IMPORTANT

IMPORTANT: If you are in any doubt about any of the contents of this prospectus, you should seek independent professional advice.

Bank of Guizhou Co., Ltd.* 貴州銀行股份有限公司* (A joint stock company incorporated in the People’s Republic of China with limited liability) GLOBAL OFFERING Number of Offer Shares in : 2,200,000,000 H Shares (subject to the the Global Offering Over-Allotment Option) Number of Offer Shares in : 1,980,000,000 H Shares (subject to adjustment the International Offering and the Over-Allotment Option) Number of Hong Kong Offer Shares : 220,000,000 H Shares (subject to adjustment) Maximum Offer Price : HK$2.61 per H Share, plus brokerage of 1%, SFC transaction levy of 0.0027% and Hong Kong Stock Exchange trading fee of 0.005% (payable in full on application in Hong Kong dollars and subject to refund) Nominal value : RMB1.00 per H Share Stock code : 6199 Joint Sponsors

Joint Global Coordinators

Joint Bookrunners

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 prospectus, 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 prospectus. A copy of this prospectus, having attached thereto the documents specified in “Appendix VIII – Documents Delivered to the Registrar of Companies and Available for Inspection” to this prospectus, 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 prospectus or any other document referred to above. The Offer Price is expected to be fixed by agreement between the Joint Representatives (on behalf of the Underwriters) and us on the Price Determination Date, which is expected to be on or around Thursday, December 19, 2019 (Hong Kong time) and, in any event, not later than Monday, December 23, 2019 (Hong Kong time). The Offer Price will be not more than HK$2.61 per H Share and is currently expected to be not less than HK$2.46 per H Share. Investors applying for the Hong Kong Offer Shares must pay, on application, the maximum Offer Price of HK$2.61 per Hong Kong Offer Share, unless otherwise announced, together with a brokerage fee of 1%, a Hong Kong Stock Exchange trading fee of 0.005% and a SFC transaction levy of 0.0027%, subject to refund if the Offer Price should be lower than HK$2.61. The Joint Representatives (on behalf of the Underwriters) may, with our consent, reduce the number of Offer Shares being offered in the Global Offering and/or the indicative offer price range below that stated in this prospectus at any time prior to the morning of the last day for lodging applications under the Hong Kong Public Offering. In such a case, a notice of the reduction in the number of Offer Shares being offered in the Global Offering and/or the indicative offer price range will be published on the website of the Bank at www.bgzchina.com and the website of the Hong Kong Stock Exchange at www.hkexnews.hk not later than the morning of the last day for lodging applications under the Hong Kong Public Offering. For further information, see “Structure of the Global Offering” and “How to Apply for Hong Kong Offer Shares” in this prospectus. If, for any reason, the Offer Price is not agreed on or before Monday, December 23, 2019 between the Joint Representatives (on behalf of the Underwriters) and us, the Global Offering will not proceed and will lapse. We are incorporated, and all of our businesses are located, in the PRC. Potential investors should be aware of the differences in the legal, economic and financial systems between the PRC and Hong Kong, and that there are different risk factors relating to investment in PRC-incorporated companies. Potential investors 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 H Shares. Such differences and risk factors are set forth in the sections entitled “Risk Factors,” “Supervision and Regulation,” “Appendix V – Summary of Principal Legal and Regulatory Provisions” and “Appendix VI – Summary of Articles of Association” in this prospectus. The obligations of the Hong Kong Underwriters under the Hong Kong Underwriting Agreement are subject to termination by the Joint Representatives (on behalf of the Underwriters) if certain grounds arise prior to 8:00 a.m. on the Listing Date. Such grounds are set forth in the section entitled “Underwriting – Underwriting Arrangements and Expenses – Hong Kong Public Offering – Grounds for Termination” of this prospectus. The Offer Shares have not been and will not be registered under the U.S. Securities Act of 1933, as amended and may not be offered, sold, pledged or transferred within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements under the U.S. Securities Act of 1933, as amended. The Offer Shares are being offered, sold or delivered only outside the United States in accordance with Regulation S under the U.S. Securities Act of 1933, as amended.

* Bank of Guizhou Co., Ltd. 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 and/or deposit-taking business in Hong Kong.

December 16, 2019 EXPECTED TIMETABLE(1)

Latest time for completing electronic applications under White Form eIPO service through the designated website www.eipo.com.hk(2) ...... 11:30 a.m. on Thursday, December 19, 2019 Application lists open(3) ...... 11:45 a.m. on Thursday, December 19, 2019 Latest time for lodging WHITE and YELLOW Application Forms ...... 12:00 noon on Thursday, December 19, 2019 Latest time for giving electronic application instructions to HKSCC(4) ...... 12:00 noon on Thursday, December 19, 2019 Latest time for completing payment for White Form eIPO applications by effecting Internet banking transfer(s) or PPS payment transfer(s) ...... 12:00 noon on Thursday, December 19, 2019 Application lists close(3) ...... 12:00 noon on Thursday, December 19, 2019 Expected Price Determination Date(5) ...... Thursday, December 19, 2019 (1) Announcement of: • the Offer Price; • the level of applications in the Hong Kong Public Offering; • the level of indications of interest in the International Offering; and • the basis of allotment of the Hong Kong Offer Shares to be published on the website of the Hong Kong Stock Exchange at www.hkexnews.hk(6) and the Bank’s website at http://www.bgzchina.com(6) on ...... Friday, December 27, 2019 (2) Announcement of results of allocations in the Hong Kong Public Offering (including successful applicants’ identification document numbers, where appropriate) will be available through a variety of channels (see “How to Apply for Hong Kong Offer Shares – 11. Publication of Results”) from ...... Friday, December 27, 2019

Results of allocations in the Hong Kong Public Offering will be available at www.iporesults.com.hk (alternatively: English https://www.eipo.com.hk/en/Allotment; Chinese https://www.eipo.com.hk/zh-hk/Allotment) with a “search by ID” function from ...... Friday, December 27, 2019 H Share certificates in respect of wholly or partially successful applications to be despatched or deposited into CCASS on or before(7) ...... Friday, December 27, 2019 White Form e-Refund payment instructions/refund cheques in respect of wholly or partially unsuccessful applications to be despatched on or before(8)(9) ...... Friday, December 27, 2019 Dealings in the H Shares on the Hong Kong Stock Exchange expected to commence at ...... 9:00 a.m. on Monday, December 30, 2019

–i– EXPECTED TIMETABLE(1)

(1) All dates and times refer to Hong Kong local time, except as otherwise stated. For details of the structure of the Global Offering, including conditions of the Hong Kong Public Offering, see “Structure of the Global Offering.” (2) You will not be permitted to submit your application to the White Form eIPO Service Provider through the designated website at www.eipo.com.hk after 11:30 a.m. on the last day for submitting applications. If you have already submitted your application and obtained an application reference number from the designated website prior to 11:30 a.m., you will be permitted to continue the application process (by completing payment of the application monies) until 12:00 noon on the last day for submitting applications, when the application lists close. (3) If there is a “black” rainstorm warning or a tropical cyclone warning signal number 8 or above and/or Extreme Conditions in force in Hong Kong at any time between 9:00 a.m. and 12:00 noon on Thursday, December 19, 2019, the application lists will not open on that day. See “How to Apply for Hong Kong Offer Shares – 10. Effect of Bad Weather on the Opening of the Application Lists” for further details. (4) Applicants who apply for the Hong Kong Offer Shares by giving electronic application instructions to HKSCC should see “How to Apply for Hong Kong Offer Shares – 6. Applying by Giving Electronic Application Instructions to HKSCC via CCASS.” (5) The Price Determination Date is expected to be on or about Thursday, December 19, 2019, and, in any event, not later than Monday, December 23, 2019. If, for any reason, the Offer Price is not agreed between the Joint Representatives (on behalf of the Underwriters) and the Bank on or before Monday, December 23, 2019, the Global Offering will lapse. (6) None of the website or any of the information contained on the website forms part of this prospectus. (7) No temporary documents of title will be issued in respect of the Offer Shares. H Share certificates will only become valid certificates of title provided that (i) the Global Offering has become unconditional in all respects and (ii) the Underwriting Agreements have not been terminated in accordance with their respective terms prior to 8:00 a.m. on the Listing Date. Investors who trade H Shares on the basis of publicly available allocation details prior to the receipt of H Share certificates or prior to the H Share certificates becoming valid certificates of title do so entirely at their own risk. (8) Applicants who apply for 1,000,000 or more Hong Kong Offer Shares under the Hong Kong Public Offering and have provided all required information may collect refund cheque(s) (where applicable) and/or H Share certificate(s) (where applicable) in person from the Bank’s H Share Registrar, Computershare Hong Kong Investor Services Limited, at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, from 9:00 a.m. to 1:00 p.m. on Friday, December 27, 2019. Applicants being individuals who are eligible for personal collection must not authorize any other person to make collection on their behalf. Applicants being corporations who are eligible for personal collection must attend by their authorized representatives each bearing a letter of authorization from their corporation stamped with the corporation’s chop. Both individuals and authorized representatives (if applicable) must produce, at the time of collection, evidence of identity to the Bank’s H Share Registrar. Uncollected H Share certificates and refund cheques will be dispatched by ordinary post at the applicants’ own risk to the addresses specified on the relevant Application Forms. For details of the arrangements, see “How to Apply for Hong Kong Offer Shares – 14. Dispatch/Collection of H Share Certificates and Refund Monies.” (9) e-Refund payment instructions/refund cheques will be issued in respect of wholly or partially unsuccessful applications pursuant to the Hong Kong Public Offering and also in respect of wholly or partially successful applications in the event that the final Offer Price is less than the price payable per Offer Share on application.

The H Share certificates will only become valid certificates of title provided that the Global Offering has become unconditional in all respects and neither the Hong Kong Underwriting Agreement nor the International Underwriting Agreement is terminated in accordance with its respective terms prior to 9:00 a.m. on the Listing date (which is expected to be on or about Monday, December 30, 2019). Investors who trade the H Shares on the basis of publicly available allocation details prior to the receipt of H Share certificates or prior to the H Shares certificates becoming valid certificates of title do so entirely at their own risk.

The above expected timetable is a summary only. For details of the structure of the Global Offering, including its conditions, and the procedures for applications for Hong Kong Offer Shares, see “Structure of the Global Offering” and “How to Apply for Hong Kong Offer Shares” in this prospectus respectively.

–ii– CONTENTS

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

You should rely only on the information contained in this prospectus and the Application Forms to make your investment decision. We have not authorized anyone to provide you with information that is different from what is contained in this prospectus. Any information or representation not included in this prospectus must not be relied on by you as having been authorized by us, the Joint Sponsors, the Joint Representatives, the Joint Global Coordinators, the Joint Bookrunners, the Underwriters, any of our or their respective directors, officers, employees, agents or representatives of any of them, or any other person or party involved in the Global Offering. Information contained on our website at www.bgzchina.com does not form part of this prospectus.

Page

EXPECTED TIMETABLE...... i

CONTENTS ...... iii

SUMMARY ...... 1

DEFINITIONS AND CONVENTIONS ...... 13

FORWARD-LOOKING STATEMENTS ...... 27

RISK FACTORS ...... 28

WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES .... 66

INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING...... 72

DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING...... 77

CORPORATE INFORMATION ...... 85

– iii – CONTENTS

INDUSTRY OVERVIEW ...... 87

SUPERVISION AND REGULATION ...... 101

OUR HISTORY AND DEVELOPMENT...... 142

BUSINESS ...... 152

RISK MANAGEMENT ...... 203

CONNECTED TRANSACTIONS ...... 237

DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT ...... 239

SUBSTANTIAL SHAREHOLDERS...... 264

SHARE CAPITAL ...... 266

ASSETS AND LIABILITIES ...... 270

FINANCIAL INFORMATION...... 338

FUTURE PLANS AND USE OF PROCEEDS...... 408

UNDERWRITING ...... 409

STRUCTURE OF THE GLOBAL OFFERING...... 420

HOW TO APPLY FOR HONG KONG OFFER SHARES ...... 432

APPENDIX I ACCOUNTANTS’ REPORT ...... I-1

APPENDIX II UNAUDITED SUPPLEMENTARY FINANCIAL INFORMATION ...... II-1

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION ...... III-1

APPENDIX IV TAXATION AND FOREIGN EXCHANGE...... IV-1

APPENDIX V SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS...... V-1

APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION ...... 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– SUMMARY

This summary aims to give you an overview of the information contained in this prospectus. As it is a summary, it does not contain all the information that may be important to you and is qualified in its entirety by, and should be in conjunction with, the full text of this prospectus. You should read the whole prospectus before you decide to invest in our H Shares. There are risks associated with any investment. Some of the particular risks in investing in our H Shares are set out in “Risk Factors” of this prospectus. You should read that section carefully before you decide to invest in our H Shares. OVERVIEW We are a leading city commercial bank initiated by Guizhou provincial government, with strong support from the local government and our shareholders. According to the CBIRC Guizhou Office, as of December 31, 2018, we ranked fourth and fifth, respectively, among all banks with a presence in Guizhou Province in terms of total assets and total deposits generated from this province. Established in 2012 by consolidating three city commercial banks in Guizhou Province, we are committed to supporting the development of Guizhou Province’s financial services industry. Over our seven years of operating history, we have made considerable progress in terms of asset and profit scale. Our total assets increased from RMB228,949.3 million as of December 31, 2016 to RMB341,202.9 million as of December 31, 2018, representing a CAGR of 22.1%, which further increased to RMB389,622.4 million as of June 30, 2019. Our net profit increased from RMB1,961.4 million in 2016 to RMB2,876.6 million in 2018, representing a CAGR of 21.1%. In the six months ended June 30, 2019, our net profit increased to RMB1,789.7 million from RMB1,461.7 million in the same period in 2018. In addition, we maintained strong profitability and operating efficiency. In 2018, our net interest margin and net interest spread were 2.82% and 2.66%, respectively, both ranking second among all PRC city commercial banks listed in Hong Kong over the same period. As of December 31, 2018, our return on average total assets was 0.92% and return on average equity was 12.36%, both higher than the industry average of 0.90% and 11.73%, respectively, among all PRC commercial banks as of the same date, according to the CBIRC. As of June 30, 2019, our return on average total assets was 0.98%, and return on average equity was 13.56%. We are headquartered in Guiyang and have an extensive distribution network covering the entire Guizhou Province. As of June 30, 2019, we operated our business through our head office in Guiyang, eight branches and 207 sub-branches. We also provide convenient 24-hour online services to our customers through online banking, such as internet and mobile banking. Over the years, we have developed and launched multiple corporate banking products and services that are closely aligned with Guizhou Province’s economic structure and development strategy. For example, our corporate banking business is focused on serving the fast-growing infrastructure and transportation sectors in Guizhou Province, and actively caters to the financial needs of local tourism and education sectors as well as green finance projects. In addition, we have a strong capability in serving local micro and small enterprises. Through our diverse product offering, extensive branch network and improved service efficiency, we have helped local micro and small enterprises prosper. By doing so, we have built a leading corporate banking business, which reinforced our leading position in Guizhou Province. Adhering to our “customer-centered and market-oriented” philosophy, our retail banking business has grown rapidly by focusing on meeting different customer needs, pursuing business transition and technology upgrades, and leveraging our extensive branch network across Guizhou Province. For example, from December 31, 2016 to December 31, 2018, our personal deposits grew from RMB31,152.4 million to RMB63,109.1 million, at a CAGR of 42.3%, substantially higher than the industry average of all PRC commercial banks with a presence in Guizhou Province, according to the PBOC Guiyang Central Sub-branch. As of June 30, 2019, our personal deposits further increased to RMB74,853.6 million. We received strong support from the local government, such as local finance bureaus. For example, we formed a lasting business relationship with our substantial shareholder, Guizhou Provincial Finance Bureau, in providing financial services, such as deposit, treasury management, payroll and settlement services. As of June 30, 2019, we attracted RMB32.3 billion of deposits from finance bureaus at all levels of Guizhou Province. As a result, we have access to a stable source of capital at a relatively low cost. In addition, we have adhered to prudent and effective risk management and maintained sound asset quality. As of December 31, 2016, 2017 and 2018 and June 30, 2019, our NPL ratios were 1.91%, 1.60%, 1.36% and 1.09%, respectively.

–1– SUMMARY

Our principal business segments include corporate banking, retail banking and financial markets. Corporate banking business is our most important source of operating income. We provide our corporate customers with diversified financial products and services, including corporate loans, corporate deposits and fee- and commission-based products and services. We also offer a wide range of products and services to our retail customers, including loans, deposits, bank cards, and other fee- and commission-based services, and our retail banking business has grown significantly in recent years. Our financial markets business primarily includes investment business, money-market transactions, debt securities underwriting and distribution and interbank discount and rediscount of bills. See “Business – Our Principal Business Lines” for details of our principal business. The following table sets forth our operating income for each of our segments for the periods indicated: Six Months Year ended December 31, ended June 30, 2016 2017 2018 2019 %of %of %of %of Amount total Amount total Amount total Amount total (in millions of RMB, except percentages) Corporate banking 7,133.9 88.4 7,384.0 85.7 7,094.3 80.9 3,572.7 70.8 Retail banking 767.7 9.5 857.1 9.9 843.3 9.6 565.3 11.2 Financial markets 160.8 2.0 373.3 4.3 822.8 9.4 904.9 17.9 Others(1) 6.1 0.1 11.0 0.1 9.2 0.1 2.3 0.1

Total 8,068.5 100.0 8,625.4 100.0 8,769.6 100.0 5,045.2 100.0

(1) Include income and expenses that are not directly attributable to any specific segment, such as rental income. Our operating income increased during the Track Record Period, mainly due to our continued efforts to expand our corporate and retail banking business, as well as investment portfolio. OUR COMPETITIVE STRENGTHS We believe the following competitive advantages have positioned us favorably in the banking industry of Guizhou Province and will help drive our future growth: • As a leading city commercial bank initiated by Guizhou provincial government, we benefit from the rapid and substantial economic growth of Guizhou Province supported by favorable national policies; • Corporate banking business closely aligned with Guizhou Province’s economic structure and development strategy; • Fast growing retail banking business through meeting different customer needs, developing new products and providing one-stop services; • Prudent and effective risk management, and sound asset quality; • Long-term support from the local government and our shareholders; and • An experienced and aspiring management team and a sound workforce training, evaluation and incentive mechanism. OUR BUSINESS STRATEGIES We aim to become a first-class modern city commercial bank, create welfare for our staff, bring satisfaction to our customers, gain recognition from local governments and generate value for our shareholders. To this end, we intend to implement the following strategies: • Further expand our corporate client base and diversify our corporate banking business; • Further improve the scale and quality of our retail banking business; • Develop our financial markets business as a new driver of earnings growth; • Strengthen information technology capabilities and develop fintech; • Further enhance risk management capabilities to facilitate our strategic transition; and • Optimize human resource management systems and strengthen our workforce.

–2– SUMMARY

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 Accountants’ Report set forth in Appendix I, which was prepared in accordance with IFRS, and the sections headed “Assets and Liabilities” and “Financial Information.” The statements of profit or loss and other comprehensive income for the years ended December 31, 2016, 2017 and 2018 and the six months ended June 30, 2018 and 2019, as well as the statements of financial position as of December 31, 2016, 2017 and 2018 and June 30, 2019 set out below have been derived from the Accountants’ Report set forth in Appendix I. We have adopted International Financial Reporting Standard 9 “Financial Instruments” (“IFRS 9”) since January 1, 2018, resulting in changes in accounting policies. Compared with International Accounting Standard 39 “Financial Instruments” (“IAS 39”) that we adopted prior to January 1, 2018, the major changes adopted by IFRS 9 are the classification and measurement and the impairment model for 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. Furthermore, 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 with the incurred loss model under IAS 39, uses more forward-looking information instead of objective evidence of impairment as a precondition for recognizing credit losses. To illustrate the difference between IAS 39 and IFRS 9 and the impact on our financial results for 2018, we prepared financial information for 2018 according to IAS 39 and IFRS 9, respectively. The adoption of IFRS 9 for 2018 did not result in any significant impact on amounts reported in the financial information if compared with the adoption of IAS 39 exceptfor (i) a 0.6% decrease in the interest income in 2018 if compared with the result for the same period should we apply IAS 39, which led to an 1.1% decrease in the net interest income for the same period as compared to the result when applying IAS 39, together with a 40.6% increase in the net trading gains and a 25.5% increase in the net gains from investment securities, mainly due to reclassification of financial investments; (ii) a 5.4% increase in the deferred tax assets from December 31, 2017 to January 1, 2018, which was also attributable to the application of the expected credit loss model and reclassification of financial investments under IFRS 9; and (iii) a 1.7% decrease in the fair value reserve from December 31, 2017 to January 1, 2018, as well as a 21.3% decrease in the retained earnings from December 31, 2017 to January 1, 2018. See “Financial Information – Critical Accounting Estimates and Judgments – Impact of New Accounting Policies” and note 2(1)(a) to the Accountants’ Report in Appendix I. In addition, we have adopted International Financial Reporting Standard 15 “Revenue from Contracts with Customers” (“IFRS 15”) since January 1, 2018, resulting in changes in accounting policies. Compared with International Accounting Standard 18 “Revenue” (“IAS 18”) that we adopted prior to January 1, 2018, the adoption of IFRS 15 for 2018 does not result in any significant impact on our financial position and performance. See “Financial Information – Critical Accounting Estimates and Judgments – Impact of New Accounting Policies” and note 2(1)(a) to the Accountants’ Report in Appendix I. We have also adopted International Financial Reporting Standard 16 “Leases” (“IFRS 16”) since January 1, 2019, replacing International Accounting Standard 17 “Leases” (“IAS 17”) that we adopted prior to January 1, 2019 regarding operating leases. We used the modified retrospective approach for the adoption of IFRS 16, and recognized right-of-use assets and lease liabilities with an amount of RMB567.9 million as of January 1, 2019. There was no adjustment to the balance of equity as of January 1, 2019, and we did not restate the comparative information. Summary Statements of Financial Position December 31, June 30, 2016(1) 2017(1) 2018(2) 2019(2) %of %of %of %of Amount total Amount total Amount total Amount total (in millions of RMB, except percentages) Assets Gross loans and advances to customers 68,331.4 29.8 88,132.3 30.8 140,140.5 41.1 164,339.7 42.2 Interest receivables N/A N/A N/A N/A 333.4 0.1 336.9 0.1

–3– SUMMARY

December 31, June 30, 2016(1) 2017(1) 2018(2) 2019(2) %of %of %of %of Amount total Amount total Amount total Amount total (in millions of RMB, except percentages) Allowance for impairment losses (2,781.6) (1.2) (2,722.8) (1.0) (4,642.0) (1.4) (5,783.9) (1.5) Net loans and advances to customers 65,549.8 28.6 85,409.5 29.8 135,831.9 39.8 158,892.7 40.8 Gross financial investments 103,104.4 45.1 131,423.5 45.9 137,122.9 40.1 150,185.9 38.5 Allowance for impairment losses (836.1) (0.4) (1,378.0) (0.5) (1,784.5) (0.5) (1,319.2) (0.3) Interest receivables N/A N/A N/A N/A 1,306.6 0.4 1,287.6 0.3 Net financial investments 102,268.3 44.7 130,045.5 45.4 136,645.0 40.0 150,154.3 38.5 – Financial investments at fair value through profit or loss 3,856.4 1.7 3,687.0 1.3 8,670.7 2.5 15,378.6 3.9 – Available-for-sale financial assets 3,159.2 1.4 8,966.1 3.1 N/A N/A N/A N/A – Held-to-maturity investments 31,876.0 13.9 42,381.6 14.8 N/A N/A N/A N/A – Debt securities classified as receivables 63,376.7 27.7 75,010.8 26.2 N/A N/A N/A N/A – Financial investments at fair value through other comprehensive income N/A N/A N/A N/A 14,117.1 4.1 23,643.5 6.1 – Financial investments at amortized cost N/A N/A N/A N/A 113,857.2 33.4 111,132.2 28.5 Cash and deposits with the central bank 32,241.7 14.1 49,676.5 17.3 45,803.0 13.4 48,020.9 12.3 Deposits with banks and other financial institutions 5,886.9 2.6 1,121.7 0.4 834.8 0.2 4,232.3 1.1 Financial assets held under resale agreements 17,740.3 7.7 12,948.3 4.5 14,700.3 4.3 19,988.8 5.1 Property and equipment 1,828.9 0.8 1,796.7 0.6 3,293.4 1.0 3,398.4 0.9 Other assets(3) 3,433.4 1.5 5,370.2 2.0 4,094.5 1.3 4,935.0 1.3

Total assets 228,949.3 100.0 286,368.4 100.0 341,202.9 100.0 389,622.4 100.0 Liabilities Deposits from customers 164,810.1 77.5 202,270.5 76.3 220,083.7 69.7 247,113.7 68.2 Debt securities issued 18,297.3 8.6 49,288.6 18.6 78,282.4 24.8 99,913.3 27.6 Deposits from banks and other financial institutions 15,679.6 7.4 8,279.6 3.1 9,983.8 3.2 7,290.2 2.0 Placements from banks and other financial institutions – 0.0 – 0.0 – 0.0 100.1 0.0 Borrowing from the central bank 1,316.6 0.6 1,572.0 0.6 2,820.2 0.9 2,758.6 0.8 Financial assets sold under repurchase agreements 7,957.2 3.7 – – 2,175.3 0.7 2,313.8 0.6 Other liabilities(4) 4,631.5 2.2 3,860.3 1.4 2,398.6 0.7 2,805.2 0.8

Total liabilities 212,692.3 100.0 265,271.0 100.0 315,744.0 100.0 362,294.9 100.0

Total equity 16,257.0 21,097.4 25,458.9 27,327.5

Total liabilities and equity 228,949.3 286,368.4 341,202.9 389,622.4

(1) IAS 39 was adopted prior to January 1, 2018. (2) IFRS 9 was adopted from January 1, 2018. (3) Mainly inclusive of deferred tax assets, investments in associates and other assets. (4) Mainly inclusive of income tax payable and other liabilities. Summary Statements of Profit or Loss and Other Comprehensive Income Six Months Year ended December 31, ended June 30, 2016 2017 2018 2018 2019 (in millions of RMB) Interest income 11,211.5 12,968.0 14,676.2 6,960.2 8,600.7 Interest expense (3,281.3) (4,257.1) (6,349.9) (2,992.5) (3,963.3) Net interest income 7,930.2 8,710.9 8,326.3 3,967.7 4,637.4 Fee and commission income 278.6 108.9 108.4 46.0 108.1

–4– SUMMARY

Six Months Year ended December 31, ended June 30, 2016 2017 2018 2018 2019 (in millions of RMB) Fee and commission expense (88.6) (118.6) (87.1) (38.7) (46.8) Net fee and commission income 190.0 (9.7) 21.3 7.3 61.3 Net trading (losses)/gains (91.3) (110.8) 151.6 62.9 125.8 Net gains/(losses) arising from investment securities 12.8 (10.2) 217.2 81.4 208.2 Other operating income 26.8 45.2 53.2 8.9 12.5 Operating income 8,068.5 8,625.4 8,769.6 4,128.2 5,045.2 Operating expenses (2,858.2) (2,919.5) (3,039.8) (1,355.7) (1,578.8) Impairment losses on assets (2,819.4) (3,058.5) (2,392.3) (1,060.8) (1,439.7) – Loans and advances to customers (2,444.9) (2,541.3) (2,071.8) (777.6) (811.1) – Others (374.5) (517.2) (320.5) (283.2) (628.6) Share of profits/(losses) of associates 7.0 (5.5) (34.5) (3.3) (4.1) Profit before tax 2,397.9 2,641.9 3,303.0 1,708.4 2,022.6 Income tax (436.5) (386.9) (426.4) (246.7) (232.9) Net profit 1,961.4 2,255.0 2,876.6 1,461.7 1,789.7

Our net interest income increased by 16.9% from RMB3,967.7 million for the six months ended June 30, 2018 to RMB4,637.4 million for the same period in 2019, with a 23.6% increase in interest income, primarily due to (i) an increase in the average balance of interest-earning assets which was primarily attributable to the increases in loans to customers, mainly corporate loans, and financial investments, and (ii) an increase in the average yield on interest-earning assets which was primarily attributable to the increased market interest rate, which was partially offset by a 32.4% increase in interest expense, primarily due to (i) an increase in the average balance of interest-bearing liabilities which was primarily attributable to the increases in the average balance of debt securities issued by us, customer deposits and borrowings from the central bank, and (ii) an increase in the average cost of interest-bearing liabilities which was primarily attributable to (a) the increased market interest rate caused by intense market competition, and (b) our increased time deposits with relatively high cost to provide a stable source of funding for our business operations. Our net interest income increased by 9.8% from RMB7,930.2 million in 2016 to RMB8,710.9 million in 2017 with a 15.7% increase in interest income, which was partially offset by a 29.7% increase in interest expense. The increase in interest income was primarily due to an increase in the average balance of interest-earning assets which was primarily attributable to the increases in financial investments and loans to customers, mainly corporate loans, partially offset by a decrease in the average yield on interest-earning assets which was primarily attributable to decreases in the average yields on our loans to customers, financial investments and deposits with banks and other financial institutions as a result of intensified market competition due to interest rate liberalization and the decrease in the prevailing market interest rate. The increase in interest expense was primarily due to (i) an increase in the average balance of interest-bearing liabilities which was primarily attributable to increases in the average balance of customer deposits and debt securities issued by us, and (ii) an increase in the average cost of interest-bearing liabilities which was primarily attributable to (a) the increased market interest rate caused by tightened market liquidity, and (b) our increased time deposits with relatively high cost to provide a stable source of funding for our business operations. Loans and Advances to Customers The following table sets forth the distribution of our loans to customers by type of security as of the dates indicated: December 31, January 1, December 31, June 30, 2016(1) 2017(1) 2018(2) 2019(2) %of %of %of %of %of Amount total Amount total Amount total Amount total Amount total (in millions of RMB, except percentages) Pledged loans(3)(4) 6,481.7 9.5 13,812.6 15.7 13,812.6 15.7 34,165.5 24.4 39,583.3 24.1 Collateralized loans(3)(5) 25,308.1 37.0 24,284.0 27.5 24,284.0 27.5 28,486.9 20.3 31,938.1 19.4 Guaranteed loans(3) 28,288.9 41.4 43,514.7 49.4 42,704.8 48.5 68,126.9 48.6 81,811.4 49.8 Unsecured loans 8,252.7 12.1 6,521.0 7.4 6,521.0 7.4 7,969.8 5.7 7,821.8 4.8

–5– SUMMARY

December 31, January 1, December 31, June 30, 2016(1) 2017(1) 2018(2) 2019(2) %of %of %of %of %of Amount total Amount total Amount total Amount total Amount total (in millions of RMB, except percentages) Loans measured at fair value through other comprehensive income Guaranteed loans(3)(6) N/A N/A N/A N/A 802.9 0.9 1,391.4 1.0 3,185.1 1.9 Total 68,331.4 100.0 88,132.3 100.0 88,125.3 100.0 140,140.5 100.0 164,339.7 100.0

(1) IAS 39 was adopted prior to January 1, 2018. (2) IFRS 9 was adopted from January 1, 2018. (3) Represents the total amount of loans fully or partially secured by collateral in each category. If a loan is secured by more than one form of security interest, the classification is based on the primary form of security interest. (4) Represents security interests in intangible assets or monetary assets, such as movable assets, certificates of deposit, financial instruments, intellectual property and interests in future cash flows, by taking possession of, or registering against, such assets. (5) Represents security interests in tangible assets other than monetary assets, such as buildings and fixtures, land use rights, machines, equipment and vehicles, without taking possession. (6) Associated with discounted bills prepared in accordance with IFRS 9, starting from January 1, 2018. The following table sets forth our loan products by remaining maturity as of June 30, 2019: June 30, 2019 Due in Due in over three Due in three months over one Due in Overdue(1) months up to year up to more than On or less 12 months five years five years demand Indefinite Total (in millions of RMB) Corporate loans Working capital loans 3,954.1 14,060.3 12,801.5 48.4 163.5 553.9 31,581.7 Fixed asset loans 653.5 5,365.4 14,402.0 83,203.3 – 615.9 104,240.1 Others 974.0 – 519.2 235.0 149.2 299.3 2,176.7 Subtotal 5,581.6 19,425.7 27,722.7 83,486.7 312.7 1,469.1 137,998.5 Personal loans Residential mortgage loans 0.3 3.8 256.4 12,072.1 9.5 29.0 12,371.1 Personal consumption loans 13.6 80.6 911.4 80.4 10.6 20.2 1,116.8 Personal business loans 472.3 1,871.1 5,812.0 2,060.1 102.4 281.0 10,598.9 Bank card balances 42.4––––0.943.3 Subtotal 528.6 1,955.5 6,979.8 14,212.6 122.5 331.1 24,130.1 Discounted bills Bank acceptance bills 1,073.7 1,137.4––––2,211.1 Subtotal 1,073.7 1,137.4––––2,211.1 Total 7,183.9 22,518.6 34,702.5 97,699.3 435.2 1,800.2 164,339.7

(1) Includes loans on which principal or interest is overdue for one day or more. For loans that are repayable in installments, the total outstanding amount of loans is stated as overdue. The following table sets forth the distribution of our corporate loans by the size of the borrowers as of the dates indicated: December 31, June 30, 2016 2017 2018 2019 %of %of %of %of Amount total Amount total Amount total Amount total (in millions of RMB, except percentages) Large enterprises(1) 8,479.7 14.4 11,127.4 14.5 16,512.6 13.4 18,799.6 13.6 Medium enterprises(1) 10,805.9 18.3 18,446.7 24.1 29,073.5 23.9 33,604.0 24.4 Small enterprises(1) 18,516.2 31.3 26,362.7 34.4 49,691.6 40.8 55,944.0 40.5 Micro enterprises(1) 2,217.4 3.7 3,127.0 4.1 10,336.8 8.5 13,618.5 9.9 Others(2) 19,057.4 32.3 17,509.1 22.9 16,274.2 13.4 16,032.4 11.6 Total corporate loans 59,076.6 100.0 76,572.9 100.0 121,888.7 100.0 137,998.5 100.0

–6– SUMMARY

(1) The classification criteria for large, medium, micro and small enterprises are set forth in the Classification Standards of Small and Medium Enterprises. See “Definitions and Conventions” for details. (2) Consists primarily land reserve centers, and public institutions such as schools and hospitals. The following table sets forth the distribution of our corporate loans by industry classification as of the dates indicated: December 31, June 30, 2016 2017 2018 2019 %of %of %of %of Amount total Amount total Amount total Amount total (in millions of RMB, except percentages) Leasing and commercial services(1) 12,101.9 20.5 23,190.5 30.3 58,709.1 48.2 68,389.2 49.6 Water conservancy, environment and public utility management 4,750.0 8.0 7,484.7 9.8 12,272.0 10.1 13,313.2 9.6 Construction 3,561.0 6.0 8,331.5 10.9 9,409.4 7.7 10,958.9 7.9 Education 12,081.9 20.5 9,522.6 12.4 9,070.8 7.4 9,225.9 6.7 Real estate 5,951.2 10.1 4,905.2 6.4 7,055.7 5.8 7,979.8 5.8 Transportation, storage and postal services 2,863.0 4.8 5,633.2 7.4 6,711.3 5.5 7,313.7 5.3 Mining 5,209.9 8.8 3,461.7 4.5 4,313.6 3.5 4,171.9 3.0 Hygiene and social welfare 2,484.4 4.2 3,402.5 4.4 3,312.7 2.7 3,509.4 2.5 Wholesale and retail 2,199.6 3.7 2,052.8 2.7 3,103.0 2.5 3,789.2 2.7 Manufacturing 5,369.3 9.1 4,094.8 5.3 3,164.1 2.6 3,664.3 2.7 Production and supply of electricity, gas and water 1,061.8 1.8 2,054.5 2.7 2,327.4 1.9 2,179.6 1.6 Others(2) 1,442.6 2.5 2,438.9 3.2 2,439.6 2.1 3,503.4 2.6 Total corporate loans 59,076.6 100.0 76,572.9 100.0 121,888.7 100.0 137,998.5 100.0

(1) During the Track Record Period, substantially all of our corporate customers in such industry are government-affiliated entities primarily engaged in infrastructure construction projects. (2) Consists primarily of (i) agriculture, forestry, animal husbandry and fishery, (ii) culture, sports and entertainment, (iii) information transmission, computer services and software, (iv) residential services, repairs and other services, (v) hotel and catering, (vi) scientific research and technical services, (vii) finance, as well as (viii) public administration and social organizations. Guizhou Province is one of the most important bases in the PRC for natural resources, especially for coal, minerals and water power resources. Guizhou Province identified ten key industries for development, including tobacco and alcohol, mining, electric power, gas and water production and distribution, metal smelting and pressing, Chinese medicine and pharmaceuticals, modern chemicals, modern logistics, tourism and telecommunication and electronic equipment. From 2015 to 2018, the nominal GDP and GDP per capita of Guizhou Province ranked 25th and 29th, respectively, among 31 provinces, autonomous regions and municipalities in China. Although Guizhou Province is an underdeveloped province with relatively low GDP per capita among PRC provinces, from 2014 to 2018, Guizhou Province’s real GDP and GDP per capita grew at a CAGR of 10.1% and 11.8%, respectively, ranking first among all provinces in China. In 2016, 2017 and 2018, Guizhou Province had fiscal revenue of RMB617.6 billion, RMB608.3 billion and RMB684.4 billion, respectively, and fiscal expense of RMB616.4 billion, RMB609.6 billion and RMB687.0 billion, respectively. According to Guizhou Provincial Finance Bureau, Guizhou Province relies mainly on the PRC central government to finance its fiscal spending. Active infrastructure investments in Guizhou Province have provided us with numerous market opportunities. In particular, we have a high concentration of loans to corporate clients in the leasing and commercial services industry, substantially all of which are government-affiliated entities primarily engaging in infrastructure construction projects. Local government-affiliated entities are subject to credit risks and our loans may not be guaranteed by local or provincial governments. See “Risk Factors – Risks Relating to Our Business – We have a high concentration of loans to leasing and commercial services industry, substantially all of which involve government-affiliated entities, whose operations are related to the economic development in Guizhou Province and China and may be affected by the overall economic condition and periodic economic fluctuation.”

–7– SUMMARY

Financial Investments The following table sets forth the breakdown of the investment portfolio by product type and their respective average rates of return for the periods indicated: December 31, June 30, 2016 2017 2018 2019 Average(1) Average(1) Average(1) Average(1) rate of rate of rate of rate of %of return %of return %of return %of return Amount total (%) Amount total (%) Amount total (%) Amount total (%) (in millions of RMB, except percentages) Investments in debt securities 38,707.1 37.5 3.69 54,351.7 41.3 3.61 63,303.4 46.2 3.65 72,294.9 48.1 3.81 SPV investments 64,359.5 62.5 8.43 77,034.0 58.7 7.09 73,781.7 53.8 6.53 77,853.2 51.9 6.20 – Asset management plans 58,727.4 57.1 9.00 68,373.9 52.1 7.60 56,734.7 41.4 6.50 53,861.3 35.9 6.20 – Trust plans 5,482.1 5.3 10.90 8,009.0 6.1 8.60 10,652.3 7.8 7.20 10,298.4 6.9 6.80 – Wealth management products 150.0 0.1 3.00 651.1 0.5 4.80 2,671.2 1.9 – 4,123.8 2.7 – – Mutual funds – – – – – – 3,323.5 2.4 – 9,153.0 6.1 – – Private placement bonds – – – – – – 400 0.3 6.05 416.7 0.3 6.05 Equity investments 37.8 – – 37.8 – – 37.8 – – 37.8 – – Gross financial investments 103,104.4 100.0 6.77 131,423.5 100.0 5.77 137,122.9 100.0 5.24 150,185.9 100.0 5.02 Allowance for impairment losses (836.1) (1,378.0) (1,784.5) (1,319.2) Interest receivables N/A N/A 1,306.6 1,287.6 Net financial investments 102,268.3 130,045.5 136,645.0 150,154.3

(1) Calculated by dividing annualized interest income or expense by average balance. The following table sets forth a breakdown of our interest income from financial investments by type for the years indicated: Year ended December 31, Six Months ended June 30, 2016(1) 2017(1) 2018(2) 2018 2019 Average Average Average Average Average Interest %of yield(3) Interest %of yield(3) Interest %of yield(3) Interest %of yield(1) Interest %of yield(1) income total (%) income total (%) income total (%) income total (%) income total (%) (in millions of RMB, except percentages) SPV investments 5,169.4 80.8 8.43 5,434.1 76.0 7.09 4,953.8 68.9 6.53 2,529.1 70.6 6.43 2,151.7 62.4 6.20 Investments in debt securities 1,225.8 19.2 3.69 1,711.2 24.0 3.61 2,234.8 31.1 3.65 1,055.3 29.4 3.72 1,294.7 37.6 3.81 Total 6,395.2 100.0 6.77 7,145.3 100.0 5.77 7,188.6 100.0 5.24 3,584.4 100.0 5.29 3,446.4 100.0 5.02

(1) IAS 39 was adopted prior to January 1, 2018. (2) IFRS 9 was adopted from January 1, 2018. (3) Calculated by dividing our interest income from the corresponding assets in the period by the average balance of these assets. See “Risk Factors – Risks Relating to Our Business – We are subject to risks relating to our financial investments. Our investment assets may suffer significant losses or experience sharp declines in their returns, which could have a material adverse effect on our business, financial condition and results of operations” and “Risk Factors – Risks Relating to Our Business – We are subject to risks relating to wealth management products” for discussions on the risks relating to our SPV investments. Cash Flow In 2018 and the six months ended June 30, 2018, we recorded net cash outflows from operating activities of RMB22,139.9 million and RMB2,358.6 million, respectively. These net cash outflows from operating activities were primarily attributable to (i) increases in loans to customers, deposits with banks and other financial institutions and other operating assets, (ii) an increase in deposits with the central bank and a decrease in other operating liabilities in the

–8– SUMMARY six months ended June 30, 2018, and (iii) our partial reliance on interbank lending and issue of debt securities to fund our working capital, which are within our ordinary course of business. See “Financial Information – Cash Flows” for further details. Selected Ratios The following table sets forth our selected profitability ratios for the periods indicated: Six Months ended Year ended December 31, June 30, 2016(1) 2017(1) 2018(2) 2018(2)(8) 2019(2)(8) (%) Return on average total assets(3) 0.99 0.88 0.92 0.99 0.98 Return on average equity(4) 13.14 12.07 12.36 12.64 13.56 Net interest spread(5) 3.86 3.31 2.66 2.63 2.61 Net interest margin(6) 3.95 3.45 2.82 2.78 2.74 Cost-to-income ratio(7) 32.53 33.05 33.91 31.84 29.84 (1) IAS 39 was adopted prior to January 1, 2018. (2) IFRS 9 was adopted from January 1, 2018. (3) Represents net profit for the period as a percentage of average balance of total assets at the beginning and the end of the period. (4) Represents net profit for the period as a percentage of average balance of total equity at the beginning and the end of the period. (5) Calculated as the difference between the daily average yield on total interest-earning assets and the daily average cost of total interest-bearing liabilities. (6) Calculated by dividing net interest income by the daily average balance of total interest-earning assets. (7) Calculated by dividing total operating expenses, excluding tax and surcharges, by total operating income. (8) On an annualized basis. Our net interest spread remained relatively stable at 2.63% and 2.61% for the six months ended June 30, 2018 and 2019, respectively. Our net interest margin decreased slightly from 2.78% for the six months ended June 30, 2018 to 2.74% for the same period in 2019, primarily as our average cost of interest-bearing liabilities increased from 2.24% for the six months ended June 30, 2018 to 2.47% for the same period in 2019, mainly due to (i) our introduction of new deposit products with relatively high costs and (ii) our ability to actively market and attract time deposits for a stable funding source, which generally have higher average costs. Our net interest spread decreased from 3.31% in 2017 to 2.66% in 2018 and our net interest margin decreased from 3.45% in 2017 to 2.82% in 2018, primarily because our average cost of interest-bearing liabilities increased from 1.82% in 2017 to 2.31% in 2018, which was caused by increased market competition driven by interest rate liberalization, as well as our increased loans to, and investments in, low-risk projects with government supports mainly including local government bonds and loans for transportation and infrastructure construction projects. Our net interest spread decreased from 3.86% in 2016 to 3.31% in 2017 and our net interest margin decreased from 3.95% in 2016 to 3.45% in 2017, primarily because (i) our average yield on interest-earning assets decreased from 5.59% in 2016 to 5.13% in 2017, as a result of increased market competition driven by interest rate liberalization, as well as the increased proportion of low-risk loans to industries or projects with government support, and (ii) our average cost of interest-bearing liabilities increased from 1.73% in 2016 to 1.82% in 2017, mainly due to (a) the increased market interest rate caused by tightened market liquidity and (b) the increased proportion of personal time deposits with relatively high average costs. 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: Regulatory December 31, June 30, requirement 2016 2017 2018 2019 (%) Capital adequacy indicators Core tier-one capital adequacy ratio Ն7.50 10.26 10.93 10.62 10.31 Tier-one capital adequacy ratio Ն8.50 10.26 10.93 10.62 10.31 Capital adequacy ratio Ն10.50 11.21 11.62 12.83 12.51 Total equity to total assets N/A 7.10 7.37 7.46 7.01 Asset quality indicators Non-performing loan ratio(1) Յ5.00 1.91 1.60 1.36 1.09 Allowance coverage ratio(2) Ն150.00 212.86 192.77 243.72 323.27 Allowance to gross loans(3) Ն2.50 4.07 3.09 3.31 3.52 Other indicator Loan-to-deposit ratio(4) N/A 41.46 43.57 63.68 66.50

–9– SUMMARY

(1) Calculated by dividing total non-performing loans by loans to customers. (2) Calculated by dividing total allowance for impairment losses on loans by total NPLs. (3) Calculated by dividing total allowance for impairment losses on loans by loans to customers. (4) Calculated by dividing total loans to customers by total customer deposits. RECENT DEVELOPMENTS Our business has continued to experience growth since June 30, 2019. In particular, our total assets increased in the four months ended October 31, 2019, driven by continued expansion in our loans to customers, particularly corporate loans. Our financial investments also had steady growth, mainly due to our increased investments in debt securities and mutual funds. Our customer deposits also had stable increases in the four months ended October 31, 2019, driven by our efforts to attract more corporate and retail deposits. Our operating income increased in the four months ended October 31, 2019 as compared with the same period in 2018, driven by the growth of our business scale. As of October 31, 2019, our asset quality further improved from June 30, 2019 with a lower NPL ratio. The PBOC announced on August 17, 2019 a reform to the benchmark lending rate to further promote the interest rate liberalization in China. This reform encourages commercial banks to price their loans with reference to a revamped loan prime rate that is updated on a monthly basis and linked to the PBOC’s medium-term lending facility rate, which is determined by the banking system’s demand for central bank liquidity. The adjustment to the benchmark lending rate is expected to lower financing costs in China. We believe that this interest rate reform may intensify competition in the PRC banking industry and put pressure on our net interest margins. 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 PRC’s banking industry may materially and adversely affect our results of operations.” Our Directors confirm that there was no material adverse change in our financial, operational or trading position from June 30, 2019 to the date of this prospectus. Our Business with Baoshang Bank We started our business relationship with Baoshang Bank in September 2014. On May 24, 2019, the PBOC and the CBIRC took over control of Baoshang Bank due to its severe credit risk. Pursuant to the agreement entered between us, the Deposit Insurance Fund Management Co., Ltd. (“Deposit Insurance Fund”) and the takeover working group of Baoshang Bank on June 5, 2019, 90.7% of our interbank deposit principal with Baoshang Bank was guaranteed by Deposit Insurance Funds, while we retain our creditor’s right to claim the remaining amount due from Baoshang Bank. Deposit Insurance Fund was established by the PBOC on May 24, 2019 to protect depositors’ savings at financial institutions. Funded by insurance premium contributed by commercial banks and financial institutions in China. Deposit Insurance Fund has set aside funds to pay back the money lost due to the failure of a financial institution and is devoted to insuring the deposits of individuals. See “Industry Overview” for further details on Deposit Insurance Fund. As of June 30, 2019, we had RMB1,450.0 million of interbank deposits with Baoshang Bank and RMB732.2 million of funds raised from our non-principal-protected wealth management products that were placed as deposits with Baoshang Bank. Given the increased credit risk we expected from our deposits with Baoshang Bank and the contract arrangement mentioned above, we recognized RMB147.8 million of impairment losses on deposits with banks and other financial institutions as reflected in our statements of profit and loss and other comprehensive income for the six months ended June 30, 2019 in relation to our deposits with Baoshang Bank. This is based on our management’s assessment of the likelihood of future credit loss considering the available market information concerning the credit conditions of Baoshang Bank, our preliminary discussion with the competent regulators and the contract arrangement with Baoshang Bank and regulators, among other factors. In addition, we are not required to compensate for any loss suffered by the holders of our non-principal-protected wealth management products in the event of default by Baoshang Bank. Therefore, based on the foregoing considerations, we believe that our allowance for impairment losses on deposits with banks and other financial institutions is sufficient. In the second half of 2019, all of our interbank deposits with Baoshang Bank matured and RMB1,313.8 million was repaid to us. As of the Latest Practicable Date, we had RMB151.3 million of interbank deposits remaining with Baoshang Bank. We have been closely following up with Baoshang Bank and the relevant banking regulators on the debt protection scheme of Baoshang Bank to protect our exposures to such bank. See “Risk Factors – Risks relating to Our Business – Our allowance for impairment losses on loans and advances to customers and

–10– SUMMARY deposits with banks and other financial institutions may not be sufficient to cover actual losses on our assets in the future” and “Risk Factors – Risks relating to Our Business – We are subject to risks relating to wealth management products” for further discussions. Our Directors believe that the likelihood of our Bank suffering any significant financial losses due to our credit exposure with other financial institutions is low, considering the diversity of our counterparties, their operational scale and credit ratings, the general conditions of the PRC banking industry as a whole, our provisions on our interbank deposits with these financial institutions and our prudent risk management measures to control and monitor potential counterparty risk in the interbank business. See “Risk Management – Credit Risk Management for Financial Markets Business – Credit Risk Management for Interbank Business.” In addition, we also believe that in the unlikely event that there is any default by our existing counterparties in the interbank deposit market, our ability to comply with the regulatory requirements and to continue to operate our business will not be materially adversely affected, considering our limited credit exposure to each financial institution, the diversity of our counterparties and their operational scale and credit ratings, the general conditions of the PRC banking industry as a whole, our sufficient provisions on the interbank deposits with these financial institutions and our prudent risk management measures to control and monitor potential counterparty risk in the interbank business. In addition, we also had interbank deposits of RMB500 million due in January 2020 with a city commercial bank, the H shares of which were suspended from trading in April 2019 and resumed trading on September 2, 2019. See “Risk Factors – Risks Relating to Our Business – Our credit exposure to counterparties in the interbank business could subject us to losses” for further discussions. OFFERING STATISTICS The statistics in the following table are based on the assumptions that (i) the Global Offering is completed and 2,200,000,000 H Shares are newly issued in the Global Offering, (ii) the Over-allotment Option for the Global Offering is not exercised, and (iii) 14,588,046,744 Shares are issued and outstanding following the completion of the Global Offering:

Based on an Offer Price Based on an Offer Price of HK$2.46 of HK$2.61 Market capitalization HK$35,887 million HK$38,075 million Unaudited pro forma adjusted net tangible assets per RMB2.18(2) RMB2.20(2) share(1) (HK$2.42) (HK$2.45)

(1) The amount of unaudited pro forma 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 Pro Forma Financial Information.” (2) The estimated net proceeds from the Global Offering are translated into Renminbi at the rate of RMB0.8990 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. DIVIDEND Whether to pay dividends, the amount of dividends to be paid or the dividend payout ratio 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. We currently do not have a predetermined dividend payout ratio. 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, whichever is lower. In 2016, 2017 and 2018 and the six months ended June 30, 2019, we paid cash dividends to our shareholders of RMB868.7 million, RMB542.3 million, RMB716.5 million and RMB0.03 million, respectively. As of June 30, 2019, our declared but unpaid dividends amounted to RMB48.3 million. We will not declare or pay any dividend before the Listing. Dividends paid in prior periods may not be indicative of future dividend payments. INFORMATION ON SUBSTANTIAL SHAREHOLDERS As of the Latest Practicable Date, Guizhou Provincial Finance Bureau directly held approximately 15.49% of our Shares and Kweichow Moutai directly held approximately 14.13% of our Shares. Immediately after the Global Offering and assuming that the Over-allotment Option is not exercised, Guizhou Provincial Finance Bureau will directly hold

–11– SUMMARY approximately 13.15% of our Shares (or approximately 12.86% assuming that the Over- allotment Option is fully exercised) and Kweichow Moutai will directly hold approximately 12.00% of our Shares (or approximately 11.73% assuming that the Over-allotment Option is fully exercised). For details, see “Substantial Shareholders.” Also see “Supervision and Regulation – Ownership and Shareholder Restrictions – Restrictions on Shareholders” for further details. USE OF PROCEEDS We intend to use our proceeds from the Global Offering to strengthen our capital base to support the sustainable growth of our business. Assuming an Offer Price of HK$2.54 per Share (being the mid-point of the stated range of the Offer Price of between HK$2.46 and HK$2.61 per Share), we estimate that we will receive net proceeds of approximately HK$5,437.4 million from the Global Offering after deducting the underwriting commissions and other estimated expenses in connection with the Global Offering and assuming that the Over-allotment Option is not exercised. See “Future Plans and Use of Proceeds” for more details on our plans for using the proceeds of the Global Offering. RISK FACTORS There are risks associated with any investment and there are certain risks and considerations relating to an investment in the Shares. You should read “Risk Factors” carefully before you decide to invest in our H Shares. The major risks relating to an investment in our shares are as follows: • If we are unable to effectively maintain the quality and growth of our loan portfolio, our business, financial condition and results of operations may be materially and adversely affected; • We have a high concentration of loans to the leasing and commercial services industry, substantially all of which involve government-affiliated entities, whose operations are related to the economic development in Guizhou Province and China and may be affected by the overall economic condition and periodic economic fluctuation; • We are exposed to risks due to our business and operational concentration in Guizhou Province; • Our allowance for impairment losses on loans and advances to customers and deposits with banks and other financial institutions may not be sufficient to cover actual losses on our assets in the future; • We are subject to risks relating to our financial investments. Our investment assets may suffer significant losses or experience sharp declines in their returns, which could have a material adverse effect on our business, financial condition and results of operations; • Our credit exposure to counterparties in the interbank business could subject us to losses; and • We are exposed to risks arising from loans granted to micro and small enterprises and individual business owners. LISTING EXPENSES We will incur listing expenses in connection with the Listing, which include professional fees, underwriting commissions and other fees. Assuming the Over-allotment Option were not exercised and an Offer Price of HK$2.54 per H Share, being the mid-point of the stated range of the Offer Price of between HK$2.46 and HK$2.61 per Share, the listing expenses to be borne by us are estimated to be RMB135.4 million (equivalent to approximately HK$150.6 million). We recognized RMB5.7 million as listing expense in our statement of profit or loss and other comprehensive income for the six months ended June 30, 2019, and additional listing expenses of approximately RMB5.7 million are expected to be expensed in 2019. Approximately RMB124.0 million is expected to be capitalized. Our Directors do not expect these listing expenses to have a material adverse impact on our results of operation for 2019.

–12– DEFINITIONS AND CONVENTIONS

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

“Application Form(s)” WHITE, YELLOW and GREEN application form(s) or, where the context so requires, any of them, relating to the Hong Kong Public Offering

“Articles of Association” or the articles of association of the Bank, the version of “Articles” which was passed by our shareholders at the shareholders’ meeting on March 26, 2019 and was approved by the CBIRC Guizhou Office on April 29, 2019, which will become effective upon the Listing, as the same may be amended, supplemented or otherwise modified from time to time

“ATM” Automated Teller Machine

“Bank”, “we” or “us” Bank of Guizhou Co., Ltd. (貴州銀行股份有限公司), a joint stock company incorporated on September 28, 2012 in Guizhou Province, China, with limited liability in accordance with PRC laws and regulations and, if the context requires, includes its predecessors, subsidiaries, branches and sub-branches

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

“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

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

“Basel III” the revised Basel Capital Accord promulgated in 2010

“Board” or “Board of Directors” the board of Directors of the Bank

“Board of Supervisors” the board of Supervisors of the Bank

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

–13– DEFINITIONS AND CONVENTIONS

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

“CAGR” Compound Annual Growth Rate

“Capital Administrative the Administrative Measures for the Capital of Measures” Commercial Banks (Trial) (商業銀行資本管理辦法(試 行)) promulgated by the then CBRC on June 7, 2012 and effective on January 1, 2013

“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 then CBRC and the then 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

“CBIRC Guizhou Office” China Banking and Insurance Regulatory Commission Guizhou Office (中國銀行保險監督管理委員會貴州監管 局)

“CBRC” China Banking Regulatory Commission (中國銀行業監督 管理委員會), which merged with China Insurance Regulatory Commission (中國保險監督管理委員會) 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, and, if the context requires, includes its successor, the CBIRC

“CBRC Guizhou Office” China Banking Regulatory Commission Guizhou Office (中國銀行業監督管理委員會貴州監管局)

“CCASS” the Central Clearing and Settlement System established and operated by HKSCC

“CCASS Clearing Participant” a person admitted to participate in CCASS as a direct clearing participant or a general clearing participant

“CCASS Custodian Participant” a person admitted to participate in CCASS as a custodian participant

–14– DEFINITIONS AND CONVENTIONS

“CCASS Investor Participant” a person admitted to participate in CCASS as an investor participant who may be an individual or joint individuals or a corporation

“CCASS Participant” a CCASS Clearing Participant, a CCASS Custodian Participant or a CCASS Investor Participant

“China” or “PRC” the People’s Republic of China, but for the purpose of this prospectus only, excluding Hong Kong, Macau and Taiwan

“CIRC” China Insurance Regulatory Commission (中國保險監督 管理委員會), which merged with 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, and, if the context requires, includes its successor, the CBIRC

“city commercial banks” banks with branches at municipal or higher levels created with the approval of the then CBRC 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 Enterprises” by the PRC Ministry of Industry and Information Technology, the NBS, the NDRC and the MOF on June 18, 2011, which classifies SMEs in 16 industries into medium, micro and small enterprises with consideration of the nature of the industry in terms of number of employees, operating income, and total assets

“commercial banks” all the banking financial institutions in the PRC other than policy banks, including the Large Commercial Banks, the Joint-stock Commercial Banks, city commercial banks, foreign banks and other banking financial institutions

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

–15– DEFINITIONS AND CONVENTIONS

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

“connected person(s)” has the meaning ascribed to it under the Listing Rules

“connected transaction(s)” has the meaning ascribed to it under the Listing Rules

“Core Indicators (Provisional)” the Core Indicators for Supervision of Risks of Commercial Banks (Provisional) (商業銀行風險監管核 心指標(試行)), as promulgated by the then 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 then 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 the Bank

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

“Extreme Conditions” extreme conditions caused by a super typhoon as announced by the Government of Hong Kong

“GDP” Gross Domestic Product

“GFA” gross floor area

“Global Offering” the Hong Kong Public Offering and the International Offering

“Green Application Form(s)” the application form(s) to be completed by the White Form eIPO Service Provider, Computershare Hong Kong Investor Services Limited

–16– DEFINITIONS AND CONVENTIONS

“GuiAn New District GuiAn New District Development and Investment Co., Development and Investment” Ltd. (貴安新區開發投資有限公司), a limited liability company incorporated in PRC on November 29, 2012, and a substantial shareholder of the Bank

“Guizhou Provincial Finance Finance Bureau of Guizhou Province (貴州省財政廳), a Bureau” substantial shareholder of the Bank

“H Share Registrar” Computershare Hong Kong Investor Services Limited

“H Shares” overseas-listed shares in the share capital of the Bank, with a nominal value of RMB1.00 each, which are to be subscribed for and traded in Hong Kong dollars and for which an application has been made for listing and permission to trade on the Hong Kong Stock Exchange

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

“HKMA” the Hong Kong Monetary Authority

“HKSCC” Hong Kong Securities Clearing Company Limited, a wholly owned subsidiary of Hong Kong Exchanges and Clearing Limited

“HKSCC Nominees” HKSCC Nominees Limited, a wholly-owned subsidiary of HKSCC

“Hong Kong” or “HK” Hong Kong Special Administrative Region of the People’s Republic of China

“Hong Kong Offer Shares” H Shares (subject to adjustment) offered pursuant to the Hong Kong Public Offering

“Hong Kong Public Offering” the offer for subscription of the Hong Kong Offer Shares by the public in Hong Kong at the Offer Price and on, and subject to, the terms and conditions of this prospectus and the Application Forms, as further described in the section entitled “Structure of the Global Offering – The Hong Kong Public Offering” of this prospectus

“Hong Kong Stock Exchange”, The Stock Exchange of Hong Kong Limited “SEHK” or “Stock Exchange”

–17– DEFINITIONS AND CONVENTIONS

“Hong Kong Underwriters” the underwriters of the Hong Kong Public Offering listed in the section entitled “Underwriting – Hong Kong Underwriters” in this prospectus

“Hong Kong Underwriting the underwriting agreement dated December 13, 2019 Agreement” entered into by, among others, the Joint Sponsors, the Joint Representatives, the Hong Kong Underwriters and our Bank relating to the Hong Kong Public Offering, as further described in the section entitled “Underwriting – Underwriting Arrangements and Expenses – Hong Kong Public Offering – Hong Kong Underwriting Agreement” of this prospectus

“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)” person(s) or company(ies) and their respective ultimate beneficial owner(s), which, to the best of our Directors’ knowledge, information and belief, having made all reasonable enquiries, are independent of the Bank or are not its Connected Persons

“International Offer Shares” H Shares offered pursuant to the International Offering, together, where relevant, with any H Shares that may be issued pursuant to any exercise of the Over-Allotment Option, subject to adjustment as described in the section entitled “Structure of the Global Offering” of this prospectus

“International Offering” the conditional placement by the International Underwriters of the International Offer Shares, as further described in the section entitled “Structure of the Global Offering” of this prospectus

“International Underwriters” the group of underwriters who are expected to enter into the International Underwriting Agreement to underwrite the International Offering

–18– DEFINITIONS AND CONVENTIONS

“International Underwriting the underwriting agreement relating to the International Agreement” Offering, which is expected to be entered into among the Bank, the Joint Representatives and the International Underwriters, as further described in the section entitled “Structure of the Global Offering – The International Offering” of this prospectus

“Joint Bookrunners” ABCI Capital Limited, CCB International Capital Limited, CLSA Limited, AMTD Global Markets Limited, ICBC International Capital Limited, CMB International Capital Limited, China Investment Securities International Brokerage Limited, Goldbridge Securities Limited and Haitong International Securities Company Limited

“Joint Global Coordinators” ABCI Capital Limited, CCB International Capital Limited, CLSA Limited and AMTD Global Markets Limited

“Joint Lead Managers” ABCI Securities Company Limited, CCB International Capital Limited, CLSA Limited, AMTD Global Markets Limited, ICBC International Securities Limited, CMB International Capital Limited, China Investment Securities International Brokerage Limited, Goldbridge Securities Limited and Haitong International Securities Company Limited

“Joint Representatives” ABCI Capital Limited, CCB International Capital Limited and CLSA Limited

“Joint Sponsors” ABCI Capital Limited, CCB International Capital Limited and CLSA Capital Markets Limited

“Joint-stock Commercial Banks” China CITIC Bank Corporation Limited, China 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 Banking Corp., Ltd., HengFeng Bank Co., Ltd., China Zheshang Bank Co., Ltd., and China Bohai Bank Co., Ltd., collectively

–19– DEFINITIONS AND CONVENTIONS

“Kweichow Moutai” China Kweichow Moutai Distillery (Group) Co., Ltd. (中 國貴州茅台酒廠(集團)有限責任公司), a limited liability company incorporated in PRC on January 24, 1998, and a substantial shareholder and connected person of the Bank

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

“large enterprises” enterprises other than those classified as medium, small or micro enterprises under the Classification Standards of Small and Medium Enterprises. For example, industrial enterprises with 1,000 or more employees and operating income of RMB400 million or more shall be classified as large enterprises

“Latest Practicable Date” December 6, 2019, being the latest practicable date for the purpose of ascertaining certain information contained in this prospectus prior to its publication

“LGFV” Local government financing vehicle

“Listing” the listing of our H Shares on the Hong Kong Stock Exchange

“Listing Date” the date, expected to be on or about December 30, 2019, on which dealings in the H Shares first commence on the Hong Kong Stock Exchange

“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

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

–20– DEFINITIONS AND CONVENTIONS

“medium enterprises” before June 18, 2011, the enterprises classified as medium enterprises under the Interim Provisions on the Standards for Medium and Small Enterprises (中小企業 標準暫行規定); on and after June 18, 2011, the enterprises classified as medium enterprises under the Classification Standards of Small and Medium Enterprises (中小企業劃型標準規定)

“micro enterprises” the enterprises classified as micro enterprises under the Classification Standards of Small and Medium Enterprises

“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)

“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)

“NPL(s)” or “non-performing for the purpose of this prospectus, is used synonymously loans” with “impaired loans and advances” in note 17 to the Accountants’ Report in Appendix I to this prospectus

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

“Offer Price” the final price per Offer Share in Hong Kong dollars (exclusive of a brokerage fee of 1%, an SFC transaction levy of 0.0027% and a Hong Kong Stock Exchange trading fee of 0.005%) at which the H Shares are to be subscribed for and issued pursuant to the Global Offering, to be determined as further described in “Structure of the Global Offering – Pricing and Allocation” in this prospectus

“Offer Shares” the Hong Kong Offer Shares and the International Offer Shares, together, where relevant, with any additional H Shares to be issued pursuant to the exercise of the Over-allotment Option

–21– DEFINITIONS AND CONVENTIONS

“Over-allotment Option” the option to be granted by the Bank to the International Underwriters exercisable by the Joint Representatives on behalf of the International Underwriters pursuant to the International Underwriting Agreement, to be exercisable at any time from the day on which trading of the Shares commences on the Hong Kong Stock Exchange until 30 days after the last day for the lodging of applications under the Hong Kong Public Offering, to require the Bank to allot and issue up to an aggregate of 330,000,000 additional H Shares (representing 15% of the initial Offer Shares), at the Offer Price under the International Offering solely to cover over-allocations in the International Offering, if any, details of which are described in the section headed “Structure of the Global Offering – Over-allotment Option” in this prospectus

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

“PRC Banking Supervision and the Banking Supervision and Regulatory Law of the PRC Regulatory Law” (中華人民共和國銀行業監督管理法), promulgated by the 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 Law” the Commercial Banking Law of the PRC (中華人民共和 國商業銀行法), 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), which was promulgated by the 5th session of the Standing Committee of the 8th National People’s Congress on December 29, 1993 and became effective on July 1, 1994, as amended, supplemented or otherwise modified from time to time

–22– DEFINITIONS AND CONVENTIONS

“PRC GAAP” the PRC Accounting Standards and Accounting Regulations for Business Enterprises (企業會計準則) promulgated by the 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

“Price Determination Agreement” the agreement to be entered into among the Bank and the Joint Representatives (on behalf of the Joint Bookrunners and the Underwriters) on the Price Determination Date to record and fix the Offer Price

“Price Determination Date” the date, expected to be on or around Thursday, December 19, 2019 but no later than Monday, December 23, 2019 on which the Offer Price is fixed for the purposes of the Global Offering

“Regulation S” Regulation S under the U.S. Securities Act

“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 CBRC, Accounting Standards for Business Enterprises (企業會計準則) promulgated by the MOF, 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 promulgated by the then CBRC, Accounting Standards for Business Enterprises promulgated by the MOF, and/or IFRS

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

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

–23– DEFINITIONS AND CONVENTIONS

“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 State Administration for Market Supervision (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

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

“SFC” the 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

“Share(s)” Share(s) in the share capital of the Bank with a nominal value of RMB1.00 each

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

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

“small enterprises” the enterprises classified as small enterprises under the Classification Standards of Small and Medium Enterprises

“SME(s)” the enterprises classified as micro enterprises, small enterprises and medium enterprises based on the number of employees, operating income, and total assets 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

“Special Regulations” the Special Regulations 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), as promulgated by the State Council on August 4, 1994

–24– DEFINITIONS AND CONVENTIONS

“SPV Investment(s)” investments made by financial institutions in special purpose vehicles, including but not limited to wealth management products managed by commercial banks, trust plans managed by trust companies, asset management plans 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 the PBOC, the then CBRC, the CSRC, the then CIRC and the SAFE on April 24, 2014

“SSE” Shanghai Stock Exchange

“Stabilizing Manager” ABCI Securities Company Limited

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

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

“SZSE” Shenzhen Stock Exchange

“Track Record Period” the three years ended December 31, 2016, 2017 and 2018 and the six months ended June 30, 2019

“Underwriters” the Hong Kong Underwriters and the International Underwriters

“Underwriting Agreements” the Hong Kong Underwriting Agreement and the International Underwriting Agreement

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

“U.S. Securities Act” the United States Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder

“White Form eIPO” the application for Hong Kong Public Offer Shares to be issued in the applicant’s own name by submitting applications online through the designated website of White Form eIPO at www.eipo.com.hk

–25– DEFINITIONS AND CONVENTIONS

“White Form eIPO Service Computershare Hong Kong Investor Services Limited Provider”

“Zunyi City Mingcheng State- Zunyi City Mingcheng State-owned Assets Investment owned Assets Investment” and Operation Co., Ltd. (遵義市名城國有資產投資經營 有限公司), a limited liability company incorporated in PRC on March 14, 2000

“Zunyi City State-owned Assets Zunyi City State-owned Assets Investment and Financing Investment” Management Co., Ltd. (遵義市國有資產投融資經營管理 有限責任公司), a limited liability company incorporated in PRC on September 20, 2007, and a substantial shareholder of the Bank

Certain amounts and percentage figures included in this prospectus 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. For ease of reference, in this prospectus, unless otherwise indicated, we use the terms “loans and advances to customers,” “loans” and “loans to customers” synonymously.

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

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.

–26– FORWARD-LOOKING STATEMENTS

This prospectus 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 prospectus, 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 us or our management, are intended to identify forward-looking statements. Such statements reflect the current views of our 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 other risk factors as described in this prospectus. You are strongly cautioned that reliance on any forward-looking statements involves known and unknown risks and uncertainties. The risks and uncertainties facing us which could affect the accuracy of forward-looking statements include, but are not limited to, the following:

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

• general political and economic conditions;

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

• the products, actions and developments of our competitors;

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

• our business strategies and initiative to implement these strategies;

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

• our dividend policy;

• our financial condition, results of operations and performance;

• the amount and nature of, potential for and future development of, our business; 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 prospectus, 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 prospectus 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 prospectus are qualified by reference to the cautionary statements set out in this section.

–27– RISK FACTORS

You should carefully consider all of the information in this prospectus, including the risks and uncertainties described below, before making an investment in our H Shares. Our business, financial condition or results of operations could be materially and adversely affected by any of these risks. The trading price of our H Shares could significantly decrease due to any of these risks, and you may lose all or part of your investment. 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 may differ from those prevailing in other jurisdictions. For information concerning the legal and regulatory systems of the PRC and certain related matters discussed below, see “Supervision and Regulation,” “Appendix V – Summary of Principal Legal and Regulatory Provisions” and “Appendix VI – Summary of Articles of Association.”

RISKS RELATING TO OUR BUSINESS

If we are unable to effectively maintain the quality and growth of our loan portfolio, our business, 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 or improve the quality and growth of our loan portfolio. We have adopted measures to control our risk exposure to our loan portfolio, including implementing credit exposure limits on our loans to customers and strengthening our credit concentration and monitoring mechanism. See “Risk Management” for details of these measures. We cannot assure you that these measures are sufficient to protect ourselves against deterioration of the quality of our loan portfolio, which may lead to increases in our non-performing loans, allowances for impairment losses and loans written off due to impairment.

In addition, deterioration in the overall quality and slowdown in the growth of our loan portfolio may occur due to a variety of reasons beyond our control, including a slowdown of China’s or Guizhou Province’s economy, and other adverse macroeconomic developments in China, particularly Guizhou Province, certain of which may also adversely affect the businesses, results of operations, liquidity of our borrowers or their ability to service their debts. As of December 31, 2016, 2017 and 2018 and June 30, 2019, our gross loans and advances to customers were RMB68,331.4 million, RMB88,132.3 million, RMB140,140.5 million and RMB164,339.7 million, respectively, accounting for approximately 29.8%, 30.8%, 41.1% and 42.2%, respectively, of our total assets. As of the same dates, our non-performing loans amounted to RMB1,306.8 million, RMB1,412.5 million, RMB1,904.6 million and RMB1,789.2 million, respectively, and our non-performing loan ratio was 1.91%, 1.60%, 1.36% and 1.09% as of the same dates, respectively. The increase in the balance of our non-performing loans during the Track Record Period was primarily due to the increased scale of our business. See “Assets and Liabilities – Asset – Asset Quality of Our Loan Portfolio” for details on asset quality of our loan portfolio. Further, we disposed of certain non-performing assets by way of sale, auction or transfer to third parties in accordance with our liquidity management and risk management policies. There is no guarantee that we may be able to dispose of, or transfer, our non-performing assets on a similar scale or on similar terms. Any deterioration in our asset quality or slowdown in the growth of our loan portfolio may materially and adversely affect our capital adequacy, business, financial condition and results of operations.

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We have a high concentration of loans to leasing and commercial services industry, substantially all of which involve government-affiliated entities, whose operations are related to the economic development in Guizhou Province and China and may be affected by the overall economic condition and periodic economic fluctuation.

Similar to other regional commercial banks in the PRC, we provide loans to local government-affiliated entities which are corporate entities with independent legal capacity established or supervised by local governments and other public departments and institutions. Local government-affiliated entities typically use our loans for infrastructure or industrial construction, urban renewal, or other public projects, and repay us primarily with proceeds from the local government budget. As of December 31, 2016, 2017 and 2018 and June 30, 2019, our loans to local government-affiliated entities amounted to RMB16.9 billion, RMB35.3 billion, RMB62.1 billion and RMB68.8 billion, which increased during the Track Record Period, representing 24.8%, 40.0%, 44.3% and 41.9%, respectively, of our total gross loans and advances, primarily as we increased lending to support local infrastructure development. In particular, we have a high concentration of loans to leasing and commercial services industry, substantially all of which involve government-affiliated entities primarily engaging in infrastructure construction projects. As of June 30, 2019, our loans to leasing and commercial services industry was RMB68,389.2 million, which was the largest component of our total corporate loans, accounting for approximately 49.6% of our total corporate loans as of the same date. In the six months ended June 30, 2019, our interest income and interest expenses arising from government-affiliated entities amounted to approximately RMB2,098.4 million and RMB570.4 million, respectively, accounting for 44.5% of total interest income from loans to customers and 29.3% of total interest expenses on customer deposits for the same period, respectively.

Many projects sponsored by local government-affiliated entities are carried out primarily for developing local infrastructure, and are not necessarily commercially viable. In addition, we may have limited access to the financial conditions of such borrowers, and there is no assurance of the accuracy of the information we acquire through publicly available information. Therefore, the ability of a local government-affiliated entity to repay its loans may, to a significant extent, be affected by the overall economy and periodic economic fluctuations.

Our allowance for impairment losses on loans and advances to customers and deposits with banks and other financial institutions may not be sufficient to cover actual losses on our assets in the future.

As of December 31, 2016, 2017 and 2018 and June 30, 2019, our allowance for impairment losses on loans and advances to customers was RMB2,781.6 million, RMB2,722.8 million, RMB4,642.0 million and RMB5,783.9 million, respectively, while our allowance coverage ratio was 212.86%, 192.77%, 243.72% and 323.27% as of the same dates, respectively. Our allowance to gross loan ratio for our loans to customers was 4.07%, 3.09%, 3.31% and 3.52%, respectively, as of the same dates. In the first half of 2019, our allowance for impairment losses on deposits with banks and other financial institutions increased

–29– RISK FACTORS significantly to RMB147.9 million, among which approximately RMB147.8 million was recognized for deposits with Baoshang Bank, from RMB0.6 million as of December 31, 2018. See “– Our credit exposure to counterparties in the interbank business could subject us to losses” for further discussions on such increase. The amount of allowance for impairment losses is based on our assessment of various factors affecting the quality of our loan portfolio. These factors include our borrowers’ operational and financial condition, their repayment ability and intention, the realizable value of any collateral and the ability of the guarantors of our customers to fulfill their obligations, as well as the prevailing economic, legal and regulatory environment in China. Many of these factors are beyond our control, and therefore our assessment of, and expectations for, these factors may differ from their future developments. Any of the above factors may reduce our profit, and materially and adversely affect our business and financial condition and results of operations.

We are subject to risks relating to our financial investments. Our investment assets may suffer significant losses or experience sharp declines in their returns, which could have a material adverse effect on our business, financial condition and results of operations.

During the Track Record Period, we invested in a wide range of securities and other financial assets, including investments in government bonds, debt securities issued by PRC policy banks, other PRC banks and financial institutions and PRC corporate issuers, trust plans, asset management plans, as well as wealth management products issued by other PRC commercial banks. As of December 31, 2016, 2017 and 2018 and June 30, 2019, our investments in debt securities and SPV investments (before interest accrued and provision for impairment losses) in aggregate amounted to RMB103,066.6 million, RMB131,385.7 million, RMB137,085.1 million and RMB150,148.1 million, respectively, accounting for approximately 45.0%, 45.9%, 40.2% and 38.5%, respectively, of our total assets as of the same dates. See “Business – Our Principal Business Lines – Financial Markets Business – Investment” for further details regarding our investments in securities and other financial assets. Returns on our investment in securities and other financial assets and our profitability may be materially affected by changes in interest rates, foreign exchange rates, credit and liquidity conditions, asset values, regulatory policies and macroeconomic and geopolitical conditions. Any significant deterioration in one or more of these factors could reduce the value of, and the gains generated from, our investment securities and other financial assets in our portfolio and could have a material adverse effect on our business, financial condition and results of operations. Volatility in bond markets in China may also affect our investment assets, especially our investments in debt securities.

Changes in PRC regulatory requirements may also have material adverse effects on our investment business. Although PRC regulatory authorities do not currently prohibit commercial banks from participating in SPV investments, we cannot assure you 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 any type of our financial 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.

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In addition, the repayment of principal of, and returns on, our investment assets, such as trust plans and asset management plans is typically secured by collateral provided by ultimate borrowers, including properties and land use rights or guarantee provided by guarantors. We make investment decisions based on our own assessment of these trust plans, asset management plans and the ultimate borrowers to achieve the agreed-upon return rates. See “Risk Management – Credit Risk Management for Financial Markets Business.” We primarily rely on the ultimate borrowers to reduce our losses and exercise our rights under the related security contracts and guarantees to recover losses from the guarantors upon the occurrence of any default. Any deterioration in the financial condition of issuers under investment securities and other wealth management products issued by other commercial banks could also adversely affect our ability to recover principal and returns from such instruments.

Our impairment allowance on financial investments may not be sufficient to fully cover the actual losses on such investment we may incur in the future.

As of December 31, 2016, 2017 and 2018 and June 30, 2019, our financial investments before impairment allowance amounted to RMB103,104.4 million, RMB131,423.5 million, RMB137,122.9 million and RMB150,185.9 million, representing 45.1%, 45.9%, 40.1% and 38.5% of our total assets as of the same dates, respectively. Prior to January 1, 2018, we did not classify any assets into financial investments at amortized cost under IAS 39. We have adopted IFRS 9 since January 1, 2018 to replace IAS 39. According to IFRS 9, our financial investments classified as receivables were re-classified to financial investments measured at amortized cost. See the section headed “Financial Information – Critical Accounting Estimates and Judgments – Impact of New Accounting Policies” and note 2(1) to the Accountants’ Report in Appendix I for details on differences between IAS 39 and IFRS 9 and the impact of IFRS 9 on our financial performance and net assets. As of June 30, 2019, our financial investments at amortized cost amounted to RMB111,132.2 million, representing 28.5% of our total assets as of the same date.

We assess impairment allowance on such investment in line with our applicable accounting policies and conduct periodic review and assessment in this respect. As of December 31, 2016, 2017 and 2018 and June 30, 2019, our impairment allowance on financial investments amounted to RMB836.1 million, RMB1,378.0 million, RMB1,784.5 million and RMB1,319.2 million, respectively.

Our management determines the amount of the impairment losses or expected credit losses and the impairment allowance based on applicable accounting policies and on our management’s assessments of relevant factors, such as operational and financial conditions of counterparties or underlying financing parties, the realizable value of collateral, and the ability of the guarantors to fulfill their obligations, as well as China’s economic, legal, and regulatory environment. Particularly, in line with IFRS 9 that we have adopted since January 1, 2018, in determining impairment losses, the management is required to adopt an “expected credit loss” model where a loss event will no longer need to occur before an impairment allowance is recognized. Under IFRS 9, the management is required to estimate on expected credit losses and the point at which there is a significant increase in credit risk based on available

–31– RISK FACTORS information that the management deems reasonable and applicable, all of which may involve difficult judgment. Many of these factors are beyond our control and our estimation is subjective in nature, and therefore is subject to inherent restrictions. See “Financial Information – Critical Accounting Estimates and Judgments – Impact of New Accounting Policies” for further details. There is no assurance that we can always make accurate assessment and expectation or the actual losses on such assets will not significantly increase in the future compared with our expected losses. We also cannot assure you that the impairment allowance will be sufficient to cover all losses we may actually incur in the future, upon occurrence of which, our business, prospects, financial condition and results of operations may be materially and adversely affected.

Our credit exposure to counterparties in the interbank business could subject us to losses.

We are exposed to credit risks in our interbank business due to potential default by counterparties. Credit risk in the interbank business may arise from our deposits with other commercial banks and financial institutions. As of December 31, 2016, 2017 and 2018 and June 30, 2019, our deposits with banks and other financial institutions amounted to RMB5,886.9 million, RMB1,121.7 million, RMB834.8 million and RMB4,232.3 million, respectively, representing 2.6%, 0.4%, 0.2% and 1.1%, respectively, of our total assets as of the respective dates. Although our interbank deposits account for a small proportion of our total assets, we may be subject to increased credit risks, if there is any default by our counterparties.

Our counterparties may default on their interbank obligations to us due to a credit crisis, operational failure or bankruptcy, or a liquidity crisis in the interbank market. As of the Latest Practicable Date, we have RMB151.3 million of interbank deposits with Baoshang Bank. We also had interbank deposits of RMB500 million due in January 2020 with a city commercial bank, the H shares of which were suspended from trading in April 2019 and resumed trading on September 2, 2019. A liquidity crisis in the PRC interbank market, although unlikely at the moment, could expose us to risks that our ability to comply with PRC regulatory requirements and to continue to operate our business would be weakened. See “Industry Overview” for further discussion.

In addition, the financial soundness of many commercial banks may be closely interrelated as a result of credit, trading, clearing or other relationships between the institutions. As a result, negative publicity and public concerns over the liquidity of a commercial bank, particularly medium and small regional banks, in China could adversely affect the banking industry and increase the perceived default risks associated with commercial banks. Actual defaults, increases in perceived default risk and other similar events in the interbank markets could have an adverse effect on our interbank and related business.

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In May 2019, the PBOC and the CBIRC took over control of Baoshang Bank due to its severe credit risk, and there are widespread reports that other small and regional banks may face certain credit and liquidity risks, as they normally have less robust internal governance and risk management compared with large commercial banks and are more vulnerable to adverse regional changes. Given the increased credit risk we expected from our deposits with Baoshang Bank, we recognized RMB147.8 million of impairment losses on deposits with banks and other financial institutions as reflected in our statements of profit and loss and other comprehensive income for the six months ended June 30, 2019 in relation to our deposits with Baoshang Bank. This is based on our management’s assessment of the likelihood of future credit loss considering the available market information concerning the financial and operating conditions of Baoshang Bank, among other factors. However, many of these factors are beyond our control, and therefore our assessment of, and expectations for, these factors may differ from their future development. In addition, we cannot guarantee that other commercial banks in China with which we have interbank deposits will not experience credit deterioration or other material risk-based incidents.

Although we continually improve internal control policies and procedures, we cannot assure you that such internal control policies and procedures are effective and sufficient to detect and prevent any incident of default by our counterparties. See “Risk Management – Credit Risk Management for Financial Markets Business – Credit Risk Management for Interbank Business.”

Changes in the fair value of our financial investments may materially and adversely affect our operating results, financial condition and prospects.

As of June 30, 2019, we had financial investments at fair value through profit or loss of RMB15,378.6 million and financial investments at fair value through other comprehensive income of RMB23,643.5 million. All these financial investments are stated at fair value. We recognize fair value change in profit or loss which arising from remeasurement of investments classified as financial investments measured at fair value through profit or loss in the relevant accounting period. For financial investments measured at fair value through other comprehensive income, we recognize change in their fair value under other comprehensive income. In 2016 and 2017, we recognized fair value losses of RMB95.9 million and RMB106.9 million, respectively, while in 2018 and the first half of 2018 and 2019, we recognized fair value gains of RMB159.6 million, RMB63.7 million and RMB2.5 million, respectively, from remeasurement of financial investments at fair value through profit or loss. See note 6 to the Accountants’ Report set forth in Appendix I attached to this prospectus for further details on net gains or losses arising from investment securities. Asset valuations in future periods, reflecting then prevailing market conditions, may result in negative changes in the fair values of these financial investments, which will result in a decline in our reported shareholders’ equity, book value per share and net profit. In addition, the value ultimately realized by us on disposal of these investments may be lower than their current fair value. Any of these factors could require us to record negative fair value adjustments, which may have a material adverse effect on our operating results, financial condition or prospects. There is no assurance that we can always obtain necessary or reliable data to apply relevant financial valuation models for determination of fair value due to factors beyond our concern, such as loss of data caused by

–33– RISK FACTORS economic development or, for illiquid assets, which has no available market information. In such circumstances, we are required to make assumptions, judgments and estimates in order to establish their fair value. Since reliable assumptions are subjective in nature and inherently uncertain, the actual results may differ from our estimates. Any consequential impairments or write-downs could have a material adverse effect on our operating results, financial condition and prospects.

We are exposed to risks due to our business and operational concentration in Guizhou Province.

As of June 30, 2019, substantially all of our loans and advances to customers and substantially all of our customer deposits were originated from Guizhou Province. All of our branches and sub-branches are also located in Guizhou Province. We expect all of our loans and deposits to continue to originate from Guizhou Province for the foreseeable future. Our continued growth depends to a large extent on the continued growth of Guizhou Province’s economy and we are exposed to risks arising from the concentration of loans in Guizhou Province. In 2016, 2017 and 2018, Guizhou Province had fiscal revenue of RMB617.6 billion, RMB608.3 billion and RMB684.4 billion, respectively, and fiscal expenses of RMB616.4 billion, RMB609.6 billion and RMB687.0 billion, respectively. Guizhou Province’s economy has recently experienced significant growth, benefiting from a series of central and regional government policies. Adverse changes in the economic development or occurrence of any significant natural disaster or catastrophic event in Guizhou Province could materially and adversely affect our business, financial condition and results of operations.

In recent years, we have been actively echoing government initiatives and participating in poverty reduction financial and industry projects led by the central government and the local government in Guizhou Province. During the Track Record Period, we invested primarily in projects supporting the transportation infrastructure development in rural areas in Guizhou Province under our “Zu Zu Tong” (組組通) loan products, as part of the Guizhou Provincial government initiative. We also offered special long-term loans to designated enterprises that can help alleviate poverty. As of December 31, 2017 and 2018 and June 30, 2019, our loans granted for poverty reduction projects were RMB3,208.7 million, RMB14,143.1 million and RMB15,552.2 million, respectively. Any significant change to the favorable local policies or any adverse change in the economy of Guizhou Province could adversely affect these borrowers’ ability to repay such loans. If borrowers under these loans are unable to perform their payment obligations, our business, results of operations and financial condition could be adversely affected.

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We determine the fair value of level 3 financial instruments based on valuation techniques and various assumptions of unobservable inputs, which may fluctuate according to the changes in the unobservable inputs.

We determine fair value of level 3 financial instruments based on valuation techniques and various assumptions of unobservable inputs, which may fluctuate according to the changes in the unobservable inputs. The fair value of a financial instrument is the amount that would be received if an asset is sold or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In line with our accounting policies, we establish a fair value hierarchy that prioritizes the inputs to valuation techniques being used to measure fair value of our financial instrument. We determine fair value of our financial assets and financial liabilities that are classified in levels 1 and 2 of the fair value hierarchy based on observable prices and inputs. In particular, as of December 31, 2016, 2017 and 2018 and June 30, 2019, our level 1 and level 2 financial assets in aggregate amounted to RMB6,831.1 million, RMB11,970.1 million, RMB21,470.2 million and RMB38,045.7 million, respectively, representing approximately 97.4%, 94.6%, 88.8% and 90.1%, respectively, of our total financial assets measured at fair value as of the same dates. Instruments classified in level 3 of the fair value hierarchy are those which require one or more significant inputs that are not observable. In particular, as of December 31, 2016, 2017 and 2018 and June 30, 2019, our level 3 financial assets amounted to RMB184.5 million, RMB683.1 million, RMB2,708.9 million and RMB4,161.6 million, respectively, representing approximately 2.6%, 5.4%, 11.2% and 9.9%, respectively, of our total financial assets measured at fair value as of the same dates and approximately 0.1%, 0.2%, 0.8% and 1.1%, respectively, of our total assets as of the same dates.

Absent evidence to the contrary, instruments classified in level 3 of the fair value hierarchy are initially valued at transaction price. To determine fair value, we rely on judgment from our management taking into account various factors, including changes in unobservable inputs such as estimated future cash flows and discount rates. Many of these factors are beyond our control and may not be available on a consistent basis. In addition, the judgment and estimation is a subjective process and is subject to inherent limitations. We cannot assure you that such judgment and estimation are accurate, in which case the fair value of relevant financial instruments may be materially and adversely affected, resulting in material and adverse impact to our financial conditions and results of operations.

Changes in accounting standards or policies may materially affect our financial condition and results of operations.

The financial accounting and reporting standards governing our financial statements as well as their application and interpretation may change from time to time. Such changes may be beyond our control, and can be difficult to predict, which, in turn, could materially impact our results of operations and financial condition. In some cases, we may be required to apply a new or revised standard retrospectively, resulting in material changes to previously reported financial results. Any changes in accounting standards or policies may materially affect our results of operations and financial condition.

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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 lifetime expected credit losses for those assets, rather than setting out allowance in the amount of 12-month expected credit losses. See “Financial Information – Critical Accounting Estimates and Judgments – Impact of New Accounting Policies” for details of the impact of IFRS 9 and note 2(1) to the Accountants’ Report set forth in Appendix I attached to this prospectus. As a result, our results of operations during the years ended December 31, 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.

Any future changes to our accounting policies may have a material impact on our financial condition and results of operations.

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

As of June 30, 2019, our loans to (i) leasing and commercial services, substantially all of which involve government-affiliated entities primarily engaging in infrastructure construction projects, (ii) water conservancy, environment and public facilities management, (iii) construction, (iv) education, (v) real estate, and (vi) transportation, storage and postal services, which are critical to the urbanization effort and livelihood of Guizhou Province and the establishment of inclusive finance, accounted for approximately 49.6%, 9.6%, 7.9%, 6.7%, 5.8% and 5.3%, respectively, of our total corporate loans as of the same date. As of June 30, 2019, our non-performing loans to these sectors accounted for approximately 27.5% in aggregate of our total non-performing corporate loans.

Any deterioration in any of the industries in which our loans are highly concentrated, or any deterioration in the financial condition or results of operations of our borrowers in the relevant industries, could undermine the quality of our existing loans and our ability to grant new loans to relevant industries, which, in turn, could materially and adversely affect our business, financial condition and results of operations. We have taken measures to control our risk exposure to such sectors. See “Risk Management – Market Risk Management” for details on these measures. We cannot assure you that any measure we take will be effective or sufficient to protect us against the effects of any downturn in such markets in China. As a result, any significant or protracted downturn in, or change in national policies affecting, such markets in China may have a material adverse effect on our prospects, asset quality, business, financial condition and results of operations.

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As of June 30, 2019, loans to our ten largest single borrowers totaled RMB16,901.9 million, representing 51.4% of our regulatory capital. As of the same date, our credit exposure to our ten largest group customers totaled RMB25,590.9 million, representing 77.8% 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.

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

As a city commercial bank in Guizhou Province, we have a substantial number of customers that are local micro and small enterprises and individual business owners. We believe that providing loans to them is an important component of our lending business. As of December 31, 2016, 2017 and 2018 and June 30, 2019, our loans to micro and small enterprises and individual business owners were RMB24,356.4 million, RMB32,722.7 million, RMB65,836.9 million and RMB80,161.4 million, respectively, representing 35.6%, 37.1%, 47.0% and 48.8%, respectively, of our total loans.

Micro and small enterprises and individual business owners are more vulnerable to macroeconomic fluctuations, as they may lack the financial, management or other resources necessary to withstand the material adverse effects brought about by a slowdown in economic growth or changes in the regulatory environment, as compared with larger enterprises. In addition, we may not be able to obtain all the information on micro and small enterprises and individual business owners which is necessary for us to assess their credit risks. As of December 31, 2016, 2017 and 2018 and June 30, 2019, our non-performing loan ratio of loans granted to micro and small enterprises and individual business owners was 2.76%, 2.62%, 1.52% and 0.79%, respectively. However, our non-performing loans may increase due to the effects of the economic slowdown or unfavorable changes in the regulatory environment on our micro and small enterprise and individual business owner customers, which may adversely affect our business, financial condition and results of operations.

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

We are exposed to real estate market related risks, especially due to our corporate loans to the real estate industry, our residential mortgage loans and other loans associated with the real estate market. The purchase price of commercial residential properties in Guizhou Province has been rising in recent years. We extend loans to high-quality local real estate projects with caution, while we rigorously implement the onboarding criteria for real estate projects. As of December 31, 2016, 2017 and 2018 and June 30, 2019, our corporate loans to the real estate industry amounted to RMB5,951.2 million, RMB4,905.2 million, RMB7,055.7 million and RMB7,979.8 million, respectively, representing 8.7%, 5.6%, 5.0% and 4.9%, respectively, of our total loans and advances as of the same dates. As of December 31, 2016,

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2017 and 2018 and June 30, 2019, our residential mortgage loans amounted to RMB2,182.5 million, RMB6,143.5 million, RMB9,765.5 million and RMB12,371.1 million, respectively, representing 3.2%, 7.0%, 7.0% and 7.5%, respectively, of our total loans and advances as of the same dates.

The PRC government has imposed, and may continue to implement, macroeconomic policies to regulate the real estate market, such as restriction of purchasers’ household registration and buying amounts. In addition, any significant decline in property prices in China may have a material adverse effect on the asset quality of our corporate loans to customers in the real estate sector and our residential mortgage loans. If the real estate market in China experiences a significant downturn, the value of the collateral securing our loans may decrease, which could result in a decrease in the amount we could recover on any defaulting loans secured by such real estate properties.

We have taken measures to control our risk exposure to the real estate sector. See “Risk Management – Credit Risk Management for Corporate Loans – Management in Key Risk Areas – Credit Risk Management for Loans to Real Estate Industry” for details on these measures. We cannot assure you that any measure we take will be effective or sufficient to protect us against the effects of any downturn in the PRC real estate market. As a result, any significant or protracted downturn in, or change in national policies affecting, the real estate market in China may have a material adverse effect on our prospects, asset quality, business, financial condition and results of operations.

The collateral or guarantees securing our loans and advances to customers may not be sufficient or fully realizable.

As of June 30, 2019, 24.1%, 19.4% and 49.8% of our gross loans and advances to customers were secured by pledges, collateral and guarantees, respectively. We generally accept collateral, including land use rights, commercial buildings and houses, machinery and equipment, equity securities, debt securities, certificates of deposit, accounts receivable and other assets. The value of the collateral securing our loans may fluctuate or decline due to factors beyond our control, including macroeconomic factors affecting the PRC and Guizhou Province economies. For example, any change in the PRC macroeconomic policies or a slowdown in the PRC’s economic growth could lead to a downturn in the PRC real estate market, which, in turn, could result in declines in the realizable value of the real estate securing our loans to levels below the outstanding principal balance of such loans. Furthermore, we cannot assure you that our evaluation of collateral will always be accurate. If the collateral prove to be insufficient to cover the related loans, we may have to obtain additional collateral from our borrowers. If we fail to do so or the price of the collateral decreases, we may need to recognize additional allowance for loan impairment, which could materially and adversely affect our business, financial condition and results of operations.

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In China, the procedures for liquidating or otherwise realizing the value of collateral may be time-consuming, and it may be difficult to enforce claims in respect of such collateral. In addition, we may not be able to fully realize the value of collateral. All of the foregoing factors could materially and adversely affect our ability to realize the value of collateral.

As of December 31, 2016, 2017 and 2018 and June 30, 2019, approximately 41.4%, 49.4%, 48.6% and 51.7% of our loans and advances were guaranteed loans, respectively. Our guaranteed loans are generally not secured by any asset. In addition, some of the guarantees are provided by the borrowers’ affiliates or other related parties. Furthermore, we are subject to the risk that a court or any other judicial or government authority fail to enforce such guarantee due to lack of enforceable assets. The factors resulting in the inability of such borrowers to fulfill their payment obligations could also lead to the deterioration in the financial condition of the guarantors and, therefore, could expose us to additional risks of default on the guarantee obligations, which could materially and adversely affect our business, financial condition and results of operations.

As of December 31, 2016, 2017 and 2018 and June 30, 2019, approximately 12.1%, 7.4%, 5.7% and 4.8% of our loans and advances were unsecured, respectively. We granted these unsecured loans mainly based on our credit assessment of the borrowers. No assurance can be given that such credit assessments are or will be accurate at all times, or that the borrowers will repay their loans in full and on time. As we only have general claims on the assets of defaulting borrowers under unsecured loans, we are exposed to a relatively high risk of losing the entire amounts outstanding under such loans, which may materially and adversely affect our business, financial condition and results of operations.

We are subject to risks relating to wealth management products.

In recent years, we have increased both the volume and range of wealth management products offered to our customers. In 2016, 2017, 2018, and the six months ended June 30, 2019 the wealth management products we issued amounted to RMB27,360.4 million, RMB18,904.1 million, RMB12,412.5 million and RMB9,431.1 million, respectively. The PRC Government has promulgated various rules and regulations to mitigate systemic risks in the financial industry in recent years, including 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》) jointly issued by the PBOC, the CBIRC, the CSRC and the SAFE on April 27, 2018 (the “April 27 Guideline”) to, among other things, improve wealth management business of financial institutions and unify supervision standard for asset management products of same class and thereby effectively prevent financial risks, and the Measures for the Supervision and administration of the Wealth management Business of Commercial Banks (《商業銀行理財業 務監督管理辦法》) issued by the CBIRC on September 26, 2018 (the “September 26 Guidelines”), which, among other things, strengthen the supervision and administration of wealth management products issued by commercial banks. See “ Supervision and Regulation – Establishment of Branches and Sub-branches” for further details on the April 27 Guideline and the September 26 Guidelines.

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In line with restrictions set out in the April 27 Guideline and the September 26 Guidelines, particularly the Non-Guarantee Requirements and Other Requirements (非擔保規 定及其他規定), our newly issued net value type wealth management products are not allowed to offer principal-protected guarantee, which may lead to decreased market demand for our financial markets 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. As of June 30, 2019, all of the existing wealth management products we issued were non-principal protected. The balance of our non- principal-protected wealth management products amounted to RMB10,575.08 million. We primarily invest the funds raised from our wealth management products in, among other things, money market instruments and SPV investments. See “Business – Financial Markets Business – Wealth Management for Customers.”

Our ability to pay the principal and investment returns under the wealth management products we issued to our customers is based on the performance of the financial investment products we purchased using proceeds raised from such wealth management products. As all of the existing wealth management products issued by us are non-principal protected, we are not liable for any loss suffered by the investors in these products. However, to the extent that the investors suffer losses on these wealth management products, our reputation may be materially and adversely affected, and we may also suffer a loss of business and customer deposits. 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 otherwise. During the Track Record Period, investors of our non-principal-protected wealth management products had been paid the principal and the returns based on the expected yield rate (預期收益率) or performance comparable benchmark (業績比較基準). However, there is no assurance that we will not suffer a loss or be negatively affected as a result of our investors’ losses in the future.

In addition, the terms of wealth management products issued by us are often shorter than those of their underlying assets. This mismatch subjects us to liquidity risk and requires us to issue new wealth management products, sell the underlying assets or otherwise repay the principal and returns when existing wealth management products mature.

In addition, to ensure compliance with the Non-Guarantee Requirements and Other Requirements (非擔保規定及其他規定), 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 condition and results of operations. Furthermore, the April 27 Guideline and the September 26 Guidelines were 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 and the September 26 Guidelines, or issue new laws and rules to replace the April 27 Guideline or the September 26 Guidelines setting out limitations that are costly for us to follow. Such additional rules and interpretations may materially and negatively affect our financial condition and results of operations.

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We may have difficulties in meeting capital adequacy and other regulatory requirements in the future.

We are subject to capital adequacy regulations set by the CBIRC. See “Supervision and Regulation – Establishment of Branches and Sub-branches.” Calculated in accordance with the Capital Administrative Measures (Provisional), as of June 30, 2019, our core tier-one capital adequacy ratio, tier-one capital adequacy ratio and capital adequacy ratio were 10.31%, 10.31% and 12.51%, respectively, all of which satisfy the requirements of the PRC banking regulatory authorities. The CBIRC may increase the minimum capital adequacy requirements or change the methodology for calculating regulatory capital or capital adequacy ratios. As a result, we may be subject to new capital adequacy requirements.

If our growth places capital demands on us in excess of what we are able to generate internally or raise in the capital markets, we may need to seek additional capital through alternative means. However, we may not be able to obtain additional capital 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, quality of assets, results of operations and cash flows prescribed by the PRC law and regulatory approvals, general market conditions for capital-raising activities, as well as economic, political and other conditions. 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 compliance and capital costs as well as 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 against us, including, for example, imposing restrictions on our lending and investment activities, declining 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.

We mainly rely on customer deposits to fund our business and manage our liquidity.

Customer deposits remain our primary funding source. We rely on growth in customer deposits to expand our loan business and meet other liquidity needs. A decrease in customer deposits will reduce our funding sources, which, in turn, will affect our ability to extend new loans, while meeting capital and liquidity requirements. However, there are various factors affecting the growth of customer deposits, many of which are beyond our control, such as economic and political conditions, availability of alternative investment choices, changes in government policies 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 the higher financing costs and difficulty in raising financing may result in increased corporate deposit withdrawals and weakened willingness and ability of corporates to place deposits. We cannot assure you that we will be able to maintain growth in our customer deposits at a pace sufficient to support our business.

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In addition, as of June 30, 2019, 74.9% of our total deposits from customers were due within one year, or were payable on demand, and 18.1% of our gross loans and advances to customers were due within one year. There is a mismatch between the maturities of our liabilities and our assets. Based on our experience, our short-term customer deposits will typically be rolled over upon maturity, and these deposits have represented a relatively stable source of our funding. However, due to the increased availability of wealth management products, other investment products on the PRC financial markets and the financial disintermediation in recent years, certain customers may withdraw their deposits and invest in alternative products.

If we are unable to maintain the growth rate 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 and other 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. Therefore, our business, financial condition and results of operations may be materially and adversely affected.

We had negative net cash flows from operating activities in 2018 and the six months ended June 30, 2018.

We had net cash outflows from operating activities of RMB22,139.9 million and RMB2,358.6 million, respectively, in 2018 and the six months ended June 30, 2018. These net cash outflows from operating activities were primarily attributable to (i) increases in loans to customers, deposits with banks and other financial institutions and other operating assets, (ii) an increase in deposits with the central bank and a decrease in other operating liabilities in the six months ended June 30, 2018, and (iii) our partial reliance on interbank lending and issue of debt securities to fund our working capital, which are within our ordinary course of business. See “Financial Information – Cash Flows” for further details. We cannot assure you that we will be able to generate positive cash flows from operating activities. If we resort to other financing activities to generate additional working capital, we will incur financing costs and we cannot guarantee that we will be able to obtain the financing on reasonable terms, or at all, which in turn may adversely affect our ability to expand the business and to offer loans to customers.

If we are not effective in designing or implementing our risk management policies and procedures, or fail to use information technology systems to support the improvement of our risk management and internal controls, our business, financial condition, results of operations and prospects could be materially and adversely affected.

Our risk management capabilities are limited by the information, tools or technologies available to us. For example, we may not be able to effectively monitor credit risk due to limited information sources or tools. In recent years, we have undertaken various initiatives to strengthen our risk management capabilities, including improving our internal credit-approving mechanisms, providing employee training regarding operational risk, enhancing committee rules and procedures to systematically control liquidity risk, as well as improving market,

–42– RISK FACTORS compliance and reputational risk management, while continually upgrading our information technology systems. However, our ability to successfully execute such mechanisms, operate such systems and monitor and analyze their effectiveness is subject to continuous testing and improvement. See “– Risks Relating to Our Business – Our business is highly dependent on the proper functioning and improvement of our information technology systems.”

If we are not able to effectively improve our risk management and internal control policies, procedures and systems, or if we are not able to achieve the intended results of such policies, procedures or systems in a timely manner, our asset quality, business, financial condition and results of operations may be materially and adversely affected.

We cannot assure you that we will continue the geographical expansion of our branch network.

As of June 30, 2019, we operated our business through our head office in Guiyang, eight branches and 207 sub-branches. Our operation network has covered all counties in Guizhou Province since 2016, and we have slowed down the growth in our branch network. Our focus may gradually shift from expansion to operational efficiency. There can be no assurance that our historical expansion rate can continue, and there can be no assurance that our corresponding business growth can match the speed at which we invest in our branch expansion.

We need to comply with the requirements of the PRC regulatory authorities and obtain the relevant regulatory approvals to further develop our business outside of the regions in which we currently operate. However, we may not be able to obtain such approvals, or may otherwise fail to successfully establish branches in other areas outside of Guizhou Province. In addition, compared with joint-stock commercial Banks, we do not have advantages in terms of asset size, number of branches and talent. Moreover, in regions where we intend to expand our business, we are likely to compete with established local commercial banks in terms of customers, capital, services, technology and talent, and we face uncertainties associated with national and local government policies and initiatives which are adopted to promote local economy.

If we expand our operations outside of Guizhou Province, we may face a number of other risks and challenges, in particular:

• our products and services may not meet the needs of local customers or may not be accepted by them and, as a result, we may not be able to achieve our goals;

• we may not be able to recruit employees who are familiar with the local economy, culture and customers, or recruit employees on reasonable commercial terms; and

• our financial, operational, management and other resources may not be sufficient to support the expansion of our geographical coverage.

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We will be exposed to various risks as we expand the range of our products and services.

We will continue to expand our offerings of products and services to our customers in the future. Our expansion in our offerings of products and services has exposed, and will continue to expose, us to new and potentially increasingly challenging market and operational risks, which may include:

• our experience and expertise in managing new products and services;

• our ability to recruit additional qualified staff;

• our ability to provide satisfactory customer services, such as providing sufficient products and service information and handling customer complaints;

• our ability to guide customers to accept new products;

• our ability to establish an effective management team or to enhance our risk management and information technology systems to support a broader range of products and services;

• our ability to identify and effectively manage all potential risks associated with our products and services; and

• our ability to react to the actions of our competitors and other financial service providers.

Furthermore, if we are unable to obtain relevant regulatory approvals, or comply with relevant banking industry regulations in the sales and marketing of our new products and services, we may be subject to legal proceedings or regulatory sanctions, which, in turn, could lead to significant financial losses and reputational damage.

We rely heavily on interest income and may be exposed to risks associated with our fee- and commission-based products and services.

Net interest income has historically been the largest component of our operating income. As part of our growth strategy, we plan to introduce more fee-and commission-based products and services, such as the issuance of letters of credit, agency services, wealth management services and payroll and payment services.

In particular, for certain fee- and commission-based products and services, we are not the principal issuer or borrower of relevant products, but act as the distributor of relevant products, or provide other services such as agency services. These products and services are also subject to inherent risks associated with financial performance or business operations of relevant issuers or owners of underlying assets, which can be affected by many factors beyond our control, including general economic conditions or proper compliance with laws and regulations

–44– RISK FACTORS by relevant third parties. For these products, we are not liable for any investment losses or defaults directly derived from them. However, we may still be subject to client complaints, negative news coverage and possible litigation which could have an adverse effect on our reputation.

If we are unable to offer more fee- and commission-based products and other non-interest income products and services, we will continue to rely heavily on interest income, and may face pressures resulting from greater competition among banks for interest income and lower net interest margins from interest rate liberalization measures. See “– 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 PRC’s banking industry may materially and adversely affect our results of operations.”

We rely on the continuing efforts of our key personnel, and may not be able to recruit or retain a sufficient number of qualified staff.

Our ability to maintain growth and meet our business targets is dependent upon the continued services of our senior management and other key personnel, in particular, their industry experience, experience in our business operations and 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.

Moreover, we face increasing competition in recruiting and retaining experienced and qualified staff for our branches and sub-branches in relatively remote areas since other banks, especially those from more developed cities or provinces in China, such as Beijing, Shanghai, Chengdu and Chongqing, are more attractive to experienced professionals and new graduates, while our compensation packages may also not be as competitive as those of our competitors. There is no assurance that we will be able to recruit staff in sufficient numbers or with sufficient experience, or that competition in recruitment will not lead to increases in our employment costs. If we fail to recruit or retain a sufficient number of qualified staff with reasonable costs, our business, financial condition and results of operations may be materially and adversely affected.

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

Our business is highly dependent on the ability of our information technology systems to support our business development and accurately process a large number of transactions in a timely manner. The proper functioning and continual improvement of our internal control, risk management, customer service and other data processing systems, together with internal communication among branch networks, is critical to our business and our ability to maintain competitiveness. See “Business – Information Technology” for further information with respect to our information technology systems.

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In order to reduce risks caused by system failure, we have established a principal data production center in Guiyang, an application-level disaster recovery data center in Zunyi and a data-level intercity disaster recovery data center in Liupanshui to protect our business continuity. We cannot guarantee, however, that our operations will not be materially disrupted if there is a partial or complete failure of any of the information technology systems or data centers. In addition, our ability to remain competitive will depend, in part, on our ability to upgrade our information technology systems in a timely and cost-effective manner in order to respond to market changes and other developments. Thus, any failure to improve or upgrade our information technology systems effectively or timely, may materially and adversely affect our business, financial condition and results of operations.

We are also subject to the risk of telecommunication network or Internet breakdowns. Such failures could be caused by, among other things, software bugs, computer virus attacks, conversion errors due to system upgrading, an equipment provider’s failure to provide proper system maintenance, or natural disasters. Any security breach caused by unauthorized access to information or systems, loss or corruption of data and malfunction of software, hardware or other computer equipment could materially and adversely affect our business, financial condition and results of operations.

We obtain 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.

If we fail to fully comply with the various regulatory requirements applicable to us, our reputation could be harmed and our business, financial condition and results of operations could be materially and adversely affected.

We are subject to the regulatory requirements and guidelines set forth by various PRC regulatory authorities, which include the CBIRC, the PBOC, the SAFE, the CSRC, the MOF, the NAO, the NDRC, the SAIC and the SAT and their authorized branches. These regulatory authorities carry out periodic supervision and spot checks of banks like us and have the authority to impose penalties or remediation action based on their findings. See “Business – Legal and Regulatory Matters.” We cannot assure you that we will be able to meet all the applicable regulatory requirements and guidelines, or comply with all the applicable regulations, at all times, or that we will not be subject to sanctions, fines or other penalties in the future as a result of noncompliance. Any failure to comply with applicable requirements, guidelines or regulations could have a material adverse effect on our financial condition and results of operations, as well as damage our reputation and our ability to grow our business.

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Our deferred tax assets may not be recovered, which could materially and adversely affect our results of operations.

As of June 30, 2019, our deferred tax assets amounted to RMB2,780.9 million, representing approximately 0.7% of our total assets. We periodically assess the probability of the realization of deferred tax assets, using accounting judgments and estimates with respect to, among other things, historical operating results, expectations of future earnings and tax planning strategies. In particular. these deferred tax assets can only be recognized to the extent that it is probable that future taxable profits will be available against which the unused tax credits can be utilized. However, we cannot assure you that our expectation of future earnings will materialize, due to factors beyond our control such as general economic conditions negative development of a regulatory environment, in which case we may not be able to recover our deferred tax assets which in turn could have a material adverse effect on our financial condition and results of operations.

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 or third parties, which could subject us to financial losses, third-party claims, regulatory actions or reputational damage. Although we continually improve internal control policies and procedures, we cannot assure you that such internal control policies and procedures are effective and sufficient to prevent, or that we can otherwise fully detect or deter, all incidents of fraud and misconduct. In addition, improper acts of third parties against us, such as fraud, theft of customer information for illegal activities, robbery and certain armed crimes, may also expose us to certain risks. As a result, our business, financial condition and results of operations could 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 damage and additional legal or regulatory liability risks.

We are required to comply with the PRC laws and regulations concerning anti-money laundering and anti-terrorism, which require us to strictly enforce “know-your-customer” policies and incorporate criteria for identifying large and suspicious transactions into our anti-money laundering monitoring and reporting system. We are also required to timely report large and suspicious transactions to the PRC Anti-Money Laundering Monitoring and Analyzing Center. See “Risk Management – Legal and Compliance Risk Management – Anti-money Laundering.” Although we have adopted policies and procedures that are intended to detect and prevent the use of our banking networks for money-laundering activities and by terrorists and terrorist-related organizations and individuals, those policies and procedures may not completely eliminate the risk that third parties may use us to engage in money laundering

–47– RISK FACTORS and other illegal or improper activities due to its complexity. If we fail to fully comply with applicable PRC laws and regulations, or if our customers or any third party uses us for money laundering or other illegal or improper purposes, we may be subject to fines and other penalties.

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 primarily of bank acceptances, guarantees, letters of credit and loan commitments. Such arrangements are not reflected on our balance sheet but constitute contingent assets or contingent liabilities. As of June 30, 2019, our off-balance sheet commitments totaled RMB28,520.8 million. See “Financial Information – Off-balance Sheet Commitments.” We are subject to credit risks associated with 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 disposed of certain non-performing assets and should we become unable to dispose of or transfer such assets in the future, our liquidity, financial condition and results of operations may be affected.

During the course of our business, we, in line with our risk management policy, disposed of certain non-performing assets primarily at China Credit Assets Registration & Exchange Co., Ltd.. These non-performing assets mainly include non-performing loans. These purchasers are independent third parties. We may choose to continue disposing of loans and other assets from time to time in accordance with our liquidity management and risk management policies when we deem appropriate. Our current results of operations and financial condition would be different had these disposals not taken place. In 2017, the principal amount of non-performing loans we disposed of amounted to RMB3,126.4 million. Our NPL amount and NPL ratio during the relevant periods would be higher had such disposals failed to take place. In the future, we may not be able to dispose of our loans on a similar scale or on similar terms.

Issues related to land use rights and building ownership may adversely affect our ability to occupy and use certain properties owned by us and/or leased from third parties.

As of the Latest Practicable Date, we owned or occupied 256 properties with an aggregate GFA of approximately 145,756.4 square meters. We have not obtained the building ownership certificates for 38 properties with an aggregate GFA of approximately 33,869.6 square meters, accounting for approximately 23.2% of the aggregate GFA of our owned or occupied properties. We are currently in the process of applying for land use right certificates and building ownership certificates for these properties. See “Business – Properties – Owned Properties.” However, we may not be able to obtain these title certificates; therefore, our ownership rights may be adversely affected in respect of these properties. 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.

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As of the Latest Practicable Date, we leased 397 properties with an aggregate GFA of approximately 129,195 square meters, in China, which we mainly use as branch networks and offices. Among these properties, 189 properties with an aggregate GFA of approximately 51,710 square meters were leased from lessors who were unable to provide the title certificates or the documents which entitle the lessor to lease. As a result, the validity of such leases may be subject to legal challenge. In addition, we cannot assure you that we would 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 with such relocation, and our business, financial condition and results of operations may be adversely affected. See “Business – Properties – Leased Properties.”

We may be involved in legal and other disputes from time to time arising out of our operations.

We are involved in legal and other disputes from time to time for a variety of reasons, which are generally for loan collection purposes or other claims arising out of our ordinary daily operations. See “Business – Legal and Regulatory Matters – Legal Proceedings”. As of the Latest Practicable Date, there is no litigation, arbitration or investigation against us, our Directors, Supervisors or senior management that would have a material adverse effect on our business operations or financial results. We cannot guarantee that the outcome in any of the litigation in which we are involved would be favorable to us, or that the judgment in relation to the rejected litigation against us will not be subject to disputes resulting in new litigation, appeal or retrial. In addition, we cannot guarantee that any existing or potential investigations will not have a material adverse effect on us, or that any future legal disputes we may confront will not result in damage to our reputation, additional operational costs and a diversion of resources and management’s attention from our business operations, in which case our business, financial condition and results of operations may be adversely affected.

We have certain Shareholders that we have been unable to contact and register, which may lead to potential disputes.

As of the Latest Practicable Date, among our 5,307 existing shareholders, we have not been able to confirm the identities of 549 of them according to Guidelines for the Supervision of Unlisted Public Companies No. 4, which include 47 non-individual shareholders and 502 individual shareholders. The shares held by such shareholders represent an aggregate of approximately 3.83% of our total issued share capital.

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There is no assurance that we will successfully contact and accurately record all holders of our shares or all persons who are entitled to our shares. We have entrusted the shares held by all of our existing Shareholders, including such unidentifiable shareholders, to Guizhou Sun Property Rights Exchange Co., Ltd. (貴州陽光產權交易所有限公司). Our PRC legal advisors are of the view that the existence of the aforementioned uncontactable shareholders will not have a material adverse effect on the certainty and stability of our share capital structure. However, there is no assurance that there will not be any disputes regarding equity interests raised by shareholders, such as disputes over the dilution of their shares, including H Shares. Any such disputes or objections may result in negative publicity or reputational damage to us.

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.

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 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 and destroy our markets. Any of these factors and other factors beyond our control could have an adverse effect on the overall business sentiment and 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.

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RISKS RELATING TO THE PRC BANKING INDUSTRY

We face increasingly intensive competition in China’s banking industry and from other investments and financing channels.

The banking industry in China is becoming increasingly competitive. We face competition in all of our principal lines of business from commercial banks with operations in Guizhou Province, including Joint-stock Commercial Banks and other commercial banks, which may enjoy a significant advantage over us in capital, assets, market influence and information technology. We may also face further intensified competition from privately- owned banks in the future as a result of PRC market liberalization. Such increasingly intense 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, affecting the growth of our loan or deposit portfolios and increasing competition for recruiting talent and qualified professional personnel.

In addition, we also face competition from other forms of investment alternatives in China. In recent years, financial disintermediation, which involves investors moving funds out of intermediary financial institutions, such as savings and deposit-taking banks, to direct investments, has increased in China, in part due to interest rates on deposits being below inflation rates, availability of new financial products, further development of financial markets, diversification of customer demand and other factors. In addition, due to the continued growth of domestic securities markets and relaxation of restrictions on issuing securities in the international 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. A decrease in the financing demand of our customers, especially large corporates, could materially and adversely affect our business, financial condition and results of operations.

Traditional banking institutions may face intensified challenges brought by Internet finance.

China’s e-commerce giants are making an aggressive foray into the financial sector, cutting into traditional banking services by offering online wealth management products and payment solutions and attracting increasing numbers of individual consumers and investors. 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. Personal loan products provided by internet-based financial service companies may result in decreased demand from 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 flow back to commercial banks in the form of interbank deposits. As a result, commercial banks may experience increased funding costs, narrowed interest margins, and therefore, reduced profitability. The PRC commercial banks also face competition from other types of e-commerce finance, such as Internet lending and crowd funding. We cannot assure you that we will successfully meet the challenges from such

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Internet finance companies, and in the event that we are unable to effectively respond to changes in the competition environment of the PRC banking industry, our business, financial condition and results of operations could be materially and adversely affected.

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.

We are subject to various regulatory requirements and guidelines set forth by the PRC regulatory authorities, which include, but are not limited to, the MOF, the NAO, the PBOC, the SAT, the CBIRC, the CSRC, the SAFE and their respective local branches, particularly in Guiyang, Guizhou Province. Some of such regulatory authorities conduct periodic and ad hoc inspections, examinations and inquiries on our business operations and compliance with the laws, regulations and guidelines, and have the authority to impose sanctions, penalties or remediation actions. These laws, regulations and guidelines impose regulatory requirements on, among others, banking products and services, market entry, opening of new branches, risk management, 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 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. 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, which 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 PRC 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 China 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 growth of the PRC economy, other unfavorable macroeconomic developments and trends in China and other parts of the world could materially adversely affect the banking industry in China. For example, the recent slowdown in China’s economic growth has led to a rise in non-performing loans among PRC banks. We cannot assure you that the banking industry in China is free from systemic risks, given the slowing economy, increasing local government

–52– RISK FACTORS debts, and overcapacity in certain sectors as well as unbalanced development in many regions in China. If we cannot timely adapt to such changes and trends, our business, financial condition and results of operations could be materially and adversely affected.

Change 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.

We utilize short-term funding in the interbank market to satisfy some of our liquidity needs. As of June 30, 2019, our deposits from banks and other financial institutions and financial assets sold under repurchase agreements accounted for 2.0% and 0.6% of our total liabilities, respectively. According to the Notice on Regulating the Interbank Business of Financial Institutions (關於規範金融機構同業業務的通知) jointly issued by the PBOC, the then CBRC, the CSRC, the then CIRC and the SAFE on April 24, 2014, 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. 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 further impose restrictions on the interbank business and interbank borrowing, which may materially and adversely affect our liquidity and profitability.

In addition, 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, and we cannot assure you that SHIBOR interest rates could return to the normal range in the short term after irregular fluctuations in such rates in the future. 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. Further, 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 debt securities, which will have a material and adverse effect on our financial condition 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 PRC’s banking industry may materially and adversely affect our results of operations.

Our net interest income accounted for 98.3%, 101.0%, 94.9% and 91.9% of our operating income in 2016, 2017 and 2018 and the six months ended June 30, 2019, respectively. Our net interest income is sensitive to adjustments in the benchmark interest rates set by the PBOC. In recent years, the PBOC has adjusted the benchmark interest rates several times, and interest rates in China have been gradually liberalized since 2012. See “Supervision and Regulation –

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Pricing of Products and Services – Interest Rates for Loans and Deposits.” Adjustments by the 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. This would lead to a decrease in our net interest income, which, in turn, may materially and adversely affect our results of operations and financial condition. We cannot assure you that we will be able to promptly diversify our business, adjust the mix of our assets and liabilities and change our pricing to effectively respond to further liberalization of interest rates.

The Deposit Insurance Regulation came into effect on May 1, 2015. The Deposit Insurance Regulation (存款保險條例) insures each depositor of a failed 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 debt securities portfolio to drop, which may materially and adversely affect our results of operations and financial condition. In addition, the derivatives market in China is still in the early stages of development. As a result, we may not be able to effectively hedge such market risks.

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 the PBOC have been put into use, national credit information databases in China are generally under-developed, and 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 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 would not allow us to effectively monitor changes to 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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Investments in commercial banks in China are subject to a number of 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 include order to correct as well as 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 himself 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 due. 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.

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 then 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 the then CBRC; the same investor and its related parties and parties acting in concert shall comply with the shareholding percentage requirement of the then CBRC, if they decide to invest in a commercial bank; if the then CBRC or its local offices take steps to control risks and take-overs due to material risk issues or material noncompliance of the commercial bank, shareholders shall actively cooperate with the then CBRC or its local offices to conduct risk controlling and other relevant actions.

In particular, this regulation sets out that the 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 the relevant bank. Administrative approval in relation to holding 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

–55– RISK FACTORS financial products that are controlled by an 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 by 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.

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

We classify our loans using a five-category loan risk classification system in accordance with the guidelines set forth by the CBIRC. 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, the time we started to apply IFRS 9 in determining impairment losses. We are required to apply a new expected credit loss impairment model under IFRS 9, which, compared with 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. Our loan classification and provisioning policies may be different in certain respects from those for banks incorporated in certain other countries or regions. As a result, our loan classification and our allowance for impairment losses, as determined under our loan classification and provisioning policies, may differ from those reported in those countries or regions.

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, the PBOC, PRC policy banks, PRC commercial banks and corporates. In recent years, additional investment products have been introduced to the market, such as trust fund plans, asset management plans, wealth management products issued by financial institutions, investment funds, asset-backed securities and structural notes, as a result of changes to regulatory regimes and market conditions. However, investments in equity products by commercial banks are still subject to strict restrictions. See “Supervision and Regulation” for further details. Restrictions on the ability to diversify the investment portfolio of commercial banks in China, including us, may limit our ability to seek optimal returns.

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RISKS RELATING TO THE PRC

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

All of our business, 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 industries by imposing industrial policies and regulates the PRC’s macroeconomy through its fiscal and monetary policies.

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.

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.

From 2014 to 2018, according to data released by the NBS, the PRC’s nominal GDP grew at a CAGR of 8.9%. The PRC’s economic growth has resulted in a substantial increase in corporate financing activities and individual wealth, which has in turn contributed to rapid growth in the corporate and retail banking business of PRC commercial banks. After three decades of rapid development, China’s economy has entered a new normal. The slowdown of growth in the overall economy and certain industries may impose greater challenges to companies in China, particularly those micro and small enterprises which are generally more susceptible to macroeconomic fluctuations, and may affect the results of operations and the financial condition of PRC commercial banks. Any prolonged slowdown in the Chinese economy may materially and adversely affect our business and results of operations.

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 such economic matters as the issuance and trading of securities, shareholders’ rights, foreign investment, corporate organization and governance, commerce, taxation and trade, with a view towards developing a comprehensive system of commercial law. However, as these laws and regulations are relatively new and the development of products, investment instruments and the environment in the PRC banking industry continue 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.

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Our Articles of Association provide that, apart from disputes over the recognition of Shareholders or 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 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.

Our current practice of enforcing voting restrictions may be subject to more stringent regulatory requirements in the future, which, in turn, could lead to additional costs.

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”) promulgated by the then CBRC in November 2013, commercial banks are required to stipulate in their articles of association that, where a shareholder pledges 50% or more of its respective equity interests in the bank, the voting rights of such shareholder at 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 (the “Voting Restrictions”).

To comply with the Notice, we amended our Articles of Association to include articles on Voting Restrictions (the “Voting Restriction Articles”), which were adopted at the shareholders’ general meeting and approved by the CBIRC Guizhou Office. See “ Supervision and Regulation – Restrictions on Shareholders” and “Substantial Shareholders.” Since the promulgation of the Notice, we have not been notified of administrative penalties brought against us in this regard by the PRC regulatory authorities. Nevertheless, the PRC regulatory authorities may adopt more stringent requirements in the future. If our current practice is not in conformity with any new implementation guidelines or regulatory opinion, the PRC regulatory authorities may demand that we take remediation actions and, at their discretion, bring regulatory actions against us. Such demand and regulatory actions may adversely affect our business operation.

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 within the United States or elsewhere outside the PRC upon us or most of our Directors, Supervisors and senior management personnel, 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

–58– RISK FACTORS judgments of courts with the United States, the United Kingdom, Japan or 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 Administration 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), which was promulgated on July 3, 2008 with effect on August 1, 2008 (the “Arrangement”). Under the Arrangement, where any designated PRC 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. 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. A final judgment that does not comply with the Arrangement may not be recognized and enforced in a PRC court and we cannot assure you that a final judgment that complies with the Arrangement can be recognized and enforced in a PRC court.

We are subject to PRC government controls on currency conversion, and the fluctuation of the RMB exchange rate may materially and adversely affect our business and our ability to pay dividends to holders of H shares.

Substantially all of our revenue is denominated in RMB, which is currently 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 Global Offering, we will be able to make dividend payments in foreign currencies by complying with certain procedural requirements and without prior approval from the 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. As a result, we may not be able to pay dividends in foreign currencies to holders of our H Shares.

The value of the Renminbi against the U.S. dollar and other currencies fluctuates from time to time and is affected by a number of factors, such as changes in political and economic conditions in China and internationally and in 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 RMB to the U.S. dollar, allowing the RMB to fluctuate in a regulated band based on reference to a basket of currencies determined by the

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PBOC. The PRC government further reformed the RMB exchange rate regime in 2012 and 2014. On August 11, 2015, the PBOC announced measures to improve the central parity of the RMB against the U.S. dollar by authorizing market-makers to provide parity to the China Foreign Exchange Trade System 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 September 30, 2016, the International Monetary Fund announced that the RMB had joined its Special Drawing Rights currency market. Such change and additional future changes may increase the volatility in the trading value of the RMB against foreign currencies. In addition, there remains significant international pressure on the PRC government to adopt a more flexible currency policy. With the development of the foreign exchange market and progress towards interest rate liberalization and RMB internationalization, the PRC government may in the future announce further reforms to the exchange rate regime.

We believe our current exposure to risk relating to fluctuations in exchange rates is limited. As of December 31, 2018, 0.03% of our assets and 4.35% of our liabilities were denominated in foreign currencies. However, our foreign currency business may expand and, therefore, any appreciation of the RMB against the U.S. dollar or any other foreign currencies may result in a decrease in the value of our foreign currency-denominated assets. Conversely, any devaluation of the RMB may adversely affect the value of, and any dividends payable on, our H Shares in foreign currencies. As the instruments available to us to hedge our exchange rate risk at reasonable cost are limited, we cannot assure you that we will be able to fully hedge our exchange rate risk exposure relating to our foreign currency-denominated assets.

Any appreciation of the RMB against the U.S. dollar or any other foreign currencies may materially and adversely affect the financial conditions of some of our customers, particularly those deriving substantial income from export-related businesses. As a result, their ability to perform their obligations to repay their debt to us may be adversely impacted. Furthermore, we are also currently required to obtain approval from the SAFE before converting large amounts of foreign currencies into RMB. 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

–60– RISK FACTORS 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 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 investment in our H Shares may be materially affected. See “Appendix IV – Taxation and Foreign Exchange”.

Payment of dividends is subject to restrictions under the PRC laws.

Under the 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 the PRC accounting standards and regulations, we will also prepare 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 unable to pay dividends to our Shareholders before paying any unpaid government fine or penalty, 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 of periods where we have recorded an accounting profit. Any distributable profits not distributed in a given year may be retained and hence be available for distribution in subsequent years. In addition, the CBIRC has discretion to restrict dividend

–61– RISK FACTORS 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. See “Supervision and Regulation – Supervision of Capital Adequacy Level” for details.

RISKS RELATING TO THE GLOBAL OFFERING

There has been no prior public market for our H Shares, an active trading market for our H Shares may not develop, and their trading price may fluctuate significantly.

Prior to the completion of the Global Offering, no public market has existed for our H Shares. The initial Offer Price range to the public for our H Shares is the result of negotiations between us on behalf of ourselves and the Joint Representatives on behalf of the Underwriters, and the Offer Price may differ significantly from the market price for our H Shares following the Global Offering. There can be no assurance that an active trading market for our H Shares will develop following the Global Offering or, if it does develop, that it will be sustained or that the market price for our H Shares will not decline below the initial Offer Price.

The trading volume and market price of our H Shares may be volatile, which could result in substantial losses for investors who purchase our H Shares in the Global Offering.

The price and trading volume of our H Shares may be highly volatile. Factors, some of which are beyond our control, such as variations in our revenue, earnings and cash flow, changes in our pricing policy as a result of competition, the emergence of new technologies, strategic alliances or acquisitions, the addition or departure of key personnel, changes in ratings by financial analysts and credit rating agencies, litigation or fluctuations in the market prices and demand for our products or services could cause large and sudden changes in the volume and price at which our H Shares will trade. In addition, the Hong Kong Stock Exchange and other securities markets have, from time to time, experienced significant price and volume fluctuations that are not related to the operating performance of any particular company. These fluctuations may also materially and adversely affect the market price of our H Shares.

Future offerings, sales, perceived sales or conversion of substantial amounts of our Shares in the public market, including any future conversion of unlisted shares into H Shares, could materially and adversely affect the prevailing market price of our H Shares and our ability to raise additional capital in the future, or could result in dilution in shareholding of our H shareholders.

The market price of our H Shares could decline as a result of future offerings or sales of substantial amounts of our Shares or other securities relating to our Shares in the public market, or the issuance of new H Shares or other securities relating to our Shares or the perception that such sales or issuances may occur. Future sales, or perceived sales, of substantial amounts of our securities, including any future offerings, could materially and adversely affect the prevailing market price of our H Shares and our ability to raise capital in the future at a time and at a price which we deem appropriate. In addition, our Shareholders would experience a dilution in their holdings upon the issuance of additional securities for any purpose. If additional funds were raised through our issuance of new equity or equity-linked securities

–62– RISK FACTORS other than on a pro-rata basis to existing Shareholders, the ownership percentage of such Shareholders could be reduced and such new securities might confer rights and privileges that take priority over those conferred by the H Shares.

Upon the completion of the Global Offering, we will have two classes of ordinary shares, H Shares and Domestic Shares. All of our Domestic Shares are unlisted Shares which are not listed or traded on any stock exchange. Assuming the Over-allotment Option is not exercised, there will be 2,200,000,000 H Shares representing 15.08% of our enlarged share capital and 12,388,046,744 Domestic Shares representing 84.92% of our enlarged share capital. Our unlisted Shares may be converted into H Shares, and such converted H Shares may 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 processes shall have been duly completed and the approval from the relevant regulatory authorities, including the CSRC, shall have been obtained in accordance with the regulations of the State Council’s securities regulatory authorities as well as the regulations, requirements and procedures of relevant overseas stock exchanges. The listing of such converted Shares on the Hong Kong Stock Exchange will also require approval by the Hong Kong Stock Exchange. No class shareholder vote is required for the conversion of such Shares and the listing and trading of the converted Shares on an overseas stock exchange. Future sales, or perceived sales, of the converted Shares may adversely affect the trading price of H Shares.

Because the offer price of our H Shares is higher than our latest net tangible value per Share, purchasers of our H Shares in the global offering will experience immediate dilution upon such purchase.

The Offer Price of our H Shares is higher than our latest net tangible value per Share of the outstanding Shares issued to our existing Shareholders as of June 30, 2019, following the principle laid down by the departments supervising and administrating state-owned assets. Therefore, purchasers of our H Shares in the Global Offering will experience an immediate dilution in pro forma net tangible assets per Share and our existing Shareholders will receive an increase in the pro forma adjusted net tangible asset per Share. In addition, holders of our H Shares may experience a further dilution of their shareholding percentage if the Joint Representatives on behalf of the International Underwriters exercise the Over-allotment Option or if we obtain additional capital in the future through equity offerings.

U.S. withholding tax may be imposed on payments on the H Shares.

Pursuant to certain provisions of the U.S. Internal Revenue Code of 1986, as amended, commonly known as FATCA, a foreign financial institution (an “FFI”) may be required to withhold on “foreign passthru payments” it makes after the later of January 1, 2019 or the date that is six months after the date on which final regulations defining the term “foreign passthru payments” are published in the U.S. Federal Register to (i) other FFIs that are not exempt from or in actual or deemed compliance with FATCA or (ii) account holders of such FFIs that fail to meet certain certification, reporting, or related requirements. A number of jurisdictions have entered into, or have agreed in substance to enter into, intergovernmental agreements with the United States to implement under the domestic laws of such jurisdiction an alternative information reporting and exchange regime applicable to FFIs (or FFI branches) operating in

–63– RISK FACTORS such jurisdiction (“IGAs”). Under the provisions of IGAs currently in effect, an FFI (or branch) operating in an IGA jurisdiction is generally not required to withhold from payments that it makes if the FFI complies with the reporting requirements of the IGA.

The United States and Hong Kong have entered into an IGA, and the United States and the PRC have agreed in substance to enter into an IGA that the United States treats as in force pending finalization of a formal IGA. We and each of our subsidiaries intend to comply with FATCA and any applicable IGA, including the information reporting requirements related to our accountholders and investors. If the United States and the PRC ultimately fail to reach a final agreement on the terms of an IGA, then the FATCA reporting and withholding regime applicable to FFIs in non-IGA jurisdictions would apply to us and any of our subsidiaries that are FFIs. Certain aspects of the application of the FATCA provisions and IGAs to financial instruments such as the H Shares, including whether withholding would ever be required pursuant to FATCA or an IGA with respect to payments on financial instruments such as the H Shares, are uncertain and may be subject to change. Even if withholding would be required pursuant to FATCA or an IGA with respect to payments on financial instruments such as the H Shares, such withholding would not apply prior to the time specified in the paragraph above. You should consult your own tax advisors regarding how these rules may apply to your investment in the H Shares. In the event that any withholding would be required pursuant to FATCA or an IGA with respect to payments on financial instruments such as the H Shares, no person will be required to pay additional amounts as a result of the withholding.

Dividends distributed in the past may not be indicative of our dividend policy in the future.

We distributed cash dividends of RMB868.7 million, RMB542.3 million, RMB716.5 million and RMB0.03 million in 2016, 2017, 2018 and the first half of 2019, respectively. 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. The determination of whether to pay a dividend and in what amount 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 deems relevant. We may not have sufficient or any profits for dividend distributions in the future, even if our financial statements indicate that our operations have been profitable. See “Financial Information – Dividends.”

We cannot assure you of the accuracy of facts, forecasts and statistics derived from official government publications contained in this prospectus with respect to China, its economy or its banking industry.

Facts, forecasts and statistics in this prospectus relating to the PRC, the PRC economy and the PRC and global banking industries, including our market share information, are derived from various governmental sources and information published by various government authorities and departments, such as the PBOC, the CBIRC, the Statistics Bureau of Guizhou Province and other provinces, or other public sources. We believe that these 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

–64– RISK FACTORS information is false or misleading or that any fact has been omitted that would render such information false or misleading. Such information has not been independently verified by us, the Joint Sponsors, the Joint Representatives, the Joint Bookrunners or their respective directors or any other person involved in the Global Offering, and no representation is given as to its accuracy. In addition, these facts, forecasts and statistics may not be consistent with information available from other sources, and may not be complete or up to date. As a result, you should not place undue reliance on such information.

Since there may be a gap of several Business Days between pricing and trading 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 trading of our H Shares begins.

The Offer Price of our H Shares is expected to be determined on the Price Determination Date. However, our H Shares will not commence trading on the Hong Kong Stock Exchange until they are delivered, which is expected to be several Business Days after the Price Determination Date. As a result, investors may not be able to sell or otherwise deal 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 trading begins as a result of adverse market conditions or other adverse developments that could occur between the time of sale and the time trading begins.

You should rely only on this prospectus, the Application Forms and other formal announcements made with respect to the Global Offering, and not place any reliance on any information contained in press articles or other media, in making your investment decision.

We have not authorized anyone to provide you with information that is not contained in this prospectus and the Application Forms. Any financial information, financial projections, valuations, and other information purportedly 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 prospectus, the Application Forms and other formal announcements made with respect to our Global Offering.

–65– WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES

In preparation for the Global Offering, we have sought and have been granted the following waivers from strict compliance with the relevant provisions of the Listing Rules:

MANAGEMENT PRESENCE

According to Rules 8.12 and 19A.15 of the Listing Rules, we must have sufficient management presence in Hong Kong. This normally means that at least two of our executive Directors must be ordinarily residents in Hong Kong. Since our head office and substantially all of our business operations are based, managed and conducted in mainland China, we do not, and for the foreseeable future, will not, have executive Directors who are ordinarily residents in Hong Kong for the purpose of satisfying the requirements under Rules 8.12 and 19A.15 of the Listing Rules. Currently, all of our executive Directors reside in the mainland China.

Accordingly, we have applied to the Stock Exchange for, and the Stock Exchange has granted us a waiver from strict compliance with Rules 8.12 and 19A.15 of the Listing Rules. We have made the following arrangements to maintain effective communication with the Stock Exchange:

(i) both of our authorized representatives, Mr. Li Zhiming (“Mr. Li”) and Mr. Zhou Guichang (“Mr. Zhou”) will act as our principal channel of communication with the Stock Exchange. Although Mr. Li and Mr. Zhou reside in the mainland China, each of them possesses valid travel documents and is able to renew such travel documents when they expire in order to visit Hong Kong. Accordingly, our authorized representatives will be able to meet with the relevant members of the Stock Exchange on reasonable notice;

(ii) both of our authorized representatives have means of contacting all Directors (including our independent non-executive Directors) promptly at all times as and when the Stock Exchange proposes to contact a Director with respect to any matter;

(iii) each Director has provided his mobile phone number, office phone number, fax number and e-mail address to our authorized representatives and the Stock Exchange. In the event that any Director expects to travel or otherwise be out of the office, he will provide the phone number of the place of his accommodation to the authorized representatives;

(iv) each of our Directors not ordinarily residing in Hong Kong possesses or can apply for valid travel documents to visit Hong Kong and will be able to meet with the relevant members of the Stock Exchange within a reasonable period; and

(v) we have appointed Guotai Junan Capital Limited as our compliance advisor, who will also act as an additional channel of communication with the Stock Exchange from the Listing Date to the date when we dispatch the annual reports to the Shareholders for the first full financial year immediately after the Listing of our H Shares. The compliance advisor will maintain constant contact with our authorized representatives, Directors and senior management through various means, including regular meetings and telephone discussions whenever necessary.

–66– WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES

APPOINTMENT OF JOINT COMPANY SECRETARIES

Rule 8.17

According to Rule 8.17 of the Listing Rules, the issuer must appoint a company secretary who satisfies Rule 3.28 of the Listing Rules.

Rule 3.28

According to Rule 3.28 of the Listing Rules, our secretary must be a person who, by virtue of his/her academic or professional qualifications or relevant experience, is, in the opinion of the Stock Exchange, capable of discharging the functions of company secretary. The Stock Exchange considers the following academic or professional qualifications to be acceptable:

(a) a member of The Hong Kong Institute of Chartered Secretaries;

(b) a solicitor or barrister (as defined in the Legal Practitioners Ordinance); and

(c) a certified public accountant (as defined in the Professional Accountants Ordinance).

In assessing “relevant experience,” the Stock Exchange will consider:

(a) length of employment with the issuer and other issuers and the roles played;

(b) familiarity with the Listing Rules and other relevant law and regulations including the Securities and Future Ordinance, the Companies Ordinance, and the Codes on Takeovers and Mergers and Share Buy-backs;

(c) relevant training taken and/or to be taken in addition to the minimum requirement under Rule 3.29 of the Listing Rules; and

(d) professional qualifications in other jurisdictions.

We have appointed Mr. Zhou Guichang (“Mr. Zhou”) as a joint company secretary. Mr. Zhou has substantial experience in handling corporate and administrative matters relating to the Bank. Mr. Zhou is currently a joint company secretary and the secretary to the Board. Mr. Zhou joined us during the preparatory stage of the establishment of the Bank and has held various positions in the Bank since then. For details of Mr. Zhou’s biography, see “Directors, Supervisors and Senior Management – Senior Management”. Since Mr. Zhou does not possess the professional or academic qualifications as stipulated in Rule 3.28 of the Listing Rules, we have appointed Mr. Lei Kin Keong (“Mr. Lei”), a non-practising member of the Hong Kong Institute of Certified Public Accountants, an associate member of The Hong Kong Institute of Chartered Secretaries, and an associate member of The Institute of Chartered Secretaries and

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Administrators, as joint company secretary. Over a period of three years from the Listing Date, we propose to implement the following measures to assist Mr. Zhou to become a company secretary with the requisite qualifications or relevant experience as required under the Listing Rules:

(i) Mr. Zhou will endeavor to attend relevant training courses, including briefings on the latest changes to the relevant applicable Hong Kong laws and regulations and the Listing Rules which will be organized by our Hong Kong legal advisors on an invitation basis and seminars organized by the Stock Exchange for listed issuers from time to time;

(ii) Mr. Lei will assist Mr. Zhou to enable him to acquire the relevant experience (as required under Rule 3.28 of the Listing Rules) to discharge the duties and responsibilities as our company secretary; and

(iii) Mr. Lei will communicate regularly with Mr. Zhou on matters relating to corporate governance, the Listing Rules and any other laws and regulations which are relevant to us and our affairs. Mr. Lei will work closely with, and provide assistance to, Mr. Zhou in the discharge of his duties as a company secretary, including organizing our Board meetings and Shareholders’ general meetings.

The appointment of Mr. Zhou has an initial period of three years commencing from the Listing Date on the condition that Mr. Zhou will be assisted by Mr. Lei.

We have applied to the Stock Exchange for, and the Stock Exchange has granted us, a waiver from strict compliance with the requirements of Rules 3.28 and 8.17 of the Listing Rules, provided that Mr. Lei will act as a joint company secretary and provide assistance to Mr. Zhou. The waiver is valid for an initial period of three years from the Listing Date, and will be revoked immediately if Mr. Lei ceases to provide assistance and guidance to Mr. Zhou. Before the expiry of the initial three-year period, the Bank will re-evaluate the qualifications and experiences of Mr. Zhou. Upon determination of the Bank that no on-going assistance to Mr. Zhou is necessary, the Bank will demonstrate to the Hong Kong Stock Exchange that, having had the benefit of Mr. Lei’s assistance over the three-year period, Mr. Zhou has acquired the relevant experience within the meaning of Rule 3.28 of the Listing Rules. The Hong Kong Stock Exchange will then re-evaluate whether any further waiver would be necessary.

HONG KONG FINANCIAL DISCLOSURE REQUIREMENTS

As we are engaged in banking activities, pursuant to Rule 4.10 of the Listing Rules, the financial information to be disclosed in our Accountants’ Report must be in accordance with best practice, which is at least that is required to be disclosed in respect of specific matters in the accounts of a company under the Hong Kong Companies Ordinance, IFRS, PRC GAAP and the Banking (Disclosure) Rules.

–68– WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES

Due to the reasons described below, we are currently unable to fully satisfy the disclosures required by the Banking (Disclosure) Rules. We believe that the financial disclosures which we are currently unable to satisfy do not have material impact on potential investors.

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

Banking Bank’s Position in Expected (Disclosure) Relation to the Bank’s Proposal Timing for Full Rules Item Description Specified Disclosure for Disclosure Compliance 99 Sector Information The Bank maintains a For the Bank, all loans and N/A breakdown of loans advances to customers and advances to are used in the PRC customers by instead of in Hong industry sector as Kong. The Bank is set out in the subject to the Classification and supervision of the Codes of National CBIRC and maintains a Economic breakdown of loans and Industries in its advances to customers loan system for the by industry sector based purpose of filing a on the classification return to the system as prescribed by CBIRC. the CBIRC, e.g. loans are categorized into corporate and personal loans which are further classified into detailed subcategories by industry/nature. The Bank has disclosed the loans and advances to customers by industry sectors in accordance with its management reports based on the CBIRC classification in Note 17(b) to the Accountants’ Report as set out in Appendix I to this prospectus. The Bank considers that the current disclosure is sufficient to serve HKMA’s disclosure objectives.

–69– WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES

Banking Bank’s Position in Expected (Disclosure) Relation to the Bank’s Proposal Timing for Full Rules Item Description Specified Disclosure for Disclosure Compliance 102 An authorized The Bank’s accounts N/A N/A institution shall are settled in RMB, disclose its non- which means that HKD currency the Bank only exposures which disclosed non-RMB arise from trading, currency exposures non-trading and instead of non- structural positions HKD currency in accordance with exposures. the return relating to non-HKD currency positions it submitted to HKMA pursuant to section 63 of the Banking Ordinance in respect of the annual report period.

16M Additional annual The computation The Bank can provide N/A disclosure to be basis for risks is relevant capital structure made by an promulgated by the and adequacy in authorized CBIRC as set out accordance with the institution using in the Core disclosure requirements standardized Indicators from the CBIRC’s approach to (Provisional). requirements. The Bank calculate its credit believes that such risk for non- requirements attempt to securitization address similar exposures. disclosure purpose as the related requirements of the Banking (Disclosure) Rules.

As a financial institution incorporated and based in China, we are required to comply with the regulatory requirements set out by the CBIRC and the 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 the CBIRC and the 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. As a result, we propose to disclose information in compliance with the CBIRC and PBOC regulations in this regard instead of

–70– WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES 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 prospectus will contain sufficient information for investors to make 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 Joint Sponsors concur with the view of the Bank based on the reasoning above.

Based on the above, we have applied to the Stock Exchange for, and the Stock Exchange has granted us, a waiver from strict compliance with the requirements under Rule 4.10 of the Listing Rules on the condition that as soon as we obtain the relevant information, we must comply with the requirements under Rule 4.10 of the Listing Rules.

PUBLIC FLOAT REQUIREMENTS

Rule 8.08(1) of the Listing Rules requires that there must be an open market in the securities for which listing is sought and that a sufficient public float of an issuer’s listed securities must be maintained.

We have applied to the Stock Exchange for, and the Stock Exchange has granted us, a waiver that the minimum public float requirement under Rule 8.08(1) be reduced and the minimum percentage of H Shares (being the securities for which listing on the Stock Exchange is sought) from time to time held by the public to be the higher of:

(a) 15.08% of the total issued share capital of the Bank; or

(b) such percentage of shares of the Bank to be held by the public after the exercise of the Over-allotment Option.

In support of the application, we have confirmed to the Stock Exchange that:

(a) we will have an expected market capitalization at the time of Listing of over HK$10 billion;

(b) there will be an open market in the H Shares, and the number of securities concerned and the extent of their distribution would enable the market to operate properly with a lower percentage of public float;

(c) we will make appropriate disclosure of the lower percentage of public float as approved by the Stock Exchange in this prospectus;

(d) we will confirm sufficiency of public float prescribed by the Stock Exchange in our successive annual reports after the Listing; and

(e) we will implement appropriate measures and mechanisms to ensure continual maintenance of the minimum percentage of public float prescribed by the Stock Exchange.

–71– INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING

DIRECTORS’ RESPONSIBILITY FOR THE CONTENTS OF THIS PROSPECTUS

This prospectus, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Companies (Winding Up and Miscellaneous Provisions) Ordinance, the Securities and Futures (Stock Market Listing) Rules and the Listing Rules for the purpose of giving information to the public with regard to us. The Directors, having made all reasonable enquiries, confirm that, to the best of their knowledge and belief, the information contained in this prospectus is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this prospectus misleading.

CSRC AND CBIRC APPROVALS

We have obtained approvals from the CBIRC Guizhou Office and the CSRC for the Global Offering and the making of the application to list our H Shares on the Hong Kong Stock Exchange, on April 26, 2019 and August 22, 2019, respectively. In granting such approvals, neither the CBIRC Guizhou Office nor the CSRC accepts any responsibility for our financial soundness, nor for the accuracy of any of the statements made or opinions expressed in this prospectus or in the Application Forms.

UNDERWRITING AND INFORMATION ON THE GLOBAL OFFERING

This prospectus is published solely in connection with the Hong Kong Public Offering which forms part of the Global Offering. For applicants under the Hong Kong Public Offering, this prospectus and the Application Forms contain the terms and conditions of the Hong Kong Public Offering.

The listing of our H Shares on the Hong Kong Stock Exchange is sponsored by the Joint Sponsors. The Global Offering is managed by the Joint Representatives. The Hong Kong Public Offering is fully underwritten by the Hong Kong Underwriters pursuant to the Hong Kong Underwriting Agreement. The International Underwriting Agreement relating to the International Offering is expected to be entered into on or about the Price Determination Date, subject to determination of the pricing of the Offer Shares. For further details about the Underwriters and the underwriting arrangements, see “Underwriting – Underwriting Arrangements and Expenses – Hong Kong Public Offering” in this prospectus.

The H Shares are offered solely on the basis of the information contained and representations made in this prospectus and on the Application Forms and on the terms and subject to the conditions set out herein and therein. No person is authorized to give any information in connection with the Global Offering or to make any representation not contained in this prospectus, and any information or representation not contained herein must not be relied upon as having been authorized by the Bank, the Joint Sponsors, the Joint Representatives, the Joint Global Coordinators, the Joint Bookrunners, the Underwriters, any of their respective directors, agents, employees or advisors or any other party involved in the Global Offering.

–72– INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING

Neither the delivery of this prospectus nor any subscription or acquisition made under it shall, under any circumstances, create any implication that there has been no change in our affairs since the date of this prospectus or that the information in this prospectus is correct as of any subsequent time.

DETERMINATION OF THE OFFER PRICE

The H Shares are being offered at the Offer Price which will be determined by the Joint Representatives (on behalf of the Underwriters) and us on or around Thursday, December 19, 2019 or such later date as may be agreed upon between the Joint Representatives (on behalf of the Underwriters) and us, and in any event no later than Monday, December 23, 2019. If the Joint Representatives (on behalf of the Underwriters) and us are unable to reach an agreement on the Offer Price on such date, the Global Offering will not proceed and will lapse.

RESTRICTIONS ON OFFER AND SALE OF THE OFFER SHARES

Each person acquiring the Offer Shares will be required to confirm, or by his acquisition of the Offer Shares will be deemed to confirm, that he is aware of the restrictions on offers of the Offer Shares described in this prospectus.

No action has been taken to permit an offering of the Offer Shares other than in Hong Kong, or the distribution of this prospectus in any jurisdiction other than Hong Kong. Accordingly, and without limitation to the following, this prospectus may not be used for the purpose of, and does not constitute, an offer or invitation for subscription in any jurisdiction or in any circumstances in which such an offer or invitation for subscription is not authorized or to any person to whom it is unlawful to make such an offer or invitation for subscription.

The distribution of this prospectus and/or the related Application Forms and the offering and sales of the Offer Shares in other jurisdictions are subject to restrictions and may not be made except as permitted under the applicable securities laws of such jurisdictions pursuant to registration with or authorization by the relevant securities regulatory authorities or an exemption therefrom. In particular, the Offer Shares have not been offered and sold, and will not be offered or sold, directly or indirectly, in the PRC.

CERTAIN MATTERS RELATING TO THE HONG KONG PUBLIC OFFERING

Application for Listing on the Hong Kong Stock Exchange

We have applied to the Listing Committee of the Hong Kong Stock Exchange for the listing of, and permission to deal in, our H Shares to be issued by the Bank pursuant to the Global Offering (including any additional H Shares that may be issued pursuant to the exercise of the Over-allotment Option). Dealings in the H Shares on the Hong Kong Stock Exchange are expected to commence on Monday, December 30, 2019.

–73– INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING

Except as otherwise disclosed in this prospectus, no part of our Shares or loan capital is listed on or dealt in on any other stock exchange and no such listing or permission to list is being or proposed to be sought in the near future.

H Share Register and Stamp Duty

All of the H Shares issued pursuant to applications made in the Hong Kong Public Offering and the International Offering will be registered on our H Share register to be maintained in Hong Kong. Our principal register of members will be maintained by us at our headquarters in the PRC.

Dealings in the H Shares registered in our H Share register will be subject to the Hong Kong stamp duty. See “Appendix IV – Taxation and Foreign Exchange” in this prospectus.

Dividends Payable to Holders of H Shares

Unless determined otherwise by the Bank, dividends payable in Hong Kong dollars in respect of H Shares will be paid to shareholders as recorded in our H Share register, and sent by ordinary post, at the shareholders’ own risk, to the registered address of each shareholder.

Professional Tax Advice Recommended

Applicants for the Hong Kong Offer Shares are recommended to consult their professional advisors if they are in any doubt as to the taxation implications of subscribing for, purchasing, holding, disposing of, dealing in, or the exercise of any rights in relation to, the H Shares. It is emphasized that neither we nor the Joint Sponsors, the Joint Representatives, the Joint Global Coordinators, the Joint Bookrunners, the Underwriters, nor their respective directors, officers, employees, advisors, agents or representatives nor any other person or party involved in the Global Offering accepts responsibility for any tax effects or liabilities of holders of H Shares resulting from the subscription, purchase, holding, disposal of, dealing in, or exercise of any rights in relation to, the H Shares.

Registration of Subscription, Purchase and Transfer of H Shares

We have instructed Computershare Hong Kong Investor Services Limited, the H Share Registrar, and it has agreed, not to register the subscription, purchase or transfer of any H Shares in the name of any particular holder unless and until such holder delivers a signed form to the H Share Registrar in respect of those H Shares bearing statements to the effect that the holder:

(i) agrees with us and each of our shareholders, and we agree with each shareholder, to observe and comply with the PRC Company Law, the Special Regulations and our Articles of Association;

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(ii) agrees with us, each of our shareholders, Directors, Supervisors, managers and officers, and we, acting for ourselves and for each of our Directors, Supervisors, managers and officers agree with each of our shareholders, to refer all differences and claims arising from our Articles of Association or any rights or obligations conferred or imposed by the PRC Company Law or other relevant laws, rules and regulations concerning our affairs to arbitration in accordance with our Articles of Association, and any reference to arbitration shall be deemed to authorize the arbitration tribunal to conduct hearings in open session and to publish its award, which arbitration shall be final and conclusive;

(iii) agrees with us and each of our shareholders that the H Shares are freely transferable by the holders thereof; and

(iv) authorizes us to enter into a contract on his behalf with each of our Directors, Supervisors, managers and officers whereby such Directors, Supervisors, managers and officers undertake to observe and comply with their obligations to our shareholders as stipulated in our Articles of Association.

Persons applying for or purchasing H Shares under the Global Offering are deemed, by their making an application or purchase, to have represented that they are not close associates (as such term is defined in the Listing Rules) of any of the Directors of the Bank or an existing Shareholder of the Bank or a nominee of any of the foregoing.

Procedure for Application for Hong Kong Offer Shares

The procedure for applying for Hong Kong Offer Shares is set forth in the section entitled “How to Apply for Hong Kong Offer Shares” of this prospectus and the Application Forms.

STRUCTURE OF THE GLOBAL OFFERING

Details of the structure of the Global Offering, including its conditions, are set forth in the section entitled “Structure of the Global Offering” of this prospectus.

OVER-ALLOTMENT AND STABILIZATION

Details of the arrangements relating to the Over-Allotment Option and the stabilization are set forth in the section entitled “Underwriting” of this prospectus.

H SHARES WILL BE ELIGIBLE FOR ADMISSION INTO CCASS

Subject to the granting of listing of, and permission to deal in, the H Shares on the Hong Kong Stock Exchange and our compliance with the stock admission requirements of HKSCC, the H Shares will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the date of commencement of dealings in the H Shares on the Hong Kong Stock Exchange or any other date as determined by HKSCC. Settlement of

–75– INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING transactions between participants of the Hong Kong Stock Exchange is required to take place in CCASS on the second business day after any trading day. All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time. Investors should seek the advice of their stockbroker or other professional advisors for the details of the settlement arrangements as such arrangements may affect their rights and interests. All necessary arrangements have been made for the H Shares to be admitted into CCASS.

EXCHANGE RATE CONVERSION

Solely for your convenience, this prospectus contains translations of certain Renminbi amounts into US dollars and Hong Kong dollars at specified rates. No representation is made that the amounts denominated in one currency could actually be converted into another currency at the rates indicated or at all. Unless we indicate otherwise, (i) the translation of Renminbi into US dollars was made at the rate of RMB7.0383 to US$1.00, the median rate set by the PBOC for foreign exchange transactions prevailing on December 6, 2019; (ii) the translation of Hong Kong dollars into US dollars was made at the rate of HK$7.8288 to US$1.00, the noon buying rate in effect on December 6, 2019 as set forth in the H.10 weekly statistical release of the Federal Reserve Board; and (iii) the translation of Renminbi into Hong Kong dollars was made at the rate of RMB0.8990 to HK$1.00, the median rate set by the PBOC for foreign exchange transactions prevailing on December 6, 2019. Any discrepancies in any table between totals and sums of amounts listed therein are due to rounding.

LANGUAGE

If there is any inconsistency between this prospectus and the Chinese translation of this prospectus, this prospectus shall prevail. Translated English names of Chinese laws and regulations, governmental authorities, institutions, natural persons or other entities included in this prospectus and for which no official English translation exists are unofficial translations for your reference only.

ROUNDING

In this prospectus, where information is presented in hundreds, thousands, ten thousands, millions or hundred millions, certain amounts of less than one hundred, one thousand, ten thousand, one million or a hundred million, as the case may be, have been rounded to the nearest hundred, thousand, ten thousand, million or hundred million, respectively. Amounts presented as percentages have, in certain cases, been rounded to the nearest tenth or hundredth of a percent. Any discrepancies in any table or chart between totals and sums of amounts listed therein are due to rounding.

–76– DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING

DIRECTORS

Name Address Nationality Executive Directors

Mr. LI Zhiming No. 10-8-3, Dong Ting Yi Cun, Chinese (李志明) Wuchang District, Wuhan, Hubei Province, PRC

Mr. XU An No. 5, Jianshe Road, Chinese (許安) Xixiu District, Anshun, Guizhou Province, PRC

Non-executive Directors

Mr. YANG Mingshang Sub No. 13, Unit 2, Chinese (楊明尚) No. 1, Shiling Street, Nanming District, Guiyang, Guizhou Province, PRC

Mr. CHEN Yongjun No. 1102, Unit 2 Chinese (陳永軍) Building 903, Bihai Qiantu, Bihai Garden, Jinyang New District, Yunyan District, Guiyang, Guizhou Province, PRC

Ms. GONG Taotao 14G, Zi Teng Xuan, Chinese (龔濤濤) Cai Tian Ming Yuan, Futian District, Shenzhen, Guangdong Province, PRC

Mr. LU Lin Unit 1, Building 3, Chinese (盧麟) No. 71 Guanjing Road, Honghuagang District, Zunyi, Guizhou Province, PRC

–77– DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING

Name Address Nationality Independent Non-executive Directors

Mr. TANG Xin No.143, Block Northwestern 1, Chinese (湯欣) Tsinghua University, Haidian District, Beijing, PRC

Mr. WANG Gefan Room 401, Suite 2, Building No. 10, Chinese (王革凡) Guoyingyuan Xiaoqu, Xicheng District, Beijing, PRC

Mr. SONG Ke Room 15004, Chinese (宋科) No. 59 Zhongguancun Avenue, Haidian District, Beijing, PRC

Mr. LI Shoubing Room 9, Unit 4, Block 67, Chinese (李守兵) No. 10 Jigui Road, Yunyan District, Guiyang, Guizhou Province, PRC

Mr. LAW Cheuk Kin Stephen Flat C, 23/F, Block 1 Chinese (羅卓堅) Ronsdale Garden (Hong Kong) 25 Tai Hang Drive Hong Kong

–78– DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING

SUPERVISORS

Name Address Nationality Mr. XIAO Cifa Room 202, Chinese (肖慈發) No. 2 South Xiangyang Road, Zhongshan District, Liupanshui, Guizhou Province, PRC Mr. LIU Hanmin Room 303, Building 6, Chinese (劉漢民) JNU Nanhuyuan, No. 601 West Huangpu Avenue. Tianhe District, Guangzhou, Guangdong Province, PRC Mr. SU Zhi Faculty Dormitory, Chinese (蘇治) No. 39 South Xueyuan Road, Haidian District, Beijing, PRC Mr. CHEN Houyi No. 10, Unit 2, Building 18, Chinese (陳厚義) Upper Guigongluzhai, Nanming District, Guiyang, Guizhou Province, PRC Ms. WU Qiangli No. 444, East Huancheng Road, Chinese (吳強麗) Yunyan District, Guiyang, Guizhou Province, PRC Mr. WANG Changyi No. 16 Guangshun Road, Chinese (王常懿) Nanming District, Guiyang, Guizhou Province, PRC Mr. LI Keyong Room 704, No. 33-1, Chinese (李克勇) West Zhongshan Road, Zhongshan District, Liupanshui, Guizhou Province, PRC

See “Directors, Supervisors and Senior Management” for details of our Directors and Supervisors.

–79– DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING

PARTIES INVOLVED IN THE GLOBAL OFFERING

Joint Sponsors ABCI Capital Limited 11/F, Agricultural Bank of China Tower 50 Connaught Road Central Hong Kong

CCB International Capital Limited 12/F., CCB Tower 3 Connaught Road Central Central Hong Kong

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

Joint Global Coordinators ABCI Capital Limited 11/F, Agricultural Bank of China Tower 50 Connaught Road Central Hong Kong

CCB International Capital Limited 12/F., CCB Tower 3 Connaught Road Central Central Hong Kong

CLSA Limited 18/F, One Pacific Place 88 Queensway Hong Kong

AMTD Global Markets Limited 23/F – 25/F Nexxus Building 41 Connaught Road Central Hong Kong

–80– DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING

Joint Bookrunners ABCI Capital Limited 11/F, Agricultural Bank of China Tower 50 Connaught Road Central Hong Kong

CCB International Capital Limited 12/F., CCB Tower 3 Connaught Road Central Central Hong Kong

CLSA Limited 18/F, One Pacific Place 88 Queensway Hong Kong

AMTD Global Markets Limited 23/F – 25/F Nexxus Building 41 Connaught Road Central Hong Kong

ICBC International Capital Limited 37/F, ICBC Tower 3 Garden Road Central Hong Kong

CMB International Capital Limited 45th Floor, Champion Tower 3 Garden Road Central, Hong Kong

China Investment Securities International Brokerage Limited Unit Nos. 7701A & 05B-08, Level 77 International Commerce Centre 1 Austin Road West Kowloon Hong Kong

Goldbridge Securities Limited Unit 1002H, Tower 1, Admiralty Centre 18 Harcourt Road Admiralty Hong Kong

–81– DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING

Haitong International Securities Company Limited 22/F, Li Po Chun Chambers 189 Des Voeux Road Central Hong Kong

Joint Lead Managers ABCI Securities Company Limited 11/F, Agricultural Bank of China Tower 50 Connaught Road Central Hong Kong

CCB International Capital Limited 12/F., CCB Tower 3 Connaught Road Central Central Hong Kong

CLSA Limited 18/F, One Pacific Place 88 Queensway Hong Kong

AMTD Global Markets Limited 23/F – 25/F Nexxus Building 41 Connaught Road Central Hong Kong

ICBC International Securities Limited 37/F, ICBC Tower 3 Garden Road Central Hong Kong

CMB International Capital Limited 45th Floor, Champion Tower 3 Garden Road Central, Hong Kong

China Investment Securities International Brokerage Limited Unit Nos. 7701A & 05B-08, Level 77 International Commerce Centre 1 Austin Road West Kowloon Hong Kong

–82– DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING

Goldbridge Securities Limited Unit 1002H, Tower 1, Admiralty Centre 18 Harcourt Road Admiralty Hong Kong

Haitong International Securities Company Limited 22/F, Li Po Chun Chambers 189 Des Voeux Road Central Hong Kong

Legal Advisors to the Bank As to Hong Kong and U.S. laws Clifford Chance 27/F, Jardine House One Connaught Place Central Hong Kong

As to PRC law King & Wood Mallesons 18th Floor, East Tower World Financial Center 1 Dongsanhuan Zhonglu Chaoyang District Beijing PRC

Legal Advisors to the Joint Sponsors As to Hong Kong and U.S. law and the Underwriters Latham & Watkins LLP 18th Floor, One Exchange Square 8 Connaught Place Central Hong Kong

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

–83– DIRECTORS, SUPERVISORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING

Compliance Advisor Guotai Junan Capital Limited 27/F, Low Block, Grand Millennium Plaza 181 Queen’s Road Central Hong Kong

Reporting Accountants and Auditor KPMG Certified Public Accountants 8th Floor, Prince’s Building 10 Chater Road Central Hong Kong

Receiving Bank(s) Bank of China (Hong Kong) Limited 1 Garden Road Central, Hong Kong

Industrial and Commercial Bank of China (Asia) Limited 33/F, ICBC Tower 3 Garden Road Central, Hong Kong

–84– CORPORATE INFORMATION

Registered Office 41 Middle Ruijin Road, Yunyan District Guiyang, Guizhou Province PRC

Head Office in the PRC Bank of Guizhou Co., Ltd. No. 149 South Zhonghua Road Nanming District Guiyang, Guizhou Province PRC

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

Our Website www.bgzchina.com (The information on the website does not form part of this prospectus)

Joint Company Secretaries Mr. Zhou Guichang No. 201 South Zhonghua Road Nanming District Guiyang, Guizhou Province PRC

Mr. Lei Kin Keong 40th Floor, Sunlight Tower No. 248 Queen’s Road East Wanchai Hong Kong

Authorized Representatives Mr. Li Zhiming No. 10-8-3, Dong Ting Yi Cun Wuchang District, Wuhan, Hubei Province, PRC

Mr. Zhou Guichang No. 201 South Zhonghua Road Nanming District Guiyang, Guizhou Province PRC

–85– CORPORATE INFORMATION

Audit Committee Mr. LI Shoubing (Chairman) Ms. GONG Taotao Mr. WANG Gefan Mr. LAW Cheuk Kin Stephen

Nomination and Remuneration Committee Mr. TANG Xin (Chairman) Mr. LU Lin Mr. LI Shoubing Mr. SONG Ke

Risk and Related Party Transactions Mr. WANG Gefan (Chairman) Management Committee Mr. YANG Mingshang Mr. TANG Xin Mr. SONG Ke

Strategic Development Committee Mr. LI Zhiming (Chairman) Mr. XU An (Vice Chairman) Mr. WANG Gefan Mr. TANG Xin Mr. SONG Ke

Consumer Rights Protection and Social Mr. XU An (Chairman) Responsibility Committee Mr. CHEN Yongjun Mr. LI Shoubing

Compliance Advisor Guotai Junan Capital Limited 27/F, Low Block, Grand Millennium Plaza 181 Queen’s Road Central Hong Kong

H Share Registrar Computershare Hong Kong Investor Services Limited Shops 1712-1716 17th Floor, Hopewell Centre 183 Queen’s Road East, Wan Chai Hong Kong

–86– INDUSTRY OVERVIEW

This section contains certain information, data 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 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 such information are appropriate and we 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 Joint Sponsors, Joint Bookrunners, Underwriters or any other party involved in the Global Offering and no representation is given as to its accuracy. Accordingly, such information should not be unduly relied upon. As of the Latest Practicable Date, our Directors confirm that, after taking reasonable care, there has been no material adverse change in the market information presented in this section.

OVERVIEW

Economy of China

China is the second largest economy in the world. Following rapid growth over the past three decades, China’s economic development has entered into a “new normal” stage with a slower but stable performance and good growth momentum. According to National Bureau of Statistics, China’s nominal GDP increased from RMB64,128 billion in 2014 to RMB90,031 billion in 2018 at a CAGR of 8.9%. The GDP per capita in China increased from RMB47,005 in 2014 to RMB64,644 in 2018 representing a CAGR of 8.3%.

Economy of Guizhou Province

Guizhou Province is located in Southwestern China (including Chongqing Municipality, Tibet Autonomous Region, Sichuan, Yunnan and Guizhou Provinces) and is adjacent to five provinces of Hunan, Guangxi, Yunnan, Sichuan and Chongqing. Guizhou Province is one of the most important bases in the PRC for natural resources, especially for coal, minerals and water power resources. Guizhou Province identified ten key industries, including tobacco and alcohol, mining, electric power, gas and water production and distribution, metal smelting and pressing, Chinese medicine and pharmaceuticals, modern chemical, modern logistics, tourism and telecommunication and electronic equipment. In recent years, Guizhou Province has witnessed the emergence of a number of leading enterprises in areas of big data, cloud computing, artificial intelligence, integrated circuits, and intelligent terminals. Benefiting from favorable policies supporting its economic development, Guizhou Province has experienced rapid economic growth in recent years and its nominal GDP amounted to RMB1.48 trillion in 2018. In 2014, the nominal GDP and GDP per capita of Guizhou Province ranked 26th and 30th, respectively, among 31 provinces, autonomous regions and municipalities in China. From 2015 to 2018, the nominal GDP and GDP per capita of Guizhou Province ranked 25th and 29th, respectively, among 31 provinces, autonomous regions and municipalities in China. From 2014 to 2018, the real GDP and GDP per capita of Guizhou Province recorded rapid growth at a CAGR of 10.1% and 11.8%, respectively, each of which ranked first among all provinces in the PRC.

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Guizhou Province has benefited from and will continue to benefit from the following PRC national strategies and policies:

• In January 2012, the State council issued Several Opinions of the State Council on Further Promoting Fast and Sound Economic Development in Guizhou Province (《國務院關於進一步促進貴州經濟社會又好又快發展的若干意見》). This opinion targets Guizhou Province as the nationwide energy base, resources deep-processing base, specialty light industry base and equipment manufacturing base, focusing on manufacturing aerospace and aviation equipment, the road transportation hub, tourism center with rich culture and natural scenery and eco-safeguard for upper reaches of Pearl River. This opinion further sets out development goals in respect of infrastructure construction, industry development planning, natural environment as well as public services in Guizhou Province. This opinion establishes the development principles of collaboration among the four economic districts within Guizhou Province. More than 100 specific measures, in respect of tax, investment, financing, land-use planning, interregional assistance and competitive industrial development, have been proposed to accelerate economic development in Guizhou Province.

• In September 2012, NDRC approved Development Plan in Central Guizhou Economic Zone (《黔中經濟區發展規劃》). Following the 12th Five Year Plan and Several Opinions on Further Promoting Fast and Sound Economic Development in Guizhou Province, this plan identifies Central Guizhou area as the key economic zone in the latest Plan for Developing Western Regions in China (西部大開發規劃). Covering the period from 2012 to 2020, this plan guides the economic development in Central Guizhou economic zone and serves as the legislation basis for any further special planning in the future. This plan outlines the development strategies and sets out the development goals with regard to GDP, infrastructure construction, forested area and public services in Central Guizhou economic zone.

• In January 2014, the State Council approved the establishment of Gui’an New Area (貴安新區) in Guizhou Province. The construction of Gui’an New Area aims at building an open economy and setting up a demonstration zone for an ecological civilization, further supporting economic growth in Guizhou Province and the western region of China. Gui’an New Area was designed to serve as an experimental zone for innovative technology, advanced manufacturing and emerging industry, a regional commercial and logistics center, a gathering place for high-end services and an international tourism area with rich traditional culture and natural scenery. In addition, with the support of central government, Guizhou Province built Guiyang National High Technology Industrial Development Zone, Anshun National High Technology Industrial Development Zone, Guiyang National Economic and Technological Development Zone, Zunyi National Economic and Technological Development Zone, Guiyang Free Trade Zone, Gui’an Free Trade Zone, Zunyi Free Trade Zone and Guizhou Shuanglong Airport Economic Zone, which, together with Gui’an New Area, are known as “1+8” national open platforms.

–88– INDUSTRY OVERVIEW

• In August 2015, the State Council approved Notice of the State Council on Issuing the Action Outline for Promoting the Development of Big Data (《國務院關於印發 促進大數據發展行動綱要的通知》), aiming at promoting the development and application of big data in China and accelerating the construction of a powerful data nation. In accordance with this action outline, several big data experimental zones were established in regions such as Guizhou Province and some regional pilot projects were launched to accelerate the construction of these zones and promote the integration of regional big data infrastructure. In February 2016, NDRC, Ministry of Industry and Information Technology and Office of the Central Cyberspace Affairs Commission approved the establishment the first national big data experimental zone, National Big Data (Guizhou) Comprehensive Experimental Zone (國家大數據 (貴州)綜合試驗區). This is an important step in implementing the action outline. The major tasks for experimental work in Guizhou Big Data Zone include managing and sharing data resources, consolidating data centers, applying data resources, centralizing big data industry, increasing international big data cooperation and institutional innovation. These supporting policies are intended to encourage innovation and to restructure and upgrade the economy in Guizhou Province.

• In August 2016, the PBOC, the MOF, the NDRC, the then CBRC and three other national departments issued Guiding Opinions on Building a Green Financial System (《關於構建綠色金融體系的指導意見》), aiming at including more private capital to participate in the investment in green industries and limiting pollution- inflicting investment. In November 2016, Guizhou Government issued Opinions on Accelerating Green Financial Development (《關於加快綠色金融發展的實施意 見》), which specifically raises working plans to implement the national opinions and promote building a green finance system in Guizhou Province. In June 2017, the State Council decided to establish experimental zones for green finance reform in five provinces, including Guizhou Province. Gui’an New Area was thereby established as one of the experimental zones. Several financial instruments are proposed, such as green credit, green bonds, green stock index, green development funds, green insurance and carbon finance. Building a green financial system is very helpful in maintaining Guizhou Province’s ecological civilization and promoting Guizhou Province’s economy developing in a sustainable way. Meanwhile, it helps developing new technologies in the fields, such as environmental protection and energy savings.

• In September 2013, China proposed the strategic initiative of building the “Silk Road Economic Belt” (“絲綢之路經濟帶”) and the “21st Century Maritime Silk Road” (“21世紀海上絲綢之路”), together known as the “Belt and Road” (“一帶一 路”) initiative. The strategy underlines China’s focus on connectivity and cooperation among countries of Eurasia. Guizhou Province actively took the initiative to serve the “Belt and Road” initiative and continuously explored economic development opportunities. In December 2018, Guizhou Government issued Plan of Action in Guizhou Province to Promote Enterprises to Head Overseas under the Guidance of “Belt and Road” Initiative (From 2018 to 2020) (《貴州省推 動企業沿著“一帶一路”方向“走出去”行動計劃(2018-2020年)》) to encourage

–89– INDUSTRY OVERVIEW

international trade and investment and promote comprehensive economic and technology cooperation. Guizhou Province particularly focuses on exploring the markets of Southeast Asia, South Asia, Central Asia, Eastern Europe, Central and Eastern Europe and Africa.

• Tourism is a traditionally competitive industry for Guizhou Province as it has an outstanding natural landscape and ecological environment. In recent years, Guizhou Province has benefited from a series of national policies for tourism development. In December 2016, the State Council issued Notice of the State Council on Tourism Development Plan during the 13th Five-year Plan Period (《國務院關於印發“十三 五”旅遊業發展規劃的通知》), which establishes Guizhou Province as the key area for developing tourism in the country. In March 2018, the State Council issued Guiding Opinions of the General Office of the State Council on Promoting Region-wide Tourism Development (《國務院辦公廳關於促進全域旅遊發展的指導 意見》), aiming at upgrading tourism industry and optimizing tourism environment and public services. This opinion encourages developing tourism with sources from other industries, such as agriculture, transportation, technology, education, culture, sanitation, history and geography.

The following table sets out the nominal GDP, increases in values of the three major industries, GDP per capita, urban household disposable income per capita, fixed asset investments as well as total import and export volume of Guizhou Province for the years indicated:

Year ended December 31, CAGR (2014 to 2018) 2014 2015 2016 2017 2018 (%) Nominal GDP (in billions of RMB) 927 1,050 1,178 1,354 1,481 12.4% Increase in value of the primary industry (in billions of RMB) 128 164 185 203 216 14.0 Increase in value of the secondary industry (in billions of RMB) 386 415 467 543 576 10.5 Increase in value of the tertiary industry (in billions of RMB) 413 471 526 608 689 13.7 GDP per capita (in RMB) 26,437 29,847 33,246 37,956 41,244 11.8 Urban household disposable income per capita (in RMB) 22,548 24,580 26,743 29,080 31,592 8.8 Fixed asset investments (in billions of RMB) 903 1,095 1,320 1,550 N/A N/A Total import and export volume (in millions of USD) 10,771 12,221 5,700 8,162 7,601 (8.3)

Source: the National Bureau of Statistics

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In 2014, 2015, 2016, 2017 and 2018, Guizhou Province had fiscal revenue of RMB373.3 billion, RMB410.6 billion, RMB617.6 billion, RMB608.3 billion and RMB684.4 billion, respectively, and fiscal expenses of RMB373.6 billion, RMB411.6 billion, RMB616.4 billion, RMB609.6 billion and RMB687.0 billion, respectively, primarily due to (i) fiscal expenses in education, health care and family planning, housing support and transport infrastructure construction in 2014; (ii) fiscal expenditures to improve people’s livelihood, covering the nine key industries of public security, education, science and technology, culture, sports and media, social security and employment, health care and family planning, energy conservation and environmental protection, agriculture, forestry and fisheries and housing support in 2015; (iii) structural tax reduction and fiscal expenses in education, urban and rural minimum living standard guarantees, temporary assistance, basic medical insurance for urban and rural residents, big data technology, transport infrastructure construction, poverty alleviation through resettling impoverished population and poverty alleviation funds in 2017; and (iv) structural tax reduction and fiscal expenses to support the transport infrastructure construction development in rural areas, poverty alleviation through resettling impoverished population, rural construction, Public-Private Partnership (PPP) projects, big data technology and environmental protection and ecological construction in 2018. According to Guizhou Provincial Finance Bureau, Guizhou Province mainly relies on the PRC central government to finance its fiscal spending.(1) From 2017, Guizhou Province also financed its fiscal spending with government issued bonds.

According to Notice on Issuing 2019 Budget for Central Finance Special Funds for Urban Government-Subsidized Housing Projects (《關於下達2019年中央財政城鎮保障性安居工程 專項資金預算的通知》) (Cai Zong [2019] No. 14) issued by the MOF and Ministry of Housing and Urban-rural Development on April 15, 2019, the finance difficulty coefficient of Guizhou Province is 76.35, within the range from 20 to 90 among 36 provinces or provincial level cities, with a higher score indicating greater finance difficulty.(2)

The following table sets out the fiscal revenue and expense of Guizhou Province for the years indicated:

Year ended December 31, CAGR (2014 to 2018) 2014 2015 2016 2017 2018 (%) (in billions of RMB, except percentages) Fiscal revenue 373.3 410.6 617.6 608.3 684.4 16.4 Fiscal expense 373.6 411.6 616.4 609.6 687.0 16.4

Source: Guizhou Provincial Finance Bureau

(1) See http://www.mof.gov.cn/zhuantihuigu/2019ysbghb/201902/t20190221_3176026.htm for details of transfer payment from the PRC central government to Guizhou Province in 2018. (2) See http://sme.miit.gov.cn/cms/news/100003/0000000700/2019/4/24/9110ec7e76744da087a2cdd322b833a8.shtml for details of difficulty coefficient of 36 provinces or provincial level cities.

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The following table sets out the debt to GDP ratio of Guizhou Province for the years indicated:

Year ended December 31,

2014 2015 2016 2017 2018

(in billions of RMB, except percentages)

Balance of government debt 877.4 875.5 872.1 860.7 883.4 Nominal GDP 926.6 1,050.3 1,177.7 1,354.1 1,480.6 Debt to GDP ratio 94.7% 83.4% 74.1% 63.6% 59.7%

Source: the National Bureau of Statistics, Guizhou Provincial Finance Bureau and ChinaBond.com.cn

CHINA’S BANKING INDUSTRY

Overview

In recent years, the banking industry in China has maintained steady growth, primarily driven by the steady macroeconomy growth of China. From 2014 to 2018, the aggregate RMB-denominated loans and deposits of financial institutions in China increased at a CAGR of 13.7% and 11.7%, respectively. The following table sets forth the aggregate Renminbi- and foreign currency-denominated loans and deposits of financial institutions in China as of the dates indicated:

December 31, CAGR (2014 to 2018) 2014 2015 2016 2017 2018 (%)

Total RMB-denominated loans (in billions of RMB) 81,677 93,954 106,604 120,132 136,297 13.7 Total RMB-denominated deposits (in billions of RMB) 113,864 135,702 150,586 164,104 177,523 11.7 Total foreign currency- denominated loans (in billions of USD) 835 830 786 838 795 (1.2) Total foreign currency- denominated deposits (in billions of USD) 573 627 712 791 728 6.1

Source: the PBOC

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The following table sets forth certain information on the commercial banks in China as of the dates or for the years indicated:

As of and for the year ended December 31,

CAGR (2014 to 2018) 2014 2015 2016 2017 2018 (%) (in billions of RMB, except percentages)

Total assets 134,797.8 155,825.7 181,688.4 196,783.4 209,963.8 11.7 Total liabilities 125,093.3 144,268.2 168,592.2 182,061.0 193,487.6 11.5 Net profit 1,554.8 1,592.6 1,649.0 1,747.7 1,830.2 4.2 Return on assets (%) 1.23 1.10 0.98 0.92 0.90 N/A Allowance coverage ratio (%) 232.06 181.18 176.40 181.42 186.31 N/A Non-performing loan ratio (%) 1.25 1.67 1.74 1.74 1.83 N/A

Source: the CBIRC

China’s banking financial institutions can be broadly classified into Large Commercial Banks, Joint-stock Commercial Banks, city commercial banks and other commercial banks. The following table sets forth the total assets of different types of commercial banks in China as of the dates indicated:

December 31, CAGR (2014 to 2018) 2014 2015 2016 2017 2018 (%) (in billions of RMB, except percentages)

Large Commercial Banks 71,014.1 78,163.0 86,598.2 92,814.5 98,353.4 8.5 Joint-stock Commercial Banks 31,380.1 36,988.0 43,473.2 44,962.0 47,020.2 10.6 City commercial banks 18,084.2 22,680.2 28,237.8 31,721.7 34,345.9 17.4 Other commercial banks(1) 14,319.4 17,994.5 23,379.2 27,285.2 30,244.3 20.6 Total 134,797.8 155,825.7 181,688.4 196,783.4 209,963.8 11.7

Source: the CBIRC (1) Including rural commercial banks, private banks and foreign banks.

City Commercial Banks

After more than two decades of rapid development, city commercial banks form a substantial part of the PRC’s banking system. As of December 31, 2018, there were 134 city commercial banks in China. City commercial banks have played important roles in maintaining regional financial stability, promoting market competition, facilitating access to financial

–93– INDUSTRY OVERVIEW services, and easing funding pressures for small and medium enterprises. In addition, leveraging their understanding of local markets and relationships with local customers, city commercial banks are generally well-positioned to capture local opportunities and market trends.

The table below sets forth certain information relating to city commercial banks in China as of the dates or for the years indicated:

As of and for the year ended December 31, CAGR (2014 to 2018) 2014 2015 2016 2017 2018 (%) (in billions of RMB, except percentages) Assets 18,084.2 22,680.2 28,237.8 31,721.7 34,345.9 17.4 Net profit 186.0 199.4 224.5 247.4 246.1 7.3 Return on assets (%) 1.12 0.98 0.88 0.83 0.74 N/A Allowance coverage ratio (%) 249.33 221.27 219.89 214.48 187.16 N/A Non-performing loan ratio (%) 1.16 1.40 1.48 1.52 1.79 N/A

Source: the CBIRC

During the past few years, the return on assets of city commercial banks in China continued to decrease while their non-performing loan ratio continued to rise. This trend reflected some of the disadvantages of city commercial banks compared with larger commercial banks:

• City commercial banks have a relatively small capital base and business scale, therefore making them more vulnerable to risks. In recent years, both the profitability and asset quality of city commercial banks declined, driven partly by competition, regulatory changes and slowing regional economy, which further limited their growth potential.

• City commercial banks are generally only permitted to operate within certain geographic regions, such as a province or city. Within the limit areas, city commercial banks are restricted in terms of asset diversification, customer base and business expansion. In addition, city commercial banks are largely dependent on local economy and industrial structure, and therefore, it is difficult to develop cross-regional business and further enlarge their scales.

• City commercial banks lack strong talent support. Most of the PRC city commercial banks are located in small- and medium-sized cities, which lack high quality talents. Also, certain city commercial banks do not have comprehensive corporate governance structure and human resource system.

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However, city commercial banks have made good progress along the way. According to the CBIRC, during 2014 and 2018, total assets of city commercial banks grew at a CAGR of 17.4%, higher than the corresponding CAGR of all PRC commercial banks of 11.7%. Total assets of all city commercial banks in China as a percentage of the total assets of all commercial banks in China increased from 13.4% as of December 31, 2014 to 16.4% as of December 31, 2018.

Recent Development in the PRC Interbank Market

The PBOC and the CBIRC took over control of Baoshang Bank due to its severe credit risk on May 24, 2019, while the H shares of Bank of Jinzhou Co., Ltd. (“Bank of Jinzhou”) was suspended from trading in April 2019 and resumed trading on September 2, 2019. Though there still are concerns over liquidity in the interbank market, especially after the takeover of Baoshang Bank, during recent years, China’s economy remained stable when the government continued to deepen its supply-side structural form that is focused on deleveraging, preventing systematic risks and improve the quality of economic growth. To enhance banking system stability, the PBOC also established the Deposit Insurance Fund Management Co., Ltd. (“Deposit Insurance Fund”) on May 24, 2019, with a registered capital of RMB10 billion, to protect depositors’ savings with financial institutions. Mr. Huang Xiaolong, deputy head of the Financial Stability Bureau of the PBOC, acts as the legal representative and executive director of Deposit Insurance Fund. Funded by insurance payments made by commercial banks and financial institutions, Deposit Insurance Fund is set aside to pay back money lost due to the failure of a financial institution and is devoted to insuring the deposits of individuals. In addition, Deposit Insurance Fund could inject capital into a bank, acquire liabilities of a bank and explore a market-based financial risk disposal mechanism.

The PBOC and the CBIRC announced policy support for small and medium sized banks and encouraged them to further improve corporate governance and risk mitigation capability. For example, the PBOC utilized targeted tools, such as targeted medium-term lending facilities, to direct funding to certain commercial banks to facilitate lending to small and micro enterprise borrowers. With such a steady stream of affordable financing, the city commercial banks can further improve their liquidity and capital conditions and risk mitigation capabilities, and focus on their core business and advantages to better serve small and micro enterprises and local residents. The PBOC also offers other credit enhancement; for example, providing guarantees through credit risk mitigation warrant to support interbank deposits issued by small to medium-sized banks, increasing rediscount and standing lending facility quotas to ease liquidity concerns on the interbank market, as well as expanding collateral options by accepting interbank certificates of deposit and bank bills as collateral to improve funding access.

City commercial banks have been strengthening their capital base through the introduction of strategic investors, including via state-backed capital injections, and initial public offerings. For example, Bank of Jinzhou won a government-backed capital contribution in July 2019. Such strategic investments are expected to further improve its corporate governance and ability to manage and mitigate risks, and drive its future development. In

–95– INDUSTRY OVERVIEW addition, some city commercial banks have started to expand into new services and products, such as consumer finance services and financial leasing services. Guided by prevailing regulatory policies, city commercial banks are encouraged to pursue differentiated business model and strategies, take advantage of being small and nimble, and provide a wider range of financial services that cater to the needs of SMEs and local residents.

Banking Industry in Guizhou Province

The banking industry in Guizhou Province has developed steadily alongside the local economic growth. According to CBIRC Guizhou Office, as of December 31, 2018, the total assets of banking financial institutions in Guizhou Province amounted to RMB3,704.7 billion, representing a CAGR of 16.4% from 2014 to 2018. As of December 31, 2018, the aggregate loans and deposits amounted to RMB2,481.7 billion and RMB2,468.4 billion, respectively, representing a CAGR of 18.9% and 13.7%, respectively, from 2014 to 2018.

The following table sets forth the relevant information on the aggregate loans and deposits of banking financial institutions in Guizhou Province as of the dates indicated:

December 31, CAGR (2014 to 2018) 2014 2015 2016 2017 2018 (%) Total loans (in billions of RMB) 1,243.6 1,512.0 1,796.0 2,097.4 2,481.7 18.9 Total deposits (in billions of RMB) 1,477.1 1,829.4 2,255.8 2,463.0 2,468.4 13.7

Source: the CBIRC Guizhou Office

The following table sets forth certain information relating to various types of banking institutions in Guizhou Province as of December 31, 2018:

December 31, 2018 Assets Number of Number of (in billions of institutions(1) employees RMB) Large Commercial Banks 1,095 23,043 979.8 National development banks and policy banks 74 1,626 575.3 Joint-stock Commercial Banks 119 2,876 180.8 City commercial banks 526 10,562 833.2 Rural financial institutions(2) 1,542 17,279 513.2 Other banking institutions(3) 1,187 7,133 171.7 Total 4,543 62,519 3,254

Source: the CBIRC Guizhou Office (1) Including the number of legal entities, first-tier branches, second-tier branches and sub-branches and their sales networks. (2) Including rural commercial banks, rural credit cooperatives and rural cooperative banks. (3) Mainly including postal savings banks, foreign banks and village and township banks.

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Competition of Banking Industry in Guizhou Province

As a city commercial bank based in Guizhou Province, Bank of Guizhou mainly competes with other commercial banks operating in Guizhou Province, such as Bank of Guiyang and local branches of China Construction Bank, Bank of China, Agricultural Bank of China, Industrial and Commercial Bank of China and Bank of Communications. Bank of Guizhou is one of the two city commercial banks headquartered in Guizhou Province and the only city commercial bank initiated by Guizhou provincial government. As of December 31, 2018, Bank of Guizhou ranked second among two city commercial banks in Guizhou Province in terms of total assets, total deposits, and total loans and advances to customers and ranked fourth and fifth, respectively, among all banks with a presence in Guizhou Province in terms of total assets and total deposits generated from Guizhou Province. The following table sets forth the key performance indicators of our Bank among the five largest banks in Guizhou Province in terms of total assets in Guizhou Province as of December 31, 2018.

December 31, 2018 Tier-one Core tier- Capital capital one capital Allowance Allowance to Loan-to- Total Total Total Total adequacy adequacy adequacy NPL ratio coverage gross loan deposit ratio Listing Status Background assets(1) liabilities(1) deposits(1) loans(1) ratio (%) ratio (%) ratio (%) (%) ratio (%) ratio (%) (%) (in billions of RMB, except percentage) Bank A Listed in Shanghai City Commercial 474.3 439.8 301.9 165.5 12.97(2) 11.22(2) 9.61(2) 1.35(2) 266.05(2) 3.60(2) 54.50(2) Stock Exchange Bank Bank B Unlisted Guizhou Branch of 344.0 340.9 44.7 294.0 N/A(3) N/A(3) N/A(3) N/A(3) N/A(3) N/A(3) N/A(3) a Policy and National Development Bank Bank C Listed in Shanghai Guizhou Branch of 343.0 335.4 301.3 316.8 N/A(3) N/A(3) N/A(3) N/A(3) N/A(3) N/A(3) N/A(3) Stock Exchange a Large and Hong Kong Commercial Bank Stock Exchange Our Bank Unlisted City Commercial 342.5 316.4 218.8 141.0 12.83 10.62 10.62 1.36 243.72 3.31 63.68 Bank Bank D Listed in Shanghai Guizhou Branch of 261.1 261.2 240.6 217.1 N/A(3) N/A(3) N/A(3) N/A(3) N/A(3) N/A(3) N/A(3) Stock Exchange a Large and Hong Kong Commercial Bank Stock Exchange

(1) Source: the CBIRC Guizhou Office. (2) Source: Annual Report of Bank A for the year ended December 31, 2018. (3) There is no publicly available and reliable information.

Providing a wide range of services and products, Bank of Guizhou has established more than 200 outlets throughout the province and achieved full coverage of all counties. As the only city commercial bank initiated by Guizhou provincial government, Bank of Guizhou benefits from supportive government policies at all levels in relation to the development of Guizhou Province.

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DEVELOPMENT TREND OF CITY COMMERCIAL BANKS

Economic Growth in the PRC and Guizhou Province

The PRC banking industry has experienced rapid growth along with the PRC’s economic development, and its continued expansion is largely affected by the overall economic growth in the PRC and the increase in household income, among other factors. The development of city commercial banks is also subject, to a significant degree, to the economic growth of the regions where they operate. Although China’s economy has entered into the “new normal” stage during the recent period, Guizhou Province continued to experience rapid growth and is one of the fastest growing provinces in the PRC. During the past eight consecutive years, Guizhou Province was among the top three provinces in the PRC in terms of economic growth rate. Continued economic growth in the PRC and Guizhou Province is expected to bring more opportunities for the city commercial banks in Guizhou Province and further boosts their development.

Interest Rate Liberalization

In recent years, the lending and deposit rates in China are mainly determined by a market-oriented approach. As permitted by the PBOC since June 8, 2012, the highest RMB deposit rates set by financial institutions may be up to 110% of the PBOC benchmark interest rate. On July 20, 2013, the PBOC abolished the floor rate of RMB-denominated loans (excluding housing mortgage loans), and allowed financial institutions to determine their lending rates based on commercial considerations. On November 22, 2014, the PBOC permitted financial institutions to raise RMB-denominated deposit rates to up to 120% of the PBOC benchmark interest rate, the cap of which was further raised to 130% and 150% of the PBOC benchmark interest rates on March 1, 2015 and May 11, 2015, respectively. On August 26, 2015, the PBOC abolished the interest rate cap of RMB-denominated time deposits with tenors of over one year. Furthermore, effective from October 24, 2015, the PBOC removed the cap on deposit interest rates of commercial banks, and allowed commercial banks to set their own deposit interest rates based on commercial considerations.

The Deposit Insurance Regulation (《存款保險條例》) came into effect on May 1, 2015, which is a crucial milestone for the liberalization of interest rate in China. According to the Deposit Insurance Regulation, each depositor shall be compensated up to a maximum of RMB500,000 in the event of a bank’s liquidation. Each depositor is fully protected within the prescribed limit for both RMB- and foreign currency-denominated deposits.

Interest rate liberalization may intensify the competition in China’s banking industry, narrow net interest margin and net interest spreads, and materially affect the results of operations of banks. Meanwhile, Interest liberalization allows banks to set interest rates of deposits and loans with more flexibility, which is expected to promote the prosperous development of the banking industry.

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Increasing Banking Services to Micro and Small enterprises

In recent years, loans to micro and small enterprises in China have grown rapidly. According to the CBIRC, as of December 31, 2018, the balance of loans to micro and small enterprises from the PRC banking industry amounted to RMB33.5 trillion.

To promote the development of micro and small enterprises, various policies and measures have been promulgated to encourage the provision of loans, innovative financial products and credit services to micro and small enterprises:

• Broader coverage and higher-quality services. Commercial banks are encouraged to expand their distribution networks and scale their business by launching more kinds of products, which could target more micro and small enterprises. In addition, they are encouraged to improve their service quality;

• Lower reserve ratio. To increase the liquidity of commercial banks and encourage the extension of credit to micro and small enterprises, effective from June 16, 2014, the PBOC lowered the RMB deposit reserve ratio by an additional 0.5% for commercial banks that meet specific operating requirements and has extended a specified percentage of loans to borrowers in the “agricultural industry” sector or micro and small enterprises; and

• Tailor-made products. Banking institutions are encouraged to put more efforts in designing tailor-made financial products that specifically meet micro and small enterprises’ financing needs, for example, adjusting the maturity of the products to match the cash flow of enterprises.

Enhancing the Role of Finance in Supporting Real Economy

The national government proceeds with the reform of financial system and emphasizes developing real economy. The report of the 19th National Congress of the Communist Party of China proposed to deepen financial reform and strengthen the role of finance in supporting the real economy. The Implementation Plan for Establishment of Inclusive Financial Business Divisions by Medium and Large-sized Commercial Banks (大中型商業銀行設立普惠金融事業 部實施方案), jointly released by 11 ministries, all emphasize the major problem of finance lacking the strength to support the real economy.

Over a long time, China’s real economy has had difficulty in getting access to financing. Several measures have been taken to increase the financial availability to local enterprises. The PBOC has already injected a significant amount of liquidity through cuts to the required reserve ratio so that banks will have more funds available to lend, while the Ministry of Finance is expected to lower the Value Added Tax rate. The CBIRC will be more tolerant of non-performing loans so that banks will be more willing to grant loans to private borrowers. In 2018, the central bank increased the amount of re-lending and re-discounting by RMB300 billion, mainly to support financing of micro and small enterprises. The innovation of financing

–99– INDUSTRY OVERVIEW instruments for private enterprises’ bonds has increased the credit resources for private enterprises to issue bonds. In response to the national policy, local government also encourages financial institutions to provide financial support to non-financial enterprises and entities, by increasing credit scale and increasing loans to micro and small enterprises and agriculture- related enterprises, for example.

Increasing Demand for Personal Financial Services

With the rapid growth of the domestic economy and advanced urbanization, PRC household disposable income has been increasing. According to National Bureau of Statistics, the urban household disposable income per capita in China increased from RMB28,844 in 2014 to RMB39,251 in 2018, representing a CAGR of 8.0%.

With increased income per capita and changes in living patterns, there is an increasing demand from PRC residents for diversified financial products and services (such as wealth management, private banking and consumer finance). These demands are expected to continually drive the growth of PRC banking industry.

In addition, consumer finance has experienced vigorous development under national policies. With increasing urban population and the growth of the young consumer class, PRC residents’ consumption preferences and patterns have changed and advance consumption through consumer finance is increasingly acceptable. Moreover, the development of internet finance and the improvement of credit systems have also significantly increased the efficiency of consumer finance business. According to the PBOC, the Renminbi-denominated consumer loans in China amounted to RMB25.0 trillion, RMB31.5 trillion and RMB37.8 trillion as of December 31, 2016, 2017 and 2018, respectively, representing a CAGR of 22.8%.

Opportunities and Challenges Brought by Internet Finance

In recent years, with the development and popularity of internet technology and information systems of financial institutions in China, internet financial products including online and mobile wealth management products, online investment and financing products as well as online and mobile third-party payment have grown remarkably. Moreover, mobile payment has become one of the major means of payment in China. The development of internet finance offers more product choices to the public and reduces the costs of certain financial services. Internet finance also brings challenges as well as more development opportunities to the traditional commercial banking business.

Through the application of internet and mobile phone technology, commercial banks in China have integrated electronic banking platforms with physical outlets and provided customers with more convenient banking services. They have also further improved customer experiences on more sophisticated and innovative financial products and enlarged customer base by providing direct banking services. Furthermore, they have expanded their business channels and business coverage. Meanwhile, some commercial banks seek to expand their customer base, improve risk control and operational efficiency, and introduce personalized and specialized products by utilizing big data technology.

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OVERVIEW

The banking industry in the PRC is highly regulated. The current principal regulatory authorities in 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 and basic system for prudential regulation in relation to the banking industry. 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 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)》), 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)》) (“the PRC Banking Supervision and Regulatory Law”), and relevant regulations, rules and normative documents established thereunder.

PRINCIPAL REGULATORS

CBIRC

Established by merging the then CBRC and 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 financial institutions operating in the PRC, including commercial banks, urban credit cooperatives, rural credit cooperatives, other deposit-taking financial institutions, policy banks, as well as 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 then CBRC and the then CIRC, the then CBRC exercised the current functions of the CBIRC and was responsible for preparing drafts of important laws and regulations and basic system for prudential regulation in relation to the banking industry.

The CBIRC, through its headquarters in Beijing and its offices throughout the PRC, monitors the operations of banks and their branches and sub-branches through on-site examinations and off-site monitoring.

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 and basic systems for prudential regulation in relation to the banking industry and the insurance industry 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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The CBIRC is authorized to conduct on-site examinations on business activities of the banking financial institutions and their risk profiles. On-site examinations generally include inspecting the business premises and electronic data systems of banks, interviewing their employees, senior management and directors for an explanation of significant issues relating to operations and risk management of the banks, as well as reviewing relevant documents and data maintained by the banks. Off-site monitoring generally includes reviewing business reports, financial statements and other reports periodically submitted by banks to the CBIRC.

If a banking financial institution is not in compliance with 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, demanding the transfer of equity interest held by controlling shareholders or restricting the rights of the relevant shareholders, demanding the change of directors or senior management or restricting their rights, and withholding the approval for the opening of new branches and sub-branches. In extreme cases, if a commercial bank fails to take corrective action within the time period specified by the CBIRC, the CBIRC may order the banking financial institution to suspend operations and revoke its business license. In the event of existing or potential credit crisis within a banking financial institution, which may materially impact the legitimate rights and interests of depositors and other customers, the CBIRC may take over or procure the restructuring of such banking financial 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 of the State Council 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》), pursuant to which, the PBOC will preside over the joint meetings, with key members including the then CBRC, the CSRC, the then CIRC and the SAFE. Relevant departments such as the NDRC and the MOF may be invited to attend the joint meetings, where 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 then CBRC and the then CIRC to prepare drafts of important laws and regulations and basic systems for prudential regulation in relation to the banking industry and the insurance industry 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 license.

Pursuant to relevant provisions of the PRC Commercial Banking Law and the Implementation Measures of the CBIRC for 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; (2) the registered capital is equal to its paid-up capital and 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 and the practitioners are qualified persons who are familiar with the banking business; (4) the organizational structure and management system are sound; (5) its business premises, safety and security measures and other business-related facilities meet the requirements; and (6) an information technology structure which satisfies the needs of business operation has been set up, together with an information technology system supporting business operation which is safe and in compliance with the relevant laws and regulations, and the technologies and measures to ensure the effectiveness and safety are in place of the system. The applicant for the establishment of a city commercial bank shall also satisfy other prudential requirements, including, at a minimum, the following: (1) it has a sound corporate governance structure; (2) it has a sound risk management system capable of effectively controlling various risks; (3) there are qualified strategic investors among the promoter shareholders; (4) it has scientific and effective human resources management rules and highly competent professionals; (5) it has effective capital restraint and replenishment mechanism; and (6) its establishment is conducive to dissolving the risks in existing financial institutions and promoting financial stability.

Significant Changes

City commercial banks are required to obtain approval from the CBIRC or its local offices to undergo significant changes, including: establishment, promotion or closure of branches or sub-branches; change of the name of headquarters, branches or sub-branches; change of registered capital; change of domicile of headquarters, branches or sub-branches; change of business scope; change of form of organization; change of shareholders holding more than 5% of the bank’s total capital or shares; approval of qualifications of directors and senior management; investments in the equity interest in a bank by an overseas financial organization; investment in the establishment of, participation in the share capital of and acquisition of domestic legal person financial institutions or overseas entities; amendments to the articles of association; change of overseas institutions; division, merger or acquisition; dissolution and bankruptcy.

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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 then CBRC on January 5, 2018 specifies that the relationships among commercial banks’ shareholders and their controlling shareholders, de facto controllers, related parties, parties acting in concert and ultimate beneficiaries shall be clear and transparent; the shareholding percentage of shareholders and their related parties and parties acting in concert shall be calculated together. The Notice on Further Deepening the Rectification of Market Chaos in the Banking Industry (《中國銀監會關於進一步深化整治銀 行業市場亂象的通知》) (the “Notice”) issued by the then CBRC on January 12, 2018 takes regulation of (bank) shareholders’ behaviors as a key point for rectification to improve the corporate governance, including shareholder and equity interest 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.

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 the Implementation Measures of the CBIRC for 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 application for the establishment of a branch shall be submitted by the head office of the city commercial bank to the provincial office of the CBIRC at the place where such branch is to be established; an application for the establishment of a sub-branch shall be submitted by the head office of the city commercial bank to the municipal office or provincial office at the place where such sub-branch is to be established.

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REGULATIONS ON PRINCIPAL COMMERCIAL BANKING ACTIVITIES

Lending Business

On August 16, 2004, the PBOC and the then CBRC issued the Measures for the Management of Auto Loans (《汽車貸款管理辦法》), which was amended on August 4, 2015 and October 13, 2017. According to the Measures, the term of auto loans (including the extension periods) may not be longer than five years, of which, the terms for secondhand auto loans (including the extension periods) may not be longer than three years and the terms of loans to auto dealers may not be longer than one year.

On August 30, 2004, the then CBRC promulgated 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》). According to the Guidelines, a commercial bank 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, no commercial banks are allowed to grant land reserve loans to any borrower whose capital is not fully contributed or is seriously insufficient or whose operations or management is irregular, or grant any form of loans to real estate projects without state-owned land use permit, construction land use planning permit, construction works planning permit and construction works commencement permit.

On July 18, 2009, the then CBRC promulgated the Guidelines on Project Financing Business (《項目融資業務指引》). According to the Guidelines, banking financial institutions should require that those project assets and/or projected earnings or other rights of the project (which satisfy the conditions for being pledged) be pledged as security for project finance loans, and if necessary, the pledging of the equity interest of the project sponsor in the project company as guarantee for the loans. Moreover, lenders should require that they be the first claimants in line for the commercial insurance taken out for the projects, or take other measures to effectively control the rights arising from the insurance indemnities. Banking financial institutions should designate a special account for borrowers to deposit all revenues from the financed projects, monitor the account, and in case of any abnormal changes in the account, promptly find out the causes and take appropriate measures.

On December 22, 2009, the PBOC, the then CBRC, the CSRC and the then CIRC jointly promulgated the Guiding Opinions of the PBOC, the CBRC, the CSRC and the CIRC on Further Supporting the Restructuring and Revitalization of Key Industries and Curbing Overcapacity in Certain Industries through Financial Services (《中國人民銀行、銀監會、證 監會、保監會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》), which specify that credit funds should be guaranteed to be granted in a timely and efficient manner for enterprises and projects that meet the requirements of the plans for the restructuring and revitalization of key industries, meet market entry requirements and comply with the banks’ lending principle; for projects that do not comply with industry policies, market entry requirements and technical standards, and which do not have sufficient funds, credit should not be extended. Strict examination and approval should be conducted before loans are granted to the projects in industries with overcapacity.

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On February 12, 2010, the then CBRC promulgated the Interim Measures for the Administration of Working Capital Loans (《流動資金貸款管理暫行辦法》). According to the Measures, commercial banks should 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 specific loan limit, and shall not grant working capital loans in excess of the borrower’s actual needs. Commercial banks should specify with the borrowers express and lawful use of loans. Working capital loans should not be used for fixed asset investment or equity investment or for areas or purposes where production or operation is expressly prohibited by the state.

On February 12, 2010, the then CBRC promulgated the Interim Measures for the Administration of Personal Loans (《個人貸款管理暫行辦法》). According to the Measures, the loan contract for personal loans should specify the use of loans. The uses of personal loans should comply with laws and regulations and relevant state policies. Commercial banks are prohibited from extending personal loans without designated use. Meanwhile, the term and interest rate of personal loans should 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 then CBRC issued the Guidelines for Commercial Banks on the Risk Management on Credit Extension to the Group Clients (2010 Revision) (《商業銀行集團客戶授信業務風險管 理指引(2010修改)》) on June 4, 2010. According to the Guidelines, the credit balance of a commercial bank to a single group borrower should not exceed 15% of the commercial bank’s net capital. Otherwise, the commercial bank will be considered to have exceeded its risk bearing ability. If the credit needs of a group borrower exceeds the risk tolerance capacity of a bank, the commercial bank should take measures to diversify risks through syndication of loans, loan participation and transfer of loans. In line with prudent supervision requirements, the then CBRC may lower the ratio of credit balance of any commercial bank to a single group borrower to the commercial bank’s net capital.

On September 17, 2012, the then CBRC issued the Administrative Measures for Loans to Rural Households (《農戶貸款管理辦法》). The Measures encourage rural financial institutions and other banking financial institutions which extend loans to rural households to develop agricultural-related loan business, formulate relevant business strategies and enhance rural households’ ability to control loan-related risks. It is also stipulated that loans to rural households shall be used in compliance with laws and regulations and related national policies, and banking financial institutions shall not offer loans to rural households who fail to specify the use of such loans.

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On February 26, 2013, the General Office of the State Council issued the Notice of the General Office of the State Council on Further Improvement in the Market Regulation and Control of 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》), which prohibits commercial banks from offering loans for new development projects to real estate developers who are engaged in illegal activities such as possession of idle land, land speculation, hoarding of properties and driving up of 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 then CBRC issued the Guiding Opinions on Strengthening the Risk Control and Management of Loans to Local Government Financing Platforms in 2013 (《關於 加強2013年地方政府融資平台貸款風險監管的指導意見》), requiring the banks to impose aggregate lending limits on local government financing platform companies (“LGFPCs”) and banking financial institution legal persons should not expand the scale of lending of LGFPCs, and also provide that, for the LGFPCs with a cash flow coverage ratio lower than 100% or an asset-liability ratio higher than 80%, the proportion of their loans to total loans granted by the bank to all LGFPCs should not exceed that of the previous year, and that the bank should take measures to gradually reduce the granting of loans and step up efforts to collect such loans.

On September 21, 2014, the State Council issued 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》), stipulating that financial institutions should not provide financing to or seek guarantees from local governments in violation of applicable laws or regulations. Subscription of bonds issued by local governments by financial institutions should be in compliance with regulatory requirements. When providing financing to governments or enterprises whose debt may be recognized as the government’s contingent liabilities should strictly regulate credit management by enhancing risk identification and risk management. Financial institutions shall bear all 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 PRC Commercial Banking Law and the PRC Banking Supervision and Regulatory Law.

The Circular of the MOF, the PBOC and the then CBRC on Properly Resolving Subsequent Financing Issues of the On-going Projects of LGFVs was forwarded by the General Office of the State Council on May 11, 2015 and came into force on the same day, requiring local governments at all levels and banking financial institutions to support the existing financing needs of on-going projects of financing vehicles to ensure their orderly development with the objective of “controlling the total amount and providing tailored treatment”. For loans of on-going projects of financing vehicles, banking financial institutions should independently determine, independently bear risks and to improve the management of loans based on prudent estimation of financing vehicles’ repayment ability and revenue from on-going projects, and also consider the repayment ability of the local government. Banking financial institutions should exercise caution when reviewing where loans are extended and focus on supporting

– 107 – SUPERVISION AND REGULATION irrigation and water conservancy facilities, affordable housing projects, urban rail transit and other areas of on-going projects of financing vehicles, to ensure that the loans are in line with industrial development needs and industrial park development plans.

On February 10, 2015, the then CBRC issued the latest revised Guidelines on Risk Management for Acquisition Financing by Commercial Banks (《商業銀行併購貸款風險管理 指引》). According to the Guideline, the total balance of acquisition financing of commercial banks shall not exceed 50% of their net tier-one capital in the same period; the balance of commercial banks’ acquisition financing to single borrowers shall not exceed 5% of their net tier-one capital in the same period; and the proportion of acquisition financing to the consideration of M&A transactions shall not exceed 60%. The term of acquisition financing shall not exceed 7 years.

On March 30, 2015, the PBOC, MOHURD and the then CBRC jointly issued the Notice of the PBOC, MOHURD and CBRC on Issues concerning Individual Housing Loan Policies (《中國人民銀行、住房城鄉建設部、中國銀行業監督管理委員會關於個人住房貸款政策有關 問題的通知》), providing that if a household owns one residential property but has not fully repaid the corresponding mortgage loan and then applies for a commercial housing loan to purchase an ordinary residential property to improve living conditions, the minimum down payment ratio shall be adjusted to not less than 40%. The specific amount of the down payment and interest rate shall be determined by the relevant banking institutions based on factors including the credit standing and solvency of the borrowers. 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%.

On September 24, 2015, the PBOC and the then CBRC issued the Notice of the PBOC and CBRC on Issues concerning the Further Improvement of Differential Housing Credit Policies (《中國人民銀行、中國銀監會關於進一步完善差別化住房信貸政策有關問題的通 知》), stating that for personal commercial housing loans provided to families for the first-time purchase of ordinary housing, the minimum down payment ratio shall be adjusted to not less than 25% in cities that have not imposed property purchase restriction policies.

On February 1, 2016, the PBOC and the then CBRC issued the Notice of the PBOC and CBRC on Issues concerning the Adjustment on Individual Housing Loan Policies (《中國人民 銀行、中國銀監會關於調整個人住房貸款政策有關問題的通知》), requiring that in cities that have not imposed property purchase restriction policies, the minimum down payment ratio for personal commercial housing loans provided to families for the first-time purchase of ordinary housing shall in principle be 25%, which may be adjusted downwards locally by 5 percentage points. The minimum down payment ratio shall be adjusted to no less than 30% for households possessing one residential property with outstanding loans but applying for more commercial

– 108 – SUPERVISION AND REGULATION housing loans to purchase ordinary housing to improve living conditions. In cities that have imposed property purchase restriction policies, the residential mortgage loan policies shall be carried out in accordance with the existing stipulations.

Entrusted Loan Business

On January 5, 2018, the then CBRC issued the Administrative Measures of Entrusted Loans for Commercial Banks (《商業銀行委託貸款管理辦法》), confirming that (i) entrusted loan business is an entrusted agency business of commercial banks. As trustees, commercial banks should provide services pursuant to the principle of powers matching obligations and interests but are prohibited from determining borrowers on behalf of principals, involving in lending decision, issuing entrusted loans on behalf of the trustee, providing guarantees in any forms, determining the guarantors for the borrowers or advancing funds to repay the entrusted loan for the borrowers, or directly or indirectly undertaking entrusted loans with credit funds or wealth management funds; (ii) commercial banks cannot use funds under entrusted management from other person, funds from bank lending, all kinds of special funds with specific uses (unless otherwise specified by relevant departments of the State Council), other debt funds (unless otherwise specified by relevant departments of the State Council) and funds from other sources that cannot be identified to issue entrusted loans, except for funds raised from issuance of bonds by a business group and used in the group; (iii) funds shall not be used for manufacturing, operating or investing in areas and for purposes that are explicitly prohibited by the State, shall not be used for investing in bonds, futures, financial derivatives and asset management products, shall not be used as registered capital and registered capital verification, shall not be used for investing in equity capital or increasing registered capital (unless otherwise specified by regulatory departments), and shall not be used for other purposes contrary to regulatory provisions; (iv) commercial banks are required to strictly distinguish between entrusted loan business and their own business to strengthen the isolation of risks and business management. Commercial banks shall establish and improve the information system of entrusted loan business management, to ensure the completeness, continuity, accuracy and traceability of the information for such business; (v) commercial banks shall not accept any entrusted loan application from a client which is a financial assets management company or an institution engaging in loan business; (vi) commercial banks shall not divert the funds of one client to another.

Foreign Exchange Business

Commercial banks are required to obtain approvals or filings from the PBOC, the SAFE, the CBIRC or their branches to conduct foreign exchange businesses. Under the PRC’s 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 discover on a timely basis.

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Securities and Assets Management Business

Generally speaking, PRC commercial banks are not allowed to engage in equity security trading and underwriting business. However, they are allowed to:

(1) underwrite, buy and sell government bonds, bonds issued by financial institutions and commercial bonds issued by qualified non-financial institutions;

(2) act as agent for securities trading (including bonds issued by the PRC Government, financial institutions and other corporate entities);

(3) offer comprehensive asset management and consultancy service to institutions and retail investors;

(4) act as a financial advisor to large infrastructure projects, acquisitions and bankruptcy restructuring;

(5) act as the trustee for funds such as securities investment funds and enterprise annuity funds.

On April 2, 2013, the Management Measures for Custody of Securities Investment Funds (《證券投資基金託管業務管理辦法》) were issued by the CSRC and the then CBRC, providing that a commercial bank may, with approval, engage in custodian business for securities investment funds, if, (1) such commercial bank has year-end net assets of no less than RMB2 billion for the most recent three fiscal years and if its risk control indicators such as capital adequacy ratio meet the relevant regulatory requirements; (2) the proposed senior managers of its fund custody department meet the legal requirements; the practitioners who have obtained the qualification as fund practitioners shall be no less than half of the total staff members of the department; the number of its qualified fund practitioners proposed to engage in clearing, accounting, investment oversight, information disclosure, internal audit and monitoring and other relevant businesses shall be no less than eight, among which, the personnel holding core positions, such as accounting and oversight, shall have at least two years’ experience in the custody services; (3) it meets the conditions for ensuring the safekeeping of fund assets and the integrity and independence of fund assets; (4) it has a safe and efficient clearing and settlement system; (5) the fund custody department has a fixed place necessary for the business operations and is equipped with an independent security monitoring system; (6) the fund custody department is equipped with independent technical systems for the custody business, including network systems, application systems, security and protection systems and data back-up systems; (7) it has a sound internal auditing and monitoring system and risk control system; (8) it has no record of major illegal or irregular acts for the last three years; (9) it has a special fund custody department, whose setup can ensure the integrity and independence of its custody business operations; (10) other requirements provided for by relevant laws or administrative regulations and other conditions stipulated by the CSRC and the then CBRC that are approved by the State Council.

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On April 27, 2018, the PBOC, the CBIRC, the CSRC and the 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 “Guidelines on April 27”), which stipulates that in regulating the asset management business of financial institutions, it is necessary to follow the principles of adhering to the bottom-line of strict risk control, the fundamental goal of serving the real economy, the regulatory concept of integrating macro-prudential management with micro-prudential regulation and combining institutional regulation with functional regulation, the problem-solving orientation with pertinent focus and active, stable and prudent advancement, achieve comprehensive coverage of and unified standards for the asset management business of various financial institutions, implement fair market access and regulation, and maximally eliminate the regulatory arbitrage to effectively protect the legitimate rights and interests of financial consumers. It is worth noting that the Guidelines on April 27 specifies the following points:

(1) the core elements of standardized assets of creditor’s right. Standardized assets of creditor’s right shall have the following features: in equal proportions and available for transaction, full disclosure of information, centralized registration and independent custody, fair pricing, with improved liquidity mechanism, and trading in the markets such as interbank markets, securities exchange markets, etc. established upon approval of the State Council. The specific rules for identification shall be separately formulated by the People’s Bank of China in conjunction with financial authorities. The assets of creditor’s right other than standardized assets of creditor’s right are all non-standardized assets of creditor’s right.

(2) that publicly offered products shall not invest in non-standardized assets of creditor’s right. The Guidelines on April 27 specifies that publicly offered products shall mainly invest in standardized assets of creditor’s right and listed stocks and shall not invest in the equity of unlisted companies, unless otherwise specified by laws, regulations and financial authorities. Publicly offered products can invest in commodities and financial derivatives, provided that they are in compliance with laws, regulations and relevant provisions of financial authorities.

(3) the identification of rigid payment. the following activities shall be deemed as rigid payment: (i) the issuers or managers of asset management products violate the principle of determining the net value in a real and fair manner by guaranteeing principal and income for the products; (ii) taking measures such as rolling issuance, which makes principal, incomes and risks of asset management products transfer among various investors, so as to achieve guarantee of principal and income for the products; (iii) if the asset management products cannot be redeemed in due time or there is difficulty for redemption, the financial institutions that issue or manage the products shall raise funds by themselves or entrust other institutions to make payment on their behalf; and (iv) other circumstances as identified by the financial authorities.

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(4) the net value management. Financial institutions shall implement net value management on asset management products. The generation of net value shall be in compliance with the provisions of the accounting standards for business enterprises and shall timely reflect the incomes and risks of the basic financial assets. The trustee shall conduct accounting and provide regular reports, subject to auditing and confirmation by an external audit agency. The financial institution that is audited shall disclose the audit results and report the same to the financial authorities at the same time. Financial assets shall be measured under the principle of fair value, and it is encouraged to measure at market value.

(5) the nesting levels. The Guidelines on April 27 specifies that asset management products can be reinvested in another layer of asset management products, but the asset management products they reinvest in shall not be reinvested in asset management products other than publicly offered securities investment funds.

(6) the leverage ratio. The leverage of asset management products is classified into debt leverage and classified leverage; regarding the debt leverage, the Guidelines on April 27 sets that the debt ratio (total assets/net assets) of open-ended publicly offered, closed publicly offered, classified privately offered and other privately offered asset management products shall not exceed 140%, 200%, 140% and 200%, respectively, and prohibits financial institutions from using the products entrusted for management to carry out pledge financing. Regarding the classified leverage, the Guidelines on April 27 specifies that publicly offered products and open-ended privately offered products shall not be subject to classification of shares. Among classified closed privately offered products, the classification ratio (preferred share/inferior share) of debt securities shall not exceed 3:1; the classification ratio of equity products shall not exceed 1:1; and the classification ratio of products and financial derivatives and that of hybrid products shall not exceed 2:1.

Insurance Agency Business

On November 1, 2010, the Notice of the CBRC on Further Strengthening Compliant Sales and Risk Management of Commercial Bank’s Bancassurance Business (《中國銀行業監督管理 委員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》) was issued by the then CBRC, which stipulates that each outlet of a commercial bank may, in principle, cooperate with no more than three insurance companies to sell their insurance products. If the outlet cooperates with more than three insurance companies, the outlet must report to the local branch of the then CBRC.

On April 25, 2016, the then CIRC issued the Notice of the CIRC on the Issues Relating to the Administrative Permits of Banks Engaging in Insurance Agency Business (《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 stipulates that upon the obtaining of the licenses for insurance agency business by the banking institutions, outlets of banking institutions may provide insurance agency services based on the authorization of legal entities.

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On August 23, 2019, the General Office of the CBIRC issued the Notice of Issuing the Measures for the Administration of the Bancassurance Business of Commercial Banks (Yin Bao Jian Ban Fa [2019] No. 179) (中國銀保監會辦公廳關於印發《商業銀行代理保險業務管 理辦法》的通知)(銀保監辦發[2019]179號). Under the Measures, except in the internet insurance business and telephone sales insurance business, each outlet of a commercial bank can cooperate with no more than three insurance companies in the bancassurance business in the same fiscal year; In addition, upon obtaining licenses for bancassurance business by the corporate institution of a commercial bank, outlets of a commercial bank shall engage in the bancassurance business based on the authorization of the corporate institution.

Wealth Management

On September 26, 2018, the CBIRC issued the Measures for the Supervision and Administration of the Wealth Management Business of Commercial Banks (《商業銀行理財業 務監督管理辦法》), according to which (1) a commercial bank that sells wealth management products shall not publicize or promise the guarantee of principal and proceeds; (2) a commercial bank shall conduct the wealth management business through a subsidiary company with the independent legal person status. If the conditions are not met for the time being, the head office of the commercial bank shall set up a specialized department for the wealth management business to exercise centralized and unified management on the wealth management business; (3) the balance of investment of all wealth management products of a commercial bank in non-standardized debt products shall not exceed 35% of net assets of the wealth management products at any time, and shall not exceed 4% of the total assets disclosed in the audit report of the bank in the previous year; (4) the transition period of the Measures for the Supervision and Administration of the Wealth Management Business of Commercial Banks (《商業銀行理財業務監督管理辦法》) shall last from the date when it comes into force to the end of 2020. During the transition period, the new wealth management products issued by a commercial bank shall comply with the provisions of the Measures for the Supervision and Administration of the Wealth Management Business of Commercial Banks (《商業銀行理財業 務監督管理辦法》); and for existing wealth management products, the commercial bank may issue former products for transition with immature assets invested by existing wealth management products, but it shall strictly restrict the products to the overall size of existing products and reduce them in an orderly manner.

In addition to domestic wealth management business, on April 17, 2006, the PBOC, the then CBRC and the SAFE also jointly issued 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》), according to which commercial banks intending to provide overseas financial management services shall apply to the then CBRC for approval. Commercial banks which have obtained licenses to make overseas investments with funds from investors may invest in specified overseas financial products on behalf of domestic institutions and individuals.

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On December 2, 2018, the CBIRC promulgated the Measures for the Administration of Wealth Management Subsidiary Companies of Commercial Banks (《商業銀行理財子公司管 理辦法》), according to which commercial banks intending to set up a wealth management subsidiary company shall seek approval of the banking regulatory authority of the State Council and the wealth management subsidiary company shall meet the following conditions: (1) it has the bylaws prescribed in the PRC Company Law and by the banking regulatory authority of the State Council; (2) it has shareholders that meet the prescribed conditions; (3) it has the minimal registered capital prescribed in the Measures for the Administration of Wealth Management Subsidiary Companies of Commercial Banks (《商業銀行理財子公司管 理辦法》); (4) it has directors and senior management meeting the conditions of qualifications for holding office, and has sufficient qualified practitioners holding positions of research, investment, valuation, risk management and other wealth management business positions; (5) it has established effective corporate governance, internal control and risk management systems, has an information system supporting separate management, establishment of separate accounts, separate accounting, and other business management of wealth management products, and has the technologies and measures ensuring the effective and safe operation of the information system; (6) it has the business premises, safety protection measures and other facilities suitable for the business operation; (7) it meets other prudential conditions prescribed in the rules of the banking regulatory authority of the State Council.

Bills Business

Under the PRC Commercial Banking Law, commercial banks engaged in settlement business, including the acceptance on bills, foreign exchange services and entrusted fund collection, should honor checks and credit accounts in accordance with the required timeframes and shall not cumulate orders or checks or dishonor checks in violation of requirements. The prescribed terms for honoring checks and the timing for crediting of accounts should be published.

Interbank Business

On April 24, 2014, the PBOC, the then CBRC, the CSRC, the then CIRC and the SAFE jointly issued the Notice of the PBOC, the CBRC, the CSRC, the CIRC and the SAFE on Regulating Interbank Businesses of Financial Institutions (《中國人民銀行、中國銀行業監督 管理委員會、中國證券監督管理委員會、中國保險監督管理委員會、國家外匯局關於規範金 融機構同業業務的通知》), which sets out certain requirements in connection with the regulation of interbank business operations:

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

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

(3) financial institutions that engage in the business of financial assets held under resale agreements (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) interbank investments of financial institutions should accurately measure risks and set aside capital and make provisions pursuant to the principle of “substance over form” and according to the nature of the underlying assets invested;

(5) financial institutions engaging in interbank businesses should determine the term of financing in a reasonable and prudent manner. The term of interbank borrowings may not exceed three years and the term of other interbank financings should not exceed one year, and such terms may not be extended upon their maturity;

(6) the net interbank financing volume (excluding interbank deposits for settlement purposes) from a commercial bank to another financial institution legal person after deducting assets with zero risk weighted financial assets should not exceed 50% of the bank’s tier-one capital; and the net balance of interbank funds borrowed by a single commercial bank may not exceed one third of its total liabilities. Such provisions have currently not been implemented for provincial rural credit cooperatives, provincial level second-level rural credit cooperatives with legal person status and village and township banks;

(7) financial institutions engaging in interbank businesses should establish a sound risk management system and internal control system and adopt proper accounting treatment methodology.

Business between Banks and Trust Companies

On August 5, 2010, the then CBRC issued the Notice of the CBRC on the Regulation of Relevant Matters for the Wealth Management Cooperation Business 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 required commercial banks and trust companies to comply with the following principles in conducting the financing-oriented wealth management cooperation business between banks and trust companies: (1) the term of a trust product of a trust company which works with banks in wealth management shall not be less than one year; (2) headroom management shall be implemented on trust companies for their financing-oriented wealth management cooperation business

–115– SUPERVISION AND REGULATION between banks and trust companies, i.e., the balance of the financing-oriented business as a percentage of the balance of the wealth management cooperation business between banks and trust companies shall not exceed 30%; (3) trust products under trust companies shall not be designed as open-ended.; (4) funds for the investment-oriented wealth management cooperation business between banks and trust companies shall, in principle, not be invested in shares of non-listed companies.

On January 13, 2011, the then CBRC promulgated the Notice of the CBRC on Further Regulation of the Wealth Management Cooperation Business between Banks and Trust Companies (《中國銀行業監督管理委員會關於進一步規範銀信理財合作業務的通知》), which required commercial banks to transfer the off-balance sheet assets of the wealth management cooperation business between banks and trust companies into the on-balance sheet assets by the end of 2011 according to the aforesaid regulations. Commercial banks shall report the detailed transfer plan to the then CBRC or its provincial dispatched agencies by January 31, 2011. In principle, the balance of loan from cooperation between banks and trust companies shall be reduced at the percentage of at least 25% quarterly. Trust companies shall not draw dividends if the trust compensation reserves fall below 150% of the non-performing trust loans from cooperation between banks and trust companies or 2.5% of the total balance of trust loans from cooperation between banks and trust companies.

On November 22, 2017, the then CBRC issued the Notice of the CBRC on the Regulation of the Business between Banks and Trust Companies (《中國銀監會關於規範銀信類業務的通 知》), which required that commercial banks shall (1) incorporate the business for which commercial banks actually bear credit risks into unified credit management and implement credit concentration regulation measures pursuant to the principle of substance over form in the business between banks and trust companies; (2) categorize the business between banks and trust companies which they actually bear credit risks, categorize the risks based on the risk profile of underlying assets and make provisions based on the nature of underlying assets under penetrating management requirements; (3) regarding banks and trust companies channel business, (i) restore the nature of business and manage and control risks, (ii) not conceal the nature of risk by utilizing trust channel nor evade the regulatory requirements for funds investment, assets classification, provisions making and capital occupying, and (iii) not utilize trust channel to present false assets off balance sheet; (4) implement list-based management on trust companies in business between banks and trust companies, comprehensively consider the risk management level and professional investment ability of the trust companies and prudently choose their counterparties; and (5) not illegally invest trust funds in restricted or prohibited areas such as real estate, LGFVs, stock market or those with overcapacity when carrying out business between banks and trust companies.

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Electronic Banking

In order to strengthen the security and risk management of e-banking business, the then CBRC issued the Measures for the Administration of Electronic Banking (《電子銀行業務管 理辦法》) and the Guidelines for the Assessment of Electronic Banking Safety (《電子銀行安 全評估指引》) on January 26, 2006. Banking financial institutions that apply for the establishment of an e-banking business should have a sound risk management system and an internal control system, and no major accidents should have occurred in the major information management systems and business process systems of such banking financial institutions one year prior to the application. In addition, all banking financial institutions that operate electronic banking are required to take security measures to ensure the confidentiality of information and prevent the unauthorized use of e-banking accounts.

On August 9, 2011, the then CBRC issued the Notice of the CBRC on Strengthening the Management of Customer Information in Electronic Banking (《中國銀監會關於加強電子銀行 客戶信息管理工作的通知》), which requires commercial banks to attach a high level of importance to customer information security and confidentiality; commercial banks may not directly or indirectly provide customer sensitive information such as the name, ID type and number, mobile phone number, telephone number, address, etc. to third party organizations without the customer’s authorization to the entity.

Credit Card Business

On January 13, 2011, the then CBRC issued the Measures for the Supervision and Administration of Credit Card Business of Commercial Banks (《商業銀行信用卡業務監督管 理辦法》), which stipulated that commercial banks which commence credit card business should (1) have effective internal control and risk management systems, to monitor the credit card business operations, and protect the legal rights and interests of customers and personal information security; (2) not use relevant information for purposes other than the credit card business of the Bank without authorization of customers; (3) establish a sound risk management and internal control system for credit card business and strictly implement authorization management to effectively identify, assess, monitor and control business risks; (4) fully disclose relevant information and business risks associated with credit card business to the card holders, and establish and improve the corresponding complaint handling mechanism, and (5) obtain the prior approval of the then 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, various types of instruments such as short-term commercial paper, medium-term notes, corporate bonds, enterprise bonds and asset securitization 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 property (other than for their own use) or in non-banking financial institutions and enterprises.

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

On December 5, 2013, the then CBRC issued the Notice of the General Office of the CBRC on Establishment of Community Sub-Branches and SME Sub-Branches by Small-and Medium-sized 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》), explicitly supporting eligible small and medium-sized commercial banks to set up community sub-branches and sub-branches for micro and small enterprises with their own characteristics and differences 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 micro and small enterprises are simply bank outlets that are specially set up to serve community residents and micro and small enterprises. To set up such sub-branches, banks are required to complete relevant administrative examination and approval procedures to obtain the license.

Micro and Small Enterprises Financing

On October 31, 2014, the State Council issued the Opinions of the State Council on Supporting the Healthy 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》), to encourage and guide banks to focus on supporting micro and small enterprises and regional economic development, and require each banking financial institution to separately list micro and small enterprise credit schemes on the basis that such business is sustainable and risks are effectively controlled.

On June 22, 2015, the then CBRC issued the Notice from the CBRC to Further Implement Financial Service Supervising Policy of Micro and Small 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 insisting problem-oriented strategy, ensuring the implementation of policies, clarifying the emphasis of support, increasing the input of credit and loans, advancing the innovation of loan services, enlarging the scope of autonomously renewing loans, improving tolerance indicator of non-performing assets, strengthening differentiated assessment, optimizing the internal resources allocation, improving the service ability, strictly implementing “Two Banned and Two Limits” (兩禁兩限) and standardizing service charges, for the purpose of further implementing regulatory supporting policies and continually improving and deepening financial services to micro and small enterprises.

PRICING OF PRODUCTS AND SERVICES

Interest Rates for Loans and Deposits

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

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On July 20, 2013, the PBOC removed the minimum interest rate requirement for new loans provided by commercial banks, except for residential mortgage loans.

With effect from October 29, 2004, commercial banks in the PRC were allowed to set their own interest rates of RMB-denominated deposits so long as such interest rates were not higher than the relevant PBOC benchmark rates. After that, the cap of interest rates on RMB-denominated deposits of commercial banks in PRC was further relaxed. Effective from October 24, 2015, the PBOC removed the cap of interest rates on deposits and allowed commercial banks in PRC to set interest rates on deposits based on commercial considerations.

In accordance with the Notice of the PBOC on Further Promoting the Interest Rate Liberalization Reform (《中國人民銀行關於進一步推進利率市場化改革的通知》) issued by the PBOC, commercial banks may set their own bill discounting rates with effect from July 20, 2013.

Pricing for Fee and Commission-based Products and Services

Under the Administrative Measures on Pricing of Commercial Banking Services (《商業 銀行服務價格管理辦法》) issued by the then CBRC and the NDRC on February 14, 2014, pricing for basic services of banks that customers generally use and are closely related to national economic development and people’s livelihood is guided or determined by the government. Except for those services for which pricing is guided or determined by the government, a commercial bank which sets prices for its services based on market conditions 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.

Statutory 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.

SUPERVISION OF CAPITAL ADEQUACY LEVEL

Latest Supervisory Standards Regarding Capital Adequacy Level

On February 23, 2004, the then CBRC issued the Administrative Measures on the 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 on the Capital Adequacy Ratio of Commercial Banks require commercial banks to maintain a capital adequacy ratio of no less than 8% and a core capital adequacy ratio of no less than 4%. Prior to January 1, 2013, the Bank was required to comply with the Administrative Measures on the Capital Adequacy Ratio of Commercial Banks.

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On June 7, 2012, the then CBRC issued the Capital Administrative Measures for Commercial Banks (Provisional) (《商業銀行資本管理辦法(試行)》), in effect since January 1, 2013, to replace the Administrative Measures on the Capital Adequacy Ratio of Commercial Banks. According to the Measures, commercial banks are required to maintain a minimum capital adequacy ratio of 8% and a minimum core tier-one capital adequacy ratio of 5%, and make sufficient reserves for multiple impairment losses (including those related to loans) before calculating the capital adequacy ratio. Under the Capital Administrative Measures for Commercial Banks (Provisional), 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), 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.

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 (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.

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Meanwhile, the 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 then 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.

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. Where a commercial bank fails to meet the requirements on the continued use of the advanced capital measurement approaches as specified in the Measures, the then CBRC has the right to require correction within a prescribed timeframe. Where the commercial bank fails to correct as required within the timeframe, the then CBRC has the right to revoke the qualification of the bank for using the advanced capital measurement approaches.

To ensure the smooth implementation of the Capital Administrative Measures, on November 30, 2012, the then CBRC issued the Notice of the CBRC Regarding the Arrangement of Transition Period of Implementation of the Capital Administrative Measures for Commercial Banks (Provisional) (《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》) (Yin Jian Fa [2012] No. 57). This Notice provides that commercial banks must meet the minimum capital requirements and also provides that the systematically important banks in the PRC are required to 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 annual capital adequacy ratio requirement as follows:

As of December 31, Type of Bank Item 2013 2014 2015 2016 2017 2018 Systematically Core tier-one 6.5% 6.9% 7.3% 7.7% 8.1% 8.5% Tier-one capital 7.5% 7.9% 8.3% 8.7% 9.1% 9.5% Capital 9.5% 9.9% 10.3% 10.7% 11.1% 11.5% Other Banks Core tier-one 5.5% 5.9% 6.3% 6.7% 7.1% 7.5% Tier-one capital 6.5% 6.9% 7.3% 7.7% 8.1% 8.5% Capital 8.5% 8.9% 9.3% 9.7% 10.1% 10.5%

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In addition, according to the aforesaid Notice, if the commercial banks need to make provisions for countercyclical capital or the regulatory authorities impose capital requirements on an individual bank under the second pillar during the transition period, 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.

Issuance of Tier-two Capital Bonds

On June 17, 2004, the PBOC and the then CBRC issued 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 No. 4 [2004] of the PBOC and CBRC), pursuant to which, principal and interest of subordinated bonds issued by commercial banks shall be subordinated to the banks’ other liabilities but be senior to the bonds in banks’ equity capital. The PBOC and the then CBRC have the statutory responsibility of supervising the issuance of subordinated bonds. The then CBRC shall be in charge of reviewing and approving the issuer’s qualifications and overseeing the issuer’s activities in including the subordinated bonds in its supplementary capital. The PBOC shall be in charge of supervising the issuance and trading of subordinated bonds in 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 the other criteria in Measures 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 shall not be included in regulatory capital.

Supervision of Capital Adequacy Level

The then CBRC is responsible for supervising the capital adequacy level of banking institutions in the PRC, reviewing and evaluating banking institutions’ capital adequacy through both on-site examination and off-site monitoring.

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Under the Capital Administrative Measures for Commercial Banks (Provisional), commercial banks are classified into four categories by the then CBRC based on their capital adequacy ratios, and corresponding measures are adopted, details of which are as follows:

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

• 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.

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

• to issue a regulatory opinion, including the problems identified with the capital management of the commercial bank, the proposed measures for rectification 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.

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Categories Capital adequacy Measures of the then CBRC Grade III Commercial banks which meet all the • to adopt the regulatory measures capital requirements for capital for Grades I and II banks; adequacy ratio, tier-one capital adequacy ratio and core tier-one • to restrict the commercial bank capital adequacy ratio but fail to from distributing dividends and meet other capital requirements. other 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.

Grade IV Commercial banks which fail to meet • to adopt the regulatory measures the minimum capital requirement for for Grade I, II and III banks; any of capital adequacy ratio, tier- one capital adequacy ratio and core • to require the commercial bank tier-one capital adequacy ratio. to 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;

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Categories Capital adequacy Measures of the then CBRC • to compulsorily 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 take over the commercial bank or procure the institutional reorganization of, or even dissolve, the commercial bank in accordance with applicable laws; and

• to comprehensively consider external factors and take other necessary measures.

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Introduction of the New Leverage Requirements

To effectively control the leverage ratio of commercial banks and maintain their safe and stable operation, the then CBRC revised 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%, whether or not on a consolidated basis. The leverage ratio is calculated according to the following formula:

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

For a commercial bank whose leverage ratio is lower than the minimum regulatory requirement, the then CBRC and its offices may take the following rectification measures 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 commercial bank fails to rectify its noncompliance within the specified period, or its behavior has seriously endangered its sound operation or damaged the legitimate interests of depositors or other clients, the then CBRC and its offices may take relevant regulatory measures, as the case may be, pursuant to the PRC Banking Supervision and Regulatory Law. In addition to the above-mentioned measures, the then CBRC and its offices may also impose administrative penalties on the commercial bank.

The Administrative Measures on the Leverage Ratio of Commercial Banks also requires that, systematically important banks are required to meet the minimum regulatory requirements in such Administrative Measures on April 1, 2015 when the Administrative Measures implemented, while other commercial banks are required to meet the minimum regulatory requirements in such Administrative Measures before the end of 2016.

Basel Accords

Basel Capital Accord I (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 a series of proposals, and replaced Basel I with Basel II (the revised Basel Capital Accord promulgated in 2004).

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In response to the deficiencies in financial regulation system 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. Under such circumstances, Basel III was drafted and 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 level 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 requirement of capital adequacy ratio, 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 then 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 then CBRC issued the Administrative Measures on the Leverage Ratio of Commercial Banks (《商業銀行槓桿率 管理辦法》). On June 7, 2012, the then CBRC issued the Capital Administrative Measures for Commercial Banks (Provisional) (《商業銀行資本管理辦法(試行)》), which came into effect on January 1, 2013 and superseded the Administrative Measures for Capital Adequacy Ratio of Commercial Banks (《商業銀行資本充足率管理辦法》) and the 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. In accordance with the new rules of leverage ratio by the Basel Committee, on January 30, 2015, the then CBRC revised the Administrative Measures on the Leverage Ratio of Commercial Banks (《商業銀行槓桿率管理辦法》) which was issued on June 1, 2011, and put forward clearer and stricter requirements for the disclosure of leverage ratio of commercial banks.

LOAN CLASSIFICATION, ALLOWANCES AND WRITE-OFFS

Loan Classification

On July 3, 2007, the then CBRC issued the Guidelines of Risk-based Classification of Loans (《貸款風險分類指引》) (Yin Jian Fa [2007] No. 54), pursuant to which commercial banks in the PRC are required to classify loans under a five-category loan classification system based on the judgment of the likelihood of full repayment of principal and interest by debtors on time. The five categories are “pass”, “special mention”, “substandard”, “doubtful” and “loss”. A loan classified as substandard, doubtful or loss is considered to be non-performing. The primary factors for evaluating the borrower’s repayment ability include the borrower’s cash flow, financial conditions and non-financial factors that affect repayment ability.

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Loan Loss Allowance

According to the Guidelines of Risk-based Classification of Loans (《貸款風險分類指 引》), a loan classified as substandard, doubtful or loss is considered to be non-performing, for which commercial banks are required to make full allowance for loan loss and write off loan loss in a timely manner on the basis of classifications of loans and in accordance with the relevant regulations.

According to 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 general loan loss allowances on a quarterly basis and to have a general allowance of not less than 1% of the total loans outstanding as of the end of the year. The guidelines also provide 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 decide to make special allowances quarterly in accordance with special risk factors of loans in different categories (such as countries and industries), probability of losses and historical experience.

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》) which was promulgated by the then 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 loan provision ratio and its provision coverage ratio, the benchmarks of which are 2.5% and 150%, respectively. The higher of the two standards will be taken to be the supervisory standard. Systematically important banks confirmed by banking regulatory authorities are required to reach the standard before the end of 2013, and non-systematically important banks are required to reach such standard before the end of 2016. Those failing to reach the standard before 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 the information regarding loan classification and loan loss allowance on a regular basis by submitting quarterly and annual reports. According to the Administrative Measures for Loan Loss Allowance of Commercial Banks (《商業銀行貸款損失準備管理辦法》) which became effective on January 1, 2012, banking regulatory authorities may issue risk notices to a commercial bank and require rectifications to be made accordingly if the commercial bank fails to meet the relevant minimum loan loss allowance standards for three consecutive months. The banking regulatory authorities may take further regulatory actions in accordance with the PRC Banking Supervision and Regulatory Law if the noncompliance lasts for six consecutive months.

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Bulk Transfer of Non-performing Assets

On January 18, 2012, the MOF and the then 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)). It stipulates that financial enterprises can bulk transfer non-performing credit assets and non-credit assets formed in operations to asset management companies, and such negotiable assets mainly include: loans identified as substandard, doubtful and loss according to prescribed procedures and standards; written-off back 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 restriction 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 then 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 effective from July 1, 2018, after the financial institution adopts necessary measures and procedures, bad debts 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 Institutions (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 that, in principle, the general statutory reserve shall be no less than 1.5% of the risk-bearing assets at the balance sheet date of the financial institutions. Financial institutions 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 level of general reserve of a financial institution fails to reach 1.5% of the aggregate amount of risk-bearing assets at the balance sheet date on a one-off basis, the financial institution will be allowed to achieve compliance within a certain period of time not exceeding five years in principle.

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OTHER OPERATIONAL AND RISK MANAGEMENT RATIOS

The Administrative Measures for the Capital of Commercial Banks (Trial) and the Core Indicators for Supervision of Risks of Commercial Banks (Provisional) (the “Core Indicators (Provisional)”) were promulgated by the then CBRC.

The table below sets forth the required ratios of the Core Indicators and the ratios of the Bank under PRC GAAP as of or for the years ended December 31, 2016 and 2017 and 2018 and the six months ended June 30, 2019.

Secondary As of Indicator categories Primary indicators indicators Requirement As of December 31, June 30, 2016 2017 2018 2019 % Risk Level Liquidity Risk Liquidity ratio Domestic and Ն25 49.67 60.33 65.31 86.60 foreign currencies Core liabilities ratio Ն60 52.04 82.23 63.29 64.63 Liquidity gap ratio Ն-10 -0.80 21.68 27.60 52.27 Credit risk Non-performing asset Յ4 1.19 1.01 1.07 0.67 ratio Non-performing Յ5 1.91 1.60 1.36 1.09 loan ratio Credit exposure to Յ15 11.89 8.88 11.77 N/A(1) a single group customer Loan exposure to Յ10 9.01 6.78 6.57 7.30 the first customer Overall credit Յ50 10.52 6.80 8.48 45.17 exposure to related parties

Risk Cushion Profitability Cost-to-income ratio Յ35 32.53 33.05 33.91 29.84 Return on assets Ն0.6 0.99 0.88 0.92 0.99 Return on capital Ն11 13.14 12.07 12.36 12.64 Allowance Adequacy Allowance adequacy Ն100 393.48 358.91 391.36 646.53 ratio for asset losses Allowance Ն100 212.86 192.77 243.72 N/A(1) adequacy ratio for loan losses Capital adequacy Capital adequacy Ն10.5 11.21 11.62 12.83 12.51 ratio Tier-one capital Ն8.5 10.26 10.93 10.62 10.31 adequacy ratio Core tier-one Ն7.5 10.26 10.93 10.62 10.31 capital adequacy ratio

Note: (1) Such ratio is not required by the CBIRC for the period indicated.

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In addition, the Core Indicators (Provisional) 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, 2016, the Bank’s core liability ratio was 52.04%, which failed to meet the requirements under the Core Indicators (Provisional), primarily due to the elimination of certificates of interbank deposits when calculating the core liability ratio since 2016, but it has increased as compared with that of 2015 calculated excluding the certificates of interbank deposits. The Bank has been monitoring the interbank lending, and the core liability ratio as of December 31, 2017 and 2018 met the requirements under the Core Indicators (Provisional). The failure to meet these requirements in 2016 did not cause any material liquidity issues.

In addition, as confirmed by King & Wood Mallesons, the Bank’s PRC legal advisors, the Core Indicators (Provisional) provides no explicit penalties in respect of compliance with the core liability ratio therein. During the Track Record Period and up to the Latest Practicable Date, the Bank did not receive any administrative penalty for failure to meet the core liability ratio in 2016. According to the Measures on the Liquidity Risk Management of Commercial Banks (《商業銀行流動性風險管理辦法》) promulgated by the CBIRC on May 23, 2018 and effective on July 1, 2018, which replaced the former 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)》), the core liability ratio no longer acted as a regulatory indicator, but for reference only. Based on the above reasons, our PRC legal advisors are of the view that the Bank’s failure to meet the core liability ratio requirements in 2016 will not have a material adverse impact on its business operation and financial condition.

CORPORATE GOVERNANCE AND INTERNAL CONTROLS

Corporate Governance

The Company Law, the PRC Commercial Banking Law and other laws, regulations and normative documents set out specific requirements regarding corporate governance. Among them, the Corporate Governance Guidelines for 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 then CBRC on July 19, 2013 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.

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Internal Controls

On July 19, 2013, the then CBRC issued the Corporate Governance Guidelines for Commercial Banks (Yin Jian Fa [2013] No. 34) (《商業銀行公司治理指引》(銀監發[2013]34 號)), pursuant to which 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. Moreover, the supervisory board is required to perform its supervisory obligations by supervising the directors and senior management, refining the system and rules of internal control and performing supervisory duties in internal control. Commercial banks are required to establish a relatively independent supervision and evaluation department in internal control that is responsible for effectively supervising and evaluating system construction and implementation of internal control and the department can report directly to the board of directors, supervisory board and senior management.

On April 16, 2016, the then CBRC issued the Internal Audit Guidelines for Commercial Banks (Yin Jian Fa [2016] No. 12) (《商業銀行內部審計指引》(銀監發[2016]12號)), which requires that the board of directors of a commercial bank should have an audit committee of not less than three members, a majority of whom should be independent directors. Commercial banks must also set up an independent internal audit department with sufficient internal auditors, who should not be less than 1% of the total number of employees in principle.

Information Disclosure Requirements

Pursuant to the Measures for the Information Disclosure of Commercial Banks (CBRC 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 then CBRC on July 3, 2007, a PRC commercial bank is required to issue an annual report (including the audited financial statements) within four months from 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 information of commercial banks. The documents of information disclosure include periodical reports, interim reports and other information under regulatory requirements. The commercial banks shall disclose information via annual reports, website or other methods to facilitate timely access to the disclosed information by shareholders and other stakeholders. Listed commercial banks shall also disclose information in compliance with the relevant provisions promulgated by the securities regulatory authority.

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Related Party Transactions

On April 2, 2004, the then CBRC promulgated the Administrative Measures on Related Party Transactions with Insiders and Shareholders of Commercial Banks (CBRC 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)), which provided stringent and detailed requirements on the related party transactions of PRC commercial banks. Such measures require PRC commercial banks to adhere to the principles of honesty and fairness in conducting related party transactions. 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.

Risk Management

Since its inception, the then 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.

On March 28, 2017, the then CBRC issued the Notice on the Special Governing of Behaviors of Illegal, Irregular 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 Special Administration on Supervision of 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)). On April 6, 2017, the then CBRC 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 financial 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 supervision of arbitrage, spinning arbitrage and related arbitrage and special administration on improper innovation, improper trading, improper incentives and improper fees in banking financial institutions, and requested banks to perform fully self-examination in respect of the above and regulatory authorities to supervise and inspect banks.

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On January 12, 2018, the then CBRC issued the Notice of the CBRC on Further Deepening the Rectification of Market Chaos in 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)), in which the key targets for rectification on the banking market in 2018 are proposed as follows:

(1) corporate governance: shareholders and equity interests, performance and evaluation of members from “the shareholders’ general meeting, the board of directors, the board of supervisors and the senior management”, and performance of duties by directors and senior management without qualifications approved by the regulatory authority; performance of duties by chief risk officers, chief compliance officers, internal audit officers and financial officers who need approved qualifications but have not obtained relevant qualifications;

(2) acts in violation of macro-control policies, with the focus on the rectification of acts in violation of credit policies and real estate control policies;

(3) risks of shadow banks and cross-financial products, mainly focusing on the governance and reform of interbank business, wealth management business, off-balance sheet business and cooperative business;

(4) infringement on rights and interests of financial consumers: mis-selling and improper fees;

(5) transfer of benefits: transfer of benefits to shareholders and related persons;

(6) development of business in violation of laws: development of loan and deposit business and bill business in violation of laws and illegal covering up or disposal of distressed assets; and

(7) case and operation risks: unsatisfactory employee and internal control management, etc.

Risk Management, Prevention and Control

On April 7, 2017, the then CBRC issued the Guiding Opinions of the CBRC on Risk Prevention and Control of 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)), which required banks to strengthen credit and liquidity risk management, regulate bond investment, interbank business, cross-financial business, bank financing and consignment business, prevent the risks of real estate industry and local government financing platforms and mitigate the financial risks relating to the Internet finance and folk finance. On April 26, 2017, the then CBRC promulgated the Notice of the CBRC on Issuing the Guidelines for the Collateral Management of Commercial Banks (Yin Jian Fa [2017] No. 16) (《中國銀監會關於印發商業銀行押品管理指引的通知》(銀監發[2017]16 號)), according to which commercial banks should include the collateral management in the comprehensive risk management system and relevant implementation measures, so as to

– 134 – SUPERVISION AND REGULATION improve the collateral management related governance structure, internal rules and policies, business operation process and information system. On May 23, 2018, the CBIRC issued the Administrative Measures on the Liquidity Risk of Commercial Banks (Decree of CBIRC [2018] No. 3) (《商業銀行流動性風險管理辦法》(中國銀保監會令2018年第3號)), according to which commercial banks should establish an adaptable risk management system covering (1) effective governance structure for liquidity risk management, (2) optimal liquidity risk management strategies, policies and procedures, (3) effective management information system to identify, measure, monitor and control liquidity risks, and (4) sound management information system, thereby ensuring that their liquidity requirements can be met timely at reasonable costs.

Large Risk Exposure Management

On April 24, 2018, the CBIRC issued the Administrative Measures for Large Risk Exposures of Commercial Banks (“the Administrative Measures”) (《商業銀行大額風險暴露 管理辦法》), with effect from July 1, 2018. The Administrative Measures defined the concept of large risk exposure, provided the supervisory standards and calculation methods of large risk exposure according to the reality of domestic banks and with reference to international supervisory standards, and presented a set of arrangements and requirements for enhancing large risk exposure management of commercial banks, which helped improve the concentration risk management of commercial banks, reduce the credit concentration of customers and effectively prevent and control systematic risks.

Improvement of Overall Management and Control Capability

On May 22, 2018, the CBIRC issued the Notice of the CBIRC on Issuing the Administrative Measures for Joint Credit Granting of Banking Financial Institutions (Provisional) (《中國銀行保險監督管理委員會關於印發銀行業金融機構聯合授信管理辦法(試 行)的通知》), which required banking financial institutions to fully comprehend the great significance of the joint credit granting mechanism for enhancing the overall capability of managing and controlling the credit risks of banking financial institutions and to carry out such works as joint risk prevention and control, risk warning and risk disposal on the enterprises receiving the credit through the joint credit granting mechanism, including to monitor the operation management, operating results, major project investment, external guarantee, related party transaction, cross default and other credit risk-related circumstances of the enterprises receiving the credit, so as to effectively prevent and control significant credit risks.

Supervisory Rating System

The then CBRC issued the Internal Guidelines of the CBRC for Regulatory Rating of Commercial Banks (《中國銀監會商業銀行監管評級內部指引》) on June 19, 2014, which requires all commercial banks legally established in China (not applicable to newly-established commercial banks) to undergo an assessment conducted by the then CBRC based on a supervisory rating system. Under such guidance, the capital adequacy, asset quality, management quality, profitability, liquidity and exposure to market risk, etc. of commercial banks are evaluated and scored by the then CBRC on a continuous basis. Each bank is

– 135 – SUPERVISION AND REGULATION 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. The regulatory ratings are currently not publicly available.

OWNERSHIP AND SHAREHOLDER RESTRICTIONS

Regulations on Equity Investment in Banks

According to the Measures of the CBIRC for the Implementation of Administrative Licensing of Chinese-funded Commercial Banks (2018 Revision) (《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)) promulgated by the CBIRC on August 17, 2018, an application for change by a city commercial bank to modify shareholders that hold more 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 provincial agency dispatched by the CBIRC. An application by a city commercial bank to modify the shareholders that hold more than 1% but less than 5% of its total amount of capital or shares shall be reported to the local provincial agency dispatched by the CBIRC within 10 days after the transfer of the equity.

Specifically, according to the Interim Measures for Management of Commercial Bank Equity (《商業銀行股權管理暫行辦法》) issued by the then CBRC on January 5, 2018, an investor and its related parties and parties acting in concert shall seek the prior approval of the then CBRC or its dispatched agencies when they individually or jointly plan to (i) hold for the first time; or (ii) cumulatively increase their shareholding to more than 5% of the total amount of capital or shares of a commercial bank. An administrative licensing approval for a proposed holding of more than 5% of the total amount of shares of a commercial bank via the domestic and overseas securities market shall be valid for six months. An investor and its related parties and parties acting in concert who individually or jointly hold more than 1% but less than 5% of the total amount of capital or shares of a commercial bank shall report to the then CBRC (now changed to the CBIRC) or its dispatched agencies within 10 workdays after obtaining relevant equity.

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), 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, de facto controllers, related parties, parties acting in concert and ultimate beneficiaries as its own related parties under the transparency principle; (2)

– 136 – SUPERVISION AND REGULATION 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 de facto 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 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, de facto 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 then CBRC; (7) the credit balance granted to individual entities, including the substantial shareholders or their controlling shareholders, de facto controllers, related parties, parties acting in concert and ultimate beneficiaries, by the commercial bank shall not exceed 10% of the commercial bank’s net equity. The total credit balance granted to the individual substantial shareholder and its controlling shareholders, de facto controllers, related parties, parties acting in concert and ultimate beneficiaries by the commercial bank shall not exceed 15% of the commercial bank’s net equity; (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; and (9) financial products may hold shares of a listed commercial bank, but the shares accumulatively held in the same commercial bank by the financial products controlled by a single investor, issuer or manager and its de facto controllers, related parties and parties acting in concert shall not exceed 5% of total shares of the commercial bank. A substantial shareholder of a commercial bank shall not hold shares of the commercial bank through financial products issued, managed or controlled by it by any other means. For “Substantial Shareholders” referred to in this section, see “Risk Factors – Risks relating to the PRC Banking Industry – Investments in commercial banks in China are subject to a number of restrictions that may adversely affect the value of your investment”.

Restrictions on Shareholders

According to the Notice of the Ministry of Finance, People’s Bank of China, China Banking Regulatory Commission, China Securities Regulatory Commission and China Insurance Regulatory Commission on the Regulation of Internal Staff Shares in Financial Enterprises (《財政部、中國人民銀行、銀監會、證監會、保監會關於規範金融企業內部職工 持股的通知》) issued by the Ministry of Finance, the PBOC, the then CBRC, etc. on September 15, 2010, the proportion of shareholding by internal staff shall not exceed 20% of the total capital stock and the proportion of shareholding by a single staff shall not exceed 0.5%

– 137 – SUPERVISION AND REGULATION of the total capital stock. In addition, after public offering of new shares, the proportion of shareholding by internal staff shall not exceed 10% of the total capital stock and the shares held by a single staff shall not exceed 0.1% of the total capital stock or 500,000 shares (on a “whichever-is-lower” basis), otherwise, public offering of new shares will not be approved.

The Corporate Governance Guidelines for Commercial Banks imposes 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 the commercial bank so that the capital of the bank can meet the regulatory requirements on an on-going basis. If a commercial bank’s capital 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 capital is required to be replenished by means of increasing core capital. Under such circumstances, substantial shareholders cannot obstruct the capital injection moves by other shareholders or the participation of new qualified shareholders. If shareholders of a commercial bank, especially substantial shareholders, fail to repay outstanding loans extended by the bank when due, their voting rights at shareholders’ meeting and their appointed directors’ voting rights at board meeting shall be restricted.

The Interim Measures for Management of Commercial Bank Equity sets further requirements on substantial shareholders of a commercial bank. For example, (i) a substantial shareholder of a commercial bank shall exercise its rights as a capital contributor in strict accordance with laws and regulations, regulatory provisions and the articles of association, fulfill the obligations of capital contributor, and shall not abuse shareholders’ rights or utilize its influence to intervene in the decision-making power and management power that the board of directors and the senior management are entitled to in accordance with the articles of association; (ii) a substantial shareholder of a commercial bank shall not directly intervene in or utilize influence to intervene in the business management of the commercial bank bypassing the board of directors and the senior management, conduct tunneling, or damage the lawful rights and interests of any depositor, the commercial bank or any other shareholder in any other form; (iii) a substantial shareholder of a commercial bank shall establish an effective risk isolation mechanism to prevent risk contagion and transfer among shareholders, the commercial bank and other affiliates; and (iv) a substantial shareholder of a commercial bank shall effectively manage the concurrent holding of positions by any of the members of its board of directors, members of its board of supervisors and its senior executives in the commercial bank or in any other affiliate as a member of the board of directors, a member of the board of supervisors or a senior executive to prevent conflicts of interest.

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New Requirements on Specific Business Activities

According to the Corporate Governance Guidelines for Commercial Banks issued by the then CBRC on July 19, 2013, (1) any shareholder of a commercial bank must give prior notice to the board of directors of the bank if he or she or it wishes to pledge his or her or its shares as collateral; and (2) where the balance of loans extended by a commercial bank to its shareholder exceeds the net value of his or her equity derived from the audited statements for the preceding year, the shareholder cannot use his or her stake in the bank as pledge.

On November 14, 2013, the then 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 aforesaid Corporate Governance Guidelines for Commercial Banks: (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, he 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 related party 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 completion of 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 compliance with requirements in risk management and information disclosure; 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 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》), 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.

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Anti-money Laundering Regulation

The Anti-Money Laundering Law of the People’s Republic of China (《中華人民共和國 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 the formulation of the anti-money laundering rules for financial institutions and requiring financial institutions to establish a robust internal control system for anti-money laundering.

Pursuant to 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, commercial banks are required to establish a specialized department or designate an internal department to implement their anti-money laundering procedures. On the same day, the PBOC issued the Administrative Measures for the Financial Institutions’ Report of Large-Sum Transactions and Suspicious Transactions (《金融機構大額交易和可疑交易報告管理辦法》), which was amended on December 28, 2016 and July 26, 2018, respectively. Such Administrative Measures stipulates that upon the detection of any suspicious transactions or transactions involving large amounts, commercial banks are required to submit an electronic transaction report in a timely manner. Where necessary and pursuant to appropriate judicial proceedings, commercial banks are required to cooperate with investigation authorities in preventing money laundering activities and in freezing assets. In accordance with the PRC Anti-Money Laundering (《中國反洗錢 法》) and the Anti-Money Laundering Regulations for Financial Institutions (《金融機構反洗 錢規定》), the PBOC supervises and conducts on-site examinations on commercial banks’ compliance with the anti-money laundering laws and regulations and may impose penalties for any violations thereof.

On June 21, 2007, the PBOC, the then CBRC, the CSRC and the then CIRC jointly promulgated 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資料 及交易記錄保存管理辦法》), pursuant to which commercial banks are required to establish, improve and implement the client identity identification system, appropriately preserve client identity materials and transaction records according to the principle of safety, accuracy, entirety and confidentiality, and establish and improve internal working rules in respect of client identity identification, client identity materials and transaction recording.

In accordance with 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)》) which was promulgated by the PBOC on November 15, 2014, 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 the PBOC and actively cooperate with the PBOC and its branches in supervisory inspections.

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On January 29, 2019, the CBIRC promulgated the Measures for the Administration of Anti-money Laundering and Anti-terrorist Financing by Banking Financial Institutions (《銀 行業金融機構反洗錢和反恐怖融資管理辦法》), providing that local offices of the banking regulatory authorities under the State Council are responsible for the supervision and administration of anti-money laundering and anti-terrorist financing by banking financial institutions under their respective jurisdiction according to laws, administrative regulations and the Measures. Banking financial institutions are required to establish and improve a risk management system for money laundering and terrorist financing, comprehensively identify and assess their own risks of money laundering and terrorist financing and adopt policies and procedures commensurate with the risks. Besides, banking financial institutions are required to incorporate the management of the risks of money laundering and terrorist financing into a comprehensive risk management system, and embed the requirements for anti-money laundering and anti-terrorist financing into the compliance management and internal control system to ensure that the risk management system for money laundering and terrorist financing may completely cover various products and services.

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 that 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) bill acceptance and discounting; (3) engaging in interbank loans; (4) trading of government bonds; (5) trading of financial bonds; (6) investment in banking financial institutions; and (7) other uses as may be approved by the relevant government authorities.

REGULATORY AND SHAREHOLDERS’ APPROVALS

The Bank has obtained the Shareholders’ approval for the proposed listing. See “Appendix VII – Statutory and General Information – 1. Further Information about the Bank – C. The Bank’s Shareholders’ Meetings Held on March 26, 2019” for details.

The Bank also obtained approvals from the CBIRC Guizhou Office and the CSRC for the Global Offering and the application to list the H Shares on the Hong Kong Stock Exchange on April 26, 2019 and August 22, 2019, respectively.

– 141 – OUR HISTORY AND DEVELOPMENT

OUR HISTORY

Overview

Our Bank is a leading city commercial bank initiated by Guizhou provincial government and headquartered in Guiyang, Guizhou Province, China. We were established with the name “Bank of Guizhou Co., Ltd.” on September 28, 2012 in accordance with relevant PRC laws and regulations. According to the Several Opinions of the State Council on Further Promoting the Sound and Rapid Economic and Social Development of Guizhou (Guo Fa [2012] No. 2) (《國 務院關於進一步促進貴州經濟社會又好又快發展的若干意見》(國發[2012]2號), the Notice of the General Office of Provincial People’s Government on Establishment of Preparatory Group for Bank of Guizhou (Qian Fu Ban Han [2011] No. 28) (《省人民政府辦公廳關於成立貴州銀 行籌備組的通知》(黔府辦函[2011]28號)), the Request from the People’s Government of Guizhou Province for Supporting the Establishment of Bank of Guizhou (Qian Fu Han [2011] No. 354) (《貴州省人民政府關於懇請支持我省組建貴州銀行的請示》(黔府函[2011]354號)), the Approval of the CBRC in relation to the Establishment of Bank of Guizhou Co., Ltd. (Yin Jian Fu [2012] No. 185) (《中國銀監會關於籌建貴州銀行股份有限公司的批復》(銀監復[2012]185 號)), and the Approval from the CBRC Guizhou Office in relation to Business Commencement of Bank of Guizhou Co., Ltd. (Qian Yin Jian Fu [2012] No. 231) (《貴州銀監局關於貴州銀行 股份有限公司開業的批復》(黔銀監復[2012]231號)), our Bank was established with a registered capital of RMB3,241,214,789.72 by the merger of the former Zunyi City Commercial Bank Co., Ltd. (“Zunyi City Commercial Bank”), the former Liupanshui City Commercial Bank Co., Ltd. (“Liupanshui City Commercial Bank”), and the former Anshun City Commercial Bank Co., Ltd. (“Anshun City Commercial Bank”). Former shareholders of Zunyi City Commercial Bank, Liupanshui City Commercial Bank and Anshun City Commercial Bank became shareholders of our Bank following the completion of the merger and reorganization.

The principal businesses of our Bank comprise of corporate banking, retail banking and financial markets. In our corporate banking business, we provide our corporate customers with diversified financial products and services, including corporate loans, corporate deposits and fee- and commission-based products and services. In our retail banking business, we offer a wide range of products and services to our retail customers, including loans, deposits, bank cards, and other fee- and commission-based services. Our financial markets business primarily includes investment business, money-market transactions, debt securities underwriting and distribution, interbank discount and rediscounts of bills, as well as asset management business.

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Milestones

Our important milestones so far are as follows:

April 2012 The then CBRC approved the establishment of our Bank

September 2012 Our Bank was registered and established as the name Bank of Guizhou Co., Ltd.

February 2013 Our Bank’s launched the first tranche “Gui Yin Heng Li (貴銀恒 利)” series wealth management products

August 2013 Our Bank issued “Qianxiu Card” debit card to retail clients

March 2014 Our Bank’s Tongren Branch, which is our first newly-established branch, was established

April 2014 Our Bank put into use its new-generation IT system

April 2015 Our Bank issued “Union Card” to employees of government, public utilities and high quality enterprises as accounts for giving union benefits

October 2016 Our Bank’s branches and sub-branches were established across all 88 counties within Guizhou Province

December 2016 Our Bank’s total assets exceeded RMB200 billion

May 2018 Our Bank obtained the approval of opening public-facing credit card business from the CBIRC Guizhou Office

November 2018 Our Bank successfully issued our first tranche green bonds

December 2018 Our Bank’s total assets exceeded RMB300 billion

December 2018 Our Bank was awarded “The Best Online Bank Security in Regional Commercial Bank in 2018” by China Financial Certification Authority

– 143 – OUR HISTORY AND DEVELOPMENT

Establishment

Zunyi City Commercial Bank, Liupanshui City Commercial Bank and Anshun City Commercial Bank (collectively referred to as the “Three Banks”) agreed to establish our Bank by merger and reorganization and signed a promoters agreement on December 7, 2011. The Three Banks were dissolved upon the incorporation of our Bank, and the original creditor’s rights, debts, taxes and owners’ equities of the Three Banks were inherited by our Bank. The registered capital of our Bank at the time of its establishment was RMB3,241,214,789.72.

On April 18, 2012, the then CBRC approved the establishment of our Bank by merger and reorganization of the Three Banks in the Approval of the CBRC in relation to the Establishment of Bank of Guizhou Co., Ltd. (Yin Jian Fu [2012] No. 185) (《中國銀監會關於籌建貴州銀行 股份有限公司的批復》(銀監復[2012]185號)). The then CBRC Guizhou Office was responsible for directing the merger and reorganization of the Three Banks.

Details of the Three Banks before merger and reorganization are set out in the following table:

Registered Date of capital (RMB Bank establishment Place in millions)1 Principal businesses Zunyi City June 5, 2001 Zunyi City, 567.9 Taking deposits from the public; Commercial Guizhou extending short-term, medium-term Bank Province, and long-term loans; effecting PRC domestic payment settlements; discounting instruments; issuing financial bonds; acting as the issuing agent, payment agent and underwriter of government bonds; and other businesses approved by regulatory authorities.

Liupanshui City May 23, 2008 Liupanshui 592.4 Taking deposits from the public, Commercial City, extending short-term, medium-term Bank Guizhou and long-term loans, effecting Province, domestic payment settlements, PRC accepting and discounting instruments, entrusted deposits and entrusted loans, and other businesses approved by regulatory authorities.

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Registered Date of capital (RMB Bank establishment Place in millions)1 Principal businesses Anshun City January 14, Anshun 400.0 Taking deposits from the public, Commercial 2002 City, extending short-term, medium-term Bank Guizhou and long-term loans, effecting Province, domestic payment settlements, PRC accepting and discounting instruments, entrusted deposits and entrusted loans, and other businesses approved by regulatory authorities.

1. As of June 30, 2012

After the merger and reorganization of the Three Banks and upon approval by the then CBRC Guizhou Office in the Approval from the CBRC Guizhou Office in relation to Business Commencement of Bank of Guizhou Co., Ltd. (Qian Yin Jian Fu [2012] No. 231) (《貴州銀 監局關於貴州銀行股份有限公司開業的批復》(黔銀監復[2012]231號)) on September 26, 2012, our Bank was established as a joint stock company on September 28, 2012 and the Three Banks automatically ceased to be corporate bodies. The registered capital of our Bank at the time of its establishment was RMB3,241,214,789.72.

Though there were certain defects in the regulatory procedures of the merger and reorganization of the Three Banks, King & Wood Mallesons, our PRC legal advisors, are of the view that, because (i) the merger and reorganization was approved by then competent authorities, (ii) the registered capital of our Bank was verified, (iii) there is no dispute or objection raised by the creditors of The Three Banks or other relevant parties, and (iv) People’s Government of Guizhou issued confirmation letter on 6 May 2019 confirming that the establishment of our Bank complied with laws and is effective, the defects have no material or adverse effect on our Bank’s operations and financial conditions and will not result in any material adverse effect on the listing of our Bank.

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Changes in registered capital

Our registered capital was RMB3,241,214,789.72 at the time of incorporation. After several rounds of registered capital injection, our registered capital was increased to RMB12,388,046,744 as of the Latest Practicable Date. The changes in our registered capital are summarized as follows:

Date of registration of the change Description of change July 2015 Our registered capital changed from RMB3,241,214,789.72 to RMB7,199,389,101.79, of which RMB3,500,360,100.00 was contributed in cash by 59 non-individual shareholders and 2,228 individual shareholders before March 27, 2015, with the rest of RMB457,814,212.07 transferred from capital reserve to paid-up capital.

In July 2015, our Bank completed the registration for the above change in registered capital with the Industry and Commerce Administration Bureau of Guizhou Province and obtained the renewed business license.

December 2017 Our registered capital changed from RMB7,199,389,101.79 to RMB9,699,345,232.77, of which RMB1,422,256,130.98 was contributed in cash by 15 non-individual shareholders and 292 individual shareholders before December 30, 2015, RMB1,039,700,000.00 was contributed in cash by eight non-individual shareholders before December 28, 2016 and RMB38,000,000.00 was contributed in cash by one corporate shareholder before March 13, 2017.

In December 2017, our Bank completed the registration for the above changes in registered capital with the Industry and Commerce Administration Bureau of Guizhou Province and obtained the renewed business license.

May 2019 Our registered capital changed from RMB9,699,345,232.77 to RMB12,388,046,744.00, of which RMB1,563,700,000.00 was contributed in cash by 25 non-individual shareholders before December 31, 2017 and RMB1,125,000,000.00 was contributed in cash by three non-individual shareholders before April 2, 2018. RMB1,511.23 was contributed in cash by a non-individual shareholder before January 23, 2019.

In May 2019, our Bank completed the registration for the above changes in registered capital with the Administration for Market Regulation of Guizhou Province and obtained the renewed business license.

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Though there were certain defects in the regulatory procedures of the above changes in our Bank’s registered capital, King & Wood Mallesons, our PRC legal advisors, are of the view that, because (i) the previous changes of registered capital of our Bank was in line with the relevant approvals of the then CBRC Guizhou Office, (ii) the capital verification procedures and the registration procedure with local industry and commerce administration bureau were completed, (iii) there is no dispute or objection raised by any Shareholder, state-owned asset administration authority or other regulatory authorities as of the Latest Practicable Date and no penalty is sanctioned against our Bank, and (iv) People’s Government of Guizhou issued confirmation letter on May 6, 2019 confirming that the establishment of our Bank and the changes in the share capital of our Bank complied with the relevant PRC laws and regulations in general, and there is no dispute or potential dispute or other issue on loss of state-owned assets, the defects in the above changes in our Bank’s registered capital have no material or adverse effect on our Bank’s registered capital and shareholding and do not and will not result in any material legal impediment on the listing of our Bank.

Issuance of bonds

Issuance of tier-two capital bonds

On June 15, 2018, with the approval from the then CBRC Guizhou Office and PBOC, our Bank issued 10-year fixed-rate bonds of RMB1.8 billion, with a coupon rate of 5.00% (interest will be paid on an annual basis). From December 4, 2018 to December 6, 2018, with the approval from the then CBRC Guizhou Office and PBOC, our Bank issued 10-year fixed-rate bonds of RMB1 billion, with a coupon rate of 5.50% (interest will be paid on an annual basis). Our Bank has the right to redeem the bonds prematurely, with the prior approval of the CBIRC, if the prerequisites for exercising the redemption right are met. Our Bank may choose to redeem the bonds at face value in full or in part on the last day of the fifth interest-bearing year of such bonds.

Issuance of green bonds

From November 16, 2018 to November 20, 2018, with the approval from the then CBRC Guizhou Office and the PBOC, our Bank issued 3-year fixed-rate green financial bonds of RMB3 billion, with a coupon rate of 4.03% (interest will be paid on an annual basis). The bondholders shall not sell back such bonds prematurely.

From December 3, 2018 to December 5, 2018, with the approval from the then CBRC Guizhou Office and the PBOC, our Bank issued 3-year fixed-rate green financial bonds of RMB2 billion, with a coupon rate of 4.00% (interest will be paid on an annual basis). The bondholders shall not sell back such bonds prematurely.

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Shareholding and Group Structure of our Bank

Shareholding structure

As of the Latest Practicable Date, our Bank had 195 non-individual shareholders and 5,112 individual shareholders, which hold approximately 93.88% and 6.12% of our Bank’s shares, respectively. As of the Latest Practicable Date, there were four shareholders severally and directly holding at least 5% of our Bank’s Shares, namely Guizhou Provincial Finance Bureau, Kweichow Moutai, GuiAn New District Development and Investment and Zunyi City State-owned Assets Investment, which directly held 15.49%, 14.13%, 8.48% and 5.80% of our Bank’s Shares respectively. To the best knowledge of our Bank after making due and careful inquiries, these four shareholders are independent from each other.

As of the Latest Practicable Date, our Bank was unable to verify the equity of 47 non-individual shareholders and 502 individual shareholders (including persons we could not contact) jointly holding approximately 3.83% of our Bank’s shares. According to the opinions of our PRC legal advisors, King & Wood Mallesons, the circumstance that we are unable to verify shareholders’ equity will not have any material adverse impact on the certainty and stability of our Bank’s equity structure.

Immediately prior to the Global Offering

The following table sets forth our shareholding structure as of the Latest Practicable Date and immediately prior to the Global Offering:

GuiAn New District Guizhou Provincial Zunyi City State-owned Other Non-individual Individual Kweichow Moutai(1) Development and Finance Bureau Assets Investment(3) Shareholders(4) Shareholders(5) Investment(2)

100%

Zunyi City Mingcheng State-owned Assets Investment

15.49% 14.13% 8.48% 5.80%0.27% 49.72% 6.12%

The Bank

(1) Kweichow Moutai is a wholly state-owned entity owned by the State-owned Assets Supervision and Administration Commission of Guizhou Province and primarily engaged in production and management of alcoholic products. (2) GuiAn New District Development and Investment is a state-controlled entity. Guizhou GuiAn New Area Management Committee (貴州貴安新區管理委員會), Guizhou Financial Holding Group Co., Ltd. (貴州 金融控股集團有限責任公司), Guiyang Holdings Group Co., Ltd. and Poly Xinlian Blasting Engineering Group. Co., Ltd. (保利新聯爆破工程集團有限公司) holds 95.5%, 2.5%, 1.0% and 1.0% of the issued share capital of GuiAn New District Development and Investment, respectively. GuiAn New District Development and Investment mainly engages in the development and construction of GuiAn New Area. (3) Zunyi City State-owned Assets Investment is a state-controlled entity. Zunyi Financial Holdings Group Co., Ltd., which is wholly owned by State-owned Assets Supervision and Administration Commission of Zunyi Municipal, holds 73.5% of the issued share capital of Zunyi City State-owned Assets Investment. China Development Fund Co., Ltd. (國開發展基金有限公司), which is wholly-owned by China Development Bank (國家開發銀行), holds 26.5% of the issued share capital of Zunyi City State-owned Assets Investment. Zunyi City State-owned Assets Investment mainly engages in capital management, industry investment, financing guarantee, city construction development and financial services. (4) Represents 190 other non-individual shareholders with shareholding percentage of each of these non-individual Shareholders not exceeding 3.5%. (5) Represents 5,112 individual shareholders with shareholding percentage of each of these individual Shareholders not exceeding 0.025%.

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Immediately after completion of the Global Offering

The following table sets forth our Bank’s equity structure immediately after completion of the Global Offering (assuming the over-allotment option is not exercised and the number of shares transferred by the following shareholders remained unchanged as of the Latest Practicable Date):

GuiAn New District Guizhou Provincial Zunyi City State-owned Other Non-individual Individual Public Shareholders (1) Development and Finance Bureau Kweichow Moutai Assets Investment(3) Shareholders(4) Shareholders(5) of H Shares Investment(2)

100%

Zunyi City Mingcheng State-owned Assets Investment

13.15% 12.00% 7.20% 4.93%0.23% 42.22% 5.19% 15.08%

The Bank

(1) Kweichow Moutai is a wholly state-owned entity owned by the State-owned Assets Supervision and Administration Commission of Guizhou Province and primarily engaged in production and management of alcoholic products. (2) GuiAn New District Development and Investment is a state-controlled entity. Guizhou GuiAn New Area Management Committee (貴州貴安新區管理委員會), Guizhou Financial Holding Group Co., Ltd. (貴州 金融控股集團有限責任公司), Guiyang Holdings Group Co., Ltd. and Poly Xinlian Blasting Engineering Group. Co., Ltd. (保利新聯爆破工程集團有限公司) holds 95.5%, 2.5%, 1.0% and 1.0% of the issued share capital of GuiAn New District Development and Investment, respectively. GuiAn New District Development and Investment mainly engages in the development and construction of GuiAn New Area. (3) Zunyi City State-owned Assets Investment is a state-controlled entity. Zunyi Financial Holdings Group Co., Ltd., which is wholly owned by State-owned Assets Supervision and Administration Commission of Zunyi Municipal, holds 73.5% of the issued share capital of Zunyi City State-owned Assets Investment. China Development Fund Co., Ltd. (國開發展基金有限公司), which is wholly-owned by China Development Bank (國家開發銀行), holds 26.5% of the issued share capital of Zunyi City State-owned Assets Investment. Zunyi City State-owned Assets Investment mainly engages in capital management, industry investment, financing guarantee, city construction development and financial services. (4) Represents 190 other non-individual shareholders holding domestic shares with shareholding percentage of each of these non-individual Shareholders not exceeding 3.0%. (5) Represents 5,112 individual shareholders holding domestic shares with shareholding percentage of each of these individual Shareholders not exceeding 0.025%.

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ORGANIZATIONAL AND MANAGEMENT STRUCTURE

The following chart sets forth our Bank’s main organizational and management structure as of the Latest Practicable Date:

Shareholders’ General Meeting

Board of Directors Board of Supervisors

Office of the Board of Directors Senior Management Office of the Board of Supervisors Department Micro and Small Audit Department Poverty Alleviation Poverty Labor Union Office Finance Department Security Department Business Department Credit Card Department Product R&D Department Credit Review Department Credit Review Green Finance Department Accounting and Settlement Internet Finance Department Centralized Operation Center Financial Market Department Financial Market Personal Business Department Risk Management Department Asset Preservation Department Asset Preservation Asset Management Department Corporate Business Department/ Transaction Banking Department Transaction Party-masses Affairs Affairs Party-masses Department/ Institutional Business Department Department of the Party Committee Department of the Party Department of the Party Committee Department of the Party Legal and Compliance Department Legal Planning and Financial Department Information Technology Department Information Technology Office of Party Committee for Organs of Office Office/Office of Party Committee/Publicity of Office/Office Inspection Office of the Party Committee of the Inspection Office Administration and Logistics Department Human Resources Department/Organization Office of Discipline Committee for Organs Office Investment Banking Department Investment

CORPORATE GOVERNANCE STRUCTURE

We have established and further developed a corporate governance structure comprising shareholders’ general meeting, the Board, the Board of Supervisors and the senior management.

Board of Directors

Our Board is accountable to our shareholders and is responsible for, among others, determining our business and development strategy, risk management and internal control, and appointment of our senior management. Our Board has established certain special committees, including the Strategic Development Committee, the Audit Committee, the Risk and Related Party Transactions Management Committee, the Nomination and Remuneration Committee and the Consumer Rights Protection and Social Responsibility Committee. Each committee shall report to our Board. For details, see “Directors, Supervisors and Senior Management.”

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Board of Supervisors

The Board of Supervisors is accountable to our shareholders and is responsible for supervising the performance of duties by the Board and the senior management as well as our finance, risk management and internal control. The Board of Supervisors has established a Nomination, Remuneration and Evaluation Committee and a Supervision Committee and each committee shall report to the Board of Supervisors. For details, see “Directors, Supervisors and Senior Management.”

Senior Management

Our senior management consists of the President, Vice President and other personnels. The President organizes the business activities of our Bank according to the laws and regulations, the Articles of Association and the authorization of the Board. For details, see “Directors, Supervisors and Senior Management.”

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OVERVIEW

We are a leading city commercial bank initiated by Guizhou provincial government, with strong support from the local government and our shareholders. According to the CBIRC Guizhou Office, as of December 31, 2018, we ranked fourth and fifth, respectively, among all banks with a presence in Guizhou Province in terms of total assets and total deposits generated from this province.

We are headquartered in Guiyang and have an extensive distribution network covering the entire Guizhou Province. As of June 30, 2019, we operated our business through our head office in Guiyang, eight branches and 207 sub-branches. We also provide convenient 24-hour online services to our customers through online banking, such as internet banking and mobile banking.

Over our seven years of operating history, we have made considerable progress in terms of asset and profit scale. Our total assets increased from RMB228,949.3 million as of December 31, 2016 to RMB341,202.9 million as of December 31, 2018, representing a CAGR of 22.1%, which further increased to RMB389,622.4 million as of June 30, 2019. Our net profit increased from RMB1,961.4 million in 2016 to RMB2,876.6 million in 2018, representing a CAGR of 21.1%. Our net profit amounted to RMB1,789.7 million in the six months ended June 30, 2019. In addition, we maintained strong profitability and operating efficiency. In 2018, our net interest margin and net interest spread were 2.82% and 2.66%, respectively, both ranking second among all PRC city commercial banks listed in Hong Kong over the same period. In the six months ended June 30, 2019, our net interest margin and net interest spread were 2.74% and 2.61%, respectively. As of December 31, 2018, our return on average total assets was 0.92% and return on average equity was 12.36%, both higher than the industry average of 0.90% and 11.73%, respectively, for all PRC commercial banks, as of the same date, according to the CBIRC. As of June 30, 2019, our return on average total assets was 0.98% and return on average equity was 13.56%.

OUR COMPETITIVE STRENGTHS

We believe the following competitive advantages have positioned us favorably in the banking industry of Guizhou Province and will help drive our future growth.

As a leading city commercial bank initiated by Guizhou provincial government, we benefit from the rapid and substantial economic growth of Guizhou Province supported by favorable national policies

In recent years, supported by favorable national policies, Guizhou Province has sustained rapid economic growth and was among the fastest growing provinces in terms of real GDP and GDP per capita in China. In 2017 and 2018, Guizhou Province’s real GDP grew by 10.2% and 9.1%, respectively, ranking first among all provinces in China for two consecutive years. Although Guizhou Province is an underdeveloped province with relatively low GDP per capita

– 152 – BUSINESS among the PRC provinces, from 2014 to 2018, Guizhou Province’s real GDP and GDP per capita grew at a CAGR of 10.1% and 11.8%, respectively, ranking first among all provinces in China. In particular, Guizhou Province benefits from:

• Favorable national policies. Guizhou Province has continuously benefited from numerous national policies and strategies that facilitated the growth of local economy, such as Several Opinions of the State Council on Further Promoting Sound and Rapid Economic and Social Development of Guizhou Province (國務院 關於進一步促進貴州經濟社會又好又快發展的若干意見), the first National Big Data Pilot Zone, Gui’an New Area in Guizhou Province (the eighth state-level new area in China) and the second Inland Opening-up Pilot Economic Zone.

• Active investments in infrastructure construction. In 2018, Guizhou Province’s fixed-asset investment grew by 15.8%, the fastest among all provinces in China. In recent years, the continual construction of high-speed railways, expressways and other transportation facilities in Guizhou Province has resulted in a significant change in Guizhou Province’s transportation infrastructure, establishing a highly interconnected Guizhou Province and driving the local economy into a stage of medium-to-high growth. The active investments in infrastructure construction in Guizhou Province have provided us with a great number of business opportunities.

• Abundant natural resources. Guizhou Province has abundant tourism and natural resources. In 2018, the total number of visits to Guizhou Province reached 969 million, up by 30.2% from 2017; revenue from the tourism industry amounted to RMB947.1 billion, up by 33.1% from 2017. Besides, Guizhou Province is rich in mineral resources and stands among the top ten PRC provinces in terms of reserves for 49 mineral resources. Guizhou Province’s strength in tourism and natural resources fostered many high-quality enterprises, and provided us with substantial opportunities for retail and corporate banking businesses.

As the only city commercial bank initiated by Guizhou provincial government, we benefit from the rapid and significant economic growth of Guizhou Province supported by favorable national policies. We recorded fast growth in total assets and net profit from 2016 to 2018, achieving a CAGR of 22.1% and 21.1%, respectively. According to the CBIRC Guizhou Office, of the seven key financial indicators that measure year-on-year increase (including total assets, total loans, total deposits and market shares of total assets, total loans, total deposits and personal deposits in Guizhou Province), we ranked first among all commercial banks with a presence in Guizhou Province in 2018.

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Corporate banking business closely aligned with Guizhou Province’s economic structure and development strategy

Over the years, we have developed and launched multiple corporate banking products and services that are closely aligned with Guizhou Province’s economic structure and development strategy. By doing so, we have built a leading corporate banking business, which reinforced our leading position in Guizhou Province.

Our corporate banking business is focused on serving the fast-growing infrastructure and transportation sectors in Guizhou Province, and we have also actively catered to the financial needs of local tourism and education sectors as well as green finance projects. As of June 30, 2019, our loans and advances to the transportation, infrastructure, tourism and education sectors as well as green finance projects amounted to RMB23.3 billion, RMB19.8 billion, RMB10.7 billion, RMB9.2 billion, and RMB17.5 billion, respectively. The aggregate amount of these loans and advances accounted for 58.3% of our total corporate loans and advances as of June 30, 2019, which we believe have contributed positively to local economy, households welfare and urban development in Guizhou Province.

In addition, we have a strong capability in serving local micro and small enterprises. Through a diverse product offering, extensive branch network and improved service efficiency, we have helped micro and small enterprises prosper. We established a designated department to improve the efficiency of our micro and small finance business while controlling the relevant risks. Based on our deep understanding of local economy, we launched a number of bespoke financial products to meet the needs of micro and small enterprise clients. As of June 30, 2019, our loans to micro and small enterprises amounted to RMB69,562.5 million, representing an increase of RMB9,534.1 million from December 31, 2018. As of June 30, 2019, our loans to micro and small enterprises accounted for 42.3% of our total loans and advances. As of June 30, 2019, the NPL ratio of our loans to micro and small enterprises was 0.79%.

Fast growing retail banking business through meeting different customer needs, developing new products and providing one-stop services

Adhering to our “customer-centered and market-oriented” philosophy, our retail banking business has grown rapidly, focusing on meeting differentiated customer needs, pursuing business transition and technology upgrades, and leveraging our extensive branch network across Guizhou Province.

As of December 31, 2018, our personal deposits amounted to RMB63,109.1 million, representing an increase of 46.8% from December 31, 2017, ranking second among all commercial banks with a presence in Guizhou Province. As of June 30, 2019, our personal deposits further increased to RMB74,853.6 million. From December 31, 2016 to December 31, 2018, our personal deposits grew at a CAGR of 42.3%, substantially higher than the industry average of all commercial banks with a presence in Guizhou Province, according to the PBOC Guiyang Central Sub-branch. As of June 30, 2019, our personal loans amounted to RMB24,130.1 million, representing an increase of 230.1% from December 31, 2016. Our

– 154 – BUSINESS customer base has rapidly increased. As of June 30, 2019, we had approximately 6.3 million personal deposit customers, representing an increase of 114.3% from December 31, 2016. The rapid growth of our retail banking business was mainly due to:

• Diverse products with targeted customer positioning. We create added value for our customers by launching diverse products and services that meet customer needs, such as “Ai Xin Cun” (愛心存) with principal deposited by customers and interest enjoyed by others, “Gui Yin Heng Li” (貴銀恒利) which is our wealth management product series developed and designed for specific target customer groups with differentiated needs, and “Xin Yi Dai” (薪易貸) for creditworthy retail customers who receive a regular salary.

• Rapid expansion of customer base through wholesaling. As the only financial institution designated by the Federation of Trade Unions of Guizhou Province for issuing Union Cards, we have attracted over 1.9 million union members to apply for our Union Cards since 2015. We can also quickly acquire retail customers through collaborating with Guiyang Metro’s mobile app and other wholesale methods. In 2018, we acquired approximately 740,000 new accounts through wholesale methods, accounting for 44.2% and 15.8% of our newly acquired and existing customers for the year, respectively.

• Innovation in technology and the internet. We have an integrated online banking platform consisting of our website, mobile app and WeChat mini program. As of June 30, 2019, we had over 2.1 million mobile app users, representing an increase of 195.3% from December 31, 2016. In 2018, the number of customer transactions on our online banking channel accounted for 95.4% of our total number of transactions. In the first half of 2019, the number of customer transactions on our online banking channel accounted for 97.3% of our total number of transactions.

• All-county coverage. In October 2016, our branch network reached the entire 88 counties of Guizhou Province. This has helped us in expanding our business across the province, and also contributed to local economy and financial inclusivity throughout Guizhou Province.

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Prudent and effective risk management, and sound asset quality

We have established a comprehensive and effective risk management system and culture, which is mainly reflected in:

• Well-defined risk management strategy. Based on the objective of maximizing risk-adjusted return and reasonable prediction of the external environment, we formulated a risk management strategy based on risk appetite and set up the business philosophy of “safety, compliance, and efficiency.” Our risk management strategy and development strategy were formulated in parallel with each other, and our overall risk appetite was closely aligned with business, budget and capital planning, and therefore our business growth and risk are effectively balanced.

• Effective risk management system. We have built a professional and vertical risk management structure to ensure that all types of risks involved in our business can be identified, evaluated, controlled and addressed. We adopt a combination of qualitative and quantitative methods when we establish our risk appetite, and set limits for specific risks to ensure that our total risk exposure is within our risk tolerance.

• Sound asset quality. In 2016, 2017 and 2018 and the first half of 2019, our asset quality improved steadily and our NPL ratios were 1.91%, 1.60%, 1.36% and 1.09%, respectively, and our allowance coverage ratios were 212.86%, 192.77%, 243.72% and 323.27%, respectively, while our allowance to loan ratios were 4.07%, 3.09%, 3.31% and 3.52%, respectively. Specifically, our NPL ratio and allowance coverage ratio as of December 31, 2018 were significantly better than the industry average of PRC commercial banks, which were 1.83% and 186.31%, respectively, according to the CBIRC. As of December 31, 2018, the balance of our loans overdue for more than 90 days accounted for 51.4% of our non-performing loans, and our overdue loans as a percentage of total loans was only 0.7%, which further decreased to 36.6% and 0.6%, respectively, as of June 30, 2019. As of December 31, 2018, both of the aforementioned ratios were lower than the industry average of all PRC city commercial banks listed in Hong Kong as of December 31, 2018.

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Long-term support from the local government and our shareholders

As the only city commercial bank initiated by Guizhou provincial government, we received strong support from the local government, such as local finance bureaus, in terms of sourcing deposits, building our branch network and creating a supportive financial environment. We have long-term partnerships with local government authorities at all levels and enjoy competitive advantages in acquiring customers. For example, we formed a lasting business relationship with our substantial shareholder, Guizhou Provincial Finance Bureau, in providing financial services, such as deposit, treasury management, payroll and settlement services. As of June 30, 2019, we attracted RMB32.3 billion of deposits from finance bureaus at all levels of Guizhou Province. As a result, we have access to a stable source of capital at a relatively low cost. In addition, we also formed sound partnerships with leading provincial- level state-owned enterprises.

In addition, we have a diverse shareholder structure, including local finance bureaus and industry-leading enterprises. As of the Latest Practicable Date, our substantial shareholders include Guizhou Provincial Finance Bureau which holds a 15.49% equity interest in us and Kweichow Moutai which holds a 14.13% equity interest in us. They have participated in multiple rounds of our capital raising, thereby demonstrating their confidence in our long-term development.

Local government authorities and our substantial shareholders have provided valuable support to our business development and strategic planning. We believe they will continue to be instrumental to our business expansion and talent acquisition.

An experienced and aspiring management team and a sound workforce training, evaluation and incentive mechanism

We have a management team with outstanding strategic vision and rich industry experience, as well as great courage in reform and innovation. Our management team has a diverse background and many members have worked in various aspects of the financial services industry, including state-owned banks and government authorities. With 37 years of experience in the banking industry, Mr. LI Zhiming, our Chairman, has extensive management experience, profound insights into the economic environment and industry trends, as well as strategic vision. With 39 years of experience in the banking industry, Mr. XU An, our President, is a veteran of business strategy and operations management brought by his previous leadership positions in large commercial banks and city commercial banks. Our senior management team has an average of 30 years’ working experience in the financial services industry, and their rich management experience has enhanced our compliance management, business development, internal governance, workforce development and team building capabilities.

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We have a well-structured human resources framework and have cultivated a professional workforce through internal competition and competitive remuneration. The majority of our employees have a college degree or higher. As of June 30, 2019, employees with a college degree or higher accounted for 97.0% of the total number of our employees. We also pay competitive salaries to our employees and value a market-based incentive mechanism. We have built an effective internal performance evaluation and incentive mechanism to attract and retain employees. Besides, we have created a learning culture focusing on lifetime learning and have a comprehensive training system in place targeting different posts and training objectives.

We own the first postdoctoral workstation for financial institutions in Guizhou Province authorized by Ministry of Human Resources and Social Security. Our postdoctoral workstation has recruited post doctors-in-residence through cooperation with nationally renowned universities such as Fudan University and Shanghai University of Finance and Economics, thereby assisting us in performing studies and researches while providing us with a high-caliber talent pool.

OUR BUSINESS STRATEGIES

We aim to become a first-class modern city commercial bank, create welfare for our staff, bring satisfaction to our customers, gain recognition from local governments and generate value for our shareholders. To this end, we intend to implement the following strategies:

Further expand our corporate client base and diversify our corporate banking business

We intend to seize the opportunities of economic development and policy support of Guizhou Province and utilize our strength to consolidate our market leadership. We intend to focus on strategic industries, improve our professionalism and become a go-to bank for corporate clients.

We plan to focus on strategic sectors and high-quality clients, strengthen our connections with treasury and public administration institution clients and actively develop enterprise and public utilities clients. We plan to focus on high quality clients from tourism, healthcare, urban construction, infrastructure, big data technology, energy and manufacturing sectors as well as other local specialty sectors. We plan to provide comprehensive and distinctive services to targeted clients based on sector research.

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In addition, we plan to expand our transaction banking and investment banking services, and provide integrated solutions to corporate clients, including:

• growing our transaction banking team and strengthening our trade finance and supply chain finance business, particularly an online supply chain finance platform; and

• actively expanding investment banking qualifications, establishing an investment banking team, and offering a diverse range of investment banking services, such as structured finance products and mergers and acquisition loans.

Further improve the scale and quality of our retail banking business

We aim to actively develop a “one-stop” retail banking business and increase the profit contribution of such business by strengthening relationships with retail customers, improving product and service offerings, launching credit card services, conducting comprehensive marketing and transforming towards online services, including:

• We plan to acquire retail customers on a wholesale basis, increase the number of active customers, enhance our customers’ loyalty and improve customer monetization. We plan to target four major customer groups; namely, affluent customers, senior citizens, holders of our debit cards, and micro and small enterprise owners. We also intend to build a differentiated marketing system based on customer classification.

• We plan to develop new deposit products, implement differentiated interest rates for personal deposits and expand our wealth management products with an attractive yield. We also intend to build a customer-based marketing model and introduce insurance, funds, precious metals and other third-party financial products to enhance our service capability.

• We intend to optimize our existing branch network and upgrade our branches from transaction-based outlets to marketing-based, smart outlets that are more focused on customer service and experience. We also intend to expand our online marketing efforts and increase product cross-sale through continued upgrades to our online banking systems.

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Develop our financial markets business as a new driver of earnings growth

We plan to further expand our financial markets business and optimize our revenue mix by strengthening our investment and wealth management capabilities and expanding interbank clients. In particular, we intend to:

• continue to expand our investment portfolio and diversity to increase our investment gains, and endeavor to acquire key business qualifications such as those for underwriting policy financial bonds and treasury bonds. We also intend to start providing agency services for foreign exchange, precious metals, and commodities;

• enhance the brand recognition and the market share of our asset management business, and endeavor to become a leading asset management service provider in Guizhou Province and China through continuing to improve our capabilities in investment research, product design, distribution, risk management, compliance, artificial intelligence and big data analytics; and

• further expand our interbank and non-bank financial institution client base through a differentiated marketing strategy, improving interbank collaboration, increasing coverage efforts, and establishing regional alliances.

Strengthen information technology capabilities and develop fintech

We intend to develop fintech as one of our core strengths. We plan to continually upgrade our key business and management systems and adopt advanced technology to support our frontline business development and middle- and back-office functions. As part of our IT initiative to transform our business operations to become more technology focused, we intend to:

• improve our in-house technology capabilities in research and development, operations and maintenance, and expand our dedicated information technology team;

• apply new and advanced technologies in our business to improve customer experience, such as developing direct banking, smart branch network and blockchain technology;

• improve our operating efficiency through establishing a digital data collection and statistical system, and enhance data integration across all business lines; and

• improve our risk management capabilities through big data analytics to achieve more accurate and proactive risk controls that cover our entire business lines.

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Further enhance risk management capabilities to facilitate our strategic transition

We aim to establish a comprehensive risk management system aligned with our business development. We intend to change our approach to risks from risk control to active risk management in order to ensure a better balance between revenue, scale and quality and facilitate our strategic transition. Our detailed measures include:

• We intend to further improve risk governance structure and optimize risk management procedures and quantitative risk management capability. We aim to cultivate risk management awareness among our employees and strike a proper balance among risk, capital and income.

• We intend to facilitate the adoption of the Basel New Capital Accord, including capital measurement and assessment system for credit, market, execution and other related risks.

• We intend to strengthen our macroeconomic research and policy analysis, and timely update and improve our risk management policies and strategies to increase the effectiveness of risk management. We will also step up efforts in the settlement and disposal of non-performing assets through various alternative means such as transfer and settlement of debt claims and NPL beneficiary rights. We also intend to utilize fintech and other monitoring and reporting tools to increase the timeliness and effectiveness of our risk monitoring and warning system.

Optimize human resource management systems and strengthen our workforce

We intend to continue optimizing our human resource management system that covers planning, attracting, training and management of workforce to provide a strong support for our future success. Our specific measures include:

• Through improving our human resource evaluation models and standards, we intend to accurately identify crucial job positions to add or fill, and formulate targeted talent acquisition plans.

• We are committed to a market-oriented talent acquisition mechanism and hiring high-caliber IT, marketing and management workforce through multiple hiring methods.

• We intend to build a two-way career path for our employees, comprising management and professional tracks, to facilitate and better manage our employees’ occupational development. We are committed to providing on-the-job training to our employees, and offering them job rotation and secondment opportunities to improve their strategic thinking and problem solving capabilities.

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• We highly recognize the importance of market-oriented compensation when attracting and retaining talents, and we will continue to optimize and adjust our compensation mechanism and increase the market competitiveness of our compensation package.

OUR PRINCIPAL BUSINESS LINES

Our principal business lines include corporate banking, retail banking and financial markets businesses. The following table sets forth the contribution of each line of business to our total operating income for the periods indicated:

Six Months ended Year ended December 31, June 30,

2016 2017 2018 2019

%of %of %of %of Amount total Amount total Amount total Amount total (in millions of RMB, except percentages)

Corporate banking 7,133.9 88.4 7,384.0 85.7 7,094.3 80.9 3,572.7 70.8 Retail banking 767.7 9.5 857.1 9.9 843.3 9.6 565.3 11.2 Financial markets 160.8 2.0 373.3 4.3 822.8 9.4 904.9 17.9 Others(1) 6.1 0.1 11.0 0.1 9.2 0.1 2.3 0.1 Total 8,068.5 100.0 8,625.4 100.0 8,769.6 100.0 5,045.2 100.0

(1) Consists of income and expenses that are not directly attributable to any specific segment, such as rental income.

Corporate Banking Business

Overview

We provide our corporate customers with diversified financial products and services, including corporate loans, corporate deposits and fee- and commission-based products and services. Our corporate customers include government agencies, public institutions and industrial and commercial enterprises. Corporate banking business is our most important source of operating income. In 2016, 2017 and 2018 and the six months ended June 30, 2019, operating income from our corporate banking business was RMB7,133.9 million, RMB7,384.0 million, RMB7,094.3 million and RMB3,572.7 million, respectively, accounting for 88.4%, 85.7%, 80.9% and 70.8% of our total operating income, respectively.

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We provide differentiated products and services to meet the diverse needs of our corporate customers. We seek to continually build up and maintain long-term and full-service business relationships with our core corporate customers. See “– Customer Base” for details of our efforts to establish and maintain client relationships.

We pay special attention to our relationship with local governments. We took a proactive approach in participating in major projects promoted by local governments, especially those key infrastructure construction projects that fit Guizhou Province’s strategic planning, in different regional markets across Guizhou Province. We provide comprehensive financial services to a broad range of projects led by local governments, such as infrastructure construction, road construction, urban renewal, agriculture modernization, reform and innovation of rural financial services as well as development of micro and small enterprises. For example, in 2017, we launched “Zu Zu Tong” (組組通), a specialized loan product to support transport infrastructure construction development in rural areas in Guizhou Province. As of June 30, 2019, the balance of “Zu Zu Tong” loans amounted to RMB13.9 billion.

Our corporate loans increased from RMB59,076.6 million as of December 31, 2016 to RMB121,888.7 million as of December 31, 2018, while our corporate deposits increased from RMB133,401.4 million as of December 31, 2016 to RMB155,545.3 million as of December 31, 2018. Our corporate loans grew at a CAGR of 43.6% from 2016 to 2018, while our corporate deposits grew at a CAGR of 8.0% from 2016 to 2018. Our corporate loans further increased to RMB137,998.5 million as of June 30, 2019, representing an increase of 13.2% from RMB121,888.7 million as of December 31, 2018. Our corporate deposits further increased to RMB15,267.2 million as of June 30, 2019, representing an increase of 9.8% from RMB155,545.3 million as of December 31, 2018. As of June 30, 2019, we had 2,772 corporate loan customers and 61,814 corporate deposit customers.

Corporate Loans

Corporate loans have been the largest component of our loan portfolio. The majority of our corporate loan customers are incorporated or have their principal place of business in Guizhou Province. As of December 31, 2016, 2017 and 2018 and June 30, 2019, our corporate loans were RMB59,076.6 million, RMB76,572.9 million, RMB121,888.7 million and RMB137,998.5 million, respectively, accounting for 86.5%, 86.9%, 86.9% and 84.0%, respectively, of our total loans to customers as of the same dates.

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Distribution of Corporate Loans by Product Type

Our corporate loan products include working capital loans, fixed asset loans and other loans to satisfy our corporate customers’ diverse financing needs. The following table sets forth our corporate loans by product type as of the dates indicated:

December 31, June 30,

2016 2017 2018 2019

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

(in millions of RMB, except percentages)

Working capital loans 22,801.0 38.6 22,014.8 28.8 25,113.1 20.6 31,581.7 22.9 Fixed asset loans 34,618.6 58.6 53,644.4 70.0 94,515.5 77.5 104,240.1 75.5 Others(1) 1,657.0 2.8 913.7 1.2 2,260.1 1.9 2,176.7 1.6 Total corporate loans 59,076.6 100.0 76,572.9 100.0 121,888.7 100.0 137,998.5 100.0

(1) Consists primarily of trade finance and loans for mergers and acquisitions.

Working Capital Loans

We provide working capital loans to our corporate customers to address their financing needs in their day-to-day operations. Our working capital loans include short-term loans due within one year and medium-term loans due in one to three years. Our working capital loans are generally guaranteed or secured.

Fixed Asset Loans

We provide fixed asset loans to our corporate customers mainly to address their financing demands for fixed asset investment projects, including infrastructure construction, road construction, building construction and other projects. Generally, our fixed asset loans have maturities between ten to 20 years.

Others

We also provide financing support of other kinds tailored to our corporate customers’ needs, such as loans for mergers and acquisitions.

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Distribution of Corporate Loans by Maturity

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

December 31, June 30,

2016 2017 2018 2019

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

(in millions of RMB, except percentages)

Short-term loans(1) 13,862.5 23.5 12,845.3 16.8 15,708.0 12.9 18,451.6 13.4 Medium- to long-term loans(2) 45,214.1 76.5 63,727.6 83.2 106,180.7 87.1 119,546.9 86.6 Total corporate loans 59,076.6 100.0 76,572.9 100.0 121,888.7 100.0 137,998.5 100.0

(1) Refers to loans and advances with a maturity of one year or less. (2) Refers to loans and advances with a maturity of more than one year.

Distribution of Corporate Loans by Customer Type

We offer our financial products and services to corporate loan customers of all sizes. The following table sets forth our corporate loans by the size of our corporate customers as of the dates indicated:

December 31, June 30, 2016 2017 2018 2019 %of %of %of %of Amount total Amount total Amount total Amount total (in millions of RMB, except percentages)

Large enterprises(1) 8,479.7 14.4 11,127.4 14.5 16,512.6 13.4 18,799.6 13.6 Medium enterprises(1) 10,805.9 18.3 18,446.7 24.1 29,073.5 23.9 33,604.0 24.4 Small enterprises(1) 18,516.2 31.3 26,362.7 34.4 49,691.6 40.8 55,944.0 40.5 Micro enterprises(1) 2,217.4 3.7 3,127.0 4.1 10,336.8 8.5 13,618.5 9.9 Others(2) 19,057.4 32.3 17,509.1 22.9 16,274.2 13.4 16,032.4 11.6 Total corporate loans 59,076.6 100.0 76,572.9 100.0 121,888.7 100.0 137,998.5 100.0

(1) The classification criteria for large, medium, micro and small enterprises are set forth in the Classification Standards of Small and Medium Enterprises. See “Definitions and Conventions” for details. (2) Consists primarily of land reserve centers and public institutions such as schools and hospitals.

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Loans to Large and Medium Enterprises

Our large and medium enterprise customers, one of our core customer groups, mainly include large state-owned enterprises operating in a broad range of industries, such as leasing and commercial services, real estate, construction and water conservancy, environment and public facilities management. As of December 31, 2016, 2017 and 2018 and June 30, 2019, our loans to large and medium enterprises amounted to RMB19,285.6 million, RMB29,574.1 million, RMB45,586.1 million and RMB52,403.6 million, respectively, accounting for 32.7%, 38.6%, 37.3% and 38.0%, respectively, of our total corporate loans as of the same dates. Our loans to large and medium enterprises grew at a CAGR of 53.7% from 2016 to 2018.

Large and medium enterprise customers are strategically important to our continuous growth. We seek to provide customized financial products and services tailored to the specific financing needs of large and medium corporate customers.

Loans to Micro and Small Enterprises

Providing loans to micro and small enterprises is an important part of our corporate loan business. Our micro and small enterprise customers operate in a wide range of industries, including transportation, storage and postal services, leasing and commercial services, construction, water conservancy, environment and public facilities management. With our in-depth knowledge of local markets, we aim to better serve micro and small enterprises and to develop our financial services for these customers by offering professional, comprehensive, bespoke and efficient financing solutions and services to meet their financing needs. We provide corporate loans to micro and small enterprises to meet their diverse financing needs arising from daily business operations.

As of December 31, 2016, 2017 and 2018 and June 30, 2019, our loans to micro and small enterprises amounted to RMB20,733.6 million, RMB29,489.7 million, RMB60,028.4 million and RMB69,562.5 million, respectively, accounting for 35.0%, 38.5%, 49.3% and 50.4%, respectively, of our total corporate loans. Our loans to micro and small enterprises grew at a CAGR of 70.2% from 2016 to 2018.

For details of the loan products offered to our micro and small enterprise customers, see “– Micro and Small Finance Business.”

Others

During the Track Record Period, our other corporate loans were mainly granted to educational service providers, hospitals and land reserve centers. Among our other loans, approximately 54.5%, 40.0%, 44.0% and 54.2% were granted to educational service providers, and approximately 11.0%, 14.4%, 16.4% and 20.8% were granted to hospitals as of December 31, 2016, 2017 and 2018 and June 30, 2019, respectively. In addition, approximately 20.4%, 17.1%, 16.1% and 7.5% were granted to land reserve centers as of the same dates, respectively. Land reserve centers are public institutions responsible for the land reserve work within the administrative jurisdiction, established under approval from local governments in cities and counties and subject to the departments of land resources management.

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Bill Discounting

Through bill discounting services, we offer short-term financing by virtue of which we purchase at discounts (i) paper bank acceptance bills and commercial acceptance bills with remaining maturities of less than six months, and (ii) electronic bank acceptance bills and commercial acceptance bills with remaining maturities of less than one year. We may resell these bills to the PBOC or other financial institutions licensed to conduct bill discounting business, to obtain additional liquidity and net interest income.

As of December 31, 2016, 2017 and 2018 and June 30, 2019, the balance of our discounted bills were RMB1,945.0 million, RMB809.9 million, RMB1,391.4 million and RMB2,211.1 million, respectively, accounting for 2.8%, 0.9%, 1.0% and 1.3%, respectively, of our total loans and advances to customers as of the same dates.

Corporate Deposits

We primarily offer our corporate customers time deposits and demand deposits in Renminbi. We provide Renminbi-denominated time deposits with a maximum maturity of five years. We offer deposit products with different terms on interest rates and maturities to capture the demands of various target customer groups. We also offer large-denomination certificates of deposit to meet market demand arising from interest rate liberalization in the PRC. Our corporate deposit customers primarily include local government agencies, public institutions, state-owned enterprises and private enterprises.

As of December 31, 2016, 2017 and 2018 and June 30, 2019, our corporate deposits were RMB133,401.4 million, RMB159,159.6 million, RMB155,545.3 million and RMB170,812.5 million, respectively, accounting for 80.9%, 78.7%, 70.7% and 69.1%, respectively, of our total customer deposits as of the same dates.

The following table sets forth our corporate deposits, net of interest payables, by product type as of the dates indicated:

As of December 31, As of June 30, 2016 2017 2018 2019 %of %of %of %of Amount total Amount total Amount total Amount total (in millions of RMB, except percentages)

Demand deposits 99,634.9 74.7 126,130.1 79.2 116,485.6 74.9 110,901.1 64.9 Time deposits 33,766.5 25.3 33,029.5 20.8 39,059.7 25.1 59,911.4 35.1 Total corporate deposits 133,401.4 100.0 159,159.6 100.0 155,545.3 100.0 170,812.5 100.0

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Fee- and Commission-based Products and Services for Corporate Customers

We provide our corporate customers with a broad range of fee- and commission-based products and services, including bank acceptance, letters of guarantee and other domestic settlement and fee- and commission-based products and services.

Bank Acceptance

We provide bank acceptance service to our corporate customers. This service utilizes bank credits to provide reliable and convenient payment and settlement to support the production and operating activities of our customers. Our bank acceptance service is in Renminbi and its terms generally do not exceed six months for paper bills, or one year for electronic bills.

Letters of Guarantee

We provide letters of guarantee to our corporate customers, including letters of guarantee for both financing and non-financing purposes. Letters of guarantee for financing purposes include loan guarantees. Letters of guarantee for non-financing purposes include letters of guarantee to support payments, prepayments, bidding and performance.

Entrusted Loans Services

We extend entrusted loans to borrowers on behalf of our corporate customers according to their lending purpose, amount, term, and interest rate. We monitor the loan utilization status and assist with the collection of loans for relevant corporate customers who, being the principals, assume the default risk of the loans, while we receive agency fees based on the entrusted loan amounts.

Transaction Banking Services

In our transaction banking business, we mainly offer cash management services, supply chain finance services, trade finance services and international settlement services. These services allow us to leverage our competitive strengths and long-term relationships with strategic corporate clients to capture business opportunities.

Customer Base

We have established a large and stable corporate customer base in Guizhou Province. Our corporate customers consist primarily of government agencies, public institutions and industrial and commercial enterprises in Guizhou Province. As of December 31, 2016, 2017 and 2018 and June 30, 2019, the numbers of our corporate loan customers were 2,057, 2,358, 2,439 and 2,772, respectively, and the numbers of our corporate deposit customers were 41,911, 45,975, 57,467 and 61,814, respectively. Our corporate loan customers are primarily from the industries of (i) leasing and commercial services, (ii) water conservancy, environment and public facilities management, (iii) construction, (iv) education, (v) real estate, and (vi) transportation, storage and postal services, which are critical to the infrastructure improvement, the livelihood and the establishment of inclusive finance in Guizhou Province. Substantially all of our corporate clients in the leasing and commercial services industry

– 168 – BUSINESS involve government-affiliated entities primarily engaging in infrastructure construction projects. These local government-affiliated entities are subject to credit risks and our loans may not be guaranteed by local or provincial governments. See “Risk Factors – Risks Relating to Our Business – We have a high concentration of loans to leasing and commercial services industry, substantially all of which involve government-affiliated entities, whose operations are related to the economic development in Guizhou Province and China and may be affected by the overall economic condition and periodic economic fluctuation” for further discussions.

We focus on developing business relationships with large enterprise and institutional customers, particularly local government agencies and public institutions such as public hospitals and educational service providers or clients engaging in industries with strategic importance to the local economy. We continue to maintain and expand our core customer base in Guizhou Province to further reinforce our business foundation. We have established a designated department at our head office, which is in charge of marketing, exploring potential business opportunities, internal coordination and executing customized business solutions, for large corporate, enterprise and institutional customers, with a particular focus on those designated as our key customers. For corporate deposits, we have also received strong support from local government agencies, public institutions and industrial and commercial state-owned enterprises in Guizhou Province, allowing us to open designated accounts for fiscal and social security funds and provide payroll and settlement services.

We seek to actively acquire large enterprise customers with competitive strength and operational capabilities in Guizhou Province. Furthermore, we select and support medium enterprise customers with clearly defined principal businesses, stable market shares and strong ability to maintain sustainable operations, which have the potential to grow into large enterprises.

In addition to proactively developing local government and large and medium corporate customers, we are also committed to developing quality micro and small enterprise customers in Guizhou Province, including those engaging in agriculture, tourism, construction, retail and commercial industries with government and policy support. For more details, see “– Micro and Small Finance Business.”

Retail Banking Business

Overview

We offer a wide range of products and services to our retail customers, including loans, deposits, bank cards, and other fee- and commission-based services. Our retail banking business has grown significantly in recent years. In 2016, 2017 and 2018 and the six months ended June 30, 2019, operating income from our retail banking business amounted to RMB767.7 million, RMB857.1 million, RMB843.3 million and RMB565.3 million, respectively, accounting for 9.5%, 9.9%, 9.6% and 11.2% of our total operating income, respectively.

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Our personal loans increased from RMB7,309.8 million as of December 31, 2016 to RMB16,860.4 million as of December 31, 2018, representing a CAGR of 51.9%. Our personal loans increased further to RMB24,130.1 million as of June 30, 2019, representing an increase of 43.1% from RMB16,860.4 million as of December 31, 2018. Our personal deposits increased from RMB31,152.4 million as of December 31, 2016 to RMB63,109.1 million as of December 31, 2018, representing a CAGR of 42.3%. Our personal deposits further increased to RMB74,853.6 million as of June 30, 2019, representing an increase of 18.6% from RMB63,109.1 million as of December 31, 2018. As of June 30, 2019, we had approximately 71,037 personal loan customers and 6.3 million personal deposit customers.

Personal Loans

Our personal loans mainly include residential mortgage loans, personal business loans, personal consumption loans and bank card services. As of December 31, 2016, 2017 and 2018 and June 30, 2019, the balance of our personal loans amounted to RMB7,309.8 million, RMB10,749.5 million, RMB16,860.4 million and RMB24,130.1 million, respectively, accounting for 10.7%, 12.2%, 12.0% and 14.7%, respectively, of our total loans to customers as of the same dates. The following table sets forth our personal loans by product type as of the dates indicated:

December 31, June 30, 2016 2017 2018 2019 %of %of %of %of Amount total Amount total Amount total Amount total (in millions of RMB, except percentages)

Residential mortgage loans 2,182.5 29.8 6,143.5 57.1 9,765.5 57.9 12,371.1 51.3 Personal business loans 3,622.8 49.6 3,233.0 30.1 5,808.5 34.5 10,598.9 43.9 Personal consumption loans 1,504.5 20.6 1,373.0 12.8 1,253.3 7.4 1,116.8 4.6 Bank card balances – – – – 33.1 0.2 43.3 0.2 Total personal loans 7,309.8 100.0 10,749.5 100.0 16,860.4 100.0 24,130.1 100.0

Residential Mortgage Loans

We provide our retail customers with residential mortgage loans to finance their purchases of new or resale residential properties. These loans are secured by the residential properties purchased by the borrowers. Our loan-to-value ratio of the residential mortgage loans to individuals generally shall not exceed 80%. Our residential mortgage loans generally have terms of up to 30 years.

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Personal Business Loans

We provide personal business loans to owners of micro and small enterprises, individual business owners and other retail customers engaged in business activities, to meet their working capital and other operating needs. Our credit review is effective and efficient to expedite the granting of loan proceeds. Our personal business loans may be secured by various means and we provide differentiated repayment terms pursuant to the borrowers’ operation model and billing cycle. Qualified borrowers can obtain loans without collateral. For selected personal business loans that meet our risk management criteria, we can extend new loans to replace the existing loans when the latter become due, which helps to seamlessly meet the financing needs of our borrowers in normal operation.

Personal Consumption Loans

We provide our retail customers with a variety of personal consumption loan products to support their personal and household consumption, such as home improvement projects and purchases of durable consumer goods. Our personal consumption loans are either secured or unsecured, with maturities generally not exceeding 15 years. For example, we offer “Xin Yi Dai” (薪易貸), a personal credit loan product that targets individuals with sound creditworthiness and a stable income, for personal consumption.

To meet the growing competition in the retail banking sector and to efficiently capture market demands for conveniently accessible financing products, we plan to invest in advanced technology to develop and deliver personal consumption loan products. For instance, when we review loan applications, we will be able to utilize big data to help us efficiently process and analyze vast amounts of data that we collect from public and third-party databases, such as administrative penalty records and litigation records of the applicant. The expedited process of shortlisting qualified candidates can improve our customer experience and increase customer loyalty.

Personal Deposits

We offer our retail customers a variety of demand deposit and time deposit products. The time deposits for our retail customers have maturities of no more than five years. We take an active approach to attract personal deposits by offering various products designed to offer favorable interest rates and convenient withdrawal options. For instance, starting from the second half of 2018, we offer the “Ai Xin Cun” (愛心存) product to allow designated beneficiaries to enjoy the interest income from the deposits placed by our customers. With such flexibility, our customers can designate the interest income for various needs, such as pension for their parents or living expenses for their children.

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We provide direct deposit services for government agencies, public institutions and corporations. The employees of the aforesaid entities receive their salaries through their personal bank accounts with us, which has become an important source of our personal deposits. In addition, to attract and retain affluent customers, in 2016, we obtained the qualification to issue certificates of deposits. In 2018, we officially launched the large certificate of personal deposit product to customers with a savings amount exceeding RMB200,000. As of June 30, 2019, our total deposits under large certificates of personal deposit amounted to RMB1,262.7 million.

As of December 31, 2016, 2017 and 2018 and June 30, 2019, the balance of our personal deposits amounted to RMB31,152.4 million, RMB43,002.7 million, RMB63,109.1 million and RMB74,853.6 million, respectively, accounting for 18.9%, 21.3%, 28.7% and 30.3%, respectively, of our total customer deposits as of the same dates. The following table sets forth our personal deposits, net of interest payable, by product type as of the dates indicated:

December 31, June 30, 2016 2017 2018 2019 %of %of %of %of Amount total Amount total Amount total Amount total (in millions of RMB, except percentages)

Demand deposits 16,803.5 53.9 21,116.0 49.1 26,825.1 42.5 28,123.1 37.6 Time deposits 14,348.9 46.1 21,886.7 50.9 36,284.0 57.5 46,730.5 62.4 Total personal deposits 31,152.4 100.0 43,002.7 100.0 63,109.1 100.0 74,853.6 100.0

Bank Card Services

Debit Cards

We issue Renminbi-denominated debit cards, branded as “Qian Xiu Card” (黔秀卡), to retail customers who maintain deposit accounts with us. We currently offer our cardholders cross-bank and cross-city cash withdrawal services free of charge, and provide various value-added services to consolidate our relationships with retail customers. As of December 31, 2016, 2017 and 2018 and June 30, 2019, we had issued an aggregate number of debit cards of 3.6 million, 5.2 million, 6.8 million and 7.5 million, respectively. As a member of China UnionPay, our debit cards are accepted through the China UnionPay network in China and globally.

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In addition, in April 2015, we launched our “Union Card” (工會卡), which targets employees of governments, public service institutions and quality enterprises. Through cooperation with trade unions in these institutions and enterprises, we issue Union Cards to their employees for receiving employee benefit distribution. We are the only banking institution in Guizhou Province authorized to issue Union Cards. As of June 30, 2019, we had issued an aggregate of over 1.9 million Union Cards, with the total balance reaching RMB5.5 billion.

Credit Cards

Before launching credit card services, we issued public service cards which primarily targeted employees of government agencies and administrative and public institutions funded by the government, and facilitated the payment and reimbursement of business-related expenses. Our public service cards are equipped with an overdraft function, which prepares us for our subsequent launch of a credit card business. We obtained the qualification to issue credit cards to the general public in May 2018, and commenced our credit card business in August 2018, initially only made available to our employees.

Other Fee- and Commission-based Products and Services for Retail Customers

Our other fee- and commission-based retail banking products and services consist primarily of personal wealth management services and agency services. In 2016, 2017 and 2018 and the six months ended June 30, 2019, our retail banking business recorded net fee and commission expenses in the amount of RMB12.7 million, RMB16.7 million, RMB21.3 million and RMB12.5 million, respectively.

Personal Wealth Management Services

We provide diversified personal wealth management products and services to retail customers under the “Gui Yin Heng Li” (貴銀恒利) brand. We develop, tailor and sell a variety of investment and wealth management products to designated customers through research and analysis on the needs of our potential customer group. Our products primarily comprise fixed income wealth management products with different terms and risk levels. As of the Latest Practicable Date, we offered five series of products under our “Gui Yin Heng Li” brand, all of which are non-principal-protected products. As of December 31, 2016, 2017 and 2018 and June 30, 2019, the balance of our wealth management products for retail customers were RMB4,265.3 million, RMB6,148.2 million, RMB6,759.9 million and RMB7,932.3 million, respectively.

Our personal wealth management service has become an important platform to attract quality customers and cross-sell other financial products and services. We estimate that there will be an increasing demand from retail customers for comprehensive and personalized wealth management services apart from traditional banking products and services, in light of the economic growth in Guizhou Province and an increase in disposable income. See “– Financial Markets Business – Wealth Management for Customers” for more details.

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Agency Services

Our agency services mainly include:

• Bancassurance. We distribute insurance products to retail customers as an agent through our cooperation with insurance companies. As of June 30, 2019, we had distributed insurance products as an agent for six insurance companies.

• Agency Trading of Precious Metals. We conduct agency sales of precious metals including gold and silver.

• Payment Agency Services. We provide government agencies, public institutions as well as corporations with agency services including payroll, management of payment of allowance, or payment of social security.

• Fund Distribution. Our customers can subscribe to, purchase and redeem fund products over our counters, or through our personal online banking website or mobile banking app.

As of Latest Practicable Date, we had 204 branches qualified to offer agency sales services of insurance products, while over 86 of our branches are qualified to offer agency trading of precious metals.

Customer Base

We have an extensive retail customer base in Guizhou Province. The customer base of our retail banking business has expanded rapidly in recent years. As of December 31, 2016, 2017 and 2018 and June 30, 2019, we had approximately 45,700, 56,600, 67,300 and 71,037 personal loan customers, respectively, and approximately 3.0 million, 4.1 million, 5.8 million and 6.3 million personal deposit customers, respectively.

To capture the opportunities driven by China’s “new urbanization” plan and to promote the economic development at the county level, we have endeavored to build sub-branches on the doorsteps of urban residents. Since October 2016, our branches and sub-branches have covered all 88 counties in Guizhou Province, which enhanced our visibility among residents, and allowed us to better identify and serve the diverse financing needs of our prospective retail customers by taking advantage of strong ties in local social networks. Our sub-branches offer integrated banking services to retail customers in the vicinity.

We also enhance our technological innovation and our online banking capabilities to ensure that our retail banking services will be conveniently accessible both online and offline. For details of our online banking, see “– Distribution Network – Electronic Banking.” As of June 30, 2019, we had approximately 3.7 million online banking retail customers.

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Micro and Small Finance Business

Our micro and small finance business provides credit services to micro and small enterprises, as well as individual business owners. This business includes loans provided to micro and small enterprises under our corporate banking business and personal business loans under our retail banking business. We have a designated department to improve the efficiency of our micro and small finance business while controlling the relevant risks.

The following table sets forth a breakdown of the balances of our loans to micro and small enterprises and personal business loans by borrower type as of the dates indicated:

December 31, June 30,

2016 2017 2018 2019

%of %of %of %of Amount total Amount total Amount total Amount total (in millions of RMB, except percentages)

Loans to small and micro enterprises 20,733.6 85.1 29,489.7 90.1 60,028.4 91.2 69,562.5 86.8 Personal business loans 3,622.8 14.9 3,233.0 9.9 5,808.5 8.8 10,598.9 13.2 Total 24,356.4 100.0 32,722.7 100.0 65,836.9 100.0 80,161.4 100.0

We regularly launch featured micro and small financial products under the brand name of “Qian Yi Dai” (黔易貸), primarily serving micro and small enterprises and individual business owners that fit government policies and our credit criteria. We prioritize those micro and small finance business customers and individual business owners that possess one or more of the following qualities: real economy, eco-tourism, strong innovation capabilities, mature business model, favored by government policies, low energy consumption, low emission and rural renewal. Our major micro and small finance business products include:

• “Bao Jie Dai” (保捷貸): Considering the difficulty of micro and small enterprises and individual business owners in providing meaningful collateral, we offer loans guaranteed by third-party state-owned guarantors. We offer our “Bao Jie Dai” loans primarily in collaboration with state-owned guarantee companies. This product line targets customers without sufficient collateral and offers micro and small loans generally not exceeding RMB5 million. Our “Bao Jie Dai” products received the Second Prize Award of Innovative Financial Products in Support of Real Economy by Financial Institutions in Guizhou Province in 2018 issued by the Provincial Government Financial Office in Guizhou Province, as a result of their wide coverage, alleviation of collateral burden and strong risk management.

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• “Zheng Cai Dai” (政採貸): We cooperate with a government centralized procurement platform and offer our Zheng Cai Dai loan product up to RMB10 million to those micro and small enterprises winning government procurement bidding. We primarily review the credit profiles of successful bidders from the credit reference center of the PBOC and the relevant bidding information from the government centralized procurement platform during our due diligence process. We require the borrowers under this product line to open a bank account with us and designate such account for receiving the procurement payment under the relevant government procurement bidding. It allows us to have direct access to procurement payments to better secure the repayment of our loans.

We strive to promote cooperation among different business lines to seek cross-selling opportunities and achieve synergies. For example, our micro and small finance business helps create business needs for our corporate banking business and retail banking business, by referring our micro and small finance enterprise customers for account opening, bank cards services and deposits. We also intend to acquire micro and small enterprise clients on a wholesale basis through partnering with local trade unions, business districts, chambers of commerce and industrial parks as well as numerous micro and small enterprises operating on their supply and distribution chains.

Financial Markets Business

Our financial markets business primarily includes investment business, money-market transactions, debt securities underwriting and distribution and interbank discount and rediscount of bills. In 2016, 2017 and 2018 and the six months ended June 30, 2019, operating income from our financial markets business amounted to RMB160.8 million, RMB373.3 million, RMB822.8 million and RMB904.9 million, respectively, accounting for 2.0%, 4.3%, 9.4% and 17.9% of our total operating income, respectively.

Investment

Our investment business mainly includes investments in debt securities and SPV investments. Our investments in debt securities mainly comprise investments in local government bonds and treasury bonds. SPV investments refer to the investments in financial assets through SPVs. As of June 30, 2019, the balance of our investments in debt securities and SPV investments amounted to RMB72,294.9 million and RMB77,853.2 million, respectively, accounting for 48.1% and 51.9%, respectively, of our total financial investment assets.

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The following table sets forth a breakdown of the total balance of our investments in debt securities, SPV investments and other investments as of the dates indicated:

December 31, June 30,

2016 2017 2018 2019

Average(1) Average(1) Average(1) Average(1) rate of rate of rate of rate of %of return %of return %of return %of return Amount total (%) Amount total (%) Amount total (%) Amount total (%) (in millions of RMB, except percentages)

Investments in debt securities 38,707.1 37.5 3.69 54,351.7 41.3 3.61 63,303.4 46.2 3.65 72,294.9 48.1 3.81 SPV investments 64,359.5 62.5 8.43 77,034.0 58.7 7.09 73,781.7 53.8 6.53 77,853.2 51.9 6.20 – Asset management plans 58,727.4 57.1 9.00 68,373.9 52.1 7.60 56,734.7 41.4 6.50 53,861.3 35.9 6.20 – Trust plans 5,482.1 5.3 10.90 8,009.0 6.1 8.60 10,652.3 7.8 7.20 10,298.4 6.9 6.80 – Wealth management products 150.0 0.1 3.00 651.1 0.5 4.80 2,671.2 1.9 – 4,123.8 2.7 – – Mutual funds – – – – – – 3,323.5 2.4 – 9,153.0 6.1 – – Private placement bonds – – – – – – 400 0.3 6.05 416.7 0.3 6.05 Equity investments 37.8 – – 37.8 – – 37.8 – – 37.8 – – Gross financial investments 103,104.4 100.0 6.77 131,423.5 100.0 5.77 137,122.9 100.0 5.24 150,185.9 100.0 5.02

Allowance for impairment losses (836.1) (1,378.0) (1,784.5) (1,319.2) Interest receivables N/A N/A 1,306.6 1,287.6 Net financial investments 102,268.3 130,045.5 136,645.0 150,154.3

(1) Calculated by dividing annualized interest income or expense by average balance.

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Investments in Debt Securities

Our investments in debt securities comprise investments in bonds issued by the PRC government, PRC policy banks, PRC commercial banks and other financial institutions and corporations in the PRC, mainly including investments in local government bonds and treasury bonds. The table below sets forth the breakdown of our investments in bonds as of the dates indicated:

December 31, June 30,

2016 2017 2018 2019

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

(in millions of RMB, except percentages)

PRC government bonds 29,258.7 75.6 43,327.8 79.7 47,947.6 75.7 44,872.6 62.0 Bonds issued by PRC policy banks 7,803.9 20.2 8,322.0 15.3 8,217.9 13.0 15,034.6 20.8 Bonds issued by other PRC commercial banks and financial institutions 408.6 1.0 206.5 0.4 1,753.7 2.8 3,301.8 4.6 Bonds issued by PRC corporate issuers 1,235.9 3.2 2,495.4 4.6 5,384.2 8.5 9,085.9 12.6 Total 38,707.1 100.0 54,351.7 100.0 63,303.4 100.0 72,294.9 100.0

When investing in bonds, we conduct analysis on market risks, such as adverse movement of asset prices and adverse movement of benchmark rates in the market, and formulate corresponding contingency plans and make adjustments to our investment strategies in a timely manner. For bonds issued by PRC commercial banks, we will approve within the relevant prescribed limits. For other financial institutions and corporate issuers, we implement a more stringent approval process and all investment decisions are made through our Investment Business Management Committee. See “Risk Management – Market Risk Management – Interest Rate Risk” for details.

SPV Investments

Our SPV investments mainly include investments in asset management plans, trust plans, wealth management products and mutual funds issued by other PRC commercial banks. Our SPV investments are made based on investment preference and appetite, market conditions and other factors, including the yield, maturity, risk and liquidity profiles of these investments. In 2016, 2017 and 2018 and the six months ended June 30, 2019, the interest income from our SPV investments amounted to RMB5,169.4 million, RMB5,434.1 million, RMB4,953.8 million and RMB2,151.7 million, respectively.

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The following table sets forth distribution of our SPV investments by the underlying assets as of the dates indicated:

As of December 31, As of June 30,

2016 2017 2018 2019

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

(in millions of RMB, except percentages)

Asset management plans 58,727.4 91.3 68,373.9 88.8 56,734.7 76.9 53,861.3 69.2 Trust plans 5,482.1 8.5 8,009.0 10.4 10,652.3 14.4 10,298.4 13.2 Wealth management products issued by other PRC commercial banks 150.0 0.2 651.1 0.8 2,671.2 3.6 4,123.8 5.3 Mutual funds – – – – 3,323.5 4.5 9,153.0 11.8 Private placement bonds – – – – 400.0 0.6 416.7 0.5 Total 64,359.5 100.0 77,034.0 100.0 73,781.7 100.0 77,853.2 100.0

For details of our SPV investments, see “Assets and Liabilities – Assets – Financial Investments – SPV Investments” and “Assets and Liabilities – Assets – Financial Investments – Distribution of SPV Investments by Industry.” For details on risks arising from our SPV investments, see “Risk Factors – Risks Relating to Our Business.” For details on our risk management policies on SPV investments, see “Risk Management – Credit Risk Management for Investments in Debt Securities and Special Purpose Vehicles.”

Asset Management Plans

We invest in asset management plans under which credit facilities are extended to predetermined financing parties.

We enter into asset management contracts with reputable asset management or securities firms that are qualified to conduct asset management business. Pursuant to the terms and conditions of those contracts, we provide those firms with written investment instructions. These instructions set out the particulars of the products we plan to invest in using our funds. The asset management or securities firms then invest our funds in debt securities or certain other assets pursuant to our written instructions, through third-party custodian banks, in accordance with the terms and conditions of those contracts. Asset management and securities firms that fail to follow our instructions or otherwise violate an asset management contract are liable for losses on our entrusted funds. Custodian banks are liable for the losses of asset management firms, securities firms and us due to their failure to perform custodian services. Asset management firms and securities firms do not provide guarantees for asset management plans.

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The chart below illustrates the relationship among the parties involved in our investments in asset management plans:

Securities Firms/Asset Management Firms (Counterparties)

Settlement of principal of, and Repayment of principal returns on, asset and returns based management plans Asset on agreed-upon terms Management Our Bank Financing Parties Plan Investments(Manager) Financing through entrusted loan, etc. Guarantees for the financing

Guarantor

As of June 30, 2019, we entered into asset management contracts with 17 securities firms and asset management firms. As of December 31, 2016, 2017 and 2018 and June 30, 2019, our investments in the asset management plans were RMB58,727.4 million, RMB68,373.9 million, RMB56,734.7 million and RMB53,861.3 million, respectively.

Trust Plans

We initiate the establishment of, and invest in, trust plans. By investing in trust plans, we, as the investor of the trusts, entrust the trust companies as the trustee of the investment to grant credit facilities to the financing parties in their own names, and the trust companies are responsible for the management of trust funds. The financing parties’ obligations owed to the trust companies are secured by collateral or irrevocable and joint and several guarantees provided by guarantors to the trust companies. The financing parties use the funds provided by trust companies for their business operations, and are required to repay the principal and the agreed returns within the life of the trust plans.

The following chart shows the relationship among the parties involved in our investments in trust plans:

Trust Companies (Counterparties)

Settlement of Repayment of principal principal of, and and returns based on returns on, trust plans Trust Plan agreed-upon terms Our Bank (Manager/ Financing Parties InvestmentsTrustee) Trust financing

Guarantees for the financing

Guarantor

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As of June 30, 2019, we entered into trust contracts with six trust companies. As of December 31, 2016, 2017 and 2018 and June 30, 2019, our investments in the trust plans were RMB5,482.1 million, RMB8,009.0 million, RMB10,652.3 million and RMB10,298.4 million, respectively.

We classify our SPV investments into five categories based on their risk levels, namely, normal, special mention, substandard, doubtful and loss, considering the CBIRC’s five-level loan classification. See “Assets and Liabilities – Assets – Asset Quality of Our Loan Portfolio – Loan Classification Criteria” for further discussion on the five-level loan classification. The table below sets forth the distribution of the asset management plans and trust plans we invested by risk level during the periods indicated:

December 31, June 30,

2016 2017 2018 2019

%of %of %of %of Amount total Amount total Amount total Amount total (in millions of RMB, except percentages)

Normal 62,406.8 97.2 74,594.8 97.7 65,640.9 97.5 63,584.0 98.5 Special mention –––––––– Substandard 1,802.7 2.8 872.8 1.1 235.0 0.3 107.8 0.2 Doubtful – – 915.3 1.2 1,511.1 2.2 884.6 1.3 Loss –––––––– Total 64,209.5 100.0 76,382.9 100.0 67,387.0 100.0 64,576.4 100.0

Wealth Management Products Issued by Other PRC Commercial Banks

We invest in wealth management products issued by other PRC commercial banks. These PRC commercial banks, as the sponsor and manager of wealth management products, invest the proceeds in money market instruments, bonds and other products. The wealth management products issued by other PRC commercial banks we invest in include principal-protected and non-principal-protected products, each with floating investment yields. The wealth management products we invest in are mostly at floating investment yields with the actual yields to maturity determined upon the investment portfolio under each wealth management product.

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The following table sets forth a breakdown of our balance of the wealth management products in which we invested by category as of the dates indicated:

December 31, June 30,

2016(1) 2017(1) 2018(2) 2019(2)

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

(in millions of RMB, except percentages)

Principal-protected – – 500.4 76.9 553.3 20.7 833.5 20.2 Non-principal-protected 150.0 100.0 150.7 23.1 2,117.9 79.3 3,290.3 79.8 Total 150.0 100.0 651.1 100.0 2,671.2 100.0 4,123.8 100.0

(1) Prepared in accordance with IAS 39. (2) Prepared in accordance with IFRS 9, starting from January 1, 2018.

Pursuant to the contracts we entered into with PRC commercial banks issuing wealth management products, PRC commercial banks usually pay the principal and investment returns to us upon the maturity of the products. PRC commercial banks issuing wealth management products are entitled to certain commissions and/or management fees, according to the terms and conditions of the contracts.

The chart below illustrates the relationship between the parties involved in our investments in wealth management products issued by other PRC commercial banks:

PRC Commercial Banks (Counterparties)

Settlement of the Repayment of principal principal and return on and returns based on wealth management agreed-upon terms Wealth Money market investments, Our Bank management bonds and other products Purchase of wealth product Investments management products

As of December 31, 2016, 2017 and 2018 and June 30, 2019, our investments in the wealth management plans amounted to RMB150.0 million, RMB651.1 million, RMB2,671.2 million and RMB4,123.8 million, respectively.

To manage credit risks arising from our investments in these wealth management products, we mainly invest in wealth management products issued by national joint-stock commercial banks and large- to medium-sized listed commercial banks. For details of the risk management measures with respect to our investments in wealth management products issued by other PRC commercial banks, see “Risk Management – Credit Risk Management for Financial Markets Business.”

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Mutual Funds

We started to invest in mutual funds in 2018, the underlying assets of which principally include treasury, financial and other bonds, certificates of interbank deposits, financial assets purchased under resale agreements and deposits from commercial banks and other financial institutions in China. Based on the agreement entered into with the fund manager, we are entitled to receive regular dividends as investment gains and recoup our principal amount through fund redemption, while the fund manager is entitled to certain agreed amounts of commission and/or management fees. As of December 31, 2018 and June 30, 2019, the balance of our investment in mutual funds were RMB3,323.5 million and RMB9,153.0 million, respectively.

The following chart illustrates the relationship among the parties involved in our mutual fund investments:

Fund Management Companies (Counterparties)

Repayment of principal Principal repayment and and returns based on dividends agreed-upon terms Underlying assets; Our Bank Funds other financial assets

Investments Investments

Money Market Transactions

Our money market transactions consist of (i) interbank deposits, and (ii) securities repurchase and reverse repurchase transactions with other PRC banks and non-banking financial institutions. We deposit funds to banks and other financial institutions and accept deposits from banks and other financial institutions to manage our assets and liabilities. We engage in other transactions with certain of these banks and financial institutions. The securities underlying repurchase and reverse repurchase transactions primarily include bonds issued by the central government, policy banks and local governments.

Interbank Deposits

As of December 31, 2016, 2017 and 2018 and June 30, 2019, the deposits from banks and other financial institutions amounted to RMB15,679.6 million, RMB8,279.6 million, RMB9,983.8 million and RMB7,290.2 million, respectively, and the balances of our deposits with banks and other financial institutions amounted to RMB5,886.9 million, RMB1,121.7 million, RMB833.8 million and RMB4,352.2 million, respectively.

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Securities Repurchase and Reverse Repurchase

As of December 31, 2016, 2017 and 2018 and June 30, 2019, our financial assets sold under repurchase agreements were RMB7,957.2 million, nil, RMB2,175.3 million and RMB2,313.8 million, respectively, and our financial assets purchased under resale agreements were RMB17,740.3 million, RMB12,948.3 million, RMB14,694.2 million and RMB19,992.0 million, respectively.

The leverage ratios of the financial assets under repurchase and reverse repurchase agreements can be calculated as the ending balance of repurchase or reverse repurchase transactions divided by the nominal value of the underlying assets. The underlying financial assets in repurchase and reverse repurchase transactions primarily comprise debt securities issued by central and local government, policy banks and commercial banks and enterprises. The leverage ratios of the financial assets sold under repurchase agreements were 94%, nil, 94% and 90%, respectively, and those of the financial assets purchased under resale agreements were 98%, 91%, 94% and 94%, respectively, as of December 31, 2016, 2017 and 2018 and June 30, 2019.

The interest rate for a repurchase or reverse repurchase transaction refers to the interest paid or earned from such transaction, which is the difference between the initial sale price and the buyback price and represented in the form of percentage per annum. As of December 31, 2016, 2017 and 2018 and June 30, 2019, the interest rate for our financial assets purchased under resale agreements was in the ranges of 1.89% to 5.60%, 2.05% to 5.00%, 1.15% to 5.60% and 0.95% to 3.10%, respectively. As of December 31, 2016, 2017 and 2018 and June 30, 2019, the interest rate for our financial assets sold under repurchase agreements was in the ranges of 1.85% to 4.43%, 2.05% to 4.03%, 1.58% to 4.85% and 1.11% to 3.30%, respectively.

Bond Underwriting and Distribution

We underwrite and distribute bonds in the PRC interbank bond market as a member of Shanghai Clearing House and China Central Depository & Clearing Co., Ltd. (中央國債登記 結算有限責任公司). We are a member of the underwriting syndicates for bonds issued by the local government in Guizhou Province.

In 2016, 2017 and 2018 and the six months ended June 30, 2019, the aggregate principal amount of bonds underwritten and distributed by us were approximately RMB18.6 billion, RMB14.5 billion, RMB23.9 billion and RMB1.8 billion, respectively. During the Track Record Period, the fee income arising from bond underwriting and distribution was RMB17.0 million, RMB10.6 million, RMB20.3 million and RMB0.8 million, respectively.

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Interbank Discounts and Rediscounts of Bills

We engage in interbank discounts of commercial bills with other qualified financial institutions or rediscounts of commercial bills with the PBOC to generate working capital and income from interest spreads. We offer interbank discount services such as bills buyouts, bills sell-offs, and bills held under reverse repurchase agreements, as well as bills sold under repurchase agreements. We rediscount bills in accordance with the regulation of the PBOC.

Wealth Management for Customers

Our financial markets business also includes the management of the proceeds from the issuance of wealth management products for our corporate and retail customers.

As of the Latest Practicable Date, we provided diversified wealth management products and services to corporate and retail customers under the “Gui Yin Heng Li” brand, and we offered five series of products under our “Gui Yin Heng Li” brand, all of which are non-principal-protected products. See “– Retail Banking Business – Other Fee- and Commission-based Products and Services for Retail Customers – Personal Wealth Management Services” for further details on our personal wealth management services. The following table sets forth the details on our wealth management products as of the Latest Practicable Date:

Average Series Nature and terms Risk level Duration product size (RMB in (days) millions)

“Zeng Li” (增利) Series Non-principal protected low-medium 98-1096 130.9 with floating yields “Hong Li” (宏利) Series Non-principal protected medium 133-1095 94.2 with floating yields “Qian Xiu” (黔秀) Non-principal protected low or 175-356 114.1 Series with floating yields low-medium “Yang Fan” (揚帆) Non-principal protected low-medium 93-366 121.1 Series with floating yields “Qian Li Ying” Non-principal protected low-medium More than 1,167.0 (黔利盈) Series with floating yields three years

In 2016, 2017 and 2018 and the six months ended June 30, 2019, we issued wealth management products in 246 tranches, 179 tranches, 132 tranches and 84 tranches to our customers, respectively, with aggregate funds raised of RMB27,360.4 million, RMB18,904.1 million, RMB12,412.5 million and RMB9,431.1 million, respectively, and the average size of each tranche of wealth management products we raised were RMB111.2 million, RMB105.6 million, RMB94.0 million and RMB112.3 million, respectively. As of December 31, 2016, 2017 and 2018 and June 30, 2019, the balances of our wealth management products with a tenor longer than those of their underlying assets were RMB1,669.0 million, RMB710.0 million, RMB1,301.9 million and RMB10,575.1 million, respectively, accounting for approximately 28.9%, 10.4%, 19.3% and 15.0% of our total balances of wealth management

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The table below sets forth a breakdown of our wealth management products issued for different sizes for the periods indicated:

Year ended December 31, Six Months ended June 30,

2016 2017 2018 2018 2019

Number of Number of Number of Number of Number of tranches Amount of tranches Amount of tranches Amount of tranches Amount of tranches Amount of issued proceeds issued proceeds issued proceeds issued proceeds issued proceeds (in millions of RMB, except tranches)

Up to RMB50 million 41 1,705.9 35 1,367.8 24 941.7 15 570.2 13 433.1 Over RMB50 million to RMB100 million 172 13,106.7 110 8,865.9 58 4,930.4 39 3,326.1 33 2,552.1 Over RMB100 million 33 12,547.8 34 8,670.4 50 6,540.4 30 3,930.4 38 6,446.0 Total 246 27,360.4 179 18,904.1 132 12,412.5 84 7,826.7 84 9,431.1

We invest the proceeds from our wealth management products mainly in money market instruments and SPV investments. The following table sets forth, as of the dates indicated, the distribution of balances of our wealth management products by use of funds:

December 31, June 30, 2016 2017 2018 2019 %of %of %of %of Amount total Amount total Amount total Amount total (in millions of RMB, except percentages)

Money market instruments 1,519.0 26.3 710.0 10.4 614.3 9.1 822.2 7.8 SPV investments 4,265.3 73.7 6,148.2 89.6 6,145.6 90.9 9,752.9 92.2 Total 5,784.3 100.0 6,858.2 100.0 6,759.9 100.0 10,575.1 100.0

We invest the proceeds raised from our wealth management products mainly in debt securities, which accounted for approximately 39.0%, 61.6%, 62.5% and 71.9% of the balances of our wealth management products as of December 31, 2016, 2017 and 2018 and June 30, 2019, respectively.

In accordance with the Measures for the Supervision and Administration of the Wealth Management Business of Commercial Banks (商業銀行理財業務監督管理辦法) issued by the CBIRC in September 2018, we classify wealth management products that we issued into five

– 186 – BUSINESS categories based on their 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. We correlate the risk levels of our wealth management products with risk tolerance levels of customers. The wealth management products issued by us are all risk level 1, risk level 2 and risk level 3 products.

The table below sets forth the distribution of our wealth management products issued by risk level during the periods indicated:

Year ended December 31, Six Months ended June 30,

2016 2017 2018 2018 2019

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

(in millions of RMB, except percentages)

Risk Level Level 1 11,592.0 42.4 6,943.0 36.7 1,358.3 10.9 744.0 9.5 0.0 0.0 Level 2 1,589.3 5.8 2,579.0 13.7 8,620.5 69.5 5,005.4 64.0 8,439.7 90.0 Level 3 14,179.1 51.8 9,382.1 49.6 2,433.7 19.6 2,077.3 26.5 937.4 10.0 Total 27,360.4 100.0 18,904.1 100.0 12,412.5 100.0 7,826.7 100.0 9,431.1 100.0

During the Track Record Period, we issued both non-principal-protected and principal- protected wealth management products. Upon the coming into effect of 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) on April 27, 2018, we discontinued issuing principal-protected wealth management products accordingly. During the Track Record Period and as of the Latest Practicable Date, all wealth management products issued by us had been under normal operation, the payment of principal and interest had been duly made without any default, and investors in our non-principal-protected wealth management products had not suffered any losses.

PRICING

Under the regulatory regime of the PRC banking industry, we have established a competitive pricing mechanism for our products. Our pricing policies and interest rates for deposits and loans are primarily determined by the Asset and Liability Management Committee at our head office comprising senior management and a chief officer of each relevant department. We take various factors into consideration to determine or adjust our prices, such as capital cost, operation cost, risk, expected return and prices guided by regulatory bodies. In addition, we also consider the market condition as well as prices of similar products and services offered by other players.

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Loans

Our Renminbi-denominated loan rate is subject to regulations of the PBOC. For Renminbi-denominated loans, the lower limit of 70% of the PBOC’s benchmark rate was removed in July 2013. We determine interbank interest rates through negotiation, since these rates are usually not subject to the regulations of PRC regulatory bodies.

We price our products based on various criteria, such as the borrower’s financial position and credit rating, the nature and value of collateral, loan maturity and prevailing market conditions. We also consider, among other things, the capital cost, expected rate of return, risks and our internal capital pricing standard.

Deposits

In October 2016, the PBOC removed the cap on the interest rates on Renminbi- denominated deposits and allowed banks to set interest rates on such deposits based on commercial considerations. In addition, commercial banks currently are permitted to negotiate and determine the interest rates on foreign currency-denominated deposits.

We stick with our standardized interest rates. Meanwhile, we set differentiated interest rates based on our cost and benefit analysis, with reference to the PBOC prescribed rates, market interest rate and product types and taking into consideration other factors such as customer type, structure of our assets and liabilities, rate of return of capital, pricing of other players, comprehensive contribution from customers and business development trends.

Fee- and Commission-based Products and Services

We generally determine the prices of our fee- and commission-based products and services based on prices set by the government or government guided prices, and adjust our prices with reference to prevailing market conditions, cost of services and prices of similar products and services of competitors.

MARKETING

We have adopted a customer-oriented approach to the organization of our marketing function and have established an effective marketing team. Our head office formulates our overall business development plans and strategies and develops our bank-wide marketing initiatives and guidelines. The plans and strategies formulated by our head office are implemented by our branches and sub-branches, which generally conduct marketing activities in their respective regions and collect valuable information and feedback from customers. In order to provide high-quality customer service, we emphasize teamwork and cross-department initiatives in our marketing activities.

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DISTRIBUTION NETWORK

We provide banking products and services through our extensive distribution channels, including a branch network and electronic banking channels. Our branch network and electronic banking channels have enabled us to deliver quality services to our customers effectively.

Branches and Sub-branches

As of June 30, 2019, we operated our business through our head office in Guiyang, eight branches and 207 sub-branches. Our branch network spans Guizhou Province, reaching the entire 88 counties of Guizhou Province.

The table below sets forth the number of our branches and sub-branches as of the dates indicated:

December 31, June 30, 2016 2017 2018 2019

Guiyang 貴陽 41 41 45 47 Zunyi 遵義 54 54 55 53 Anshun 安順 26 26 24 24 Qiannan 黔南 15 15 15 15 Qiandongnan 黔東南 19 19 19 19 Tongren 銅仁 13 13 13 13 Bijie 畢節 9 9 10 12 Liupanshui 六盤水 21 22 22 22 Qianxinan 黔西南 10 10 10 10 Total 208 209 213 215

Electronic Banking

We place strong emphasis on building up electronic channels to improve our capabilities to serve our customers in a convenient, efficient and secure way. Our electronic channels provide comprehensive financial services through mobile banking, internet banking, telephone banking and self-service banking in order to enhance customer experience.

In 2018, an aggregate of approximately 119.4 million transactions amounting to RMB626.0 billion had been completed through our electronic banking channels, representing 96.2% of our total transaction volume for the same period. In the first half of 2019, an aggregate of approximately 85.4 million transactions amounting to RMB317.0 billion had been completed through our electronic banking channels, representing 96.9% of our total transaction volume for the same period. We will continue to promote the use of our electronic banking platform, enlarge our service portfolio and improve efficiency.

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We offer customized payment schemes and develop financial products and services catering to various consumption scenarios to increase our brand awareness and market recognition. We also prepare ourselves for acquiring customers using internet-based financial services. For example, we have developed an electronic payment platform for paying traffic tickets in collaboration with Guizhou Provincial Public Security Bureau.

Mobile Banking

We offer mobile banking services to our retail customers, which mainly include basic services such as account management, money transfer and remittance, credit card management, investment wealth management, as well as services related to daily life, such as payment of utility fees. In addition, we also provide an SMS service to contracted customers, primarily including notification of account changes and risk alerts. Our mobile banking application can be downloaded on mobile phones, providing convenient services to our retail customers.

WeChat Banking

In the first half of 2019, we introduced our WeChat public platform and “Bank of Guizhou” mini program on the WeChat app to our customers to further diversify our financial services channels. As one of the channels to our banking services on the WeChat public platform, our customers are able to use this platform to order credit cards, make account information enquiries, receive notifications, search for outlets and schedule appointments, and use other services.

Internet Banking

Our internet banking platform www.bgzchina.com provides comprehensive financial products and services to our corporate and retail customers. Our corporate internet banking products and services include account management, payment business and payroll services. Our retail internet banking services include account inquiry and management, transfer and remittance, self-service payment and wealth management products investment. As of June 30, 2019, we had approximately 1.6 million internet banking customers, substantially all of whom are registered retail customers. In 2018, an aggregate number of approximately 4.2 million transactions were processed through our internet banking platform with an aggregate transaction volume of approximately RMB468.9 billion. In the first half of 2019, an aggregate number of approximately 2.3 million transactions were processed through our internet banking platform with an aggregate transaction volume of approximately RMB268.4 billion.

Telephone Banking

We offer telephone banking services to both corporate and retail customers, including both automated voice- and teller-operated services through our 24-hour nationwide customer service hotline “40006-96655.” Our services include emergency reporting of lost cards, account inquiries and management, product information enquiries, as well as handling of customer complaints and recommendations.

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Self-service Banking

Our self-service banking facilities include ATMs, self-service deposit and withdrawal machines and self-service terminals, which effectively provide customers with convenient banking services and reduce operating costs. Our self-service banking facilities are placed on the premises of our outlets, providing customers with balance inquiry, cash deposit and withdrawal, fund transfer, and certain other services. As of June 30, 2019, we had a total of approximately 1,155 self-service banking facilities, including approximately 959 ATM and self-service deposit and withdrawal machines, and approximately 196 multimedia self-service terminals.

INFORMATION TECHNOLOGY

We believe the use of information technology is critical to the effective operation of our business and our future growth. Our information technology system provides strong technical support to our daily operation, transaction processing, customer service, product management, as well as risk, financial and information management. The application of our advanced information technology system has greatly improved, and will continue to optimize our efficiency, the quality of our customer service and our risk and financial management capabilities.

Our information technology system covers primarily business process, accounting, account management, management information, risk management and others. We have established an information technology platform for centralized data processing, thereby realizing the unified management of our business transactions.

With regard to customer service, we have set up a centralized system for our branch network and electronic channels to cover our client service channels, streamline the network services, as well as to construct and maintain self-service banking services, online banking services, telephone banking services, mobile banking services and WeChat banking.

In terms of product and business development, we have established an information system for areas such as our core business, wealth management, funds, fiscal payment, social insurance, the second-generation payment system of the PBOC, interbank payments, Union Pay, PRC UnionPay banking card system, PRC UnionPay QR code payment system, international settlement, fund transactions, electronic commercial bills of exchange and multi-functional one-card passes, to cover the major products and services we offer to our customers.

In respect of risk and operations management, we have established a system for credit management, anti-money laundering, audit, financial management, performance assessment, office automation, big data platform and management analysis. This system provides effective technical support to improve internal management standards and effectiveness. In addition, we are able to independently design and develop parts of the information management system.

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With regard to information management, we maintain security of our information and system through various technologies, including firewall, data encryption and intrusion detection. We have established effective supervision and control mechanisms through measures such as security checks conducted by our information technology department, risk monitoring conducted by our risk management department and audit supervision conducted by our audit department. We have established a principal data center in Guiyang, an application-level disaster recovery data center in Zunyi, Guizhou Province and a data-level intercity disaster recovery data center in Liupanshui, Guizhou Province to protect our business continuity.

We have introduced an integrated financial reporting system covering our head office, branches and sub-branches and have been continuously upgrading such reporting system. We have set up portals connected to the system in each of our subsidiaries and all of our business departments at our head office. We require our subsidiaries to input relevant transactional information, such as account information, transactional type, transactional amount and the counterparty information into that system. The self-service portals, such as internet banking, mobile banking and ATMs, also transmit the relevant information to the system automatically. The integrated financial reporting system allows the relevant departments at our head office to generate various types of financial and operational statements based on their needs. Our head office actively monitors the financial condition of our subsidiaries by analyzing the data in various types of financial and operational statements.

In order to meet the changing needs of corporate governance and our risk management, we have set up the information technology management committee, which consists of our senior management, information technology department and major business departments. The information technology department is in charge of the development (construction), operation, maintenance, management and risk control of information technology systems and infrastructure, and the research, development, and management of our information technology projects, as well as the internal control of information technology security management.

COMPETITION

The banking industry in China is becoming increasingly competitive. We compete primarily with Bank of Guiyang and the local operations of joint-stock commercial banks, large commercial banks and Postal Savings Bank of China Co., Ltd. in Guizhou Province. 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. With the rapid development of the banking industry and capital markets in the PRC, we also face competition from other banking institutions including rural credit cooperatives, as well as non-banking financial institutions such as securities firms, fund management companies, insurance companies and internet finance service providers. See “Industry Overview – China’s Banking Industry – Banking Industry in Guizhou Province” for details on the banking industry in Guizhou Province.

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EMPLOYEES

As of June 30, 2019, we had 4,590 full-time employees. Almost all of our employees are located in Guizhou Province. The following table sets forth the number of our full-time employees by function:

June 30, 2019

Number of employees % of total

Corporate banking business 2,021 44.0 Retail banking business 680 14.8 Financial markets business 18 0.4 Finance and accounting 174 3.8 Risk management, internal control and audit 139 3.0 Legal and compliance, human resources and information technology 244 5.3 Management 114 2.5 Teller 1,161 25.3 Others 39 0.8 Total 4,590 100.0

The following table sets forth the number of our full-time employees by age as of the date indicated:

June 30, 2019 Number of employees % of total

Aged below 30 1,345 29.3 Aged 30-39 1,675 36.5 Aged 40-49 1,129 24.6 Aged 50 and over 50 441 9.6 Total 4,590 100.0

The following table sets forth the number of our full-time employees by education as of the date indicated:

June 30, 2019 Number of employees % of total

Master’s degree and higher 210 4.6 Bachelor’s or associate degree 4,243 92.4 Others 137 3.0 Total 4,590 100.0

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We believe our sustainable growth depends on the outstanding capability and dedication of our employees. We have invested substantial resources in recruiting and training our employees. We provide on-the-job training to our employees on a variety of subjects, such as general management of corporate and retail banking and financial markets businesses, marketing, and risk control, as well as policies and regulations.

We have established a comprehensive performance evaluation and incentive system and offer competitive compensation packages to our employees. Our employees participate in employee benefit plans, such as pension insurance, health insurance, unemployment insurance, work-related injury insurance, maternity insurance, housing provident fund, corporate annuity and supplementary medical insurance.

During the Track Record Period, and as of the Latest Practicable Date, we did not experience any strikes or other material labor disputes affecting our operations. Our management, the labor union, and our employees have maintained good working relationships.

In addition to full-time employees, as of June 30, 2019, we also had 222 contract workers retained through third-party human resources agencies. These contract workers are not our employees and generally do not hold key positions with us. We do not enter into labor contracts with these contract workers. Instead, they enter into labor contracts with third-party human resources agencies. We are not legally obligated to make social security contributions for these contract workers. Instead, pursuant to the employment agreements between the third-party human resources agencies and us, we make salary payments and other related payments to these agencies, which then make salary payments to the contract workers and make social security contributions to the relevant governmental agencies for the contract workers.

PROPERTIES

Our head office is located at No. 149 South Zhonghua Road, Nanming District, Guiyang, Guizhou Province, PRC. As of the Latest Practicable Date, we owned or occupied 256 properties with an aggregate GFA of approximately 145,756.4 square meters, we owned four parcels of land with an aggregate site area of approximately 70,959.7 square meters, and we owned seven newly obtained properties with an aggregate GFA of approximately 157,083.3 square meters in the PRC. As of the same date, we leased 397 properties with an aggregate GFA of approximately 129,195 square meters in China.

As of the Latest Practicable Date, we did not have any single property with a book value accounting for 15% or more of our total assets. Our Directors are of the view that, in connection with the Global Offering, we are not required to set out all of our interest in land and buildings in the valuation report described in paragraph 34(2) of the Third Schedule to the Companies (Winding Up and Miscellaneous Provisions) Ordinance according to Chapter 5 of the Listing Rules and section 342(1)(b) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance.

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Owned Properties

Buildings

As of the Latest Practicable Date, we owned or occupied 256 properties with an aggregate GFA of approximately 145,756.4 square meters, which are used primarily as premises for business operations and offices. Details of these properties are as follows:

• We have obtained building ownership certificates and land use right certificates, by means of land transfer, for 172 properties with an aggregate GFA of approximately 102,034.4 square meters, accounting for approximately 70.0% of the aggregate GFA of the properties we owned, the land use rights of which have been granted to us. As advised by our PRC legal advisors, we are legally entitled to the building ownership rights of such properties and the land use rights to the land area occupied by such properties, and we have the right to legally occupy, use, transfer, lease, mortgage, or otherwise dispose of these properties.

• We have obtained building ownership certificates and land use right certificates, by means of land allocation, for 46 properties with an aggregate GFA of approximately 9,852.3 square meters, accounting for approximately 6.8% of the aggregate GFA of the properties we owned, the land use rights of which have been granted to us. As advised by our PRC legal advisors, according to PRC Property Law (《中華人民共 和國物權法》) and PRC Urban Real Estate Administration Law (《中華人民共和國 城市房地產管理法》), properties obtained by land allocation can be transferred, leased and mortgaged only when we obtain the relevant land use rights by means of transfer and leasing. Our PRC legal advisors are of the view that there is no legal impediment to occupy and use these properties.

• We owned three properties with an aggregate GFA of approximately 3,664.6 square meters, accounting for approximately 2.5% of the aggregate GFA of the properties we owned. The building ownership certificates belong to our predecessors, namely, Zunyi City Commercial Bank, Qianzhong Credit Cooperative and Anshun Xixiu City Credit Cooperative, but the renaming procedure to transfer the ownership to us has yet to be carried out. Besides, we have not obtained the land use right certificates for the parcels of land occupied by the above properties. As advised by our PRC legal advisors, although the building ownership certificates had not transferred to us, such properties were agreed to be owned by us pursuant to the relevant documentation in connection with our restructuring and incorporation. Furthermore, we have been occupying such properties without knowledge of third-party claims which could materially and adversely affect our business operations as of the Latest Practicable Date, and our PRC legal advisors advised us that our relocation risk with respect to the three buildings is remote. We are actively working on the renaming procedure of transferring the building ownership certificates of such buildings and the acquisition procedure of the land use right certificates.

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• As for two properties with a GFA of approximately 912.7 square meters (representing approximately 0.6% of the total GFA of the properties we owned), which were purchased by us, we have not received the building ownership certificates for such properties or the land use right certificates for the land occupied by such properties. We entered into a property purchase agreement with the relevant real estate developers in respect of such properties. The sellers of the properties have legally obtained valid pre-sale permits and we have paid the purchase prices for the properties. As advised by our PRC legal advisors, the property purchase agreements do not violate relevant PRC laws and regulations.

• As for 33 properties with a GFA of approximately 29,292.3 square meters (representing approximately 20.1% of the total GFA of the properties we owned), we have not obtained the building ownership certificates for such properties or the land use right certificates for the land occupied by such properties for some historical reasons. As advised by our PRC legal advisors, we may freely occupy, use, transfer, lease, pledge or otherwise dispose of these properties after we obtain the building ownership certificates and obtain the land use right certificates by means of transfer and leasing. We believe that if a third party acquires the building ownership certificates for these properties or land use certificates for the land occupied by these properties by bringing up a claim or legal proceeding which may result in our relocation, we will be able to find comparable properties as alternatives with full title certificates or legal leases to continue our business, and such relocation will not have material adverse effects on our results of operations or financial condition.

During the Track Record Period and up to the Latest Practicable Date, the defective legal titles of certain 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 right 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 we 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 our results of operations.

As of the Latest Practicable Date, we have newly purchased seven properties with an aggregate GFA of approximately 157,083.3 square meters which have not been delivered to us. We entered into property purchase agreements with the relevant real estate developers in respect of such properties, who have legally obtained valid pre-sale permits. As advised by our PRC legal advisors, the property purchase agreements do not violate relevant PRC laws and regulations.

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Land

As of the Latest Practicable Date, except for the land areas occupied by the above properties, we owned four parcels of land with an aggregate site area of approximately 70,959.7 square meters. For three parcels of land with a site area of approximately 69,506.9 square meters, we obtained land use right certificates by means of land transfer. For one parcel of land with a site area of approximately 1,452.8 square meters, we obtained a land use right certificate by means of land allocation. As advised by our PRC legal advisors, for the land obtained by means of land transfer, we have the right to legally occupy, use, transfer, lease, mortgage, or otherwise dispose of such land. For the land obtained by means of land allocation, we have the right to occupy and use the land use rights, but we may not freely transfer, lease or pledge the land use rights unless local land administrative authorities in municipal and country governments approve and grant the land use rights.

As of the Latest Practicable Date, our business operations and financial condition had not been subject to any material adverse effect arising from land owned by us.

Leased Properties

As of the Latest Practicable Date, we leased 397 properties with an aggregate GFA of approximately 129,195 square meters, which were mainly used for our business operations and offices. Details of these properties are as follows:

• The lessors of 208 of our leased properties (with an aggregate GFA of approximately 77,485 square meters, accounting for approximately 60.0% of the aggregate GFA of our leased properties) have obtained the building ownership certificates of the properties and/or relevant authorization documents evidencing their rights to lease the properties. As advised by our PRC legal advisors, the lessors have rights to lease the properties and the lease agreements are legal and valid.

• The lessors of 189 of our leased properties (with an aggregate GFA of approximately 51,710 square meters, accounting for approximately 40.0% of the aggregate GFA of our leased properties) have not provided building ownership certificates or relevant authorization documents evidencing their rights to lease the properties. These properties are mainly used as our business premises or offices.

Among them, the lessors of 156 of such properties (with an aggregate GFA of approximately 33,909 square meters, accounting for approximately 26.2% of the aggregate GFA of our leased properties) have provided written undertakings to confirm that they have legitimate leasing rights and undertake to indemnify us for any losses attributable to the defective titles of such leased properties.

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Our PRC legal advisors advised us that the lessors are not entitled to lease the properties if they do not have the ownership of such properties or the consent from the properties’ owners authorizing the leasing. 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 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 that we are not able to continue to use such properties due to the defective titles of such properties, we will be able to find comparable properties as alternatives, and such relocation would not have material adverse effects on our financial position and operations.

• We have not completed lease registration for 373 leased properties.

Our PRC legal advisors are of the view that the non-registration of lease agreements will not affect the validity of the lease agreements, but local housing administrative authorities can require us to complete registrations within a specified timeframe and we may be subject to a fine between RMB1,000 and RMB10,000 for any delay in making these registrations. Therefore, we have the right to use such properties in accordance with the leasing agreement, but may be subject to fines if we are not able to complete the lease registration as required by the relevant local housing administrative authorities. During the Track Record Period, we were not subject to administrative penalties by the relevant housing administrative authorities for non-registration of lease agreements.

INTELLECTUAL PROPERTY RIGHTS

We operate under the name “Bank of Guizhou.” As of June 30, 2019, we held 18 registered trademarks in the PRC, one artwork copyright, four computer software copyrights and two internet domain names. With respect to details of our intellectual property rights, 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 will have a material adverse effect on our business, financial condition and results of operations.

LEGAL AND REGULATORY MATTERS

Licensing Requirements

As of the Latest Practicable Date, we have obtained all of the required business qualifications for operations described in this prospectus.

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Legal Proceedings

We are involved in various claims and lawsuits in the ordinary course of our business from time to time. As of the Latest Practicable Date, we do not expect any of our current pending legal proceedings to have, individually or in the aggregate, a material adverse effect on our business, financial condition and results of operations.

Regulatory Inspections

We are subject to various regulatory requirements and guidelines promulgated by different PRC regulatory authorities, such as the CBIRC and the PBOC, and their respective local branches and offices. These regulatory authorities carry out regular and ad hoc inspections and reviews regarding our compliance with the legal and regulatory requirements in relation to business operations, risk management and internal controls.

During the Track Record Period, the relevant regulatory authorities imposed an aggregate amount of administrative fines of RMB3.2 million on us, principally as a result of the following issues that were reported to us during their inspections and reviews:

Latest submission Date of Implementation of remedial Matters regulatory notice Remedial measures date reports • Penalties against a branch for November 17, • Strengthening customer credit review, December 18, 2015 January 8, 2016 improper bill discounting service; 2015 bill discounting application review and the review of the authenticity of the underlying transactions; and improving the examination and approval procedures. • Penalties against a branch for April 18, 2016 • Enhancing staff training on relevant December 19, 2016 January 17, 2017 inadequate examination of internal rules and regulations, including transaction background in relation loan risk classification guidelines, risk to granting loans, inadequate pre- level classification and related loan due diligence and inadequate procedures; improving our credit risk implementation of policies relating management. to entrusted payment; • Penalties against us as a result of November 4, 2016 • Strengthening risk management over December 7, 2016 January 20, 2017 granting credit loans to related credit facilities; making adequate persons and granting entrusted provision for loans; undertaking loans to lower credit risk; measures to procure the borrowers to create a feasible repayment plan; monitoring the borrower’s operating cash flow. • Penalties against a branch as a June 22, 2016 • Providing front office staff with August 29, 2016 September 28, 2016 result of its failure to fix the stamp trainings for counterfeit bank note on the counterfeit bank notes in forfeiture procedures; raising the front of the relevant customer; employees’ awareness of the importance of timely and clear stamping during forfeiture procedures for counterfeit bank notes.

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Latest submission Date of Implementation of remedial Matters regulatory notice Remedial measures date reports • Penalties against a branch as a September 20, • Enhancing anti-money laundering review October 26, 2017 December 14, 2017 result of its failure to implement 2017 procedures, including arranging customer identification procedures dedicated personnel in the sub-branches and properly keep customer to strengthen review and management identification documentation; capabilities, reviewing customer identification based on relevant anti- money laundering measures, arranging dedicated staff to monitor risk levels of different customers and enhancing review procedures of suspicious transactions with a large amount; and enhancing anti-money laundering related training and raising employees’ awareness of money laundering risk. • Penalties against a branch for August 6, 2018 • Enhancing anti-money laundering review October 8, 2018 October 24, 2018 opening fake name account, failure procedures, including reviewing to properly implement customer customer identification pursuant to identification procedures, failure to relevant anti-money laundering measures properly keep customer and reporting corrective progress to the identification documentation, PBOC local offices; enhancing anti- failure to properly report money laundering training and raising suspicious transactions, providing employees’ awareness of money access to personal or company laundering risk; establishing information without consent, delay implementation review program to or failure to report the relevant regularly test the implementation of customer account opening, change anti-money laundering review or cancellation to the PBOC; and procedures by the relevant branches or departments; and enhancing credit information management. • Penalties against us for improper May 18, 2018 • Enhancing training related to foreign March 21, 2018 August 13, 2018 handling of foreign exchange exchange regulations; streamlining settlement, and failure to report foreign exchange transaction procedures relevant data and information to and enhancing the reporting of credit the SAFE. card offshore transactions and offshore cash withdrawal; and establishing internal rules over the reporting of bank card offshore transactions.

In addition, regulatory inspections and reviews during the Track Record Period have not resulted in any findings of material or systematic noncompliance by us but have identified some deficiencies in our business operations.

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The main findings and recommendations of the CBIRC, among others, include:

• our risk-based classification of certain loans is inaccurate and the allowance for loan losses is inadequate;

• our corporate governance requires more reinforcement, especially the setting of the top-level organizational structure;

• our capital management requires enhancement;

• our peer-to-peer depository system is exposed to network attacks, which reflects the defects in our business process controls and reconciliation systems;

• our credit management requires improvement, including improving pre-loan due diligence and post-loan management and inspection; • our failure to meet certain supplementary credit concentration ratios imposed by the CBIRC in our corporate banking and financial markets business; and

• our failure to meet certain internal loan extension requirements by issuing loan extension to certain ineligible loans.

The main findings and recommendations from the PBOC, among others, include: • strengthening our anti-money laundering efforts and improving our anti-money laundering management system; • strengthening customer identification and properly maintaining customer identity data and transaction records in accordance with the principles of safety, accuracy, completeness and confidentiality; • strengthening our reporting of large-sum and suspicious transactions in our anti-money laundering measures; • improving our implementation of credit and our financial statistical work;

• improving our internal control and management system; and

• improving our credit investigation system, including improving customer information collection and management.

During the Track Record Period, we submitted remedial reports in response to the regulatory recommendations included in the inspection reports issued by the local offices of the CBIRC and the PBOC. As of the Latest Practicable Date, we have not received objections from the regulators in relation to our implementation of the remedial measures. Pursuant to the inspection reports issued by the relevant local offices of the CBIRC and the PBOC, 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 findings and recommendations have no material and adverse impact on our business, financial condition or results of operations, but instead have enabled us to take improvement and remedial measures to prevent the occurrence of similar incidents in the future.

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Compliance with Core Indicators

We have complied with the relevant regulatory requirements and guidelines relating to business operations, risk management, tax compliance and internal control in all material respects. In particular, we are required to comply with the various ratios as required in the Core Indicators for Supervision of Risks of Commercial Banks (Provisional) (商業銀行風險監管核 心指標(試行)) of the CBIRC (the “Core Indicators (Provisional)”). See “Supervision and Regulation – Other Operational and Risk Management Ratios” for details of our compliance with the Core Indicators (Provisional) during the Track Record Period. During the Track Record Period, no administrative penalties had been imposed on us due to noncompliance with the Core Indicators (Provisional) in regulatory checks and reviews.

Anti-Money Laundering

No material anti-money laundering incidents had been identified by, or reported to, senior management during the Track Record Period. For details of our anti-money laundering measures, see “Risk Management – Anti-Money Laundering.”

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OVERVIEW

The primary risks in relation to our Bank’s operations include credit, market, liquidity and operational risks. Our Bank is also exposed to information technology, legal and compliance, and reputational risks.

We have established an integrated risk management system with comprehensive risk coverage and will keep improving this system according to our Bank’s strategic plans, the New Basel Capital Accord, operating objectives and financial conditions.

RISK MANAGEMENT OBJECTIVES AND GUIDANCE PRINCIPLES

We seek to constantly improve our comprehensive risk management system in line with the nature, scope and complexity of our businesses. Our risk management objectives include:

• improving our risk management systems and procedures;

• enhancing our ability to identify, measure, prevent and manage risks;

• continuously improving the quality of our credit assets;

• cultivating a bank-wide culture of risk management, raising awareness of risk management, and enhancing the professional skills of our risk management team; and

• formulating emergency plans for material risks or risk exposure mitigation proposals to avoid substantial losses from natural disasters or human errors.

Our risk management is based on the following guiding principles:

Safety first and operating operate in compliance with national industrial law and in compliance with regulations and regulatory policies. applicable laws and regulations

Driven by value and aim to maximize the benefits after risk adjustment, as prioritizing efficacy well as to focus on customer selection and provide proper products for customers.

Carrying out strategies keep improving our targets learning from the practice of and promoting excellent counterparties and regulatory ratings, as well as transformations rapidly promote the implementation of projects to a high standard based on the New Basel Capital Accord.

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RISK MANAGEMENT STRUCTURE

We have established three lines of defense against the risks associated with our business activities:

• The First Line of Defense consists of our front office business departments and business outlets, which identify, evaluate, address, monitor and report risk exposure at the front end of our operations.

• The Second Line of Defense consists of departments responsible for risk management, credit review and approval, asset preservation, as well as for legal and compliance matters.

• The Third Line of Defense consists of the Audit Department, which monitors and evaluates our risk management procedures and risk events, along with the person in charge and the responsible departments.

The chart below sets forth our organizational structure of risk management as of the Latest Practicable Date:

Board of Directors Board of Supervisors

Strategic Risk and Related Party Supervision Development Committee Transactions Committee Committee

Audit Committee Office of the Senior Board of Directors Management

Credit Review Information Risk Management Assets and Liabilities Investment Management Wealth Management and Technology Committee Committee Committee Review Committee Approval Management Committee Committee

Business Reputational Market Risk Liquidity Risk Operational Asset Credit Risk Continuity Risk Management Management Risk Preservation Management Management Management Committee Committee Committee Management Committee Committee Committee Committee

Risk Management Department, Audit Credit Review Department Credit Information Department, Review Technology Corporate Business Department Department Department, Legal and Transaction Banking Compliance Department, Department, Poverty Risk Management Risk Management Alleviation Department, Department, Financial Accounting and Planning and Department, Planning and Settlement Risk Management Asset Micro and Finance Finance Department, Department, Office, Preservation Small Business Department, Department, Centralized Information Risk Management Department, Department, Financial Market Risk Management Operation Technology Department Risk Management Personal Department, Department Center, Department Department Business Asset Product Department, Management Research and Asset Department Preservation Development Department, Department Centralized and Relevant Operation Departments Center, Internet Finance Department, Credit Card Department

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Our Board of Directors is ultimately responsible for our risk management. It performs its risk management duties through its Risk and Related Party Transactions Management Committee, Audit Committee, and Strategic Development Committee.

Our Board of Supervisors oversees our overall risk management by supervising and examining our Board’s and senior management’s performance of their respective risk management responsibilities and by reporting its findings to the shareholders.

Risk Management Committee

The Risk Management Committee is primarily responsible for:

• supervising the effectiveness of the risk management decision system of the senior management;

• reviewing our risk management policies and risk exposure preferences;

• reviewing and approving proposals on dealing with material risk events.

The Risk Management Committee consists of 21 members and its chairman is Mr. XU An.

Credit Risk Management Committee

The Credit Risk Management Committee is primarily responsible for approving (i) proposals on credit risk management and (ii) disposal plans on material credit risks.

The Credit Risk Management Committee consists of 20 members and its chairman is Mr. XU An.

Asset Preservation Committee

The Asset Preservation Committee is primarily responsible for approving (i) disposal plans on asset preservation and litigation, (ii) restructuring plans on non-performing credit assets, and (iii) write-off plans on non-performing loans.

The Asset Preservation Committee consists of five members and its chairman is Mr. HU Liangpin.

Market Risk Management Committee

The Market Risk Management Committee is primarily responsible for (i) studying and considering market risk management policies and procedures; (ii) reviewing and approving management plans on market risks; and (iii) considering market risk management tools and models and monitoring and evaluating their effectiveness.

The Market Risk Management Committee consists of 17 members and its chairman is Mr. XU An.

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Business Continuity Management Committee

The Business Continuity Management Committee is primarily responsible for (i) devising appropriate business continuity management strategies in accordance with the overall objective, business scale and basic strategies and appetites for risk control of our Bank; (ii) establishing an organizational structure for business continuity management and determining major businesses and their recovery goals; and (iii) reviewing and revising our business continuity plans, monitoring and evaluating their implementation and the results thereof, and constantly evaluating and improving business continuity management.

The Business Continuity Management Committee consists of 22 members and its chairman is Mr. XU An.

Liquidity Risk Management Committee

The Liquidity Risk Management Committee is primarily responsible for (i) planning, coordinating, supervising and guiding the work of liquidity risk management throughout our Bank; (ii) evaluating and supervising the implementation of liquidity risk management measures, liquidity risk appetites, liquidity risk management strategies, policies and procedures, liquidity risk limits and liquidity risk stress test policies and emergency plans; and (iii) evaluating the allocation plans for the liquidity asset structure of our Bank.

The Liquidity Risk Management Committee consists of 10 members and its chairman is Mr. XU An.

Reputational Risk Management Committee

The Reputational Risk Management Committee is primarily responsible for (i) planning, coordinating, supervising and guiding the work of reputational risk management throughout our Bank; and (ii) studying and formulating measures for enhancing our reputational risk management of our Bank.

The Reputational Risk Management Committee consists of 25 members and its chairman is Mr. ZHOU Guichang.

Operational Risk Management Committee

The Operational Risk Management Committee is primarily responsible for analyzing and evaluating the bank-wide operational risk profile, and studying and reviewing measures to improve operational risk management.

The Operational Risk Management Committee consists of 20 members and Mr. XU An is the chairman.

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Credit Review Committee

The Credit Review Committee under the senior management of the head office is a deliberative and decision-making body, which conducts collective reviews on the credit business, evaluates the risks and earnings concerned and votes on the review opinions for approval. Review and approval are conducted by two teams: meeting and review team. In particular, credit businesses within the approval authority of the general manager of the Credit Review and Approval Department of the head office are reviewed and approved by the review team, while credit businesses beyond the approval authority of the general manager are reviewed and approved via meetings.

Branches set up their respective credit review and approval committees based on the structure and model of head office and develop relevant rules of procedure accordingly.

The Credit Review Committee consists of 28 members and its chairman is Mr. CHAI Bolin.

Risk Management Departments at Head Office

Risk Management Department

The Risk Management Department at the Head Office leads and coordinates the bank-wide risk management efforts. It is primarily responsible for (i) organizing the design and release of our risk policies and conducting supervision, evaluation and assessment; (ii) planning and coordinating the implementation and application of the New Basel Capital Accord; (iii) building our risk information management and comprehensive risk management report system, preparing various risk management reports, and producing the overall risk management report of our Bank; (iv) establishing a risk limit management system according to the risk appetites determined by the Board, and supervising and reporting implementations of the limit; and (v) leading the formulation and revision of credit policies and systems.

Credit Review and Approval Department

The Credit Review and Approval Department is primarily responsible for (i) building and constantly improving the review and approval structure and system; (ii) performing the functions and powers of the office of the Credit Review Committee and organizing the meeting conventions of the Credit Review Committee; (iii) building and managing the credit review team, practicing employment of credit review staff with certificates and conducting business training and performance evaluation for the credit review lines; and (iv) guiding the branches and sub-branches to conduct credit review and approval business and to examine performance of duties by the Credit Review Committee.

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Asset Preservation Department

The Asset Preservation Department is primarily responsible for (i) organizing the recovery and disposal of risk assets; (ii) supervising the operation, activation and disposal of risk assets within the operation scope of our Bank; and (iii) examining and approving the risk assets disposal plans of institutions at lower levels and organizing and promoting the implementation thereof.

Risk Management of Branches and Sub-branches

We have established a centralized and vertical risk management structure. Each of our branches and sub-branches has established its own risk management department and positions by carrying on the following.

Branches and • implementing the risk management policies developed by the sub-branches head office;

• monitoring and supervising the risk management policies associated with our business activities;

• completing the asset quality control targets and recovery tasks set by the head office; and

• reporting major risk events to the risk management department of our head office.

Risk Management Policies and Credit Guidelines

We develop risk management policies on an annual basis as the programmatic documents for our bank-wide annual risk management. The risk polices of 2019 specify that we adhere to sound and prudent risk exposure preferences, comprehensively optimize the credit resource allocation, vigorously develop green finance and inclusive finance businesses, and strengthen credit risk prevention and control across the whole process and key areas of credit extension.

We have formulated credit policy guidelines in strict compliance with the national macro-control policies, regulatory policies and regional development policies. We formulated the policies based on the principle of “expanding into some sectors while withdrawing from others.” We actively support industries or sectors such as healthcare, pharmaceuticals, education, cultural media, tourism, tap water supply, sewage and garbage disposal, power grid and clean energy power generation, gas supply, urban infrastructure, transportation, rural ecological management, water conservancy and strategic emerging industries (including high-end manufacturing). We moderately support industries or sectors such as real estate, coal, modern logistics, wholesale and retail, construction and agriculture industrialization. We maintain our credit policies for the industries such as thermal power generation and iron and steel smelting, and keep the overall asset scale for those industries lower than that at the end of the previous year.

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Credit Risk Management for Corporate Loans

Our credit risk management procedures for corporate loans include credit business investigations, credit review and approval, loan disbursement management, post-loan management and non-performing credit assets management. The following flowchart illustrates those procedures for our corporate loan business.

Pre-loan Investigations

Credit Business Investigations Customer Credit Rating

Customer Classification and Access

Appraisal of Collateral, Pledges and Guarantees (if applicable)

Credit Review and Approval Confirmation of Customer Credit Rating

Level-by-level Approval

Execution of Loan Agreements

Loan Disbursement Management Verification of Conditions Precedent

Fund Disbursement

Post-loan Inspections

Risk Monitoring and Alert Post-loan Management Maturity and Collection Management

Loan Classification

Preservation and Recovery of Non-performing Assets, Non-performing Credit Assets Management Liability Attribution of Non-performing Assets

Credit Business Investigations

Pre-loan Investigations

After a corporate banking customer submits a credit application, we would initiate our pre-loan investigation process. Pre-loan investigations provide the basis for loan business review and approval by utilizing primarily on on-site investigations and secondarily on indirect investigations, adopting a combination of qualitative analysis and quantitative analysis to obtain comprehensive and objective customer and guarantee information. We generally 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 if the loan is secured, and information and the relevant supporting documents about its guarantors, if the loan is guaranteed. Our account managers will review relevant documents pursuant to the established criteria and verify their authenticity and effectiveness.

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Customer Credit Rating

Upon the receipt of all necessary documents to our satisfaction and the completion of the pre-loan investigations, our account managers accept the credit application and proceed with the credit rating. A credit rating is a prerequisite for credit extension to corporate banking customers. We rate our corporate customers in ten categories, namely AAA, AA, A, BBB, BB, B, CCC, CC, C and D.

Our credit rating system utilizes 17 rating models to address different scenarios, which take into account various financial and non-financial indicators, including industry sector, business nature and scale of relevant loan applicant. Once our account managers enter the relevant financial and operational data of the loan applicant into this credit system, the system will apply one of these rating models based on the applicant’s specifications to generate a preliminary credit rating for further analysis. In determining final credit category, we conduct further review on relevant factors, including transaction history between our Bank and relevant applicant, shareholders’ background or government support of relevant applicant, as well as business prospect of the underlying projects of the loan.

Subsequent to the loan disbursement, we generally re-rate each customer who has credit balance with us on an annual basis. We will adjust the credit rating of a borrower if there are any significant changes in its financial condition or business operations or if there are any other events that may materially and adversely affect its ability to repay our Bank’s loans.

Customer Classification and Access Management

We implement corporate credit customer access and classification management, that is, to carry out access and classification management for corporate credit customers in accordance with our internal management industry classification for corporate credit customers and under the guidance of our credit policies. Corporate credit customers fall under the categories of support, maintain, compress and exit according to factors such as business capacity, financial strength, risk resistance capacity, cash flow and credit position.

The corporate business departments of sub-branches and branches (including Guiyang management department), corporate business department of head office and other institutions may initiate corporate customer access and classification and set different levels of approval. For details of the approval procedures, see “– Credit Risk Management for Corporate Loans – Credit Review and Approval.”

Appraisal of Collateral, Pledges and Guarantees

Most of our Bank’s corporate loans are secured by collateral, pledges or third-party guarantees. For loans secured by collateral, we require the mortgagers or pledgers to provide detailed information and supporting documents on the collateral including (i) the name, quantity, quality and address of the collateral, (ii) the certificates of ownership, the valuation report and other relevant documents about the collateral, (iii) the identification documents for

– 210 – RISK MANAGEMENT individual mortgagers or pledgers and (iv) signed declarations about the mortgages or pledges. In particular, we set forth compulsory requirement to conduct risk management by two credit staff for cross-checking, requires employees in charge of credit risk management to make mandatory on-site visits to verify and/or obtain original due diligence document used for credit risk evaluation.

We usually select third-party appraisers to independently evaluate the value of the collateral and issue valuation reports and specifies the access and exit mechanisms for intermediary appraisers.

We set requirements on the type of acceptable collateral and maximum loan-to-value ratio. To set maximum loan-to-value ratios for different types of collateral, we take into account various factors including credit risks relating to the loans, valuation of collateral, depreciation of collateral, applicability of collateral and fluctuation of collateral prices and then integrate practices of our peers into our considerations. The maximum loan-to-value ratios for the principal types of collateral securing our Bank’s corporate loans are as follows:

Maximum Loan- Type of Mortgages (Pledges) to-Value Ratio % Mortgages Real estate – residential (for residential mortgage loans to individuals) 80 Real estate – residential (for others) 70 Real estate – commercial 65 Inventories/General movable property 60 Means of transportation 60 Land use rights 70 Projects under construction 50 Mining rights 50 Pledges Margin 100 Certificates of deposit of our Bank 100 Bonds 90 Equity 60 Movable property 70 Bills of exchange, cheques and promissory notes 90 Warehouse warrants and bills of lading 70 Other pledges 90

For guaranteed loans, we conduct a comprehensive analysis of the guarantor’s background to determine the guarantor’s qualifications, capabilities and reliability. We generally require that the borrower and the guarantor are jointly liable for our Bank’s loans. For individual guarantors, we review their identity documents, their repayment ability documents such as employment and salary certificates issued by employers, and other relevant documents.

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For the entity guarantor, we generally require (i) a business certificate, Articles of Association and other necessary organizational documents; (ii) a shareholder resolution or a board resolution to approve the relevant guarantee; and (iii) other files required by our Bank.

Credit Review and Approval

We determine the authority of credit review among different institutions within our Bank based on several factors, including the type of business, credit limit and degree of risks. In addition, to achieve the balance between business development and risk management, we adjust credit review authority from time to time due to various factors.

Approval of corporate credit loan business can be initiated by the head office, branches or sub-branches according to product types and authority as well as our internal procedures under the two-person investigation principle. For application that a branch or sub-branch is permitted to approve, president of that branch or sub-branch is the ultimate person to make the approval. Credit review at this level is generally initiated by entering necessary information into our electronic credit management system. The applications beyond the authority of sub-branch and branch are reported to head office level-by-level for review and approval.

Loan Disbursement Management

Execution of Loan Agreements

After the approval of a loan application, we would enter into a loan agreement and, if applicable, an agreement of collateral, pledges or guarantees with the borrower and the guarantor based on our standard forms. Any deviation from the standard forms must be approved by our Legal and Compliance Department.

Verification of Conditions Precedent

We have established a standardized operational procedure for corporate loan disbursement. Our Risk Management Department is responsible for the overall management and monitoring of our corporate loan disbursement. Our account managers are responsible for handling the post-approval matters including registration of collateral and purchasing insurance for collateral, etc. We require two people to independently conduct a review of these post-approval matters. Our customer managers and disbursement reviewers review, and are responsible for the truthfulness, completeness and compliance of credit granting documents associated with designated projects for the loans, as well as credit granting and guarantee procedures.

Fund Disbursement

Only upon the approval by the disbursement reviewers and authorized approvers would our relevant branches or sub-branches commence the loan disbursement in accordance with our loan disbursement procedures.

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Post-loan Management

Our post-loan management consists of post-loan inspection, risk monitoring and alert, maturity and collection management, loan classification, and non-performing credit assets management.

Post-loan Inspection

After the disbursement of the loans, we conduct routine inspection to our customers at least once a quarter. For customers rated AAA or above, we may conduct inspection in every half year. Meanwhile, for borrowers who are under special situations, we will include them in the list of key post-loan customers, focus on their management and conduct inspection at least once a month. We shall immediately conduct on-site inspections if any of the following circumstances happen to the borrower: (i) the loan risk has developed toward deterioration; (ii) the loan and interest have become overdue, the loan term has been extended and/or assets have fallen due for advance payment; (iii) the customer has stopped production or is operating at half capacity; and (iv) the customer has been involved in significant matters such as investing activities, system restructuring, disputes over creditor’s rights or debts, accidents and compensations that may affect the security of credit assets, and shall initiate risk alert in accordance with relevant measures and regulations.

The focus of on-site inspections includes and is not limited to the borrower’s fund activities, production and operation, financial condition, guarantee condition and other significant matters.

Risk Monitoring and Alert

We conduct regular post-loan review on quality of loans covering multiple factors, including financial indicators, account behavior, nature of relevant industry, legal compliance, regulatory environment, credit rating and sufficiency of guarantee. Upon identifying factors that may negatively affect business operations of the borrower, we will take immediate action based on seriousness of relevant factors and classify the customers from low to high alert level according to the seriousness of potential risks that are expected to affect the credit security.

Unless the risk alert is found to be inaccurate, we require that the problems related to such risk alert be fully solved before the risk alert is cleared. Otherwise, we will set restrictions on relevant businesses based on the risk alert level. We have designed detailed procedures, setting forth the reporting and approval of risk alert clearing or adjustment.

Maturity and Collection Management

The account managers investigate to assess the customers’ fund preparation for repayment of loans and make a clear estimate on whether the due loans can be recovered 30 days before maturity of the loans. When loans become due, the account managers shall alert the borrower to make proper arrangements for funds.

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The account managers shall reinforce tracking management for customers failing to repay the principal and interest or advances when their loans fall due. They shall notify and obtain receipts from borrowers and guarantors within one week (including five consecutive workdays) after the loans or interests became overdue or advances were made from off-balance sheet business. They shall conduct collection against and obtain receipts from customers and guarantors at least once a quarter before customers repay all the overdue loans (advances) and interests. If they fail to obtain any receipt from customers, they may collect the payment in person, serve notarized notices, apply for an order of payment or file lawsuits, as appropriate, to toll the statute of limitation in time.

The account managers shall conduct collection for overdue loans (advances) requiring collection in person at least once a month, urge borrowers to make feasible repayment plans, re-evaluate the effectiveness of the second source of repayment, and closely monitor the asset condition of the borrowers to prevent them from transferring valid assets. We take measures against assets falling into the sub-category of three under special mention in accordance with the Measures for Management of Non-performing Credit Assets of Bank of Guizhou. See “– Non-performing Credit Assets Management” for details.

Loan Classification

For risk management purposes, based on the CBIRC’s five-level loan classification (normal, special mention, substandard, doubtful and loss), we divide our credit assets into five levels and ten sub-categories, including three under “normal”, three under “special mention”, two under “substandard”, one under “doubtful” and one under “loss”, and shall conduct various management measures for assets falling into the sub-category of three under special mention in accordance with the Measures for Management of Non-performing Credit Assets of Bank of Guizhou. See “– Non-performing Credit Assets Management” for details.

We closely monitor the quality of loans and may reclassify corporate loans based on the result of routine inspection and ad hoc inspection. The upgrade and adjustment among the five levels deemed important by authorized approvers at branch or head office level are submitted to the Credit Risk Management Committee in head office for final approval.

Non-performing Credit Assets Management

We carry out liability identification on certain non-performing credit assets, including: (i) new non-performing credit assets and non-performing credit assets that have not been identified; (ii) although not entering non-performing credit assets, the loan principal (or interest) is overdue for more than 90 days. (iii) assets for refinancing and non-performing loan restructuring; (iv) assets that we consider necessary to implement liability attribution for significant risks or other significant events; and (v) already identified, however, if it is found in management that there is in fact a major responsibility missing, it shall be subject to supplementary liability identification.

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We ultimately achieve effective management for non-performing credit assets, i.e., making the assets return to normal, and recovering, maximizing the recovery value or writing off the assets, by taking basic management measures including due diligence, creditor’s rights protection and direct recovery and applying various disposal methods in accordance with the prescribed procedures and authority, refining the management of off-balance sheet assets, prioritizing based on the difficulty of collection and the possibility of recovery, and increasing the intensity of collection. We may also write off qualified non-performing assets according to relevant requirements.

The branches and sub-branches shall promptly carry out key recovery and, if necessary, take judicial protection measures for valuable property clues based on early inspections. We would conduct a rigorous assessment of the responsible department by clearly arranging the non-performing assets and the annual task of cash collection.

Management in Key Risk Areas

Our Bank also pays special attention to key industries such as real estate and mining industries by issuing annual risk management policies, credit guidelines and other documents.

Credit Risk Management for Loans to Real Estate Industry

Our Bank steadily promotes the real estate loan business during the Track Record Period. Our Bank effectively controls the risk exposure to real estate industry by selecting quality commercial and residential housing projects developed by quality customers such as state-owned companies and large-brand real estate enterprises. As of June 30, 2019, our Bank’s non-performing loans to the real estate industry amounted to RMB383.6 million, representing 0.3% of our corporate loans. As of June 30, 2019, the non-performing loan ratio of our Bank in the real estate industry amounted to 4.81%.

Our credit procedures of loans to real estate development are carried out with reference to the basic procedures of corporate credit, which implements credit rating, access, review and approval, loan disbursement and post-loan management. In the meantime, we implement stricter personalized management on customer access and post-loan management. We adopt list-based access for real estate customers and manage the list of access on a dynamic basis, and only conduct real estate related businesses with customers on the list. Our list of real estate customers includes the list of existing customers, newly-developed customers and black-listed customers, and we specify the relevant access standards through relevant administrative measures. For post-loan management, we also adopt a stricter regulatory model for projects in relation to financial asset businesses of real estate, which specifies the regulatory procedures for accounts, projects, sales proceeds and collaterals by formulating relevant policies.

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Credit Risk Management for Loans to Mining Industry

The enterprises engaging in the mining industry are subject to strong business cycle. Our Bank makes dynamic adjustments to our credit policies to reduce our risk exposure and to prohibit all forms of new credit extensions to the entities or projects not in compliance with national industrial policies and market entry conditions. As of June 30, 2019, our non- performing loans to the mining industry amounted to RMB762.8 million, representing 0.6% of our corporate loans. As of June 30, 2019, the non-performing loan ratio of our Bank in the mining industry amounted to 18.28%.

Given the strong business cycle of coal industry, we determine the access standards for coal credit projects based on the coal industry trend for the year, strengthen the credit management on existing projects and control over sales cash flows according to the market trends in our credit policies published on an annual basis.

Credit Concentration Management

We closely and timely monitor the loan balances issued to single individual and group borrower to effectively control the concentration of credit risk generated by loan business expansion and ensure compliance with relevant laws and regulations.

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-loan management.

Pre-loan Investigations

For personal loan applications, we conduct due diligence on applicants through on-site verification or telephone enquiry to verify the borrowers’ identification, occupation and credit status. We require individual applicants to provide information about their personal financial condition, such as their address proof, occupations, source of income, debt status and credit records, and to specify their intended use of proceeds. For personal business loans, we will conduct additional inspections on compliance of business activities, industries, business licenses and production and operation plans of applicants.

For personal loans secured by collateral and pledges, we usually designate a third-party appraiser to verify the value of the collateral and pledges. For guaranteed personal loans, we also investigate the guarantors’ background and credit history.

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Credit Review

We determine the authority of credit review among different institutions within our Bank based on the value of products to be approved. We routinely adjust detailed standards on authorization structure based on our business status changes in various elements of different local markets, geographic location of certain branches or sub-branches and nature and specification of relevant collateral.

Credit Approval for Personal Consumption Loans and Residential Mortgage Loans

We implement hierarchical approval for personal consumption and residential mortgage loan business. Our review and approval, procedures and persons in charge at all levels are as follows:

• For business within the authority of sub-branch, it shall be accepted and investigated by the account manager, then reviewed by the examiner of sub-branch, and submitted to the president of sub-branch for approval. The post of examiner of sub-branch shall be held by other credit staff on a part-time basis so as to achieve post separation.

• For business within the authority of branch, it shall be accepted and investigated by the account manager, next reviewed by the president of sub-branch, and then submitted to the examiner of branch for review and approval, and competent approvers of branch for approval beyond the authority of examiner. The examiner of branch shall approve business within its authority, and business beyond its authority shall be submitted to competent approvers of branch for approval.

• For business within the authority of head office, it shall be accepted and investigated by the account manager, next reviewed by the president of sub-branch, and then submitted to the president of branch and the examiner of head office for review, and further reported to competent approvers of head office for approval. If the loan disbursement procedures are initiated by the account manager of sub-branch, it shall be approved by the president of sub-branch, next reviewed by the examiner of loan disbursement center and then processed by the financial staff. If the borrower fails to use the loan within 12 months after issuance of the approval notice, its application shall be resubmitted in accordance with the review and approval procedures.

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Credit Approval for Personal Business Loans

The micro and small business department of head office and branches is the unified management department for personal business loans. It adopts the review committee system and its procedures and persons in charge are as follows:

• The micro and small business department of the head office and risk management department of each branch are the review departments for micro and small loan business. The reviewers shall review the compliance, effectiveness and completeness of customer information and credit investigation information handed over by the customer department or subordinate bank and focus on reviewing credit policies and risks.

• After the review, the reviewers shall draw conclusions. Specifically, they will submit qualified loan business to the review committee for consideration; for loan business with incomplete credit information and incomplete and unclear investigation contents handed over, the reviewers may require the customer department or subordinate bank to supplement; for loan business not in compliance with national industrial policies or our credit policies or projects of significant risks, the reviewers shall return the materials and make records.

• The review committee shall consider and vote on loan business to be reviewed at the meeting as presided over by its director according to its working rules, form its decision-making opinions (consent, veto or require a separate meeting), and report to its director for signing approval opinions.

• For loan business requiring to be reviewed at a separate meeting based on its approval conclusion, the handling bank shall initiate a meeting after making supplement and investigations on the renewed information as specifically required by the approval notice.

• The approval notice shall be issued upon consent of competent approvers. If the borrower fails to use the loan within six months after issuance of the approval notice for business loans, its application shall be resubmitted for approval in accordance with the operational procedures for reviewing micro and small loan business.

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Loan Disbursement

The disbursement procedure for personal loans is generally similar to that of our corporate loans. Upon the approval of a personal loan application, we would enter into a loan agreement and other ancillary agreements with borrowers, setting forth the key terms of the loan and, where applicable, the collateral and guarantees. We would disburse the funds to personal customers only upon the satisfaction of all the conditions precedent specified in the credit approval and the agreements.

Post-loan Management

The key inspection areas of post-loan management on personal consumption loan business include (without limitation): (i) keeping abreast of the changes in borrowers’ basic information and updating the information such as contact details of borrowers in a timely manner; (ii) contacting borrowers through calls or visits to learn about and keep abreast of the changes in factors which affect their repayment abilities and willingness; (iii) conducting inspection on the changes in the eligibility and capabilities of guarantee of guarantors as well as the completeness of and changes in the value of the collaterals; and (iv) changes in other factors which may affect the asset quality of consumption loans.

Routine inspections for personal business loans include first-time post-loan inspection and regular inspections. Within 15 days after the use of loans by borrowers, the account managers shall conduct post-loan inspection for the first time, mainly checking the use of funds by customers and collecting evidences for the use of credit funds. We shall conduct regular on-site inspection at least once a quarter, including but not limited to inspections on the borrowers’ basic information, credit standing, repayment, finance, business operations and other circumstances that may affect their repayment abilities, compliance of loan use (loan fund flow), registration, use and ownership of collateral, value change, guarantors’ operation, finance, credit standing and margin account movements, contract management and others.

The means of post-loan inspection for residential mortgage loan include monitoring loan accounts, checking the ledger detail of non-performing loans, conducting telephone and face-to-face interviews, conducting field inspection and monitoring fund use. Post-loan management staff conduct dynamic maintenance on buildings provided to us as collateral and timely update the building information.

Our risk monitoring and alert, loan classification, maturity and collection management and non-performing assets management for personal loans are generally similar to that for our corporate loans.

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Credit Risk Management for Financial Markets Business

Our financial markets business is exposed to the credit risk associated with interbank market transactions, investments in debt securities and SPV investments such as trust plans and assets management plans. The Investment Business Management Committee and the Wealth Management Business Review Committee at the head office is the management authority for the credit risk management of our financial markets business. After being reviewed by a professional panel, our proprietary investment business and wealth management investment business are submitted to the Investment Business Management Committee and the Wealth Management Business Review Committee respectively for review, effectively optimizing the financial markets business approval process and establishing an efficient approval structure.

Credit Risk Management for Interbank Business

Our interbank business includes interbank lending, interbank deposits, interbank borrowing, interbank payment, financial assets held under resale agreements (financial assets sold under repurchase agreements), interbank financing business and interbank investment business. We have developed corresponding management systems for specific business types.

The interbank business shall be conducted in accordance with the following principles: (i) principle of specialized department. The Financial Markets Department of the head office is the sole specialized department in charge of our interbank business, and other departments and branches or sub-branches may not operate interbank business without authorization; and (ii) principle of “credit first”. Interbank credit extension of by us must be obtained to carry out interbank businesses involving credit risks, the transaction amount shall constitute part of the interbank credit line of counterparties, and no transaction may be conducted with no credit or beyond credits.

We allow cooperation with interbank business customers in accordance with the following principles:

• Principle of prudent and decentralized cooperation

When conducting interbank cooperation business with interbank business customers, we carefully select those with strong business innovation capabilities, risk management capabilities, profitability and standardized internal management to conduct business in compliance with the access conditions and procedures and based on the regulation of duration management, due disclosure of information and establishment of withdrawal mechanism. Under the same conditions, we select those interbank business customers with stronger business synergy and more favorable rates.

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We cooperate with a wide range of commercial banks and financial institutions with different backgrounds, regulatory ratings, operational and asset scale, ranking, business focus and geographical coverage to mitigate our credit and operational risks. In order to reduce business concentration, we adopt a credit limit control system applying diversification strategy to prevent concentration risk.

For our key interbank business customers, we set different limits on exposure in accordance with which type they correspond, including state-owned policy banks, state-owned commercial banks, national Joint-stock Commercial Banks, listed city commercial banks, listed rural commercial banks, provincial commercial banks, provincial-level rural credit cooperatives, securities companies with regulatory ratings above BBB, trust companies, fund companies and insurance companies, other city commercial banks and other financial institutions. We categorize the credit limits extended to our interbank business customers into seven levels, ranging from 10% to 25% of their respective net tier-one capital. Any exposure to a single interbank business customer that exceeds its credit limit will be deemed as over-concentration. We carry out our business in a prudent manner and closely monitor our concentration status to safeguard against undue risk concentrations from excessive exposures to particular counterparties.

For the other interbank business customers, we adopt both quantitative and qualitative methods to carry out our evaluation. As for banking financial institutions, quantitative evaluation accounts for 75% of their total evaluation results and qualitative evaluation accounts for 25%, while as for non-banking financial institutions, quantitative evaluation accounts for 70% and qualitative evaluation accounts for 30%.

Our quantitative evaluation takes into account a financial institution’s credit standing, equity structure, operating management, operating history, corporate structure, management team and other information disclosed.

We also conduct regular qualitative evaluation, at least once a year, on our interbank business customers’ capital strength, business operations, asset quality and scale, operating conditions, profitability, liquidity, compliance with regulatory indicators and other external factors that could affect their ability to honor their contractual obligations. Specifically, we grade our interbank business customers based on the aforementioned evaluation criteria. The weighted proportions of the evaluation criteria vary among different types of interbank business customers. For example, capital strength accounts for 26% of the total evaluation for banking financial institutions while it would account for 16% of the total evaluation for trust companies. In addition, to assess each criterion, we consider different factors for different types of interbank business customers. The table below sets forth the key factors concerned in respect of the major type of our interbank business customers.

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Compliance Capital Asset quality Operating with regulatory strength and scale conditions Profitability Liquidity indicators Others Banking financial Asset adequacy NPL ratio; – Return on assets; Current ratio; –– institutions ratio; core allowance return on loan-to-deposit capital coverage ratio; equity; non- ratio; net adequacy the loan ratio of interest borrowing ratio; owner’s the largest single income ratio; ratio equity. customer and operating largest ten expense ratio; customers; profit growth relations between related parties; total assets

Securities companies Net assets; total Net capital Underwriting Return on assets; Current ratio – External assets business share return on guarantee and in the primary equity; profit contingent market; growth liabilities/net brokerage assets business share in the secondary market; asset management business

Trust companies Owner’s equity; NPL ratio; trust – Trustee revenue Current ratio Trust loan-to- – trust assets compensation ratio; return trust assets provision on equity ratio; related coverage ratio; party risk assets transactions; provision interbank coverage ratio borrowings/net assets; external guarantee/net assets Fund companies Net assets; total NPL ratio Operating Return on assets; ––– assets; fund expense ratio return on management equity; profit scale growth

Others Net assets; total NPL ratio Operating Return on assets; Current ratio – – assets expense ratio return on equity; profit growth

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Based on the aforementioned evaluation system, we give other interbank business customers their respective numerical evaluation results, and then use such evaluation results to decide the corresponding internal ratings and credit limits. An interbank business customer with evaluation results below 50 will have its credit application rejected. The table below sets forth the credit limits corresponding to the different levels of evaluation results.

Internal Evaluation results credit ratings Credit limits Above 85 A Net tier-one capital * 25% 75 to 85 B Net tier-one capital * 25% * 90% 60 to 74 C Net tier-one capital * 25% * 80% 50 to 59 D Net tier-one capital * 25% * 70% Under 50 E0

We closely monitor the financial performance and operating status of our interbank business customers after setting their credit limits. Our financial market department is responsible for detecting potential risks of interbank business customers and will inform the risk management department on the same day as they identify any significant issues which may materially increase our credit risks. Our risk management department sets and adjusts risk classifications based upon potential risk alert signals, such as deterioration of business conditions, material default, noncompliance events and misrepresentation in their credit application documents. The initial credit limit will be valid for one year and may be extended for another two years upon approval. We reevaluate our existing interbank business customers in a timely manner when they apply for extension.

• Principle of list-based management

Our Bank adopts a list-based management to cooperate with interbank business customers, and formulates the list of cooperation according to the following criteria: (a) state-owned policy banks, state-owned commercial banks, national Joint-stock Commercial Banks, listed city commercial banks and listed rural commercial banks; (b) top 30 foreign banks according to the worldwide ranking announced by “The Banker”; (c) other city commercial banks meeting all of the following conditions: (1) with total assets more than RMB100 billion, (2) having over five years of continuous operations, (3) no material risk event having occurred during the past year and (4) achieved positive net profit in the past three consecutive years. During the business operation, we strictly adhere to those institutions on the list for cooperation, and update the access criteria and the list itself on an annual basis in principle.

• Principle of dynamic adjustments

In order to ensure the smooth business cooperation and prevent risks of cooperative institutions, we make dynamic adjustments to the list of cooperative institutions and pay close attention to the business development as well as changes in market ranking and other external information of cooperative institutions in a real-time manner.

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Pursuant to the Measures for the Administration of Interbank Credit Extension of Bank of Guizhou (《貴州銀行同業授信管理辦法》), interbank businesses sharing the interbank credit must obtain the interbank credit in advance and carry out business within the credit line. We assess the interbank credit limit by adopting the key interbank credit client list system and credit rating, and reasonably determine the total amount of interbank credit according to the corresponding rules within the credit limit. According to the business needs, the Financial Markets Department of the head office designs the credit plans, proposes credit investigation opinions, and submits the application to the Credit Review Department of the head office for review. After the Credit Review Department of the head office issues a review report, it will be submitted to the Credit Review Committee of the head office for review and approval by the authorized approver thereafter.

The Financial Markets Department of the head office establishes a management ledger of total credits to monitor the use of limits and recovery of business. The credit list and total credits of key interbank clients are developed on an annual basis and dynamically adjusted according to the changes in client conditions. The Financial Markets Department also monitors the risk profile of interbank credit institutions and makes timely reports. Non-performing assets arising from businesses under interbank credit are settled and disposed of by the business beneficiaries according to the principle of “beneficiary takes responsibility”, and the Asset Preservation Department of the head office is responsible for unified coordination and management.

Credit Risk Management for Investments in Debt Securities and Special Purpose Vehicles

We have implemented a variety of specific risk management measures to control the risks associated with our investments in debt securities and other financial assets through SPV.

Investments in Debt Securities

We adopt a unified credit risk management system and apply the principle of prudence in managing the credit risks arising from our investments in debt securities. The investments in debt securities issued by our customers in Guizhou Province are initiated by our corporate department and are reviewed and approved by the Credit Review and Approval Committee at our head-office level. Investments in debt securities issued by our customers out of Guizhou Province are initiated by the financial market department and reviewed and approved by both the Credit Review and Approval Committee and Investment Management Committee at our head-office level. We apply a stringent dual investigation system to conduct due diligence procedure similar to that for corporate loans. We also monitor material fluctuation of the fair value of active traded debt securities, overall market condition, as well as impact on our capital adequacy, liquidity, and the maturity structure of our assets and liabilities. We also classify the credit risks of our investments in debt securities into five categories in accordance with the guidelines on loan risk classification system set forth by the CBIRC.

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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 SPV investment.

Unified Credit Risk Management System. We adopted a unified credit risk management system for our SPV investments, in addition to strict enforcement of regulatory requirements. We control the credit risk relating to the underlying assets of such investment, and conduct credit rating, customer access, due diligence and investigation and approval with reference to loans, which will be submitted to the Investment Business Management Committee for consideration after being approved and passed by the Credit Review Committee. Our head office is the only authority to approve and issue SPV investments.

Due Diligence. For SPV investments, we apply a stringent due diligence procedure similar to that for corporate loans. We utilize a dual investigation system to conduct due diligence on the counterparties and the ultimate financing parties or the underlying assets prior to the investment, in accordance with our internal regulations, Bank of Guizhou Credit Management Rules and Corporate Credit Management Regulations of Bank of Guizhou.

Review and Approval. We apply a stringent credit review and approval procedure similar to that for corporate loans, while all the SPV investments are reviewed and approved at our head-office level. Depending on various investment targets, our SPV investments are categorized into bank’s projects and non-bank projects. The bank’s projects refer to projects in which the underlying assets have been credited, while the non-Bank projects refer to projects in which the underlying assets have not yet been credited before the project is approved under additional review. They are under the different review and report system and initiated by different departments. For non-bank projects, other than the routine due diligence of credit risks of the underlying assets, the involved interbank institutions have to obtain interbank credit lines from financial market department at our head office and approval by our head office credit rating review committee and investment management committee. After being reviewed by a professional panel, our proprietary investment business and wealth management investment business are submitted to the Investment Business Management Committee and the Wealth Management Business Review Committee, respectively, for review, effectively optimizing the financial markets business approval process and establishing an efficient approval structure.

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Inspections and Monitoring. The financial market department at each level is responsible for inspections and post-issuance monitoring. Senior managers in sub-branches take the responsibility of, and actively participate in, supervising all the investment projects. After investing in projects, we continue to track and manage financing parties in order to monitor their operation and financial condition in real time. Post-investment management includes account supervising, post-investment examination, risk alert, provisional management, risk classification, non-performing assets management, document management and summarized evaluation. We implement differentiated and focused post-investment management according to different investment targets and carry out focused and general management according to the extent of risks. We perform initial, regular and ad hoc examinations across different stages.

Classification. We have since 2015 prudently adopted a five-category risk classification system for all non-loan credit asset, including financial assets under our SPV investments, in accordance with the guidelines on loan risk classification system set forth by the CBIRC. See “– Risk Management Structure – Credit Review and Approval – Post-loan Management-Loan Classification” for further details on classification criteria. The following table sets forth a breakdown of our non-loan assets by risk classification category as of the dates indicated.

December 31, June 30, 2016 2017 2018 2019 (in millions of RMB)

Normal 179,664.4 200,092.3 203,903.3 240,933.2 Special mention 799.7 1,058.7 1,123.7 2,338.3 Substandard 1,868.3 1,112.1 447.6 184.9 Doubtful 150.9 1,069.9 1,579.8 66.1 Loss 2.7 2.7 1.4 8.3 Total 182,486.1 203,335.7 207,055.9 243,530.8

LIQUIDITY RISK MANAGEMENT

Liquidity risk refers to the risk of failing to liquidate a position in a timely manner or failing to acquire sufficient funds at a reasonable cost to fulfill payment obligations. Factors affecting our liquidity include changes in the maturity structure of our assets and liabilities and financial market policies, such as changes in the statutory deposit reserve ratio. We are exposed to liquidity risks primarily in our lending, trading and investing activities, as well as in the management of our cash flow positions.

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The organizational framework of our liquidity risk management focuses on formulating, implementing and supervising the separation of duties in relation to liquidity risk management policies and procedures. The Board of Directors assumes ultimate responsibility for liquidity risk management. Senior management is responsible for liquidity risk management, while the Liquidity Risk Management Committee is responsible for implementing liquidity risk management policies and procedures. The Board of Supervisors is responsible for monitoring and evaluating the implementation of liquidity risk management by the Board of Directors and senior management. The Planning and Finance Department is responsible for daily liquidity risk management.

The objective of liquidity risk management is, by establishing timely, reasonable and effective liquidity risk management mechanisms, to identify, measure, monitor and control liquidity risks, meet the liquidity needs of our assets, liabilities and off-balance sheet businesses on a timely basis, and control liquidity risks at an acceptable level to maintain sustained and healthy operations.

According to the Measures for the Liquidity Risk Management of Commercial Banks (Provisional) (effective as from October 1, 2015) issued by the CBIRC, we continually improve liquidity risk management, strictly implement regulatory rules, closely monitor liquidity indicators, enhance maturity management of cash flows, formulate emergency plans and enhance liquidity risk management and stress tests.

We manage liquidity risks with instruments such as position monitoring and reporting, cash flow analysis, liquidity stress test, liquidity risk limits and liquidity risk indicators. We have implemented the following measures to achieve these objectives:

• Optimizing the maturity structure of assets and liabilities. We provide instructions for business departments to adjust the maturity structure of assets and liabilities based on the maturities of these businesses through fund transfer, price orientation, and business development.

• Maintaining appropriate balance between loan business and bond investments.We seek to increase our liquidity by (i) increasing the ratio of loans to SMEs which have shorter maturities; (ii) adjusting the distribution of borrowers in certain industries and the maturity of loans; and (iii) increasing investments in bonds with high liquidity.

• Establishing and improving financing strategies. Based on a comprehensive assessment of a customer’s liquidity sensitivity, financing costs and sources of funds, we prioritize customer savings, adjust the sources and channels of funds through market financing, interbank savings and market lending and enhance the diversification of financing sources and promote financial stability.

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• Monitoring liquidity risk indicators and conducting risk limit management.We monitor key indicators of liquidity risks, such as the liquidity coverage ratio, liquidity gap ratio, surplus reserve ratio, savings percentage of top ten accounts, and the proportion of top ten interbank financing. Our Planning and Finance Department analyzes liquidity risk indicators and stress test results on a monthly and quarterly basis.

• Conducting stress tests. We conduct stress test on a quarterly basis to analyze liquidity risks. We may also conduct temporary or special stress tests for particular scenarios during significant market fluctuations or when required by regulatory authorities. Our Planning and Finance Department conducts liquidity stress tests on a periodic basis, analyzes its ability to handle stress events and evaluates our liquidity buffer asset profile and financing capacity in extreme situations, all with the goal of minimizing liquidity risks.

• Formulating liquidity emergency plans. We formulate liquidity risk emergency plans based on the business scale, attributes, complexity, risk levels, organizational structure and market influence as well as consideration of stress test results.

• Improving liquidity report system. Our Planning and Finance Department monitors and reports relevant indicators, stress tests, management situations and adjustment recommendations to senior management quarterly. The Financial Markets Department and other business departments formulate various reports according to their respective management functions and submit required to reports to the Liquidity Risk Management Committee to the office of the Committee.

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. The major market risk 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 the our risk appetite.

We have established a comprehensive market risk management system covering our Board of Directors, Board of Supervisors, senior management, and business departments, including Risk Management Department, Audit Department, Asset Preservation Department, Legal and Compliance Department and other departments in charge of risk management relating to their business.

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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 Management Committee, which is responsible for reviewing detailed internal rules and regulations on market risk management, conducting periodic analysis on bank-wide market risks and advising relevant mitigation measures. Our Risk Management Department is responsible for the implementation of bank-wide market risk management policies and measures. Our Audit Department is responsible for monitoring 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.

Our market risk management consists of the identification, measurement, monitoring and control of market risk. We primarily employ gap analysis, duration analysis, stress test and scenario analysis in measuring and monitoring market risk.

Interest Rate Risk

Interest rate risk arises primarily from fluctuations in the prevailing interest rates, as well as the mismatch in the re-pricing dates or 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 for RMB-denominated loans at their own discretion. 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.

We have implemented uniform interest rate management policies to better manage the interest rate risk. We price 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 our competitors’ products as well as the business relationship between our customers and us. We periodically conduct sensitivity analysis on interest rates. We analyze the interest rate gap between interest-earning assets and interest-bearing liabilities periodically and closely follow the latest development of economic policies, based on which we guide our business development and improve our predictions on the interest rate volatility. We make timely adjustments to the size and structure of assets in response to changes in the market environment.

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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, worksite security, business interruptions, information system breakdown, and defects in the execution and settlement of transactions and operational procedure management.

Principles of Operational Risk Management

We strictly follow the Guidelines on the Operational Risk Management of Commercial Banks promulgated by the CBIRC and have formed our operational risk management policies and prepared the following key principles:

• Effectiveness. The operational risk management system should be consistent with the Board’s strategic arrangements, so that the system can be implemented comprehensively and problems in internal control can be tackled and corrected in a timely manner;

• Comprehensiveness. Operational risk management should penetrate into our business management and various operational procedures and operational links, cover all the institutions, departments and posts, and involve all the employees. Any decision or operation should be well documented;

• Prudence. Starting from risk prevention and prudential operation in our operational risk management, we shall reflect the principle of “giving priority to internal control” in various operation and management activities, particularly in activities involving the reform of relevant systems, establishment of new institutions and provision of new businesses;

• Cost efficiency. We shall inspect and identify major risk points in our operational risk management, stress the key points and strive to reduce the cost for operational risk management to ensure that the best control results can be achieved through reasonable cost control.

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. We have established “three lines of defense” against operational risk. The first line of defense is formed by various business departments of our head office, branches and sub-branches. The second line of defense includes our Risk Management Department, Legal and Compliance Department and other risk management-related departments. Our Legal and Compliance Department is responsible for leading the formulation of operational risk management policies and procedures and reviewing the effectiveness of operational risk management implemented by our branches and sub-branches at all levels. Our Legal and Compliance Department is also

– 230 – RISK MANAGEMENT responsible for leading the establishment of our operational risk management system and ensuring the uniform application and effectiveness of our operational risk management. The third line of defense is our Audit Department, which is responsible for conducting independent valuation of our operational risk management system and monitoring the implementation and 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 every aspect of the operational procedures in our head office, branches and sub-branches. We provide continuous training to improve our employees’ skills and require all of our employees to strictly follow these operational procedures in their daily work, regardless of whether they are responsible for business development or risk management. Compliance with these procedures is an important factor in evaluating our employees’ performance.

Bottom-Up Operational Risk Reporting System

We have established a bottom-up operational risk reporting system. Our business departments at the head office and branches report their operational risk management status and loss events to the Legal and Compliance Department, which submits reports on operational risks to our Board of Directors, Board of Supervisors and senior management. In addition, the relevant employees shall file a report to departments in charge of operational risks in the same time. We have formulated a code of conduct and other internal policies to encourage our employees to report misconduct upon discovery in a timely manner.

Normalized 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 positions, key business links, key organizations under inspection and staff’s abnormal behavior, in order to effectively eliminate potential operational risks.

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 on legal rights of others or otherwise in connection with any contract or business activity in which we are involved.

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The Legal and Compliance Department at our head office and the corresponding departments at the branch level are responsible for the 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 for all types of business bank-wide to be reviewed by the Compliance Department at our head office, branches, or sub-branches to prevent legal risks and ensure the legality of our operational activities.

• Formulating form agreements. Our head office formulates form agreements for frequent operational activities and uses them in our businesses to reduce legal risks.

• Strengthening litigation management. Our head office manages our litigation cases. We study and discuss the action plans upon litigation and enhances case management capability to reduce legal risks.

• Periodic legal training. We conduct bank-wide legal training every year to enhance our employees’ legal knowledge and risk awareness.

• Legal risk alert system. For common legal risks in our business operations, we publish legal risk alerts on our website to remind our employees to prevent and reduce the occurrence of legal risk incidents.

Compliance Risk

Compliance risk refers to the risk of being subject to legal sanctions, regulatory penalties, significant financial loss and reputational loss as a result of failure to comply with laws, regulations and rules. The objectives of our compliance risk management are to effectively identify, evaluate and prevent compliance risks by establishing a sound mechanism of compliance risk management, thereby building up a comprehensive risk management mechanism to ensure our compliance with laws and regulations.

We carry out compliance risk management mainly through the following measures:

• Compliance resource allocation. We hire sufficient compliance management personnel with appropriate qualification, experience and expertise to provide adequate support to the compliance work in each business line and branch.

• Monitoring and control of the compliance risk. We conduct periodic analysis on business procedures and identify and verify the compliance risk points. Our compliance departments provide bank-wide compliance consultation relating to relevant domestic and international laws, regulations and internal policies. We issue compliance risk notifications when certain conditions are met.

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• Compliance risk reports. Each business department and branch reports compliance risk-related information to the person in charge of such business department or branch, and simultaneously to the Compliance Department at our head office. The Compliance Department at our head office consolidates this information and report to the senior management.

• Compliance performance review, accountability and reporting. We have incorporated compliance into our performance review system to emphasize the importance of compliance. We have established compliance accountability and reporting mechanism to encourage our employees to participate in compliance risk management.

• Compliance culture. We believe that compliance creates value for us and dedicate to cultivating a compliance culture among all of our employees. In light of the increasingly strict regulatory requirements imposed by the banking regulatory authorities recently, we are strengthening our internal compliance checks and inspections for relevant businesses; evaluating and optimizing the operational policies and procedures for relevant businesses; increasing the proportion of compliance in the evaluation mechanism; adopting strict accountability internally; conducting compliance training, etc.

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 bank-wide organizational structure for anti-money laundering and developed internal control measures and standard operational procedures, which enable us to effectively identify, evaluate, monitor, control and report money laundering risk. We have set up an anti-money laundering leading group, which is headed by our senior management, to lead, decide, deploy and coordinate the bank-wide anti-money laundering policy implementation. The Legal and Compliance Department is responsible for leading the anti-money laundering management and coordinating with all the business departments, functional departments, branches and sub-branches in implementing the internal control policies and operational procedures about anti-money laundering.

We have developed internal policies and procedures with respect to anti-money laundering which are primarily related to customer due diligence, transaction history record keeping, suspected terrorism financing, money laundering risk classification, and large and suspicious transaction reporting.

We have formulated our Customer Money Laundering Risk Classification Policy to classify our customers into four levels based on their money laundering risk. For customers who newly established business relationship with us, we review the customer’s information and classifies their risk levels. We continuously monitor the status of existing customers and changes in their transactional records and adjust their risk levels as appropriate.

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We have established a management system for large and suspicious transaction reporting and have formulated independent monitoring rules and models according to the requirements set forth by the regulatory authorities.

INTERNAL AUDIT

We believe internal audit is essential to the sustainable development of our business operations. The objectives of our internal audit are to enhance our internal control and risk management, improve corporate governance and monitor implementation of relevant rules and regulations by our departments and employees.

We have established an independent internal audit system where the Board of Directors undertakes ultimate responsibility to ensure the independence and effectiveness of internal audit. We have set up the Audit Committee to guide and supervise our internal audit work, and the Board of Supervisors is responsible for supervising the internal audit work. The Audit Department prepares the annual audit plan for approval by the Audit Committee and the Board of Directors. During routine audits, we 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 special audits on our exposures to various risks such as credit risk, market risk, operational risk and information technology risk. We carry out our internal audit work on-site or off-site and issue audit reports afterwards. To ensure that the audited units have taken proper rectifying actions in response to audit suggestions, our Audit Department conducts subsequent audits and provide reports on the results of the rectifying actions.

INFORMATION TECHNOLOGY RISK MANAGEMENT

Information technology risks include operational risk, reputational risk, legal risk and other types of risks caused by natural or human factors, technical loopholes and management failure arising from our use of information technology. We make efforts to identify and monitor information technology risks by establishing an effective mechanism to operate our business. We strive to continuously improve our information technology infrastructure and keep our management in line with the ISO27001 standard and the Guidelines on Information Technology Risk Management of Commercial Banks issued by the CBIRC.

Similar to other banks and financial institutions, we rely on proper functioning of the information technology systems for our business operations. As a result, disruptions of our information technology may severely damage our internet banking or mobile banking operations. We have established an information technology risk control self-assessment mechanism, which requires each of our departments to identify, register and evaluate the risks relating to information technology and take proper mitigation measures. 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.

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Information Security Management

We have established a complete information security organizational structure, which covers the security management for physical conditions, 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 have established a series of information security management measures covering various areas in order 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, antivirus software, firewall and malicious code protection. 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 enable us to deal with any red flag issues promptly.

Business Continuity Management

As part of our business continuity management measures, we have established several disaster backup infrastructures in different cities, which provides back-up plans for our important information system in the event of fire, construction breakdown and interruption of electricity and telecommunication. We have also established detailed contingency plans regarding the potential breakdown of information system to ensure the continuity of our operations. We regularly conduct business continuity-related training to ensure the effective control of business continuity risks.

Information Technology Audit

We carry out comprehensive internal audits at least once every three years to safeguard the effective implementation of our various risk management measures. Our Audit Department formulates, implements and adjusts internal audit plans, inspects and evaluates the comprehensiveness and effectiveness of our information technology system and internal control regime, and completes the internal audit work pursuant to the audit plans. We may also engage external experts to carry out external audits upon our hardware, software, files, and data in order to identify existing risks associated with our information technology.

REPUTATIONAL RISK MANAGEMENT

Reputational risk refers to the risk of negative comments from relevant interested parties resulting from our operations, management and other activities or external events. We seek to establish an effective reputational risk management mechanism to monitor, identify, report, and control our reputational risk.

We have established a tiered organizational framework for reputational risk management. Our Board of Directors bears the ultimate responsibility for reputational risk management. We have established the General Office at our head office to deal with publicity and handle material or emergent reputational events.

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We collect, organize, and analyze information in relation to our reputation every day. By enhancing our relationship with the media, we strive to promote positive publicity and receive positive feedback on our business operations. We also conduct regular review of our reputational risk and issues risk alerts for potential reputational risk incidents.

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Upon Listing, 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. Certain transactions will continue following the Listing Date, thereby constituting our continuing connected transactions under the Listing Rules.

EXEMPT CONTINUING CONNECTED TRANSACTIONS

We are a commercial bank incorporated in the PRC and regulated by the CBIRC and the 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 (including but not limited to substantial shareholder, Directors, Supervisors, president and/or their respective associates). Set forth below are details of various continuing 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, if any) in the ordinary and usual course of our business, and thus are fully exempt from all disclosure, annual review and 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 to Connected Persons

We grant loans in the ordinary and usual course of our business to certain of our connected persons on normal commercial terms (or commercial terms that are better to us, if any) with reference to prevailing market rates. We expect that we will continue to provide loans and credit facilities to our connected persons following the Listing, which will constitute continuing connected transactions of us under Chapter 14A of the Listing Rules.

The above loans and other forms of financial assistance 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 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 connected persons on normal commercial terms (or commercial terms that are better to us), and thus will be fully exempt from all disclosure, annual review and shareholders’ approval requirements under Chapter 14A of the Listing Rules.

• Commercial Banking Services and Products Provided in the Ordinary and Usual Course of Business – Deposit Taking

We take deposits in the ordinary and usual course of our 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 Listing, which will constitute continuing connected transactions of us under Chapter 14A of the Listing Rules.

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The deposits placed by our connected persons are at normal interest rates, on normal commercial terms (or commercial terms that are better to us, if any) and not secured by the assets of our Bank.

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 placed with a listed issuer on normal commercial terms (or commercial terms that are better to the listed issuer) and not secured by the assets of the listed issuer’s group, and thus will be fully exempt from all disclosure, annual review and shareholders’ approval requirements under Chapter 14A of the Listing Rules.

• Commercial Banking Services and Products Provided in the Ordinary and Usual Course of Business – Other Banking Services and Products

We provide various commercial banking services and products (including credit cards) to certain of our connected persons at normal subscription fees, service fees and charges in the ordinary and usual course of our business and on normal commercial terms and conditions (or commercial terms that are better to us, if any). We expect that we will continue to provide such banking products and services to our connected persons following the Listing, which will constitute continuing connected transactions of us under Chapter 14A of the Listing Rules.

These continuing connected transactions are the provision of other banking services and products to our connected persons in the ordinary and usual course of business and on normal commercial terms that are comparable or no more favorable than those offered to Independent Third Parties and are expected to fall within the de minimis transactions under Chapter 14A of the Listing Rules. As a result, these transactions will constitute our fully exempt continuing connected transactions pursuant to Rule 14A.76(1) of the Listing Rules, and thus will be fully exempt from all disclosure, annual review and shareholders’ approval requirements under Chapter 14A of the Listing Rules.

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BOARD OF DIRECTORS

The Board of our Bank consists of eleven Directors, including two executive Directors, four non-executive Directors and five independent non-executive Directors. The Board is responsible and has general power for the overall management and operation of businesses of our Bank. The functions and duties of the Board include, but are not limited to, convening shareholders’ general meetings, reporting its performance to the shareholders’ general meetings, implementing resolutions of the shareholders’ general meetings, determining the operation and development strategies of our Bank, determining business plans and investment plans of the Bank, and other functions and powers stipulated by laws and regulations and the Articles of Association of our Bank and the shareholders’ general meetings.

The following table sets forth certain information regarding our Directors.

Date of appointment Date of joining Name Age Position as a Director1 our Bank2 Major roles and responsibilities LI Zhiming 58 Chairman of April 2018 December 2017 Presides over the shareholders’ general meetings (李志明) the Board, and convenes and presides over Board executive meetings; supervises and inspects the Director implementation of resolutions of the Board; exercises the function and power of legal representatives and other works; serves as Chairman of the Strategic Development Committee under the Board

XU An (許安) 56 Executive August 2018 September 2012 Takes charge of the business operation and Director, management of our Bank; organizes the President implementation of resolutions of the Board and reports to the Board; organizes the implementation of the annual business plans and investment plans of our Bank; serves as Chairman of the Consumer Rights Protection and Social Responsibility Committee and Vice Chairman of the Strategic Development Committee under the Board

YANG 54 Non-executive August 2018 August 2018 Serves as member of the Risk and Related Party Mingshang Director Transactions Management Committee under (楊明尚) the Board

CHEN 56 Non-executive August 2017 August 2017 Serves as member of the Consumer Rights Yongjun Director Protection and Social Responsibility (陳永軍) Committee under the Board

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Date of appointment Date of joining Name Age Position as a Director1 our Bank2 Major roles and responsibilities GONG Taotao 46 Non-executive November November 2016 Serves as member of the Audit Committee under (龔濤濤) Director 2016 the Board

LU Lin (盧麟) 54 Non-executive August 2018 August 2018 Serves as member of the Nomination and Director Remuneration Committee under the Board

TANG Xin (湯 48 Independent August 2018 August 2018 Serves as Chairman of the Nomination and 欣) non-executive Remuneration Committee and member of the Director Strategic Development Committee and Risk and Related Party Transactions Management Committee under the Board

WANG Gefan 62 Independent August 2018 August 2018 Serves as Chairman of the Risk and Related (王革凡) non-executive Party Transactions Management Committee Director and member of the Strategic Development Committee and Audit Committee under the Board

SONG Ke (宋 37 Independent August 2018 August 2018 Serves as member of the Strategic Development 科) non-executive Committee, Risk and Related Party Director Transactions Management Committee and Nomination and Remuneration Committee under the Board

LI Shoubing 47 Independent August 2018 August 2018 Serves as Chairman of the Audit Committee and (李守兵) non-executive member of the Nomination and Remuneration Director Committee and Consumer Rights Protection and Social Responsibility Committee under the Board

LAW Cheuk 57 Independent November November 2018 Serves as member of the Audit Committee under Kin Stephen non-executive 2018 the Board (羅卓堅) Director

Notes: 1. Refers to the date on which approval on the appointment as a Director from the CBIRC Guizhou Office was obtained; 2. Refers to the date of joining our Bank.

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Executive Directors

Mr. LI Zhiming (李志明), aged 58, is the Secretary of the Party Committee of our Bank, Chairman of the Board and executive Director of our Bank.

Mr. Li served as a credit clerk in Agricultural Bank of China (“ABC”), Jianli Sub-branch, Huangxue Business Office starting from March 1982; the secretary of the general office in ABC Jianli Sub-branch from July 1986 to October 1986; auditor of audit section in ABC Jingzhou Branch from October 1986 to July 1990; member of information division in ABC Hubei Branch from July 1990 to June 1993; a deputy director clerk at the general office in ABC Hubei Branch from June 1993 to October 1995; vice president in ABC Xianning Branch from October 1995 to January 1999; vice president in ABC Wuhan Wuchang Sub-branch from January 1999 to February 2000; deputy general manager (person in charge) of bank card department in ABC Wuhan Branch from February 2000 to February 2001; president in ABC Wuhan Wuchang Sub-branch from February 2001 to November 2004; secretary of the party committee and the president in ABC Hubei Enshi Branch from November 2004 to February 2008; general manager of credit card department in ABC Hubei Branch from February 2008 to March 2009; general manager of bank card center in ABC Hubei Branch from March 2009 to May 2010; and general manager of agriculture, countryside and farmers credit department in ABC Hubei Branch from May 2010 to January 2011. He worked in Shenzhen Development Bank Wuhan Branch as the assistant to the president from April 2011 to March 2012. He was also the assistant to the president (from March 2012 to May 2016) and vice president (from May 2016 to December 2017) of Hubei Bank. Mr. Li joined our Bank in December 2017 and served as the candidate for our Bank’s Secretary of the Party Committee and candidate for the Chairman of the Board from December 2017 to April 2018. He has been our Bank’s Secretary of the Party Committee and Chairman of the Board since April 2018.

Mr. Li graduated from Wuhan University as a bachelor (correspondence program) in finance in July 1996 and from Hunan Institute of Finance and Economics (now Hunan University) as a master in finance in December 1999. Mr. Li has the title of senior economist. Mr. Li was elected as a member of the 13th National People’s Congress and National People’s Congress Financial and Economic Affairs Committee of Guizhou Province in January 2018.

Mr.XUAn(許安), aged 56, is the Deputy Secretary of the Party Committee of our Bank, executive Director and President of our Bank.

Mr. Xu successively engaged in depositing and accounting work in the PBOC Pingba Sub-branch from December 1980 to July 1983. Mr. Xu studied in Guizhou Radio & TV University from July 1983 to July 1986. He successively served in several positions in Industrial and Commercial Bank of China (“ICBC”) Anshun Central Sub-branch, including auditor from July 1986 to August 1992; deputy director of business department from August 1992 to May 1995; manager of international business department from May 1995 to August 1996; and director of business department and manager of international business department from August 1996 to February 1998; the secretary of the Party committee and the president in ICBC Anshun Sub-branch from February 1998 to April 1999; the secretary of the Party

– 241 – DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT committee and the president in ICBC Anshun Tashan Sub-branch from April 1999 to September 1999; the chief of industrial and commercial credit division in ICBC Anshun Branch from October 1999 to May 2002. He served as the deputy secretary of the party committee, vice chairman of the board and general manager in Anshun Urban Credit Cooperative (安順市城市 信用社) from May 2002 to February 2009, and secretary of the party committee and chairman of the board in Anshun City Commercial Bank from February 2009 to September 2012. Mr. Xu was a member of the Party Committee and Vice President of our Bank from September 2012 to December 2017; and has been the Deputy Secretary of the Party Committee, President of our Bank since January 2018, executive Director of our Bank since August 2018.

Mr. Xu studied at and graduated from Guizhou Radio & TV University majoring in finance, from Guizhou College of Finance and Economics (now known as Guizhou University of Finance and Economics) with a bachelor’s degree in finance in July 1997 and from the University of International Business and Economics with an Executive Master of Business Administration (EMBA) degree in December 2012.

Non-executive Directors

Mr. YANG Mingshang (楊明尚), aged 54, is a non-executive Director of our Bank.

Mr. Yang successively served in several positions in ABC Guizhou Branch, including member of the inspection office and general office from July 1994 to February 1997; member of the office of legal counsel from February 1997 to July 1997; deputy chief of industrial and commercial credit division from July 1997 to November 1998; deputy chief of asset preservation division from November 1998 to March 2000; chief of credit management division, chief of corporate business division from March 2000 to June 2003; and chief of retail business division from June 2003 to January 2004. He was also the secretary of the party committee and the president in ABC Guizhou Anshun Sub-branch from January 2004 to June 2004. Prior to joining our Bank, Mr. Yang also served as a member of party committee and a vice president in ABC Guizhou Branch since June 2004. He worked as the Deputy Secretary of the Party Committee, Director and President of our Bank from May 2014 to December 2017, and has been the deputy secretary of the party committee, vice chairman of the board and general manager in Guizhou Financial Holding Group Co., Ltd. (Guizhou Guimin Investment Group Co., Ltd.) (貴州金融控股集團有限責任公司(貴州貴民投資集團有限責任公司)) since December 2017. Mr. Yang has served as non-executive Director of our Bank since August 2018.

Mr. Yang graduated from Wuhan University as a bachelor in philosophy in June 1988 and from Xiamen University as a master in civil law in July 1994. He has the title of economist.

Mr. CHEN Yongjun (陳永軍), aged 56, is a non-executive Director of our Bank.

Mr. Chen worked in Bureau of Geology and Mineral Exploration and Development of Guizhou Province (貴州省地礦廳) from December 1989 to November 2000, serving as office clerk, senior staff member, principal staff member; and acted as the deputy chief of farmland

– 242 – DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT protection division, office director and chief of planning and monitoring division in the Department of Land and Resources of Guizhou Province (貴州省國土資源廳) from November 2000 to January 2013; and seconded to the leading group office for planning and construction from September 2012 to November 2012. He has been the director and deputy general manager of GuiAn New District Development and Investment since February 2013, and a non-executive Director of our Bank since August 2017.

Mr. Chen graduated from Party School of Guizhou Provincial Committee of the Communist Party of China (“CPC”) with a bachelor’s degree in economic management in May 2000.

Ms. GONG Taotao (龔濤濤), aged 46, is a non-executive Director of our Bank.

Ms. Gong worked in Shenzhen Expressway Company Limited (深圳高速公路股份有限公 司) (SEHK stock code: 0548; SSE stock code: 600548) from July 1999 to November 2002, serving successively as deputy manager of the financial department and manager of the audit department; and the finance director of Shenzhen Expressway Company Limited from November 2002 to September 2018, during which she acted as executive director of the company from January 2018 to September 2018. She has been the vice president of Shenzhen Expressway Company Limited since September 2018. Ms. Gong has been a non-executive Director of our Bank since November 2016.

Ms. Gong graduated from the Department of Accounting of Shanghai University of Finance and Economics, majoring in audit, and was conferred a bachelor’s degree in economics in July 1994; she graduated from Fudan University, majoring in business administration, and was conferred an MBA degree in July 2000. Ms. Gong has CPA and CPV qualifications.

Mr. LU Lin (盧麟), aged 54, is a non-executive Director of our Bank.

Mr. Lu served as a worker in Agricultural Technology Station in Jiucheng (舊城農技站) of the Agriculture Bureau (農業局) in Daozhen Gelao and Miao Autonomous County, Guizhou from August 1986 to October 1988; a worker in Shangji Ward Office (尚嵇區公所) in Zunyi County, Guizhou from October 1988 to January 1989; Mr. Lu served as deputy township head, township head and town head in succession in Zunyi County, Guizhou Province from January 1989 to April 2003; director and deputy secretary of leading party members’ group of the Development and Planning Bureau in Zunyi County, Guizhou from April 2003 to April 2004; director and secretary of the leading party members’ group of Huichuan Development and Reform Bureau (匯川發展和改革局) (Statistics Bureau, Price Bureau, Investment Promotion Bureau) in Zunyi City, Guizhou from July 2004 to March 2006; secretary of the leading party members’ group and director of Huichuan District Finance Bureau (匯川區財政 局) in Zunyi City, Guizhou and concurrently chairman and general manager of State-owned Assets Investment and Management Co., Ltd. of Zunyi National Economic and Technological Development Zone in Guizhou (遵義經濟技術開發區國有資產投資經營有限責任公司) from August 2008 to May 2011; director of the former Huichuan Electromechanical Manufacturing Industrial Park Management Committee (匯川機電製造工業園區管委會) and temporary deputy

– 243 – DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT head of Huichuan District Government in Zunyi City, Guizhou from May 2011 to February 2013; member of party working committee and assistant director (deputy county head level) of the management committee of Zunyi National Economic and Technological Development Zone from February 2013 to June 2016; and member of party committee and deputy general manager of Zunyi State-owned Assets Investment and Financing Management Co., Ltd. (遵義市國有資產投融資經營管理有限責任公司) and member of party committee and deputy general manager of Zunyi Indemnificatory Housing Construction Investment Development Co., Ltd. (遵義市保障性住房建設投資開發有限責任公司) from July 2016 to February 2018; and has been the secretary of party committee and chairman of Zunyi State-owned Assets Investment and Financing Management Co., Ltd. since March 2018. Mr. Lu has been a non-executive Director of our Bank since August 2018.

Mr. Lu studied in Law major (correspondence program) at Party School of the Guizhou Provincial Committee of CPC from September 2000 to January 2003.

Independent Non-executive Directors

Mr. TANG Xin (湯欣), aged 48, is an independent non-executive Director of our Bank.

Mr. Tang conducted post-doctoral research in law major at Peking University Law School from July 1998 to June 2000 and has been teaching in Tsinghua University School of Law since 2000; Mr. Tang was promoted Associate Professor of Tsinghua University School of Law in February 2001 and was promoted Professor of Tsinghua University School of Law in January 2015. Mr. Tang has been a member of the third session of the listing committee of the SSE since August 2012. Mr. Tang has also been an independent non-executive director of GF Securities Co., Ltd. (SEHK stock code: 1776; SZSE stock code: 000776) since May 2014, a supervisor of Beijing Rural Commercial Bank Co., Ltd. since 2015, and an independent director of China Life Insurance Company Limited (SSE stock code: 601628) since March 2016. In September 2014, Mr. Tang served as the head of the committee of independent directors of the China Association for Public Companies. Mr. Tang has been an independent non-executive Director of our Bank since August 2018.

Mr. Tang graduated and obtained his bachelor’s, master’s and doctor’s degree in economic law, civil law and civil law from Renmin University of China in June 1992, July 1995 and June 1998, respectively.

Mr. WANG Gefan (王革凡), aged 62, is an independent non-executive Director of our Bank.

Mr. Wang served as a vice director of International Finance Department of China Development Bank (“CDB”) in 1997; successively served as the president of Guizhou Branch of CDB, the director of Project Appraisal Department I and the director of Global Cooperation Department of CDB since 2002; served as the operating director of CDB from 2013 to 2017, during which he concurrently served as the director of International Finance Department. Mr. Wang has been an independent non-executive Director of our Bank since August 2018.

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Mr. Wang graduated with a doctor’s degree in science, geology and mineralogy in July 1988 from Kyoto University in Japan.

Mr. SONG Ke (宋科), aged 37, is an independent non-executive Director of our Bank.

Mr. Song served as the secretary of the communist youth league committee of the School of Finance of Renmin University of China from July 2004 to September 2009; he engaged in post-doctoral research in the School of Statistics of Renmin University of China from July 2012 to July 2015; he has been a deputy head of International Monetary Institute of Renmin University of China since January 2014, responsible for scientific research and administration; he has been a teacher of Department of Money and Finance of the School of Finance of Renmin University of China since September 2015; the assistant dean of the School of Finance of Renmin University of China since January 2018; a deputy secretary of the party committee of the School of Finance of Renmin University of China since April 2019. Mr. Song has been an external supervisor of Bank of Zhengzhou Co., Ltd. (SEHK stock code: 6196; SZSE stock code: 002936) since May 2017; an independent non-executive director of Zhejiang Yongan Rongtong Holdings Co., Ltd. since December 2017; and an independent non-executive Director of our Bank since August 2018.

Mr. Song graduated as a bachelor of economics majoring in finance from the School of Finance of Renmin University of China in July 2004; and he graduated as the doctor of economics majoring in finance from the School of Finance of Renmin University of China in June 2012.

Mr. LI Shoubing (李守兵), aged 47, is an independent non-executive Director of our Bank.

Mr. Li served as accounting supervisor of the financial department of Guizhou New Era Union I/E Co., Ltd. (貴州新聯進出口公司) from July 1994 to March 2001; worked in Guizhou Yaxin Accounting Firm Co., Ltd. (貴州亞信會計師事務所有限公司) from November 2004 to October 2009; has been a partner of Guizhou Zhihe Certified Public Accountant Co., Ltd. (貴 州智合會計師事務所有限公司) since August 2009; and was awarded as financial review expert of Guizhou Science and Technology Department (貴州省科學技術廳) in 2016. He sponsored Guizhou Fudesheng Enterprise Management Consulting Co., Ltd. (貴州富德盛企業管理諮詢有 限公司) and served as manager in 2017. He has been a director of Guizhou Yanxing Cultural Industry Development Co., Ltd. (貴州雁行文化產業發展股份有限公司) since October 2018. Mr. Li has been an independent non-executive Director of our Bank since August 2018.

Mr. Li graduated from Renmin University of China with a bachelor’s degree majoring in accounting in July 1994. Mr. Li has CPA qualification.

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Mr. LAW Cheuk Kin Stephen (羅卓堅), aged 57, is an independent non-executive Director of our Bank.

Mr. Law worked in Wheelock and Company Limited (會德豐有限公司) (SEHK stock code: 0020) and the Wharf (Holdings) Limited (九龍倉集團有限公司) (SEHK stock code: 0004) from 1995 to 2000; and Morningside Group (晨興創投集團) from 2000 to 2006; and TPG Growth Capital (Asia) Limited from July 2006 to September 2012, ending as the managing director. Mr. Law served as the chief financial officer of Guoco Group Limited (國 浩集團有限公司) (SEHK stock code: 0053) from October 2012 to June 2013; the finance director of MTR Corporation Ltd. (SEHK stock code: 0066) from July 2013 to July 2016; the adjunct professor of the Hong Kong Polytechnic University from 2015 to 2017; the independent non-executive director of AAG Energy Holdings Limited (亞美能源控股有限公 司) (SEHK stock code: 2686) from July 2016 to September 2018; and has been the managing director of ANS Capital Limited since 2017; an independent non-executive director of Stealth BioTherapeutics Inc. (NASDAQ stock symbol: MITO) from June 2018 to July 2019; an independent non-executive director of China Everbright Limited (中國光大控股有限公司) (SEHK stock code: 0165) since May 2018 and an independent non-executive director of Somerley Capital Holdings Limited (新百利融資控股有限公司) (SEHK stock code: 8439) since February 2019. Mr. Law has been an independent non-executive Director of our Bank since November 2018.

Mr. Law graduated from University of Birmingham and with a bachelor’s degree majoring in science (civil engineering) in April 1984; he graduated from University of Hull and with an MBA degree in July 1996. Mr. Law was a council member of the Hong Kong Institute of Certified Public Accountants (HKICPA) from January 2010 to December 2017. Mr. Law is now a member of the HKICPA and the Institute of Chartered Accountants in England and Wales, a council member of Hong Kong Business Accountants Association Ltd. (HKBAA) and an expert accounting consultant appointed by the Ministry of Finance of the PRC. Mr. Law is also a council member of The Hong Kong Independent Non-Executive Director Association Limited (HKiNEDA). Mr. Law has accounting qualifications in Hong Kong and the United Kingdom.

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BOARD OF SUPERVISORS

The Board of Supervisors consists of seven Supervisors, including three external Supervisors, one shareholder Supervisor and three employee Supervisors. The functions and duties of the Board of Supervisors include, but are not limited to, examining and supervising our Bank’s financial activities, supervising the implementation of resolutions made at general meetings and the performance of duties by the Board of Directors and senior management, and other functions and powers stipulated by laws, regulations and the Articles of Association of our Bank.

The following table sets forth certain information regarding our Supervisors.

Date of Date of joining Major roles and Name Age Position appointment1 our Bank2 responsibilities XIAO Cifa (肖慈發) 58 Chairman of May 2018 September 2012 Chairman of the Board of the Board of Supervisors Supervisors, employee Supervisor

LIU Hanmin (劉漢民) 57 External May 2018 May 2018 External Supervisor, serves as Supervisor the Chairman of the Supervising Committee

SU Zhi (蘇治) 41 External May 2018 May 2018 External Supervisor, serves as Supervisor the chairman of the Nomination, Remuneration and Evaluation Committee

CHEN Houyi 63 External April 2017 April 2017 External Supervisor, serves as (陳厚義) Supervisor the member of the Nomination, Remuneration and Evaluation Committee

WU Qiangli (吳強麗) 51 Shareholder May 2018 May 2018 Shareholder Supervisor, serves Supervisor as the member of the Supervising Committee

WANG Changyi 43 Employee May 2018 December 2013 Employee Supervisor, serves as (王常懿) Supervisor the member of the Nomination, Remuneration and Evaluation Committee

LI Keyong (李克勇) 56 Employee October 2012 October 2012 Employee Supervisor, serves as Supervisor the member of the Supervising Committee

Notes: 1. Refers to the date on which the appointment as a non-employee Supervisor was approved by the general meeting, and the election as an employee Supervisor was approved by the employee meeting; 2. Refers to the date of joining our Bank.

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Mr. XIAO Cifa (肖慈發), aged 58, is a member of the Party Committee of our Bank, the Chairman of the Board of Supervisors and an employee Supervisor of our Bank. Mr. Xiao was formerly known as Xiao Chifa (肖池發).

Mr. Xiao worked at the credit section of the PBOC Liupanshui Sub-Branch in Guizhou Province from September 1979 to January 1985 and the credit section of ICBC Liupanshui Sub-Branch in Guizhou Province from January 1985 to July 1986. He served as deputy chief of the credit section of ICBC Liupanshui Sub-Branch from July 1986 to March 1991, director of the business department of ICBC Liupanshui Branch in Guizhou from March 1991 to December 1992, assistant to the president (section level) of ICBC Liupanshui Branch in Guizhou Province from December 1992 to September 1995, vice president of ICBC Liupanshui Branch in Guizhou Province from September 1995 to November 2004, chairman of the Urban Credit Cooperative in Liupanshui City of Guizhou Province from November 2004 to April 2008, chairman and secretary of the party committee of the Liupanshui City Commercial Bank in Guizhou Province from April 2008 to September 2012 and member of the party committee and Vice President of our Bank from September 2012 to January 2018. He has been a member of Party Committee, Chairman of the Board of Supervisors and employee Supervisor of our Bank since May 2018.

Mr. Xiao studied economic management at the Party School of Guizhou Provincial Committee of the CPC from September 1996 to July 1999. He has the title of senior economist.

Mr. LIU Hanmin (劉漢民), aged 57, is an external Supervisor of our Bank.

Mr. Liu served as lecturer and associate professor of Department of Accounting at the School of International Business of Qingdao University and director of the Institute of Modern Corporation (現代公司研究所) from July 1988 to August 2003, responsible for scientific teaching and research; and engaged in post-doctoral research and strategic planning at the Management Science and Engineering Department of Tianjin University (天津大學管理科學與 工程學科) from July 2001 to June 2003. He has been the professor since October 2003 and the doctoral supervisor of management of Jinan University since 2009, and acted as visiting scholar at the University of California-Berkeley from March 2007 to September 2008. He has been an external Supervisor of our Bank since May 2018.

Mr. Liu obtained a bachelor’s degree in economics from Shandong University in July 1983, a master’s degree in economics from Graduate School of Chinese Academy of Social Sciences in July 1988 and a doctor’s degree in economics from Nankai University in July 2001.

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Mr. SU Zhi (蘇治), aged 41, is an external Supervisor of our Bank.

Mr. Su has worked at the Central University of Finance and Economics since June 2009, and has been the deputy director of the academic committee of the Institute of International Technology and Economy under the Development Research Center of the State Council since July 2018. He has served as professor and doctoral supervisor of both the School of Finance and the School of Statistics and Mathematics of the Central University of Finance and Economics since October 2016; the head of the Department of Financial Technology of the School of Finance of Central University of Finance and Economics since January 2017. Mr. Su has also worked as executive deputy director of the Central University of Finance and Economics & University of Electronic Science and Technology of China Joint Research Data Center (聯合數據研究中心) since September 2018. He has been an external Supervisor of our Bank since May 2018.

Mr. Su obtained a bachelor’s degree in management in economic information management major from Jilin University in July 2001 and a doctor’s degree in economics majoring in quantitative economics from Jilin University in June 2006. He engaged in the finance research at the post-doctoral study station of the School of Economics and Management of Tsinghua University from March 2007 to June 2009, and was conferred an EMBA degree in business administration from University of Texas in February 2009.

Mr. CHEN Houyi (陳厚義), aged 63, is an external Supervisor of our Bank.

Mr. Chen served successively as secretary of party general branch and deputy director of the third department of adult education (managing the party and government work of the department), head of the organization department of party committee and deputy secretary of the party committee of Guizhou University of Industry from February 1995 to March 1998. He served as dean of Guizhou Economic Management Cadre College (貴州省經濟管理幹部學院) from March 1998 to 2001, and successively as dean and president (excellent expert under the management of Guizhou Province, recipient of special government allowances of the State Council, and master supervisor) of Guizhou University of Finance and Economics since 2001, and professor (2nd class) of Guizhou University of Finance and Economics since January 2016. He has been an External Supervisor of our Bank since April 2017.

Mr. Chen graduated from Wuhan University and obtained his bachelor’s degree in January 1982 and obtained a doctor’s degree majoring in economics in industry economics from Wuhan University of Technology in June 2009.

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Ms. WU Qiangli (吳強麗), aged 51, is a shareholder Supervisor of our Bank.

Ms. Wu worked as a staff, head of the financial department of Guizhou High-strength Bolts Plant (貴州省高強度螺栓廠), financial manager and director of West Water Group (Guizhou) Co., Ltd. (西部水務集團(貴州)有限公司) from June 2006 to December 2012, and financial manager of JSI Rock Tools Co., Ltd. (貴州捷盛鑽具股份有限公司) from May 2014 to September 2014. She has been the senior consultant of Guizhou Water Investment Water Affairs Group Limited (貴州水投水務集團有限公司) since September 2014, and a shareholder Supervisor of our Bank since May 2018.

Ms. Wu graduated from the Party School of Guiyang Municipal Committee of the CPC majoring in economic management in January 2008. She has the title of senior economist.

Mr. WANG Changyi (王常懿), aged 43, is an employee Supervisor of our Bank.

Mr. Wang served as section member in Xingren Town, Danzhai County, Guizhou Province from July 2000 to March 2002, office director of the united front work department of the Danzhai County committee in Guizhou Province from March 2002 to July 2003, office clerk of the united front work department of the Qiandongnan Prefecture committee in Guizhou Province from July 2003 to March 2005, senior staff member of the office of the united front work department of the Qiandongnan Prefecture committee in Guizhou Province from March 2005 to September 2006, cadre of vice section level at the organization division of the organization department of Guizhou Provincial Committee from September 2006 to November 2006, senior staff member at the organization division of the organization department of Guizhou Provincial Committee from December 2006 to May 2008, principal staff member at the organization division of the organization department of Guizhou Provincial Committee from May 2008 to March 2010, principal staff member at the five cadre organization division of the organization department of Guizhou Provincial Committee from March 2010 to February 2013, deputy director at the political department of party working committee in Gui’an New Area from February 2013 to December 2013 (during which he was elected as member of the 13th Committee of Guizhou Province Federation of Trade Unions in June 2013). He was elected as executive director of Guizhou China Council for the Promotion of Peaceful National Reunification in November 2013. He served as deputy director of the Office of our Bank from December 2013 to June 2015, deputy head (concurrent) of the Organization Department of the Party Committee of our Bank from March 2015 to June 2015, deputy director of the Discipline Inspection Office and deputy head (concurrent) of the Organization Department of the Party Committee of our Bank from June 2015 to February 2016, deputy head of the Organization Department of the Party Committee of our Bank from February 2016 to October 2016, and deputy head of the Organization Department of the Party Committee of our Bank and deputy secretary of party Branch of Gui’an New Area Sub-Branch (overseeing work) from October 2016 to March 2018. He has been the head of the Party-mass Work Department and Publicity Department of the Party Committee, director of the Trade Union Office and Office of Party Committee for Organs of our Bank since March 2018, and an employee Supervisor of our Bank since May 2018.

Mr. Wang obtained a bachelor’s degree in Chinese minority linguistics and literature from Guizhou Minzu College (貴州民族學院) (currently Guizhou Minzu University) in July 2000.

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Mr. LI Keyong (李克勇), aged 56, is an employee Supervisor of our Bank.

Mr. Li served as cashier of the PBOC in Shuicheng Special Zone, Liupanshui City, Guizhou Province from December 1980 to June 1983, successively as planned credit clerk, clerk of the PBOC in sub-branch of Shuicheng Special Zone, Liupanshui City from June 1986 to May 1990, successively as clerk and deputy director clerk of the PBOC Liupanshui Branch from May 1990 to May 1997, auditor of vice section level of the PBOC Liupanshui Branch from May 1997 to September 1998, chairman and director of the center cooperative of Urban Credit Cooperative in Liupanshui City, Guizhou Province from September 1998 to June 2000, deputy director of the office of the preparatory leading group of the single legal person cooperative of Urban Credit Cooperative in Liupanshui City, Guizhou Province from June 2000 to November 2000, member of the Board and deputy general manager (person in charge) of the Urban Credit Cooperative in Liupanshui City, Guizhou Province from November 2000 to March 2005. He was successively the general manager and vice chairman of Urban Credit Cooperative in Liupanshui City, Guizhou Province from March 2004 to April 2008. He served as deputy secretary of the party committee, vice chairman and president of Liupanshui Commercial Bank in Guizhou Province from April 2008 to October 2012, president of Liupanshui Branch of our Bank from October 2012 to September 2013, secretary of the party committee and president of Liupanshui Branch of our Bank from September 2013 to January 2014, and general manager of the Legal and Compliance Department of our Bank from January 2014 to November 2014. He worked at the Bill Business Department of our Bank from November 2014 to March 2018. He has been an employee Supervisor of our Bank since October 2012.

Mr. Li graduated from Guizhou Radio & TV University with a bachelor’s degree in finance in August 1986 and obtained a master’s degree in public administration from the Party School of Guizhou Provincial Committee of the CPC in June 2010. He has the title of economist.

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SENIOR MANAGEMENT

The following table sets forth information regarding Senior Management of our Bank.

Date of Date of joining Name Age Position appointment1 our Bank2 Major roles and responsibilities XU An (許安) 56 President August 2018 September 2012 Takes charge of the business operation and management of our Bank; organizes the implementation of the resolutions of the Board and reports to the Board; organizes the implementation of the annual business plans and investment plans of our Bank

LI Tao (李濤) 56 Vice President September September 2012 Manages the Personal Business 2018 Department, Credit Card Department, Micro and Small Business Department, Transaction Banking Department and Information Technology Department

CHAI Bolin (柴柏林) 58 Vice President April 2013 April 2013 Manages the Credit Review Department, Product R&D Department and centralized procurement

HU Liangpin (胡良 51 Vice President January 2018 January 2017 Manages the Security 品) Department, Asset Preservation Department and Internet Finance Department

WU Fan (吳帆) 51 Vice President April 2019 February 2013 Manages Corporate Business Department, Institutional Business Department, Financial Markets Department, Asset Management Department and Poverty Alleviation Finance Department

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Date of Date of joining Name Age Position appointment1 our Bank2 Major roles and responsibilities ZHOU Guichang 45 Secretary to the April 2019 August 2012 Manages Office of our Bank and (周貴昌) Board the Office of the Board of Directors, prepares and submits reports and documents required by relevant authorities; prepares for Board meetings and general meetings; drafts documents for Board meetings and general meetings as well as relevant rules

WANG Xiangdong 56 Chief Officer July 2014 March 2013 Assists in managing Corporate (王向東) Business Department, Institutional Business Department, Poverty Alleviation Finance Department

Notes: 1. Refers to the date on which the Board approved the relevant resolution of appointment; 2. Refers to the date of joining our Bank.

Mr.XUAn(許安), aged 56, is the Deputy Secretary of the Party Committee of our Bank, executive Director and President of our Bank.

See “Directors, Supervisors and Senior Management – Board of Directors” for his biography.

Mr. LI Tao (李濤), aged 56, is a member of the Party Committee of our Bank and Vice President of our Bank.

Mr. Li served as section member of the PBOC Zunyi City Sub-branch from March 1980 to November 1981; served as member of the planning section of the PBOC Zunyi Central Sub-branch from November 1981 to September 1983; studied in Guizhou Radio & TV University (貴州廣播電視大學) as a major in finance from September 1983 to August 1986; successively served as a staff and deputy chief of the planning section of the PBOC Zunyi Central Sub-branch from June 1986 to December 1993; took a temporary post as vice president in the president’s office of the PBOC Zunyi County Sub-branch from January 1993 to December 1993; served as deputy chief of the planning section of the PBOC Zunyi Central Sub-branch from December 1993 to July 1995; served as chief of the planning section of the PBOC Zunyi Central Sub-branch from July 1995 to July 1996; served as chairman of Shuguang Urban Credit Cooperative in Zunyi City of Guizhou Province from July 1996 to April 2001; and served as vice president and president of Guizhou Zunyi Commercial Bank Co., Ltd. from

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April 2001 to September 2012. Mr. Li served successively as member and secretary of the Party Committee of our Bank and president of our Zunyi Branch from August 2012 to September 2018; and has successively been a member of the party committee and vice president of our Bank since September 2018.

Mr. Li graduated from the Party School of Guizhou Provincial Committee of the CPC majoring in economic management (correspondence program) in January 2006; and graduated as an EMBA from the Southwestern University of Finance and Economics in December 2013.

Mr. CHAI Bolin (柴柏林), aged 58, is a member of the party committee and Vice President of our Bank.

Mr. Chai served as a staff and deputy chief of the planning section of the PBOC and ICBC in Anshun from August 1983 to May 1988; vice president of the ICBC Anshun Sub-branch from June 1988 to June 1990; member of the party committee group and vice president of ICBC Anshun Sub-branch from June 1990 to February 1995; assistant to the president of the ICBC Anshun Central Sub-branch from February 1995 to February 1997; member of the leading party members’ group and vice president of the ICBC Zunyi Central Sub-branch from February 1997 to April 2002; person in charge (deputy division chief level) of Customer (Credit) Division II of China Development Bank Guizhou Branch from April 2002 to September 2002; deputy chief of Customer (Credit) Division II of China Development Bank Guizhou Branch from September 2002 to October 2003; chief of Customer (Credit) Division II of China Development Bank Guizhou Branch from October 2003 to January 2006; chief of the operations management division of China Development Bank Guizhou Branch from January 2006 to January 2008; and chief of Customer (Credit) Division I of China Development Bank Guizhou Branch from January 2008 to April 2013. Mr. Chai has been a member of the party committee and vice president of our Bank since April 2013.

Mr. Chai graduated as a bachelor of economics majoring in finance from the Department of Finance of Sichuan Institute of Finance and Economics (now known as Southwestern University of Finance and Economics) in July 1983; and graduated as a master of engineering majoring in software engineering from Wuhan University in June 2010. Mr. Chai has a title of senior economist.

Mr. HU Liangpin (胡良品), aged 51, is a member of the party committee and Vice President of our Bank.

Mr. Hu worked at Yuezhao Credit Cooperative in Shuicheng County of Guizhou Province from May 1987 to May 1988; Mr. Hu served successively as deputy chief (person in charge) and chief of Zhongshan District Rural Credit Cooperative in Liupanshui City of Guizhou Province from October 1995 to August 2001; served as acting chairman and deputy director of Liuzhi Special District Rural Credit Cooperative in Guizhou Province from August 2001 to April 2004; served as chairman and director of Shuicheng County Rural Credit Cooperative in Guizhou Province and council member of Guizhou Rural Credit Union from April 2004 to August 2005. Prior to joining our Bank in 2017, from August 2015, Mr. Hu worked in Guizhou

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Rural Credit Union where he successively served in the human resources division and Anshun Office, and worked in Anshun Financial Service Center for Migrant Workers (安順市農民工金 融服務中心) where he served successively as deputy director and director as well as secretary of the party committee. Mr. Hu served as member of the Party Committee of our Bank and Chairman of the Board of Supervisors of our Bank from January 2017 to January 2018; and has been a member of the party committee and vice president of our Bank since January 2018.

Mr. Hu graduated as a bachelor in law from the Party School of Guizhou Provincial Party Committee in January 2004; and graduated with a correspondence college diploma as a major in finance from the Economic Management Department of Yunnan University in July 2010. Mr. Hu won the honor of “Advanced Individual for Peasant-worker Financial Services in Guizhou Province” from the then CBRC Guizhou Office in April 2010; and the honor of the 10th National “Venture Star” in May 2012.

Ms. WU Fan (吳帆), aged 51, is a member of the party committee and Vice President of our Bank.

Ms. Wu worked in China Construction Bank (“CCB”) from July 1992 to March 2013. In particular, she held a post in relation to international settlement and credit in the international business department of CCB Guizhou Branch from July 1992 to December 1995; and served as general manager assistant of the international business department and manager of the credit department of CCB Guizhou Branch from December 1995 to November 1996; deputy general manager of the international business department of CCB Guizhou Branch from November 1996 to May 1998; vice president of Chengbei Sub-branch directly under CCB Guizhou Branch from May 1998 to July 1999; deputy general manager of the international business department and vice president of Guiyang Jinyang Sub-branch of CCB Guizhou Branch from July 1999 to July 2001; deputy general manager of the international business department of CCB Guizhou Branch from July 2001 to February 2006; general manager of the international business department of CCB Guizhou Branch from February 2006 to June 2006; general manager of the corporate business department of CCB Guizhou Branch from June 2006 to July 2012; and served successively as secretary of the party committee and president of branch of Guiyang Chengbei Sub-branch of CCB Guizhou Branch from July 2012 to February 2013; served as Marketing Director of our Bank from February 2013 to January 2014; and has been an Assistant to the President of our Bank from January 2014 to April 2019. In particular, she served as General Manager of Guiyang Management Department of our Bank from March 2014 to November 2014 and Executive Deputy Secretary of the Party Committee of Guiyang Management Department of our Bank from November 2014 to March 2016. Ms. Wu has been a member of the party committee and Vice President of our Bank since March 2019 and April 2019, respectively.

Ms. Wu graduated as a master majoring in systems engineering from Shanghai Institute of Mechanical Engineering (currently known as University of Shanghai for Science and Technology) in June 1992. Ms. Wu has a title of senior economist.

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Mr. ZHOU Guichang (周貴昌), aged 45, is the secretary to the Board of our Bank.

Mr. Zhou served as an accountant in Beijing Road department of Zunyi Honghuagang Sub-Branch of Agricultural Bank of China from July 1997 to July 1998; served as a secretary of the general office in Zunyi Development Region Sub-Branch of ABC from July 1998 to July 1999; served as a secretary of the general office of the Zunyi Branch of ABC from July 1999 to October 2000; served as a secretary of the general office of Guizhou Branch of ABC since October 2000 to February 2004; served as a principal staff member of the general office of Guizhou Branch of ABC from February 2004 to April 2005; served as an assistant of the director of general office of Guizhou Branch of ABC from April 2005 to August 2006; served as a vice director of general office of Guizhou Branch of ABC from August 2006 to September 2007; served as vice president of Liupanshui Branch of ABC from September 2007 to May 2012; served as a vice general manager of business department of Guizhou Branch of ABC from May 2012 to August 2012; Mr. Zhou participated in the preparatory group work of the establishment of our Bank and worked in our Bank from October 2012. He served as the temporary principal of the general office of our Bank from December 2012 to December 2013; served as the vice director of general office of our Bank (temporary principal) from December 2013 to March 2014; served as the vice director of the Office of Party Committee of our Bank (person in charge) and vice director of General Office from March 2014 to March 2018; served as the director of the Office of Party Committee and director of General Office of our Bank from March 2018 to April 2019; Mr. Zhou has been the secretary to the Board of our Bank since April 2019.

Mr. Zhou graduated as a bachelor in journalism from the department of Chinese literature of Guizhou University in July 1997; and graduated as a master in business administration from the school of management of Guizhou University in July 2014. Mr. Zhou has a title of intermediate economist.

Mr. WANG Xiangdong (王向東), aged 56, is a Chief Officer of our Bank.

Mr. Wang served as a trainee in Guilin Army College of Chinese People’s Liberation Army (currently known as Army Special Operations Academy of Chinese People’s Liberation Army) (中國人民解放軍陸軍特種作戰學院) from August 1983 to July 1984; served as platoon leader in the 93rd Regiment of the 31st Army Division of the Chinese People’s Liberation Army (陸軍三十一師第九十三團) from July 1984 to July 1985; served successively as barracks assistant, company commander and deputy battalion commander in the second communication station of Chengdu Military Region of the Chinese People’s Liberation Army from September 1986 to August 1991; served as principal staff member of the administrative department real estate division of the Bank of China (“BOC”) Guizhou Branch from August 1995 to January 2000; served as vice president of the BOC Guiyang Hebin Sub-branch from January 2000 to April 2003; served as vice president of the BOC Guiyang Dongshan Sub-branch from April 2003 to March 2005; served as president of the BOC Guiyang Yunyan Sub-branch from March 2005 to July 2006; served successively as secretary of the party committee and president of the BOC Zunyi Sub-branch from July 2006 to February 2009; and served successively as general manager of the business department of the BOC Guizhou Branch and director of business

– 256 – DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT development management committee in Guiyang from February 2009 to March 2013. Mr. Wang held a post as Chief Officer in our Bank from March 2013 to October 2013. In particular, he served concurrently as leader of the preparatory group of Guiyang Huaxi Sub-branch from March 2013 to May 2013; secretary of the party branch of Xingyiruijin Sub-branch from June 2013 to December 2013; president of Guiyang Huaxi Sub-branch from May 2013 to January 2014; deputy secretary of the party committee and executive deputy general manager of Guiyang Management Department of our Bank from December 2013 to August 2014; secretary of the party branch of Duyun Jianjiang Sub-branch from July 2014 to July 2016; and secretary of CPC Branch, president of Duyun Jianjiang Sub-branch from September 2014 to July 2016. Mr. Wang has been a Chief Officer of our Bank since December 2014 and serves concurrently as secretary of the party committee and president of Qiannan branch of our Bank since July 2016.

Mr. Wang graduated as a bachelor in metallography and heat treatment from Guizhou Institute of Engineering (currently known as Guizhou University) in July 1983.

KINSHIP

There is no family or blood relationship among any of the Directors, Supervisors and senior management of our Bank.

JOINT COMPANY SECRETARIES

Mr. ZHOU Guichang (周貴昌), aged 45, is the secretary to the Board of our Bank. See “Directors, Supervisors and Senior Management – Senior Management” for his biography.

Mr. LEI Kin Keong (李健強), aged 43, was appointed as one of the joint company secretaries of our Bank on June 3, 2019. The appointment will come into effect on the Listing Date. Mr. Lei currently serves as an assistant vice president of SWCS Corporate Services Group (Hong Kong) Limited. He is currently a non-practising member of The Hong Kong Institute of Certified Public Accountants and the associate member of both The Hong Kong Institute of Chartered Secretaries and The Institute of Chartered Secretaries and Administrators. He holds a Bachelor of Art (Honors) in Accountancy from The Hong Kong Polytechnic University and a Postgraduate Diploma in Corporate Compliance from The University of Hong Kong (School of Professional and Continuing Education).

BOARD COMMITTEES

Our Bank has established five Board committees in accordance with relevant PRC laws and regulations and the corporate governance practices under the Listing Rules, being the Strategic Development Committee, the Audit Committee, the Risk and Related Party Transactions Management Committee, the Nomination and Remuneration Committee, and the Consumer Rights Protection and Social Responsibility Committee.

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Strategic Development Committee

The Strategic Development Committee of our Bank consists of five Directors: Mr. LI Zhiming, Mr. XU An, Mr. WANG Gefan, Mr. TANG Xin and Mr. SONG Ke. Mr. LI Zhiming is the Chairman of the Strategic Development Committee. The primary responsibilities of the Strategic Development Committee include (among other things):

(I) formulating operation and management objectives and medium and long-term development strategies of our Bank, reviewing the implementation of the medium and long-term development strategies and making amendments thereon based on actual situations;

(II) making recommendations on matters in relation to major investments and financing plans of our Bank;

(III) supervising and reviewing the implementation of annual business plans and investment and financing plans; and

(IV) other functions stipulated by relevant laws, regulations and the Articles of Association of our Bank and authorized by the Board.

Audit Committee

The Audit Committee of our Bank consists of four Directors: Mr. LI Shoubing, Ms. GONG Taotao, Mr. WANG Gefan and Mr. LAW Cheuk Kin Stephen. Mr. LI Shoubing is the Chairman of the Audit Committee. The primary responsibilities of the Audit Committee are to review and supervise our financial reporting process, including (among other things):

(I) supervising and evaluating the work of external auditors;

(II) guiding the internal audit work;

(III) reviewing and expressing opinions on the financial reports of our Bank, and submitting to the Board for consideration;

(IV) evaluating the effectiveness of internal control;

(V) supervising the completeness of financial statements, annual reports and accounts, interim reports and quarterly reports of our Bank, reviewing the major opinions about the financial reporting set out in the statements and reports; and

(VI) other functions stipulated by relevant laws, regulations and the Articles of Association of our Bank and authorized by the Board.

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Risk and Related Party Transactions Management Committee

The Risk and Related Party Transactions Management Committee of our Bank consists of four Directors: Mr. WANG Gefan, Mr. YANG Mingshang, Mr. TANG Xin and Mr. SONG Ke. Mr. WANG Gefan is the Chairman of the Risk and Related Party Transactions Management Committee. The primary responsibilities of the Risk and Related Party Transactions Management Committee include (among other things):

(I) supervising our Bank’s risk control and evaluating risk policies, management and risk tolerance, and making recommendations on the improvement of risk management and internal control of our Bank;

(II) giving explicit views on the material investments, material asset disposals and material guarantees of our Bank for decision-making by the Board;

(III) accepting the filing of general related party transactions, reviewing major and particularly significant related party transactions, and submitting to the Board or shareholders’ general meeting for review and approval;

(IV) inspecting and supervising the risk and related party/connected transactions management of our Bank, and submitting to the Board our Bank’s annual special report on risk management and related party transactions control on a regular basis; and

(V) other functions stipulated by relevant laws, regulations and the Articles of Association of our Bank and authorized by the Board.

Nomination and Remuneration Committee

The Nomination and Remuneration Committee of our Bank consists of four Directors: Mr. TANG Xin, Mr. LU Lin, Mr. LI Shoubing and Mr. SONG Ke. Mr. TANG Xin is the Chairman of the Nomination and Remuneration Committee. The primary responsibilities of the Nomination and Remuneration Committee include (among other things):

(I) reviewing the size, composition (including the skills, knowledge and experience) and structure of the Board and senior management at least annually according to the business operations, asset scale and shareholding structure of our Bank, and making recommendations on any proposed changes to the Board to complete our Bank’s development strategy;

(II) formulating the standards and procedures for the election of Directors and senior management personnel of our Bank, and conducting preliminary examination on the qualifications and conditions of the candidates for Directors and senior management officers and making recommendations;

(III) formulating the assessment criteria for Directors and senior management officers, carrying out assessment and making recommendations;

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(IV) identifying individuals suitably qualified as Directors, and selecting or proposing such individuals as Directors or making recommendations to the Board thereon;

(V) making recommendations to the Board on the appointment or reappointment of Directors and succession plans for Directors, particularly the chairman and the president;

(VI) considering salaries paid by other comparable companies, time commitment of the post and responsibilities and employment conditions of other positions in our Bank; determining the remuneration policies and system as well as the remuneration packages of each Director and senior management member, including benefits in kind, pension rights and compensation payments (including any compensation payable for loss or termination of their office or appointment); making recommendations to the Board on the remuneration packages, and supervising the implementation thereof; and making recommendations to the Board on the establishment of a formal and transparent procedure for developing remuneration policies;

(VII) reviewing and approving the compensation payable to executive Directors and senior management members for loss or termination of office or appointment to ensure that the compensation is in compliance with the relevant contractual terms and is otherwise fair and reasonable and not excessive; and

(VIII) other functions stipulated by relevant laws, regulations and the Articles of Association of our Bank and authorized by the Board.

Consumer Rights Protection and Social Responsibility Committee

The Consumer Rights Protection and Social Responsibility Committee of our Bank consists of three Directors: Mr. XU An, Mr. CHEN Yongjun and Mr. LI Shoubing. Mr. XU An is the Chairman of the Consumer Rights Protection and Social Responsibility Committee. The primary responsibilities of the Consumer Rights Protection and Social Responsibility Committee includes (among other things):

(I) to formulate the social responsibility strategies and policies of our Bank;

(II) to formulate plans and measures for fulfilling social responsibilities and consumer rights protection;

(III) to review the strategies, policies and objectives of the consumer rights protection; and

(IV) other functions stipulated by relevant laws, regulations and the Articles of Association of our Bank and authorized by the Board.

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THE PARTY COMMITTEE

Our Bank has established the communist party committee of the Bank of Guizhou Co., Ltd. (the “Party Committee”). The Party Committee of our Bank is a leading and political body to supervise the implementation of the policies of the Communist Party of China (the “Party”) and the government in our Bank. The Party Committee firmly implements the relevant deployment and requirements of the provincial party committee and the provincial government on promoting the reform, development and stability of the state-owned enterprises. The Party Committee supports shareholders’ general meeting, the Board, the Board of Supervisors and the senior management of our Bank to perform their duties in accordance with the law; researches and arranges the improvement of the Party; enhances the self-building of the organization of the Party; implements the principle of Party governing the cadre and talents; establishes and enhances the employee’s selecting and using mechanism which meets the demand of modern enterprises system requirements and market competition requirements; implements requirements of Party for enterprises’ material manufacture and operation management matters; discusses and researches our Bank’s reform and development, manufacture and operation, cadre personnel and distribution and other material matters relating to employees’ interests; enhances supervisions for our Bank’s senior managements, coordinates internal supervision resource, seriously performs supervision duty and establishes and strengthens supervision mechanism for power utilizing; relies on the employee wholeheartedly and leads our Bank’s ideological and political work and organizations such as unions and the communist youth league; supports the labor union of our Bank; and researches other matters to be decided by the Party Committee of our Bank.

BOARD DIVERSITY POLICY

The Board has adopted a board diversity policy (the “Board Diversity Policy”) in order to enhance the effectiveness of our Board and to maintain high standard of corporate governance. The Board Diversity Policy sets out the criteria in selecting candidates to our Board, including but not limited to gender, age, cultural and educational background, ethnicity, professional experience, skills, knowledge and length of service. The ultimate decision will be based on merit and contribution that the selected candidates will bring to our Board.

Our Directors have a balanced mixed of knowledge and skills, including but not limited to overall business management, finance and accounting, investment and law. They obtained degrees in various majors including business administration, science, geology and mineralogy, finance, accounting and law. The Board of Directors is of the view that our Board satisfies the Board Diversity Policy.

The Nomination and Remuneration Committee is responsible for reviewing the diversity of the Board. After Listing, the Nomination and Remuneration Committee will monitor and evaluate the implementation of the Board Diversity Policy from time to time to ensure its

– 261 – DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT continued effectiveness. The Nomination and Remuneration Committee will also include in successive annual reports a summary of the Board Diversity Policy, including any measurable objectives set for implementing the Board Diversity Policy and the progress on achieving these objectives.

REMUNERATION OF DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

For the year ended December 31, 2016, 2017 and 2018 and the six months ended June 30, 2019, the aggregate amount of fees, salaries, allowances, discretionary bonuses, contributions to pension schemes and other benefits in kind, if applicable, paid by us to our Directors and Supervisors were approximately RMB6.6 million, RMB9.6 million, RMB8.1 million and RMB2.3 million, respectively.

For the year ended December 31, 2016, 2017 and 2018 and the six months ended June 30, 2019, the aggregate amount of fees, salaries, allowances, discretionary bonuses, contributions to pension schemes and other benefits in kind, if applicable, paid by us to our five highest-paid individuals were RMB4.9 million, RMB6.2 million, RMB6.5 million and RMB2.9 million, respectively.

During the Track Record Period, no remuneration was paid, or is payable, to the Directors, Supervisors or our five highest-paid individuals as an inducement to join or upon joining our Bank or as a remuneration for loss of office.

During the Track Record Period, none of our Directors or Supervisors has waived or agreed to waive any remuneration or benefits in kind for the Track Record Period. Save as disclosed above, no other payments have been paid, or are payable, by our Bank to our Directors, Supervisors or the five highest-paid individuals during the Track Record Period.

In accordance with the remuneration policy of our Bank, the Nomination and Remuneration Committee will consider various factors, including salaries paid by comparable companies, and the tenure, commitment, responsibilities and performance of our Directors, Supervisors and senior management (as the case may be), in assessing the amount of remuneration payable to our Directors, Supervisors and relevant employees. It is estimated that under the arrangements currently in force, the aggregate amount of remuneration payable by us to our Directors and Supervisors for the year ending 2019 is approximately RMB5.6 million.

DIRECTORS’ AND SUPERVISORS’ INTERESTS

Save as disclosed in this prospectus, each of the Directors, Supervisors and senior management staff (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. See Appendix VII – “Statutory and

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General Information – 3. Further Information about Our Directors, Supervisors and Substantial Shareholders” in this prospectus for Directors’ and Supervisors’ interests in the Domestic Shares (within the meaning of Part XV of the SFO).

COMPLIANCE ADVISOR

We have appointed Guotai Junan Capital Limited as our compliance advisor pursuant to Rule 3A.19 and Rule 19A.05 of the Listing Rules. Pursuant to Rule 3A.23 of the Listing Rules, we shall consult the compliance advisor timely under the following circumstances and, if necessary, seek its advice:

(a) before the publication of any regulatory announcement, circular or financial report;

(b) where a transaction, which might be a notifiable or related party transaction, is contemplated, including but not limited to share issues and share repurchases;

(c) where our Bank proposes to use the proceeds of the Global Offering in a manner other than that detailed in this prospectus or where the business activities, developments or results of operation of our Bank deviate from any forecast, estimate, or other information in this prospectus; and

(d) where the Stock Exchange makes an inquiry of our Bank pursuant to Rule 13.10 of the Listing Rules regarding unusual movements in the price or trading volume of our Shares.

Pursuant to Rule 19A.06 of the Listing Rules, our compliance advisor will, on a timely basis, inform us of any amendment or supplement to the Listing Rules that are announced by the Stock Exchange. Our compliance advisor will also inform us of any amendment or supplement to the applicable laws and guidelines.

The term of appointment of the compliance advisor will commence on the Listing Date and end on the date when we distribute the annual report of our financial results for the first full financial year commencing after the Listing Date, and shall be renewable upon mutual agreement.

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Immediately following the completion of the Global Offering (and assuming the Over-allotment Option is not exercised), the share capital of the Bank will comprise 12,388,046,744 Domestic Shares and 2,200,000,000 H Shares, representing approximately 84.92% and 15.08% of the total share capital of the Bank, respectively.

To the best knowledge of the Directors, the following table sets out the shareholdings of the substantial shareholders of the Bank (as defined under Part XV of the SFO) immediately following the completion of the Global Offering (assuming the Over-allotment Option is not exercised):

Approximate Approximate percentage of percentage of shareholding in shareholding in Class of Shares Number of the relevant class the total share to be held after Shares to be held of Shares after capital of the the Global after the Global Nature of the Global Bank after the Name of Shareholder Offering Offering interest Offering Global Offering Guizhou Provincial Domestic Shares 1,918,500,000 Beneficial 15.49% 13.15% Finance Bureau Owner

Kweichow Moutai Domestic Shares 1,750,000,001 Beneficial 14.13% 12.00% Owner

GuiAn New District Domestic Shares 1,050,000,000 Beneficial 8.48% 7.20% Development and Owner Investment

Zunyi City State-owned Domestic Shares 718,545,710 Beneficial 5.80% 4.93% Assets Investment Owner

Domestic Shares 34,065,055 Interest in 0.27% 0.23% controlled corporation

The following table sets out the shareholdings of the substantial shareholders of the Bank (as defined under Part XV of the SFO) immediately following the completion of the Global Offering (assuming the Over-allotment Option is exercised in full):

Approximate Approximate percentage of percentage of shareholding in shareholding in Class of Shares Number of the relevant class the total share to be held after Shares to be held of Shares after capital of the the Global after the Global Nature of the Global Bank after the Name of Shareholder Offering Offering interest Offering Global Offering Guizhou Provincial Domestic Shares 1,918,500,000 Beneficial 15.49% 12.86% Finance Bureau Owner

Kweichow Moutai Domestic Shares 1,750,000,001 Beneficial 14.13% 11.73% Owner

GuiAn New District Domestic Shares 1,050,000,000 Beneficial 8.48% 7.04% Development and Owner Investment

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Approximate Approximate percentage of percentage of shareholding in shareholding in Class of Shares Number of the relevant class the total share to be held after Shares to be held of Shares after capital of the the Global after the Global Nature of the Global Bank after the Name of Shareholder Offering Offering interest Offering Global Offering Zunyi City State-owned Domestic Shares 718,545,710 Beneficial 5.80% 4.82% Assets Investment Owner

Domestic Shares 34,065,055 Interest in 0.27% 0.23% controlled corporation

Save as disclosed herein, the Directors are not aware of any person who will, immediately following the Global Offering, have an interest or short position in Shares or underlying Shares of the Bank, which would be required to be disclosed to the Bank and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO. Save as disclosed in this prospectus, to the best knowledge of the Bank, it is not aware of any other relationship among the substantial shareholders of the Bank as of the Latest Practicable Date.

– 265 – SHARE CAPITAL

This section presents certain information regarding the share capital of the Bank following the completion of the Global Offering.

As of the Latest Practicable Date, the issued share capital of the Bank was RMB12,388,046,744, divided into 12,388,046,744 Domestic Shares with a nominal value of RMB1.00 each.

Assuming the Over-allotment Option is not exercised, the share capital of the Bank immediately after the Global Offering will be as follows:

Approximate percentage of Number of registered share Description of Shares shares capital

Domestic Shares 12,388,046,744 84.92% H Shares to be issued under the Global Offering 2,200,000,000 15.08% Total issued share capital 14,588,046,744 100%

Assuming the Over-allotment Option is exercised in full, the share capital of the Bank immediately after the Global Offering will be as follows:

Approximate percentage of Number of registered share Description of Shares shares capital

Domestic Shares 12,388,046,744 83.04% H Shares to be issued under the Global Offering 2,530,000,000 16.96% Total issued share capital 14,918,046,744 100%

RANKING

The Domestic Shares and H Shares are both ordinary shares in the share capital of the Bank. H Shares may only be subscribed for and traded in Hong Kong dollars. Domestic Shares, on the other hand, may only be subscribed for and traded in RMB. Apart from certain qualified domestic institutional investors in the PRC or through Shanghai-Hong Kong Stock Connect or Shenzhen-Hong Kong Stock Connect, H Shares generally cannot be subscribed for, by or traded between legal or natural persons of the PRC. Domestic Shares, on the other hand, can only be subscribed for, by and traded between legal or natural persons of the PRC, qualified foreign institutional investors and qualified foreign strategic investors. The Bank shall pay all dividends in respect of H Shares in Hong Kong dollars and all dividends in respect of Domestic Shares in RMB. See “Appendix V – Summary of Principal Legal and Regulatory Provisions” and “Appendix VI – Summary of Articles of Association” in this prospectus for details of the circumstances under which general meetings and class meetings of the Bank are required.

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Except as described in this prospectus and in relation to the dispatch of notices and financial reports to our Shareholders, dispute resolution, registration of Shares in different parts of the Bank’s register of Shareholders, the method of share transfer and the appointment of dividend receiving agents, which are all provided for in the Articles of Association and summarized in Appendix VI to this prospectus, the Domestic Shares and our H Shares will rank pari passu with each other in all respects and, in particular, will rank equally for all dividends or distributions declared, paid or made after the date of this prospectus. However, the transfer of Domestic Shares is subject to such restrictions as PRC law may impose from time to time.

CONVERSION OF OUR DOMESTIC SHARES INTO H SHARES

Conversion of Domestic Shares

The Bank will have two classes of ordinary shares, H Shares and Domestic Shares. The Domestic Shares of the Bank are unlisted Shares which are currently not listed or traded on any stock exchange. Upon completion of the Global Offering, all unlisted Shares are Domestic Shares held by our Shareholders, therefore, the scope of the unlisted Shares is the same as the scope of the Domestic Shares of the Bank. The term “unlisted Shares” is used to describe whether certain Shares are listed on a stock exchange and is not unique to PRC laws.

According to stipulations made by the State Council’s securities regulatory authority and the Articles of Association, the Domestic Shares may be converted into H Shares, and such converted H Shares may be listed or traded on an overseas stock exchange, provided that prior to the conversion and trading of such converted shares, the requisite internal approval processes (but without the necessity of shareholders’ approval by class) have been duly completed and the approval from the relevant PRC regulatory authorities, including the CSRC, have been obtained. In addition, such conversion, trading and listing shall in all respects comply with the regulations prescribed by the State Council’s securities regulatory authorities and the regulations, requirements and procedures prescribed by the relevant overseas stock exchange.

If any of the Domestic Shares of the Bank are to be converted and to be traded as H Shares on the Stock Exchange, such transfer and conversion will be subject to the approval of the relevant PRC regulatory authorities including the CSRC. Approval of the Stock Exchange is required for the listing of such converted Shares on the Stock Exchange. Based on the methodology and procedures for the conversion of the Domestic Shares into H Shares as described in this section, the Bank can apply for the listing of all or any portion of our Domestic Shares on the Stock Exchange as H Shares in advance of any proposed conversion to ensure that the conversion process can be completed promptly upon notice to the Stock Exchange and delivery of shares for entry on the H Share register. As any listing of additional shares after the Bank’s initial listing on the Stock Exchange is ordinarily considered by the Stock Exchange to be a purely administrative matter, it does not require such prior application for listing at the time of the Bank’s initial listing in Hong Kong.

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No shareholder voting by class is required for the listing and trading of the converted shares on an overseas stock exchange. Any application for listing of the converted shares on the Stock Exchange after our initial listing is subject to prior notification by way of announcement to inform the Shareholders and the public of any proposed conversion.

As confirmed by our PRC legal advisors, the Articles of Association are consistent with the relevant PRC laws and regulations on the conversion of domestic shares.

Mechanism and Procedures for Conversion

After all the requisite approvals have been obtained, the following procedures will need to be completed in order to effect the conversion: the relevant Domestic Shares will be withdrawn from the Domestic Shares register and the Bank will re-register such Shares on the H Share register of the Bank maintained in Hong Kong and instruct the H Share Registrar to issue H Share certificates. Registration on our H Share register will be conditioned on (i) the Bank’s H Share Registrar lodging with the Stock Exchange a letter confirming the proper entry of the relevant H Shares on the H Share register and the due dispatch of H Share certificates, and (ii) the admission of the H Shares to trade on the Stock Exchange complying with the Listing Rules and the General Rules of CCASS and the CCASS Operational Procedures in force from time to time. Until the transferred shares are re-registered on the Bank’s H Share register, such Shares would not be listed as H Shares.

LOCK-UP PERIODS

The Company Law provides that in relation to the public offering of a company, the shares issued by a company prior to the public offering shall not be transferred for a period of one year from the date on which the publicly offered shares are traded on any stock exchange. Accordingly, Shares issued by the Bank prior to the Listing Date shall be subject to this statutory restriction and shall not be transferred for a period of one year from the Listing Date. The Bank shall continue to post prospectus on its website after the completion of the Listing of the Bank to inform domestic shareholders the prohibition of share transfer.

Our Directors, Supervisors and members of the senior management shall declare their shareholdings in the 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 the Bank. The Shares that the aforementioned persons held in the 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 the 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.

– 268 – SHARE CAPITAL

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 transfer 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 the 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.

REGISTRATION OF SHARES NOT LISTED ON AN OVERSEAS STOCK EXCHANGE

According to the Notice of Centralized Registration and Deposit of Non-overseas Listed Shares of Companies Listed on an Overseas Stock Exchange (關於境外上市公司非境外上市股 份集中登記存管有關事宜的通知) issued by the CSRC, an overseas listed company is required to register its shares that are not listed on an overseas stock exchange with the CSDCC within 15 business days upon listing and provide a written report to the CSRC regarding the centralized registration and deposit of its non-overseas listed shares as well as the current offering and listing of shares.

SHAREHOLDERS’ GENERAL MEETINGS AND CLASS MEETINGS

For details of circumstances under which our Shareholders’ general meeting and Shareholders’ class meeting are required, 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 VI – Summary of Articles of Association.”

– 269 – 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 prospectus. 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. See “Financial Information – Critical Accounting Estimates and Judgments – Impact of New Accounting Policies” for details on differences between IAS 39 and IFRS 9 and the impact of adopting IFRS 9 on our results of operations. See note 2(1) to the Accountants’ Report in Appendix I.

The following discussion and analysis contain forward-looking statements that reflect our current views with respect to future events and financial performance. These statements are based on our assumptions and analysis in light of our experience and perception of historical trends, current conditions and expected future development, as well as other factors we believe are appropriate under the circumstances. However, whether actual outcomes and developments will meet our expectations and predictions depends on a number of risks and uncertainties. In evaluating our business, you should carefully consider the information provided in this prospectus, including, but not limited to, “Risk Factors”, “Forward-Looking Statements”, and “Business”.

ASSETS

Our total assets increased by 25.1% from RMB228,949.3 million as of December 31, 2016 to RMB286,368.4 million as of December 31, 2017, and further increased by 19.1% to RMB341,202.9 million as of December 31, 2018, representing a CAGR of 22.1%. As of June 30, 2019, our total assets increased by 14.2% to RMB389,622.4 million. The increase in our total assets was primarily due to an increase in gross loans and advances to customers as a result of the continued growth of our corporate and retail banking business as well as financial markets business. The principal components of our assets consist of (i) net loans and advances to customers and (ii) net financial investments, representing 40.8% and 38.5%, respectively, of our total assets as of June 30, 2019. The following table sets forth the components of our total assets as of the dates indicated.

December 31, June 30, 2016(1) 2017(1) 2018(2) 2019(2) %of %of %of %of Amount total Amount total Amount total Amount total (in millions of RMB, except percentages) Gross loans and advances to customers(3) 68,331.4 29.8 88,132.3 30.8 140,140.5 41.1 164,339.7 42.2 Interest receivables(4) N/A N/A N/A N/A 333.4 0.1 336.9 0.1 Allowance for impairment losses (2,781.6) (1.2) (2,722.8) (1.0) (4,642.0) (1.4) (5,783.9) (1.5) Net loans and advances to customers 65,549.8 28.6 85,409.5 29.8 135,831.9 39.8 158,892.7 40.8 Gross financial investments 103,104.4 45.1 131,423.5 45.9 137,122.9 40.1 150,185.9 38.5 Allowance for impairment losses (836.1) (0.4) (1,378.0) (0.5) (1,784.5) (0.5) (1,319.2) (0.3) Interest receivables(4) N/A N/A N/A N/A 1,306.6 0.4 1,287.6 0.3

– 270 – ASSETS AND LIABILITIES

December 31, June 30, 2016(1) 2017(1) 2018(2) 2019(2) %of %of %of %of Amount total Amount total Amount total Amount total (in millions of RMB, except percentages) Net financial investments 102,268.3 44.7 130,045.5 45.4 136,645.0 40.0 150,154.3 38.5 – Financial investments at fair value through profit or loss 3,856.4 1.7 3,687.0 1.3 8,670.7 2.5 15,378.6 3.9 – Available-for-sale financial assets 3,159.2 1.4 8,966.1 3.1 N/A N/A N/A N/A – Held-to-maturity investments 31,876.0 13.9 42,381.6 14.8 N/A N/A N/A N/A – Debt securities classified as receivables 63,376.7 27.7 75,010.8 26.2 N/A N/A N/A N/A – Financial investments at fair value through other comprehensive income N/A N/A N/A N/A 14,117.1 4.1 23,643.5 6.1 – Financial investments at amortized cost N/A N/A N/A N/A 113,857.2 33.4 111,132.2 28.5 Cash and deposits with the central bank 32,241.7 14.1 49,676.5 17.3 45,803.0 13.4 48,020.9 12.3 Deposits with banks and other financial institutions 5,886.9 2.6 1,121.7 0.4 834.8 0.2 4,232.3 1.1 Financial assets held under resale agreements 17,740.3 7.7 12,948.3 4.5 14,700.3 4.3 19,988.8 5.1 Property and equipment 1,828.9 0.8 1,796.7 0.6 3,293.4 1.0 3,398.4 0.9 Other assets(5) 3,433.4 1.5 5,370.2 2.0 4,094.5 1.3 4,935.0 1.3 Total assets 228,949.3 100.0 286,368.4 100.0 341,202.9 100.0 389,622.4 100.0

(1) IAS 39 was adopted prior to January 1, 2018. (2) IFRS 9 was adopted from January 1, 2018. (3) For ease of reference, in this prospectus, unless otherwise indicated, we use the terms “loans and advances to customers,” “loans” and “loans to customers” synonymously. (4) Presented according to the Notice on Revising and Issuing the Format of Financial Statement of Financial Enterprises for 2018 (關於修訂印發2018年金融企業財務報表格式的通知) issued by Ministry of Finance of the People’s Republic of China. (5) Consists primarily of deferred income tax assets, investments in associates and other assets.

Loans and Advances to Customers

Loans and advances to customers are a major component of our assets. Our loans and advances to customers, net of impairment allowance, accounted for 28.6%, 29.8%, 39.8% and 40.8% of our total assets as of December 31, 2016, 2017 and 2018 and June 30, 2019, respectively. We provide a broad range of loan products to our customers through our distribution network. All of our loans are denominated in Renminbi. Except as otherwise indicated, the following discussions are based on our gross loans and advances to customers before impairment allowance, rather than net loans and advances to customers. Our loans are reported net of impairment allowance on our statement of financial position.

– 271 – ASSETS AND LIABILITIES

Our loans and advances to customers increased by 29.0% from RMB68,331.4 million as of December 31, 2016 to RMB88,132.3 million as of December 31, 2017, further increased by 59.0% to RMB140,140.5 million as of December 31, 2018 and further increased by 17.3% to RMB164,339.7 million as of June 30, 2019, due to the continued and stable development of our corporate banking and retail banking businesses.

Distribution of Loans by Business Line

Our loans consist of corporate loans, personal loans and discounted bills. See “Business – Our Principal Business Lines” for a description of the loan products we offer. The following table sets forth our loans to customers by business line as of the dates indicated.

December 31, January 1, December 31, June 30,

2016(1) 2017(1) 2018(2) 2019(2)

%of %of %of %of %of Amount total Amount total Amount total Amount total Amount total (in millions of RMB, except percentages) Loans measured at amortized cost Corporate loans 59,076.6 86.5 76,572.9 86.9 76,572.9 86.9 121,888.7 87.0 137,024.5 83.4 Personal loans 7,309.8 10.7 10,749.5 12.2 10,749.5 12.2 16,860.4 12.0 24,130.1 14.7 Discounted bills 1,945.0 2.8 809.9 0.9 N/A N/A N/A N/A N/A N/A Loans measured at fair value through other comprehensive income Corporate loans N/A N/A N/A N/A N/A N/A N/A N/A 974.0 0.6 Discounted bills N/A N/A N/A N/A 802.9 0.9 1,391.4 1.0 2,211.1 1.3 Total 68,331.4 100.0 88,132.3 100.0 88,125.3 100.0 140,140.5 100.0 164,339.7 100.0

(1) IAS 39 was adopted prior to January 1, 2018. (2) IFRS 9 was adopted from January 1, 2018.

Corporate Loans

During the Track Record Period, corporate loans were the largest component of our loan portfolio, representing 86.5%, 86.9%, 87.0% and 83.4% of our total loans to customers as of December 31, 2016, 2017 and 2018 and June 30, 2019, respectively. Our corporate loans increased by 29.6% from RMB59,076.6 million as of December 31, 2016 to RMB76,572.9 million as of December 31, 2017, increased by 59.2% to RMB121,888.7 million as of December 31, 2018 and further increased by 12.4% to RMB137,024.5 million as of June 30, 2019. The continued increase in our corporate loans during the Track Record Period was primarily due to (i) continued expansion of our corporate banking business in line with the rapid economic growth in Guizhou Province, (ii) our increased customer base, and (iii) improved efficiency in loan approval process and targeted marketing efforts of our corporate banking business.

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– Distribution of Corporate Loans by Contract Maturity

The majority of our corporate loans were medium-to-long-term loans, with a maturity of more than a year representing 86.6% of the total corporate loans as of June 30, 2019. The following table sets forth the distribution of our corporate loans by contract maturity as of the dates indicated.

December 31, June 30,

2016 2017 2018 2019

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

(in millions of RMB, except percentages)

Short-term loans(1) 13,862.5 23.5 12,845.3 16.8 15,708.0 12.9 18,451.6 13.4 Medium-to-long-term loans(2) 45,214.1 76.5 63,727.6 83.2 106,180.7 87.1 119,546.9 86.6 Total corporate loans 59,076.6 100.0 76,572.9 100.0 121,888.7 100.0 137,998.5 100.0

(1) Refers to loans with a maturity of one year or less. (2) Refers to loans with a maturity of more than one year.

Short-term loans accounted for 23.5%, 16.8%, 12.9% and 13.4% of our total corporate loans as of December 31, 2016, 2017 and 2018 and June 30, 2019, respectively.

Medium-to-long-term loans accounted for 76.5%, 83.2%, 87.1% and 86.6% of our total corporate loans as of December 31, 2016, 2017 and 2018 and June 30, 2019, respectively.

The changes in the maturity structure of our corporate loans from December 31, 2016 to June 30, 2019 were primarily due to the increased portion of fixed asset loans which typically have medium-to-long terms, mainly driven by the increasing financing demand from infrastructure and transportation construction projects in Guizhou Province.

– 273 – ASSETS AND LIABILITIES

– 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. See “Business – Our Principal Business Lines – Corporate Banking Business – Corporate Loans” for details of each type of our corporate loans.

December 31, June 30,

2016 2017 2018 2019

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

(in millions of RMB, except percentages)

Fixed asset loans 34,618.6 58.6 53,644.4 70.0 94,515.5 77.5 104,240.1 75.5 Working capital loans 22,801.0 38.6 22,014.8 28.8 25,113.1 20.6 31,581.7 22.9 Others(1) 1,657.0 2.8 913.7 1.2 2,260.1 1.9 2,176.7 1.6 Total corporate loans 59,076.6 100.0 76,572.9 100.0 121,888.7 100.0 137,998.5 100.0

(1) Primarily consists of loans for restructuring, and mergers and acquisitions.

Fixed asset loans accounted for 58.6%, 70.0%, 77.5% and 75.5% of our total corporate loans as of December 31, 2016, 2017 and 2018 and June 30, 2019, respectively. Our fixed asset loans increased by 55.0% from RMB34,618.6 million as of December 31, 2016 to RMB53,644.4 million as of December 31, 2017, by 76.2% to RMB94,515.5 million as of December 31, 2018 and further increased by 10.3% to RMB104,240.1 million as of June 30, 2019. The continued increase in our fixed asset loans was primarily due to our increased lending to infrastructure construction projects to support local development, which was in line with the continued urbanization and economic growth in Guizhou Province.

During the Track Record Period, working capital loans accounted for 38.6%, 28.8%, 20.6% and 22.9% of our total corporate loans as of December 31, 2016, 2017 and 2018 and June 30, 2019, respectively. Our working capital loans remained relatively stable at RMB22,801.0 million and RMB22,014.8 million as of December 31, 2016 and 2017, respectively. Our working capital loans increased by 14.1% to RMB25,113.1 million as of December 31, 2018 and further by 25.8% to RMB31,581.7 million as of June 30, 2019, primarily as we increased working capital loans to our customers in the leasing and commercial services industry, in particular, government-affiliated entities, and the road transportation industry.

Our other corporate loans mainly consist of loans for restructuring, and mergers and acquisitions. Our other corporate loans decreased by 44.9% from RMB1,657.0 million as of December 31, 2016 to RMB913.7 million as of December 31, 2017, due primarily to a decrease in client demand. Our other corporate loans significantly increased to RMB2,260.1 million as

– 274 – ASSETS AND LIABILITIES of December 31, 2018, as we made a sizeable merger and acquisition loan in 2018. Our other corporate loans decreased by 3.7% to RMB2,176.7 million as of June 30, 2019, due primarily to the early customer repayment of the sizeable merger and acquisition loan we extended in 2018.

– 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.

December 31, June 30, 2016 2017 2018 2019 %of %of %of %of Amount total Amount total Amount total Amount total (in millions of RMB, except percentages) Leasing and commercial services(1) 12,101.9 20.5 23,190.5 30.3 58,709.1 48.2 68,389.2 49.6 Water conservancy, environment and public utility management 4,750.0 8.0 7,484.7 9.8 12,272.0 10.1 13,313.2 9.6 Construction 3,561.0 6.0 8,331.5 10.9 9,409.4 7.7 10,958.9 7.9 Education 12,081.9 20.5 9,522.6 12.4 9,070.8 7.4 9,225.9 6.7 Real estate 5,951.2 10.1 4,905.2 6.4 7,055.7 5.8 7,979.8 5.8 Transportation, storage and postal services 2,863.0 4.8 5,633.2 7.4 6,711.3 5.5 7,313.7 5.3 Mining 5,209.9 8.8 3,461.7 4.5 4,313.6 3.5 4,171.9 3.0 Hygiene and social welfare 2,484.4 4.2 3,402.5 4.4 3,312.7 2.7 3,509.4 2.5 Wholesale and retail 2,199.6 3.7 2,052.8 2.7 3,103.0 2.5 3,789.2 2.7 Manufacturing 5,369.3 9.1 4,094.8 5.3 3,164.1 2.6 3,664.3 2.7 Production and supply of electricity, gas and water 1,061.8 1.8 2,054.5 2.7 2,327.4 1.9 2,179.6 1.6 Others(2) 1,442.6 2.5 2,438.9 3.2 2,439.6 2.1 3,503.4 2.6 Total corporate loans 59,076.6 100.0 76,572.9 100.0 121,888.7 100.0 137,998.5 100.0

(1) During the Track Record Period, substantially all of our corporate customers in such industry are government-affiliated entities primarily engaged in infrastructure construction projects.

(2) Consists primarily of (i) agriculture, forestry, animal husbandry and fisheries, (ii) culture, sports and entertainment, (iii) information transmission, computer services and software, (iv) residential services, repairs and other services, (v) hotel and catering, (vi) scientific research and technical services, (vii) finance, as well as (viii) public administration and social organizations.

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The aggregate loans to our corporate borrowers in leasing and commercial services, water conservancy, environment and public utility management, construction, education and real estate, being the top five industries in terms of our aggregate corporate loan exposure as of June 30, 2019, collectively, accounted for 65.1%, 69.8%, 79.2% and 79.6% of our total corporate loans as of December 31, 2016, 2017 and 2018 and June 30, 2019, respectively.

Our loans to leasing and commercial services corporate borrowers, mostly, government- affiliated enterprises, increased by 91.6% from RMB12,101.9 million as of December 31, 2016 to RMB23,190.5 million as of December 31, 2017, and further increased significantly to RMB58,709.1 million as of December 31, 2018, which then increased by 16.5% to RMB68,389.2 million as of June 30, 2019. Local government-affiliated entities typically use our loans for infrastructure or industrial construction, urban renewal, or other public projects, and repay us primarily with proceeds from the local government budget. Our loans to water conservancy, environment and public utility management borrowers increased by 57.6% from RMB4,750.0 million as of December 31, 2016 to RMB7,484.7 million as of December 31, 2017, and further by 64.0% to RMB12,272.0 million as of December 31, 2018. As of June 30, 2019, our loans to water conservancy, environment and public utility management borrowers increased by 8.5% to RMB13,313.2 million. Our loans to corporate borrowers in the leasing and commercial services industry and water conservancy, environment and public utility management industry continuously increased during the Track Record Period as many government-affiliated infrastructure construction companies are operating in these categories and we increased lending to them to support local infrastructure development.

Our loans to construction borrowers increased significantly from RMB3,561.0 million as of December 31, 2016 to RMB8,331.5 million as of December 31, 2017, primarily due to our increased lending to government-affiliated companies for infrastructure construction projects. Our loans to construction borrowers increased by 12.9% to RMB9,409.4 million as of December 31, 2018 and further by 16.5% to RMB10,958.9 million as of June 30, 2019, primarily due to the increased financing demand from active infrastructure construction in Guizhou Province.

Our loans to education borrowers decreased by 21.2% from RMB12,081.9 million as of December 31, 2016 to RMB9,522.6 million as of December 31, 2017, and decreased slightly to RMB9,070.8 million as of December 31, 2018. The continued decrease in our loans to education borrowers was primarily due to decreased customer demands. As of June 30, 2019, our loans to education borrowers increased slightly to RMB9,225.9 million.

Our loans to real estate borrowers decreased by 17.6% from RMB5,951.2 million as of December 31, 2016 to RMB4,905.2 million as of December 31, 2017, primarily as we scaled down our lending to this industry after we tightened risk management measures. Our loans to real estate borrowers increased by 43.8% to RMB7,055.7 million as of December 31, 2018 and further by 13.1% to RMB7,979.8 million as of June 30, 2019, primarily due to the expansion of our customer base in this industry as driven by the growing property market in Guizhou Province and our in-depth understanding of the local economy and this industry.

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– 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.

December 31, June 30,

2016 2017 2018 2019

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

(in millions of RMB, except percentages)

Large enterprises(1) 8,479.7 14.4 11,127.4 14.5 16,512.6 13.4 18,799.6 13.6 Medium enterprises(1) 10,805.9 18.3 18,446.7 24.1 29,073.5 23.9 33,604.0 24.4 Small enterprises(1) 18,516.2 31.3 26,362.7 34.4 49,691.6 40.8 55,944.0 40.5 Micro enterprises(1) 2,217.4 3.7 3,127.0 4.1 10,336.8 8.5 13,618.5 9.9 Others(2) 19,057.4 32.3 17,509.1 22.9 16,274.2 13.4 16,032.4 11.6 Total corporate loans 59,076.6 100.0 76,572.9 100.0 121,888.7 100.0 137,998.5 100.0

(1) The classification criteria for large, medium, micro and small enterprises are set forth in the Classification Standards of Small and Medium Enterprises. See “Definitions and Conventions” for details. (2) Consists primarily land reserve centers, and public institutions such as schools and hospitals.

Our loans to micro and small enterprises as a percentage of our corporate loan portfolio accounted for 35.0%, 38.5%, 49.3% and 50.4% as of December 31, 2016, 2017 and 2018 and June 30, 2019, respectively. Our loans to micro and small enterprises increased by 42.2% from RMB20,733.6 million as of December 31, 2016 to RMB29,489.7 million as of December 31, 2017, and further increased significantly to RMB60,028.4 million as of December 31, 2018, which then increased by 15.9% to RMB69,562.5 million as of June 30, 2019. The continued increase in our loans to micro and small enterprises was primarily because we expanded our micro and small finance business to support the local economy.

Loans to medium to large enterprises as a percentage of our total corporate loans accounted for 32.7%, 38.6%, 37.3% and 38.0%, respectively, as of December 31, 2016, 2017 and 2018 and June 30, 2019. Loans to medium to large enterprises increased by 53.3% from RMB19,285.6 million as of December 31, 2016 to RMB29,574.1 million as of December 31, 2017, and further increased by 54.1% to RMB45,586.1 million as of December 31, 2018, which then increased by 15.0% to RMB52,403.6 million as of June 30, 2019. The continued increase in our loans to medium to large enterprises was primarily due to (i) an increase in the number of our medium to large enterprise customers, particularly government-affiliated enterprises operating in leasing and commercial services, construction and water conservancy, environment and public utility management industries, and (ii) our increased lending extended to medium to large corporate customers which we believe have strong repayment capability, in particular those operating in transportation, storage and postal services and construction industries.

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– 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.

December 31, June 30,

2016 2017 2018 2019

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

(in millions of RMB, except percentages)

Over RMB500 million 9,520.3 16.1 19,975.0 26.1 50,566.3 41.5 54,916.6 39.8 Over RMB100 million to RMB500 million (inclusive) 26,469.4 44.8 35,788.1 46.7 48,820.5 40.1 59,090.1 42.8 Over RMB50 million to RMB100 million (inclusive) 6,644.7 11.3 5,000.5 6.6 6,413.1 5.2 7,542.3 5.5 Over RMB10 million to RMB50 million (inclusive) 11,601.3 19.6 10,754.7 14.0 10,246.2 8.4 9,825.5 7.1 Over RMB5 million to RMB10 million (inclusive) 1,695.6 2.9 1,664.6 2.2 1,632.7 1.3 1,667.2 1.2 Up to RMB5 million 3,145.3 5.3 3,390.0 4.4 4,209.9 3.5 4,956.8 3.6 Total corporate loans 59,076.6 100.0 76,572.9 100.0 121,888.7 100.0 137,998.5 100.0

The balance of our corporate loans of over RMB100 million amounted to RMB35,989.7 million, RMB55,763.1 million, RMB99,386.8 million and RMB114,006.7 million as of December 31, 2016, 2017 and 2018 and June 30, 2019, respectively, which represented 60.9%, 72.8%, 81.6% and 82.6% of our total corporate loans as of the same dates, respectively. The increase in our loans to corporate customers with exposure to single clients over RMB100 million was primarily attributable to our increased lending to such customers which have shown strong business growth and repayment capabilities.

As of June 30, 2019, approximately 43.7% of our corporate loans of over RMB100 million was granted to micro and small enterprises as defined under the Classification Standards of Small and Medium Enterprises (中小企業劃型標準規定). Such micro and small enterprises included (i) infrastructure construction companies which possessed sizable capital or asset scale, and (ii) local or newly-established subsidiaries of medium to large enterprises with strong financial performance. In addition, 33.4% of our corporate loans to micro and small enterprises of over RMB100 million were secured by pledges and collaterals as of June 30, 2019. Therefore, we believe such micro and small enterprises have strong repayment capabilities and we are able to recover such corporate loans when they become due. See “Risk Factors – Risks Relating to Our Business – We are exposed to risks arising from loans granted to micro and small enterprises and individual business owners.”

– 278 – ASSETS AND LIABILITIES

Personal Loans

As of December 31, 2016, 2017 and 2018 and June 30, 2019, our personal loans accounted for 10.7%, 12.2%, 12.0% and 14.7% of our total loans, respectively.

Our personal loans increased by 47.1% from RMB7,309.8 million as of December 31, 2016 to RMB10,749.5 million as of December 31, 2017, by 56.8% to RMB16,860.4 million as of December 31, 2018 and further increased by 43.1% to RMB24,130.1 million as of June 30, 2019. The continued increase in our personal loans was primarily due to our business expansion and targeted marketing of our personal loan business, in particular, residential mortgage loans, during the Track Record Period, and personal business loans in 2018 and the six months ended June 30, 2019.

– Distribution of Personal Loans by Product Type

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

December 31, June 30, 2016 2017 2018 2019 %of %of %of %of Amount total Amount total Amount total Amount total (in millions of RMB, except percentages)

Residential mortgage loans 2,182.5 29.8 6,143.5 57.1 9,765.5 57.9 12,371.1 51.3 Personal business loans 3,622.8 49.6 3,233.0 30.1 5,808.5 34.5 10,598.9 43.9 Personal consumption loans 1,504.5 20.6 1,373.0 12.8 1,253.3 7.4 1,116.8 4.6 Bank card balances –– – – 33.1 0.2 43.3 0.2 Total personal loans 7,309.8 100.0 10,749.5 100.0 16,860.4 100.0 24,130.1 100.0

Residential mortgage loans increased significantly from RMB2,182.5 million as of December 31, 2016 to RMB6,143.5 million as of December 31, 2017, and further by 59.0% to RMB9,765.5 million as of December 31, 2018, which then increased by 26.7% to RMB12,371.1 million as of June 30, 2019. The continued increase in residential mortgage loans was primarily due to (i) our efforts to grow our residential mortgage loan portfolio in response to the favorable real estate market and the increased urbanization in Guizhou Province, and (ii) our preference to attract low-risk residential mortgage loans secured by the borrowers’ properties.

Personal business loans as a percentage of our total personal loans decreased from 49.6% as of December 31, 2016 to 30.1% as of December 31, 2017, primarily as a result of our adjustments to loan portfolio and efforts to allocate more capital to residential mortgage loans. Personal business loans as a percentage of our total personal loans increased to 34.5% as of December 31, 2018, and further increased to 43.9% as of June 30, 2019, primarily as a result of our efforts to develop new personal business loan products to capture market demand from micro and small enterprises for business loans in response to supportive government policies.

– 279 – ASSETS AND LIABILITIES

Personal consumption loans as a percentage of our total personal loans decreased from 20.6% as of December 31, 2016 to 12.8% as of December 31, 2017, and further decreased to 7.4% as of December 31, 2018, which then decreased to 4.6% as of June 30, 2019, primarily as we focused more efforts on marketing and developing low-risk residential mortgage loans.

We only commenced our credit card business in 2018, mainly targeting local public service employees and our employees, and our bank card balances accounted for 0.2% of our total personal loans as of December 31, 2018 and June 30, 2019.

– 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.

December 31, June 30, 2016 2017 2018 2019 %of %of %of %of Amount total Amount total Amount total Amount total (in millions of RMB, except percentages)

Over RMB5,000,000 164.2 2.2 122.4 1.2 140.9 0.8 203.4 0.8 Over RMB500,000 to RMB5,000,000 (inclusive) 2,663.8 36.4 4,202.8 39.1 8,000.7 47.5 13,822.0 57.3 Over RMB250,000 to RMB500,000 (inclusive) 1,583.9 21.7 3,235.6 30.1 5,178.7 30.7 6,451.3 26.8 Over RMB100,000 to RMB250,000 (inclusive) 1,780.1 24.4 2,121.6 19.7 2,580.0 15.3 2,786.0 11.5 Up to RMB100,000 1,117.8 15.3 1,067.1 9.9 960.1 5.7 867.4 3.6 Total personal loans 7,309.8 100.0 10,749.5 100.0 16,860.4 100.0 24,130.1 100.0

Discounted Bills

Discounted bills amounted to RMB1,945.0 million, RMB809.9 million, RMB1,391.4 million and RMB2,211.1 million as of December 31, 2016, 2017 and 2018 and June 30, 2019, respectively, accounted for 2.8%, 0.9%, 1.0% and 1.3% of our total loans to customers as of December 31, 2016, 2017 and 2018 and June 30, 2019, respectively. The changes in our discounted bills were primarily due to our adjustments to the holding of discounted bills to rebalance our asset structure.

During the Track Record Period, all of our discounted bills were bank acceptance bills, which generally have lower credit risks than commercial acceptance bills.

– 280 – ASSETS AND LIABILITIES

Distribution of Loans to Customers 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 loans to customers by geographic region as of the dates indicated.

December 31, June 30, 2016 2017 2018 2019 %of %of %of %of Amount total Amount total Amount total Amount total (in millions of RMB, except percentages) Guiyang (貴陽) 18,944.7 27.7 19,253.6 21.9 37,398.5 26.7 42,558.0 25.9 Zunyi (遵義) 18,720.5 27.4 22,668.2 25.7 32,452.9 23.2 36,667.7 22.3 Anshun (安順) 7,324.5 10.7 8,395.0 9.5 9,992.3 7.1 12,067.0 7.3 Liupanshui (六盤水) 7,605.2 11.1 12,063.6 13.7 16,809.5 12.0 20,023.0 12.2 Qiannan (黔南) 5,582.0 8.2 8,535.4 9.7 11,521.2 8.2 13,531.1 8.2 Bijie (畢節) 4,141.9 6.1 4,165.0 4.7 8,285.9 5.9 10,515.7 6.4 Qianxinan (黔西南) 3,623.2 5.3 6,360.2 7.2 9,497.5 6.8 11,103.7 6.9 Tongren (銅仁) 731.6 1.1 2,748.2 3.1 7,283.4 5.2 8,931.3 5.4 Qiandongnan (黔東南) 1,657.8 2.4 3,943.1 4.5 6,899.3 4.9 8,942.2 5.4 Total loans to customers 68,331.4 100.0 88,132.3 100.0 140,140.5 100.0 164,339.7 100.0

Distribution of Loans to Customers by Collateral

During the Track Record Period, a significant amount of our loans were secured by collateral, pledges or guarantees. As of December 31, 2016, 2017 and 2018 and June 30, 2019, our loans to customers secured by collateral, pledges or guarantees represented 87.9%, 92.6%, 93.3% and 93.3% of our total loans to customers, respectively. The following table sets forth the distribution of our loans to customers by type of security as of the dates indicated.

December 31, January 1, December 31, June 30, 2016(1) 2017(1) 2018(2) 2019(2) %of %of %of %of %of Amount total Amount total Amount total Amount total Amount total (in millions of RMB, except percentages) Pledged loans(3)(4) 6,481.7 9.5 13,812.6 15.7 13,812.6 15.7 34,165.5 24.4 39,583.3 24.1 Collateralized loans(3)(5) 25,308.1 37.0 24,284.0 27.5 24,284.0 27.5 28,486.9 20.3 31,938.1 19.4 Guaranteed loans(3) 28,288.9 41.4 43,514.7 49.4 42,704.8 48.5 68,126.9 48.6 81,811.4 49.8 Unsecured loans 8,252.7 12.1 6,521.0 7.4 6,521.0 7.4 7,969.8 5.7 7,821.8 4.8 Loans measured at fair value through other comprehensive income Guaranteed loans(3)(6) N/A N/A N/A N/A 802.9 0.9 1,391.4 1.0 3,185.1 1.9 Total 68,331.4 100.0 88,132.3 100.0 88,125.3 100.0 140,140.5 100.0 164,339.7 100.0

– 281 – ASSETS AND LIABILITIES

(1) IAS 39 was adopted prior to January 1, 2018. (2) IFRS 9 was adopted from January 1, 2018. (3) Represents the total amount of loans fully or partially secured by collateral in each category. If a loan is secured by more than one form of security interest, the classification is based on the primary form of security interest. (4) Represents security interests in intangible assets or monetary assets, such as movable assets, certificates of deposit, financial instruments, intellectual properties and interests in future cash flows, by taking possession of, or registering against, such assets. (5) Represents security interests in tangible assets other than monetary assets, such as buildings and fixtures, land use rights, machines, equipment and vehicles, without taking possession. (6) Associated with discounted bills prepared in accordance with IFRS 9, starting from January 1, 2018.

During the Track Record Period, a majority of our loans were secured by collateral, pledges or guarantees. The continued increase in our secured loans reflected the overall growth of our loans while still maintaining prudent credit risk management.

Our loan-to-value ratio refers to an indicator that compares the size of loans with the value of the collaterals or pledges securing the loans. As of December 31, 2016, 2017, 2018 and June 30, 2019, the loan-to-value ratio of our collateralized loans was 32.0%, 33.2%, 35.0% and 33.1%, respectively. As of the same dates, the loan-to-value ratio of our pledged loans was 31.1%, 36.3%, 41.2% and 42.4%, respectively. Such increase was mainly due to the efforts to (i) optimize our credit structure by easing our requirements on pledges to provide more credit support to real economy and private enterprises, while still maintaining our credit risks well below our internal thresholds, which we established by referring to industry and market standards, and (ii) properly reduce our reliance on pledges while enhancing management and control of primarily repayment sources in accordance with regulatory rules. During the Track Record Period, we have not experienced any situation when the value of our collaterals or pledges were insufficient to cover the principal of and interest on the loans.

Our unsecured loans were RMB8,252.7 million, RMB6,521.0 million, RMB7,969.8 million and RMB7,821.8 million as of December 31, 2016, 2017 and 2018 and June 30, 2019, respectively, representing 12.1%, 7.4%, 5.7% and 4.8% of our total loans to customers as of the respective dates. The continued decrease in our unsecured loans as a percentage of our loans to customers was primarily due to the adjustments to, and improvement of, our credit approval requirements of unsecured loans imposed by us on our borrowers.

– 282 – Borrower 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 June 30, 2019.

June 30, 2019

%of Value of Coverage (3) OperationalInternalExternal % of totalregulatory Loan Underlyingunderlying ratio (1) (2) Industry Date of incorporationscale Natureratings ratings AmountType of Businessloans capital classificationsecurities securities (times) Impairment

(in millions of RMB, except percentages)

Borrower A Real estate November 24, 2004 Private Large A2,400.0 N/A Loans 1.5 7.3 Normal Collaterals7,867.0 3.28 108.0 Borrower B Leasing andSeptember commercial 24, 2015 State-owned Medium A2,040.0 N/A Loans 1.2 6.2 Normal Collaterals, 675.3 0.33 30.6

services pledges and LIABILITIES AND ASSETS guarantee Borrower C Leasing andDecember commercial 1, 2016 State-owned Large AA2,000.0 N/A Loans 1.2 6.1 Normal Credit N/A N/A 30.0 services November 15, 2011 State-owned Large AA1,997.6 N/A Loans 1.2 6.1 Normal Pledges and4,442.6 2.22 30.0 Borrower D Water conservancy, credit environment and public utility management Borrower E (4) 10,176.9 5.66 30.0 8 – 283 – Transportation, storageOctober 16, 1993 State-owned Large AA1,796.8 AAA Loans 1.1 5.5 Normal Collaterals, and postal services pledges and credit (5) 3,059.1 1.27 24.0 Borrower F Leasing and commercialSeptember 7, 2012 State-owned Medium A1,598.3 AA Loans and investment1.0 4.9 Normal Collaterals, services in private pledges and placement bonds guarantee Borrower G Leasing andMarch commercial 11, 2014 State-owned Medium A1,580.0 AA- Loans 1.0 4.8 Normal Collaterals and484.0 0.31 23.7 services guarantee Borrower H ConstructionJanuary 5, 2016 State-owned Micro A1,289.2 N/A Loans 0.8 3.9 Normal Guarantee N/A N/A 19.3 Borrower I Leasing andMay commercial 17, 2012 State-owned Small A1,100.0 N/A Loans 0.7 3.3 Normal Pledges 2,200.0 2.00 16.5 services Borrower J Leasing andOctober commercial 27, 2010 State-owned Medium AA1,100.0 AA Loans 0.7 3.3 Normal Collaterals7,219.2 and 6.56 16.5 services pledges

Total 16,901.9 10.3 51.4 325.5

(1) Represents the outstanding amount of all our loans in respect of each single borrower. (2) Represents loan balances as a percentage of our regulatory capital, calculated in accordance with the requirements of the Capital Administrative Measures (Provisional) and based on our financial statements prepared in accordance with PRC GAAP. For a calculation of our regulatory capital as of June 30, 2019, see “Financial Information – Capital Resources – Capital Adequacy.” (3) Calculated by dividing the value of underlying pledges or collaterals by outstanding loans secured by pledges or collaterals. (4) As of June 30, 2019, borrower E held 300,000,000, approximately 2.4%, of our Shares. (5) As of June 30, 2019, borrower F held 40,000,000, approximately 0.3%, of our Shares. In accordance with applicable PRC banking guidelines, our credit exposure to any single group customer is limited to no more than 15% of our net capital base. The following table sets forth our credit exposure to our ten largest group customers as of June 30, 2019.

June 30, 2019

%of Value of Coverage (3) OperationalInternalExternal % of totalregulatory Loan Underlyingunderlying ratio (1) (2) Industry Date of incorporationscale Naturerating rating AmountType of Businessloans capital classificationsecurities securities (times) Impairment

(in millions of RMB, except percentages) 2.2 11.2 Normal Collaterals,7,790.9 2.12 46.0 Group A Leasing andAugust commercial 5, 2013 State-owned Large A AA 3,680.7 Loans, bank pledges and services acceptances and guarantee investment in private placement bonds 2,200.0 0.60 26.3 Group B Mining June 17, 2019 State-owned Large A N/A2.2 3,647.3 11.1 Loans,Normal discounted Collaterals, SESADLIABILITIES AND ASSETS bills and bank guarantee and acceptances credit Group C Transportation,December storage 17, 2014 State-owned Large AA AA 3,325.22.0 Loans and 10.1 bank Normal Pledges3,000.0 and 0.90 49.8 and postal services acceptances guarantee 5,099.0 1.90 43.0 Group D Leasing andAugust commercial 1, 2012 State-owned Medium AA AA 2,688.91.6 Loans, bank 8.2 Normal Collaterals, services acceptances and pledges and letter of guarantee guarantee Group E Real estate July 13, 2006 Private Large BBB AA 2,400.0 Loans 1.5 7.3 Normal Collaterals 7,867.0 3.28 108.0 Group F 8 – 284 –

(4) Transportation, storageOctober 16, 1993 State-owned Large AA2,296.8 AAA Loans 1.4 7.0 Normal Pledges and10,177.0 4.43 34.5 and postal services guarantee November 15, 2011 State-owned Large AA1,997.6 AAA Loans 1.2 6.1 Normal Pledges 4,442.6 2.20 30.0 Group G Water conservancy, environment and public utility management Group H Leasing andFebruary commercial 24, 2004 State-owned Large A1,991.9 AA Loans and investment1.2 6.0 Normal Collaterals,7,272.9 3.65 27.3 services in debt securities pledges and guarantee Group I (5) Leasing and commercialFebruary 28, 2014 State-owned Large AA1,906.5 N/A Loans 1.2 5.8 Normal Collaterals6,833.2 and 3.58 25.9 services guarantee Group J Manufacturing December 12, 1991 State-owned Large A1,656.0 AA Bank acceptances, 1.0 5.0 Normal Pledges and531.4 0.32 1.5 factoring and letter credit of credit

Total 25,590.9 15.6 77.8 392.3

(1) Calculated pursuant to the applicable CBIRC 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 regulatory capital, calculated in accordance with the requirements of the Capital Administrative Measures (Provisional) and based on our financial statements prepared in accordance with PRC GAAP. For a calculation of our regulatory capital as of June 30, 2019, see “Financial Information – Capital Resources – Capital Adequacy.” (3) Calculated by dividing the value of underlying pledges or collaterals by outstanding loans secured by pledges or collaterals. (4) As of June 30, 2019, group D held 300,000,000, approximately 2.4%, of our Shares. (5) As of June 30, 2019, group I held 13,700,000, approximately 0.1%, of our Shares. ASSETS AND LIABILITIES

Save as disclosed above, to the best of our knowledge each of the aforementioned ten largest single borrowers and ten largest group customers, their respective shareholders, directors, senior management or any of their respective associates have no other relationship with us or any of our substantial shareholders, Directors, Supervisors and senior management as of the Latest Practicable Date.

Maturity Profile of Loan Portfolio

The following table sets forth our loan products by remaining maturity as of June 30, 2019.

June 30, 2019 Overdue(1) Due in Due in over three Due in three months over one Due in months up to year up to more than On or less 12 months five years five years demand Indefinite Total (in millions of RMB) Corporate loans Working capital loans 3,954.1 14,060.3 12,801.5 48.4 163.5 553.9 31,581.7 Fixed asset loans 653.5 5,365.4 14,402.0 83,203.3 – 615.9 104,240.1 Others 974.0 – 519.2 235.0 149.2 299.3 2,176.7 Subtotal 5,581.6 19,425.7 27,722.7 83,486.7 312.7 1,469.1 137,998.5 Personal loans Residential mortgage loans 0.3 3.8 256.4 12,072.1 9.5 29.0 12,371.1 Personal consumption loans 13.6 80.6 911.4 80.4 10.6 20.2 1,116.8 Personal business loans 472.3 1,871.1 5,812.0 2,060.1 102.4 281.0 10,598.9 Bank card balances 42.4––––0.943.3 Subtotal 528.6 1,955.5 6,979.8 14,212.6 122.5 331.1 24,130.1 Discounted bills Bank acceptance bills 1,073.7 1,137.4––––2,211.1 Subtotal 1,073.7 1,137.4––––2,211.1 Total 7,183.9 22,518.6 34,702.5 97,699.3 435.2 1,800.2 164,339.7

(1) Includes loans on which principal or interest is overdue for one day or more. For loans that are repayable in installments, the total outstanding amount of loans is stated as overdue.

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 the PBOC benchmark interest rates. On July 20, 2013, the PBOC removed the lower limits of benchmark interest rates for loans (except for interest rates on residential mortgage loans), allowing financial institutions to freely set interest rates.

– 285 – ASSETS AND LIABILITIES

Asset Quality of Our Loan Portfolio

We measure and monitor the asset quality of our loans to customers 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 then 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 the then CBRC’s guidelines. See “Supervision and Regulation – Loan Classification, Allowances and Write-Offs – Loan Classification.”

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 with Amounts of Not More than RMB5 Million)

The classification 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) our 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. See “Risk Management – Credit Risk Management for Corporate Loans – Loan 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 with us;

• 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 prospects.

– 286 – ASSETS AND LIABILITIES

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;

• 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.

– 287 – ASSETS AND LIABILITIES

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, is 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 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;

• 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.

– 288 – ASSETS AND LIABILITIES

Corporate Loans to Micro and Small Enterprises (Not More than RMB5 Million) and Personal Loans

Corporate loans to micro and small enterprise 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 then 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.

Personal loans refer to residential mortgage loans, personal consumption loans, and personal business loans. Residential mortgage loans mainly include loans for purchasing new and secondhand 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 business owners or owners of micro and small enterprises for business purposes. In applying the loan classification criteria to personal consumption loans, we primarily consider the amount of time such outstanding principal or interest past due and the type of collateral involved.

We adopt the same loan classification criteria for our loans to micro and small enterprises and personal loans if we can obtain sufficient information for loan classification. The following table sets forth the five-level classification of our loans to micro and small enterprises and personal loans by time for which payments of the principal or interest are overdue and by type of security.

Overdue by One day- 121-180 181-360 Over 361 Type of collateral Current 30 days 31-60 days 61-90 days 91-120 days days days days Pledged loans Normal Normal Special Special Substandard Substandard Doubtful Doubtful mention mention Collateralized loans Normal Normal Special Special Substandard Substandard Doubtful Doubtful mention mention Guaranteed loans Normal Normal Special Special Substandard Substandard Doubtful Loss mention mention Credit loans Normal Special Substandard Substandard Doubtful Doubtful Doubtful Loss mention

Distribution of Loans by Loan Classification

We use the term “non-performing loans,” “NPLs” or “impaired loans” to refer to the loans identified as “impaired loans to customers” in note 17 to included in the Accountants’ Report in Appendix I to this prospectus. Under our credit system, our non-performing loans 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.

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December 31, June 30, 2016(1) 2017(1) 2018(2) 2019(2) %of %of %of %of Amount total Amount total Amount total Amount total (in millions of RMB, except percentages) Normal 61,395.9 89.9 84,729.5 96.1 137,136.1 97.8 161,067.0 97.9 Special mention 5,628.7 8.2 1,990.3 2.3 1,099.8 0.8 1,483.5 0.9 Subtotal 67,024.6 98.1 86,719.8 98.4 138,235.9 98.6 162,550.5 98.8 Substandard 402.0 0.6 626.9 0.7 1,187.5 0.9 1,249.5 0.8 Doubtful 830.7 1.2 559.7 0.6 623.9 0.4 428.6 0.3 Loss 74.1 0.1 225.9 0.3 93.2 0.1 111.1 0.1 Subtotal 1,306.8 1.9 1,412.5 1.6 1,904.6 1.4 1,789.2 1.2 Total loans to customers 68,331.4 100.0 88,132.3 100.0 140,140.5 100.0 164,339.7 100.0

NPL ratio(3) 1.91% 1.60% 1.36% 1.09%

(1) IAS 39 was adopted prior to January 1, 2018. (2) IFRS 9 was adopted from January 1, 2018. (3) Calculated by dividing total non-performing loans by gross loans and advances to customers.

The following table sets forth the distribution of our loans to customers by business line and by our credit classification system as of the dates indicated.

December 31, June 30, 2016(1) 2017(1) 2018(2) 2019(2) %of %of %of %of Amount total Amount total Amount total Amount total (in millions of RMB, except percentages) Corporate loans Normal 52,429.9 76.8 73,657.7 83.6 119,206.0 85.2 135,058.1 82.2 Special mention 5,497.3 8.0 1,828.9 2.1 1,042.1 0.7 1,471.6 0.9 Substandard 361.0 0.5 556.5 0.6 1,138.8 0.8 1,144.2 0.7 Doubtful 772.9 1.1 464.7 0.5 487.5 0.3 300.9 0.2 Loss 15.5 – 65.1 0.1 14.3 – 23.7 – Subtotal 59,076.6 86.4 76,572.9 86.9 121,888.7 87.0 137,998.5 84.0 NPL ratio(3) 1.95% 1.42% 1.35% 1.06% Personal loans Normal 7,021.0 10.3 10,261.9 11.6 16,538.7 11.8 23,797.8 14.4 Special mention 131.4 0.2 161.4 0.2 57.7 0.0 11.9 – Substandard 41.0 0.1 70.4 0.1 48.7 0.0 105.3 0.1 Doubtful 57.8 0.1 95.0 0.1 136.4 0.1 127.7 0.1 Loss 58.6 0.1 160.8 0.2 78.9 0.1 87.4 0.1 Subtotal 7,309.8 10.8 10,749.5 12.2 16,860.4 12.0 24,130.1 14.7 NPL ratio(3) 2.15% 3.03% 1.57% 1.33% Discounted bills Normal 1,945.0 2.8 809.9 0.9 1,391.4 1.0 2,211.1 1.3 Subtotal 1,945.0 2.8 809.9 0.9 1,391.4 1.0 2,211.1 1.3 NPL ratio(3) 0.00% 0.00% 0.00% 0.00% Total customers loans 68,331.4 100.0 88,132.3 100.0 140,140.5 100.0 164,339.7 100.0

NPL ratio(4) 1.91% 1.60% 1.36% 1.09%

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(1) IAS 39 was adopted prior to January 1, 2018. (2) IFRS 9 was adopted from January 1, 2018. (3) Calculated by dividing non-performing loans in each business line by gross loans in that business line. (4) Calculated by dividing total non-performing loans by gross loans and advances to customers.

Our NPL ratio was 1.91%, 1.60%, 1.36% and 1.09% as of December 31, 2016, 2017 and 2018 and June 30, 2019, respectively.

Our NPL ratio decreased from 1.91% as of December 31, 2016 to 1.60% as of December 31, 2017, primarily due to a decrease of RMB63.0 million in the corporate loans downgraded to non-performing loans in 2017, mainly as a result of (i) our efforts in recovering non-performing loans and strengthening our risk management and (ii) our enhanced efforts to select quality corporate customers with strong repayment abilities and good financial condition and the improvement of our overall loan quality in 2017. Our NPL ratio further decreased to 1.36% as of December 31, 2018, primarily due to (i) our enhanced collection efforts and strengthened risk control measures and credit assets quality assessment system, and (ii) decreased non-performing personal business loans given the impact of market conditions on the repayment abilities and financial conditions of individual borrowers. Our NPL ratio decreased to 1.09% as of June 30, 2019, primarily due to our enhanced collection efforts, resulting in an increase in our non-performing loans recovered.

Loans Classified as Special Mention

As of December 31, 2016, 2017 and 2018, the balance of our loans to customers classified as special mention was RMB5,628.7 million, RMB1,990.3 million and RMB1,099.8 million, respectively, representing 8.2%, 2.3% and 0.8%, respectively, of our total loans to customers. The decrease in the percentage of loans classified as special mention to total loans to customers from December 31, 2016 to December 31, 2018 was primarily because 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 balance of our loans to customers classified as special mention increased to RMB1,483.5 million as of June 30, 2019, representing 0.9% of our total loans to customers, mainly as we prudently downgraded certain loans granted to a borrower as special mention during the first half of 2019, which had been repaid by such borrower as of the Latest Practicable Date.

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The following table sets forth the distribution of our loans classified as special mention to customers by security as of the dates indicated.

December 31, June 30, 2016 2017 2018 2019 %of %of %of %of Amount total Amount total Amount total Amount total (in millions of RMB, except percentages) Pledged loans(1)(2) 127.5 2.3 –– –– –– Collateralized loans(1)(4) 5,069.6 90.0 1,603.6 80.6 895.9 81.5 732.2 49.4 Guaranteed loans(1) 429.8 7.6 386.7 19.4 202.6 18.4 750.6 50.6 Unsecured loans 1.8 0.1 – – 1.3 0.1 0.7 – Total loans of customers classified as special mention 5,628.7 100.0 1,990.3 100.0 1,099.8 100.0 1,483.5 100.0

(1) Represents the total amount of loans fully or partially secured by collateral in each category. If a loan is secured by more than one form of security interest, the classification is based on the primary form of security interest. (2) Represents security interests in intangible assets or monetary assets, such as movable assets, certificates of deposit, financial instruments, intellectual properties and interests in future cash flows, by taking possession of or registering against such assets. (3) Represents security interests in tangible assets other than monetary assets, such as buildings and fixtures, land use rights, machinery, equipment and vehicles, without taking possession.

Changes in Asset Quality of Our Loans

The following table sets forth the changes in our non-performing loans for the periods indicated.

December 31, June 30, 2016 2017 2018 2019 (in millions of RMB) Balance at the beginning of the period 1,055.2 1,306.8 1,412.5 1,904.6 Increases 2,397.3 3,811.6 1,356.8 564.6 New loans(1) 1.3 – – 564.6 Downgrades(2) 2,396.0 3,811.6 1,356.8 Decreases 2,145.7 3,705.9 864.7 680.0 Recoveries 86.8 120.1 247.0 174.5 Upgrades 86.9 31.6 21.5 26.5 Payment in kind 3.0 – 79.2 Write-offs 1,969.0 427.8 517.0 9.0 Transfer out – 3,126.4 – 470.0 Balance at the end of the period 1,306.8 1,412.5 1,904.6 1,789.2

NPL ratio 1.91% 1.60% 1.36% 1.09%

(1) Represents downgrades of new loans made in the current period. (2) Represents downgrades of loans classified as normal or special mention at the end of last period to non-performing classifications.

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In 2017, to dispose of certain of our non-performing loans, we transferred and sold RMB3,126.4 million of our non-performing loan receivables to a designated trust scheme established by a trust company. This trust scheme was offered on the open market and comprised a senior tranche and a subordinated tranche with a subscription value of RMB470.0 million for each tranche. The senior tranche was subscribed and held by an independent third party which mainly engages in industrial, project, equity and other investment businesses, while the subordinated tranche was subscribed and held by us. However, the value of the subordinated tranche remained as our non-performing loans in accordance with regulatory requirements. As a result, we made provisions for impaired loans of RMB2,186.4 million relating to this transfer and sale of non-performing loan receivables.

We only made disposal in 2017 after considering the RMB3,811.6 million of loans downgraded to non-performing category in 2017 and other factors, such as our liquidity risk and credit risk control, as well as the regulatory policies and market environment, which was in line with our credit loss impairment model. We determined the consideration for such disposal based on the expected recovery amount determined through our internal evaluation and the external evaluation prepared by a qualified professional valuation and rating agency.

We have been working on optimizing our credit exposure structure in accordance with the relevant regulatory policies and in alignment with the trends of industry development. Our approaches to reduce our non-performing loans mainly include (i) collecting repayment from the borrower, (ii) write-offs, (iii) executing collaterals or pursuing recovery from the guarantor, (iv) initiating lawsuits against the borrower to claim repayment, and (v) disposal of loans to third parties. As of December 31, 2016, 2017 and 2018, our total outstanding loans written off or transferred out for that year amounted to RMB1,969.0 million, RMB3,554.2 million and RMB517.0 million, respectively.

In the future, we may choose to continue reducing our non-performing loans through the proper and commercially sound approach, including disposal, as we deem appropriate from time to time in accordance with our risk management policies. Taking into account the relevant laws and regulations in the PRC, we believe that reducing non-performing loans through disposal will continue. See “Risk Factors – Risks Relating to Our Business – We disposed of certain non-performing assets and should we become unable to dispose of or transfer such assets in the future, our liquidity, financial condition and results of operations may be affected” for details of the risks relating to our disposal of non-performing loans.

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The following table sets forth the migration ratios of our loan portfolio calculated in accordance with the applicable regulatory requirements for the periods indicated.

Year ended December 31, 2016 2017 2018 (%) Normal and special mention loans(1) 2.82 1.25 1.63 Normal loans(2) 12.73 2.51 1.34 Special mention loans(3) 43.69 13.81 68.87 Substandard loans(4) 80.89 35.13 19.70 Doubtful loans(5) 10.98 6.42 8.84

(1) Represents migration ratios of loans classified as normal or special mention which were downgraded to non-performing loans. 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 date of the period and downgraded to non-performing classifications at the ending date of the period and (ii) loans classified as special mention at the beginning date of the period and downgraded to non-performing classifications at the end of the period, and the denominator of which equals to the sum of (i) the difference between the balance of normal loans at the beginning date of the period and the decrease, in the period, in the loans which were classified as normal at the beginning date of the period, and (ii) the difference between the balance of special mention loans at the beginning date of the period and the decrease in such loans in the period. (2) Represents migration ratios of loans classified as normal which were downgraded to lower classifications. The normal loan migration ratio represents a fraction, the numerator of which equals loans classified as normal at the beginning date of the period and downgraded to lower classifications at the ending date of the period, and the denominator of which equals the difference between the balance of normal loans at the beginning date of the period and the decrease in such loans in the period. (3) Represents migration ratios of loans classified as special mention which were downgraded to lower classifications. The migration ratio of special mention loans represents a fraction, the numerator of which equals the loans which were classified as special mention at the beginning date of the period and downgraded to lower classifications at the ending date of the period, and the denominator of which equals the difference between the balance of special mention loans at the beginning date of the period and the decrease in such loans in the period. (4) Represents migration ratios of loans classified as substandard which were downgraded to lower classifications. The substandard loan migration ratio represents a fraction, the numerator of which equals the loans classified as substandard at the beginning date of the period and downgraded to lower classifications at the ending date of the period, and the denominator of which equals the difference between the balance of substandard loans at the beginning date of the period and the decrease in such loans in the period. (5) Represents migration ratios of loans classified as doubtful which were downgraded to lower classifications. The doubtful loan migration ratio represents a fraction, the numerator of which equals the loans classified as doubtful at the beginning date of the period and downgraded to lower classifications at the ending date of the period, and the denominator of which equals the difference between the balance of doubtful loans at the beginning date of the period and the decrease in such loans in the period.

The migration ratio of special mention loans represents a fraction, the numerator of which equals the loans which were classified as special mention at the beginning date of the period and downgraded to lower classifications at the ending date of the period, and the denominator of which equals the difference between the balance of special mention loans at the beginning date of the period and the decrease in such loans in the period. The migration ratio of our special mention loans decreased from 43.69% in 2016 to 13.81% in 2017, but this ratio increased to 68.87% in 2018. The decrease in 2017 was due primarily to our enhanced collection efforts and improved asset quality. The increase in 2018 was mainly due to the increase in loans classified as special mention at the beginning of 2018 which were downgraded to lower classifications by the end of 2018 and the decrease in the difference between the balance of special mention loans at the beginning of 2018 and the decrease in such loans during 2018, reflecting (i) our prudent downgrade of certain normal loans to

– 294 – ASSETS AND LIABILITIES non-performing loans, considering the increased credit risk surrounding certain corporate borrowers; and (ii) changes of regulatory policies in 2018 requiring banks to classify loans overdue by 90 days to non-performing loans by the end of 2018, pursuant to which, we adjusted our loan classification policies.

The migration ratio of our substandard loans decreased from 80.89% in 2016 to 35.13% in 2017, and further decreased to 19.70% in 2018. The decreases was due primarily to our enhanced collection efforts and improved asset quality.

The migration ratio of our doubtful loans remained relatively stable in 2016, 2017 and 2018.

Distribution of Non-Performing Loans by Product Type

The following table sets forth the distribution of our non-performing loans by product type as of the dates indicated.

December 31, June 30, 2016 2017 2018 2019 NPL NPL NPL NPL (1) (1) (1) (1) %of ratio %of ratio %of ratio %of ratio Amount total (%) Amount total (%) Amount total (%) Amount total (%) (in millions of RMB, except percentages) Corporate loans Working capital loans 320.8 24.5 1.41 548.4 38.8 2.49 567.6 29.8 2.26 553.6 30.9 1.75 Fixed asset loans 762.7 58.4 2.20 414.4 29.3 0.77 793.4 41.7 0.84 615.9 34.4 0.59 Others(2) 65.9 5.0 3.98 123.5 8.7 13.52 279.6 14.7 12.37 299.3 16.9 13.75 Subtotal 1,149.4 87.9 1.95 1,086.3 76.8 1.42 1,640.6 86.2 1.35 1,468.8 82.2 1.06 Personal loans Residential mortgage loans 3.3 0.3 0.15 10.7 0.8 0.17 9.9 0.5 0.10 21.8 1.2 0.18 Personal consumption loans 20.5 1.6 1.36 26.3 1.9 1.92 20.9 1.1 1.67 20.2 1.1 1.81 Personal business loans 133.6 10.2 3.69 289.2 20.5 8.95 233.2 12.2 4.01 278.0 15.5 2.62 Bank card balances – – – – – – – – – 0.4 – 0.92 Subtotal 157.4 12.1 2.15 326.2 23.2 3.03 264.0 13.8 1.57 320.4 17.8 1.33 Total non-performing loans 1,306.8 100.0 1.91 1,412.5 100.0 1.60 1,904.6 100.0 1.36 1,789.2 100.0 1.09

(1) Calculated by dividing non-performing loans in each product type by gross loans in that product type. (2) Mainly consists of loans for restructuring, and mergers and acquisitions.

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As of December 31, 2016, 2017 and 2018 and June 30, 2019, we did not have any non-performing discounted bills.

Non-performing Corporate Loans

Our non-performing corporate loans decreased by 5.5% from RMB1,149.4 million (representing an NPL ratio of 1.95%) as of December 31, 2016 to RMB1,086.3 million (representing an NPL ratio of 1.42%) as of December 31, 2017, primarily due to (i) our efforts in recovering non-performing loans and strengthening our risk management, and (ii) our enhanced efforts to select quality corporate customers with strong repayment abilities and good financial condition. Our non-performing corporate loans increased by 51.0% to RMB1,640.6 million (representing an NPL ratio of 1.35%) as of December 31, 2018, primarily because (i) we downgraded certain normal corporate loans to non-performing loans out of prudence, considering the potential increased credit risk surrounding certain corporate borrowers in the real estate and mining industries, and (ii) we were required by the changes in regulatory policies to classify loans overdue by 90 days to non-performing loans by the end of 2018. Our non-performing corporate loans decreased by 10.5% to RMB1,468.8 million (representing an NPL ratio of 1.06%) as of June 30, 2019, primarily due to the overall decrease in non-performing corporate loans as a result of our efforts in recovering non-performing loans, in particular, from the corporate borrowers in the real estate industry, and in strengthening our risk management.

Non-performing Personal Loans

Our non-performing personal loans increased significantly from RMB157.4 million (representing an NPL ratio of 2.15%) as of December 31, 2016 to RMB326.2 million (representing an NPL ratio of 3.03%) as of December 31, 2017, primarily due to a significant increase in non-performing personal business loans as a result of deterioration of certain retail banking customers’ repayment abilities during the slowdown in the PRC economic growth. Our non-performing personal loans decreased by 19.1% to RMB264.0 million (representing an NPL ratio of 1.57%) as of December 31, 2018, primarily due to a decrease in our non-performing personal business loans, mainly due to our enhanced collection efforts and increased amount of personal loans recovered. Our non-performing personal loans increased by 21.4% to RMB320.4 million (representing an NPL ratio of 1.33%) as of June 30, 2019, primarily as we increased our non-performing loan classification criteria from being overdue in over 90 days to over 60 days since May 31, 2019.

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Distribution of Non-Performing Corporate Loans by Industry

The following table sets forth the distribution of our non-performing loans to corporate customers by industry as of the dates indicated.

December 31, June 30, 2016 2017 2018 2019 NPL NPL NPL NPL %of ratio(1) %of ratio(1) %of ratio(1) %of ratio(1) Amount total (%) Amount total (%) Amount total (%) Amount total (%) (in millions of RMB, except percentages) Mining 847.4 73.7 16.27 385.9 35.5 11.15 719.3 43.8 16.68 762.8 51.9 18.28 Real estate 2.2 0.2 0.04 73.8 6.8 1.50 423.7 25.8 6.01 383.6 26.1 4.81 Manufacturing 27.2 2.4 0.51 341.4 31.4 8.34 295.0 18.0 9.32 91.1 6.2 2.49 Wholesale and retail 260.5 22.7 11.84 208.2 19.2 10.14 111.1 6.8 3.58 136.4 9.3 3.60 Residential services, repairs and other services – – – 40.0 3.7 6.19 39.5 2.4 7.40 39.4 2.7 7.09 Hotels and catering – – – 13.7 1.3 8.38 19.3 1.2 9.57 30.4 2.1 12.73 Construction 0.9 0.1 0.03 13.8 1.3 0.17 27.6 1.7 0.29 17.7 1.2 0.16 Others(2) 11.2 0.9 0.03 9.5 0.8 0.02 5.1 0.3 0.01 7.4 0.5 0.01 Total non-performing corporate loans 1,149.4 100.0 1.95 1,086.3 100.0 1.42 1,640.6 100.0 1.35 1,468.8 100.0 1.06

(1) Calculated by dividing non-performing loans in each industry by gross loans in that industry. (2) Consists primarily of (i) agriculture, forestry, animal husbandry and fishery, (ii) transportation, storage and postal services, (iii) leasing and commercial services, (iv) production and supply of electricity, gas and water, (v) information transmission, computer services and software, (vi) finance, (vii) scientific research and technical services, (viii) water conservancy, environment and public utility management, (ix) education, (x) hygiene and social welfare, (xi) culture, sports and entertainment, as well as (xii) public administration and social organizations.

Our non-performing corporate loans consisted primarily of non-performing loans to corporate borrowers in the mining, real estate, manufacturing and wholesale and retail industries.

The NPL ratio for our corporate loans in the mining industry decreased from 16.27% as of December 31, 2016 to 11.15% as of December 31, 2017, primarily due to the decreased NPL ratio in coal industry, as we tightened our credit policy applied to coal mining enterprises and we decreased the risk exposure to loans granted to the coal mining industry. The NPL ratio for our corporate loans in the mining industry increased to 16.68% as of December 31, 2018, primarily because we prudently downgraded the risk classification of our loans to two corporate customers in according to our judgment over their repayment abilities and credit risks. The NPL ratio for our corporate loans in the mining industry increased to 18.28% as of June 30, 2019, primarily as we prudently downgraded loans from two coal enterprises as they encountered operating and financial difficulties during their internal technology transition period.

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The NPL ratio for our corporate loans in the real estate industry increased from 0.04% as of December 31, 2016 to 1.50% as of December 31, 2017, and further increased to 6.01% as of December 31, 2018, primarily (i) as we prudently downgraded loans from certain corporate borrowers to non-performing loans based on our judgment of their financial conditions and credit risk and (ii) because we scaled back our allocation of funds to this industry as a result of our tightened internal control measures towards borrowers in this industry during the slowdown of economic growth in China. The NPL ratio for our corporate loans in the real estate industry decreased to 4.81% as of June 30, 2019, primarily due to our enhanced efforts and successful collection from certain borrowers.

The NPL ratio for our corporate loans in the manufacturing industry increased from 0.51% as of December 31, 2016 to 8.34% as of December 31, 2017, and further increased to 9.32% as of December 31, 2018, due primarily to the economic downturn in the liquor and other manufacturing services industry and the underperformance of certain micro and small borrowers in 2017. The NPL ratio for our corporate loans in the manufacturing industry decreased to 2.49% as of June 30, 2019, primarily due to the collection from certain borrowers.

The NPL ratio for our corporate loans in the wholesale and retail industry decreased from 11.84% as of December 31, 2016 to 10.14% as of December 31, 2017, and further decreased to 3.58% as of December 31, 2018, primarily due to our enhanced risk management measures, write-off of non-performing loans and effective collection efforts. The NPL ratio for our corporate loans in the wholesale and retail industry increased to 3.60% as of June 30, 2019, primarily as (i) we increased credit support to micro and small enterprises in the wholesale and retail industry; and (ii) we increased our non-performing loan classification criteria from being overdue in over 90 days to over 60 days since May 31, 2019.

Distribution of Non-Performing Loans by Geographical Region

All of our non-performing loans as of December 31, 2016, 2017 and 2018 and June 30, 2019 were originated in Guizhou Province, as all of our branches are located within Guizhou Province and all of our loans during the Track Record Period were originated in Guizhou Province. See “– Assets – Loans and Advances to Customers – Distribution of Loans to Customers by Geographical Region” for the distribution of loans to customers by geographical region.

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The following table sets forth, as of the dates indicated, the distribution of our non-performing loans by geographical region.

December 31, June 30, 2016 2017 2018 2019 NPL NPL NPL NPL %of ratio(1) %of ratio(1) %of ratio(1) %of ratio(1) Amount total (%) Amount total (%) Amount total (%) Amount total (%) (in millions of RMB, except percentages)

Guiyang (貴陽) 157.4 12.0 0.83 138.5 9.8 0.72 295.6 15.5 0.79 448.5 25.1 1.05 Zunyi (遵義) 173.3 13.3 0.93 617.1 43.7 2.72 583.0 30.6 1.80 356.6 19.9 0.97 Bijie (畢節) 802.3 61.4 19.37 257.5 18.2 6.18 441.1 23.2 5.32 302.5 16.9 2.88 Liupanshui (六盤水) 96.6 7.4 1.27 119.4 8.5 0.99 357.1 18.8 2.12 413.4 23.1 2.06 Anshun (安順) 66.1 5.1 0.90 145.3 10.3 1.73 157.9 8.3 1.58 195.1 10.9 1.62 Tongren (銅仁) – – – 48.6 3.4 1.77 32.7 1.7 0.45 32.7 1.8 0.37 Qiannan(2) (黔南) 0.4 – 0.01 17.0 1.2 0.20 17.7 0.9 0.15 21.0 1.2 0.16 Qianxinan(3) (黔西南) 7.4 0.5 0.20 62.7 4.4 0.99 13.2 0.7 0.14 13.1 0.7 0.12 Qiandongnan(4) (黔東南) 3.3 0.3 0.20 6.4 0.5 0.16 6.3 0.3 0.09 6.3 0.4 0.07 Total loans to customers 1,306.8 100.0 1.91 1,412.5 100.0 1.60 1,904.6 100.0 1.36 1,789.2 100.0 1.09

(1) Calculated by dividing non-performing loans in each region by gross loans in that region. (2) Referred to Qiannan Bouyei and Miao Autonomous Prefecture. (3) Referred to Qianxinan Bouyei and Miao Autonomous Prefecture, (4) Referred to Qiandongnan Miao and Dong Autonomous Prefecture.

Distribution of Non-Performing Loans by Collateral

The following table sets forth the distribution of our non-performing loans by types of collateral as of the dates indicated.

December 31, June 30, 2016 2017 2018 2019

NPL NPL NPL NPL %of ratio(1) %of ratio(1) %of ratio(1) %of ratio(1) Amount total (%) Amount total (%) Amount total (%) Amount total (%) (in millions of RMB, except percentages)

Pledged loans 75.3 5.8 1.16 12.0 0.8 0.09 12.2 0.6 0.04 109.6 6.1 0.28 Collateralized loans 1,056.0 80.8 4.17 1,205.2 85.3 4.96 1,746.3 91.7 6.13 1,529.7 85.5 4.79 Guaranteed loans 174.0 13.3 0.62 187.1 13.3 0.43 139.9 7.3 0.20 142.8 8.0 0.17 Unsecured loans 1.5 0.1 0.02 8.2 0.6 0.13 6.2 0.4 0.08 7.1 0.4 0.09 Total non-performing loans 1,306.8 100.0 1.91 1,412.5 100.0 1.60 1,904.6 100.0 1.36 1,789.2 100.0 1.09

(1) Calculated by dividing non-performing loans in each product type by gross loans in that product type.

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The NPL ratio for our pledged and collateralized loans decreased from 3.56% as of December 31, 2016 to 3.20% as of December 31, 2017, further to 2.81% as of December 31, 2018, and to 2.29% as of June 30, 2019. The continued decrease in the NPL ratio of pledged and collateralized loans was primarily due to our enhanced risk management measures, stringent conditions imposed by us on our borrowers and continuous efforts to recover non-performing loans.

The NPL ratio for our guaranteed loans decreased from 0.62% as of December 31, 2016 to 0.43% as of December 31, 2017, and further decreased to 0.20% as of December 31, 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 guaranteed loans remained relatively stable at 0.17% as of June 30, 2019.

The NPL ratio for our unsecured loans remained at a relatively low level during the Track Record Period and amounted to 0.02%, 0.13%, 0.08% and 0.09% as of December 31, 2016, 2017 and 2018 and June 30, 2019, respectively, primarily due to our improved management of pre-loan approval and post-loan risk management for unsecured loans.

Ten Largest Non-performing Borrowers

The following table sets forth our borrowers with the ten largest non-performing loan balances outstanding as of the date indicated.

June 30, 2019 Non-performing %of Corporate/ loan balances Loan % total regulatory Individual Industry outstanding classification loans capital(1) (in millions of RMB, except percentages) Borrower A Corporate Mining 296.0 Substandard 16.5 0.90 Borrower B Corporate Mining 172.0 Substandard 9.6 0.52 Borrower C Corporate Mining 119.0 Doubtful 6.7 0.36 Borrower D Corporate Real estate 110.9 Substandard 6.2 0.34 Borrower E Corporate Mining 80.0 Substandard 4.5 0.24 Borrower F Corporate Mining 65.0 Doubtful 3.6 0.20 Borrower G Corporate Real estate 52.1 Substandard 2.9 0.16 Borrower H Corporate Real estate 45.5 Substandard 2.5 0.14 Borrower I Corporate Real estate 43.2 Substandard 2.4 0.13 Borrower J Corporate Resident service, 39.0 Doubtful 2.2 0.12 repairing and other services Total 1,022.7 57.1

(1) Represents loan balances as a percentage of our regulatory capital, calculated in accordance with the requirements of the Capital Administrative Measures (Provisional) and based on our financial statements prepared in accordance with PRC GAAP.

– 300 – ASSETS AND LIABILITIES

Loan Aging Schedule

The following table sets forth our loan aging schedule as of the dates indicated.

December 31, June 30,(2) 2016 2017 2018 2019

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

(in millions of RMB, except percentages)

Current loans 65,027.1 95.2 86,661.1 98.3 139,089.9 99.2 163,315.3 99.3 Overdue loans(1) Overdue in 60 days or less 670.6 1.0 380.7 0.4 61.2 0.1 354.2 0.2 Overdue in over 60 days up to three months 44.4 0.0 62.1 0.1 9.9 0.0 14.7 0.0 Overdue in over three months up to six months 276.5 0.4 273.6 0.3 125.1 0.1 90.7 0.1 Overdue in over six months up to one year 444.1 0.6 266.8 0.3 207.7 0.1 101.2 0.1 Overdue in over one year up to three years 1,812.0 2.7 431.7 0.5 574.3 0.4 434.0 0.3 Overdue in over three years 56.7 0.1 56.3 0.1 72.4 0.1 29.6 0.0 Subtotal 3,304.3 4.8 1,471.2 1.7 1,050.6 0.8 1,024.4 0.7 Total loans 68,331.4 100.0 88,132.3 100.0 140,140.5 100.0 164,339.7 100.0

Total non-performing loans 1,306.8 1,412.5 1,904.6 1,789.2

(1) Represents the loan principal amount of the overdue principal or interest. (2) All of our loans overdue in over 60 days were classified as non-performing loans from May 31, 2019.

Impairment Allowance on Loans to Customers

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. See “Financial Information – Critical Accounting Estimates and Judgments – Impact of New Accounting Policies” and note 2(1) to our historical financial information included in the Accountants’ Report in Appendix I to this prospectus. 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 existed 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.

– 301 – ASSETS AND LIABILITIES

Starting from January 1, 2018, under the requirements of IFRS 9, we categorize and manage our financial assets’ credit risk into the following stages: (i) Stage 1 (Normal Credit Quality) refers to loans to customers 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 loans to customers 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 loans to customers 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 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 such 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 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. We made full provision for impairment allowance for loans classified as “loss.” For loans classified as “substandard” and “doubtful,” we generally do not make full provision for impairment allowance and measure impairment allowance as the difference between the carrying amounts and the estimated recoverable amounts of the loans. The estimated recoverable amounts are the present value of the estimated future recoverable cash flows of the loans, including the recoverable value of the collateral or pledges. We believe the measurement of our impairment allowance complies with the Guidelines of Risk-based Classification of Loans (《貸款風險分類指引》) and the requirements under IAS 39 and IFRS 9.

See “Financial Information – Results of Operations for the Years Ended December 31, 2016, 2017 and 2018 – Impairment Losses on Assets” and “Financial Information – Results of Operations for the Six Months Ended June 30, 2018 and 2019 – Impairment Losses on Assets” for further discussion on impairment losses on our loans to customers and note 11 to the Accountants’ Report in Appendix I to this prospectus.

– 302 – Distribution of Impairment Allowance by Loan Classification

The following table sets forth the allocation of our impairment allowance by loan classification category as of the dates indicated.

December 31, January 1, December 31, June 30,

2016(1) 2017(1) 2018(2) 2018(2) 2019(2)

Allowance Allowance Allowance Allowance Allowance %of to gross loan %of to gross loan %of to gross loan %of to gross loan %of to gross loan Amount total ratio (%)(3) Amount total ratio (%)(3) Amount total ratio (%)(3) Amount total ratio (%)(3) Amount total ratio (%)(3) SESADLIABILITIES AND ASSETS (in millions of RMB, except percentages)

Normal 962.2 34.6 1.57 1,540.2 56.6 1.82 1,828.3 61.4 2.16 3,378.3 72.8 2.46 4,215.9 72.9 2.62 Special mention 1,151.4 41.4 20.46 392.9 14.4 19.74 361.5 12.1 18.16 308.5 6.6 28.91 476.3 8.2 32.11 Substandard 145.5 5.2 36.20 210.6 7.7 33.59 210.5 7.1 33.58 449.4 9.7 37.84 649.2 11.2 51.96 Doubtful 448.4 16.1 53.98 353.2 13.0 63.12 352.0 11.8 62.89 412.6 8.9 65.59 331.4 5.7 77.32 0 – 303 – Loss 74.1 2.7 100.00 225.9 8.3 100.00 225.9 7.6 100.00 93.2 2.0 100.00 111.1 2.0 100.00 Total allowance for impairment losses on loans 2,781.6 100.0 4.07 2,722.8 100.0 3.09 2,978.2 100.0 3.38 4,642.0 100.0 3.31 5,783.9 100.0 3.52

(1) Measured and recognized in accordance with the requirements of IAS 39. (2) Measured and recognized in accordance with the requirements of IFRS 9. (3) Calculated by dividing allowance for impairment losses in each loan type by gross loans in that loan type. The following table sets forth the allocation of our impairment allowance by business line and by loan classification category as of the dates indicated.

December 31, January 1, December 31, June 30, 2016(1) 2017(1) 2018(2) 2018(2) 2019(2) Allowance Allowance Allowance Allowance Allowance %of to gross loan %of to gross loan %of to gross loan %of to gross loan %of to gross loan Amount total(3) ratio (%)(4) Amount total(3) ratio (%)(4) Amount total(3) ratio (%)(4) Amount total(3) ratio (%)(4) Amount total(3) ratio (%)(4) (in millions of RMB, except percentages) Corporate loans

Normal 811.0 29.1 1.55 1,381.1 50.6 1.88 1,811.5 60.8 2.46 3,347.0 72.1 2.81 4,187.5 LIABILITIES AND ASSETS 72.4 3.10 Special mention 1,138.1 40.9 20.70 374.9 13.8 20.50 335.0 11.2 18.32 298.3 6.4 28.62 473.5 8.2 32.18 Substandard 133.2 4.8 36.90 189.5 7.0 34.05 190.0 6.4 34.14 435.0 9.4 38.20 617.6 10.7 53.98 Doubtful 413.7 14.9 53.53 296.3 10.9 63.76 296.3 9.9 63.76 327.4 7.1 67.16 254.8 4.4 84.68 Loss 15.5 0.6 100.00 65.1 2.4 100.00 65.1 2.2 100.00 14.3 0.3 100.00 23.7 0.4 100.00 Subtotal 2,511.5 90.3 4.25 2,306.9 84.7 3.06 2,697.9 90.5 3.52 4,422.0 95.3 3.63 5,557.1 96.1 4.03 Discounted bills 0 – 304 – Normal 26.4 0.9 1.36 15.0 0.6 1.85 N/A N/A N/A N/A N/A N/A N/A N/A N/A Subtotal 26.4 0.9 1.36 15.0 0.6 1.85 N/A N/A N/A N/A N/A N/A N/A N/A N/A Personal loans Normal 124.8 4.6 1.78 144.1 5.2 1.40 16.8 0.6 0.16 31.3 0.7 0.19 28.4 0.6 0.12 Special mention 13.3 0.5 10.12 18.0 0.7 11.15 26.5 0.9 16.41 10.2 0.2 17.68 2.8 0.0 23.53 Substandard 12.3 0.4 30.00 21.1 0.8 29.97 20.5 0.7 29.12 14.4 0.3 29.57 31.6 0.5 30.01 Doubtful 34.7 1.2 60.03 56.9 2.1 59.89 55.7 1.9 58.63 85.2 1.8 62.46 76.6 1.3 59.98 Loss 58.6 2.1 100.00 160.8 5.9 100.00 160.8 5.4 100.00 78.9 1.7 100.00 87.4 1.5 100.00 Subtotal 243.7 8.8 3.33 400.9 14.7 3.86 280.3 9.5 2.61 220.0 4.7 1.30 226.8 3.9 0.94 Total allowance for loans 2,781.6 100.0 4.07 2,722.8 100.0 3.09 2,978.2 100.0 3.38 4,642.0 100.0 3.31 5,783.9 100.0 3.52

(1) Measured and recognized in accordance with the requirements of IAS 39. (2) Measured and recognized in accordance with the requirements of IFRS 9. (3) Calculated by dividing allowance for impairment losses in each loan type by total allowance for impairment losses. (4) Calculated by dividing allowance for impairment losses in each loan type by gross loans in that loan type. ASSETS AND LIABILITIES

Changes to Impairment Allowance on Loans to Customers

We report net provisions for impairment losses on loans to customers on our statement of profit and loss and other comprehensive income. The following table sets forth the changes to the impairment allowance on loans to customers for the periods indicated.

Amount (in millions of RMB) As of January 1, 2016(1) 2,290.6 Change for the year 2,444.9 Write-offs/transfer out (1,968.9) Recoveries 39.4 Unwinding of discount(2) (24.4) As of December 31, 2016(1) 2,781.6 Change for the year 2,541.3 Write-offs/transfer out (2,712.6) Recoveries 156.3 Unwinding of discount(2) (43.8) As of December 31, 2017(1) 2,722.8 Changes in accounting policies 255.4 As of January 1, 2018(3) 2,978.2 Change for the year 2,071.8 Write-offs (517.0) Recoveries 163.3 Unwinding of discount(2) (54.3) As of December 31, 2018(3) 4,642.0 Change for the period 810.5 Write-offs (9.0) Transfer out (324.4) Recoveries 684.6 Unwinding of discount(2) (19.8) As of June 30, 2019(3) 5,783.9

(1) IAS 39 was adopted prior to January 1, 2018. (2) Refers to unwinding of discount on allowance for the interest income accrued on impaired loans as a result of subsequent increases in their present value due to the passage of time. (3) IFRS 9 was adopted from January 1, 2018.

Our impairment allowance on loans to customers decreased slightly from RMB2,781.6 million as of December 31, 2016 to RMB2,722.8 million as of December 31, 2017. Our impairment allowance on loans to customers as of January 1, 2018 was restated to RMB2,978.2 million in accordance with IFRS 9, as the expected credit loss model under the new accounting policy considers assumptions and factors differently as compared with the previous accounting policy. Our impairment allowance on loans to customers as of December 31, 2018 amounted to RMB4,642.0 million, the increase in which was generally in line with the growth of our loans to customers and an increase in our non-performing loans, setting aside the difference caused by the adoption of the new accounting policies. Our impairment allowance on loans to customers increased to RMB5,783.9 million as of June 30, 2019, generally in line with the growth of our loans to customers and our more prudent provision policies.

– 305 – Distribution of Impairment Allowance by Product type

The following table sets forth the distribution of our impairment allowance on loans to customers by product type as of the dates indicated.

December 31, January 1, December 31, June 30,

2016(1) 2017(1) 2018(2) 2018(2) 2019(2)

Allowance Allowance Allowance Allowance Allowance %of to gross loan %of to gross loan %of to gross loan %of to gross loan %of to gross loan Amount total ratio (%)(3) Amount total ratio (%)(3) Amount total ratio (%)(3) Amount total ratio (%)(3) Amount total ratio (%)(3)

(in millions of RMB, except percentages) LIABILITIES AND ASSETS

Corporate loans Working capital loans 1,087.3 39.1 4.77 820.2 30.1 3.73 925.3 31.0 4.20 1,089.4 23.5 4.34 1,469.7 25.4 4.65 Fixed asset loans 1,049.9 37.7 3.03 1,319.4 48.5 2.46 1,655.0 55.6 3.09 3,124.5 67.3 3.31 3,829.7 66.2 3.67 Other loans 374.3 13.5 22.59 167.3 6.1 18.31 117.6 3.9 12.87 208.1 4.5 9.21 257.7 4.5 11.84

Subtotal 2,511.5 90.3 4.25 2,306.9 84.7 3.01 2,697.9 90.5 3.52 4,422.0 95.3 3.63 5,557.1 96.1 4.03

0 – 306 – Discounted bills Bank acceptance bills 26.4 0.9 1.36 15.0 0.6 1.85 N/A N/A N/A N/A N/A N/A N/A N/A N/A

Subtotal 26.4 0.9 1.36 15.0 0.6 1.85 N/A N/A N/A N/A N/A N/A N/A N/A N/A

Personal loans Residential mortgage loans 39.2 1.4 1.80 92.7 3.4 1.51 20.5 0.7 0.33 27.9 0.6 0.29 25.8 0.4 0.21 Personal consumption loans 40.6 1.5 2.70 42.0 1.5 3.06 25.7 0.9 1.87 21.0 0.4 1.68 19.3 0.3 1.73 Personal business loans 163.9 5.9 4.52 266.2 9.8 8.23 234.1 7.9 7.24 171.0 3.7 2.94 181.3 3.2 1.71 Bank card balances – – – – – – – – – 0.1 – 0.30 0.4 0.0 0.92

Subtotal 243.7 8.8 3.33 400.9 14.7 3.73 280.3 9.5 2.61 220.0 4.7 1.30 226.8 3.9 0.94 Total allowance for loans 2,781.6 100.0 4.07 2,722.8 100.0 3.09 2,978.2 100.0 3.38 4,642.0 100.0 3.31 5,783.9 100.0 3.52

(1) Measured and recognized in accordance with the requirements of IAS 39. (2) Measured and recognized in accordance with the requirements of IFRS 9. (3) Calculated by dividing allowance for impairment losses in each loan type by gross loans in that loan type. Distribution of Impairment Allowance by Geographic Region

The following table sets forth the allocation of our impairment allowance on loans to customers by geographical region as of the dates indicated.

December 31, January 1, December 31, June 30,

2016(1) 2017(1) 2018(2) 2018(2) 2019(2)

Allowance Allowance Allowance Allowance Allowance %of to gross loan %of to gross loan %of to gross loan %of to gross loan %of to gross loan Amount total ratio (%)(3) Amount total ratio (%)(3) Amount total ratio (%)(3) Amount total ratio (%)(3) Amount total ratio (%)(3)

(in millions of RMB, except percentages) LIABILITIES AND ASSETS

Guiyang (貴陽) 410.6 14.8 2.17 562.3 20.7 2.92 570.5 19.2 2.96 1,160.2 25.0 3.10 1,518.3 26.4 3.57 Zunyi (遵義) 1,246.4 44.8 6.66 774.9 28.5 3.42 855.9 28.7 3.78 1,113.9 24.0 3.43 1,220.4 21.1 3.33 Liupanshui (六盤水) 223.7 8.0 2.94 336.4 12.4 2.79 379.2 12.7 3.14 633.3 13.6 3.77 874.2 15.1 4.37 Anshun (安順) 188.7 6.8 2.58 244.7 9.0 2.91 292.1 9.8 3.48 345.5 7.4 3.46 489.8 8.5 4.06 Bijie (畢節) 500.5 18.0 12.08 312.8 11.5 7.51 297.8 10.0 7.15 396.8 8.6 4.79 429.1 7.4 4.08 0 – 307 – Qiannan (黔南) 78.0 2.8 1.40 167.4 6.1 1.96 212.5 7.1 2.49 311.3 6.7 2.70 377.6 6.5 2.79 Qiandongnan (黔東南) 45.1 1.6 2.72 77.1 2.8 1.96 93.4 3.1 2.37 250.6 5.4 3.63 320.5 5.5 3.58 Qianxinan (黔西南) 66.1 2.4 1.82 141.4 5.1 2.22 169.3 5.8 2.66 234.6 5.1 2.47 308.9 5.3 2.78 Tongren (銅仁) 22.5 0.8 3.08 105.8 3.9 3.85 107.5 3.6 3.91 195.8 4.2 2.69 245.1 4.2 2.74

Total allowance for loans 2,781.6 100.0 4.07 2,722.8 100.0 3.09 2,978.2 100.0 3.38 4,642.0 100.0 3.31 5,783.9 100.0 3.52

(1) Measured and recognized in accordance with the requirements of IAS 39. (2) Measured and recognized in accordance with the requirements of IFRS 9. (3) Calculated by dividing allowance for impairment losses in each loan type by gross loans and advances in that loan type. 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 loans to customers. The following table sets forth the distribution of the impairment allowance for our loans to customers by our assessment methodology as of the dates indicated.

December 31, January 1, December 31, June 30,

(1) (1) (2) (2) (2) 2016 2017 2018 2018 2019

Allowance Allowance Allowance Allowance Allowance LIABILITIES AND ASSETS %of to gross loan %of to gross loan %of to gross loan %of to gross loan %of to gross loan (3) (3) (3) (3) (3) Amount total ratio (%) Amount total ratio (%) Amount total ratio (%) Amount total ratio (%) Amount total ratio (%)

(in millions of RMB, except percentages) (in millions of RMB, except percentages)

Collectively assessed 2,219.23.24 79.8 2,171.9 79.8 3.09 Stage 1 1,827.7 61.42.16 3,371.9 72.6 2.46 4,216.0 72.9 2.62 0 – 308 – Individually assessed 562.4 20.2 48.93 550.9 20.2 50.70 Stage 2 344.1 11.6 17.26 318.032.11 6.9 28.91 476.3 8.2

Stage 3 806.4 27.0 57.09 952.1 20.5 49.99 1,091.6 18.9 61.01

Total allowance 2,781.6 100.0 4.07 2,722.8 100.0 3.09 Total 2,978.2 100.0 3.38 4,642.0 100.0 3.31 5,783.9 100.0 3.52

(1) Measured and recognized in accordance with the requirements of IAS 39. (2) Measured and recognized in accordance with the requirements of IFRS 9. (3) Calculated by dividing allowance for impairment losses in each loan type by gross loans and advances in that loan type. Distribution of Impairment Allowance on Corporate Loans by Industry

The following table sets forth the impairment allowance on corporate loans by industry as of the dates indicated.

December 31, January 1, December 31 June 30, (1) (1) (2) (2) 2016 2017 2018 2019

Allowance Allowance Allowance Allowance Allowance %of to gross loan %of to gross loan %of to gross loan %of to gross loan %of to gross loan (3) (3) (3) (3) (3) Amount total ratio (%) Amounttotal ratio (%) Amounttotal ratio (%) Amounttotal ratio (%) Amounttotal ratio (%)

(in millions of RMB, except percentages)

Leasing and commercial LIABILITIES AND ASSETS (4) services 170.8 6.8 1.41 435.0 18.9 1.88 579.3 21.5 2.50 1,724.0 39.0 2.94 2,273.3 40.9 3.32 Mining 715.1 28.5 13.73 427.6 18.5 12.35 389.2 14.4 11.24 605.3 13.7 14.03 724.4 13.0 17.36 Real estate 274.9 10.9 4.62 227.1 9.8 4.63 244.4 9.1 4.98 370.2 8.4 5.25 484.0 8.7 6.07 Construction 49.7 2.0 1.40 162.7 7.1 1.95 210.6 7.8 2.53 266.8 6.0 2.84 353.2 6.4 3.22 Education 174.1 6.9 1.44 187.3 8.1 1.97 245.8 9.1 2.58 263.6 6.0 2.91 288.1 5.2 3.12 Manufacturing 746.2 29.7 13.90 254.5 11.0 6.22 278.3 10.3 6.80 247.9 5.6 7.83 260.8 4.7 7.12

0 – 309 – Transportation, storage and postal services 40.9 1.6 1.43 109.3 4.7 1.94 140.7 5.2 2.50 185.0 4.2 2.76 230.1 4.1 3.15 Wholesale and retail 178.7 7.1 8.12 196.9 8.5 9.59 204.1 7.6 9.94 151.8 3.4 4.89 183.1 3.3 4.83 Water conservancy, environment and public utility management 64.6 2.6 1.36 138.5 6.0 1.85 190.2 7.0 2.54 343.7 7.8 2.80 415.8 7.5 3.12 Production and supply of electricity, gas and water 14.41.36 0.6 37.9 1.6 1.84 49.9 1.8 2.43 64.8 1.5 2.78 66.3 1.2 3.04 Agriculture, forestry, animal husbandry and fishery 4.7 0.2 3.75 5.7 0.2 2.60 7.0 0.3 3.23 23.4 0.5 3.01 41.5 0.7 3.41 Hotels and catering 25.5 1.0 10.03 9.2 0.4 5.63 9.7 0.4 5.93 18.7 0.4 9.27 28.3 0.5 11.85 (5)(6) Others 51.9 2.1 1.46 115.2 5.2 2.11 148.7 5.5 2.72 156.8 3.5 3.28 208.2 3.8 3.75

Total allowance for corporate loans 2,511.5 100.0 4.12 2,306.9 100.0 2.98 2,697.9 100.0 3.49 4,422.0 100.0 3.63 5,557.1 100.0 4.03

(1) Measured and recognized in accordance with the requirements of IAS 39. (2) Measured and recognized in accordance with the requirements of IFRS 9. (3) Calculated by dividing allowance for impairment losses on corporate loans in each industry by gross corporate loans in that industry. (4) During the Track Record Period, substantially all of our corporate customers in such industry are government-affiliated entities primarily engaged in infrastructure construction projects. (5) Consists primarily of (i) information transmission, computer services and software, (ii) financial, (iii) scientific research and technical services, (iv) residential services and other services, (v) sanitation and social work, (vi) culture, sports and entertainment, as well as (vii) public administration, social security and social organizations. (6) Include discounted bills prior to January 1, 2018. ASSETS AND LIABILITIES

Financial Investments

Financial investments are another important component of our assets. Our financial investments, net of impairment allowance, represented 44.7%, 45.4%, 40.0% and 38.5% of our total assets as of December 31, 2016, 2017 and 2018 and June 30, 2019, respectively.

Our financial investments, net of impairment allowance, increased by 27.2% from RMB102,268.3 million as of December 31, 2016 to RMB130,045.5 million as of December 31, 2017, and further by 5.1% to RMB136,645.0 million as of December 31, 2018. As of June 30, 2019, our financial investments, net of impairment allowance, increased by 9.9% to RMB150,154.3 million. The continued increase in financial investments was primarily due to our increased investments in bonds issued by local government and corporate issuers in Guizhou Province and our investments in mutual funds starting in 2018 and increased investment during the six months ended June 30, 2019.

Except as otherwise indicated, 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.

Classification 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 into:

(i) financial investments measured at fair value through profit or loss. Our financial investments measured at fair value through profit or loss primarily comprise investments in debt securities;

(ii) available-for-sale. Our financial investments classified as available-for-sale primarily comprise investments in debt securities, SPV investments in wealth management products and mutual funds as well as equity investments, which are non-derivative financial assets designated on initial recognition as available-for-sale or any other instruments that are not classified as (a) loans and receivables, (b) held-to-maturity investments or (c) financial assets at fair value through profit or loss;

(iii) held-to-maturity investments. Our held-to-maturity investments primarily comprise investments in debt securities that we have the positive intention and ability to hold to maturity, other than (a) those that we, upon initial recognition, designate at fair value through profit or loss or as available-for-sale; or (b) those that meet the definition of loans and receivables; and

– 310 – ASSETS AND LIABILITIES

(iv) investments classified as receivables. Our financial investments classified as receivables primarily comprise SPV investments in trust plans and asset management plans that are non-derivative financial assets with fixed or determinable payments not quoted in an active market, other than held for trading or designated on initial recognition as assets at fair value through profit or loss or as available-for-sale.

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 the following categories:

(i) financial investments measured at fair value through other comprehensive income. An investment in debt securities is measured at fair value through other comprehensive income if it meets both of the following conditions and is not designated as financial investments measured at fair value through profit or loss: (a) it is held within a business model whose objective is set for both collecting contractual cash flows and selling such financial assets: and (b) its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Financial investments measured at fair value through other comprehensive income also include equity investments designated as financial investments measured at fair value through other comprehensive income. Our financial investments at fair value through other comprehensive income primarily comprise investments in debt securities and equity investments;

(ii) financial assets measured at amortized cost. A financial investment is measured at amortized cost if it meets both of the following conditions and is not designated as financial investments measured at fair value through profit or loss: (a) it is held within a business model whose objective is to hold assets to collect contractual cash flows; and (b) its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Our financial investments measured at amortized cost primarily comprise investments in debt securities and SPV investments in trust plans and asset management plans;

(iii) financial investments measured at fair value through profit or loss. All financial investments not classified as measured at amortized cost or as measured at fair value through other comprehensive income are designated as financial investments measured at fair value through profit or loss. Our financial investments measured at fair value through profit or loss primarily comprise investments in debt securities as well as SPV investments in wealth management products and mutual funds.

–311– ASSETS AND LIABILITIES

The following table sets forth the distribution of our financial investments by business model and cashflow characteristics as of the dates indicated. See note 18 in the Accountants’ Report in Appendix I to this prospectus for further details on the components of each category of our financial investments.

December 31, January 1, December 31, June 30, 2016 2017 2018(1) 2018(1) 2019 %of %of %of %of %of Amount total Amount total Amount total Amount total Amount total (in millions of RMB, except percentages) Financial investments at fair value through profit or loss(2) 3,856.4 3.7 3,687.0 2.8 2,678.8 2.0 8,670.7 6.3 15,378.6 10.1 Available-for-sale financial assets(3) 3,162.5 3.1 8,972.0 6.8 N/A N/A N/A N/A N/A N/A Held-to-maturity investments(3) 31,876.0 30.9 42,381.6 32.3 N/A N/A N/A N/A N/A N/A Debt securities classified as receivables(3) 64,209.5 62.3 76,382.9 58.1 N/A N/A N/A N/A N/A N/A Subtotal 103,104.4 100.0 131,423.5 100.0 2,678.8 2.0 8,670.7 6.3 15,378.6 10.1 Financial investments at amortized cost(4) N/A N/A N/A N/A 120,561.5 91.7 114,596.6 82.8 111,584.0 73.7 Interest receivables N/A N/A N/A N/A N/A N/A 1,045.1 0.7 867.4 0.6 Subtotal N/A N/A N/A N/A 120,561.5 91.7 115,641.7 83.5 112,451.4 74.3 Financial investments at fair value through other comprehensive income(4) N/A N/A N/A N/A 8,219.4 6.3 13,855.6 10.0 23,223.3 15.3 Interest receivables N/A N/A N/A N/A N/A N/A 261.5 0.2 420.2 0.3 Subtotal N/A N/A N/A N/A 8,219.4 6.3 14,117.1 10.2 23,643.5 15.6 Gross financial investments 103,104.4 100.0 131,423.5 100.0 131,459.7 100.0 138,429.5 100.0 151,473.5 100.0

Allowance for impairment losses(5) (836.1) (1,378.0) (1,529.5) (1,784.5) (1,319.2) Net financial investments 102,268.3 130,045.5 129,930.2 136,645.0 150,154.3

(1) We adopted IFRS 9 starting from January 1, 2018. According to this accounting policy, our available-for-sale financial assets were reclassified to financial investments measured at fair value through profit or loss and financial investments measured at fair value through other comprehensive income. Our held-to-maturity investments were reclassified to financial investments measured at amortized cost and financial investments measured at fair value through profit or loss. Meanwhile, debt securities classified as receivables were reclassified to financial investments measured at amortized cost. (2) The balance of financial investments measured at fair value through profit or loss prior to January 1, 2018 was classified in accordance with IAS 39 and the balance of financial investments measured at fair value through profit or loss on or after January 1, 2018 was classified in accordance with IFRS 9. (3) IAS 39 was adopted prior to January 1, 2018. (4) IFRS 9 was adopted from January 1, 2018. (5) For the amount on or after January 1, 2018, such allowance for impairment losses only includes allowance for impairment losses on financial investments measured at amortized cost. Allowance for impairment losses on financial investments measured at fair value through other comprehensive income is recognized in the “impairment reserve,” which does not affect the book value of financial investments reported in our statements of financial position. As of January 1, 2018 and December 31, 2018, the allowance for impairment losses on financial investments at fair value through other comprehensive income recognized in the impairment reserve was RMB2.0 million and RMB5.0 million, respectively.

– 312 – ASSETS AND LIABILITIES

Our financial investments measured at fair value through profit or loss primarily comprise investments in debt securities during the Track Record Period and investments in wealth management products and mutual funds in 2018 and the six months ended June 30, 2019, and our objective is not solely to collect the contractual cash flows from them. Our financial investments measured at fair value through profit or loss decreased from RMB3,856.4 million as of December 31, 2016 to RMB3,687.0 million as of December 31, 2017, primarily due to the maturity of certain investments in debt securities in 2017. Our financial investments measured at fair value through profit or loss increased from RMB2,678.8 million as of January 1, 2018 to RMB8,670.7 million as of December 31, 2018 and further increased by 77.4% to RMB15,378.6 million as of June 30, 2019, primarily due to our increased investments in mutual funds and wealth management products.

Our financial investments classified as available-for-sale primarily consist of investments in debt securities as well as investments in wealth management products in 2016 and 2017. The available-for-sale debt securities consisted of debt securities issued by PRC central and local governments, policy banks, other commercial banks and financial institutions, as well as corporate issuers in China. We had a limited amount of available-for-sale equity investments, which comprised equity investments in unlisted companies. Our financial investments classified as available-for-sale increased significantly from RMB3,162.5 million as of December 31, 2016 to RMB8,972.0 million as of December 31, 2017, primarily due to our increased investments in local government and corporate bonds. Upon the adoption of IFRS 9, (i) our financial investments classified as available-for-sale that are not held for collection of contractual cash flows representing solely payments of principal and interest have been reclassified to financial investments measured at fair value through profit or loss, and (ii) the remaining financial investments classified as available-for-sale have been reclassified to financial investments measured at fair value through other comprehensive income. See “Financial Information – Critical Accounting Estimates and Judgments – Impact of New Accounting Policies” for details of the impact of IFRS 9. We do not expect the reclassification of available-for-sale financial investments would have a material impact on our financial performance.

Our financial investments classified as held-to-maturity consist of investments in debt securities in 2016 and 2017. Our financial investments classified as held-to-maturity increased from RMB31,876.0 million as of December 31, 2016 to RMB42,381.6 million as of December 31, 2017, primarily due to our increased investments in local government bonds and bonds issued by PRC policy banks. Our financial investments classified as held-to-maturity have been reclassified to financial investments measured at amortized cost and financial investments measured at fair value through profit or loss due to the adoption of IFRS 9 on January 1, 2018.

– 313 – ASSETS AND LIABILITIES

Our financial investments classified as receivables consist of investments in trust plans and asset management plans in 2016 and 2017. Our financial investments classified as receivables increased from RMB64,209.5 million as of December 31, 2016 to RMB76,382.9 million as of December 31, 2017, primarily due to our efforts to invest in trust plans and asset management plans to support the ultimate borrowers and the local economy. Our financial investments classified as receivables have been reclassified to financial assets measured at amortized cost due to the adoption of IFRS 9 on January 1, 2018.

Our financial investments measured at amortized cost primarily comprise (i) our investments in debt securities that were previously classified as held-to-maturity in 2016 and 2017 and (ii) financial investments that were previously classified as receivables in 2016 and 2017. After January 1, 2018, our financial assets measured at amortized costs decreased from RMB120,561.5 million as of January 1, 2018 to RMB114,596.6 million as of December 31, 2018, primarily due to the maturity and a slower increase in our investments in trust plans and asset management plans in response to changing regulatory environment. As of June 30, 2019, our financial assets measured at amortized costs decreased slightly to RMB111,584.0 million.

Our financial investments measured at fair value through other comprehensive income comprise investments in debt securities, which we hold for collection of contractual cash flows and for selling. Our financial investments measured at fair value through other comprehensive income increased from RMB8,219.4 million as of January 1, 2018 to RMB13,855.6 million as of December 31, 2018 and further by 67.6% to RMB23,223.3 million as of June 30, 2019, primarily due to our increased investments in debts securities, mainly comprising government bonds, to support the local economy.

See “Risk Management – Credit Risk Management for Financial Markets Business – Credit Risk Management for Investments in Debt Securities and Special Purpose Vehicles” for details relating to our risk management in connection with our financial investments.

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.

June 30, 2019 Due in over Due in three months Due in over Due in Indefinite/ three months up to one year up to more than five Repayable on or less 12 months five years years demand Total (in millions of RMB) Financial investments at fair value through profit or loss 1,305.7 10,929.5 1,435.2 1,708.2 0.0 15,378.6 Financial investments at fair value through other comprehensive income 240.8 4,600.8 11,199.0 7,602.9 0.0 23,643.5 Financial investments at amortized cost 1,741.7 7,886.3 56,856.9 44,306.1 341.2 111,132.2 Total financial investments 3,288.2 23,416.6 69,491.1 53,617.2 341.2 150,154.3

– 314 – ASSETS AND LIABILITIES

Carrying Value and Fair Value

The following table sets forth our financial investments that have different carrying values and fair values as of the dates indicated.

December 31, June 30,

2016(1) 2017(1) 2018(2) 2019(2) Carrying Fair Carrying Fair Carrying Fair Carrying Fair value value value value value value value value

(in millions of RMB)

Financial investments at fair value through profit or loss 3,856.4 3,856.4 3,687.0 3,687.0 8,670.7 8,670.7 15,378.6 15,378.6 Available-for-sale financial assets 3,159.2 3,159.2 8,966.1 8,966.1 N/A N/A N/A N/A Held-to-maturity investments 31,876.0 31,736.2 42,381.6 41,492.2 N/A N/A N/A N/A Debt securities classified as receivables 63,376.7 63,376.7 75,010.8 75,010.8 N/A N/A N/A N/A Financial investments at amortized cost N/A N/A N/A N/A 113,857.3 113,980.6 111,132.2 111,297.6 Financial investments at fair value through other comprehensive income N/A N/A N/A N/A 14,117.0 14,117.0 23,643.5 23,643.5

(1) IAS 39 was adopted prior to January 1, 2018. (2) IFRS 9 was adopted from January 1, 2018.

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 Product Type

Our financial investments mainly consist of (i) investments in debts securities, (ii) SPV investments, and (iii) equity investments. The following table sets forth the components of our financial investments as of the dates indicated.

December 31, January 1, December 31, June 30, 2016(1) 2017(1) 2018(2) 2018(2) 2019(2) %of %of %of %of %of Amount total Amount total Amount total Amount total Amount total (in millions of RMB, except percentages) Investments in debt securities – Financial investments at fair value through profit or loss 3,856.4 3.7 3,687.0 2.8 2,028.3 1.5 2,676.0 2.0 2,101.8 1.4 – Available-for-sale financial assets 2,974.7 2.9 8,283.1 6.3 N/A N/A N/A N/A N/A N/A – Held-to-maturity investments 31,876.0 30.9 42,381.6 32.2 N/A N/A N/A N/A N/A N/A – Financial investments at fair value through other comprehensive income N/A N/A N/A N/A 8,181.6 6.2 13,817.8 10.1 23,185.5 15.4

– 315 – ASSETS AND LIABILITIES

December 31, January 1, December 31, June 30, 2016(1) 2017(1) 2018(2) 2018(2) 2019(2) %of %of %of %of %of Amount total Amount total Amount total Amount total Amount total (in millions of RMB, except percentages) – Financial investments at amortized cost N/A N/A N/A N/A 44,178.6 33.6 46,809.6 34.1 47,007.6 31.3 Subtotal 38,707.1 37.5 54,351.7 41.3 54,388.5 41.3 63,303.4 46.2 72,294.9 48.1 SPV investments Wealth Management Products 150 0.1 651.1 0.5 650.5 0.5 2,671.2 1.9 4,123.8 2.7 – Financial investments at fair value through profit or loss – – – – 650.5 0.5 2,671.2 1.9 4,123.8 2.7 – Available-for-sale financial assets 150 0.1 651.1 0.5 N/A N/A N/A N/A N/A N/A Asset management plans 58,727.4 57.1 68,373.9 52.1 68,373.9 52.1 56,734.7 41.4 53,861.3 35.9 – Debt securities classified as receivables 58,727.4 57.1 68,373.9 52.1 N/A N/A N/A N/A N/A N/A – Financial investments at amortized cost N/A N/A N/A N/A 68,373.9 52.1 56,734.7 41.4 53,861.3 35.9 Trust plans 5,482.1 5.3 8,009.0 6.1 8,009.0 6.1 10,652.3 7.8 10,298.4 6.9 – Debt securities classified as receivables 5,482.1 5.3 8,009.0 6.1 N/A N/A N/A N/A N/A N/A – Financial investments at amortized cost N/A N/A N/A N/A 8,009.0 6.1 10,652.3 7.8 10,298.4 6.9 Mutual funds – – – – – – 3,323.5 2.4 9,153.0 6.1 – Financial investments at fair value through profit or loss – – – – – – 3,323.5 2.4 9,153.0 6.1 Private placement bonds – – – – – – 400.0 0.3 416.7 0.3 – Financial investments at amortized cost – – – – – – 400.0 0.3 416.7 0.3 Subtotal 64,359.5 62.5 77,034.0 58.7 77,033.4 58.7 73,781.7 53.8 77,853.2 51.9 Equity investments – Available-for-sale financial assets 37.8 – 37.8 – N/A N/A N/A N/A N/A N/A – Financial investments at fair value through other comprehensive income N/A N/A N/A N/A 37.8 – 37.8 – 37.8 – Subtotal 37.8 – 37.8 – 37.8 – 37.8 – 37.8 – Gross financial investments 103,104.4 100.0 131,423.5 100.0 131,459.7 100.0 137,122.9 100.0 150,185.9 100.0 Allowance for impairment losses (836.1) (1,378.0) (1,529.5) (1,784.5) (1,319.2) Interest receivables – – – 1,306.6 1,287.6 Net financial investments 102,268.3 130,045.5 129,930.2 136,645.0 150,154.3

(1) IAS 39 was adopted prior to January 1, 2018. (2) IFRS 9 was adopted from January 1, 2018.

– 316 – ASSETS AND LIABILITIES

Investments in Debt Securities

Investments in debt securities accounted for 37.5%, 41.4%, 46.2% and 48.0% of our total financial investments as of December 31, 2016, 2017 and 2018 and June 30, 2019, respectively. Our investments in debt securities consist primarily of investment in debt securities issued by PRC central and local government, policy banks, other commercial banks and financial institutions, as well as corporations in China, with a rating ranging from AA to AAA. All of the debt securities products we held as of December 31, 2016, 2017 and 2018 and June 30, 2019 were denominated in Renminbi. The following table sets forth the components of our investments in debt securities classified by issuer as of the dates indicated.

December 31, June 30,

2016(1) 2017(1) 2018(2) 2019(2)

%of %of %of %of Amount total Amount total Amount total Amount total (in millions of RMB, except percentages)

PRC government bonds 29,258.7 75.6 43,327.8 79.7 47,947.6 75.7 44,872.6 62.0 Bonds issued by PRC policy banks 7,803.9 20.2 8,322.0 15.3 8,217.9 13.0 15,034.6 20.8 Bonds issued by other PRC commercial banks and financial institutions 408.6 1.0 206.5 0.4 1,753.7 2.8 3,301.8 4.6 Bonds issued by PRC corporate issuers 1,235.9 3.2 2,495.4 4.6 5,384.2 8.5 9,085.9 12.6 Total 38,707.1 100.0 54,351.7 100.0 63,303.4 100.0 72,294.9 100.0

(1) IAS 39 was adopted prior to January 1, 2018. (2) IFRS 9 was adopted from January 1, 2018.

We increased our investment in debt securities to expand our financial markets business and support the local economy and government financing.

During the Track Record Period, debt securities issued by PRC central and local government were the largest component of our debt securities portfolio. The debt securities issued by PRC central and local government increased by 48.1% from RMB29,258.7 million as of December 31, 2016 to RMB43,327.8 million as of December 31, 2017, and further by 10.7% to RMB47,947.6 million as of December 31, 2018, as we expanded our financial markets business to support the local government financing. The debt securities issued by PRC central and local government decreased by 6.4% to RMB44,872.6 million as of June 30, 2019, primarily as we adjusted our financial investment portfolio by increasing our investments in bonds issued by PRC corporate issuers and policy banks to increase financial support to local economy and increase our returns.

– 317 – ASSETS AND LIABILITIES

Debt securities issued by PRC policy banks increased by 6.6% from RMB7,803.9 million as of December 31, 2016 to RMB8,322.0 million as of December 31, 2017, primarily due to our liquidity management requirements as such debt securities have good liquidity and relatively low risk. Debt securities issued by policy banks then decreased slightly to RMB8,217.9 million, primarily due to our liquidity management requirements. Debt securities issued by PRC policy banks increased by 82.9% to RMB15,034.6 million as of June 30, 2019, primarily due to our liquidity management requirement as such debt securities have good liquidity and relatively low risk.

Debt securities issued by other PRC commercial banks and financial institutions decreased by 49.5% from RMB408.6 million as of December 31, 2016 to RMB206.5 million as of December 31, 2017, primarily due to our liquidity management requirements. Debt securities issued by other PRC commercial banks and other financial institutions then increased significantly to RMB1,753.7 million as of December 31, 2018, primarily due to our decision to diversify our assets portfolio considering risk, return and market conditions. Debt securities issued by other PRC commercial banks and financial institutions increased by 88.3% to RMB3,301.8 million as of June 30, 2019, primarily as we decided to diversify our debt securities investment portfolio in order to balance returns and risk management.

Debt securities issued by PRC corporate issuers increased significantly from RMB1,235.9 million as of December 31, 2016 to RMB2,495.4 million as of December 31, 2017, and further to RMB5,384.2 million as of December 31, 2018, which then increased by 68.8% to RMB9,085.9 million as of June 30, 2019, as we increased our financing support to local companies amid the trend of disintermediation which favors capital market financing.

The following table sets forth the balance of our debt securities portfolio by remaining maturity as of the date indicated.

June 30, 2019 Due in over three Due in over Due in three months up to 12 one year up Due in more than months or less months to five years five years Total (in millions of RMB) Debt securities Bonds issued by PRC government 1,217.5 3,630.1 31,313.7 8,711.3 44,872.6 Bonds issued by PRC policy banks – 2,507.0 7,747.0 4,780.6 15,034.6 Bonds issued by other PRC commercial banks and financial institutions – 1,844.3 283.9 1,173.6 3,301.8 Bonds issued by PRC corporate issuers 203.1 513.5 4,403.5 3,965.8 9,085.9 Total debt securities 1,420.6 8,494.9 43,748.1 18,631.3 72,294.9

– 318 – ASSETS AND LIABILITIES

The following table sets forth a breakdown of our debt securities investments between fixed interest rates and floating interest rates as of the dates indicated.

December 31, June 30,

2016(1) 2017(1) 2018(2) 2019(2)

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

(in millions of RMB, except percentages)

Fixed interest rates 38,603.5 99.7 54,246.6 99.8 62,597.7 99.0 68,369.2 94.6 Floating interest rates 103.6 0.3 105.1 0.2 705.7 1.0 3,925.7 5.4 Total debt securities investment 38,707.1 100.0 54,351.7 100.0 63,303.4 100.0 72,294.9 100.0

(1) IAS 39 was adopted prior to January 1, 2018. (2) IFRS 9 was adopted from January 1, 2018.

SPV Investments

Our SPV investments are made through trust plans, asset management plans, wealth management products and mutual funds, where we entrust our counterparties to manage our funds and they then provide financing to financing parties or ultimate borrowers or invest our funds in investment portfolios, such as debt securities and money market products. See “Business – Financial Markets Business – SPV Investments” for details.

– Trust plans

As of December 31, 2016, 2017 and 2018, our investment in trust plans amounted to RMB5,482.1 million, RMB8,009.0 million and RMB10,652.3 million, respectively. Such increase was due to our efforts to meet the growing financing demand from the ultimate borrowers using trust plans for financing. As of June 30, 2019, our investment in trust plans remained relatively stable at RMB10,298.4 million.

– Asset management plans

Our investment in asset management plans increased from RMB58,727.4 million as of December 31, 2016 to RMB68,373.9 million as of December 31, 2017, mainly as we increased investments to meet the growing financing demand from the ultimate borrowers. Our investment decreased to RMB56,734.7 million as of December 31, 2018 and further decreased to RMB53,861.3 million as of June 30, 2019, primarily due to (i) the gradual maturity of our investments in certain asset management plans and (ii) our discontinuance in increasing investments in asset management plans according to the changing regulatory policies regulating asset management plans.

– 319 – ASSETS AND LIABILITIES

– Wealth management products

Our investment in wealth management products increased from RMB150.0 million as of December 31, 2016 to RMB651.1 million as of December 31, 2017, and further to RMB2,671.2 million as of December 31, 2018, which then increased to RMB4,123.8 million as of June 30, 2019, primarily due to our efforts to diversify our investment portfolio and to increase return on our capital.

– Mutual funds

We began to invest in mutual funds, mainly comprising bond funds and money market funds, in 2018. As of December 31, 2018, our investments in mutual funds amounted to RMB3,323.5 million, which increased significantly to RMB9,153.0 million as of June 30, 2019, primarily due to our efforts to diversify our asset portfolio and our strategy to expand our financial markets business.

Equity Investments

As of 2018 and June 30, 2019, our equity investments remained at RMB37.8 million, representing our equity investments in two unlisted companies in China.

Distribution of SPV Investments by Industry

The following table sets forth, as of June 30, 2019, the distribution of our SPV investments by industry classification.

June 30, 2019 Asset Wealth Private Trust management management Mutual placement %of plans plans products funds bonds Total total (in millions of RMB, except percentages) Water conservancy, environment and public utility management 6,871.0 33,179.6 – – – 40,050.6 51.4 Finance 146.4 – 416.7 4,123.8 9,153.0 13,839.9 17.8 Transportation, storage and postal services 382.0 13,604.1 – – – 13,986.1 18.0 Real estate 1,400.0 4,263.9 – – – 5,663.9 7.3 Leasing and commercial services 999.0 1,036.3 – – – 2,035.3 2.6 Mining – 1,677.4 – – – 1,677.4 2.2 Culture, sports and entertainment 500.0 – – – – 500.0 0.6 Retail and wholesale – 100.0 – – – 100.0 0.1 Total 10,298.4 53,861.3 416.7 4,123.8 9,153.0 77,853.2 100.0

– 320 – Distribution of SPV Investments by Collateral

The following table sets forth the breakdown of our SPV investments by security type as of the dates indicated.

December 31, June 30,

(1) (1) (2) (2) 2016 2017 2018 2019

Asset Wealth Asset Wealth Asset Wealth Private Asset Wealth Private

Trustmanagementmanagement %ofTrustmanagementmanagement %ofTrustmanagementmanagementMutualplacement %ofTrustmanagementmanagementMutualplacement %of

plans plans productstotal Totalplans plans productstotal Totalplans plans productsfunds bondstotal Totalplans plans productsfunds bondstotal Total

(in millions of RMB, except percentages) LIABILITIES AND ASSETS

Pledges –2,240.5 2,240.53.5 – – 2,245.82,245.82.9 200.0 – 71.9271.9 –0.4 – – – 27.627.6 –0.0 – –

Collateral 1,291.130,015.0 28,723.946.6 910.0 – 20,102.221,012.227.3 80.0 – 11,860.311,940.3 –16.2 – 80.0 10,594.8 – 10,674.8 –13.7 – –

Guarantees –5,598.9 5,598.98.7 – – 6,726.16,726.18.7 707.0 – 5,098.65,805.6 –7.9 682.0 – 4,664.5 – 5,346.5 –6.9 – –

Unsecured 4,191.026,505.1 22,164.141.2 7,099.0 150.0 39,299.847,049.961.1 651.1 9,665.3 39,703.955,763.9 2,671.275.5 3,323.5 9,536.4 400.0 38,574.461,804.3 4,123.879.4 9,153.0 416.7

Total 5,482.1 58,727.4 150.0 64,359.5 100.0 8,009.0 68,373.9 651.1 77,034.0 100.0 10,652.3 56,734.7 2,671.2 3,323.5 400.0 73,781.7 100.0 10,298.4 53,861.3 4,123.8 9,153.0 416.7 77,853.2 100.0 2 – 321 –

(1) IAS 39 was adopted prior to January 1, 2018. (2) IFRS 9 was adopted from January 1, 2018. ASSETS AND LIABILITIES

Investment Concentration

The table below sets forth the ten largest holdings of financial investments as of the date indicated.

June 30, 2019 % of total %of Carrying financial % of total net capital value investments equity base (in millions of RMB, except percentages) Investment A 9,233.2 14.3 2.4 28.0 Investment B 7,527.5 11.7 1.9 22.9 Investment C 7,524.0 11.7 1.9 22.8 Investment D 6,991.0 10.8 1.8 21.2 Investment E 6,036.6 9.3 1.5 18.3 Investment F 4,513.4 7.0 1.2 13.7 Investment G 3,823.8 5.9 1.0 11.6 Investment H 3,764.2 5.8 1.0 11.4 Investment I 3,443.6 5.3 0.9 10.5 Investment J 2,358.7 3.7 0.6 7.2 Total 55,216.0 85.50 14.2 167.6

Concentration of Investments in Trust Plans

The following table sets forth our credit exposure to the five largest ultimate borrowers under the trust plans in which we invested that have a single borrower as of the each date indicated.

June 30, 2019 Regulatory % of total ratings/ investments Industry Credit ratings Amount in trust plans (in millions of RMB, except percentages) Trust plan borrower A Real estate AA+ 1,400.0 13.6 Trust plan borrower B Leasing and commercial services N/A(1) 999.0 9.7 Trust plan borrower C Water conservancy, environment N/A(1) 300.0 2.9 and public utility management Trust plan borrower D Transportation, storage and postal N/A(1) 217.0 2.1 services Trust plan borrower E Leasing and commercial services N/A(1) 165.0 1.6 Total 3,081.0 29.9

– 322 – ASSETS AND LIABILITIES

December 31, 2018 Regulatory % of total ratings/ investments Industry Credit ratings Amount in trust plans (in millions of RMB, except percentages) Trust plan borrower A Real estate N/A(1) 1,400.0 13.1 Trust plan borrower B Leasing and commercial services N/A(1) 999.0 9.4 Trust plan borrower C Water conservancy, environment N/A(1) 300.0 2.8 and public utility management Trust plan borrower F Mining N/A(1) 235.0 2.2 Trust plan borrower D Transportation, storage and postal N/A(1) 217.0 2.0 services Total 3,151.0 29.5

December 31, 2017 Regulatory % of total ratings/ investments Industry Credit ratings Amount in trust plans (in millions of RMB, except percentages) Trust plan borrower G Leasing and commercial services N/A(1) 380.0 4.7 Trust plan borrower H Water conservancy, environment N/A(1) 300.0 3.7 and public utility management Trust plan borrower F Mining N/A(1) 237.0 3.0 Trust plan borrower I Water conservancy, environment N/A(1) 1.0 – and public utility management Total 918.0 11.4

December 31, 2016 Regulatory % of total ratings/ investments Industry Credit ratings Amount in trust plans (in millions of RMB, except percentages) Trust plan borrower G Leasing and commercial services N/A(1) 380.0 6.9 Trust plan borrower H Water conservancy, environment N/A(1) 300.0 5.5 and public utility management Trust plan borrower J Water conservancy, environment N/A(1) 211.1 3.9 and public utility management Trust plan borrower K Water conservancy, environment AA+ 200.0 3.6 and public utility management Trust plan borrower L Education N/A(1) 100.0 1.8 Total 1,191.1 21.7

(1) There is no publicly available and reliable regulatory or credit rating information.

– 323 – ASSETS AND LIABILITIES

The following table sets forth our five largest trust company counterparties as of each date indicated.

June 30, 2019 % of total investments Total in trust Nature assets(1) Amount plans Trust plan counterparty A State-owned N/A 6,991.0 67.9 Trust plan counterparty E State-owned N/A 1,400.0 13.6 Trust plan counterparty F State-owned N/A 999.0 9.7 Trust plan counterparty G State-owned N/A 300.0 2.9 Trust plan counterparty H State-owned N/A 217.0 2.1 Total 9,907.0 96.2

December 31, 2018 % of total investments Total in trust Nature assets(1) Amount plans Trust plan counterparty A State-owned 21,336.0 6,991.0 65.6 Trust plan counterparty E State-owned 37,912.5 1,400.0 13.1 Trust plan counterparty F State-owned 28,682.0 999.0 9.4 Trust plan counterparty D State-owned 15,381.0 315.0 3.0 Trust plan counterparty G State-owned 17,954.8 300.0 2.8 Total 10,005.0 93.9

December 31, 2017 % of total investments Total in trust Nature assets(1) Amount plans Trust plan counterparty A State-owned 13,851.4 6,991.0 87.3 Trust plan counterparty D State-owned 11,840.2 537.0 6.7 Trust plan counterparty C State-owned 28,788.3 380.0 4.7 Trust plan counterparty E State-owned 36,235.4 100.0 1.3 Total 8,009.0 100.0

December 31, 2016 % of total investments Total in trust Nature assets(1) Amount plans Trust plan counterparty A State-owned 14,671.6 4,091.0 74.6 Trust plan counterparty B State-owned 4,742.0 411.1 7.5 Trust plan counterparty C State-owned 25,651.3 380.0 6.9 Trust plan counterparty D State-owned 8,713.9 300.0 5.5 Trust plan counterparty E State-owned 27,921.5 200.0 3.6 Total 5,382.1 98.1

(1) Source: each counterparty’s annual report.

– 324 – ASSETS AND LIABILITIES

Concentration of Investments in Asset Management Plans

The following table sets forth our credit exposure to the five largest ultimate borrowers under the asset management plans in which we invested that have a single borrower as of each date indicated.

June 30, 2019 % of total investments Regulatory in asset ratings/Credit management Industry ratings Amount plans (in millions of RMB, except percentages) Asset management plan Water AA 1,250.0 2.3 borrower A conservancy, environment and public utility management Asset management plan Real estate N/A(1) 1,099.7 2.0 borrower B Asset management plan Mining N/A(1) 867.8 1.6 borrower C Asset management plan Leasing and AA+ 709.6 1.3 borrower D commercial services Asset management plan Water AA 650.0 1.2 borrower E conservancy, environment and public utility management Total 4,577.1 8.4

December 31, 2018 % of total investments Regulatory in asset ratings/Credit management Industry ratings Amount plans (in millions of RMB, except percentages) Asset management plan Water A 1,250.0 2.2 borrower A conservancy, environment and public utility management Asset management plan Real estate N/A(1) 1,099.7 1.9 borrower B Asset management plan Mining N/A(1) 867.8 1.5 borrower C Asset management plan Leasing and AA+ 710.0 1.3 borrower D commercial services Asset management plan Water AA 650.0 1.1 borrower E conservancy, environment and public utility management Total 4,577.5 8.0

– 325 – ASSETS AND LIABILITIES

December 31, 2017 % of total investments Regulatory in asset ratings/Credit management Industry ratings Amount plans (in millions of RMB, except percentages) Asset management plan Water AA+ 1,900.0 2.8 borrower A conservancy, environment and public utility management Asset management plan Water N/A(1) 1,250.0 1.8 borrower B conservancy, environment and public utility management Asset management plan Real estate N/A(1) 1,099.7 1.6 borrower C Asset management plan Real estate N/A(1) 1,000.0 1.5 borrower D Asset management plan Mining N/A(1) 872.8 1.3 borrower E Total 6,122.5 9.0

December 31, 2016 % of total investments Regulatory in asset ratings/Credit management Industry ratings Amount plans (in millions of RMB, except percentages) Asset management plan Water AA+ 2,100.0 3.6 borrower F conservancy, environment and public utility management Asset management plan Water N/A(1) 1,250.0 2.1 borrower B conservancy, environment and public utility management Asset management plan Real estate N/A(1) 1,099.7 1.9 borrower C Asset management plan Real estate N/A(1) 1,000.0 1.7 borrower A Asset management plan Water N/A(1) 1,000.0 1.7 borrower E conservancy, environment and public utility management

Total 6,449.7 11.0

(1) There is no publicly available and reliable regulatory or credit rating information.

– 326 – ASSETS AND LIABILITIES

The following table sets forth our five largest counterparties for asset management plans in which we invested as of each date indicated.

June 30, 2019 % of total investments Regulatory in asset Total ratings/Credit management Nature assets(1) ratings Amount plans (in millions of RMB, except percentages)

Asset management plan State-owned 233,943.1 AAA 9,233.2 17.1 counterparty A Asset management plan State-owned 155,098.2 AAA 7,527.5 14.0 counterparty B Asset management plan State-owned 350,359.0 AAA 7,524.0 14.0 counterparty C Asset management plan Private 15,275.0 AA 6,036.6 11.2 counterparty D Asset management plan State-owned N/A N/A(2) 4,513.4 8.4 counterparty E Total 34,834.70 64.7

December 31, 2018 % of total investments Regulatory in asset Total ratings/Credit management Nature assets(1) ratings Amount plans (in millions of RMB, except percentages)

Asset management plan State-owned 211,813.6 A 9,918.2 17.5 counterparty A Asset management plan State-owned 148,221.8 A 7,952.5 14.0 counterparty B Asset management plan State-owned 304,930.7 AA 7,858.4 13.9 counterparty C Asset management plan Private N/A BBB 6,388.0 11.3 counterparty D Asset management plan State-owned 251,363.3 AA 4,670.6 8.2 counterparty E Total 36,787.7 64.9

– 327 – ASSETS AND LIABILITIES

December 31, 2017 % of total investments Regulatory in asset Total ratings/Credit management Nature assets(1) ratings Amount plans (in millions of RMB, except percentages)

Asset management plan State-owned 199,638.0 A 10,768.2 15.7 counterparty A Asset management plan State-owned 148,336.2 C 8,662.5 12.7 counterparty B Asset management plan State-owned 285,643.6 AA 7,886.4 11.5 counterparty C Asset management plan Private 33,421.4 BB 7,451.7 10.9 counterparty E Asset management plan Private 15,198.9 BB 7,224.3 10.6 counterparty D Total 41,993.1 61.4

December 31, 2016 % of total investments Regulatory in asset Total ratings/Credit management Nature assets(1) ratings Amount plans (in millions of RMB, except percentages)

Asset management plan Private 25,629.6 BBB 9,887.2 16.8 counterparty E Asset management plan State-owned 152,338.7 C 9,202.8 15.7 counterparty B Asset management plan Private 12,225.4 BBB 7,933.7 13.5 counterparty D Asset management plan State-owned 193,029.5 BBB 7,729.5 13.2 counterparty A Asset management plan Private 47,961.0 AA 5,753.8 9.8 counterparty F Total 40,507.0 69.0

(1) Source: each counterparty’s annual report. (2) There is no publicly available and reliable regulatory or credit rating information.

– 328 – ASSETS AND LIABILITIES

Concentration of Investment in Wealth Management Products

The following table sets forth the five largest counterparties for our investments in wealth management products as of each date indicated.

June 30, 2019 % of total investments in Regulatory wealth ratings/Credit management Total assets(1) ratings Amount products(2) (in millions of RMB, except percentages) Bank A 1,019,685.3 AAA 1,541.9 37.4 Bank B N/A AAA 1,032.7 25.0 Bank C 623,434.7 AAA 514.5 12.5 Bank D 16,179,820.0 N/A(3) 501.00 12.1 Bank E 37,085.2 AA+ 332.6 8.1 Total 3,922.7 95.1

December 31, 2018 % of total investments in Regulatory wealth ratings/Credit management Total assets(1) ratings Amount products(2) (in millions of RMB, except percentages) Bank A 950,618.0 AAA 1,000.0 37.7 Bank B N/A AAA 500.0 18.9 Bank C 615,588.5 AAA 500.0 18.9 Bank D 37,551.0 N/A(3) 500.0 18.9 Bank F N/A N/A(3) 100.0 3.8 Total 2,600.0 98.2

December 31, 2017 % of total investments Regulatory in wealth Total ratings/Credit management assets(1) ratings Amount products(2) (in millions of RMB, except percentages) Bank D 31,117.0 N/A(3) 500.0 76.9 Bank F N/A N/A(3) 100.0 15.4 Bank G 5,902,086.0 AAA 50.0 7.7 Total 650.0 100.0

December 31, 2016 % of total investments Regulatory in wealth Total ratings/Credit management assets(1) ratings Amount products(2) (in millions of RMB, except percentages) Bank G 5,895,877.0 AAA 50.0 33.3 Bank F N/A N/A(3) 100.0 66.7 Total 150.0 100.0

– 329 – ASSETS AND LIABILITIES

(1) Source: each bank’s annual report. (2) Refer to wealth management products issued by other financial institutions. (3) There is no publicly available and reliable regulatory or credit rating information.

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, (iii) property and equipment and (iv) other assets, such as investment in associates and deposits with banks and other financial institutions.

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 the PBOC. The minimum level is determined as a percentage of our customer deposits. See “Supervision and Regulation – Statutory Deposit Reserve” for details of changes in the statutory deposit reserve ratio. Surplus deposit reserves are deposits with the PBOC in excess of statutory deposit reserves which we maintain for clearing purposes. As of December 31, 2016 and 2017, our cash and balances with the central bank amounted to RMB32,241.7 million and RMB49,676.5 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 deposits from customers. Our cash and balances with the central bank decreased to RMB45,803.0 million as of December 31, 2018, primarily due to the decreased statutory deposit reserve ratio according to the changes in regulatory policies issued by the PBOC in 2018. Our cash and balances with the central bank increased by 4.8% to RMB48,020.9 million as of June 30, 2019, mainly due to our increased surplus deposit reserves maintained with the PBOC in accordance with our liquidity considerations.

Financial assets held under resale agreements consist primarily of debt securities and bills held under resale agreements. All of our financial assets held under resale agreements were secured by pledges during the Track Record Period. Our financial assets held under resale agreements decreased by 27.0% from RMB17,740.3 million as of December 31, 2016 to RMB12,948.3 million as of December 31, 2017, primarily due to our liquidity management requirements. Our financial assets held under resale agreements as of January 1, 2018 were restated to RMB12,939.6 million in accordance with IFRS 9, which was slightly less than the result as of December 31, 2017 under IAS 39. See Appendix I to this prospectus for further details on the differences between IAS 39 and IFRS 9 and the impact of adopting IFRS 9 on our financial position. Our financial assets held under resale agreements increased by 13.6% from RMB12,939.6 million as of January 1, 2018 to RMB14,700.3 million as of December 31, 2018, primarily due to our increased financial assets held under resale agreements according to our liquidity management requirements. As of June 30, 2019, our financial assets held under resale agreements increased by 36.0% to RMB19,988.8 million as a result of our liquidity needs.

– 330 – ASSETS AND LIABILITIES

Our deposits with banks and other financial institutions consist primarily of our balances maintained with other banks and financial institutions for payment, settlement, clearance and investment purposes. As of December 31, 2016, 2017 and 2018 and June 30, 2019, our deposits with banks and other financial institutions amounted to RMB5,886.9 million, RMB1,121.7 million, RMB834.8 million and RMB4,232.3 million, respectively. Our deposits with large commercial banks decreased from RMB907.7 million as of December 31, 2017 to RMB202.5 million as of December 31, 2018, while our deposits with city commercial banks increased continually from RMB4.2 million as of December 31, 2017 to RMB373.5 million as of December 31, 2018, and further to RMB1,984.3 million as of June 30, 2019, primarily (i) as we optimized our assets allocation and placed more deposits with small and medium-sized banks for higher returns while maintaining risks within acceptable levels, and (ii) we gradually decreased offering principal-protected wealth management products in accordance with the regulatory changes, while the proceeds from offering principal-protected wealth management products were typically deposited with large commercial banks to effectively control our credit risk. We increased our deposits with both city commercial banks and large commercial banks to RMB1,984.3 million and RMB2,160.3 million, respectively, as of June 30, 2019, primarily due to our increased time deposits with city commercial banks and large commercial banks for higher returns.

The following table sets forth a breakdown of our deposits with banks and other financial institutions by the type of financial institution as of the dates indicated.

December 31, June 30, 2016 2017 2018 2019 %of %of %of %of Amount total Amount total Amount total Amount total (in millions of RMB, except percentages) Policy and national development banks 926.8 15.7 200.0 17.8 200.0 24.0 200.0 4.1 Large commercial banks(1) 3,735.9 63.5 907.7 80.9 202.5 24.3 2,160.3 44.5 City commercial banks 1,211.4 20.6 4.2 0.4 373.5 44.8 1,984.3 40.9 Other commercial banks and financial institutions(2) 12.8 0.2 9.8 0.9 57.8 6.9 7.6 0.2 Gross deposits with banks and other financial institutions 5,886.9 100.0 1,121.7 100.0 833.8 100.0 4,352.2 100.0

Interest receivables – – 1.6 28.6 Allowance for impairment losses – – (0.6) (148.5) Total 5,886.9 1,121.7 834.8 4,232.3

(1) Mainly consists of state owned commercial banks and Joint-stock Commercial Banks. (2) Mainly consists of rural commercial banks and rural credit cooperatives.

Our property and equipment decreased slightly from RMB1,828.9 million as of December 31, 2016 to RMB1,796.7 million as of December 31, 2017. Our property and equipment increased by 83.3% to RMB3,293.4 million as of December 31, 2018, as we purchased an office building in Guiyang. Our property and equipment further increased by 3.2% to RMB3,398.4 million as of June 30, 2019, in accordance with our daily operational needs.

– 331 – ASSETS AND LIABILITIES

LIABILITIES AND SOURCES OF FUNDS

Our total liabilities increased by 24.7% from RMB212,692.3 million as of December 31, 2016 to RMB265,271.0 million as of December 31, 2017, and further by 19.0% to RMB315,744.0 million as of December 31, 2018, primarily due to an increase in customer deposits and debt securities issued by us. Our total liabilities increased further by 14.7% to RMB362,294.9 million as of June 30, 2019, primarily due to increases in customer deposits and debt securities issued by us. The following table sets forth the components of our total liabilities as of the dates indicated.

December 31, June 30, 2016(1) 2017(1) 2018(2) 2019(2) %of %of %of %of Amount total Amount total Amount total Amount total (in millions of RMB, except percentages) Customer deposits 164,810.1 77.5 202,270.5 76.3 220,083.7 69.7 247,113.7 68.2 Debt securities issued 18,297.3 8.6 49,288.6 18.6 78,282.4 24.8 99,913.3 27.6 Deposits from banks and other financial institutions 15,679.6 7.4 8,279.6 3.1 9,983.8 3.2 7,290.2 2.0 Placements from banks and other financial institutions – 0.0 – 0.0 – 0.0 100.1 0.0 Borrowings from the central bank 1,316.6 0.6 1,572.0 0.6 2,820.2 0.9 2,758.6 0.8 Financial assets sold under repurchase agreements 7,957.2 3.7 – 0.0 2,175.3 0.7 2,313.8 0.6 Other liabilities(3) 4,631.5 2.2 3,860.3 1.4 2,398.6 0.7 2,805.2 0.8 Total liabilities 212,692.3 100.0 265,271.0 100.0 315,744.0 100.0 362,294.9 100.0

(1) IAS 39 was adopted prior to January 1, 2018. (2) IFRS 9 was adopted from January 1, 2018. (3) Consists primarily of income tax payable and other liabilities.

Customer Deposits

Customer deposits have historically been our primary source of funding, representing 77.5%, 76.3%, 69.7% and 68.2% of our total liabilities as of December 31, 2016, 2017 and 2018 and June 30, 2019, respectively. We provide demand and time deposit products to corporate and retail banking customers. The following table sets forth our deposits from customers by product type as of the dates indicated.

December 31, June 30, 2016 2017 2018 2019 %of %of %of %of Amount total Amount total Amount total Amount total (in millions of RMB, except percentages) Demand deposits Corporate customers 99,634.9 60.5 126,130.1 62.4 116,485.6 52.9 110,901.1 44.9 Retail banking customers 16,803.5 10.2 21,116.0 10.4 26,825.1 12.2 28,123.1 11.4 Subtotal 116,438.4 70.7 147,246.1 72.8 143,310.7 65.1 139,024.2 56.3

– 332 – ASSETS AND LIABILITIES

December 31, June 30, 2016 2017 2018 2019 %of %of %of %of Amount total Amount total Amount total Amount total (in millions of RMB, except percentages) Time deposits Corporate customers 33,766.5 20.4 33,029.5 16.3 39,059.7 17.7 59,911.4 24.2 Retail banking customers 14,348.9 8.7 21,886.7 10.8 36,284.0 16.5 46,730.5 18.9 Subtotal 48,115.4 29.1 54,916.2 27.1 75,343.7 34.2 106,641.9 43.1 Remittances outstanding and temporary deposits 256.3 0.2 108.2 0.1 132.3 0.1 149.1 0.1 Subtotal 164,810.1 100.0 202,270.5 100.0 218,786.7 99.4 245,815.2 99.5 Interest payable – – – – 1,297.0 0.6 1,298.5 0.5 Total customer deposits 164,810.1 100.0 202,270.5 100.0 220,083.7 100.0 247,113.7 100.0

Our total customer deposits increased by 22.7% from RMB164,810.1 million as of December 31, 2016 to RMB202,270.5 million as of December 31, 2017, and increased by 8.8% to RMB220,083.7 million as of December 31, 2018, which further increased by 12.3% to RMB247,113.7 million as of June 30, 2019, primarily due to the expansion of our deposit business with enhanced marketing efforts and new product offering to meet different customer demand as well as the steady flow of deposits from the local finance bureau.

Our corporate deposits increased by 19.3% from RMB133,401.4 million as of December 31, 2016 to RMB159,159.6 million as of December 31, 2017, primarily due to the favorable market condition in Guizhou Province and our continuous marketing efforts. Our corporate deposits decreased slightly to RMB155,545.3 million as of December 31, 2018, primarily attributable to a decrease in corporate demand deposits due to the industry-wide corporate withdrawals and cash repatriation to other provinces in China, mainly as a result of regulatory changes. Our corporate deposits increased by 9.8% to RMB170,812.5 million as of June 30, 2019, primarily due to an increase in corporate time deposits as we enhanced our marketing efforts to increase time deposits to obtain stable sources of funding.

Our personal deposits increased by 38.0% from RMB31,152.4 million as of December 31, 2016 to RMB43,002.7 million as of December 31, 2017, and further by 46.8% to RMB63,109.1 million as of December 31, 2018, which then increased by 18.6% to RMB74,853.6 million as of June 30, 2019, primarily due to our successful development of our retail banking business through new product offering and enhanced marketing efforts, such as the introduction of “Ai Xin Cun” (愛心存).

– 333 – ASSETS AND LIABILITIES

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, excluding interest payables.

December 31, June 30,

2016 2017 2018 2019

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

(in millions of RMB, except percentages)

Guiyang (貴陽) 48,881.1 29.7 57,584.5 28.5 63,900.0 29.2 75,099.1 30.5 Zunyi (遵義) 46,956.3 28.5 53,272.2 26.3 58,607.7 26.8 58,157.6 23.6 Anshun (安順) 13,809.7 8.4 15,376.2 7.6 15,199.4 6.9 17,660.3 7.2 Qiannan (黔南) 7,486.4 4.5 11,656.2 5.8 12,801.9 5.9 15,165.1 6.2 Qiandongnan (黔東南) 6,786.3 4.1 10,428.7 5.2 11,311.6 5.2 13,413.0 5.5 Tongren (銅仁) 6,959.3 4.2 9,732.0 4.8 9,803.2 4.5 12,794.4 5.2 Bijie (畢節) 8,210.3 5.0 12,508.6 6.2 15,708.3 7.2 15,890.1 6.5 Liupanshui (六盤水) 17,844.8 10.8 21,172.3 10.4 20,176.6 9.2 24,638.5 10.0 Qianxinan (黔西南) 7,875.9 4.8 10,539.8 5.2 11,278.1 5.1 12,997.1 5.3 Total customer deposits 164,810.1 100.0 202,270.5 100.0 218,786.8 100.0 245,815.2 100.0

Distribution of Deposits from Customers by Currency

Substantially all of our deposits from customers are Renminbi-denominated deposits. The following table sets forth the distribution of our deposits from customers by currency as of the dates indicated, excluding interest payable.

December 31, June 30, 2016 2017 2018 2019 %of %of %of %of Amount total Amount total Amount total Amount total (in millions of RMB, except percentages)

Renminbi-denominated deposits 164,740.5 100.0 202,257.0 100.0 218,765.7 100.0 245,814.6 100.0 US dollar-denominated deposits 69.6 0.0 13.5 0.0 21.1 0.0 0.6 0.0 Total customer deposits 164,810.1 100.0 202,270.5 100.0 218,786.8 100.0 245,815.2 100.0

– 334 – ASSETS AND LIABILITIES

Distribution of Customer Deposits by Remaining Maturity

The following table sets forth the distribution of our customer deposits, including interest payable, by remaining maturity as of the dates indicated.

June 30, 2019 Due in over Due in less Due in over one year Repayable than three three months up to five Due in over on demand months up to one year years five years Total (in millions of RMB, except percentages) Corporate deposits 111,301.8 2,762.9 25,442.9 28,443.6 219.2 168,170.4 Personal deposits 27,915.1 2,854.4 11,492.7 31,414.2 12.3 73,688.7 Pledged deposits – 623.9 2,479.3 1,876.8 – 4,980.0 Others(1) 274.6 – – – – 274.6 Total customer deposits 139,491.5 6,241.2 39,414.9 61,734.6 231.5 247,113.7

(1) Consists primarily of fiscal deposits, remittances outstanding and temporary deposits, as well as interest payable.

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.

December 31, June 30, 2016 2017 2018 2019 %of %of %of %of Amount total Amount total Amount total Amount total (in millions of RMB, except percentages) Up to RMB500,000 (inclusive) 1,014.5 0.8 1,312.9 0.8 1,670.3 1.1 1,660.9 1.1 Over RMB500,000 to RMB1 million (inclusive) 726.0 0.5 888.5 0.6 1,113.3 0.7 1,077.0 0.6 Over RMB1 million to RMB10 million (inclusive) 6,769.8 5.1 8,755.9 5.5 10,126.3 6.5 11,751.8 6.9 Over RMB10 million to RMB50 million (inclusive) 18,338.1 13.7 22,308.4 14.0 24,724.1 15.9 20,044.7 11.7 Over RMB50 million to RMB100 million (inclusive) 13,848.9 10.4 19,842.7 12.4 18,173.9 11.7 14,891.4 8.7 Over RMB100 million to RMB500 million (inclusive) 45,705.5 34.3 59,637.7 37.5 56,833.4 36.5 64,623.4 37.8 Over RMB500 million 46,998.6 35.2 46,413.5 29.2 42,904.0 27.6 56,763.3 33.2 Total corporate deposits 133,401.4 100.0 159,159.6 100.0 155,545.3 100.0 170,812.5 100.0

– 335 – ASSETS AND LIABILITIES

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.

December 31, June 30,

2016 2017 2018 2019

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

(in millions of RMB, except percentages)

Less than RMB10,000 (inclusive) 2,279.2 7.3 3,098.0 7.2 4,069.6 6.5 3,149.1 4.2 Over RMB10,000 to RMB50,000 (inclusive) 7,319.1 23.5 10,250.4 23.8 14,049.4 22.3 8,220.3 11.0 Over RMB50,000 to RMB100,000 (inclusive) 5,451.5 17.5 8,037.0 18.7 12,816.4 20.3 7,381.3 9.9 Over RMB100,000 to RMB150,000 (inclusive) 2,729.3 8.8 3,653.5 8.5 5,201.0 8.2 7,476.8 10.0 Over RMB150,000 to RMB200,000 (inclusive) 2,161.5 6.9 2,932.8 6.8 5,183.7 8.2 4,470.5 6.0 Over RMB200,000 to RMB500,000 (inclusive) 5,073.3 16.3 7,212.8 16.8 10,562.8 16.7 18,247.4 24.4 Over RMB500,000 to RMB1 million (inclusive) 2,481.4 8.0 3,501.1 8.1 5,110.6 8.1 11,263.9 15.0 Over RMB1 million to RMB5 million (inclusive) 2,539.2 8.2 2,999.5 7.0 4,378.8 6.9 6,987.2 9.3 More than RMB5 million 1,117.9 3.5 1,317.6 3.1 1,736.8 2.8 7,657.1 10.2 Total personal deposits 31,152.4 100.0 43,002.7 100.0 63,109.1 100.0 74,853.6 100.0

Other Components of Our Liabilities

Other components of our liabilities consisted primarily of (i) debt securities issued, (ii) deposits from banks and other financial institutions, (iii) borrowing from the central bank and (iv) financial assets sold under repurchase agreements.

Debt securities issued by us consist primarily of interbank certificates of deposit we issued during the Track Record Period and the tier-two capital bonds and green bonds we issued in 2018. See “Financial Information – Capital Resources – Indebtedness” for details of our debt securities issued. Our debt securities issued amounted to RMB18,297.3 million, RMB49,288.6 million, RMB78,282.4 million and RMB99,913.3 million as of December 31, 2016, 2017 and 2018 and June 30, 2019, respectively. The increase was mainly due to the increased amount of interbank certificates of deposit we issued during the Track Record Period.

– 336 – ASSETS AND LIABILITIES

Our deposits from banks and other financial institutions decreased by 47.2% from RMB15,679.6 million as of December 31, 2016 to RMB8,279.6 million as of December 31, 2017, primarily because we adjusted our liability structure by increasing the issuance of interbank certificate of deposit and borrowings from central bank to meet our financing needs. Our deposits from banks and other financial institutions increased by 20.6% to RMB9,983.8 million as of December 31, 2018, primarily because of our expanded asset scale and broadened financing channels in line with the growth of our interbank businesses and capital needs. Our deposits from banks and other financial institutions decreased by 27.0% to RMB7,290.2 million as of June 30, 2019, primarily as we adjusted our liability structure by increasing the issuance of interbank certificate of deposit to meet our financing needs.

Our borrowing from the central bank increased by 19.4% from RMB1,316.6 million as of December 31, 2016 to RMB1,572.0 million as of December 31, 2017, and further by 79.4% to RMB2,820.2 million as of December 31, 2018, primarily as we received an increased amount of borrowings from the central bank with competitive financing costs for extending credit support to micro and small enterprises as well as private or individual business owners and enterprise owners to better serve the real economy. Our borrowing from the central bank decreased slightly to RMB2,758.6 million as of June 30, 2019, primarily as we reduced the amount of discounted bills with the central banks as of the end of the first half of 2019 according to our capital requirements for operation.

Our financial assets sold under repurchase agreements decreased from RMB7,957.2 million as of December 31, 2016 to nil as of December 31, 2017, primarily as we obtained sufficient capital from other channels including customer deposits. Our financial assets sold under repurchase agreements increased to RMB2,175.3 million as of December 31, 2018, and further increased by 6.4% to RMB2,313.8 million as of June 30, 2019, generally in line with our liquidity needs at the end of 2018 and the first half of 2019.

– 337 – FINANCIAL INFORMATION

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 prospectus. Our historical financial information has been prepared in accordance with IFRS. Capital adequacy ratios discussed in this section are calculated in accordance with applicable CBIRC guidelines and based on our financial statements prepared in accordance with PRC GAAP.

The following discussion and analysis contains forward-looking statements that reflect our current views with respect to future events and financial performance. These statements are based on our assumptions and analysis in light of our experience and perception of historical trends, current conditions and expected future development, as well as other factors we believe are appropriate under the circumstances. However, whether actual outcomes and developments will meet our expectations and predictions depends on a number of risks and uncertainties. In evaluating our business, you should carefully consider the information provided in this prospectus, including, but not limited to, “Risk Factors”, “Forward-Looking Statements”, and “Business”.

OVERVIEW

We are a leading city commercial bank initiated by Guizhou provincial government, with strong support from the local government and our shareholders. As of December 31, 2018, we ranked fourth and fifth, respectively, among all banks with a presence in Guizhou Province in terms of total assets and total deposits generated from this province.

During the Track Record Period, our total assets increased from RMB228,949.3 million as of December 31, 2016 to RMB341,202.9 million as of December 31, 2018, representing a CAGR of 22.1%. As of June 30, 2019, our total assets increased by 7.3% to RMB389,622.4 million. Our net profit increased from RMB1,961.4 million for the year ended December 31, 2016 to RMB2,876.6 million as of December 31, 2018, representing a CAGR of 21.1%. As of June 30, 2019, our total customer deposits and loans and advances to customers amounted to RMB247,113.7 million and RMB164,339.7 million, respectively. In addition, we maintained strong profitability and operating efficiency. In 2018, our net interest margin and net interest spread were 2.82% and 2.66%, respectively, both ranking second among all PRC city commercial banks listed in Hong Kong. As of December 31, 2018, our return on average total assets and return on average equity were both higher than the industry average of all PRC commercial banks.

KEY 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 key factors set out below.

Economic Conditions of the PRC, Guizhou Province and Guiyang

As a city commercial bank headquartered in Guiyang with a presence throughout the Guizhou Province, our financial conditions and results of operations are affected by the economic conditions of the PRC, in particular, Guizhou Province and Guiyang, and the macroeconomic policies implemented by the PRC government.

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From 2014 to 2018, according to the NBS, the PRC’s nominal GDP grew at a CAGR of 8.9%, from RMB64,128 billion in 2014 to RMB90,031 billion in 2018. The PRC’s economic growth has resulted in an 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. According to the CBIRC, total assets of PRC commercial banks in the banking industry reached RMB209,963.8 billion as of December 31, 2018, representing a CAGR of 11.7% from December 31, 2014.

In addition, the GDP for Guizhou Province amounted to RMB1.48 trillion in 2018, representing a CAGR of 12.4% from 2014 to 2018, ranking first among all provinces in China. In addition, in terms of year-on-year GDP growth rate, Guizhou Province was among the top three provinces in the PRC during each of the past eight consecutive years. See “Industry Overview – Economy of Guizhou Province” for more details.

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 rapid expansion. 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. In 2016, 2017 and 2018 and the six months ended June 30, 2019, our net interest income accounted for 98.3%, 101.0%, 94.9% and 91.9% 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 China, interest rates on Renminbi-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 Renminbi-denominated 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 Renminbi-denominated deposits at up 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 Renminbi- denominated time deposits with maturities over one year. Effective from October 24, 2015, the

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PBOC removed the interest rate cap on Renminbi-denominated demand deposits as well as time deposits with 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 adjust its macroeconomic targets from time to time through guiding interest rates.

In addition, market liquidity and competition may lead to fluctuations in the net interest spread for our interbank business. As a result, our net interest income may be adversely impacted and our business, results of operations and financial condition may be affected. See “Risk Factors – Risks Relating to Our Business – Further development of interest rate liberalization, the PBOC’s adjustments to the benchmark interest rate, the deposit insurance program and other regulatory changes in 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 the PBOC. Additionally, PRC city commercial banks are also subject to the supervision and regulation of other regulatory authorities, such as the SAFE, the CSRC, the MOF, the NAO, the NDRC, the SAT and the SAIC and their authorized branches. 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 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.

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 that PRC city commercial banks are permitted to engage in, interests and fees that 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.

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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. For instance, products and services offered by online financial product market places and peer-to-peer lending platforms may materially and negatively affect market demand for personal loans and personal deposit services from us.

Competitive Landscape in the PRC Banking Industry

We compete primarily with commercial banks operating in Guizhou Province, mainly on product offerings and prices, service quality, brand recognition, distribution networks and information technology capabilities. We also mainly face competition from other financial institutions in Guizhou Province.

In recent years, certain commercial banks in China have completed initial public offerings, which have enabled them to obtain more funding 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 services. See “Business – Competition.”

CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

In the application of our accounting policies described in note 2(25) of the Accountants’ Report attached as Appendix I to this prospectus, 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.

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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 uncertainties in estimates and the critical judgments that we have made in the process of applying our accounting policies that have had the most significant effect on the amounts recognized in our financial statements and/or will have in the next twelve months.

Provision for impairment losses on loans and advances to customers, available-for-sale financial assets, held-to-maturity investments and debt securities classified as receivables

The following accounting estimates and judgments apply to the period before January 1, 2018:

We review portfolios of loans and advances to customers and financial investments periodically to assess whether any impairment losses exist and the amount of impairment losses if there is any indication of impairment. Objective evidence for impairment includes observable data indicating that there is a measurable decrease in the estimated future cash flows for loans and advances to customers and financial investments. It also includes observable data indicating adverse changes in the repayment status of the debtors, or change in national or local economic conditions that causes the default in payment.

The impairment loss for loans and advances to customers, and debt investments that is individually assessed for impairment is the net decrease in the estimated discounted future cash flow of the assets. When the financial assets are collectively assessed for impairment, the estimate is based on historical loss experience for assets with credit risk characteristics similar to the financial assets. Historical loss experience is adjusted on the basis of the relevant observable data that reflect current economic conditions and the judgment based on our historical experience. We review the methodology and assumptions used in estimating future cash flows regularly to reduce any difference between loss estimates and actual loss.

The objective evidence of impairment for an available-for-sale equity investment includes significant or prolonged decline in its fair value below its cost. When deciding whether there is significant or prolonged decline in fair value, we will consider the historical fluctuation records of market and debtors’ credit condition, financial position and performance of related industry.

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Measurement of expected credit loss

The following accounting policies apply to the period after January 1, 2018:

The measurement of the expected credit loss allowance for the investment in financial assets and debt instruments measured at amortized cost and fair value through other comprehensive income is an area that requires the use of complex models and significant assumptions about future economic conditions and credit behavior (e.g. the likelihood of customers defaulting and the resulting losses).

A number of significant judgments are required in applying the accounting requirements for measuring expected credit losses, such as:

• determining criteria for significant increase in credit risk;

• choosing appropriate models and assumptions for the measurement of expected credit losses; and

• establishing the number and relative weightings of forward-looking scenarios for each type of product/market and the associated expected credit losses.

In addition, we also consider the following as our critical accounting judgments and estimates, the details of which are set out in note 2 in Accountants’ Report attached as Appendix I to this prospectus:

• fair value of financial instruments;

• the classification of held-to-maturity investments;

• income taxes;

• impairment of non-financial assets;

• depreciation and amortization;

• determination of control over investees; and

• defined benefit plan.

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.

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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. Furthermore, 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, compared with 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. Under the expected credit loss model, it will no longer be necessary for a loss event to occur before an impairment loss is recognized. Instead, an entity is required to recognize and measure either a 12-month expected credit loss or lifetime expected credit loss, depending on the asset and the facts and circumstances, which will result in an early recognition of credit losses. For details of the provision matrix for financial assets, see “Risk Factors – Risks Relating to Our Business – Changes in accounting standards or policies may materially affect our financial condition and results of operations.”

Under the expected credit loss impairment model, the rate of expected credit losses (“Rate of ECL”) is calculated by dividing expected credit loss allowance by the balance of related assets. As of June 30, 2019, the Rate of ECL for our financial assets measured at amortized cost was 2.11%. This type of financial assets mainly includes the loans and advances to customers and financial investments which are measured at amortized cost. As of June 30, 2019, the Rate of ECL for loans and advances to customers which are classified as financial assets measured at amortized cost was 3.59%, and the Rate of ECL for financial investments measured at amortized cost was 1.18%. For more details on the expected credit loss impairment model and provision matrix for financial assets, see note 37(a) to the Accountants’ Report in Appendix I.

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 Discounted bills held within a business model whose objective was to collect contractual cash flows and sell financial assets. In addition, their contractual cash flows were identified as solely payments of principal and interest on the principal amount outstanding. Therefore, these assets were classified as financial assets at fair value through other comprehensive income under IFRS 9.

Financial investments Certain debt instruments were originally classified as either receivables or certain available-for-sale financial assets, and their contractual cash flows were not identified as solely payments of principal and interest on the principal outstanding. Therefore, these assets were classified as financial assets at fair value through profit and loss under IFRS 9.

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In addition, certain financial assets classification under IAS 39 is replaced by the classification under IFRS 9 with the same measurement methods as follows: (i) certain financial assets originally classified as receivables were classified as financial assets at amortized cost under IFRS 9; (ii) certain financial assets originally classified as held-to- maturity investments were classified as financial assets at amortized cost under IFRS 9; and (iii) certain financial assets originally classified as available-for-sale financial assets were classified as a financial asset at fair value through other comprehensive income under IFRS 9.

Except for the changes in relation to impairment and classification and measurement of financial assets, the adoption of IFRS 9 does not result in any significant impact on our financial position and performance compared with the adoption of IAS 39.

To illustrate the difference between IAS 39 and IFRS 9 and their impact on our financial results for 2018, we have prepared financial information for 2018 according to IAS 39 and IFRS 9, respectively.

Year ended December 31, 2018 Prepared Prepared according according to IAS 39 to IFRS 9 (in millions of RMB)

Interest income 14,769.3 14,676.2 Interest expense (6,349.9) (6,349.9) Net interest income 8,419.4 8,326.3

Fee and commission income 108.4 108.4 Fee and commission expense (87.1) (87.1) Net fee and commission income 21.3 21.3

Net trading gains 107.8 151.6 Net gains arising from investment securities 173.0 217.2 Other income 53.3 53.2 Operating income 8,774.8 8,769.6

Operating expenses (3,039.8) (3,039.8) Impairment losses on assets (2,389.2) (2,392.3) Share of losses of associates (34.5) (34.5) Profit before tax 3,311.3 3,303.0

Income tax (428.5) (426.4) Net profit 2,882.8 2,876.6

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To show the impact of IFRS 9 on our financial position as of January 1, 2018, we include here our financial position as of January 1, 2018 prepared in accordance with IFRS 9. See note 2(1) to the Accountants’ Report in Appendix I for more details on the effect of the adjustments arising from the adoption of IFRS 9.

December 31, January 1,

2017 2018

(in millions of RMB)

Assets Cash and deposits with the central bank 49,676.5 49,676.5 Deposits with banks and other financial institutions 1,121.7 1,121.5 Financial assets held under resale agreements 12,948.3 12,939.6 Loans and advances to customers(1) 85,409.5 85,147.2 Financial investments 130,045.5 129,930.2 Investments in associates 129.0 129.0 Property and equipment 1,796.7 1,796.7 Deferred tax assets 2,051.3 2,161.2 Other assets 3,189.9 3,147.9 Total assets 286,368.4 286,049.8 Liabilities Borrowing from the central bank 1,572.0 1,572.0 Deposits from banks and other financial institutions 8,279.6 8,279.6 Financial assets sold under repurchase agreements – – Deposits from customers 202,270.5 202,270.5 Income tax payable 727.8 727.8 Debt securities issued 49,288.6 49,288.6 Other liabilities 3,132.5 3,219.9 Total liabilities 265,271.0 265,358.4 Equity Share capital 11,263.0 11,263.0 Capital reserve 5,027.4 5,027.4 Surplus reserve 846.4 846.4 General reserve 2,190.0 2,190.0 Fair value reserve (139.6) (142.0) Impairment reserve – 2.2 Surplus on remeasurement of net defined benefit liability 7.5 7.6 Retained earnings 1,902.7 1,496.8 Total equity 21,097.4 20,691.4 Total liabilities and total equity 286,368.4 286,049.8

(1) For ease of reference, in this prospectus, unless otherwise indicated, we use the terms “loans and advances to customers,” “loans” and “loans to customers” synonymously.

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In addition, we have adopted IFRS 15 on January 1, 2018. IFRS 15 replaces IAS 18 that we adopted prior to January 1, 2018 regarding recognition, classification and measurement of revenue and cost. Compared with IAS 18, the adoption of IFRS 15 for 2018 does not result in any significant impact on our financial position and performance. See note 2(1) to the Accountants’ Report in Appendix I.

We have adopted IFRS 16 on January 1, 2019, replacing IAS 17 that we adopted prior to January 1, 2019. IFRS 16 primarily affected our accounting as a lessee of the lease for certain office premise which is currently classified as operating leases. Under IFRS 16, we recognized right-of-use assets and lease liabilities on balance sheet for most leases which were classified as operating leases under IAS 17. We decided to apply recognition exemptions to leases with less than 12 months of lease term and leases of low-value assets. We used the modified retrospective approach for the adoption of IFRS 16, and recognized right-of-use assets and lease liabilities with an amount of RMB567.9 million as of January 1, 2019. There was no adjustment to the balance of equity as of January 1, 2019, and we did not restate the comparative information.

The adoption of IFRS 16 for the six months ended June 30, 2019 does not result in any 5% or more increase or decrease in the amounts reported in the financial statements if compared with the adoption of IAS 17, except for (i) a 26.8% increase in other assets for the six months ended June 30, 2019, compared with the result for the same period should we apply IAS 17, together with a 60.5% increase in other liabilities which further caused a 0.3% decrease in the net assets for the same period as compared with the result if we apply IAS 17, as lease asset is measured at amortized cost and lease liabilities are measured with the straight-line method, and (ii) a 5.8% increase in operating costs for the six months ended June 30, 2019, compared with the result for the same period should we apply IAS 17, which led to a 4.5% decrease in the profit before tax, and together with a 9.9% decrease in the income tax which further caused a 3.9% decrease in the net profit for the same period as compared with the result when applying IAS 17, as, under IFRS 16, the impact of leasing business on operating costs derives from the depreciation of leasing assets, which is different under IAS 17. The adoption of IFRS16 did not result in any increase or decrease in current ratio or quick ratio, or any 0.1% increase or decrease in gearing ratio, for the six months ended June 30, 2019, compared with the result for the same period should we apply IAS 17. Therefore, the adoption of IFRS 16 does not have any significant impact on our financial position or results of operations compared with the results should we apply IAS 17.

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SELECTED FINANCIAL DATA

The following table sets forth our results of operations for the periods indicated.

Six Months ended Year ended December 31, June 30,

2016(1) 2017(1) 2018(1) 2018(2) 2018(2) 2019(2) (in millions of RMB)

Interest income 11,211.5 12,968.0 14,769.3 14,676.2 6,960.2 8,600.7 Interest expense (3,281.3) (4,257.1) (6,349.9) (6,349.9) (2,992.5) (3,963.3) Net interest income 7,930.2 8,710.9 8,419.4 8,326.3 3,967.7 4,637.4 ------Fee and commission income 278.6 108.9 108.4 108.4 46.0 108.1 Fee and commission expense (88.6) (118.6) (87.1) (87.1) (38.7) (46.8) ------Net fee and commission income 190.0 (9.7) 21.3 21.3 7.3 61.3

Net trading (losses)/gains (91.3) (110.8) 107.8 151.6 62.9 125.8 Net gains/(losses) arising from investment securities 12.8 (10.2) 173.0 217.2 81.4 208.2 Other operating income 26.8 45.2 53.3 53.2 8.9 12.5 ------Operating income 8,068.5 8,625.4 8,774.8 8,769.6 4,128.2 5,045.2 Operating expenses (2,858.2) (2,919.5) (3,039.8) (3,039.8) (1,355.7) (1,578.8) Impairment losses on assets (2,819.4) (3,058.5) (2,389.2) (2,392.3) (1,060.8) (1,439.7) – Loans and advances to customers (2,444.9) (2,541.3) (2,094.6) (2,071.8) (777.6) (811.1) – Others (374.5) (517.2) (294.6) (320.5) (283.2) (628.6) Share of profits/(losses) of associates 7.0 (5.5) (34.5) (34.5) (3.3) (4.1) Profit before tax 2,397.9 2,641.9 3,311.3 3,303.0 1,708.4 2,022.6 Income tax (436.5) (386.9) (428.5) (426.4) (246.7) (232.9) Net profit 1,961.4 2,255.0 2,882.8 2,876.6 1,461.7 1,789.7

(1) IAS 39 was adopted prior to January 1, 2018. (2) IFRS 9 was adopted from January 1, 2018.

The following table sets forth our key financial indicators for the periods indicated.

Six Months ended Year ended December 31, June 30, 2016(1) 2017(1) 2018(2) 2018(2)(8) 2019(2)(8) (%) Return on average total assets(3) 0.99 0.88 0.92 0.99 0.98 Return on average equity(4) 13.14 12.07 12.36 12.64 13.56 Net interest spread(5) 3.86 3.31 2.66 2.63 2.61 Net interest margin(6) 3.95 3.45 2.82 2.78 2.74 Cost-to-income ratio(7) 32.53 33.05 33.91 31.84 29.84

(1) IAS 39 was adopted prior to January 1, 2018. (2) IFRS 9 was adopted from January 1, 2018.

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(3) Represents net profit for the period as a percentage of average balance of total assets at the beginning and the end of the period. (4) Represents net profit for the period as a percentage of average balance of total equity at the beginning and the end of the period. (5) Calculated as the difference between the daily average yield on total interest-earning assets and the daily average cost of total interest-bearing liabilities. (6) Calculated by dividing net interest income by the daily average balance of total interest-earning assets. (7) Calculated by dividing total operating expenses, excluding tax and surcharges, by total operating income. (8) On an annualized basis.

RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2019

Our net profit increased by 22.4% from RMB1,461.7 million for the six months ended June 30, 2018 to RMB1,789.7 million for the same period in 2019, primarily due to the increase in our net interest income during the same period, in line with our business expansion.

Net Interest Income

Net interest income represents the largest component of our operating income, representing 96.1% and 91.9% of our operating income for the six months ended June 30, 2018 and 2019, respectively.

The following table sets forth our interest income, interest expense and net interest income for the periods indicated.

Six Months ended June 30, 2018 2019 (in millions of RMB)

Interest income 6,960.2 8,600.7 Interest expense (2,992.5) (3,963.3) Net interest income 3,967.7 4,637.4

Our net interest income increased by 16.9% from RMB3,967.7 million for the six months ended June 30, 2018 to RMB4,637.4 million for the same period in 2019 primarily due to a 23.6% increase in interest income, which was partially offset by a 32.4% increase in interest expense.

The following table sets forth the daily 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.

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Six Months ended June 30, 2018 2019 Interest Average Interest Average Average income/ yield/cost(1) Average income/ yield/cost(1) balance expense (%) balance expense (%) (in millions of RMB, except percentages) Assets Loans to customers, total 98,273.2 2,832.2 5.76 155,917.2 4,714.5 6.05 Financial investments(2) 135,402.9 3,584.4 5.29 137,366.5 3,446.4 5.02 – Financial investments at fair value through other comprehensive income 12,271.4 251.7 4.10 19,379.1 397.1 4.10 – Financial investments at amortized cost 123,131.5 3,332.7 5.41 117,987.4 3,049.3 5.17 Cash and deposits with the central bank 32,810.6 247.9 1.51 26,978.4 206.8 1.53 Deposits with banks and other financial institutions 1,277.2 16.7 2.62 3,605.8 63.0 3.49 Financial assets held under resale agreements 17,770.0 279.0 3.14 14,520.0 170.0 2.34 Total interest- earning assets 285,533.9 6,960.2 4.88 338,387.9 8,600.7 5.08 Liabilities Deposits from customers 201,854.2 1,411.8 1.40 216,081.3 1,947.5 1.80 Deposits from banks and other financial institutions 11,051.1 277.8 5.03 6,876.8 126.3 3.67 Borrowing from the central bank 1,416.4 22.1 3.12 2,731.6 39.1 2.86 Financial assets sold under repurchase agreements – – – 6,238.5 74.7 2.39 Placements from banks and other financial institutions – – – 34.8 0.9 5.17 Debt securities issued 52,448.4 1,280.8 4.88 89,021.7 1,774.8 3.99 Total interest- bearing liabilities 266,770.1 2,992.5 2.24 320,984.7 3,963.3 2.47 Net interest income 3,967.7 4,637.4 Net interest spread(3) 2.63 2.61 Net interest margin(4) 2.78 2.74

(1) Calculated by dividing annualized interest income or expense by average balance. (2) In 2016 and 2017, financial investments consists of financial investments measured at fair value through profit or loss, financial investments classified as available-for-sale, financial investments classified as held-to- maturity, as well as investments classified as receivables. Starting from January 1, 2018, according to IFRS 9, financial investments consist of financial investments measured at amortized costs, financial investments measured at fair value through other comprehensive income and financial investments measured at fair value through profit or loss. See “Assets and Liabilities – Assets – Financial Investments” for further details.

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(3) Calculated as the difference between the daily average yield on total interest-earning assets and the daily average cost of total interest-bearing liabilities. (4) Calculated by dividing net interest income by the daily average balance of total interest-earning assets.

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.

Six Months ended June 30,

2018 vs. 2019

Increase/(decrease) due to Net increase/ Volume(1) Rate(2) (decrease)(3) (in millions of RMB)

Interest-earning assets Gross loans and advances to customers 1,660.1 222.2 1,882.3 Financial investments – Measured at fair value through other comprehensive income 145.7 (0.3) 145.4 – Measured at amortized cost (139.1) (144.3) (283.4) Cash and deposits with the central bank (44.0) 2.9 (41.1) Deposits with banks and other financial institutions 30.5 15.8 46.3 Financial assets held under resale agreements (51.0) (58.0) (109.0) Changes in interest income 1,602.2 38.3 1,640.5

Interest-bearing liabilities Deposits from customers 99.6 436.1 535.7 Deposits from banks and other financial institutions (105.0) (46.5) (151.5) Borrowing from the central bank 20.5 (3.5) 17.0 Financial assets sold under repurchase agreements – 74.7 74.7 Placements from banks and other financial institutions – 0.9 0.9 Debt securities issued 892.4 (398.4) 494.0 Changes in interest expense 907.5 63.3 970.8

Changes in net interest income 694.7 (25.0) 669.7

(1) Represents the daily average balance for the period minus the daily average balance for the previous period, multiplied by the average yield/cost for the period. (2) Represents the annualized average yield/cost for the period minus the average yield/cost for the previous period, multiplied by the daily average balance for the previous period. (3) Represents interest income/expense for the period minus interest income/expense for the previous period.

– 351 – FINANCIAL INFORMATION

Interest Income

The following table sets forth a breakdown of our interest income for the periods indicated.

Six Months ended June 30,

2018 2019

Amount % of total Amount % of total

(in millions of RMB, except percentages)

Interest income from Loans to customers 2,832.2 40.7 4,714.5 54.7 – Corporate loans 2,442.3 35.1 4,046.5 47.0 – Personal loans 314.9 4.5 604.6 7.0 – Discounted bills 75.0 1.1 63.4 0.7 Financial investments 3,584.4 51.5 3,446.4 40.1 Cash and deposits with the central bank 247.9 3.6 206.8 2.5 Financial assets held under resale agreements 279.0 4.0 170.0 2.0 Deposits with banks and other financial institutions 16.7 0.2 63.0 0.7 Total 6,960.2 100.0 8,600.7 100.0

Our interest income increased by 23.6% from RMB6,960.2 million for the six months ended June 30, 2018 to RMB8,600.7 million for the same period in 2019, primarily due to (i) an 18.5% increase in the average balance of interest-earning assets from RMB285,533.9 million for the six months ended June 30, 2018 to RMB338,387.9 million for the same period in 2019, and (ii) an increase in the average yield on interest-earning assets from 4.88% for the six months ended June 30, 2018 to 5.08% for the same period in 2019. The increase in the average balance of interest-earning assets was primarily attributable to the increases in loans to customers, mainly corporate loans, and financial investments. The increase in the average yield on interest-earning assets was primarily attributable to the increase in the average yields on our loans to customers and deposits with banks and other financial institutions, primarily due to the general increase in the market interest rate and the increased proportion of time deposits with banks and other financial institutions.

Interest Income from Loans to Customers

During the Track Record Period, interest income from our loans to customers represented 40.7% and 54.8% of our interest income for the six months ended June 30, 2018 and 2019, respectively.

– 352 – FINANCIAL INFORMATION

The following table sets forth the average balance, interest income and average yield for each component of our total loans and advances to customers for the periods indicated.

Six Months ended June 30,

2018 2019

Average Average Average Interest yield(1) Average Interest yield(1) balance income (%) balance income (%)

(in millions of RMB, except percentages)

Corporate loans 82,498.9 2,442.3 5.92 130,245.4 4,046.5 6.21 Personal loans 12,057.3 314.9 5.22 21,801.2 604.6 5.55 Discounted bills 3,717.0 75.0 4.04 3,870.6 63.4 3.28 Total loans and advances to customers 98,273.2 2,832.2 5.76 155,917.2 4,714.5 6.05

(1) Calculated by dividing annualized interest income by average balance.

Our interest income from loans and advances to customers increased by 66.5% from RMB2,832.2 million for the six months ended June 30, 2018 to RMB4,714.5 million for the same period in 2019, primarily due to (i) a 58.7% increase in the average balance of total loans and advances to customers from RMB98,273.2 million for the six months ended June 30, 2018 to RMB155,917.2 million for the same period in 2019, and (ii) an increase in the average yield on total loans and advances to customers from 5.76% for the six months ended June 30, 2018 to 6.05% for the same period in 2019. The increase in the average balance of loans and advances to customers was primarily due to the continued expansion of our corporate banking business and personal banking business. The increase in the average yield on loans and advances to customers was primarily attributable to the general increase in the market interest rate.

Corporate Loans

Our interest income from corporate loans increased by 65.7% from RMB2,442.3 million for the six months ended June 30, 2018 to RMB4,046.5 million for the same period in 2019, primarily due to (i) a 36.7% increase in the average balance of our corporate loans from RMB82,498.9 million for the six months ended June 30, 2018 to RMB130,245.4 million for the same period in 2019, and (ii) an increase in the average yield on our corporate loans from 5.92% for the six months ended June 30, 2018 to 6.21% for the same period in 2019. The increase in the average balance of our corporate loans was primarily attributable to the increase in loans to government-affiliated entities providing infrastructure development and construction services and to micro and small enterprises as well as private or individual business owners to better serve the local economy. The increase in the average yield on corporate loans was primarily due to the increased market interest rate.

– 353 – FINANCIAL INFORMATION

Personal Loans

Our interest income from personal loans increased by 92.0% from RMB314.9 million for the six months ended June 30, 2018 to RMB604.6 million for the same period in 2019 primarily due to (i) a 47.7% increase in the average balance of our personal loans from RMB12,057.3 million for the six months ended June 30, 2018 to RMB21,801.2 million for the same period in 2019, and (ii) an increase in the average yield on our personal loans from 5.22% for the six months ended June 30, 2018 to 5.55% for the same period in 2019. The increase in the average balance of personal loans was primarily due to our enhanced efforts to develop and market our retail banking business and our offering of new and attractive loan products to retail customers. The increase in the average yield on our personal loans was mainly attributable to the increased market interest rate.

Discounted Bills

Our interest income from discounted bills decreased by 15.5% from RMB75.0 million for the six months ended June 30, 2018 to RMB63.4 million for the same period in 2019, primarily due to a decrease in the average yield on our discounted bills from 4.04% for the six months ended June 30, 2018 to 3.28% for the same period in 2019, which was partially offset by a 4.1% increase in the average balance of our discounted bills from RMB3,717.0 million for the six months ended June 30, 2018 to RMB3,870.6 million for the same period in 2019. The decrease in the average yield on discounted bills was primarily due to the decreased market rates for discounted bills. The increase in the average balance of our discounted bills reflected our asset allocation strategy based on our loan balances and market conditions.

Interest Income from Financial Investments

Our interest income from financial investments decreased slightly from RMB3,584.4 million for the six months ended June 30, 2018 to RMB3,446.4 million for the same period in 2019, primarily due to a decrease in the average yield on our financial investments from 5.29% for the six months ended June 30, 2018 to 5.02% for the same period in 2019, which was partially offset by a 1.5% increase in the average balance of our financial investments from RMB135,402.9 million for the six months ended June 30, 2018 to RMB137,366.5 million for the same period in 2019. The decrease in the average yield on our financial investments was primarily due to the gradual maturity of certain investments in asset management plans which generally have higher yields. The increase in the average balance of our financial investments was primarily due to our increased investments in debt securities.

The following table sets forth a breakdown of our interest income from financial investments by type for the periods indicated. In our SPV investments, only investments in trust plans and asset management plans generate interest income.

– 354 – FINANCIAL INFORMATION

Six Months ended June 30,

2018 2019

Average Average Interest %of yield(1) Interest %of yield(1) income total (%) income total (%)

(in millions of RMB, except percentages)

SPV investments(2) 2,529.1 70.6 6.43 2,151.7 62.4 6.20 Investments in debt securities 1,055.3 29.4 3.72 1,294.7 37.6 3.81 Total 3,584.4 100.0 5.29 3,446.4 100.0 5.02

(1) Calculated by dividing our annualized interest income from the corresponding assets by the average balance of these assets. (2) Consist exclusively of investments in trust plans and asset management plans.

In the six months ended June 30, 2018 and 2019, interest income from our investments in trust plans and asset management plans represented 70.6% and 62.4%, respectively, of our total interest income from our financial investment business. The average yield on our SPV investments decreased slightly from 6.43% for the six months ended June 30, 2018 to 6.20% for the same period in 2019, principally due to the gradual maturity of certain investments in asset management plans which generally have higher yields.

In the six months ended June 30, 2018 and 2019, our interest income from investments in debt securities represented 29.4% and 37.6%, respectively, of our total interest income from financial investment business. The average yield on our investments in debt securities increased from 3.72% for the six months ended June 30, 2018 to 3.81% for the same period in 2019, primarily due to (i) our increased investments in bonds issued by PRC policy banks and corporate issuers with relatively high yields in the first half of 2019 and (ii) the impact from the increased interest rates in the bond market.

Interest Income from Financial Assets Held Under Resale Agreements

Our interest income from financial assets held under resale agreements decreased by 39.1% from RMB279.0 million for the six months ended June 30, 2018 to RMB170.0 million for the same period in 2019, primarily due to (i) a 18.3% decrease in the average balance of our financial assets held under resale agreements from RMB17,770.0 million for the six months ended June 30, 2018 to RMB14,520.0 million for the same period in 2019, reflecting our asset allocation strategy taking into account our liquidity needs and market conditions, and (ii) a decrease in the average yield on our financial assets held under resale agreements from 3.14% for the six months ended June 30, 2018 to 2.34% for the same period in 2019, primarily due to the decrease in the money market interest rate.

– 355 – FINANCIAL INFORMATION

Interest Income from Cash and Balances with the Central Bank

Our cash and balances with the central bank consist primarily of cash, statutory deposit reserves, surplus deposit reserves and fiscal deposits with the PBOC. Statutory deposit reserves represent the minimum level of deposits that we are required to maintain at the PBOC, calculated as a percentage of the average daily 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 the central bank decreased by 16.6% from RMB247.9 million for the six months ended June 30, 2018 to RMB206.8 million for the same period in 2019, primarily due to a 17.8% decrease in the average balance of our cash and balances with the central bank from RMB32,810.6 million for the six months ended June 30, 2018 to RMB26,978.4 million for the same period in 2019, which was partially offset by a slight increase in the average yield on cash and balances with the central bank from 1.51% for the six months ended June 30, 2018 to 1.53% for the same period in 2019. The decrease in the average balance of our cash and balances with the central bank was mainly attributable to the decrease in the reserve ratio by the PBOC over the period.

Interest Income from Deposits with Banks and Other Financial Institutions

Interest income from deposits with banks and other financial institutions represented 0.2% and 0.7% of our interest income for the six months ended June 30, 2018 and 2019, respectively.

Our interest income from deposits with banks and other financial institutions increased significantly from RMB16.7 million for the six months ended June 30, 2018 to RMB63.0 million for the same period in 2019, primarily due to (i) a significant increase in the average balance of our deposits with banks and other financial institutions from RMB1,277.2 million for the six months ended June 30, 2018 to RMB3,605.8 million for the same period in 2019, and (ii) an increase in the average yield on our deposits with banks and other financial institutions from 2.62% for the six months ended June 30, 2018 to 3.49% for the same period in 2019. The increase in the average balance of our deposits with banks and other financial institutions was in line with our asset allocation decision to increase our deposits with banks and other financial institutions which offer relatively high deposit rates. The increase in the average yield on our deposits with banks and other financial institutions was primarily attributable to our increased proportion of time deposits with banks and other financial institutions.

– 356 – FINANCIAL INFORMATION

Interest Expense

The following table sets forth a breakdown of our interest expense for the periods indicated.

Six Months ended June 30,

2018 2019

Amount % of total Amount % of total

(in millions of RMB, except percentages)

Interest expense on Debt securities issued 1,280.8 42.8 1,774.8 44.8 Customer deposits 1,411.8 47.2 1,947.5 49.1 Deposits from banks and other financial institutions 277.8 9.3 126.3 3.2 Borrowing from the central bank 22.1 0.7 39.1 1.0 Placements from banks and other financial institutions – – 0.9 0.0 Financial assets sold under repurchase agreements – – 74.7 1.9 Total 2,992.5 100.0 3,963.3 100.0

Our interest expense increased by 32.4% from RMB2,992.5 million for the six months ended June 30, 2018 to RMB3,963.3 million for the same period in 2019, primarily due to (i) a 20.3% increase in the average balance of interest-bearing liabilities from RMB266,770.1 million for the six months ended June 30, 2018 to RMB320,984.7 million for the same period in 2019, and (ii) an increase in the average cost of interest-bearing liabilities from 2.24% for the six months ended June 30, 2018 to 2.47% for the same period in 2019. The increase in the average balance of interest-bearing liabilities was primarily attributable to the increases in the average balance of debt securities issued by us, customer deposits and financial assets sold under repurchase agreements, which were in line with our overall business growth. The increase in the average cost of interest-bearing liabilities was primarily attributable to (i) the increased market interest rate caused by intense market competition, and (ii) our efforts in enhancing the stableness of our source of funding through the increased proportion of time deposits with relatively high average costs.

Interest Expense on Customer Deposits

During the Track Record Period, customer deposits were an important source of our funding. Our interest expense on customer deposits accounted for 47.2% and 49.1% of our total interest expense for the six months ended June 30, 2018 and 2019, respectively.

– 357 – FINANCIAL INFORMATION

The following table sets forth the average balance, interest expense and average cost of our customer deposits by product type for the periods indicated.

Six Months ended June 30, 2018 2019 Average Interest Average Average Interest Average balance expense cost (%) balance expense cost (%) (in millions of RMB, except percentages) Corporate deposits Time 32,949.0 407.5 2.47 44,342.0 663.1 2.99 Demand 116,913.1 424.0 0.73 104,000.8 416.9 0.80 Subtotals 149,862.1 831.5 1.11 148,342.8 1,080.0 1.46 Personal deposits Time 28,072.0 526.4 3.75 40,761.6 788.6 3.87 Demand 23,920.1 53.9 0.45 26,976.9 78.9 0.58 Subtotal 51,992.1 580.3 2.23 67,738.5 867.5 2.56 Total customer deposits 201,854.2 1,411.8 1.40 216,081.3 1,947.5 1.80

Our interest expense on customer deposits increased by 37.9% from RMB1,411.8 million for the six months ended June 30, 2018 to RMB1,947.5 million for the same period in 2019, primarily due to (i) an increase in our average cost of customer deposits from 1.40% for the six months ended June 30, 2018 to 1.80% for the same period in 2019, and (ii) a 7.0% increase in our average balance of customer deposits from RMB201,854.2 million for the six months ended June 30, 2018 to RMB216,081.3 million for the same period in 2019. The increase in our average cost of customer deposits was primarily due to (i) the continuous impact of interest rate liberalization, and (ii) our ability to actively market and attract time deposits for a stable funding source, which generally have higher average cost. The increase in our average balance of customer deposits was due to the expansion of our corporate banking and retail banking businesses.

Interest Expense on Debt Securities Issued

Our interest expense on debt securities issued increased by 38.6% from RMB1,280.8 million for the six months ended June 30, 2018 to RMB1,774.8 million for the same period in 2019, primarily due to a 69.7% increase in the average balance of debt securities issued from RMB52,448.4 million for the six months ended June 30, 2018 to RMB89,021.7 million for the same period in 2019, which was partially offset by a decrease in the average cost of debt securities issued from 4.88% for the six months ended June 30, 2018 to 3.99% for the same period in 2019. The increase in the average balance of debt securities issued was primarily caused by (i) the increased interbank certificates of deposit we issued to obtain a stable source of funding for our business operations and development, and (ii) our efforts to diversify our funding source by issuing green financial bonds and tier-two capital bonds in the same period in 2019. The decrease in our average cost of debt securities issued was primarily due to an increase in interbank certificates of deposit issued by us which have comparatively low interest rates.

– 358 – FINANCIAL INFORMATION

Interest Expense on Deposits from Banks and Other Financial Institutions

Our interest expense on deposits from banks and other financial institutions decreased by 54.5% from RMB277.8 million for the six months ended June 30, 2018 to RMB126.3 million for the same period in 2019, primarily due to (i) a decrease in the average cost of deposits from banks and other financial institutions from 5.03% for the six months ended June 30, 2018 to 3.67% for the same period in 2019, and (ii) a 37.8% decrease in the average balance of deposits from banks and other financial institutions from RMB11,051.1 million for the six months ended June 30, 2018 to RMB6,876.8 million for the same period in 2019. The decrease in the average balance of deposits from banks and other financial institutions was mainly due to the gradual maturity of existing deposits from banks and other financial institutions, and our increased issue of interbank certificates of deposits in lieu of interbank deposits over the period. The decrease in the average cost of deposits from banks and other financial institutions was mainly due to a decrease in interbank market interest rate.

Interest Expense on Borrowing from the Central Bank

Our interest expense on borrowing from the central bank increased by 76.9% from RMB22.1 million for the six months ended June 30, 2018 to RMB39.1 million for the same period in 2019, primarily due to a 92.9% increase in the average balance of borrowing from the central bank from RMB1,416.4 million for the six months ended June 30, 2018 to RMB2,731.6 million for the same period in 2019, mainly reflecting the increased supports from the central bank for us to lend to micro and small enterprises as well as private or individual business owners to better serve the local economy. This increase was partially offset by a slight decrease in the average cost of borrowing from the central bank from 3.12% for the six months ended June 30, 2018 to 2.86% for the same period in 2019, mainly as a result of the more supportive policy of the central bank.

Interest Expense on Placements from Banks and Other Financial Institutions

Our interest expense on placements from banks and other financial institutions increased from nil for the six months ended June 30, 2018 to RMB0.9 million for the six months ended June 30, 2019, mainly due to the placement from one policy bank which was lent to micro and small enterprises.

Interest Expense on Financial Assets Sold Under Repurchase Agreements

Our interest expense on financial assets sold under repurchase agreements increased from nil for the six months ended June 30, 2018 to RMB74.7 million for the same period in 2019, mainly due to our liquidity management needs.

– 359 – FINANCIAL INFORMATION

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 remained relatively stable at 2.63% and 2.61% for the six months ended June 30, 2018 and 2019, respectively. Our net interest margin decreased slightly from 2.78% for the six months ended June 30, 2018 to 2.74% for the same period in 2019, primarily as our average cost of interest-bearing liabilities increased from 2.24% for the six months ended June 30, 2018 to 2.47% for the same period in 2019, mainly due to (i) our introduction of new deposit products with relatively high costs and (ii) our ability to actively market and attract time deposits for a stable funding source, which generally have higher average costs.

Net Fee and Commission Income

The following table sets forth the principal components of our net fee and commission income for the periods indicated.

Six Months ended June 30, 2018 2019 (in millions of RMB)

Agency business income 10.1 63.0 Bank card business income 15.7 13.3 Settlement and clearing service income 7.7 14.0 Guarantee commitment business income 3.9 16.4 Consultancy business income 8.6 1.4 Fee and commission income 46.0 108.1

Bank card fees (36.6) (37.5) Other fee and commission expense (2.1) (9.3) Fee and commission expense (38.7) (46.8) Net fee and commission income 7.3 61.3

Our net fee and commission income increased significantly from RMB7.3 million for the six months ended June 30, 2018 to RMB61.3 million for the same period in 2019, mainly due to a significant increase in the fee and commission from RMB46.0 million for the six months ended June 30, 2018 to RMB108.1 million for the same period in 2019, primarily due to our increased agency business income as a result of our increased issuance of wealth management products. Our fee and commission expense increased by 20.9% from RMB38.7 million for the six months ended June 30, 2018 to RMB46.8 million for the six months ended June 30, 2019, primarily due to an increase in other fee and commission expense, as a result of the increased expenses paid to third parties for collateral management.

– 360 – FINANCIAL INFORMATION

Net Trading Gains/(Losses)

Our net trading gains increased from RMB62.9 million for the six months ended June 30, 2018 to RMB125.8 million for the same period in 2019, primarily due to an increase in the fair value of our investments in debt securities for trading purposes.

Net Gains Arising from Investments Securities

Our net gains arising from investments securities increased significantly from RMB81.4 million for the six months ended June 30, 2018 to RMB208.2 million for the same period in 2019, primarily due to our efforts to expand our financial markets business, in particular, our investments in certain debt securities and mutual funds.

Other Components of Our Operating Income

Other components of our operating income consisted primarily of government grants and subsidies for our contribution to local development. Other components of our operating income were RMB8.9 million and RMB12.5 million in the six months ended June 30, 2018 and 2019, respectively, representing 0.2% and 0.2% of our operating income, respectively.

Operating Expenses

The following table sets forth the principal components of our total operating expenses for the periods indicated.

Six Months ended June 30, 2018 2019 (in millions of RMB, except percentage)

Staff costs 814.7 957.4 Depreciation and amortization 161.9 254.3 Office expenses 162.8 157.2 Rental and property management expenses 74.3 16.0 Tax and surcharges 41.3 73.4 Others(1) 100.7 120.5 Total operating expenses 1,355.7 1,578.8

Cost-to-income ratio(2) 31.84% 29.84%

(1) Consist of various sundry expenditures, such as fuel fees, electronic equipment operating costs, committee fees and security fees, and other repairs and maintenance expenses. (2) Calculated by dividing total operating expenses, excluding tax and surcharges, by total operating income.

– 361 – FINANCIAL INFORMATION

Our operating expenses increased by 16.5% from RMB1,355.7 million for the six months ended June 30, 2018 to RMB1,578.8 million for the same period in 2019, primarily due to increases in our staff costs and depreciation and amortization.

Our cost-to-income ratio (excluding tax and surcharges) was 31.84% and 29.84% for the six months ended June 30, 2018 and 2019, respectively. The slight decrease in our cost-to-income ratio was primarily because the growth of our operating income outpaced the growth of our operating expenses (excluding tax and surcharges).

Staff Costs

During the Track Record Period, staff costs were the largest component of our operating expenses, representing 60.6% and 60.1% of our total operating expenses for the six months ended June 30, 2018 and 2019, respectively.

The following table sets forth the components of our staff costs for the periods indicated.

Six Months ended June 30, 2018 2019 (in millions of RMB)

Salaries, bonuses and allowances 538.1 650.7 Social insurance 127.7 163.6 Staff welfare 61.8 62.7 Housing funds 38.8 39.2 Supplementary retirement benefits 29.7 25.2 Staff education expenses and labor union fees 18.6 16.0 Total staff costs 814.7 957.4

Our staff costs increased by 17.5% from RMB814.7 million for the six months ended June 30, 2018 to RMB957.4 million for the same period in 2019, primarily due to increases in salaries, bonuses and allowances and social insurance as we recruited more employees, in line with our growing business.

Office Expenses

Our office expenses consist primarily of business marketing and meeting expenses, marketing and advertisement expenses, as well as fees associated with general maintenance of our offices and daily operation. Our office expenses decreased by 3.4% from RMB162.8 million for the six months ended June 30, 2018 to RMB157.2 million for the same period in 2019, primarily reflecting our effective measures to control business expenses.

– 362 – FINANCIAL INFORMATION

Depreciation and Amortization

Our depreciation and amortization consists primarily of depreciation of our property and equipment and amortization of renovation expenses and software development expenses. Our depreciation and amortization increased by 57.1% from RMB161.9 million for the six months ended June 30, 2018 to RMB254.3 million for the same period in 2019, primarily as a result of applying IFRS 16, starting from January 1, 2019 to leases which were previously classified as operating leases and were not recognized in our statements of financial position.

Rental and Property Management Fees

Our rental and property management fees decreased by 78.5% from RMB74.3 million for the six months ended June 30, 2018 to RMB16.0 million for the six months ended June 30, 2019, primarily due to the application of IFRS 16, starting from January 1, 2019, under which leases previously being classified as operating leases were not recognized in our statements of financial position.

Taxes and Surcharges

Our taxes and surcharges increased by 77.7% from RMB41.3 million for the six months ended June 30, 2018 to RMB73.4 million for the same period in 2019, primarily due to (i) an increase in our operating income, and (ii) the increased deed tax arising from purchasing properties.

Other General Operational and Administrative Expenses

Our other general operational and administrative expenses primarily consist of various sundry expenditures, such as fuel fees, electronic equipment operating costs, committee fees and security fees, and other repairs and maintenance expenses. Our other general operational and administrative expenses increased by 19.7% from RMB100.7 million for the six months ended June 30, 2018 to RMB120.5 million for the same period in 2019, primarily in line with our business expansion.

Impairment Losses on Assets

The following table sets forth the principal components of our impairment losses or reversals on assets for the periods indicated.

Six Months ended June 30, 2018 2019 (in millions of RMB) Impairment losses/(reversals) on assets Loans and advances to customers 777.6 811.1 Credit commitments 23.3 302.8 Deposits with banks and other financial institutions (0.1) 147.9 Financial investments 252.0 137.7 Financial assets held under resale agreements (5.7) (0.5) Others 13.7 40.7 Total 1,060.8 1,439.7

– 363 – FINANCIAL INFORMATION

Impairment losses on assets increased by 35.7% from RMB1,060.8 million for the six months ended June 30, 2018 to RMB1,439.7 million for the same period in 2019, primarily due to (i) a substantial increase in our credit commitments primarily due to (a) our increased off-balance sheet commitments, mainly the bank acceptances and letters of credit business, and (b) the impact of the “expected credit loss” model under IFRS 9 and (ii) the substantial increase in our impairment losses on deposits with banks and other financial institutions due to our deposits with Baoshang Bank and the significantly increased credit risk we expected in the future as a result of the government takeover of Baoshang Bank in May 2019, which was partially offset by a 45.4% decrease in impairment losses on financial investments, due to our reduced investments in trust plans and asset management plans as a result of the stricter regulatory policies regulating such investments. See “Summary – Recent Development” and “Risk Factors – Risks relating to Our Business – Our allowance for impairment losses on loans and advances to customers and deposits with banks and other financial institutions may not be sufficient to cover actual losses on our assets in the future” for further discussions.

Share of Profits/(Losses) of Associates

Our share of losses of associates increased by 24.2% from RMB3.3 million for the six months ended June 30, 2018 to RMB4.1 million for the same period in 2019, primarily attributable to the increased operating losses of the village and township banks in which we invested.

Income Tax

The following table sets forth the reconciliation between the income tax calculated at the statutory income tax rate applicable to our profit before tax and our actual income tax for the periods indicated.

Six Months ended June 30, 2018 2019 (in millions of RMB)

Profit before tax 1,708.4 2,022.6 Income tax calculated at applicable statutory tax rate of 25% 427.1 505.7 Non-deductible expenses 19.6 13.1 Non-taxable income(1) (200.0) (285.9) Income tax 246.7 232.9

(1) Non-taxable income mainly represents interest income from PRC government bonds, which is non-taxable in accordance with PRC tax regulations.

– 364 – FINANCIAL INFORMATION

Our income tax expenses decreased by 5.6% from RMB246.7 million for the six months ended June 30, 2018 to RMB232.9 million for the same period in 2019, mainly due to our increased tax-free interest income from treasury bonds, local government bonds and money market funds.

Our effective income tax rate decreased from 14.4% in the six months ended June 30, 2018 to 11.5% in the six months ended June 30, 2019, primarily due to our increased tax-free interest income from treasury bonds, local government bonds and monetary funds.

Net Profit

Primarily as a result of the foregoing factors, our net profit increased by 22.4% from RMB1,461.7 million for the six months ended June 30, 2018 to RMB1,789.7 million for the same period in 2019.

RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2016, 2017 AND 2018

We have adopted IFRS 9 since January 1, 2018 to replace IAS 39. According to IFRS 9, our net profit in 2018 amounted to RMB2,876.6 million, which was slightly less than the result for the same period should we apply IAS 39. See “– Critical Accounting Estimates and Judgments – Impact of New Accounting Policies” for details on the differences between IAS 39 and IFRS 9 and the impact of adopting IFRS 9 on our results of operations.

Assuming we still apply IAS 39 in 2018, our net profit in 2018 would be RMB2,882.8 million, representing an increase of 27.8% from RMB2,255.0 million in 2017, primarily due to (i) the decrease in impairment losses on assets as a result of our improved asset quality and decreased allowance recognized and, to a lesser extent, (ii) the changes from net trading losses and net losses arising from investment securities in 2017 to net trading gains and net gains arising from investment securities in 2018, respectively, mainly reflecting the increased income from our non-interest-earning assets. Our net profit increased by 15.0% from RMB1,961.4 million in 2016 to RMB2,255.0 million in 2017, primarily due to the increase in our net interest income for the same periods, in line with our business expansion.

– 365 – FINANCIAL INFORMATION

Net Interest Income

Net interest income was the largest component of our operating income, representing 98.3%, 101.0% and 94.9% of our operating income in 2016, 2017 and 2018, respectively.

The following table sets forth our interest income, interest expense and net interest income for the periods indicated.

Year ended December 31,

2016(1) 2017(1) 2018(1) 2018(2) (in millions of RMB)

Interest income 11,211.5 12,968.0 14,769.3 14,676.2 Interest expense (3,281.3) (4,257.1) (6,349.9) (6,349.9) Net interest income 7,930.2 8,710.9 8,419.4 8,326.3

(1) IAS 39 was adopted prior to January 1, 2018. (2) IFRS 9 was adopted from January 1, 2018.

According to IFRS 9, our net interest income in 2018 amounted to RMB8,326.3 million, which was slightly less than the result for the same period should we apply IAS 39, mainly because the interest income from financial investments measured at fair value through profit or loss under IAS 39 was recognized in “net gains arising from investment securities” rather than “interest income” according to IFRS 9.

Assuming we still apply IAS 39 in 2018, our net interest income in 2018 would amount to RMB8,419.4 million, representing a slight decrease from RMB8,710.9 million in 2017, attributable to a 49.2% increase in interest expense, which was partially offset by a 13.9% increase in interest income. Our net interest income increased by 9.8% from RMB7,930.2 million in 2016 to RMB8,710.9 million in 2017 with a 15.7% increase in interest income, which was partially offset by a 29.7% increase in interest expense.

– 366 – 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.

Year ended December 31,

2016(1) 2017(1) 2018(1) 2018(2) Interest Average Interest Average Interest Average Interest Average Average income/ yield/cost(3) Average income/ yield/cost(3) Average income/ yield/cost(3) Average income/ yield/cost(3) balance expense (%) balance expense (%) balance expense (%) balance expense (%) (in millions of RMB, except percentages) Assets

Gross loans and advances INFORMATION FINANCIAL to customers 61,533.2 3,895.6 6.33 78,030.8 4,688.7 6.01 109,698.8 6,504.5 5.93 109,698.8 6,504.5 5.93 Financial investments(4) 94,501.8 6,395.2 6.77 123,933.4 7,145.3 5.77 140,755.2 7,281.75.17 137,126.0 7,188.6 5.24 – Financial investments measured at fair value through profit or loss 2,653.7 100.1 3.77 3,769.5 130.7 3.47 3,455.3 118.13.42 N/A N/A N/A – Available-for-sale financial assets 27,532.3 961.6 3.49 37,207.5 1,285.2 3.45 15,099.5 570.73.78 N/A N/A N/A 6 – 367 – – Held-to-maturity investments 2,999.1 164.1 5.47 6,364.1 295.3 4.64 45,870.6 1,639.13.57 N/A N/A N/A – Debt securities classified as receivables 61,316.7 5,169.4 8.43 76,592.3 5,434.1 7.09 76,329.8 4,953.86.49 N/A N/A N/A – Financial investments measured at fair value through other comprehensive income N/A N/A N/A N/A N/A N/A N/A N/AN/A 14,232.1 545.3 3.83 – Financial investments measured at amortized cost N/A N/A N/A N/A N/A N/A N/A N/AN/A 122,893.9 6,643.3 5.41 Cash and deposits with the central bank 24,068.9 380.1 1.58 28,671.2 438.6 1.53 31,013.4 472.91.52 31,013.4 472.9 1.52 Deposits with banks and other financial institutions 5,746.9 246.6 4.29 4,454.3 151.7 3.41 1,343.6 37.02.75 1,343.6 37.0 2.75 Financial assets held under resale agreements 14,770.4 294.0 1.99 17,481.8 543.7 3.11 16,221.6 473.22.92 16,221.6 473.2 2.92 Total interest-earning assets 200,621.2 11,211.5 5.59 252,571.5 12,968.0 5.13 299,032.6 14,769.3 4.94 295,403.4 14,676.2 4.97 Year ended December 31,

2016(1) 2017(1) 2018(1) 2018(2) Interest Average Interest Average Interest Average Interest Average Average income/ yield/cost(3) Average income/ yield/cost(3) Average income/ yield/cost(3) Average income/ yield/cost(3) balance expense (%) balance expense (%) balance expense (%) balance expense (%) (in millions of RMB, except percentages) Liabilities Deposits from customers 150,046.8 1,731.4 1.15 185,915.9 2,153.3 1.16 203,801.7 2,982.5 1.46 203,801.7 2,982.5 1.46 Debt securities issued 14,806.5 498.4 3.37 36,198.7 1,534.1 4.24 58,393.2 2,784.2 4.77 58,393.2 2,784.2 4.77 Deposits from banks and other financial

institutions 21,143.8 964.9 4.56 9,009.1 495.2 5.50 10,134.0 520.3 5.13 10,134.0 520.3 INFORMATION FINANCIAL 5.13 Borrowing from the central bank 1,065.6 32.7 3.07 948.2 26.4 2.78 1,425.3 41.6 2.92 1,425.3 41.6 2.92 Financial assets sold under repurchase agreements 2,444.1 53.9 2.21 1,772.9 48.1 2.71 901.8 21.3 2.36 901.8 21.3 2.36 Total interest-bearing liabilities 189,506.8 3,281.3 1.73 233,844.8 4,257.1 1.82 274,656.0 6,349.9 2.31 274,656.0 6,349.9 2.31 6 – 368 – Net interest income 7,930.2 8,710.9 8,419.4 8,326.3 Net interest spread (5) 3.86 3.31 2.63 2.66 Net interest margin(6) 3.95 3.45 2.82 2.82

(1) IAS 39 was adopted prior to January 1, 2018. (2) IFRS 9 was adopted from January 1, 2018. (3) Calculated by dividing interest income/expense by average balance. (4) In 2016 and 2017, financial investments consist of financial investments measured at fair value through profit or loss, financial investments classified as available-for-sale, financial investments classified as held-to-maturity, as well as investments classified as receivables. Starting from January 1, 2018, according to IFRS 9, financial investments consist of financial investments measured at amortized costs, financial investments measured at fair value through other comprehensive income and financial investments measured at fair value through profit or loss. See “Assets and Liabilities – Assets – Financial Investments” for further details. (5) Calculated as the difference between the daily average yield on total interest-earning assets and the daily average cost of total interest-bearing liabilities. (6) Calculated by dividing net interest income by the daily average balance of total interest-earning assets. FINANCIAL INFORMATION

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.

Year ended December 31,

2017(1) vs. 2016(1) 2018(1) vs. 2017(1) Increase/ Increase/ (decrease) due to (decrease) due to Net increase/ Net increase/ Volume(2) Rate(3) (decrease)(4) Volume(2) Rate(3) (decrease)(4) (in millions of RMB)

Interest-earning assets Gross loans and advances to customers 991.2 (198.1) 793.1 1,877.8 (61.9) 1,815.9 Financial investments – Financial investments at fair value through profit or loss 38.7 (8.1) 30.6 (10.7) (1.9) (12.6) – Available-for-sale financial investment 334.2 (10.6) 323.6 (835.6) 121.1 (714.5) – Held-to-maturity investments 156.1 (24.9) 131.2 1,411.7 (67.9) 1,343.8 – Debt securities classified as receivables 1,083.9 (819.2) 264.7 (17.1) (463.2) (480.3) Cash and deposits with the central bank 70.4 (11.9) 58.5 35.7 (1.5) 34.2 Deposits with banks and other financial institutions (44.0) (50.9) (94.9) (85.7) (29.0) (114.7) Financial assets held under resale agreements 84.3 165.4 249.7 (36.8) (33.7) (70.5) Changes in interest income 2,714.8 (958.3) 1,756.5 2,339.3 (538.0) 1,801.3

Interest-bearing liabilities Deposits from customers 415.4 6.5 421.9 261.7 567.5 829.2 Debt securities issued 906.6 129.1 1,035.7 1,058.3 191.8 1,250.1 Deposits from banks and other financial institutions (667.0) 197.3 (469.7) 57.8 (32.7) 25.1 Borrowing from the central bank (3.3) (3.0) (6.3) 13.9 1.3 15.2 Financial assets sold under repurchase agreements (18.2) 12.4 (5.8) (20.6) (6.2) (26.8) Changes in interest expense 633.5 342.3 975.8 1,371.0 721.7 2,092.8

Changes in net interest income 2,081.3 (1,300.6) 780.7 968.3 (1,259.7) (291.5)

(1) Prepared according to IAS 39 that we adopted prior to January 1, 2018. (2) Represents the daily average balance for the year minus the daily average balance for the previous year, multiplied by the average yield/cost for the year. (3) Represents the average yield/cost for the year minus the average yield/cost for the previous year, multiplied by the daily average balance for the year. (4) Represents interest income/expense for the year minus interest income/expense for the previous year.

– 369 – FINANCIAL INFORMATION

Interest Income

The following table sets forth a breakdown of our interest income for the periods indicated.

Year ended December 31,

2016(1) 2017(1) 2018(1) 2018(2)

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

(in millions of RMB, except percentages)

Interest income from Financial investments 6,395.2 57.0 7,145.3 55.1 7,281.7 49.3 7,188.6 49.0 Loans and advances to customers 3,895.6 34.7 4,688.7 36.2 6,504.5 44.0 6,504.5 44.3 – Corporate loans 3,303.8 29.5 4,107.7 31.7 5,642.5 38.2 5,642.5 38.4 – Personal loans 452.4 4.0 455.9 3.5 695.9 4.7 695.9 4.7 – Discounted bills 139.4 1.2 125.1 1.0 166.2 1.1 166.2 1.1 Financial assets held under resale agreements 294.0 2.6 543.7 4.2 473.2 3.2 473.2 3.2 Cash and deposits with the central bank 380.1 3.4 438.6 3.4 472.9 3.2 472.9 3.2 Deposits with banks and other financial institutions 246.6 2.2 151.7 1.2 37.0 0.3 37.0 0.3 Total 11,211.5 100.0 12,968.0 100.0 14,769.3 100.0 14,676.2 100.0

(1) IAS 39 was adopted prior to January 1, 2018. (2) IFRS 9 was adopted from January 1, 2018.

We have adopted IFRS 9 since January 1, 2018 to replace IAS 39. According to IFRS 9, our interest income in 2018 amounted to RMB14,676.2 million, which was slightly less than the result for the same period should we apply IAS 39, mainly because the interest income from financial investments measured at fair value through profit or loss under IAS 39 was recognized in “net gains from investment securities” rather than “interest income” according to IFRS 9.

Assuming we still apply IAS 39 in 2018, our interest income in 2018 would amount to RMB14,769.3 million, representing a 13.9% increase from RMB12,968.0 million 2017, mainly attributable to a 18.4% increase in the average balance of our interest-earning assets from RMB252,571.5 million in 2017 to RMB299,032.6 million in 2018, which was partially offset by a slight decrease in the average yield on interest-earning assets from 5.13% in 2017 to 4.94% in 2018. The increase in the average balance of interest-earning assets was primarily attributable to the increases in loans to customers and cash and balances with the central bank. The decrease in the average yield on interest-earning assets was primarily attributable to decreases in the average yields on our loans to customers, financial investments, deposits with banks and other financial institutions and financial assets held under resale agreements, which

– 370 – FINANCIAL INFORMATION mainly resulted from (i) intensified market competition due to interest rate liberalization, (ii) the decrease in the prevailing market interest rate, and (iii) our efforts to attract quality customers with competitive interest rates in accordance with our pricing strategy.

Our interest income increased by 15.7% from RMB11,211.5 million in 2016 to RMB12,968.0 million in 2017, primarily due to a 25.9% increase in the average balance of interest-earning assets from RMB200,621.2 million in 2016 to RMB252,571.5 million in 2017, which was partially offset by a decrease in the average yield on interest-earning assets from 5.59% in 2016 to 5.13% in 2017. The increase in the average balance of interest-earning assets was primarily attributable to the increases in financial investments and loans to customers, mainly corporate loans. The decrease in the average yield on interest-earning assets was primarily attributable to decreases in the average yields on our loans to customers, financial investments and deposits with banks and other financial institutions, which mainly resulted from (i) intensified market competition due to interest rate liberalization, and (ii) the decrease in the prevailing market interest rate.

Interest Income from Loans to Customers

The following table sets forth the average balance, interest income and average yield for each component of our loans to customers for the periods indicated.

Year ended December 31, 2016(1) 2017(1) 2018(2)

Average Average Average Average Interest yield(3) Average Interest yield(3) Average Interest yield(3) balance income (%) balance income (%) balance income (%) (in millions of RMB, except percentages)

Corporate loans 49,476.3 3,303.8 6.68 66,722.4 4,107.7 6.16 91,935.0 5,642.4 6.14 Personal loans 7,371.6 452.4 6.14 8,420.6 455.9 5.41 13,390.5 695.9 5.20 Discounted bills 4,685.3 139.4 2.98 2,887.8 125.1 4.33 4,373.3 166.2 3.80 Total 61,533.2 3,895.6 6.33 78,030.8 4,688.7 6.01 109,698.8 6,504.5 5.93

(1) IAS 39 was adopted prior to January 1, 2018. (2) IFRS 9 was adopted from January 1, 2018. (3) Calculated by dividing interest income by average balance.

Our interest income from loans to customers increased by 38.7% from RMB4,688.7 million in 2017 to RMB6,504.5 million in 2018, primarily due to a 40.6% increase in the average balance of total loans to customers from RMB78,030.8 million in 2017 to RMB109,698.8 million in 2018, partially offset by a slight decrease in the average yield on total loans to customers from 6.01% in 2017 to 5.93% in 2018. The increase in the average balance of loans to customers was primarily due to our continued business expansion. The decrease in the average yield on loans to customers was primarily attributable to the decreased average yield on corporate loans, personal loans and discounted bills.

– 371 – FINANCIAL INFORMATION

Our interest income from loans to customers increased by 20.4% from RMB3,895.6 million in 2016 to RMB4,688.7 million in 2017, primarily due to a 26.8% increase in the average balance of total loans to customers from RMB61,533.2 million in 2016 to RMB78,030.8 million in 2017, which was offset by a decrease in the average yield on total loans to customers from 6.33% in 2016 to 6.01% in 2017. The increase in the average balance of loans to customers was primarily due to the continued expansion of our corporate and retail banking business. The decrease in the average yield on loans to customers was primarily attributable to the decreased average yield on corporate loans and personal loans, which was partially offset by the increased average yield on discounted bills.

Interest income from corporate loans was the largest component of our interest income from loans to customers, representing 84.8%, 87.6% and 86.7% of our total interest income from loans to customers in 2016, 2017 and 2018, respectively.

Corporate Loans

Our interest income from corporate loans increased by 37.4% from RMB4,107.7 million in 2017 to RMB5,642.4 million in 2018, primarily due to a 37.8% increase in the average balance of our corporate loans from RMB66,722.4 million in 2017 to RMB91,935.0 million in 2018. The increase in the average balance of our corporate loans was primarily attributable to the increase in loans to customers in the transportation industry operating infrastructure construction projects and to micro and small enterprises as well as individual business owners to better serve the local economy. The decrease in the average yield on corporate loans from 6.16% in 2017 to 6.14% in 2018 was primarily due to (i) the continuous impact of the interest rate liberalization, and (ii) our increased lending to local transportation and infrastructure construction projects with relatively low risk and return.

Our interest income from corporate loans increased by 24.3% from RMB3,303.8 million in 2016 to RMB4,107.7 million in 2017, primarily due to a 34.9% increase in the average balance of our corporate loans from RMB49,476.3 million in 2016 to RMB66,722.4 million in 2017, which was partially offset by a decrease in the average yield on our corporate loans from 6.68% in 2016 to 6.16% in 2017. The increase in the average balance of our corporate loans was primarily attributable to the increase in loans to customers in the transportation industry operating infrastructure construction projects and to micro and small enterprises as well as individual business owners. The decrease in the average yield on corporate loans was primarily due to (i) the continuing impact of interest rate liberalization, and (ii) our increased lending to local transportation and infrastructure construction projects with relatively low risk and return.

Personal Loans

Our interest income from personal loans increased by 52.6% from RMB455.9 million in 2017 to RMB695.9 million in 2018, primarily due to a 59.0% increase in the average balance of our personal loans from RMB8,420.6 million in 2017 to RMB13,390.5 million in 2018, which was partially offset by a slight decrease in the average yield on our personal loans from 5.41% in 2017 to 5.20% in 2018. The increase in the average balance of personal loans was

– 372 – FINANCIAL INFORMATION primarily due to our enhanced efforts to develop our retail banking business by increasing residential mortgage loans and personal business loans. The decrease in the average yield on our personal loans was mainly attributable to the increased residential mortgage loans with relatively low risk and return.

Our interest income from personal loans increased slightly from RMB452.4 million in 2016 to RMB455.9 million in 2017, primarily due to a 14.2% increase in the average balance of our personal loans from RMB7,371.6 million in 2016 to RMB8,420.6 million in 2017, which was partially offset by a decrease in the average yield on our personal loans from 6.14% in 2016 to 5.41% in 2017. The increase in the average balance of personal loans was primarily due to our increased residential mortgage loans in response to the favorable real estate market and the urbanization in Guizhou Province. The decrease in the average yield on our personal loans was attributable to the increased proportion of residential mortgage loans, with relatively low risk and return.

Discounted Bills

Our interest income from discounted bills increased by 32.9% from RMB125.1 million in 2017 to RMB166.2 million in 2018, primarily due to a 51.4% increase in the average balance of our discounted bills from RMB2,887.8 million in 2017 to RMB4,373.3 million in 2018, which was partially offset by a decrease in the average yield on our discounted bills from 4.33% in 2017 to 3.80% in 2018. The increase in the average balance of discounted bill reflected our asset allocation decision and liquidity needs. The decrease in the average yield on discounted bills was primarily due to the decreased market rates for discounted bills in 2018.

Our interest income from discounted bills decreased by 10.3% from RMB139.4 million in 2016 to RMB125.1 million in 2017, primarily due to a 38.4% decrease in the average balance of our discounted bills from RMB4,685.3 million in 2016 to RMB2,887.8 million in 2017, which was partially offset by an increase in the average yield on our discounted bills from 2.98% in 2016 to 4.33% in 2017. The decrease in the average balance of our discounted bills reflected our asset allocation decision and liquidity needs. The increase in the average yield on discounted bills was primarily due to the increased market rates for discounted bills in 2017.

Interest Income from Financial Investments

We have adopted IFRS 9 since January 1, 2018 to replace IAS 39. According to IFRS 9, our interest income from financial investments in 2018 amounted to RMB7,188.6 million, which was slightly less than the result for the same period should we apply IAS 39, primarily because the interest income from financial investments measured at fair value through profit or loss under IAS 39 was recognized in “net gains from investment securities” rather than “interest income” according to IFRS 9.

– 373 – FINANCIAL INFORMATION

Assuming we still apply IAS 39 in 2018, our interest income from financial investments would amount to RMB7,281.7 million, representing a slight increase from 2017, primarily due to a 13.6% increase in the average balance of our financial investments from RMB123,933.4 million in 2017 to RMB140,755.2 million in 2018, which was partially offset by a decrease in the average yield on our financial investments from 5.77% in 2017 to 5.17% in 2018. The increase in the average balance of our financial investments was primarily due to our efforts to increase investments classified as held-to-maturity as we invested a significantly higher amount in investments in debt securities, in particular, bonds issued by PRC local government in 2018. The decrease in the average yield on our financial investments was primarily due to the increased proportion of investments in debt securities, in particular, bonds issued by PRC local governments, which are relatively low-risk investments with low yields.

Our interest income from financial investments increased by 11.7% from RMB6,395.2 million in 2016 to RMB7,145.3 million in 2017, primarily due to a 31.1% increase in the average balance of our financial investments from RMB94,501.8 million in 2016 to RMB123,933.4 million in 2017, which was partially offset by a decrease in the average yield on our financial investments from 6.77% in 2016 to 5.77% in 2017. The increase in the average balance of our financial investments was primarily due to our increased investments in debt securities, trust plans and asset management plans. The decrease in the average yield on our financial investments was primarily due to (i) an increased proportion of our investments in debt securities, in particular, bonds issued by PRC central and local governments with relatively low yields, and (ii) the decreased average yield on investments classified as receivables as a result of the decrease in market interest rates.

The following table sets forth a breakdown of our interest income from financial investments by type for the years indicated.

Year ended December 31, 2016(1) 2017(1) 2018(2) Average Average Average Interest yield(3) Interest yield(3) Interest yield(3) income % of total (%) income % of total (%) income % of total (%) (in millions of RMB, except percentages) SPV investments 5,169.4 80.8 8.43 5,434.1 76.0 7.09 4,953.8 68.9 6.53 Investments in debt securities 1,225.8 19.2 3.69 1,711.2 24.0 3.61 2,234.8 31.1 3.65 Total 6,395.2 100.0 6.77 7,145.3 100.0 5.77 7,188.6 100.0 5.24

(1) IAS 39 was adopted prior to January 1, 2018. (2) IFRS 9 was adopted from January 1, 2018. (3) Calculated by dividing our interest income from the corresponding assets in the period by the average balance of these assets.

In 2016, 2017 and 2018, our interest income from SPV investments in trust plans and asset management plans represented 80.8%, 76.0% and 68.9%, respectively, of total interest income from our financial investments. The average yield on our SPV investments was 8.43%, 7.09% and 6.53% in 2016, 2017 and 2018, respectively. The decrease in the average yield on our SPV investments was principally due to the impact of a decrease in market interest rates.

– 374 – FINANCIAL INFORMATION

The average yield on our investments in debt securities was 3.69%, 3.61% and 3.65% in 2016, 2017 and 2018, respectively. The increase in the average yield on our investments in debt securities from 2017 to 2018 was due to changes in the mix of our debt securities portfolio. The decrease in the average yield on our investments in debt securities from 2016 to 2017 was due the increased proportion of PRC government bonds we held with lower yields.

Interest Income from Financial Assets Held under Resale Agreements

Our interest income from financial assets held under resale agreements decreased by 13.0% from RMB543.7 million in 2017 to RMB473.2 million in 2018 primarily due to (i) a 7.2% decrease in the average balance of our financial assets held under resale agreements to RMB16,221.6 million in 2018, reflecting our asset allocation decision and liquidity needs and (ii) a decrease in the average yield on our financial assets held under resale agreements to 2.92% in 2018, primarily due to the decrease in the short-term interbank market interest rate.

Our interest income from financial assets held under resale agreements increased by 84.9% from RMB294.0 million in 2016 to RMB543.7 million in 2017, primarily due to (i) an increase in the average yield on our financial assets held under resale agreements from 1.99% in 2016 to 3.11% in 2017, primarily due to the increase in the money market interest rate, and (ii) an 18.4% increase in the average balance of our financial assets held under resale agreements from RMB14,770.4 million in 2016 to RMB17,481.8 million in 2017, reflecting our asset allocation decision and liquidity needs.

Interest Income from Cash and Balances with the Central Bank

Interest income from cash and balances with the central bank increased by 7.8% from RMB438.6 million in 2017 to RMB472.9 million in 2018, primarily because of an 8.2% increase in the average balance of our cash and balances with the central bank to RMB31,013.4 million in 2018. The average yield on cash and balances with the central bank remained relatively stable at 1.53% and 1.52% in 2017 and 2018, respectively. The increase in the average balance of our cash and balances with the central bank was mainly attributable to the continued growth of our deposits from customers.

Interest income from cash and balances with the central bank increased by 15.4% from RMB380.1 million in 2016 to RMB438.6 million in 2017, primarily because of a 19.1% increase in the average balance of our cash and balances with the central bank from RMB24,068.9 million in 2016 to RMB28,671.2 million in 2017, which was partially offset by a slight decrease in the average yield on cash and balances with the central bank from 1.58% in 2016 to 1.53% in 2017. The increase in the average balance of our cash and balances with the central bank in 2017 was mainly attributable to the growth of our customer deposits. The decrease in average yield on cash and balances with the central bank was primarily caused by the decrease of statutory reserve ratio from 14.5% in 2016 to 13.5% in 2017.

– 375 – FINANCIAL INFORMATION

Interest Income from Deposits with Banks and Other Financial Institutions

Interest income from deposits with banks and other financial institutions represented 2.2%, 1.2% and 0.3% of our interest income in 2016, 2017 and 2018, respectively.

Our interest income from deposits with banks and other financial institutions decreased by 75.6% from RMB151.7 million in 2017 to RMB37.0 million in 2018, primarily due to (i) a 69.8% decrease in the average balance of our deposits with banks and other financial institutions from RMB4,454.3 million in 2017 to RMB1,343.6 million in 2018, and (ii) a decrease in the average yield on our deposits with banks and other financial institutions from 3.41% in 2017 to 2.75% in 2018. The decrease in the average balance of our deposits with banks and other financial institutions was primarily due to our adjustments to asset structure for higher returns. The decrease in the average yield on our deposits with banks and other financial institutions was primarily attributable to our decreased proportion of time deposits with banks and other financial institutions.

Our interest income from deposits with banks and other financial institutions decreased by 38.5% from RMB246.6 million in 2016 to RMB151.7 million in 2017, primarily due to (i) a 22.5% decrease in the average balance of our deposits with banks and other financial institutions from RMB5,746.9 million in 2016 to RMB4,454.3 million in 2017, and (ii) a decrease in the average yield on our deposits with banks and other financial institutions from 4.29% in 2016 to 3.41% in 2017. The decrease in the average balance of our deposits with banks and other financial institutions was primarily due to our adjustments to asset structure for higher returns. The decrease in the average yield on our deposits with banks and other financial institutions was primarily attributable to our decreased proportion of time deposits with banks and other financial institutions.

Interest Expense

The following table sets forth a breakdown of our interest expense for the periods indicated.

Year ended December 31, 2016(1) 2017(1) 2018(2) %of %of %of Amount total Amount total Amount total (in millions of RMB, except percentages) Interest expense on Deposits from customers 1,731.4 52.8 2,153.3 50.6 2,982.5 47.0 Debt securities issued 498.4 15.2 1,534.1 36.0 2,784.2 43.8 Deposits from banks and other financial institutions 964.9 29.4 495.2 11.6 520.3 8.2 Borrowing from the central bank 32.7 1.0 26.4 0.6 41.6 0.7 Financial assets sold under repurchase agreements 53.9 1.6 48.1 1.1 21.3 0.3 Total 3,281.3 100.0 4,257.1 100.0 6,349.9 100.0

(1) IAS 39 was adopted prior to January 1, 2018. (2) IFRS 9 was adopted from January 1, 2018.

– 376 – FINANCIAL INFORMATION

Our interest expense increased by 49.2% from RMB4,257.1 million in 2017 to RMB6,349.9 million in 2018, primarily due to (i) an increase in the average cost of interest-bearing liabilities from 1.82% in 2017 to 2.31% in 2018, and (ii) a 17.5% increase in the average balance of interest-bearing liabilities from RMB233,844.8 million in 2017 to RMB274,656.0 million in 2018. The increase in the average cost of interest-bearing liabilities was primarily attributable to an increase in customer deposits with higher interest rates due to interest rate liberalization. The increase in the average balance of interest-bearing liabilities was primarily attributable to increases in debt securities issued by us and the steady growth in customer deposits.

Our interest expense increased by 29.7% from RMB3,281.3 million in 2016 to RMB4,257.1 million in 2017, primarily due to (i) a 23.4% increase in the average balance of interest-bearing liabilities from RMB189,506.8 million in 2016 to RMB233,844.8 million in 2017, and (ii) an increase in the average cost of interest-bearing liabilities from 1.73% in 2016 to 1.82% in 2017. The increase in the average balance of interest-bearing liabilities was primarily attributable to increases in the average balance of customer deposits and debt securities issued by us, which were in line with our overall business growth. The increase in the average cost of interest-bearing liabilities was primarily attributable to (i) the increased market interest rate caused by tightened market liquidity, and (ii) the increased time deposits with relatively high cost to provide a stable source of funding for our business operations.

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 52.8%, 50.6% and 47.0% of our total interest expense for 2016, 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.

Year ended December 31, 2016(1) 2017(1) 2018(2) 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 Time 38,869.5 706.6 1.82 33,062.4 662.5 2.00 32,135.7 764.6 2.38 Demand 83,105.1 611.8 0.74 114,774.6 910.4 0.79 116,204.9 887.8 0.76 Subtotals 121,974.6 1,318.4 1.08 147,837.0 1,572.9 1.06 148,340.6 1,652.4 1.11 Personal deposits Time 13,348.9 346.3 2.59 18,324.5 491.9 2.68 31,315.1 1,217.2 3.89 Demand 14,723.3 66.7 0.45 19,754.4 88.5 0.45 24,146.0 112.9 0.47 Subtotal 28,072.2 413.0 1.47 38,078.9 580.4 1.52 55,461.1 1,330.1 2.40 Total customer deposits 150,046.8 1,731.4 1.15 185,915.9 2,153.3 1.16 203,801.7 2,982.5 1.46

(1) IAS 39 was adopted prior to January 1, 2018. (2) IFRS 9 was adopted from January 1, 2018.

– 377 – FINANCIAL INFORMATION

Our interest expense on customer deposits increased by 38.5% from RMB2,153.3 million in 2017 to RMB2,982.5 million in 2018, primarily due to (i) an increase in our average cost of customer deposits from 1.16% in 2017 to 1.46% in 2018, and (ii) a 9.6% increase in our average balance of customer deposits from RMB185,915.9 million in 2017 to RMB203,801.7 million in 2018. The increase in our average cost of customer deposits was primarily attributable to (i) the increase in retail banking deposit products with competitive interest rates that we offered in order to attract quality retail banking customers in response to increased market competition, and (ii) the increased time deposits we obtained for a stable funding source to support our business expansion, which generally have higher average cost. 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.

Our interest expense on customer deposits increased by 24.4% from RMB1,731.4 million in 2016 to RMB2,153.3 million in 2017, primarily due to (i) a 23.9% increase in our average balance of customer deposits from RMB150,046.8 million in 2016 to RMB185,915.9 million in 2017, and (ii) a slight increase in our average cost of customer deposits from 1.15% in 2016 to 1.16% in 2017. The increase in our average balance of customer deposits was primarily due to the expansion of our corporate and retail banking businesses.

Interest Expense on Debt Securities Issued

Our interest expense on debt securities issued increased by 81.5% from RMB1,534.1 million in 2017 to RMB2,784.2 million in 2018, primarily due to (i) a 61.3% increase in the average balance of debt securities issued from RMB36,198.7 million in 2017 to RMB58,393.2 million in 2018, and (ii) an increase in the average cost of debt securities issued from 4.24% in 2017 to 4.77% in 2018. The increase in the average balance of debt securities issued was due to our issue of interbank certificates of deposit for a stable source of funding for our business operations and development. The increase in our average cost of debt securities issued was primarily due to an increase in interbank certificates of deposit issued by us in 2018 which have comparatively high interest rates, reflecting the relatively high bond market interest rates in 2018 caused by tightened market liquidity.

Our interest expense on debt securities issued increased significantly from RMB498.4 million in 2016 to RMB1,534.1 million in 2017, primarily due to (i) a significant increase in the average balance of debt securities issued from RMB14,806.5 million in 2016 to RMB36,198.7 million in 2017, and (ii) an increase in the average cost of debt securities issued from 3.37% in 2016 to 4.24% in 2017. The increase in the average balance of debt securities issued was due to our issue of a number of interbank certificates of deposit for a stable source of funding. The increase in the average cost of debt securities issued was due to an increase in the interbank market interest rate.

– 378 – FINANCIAL INFORMATION

Interest Expense on Deposits from Banks and Other Financial Institutions

Our interest expense on deposits from banks and other financial institutions increased by 5.1% from RMB495.2 million in 2017 to RMB520.3 million in 2018, primarily due to a 12.5% increase in the average balance of deposits from banks and other financial institutions from RMB9,009.1 million in 2017 to RMB10,134.0 million in 2018, which was partially offset by a decrease in the average cost of deposits from banks and other financial institutions from 5.50% in 2017 to 5.13% in 2018. The increase in the average balance of deposits from banks and other financial institutions was mainly due to our liquidity needs. The decrease in the average cost of deposits from banks and other financial institutions was mainly due to the decrease in market interest rate for interbank deposits.

Our interest expense on deposits from banks and other financial institutions decreased by 48.7% from RMB964.9 million in 2016 to RMB495.2 million in 2017, primarily due to a 57.4% decrease in the average balance of deposits from banks and other financial institutions from RMB21,143.8 million in 2016 to RMB9,009.1 million in 2017, which was partially offset by an increase in the average cost of deposits from banks and other financial institutions from 4.56% in 2016 to 5.50% in 2017. The decrease in the average balance of deposits from banks and other financial institutions was mainly due to the gradual maturity of certain existing deposits from banks and other financial institutions. The increase in the average cost of deposits from banks and other financial institutions was mainly due to an increase in market interest rate for interbank deposits.

Interest Expense on Borrowing from the Central Bank

Our interest expense on borrowings from the central bank increased by 57.6% from RMB26.4 million in 2017 to RMB41.6 million in 2018, primarily due to (i) a 50.3% increase in the average balance of borrowing from the central bank from RMB948.2 million in 2017 to RMB1,425.3 million in 2018, as we increased borrowings to fund our business expansion, and (ii) an increase in the average cost of borrowing from the central bank from 2.78% in 2017 to 2.92% in 2018, as a result of our increased borrowings from the central bank to support micro and small enterprises as well as individual business owners with higher average costs.

Our interest expense on borrowing from the central bank decreased by 19.3% from RMB32.7 million in 2016 to RMB26.4 million in 2017, primarily due to (i) an 11.0% decrease in the average balance of borrowing from the central bank from RMB1,065.6 million in 2016 to RMB948.2 million in 2017, mainly because we decreased re-discounting with the central bank and relied more on other sources of funds to support our business expansion, and (ii) a decrease in the average cost of borrowing from the central bank from 3.07% in 2016 to 2.78% in 2017, mainly because we repaid certain borrowings from the central bank which had relatively high interest rates.

– 379 – FINANCIAL INFORMATION

Interest Expense on Financial Assets Sold under Repurchase Agreements

Our interest expense on financial assets sold under repurchase agreements decreased by 55.7% from RMB48.1 million in 2017 to RMB21.3 million in 2018, primarily due to (i) a 49.1% decrease in the average balance of financial assets sold under repurchase agreements from RMB1,772.9 million in 2017 to RMB901.8 million in 2018, and (ii) a 12.9% decrease in the average cost of financial assets sold under repurchase agreements from 2.71% in 2017 to 2.36% in 2018. The decrease in the average balance of financial assets sold under repurchase agreements was primarily due to our liquidity needs. The decrease in our average cost of financial assets sold under repurchase agreements was primarily due to the decrease in interbank market interest rates caused by an easing in market liquidity.

Our interest expense on financial assets sold under repurchase agreements decreased by 10.8% from RMB53.9 million in 2016 to RMB48.1 million in 2017, primarily due to a 27.5% decrease in the average balance of financial assets sold under repurchase agreements from RMB2,444.1 million in 2016 to RMB1,772.9 million in 2017, which was partially offset by a 22.6% increase in our average cost of financial assets sold under repurchase agreements from 2.21% in 2016 to 2.71% in 2017. The decrease in the average balance of financial assets sold under repurchase agreements was primarily due to a decrease in debt securities sold under repurchase agreements and bills sold under repurchase agreements according to our liquidity needs. The increase in the average cost of financial assets sold under repurchase agreements was primarily due to an increase in interbank market interest rates for the majority of 2017.

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 further decreased from 3.31% in 2017 to 2.66% in 2018 and our net interest margin decreased from 3.45% in 2017 to 2.82% in 2018, primarily because (i) our average cost of interest-bearing liabilities increased from 1.82% in 2017 to 2.31% in 2018, which was caused by increased market competition driven by interest rate liberalization, as well as our increased loans to, and investments in, low-risk projects with government supports mainly including local government bonds and loans for transportation and infrastructure construction projects, and (ii) our average yield on interest-earning assets decreased slightly from 5.13% in 2017 to 4.97% in 2018, mainly as a result of interest rate liberalization, the decrease in the prevailing market interest rate, as well as our enhanced efforts to attract quality customers with competitive interest rates in accordance with our pricing strategy.

– 380 – FINANCIAL INFORMATION

Our net interest spread decreased from 3.86% in 2016 to 3.31% in 2017 and our net interest margin decreased from 3.95% in 2016 to 3.45% in 2017, primarily because (i) our average yield on interest-earning assets decreased from 5.59% in 2016 to 5.13% in 2017, as a result of the increased market competition with the interest rate liberalization, as well as the increased proportion of low-risk loans to industries or projects with government support, and (ii) our average cost of interest-bearing liabilities increased from 1.73% in 2016 to 1.82% in 2017, mainly due to (a) the increased market interest rate caused by tightened market liquidity and (b) the increased proportion of personal time deposits with relatively high average costs.

Net Fee and Commission Income

The following table sets forth the principal components of our net fee and commission income for the periods indicated.

Year ended December 31, 2016(1) 2017 2018 (in millions of RMB)

Agency business income(1) 203.9 44.6 34.8 Bank card business income 30.3 32.5 30.6 Consultancy business income 25.3 11.3 20.8 Settlement and clearing service income 10.0 13.6 13.6 Guarantee commitment business income 9.1 6.9 8.6 Fee and commission income 278.6 108.9 108.4

Bank card fees (48.8) (57.8) (57.5) Other fee and commission expense (39.8) (60.8) (29.6) Fee and commission expense (88.6) (118.6) (87.1) Net fee and commission income 190.0 (9.7) 21.3

(1) Refers to our income from the provision of agency services to institutions and individuals, primarily including transaction fees levied for agency sales of entrusted loans to institutions in the interbank market and to corporate customers, fees and income from issuance of our wealth management products, provision of payment and disbursement agency services to local finance bureaus, agency sales of insurance products, as well as agency trading of precious metals. By providing agency services for entrusted loans in the interbank market, we extend entrusted loans to borrowers on behalf of other financial institutions according to their lending purpose, amount, term, and interest rate, and monitor the loan utilization status and assist with the collection of loans for relevant customers who, being the principals, assume the default risk of the loans, while we receive agency fees based on the entrusted loan amounts.

In 2018, our net fee and commission income increased to RMB21.3 million in 2018, mainly due to a 26.6% decrease in fee and commission expense from RMB118.6 million in 2017 to RMB87.1 million in 2018, which was mainly attributable to a decrease in expenses paid to third parties for collateral management. Our fee and commission income remained relatively stable at RMB108.9 million and RMB108.4 million in 2017 and 2018, respectively.

– 381 – FINANCIAL INFORMATION

In 2016, our net fee and commission income was RMB190.0 million, representing 2.4% 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 in 2016 and 2017. As a result, we incurred a net fee and commission loss of RMB9.7 million in 2017. The decrease in our net fee and commission income was mainly due to (i) a 60.9% decrease in our fee and commission income from RMB278.6 million in 2016 to RMB108.9 million in 2017, and (ii) a 33.9% increase in our fee and commission expenses from RMB88.6 million in 2016 to RMB118.6 million in 2017. The decrease in our fee and commission income was mainly attributable to (i) a decrease in agency business income from RMB203.9 million in 2016 to RMB44.6 million in 2017, reflecting lower business demand and (ii) a 55.3% decrease in consultancy business income, mainly as a result of decreased market demand. The increase in our fee and commission expenses was mainly caused by (i) an increase in fees paid in connection with our bank card services as we reduced or waived certain card fees chargeable to the customers, and (ii) an increase in expenses paid to third parties for collateral management.

Net Trading Gains/(Losses)

We have adopted IFRS 9 since January 1, 2018 to replace IAS 39. According to IFRS 9, our net trading gains in 2018 amounted to RMB151.6 million, which was more than the result for the same period should we apply IAS 39, primarily because certain financial investments which originally were available-for-sale financial assets or held-to-maturity financial assets under IAS 39 were reclassified as financial investments measured at fair value through profit or loss under IFRS 9.

Assuming we still apply IAS 39 in 2018, our net trading gains in 2018 would amount to RMB107.8 million, representing a significant increase from 2017, primarily due to our disposal of certain debt securities in 2018.

In 2016 and 2017, we incurred net trading losses of RMB91.3 million and RMB110.8 million, respectively. Our net trading losses increased by 21.4%, primarily due to the impact of market conditions.

Net Gains Arising from Investments Securities

We realized net gains arising from investments securities of RMB12.8 million in 2016 and incurred net losses arising from investments securities of RMB10.2 million in 2017, primarily due to a decrease in fair value of the debt securities and mutual funds that we held due to the impact from market conditions. We realized net gains arising from investments securities of RMB173.0 million in 2018, primarily due to (i) an increase in the fair value of certain debt securities we invested in 2018 and (ii) our disposal of debt securities in 2018.

– 382 – FINANCIAL INFORMATION

Other Components of Our Operating Income

Other components of our operating income consisted primarily of government grants and subsidies for our contribution to local development. Other components of our operating income were RMB26.8 million, RMB45.2 million and RMB53.2 million in 2016, 2017 and 2018, respectively, representing 0.3%, 0.5% 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.

Year ended December 31,

2016 2017 2018

(in millions of RMB)

Staff costs 1,595.9 1,770.9 1,833.1 Office expenses 445.9 402.9 391.8 Depreciation and amortization 292.7 341.6 350.4 Rental and property management expenses 131.9 153.9 166.9 Tax and surcharges 205.9 68.9 65.9 Others(1) 185.9 181.3 231.7 Total operating expenses 2,858.2 2,919.5 3,039.8

Cost-to-income ratio(2) 32.53% 33.05% 33.91%

(1) Other general operational and administrative expenses consist of various sundry expenditures, such as fuel fees, electronic equipment operating costs, committee fees and security fees, and other repairs and maintenance expenses. (2) Calculated by dividing total operating expenses, excluding tax and surcharges, by total operating income.

Our operating expenses increased slightly from RMB2,858.2 million in 2016 to RMB2,919.5 million in 2017, and further to RMB3,039.8 million in 2018, primarily due to increases in our staff costs, rental and property management expenses and depreciation and amortization.

Our cost-to-income ratio (excluding tax and surcharges) was 32.53%, 33.05% and 33.91% in 2016, 2017 and 2018, respectively. The increase from 2016 to 2018 was primarily because the growth of our operating expenses (excluding tax and surcharges) outpaced the growth of our operating income.

– 383 – FINANCIAL INFORMATION

Staff Costs

The following table sets forth the components of our staff costs for the periods indicated.

Year ended December 31,

2016 2017 2018

(in millions of RMB)

Salaries, bonuses and allowances 1,077.9 1,177.7 1,220.0 Social insurance 239.8 277.0 301.7 Staff welfare 117.1 118.9 124.3 Housing funds 62.0 72.7 77.2 Supplementary retirement benefits 60.5 86.4 75.3 Staff education expenses and labor union fees 38.6 38.2 34.6 Total staff costs 1,595.9 1,770.9 1,833.1

Our staff costs increased by 11.0% from RMB1,595.9 million in 2016 to RMB1,770.9 million in 2017, and further increased slightly to RMB1,833.1 million in 2018. The continued increases in our staff costs reflected an increase in our employee headcount in line with our growing business.

Office Expenses

Our office expenses consist primarily of business marketing and meeting expenses, marketing and advertisement expenses, deposit insurance expenses as well as fees associated with the general maintenance of our offices and daily operations. Our office expenses decreased by 9.6% from RMB445.9 million in 2016 to RMB402.9 million in 2017, and further decreased slightly to RMB391.8 million in 2018, primarily reflecting our effective efforts to control office expenses.

Depreciation and Amortization

Our depreciation and amortization consists primarily of depreciation of our property equipment and amortization of renovation expenses and software development expenses. Our depreciation and amortization increased by 16.7% from RMB292.7 million in 2016 to RMB341.6 million in 2017, and further increased slightly to RMB350.4 million in 2018, primarily due to (i) an increase in amortization of renovation expenses due to the expansion of our branch network, and (ii) an increase in amortization of software development expenses with continued investment in our information technology.

Rental and Property Management Fees

Our rental and property management fees increased by 16.7% from RMB131.9 million in 2016 to RMB153.9 million in 2017, and further by 8.4% to RMB166.9 million in 2018, primarily attributable to the higher rent level.

– 384 – FINANCIAL INFORMATION

Taxes and Surcharges

Our taxes and surcharges decreased by 66.5% from RMB205.9 million in 2016 to RMB68.9 million in 2017, and further decreased slightly to RMB65.9 million in 2018, primarily due to the transition from business tax to value-added tax in May 2016 in accordance with the regulatory change in China.

Other General Operational and Administrative Expenses

Our other general operational and administrative expenses primarily consist of various sundry expenditures, such as fuel fees, electronic equipment operating costs, committee fees and security fees, and other repairs and maintenance expenses. Our other general operational and administrative expenses decreased slightly from RMB185.9 million in 2016 to RMB181.3 million in 2017, primarily due to our effective efforts to control general operational expenses, including various sundry expenditures for electricity, fuel and other repairs and maintenance. Our other general operational and administrative expenses increased by 27.8% to RMB231.7 million in 2018, primarily due to increases in software development and maintenance expenses.

Impairment Losses on Assets

The following table sets forth the principal components of our impairment losses or reversals on assets for the periods indicated.

Year ended December 31, 2016(1) 2017(1) 2018(1) 2018(2) (in millions of RMB) Impairment losses/(reversals) on assets Loans and advances to customers 2,444.9 2,541.3 2,094.6 2,071.8 Financial investments 370.4 541.9 293.5 257.9 Credit Commitments – – – 61.6 Deposits with banks and other financial institutions – – – 0.3 Financial assets held under resale agreements – – – (0.7) Others 4.1 (24.7) 1.1 1.4 Total 2,819.4 3,058.5 2,389.2 2,392.3

(1) IAS 39 was adopted prior to January 1, 2018. (2) IFRS 9 was adopted from January 1, 2018.

We have adopted IFRS 9 since January 1, 2018 to replace IAS 39. According to IFRS 9, our impairment losses on assets amounted to RMB2,392.3 million, which was slightly more than the result for the same period should we apply IAS 39, primarily because of the impact of the “expected credit loss” model under IFRS 9.

– 385 – FINANCIAL INFORMATION

Assuming we still apply IAS 39 in 2018, our impairment losses on assets in 2018 would amount to RMB2,389.2 million, representing a 21.9% decrease from 2017, primarily due to (i) a 17.6% decrease in impairment losses on loans to customers from RMB2,541.3 million in 2017 to RMB2,094.6 million in 2018, primarily due to our continuing efforts to improve asset quality, and (ii) a 45.8% decrease in impairment losses on financial investments from RMB541.9 million in 2017 to RMB293.5 million in 2018, primarily due to the decrease in our total assets.

Impairment losses on assets increased by 8.5% from RMB2,819.4 million in 2016 to RMB3,058.5 million in 2017, primarily due to (i) a 3.9% increase in impairment losses on loans to customers from RMB2,444.9 million in 2016 to RMB2,541.3 million in 2017, primarily due to continued increases in our loans to customers and an increase in non- performing loans, and (ii) a 46.3% increase in impairment losses on financial investments from RMB370.4 million in 2016 to RMB541.9 million in 2017, primarily due to continued increase in the scale of our financial investments. See “Assets and Liabilities – Assets – Impairment Allowance on Loans to Customers” for details of changes in our impairment allowance for loans to customers.

Share of Profits/(Losses) of Associates

We recorded an amount of RMB7.0 million associated with our share of profits of associates in 2016, and recorded a share of losses of associates of RMB5.5 million and RMB34.5 million in 2017 and 2018, respectively. The decrease in share of profits of associates in 2017 and the increase in share of losses of associates in 2018 primarily reflected the operating losses of the village and township banks, in which we invested.

Income Tax

The following table sets forth the reconciliation between the income tax calculated at the statutory income tax rate applicable to our profit before tax and our actual income tax for the periods indicated.

Year ended December 31, 2016(1) 2017(1) 2018(1) 2018(2) (in millions of RMB) Profit before tax 2,397.9 2,641.8 3,311.3 3,303.0 Income tax calculated at applicable statutory tax rate of 25% 599.5 660.5 827.8 825.7 Non-deductible expenses 22.2 24.6 33.6 33.6 Non-taxable income(3) (185.2) (298.2) (432.9) (432.9) Income tax 436.5 386.9 428.5 426.4

(1) IAS 39 was adopted prior to January 1, 2018. (2) IFRS 9 was adopted from January 1, 2018. (3) Non-taxable income mainly represents interest income from PRC government bonds, which is non-taxable in accordance with PRC tax regulations.

– 386 – FINANCIAL INFORMATION

We have adopted IFRS 9 since January 1, 2018 to replace IAS 39. According to IFRS 9, our income tax expenses amounted to RMB426.4 million, which was slightly less than the result for the same period should we apply IAS 39, primarily because of the impact of the “expected credit loss” model under IFRS 9.

Assuming we still apply IAS 39 in 2018, our income tax expenses would amount to RMB428.5 million in 2018, representing a 10.8% increase from 2017, primarily due to (i) continued increases in profit before tax, and (ii) an increase in our non-taxable income as a result of our increased investments in non-taxable treasury and local government bonds.

Our income tax expenses decreased by 11.4% from RMB436.5 million in 2016 to RMB386.9 million in 2017, mainly due to our increased investments in non-taxable treasury bonds and local government bonds.

Our effective income tax rate was 18.2%, 14.6% and 12.9% in 2016, 2017 and 2018, respectively. The decrease was mainly attributable to our tax-free interest income from treasury bonds and local government bonds.

Net Profit

Primarily as a result of all the foregoing factors, our net profit increased by 15.0% from RMB1,961.4 million in 2016 to RMB2,255.0 million in 2017, and further increased by 27.8% to RMB2,882.8 million in 2018 assuming we still apply IAS 39 in 2018. According to IFRS 9, our net profit amounted to RMB2,876.6 million in 2018, which was slightly less than the result for the same period should we apply IAS 39, primarily because of the impact of the “expected credit loss” model under IFRS 9.

– 387 – SUMMARY OF SEGMENT OPERATING RESULTS

Summary Business Segment Information

We have three principal business segments: corporate banking, retail banking and financial markets. See “Business – Our Principal Business Lines” for further details. The following table sets forth our operating results for each of our principal segments for the periods indicated.

Year ended December 31, Six Months ended June 30,

(1) (1) (2) (2) (2) 2016 2017 2018 2018 2019

CorporateRetailFinancial CorporateRetailFinancial CorporateRetailFinancial CorporateRetailFinancial CorporateRetailFinancial IACA INFORMATION FINANCIAL (3) (3) (3) (3) (3) bankingbankingmarkets OthersTotalbankingbankingmarkets OthersTotalbankingbankingmarkets OthersTotalbankingbankingmarkets OthersTotalbankingbankingmarkets OthersTotal

(in millions of RMB, except percentages)

External net interest (4) income/(expenses)7,459.8 112.7 357.77,930.28,320.0 – (30.7) 421.68,710.99,232.8 – (498.7) (407.8)8,326.34,302.1 – (198.6) (135.8)3,967.75,246.7 – (200.5) (408.8)4,637.4 –

Intersegment net interest

8 – 388 – (5) income/(expense) (485.2) 667.7 (182.5)0.0 (953.6) – 904.5 49.1(0.0)(2,200.2) – 1,363.3 836.90.0 (1,229.4) – 726.1 503.3(0.0)(1,719.6) – 778.3 941.3– –

Net interest income 6,974.6 780.4 175.2 – 7,930.2 7,366.4 873.8 470.7 – 8,710.9 7,032.6 864.6 429.1 – 8,326.3 3,072.7 527.5 367.5 – 3,967.7 3,527.1 577.8 532.5 – 4,637.4

Net fee and commission

income 138.6190.0 (12.7)(16.6) 64.1 (16.7) –23.6(9.7) 17.7 – (21.3) 24.921.3 7.4 – (11.7) 11.67.3 35.4 – (12.5) 38.461.3 –

Net trading gains/(losses) –(91.3) –– (91.3) – (110.8) –(110.8) – – – 151.6151.6 – – – 62.962.9 – – – 125.8125.8 –

Net gains/(losses) arising

from investment securities –12.8 –– 12.8 – (10.2) – (10.2) – – – 217.2217.2 – – – 81.481.4 – – – 208.2208.2 –

Other operating income 20.726.8 –34.2 – – 6.145.2 –44.0 11.0 –53.2 –4.8 9.2 –8.9 –10.2 4.1 –12.5 – 2.3

Total operating income 7,133.9 767.7 160.8 6.1 8,068.5 7,384.0 857.1 373.3 11.0 8,625.4 7,094.3 843.3 822.8 9.2 8,769.6 3,084.9 515.8 523.4 4.1 4,128.2 3,572.7 565.3 904.9 2.3 5,045.2

Operating expenses (1,927.9)(2,858.2) (419.6)(1,925.6) (482.3) (454.5) (28.4) (500.8)(2,919.5)(1,962.7) (38.6) (451.6) (577.6)(3,039.8)(868.5) (47.9) (215.1) (243.8)(1,355.7)(965.6) (28.3) (290.4) (315.8)(1,578.8) (7.0)

Impairment losses on assets (2,627.7)(2,819.4) (189.9)(2,854.4) (204.1) – (1.8)(3,058.5) –(2,341.3) – (45.2)(2,392.3) (5.6)(1,082.2) (0.2) 15.5(1,060.8) 6.1(1,278.4) (0.2) 4.3 (145.3)(1,439.7) (20.3)

Share of profits of associates –7.0 –– – – 7.0 –(5.5) (5.5)– – –(34.5) (34.5)– – –(3.3) – (3.3) – –(4.1) (4.1)

Profit before tax 2,578.3 158.2 (321.5) (17.1) 2,397.9 2,604.0 198.5 (127.5) (33.1) 2,641.9 2,790.3 346.5 239.6 (73.4) 3,303.0 1,134.2 316.2 285.7 (27.7) 1,708.4 1,328.7 279.2 443.8 (29.1) 2,022.6

(1) IAS 39 was adopted prior to January 1, 2018. (2) IFRS 9 was adopted from January 1, 2018. (3) Consist primarily of income and expenses that are not directly attributable to any specific segment. (4) Represents net interest income or expenses from each segment’s external customers or activities. (5) Represents net interest income or expenses attributable to each segment’s transactions with other segments. FINANCIAL INFORMATION

Operating income from our corporate banking business represented 88.4%, 85.7%, 80.9%, 74.7% and 70.8% of our total operating income in 2016, 2017 and 2018 and the six months ended June 30, 2018 and 2019, respectively. Although our investments in trust plans and asset management plans are disclosed in “Business – Our Principal Business Lines – Financial Markets Business” for ease of reference, we account for the net interest income from our investments in trust plans and asset management plans in the segment operating income of our corporate banking business, due to the combination of the following: (i) we assess the operational performance of our financial investments in trust plans and asset management plans under the corporate banking business in accordance with our internal performance assessment system; (ii) the source of capital for making investments in trust plans and asset management plans predominately come from our corporate deposits, (iii) the ultimate borrowers for these trust plans and asset management plans are existing or potential clients of our corporate banking business, and (iv) the business development and risk management processes associated with these plans are similar to our corporate banking business. Operating income from our corporate banking business increased slightly from RMB7,133.9 million in 2016 to RMB7,384.0 million in 2017, primarily due to an increase in net interest income in line with the increase in corporate loans. Operating income from our corporate banking business decreased slightly to RMB7,094.3 million in 2018, primarily due to a decrease in net interest income mainly as a result of our increased corporate lending to government-affiliated entities with relatively low risk and return. Operating income from our corporate banking business increased by 15.8% from RMB3,084.9 million for the six months ended June 30, 2018 to RMB3,572.7 million for the same period in 2019, primarily due to the increase in net interest income attributable to the increase in corporate loans in line with our business expansion.

Operating income from our retail banking business represented 9.5%, 9.9%, 9.6%, 12.5% and 11.2% of our total operating income in 2016, 2017 and 2018 and the six months ended June 30, 2018 and 2019, respectively. The percentage of operating income from our retail banking business in our total operating income remained relatively stable in 2016, 2017 and 2018. Operating income from our retail banking business increased by 9.6% from RMB515.8 million for the six months ended June 30, 2018 to RMB565.3 million for the same period in 2019, primarily due to our efforts to expand our retail banking business.

Operating income from our financial markets business represented 2.0%, 4.3%, 9.4%, 12.7% and 17.9% of our total operating income in 2016, 2017 and 2018 and the six months ended June 30, 2018 and 2019, respectively. Operating income from our financial markets business increased significantly from RMB160.8 million in 2016 to RMB373.3 million in 2017, primarily due to increase in net interest income attributable to our increased investments in local government bonds. Operating income from our financial markets business further increased significantly to RMB822.8 million in 2018, primarily due to the increased net trading gains and net gains arising from investment securities due to favorable market conditions. Operating income from our financial markets business increased by 72.9% from RMB523.4 million for the six months ended June 30, 2018 to RMB904.9 million for the same period in 2019, primarily due to our expanded investment portfolio, particularly investments in debt securities and mutual funds.

– 389 – FINANCIAL INFORMATION

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.

Year ended December 31, Six Months ended June 30,

2016(1) 2017(1) 2018(2) 2018(2) 2019(2)

%of %of %of %of %of Amount Total Amount Total Amount Total Amount Total Amount Total

(in millions of RMB, except percentages)

Head office 642.4 8.1 (126.2) (1.5) (277.1) (3.2) 112.0 2.8 528.3 10.6 Guiyang (貴陽) 2,429.7 30.1 2,604.4 30.2 2,500.2 28.5 1,144.4 27.7 1,232.0 24.4 Zunyi (遵義) 1,446.2 17.9 1,802.6 20.9 2,288.9 26.1 934.9 22.6 1,036.5 20.5 Liupanshui (六盤水) 744.1 9.2 871.2 10.1 919.3 10.5 436.5 10.6 490.5 9.7 Qiannan (黔南) 329.1 4.1 562.2 6.6 636.3 7.3 265.0 6.4 365.1 7.2 Anshun (安順) 646.4 8.0 785.5 9.1 672.8 7.7 307.9 7.5 360.3 7.1 Qianxinan (黔西南) 544.1 6.7 544.8 6.3 482.1 5.5 223.0 5.4 235.1 4.7 Bijie (畢節) 509.8 6.3 568.1 6.6 625.5 7.1 294.7 7.1 278.5 5.5 Qiandongnan (黔東南) 341.1 4.2 537.6 6.2 521.0 5.9 236.6 5.7 295.3 5.9 Tongren (銅仁) 435.6 5.4 475.2 5.5 400.6 4.6 173.2 4.2 223.6 4.4 Total operating income 8,068.5 100.0 8,625.4 100.0 8,769.6 100.0 4,128.2 100.0 5,045.2 100.0

(1) IAS 39 was adopted prior to January 1, 2018. (2) IFRS 9 was adopted from January 1, 2018.

Since our establishment in September 1997, we have operated our business in Guizhou Province, and our head office and operations in Guiyang and Zunyi have become the largest sources of our operating income. In 2016, 2017 and 2018 and the six months ended June 30, 2018 and 2019, operating income from our head office and our operations in Guiyang and Zunyi accounted for 56.1%, 49.6%, 51.4%, 53.1% and 55.5%, respectively, of our total operating income.

– 390 – FINANCIAL INFORMATION

CASH FLOWS

The following table sets forth our cash flows for the periods indicated.

Six Months ended Year ended December 31, June 30, 2016(1) 2017(1) 2018(2) 2018(2) 2019(2) (in millions of RMB) Cash flow from operating activities before changes in operating assets and liabilities 6,063.3 7,660.1 8,465.9 4,057.3 5,159.2 Cash flows from changes in operating assets and liabilities 38,903.0 (3,652.1) (30,605.8) (6,416.1) (462.3) Net cash generated from/ (used in) operating activities 44,966.3 4,008.0 (22,139.9) (2,358.8) 4,696.9 Net cash used in investing activities (28,086.8) (28,865.1) (6,933.9) (12,286.5) (14,353.6) Net cash generated from financing activities 8,152.4 32,258.6 27,855.7 3,985.7 19,766.8 Net increase/(decrease) in cash and cash equivalents 25,031.9 7,401.5 (1,218.1) (10,659.6) 10,110.1 Cash and cash equivalents at beginning of the year/period 3,900.4 28,934.7 36,334.6 36,334.6 35,118.3 Effect of foreign exchange rate changes 2.4 (1.6) 1.8 – – Cash and cash equivalents at the end of the year/period 28,934.7 36,334.6 35,118.3 25,675.0 45,228.4

(1) IAS 39 was adopted prior to January 1, 2018. (2) IFRS 9 was adopted from January 1, 2018.

Cash Flows Generated from/(Used in) Operating Activities

Cash inflows from operating activities are primarily attributable to increases in customer deposits, deposits from banks and other financial institutions and financial assets sold under repurchase agreements, and decreases in financial assets held under resale agreements and deposits with the central bank. Cash outflows from operating activities are primarily attributable to increases in loans and advances to customers and cash and balances with the central bank and decreases in financial assets sold under repurchase agreements and deposits from banks and other financial institutions.

The increase in our customer deposits was RMB48,575.9 million, RMB37,460.4 million, RMB16,516.3 million, RMB9,789.7 million and RMB27,028.4 million in 2016, 2017, 2018 and the six months ended June 30, 2018 and 2019, respectively. We had an increase in financial assets sold under repurchase agreements of RMB7,957.2 million, RMB2,175.2 million and RMB136.3 million in 2016, 2018 and the six months ended June 30, 2019, respectively. We had an increase in deposits from banks and other financial institutions of RMB1,660.5 million and RMB1,137.2 million in 2018 and the six months ended June 30, 2018. We incurred a decrease in balances with the central bank of RMB1,664.8 million and RMB224.2 million in 2018 and the six months ended June 30, 2019. The decrease in financial assets held under resale agreements was RMB10,123.4 million in 2016. We incurred a decrease in financial assets sold under repurchase agreements of RMB7,957.2 million in 2017. The decrease in deposits from banks and other financial institutions amounted to RMB3,772.2 million, RMB7,400.1 million and RMB2,722.3 million in 2016, 2017 and the six months ended June 30, 2019.

– 391 – FINANCIAL INFORMATION

The increase in our loans to customers amounted to RMB14,937.9 million, RMB22,353.5 million, RMB52,366.6 million, RMB14,521.1 million and RMB23,891.3 million in 2016, 2017 and 2018 and the six months ended June 30, 2018 and 2019, respectively. See “Assets and Liabilities – Assets – Loans and Advances to Customers” for a discussion on increases in our loans to customers from December 31, 2016 to December 31, 2018. We had an increase in cash and balances with the central bank of RMB8,527.6 million, RMB2,446.4 million and RMB854.0 million in 2016, 2017 and the six months ended June 30, 2018, respectively. We incurred a decrease in financial assets sold under repurchase agreements of RMB7,957.2 million in 2017. The decrease in deposits from banks and other financial institutions amounted to RMB3,772.2 million, RMB7,400.1 million and RMB2,722.3 million in 2016, 2017 and the six months ended June 30, 2019. We incurred decreases in balances with the central bank of RMB1,664.8 million and RMB224.2 million in 2018 and the six months ended June 30, 2019. The decrease in financial assets held under resale agreements was RMB10,123.4 million in 2016.

Primarily as a result of the foregoing, our net cash generated from operating activities was RMB44,966.3 million, RMB4,008.0 million and RMB4,696.9 million in 2016, 2017 and the six months ended June 30, 2019, respectively. Our net cash used in operating activities was RMB22,139.9 million and RMB2,358.6 million in 2018 and the six months ended June 30, 2018, respectively.

Cash Flows Used in 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 RMB39,897.7 million, RMB66,147.8 million, RMB72,943.4 million, RMB7,322.3 million and RMB10,207.9 million in 2016, 2017 and 2018 and the six months ended June 30, 2018 and 2019, respectively.

Our cash outflows from investing activities are primarily attributable to payments on purchase of investment securities. We used cash of RMB67,675.3 million, RMB94,854.7 million, RMB78,105.5 million, RMB19,555.0 million and RMB24,283.4 million in 2016, 2017 and 2018 and the six months ended June 30, 2018 and 2019, respectively, to purchase investment securities.

Our net cash used in investing activities was RMB28,086.8 million, RMB28,865.1 million, RMB6,933.9 million, RMB12,286.5 million and RMB14,353.7 million in 2016, 2017 and 2018 and the six months ended June 30, 2018 and 2019, respectively.

Cash Flows Generated from Financing Activities

Our cash inflows from financing activities are primarily attributable to proceeds from issuance of debt securities. Our proceeds from issuance of debt securities was RMB20,849.3 million, RMB58,817.1 million, RMB77,289.7 million, RMB19,886.7 million and RMB50,156.1 million in 2016, 2017 and 2018 and the six months ended June 30, 2018 and 2019, respectively.

– 392 – FINANCIAL INFORMATION

Our cash outflows from financing activities are primarily attributable to repayment for due indebtedness. Our repayment of maturing indebtedness was RMB13,224.0 million, RMB28,683.2 million, RMB49,558.7 million, RMB17,277.6 million and RMB29,136.6 million in 2016, 2017 and 2018 and the six months ended June 30, 2018 and 2019, respectively.

Our net cash generated from financing activities was RMB8,152.4 million, RMB32,258.6 million, RMB27,855.7 million, RMB3,985.7 million and RMB19,766.8 million in 2016, 2017 and 2018 and the six months ended June 30, 2018 and 2019, 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 repayable on demand represented 85.4%, 90.8%, 80.3% and 74.9% of total customer deposits as of December 31, 2016, 2017 and 2018 and June 30, 2019, respectively. See “Supervision and Regulation – Other Operational and Risk Management Ratios” for additional information about our short-term liabilities and sources of funds, as well as for details of our liquidity indicators.

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. We have been focusing on maintaining stable sources of funding and increasing our deposits from customers. Furthermore, to meet potential liquidity demand, we have taken the initiative to hold highly liquid financial assets, such as debt securities issued by PRC government and policy banks, and use deposits with the central bank and deposits with banks and other financial institutions for the purposes of daily liquidity management and settlement. We are able to utilize our cash and surplus deposit reserves and obtain funds from disposing our highly liquid financial assets on short notice. We are also able to quickly obtain financing in the interbank market and through issuing interbank certificates of deposit. See “Risk Management – Liquidity Risk Management” for details of our liquidity risk management measures.

– 393 – FINANCIAL INFORMATION

The following table sets forth, as of June 30, 2019, the remaining maturities of our assets and liabilities.

June 30, 2019(1) Between Between Between Repayable Less than one and three and one and More than Indefinite on demand one month three months 12 Months five years five years Total (in millions of RMB)

Assets Loans and advances to customers 705.6 223.5 2,150.4 4,251.3 22,802.8 33,731.8 95,027.3 158,892.7 Financial investments 341.1 87.4 1,085.6 2,115.2 23,416.5 69,491.2 53,617.3 150,154.3 Cash and deposits with the central bank 25,378.0 22,642.9 – ––––48,020.9 Financial assets held under resale agreements – – 19,988.8 ––––19,988.8 Deposits with banks and other financial institutions 1,318.2 2,152.0 – – 762.1 – – 4,232.3 Others(2) 8,333.4 – – ––––8,333.4 Total assets 36,076.3 25,105.8 23,224.8 6,366.5 46,981.4 103,223.0 148,644.6 389,622.4 Liabilities Deposits from customers – 139,491.4 1,681.1 4,560.1 39,415.0 61,734.6 231.5 247,113.7 Debt securities issued – – – 24,220.2 67,750.6 5,116.5 2,826.0 99,913.3 Deposits from banks and other financial institutions – 492.9 5.2 1,001.1 5,791.0 – – 7,290.2 Borrowings from the central bank – – – 181.1 2,577.5 – – 2,758.6 Financial assets sold under repurchase agreements – – 2,313.8 ––––2,313.8 Placements from banks and other financial institutions – – – 0.1 – 100.0 – 100.1 Others(3) 2,118.7 – 33.3 11.3 152.2 354.2 135.5 2,805.2 Total liabilities 2,118.7 139,984.3 4,033.4 29,973.9 115,686.3 67,305.3 3,193.0 362,294.9 Net liquidity gap 33,957.6 (114,878.5) 19,191.4 (23,607.4) (68,704.9) 35,917.7 145,451.6 27,327.5

Cumulative liquidity gap 33,957.6 (80,920.9) (61,729.5) (85,336.9) (154,041.8) (118,124.1) 27,327.5

(1) IFRS 9 was adopted from January 1, 2018. (2) Consists primarily of property and equipment, deferred tax assets, investments in associates and other assets. (3) Consists primarily of income tax payable, accrued staff cost and other liabilities.

– 394 – FINANCIAL INFORMATION

CAPITAL RESOURCES

Shareholders’ Equity

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, 2016(1) 13,587.7 Share capital 1,039.7 Capital reserve 602.1 Surplus reserve 196.1 General reserve 420.0 Fair value reserve (74.7) Surplus on remeasurement of net defined benefit liability 2.9 Retained earnings 483.2 Non-controlling interest – As of December 31, 2016(1) 16,257.0 Share capital 1,601.7 Capital reserve 1,742.1 Fair value reserve (157.5) Surplus on remeasurement of net defined benefit liability 10.2 Surplus reserve 225.5 General reserve 1,350.0 Retained earnings 68.4 Non-controlling interest – As of December 31, 2017(1) 21,097.4 Changes in accounting policies (406.0) As of January 1, 2018(2) 20,691.4 Share capital 1,125.0 Capital reserve 1,237.5 Fair value reserve 220.2 Impairment reserve 3.2 Deficit on remeasurement of net defined benefit liability (16.0) Surplus reserve 288.3 General reserve 420.0 Retained earnings 1,489.3 Non-controlling interest – As of December 31, 2018(2) 25,458.9 Share capital – Capital reserve – Fair value reserve 70.8 Impairment reserve 3.4 Surplus on remeasurement of net defined benefit liability 4.7 Surplus reserve – General reserve – Retained earnings 1,789.7 Non-controlling interest – As of June 30, 2019(2) 27,327.5

– 395 – FINANCIAL INFORMATION

(1) IAS 39 was adopted prior to January 1, 2018. (2) IFRS 9 was adopted from January 1, 2018.

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. See “– Critical Accounting Estimates and Judgments – Impact of New Accounting Policies” for details on differences between IAS 39 and IFRS 9 and the impact of adopting IFRS 9 on our results of operations.

Indebtedness

As of October 31, 2019, the most recent practicable date for the purpose of ascertaining certain information contained in this description of indebtedness, we had the following indebtedness:

• outstanding interbank certificates of deposit issued in an aggregate principal amount of RMB92.7 billion;

• tier-two capital bonds issued with an aggregate principal amount of RMB2.8 billion;

• financial bonds issued with an aggregate principal amount of RMB5.0 billion;

• the deposits and money market positions taking from customers and other banks, and the balances under repurchase agreements that arose from the ordinary course of our banking business;

• the loan commitments, acceptances, letters of credit and letters of guarantee issued, other commitments, and contingencies that arose from the ordinary course of our banking business; and

• lease liabilities in an amount of RMB504.0 million.

Except as disclosed above, we did not have, as of October 31, 2019, 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 October 31, 2019.

– 396 – FINANCIAL INFORMATION

Interbank Certificate of Deposit

The following are interbank certificates of deposit issued by us during the Track Record Period:

• In 2017, we issued a number of interbank certificates of deposit with an aggregate nominal amount of RMB61.5 billion with effective interest rates ranging from 4.24% to 5.38% per year and terms ranging from six months to 12 months;

• In 2018, we issued a number of interbank certificates of deposit with an aggregate nominal amount of RMB72.0 billion with effective interest rates ranging from 3.79% to 5.23% per year and terms ranging from nine months to 12 months; and

• In the six months ended June 30, 2019, we issued a number of interbank certificates of deposit with an aggregate nominal amount of RMB51.9 billion with effective interest rates ranging from 2.73% to 3.86% per year and terms ranging from one month to 12 months.

Tier-two Capital Bonds

The following are tier-two capital bonds issued by us during the Track Record Period:

• In June 2018, we issued ten-year tier-two capital bonds with a principal amount of RMB1.8 billion in aggregate and a fixed interest rate of 5.00% per year. We have the option to early redeem such bonds in June 2023; and

• In December 2018, we issued ten-year tier-two capital bonds with a principal amount of RMB1.0 billion in aggregate and a fixed interest rate of 5.50% per year. We have the option to early redeem such bonds in June 2023.

Green Financial Bonds

The following are green financial bonds issued by us during the Track Record Period:

• In November 2018, we issued three-year green financial bonds with a principal amount of RMB3.0 billion in aggregate and a fixed interest rate of 4.03% per year.

• In December 2018, we issued three-year green financial bonds with a principal amount of RMB2.0 billion in aggregate and a fixed interest rate of 4.00% per year.

Capital Adequacy

We are subject to capital adequacy requirements as promulgated by the CBIRC. We are required to maintain our capital adequacy ratio above the minimum level required by the CBIRC during the transitional period.

– 397 – FINANCIAL INFORMATION

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.

December 31, June 30,

2016 2017 2018 2019

(in millions of RMB, except percentages)

Core tier-one capital: Share capital 9,661.3 11,263.0 12,388.0 12,388.0 Capital reserve 3,285.3 5,027.4 6,264.9 6,264.9 Retained earnings 1,834.3 1,902.7 3,398.2 4,025.8 General reserve 840.0 2,190.0 2,610.0 3,360.0 Surplus reserve 620.9 846.4 1,134.7 1,134.7 Fair value reserve 17.8 (139.6) 106.2 149.0 Remeasurement of net defined benefit liability for reserve (2.7) 7.5 (8.5) (3.8) Impairment reserve – – – 8.9 Qualifying non-controlling interests –––– Total core tier-one capital 16,256.9 21,097.4 25,893.5 27,327.5

Core tier-one capital deductions 297.7 277.2 208.0 194.1 Other tier-one capital –––– Net tier-one capital 15,959.2 20,820.2 25,685.5 27,133.4 Tier-two capital: Qualifying surplus allowance for impairment losses on loans 1,474.8 1,310.3 2,504.9 2,969.6 Qualifying tier-two capital instruments and related premiums – – 2,843.4 2,826.0 Non-controlling interests –––– Net capital base 17,434.0 22,130.5 31,033.8 32,929.0

Total risk-weighted assets 155,519.4 190,502.9 241,843.5 263,276.3 Core tier-one capital adequacy ratio 10.26% 10.93% 10.62% 10.31% Tier-one capital adequacy ratio 10.26% 10.93% 10.62% 10.31% Capital adequacy ratio 11.21% 11.62% 12.83% 12.51%

As of December 31, 2016, 2017 and 2018, and June 30, 2019, our core tier-one capital adequacy ratio, tier-one capital adequacy ratio and capital adequacy ratio were all in compliance with the CBIRC requirements.

We closely monitor capital adequacy ratio to ensure compliance with regulatory requirements and will take various measures to maintain ongoing compliance, including: (i) raising capital by issuing new shares and debt securities, (ii) increasing retained earnings by continually improving profitability, and (iii) managing the growth of risk-weighted assets.

– 398 – FINANCIAL INFORMATION

OFF-BALANCE SHEET COMMITMENTS

Our off-balance sheet commitments consist primarily of bank acceptances, operating lease commitments, letters of guarantee issued, capital commitments and letters of credit. The following table sets forth the contractual amounts of our off-balance sheet commitments as of the dates indicated.

December 31, June 30,

2016(1) 2017(1) 2018(2) 2019(2) (in millions of RMB)

Bank acceptances 8,830.7 8,529.5 10,107.7 26,127.2 Letters of credit – – 183.3 1,016.6 Letters of guarantee 737.8 283.5 531.7 542.4 Capital commitments 44.6 40.6 372.9 418.0 – Contracted but unpaid 44.6 40.0 362.8 415.6 Credit card commitments – – 305.8 416.6 – Authorized but not contracted – 0.6 10.1 2.4 Operating lease commitments 818.60 695.40 641.40 N/A – Within one year 123.2 142.1 201.8 N/A – From one year to two years 142.1 175.2 134.6 N/A – From two years to three years 175.2 116.7 112.9 N/A – Over three years 378.1 261.4 192.1 N/A Loan commitments (due within one year) 969.7––– Total 11,401.4 9,549.0 12,142.8 28,520.8

(1) IAS 39 was adopted prior to January 1, 2018. (2) IFRS 9 was adopted from January 1, 2018.

Our total off-balance sheet commitments increased significantly from RMB12,142.8 million as of December 31, 2018 to RMB28,520.8 million as of June 30, 2019, primarily due to (i) an increase in bank acceptances from RMB10,107.7 million as of June 30, 2018 to RMB26,127.2 million as of June 30, 2019, primarily as we increased financial support to local real economy by offering diversified financing channels to private and small-sized enterprises while requiring pledges of certificates of deposit and pledged deposits as risk control management measures, and (ii) an increase in letters of credit from RMB183.3 million as of December 31, 2018 to RMB1,016.6 million as of June 30, 2019, mainly reflecting our efforts to expand and diversify our business to meet increasing customer demands.

Our total off-balance sheet commitments increased by 27.2% from RMB9,549.0 million as of December 31, 2017 to RMB12,142.8 million as of December 31, 2018, primarily due to the increases in our bank acceptances and letters of guarantee, as we developed bank acceptance and guarantee business in response to our business expansion and increased customer demands.

– 399 – FINANCIAL INFORMATION

Our total off-balance sheet commitments decreased by 16.2% from RMB11,401.4 million as of December 31, 2016 to RMB9,549.0 million as of December 31, 2017, primarily due to (i) a decrease in our loan commitments due within one year from RMB969.7 million as of December 31, 2016 to nil as of December 31, 2017, as we improved our asset management in high-risk business and reduced capital consumption and (ii) a 61.6% decrease in letters of guarantee from RMB737.8 million as of December 31, 2016 to RMB283.5 million as of December 31, 2017, mainly due to decreased customer demands according to customer funding needs and preference.

CAPITAL EXPENDITURES

Our capital expenditures during the Track Record Period were primarily for acquisition of properties for, and renovation of, our branches and sub-branches, purchases of self-service banking equipment and development of information systems.

Our capital expenditures amounted to RMB706.9 million, RMB493.8 million, RMB1,844.2 million and RMB293.9 million in 2016, 2017 and 2018 and the six months ended June 30, 2019, respectively. As of June 30, 2019, we had authorized capital commitments of RMB418.0 million, among which RMB2.4 million has not been contracted for. The foregoing amounts and purposes may change depending on business conditions.

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 June 30, 2019. See “– Liquidity” for the remaining maturities of our assets and liabilities as of June 30, 2019.

June 30, 2019 Between one Less than year and More than one year five years five years Total (in millions of RMB) Contractual obligations on balance sheet Green financial bonds – 5,116.5 – 5,116.5 Tier two capital bonds issued – – 2,826.0 2,826.0 Interbank certificates of deposits issued 91,970.8 – – 91,970.8 Subtotal 91,970.8 5,116.5 2,826.0 99,913.3 Contractual obligations off-balance sheet Bank acceptance 26,127.2 – – 26,127.2 Letters of credit 1,016.6 – – 1,016.6 Letters of guarantee 26.4 516.0 – 542.4 Unused credit card facility extent – – – – Subtotal 27,170.2 516.0 – 27,686.2 Total 27,170.2 516.0 – 27,686.2

– 400 – FINANCIAL INFORMATION

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. See note 35 to the Accountants’ Report attached hereto as Appendix I to this prospectus for further details.

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, 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 risk to which we are primarily exposed is 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.

– 401 – FINANCIAL INFORMATION

Repricing Gap Analysis

The following table sets forth, as of June 30, 2019, 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.

June 30, 2019(1) Non- Within Three One year interest three months to to five Over five bearing months 12 months years years Total (in millions of RMB)

Assets Loans and advances to customers 336.9 6,531.1 23,125.4 33,871.9 95,027.4 158,892.7 Financial investments 1,287.5 3,591.9 23,348.0 68,713.6 53,213.3 150,154.3 Cash and deposits with the central bank 571.0 47,449.9 – – – 48,020.9 Deposits with banks and other financial institutions 28.6 2,600.0 1,603.7 – – 4,232.3 Financial assets held under resale agreements 4.4 19,984.4 – – – 19,988.8 Others(2) 8,333.4 – – – – 8,333.4 Total assets 10,561.8 80,157.3 48,077.1 102,585.5 148,240.7 389,622.4 Liabilities Deposits from customers 1,413.9 150,791.0 38,070.6 56,838.2 – 247,113.7 Debt securities issued 153.4 24,220.2 67,750.5 4,997.1 2,792.1 99,913.3 Deposits from banks and other financial institutions 72.4 1,497.8 5,720.0 – – 7,290.2 Borrowings from the central bank 1.9 181.1 2,575.6 – – 2,758.6 Financial assets sold under repurchase agreements 2.3 2,311.5 – – – 2,313.8 Placements from banks and other financial institutions 0.1 – – 100.0 – 100.1 Others(3) 2,805.2 – – – – 2,805.2 Total liabilities 4,449.2 179,001.6 114,116.7 61,935.3 2,792.1 362,294.9 Re-pricing gap 6,112.6 (98,844.3) (66,039.6) 40,650.2 145,448.6 27,327.5

Cumulative re-pricing gap 6,112.6 (92,731.7) (158,771.3) (118,121.1) 27,327.5

(1) IFRS 9 was adopted from January 1, 2018. (2) Consists primarily of property and equipment, deferred income tax assets, investments in associates and other assets. (3) Consists primarily of income tax payable, accrued staff cost and other liabilities.

– 402 – FINANCIAL INFORMATION

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.

December 31, June 30, 2016(1) 2017(1) 2018(2) 2019(2) Net Net Net Net profit Equity profit Equity profit Equity profit Equity (in millions of RMB) 100 basis-point increase (624.6) (623.3) (819.7) (802.1) (891.8) (889.6) (919.4) (904.9) 100 basis-point decrease 624.6 623.3 819.7 802.1 891.8 889.6 919.4 904.9

(1) IAS 39 was adopted prior to January 1, 2018. (2) IFRS 9 was adopted from January 1, 2018.

Based on our assets and liabilities as of June 30, 2019, if interest rates increase (or decrease) by 100 basis points instantaneously, our net profit and equity for the six months ended June 30, 2019 would decrease (or increase) by RMB919.4 million and RMB904.9 million, respectively.

The sensitivity analysis above is based on a static interest rate risk profile of our assets and liabilities. This analysis measures only the impact of changes in interest rates within one year, showing how annualized net profit or loss and equity would have been affected by repricing of our assets and liabilities within the one-year period. The sensitivity analysis is based on the following assumptions:

• interest rate movements at the end of each of the relevant periods apply to our non-derivative financial instruments;

• at the end of each of the relevant periods, an interest rate movement of 100 basis points is based on the assumption of interest rates movement over the next 12 months;

• there is a parallel shift in the yield curve with the changes in interest rates;

• there are no other changes to the assets and liabilities portfolio;

• other variables (including exchange rates) remain unchanged; and

• the analysis does not take into account the effect of risk management measures taken by the management.

Due to the adoption of the aforementioned assumptions, the actual changes in our net profit or loss and equity caused by an increase or decrease in interest rates might vary from the estimated results of this sensitivity analysis.

– 403 – FINANCIAL INFORMATION

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

Whether to pay dividends, the amount of dividends to be paid or the dividend payout ratio 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. We currently do not have a pre-determined dividend payout ratio. 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.

Under PRC laws and our Articles of Association, we may only pay dividends out of our distributable profits. Our distributable profits represent 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 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 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 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;

• appropriations to a discretionary surplus reserve as approved by the shareholders in an annual general meeting; and

• losses from confiscated properties, and payments for unpaid government fine or penalty.

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 reserve constitutes part of our reserves. As of June 30, 2019, the balance of our general reserve amounted to RMB3,360.0 million, which was in compliance with the MOF requirements in respect of appropriation of the general reserve.

– 404 – FINANCIAL INFORMATION

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. See “Supervision and Regulation – Supervision of Capital Adequacy Level – Regulatory Requirements in respect of Capital Adequacy Ratios” and “Supervision and Regulation – Principal Regulators – CBIRC.”

In 2016, 2017, 2018 and the first half of 2019, we paid cash dividends to our shareholders of RMB868.7 million, RMB542.3 million, RMB716.5 million and RMB0.03 million, respectively. As of June 30, 2019, our declared but unpaid dividends amounted to RMB48.3 million, mainly comprising dividends payable to shareholders that we were unable to contact or who did not timely claim the dividends. We intend to make payment of the declared but undistributed dividends payable to shareholders that we were unable to contact or who did not timely claim using our internal funds after locating relevant shareholders, according to relevant PRC laws and regulations. See note 31 to Appendix I attached to this prospectus for further details. 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.

There is no material difference between PRC GAAP and IFRS in terms of preparing our financial statements for 2016 and 2017. In 2016 and 2017, our net profit calculated in accordance with PRC GAAP was the same as our net profit calculated in accordance with IFRS for the same year, respectively. In 2018, we adopted IFRS 9 which differs from the standards under PRC GAAP, and our profit prepared in accordance with PRC GAAP amounted to RMB2,882.8 million, representing a 0.2% increase from our net profit of RMB2,876.6 million should we apply the standards under IFRS.

In view of our application of the New Standards of PRC GAAP since January 1, 2019, we expect that, after January 1, 2019, unless new accounting standards or related amendment are issued which would result in different adoption time of relevant standards under PRC GAAP and IFRS, there would be no material difference between our net profit prepared in accordance with PRC GAAP and IFRS which may impact the amount of dividend that we will pay in the future.

– 405 – FINANCIAL INFORMATION

UNAUDITED PRO FORMA STATEMENT OF ADJUSTED NET TANGIBLE ASSETS

The following unaudited pro forma statement of adjusted net tangible assets is prepared based on our net tangible assets attributable to our Shareholders as of June 30, 2019 derived from our financial information as of June 30, 2019 as set out in the Accountants’ Report set forth in Appendix I to this prospectus, adjusted as described below.

The unaudited pro forma statement of adjusted net tangible assets has been prepared to show the effect on our net tangible assets as of June 30, 2019 as if the Global Offering had occurred on June 30, 2019. The unaudited pro forma adjusted net tangible assets per share are calculated in accordance with Rule 4.29 of the Listing Rules.

The unaudited pro forma 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.

Estimated Unaudited pro Net tangible net proceeds forma adjusted assets of our from the net tangible Unaudited pro forma Bank as of Global assets of adjusted net tangible assets June 30, 2019(1) Offering(2)(5) our Bank(3) per share(4) (in millions of RMB) (RMB) (HK$)(5) Based on an Offer Price of HK$2.46 per Offer Share 27,131.8 4,732.4 31,864.2 2.18 2.42 Based on an Offer Price of HK$2.61 per Offer Share 27,131.8 5,024.3 32,156.1 2.20 2.45

(1) The net tangible assets of our Bank as of June 30, 2019 are based on the total equity attributable to Shareholders of our Bank of approximately RMB27,327.5 million as of June 30, 2019, with an adjustment for the intangible assets of RMB195.7 million as of June 30, 2019. (2) The estimated net proceeds from the Global Offering are based on the indicative Offer Price of HK$2.46 per share (being the minimum offer price) and HK$2.61 per share (being the maximum offer price), after deduction of the underwriting fees and other related listing expenses payable by us, taking no account of any shares which may be issued upon the exercise of the Over-allotment Option for the Global Offering. (3) The unaudited pro forma adjusted net tangible assets do not take into account the operational results or other transactions of our Group subsequent to June 30, 2019. (4) The unaudited pro forma adjusted net tangible assets per share are arrived at after the adjustments referred to in note (2) above and on the basis that 14,588,046,744 shares are issued and outstanding, assuming that the Global Offering has been completed on June 30, 2019 and that the Over-allotment Option for the Global Offering is not exercised. (5) The translation of Renminbi into or from Hong Kong dollars has been made at the rate of RMB0.8990 to HK$1.0000, the exchange rate set by the PBOC prevailing on December 6, 2019. No representation is made that the Renminbi amounts have been, could have been or may be converted to Hong Kong dollars, or vice versa, at that rate or at any other rate or at all.

– 406 – FINANCIAL INFORMATION

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, 2019 to the date of this prospectus.

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 our Directors in this prospectus.

LISTING EXPENSES

We will incur listing expenses in connection with the Listing, which include professional fees, underwriting commissions and other fees. Assuming the Over-allotment Option were not exercised and an Offer Price of HK$2.54 per H Share, being the mid-point of the stated range of the Offer Price of between HK$2.46 and HK$2.61 per Share, the listing expenses to be borne by us are estimated to be RMB135.4 million (equivalent to approximately HK$150.6 million). We recognized RMB5.7 million as listing expense in our statement of profit or loss and other comprehensive income for the six months ended June 30, 2019, and additional listing expenses of approximately RMB5.7 million is expected to be expensed in 2019. Approximately RMB124.0 million is expected to be capitalized. Our Directors do not expect these listing expenses to have a material adverse impact on our results of operation for 2019.

– 407 – FUTURE PLANS AND USE OF PROCEEDS

FUTURE PLANS

See “Business – Our Business Strategies” in this prospectus for a detailed discussion of our future plans.

USE OF PROCEEDS

Assuming an Offer Price of HK$2.54 per Share (being the mid-point of the stated range of the Offer Price of between HK$2.46 and HK$2.61 per Share), we estimate that we will receive net proceeds of approximately HK$5,437.4 million from the Global Offering after deducting the underwriting commissions and other estimated expenses in connection with the Global Offering and assuming that the Over-allotment Option is not exercised. In line with our strategies, we intend to use our proceeds from the Global Offering to strength our capital base to support the sustainable growth of our business.

Assuming an Offer Price of HK$2.46 per Share (being the low-end of the indicative range of the Offer Price), we estimate that we will receive net proceeds of approximately HK$5,264.2 million from the Global Offering after deducting the underwriting commissions and other estimated expenses in connection with the Global Offering and assuming that the Over- allotment Option is not exercised. In line with our strategies, we intend to use our proceeds from the Global Offering to strength our capital base to support the sustainable growth of our business.

Assuming an Offer Price of HK$2.61 (being the high-end of the indicative range of the Offer Price), we estimate that we will receive net proceeds of approximately HK$5,588.9 million from the Global Offering after deducting the underwriting commissions and other estimated expenses in connection with the Global Offering and assuming that the Over- allotment Option is not exercised. In line with our strategies, we intend to use our proceeds from the Global Offering to strength our capital base to support the sustainable growth of our business.

The net proceeds that we would receive if the Over-allotment Option were exercised in full would be (i) HK$6,436.4 million (assuming an Offer Price of HK$2.61 per Share, being the high-end of the Offer Price range stated in this prospectus), (ii) HK$6,262.2 million (assuming an Offer Price of HK$2.54 per Share, being the mid-point of the Offer Price range stated in this prospectus) and (iii) HK$6,063.0 million (assuming an Offer Price of HK$2.46 per Share, being the low-end of the Offer Price range stated in this prospectus).

– 408 – UNDERWRITING

HONG KONG UNDERWRITERS

ABCI Securities Company Limited CCB International Capital Limited CLSA Limited AMTD Global Markets Limited ICBC International Securities Limited CMB International Capital Limited China Investment Securities International Brokerage Limited Goldbridge Securities Limited Haitong International Securities Company Limited

UNDERWRITING ARRANGEMENTS AND EXPENSES

Hong Kong Public Offering

Hong Kong Underwriting Agreement

Pursuant to the Hong Kong Underwriting Agreement, we are offering initially 220,000,000 Hong Kong Offer Shares (subject to re-allotment) for subscription by way of the Hong Kong Public Offering on and subject to the terms and conditions of this prospectus and the Application Forms at the Offer Price.

Subject to the Listing Committee of the Hong Kong Stock Exchange granting approval for the listing of, and permission to deal in, the H Shares to be offered pursuant to the Global Offering (including any additional H Shares which may be issued or sold pursuant to the exercise of the Over-allotment Option) as mentioned in this prospectus, and to certain other conditions set out in the Hong Kong Underwriting Agreement, the Hong Kong Underwriters have agreed severally and not jointly to subscribe or procure subscriptions for the Hong Kong Offer Shares now being offered which are not taken up under the Hong Kong Public Offering on and subject to the terms and conditions of this prospectus, the Application Forms and the Hong Kong Underwriting Agreement.

The Hong Kong Underwriting Agreement is conditional on and subject to the International Underwriting Agreement having been executed and becoming unconditional and not having been terminated in accordance with its terms.

– 409 – UNDERWRITING

Grounds for Termination

The obligations of the Hong Kong Underwriters to subscribe or procure subscriptions for the Hong Kong Offer Shares under the Hong Kong Underwriting Agreement are subject to termination with immediate effect by notice from the Joint Representatives (for themselves and on behalf of the Hong Kong Underwriters) and the Joint Sponsors if, at any time prior to 8:00 a.m. on the Listing Date:

(1) there develops, occurs, exists or comes into force:

(i) any change or development involving a prospective change, or any event or series of events likely to result in a change or prospective change, in local, national, regional or international financial, political, military, industrial, economic, fiscal, regulatory, currency, credit or market conditions or sentiments, equity securities or other financial markets (including, without limitation, conditions and sentiments in stock and bond markets, money and foreign exchange markets, the inter-bank markets and credit markets) or currency exchange rate or controls in or affecting Hong Kong, the PRC, the United States, Japan, Singapore, the United Kingdom or the European Union (or any member thereof), or any other jurisdiction relevant to the Bank (together, the “Relevant Jurisdictions”); or

(ii) any new law or regulation or any change or development involving a prospective change in existing law or regulation, or any change or development involving a prospective change in the interpretation or application thereof by any court or other competent authority in or affecting any of the Relevant Jurisdictions; or

(iii) any event or series of events in the nature of force majeure (including, without limitation, acts of government, declaration of a national or international emergency or war, calamity, crisis, economic sanctions, strikes, labor disputes, lock-outs, fire, explosion, flooding, earthquake, civil commotion, riots, public disorder, acts of war, acts of God, epidemic, pandemic, outbreak or escalation of infectious disease, (including without limitation SARS, MERS, H5N1, H1N1, swine or avian influenza or such related/mutated forms), accident or interruption or delay in transportation) in or affecting any of the Relevant Jurisdictions, or without limiting the foregoing, any local, national, regional or international outbreak or escalation of hostilities (whether or not war is or has been declared), act of terrorism (whether or not responsibility has been claimed), or other state of emergency or calamity or crisis in or affecting any of the Relevant Jurisdictions; or

– 410 – UNDERWRITING

(iv) the imposition or declaration of (a) any moratorium, suspension or limitation (including without limitation, any imposition of or requirement for any minimum or maximum price limit or price range) on trading in shares or securities generally on the Stock Exchange, the Shanghai Stock Exchange, the Shenzhen Stock Exchange, the Tokyo Stock Exchange, the Singapore Stock Exchange, the New York Stock Exchange, the NASDAQ Global Market or the London Stock Exchange; (b) any moratorium, suspension or limitation (including without limitation, any imposition of or requirement for any minimum or maximum price limit or price range) in or on trading in any securities of the Bank listed or quoted on a stock exchange or an over-the- counter market or (c) any moratorium on banking activities in or affecting any of the Relevant Jurisdictions or any disruption in commercial banking or foreign exchange trading or securities settlement or clearing services in those places or jurisdictions; or

(v) a change or development involving a prospective change or amendment in taxation or exchange control, currency exchange rates or foreign investment regulations (including, without limitation, a devaluation of the Hong Kong dollar or Renminbi against any foreign currencies, a change in the system under which the value of the Hong Kong dollar is linked to that of the United States dollar or the Renminbi is linked to any foreign currency or currencies), or the implementation of any exchange control, in any of the Relevant Jurisdictions; or

(vi) the commencement by any body, authority or agency of any government of any relevant state or territory (including political and regulatory subdivisions) and central, provincial, municipal and other local or regional governments and any court at the central, municipal, local or regional level (the “Governmental Authority”) or other regulatory or political body or organization of any public action or investigation against the Bank or a Director or an announcement by any Governmental Authority or regulatory or political body or organization that it intends to take any such action; or

(vii) any noncompliance of this prospectus (or any other documents used with the contemplated subscription of the Hong Kong Offer Shares) or any aspect of the Global Offering with the Listing Rules or any other applicable law; or

(viii) any contravention by the Bank or any Director of the Listing Rules or applicable laws; or

(ix) any litigation or claim instigated, or any litigation or claim being threatened against the Bank or any Director; or

–411– UNDERWRITING

(x) it becomes necessary for the Bank to issue a supplemental prospectus (or any other documents used in connection with the Global Offering) pursuant to the Companies Ordinance or the Companies (Winding Up and Miscellaneous Provisions) Ordinance or the Listing Rules or any requirement or request of the Stock Exchange and/or the SFC; or

(xi) any breach of, or any event rendering untrue or incorrect in any respect, any of the warranties given by the Bank in the Hong Kong Underwriting Agreement; or

(xii) any event, act or omission which gives rise or is likely to give rise to any liability of the Bank pursuant to the indemnity clause in the Hong Kong Underwriting Agreement; or

(xiii) a portion of the orders placed or confirmed in the bookbuilding process under the International Offering have been withdrawn, terminated or cancelled; or

(xiv) that (a) any Director of the Bank named in this prospectus seeks to retire, or is removed from office, or (b) any Director or any member of senior management as named in this prospectus is being charged with an indictable offense or prohibited by operation of law or otherwise disqualified from taking part in the management of a company, and which, in any of (1) (i) to (xiv) above, individually or in the aggregate, in the sole opinion of the Joint Representatives (for themselves and on behalf of the Hong Kong Underwriters):

(a) has or will or may have a material adverse effect on the assets, liabilities, business, general affairs, prospects, shareholders’ equity, profits, losses, results of operations, position or condition, financial or otherwise, or performance of the Bank as a whole; or

(b) has or will or may have a material adverse effect on the success of the Global Offering and/or make it impracticable or inadvisable for any material part of the Hong Kong Underwriting Agreement, the Hong Kong Public Offering or the Global Offering to be performed or implemented as envisaged; or

(c) has or will or may have a material adverse effect on the level of applications under the Hong Kong Public Offering or the level of interest under the International Offering; or

(d) make, will or may make it impracticable, inadvisable or inexpedient to proceed with the Hong Kong Public Offering and/or the Global Offering, to market the Global Offering or the delivery of H Shares on the Listing Date; or

– 412 – UNDERWRITING

(2) there has come to the notice of the Joint Sponsors, the Joint Representatives, the Joint Global Coordinators, the Joint Bookrunners, the Joint Lead Managers or any of the Hong Kong Underwriters after the date of the Hong Kong Underwriting Agreement:

(i) that any statement contained in any of the Hong Kong Public Offering Documents, International Offering Documents or other Global Offering Documents (each as defined in the Hong Kong Underwriting Agreement) and/or any notices, announcements, advertisements, communications or other documents issued or used by or on behalf of the Bank in connection with the Hong Kong Public Offering (including any supplement or amendment thereto) was, when it was issued, or has become untrue, incorrect, inaccurate or misleading in any material respect; or

(ii) that any estimate, forecast, expression of opinion, intention or expectation contained in any of the Hong Kong Public Offering Documents, International Offering Documents or other Global Offering Documents (each as defined in the Hong Kong Underwriting Agreement) and/or any notices, announcements, advertisements, communications or other documents issued or used by or on behalf of the Bank in connection with the Hong Kong Public Offering (including any supplement or amendment thereto) was, when it was issued, or has become unfair or misleading in any material respect or based on untrue, dishonest or unreasonable assumptions, when taken as a whole; or

(iii) any matter which would, if the Hong Kong Public Offering Documents or International Offering Documents or other Global Offering Documents (each as defined in the Hong Kong Underwriting Agreement) and/or any notices, announcements, advertisements, communications or other documents issued or used by or on behalf of the Bank in connection with the Hong Kong Public Offering (including any supplement or amendment thereto) were issued at that time, constitute a material omission therefrom; or

(iv) any material breach of any of the obligations of any party (other than the Joint Sponsors, the Joint Representatives, the Joint Global Coordinators, the Joint Bookrunners, the Joint Lead Managers or the Hong Kong Underwriters) to the Hong Kong Underwriting Agreement or the International Underwriting Agreement; or

(v) any material adverse change, or any development or any prospective material adverse change or development, in the condition (financial or otherwise) or in the assets, liabilities, business, general affairs, management, prospects, shareholders’ equity, profits, losses, results of operations, position or condition, financial or otherwise, or performance of the Bank as a whole; or

– 413 – UNDERWRITING

(vi) an order or petition is presented for the winding-up or liquidation of the Bank or the Bank makes any composition or arrangement with its creditors or enters into a scheme of arrangement or any resolution is passed for the winding-up of the Bank or a provisional liquidator, receiver or manager is appointed over all or part of the assets or undertaking of the Bank or anything analogous thereto occurs in respect of the Bank; or

(vii) the Bank withdraws this prospectus or the Global Offering; or

(viii)any prohibition on the Bank for whatever reason from offering, allotting, issuing or selling any of the Offer Shares pursuant to the terms of the Global Offering; or

(ix) any expert as disclosed in this prospectus (other than any of the Joint Sponsors) has withdrawn or sought to withdraw its consent to being named in any of the Global Offering Documents (as defined in the Hong Kong Underwriting Agreement) or to the issue of any of the Global Offering Documents (as defined in the Hong Kong Underwriting Agreement).

Undertakings to the Hong Kong Stock Exchange Pursuant to the Listing Rules

Undertakings by the Bank

Pursuant to Rule 10.08 of the Listing Rules, we have undertaken to the Hong Kong Stock Exchange that we will not issue any further Shares or securities convertible into equity securities (whether or not of a class already listed) or enter into any agreement to such issue within six months from the Listing Date (whether or not such issue of Shares or securities will be completed within six months from the commencement of dealings), except pursuant to the Global Offering or any of the circumstances provided under Rule 10.08 of the Listing Rules.

– 414 – UNDERWRITING

Undertakings Pursuant to the Hong Kong Underwriting Agreement

Undertakings by the Bank

We have, pursuant to the Hong Kong Underwriting Agreement, undertaken to each of the Joint Sponsors, the Joint Representatives, the Joint Global Coordinators, the Joint Bookrunners, the Joint Lead Managers and the Hong Kong Underwriters that, except pursuant to the Global Offering (including the Over-allotment Option) or with the prior written consent of the Joint Sponsors and the Joint Representatives (for themselves and on behalf of the Hong Kong Underwriters), and unless in compliance with the Listing Rules, at any time during a period of six months from the Listing Date (the “First Six-Month Period”), it will not, whether conditionally or unconditionally:

(i) allot, issue, offer, sell, contract to sell, accept subscription for, offer to allot, issue or sell, contract or agree to allot, pledge, grant or sell any option, warrant or right to subscribe for or purchase, contract to purchase, or create any interests or encumbrance in respect of, transfer or otherwise dispose of, directly or indirectly, any H Shares or any equity securities of the Bank or any interest in any of the foregoing (including, without limitation, any securities which are convertible into or exchangeable or exercisable for, or represent the right to receive, or any warrants or other rights to purchase, any H Shares); or

(ii) enter into a transaction or an arrangement (including, without limitation, a swap or other derivative transaction) that transfers, in whole or in part, any of the economic consequences of ownership of any H Shares, any other equity securities of the Bank or any interest in any of the foregoing (including, without limitation, any securities which are convertible into or exchangeable or exercisable for, or represent the right to receive, or any warrants or other rights to purchase, any H Shares); or

(iii) enter into any transaction with the same economic effect as any transaction specified in paragraph (i) or (ii); or

(iv) offer or agree or announce any intention to do any of the foregoing,

in each case, whether any of the foregoing transactions is to be settled by delivery of H Shares or such other equity securities of the Bank, or in cash or otherwise (whether or not the issue of the H Shares or such other securities will be completed within the aforesaid period), provided that the foregoing restrictions shall not apply to the issue of H Shares by the Bank pursuant to the Global Offering (including pursuant to the exercise of the Over-allotment Option).

– 415 – UNDERWRITING

In the event that, during the period of six months commencing on the date on which the First Six-Month Period expires (the “Second Six-Month Period”), the Bank enters into any of the transactions specified in paragraph (i), (ii) or (iii) above or offers to or agrees to or announces any intention to effect any such transaction, the Bank shall take all reasonable steps to ensure that such transaction, agreement or, as the case may be, such announcement will not create a disorderly or false market in the securities of the Bank.

Indemnity

We have agreed to indemnify the Joint Sponsors, the Joint Representatives, the Joint Global Coordinators, the Joint Bookrunners, the Joint Lead Managers and the Hong Kong Underwriters for certain losses which they may suffer, including losses arising from their performance of their obligations under the Hong Kong Underwriting Agreement and any breach by us of the Hong Kong Underwriting Agreement.

Hong Kong Underwriters’ Interests in the Bank

Except for its obligations under the Hong Kong Underwriting Agreement, none of the Hong Kong Underwriters has any shareholding interest in the Bank or any right or option (whether legally enforceable or not) to subscribe for or nominate persons to subscribe for securities in the Bank.

Following the completion of the Global Offering, the Hong Kong Underwriters and their affiliated companies may hold a certain portion of the H Shares as a result of fulfilling their obligations under the Hong Kong Underwriting Agreement.

International Offering

International Underwriting Agreement

In connection with the International Offering, it is expected that we will enter into the International Underwriting Agreement with the International Underwriters. Under the International Underwriting Agreement, subject to the conditions set out therein, the International Underwriters will severally agree to procure subscribers or purchasers for the International Offer Shares, failing which they agree to subscribe for or purchase their respective portions of the International Offer Shares which are not taken up under the International Offering.

It is expected that the International Underwriting Agreement may be terminated on similar grounds as the Hong Kong Underwriting Agreement. Potential investors should note that if the International Underwriting Agreement is not entered into, or is terminated, the Global Offering will not proceed.

– 416 – UNDERWRITING

Over-allotment Option

The Bank expects to grant the Over-allotment Option to the International Underwriters, exercisable by the Joint Representatives on behalf of the International Underwriters, until 30 days after the last day for the lodging of Application Forms under the Hong Kong Public Offering, to require the Bank to issue and allot up to an aggregate of 330,000,000 H Shares, representing in aggregate 15% of the Offer Shares initially available under the Global Offering at the Offer Price to cover over-allocations, if any, in the International Offering.

Commissions and Expenses

The Hong Kong Underwriters will receive an underwriting commission of 0.90% of the aggregate Offer Price of all the Hong Kong Offer Shares initially offered under the Hong Kong Public Offering. In addition, we agree, in our sole and absolute discretion, to pay to the Hong Kong Underwriters an incentive fee.

For unsubscribed Hong Kong Offer Shares reallocated to the International Offering, the underwriting commission will not be paid to the Hong Kong Underwriters but will instead be paid, at the rate applicable to the International Offering, to the Joint Representatives and the relevant International Underwriters.

The aggregate commissions and fees, together with the Hong Kong Stock Exchange listing fees, SFC transaction levy and the Hong Kong Stock Exchange trading fee, legal and other professional fees, printing and all other expenses relating to the Global Offering, which are estimated to amount in aggregate to approximately HK$150.6 million (assuming an Offer Price of HK$2.54 per Offer Share (being the mid-point of the indicative Offer Price range stated in this prospectus) and the Over-allotment Option is not exercised at all), are payable and borne by the Bank.

INDEPENDENCE OF THE JOINT SPONSORS

Each of the Joint Sponsors satisfies the independence criteria applicable to sponsors set out in Rule 3A.07 of the Listing Rules.

ACTIVITIES BY SYNDICATE MEMBERS

The underwriters of the Hong Kong Public Offering and the International Offering (together, the “Syndicate Members”) and their affiliates may each individually undertake a variety of activities (as further described below) which do not form part of the underwriting or stabilizing process.

The Syndicate Members and their affiliates are diversified financial institutions with relationships in countries around the world. These entities engage in a wide range of commercial and investment banking, brokerage, funds management, trading, hedging, investing and other activities for their own account and for the account of others. In relation

– 417 – UNDERWRITING to the H Shares, those activities could include acting as agent for buyers and sellers of the H Shares, entering into transactions with those buyers and sellers of the H Shares in a principal capacity, proprietary trading in the H Shares, and entering into over the counter or listed derivative transactions or listed and unlisted securities transactions (including issuing securities such as derivative warrants listed on a stock exchange) which have H Shares as their or part of their underlying assets. Those activities may require hedging activity by those entities involving, directly or indirectly, the buying and selling of the H Shares. All such activity could occur in Hong Kong and elsewhere in the world and may result in the Syndicate Members and their affiliates holding long and short positions in the H Shares, securities or baskets including indices, units of funds that may purchase the H Shares, or derivatives related to any of the foregoing.

In relation to the issuance by Syndicate Members or their affiliates of any listed securities having the H Shares as their underlying securities, whether on the Hong Kong Stock Exchange or on any other stock exchange, the rules of the relevant exchange may require the issuer of those securities (or one of its affiliates or agents) to act as a market maker or liquidity provider in the security, and this will also result in hedging activity in the H Shares in most cases. All such activities may occur both during and after the end of the stabilizing period described in the section headed “Structure of the Global Offering” in this prospectus. Such activities may affect the market price or value of the shares, the liquidity or trading volume in the shares and the volatility of the price of the shares, and the extent to which this occurs from day to day cannot be estimated.

It should be noted that when engaging in any of these activities, the Syndicate Members will be subject to certain restrictions, including the following:

• the Syndicate Members (other than the Stabilizing Manager, its affiliates or any person acting for it) must not, in connection with the distribution of the Offer Shares, effect any transactions (including issuing or entering into any option or other derivative transactions relating to the Offer Shares), whether in the open market or otherwise, with a view to stabilizing or maintaining the market price of any of the Offer Shares at levels higher than those which might otherwise prevail in the open market or other markets; and

• all of them must comply with all applicable laws and regulations, including the market misconduct provisions of the SFO, the provisions prohibiting insider dealing, false trading, price rigging and stock market manipulation.

Hong Kong Underwriters’ Interests in our Bank

Save for its obligations under the Hong Kong Underwriting Agreement, as of the Latest Practicable Date, none of the Hong Kong Underwriters has any shareholding interests in our Bank or the right or option (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in our Bank.

– 418 – UNDERWRITING

Following the completion of the Global Offering, the Hong Kong Underwriters and their affiliated companies may hold a certain portion of the Shares as a result of fulfilling their respective obligations under the Underwriting Agreements.

Over-Allotment and Stabilization

Details of the arrangements relating to the stabilization and Over-allotment Option, if any, are set forth in the sections headed “Structure of the Global Offering – Stabilization”, and “Structure of the Global Offering – The International Offering – Over-allotment Option.”

– 419 – STRUCTURE OF THE GLOBAL OFFERING

THE GLOBAL OFFERING

This prospectus is published in connection with the Hong Kong Public Offering as part of the Global Offering. The Global Offering comprises (subject to adjustment and the Over-allotment Option):

(a) the Hong Kong Public Offering of 220,000,000 Offer Shares (subject to adjustment as mentioned below) in Hong Kong as described in the section headed “– The Hong Kong Public Offering” below; and

(b) the International Offering of 1,980,000,000 Offer Shares (subject to adjustment and the Over-allotment Option as mentioned below) outside the United States (including to professional and institutional investors within Hong Kong) in offshore transactions in reliance on Regulation S.

The Offer Shares will represent approximately 15.08% of the enlarged issued share capital of the Bank immediately after completion of the Global Offering without taking into account the exercise of the Over-allotment Option. If the Over-allotment Option is exercised in full, the Offer Shares will represent approximately 16.96% of the enlarged issued share capital of the Bank immediately after completion of the Global Offering and the exercise of the Over-allotment Option as set out in the section headed “– The International Offering – Over-allotment Option” below.

The Bank has obtained the requisite PRC governmental approvals, including the approval of the CSRC, in respect of the Global Offering.

Investors may apply for the Hong Kong Offer Shares under the Hong Kong Public Offering or indicate an interest, if qualified to do so, for the International Offer Shares under the International Offering, but may not do both. The Hong Kong Public Offering is open to members of the public in Hong Kong as well as to institutional and professional investors in Hong Kong. The International Offering will involve selective marketing of the International Offer Shares to institutional and professional investors and other investors expected to have a sizeable demand for the International Offer Shares in Hong Kong and other jurisdictions outside the United States in reliance on Regulation S.

The International Underwriters are soliciting from prospective investors’ indications of interest in acquiring the International Offer Shares. Prospective investors will be required to specify the number of International Offer Shares under the International Offering they would be prepared to acquire either at different prices or at a particular price.

The number of Hong Kong Offer Shares and International Offer Shares to be offered under the Hong Kong Public Offering and the International Offering respectively may be subject to reallocation as described in the sub-section headed “– The Hong Kong Public Offering-Reallocation and Clawback” below.

– 420 – STRUCTURE OF THE GLOBAL OFFERING

THE HONG KONG PUBLIC OFFERING

Number of Shares Initially Offered

We are initially offering 220,000,000 Offer Shares for subscription by the public in Hong Kong at the Offer Price, representing 10% of the total number of the Offer Shares initially available under the Global Offering. The Hong Kong Public Offering is open to members of the public in Hong Kong as well as to institutional and professional investors. Subject to the reallocation of the Offer Shares between the International Offering and the Hong Kong Public Offering, the Hong Kong Offer Shares will represent approximately 1.51% of the enlarged issued share capital of the Bank immediately following the completion of the Global Offering (assuming the Over-allotment Option is not exercised). Professional investors generally include brokers, dealers, companies (including fund managers) whose ordinary business involves dealing in shares and other securities and corporate entities which regularly invest in shares and other securities.

Completion of the Hong Kong Public Offering is subject to the conditions as set forth in the paragraph headed “– Conditions of the Global Offering” below.

Allocation

Allocation of the Offer Shares to investors under the Hong Kong Public Offering will be based solely on the level of valid applications received under the Hong Kong Public Offering. The basis of allocation may vary, depending on the number of Hong Kong Offer Shares validly applied for by applicants. Such allocation could, where appropriate, consist of balloting, which would mean that some applicants may receive a higher allocation than others who have applied for the same number of the Hong Kong Offer Shares, and those applicants who are not successful in the ballot may not receive any Hong Kong Offer Shares.

The total number of the Offer Shares initially available under the Hong Kong Public Offering (after taking into account any adjustment in the number of the Offer Shares allocated between the Hong Kong Public Offering and the International Offering) is to be equally divided into two pools for allocation purposes (subject to adjustment at odd lot size): Pool A and Pool B. The Hong Kong Offer Shares in Pool A will be allocated on an equitable basis to applicants who have applied for Offer Shares with an aggregate price of HK$5 million or less (excluding the brokerage, SFC transaction levy and the Hong Kong Stock Exchange trading fee payable). The Hong Kong Offer Shares in Pool B will be allocated on an equitable basis to applicants who have applied for the Offer Shares with an aggregate price of more than HK$5 million and up to the total value of Pool B (excluding the brokerage, SFC transaction levy and the Hong Kong Stock Exchange trading fee payable).

Investors should be aware that applications in Pool A and applications in Pool B may receive different allocation ratios. If the Offer Shares in one (but not both) of the pools are under-subscribed, the surplus Offer Shares will be transferred to the other pool to satisfy demand in that other pool and be allocated accordingly. For the purpose of this paragraph only, the “price” for the Offer Shares means the price payable on application therefor (without regard to the Offer Price as finally determined). Applicants can only receive an allocation of the Offer

– 421 – STRUCTURE OF THE GLOBAL OFFERING

Shares from either Pool A or Pool B but not from both pools. Multiple or suspected multiple applications and any application for more than 110,000,000 Hong Kong Offer Shares (being 50% of the 220,000,000 Offer Shares initially available under the Hong Kong Public Offering) are liable to be rejected.

Reallocation and Clawback

The allocation of the Offer Shares between the Hong Kong Public Offering and the International Offering is subject to adjustment. Paragraph 4.2 of Practice Note 18 of the Listing Rules requires a clawback mechanism to be put in place which would have the effect of increasing the number of the Offer Shares under the Hong Kong Public Offering to a certain percentage of the total number of the Offer Shares offered under the Global Offering if the International Offer Shares are fully subscribed or oversubscribed, and certain prescribed total demand levels are reached as further described below:

• if the number of the Offer Shares validly applied for under the Hong Kong Public Offering represents 15 times or more but less than 50 times the number of the Offer Shares initially available for subscription under the Hong Kong Public Offering, then the number of the Offer Shares to be reallocated to the Hong Kong Public Offering from the International Offering will be increased so that the total number of the Offer Shares available under the Hong Kong Public Offering will be 660,000,000 Offer Shares, representing 30% of the Offer Shares initially available under the Global Offering;

• if the number of the Offer Shares validly applied for under the Hong Kong Public Offering represents 50 times or more but less than 100 times the number of the Offer Shares initially available for subscription under the Hong Kong Public Offering, then the number of the Offer Shares to be reallocated to the Hong Kong Public Offering from the International Offering will be increased so that the total number of the Offer Shares available under the Hong Kong Public Offering will be 880,000,000 Offer Shares, representing 40% of the Offer Shares initially available under the Global Offering; and

• if the number of the Offer Shares validly applied for under the Hong Kong Public Offering represents 100 times or more than the number of the Offer Shares initially available for subscription under the Hong Kong Public Offering, then the number of the Offer Shares to be reallocated to the Hong Kong Public Offering from the International Offering will be increased so that the total number of the Offer Shares available under the Hong Kong Public Offering will be 1,100,000,000 Offer Shares, representing 50% of the Offer Shares initially available under the Global Offering.

The Offer Shares to be offered in the Hong Kong Public Offering and the International Offering may, in certain circumstances, be reallocated as between these offerings at the discretion of the Joint Representatives. If the Hong Kong Offer Shares are not fully subscribed, the Joint Representatives (for themselves and on behalf of the other Underwriters) will have

– 422 – STRUCTURE OF THE GLOBAL OFFERING the discretion (but shall not be under any obligation) to reallocate all or any unsubscribed Hong Kong Offer Shares to the International Offering in such amount as the Joint Representatives (for themselves and on behalf of the other Underwriters) deem appropriate. In addition, the Joint Representatives may reallocate Offer Shares from the International Offering to the Hong Kong Public Offering to satisfy valid applications under the Hong Kong Public Offering in accordance with Guidance Letter HKEX-GL91-18. In particular, in the event that (i) the International Offer Shares are undersubscribed and the Hong Kong Offer Shares are fully subscribed or oversubscribed irrespective of the number of times; or (ii) the International Offer Shares are fully subscribed or oversubscribed and the Hong Kong Offer Shares are fully subscribed or oversubscribed as to less than 15 times of the number of Hong Kong Offer Shares initially available under the Hong Kong Public Offering, provided that the Offer Price would be set at HK$2.46 (low-end of the indicative Offer Price range), up to 220,000,000 Offer Shares may be reallocated to the Hong Kong Public Offering from the International Offering, so that the total number of the Offer Shares available under the Hong Kong Public Offering will be increased to 440,000,000 Offer Shares, representing 20% of the number of the Offer Shares initially available under the Global Offering (before any exercise of the Over-allotment Option).

Applications

Each applicant under the Hong Kong Public Offering will also be required to give an undertaking and confirmation in the Application Form submitted by him that he and any person(s) for whose benefit he is making the application have not applied for or taken up, or indicated an interest for, and will not apply for or take up, or indicate an interest for, any Offer Shares under the International Offering, and such applicant’s application is liable to be rejected if the said undertaking and/or confirmation is breached and/or untrue (as the case may be) or it has been or will be placed or allocated Offer Shares under the International Offering.

Applicants under the Hong Kong Public Offering are required to pay, on application, the maximum Offer Price of HK$2.61 per Offer Share in addition to the brokerage, SFC transaction levy and the Hong Kong Stock Exchange trading fee payable on each Offer Share. If the Offer Price, as finally determined in the manner described in the section headed “– The International Offering – Pricing and Allocation” below, is less than the maximum price of HK$2.61 per Offer Share, appropriate refund payments (including the brokerage, SFC transaction levy and the Hong Kong Stock Exchange trading fee attributable to the surplus application monies) will be made to successful applicants, without interest. Further details are set out below in the section headed “How to Apply for Hong Kong Offer Shares”.

References in this prospectus to applications, Application Forms, application monies or the procedure for application relate solely to the Hong Kong Public Offering.

– 423 – STRUCTURE OF THE GLOBAL OFFERING

THE INTERNATIONAL OFFERING

Number of International Offer Shares Offered

The International Offering will consist of an initial offering of 1,980,000,000 International Offer Shares, representing 90% of the total number of Offer Shares initially available under the Global Offering subject to the reallocation of Offer Shares between the International Offering and the Hong Kong Public Offering and assuming that the Over- allotment Option is not exercised.

Allocation

Pursuant to the International Offering, the International Offering Shares will be conditionally placed on behalf of the Bank by the International Underwriters or through selling agents appointed by them. The International Offering will include selective marketing of the Offer Shares to institutional and professional investors and other investors anticipated to have a sizeable demand for such Offer Shares. Professional investors generally include brokers, dealers, companies (including fund managers) whose ordinary business involves dealing in shares and other securities and corporate entities which regularly invest in shares and other securities. Allocation of the Offer Shares pursuant to the International Offering will be effected in accordance with the “book-building” process described in the section headed “– The International Offering – Pricing and Allocation” below and based on a number of factors, including the level and timing of demand, the total size of the relevant investor’s invested assets or equity assets in the relevant sector and whether or not it is expected that the relevant investor is likely to buy further H Shares, and/or hold or sell its H Shares, after the listing of the H Shares on the Hong Kong Stock Exchange. Such allocation is intended to result in a distribution of the International Offer Shares on a basis which would lead to the establishment of a solid professional and institutional shareholder base to the benefit of the Bank and its Shareholders as a whole.

The Joint Representatives (for themselves and on behalf of the Underwriters) may require any investor who has been offered the Offer Shares under the International Offering, and who has made an application under the Hong Kong Public Offering, to provide sufficient information to the Joint Representatives so as to allow them to identify the relevant applications under the Hong Kong Public Offering and to ensure that they are excluded from any application of the Offer Shares under the Hong Kong Public Offering.

Reallocation

The total number of the Offer Shares to be issued or sold pursuant to the International Offering may change as a result of the clawback arrangement described in the subsection headed “– The Hong Kong Public Offering – Reallocation and Clawback” or the Over- allotment Option in whole or in part and/or any reallocation of unsubscribed Offer Shares originally included in the Hong Kong Public Offering.

– 424 – STRUCTURE OF THE GLOBAL OFFERING

Over-allotment Option

In connection with the Global Offering, the Bank is expected to grant the Over-allotment Option to the International Underwriters, exercisable by the Joint Representatives in whole or in part at their sole and absolute discretion for themselves and on behalf of the International Underwriters within 30 days after the last day for lodging applications under the Hong Kong Public Offering. Pursuant to the Over-allotment Option, the Joint Representatives will have the right to require the Bank to allot and issue up to an aggregate of 330,000,000 Offer Shares representing in aggregate 15% of the initial number of the Offer Shares at the Offer Price to cover over-allocations in the International Offering, if any. An announcement will be made in the event that the Over-allotment Option is exercised. The Joint Representatives may also cover any over-allocations by purchasing the H Shares in the secondary market or by a combination of purchases in the secondary market and a partial exercise of the Over-allotment Option. Any such secondary market purchase will be made in compliance with all applicable laws, rules and regulations.

STABILIZATION

Stabilization is a practice used by underwriters in some markets to facilitate the distribution of securities. To stabilize, the underwriters may bid for, or purchase, the newly issued securities in the secondary market, during a specified period of time, to retard and, if possible, prevent any decline in the market price of the securities below the Offer Price. In Hong Kong and a number of other jurisdictions, activity aimed at reducing the market price is prohibited, and the price at which stabilization is effected is not permitted to exceed the Offer Price.

In connection with the Global Offering, the Stabilizing Manager, its affiliates or any person acting for it, as stabilizing manager, on behalf of the Underwriters, may effect transactions with a view to stabilizing or supporting the market price of the H Shares at a level higher than that which might otherwise prevail for a limited period after the Listing Date. Any market purchases of the H Shares will be effected in compliance with all applicable laws and regulatory requirements. However, there is no obligation on the Stabilizing Manager, its affiliates or any persons acting for it, to conduct any such stabilizing action. Such stabilization action, if commenced, may be discontinued at any time, and is required to be brought to an end within 30 days of the last day for the lodging of applications under the Hong Kong Public Offering. Should stabilizing transactions be effected in connection with the Global Offering, this will be effected at the absolute discretion of the Stabilizing Manager, its affiliates or any person acting for it.

Stabilization action will be entered into in accordance with the laws, rules and regulations in place in Hong Kong. Stabilization action permitted in Hong Kong pursuant to the Securities and Futures (Price Stabilizing) Rules (Chapter 571W of the Laws of Hong Kong), as amended, includes (i) over-allocating for the purpose of preventing or minimizing any reduction in the market price of the H Shares, (ii) selling or agreeing to sell the H Shares so as to establish a short position in them for the purpose of preventing or minimizing any reduction in the market

– 425 – STRUCTURE OF THE GLOBAL OFFERING price of the H Shares, (iii) purchasing or subscribing for, or agreeing to purchase or subscribe for, the H Shares pursuant to the Over-allotment Option in order to close out any position established under (i) or (ii) above, (iv) purchasing, or agreeing to purchase, any of the H Shares for the sole purpose of preventing or minimizing any reduction in the market price of the H Shares, (v) selling or agreeing to sell any H Shares in order to liquidate any position established as a result of those purchases and (vi) offering or attempting to do anything as described in paragraph (ii), (iii), (iv) or (v).

Specifically, prospective applicants for and investors in the Offer Shares should note that:

• the Stabilizing Manager, its affiliates or any person acting for it may, in connection with the stabilizing action, maintain a long position in the H Shares;

• there is no certainty regarding the extent to which and the time or period for which the Stabilizing Manager, or any person acting for it, will maintain such a long position;

• liquidation of any such long position by the Stabilizing Manager, its affiliates or any person acting for it may have an adverse impact on the market price of the H Shares;

• no stabilizing action can be taken to support the price of the H Shares for longer than the stabilizing period which will begin on the Listing Date, and is expected to expire on the 30th day after the date of closing of the application lists under the Hong Kong Public Offering. After this date, when no further stabilizing action may be taken, demand for the H Shares, and therefore the price of the H Shares, could fall;

• the price of the H Shares cannot be assured to stay at or above the Offer Price by the taking of any stabilizing action; and

• stabilizing bids may be made or transactions effected in the course of the stabilizing action at any price at or below the Offer Price, which means that stabilizing bids may be made or transactions effected at a price below the price paid by applicants for, or investors in, the H Shares.

In effecting stabilizing actions, the Stabilizing Manager will arrange cover up to an aggregate of 330,000,000 Offer Shares, which is approximately 15% of the number of Offer Shares initially available under the Global Offering. Both the size of such cover and the extent to which the Over-allotment Option can be exercised will depend on whether sufficient number of H Shares will be made available under delayed settlement or deferred settlement arrangements. There will be no stabilization actions and no exercise of the Over-allotment Option should no investors be willing to enter into such delayed delivery or deferred settlement arrangements.

– 426 – STRUCTURE OF THE GLOBAL OFFERING

As a result of effecting transactions to stabilize or maintain the market price of the H Shares, the Stabilizing Manager, or any person acting for it, may maintain a long position in the H Shares. The size of the long position, and the period for which the Stabilizing Manager, or any person acting for it, will maintain the long position is at the discretion of the Stabilizing Manager and is uncertain. In the event that the Stabilizing Manager liquidates this long position by making sales in the open market, this may lead to a decline in the market price of the H Shares.

Stabilizing action by the Stabilizing Manager, or any person acting for it, is not permitted to support the price of the H Shares for longer than the stabilizing period, which begins on the day on which trading of the H Shares commences on the Hong Kong Stock Exchange and ends on the 30th day after the last day for the lodging of applications under the Hong Kong Public Offering. The stabilizing period is expected to end on Saturday, January 18, 2020. As a result, demand for the H Shares, and their market price, may fall after the end of the stabilizing period. It is anticipated that no stabilization activity will be carried out during the stabilization period. The Bank will ensure or procure that an announcement in compliance with the Securities and Futures (Price Stabilizing) Rules of the SFO will be made within seven days of the expiration of the stabilization period.

Over-allocation

Following any over-allocation of the H Shares in connection with the Global Offering, the Joint Representatives, their affiliates or any person acting for them may cover such over-allocation by, among other methods, using H Shares purchased by the Stabilizing Manager, its affiliates or any person acting for it in the secondary market, exercising the Over-allotment Option in full or in part, or by a combination of these means. Any such purchases will be made in accordance with the laws, rules and regulations in place in Hong Kong, including in relation to stabilization, the Securities and Futures (Price Stabilizing) Rules, as amended, made under the SFO. The number of the H Shares which can be over-allocated will not exceed the number of the H Shares which may be issued or sold pursuant to the exercise in full of the Over-allotment Option, being 330,000,000 H Shares, representing 15% of the Offer Shares initially available under the Global Offering.

PRICING AND ALLOCATION

The International Underwriters will be soliciting from prospective investors indications of interest in acquiring the Offer Shares in the International Offering. Prospective professional and institutional investors will be required to specify the number of the Offer Shares under the International Offering they would be prepared to acquire either at different prices or at a particular price. This process, known as “book-building”, is expected to continue up to, and to cease on or about, the last day for lodging applications under the Hong Kong Public Offering.

– 427 – STRUCTURE OF THE GLOBAL OFFERING

The Offer Price is expected to be fixed by agreement between the Joint Representatives (for themselves and on behalf of the Underwriters) and us on the Price Determination Date, which is expected to be on or about Thursday, December 19, 2019 and in any event no later than Monday, December 23, 2019.

The Offer Price will not be more than HK$2.61 per Offer Share and is expected to be not less than HK$2.46 per Offer Share unless otherwise announced, as further explained below, not later than the morning of the last day for lodging applications under the Hong Kong Public Offering. Prospective investors should be aware that the Offer Price to be determined on the Price Determination Date may be, but is not expected to be, lower than the indicative Offer Price range stated in this prospectus.

If, for any reason, the Offer Price is not agreed between the Joint Representatives (for themselves and on behalf of the Underwriters) and us by Monday, December 23, 2019, the Global Offering will not proceed and will lapse.

If, based on the level of interest expressed by prospective institutional, professional and other investors during the book-building process, the Joint Representatives and the Joint Sponsors consider it appropriate, the number of the Offer Shares being offered under the Global Offering and/or the indicative Offer Price range may be reduced below that stated in this prospectus at any time prior to the morning of the last day for lodging applications under the Hong Kong Public Offering. In such a case, we will, as soon as practicable following the decision to make such reduction, and in any event not later than the morning of Thursday, December 19, 2019, being the last day for lodging applications under the Hong Kong Public Offering, cause to be published on the Hong Kong Stock Exchange’s website at www.hkexnews.hk, and on the Bank’s website at www.bgzchina.com, notice of the reduction in the number of the Offer Shares being offered under the Global Offering and/or the indicative Offer Price range and will, as soon as practicable following the decision to make such reduction, issue a supplemental prospectus updating investors of the change in the number of Offer Shares being offered under the Global Offering and/or the indicative Offer Price range, extend the period under which the Hong Kong Public Offering was opened for acceptance to allow potential investors sufficient time to consider their subscriptions or reconsider their submitted subscriptions, and give potential investors who had applied for the Hong Kong Offer Shares the right to withdraw their applications under the Hong Kong Public Offering. Such notice and supplemental prospectus will also include confirmation or revision, as appropriate, of the offering statistics, and the future plans and use of proceeds as currently set out in “Summary” and any other financial information which may change as a result of such reduction.

Before submitting applications for the Hong Kong Offer Shares, applicants should have regard to the possibility that any announcement of a reduction in the number of the Offer Shares being offered under the Global Offering and/or the indicative Offer Price range may not be made until the day which is the last day for lodging applications under the Hong Kong Public Offering.

– 428 – STRUCTURE OF THE GLOBAL OFFERING

If the number of the Offer Shares being offered under the Global Offering and/or the indicative Offer Price range is so reduced, applicants who have already submitted an application may or may not (depending on the information contained in the announcement) be notified that they are required to confirm their applications. All applicants who have already submitted an application need to confirm their applications in accordance with the procedures set out in the announcement and all unconfirmed applications will not be valid. The Offer Price, if agreed upon, will be fixed within such revised Offer Price range. In the absence of any notice being published of a reduction in the number of the Offer Shares being offered under the Global Offering stated in this prospectus and the Application Forms, respectively, on or before the last day for lodging applications under the Hong Kong Public Offering, the Offer Price, once agreed upon, will under no circumstances be higher than the maximum Offer Price as stated in the Application Forms.

In the event of a reduction in the number of the Offer Shares, the Joint Representatives and the Joint Sponsors may, at their discretion, reallocate the number of the Offer Shares to be offered in the Hong Kong Public Offering and the International Offering, provided that the number of the Offer Shares comprised in the Hong Kong Public Offering shall not be less than 10% of the total number of Offer Shares available under the Global Offering. The Offer Shares to be offered in the Hong Kong Public Offering and the Offer Shares to be offered in the International Offering may, in certain circumstances, be reallocated between these offerings at the discretion of the Joint Representatives and the Joint Sponsors. Allocation of the International Offer Shares under the International Offering will be determined by the Joint Representatives and will be based on a number of factors, including the level and timing of demand, total size of the relevant investor’s invested assets or equity assets in the relevant sector, and whether or not it is expected that the relevant investor is likely to buy further and/or hold or sell Offer Shares after the Listing. Such allocation may be made to professional, institutional, or corporate investors and is intended to result in a distribution of our Offer Shares on a basis which would lead to the establishment of a solid Shareholder base to the benefit of the Bank and our Shareholders as a whole. Allocation of the Hong Kong Offer Shares to investors under the Hong Kong Public Offering will be based on the level of valid applications received under the Hong Kong Public Offering. The basis of allocation may vary, depending on the number of the Hong Kong Offer Shares validly applied for by applicants. The allocation of the Hong Kong Offer Shares could, where appropriate, consist of balloting, which would mean that some applicants may receive a higher allocation than others who have applied for the same number of the Hong Kong Offer Shares, and those applicants who are not successful in the ballot may not receive any Hong Kong Offer Shares.

The final Offer Price, the level of indications of interest in the International Offering, the level of applications in the Hong Kong Public Offering and the basis of and results of allocations of the Offer Shares under the Hong Kong Public Offering are expected to be announced on Friday, December 27, 2019 on the website of the Bank (www.bgzchina.com) and the website of the Hong Kong Stock Exchange (www.hkexnews.hk).

– 429 – STRUCTURE OF THE GLOBAL OFFERING

UNDERWRITING AGREEMENTS

The Hong Kong Public Offering is fully underwritten by the Hong Kong Underwriters under the terms of the Hong Kong Underwriting Agreement and is subject to agreement on the Offer Price between the Joint Representatives (for themselves and on behalf of the Underwriters) and us on the Price Determination Date.

We expect that the Bank will, on or about Thursday, December 19, 2019, shortly after determination of the Offer Price, enter into the International Underwriting Agreement relating to the International Offering. Underwriting arrangements, the Hong Kong Underwriting Agreement and the International Underwriting Agreement are summarized in the section headed “Underwriting”.

H SHARES WILL BE ELIGIBLE FOR CCASS

All necessary arrangements have been made enabling the H Shares to be admitted into CCASS, established and operated by the HKSCC.

If the Hong Kong Stock Exchange grants the listing of, and permission to deal in, the H Shares and the Bank complies with the stock admission requirements of HKSCC, the H Shares will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the date of commencement of dealings in the H Shares on the Hong Kong Stock Exchange or any other date HKSCC chooses. Settlement of transactions between participants of the Hong Kong Stock Exchange is required to take place in CCASS on the second Business Day after any trading day.

All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time.

CONDITIONS OF THE GLOBAL OFFERING

Acceptance of all applications for the Hong Kong Offer Shares pursuant to the Hong Kong Public Offering will be conditional on, inter alia:

(a) the Listing Committee of the Hong Kong Stock Exchange granting the listing of, and permission to deal in, the Offer Shares to be offered pursuant to the Global Offering (including any Offer Shares which may be issued or sold pursuant to the exercise of the Over-allotment Option) and such listing and permission not subsequently having been revoked prior to the commencement of dealings in the Offer Shares on the Hong Kong Stock Exchange;

(b) the Bank having submitted to the HKSCC all requisite documents to enable the Offer Shares to be admitted to trade on the Hong Kong Stock Exchange;

– 430 – STRUCTURE OF THE GLOBAL OFFERING

(c) the Offer Price having been duly determined and the execution and delivery of the International Underwriting Agreement on or around the Price Determination Date; and

(d) the obligations of the Underwriters under the respective Underwriting Agreements becoming and remaining unconditional (unless and to the extent such conditions are validly waived on or before such dates and times) and not having been terminated in accordance with the terms of the respective agreements, in each case on or before the dates and times specified in the respective Underwriting Agreements (unless and to the extent such conditions are validly waived on or before such dates and times) and in any event, not later than the date which is 30 days after the date of this prospectus.

If the above conditions are not fulfilled or waived prior to the times and dates specified, the Global Offering will lapse and the Hong Kong Stock Exchange will be notified immediately. We will cause a notice of the lapse of the Hong Kong Public Offering to be published by us on the Bank’s website at www.bgzchina.com and the website of the Hong Kong Stock Exchange at www.hkexnews.hk on the next day following such lapse. In such event, all application monies will be returned, without interest, on the terms set out in “How to Apply for Hong Kong Offer Shares”. In the meantime, the application monies will be held in separate bank account(s) with the receiving banker(s) or other bank(s) in Hong Kong licensed under the Banking Ordinance.

The consummation of each of the Hong Kong Public Offering and the International Offering is conditional upon, amongst other things, the other becoming unconditional and not having been terminated in accordance with its terms.

H Share certificates for the Offer Shares are expected to be issued on or before Friday, December 27, 2019 but will only become valid certificates of title at 8:00 a.m. on the date of commencement of the dealings in our Offer Shares, which is expected to be on Monday, December 30, 2019, provided that (i) the Global Offering has become unconditional in all respects and (ii) neither of the Underwriting Agreements has been terminated in accordance with its terms. Investors who trade the Offer Shares prior to the receipt of H Share certificates or prior to the H Share certificates becoming valid certificates of title do so entirely at their own risk.

DEALING ARRANGEMENTS

Assuming that the Hong Kong Public Offering becomes unconditional at or before 8:00 a.m. in Hong Kong on Monday, December 30, 2019, it is expected that dealings in the H Shares on the Hong Kong Stock Exchange will commence at 9:00 a.m. on Monday, December 30, 2019. The H Shares will be traded in board lots of 1,000 H Shares. The stock code of the H Shares is 6199.

– 431 – HOW TO APPLY FOR HONG KONG OFFER SHARES

1. HOW TO APPLY

If you apply for Hong Kong Offer Shares, then you may not apply for or indicate an interest for International Offer Shares.

To apply for Hong Kong Offer Shares, you may:

• use a WHITE or YELLOW Application Form;

• apply online via the White Form eIPO service at www.eipo.com.hk;or

• electronically cause HKSCC Nominees to apply on your behalf.

None of you or your joint applicant(s) may make more than one application, except where you are a nominee and provide the required information in your application.

The Bank, the Joint Representatives, the White Form eIPO Service Provider and their respective agents may reject or accept any application in full or in part for any reason at their discretion.

2. WHO CAN APPLY

You can apply for Hong Kong Offer Shares on a WHITE or YELLOW Application Form if you or the person(s) for whose benefit you are applying:

• are 18 years of age or older;

• have a Hong Kong address;

• are outside the United States, and are not a United States Person (as defined in Regulation S); and

• are not a legal or natural person of the PRC.

If you apply online through the White Form eIPO service, in addition to the above, you must also: (i) have a valid Hong Kong identity card number and (ii) provide a valid e-mail address and a contact telephone number.

If you are a firm, the application must be in the individual members’ names. If you are a body corporate, the Application Form must be signed by a duly authorized officer, who must state his or her representative capacity, and stamped with your corporation’s chop.

If an application is made by a person under a power of attorney, the Joint Representatives may accept it at their discretion and on any conditions they think fit, including evidence of the attorney’s authority.

The number of joint applicants may not exceed four and they may not apply by means of White Form eIPO for service for the Hong Kong Offer Shares.

– 432 – HOW TO APPLY FOR HONG KONG OFFER SHARES

Unless permitted by the Listing Rules, you cannot apply for any Hong Kong Offer Shares if you:

• are an existing beneficial owner of any Shares in the Bank and/or any of our subsidiaries;

• are a Director or chief executive officer of the Bank and/or any of our subsidiaries;

• are a close associate (as defined in the Listing Rules) of any of the above;

• are a core connected person (as defined in the Listing Rules) of the Bank or will become a core connected person of the Bank immediately upon completion of the Global Offering; or

• have been allocated or have applied for any International Offer Shares or otherwise participate in the International Offering.

3. APPLYING FOR HONG KONG OFFER SHARES

Which Application Channel to Use

For Hong Kong Offer Shares to be issued in your own name, use a WHITE Application Form or apply online through www.eipo.com.hk.

For Hong Kong Offer Shares to be issued in the name of HKSCC Nominees and deposited directly into CCASS to be credited to your or a designated CCASS Participant’s stock account, use a YELLOW Application Form or electronically instruct HKSCC via CCASS to cause HKSCC Nominees to apply for you.

Where to Collect the Application Forms

You can collect a WHITE Application Form and a prospectus during normal business hours from 9:00 a.m. on Monday, December 16, 2019 until 12:00 noon on Thursday, December 19, 2019 from:

(i) any of the following offices of the Joint Global Coordinators:

ABCI Capital Limited 11/F, Agricultural Bank of China Tower 50 Connaught Road Central Hong Kong

CCB International Capital Limited 12/F., CCB Tower 3 Connaught Road Central Central Hong Kong

CLSA Limited 18/F, One Pacific Place 88 Queensway Hong Kong

AMTD Global Markets Limited 23/F-25/F Nexxus Building 41 Connaught Road Central Hong Kong

– 433 – HOW TO APPLY FOR HONG KONG OFFER SHARES

(ii) any of the designated branches of the following receiving banks:

(a) Bank of China (Hong Kong) Limited

District Branch Name Address Hong Kong Island Shek Tong Tsui Branch 534 Queen’s Road West, Shek Tong Tsui, Hong Kong

Quarry Bay Branch Parkvale, 1060 King’s Road, Quarry Bay, Hong Kong

Central District (Wing B/F-2/F, Wing On House, On House) Branch 71 Des Voeux Road Central, Hong Kong

Kowloon Whampoa Garden Shop G8B, Site 1, Branch Whampoa Garden, Hung Hom, Kowloon

194 Cheung Sha Wan 194-196 Cheung Sha Wan Road, Road Branch Sham Shui Po, Kowloon

Jordan Road Branch 1/F, Sino Cheer Plaza, 23-29 Jordan Road, Kowloon

New Territories Fo Tan Branch No 2, 1/F Shatin Galleria, 18-24 Shan Mei Street, Fo Tan, New Territories

Metro City Branch Shop 209, Level 2, Metro City Phase 1, Tseung Kwan O, New Territories

Texaco Road Branch Shop A112, East Asia Gardens, 36 Texaco Road, Tsuen Wan, New Territories

Kwai Chung Plaza A18-20, G/F Kwai Chung Plaza, Branch 7-11 Kwai Foo Road, Kwai Chung, New Territories

– 434 – HOW TO APPLY FOR HONG KONG OFFER SHARES

(b) Industrial and Commercial Bank of China (Asia) Limited

District Branch Name Address Hong Kong Island Admiralty Branch Shop 1013-1014, 1/F, United Centre, 95 Queensway, Admiralty, Hong Kong

Causeway Bay Branch Shop A on G/F, 1/F, Hennessy Apartments, 488 & 490 Hennessy Road, Causeway Bay, Hong Kong

Kowloon Mei Foo Branch Shop N95A, 1/F, Mount Sterling Mall, Mei Foo Sun Chuen, Kowloon

Wong Tai Sin Branch Shop 128, Level One, Wong Tai Sin Plaza, 103 Ching Tak Street, Wong Tai Sin, Kowloon

Kwun Tong Branch Shop 5&6, 1/F, Crocodile Center, 79 Hoi Yuen Road, Kwun Tong, Kowloon

New Territories Tsuen Wan Castle Peak G/F, 423-427 Castle Peak Road Road Branch Tsuen Wan, New Territories

Yan Ching Street Branch Shops 4 and 5, G/F, Tuen Mun Centre, 11 Yan Ching Street, Tuen Mun, New Territories

Shatin Branch Shop 22J, Level 3, Shatin Centre, New Territories

You can collect a YELLOW Application Form and a prospectus during normal business hours from 9:00 a.m. on Monday, December 16, 2019 until 12:00 noon on Thursday, December 19, 2019 from the Depository Counter of HKSCC at 1/F, One and Two Exchange Square, 8 Connaught Place, Central, Hong Kong or from your stockbroker.

– 435 – HOW TO APPLY FOR HONG KONG OFFER SHARES

Time for Lodging Application Forms

Your completed WHITE or YELLOW Application Form, together with a cheque or a banker’s cashier order attached and marked payable to “BANK OF CHINA (HONG KONG) NOMINEES LIMITED – BANK OF GUIZHOU PUBLIC OFFER” for the payment, should be deposited in the special collection boxes provided at any of the branches of the receiving banks listed above, at the following times:

• Monday, December 16, 2019 – 9:00 a.m. to 5:00 p.m.

• Tuesday, December 17, 2019 – 9:00 a.m. to 5:00 p.m.

• Wednesday, December 18, 2019 – 9:00 a.m. to 5:00 p.m.

• Thursday, December 19, 2019 – 9:00 a.m. to 12:00 noon

The application lists will be open from 11:45 a.m. to 12:00 noon on Thursday, December 19, 2019, the last application day or such later time as described in “– 10. Effect of Bad Weather on the Opening of the Application Lists” in this section.

4. TERMS AND CONDITIONS OF AN APPLICATION

Follow the detailed instructions in the Application Form carefully; otherwise, your application may be rejected.

By submitting an Application Form or applying through the White Form eIPO, among other things, you:

(i) undertake to execute all relevant documents and instruct and authorize the Bank and/or the Joint Representatives (or their agents or nominees), as agents of the Bank, to execute any documents for you and to do on your behalf all things necessary to register any Hong Kong Offer Shares allocated to you in your name or in the name of HKSCC Nominees as required by the Articles of Association;

(ii) agree to comply with the Companies Ordinance, the Companies (Winding Up and Miscellaneous Provisions) Ordinance, the PRC Company Law, the Special Regulations and the Articles of Association;

(iii) confirm that you have read the terms and conditions and application procedures set out in this prospectus and in the Application Form and agree to be bound by them;

(iv) confirm that you have received and read this prospectus and have only relied on the information and representations contained in this prospectus in making your application and will not rely on any other information or representations except those in any supplement to this prospectus;

– 436 – HOW TO APPLY FOR HONG KONG OFFER SHARES

(v) confirm that you are aware of the restrictions on the Global Offering in this prospectus;

(vi) agree that none of the Bank, the Joint Sponsors, the Joint Representatives, the Joint Global Coordinators, the Joint Bookrunners, the Joint Lead Managers, the Underwriters, their respective directors, officers, employees, partners, agents, advisers and any other parties involved in the Global Offering is or will be liable for any information and representations not in this prospectus (and any supplement to it);

(vii) undertake and confirm that you or the person(s) for whose benefit you have made the application have not applied for or taken up, or indicated an interest for, and will not apply for or take up, or indicate an interest for, any International Offer Shares nor participated in the International Offering;

(viii) agree to disclose to the Bank, our H Share Registrar, receiving banks, the Joint Sponsors, the Joint Representatives, the Joint Global Coordinators, the Joint Bookrunners, the Joint Lead Managers, the Underwriters and/or their respective advisers and agents any personal data which they may require about you and the person(s) for whose benefit you have made the application;

(ix) if the laws of any place outside Hong Kong apply to your application, agree and warrant that you have complied with all such laws and none of the Bank, the Joint Sponsors, the Joint Representatives, the Joint Global Coordinators, the Joint Bookrunners, the Joint Lead Managers and the Underwriters nor any of their respective officers or advisers will breach any law outside Hong Kong as a result of the acceptance of your offer to purchase, or any action arising from your rights and obligations under the terms and conditions contained in this prospectus and the Application Form;

(x) agree that once your application has been accepted, you may not rescind it because of an innocent misrepresentation;

(xi) agree that your application will be governed by the laws of Hong Kong;

(xii) represent, warrant and undertake that (a) you understand that the Hong Kong Offer Shares have not been and will not be registered under the U.S. Securities Act; and (b) you and any person for whose benefit you are applying for the Hong Kong Offer Shares are outside the United States (as defined in Regulation S) or are a person described in paragraph (h)(3) of Rule 902 of Regulation S;

(xiii) warrant that the information you have provided is true and accurate;

(xiv) agree to accept the Hong Kong Offer Shares applied for, or any lesser number allocated to you under the application;

– 437 – HOW TO APPLY FOR HONG KONG OFFER SHARES

(xv) authorize the Bank to place your name(s) or the name of the HKSCC Nominees, on the Bank’s register of members as the holder(s) of any Hong Kong Offer Shares allocated to you, and the Bank and/or its agents to send any H Share certificate(s) and/or any e-Refund payment instructions and/or any refund cheque(s) to you or the first-named applicant for joint application by ordinary post at your own risk to the address stated on the application, unless you have fulfilled the criteria mentioned in “Personal Collection” section in this prospectus to collect the H Share certificate(s) and/or refund cheque(s);

(xvi) declare and represent that this is the only application made and the only application intended by you to be made to benefit you or the person for whose benefit you are applying;

(xvii) understand that the Bank and the Joint Representatives, will rely on your declarations and representations in deciding whether or not to make any allotment of any of the Hong Kong Offer Shares to you and that you may be prosecuted for making a false declaration;

(xviii) (if the application is made for your own benefit) warrant that no other application has been or will be made for your benefit on a WHITE or YELLOW Application Form or by giving electronic application instructions to HKSCC or to the White Form eIPO Service Provider by you or by any one as your agent or by any other person; and

(xix) (if you are making the application as an agent for the benefit of another person) warrant that (a) no other application has been or will be made by you as agent for or for the benefit of that person or by that person or by any other person as agent for that person on a WHITE or YELLOW Application Form or by giving electronic application instructions to HKSCC; and (b) you have due authority to sign the Application Form or give electronic application instructions on behalf of that other person as their agent.

Additional Instructions for YELLOW Application Form

You may refer to the YELLOW Application Form for details.

5. APPLYING THROUGH THE WHITE FORM eIPO SERVICE

General

Individuals who meet the criteria in “– 2. Who Can Apply” section, may apply through the White Form eIPO service for the Offer Shares to be allotted and registered in their own names through the designated website at www.eipo.com.hk.

– 438 – HOW TO APPLY FOR HONG KONG OFFER SHARES

Detailed instructions for application through the White Form eIPO service are on the designated website. If you do not follow the instructions, your application may be rejected and may not be submitted to the Bank. If you apply through the designated website, you authorize the White Form eIPO Service Provider to apply on the terms and conditions in this prospectus, as supplemented and amended by the terms and conditions of the White Form eIPO service.

Time for Submitting Applications under the White Form eIPO

You may submit your application to the White Form eIPO Service Provider at www.eipo.com.hk (24 hours daily, except on the last application day) from 9:00 a.m. on Monday, December 16, 2019 until 11:30 a.m. on Thursday, December 19, 2019 and the latest time for completing full payment of application monies in respect of such applications will be 12:00 noon on Thursday, December 19, 2019 or such later time under “– 10. Effect of Bad Weather on the Opening of the Application Lists” in this section.

No Multiple Applications

If you apply by means of White Form eIPO, once you complete payment in respect of any electronic application instruction given by you or for your benefit through the White Form eIPO service to make an application for Hong Kong Offer Shares, an actual application shall be deemed to have been made. For the avoidance of doubt, giving an electronic application instruction under White Form eIPO more than once and obtaining different application reference numbers without effecting full payment in respect of a particular reference number will not constitute an actual application.

If you are suspected of submitting more than one application through the White Form eIPO service or by any other means, all of your applications are liable to be rejected.

Section 40 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance

For the avoidance of doubt, the Bank and all other parties involved in the preparation of this prospectus acknowledge that each applicant who gives or causes to give electronic application instructions is a person who may be entitled to compensation under Section 40 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (as applied by Section 342E of the Companies (Winding Up and Miscellaneous Provisions) Ordinance).

Commitment to Sustainability

The obvious advantage of White Form eIPO is to save the use of papers via the self-serviced and electronic application process. Computershare Hong Kong Investor Services Limited, being the designated White Form eIPO Service Provider, will contribute HK$2 for each “BANK OF GUIZHOU CO., LTD.” White Form eIPO application submitted via www.eipo.com.hk to support sustainability.

– 439 – HOW TO APPLY FOR HONG KONG OFFER SHARES

6. APPLYING BY GIVING ELECTRONIC APPLICATION INSTRUCTIONS TO HKSCC VIA CCASS

General

CCASS Participants may give electronic application instructions to apply for the Hong Kong Offer Shares and to arrange payment of the money due on application and payment of refunds under their participant agreements with HKSCC and the General Rules of CCASS and the CCASS Operational Procedures.

If you are a CCASS Investor Participant, you may give these electronic application instructions through the CCASS Phone System by calling +852 2979 7888 or through the CCASS Internet System (https://ip.ccass.com) (using the procedures in HKSCC’s “An Operating Guide for Investor Participants” in effect from time to time).

HKSCC can also input electronic application instructions for you if you go to:

Hong Kong Securities Clearing Company Limited Customer Service Center 1/F One & Two Exchange Square 8 Connaught Place Central Hong Kong

and complete an input request form.

You can also collect a prospectus from this address.

If you are not a CCASS Investor Participant, you may instruct your broker or custodian who is a CCASS Clearing Participant or a CCASS Custodian Participant to give electronic application instructions via CCASS terminals to apply for the Hong Kong Offer Shares on your behalf.

You will be deemed to have authorized HKSCC and/or HKSCC Nominees to transfer the details of your application to the Bank, the Joint Representatives and the H Share Registrar.

– 440 – HOW TO APPLY FOR HONG KONG OFFER SHARES

GIVING ELECTRONIC APPLICATION INSTRUCTIONS TO HKSCC VIA CCASS

Where you have given electronic application instructions to apply for the Hong Kong Offer Shares and a WHITE Application Form is signed by HKSCC Nominees on your behalf:

(i) HKSCC Nominees will only be acting as a nominee for you and is not liable for any breach of the terms and conditions of the WHITE Application Form or this prospectus;

(ii) HKSCC Nominees will do the following things on your behalf:

• agree that the Hong Kong Offer Shares to be allotted shall be issued in the name of HKSCC Nominees and deposited directly into CCASS for the credit of the CCASS Participant’s stock account on your behalf or your CCASS Investor Participant’s stock account;

• agree to accept the Hong Kong Offer Shares applied for or any lesser number allocated;

• undertake and confirm that you have not applied for or taken up, will not apply for or take up, or indicate an interest for, any Offer Shares under the International Offering;

• declare that only one set of electronic application instructions has been given for your benefit;

• (if you are an agent for another person) declare that you have only given one set of electronic application instructions for the other person’s benefit and are duly authorized to give those instructions as their agent;

• confirm that you understand that the Bank, the Directors and the Joint Representatives will rely on your declarations and representations in deciding whether or not to make any allotment of any of the Hong Kong Offer Shares to you and that you may be prosecuted if you make a false declaration;

• authorize the Bank to place HKSCC Nominees’ name on the Bank’s register of members as the holder of the Hong Kong Offer Shares allocated to you and to send H Share certificate(s) and/or refund monies under the arrangements separately agreed between us and HKSCC;

• confirm that you have read the terms and conditions and application procedures set out in this prospectus and agree to be bound by them;

– 441 – HOW TO APPLY FOR HONG KONG OFFER SHARES

• confirm that you have received and/or read a copy of this prospectus and have relied only on the information and representations in this prospectus in causing the application to be made, save as set out in any supplement to this prospectus;

• agree that none of the Bank, the Joint Sponsors, the Joint Representatives, the Joint Global Coordinators, the Joint Bookrunners, the Joint Lead Managers, the Underwriters, their respective directors, officers, employees, partners, agents, advisers and any other parties involved in the Global Offering, is or will be liable for any information and representations not contained in this prospectus (and any supplement to it);

• agree to disclose your personal data to the Bank, our H Share Registrar, receiving banks, the Joint Sponsors, the Joint Representatives, the Joint Global Coordinators, the Joint Bookrunners, the Joint Lead Managers, the Underwriters and/or their respective advisers and agents;

• agree (without prejudice to any other rights which you may have) that once HKSCC Nominees’ application has been accepted, it cannot be rescinded for innocent misrepresentation;

• agree that any application made by HKSCC Nominees on your behalf is irrevocable before the fifth day after the time of the opening of the application lists (excluding any day which is Saturday, Sunday or public holiday in Hong Kong), such agreement to take effect as a collateral contract with us and to become binding when you give the instructions and such collateral contract to be in consideration of the Bank agreeing that it will not offer any Hong Kong Offer Shares to any person before the fifth day after the time of the opening of the application lists (excluding any day which is Saturday, Sunday or public holiday in Hong Kong), except by means of one of the procedures referred to in this prospectus. However, HKSCC Nominees may revoke the application before the fifth day after the time of the opening of the application lists (excluding for this purpose any day which is a Saturday, Sunday or public holiday in Hong Kong) if a person responsible for this prospectus under Section 40 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance gives a public notice under that section which excludes or limits that person’s responsibility for this prospectus;

• agree that once HKSCC Nominees’ application is accepted, neither that application nor your electronic application instructions can be revoked, and that acceptance of that application will be evidenced by the Bank’s announcement of the Hong Kong Offering results;

– 442 – HOW TO APPLY FOR HONG KONG OFFER SHARES

• agree to the arrangements, undertakings and warranties under the participant agreement between you and HKSCC, read with the General Rules of CCASS and the CCASS Operational Procedures, for the giving electronic application instructions to apply for Hong Kong Offer Shares;

• agree with the Bank, for itself and for the benefit of each Shareholder (and so that the Bank will be deemed by its acceptance in whole or in part of the application by HKSCC Nominees to have agreed, for itself and on behalf of each of the Shareholders, with each CCASS Participant giving electronic application instructions) to observe and comply with the Companies Ordinance, the Companies (Winding Up and Miscellaneous Provisions) Ordinance and the Articles of Association;

• agree with the Bank, for itself and for the benefit of each Shareholder and each Director, Supervisor, manager and other senior officer of the Bank (and so that the Bank will be deemed by its acceptance in whole or in part of the application to have agreed, for itself and on behalf of each of the Shareholders and each Director, Supervisor, manager and other senior officer of the Bank, with each CCASS Participant giving electronic application instructions):

(a) 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 the affairs of the Bank to arbitration in accordance with the Articles of Association;

(b) that any award made in such arbitration shall be final and conclusive; and

(c) that the arbitration tribunal may conduct hearings in open sessions and publish its award;

• agree with the Bank (on our behalf and for the benefit of each of our Shareholders) that H Shares in the Bank are freely transferable by their holders;

• authorize the Bank to enter into a contract on our behalf with each Director and officer of the Bank whereby each such Director and officer undertakes to observe and comply with his obligations to the Shareholders stipulated in the Articles of Association; and

• agree that your application, any acceptance of it and the resulting contract will be governed by the laws of Hong Kong.

– 443 – HOW TO APPLY FOR HONG KONG OFFER SHARES

Effect of Giving Electronic application instructions to HKSCC via CCASS

By giving electronic application instructions to HKSCC or instructing your broker or custodian who is a CCASS Clearing Participant or a CCASS Custodian Participant to give such instructions to HKSCC, you (and, if you are joint applicants, each of you jointly and severally) are deemed to have done the following things. Neither HKSCC nor HKSCC Nominees shall be liable to the Bank or any other person in respect of the things mentioned below:

• instructed and authorized HKSCC to cause HKSCC Nominees (acting as nominee for the relevant CCASS Participants) to apply for the Hong Kong Offer Shares on your behalf;

• instructed and authorized HKSCC to arrange payment of the maximum Offer Price, brokerage, SFC transaction levy and the Hong Kong Stock Exchange trading fee by debiting your designated bank account and, in the case of a wholly or partially unsuccessful application and/or if the Offer Price is less than the maximum Offer Price per Offer Share initially paid on application, refund of the application monies (including brokerage, SFC transaction levy and the Hong Kong Stock Exchange trading fee) by crediting your designated bank account; and

• instructed and authorized HKSCC to cause HKSCC Nominees to do on your behalf all the things stated in the WHITE Application Form and in this prospectus.

Minimum Purchase Amount and Permitted Numbers

You may give or cause your broker or custodian who is a CCASS Clearing Participant or a CCASS Custodian Participant to give electronic application instructions for a minimum number of 1,000 Hong Kong Offer Shares. Instructions for more than 1,000 Hong Kong Offer Shares must be in one of the numbers set out in the table in the Application Forms. No application for any other number of Hong Kong Offer Shares will be considered and any such application is liable to be rejected.

Time for Inputting Electronic application instructions(1)

CCASS Clearing/Custodian Participants can input electronic application instructions at the following times on the following dates:

• Monday, December 16, 2019 – 9:00 a.m. to 8:30 p.m.

• Tuesday, December 17, 2019 – 8:00 a.m. to 8:30 p.m.

• Wednesday, December 18, 2019 – 8:00 a.m. to 8:30 p.m.

• Thursday, December 19, 2019 – 8:00 a.m. to 12:00 noon

– 444 – HOW TO APPLY FOR HONG KONG OFFER SHARES

CCASS Investor Participants can input electronic application instructions from 9:00 a.m. on Monday, December 16, 2019 until 12:00 noon on Thursday, December 19, 2019 (24 hours daily, except on December 19, 2019, the last application day).

The latest time for inputting your electronic application instructions will be 12:00 noon on Thursday, December 19, 2019, the last application day or such later time as described in “– 10. Effect of Bad Weather on the Opening of the Application Lists” in this section.

Note: (1) The times in this sub-section are subject to change as HKSCC may determine from time to time with prior notification to CCASS Clearing/Custodian Participants and/or CCASS Investor Participants.

No Multiple Applications

If you are suspected of having made multiple applications or if more than one application is made for your benefit, the number of Hong Kong Offer Shares applied for by HKSCC Nominees will be automatically reduced by the number of Hong Kong Offer Shares for which you have given such instructions and/or for which such instructions have been given for your benefit. Any electronic application instructions to make an application for the Hong Kong Offer Shares given by you or for your benefit to HKSCC shall be deemed to be an actual application for the purposes of considering whether multiple applications have been made.

Section 40 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance

For the avoidance of doubt, the Bank and all other parties involved in the preparation of this prospectus acknowledge that each CCASS Participant who gives or causes to give electronic application instructions is a person who may be entitled to compensation under Section 40 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (as applied by Section 342E of the Companies (Winding Up and Miscellaneous Provisions) Ordinance).

Personal Data

The section of the Application Form headed “Personal Data” applies to any personal data held by the Bank, the H Share Registrar, the receiving banks, the Joint Representatives, the Underwriters and any of their respective advisers and agents about you in the same way as it applies to personal data about applicants other than HKSCC Nominees.

7. WARNING FOR ELECTRONIC APPLICATIONS

The subscription of the Hong Kong Offer Shares by giving electronic application instructions to HKSCC is only a facility provided to CCASS Participants. Similarly, the application for Hong Kong Offer Shares through the White Form eIPO service is also only a facility provided by the White Form eIPO Service Provider to public investors. Such facilities are subject to capacity limitations and potential service interruptions and you are advised not to wait until the last application day in making your electronic applications. The Bank, the

– 445 – HOW TO APPLY FOR HONG KONG OFFER SHARES

Directors, the Joint Sponsors, the Joint Representatives, the Joint Global Coordinators, the Joint Bookrunners, the Joint Lead Managers and the Underwriters take no responsibility for such applications and provide no assurance that any CCASS Participant or person applying through the White Form eIPO service will be allotted any Hong Kong Offer Shares.

To ensure that CCASS Investor Participants can give their electronic application instructions, they are advised not to wait until the last minute to input their instructions to the systems. In the event that CCASS Investor Participants have problems in the connection to CCASS Phone System/CCASS Internet System for submission of electronic application instructions, they should either (i) submit a WHITE or YELLOW Application Form, or (ii) go to HKSCC’s Customer Service Center to complete an input request form for electronic application instructions before 12:00 noon on Thursday, December 19, 2019.

8. HOW MANY APPLICATIONS CAN YOU MAKE

Multiple applications for the Hong Kong Offer Shares are not allowed except by nominees. If you are a nominee, in the box on the Application Form marked “For nominees” you must include:

• an account number; or

• some other identification code, for each beneficial owner or, in the case of joint beneficial owners, for each joint beneficial owner. If you do not include this information, the application will be treated as being made for your benefit.

All of your applications will be rejected if more than one application on a WHITE or YELLOW Application Form or by giving electronic application instructions to HKSCC or through the White Form eIPO service, is made for your benefit (including the part of the application made by HKSCC Nominees acting on electronic application instructions). If an application is made by an unlisted company and:

• the principal business of that company is dealing in securities; and

• you exercise statutory control over that company, then the application will be treated as being for your benefit.

“Unlisted company” means a company with no equity securities listed on the Hong Kong Stock Exchange.

“Statutory control” means you:

• control the composition of the board of directors of the company;

– 446 – HOW TO APPLY FOR HONG KONG OFFER SHARES

• control more than half of the voting power of the company; or

• hold more than half of the issued share capital of the company (not counting any part of it which carries no right to participate beyond a specified amount in a distribution of either profits or capital).

9. HOW MUCH ARE THE HONG KONG OFFER SHARES

The WHITE and YELLOW Application Forms have tables showing the exact amount payable for H Shares.

You must pay the maximum Offer Price, brokerage, SFC transaction levy and the Hong Kong Stock Exchange trading fee in full upon application for the Hong Kong Offer Shares under the terms set out in the Application Forms.

You may submit an application using a WHITE or YELLOW Application Form or through the White Form eIPO service in respect of a minimum of 1,000 Hong Kong Offer Shares. Each application or electronic application instruction in respect of more than 1,000 Hong Kong Offer Shares must be in one of the numbers set out in the table in the Application Form, or as otherwise specified on the designated website at www.eipo.com.hk.

If your application is successful, brokerage will be paid to the Exchange Participants, and the SFC transaction levy and the Hong Kong Stock Exchange trading fee are paid to the Hong Kong Stock Exchange (in the case of the SFC transaction levy, collected by the Hong Kong Stock Exchange on behalf of the SFC).

For further details on the Offer Price, see the section headed “Structure of the Global Offering – The International Offering – Pricing and Allocation”.

10. EFFECT OF BAD WEATHER ON THE OPENING OF THE APPLICATION LISTS

The application lists will not open if there is:

• a tropical cyclone warning signal number 8 or above; or

• a “black” rainstorm warning; or

• Extreme Conditions, in force in Hong Kong at any time between 9:00 a.m. and 12:00 noon on Thursday, December 19, 2019. Instead they will open between 11:45 a.m. and 12:00 noon on the next business day which does not have either of those warnings and/or Extreme Conditions in Hong Kong in force at any time between 9:00 a.m. and 12:00 noon.

– 447 – HOW TO APPLY FOR HONG KONG OFFER SHARES

If the application lists do not open and close on Thursday, December 19, 2019 or if there is a tropical cyclone warning signal number 8 or above or a “black” rainstorm warning signal and/or Extreme Conditions in force in Hong Kong that may affect the dates mentioned in the section headed “Expected Timetable”, an announcement will be made in such event.

11. PUBLICATION OF RESULTS

We expect to announce the final Offer Price, the level of indication of interest in the International Offering, the level of applications in the Hong Kong Public Offering and the basis of allocation of the Hong Kong Offer Shares on Friday, December 27, 2019 on the Bank’s website at www.bgzchina.com and the website of the Hong Kong Stock Exchange at www.hkexnews.hk.

The results of allocations and the Hong Kong identity card/passport/Hong Kong business registration numbers of successful applicants under the Hong Kong Public Offering will be available at the times and date and in the manner specified below:

• in the announcement to be posted on the Bank’s website at www.bgzchina.com and the Hong Kong Stock Exchange’s website at www.hkexnews.hk by no later than 9:00 a.m. on Friday, December 27, 2019;

• from the designated results of allocations website at www.iporesults.com.hk (alternatively: English https://www.eipo.com.hk/en/Allotment; Chinese https://www.eipo.com.hk/zh-hk/Allotment) with a “search by ID” function on a 24-hour basis from 8:00 a.m. on Friday, December 27, 2019 to 12:00 midnight on Thursday, January 2, 2020;

• by telephone enquiry line by calling 2862 8669 between 9:00 a.m. and 10:00 p.m. from Friday, December 27, 2019 to Monday, December 30, 2019;

• in the special allocation results booklets which will be available for inspection during opening hours on Friday, December 27, 2019, Saturday, December 28, 2019 and Monday, December 30, 2019 at all the receiving banks designated branches.

If we accept your offer to purchase (in whole or in part), which we may do by announcing the basis of allocations and/or making available the results of allocations publicly, there will be a binding contract under which you will be required to purchase the Hong Kong Offer Shares if the conditions of the Global Offering are satisfied and the Global Offering is not otherwise terminated. Further details are contained in the section headed “Structure of the Global Offering”.

You will not be entitled to exercise any remedy of rescission for innocent misrepresentation at any time after acceptance of your application. This does not affect any other right you may have.

– 448 – HOW TO APPLY FOR HONG KONG OFFER SHARES

12. CIRCUMSTANCES IN WHICH YOU WILL NOT BE ALLOTTED OFFER SHARES

You should note the following situations in which the Hong Kong Offer Shares will not be allotted to you:

(a) If your application is revoked:

By completing and submitting an Application Form or giving electronic application instructions to HKSCC or to the White Form eIPO Service Provider, you agree that your application or the application made by HKSCC Nominees on your behalf cannot be revoked on or before the fifth day after the time of the opening of the application lists (excluding for this purpose any day which is Saturday, Sunday or public holiday in Hong Kong). This agreement will take effect as a collateral contract with us.

Your application or the application made by HKSCC Nominees on your behalf may only be revoked on or before such fifth day if a person responsible for this prospectus under Section 40 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (as applied by Section 342E of the Companies (Winding Up and Miscellaneous Provisions) Ordinance) gives a public notice under that section which excludes or limits that person’s responsibility for this prospectus.

If any supplement to this prospectus is issued, applicants who have already submitted an application will be notified that they are required to confirm their applications. If applicants have been so notified but have not confirmed their applications in accordance with the procedure to be notified, all unconfirmed applications will be deemed revoked.

If your application or the application made by HKSCC Nominees on your behalf has been accepted, it cannot be revoked. For this purpose, acceptance of applications which are not rejected will be constituted by notification in the press of the results of allocation, and where such basis of allocation is subject to certain conditions or provides for allocation by ballot, such acceptance will be subject to the satisfaction of such conditions or results of the ballot respectively.

(b) If the Bank or our agents exercise our discretion to reject your application:

The Bank, the Joint Representatives, the White Form eIPO Service Provider and their respective agents and nominees have full discretion to reject or accept any application, or to accept only part of any application, without giving any reasons.

– 449 – HOW TO APPLY FOR HONG KONG OFFER SHARES

(c) If the allotment of Hong Kong Offer Shares is void:

The allotment of Hong Kong Offer Shares will be void if the Listing Committee of the Hong Kong Stock Exchange does not grant permission to list the H Shares either:

• within three weeks from the closing date of the application lists; or

• within a longer period of up to six weeks if the Listing Committee notifies the Bank of that longer period within three weeks of the closing date of the application lists.

(d) If:

• you make multiple applications or suspected multiple applications;

• you or the person for whose benefit you are applying have applied for or taken up, or indicated an interest for, or have been or will be placed or allocated (including conditionally and/or provisionally) Hong Kong Offer Shares and International Offer Shares;

• your Application Form is not completed in accordance with the stated instructions;

• your electronic application instructions through the White Form eIPO Service are not completed in accordance with the instructions, terms and conditions on the designated website;

• your payment is not made correctly or the cheque or banker’s cashier order paid by you is dishonored upon its first presentation;

• the Underwriting Agreements do not become unconditional or are terminated;

• the Bank or the Joint Representatives believe that by accepting your application, it or they would violate applicable securities or other laws, rules or regulations; or

• your application is for more than 50% of the Hong Kong Offer Shares initially offered under the Hong Kong Public Offering.

– 450 – HOW TO APPLY FOR HONG KONG OFFER SHARES

13. REFUND OF APPLICATION MONIES

If an application is rejected, not accepted or accepted in part only, or if the Offer Price as finally determined is less than the maximum offer price of HK$2.61 per Offer Share (excluding brokerage, SFC transaction levy and the Hong Kong Stock Exchange trading fee thereon), or if the conditions of the Hong Kong Public Offering are not fulfilled in accordance with “Structure of the Global Offering – Conditions of the Global Offering” in this prospectus or if any application is revoked, the application monies, or the appropriate portion thereof, together with the related brokerage, SFC transaction levy and the Hong Kong Stock Exchange trading fee, will be refunded, without interest or the cheque or banker’s cashier order will not be cleared.

Any refund of your application monies will be made on or before Friday, December 27, 2019.

14. DISPATCH/COLLECTION OF H SHARE CERTIFICATES AND REFUND MONIES

You will receive one H Share certificate for all Hong Kong Offer Shares allotted to you under the Hong Kong Public Offering (except pursuant to applications made on YELLOW Application Forms or by electronic application instructions to HKSCC via CCASS where the H Share certificates will be deposited into CCASS as described below).

No temporary document of title will be issued in respect of the H Shares. No receipt will be issued for sums paid on application. If you apply by a WHITE or YELLOW Application Form, subject to personal collection as mentioned below, the following will be sent to you (or, in the case of joint applicants, to the first-named applicant) by ordinary post, at your own risk, to the address specified on the Application Form:

• H Share certificate(s) for all the Hong Kong Offer Shares allotted to you (for YELLOW Application Forms, H Share certificates will be deposited into CCASS as described below); and

• refund cheque(s) crossed “Account Payee Only” in favor of the applicant (or, in the case of joint applicants, the first-named applicant) for (i) all or the surplus application monies for the Hong Kong Offer Shares, wholly or partially unsuccessfully applied for; and/or (ii) the difference between the Offer Price and the maximum Offer Price per Offer Share paid on application in the event that the Offer Price is less than the maximum Offer Price (including brokerage, SFC transaction levy and the Hong Kong Stock Exchange trading fee but without interest). Part of the Hong Kong identity card number/passport number, provided by you or the first named applicant (if you are joint applicants), may be printed on your refund cheque, if any. Your banker may require verification of your Hong Kong identity card

– 451 – HOW TO APPLY FOR HONG KONG OFFER SHARES

number/passport number before encashment of your refund cheque(s). Inaccurate completion of your Hong Kong identity card number/passport number may invalidate or delay encashment of your refund cheque(s).

Subject to arrangement on dispatch/collection of H Share certificates and refund monies as mentioned below, any refund cheques and H Share certificates are expected to be posted on or before Friday, December 27, 2019. The right is reserved to retain any H Share certificate(s) and any surplus application monies pending clearance of cheque(s) or banker’s cashier’s order(s).

H Share certificates will only become valid at 8:00 a.m. on Monday, December 30, 2019 provided that the Global Offering has become unconditional and the right of termination described in the “Underwriting” section in this prospectus has not been exercised. Investors who trade H Shares prior to the receipt of H Share certificates or the H Share certificates becoming valid do so at their own risk.

Personal Collection

(a) If you apply using a WHITE Application Form

If you apply for 1,000,000 or more Hong Kong Offer Shares and have provided all information required by your Application Form, you may collect your refund cheque(s) and/or H Share certificate(s) from the H Share Registrar, Computershare Hong Kong Investor Services Limited, at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, from 9:00 a.m. to 1:00 p.m. on Friday, December 27, 2019 or such other date as notified by us in the newspapers.

If you are an individual who is eligible for personal collection, you must not authorize any other person to collect for you. If you are a corporate applicant which is eligible for personal collection, your authorized representative must bear a letter of authorization from your corporation stamped with your corporation’s chop. Both individuals and authorized representatives must produce, at the time of collection, evidence of identity acceptable to the H Share Registrar.

If you do not collect your refund cheque(s) and/or H Share certificate(s) personally within the time specified for collection, they will be dispatched promptly to the address specified in your Application Form by ordinary post at your own risk.

If you apply for less than 1,000,000 Hong Kong Offer Shares, your refund cheque(s) and/or H Share certificate(s) will be sent to the address on the relevant Application Form on or before Friday, December 27, 2019, by ordinary post and at your own risk.

– 452 – HOW TO APPLY FOR HONG KONG OFFER SHARES

(b) If you apply using a YELLOW Application Form

If you apply for 1,000,000 or more Hong Kong Offer Shares, please follow the same instructions as described above for collecting refund cheque(s). If you have applied for less than 1,000,000 Hong Kong Offer Shares, your refund cheque(s) will be sent to the address on the relevant Application Form on or before Friday, December 27, 2019, by ordinary post and at your own risk.

If you apply by using a YELLOW Application Form and your application is wholly or partially successful, your H Share certificate(s) will be issued in the name of HKSCC Nominees and deposited into CCASS for credit to your or the designated CCASS Participant’s stock account as stated in your Application Form on Friday, December 27, 2019, or upon contingency, on any other date determined by HKSCC or HKSCC Nominees.

• If you apply through a designated CCASS Participant (other than a CCASS Investor Participant)

For Hong Kong Offer Shares credited to your designated CCASS Participant’s stock account (other than CCASS Investor Participant), you can check the number of Hong Kong Offer Shares allotted to you with that CCASS Participant.

• If you are applying as a CCASS Investor Participant

The Bank will publish the results of CCASS Investor Participants’ applications together with the results of the Hong Kong Public Offering in the manner described in “– 11. Publication of Results” above. You should check the announcement published by the Bank and report any discrepancies to HKSCC before 5:00 p.m. on Friday, December 27, 2019 or any other date as determined by HKSCC or HKSCC Nominees. Immediately after the credit of the Hong Kong Offer Shares to your stock account, you can check your new account balance via the CCASS Phone System and CCASS Internet System.

(c) If you apply through the White Form eIPO service

If you apply for 1,000,000 or more Hong Kong Offer Shares and your application is wholly or partially successful, you may collect your H Share certificate(s) from the H Share Registrar, Computershare Hong Kong Investor Services Limited, at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong from 9:00 a.m. to 1:00 p.m. on Friday, December 27, 2019, or such other date as notified by the Bank in the newspapers as the date of dispatch/collection of H Share certificates/e-Refund payment instructions/refund cheques.

If you do not collect your H Share certificate(s) personally within the time specified for collection, they will be sent to the address specified in your application instructions by ordinary post at your own risk.

– 453 – HOW TO APPLY FOR HONG KONG OFFER SHARES

If you apply for less than 1,000,000 Hong Kong Offer Shares, your H Share certificate(s) (where applicable) will be sent to the address specified in your application instructions on or before Friday, December 27, 2019 by ordinary post at your own risk.

If you apply and pay the application monies from a single bank account, any refund monies will be dispatched to that bank account in the form of e-Refund payment instructions. If you apply and pay the application monies from multiple bank accounts, any refund monies will be dispatched to the address as specified in your application instructions in the form of refund cheque(s) by ordinary post at your own risk.

(d) If you apply via Electronic application instructions to HKSCC

Allocation of Hong Kong Offer Shares

For the purposes of allocating Hong Kong Offer Shares, HKSCC Nominees will not be treated as an applicant. Instead, each CCASS Participant who gives electronic application instructions or each person for whose benefit instructions are given will be treated as an applicant.

Deposit of H Share Certificates into CCASS and Refund of Application Monies

• If your application is wholly or partially successful, your H Share certificate(s) will be issued in the name of HKSCC Nominees and deposited into CCASS for the credit of your designated CCASS Participant’s stock account or your CCASS Investor Participant stock account on Friday, December 27, 2019, or, on any other date determined by HKSCC or HKSCC Nominees.

• We expect to publish the application results of CCASS Participants (and where the CCASS Participant is a broker or custodian, we will include information relating to the relevant beneficial owner), your Hong Kong identity card number/passport number or other identification code (Hong Kong business registration number for corporations) and the basis of allotment of the Hong Kong Public Offering in the manner specified in “– 11. Publication of Results” above on Friday, December 27, 2019. You should check the announcement published by us and report any discrepancies to HKSCC before 5:00 p.m. on Friday, December 27, 2019 or such other date as determined by HKSCC or HKSCC Nominees.

• If you have instructed your broker or custodian to give electronic application instructions on your behalf, you can also check the number of Hong Kong Offer Shares allotted to you and the amount of refund monies (if any) payable to you with that broker or custodian.

– 454 – HOW TO APPLY FOR HONG KONG OFFER SHARES

• If you have applied as a CCASS Investor Participant, you can also check the number of Hong Kong Offer Shares allotted to you and the amount of refund monies (if any) payable to you via the CCASS Phone System and the CCASS Internet System (under the procedures contained in HKSCC’s “An Operating Guide for Investor Participants” in effect from time to time) on Friday, December 27, 2019. Immediately following the credit of the Hong Kong Offer Shares to your stock account and the credit of refund monies to your bank account, HKSCC will also make available to you an activity statement showing the number of Hong Kong Offer Shares credited to your CCASS Investor Participant stock account and the amount of refund monies (if any) credited to your designated bank account.

• Refund of your application monies (if any) in respect of wholly and partially unsuccessful applications and/or difference between the Offer Price and the maximum Offer Price per Offer Share initially paid on application (including brokerage, SFC transaction levy and the Hong Kong Stock Exchange trading fee but without interest) will be credited to your designated bank account or the designated bank account of your broker or custodian on Friday, December 27, 2019.

15. ADMISSION OF THE H SHARES INTO CCASS

If the Hong Kong Stock Exchange grants the listing of, and permission to deal in, the H Shares and we comply with the stock admission requirements of HKSCC, the H Shares will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the date of commencement of dealings in the H Shares or any other date HKSCC chooses. Settlement of transactions between Exchange Participants (as defined in the Listing Rules) is required to take place in CCASS on the second business day after any trading day.

All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time.

Investors should seek the advice of their stockbroker or other professional advisor for details of the settlement arrangement as such arrangements may affect their rights and interests.

All necessary arrangements have been made enabling the H Shares to be admitted into CCASS.

– 455 – APPENDIX I ACCOUNTANTS’ REPORT

The following is the text of a report set out on pages I-1 to I-127, received from the Bank’s reporting accountants, KPMG, Certified Public Accountants, Hong Kong, for the purpose of incorporation in this prospectus.

ACCOUNTANTS’ REPORT ON HISTORICAL FINANCIAL INFORMATION TO THE DIRECTORS OF BANK OF GUIZHOU CO., LTD. AND ABCI CAPITAL LIMITED, CCB INTERNATIONAL CAPITAL LIMITED AND CLSA CAPITAL MARKETS LIMITED

Introduction

We report on the historical financial information of Bank of Guizhou Co., Ltd. (the “Bank”) set out on pages I-4 to I-127, which comprises the statements of financial position of the Bank as at December 31, 2016, 2017 and 2018 and June 30, 2019, the statements of profit or loss and other comprehensive income, the statements of changes in equity and the cash flow statements, for each of the years ended December 31, 2016, 2017 and 2018 and the six months ended June 30, 2019 (the “Relevant Periods”), and a summary of significant accounting policies and other explanatory information (together, the “Historical Financial Information”). The Historical Financial Information set out on pages I-4 to I-127 forms an integral part of this report, which has been prepared for inclusion in the prospectus of the Bank dated December 16, 2019 (the “Prospectus”) in connection with the initial listing of shares of the Bank on the Main Board of The Stock Exchange of Hong Kong Limited.

Directors’ responsibility for 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 and presentation set out in Notes 2(1)-(4) to the Historical Financial Information, and for such internal control as the directors of the Bank determine is necessary to enable the preparation of the Historical Financial Information that is free from material misstatement, whether due to fraud or error.

Reporting accountants’ 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 – APPENDIX I ACCOUNTANTS’ 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 accountants’ judgment, 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 accountants consider 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 and presentation set out in Notes 2(1)-(4) 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 purpose of the accountants’ report, a true and fair view of the Bank’s financial position as at December 31, 2016, 2017 and 2018 and June 30, 2019 and of the Bank’s financial performance and cash flows for the Relevant Periods in accordance with the basis of preparation and presentation set out in Notes 2(1)-(4) to the Historical Financial Information.

Review of stub period corresponding financial information

We have reviewed the stub period corresponding financial information of the Bank which comprises the statement of profit or loss and other comprehensive income, the statement of changes in equity and the cash flow statement for the six months ended June 30, 2018 and other explanatory information (the “Stub Period Corresponding Financial Information”). The directors of the Bank are responsible for the preparation and presentation of the Stub Period Corresponding Financial Information in accordance with the basis of preparation and presentation set out in Notes 2(1)-(4) to the Historical Financial Information. Our responsibility is to express a conclusion on the Stub Period Corresponding Financial Information based on our review. We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the HKICPA. A review consists of making enquiries, 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 Hong Kong 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 Corresponding Financial Information, for the purpose of the accountants’ report, is not prepared, in all material respects, in accordance with the basis of preparation and presentation set out in Notes 2(1)-(4) to the Historical Financial Information.

– I-2 – APPENDIX I ACCOUNTANTS’ REPORT

Report on matters under the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited 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 31 to the Historical Financial Information which contains information about the dividends paid by the Bank in respect of the Relevant Periods.

KPMG Certified Public Accountants 8th Floor, Prince’s Building 10 Chater Road Central, Hong Kong December 16, 2019

– I-3 – APPENDIX I ACCOUNTANTS’ REPORT

HISTORICAL FINANCIAL INFORMATION

Set out below is the Historical Financial Information which forms an integral part of this accountants’ report. The financial statements of the Bank for the Relevant Periods, on which the Historical Financial Information is based, were audited by KPMG Huazhen LLP in accordance with Hong Kong Standards on Auditing issued by the HKICPA (“Underlying Financial Statements”). A FINANCIAL INFORMATION OF THE BANK Statements of profit or loss and other comprehensive income (Expressed in thousands of Renminbi, unless otherwise stated)

Six months ended Years ended December 31, June 30, Note 2016 2017 2018 2018 2019 (Unaudited) Interest income 11,211,511 12,967,950 14,676,173 6,960,165 8,600,759 Interest expense (3,281,272) (4,257,143) (6,349,876) (2,992,524) (3,963,277) Net interest income 3 7,930,239 8,710,807 8,326,297 3,967,641 4,637,482 ------Fee and commission income 278,560 108,910 108,419 46,035 108,066 Fee and commission expense (88,595) (118,579) (87,119) (38,691) (46,794) Net fee and commission income/(expense) 4 189,965 (9,669) 21,300 7,344 61,272 ------Net trading (losses)/gains 5 (91,335) (110,770) 151,596 62,939 125,808 Net gains/(losses) arising from investment securities 6 12,768 (10,154) 217,160 81,397 208,184 Other operating income 7 26,858 45,167 53,261 8,899 12,475 ------Operating income 8,068,495 8,625,381 8,769,614 4,128,220 5,045,221 Operating expenses 8 (2,858,211) (2,919,534) (3,039,832) (1,355,726) (1,578,805) Impairment losses on assets 11 (2,819,430) (3,058,515) (2,392,283) (1,060,806) (1,439,652) Share of profits/(losses) of associates 7,013 (5,495) (34,460) (3,311) (4,164) Profit before tax 2,397,867 2,641,837 3,303,039 1,708,377 2,022,600 Income tax 12 (436,433) (386,883) (426,468) (246,657) (232,863) Net profit 1,961,434 2,254,954 2,876,571 1,461,720 1,789,737 ------Other comprehensive income: Items that may be reclassified subsequently to profit or loss: Financial assets at fair value through other comprehensive income: – net movement in the fair value reserve, net of tax 30(d) – – 220,174 55,310 70,828 – net movement in the impairment reserve, net of tax 30(e) – – 3,214 1,226 3,395 Available-for-sale financial assets: – net movement in the fair value reserve, net of tax 30(d) (74,715) (157,497) – – – Item that will not be reclassified to profit or loss: Remeasurement of net defined benefit liability, net of tax 30(f) 2,860 10,240 (16,000) (4,830) 4,650 Other comprehensive income, net of tax (71,855) (147,257) 207,388 51,706 78,873 ------Total comprehensive income 1,889,579 2,107,697 3,083,959 1,513,426 1,868,610

Basic and diluted earnings per share (in RMB) 13 0.23 0.23 0.24 0.12 0.14

The notes on pages I-11 to I-127 form part of the Historical Financial Information.

– I-4 – APPENDIX I ACCOUNTANTS’ REPORT

Statements of financial position (Expressed in thousands of Renminbi, unless otherwise stated)

At December 31, At June 30, Note 2016 2017 2018 2019 Assets Cash and deposits with the central bank 14 32,241,708 49,676,474 45,802,967 48,020,919 Deposits with banks and other financial institutions 15 5,886,882 1,121,686 834,826 4,232,322 Financial assets held under resale agreements 16 17,740,304 12,948,325 14,700,328 19,988,816 Loans and advances to customers 17 65,549,846 85,409,486 135,831,853 158,892,694 Financial investments: 18 Financial investments at fair value through profit or loss 3,856,434 3,686,958 8,670,658 15,378,607 Financial investments at fair value through other comprehensive income – – 14,117,103 23,643,501 Financial investments at amortized cost – – 113,857,259 111,132,225 Available-for-sale financial assets 3,159,198 8,966,149 – – Held-to-maturity investments 31,876,002 42,381,575 – – Debt securities classified as receivables 63,376,678 75,010,766 – – Interest in associates 19 136,319 129,024 94,564 90,400 Property and equipment 20 1,828,877 1,796,738 3,293,369 3,398,351 Deferred tax assets 21 1,167,389 2,051,260 2,515,311 2,780,936 Other assets 22 2,129,629 3,189,963 1,484,641 2,063,595 Total assets 228,949,266 286,368,404 341,202,879 389,622,366

At December 31, At June 30, Note 2016 2017 2018 2019 Liabilities and equity Liabilities Borrowing from the central bank 1,316,566 1,572,039 2,820,175 2,758,554 Deposits from banks and other financial institutions 24 15,679,630 8,279,574 9,983,768 7,290,217 Placements from banks and other financial institutions – – – 100,139 Financial assets sold under repurchase agreements 25 7,957,200 – 2,175,276 2,313,840 Deposits from customers 26 164,810,111 202,270,510 220,083,735 247,113,664 Income tax payable 707,503 727,783 386,285 301,543 Debt securities issued 27 18,297,253 49,288,569 78,282,412 99,913,345 Other liabilities 28 3,924,024 3,132,517 2,012,337 2,503,560 Total liabilities 212,692,287 265,270,992 315,743,988 362,294,862 ------Equity Share capital 29 9,661,345 11,263,045 12,388,045 12,388,047 Capital reserve 30(a) 3,285,309 5,027,419 6,264,920 6,264,921 Surplus reserve 30(b) 620,927 846,422 1,134,697 1,134,697 General reserve 30(c) 840,000 2,190,000 2,610,000 3,360,000 Fair value reserve 30(d) 17,820 (139,677) 78,163 148,991 Impairment reserve 30(e) – – 5,431 8,826 (Deficit)/surplus on remeasurement of net defined benefit liability 30(f) (2,700) 7,540 (8,460) (3,810) Retained earnings 31 1,834,278 1,902,663 2,986,095 4,025,832 Total equity 16,256,979 21,097,412 25,458,891 27,327,504 ------Total liabilities and equity 228,949,266 286,368,404 341,202,879 389,622,366

The notes on pages I-11 to I-127 form part of the Historical Financial Information.

– I-5 – APPENDIX I ACCOUNTANTS’ REPORT

Statements of changes in equity (Expressed in thousands of Renminbi, unless otherwise stated)

(Deficit)/ surplus on remeasurement Share Capital Surplus General Fair value of net defined Retained Note capital reserve reserve reserve reserve benefit liability earnings Total Balance at January 1, 2016 8,621,645 2,683,163 424,784 420,000 92,535 (5,560) 1,351,152 13,587,719 ------Changes in equity for the year: Net profit for the year –––– – – 1,961,434 1,961,434 Other comprehensive income – – – – (74,715) 2,860 – (71,855) Total comprehensive income – – – – (74,715) 2,860 1,961,434 1,889,579 Capital contribution by equity shareholders 29 1,039,700 602,146 – – – – – 1,641,846 Appropriation of profit – Appropriation to surplus reserve 30(b) – – 196,143 – – – (196,143) – – Appropriation to general reserve 30(c) – – – 420,000 – – (420,000) – – Appropriation to shareholders 31 –––– – – (862,165) (862,165) ------Balance at December 31, 2016 9,661,345 3,285,309 620,927 840,000 17,820 (2,700) 1,834,278 16,256,979

(Deficit)/ surplus on remeasurement Share Capital Surplus General Fair value of net defined Retained Note capital reserve reserve reserve reserve benefit liability earnings Total Balance at January 1, 2017 9,661,345 3,285,309 620,927 840,000 17,820 (2,700) 1,834,278 16,256,979 ------Changes in equity for the year: Net profit for the year –––– – – 2,254,954 2,254,954 Other comprehensive income – – – – (157,497) 10,240 – (147,257) Total comprehensive income – – – – (157,497) 10,240 2,254,954 2,107,697 Capital contribution by equity shareholders 29 1,601,700 1,742,110 – – – – – 3,343,810 Appropriation of profit – Appropriation to surplus reserve 30(b) – – 225,495 – – – (225,495) – – Appropriation to general reserve 30(c) – – – 1,350,000 – – (1,350,000) – – Appropriation to shareholders 31 –––– – – (611,074) (611,074) ------Balance at December 31, 2017 11,263,045 5,027,419 846,422 2,190,000 (139,677) 7,540 1,902,663 21,097,412

The notes on pages I-11 to I-127 form part of the Historical Financial Information.

– I-6 – APPENDIX I ACCOUNTANTS’ REPORT

Surplus/ (deficit) on remeasurement Share Capital Surplus General Fair value Impairment of net defined Retained Note capital reserve reserve reserve reserve reserve benefit liability earnings Total Balance at December 31, 2017 11,263,045 5,027,419 846,422 2,190,000 (139,677) – 7,540 1,902,663 21,097,412 Changes in accounting policies 2(1)(a) – – – – (2,334) 2,217 – (405,909) (406,026) Balance at January 1, 2018 11,263,045 5,027,419 846,422 2,190,000 (142,011) 2,217 7,540 1,496,754 20,691,386 ------Changes in equity for the year: Net profit for the year – ––– – – – 2,876,571 2,876,571 Other comprehensive income – – – – 220,174 3,214 (16,000) – 207,388 Total comprehensive income – – – – 220,174 3,214 (16,000) 2,876,571 3,083,959 Capital contribution by equity shareholders 29 1,125,000 1,237,501 – – – – – – 2,362,501 Appropriation of profit – Appropriation to surplus reserve 30(b) – – 288,275 – – – – (288,275) – – Appropriation to general reserve 30(c) – – – 420,000 – – – (420,000) – – Appropriation to shareholders 31 – ––– – – – (678,955) (678,955) ------Balance at December 31, 2018 12,388,045 6,264,920 1,134,697 2,610,000 78,163 5,431 (8,460) 2,986,095 25,458,891

The notes on pages I-11 to I-127 form part of the Historical Financial Information.

– I-7 – APPENDIX I ACCOUNTANTS’ REPORT

Surplus on remeasurement Share Capital Surplus General Fair value Impairment of net defined Retained Note capital reserve reserve reserve reserve reserve benefit liability earnings Total Balance at December 31, 2017 11,263,045 5,027,419 846,422 2,190,000 (139,677) – 7,540 1,902,663 21,097,412 Changes in accounting policies 2(1)(a) – – – – (2,334) 2,217 – (405,909) (406,026) Balance at January 1, 2018 11,263,045 5,027,419 846,422 2,190,000 (142,011) 2,217 7,540 1,496,754 20,691,386 ------Changes in equity for the period: Net profit for the period – ––– – – – 1,461,720 1,461,720 Other comprehensive income – – – – 55,310 1,226 (4,830) – 51,706 Total comprehensive income – – – – 55,310 1,226 (4,830) 1,461,720 1,513,426 Capital contribution by equity shareholders 29 1,125,000 1,237,501 – – – – – – 2,362,501 Appropriation of profit – Appropriation to general reserve 30(c) – – – 420,000 – – – (420,000) – – Appropriation to shareholders 31 – ––– – – – (678,955) (678,955) ------Balance at June 30, 2018 12,388,045 6,264,920 846,422 2,610,000 (86,701) 3,443 2,710 1,859,519 23,888,358

Deficit on remeasurement Share Capital Surplus General Fair value Impairment of net defined Retained Note capital reserve reserve reserve reserve reserve benefit liability earnings Total Balance at January 1, 2019 12,388,045 6,264,920 1,134,697 2,610,000 78,163 5,431 (8,460) 2,986,095 25,458,891 ------Changes in equity for the period: Net profit for the period – ––– – – – 1,789,737 1,789,737 Other comprehensive income – – – – 70,828 3,395 4,650 – 78,873 Total comprehensive income – – – – 70,828 3,395 4,650 1,789,737 1,868,610 Capital contribution by equity shareholders 29 21–– – – ––3 Appropriation of profit – Appropriation to general reserve 30(c) – – – 750,000 – – – (750,000) – ------Balance at June 30, 2019 12,388,047 6,264,921 1,134,697 3,360,000 148,991 8,826 (3,810) 4,025,832 27,327,504

The notes on pages I-11 to I-127 form part of the Historical Financial Information.

– I-8 – APPENDIX I ACCOUNTANTS’ REPORT

Cash flow statements (Expressed in thousands of Renminbi, unless otherwise stated)

Six months ended Years ended December 31, June 30, Note 2016 2017 2018 2018 2019 (Unaudited) Cash flows from operating activities Profit before tax 2,397,867 2,641,837 3,303,039 1,708,377 2,022,600 Adjustments for: Impairment losses on assets 2,819,430 3,058,515 2,392,283 1,060,806 1,439,652 Depreciation and amortization 292,666 341,629 350,363 161,878 254,291 Depreciation of investment properties 8,856 4,413 585 146 5,206 Unwinding of discount (24,425) (43,846) (54,263) (13,757) (19,787) Unrealized foreign exchange (gains)/losses (4,460) 3,969 (3,420) (873) (181) Net (gains)/losses on disposal of property and equipment (1,055) (3,106) 24,012 155 (127) Net trading losses/(gains) 95,795 106,801 (148,176) (62,066) (125,627) Net (gains)/losses on disposal of investment securities (12,768) 10,154 (217,160) (81,397) (208,184) Share of (profits)/losses of associates (7,013) 5,495 34,460 3,311 4,164 Interest expenses on debt securities issued 498,398 1,534,169 2,784,163 1,280,841 1,774,793 Interest expenses on lease liabilities ––––12,282 6,063,291 7,660,030 8,465,886 4,057,421 5,159,082 ------Changes in operating assets Net (increase)/decrease in deposits with the central bank (8,527,641) (2,446,352) 1,664,841 (854,044) 224,204 Net decrease/(increase) in deposits with banks and other financial institutions 2,893,014 1,968,711 (452,631) (70,740) (1,147,337) Net increase in loans and advances to customers (14,937,939) (22,353,480) (52,366,636) (14,521,056) (23,891,290) Net decrease/(increase) in financial assets held under resale agreements 10,123,431 – – (3,003) – Net (increase)/decrease in financial assets held for trading (2,302,184) 62,675 151,039 41,194 840,371 Net increase in other operating assets (340,147) (1,190,238) (103,527) (759,468) (59,901) (13,091,466) (23,958,684) (51,106,914) (16,167,117) (24,033,953) ------Changes in operating liabilities Net (decrease)/increase in borrowing from the central bank (90,349) 255,473 1,246,478 (292,255) (61,873) Net (decrease)/increase in deposits from banks and other financial institutions (3,772,248) (7,400,056) 1,660,529 1,137,190 (2,722,305) Net increase in placements from banks and other financial institutions ––––100,000 Net increase/(decrease) in financial assets sold under repurchase agreements 7,957,200 (7,957,200) 2,175,200 – 136,300 Net increase in deposits from customers 48,575,890 37,460,399 16,516,259 9,789,728 27,028,404 Net (decrease)/increase in other operating liabilities (169,938) (854,030) 71,966 (786,221) (301,905) 52,500,555 21,504,586 21,670,432 9,848,442 24,178,621 ------Net cash flows generated from/(used in) operating activities before income tax paid 45,472,380 5,205,932 (20,970,596) (2,261,254) 5,303,750 Income tax paid (506,077) (1,197,974) (1,169,326) (97,360) (606,840)

Net cash flows generated from/(used in) operating activities 44,966,303 4,007,958 (22,139,922) (2,358,614) 4,696,910 ------

The notes on pages I-11 to I-127 form part of the Historical Financial Information.

– I-9 – APPENDIX I ACCOUNTANTS’ REPORT

Six months ended Years ended December 31, June 30, Note 2016 2017 2018 2018 2019 (Unaudited) Cash flows from investing activities Proceeds from disposal and redemption of investments 39,897,712 66,147,814 72,943,357 7,322,256 10,207,919 Proceeds from disposal of property and equipment and other assets 397,698 335,571 72,413 – 15,813 Payments on acquisition of investments (67,675,306) (94,854,668) (78,105,461) (19,555,017) (24,283,438) Payments on acquisition of property and equipment, intangible assets and other assets (706,909) (493,815) (1,844,235) (53,775) (293,945) Net cash flows used in investing activities (28,086,805) (28,865,098) (6,933,926) (12,286,536) (14,353,651) ------Cash flows from financing activities Proceeds from capital contribution by equity shareholders 1,641,846 3,343,810 2,362,501 2,362,501 3 Proceeds from debt securities issued 34(c) 20,849,338 58,817,147 77,289,680 19,886,728 50,156,140 Repayment of debt securities issued 34(c) (13,224,020) (28,683,206) (49,558,722) (17,277,578) (29,136,585) Interest paid on debt securities issued 34(c) (245,980) (676,794) (1,521,278) (952,423) (1,163,415) Capital element of lease liabilities paid ––––(48,455) Interest element of lease liabilities paid ––––(40,815) Dividends paid (868,748) (542,281) (716,467) (33,529) (27) Net cash flows generated from financing activities 8,152,436 32,258,676 27,855,714 3,985,699 19,766,846 ------Effect of foreign exchange rate changes on cash and cash equivalents 2,386 (1,586) 1,832 (78) (44) ------Net increase/(decrease) in cash and cash equivalents 34(a) 25,034,320 7,399,950 (1,216,302) (10,659,529) 10,110,061 Cash and cash equivalents as at January 1 3,900,368 28,934,688 36,334,638 36,334,638 35,118,336 Cash and cash equivalents as at December 31/June 30 34(b) 28,934,688 36,334,638 35,118,336 25,675,109 45,228,397

Interest received 10,759,606 12,664,758 14,611,960 7,061,339 8,539,418

Interest paid (excluding interest expense on debt securities issued) (2,695,201) (2,568,723) (3,689,989) (1,747,296) (2,155,553)

The notes on pages I-11 to I-127 form part of the Historical Financial Information.

– I-10 – APPENDIX I ACCOUNTANTS’ REPORT

B NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Expressed in thousands of Renminbi, unless otherwise stated)

1 BACKGROUND INFORMATION

The Bank was established in Guiyang, Guizhou Province, the People’s Republic of China (the “PRC”) on October 11, 2012 with the approval of the former China Banking Regulatory Commission (the former “CBRC”).

The Bank obtained its financial institution license No. B1383H252010001 from the former CBRC, and obtained its business license No. 915200000550280000 from the State Administration for Industry and Commerce of the PRC. The Bank is regulated by the China Banking and Insurance Regulatory Commission authorized by the State Council.

As at June 30, 2019, the Bank has one head office and 8 branches across Guizhou Province. The principal activities of the Bank are the provision of corporate and personal deposits, loans and advances, settlement, financial market business and other banking services as approved by the former CBRC. The statutory financial statements of the Bank for the years ended December 31, 2016 and 2017 were audited by Pan-China Certified Public Accountants LLP Chongqing Branch and the statutory financial statements of the Bank for the year ended December 31, 2018 were audited by KPMG Huazhen LLP.

2 SIGNIFICANT ACCOUNTING POLICIES

(1) Basis of preparation and presentation – Statement of compliance

The Historical Financial Information has been prepared in accordance with all applicable International Financial Reporting Standards (the “IFRSs”), which collective term includes all applicable individual International Financial Reporting Standards, International Accounting Standards and Interpretations issued by the International Accounting Standards Board (the “IASB”). The Historical Financial Information also complies with the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

The Stub Period Corresponding Financial Information has been prepared in accordance with the same basis of preparation and presentation adopted in respect of the Historical Financial Information.

(a) Changes in accounting policies

The IASB has issued a number of amendments to IFRSs that are first effective for the Relevant Periods. The principal effects of new and revised IFRSs (including International Accounting Standards (“IASs”)) are as follows:

IFRS 15 “Revenue from contracts with customers”

The Bank has adopted IFRS15 from January 1, 2018. The standard contains a single model that applies to contracts with customers and two approaches to recognizing revenue: at a point in time or over time. The model features a contract-based five-step analysis of transactions to determine whether, how much and when revenue is recognized.

IFRS 15 also introduces extensive qualitative and quantitative disclosure requirements which aim to enable users of the financial information to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. An entity may adopt IFRS 15 on a full retrospective basis. Alternatively, it may choose to adopt it from the date of initial application by adjusting opening balances at that date. Transitional disclosures are different depending on the approach adopted by the entity.

The Bank choose to adopt it from the date of initial application by adjusting opening balances at that date and the adoption does not have any material impact on the financial position and the financial result of the Bank.

IFRS 9 “Financial instruments”

IFRS 9 Financial Instruments (“IFRS 9”) introduces new requirements for classification and measurement of financial assets, including the measurement of impairment for financial assets, hedge accounting and disclosure. IFRS 9 is effective for annual periods beginning on or after January 1, 2018 on a retrospective basis and includes an exception from the requirement to restate comparative information. The Bank used the exemption from restating comparative information and recognized any transition adjustments against the opening balance of equity at January 1, 2018.

– I-11 – APPENDIX I ACCOUNTANTS’ REPORT

Classification and measurement

IFRS 9 contains three principal classification categories for financial assets: measured at (1) amortized cost, (2) fair value through other comprehensive income (“FVOCI”) and (3) fair value through profit or loss (“FVTPL”):

• The classification for debt instruments is determined based on the entity’s business model for managing the financial assets and the contractual cash flow characteristics of the asset. On initial recognition the Bank may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortized cost or at FVOCI as at FVTPL. If a debt instrument is classified as FVOCI, then interest revenue, impairment, foreign exchange gains/losses and gains/losses on disposal will be recognized in profit or loss.

• For equity investments, the classification is FVTPL regardless of the entity’s business model. The only exception is if the equity investment is not held for trading and the entity irrevocably elects to designate that investment as FVOCI. If an equity investment is designated as FVOCI, then only dividend income on that investment will be recognized in profit or loss. Gains and losses on that investment will be recognized in other comprehensive income without recycling.

The classification and measurement requirements for financial liabilities under IFRS 9 are largely unchanged from International Accounting Standard (IAS) 39, Financial Instruments: Recognition and Measurement, except that IFRS 9 requires the fair value change of a financial liability designated at FVTPL that is attributable to changes of that financial liability’s credit risk to be recognized in other comprehensive income (without reclassification to profit or loss).

Impairment

The new impairment model in IFRS 9 replaces the “incurred loss” model in IAS 39 with an “expected credit loss” (“ECL”) model. Under the expected credit loss model, it will no longer be necessary for a loss event to occur before an impairment loss is recognized. Instead, an entity is required to recognize and measure either a 12-month expected credit loss or lifetime expected credit loss, depending on the asset and the facts and circumstances, which will result in an early recognition of credit losses.

Disclosure

IFRS 9 requires extensive new disclosures, in particular about hedge accounting, credit risk and expected credit loss.

Transition

The Bank has adopted IFRS 9 since January 1, 2018. The Bank used the exemption from restating comparative information and recognized any transition adjustments against the opening balance of net assets at January 1, 2018. The Bank did not adopt IFRS 9 for the years ended December 31, 2016 and 2017.

The following table summarizes the impact of transition to IFRS 9 on fair value reserve, impairment reserve and retained earnings at January 1, 2018.

Fair value reserve Recognition fair value reserve (12,676) Transferred to retained earnings 9,565 Related tax effect 777 Impact as at January 1, 2018 (2,334)

Impairment reserve Impact as at January 1, 2018 2,217

Retained earnings Transferred from fair value reserve (9,565) Recognition of additional ECL on: – financial assets (418,147) – credit commitments (113,502) Related tax effect 135,305 Impact as at January 1, 2018 (405,909)

– I-12 – APPENDIX I ACCOUNTANTS’ REPORT

The following table provides the amount of Bank’s financial instruments listed on January 1, 2018, according to the original classification and measurement categories of IAS 39 and the new classification and measurement categories of IFRS 9 respectively.

IAS 39 IFRS 9 Carrying Carrying amount at amount at Financial instruments December 31, January 1, category Classification under IAS 39 2017 Classification under IFRS 9 2018 Cash and deposits with the Financial assets measured at 49,676,474 Financial assets measured at 49,676,474 central bank amortized cost (Loans and amortized cost receivables) Deposits with banks and Financial assets measured at 1,121,686 Financial assets measured at 1,121,426 other financial amortized cost (Loans and amortized cost institutions receivables) Financial assets held under Financial assets measured at 12,948,325 Financial assets measured at 12,939,587 resale agreements amortized cost (Loans and amortized cost receivables) Loans and advances to Financial assets measured at 85,409,486 Financial assets measured at 84,344,153 customers amortized cost (Loans and amortized cost receivables) Financial assets at fair value 803,003 through other comprehensive income Financial investments Financial investments 3,686,958 Financial investments 1,820,256 measured at fair value measured at fair value measured at fair value through profit or loss through profit or loss through profit or loss Financial assets measured at 1,902,111 amortized cost Available-for-sale financial Financial assets at fair value 8,966,149 Financial assets at fair value 8,219,378 assets through other through other comprehensive income comprehensive income (Available-for-sale financial assets) Financial assets at fair value 757,561 through profit or loss (Standards requirement) Held-to-maturity Financial assets measured at 42,381,575 Financial assets measured at 42,258,902 investments amortized cost (Held-to- amortized cost maturity investments) Financial assets at fair value 101,023 through profit or loss (Standards requirement) Debt securities classified Financial assets measured at 75,010,766 Financial assets measured at 74,871,034 as receivables amortized cost (Loans and amortized cost receivables)

– I-13 – APPENDIX I ACCOUNTANTS’ REPORT

The following financial assets has been reclassified and remeasured on transition to IFRS 9 from IAS 39 on January 1, 2018.

Carrying Carrying amount amount Note under IAS 39 under IFRS 9 As at As at December 31, January 1, 2017 Reclassification Remeasurement 2018 Financial assets measured at amortized cost Cash and deposits with the central bank Balance presented according to IAS 39 and IFRS 9 49,676,474 – – 49,676,474 ------Deposits with banks and other financial institutions Balance presented according to IAS 39 1,121,686 – – 1,121,686 Remeasurement: ECL allowance – – (260) (260) Balance presented according to IFRS 9 1,121,426 ------Financial assets held under resale agreements Balance presented according to IAS 39 12,948,325 – – 12,948,325 Remeasurement: ECL allowance – – (8,738) (8,738) Balance presented according to IFRS 9 12,939,587 ------Loans and advances to customers Balance presented according to IAS 39 85,409,486 – – 85,409,486 Less: transferred to financial assets at fair value through other comprehensive income (IFRS 9) A – (795,013) – (795,013) Remeasurement: ECL allowance – – (270,320) (270,320) Balance presented according to IFRS 9 84,344,153 ------Financial investments at amortized cost Balance presented according to IAS 39 Add: transferred from held-to-maturity investments (IAS 39) B – 42,276,494 – 42,276,494 Remeasurement: ECL allowance – – (17,592) (17,592) Add: transferred from debt securities classified as receivables (IAS 39) B – 75,010,766 – 75,010,766 Remeasurement: ECL allowance – – (139,732) (139,732) Add: transferred from financial investments at fair value through profit or loss (IAS 39) – 1,902,111 – 1,902,111 Balance presented according to IFRS 9 119,032,047 ------Held-to-maturity investments Balance presented according to IAS 39 42,381,575 – – 42,381,575 Less: transferred to amortized cost (IFRS 9) B – (42,276,494) – (42,276,494) Less: transferred to financial assets at fair value through profit or loss (IFRS 9) C – (105,081) – (105,081) Balance presented according to IFRS 9 – ------Debt securities classified as receivables Balance presented according to IAS 39 75,010,766 – – 75,010,766 Less: transferred to amortized cost (IFRS 9) B – (75,010,766) – (75,010,766) Balance presented according to IFRS 9 – ------Total 266,548,312 1,002,017 (436,642) 267,113,687

– I-14 – APPENDIX I ACCOUNTANTS’ REPORT

Carrying Carrying amount amount Note under IAS 39 under IFRS 9 As at As at December 31, January 1, 2017 Reclassification Remeasurement 2018 Financial assets at fair value through profit or loss Financial investments at fair value through profit or loss Balance presented according to IAS 39 3,686,958 – – 3,686,958 Add: reclassified interest receivable as fair value – 35,409 – 35,409 Add: transferred from available-for-sale financial assets (IAS 39) D – 746,771 – 746,771 Remeasurement: release the allowance for impairment losses under IAS 39 – – 5,750 5,750 Remeasurement: from cost to fair value – – (549) (549) Add: reclassified interest receivable as fair value – 5,589 – 5,589 Add: held-to-maturity investments (IAS 39) C – 105,081 – 105,081 Remeasurement: from amortized cost to fair value – – (5,155) (5,155) Add: reclassified interest receivable as fair value – 1,097 – 1,097 Less: transferred to amortized cost (IFRS 9) B – (1,902,111) – (1,902,111) Balance presented according to IFRS 9 2,678,840 ------Total 3,686,958 (1,008,164) 46 2,678,840

Financial assets at fair value through other comprehensive income Loans and advances to customers Balance presented according to IAS 39 – – – – Add: transferred from loans and advances to customers (IAS 39) A – 795,013 – 795,013 Remeasurement: release the allowance for impairment losses under IAS 39 – – 14,962 14,962 Remeasurement: from amortized cost to fair value – – (6,972) (6,972) Balance presented according to IFRS 9 803,003 ------Financial investments at fair value through other comprehensive income Balance presented according to IAS 39 – – – – Add: transferred from available-for-sale financial assets (IAS 39) B – 8,219,378 – 8,219,378 Balance presented according to IFRS 9 8,219,378 ------Available-for-sale financial assets (IAS 39) Balance presented according to IAS 39 8,966,149 – – 8,966,149 Less: transferred to financial assets at fair value through other comprehensive income B – (8,219,378) – (8,219,378) Less: transferred to financial assets at fair value through profit or loss (IFRS 9) D – (746,771) – (746,771) Balance presented according to IFRS 9 – ------Total 8,966,149 48,242 7,990 9,022,381

– I-15 – APPENDIX I ACCOUNTANTS’ REPORT

The Bank has adopted IFRS 9 from January 1, 2018. There were a net decrease of RMB2.33 million (after tax) in investment revaluation reserve, a net increase of RMB2.22 million in impairment reserve (after tax) and a net decrease of RMB405.91 million in retained earnings (after tax) arising from the new requirements on classification and measurement of financial assets listed above as compared with that recognized under IAS 39. A. Certain loans and advances to customers held by the Bank were held within a business model whose objective on the transition date was to collect contractual cash flows and sell financial assets. In addition, their contractual cash flows were identified as solely payments of principal and interest on the principal amount outstanding. Therefore, these assets were classified as financial assets at FVOCI under IFRS 9. B. Certain debt instruments’ classification under IAS 39 is replaced by the classification under IFRS 9 at the same measurement methods. (i) Certain debt instruments previously classified as receivables were classified as financial assets at amortized cost under IFRS 9. (ii) Certain debt instruments previously classified as held-to-maturity investments were classified as financial assets at amortized cost under IFRS 9. (iii) Certain debt instruments originally classified as available-for-sale financial assets were classified as financial assets at fair value through other comprehensive income under IFRS 9. C. Certain debt instruments originally classified as held-to-maturity investments, of which their contractual cash flows were not identified as solely payments of principal and interest on the principal outstanding. Therefore, these assets were classified as financial assets at fair value through profit or loss under IFRS 9.

D. Certain available-for-sale financial assets, of which the contractual cash flows were not identified as solely payments of principal and interest on the principal outstanding, were classified as financial assets at fair value through profit or loss under IFRS 9.

At initial application date, the ending balance of the allowance of financial assets impairment losses from IAS 39 to IFRS 9 is reconciled as follows: Provision for Provision for impairment loss impairment according to IAS 39/ loss Provisions recognized recognized under IAS 37 under IFRS 9 As at December 31, As at January 2017 Reclassification Remeasurement 1, 2018 Loans and advances (IAS 39)/Financial assets measured at amortized cost (IFRS 9) Deposits with banks and other financial institutions – – 260 260 Financial assets held under resale agreements – – 8,738 8,738 Loans and advances to customers 2,722,851 (14,962) 270,320 2,978,209 Debt securities classified as receivables 1,372,220 – 139,732 1,511,952 Impairment reserve (IFRS 9) Loans and advances to customers at fair value through other comprehensive income – 14,962 (14,718) 244 Held-to-maturity securities (IAS 39)/Financial assets measured at amortized cost (IFRS 9) Financial assets measured at amortized cost – – 17,592 17,592 Impairment reserve (IFRS 9) Financial assets at fair value through other comprehensive income 5,750 (5,750) 1,973 1,973 Credit commitments and financial guarantee contracts Credit commitments – – 113,502 113,502

– I-16 – APPENDIX I ACCOUNTANTS’ REPORT

IFRS 16 “Leases”

The Bank applied IFRS 16 with a date of initial application of January 1, 2019. As a result, the Bank has changed its accounting policy for lease contracts as detailed below.

The Bank applied IFRS 16 using the modified retrospective approach, under which the cumulative effect of initial application was recognized in retained earnings at January 1, 2019. The details of the changes in accounting policies are disclosed below.

Definition of a lease

Previously, the Bank determined at contract inception whether an arrangement is or contains a lease under IFRIC 4. Under IFRS 16, the Bank assesses whether a contract is or contains a lease based on the definition of a lease.

On transition to IFRS 16, the Bank elected to apply the practical expedient to grandfather the assessment of which transactions are leases. It applied IFRS 16 only to contracts that were previously identified as leases. Contracts that were not identified as leases under IAS 17 and IFRIC 4 were not reassessed for whether there is a lease. Therefore, the definition of a lease under IFRS 16 was applied only to contracts entered into or changed on or after January 1, 2019.

As a lessee

As a lessee, the Bank previously classified leases as operating or finance leases based on its assessment of whether the lease transferred significantly all of the risks and rewards incidental to ownership of the underlying asset to the Bank. Under IFRS 16, the Bank recognizes right-of-use assets and lease liabilities for most leases – i.e. these leases are on-balance sheet.

The Bank decided to apply recognition exemptions to leases with less than 12 months of lease term (the “short-term leases”) and leases of low-value assets. For leases of other assets, which were classified as operating under IAS 17, the Bank recognized right-of-use assets and lease liabilities.

Leases classified as operating leases under IAS 17

At transition, lease liabilities were measured at the present value of the remaining lease payments, discounted at the Bank’s incremental borrowing rate as at January 1, 2019. Right-of-use assets are measured at either:

– their carrying amount as if IFRS 16 had been applied since the commencement date, discounted using the lessee’s incremental borrowing rate at the date of initial application – the Bank applied this approach to its largest property leases; or

– an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments – the Bank applied this approach to all other leases.

The Bank used the following practical expedients when applying IFRS 16 to leases previously classified as operating leases under IAS 17:

– Applied a single discount rate to a portfolio of leases with similar characteristics.

– Adjusted the right-of-use assets by the amount of IAS 37 onerous contract provision immediately before the date of initial application, as an alternative to an impairment review.

– Applied the exemption not to recognize right-of-use assets and liabilities for leases with less than 12 months of lease term.

– Excluded initial direct costs from measuring the right-of-use asset at the date of initial application.

– Used hindsight when determining the lease term if the contract contains options to extend or terminate the lease.

Leases previously classified as finance leases

For leases that were classified as finance leases under IAS 17, the carrying amount of the right-of-use asset and the lease liability at January 1, 2019 are determined at the carrying amount of the lease asset and lease liability under IAS 17 immediately before that date.

– I-17 – APPENDIX I ACCOUNTANTS’ REPORT

As a lessor

The Bank is not required to make any adjustments on transition to IFRS 16 for leases in which it acts as a lessor, except for a sub-lease. The Bank accounted for its leases in accordance with IFRS 16 from the date of initial application.

Under IFRS 16, the Bank is required to assess the classification of a sub-lease with reference to the right-of-use asset, not the underlying asset. On transition, the Bank reassessed the classification of a sub-lease contract previously classified as an operating lease under IAS 17. The Bank concluded that the sub-lease is a finance lease under IFRS 16.

The Bank applied IFRS 15 Revenue from Contracts with Customers to allocate consideration in the contract to each lease and non-lease component.

Impacts on financial statements

The Bank elected to use the modified retrospective approach for the adoption of IFRS 16 and recognized right-of-use assets based on lease liabilities. Therefore, there was no adjustment to the opening balance of equity at January 1, 2019 and did not restate the comparative information.

Impacts on financial statements Operating lease commitment at December 31, 2018 641,413

Discounted using the incremental borrowing rate at January 1, 2019 568,360 Recognition exemption for short-term leases (424) Lease liabilities recognized at January 1, 2019 567,936

Right-of-use assets recognized at January 1, 2019 567,936

(b) Possible impact of amendments, new standards and interpretations issued but not yet effective

The IASB has issued a number of new and revised IFRSs. For the purpose of preparing the Historical Financial Information, the Bank has adopted all applicable new and revised IFRSs to the Relevant Periods, except for any new standards or interpretations that are not yet effective.

The revised and new accounting standards and interpretations but not yet effective are set out below:

Effective for accounting period beginning on or after Amendments to References to Conceptual Framework in IFRS Standards January 1, 2020 Amendments to IFRS 3, Definition of a business January 1, 2020 Amendments to IAS 1 and IAS 8, Definition of material January 1, 2020 IFRS 17, Insurance contracts January 1, 2021 Amendments to IFRS 10 and IAS 28, Sale or contribution of To be determined assets between an Investor and its associate or joint venture

The Bank is in the process of making an assessment of what the impact of these amendments is expected to be in the period of initial application. So far it has concluded that the adoption of them is unlikely to have a significant impact on the Bank’s result of operations and financial position.

(2) Basis of preparation and presentation – Functional and presentation currency

The Historical Financial Information is presented in Renminbi (“RMB”), which is the functional currency of the Bank. All financial information presented in RMB has been rounded to the nearest thousand, except when otherwise indicated.

(3) Basis of preparation and presentation – Basis of measurement

The financial information has been prepared on the historical cost basis except of certain financial assets, which are measured at fair value, as stated in Note 2(8).

– I-18 – APPENDIX I ACCOUNTANTS’ REPORT

(4) Basis of preparation and presentation – Use of estimates and judgments

The preparation of financial information in conformity with IFRSs requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

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 years if the revision affects both current and future years.

Judgments made by management in the application of IFRSs that have a significant effect on the Historical Financial Information and major sources of estimation uncertainty are discussed in Note 2(25).

(5) Associates and joint ventures

An associate is an entity in which the Bank has significant influence, but not control or joint control, over its management, including participation in the financial and operating policy decisions.

A joint venture is an arrangement whereby the Bank and other parties contractually agree to share control of the arrangement, and have rights to the net assets of the arrangement.

An investment in an associate or a joint venture is accounted for under the equity method, unless it is classified as held for sale (or included in a disposal group that is classified as held for sale). Under the equity method, the investment is initially recorded at cost, adjusted for any excess of the Bank’s share of the acquisition-date fair values of the investee’s identifiable net assets over the cost of the investment (if any). Thereafter, the investment is adjusted for the post acquisition change in the Bank’s share of the investee’s net assets and any impairment loss relating to the investment (see Note 2(15)). Any acquisition-date excess over cost, the Bank’s share of the post-acquisition, post-tax results of the investees and any impairment losses for the year are recognized in the statements of profit or loss, whereas the Bank’s share of the post-acquisition post-tax items of the investees’ other comprehensive income is recognized in the statements of profit or loss and other comprehensive income.

When the Bank’s share of losses exceeds its interest in the associate or the joint venture, the Bank’s interest is reduced to nil and recognition of further losses is discontinued except to the extent that the Bank has incurred legal or constructive obligations or made payments on behalf of the investee. For this purpose, the Bank’s interest is the carrying amount of the investment under the equity method together with the Bank’s long-term interests that in substance form part of the Bank’s net investment in the associate or the joint venture.

Unrealized profits and losses resulting from transactions between the Bank and its associates and joint venture are eliminated to the extent of the Bank’s interest in the investee, except where unrealized losses provide evidence of an impairment of the asset transferred, in which case they are recognized immediately in profit or loss.

If an investment in an associate becomes an investment in a joint venture or vice versa, retained interest is not remeasured. Instead, the investment continues to be accounted for under the equity method.

In all other cases, when the Bank ceases to have significant influence over an associate or joint control over a joint venture, it is accounted for as a disposal of the entire interest in that investee, with a resulting gain or loss being recognized in profit or loss. Any interest retained in that former investee at the date when significant influence or joint control is lost is recognized at fair value and this amount is regarded as the fair value on initial recognition of a financial asset.

(6) Translation of foreign currencies

When the Bank receives capital in foreign currencies from investors, the capital is translated to RMB at the spot exchange rate on the date of receipt. Other foreign currency transactions are, on initial recognition, translated to RMB at the spot exchange rates or the rates that approximate the spot exchange rates at the dates of transactions.

A spot exchange rate is quoted by The People’s Bank of China (“PBOC”), the State Administration of Foreign Exchange, or a cross rate determined based on quoted exchange rates. A rate that approximates the spot exchange rate is determined by a systematic and rational method, normally the average exchange rate of the current period.

– I-19 – APPENDIX I ACCOUNTANTS’ REPORT

Monetary items denominated in foreign currencies are translated to RMB at the spot exchange rate at the end of each of the Relevant Periods. The resulting exchange differences are recognized in profit or loss. Non-monetary items denominated in foreign currencies that are measured at historical cost are translated to RMB using the foreign exchange rate at the transaction date. Non-monetary items denominated in foreign currencies that are measured at fair value are translated using the foreign exchange rate at the date the fair value is determined; the exchange differences are recognized in profit or loss, except for the exchange differences arising from the translation of non-monetary financial investments which are recognized in fair value reserve.

(7) Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, non-restricted balances with central bank, short-term deposits and placements with banks and other financial institutions, financial assets held under resale agreements and highly liquid short-term investments which are readily convertible into known amounts of cash and are subject to an insignificant risk of change in value.

(8) Financial instruments

(a) The following accounting policies related to financial instruments apply to the period before January 1, 2018

(i) Recognition and measurement of financial assets and liabilities

A financial asset or financial liability is recognized in the statements of financial position when the Bank becomes a party to the contractual provisions of a financial instrument.

The Bank classifies financial assets and liabilities into different categories at initial recognition based on the purpose of acquiring assets or assuming liabilities: financial assets and financial liabilities at fair value through profit or loss, loans and receivables, held-to-maturity investments, available-for- sale financial assets and other financial liabilities.

Financial assets and financial liabilities are measured initially at fair value. For financial assets and financial liabilities at fair value through profit or loss, any directly attributable transaction costs are charged to profit or loss; for other categories of financial assets and financial liabilities, any attributable transaction costs are included in their initial costs.

Financial assets and financial liabilities are categorized as follows:

• Financial assets and financial liabilities at fair value through profit or loss (including financial assets or financial liabilities held for trading)

A financial asset or financial liability is classified as at fair value through profit or loss if it is acquired or incurred principally for the purpose of selling or repurchasing in the near term, a financial instrument managed in a pattern of short-term profit taking, a derivative, or if it is designated at fair value through profit or loss.

Financial assets and financial liabilities are designated at fair value through profit or loss upon initial recognition when:

– the financial assets or financial liabilities are managed, evaluated and reported internally on a fair value basis;

– the designation eliminates or significantly reduces the discrepancies in the recognition or measurement of relevant gains or losses arising from the different basis of measurement of the financial assets or financial liabilities;

– the financial assets or financial liabilities contains an embedded derivative that significantly modifies the cash flows that would otherwise be required under the contract; or

– the separation of the embedded derivatives from the financial instrument is prohibited.

Subsequent to initial recognition, financial assets and financial liabilities at fair value through profit or loss are measured at fair value, without any deduction for transactions costs that may occur on sale, and changes therein are recognized in profit or loss.

– I-20 – APPENDIX I ACCOUNTANTS’ REPORT

• Held-to-maturity investments

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity that the Bank has the positive intention and ability to hold to maturity, other than:

(a) those that the Bank, upon initial recognition, designates at fair value through profit or loss or as available-for-sale; or

(b) those that meet the definition of loans and receivables.

Subsequent to initial recognition, held-to-maturity investments are stated at amortized cost using the effective interest method.

• Loans and receivables

Loans and receivables are non-derivative financial assets held by the Bank with fixed or determinable recoverable amounts that are not quoted in an active market, other than:

(a) those that the Bank intends to sell immediately or in the near-term, which will be classified as held for trading;

(b) those that the Bank, upon initial recognition, designates as at fair value through profit or loss or as available-for-sale; or

(c) those where the Bank may not recover substantially all of its initial investment, other than because of credit deterioration, which will be classified as available-for- sale.

Loans and receivables mainly comprise loans and advances to customers, financial assets classified as receivables, deposits and placements with banks and other financial institutions and financial assets held under resale agreements. Subsequent to initial recognition, loans and receivables are stated at amortized cost using the effective interest method.

• Available-for-sale financial assets

Available-for-sale financial assets include non-derivative financial assets that are designated upon initial recognition as available-for-sale and other financial assets which do not fall into any of the above categories.

Subsequent to initial recognition, available-for-sale financial assets are measured at fair value, without any deduction for transaction costs that may occur on sale and changes therein, except for impairment losses and foreign exchange gains and losses from monetary financial assets, are recognized directly in other comprehensive income. Investments in available-for-sale equity instruments that do not have a quoted price in an active market and whose fair value cannot be reliably measured, are measured at cost less impairment losses, if any. When an investment is derecognized, the cumulative gain or loss in other comprehensive income is reclassified to the profit or loss.

• Other financial liabilities

Financial liabilities other than the financial liabilities at fair value through profit or loss are classified as other financial liabilities.

Subsequent to initial recognition, other financial liabilities are measured at amortized cost using the effective interest method.

(ii) Impairment of financial assets

The carrying amounts of financial assets other than those at fair value through profit or loss are reviewed by the Bank at the end of each of the Relevant Periods to determine whether there is objective evidence of impairment. If any such evidence exists, impairment loss is provided. Objective evidence of impairment in the financial asset represents events that occur after the initial recognition of the financial asset and have impact on the estimated future cash flows of the asset, which can be estimated reliably.

– I-21 – APPENDIX I ACCOUNTANTS’ REPORT

Objective evidence includes the following loss event:

• significant financial difficulty of the issuer or borrower;

• a breach of contract, such as a default or delinquency in interest or principal payments;

• it is becoming probable that the borrower will enter bankruptcy or other financial reorganization;

• disappearance of an active market for financial assets because of financial difficulties;

• significant changes in the technological, market, economic or legal environment that have an adverse effect on the borrower; and

• a significant or prolonged decline in the fair value of an investment in an equity instrument below its cost.

• Loans and receivables

The Bank uses two methods of assessing impairment losses: those assessed individually and those assessed on a collective basis.

Individual assessment

Loans and receivables, which are considered individually significant, are assessed individually for impairment. If there is objective evidence of impairment of loans and receivables, the amount of loss is measured as the excess of its carrying amount over the present value of the estimated future cash flows (exclusive of future credit losses that have not been incurred) discounted at the original effective interest rate. The impairment losses are recognized in profit or loss.

It may not be possible to identify a single, discrete event that caused the impairment but it may be possible to identify impairment through the combined effect of several events.

Cash flows relating to short-term loans and receivables are not discounted when assessing impairment loss if the difference between the estimated future cash flows and its present value is immaterial.

The calculation of the present value of the estimated future cash flows of a collateralized loan or receivable reflects the cash flows that may result from foreclosure less costs for obtaining and selling the collateral.

Collective assessment

Loans and receivables which are assessed collectively for impairment include individually assessed loans and receivables with no objective evidence of impairment on an individual basis, and homogeneous banks of loans and receivables which are not considered individually significant and not assessed individually. Loans and receivables are banked for similar credit risk characteristics for collective assessment. The objective evidence of impairment mainly includes that, though it is unable to identify the decrease of cash flow of each individual asset, after collective assessment based on observable data, there is observable evidence indicating that there is a measurable decrease in the estimated future cash flow from a bank of financial assets since the initial recognition of those assets.

Homogeneous groups of loans not considered individually significant

For homogeneous groups of loans that are not considered individually significant, the Bank adopts a flow rate methodology to collectively assess impairment losses. This methodology utilizes a statistical analysis of historical trends of probability of default and amount of consequential loss, as well as an adjustment of observable data that reflects the current economic conditions and judgment based on management’s historical experience.

– I-22 – APPENDIX I ACCOUNTANTS’ REPORT

Individually assessed loans with no objective evidence of impairment on an individual basis

Loans which are individually significant and therefore have been individually assessed but for which no objective evidence of impairment can be identified, either due to the absence of any loss events or due to an inability to measure reliably the impact of loss events on future cash flows, are banked together in portfolios of similar credit risk characteristics for the purpose of assessing a collective impairment loss. This assessment covers those loans and advances that were impaired at the end of each of the Relevant Periods but which will not be individually identified as such until sometime in the future.

The collective impairment loss is assessed after taking into account:

– historical loss experience in portfolios of similar credit risk characteristics;

– the emergence period between a loss occurring and that loss being identified; and

– the current economic and credit environments and the judgment on inherent loss based on management’s historical experience.

The emergence period between a loss occurring and its identification is determined by management based on the historical experience of the markets where the Bank operates.

As soon as information is available that specifically identifies objective evidence of impairment on individual assets in a portfolio, those assets are removed from the portfolio of financial assets. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognized are not included in a collective assessment for impairment.

The Bank periodically reviews and assesses the impaired loans and receivables for any subsequent changes to the estimated recoverable amounts and the resulted changes in the provision for impairment losses.

If, in a subsequent period the amount of an impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment loss was recognized, the impairment loss is reversed through profit or loss. The reversal shall not result in a carrying amount of the financial asset that exceeds the amortized cost at the date of the reversal had the impairment not been recognized.

When the Bank determines that loans and receivables have no reasonable prospect of recovery after the Bank has completed all the necessary legal or other claim proceedings, the loans and receivables are written off against its provision for impairment losses upon necessary approval. If in a subsequent period the loans and receivables written off are recovered, the amount recovered is recognized in profit or loss through impairment losses.

Rescheduled loans are loans that have been restructured due to deterioration in the borrower’s financial position to the extent that the borrower is unable to repay according to the original terms and where the Bank has made concessions that it would not otherwise consider under normal circumstances. Rescheduled loans are assessed individually and classified as impaired loans upon restructuring. Rescheduled loans are subject to ongoing monitoring. Once a rescheduled loan meets specific conditions, it is no longer considered as impaired.

• Held-to-maturity investments

The impairment loss is calculated based on the excess of its carrying amount over the present value of the estimated future cash flows (exclusive of future credit losses that have not been incurred) discounted at the original effective interest rate. All impairment losses are recognized in profit or loss.

If, in a subsequent period the amount of an impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment loss was recognized, the impairment loss is reversed through profit or loss. The reversal shall not result in a carrying amount of the financial asset that exceeds the amortized cost at the date of the reversal had the impairment not been recognized.

– I-23 – APPENDIX I ACCOUNTANTS’ REPORT

• Available-for-sale financial assets

When an available-for-sale financial asset is impaired, the cumulative loss arising from decline in fair value that had been recognized in other comprehensive income is reclassified to the profit or loss even though the financial asset has not been derecognized.

The amount of the cumulative loss that is removed from equity is the difference between the acquisition cost net of any principal repayment and amortization and current fair value, less any impairment loss on that financial asset previously recognized in profit or loss.

If, after an impairment loss has been recognized on available-for-sale debt securities, the fair value of the assets increases in a subsequent period and the increase can be objectively related to an event occurring after the impairment loss was recognized, the impairment loss is reversed through profit or loss. An impairment loss recognized for an equity instrument classified as available-for-sale is not reversed through profit or loss but recognized directly in other comprehensive income.

For investments in equity instruments measured at cost, the amount of any impairment loss is measured as the difference between the carrying amount of the financial asset, and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset and recognized in profit or loss. Impairment losses for equity instruments carried at cost are not reversed.

(iii) Fair value measurement principles

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the Bank has access at that date.

If there is an active market for a financial asset or financial liability, the quoted price in the active market without adjusting for transaction costs that may be incurred upon future disposal or settlement is used to establish the fair value of the financial asset or financial liability. For a financial asset held or a financial liability to be assumed, the quoted price is the current bid price. For a financial asset to be acquired or a financial liability assumed, it is the current asking price. The quoted prices from an active market are prices that are readily and regularly available from an exchange, broker, industry bank or pricing service agency, and represent actual and regularly occurring market transactions on an arm’s length basis.

If no active market exists for a financial instrument, a valuation technique is used to establish the fair value. Valuation techniques include using recent arm’s length market transactions between knowledgeable, willing parties; reference to the current fair value of another instrument that is substantially the same; discounted cash flow analysis and option pricing models. Where discounted cash flow technique is used, future cash flows are estimated based on management’s best estimates and the discount rate used is the prevailing market rate applicable for instrument with similar terms and conditions at the end of each of the Relevant Periods. Where other pricing models are used, inputs are based on market data at the end of each of the Relevant Periods.

In estimating the fair value of a financial asset and financial liability, the Bank considers all factors including, but not limited to, risk-free interest rate, credit risk, foreign exchange rate and market volatility, that are likely to affect the fair value of the financial asset and financial liability.

The Bank obtains market data from the same market where the financial instrument was originated or purchased.

(iv) Derecognition of financial assets and financial liabilities

Financial assets (or a part of a financial asset or bank of financial assets) are derecognized when the financial assets meet one of the following conditions:

– the contractual rights to the cash flows from the financial asset expire; or

– the Bank transfers substantially all the risks and rewards of ownership of the financial assets or where substantially all the risks and rewards of ownership of a financial asset are neither retained nor transferred, the control over that asset is relinquished.

– I-24 – APPENDIX I ACCOUNTANTS’ REPORT

If the Bank neither transfers nor retains substantially all the risks and rewards of ownership of the financial asset, but retains control, the Bank continues to recognize the financial asset and relevant liability to the extent of its continuing involvement in the financial asset.

The financial liability (or part of it) is derecognized only when the underlying present obligation (or part of it) specified in the contracts is discharged, canceled or expired. An agreement between the Bank and an existing lender to replace the original financial liability with a new financial liability with substantially different terms, or a substantial modification of the terms of an existing financial liability is accounted for as an extinguishment of the original financial liability and recognition of a new financial liability. The difference between the carrying amount of the derecognized financial liability and the consideration paid is recognized in profit or loss.

(v) Offsetting

Financial assets and financial liabilities are offset and the net amount is reported in the statements of financial position when the Bank has a legally enforceable right to set off the recognized amounts and the transactions are intended to be settled on a net basis, or by realizing the asset and settling the liability simultaneously.

(b) The following accounting policies related to financial instruments apply to the period after January 1, 2018

(i) Recognition and initial measurement of financial assets and financial liabilities

A financial asset or financial liability is recognized in the balance sheet when the Bank becomes a party to the contractual provisions of a financial instrument.

A financial assets and financial liabilities is measured initially at fair value. For financial assets and financial liabilities at fair value through profit or loss, any related directly attributable transaction costs are charged to profit or loss; for other categories of financial assets and financial liabilities, any related directly attributable transaction costs are included in their initial costs.

(ii) Classification and subsequent measurement of financial assets

Classification of financial assets

The classification of financial assets is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. Financial assets are classified as:

– Financial assets measured at amortized cost, including loans, advances and financial investments measured at amortized cost;

– Financial assets measured at fair value through other comprehensive income (FVOCI), including loans, advances and financial investments measured at FVOCI; and

– Financial assets measured at fair value through profit or loss (FVTPL).

Financial assets are not reclassified subsequent to their initial recognition unless the Bank changes its business model for managing financial assets in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL:

– it is held within a business model whose objective is to hold assets to collect contractual cash flows; and

– its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

– I-25 – APPENDIX I ACCOUNTANTS’ REPORT

A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL:

– it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and

– its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

On initial recognition of an equity investment that is not held for trading, the Bank may irrevocably elect to present subsequent changes in the investment’s fair value in other comprehensive income. This election is made on an investment-by-investment basis.

All financial assets not classified as measured at amortized cost or FVOCI as described above are measured at FVTPL. On initial recognition, the Bank may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortized cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

The business model refers to how the Bank manages its financial assets in order to generate cash flows. That is, the Bank’s business model determines whether cash flows will result from collecting contractual cash flows, selling financial assets or both. The Bank determines the business model for managing the financial assets according to the facts and based on the specific business objective for managing the financial assets determined by the Bank’s key management personnel.

In assessing whether the contractual cash flows are solely payments of principal and interest, the Bank considers the contractual terms of the instrument. For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial asset on initial recognition. ‘Interest’ is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs, as well as a profit margin. The Bank also assesses whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition.

Subsequent measurement of financial assets

– Financial assets at FVTPL

These financial assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognized in profit or loss unless the financial assets are part of a hedging relationship.

– Financial assets at amortized cost

These assets are subsequently measured at amortized cost using the effective interest method. A gain or loss on a financial asset that is measured at amortized cost and is not part of a hedging relationship shall be recognized in profit or loss when the financial asset is derecognized, through the amortization process or in order to recognize impairment gains or losses.

– Debt investments at FVOCI

These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, impairment and foreign exchange gains and losses are recognized in profit or loss. Other net gains and losses are recognized in other comprehensive income. On derecognition, gains and losses accumulated in other comprehensive income are reclassified to profit or loss.

– Equity investments at FVOCI

These assets are subsequently measured at fair value. Dividends are recognized as income in profit or loss. Other net gains and losses are recognized in other comprehensive income. On derecognition, gains and losses accumulated in other comprehensive income are reclassified to retained earnings.

– I-26 – APPENDIX I ACCOUNTANTS’ REPORT

(iii) Classification and subsequent measurement of financial liabilities

Financial liabilities are classified as measured at FVTPL, financial guarantee liabilities or amortized cost.

– Financial liabilities at FVTPL

A financial liability is classified as at FVTPL if it is classified as held-for-trading (including derivative financial liability) or it is designated as such on initial recognition.

Financial liabilities at FVTPL are subsequently measured at fair value and net gains and losses, including any interest expense, are recognized in profit or loss, unless the financial liabilities are part of a hedging relationship.

– Financial guarantee liabilities

Financial guarantees are contracts that require the Bank to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument.

A financial guarantee liability is measured at the higher of:

The amount of the loss allowance determined in accordance with impairment policies of financial instruments (see Note 2(18)(i)); and

The amount initially recognized less the cumulative amount of income.

– Financial liabilities at amortized cost

Other financial liabilities are subsequently measured at amortized cost using the effective interest method.

(iv) Impairment

The Bank recognizes loss allowances for expected credit loss (ECL) on:

– financial assets measured at amortized cost;

– debt investments measured at FVOCI.

Financial assets measured at fair value, including debt investments or equity securities at FVTPL, and equity securities designated at FVOCI, are not subject to the ECL assessment.

Measurement of ECLs

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Bank expects to receive).

The maximum period considered when estimating ECLs is the maximum contractual period (including extension options) over which the Bank is exposed to credit risk.

Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument.

12-month ECLs are the portion of ECLs that result from default events that are possible within the 12 months after the balance sheet date (or a shorter period if the expected life of the instrument is less than 12 months).

ECLs on these financial assets are estimated using a provision matrix based on the Bank’s historical credit loss experience, adjusted for factors that are specific to the debtors and an assessment of both the current and forecast general economic conditions at the balance sheet date.

See Note 37(a) for the measurement of expected credit loss of the Bank.

– I-27 – APPENDIX I ACCOUNTANTS’ REPORT

Presentation of allowance for ECL

ECLs are remeasured at each balance sheet date to reflect changes in the financial instrument’s credit risk since initial recognition. Any change in the ECL amount is recognized as an impairment gain or loss in profit or loss. The Bank recognizes an impairment gain or loss for all financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account, except for debt investments that are measured at FVOCI, for which the loss allowance is recognized in other comprehensive income.

Write-off

The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery. A write-off constitutes a derecognition event. This is generally the case when the Bank determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Bank’s procedures for recovery of amounts due.

Subsequent recoveries of an asset that was previously written off are recognized as a reversal of impairment in profit or loss in the period in which the recovery occurs.

(v) Fair value measurement principles

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the Bank has access at that date.

If there is an active market for a financial asset or financial liability, the quoted price in the active market without adjusting for transaction costs that may be incurred upon future disposal or settlement is used to establish the fair value of the financial asset or financial liability. For a financial asset held or a financial liability to be assumed, the quoted price is the current bid price. For a financial asset to be acquired or a financial liability assumed, it is the current asking price. The quoted prices from an active market are prices that are readily and regularly available from an exchange, broker, industry bank or pricing service agency, and represent actual and regularly occurring market transactions on an arm’s length basis.

If no active market exists for a financial instrument, a valuation technique is used to establish the fair value. Valuation techniques include using recent arm’s length market transactions between knowledgeable, willing parties; reference to the current fair value of another instrument that is substantially the same; discounted cash flow analysis and option pricing models. Where discounted cash flow technique is used, future cash flows are estimated based on management’s best estimates and the discount rate used is the prevailing market rate applicable for instrument with similar terms and conditions at the end of each of the Relevant Periods. Where other pricing models are used, inputs are based on market data at the end of each of the Relevant Periods.

In estimating the fair value of a financial asset and financial liability, the Bank considers all factors including, but not limited to, risk-free interest rate, credit risk, foreign exchange rate and market volatility, that are likely to affect the fair value of the financial asset and financial liability.

The Bank obtains market data from the same market where the financial instrument was originated or purchased.

(vi) Derecognition of financial assets and financial liabilities

Financial asset is derecognized when one of the following conditions is met:

– the Bank’s contractual rights to the cash flows from the financial asset expire;

– the financial asset has been transferred and the Bank transfers substantially all of the risks and rewards of ownership of the financial asset; or

– the financial asset has been transferred, although the Bank neither transfers nor retains substantially all of the risks and rewards of ownership of the financial asset, it does not retain control over the transferred asset.

– I-28 – APPENDIX I ACCOUNTANTS’ REPORT

Where a transfer of a financial asset in its entirety meets the criteria for derecognition, the difference between the two amounts below is recognized in profit or loss:

– the carrying amount of the financial asset transferred measured at the date of derecognition;

– the sum of the consideration received from the transfer and, when the transferred financial asset is a debt investment at FVOCI, any cumulative gain or loss that has been recognized directly in other comprehensive income for the part derecognized.

The Bank derecognizes a financial liability (or part of it) only when its contractual obligation (or part of it) is extinguished.

(vii) Offsetting

Financial assets and financial liabilities are generally presented separately in the balance sheet, and are not offset. However, a financial asset and a financial liability are offset and the net amount is presented in the balance sheet when both of the following conditions are satisfied:

– the Bank currently has a legally enforceable right to set off the recognized amounts;

– the Bank intends either to settle on a net basis, or to realize the financial asset and settle the financial liability simultaneously.

(9) Financial assets held under resale and repurchase agreements

Financial assets purchased under agreements to resell are reported not as purchases of the assets but as receivables and are carried in the statements of financial position at amortized cost.

Financial assets sold subject to a simultaneous agreement to repurchase these assets are retained in the statements of financial position and measured in accordance with their original measurement principles. The proceeds from the sale are reported as liabilities and are carried at amortized cost.

Interest earned on reverse repurchase agreements and interest incurred on repurchase agreements are recognized respectively as interest income and interest expense over the life of each agreement using the effective interest method.

(10) Property and equipment and construction in progress

Property and equipment are assets held by the Bank for operation and administration purposes with useful lives over one year.

Property and equipment are stated in the statements of financial position at cost less accumulated depreciation and impairment loss (see Note 2(15)). Construction in progress is stated in the statements of financial position at cost less impairment loss (see Note 2(15)).

The cost of a purchased property and equipment comprises the purchase price, related taxes, and any expenditure directly attributable to bringing the asset into working condition for its intended use.

All direct and indirect costs that are related to the construction of property and equipment and incurred before the assets are ready for their intended use are capitalized as the cost of construction in progress. Construction in progress is transferred to property and equipment when the item being constructed is ready for its intended use. No depreciation is provided against construction in progress.

Where the individual component parts of an item of property and equipment have different useful lives or provide benefits to the Bank in different patterns thus necessitating use of different depreciation rates or methods, they are recognized as a separate property and equipment.

The subsequent costs including the cost of replacing part of an item of property and equipment are recognized in the carrying amount of the item if the recognition criteria are satisfied, and the carrying amount of the replaced part is derecognized. The costs of the day-to-day servicing of property and equipment are recognized in profit or loss as incurred.

Gains or losses arising from the retirement or disposal of an item of property and equipment are determined as the difference between the net disposal proceeds and the carrying amount of the item and are recognized in profit or loss on the date of retirement or disposal.

– I-29 – APPENDIX I ACCOUNTANTS’ REPORT

Property and equipment are depreciated using the straight-line method over their estimated useful lives, after taking into account their estimated residual values. The estimated useful lives, residual values and depreciation rates of each class of property and equipment are as follows:

Estimated rate Estimated of residual Asset category useful life value Depreciation rate Premises 20 years 3% 4.85% Vehicles 6 years 3% 16.17% Electronic equipment and others 3 – 5 years 3% 19.40% – 32.33%

Useful lives, residual values and depreciation methods are reviewed at least at each year-end.

(11) Investment property

Investment property is a property held either for earning rental income or for capital appreciation or for both. Investment property is accounted for using the cost model and stated in the statements of financial position at cost less accumulated depreciation and impairment loss (Note 2(15)). Investment property is depreciated using the straight-line method over its estimated useful life after taking into account its estimated residual value.

Estimated rate Estimated of residual Depreciation useful life value rate Premises 20 years 3% 4.85%

(12) Leases

The Bank has applied IFRS 16 using the modified retrospective approach and therefore the comparative information has not been restated and continues to be reported under IAS 17 and IFRIC 4. The details of accounting policies under IAS 17 and IFRIC 4 are disclosed separately if they are different from those under IFRS 16 and the impact of changes is disclosed in Note 2(1)(a).

Policy applicable from January 1, 2019

At inception of a contract, the Bank assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Bank, as a lessor or a lessee, assesses whether:

– the contract involves the use of an identified asset – this may be specified explicitly or implicitly, and should be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified;

– the lessee has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use;

– the lessee has the right to direct the use of the asset. The lessee has this right when it has the decision-making rights that are most relevant to changing how and for what purpose the asset is used. In rare cases where the decision about how and for what purpose the asset is used is predetermined, the lessee has the right to direct the use of the asset if either:

– the lessee has the right to operate the asset; or

– the lessee designed the asset in a way that predetermines how and for what purpose it will be used.

IFRS 16 is applied to contracts entered into, or changed, on or after January 1, 2019.

At inception or on reassessment of a contract that contains a lease component, the Bank allocates the consideration in the contract to each lease component on the basis of their relative stand-alone prices. However, for the leases of land and buildings in which it is a lessee, the Bank has elected not to separate non-lease components and account for the lease and non-lease components as a single lease component.

– I-30 – APPENDIX I ACCOUNTANTS’ REPORT

Policy applicable before January 1, 2019

For contracts entered into before January 1, 2019, the Bank determined whether the arrangement was or contained a lease based on the assessment of whether:

– fulfillment of the arrangement was dependent on the use of a specific asset or assets;

– the arrangement had conveyed a right to use the asset. An arrangement conveyed the right to use the asset if one of the following was met;

– the purchaser had the ability or right to operate the asset while obtaining or controlling more than an insignificant amount of the output;

– the purchaser had the ability or right to control physical access to the asset while obtaining or controlling more than an insignificant amount of the output; or

– facts and circumstances indicated that it was remote that other parties would take more than an insignificant amount of the output, and the price per unit was neither fixed per unit of output nor equal to the current market price per unit of output.

(i) As a lessee

The Bank recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Bank’s incremental borrowing rate. Generally, the Bank uses its incremental borrowing rate as the discount rate.

Lease payments included in the measurement of the lease liability comprise the following:

– fixed payments, including in-substance fixed payments;

– variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;

– amounts expected to be payable under a residual value guarantee; and

– the exercise price under a purchase option that the Bank is reasonably certain to exercise, lease payments in an optional renewal period if the Bank is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Bank is reasonably certain not to terminate early.

The lease liability is measured at amortized cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Bank’s estimate of the amount expected to be payable under a residual value guarantee, or if the Bank changes its assessment of whether it will exercise a purchase, extension or termination option.

When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

The Bank presents right-of-use assets that do not meet the definition of investment property in ‘property, plant and equipment’ and lease liabilities in ‘loans and borrowings’ in the statements of financial position.

– I-31 – APPENDIX I ACCOUNTANTS’ REPORT

Short-term leases and leases of low-value assets

The Bank has elected not to recognize right-of-use assets and lease liabilities for short-term leases of machinery that have a lease term of 12 months or less and leases of low-value assets. The Bank recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

Policy applicable before January 1, 2019

In the comparative period, as a lessee the Bank classified leases that transfer substantially all of the risks and rewards of ownership as finance leases. When this was the case, the right-of-use assets were measured initially at an amount equal to the lower of their fair value and the present value of the minimum lease payments. Minimum lease payments were the payments over the lease term that the lessee was required to make, excluding any contingent rent.

Subsequently, the assets were accounted for in accordance with the accounting policy applicable to that asset.

Assets held under other leases were classified as operating leases and were not recognized in the Bank’s statements of financial position. Payments made under operating leases were recognized in profit or loss on a straight-line basis over the term of the lease. Lease incentives received were recognized as an integral part of the total lease expense, over the term of the lease.

(ii) As a lessor

When the Bank acts as a lessor, it determines at lease inception whether each lease is a finance lease or an operating lease.

To classify each lease, the Bank makes an overall assessment of whether the lease transfers substantially all of the risks and rewards incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then it is an operating lease. As part of this assessment, the Bank considers certain indicators such as whether the lease is for the major part of the economic life of the asset.

When the Bank is an intermediate lessor, it accounts for its interests in the head lease and the sub-lease separately. It assesses the lease classification of a sub-lease with reference to the right-of-use asset arising from the head lease, not with reference to the underlying asset. If a head lease is a short-term lease to which the Bank applies the exemption described above, then it classifies the sub-lease as an operating lease.

If an arrangement contains lease and non-lease components, the Bank applies IFRS 15 to allocate the consideration in the contract.

The Bank recognizes lease payments received under operating leases as income on a straight-line basis over the lease term as part of ‘other income’.

The accounting policies applicable to the Bank as a lessor in the comparative period were not different from IFRS 16. However, when the Bank was an intermediate lessor the sub-leases were classified with reference to the underlying asset.

(13) Intangible assets

The intangible assets of the Bank have finite useful lives. The intangible assets are stated at cost less accumulated amortization and impairment loss (see Note 2(15)). The cost of intangible assets less residual value and impairment loss is amortized on the straight-line method over the estimated useful lives.

The respective amortization periods for intangible assets are as follows:

Land use rights 50 – 70 years Computer software 3 – 10 years

– I-32 – APPENDIX I ACCOUNTANTS’ REPORT

(14) Repossessed assets

Repossessed assets are physical assets or property rights obtained by the Bank from debtors, warrantors or third parties following the enforcement of its creditor’s rights. The repossessed assets are initially recognized at fair value, and are subsequently measured at the lower of the carrying value and net recoverable amount. If the recoverable amount is lower than the carrying value of the repossessed assets, the assets are written down to the recoverable amount.

(15) Provision for impairment losses on non-financial assets

The carrying amounts of the following assets are reviewed at the end of each of the Relevant Periods based on the internal and external sources of information to determine whether there is any indication of impairment:

– property and equipment

– construction in progress

– investment property measured using a cost model

– intangible assets

– investment in associates

– right-of-use assets

If any indication exists that an asset may be impaired, the recoverable amount of the asset is estimated.

A cash-generating unit (“CGU”) is the smallest identifiable bank of assets that generates cash inflows that are largely independent of the cash inflows from other assets or asset groups. A CGU is composed of assets directly relating to cash-generation. Identification of a CGU is based on whether major cash inflows generated by the asset groups are largely independent of the cash inflows from other assets or asset groups. In identifying an asset group, the Bank also considers how management monitors the Bank’s operations and how management makes decisions about continuing or disposing of the Bank’s assets.

The recoverable amount of an asset or CGU, or a group of CGUs (hereinafter called “asset”) is the higher of its fair value less costs to sell and its present value of expected future cash flows. If there is any indication that an asset may be impaired, the recoverable amount is estimated for the individual asset; if it is not possible to estimate the recoverable amount of the individual asset, the Bank determines the recoverable amount of the asset group to which the assets belongs.

An asset’s fair value less costs to sell is the amount determined by the price of a sale agreement in an arm’s length transaction, less the costs that are directly attributable to the disposal of the asset. The present value of expected future cash flows of an asset is determined by discounting the future cash flows, estimated to be derived from continuing use of the asset and from its ultimate disposal, to their present value using a pre-tax discount rate that reflects expected future cash flows, the useful life and the discount rate specific to the asset.

An impairment loss is recognized in profit or loss if the carrying amount of an asset exceeds its recoverable amount. A provision for an impairment loss of the asset is recognized accordingly.

If, in a subsequent period, the amount of impairment loss of the non-financial asset decreases and the decrease can be linked objectively to an event occurring after impairment was recognized, the previously recognized impairment loss is reversed through the profit or loss. A reversal of impairment loss is limited to the asset’s carrying amount that would have been determined had no impairment loss been recognized in prior periods.

(16) Employee benefits

(i) Short-term employee benefits and contributions to defined contribution retirement plans

Salaries, annual bonuses, paid annual leave, contributions to defined contribution retirement plans and the cost of non-monetary benefits are accrued in the period in which the associated services are rendered by employees. Where payment or settlement is deferred and the effect would be material, these amounts are stated at their present values.

The defined contribution retirement plans of the Bank include the social pension schemes, annuity plan, housing fund and other social insurances.

– I-33 – APPENDIX I ACCOUNTANTS’ REPORT

Social pension schemes

Pursuant to the relevant laws and regulations in the PRC, the Bank has participated in the social pension schemes for the employees arranged by local government labor and security authorities. The Bank makes contributions to the retirement schemes at the applicable rates based on the amounts stipulated by the government. The contributions are charged to the profit or loss on an accrual basis. When employees retire, the local government labor and security authorities are responsible for the payment of the basic retirement benefits to the retired employees.

Annuity plan

The Bank provides an annuity plan to the eligible employees. The Bank makes annuity contributions in proportion to its employees’ total salaries and bonuses, which are charged to profit or loss when the contributions are made.

Housing fund and other social insurances

In addition to the retirement benefits above, the Bank has joined social security contributions schemes for employees pursuant to the relevant laws and regulations of the PRC. These schemes include a housing fund, basic medical insurance, unemployment insurance, injury insurance and maternity insurance. The Bank makes monthly contributions to the housing fund and other social insurances schemes at the applicable rates based on the amounts stipulated by the relevant government authorities. The contributions are charged to profit or loss on an accrual basis.

(ii) Supplementary retirement benefits

Early retirement plan

The Bank provides early retirement benefit payments to employees who voluntarily agreed to retire early for the period from the date of early retirement to the regulated retirement date. The benefit is discounted to determine the present value based on certain assumptions. The calculation is performed by a qualified actuary using the projected unit credit method. Differences arising from changes in assumptions and estimates of the present value of the liabilities are recognized in profit or loss when incurred.

Supplementary retirement plan

The Bank provides a supplementary retirement plan to its eligible employees. The Bank’s obligations in respect of the supplementary retirement plan are calculated by estimating the present value of the total amount of future benefits that the Bank is committed to pay to the employees after their retirement. The calculation is performed by a qualified actuary using the projected unit credit method. Such obligations were discounted at the interest yield of government bonds with similar duration at the reporting date. The related service cost and net interest from the retirement plan are recognized in profit or loss, and the actuarial gains and losses arising from remeasurements are recognized in other comprehensive income.

Early retirement plan and supplementary retirement plan thereafter collectively referred to as “supplementary retirement benefits”. Except for the above mentioned, the Bank has no significant responsibilities to pay any other retirement benefits to employees.

(17) Income tax

Income tax for the reporting period comprises current tax and movements in deferred tax assets and liabilities. Current tax and movements in deferred tax assets and liabilities are recognized in profit or loss except to the extent that they relate to items recognized in other comprehensive income or directly in equity, in which case the relevant amounts of tax are recognized in other comprehensive income or directly in equity, respectively.

Current tax is the expected tax payable on the taxable income for the reporting period, using tax rates enacted or substantively enacted at the end of the reporting period, and any adjustment to tax payable in respect of previous years.

Deferred tax assets and liabilities arise from deductible and taxable temporary differences respectively, being the differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases. Deferred tax assets also arise from unused tax losses and unused tax credits.

– I-34 – APPENDIX I ACCOUNTANTS’ REPORT

Apart from certain limited exceptions, all deferred tax liabilities, and all deferred tax assets to the extent that it is probable that future taxable profits will be available against which the asset can be utilized, are recognized. Future taxable profits that may support the recognition of deferred tax assets arising from deductible temporary differences include those that will arise from the reversal of existing taxable temporary differences, provided those differences relate to the same taxation authority and the same taxable entity, and are expected to reverse either in the same period as the expected reversal of the deductible temporary difference or in periods into which a tax loss arising from the deferred tax asset can be carried back or forward. The same criteria are adopted when determining whether existing taxable temporary differences support the recognition of deferred tax assets arising from unused tax losses and credits, that is, those differences are taken into account if they relate to the same taxation authority and the same taxable entity, and are expected to reverse in a period, or periods, in which the tax loss or credit can be utilized.

The limited exceptions to recognition of deferred tax assets and liabilities are those temporary differences arising from goodwill not deductible for tax purposes, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit (provided they are not part of a business combination), and temporary differences relating to investments in subsidiary to the extent that, in the case of taxable differences, the Bank controls the timing of the reversal and it is probable that the differences will not reverse in the foreseeable future, or in the case of deductible differences, unless it is probable that they will reverse in the future.

The amount of deferred tax recognized is measured based on the expected manner of realization or settlement of the carrying amount of the assets and liabilities, using tax rates enacted or substantively enacted at the end of the reporting period. Deferred tax assets and liabilities are not discounted.

The carrying amount of a deferred tax asset is reviewed at the end of each reporting period and is reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow the related tax benefit to be utilized. Any such reduction is reversed to the extent that it becomes probable that sufficient taxable profits will be available.

Additional income taxes that arise from the distribution of dividends are recognized when the liability to pay the related dividends is recognized.

Current tax balances and deferred tax balances, and movements therein, are presented separately from each other and are not offset. Current tax assets are offset against current tax liabilities, and deferred tax assets against deferred tax liabilities, if the Bank has the legally enforceable right to set off current tax assets against current tax liabilities and the following additional conditions are met:

– in the case of current tax assets and liabilities, the Bank intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously; or

– in the case of deferred tax assets and liabilities, if they relate to income taxes levied by the same taxation authority on either:

– the same taxable entity; or

– different taxable entities, which, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered, intend to realize the current tax assets and settle the current tax liabilities on a net basis or realize and settle simultaneously.

(18) Financial guarantees, provisions and contingent liabilities

(i) Financial guarantees

The following accounting policies apply to the period before January 1, 2018:

Financial guarantees are contracts that require the issuer (the “guarantor”) to make specified payments to reimburse the beneficiary of the guarantee (“holder”) for a loss that the holder incurs because 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 recognized as deferred income in other liabilities. The deferred income is amortized in profit or loss over the term of the guarantee as income from financial guarantees issued. Provisions are recognized in the statements of financial position as stated in Note 2(18)(ii) if and when it becomes probable that the holder of the guarantee will call upon the Bank under the guarantee, and the amount of that claim on the Bank is expected to exceed the carrying amount of the deferred income.

The following accounting policies apply to the period after January 1, 2018:

In terms of off-balance sheet credit commitment, the Bank applies expected credit loss model to measure the loss caused by particular debtors incapable of paying due debts, which is present in provisions. See Note 2(8)(b)(iv) for the description of expected credit loss model.

– I-35 – APPENDIX I ACCOUNTANTS’ REPORT

(ii) Other provisions and contingent liabilities

A provision is recognized for an obligation related to a contingency if the Bank has a present obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. A provision is initially measured at the best estimate of the expenditure required to settle the related present obligation. Factors pertaining to a contingency such as the risks, uncertainties and time value of money are taken into account as a whole in reaching the best estimate. Where the effect of time value of money is material, provisions are determined by discounting the expected future cash flows.

For a possible obligation resulting from a past transaction or event whose existence will only be confirmed by the occurrence or non-occurrence of uncertain future events or a present obligation resulting from a past transaction or event, where it is not probable that the settlement of the above obligation will cause an outflow of economic benefits, or the amount of the outflow cannot be estimated reliably, the possible or present obligation is disclosed as a contingent liability.

(19) Fiduciary activities

The Bank acts in a fiduciary activity as a manager, a custodian, or an agent for customers. Assets held by the Bank and the related undertakings to return such assets to customers are recorded as off-balance sheet items as the risks and rewards of the assets reside with customers.

The Bank enters into entrusted loan agreements with customers, whereby the customers provide funding (“entrusted funds”) to the Bank, and the Bank grants loans to third parties (“entrusted loans”) under instructions of the customers. As the Bank does not assume the risks and rewards of the entrusted loans and the corresponding entrusted funds, the entrusted loans and funds are recorded as off-balance sheet items at their principal amount. No provision for impairment loss is made for entrusted loans.

(20) Income recognition

Income is the gross inflow of economic benefit in the periods arising in the course of the Bank’s ordinary activities when the inflows result in an increase in shareholder’s equity, other than an increase relating to contributions from shareholders.

(a) The following accounting policies apply to the period before January 1, 2018

Income is recognized when it is probable that the economic benefits will flow to the Bank, the income and costs can be measured reliably.

(b) The following accounting policies apply to the period after January 1, 2018

Income is recognized when the Bank satisfies the performance obligation in the contract which by transferring the control over relevant goods or services to the customers.

The following is the description of accounting policies regarding income from the Bank’s principal activities.

(i) Interest income

Interest income for financial assets is recognized in profit or loss as it is incurred, based on the time for alienation of right to use capital and effective interest rates. Interest income includes the amortization of any discount or premium or differences between the initial carrying amount of an interest-bearing asset and its amount at maturity calculated using the effective interest rate.

The effective interest method is a method of calculating the amortized cost of a financial asset and of allocating the interest income over the Relevant Periods. 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. When calculating the effective interest rate, the Bank estimates cash flows considering all contractual terms of the financial instrument (for example, prepayment, call and similar 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.

Interest on the impaired assets is recognized using the rate of interest used to discount future cash flows for the purpose of measuring the related impairment loss.

– I-36 – APPENDIX I ACCOUNTANTS’ REPORT

(ii) Fee and commission income

The Bank earns fee and commission income from a diverse range of services it provides to its customers. The fee and commission income recognized by the Bank reflects the amount of consideration to which the Bank expects to be entitled in exchange for transferring promised services to customers, and income is recognized when its performance obligation in contracts is satisfied.

The Bank recognizes income over time by measuring the progress towards the complete satisfaction of a performance obligation, if one of the following criteria is met:

– The customer simultaneously receives and consumes the benefits provided by the Bank’s performance as the Bank performs;

– The customer controls the service provided by the Bank in the course of performance or;

– The Bank does not provide service with an alternative use to the Bank, and the Bank has an enforceable right to payment for performance completed to date;

– In other cases, the Bank recognizes revenue at a point in time at which a customer obtains control of the promised services.

(iii) Government grants

Government grants are recognized in the statements of financial position initially when there is reasonable assurance that they will be received and that the Bank will comply with the conditions attaching to them. Grants that compensate the Bank for expenses incurred are recognized as income in profit or loss on a systematic basis in the same periods in which the expenses are incurred. Grants that compensate the Bank for the cost of an asset are deducted from the carrying amount of the asset and consequently are effectively recognized in profit or loss over the useful life of the asset by way of reduced depreciation expense.

(iv) Other income

Other income is recognized on an accrual basis.

(21) Expenses recognition

(i) Interest expenses

Interest expenses from financial liabilities are accrued on a time proportion basis with reference to the amortized cost and the applicable effective interest rate.

(ii) Other expenses

Other expenses are recognized on an accrual basis.

(22) Dividends

Dividends or distributions of profits proposed in the profit appropriation plan which will be authorized and declared after the end of each of the Relevant Periods are not recognized as a liability at the end of each of the Relevant Periods but disclosed separately in the notes to the Historical Financial Information.

(23) Related parties

(a) A person, or a close member of that person’s family, is related to the Bank if that person:

(i) has control or joint control over the Bank;

(ii) has significant influence over the Bank; or

(iii) is a member of the key management personnel of the Bank or the Bank’s parent.

– I-37 – APPENDIX I ACCOUNTANTS’ REPORT

(b) An entity is related to the Bank if any of the following conditions applies:

(i) The entity and the Bank are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others);

(ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member);

(iii) Both entities are joint ventures of the same third party;

(iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity;

(v) The entity is a post-employment benefit plan for the benefit of employees of either the Bank or an entity related to the Bank;

(vi) The entity is controlled or jointly controlled by a person identified in (a);

(vii) A person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity);

(viii) The entity, or any member of a Bank of which it is a part, provides key management personnel services to the Bank or to the Bank’s parent.

Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity.

(24) Segment reporting

Operating segments, and the amounts of each segment item reported in the Historical Financial Information, are identified from the financial information provided regularly to the Bank’s most senior executive management for the purposes of allocating resources to, and assessing the performance of the Bank’s various lines of business and geographical locations.

Individually material operating segments are not aggregated for financial reporting purposes unless the segments have similar economic characteristics and are similar in respect of the nature of products and services, the nature of production processes, the type or class of customers, the methods used to distribute the products or provide the services, and the nature of the regulatory environment. Operating segments which are not individually material may be aggregated if they share a majority of these criteria.

(25) Significant accounting estimates and judgments

The preparation of Historical Financial Information requires management to make estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. 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 and in any future periods affected.

(a) Provision for impairment losses on loans and advances to customers, available-for-sale financial assets, held-to-maturity investments and debt securities classified as receivables

The following accounting estimates and judgments apply to the period before January 1, 2018:

The Bank reviews portfolios of loans and advances to customers and investments periodically to assess whether any impairment losses exist and the amount of impairment losses if there is any indication of impairment. Objective evidence for impairment includes observable data indicating that there is a measurable decrease in the estimated future cash flows for loans and advances to customers and investments. It also includes observable data indicating adverse changes in the repayment status of the debtors, or change in national or local economic conditions that causes the default in payment.

The impairment loss for loans and advances to customers, and debt investments that is individually assessed for impairment is the net decrease in the estimated discounted future cash flow of the assets. When the financial assets are collectively assessed for impairment, the estimate is based on historical loss experience for assets with credit risk characteristics similar to the financial assets. Historical loss experience is adjusted on the basis of the relevant observable data that reflect current economic conditions and the judgment based on management’s historical experience. Management reviews the methodology and assumptions used in estimating future cash flows regularly to reduce any difference between loss estimates and actual loss.

– I-38 – APPENDIX I ACCOUNTANTS’ REPORT

The objective evidence of impairment for an available-for-sale equity investment includes significant or prolonged decline in its fair value below its cost. When deciding whether there is significant or prolonged decline in fair value, the Bank will consider the historical fluctuation records of market and debtors’ credit condition, financial position and performance of related industry.

(b) Measurement of expected credit loss

The following accounting policies apply to the period after January 1, 2018:

The measurement of the expected credit loss allowance for the investment in financial assets and debt instruments measured at amortized cost and FVOCI is an area that requires the use of complex models and significant assumptions about future economic conditions and credit behavior (e.g. the likelihood of customers defaulting and the resulting losses). Explanation of the inputs, assumptions and estimation techniques used in measuring expected credit losses is further detailed in Note 37(a).

A number of significant judgments are required in applying the accounting requirements for measuring expected credit losses, such as:

• Determining criteria for significant increase in credit risk;

• Choosing appropriate models and assumptions for the measurement of expected credit losses;

• Establishing the number and relative weightings of forward-looking scenarios for each type of product/market and the associated expected credit losses.

Detailed information about the judgments and estimates made by the Bank in the above areas is set out in Note 37(a) credit risk.

(c) Fair value of financial instruments

There are no quoted prices from an active market for a number of financial instruments. The fair values for these financial instruments are established by using valuation techniques. These techniques include using recent arm’s length market transactions by referring to the current fair value of similar instruments, discounted cash flow analysis, and option pricing models. Valuation models established by the Bank make maximum use of market input and rely as little as possible on the Bank’s specific data. However, it should be noted that some input, such as credit and counterparty risk, and risk correlations require management’s estimates. The Bank reviews the above estimations and assumptions periodically and makes adjustment if necessary.

(d) The classification of the held-to-maturity investments

The following accounting policies apply before January 1, 2018:

Non-derivative financial assets with fixed or determinable payments and fixed maturity are classified as held-to-maturity investments, if the Bank has the intention and ability to hold them until maturity. In evaluating whether requirements to classify a financial asset as held-to-maturity are met, management makes significant judgments. Failure in correctly assessing the Bank’s intention and ability to hold specific investments until maturity may result in reclassification of the whole portfolio as available-for-sale.

(e) Income taxes

Determining income tax provisions involves judgment on the future tax treatment of certain transactions. The Bank carefully evaluates the tax implications of transactions and tax provisions are set up accordingly. The tax treatment of such transactions is reconsidered periodically to take into account all changes in tax legislation. Deferred tax assets are recognized for tax losses not yet used and temporary deductible differences. As those deferred tax assets can only be recognized to the extent that it is probable that future taxable profits will be available against which the unused tax credits can be utilized, management’s judgment is required to assess the probability of future taxable profits. Management’s assessment is constantly reviewed and additional deferred tax assets are recognized if it becomes probable that future taxable profits will allow the deferred tax assets to be recovered.

– I-39 – APPENDIX I ACCOUNTANTS’ REPORT

(f) Impairment of non-financial assets

Non-financial assets are reviewed regularly to determine whether the carrying amount exceeds the recoverable amount of the assets. If any such indication exists, an impairment loss is provided.

Since the market price of an asset (the asset bank) may not be obtained reliably, the fair value of the asset may not be estimated reliably. In assessing the present value of future cash flows, significant judgments are exercised over the asset’s selling price, related operating expenses and discounting rate to calculate the present value. All relevant materials which can be obtained are used for estimation of the recoverable amount, including the estimation of the selling price and related operating expenses based on reasonable and supportable assumption.

(g) Depreciation and amortization

Investment properties, property and equipment, intangible assets and right-of-use assets are depreciated and amortized using the straight-line method over their estimated useful lives after taking into account residual values. The estimated useful lives are regularly reviewed to determine the depreciation and amortization costs charged in each of the Relevant Periods. The estimated useful lives are determined based on historical experiences of similar assets and the estimated technical changes. If there is an indication that there has been a change in the factors used to determine the depreciation or amortization, the amount of depreciation or amortization will be revised.

(h) Determination of control over investees

Management applies its judgment to determine whether the control indicators indicate that the Bank controls a non-principal guaranteed wealth management product and an asset management plan.

The Bank acts as manager to a number of non-principal guaranteed wealth management products and asset management plans. Determining whether the Bank controls such a structured entity usually focuses on the assessment of the aggregate economic interests of the Bank in the entity (comprising any carried interests and expected management fees) and the decision-making authority of the entity. For all these structured entities managed by the Bank, the Bank’s aggregate economic interest is in each case not significant and the decision makers establish, market and manage them according to restricted parameters as set out in the investment agreements as required by laws and regulations. As a result, the Bank has concluded that it acts as agent as opposed to principal for the investors in all cases, and therefore has not consolidated these structured entities.

For further disclosure in respect of unconsolidated non-principal guaranteed wealth management products and asset management plans in which the Bank has an interest or for which it is a sponsor, see Note 32.

(i) Defined benefit plan

The Bank, in accordance with the projected unit credit method, using unbiased and mutually compatible actuarial assumption to estimate related demographic variables and financial variables, measures the obligations under the defined benefit plan and recognizes a defined benefit plan liability by the present value of the defined benefit plan. The Bank attributes obligations under a defined benefit plan to periods of service provided by employees, with a corresponding charge to the profit or loss for the current period or the cost of a relevant asset which include the service cost and interest expense of under a defined benefit plan, changes as a result of remeasurements of the net defined benefit plan liability or asset are recognized in deficit/surplus on remeasurement of net defined benefit liability.

– I-40 – APPENDIX I ACCOUNTANTS’ REPORT

3 NET INTEREST INCOME

Six months ended Years ended December 31, June 30, 2016 2017 2018 2018 2019 (Unaudited) Interest income arising from Deposits with the central bank 380,146 438,586 472,850 247,938 206,804 Deposits with banks and other financial institutions 246,608 151,703 37,041 16,733 62,952 Loans and advances to customers – Corporate loans and advances 3,303,762 4,107,701 5,642,410 2,442,234 4,046,586 – Personal loans and advances 452,362 455,906 695,908 314,880 604,622 – Discounted bills 139,382 125,087 166,154 74,998 63,360 Financial assets held under resale agreements 294,047 543,709 473,201 278,973 170,020 Financial investments 6,395,204 7,145,258 7,188,609 3,584,409 3,446,415 Sub-total 11,211,511 12,967,950 14,676,173 6,960,165 8,600,759 ------Interest expenses arising from Borrowing from the central bank (32,679) (26,368) (41,562) (22,066) (39,068) Deposits from banks and other financial institutions (964,895) (495,207) (520,317) (277,755) (126,342) Placements from banks and other financial institutions ––––(873) Deposits from customers (1,731,369) (2,153,328) (2,982,489) (1,411,862) (1,947,499) Financial assets sold under repurchase agreements (53,931) (48,071) (21,345) – (74,702) Debt securities issued (498,398) (1,534,169) (2,784,163) (1,280,841) (1,774,793) Sub-total (3,281,272) (4,257,143) (6,349,876) (2,992,524) (3,963,277) ------Net interest income 7,930,239 8,710,807 8,326,297 3,967,641 4,637,482

Total interest income arising from financial assets that are not at fair value through profit or loss for the years ended December 31, 2016, 2017 and 2018 and six months ended June 30, 2018 and 2019 amounted to RMB11,111.41 million, RMB12,837.24 million, RMB14,676.17 million, RMB6,960.17 million (unaudited) and RMB8,600.76 million, respectively.

Total interest expense arising from financial liabilities that are not at fair value through profit or loss for the years ended December 31, 2016, 2017 and 2018 and six months ended June 30, 2018 and 2019 amounted to RMB3,281.27 million, RMB4,257.14 million, RMB6,349.88 million, RMB2,992.52 million (unaudited) and RMB3,963.28 million, respectively.

Interest income arising from impaired loan for the years ended December 31, 2016, 2017 and 2018 and six months ended June 30, 2018 and 2019 amounted to RMB24.43 million, RMB43.85 million, RMB54.26 million, RMB13.76 million (unaudited) and RMB19.79 million, respectively.

– I-41 – APPENDIX I ACCOUNTANTS’ REPORT

4 NET FEE AND COMMISSION INCOME/(EXPENSE)

(a) Income and expense streams:

Six months ended Years ended December 31, June 30, 2016 2017 2018 2018 2019 (Unaudited) Fee and commission income Agency services fees and others 203,855 44,638 34,755 10,122 62,998 Bank card services fees 30,329 32,455 30,562 15,675 13,279 Consultancy services fees 25,337 11,285 20,844 8,583 1,393 Settlement and clearing fees 9,956 13,598 13,622 7,659 14,043 Acceptance and guarantee services fees 9,083 6,934 8,636 3,996 16,353 Sub-total 278,560 108,910 108,419 46,035 108,066 ------Fee and commission expense Bank card services fees (61,565) (76,494) (81,527) (36,608) (37,458) Others (27,030) (42,085) (5,592) (2,083) (9,336) Sub-total (88,595) (118,579) (87,119) (38,691) (46,794) ------Net fee and commission income/(expense) 189,965 (9,669) 21,300 7,344 61,272

(b) Disaggregation of income:

Year ended December 31, Six months ended June 30, 2018 2018 2019 At a At a At a point in Over point in Over point in Over time time time time time time (Unaudited) Agency services fees and others – 34,755 – 10,122 – 62,998 Bank card services fees 30,562 – 15,675 – 13,279 – Consultancy service fees – 20,844 – 8,583 – 1,393 Settlement and clearing fees 13,622 – 7,659 – 14,043 – Acceptance and guarantee services fees – 8,636 – 3,996 – 16,353 Total 44,184 64,235 23,334 22,701 27,322 80,744

5 NET TRADING (LOSSES)/GAINS

Six months ended Years ended December 31, June 30, Note 2016 2017 2018 2018 2019 (Unaudited) Net (losses)/gains from debt securities (a) (95,795) (106,801) 148,176 62,066 125,627 Net foreign exchange gains/(losses) (b) 4,460 (3,969) 3,420 873 181 Total (91,335) (110,770) 151,596 62,939 125,808

(a) Net (losses)/gains from debt securities include (losses)/gains arising from the buying and selling of, and changes in the fair value of financial assets held for trading. (b) Net foreign exchange gains/(losses) mainly include gains/(losses) from translation of foreign currency monetary assets and liabilities into Renminbi.

– I-42 – APPENDIX I ACCOUNTANTS’ REPORT

6 NET GAINS/(LOSSES) ARISING FROM INVESTMENT SECURITIES

Six months ended Years ended December 31, June 30, Note 2016 2017 2018 2018 2019 (Unaudited) Net gains/(losses) on disposal of available-for- sale financial assets 12,768 (10,154) – – – Net gains of financial investments at fair value through other comprehensive income – – 119,529 48,483 49,225 Net gains of financial investments at fair value through profit or loss (a) – – 97,631 32,914 158,959 Total 12,768 (10,154) 217,160 81,397 208,184

(a) Net gains of financial investments at fair value through profit or loss include the investment income and fair value changes of financial investments at fair value through profit or loss except for debt securities held for trading.

7 OTHER OPERATING INCOME

Six months ended Years ended December 31, June 30, 2016 2017 2018 2018 2019 (Unaudited) Government grants (Note) 17,071 30,560 67,261 4,397 9,963 Rental income 6,932 3,306 5,856 1,492 1,568 Net gains/(losses) on disposal of property and equipment 244 3,605 1,676 (155) (22) Net gains/(losses) on disposal of repossessed assets 811 (499) (25,688) – 149 Penalty income 1,031 1,670 1,650 1,010 390 Others 769 6,525 2,506 2,155 427 Total 26,858 45,167 53,261 8,899 12,475

Note:

Government grants recognized as other operating income are awarded to the Bank by the local government as incentives primarily to encourage the development of the Bank and the contribution to the local economic development. The government grants are one-off according to its balances of loans and advances to small and medium sized enterprises and agricultural enterprises in Guizhou Province.

– I-43 – APPENDIX I ACCOUNTANTS’ REPORT

8 OPERATING EXPENSES

Six months ended Years ended December 31, June 30, 2016 2017 2018 2018 2019 (Unaudited) Staff costs – Salaries, bonuses and allowances 1,077,854 1,177,666 1,219,980 538,075 650,672 – Social insurance and annuity 239,756 277,063 301,695 127,717 163,556 – Housing allowances 62,024 72,696 77,159 38,807 39,239 – Staff welfares 117,161 118,921 124,330 61,830 62,688 – Employee education expenses and labor union expenses 38,563 38,174 34,625 18,634 16,098 – Supplementary retirement benefits 60,522 86,360 75,347 29,680 25,184 Sub-total 1,595,880 1,770,880 1,833,136 814,743 957,437 ------Rental and property management expenses 131,929 153,879 166,931 74,259 3,672 Depreciation and amortization 292,666 341,629 350,363 161,878 149,392 Taxes and surcharges 205,939 68,892 65,940 41,280 73,384 Office expenses 445,924 402,912 391,769 162,807 157,207 Other general and administrative expenses 185,873 181,342 231,693 100,759 120,532 Interest expense on lease liabilities ––––12,282 Depreciation charge for the right-of-use assets ––––104,899 ------Total 2,858,211 2,919,534 3,039,832 1,355,726 1,578,805

Auditor’s remunerations for the years ended December 31, 2016, 2017 and 2018 amounted to RMB1.13 million, RMB1.13 million and RMB0.83 million, respectively.

– I-44 – APPENDIX I ACCOUNTANTS’ REPORT

9 DIRECTORS’ AND SUPERVISORS’ EMOLUMENTS

The emoluments before individual income tax in respect of the directors and supervisors who held office during the Relevant Periods are as follows:

Year ended December 31, 2016 Contribution by the employer to social insurance and welfare Total Discretionary plans, housing emoluments Fees Salaries bonus allowance, etc. before tax Executive directors Xiao Ruiyan – 572 – 97 669 Yang Mingshang – 572 – 95 667 Non-executive directors Yang Jianjun – – – – – He Chenggang – – – – – Ren Ren – – – – – Gong Taotao – – – – – Chen Yongjun – – – – – Independent non-executive directors Wu Beiying 210 – – – 210 Zhang Zhixue 210 – – – 210 Supervisors Zhang Hongsheng – 458 – 94 552 Guo Jiangtao – – – – – Lin Yusheng – – – – – Yang Jinsheng – – – – – Sun Yucun – – – – – Yin Xinquan – – – – – Mao Youzhi – – – – – Chen Guangqiang – 1,520 – 94 1,614 Li Keyong – 1,126 – 95 1,221 Wang Wenqing – 1,313 – 94 1,407 Total 420 5,561 – 569 6,550

– I-45 – APPENDIX I ACCOUNTANTS’ REPORT

Year ended December 31, 2017 Contribution by the employer to social insurance and welfare Total Discretionary plans, housing emoluments Note Fees Salaries bonus allowance, etc. before tax Executive directors Xiao Ruiyan (e) – 583 – 102 685 Yang Mingshang (e) – 461 – 100 561 Non-executive directors Yang Jianjun – – – – – He Chenggang – – – – – Ren Ren – – – – – Gong Taotao – – – – – Liu Chuncheng (b) ––– –– Chen Yongjun – – – – – Xiao Ming (c) ––– –– Li Zhengqiang (b) ––– –– Independent non- executive directors Wu Beiying 210 – – – 210 Zhang Zhixue 210 – – – 210 Supervisors Zhang Hongsheng (d) – 236 – 32 268 Hu Liangpin (b) – 293 – 92 385 Guo Jiangtao – – – – – Lin Yusheng – – – – – Yang Jinsheng – – – – – Sun Yucun – – – – – Yin Xinquan – – – – – Mao Youzhi – – – – – Chen Guangqiang – 1,804 – 100 1,904 Li Keyong – 1,281 – 100 1,381 Wang Wenqing – 1,477 – 100 1,577 Xiong Song (a) – 1,863 – 100 1,963 Li He (b) 210 – – – 210 Chen Houyi (b) 210 – – – 210 Total 840 7,998 – 726 9,564

– I-46 – APPENDIX I ACCOUNTANTS’ REPORT

Year ended December 31, 2018 Contribution by the employer to social insurance and welfare Total Discretionary plans, housing emoluments Note Fees Salaries bonus allowance, etc. before tax Executive directors Li Zhiming (i) – 377 – 103 480 Xu An (j) – 592 – 93 685 Non-executive directors Yang Jianjun – – – – – Gong Taotao – – – – – Ren Ren – – – – – Chen Yongjun – – – – – Xiao Ming (c) ––– –– Yang Mingshang (h) ––– –– Lu Lin (h) ––– –– He Chenggang (k) ––– –– Liu Chuncheng (k) ––– –– Li Zhengqiang (k) ––– –– Independent non- executive directors Tang Xin (h) 127 – – – 127 Li Shoubing (h) 127 – – – 127 Song Ke (h) 127 – – – 127 Wang Gefan (h) 127 – – – 127 Law Cheuk Kin Stephen (h) 122 – – – 122 Wu Beiying (k) ––– –– Zhang Zhixue (k) ––– –– Supervisors Xiao Cifa (g) – 563 – 92 655 Liu Hanmin (g) 127 – – – 127 Su Zhi (g) 127 – – – 127 Chen Houyi 210 – – – 210 Wu Qiangli (g) ––– –– Yang Jinsheng (l) ––– –– Hu Liangpin (f) – 447 – 93 540 Wang Changyi (g) – 894 – 103 997 Li Keyong – 1,118 – 102 1,220 Guo Jiangtao (k) ––– –– Lin Yusheng (k) ––– –– Sun Yucun (k) ––– –– Yin Xinquan (k) ––– –– Mao Youzhi (k) ––– –– Li He (k) ––– –– Chen Guangqiang (k) – 907 – 43 950 Wang Wenqing (k) – 659 – 43 702 Xiong Song (k) – 723 – 43 766 Total 1,094 6,280 – 715 8,089

– I-47 – APPENDIX I ACCOUNTANTS’ REPORT

Six months ended June 30, 2018 (unaudited) Contribution by the employer to social insurance and welfare Total Discretionary plans, housing emoluments Note Fees Salaries bonus allowance, etc. before tax

Executive directors Li Zhiming – 188 – 57 245 Xu An – 331 – 52 383

Non-executive directors He Chenggang (k) –– – – – Liu Chuncheng (k) –– – – – Xiao Ming (c) –– – – – Li Zhengqiang (k) –– – – – Yang Jianjun – – – – – Chen Yongjun – – – – – Ren Ren – – – – – Gong Taotao – – – – –

Independent non-executive directors Wu Beiying (k) –– – – – Zhang Zhixue (k) –– – – –

Supervisors Guo Jiangtao (k) –– – – – Lin Yusheng (k) –– – – – Yang Jinsheng (l) –– – – – Sun Yucun (k) –– – – – Yin Xinquan (k) –– – – – Mao Youzhi (k) –– – – – Li He (k) –– – – – Chen Houyi – – – – – Hu Liangpin (f) – – ––– Chen Guangqiang (k) – 991 – 51 1,042 Wang Wenqing (k) – 722 – 51 773 Xiong Song (k) – 795 – 51 846 Li Keyong – 687 – 51 738

Total – 3,714 – 313 4,027

– I-48 – APPENDIX I ACCOUNTANTS’ REPORT

Six months ended June 30, 2019 Contribution by the employer to social insurance and welfare plans, Total Discretionary housing emoluments Note Fees Salaries bonus allowance, etc. before tax

Executive directors Li Zhiming – 204 – 47 251 Xu An – 504 – 39 543

Non-executive directors Gong Taotao – – – – – Yang Jianjun (l) –– – – – Chen Yongjun – – – – – Ren Ren (l) –– – – – Yang Mingshang – – – – – Lu Lin – – – – –

Independent non-executive directors Tang Xin – – – – – Li Shoubing – – – – – Song Ke – – – – – Wang Gefan – – – – – Law Cheuk Kin Stephen – – – – –

Supervisors Xiao Cifa – 505 – 39 544 Liu Hanmin – – – – – Su Zhi – – – – – Chen Houyi – – – – – Wu Qiangli – – – – – Wang Changyi – 587 – 49 636 Li Keyong – 312 – 49 361

Total – 2,112 – 223 2,335

There was no amount paid during each of the years ended December 31, 2016, 2017 and 2018 and six months ended June 30, 2018 and 2019 to the directors in connection with their retirement from employment or compensation for loss of office with the Bank, or inducement to join the Bank. There was no arrangement under which a director or supervisor waived or agreed to waive any remuneration during each of the years ended December 31, 2016, 2017 and 2018 and six months ended June 30, 2018 and 2019.

Notes: (a) In the meeting of the labor union committee of the Bank held on February 5, 2017, Xiong Song was elected as supervisor. (b) In the general meeting held on April 7, 2017, Hu Liangpin, Li He and Chen Houyi were elected as supervisors; Li Zhengqiang and Liu Chuncheng were elected as non-executive directors. (c) In the general meeting held on April 7, 2017, Xiao Ming was elected as non-executive director. In the general meeting held on May 17, 2018, Xiao Ming was elected as supervisor and on September 26, 2018, Xiao Ming resigned as supervisor. (d) On April 27, 2017, Zhang Hongsheng resigned as supervisor. (e) On December 27, 2017, Xiao Ruiyan and Yang Mingshang resigned as executive directors. (f) On February 1, 2018, Hu Liangpin resigned as supervisor. (g) In the general meeting held on May 17, 2018, Xiao Cifa, Liu Hanmin, Su Zhi, Wu Qiangli and Wang Changyi were elected as supervisors. (h) In the general meeting held on May 17, 2018, Yang Mingshang and Lu Lin were elected as non-executive directors; Tang Xin, Li Shoubing, Song Ke, Wang Gefan and Law Cheuk Kin Stephen were elected as independent non-executive directors.

– I-49 – APPENDIX I ACCOUNTANTS’ REPORT

(i) In the extraordinary shareholders meeting held on February 1, 2018, Li Zhiming, was elected as Chairman of the Board. (j) In the extraordinary shareholders meeting held on February 1, 2018, Xu An, who was vice president in the Bank previously, was elected as executive director. (k) On May 17, 2018, He Chenggang, Liu Chuncheng, Li Zhengqiang resigned as non-executive directors, Wu Beiying and Zhang Zhixue resigned as independent non-executive directors; Guo Jiangtao, Lin Yusheng, Sun Yucun, Yin Xinquan, Mao Youzhi, Chen Guangqiang, Wang Wenqing, Xiong Song and Li He resigned as supervisors. (l) On March 4, 2019, Yang Jianjun and Ren Ren resigned as non-executive directors; Yang Jinsheng resigned as supervisor.

10 INDIVIDUALS WITH HIGHEST EMOLUMENTS

For the years ended December 31, 2016, 2017 and 2018, the five individuals with highest emolument included 2, 2 and 1 supervisors of the Bank, respectively. For the six months ended June 30, 2018 and 2019, the five individuals with highest emoluments included 2 and 1 supervisors of the Bank, respectively. Their emoluments are disclosed in Note 9. The emoluments for the other highest paid individuals are shown as follows:

Six months ended Years ended December 31, June 30, 2016 2017 2018 2018 2019 (Unaudited) Salaries and other emoluments 4,605 5,861 6,115 3,251 2,740 Contributions to pension schemes 283 300 411 154 136 Total 4,888 6,161 6,526 3,405 2,876

The number of these individuals whose emoluments are within the following bands is set out below:

Six months ended Years ended December 31, June 30, 2016 2017 2018 2018 2019 (Unaudited) HKD500,000 – 1,000,000 ––––3 HKD1,000,001 – 1,500,000 ––131 HKD1,500,001 – 2,000,000 3–––– HKD2,000,001 – 2,500,000 –33––

None of these individuals received any inducement to join or upon joining the Bank or compensation for loss of office, or waived any emoluments during the Relevant Periods.

11 IMPAIRMENT LOSSES ON ASSETS

Six months ended Years ended December 31, June 30, 2016 2017 2018 2018 2019 (Unaudited) Financial investments 370,427 541,891 257,937 251,967 137,660 Loans and advances to customers 2,444,946 2,541,269 2,071,935 777,619 811,056 Financial assets held under resale agreements – – (691) (5,734) (469) Credit commitments – – 61,646 23,322 302,798 Deposits with banks and other financial institutions – – 311 (125) 147,943 Others 4,057 (24,645) 1,145 13,757 40,664 Total 2,819,430 3,058,515 2,392,283 1,060,806 1,439,652

– I-50 – APPENDIX I ACCOUNTANTS’ REPORT

12 INCOME TAX EXPENSE

(a) Income tax:

Six months ended Note Years ended December 31, June 30, 2016 2017 2018 2018 2019 (Unaudited) Current tax 1,072,146 1,218,255 853,971 364,807 522,098 Deferred tax 21(b) (635,713) (831,372) (427,503) (118,150) (289,235) Total 436,433 386,883 426,468 246,657 232,863

(b) Reconciliations between income tax and accounting profit are as follows:

Six months ended Note Years ended December 31, June 30, 2016 2017 2018 2018 2019 (Unaudited) Profit before tax 2,397,867 2,641,837 3,303,039 1,708,377 2,022,600

Statutory tax rate 25% 25% 25% 25% 25% Income tax calculated at statutory tax rate 599,467 660,459 825,760 427,094 505,650 ------Non-deductible expenses 22,139 24,594 33,639 19,592 13,060 Non-taxable income (i) (185,173) (298,170) (432,931) (200,029) (285,847) ------Income tax 436,433 386,883 426,468 246,657 232,863

(i) The non-taxable income mainly represents the interest income arising from the PRC government bonds and dividends from domestic enterprises.

13 BASIC AND DILUTED EARNINGS PER SHARE

Six months ended Note Years ended December 31, June 30, 2016 2017 2018 2018 2019 (Unaudited) Net profit attributable to equity shareholders of the Bank 1,961,434 2,254,954 2,876,571 1,461,720 1,789,737 Weighted average number of ordinary shares (in thousands) (i) 8,630,190 9,696,133 12,106,795 11,816,222 12,388,046 Basic and diluted earnings per share attributable to equity shareholders of the Bank (in RMB) 0.23 0.23 0.24 0.12 0.14

There is no difference between basic and diluted earnings per share as there were no potentially dilutive shares outstanding during the Relevant Periods.

– I-51 – APPENDIX I ACCOUNTANTS’ REPORT

(i) Weighted average number of ordinary shares (in thousands)

Years ended December 31, Six months ended June 30, 2016 2017 2018 2018 2019 (Unaudited) Number of ordinary shares as at January 1 8,621,645 9,661,345 11,263,045 11,263,045 12,388,045 New added weighted average number of ordinary shares 8,545 34,788 843,750 553,177 1 Weighted average number of ordinary shares as at December 31/June 30 8,630,190 9,696,133 12,106,795 11,816,222 12,388,046

Basic earnings per share have been computed by taking into account of the shares subscribed by the investors for the Relevant Periods as disclosed in Note 29.

14 CASH AND DEPOSITS WITH THE CENTRAL BANK

Note At December 31, At June 30, 2016 2017 2018 2019 Cash on hand 557,489 632,548 660,721 557,007 ------Deposits with the central bank – Statutory deposit reserves (a) 24,707,798 27,225,660 25,579,210 25,234,110 – Surplus deposit reserves (b) 6,870,998 21,784,353 19,534,491 22,079,420 – Fiscal deposits 105,423 33,913 15,522 136,418 Sub-total 31,684,219 49,043,926 45,129,223 47,449,948 ------Interests receivable – – 13,023 13,964 ------Total 32,241,708 49,676,474 45,802,967 48,020,919

(a) The Bank places statutory deposit reserves with the PBOC in accordance with relevant regulations. As at the end of each of the Relevant Periods, the statutory deposit reserve ratios applicable to the Bank were as follows:

At December 31, At June 30, 2016 2017 2018 2019 Reserve ratio for RMB deposits 14.5% 13.5% 12.0% 11.0% Reserve ratio for foreign currency deposits 5.0% 5.0% 5.0% 5.0%

(b) The surplus deposit reserves are maintained with the PBOC for the purpose of clearing.

– I-52 – APPENDIX I ACCOUNTANTS’ REPORT

15 DEPOSITS WITH BANKS AND OTHER FINANCIAL INSTITUTIONS

Analyzed by type and location of counterparty

At December 31, At June 30, 2016 2017 2018 2019 Deposits in mainland China – Banks 5,886,463 1,117,533 810,351 4,317,874 – Other financial institutions 419 4,153 23,480 34,337 Total 5,886,882 1,121,686 833,831 4,352,211 ------Interests receivable – – 1,566 28,625 Less: Provision for impairment losses – – (571) (148,514) ------Net carrying amount 5,886,882 1,121,686 834,826 4,232,322

16 FINANCIAL ASSETS HELD UNDER RESALE AGREEMENTS

(a) Analyzed by type and location of counterparty

At December 31, At June 30, 2016 2017 2018 2019 In mainland China – Banks 17,740,304 12,948,325 14,694,198 19,992,000 Total 17,740,304 12,948,325 14,694,198 19,992,000 Interests receivable – – 14,177 4,394 Less: Provision for impairment losses – – (8,047) (7,578) Total 17,740,304 12,948,325 14,700,328 19,988,816

(b) Analyzed by type of collateral held

At December 31, At June 30, 2016 2017 2018 2019 Debt securities 16,725,902 11,960,760 14,694,198 19,992,000 Bank acceptance 1,014,402 987,565 – – Total 17,740,304 12,948,325 14,694,198 19,992,000 Interests receivable – – 14,177 4,394 Less: Provision for impairment losses – – (8,047) (7,578) Net carrying amount 17,740,304 12,948,325 14,700,328 19,988,816

– I-53 – APPENDIX I ACCOUNTANTS’ REPORT

17 LOANS AND ADVANCES TO CUSTOMERS

(a) Analyzed by nature

At December 31, 2016 2017 Corporate loans and advances 59,076,519 76,572,866 ------Personal loans and advances – Residential mortgage 2,182,537 6,143,464 – Personal consumption loans 1,504,455 1,373,081 – Personal business loans 3,622,828 3,232,951 Sub-total 7,309,820 10,749,496 ------Discounted bills 1,945,075 809,975 ------Gross loans and advances to customers 68,331,414 88,132,337 ------Less: Provision for impairment losses – Individually assessed (562,413) (550,822) – Collectively assessed (2,219,155) (2,172,029) Total provision for impairment losses (2,781,568) (2,722,851) ------Net loans and advances to customers 65,549,846 85,409,486

At December 31, At June 30, 2018 2019 Loans and advances to customers measured at amortized cost Corporate loans and advances 121,888,789 137,024,501 ------Personal loans and advances – Residential mortgage 9,765,545 12,371,047 – Personal consumption loans 1,253,326 1,116,822 – Personal business loans 5,808,339 10,598,893 – Credit cards 33,146 43,330 Sub-total 16,860,356 24,130,092 ------Interests receivable 333,357 336,821 Less: provision for loans and advances to customers measured at amortized cost (4,642,033) (5,783,853) ------Sub-total 134,440,469 155,707,561 ------Loans and advances to customers measured at fair value through other comprehensive income: Corporate loans and advances – 973,986 Discounted bills 1,391,384 2,211,147 Sub-total 1,391,384 3,185,133 ------Net loans and advances to customers 135,831,853 158,892,694

– I-54 – APPENDIX I ACCOUNTANTS’ REPORT

(b) Analyzed by industry sector

As at December 31, 2016 Loans and advances secured by Amount Percentage collaterals Leasing and commercial services 12,101,886 17.71% 6,127,768 Education 12,081,912 17.68% 454,770 Real estate 5,951,235 8.71% 5,781,235 Manufacturing 5,369,317 7.86% 3,280,601 Mining 5,209,887 7.62% 3,712,306 Water resources, environment and public facilities management 4,749,995 6.95% 1,647,600 Construction 3,561,023 5.21% 1,649,432 Transportation, storage and postal services 2,862,967 4.19% 701,538 Health and social work 2,484,375 3.64% 650,680 Wholesale and retail trade 2,199,642 3.22% 1,460,660 Production and supply of electric power, gas and water 1,061,757 1.55% 545,957 Culture, sports and entertainment 411,306 0.60% 99,500 Resident services, repair and other services 381,490 0.56% 307,067 Others 649,727 0.95% 376,890 Sub-total of corporate loans and advances 59,076,519 86.45% 26,796,004 Personal loans and advances 7,309,820 10.70% 4,993,781 Discounted bills 1,945,075 2.85% – Gross loans and advances to customers 68,331,414 100.00% 31,789,785

As at December 31, 2017 Loans and advances secured by Amount Percentage collaterals Leasing and commercial services 23,190,452 26.31% 8,279,761 Education 9,522,642 10.80% 139,001 Construction 8,331,519 9.45% 3,632,184 Water resources, environment and public facilities management 7,484,659 8.49% 2,163,536 Transportation, storage and postal services 5,633,224 6.39% 3,185,231 Real estate 4,905,247 5.57% 4,640,247 Manufacturing 4,094,764 4.65% 1,535,874 Mining 3,461,686 3.93% 2,329,962 Health and social work 3,402,548 3.86% 923,600 Production and supply of electric power, gas and water 2,054,458 2.33% 954,542 Wholesale and retail trade 2,052,836 2.33% 1,066,269 Culture, sports and entertainment 747,601 0.85% 2,449 Resident services, repair and other services 646,197 0.73% 217,654 Others 1,045,033 1.19% 243,077 Sub-total of corporate loans and advances 76,572,866 86.88% 29,313,387 Personal loans and advances 10,749,496 12.20% 8,783,075 Discounted bills 809,975 0.92% – Gross loans and advances to customers 88,132,337 100.00% 38,096,462

– I-55 – APPENDIX I ACCOUNTANTS’ REPORT

As at December 31, 2018 Loans and advances secured by Amount Percentage collaterals Leasing and commercial services 58,709,061 41.89% 23,613,332 Water resources, environment and public facilities management 12,272,027 8.76% 5,879,964 Construction 9,409,421 6.71% 4,551,008 Education 9,070,794 6.47% 607,590 Real estate 7,055,666 5.03% 5,411,706 Transportation, storage and postal services 6,711,309 4.79% 3,847,375 Manufacturing 3,164,071 2.26% 802,003 Mining 4,313,641 3.08% 2,166,487 Health and social work 3,312,739 2.36% 889,900 Wholesale and retail trade 3,102,957 2.21% 957,136 Production and supply of electric power, gas and water 2,327,352 1.66% 672,854 Culture, sports and entertainment 512,910 0.37% 11,910 Resident services, repair and other services 533,904 0.38% 91,567 Others 1,392,937 0.99% 352,180 Sub-total of corporate loans and advances 121,888,789 86.96% 49,855,012 Personal loans and advances 16,860,356 12.05% 12,733,844 Discounted bills 1,391,384 0.99% – Gross loans and advances to customers (excluding interests receivable) 140,140,529 100.00% 62,588,856

As at June 30, 2019 Loans and advances secured by Amount Percentage collaterals Leasing and commercial services 68,389,231 41.61% 26,557,287 Water resources, environment and public facilities management 13,313,178 8.10% 5,816,184 Construction 10,958,895 6.67% 5,349,010 Education 9,225,893 5.61% 582,730 Real estate 7,979,765 4.86% 6,671,435 Transportation, storage and postal services 7,313,701 4.45% 5,402,927 Mining 4,171,860 2.54% 1,986,234 Health and social work 3,509,391 2.14% 867,150 Wholesale and retail trade 3,789,206 2.31% 629,970 Manufacturing 3,664,253 2.23% 1,038,057 Production and supply of electric power, gas and water 2,179,560 1.33% 375,497 Culture, sports and entertainment 518,290 0.32% 6,790 Resident services, repair and other services 555,571 0.34% 103,307 Others 2,429,693 1.46% 304,825 Sub-total of corporate loans and advances 137,998,487 83.97% 55,691,403 Personal loans and advances 24,130,092 14.68% 15,830,009 Discounted bills 2,211,147 1.35% – Gross loans and advances to customers (excluding interests receivable) 164,339,726 100.00% 71,521,412

– I-56 – APPENDIX I ACCOUNTANTS’ REPORT

As at the end of each of the Relevant Periods and during the respective periods, detailed information of the impaired loans and advances to customers as well as the corresponding provision for impairment losses in respect of each industry sector which constitutes 10% or more of gross loans and advances to customers are as follows:

As at December 31, 2016 Individually Collectively Impairment assessed assessed losses Impaired provision for provision for charged Written-off loans and impairment impairment during the during the advances losses losses year year Leasing and commercial services – – (170,798) (44,101) – Education – – (174,089) (130,335) –

As at December 31, 2017 Individually Collectively Impairment assessed assessed losses Impaired provision for provision for charged Written-off loans and impairment impairment during the during the advances losses losses year year Leasing and commercial services 426 (271) (434,724) (264,184) – Education – – (187,266) (13,177) –

As at December 31, 2018 Provision for Provision Provision for loans and for credit- loans and advances impaired advances that are not loans and that are credit- advances assessed for impaired and that are Impairment Credit- expected assessed for assessed for losses impaired credit losses lifetime lifetime charged Written-off loans and over the next expected expected during the during the advances 12 months credit loss credit loss year year Leasing and commercial services – (1,723,968) – – (1,291,973) 3,000

As at June 30, 2019 Provision for Provision Provision for loans and for credit- loans and advances impaired advances that are not loans and that are credit- advances assessed for impaired and that are Impairment Credit- expected assessed for assessed for losses impaired credit losses lifetime lifetime charged Written-off loans and over the next expected expected during the during the advances 12 months credit loss credit loss period period Leasing and commercial services – (2,273,349) – – (549,381) –

– I-57 – APPENDIX I ACCOUNTANTS’ REPORT

(c) Analyzed by type of collateral

At December 31, 2016 2017 Unsecured loans 8,252,688 6,521,086 Guaranteed loans 28,288,941 43,514,789 Collateralized loans 25,308,133 24,283,982 Pledged loans 6,481,652 13,812,480 Gross loans and advances to customers 68,331,414 88,132,337 ------Less: Provision for impairment losses – Individually assessed (562,413) (550,822) – Collectively assessed (2,219,155) (2,172,029) Total provision for impairment losses (2,781,568) (2,722,851) ------Net loans and advances to customers 65,549,846 85,409,486

At At December 31, June 30, 2018 2019 Unsecured loans 8,038,885 7,821,805 Guaranteed loans 69,512,788 84,996,509 Collateralized loans 28,413,338 31,938,115 Pledged loans 34,175,518 39,583,297 Gross loans and advances to customers 140,140,529 164,339,726 Interests receivable 333,357 336,821 Less: provision for loans and advances to customers measured at amortized cost (4,642,033) (5,783,853) Net loans and advances to customers 135,831,853 158,892,694

(d) Overdue loans analyzed by overdue period

At December 31, 2016 Overdue Overdue more Overdue more within three than three than one year Overdue more months months to one to three years than three (inclusive) year (inclusive) (inclusive) years Total Unsecured loans 5,092 1,316 200 238 6,846 Guaranteed loans 77,714 188,140 116,913 1,573 384,340 Collateralized loans 631,143 504,899 1,568,640 54,865 2,759,547 Pledged loans 1,050 26,298 126,198 – 153,546 Total 714,999 720,653 1,811,951 56,676 3,304,279

As a percentage of gross loans and advances to customers 1.06% 1.05% 2.65% 0.08% 4.84%

– I-58 – APPENDIX I ACCOUNTANTS’ REPORT

At December 31, 2017 Overdue Overdue more Overdue more within three than three than one year Overdue more months months to one to three years than three (inclusive) year (inclusive) (inclusive) years Total Unsecured loans 1,605 3,210 3,908 420 9,143 Guaranteed loans 19,153 60,584 101,527 15,128 196,392 Collateralized loans 421,575 476,610 314,641 40,793 1,253,619 Pledged loans 484 – 11,610 – 12,094 Total 442,817 540,404 431,686 56,341 1,471,248

As a percentage of gross loans and advances to customers 0.51% 0.61% 0.49% 0.06% 1.67%

At December 31, 2018 Overdue Overdue more Overdue more within three than three than one year Overdue more months months to one to three years than three (inclusive) year (inclusive) (inclusive) years Total Unsecured loans 1,888 1,753 3,429 420 7,490 Guaranteed loans 24,888 37,821 66,522 13,648 142,879 Collateralized loans 44,285 293,284 484,903 46,707 869,179 Pledged loans – – 19,462 11,610 31,072 Total 71,061 332,858 574,316 72,385 1,050,620

As a percentage of gross loans and advances to customers 0.05% 0.24% 0.41% 0.05% 0.75%

At June 30, 2019 Overdue Overdue more Overdue more within three than three than one year Overdue more months months to one to three years than three (inclusive) year (inclusive) (inclusive) years Total Unsecured loans 2,390 1,513 3,997 422 8,322 Guaranteed loans 316,879 37,608 66,195 17,600 438,282 Collateralized loans 49,624 105,359 344,864 11,511 511,358 Pledged loans – 47,445 18,978 – 66,423 Total 368,893 191,925 434,034 29,533 1,024,385

As a percentage of gross loans and advances to customers 0.22% 0.12% 0.26% 0.02% 0.62%

Overdue loans represent loans, of which the whole or part of the principal or interest were overdue for one day or more.

– I-59 – APPENDIX I ACCOUNTANTS’ REPORT

(e) Loans and advances and provision for impairment losses

At December 31, 2016 Gross Impaired loans and Loans and impaired advances (Note (ii)) advances loans and for which for which for which advances as a provision are provision are provision are percentage of collectively collectively individually gross loans assessed assessed assessed Total and advances (Note (i)) Gross loans and advances to customers 67,024,629 157,454 1,149,331 68,331,414 1.91% Less: provision for impairment losses (2,113,572) (105,583) (562,413) (2,781,568) Net loans and advances to customers 64,911,057 51,871 586,918 65,549,846

At December 31, 2017 Gross Impaired loans and Loans and impaired advances (Note (ii)) advances loans and for which for which for which advances as a provision are provision are provision are percentage of collectively collectively individually gross loans assessed assessed assessed Total and advances (Note (i)) Gross loans and advances to customers 86,719,817 326,164 1,086,356 88,132,337 1.60% Less: provision for impairment losses (1,933,141) (238,888) (550,822) (2,722,851) Net loans and advances to customers 84,786,676 87,276 535,534 85,409,486

– I-60 – APPENDIX I ACCOUNTANTS’ REPORT

At December 31, 2018 Loans and Credit- Loans and advances that impaired advances that are not loans and are assessed credit-impaired advances that for expected and assessed are assessed credit losses for lifetime for lifetime over the next expected expected 12 months credit loss credit loss Total (Note (iii)) Total loans and advances to customers measured at amortized cost 135,744,710 1,099,809 1,904,626 138,749,145 Interests receivable 333,357 – – 333,357 Less: provision for impairment losses (3,371,865) (318,046) (952,122) (4,642,033) Carrying amount of loans and advances to customers measured at amortized cost 132,706,202 781,763 952,504 134,440,469 Carrying amount of loans and advances to customers measured at fair value through other comprehensive income 1,391,384 – – 1,391,384 Total carrying amount of loans and advances to customers 134,097,586 781,763 952,504 135,831,853

At June 30, 2019 Loans and Credit- Loans and advances that impaired advances that are not loans and are assessed credit-impaired advances that for expected and assessed are assessed credit losses for lifetime for lifetime over the next expected expected 12 months credit loss credit loss Total (Note (iii)) Total loans and advances to customers measured at amortized cost 157,881,928 1,483,534 1,789,131 161,154,593 Interests receivable 336,821 – – 336,821 Less: provision for impairment losses (4,215,976) (476,300) (1,091,577) (5,783,853) Carrying amount of loans and advances to customers measured at amortized cost 154,002,773 1,007,234 697,554 155,707,561 Carrying amount of loans and advances to customers measured at fair value through other comprehensive income 3,185,133 – – 3,185,133 Total carrying amount of loans and advances to customers 157,187,906 1,007,234 697,554 158,892,694

– I-61 – APPENDIX I ACCOUNTANTS’ REPORT

Notes: (i) Loans and advances collectively assessed for impairment bear relatively insignificant impairment losses as a proportion of the total portfolio. These loans and advances include those which are graded normal or special-mention. (ii) Impaired loans and advances include those for which objective evidence of impairment has been identified and assessed using the following methods: – Individually (including corporate loans and advances which are graded substandard, doubtful or loss); or – Collectively, representing portfolios of homogeneous loans (including personal loans and advances which are graded substandard, doubtful or loss). (iii) The loans and advances are “credit-impaired” when one or more events that have a detrimental impact on the estimated future cash flows of the loans and advances have occurred. Evidence that loans and advances are credit-impaired includes the following observable data: significant financial difficulty of the borrower or issuer; a breach of contract, such as a default or delinquency in interest or principal payments; for economic or contractual reasons relating to the borrower’s financial difficulty, the Bank having granted to the borrower a concession that otherwise would not consider; it is probable that the borrower will enter bankruptcy or other financial reorganization; the disappearance of an active market for that financial asset because of financial difficulties; or debts overdue more than 90 days. (iv) The definitions of the loan classifications, stated in Notes (i) and (ii) above, are set out in Note 37(a).

(f) For the year ended December 31, 2016 and 2017, movements of provision for impairment of loans and advances to customers

Year ended December 31, 2016 Provision for Provision for impaired loans loans and and advances advances which are which are which are collectively collectively individually assessed assessed assessed Total As at January 1 1,594,514 33,052 663,059 2,290,625 Charge for the year 519,058 107,409 1,818,479 2,444,946 Write-offs/transfer out – (38,298) (1,930,677) (1,968,975) Recoveries – 3,420 35,977 39,397 Unwinding of discount – – (24,425) (24,425) As at December 31 2,113,572 105,583 562,413 2,781,568

Year ended December 31, 2017 Provision for Provision for impaired loans loans and and advances advances which are which are which are collectively collectively individually assessed assessed assessed Total As at January 1 2,113,572 105,583 562,413 2,781,568 (Release)/charge for the year (180,431) 186,931 2,534,769 2,541,269 Write-offs/transfer out – (54,706) (2,657,860) (2,712,566) Recoveries – 1,080 155,346 156,426 Unwinding of discount – – (43,846) (43,846) As at December 31 1,933,141 238,888 550,822 2,722,851

– I-62 – APPENDIX I ACCOUNTANTS’ REPORT

(i) For the year ended December 31, 2018 and the six months ended June 30, 2019, movements of provision for impairment of loans and advances to customers measured at amortized cost:

Year ended December 31, 2018 Loans and Credit- Loans and advances that impaired advances that are not credit- loans and are assessed impaired and advances that for expected assessed for are assessed credit losses lifetime for lifetime over the next expected credit expected 12 months loss credit loss Total As at January 1 1,826,600 361,899 789,710 2,978,209 Transferred: – to expected credit losses over the next 12 months 9,775 (545) (9,230) – – to lifetime expected credit losses: not credit-impaired loans (14,566) 15,161 (595) – – to lifetime expected credit losses: credit-impaired loans (4,879) (137,542) 142,421 – Charge for the year 1,554,935 79,073 437,766 2,071,774 Write-offs – – (517,033) (517,033) Recoveries – – 163,346 163,346 Unwinding of discount – – (54,263) (54,263) As at December 31 3,371,865 318,046 952,122 4,642,033

Six months ended June 30, 2019 Loans and Credit- Loans and advances that impaired advances that are not credit- loans and are assessed impaired and advances that for expected assessed for are assessed credit losses lifetime for lifetime over the next expected credit expected 12 months loss credit loss Total

As at January 1 3,371,865 318,046 952,122 4,642,033 Transferred: – to expected credit losses over the next 12 months 2,529 (2,153) (376) – – to lifetime expected credit losses: not credit-impaired loans (23,003) 23,106 (103) – – to lifetime expected credit losses: credit-impaired loans (1,265) (130,201) 131,466 – Charge/(release) for the period 865,850 267,502 (322,847) 810,505 Write-offs – – (8,972) (8,972) Transfer out – – (324,366) (324,366) Recoveries – – 684,440 684,440 Unwinding of discount – – (19,787) (19,787)

As at June 30 4,215,976 476,300 1,091,577 5,783,853

– I-63 – APPENDIX I ACCOUNTANTS’ REPORT

(ii) For the year ended December 31, 2018 and the six months ended June 30, 2019, movements of provision for impairment of loans and advances to customers measured at fair value through other comprehensive income:

Year ended December 31, 2018 Loans and Credit- Loans and advances that impaired advances that are not credit- loans and are assessed impaired and advances that for expected assessed for are assessed credit losses lifetime for lifetime over the next expected credit expected 12 months loss credit loss Total As at January 1 244 – – 244 Charge for the year 161 – – 161 As at December 31 405 – – 405

Six months ended June 30, 2019 Loans and Credit- Loans and advances that impaired advances that are not credit- loans and are assessed impaired and advances that for expected assessed for are assessed credit losses lifetime for lifetime over the next expected credit expected 12 months loss credit loss Total As at January 1 405 – – 405 Charge for the period 551 – – 551 As at June 30 956 – – 956

(g) Disposal of loans and advances

In May 2019, the Bank disposed certain loans and advances with gross amount of RMB1,917.09 million to China Cinda Asset Management Co., Ltd. Guizhou Branch (the “Cinda Asset Management”) at a consideration of RMB673.81 million. As at June 30, 2019, the Bank has received the consideration in full.

18 FINANCIAL INVESTMENTS

Note At December 31, At June 30, 2016 2017 2018 2019 Financial investments measured at fair value through profit or loss (a) 3,856,434 3,686,958 8,670,658 15,378,607 Financial investments measured at fair value through other comprehensive income (b) – – 14,117,103 23,643,501 Financial investments measured at amortized cost (c) – – 113,857,259 111,132,225 Available-for-sale financial assets (d) 3,159,198 8,966,149 – – Held-to-maturity investments (e) 31,876,002 42,381,575 – – Debt securities classified as receivables (f) 63,376,678 75,010,766 – – Total 102,268,312 130,045,448 136,645,020 150,154,333

– I-64 – APPENDIX I ACCOUNTANTS’ REPORT

(a) Financial investments measured at fair value through profit or loss

At December 31, At June 30, 2016 2017 2018 2019 Debt securities issued by the following institutions in mainland China – Government 2,260,017 2,200,145 103,920 224,632 – Policy banks 1,046,026 1,029,047 354,238 598,777 – Banks and other financial institutions – – 1,753,743 1,278,384 – Corporate 550,391 457,766 464,076 – Sub-total 3,856,434 3,686,958 2,675,977 2,101,793 ------Listed 1,056,144 1,039,001 669,212 329,310 Unlisted 2,800,290 2,647,957 2,006,765 1,772,483 Wealth management products issued by financial institutions – Unlisted – – 2,671,166 4,123,818 ------Investment funds managed by public fund manager – Unlisted – – 3,323,515 9,152,996 ------Total 3,856,434 3,686,958 8,670,658 15,378,607

Note: At the end of each of the Relevant Periods, certain debt securities were pledged for repurchase agreements (Note 23(a)). No other investments were subject to material restrictions in the realization.

(b) Financial investments measured at fair value through other comprehensive income

At December 31, At June 30, Note 2018 2019 Debt securities issued by the following institutions in mainland China (i) – Government 6,344,076 4,295,226 – Policy banks 3,473,243 8,700,708 – Banks and other financial institutions – 2,023,463 – Corporate 4,000,456 8,166,161 Sub-total 13,817,775 23,185,558 ------Listed 8,336,151 8,996,687 Unlisted 5,481,624 14,188,871 Interests accrued 261,578 420,193 ------Equity investments (ii) – Unlisted 37,750 37,750 ------Total 14,117,103 23,643,501

Notes: (i) As at December 31, 2018 and June 30, 2019, certain debt securities were pledged for repurchase agreements (Note 23(a)). No other investment were subject to material restrictions in the realization. (ii) The Bank designates non-trading equity investments as financial investments at fair value through other comprehensive income.

– I-65 – APPENDIX I ACCOUNTANTS’ REPORT

(iii) For the year ended December 31, 2018 and the six months ended June 30, 2019, movements of provision for impairment of financial investments at fair value through other comprehensive income are as follows:

Year ended December 31, 2018 Lifetime Lifetime Expected expected expected credit losses credit losses credit losses over the next not credit- credit- 12 months impaired impaired Total Balance at January 1 1,973 – – 1,973 Charge for the year 3,053 – – 3,053 Balance at December 31 5,026 – – 5,026

Six months ended June 30, 2019 Lifetime Lifetime Expected expected expected credit losses credit losses credit losses over the next not credit- credit- 12 months impaired impaired Total Balance at January 1 5,026 – – 5,026 Charge for the period 2,844 – – 2,844

Balance at June 30 7,870 – – 7,870

(c) Financial investments measured at amortized cost

At December 31, At June 30, Note 2018 2019 Debt securities issued by the following institutions in mainland China (i) – Government 41,499,573 40,352,739 – Policy banks 4,390,447 5,735,072 – Corporate 919,612 919,720 Sub-total 46,809,632 47,007,531 Listed 41,999,573 40,852,739 Unlisted 4,810,059 6,154,792 Investment management products managed by trust plans 10,652,335 10,298,386 Investment management products managed by asset management companies 56,734,667 53,861,325 Private debt financing plans 400,000 416,765 Sub-total 114,596,634 111,584,007 Interests accrued 1,045,053 867,380 ------Less: Provision for impairment losses (ii) (1,784,428) (1,319,162) ------Total 113,857,259 111,132,225

Notes: (i) As at December 31, 2018 and June 30, 2019, certain debt securities were pledged for repurchase agreements (Note 23(a)). No other investment were subject to material restrictions in the realization. (ii) For the year ended December 31, 2018 and the six months ended June 30, 2019, movements of provision for impairment of financial investments at amortized cost are as follows:

– I-66 – APPENDIX I ACCOUNTANTS’ REPORT

Year ended December 31, 2018 Lifetime Lifetime Expected expected expected credit losses credit losses credit losses over the next not credit- credit- 12 months impaired impaired Total Balance at January 1 530,298 – 999,246 1,529,544 Charge/(release) for the year 269,584 – (14,700) 254,884 Balance at December 31 799,882 – 984,546 1,784,428

Six months ended June 30, 2019 Lifetime Lifetime Expected expected expected credit losses credit losses credit losses over the next not credit- credit- 12 months impaired impaired Total

Balance at January 1 799,882 – 984,546 1,784,428 Transferred: – to lifetime expected credit losses not credit-impaired: (1,274) 1,274 – – (Release)/charge for the period (36,377) 12,256 158,937 134,816 Transfer out – – (600,082) (600,082)

Balance at June 30 762,231 13,530 543,401 1,319,162

(iii) Disposal of financial investments measured at amortised cost

In May 2019, the Bank disposed certain financial investments with gross amount of RMB879.28 million to the Cinda Asset Management at a consideration of RMB279.19 million. As at June 30, 2019, the Bank has received the consideration in full.

(d) Available-for-sale financial assets

At December 31, 2016 2017 Equity investments – unlisted 37,750 37,750 ------Debt securities issued by the following institutions in mainland China – Government 1,091,730 4,168,892 – Policy banks 1,571,383 2,504,435 – Banks and other financial institutions 205,001 101,465 – Corporate 106,585 1,508,301 Sub-total 2,974,699 8,283,093 ------Listed 1,091,730 5,570,387 Unlisted 1,882,969 2,712,706 Wealth management products issued by financial institutions – Unlisted 146,749 645,306 ------Total 3,159,198 8,966,149

Note: As at December 31, 2016 and 2017, certain debt securities were pledged for repurchase agreements (Note 23(a)), no other investments were subject to material restrictions in the realization.

– I-67 – APPENDIX I ACCOUNTANTS’ REPORT

(e) Held-to-maturity investments

At December 31, Note 2016 2017 Debt securities issued by the following institutions in mainland China: – Government 25,906,890 36,958,657 – Policy banks 5,186,509 4,788,504 – Banks and other financial institutions 203,647 105,083 – Corporate 578,956 529,331 Total (i) 31,876,002 42,381,575

Listed 26,096,557 37,068,576 Unlisted 5,779,445 5,312,999 Total 31,876,002 42,381,575

Fair value 31,736,180 41,492,164

Notes: (i) As at December 31, 2016 and 2017, certain held-to-maturity investments were pledged as security for repurchase agreements (Note 23(a)). (ii) During the years ended December 31, 2016 and 2017, the Bank did not dispose of material held-to-maturity debt investments prior to their maturity dates.

(f) Debt securities classified as receivables

At December 31, 2016 2017 Investment management products managed by trust plan 5,482,095 8,008,999 Investment management products managed by securities companies 58,727,412 68,373,987 Total 64,209,507 76,382,986 Less: Provision for impairment losses (832,829) (1,372,220) Net carrying amount 63,376,678 75,010,766

19 INVESTMENTS IN ASSOCIATES

Note At December 31, At June 30, 2016 2017 2018 2019 Investments in associates (a) 136,319 129,024 94,564 90,400

Note: (a) The following list contains the Bank’s associates, all of which are individually immaterial to the Bank and are unlisted corporate entities whose quoted market price is not available.

– I-68 – APPENDIX I ACCOUNTANTS’ REPORT

Name Percentages of equity/voting rights Place of At December 31, At June 30, incorporation/ Business 2016 2017 2018 2019 registration sector Guiyang Baiyun Dexin 20% 20% 20% 20% Guiyang Commercial Rural Bank Co., Ltd. Guizhou bank (貴陽白雲德信村鎮銀 Province 行股份有限公司) Qingzhen Xingbang 15% 15% 15% 15% Guiyang Commercial Rural Bank Co., Ltd. Guizhou bank (清鎮興邦村鎮銀行有 Province 限責任公司) Zunyi Bozhou Huilong 20% 20% 20% 20% Zunyi Guizhou Commercial Town Bank Co., Ltd. Province bank (遵義播州匯隆村鎮銀 行有限責任公司) Suiyang Qianbei Town 20% 20% 20% 20% Zunyi Guizhou Commercial Bank Co., Ltd. Province bank (綏陽黔北村鎮銀行有 限責任公司) Zunyi Huichuan 20% 20% 20% 20% Zunyi Guizhou Commercial Qianxing Town Bank Province bank Co., Ltd. (遵義匯川黔興村鎮銀 行有限責任公司) Liupanshui Zhongshan 20% 20% 20% 20% Liupanshui Commercial Liangdu Town Bank Guizhou bank Co., Ltd. (六盤水鐘山 Province 涼都村鎮銀行股份有 限公司) Panzhou Wanhe Rural 20% 20% 20% 20% Liupanshui Commercial Bank Co.,Ltd. (盤州 Guizhou bank 萬和村鎮銀行有限責 Province 任公司) Pingba Dingli Rural 20% 20% 20% 20% Anshun Commercial Bank Co., Ltd. (平壩 Guizhou bank 鼎立村鎮銀行有限責 Province 任公司) Anshun Xihang Nanma 15% 15% 15% 15% Anshun Commercial Rural Bank Co., Ltd. Guizhou bank (安順西航南馬村鎮銀 Province 行有限責任公司) Longli County Guofeng 20% 20% 20% 20% Qiannan Bouyei Commercial Rural Bank Co., Ltd. and Miao bank (龍里國豐村鎮銀行有 Autonomous 限責任公司) Prefecture, Guizhou Province Duyun Rongtong Town 20% 20% 20% 20% Qiannan Bouyei Commercial Bank Co., Ltd. and Miao bank (都勻融通村鎮銀行有 Autonomous 限責任公司) Prefecture, Guizhou Province Tongren Fengyuan 20% 20% 20% 20% Tongren Commercial Town Bank Co., Ltd. Guizhou bank (銅仁豐源村鎮銀行有 Province 限責任公司) Kaili Dongnan Town 20% 20% 20% 20% Qiandongnan Commercial Bank Co., Ltd. (凱里 Miao and Dong bank 東南村鎮銀行有限責 Autonomous 任公司) Prefecture, Guizhou Province

– I-69 – APPENDIX I ACCOUNTANTS’ REPORT

The following tables illustrate the aggregate information of the Bank’s associates that are not individually material:

At December 31, At June 30, 2016 2017 2018 2019 Aggregate carrying amount of individually immaterial associates in the statements of financial position of the Bank 136,319 129,024 94,564 90,400 Declaration of cash dividends (1,800) – – – Aggregate amounts of the Bank’s share of results of those associates – Profits/(losses) from continuing operations 7,013 (5,495) (34,460) (4,164) – Other comprehensive income –––– – Total comprehensive income 7,013 (5,495) (34,460) (4,164)

20 PROPERTY AND EQUIPMENT

Electronic equipment Construction Premises Vehicles and others in process Total Cost As at January 1, 2016 1,722,331 78,238 320,100 160,852 2,281,521 Additions 58,125 10,966 73,363 124,514 266,968 Disposals (10,473) (2,764) (16,085) (90,924) (120,246) Transfer in/(out) 29,124 – 75,155 (104,279) – As at December 31, 2016 1,799,107 86,440 452,533 90,163 2,428,243 ------As at January 1, 2017 1,799,107 86,440 452,533 90,163 2,428,243 Additions 137,144 3,622 69,010 16,126 225,902 Disposals (42,818) (698) (14,533) – (58,049) Transfer in/(out) 10,410 – 15,864 (26,274) – As at December 31, 2017 1,903,843 89,364 522,874 80,015 2,596,096 ------As at January 1, 2018 1,903,843 89,364 522,874 80,015 2,596,096 Additions 67,316 1,369 47,615 1,629,685 1,745,985 Disposals (33,737) (4,430) (17,244) (7,744) (63,155) Transfer in/(out) 33,520 – 3,162 (36,682) – As at December 31, 2018 1,970,942 86,303 556,407 1,665,274 4,278,926 ------As at January 1, 2019 1,970,942 86,303 556,407 1,665,274 4,278,926 Additions 4,636 – 3,425 205,766 213,827 Disposals – – (2,128) – (2,128) Transfer (out)/in (15,620) 416 – (2,810) (18,014) As at June 30, 2019 1,959,958 86,719 557,704 1,868,230 4,472,611 ------

– I-70 – APPENDIX I ACCOUNTANTS’ REPORT

Electronic equipment Construction Premises Vehicles and others in process Total Accumulated depreciation As at January 1, 2016 (239,498) (39,622) (166,685) – (445,805) Charge for the year (95,776) (11,764) (68,172) – (175,712) Disposals 6,707 2,314 13,130 – 22,151 As at December 31, 2016 (328,567) (49,072) (221,727) – (599,366) ------As at January 1, 2017 (328,567) (49,072) (221,727) – (599,366) Charge for the year (122,487) (11,512) (87,722) – (221,721) Disposals 10,945 331 10,453 – 21,729 As at December 31, 2017 (440,109) (60,253) (298,996) – (799,358) ------As at January 1, 2018 (440,109) (60,253) (298,996) – (799,358) Charge for the year (93,392) (9,651) (98,972) – (202,015) Disposals 771 3,115 11,930 – 15,816 As at December 31, 2018 (532,730) (66,789) (386,038) – (985,557) ------As at January 1, 2019 (532,730) (66,789) (386,038) – (985,557) Charge for the period (47,945) (3,899) (44,123) – (95,967) Disposals – – 2,058 – 2,058 Transfer out 5,206–––5,206 As at June 30, 2019 (575,469) (70,688) (428,103) – (1,074,260) ------

Net book value As at December 31, 2016 1,470,540 37,368 230,806 90,163 1,828,877

As at December 31, 2017 1,463,734 29,111 223,878 80,015 1,796,738

As at December 31, 2018 1,438,212 19,514 170,369 1,665,274 3,293,369

As at June 30, 2019 1,384,489 16,031 129,601 1,868,230 3,398,351

At the end of each of the Relevant Periods, the net book values of premises of which title deeds were not yet finalized were RMB1,054.25 million, RMB1,063.50 million, RMB1,088.12 million and RMB438.41 million, respectively. The Bank is still in the progress of applying the outstanding title deeds for the above premises. The directors of the Bank are of the opinion that there would be no significant costs in obtaining the title deeds.

The carrying value of the Bank’s premises is analyzed based on the remaining terms of the land leases as follows:

At December 31, At June 30, 2016 2017 2018 2019 Held in mainland China – Medium-term leases (10-50 years) 380,170 440,795 562,134 556,775 – Long-term leases (over 50 years) 1,090,370 1,022,939 876,078 827,714

Total 1,470,540 1,463,734 1,438,212 1,384,489

– I-71 – APPENDIX I ACCOUNTANTS’ REPORT

21 DEFERRED TAX ASSETS

(a) Analyzed by nature

At December 31, At June 30, 2016 2017 2018 2019 Deductible/ Deferred Deductible/ Deferred Deductible/ Deferred Deductible Deferred (taxable) income tax (taxable) income tax (taxable) income tax temporary income tax temporary assets/ temporary assets/ temporary assets/ differences assets differences (liabilities) differences (liabilities) differences (liabilities) Deferred income tax assets/(liabilities) – Allowance for impairment losses 4,474,932 1,118,733 7,594,772 1,898,693 9,481,308 2,370,327 10,571,908 2,642,977 – Accrued staff costs 129,444 32,361 197,636 49,409 636,236 159,059 704,768 176,192 – Supplemental retirement benefits 62,152 15,538 96,292 24,073 120,664 30,166 123,216 30,804 – Fair value changes of financial assets 332 83 317,252 79,313 (203,004) (50,751) (306,244) (76,561) – Deferred income 2,696 674 (912) (228) 4,340 1,085 14,672 3,668 – Others ––––21,700 5,425 15,420 3,856 Net deferred income tax 4,669,556 1,167,389 8,205,040 2,051,260 10,061,244 2,515,311 11,123,740 2,780,936

(b) Movements of deferred tax

Allowance for Supplemental Change Net balance impairment Accrued retirement in fair Deferred of deferred losses staff costs benefits value income Others tax assets Note (i) Note (ii) January 1, 2016 529,970 18,616 6,973 (48,788) – – 506,771 Recognized in profit or loss 588,763 13,745 8,565 23,966 674 – 635,713 Recognized in other comprehensive income – – – 24,905 – – 24,905 December 31, 2016 1,118,733 32,361 15,538 83 674 – 1,167,389 Recognized in profit or loss 779,960 17,048 8,535 26,731 (902) – 831,372 Recognized in other comprehensive income – – – 52,499 – – 52,499 December 31, 2017 1,898,693 49,409 24,073 79,313 (228) – 2,051,260 Changes in accounting policies 132,912 – – (22,972) – – 109,940 January 1, 2018 2,031,605 49,409 24,073 56,341 (228) – 2,161,200 Recognized in profit or loss 338,722 109,650 6,093 (33,700) 1,313 5,425 427,503 Recognized in other comprehensive income – – – (73,392) – – (73,392) December 31, 2018 2,370,327 159,059 30,166 (50,751) 1,085 5,425 2,515,311 Recognized in profit or loss 272,650 17,133 638 (2,200) 2,583 (1,569) 289,235 Recognized in other comprehensive income – – – (23,610) – – (23,610) June 30, 2019 2,642,977 176,192 30,804 (76,561) 3,668 3,856 2,780,936

– I-72 – APPENDIX I ACCOUNTANTS’ REPORT

Notes: (i) The Bank made provision for impairment losses on loans and advances to customers and other assets. The provision for impairment losses was determined based on the expected recoverable amount of the relevant assets at the end of the Relevant Period. However, the amounts deductible for income tax purposes are calculated at 1% of the gross carrying amount of qualifying assets at the end of the Relevant Periods, together with write-offs which fulfill specific criteria as set out in the PRC tax rules and are approved by the tax authorities. (ii) Net gains or losses on fair value changes of financial instruments are subject to tax when realized.

22 OTHER ASSETS

Note At December 31, At June 30, 2016 2017 2018 2019 Interests receivable (a) 1,238,306 1,581,761 42,735 61,866 Intangible assets (b) 267,633 244,537 206,921 195,741 Repossessed assets 124,555 485,295 421,802 152,830 Deferred expenses 333,840 315,655 263,720 194,482 Investment properties (c) 125,989 14,717 4,499 16,711 Continuing involvement assets (d) – 470,000 470,000 – Right-of-use assets, except for investment properties (e) – – – 500,210 Fiscal receivables (f) – – – 620,509 Other receivables 39,306 77,998 74,964 321,246 Total 2,129,629 3,189,963 1,484,641 2,063,595

(a) Interests receivable

At December 31, At June 30, 2016 2017 2018 2019 Interests receivable arising from: Financial investments 889,867 1,154,403 40,050 58,325 Loans and advances to customers 299,007 396,901 2,685 3,541 Banks and other financial institutions 49,432 30,457 – – Total 1,238,306 1,581,761 42,735 61,866

– I-73 – APPENDIX I ACCOUNTANTS’ REPORT

(b) Intangible assets

Computer Land use software rights Total Cost: As at January 1, 2016 227,911 123,800 351,711 Additions 20,589 – 20,589 Disposals (3,757) (11,683) (15,440) As at December 31, 2016 244,743 112,117 356,860 Additions 4,041 – 4,041 Disposals (7,274) – (7,274) As at December 31, 2017 241,510 112,117 353,627 Additions 8,713 – 8,713 Disposals (2,215) – (2,215) As at December 31, 2018 248,008 112,117 360,125 Additions 369 – 369 Disposals – – – As at June 30, 2019 248,377 112,117 360,494 ------

Accumulated amortization: As at January 1, 2016 (53,078) (10,682) (63,760) Additions (23,713) (2,866) (26,579) Disposals 478 634 1,112 As at December 31, 2016 (76,313) (12,914) (89,227) Additions (24,271) (2,866) (27,137) Disposals 7,274 – 7,274 As at December 31, 2017 (93,310) (15,780) (109,090) Additions (42,730) (2,866) (45,596) Disposals 1,482 – 1,482 As at December 31, 2018 (134,558) (18,646) (153,204) Additions (10,116) (1,433) (11,549) Disposals – – – As at June 30, 2019 (144,674) (20,079) (164,753) ------

Book value: As at December 31, 2016 168,430 99,203 267,633

As at December 31, 2017 148,200 96,337 244,537

As at December 31, 2018 113,450 93,471 206,921

As at June 30, 2019 103,703 92,038 195,741

– I-74 – APPENDIX I ACCOUNTANTS’ REPORT

(c) Investment properties

Investment properties Cost: As at January 1, 2016 194,778 Additions – Disposals (37,796) As at December 31, 2016 156,982 Additions – Disposals (140,702) As at December 31, 2017 16,280 Additions – Disposals (9,710) As at December 31, 2018 6,570 Additions – Disposals – Transfer in 18,014 As at June 30, 2019 24,584 ------

Accumulated depreciation: As at January 1, 2016 (28,619) Additions (8,856) Disposals 6,482 As at December 31, 2016 (30,993) Additions (4,413) Disposals 33,843 As at December 31, 2017 (1,563) Additions (585) Disposals 77 As at December 31, 2018 (2,071) Additions (596) Disposals – Transfer in (5,206) As at June 30, 2019 (7,873) ------

Book value: As at December 31, 2016 125,989

As at December 31, 2017 14,717

As at December 31, 2018 4,499

As at June 30, 2019 16,711

(d) Continuing involvement assets

In 2017, the Bank entered into securitization transaction by which it transferred its impaired loans to the structured entity which issues asset-backed securities to investors at China Credit Assets Registration & Exchange Co., Ltd. The impaired loans with total amount of RMB3,126.52 million was securitized by the Bank. The provision of the impaired loans amounted to RMB2,186.52 million. The total consideration amounted to RMB940.00 million and the Bank held the RMB470.00 million subordinated tranche.

The Bank retains interests in the form of subordinated tranche which gives rise to the Bank’s continuing involvement in the transferred assets. The financial asset is recognized on the statements of financial position to the extent of the Bank’s continuing involvement. The extent of the Bank’s continuing involvement is the extent to which the Bank is exposed to the changes in the value of the transferred assets.

As at December 31, 2018, the carrying amount of assets that the Bank continues to recognize amounted to RMB470.00 million and the assets were recognized in loans and advances to customers. Arising from this continuing involvement, the Bank recognized continuing involvement assets and liabilities of RMB470.00 million each.

In May 2019, the Bank disposed the assets recognized in loans and advances to customers amounted to RMB470.00 million to the Cinda Asset Management as part of the disposing of loans and advances as described in Note 17(g). Therefore, the continuing involvement assets and liabilities were derecognized accordingly.

– I-75 – APPENDIX I ACCOUNTANTS’ REPORT

(e) Right-of-use assets

Property Balance at January 1, 2019 567,936 Additions 37,173 Depreciation charge for the period (104,899) Balance at June 30, 2019 500,210

(f) Fiscal receivables

The balance represents amounts due from the local fiscal departments, which arises from the centralized payments made by the Bank according to the local fiscal departments’ instructions. The balance will be settled with the local fiscal departments by the end of the year.

23 PLEDGED ASSETS

(a) Assets pledged as collateral

At December 31, At June 30, 2016 2017 2018 2019 Borrowings from the central bank: – Bills discounted 517,950 577,800 320,583 257,800 For repurchase agreements: – Financial investments at fair value through profit or loss 1,254,776 – – 74,250 – Available-for-sale debt securities 1,833,443 – – – – Held-to-maturity investments 4,868,981 – – – – Financial investments at fair value through other comprehensive income – – 222,000 1,084,500 – Financial investments at amortized cost – – 2,091,000 1,152,750 Total 8,475,150 577,800 2,633,583 2,569,300

Financial assets pledged by the Bank as collateral for liabilities are mainly debt securities for repurchase agreements.

(b) Pledged assets received

The Bank conducts resale agreements under the usual and customary terms of placements, and holds collateral for these transactions. The carrying amounts of the received pledged assets was RMB18,943.00 million, RMB13,008.40 million, RMB16,518.00 million and RMB19,922.00 million as at December 31, 2016, 2017 and 2018 and June 30, 2019 respectively.

24 DEPOSITS FROM BANKS AND OTHER FINANCIAL INSTITUTIONS

Analyzed by type of and location of counterparty

At December 31, At June 30, 2016 2017 2018 2019 Deposits in mainland China – Banks 12,300,455 1,272,795 5,096,769 4,194,773 – Other financial institutions 3,379,175 7,006,779 4,843,334 3,023,025 Sub-total 15,679,630 8,279,574 9,940,103 7,217,798 – Interests payable – – 43,665 72,419 Total 15,679,630 8,279,574 9,983,768 7,290,217

– I-76 – APPENDIX I ACCOUNTANTS’ REPORT

25 FINANCIAL ASSETS SOLD UNDER REPURCHASE AGREEMENTS

(a) Analyzed by type and location of counterparty

At December 31, At June 30, 2016 2017 2018 2019 In mainland China – Banks 456,500 – 2,175,200 2,311,500 – Other financial institutions 7,500,700 – – – Sub-total 7,957,200 – 2,175,200 2,311,500 Interests payable – – 76 2,340 Total 7,957,200 – 2,175,276 2,313,840

(b) Analyzed by type of collateral held

At December 31, At June 30, 2016 2017 2018 2019 Debt securities 7,957,200 – 2,175,200 2,311,500 Interests payable – – 76 2,340 Total 7,957,200 – 2,175,276 2,313,840

26 DEPOSITS FROM CUSTOMERS

At December 31, At June 30, 2016 2017 2018 2019 Demand deposits – Corporate customers 99,554,102 126,123,973 116,480,206 109,333,488 – Individual customers 16,666,329 20,914,098 26,552,727 27,749,009 Sub-total 116,220,431 147,038,071 143,032,933 137,082,497 ------Time deposits – Corporate customers 29,296,552 27,410,106 31,948,515 38,778,448 – Individual customers 14,348,852 21,886,735 36,284,029 46,730,526 Sub-total 43,645,404 49,296,841 68,232,544 85,508,974 ------Pledged deposits 4,607,072 5,821,326 7,383,606 23,065,414 Fiscal deposits 80,771 6,105 5,438 9,156 Inward and outward remittances 256,433 108,167 132,248 149,134 ------Sub-total 164,810,111 202,270,510 218,786,769 245,815,175 Interests payable – – 1,296,966 1,298,489 Total 164,810,111 202,270,510 220,083,735 247,113,664

– I-77 – APPENDIX I ACCOUNTANTS’ REPORT

27 DEBT SECURITIES ISSUED

Note At December 31, At June 30, 2016 2017 2018 2019 Interbank deposits issued (a) 18,297,253 49,288,569 70,422,572 91,970,793 Financial bonds issued (b) – – 5,016,465 5,116,541 Tier-two capital bonds issued (c) – – 2,843,375 2,826,011 Total 18,297,253 49,288,569 78,282,412 99,913,345

Notes: (a) Interbank deposits issued (i) In 2016, the Bank issued a number of certificates of interbank deposits with total nominal amount of RMB21,480.00 million and duration between 6 to 12 months. The effective interest rates ranged from 3.05% to 3.38% per annum. (ii) In 2017, the Bank issued a number of certificates of interbank deposits with total nominal amount of RMB61,530.00 million and duration between 6 to 12 months. The effective interest rates ranged from 4.24% to 5.38% per annum. (iii) In 2018, the Bank issued a number of certificates of interbank deposits with total nominal amount of RMB72,010.00 million and duration between 9 to 12 months. The effective interest rates ranged from 3.79% to 5.23% per annum. (iv) In 2019, the Bank issued a number of certificates of interbank deposits with total nominal amount of RMB51,890.00 million and duration between 1 to 12 months. The effective interest rates ranged from 2.73% to 3.86% per annum. (v) As at December 31, 2016, 2017 and 2018 and June 30, 2019, the fair value of outstanding interbank deposits issued by the Bank in the inter-bank market amounted to RMB18,176.65 million, RMB49,118.30 million, RMB70,546.94 million and RMB91,842.87 million, respectively. (b) Financial bonds issued (i) In November 2018, the Bank issued three-year fixed-rate green financial bonds amounted to RMB3,000.00 million with annual coupon rate of 4.03%. (ii) In December 2018, the Bank issued three-year fixed-rate green financial bonds amounted to RMB2,000.00 million with annual coupon rate of 4.00%. (iii) As at December 31, 2018 and June 30, 2019, the fair value of outstanding financial bonds issued by the Bank in the inter-bank market amounted RMB5,001.10 million and RMB5,097.13 million, respectively. (c) Tier-two capital bonds issued (i) In June 2018, the Bank issued fixed-rate tier-two capital bonds issued amounted to RMB1,800.00 million with a maturity of 10 years and annual coupon rate of 5.00%. (ii) In December 2018, the Bank fixed-rate tier-two capital bonds issued amounted to RMB1,000.00 million with a maturity of 10 years and the annual coupon rate of 5.50%. (iii) As at December 31, 2018 and June 30, 2019, the fair value of outstanding tier-two capital bonds issued by the Bank in the inter-bank market amounted to RMB2,817.12 million and RMB2,813.38 million, respectively.

– I-78 – APPENDIX I ACCOUNTANTS’ REPORT

28 OTHER LIABILITIES

Note At December 31, At June 30, 2016 2017 2018 2019 Interests payable (a) 1,312,390 1,466,641 – – Accrued staff cost (b) 503,999 627,325 926,715 960,334 Continuing involvement liabilities 22(d) – 470,000 470,000 – Payment and collection clearance accounts 23,958 135,688 115,389 182,160 Dividend payable 17,023 85,816 48,304 48,277 Other taxes payable (91,372) 92,577 58,127 142,442 Provisions (c) – – 175,148 477,946 Lease liabilities – – – 528,121 Payables to other financial institution 1,846,300 – – – Other payables 311,726 254,470 218,654 164,280 Total 3,924,024 3,132,517 2,012,337 2,503,560

(a) Interests payable

At December 31, At June 30, 2016 2017 2018 2019 Interests payable arising from: Deposits from customers 1,205,135 1,454,081 – – Deposits from banks and other financial institutions 104,817 12,560 – – Financial assets sold under repurchase agreements 2,438––– Total 1,312,390 1,466,641 – –

(b) Accrued staff cost

At December 31, At June 30, 2016 2017 2018 2019 Salary, bonuses and allowances payable 369,834 459,621 714,887 713,558 Social insurance payable 33,000 43,835 47,155 79,346 Labor union fee, staff and workers’ education fee 2,375 1,179 1,633 9,190 Supplementary retirement benefits payable 98,790 122,690 163,040 158,240 Total 503,999 627,325 926,715 960,334

– I-79 – APPENDIX I ACCOUNTANTS’ REPORT

Supplementary retirement benefits

The supplementary retirement benefits of the Bank include early retirement plan and supplementary retirement plan. The early retirement benefits is provided to employees who voluntarily agreed to retire before the retirement age during the period from the date of early retirement to the statutory retirement date. The supplementary retirement plan is provided to the Bank’s eligible employees.

(i) The balances of supplementary retirement benefits of the Bank are as follows:

At December 31, At June 30, 2016 2017 2018 2019 Present value of early retirement plan 21,300 18,840 17,450 15,740 Present value of supplementary retirement benefits 77,490 103,850 145,590 142,500 Total 98,790 122,690 163,040 158,240

(ii) The movements of supplementary retirement benefits of the Bank are as follows:

At December 31, At June 30, 2016 2017 2018 2019 As at January 1, 82,340 98,790 122,690 163,040 Benefits paid during the year/period (41,212) (52,220) (50,997) (25,334) Defined benefit cost recognized in profit or loss 60,522 86,360 75,347 25,184 Defined benefit cost recognized in other comprehensive income (2,860) (10,240) 16,000 (4,650) As at December 31/ June 30 98,790 122,690 163,040 158,240

(iii) Principal actuarial assumptions of the Bank are as follows:

Early retirement plan

At December 31, At June 30, 2016 2017 2018 2019 Discount rate 2.75% 3.75% 3.00% 3.00% Retired age Male 60 60 60 60 Female 55 55 55 55 Annual increase rate of internal salary 10.00% 10.00% 10.00% 10.00%

– I-80 – APPENDIX I ACCOUNTANTS’ REPORT

Supplementary retirement plan

At December 31, At June 30, 2016 2017 2018 2019 Discount rate 3.50% 4.25% 3.50% 3.75% Retired age Male 60 60 60 60 Female 55 55 55 55

(c) Provisions

Note At December 31, At June 30, 2018 2019 Provision for credit commitments (i) 175,148 477,946

(i) Movements of provisions for credit commitments are as follows:

Year ended December 31, 2018 Lifetime Lifetime Expected expected expected credit losses credit losses credit losses over the next not credit- credit- 12 months impaired impaired Total As at January 1 108,948 51 4,503 113,502 Transferred – to lifetime expected credit losses credit-impaired (80) – 80 – Charge for the year 51,378 9,402 866 61,646 As at December 31 160,246 9,453 5,449 175,148

Six months ended June 30, 2019 Lifetime Lifetime Expected expected expected credit losses credit losses credit losses over the next not credit- credit- 12 months impaired impaired Total As at January 1 160,246 9,453 5,449 175,148 Transferred – to expected credit losses over the next 12 months 3,151 – (3,151) – – to lifetime expected credit losses not credit-impaired (1,518) 1,534 (16) – Charge/(release) for the period 239,087 65,949 (2,238) 302,798 As at June 30 400,966 76,936 44 477,946

29 SHARE CAPITAL

Authorized and issued share capital

At December 31, At June 30, 2016 2017 2018 2019 Number of shares authorized, issued and fully paid at par value of RMB1 each 9,661,345 11,263,045 12,388,045 12,388,047

– I-81 – APPENDIX I ACCOUNTANTS’ REPORT

The Bank has received cash injection amounting to RMB1,641.85 million and RMB3,343.81 million from the investors to subscribe 1,039,700,000 shares and 1,601,700,000 shares in 2016 and 2017, respectively. The Bank obtained approval from Guizhou Bureau of the former CBRC on Approving Changes in Registered Capital of Bank of Guizhou Co., Ltd. (《貴州銀監局關於貴州銀行股份有限公司變更註冊資本的批復》)(黔銀監復[2016]185號).

In accordance with the Approval from Guizhou Bureau of the former CBRC on the Capital Contribution Plan of Bank of Guizhou Co., Ltd. (《貴州銀監局關於貴州銀行股份有限公司第三次增資擴股方案的批復》)(黔銀監復 [2017]300號), the Bank has received cash injection from the investors amounting to RMB2,362.50 million to subscribe 1,125,000,000 shares in 2018.

In accordance with the Approval from Guizhou Bureau of the former CBRC on the Capital Contribution Plan of Bank of Guizhou Co., Ltd. (《貴州銀監局關於貴州銀行股份有限公司第三次增資擴股方案的批復》)(黔銀監復 [2017]300號), the Bank has received cash injection from the investors amounting to RMB3,173.60 to subscribe 1,511.23 shares in 2019.

30 RESERVES

(a) Capital reserve

At December 31, At June 30, 2016 2017 2018 2019 Share premium 3,285,309 5,027,419 6,264,920 6,264,921

(b) Surplus reserve

The surplus reserve at the end of each of the Relevant Periods represented statutory surplus reserve and discretionary surplus reserve.

Pursuant to the PRC Company Law and the Articles of Association of the Bank, the Bank is required to appropriate 10% of its net profit as on an annual basis determined under the PRC GAAP after making good prior year’s accumulated loss, to statutory surplus reserve until the balance reaches 50% of its registered capital.

The Bank appropriated an amount of RMB196.14 million, RMB225.50 million and RMB288.28 million to the statutory surplus reserve for the years ended December 31, 2016, 2017 and 2018, respectively.

The Bank may also appropriate discretionary surplus reserve in accordance with the resolution of the shareholders.

(c) General reserve

Pursuant to the “Measures on Impairment Allowances for Financial Enterprises (Cai Jin [2012] No. 20)” issued by the Ministry of Finance, the Bank is required to set aside a general reserve through profit appropriation which should not be lower than 1.5% of the ending balance of its gross risk-bearing assets on an annual basis. The balance of the general reserve amounted to RMB840.00 million, RMB2,190.00 million, RMB2,610.00 million and RMB3,360.00 million as at December 31, 2016, 2017 and 2018 and June 30, 2019, respectively.

(d) Fair value reserve

At December 31, At June 30, 2016 2017 2018 2019 As at January 1 92,535 17,820 (142,011) 78,163 Changes in fair value recognized in other comprehensive income (86,852) (220,150) 413,095 96,148 Transfer to profit or loss upon disposal (12,768) 10,154 (119,529) (1,710) Less: deferred tax 24,905 52,499 (73,392) (23,610) As at December 31/ June 30 17,820 (139,677) 78,163 148,991

(e) Impairment reserve

As at January 1, 2018 2,217 Changes in fair value recognized in other comprehensive income 3,214 As at December 31, 2018 5,431 Changes in fair value recognized in other comprehensive income 3,395 As at June 30, 2019 8,826

– I-82 – APPENDIX I ACCOUNTANTS’ REPORT

(f) (Deficit)/surplus on remeasurement of net defined benefit liability

(Deficit)/surplus on remeasurement of net defined benefit liability represents actuarial gains or losses, net of tax, from remeasuring the net defined benefit liability.

At December 31, At June 30, 2016 2017 2018 2019 As at January 1 (5,560) (2,700) 7,540 (8,460) Changes in fair value recognized in other comprehensive income 2,860 10,240 (16,000) 4,650 As at December 31/ June 30 (2,700) 7,540 (8,460) (3,810)

31 RETAINED EARNINGS

(a) Appropriation of profits

In accordance with the resolution at the Bank’s Annual General Meeting held on June 20, 2016, the shareholders approved the following profit appropriations for the year ended December 31, 2015:

– Appropriation of statutory surplus reserve base on 10% of the net profit;

– Appropriation of general reserve to 1.5% of the ending balance of the gross risk-bearing assets amounted to RMB420.00 million; and

– Declaration of cash dividend of RMB1.00 per 10 shares before tax and in an aggregation amount of approximately RMB862.17 million to all existing shareholders.

In accordance with the resolution at the Bank’s Annual General Meeting held on April 27, 2017, the shareholders approved the following profit appropriations for the year ended December 31, 2016:

– Appropriation of statutory surplus reserve base on 10% of the net profit;

– Appropriation of general reserve to 1.5% of the ending balance of the gross risk-bearing assets amounted to RMB1,350.00 million; and

– Declaration of cash dividend of RMB0.70 per 10 shares before tax and in an aggregation amount of approximately RMB611.07 million to all existing shareholders.

In accordance with the resolution at the Bank’s Annual General Meeting on May 17, 2018, the shareholders approved the following profit appropriations for the year ended December 31, 2017:

– Appropriation of statutory surplus reserve base on 10% of the net profit;

– Appropriation of general reserve to 1.5% of the ending balance of the gross risk-bearing assets amounted to approximately RMB420.00 million; and

– Declaration of cash dividend of RMB0.70 per 10 shares and in an aggregation amount of approximately RMB678.96 million to all existing shareholders.

In accordance with the resolution at the Bank’s Annual General Meeting on March 26, 2019, the Bank’s profit appropriations plan for the year ended December 31, 2018:

– Appropriation of statutory surplus reserve base on 10% of the net profit; and

– Appropriation of general reserve to 1.5% of the ending balance of the gross risk-bearing assets amounted to approximately RMB750.00 million.

– I-83 – APPENDIX I ACCOUNTANTS’ REPORT

32 Involvement with unconsolidated structured entities

(a) Structured entities sponsored by third party institutions in which the Bank holds an interest:

The Bank holds interests in certain structured entities sponsored by third party institutions through investments in the units issued by these structured entities. Such structured entities include the investment management products under trust schemes and wealth management products under trust schemes issued by financial institutions. The nature and purpose of these structured entities are to generate fees from managing assets on behalf of third party investors. These vehicles are financed through the issue of units to investors.

The following table sets out an analysis of the carrying amounts of interests held by the Bank in unconsolidated structured entities, as well as an analysis of the line items in the statements of financial position in which relevant assets are recognized at the end of each of the Relevant Periods:

At December 31, At June 30, 2016 2017 2018 2019 Carrying Maximum Carrying Maximum Carrying Maximum Carrying Maximum amount exposure amount exposure amount exposure amount exposure Available-for-sale financial assets 146,749 146,749 645,306 645,306–––– Debt securities classified as receivables 63,376,678 63,376,678 75,010,766 75,010,766–––– Financial investments at fair value through profit or loss ––––5,994,681 5,994,681 13,276,814 13,276,814 Financial investments at amortized cost ––––66,023,076 66,023,076 63,272,803 63,272,803 63,523,427 63,523,427 75,656,072 75,656,072 72,017,757 72,017,757 76,549,617 76,549,617

At the end of each of the Relevant Periods, the carrying amounts of the unconsolidated structured entities are equal to the maximum exposures.

(b) Structured entities sponsored by the Bank which the Bank does not consolidate but holds an interest in:

The types of unconsolidated structured entities sponsored by the Bank include non-principal guaranteed wealth management products. The nature and purpose of these structured entities are to generate fees from managing assets on behalf of investors. These structured entities are financed through the issue of units to investors. Interest held by the Bank includes investments in units issued by these structured entities and fees charged by providing management services. At the end of each of the Relevant Periods, the carrying amounts of the investments in the units issued by these structured entities and management fee receivables being recognized are not material in the statements of financial positions.

At the end of each of the Relevant Periods, the amount of assets held by the unconsolidated non-principal guaranteed wealth management products, which are sponsored by the Bank, are RMB4,265.33 million, RMB6,148.22 million, RMB6,759.85 million and RMB10,575.08 million, respectively.

(c) Unconsolidated structures entities sponsored by the Bank during the year/period which the Bank does not have an interest in as at December 31, 2016, 2017 and 2018 and June 30, 2019:

For the years ended December 31, 2016, 2017 and 2018 and the six months ended June 30, 2019, the aggregated amount of the non-principal guaranteed wealth management products sponsored and issued by the Bank after January 1, but matured before December 31, and June 30, amounted to RMB11,823.11 million and RMB6,462.86 million, RMB6,597.19 million and RMB921.88 million, respectively.

– I-84 – APPENDIX I ACCOUNTANTS’ REPORT

33 CAPITAL MANAGEMENT

The Bank’s capital management includes capital adequacy ratio management, capital financing management and economic capital management, of which the primary focus is on capital adequacy ratio management. The Bank calculates the capital adequacy ratio in accordance with guidelines issued by the former CBRC. The capital of the Bank is divided into core tier-one capital, other core tier-one capital and tier-two capital.

Capital adequacy ratio management is the key in capital management. The capital adequacy ratio reflects the soundness of the Bank’s operations and risk management capabilities. The main objective in capital adequacy ratio management is to set an optimal capital adequacy ratio that meets the regulatory requirements by benchmarking against the capital adequacy ratio level of leading peer banks with reference to its own business environment and conditions.

At the end of each of the Relevant Periods, the Bank considers its strategic development plans, business expansion plans and risk variables when conducting scenario analysis and stress testing and executing other measures to forecast, plan and manage its capital adequacy ratio.

The Bank calculates its capital adequacy ratios in accordance with “Regulation Governing Capital of Commercial Banks (Provisional)” and other relevant regulations promulgated by the former CBRC.

The former CBRC requires commercial banks to meet the requirements of capital adequacy ratios by the end of 2018 in accordance with “Regulation Governing Capital of Commercial Banks (Provisional)”. For non- systemically important banks, the minimum ratios for core tier-one capital adequacy ratio, tier-one capital adequacy ratio and capital adequacy ratio are 7.50%, 8.50% and 10.50%, respectively.

The on-balance sheet risk-weighted assets are measured using different risk weights, which are determined according to the credit, market and other risks associated with each asset and counterparty, taking into account any eligible collateral or guarantees. Similar treatment is adopted for off-balance sheet exposure, with adjustments made to reflect the more contingent nature of any potential losses. Market risk-weighted assets are calculated using the standardized approach. Operational risk-weighted assets are calculated using basic indicator approach.

At the end of each of the Relevant Periods, the capital adequacy ratios and related components of the Bank illustrated below are computed based on the Bank’s statutory financial statements prepared in accordance with PRC GAAP.

The Bank’s capital adequacy ratios at the end of each of the Relevant Periods calculated in accordance with “Regulation Governing Capital of Commercial Banks (Provisional)” and relevant requirements promulgated by the former CBRC are as follows:

At December 31, At June 30, 2016 2017 2018 2019 Total core tier-one capital – Share capital 9,661,345 11,263,045 12,388,045 12,388,047 – Qualifying portion of capital reserve 3,300,429 4,895,282 6,362,605 6,418,928 – Surplus reserve 620,927 846,422 1,134,697 1,134,697 – General reserve 840,000 2,190,000 2,610,000 3,360,000 – Retained earnings 1,834,278 1,902,663 3,398,183 4,025,832 Core tier-one capital 16,256,979 21,097,412 25,893,530 27,327,504 Core tier-one capital deductions (297,747) (277,224) (208,014) (194,102) Net core tier-one capital 15,959,232 20,820,188 25,685,516 27,133,402 Net tier-one capital 15,959,232 20,820,188 25,685,516 27,133,402 ------

– I-85 – APPENDIX I ACCOUNTANTS’ REPORT

At December 31, At June 30, 2016 2017 2018 2019 Tier-two capital – Instruments issued and share premium – – 2,843,375 2,826,011 – Surplus provision for loan impairment 1,474,782 1,310,331 2,504,891 2,969,574 Net tier-two capital 1,474,782 1,310,331 5,348,266 5,795,585 ------

Net capital base 17,434,014 22,130,519 31,033,782 32,928,987

Total risk weighted assets 155,519,377 190,502,877 241,843,544 263,276,269 Core tier-one capital adequacy ratio 10.26% 10.93% 10.62% 10.31% Tier-one capital adequacy ratio 10.26% 10.93% 10.62% 10.31% Capital adequacy ratio 11.21% 11.62% 12.83% 12.51%

34 NOTES TO THE CASH FLOW STATEMENTS

(a) Net increase/(decrease) in cash and cash equivalents

At December 31, At June 30, 2016 2017 2018 2019 Cash and cash equivalents as at December 31/June 30 28,934,688 36,334,638 35,118,336 45,228,397 Less: Cash and cash equivalents as at January 1 3,900,368 28,934,688 36,334,638 35,118,336 Net increase/(decrease) in cash and cash equivalents 25,034,320 7,399,950 (1,216,302) 10,110,061

(b) Cash and cash equivalents

At December 31, At June 30, 2016 2017 2018 2019 Cash on hand 557,489 632,548 660,721 557,007 Deposits with central bank other than restricted deposits 6,870,998 21,784,353 19,534,491 22,079,420 Deposits with banks and other financial institutions 3,765,897 969,412 228,926 2,599,970 Financial assets held under resale agreements 17,740,304 12,948,325 14,694,198 19,992,000 Total 28,934,688 36,334,638 35,118,336 45,228,397

– I-86 – APPENDIX I ACCOUNTANTS’ REPORT

(c) Reconciliation of liabilities arising from financing activities

The table below details changes in the Bank’s liabilities from financing activities, including both cash and non-cash changes. Liabilities arising from financing activities are liabilities for which cash flows were, or future cash flows will be, classified in the Bank’s cash flow statement as cash flows from financing activities.

Debt securities issued (Note 27) As at January 1, 2016 10,419,517 ------Changes from financing cash flows: Net proceeds from new debt securities issued 20,849,338 Repayment of debt securities issued (13,224,020) Interest paid on debt securities issued (245,980) Total changes from financing cash flows 7,379,338 ------Other change Interest expenses (Note 3) 498,398 Total other change 498,398 ------As at December 31, 2016 18,297,253

Debt securities issued (Note 27) As at January 1, 2017 18,297,253 ------Changes from financing cash flows: Net proceeds from new debt securities issued 58,817,147 Repayment of debt securities issued (28,683,206) Interest paid on debt securities issued (676,794) Total changes from financing cash flows 29,457,147 ------Other change Interest expenses (Note 3) 1,534,169 Total other change 1,534,169 ------As at December 31, 2017 49,288,569

Debt securities issued (Note 27) As at January 1, 2018 49,288,569 ------Changes from financing cash flows: Net proceeds from new debt securities issued 77,289,680 Repayment of debt securities issued (49,558,722) Interest paid on debt securities issued (1,521,278) Total changes from financing cash flows 26,209,680 ------Other change Interest expenses (Note 3) 2,784,163 Total other change 2,784,163 ------As at December 31, 2018 78,282,412

– I-87 – APPENDIX I ACCOUNTANTS’ REPORT

Debt securities issued (Note 27) As at January 1, 2019 78,282,412 ------Changes from financing cash flows: Net proceeds from new debt securities issued 50,156,140 Repayment of debt securities issued (29,136,585) Interest paid on debt securities issued (1,163,415) Total changes from financing cash flows 19,856,140 ------Other change Interest expenses (Note 3) 1,774,793 Total other change 1,774,793 ------As at June 30, 2019 99,913,345

35 RELATED PARTY RELATIONSHIPS AND TRANSACTIONS

(a) Related parties of the Bank

(i) Major shareholders

Major shareholders include shareholders of the Bank with direct or indirect 5% or above shareholding, or with the right to appoint a director in the Bank.

Shareholding in the Bank:

At December 31, At June 30, 2016 2017 2018 2019 Guizhou Provincial Financial Bureau (貴州省財政廳) 12.12% 15.72% 14.30% 15.49% China Kweichow Moutai Distillery (Group) Co., Ltd. (中國貴州茅台酒廠(集團) 有限責任公司) 7.76% 6.66% 14.13% 14.13% Gui An New District Development and Investment Co., Ltd. (貴安 新區開發投資有限公司) 7.76% 9.32% 8.48% 8.48% Zunyi City State-owned Assets Investment and Financing Management Co., Ltd. (遵義市國有資產投融 資經營管理有限責任公司) 2.69% 3.64% 3.31% 5.80%(i) Shenzhen Expressway Company Limited (深圳高 速公路股份有限公司) 4.41% 3.78% 3.44% 3.44% Zunyi Municipal Finance Bureau (遵義市財政局) 3.19% 2.74% 2.49% –(i) Guizhou Expressway Group Company Limited (貴州高 速公路集團有限公司) 3.11% 2.66% 2.42% 2.42%(ii)

– I-88 – APPENDIX I ACCOUNTANTS’ REPORT

(i) On March 26, 2019, Zunyi Municipal Finance Bureau transferred its entire share in the Bank to Zunyi City State-owned Assets Investment and Financing Management Co., Ltd., which was subsequently approved by Guizhou Bureau of the CBIRC on April 24, 2019. Upon the completion of the share transfer, the shareholding in the Bank of Zunyi City State-owned Assets Investment and Financing Management Co., Ltd. is 5.80%.

(ii) The director appointed by Guizhou Expressway Group Company Limited resigned on March 4, 2019.

The official names of these related parties are in Chinese. The English translation is for reference only.

(ii) Associates of the Bank

The detailed information of the Bank’s associates is set out in Note 19.

(iii) Other related parties

Other related parties can be individuals or enterprises, which include: members of the board of directors, the board of supervisors and senior management, and close family members of such individuals; entities (and their subsidiary) controlled or jointly controlled by members of the board of directors, the board of supervisors and senior management, and close family members of such individuals; and entities controlled or jointly controlled by the major shareholders of the Bank as set out in Note 35(a) or their controlling shareholders.

(b) Transactions with related parties other than key management personnel

(i) Transactions between the Bank and major shareholders:

Six months ended At December 31, June 30, 2016 2017 2018 2018 2019 (Unaudited) Transactions during the year/period Interest income 328,146 263,974 72,225 38,451 23,268 Interest expense 105,464 371,570 301,559 65,901 48,145

At December 31, At June 30, 2016 2017 2018 2019 Balances at end of the year/period Loans and advances to customers 1,570,000 2,369,200 1,099,212 501,130 Financial investments 3,134,250 1,890,500 99,226 99,051 Interests receivable 10,169 6,752 – – Deposits from customers 1,415,894 13,164,954 13,436,286 1,648,173 Interests payable 104 117,759 – –

(ii) Transactions between the Bank and other related parties:

Six months ended At December 31, June 30, 2016 2017 2018 2018 2019 (Unaudited) Transactions during the year/period Interest income 9,399 10,992 92,026 44,517 145,716 Interest expense 85,092 135,884 149,101 74,551 107,244

– I-89 – APPENDIX I ACCOUNTANTS’ REPORT

At December 31, At June 30, 2016 2017 2018 2019 Balances at end of the year/period Loans and advances to customers 150,250 680,000 2,654,195 2,469,045 Financial investments – 298,500 704,375 702,717 Interests receivable 20 1,524 – – Deposits from customers 2,061,142 2,359,049 1,073,731 1,409,979 Deposits from banks and other financial institutions 3,161,351 4,102,757 5,932,974 2,831,230 Interests payable 7,742 8,645 – – Bank acceptances 114,531 777,755 107,790 23,000

(iii) Other transaction

In 2017, the Bank invested a total of RMB8,990.00 million in a fund managed by a subsidiary of the Bank’s major shareholder, Gui An New District Development and Investment Co., Ltd.. As at December 31, 2017 and 2018 and June 30, 2019, the outstanding balance of this financial investment was RMB8,990.00 million each. This fund’s repayment will be arranged through Gui An New District Development and Investment Co., Ltd..

(c) Key management personnel

The key management personnel are those persons who have the authority and responsibility to plan, direct and control the activities of the Bank, directly or indirectly, including members of the board of directors, the supervisory board and executive officers.

(i) Transactions between the Bank and key management personnel

Six months ended At December 31, June 30, 2016 2017 2018 2018 2019 (Unaudited) Transactions during the year/period Interest income 51 72 156 67 123 Interest expense 41 45 637 159 49

At December 31, At June 30, 2016 2017 2018 2019 Balances at end of the year/period Loans and advances to customers 55 885 3,380 1,618 Interests receivable –1–– Deposits from customers 1,220 3,231 5,429 6,885 Interests payable – –* – –

–* Rounded to zero.

– I-90 – APPENDIX I ACCOUNTANTS’ REPORT

(ii) Key management personnel compensation

The aggregate compensation of key management personnel is listed as follows:

Six months ended At December 31, June 30, 2016 2017 2018 2018 2019 (Unaudited) Key management personnel compensation during the year/period 15,941 20,108 16,744 9,862 8,091

(d) Loans and advances to directors, supervisors and officers

At December 31, At June 30, 2016 2017 2018 2019 Aggregate amount of relevant loans outstanding at the end of the year/period 55 885 3,380 1,613 Maximum aggregate amount of relevant loans outstanding during the year/period 55 885 3,380 1,613

There were no amount due but unpaid, nor any impairment provision made against the principal or interest on these loans at the end of each of the Relevant Periods.

36 SEGMENT REPORTING

The Bank manages its business by business lines. Consistent with the way in which information is reported internally to the Bank’s most senior executive management for the purposes of resource allocation and performance assessment, the Bank defines reporting segments based on the following operating segments:

Corporate banking

This segment represents the provision of a range of financial products and services to corporations, government agencies and financial institutions. These products and services include corporate loans and advances, trade financing, deposit taking activities, agency services, wealth management services, consulting and advisory services, remittance and settlement services and guarantee services.

Retail banking

This segment represents the provision of a range of financial products and services to retail customers. These products and services include personal loans, deposit taking activities, personal wealth management services and remittance services.

Financial markets

This segment covers the Bank’s financial markets business operations. The financial markets business enters into inter-bank money market transactions, repurchases transactions, and investments. It also trades in debt securities. The financial markets business segment also covers management of the Bank’s overall liquidity position, including the issuance of debts.

Others

These represent assets, liabilities, income and expenses which cannot directly attributable or cannot be allocated to a segment on a reasonable basis.

– I-91 – APPENDIX I ACCOUNTANTS’ REPORT

Measurement of segment assets and liabilities and of segment income, expenses and results is based on the Bank’s accounting policies.

Internal charges and transfer prices are determined with reference to market rates and have been reflected in the performance of each segment. Interest income and expense earned from third parties are referred to as “external net interest income/expense”. Net interest income and expense arising from internal charges and transfer pricing adjustments are referred to as “internal net interest income/expense”.

Segment income, expenses, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Segment income, expenses, assets and liabilities are determined before intra-bank balances and intra-bank transactions are eliminated as part of the consolidation process. Segment capital expenditure is the total cost incurred during the Relevant Periods to acquire property and equipment, intangible assets and other long-term assets.

At December 31, 2016 Corporate Retail Financial banking banking markets Others Total Operating income External net interest income 7,459,838 112,734 357,667 – 7,930,239 Internal net interest (expense)/income (485,190) 667,695 (182,505) – – Net interest income 6,974,648 780,429 175,162 – 7,930,239 Net fee and commission income/(expense) 138,569 (12,678) 64,074 – 189,965 Net trading losses – – (91,335) – (91,335) Net gains arising from investment securities – – 12,768 – 12,768 Other operating income 20,684 – – 6,174 26,858 Operating income 7,133,901 767,751 160,669 6,174 8,068,495 Operating expenses (1,927,921) (419,562) (482,303) (28,425) (2,858,211) Impairment losses on assets (2,627,710) (189,890) – (1,830) (2,819,430) Share of profits of associates – – – 7,013 7,013 Profit/(loss) before tax 2,578,270 158,299 (321,634) (17,068) 2,397,867

Segment assets 148,605,658 13,400,034 65,563,471 212,714 227,781,877 Deferred tax assets – – – 1,167,389 1,167,389 Total assets 148,605,658 13,400,034 65,563,471 1,380,103 228,949,266

Segment liabilities 135,101,607 31,837,053 43,766,141 1,987,486 212,692,287 Total liabilities 135,101,607 31,837,053 43,766,141 1,987,486 212,692,287

Other segment information – Depreciation and amortization 185,920 47,811 56,358 – 290,089

– Capital expenditure 453,063 116,509 137,337 – 706,909

– I-92 – APPENDIX I ACCOUNTANTS’ REPORT

At December 31, 2017 Corporate Retail Financial banking banking markets Others Total Operating income External net interest income/(expense) 8,319,979 (30,746) 421,574 – 8,710,807 Internal net interest (expense)/income (953,642) 904,522 49,120 – – Net interest income 7,366,337 873,776 470,694 – 8,710,807 Net fee and commission (expense)/income (16,615) (16,701) 23,647 – (9,669) Net trading losses – – (110,770) – (110,770) Net losses arising from investment securities – – (10,154) – (10,154) Other operating income 34,149 – – 11,018 45,167 Operating income 7,383,871 857,075 373,417 11,018 8,625,381 Operating expenses (1,925,636) (454,479) (500,847) (38,572) (2,919,534) Impairment losses on assets (2,854,458) (204,057) – – (3,058,515) Share of losses of associates – – – (5,495) (5,495) Profit/(loss) before tax 2,603,777 198,539 (127,430) (33,049) 2,641,837

Segment assets 191,540,943 21,262,290 71,269,710 244,201 284,317,144 Deferred tax assets – – – 2,051,260 2,051,260 Total assets 191,540,943 21,262,290 71,269,710 2,295,461 286,368,404

Segment liabilities 161,800,395 43,733,956 59,469,092 267,549 265,270,992 Total liabilities 161,800,395 43,733,956 59,469,092 267,549 265,270,992

Other segment information – Depreciation and amortization 221,903 57,907 66,232 – 346,042

– Capital expenditure 316,664 82,636 94,515 – 493,815

– I-93 – APPENDIX I ACCOUNTANTS’ REPORT

At December 31, 2018 Corporate Retail Financial banking banking markets Others Total Operating income External net interest income/(expense) 9,232,767 (498,676) (407,794) – 8,326,297 Internal net interest (expense)/income (2,200,180) 1,363,323 836,857 – – Net interest income 7,032,587 864,647 429,063 – 8,326,297 Net fee and commission income/(expense) 17,734 (21,311) 24,877 – 21,300 Net trading gains – – 151,596 – 151,596 Net gains arising from investment securities – – 217,160 – 217,160 Other operating income 44,018 – – 9,243 53,261 Operating income 7,094,339 843,336 822,696 9,243 8,769,614 Operating expenses (1,962,766) (451,571) (577,585) (47,910) (3,039,832) Impairment losses on assets (2,341,337) (45,201) (5,584) (161) (2,392,283) Share of losses of associates – – – (34,460) (34,460) Profit/(loss) before tax 2,790,236 346,564 239,527 (73,288) 3,303,039

Segment assets 219,957,909 30,039,979 88,482,653 207,027 338,687,568 Deferred tax assets – – – 2,515,311 2,515,311 Total assets 219,957,909 30,039,979 88,482,653 2,722,338 341,202,879

Segment liabilities 163,026,066 63,859,858 88,577,661 280,403 315,743,988 Total liabilities 163,026,066 63,859,858 88,577,661 280,403 315,743,988

Other segment information – Depreciation and amortization 223,706 55,064 72,178 – 350,948

– Capital expenditure 1,175,574 289,363 379,298 – 1,844,235

– I-94 – APPENDIX I ACCOUNTANTS’ REPORT

Six months ended June 30, 2018 (unaudited) Corporate Retail Financial banking banking markets Others Total Operating income External net interest income/(expense) 4,302,156 (198,570) (135,945) – 3,967,641 Internal net interest (expense)/income (1,229,445) 726,144 503,301 – – Net interest income 3,072,711 527,574 367,356 – 3,967,641 Net fee and commission income/(expense) 7,384 (11,778) 11,738 – 7,344 Net trading gains – – 62,939 – 62,939 Net gains arising from investment securities – – 81,397 – 81,397 Other operating income 4,780 – – 4,119 8,899 Operating income 3,084,875 515,796 523,430 4,119 4,128,220 Operating expenses (868,523) (215,087) (243,752) (28,364) (1,355,726) Impairment losses on assets (1,082,156) 15,438 6,135 (223) (1,060,806) Share of losses of associates – – – (3,311) (3,311) Profit/(loss) before tax 1,134,196 316,147 285,813 (27,779) 1,708,377

Other segment information – Depreciation and amortization 103,900 27,114 31,010 – 162,024

– Capital expenditure 34,385 8,973 10,262 – 53,620

– I-95 – APPENDIX I ACCOUNTANTS’ REPORT

Six months ended June 30, 2019 Corporate Retail Financial banking banking markets Others Total Operating income External net interest income/(expense) 5,246,718 (200,462) (408,774) – 4,637,482 Internal net interest (expense)/income (1,719,576) 778,252 941,324 – – Net interest income 3,527,142 577,790 532,550 – 4,637,482 Net fee and commission income/(expense) 35,354 (12,494) 38,412 – 61,272 Net trading gains – – 125,808 – 125,808 Net gains arising from investment securities – – 208,184 – 208,184 Other operating income 10,185 – – 2,290 12,475 Operating income 3,572,681 565,296 904,954 2,290 5,045,221 Operating expenses (965,640) (290,408) (315,761) (6,996) (1,578,805) Impairment losses on assets (1,278,341) 4,332 (145,305) (20,338) (1,439,652) Share of losses of associates – – – (4,164) (4,164) Profit/(loss) before tax 1,328,700 279,220 443,888 (29,208) 2,022,600

Other segment information – Depreciation and amortization 155,369 50,535 53,593 – 259,497

– Capital expenditure 175,993 57,243 60,709 – 293,945

At June 30, 2019 Corporate Retail Financial banking banking markets Others Total Segment assets 233,086,958 38,748,957 114,215,761 789,754 386,841,430 Deferred tax assets – – – 2,780,936 2,780,936 Total assets 233,086,958 38,748,957 114,215,761 3,570,690 389,622,366

Segment liabilities 178,201,486 75,703,403 107,649,294 740,679 362,294,862 Total liabilities 178,201,486 75,703,403 107,649,294 740,679 362,294,862

37 RISK MANAGEMENT

The Bank has exposure to the following risks from its use of financial instruments: credit risk, market risk, liquidity risk and operational risk.

This note presents information about the Bank’s exposure to each of the above risks and their sources, and the Bank’s objectives, policies and procedures for measuring and managing these risks.

The Bank’s risk management policies are established to identify and analyze the risks faced by the Bank, to set appropriate risk limits and internal controls, and to monitor risks and adherence to limits. Risk management policies and relevant internal control systems are reviewed regularly in order to adapt to the changes in market conditions and the Bank’s operating activities. The internal audit department of the Bank undertakes both regular and ad-hoc reviews of risk management controls and procedures.

(a) Credit risk

Credit risk represents the potential loss that may arise from the failure of a debtor or counterparty to meet its contractual obligation or commitment to the Bank. It arises primarily from credit and bond investment portfolios and guarantees granted.

– I-96 – APPENDIX I ACCOUNTANTS’ REPORT

Credit business

The Board of Directors formulates the Bank’s risk management strategy and acceptable overall risk level, supervises the Bank’s risk control, conducts regular assessments of risk status and risk management strategies, and advises on improving the Bank’s internal controls related to risk management. The Bank’s functional departments engaging in credit risk management mainly include credit review department and risk management department, as well as corporate business department, small and micro business department and personal business department. Risk management department is responsible for the overall promotion of the comprehensive risk management system and risk monitoring and management, immediately alerting any negative events that may affect the borrower’s ability to repay, and taking countermeasures to prevent and control risks, and is also responsible for the establishment of relevant risk management policies. Credit review department is independent of customer relationship and product management department so as to ensure the independence of credit extension review. The front line departments such as corporate business department, small and micro business department and personal business department, perform continuous monitoring and post-loan management regarding credit extension programs. The front-line departments such as branches and business divisions, carry out credit business in accordance with the Bank’s risk management policies and procedures.

The Bank continuously improves the internal control mechanism and strengthens the management of the credit business. The Bank has established comprehensive assessment and inquiry mechanisms, assigning the credit management accountability to the relevant departments and individuals.

For corporate and institutional businesses, the Bank has established industry-specific limits for credit approval. With respect to pre-lending evaluations, the Bank assesses customer credit ratings and performs integrated analysis on the risk and return of the loan. In the credit approval phase, all credit applications are approved by designated credit officers. During the post-lending monitoring, the Bank continually monitors outstanding loans and other credit related businesses. Any adverse events that may significantly affect a borrower’s repayment ability are reported immediately, and actions are taken to mitigate the risks.

For personal credit operation business, credit assessment of applicants is used as the basis for loan approval. In the credit assessment, customer relationship managers are required to assess the income level, credit history, and repayment ability of the applicant. The customer relationship managers then forward the application and their recommendations to the loan-approval departments for further approval. The Bank monitors borrowers’ repayment ability, the status of collateral and any changes to their value during the post-lending phase. Once a loan becomes overdue, the Bank starts the recovery process according to standardized loan recovery procedures.

The following credit risk management applies to the period before January 1, 2018:

The Bank adopts a loan risk classification approach to manage its loan portfolio risk. Loans are generally classified as normal, special mention, substandard, doubtful and loss according to their levels of risk. Substandard, doubtful and loss loans are considered to be impaired loans and advances. They are classified as such when one or more events demonstrate that there is objective evidence of a loss event. The impairment loss is assessed collectively or individually as appropriate.

The core definitions of the five categories of loans and advances are set out below:

Normal: Borrowers can honor the terms of their loans. There is no reason to doubt their ability to repay principal and interest in full on a timely basis.

Special mention: Borrowers are currently able to service their loans and interest, although repayment may be adversely affected by specific factors.

Substandard: Borrowers’ ability to service their loans is in question and they cannot rely entirely on normal business revenues to repay principal and interest. Losses may ensue even when collateral or guarantees are invoked.

Doubtful: Borrowers cannot repay principal and interest in full and significant losses will need to be recognized even when collateral or guarantees are invoked.

Loss: Principal and interest of loans cannot be recovered or only a small portion of them can be recovered after taking all possible measures or resorting to all necessary legal procedures.

– I-97 – APPENDIX I ACCOUNTANTS’ REPORT

The following credit risk management applies to the period after January 1, 2018:

Stages of risks in financial instrument

After adopting IFRS 9 at January 1, 2018, the financial assets are categorized by the Bank into the following stages to manage its financial assets’ credit risk:

Stage 1

Financial assets have not experienced a significant increase in credit risk since origination and impairment recognized on the basis of 12 months expected credit losses.

Stage 2

Financial assets have experienced a significant increase in credit risk since origination and impairment is recognized on the basis of lifetime expected credit losses.

Stage 3

Financial assets that are in default and considered credit-impaired.

Significant increase in credit risk

When one or more quantitative, qualitative standards or upper limits are triggered, the Bank assumes that credit risk on financial assets has increased significantly.

If the borrower is listed in the watch list and one or more of the following criteria are met:

– The credit spread increases significantly;

– Significant changes with an adverse effect that have taken place in the borrower’s business, financial and economic status;

– Application of a grace period or debt-restructuring;

– Significant changes with an adverse effect in the borrower’s business conditions;

– Less value of the collateral (for the collateral loans and pledged loans only);

– Early indicators of problems of cash flow/liquidity, such as late payment of accounts payable/repayment of loans; or

– The borrower is more than 30 days past due.

The Bank uses watch lists to monitor credit risk of financial assets related to loans and treasury operations, and conducts regular assessments at the counterparty level. The standards used in determining whether credit risk increases significantly are regularly monitored and reviewed by the management for the appropriateness.

As at June 30, 2019, the Bank has not considered that any of its financial assets has lower credit risk and no longer compared the credit risk at the balance sheet date with that at the initial recognition to identify whether there was a significant increase in credit risk.

Definition of “default” and “credit-impaired assets”

At each reporting date, the Bank assesses whether a financial asset is credit-impaired. A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.

– I-98 – APPENDIX I ACCOUNTANTS’ REPORT

Evidence that a financial asset is credit-impaired includes the following observable events:

– significant financial difficulties of the debtor;

– a breach of contract, such as a default or delinquency in interest or principal payments;

– it becoming probable that the borrower will enter into bankruptcy or other financial reorganization;

– significant changes in the technological, market, economic or legal environment that have an adverse effect on the debtor;

– the disappearance of an active market for a security because of financial difficulties of the issuer; or

– overdue more than 90 days.

The above criteria apply to all financial assets of the Bank and they are consistent with the definition of “default” adopted by the internal management of credit risk.

Measurement of expected credit losses (“ECL”)

The Bank adopts ECL model to measures provision for loss of financial assets based on the stages categorized above.

The ECL is the result of the discounted product of probability of default (PD), exposure at default (EAD) and loss given default (LGD). The definitions of these terms are as follows:

– PD refers to the likelihood that a borrower will be unable to meet his repayment obligations over the next 12 months or the remaining lifetime of the loan;

– EAD is the amount that the Bank should be reimbursed upon default of an obligor over the next 12 months or the remaining lifetime of the loan;

– LGD refers to the expected degree of loss arising from the exposure at default which is predicted by the Bank. LGD varies according to different types of counterparties, methods and priority of recovering debts, and the availability of collateral or other credit support.

The Bank determines the ECL by estimating the PD, LGD and EAD of individual exposure or asset portfolios in the future months. The Bank multiplies these three parameters and makes adjustments according to the probability of their continuance (i.e. there is no prepayment or default at an earlier period). By adopting this approach, the Bank can calculate the ECL for the future months. The results of calculation for each month are then discounted to the balance sheet date and added up. The discount rate used in the calculation of ECL is the initial effective interest rate or its approximate value.

The lifetime PD is deduced from using the maturity model or 12-month probability of default. The maturity model describes the development rule of the defaults of the asset portfolio over its lifetime. The model is developed based on historical observational data and applicable to all assets in the same portfolio with the same credit rating. The above method is supported by empirical analysis.

The 12-month EAD and lifetime EAD are determined based on expected repayment arrangements, which are different according to different types of products.

• In respect of the financial assets with installment repayments and bullet repayment, the Bank determines 12-month or lifetime EAD according to the repayment schedule agreed in the contract, and makes adjustment based on prediction of overlimit repayment and prepayments/refinancing made by the borrower.

• As to the off-balance sheet credit commitments, the parameter of EAD is calculated using the current exposure method, and obtained from multiplying the nominal amount of the off-balance sheet items on the balance sheet date by the credit conversion factor (CCF).

– I-99 – APPENDIX I ACCOUNTANTS’ REPORT

• The Bank determines the 12-month LGD and lifetime LGD based on the factors that affects post-default recovery. LGD for different product types are different.

• As to financial assets classified as guarantees, the Bank determines LGD according to the types of collateral and their expected value, the discount rate at the compulsory sale, the recovery time and the estimated recovery cost.

• As to credit-based financial assets, the Bank usually determines LGD in the product level due to the limited differences in recoverable amounts from different borrowers.

Forward-looking economic information should be considered when determining the 12-month and lifetime probability of default, exposure at default and loss given default.

The Bank quarterly monitors and reviews assumptions related to the calculation of expected credit losses, including the changes in PD and the value of collateral under the different time limits.

As at June 30, 2019, there has been no significant changes in the estimate techniques and key assumptions of the Bank.

Forward-looking information included in the expected credit loss model is as follows:

• Both the assessment of significant increase in credit risk and the measurement of expected credit losses involve forward-looking information. Based on the analysis on historical data, the Bank identified critical economic indicators that affect the credit risk and expected credit losses of all asset portfolios, including gross domestic product (GDP), consumer price index (CPI), and producer price index (PPI), etc. The Bank identified the relations between these economic indicators and the probability of default historically by conducting regression analysis, and identified the expected probability of default by predicting the future economic indicators.

• When judging whether there is significant increase in credit risk, the Bank multiplies the lifetime PD at the benchmark and under other scenarios by the weight of the scenarios, and considers the qualitative and maximum indicators. The Bank measures relevant provision for loss by the weighted 12-month ECL (for stage 1) or the weighted lifetime ECL (for stage 2 and stage 3). The above weighted credit losses are calculated from multiplying the ECL under the different scenarios by the weight of the corresponding scenarios.

• Similar to other economic forecasts, there is highly inherent uncertainty in the assessment of estimated economic indicators and the probability of occurrence, and therefore, the actual results may be materially different from the forecasts. The Bank believes that these forecasts reflect the Bank’s best estimate of possible outcomes.

• Other forward-looking factors not incorporated in above scenarios, such as the impact of regulatory and legal changes, have also been taken into account. However, they were not considered to have significant impact, and the expected credit losses were not adjusted accordingly. The Bank reviews and monitors the appropriateness of the above assumptions on a quarterly basis.

(i) Maximum credit risk exposure

The maximum exposure to credit risk is represented by the net carrying amount of each type of financial assets as at the end of each of the Relevant Periods.

– I-100 – APPENDIX I ACCOUNTANTS’ REPORT

(ii) Financial assets analyzed by credit quality are summarized as follows:

At December 31, 2016 Deposits with banks Financial and other assets held Loans and financial under resale Financial advances institutions agreement investments (*) Impaired Individually assessed gross amount 1,149,331 – – 1,802,720 Provision for impairment losses (562,413) – – (520,795) Sub-total 586,918 – – 1,281,925 ------Collectively assessed gross amount 157,454 – – – Provision for impairment losses (105,583) – – – Sub-total 51,871 – – – ------Overdue but not impaired Less than three months (inclusive) 704,537 – – – Between three months and six months (inclusive) 235,475 – – – Between six months and one year (inclusive) 373,143 – – – More than one year 805,380 – – – Gross amount 2,118,535 – – – Provision for impairment losses (519,716) – – – Sub-total 1,598,819 – – – ------Neither overdue nor impaired Gross amount 64,906,094 5,886,882 17,740,304 101,298,420 Provision for impairment losses (1,593,856) – – (312,033) Sub-total 63,312,238 5,886,882 17,740,304 100,986,387 ------Total 65,549,846 5,886,882 17,740,304 102,268,312

– I-101 – APPENDIX I ACCOUNTANTS’ REPORT

At December 31, 2017 Deposits with banks Financial and other assets held Loans and financial under resale Financial advances institutions agreement investments (*) Impaired Individually assessed gross amount 1,086,356 – – 1,788,076 Provision for impairment losses (550,822) – – (999,246) Sub-total 535,534 – – 788,830 ------Collectively assessed gross amount 326,164 – – – Provision for impairment losses (238,888) – – – Sub-total 87,276 – – – ------Overdue but not impaired Less than three months (inclusive) 311,903 – – – Between three months and six months (inclusive) 33,625 – – – Gross amount 345,528 – – – Provision for impairment losses (61,470) – – – Sub-total 284,058 – – – ------Neither overdue nor impaired Gross amount 86,374,289 1,121,686 12,948,325 129,635,342 Provision for impairment losses (1,871,671) – – (378,724) Sub-total 84,502,618 1,121,686 12,948,325 129,256,618 ------Total 85,409,486 1,121,686 12,948,325 130,045,448

– I-102 – APPENDIX I ACCOUNTANTS’ REPORT

At December 31, 2018 Deposits with banks Financial and other assets held Loans and financial under resale Financial advances institutions agreements investments (**) Balance of financial assets that are assessed for expected credit losses over the next 12 months – Overdue but not credit- impaired 3,540 – – – – Neither overdue nor credit-impaired 137,132,554 833,831 14,694,198 135,411,740 Sub-total 137,136,094 833,831 14,694,198 135,411,740 ------Balance of financial assets that are not credit- impaired and assessed for lifetime expected credit losses – Overdue but not credit- impaired 39,368 – – – – Neither overdue nor credit-impaired 1,060,441 – – – Sub-total 1,099,809 – – – ------Balance of credit-impaired financial assets that are assessed for lifetime expected credit losses – Overdue and credit- impaired 1,007,712 – – 643,277 – Credit-impaired but not overdue 896,914 – – 1,067,800 Sub-total 1,904,626 – – 1,711,077 ------Accrued interests 333,357 1,566 14,177 1,306,631 Less: Provision for impairment losses (4,642,033) (571) (8,047) (1,784,428) ------Net value 135,831,853 834,826 14,700,328 136,645,020

– I-103 – APPENDIX I ACCOUNTANTS’ REPORT

At June 30, 2019 Deposits with banks Financial and other assets held Loans and financial under resale Financial advances institutions agreements investments (**) Balance of financial assets that are assessed for expected credit losses over the next 12 months – Overdue but not credit- impaired 19,289 – – – – Neither overdue nor credit-impaired 161,047,772 2,902,211 19,992,000 149,193,649 Sub-total 161,067,061 2,902,211 19,992,000 149,193,649 ------Balance of financial assets that are not credit- impaired and assessed for lifetime expected credit losses – Overdue but not credit- impaired 324,561 – – 100,000 – Neither overdue nor credit-impaired 1,158,973 – – 7,708 Sub-total 1,483,534 – – 107,708 ------Balance of credit-impaired financial assets that are assessed for lifetime expected credit losses – Overdue and credit- impaired 680,535 – – 867,800 – Credit-impaired but not overdue 1,108,596 1,450,000 – 16,765 Sub-total 1,789,131 1,450,000 – 884,565 ------Accrued interests 336,821 28,625 4,394 1,287,573 Less: Provision for impairment losses (5,783,853) (148,514) (7,578) (1,319,162) ------Net value 158,892,694 4,232,322 19,988,816 150,154,333

* Financial investments include financial investments at fair value through profit or loss, available-for-sale financial assets, held-to-maturity investments and debt securities classified as receivables.

** Financial investments include financial investments at fair value through profit or loss, financial investments at fair value through other comprehensive income and financial investments at amortized cost.

– I-104 – APPENDIX I ACCOUNTANTS’ REPORT

Financial assets (exclusive interests accrued) analyzed by credit quality are summarized as follows:

At December 31, 2018 Balance Provision for impairment losses Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total Financial assets measured at amortized cost Cash and deposits with the central bank 45,129,223 – – 45,129,223 –––– Deposits with banks and other financial institutions 833,831 – – 833,831 (571) – – (571) Financial assets held under resale agreements 14,694,198 – – 14,694,198 (8,047) – – (8,047) Loans and advances to customers 135,744,710 1,099,809 1,904,626 138,749,145 (3,371,865) (318,046) (952,122) (4,642,033) Financial investments 112,885,557 – 1,711,077 114,596,634 (799,882) – (984,546) (1,784,428) Total 309,287,519 1,099,809 3,615,703 314,003,031 (4,180,365) (318,046) (1,936,668) (6,435,079)

Financial assets at fair value through other comprehensive income Loans and advances to customers 1,391,384 – – 1,391,384 (405) – – (405) Financial investments 13,855,525 – – 13,855,525 (5,026) – – (5,026) Total 15,246,909 – – 15,246,909 (5,431) – – (5,431)

Credit commitments 10,991,009 90,716 46,828 11,128,553 (160,246) (9,453) (5,449) (175,148)

At June 30, 2019 Balance Provision for impairment losses Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total Financial assets measured at amortized cost Cash and deposits with the central bank 47,449,948 – – 47,449,948 –––– Deposits with banks and other financial institutions 2,902,211 – 1,450,000 4,352,211 (683) – (147,831) (148,514) Loans and advances to customers 157,881,928 1,483,534 1,789,131 161,154,593 (4,215,976) (476,300) (1,091,577) (5,783,853) Financial investments 110,591,734 107,708 884,565 111,584,007 (762,231) (13,530) (543,401) (1,319,162) Financial assets held under resale agreements 19,992,000 – – 19,992,000 (7,578) – – (7,578) Total 338,817,821 1,591,242 4,123,696 344,532,759 (4,986,468) (489,830) (1,782,809) (7,259,107)

Financial assets at fair value through other comprehensive income Loans and advances to customers 3,185,133 – – 3,185,133 (956) – – (956) Financial investments 23,223,308 – – 23,223,308 (7,870) – – (7,870) Total 26,408,441 – – 26,408,441 (8,826) – – (8,826)

Credit commitments 27,572,376 530,316 124 28,102,816 (400,966) (76,936) (44) (477,946)

– I-105 – APPENDIX I ACCOUNTANTS’ REPORT

The overall ECL rate for financial assets and credit commitments analyzed by credit quality are summarized as follows:

At December 31, 2018 Stage 1 Stage 2 Stage 3 Total Financial assets measured at amortized cost 1.35% 28.92% 53.56% 2.05% Financial assets at fair value through other comprehensive income 0.04% – – 0.04% Credit commitments 1.46% 10.42% 11.64% 1.57%

At June 30, 2019 Stage 1 Stage 2 Stage 3 Total Financial assets measured at amortized cost 1.47% 30.78% 43.23% 2.11% Financial assets at fair value through other comprehensive income 0.03% – – 0.03% Credit commitments 1.45% 14.51% 35.48% 1.70%

The fair value of collaterals held against loans and advances overdue but not impaired at December 31, 2016 and 2017 amounted to RMB1,391.26 million and RMB210.30 million, respectively. The fair value of collaterals held against loans and advances impaired at December 31, 2016 and 2017 amounted to RMB478.35 million and RMB580.06 million, respectively. The collaterals mainly include land, buildings, machinery and equipment, etc. The fair value of collaterals were estimated by the Bank based on the latest external valuations available, adjusted in light of disposal experience and current market conditions.

As at December 31, 2018 and June 30, 2019, the fair value of collaterals held against loans and advances that are not credit-impaired and assessed for lifetime expected credit losses amounted to RMB627.50 million and RMB482.48 million, respectively, and the fair value of collaterals held against loans and advances that are assessed for lifetime expected credit losses amounted to RMB923.63 million and RMB665.46 million, respectively. The collaterals mainly include land, buildings, machinery and equipment, etc. The fair value of collaterals were estimated by the Bank based on the latest external valuations available, adjusted in light of disposal experience and current market conditions.

(iii) Rescheduled loans and advances to customers

As at December 31, 2016, 2017 and 2018 and June 30, 2019, the Bank has rescheduled loans and advances to customers amounted to RMB636.82 million, RMB335.51 million and RMB1,056.29 million and RMB219.82 million, respectively.

– I-106 – APPENDIX I ACCOUNTANTS’ REPORT

(iv) Credit rating

The Bank adopts a credit rating approach in managing the credit risk of the debt securities portfolio. Debt securities are rated with reference to major rating agencies where the issuers of the securities are located. The carrying amounts of debt securities investments analyzed by the rating agency designations as at the end of the Relevant Periods are as follows:

At December 31, At June 30, 2016 2017 2018 2019 Neither overdue nor impaired Ratings – AAA 19,446,126 31,581,367 35,497,291 32,682,510 – AA- to AA+ 621,142 1,903,527 5,018,970 7,682,672 Sub-total 20,067,268 33,484,894 40,516,261 40,365,182 Unrated 18,639,865 20,866,732 22,787,123 31,929,700 Total 38,707,133 54,351,626 63,303,384 72,294,882

(b) Market risk

Market risk is the risk of loss, in respect of the Bank’s activities, arising from adverse movements in market rates including interest rates, foreign exchange rates, commodity prices, stock prices and other prices.

The Board of Directors is ultimately responsible for monitoring the Bank’s market risk management to ensure that the Bank effectively identifies, measures, monitors and controls various market risks faced by each business. The risk management committee is responsible for monitoring market risk management within the authorized scope of the Board of Directors, reviewing the strategies, policies and procedures regarding market risk management, and recommendations for acceptable level of market risk proposed by senior management. The market risk faced by the Bank’s business operations and development are mostly concentrated in the treasury operations. The financial markets department is responsible for fund investment and proprietary trading. The planning and financial department is responsible for the daily monitoring and management of interest rate risk under the bank accounts; and the trade finance department is responsible for the daily monitoring and management of exchange rate risk. The risk management department is responsible for drafting basic policies and procedures for market risk management, as well as identifying, measuring and monitoring the Bank’s market risk.

The major source of market risk of the Bank is the asset and liability businesses involved in market operation and the risks in interest rate and exchange rate of products.

Interest rate risk

The Bank is primarily exposed to interest rate risk arising from repricing risk in its commercial banking business and the risk of financial markets business position.

Repricing risk

Repricing risk, which is also known as “maturity mismatch risk”, is the most common form of interest rate risk. It is caused by the differences in timing between the maturities (related to fixed interest instruments) or repricing (related to floating interest instruments) of bank assets, liabilities and off-balance sheet items. The mismatch of repricing timing causes the Bank’s income or its inherent economic value to vary with the movement in interest rates.

The planning and financial department is responsible for the measurement, monitoring and management of interest rate risk. In respect of measuring and managing risks, the Bank regularly assesses the impact of interest rate sensitivity repricing gaps and interest rate changes on the Bank’s net interest income and economic value. The main purpose of interest rate risk management is to reduce the potential negative impact of interest rate changes on net interest income and economic value.

– I-107 – APPENDIX I ACCOUNTANTS’ REPORT

Trading interest rate risk

Trading interest rate risk mainly arises from the financial markets’ investment portfolios. Interest rate risk is monitored using the effective duration analysis method. The Bank employs other supplementary methods to measure its interest rate sensitivity, which is expressed as changes in the investment portfolios’ fair value given a 100 basis points (1%) movement in the interest rates.

(i) The following tables indicate the assets and liabilities as at the end of each of the Relevant Periods by the expected next repricing dates or by maturity dates, depending on which is earlier:

At December 31, 2016 Between Between Non-interest Less than three months one year and More than Total bearing three months and one year five years five years Assets Cash and deposits with the central bank 32,241,708 557,489 31,684,219––– Deposits with banks and other financial institutions 5,886,882 – 3,765,897 2,120,985 – – Financial assets held under resale agreements 17,740,304 – 17,740,304––– Loans and advances to customers (Note (i)) 65,549,846 – 6,819,119 17,991,706 22,095,910 18,643,111 Financial investments (Note (ii)) 102,268,312 – 3,182,857 7,644,541 50,756,515 40,684,399 Others 5,262,214 5,262,214–––– Total assets 228,949,266 5,819,703 63,192,396 27,757,232 72,852,425 59,327,510 ------Liabilities Borrowing from the central bank 1,316,566 – 362,161 954,405 – – Deposits from banks and other financial Institutions 15,679,630 – 7,029,630 8,150,000 500,000 – Financial assets sold under repurchase agreements 7,957,200 – 7,957,200––– Deposits from customers 164,810,111 285,572 136,897,759 14,171,282 13,412,300 43,198 Debt securities issued 18,297,253 – – 18,297,253 – – Others 4,631,527 4,631,527–––– Total liabilities 212,692,287 4,917,099 152,246,750 41,572,940 13,912,300 43,198 ------Asset-liability gap 16,256,979 902,604 (89,054,354) (13,815,708) 58,940,125 59,284,312

– I-108 – APPENDIX I ACCOUNTANTS’ REPORT

At December 31, 2017 Between Between Non-interest Less than three months one year and More than Total bearing three months and one year five years five years Assets Cash and deposits with the central bank 49,676,474 632,548 49,043,926––– Deposits with banks and other financial institutions 1,121,686 – 969,412 152,274 – – Financial assets held under resale agreements 12,948,325 – 12,948,325––– Loans and advances to customers (Note (i)) 85,409,486 – 5,520,562 16,004,420 22,841,466 41,043,038 Financial investments (Note (ii)) 130,045,448 – 1,925,347 11,414,146 53,560,556 63,145,399 Others 7,166,985 7,166,985–––– Total assets 286,368,404 7,799,533 70,407,572 27,570,840 76,402,022 104,188,437 ------Liabilities Borrowing from the central bank 1,572,039 – 131,503 1,440,536 – – Deposits from banks and other financial Institutions 8,279,574 – 264,574 8,015,000 – – Deposits from customers 202,270,510 42,747 162,415,119 21,279,741 18,417,121 115,782 Debt securities issued 49,288,569 – 10,723,216 38,565,353 – – Others 3,860,300 3,860,300–––– Total liabilities 265,270,992 3,903,047 173,534,412 69,300,630 18,417,121 115,782 ------Asset-liability gap 21,097,412 3,896,486 (103,126,840) (41,729,790) 57,984,901 104,072,655

– I-109 – APPENDIX I ACCOUNTANTS’ REPORT

At December 31, 2018 Between Between Non-interest Less than three months one year and More than Total bearing three months and one year five years five years Assets Cash and deposits with the central bank 45,802,967 673,744 45,129,223––– Deposits with banks and other financial institutions 834,826 1,566 228,825 604,435 – – Financial assets held under resale agreements 14,700,328 14,177 14,686,151––– Loans and advances to customers (Note (i)) 135,831,853 333,357 6,934,466 19,507,050 27,262,671 81,794,309 Financial investments (Note (iii)) 136,645,020 1,306,631 2,763,279 12,681,808 62,579,256 57,314,046 Others 7,387,885 7,387,885–––– Total assets 341,202,879 9,717,360 69,741,944 32,793,293 89,841,927 139,108,355 ------Liabilities Borrowing from the central bank 2,820,175 1,658 51,773 2,766,744 – – Deposits from banks and other financial Institutions 9,983,768 43,665 5,515,103 4,425,000 – – Financial assets sold under repurchase agreements 2,175,276 76 2,175,200––– Deposits from customers 220,083,735 57,688 162,750,921 18,284,135 38,310,940 680,051 Debt securities issued 78,282,412 71,830 17,670,421 52,752,150 4,996,636 2,791,375 Others 2,398,622 2,398,622–––– Total liabilities 315,743,988 2,573,539 188,163,418 78,228,029 43,307,576 3,471,426 ------Asset-liability gap 25,458,891 7,143,821 (118,421,474) (45,434,736) 46,534,351 135,636,929

– I-110 – APPENDIX I ACCOUNTANTS’ REPORT

At June 30, 2019 Between Between Non-interest Less than three months one year and More than Total bearing three months and one year five years five years Assets Cash and deposits with the central bank 48,020,919 570,971 47,449,948––– Deposits with banks and other financial institutions 4,232,322 28,625 2,599,970 1,603,727 – – Financial assets held under resale agreements 19,988,816 4,394 19,984,422––– Loans and advances to customers (Note (i)) 158,892,694 336,821 6,531,142 23,125,368 33,871,933 95,027,430 Financial investments (Note (ii)) 150,154,333 1,287,573 3,591,873 23,347,986 68,713,648 53,213,253 Others 8,333,282 8,333,282–––– Total assets 389,622,366 10,561,666 80,157,355 48,077,081 102,585,581 148,240,683 ------Liabilities Borrowing from the central bank 2,758,554 1,910 181,134 2,575,510 – – Deposits from banks and other financial Institutions 7,290,217 72,419 1,497,798 5,720,000 – – Placement from banks and other financial institutions 100,139 139 – – 100,000 – Financial assets sold under repurchase agreements 2,313,840 2,340 2,311,500––– Deposits from customers 247,113,664 116,043 151,587,563 38,271,657 57,138,401 – Debt securities issued 99,913,345 153,358 24,220,240 67,750,553 4,997,087 2,792,107 Others 2,805,103 2,805,103–––– Total liabilities 362,294,862 3,151,312 179,798,235 114,317,720 62,235,488 2,792,107 ------Asset-liability gap 27,327,504 7,410,354 (99,640,880) (66,240,639) 40,350,093 145,448,576

Notes: (i) As at December 31, 2016, 2017 and 2018 and June 30, 2019, for loans and advances to customers, the category “Less than three months” includes overdue amounts (net of provision for impairment losses) of RMB2,118.23 million, RMB879.27 million, RMB379.34 million and RMB422.48 million, respectively. (ii) Financial investments include financial investments at fair value through profit or loss, available-for-sale financial assets, held-to-maturity investments and debt securities classified as receivables. As at December 31, 2016 and 2017, for financial investments, the category “Less than three months” includes overdue amounts (net of provision for impairment losses) of RMB24.50 million and RMB134.94 million, respectively. (iii) Financial investments include financial investments at fair value through profit or loss, financial investments at fair value through other comprehensive income and financial investments at amortized cost. As at December 31, 2018 and June 30, 2019, for financial investments, the category “Less than three months” includes overdue amounts (net of provision for impairment losses) of RMB257.31 million and RMB465.94 million, respectively.

– I-111 – APPENDIX I ACCOUNTANTS’ REPORT

(ii) Interest rate sensitivity analysis

The Bank uses sensitivity analysis to measure the impact of changes in interest rate on the Bank’s net profit or loss and equity.

At December 31, At June 30, 2016 2017 2018 2019 Change in net profit (Decrease)/ (Decrease)/ (Decrease)/ (Decrease)/ Increase Increase Increase Increase Up 100 bps parallel shift in (624,631) (819,659) (891,843) (919,368) yield curves Down 100 bps parallel shift in 624,631 819,659 891,843 919,368 yield curves

Change in equity (Decrease)/ (Decrease)/ (Decrease)/ (Decrease)/ Increase Increase Increase Increase Up 100 bps parallel shift in (623,276) (802,067) (889,639) (904,926) yield curves Down 100 bps parallel shift in 623,276 802,067 889,639 904,926 yield curves

The sensitivity analysis above is based on a static interest rate risk profile of the Bank’s assets and liabilities. This analysis measures only the impact of changes in interest rates within one year, showing how annualized net profit or loss and equity would have been affected by repricing of the Bank’s assets and liabilities within the one-year period. The sensitivity analysis is based on the following assumptions:

– Interest rate movements at the end of each of the Relevant Periods apply to non-derivative financial instruments of the Bank;

– At the end of each of the Relevant Periods, an interest rate movement of 100 basis points is based on the assumption of interest rates movement over the next 12 months;

– There is a parallel shift in the yield curve with the changes in interest rates;

– There are no other changes to the assets and liabilities portfolio;

– Other variables (including exchange rates) remain unchanged; and

– The analysis does not take into account the effect of risk management measures taken by the management.

Due to the adoption of the aforementioned assumptions, the actual changes in the Bank’s net profit or loss and equity caused by an increase or decrease in interest rates might vary from the estimated results of this sensitivity analysis.

Foreign currency risk

The Bank’s foreign currency positions are not subject to risk of significant exchange rate fluctuation due to its small-scale foreign currency business.

(c) Liquidity risk

Liquidity risk refers to the risk of the failure to obtain sufficient funds in a timely manner at reasonable prices for meeting assets growth or repaying mature debts, although the commercial banks are capable of paying off debts. The Bank monitors its future cash flows based on liquidity risk management policies and ensures that appropriate levels of highly liquid assets are maintained.

The liquidity risk management committee is responsible for the overall liquidity of the Bank. The committee is responsible for formulating liquidity policies in accordance with regulatory requirements and prudential principles. Policy objectives include:

– Maintain a sound and adequate liquidity level and establish a scientific and sound liquidity risk management system to ensure timely payment obligations and the satisfaction of liquidity requirements arising from assets, liabilities and off-balance sheet businesses in a normal operating environment or under a status of pressure, thereby balancing the effectiveness and safety of funds; and

– I-112 – APPENDIX I ACCOUNTANTS’ REPORT

– Make timely and reasonable adjustments to the scale and structure of assets and liabilities based on market changes and business development, and under the premise of ensuring liquidity, moderately pursue profit maximization and cost minimization, and realize the centralization of safety, liquidity and efficiency for the Bank’s funds.

The planning and financial department takes the lead in implementing the liquidity risk management policy, and is responsible for formulating and timely revising the liquidity risk management strategy, and the identification, measurement, monitoring and mitigation management of the Bank’s liquidity risk. In the meantime, the planning and financial department and the financial markets department are responsible for daily position management and forecasting, and maintaining an appropriate level of highly liquid portfolio based on liquidity management strategies. The financial markets department operates in accordance with the instructions from the planning and financial department. In case of significant payment crisis or structural changes, the financial markets department should report to the liquidity risk management committee and make recommendations in a timely manner.

Most of the sources of funds for the assets held by the Bank are deposits from customers. In recent years, the Bank’s deposits from customers continue to grow, with diversified categories and types of maturities, it has become a stable source of funds.

The Bank mainly adopts liquidity gap analysis to measure liquidity risk and uses different scenario analysis and stress tests to assess the impact of liquidity risk.

The following tables provide an analysis of assets and liabilities of the Bank into relevant maturity groupings based on the remaining periods to repayment at the end of each of the Relevant Periods:

At December 31, 2016 Between Between Between one month three one year Repayable Within and three months and and five More than Indefinite on demand one month months one year years five years Total Note (i) Assets Cash and deposits with the central bank 24,813,221 7,428,487–––––32,241,708 Deposit with banks and other financial institutions – 356,897 2,110,000 1,299,000 2,120,985 – – 5,886,882 Financial assets held under resale agreements – – 17,740,304––––17,740,304 Loans and advances to customers 1,675,103 533,864 4,162,876 3,929,569 16,102,927 20,626,960 18,518,547 65,549,846 Financial investments 1,319,675 – 394,020 1,365,514 7,644,541 50,756,515 40,788,047 102,268,312 Others 4,023,909 1,940 918,770 306,067 11,528 – – 5,262,214 Total assets 31,831,908 8,321,188 25,325,970 6,900,150 25,879,981 71,383,475 59,306,594 228,949,266 ------Liabilities Borrowing from the central bank – – 300,832 61,329 954,405 – – 1,316,566 Deposits from banks and other financial Institutions – 1,479,630 450,000 5,100,000 8,150,000 500,000 – 15,679,630 Financial assets sold under repurchase agreements – – 7,957,200––––7,957,200 Deposits from customers – 116,557,635 3,785,908 6,229,645 14,171,282 24,065,641 – 164,810,111 Debt securities issued – – 488,580 – 17,808,673 – – 18,297,253 Others 4,008,398 9,891 33,937 81,262 165,378 215,096 117,565 4,631,527 Total liabilities 4,008,398 118,047,156 13,016,457 11,472,236 41,249,738 24,780,737 117,565 212,692,287 ------Net position 27,823,510 (109,725,968) 12,309,513 (4,572,086) (15,369,757) 46,602,738 59,189,029 16,256,979

– I-113 – APPENDIX I ACCOUNTANTS’ REPORT

At December 31, 2017 Between Between Between one month three one year Repayable Within one and three months and and five More than Indefinite on demand month months one year years five years Total Note (i) Assets Cash and deposits with the central bank 27,259,573 22,416,901–––––49,676,474 Deposit with banks and other financial institutions – 159,412 425,000 385,000 152,274 – – 1,121,686 Financial assets held under resale agreements – – 12,010,710 937,615–––12,948,325 Loans and advances to customers 536,750 47,754 2,186,809 2,616,819 23,616,838 21,989,375 34,415,141 85,409,486 Financial investments 826,580 – 700,100 398,667 11,414,146 53,560,556 63,145,399 130,045,448 Others 5,585,224 3,656 1,168,549 406,063 3,493 – – 7,166,985 Total assets 34,208,127 22,627,723 16,491,168 4,744,164 35,186,751 75,549,931 97,560,540 286,368,404 ------Liabilities Borrowing from the central bank – – 9,985 121,518 1,440,536 – – 1,572,039 Deposits from banks and other financial Institutions – 264,574 – – 8,015,000 – – 8,279,574 Deposits from customers – 147,161,992 3,486,352 9,004,818 24,080,991 18,536,357 – 202,270,510 Debt securities issued – – 199,442 10,523,774 38,565,353 – – 49,288,569 Others 2,508,481 93,022 25,804 793,998 191,938 165,501 81,556 3,860,300 Total liabilities 2,508,481 147,519,588 3,721,583 20,444,108 72,293,818 18,701,858 81,556 265,270,992 ------Net position 31,699,646 (124,891,865) 12,769,585 (15,699,944) (37,107,067) 56,848,073 97,478,984 21,097,412

– I-114 – APPENDIX I ACCOUNTANTS’ REPORT

At December 31, 2018 Between Between Between one month three one year Repayable Within one and three months and and five More than Indefinite on demand month months one year years five years Total Note (i) Assets Cash and deposits with the central bank 25,602,118 20,200,849–––––45,802,967 Deposit with banks and other financial institutions – 179,202 – 50,052 605,572 – – 834,826 Financial assets held under resale agreements – – 14,700,328––––14,700,328 Loans and advances to customers 1,001,707 22,950 2,043,485 4,734,171 19,009,170 26,570,846 82,449,524 135,831,853 Financial investments 798,867 – 200,098 1,780,060 12,761,251 63,450,239 57,654,505 136,645,020 Others 7,387,885––––––7,387,885 Total assets 34,790,577 20,403,001 16,943,911 6,564,283 32,375,993 90,021,085 140,104,029 341,202,879 ------Liabilities Borrowing from the central bank – – 44,459 7,304 2,768,412 – – 2,820,175 Deposits from banks and other financial Institutions – 1,521,759 – 4,017,571 4,444,438 – – 9,983,768 Financial assets sold under repurchase agreements – – 2,175,276––––2,175,276 Deposits from customers – 143,197,063 4,344,333 10,658,775 18,496,687 42,703,146 683,731 220,083,735 Debt securities issued – – – 17,670,421 52,752,150 5,016,466 2,843,375 78,282,412 Others 1,849,297 – 808 387,901 7,272 35,779 117,565 2,398,622 Total liabilities 1,849,297 144,718,822 6,564,876 32,741,972 78,468,959 47,755,391 3,644,671 315,743,988 ------Net position 32,941,280 (124,315,821) 10,379,035 (26,177,689) (46,092,966) 42,265,694 136,459,358 25,458,891

– I-115 – APPENDIX I ACCOUNTANTS’ REPORT

At June 30, 2019 Between Between Between one month three one year Repayable Within one and three months and and five More than Indefinite on demand month months one year years five years Total Note (i) Assets Cash and deposits with the central bank 25,377,976 22,642,943–––––48,020,919 Deposit with banks and other financial institutions 1,318,250 2,151,997 – – 762,075 – – 4,232,322 Financial assets held under resale agreements – – 19,988,816––––19,988,816 Loans and advances to customers 705,577 223,489 2,150,408 4,251,278 22,802,795 33,731,799 95,027,348 158,892,694 Financial investments 341,164 87,363 1,085,621 2,115,206 23,416,523 69,491,163 53,617,293 150,154,333 Others 8,333,282––––––8,333,282 Total assets 36,076,249 25,105,792 23,224,845 6,366,484 46,981,393 103,222,962 148,644,641 389,622,366 ------Liabilities Borrowing from the central bank – – – 181,134 2,577,420 – – 2,758,554 Deposits from banks and other financial institutions – 492,872 5,191 1,001,125 5,791,029 – – 7,290,217 Placements from banks and other financial institutions – – – 139 – 100,000 – 100,139 Financial assets sold under repurchase agreements – – 2,313,840––––2,313,840 Deposit from customers – 139,491,411 1,681,107 4,560,125 39,414,936 61,734,611 231,474 247,113,664 Debt securities issued – – – 24,220,240 67,750,553 5,116,541 2,826,011 99,913,345 Others 2,118,742 – 33,259 11,306 152,032 354,230 135,534 2,805,103 Total liabilities 2,118,742 139,984,283 4,033,397 29,974,069 115,685,970 67,305,382 3,193,019 362,294,862 ------Net position 33,957,507 (114,878,491) 19,191,448 (23,607,585) (68,704,577) 35,917,580 145,451,622 27,327,504

Note: (i) Indefinite amount of cash and deposits with the central bank represents the statutory deposit reserves and fiscal deposits with the central bank. Impaired deposits from banks and other financial institutions represents in indefinite category. Indefinite amount of loans and advances to customers includes all the impaired loans, as well as those overdue more than one month. Loans and advances to customers with no impairment but overdue within one month are classified into the category of repayable on demand. Indefinite amount of investments represents impaired investments or those overdue more than one month. Equity investments are listed in the category of indefinite.

– I-116 – APPENDIX I ACCOUNTANTS’ REPORT

The following tables provide an analysis of the contractual undiscounted cash flow of the non-derivative financial liabilities of the Bank at the end of the Relevant Periods:

At December 31, 2016 Between Between Between Contractual one month three one year Carrying undiscounted Repayable Within and three months and and five More than amount cash flow on demand one month months one year years five years Non-derivative financial liabilities Borrowings from central bank 1,316,566 1,332,869 – 303,206 61,771 967,892 – – Deposits from banks and other financial institutions 15,679,630 15,860,602 1,479,950 450,000 5,123,172 8,284,222 523,258 – Financial assets sold under repurchase agreements 7,957,200 7,961,734 – 7,961,734–––– Deposits from customers 164,810,111 165,503,111 116,582,635 3,810,908 6,249,645 14,194,282 24,665,641 – Debt securities issued 18,297,253 18,630,000 – 500,000 – 18,130,000 – – Other financial liabilities 1,312,390 1,312,390 862,192 33,129 79,646 158,106 179,317 – Total non-derivative financial liabilities 209,373,150 210,600,706 118,924,777 13,058,977 11,514,234 41,734,502 25,368,216 –

At December 31, 2017 Between Between Between Contractual one month three one year Carrying undiscounted Repayable Within and three months and and five More than amount cash flow on demand one month months one year years five years Non-derivative financial liabilities Borrowings from central bank 1,572,039 1,607,864 – 10,095 122,812 1,474,957 – – Deposits from banks and other financial institutions 8,279,574 8,525,235 264,631 – – 8,260,604 – – Financial assets sold under repurchase agreements – ––––––– Deposits from customers 202,270,510 203,624,723 147,181,438 3,489,319 9,320,510 24,105,825 19,527,631 – Debt securities issued 49,288,569 50,800,000 – 200,000 10,580,000 40,020,000 – – Other financial liabilities 1,466,641 1,466,641 1,058,318 25,063 64,734 185,272 133,254 – Total non-derivative financial liabilities 262,877,333 266,024,463 148,504,387 3,724,477 20,088,056 74,046,658 19,660,885 –

– I-117 – APPENDIX I ACCOUNTANTS’ REPORT

At December 31, 2018 Between Between Between Contractual one month three one year Carrying undiscounted Repayable Within and three months and and five More than amount cash flow on demand one month months one year years five years Non-derivative financial liabilities Borrowings from central bank 2,820,175 2,883,014 – 44,637 7,336 2,831,041 – – Deposits from banks and other financial institutions 9,983,768 10,153,480 1,522,087 – 4,051,387 4,580,006 – – Financial assets sold under repurchase agreements 2,175,276 2,178,721 – 2,178,721–––– Deposits from customers 220,083,735 222,663,113 144,198,767 4,424,355 11,149,650 18,593,676 43,347,369 949,296 Debt securities issued 78,282,412 81,651,057 – – 17,860,000 54,150,000 5,756,027 3,885,030 Total non-derivative financial liabilities 313,345,366 319,529,385 145,720,854 6,647,713 33,068,373 80,154,723 49,103,396 4,834,326

At June 30, 2019 Between Between Between Contractual one month three one year Carrying undiscounted Repayable Within one and three months and and five More than amount cash flow on demand month months one year years five years Non-derivative financial liabilities Borrowings from central bank 2,758,554 2,786,430 – – 182,188 2,604,242 – – Deposits from banks and other financial institutions 7,290,217 7,408,705 492,978 5,201 1,009,225 5,901,301 – – Placements from banks and other financial institutions 100,139 109,398 – – 139 – 109,259 – Financial assets sold under repurchase agreements 2,313,840 2,314,731 – 2,314,731–––– Deposits from customers 247,113,664 250,040,156 139,508,708 1,682,750 4,575,604 39,721,905 64,077,959 473,230 Debt securities issued 99,913,345 103,212,032 – – 24,310,000 69,290,000 5,484,347 4,127,685 Lease liabilities 528,121 678,677 – 32,680 9,865 152,510 431,971 51,651 Total non-derivative financial liabilities 360,017,880 366,550,129 140,001,686 4,035,362 30,087,021 117,669,958 70,103,536 4,652,566

This analysis of the non-derivative financial liabilities by contractual undiscounted cash flow might diverge from actual results.

(d) Operational risk

Operational risk refers to the risk of losses associated with internal processes deficiencies, personnel mistakes and information system failures, or impact from other external events.

The Bank has established an operational risk management system consisting of the Board of Directors, the Board of Supervisors, senior management, operational risk management committee, risk management department, legal compliance department, information technology department, audit department and other functional departments of the head office, branches and sub-branches.

– I-118 – APPENDIX I ACCOUNTANTS’ REPORT

The Bank has established operational risk management policies, systems and procedures to effectively identify, assess, monitor, control and mitigate the operational risks of the Bank and to minimize any losses associated with operational risk.

The Bank has established the Three Lines of Defense to comprehensively manage operational risk: business establishments of branches and sub-branches and business functions at all levels are the First Line of Defense against operational risk and are directly responsible for operational risk management. The risk management and legal compliance department are the Second Line of Defense against operational risk and responsible for formulating operational risk management policies, coordinating, supporting and supervising operational risk management. The audit department is the Third Line of Defense and is responsible for auditing whether the Bank’s operational risk management policies are effective and assessing internal control systems and status of compliance.

The Bank has developed an emergency plan system and a business continuity plan system for various emergencies such as natural disasters, IT system failures, bank run, theft and robbery.

The Bank has established a system of accountability for all types of violations and disciplinary actions; and a risk assessment system based on internal audit and compliance review.

38 FAIR VALUE

(a) Methods and assumptions for measurement of fair value

The Bank adopts the following methods and assumptions when evaluating fair values:

(i) Debt securities and equity investments

The fair values of debt securities and equity investments that are traded in an active market are based on their quoted market prices in an active market at the end of the Relevant Periods. If quoted market prices are not available, then fair values are estimated on the basis of pricing models or discounted cash flows.

(ii) Receivables and other non-derivative financial assets

Fair values are estimated as the present value of the future cash flows, discounted at the market interest rates at the end of the Relevant Periods.

(iii) Debt securities issued and other non-derivative financial liabilities

Fair values of debt securities issued are based on their quoted market prices at the end of the Relevant Periods, or the present value of estimated future cash flows. The fair values of other non-derivative financial liabilities are valued at the present value of estimated future cash flows. The discount rates are based on the market interest rates at the end of the Relevant Periods.

(b) Fair value measurement

(i) Financial assets

The Bank’s financial assets mainly consist of cash and deposits with the central bank, receivables with banks and other financial institutions, loans and advances to customers, and investments.

Deposits with the central bank, receivables with banks and other financial institutions and financial assets held under resale agreements are mostly priced at market interest rates and due within one year. Accordingly, the carrying amounts approximate the fair values.

Loans and advances to customers are mostly priced at floating rates close to the PBOC rates. Accordingly, the carrying amounts approximate the fair values.

Financial investments at fair value through other comprehensive income, available-for-sale investments and financial assets at fair value through profit or loss are stated at fair value. The carrying amount and fair value of held-to-maturity investments are disclosed in Note 18. Financial investments at amortized cost and the carrying amounts of debt securities classified as receivables are the reasonable approximations of their fair values because, for example, they are short-term in nature or repriced at current market rates frequently.

– I-119 – APPENDIX I ACCOUNTANTS’ REPORT

(ii) Financial liabilities

The Bank’s financial liabilities mainly include deposits from banks and other financial institutions, placements from banks and other financial institutions, financial assets sold under repurchase agreements, deposits from customers and debt securities issued.

The book value and fair value of debt securities issued is presented in Note 27. The carrying amounts of other financial liabilities approximate their fair value.

(c) Fair value hierarchy

The following table presents the fair value of financial instruments measured at the end of the reporting period on a recurring basis, categorized into the three-level fair value hierarchy as defined in IFRS 13, Fair value measurement. The level into which a fair value measurement is classified is determined with reference to the observability and significance of the inputs used in the valuation technique as follows:

– Level 1: Fair value measured using only Level 1 inputs (i.e. unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date);

– Level 2: Fair value measured using Level 2 inputs i.e. observable inputs which fail to meet Level 1, and not using significant unobservable inputs. Unobservable inputs are inputs for which market data are not available; and

– Level 3: Fair value measured using significant unobservable inputs.

If there is a reliable market quote for financial instruments, the fair value of financial instruments is based on quoted market prices. If a reliable quoted market price is not available, the fair value of the financial instruments is estimated using valuation techniques. Valuation techniques applied include reference to the fair value of another instrument that is substantially the same, discounted cash flow analysis. The inputs used in valuation techniques include risk-free and benchmark interest rates, credit spreads and exchange rate. Where discounted cash flow analysis is used, estimated cash flows are based on management’s best estimates and the discount rate used is reference to another instrument that is substantially the same.

At December 31, 2016 Level 1 Level 2 Level 3 Total Recurring fair value measurements Assets Financial investments at fair value through profit or loss – debt securities – 3,856,434 – 3,856,434 Available-for-sale financial assets – debt securities – 2,974,699 – 2,974,699 – wealth management products – – 146,749 146,749 – equity investments – – 37,750 37,750 Total – 6,831,133 184,499 7,015,632

At December 31, 2017 Level 1 Level 2 Level 3 Total Recurring fair value measurements Assets Financial investments at fair value through profit or loss – debt securities – 3,686,958 – 3,686,958 Available-for-sale financial assets – debt securities – 8,283,093 – 8,283,093 – wealth management products – – 645,306 645,306 – equity investments – – 37,750 37,750 Total – 11,970,051 683,056 12,653,107

– I-120 – APPENDIX I ACCOUNTANTS’ REPORT

At December 31, 2018 Level 1 Level 2 Level 3 Total Recurring fair value measurements Assets Financial investments at fair value through profit or loss – debt securities – 2,675,977 – 2,675,977 – investment funds – 3,323,515 – 3,323,515 – wealth management products – – 2,671,166 2,671,166 Financial investments at fair value through other comprehensive income – debt securities – 14,079,353 – 14,079,353 – discounted bills – 1,391,384 – 1,391,384 – equity investments – – 37,750 37,750 Total – 21,470,229 2,708,916 24,179,145

At June 30, 2019 Level 1 Level 2 Level 3 Total Recurring fair value measurements Assets Financial investments at fair value through profit or loss – debt securities – 2,101,793 – 2,101,793 – investment funds – 9,152,996 – 9,152,996 – wealth management products – – 4,123,818 4,123,818 Financial investments at fair value through other comprehensive income – debt securities – 23,605,751 – 23,605,751 – corporate loans and advances – 973,986 – 973,986 – discounted bills – 2,211,147 – 2,211,147 – equity investments – – 37,750 37,750 Total – 38,045,673 4,161,568 42,207,241

The movement during the year ended December 31, 2016 in the balance of Level 3 fair value measurements is as follows:

Transfer Transfer January 1, into out of December 31, 2016 Level 3 Level 3 Total gains or losses Purchases, issues, sales and settlements 2016 Recorded in other Recorded in comprehensive profit or loss income Purchases Issues Sales Settlements Assets Available-for-sale financial assets – wealth management products 100,000 – – – (3,251) 50,000 – – – 146,749 – equity investments 37,750 – – – –––– –37,750 Total 137,750 – – – (3,251) 50,000 – – – 184,499

– I-121 – APPENDIX I ACCOUNTANTS’ REPORT

The movement during the year ended December 31, 2017 in the balance of Level 3 fair value measurements is as follows:

Transfer Transfer January 1, into out of December 31, 2017 Level 3 Level 3 Total gains or losses Purchases, issues, sales and settlements 2017 Recorded in other Recorded in comprehensive profit or loss income Purchases Issues Sales Settlements Assets Available-for-sale financial assets – wealth management products 146,749 – – – (1,443) 500,000 – – – 645,306 – equity investments 37,750 – – – –––– –37,750 Total 184,499 – – – (1,443) 500,000 – – – 683,056

The movement during the year ended December 31, 2018 in the balance of Level 3 fair value measurements is as follows:

Transfer Transfer January 1, into out of December 31, 2018 (Note) Level 3 Level 3 Total gains or losses Purchases, issues, sales and settlements 2018 Recorded in other Recorded in comprehensive profit or loss income Purchases Issues Sales Settlements Assets Financial assets at fair value through profit or loss – wealth management products 650,507 – – 20,952 – 2,550,000 – – (550,293) 2,671,166 Sub-total 650,507 – – 20,952 – 2,550,000 – – (550,293) 2,671,166 Financial investments at fair value through other comprehensive income – equity investments 37,750 – – – –––– –37,750 Total 688,257 – – 20,952 – 2,550,000 – – (550,293) 2,708,916

Note:

The Bank has adopted IFRS 9 from January 1, 2018. According to the classification and measurement requirements under IFRS 9, the financial instruments in Level 3 fair value hierarchy have been reclassified and measured on January 1, 2018 (see Note 2(1)(a)).

– I-122 – APPENDIX I ACCOUNTANTS’ REPORT

The movement during the six months ended June 30, 2019 in the balance of Level 3 fair value measurements is as follows:

Transfer Transfer January 1, into out of June 30, 2019 Level 3 Level 3 Total gains or losses Purchases, issues, sales and settlements 2019 Recorded in other Recorded in comprehensive profit or loss income Purchases Issues Sales Settlements Assets Financial assets at fair value through profit or loss – wealth management products 2,671,166 – – 34,155 – 1,600,000 – – (181,503) 4,123,818 Sub-total 2,671,166 – – 34,155 – 1,600,000 – – (181,503) 4,123,818 Financial investments at fair value through other comprehensive income – equity investments 37,750 – – – –––– –37,750 Total 2,708,916 – – 34,155 – 1,600,000 – – (181,503) 4,161,568

During the years ended December 31, 2016, 2017 and 2018 and the six months ended June 30, 2019, the carrying amount of financial instrument valued with significant unobservable inputs were immaterial, and the effects of changes in significant unobservable assumptions to reasonably possible alternative assumptions were also immaterial.

The valuation techniques used and the qualitative and quantitative information of key parameters for recurring fair value measurements categorized within Level 3.

Quantitative information of Level 3 fair value measurement is as below:

Fair value as at December 31, 2016 Valuation techniques Unobservable inputs Available-for-sale financial assets – wealth management 146,749 Discounted cash flow Risk-adjusted discount products rate, cash flow – equity investments 37,750 Discounted cash flow Risk-adjusted discount rate, cash flow

Fair value as at December 31, 2017 Valuation techniques Unobservable inputs Available-for-sale financial assets – wealth management 645,306 Discounted cash flow Risk-adjusted discount products rate, cash flow – equity investments 37,750 Discounted cash flow Risk-adjusted discount rate, cash flow

– I-123 – APPENDIX I ACCOUNTANTS’ REPORT

Fair value as at December 31, 2018 Valuation techniques Unobservable inputs Financial assets at fair value through profit or loss – wealth management 2,671,166 Discounted cash flow Risk-adjusted discount products rate, cash flow

Financial investments at fair value through other comprehensive income – equity investments 37,750 Discounted cash flow Risk-adjusted discount rate, cash flow

Fair value as at June 30, 2019 Valuation techniques Unobservable inputs Financial assets at fair value through profit or loss – wealth management 4,123,818 Discounted cash flow Risk-adjusted discount products rate, cash flow

Financial investments at fair value through other comprehensive income – equity investments 37,750 Discounted cash flow Risk-adjusted discount rate, cash flow

During the years ended December 31, 2016, 2017 and 2018 and the six months ended June 30, 2019, there were no significant changes in the valuation techniques.

As at December 31, 2016, 2017 and 2018 and June 30, 2019, unobservable inputs such as risk-adjusted discount rate and cash flow were used in the valuation of financial assets at fair value classified as Level 3, which were mainly equity investments and wealth management products. The fair value of these financial assets fluctuates according to the changes in the unobservable inputs.

The sensitivity of the fair value on changes in unobservable inputs for Level 3 financial instruments is measured at fair value on an ongoing basis.

The fair value of financial instruments is, in certain circumstances, measured using valuation models which incorporate assumptions that are not supported by prices from observable current market transactions in the same instrument and are not based on observable market data. The following table shows the sensitivity of fair value due to parallel movement of plus or minus 1 percent of change in fair value to reasonably possible alternative assumptions.

At December 31, 2016 Effect on other Effect on net profit comprehensive income Favorable (Unfavorable) Favorable (Unfavorable) Available-for-sale financial assets – wealth management products – – 7 (7) – equity investments ––––

– I-124 – APPENDIX I ACCOUNTANTS’ REPORT

At December 31, 2017 Effect on other Effect on net profit comprehensive income Favorable (Unfavorable) Favorable (Unfavorable) Available-for-sale financial assets – wealth management products – – 11 (11) – equity investments ––––

At December 31, 2018 Effect on other Effect on net profit comprehensive income Favorable (Unfavorable) Favorable (Unfavorable) Financial assets at fair value through profit or loss – wealth management products 212 (212) – –

Financial investments at fair value through other comprehensive income – equity investments ––––

At June 30, 2019 Effect on other Effect on net profit comprehensive income Favorable (Unfavorable) Favorable (Unfavorable) Financial assets at fair value through profit or loss – wealth management products 869 (869) – –

Financial investments at fair value through other comprehensive income – equity investments ––––

39 ENTRUSTED LENDING BUSINESS

The Bank provides entrusted lending business services to customers. All entrusted loans are funded by entrusted funds from these customers. The Bank does not take any credit risk in relation to these transactions. The Bank acts as an agent to hold and manage these assets and liabilities at the direction of the entrustor and receives fee income for the services provided. The entrusted assets are not the assets of the Bank and are not recognized in the statements of financial position. Surplus funding is accounted for as deposits from customers.

At December 31, At June 30, 2016 2017 2018 2019 Entrusted loans 67,516,664 76,949,452 67,042,110 63,042,110

Entrusted funds 67,516,664 76,949,452 67,042,110 63,042,110

– I-125 – APPENDIX I ACCOUNTANTS’ REPORT

40 COMMITMENTS AND CONTINGENT LIABILITIES

(a) Credit commitments

The Bank’s credit commitments take the form of approved loans with signed contracts, credit card commitments, bank acceptances, letters of credit and financial guarantees.

The contractual amounts of loans commitments represent the amounts should the contracts be fully drawn upon. The Bank provides financial guarantees and letters of credit to guarantee the performance of customers to third parties. Acceptances comprise of undertakings by the Bank to pay bills of exchange drawn on customers. The Bank expects most acceptances to be settled simultaneously with the reimbursement from the customers.

At December 31, At June 30, 2016 2017 2018 2019 Loan commitments – Original contractual maturity within one year 969,700 – – – Credit card commitments – – 305,791 416,594 Sub-total 969,700 – 305,791 416,594 ------Acceptances 8,830,689 8,529,492 10,107,741 26,127,232 Letters of credit – – 183,317 1,016,591 Letters of guarantees 737,803 283,503 531,704 542,400 ------Total 10,538,192 8,812,995 11,128,553 28,102,817

The Bank may be exposed to credit risk in all the above credit businesses. Management periodically assesses credit risk and makes provision for any probable losses. As the facilities may expire without being drawn upon, the total of the contractual amounts shown above is not representative of expected future cash outflows.

(b) Credit risk-weighted amount

At December 31, At June 30, 2016 2017 2018 2019 Credit risk-weighted amounts 5,691,824 4,755,784 6,182,856 6,256,937

The credit risk-weighted amount represents the amount calculated with reference to the guidelines issued by the former CBRC.

(c) Operating lease commitments

As at December 31, 2016, 2017 and 2018, the Bank’s future minimum lease payments under non-cancellable operating leases for properties are as follows:

At December 31, 2016 2017 2018 Within one year (inclusive) 123,219 142,121 201,816 After one year but within two years (inclusive) 142,121 175,164 134,623 After two years but within three years (inclusive) 175,164 116,703 112,923 After three years but within five years (inclusive) 276,858 203,537 137,825 After five years 101,247 57,865 54,226 Total 818,609 695,390 641,413

– I-126 – APPENDIX I ACCOUNTANTS’ REPORT

(d) Capital commitments

As at the end of each of the Relevant Periods, the Bank’s authorized capital commitments are as follows:

At December 31, At June 30, 2016 2017 2018 2019 Contracted but not paid for 44,618 40,009 362,831 415,643 Authorized but not contracted for – 567 10,131 2,360 Total 44,618 40,576 372,962 418,003

(e) Outstanding litigations and disputes

As at the end of each of the Relevant Periods, the Bank was the defendant in certain pending litigations and disputes with an estimated gross amounts of RMB66.20 million, RMB18.34 million, RMB19.76 million and RMB22.22 million, respectively. According to the opinion of the Bank’s in-house lawyers and external lawyers, the Bank has assessed the above outstanding litigation cases that may lead to the loss of economic benefits. The management believes that the Bank is extremely unlikely to be liable for compensation. Therefore, the Bank didn’t recognize any litigation provision.

41 SUBSEQUENT EVENTS

The Bank had no material events for disclosure subsequent to June 30, 2019 and up to the date of this report.

C SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statement has been prepared by the Bank in respect of any period subsequent to June 30, 2019.

– I-127 – APPENDIX II UNAUDITED SUPPLEMENTARY FINANCIAL INFORMATION

The information set out below does not form part of the Accountants’ Report prepared by the independent reporting accountants, KPMG, Certified Public Accountants, Hong Kong, as set out in Appendix I to this prospectus, and is included herein for information purpose only.

UNAUDITED SUPPLEMENTARY FINANCIAL INFORMATION (Expressed in thousands of Renminbi, unless otherwise stated)

1 Liquidity coverage ratio and leverage ratio

(a) Liquidity coverage ratio

At At December 31, June 30,

2016 2017 2018 2019

Liquidity coverage ratio (RMB and foreign currency) 119.87% 143.01% 180.08% 430.41%

Pursuant to the Administrative Measures on the Liquidity Risk Management of Commercial Banks (Provisional), the liquidity coverage ratio of commercial banks shall reach 100% by the end of 2018 and 2019. During the transitional period, such ratio shall reach 80% and 90% by the end of 2016 and 2017, respectively.

(b) Leverage Ratio

At At December 31, June 30, 2016 2017 2018 2019

Leverage Ratio 6.81% 7.11% 7.35% 6.52%

Pursuant to the Administrative Measures on the Leverage Ratio of Commercial Banks issued by the former CBRC and was effective since April 1, 2015, a minimum leverage ratio 4% is required.

The above liquidity coverage ratio and leverage ratio are calculated in accordance with the formula promulgated by the former CBRC and based on the financial information prepared in accordance with PRC GAAP.

– II-1 – APPENDIX II UNAUDITED SUPPLEMENTARY FINANCIAL INFORMATION

High-quality liquid assets Liquidity coverage rate = × 100% Net cash outflows over the next 30 calendar days

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

2 Currency concentrations

At December 31, 2016

US Dollars (RMB equivalent) Total

Spot assets 69,801 69,801 Spot liabilities – –

Net position 69,801 69,801

At December 31, 2017 US Dollars (RMB equivalent) Total

Spot assets 79,978 79,978 Spot liabilities 13,476 13,476 Net position 66,502 66,502

At December 31, 2018 US Dollars (RMB equivalent) Total

Spot assets 92,419 92,419 Spot liabilities 21,121 21,121 Net position 71,298 71,298

At June 30, 2019 US Dollars (RMB equivalent) Total

Spot assets 73,024 73,024 Spot liabilities 630 630 Net position 72,394 72,394

The Bank has no structural position at the end of each of the Relevant Periods.

– II-2 – APPENDIX II UNAUDITED SUPPLEMENTARY FINANCIAL INFORMATION

3 Gross amount of overdue loans and advances

At At December 31, June 30,

2016 2017 2018 2019

Gross loans and advances which have been overdue with respect to either principal or interest for periods of – between 3 and 6 months (inclusive) 276,454 132,235 125,145 90,688 – between 6 months and 1 year (inclusive) 444,199 408,169 207,714 101,237 – between 1 year and 3 years (inclusive) 1,811,951 431,686 574,316 434,034 – over 3 years 56,676 56,341 72,385 29,533

Total 2,589,280 1,028,431 979,560 655,492

As a percentage of total gross loans and advances – between 3 and 6 months (inclusive) 0.40% 0.15% 0.09% 0.06% – between 6 months and 1 year (inclusive) 0.65% 0.46% 0.15% 0.06% – between 1 year and 3 years (inclusive) 2.65% 0.49% 0.41% 0.27% – over 3 years 0.08% 0.06% 0.05% 0.02% Total 3.78% 1.16% 0.70% 0.41%

– II-3 – APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION

The information set out below does not form part of the Accountants’ Reports prepared by the independent reporting accountants, KPMG, Certified Public Accountants, Hong Kong, as set out in Appendix I to this prospectus, and is included herein for illustrative purpose only.

The unaudited pro forma financial information should be read in conjunction with the section headed “Financial Information” in this prospectus and the Accountants’ Reports set out in Appendix I to this prospectus.

A. UNAUDITED PRO FORMA STATEMENT OF ADJUSTED NET TANGIBLE ASSETS

The following unaudited pro forma statement of adjusted net tangible assets of the Bank is prepared in accordance with Rule 4.29 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and is set out below to illustrate the effect of the Global Offering on the net tangible assets of the Bank as of June 30, 2019, as if the Global Offering had taken place on June 30, 2019.

The unaudited pro forma 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 financial position of the Bank had the Global Offering been completed as of June 30, 2019 or at any future date.

Estimated net Unaudited Unaudited Net tangible proceeds from pro forma pro forma adjusted assets as of the Global adjusted net net tangible assets June 30, 2019 Offering tangible assets per share RMB Million RMB Million RMB Million RMB HK$ Note (1) Note (2)/(5) Note (3) Note (4) Note (5) Based on an offer price of HK$2.61 per share 27,131.8 5,024.3 32,156.1 2.20 2.45 Based on an offer price of HK$2.46 per share 27,131.8 4,732.4 31,864.2 2.18 2.42

Notes: (1) The net tangible assets of our Bank as of June 30, 2019 are based on the total equity attributable to Shareholders of our Bank of approximately RMB27,327.5 million as of June 30, 2019, with an adjustment for the intangible assets of RMB195.7 million as of June 30, 2019. (2) The estimated net proceeds from the Global Offering are based on the indicative Offer Price of HK$2.46 per share (being the minimum offer price) and HK$2.61 per share (being the maximum offer price), after deduction of the underwriting fees and other related listing expenses payable by us, taking no account of any shares which may be issued upon the exercise of the Over-allotment Option for the Global Offering. (3) The unaudited pro forma adjusted net tangible assets do not take into account the operational results or other transactions of our Group subsequent to June 30, 2019. (4) The unaudited pro forma adjusted net tangible assets per share are arrived at after the adjustments referred to in note (2) above and on the basis that 14,588,046,744 shares are issued and outstanding, assuming that the Global Offering has been completed on June 30, 2019 and that the Over-allotment Option for the Global Offering is not exercised. (5) The translation of Renminbi into or from Hong Kong dollars has been made at the rate of RMB0.8990 to HK$1.0000, the exchange rate set by the PBOC prevailing on December 6, 2019. No representation is made that the Renminbi amounts have been, could have been or may be converted to Hong Kong dollars, or vice versa, at that rate or at any other rate or at all.

– III-1 – APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION

B. REPORT FROM THE REPORTING ACCOUNTANTS

The following is the text of a report received from the reporting accountants, KPMG, Certified Public Accountants, Hong Kong, in respect of the Bank’s pro forma financial information for the purpose in this prospectus.

Independent Reporting Accountants’ Assurance Report on the Compilation of Pro Forma Financial Information

To the Directors of Bank of Guizhou Co., Ltd.

We have completed our assurance engagement to report on the compilation of pro forma financial information of Bank of Guizhou Co., Ltd. (the “Bank”) by the directors of the Bank (the “Directors”) for illustrative purposes only. The pro forma financial information consists of the unaudited pro forma statement of adjusted net tangible assets as at June 30, 2019 and related notes as set out in Part A of Appendix III to the prospectus dated December 16, 2019 (the “Prospectus”) issued by the Bank. The applicable criteria on the basis of which the Directors have compiled the pro forma financial information are described in Part A of Appendix III to the Prospectus.

The pro forma financial information has been compiled by the Directors to illustrate the impact of the proposed offering of the ordinary shares of the Bank (the “Global Offering”) on the Bank’s financial position as at June 30, 2019 as if the Global Offering had taken place at June 30, 2019. As part of this process, information about the Bank’s financial position as at June 30, 2019 has been extracted by the Directors from the Bank’s historical financial information included in the Accountants’ Report as set out in Appendix I to the Prospectus.

Directors’ Responsibilities for the Pro Forma Financial Information

The Directors are responsible for compiling the pro forma financial information in accordance with paragraph 4.29 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and with reference to Accounting Guideline 7 “Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars” (“AG 7”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).

– III-2 – APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION

Our Independence and Quality Control

We have complied with the independence and other ethical requirements of the Code of Ethics for Professional Accountants issued by the HKICPA, which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behavior.

The firm applies Hong Kong Standard on Quality Control 1 “Quality Control for Firms That Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements” issued by the HKICPA and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.

Reporting Accountants’ Responsibilities

Our responsibility is to express an opinion, as required by paragraph 4.29(7) of the Listing Rules, on the pro forma financial information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the pro forma financial information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

We conducted our engagement in accordance with Hong Kong Standard on Assurance Engagements (“HKSAE”) 3420 “Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus” issued by the HKICPA. This standard requires that the reporting accountants plan and perform procedures to obtain reasonable assurance about whether the Directors have compiled the pro forma financial information in accordance with paragraph 4.29 of the Listing Rules, and with reference to AG 7 issued by the HKICPA.

For purpose of this engagement, we are not responsible for updating or reissuing any reports or opinions on any historical financial information used in compiling the pro forma financial information, nor have we, in the course of this engagement, performed an audit or review of the financial information used in compiling the pro forma financial information.

The purpose of pro forma financial information included in an investment circular is solely to illustrate the impact of a significant event or transaction on unadjusted financial information of the Bank as if the event had occurred or the transaction had been undertaken at an earlier date selected for purposes of the illustration. Accordingly, we do not provide any assurance that the actual outcome of events or transactions as at June 30, 2019 would have been as presented.

– III-3 – APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION

A reasonable assurance engagement to report on whether the pro forma financial information has been properly compiled on the basis of the applicable criteria involves performing procedures to assess whether the applicable criteria used by the Directors in the compilation of the pro forma financial information provide a reasonable basis for presenting the significant effects directly attributable to the event or transaction, and to obtain sufficient appropriate evidence about whether:

• the related pro forma adjustments give appropriate effect to those criteria; and

• the pro forma financial information reflects the proper application of those adjustments to the unadjusted financial information.

The procedures selected depend on the reporting accountants’ judgment, having regard to the reporting accountants’ understanding of the nature of the Bank, the event or transaction in respect of which the pro forma financial information has been compiled, and other relevant engagement circumstances.

The engagement also involves evaluating the overall presentation of the pro forma financial information.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Our procedures on the pro forma financial information have not been carried out in accordance with attestation standards or other standards and practices generally accepted in the United States of America, auditing standards of the Public Company Accounting Oversight Board (United States) or any overseas standards and accordingly should not be relied upon as if they had been carried out in accordance with those standards and practices.

We make no comments regarding the reasonableness of the amount of net proceeds from the issuance of the Bank’s shares, the application of those net proceeds, or whether such use will actually take place as described in the section headed “Future Plans and Use of Proceeds” in the Prospectus.

– III-4 – APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION

Opinion

In our opinion:

(a) the pro forma financial information has been properly compiled on the basis stated;

(b) such basis is consistent with the accounting policies of the Bank; and

(c) the adjustments are appropriate for the purposes of the pro forma financial information as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.

KPMG Certified Public Accountants 8th Floor, Prince’s Building 10 Chater Road Central, Hong Kong December 16, 2019

– III-5 – APPENDIX IV TAXATION AND FOREIGN EXCHANGE

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, and no predictions are made about changes or adjustments to relevant laws or policies, and no comments or suggestions will be made accordingly. The discussion has no intention to cover all possible tax consequences resulting from the investment in H Shares, nor does it take into account the specific circumstances of any particular investor, some of which may be subject to special regulations. Accordingly, you should consult your own tax advisor regarding the tax consequences of an investment in H Shares. The discussion is based upon laws and relevant interpretations in effect as of the date of this document, which is subject to change or adjustment and may have retrospective effect.

No issues on PRC or Hong Kong taxation other than income tax, capital gain and profit tax, business tax/appreciation tax, stamp duty and estate duty was referred in the discussion. Prospective investors are urged to consult their financial advisors regarding the PRC, Hong Kong and other tax consequences of owning and disposing of H Shares.

The PRC Taxation

Taxation on Dividends

Individual Investor

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 August 31, 2018 and the Implementation Provisions of the Individual Income Tax 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 December 18, 2018, dividends distributed by PRC enterprises are subject to individual income tax levied at a flat rate of 20%. For a foreign individual who is not a resident of the PRC, the receipt of dividends from an enterprise in the PRC is normally subject to individual income tax of 20% unless specifically exempted by the tax authority of the State Council or reduced or eliminated by an applicable tax treaty.

Pursuant to the Notice of the State Administration of Taxation on Issues Concerning Taxation and Administration of Individual Income Tax After the Repeal of the Guo Shui Fa [1993] No. 45 Document (《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-Chinese resident individuals in the jurisdiction of the agreement, withhold individual income tax at a rate of 10%. For non-Chinese resident individual holders of H Shares being paid dividends who are citizens of jurisdictions that have entered into tax agreements or arrangements 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 rights enjoying lower preferential tax treatments, and, upon the

– IV-1 – APPENDIX IV TAXATION AND FOREIGN EXCHANGE approval of competent tax authorities, the exceeding amount of individual income tax will be refunded. For non-Chinese resident individual holders of H Shares being paid dividends who are citizens of jurisdictions that have entered into tax agreements or arrangements with the PRC with tax rates higher than 10% but lower than 20%, the domestic non-foreign-invested enterprise whose Shares are listed in Hong Kong is required to withhold the tax at the agreed rate under the agreement, and the application procedures of which will not be necessary. For non-Chinese resident individual holders of H Shares being paid dividends who are citizens of jurisdictions without entering any taxation agreement or arrangements with the PRC or are under other situations, the domestic non-foreign-invested enterprise whose Shares are listed in Hong Kong is required to withhold the tax at a rate of 20%.

Enterprise Investors

In accordance with the Corporate Income Tax Law of the PRC (《中華人民共和國企業 所得稅法》) (the “CIT Law”), which came into effect on December 29, 2018, and the Implementation Provisions of the Corporate Income Tax Law of the PRC (《中華人民共和國 企業所得稅法實施條例》), which was issued on December 6, 2007 and implemented on January 1, 2008, a nonresident enterprise is generally subject to a 10% corporate income tax on PRC-sourced income (including dividends received from a PRC resident enterprise), if it does not have an establishment or premise in the PRC or has an establishment or premise in the PRC but its PRC-sourced income has no real connection with such establishment or premise. The aforesaid income tax payable for nonresident enterprises are deducted at source, where the payer of the income are required to withhold the income tax from the amount to be paid to the nonresident enterprise when such payment is made or due.

The Circular of the SAT on Issues Relating to the Withholding and Remitting of Corporate Income Tax by PRC Resident Enterprises on Dividends Distributed to Overseas Non – Resident Enterprise 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 by the SAT on November 6, 2008, further clarified that a PRC-resident enterprise must withhold corporate income tax at a rate of 10% on the dividends of 2008 and onwards that it distributes to overseas nonresident enterprise shareholders of H Shares. In addition, the Response of the SAT to Questions on Levying Corporate Income Tax on Dividends Derived by Nonresident 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復》) (Guo Shui Han [2009] No.394), which was issued by the SAT and implemented on July 24, 2009, further provides that any PRC-resident enterprise whose shares are listed on overseas stock exchanges must withhold and remit corporate income tax at a rate of 10% on dividends of 2008 and onwards that it distributes to nonresident enterprises. Such tax rates may be further modified pursuant to the tax treaty or agreement that China has entered into with the relevant jurisdictions, where applicable.

– IV-2 – APPENDIX IV TAXATION AND FOREIGN EXCHANGE

Pursuant to the Arrangement between the Mainland 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》), which was 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 the 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, then such tax shall not exceed 5% of the total dividends payable by the Chinese company. 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 issued by the State Administration of Taxation (《<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》), which came into effect on December 29, 2015, states that such provisions shall not apply to arrangement made for the primary purpose of gaining such tax benefit from the generation or configuration of resulting benefits gained. The application of the dividend clause of tax agreements is subject to the requirements of PRC tax law and regulation, such as the Notice of the State Administration of Taxation on the Issues Concerning the Application of the Dividend Clauses of Tax Agreements (《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-PRC resident investors residing in jurisdictions which have entered into treaties or adjustments for the avoidance of double taxation with the PRC are entitled to a reduction of the Chinese corporate income tax imposed on the dividends received from PRC companies. The PRC currently has entered into Avoidance of Double Taxation Treaties/Arrangements with a number of countries and regions including HK, Macau, Australia, Canada, France, Germany, Japan, Malaysia, the Netherlands, Singapore, the United Kingdom and the United States. Non-PRC resident enterprises entitled to preferential tax rates in accordance with the relevant income tax agreements or arrangements are required to apply to the Chinese tax authorities for a refund of the corporate income tax in excess of the agreed tax rate, and the refund application is subject to approval by the Chinese tax authorities.

Taxation on Share Transfer

VAT and Local Additional Tax

Pursuant to the Notice on Fully Implementing the Pilot Reform for the 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) (“Notice 36”), which was implemented on May 1, 2016, entities and individuals engaged in the services sale in the PRC are subject to VAT and “engaged in the services sale in the PRC” means that the seller or buyer of the taxable services is located in 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 revenue (which is the balance of sales price upon deduction of purchase price), for a general or a foreign VAT taxpayer. However, individuals who transfer financial products are exempt from VAT.

– IV-3 – APPENDIX IV TAXATION AND FOREIGN EXCHANGE

According to these regulations, if the holder is a nonresident individual, the PRC VAT is exempted from the sale or disposal of H shares; if the holder is a nonresident enterprise and the H-share buyer is an individual or entity located outside China, the holder is not required to pay the PRC VAT, but if the H-share buyer is an individual or entity located in China, the holder may be required to pay the PRC VAT.

However, in view of no clear regulations, whether the non-Chinese resident enterprises are required to pay the PRC VAT for the disposal of H shares, there is still uncertainty in the interpretation and application of the above provisions.

At the same time, VAT payers are also required to pay urban maintenance and construction tax, education surtax and local education surcharge (collectively referred to as “Local Additional Tax”), which shall be usually subject to 12% of the VAT payable (if any).

Income tax

Individual Investors

According to the IIT Law and the Implementation Provisions of the Individual Income Tax Law of the PRC (《中華人民共和國個人所得稅法實施條例》), gains on the transfer of equity interests in the PRC resident enterprises are subject to individual income tax at a rate of 20%.

Pursuant to the Circular of the MOF and the State Administration of Taxation on Declaring that Individual Income Tax Continues to be Exempted over Income of Individuals from the 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 State Administration of Taxation on March 30, 1998, from January 1, 1997, income of individuals from transfer of the shares of listed enterprises continues to be exempted from individual income tax. The State Administration of Taxation has not expressly stated whether it will continue to exempt individual income tax on income of individuals from transfer of the shares of listed enterprises in the latest amended Individual Income Tax Law and its implementation provisions.

However, on December 31, 2009, the MOF, the State Administration of Taxation and CSRC jointly issued the Circular of the MOF, the State Administration of Taxation and CSRC on Related Issues on Levying Individual Income Tax over the Income Received by Individuals from the Transfer of Listed Shares Subject to Sales Limitation (《財政部、國家稅務總局及中 國證監會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), which came into effect on January 1, 2010, which states that individuals’ income from the transfer of listed shares obtained from the public offering of listed companies and transfer market on the Shanghai Stock Exchange and the Shenzhen Stock Exchange shall continue to be exempted from individual income tax, except for the relevant shares which are subject to sales restriction (as defined in the Supplementary Notice on Issues Concerning the Levy of Individual Income Tax on Individuals’ Income from the Transfer of Restricted Stocks

– IV-4 – APPENDIX IV TAXATION AND FOREIGN EXCHANGE 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 by such departments on November 10, 2010). As of the Latest Practicable Date, no aforesaid provisions have expressly provided that whether individual income tax shall be levied from non-Chinese resident individuals on the transfer of shares in PRC resident enterprises listed on overseas stock exchanges, and no such individual income tax was levied by PRC tax authorities in practice.

Enterprise Investors

In accordance with the CIT Law and its implementation provisions, a nonresident enterprise is generally subject to corporate income tax at the rate of a 10% 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 premise in the PRC or has an establishment or premise in the PRC but its PRC-sourced income has no real connection with such establishment or premise. Such income tax payable for nonresident enterprises are deducted at source, where the payer of the income are required to withhold the income tax from the amount to be paid to the nonresident enterprise when such payment is made or due. Such tax may be reduced or exempted pursuant to relevant tax treaties or agreements on avoidance of double taxation.

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》), which was issued on August 6, 1998 and amended on January 8, 2011, and the Implementation Provisions 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》), which came into effect on October 1, 1988, PRC stamp duty only applies to specific taxable document executed or received within the PRC, having legally binding force in the PRC and protected under the PRC laws, thus the requirements of 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

Taxation on Dividends

No tax is payable in Hong Kong in respect of dividends paid by the Bank.

– IV-5 – APPENDIX IV TAXATION AND FOREIGN EXCHANGE

Profits Tax

Hong Kong profits tax will not be payable by any Shareholders (other than Shareholders carrying on a trade, profession or business in Hong Kong and holding the Shares for trading purposes) on any capital gains made on the sale or other disposal of the Shares. Shareholders should take advice from their own professional advisers as to their particular tax position.

Stamp Duty

Hong Kong stamp duty will be charged on the sale and purchase of Shares at the current rate of 0.2% of the consideration for, or (if greater) the value of, the Shares being sold or purchased, whether or not the sale or purchase is on or off the Stock Exchange. The Shareholder selling the Shares and the purchaser will each be liable for one-half of the amount of Hong Kong stamp duty payable upon such transfer. In addition, a fixed duty of HK$5 is currently payable on any instrument of transfer of Shares.

Estate Duty

Hong Kong estate duty was abolished effective from February 11, 2006. No Hong Kong estate duty is payable by Shareholders in relation to the Shares owned by them upon death.

PRINCIPAL TAXATION OF THE BANK IN THE PRC

Corporate Income Tax

Pursuant to the CIT Law, enterprises and other organizations which generate income within the PRC are corporate income tax payers and shall pay corporate income tax at the tax rate of 25%.

Business Tax/Value-added Tax

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》), which came into effect on January 1, 1994, amended on November 10, 2008 and implemented on January 1, 2009, the Bank is subject to business tax at a business tax rate of 5% for its banking operating activities carried within the PRC.

Pursuant to the Notice of the MOF and the SAT on Fully Implementing the Pilot Reform for the Transition from Business Tax to Value-added Tax (《財政部、國家稅務總局關於全面 推開營業稅改徵增值稅試點的通知》) (Cai Shui [2016] No. 36), which was issued by the MOF and the SAT on March 23, 2016 and came in effect on May 1, 2016, the pilot reform for the transition from business tax to VAT is implemented nationwide from May 1, 2016, and the financial industry is included in such pilot and is required to pay VAT instead of Business Tax. Pursuant to the Pilot Implementation Measures for the Transition from Business Tax to VAT (營

– IV-6 – APPENDIX IV TAXATION AND FOREIGN EXCHANGE

業稅改徵增值稅試點實施辦法) as an annex to the aforementioned notice, the tax rate for tax payers for their taxable service sales is generally 6%, unless otherwise provided in the implementation measures. The Bank has started to calculate and pay VAT instead of business tax since May 1, 2016.

TAXATION OF THE BANK IN HONG KONG

Our Directors do not consider that any of the Bank’s income is derived from or arose in Hong Kong for the purpose of Hong Kong taxation. The Bank will therefore not be subject to Hong Kong taxation.

FOREIGN EXCHANGE

The lawful currency of the PRC is Renminbi, which is currently subject to foreign exchange control and cannot be freely converted into foreign currency. The SAFE, with 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 on Foreign Exchange Control (《中華人民共和國外匯管理 條例》) (the “Foreign Exchange Control Regulations”), which was issued 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 not subject to the approval of foreign exchange administration agencies, while capital items are subject to such approval. Pursuant to the Foreign Exchange Control Regulations amended on January 14, 1997 and August 1, 2008, PRC will not impose any restriction on international current payments and transfers.

According to 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, it removes other restrictions on convertibility of foreign exchange under current items, while imposing existing restrictions on foreign exchange transactions under capital account items.

According to the Public Announcement of the People’s Bank of China on Reforming the RMB Exchange Rate Regime (《中國人民銀行關於完善人民幣匯率形成機制改革的公告》) (PBOC Announcement [2005] No. 16), which was issued by the PBOC and implemented on July 21, 2005, the PRC has started 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 since July 21, 2005. Therefore, 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.

– IV-7 – APPENDIX IV TAXATION AND FOREIGN EXCHANGE

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 the central parity of Renminbi spot exchange 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 authorized China Foreign Exchange Trading Center to 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 decided 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, after considering the supply and demand for foreign exchange as well as changes in major international currency exchange rates.

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 foreign exchange 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 formation mechanism based on market supply and demand; third, in the event that international revenues and expenditure occur or may occur a material misbalance, or the national economy encounters or may encounter a severe crisis, the State may adopt necessary safeguard and control measures on international revenues and expenditure; 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 administrative authorities, effect payment through foreign exchange accounts opened at the designated foreign exchange bank, on the strength of valid transaction receipts and proof. 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 the Bank) may, on the strength of resolutions of the board of directors or the shareholders’ meeting on the distribution of profits, effect payment from foreign exchange accounts at the designated foreign exchange bank, or effect exchange and payment at the designated foreign exchange bank.

– IV-8 – APPENDIX IV TAXATION AND FOREIGN EXCHANGE

According to 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項目等事項的決定》) (Guo Fa [2014] No. 50) promulgated by the State Council on October 23, 2014, it decided to cancel 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.

According 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) issued by the SAFE and implemented 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 local branch office of State Administration of Foreign Exchange at the place of its establishment; the proceeds from an overseas listing of a domestic company 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 and other disclosure documents.

According to 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), which was issued by the SAFE on February 13, 2015 and came into effect on June 1, 2015, it has canceled two of the administrative examination and approval items, being the confirmation of foreign exchange registration under 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項目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.

– IV-9 – APPENDIX V 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 IV – Taxation and Foreign Exchange” to this prospectus. 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, see “Supervision and Regulation” in this prospectus.

PRC LAWS AND REGULATIONS

The PRC Legal System

The PRC legal system is based on the PRC Constitution (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 documents. 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 (“Legislation Law”), the National People’s Congress (“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 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

– V-1 – APPENDIX V SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS 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 relevant provinces or autonomous regions. The standing committees of the people’s congresses of the provinces or autonomous regions shall 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 such provinces or autonomous regions. 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 such provinces or autonomous regions, a decision should be made 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 permissions of their respective departments based on the laws and administrative regulations, and the decisions and orders of the State Council. Provisions of departmental rules and regulations should be the matters related to the enforcement of 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 such 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律解釋工作的決議) passed on June 10, 1981, issues related to further clarification or supplement of laws should be interpreted or provided by the Standing Committee of the NPC, 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. At the regional level, the power to interpret provisions of local regulations is vested in the regional legislative and administrative authorities which promulgate such laws.

– V-2 – APPENDIX V SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

The PRC Judicial System

Under the Constitution, the Law of Organization of the People’s Court of the PRC (2018 Revision) (中華人民共和國人民法院組織法(2018修訂)) and the Law of Organization of the People’s Procuratorate of the PRC (2018 Revision) (中華人民共和國人民檢察院組織法(2018 修訂)), the people’s courts of the PRC are divided into the Supreme People’s Court, the local people’s courts at all levels and special people’s courts. The local people’s courts at all levels 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 certain people’s tribunals based on the status of the region, population and cases. The Supreme People’s Court shall be the highest judicial organ of the state. The Supreme People’s Court shall supervise the administration of justice by the local people’s courts at all levels and by the special people’s courts. The people’s courts at a higher level shall supervise the judicial work of the people’s courts at lower levels. The people’s procuratorates of the PRC are divided into the Supreme People’s Procuratorate, the local people’s procuratorates at all levels, Military Procuratorates and other special people’s procuratorates. The Supreme People’s Procuratorate shall be the highest procuratorial organ. The Supreme People’s Procuratorate shall direct the work of the local people’s procuratorates at all levels and of the special people’s procuratorates; the people’s procuratorates at higher levels shall direct the work of those at lower levels.

The people’s courts employ a two-tier appellate system, i.e., judgments or rulings of the second instance at the people’s courts are final. A party may appeal against the judgment or ruling of the first instance of a local people’s courts. The people’s procuratorate may present a protest to the people’s courts 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 courts 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 or the people’s courts at the next higher level finds any definite errors in a legally effective final judgment or ruling of the people’s court at a lower level, or if the chief judge of a people’s court at any level finds any definite errors in a legally effective final judgment or ruling of such court, the case can be retried according to judicial supervision procedures.

The Civil Procedure Law of the PRC (中華人民共和國民事訴訟法) (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 court, 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 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

– V-3 – APPENDIX V SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS 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.

A foreign individual, a person without nationality, a foreign enterprise or a foreign organization is given the same litigation rights and obligations as a citizen, a legal person or other organizations of the PRC when initiating an action or defending against a litigation at a people’s court. 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 foreign individual, a person without nationality, a foreign enterprise or a foreign 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 people’s court. In accordance with the international treaties to which the PRC is a signatory or participant or according to the principle of reciprocity, the 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 people’s 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 the 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.

Where a party requests for enforcement of an effective judgment or ruling made by a people’s court, but the opposite party or his property is not within the territory of the People’s Republic of China, the party may directly apply to the foreign court with jurisdiction for recognition and enforcement of the judgment or ruling, or the people’s court may, in accordance with the provisions of international treaties to which the PRC is a signatory or in which the PRC is a participant or according to the principle of reciprocity, request for recognition and enforcement by the foreign court. Similarly, for an effective judgment or ruling made by a foreign court that requires recognition and enforcement by a people’s court of the PRC, a party may directly apply to an intermediate people’s court of the PRC with jurisdiction for recognition and enforcement of the judgment or ruling, or the foreign court may, in accordance with the provisions of international treaties to which its country and the PRC are signatories or in which its country is a participant or according to the principle of reciprocity, request for recognition and enforcement by the people’s court, 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 social and public interest.

– V-4 – APPENDIX V 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

The Company Law of the People’s Republic of China 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, December 28, 2013 and October 26, 2018. The newly revised the PRC Company Law has been implemented since October 26, 2018.

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) (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 Special Regulations include provisions in respect of the overseas share offering and listing of joint stock limited companies.

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) (the “Mandatory Provisions”), jointly promulgated by the former Securities Commission of the State Council and the former State Commission for Restructuring the Economic System on September 29, 1994 prescribe that the provisions should be incorporated in the articles of association of joint stock limited companies to be listed on 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” (“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 property it owns and the liability of its shareholders to the company is limited to the extent of the shares they subscribe for.

Incorporation

A company may be established by promotion or subscription. A company shall have a minimum of two but no more than 200 people as its promoters, over half of which must be residents within the PRC. The registered capital of a company established by promotion is the total share capital subscribed for by all its promoters registered with company registration

– V-5 – APPENDIX V SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS authority. No share offering shall be made before the shares subscribed for by promoters are fully paid up. For companies established by share offering, the registered capital is the total paid-up share capital as registered with company registration authority. If laws, administrative regulations and decisions of the State Council provided otherwise on paid-in registered capital and the minimum registered capital, a 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 board of supervisors shall be elected and the board of directors shall apply for registration of establishment by filing the articles of association with the company registration authority, 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 prospectus and prepare a subscription letter 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 laws, 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 laws must be engaged to conduct a capital verification and furnish a certificate thereof. The promoters shall preside over and convene an inauguration meeting within 30 days from the date of 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 deadline stipulated in the 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 after 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 capacity of a legal person after approval of registration has been given by the relevant company registration authority for industry and commerce and a business license has been issued.

– V-6 – APPENDIX V SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

A company’s promoters shall be liable for: (1) the debts and expenses incurred in the establishment process jointly and severally if the company cannot be incorporated; (2) the 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 establishment as a result of the promoters’ fault.

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.

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 such nominal value.

A company must obtain the approval of CSRC to offer its shares to overseas public. The Special Regulations and the Mandatory Provisions provide that shares issued to foreign investors and listed overseas by a company 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 such overseas listed foreign shares proposed to be issued in addition to the number of underwritten shares. The issuance of the retained shares is deemed to be a part of this issuance.

Under 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.

– V-7 – APPENDIX V 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 to the public upon the approval by CSRC, a new share offering prospectus and financial accounting report must be announced and a subscription letter must be prepared. After the new shares issued by the company has been paid up, the change must be registered with the company registration authority 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 establishment of a company.

Reduction of Share Capital

A company shall 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 within 10 days and publish an announcement in newspapers within 30 days from the day on which the resolution approving the reduction was passed; (4) the creditors of the company are entitled to require the company to repay its debts or provide guarantees for such debts within 30 days from receipt of the notification or within 45 days from the date of the announcement if he/she/it has not received any notification; and (5) the company must apply to the company registration authority for change in registration.

Repurchase of Shares

Pursuant to the PRC Company Law, a company may not repurchase its own shares other than for the following purposes: (1) reducing its registered capital; (2) merging with other companies which hold its shares; (3) granting shares to its employees as incentives; (4) acquiring its shares at the request of its shareholders who vote in a shareholders’ general meeting against a resolution regarding a merger and division; (5) utilizing the shares for conversion of corporate bonds which are convertible into shares issued by the company; and (6) where it is necessary for the company to safeguard the value of the company and the interests of its shareholders. The acquisition by a company of its own shares on the grounds set out in item (1) to (2) above shall be approved by way of a resolution of a shareholders’ general meeting; the acquisition by a company of its own shares in circumstances as set out in

– V-8 – APPENDIX V SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS items (3), (5) and (6) above may be approved by way of a resolution at a board meeting with two-third or more of the directors present in accordance with the provisions of the company’s articles of association or the authorization of the shareholders’ general meeting.

Following the acquisition by a company of its own shares in accordance with these requirements, such shares shall be canceled within 10 days from the date of the acquisition under the circumstance in item (1); such shares shall be transferred or canceled within six months under the circumstances in items (2) or (4); the total shares held by the Company shall not exceed 10% of the total shares issued by the Company and such shares shall be transferred or canceled within three years under the circumstances in items (3), (5) or (6).

A listed company shall perform its information disclosure obligations in accordance with the provisions of the Securities Law of People’s Republic of China (the “PRC Securities Law”) when acquiring its own shares. The acquisition by a listed company of its own shares in circumstances as set out in items (3), (5) and (6) of this article shall be conducted through open centralized trading.

The Company shall not accept the shares of the Company as the subject of pledge.

Transfer of Shares

Shares held by shareholders may be transferred legally. Pursuant to the PRC Company Law, a shareholder should effect 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 other manner specified by laws and 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 stipulated by 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 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 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

– V-9 – APPENDIX V SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS year from 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.

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 on a shareholders’ general meeting or a meeting of the board of directors that has been convened or whose voting has been conducted in violation of the laws, regulations or the articles of association, or any resolution the contents of which is in violation of the 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 legally; (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 board of supervisors 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 (8) any other shareholders’ rights provided for in laws, administrative regulations, other normative documents and the articles of association.

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 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 board of supervisors or the reports of the supervisors; (5) to review and approve the company’s annual financial budgets proposals and final accounts proposals; (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

– V-10 – APPENDIX V SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS 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.

Pursuant 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 accounting year. An extraordinary general meeting is required to be held within two months upon the occurrence of any of the following: (1) the number of directors is less than the number required by law or less than two-thirds of the number specified in the articles of association; (2) the total 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 to convene an extraordinary general meeting; (4) the board deems necessary; (5) the board of supervisors so proposes; or (6) any other circumstances as provided for in the articles of association.

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 recommended 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, the board of supervisors shall convene and preside over the shareholders’ general meeting in a timely manner. If the board of supervisors fails to convene and preside over the shareholders’ general 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 the shareholders’ general 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 prior to 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 prior to the meeting. A single shareholder who holds, or several shareholders who jointly hold, more than three percent of the shares of the company may submit an interim proposal in writing to the board of directors within 10 days before the general meeting. The board of directors shall notify other shareholders within two days upon receipt of the proposal, and submit the interim proposal to the general meeting for deliberation. The contents of the interim proposal shall fall within the scope of powers of the general meeting, and the proposal shall provide clear agenda and specific matters for a resolution is to be made. A general meeting shall not make any resolution in respect of any matter not set out in the notices. Holders of bearer share certificates who intend to attend a general meeting shall deposit their share certificates with the company during the time from five days before the meeting to the conclusion of the meeting.

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In accordance with the Mandatory Provisions, a written notice of the general meeting stating, among other things, matters to be considered at the meeting as well as the time and venue 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.

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 notify shareholders again within five days by announcement of the matters to be considered at the meeting as well as the date and venue of the meeting, and the general meeting may be held by the company thereafter.

Pursuant to the PRC Company Law, shareholders present at a shareholders’ general meeting have one vote for each share they hold, save that the Bank’s 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 resolutions 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, in each case of which must be passed by more than 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 and such other matters must be approved by way of resolution of the general meeting, the board of directors shall convene a shareholders’ general meeting promptly to vote on such matters. A shareholder may entrust a proxy to attend the general meeting on his/her behalf. The proxy shall present the shareholders’ power of attorney to the company and exercise voting rights within the scope of authorization.

Minutes shall be prepared in respect of matters considered at the general meeting and the chairperson 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.

– V-12 – APPENDIX V SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

Pursuant to 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 more than two-thirds of the voting rights held by shareholders (including his/her proxies) 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 re-elected 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.

Under 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 proposals 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;

– V-13 – APPENDIX V SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

(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 manager and decide on his/her remuneration and, based on the 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 board of supervisors. 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. Resolutions on matters discussed at a meeting shall be minuted down. The directors attending the meeting shall sign the minutes.

If a resolution of the board of directors violates any 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.

Under 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 no more 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

– V-14 – APPENDIX V SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS enterprise, where no more 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 no more 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 provide other circumstances under which a person is disqualified from acting as a director of a company, including: (1) the person is under investigation by the judicial authorities after a claim has been brought for violating the criminal law, pending conclusion of the case; (2) the person is not eligible for enterprise leadership under the laws and administrative regulations; (3) the person is not a natural person; and (4) no more than five years have lapsed since the person was found guilty of violating relevant securities regulations and involved in fraud or dishonesty as adjudged by relevant regulatory authorities.

Pursuant to the PRC Company Law, the board of directors shall appoint a chairman and may appoint 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 jointly elected 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 board of supervisors shall consist of representatives of the shareholders and an appropriate proportion of representatives of the company’s staff, among which the proportion of representatives of the company’s staff shall not be less than one-third, and 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. The board of supervisors shall appoint a chairman and may appoint a vice chairman. The chairman and the vice chairman of the board of supervisors shall be elected by more than half of all the supervisors. Directors and senior management members shall not act concurrently as supervisors.

– V-15 – APPENDIX V SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

Pursuant to 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), the chairman of the board of supervisors shall be elected by more than two-thirds of all the supervisors.

The chairman of the board of supervisors shall convene and preside over board of supervisors meetings. Where the chairman of the board of supervisors is incapable of performing or is not performing his/her duties, the vice chairman of the board of supervisors shall convene and preside over board of supervisors meetings. Where the vice chairman of the board of supervisors is incapable of performing or is not performing his/her duties, a supervisor elected by more than half of the supervisors shall convene and preside over board of supervisors meetings.

Each term of office of a supervisor is three years and he/she may serve consecutive terms if re-elected. 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 board of supervisors 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 resolutions of the shareholders’ general meetings;

(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;

(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.

– V-16 – APPENDIX V SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

Supervisors may be present at board meetings and make inquiries or proposals in respect of the resolutions of the board. The board of supervisors 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 PRC Company Law, a company shall have a manager who shall be appointed or removed by the board of directors. Pursuant to the relevant provisions of the Mandatory Provisions, the manager, who reports to the board of directors, may exercise his/her powers:

(1) to manage the production and 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 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.

Pursuant to the PRC Company Law, senior management refers to 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.

– V-17 – APPENDIX V 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 PRC Company Law to comply with the relevant laws, administrative 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 abusing their authority in accepting bribes or other unlawful income and from misappropriating the company’s property. In addition, 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 and 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 for their own benefit commissions from 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.

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 laws, administrative regulation or the 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.

– V-18 – APPENDIX V SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

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 data to the board of supervisors, without impeding the discharge of duties by the board of supervisors or supervisors.

Where a director or senior management contravenes laws, administrative regulations or the articles of association in the performance of his/her duties resulting in any loss to the company, shareholder(s) holding individually or in aggregate more than 1% of the company’s shares consecutively for more than 180 days may request in writing that the board of supervisors institutes litigation at the people’s court. Where the supervisors violate laws, 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 the 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 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 the 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 the 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 the 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 good faith 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 PRC Company Law, a company shall establish its own financial and accounting systems according to laws, administrative regulations and the regulations of the competent financial departments under 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 laws, administrative regulations and the regulations of the financial departments under the State Council. The company’s financial reports shall be made available for shareholders’ inspection at the company within 20 days before the convening of an annual general meeting. A joint stock limited company that makes public stock offerings shall announce its financial reports.

– V-19 – APPENDIX V SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

When distributing each year’s profits after taxation, the company shall set aside 10% of its profits after taxation for the company’s statutory common reserve fund until the fund has reached more than 50% of the PRC 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 its own shares held by it.

The premium over the nominal value per share of the company on issue and other income as required by relevant government department 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 PRC Company Law, the engagement 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 conducts a vote on the dismissal of the accounting firm. The company should provide true and complete accounting evidence, accounting books, financial and accounting reports and other accounting information to the engaged accounting firm without any refusal, withholding or falsification of data.

– V-20 – APPENDIX V SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

The Special Regulations require a company to engage an independent qualified accounting firm to audit the company’s financial statements 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 PRC Company Law, a company shall not distribute profits before losses are covered and the statutory common reserve fund is provided. In addition, 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. Under the Mandatory Provisions, a company shall make foreign currency payments to shareholders through receiving agents.

Amendments to the Articles of Association

Pursuant to 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 more than 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 authorized by the State Council and approval of the securities regulatory department under the State Council, while the amendment to articles of association involving matters of company registration shall be registered with the relevant authority in accordance with laws.

Dissolution and Liquidation

Pursuant to 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 shall be 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

– V-21 – APPENDIX V SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

(5) the company is dissolved by the 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’ interests.

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 circumstance set forth in paragraph (1), (2), (4) or (5) above, 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 other persons determined by a shareholders’ general meeting. If a liquidation committee is not established within the stipulated period, the company’s creditors can apply to the people’s court for setting up a liquidation committee with designated relevant personnel to conduct 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 from 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.

– V-22 – APPENDIX V SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

A creditor 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 it to a shareholders’ general meeting or the People’s Court for endorsement. The remaining assets of the company’s property after payment of liquidation expenses, employee wages, social insurance expenses and statutory compensation, outstanding taxes and the company’s debts 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 conduct 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 the 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 the people’s court for verification, and to the company registration authority for the cancellation of company registration, and an announcement of its termination shall be published. Members of the liquidation committee shall be faithful in the discharge of their duties and shall perform their liquidation duties in accordance with laws. Members of the liquidation committee may not take bribes or other illegal income by utilizing their authorities and may not misappropriate the company’s properties. Members of the liquidation committee who have caused the company or its creditors to suffer from any loss due to intentional fault or gross negligence, should be liable for making compensations to the company or its creditors. In addition, liquidation of a company declared bankrupt according to laws shall be processed in accordance with 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 the issuance of shares, respectively, within fifteen months from the date of approval by CSRC.

– V-23 – APPENDIX V SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

In addition, if a company fails to issue all the shares as planned in one issue, it is not allowed to issue new shares not covered by the plan. If a company needs to adjust the issue plan, the shareholders’ general meeting shall adopt a resolution for the examination by the company examination and approval department authorized by the State Council and the approval by the Securities Committee of the State Council.

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. Upon the people’s court’s declaration that such certificate(s) will no longer be valid, 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

Pursuant to the PRC Company Law, 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 from the date of passing the resolution approving the merger notify their respective creditors and public the announcement of the merger in newspapers within 30 days. A creditor may, within 30 days from the date of reception of the notification, or within 45 days from the date of the announcement if he has not received such notification, request the company to settle any outstanding debts or provide corresponding 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 correspondingly 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 from the date on which the aforementioned resolution was passed and publicly announce the division in newspapers within 30 days. Except for the agreement in writing between the company and its creditors in respect of the settlement of debts before a division, the relevant liabilities of the company 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.

– V-24 – APPENDIX V SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

The PRC Securities Laws and 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 relevant application and approval procedures for public offerings of shares, issuing and trading of shares, the acquisition of listed companies, maintaining, clearing and transferring of shares, the disclosure of information, investigation, penalties and dispute resolutions with respect to a listed company.

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 PRC Securities Law took effect on July 1, 1999 and was revised as at 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 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 PRC 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.

– V-25 – APPENDIX V SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

Arbitration and Enforcement of Arbitral Awards

The Arbitration Law of the PRC (中華人民共和國仲裁法) (the “PRC Arbitration Law”) 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 provisions in accordance with the PRC Arbitration Law and the PRC Civil Procedure Law. Where the involved 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, the Listing Rules also require the contracts between the company and each director or supervisor shall include arbitration clauses. Pursuant to such clause, whenever a dispute or claim arises from right and 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 (i) a holder of overseas listed foreign shares and the company; (ii) a holder of overseas listed foreign shares and a holder of domestic shares; or (iii) 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 or the Hong Kong International Arbitration Center. 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 Hong Kong International Arbitration Center, then either party may apply to have such arbitration conducted in Shenzhen in accordance with the securities arbitration rules of the Hong Kong International Arbitration Center.

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 one party fails to comply with the arbitral award, the other party to the award may apply to a people’s court for its enforcement. However, the people’s court may refuse to enforce an arbitral award made by arbitration commission if there is any procedural irregularity (including, but not limited to, irregularity in the composition of arbitration tribunal or the making of an award on matters beyond the scope of the arbitration agreement or outside the jurisdiction of the arbitration commission).

Any party seeking to enforce an award of a foreign affairs arbitration organ of the PRC against a party who or whose property is not located within the PRC may apply to a foreign court with jurisdiction over the relevant matters for recognition and enforcement of the award.

– V-26 – APPENDIX V SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

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 treaties concluded or acceded to by the PRC.

The PRC acceded to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”) passed 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 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 (i) 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 based on the principle of reciprocity; and (ii) the New York Convention will only apply to disputes deemed under PRC laws 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 Mainland arbitral authorities acknowledged by Hong Kong can be enforced in Hong Kong, and awards made by Hong Kong arbitral authorities are also enforceable in mainland China. Where a court of the Mainland considers that the enforcement in the Mainland of a ruling made by Hong Kong arbitral authority will violate the social public interests of the Mainland, execution of such ruling may be ignored.

Summary of Material Differences between Hong Kong and the PRC Company Law

The Hong Kong laws applicable to a company incorporated in Hong Kong are the Companies Ordinance and the Companies (Winding up and Miscellaneous Provisions) Ordinance and are supplemented by common law and the rules of equity that are applicable to Hong Kong. As a joint stock limited company established in the PRC that is seeking a listing of shares on the 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.

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 incorporated under the PRC Company Law. This summary is, however, not intended to be an exhaustive comparison.

– V-27 – APPENDIX V SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

Incorporation of Corporate

Under the 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 October 26, 2018, has no provisions on minimum registered capital of joint stock companies, except that laws, administrative regulations and State Council decisions have separate provisions on paid-in registered capital and the minimum registered capital of joint stock companies, in which case the company should follow such provisions.

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. 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 PRC Securities Law, 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 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 transfer procedures of property rights 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 the Hong Kong law.

Restrictions on Shareholding and Transfer of Shares

Under PRC laws, the Bank’s Domestic Shares, which are denominated and subscribed for in Renminbi, may only be subscribed for and traded by the government or government-authorized departments, 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 foreign currency, may only be subscribed for and traded by investors from Hong Kong, Macau, Taiwan or any country and territory outside

– V-28 – APPENDIX V SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS the PRC, or qualified domestic institutional investors. However, qualified institutional investors and individual investors may trade the Southbound Hong Kong Trading Link and the Northbound Shanghai Trading Link (or the Northbound Shenzhen Trading Link) shares via participating in the Shanghai-Hong Kong Stock Connect and the Shenzhen-Hong Kong Stock Connect.

Under 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 transferred each year by the directors, supervisors and senior management of a joint stock limited company 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 shareholding and transfers of shares under Hong Kong law apart from six-month lockup on the company’s issue of shares and the twelve-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, the Mandatory Provisions contain special restrictions provisions on a company and its subsidiaries on providing aforesaid financial assistance 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. The relevant 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 of shares at a separate meeting, (ii) with the consent in writing of the holders representing at least 75% of the total voting rights of the relevant class of shares, or (iii) if there are provisions in the articles of association relating to the variation of those rights, then in accordance with those provisions.

– V-29 – APPENDIX V SUMMARY OF PRINCIPAL LEGAL AND REGULATORY 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.

Board of Supervisors

Under the PRC Company Law, a joint stock limited company’s directors and members of the senior management are subject to the supervision of board of supervisors. There is no mandatory requirement for the establishment of board of supervisors 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

Pursuant to Hong Kong law, minority shareholders may 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 aforesaid 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 from the date of 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.

– V-30 – APPENDIX V SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

The Mandatory Provisions also provides 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 of the company in default.

Protection of Minorities

Under Hong Kong law, a shareholder who complains that the business 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, if the application of members reaches a specified number, 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 provides that, a company which encounters substantial difficulties in its operation and management and its continuance will cause significant loss to the interests of its shareholders, shareholders of the company who hold more than ten percent of the voting rights of all shareholders may, when no other solutions, apply to a people’s court for the dissolution of the company. The Mandatory Provisions, however, provides that a controlling shareholder shall 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 to shareholders at least 20 days and 15 days before the date of such meeting, respectively. Under the Special Regulations and the Mandatory Provisions, at least 45 days’ written notice must be given to all shareholders before the meeting 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 shareholders unless the articles of association of the company otherwise provided. For companies with only one shareholder, the quorum must be one shareholder. The PRC Company Law does not specify the quorum for a shareholders’ general meeting, but pursuant to the Special Regulations and the Mandatory Provisions, shareholders’ general meetings of the

– V-31 – APPENDIX V SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS company may only be convened after replies to the notice of that meeting have been received from shareholders whose shares represent at least 50% of the voting rights of the company at least 20 days before the proposed date of the meeting, or if the replies of shareholders is not reached 50% of the voting rights, the company shall notify its shareholders again within five days by way of a public announcement and the shareholders’ general meeting may be held thereafter.

Voting

Under the Companies Ordinance, an ordinary resolution of shareholders’ general meetings should be passed by more than half of the votes and a special resolution of shareholders’ general meetings should be passed by no less than 75% of such votes. Under the PRC Company Law, the passing of any resolution requires affirmative votes of shareholders representing more than half of the voting rights held 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 held 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 issued 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’s annual general meeting, not less than 21 days before such meeting. A joint stock limited liability company is required under the PRC laws to prepare its financial statements in accordance with the PRC GAAP. In addition, pursuant to the Mandatory Provisions, 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 such 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 stated in the abovementioned two kinds of financial statements shall prevail in the allocation of after-tax profits for the accounting year. 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.

– V-32 – APPENDIX V SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

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, share register, counterfoil of company debentures, resolutions of board meetings, resolutions 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 laws 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 members under Division 2 of Part 13 of the Companies Ordinance, which requires the sanction of the court. Under the PRC laws, merger, division, dissolution or change the form of a joint stock limited company has to be approved by shareholders at the shareholders’ general meeting.

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 Hong Kong International Arbitration Center or the China International Economic and Trade Arbitration Commission, at the claimant’s choice.

– V-33 – APPENDIX V SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

Appropriations to the Statutory Common Reserve Fund

Under the PRC Company Law, when distributing the after-tax profits for the current year, a joint stock limited company shall allocate 10% of its profits to the statutory common 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 management 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 management 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 management).

Dividends

The company has the power in certain circumstances to withhold, and pay to the relevant tax authorities, any tax payable under PRC laws 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 laws, 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 management should be loyal and diligent. Under the Mandatory Provisions, directors, supervisors and senior management are not permitted, without the 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 special circumstances) in a year, whereas, as required by the PRC Company Law and the 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.

– V-34 – APPENDIX V SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

HONG KONG LISTING RULES

The Listing Rules provide additional requirements which apply to us 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 us.

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 to 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.

Accountants’ Report

The accountants’ report must normally be drawn up in conformity with: (a) HKFRS; or (b) IFRS; or (c) 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.

– V-35 – APPENDIX V SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

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 capitalization at the time of listing of not less than HK$50 million. The Hong Kong Stock Exchange may, at its discretion, accept a lower percentage of between 15% and 25% if the issuer is expected to have a market capitalization at the time of listing of more than HK$10,000 million.

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 Hong Kong Takeovers Code 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.

– V-36 – APPENDIX V SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

Preemptive Rights

Except in the circumstances mentioned below, the directors of a company are required to obtain the approval by a special resolution of shareholders in general meeting, and the approvals by special resolutions of the holders of domestic shares and H shares (each being otherwise entitled to vote at general meetings) at separate class meetings conducted in accordance with the company’s articles of association, prior to (i) authorizing, allotting, issuing or granting shares or securities convertible into shares, or options, warrants or similar rights to subscribe for any shares or such convertible securities; or (ii) any major subsidiary of the Bank making any such authorization, allotment, issue or grant so as materially to dilute the percentage equity interest of the company and its shareholders in such subsidiary.

No such approval will be required under the Listing Rules to the extent that (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 securities supervision or administration authorities of State Council; or (iii) where upon approval by securities supervision or administration authorities of State Council, the shareholders of domestic shares of the company transfer its shares to overseas investors and such shares are listed and traded in foreign markets.

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 listed company or any of its subsidiaries: (1) the term of the contract exceeds three years; or (2) 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.

– V-37 – APPENDIX V SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

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 or the Listing Rules.

Documents 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:

• a complete duplicate register of shareholders;

• a report showing the state of its issued share capital;

• its latest audited financial statements and the reports of the directors, auditors and supervisors, if any, thereon;

• special resolutions;

• reports showing the number and nominal value of securities repurchased by it 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);

• copy of the latest annual return filed with the SAIC or other competent PRC authority; and

• for shareholders only, copies of minutes of shareholders’ meetings.

Receiving Agents

Under Hong Kong laws, 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.

– V-38 – APPENDIX V SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

Statements in H Share Certificates

A PRC issuer is required to ensure that all of its listing documents and H 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:

• 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;

• agrees with the company, each shareholder, director, supervisor, manager and other senior management and it (acting both for the company and for each director, supervisor, manager and other senior management), agree 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 tribunal to conduct hearings in open session and to publish its award. Such arbitration shall be final and conclusive;

• agrees with the company and each shareholder that shares are freely transferable by the holder thereof; and

• authorizes the company to enter into a contract on his behalf with each director and senior management whereby such directors and senior management 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.

– V-39 – APPENDIX V SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

Contract between the PRC Issuer and Directors, Senior Management and Supervisors

A PRC issuer is required to enter into a contract in writing with every director and senior management containing at least the following provisions:

• an undertaking by the director or senior management to itself to observe and comply with the PRC Company Law, the Special Regulations, its articles of association, the Hong Kong Takeovers Code 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;

• an undertaking by the director or senior management to it acting as agent for each shareholder to observe and comply with his obligations to our shareholders as stipulated in the articles of association; and

• an arbitration clause which provides that whenever any differences or claims arise from the contract, its articles of association or any rights or obligations conferred or imposed by the PRC Company Law or other relevant laws and administrative regulations concerning affairs between us and its directors or senior management and between a holder of H shares and a director or senior management, such differences or claims will be referred to arbitration at either the CIETAC in accordance with its 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 will 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 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.

– V-40 – APPENDIX V SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

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 Hong Kong Takeovers Code and such other relevant ordinances and regulations will apply to a PRC issuer.

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 law or the laws of any jurisdiction is recommended to seek independent legal advice.

– V-41 – APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION

Set out below is a summary of the principal provisions of the Articles of Association, the objective of which is to provide investors with an overview of the Articles of Association.

As the information contained below is in summary form, it may not contain all the information that may be important to potential investors. Copies of the full English and Chinese texts of the Articles of Association are available for inspection as mentioned in “Appendix VIII – Documents Delivered to the Registrar of Companies and Available for Inspection”.

The Articles of Association were adopted by the Bank’s Shareholders in the Shareholders’ general meeting held on March 26, 2019 and were approved by the CBIRC Guizhou Office on April 29, 2019. The Articles of Association will become effective on the date that the Bank’s H Shares are listed on the Hong Kong Stock Exchange.

DIRECTORS AND OTHER SENIOR MANAGEMENT

Power to Allot and Issue Shares

There is no provision in the Articles of Association empowering the Directors to allot and issue shares.

To increase the registered capital of the Bank, the proposal must be submitted for approval by a special resolution at a Shareholders’ general meeting.

Power to Dispose of the Assets of The Bank or Any Subsidiary

For the disposal of 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 months preceding such proposal for disposal exceeds thirty-three percent 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’ 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.

A breach of the above paragraph shall not affect the validity of transactions entered into in disposing of fixed assets.

– VI-1 – APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION

Remunerations and Compensation for Loss of Office

The Bank shall enter into written contracts with its Directors and Supervisors regarding remuneration which are subject to the prior approval from the Shareholders’ general meeting. The aforesaid “remunerations” include:

(a) remuneration for the Directors, Supervisors or senior management personnel of the Bank;

(b) remuneration for the Directors, Supervisors or senior management personnel of the subsidiary banks of the Bank;

(c) remuneration for those providing other services for managing the Bank and its subsidiary banks;

(d) compensation to Directors or Supervisors for loss of office or upon retirement.

Save as specified in the aforesaid contracts, the Directors or Supervisors shall not file a lawsuit against the Bank for the aforesaid interests.

The remuneration contracts between the Bank and its Directors or Supervisors shall stipulate that if the Bank is to be 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:

(a) a takeover offer made by any person to all Shareholders;

(b) a takeover offer made by any person with the intent of becoming a controlling Shareholder. See the definition of “controlling Shareholder” in “– Rights of Minority Shareholders”.

If the Directors and Supervisors concerned do not comply with the preceding provisions, any funds received by them shall go to the persons who sell their shares as a result of the aforesaid offer. The Directors and Supervisors shall bear the expenses arising from the proportional distribution of such amounts, 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 loans or loan guarantees to the Directors, Supervisors, President and other senior management personnel of the Bank and its parent company, nor shall the Bank provide the same to their connected persons.

– VI-2 – APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION

The preceding provision shall not apply to the following circumstances:

(a) loans or loan guarantees provided by the Bank to its subsidiaries;

(b) 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, with which the foregoing persons can make payments in the interests of the Bank or for the expenses incurred in performing their duties and responsibilities;

(c) loans and loan guarantees can be provided by the Bank to the relevant Directors, Supervisors, President and other senior management personnel of the Bank and their connected persons, but provision of loans or loan guarantees shall be subject to normal business conditions.

If the Bank provides a loan in breach of the provisions above, regardless of the terms of the loan the person who has received the loan shall repay it immediately.

A loan guarantee provided by the Bank in breach of the provisions above shall be unenforceable against the Bank, unless:

(a) at the time when the loan was provided to a connected person of any of the Directors, Supervisors, President and other senior management personnel of the Bank or its parent company, the lender did not know the relevant circumstances;

(b) the collateral provided by the Bank has been lawfully disposed of by the lender to a bona fide purchaser.

The guarantee referred to in the preceding provisions shall include the act of the guarantor to undertake liability or provide property to ensure fulfillment of obligations by the obligor.

Financial Assistance for the Acquisition of Shares in The Bank

The Bank (including its branches) or its subsidiaries shall not offer any financial assistance at any time by any means to purchasers or prospective purchasers of the Shares of the Bank for their purchase or purchasing intention of the Shares of the Bank. The purchasers of the Shares of the Bank as mentioned above shall include the persons who have directly or indirectly assumed obligations as a result of the purchase of the Shares of the Bank.

The Bank (including its branches) or its subsidiaries shall not offer any financial assistance at any time by any means in order to reduce or relieve the obligations of the aforesaid obligors arising from their purchase or purchasing intention of the Shares of the Bank.

– VI-3 – APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION

Financial assistance referred to in the Articles of Association shall include, without limitation, the following means:

(a) financial assistance given as gifts;

(b) financial assistance given by guarantee (including the assumption of liability by the guarantor or the provision of properties by the guarantor to secure the performance of obligations by the obligor), indemnity (other than an indemnity in respect of the Bank’s own error) or the release or waiver of any rights;

(c) 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, and the assignment of rights arising under such loans or agreement;

(d) any other form of financial assistance given by the Bank when the Bank is insolvent, has no net assets, or under any other situations when its net assets would be reduced to a material extent.

The obligations referred to in the aforesaid provisions shall include the obligations of an obligor which have arisen by entering into an agreement or making an arrangement (regardless of whether such agreement or arrangement is enforceable, or is 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.

The following acts are not deemed as prohibited under Article 40 of the Articles of Association:

(a) 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 an overall plan of the Bank;

(b) the lawful distribution of the Bank’s properties in the form of dividends;

(c) the distribution of dividends in the form of shares;

(d) the reduction of registered capital, repurchase of shares, and adjustment of shareholding structure, etc. in accordance with the Articles of Association;

(e) 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);

– VI-4 – APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION

(f) 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 there causes a reduction, the financial assistance is taken from the Bank’s distributable profits).

Disclosure of Interests in Contracts with The Bank

If the Directors, Supervisors, President and other senior management personnel of the Bank have any direct or indirect material conflict of interests in any contracts, transactions or arrangements already concluded or under planning with the Bank (except the employment contracts between the Bank and its Directors, Supervisors, President and other senior management personnel), regardless of whether relevant matters are usually subject to the approval and consent of the Board, such persons shall disclose the nature and extent of the interests to the Board as soon as possible.

Unless the Directors, Supervisors, President and other senior management personnel of the Bank with conflicts of interest have disclosed their interests to the Board in accordance with the preceding provisions, and the Board has approved the matter 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 of that the Directors, Supervisors, President and other senior management personnel are in breach of their obligations.

If a connected person of a Director, Supervisor, President or other senior management personnel of the Bank has any conflict of interests with any contract, transaction or arrangement, the Director, Supervisor, President or other 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, if any Director, Supervisor, 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 contents 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.

REMUNERATION

The remuneration of Directors must be approved by Shareholders at a Shareholders’ general meeting. See “– Remunerations and Compensation for Loss of Office” above.

– VI-5 – APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION

APPOINTMENT, REMOVAL AND RETIREMENT

The qualifications of the Directors and senior management personnel of the Bank shall be subject to examination by the banking regulatory authorities. Directors of the Bank shall be natural persons, and shall be elected or replaced by the Shareholders’ general meeting. The position of a Director may be taken by a Shareholder or a person who is not a Shareholder. Directors are not required to hold the Shares of the Bank. The term of office of a Director shall be three years, and a Director may be re-elected and re-appointed upon expiry of his/her term of office.

According to the number of Directors to be elected in the quorum of Directors specified in the Articles of Association, the Nomination Committee of the Board may nominate candidates for Directors; Shareholders individually or jointly holding above three percent of the Bank’s total Shares with voting rights may also nominate candidates for Directors to the Board; however, a Shareholder and his/her connected person shall not nominate candidates for Directors and Supervisors at the same time; where a candidate for Director nominated by a Shareholder or his/her connected person is approved to sit on the Board, the Shareholder shall not nominate any candidate for Supervisor until the term of office of the Director expires or the Director is replaced; and the number of candidates for Directors nominated by a Shareholder and his/her connected person shall not exceed one third of the number of members of the Board.

The Board of the Bank shall be composed of five to nineteen Directors. In particular, independent Directors shall account for no less than one third of the total number of Directors of the Bank. The Board shall have one chairman, which shall be elected or removed from office by more than half of all Directors. The chairman may be re-elected and re-appointed and shall be subject to audit by the audit department upon resignation.

A person shall not hold the position of Director, Supervisor or senior management personnel of the Bank if he/she:

(a) is a person who has been banned in the PRC Company Law and the PRC Commercial Banking Law from holding the position of Director, Supervisor or senior management personnel of the Bank;

(b) is a person who has been removed from office by commercial banks or other financial institutions or organizations for failure to fulfill obligation of good faith;

(c) is an individual or a company employee who has outstanding loans payable to the Bank;

(d) is a Shareholder or a person holding positions in the Shareholders’ entities whose balances of borrowings (excluding borrowings guaranteed by the pledge of bank deposit certificate or government bonds) from the Bank exceed his/her audited net equity value of the previous year of the Bank;

– VI-6 – APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION

(e) is a person who does not meet conditions specified by the banking regulatory authorities;

(f) is subject to investigation by judicial body for violation of criminal law where the said investigation has not yet been concluded;

(g) is banned from holding leadership position in enterprises as stipulated by laws and regulations;

(h) is not a natural person;

(i) has been convicted of contravention of provision of relevant securities regulations by relevant competent authority, and such conviction involves a finding that he/she has acted fraudulently or dishonestly, where less than five years have elapsed since the date of the conviction.

The validity of any act by a Director, President or other senior management personnel of the Bank made on behalf of the Bank against a third party acting in good faith shall not be affected by any noncompliance in regulations of that person’s position, election procedure or qualifications.

CREDIT POWERS

The Articles of Association 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, except for:

(a) provisions which authorize the Board to formulate proposals on the issue and listing of bonds or other securities issued by the Bank;

(b) provisions which provide that the issue and listing of any class of shares, warrants and other similar securities, bonds by the Bank shall be approved by the Shareholders’ general meeting by a special resolution.

– VI-7 – APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION

AMENDMENTS TO THE ARTICLES OF ASSOCIATION OF THE BANK

In any of the following circumstances, the Bank shall amend the Articles of Association:

(a) Upon amendments to the PRC Company Law, the PRC Commercial Banking Law or relevant laws and regulations, matters specified in the Articles of Association become inconsistent with the provisions of the amended laws and regulations;

(b) a change in the Bank causes inconsistence with those contained in the Articles of Association;

(c) the Shareholders’ general meeting decides to amend the Articles of Association.

For any amendment to the Articles of Association, the Board shall propose the amendment draft, which shall be reported to the banking regulatory authorities for approval after being deliberated and adopted by the Shareholders’ general meeting. The Board shall amend the Articles of Association in accordance with the resolution of the Shareholders’ general meeting on the Articles of Association and approval opinions of the banking regulatory authorities. If registration matters of the Bank 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

The Bank’s proposal to change or nullify the rights of class Shareholders shall be subject to approval by way of a special resolution at a Shareholders’ general meeting and approval by the Shareholders of the class so affected at a class meeting convened in accordance with the Articles of Association.

The rights of a certain class of Shareholders shall be deemed to be changed or nullified in the following circumstances:

(a) to increase or reduce the number of the shares of that class, or increase or reduce the number of the shares of another class which enjoy the same or more voting rights, distribution rights or other privileges as compared with shares of that class;

(b) to convert all or part of the shares of that class into another class, convert all or part of the shares of another class into that class, or grant such conversion rights;

(c) to nullify or reduce the rights of that class of shares to receive accrued dividends or cumulative dividends;

(d) to reduce or nullify the privileged rights of that class of shares to acquire dividends or obtain distribution of property during liquidation of the Bank;

– VI-8 – APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION

(e) 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;

(f) to nullify or reduce the rights of that class of shares to receive amounts payable by the Bank in a particular currency;

(g) 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;

(h) to restrict the transfer of ownership of that class of shares, or increase the restrictions;

(i) to grant the share subscription options or share conversion options of that or another class of shares;

(j) to increase the rights or privileges of other class(es) of shares;

(k) any restructuring scheme of the Bank that may result in the assumption of disproportionate responsibilities by different classes of Shareholders during the restructuring;

(l) to revise or nullify the provisions of “Chapter 5 Special Procedures for Voting by a Class of Shareholders” under the Articles of Association.

Where issues specified in (b) to (h), (k) to (l) of the preceding provisions are involved, the affected class Shareholders, whether or not they are entitled to vote at Shareholders’ general meetings originally, shall have the right to vote at class general meetings. However, the Shareholders with conflicts of interests 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.

When convening a meeting for a certain class of Shareholders, the Bank shall issue a written notice, forty-five 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.

– VI-9 – APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION

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 the Articles of Association 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 Shareholders 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:

(a) 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 months, and the amount of each class of shares intended to be issued is not more than twenty percent of the outstanding shares of the respective class;

(b) the Bank’s plan on issuing Domestic Shares and Overseas Listed Foreign Shares at the time of establishment is completed within fifteen months from the date of approval by the securities regulatory authorities under the State Council;

(c) with the approval of relevant competent authorities such as banking regulatory authorities and securities regulatory authorities under the State Council, a Shareholder of the Bank has listed and traded the unlisted shares held by him/her overseas.

For the purposes of the class rights provisions of the Articles of Association, the meaning of the Shareholders with conflict of interests is:

(a) if the Bank has made an offer to repurchase to all of its Shareholders in the same proportion in accordance with the Articles of Association or has repurchased its own Shares through public trading on a stock exchange, “Shareholders with conflicts of interests” shall mean the “controlling Shareholders” defined in the Articles of Association;

(b) if the Bank has repurchased its own Shares by way of agreement over the counter in accordance with the Articles of Association, “Shareholders with conflicts of interests” shall mean Shareholders who are connected with the said agreement;

(c) under a restructuring scheme of the Bank, “Shareholders with conflicts of interests” 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.

– VI-10 – APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION

RESOLUTIONS-MAJORITY REQUIRED

The resolutions of a Shareholders’ general meeting shall either be classified as ordinary resolutions or special resolutions.

Ordinary resolutions made by a Shareholders’ general meeting shall be approved by a simple majority of voting rights held by the Shareholders (including their proxies) attending the meeting.

Special resolutions made by a Shareholders’ general meeting shall be approved by above two-thirds of voting rights held by the Shareholders (including their proxies) attending the meeting.

VOTING RIGHTS

The “one share, one vote” voting system is adopted for the Shareholders’ general meeting, that is, a Shareholder (including his/her proxy) attending the Shareholders’ general meeting shall exercise his/her voting rights based on the number of shares with voting rights represented by him/her. Each share shall have one vote. The Shares held by the Bank have no voting rights.

Any voting of the Shareholders at a Shareholders’ general meeting must be taken by poll except where the chairman of the meeting, in good faith, decides to allow a resolution which relates purely to procedures or administrative matters to be voted by a show of hands.

On a poll taken at a meeting, a Shareholder (including his/her proxies) who is entitled to two or more votes need not cast all of his/her votes in the same way of pros or cons.

REQUIREMENT FOR ANNUAL GENERAL MEETINGS

The annual general meeting shall be held once a year and within six months after the previous financial year end.

ACCOUNTS AND AUDIT

The Bank shall establish its financial and accounting system in accordance with laws, regulations, PRC accounting standards formulated by the competent financial department under the State Council and the relevant provisions of the banking regulatory authorities.

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,

– VI-11 – APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION 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.

The Bank shall publish its financial report twice in each financial year, i.e. publish the interim financial report within sixty days after the end of the first six months of each financial year and publish its annual financial report within one hundred and twenty days after the end of each financial year.

The interim results or financial information published 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 reports of the Bank shall be kept at the principal place of business of the Bank twenty days before the convening of the annual general meeting for the inspection and review of Shareholders. Each Shareholder of the Bank shall be entitled to obtain the financial reports mentioned in the Articles of Association.

Except as otherwise provided in the Articles of Association, the Bank shall send the aforesaid report or report of the Board along with the balance sheet and income statement or income and expenditure statement to each holder of H Shares by pre-paid post at least twenty-one days prior to the convening of the annual general meeting. The address of the recipients shall be the address registered in the register of Shareholders. If the laws and regulations or the securities regulatory authorities in the locality in which the Shares of the Bank are listed have provided otherwise, such provisions shall prevail.

NOTICE OF MEETINGS AND BUSINESS TO BE CONDUCTED THEREAT

There are two types of Shareholders’ general meetings: annual general meetings and extraordinary general meetings.

An extraordinary general meeting shall be convened within two months from the date of occurrence of any of the following events:

(a) the number of Directors is less than the minimum number required by the PRC Company Law or less than two-thirds of the minimum number of Directors of the Bank required by the Articles of Association;

(b) the outstanding loss of the Bank is one-third of the Bank’s total share capital;

(c) Shareholders who individually or jointly hold more than ten percent of the Bank’s shares with voting rights make a request in writing;

(d) the Board deems it necessary to convene the meeting;

– VI-12 – APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION

(e) the Board of Supervisors proposes to convene the meeting;

(f) above half of the independent Directors propose to convene the meeting (the only two independent Directors of the Bank unanimously propose to convene the meeting);

(g) above half of the external Supervisors propose to convene the meeting (the only two external Supervisors of the Bank unanimously propose to convene the meeting);

(h) the chairman proposes to convene the meeting in special circumstances;

(i) other circumstances as stipulated by laws, regulations, securities regulatory authorities in the locality in which the Shares of the Bank are listed or the Articles of Association.

The amount of shareholding mentioned in (c) above is calculated as from the day when the Shareholders make the request in writing.

When the Bank is to convene a Shareholders’ general meeting, the Board shall issue a written notice forty-five days before 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 days before the Shareholders’ general meeting is convened.

The Bank shall calculate the number of voting shares represented by Shareholders who wish to attend the meeting based on the written replies received twenty days before the Shareholders’ general meeting that is convened by the Bank. Where the number of voting shares represented by Shareholders who wish to attend the meeting reaches above half of the total voting Shares of the Bank, the Bank may convene the Shareholders’ general meeting. If this threshold is not met, the Bank shall again inform the Shareholders within five days via an announcement stipulating the matters to be considered and the date and venue 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:

(a) be issued in writing;

(b) specify the date, venue and time of the meeting;

(c) state the matters to be discussed at the meeting;

– VI-13 – APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION

(d) provide Shareholders with all necessary information and explanation to enable Shareholders to make informed decisions on the matters to be discussed. This means that (but is not limited to) when any merger, share repurchase, share capital reorganization or any other restructuring is proposed by the Bank, the detailed terms and agreements (if any) and detailed explanation as to the cause and effect of such a proposed transaction shall be provided;

(e) if any of the Directors, Supervisors, President and other senior management personnel have material interest in the matters to be discussed, they shall disclose the nature and extent of such interest; and if the effects of the matters to be discussed have a different effect on a Director, Supervisor, President and other senior management personnel as Shareholders compared to other Shareholders of that same class, they shall explain this difference;

(f) contain the full text of any proposed special resolution to be voted on at the meeting;

(g) contain a prominent statement stating that a Shareholder entitled to attend and vote at the meeting, is entitled to appoint one or above proxy to attend and vote on his/her behalf, and such proxy need not be a Shareholder of the Bank;

(h) specify the time and venue for delivering the proxy form authorizing the proxy to vote of the relevant meeting;

(i) specify the date of registration of shareholdings;

(j) specify the name and phone number of the contact person of the meeting;

(k) specify the time when the meeting notice is sent.

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 to fifty day interval prior to the date on which 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.

– VI-14 – APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION

The Shareholders’ general meeting shall be an organ of power of the Bank. It may exercise the following powers in accordance with the laws, regulations and the Articles of Association:

(a) to decide on the business policies and investment plans of the Bank;

(b) to elect and replace Directors which are not appointed as representatives of the employees and to decide on the remuneration of the relevant Directors;

(c) to elect and replace Supervisors which are not appointed as representatives of the employees and to decide on the remuneration of the relevant Supervisors;

(d) to examine and approve reports made by the Board;

(e) to examine and approve reports made by the Board of Supervisors;

(f) to examine and approve the Bank’s annual financial budget plans and final account plans;

(g) to examine and approve the Bank’s profit distribution plans and loss recovery plans;

(h) to adopt resolutions concerning the increase or reduction in the Bank’s registered capital;

(i) to adopt resolutions on the issuance of bonds by the Bank;

(j) to adopt resolutions on the major asset transfer, repurchase of the Bank’s Shares, merger, division, dissolving and liquidation of the Bank;

(k) to amend the Articles of Association;

(l) to listen to the results of evaluation by the Board on the Directors and by the independent Directors on each other;

(m) to listen to the results of evaluation by the Board of Supervisors on the Supervisors and by the external Supervisors on each other;

(n) to consider the proposals by Shareholders individually or jointly holding more than 3% of the Bank’s Shares with voting rights;

(o) to consider and approve any single related party transaction with an amount exceeding 10% of the Bank’s net capital;

(p) to listen to the regulatory opinions of the banking regulatory authorities for the Bank and the execution of reform by the Bank;

– VI-15 – APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION

(q) to adopt resolutions on the engagement, dismissal or discontinuation of the appointment of the accounting firm;

(r) to examine other issues which shall be decided by the Shareholders’ general meeting as stipulated by laws and regulations, securities regulatory authorities in the locality in which the Shares of the Bank are listed, the Articles of Association and other internal systems of the Bank.

The following matters shall be approved by ordinary resolutions at a Shareholders’ general meeting:

(a) the work reports of the Board of Directors and the Board of Supervisors;

(b) profit distribution plan and loss recovery plan prepared by the Board of Directors;

(c) election and replacement of Directors and Supervisors which are not appointed as representatives of the employees, and decision on matters relating to the remunerations of Directors and Supervisors;

(d) annual budgets, final accounts, balance sheets, statements of profits and other financial statements of the Bank;

(e) engagement, dismissal or discontinuation of the appointment of the accounting firm;

(f) related party transactions required to be approved within the functions and powers of the Shareholders’ general meeting;

(g) matters other than those stipulated by laws and regulations or the Articles of Association to be approved by special resolutions.

The following matters shall be approved by special resolutions at a Shareholders’ general meeting:

(a) increase or reduction in the registered capital of the Bank and issuance of shares of any class, warrants and other similar securities;

(b) issuance of bonds by the Bank;

(c) the Bank’s material acquisition and repurchase of Shares of the Bank;

(d) the division, merger, dissolution and liquidation or change of the form of the Bank;

(e) amendment to the Articles of Association;

– VI-16 – APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION

(f) any other matters specified in the laws and regulations and the Articles of Association or confirmed by an ordinary resolution at a Shareholders’ general meeting that it may have material impact on the Bank and accordingly shall be approved by special resolutions.

TRANSFER OF SHARES

Unless otherwise specified by laws and regulations and the securities regulatory authorities in the locality in which the Shares of the Bank are listed, the fully paid shares of the Bank may be transferred legally and freely without any lien attached.

Registration shall be made in the share registrar authorized by the Bank for the transfer of the Shares of the Bank. Transfer of Shares of the Bank has to conform to relevant regulations of relevant regulatory authorities including the banking regulatory authorities.

Investors and their related parties and persons acting in concert separately or jointly purchasing or initially or cumulatively holding more than 5% of the Bank’s total capital or shares in other ways shall obtain prior consent of the banking regulatory authorities.

The official reply for the administrative licensing of proposed holding of more than 5% of total shares of the Bank through a domestic or overseas securities market shall be valid for six months. 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, such Shareholder shall make rectification within the prescribed period and no corresponding Shareholders’ rights attached thereto shall be exercised before rectification.

Investors and their related parties and persons acting in concert separately or jointly holding more than 1% but less than 5% (exclusive) of the Bank’s total capital or shares shall report to the banking regulatory authorities within ten workdays after obtaining corresponding equities.

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, proposal right and right of disposition.

Transfer of all H Shares shall be executed with a written transfer document 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 written transfer document may be signed by hand, or be stamped with the valid seal of the Bank (if the transferor or the transferee is the Bank). 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 written transfer document can be signed by hand or by print.

All transfer documents shall be kept at the legal address of the Bank, the address of the share registrar of the Bank or other place designated by the Board from time to time.

– VI-17 – APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION

Shares in the Bank held by promoters may not be transferred within one year of the establishment of the Bank.

Shares in the Bank held by Directors, Supervisors, President and other senior management personnel of the Bank shall not be transferred within six months upon completion of their terms of office.

Shares in the Bank held by Shareholders which are frozen according to laws or whose ownership is disputable may not be transferred.

Shares held by Shareholders who intend to transfer the shares but have outstanding credit borrowings (those of related parties not included) or overdue borrowings in the Bank shall not be transferred, unless proceeds from the shares to be transferred are used to repay the borrowings from the Bank.

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.

PLEDGE OF SHARES

The Bank does not accept Shares of the Bank as the subject of pledges.

If Shareholders serving as Directors or Supervisors of the Bank or Shareholders who can directly or indirectly, or jointly hold or control above two percent of the Shares or voting rights of the Bank pledge the Shares of the Bank, they shall make an application to the Board of the Bank for filing in advance to state basic information such as reason for pledge, number of shares, duration of the pledge and the pledgee. Filing shall not be made if the Board determines that it has material adverse effect on the stability of the Bank’s shareholdings, corporate governance, risks and control over its related party transactions. 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 at which such proposal is considered.

POWER OF THE BANK TO REPURCHASE OUR OWN SHARES

In the following circumstances, the Bank may, subject to laws and regulations, the Articles of Association and requirements of the securities regulatory authorities in the locality in which the Shares of the Bank are listed, repurchase its outstanding shares in accordance with the procedures set forth in the Articles of Association and upon approval by relevant competent authorities of the State:

(a) cancellation of shares for reduction of the Bank’s registered capital;

(b) merging with another company holding shares in the Bank;

(c) using the shares for employee share ownership plans or as equity incentives;

– VI-18 – APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION

(d) requests to the Bank for acquiring their shares from Shareholders who have voted against the resolutions passed at a Shareholders’ general meeting on the merger or division of the Bank;

(e) using the shares for convertible bonds issued by the Bank to convert them to stocks;

(f) the necessity of protecting the Bank’s value and equity interests;

(g) other circumstances stipulated by laws and regulations.

Approval shall be obtained at a Shareholders’ general meeting when the Bank is to repurchase its own shares because of the circumstances set out in (a) and (b) above. The repurchase of the Bank’s Shares under the circumstances set out in (c), (e) and (f) may be resolved at a Board meeting attended by more than two thirds of Directors according to the Articles of Association or authorization of a Shareholder’s general meeting.

After the Bank has repurchased its own shares in accordance with the preceding provision, the shares so repurchased shall be canceled within ten days from the date of repurchase (under the circumstances set out in (a)), or shall be transferred or canceled within six months (under the circumstances set out in (b) and (d)). Under the circumstances set out in (c), (e) and (f), the total shares of the Bank held by the Bank shall not be more than 10% of the total issued shares of the Bank and shall be transferred or canceled within three years.

The Bank shall perform relevant information disclosure obligations according to relevant laws and regulations when repurchasing its Shares. Where the Bank repurchases its Shares under the circumstances set out in (c), (e) and (f) in the preceding paragraph, the trading shall be carried out in an open and centralized manner.

With the approval of relevant competent authorities of the State for repurchasing its Shares, the Bank may conduct the repurchase in one of the following manners:

(a) to make an offer to repurchase to all of its Shareholders in the same proportion;

(b) to repurchase shares through public trading on a stock exchange;

(c) to repurchase by way of agreement over the counter;

(d) by other means stipulated by laws and regulations and permitted by 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 regulations, and register the change of the registered capital with the original registration authority of the Bank. The aggregate par value of the canceled shares shall be deducted from the Bank’s registered capital.

– VI-19 – APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION

A prior approval shall be obtained from a Shareholders’ general meeting in respect of any share repurchase by the Bank through an agreement over the counter in accordance with the provisions of the Articles of Association. After the Shareholders’ 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.

Unless the Bank is undergoing liquidation, it shall comply with the following requirements with respect to a repurchase of its outstanding shares:

(a) 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 issuance of new shares for that purpose;

(b) 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 issuance of new 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 issuance of new shares for that purpose. However, the amount deducted from the proceeds of issuance of new 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;

(c) the Bank shall make the following payments from the Bank’s distributable profits:

i. acquisition of the rights to repurchase its Shares;

ii. variation of any contracts for the repurchase of its Shares;

iii. release from its obligations under any repurchase contracts.

– VI-20 – APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION

(d) after the aggregate par value of the canceled 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 THE BANK’S SUBSIDIARIES TO THEIR OWN SHARES IN THE BANK

There are no provisions in the Articles of Association preventing a subsidiary of the Bank from owning any of our Shares.

DIVIDENDS AND OTHER METHODS OF PROFIT DISTRIBUTION

The Bank may distribute dividends in cash or by Shares.

The Bank shall appoint for Shareholders of overseas listed foreign 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 foreign 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 holders of H Shares shall be a company which is registered as a trust company under the Trustee Ordinance of Hong Kong.

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 so appointed may exercise the following rights as granted by the said Shareholder:

(a) the Shareholder’s right to speak at a Shareholders’ general meeting;

(b) to severally or jointly request to vote by ballot;

(c) to vote by a show of hand or ballot, but only by ballot when there is more than one proxy.

The proxy form for voting shall be placed at the Bank’s domicile or at any other place designated in the notice of Shareholders’ general meeting at least twenty-four hours prior to either the convening of the relevant meeting at which the proxy is authorized to vote or the designated voting time. If the proxy form 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 for voting, be placed at the Bank’s domicile or any other place designated in the notice of Shareholders’ general meeting.

– VI-21 – APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION

Where the appointing Shareholder is a legal person, its legal representative or a person authorized by the resolutions of the Board and other decision-making bodies shall be represented to attend the Shareholders’ general meeting of the Bank.

If the appointing Shareholder has passed away or lost his/her ability to act or withdrawn the authorization or withdrawn the authorization of the signed power of attorney or has transferred relevant shares prior to voting at the Shareholders’ general meeting, 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

The Bank shall have the right to cease delivering dividend notice to the holders 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.

Subject to the relevant PRC laws and regulations and the securities regulatory rules in the locality in which the Shares of the Bank are listed, the Bank shall have the right to sell the shares of the H Shareholders un-contactable through the methods the Board deems appropriate and subject to the following conditions:

(a) the Bank has distributed dividends on such shares at least three times in a period of twelve years and the dividends are not claimed by anyone during that period;

(b) after the expiration of the twelve-year period, the Bank makes a public announcement in one or more newspapers in the locality in which the securities of the Bank are listed, stating its intention to sell such shares and notifies securities regulatory authorities in the locality in which the Shares of the Bank are listed.

RIGHTS OF SHAREHOLDERS (INCLUDING INSPECTION OF REGISTER OF SHAREHOLDERS)

An ordinary Shareholder of the Bank shall enjoy the following rights:

(a) to receive dividends and other kinds of distributions as determined by the number of Shares held by them;

(b) to attend in person or by a proxy general meeting and to exercise voting rights;

(c) to supervise and manage the business operation of the Bank, and to make suggestions and enquiries accordingly;

– VI-22 – APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION

(d) to transfer, bestow or pledge of the shares held by them in accordance with the laws and regulations, relevant requirements of the securities regulatory authorities of the place where the Bank’s shares are listed and the regulations of the Articles of Association;

(e) to obtain relevant information in accordance with the Articles of Association, including:

i. to obtain a copy of the Articles of Association after paying the costs and expenses incurred;

ii. to have access to and copy the following documents after a reasonable fee has been paid:

(i) all parts of the register of Shareholders;

(ii) the personal information of Directors, Supervisors, President and other senior management personnel of the Bank, including a. present and former names and aliases; b. principal addresses (residences); c. nationality; d. full-time and all part-time occupations and positions; e. identity certificates and numbers thereof;

(iii) status of the Bank’s share capital;

(iv) the aggregate par value, number of shares, and highest and lowest prices, and the report of all expenses paid by the company (by Domestic Shares and H Shares) of each class of shares in relation to any repurchase by the Bank of its shares since the last financial year;

(v) minutes of the Shareholders’ general meetings;

(vi) the special resolutions of the Bank;

(vii) the latest audited financial statements, Directors’ reports, reports of the Board of Supervisors and auditors’ reports;

(viii) the copy of the latest annual return submitted to the SAIC or other competent authorities for filing.

Apart from the documents under (ii) above, the Bank shall place the above-mentioned documents at the Bank’s address in Hong Kong as required by the Hong Kong Listing Rules for inspection by the public and holders of H Shares free of charge. In particular, the documents under (v) above are available for inspection by Shareholders only.

– VI-23 – APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION

If any Shareholder makes a request to obtain a copy of the relevant document from the Bank, the Bank shall send a copy of the requested document within seven days upon the receipt of a reasonable fee.

The Bank may refuse to provide any of the aforesaid documents if the documents to be inspected and photocopied contain the trade secrets and price sensitive information of the Bank.

(f) to participate in the distribution of the remaining assets of the Bank based on the number of Shares held in the event of the dissolution or liquidation of the Bank;

(g) to have other rights conferred in accordance with laws, regulations and the Articles of Association.

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 equity to the Bank.

QUORUM FOR SHAREHOLDERS’ GENERAL MEETINGS AND SEPARATE CLASS MEETINGS

Where the Bank convenes a Shareholders’ general meeting, the Board shall issue a written notice, forty-five 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 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 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 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 general meeting of class Shareholders, the Bank shall issue a written notice, forty-five 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 response to the Bank twenty days before the meeting is convened. The Bank may convene a general meeting of class Shareholders if the number of 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 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.

– VI-24 – APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION

RIGHTS OF MINORITY SHAREHOLDERS

In addition to the obligations required under the laws, regulations or the listing rules of the stock exchange in the locality in which the Shares of the Bank are listed, when exercising their power as a Shareholder, controlling shareholders of the Bank 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:

(a) relieving a Director or Supervisor of their responsibility to act in good faith and in the best interests of the Bank;

(b) approving a Director or a Supervisor in depriving the Bank of its assets in any form, including but not limited to any 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;

(c) approving a Director or a Supervisor (for his/her own 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 the Articles of Association.

The “controlling shareholder(s)” under the Articles of Association shall refer to the controlling shareholder(s) stipulated in the PRC Company Law. The person(s) satisfying any of the following conditions shall be deemed as controlling shareholder(s) sufficient to have a significant impact on the resolutions of the Shareholders’ general meeting of the Bank:

(a) the person may elect more than half of the Directors when acting alone or in concert with others;

(b) the person may exercise or control the exercise of above thirty percent of the total voting shares of the Bank when acting alone or in concert with others;

(c) the person holds above thirty percent of shares of the Bank when acting alone or in concert with others;

(d) the person may de facto control the Bank in other manner when acting alone or in concert with others.

The “acting in concert” under the Articles of Association refers to the act or fact of an investor expanding the number of voting shares of the Bank at its disposal by agreement, other arrangements, and co-operation with other investors. The relevant investors agreeing to undertake identical actions are persons acting in concert.

– VI-25 – APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION

PROCEDURES ON LIQUIDATION

The Bank shall be dissolved and liquidated according to laws in any of the following circumstances:

(a) when its business term has expired or other events of dissolution specified in the Articles of Association have occurred;

(b) if the Shareholders’ general meeting resolves to do so;

(c) dissolution is necessary due to a merger or division of the Bank;

(d) the Bank is declared bankrupt due to its failure to repay debts due;

(e) where the operation and management of the Bank falls into serious difficulties and its continued existence would cause material losses to Shareholders, the Shareholders holding above ten percent of the total voting rights of the Bank may apply to the people’s court to dissolve the Bank if there are no other solutions, and the people’s court decides to dissolve the Bank;

(f) the Bank has been ordered to close down for violation of laws.

In the event of dissolution pursuant to (a) and (b) above, the Bank shall set up a liquidation committee within 15 days, and the members of the committee shall be decided by an ordinary resolution on a Shareholders’ general meeting.

If the Bank is dissolved pursuant to (c) above, the liquidation shall be effected in accordance with the contracts the parties to the merger or division enter into when the Bank is merged or divided.

If the Bank is dissolved pursuant to (d) and (e) above, a liquidation committee comprising Shareholders’ representatives, relevant departments and professionals shall be established by the people’s court in accordance with relevant laws 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 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.

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.

– VI-26 – APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION

The liquidation committee shall follow the instructions of the Shareholders’ general meetings 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.

The liquidation committee shall exercise the following powers during the period of liquidation:

(a) Giving notice or making public announcement to the depositors and other creditors to confirm the credits;

(b) Keeping, cleaning up the Bank’s properties, drawing up the balance sheet and property list;

(c) Handling the unfinished business related to the liquidation of the Bank;

(d) Paying off the taxes owed and the taxes arising during liquidation;

(e) Cleaning up the credits and debts, urging the repayment of credits and disposing of assets;

(f) Making the liquidation scheme, repaying the debts according to the approved liquidation scheme, and disposing of the remaining assets after the Bank repays the debts;

(g) Representing the Bank to participate in litigations and arbitrations;

(h) Asking the relevant departments to investigate for the legal responsibilities of the persons involved.

The liquidation committee shall, within ten days after its establishment, notify the creditors and make a public announcement in Financial Times, Guizhou Daily or other newspapers and periodicals at or above the provincial level at least three times within 60 days. The liquidation committee shall register the credits.

The creditors shall declare their credits before the liquidation committee within the period specified in the Articles of Association. In declaring credits, creditors shall specify the relevant matters about the credits and provide verifications. The liquidation committee shall not pay off any debts to any creditors during the period of credit declaration.

After clearing the properties and compiling the balance sheet and property list, the liquidation committee shall formulate a liquidation plan and submit it to the Shareholders’ general meeting, or the people’s court, or banking regulatory authorities for confirmation.

– VI-27 – APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION

The properties of the Bank shall be liquidated in the following order of priority:

(a) to pay off the liquidation expenses;

(b) to pay off wages, social insurance expenditures and statutory compensation of employees of the Bank;

(c) to pay off outstanding taxes;

(d) to pay off debts of the Bank;

(e) to be distributed according to the proportion of shares held by the shareholders.

None of the properties of the Bank may be distributed to any Shareholder before they are used for payoff as described in (a) to (e).

If after clearance of the assets and compilation of the balance sheet and property list of the Bank due to dissolution or liquidation, the Bank’s properties are found to be insufficient for the debt payments, the liquidation committee shall immediately apply for declaration of bankruptcy of the Bank with the people’s court. If the Bank has been declared bankruptcy by the people’s court, the liquidation group shall hand over the liquidation affairs to the people’s court.

After the liquidation of the Bank, the liquidation committee shall prepare a liquidation report, income and expenditure statement and account book in respect of the period of liquidation and, after verification of the Chinese certified public accountants, shall submit the same to the Shareholders’ general meeting or the people’s court or the banking regulatory authorities for confirmation.

The liquidation committee shall, within thirty days after obtaining confirmation from the Shareholders’ general meeting or the people’s court or the banking regulatory authorities, cancel registration of the Bank with the registration authority of the Bank and announce termination of the Bank.

Members of the liquidation committee shall be faithful to their office and perform their duties according to law, may not abuse their powers to accept bribes or other illegal income or convert properties of the Bank into their own. Members of the liquidation committee shall be liable to compensation for the losses caused to the Bank or creditor due to their deliberate acts or serious faults.

– VI-28 – APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION

OTHER PROVISIONS MATERIAL TO THE BANK AND OUR SHAREHOLDERS

General Provisions

After approval by the banking regulatory authorities, the Articles of Association shall become effective from the date of public offering of the H Shares of the Bank on the Hong Kong Stock Exchange. The original articles of association of the Bank shall become null and void automatically on the date when the Articles of Association comes into effect.

Based on the requirements for operation and development and in accordance with the laws and regulations, after the Shareholders’ general meeting has made its resolution and an approval has been obtained from the banking regulatory authorities, the Bank may increase its capital by the following ways:

(a) public offering of shares;

(b) nonpublic offering of shares;

(c) placing new shares to existing Shareholders;

(d) distributing new shares to existing Shareholders;

(e) transferring reserve funds to increase share capital;

(f) other methods permitted by laws, regulations and relevant competent authorities of the State.

Holders of Ordinary Shares of the Bank shall have the following obligations:

(a) to abide by laws and regulations and the Articles of Association;

(b) to contribute to the share capital as determined by the number of shares subscribed by him and the method of capital contribution;

(c) not to withdraw their contributed share capital except in circumstances allowed by the laws and regulations;

(d) to be liable for the Bank’s debts and losses based on the shares held by him;

(e) to safeguard the interests of the Bank, object to and resist any behavior that damages the interest of the Bank;

(f) to execute resolutions of the Shareholders’ general meeting;

– VI-29 – APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION

(g) when the capital adequacy ratio of the Bank fails to meet legal requirements, the Shareholder shall support the measures proposed by the Board of Directors to raise the capital adequacy ratio, and major shareholders shall supply additional capital to the commercial bank when necessary;

(h) to promptly notify the equity management department of the Bank and report to the Board for archiving in case of any changes in the legal representative of the non-individual shareholder, name, business premises, business scope, affiliation and other important matters of the Bank, as well as revocation and merger thereof;

(i) to keep the secrets of the Bank;

(j) to fulfill other obligations stipulated by laws, regulations and the Articles of Association.

Directors’ Qualification Shares

Directors of the Bank shall be natural persons, and shall be elected by the Shareholders’ general meeting. The position of a Director may be taken by a Shareholder or a person who is not a Shareholder. Directors are not required to hold the Shares of the Bank.

BOARD OF DIRECTORS

The Board of Directors shall be accountable to the Shareholders’ general meeting and is under the supervision of the Board of Supervisors. The Board of Directors shall exercise the following functions and powers:

(a) convening Shareholders’ general meetings and reporting its performance at the Shareholders’ general meetings;

(b) implementing resolutions of the Shareholders’ general meetings;

(c) determining the Bank’s business development strategies, business plans and investment plans;

(d) formulating annual financial budget plans, final account plans, profit distribution plans and loss recovery plans of the Bank;

(e) assessing and evaluating the performance of the Directors’ duties and report to the Shareholders’ general meeting;

(f) formulating proposals for the Bank’s increase in or reduction of registered capital and issuance of corporate bonds or other securities and the listing;

– VI-30 – APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION

(g) formulating proposals for the Bank’s major asset transfer, repurchase of the Bank’s Shares or the merger, division and dissolving;

(h) determining the setting, merger and revocation of branches and the internal management structure of the Bank;

(i) determining material external guarantees;

(j) considering and approving any related party transaction involving single transaction amount accounting for more than 1% (exclusive) but less than 10% of the net capital of the Bank or the transaction balance between the Bank and a related party accounting for more than 5% (exclusive) of the net capital of the Bank after their transaction;

(k) appointing or dismissing the President and the secretary to the Board; appointing or dismissing vice presidents and other senior management personnel based on the nominations of the President and determining their remunerations, awards or punishments and the method of payment thereof;

(l) determining the Bank’s risk management and internal control policies and formulating the Bank’s basic management system;

(m) formulating modifications to the Articles of Association;

(n) managing the information disclosures of the Bank, and being ultimately responsible for the completeness and accuracy of the Bank’s accounting and financial reporting system;

(o) proposing at a Shareholders’ general meeting the engagement, dismissal or discontinuance of the engagement of an accounting firm providing audit for the Bank;

(p) considering and determining working rules of the President, listening to his/her work reports and examine his/her work;

(q) other functions and powers stipulated by laws and regulations and the Articles of Association and authorized by the Shareholders’ general meetings.

Board meetings are divided into regular meetings and interim meetings, which are convened and presided over by the chairman. When the chairman is unable to perform his/her duties, a director nominated by more than half of the directors shall act on his/her behalf. The Board of Directors shall hold a regular meeting at least once a quarter, with the notice sent to all Directors in writing at least ten days before the date of the meeting, and shall send a prior notice to the Board of Supervisors for appointing persons to attend the meeting. The notice of the Board of Directors to convene an extraordinary meeting of the Board of Directors may be

– VI-31 – APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION sent in written form, as by registered letter, telegram, telex and fax with acknowledgement of receipt. The meeting documents shall be sent to all Directors and Supervisors five days before the date of the meeting in case of emergency, an extraordinary meeting of the Board of Directors needs to be convened as soon as possible, the meeting notice may be sent by telephone or other oral means at any time, but the convener shall make a statement at the meeting.

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 or by open ballot. Resolutions of the Board shall be passed on a “one person one vote” basis.

BOARD OF SUPERVISORS

The Bank shall have a Board of Supervisors, which shall be accountable to the Shareholders’ general meeting, and be composed of three to thirteen members. In particular, the number of external Supervisors shall comply with laws, regulations and other rules. The Board of Supervisors consists of employee Supervisors democratically elected by the employees of the Bank and external Supervisors and Shareholder Supervisors elected by the Shareholders’ general meeting. In particular, the proportion of employee Supervisors and external Supervisors shall not be less than one-third of Supervisors.

The Board of Supervisors shall have one chairman, who shall be a Supervisor. The appointment and removal of the chairman shall be made with a resolution passed by above two-thirds of the all members of the Board of Supervisors.

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 cannot or does not fulfill the duty thereof, more than half of the Supervisors may jointly elect a Supervisor to convene and preside over the meetings of the Board of Supervisors.

Supervisors shall honestly fulfill the supervisory duty in accordance with laws, regulations and the Articles of Association. The procedures for nominating and electing Shareholder Supervisors and external Supervisors shall be similar to those for Directors set out in the Articles of Association. Shareholder Supervisors and external supervisors shall be elected, removed and replaced at Shareholders’ general meetings; and employee representative Supervisors shall be elected, removed and replaced by employee representative meeting or other democratic procedures of the Bank. A Supervisor shall serve a term of three years, and may seek re-election upon expiry of the said term.

The same Shareholder and its related parties shall not nominate Directors and Supervisors at the same time. If the Supervisors nominated by the same Shareholder and its related parties have held the duties of Supervisors, such Shareholder shall not nominate the Supervisors before the expiry of their term of office.

– VI-32 – APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION

The Board of Supervisors shall be accountable to the Shareholders’ general meeting and exercise the following functions and powers according to law:

(a) to examine and supervise the Bank’s financial activities;

(b) to supervise the implementation of resolutions made at Shareholders’ general meetings and the fulfillment of duties of the Board of Directors and senior management;

(c) to supervise the fulfillment of duties of Directors, chairman and senior management personnel;

(d) to undertake the resign audit of Directors and senior management personnel;

(e) to independently audit operation decisions, risk management and internal control of the Bank and guide the internal audit department of the Bank in work;

(f) to address inquiries to Directors, the chairman and senior management personnel;

(g) to supervise the Directors, chairman and senior management personnel for any violation of laws, regulations or the Articles of Association while they perform their duties for the Bank; if any act of the Directors, chairman and senior management personnel damages the interests of the Bank, to require them to rectify such act accordingly, and where necessary, to report to the Shareholders’ general meeting or banking regulatory authorities;

(h) to express independent opinions on proposals formulated by the Board and reports issued by the Bank;

(i) to assess and evaluate the fulfillment of duties of Supervisors and report to the Shareholders’ general meeting;

(j) to propose the convening of extraordinary general meeting and interim Board meeting;

(k) to negotiate with Directors or pursue legal actions against the same on behalf of the Bank;

(l) to exercise any other functions and powers as authorized by the laws and regulations, the Articles of Association and the Shareholders’ general meetings.

Supervisors may attend the Board meetings.

– VI-33 – APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION

Regular meetings of the Board of Supervisors shall be convened at least once each quarter. Notice of meeting shall be served to all the Supervisors in writing ten days before the date of such meeting. The chairman of the Board of Supervisors or more than one third of the Supervisors may propose to convene an interim meeting of the Board of Supervisors and the notice of such meeting and meeting documents shall be served five days before the date of the meeting.

The voting procedure of the Board of Supervisors: the resolutions of the Board of Supervisors shall be adopted by a show of hands or open ballot, and each Supervisor present at the meeting shall have one vote. Any resolutions made by the Board of Supervisors shall be approved and passed by more than two thirds of all Supervisors.

PRESIDENT

The President shall be accountable to the Board, shall have the right to organize and carry out the Bank’s operation and management in accordance with laws, regulations and other rules, the Articles of Association and the authorization of the Board, and shall perform the following functions and powers:

(a) to take charge of the business operation and management affairs of the Bank, to organize the implementation of the resolutions of the Board and to report to the Board;

(b) to organize the implementation of the annual business plans and investment plans of the Bank;

(c) to prepare plans for the establishment of internal management structure of the Bank;

(d) to draft the Bank’s basic management system;

(e) to appoint or dismiss persons in charge of the departments and branches of the Bank other than those to be engaged or dismissed by the Board;

(f) to propose the Board to appoint or dismiss the vice presidents and other senior management personnel;

(g) to authorize other senior management personnel and persons in charge of internal departments and branches to conduct operation activities;

(h) to determine the salary, welfare, reward and punishment schemes of the Bank’s employees and implement them after the approval of the Board of Directors;

(i) to decide on the appointment and dismissal of employees of the Bank;

– VI-34 – APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION

(j) to adopt emergency measures when any material emergency (such as a run on the Bank) arises and promptly report them to the banking regulatory authorities, the Board and the Board of Supervisors;

(k) to propose the convening of interim Board meeting in special circumstances;

(l) to formulate the basic regulations of the Bank;

(m) to exercise other functions and powers authorized by the Articles of Association or the Board.

The President shall attend the Board meetings. A non-Director President and vice presidents may attend Board meetings but shall have no voting rights thereat.

SECRETARY TO THE BOARD

There shall be a secretary to the Board of the Bank, who shall be a senior management personnel and be accountable to the Board. The secretary to the Board shall serve a term of three years and may seek re-election upon expiry of the said term. The Board may dismiss the secretary to the Board for dereliction of duty or incompetence.

The main duties and responsibilities of the secretary to the Board shall include:

(a) ensuring that the Bank prepares and submits the reports and documents required by relevant institutions in accordance with relevant laws;

(b) ensuring that complete organizational documents are available for the Bank, arranging for the Board meetings and Shareholders’ general meetings, making minutes of the meetings and ensuring their completeness and accuracy, keeping meeting documents and minutes, and taking initiative to monitor the progress of the implementation of relevant resolutions. Reporting any important issues occurring during the implementation to the Board and give relevant advice to the Board;

(c) preparing documents for Board meetings and Shareholders’ general meetings as well as relevant rules;

(d) ensuring the material matters decided by the Board of the Bank to be carried out in strict accordance with the procedures stipulated. At request of the Board, participating in the arrangement of consultation on and analysis of the matters to be decided by the Board and offer relevant opinions and suggestions. Handling the day-to-day affairs of the Board and its relevant committees as entrusted;

– VI-35 – APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION

(e) coordinating and organizing the Bank’s information disclosure, establishing and improving the information disclosure system, participating in all of the Bank’s meetings involving information disclosure, and keeping informed of the Bank’s material operation decisions and related information in a timely manner;

(f) coordinating and organizing marketing activities, handling the investor relations and ensuring investors to obtain the information disclosed by the Bank in a timely manner. Organizing and preparation of the Bank’s marketing and promotion activities, preparing conclusive reports on important marketing and visits, and organizing matters about the submission of the reports to the regulatory authorities;

(g) ensuring that the register of Shareholders of the Bank is properly established and being responsible for maintaining the register of Shareholders, the seal of the Board and relevant materials;

(h) ensuring that relevant records and documents of the Bank are duly obtained by persons who are entitled to receive them;

(i) exercising other functions and powers as conferred by the Board.

In the event a Director serves concurrently as secretary to the Board, where any act requires to be executed by the Director and the secretary to the Board separately, the said Director serving concurrently as secretary to the Board shall not execute the said act in both capacities.

RESOLUTION OF DISPUTES

The Bank shall abide by the following rules for dispute resolution:

(a) If any disputes or claims in relation to the Bank’s business, with respect to any rights or obligations under the Articles of Association, the PRC Company Law or any other relevant laws and regulations, arise between holders of H Shares and the Bank, between holders of H Shares and the Bank’s Directors, Supervisors, President or other senior management personnel, or between holders of H 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;

– VI-36 – APPENDIX VI SUMMARY OF ARTICLES OF ASSOCIATION

(b) 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 Center 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 Center, 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 Center;

(c) Unless otherwise provided by laws and regulations, the laws of the PRC shall apply to the settlement of any disputes or claims that are resolved by arbitration described in item (a) above;

(d) The award of the arbitration institution shall be final and binding on all parties.

– VI-37 – APPENDIX VII STATUTORY AND GENERAL INFORMATION

1. FURTHER INFORMATION ABOUT THE BANK

A. Incorporation

We were incorporated as a city commercial bank in the PRC on September 28, 2012 under the name of 貴州銀行股份有限公司 (Bank of Guizhou Co., Ltd.) upon the approval of the then CBRC Guizhou Office. The 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 has been registered as a non-Hong Kong company in Hong Kong under Part 16 of the Companies Ordinance on June 11, 2019. Mr. Lei Kin Keong has been appointed as our agent for the acceptance of service of process in Hong Kong. As the Bank is incorporated in the PRC, its corporate structure and Articles of Association are subject to the relevant laws and regulations of the PRC. A summary of the relevant provisions of the Articles of Association of the Bank is set out in Appendix VI to this prospectus. A summary of certain relevant aspects of the laws and regulations of the PRC and Hong Kong is set out in Appendix V to this prospectus.

B. Changes in Share Capital

At the date of the Bank’s establishment as a joint stock limited company, its registered capital was RMB3,241,214,789.72 divided into 3,241,214,789.72 Domestic Shares of nominal value of RMB1.00 each.

For further details, see “Our History and Development – Our History – Changes in registered capital.”

Save as aforesaid, there has been no alteration in the Bank’s share capital within two years preceding the date of this prospectus.

C. The Bank’s Shareholders’ Meetings Held on March 26, 2019

At the Shareholders’ meeting of the Bank held on March 26, 2019, the following resolutions were passed by the Shareholders of the Bank, among other things:

(a) the issue by the Bank of the H Shares of nominal value of RMB1.00 each covering the Offer Shares and such H Shares being listed on the Stock Exchange;

(b) subject to the completion of the Global Offering, the Articles of Association effective on the Listing Date has been adopted, and the Board and its authorized persons have been authorized to amend the Articles of Association in accordance with relevant laws and regulations and upon the request from the Stock Exchange and relevant PRC regulatory authorities; and

(c) the Board and its authorized persons are authorized to deal with matters in connection with the Global Offering and Listing.

– VII-1 – APPENDIX VII STATUTORY AND GENERAL INFORMATION

2. FURTHER INFORMATION ABOUT OUR BUSINESS

A. Summary of Material Contracts

The Bank has entered into the following contracts (not being contracts entered into in the ordinary course of business) within two years preceding the date of this prospectus which are or may be material, a copy of each has been delivered to the Registrar of Companies in Hong Kong for registration:

(a) the share subscription agreement dated December 27, 2017 entered into between the Bank and Guizhou Provincial Finance Bureau, pursuant to which Guizhou Provincial Finance Bureau agreed to subscribe for 600 million shares in the Bank for a consideration of RMB1,260 million;

(b) the share subscription agreement dated December 28, 2017 entered into between the Bank and GuiAn New District Development and Investment Co., Ltd. (貴安新區開 發投資有限公司), pursuant to which GuiAn New District Development and Investment Co., Ltd. agreed to subscribe for 300 million shares in the Bank for a consideration of RMB630 million;

(c) the share subscription agreement dated February 20, 2018 entered into between the Bank and China Kweichow Moutai Distillery (Group) Co., Ltd. (中國貴州茅台酒廠 (集團)有限責任公司), pursuant to which China Kweichow Moutai Distillery (Group) Co., Ltd. agreed to subscribe for 1,000 million shares in the Bank for a consideration of RMB2,100 million;

(d) the office operation building purchase agreement (辦公營業用房購買協議) dated December 21, 2018 entered into between the Bank and Zhongtian City Investment Group Guiyang International Financial Center Co., Ltd. (中天城投集團貴陽國際金 融中心有限責任公司) with regard to the purchase from Zhongtian City Investment Group Guiyang International Financial Center Co., Ltd. of Building No.2 of the Business Zone of Phase 1 Guiyang International Financial Center located in Guanshanhu District, Guiyang at a purchase price of RMB2,039,189,530;

(e) the Hong Kong Underwriting Agreement.

– VII-2 – APPENDIX VII STATUTORY AND GENERAL INFORMATION

B. Our Intellectual Property Rights

(a) Trademarks-registered

As of the Latest Practicable Date, we have registered the following trademarks which we consider to be or may be material to our business:

Registration Place of Trademark Registrant number registration Duration Class 1 The Bank 17957163 PRC 2017.01.07- 36 2027.01.06 2 The Bank 13013904 PRC 2015.01.07- 36 2025.01.06 3 The Bank 13013886 PRC 2015.01.21- 36 2025.01.20 4 The Bank 12991071 PRC 2015.03.28- 36 2025.03.27 5 The Bank 12991047 PRC 2014.12.14- 36 2024.12.13 6 The Bank 12991032 PRC 2014.12.14- 36 2024.12.13 7 The Bank 12095301 PRC 2014.07.14- 35 2024.07.13 8 The Bank 12095280 PRC 2014.07.14- 36 2024.07.13 9 The Bank 12095264 PRC 2014.07.14- 42 2024.07.13 10 The Bank 12090950 PRC 2014.07.14- 35 2024.07.13 11 The Bank 12090940 PRC 2014.07.14- 36 2024.07.13 12 The Bank 12090935 PRC 2014.07.14- 42 2024.07.13 13 The Bank 12090931 PRC 2014.07.14- 35 2024.07.13 14 The Bank 12090927 PRC 2014.07.14- 36 2024.07.13 15 The Bank 12090920 PRC 2014.07.14- 42 2024.07.13 16 The Bank 12090910 PRC 2015.05.07- 35 2025.05.06

– VII-3 – APPENDIX VII STATUTORY AND GENERAL INFORMATION

Registration Place of Trademark Registrant number registration Duration Class 17 The Bank 12090903 PRC 2015.05.14- 36 2025.05.13

18 The Bank 12090900 PRC 2015.05.14- 42 2025.05.13

19 The Bank 304841893 Hong Kong 2019.02.27- 16,35,36 2029.02.26

20 The Bank 304850136 Hong Kong 2019.03.07- 16,35,36 2029.03.06

21 The Bank 304850145 Hong Kong 2019.03.07- 16,35,36 2029.03.06

– VII-4 – APPENDIX VII STATUTORY AND GENERAL INFORMATION

(b) Copyrights

As of the Latest Practicable Date, we have registered the following copyrights which we consider to be or may be material to our business:

Work First Registration Type of completion publication Registration certificate number Name of work work Proprietor date date date 1 Guo Zuo Deng Zi- Sample advertisement Art The Bank 2017.06.15 2017.10.01 2018.04.25 2018-F-00535322 picture showing “Bank of Guizhou, a bank serving with heart” (貴州銀行用 心的銀行廣告圖樣) 2 2017SR166247 Bank of Guizhou Computer The Bank – – 2017.05.08 Communication software Management Platform Resources Distribution System 3 2017SR074246 CMP Resource Computer The Bank – 2016.08.24 2017.03.10 Distribution System software 4 2017SR074260 Bidding management Computer The Bank – 2014.07.01 2017.03.10 system software 5 2017SR074255 Judicial Authority Computer The Bank – 2016.03.20 2017.03.10 Interface Platform software System of the Bank of Guizhou

(c) Domain Name

As of the Latest Practicable Date, we have registered the following domain names which we consider to be or may be material to our business:

Class of Registration Domain name Domain date Expiry date 1 bgzchina.com International 2013.07.20 2025.07.20 Domain 2 bgzchina.cn Domestic 2013.07.20 2025.07.20 Domain

– VII-5 – APPENDIX VII STATUTORY AND GENERAL INFORMATION

C. Our Depositors and Borrowers

Our five largest depositors and five largest borrowers accounted for less than 30% of the respective total deposits from customers and gross loans to customers as of the Latest Practicable Date.

3. FURTHER INFORMATION ABOUT OUR DIRECTORS, SUPERVISORS AND SUBSTANTIAL SHAREHOLDERS

A. Directors and Supervisors

(a) Disclosure of Interest

Save as disclosed below, immediately following completion of the Global Offering and assuming the Over-allotment Option is not exercised, none of our Directors, Supervisors and chief executive of the Bank has any interest and/or short position in the Shares, underlying shares and debentures of the Bank or any associated corporation (within the meaning of Part XV of the SFO) which will have to be notified to us and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which he has taken or is deemed to have under such provisions of SFO) or which will be required, pursuant to section 352 of the SFO, to be entered in the register referred to therein, or will be required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers to be notified to the Bank and the Stock Exchange (for this purpose, the relevant provisions of the SFO will be interpreted as if they applied to the Supervisors).

Interest in the Bank

Approximate Approximate percentage of percentage of shareholding shareholding in the total Number of in the relevant share capital Class of Shares Shares to be class of Shares of the Bank Name of Director/ to be held after held after after the after the Supervisor/ the Global the Global Nature of Global Global Chief executives Offering Offering interest Offering Offering

XU An (許安), Director and Domestic Shares 500,000 Beneficial Owner 0.004% 0.003% President XIAO Cifa (肖慈發), Chairman Domestic Shares 500,000 Beneficial Owner 0.004% 0.003% of the Board of Supervisors WANG Changyi (王常懿), Domestic Shares 280,000 Beneficial Owner 0.002% 0.002% Supervisor LI Keyong (李克勇), Domestic Shares 500,000 Beneficial Owner 0.004% 0.003% Supervisor

– VII-6 – APPENDIX VII STATUTORY AND GENERAL INFORMATION

(b) Particulars of Service Contracts

Each of the Directors and Supervisors has entered into a contract pursuant to Rule 19A.54 and Rule 19A.55 of the Listing Rules with the Bank which provides for, among others, compliance of relevant laws and regulations, observations of the Articles of Association and provision on arbitration with the Bank.

Save as disclosed above, none of the Directors or Supervisors of the Bank has or is proposed to have a service contract with us (other than contracts expiring or determinable by the employer within one year without the payment of compensation other than statutory compensation).

(c) Directors’ and Supervisors’ Remuneration

For the year ended December 31, 2016, 2017 and 2018 and the six months ended June 30, 2019, the aggregate amount of fees, salaries, allowances, discretionary bonus, pension-defined contribution plans and other benefits in kind, if applicable, paid by the Bank to the Directors were approximately RMB1.76 million, RMB1.67 million and RMB1.80 million and RMB1.00 million, respectively. For the year ended December 31, 2016, 2017 and 2018 and the six months ended June 30, 2019, the aggregate amount of fees, salaries, allowances, discretionary bonus, pension-defined contribution plans and other benefits in kind, if applicable, paid by the Bank to the Supervisors were approximately RMB4.79 million, RMB7.90 million and RMB6.29 million and RMB1.34 million, respectively. Save as disclosed under note 9 to the Accountants’ Report set out in Appendix I to this prospectus, no Director or Supervisor received other remuneration or benefits in kind from the Bank in respect of the year ended December 31, 2016, 2017 and 2018 and the six months ended June 30, 2019.

It is estimated that under the arrangements currently in force, the aggregate amount of remuneration payable by us to our Directors and Supervisors for the year ending 2019 is approximately RMB5.6 million.

B. Substantial Shareholders

For information on the persons who will, immediately following the completion of the Global Offering, have interests or short positions in the Shares or underlying Shares of the Bank 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, directly or indirectly, be interested in 10.0% or more of the nominal value of any class of share capital carrying the rights to vote in all circumstances at general meetings of the Bank, see “Substantial Shareholders” in this prospectus.

– VII-7 – APPENDIX VII STATUTORY AND GENERAL INFORMATION

C. Personal Guarantees

The Directors and Supervisors of the Bank have not provided personal guarantees in favor of lenders in connection with banking facilities granted to us.

D. Agency Fees or Commissions Paid or Payable

Save as disclosed in “Underwriting” in this prospectus, no commissions, discounts, brokerages or other special terms have been granted in connection with the issue or sale of any share or loan capital of the Bank or any of its subsidiaries within the two years ended on the date of this prospectus.

E. Related Party Transactions

During the two years preceding the date of this prospectus, we have engaged in the material related party transactions as described in Note 35 – Related Party Relationships and Transactions to the Accountants’ Report set out in Appendix I to this prospectus.

F. Disclaimers

Save as disclosed in this prospectus:

(a) none of the Directors, Supervisors or chief executive of the Bank has any interests and short positions in our Shares, underlying Shares and debentures of the Bank or any associated corporation (within the meaning of Part XV of the SFO) which will have to be notified to us and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which he has taken or is deemed to have under such provisions of SFO) or which will be required, pursuant to section 352 of the SFO, to be entered in the register referred to therein, or will be required, pursuant to the Model Code for Securities Transactions by Directors and Listed Companies to be notified to us and the Stock Exchange, in each case once the H Shares of the Bank are listed. For this purpose, the relevant provisions of the SFO will be interpreted as if they applied to the Supervisors;

(b) none of the Directors or Supervisors nor any of the parties listed in the paragraph headed “– Qualification of Experts” of this Appendix is interested in the Bank’s promotion, or in any assets which have, within the two years immediately preceding the issue of this prospectus, been acquired or disposed of by or leased to the Bank, or are proposed to be acquired or disposed of by or leased to the Bank;

– VII-8 – APPENDIX VII STATUTORY AND GENERAL INFORMATION

(c) none of the Directors or Supervisors is a director or employee of a company which is expected to have an interest in the Shares falling to be disclosed to the Bank and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO once the H Shares are listed on the Stock Exchange; save as disclosed in this prospectus, none of the Directors or Supervisors of the Bank nor any of the parties listed in paragraph headed “Qualification of Experts” of this Appendix is materially interested in any contract or arrangement subsisting at the date of this prospectus which is significant in relation to our business; and

(d) none of the parties listed in the paragraph headed “Qualification of Experts” of this Appendix: (i) is interested legally or beneficially in any of the Shares of the Bank or any shares in any of its subsidiaries; or (ii) has any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for the securities of the Bank.

4. OTHER INFORMATION

A. Estate Duty

We have been advised that no material liability for estate duty under PRC law is likely to fall upon the Group.

B. Litigation

As at the Latest Practicable Date, save as disclosed in this prospectus, our Group is not involved in any material litigation, arbitration or administrative proceedings. So far as we are aware, no such litigation, arbitration or administrative proceedings are pending or threatened.

C. Joint Sponsors

The Joint Sponsors have made an application on behalf of the Bank to the Listing Committee for listing of, and permission to deal in, the H Shares of the Bank, including any additional Offer Shares which may be issued pursuant to the exercise of the Over-allotment Option. All necessary arrangements have been made enabling the H Shares to be admitted into CCASS.

Each of the Joint Sponsors satisfies the independence criteria applicable to sponsors set out in Rule 3A.07 of the Listing Rules.

The Bank has entered into an engagement agreement with the Joint Sponsors collectively, pursuant to which the Bank agreed to pay HK$4.6 million to the Joint Sponsors collectively to act as the sponsors to the Bank in the Global Offering.

– VII-9 – APPENDIX VII STATUTORY AND GENERAL INFORMATION

D. Compliance Advisor

The Bank have appointed Guotai Junan Capital Limited as its compliance advisor in compliance with Rule 3A.19 of the Listing Rules.

E. Preliminary Expenses for the Listing

Our Bank’s preliminary expenses for the Listing are approximately HK$150.6 million, and were borne by our Bank.

F. Promoter(s)

The promoters of the Bank comprise the former shareholders of Zunyi City Commercial Bank, Liupanshui City Commercial Bank and Anshun City Commercial Bank. For details of the promoters of the Bank, see “Our History and Development” in this prospectus.

Save as disclosed in this prospectus, within the two years immediately preceding the date of this prospectus, no cash, securities or other benefit have been paid, allotted or given or have been proposed to be paid, allotted or given to the above promoters in connections with the Global Offering or related transactions in this prospectus.

G. Qualification of Experts

The qualifications of the experts are as follows:

Name Qualification ABCI Capital Limited Licensed to conduct Type 1 (Dealing in securities) and Type 6 (Advising on corporate finance) of the regulated activities as defined under the SFO

CCB International Capital Licensed to conduct Type 1 (Dealing in securities), Limited Type 4 (Advising on securities) and Type 6 (Advising on corporate finance) of the regulated activities as defined under the SFO

CLSA Capital Markets Limited Licensed to conduct Type 4 (Advising on securities) and Type 6 (Advising on corporate finance) of the regulated activities as defined under the SFO

KPMG Certified Public Accountants

King & Wood Mallesons PRC legal advisors

– VII-10 – APPENDIX VII STATUTORY AND GENERAL INFORMATION

H. Taxation of Holders of H Shares

The sale, purchase and transfer of H Shares are subject to Hong Kong stamp duty if such sale, purchase and transfer are effected on the H Share register of members of the Bank, including in circumstances where such transaction is effected on the Stock Exchange. For further information in relation to taxation, see “Appendix IV – Taxation and Foreign Exchange” in this prospectus.

I. No Material Adverse Change

The Directors confirm that there has been no material adverse change in our financial or trading position since December 31, 2018.

J. Binding Effect

This prospectus 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.

K. Bilingual prospectus

The English language and Chinese language versions of this prospectus 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).

L. Miscellaneous

Save as disclosed in this prospectus,

(a) within the two years preceding the date of this prospectus, the Bank has 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;

(b) no Share or loan capital of the Bank, if any, is under option or is agreed conditionally or unconditionally to be put under option;

(c) the Bank has not issued nor agreed to issue any founder shares, management shares or deferred shares;

(d) the Bank has no outstanding convertible debt securities or debentures;

– VII-11 – APPENDIX VII STATUTORY AND GENERAL INFORMATION

(e) within the two years immediately preceding the date of this prospectus, no commission, discount, brokerage or other special term has been granted in connection with the issue or sale of any capital of the Bank;

(f) there is no arrangement under which future dividends are waived or agreed to be waived;

(g) the Bank currently does not intend to apply for the status of a sino-foreign investment joint stock limited company and does not expect to be subject to the Sino-Foreign Joint Venture Law of the PRC (中華人民共和國中外合資經營企業法);

(h) there has been no interruption in our business which may have or have had a significant effect on the financial position in the last 12 months; and

(i) none of the equity and debt securities of the Bank, if any, is listed or dealt within any other stock exchange nor is any listing or permission to deal in other stock exchanges being or proposed to be sought.

M. Agency Fees or Commissions Paid or Payable

Save as disclosed in this prospectus, no commissions, discounts, brokerages or other special terms have been granted in connection with the issue or sale of any capital of any member of our Group within the two years immediately preceding the date of this prospectus.

N. Consents

Each of the experts as referred to in the paragraph headed “– G. Qualification of Experts” in this Appendix has given, and has not withdrawn their written consents to the issue of this prospectus with the inclusion of their reports and/or letters and/or the references to their names included herein in the form and context in which they are respectively included.

None of the experts named above has any shareholding interests in any member of our Group or the right (other than the penal provisions) of section 44A of the Companies (Winding Up and Miscellaneous Provisions) Ordinance so far as applicable.

– VII-12 – 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 a copy of the Prospectus and delivered to the Registrar of Companies in Hong Kong for registration were:

(1) copies of the White, Yellow and Green Application Forms;

(2) copies of each of the material contracts referred to in the section headed “Statutory and General Information – 2. Further Information About Our Business – A. Summary of Material Contracts” in Appendix VII to this prospectus; and

(3) the written consents referred to in the section headed “Statutory and General Information – 4. Other Information – N. Consents” in Appendix VII to this prospectus.

2. DOCUMENTS AVAILABLE FOR INSPECTION

• Copies of the following documents will be available for inspection at the office of Clifford Chance at 27th Floor, Jardine House, One Connaught Place, Central, Hong Kong during normal business hours up to and including the date which is 14 days from the date of this prospectus:

(1) the Articles of Association;

(2) the accountants’ report issued by KPMG in relation to the historical financial information of the Bank for each of the three years ended December 31, 2016, 2017 and 2018 and the six months ended June 30, 2019, the text of which is set out in “Appendix I – Accountants’ Report”;

(3) the unaudited supplementary financial information of the Bank, the text of which is set out in “Appendix II – Unaudited Supplementary Financial Information”;

(4) the report of KPMG relating to the unaudited pro forma financial information of the Bank, the text of which is set out in “Appendix III – Unaudited Pro Forma Financial Information”;

(5) the audited financial statements of the Bank for each of the three years ended December 31, 2016, 2017 and 2018 and the six months ended June 30, 2019;

(6) the PRC legal opinions issued by King & Wood Mallesons, our PRC legal advisors, in respect of our general matters and property interests;

– VIII-1 – APPENDIX VIII DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES AND AVAILABLE FOR INSPECTION

(7) the material contracts referred to in the paragraph headed “Statutory and General Information – 2. Further Information About Our Business – A. Summary of Material Contracts” in Appendix VII to this prospectus;

(8) the written consents referred to in the paragraph headed “Statutory and General Information – 4. Other Information – N. Consents” in Appendix VII to this prospectus;

(9) the service contracts referred to in the paragraph headed “Statutory and General Information – 3. Further Information About Our Directors, Supervisors and Substantial Shareholders – A. Directors and Supervisors – (b) Particulars of Service Contracts” in Appendix VII to this prospectus; and

(10) 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 –