 1 811 (811) – – Transfer from Stage 3 to Stage 1 –––– Recoveries of loans written-off in previous years – – 407 407 Unwind of discount – – (1,106) (1,106) Loss allowance as at June 30, 2018 14,355 17,223 18,507 50,085

I-59 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

The following table further illustrates the changes in the total book value of the corporate and personal loan portfolio to explain the impact of these changes on the portfolio’s ECL.

Corporate Loan Stage 1 Stage 2 Stage 3 12-month Lifetime Lifetime ECL ECL ECL Total Loss allowance as at January 1, 2018 11,363,056 464,183 123,923 11,951,162 Transfers: Transfer from Stage 1 to Stage 2 (132,800) 132,800 – – Transfer from Stage 1 to Stage 3 (4,500) – 4,500 – Transfer from Stage 2 to Stage 3 – (85,270) 85,270 – Transfer from Stage 3 to Stage 2 –––– Transfer from Stage 2 to Stage 1 22,800 (22,800) – – Transfer from Stage 3 to Stage 1 –––– Derecognition of financial assets of current period (2,713,839) (110,250) (9,423) (2,833,512) New financial assets occurred or purchased 9,630,133 53,500 – 9,683,633 Written-off – – (49,199) (49,199) Loss allowance as at June 30, 2018 18,164,850 432,163 155,071 18,752,084

Personal Loan Stage 1 Stage 2 Stage 3 12-month Lifetime Lifetime ECL ECL ECL Total Loss allowance as at January 1, 2018 4,810,168 90,082 68,791 4,969,041 Transfers: Transfer from Stage 1 to Stage 2 (17,906) 17,906 – – Transfer from Stage 1 to Stage 3 (8,899) – 8,899 – Transfer from Stage 2 to Stage 3 – (7,426) 7,426 – Transfer from Stage 3 to Stage 2 – 977 (977) – Transfer from Stage 2 to Stage 1 9,344 (9,344) – – Transfer from Stage 3 to Stage 1 –––– Derecognition of financial assets of current period (1,026,346) (8,623) (5,361) (1,040,330) New financial assets occurred or purchased 1,451,232 1,900 – 1,453,132 Written-off – – (13,200) (13,200) Loss allowance as at June 30, 2018 5,217,593 85,472 65,578 5,368,643

2015 2016 2017 Individual Collective Individual Collective Individual Collective impairment impairment Total impairment impairment Total impairment impairment Total Balance at the beginning of the year 6,450 212,939 219,389 3,117 271,368 274,485 24,120 351,265 375,385 Impairment allowances/(reversal) for customer loans charged to profit or loss (5,078) 58,715 53,637 21,293 87,444 108,737 81,923 134,605 216,528 Customer loans written off during the year as uncollectible – –– – (6,567) (6,567) (26,034) (4,120) (30,154) Recoveries of customer loans written off in prior years 1,988 – 1,988 50 – 50 8,859 900 9,759 Reversal of discounted (243) (286) (529) (340) (980) (1,320) (2,360) (1,635) (3,995) Balance at the end of the year 3,117 271,368 274,485 24,120 351,265 375,385 86,508 481,015 567,523

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(d) Individually identified loans with impairment allowance:

2015 2016 2017 Corporate Corporate Corporate loans and loans and loans and discounted Personal discounted Personal discounted Personal bills loans Total bills loans Total bills loans Total Balance at the beginning of the year 185,186 34,203 219,389 233,152 41,333 274,485 319,133 56,252 375,385 Impairment allowances for customer loans charged to profit or loss/(reversal) 46,221 7,416 53,637 86,271 22,466 108,737 196,875 19,653 216,528 Customer loans written off during the year as uncollectible – –– – (6,567) (6,567) (26,034) (4,120) (30,154) Recoveries of customer loans written off in prior years 1,988 – 1,988 50 – 50 8,859 900 9,759 Reversal of discounted (243) (286) (529) (340) (980) (1,320) (2,360) (1,635) (3,995) Balance at the end of the year 233,152 41,333 274,485 319,133 56,252 375,385 496,473 71,050 567,523

(e) Loans listed by assessment method for allowance As at December 31, 2015

Customer loans made in combination Impaired customer loans recognized with impairment Collective Individual provision impairment impairment Subtotal Total Corporate loans 5,591,793 – 5,000 5,000 5,596,793 Personal loans 3,615,905 24,815 – 24,815 3,640,720 Discounted Bills 740,353–––740,353 Impairment provision (250,171) (21,197) (3,117) (24,314) (274,485) Net amounts of customer loans 9,697,880 3,618 1,883 5,501 9,703,381

As at December 31, 2016

Customer loans made in combination Impaired customer loans recognized with impairment Collective Individual provision impairment impairment Subtotal Total Corporate loans 8,381,271 – 37,600 37,600 8,418,871 Personal loans 4,149,102 39,540 – 39,540 4,188,642 Discounted Bills 1,926,948 – – – 1,926,948 Impairment provision (333,467) (17,798) (24,120) (41,918) (375,385) Net amounts of customer loans 14,123,854 21,742 13,480 35,222 14,159,076

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As at December 31, 2017

Customer loans made in combination Impaired customer loans recognized with impairment Collective Individual provision impairment impairment Subtotal Total Corporate loans 11,827,239 – 123,923 123,923 11,951,162 Personal loans 4,900,250 68,791 – 68,791 4,969,041 Discounted Bills 2,481,153 – – – 2,481,153 Impairment provision (452,458) (28,557) (86,508) (115,065) (567,523) Net amounts of customer loans 18,756,184 40,234 37,415 77,649 18,833,833

ECL allowance As at June 30, 2018 Stage 1 Stage 2 Stage 3 Total Total customer loans 23,382,443 517,635 220,649 24,120,727 – Corporate loans 18,164,850 432,163 155,071 18,752,084 – Personal loans 5,217,593 85,472 65,578 5,368,643 Less: ECL allowance (413,554) (104,316) (88,002) (605,872) Net customer loans 22,968,889 413,319 132,647 23,514,855

19 FINANCIAL INVESTMENTS – CREDIT RELATED FINANCIAL ASSETS

The bank’s credit related financial assets are corporate loans issued through consolidated structured entities (trust and asset management plans).

As at December 31, As at June 30, 2015 2016 2017 2018 Financial investments – credit related financial assets – Trust plans(1) – 5,304,200 5,371,050 4,241,950 – Asset management plans(2) 3,815,000 2,235,000 3,033,000 2,699,500 Less: Impairment allowances (95,375) (94,832) (124,671) N/A Less: ECL allowance N/A N/A N/A (97,771) Total 3,719,625 7,444,368 8,279,379 6,843,679

(1) Trust plans

As at December 31, As at June 30, 2015 2016 2017 2018 Pledged – 1,366,000 1,021,000 801,000 Collateralised – 2,718,200 1,167,000 150,000 Guaranteed – – 1,740,050 1,864,950 Unsecured – 1,220,000 1,443,000 1,426,000 Total – 5,304,200 5,371,050 4,241,950

(2) Asset management plans

As at December 31, As at June 30, 2015 2016 2017 2018 Pledged – – 1,663,000 1,654,500 Collateralised 3,695,000 1,835,000 1,200,000 875,000 Guaranteed 120,000 200,000 80,000 80,000 Unsecured – 200,000 90,000 90,000 Total 3,815,000 2,235,000 3,033,000 2,699,500

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The movement of ECL of financial investments – credit related financial assets is as follows:

Year ended December 31, 2015 Financial investments – credit related financial assets As at January 1, 2015 59,880 Provision for ECL 35,495 Reversal of ECL allowances – As at December 31, 2015 95,375

Year ended December 31, 2016 Financial investments – credit related financial assets As at January 1, 2016 95,375 Provision for ECL – Reversal of ECL allowances (543) As at December 31, 2016 94,832

Year ended December 31, 2017 Financial investments – credit related financial assets As at January 1, 2017 94,832 Provision for ECL 29,839 Reversal of ECL allowances – As at December 31, 2017 124,671

Six months ended June 30, 2018 Financial investments – credit related financial assets 12-month ECL for stage 1 As at January 1, 2018 127,150 Provision for ECL – Reversal of ECL allowances (29,379) As at June 30, 2018 97,771

20 FINANCIAL INVESTMENTS – FAIR VALUE THROUGH PROFIT OR LOSS

As at December 31, As at June 30, 2015 2016 2017 2018 Financial assets – fair value through profit or loss – Collective trust scheme(1) N/A N/A N/A 106,302 – Wealth management products N/A N/A N/A 604,823 – Funds N/A N/A N/A 1,564,088 – Joint investment plan N/A N/A N/A 30,000 – Equity investment N/A N/A N/A 996 Total N/A N/A N/A 2,306,209

I-63 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

(1) Collective trust scheme

As at December 31, As at June 30, 2015 2016 2017 2018 Pledged N/A N/A N/A – Collateralised N/A N/A N/A – Guaranteed N/A N/A N/A – Unsecured N/A N/A N/A 106,302 Total N/A N/A N/A 106,302

As at December 31, As at June 30, 2015 2016 2017 2018 Financial investments – fair value through profit or loss – Listed in Hong Kong N/A N/A N/A – – Listed outside Hong Kong N/A N/A N/A – – Unlisted N/A N/A N/A 2,306,209 Total N/A N/A N/A 2,306,209

21 FINANCIAL INVESTMENTS – FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME

As at December 31, As at June 30, 2015 2016 2017 2018 Financial investments – FVOCI – Debt securities N/A N/A N/A 5,064,079 Total N/A N/A N/A 5,064,079

As at December 31, As at June 30, 2015 2016 2017 2018 Financial investments – FVOCI – Listed in Hong Kong N/A N/A N/A – – Listed outside Hong Kong N/A N/A N/A 5,064,079 –Unlisted N/A N/A N/A – Total N/A N/A N/A 5,064,079

Debt securities are analysed by issuer as follows:

As at December 31, As at June 30, 2015 2016 2017 2018 Government N/A N/A N/A 258,655 Policy bank N/A N/A N/A 2,736,813 Commercial bank N/A N/A N/A 677,647 Corporate entity N/A N/A N/A 1,390,964 Total N/A N/A N/A 5,064,079

The movement of ECL allowance of financial investments – FVOCI is as follows:

As at June 30, 2018 Financial investments – FVOCI 12-month ECL for stage 1 As at January 1, 2018 (Note 2.1.1) 1,110 Provision for ECL 491 Reversal of ECL allowances – As at June 30, 2018 1,601

I-64 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

22 FINANCIAL INVESTMENTS – AVAILABLE FOR SALE

As at December 31, As at June 30, 2015 2016 2017 2018 AFS-equity securities – Listed in Hongkong –––N/A – Listed outside Hongkong –––N/A – Unlisted equity investments 975 975 996 N/A – Wealth management products – 1,710,859 2,310,840 N/A AFS-debt securities N/A – Listed outside Hongkong 3,187,216 5,845,476 9,064,775 N/A Total 3,188,191 7,557,310 11,376,611 N/A

Investment securities are analysed by issuer as follows:

As at December 31, As at June 30, 2015 2016 2017 2018 Policy bank 1,434,528 3,355,835 4,803,865 N/A Commercial bank – 2,678,037 3,931,056 N/A Government 1,752,688 1,522,463 2,473,090 N/A Corporate entity – – 167,604 N/A Equity investment at cost 975 975 996 N/A Total 3,188,191 7,557,310 11,376,611 N/A

Due to price fluctuations in the bond market, The bank disposed some bonds originally classified as held-to-maturity whose fair value varied considerably in 2015 and 2016. As a result, all remaining held-to-maturity are reclassified as available-for-sale.

23 FINANCIAL INVESTMENTS – AMORTIZED COST

As at December 31, As at June 30, 2015 2016 2017 2018 Financial investments – amortized cost – Trust plans(1) N/A N/A N/A 8,400,470 – Asset management plans(2) N/A N/A N/A 3,064,850 – Debt securities(3) N/A N/A N/A 6,525,551 Less: ECL allowance N/A N/A N/A (168,380) Total N/A N/A N/A 17,822,491

(1) Trust plans

As at December 31, As at June 30, 2015 2016 2017 2018 Pledged N/A N/A N/A – Collateralised N/A N/A N/A 2,638,720 Guaranteed N/A N/A N/A 5,562,750 Unsecured N/A N/A N/A 199,000 Total N/A N/A N/A 8,400,470

(2) Asset management plans

As at December 31, As at June 30, 2015 2016 2017 2018 Pledged N/A N/A N/A 2,198,330 Collateralised N/A N/A N/A – Guaranteed N/A N/A N/A 736,520 Unsecured N/A N/A N/A 130,000 Total N/A N/A N/A 3,064,850

I-65 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

(3) Debt securities

As at December 31, As at June 30, 2015 2016 2017 2018 Government N/A N/A N/A 2,266,037 Policy bank N/A N/A N/A 3,441,864 Commercial bank N/A N/A N/A 597,784 Corporate entity N/A N/A N/A 219,866 Total N/A N/A N/A 6,525,551

As at December 31, As at June 30, 2015 2016 2017 2018 Financial investments – amortized cost – Listed in Hong Kong N/A N/A N/A – – Listed outside Hong Kong N/A N/A N/A 6,524,240 – Unlisted N/A N/A N/A 11,298,251 Total N/A N/A N/A 17,822,491

The movement of ECL allowance of financial investments – amortized cost is as follows:

Six months ended June 30, 2018 Financial investments – amortized cost 12-month ECL for stage 1 As at January 1, 2018 (Note 2.1.1) 128,532 Provision for ECL 39,848 As at June 30, 2018 168,380

24 FINANCIAL INVESTMENTS – INVESTMENTS CLASSIFIED AS RECEIVABLES

As at December 31, As at June 30, 2015 2016 2017 2018 Investment securities – investments classified as receivables Debt securities – at amortized cost Unlisted – Trust schemes(1) 1,749,000 8,494,480 8,211,750 N/A – Asset management plan(2) 500,000 2,750,000 1,252,520 N/A – Wealth management products purchased from financial institutions(3) 1,200,000 400,000 – N/A Impairment – (47,475) (124,096) N/A Total 3,449,000 11,597,005 9,340,174 N/A

(1) Trust plans

As at December 31, As at June 30, 2015 2016 2017 2018 Pledged – 2,667,480 – N/A Collateralised – 1,510,000 2,340,000 N/A Guaranteed – 2,320,000 4,772,750 N/A Unsecured 1,749,000 1,997,000 1,099,000 N/A Total 1,749,000 8,494,480 8,211,750 N/A

I-66 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

(2) Asset management plans As at December 31, As at June 30, 2015 2016 2017 2018 Pledged 500,000 850,000 1,086,000 N/A Collateralised –––N/A Guaranteed – – 36,520 N/A Unsecured – 1,900,000 130,000 N/A Total 500,000 2,750,000 1,252,520 N/A

(3) Wealth management products purchased from financial institutions As at December 31, As at June 30, 2015 2016 2017 2018 Interbank credit 1,200,000 400,000 – N/A

The movement of impairment of financial investments – investments classified as receivables is as follows:

Year ended December 31, 2015 Financial investments – investments classified as receivables As at January 1, 2015 – Provision for impairment – Reversal of impairment allowances – As at December 31, 2015 –

Year ended December 31, 2016 Financial investments – investments classified as receivables As at January 1, 2016 – Provision for impairment 47,475 Reversal of impairment allowances – As at December 31, 2016 47,475

Year ended December 31, 2017 Financial investments – investments classified as receivables As at January 1, 2017 47,475 Provision for impairment 76,621 Reversal of impairment allowances – As at December 31, 2017 124,096

25 INVESTMENT IN AN ASSOCIATE

As at December 31 As at June 30 2015 2016 2017 2018 Balance at the beginning of the year 19,724 27,553 30,467 33,011 Share of profit after tax 7,829 2,914 2,544 2,308 Balance at the end of the year 27,553 30,467 33,011 35,319

The Bank invested Luxian Yuantong Rural Bank Co., Ltd. On April 8, 2009, accounting for 30% of the investee’s RMB9,000 thousand registered capital.

I-67 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

Investment in associates of the Bank are unlisted corporation’s ordinary shares, assets, liabilities, revenue and profit of associates are as follows:

Place of Interest incorporation Assets Liabilities Revenue Profit held December 31, 2015 Luxian Yuantong Rural Bank Co., Ltd. (瀘縣元通村鎮銀行) PRC 949,309 857,465 44,735 26,098 30%

December 31, 2016 Luxian Yuantong Rural Bank Co., Ltd. (瀘縣元通村鎮銀行) PRC 770,917 669,361 30,630 10,455 30%

December 31, 2017 Luxian Yuantong Rural Bank Co., Ltd. (瀘縣元通村鎮銀行) PRC 705,085 595,049 24,922 9,165 30%

June 30, 2018 Luxian Yuantong Rural Bank Co., Ltd. (瀘縣元通村鎮銀行) PRC 752,022 634,292 14,406 6,902 30%

26 PROPERTY, PLANT AND EQUIPMENT

Motor Electronic Office Construction Buildings vehicles equipment equipment in progress(a) Total Cost As at January 1, 2015 70,706 5,945 30,351 10,726 13,155 130,883 Additions – 478 – 576 399,847 400,901 Construction in progress transfer in/(out) – – – 835 (835) – Transfer to amortisation of long-term prepaid expenses ––––(5,255) (5,255) Disposals – – (534) (60) – (594) As at December 31, 2015 70,706 6,423 29,817 12,077 406,912 525,935 Accumulated depreciation As at January 1, 2015 (23,095) (4,303) (18,094) (3,252) – (48,744) Charge for the year (3,374) (673) (2,137) (6,259) – (12,443) Disposals – – 494 51 – 545 As at December 31, 2015 (26,469) (4,976) (19,737) (9,460) – (60,642) Net book value As at December 31, 2015 44,237 1,447 10,080 2,617 406,912 465,293 Cost As at January 1, 2016 70,706 6,423 29,817 12,077 406,912 525,935 Additions – 1,501 8,461 2,852 126,247 139,061 Construction in progress transfer in/(out) – – 25,659 – (25,659) – Transfer to amortisation of long-term prepaid expenses ––––(8,729) (8,729) Disposals – (1,471) (66) (240) – (1,777) As at December 31, 2016 70,706 6,453 63,871 14,689 498,771 654,490 Accumulated depreciation As at January 1, 2016 (26,469) (4,976) (19,737) (9,460) – (60,642) Charge for the year (3,324) (480) (6,610) (1,056) – (11,470) Disposals – 1,397 39 193 – 1,629 As at December 31, 2016 (29,793) (4,059) (26,308) (10,323) – (70,483) Net book value As at December 31, 2016 40,913 2,394 37,563 4,366 498,771 584,007

I-68 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

Motor Electronic Office Construction Buildings vehicles equipment equipment in progress(a) Total Cost As at January 1, 2017 70,706 6,453 63,871 14,689 498,771 654,490 Additions – 2,291 7,920 1,541 79,480 91,232 Construction in progress transfer in/(out) – – 16,568 – (16,568) – Transfer to amortisation of long-term prepaid expenses ––––(37,582) (37,582) Disposals – (743) (2,940) (5,580) – (9,263) As at December 31, 2017 70,706 8,001 85,419 10,650 524,101 698,877 Accumulated depreciation As at January 1, 2017 (29,793) (4,059) (26,308) (10,323) – (70,483) Charge for the year (3,338) (671) (16,897) (1,516) – (22,422) Disposals – 706 2,793 5,301 – 8,800 As at December 31, 2017 (33,131) (4,024) (40,412) (6,538) – (84,105) Net book value As at December 31, 2017 37,575 3,977 45,007 4,112 524,101 614,772 Cost As at January 1, 2018 70,706 8,001 85,419 10,650 524,101 698,877 Additions – – 4,961 818 29,491 35,270 Construction in progress transfer in/(out) – – – 680 (680) – Transfer to amortisation of long-term prepaid expenses – (400) (6,722) (722) – (7,844) As at June 30, 2018 70,706 7,601 83,658 11,426 552,912 726,303 Accumulated depreciation As at January 1, 2018 (33,131) (4,024) (40,412) (6,538) – (84,105) Charge for the period (1,670) (408) (7,693) (582) – (10,353) As at June 30, 2018 (34,801) (4,432) (48,105) (7,120) – (94,458) Net book value As at June 30, 2018 35,905 3,169 35,553 4,306 552,912 631,845

As at December 31, 2015, December 31, 2016, December 31, 2017, June 30, 2018, the net amount of buildings, for which registrations for the property ownership certificates had not been completed, were RMB15,370 thousand, RMB14,226 thousand, RMB13,082 thousand and RMB12,415 thousand. However, such registration process has little effect on the rights of the Bank to these assets. None of the land or property the Bank owned is located in Hong Kong.

(a) Significant construction in progress:

As at December 31, As at June 30, 2015 2016 2017 2018 Headquarter building 376,200 410,106 442,200 453,683 Others 30,712 88,665 81,901 99,229 Total 406,912 498,771 524,101 552,912

27 OTHER ASSETS

As at December 31, As at June 30, 2015 2016 2017 2018 Interest receivable(a) 151,160 298,272 483,617 452,554 Prepaid expenses 2,917 5,865 6,529 21,293 Other receivables 14,554 19,124 24,535 24,482 Less: Impairment/ECL allowance (1,159) (1,159) – – Foreclosed assets(c) 25,811 15,500 116,753 169,272 Less: Impairment/ECL allowance (7,743) – (1,655) (1,655) Investment properties(b) 2,567 2,195 1,911 1,769 Amortisation of long-term prepaid expenses 10,740 13,867 35,200 26,451 Others – 20,400 – – Total 198,847 374,064 666,890 694,166

I-69 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

(a) Interest receivable:

As at December 31, As at June 30, 2015 2016 2017 2018 Due from banks, other financial institutions and central bank 12,028 24,995 35,578 5,769 Placements with banks, other financial institutions and central bank 4,100 – – 3,114 Purchase with re-sale agreements investment securities 1,815 3,244 30,356 16,258 Investment securities 106,311 213,612 341,528 348,643 Customer loans 26,906 56,421 76,155 78,770 Total 151,160 298,272 483,617 452,554

(b) Investment properties

As at December 31, As at June 30, 2015 2016 2017 2018 Cost Balance at the beginning and the end of the year/period 11,724 11,724 11,724 11,724 Accumulated depreciation Balance at the beginning of the year/period (8,635) (9,157) (9,529) (9,813) addition (522) (372) (284) (142) Disposals –––– Balance at the end of the year/period (9,157) (9,529) (9,813) (9,955) Net book value Balance at the end of the year/period 2,567 2,195 1,911 1,769

The analysis of the value of investment properties by remaining leasehold period are as follows:

As at December 31, As at June 30, 2015 2016 2017 2018 Located in PRC Short-term lease (Within 10 years) 2,567 2,195 1,911 1,769

Properties & Plants Others Total As at January 1, 2015 and December 31, 2015 25,811 – 25,811 As at January 1, 2016 25,811 – 25,811 Additions 15,500 – 15,500 Disposals (25,811) – (25,811) As at December 31, 2016 15,500 – 15,500 As at January 1, 2017 15,500 – 15,500 Additions 96,074 5,179 101,253 Disposals ––– As at December 31, 2017 111,574 5,179 116,753 As at January 1, 2018 111,574 5,179 116,753 Additions 52,489 30 52,519 Disposals ––– As at June 30, 2018 164,063 5,209 169,272

I-70 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

28 FINANCIAL ASSETS SOLD UNDER REPURCHASE AGREEMENTS, DUE TO OTHER BANKS AND FINANCIAL INSTITUTIONS

As at December 31, As at June 30, 2015 2016 2017 2018 Deposits from other banks 6,659,659 9,512,926 4,787,989 4,888,202 Securities sold under repurchase agreements – 638,200 6,405,920 4,803,986 Loans from other banks and financial institutions 420,000 1,010,000 870,000 1,650,000 Notes sold under repurchase agreements – 1,230,612 – – Total 7,079,659 12,391,738 12,063,909 11,342,188

29 CUSTOMER DEPOSITS

As at December 31, As at June 30, 2015 2016 2017 2018 Corporate demand deposits 11,152,093 16,953,765 20,024,474 18,393,866 Including: Pledged deposits held as collateral 506,747 644,057 1,039,445 778,233 Corporate time deposits 5,029,274 4,407,903 6,090,369 6,667,614 Individual demand deposits 1,315,303 1,804,423 2,391,044 2,613,729 Individual time deposits 2,886,691 7,852,665 13,639,410 17,067,235 Total 20,383,361 31,018,756 42,145,297 44,742,444

30 DEBT SECURITIES ISSUED

As at December 31, As at June 30, 2015 2016 2017 2018 Certificate of deposit – 4,901,402 9,775,243 11,443,650 Fixed rate tier 2 capital debt – 2027 – – 1,000,000 1,000,000 – 4,901,402 10,775,243 12,443,650

The bank issued 1 billion RMB Tier II securities in February 2017. The term of this security lasts for 10 years, and the fixed interest rate is 5.50%. The Bank, as an issuer, can choose to redeem the bond in part or for all on February 14, 2022 at the face value. If the capital level of the bank still meet the requirement of CBRC regulatory after executing the right of redemption, the Bank can choose to redeem the bond of this term for part or at all on the last day of the interest rate year that is set to redeem in advance in this period. By the end of June 30, 2018, the Bank did not have overdue in bond or inter deposit certificate, or other default issues.

31 DEFERRED INCOME TAXES

Deferred income taxes are calculated on all temporary differences under the liability method using an effective tax rate of 25% for the year ended December 31, 2015, December 31, 2016, December 31, 2017, and six months ended June 30, 2018 for transactions in the PRC. Movements in the deferred income tax account are as follows:

As at December 31, As at June 30, 2015 2016 2017 2018 Balance at the beginning of the year/period 52,235 20,056 98,829 169,209 Charge to profit or loss (Note 14) 16,814 33,099 66,808 2,941 Fair value changes of available-for-sale securities (48,993) 45,674 78,669 N/A Fair value changes of financial investments – FVOCI N/A N/A N/A (11,936) Balance at the end of the year/period 20,056 98,829 244,306 160,214

I-71 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

Deferred income tax assets and liabilities are attributable to the following items:

As at December 31, As at June 30, 2015 2016 2017 2018 Deferred Deferred Deferred Deferred income income income income Temporary tax assets/ Temporary tax assets/ Temporary tax assets/ Temporary tax assets/ differences (liabilities) differences (liabilities) differences (liabilities) differences (liabilities) Deferred income tax liabilities Fair value changes of available- for-sale securities (199,228) (49,807) (16,532) (4,133) – – N/A N/A Fair value changes of FVPL N/A N/A N/A N/A N/A N/A (35,213) (8,803) Fair value changes of FVOCI N/A N/A N/A N/A N/A N/A (7,740) (1,935) Subtotal (199,228) (49,807) (16,532) (4,133) – – (42,953) (10,738) Deferred income tax assets Allowance for impairment losses of loans and provisions for guarantee commitment 163,011 40,753 231,913 57,978 373,510 93,377 349,754 87,438 Allowance for impairment losses of Investment securities 95,405 23,851 142,337 35,584 248,776 62,194 267,761 66,940 Allowance for Interbank assets ––––––15,936 3,984 Payroll payable 12,134 3,034 36,439 9,110 55,140 13,785 48,703 12,176 Fair value changes of available- for-sale securities ––––298,143 74,536 N/A N/A Others 8,903 2,225 1,159 290 1,655 414 1,655 414 Subtotal 279,453 69,863 411,848 102,962 977,224 244,306 683,809 170,952 Net deferred income tax assets 80,225 20,056 395,316 98,829 977,224 244,306 640,856 160,214

32 RETIREMENT BENEFIT OBLIGATIONS

Employees who retire after November 8, 2016 can voluntarily participate in an annuity plan set up by the Bank pursuant to related state corporate annuity regulations. The Bank contributes to the annuity plan based on certain percentage of the employees’ gross salary of previous year and the contribution is recognised in other comprehensive income as incurred.

As at December 31, As at June 30, 2015 2016 2017 2018 Expenses incurred for corporate annuity plan – 8,605 14,053 7,407

As at December 31, As at June 30, 2015 2016 2017 2018 Statements of financial position obligations for: – corporate annuity ––––

33 OTHER LIABILITIES

As at December 31, As at June 30, 2015 2016 2017 2018 Interest payable(a) 217,012 305,784 547,097 443,984 Employee benefits payable 43,144 74,488 102,488 48,703 Dividends payable 7,095 30,287 39,115 457,662 Loan commission be liquidated 108,670 193,027 165,188 – Deposit of financial guarantee 5,059 7,562 20,949 21,960 Deposit received 289 277 266 256 Liquidation of funds(a) 132,319 14,130 37,640 253,072 Interest receivable of entrusted loans 2,514––– Provisions – – – 7,888 Others 17,898 40,719 27,761 51,656 Total 534,000 666,274 940,504 1,285,181

Note(a): The liquidation funds contains large payment system cash flow and UnionPay liquidated funds

I-72 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

(a) Interest payable

As at December 31, As at June 30, 2015 2016 2017 2018

Deposits from banks and other financial institutions 23,713 60,661 103,880 30,954 Funds from other banks and financial institutions 977 7,233 24,727 4,272 Securities sold under repurchase agreements – 2,882 14,850 8,315 Customer deposits 192,322 235,008 355,270 379,799 Debt securities issued – – 48,370 20,644 Total 217,012 305,784 547,097 443,984

34 SHARE CAPITAL AND SHARE PREMIUM All shares of the Bank issued are fully paid ordinary shares. The par value per share is RMB1.00. The Bank’s number of shares is as follows:

As at December 31, As at June 30, 2015 2016 2017 2018 Number of shares 1,297,619 1,448,844 1,637,193 1,637,193

The movement of share capital is as follows:

Six months ended Year ended December 31, June 30, 2015 2016 2017 2018 Balance at the beginning of the year/period 724,422 1,297,619 1,448,844 1,637,193 Issue of shares 573,197 151,225 – – Share dividends – – 188,349 – Balance at the end of the year/period 1,297,619 1,448,844 1,637,193 1,637,193

Generally, transactions of the following nature are recorded in the share premium: (a) Share premium arising from the issue of shares at prices in excess of their par value; (b) Donations received from shareholders; and (c) Any other items required by the PRC regulations to be so treated. Share premium can be utilised for the issuance of bonus shares or for increasing paid-in capital as approved by the shareholders. As at December 31, 2015, 2016, 2017, and June 30, 2018, the Bank’s share premium is shown as follow:

As at December 31, As at June 30, 2015 2016 2017 2018 Share premium 900,889 1,174,606 1,174,606 1,174,606

According to the approval of the commission from Sichuan Banking Regulatory Bureau, CBRC [2015]431 on December 3, 2015, as of December 9, 2015, the bank received RMB1,473.12 million from shareholders, including share capital of RMB573.20 million and premium of RMB899.92 million. The premium was recognized in share premium and the share capital was increased to RMB1,297.62 million. According to the approval of the commission from Sichuan Banking Regulatory Bureau, CBRC [2016]195 on June 28, 2016, as of June 29, 2016, the bank received RMB322.45 million from shareholders, including share capital of RMB114.75 million and premium of RMB207.70 million. The premium was recognized in share premium and the share capital was increased to RMB1,412.37 million. According to the approval of the commission from Sichuan Banking Regulatory Bureau, CBRC [2016]411 on November 21, 2016, as of November 29, 2016, the bank received RMB102.49 million from shareholders, including share capital of RMB36.47 million and premium of RMB66.02 million. The premium was recognized in share premium and the share capital was increased to RMB1,448.84 million. According to the “Plan for profit distribution of Luzhou Commercial Bank Co. Ltd in 2016” approved in the twenty-first shareholder’s conference on July 21, 2017, as of September 30, 2017, the bank distribute RMB188.35 million from retained earnings to share capital. After the distribution, share capital was increased to RMB1,637.19 million.

I-73 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

35 OTHER RESERVES

Surplus General Revaluation reserve(a) reserve(b) reserve Total Balance at January 1, 2015 109,283 – 2,445 111,728 Other comprehensive income – – 146,976 146,976 Addition 45,147 171,901 – 217,048 Balance at December 31, 2015 154,430 171,901 149,421 475,752 Balance at January 1, 2016 154,430 171,901 149,421 475,752 Other comprehensive loss – – (137,022) (137,022) Addition 54,209 237,402 – 291,611 Balance at December 31, 2016 208,639 409,303 12,399 630,341 Balance at January 1, 2017 208,639 409,303 12,399 630,341 Other comprehensive loss – – (236,006) (236,006) Addition 61,870 282,484 – 344,354 Balance at December 31, 2017 270,509 691,787 (223,607) 738,689 Changes arising from first implementation of IFRS 9 – – 185,117 185,117 Balance at January 1, 2018 (restated) 270,509 691,787 (38,490) 923,806 Other comprehensive income – – 44,296 44,296 Addition – 155,762 – 155,762 Balance at June 30, 2018 270,509 847,549 5,806 1,123,864

(a) Surplus reserve In accordance with the ‘Company Law of the People’s Republic of China’ and the Bank’s Articles of Association, 10% of the net distributable profit of the Bank, is required to be transferred to a non-distributable statutory reserve until such time when this reserve represents 50% of the share capital of the Bank. With approval, statutory surplus reserve can be used for making up losses, or increasing the share capital. (b) General reserve According to the “the notice of the issuance of ‘the management methods for the extraction of non-performing loans of financial corporations’” (CAI No. [2005]49) and “the notice for the questions on bad debt reserve issues” (CAI [2005]90) that took effect on May 17, 2015 and September 5, 2005, banks are required to extract general risk reserve from the net profit through profit distribution. The accrue proportion of the general risk reserve is determined by the bank considering the factor of its risk exposure, usually no less than the 1% of final balance of risk assets. The bank follows the “the management methods of financial corporation reserves” (financial [2012]20) issued by the Ministry of Finance. According to its requirements, the general reserve should not be lower than the 1.5% of the final risk assets. Besides, since proportion of the general reserves to final risk asset of a financial corporation can hardly reach 1.5% at once, the corporation can years to meet this requirement, but principally it should not exceed 5 years. The board of the bank suggests that 1.5% of the risk asset at the end of 2017 should be accrued for general risk reserve RMB155,762 thousand. This suggestion has been approved in the annual general meeting for the year 2017 on May 30, 2018.

36 DIVIDENDS

Year ended December 31, Six months ended June 30, 2015 2016 2017 2017 2018 (Unaudited) Dividend declared during the year/period 72,444 106,695 54,396 54,396 418,906 Dividend per share (in RMB) (Based on prior year shares) 0.10 0.14 0.04 0.04 0.12

Under the PRC Company Law and the Bank’s Articles of Association, the net profit after tax as reported in the PRC statutory financial statements can only be distributed as dividends after allowances for the following: (i) Making up prior year’s cumulative losses, if any; (ii) Allocations to the non-distributable statutory accumulation reserve of 10% of the net profit of the Bank. In accordance with relevant regulations, after the Bank’s [REDACTED], the net profit after tax of the Bank for the purpose of profit distribution is deemed to be the lower of (i) the retained profits determined in accordance with the China Accounting Standards and (ii) the retained profit determined in accordance with IFRS. According to the “Plan for profit distribution of Luzhou Commercial Bank Co. Ltd in 2015” approved in the twentieth shareholder’s conference on April 12, 2016, the Bank had distributed cash dividends RMB106,695 thousand by December 31, 2015 to its shareholders of record, which is calculated by the criterion of RMB0.14 dividend per share.

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According to the “Plan for profit distribution of Luzhou Commercial Bank Co. Ltd in 2016” approved in the twenty-first shareholder’s conference on July 21, 2017, the Bank had distributed cash dividends RMB54,396 thousand by December 31, 2016 to its shareholders of record, which is calculated by the criterion of RMB0.04 dividend (including tax) per share. By December 31, 2016, the shareholders of record had been distributed bonus share RMB188,349 thousand according to the criterion of giving out an extra 1.3 share per 10 shares (RMB1 per share including tax, and the shares below RMB1 are rounded). According to the “Plan for profit distribution of Luzhou Commercial Bank Co. Ltd in 2017” approved in the annual general meeting for year 2017 on May 30, 2018, the Bank had distributed cash dividends RMB196,463 thousand (including tax) by December 31, 2015 to its shareholders of record, which is calculated by the criterion of RMB0.12 dividend per share. Besides, the Bank intended to distribute additional dividends RMB176,768 thousand by December 31, 2016 and RMB45,674 thousand by December 31, 2015, totally RMB222,442 thousand. The allocation plan was not reflected in the liabilities of the accounting statements as at December 31, 2017. The implementation of the allocation plan was approved in the annual general meeting for year 2017 on May 30, 2018 and has been implemented on July 27, 2018.

37 STRUCTURED ENTITY (a) Unconsolidated structured entity (i) Unconsolidated structured entities managed by the Bank The unconsolidated structure entities managed by the Bank are mainly wealth management products issued and managed by the Bank acting as an agent. Based on the analysis and research on the potential targeted clients, the Bank designs and sells capital investment and management plan to specific targeted clients, and the raised funds are then put into related financial market or invested in related wealth management products according to the product contracts. Gains would be allocated to investors after the Bank gained from investment. The Bank receives corresponding wealth management commission fee income as the asset manager. The Bank has recognised net commission income from unsecured wealth management products with the amount of RMB446 thousand, RMB515 thousand, RMB 888 thousand and RMB688 thousand for the years ended December 31, 2015, 2016, 2017 and six months ended June 30, 2018 through provision of asset management service respectively. The bank has not provided any liquidity support to the wealth management products during the period. The Bank issues and manages unsecured wealth management products to individual investors. The funds raised from the individual investors are mainly invested in the open market bonds and money market instruments. The Bank assesses its control on the unsecured wealth management products. The Bank takes a fiduciary role on these wealth management products and has no contractual obligation to repay the principal or interest. The risk exposure of the products is mainly from the fluctuation of the expected return of the bonds market, the performance of trust plans and the performance of targeted asset management plans. The risk of loss is borne by the investors. The Bank earns the net fee and commission income from the products. As at December 31, 2015, 2016, 2017 and as at June 30, 2018, the balance of unconsolidated wealth management products managed and consolidated by the Bank was RMB0, RMB89,687 thousand, RMB277,277 thousand and RMB592,065 thousand.

(ii) Unconsolidated structured entities invested by the Bank In 2017, to make better use of capital for profit, the Bank invested in unstructured entities, including the wealth management products, capital trust schemes and asset management plans issued and managed by independent third parties. The Bank classified the unconsolidated structured entities as investments classified as receivables. The table below lists the book value and maximum loss risk exposure of the assets due to the holdings of profits from unconsolidated structured entities (including interest receivable).

Maximum As at December 31, 2015 Book value risk exposure Financial instruments – Investments classified as receivables 3,494,438 (3,494,438) Total 3,494,438 (3,494,438)

Maximum As at December 31, 2016 Book value risk exposure Financial instruments – Investments classified as receivables 11,729,576 (11,729,576) Financial instruments – Available-for-sale 1,711,045 (1,711,045) Total 13,440,621 (13,440,621)

Maximum As at December 31, 2017 Book value risk exposure Financial instruments – Investments classified as receivables 9,619,276 (9,619,276) Financial instruments – Available-for-sale 2,310,864 (2,310,864) Total 11,930,140 (11,930,140)

Maximum As at June 30, 2018 Book value risk exposure Financial instruments – amortized cost 11,298,251 (11,298,251)

I-75 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

Maximum As at June 30, 2018 Book value risk exposure Financial instruments – fair value through profit or loss 2,305,213 (2,305,213) Total 13,603,464 (13,603,464)

For the years ended December 31, 2015, 2016, 2017 and six months ended June 30, 2017 and 2018, the Bank had not provided any financial or other support plan to unconsolidated structured entities. The interest income and fee and commission income from the above unconsolidated structured entities were:

Year ended December 31, Six months ended June 30, 2015 2016 2017 2017 2018 (Unaudited) Interest income 75,002 330,355 800,570 495,497 403,630 Fee and commission income 466 515 888 427 688

(b) Consolidated structured entity The consolidated structured entities are mainly trust plans and asset management plans controlled by the bank (Note 19).

38 FINANCIAL GUARANTEES AND CREDIT RELATED COMMITMENTS, OTHER COMMITMENTS AND CONTINGENT LIABILITIES Financial guarantees and credit related commitments The following tables indicate the contractual amounts of the Bank’s financial guarantees and credit related commitments which the Bank commits to extend to customers:

As at December 31, As at June 30, 2015 2016 2017 2018 Bank acceptance 102,483 995,363 1,238,938 710,173 Guarantees 45,850 45,850 573,240 502,490 148,333 1,041,213 1,812,178 1,212,663

The credit risk weighted amount refers to the amount calculated in accordance with the formula promulgated by the CBRC and depends on the status of the counterparty and the maturity characteristics. The risk weights used range from 0% to 100% for contingent liabilities and credit commitments.

Capital expenditure commitments

As at December 31, As at June 30, 2015 2016 2017 2018 Contracted but not provided for: – Capital expenditure commitments for buildings 22,786 6,267 3,833 – – Acquisition of IT system 15,055 21,129 38,697 2,718 37,841 27,396 42,530 2,718

Operating lease commitments Where the Bank is the lessee, the future minimum lease payments under irrevocable operating leases in respect of buildings are as follows:

As at December 31, As at June 30, 2015 2016 2017 2018 Within 1 year 6,154 8,315 10,994 7,526 Between 1 to 5 years 17,831 24,705 30,510 27,703 Later than 5 years 4,418 6,777 3,490 4,087 28,403 39,797 44,994 39,316

Legal proceedings Legal proceedings are initiated by third parties against the Bank as defendant. The Bank had no outstanding legal claims at December 31, 2015, December 31, 2016, December 31, 2017, June 30, 2018.

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39 COLLATERALS (a) Assets pledged

As at December 31, 2015, 2016 and 2017 and June 30, 2018, the carrying amounts of assets pledged as collateral under repurchase agreements are as follows:

As at December 31, As at June 30, 2015 2016 2017 2018 Debt securities – 638,200 6,405,920 4,803,986 Bills – 1,239,410 – – Total – 1,877,610 6,405,920 4,803,986

(b) Collateral accepted

The bank received debt securities and bills as collateral in connection with the purchase of assets under resale agreements. As at December 31, 2015, 2016 and 2017 and June 30, 2018, the Bank has not accepted collateral that can be resold or repledged. Such trade has been following the regular and general articles of the business. The bank has the obligations to return the collateral at the agreed return date. As at December 31, 2015, 2016 and 2017 and June 30, 2018, the Bank did not resale or repledge such collateral. The fair values of the collateral are as follows:

As at December 31, As at June 30, 2015 2016 2017 2018 Debt securities 3,642,850 2,380,920 9,975,858 4,980,100 Bills – – 1,866,006 2,606,100 3,642,850 2,380,920 11,841,864 7,586,200

40 OTHER COMPREHENSIVE INCOME

Before tax Tax (expense) Net of tax amount benefit amount Year ended December 31, 2015 Items that may be reclassified subsequently to profit or loss Available-for-sale securities Changes in fair value taken to other comprehensive income 195,968 (48,992) 146,976 Other comprehensive income/(losses) for the year 195,968 (48,992) 146,976

Before tax Tax (expense) Net of tax amount benefit amount Year ended December 31, 2016 Items that may be reclassified subsequently to profit or loss Available-for-sale securities Changes in fair value taken to other comprehensive income (182,696) 45,674 (137,022) Other comprehensive income/(losses) for the year (182,696) 45,674 (137,022)

Before tax Tax (expense) Net of tax amount benefit amount Year ended December 31, 2017 Items that may be reclassified subsequently to profit or loss Available-for-sale securities Changes in fair value taken to other comprehensive income (314,675) 78,669 (236,006) Other comprehensive income/(losses) for the year (314,675) 78,669 (236,006)

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Before tax Tax (expense) Net of tax amount benefit amount Six months ended June 30, 2017 (Unaudited) Items that may be reclassified subsequently to profit or loss Available-for-sale securities Changes in fair value taken to other comprehensive income 133,435 (33,359) 100,076 Other comprehensive income/(losses) for the period 133,435 (33,359) 100,076

Before tax Tax (expense) Net of tax amount benefit amount Six months ended June 30, 2018 Items that may be reclassified subsequently to profit or loss Financial investments – fair value through other comprehensive income Changes in fair value taken to other comprehensive income 59,060 (14,764) 44,296 Other comprehensive income/(losses) for the period 59,060 (14,764) 44,296

41 NOTES TO STATEMENTS OF CASH FLOWS

For the purposes of the statements of cash flow, cash and cash equivalents comprise the following balances with original maturities of less than three months used for the purpose of meeting short-term cash commitments:

Year ended December 31 Six months ended June 30 2015 2016 2017 2017 2018 (Unaudited) Cash and balances with central bank 1,992,835 2,181,543 2,131,378 2,480,957 1,818,279 Financial assets held under resale agreements, due from other banks and financial institutions 2,863,716 2,375,531 1,028,282 1,727,085 1,134,556 4,856,551 4,557,074 3,159,660 4,208,042 2,952,835

42 RELATED PARTY TRANSACTIONS 1 Related party relationships

The related parties of the Bank mainly include: the major shareholders as well as the entities controlled by them, the key management personnel (including the Bank’s directors and senior management) and their family members who have close relationships with them as well as the entities which are controlled, joint controlled or can be significantly influenced by the Bank’s key management personnel or their family members. As at December 31, 2015, the major shareholders of the bank is as follows:

Name of shareholders Amount Ratio (thousand shares) (%) Luzhou Laojiao Refco Group Ltd 288,000 22.19% Sichuan Jiale Enterprise Group Co., Ltd. 240,000 18.50% Luzhou Xinfu Mining Group Co., Ltd. 240,000 18.50% Total 768,000 59.19%

I-78 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

As at December 31, 2016, the major shareholders of the bank is as follows:

Name of shareholders Amount Ratio (thousand shares) (%) Luzhou Laojiao Refco Group Ltd 288,000 19.88% Sichuan Jiale Enterprise Group Co., Ltd. 240,000 16.56% Luzhou Xinfu Mining Group Co., Ltd. 240,000 16.56% Total 768,000 53.00%

As at December 31, 2017, the major shareholders of the bank is as follows:

Name of shareholders Amount Ratio (thousand shares) (%) Luzhou Laojiao Refco Group Ltd 325,440 19.88% Sichuan Jiale Enterprise Group Co., Ltd. 271,200 16.56% Luzhou Xinfu Mining Group Co., Ltd. 271,200 16.56% Total 867,840 53.00%

As at June 30, 2018, the major shareholders of the bank is as follows:

2 Related party transactions

Transactions between the Bank and related parties are conducted in accordance with general commercial terms and normal business procedures. The pricing principle is consistent with that of an independent third party transaction. The related party transactions of the Bank are as follows:

(1) Related party customer loans

As at December 31, As at June 30, 2015 2016 2017 2018 Major shareholders Luzhou Laojiao Refco Group Ltd –––– Sichuan Jiale Enterprise Group Co., Ltd. –––– Luzhou Xinfu Mining Group Co., Ltd. –––– Other legal person related parties 300,000 780,000 1,434,000 761,000 The key management personnel or their family members 29,468 38,796 46,922 56,291 Total 329,468 818,796 1,480,922 817,291

(2) Related party loan interest income Six months ended Year ended December 31, June 30, 2015 2016 2017 2018 Major shareholders Luzhou Laojiao Refco Group Ltd –––– Sichuan Jiale Enterprise Group Co., Ltd. –––– Luzhou Xinfu Mining Group Co., Ltd. ––– Other legal person related parties 66,864 20,436 11,060 12,196 The key management personnel or their family members 3,840 1,720 2,227 1,413 Total 70,704 22,156 13,287 13,609

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(3) Related party deposits

As at December 31, As at June 30, 2015 2016 2017 2018 Major shareholders Luzhou Laojiao Refco Group Ltd 80,686 27,458 3,050 88 Sichuan Jiale Enterprise Group Co., Ltd. 823 19,056 635 638 Luzhou Xinfu Mining Group Co., Ltd. 202,097–2– Other legal person related parties 31,739 448,884 373,205 320,872 The key management personnel or their family members 4,599 22,440 34,332 885,753 Total 319,944 517,838 411,224 1,207,351

(4) Related party deposit interest expense

Six months ended Year ended December 31, June 30, 2015 2016 2017 2018 Major shareholders Luzhou Laojiao Refco Group Ltd 573 147 156 37 Sichuan Jiale Enterprise Group Co., Ltd. 377 152 117 3 Luzhou Xinfu Mining Group Co., Ltd. 1,246 510 – – Other legal person related parties 1,412 1,273 928 316 The key management personnel or their family members 7 12 1,263 398 Total 3,615 2,094 2,464 754

(5) Related party financial investments-credit related financial assets

As at December 31, As at June 30, 2015 2016 2017 2018 Other legal person related parties – 200,000 150,000 – Total – 200,000 150,000 –

(6) Related party fees commission and income

Six months ended Year ended December 31, June 30, 2015 2016 2017 2018 Major shareholders Luzhou Laojiao Refco Group Ltd 321– Sichuan Jiale Enterprise Group Co., Ltd. 11–– Luzhou Xinfu Mining Group Co., Ltd. 111– Other legal person related parties 7531 The key management personnel or their family members –––– Total 12951

As at December 31, As at June 30, 2015 2016 2017 2018 Customer loans 4.90%-14.76% 3.43%-9.84% 3.43%-9.84% 2.50%-9.405% Customer deposits 0.385%-5.5% 0.385%-5.5% 0.385%-5.5% 0.385%-5.50% Investment securities – investments classified as receivables – 7.825% 7.825% –

I-80 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

(7) Key management compensation

Key management personnel refer to those who are entitled to plan, direct and control the activities of the Bank. The Bank conducts normal banking transactions with key management personnel in its daily operations. The remuneration of directors and other key management personnel during the reporting years are as follows:

Year ended December 31, Six months ended June 30, 2015 2016 2017 2017 2018 (Unaudited) Remuneration, salary, allowances and benefits 2,259 3,506 4,351 1,845 2,313 Discretionary bonuses 5,408 9,016 11,830 942 2,342 Contribution to pension schemes 144 199 221 110 120 Total 7,811 12,721 16,402 2,897 4,775

(8) Property leasing agreement

Luzhou Laojiao Real Estate Development Co., Ltd., a subsidiary of Luzhou Laojiao Group Co., Ltd., an related party of the Bank, leased two properties located in Chengdu, Sichuan Province to the Bank. The lease term starts from May 1, 2018 until December 31, 2018. The total rent is RMB795,312. Yijia Real Estate Development Co., Ltd., an related party of the Bank, leases a property located in Luzhou City, Sichuan Province to the Bank. The lease term starts from August 1, 2016 until July 31, 2019, for a period of three years. The annual rent in the first two years is calculated at RMB34 per square meter per month, which is RMB69,768. The rent rises by 5% and increased to RMB73,256 for the third year. These related party transactions are conducted in accordance with general commercial terms and normal business procedures, and their pricing principles are consistent with those of independent third party transactions.

(9) Government related entities

The transactions between the Bank and the government authorities proceed under normal commercial terms and conditions. These transactions mainly include provision of deposits and agency service. The Bank considers that transactions with these entities are activities conducted in the ordinary course of business. The Bank has also established pricing policies for products and services and such pricing policies do not depend on whether or not the customers are government authorities.

43 SEGMENT ANALYSIS The Bank’s operating segments are business units which provide different financial products and service and are engaged in different types of financial transactions. As different operating segments face different clients and counterparties supported by specific techniques and markets strategies, they operate independently. The bank has 4 operating segments: corporate banking, retailing banking, financial markets, unallocated classes. Corporate banking mainly provides corporate customers with financial products and services including deposits and loans. Retailing banking mainly provides individual customers with financial products and services including deposits and loans. Financial Markets mainly performs inter-bank lending and borrowing, bonds investment, re-purchasing. Unallocated classes of business perform the businesses not included in the above three segments or cannot be allocated with appropriate basis.

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Year ended December 31, 2015 Corporate Retail Financial Banking Banking Markets Unallocated Total Net interest income from external customers 424,955 (73,511) 533,757 – 885,201 Inter-segment net interest income/(expense) (120,066) 329,112 (209,046) – – Net interest income 304,889 255,601 324,711 – 885,201 Net fee and commission income/(expense) 3,724 (1,244) – 25 2,505 Net gains on trading activities ––––– Net gains arising from financial investments – – 40,917 – 40,917 Other operating income – – – 13,557 13,557 Operating income 308,613 254,357 365,628 13,582 942,180 Operating expense (56,163) (143,293) (69,116) (4,655) (273,227) – Depreciation and amortisation (4,891) (12,478) (6,019) – (23,388) – Others (51,272) (130,815) (63,097) (4,655) (249,839) Impairment losses (45,295) (8,341) (35,500) – (89,136) Share of profit of an associate – – – 7,829 7,829 Profit before income tax 207,155 102,723 261,012 16,756 587,646 Capital expenditure 125,228 61,485 220,714 – 407,427 As at December 31, 2015 Segment assets 9,756,784 4,790,453 17,194,714 21,678 31,763,629 Segment liabilities (16,306,234) (4,514,948) (7,653,687) (4,655) (28,479,524)

Year ended December 31, 2016 Corporate Retail Financial Banking Banking Markets Unallocated Total Net interest income from external customers 483,191 (243,317) 915,762 – 1,155,636 Inter-segment net interest income/(expense) (65,803) 619,146 (553,343) – – Net interest income 417,388 375,829 362,419 – 1,155,636 Net fee and commission income/(expense) 3,725 (3,242) – 12 495 Net gains on trading activities ––––– Net gains arising from financial investments – – 132,940 – 132,940 Other operating income 7,579 – – 10,332 17,911 Operating income 428,692 372,587 495,359 10,344 1,306,982 Operating expense (73,367) (205,860) (151,718) (6,482) (437,427) – Depreciation and amortisation (4,315) (12,107) (8,041) – (24,463) – Others (69,052) (193,753) (143,677) (6,482) (412,964) Impairment losses (86,197) (22,540) (46,932) – (155,669) Share of profit of an associate – – – 2,914 2,914 Profit before income tax 269,128 144,187 296,709 6,776 716,800 Capital expenditure 35,645 15,900 77,386 – 128,931 As at December 31, 2016 Segment assets 14,697,218 6,556,120 31,911,004 116,319 53,280,661 Segment liabilities (21,483,285) (9,993,989) (17,769,373) (26,600) (49,273,247)

I-82 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX I ACCOUNTANT’S REPORT

Year ended December 31, 2017 Corporate Retail Financial Banking Banking Markets Unallocated Total Net interest income from external customers 596,935 (386,425) 1,363,825 – 1,574,335 Inter-segment net interest income/(expense) (68,513) 886,380 (817,867) – – Net interest income 528,422 499,955 545,958 – 1,574,335 Net fee and commission income/(expense) 4,316 (6,219) – 13 (1,890) Net gains on trading activities ––––– Net gains arising from financial investments – – 97,784 – 97,784 Other operating income – – – 9,727 9,727 Operating income 532,738 493,736 643,742 9,740 1,679,956 Operating expense (78,629) (224,740) (235,131) (4,668) (543,168) – Depreciation and amortisation (6,283) (17,958) (17,750) – (41,991) – Others (72,346) (206,782) (217,381) (4,668) (501,177) Impairment losses (196,527) (20,001) (108,318) – (324,846) Share of profit of an associate – – – 2,544 2,544 Profit before income tax 257,582 248,995 300,293 7,616 814,486 Capital expenditure 31,134 13,698 69,476 – 114,308 As at December 31, 2017 Segment assets 19,250,712 8,469,969 42,939,259 219,496 70,879,436 Segment liabilities (26,263,845) (16,453,114) (23,826,759) (3) (66,543,721)

Six months ended June 30, 2017 Corporate Retail Financial Banking Banking Markets Unallocated Total (Unaudited) Net interest income from external customers 296,452 (107,417) 512,807 – 701,842 Inter-segment net interest income/(expense) (33,638) 286,733 (253,095) – – Net interest income 262,814 179,316 259,712 – 701,842 Net fee and commission income/(expense) 80 (309) – 7 (222) Net gains on trading activities ––––– Net gains arising from financial investments – – 63,702 – 63,702 Other operating income – – – 4,153 4,153 Operating income 262,894 179,007 323,414 4,160 769,475 Operating expense (20,710) (43,797) (107,522) (288) (172,317) – Depreciation and amortisation (2,962) (1,235) (6,996) (19) (11,212) – Others (17,748) (42,562) (100,526) (269) (161,105) Impairment losses (120,864) (15,202) (82,334) – (218,400) Share of profit of an associate – – – 2,049 2,049 Profit before income tax 121,320 120,008 133,558 5,921 380,807 Capital expenditure 994 414 2,347 6 3,761 As at June 30, 2017 Segment assets 17,130,791 7,153,904 40,422,289 136,085 64,843,069 Segment liabilities (25,631,459) (14,182,776) (20,835,405) (13,160) (60,662,800)

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Six months ended June 30, 2018 Corporate Retail Financial Banking Banking Markets Unallocated Total Net interest income from external customers 307,428 (172,990) 619,725 – 754,163 Inter-segment net interest income/(expense) (35,024) 410,492 (375,468) – – Net interest income 272,404 237,502 244,257 – 754,163 Net fee and commission income/(expense) 1,402 (622) – (9) 771 Net gains on trading activities – – 24,372 – 24,372 Net gains arising from financial investments – – 53,748 – 53,748 Other operating income – – – 6,254 6,254 Operating income 273,806 236,880 322,377 6,245 839,308 Operating expense (28,669) (66,166) (120,444) (448) (215,727) – Depreciation and amortisation (6,263) (2,194) (10,741) – (19,198) – Others (22,406) (63,972) (109,703) (448) (196,529) Expected credit losses (92,247) (16,530) (23,720) – (132,497) Share of profit of an associate – – – 2,308 2,308 Profit before income tax 152,890 154,184 178,213 8,105 493,392 Capital expenditure 885 310 1,523 – 2,718 As at June 30, 2018 Segment assets 24,273,449 8,499,368 41,612,159 170,095 74,555,071 Segment liabilities (25,983,530) (19,932,559) (24,066,470) (9,658) (69,992,217)

There is no high reliance of the Bank to any of the main external customers.

44 SUBSEQUENT EVENTS

Until the reporting date, the Bank has no significant subsequent events that need to be disclosed.

III SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared by the Bank in respect of any period subsequent to June 30, 2018 and up to the date of this report. No dividend has been declared by the Bank in respect of any period subsequent to June 30, 2018.

I-84 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX II UNAUDITED SUPPLEMENTARY FINANCIAL INFORMATION

The information set out below does not form part of the Accountant’s Report prepared by the reporting accountant, PricewaterhouseCoopers, Certified Public Accountants, Hong Kong, as set out in Appendix I, and is included herein for information purpose only.

UNAUDITED SUPPLEMENTARY FINANCIAL INFORMATION (Expressed in thousands of Renminbi, unless otherwise stated)

In accordance with the Hong Kong Listing Rules and Banking (Disclosure) Rules, the Bank discloses the unaudited supplementary financial information as follows:

1 Liquidity ratios and leverage ratio

(1) Liquidity ratios

As of December 31, 2015 RMB current assets to RMB current liabilities 57.72% Foreign currency current assets to foreign currency current liabilities N/A

As of December 31, 2016 RMB current assets to RMB current liabilities 44.99% Foreign currency current assets to foreign currency current liabilities N/A

As of December 31, 2017 RMB current assets to RMB current liabilities 48.42% Foreign currency current assets to foreign currency current liabilities N/A

As of June 30, 2018 RMB current assets to RMB current liabilities 52.41% Foreign currency current assets to foreign currency current liabilities N/A

(2) Leverage ratio

As of December 31, As of June 30,

2015 2016 2017 2018 Leverage ratio 8.48% 6.38% 5.69% 6%

Pursuant to the Leverage Ratio Management of Commercial Banks (Amended) issued by the China Banking Regulatory Commission (the “CBRC”) and was effective since April 1, 2015, a minimum leverage ratio of 4% is required.

The above liquidity ratios and leverage ratio were calculated in accordance with the formulas promulgated by the CBRC, and based on the financial information prepared in accordance with Accounting Standards for Business Enterprises issued by the Ministry of Finance in the People’s Republic of China.

II-1 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX II UNAUDITED SUPPLEMENTARY FINANCIAL INFORMATION

2 Currency concentrations The Bank is principally engaged in business operations within Luzhou, the PRC, and all business activities are conducted in RMB. The Bank has no structural position during the Track Record Period.

3 International claims The Bank is principally engaged in business operations within Luzhou, the PRC, and regard all claims on third parties outside Chinese Mainland as international claims. The Bank has no international claims during the Track Record Period.

4 Gross amount of overdue customer loans by securities As of December 31, 2015

Gross customer loans by securities which have been overdue with respect to either principal or interest for periods of

up to 90 days 90 days – 1 year 1 – 3 years over 3 years (inclusive) (’000) (inclusive) (’000) (inclusive) (’000) (’000) Total (’000)

%of %of %of %of %of total total total total total gross gross gross gross gross customer customer customer customer customer Amount loans Amount loans Amount loans Amount loans Amount loans Pledged loans 460 0.22% 110 0.05% 766 0.37% 259 0.13% 1,595 0.77% Collateralised loans 11,000 5.32% 14,300 6.91% 200 0.10% 23 0.01% 25,523 12.34% Guaranteed loans 127,463 61.61% 41,700 20.16% 1,600 0.77% – 0.00% 170,763 82.54% Unsecured loans 9,000 4.35% – 0.00% – 0.00% – 0.00% 9,000 4.35% Total 147,923 71.50% 56,110 27.12% 2,566 1.24% 282 0.14% 206,881 100.00%

As of December 31, 2016

Gross customer loans by securities which have been overdue with respect to either principal or interest for periods of

up to 90 days 90 days – 1 year 1 – 3 years over 3 years (inclusive) (’000) (inclusive) (’000) (inclusive) (’000) (’000) Total (’000)

%of %of %of %of %of total total total total total gross gross gross gross gross customer customer customer customer customer Amount loans Amount loans Amount loans Amount loans Amount loans Pledged loans 1,001 0.25% 140 0.03% 624 0.15% – 0.00% 1,765 0.43% Collateralised loans 71,754 17.66% 37,400 9.20% 4,100 1.01% 850 0.21% 114,104 28.08% Guaranteed loans 98,296 24.19% 147,468 36.29% 28,685 7.06% – 0.00% 274,449 67.54% Unsecured loans 13,010 3.20% 3,000 0.74% – 0.00% – 0.00% 16,010 3.94% Total 184,061 45.30% 188,008 46.27% 33,409 8.22% 850 0.21% 406,328 100.00%

II-2 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX II UNAUDITED SUPPLEMENTARY FINANCIAL INFORMATION

As of December 31, 2017

Gross customer loans by securities which have been overdue with respect to either principal or interest for periods of

up to 90 days 90 days – 1 year 1 – 3 years over 3 years (inclusive) (’000) (inclusive) (’000) (inclusive) (’000) (’000) Total (’000)

%of %of %of %of %of total total total total total gross gross gross gross gross customer customer customer customer customer Amount loans Amount loans Amount loans Amount loans Amount loans Pledged loans 27,310 11.56% 2,158 0.53% 129 0.03% 564 0.27% 30,161 12.77% Collateralised loans 40,420 9.95% 3,734 0.92% 2,850 0.70% 312 0.08% 47,316 20.03% Guaranteed loans 48,081 11.83% 20,697 5.09% 87,913 21.64% 1,430 0.35% 158,121 66.94% Unsecured loans 290 0.07% 340 0.08% – 0.00% – 0.00% 630 0.27% Total 116,101 28.57% 26,929 6.63% 90,892 22.37% 2,306 0.57% 236,228 100.00%

As of June 30, 2018

Gross customer loans by securities which have been overdue with respect to either principal or interest for periods of

up to 90 days 90 days – 1 year 1 – 3 years over 3 years (inclusive) (’000) (inclusive) (’000) (inclusive) (’000) (’000) Total (’000)

%of %of %of %of %of total total total total total gross gross gross gross gross customer customer customer customer customer Amount loans Amount loans Amount loans Amount loans Amount loans Pledged loans 100 0.03% 29,088 7.16% 259 0.06% 538 0.26% 29,985 8.55% Collateralised loans 73,449 18.08% 1,860 0.46% 363 0.09% 1,500 0.37% 77,172 21.99% Guaranteed loans 72,705 17.89% 69,797 17.18% 92,570 22.78% 5,034 1.24% 240,106 68.43% Unsecured loans 3,590 0.88% – 0.00% 40 0.01% – 0.00% 3,630 1.03% Total 149,844 36.88% 100,745 24.79% 93,232 22.95% 7,072 1.74% 350,893 100.00%

II-3 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX III UNAUDITED [REDACTED] FINANCIAL INFORMATION

The following information does not form part of the Accountant’s Report from [PricewaterhouseCoopers], Certified Public Accountants, the reporting accountant of the Bank, as set forth in Appendix I to this document, and is included herein for information only. The unaudited [REDACTED] financial information should be read in conjunction with the section entitled “Financial Information” in this document and the “Accountant’s Report” set forth in Appendix I to this document.

A. UNAUDITED [REDACTED] STATEMENT OF ADJUSTED NET TANGIBLE ASSETS The following unaudited [REDACTED] statement of adjusted net tangible assets of the Bank prepared in accordance with Rule 4.29 of the Listing Rules is for illustrative purposes only, and is set out below to illustrate the effect of the [REDACTED] on the net tangible assets attributable to the shareholders of the Bank as of June 30, 2018 as if the [REDACTED] had taken place on June 30, 2018. This unaudited [REDACTED] statement of adjusted net tangible assets has been prepared for illustrative purposes only and because of its hypothetical nature, it may not give a true picture of the net tangible assets of the Bank as at June 30, 2018 or at any future dates following the [REDACTED].

[REDACTED] adjustment Unaudited [REDACTED] Audited net adjusted net tangible assets tangible assets attributable to Estimated net attributable to Unaudited the shareholders [REDACTED] the shareholders [REDACTED] of the Bank as from the of the Bank as adjusted net tangible at June 30, 2018 [REDACTED] at June 30, 2018 assets per Share RMB million RMB million RMB million RMB HK$ (Note 1) (Note 2) (Note 3) (Note 4) Based on the [REDACTED]of HK$[REDACTED] per [REDACTED] 4,563 [REDACTED][REDACTED][REDACTED][REDACTED] Based on the [REDACTED]of HK$[REDACTED] per [REDACTED] 4,563 [REDACTED][REDACTED][REDACTED][REDACTED]

Notes: (1) The audited net tangible assets attributable to the shareholders of the Bank as at June 30, 2018 is extracted from the Accountant’s Report set out in Appendix I to this document, which is based on the audited net assets attributable to the shareholders of the Bank as at June 30, 2018 as the Bank has no intangible asset as at June 30, 2018. (2) The estimated net [REDACTED] from the [REDACTED] are based on [REDACTED] H Shares to be issued pursuant to the [REDACTED] and the indicative [REDACTED] of HK$[REDACTED] per [REDACTED] and HK$[REDACTED] per [REDACTED], being low and high end of the indicative [REDACTED] range, after deduction of the estimated [REDACTED] fees and other related expenses payable by the Bank. (3) The unaudited [REDACTED] net tangible assets per Share is arrived at after the adjustments as described in Note (2) above and on the basis that [REDACTED] Shares were in issue assuming that the [REDACTED] has been completed on June 30, 2018 but take no account of any Shares which may be issued upon the exercise of the [REDACTED]. (4) For the purpose of this unaudited [REDACTED] statement of adjusted net tangible assets, the balance stated in Renminbi are converted into Hong Kong dollars at the rate of HK$1.00 to RMB0.8709. No representation is made that Renminbi amounts have been, could have been or may be converted into Hong Kong dollars, or vice versa, at that rate. (5) No adjustment has been made to the unaudited [REDACTED] adjusted net tangible assets to reflect any trading results or other transactions of the Bank entered into subsequent to June 30, 2018.

III-1 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX III UNAUDITED [REDACTED] FINANCIAL INFORMATION

[REDACTED]

III-2 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX III UNAUDITED [REDACTED] FINANCIAL INFORMATION

[REDACTED]

III-3 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX III UNAUDITED [REDACTED] FINANCIAL INFORMATION

[REDACTED]

III-4 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

This Appendix sets out summaries of certain aspects of PRC laws and regulations, which are relevant to the Bank’s operations and business. Laws and regulations relating to taxation in the PRC are discussed separately in “Appendix VI – Taxation and Foreign Exchange” to this document. This Appendix also contains a summary of certain Hong Kong legal and regulatory provisions, including summaries of certain material differences between the PRC Company Law and the Companies (Winding Up and Miscellaneous Provisions) Ordinance, certain requirements of the Listing Rules and additional provisions required by the Hong Kong Stock Exchange for inclusion in the articles of association of PRC issuers. The principal objective of this summary is to provide potential investors with an overview of the principal legal and regulatory provisions applicable to the Bank. This summary is not intended to include all the information which may be important to potential investors. For discussion of laws and regulations which are relevant to our business, please see “Supervision and Regulation” in this document.

PRC LAWS AND REGULATIONS The PRC Legal System The PRC legal system is based on the PRC Constitution (hereinafter referred to as the “Constitution”) and is made up of written laws, administrative regulations, local regulations, autonomous regulations, separate regulations, rules and regulations of State Council departments, rules and regulations of local governments, laws of special administrative regions and international treaties of which the PRC government is a signatory and other regulatory document. Court judgments do not constitute legally binding precedents, although they are used for the purposes of judicial reference and guidance. Pursuant to the Constitution and the Legislation Law of the People’s Republic of China (hereinafter referred to as the “Legislation Law”), the National People’s Congress (hereinafter referred to as “NPC”) and its Standing Committee are empowered to exercise the legislative power of the State. The NPC has the power to formulate and amend basic laws governing State organs, civil, criminal and other matters. The Standing Committee of the NPC formulates and amends laws other than those required to be enacted by the NPC and to supplement and amends parts of the laws enacted by the NPC during the adjournment of the NPC, provided that such supplements and amendments are not in conflict with the basic principles of such laws. The State Council is the highest organ of state administration and has the power to formulate administrative regulations based on the Constitution and laws. The people’s congresses of the provinces, autonomous regions and municipalities and their standing committees may formulate local regulations based on the specific circumstances and actual needs of their respective administrative areas, provided that such laws and regulations do not contravene any provision of the Constitution, laws or administrative regulations. The people’s congresses of cities divided into districts and their respective standing committees may formulate local regulations on aspects such as urban and rural construction and management, environmental protection and historical and cultural protection based on the specific circumstances and actual needs of such cities, provided that such local regulations do not contravene any provision of the Constitution, laws, administrative regulations and local regulations of their respective provinces or autonomous regions. If the law provides otherwise on the formulation of local regulations by cities divided into districts, those provisions shall prevail. Such local regulations will become enforceable after being reported to and approved by the standing committees of the People’s congresses of the provinces or autonomous regions. The standing committees of the people’s congresses of the provinces or autonomous regions shall

IV-1 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS examine the legality of local regulations submitted for approval, and such approval should be granted within four months if they are not in conflict with the Constitution, laws, administrative regulations and local regulations of the provinces or autonomous regions concerned. Where, during the examination for approval of local regulations of cities divided into districts by the standing committees of the people’s congresses of the provinces or autonomous regions, conflicts are identified with the rules and regulations of the people’s governments of the provinces or autonomous regions concerned, a decision should be made by the standing committees of the people’s congresses of provinces or autonomous regions to resolve the issue. People’s congresses of national autonomous areas have the power to enact autonomous regulations and separate regulations in light of the political, economic and cultural characteristics of the ethnic groups in the areas concerned.

The ministries and commissions of the State Council, PBoC, NAO and the subordinate institutions with administrative functions directly under the State Council may formulate departmental rules and regulations within the authority of their respective departments based on the laws and administrative regulations, and the decisions and orders of the State Council. Provisions of departmental rules should be the matters related to the enforcement of the laws and administrative regulations, and the decisions and orders of the State Council. The people’s governments of the provinces, autonomous regions, municipalities and cities or autonomous prefectures divided into districts may formulate rules and regulations based on the laws, administrative regulations and local regulations of the provinces, autonomous regions and municipalities.

Pursuant to the Resolution of the Standing Committee of the NPC Providing an Improved Interpretation of the Law (全國人民代表大會常務委員會關於加強法解釋工作的決議) passed on June 10, 1981, where there is a need for further clarifying the boundaries of the laws and ordinances or making supplementary provisions, the Standing Committee of the National People’s Congress should give interpretations or stipulations through law. Issues related to the application of laws in a court trial should be interpreted by the Supreme People’s Court; issues related to the application of laws in a prosecution process of the procuratorates should be interpreted by the Supreme People’s Procuratorate; and issues related to laws other than those mentioned above should be interpreted by the State Council and the competent authorities. The State Council and its ministries and commissions are also vested with the power to give interpretations of the administrative regulations and departmental rules which they have promulgated. If local regulations are required to further clarify the boundaries or make supplementary provisions, the standing committee of the people’s congress of the province, autonomous region, or municipality directly under the central government that formulate the laws and regulations shall give interpretations or make provisions. Issues concerning the specific application of local regulations shall be interpreted by the competent authorities of the people’s governments of provinces, autonomous regions, and municipalities directly under the central government.

IV-2 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

The PRC Judicial System

Under the Constitution and the Law of Organization of the People’s Courts of the PRC (中華人民共和國人民法院組織法), the PRC judicial system is made up of the Supreme People’s Court, the local people’s courts, the military courts and other special people’s courts. The local people’s courts are divided into three levels, namely, the basic people’s courts, the intermediate people’s courts and the higher people’s courts. The basic people’s courts may set up civil, criminal and economic divisions, and certain people’s courts based on the status of the region, population and cases. The intermediate people’s courts have divisions similar to those of the basic people’s courts and may set up other special divisions, such as the intellectual property division, if needed. These two levels of people’s courts are subject to supervision by people’s courts at higher levels. The Supreme People’s Court is the highest judicial authority in the PRC. It supervises the administration of justice by the people’s courts and special people’s court at all levels. The Supreme People’s Procuratorate is authorized to supervise the judgment and ruling of the people’s courts at all levels which have been legally effective, and the people’s procuratorate at a higher level is authorized to supervise the judgment and ruling of a people’s court at lower levels which have been legally effective.

The people’s courts employ a two-tier appellate system, i.e., judgments or rulings of the second instance at a people’s court are final. A party may appeal against the judgment or ruling of the first instance of a local people’s court. The people’s procuratorate may present a protest to the people’s court at the next higher level in accordance with the procedures stipulated by the laws. In the absence of any appeal by the parties and any protest by the people’s procuratorate within the stipulated period, the judgments or rulings of the people’s court are final. Judgments or rulings of the second instance of the intermediate people’s courts, the higher people’s courts and the Supreme People’s Court and those of the first instance of the Supreme People’s Court are final. However, if the Supreme People’s Court discovers an error in the legally effective judgment, ruling, or mediation issued by the people’s courts at all levels and if the superior people’s discovers an error in the legally effective judgment, ruling, or mediation issued by the people’s court at lower levels, it shall have the right to arraign or instruct the lower people’s court for retrial; if the president of the people’s courts at all levels discovers an error in the legally effective judgment, ruling, or mediation issued by the court and he deems it necessary for retrial, it shall be submitted to the judicial committee of the people’s court at the same level for discussion and decision.

The Civil Procedure Law of the PRC (中華人民共和國民事訴訟法) (hereinafter referred to as the “PRC Civil Procedure Law”) adopted on April 9, 1991 and amended three times on October 28, 2007, August 31, 2012 and June 27, 2017 respectively prescribes the conditions for instituting a civil action, the jurisdiction of the people’s courts, the procedures for conducting a civil action, and the procedures for enforcement of a civil judgment or ruling. All parties to a civil action conducted within the PRC must abide by the relevant provisions of the PRC Civil Procedure Law. A civil case is generally heard by the court located in the defendant’s place of domicile. The court of jurisdiction in respect of a civil action may also be chosen by explicit agreement among the parties to a contract, provided that the people’s court having jurisdiction should be located at places actually connected with the disputes, such as the plaintiff’s or the defendant’s place of domicile, the place where the contract is executed or signed or the place where the object of the action is located. Meanwhile, such choice shall not in any circumstances contravene the regulations of differential jurisdiction and exclusive jurisdiction.

IV-3 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

A foreigner, a person without nationality, foreign-invested enterprise and organization is given the same litigation rights and obligations as a citizen, legal person and other organizations of the PRC. Should a foreign court limit the litigation rights of PRC citizens or enterprises, the PRC court may apply the same limitations to the citizens and enterprises of such foreign country. A foreigner, a person without nationality, foreign-invested enterprise or organization must engage a PRC lawyer in case he or it needs to engage a lawyer for the purpose of initiating actions or defending against litigations at a PRC court. In accordance with the international treaties to which the PRC is a signatory or participant or according to the principle of reciprocity, a people’s court and a foreign court may request each other to serve documents, conduct investigation and collect evidence and conduct other actions on its behalf. A PRC court shall not accommodate any request made by a foreign court which will result in the violation of sovereignty, security or public interests of the PRC.

All parties to a civil action shall perform legally effective judgments and rulings. If any party to a civil action refuses to abide by a judgment or ruling made by a people’s court or an award made by an arbitration tribunal in the PRC, the other party may apply to the people’s court for the enforcement of the same within two years subject to application for postponed enforcement or revocation. If a party fails to satisfy within the stipulated period a judgment which the court has granted an enforcement approval, the court may, upon the application of the other party, mandatorily enforce the judgment against such party.

In accordance with the international treaties to which the PRC is a signatory or participant or according to the principle of reciprocity, a people’s court and a foreign court may request each other to serve documents, conduct investigation and collect evidence and conduct other actions on its behalf. For legally effective judgments or rulings made by the people’s court, if the person to be executed or his property is outside the territory of the PRC and the party requests for enforcement, the party may directly apply to a foreign court with jurisdiction for recognition and enforcement, or the people’s courts request the foreign courts for recognition and enforcement in accordance with the provisions of the international treaties to which the PRC is a signatory or participant or according to the principle of reciprocity, unless the people’s court considers that the recognition or enforcement of such judgment or ruling would violate the basic legal principles of the PRC, its sovereignty or national security, or would not be in public interest.

IV-4 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

The Company Law of the People’s Republic of China, the Special Regulations of the State Council on the Overseas Offering and the Listing of Shares by Joint Stock Limited Companies and the Mandatory Provisions for Articles of Association of Overseas Listed Companies

The Company Law of the People’s Republic of China (hereinafter referred to as the “PRC Company Law” was adopted by the Standing Committee of the Eighth NPC at its Fifth Session on December 29, 1993 and came into effect on July 1, 1994. It was successively amended on December 25, 1999, August 28, 2004, October 27, 2005 and December 28, 2013. The newly revised PRC Company Law has been implemented since March 1, 2014.

The Special Regulations of the State Council on the Overseas Offering and the Listing of Shares by Joint Stock Limited Companies (國務院關於股份有限公司境外募集股份及上市的特別規定) (hereinafter referred to as the “Special Regulations”) were passed at the 22nd Standing Committee Meeting of the State Council on July 4, 1994 and promulgated and implemented on August 4, 1994.

The Mandatory Provisions for Articles of Association of Overseas Listed Companies (hereinafter referred to as the “Mandatory Provisions”) jointly promulgated by the former Securities Commission of the State Council and the former State Restructuring Commission on August 27, 1994 prescribe that the provisions should be incorporated in the articles of association of joint stock limited companies to be listed an overseas stock exchanges. Accordingly, the Mandatory Provisions have been incorporated in the Articles of Association of the Bank. References to a “company” made in this Appendix are to a joint stock limited company established under the PRC Company Law with H Shares to be issued.

Set out below is a summary of the major provisions of the PRC Company Law, the Special Regulations and the Mandatory Provisions.

General

“A joint stock limited company” refers to a corporate legal person incorporated in China under the PRC Company Law with independent legal person properties and entitlements to such legal person properties. The liability of the company for its own debts is limited to all the assets it owns and the liability of its shareholders for the company is limited to the extent of the shares they subscribe for.

IV-5 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

Incorporation A company may be incorporated by promotion or subscription. A company may be incorporated by two but less than 200 promoters, and half of the promoters must be residents within the PRC. For companies incorporated by promotion, the registered capital is the total amount of share capital subscribed by all promoters registered in the company registration authority. Shares shall not be raised from others unless the shares subscribed by the promoters have been fully paid up. For companies incorporated by subscription, the registered capital is the total paid-up capital as registered with the registration authorities. If laws, administrative regulations and State Council decisions provide otherwise on paid-in registered capital and the minimum registered capital, the company should follow such provisions. For companies incorporated by way of promotion, the promoters shall subscribe in writing for the shares required to be subscribed for by them and pay up their capital contributions under the articles of association. Procedures relating to the transfer of titles to non-monetary assets shall be duly completed if such assets are to be contributed as capital. Promoters who fail to pay up their capital contributions in accordance with the foregoing provisions shall assume default liabilities in accordance with the covenants set out in the promoters’ agreements. After the promoters have confirmed the capital contribution under the articles of association, a board of directors and a supervisory board shall be elected and the board of directors shall apply for registration of incorporation by filing the articles of association with the relevant Administration for Industry and Commerce, and other documents as required by the law or administrative regulations. Where companies are incorporated by subscription, not less than 35% of their total number of shares must be subscribed for by the promoters, unless otherwise provided for by laws or administrative regulations. A promoter who offers shares to the public must publish a share offering prospectus and prepare a share subscription form to be completed, signed and sealed by subscribers, specifying the number and amount of shares to be subscribed for and the subscribers’ addresses. The subscribers shall pay up monies for the shares they subscribe for. Where a promoter is offering shares to the public, such offer shall be underwritten by security companies established under PRC law, and underwriting agreements shall be entered into. A promoter offering shares to the public shall also enter into agreements with banks in relation to the receipt of subscription monies. The receiving banks shall receive and keep in custody the subscription monies, issue receipts to subscribers who have paid the subscription monies, and is obliged to furnish evidence of receipt of those subscription monies to relevant authorities. After the subscription monies for the share issue have been paid in full, a capital verification institution established under PRC law must be engaged to conduct a capital verification and furnish a certificate. The promoters shall convene an inauguration meeting within 30 days following the full payment of subscription monies. The inauguration meeting shall be formed by the promoters and subscribers. Where the shares issued remain undersubscribed by the cut-off date stipulated in the share offering prospectus, or where the promoter fails to convene an inauguration meeting within 30 days after the subscription monies for the shares issued have been fully paid up, the subscribers may demand that the promoters refund the subscription monies so paid together with the interest at bank rates of a deposit for the same period. Within 30 days of the conclusion of the inauguration meeting, the board of directors shall apply to the company registration authority for registration of the establishment of the company. A company is formally established and has the qualification of a legal person after approval of registration has been given by the relevant administration bureau for industry and commerce and a business license has been issued.

IV-6 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

A company’s promoters shall be liable for: (1) the debts and expenses incurred in the incorporation process jointly and severally if the company cannot be incorporated; (2) the refund of subscription monies paid by the subscribers together with interest at bank rates of deposit for the same period jointly and severally if the company cannot be incorporated; and (3) the compensation of any damages suffered by the company in the course of its incorporation as a result of the promoters’ default. In addition, after the incorporation of a joint stock limited company, if the promoter fails to make full contribution in accordance with the provisions of the Articles of Association, it shall make up the payment; other promoters shall bear joint and several liabilities. After the incorporation of a joint stock limited company, if the actual value of the non-monetary property funded for incorporation of the company is found to be significantly lower than the amount specified in the Articles of Association, the promoter of the capital contribution shall make up the difference; other promoters shall bear joint and several liabilities.

Share Capital

The promoters may make a capital contribution in currencies, or non-monetary assets such as in kind or intellectual property rights or land use rights which can be appraised with monetary value and transferred lawfully, except for assets which are prohibited from being contributed as capital by laws or administrative regulations. If a capital contribution is made in non-monetary assets, a valuation of the assets contributed must be carried out pursuant to the provisions of laws or administrative regulations on valuation without any over-valuation or under-valuation.

Capital of the joint stock limited company is divided into shares of equal amount. Shares of the company adopt the form of equity. An equity is a certificate issued by the company to prove the shareholding held by shareholders. The issuance of shares shall be conducted in a fair and equitable manner. Each share of the same class must carry equal rights. Shares issued at the same time and within the same class must be issued on the same conditions and at the same price. The same price per share shall be paid by any share subscriber (whether an entity or an individual). The share offering price may be equal to or greater than the nominal value of the share, but may not be less than the nominal value of the share.

A company must obtain the approval of CSRC to offer its shares to overseas public. The Special Regulations and the Mandatory Provisions provide that the Company issued shares to foreign investors and listed overseas shall be in registered form, denominated in Renminbi and subscribed for in foreign currencies. Shares issued to foreign investors (including investors from the territories of Hong Kong, Macau and Taiwan) and listed in Hong Kong are classified as H Shares, and those shares issued to investors within the PRC, other than these regions mentioned above, are known as domestic shares. Under the Special Regulations, upon approval of CSRC, a company may agree, in the underwriting agreement in respect of an issue of H Shares, to retain not more than 15% of the aggregate number of overseas listed foreign shares proposed to be issued in addition to the number of underwritten shares. The issuance of reserved shares is considered as part of the issuance.

Under the provisions of the PRC Company Law, a company issuing registered share certificates shall maintain a shareholder registry which sets forth the following matters: (1) the name and domicile of each shareholder; (2) the number of shares held by each shareholder; (3) the serial numbers of shares held by each shareholder; and (4) the date on which each shareholder acquired the shares.

IV-7 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

Increase in Share Capital Pursuant to the relevant provisions of the PRC Company Law, where a company is issuing new shares, resolutions shall be passed at general meeting in accordance with the articles of association in respect of the class and amount of the new shares, the issue price of the new shares, the commencement and end dates for the issue of the new shares and the class and amount of the new shares proposed to be issued to existing shareholders. When a company launches a public issue of new shares upon the approval by CSRC, a new share offering prospectus and financial accounting report must be published and a subscription form must be prepared. After the new share issue of the company has been paid up, the change must be registered with the relevant administration bureau for industry and commerce and a public announcement must be made accordingly. Where an increase in registered capital of a company is made by means of an issue of new shares, the subscription of new shares by shareholders shall be made in accordance with the relevant provisions on the payment of subscription monies for the incorporation of a company.

Reduction of Share Capital A company may reduce its registered capital in accordance with the following procedures prescribed by the PRC Company Law: (1) the company shall prepare a balance sheet and an inventory of assets; (2) the reduction of registered capital must be approved by shareholders at general meeting; (3) The company shall notify its creditors of the reduction in share capital within 10 days and publish a related announcement in newspapers within 30 days of the resolution approving the reduction being passed; (4) The creditors of the company may within thirty days from the date of receipt of the notice, and within forty-five days from the date of the announcement if no notice is received require the company to repay its debts or provide guarantees for covering the debts; and (5) the company must apply to the relevant administration bureau for industry and commerce for change in registration due to reduction in registered capital.

Repurchase of Shares A company may not repurchase its own shares other than for one of the following purposes: (1) reducing its registered capital; (2) merging with other company which holds its shares; (3) granting shares to its employees as incentives; and (4) acquiring its own shares at the request of its shareholders who vote in a shareholders’ general meeting against a resolution regarding a merger or division. The acquisition by a company of its own shares on the grounds set out in 1 to 3 above must be approved by way of a resolution of a shareholders’ general meeting. Following the acquisition by a company of its own shares in accordance with these requirements, such shares must be cancelled within 10 days of the date of the acquisition in the case of 1 and transferred or cancelled within six months in the case of 2 or 4. The acquisition by a company of its own shares in accordance with 3 under the first paragraph of this subsection shall not exceed 5% of the total number of issued shares of the company. Such acquisition shall be financed by funds allocated from the company’s profits after taxation, and the shares so acquired shall be transferred to the employees within one year.

IV-8 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

Transfer of Shares

Shares held by shareholders may be transferred in accordance with the laws. Pursuant to the PRC Company Law, a shareholder should affect a transfer of his shares on a stock exchange established in accordance with laws or by any other means as required by the State Council. Registered shares may be transferred after the shareholders endorse the back of the share certificates or in any other manner specified by laws or administrative regulations. Following the transfer, the company shall enter the names and addresses of the transferees into its share register. No changes of registration in the share register described above shall be effected during a period of 20 days prior to convening a shareholders’ general meeting or 5 days prior to the record date for the purpose of determining entitlements to dividend distributions, unless otherwise provided by any laws on the registration of changes in the share register of listed companies. The transfer of bearer share certificates shall become effective upon the delivery of the certificates to the transferee by the shareholder. The Mandatory Provision provides that changes due to share transfer should not be made to shareholder registry within 30 days before a shareholders’ general meeting or within 5 days before the record date for the purpose of determining entitlements to dividend distributions.

Pursuant to the relevant provisions of the PRC Company Law, shares held by promoters may not be transferred within one year of the establishment of the company. Shares of the company issued prior to the public issue of shares may not be transferred within one year of the date of the company’s listing on a stock exchange. Directors, supervisors and the senior management of a company shall declare to the company their shareholdings in it and any changes in such shareholdings. During their terms of office, they may transfer no more than 25% of the total number of shares they hold in the company every year. They shall not transfer the shares they hold within one year of the date of the company’s listing on a stock exchange, nor within six months after they leave their positions in the company. The articles of association may set out other restrictive provisions in respect of the transfer of shares in the company held by its directors, supervisors and the senior management.

Rights and Obligations of Shareholders

Under the PRC Company Law, the rights of shareholders include the rights: (1) to receive a return on assets, participate in significant decision-making and select management personnel; (2) to petition the people’s court to revoke any resolution passed at a shareholders’ general meeting or a meeting of board of directors that has not been convened in compliance with the laws or the articles of association or whose voting has been conducted in an invalid manner, or any resolution the contents of which is in violation of the laws, administrative regulations and articles of association, provided that such petition shall be submitted within 60 days of the passing of such resolution; (3) to transfer the shares of the shareholders according to the laws; (4) to attend or appoint a proxy to attend shareholders’ general meetings and exercise the voting rights; (5) to inspect the articles of association, share register, counterfoil of company debentures, minutes of shareholders’ general meetings, board resolutions, resolutions of the supervisory board and financial and accounting reports and to make suggestions or inquiries in respect of the company’s operations; (6) to receive dividends in respect of the number of shares held; (7) to participate in distribution of residual properties of the company in proportion to their shareholdings upon the liquidation of the company; and any other shareholders’ rights provided for in laws, administrative regulations, other normative documents and the articles of association.

IV-9 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

The obligations of shareholders include the obligation to abide by the company’s articles of association, to pay the subscription monies in respect of the shares subscribed for, to be liable for the company’s debts and liabilities to the extent of the amount of subscription monies agreed to be paid in respect of the shares taken up by them and any other shareholder obligation specified in the articles of association.

Shareholders’ General Meetings The general meeting is the organ of authority of the company, which exercises its powers in accordance with the relevant provisions of the PRC Company Law. The general meeting may exercise its powers: (1) to decide on the company’s operational objectives and investment plans; (2) to elect and dismiss the directors and supervisors (not being representative(s) of employees) and to decide on the matters relating to the remuneration of directors and supervisors; (3) to review and approve the reports of the board of directors; (4) to review and approve the reports of the supervisory board; (5) to review and approve the company’s annual financial budgets and final accounts; (6) to review and approve the company’s profit distribution proposals and loss recovery proposals; (7) to decide on any increase or reduction of the company’s registered capital; (8) to decide on the issue of corporate bonds; (9) to decide on merger, division, dissolution and liquidation of the company or change of its corporate form; (10) to amend the company’s articles of association; and (11) to exercise any other authority stipulated in the articles of association. According to the PRC Company Law and the Mandatory Provisions, a shareholders’ general meeting is required to be held once every year within six months after the end of the previous fiscal year. An extraordinary general meeting is required to be held within two months of the occurrence of any of the following: (1) the number of directors is less than the number stipulated by the PRC Company Law or less than two-thirds of the number specified in the articles of association; (2) the outstanding losses of the company amounted to one-third of the company’s total paid-in share capital; (3) shareholders individually or in aggregate holding 10% or more of the company’s shares request that an extraordinary general meeting is convened; (4) the board deems necessary; (5) the supervisory board so proposes; or (6) any other circumstances as provided for in the articles of association.

IV-10 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

A shareholders’ general meeting shall be convened by the board of directors and presided over by the chairman of the board of directors. In the event that the chairman is incapable of performing or is not performing his duties, the meeting shall be presided over by the vice chairman. In the event that the vice chairman is incapable of performing or is not performing his duties, a director nominated by half or more of the directors shall preside over the meeting. Where the board of directors is incapable of performing or is not performing its duties to convene the general meeting, the supervisory board shall convene and preside over such meeting in a timely manner. If the supervisory board fails to convene and preside over such meeting, shareholders individually or in aggregate holding 10% or more of the company’s shares for 90 days or more consecutively may unilaterally convene and preside over such meeting.

In accordance with the PRC Company Law, a notice of the general meeting stating the date and venue of the meeting and the matters to be considered at the meeting shall be given to all shareholders 20 days before the meeting. A notice of extraordinary general meeting shall be given to all shareholders 15 days prior to the meeting. For the issuance of bearer share certificates, the time and venue of and matters to be considered at the meeting shall be announced 30 days before the meeting. Shareholders who individually or collectively hold more than 3% of the company’s shares may submit a temporary proposal and submit it in writing to the board of directors 10 days before the shareholders’ meeting. The board of directors shall notify other shareholders within two days after receiving the proposal and submit the provisional proposal to the shareholders’ meeting for deliberation. The contents of the provisional proposal must be within the terms of reference of the general meeting of shareholders and have a clear resolution theme and specific resolutions. A shareholders’ general meeting shall not make any resolution in respect of any matters not set out in the above two types of notices. Holders of bearer share certificates who wish to attend a shareholders’ general meeting shall deposit their share certificates with the company five days before the meeting and till the conclusion of the meeting.

In accordance with the Mandatory Provisions, a written notice of the general meeting stating, among other things, matters to be considered at the meeting, the time and place of the meeting shall be given to all shareholders 45 days before the meeting. A shareholder who intends to attend the meeting shall deliver his written reply regarding his attendance of the meeting to the company 20 days before the date of the meeting. When the company holds an annual general meeting of shareholders, shareholders holding more than 5% (inclusive) of the total number of shares with voting rights of the company have the right to submit new proposals to the company in writing. The Company should include matters within the authority of the general meeting in the agenda of the meeting the shareholders.

There is no specific provision in the PRC Company Law regarding the number of shareholders constituting a quorum in a shareholders’ general meeting, although the Special Regulations and the Mandatory Provisions provide that a company’s general meeting may be convened when written replies to the notice of that meeting from shareholders holding shares representing no less than 50% of the voting rights in the company have been received 20 days before the proposed date. If that 50% level is not achieved, the company shall within five days notify shareholders again by announcement of the matters to be considered at the meeting and the date and venue of the meeting, and the general meeting may be held by the company thereafter.

IV-11 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

Pursuant to the PRC Company Law, shareholders present at a shareholders’ general meeting have one vote for each share they hold, save that shares held by the company are not entitled to any voting rights. An accumulative voting system may be adopted for the election of directors and supervisors at the general meeting pursuant to the provisions of the articles of association or a resolution of the general meeting. Under the accumulative voting system, each share shall be entitled to the number of votes equivalent to the number of directors or supervisors to be elected at the general meeting, and shareholders may consolidate their votes for one or more directors or supervisors when casting a vote.

Pursuant to the PRC Company Law, resolutions of the general meeting must be passed by more than half of the voting rights held by shareholders present at the meeting, with the exception of matters relating to merger, division or dissolution of the company, increase or reduction of registered share capital, change of corporate form or amendments to the articles of association, which in each case must be passed by at least two-thirds of the voting rights held by the shareholders present at the meeting. Where the PRC Company Law and the articles of association provide that the transfer or acquisition of significant assets or the provision of external guarantees by the company must be approved by way of resolution of the general meeting, the directors shall convene a shareholders’ general meeting promptly and the meeting of shareholders shall vote on such matters. A shareholder may entrust a proxy to attend a meeting of shareholders, and the proxy shall submit a power of attorney of the shareholder to the Company and exercise the right to vote within the scope of authorization.

Minutes shall be prepared in respect of matters considered at the general meeting and the presider and directors attending the meeting shall endorse such minutes by signature. The minutes shall be kept together with the shareholders’ attendance register and the proxy forms.

Pursuant to the provisions of the Mandatory Provisions, the increase or reduction of share capital, the issuance of shares of any class, warrants or other similar securities and bonds, the division, merger, dissolution and liquidation of the company, the amendments to the articles of association and any other matters, which, as resolved by way of an ordinary resolution of the general meeting, may have a material impact on the company and require adoption by way of a special resolution, must be approved through special resolutions by no less than two-thirds (including shareholder proxy) of the voting rights held by shareholders present at the meeting.

The Mandatory Provisions require a special resolution to be passed at the general meeting and a class meeting to be held in the event of a variation or derogation of the class rights of a shareholder class. For this purpose, holders of domestic shares and H shares are deemed to be shareholders of different classes.

Board of Directors

A company shall have a board of directors which shall consist of 5 to 19 members. Members of the board of directors may include staff representatives, who shall be democratically elected by the company’s staff at a staff representative assembly, general staff meeting or otherwise. The term of a director shall be stipulated in the articles of association, provided that no term of office shall last for more than three years. A director may serve consecutive terms if re-elected. A director shall continue to perform his/her duties as a director in accordance with the laws, administrative regulations and the articles of association until a duly reelected director takes office, if re-election is not conducted in a timely manner upon the expiry of his/her term of office or if the resignation of directors results in the number of directors being less than the quorum.

IV-12 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

Under the provisions of the PRC Company Law, the board of directors may exercise its powers:

(1) to convene shareholders’ general meetings and report on its work to the shareholders’ general meetings;

(2) to implement the resolutions passed by the shareholders at the shareholders’ general meetings;

(3) to decide on the company’s operational plans and investment proposals;

(4) to formulate proposal for the company’s annual financial budgets and final accounts;

(5) to formulate the company’s profit distribution proposals and loss recovery proposals;

(6) to formulate proposals for the increase or reduction of the company’s registered capital and the issue of corporate bonds;

(7) to formulate proposals for the merger, division or dissolution of the company or change of corporate form;

(8) to decide on the setup of the company’s internal management organs;

(9) to appoint or dismiss the company’s general manager and decide on his/her remuneration and, based on the general manager’s recommendation, to appoint or dismiss any deputy general manager and financial officer of the company and to decide on their remunerations;

(10) to formulate the company’s basic management system; and

(11) to exercise any other authority stipulated in the articles of association.

Meetings of the board of directors shall be convened at least twice each year. Notices of meeting shall be given to all directors and supervisors 10 days before the meeting. Interim board meetings may be proposed to be convened by shareholders representing more than 10% of the voting rights, more than one-third of the directors or the supervisory board. The chairman shall convene the meeting within 10 days of receiving such proposal, and preside over the meeting. The board of directors may otherwise determine the means and the period of notice for convening an interim board meeting. Meetings of the board of directors shall be held only if more than half of the directors are present. Resolutions of the board of directors shall be passed by more than half of all directors. Each director shall have one vote for a resolution to be approved by the board of directors. Directors shall attend board meetings in person. If a director is unable to attend for any reason, he/she may appoint another director to attend the meeting on his/her behalf by a written power of attorney specifying the scope of authorization. At the same time, the board of directors shall make minutes of the meeting’s decisions on the matters discussed at the meeting, and the directors attending the meeting shall sign the meeting minutes.

If a resolution of the board of directors violates the laws, administrative regulations or the articles of association or resolutions of the general meeting, and as a result of which the company sustains serious losses, the directors participating in the resolution are liable to compensate the company. However, if it can be proved that a director expressly objected to the resolution when the resolution was voted on, and that such objection was recorded in the minutes of the meeting, such director shall be relieved from that liability.

IV-13 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

Under the provisions of the PRC Company Law, the following person may not serve as a director in a company: (1) a person who is unable or has limited ability to undertake any civil liabilities; (2) a person who has been convicted of an offense of corruption, bribery, embezzlement, misappropriation of property or destruction of the socialist economic order, or who has been deprived of his political rights due to his crimes, in each case where less than five years have elapsed since the date of completion of the sentence; (3) a person who has been a former director, factory manager or manager of a company or an enterprise that has entered into insolvent liquidation and who was personally liable for the insolvency of such company or enterprise, where less than three years have elapsed since the date of the completion of the bankruptcy and liquidation of the company or enterprise; (4) a person who has been a legal representative of a company or an enterprise that has had its business license revoked due to violations of the law or has been ordered to close down by law and the person was personally responsible, where less than three years have elapsed since the date of such revocation; and (5) a person who is liable for a relatively large amount of debts that are overdue.

Where a company elects or appoints a director to which any of the above circumstances applies, such election or appointment shall be null and void. A director to which any of the above circumstances applies during his/her term of office shall be released of his/her duties by the company.

In addition, the Mandatory Provisions further stipulates other circumstances that a person is disqualified from acting as a director of a company, including: (1) the case was pending due to investigation by the judiciary for violation of the criminal law; (2) a person cannot be acted as the a leader of the company according to laws and administrative regulations; (3) non-natural persons; and (4) a person has been ruled as violations of the provisions of relevant securities laws and regulations by the competent authority, involving fraud or dishonesty, and it does not exceed five years from the date of the ruling.

Pursuant to the provisions of the PRC Company Law, the board of directors shall set a chairman and may set a vice chairman. The chairman and the vice chairman shall be elected with approval of more than half of all the directors. The chairman shall convene and preside over board meetings and review the implementation of board resolutions. The vice chairman shall assist the chairman to perform his/her duties. Where the chairman is incapable of performing or is not performing his/her duties, the duties shall be performed by the vice chairman. Where the vice chairman is incapable of performing or is not performing his/her duties, a director nominated by more than half of the directors shall perform his/her duties.

Board of Supervisors

A company shall have a board of supervisors composed of not less than three members. The supervisory board consists of representatives of the shareholders and an appropriate proportion of representatives of the company’s staff. the proportion of representatives of the company’s staff shall not be less than one-third. The actual proportion shall be determined in the articles of association. Representatives of the company’s staff at the board of supervisors shall be democratically elected by the company’s staff at the staff representative assembly, general staff meeting or otherwise.

IV-14 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

The supervisory board shall set a chairman and may set a vice chairman. The chairman and the vice chairman of the supervisory board shall be elected by more than half of the supervisors. Directors and senior management shall not act concurrently as supervisors. The Reply of the Overseas Listing Department of CSRC and the Production System Department of the State Commission for Restructuring the Economic System on Opinions Concerning the Supplement and Amendment to Articles of Association by Companies to Be Listed in Hong Kong (中國證監會海外上市部國家體改委生產體制司關於到香港上市公司對公司章程作補充修改的意見的函) further provides that the chairman of the supervisory board shall be elected by more than two-thirds of the supervisors. Directors and senior management shall not act concurrently as supervisors.

The chairman of the supervisory board shall convene and preside over supervisory board meetings. Where the chairman of the supervisory board is incapable of performing or is not performing his/her duties, the vice chairman of the supervisory board shall convene and preside over supervisory board meetings. Where the vice chairman of the supervisory board is incapable of performing or is not performing his/her duties, a supervisor recommended by more than half of the supervisors shall convene and preside over supervisory board meetings.

The board of supervisors held meeting at least once every six months. Supervisors may propose to convene a meeting of the temporary supervisory board. The method of deliberation and voting procedures of the supervisory board shall be stipulated in the company’s articles of association, except as provided in this law. Supervisory Board resolutions shall be approved by more than half of the supervisors. The supervisory board shall make minutes of the meeting’s decisions on the matters discussed, and the supervisors attending the meeting shall sign the meeting minutes.

Each term of office of a supervisor is three years and he/she may serve consecutive terms if reelected. A supervisor shall continue to perform his/her duties as a supervisor in accordance with the laws, administrative regulations and the articles of association until a duly re-elected supervisor takes office, if re-election is not conducted in a timely manner upon the expiry of his/her term of office or if the resignation of supervisors results in the number of supervisors being less than the quorum.

The supervisory board may exercise its powers:

(1) to review the company’s financial position;

(2) to supervise the directors and senior management in their performance of their duties and to propose the removal of directors and senior management who have violated laws, regulations, the articles of association or shareholders’ meeting resolutions;

(3) when the acts of a director or senior management personnel are detrimental to the company’s interests, to require the director and senior management to correct these acts;

(4) to propose the convening of extraordinary shareholders’ general meetings and to convene and preside over shareholders’ general meetings when the board fails to perform the duty of convening and presiding over shareholders’ general meetings under the PRC Company Law;

(5) to submit proposals to the shareholders’ general meetings;

IV-15 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

(6) to bring actions against directors and senior management personnel pursuant to the relevant provisions of the PRC Company Law; and

(7) to exercise any other authority stipulated in the articles of association.

Supervisors may be present at board meetings and make inquiries or proposals in respect of the resolutions of the board. The supervisory board may investigate any irregularities identified in the operation of the company and, when necessary, may engage an accounting firm to assist its work at the cost of the company.

Manager and Senior Management

Pursuant to the relevant provisions of the PRC Company Law, a company shall have a manager who shall be appointed or removed by the board of directors. Meanwhile, pursuant to the relevant provisions of the Mandatory Provisions, the general manager, who reports to the board of directors, may exercise his/her powers:

(1) to manage the production, operation and administration of the company and arrange for the implementation of the resolutions of the board of directors;

(2) to arrange for the implementation of the company’s annual operation plans and investment proposals;

(3) to formulate proposals for the establishment of the company’s internal management organs;

(4) to formulate the fundamental management system of the company;

(5) to formulate the company’s specific rules and regulations;

(6) to recommend the appointment or dismissal of any deputy manager and any financial officer of the company;

(7) to appoint or dismiss responsible management personnel (other than those required to be appointed or dismissed by the board of directors); and

(8) to exercise any other authority granted by the board of directors.

Other provisions in the articles of association on the manager’s powers shall also be complied with. The manager shall be present at meetings of the board of directors. However, the manager shall have no voting rights at meetings of the board of directors unless he/she concurrently serves as a director. In exercising their powers and duties, managers shall perform their duties of integrity and diligence in accordance with the provisions of laws, administrative regulations and the company’s articles of association.

Pursuant to the relevant provisions of the PRC Company Law, senior management refers to the manager, deputy manager, financial officer, secretary to the board of directors of a listed company and other personnel as stipulated in the articles of association.

IV-16 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

Duties of Directors, Supervisors, General Managers and Other Senior Management Directors, supervisors and senior management are required under the relevant provisions of the PRC Company Law to comply with the relevant laws, regulations and the articles of association, and shall be obliged to be faithful and diligent towards the Company. Directors, supervisors and management personnel are prohibited from accepting bribes or other unlawful income by abusing their powers and from misappropriating the company’s property. Meanwhile, directors and senior management are prohibited from: (1) misappropriating company funds; (2) depositing company funds into accounts under their own names or the names of other individuals; (3) loaning company funds to others or providing guarantees in favor of others supported by company’s property in violation of the articles of association or without approval of the general meeting or the board of directors; (4) entering into contracts or transactions with the company in violation of the articles of association or without approval of the general meeting; (5) using their position to procure business opportunities for themselves or others that should have otherwise been available to the company or operating businesses similar to that of the company for their own benefits or on behalf of others without approval of the general meeting; (6) accepting commissions paid by a third party for transactions conducted with the company; (7) unauthorized divulgence of confidential information of the company; and (8) other acts in violation of their duty of loyalty to the company. Pursuant to the relevant provisions of the PRC Company Law, income generated by directors or senior management in violation of aforementioned shall be returned to the company. A director, supervisor or senior management who contravenes the law, regulation or the company’s articles of association in the performance of his/her duties resulting in any loss to the company shall be liable to the company for compensation. Where a director, supervisor or senior management is required to attend a shareholders’ general meeting, such director, supervisor or senior management shall attend the meeting and answer the inquiries from shareholders. Directors and senior management shall furnish all true information and materials to the supervisory board without impeding the discharge of duties by the supervisory board or supervisors. Where a director or senior management contravenes the law, regulation or the company’s articles of association in the performance of his/her duties resulting in any loss to the company, shareholder(s) holding individually or in aggregate no less than 1% of the company’s shares consecutively for at least 180 days may request in writing that the board of supervisors institutes litigation at a people’s court. Where the supervisory board violates the laws or administrative regulations or the articles of association in the discharge of its duties resulting in any loss to the company, such shareholder(s) may request in writing that the board of directors institute litigation at a people’s court on its behalf. If the board of supervisors or the board of directors refuses to institute litigation after receiving this written request from the shareholder(s), or fails

IV-17 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS to institute litigation within 30 days of the date of receiving the request, or in case of emergency where failure to institute litigation immediately will result in irrecoverable damage to the company’s interests, such shareholder(s) shall have the power to institute litigation directly at a people’s court in its own name for the company’s benefit. For other parties who infringe the lawful interests of the company resulting in loss to the company, such shareholder(s) may institute litigation at a people’s court in accordance with the procedure described above. Where a director or senior management contravenes any laws, administrative regulations or the articles of association in infringement of shareholders’ interests, a shareholder may also institute litigation at a people’s court.

The Special Regulations and the Mandatory Provisions provide that a company’s directors, supervisors, manager and other senior management shall have duty of loyalty to the company. They are required to faithfully perform their duties, to protect the interests of the company and not to use their positions in the company for their own benefits. The Mandatory Provisions contain detailed stipulations on these duties.

Finance and Accounting

Pursuant to the relevant provisions of the PRC Company Law, a company shall establish its own financial and accounting systems according to the laws, administrative regulations and the regulations of the competent financial departments of the State Council. At the end of each financial year, a company shall prepare a financial report which shall be audited by an accounting firm in accordance with the laws. The financial and accounting reports shall be prepared in accordance with the laws, administrative regulations and the regulations of the financial departments of the State Council. The company’s financial reports shall be made available for shareholders’ inspection at the company 20 days before the convening of an annual general meeting. A joint stock limited company that makes public stock offerings shall publish its financial reports.

When distributing each year’s profits after taxation, the company shall set aside 10% of its profits after taxation for the PRC company’s statutory common reserve fund until the fund has reached 50% or more of the company’s registered capital. When the company’s statutory common reserve fund is not sufficient to make up for the company’s losses for the previous years, the current year’s profits shall first be used to make good the losses before any allocation is set aside for the statutory common reserve fund. After the company has made allocations to the statutory common reserve fund from its profits after taxation, it may, upon passing a resolution at a shareholders’ general meeting, make further allocations from its profits after taxation to the discretionary common reserve fund. After the company has made good its losses and made allocations to its discretionary common reserve fund, the remaining profits after taxation shall be distributed in proportion to the number of shares held by the shareholders, except for those which are not distributed in a proportionate manner as provided by the articles of association.

Profits distributed to shareholders by a resolution of a shareholders’ general meeting or the board of directors before losses have been made good and allocations have been made to the statutory common reserve fund in violation of the requirements described above must be returned to the company. The company shall not be entitled to any distribution of profits in respect of shares held by it.

IV-18 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

The premium over the nominal value of the shares of the company on issue of shares at the issue price and other income as required by the Ministry of Finance of the State Council to be treated as the capital reserve fund shall be accounted for as the capital reserve fund. The common reserve fund of a company shall be applied to make good the company’s losses, expand its business operations or increase its capital. The capital reserve fund, however, shall not be used to make good the company’s losses. Upon the transfer of the statutory common reserve fund into capital, the balance of the fund shall not be less than 25% of the registered capital of the company before such transfer.

The company shall have no accounting books other than the statutory books. The company’s assets shall not be deposited in any account opened under the name of an individual.

Appointment and Dismissal of Auditors

Pursuant to the provisions of the PRC Company Law and the Mandatory Provisions, the appointment or dismissal of an accounting firm responsible for the company’s auditing shall be determined by shareholders at a shareholders’ general meeting or the board of directors in accordance with the articles of association. The accounting firm should be allowed to make representations when the general meeting or the board of directors conduct a vote on the dismissal of the accounting firm on their respective meetings. The company should provide true and complete accounting evidence, accounting books, financial and accounting reports and other accounting information to the newly-engaged accounting firm without any refusal or withholding or falsification of information.

The Special Regulations require a company to engage an independent qualified accounting firm to audit the company’s annual reports and to review and check other financial reports of the company. The accounting firm’s term of office shall commence from the end of the shareholders’ annual general meeting to the end of the next shareholders’ annual general meeting.

Profit Distribution

According to the provisions of the PRC Company Law, a company shall not distribute profits before losses are covered and the statutory common reserve fund is provided. At the same time, the Special Regulations require that any dividend and other distribution to holders of H Shares shall be declared and calculated in RMB and paid in foreign currency.

Amendments to the Articles of Association

Pursuant to the provisions of the PRC Company Law, the resolution of a shareholders’ general meeting regarding any amendment to a company’s articles of association requires affirmative votes by at least two-thirds of the votes held by shareholders attending the meeting. Pursuant to the Mandatory Provisions, the company may amend its articles of association according to the laws, administrative regulations and the articles of association. The amendment to articles of association involving content of the Mandatory Provisions will only be effective upon approval of the department in charge of company examination and approval department authorized by the State Council and the securities regulatory department of the State Council, while the amendment to articles of association involving matters of company registration must be registered with the relevant authority in accordance with applicable laws.

IV-19 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

Dissolution and Liquidation Pursuant to the provisions of the PRC Company Law, a company shall be dissolved for any of the following reasons: (1) the term of its operation set out in the articles of association has expired or other events of dissolution specified in the articles of association have occurred; (2) the shareholders have resolved at a shareholders’ general meeting to dissolve the company; (3) the company is dissolved by reason of its merger or division; (4) the business license of the company is revoked or the company is ordered to close down or to be dissolved in accordance with the laws; or (5) the company is dissolved by a people’s court in response to the request of shareholders holding shares that represent more than 10% of the voting rights of all shareholders of the company, on the grounds that the operation and management of the company has suffered serious difficulties that cannot be resolved through other means, rendering ongoing existence of the company a cause for significant losses to the shareholders. In the event of paragraph 1 above, the company may carry on its existence by amending its articles of association. The amendments to the articles of association in accordance with the provisions described above shall require the approval of more than two-thirds of voting rights of shareholders attending a shareholders’ general meeting. Where the company is dissolved under the circumstances set forth in paragraph 1, 2, 4 or 5, it should establish a liquidation committee within 15 days of the date on which the dissolution matter occurs. The liquidation committee shall be composed of directors or any other person determined by a shareholders’ general meeting. If a liquidation committee is not established within the prescribed period, the company’s creditors may file an application with a people’s court, requesting that the court appoint relevant personnel to form a liquidation committee to administer the liquidation. The people’s court should accept such application and form a liquidation committee to conduct liquidation in a timely manner. The liquidation committee may exercise following powers during the liquidation: (1) to dispose of the company’s assets and to prepare a balance sheet and an inventory of assets; (2) to notify the company’s creditors or publish announcements; (3) to deal with any outstanding business related to the liquidation; (4) to pay any overdue tax together with any tax arising during the liquidation process; (5) to settle the company’s claims and liabilities; (6) to handle the company’s remaining assets after its debts have been paid off; and (7) to represent the company in any civil procedures. The liquidation committee shall notify the company’s creditors within 10 days of its establishment, and publish an announcement in newspapers within 60 days. A creditor shall lodge his claim with the liquidation committee within 30 days of receipt of the notification or within 45 days of the date of the announcement if he has not received any notification. A creditor

IV-20 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS shall report all matters relevant to the creditors rights he has claimed and furnish relevant evidence. The liquidation committee shall register such creditor’s rights. The liquidation committee shall not make any settlement to creditors during the period of the claim. Upon disposal of the company’s property and preparation of the required balance sheet and inventory of assets, the liquidation committee shall draw up a liquidation plan and submit this plan to a shareholders’ general meeting or a people’s court for endorsement. The remaining assets of the company, after payment of liquidation expenses, employee wages, social insurance expenses and statutory compensation, outstanding taxes and the company’s debts by the company’s property, shall be distributed to shareholders in proportion to shares held by them. The company shall continue to exist during the liquidation period, although it cannot engage in operating activities that are not related to the liquidation. The company’s property shall not be distributed to shareholders before repayments are made in accordance with the requirements described above. Upon liquidation of the company’s property and preparation of the required balance sheet and inventory of assets, if the liquidation committee becomes aware that the company does not have sufficient assets to meet its liabilities, it must apply to a people’s court for a declaration of bankruptcy in accordance with the laws. Following such declaration by the people’s court, the liquidation committee shall hand over the administration of the liquidation to the people’s court. Upon completion of the liquidation, the liquidation committee shall prepare a liquidation report and submit it to the shareholders’ general meeting or a people’s court for confirmation of its completion. Following such confirmation, such report shall be submitted to the company registration authority and apply for cancellation of the company’s registration, and an announcement of its termination shall be published. Members of the liquidation committee are required to discharge their duties in good faith and perform liquidation obligations according to law. Members of the liquidation committee shall be prohibited from abusing their authority in accepting bribes or other unlawful income and from misappropriating the company’s properties. Members of the liquidation committee are liable to indemnify the company and its creditors in respect of any loss arising from their willful or material default. In addition, liquidation of a company declared bankrupt according to laws shall be processed in accordance with the laws on corporate bankruptcy.

Overseas Listing The shares of a company shall only be listed overseas after obtaining approval from CSRC, and the listing must be arranged in accordance with procedures specified by the State Council. Pursuant to the Special Regulations, a company may issue shares to overseas investors and list its shares overseas upon approval from CSRC. Subject to approval of the company’s plans to issue overseas-listed foreign shares and domestic shares by CSRC, the board of directors of the company may make arrangement to implement such plans for issuance of the foreign invested shares and domestic shares, respectively, within fifteen months from the date of approval by CSRC. At the same time, according to the provisions of the Mandatory Provisions, if the company’s shares determined by the company’s issuance plan are not fully issued, new shares shall not be issued other than the issuance plan. If the company needs to adjust the issuance plan, the general meeting of shareholders shall make a resolution. After being approved by the company’s examination and approval department authorized by the State Council, it shall be submitted to the securities commission of the State Council for examination and approval.

IV-21 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

Loss of Share Certificates A shareholder may, in accordance with the public notice procedures set out in the PRC Civil Procedure Law, apply to a people’s court if his share certificate(s) in registered form is either stolen, lost or destroyed, for a declaration that such certificate(s) will no longer be valid. After the People’s Court declared the stock to be invalidated, the shareholder may apply to the company for the issue of a replacement certificate(s). A separate procedure regarding the loss of share certificates and H Share certificates of the overseas-listed foreign shareholders of the PRC is provided for in the Mandatory Provisions, details of which are set out in the articles of association.

Merger and Division According to the relevant provisions of the PRC Company Law, if a merger agreement shall be signed by merging companies and the involved companies shall prepare respective balance sheets and inventory of assets. The companies shall within 10 days of the date of passing the resolution approving the merger notify their respective creditors and publicly announce the merger on the newspaper within 30 days. A creditor may, within 30 days of receipt of the notification, or within 45 days of the date of the announcement if he has not received the notification, request the company to settle any outstanding debts or provide relevant guarantees. In case of a merger, the credits and debts of the merging parties shall be assumed by the surviving or the new company. In case of a division, the company’s assets shall be divided and a balance sheet and an inventory of assets shall be prepared. When a resolution regarding the company’s division is approved, the company should notify all its creditors within 10 days of the date of passing such resolution and publicly announce the division in newspapers within 30 days. Unless an agreement in writing is reached with creditors in respect of the settlement of debts before division, the liabilities of the company which have accrued prior to the separation shall be jointly borne by the separated companies. Changes in the registration as a result of the merger or division shall be registered with the relevant administration authority for industry and commerce.

The PRC Securities Laws, Regulations and Regulatory Regimes The PRC has promulgated a series of regulations that relate to the issue and trading of the Shares and disclosure of information. In October 1992, the State Council established the Securities Committee and CSRC. The Securities Committee is responsible for coordinating the drafting of securities regulations, formulating securities-related policies, planning the development of securities markets, directing, coordinating and supervising all securities-related institutions in the PRC and administering CSRC. CSRC is the regulatory arm of the Securities Committee and is responsible for the drafting of regulatory provisions governing securities markets, supervising securities companies, regulating public offerings of securities by PRC companies in the PRC or overseas, regulating the trading of securities, compiling securities- related statistics and undertaking relevant research and analysis. In April 1998, the State Council consolidated the Securities Committee and CSRC and reformed CSRC. On April 22, 1993, the State Council promulgated the Provisional Regulations Concerning the Issue and Trading of Shares (股票發行與交易管理暫行條例) govern the application and approval procedures for public offerings of shares, issue and trading in shares, the acquisition of listed companies, deposit, clearing and transfer of shares, the disclosure of information, investigation, penalties and dispute resolutions with respect to a listed company.

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On December 25, 1995, the State Council promulgated the Regulations of the State Council Concerning Domestic Listed Foreign Shares of Joint Stock Limited Companies (國務院關於股份有限公司境內上市外資股的特別規定). These regulations principally govern the issue, subscription, trading and declaration of dividends and other distributions of domestic listed foreign shares and disclosure of information of joint stock limited companies having domestic listed foreign shares.

The Securities Law of the People’s Republic of China took effect on July 1, 1999 and was revised as of August 28, 2004, October 27, 2005, June 29, 2013 and August 31, 2014, respectively. It was the first national securities law in the PRC that comprehensively regulates activities in the PRC securities market. It is divided into 12 chapters and 240 articles with contents include, among other matters, the issue and trading of securities, takeovers by listed companies, securities exchanges, securities companies and the duties and responsibilities of the State Council’s securities regulatory authorities. Article 238 of the Securities Law provides that domestic enterprises must obtain prior approval from the State Council Securities regulatory authorities to list shares outside the PRC. Currently, the issue and trading of foreign issued securities (including shares) are principally governed by the regulations and rules promulgated by the State Council and CSRC.

Arbitration and Enforcement of Arbitral Awards

The Arbitration Law of the People’s Republic of China (2017 Amendment) (中華人民共和國仲裁法(2017修正)) was enacted by the Standing Committee of the NPC on August 31, 1994, which became effective on September 1, 1995 and was amended on August 27, 2009 and September 1, 2017. The PRC Arbitration Law is applicable to, among other matters, economic disputes involving foreign parties where all parties have entered into a written agreement to resolve disputes by arbitration before an arbitration committee constituted in accordance with the PRC Arbitration Law. The PRC Arbitration Law provides that an arbitration committee may, before the promulgation of arbitration regulations by the PRC Arbitration Association, formulate interim arbitration rules in accordance with the PRC Arbitration Law and the PRC Civil Procedure Law. Where the parties have agreed to settle disputes by means of arbitration, a people’s court will refuse to handle a legal proceeding initiated by one of the parties at such people’s court, unless the arbitration agreement has lapsed.

The Listing Rules and the Mandatory Provisions require an arbitration clause to be included in the articles of association of a company listed in Hong Kong and, in the case of the Listing Rules, also in contracts between the company and each director or supervisor. Pursuant to such clause, whenever a dispute or claim arises from any right or obligation provided in the articles of association, the PRC Company Law or other relevant laws and administrative regulations concerning the affairs of the company between (1) a holder of overseas listed foreign shares and the company; (2) a holder of overseas listed foreign shares and a holder of domestic shares; or (3) a holder of overseas listed foreign shares and the company’s directors, supervisors or other management personnel, such parties shall be required to refer such dispute or claim to arbitration at either the China International Economic and Trade Arbitration Commission (“CIETAC”) or the HKIAC. Disputes in respect of the definition of shareholder and disputes in relation to the company’s shareholder registry need not be resolved by arbitration. If the party seeking arbitration elects to arbitrate the dispute or claim at the HKIAC, then either party may apply to have such arbitration conducted in Shenzhen in accordance with the securities arbitration rules of the HKIAC.

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Under the PRC Arbitration Law and the PRC Civil Procedure Law, an arbitral award shall be final and binding on the parties involved in the arbitration. If any party fails to comply with the award, the other party to the award may apply to a people’s court for its enforcement. However, a people’s court forms a collegiate bench for review and verification, ruling not to enforce an arbitral award made by an arbitration commission if there is any procedural irregularity (including but not limited to irregularity in the composition of the arbitration tribunal or arbitration procedure, the jurisdiction of the arbitration commission, or the making of an award on matters beyond the scope of the arbitration agreement). Any party seeking to enforce an arbitral award of a foreign affairs arbitration organ of the PRC while the executed party or its property is not located within the PRC may apply to a foreign court with jurisdiction over the case for recognition and enforcement of the award. Likewise, an arbitral award made by a foreign arbitration body may be recognized and enforced by a PRC court in accordance with the principle of reciprocity or any international convention concluded or acceded to by the PRC. The PRC acceded to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (hereinafter referred to as the “New York Convention”) adopted on June 10, 1958 pursuant to a resolution of the Standing Committee of the NPC passed on December 2, 1986. The New York Convention provides that all arbitral awards made in a state which is a party to the New York Convention shall be recognized and enforced by other parties thereto subject to their rights to refuse acknowledgement and enforcement under certain circumstances, including where the enforcement of the arbitral award is against the public policy of that state. At the time of the PRC’s accession to the Convention, the Standing Committee of the NPC declared that (1) the PRC will only apply the New York Convention to the recognition and enforcement of arbitral awards made in the territory of another contracting state; and (2) the New York Convention will only apply to disputes deemed under PRC law to be arising from contractual or non-contractual mercantile legal relations. An agreement has been reached between Hong Kong and the Supreme People’s Court of the PRC for the mutual enforcement of arbitral awards. On June 18, 1999, the Supreme People’s Court of the PRC adopted the Arrangement on Mutual Enforcement of Arbitral Awards between Mainland and Hong Kong SAR (關於內地與香港特別行政區相互執行仲裁裁決的安排), which became effective on February 1, 2000. The arrangement is made in accordance with the spirit of the New York Convention. Pursuant to this arrangement, awards made by PRC arbitral authorities acknowledged by Hong Kong can be enforced in Hong Kong, and arbitration awards made by the Hong Kong arbitral authority in accordance with the Arbitration Ordinance of the Hong Kong Special Administrative Region are also enforceable in China. Where a court of the Mainland finds that enforcement in the Mainland of the ruling made by the Hong Kong arbitral authority will violate public interests of the Mainland, or the Hong Kong SAR Court decided that the enforcement of the arbitral awards in the HKSAR violates the public policy of the HKSAR, execution of the ruling may be ignored.

SUMMARY OF MATERIAL DIFFERENCES BETWEEN HONG KONG AND PRC COMPANY LAW The Hong Kong law applicable to a company incorporated in Hong Kong is based on the Companies Ordinance and the Companies (Winding up and Miscellaneous Provisions) Ordinance and is supplemented by common law and the rules of equity that are applicable in Hong Kong. As a joint stock limited company established in the PRC that is seeking a [REDACTED]onthe Hong Kong Stock Exchange, the Bank is governed by the PRC Company Law and all other rules and regulations promulgated pursuant to the PRC Company Law.

IV-24 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

Set out below is a summary of certain material differences between Hong Kong company law applicable to a company incorporated in Hong Kong and the PRC Company Law applicable to a joint stock limited company established under the PRC Company Law. This summary is, however, not intended to be an exhaustive comparison.

Incorporation Under Hong Kong company law, a company with share capital, shall be incorporated by the Registrar of Companies in Hong Kong and the company will acquire an independent corporate existence upon its incorporation. A company may be incorporated as a public company or a private company. Pursuant to the Companies Ordinance, the articles of association of a private company incorporated in Hong Kong shall contain provisions that restrict a member’s right to transfer shares. A public company’s articles of association do not contain such provisions. Under the PRC Company Law, a joint stock limited company may be incorporated by promotion or subscription. The amended PRC Company Law which came into effect on March 1, 2014 has no requirements for the minimum registered capital of joint stock limited company, except that laws, administrative regulations and State Council decisions have separate provisions on paid-in registered capital and the minimum registered capital, in which case the company should follow such provisions. Hong Kong law does not prescribe any minimum capital requirement for a Hong Kong company.

Share Capital Under Hong Kong law, the directors of a Hong Kong company may, with the prior approval of the shareholders if required, issue new shares of the company. While, the PRC Company Law provides that any increase in the company’s registered capital must be approved by its shareholders’ general meeting and the relevant PRC governmental and regulatory authorities. Under the Securities Law of the PRC, a company which is approved by the relevant securities regulatory authority to list its shares on a stock exchange must have a total share capital of not less than RMB30 million. There is no such restriction on companies incorporated in Hong Kong under Hong Kong law. Under the provisions of the PRC Company Law, the shares may be subscribed for in the form of money or non-monetary assets (other than assets not entitled to be used as capital contributions under relevant laws and administrative regulations). For non-monetary assets to be used as capital contributions, appraisals and assets transfer procedures must be carried out to ensure no overvaluation or under-valuation of the assets. There is no such restriction on a Hong Kong company under Hong Kong law.

Restrictions on Shareholding and Transfer of Shares Under PRC law, the Bank’s Domestic Shares, which are denominated and subscribed for in Renminbi, may only be subscribed for and traded by the government or authorized governmental department, PRC legal persons, natural persons, qualified foreign institutional investors, or eligible foreign strategic investors. Overseas listed shares, which are denominated in Renminbi and subscribed for in a currency other than Renminbi, may only be subscribed for, and traded by, investors from Hong Kong, Macau or Taiwan or any country and territory outside the PRC, or qualified domestic institutional investors. However, eligible institutional investors and individual investors may participate in the trading of Hong Kong Stock Connect and Shanghai Stock Connect (or Shenzhen Stock Connect) through participating in Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect.

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Under the provisions of the PRC Company Law, a promoter of a joint stock limited company is not allowed to transfer the shares it holds for a period of one year after the date of establishment of the company. Shares in issue prior to the public offering cannot be transferred within one year from the listing date of the shares on a stock exchange. Shares in a joint stock limited liability company held by its directors, supervisors and senior management transferred each year during their term of office shall not exceed 25% of the total shares they held in the company, and the shares they held in the company cannot be transferred within one year from the listing date of the shares, and also cannot be transferred within half a year after such person has left office. The articles of association may set other restrictive requirements on the transfer of the company’s shares held by its directors, supervisors and senior management. There are no such restrictions on shareholdings and transfers of shares under Hong Kong law apart from six-month lockup on the company’s issue of shares and the 12-month lockup on controlling shareholders’ disposal of shares.

Financial Assistance for Acquisition of Shares

The PRC Company Law does not prohibit or restrict a joint stock limited company or its subsidiaries from providing financial assistance for the purpose of an acquisition of its own or its holding company’s shares. However, according to the provisions of the Mandatory Provisions, except for the exemption stipulated in Article 31 of the Provisions, the company or its subsidiaries should not, at any time in any way, provide any financial assistance to those who purchase or intend to purchase company shares, which is similar to those under the Hong Kong company law.

Variation of Class Rights

The PRC Company Law has no special provision relating to variation of class rights. However, the PRC Company Law states that the State Council can promulgate separate regulations relating to other kinds of shares. The Mandatory Provisions contain elaborate provisions relating to the circumstances which are deemed to be variations of class rights and the approval procedures required to be followed in respect thereof. These provisions have been incorporated in the Articles of Association.

Under the Companies Ordinance, no rights attached to any class of shares can be varied except (i) with the approval of a special resolution of the holders of the relevant class at a separate meeting, (ii) with the consent in writing of the holders representing at least 75% of the total voting rights of holders of shares in the class in question, or (iii) if there are provisions in the articles of association relating to the variation of those rights, then in accordance with those provisions.

Directors, Senior Management and Supervisors

The PRC Company Law, unlike Hong Kong company law, does not contain any requirements relating to the declaration of directors’ interests in material contracts, restrictions on companies providing certain benefits to directors and guarantees in respect of directors’ liability and prohibitions against compensation for loss of office without shareholders’ approval. The Mandatory Provisions, however, contain certain restrictions on interested contracts and specify the circumstances under which a director may receive compensation for loss of office.

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Board of Supervisors Under the relevant provisions of the PRC Company Law, a joint stock limited company’s directors and members of the senior management are subject to the supervision of the board of supervisors. There is no mandatory requirement for the establishment of supervisory board for a company incorporated in Hong Kong. The Mandatory Provisions provide that each supervisor owes a duty, in the exercise of his powers, to act in good faith and honestly in what he considers to be in the best interests of the company and to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

Derivative Action by Minority Shareholders Hong Kong law permits minority shareholders to initiate a derivative action on behalf of all shareholders against directors who have committed a breach of their fiduciary duties to the company if the directors control a majority of votes at a general meeting, thereby effectively preventing a company from suing the directors in breach of their duties in its own name. The PRC Company Law provides shareholders of a joint stock limited company with the right so that in the event where the directors and senior management violate their obligations and cause damages to a company, the shareholders individually or jointly holding more than 1% of the shares in the company for more than 180 consecutive days may request in writing the board of supervisors to initiate proceedings in the people’s court. In the event that the board of supervisors violates their obligations and cause damages to company, the above said shareholders may send written request to the board of directors to initiate proceedings in the people’s court. Upon receipt of such written request from the shareholders, if the board of supervisors or the board of directors refuses to initiate such proceedings, or has not initiated proceedings within 30 days upon receipt of the request, or if under urgent situations, failure of initiating immediate proceeding may cause irremediable damages to the company, the above said shareholders shall, for the benefit of the company’s interests, have the right to initiate proceedings directly to the people’s court in their own name. The Mandatory Provisions provide further remedies against the directors, supervisors and senior management who breach their duties to the company. In addition, as a condition to the listing of shares on the Hong Kong Stock Exchange, each director and supervisor of a joint stock limited company is required to give an undertaking in favor of the company acting as agent for the shareholders. This allows minority shareholders to take action against directors and supervisors in default.

Protection of Minorities Under Hong Kong law, a shareholder who complains that the affairs of a company incorporated in Hong Kong are conducted in a manner unfairly prejudicial to his interests may petition to the court to either appoint a receiver or manager over the property or business of the company or make an appropriate order regulating the affairs of the company. In addition, on the application of a specified number of members, the Financial Secretary of Hong Kong may appoint inspectors who are given extensive statutory powers to investigate the affairs of a company incorporated in Hong Kong. The PRC Company Law stipulates that if the company’s operation and management are seriously distressed and continuous existing will cause significant losses to shareholders’ interests and cannot be resolved through other channels, shareholders holding more than 10% of the company’s shareholders’ voting rights may request the People’s Court to dissolve the company. The Mandatory Provisions, however, contain provisions that a

IV-27 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS controlling shareholder may not exercise its voting rights in a manner prejudicial to the interests of the shareholders generally or of a proportion of the shareholders of a company to relieve a director or supervisor of his duty to act honestly in the best interests of the company or to approve the expropriation by a director or supervisor of the company’s assets or the individual rights of other shareholders.

Notice of Shareholders’ General Meetings Under the PRC Company Law, notice of a shareholders’ annual general meeting and an extraordinary shareholders meeting must be given not less than 20 days and 15 days before the meeting, respectively. Under the Special Regulations and the Mandatory Provisions, at least 45 days’ written notice must be given to all shareholders and shareholders who wish to attend the meeting must send their writing replies to the company at least 20 days before the date of the meeting. For a company incorporated in Hong Kong, the minimum period of notice is 21 days in the case of an annual general meeting and 14 days in other cases.

Quorum for Shareholders’ General Meetings Under the Companies Ordinance, the quorum for a general meeting must be at least two members unless the articles of association of the company otherwise provide. For companies with only one member, the quorum must be one member. The PRC Company Law does not specify any quorum for a shareholders’ general meeting. According to the Special Regulations and the Mandatory Provisions, general meetings may only be convened when replies have been received from shareholders whose shares represent at least 50% of the voting rights at least 20 days before the proposed date of the meeting, or if the replies of shareholders fail to reach 50%, the company shall within five days notify its shareholders again by way of a public announcement and the shareholders’ general meeting may be held thereafter.

Voting Under the Companies Ordinance, an ordinary resolution of a shareholders’ general meeting is passed by more than half of the votes and a special resolution of a shareholders’ general meeting is passed by no less than 75% of such votes. Under the provisions of the PRC Company Law, the passing of any resolution requires affirmative votes of shareholders representing more than half of the voting rights represented by the shareholders who attend the general meeting except in cases of proposed amendments to a company’s articles of association, increase or decrease of registered capital, merger, division or dissolution, or change of corporation form, which require affirmative votes of shareholders representing more than two-thirds of the voting rights represented by the shareholders who attend the general meeting.

Financial Disclosure Under the PRC Company Law, a joint stock limited company is required to make available at the company for inspection by shareholders its financial report 20 days before its shareholders’ annual general meeting. In addition, a joint stock limited company of which the shares are publicly offered must publish its financial report. The Companies Ordinance requires a company incorporated in Hong Kong to send to every shareholder a copy of its financial statements, auditors’ report and directors’ report, which are to be presented before the company in its annual general meeting, not less than 21 days before such meeting. A joint stock limited liability company is required under the PRC law to prepare its financial statements in accordance

IV-28 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS with the PRC GAAP. Meanwhile, the Mandatory Provisions require that a company must, in addition to preparing financial statements according to the PRC GAAP, have its financial statements prepared and audited in accordance with international accounting standards or accounting standards of the overseas listing place and its financial statements must also contain a statement of the financial effect of the material differences (if any) from the financial statements prepared in accordance with the PRC GAAP. The lower of the after-tax profits of a specific fiscal year stated in the statements prepared based on the above-mentioned principles shall prevail in the allocation of such profits. The company shall publish its financial reports twice in each accounting year. An interim financial report shall be published within 60 days after the end of the first six months of each accounting year, while an annual financial report shall be published within 120 days after the end of each accounting year.

The Special Regulations require that there should not be any contradiction between the information disclosed within and outside the PRC and that, to the extent that there are differences in the information disclosed in accordance with the relevant PRC and overseas laws, regulations and requirements of the relevant stock exchanges, such differences should also be disclosed simultaneously.

Information on Directors and Shareholders

The PRC Company Law gives shareholders the right to inspect the company’s articles of association, minutes of the shareholders’ general meetings, shareholders’ register, stubs of corporate bonds, resolutions of meetings of the board of directors, resolutions of meetings of the board of supervisors and financial and accounting reports, which is similar to the shareholders’ rights of Hong Kong companies under Hong Kong law.

Receiving Agent

Under the PRC Company Law and Hong Kong law, dividends once declared are debts payable to shareholders. The limitation period for debt recovery action under Hong Kong law is six years, while under the PRC law this limitation period is three years. The Mandatory Provisions require the relevant company to appoint a trust company registered under the Hong Kong Trustee Ordinance (Chapter 29 of the Laws of Hong Kong) as a receiving agent to receive on behalf of holders of shares dividends declared and all other monies owed by the company in respect of its shares.

Corporate Reorganization

Corporate reorganization involving a company incorporated in Hong Kong may be effected in a number of ways, such as a transfer of the whole or part of the business or property of the company in the course of voluntary winding up to another company pursuant to Section 237 of the Companies (Winding up and Miscellaneous Provisions) Ordinance or a compromise or arrangement between the company and its creditors or between the company and its shareholders under Division 2 of Part 13 of the Companies Ordinance, which requires the sanction of the court. Under PRC law, merger, division, dissolution or change the form of a joint stock limited company has to be approved in the shareholders’ general meeting by shareholders.

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Dispute Arbitration

In Hong Kong, disputes between shareholders on the one hand, and a company incorporated in Hong Kong or its directors on the other hand, may be resolved through legal proceedings in the courts. The Mandatory Provisions provide that such disputes should be submitted to arbitration at either the HKIAC or the CIETAC, at the claimant’s choice.

Withdrawal of the Statutory Reserve Fund

Under the PRC Company Law, where a joint stock limited company distributes its after-tax profit of the current year, it shall withdraw 10% of the profit as the company’s statutory reserve fund. There are no corresponding provisions under Hong Kong law.

Remedies of the Company

Under the PRC Company Law, if a director, supervisor or senior manager in carrying out his duties infringes any law, administrative regulation or the articles of association of a company, which results in damage to the company, that director, supervisor or senior manager should be responsible to the company for such damages. In addition, the Listing Rules require listed companies’ articles to provide for remedies of the company similar to those available under Hong Kong law (including rescission of the relevant contract and recovery of profits from a director, supervisor or senior manager).

Dividends

The company has the power in certain circumstances to withhold, and pay to the relevant tax authorities, any tax payable under PRC law on any dividends or other distributions payable to a shareholder. Under Hong Kong law, the limitation period for an action to recover a debt (including the recovery of dividends) is six years, whereas under PRC law, the relevant limitation period is three years. The company must not exercise its powers to forfeit any unclaimed dividend in respect of shares until after the expiry of the applicable limitation period.

Fiduciary Duties

In Hong Kong, there is the common law concept of the fiduciary duty of directors. Under the PRC Company Law, directors, supervisors and senior managers should be loyal and diligent. Under the Mandatory Provisions, directors, supervisors and senior managers are not permitted, without the knowledge and approval of the shareholders’ general meeting, to engage in any activities which compete with or damage the interests of their company.

Closure of Register of Shareholders

The Companies Ordinance requires that the register of shareholders of a company must not generally be closed for the registration of transfers of shares for more than 30 days (extendable to 60 days under certain circumstances) in a year, whereas, as required by the PRC Company Law and Mandatory Provisions, share transfers shall not be registered within 30 days before the date of a shareholders’ general meeting or within five days before the base date set for the purpose of distribution of dividends.

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LISTING RULES The Listing Rules provide additional requirements which apply to the Bank as an issuer incorporated in the PRC as a joint stock limited company and seeking a primary listing or whose primary listing is on the Hong Kong Stock Exchange. Set out below is a summary of the principal provisions containing the additional requirements which apply to the Bank.

Compliance Advisor A company seeking listing on the Hong Kong Stock Exchange is required to appoint a compliance advisor acceptable to the Hong Kong Stock Exchange for the period from its listing date up to the date of the publication of its financial results for the first full financial year commencing after the listing date. The compliance advisor should provide professional advice on continuous compliance with the Listing Rules and all other applicable laws and regulations, and act at all times, in addition to its two authorized representatives, as the principal channel of communication with the Hong Kong Stock Exchange. The appointment of the compliance advisor may not be terminated until a replacement acceptable to the Hong Kong Stock Exchange has been appointed. If the Hong Kong Stock Exchange is not satisfied that the compliance advisor is fulfilling its responsibilities adequately, it may require the company to terminate the compliance advisor’s appointment and appoint a replacement. The compliance advisor must keep the company informed on a timely basis of changes in the Listing Rules and any new or amended law, regulation or code in Hong Kong applicable to the company. It must act as the company’s principal channel of communication with the Hong Kong Stock Exchange if the authorized representatives of the company are expected to be frequently outside Hong Kong.

Accountant’s Report

The accountant’s report must normally be drawn up in conformity with: (1) Hong Kong Financial Reporting Standards; or (2) IFRS; or (3) China Accounting Standards for Business Enterprises (“CASBE”) in the case of a PRC issuer that has adopted CASBE for the preparation of its annual financial statements.

Process Agent

A listed company is required to appoint and maintain a person authorized to accept service of process and notices on its behalf in Hong Kong throughout the period during which its securities are listed on the Hong Kong Stock Exchange and must notify the Hong Kong Stock Exchange of his, her or its appointment, the termination of his, her or its appointment and his, her or its contact particulars.

Public Shareholding

If at any time there are existing issued securities of a PRC issuer other than foreign shares which are listed on the Hong Kong Stock Exchange, the Listing Rules require that the aggregate amount of H Shares and other securities held by the public must constitute not less than 25% of the PRC issuer’s issued share capital and that the class of securities for which listing is sought must not be less than 15% of the issuer’s total issued share capital, having an expected market

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Independent Non-executive Directors and Supervisors

Independent non-executive directors of a PRC issuer are required to demonstrate an acceptable standard of competence and adequate commercial or professional expertise to ensure that the interests of the listed company’s general body of shareholders will be adequately represented. Supervisors must have the character, expertise and integrity and be able to demonstrate the standard of competence commensurate with their position as supervisors.

Restrictions on Repurchase of Securities

Subject to governmental approvals and the articles of association of the company, a listed company may repurchase its own shares on the Hong Kong Stock Exchange in accordance with the provisions of the Listing Rules. Approval by way of a special resolution of the holders of class shares at separate class meetings conducted in accordance with the articles of association is required for share repurchases. In seeking approvals, a listed company is required to provide information on any proposed or actual purchases of all or any of its equity securities, whether or not listed or traded on the Hong Kong Stock Exchange. The director must also state the consequences (if any) of any purchases which will arise under either or both of the Codes on Takeovers and Mergers and Share Buy-backs issued by the SFC and/or any similar PRC law of which directors are aware. Any general mandate given to directors to repurchase shares must not exceed 10% of the total number of its issued shares.

Redeemable Shares

A listed company must not issue any redeemable shares unless the Hong Kong Stock Exchange is satisfied that the relative rights of its shareholders are adequately protected.

Pre-emptive Rights

Except in the circumstances mentioned below, directors are required to obtain approval by way of a special resolution of shareholders at general meeting, and the approvals by way of special resolutions of the holders of class shares (each being otherwise entitled to vote at general meetings) at separate class meetings conducted in accordance with and as required by the articles of association, prior to authorizing, allotting, issuing or granting shares or securities convertible into shares, options, warrants or similar rights to subscribe for any shares or such convertible securities.

No such approval will be required under the Listing Rules unless (i) the existing shareholders have by special resolution in general meeting given a mandate to the board of directors, either unconditionally or subject to such terms and conditions as may be specified in the resolution, to authorize, allot or issue, either separately or concurrently once every 12 months, not more than 20% of each of the existing issued domestic shares and H shares as of the date of the passing of the relevant special resolution, or (ii) such shares are issued as part of the company’s plan at the time of its establishment to issue domestic shares and H shares and which plan is implemented within 15 months from the date of approval by the securities regulatory authority of the State Council.

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Supervisors

A company listed or seeking a listing on the Hong Kong Stock Exchange is required to adopt rules governing dealings by the supervisors in securities of the company in terms no less exacting than those of the model code set out in Appendix 10 to the Listing Rules issued by the Hong Kong Stock Exchange.

A PRC issuer is required to obtain the approval of its shareholders at a general meeting (at which the relevant supervisor and his associates must abstain from voting on the matter) prior to the company or any of its subsidiaries entering into a service contract of the following nature with a supervisor or proposed supervisor of the company or any of its subsidiaries: (i) the term of the contract exceeds three years; or (ii) the contract expressly requires the company (or its subsidiaries) to give more than one year’s notice or to pay compensation or make other payments equivalent to the remuneration more than one year in order for it to terminate the contract.

The nomination and remuneration committee of the listed company or an independent board committee must form a view in respect of service contracts that require shareholders’ approval and advise shareholders (other than shareholders with a material interest in the service contracts and their associates) as to whether the terms are fair and reasonable, advise whether such contracts are in the interests of the listed company and its shareholders as a whole and advise shareholders on how to vote.

Amendment to Articles of Association

A PRC issuer may not permit or cause any amendment to be made to its articles of association which would contravene the PRC Company Law, the Mandatory Provisions and the Listing Rules.

Documents available for Inspection

A PRC issuer is required to make available at a place in Hong Kong for inspection by the public and shareholders free of charge, and for copying by its shareholders at reasonable charges of the following:

(i) a complete duplicate register of shareholders;

(ii) a report showing the state of the issuer’s issued share capital;

(iii) the issuer’s latest audited financial statements and the reports of the directors, auditors and supervisors, if any, thereon;

(iv) special resolutions;

(v) reports showing the number and nominal value of securities repurchased by the issuer since the end of the last financial year, the aggregate amount paid for such securities and the maximum and minimum prices paid in respect of each class of securities repurchased (with a breakdown between class shares);

(vi) a copy of the latest annual return filed with the SAIC or other competent PRC authority; and

(vii) for shareholders only, copies of minutes of shareholders’ general meetings.

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Receiving Agents Under Hong Kong law, a PRC issuer is required to appoint one or more receiving agents in Hong Kong and pay to such agent(s) dividends declared and other monies owed in respect of the H shares to be held, pending payment, in trust for the holders of such H shares.

Statements in Share Certificates A PRC issuer is required to ensure that all of its listing documents and share certificates include the statements stipulated below and to instruct and cause each of its share registrars not to register the subscription, purchase or transfer of any of its shares in the name of any particular holder unless and until such holder delivers to the share registrar a signed form in respect of such shares bearing statements to the following effect, that the acquirer of shares: (i) agrees with the company and each shareholder, and it agrees with each shareholder, to observe and comply with the PRC Company Law, the Special Regulations and its articles of association; (ii) agrees with the company, each shareholder, director, supervisor, manager and other senior managers and it (acting both for the company and for each director, supervisor, manager and other senior managers) agrees with each shareholder to refer all differences and claims arising from the articles of association or any rights or obligations conferred or imposed by the PRC Company Law or other relevant laws and administrative regulations concerning its affairs to arbitration in accordance with the articles of association. Any reference to arbitration shall be deemed to authorize the arbitration body to conduct hearings in open session and to publish its award. Such arbitration shall be final and conclusive; (iii) agrees with the company and each shareholder that shares are freely transferable by the holder thereof; and (iv) authorizes the company to enter into a contract on his behalf with each director and senior manager whereby such directors and senior managers undertake to observe and comply with their obligations to shareholders as stipulated in the articles of association.

Legal Compliance A PRC issuer is required to observe and comply with the PRC Company Law, the Special Regulations and its articles of association.

Contract between the PRC Issuer and Directors, Senior Managers and Supervisors A PRC issuer is required to enter into a contract in writing with every director and senior manager containing at least the following provisions: (i) an undertaking by the director or senior manager to itself to observe and comply with the PRC Company Law, the Special Regulations, its articles of association, the Codes on Takeovers and Mergers and Share Buy-back and an agreement that it must have the remedies provided in its articles of association and that neither the contract nor his office is capable of assignment; (ii) an undertaking by the director or senior manager to it acting as agent for each shareholder to observe and comply with his obligations to the shareholders as stipulated in the articles of association; and

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(iii) an arbitration clause which provides that whenever any differences or claims arise from the contract, the articles of association or any rights or obligations conferred or imposed by the PRC Company Law or other relevant law and administrative regulation concerning affairs between the company and its directors or senior managers and between a holder of H shares and a director or senior manager, such differences or claims will be referred to arbitration at either the CIETAC in accordance with its arbitration rules or the HKIAC in accordance with its Securities Arbitration Rules, at the election of the claimant and that once a claimant refers a dispute or claim to arbitration, the other party shall submit to the arbitral body elected by the claimant. Such arbitration shall be final and conclusive. If the party seeking arbitration elects to arbitrate the dispute or claim at HKIAC, then either party may apply to have such arbitration conducted in Shenzhen, according to the Securities Arbitration Rules of the HKIAC. PRC laws shall govern the arbitration of disputes or claims referred to above, unless otherwise provided by law or administrative regulations. The award of the arbitral body is final and shall be binding on the parties thereto. Disputes over who is a shareholder and over the share register do not have to be resolved through arbitration.

A PRC issuer is also required to enter into a contract in writing with every supervisor containing statements in substantially the same terms.

Subsequent Listing

A PRC issuer must not apply for the listing of its H shares on a PRC stock exchange unless the Hong Kong Stock Exchange is satisfied that the relative rights of the holders of its H shares are adequately protected.

English Translation

All notices or other documents required under the Listing Rules to be sent by a PRC issuer to the Hong Kong Stock Exchange or to holders of the H shares are required to be in English, or accompanied by a certified English translation.

General

If any change in the PRC law or market practices materially alters the validity or accuracy of any basis upon which the additional requirements have been prepared, the Hong Kong Stock Exchange may impose additional requirements or make listing of H shares by a PRC issuer subject to special conditions as the Hong Kong Stock Exchange may consider appropriate. Whether or not any such changes in the PRC law or market practices occur, the Hong Kong Stock Exchange retains its general power under the Listing Rules to impose additional requirements and make special conditions in respect of any company’s listing.

OTHER LEGAL AND REGULATORY PROVISIONS

Upon the listing on the Hong Kong Stock Exchange, the provisions of the SFO, the Codes on Takeovers and Mergers and Share Buy-back and such other relevant ordinances and regulations will apply to a PRC issuer.

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SECURITIES ARBITRATION RULES

The Securities Arbitration Rules of the HKIAC contain provisions allowing, upon application by any party, an arbitral tribunal to conduct a hearing in Shenzhen for cases involving the affairs of companies incorporated in the PRC and listed on the Hong Kong Stock Exchange so that PRC parties and witnesses may attend. Where any party applies for a hearing to take place in Shenzhen, the tribunal shall, where satisfied that such application is based on bona fide grounds, order the hearing to take place in Shenzhen conditional upon all parties, including witnesses and the arbitrators, being permitted to enter Shenzhen for the purpose of the hearing. Where a party, other than a PRC party, or any of its witnesses or any arbitrator is not permitted to enter Shenzhen, then the tribunal shall order that the hearing be conducted in any practicable manner, including the use of electronic media. For the purpose of the Securities Arbitration Rules, a PRC party means a party domiciled in the PRC other than the territories of Hong Kong, Macau and Taiwan.

Any person wishing to have detailed advice on PRC laws or the laws of any jurisdiction is recommended to seek independent legal advice.

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Set out below is a summary of the principal provisions of our Articles, the principal objective of which is to provide investors with an overview of our Articles. For the definition of “substantial shareholder” referred in this section, please see “Risk Factors – Investments in commercial banks in China are subject to restrictions that may adversely affect the value of your investment.” As the information contained below is in summary form, it does not contain all the information that may be important to potential investors. Copies of the full English and Chinese texts of our Articles are available for inspection as mentioned in “Appendix VIII – Documents Delivered to the Registrar of Companies and Available for Inspection”. Our Articles were adopted by our Shareholders at the Shareholders’ general meeting for 2017 on May 30, 2018, and were approved by CBRC Sichuan Office on August 10, 2018. Our Articles will become effective from the date on which our H Shares are [REDACTED]onthe Hong Kong Stock Exchange.

POWER OF DIRECTORS AND OTHER SENIOR MANAGEMENT TO ALLOT AND ISSUE SHARES There is no provision in our Articles empowering the Directors to allot and issue shares. To increase the capital of the Bank, the proposal must be approved at a Shareholders’ general meeting and submitted to regulatory institution for approval.

POWER TO DISPOSE OF THE ASSETS OF THE BANK OR ANY SUBSIDIARY COMPANY For the disposal of any fixed assets by the Board, if the aggregate of the expected value of the fixed assets proposed to be disposed of and the value of the fixed assets which had been disposed of within four (4) months immediately preceding such proposal for disposal exceeds 2% of the fixed assets value shown in the most recent balance sheet reviewed at a Shareholders’ general meeting, the Board shall not dispose of or approve of the disposal of such fixed assets without the approval of the Shareholders at a Shareholders’ general meeting. The disposal of fixed assets referred to in this paragraph includes the transfer of interests of certain assets, but excludes the provision of fixed assets as pledges to any guarantees. Any breach of the above paragraph shall not affect the validity of any transaction entered into by the Bank in disposing of fixed assets.

EMOLUMENTS AND COMPENSATION FOR LOSS OF OFFICE The Bank shall enter into written contracts with the Directors and the Supervisors regarding remuneration which are subject to the prior approval from the Shareholders’ general meeting. The aforesaid “remunerations” include: (1) remunerations for the Directors, Supervisors or senior management personnel of the Bank; (2) remunerations for the Directors, Supervisors or senior management personnel of the subsidiary companies of the Bank; (3) remunerations for those providing other services for managing the Bank and its subsidiary companies; and (4) compensation to Directors or Supervisors for loss of their office or upon retirement. Except for the contracts mentioned above, the Directors and Supervisors shall not initiate litigation against the Bank and claim benefits due to them for above matters.

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The remuneration contracts between the Bank and its Directors or Supervisors shall stipulate that if the Bank is acquired, the Directors and Supervisors of the Bank shall, subject to prior approval from the Shareholders’ general meeting, be entitled to compensation or other funds for loss of their positions or upon retirement. The “acquisition of the Bank” mentioned in this paragraph refers to one of the following circumstances: (1) a takeover offer made by any person to all Shareholders; (2) a takeover offer made by any person with the intent of becoming the controlling shareholder. Please see the meaning of “controlling shareholder” in “– Rights of Minority Shareholders”. If the Directors and Supervisors concerned do not comply with the preceding provision, any funds received by them shall go to the persons who have accepted the offer mentioned above and sell their shares. The Directors and Supervisors shall bear the expenses arising from the distribution of such amounts proportionally, and such expenses shall not be deducted from the amounts.

LOANS TO DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT The Bank shall not, directly or indirectly, provide any loan or loan guarantee to the Directors, Supervisors, President or other senior management personnel of the Bank or its parent company, nor shall the Bank provide the same to their connected persons. The preceding paragraph shall not apply in the following circumstances: (1) loans or loan guarantees provided by the Bank to its subsidiary banks (subsidiary companies); (2) loans, loan guarantees or other funds provided by the Bank to the Directors, Supervisors, President or other senior management personnel of the Bank pursuant to their employment contracts which were adopted by the Shareholders’ general meeting, so that the foregoing persons can make payments in the interests of the Bank or for the expenses incurred in performing their duties and responsibilities for the Bank; (3) loans and loan guarantees provided by the Bank to the relevant Directors, Supervisors, President, senior management personnel of the Bank and their connected persons, provided that the loans and loan guarantees are provided on normal commercial terms and conditions. If the Bank provides a loan in breach of the provision above, regardless of the terms of the loan the person who has received the loan shall repay it immediately. The Bank shall not be forced to perform the loan guarantee it provides in breach of the provision above, except in the following circumstances: (1) the loan provider does not know that it has provided the loan to the connected persons of the Directors, Supervisors, President and other senior management personnel of the Bank or its parent company; (2) the collateral provided by the Bank has been legally sold by the loan provider to a goodwill buyer. The guarantee as referred to in the preceding articles includes the act of the guarantor to assume the liability or provide assets to secure the performance of obligations by the obligor.

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FINANCIAL ASSISTANCE FOR THE ACQUISITION OF SHARES IN OUR BANK The Bank (including its branches and sub-branches) or its subsidiary companies shall not offer any financial assistance at any time by any means to purchasers or prospective purchasers who will or who wish to purchase the Bank’s shares. The aforementioned purchasers shall include both persons who have directly or indirectly assumed obligations due to purchasing the Bank’s shares. The Bank (including its branches and sub-branches) or its subsidiary companies shall not offer any financial assistance at any time by any means in order to reduce or relieve the obligations of the aforesaid obligors. The foregoing requirements shall not apply to the situation as mentioned in Article 42 of our Articles. “Financial assistance” referred to in our Articles for these purposes shall include, without limitation, the following means: (1) financial assistance given by gifts; (2) financial assistance given by guarantee (including the assumption of liability by the guarantor or the provision of assets by the guarantor to secure the performance of obligations by the obligor), indemnity (other than an indemnity in respect of the Bank’s neglect or default) or the release or waiver of any rights; (3) the provision of loans or the entrance into any agreement under which the obligations of the Bank are to be fulfilled before the obligations of another party, and a change in the parties to, or the novation of, or the assignment of rights arising under such loans or agreement; (4) any other form of financial assistance given by the Bank when the Bank is insolvent, has no net assets, or when its net assets would be reduced to a material extent as a result of such financial assistance. The “obligations” referred to in our Articles shall include the obligations of an obligor which have arisen by making an agreement or arrangement (regardless of whether the aforesaid agreement or arrangement is enforceable, or whether such obligations are assumed by the obligor individually or jointly with any other person) or any obligations that arise out of changes made in any other way to the obligor’s financial condition. Without prejudice to laws and administrative regulations, the acts listed below are not prohibited by Article 40 of our Articles: (1) the financial assistance provided by the Bank is either genuinely for the interests of the Bank and the main purpose of the financial assistance is not to purchase shares of the Bank, or the financial assistance is an incidental part of the Bank’s overall plans; (2) the lawful distribution of the Bank’s assets in the form of dividends; (3) the distribution of dividends in the form of shares; (4) the reduction of registered capital, repurchase of shares, and adjustment of shareholding structure, etc. in accordance with our Articles; (5) the provision of a loan by the Bank within its scope of business and in the ordinary course of business (provided that this does not lead to a reduction in the net assets of the Bank or that if this causes a reduction, the financial assistance is taken from the Bank’s distributable profits);

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(6) the provision of funds by the Bank for an employee shareholding scheme (provided that this does not lead to a reduction in the net assets of the Bank or that if this causes a reduction, the financial assistance is taken from the Bank’s distributable profits).

DISCLOSURE OF INTERESTS IN CONTRACTS WITH OUR BANK The Directors, Supervisors, President and other senior management personnel of the Bank having any direct or indirect material conflict of interests in any executed or proposed contracts, transactions or arrangements (except the employment contracts between the Bank and its Directors, Supervisors, President and other senior management personnel), regardless of whether such interests are usually subject to the approval or consent of the Board, such persons shall disclose the nature and extent of the conflict of interests to the Board as soon as possible. Unless the Directors, Supervisors, President and other senior management personnel of the Bank with conflict of interests have disclosed their interests to the Board in accordance with the requirements of the preceding paragraph, and the Board has approved the matter at the meeting without counting the interested persons into the quorum and without their participation in the vote, the Bank shall have the right to rescind such contracts, transactions or arrangements, except in circumstances where the counterparty is acting in good faith and unaware that the Directors, Supervisors, President and other senior management personnel are in breach of their obligations. If the connected persons of a Director, Supervisor, President and other senior management personnel of the Bank have any conflict of interests with any contracts, transactions or arrangements, the Director, Supervisor and senior management personnel shall be deemed to have a conflict of interests as well. Before the Bank considers entering into contracts, transactions or arrangements for the first time, and if the interested Directors, Supervisors, President and other senior management personnel of the Bank have provided a written notice to the Board stating that they have a conflict of interests in the contracts, transactions or arrangements which would be entered into by the Bank in the future for the reasons set out in the notice, then the Director, Supervisor, President and other senior management personnel concerned shall be deemed to have made the disclosure as required above to the extent as set out in the notice. When the conditions are met, the Bank may, upon approval by the Shareholders’ general meeting, establish a professional liability insurance system for Directors, Supervisors, President and other senior management personnel and make an appropriate insurance arrangement against any possible legal actions.

REMUNERATION The remunerations of Directors must be approved at a Shareholders’ general meeting. Please see “– Emoluments and Compensation for Loss of Office”.

APPOINTMENT, REMOVAL AND RETIREMENT The Board of the Bank is composed of executive Directors and non-executive Directors (including independent Directors). Executive Directors are Directors who hold other senior management position at the Bank in addition to director. Non-executive Directors are Directors who hold no management position at the Bank. The Board of the Bank shall be composed of eleven (11) to fifteen (15) Directors, including a chairman. In particular, the independent Directors shall account for no less than one third of the total number of Directors and the number of independent Directors shall be no less than three (3), and there shall be one (1) employee Director at least.

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The Board shall have one chairman who shall be elected by more than half of all Directors after regional parties, substantial Shareholders and banking regulatory authorities under the State Council reach a consensus on the chairman candidate upon communication and the chairman candidate is elected as a director by resolution of the Shareholders’ general meeting. The positions of the chairman and the President of the Bank shall be separated. Regarding Directors and Supervisors elected and replaced at the Shareholders’ general meeting, the preceding Board and the Board of Supervisors may individually nominate candidates for Directors and Supervisors according to the number of Directors and Supervisors to be elected to the extent of the number specified by our Articles; Shareholders individually or jointly holding above 3% of the Bank’s total shares in issue with voting rights may nominate candidates for Directors or Supervisors to the Board, Board of Supervisors or other convenor of the Shareholders’ general meeting, but the number of nominees shall comply with our Articles and shall not exceed the number of Directors or Supervisors to be elected. The Board or Shareholders individually or jointly holding above 1% of the Bank’s shares in issue with voting rights may nominate candidates for independent Directors to the Board, who shall be elected by a Shareholders’ general meeting; a Shareholder and connected Shareholder may only nominate either one candidate for independent Director or one candidate for external Supervisor at one time. Shareholders who have nominated candidates for Directors shall not nominate candidates for independent Directors. The term of service of an independent Director shall be the same as that of other Directors of the Bank and may be re-elected and re-appointed upon the expiration of the term of office, provided that such term of office shall not be more than six years on an accumulative basis. A Shareholder or his connected party shall not nominate candidates for Directors and Supervisors at the same time; where a candidate for Director (Supervisor) nominated by a Shareholder or his connected party is approved to sit on the Board, the Shareholder shall not nominate any candidate for Director (Supervisor) until the term of office of the Director (Supervisor) expires or the Director (Supervisor) is replaced; and, generally, the number of candidates for Directors or Supervisors nominated by a Shareholder and his connected party shall not exceed one third of the number of members of the Board or the Board of Supervisors, except as otherwise prescribed by laws, administrative regulations, departmental rules, listing rules of the stock exchange where our securities are listed. The qualification of Directors, Supervisors and senior management shall comply with the requirements under laws, administrative regulations, departmental rules, regulatory documents, requirements of relevant regulatory authorities and our Articles. Directors and senior management shall be subject to qualification examination and approval by the banking regulatory authorities under the State Council pursuant to foregoing requirements. No person shall hold the position of Director, Supervisor and senior management personnel of the Bank in one of the following circumstances: (1) a person without or with limited capacity for civil conduct; (2) a person who has been penalized or sentenced due to corruption, bribery, embezzlement, appropriation of property or the disruption of the socialist market economy, and five (5) years have not elapsed from which the punishment or deprivation of political rights for the crimes committed was carried out; (3) a Director, factory Director or manager of companies or enterprises which were bankrupted and liquidated due to bad operation, whereby such person was personally liable for the bankruptcy of such companies or enterprises, and three (3) years have not elapsed from which the liquidation of the company or enterprise was completed;

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(4) a legal representative of companies or enterprises which have had their business licenses revoked and the business of such companies or enterprises were compulsorily closed down due to a violation of laws in which such person was personally liable, and three (3) years have not elapsed from which the business license of the company or enterprise was revoked; (5) a person or his spouse with relatively large amounts of due and outstanding debt or who is engaged in high-risk investments obviously in excess of his family property affordability; (6) a person under a penalty of prohibited access to the securities market imposed by the securities regulatory authorities under the State Council, which penalty is still effective, or under investigation by judicial authorities for suspected violations of criminal law and the investigation is still ongoing; (7) a person dismissed by other commercial banks or organizations due to non- performance of fiduciary duties or disciplinary offences; (8) a Shareholder or person in a Shareholders’ institution whose loans from the Bank (excluding bank deposits or loans pledged with treasury bonds) exceed the audited net book value of the shares held by him in the previous year; (9) a person or enterprise employee with due and outstanding loans at the Bank; (10) a person within his term of office or who is disqualified for life from being Director and senior management personnel by the financial regulatory authorities; (11) a person who breaches the honesty principle by providing false documents in fulfilling his duties; (12) a person who has an obvious conflict of interest with duties of Director or senior management personnel to be appointed; (13) a person whose act is in violation of social morality, causing bad influences; (14) a non-natural person; (15) a person judged by the relevant competent authorities as having violated the provisions of relevant securities laws and regulations, the violation involves fraudulent or dishonest acts, and less than five (5) years have elapsed since the ruling; (16) other persons banned from holding the position as stipulated by the law, administrative regulations, departmental rules, regulatory documents, relevant rules of the securities regulatory authorities in the locality in which the securities of the Bank are listed or other relevant regulatory authorities and our Articles. Any election, appointment or employment of Directors, Supervisors and senior management personnel in violation of this paragraph shall be invalid. The Bank shall dismiss any Director, Supervisor and senior management personnel if he is involved in the circumstances of this provision during his term of office. The validity of any act by a Director, President or other senior management personnel made on behalf of the Bank towards a third party acting in good faith shall not be affected by any non-compliance in regulations of that person’s position, election procedure or qualifications.

CREDIT POWERS Our Articles do not specifically provide for the manner in which borrowing powers may be exercised nor do they contain any specific provision in respect of the manner in which such borrowing powers may be amended.

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AMENDMENTS TO THE ARTICLES OF OUR BANK In any of the following circumstances, our Bank shall amend the Articles: (1) if upon amendments to the Company Law, PRC Commercial Banking Law, PRC Banking Supervision and Regulatory Law, Hong Kong Listing Rules or relevant laws and administrative regulations, any terms contained in our Articles become inconsistent with the provisions of the amended laws and administrative regulations; (2) a change in the Bank causes inconsistence with those contained in our Articles; (3) a resolution being passed by the Shareholders’ general meeting to amend our Articles. Any amendments to be made to our Articles pursuant to a resolution of the Shareholders’ general meeting shall be subject to the approval of the competent authorities, and shall obtain the approval of the competent authorities; if the amendment to the Articles involves any content of Mandatory Provisions, the said amendment shall be subject to approval by the company examination and approval authority authorized by the State Council and the securities regulatory authorities under the State Council; if registration matters are involved, the Bank shall apply for registration of the changes in accordance with the law.

CHANGE OF RIGHTS OF EXISTING SHARES OR CLASSES OF SHARES If the Bank proposes to change or nullify certain rights of a certain class of Shareholders, this proposal should be passed by a special resolution at the Shareholders’ general meeting and passed at the meeting convened according to our Articles for the related class of Shareholders. The rights of a certain class of Shareholders shall be deemed to be changed or nullified in the following circumstances: (1) to increase or reduce in the quantity of the shares of that class, or increase or reduce the quantity of the shares of other class which enjoy the same or more voting rights, distribution rights or other privileges as compared with shares of that class; (2) to convert part or whole of the shares of that class into other class(es), convert part or whole of the shares of other class(es) into that class, or grant such conversion rights; (3) to nullify or reduce the rights of that class of shares to receive payable dividends or cumulative dividends; (4) to reduce or nullify the privileged rights of that class of shares to acquire dividends or obtain distribution of assets during liquidation of the Bank; (5) to increase, nullify or reduce the conversion, option, voting, transfer or privileged allotment rights of that class of shares or the rights of such class of shares to obtain securities issued by the Bank; (6) to nullify or reduce the rights of that class of shares to receive amounts payable by the Bank in a particular currency; (7) to establish new class(es) of shares which enjoy the same or more voting rights, distribution rights or other privileges as compared with that class of shares; (8) to restrict the transfer and ownership of that class of shares, or increase the restrictions;

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(9) to grant the share subscription options or share conversion options of that or another class of shares; (10) to increase the rights or privileges of other class(es) of shares; (11) any restructuring scheme of the Bank that may result in the assumption of disproportionate responsibilities by different classes of Shareholders during the restructuring; (12) to revise or nullify the provisions in our Articles. Where issues specified in (2) to (8), (11) to (12) of the preceding provisions are involved, the affected class Shareholders, whether or not they are entitled to vote at the Shareholders’ general meeting originally, shall have the right to vote at the meeting for a certain class of Shareholders. However, the interested Shareholders shall have no voting rights at the meeting for such class of Shareholders. A resolution of the meeting for a certain class of Shareholders shall be adopted by above two-thirds of the voting shares represented by Shareholders of that class present at the meeting in accordance with our Articles. When convening a meeting for a certain class of Shareholders, the Bank shall issue a written notice, forty-five (45) days prior to the date of the meeting, to all Shareholders in the relevant class whose names appear on the register of Shareholders, stating the matters to be considered at the meeting and the date and venue of the meeting. The notice of a meeting for a certain class of Shareholders only needs to be delivered to the Shareholders entitled to vote at that meeting. The procedures for convening a meeting for a certain class of Shareholder shall be the same as the procedures for the Shareholders’ general meeting to the extent practical, and the provisions in our Articles relating to the procedure to convene a Shareholders’ general meeting shall apply to the meeting for class Shareholders. Apart from other classes of Shareholders, the holders of domestic shares and overseas listed foreign shares are deemed to be Shareholders of different classes. The special voting procedure at a Shareholders’ general meeting for class Shareholders shall not apply for the following cases: (1) upon the approval by way of a special resolution passed by a Shareholders’ general meeting, the Bank independently or simultaneously issues domestic shares and/or overseas listed foreign shares every twelve (12) months, provided that the amount of each class of shares intended to be issued is not more than 20% of the issued and outstanding shares of the respective class; (2) the Bank’s plan on issuing domestic shares and overseas listed foreign shares at the time of incorporation is completed within fifteen (15) months upon the date of approval from the CSRC; (3) the relevant regulatory authorities such as banking regulatory authorities under the State Council and securities regulatory authorities under the State Council have given approval for the holders of domestic shares of the Bank to convert the unlisted shares held by them into overseas listed shares and list such shares in overseas stock exchanges.

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For the purposes of the class rights provisions of our Articles, the meaning of “interested Shareholders” is:

(1) if the Bank has made a repurchase tender offer to all Shareholders in the same proportion in accordance with our Articles or has repurchased its own shares through public transaction on a stock exchange, “interested Shareholders” shall mean the “controlling Shareholders” as defined in our Articles;

(2) if the Bank has repurchased shares under an off-market agreement in accordance with our Articles, “interested Shareholders” shall mean Shareholders who are connected with the aforementioned agreement;

(3) under a restructuring scheme of the Bank, “interested Shareholders” shall mean Shareholders who assume liability in a lower proportion than other Shareholders of the same class, or those who own different interests as compared with other Shareholders of the same class.

RESOLUTIONS – MAJORITY REQUIRED

The resolutions of a Shareholders’ general meeting shall either be classified as ordinary resolutions or special resolutions.

If an ordinary resolution is made at a Shareholders’ general meeting, Shareholders holding no less than half of the total shares of the Bank shall attend the meeting and the resolution shall be approved by no less than two-thirds of voting rights held by the Shareholders (including their proxies) attending the meeting.

If a special resolution is made at a Shareholders’ general meeting, Shareholders holding two-thirds of the total shares of the Bank shall attend the meeting and the resolution shall be approved by no less than two-thirds of voting rights held by the Shareholders (including their proxies) attending the meeting.

VOTING RIGHTS

A Shareholder (including his/her proxy) shall exercise his/her voting rights based on the number of shares held. Each share shall have one (1) vote. Shares held by the Bank have no voting rights.

Voting at a Shareholders’ general meeting shall be taken by way of registered poll, save for resolutions on procedures for Shareholders’ general meeting or administrative matters which can be resolved on by the presider of the meeting based on the principle of honesty and voted on by a show of hands.

On a poll taken at a meeting, a Shareholder (including his/her proxies) entitled to above two (2) votes need not cast all the votes towards the same stance.

REQUIREMENT FOR ANNUAL GENERAL MEETINGS

The annual general meeting shall be held once a year within six (6) months after the previous financial year end. If the annual general meeting needs to be postponed for special reasons, a report shall be made to the banking regulatory authorities under the State Council at the location of the Bank and reasons for postponement shall be given.

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ACCOUNTS AND AUDIT The Bank shall formulate its financial accounting system in accordance with the laws, regulations and the provisions of relevant regulatory authorities in the PRC. The Board of our Bank has an Audit Committee, which shall consist of no less than three members, and persons-in-charge shall be independent Directors. All members of the Audit Committee shall be non-executive Directors, with one member having the appropriate qualifications as provided for in the Hong Kong Listing Rules or an independent Director having the appropriate accounting or relevant financial expertise at least. The Bank shall prepare its financial statements in accordance with PRC accounting standards and regulations; as well as in accordance with international accounting standards or the accounting standards of the overseas listing place. If there are any material differences between the financial statements prepared in accordance with the two accounting standards, such differences shall be stated in the notes to the financial statements. When distributing the after-tax profits for the relevant financial year, the Bank shall adopt the one with the lower after-tax profits out of the aforesaid two financial statements. Our Bank shall publish its financial report twice each financial year, i.e. publish the interim financial report within 60 days after the end of the first six months of each financial year and publish its annual financial report within 120 days after the end of each financial year. The interim results or financial data announced or disclosed by the Bank shall be prepared in accordance with the PRC accounting standards and regulations as well as the international accounting standards or the accounting standards of the overseas listing place. The financial accounting statements of our Bank shall be made available at the principal place of business of the Bank 20 days or earlier before the convening of the annual general meeting for inspection by Shareholders. Each Shareholder of our Bank shall be entitled to obtain the financial reports mentioned in our Articles. Except as otherwise provided in our Articles, the Bank shall send the aforesaid report or report of the Board along with the balance sheet (including each document that should be attached to the balance sheet according to laws) and income statement or income and expenditure statement, or report on financial highlights to each holder of overseas listed foreign shares by hand or pre-paid post at least twenty-one (21) days prior to the convening of the annual general meeting. The address of the recipients shall be the address registered in the register of H Shareholders.

NOTICE OF MEETINGS AND BUSINESS TO BE CONDUCTED THEREAT There are two types of Shareholders’ general meetings: annual general meetings and extraordinary general meetings. The Board shall convene an extraordinary general meeting within two (2) months from the date of occurrence of any of the following events: (1) the number of Directors is less than the minimum number required by the Company Law or less than two-thirds of the number stipulated in our Articles; (2) the outstanding loss of the Bank is at least one-third of the Bank’s total paid-up share capital; (3) shareholders who individually or jointly hold above 10% of the voting shares of the Bank have requested to convene the meeting in writing;

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(4) the Board deems it necessary to convene the meeting; (5) the Board of Supervisors proposes to convene the meeting; (6) above half of the independent Directors propose to convene the meeting; (7) the chairman of the Board or the President proposes to convene the meeting in special circumstances; (8) above half of the external Supervisors propose to convene the meeting (if there are only two external Supervisors, then the two external Supervisors unanimously propose to convene); (9) any other circumstances as stipulated by the laws, administrative regulations, other rules or our Articles. Regarding the circumstance in (2) above, the time limit for convening an extraordinary general meeting shall start from the date when the Bank knows about the occurrence of the circumstance. The shareholding in above item (3) shall be the one on the date that Shareholders raise a request in written. When the Bank is to convene a Shareholders’ general meeting, the conveners shall issue a written notice, forty-five (45) days prior to the date of the meeting, to all Shareholders whose names appear on the register of Shareholders, stating the matters to be considered at the meeting and the date and venue of the meeting. Shareholders who wish to attend the Shareholders’ general meeting shall provide a written reply of attendance to the Bank twenty (20) days before the Shareholders’ general meeting is convened. The Bank shall calculate the proportion of voting shares held by Shareholders who wish to attend the meeting based on the written replies received twenty (20) days before the Shareholders’ general meeting. Where the proportion of voting shares held by Shareholders who wish to attend the meeting reaches above half of the total voting shares of the Bank, the Bank will convene the Shareholders’ general meeting. If this threshold is not met, the Bank shall inform the Shareholders within five (5) days via an announcement stipulating the matters to be considered and the venue and date of the meeting. Once this announcement is made, the Bank may then proceed to convene the Shareholders’ general meeting. An extraordinary general meeting shall not resolve on matters not specified in the notice. The notice of a Shareholders’ general meeting shall meet the following requirements: (1) be made in writing; (2) specify the date, venue and duration of the meeting and deadline for voting on proposals; (3) state matters to be discussed at the meeting; (4) provide all necessary information and explanation to enable Shareholders to make informed decisions on the matters to be discussed. This means that when the following matters, which shall include, but shall not be limited to: any merger, share repurchase, share capital reorganization or any proposals relating to change in the structure of the Bank are involved, the detailed terms and agreement (if any) of the proposed transaction and detailed explanation as to the cause and effect of such a proposed transaction shall be provided;

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(5) if any of the Directors, Supervisors, President or other senior management have material interest in the matters to be discussed, they shall disclose the nature and extent of such interest; and if the matters to be discussed have a different effect on a Director, Supervisor, President or other senior management as Shareholders compared to other Shareholders of that same class, they shall explain this difference; (6) specify the full text of any proposed special resolution to be adopted at the meeting; (7) state clearly that a Shareholder entitled to attend and vote at the meeting, is entitled to appoint one or more proxies to attend and vote on his/her behalf, and such proxies need not be a Shareholder, and be attached with a power of attorney for authorizing the proxies; (8) specify the time and address for serving the power of attorney for voting at the meeting; (9) specify the shareholding registration date of the Shareholders who are entitled to attend the meeting; (10) specify the name and phone number of the contact person of the meeting; (11) other requirements specified by laws, regulations, relevant regulatory authorities, Hong Kong Listing Rules and our Articles. Unless otherwise stipulated by the laws, regulations, the provisions of the relevant regulatory authorities as well as our Articles, the notice of a Shareholders’ general meeting shall be delivered by hand or prepaid mail to all Shareholders (regardless of whether they have voting rights at the Shareholders’ general meeting). The address of the recipients shall be the address registered in the register of Shareholders. For holders of domestic shares, the notice of a Shareholders’ general meeting may be in the form of an announcement. The aforesaid announcement shall be published in one or more newspapers specified by the securities regulatory authorities under the State Council between the forty-five (45) to fifty (50) day interval prior to the date when the meeting is convened. All holders of domestic shares shall be deemed as having been notified of the forthcoming Shareholders’ general meeting once the announcement is published. For holders of overseas listed foreign shares who meet the requirements of laws, administrative regulations and the securities regulatory authorities in the locality in which the securities of the Bank are listed, the notice may be in the form of an announcement published on the website of the Bank, website of the Hong Kong Stock Exchange and other websites specified by the Hong Kong Listing Rules from time to time. If the securities regulatory authorities in the locality in which the securities of the Bank are listed provide otherwise, such provisions shall prevail. The Shareholders’ general meeting shall be an organ of power of the Bank and shall exercise the following powers in accordance with the law: (1) to decide on the business policies and investment plans of the Bank; (2) to elect and replace Directors and Supervisors which are not appointed as representatives of the employees and to decide on the remuneration of the relevant Directors and Supervisors; (3) to examine and approve reports made by the Board;

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(4) to examine and approve reports made by the Board of Supervisors; (5) to examine and approve the Bank’s annual financial budgets and final accounts; (6) to examine and approve the Bank’s profit distribution plan and loss recovery plan; (7) to resolve on the increase or reduction in the Bank’s registered capital; (8) to resolve on the issuance of bonds or other securities or listing of the Bank; (9) to resolve on the merger, division, dissolution, liquidation or change in corporate form of the Bank; (10) to amend our Articles; (11) to examine and approve the report of evaluation by the Board of Supervisors on the Directors and by the independent Directors on each other and report of evaluation by the Board of Supervisors on the Supervisors and by the external Supervisors on each other; (12) to listen to the report of the Board on the supervision opinions of the financial regulators for the Bank and examine the execution of reform by the Bank; (13) to examine the equity incentive scheme; (14) to examine proposals raised by the Shareholders who individually or jointly hold above 3% of the total shares of the Bank; (15) to examine the Rules of Procedure for General Meetings, Rules of Procedure for Board Meetings and Rules of Procedure for Meetings of the Board of Supervisors; (16) to examine and approve the Bank’s equity investment business; (17) to examine and approve the Bank’s guarantee businesses including external guarantee and letter of guarantee; (18) to examine and approve the Bank’s fixed asset purchase business; (19) to examine and approve the Bank’s disposal and write-off of non-performing assets; (20) to examine and approve the Bank’s pledge of assets; (21) to examine and approve the application of the Bank’s holding or joint-stock companies for the Bank to recommend candidates and other voting matters (excluding equity investment); (22) to examine and approve matters relating to the changes in the use of proceeds from share offerings; (23) to resolve on the engagement, dismissal or discontinuation of the appointment of the accounting firm; (24) to examine other issues which should be decided on by the Shareholders’ general meeting as stipulated by the relevant laws, administrative regulations, other rules, Hong Kong Listing Rules, provisions of the securities regulatory authorities in the locality in which the securities of the Bank are listed or our Articles and other internal rules.

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The following matters shall be approved by ordinary resolutions at a Shareholders’ general meeting:

(1) work reports of the Board and the Board of Supervisors;

(2) profit distribution plan and loss recovery plan proposed by the Board;

(3) the annual reports, annual budgets, final account reports, balance sheet, statements of profits and other financial statements of the Bank;

(4) report of evaluation by the Board of Supervisors on the Directors and by the independent Directors on each other;

(5) report of evaluation by the Board of Supervisors on the Supervisors and by the external Supervisors on each other;

(6) supervision opinions of financial regulators and the Bank’s reform;

(7) matters other than those required by the laws, administrative regulations or our Articles to be approved by special resolutions.

The following matters shall be approved by special resolutions at a Shareholders’ general meeting:

(1) an increase or reduction in the registered capital and the issuance of any class of shares, warrants and other similar securities of the Bank;

(2) the issuance of bonds or listing of the Bank;

(3) the division, merger, dissolution and liquidation or change in the corporate form of the Bank;

(4) amendments to our Articles;

(5) the Bank’s purchase or sale of major assets or provision of guarantee within one year with the transaction amount exceeding 10% of the latest audited net assets of the Bank;

(6) the Bank’s buyback of its shares;

(7) equity incentive scheme;

(8) appointment and removal of the members of the Board and the Board of Supervisors (save as otherwise stipulated in Article 148 of our Articles), their remunerations and method of payment thereof;

(9) any other matters as required by the laws, regulations, regulatory documents, Hong Kong Listing Rules, provisions of the securities regulatory authorities in the locality in which the securities of the Bank are listed or our Articles, and confirmed by the Shareholders’ general meeting by an ordinary resolution that they may have a material effect on the Bank and should be adopted by a special resolution.

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TRANSFER OF SHARES

Unless otherwise specified by the relevant laws, administrative regulations and the provisions of the securities regulatory authorities in the locality in which the securities of the Bank are listed, the fully paid shares of the Bank may be transferred legally. All fully paid H shares may be freely transferred in accordance with our Articles without any limitation on transfer right (except for the circumstance permitted by the Hong Kong Stock Exchange) and without any lien attached. However, the Board may refuse to recognize the documents for transfer of H shares without stating any reason unless the conditions stipulated below are met:

(1) the transfer documents and other documents which relate to or may affect the title of any registered securities have been registered; fee prescribed by the Hong Kong Stock Exchange in the Hong Kong Listing Rules from time to time has been paid to the Bank regarding the registration, and all transfer documents and other documents which relate to or may affect the title of any shares have been registered;

(2) transfer documents are only in relation to H shares;

(3) stamp duty (as stipulated by Hong Kong law) which is payable for the transfer documents has been duly paid;

(4) relevant share certificate(s) and any other evidence which the Board may reasonably require to show that the transferor has the right to transfer the shares have been provided;

(5) where the shares are intended to be transferred to joint holders, the number of such joint Shareholders is not more than four (4);

(6) shares are free and clear of any lien of the Bank.

Should the Board refuse to register any transfer of shares, the Bank shall, within two (2) months from the date of the formal application for the transfer, provide the transferor and the transferee with a notice stating its refusal of registration of such transfer.

Transfer of shares by Shareholders shall be registered with the local stock registration agency entrusted by the Bank. Transfer of shares by the Bank shall be handled in accordance with the relevant regulations of the State.

Transfer of all H Shares shall be executed with a written transfer instrument in a common format or other format accepted by the Board (including the standard transfer format or transfer form specified by the Hong Kong Stock Exchange from time to time); the said transfer instrument may be signed by hand, or be stamped with the corporate seal (if the transferor or the transferee is a company). If the transferor or the transferee is a recognized clearing house or agent thereof defined in relevant ordinances of Hong Kong laws effective from time to time, the transfer form can be signed by hand or by print.

All transfer instruments shall be kept at the legal address of the Bank or other place designated by the Board from time to time.

The shares of the Bank held by the promoters shall not be transferred within one (1) year after incorporation of the Bank. Before initial public offering of the Bank, the shareholding by natural persons shall not exceed the proportion specified by the regulatory authority.

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The Directors, Supervisors and senior management of the Bank shall notify the Bank their holding of shares in the Bank and changes of their holdings. The shares transferred in any year during their tenures shall not exceed 25% of the total number of the shares held by them. These individuals shall not transfer the shares in the Bank held by them within six months upon the completion of their terms of office unless so demanded by a court. Shares issued prior to the Bank’s initial public offering are not transferable within one year from the date on which the Bank’s shares are listed on the stock exchange. Where the relevant regulations of the securities regulatory authorities of the place where the securities of the Bank are listed provide otherwise, such regulations shall apply. A Shareholder and his connected parties and persons acting in concert separately or jointly intending to initially or accumulatively hold more than 5% of total capital or total shares of the Bank shall obtain prior consent of a banking regulatory authority under the State Council. In the event that a Shareholder holds more than 5% of the total outstanding shares of the Bank without prior consent of a banking regulatory authority of the State Council, such shareholder shall make rectification within the prescribed period and no corresponding shareholders’ rights attached thereto shall be exercised before rectification.

PLEDGE OF SHARES The Bank does not accept shares of the Bank as the subject of pledges. The Directors, Supervisors and senior management of the Bank shall notify the Bank of their holding of shares in the Bank and changes of their holdings. During their tenures, they shall not pledge the shares held by them in the Bank. Where the laws, administrative regulations and relevant rules of the securities regulatory authorities of the place where the securities of the Bank are listed provide otherwise, such regulations shall apply. Shareholders, who owe overdue facility to the Bank shall not exercise the voting rights during the facility overdue period and shall not accounted for in the total number of voting shares represented in the shareholders’ general meeting, and the directors nominated by such shareholders shall not exercise their voting rights at the meeting of the Board of Directors. The Bank shall have the right to withhold the dividends of such shareholders as the repayment of their overdue facility during the facility overdue period. Any assets to be distributed to such shareholders in the Bank’s liquidation process shall be used in priority for the repayment of the Bank’s overdue facility.

POWER OF OUR BANK TO REPURCHASE OUR OWN SHARES The Bank may, in accordance with the provisions under laws, administrative regulations, other rules and our Articles and with the approval by the banking regulatory authorities under the State Council, repurchase its issued shares in the following circumstances: (1) reduction of the Bank’s registered capital; (2) merging with another company holding shares in the Bank; (3) offering incentives to the employees of the Bank; (4) requests for the Bank to repurchase its own shares from Shareholders who have voted against the resolutions passed at a Shareholders’ general meeting on the merger or separation of the Bank;

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(5) other circumstances permitted by laws and regulations and by the relevant authorities of the State.

Except for the circumstances set out above, the Bank shall not be engaged in any activities of buying and selling its shares.

Approval shall be obtained at a general meeting when the Bank is to repurchase its own shares because of the circumstances set out in (1) to (3) above. After the Bank has repurchased its own shares in accordance with the preceding provision, the shares so repurchased shall be cancelled within ten days from the date of purchase (under the circumstances set out in (1)), or shall be transferred or cancelled within six months (under the circumstances set out in (2) and (4)).

The shares of the Bank repurchased by the Bank under the circumstances set out in (3) above shall not exceed 5% of the total issued shares of the Bank. The funds for repurchase of such shares shall be paid out of the Bank’s profits after tax, and the acquired shares shall be transferred to the Bank’s employees within one year.

With the approval of competent state authorities for repurchasing its shares, the Bank may conduct the repurchase in one of the following manners:

(1) to make an offer of repurchase to all of its Shareholders in the same proportion;

(2) to repurchase shares through public trading on a stock exchange;

(3) to repurchase through an off-market agreement;

(4) by other means as permitted by the laws, administrative regulations and the relevant competent authorities.

After repurchasing its shares according to the laws, the Bank shall cancel or transfer the said shares before the deadline specified by laws and administrative regulations, and register the change of registered capital with the authority where the Bank was originally registered. The aggregate par value of the cancelled shares shall be deducted from the Bank’s registered capital.

A prior approval shall be obtained from a general meeting in respect of any share repurchase by the Bank through an off-market agreement instead of on a securities exchange in accordance with the provisions of our Articles. After the general meeting has given its approval in the same way, the Bank may rescind or alter any contracts entered into in the said manner or waive any rights under such contracts.

The contract to repurchase shares as referred to in the preceding paragraph includes, but is not limited to, an agreement to become obliged to repurchase or to acquire the right to repurchase shares.

The Bank shall not assign a contract for repurchasing its shares or any of its rights thereunder.

Where the Bank has the right to repurchase redeemable shares by means other than repurchases through the market or by tender, the repurchase price shall be limited to a maximum price; if repurchases are made by tender, an invitation for tenders shall be made to all Shareholders alike.

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Unless the Bank is undergoing liquidation, it shall comply with the following requirements with respect to a repurchase of its issued shares:

(1) for repurchases of shares by the Bank at their par value, payment shall be made from the book balance of its distributable profits or from the proceeds of a new issuance of shares for that purpose;

(2) where the Bank repurchases its shares at a premium to its par value, payment up to the par value shall be made from the book balance of its distributable profits or from the proceeds of a new issuance of shares for that purpose; payment of the portion which is in excess of the par value shall be made as follows:

i. If the shares being repurchased are issued at par value, payment shall be made from the book balance of its distributable profits;

ii. If the shares being repurchased are issued at a premium to its par value, payment shall be made from the book balance of its distributable profits or from the proceeds of the new issuance of shares for that purpose. However, the amount deducted from the proceeds of the new issuance of shares shall not exceed the aggregate amount of the premium received by the Bank from the issuance of the shares so repurchased, nor shall it exceed the amount in the Bank’s premium account or capital reserve fund account (including premium on the new issue) at the time of such repurchase;

(3) the Bank shall make the following payments from the Bank’s distributable profits:

i. acquisition of the rights to repurchase its own shares;

ii. variation of any contracts for the repurchase of its shares;

iii. release from its obligations under any repurchase contracts;

(4) after the aggregate par value of the cancelled shares is deducted from the Bank’s registered capital in accordance with the relevant provisions, the amount deducted from the distributable profits used for the repurchase of the shares at par value shall be credited to the Bank’s premium account or its capital reserve fund account.

RIGHT OF OUR SUBSIDIARIES TO OWN SHARES IN OUR BANK

There are no provisions in our Articles preventing a subsidiary of our Bank from owning any of our shares.

DIVIDENDS AND OTHER METHODS OF PROFIT DISTRIBUTION

The Bank may distribute dividends in cash or by shares.

Our Bank shall appoint for Shareholders of overseas listed shares a recipient agent. The recipient agent shall collect on behalf of the Shareholders concerned the dividends distributed and other funds payable by the Bank in respect of the overseas listed shares. The recipient agent appointed by the Bank shall comply with the laws of the locality in which the Bank’s shares are listed or the relevant requirements of the stock exchange where the Bank’s shares are listed. The recipient agent appointed by the Bank for Shareholders of H-shares shall be a company which is registered as a trust company under the Trustee Ordinance of Hong Kong.

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PROXIES

Any Shareholder entitled to attend and having voting rights at a Shareholders’ general meeting shall be entitled to appoint one or more persons (these persons need not be Shareholders) as proxies to attend and vote on their behalf. A proxy may exercise the following powers at a Shareholders’ general meeting:

(1) the same right of speech as the Shareholder at the meeting;

(2) have authority to demand or join other Shareholders in demanding a poll;

(3) have the right to vote by hand or on a poll, but when more than one proxy has been appointed, the proxies only have the right to vote on a poll.

The power of attorney shall be placed at the Bank’s domicile or at any other place designated in the notice of Shareholders’ general meeting, and at least twenty-four (24) hours prior to either the convening of the relevant meeting at which the resolutions are to be voted on or the designated voting time. If the power of attorney is signed by a person authorized by the appointing Shareholder instead of the appointing Shareholder himself/herself, the power of attorney or other authorization documents shall be notarized. The notarized power of attorney or other authorization documents shall, together with the proxy form, be placed at the Bank’s domicile or any other place designated in the notice of Shareholders’ general meeting.

Where the appointing Shareholder is a legal person, its legal representative or a person authorized by the Board or other decision making body shall attend the general meeting of the Bank.

If the appointing Shareholder has passed away, lost his/her ability to act, withdrawn the appointment, withdrawn the authorization to sign the power of attorney or has transferred relevant shares prior to voting, as long as the Bank has not received any written notice regarding these matters before the commencement of the relevant meeting, the vote cast by the proxy in accordance with the power of attorney shall remain valid.

CALLS ON SHARES AND FORFEITURE OF SHARES

Our Bank shall have the right to cease delivering dividend notice to the Shareholders of H Shares by mail, but such right can only be exercised after the dividend notice has not been drawn twice consecutively. If a dividend notice fails to reach the expected recipient in the initial mail delivery and is returned, the Bank may exercise the right promptly.

Our Bank shall have the right to sell the shares of the Shareholders of H Shares through the methods the Board deems appropriate and subject to the following conditions:

(1) the Bank has distributed dividends on such shares at least three (3) times in a period of twelve (12) years and the dividends are not claimed by anyone during that period;

(2) after the expiration of the twelve-year period, the Bank makes a public announcement in one or more newspapers at the place where the Bank’s securities are listed, stating its intention to sell such shares and notifies the Hong Kong Stock Exchange of such intention.

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RIGHTS OF SHAREHOLDERS (INCLUDING INSPECTION OF REGISTER OF SHAREHOLDERS) The Shareholders of ordinary Shares of our Bank shall enjoy the following rights: (1) to receive dividends and other kinds of distributions as determined by the number of shares held by them; (2) to request, convene, preside over, attend or appoint a proxy to general meetings according to laws, and to exercise corresponding voting rights; (3) to supervise and manage the business operation activities of the Bank, and to make suggestions and enquiries accordingly; (4) to transfer, bestow or pledge shares held by them in accordance with the laws, administrative regulations, and the regulations of our Articles; (5) to obtain relevant information in accordance with the laws, administrative regulations, departmental rules, regulatory documents, the relevant provisions stipulated by the securities regulatory authorities in the locality in which the securities of the Bank are listed and our Articles, including: i. to obtain a copy of our Articles after paying the costs and expenses incurred; and ii. have the right to inspect, and to photocopy, after paying a reasonable fee, the following documents: (i) all parts of the register of Shareholders; (ii) the personal information of the Directors, Supervisors, president and other senior management personnel of our Bank, including: (a) current and former names and aliases; (b) primary address (domicile); (c) nationality; (d) full-time and all other part-time occupations and positions; (e) identification documents and their numbers; (iii) report of share capital issued by the Bank; (iv) report of the total par value, quantity, and the highest and lowest prices of each class of shares bought back by the Bank from the last fiscal year (by domestic shares and H Shares), and the total amount paid by the Bank for this purpose; (v) minutes of the Shareholders’ general meetings; (vi) resolutions of meetings of the Board of Directors and meetings of the Board of Supervisors; (vii) the special resolutions of our Bank; (viii) the latest audited financial statements, Directors’ reports, report of the Board of Supervisors and auditors’ report; (ix) a copy of the latest corporate annual return already submitted to the industrial and commercial registration authority or other competent bodies. Except the documents set out in (ii) above, the Bank shall keep the above documents at the Hong Kong address of the Bank for the free inspection by the public and holders of H Shares. Documents set out in (v) are for inspection by Shareholders only.

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(6) to participate in the distribution of the remaining assets of the Bank based on the number of shares held in the event of the Bank’s dissolution or liquidation; (7) to demand the Bank to acquire their shares (for Shareholders who disagree with the resolutions adopted at a Shareholders’ general meeting in relation to the merger or division of the Bank); and (8) to have other rights conferred in accordance with the laws, administrative regulations, other rules and our Articles. The Bank shall not exercise any right to freeze or otherwise damage the rights attached to any shares directly or indirectly held by any person only on the ground that the said person has not disclosed his/her equity to the Bank.

QUORUM FOR MEETINGS AND SEPARATE CLASS MEETINGS When the Bank is to convene a general meeting, the conveners shall issue a written notice, forty-five (45) days prior to the date of the meeting, to all Shareholders whose names appear on the register of Shareholders, stating the matters to be considered at the meeting and the date and venue of the meeting. Shareholders who wish to attend the Shareholders’ general meeting shall provide a written reply of attendance to the Bank twenty (20) days before the general meeting is convened. The Bank shall calculate the proportion of voting shares held by Shareholders who wish to attend the meeting based on the written replies received twenty (20) days before the Shareholders’ general meeting that is convened by the Bank. Where the proportion of voting shares held by Shareholders who wish to attend the meeting reaches above half of the total voting shares of the Bank, the Bank will convene the Shareholders’ general meeting. If this threshold is not met, the Bank shall inform the Shareholders within five (5) days via an announcement stipulating the matters to be considered and the venue, date and time of the meeting. Once this announcement is made, the Bank may then proceed to convene the Shareholders’ general meeting. When convening a meeting for a certain class of Shareholders, the Bank shall issue a written notice, forty-five (45) days prior to the date of the meeting, to all Shareholders in the relevant class whose names appear on the register of Shareholders, stating the matters to be considered at the meeting and the date and venue of the meeting. Shareholders who intend to attend the meeting shall deliver a written reply to the Bank twenty (20) days before the meeting is convened. The Bank may convene a meeting for a certain class of Shareholders if the number of shares with voting rights held by Shareholders intending to attend the meeting represent above half of the total number of shares with voting rights in that class. If this requirement is not met, the Bank shall, within five (5) days, issue another announcement informing the Shareholders of the matters to be considered at the meeting and the date and venue of the meeting. Once this announcement is made, the Bank may convene the meeting for that class of Shareholders.

RIGHTS OF MINORITY SHAREHOLDERS In addition to the obligations required under the laws, administrative regulations or the listing rules of a stock exchange located in the locality in which the shares of the Bank are listed, when exercising their rights as a Shareholder, controlling shareholders shall not exercise their voting rights and make decisions on the following issues as these issues are detrimental to the interests of all or some of the Shareholders: (1) relieving a Director or Supervisor of their responsibility to act in good faith and in the best interests of the Bank;

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(2) approving a Director or a Supervisor in depriving the Bank of its assets in any form, including but not limited to any business opportunities that are advantageous to the Bank, regardless of whether the deprivation is made for the Director, or Supervisor’s benefit or for the benefit of others; or (3) approving a Director or a Supervisor (for his/her own benefit or for the benefit of others) in depriving other Shareholders of their personal interests, including but not limited to any distribution rights and voting rights, unless the deprivation is made pursuant to a Bank restructuring submitted to and adopted at the Shareholders’ general meeting in accordance with our Articles. “Controlling Shareholders” refer to, according to Article 216 of the Company Law of the People’s Republic of China, those Shareholders whose capital contribution accounts for more than 50% of the total capital of a limited liability company or whose shares account for more than 50% of the total shares of a joint stock company, and those Shareholders who fail to meet the above requirements on capital contribution and shareholding but whose voting rights represented by their capital contribution or shareholding have a material influence on the resolutions of the board of shareholders and Shareholders’ general meetings.

PROCEDURES ON LIQUIDATION The Bank shall be dissolved and liquidated according to laws in any of the following circumstances: (1) if its business term expires; (2) if the Shareholders’ general meeting resolves to do so; (3) if a dissolution is necessary as a result of a merger or division of the Bank; (4) if the Bank is declared bankrupt due to its failure to repay debts due; (5) if the Bank has been ordered to close down for violation of laws. If the Bank is dissolved in the circumstance set out in (1) and (2) above, a liquidation committee shall be set up within 15 days, and the members of the committee shall be decided by an ordinary resolution at a Shareholders’ general meeting. If the Bank is dissolved in the circumstance set out in (3) above, liquidation shall be effected in accordance with the contracts concluded between the parties to the merger or division when the Company is merged or divided. If the Bank is dissolved in the circumstance set out in (4) above, a liquidation committee comprising Shareholders, relevant departments and relevant professionals shall be established by the People’s Court in accordance with relevant laws to carry out the liquidation. If the Bank is dissolved in the circumstance set out in (5) above, a liquidation committee comprising Shareholders, relevant departments and relevant professionals shall be established by relevant competent authorities to carry out the liquidation. If the Board decides that the Bank shall be liquidated (except for liquidation resulting from the Bank’s declaration of bankruptcy), it shall state in the notice of the Shareholders’ general meeting convened for such purpose that the Board have conducted a comprehensive investigation into the situation of the Bank and believes that the Bank is able to pay off all its debts within twelve months following the commencement of the liquidation.

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After the Shareholders’ general meeting adopts a resolution in favor of the liquidation, the functions and powers of the Board of the Bank shall be terminated immediately. The liquidation committee shall follow the instructions of the Shareholders’ general meeting and shall report to the Shareholders’ general meeting at least once a year on the income and expenditure of the liquidation committee, the business of the Bank and the progress of the liquidation, and shall make a final report to the Shareholders’ general meeting at the end of the liquidation. During liquidation, the liquidation committee shall exercise the following functions and powers: (1) to inform creditors by notice or announcement; (2) to examine and take possession of the assets of the Bank and prepare a balance sheet and a property inventory; (3) to deal with the outstanding businesses of the Bank relating to liquidation; (4) to settle outstanding tax payment; (5) to settle claims and debts; (6) to dispose of the remaining assets of the Bank after repayment of debts; and (7) to represent the Bank in civil proceedings. The liquidation committee shall notify all creditors within 10 days after its establishment and shall make three announcements on at least one of the designated newspapers within 60 days. A creditor shall claim his/her creditor’s rights from the liquidation committee within the period specified in our Articles. During the period of the claim, the creditor shall explain all matters relevant to the creditor’s rights he/she has claimed and provide relevant evidential documents. The liquidation committee shall register such creditor’s rights. After the liquidation committee has examined and taken possession of the assets of the Bank and prepared a balance sheet and a property inventory, it shall formulate a liquidation proposal and submit it to the Shareholders’ general meeting or the relevant competent authorities for confirmation. The assets of the Bank shall be liquidated in the following order of priority: (1) to pay liquidation expenses; (2) to pay employees’ salaries and labor insurance of the Bank; (3) to pay outstanding taxes; (4) to pay principal and interest of personal savings deposits; (5) to pay other debts of the Bank; (6) to distribute to Shareholders as per their shares. Before liquidation as specified in (1)-(5) above, the assets of the Bank shall not be distributed to Shareholders. The assets of the Bank remaining after liquidation as specified in the preceding paragraphs shall be distributed to the Shareholders as per the types of their shares and their shareholding percentages.

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The Bank shall not conduct any new operation activity in the course of liquidation. In the event of liquidation due to dissolution of the Bank, after the liquidation committee has examined and taken possession of the assets of the Bank and prepared a balance sheet and a property inventory, if it believes that the Bank’s assets are insufficient to repay its debts in full, it shall apply to the People’s Court to declare the Bank bankrupt. Following a ruling by the People’s Court that the Bank is bankrupt, the liquidation committee shall transfer to the People’s Court all matters relating to the liquidation. After completion of liquidation, the liquidation committee shall prepare a liquidation report, income and expenditure statement and account books in respect of the liquidation period and, after verification of the Chinese certified public accountants, shall submit the same to the Shareholders’ general meeting or the relevant competent authorities for confirmation. The liquidation committee shall, within thirty days after obtaining confirmation from the Shareholders’ general meeting or the relevant competent authorities, cancel registration of the Bank with the company registration authority and announce termination of the Bank. The members of the liquidation committee shall fulfil the liquidation obligation according to law, and shall not abuse their official powers to seek bribes or other unlawful gains or expropriate the Bank’s property. Where any member of the liquidation committee causes any loss to the Bank or the creditors with will or serious negligence, the said member shall be liable for compensation. Merger, division, termination and dissolution of the Bank shall comply with the Company Law and the PRC Commercial Banking Law.

OTHER PROVISIONS MATERIAL TO OUR BANK AND OUR SHAREHOLDERS General Provisions After consideration and approval by the Shareholders’ general meeting and approval by the banking regulatory authorities under the State Council, our Articles shall become effective from the [REDACTED] of the H Shares publicly issued by the Bank on the Hong Kong Stock Exchange. From the date on which it becomes effective, our Articles shall become a legally binding document that regulates the organization and acts of the Bank, as well as the rights and obligations between the Bank and its Shareholders, and amongst the Shareholders themselves. The Bank may increase its capital as follows in the light of its business and development needs, in accordance with the relevant laws, administrative regulations, resolutions made at the Shareholders’ general meeting and upon approval by the banking regulatory authorities under the State Council: (1) to offer new shares to non-given investors; (2) to offer new shares to special entities; (3) to distribute new shares to existing Shareholders; (4) to transfer reserve funds to increase share capital; (5) to place new shares to existing Shareholders; (6) by other methods approved by laws, administrative regulations and relevant regulatory authorities.

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Shareholders of ordinary shares of our Bank shall have the following obligations: (1) to abide by the laws, administrative regulations, regulatory provisions, relevant regulations of securities regulatory authorities (including securities regulatory authorities in the locality in which the securities of the Bank are listed) and our Articles; (2) to contribute to the share capital as determined by the number of shares subscribed by them and the prescribed method of capital contribution; (3) not to withdraw their contributed share capital except in circumstances allowed by the laws and regulations; (4) not to abuse their rights to harm the interests of the Bank and any other Shareholders; not to abuse the Bank’s status as an independent and separate legal person and the limited liability of Shareholders to harm the interests of the Bank’s creditors. If a Shareholder of the Bank abuses his/her rights and causes loss to the Bank or other Shareholders, it will be held liable for compensation in accordance with the law. If a Shareholder abuses the Bank’s status as an independent and separate legal entity and the limited liability of Shareholders to evade the repayment of debts, resulting in material damage to the interests of the Bank’s creditors, that Shareholder will be jointly and severally liable for the debts of the Bank; (5) to report to the Board in a complete and truthful manner information about its connected enterprises, its connected party relationship with other Shareholders and its shareholdings in other financial institutions; (6) if any of the top ten Shareholders undergoes any changes in legal representatives, names, registered addresses, scope of business and other major events, he/she shall timely report to the Bank which will report to the competent national examination and approval authorities for filing; (7) to protect the Bank’s interests and reputation and support our lawful operation; (8) to support the plans and measures proposed by the Board for improving capital adequacy ratio when the Bank’s capital adequacy ratio is lower than the standard as stipulated by laws and regulations of the banking industry; Shareholders, particularly substantial Shareholders, shall support the reasonable capital plans formulated by the Board to keep the Bank’s capital in compliance with regulatory requirements; substantial Shareholders shall make a long-term commitment to the Bank in writing regarding capital replenishment as a part of the Bank’s capital plans. When the Bank’s capital fails to comply with the regulatory requirements, a capital replenishment plan shall be made to enable the capital adequacy ratio to satisfy the regulatory requirements within the time framework, and other measures to replenish capital such as increase of core capital shall be taken. The substantial Shareholders who do not participate in capital replenishment shall not hinder other Shareholders from replenishing the capital of the Bank or new eligible Shareholders from participating; substantial Shareholders shall replenish the capital of the Bank if necessary; (9) Shareholders who shall seek approval from but fail to report to regulatory authorities shall not exercise such rights as the right to request convening the Shareholders’ general meeting, voting right, right of nomination, right of making motions and right of disposition;

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(10) for any Shareholder who has made any false statement, abuses Shareholder’s rights or has other acts that harm the interests of the Bank, the banking regulatory authorities under the State Council or its local offices may restrict or prohibit any connected transactions between the Bank and him/her and restrict the quota of the Bank’s equity held by him/her and equity pledge ratio as well as his/her rights including the right to request convening the Shareholders’ general meeting, voting right, right of nomination, right of making motions and right of disposition. (11) any Shareholder and its connected parties and persons acting in concert that separately or jointly hold more than 1% but less than 5% of the Bank’s total capital or total shares shall report via the Bank to the banking regulatory authorities under the State Council or their local offices within 10 workdays after obtaining corresponding equities. The Shareholder shall report via the Bank to the banking regulatory authorities under the State Council or their local offices within 10 workdays after he/she knows or shall know that they separately or jointly hold more than 1% but less than 5% (“less than” is exclusive, only for the purpose of this item) of the Bank’s total shares. (12) to assume other obligations required by the laws, administrative regulations and our Articles.

Directors’ Qualification Shares Directors of the Bank shall be a natural person and is not required to hold any shares of the Bank.

THE BOARD The Board shall be accountable to the Shareholders’ general meeting. It shall exercise the following functions and powers: (1) to convene a Shareholders’ general meeting and report its work to the Shareholders’ general meeting; (2) to implement resolutions of the Shareholders’ general meeting; (3) to decide on the Bank’s business plans, investment proposals and development strategies; (4) to formulate Bank’s annual financial budgets, final accounts, risk capital allocation plan, profit distribution plan and loss recovery plan; (5) to formulate proposals for increases in or reductions of registered share capital, issuance of bonds or other securities and listing plans of the Bank; (6) to formulate plans for material acquisitions, purchase of shares of the Bank, merger, division, dissolution or transformation of the Bank; (7) to decide on major events of the Bank within the authorization of the Shareholders’ general meeting, such as daily operations, external investments, acquisition, sales and swap of assets, external guarantees, pledge of assets, entrusted wealth management, financial lease, connected transactions and disposal of non-performing assets; (8) to appoint or dismiss senior management including the president, vice president and secretary of the Board of the Banks as nominated by the chairman, and decide on their remunerations, rewards and punishments;

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(9) to formulate the basic management system of the Bank, and decide on the rights of senior management on the formulation of business procedures and other specific rules; (10) to formulate proposals for any amendment to our Articles; (11) to be responsible for the Bank’s information disclosure, and undertake the ultimate responsibility for the completeness and accuracy of the Bank’s accounting and financial reports; (12) to formulate a standard scheme for the remuneration and allowances of the Directors of the Bank; (13) to listen to work reports of the Bank’s president and examine his/her work; (14) to decide on the Bank’s risk management and internal control policies; (15) to supervise the work performance of the Bank’s senior management and deliberate senior management’s evaluation on the Bank’s president, vice president, chief financial officer and other senior management personnel and the reports of evaluation by the Bank’s senior management personnel on each other; and to organize the evaluation on Directors and evaluation by independent Directors on each other and report relevant evaluation result to the Board of Supervisors; (16) to regularly evaluate and improve the Bank’s governance; (17) to nominate the candidates of the next session of the Board; (18) to apply for bankruptcy to the People’s Court on behalf of the Bank according to the authorization of the Shareholders’ general meeting; (19) to decide on the plans for establishment of internal management structure of the Bank and establishment and withdrawal of branches of the Bank; (20) to establish an identification, investigation and management mechanism for the conflict of interest between the Bank and substantial Shareholders; (21) to undertake the ultimate responsibility for information technology risks and examination and approval of mid-and-long term information technology strategies, and regularly examine and approve the Bank’s reports on information technology construction and risk management; (22) to have the right to determine the pricing and the business investment between the Bank and other financial institutions, including bond investment, entrusted wealth management, purchase of wealth management products, purchase of designated (specialized) asset management plans, trust plans, beneficiary certificates issued by securities companies, right to yields on claims of margin trading and short selling, securities investment funds and other business investment and pricing; (23) to be in charge of determining green credit development strategies, examine and approve the green credit objectives determined and the green credit reports submitted by senior management, and supervise and appraise the Bank’s implementation of green credit development strategies; (24) to assume the ultimate responsibility for the protection of consumer rights of the Bank, regularly listen to the reports on the progress of the protection of consumer rights; assume the ultimate responsibility for anti-money laundering (AML) management, and ensure that the Bank establishes and implements a complete and effective AML internal control system; and

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(25) to exercise other functions and powers that shall be exercised by the Board according to the laws, regulations, Hong Kong Listing Rules and our Articles.

Board meetings are divided into regular meetings and extraordinary meetings, which are convened and presided over by the chairman. Where the chairman cannot attend the meeting for any reason, the chairman may appoint one of the directors of the Bank to convene and preside over the meeting on his or her behalf or a director shall be jointly elected by more than half of the directors to perform the duties. The Board of Directors shall hold at least four regular meetings annually, about once a quarter. Notices of board meeting shall be sent to all directors and supervisors in writing at least fourteen days before the date of the meeting. The meeting documents shall be sent to all directors and supervisors five days before the date of the meeting. The notice may be sent by: mail (including e-mail) or special delivery.

A meeting of the Board of Directors shall only be held if it has a quorum of more than one half of the directors. Resolutions adopted at the board meeting must be approved by more than one half of the directors. Voting on board meetings may be conducted by a show of hands, ballot, and means of communications. The one-person one-vote system shall be practiced for voting on resolutions of the Board.

Board of Supervisors

Our Bank shall have a Board of Supervisors which shall be composed of five (5) Supervisors. In particular, the number of external Supervisors shall comply with laws, administrative regulations and other rules. The Board of Supervisors shall include shareholder Supervisors and proportionate employee representative Supervisors of the Bank. Employee representative Supervisors and external Supervisors shall not be less than one-third of the total number of members of the Board of Supervisors.

The Board of Supervisors shall have one (1) chairman, who shall be elected by above two-thirds of all members of the Board of Supervisors after regional parties, substantial Shareholders and banking regulatory authorities under the State Council reach a consensus on the chairman candidates upon communication.

The chairman of the Board of Supervisors shall convene and preside over meetings of the Board of Supervisors; where the chairman of the Board of Supervisors is unable or fails to perform his/her duties, a supervisor appointed by more than half of the Board of Supervisors shall convene and preside over the meetings of the Board of Supervisors.

Employee representative Supervisors in the Board of Supervisors shall be elected, removed or replaced by the employees of the Bank through the employee representative meeting; shareholder Supervisors shall be elected, removed or replaced by Shareholders’ general meeting; external Supervisors shall be nominated by the nomination committee of the Board of Supervisors, or shareholder(s) severally or jointly holding more than 1% of the total number of the voting shares of the Bank, and shall be elected, removed or replaced by Shareholders’ general meeting.

The same Shareholder and his/her related Parties shall not nominate candidates for directors and supervisors at the same time; should the supervisor candidate nominated by the same Shareholder and his/her related Parties have a seat in the Board of Supervisors, the said Shareholder shall not nominate other supervisor candidates before the end of this supervisor’s term or replacement thereof.

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The Board of Supervisors shall be accountable to the general meeting and exercise the following powers: (1) to examine the regular reports and bonus scheme of the Bank prepared by the Board and produce written opinions thereon; (2) to examine and supervise financial activities of the Bank; (3) to conduct off-office auditing for Directors, president, and other senior management personnel and to guide the work of the internal audit department of the Bank; (4) to inquire Directors, president and other senior management personnel; (5) to supervise the fulfilment of duties of the Board of Directors, senior management, Directors, chairman and senior management personnel and to propose dismissal of Directors and senior management personnel who have violated laws, administrative regulations, our Articles or resolutions of the Shareholders’ general meetings; (6) when the acts of a Director, president or senior management personnel of the Bank are detrimental to its interests, to require the aforementioned persons to correct these acts; (7) to propose the convening of extraordinary general meetings and, in case the Board does not perform the obligations to convene and preside over the Shareholders’ general meetings in accordance with the Company Law, to convene and preside over the Shareholders’ general meetings; (8) to submit proposals to the Shareholders’ general meeting; (9) to initiate legal proceedings against the Directors and senior management personnel in accordance with Article 152 of the Company Law; (10) to conduct investigations if there are any doubts or irregularities in relation to the operation of the Bank, and to engage professionals from accountant firms or law firms, professional auditors etc. if necessary to assist its duties at the expenses of the Bank; (11) to formulate a standard scheme for the remuneration and allowances of the members of the Board of Supervisors of the Bank for review and determination at the Shareholders’ general meeting; (12) to audit the business decisions, risk management and internal controls of the Bank, and to supervise the information technology risks of the Bank; (13) to attend board meetings and obtain meeting materials; (14) to supervise the directors recruiting procedures; (15) to organize the evaluation of Supervisors and the mutual evaluation of external Supervisors, and to report the evaluation results to the Shareholders’ general meeting for deliberation; and (16) to exercise other functions and powers stipulated by laws, administrative regulations and other regulations, or our Articles, or granted by the Shareholders’ general meetings. Regular meetings of the Board of Supervisors shall be convened at least four times a year. Chairman of the Board of Supervisors or all external Supervisors may propose to convene a provisional meeting of the Board of Supervisors. Notice of the regular meetings of the Board of Supervisors shall be served to all of the Supervisors 10 days before the date of such meeting.

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The resolutions of the Board of Supervisors shall be adopted by open ballot, and each Supervisor present at the meeting shall have one vote. Resolutions made by the Board of Supervisors shall be approved by more than two thirds of the members of the Board of Supervisors.

PRESIDENT The president shall be accountable to the Board, shall have the right to organize and carry out the Bank’s operations and management in accordance with laws, administrative regulations and other regulations, our Articles and the authorization of the Board, and shall perform the following duties and powers: (1) to take charge of the business operation and management, to organize the implementation of the resolutions of the Board and to report the work to the chairman and the Board; (2) to draft annual business plans and investment proposals; (3) to draft the Bank’s basic management system; (4) to formulate the Bank’s specific regulations; (5) to make suggestions on the plans for establishment of internal management structure of the Bank and establishment and withdrawal of branches of the Bank; (6) to make suggestions on the Board’s appointment or dismissal of vice president and other senior management personnel of the Bank; (7) to make suggestions on the senior management personnel other than those to be engaged or dismissed by the Board; (8) to make suggestions on the plans authorizing senior management personnel and persons in charge of internal functional departments and branches to conduct operational activities; (9) to make suggestions on the salaries, benefits and reward or punishment of our staff other than the senior management personnel decided by the Board; as well as the appointment and dismissal of our staff other than the senior management personnel decided by the Board; (10) to propose to convene a provisional board meeting; (11) to adopt emergency measures when any material emergency (such as a run on the Bank) arises and promptly report them to the competent administrative authorities of the State, the Board of Directors and the Board of Supervisors; (12) to report the fulfilment of duties and evaluation of the senior management of the Bank to the Board of Directors and the Board of Supervisors, and to organize members of the senior management of the Bank to report their fulfilment of duties to the Board of Directors and the Board of Supervisors; (13) other powers and rights conferred by our Articles or by the Board. The President may observe the meetings of the Board. A non-Director president shall have no voting rights thereat.

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SECRETARY TO THE BOARD

There shall be a secretary to the Board, who shall be appointed or dismissed by the Board. The secretary shall be a member of the senior management of the Bank.

The main duties and responsibilities of the secretary to the Board shall include:

(1) to ensure that the Bank has complete constitutional documents and records;

(2) to ensure that the Bank prepares and submits reports and documents required by relevant authorities of the State;

(3) to prepare for Board meetings and general meetings and be responsible for the minutes of the meetings and the safekeeping of meeting minutes and documents;

(4) to prepare documents for Board meetings as well as relevant rules;

(5) to be responsible for the information disclosure of the Bank and ensure the timely, accurate, lawful, truly and complete disclosure of the Bank’s information;

(6) to ensure that the register of shareholders of the Bank is properly set up, and that people entitled to obtain the Bank’s relevant records and documents, can receive such records and documents in a timely manner;

(7) to be responsible for the safekeeping of the register of shareholders, the seal of the Board and relevant materials and to be responsible to handle matters related to management of the equity shares of the Bank;

(8) other matters as authorized by the Board.

The secretary of the Board shall observe relevant laws, administrative regulations, other regulations and relevant provisions of our Articles. A senior management personnel or Director of the Bank may serve concurrently as secretary to the Board of Directors.

RESOLUTION OF DISPUTES

The Bank shall abide by the following rules for dispute resolution:

(1) If any disputes or claims in relation to the Bank’s business, with respect to any rights or obligations under our Articles, the Company Law or any other relevant laws and administrative regulations, arise between holders of overseas listed foreign shares and the Bank, between holders of overseas listed foreign shares and the Bank’s Directors, Supervisors or senior management personnel, or between holders of overseas listed foreign shares and holders of domestic shares, the parties concerned shall submit such disputes or claims to arbitration. When the aforementioned disputes or claims are submitted to arbitration, such disputes or claims shall be submitted in their entirety, and all persons (being the Bank, the Bank’s Shareholders, Directors, Supervisors or senior management personnel of the Bank) that have a cause of action based on the same grounds or the persons whose participation is necessary for the resolution of such disputes or claims, shall comply with the arbitration. Disputes with respect to the definition of Shareholders and disputes concerning the register of Shareholders need not be resolved by arbitration;

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(2) An applicant may choose for the arbitration to be arbitrated either by the China International Economic and Trade Arbitration Commission in accordance with its arbitration rules or the Hong Kong International Arbitration Centre in accordance with its securities arbitration rules. Once a claimant submits a dispute or claim to arbitration, the other party must carry out the arbitration at the arbitration institution selected by the claimant. If an applicant opts for arbitration by the Hong Kong International Arbitration Centre, either party may request for the arbitration to be conducted in Shenzhen in accordance with the securities arbitration rules of the Hong Kong International Arbitration Centre;

(3) Unless otherwise provided by the laws, administrative regulations, departmental rules or regulatory documents, the laws of the PRC shall apply to the settlement of any disputes or claims that are resolved by arbitration described in item (1) above;

(4) The award of the arbitration institution shall be final and binding on all parties.

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TAXATION OF SECURITY HOLDERS The taxation of income and capital gains of holders of H Shares is subject to the laws and practices of the PRC and of jurisdictions in which holders of H Shares are resident or otherwise subject to tax. The following summary of certain relevant taxation provisions is based on current effective laws and practices, does not make any predictions about changes or adjustments to relevant laws or policies, nor does it issue any opinions or suggestions accordingly. The discussion does not deal with all possible tax consequences relating to an investment in the H Shares, nor does it take into account the specific circumstances of any particular investor, some of which may be subject to special regulation. Accordingly, you should consult your own tax adviser regarding the tax consequences of an investment in the H Shares. The discussion is based upon current laws and relevant interpretations in effect as of the date of this document. The foregoing laws and related explanations may be subject to change or adjustment and may also have retroactivity. This discussion does not address any aspects of PRC or Hong Kong taxation other than income tax, capital gain and profit tax, value-added tax, stamp duty and estate duty. Prospective investors are urged to consult their financial advisers regarding the PRC, Hong Kong and other tax consequences of owning and disposing of H Shares.

The PRC Taxation Taxation on Dividends Individual Investors Pursuant to the Individual Income Tax Law of the PRC (《中華人民共和國個人所得稅法》) (the “IIT Law”), which was last amended on June 30, 2011 and came into effect from September 1, 2011 and the Implementation Regulations of the IIT Law of the PRC (《中華人民共和國個人所得稅法實施條例》), which was last amended on July 19, 2011 and came into effect from September 1, 2011, individuals obtaining the dividends paid by PRC enterprises are subject to an individual income tax levied at a flat rate of 20%. For a foreign individual who is not a resident of the PRC, i.e. non-resident individuals, the receipt of dividends from an enterprise in the PRC is normally subject to an individual income tax of 20% unless exempted upon approval by the Ministry of Finance or exempted under international conventions participated in and agreements signed by the Chinese government. Pursuant to the Notice of the State Administration of Taxation (the “SAT”) on Issues Concerning Taxation and Administration of Individual Income Tax After the Repeal of Document Guo Shui Fa [1993] No. 045 (《國家稅務總局關於國稅發[1993]045號文件廢止後有關個人所得稅徵管問題的通知》, Guo Shui Han [2011] No. 348) issued and implemented by the SAT on June 28, 2011, domestic non-foreign-invested enterprises issuing shares in Hong Kong may, when distributing dividends to non-PRC resident individuals in treaty jurisdictions, withhold individual income tax at the rate of 10% in general. For the non-PRC resident individual holders of H Shares being paid dividends whose jurisdictions have entered into a tax treaty or arrangement with the PRC with tax rates lower than 10%, the domestic non-foreign-invested enterprise whose shares are listed in Hong Kong may apply on behalf of such holders for enjoying the lower preferential tax treatments and upon approval by the competent tax authorities, the amount which is over withheld in the individual income tax will be refunded. For the non-PRC resident individual holders of H Shares being paid dividends whose jurisdictions have entered into a tax treaty or arrangement with the PRC with tax rates higher than 10% but lower than 20%, the domestic non-foreign-invested enterprise listed in Hong Kong is required to withhold the tax at the agreed rate under the treaties, and no application procedures will be

VI-1 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX VI TAXATION AND FOREIGN EXCHANGE necessary. For the non-PRC resident individual holders of H Shares being paid dividends who reside in jurisdictions without tax treaties or arrangements with the PRC or are under other circumstances, the domestic non-foreign-invested enterprise listed in Hong Kong is required to withhold the tax at a rate of 20%.

Enterprise Investors In accordance with the Enterprise Income Tax Law of the PRC (《中華人民共和國企業所得稅法》) (the “EIT Law”), which was last amended and came into effect as of February 24, 2017, and the Implementation Rules of the EIT Law of the PRC (《中華人民共和國企業所得稅法實施條例》) which was promulgated on December 6, 2007 and came into effect as of January 1, 2008, a PRC resident enterprise is generally subject to a 25% enterprise income tax on its worldwide income, and dividends distributed by listed PRC companies are exempt from such tax if the PRC resident enterprise has held the shares for 12 months consecutively; a non-resident enterprise is generally subject to a 10% enterprise income tax on PRC-sourced income (including dividends received from a PRC resident enterprise), if such non-resident enterprise does not have an establishment or place in the PRC or has an establishment or place in the PRC but the PRC-sourced income is not effectively connected with such establishment or place in the PRC. Such tax for non-resident enterprises are withheld at source, where the PRC resident enterprise as the payer of the income is required to withhold the income tax from the amount to be paid to the non-resident enterprise when such payment is made or due. The Notice of the SAT on Issues Relating to the Withholding of Enterprise Income Tax by PRC Resident Enterprises on Dividends Paid to Overseas Non-PRC Resident Enterprise as Shareholders of H Shares (《國家稅務總局關於中國居民企業向境外H股非居民企業股東派發股息代扣代繳企業所得稅有關問題的通知》, Guo Shui Han [2008] No. 897)) which was issued and came into effect on November 6, 2008, further clarified that a PRC-resident enterprise must withhold enterprise income tax at a rate of 10% on dividends paid to overseas non-resident enterprise as shareholders of H Shares for 2008 and subsequent years. In addition, the Response of the SAT to Questions on Levying Enterprise Income Tax on Dividends Derived by Non-PRC resident Enterprise from Holding Stock such as B-shares (《國家稅務總局關於非居民企業取得 B股等股票股息徵收企業所得稅問題的批覆》, Guo Shui Han [2009] No. 394) which was issued and came into effect on July 24, 2009, further provides that any PRC-resident enterprise that makes public offering and listing of stocks (A shares, B shares and overseas shares) in China and abroad must withhold enterprise income tax at a rate of 10% when it distributes dividends of 2008 and subsequent years to non-resident enterprises. If non-resident enterprise shareholders are entitled to the tax treaty treatment, they shall go through the procedures under the applicable tax regulations for the implementation of the tax treaties. Pursuant to the Arrangement between the Mainland and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion (《內地和香港特別行政區關於對所得避免雙重徵稅和防止偷漏稅的安排》) signed on August 21, 2006, the Chinese Government may levy taxes on the dividends paid by a Chinese company to Hong Kong residents (including natural persons and legal entities) in an amount not exceeding 10% of total dividends payable by the Chinese company. If a Hong Kong resident directly holds 25% or more of the equity interest in a Chinese company and is a beneficial owner of the dividends, then such tax shall not exceed 5% of the total dividends payable by the Chinese company. Pursuant to the Fourth Protocol of the Arrangement between the Mainland of China and the Hong Kong Special Administrative Region on the Avoidance of Double Taxation and the Prevention of Fiscal Evasion (《<內地和香港特別行政區關於對所得避免雙重徵稅和防止偷漏

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稅的安排>第四議定書》) signed on April 1, 2015, effective on December 29, 2015, if the generation or allocation of relevant equity is the arrangement made for the primary purpose of gaining such tax benefit, such provisions shall not apply. The application of the dividend clause of the tax arrangement shall be subject to the PRC tax laws and regulations, such as the Notice of the SAT on the Issues Concerning the Application of the Dividend Clauses of Tax Treaties (《國家稅務總局關於執行稅收協定股息條款有關問題的通知》(Guo Shui Han [2009] No. 81)).

Tax Treaties

Non-resident investors residing in jurisdictions which have entered into tax treaties or arrangements for the avoidance of double taxation with the PRC may be entitled to a reduction of the PRC enterprise income tax imposed on the dividends received from PRC companies. The PRC currently has tax treaties/arrangements with a number of countries or regions including Hong Kong SAR, Macau SAR, Australia, Canada, France, Germany, Japan, Malaysia, the Netherlands, Singapore, the United Kingdom, the United States and so on. Non-resident enterprises entitled to preferential tax rates in accordance with the relevant tax treaties or arrangements are entitled to apply to the Chinese tax authorities for a refund of the enterprise income tax in excess of the preferential treaty tax rate, and the refund payment is subject to approval by the Chinese tax authorities.

Taxation on Share Transfer

Value-Added Tax (“VAT”) and Local Surcharges

Pursuant to the Notice on the Full Implementation of Pilot Program for Transition from Business Tax to VAT (《關於全面推開營業稅改徵增值稅試點的通知》, Cai Shui [2016] No. 36, “Circular 36”), effective from May 1, 2016, entities and individuals engaged in sales of services within the PRC shall be subject to VAT and ‘sales of services within the PRC’ refers to the situation where either the seller or the buyer of a taxable service is located within the PRC. Circular 36 also provides that transfer of financial products, including transfer of the ownership of marketable securities, shall be subject to VAT at 6% on the taxable turnover (which is the balance of sales price upon deduction of purchase price), for a general or a foreign VAT taxpayer; however, individuals are exempt from VAT upon transfer of financial products.

In accordance with these rules, upon the sale or disposal of H shares, the holders are exempt from VAT in the PRC if they are non-resident individuals; in case the holders are non-resident enterprises, they may not be subject to the VAT in the PRC if the purchasers of the H shares are individuals or entities located outside of the PRC whereas the holders may be subject to the VAT in the PRC if the purchasers of the H shares are individuals or entities located in the PRC. However, in absence of explicit rules, there remains uncertainty in the interpretation and application of the foregoing rules as to whether the disposal of H Shares by non-PRC resident enterprises is subject to PRC VAT.

Meanwhile, VAT taxpayers are also subject to urban maintenance and construction tax, education surcharge and local education surcharge (collectively, “local surcharges”), which is usually at 12% of the VAT payable, if any.

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Income Tax

Individual Investors

According to the IIT Law and its implementation rules, gains on the transfer of equity interests in the PRC resident enterprises are subject to the individual income tax at a rate of 20%.

Pursuant to the Notice of the Ministry of Finance (the “MOF”) and the SAT Declaring that Individual Income Tax Continues to be Exempted over Income of Individuals from Transfer of Shares (《財政部、國家稅務總局關於個人轉讓股票所得繼續暫免徵收個人所得稅的通知》, Cai Shui Zi [1998] No. 61) issued by the MOF and the SAT on March 30, 1998 and came into effect from January 1, 1997, income of individuals from transfer of shares in listed enterprises continues to be exempted from individual income tax. The State Administration of Taxation has not explicitly clarified whether it will continue to exempt individual income tax on income of individuals from transfer of listed shares in the IIT Law and its implementation rules.

However, on December 31, 2009, the MOF, the SAT and CSRC jointly issued the Notice on Related Issues on Collection of Individual Income Tax on the Income Received by Individuals from Transfer of Restricted Stocks of Listed Companies (《關於個人轉讓上市公司限售股所得徵收個人所得稅有關問題的通知》, Cai Shui [2009] No. 167), effective from January 1, 2010, which states that individuals’ income from transfer of listed shares acquired from public offering of companies listed on Shanghai Stock Exchange or Shenzhen Stock Exchange and transfer market shall continue to be exempted from individual income tax, except for the relevant shares which are subject to sales restriction (as defined in Supplementary Notice on Issues Concerning the Levy of Individual Income Tax on Individuals’ Income from the Transfer of Restricted Stocks of Listed Companies (《關於個人轉讓上市公司限售股所得徵收個人所得稅有關問題的補充通知》, Cai Shui [2010] No. 70)) jointly issued and implemented by the these authorities on November 10, 2010.

As of the Latest Practicable Date, there remains uncertainty in the interpretation and application of relevant current Chinese tax laws and regulations as to whether individual income tax shall be collected from non-resident individuals on the transfer of shares in PRC resident enterprises listed on overseas stock exchanges.

Enterprise Investors

In accordance with the EIT Law and its implementation rules, a non-resident enterprise is generally subject to a 10% enterprise income tax on PRC-sourced income, including gains derived from the disposal of equity interests in a PRC resident enterprise, if it does not have an establishment or place in the PRC or has an establishment or place in the PRC but the PRC-sourced income is not effectively connected with such establishment or place. Such enterprise income tax may be exempted pursuant to applicable tax treaties or arrangements.

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Tax Treaties Hong Kong individual and non-individual investors are not required to pay income tax in the PRC on gains realized from public trading of H shares purchased on the same exchange pursuant to the Fourth Protocol of the Arrangement between the Mainland of China and the Hong Kong Special Administrative Region on the Avoidance of Double Taxation and the Prevention of Fiscal Evasion (《<內地和香港特別行政區關於對所得避免雙重徵稅和防止偷漏稅的安排>第四議定書》). Such treaty benefit may also be applicable to non-resident investors in other jurisdictions which have entered into tax treaties or arrangements with the PRC depending on the provisions of the applicable tax treaties/arrangements.

Stamp Duty Pursuant to the Provisional Regulations of the PRC on Stamp Duty (《中華人民共和國印花稅暫行條例》) promulgated on August 6, 1998, effective as of October 1, 1988 and last amended on January 8, 2011, and the Detailed Rules for Implementation of Provisional Regulations of the PRC on Stamp Duty (《中華人民共和國印花稅暫行條例施行細則》) promulgated on September 29, 1988, effective as of October 1, 1988, PRC stamp duty only applies on specified dutiable documents executed or received and having legally binding force in the PRC and protected under the PRC laws, thus the stamp duty imposed on the transfer of shares of PRC listed companies shall not apply to the acquisition and disposal of H Shares by non-PRC investors outside of the PRC.

Estate Duty As of the date of this document, no estate duty has been levied in China under the PRC laws.

HONG KONG TAXATION Tax on Dividends Under the current practice of the Inland Revenue Department of Hong Kong, no tax is payable in Hong Kong in respect of dividends paid by us.

Capital Gains and Profit Tax No tax is imposed in Hong Kong in respect of capital gains from the sale of H shares. However, trading gains from the sale of the H shares by persons carrying on a trade, profession or business in Hong Kong, where such gains are derived from or arise in Hong Kong from such trade, profession or business will be subject to Hong Kong profits tax, which is currently imposed at the maximum rate of 16.5% on corporations and at the maximum rate of 15% on unincorporated businesses. Certain categories of taxpayers are likely to be regarded as deriving trading gains rather than capital gains (for example, financial institutions, insurance companies and securities dealers) unless these taxpayers can prove that the investment securities are held for long-term investment purposes. Trading gains from sales of the H shares effected on the Hong Kong Stock Exchange will be considered to be derived from or arise in Hong Kong. Liability for Hong Kong profits tax would thus arise in respect of trading gains from sales of H shares effected on the Hong Kong Stock Exchange realized by persons carrying on a business of trading or dealing in securities in Hong Kong.

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Stamp Duty

Hong Kong stamp duty, currently charged at the ad valorem rate of 0.1% on the higher of the consideration for or the market value of the H shares, will be payable by the purchaser on every purchase and by the seller on every sale of any Hong Kong securities, including H shares (in other words, a total of 0.2% is currently payable on a typical sale and purchase transaction involving H shares). In addition, a fixed duty of HK$5.00 is currently payable on any instrument of transfer of H shares. Where one of the parties is a resident outside Hong Kong and does not pay the ad valorem duty due by it, the duty not paid will be assessed on the instrument of transfer (if any) and will be payable by the transferee. If no stamp duty is paid on or before the due date, a penalty of up to 10 times the duty payable may be imposed.

Estate Duty

The Revenue (Abolition of Estate Duty) Ordinance 2005 abolished estate duty in respect of deaths occurring on or after February 11, 2006.

PRINCIPAL TAXATION OF OUR BANK IN THE PRC

Enterprise Income Tax

Pursuant to the EIT Law, enterprises and other organizations which generate income within the PRC are enterprise income tax payers and shall pay enterprise income tax generally at a tax rate of 25%.

Business Tax/VAT

Pursuant to the Provisional Regulations of the PRC on Business Tax (《中華人民共和國營業稅暫行條例》) promulgated on December 13, 1993, became effective on January 1, 1994, subsequently amended on November 10, 2008 and effective on January 1, 2009, the Bank was engaged in banking activities within the PRC and was therefore subject to a 5% business tax.

Pursuant to Notice on the Full Implementing of Pilot Program for Transition from Business Tax to VAT issued by the MOF and SAT (《關於全面推開營業稅改徵增值稅試點的通知》) (Cai Shui [2016] No. 36) promulgated on March 23, 2016 and effective on May 1, 2016, the pilot program for the transition from business tax to VAT is implemented nationwide, and the financial industry is included in such pilot program and is subject to VAT instead of Business Tax. As one of the Appendixes of the foregoing Notice, the Implementation Measures for Transition from Business Tax to VAT (《營業稅改徵增值稅試點實施辦法》) state that, unless otherwise provided in the implementation measures, the tax rate is generally 6% for general tax payers who conduct taxable sales of services. The Bank started to calculate and pay VAT instead of business tax since May 1, 2016.

TAXATION OF OUR BANK IN HONG KONG

Our Directors do not consider that any of our Bank’s income is derived from or arises in Hong Kong for the purpose of Hong Kong taxation. Our Bank will therefore not be subject to Hong Kong taxation.

VI-6 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX VI TAXATION AND FOREIGN EXCHANGE

FOREIGN EXCHANGE

The lawful currency of the PRC is the Renminbi, which is currently subject to foreign exchange control and is not freely convertible into foreign exchange. The SAFE, under the authorization of the PBoC, is empowered with the functions of administering all matters relating to foreign exchange, including the enforcement of foreign exchange control regulations.

The Regulations of the PRC for Foreign Exchange Control (《中華人民共和國外匯管理條例》) (the “Foreign Exchange Control Regulations”) promulgated by the State Council on January 29, 1996 and implemented on April 1, 1996, classifies all international payments and transfers into current items and capital items. Most of the current items are no longer subject to SAFE’s approval, while capital items are. Pursuant to the Foreign Exchange Control Regulations subsequently amended on January 14, 1997 and August 1, 2008 and implemented on August 5, 2008, China will not impose any restriction on international current payments and transfers.

The Regulations for the Administration of Settlement, Sale and Payment of Foreign Exchange (《結匯、售匯及付匯管理規定》) (the “Settlement Regulations”) promulgated by the PBoC on June 20, 1996 and implemented on July 1, 1996, abolished various restrictions on foreign exchange of current account, while impose current restrictions on foreign exchange transactions under capital account items.

According to the Announcement on Improving the Reform of the Renminbi (《完善人民幣匯率形成機制改革的公告》) (PBoC Announcement [2005] No. 16), issued by PBoC and implemented on July 21, 2005, the PRC began to implement a managed floating exchange rate system in which the exchange rate would be determined based on market supply and demand and adjusted with reference to a basket of currencies. The Renminbi exchange rate was no longer pegged to the U.S. dollar. PBoC would publish the closing price of the exchange rate of the Renminbi against trading currencies such as the U.S. dollar in the interbank foreign exchange market after the closing of the market on each working day, as the central parity of the currency against Renminbi transactions on the following working day.

Starting from January 4, 2006, PBoC introduced over-the-counter transactions into the interbank spot foreign exchange market for the purpose of improving the formation mechanism of Renminbi spot rates, and the practice of matching was kept at the same time. In addition to the above, PBoC introduced the market-maker rule to provide liquidity to the foreign exchange market. On July 1, 2014, PBoC further improved the formation mechanism of the RMB exchange rate by authorizing the China Foreign Exchange Trade Center to make inquiries with the market makers before the interbank foreign exchange market opens every day for their offered quotations which are used as samples to calculate the central parity of the RMB against the USD on that day using the weighted average of the remaining market makers’ offered quotations after excluding the highest and lowest quotations, and announce the central parity of the RMB against currencies such as the USD at 9:15 a.m. on each working day. On August 11, 2015, PBoC announced to improve the central parity quotations of RMB against the USD by authorizing market-makers to provide central parity quotations to the China Foreign Exchange Trading Center before the interbank foreign exchange market opens every day with reference to the interbank foreign exchange market closing rate of the previous day, the supply and demand for foreign exchange as well as changes in major international currency exchange rates.

VI-7 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX VI TAXATION AND FOREIGN EXCHANGE

On August 5, 2008, the State Council promulgated the revised Regulations for Foreign Exchange Control, which have made substantial changes to the foreign exchange supervision system of the PRC. First, it has adopted an approach of balancing the inflow and outflow of foreign exchange. Foreign exchange income received overseas can be repatriated or deposited overseas, and foreign exchange and settlement funds under the capital account are required to be used only for purposes as approved by the competent authorities and foreign exchange administrative authorities; second, it has improved the RMB exchange rate floating system based on market supply and demand under management; third, in the event that international balance of payment suffer or may suffer a material misbalance, or the national economy encounters or may encounter a severe crisis, the State may adopt necessary safeguard or control measures against international balance of payment; fourth, it has enhanced the supervision and administration of foreign exchange transactions and grant extensive authorities to the SAFE to enhance its supervisory and administrative powers. According to the relevant laws and regulations in the PRC, PRC enterprises (including foreign investment enterprises) which need foreign exchange for current item transactions may, without the approval of the foreign exchange administration, effect payment from foreign exchange accounts opened by financial institutions operating foreign exchange business or operating agencies engaging in foreign exchange settlement and sales business, on the strength of valid transaction receipt or evidence. Foreign investment enterprises which need foreign exchange for the distribution of profits to their shareholders and PRC enterprises which, in accordance with regulations, are required to pay dividends to their shareholders in foreign exchange (such as our Bank) may, on the strength of resolutions of the board of directors or the shareholders’ meeting on the distribution of profits, effect payment from the foreign exchange accounts opened by financial institutions operating foreign exchange business or operating agencies engaging in foreign exchange settlement and sales business or convert and effect payment in the financial institutions operating foreign exchange business or operating agencies engaging in foreign exchange settlement and sales business. The Decisions on Matters including Canceling and Adjusting a Batch of Administrative Approval Items (《國務院關於取消和調整一批行政審批專案等事項的決定》) (Guo Fa [2014] No. 50) promulgated by the State Council on October 23, 2014 canceled the approval requirement of the SAFE and its branches for the remittance and settlement of the proceeds raised from the overseas listing of the foreign shares into RMB domestic accounts. Pursuant to the Notice of the State Administration of Foreign Exchange on Issues Concerning the Foreign Exchange Administration of Overseas Listing (《國家外匯管理局關於境外上市外匯管理有關問題的通知》) (Hui Fa [2014] No. 54) promulgated and implemented by the SAFE on December 26, 2014, a domestic company shall, within 15 business days of the date of the end of its overseas listing issuance, register the overseas listing with the Foreign Exchange Administration at the place of its establishment; the proceeds from an overseas listing of domestic companies may be remitted to the domestic account or deposited in an overseas account, but the use of the proceeds shall be consistent with the content of the prospectus instruction documents and other disclosure documents. The Notice of the State Administration of Foreign Exchange on Further Simplifying and Improving Policies for the Foreign Exchange Administration of Direct Investment (《國家外匯管理局關於進一步簡化和改進直接投資外匯管理政策的通知》(Hui Fa [2015] No. 13)) promulgated on February 13, 2015 and implemented on June 1, 2015 by the SAFE, has cancelled two administrative approvals, including the confirmation of foreign exchange registration under

VI-8 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX VI TAXATION AND FOREIGN EXCHANGE domestic direct investment and the confirmation of foreign exchange registration under overseas direct investment, instead, banks shall directly examine and handle foreign exchange registration under domestic direct investment and foreign exchange registration under overseas direct investment, and the SAFE and its branch offices shall indirectly regulate the foreign exchange registration of direct investment through banks.

According to the Notice of the State Administration of Foreign Exchange of the PRC on Revolutionize and Regulate Capital Account Settlement Management Policies (《國家外匯管理局關於改革和規範資本專案結匯管理政策的通知》(Hui Fa [2016] No. 16)) issued by the SAFE and implemented on June 9, 2016, foreign currency earnings in capital account that relevant policies of willingness exchange settlement have been clearly implemented on (including the recalling of raised capital by overseas listing) may undertake foreign exchange settlement in the banks according to actual business needs of the domestic institutions. The tentative percentage of foreign exchange settlement for foreign currency earnings in capital account of domestic institutions is 100%, subject to adjust of the SAFE in due time in accordance with international revenue and expenditure situations.

VI-9 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX VII STATUTORY AND GENERAL INFORMATION

1. FURTHER INFORMATION ABOUT OUR BANK

A. Establishment

As approved by PBoC, our Bank was established as a joint stock commercial bank on September 15, 1997 under the name of “Luzhou City United Bank (瀘州城市合作銀行)”, which was established and promoted jointly by Luzhou Municipal Finance Bureau, the original shareholders of eight urban credit cooperatives and two rural credit cooperatives and other new corporate shareholders.

On May 8, 1998, the Sichuan Branch of PBoC approved the change of name of our Bank from “Luzhou City United Bank (瀘州城市合作銀行)” to “Luzhou City Commercial Bank Co., Ltd. (瀘州市商業銀行股份有限公司)”.

The registered address of our Bank is No. 1, Section 1 Jiucheng Avenue, Jiangyang District, Luzhou, Sichuan Province, the PRC. Our Bank has established a principal place of business in Hong Kong at 40th Floor, Sunlight Tower, No. 248 Queen’s Road East, Wanchai, Hong Kong, and was registered as a non-Hong Kong company under Part 16 of the Companies Ordinance on August 24, 2018. Ms. So Shuk Yi Betty (蘇淑儀) has been appointed as our agent for the acceptance of service of process and notices on behalf of our Bank in Hong Kong. Our address for acceptance of service of process in Hong Kong is the same as the address of our principal place of business in Hong Kong.

We conduct our banking business in the PRC under the supervision and regulation of CBIRC and PBoC. We are not an authorized institution within the meaning of the Banking Ordinance (Chapter 155 of the Laws of Hong Kong), and are not subject to the supervision of the HKMA, nor authorized to carry on banking and/or deposit-taking business in Hong Kong.

As we are established in the PRC, our corporate structure and Articles of Association are subject to the relevant laws and regulations of the PRC. A summary of certain relevant aspects of the laws and regulations of the PRC is set out in Appendix IV. A summary of certain relevant provisions of our Articles of Association is set out in Appendix V.

B. Changes in Registered Capital of our Bank

At the time of our establishment, the registered capital of our Bank was RMB100,763,700, divided into 100,763,700 Domestic Shares with a nominal value of RMB1.00 each. Since the establishment of our Bank, there have been several increases of the share capital of our Bank.

On May 6, 2008, the registered capital of our Bank was increased from RMB100,763,700 to RMB120,763,700 by issuing and allotting 20,000,000 new Domestic Shares with a nominal value of RMB1.00 each to Xinglu Investment Group.

On July 28, 2008, the registered capital of our Bank was increased from RMB120,763,700 to RMB160,763,700 by issuing and allotting 40,000,000 new Domestic Shares with a nominal value of RMB1.00 each to Luzhou State-owned Assets Company.

VII-1 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX VII STATUTORY AND GENERAL INFORMATION

On June 30, 2009, the registered capital of our Bank was increased from RMB160,763,700 to RMB400,763,700 by issuing and allotting 240,000,000 new Domestic Shares with a nominal value of RMB1.00 each to Luzhou Laojiao Group, Xinfu Mining Industry Group and Sichuan Jiale Group.

On April 7, 2010, the registered capital of our Bank was increased from RMB400,763,700 to RMB452,763,700 by issuing and allotting 52,000,000 new Domestic Shares with a nominal value of RMB1.00 each to Luzhou Municipal Finance Bureau.

On May 29, 2014, our Bank issued and allotted an aggregate of 271,658,220 stock dividend to the Shareholders recorded on the register of members of our Bank as of December 31, 2013 and as a result, our Bank’s registered capital was increased from RMB452,763,700 to RMB724,421,920.

On December 8, 2015, the registered capital of our Bank was increased from RMB724,421,920 to RMB1,297,618,903 by issuing and allotting 573,196,983 new Domestic Shares with a nominal value of RMB1.00 each to nine then existing corporate Shareholders and 385 then existing individual Shareholders.

On June 29, 2016, the registered capital of our Bank was increased from RMB1,297,618,903 to RMB1,412,371,383 by issuing and allotting 114,752,480 new Domestic Shares with a nominal value of RMB1.00 each to five new investors.

On November 25, 2016, the registered capital of our Bank was increased from RMB1,412,371,383 to RMB1,448,843,840 by issuing and allotting 36,472,457 new Domestic Shares with a nominal value of RMB1.00 each to Anxin Trust Co., Ltd. (安信信託股份有限公司).

On April 8, 2018, our Bank issued and allotted an aggregate of 188,349,545 stock dividend to the Shareholders recorded on the register of members of our Bank as of December 31, 2016 and as a result, the registered capital of our Bank was increased from RMB1,448,843,840 to RMB1,637,193,385.

Immediately following the [REDACTED] (assuming the [REDACTED] is not exercised), our registered capital will be RMB[REDACTED], consisting of [1,637,193,385] Domestic Shares and [REDACTED] H Shares, which represent approximately [REDACTED]% and [REDACTED]% of our total issued share capital, respectively.

Immediately following the [REDACTED] (assuming the [REDACTED] is exercised in full), our registered capital will be RMB[REDACTED], consisting of [1,637,193,385] Domestic Shares and [REDACTED] H Shares, which represent approximately [REDACTED]% and [REDACTED]% of our total issued share capital, respectively.

VII-2 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX VII STATUTORY AND GENERAL INFORMATION

C. Restriction on Share Repurchase

For details of the restriction on the share repurchase by our Bank, please see Appendix IV – “Summary of Principal Legal and Regulatory Provisions” and Appendix V – “Summary of Articles of Association”.

D. Resolutions of Our Shareholders

Resolutions were passed on the Shareholders’ general meeting on September 30, 2017, pursuant to which, among other things:

(a) the [REDACTED], the [REDACTED] and the [REDACTED] were approved; and

(b) our Board of Directors and the persons authorized by our Board of Directors were authorized to handle all matters relating to the [REDACTED].

Resolutions were passed on the Shareholders’ general meeting on May 30, 2018, pursuant to which, among other things, certain amendments to our Articles of Association in compliance with the requirements of the Listing Rules and other applicable laws and regulations were approved. On September 30, 2017, our Board of Directors and the authorized persons approved by the Board of Directors were authorized to make further amendments to our Articles of Association according to the opinions given by the relevant regulatory authorities of the PRC and Hong Kong. The relevant amendments will become effective from the [REDACTED].

2. FURTHER INFORMATION ABOUT OUR BUSINESS

A. Summary of Our Material Contracts

We entered into the following contracts (not being contracts entered into in our ordinary course of business) within the two years preceding the date of this document, which are or may be material:

(1) [a [REDACTED] dated [●], 2018 and entered into among our Bank, [●] as investor, [●] as described in the section headed “[REDACTED]” in this document]; and

(2) the [REDACTED].

VII-3 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX VII STATUTORY AND GENERAL INFORMATION

B. Intellectual Property Rights

(a) Trademarks

As of the Latest Practicable Date, we had registered the following trademarks, which are or may be material to our business.

Place of Registration No. Trademark Registration Classes(1) No. Valid Period 1 PRC 36 10446889 March 28, 2013 to March 27, 2023

2 Hong Kong 36 304307788 October 19, 2017 to October 18, 2027

3 Hong Kong 36 304307805 October 19, 2017 to October 18, 2027

4 Hong Kong 36 304307823 October 19, 2017 to October 18, 2027

5 PRC 38 and 42 21272860 November 14, 2017 to November 13, 2027

6 PRC 38 and 42 21272861 November 14, 2017 to November 13, 2027

7 PRC 38 and 42 21272862 November 14, 2017 to November 13, 2027

8 PRC 38 and 42 21272865 November 14, 2017 to November 13, 2027

VII-4 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX VII STATUTORY AND GENERAL INFORMATION

Place of Registration No. Trademark Registration Classes(1) No. Valid Period 9 PRC 38 and 42 21272866 November 14, 2017 to November 13, 2027

10 PRC 38 and 42 21272867 November 14, 2017 to November 13, 2027

11 PRC 42 21272863 January 14, 2018 to January 13, 2028

12 PRC 38 and 42 21272864 January 14, 2018 to January 13, 2028

Note:

(1) For details of the classification of goods for trademarks, please see the paragraph headed “– 2. Further Information about Our Business – B. Intellectual Property Rights – (b) Classification of Goods for Trademarks”.

VII-5 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX VII STATUTORY AND GENERAL INFORMATION

(b) Classification of Goods for Trademarks

The table below sets out the classification of goods for trademarks (the detailed classification in relation to the relevant trademarks depends on the details set out in the relevant trademark certificates and may differ from the list below):

Class Number Goods 36 Insurance; financial affairs; monetary affairs; real estate affairs

38 Telecommunications

42 Scientific and technological services and research and design services relating thereto; industrial analysis and research services; design and development of computer hardware and software

As of the Latest Practicable Date, our Bank has registered the following domain names, which are or may be material to our business:

Place of No. Domain Name Registration Owner Effective Period 1 lzccb.cn PRC Bank May 25, 2006 to June 25, 2026 2 lubaer.com PRC Bank October 23, 2015 to October 23, 2018 3 lubaer.net PRC Bank October 23, 2015 to October 23, 2018 4 lubaer.cn PRC Bank October 23, 2015 to October 23, 2018 5 瀘貝爾.cn PRC Bank October 23, 2015 to October 23, 2019 6 瀘貝爾.com PRC Bank October 23, 2015 to October 23, 2019 7 瀘貝爾.net PRC Bank October 23, 2015 to October 23, 2019 8 瀘貝爾.中國 PRC Bank October 23, 2015 to October 23, 2019 9 瀘貝爾.公司 PRC Bank October 23, 2015 to October 23, 2019 10 瀘貝爾.網絡 PRC Bank October 23, 2015 to October 23, 2019 11 lubaer.top PRC Bank October 23, 2015 to October 23, 2018 12 96830.com.cn PRC Bank May 31, 2012 to May 31, 2021 13 96830.mobi PRC Bank May 31, 2012 to May 31, 2021 14 96830.net.cn PRC Bank May 31, 2012 to May 31, 2021 15 酒城銀行.cn PRC Bank February 15, 2011 to February 15, 2019 16 酒城銀行.中國 PRC Bank February 15, 2011 to February 15, 2019

Save as disclosed herein, there are no other trademarks, copyrights, domain names, patents or other intellectual or industrial property rights which are or may be material to our business.

C. Our Depositors and Borrowers

Our five largest depositors and five largest borrowers accounted for less than 30% of the respective total customer deposits and gross customer loans as of the Latest Practicable Date.

VII-6 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX VII STATUTORY AND GENERAL INFORMATION

3. FURTHER INFORMATION ABOUT OUR SUBSTANTIAL SHAREHOLDERS, DIRECTORS, MANAGEMENT AND STAFF

A. Substantial Shareholders

So far as the Directors are aware, immediately following the completion of the [REDACTED], the following persons (other than our Directors, Supervisors and chief executive of our Bank) will have or be deemed or taken to have interests and/or short positions in the Shares or underlying Shares which would be required to be disclosed to us and the Hong Kong Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or will, directly or indirectly, be interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at our general meetings:

Interests or short positions of substantial Shareholders in our Shares or underlying Shares

VII-7 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX VII STATUTORY AND GENERAL INFORMATION

Immediately following the completion of the Immediately following the completion of the [REDACTED] (assuming no exercise of the [REDACTED] (assuming full exercise of the [REDACTED]) [REDACTED]) Approximate Approximate Number of Approximate %ofthe Number of Approximate %ofthe Shares %of relevant Shares %of relevant Name of Nature of Class of directly or interest in class of directly or interest in class of Shareholder interest Shares indirectly held our Bank Shares indirectly held our Bank Shares Luzhou Industrial Beneficial Domestic [REDACTED][REDACTED][REDACTED][REDACTED][REDACTED][REDACTED] Investment owner Shares Group(4) Interest in Domestic [REDACTED][REDACTED][REDACTED][REDACTED][REDACTED][REDACTED] controlled Shares corporation Xinglu Investment Beneficial Domestic [REDACTED][REDACTED][REDACTED][REDACTED][REDACTED][REDACTED] Group(5) owner Shares Interest in Domestic [REDACTED][REDACTED][REDACTED][REDACTED][REDACTED][REDACTED] controlled Shares corporations Luzhou Municipal Beneficial Domestic [REDACTED][REDACTED][REDACTED][REDACTED][REDACTED][REDACTED] Finance Bureau owner Shares Luzhou State-owned Beneficial Domestic [REDACTED][REDACTED][REDACTED][REDACTED][REDACTED][REDACTED] Assets Company owner Shares Xinglu Jutai Real Beneficial Domestic [REDACTED][REDACTED][REDACTED][REDACTED][REDACTED][REDACTED] Estate owner Shares Luzhou Chengnan Interest in Domestic [REDACTED][REDACTED][REDACTED][REDACTED][REDACTED][REDACTED] Construction controlled Shares Investment corporation Co., Ltd. (瀘州市城南建設投資有限公司)(6) Luzhou Fundamental Beneficial Domestic [REDACTED][REDACTED][REDACTED][REDACTED][REDACTED][REDACTED] Infrastructure owner Shares Construction Interest in Domestic [REDACTED][REDACTED][REDACTED][REDACTED][REDACTED][REDACTED] Investment controlled Shares Co., Ltd. corporations (瀘州市基礎建設投資有限公司)(6) China Development Interest in Domestic [REDACTED][REDACTED][REDACTED][REDACTED][REDACTED][REDACTED] Fund Co., Ltd. controlled Shares (國開發展基金有 corporations 限公司)(6) China Development Interest in Domestic [REDACTED][REDACTED][REDACTED][REDACTED][REDACTED][REDACTED] Bank controlled Shares (國家開發銀行)(6) corporations Luzhou Xinglu City Interest in Domestic [REDACTED][REDACTED][REDACTED][REDACTED][REDACTED][REDACTED] Development controlled Shares Investment Fund corporations Partnership (Limited partnership) (瀘州市興瀘城市發展投資基金合伙企業(有限合伙))(6)

VII-8 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX VII STATUTORY AND GENERAL INFORMATION

Notes:

(1) Luzhou Laojiao Group is our largest Shareholder and one of our state-owned Shareholders. It is wholly-owned by Luzhou SASAC. Immediately following the completion of the [REDACTED] (assuming the [REDACTED] is not exercised), Luzhou Laojiao Group directly held [REDACTED] Domestic Shares, representing [REDACTED]% equity interest in our Bank and indirectly held [REDACTED] Domestic Shares, representing [REDACTED]% equity interest in our Bank through its controlled company Luzhou Laojiao Co., Ltd. (瀘州老窖股份有限公司). By virtue of the SFO, Luzhou Laojiao Group is deemed to be interested in the Domestic Shares held by Luzhou Laojiao Co., Ltd. (2) Mr. Xiong Guoming and Ms. Jiang Xiaoying held 80% and 20% equity interest in Sichuan Jiale Group, respectively. Immediately following the completion of the [REDACTED] (assuming the [REDACTED] is not exercised), Sichuan Jiale Group directly held [REDACTED] Domestic Shares, representing [REDACTED]% equity interest in our Bank and indirectly held [REDACTED] Domestic Shares, representing [REDACTED]% equity interest in our Bank through its indirectly owned subsidiary, Jiale Real Estate. By virtue of the SFO, Sichuan Jiale Group is deemed to be interested in the Domestic Shares held by Jiale Real Estate. Mr. Xiong Guoming is deemed to be interested in the Domestic Shares held by Sichuan Jiale Group and Jiale Real Estate for the purpose of the SFO. Ms. Jiang Xiaoying is the spouse of Mr. Xiong Guoming and is deemed to be interested in the Domestic Shares which are interested by Mr. Xiong Guoming under the SFO.

(3) Mr. Lai Dafu and Ms. Ge Xiuqiong held 60% and 40% in Sichuan Xinfu Industrial Group Co., Ltd. (四川鑫福產業集團有限公司), respectively. Sichuan Xinfu Industrial Group Co., Ltd. held 92% equity interest in Xinfu Mining Industry Group. By virtue of the SFO, each of Mr. Lai Dafu, Ms. Ge Xiuqiong and Sichuan Xinfu Industrial Group Co., Ltd. is deemed to be interested in the Domestic Shares held by Xinfu Mining Industry Group. (4) Immediately following the completion of the [REDACTED] (assuming the [REDACTED] is not exercised), Luzhou Industrial Investment Group directly held [REDACTED] Domestic Shares, representing [REDACTED]% equity interest in our Bank and indirectly held [REDACTED] Domestic Shares, representing [REDACTED]% equity interest in our Bank through its subsidiary, Luzhou State-owned Assets Company. By virtue of the SFO, Luzhou Industrial Investment Group is deemed to be interested in the Domestic Shares held by Luzhou State-owned Assets Company. (5) Immediately following the completion of the [REDACTED] (assuming the [REDACTED] is not exercised), Xinglu Investment Group directly held [REDACTED] Domestic Shares, representing [REDACTED]% equity interest in our Bank and indirectly held [REDACTED] Domestic Shares, representing [REDACTED]% equity interest in our Bank through its controlled corporations, Xinglu Jutai Real Estate, Luzhou Laojiao Co., Ltd. (瀘州老窖股份有限公司), Luzhou Xinglu Financing Guarantee Co., Ltd. (瀘州市興瀘融資擔保有限公司) and Luzhou Fundamental Infrastructure Construction Investment Co., Ltd. (瀘州市基礎建設投資有限公司). By virtue of the SFO, Xinglu Investment Group is deemed to be interested in the Domestic Shares held by Xinglu Jutai Real Estate, Luzhou Laojiao Co., Ltd., Luzhou Xinglu Financing Guarantee Co., Ltd. and Luzhou Fundamental Infrastructure Construction Investment Co., Ltd. Please refer to the section headed “History and Development” for the acting-in-concert agreement entered into by Luzhou Laojiao Group and Xinglu Investment Group with respect to their respective shareholdings in Luzhou Laojiao Co., Ltd. (6) Xinglu Jutai Real Estate is held as to 53% by Xinglu Investment Group and as to 47% by Luzhou Chengnan Construction Investment Co., Ltd., in which Luzhou Fundamental Infrastructure Construction Investment Co., Ltd. and China Development Fund Co., Ltd. (國開發展基金有限公司) held 50.82% and 41.18% equity interest, respectively. China Development Fund Co., Ltd. is a wholly-owned subsidiary of China Development Bank. Xinglu Investment Group and Luzhou Xinglu City Development Investment Fund Partnership (Limited partnership) held 45.50% and 39.17% in Luzhou Fundamental Infrastructure Construction Investment Co., Ltd., respectively. The general partner of Luzhou Xinglu City Development Investment Fund Partnership (Limited partnership) is Luzhou Xinglu Equity Investment Fund Management Co., Ltd. (瀘州興瀘股權投資基金管理有限公司), which is held as to 99% by Xinglu Investment Group. By virtue of the SFO, each of Xinglu Investment Group, Luzhou Xinglu Equity Investment Fund Management Co., Ltd., Luzhou Xinglu City Development Investment Fund Partnership (Limited partnership), Luzhou Fundamental Infrastructure Construction Investment Co., Ltd., China Development Fund Co., Ltd., China Development Bank and Luzhou Chengnan Construction Investment Co., Ltd. is deemed to be interested in the Domestic Shares held by Xinglu Jutai Real Estate.

VII-9 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX VII STATUTORY AND GENERAL INFORMATION

B. Disclosure of the Directors’ and Supervisors’ interests in our issued share capital or our associated corporations

Save as disclosed below, immediately following the completion of the [REDACTED] (assuming the [REDACTED] is not exercised), none of our Directors, Supervisors and chief executive will have any interests or short positions in the Shares, underlying Shares or debentures of our Bank or any associated corporations (within the meaning of Part XV of the SFO) which will have to be notified to us and the Hong Kong Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and/or short positions which they are taken or deemed to have under such provisions of the SFO), or any interests or short positions, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies under the Listing Rules which will be required to be notified to us and the Hong Kong Stock Exchange upon the [REDACTED], or any interests or short positions, pursuant to section 352 of the SFO, which will be required to be entered in the register referred to therein. For this purpose, the relevant provisions of the SFO shall be construed as if they are applicable to our Supervisors.

Interests in our Bank

Directors

Number of Shares directly Approximate % or indirectly of interest in Name of Director Capacity Class of Shares held our Bank Mr. Xiong Guoming Interest in controlled Domestic Shares [REDACTED][REDACTED] (熊國銘) corporations Mr. LIU Shirong Beneficial Owner Domestic Shares [REDACTED][REDACTED] (劉仕榮)

Supervisor

Number of Shares directly Approximate % or indirectly of interest in Name of Supervisor Capacity Class of Shares held our Bank Chen Yong (陳勇)(1) Interest of spouse Domestic Shares [REDACTED][REDACTED]

Note: (1) Ms. Lan Ying (蘭英), the spouse of Mr. Chen Yong, held [REDACTED] Domestic Shares of our Bank. Mr. Chen Yong is deemed to be interested in the Domestic Shares held by Ms. Lan Ying under the SFO.

C. Particulars of Service Contracts

Pursuant to Rules 19A.54 and 19A.55 of the Listing Rules, we have entered into a service contract with each of our Directors and Supervisors in respect of, among other things, compliance with relevant laws and regulations, observation of the Articles of Association and provisions on arbitration. Save as disclosed above, we have not entered, and do not propose to enter, into any service contracts with any of our Directors or Supervisors in their respective capacities as Directors or Supervisors (other than contracts expiring or determinable by the employer within one year without payment of any compensation (other than statutory compensation)).

VII-10 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX VII STATUTORY AND GENERAL INFORMATION

D. Directors’ and Supervisors’ Remuneration

The aggregate amounts of remuneration paid by us to our Directors and Supervisors for the three years ended December 31, 2015, 2016 and 2017 and the six months ended June 30, 2018 were approximately RMB5.3 million, RMB5.6 million, RMB6.3 million and RMB1.3 million respectively.

It is estimated that remuneration equivalent to approximately RMB6.5 million in aggregate will be paid to the Directors and Supervisors by our Bank for the year ending December 31, 2018 based on the arrangements in force as of the date of this document.

E. Personal Guarantees

No Director or Supervisor has provided personal guarantees for the benefit of the lenders in connection with any banking facilities granted to our Bank.

F. Agency Fees or Commissions Paid or Payable

Save as disclosed in this document, none of the Directors or any of the persons whose names are listed in “– 4. Other Information – E. Qualification of Experts” had received any commissions, discounts, agency fees, brokerages or other special terms from us in connection with the issuance or sale of any of our capital within the two years preceding the date of this document.

G. Disclaimers

Save as disclosed in this document:

(a) none of the Directors, Supervisors or the parties listed in “– 4. Other Information – E. Qualification of Experts” is:

(i) interested in our promotion, or in any assets which have, within the two years immediately preceding the date of this document, been acquired or disposed of by or leased to our Bank, or are proposed to be acquired or disposed of by or leased to our Bank;

(ii) materially interested in any contract or arrangement subsisting as of the date of this document which is significant to our business;

(b) save in connection with the [REDACTED] and the [REDACTED], none of the parties listed in “– 4. Other Information – E. Qualification of Experts”:

(i) is interested legally or beneficially in any of our Shares or our securities; or

(ii) has any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for our Shares or any of our securities;

VII-11 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX VII STATUTORY AND GENERAL INFORMATION

(c) none of our Directors or Supervisors is a director or employee of a company which has an interest or short position in the Shares and underlying Shares of our Bank that has to be disclosed pursuant to Divisions 2 and 3 of Part XV of the SFO after the [REDACTED]; and

(d) so far as is known to any Director or chief executive of our Bank, no person has an interest or a short position in the Shares and underlying Shares which would fall to be disclosed to our Bank and the Hong Kong Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or is, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at our general meetings, once our H Shares are [REDACTED]onthe Hong Kong Stock Exchange.

4. OTHER INFORMATION

A. Estate Duty

Our Directors have been advised that currently there is no material liability for estate duty under PRC law that is likely to be imposed on us.

B. Litigation

Save as disclosed in “Business – Legal and Administrative Proceedings”, our Bank is not involved in any litigation, arbitration or administrative proceedings of material importance as of the Latest Practicable Date, and so far as we are aware, no litigation, arbitration or administrative proceedings of material importance is pending or threatened against us as of the Latest Practicable Date.

C. Sole Sponsor

The Sole Sponsor has made an application on our behalf to the [REDACTED] of the Hong Kong Stock Exchange for the [REDACTED] of, and permission to [REDACTED], our H Shares to be issued or sold (including any additional H Shares that may be issued or sold pursuant to the exercise of the [REDACTED]) under the [REDACTED]. All necessary arrangements have been made to enable the securities to be admitted into [REDACTED].

The Sole Sponsor satisfies the independence criteria set out in Rule 3A.07 of the Listing Rules.

We have entered into an engagement agreement with the Sole Sponsor pursuant to which we agreed to pay a total amount of RMB6.0 million to the Sole Sponsor to act as the sponsor to our Bank in the [REDACTED].

D. Preliminary Expenses

Our Bank has not incurred any material preliminary expenses.

VII-12 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX VII STATUTORY AND GENERAL INFORMATION

E. Qualification of Experts The qualifications of the experts (as defined under the Listing Rules and the Companies (Winding up and Miscellaneous Provisions) Ordinance) who have given opinions or advice in this document are as follows.

Name Qualification CLSA Capital Markets Limited Licensed corporation under the SFO permitted to conduct type 4 (advising on securities) and type 6 (advising on corporate finance) regulated activities as defined under the SFO

PricewaterhouseCoopers Certified Public Accountants

JunHe LLP Legal advisors as to PRC law

F. No Material Adverse Change Our Directors confirm that there has been no material adverse change in our financial or trading position or prospect since June 30, 2018 (being the date on which our latest audited financial statements were made up).

G. Binding Effect This document shall have the effect, if an application is made in pursuance hereof, of rendering all persons concerned bound by all the provisions (other than the penal provisions) of sections 44A and 44B of the Companies (Winding Up and Miscellaneous Provisions) Ordinance so far as applicable.

H. Miscellaneous Save as disclosed in this document: (a) within the two years preceding the date of this document, (i) we have not issued nor agreed to issue any share or loan capital fully or partly paid either for cash or for a consideration other than cash; (ii) no commissions, discounts, brokerage fee or other special terms have been granted in connection with the issue or sale of any shares of our Bank; and (iii) no commission had been paid or payable (but not including commission to [REDACTED]) for [REDACTED], agreeing to [REDACTED], procuring [REDACTED] or agreeing to procure [REDACTED] of any share in our Bank; (b) no share or loan capital is under option or is agreed conditionally or unconditionally to be put under option; (c) we have not issued nor agreed to issue any founder shares, management shares or deferred shares; (d) none of our equity and debt securities is listed or dealt with on any other stock exchange nor is any listing or permission to deal being or proposed to be sought; (e) there are no arrangements under which future dividends are waived or agreed to be waived;

VII-13 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX VII STATUTORY AND GENERAL INFORMATION

(f) there are no procedures for the exercise of any right of pre-emption or transferability of subscription rights; (g) there are no contracts for hire or hire purchase of any plant to or by us for a period of over one year which are substantial in relation to our business; (h) there have been no interruptions in our business which may have or have had a significant effect on our financial position in the last 12 months; (i) there are no restrictions affecting the remittance of profits or repatriation of capital by us into Hong Kong from overseas; (j) we have no outstanding convertible debt securities; and (k) we currently do not intend to apply for the status of a sino-foreign investment joint stock limited company and do not expect to be subject to the Sino-foreign Joint Venture Law of the PRC.

I. Consents Each of CLSA Capital Markets Limited, PricewaterhouseCoopers and JunHe LLP has given and has not withdrawn its written consents to the issue of this document with the inclusion of its report, letter and/or opinion (as the case may be) and the references to its name included herein in the form and context in which it respectively appears.

J. Bilingual Document The English language and Chinese language versions of this document are being published separately, in reliance upon the exemption provided by section 4 of the Companies (Exemption of Companies and Prospectuses from Compliance with Provisions) Notice (Chapter 32L of the Laws of Hong Kong).

K. Promoters Our promoters comprised Luzhou Municipal Finance Bureau, the original shareholders of eight urban credit cooperatives and two rural credit cooperatives and other new corporate shareholders.

The other new corporate shareholders are set out in the following table:

No. Name 1. Sichuan Luzhou Jiale Real Estate Co., Ltd. (四川省瀘州市佳樂房地產有限責任公司) 2. Luzhou Electricity Enterprise Group Company (瀘州電力企業集團公司) 3. Luzhou Bibili Apparel Co., Ltd. (瀘州比比利服裝有限責任公司) 4. Sichuan Luzhou Cereals and Oil Enterprise Group Company (四川瀘州糧油企業集團公司) 5. Sichuan Luzhou Great Wall Industrial Corporation (四川省瀘州長城實業總公司) 6. Sichuan Heyi Electricity Co., Ltd. (四川和益電力股份有限公司) 7. Luzhou Machine Factory (瀘州機器廠) 8. Lutianhua Group Co., Ltd. (瀘天化(集團)有限責任公司) 9. Luzhou Laojiao Co., Ltd. (瀘州老窖股份有限公司) 10. Sichuan Yangtze River Wood Industry Corporation Luzhou Distribution Company (四川省長江木業總公司瀘州經銷公司) 11. State-run Torch Chemical Plant (國營火炬化工廠)

VII-14 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX VII STATUTORY AND GENERAL INFORMATION

Save for the [REDACTED] and as disclosed in this document, within the two years immediately preceding the date of this document, no cash, securities or other benefits has been paid, allotted or given, or has been proposed to be paid, allotted or given, to any of the promoters above in connection with the [REDACTED] or the transactions described in this document.

VII-15 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX VIII DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES AND AVAILABLE FOR INSPECTION

1. DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES

The documents attached to the copy of this document and delivered to the Registrar of Companies in Hong Kong for registration were:

(a) copies of the [REDACTED];

(b) the written consents referred to in the paragraph entitled “4. Other Information – I. Consents” in Appendix VII to this document; and

(c) copies of the material contracts referred to in the paragraph entitled “2. Further Information about our Business – A. Summary of our Material Contracts” in Appendix VII to this document.

2. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the office of Paul Hastings at 21-22/F, Bank of China Tower, 1 Garden Road, Hong Kong, during normal business hours from 9:00 a.m. to 5:00 p.m. up to and including the date which is 14 days from the date of this document

(a) the Articles of Association;

(b) the accountant’s report from PricewaterhouseCoopers in respect of the historical financial information of the Bank for each of the three years ended December 31, 2015, 2016 and 2017 and the six months ended June 30, 2018, the text of which is set forth in Appendix I to this document;

(c) the unaudited supplementary financial information of the Bank, the text of which is set out in Appendix II to this document;

(d) the report from PricewaterhouseCoopers in respect of the unaudited [REDACTED] financial information of the Bank, the text of which is set forth in Appendix III to this document;

(e) the audited financial statements of the Bank for each of the three years ended December 31, 2015, 2016 and 2017 and the six months ended June 30, 2018;

(f) the material contracts referred to in the paragraph entitled “2. Further Information about our Business – A. Summary of our Material Contracts” in Appendix VII to this document;

(g) the written consents referred to in the paragraph entitled “4. Other Information – I. Consents” in Appendix VII to this document;

(h) the service contracts referred to in the paragraph entitled “3. Further Information about our Substantial Shareholders, Directors, Management and Staff – C. Particulars of Service Contracts” in Appendix VII to this document;

(i) the legal opinions issued by JunHe LLP, the legal advisors of our Bank as to the PRC laws, in respect of, among other things, the general matters and property interests of our Bank; and

VIII-1 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX VIII DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES AND AVAILABLE FOR INSPECTION

(j) the following PRC laws and regulations, together with unofficial English translations thereof:

(i) the PRC Company Law;

(ii) the PRC Securities Law;

(iii) the Special Regulations;

(iv) the Mandatory Provisions;

(v) the Provisional Regulations Concerning the Issue and Trading of Shares;

(vi) the PRC Arbitration Law;

(vii) the PRC Civil Procedure Law; and

(viii) the PRC Commercial Banking Law.

VIII-2