Chongqing Bank Co., Ltd.

2016 Annual Report

April 2017 Contents

Definitions...... 1

Chairman’s Statement...... 2

Important Notice...... 4

1. Bank Profile...... 5

2. Accounting and Business Data Summary...... 7

3. Business Summary...... 13

4. Management Discussion and Analysis...... 25

5. Changes in Share Capital and Shareholdings of Shareholders...... 74

6. Directors, Supervisors, Senior Management Members and Staff...... 79

7. Corporate governance...... 96

8. Significant Events...... 130

9. Financial Report...... 134

10. Inspection Documents Catalog...... 135 2016 Annual Report

Definitions

Unless otherwise specified, definitions of following terms are as

follows:

In the text Definitions

The Bank, Company and the Company Three Gorges Bank Co., Ltd.

Articles of Association of the Bank, Articles of Articles of Association of Chongqing Three

Association of the Company Gorges Bank Co., Ltd.

Our country The People's Republic of China

Central Bank, People's Bank of China People's Bank of China

BRC, CBRC China Banking Regulatory Commission

CQITC Chongqing International Trust Inc.

Amount of currency Amount is in RMB unless otherwise specified

1 2016 Annual Report

Chairman’s Statement

Time flies in a blink of an eye. 2016 was an fruitful year in the Bank’s development. Confronted with complicated economic and financial situation, the

Bank acted positively, planned in advance and took the initiate to adapt itself to new normal of economic development. Based upon ‘development promotion, risk prevention’ under the theme of ‘management improvement’ and highlighting by

‘reform, development, risk management, service and culture’, the Bank has been adhering to the development path of ‘integration, specialization, differentiation, refinement and professionalization’, sparing no effort in exploration and innovation, enhancing risk control, advancing operational transformation, performing social responsibility and preferably fulfilling major target tasks. To sum up, the Bank has not only maintained healthy and steady development trend, but also made a good beginning for ‘the 13th Five-Year Plan’.

By the end of reporting period, the Bank generated total assets of RMB 181.50 billion, deposits balance of RMB 122.16 billion and loans balance of RMB 38.45 billion. Total realized profits of the Bank amounted to RMB 2.60 billion, including

RMB 1.985 billion of realized net profit, and NPL ratio stood at 0.93%. As a result, scheduled targets assigned by Board of Directors in the beginning of the period have been achieved. In addition, all supervision indicators have met the requirements of prudential supervision.

In 2016, the Bank dared to blaze new trails in a pioneering spirit, strove to find sally port for innovation from homogeneous competition. As result, not only its

2 2016 Annual Report comprehensive operational strength is enhanced, but also its brand influence is improved continuously as it received various awards including ‘Top 100 Chongqing

Enterprises’, ‘Top 100 Chongqing Service Enterprises’, ‘Top 50 Profitable

Chongqing Enterprises’, ‘Top 10 Growing Banks in Chinese Local Finance’, ‘Top 4

Urban Commercial Bank in Competitiveness Evaluation’ and ‘2016 Top 10

Commercial Banks Supporting Development of Small-and-medium-sized Enterprises

Nationwide’. The Bank ranked the 82nd in Top 100 Banks Ranking first published by

China Banking Association. In 2016, the Bank moved up 115 places (compared with that in last year) to 530th among the Top 1000 Bank Brands by the Banker, and ranked the 22nd among Global Fastest-Growing Commercial Banks.

‘A time will come to ride the wind and cleave the waves, I’ll set my cloud like sail to cross the sea which raves.’ ‘In 2017, the Bank will adhere to the principle of steady development and compliance operation, fulfill social responsibilities effectively, support local construction fully, serve economic and social development, be strict in risk control, carry out internal construction strictly, strive to realize coordinated and sustainable development, promote the Bank to go a step further, and do all it can do to respond trust and support of shareholders and all sectors of society!’

Chairman: Ding Shilu

April 27, 2017

3 2016 Annual Report

Important Notice

Board of Directors and directors of Chongqing Three Gorges Bank Co., Ltd. ensure that there are no false records, misleading statements or major omissions in the report. The Bank bears joint and several liabilities for their authenticity, accuracy and integrity.

On April 21, 2017, Board of Directors of the Bank deliberated and approved

2016 Annual Report and Summary.

Financial figures in the report are prepared according to Accounting Standards for Business Enterprises - Basic Standards, various specific accounting standards,

Application Guide of Accounting Standards for Business Enterprises, Explanation on

Accounting Standards for Business Enterprises and other provisions issued by the

Ministry of Finance.

2016 Annual Financial Report has been audited by ShineWing International

Accounting Firm in accordance with PRC Independent Standards on Audit for

Certified Accountants, and standard 2016 Annual Auditor's Report with clean opinion has been issued as well.

Ding Shilu, Chairman & President of the Bank and Wang Liangpin, Financial

Administrator jointly declare and guarantee authenticity and integrity of financial data in this annual report.

Board of Directors of Chongqing Three Gorges Bank Co., Ltd. April 27, 2017

4 2016 Annual Report

1. Bank Profile

1.1 Legal Chinese name: 重庆三峡银行股份有限公司(hereinafter referred to as: 重

庆三峡银行)

1.2 Legal English name: CHONGQING THREE GORGES BANK CO.,LTD.

1.3 Legal representative: Ding Shilu

1.4 Board Secretary: Yao Jiangjun

1.5 Registered and office address: No.3, Baiyan Road, Wanzhou , Chongqing,

and No.99, Huichuanmen Road, Jiangbeicheng,

Jiangbei District, Chongqing

Zip: 404000

Website: www.ccqtgb.com

Customer services tel: 96968

1.6 Information disclosed on: public newspaper authorized by supervision department

Annual report published at: www.ccqtgb.com

Annual report prepared at: Board Office, Head Business Office, business hall of

branch and sub-branch

1.7 Address: 28F, Tower B, Oriental International Square, No.99, Huichuanmen

Road，Jiangbeicheng, Jiangbei District, Chongqing

Tel.: 023-88890985

Fax: 023-88890022

1.8 Registration Information:

First registered on: February 18, 1998

5 2016 Annual Report

Unified social credit code: 915001017116939742

1.9 Auditor

Name: ShineWing International Accounting Firm

Office address: 9F, Tower A, Fuhua Building, No.8, Chaoyangmen North Street,

Dongcheng District, Chongqing

6 2016 Annual Report

2. Accounting and Business Data Summary

2.1 Major operating profit norm during reporting period

2.1.1 Overall profit norm (unit: ten thousand yuan) reporting period Total profit 260,508.69 Net Profit 198,476.93 Profit from major operations 259,556.46 Profit from other operations -111.04 Operating profit 259,445.42 Investment income 5,928.09 Net nonoperating income and expense 1,063.27 Net cash flow provided by operating 3,022,394.54 activities

2.1.2 Deducted amount involving non-recurring profit and loss item (unit: ten thousand yuan)

Non-recurring profit and loss reporting period

Non-business expenditure 1,688.00 Gain from non-current asset disposal 390.63 Income from penalties 39.47 Government grant 1,227.68 Other incomes 30.22 Nonoperating expense 624.73 Disposal loss on non-current assets 125.52 Donations made 83.61 Loss from compensation and penalty 0.00 Loss from credit asset transfer 404.89 Others 10.71 Net nonoperating income and expense 1,063.27 Income tax affected by non-recurring profit and loss 265.82 Amount 797.45

7 2016 Annual Report

2.2 Main accounting data and financial index in previous three years by the end of reporting period

(unit: ten thousand yuan) 2016 2015 Year 2014 Operating revenue 426,346.42 355,191.66 272,528.85 Total profit 260,508.69 168,293.72 142,749.91 Net Profit 198,476.93 126,804.34 106,783.19 Total assets 18,150,364.06 13,246,802.48 10,079,798.82 Total liabilities 16,924,100.72 12,360,738.48 9,530,559.93 Basic earning per share (RMB) 0.54 0.43 0.36 Diluted earnings per share (RMB) 0.54 0.43 0.36 Fully diluted return on equity (%) 16.19 14.31 19.44 Weighted average return on equity 21.13 20.71 21.45 (%) Shareholders' equity 1,226,263.34 886,064.00 549,238.88 Net asset value per share 2.78 2.90 2.33 Note: the Bank officially launched listing work and proceeded to counseling period in the 4th quarter of 2016, preparatory work was proceeding orderly. In order to guarantee normativity of IPO enrollment period accounting and consistency of accounting policies, improve financial information quality declared for IPO, the Bank sorted out various accounting methods and accounting policies, and standardized and adjusted preliminary comparative statements.

8 2016 Annual Report

2.3 Principal activity information and data in previous three years by the end of reporting period

(unit: ten thousand yuan)

2016 2015 Year 2014

Total deposits 12,216,387.22 9,357,768.97 7,083,274.91 Including: Personal current 461,963.30 383,638.24 382,228.43 savings deposit Personal fixed 1,789,114.80 1,030,275.57 582,969.27 savings deposit Corporate current 3,812,602.31 3,060,554.42 1,921,030.32 deposit Corporate fixed 5,270,156.13 3,263,921.95 2,553,681.92 deposit Margin deposit 657,173.93 960,291.34 1,129,959.92 Public deposit 215,804.17 322,981.52 210,363.64 Other deposits 9,572.57 336,105.93 303,041.42 Total loan 3,845,442.17 3,241,496.67 2,684,516.95 Including: company loan 2,939,907.49 2,361,362.77 1,977,723.31 Personal loan 905,534.68 880,133.91 706,793.64 Loan loss reserves 97,667.31 88,839.55 57,568.80

9 2016 Annual Report

2.4 Supplementary financial index in previous three years by the end of reporting period (unit: %)

2016 2015 Year 2014

Return on assets 1.26 1.09 1.20 Return on capital 18.79 17.67 20.48 NPL ratio 0.93 0.98 0.31 Provision coverage 274.24 279.38 692.49 Loan appropriation ratio 2.54 2.74 2.14 Cost-income ratio 29.26 31.90 34.93 Lending ratio for single top 3.53 3.28 4.64 customer Lending ratio for top 10 31.24 25.22 37.55 customers Normal loan migration ratio 14.95 6.95 0.48 Special mention loan 37.09 25.04 26.50 migration ratio Substandard loan migration 4.08 0.42 2.10 ratio Doubtful loan migration 29.49 - - ratio Liquidity ratio 73.96 71.80 67.89

10 2016 Annual Report

2.5 Capital composition and change in previous three years by the end of reporting period (unit: ten thousand yuan, %)

2016 2015 Year 2014

Net capital 1,426,736.89 1,089,829.16 665,330.31 Core tier I capital 1,226,263.34 886,064.01 549,238.89 Deduction items of core 5,579.71 6,275.88 5,164.09 tier I capital Net core tier I capital 1,220,683.63 879,788.13 544,074.80 Other tier I capitals - - - Deduction items of other - - - tier I capitals Net tier I capital 1,220,683.63 879,788.13 544,074.80 Tier II capital 206,053.26 210,041.03 121,255.51 Deduction items of tier II - - - capital Credit risk weighted asset 10,244,970.76 7,213,425.01 6,202,202.14 Market risk weighted asset 1,036,083.24 776,271.42 401,747.29 Operational risk weighted 658,791.83 528,874.29 411,149.40 asset Total of risk weighted assets 11,939,845.83 8,518,570.72 7,015,098.83 Core tier I capital adequacy 10.22 10.33 7.76 ratio Tier I capital adequacy ratio 10.22 10.33 7.76 Capital adequacy ratio 11.95 12.79 9.48

11 2016 Annual Report

2.6 Leverage ratio in previous three years by the end of reporting

period

(unit: ten thousand yuan)

2016 2015 Year 2014

Leverage ratio (%) 6.26 5.92 4.53 Net tier I capital 1,220,683.63 879,788.13 544,074.80 Adjusted asset balance on and 19,507,995.77 14,871,450.82 11,999,207.98 off-balance sheet

5.1 Changes in shareholders' equity during the reporting period

(unit: ten thousand yuan) Opening Increase of Decrease of Ending balance balance current period current period Capital Stock 305,993.36 154,040.32 19,403.24 440,630.44 Capital reserve 150,025.84 146,876.82 0.00 296,902.65 Other 20,427.86 - 38,813.68 -18,385.82 comprehensive income Surplus reserve 51,161.23 19,847.69 0.00 71,008.92 Generic risk 167,618.60 64,354.60 0.00 231,973.19 reserve Undistributed 190,837.12 198,476.93 185,180.10 204,133.96 profits Minority - - - - shareholders' equity Amount 886,064.00 583,596.36 243,397.02 1,226,263.34

12 2016 Annual Report

3. Business Summary

3.1 Business scope of the Company

Absorbing public deposits; granting short-term, mid-term and long-term loans; handling domestic settlements; handling bill discount; issuing financial bonds; acting as an agent for the issuing, honouring and underwriting of government bonds; buying and selling government bonds; engaging in the inter-bank lending/borrowing; absorbing foreign exchange deposits; granting foreign exchange loans; international settlements; inter-bank lending/borrowing in foreign currencies; honouring and discounting foreign exchange bonds; foreign exchange borrowings; foreign exchange guarantee; self-trading and agency trading of foreign exchange (SPOT Trading only on self-trading); credit investigation, consulting and witnessing services; agency in receipts and payments and agency in insurances; offering safety box service; other services approved by CBRC and SAFE ( the aforementioned services are prohibited if against the laws and regulations; the aforementioned services are not allowed if not approved by authorities.

3.2 Principal activity

3.2.1 Financial service

During the reporting period, the Bank's corporate business achieved steady and sustainable development, main operating conditions were as follows:

I. Liability business

13 2016 Annual Report

The Bank's corporate deposit size increased steadily. As of the end of the reporting period, balance of various deposits amounted to RMB 99.653 billion, representing an increase of RMB 20.214 billion or 25.45% over the beginning of the period; balance of daily average deposit amounted to RMB 81.217 billion, representing an increase of RMB 14.177 billion or 21.32% over 2015. The Bank pushed out unit certificate of deposit timely and formally issued to the public with sales volume of RMB 485 million, and has achieved diversified development of liability business.

II. Corporate asset business

The Bank's asset size expanded steadily and continuously. As of the end of the reporting period, balance of corporate asset business amounted to RMB 64.865 billion, representing an increase of RMB 14.715 billion or 29.35% over the beginning of the period. The Bank has developed comprehensive financial service capability gradually, and established multi-channel cooperative relationship with trust company, securities agency, fund company, leasing company, Chongqing Financial Assets Exchange and regional stock transfer center. Its service capability increased gradually, and its financial service mode customized for Nan'an Mobile Phone Industrial Park was highly affirmed by enterprise customer and local government, and was also copied and promoted by other county and district government as well. The Bank took the initiative to support national and regional major strategic project, it has raised RMB

2.52 billion for inland open highland construction, Yangtze River golden waterway, multimodal transport corridor and logistics hub construction cumulatively, and has

14 2016 Annual Report provided RMB 3.98 billion for building riverside competitive industrial cluster, and

RMB 79.17 million for ecological security shelter construction in the upper reaches of

Yangtze River, representing substantial growth over the beginning of the period. The

Bank positively implemented green credit, developed green finance, and has provided over RMB 8 billion for "follow-up construction of The Three Gorges" in total. We implemented inclusive finance and targeted poverty alleviation, developed anti-poverty products including "enriching loan" and "anti-poverty loan", and have offered RMB 1.811 billion as loans to local anti-poverty project as well as filed and registered poverty-stricken households, thus benefiting 28,900 filed and registered poverty-stricken households, 276 people were lifted out of poverty.

III. Customer base

The Bank actively expands fundamental customer base. As of the end of the reporting period, accounts opened by customers at the Bank amounted to 20,365, increased by 3882 accounts (including 737 net-increased effective accounts), or

23.56% over the beginning of the period. The Company has established favorable business partnership with municipal key national enterprises, major enterprises established by central enterprises in Chongqing, major public investment groups in all districts and counties as well as famous private enterprises, and has formed a group of stable customer base. In addition, the Bank has acquired agent qualification of pension insurance fund municipal special account for Chongqing municipal government public institutions and 11 district and county collection individual accounts, and has served local government effectively.

15 2016 Annual Report

3.2.2 Retail banking

During the reporting period, retail business, retail fundamental customer base and business scale maintain a relatively rapid growth. As of the end of the reporting period, balance of savings deposit amounted to RMB 22.5 billion, representing an increase of 59.2% over the beginning of the period; balance of retail loan amounted to

RMB 6.69 billion, representing an increase of 25.7% over the beginning of the period; retail customers amounted to 1,407,000 representing an increase of 15.9% over the beginning of the period; and electronic bank customers amounted to 257,000, representing an increase of 63.3% over the beginning of the period. Main operating conditions were as follows:

I. Personal business

As of the end of the reporting period, stock bank cards held by the Bank amounted to 1,289,000, representing an increase of 18% over the beginning of the period. The Bank has signed strategic cooperation agreement with Chongqing

Municipal Federation of Trade Unions and Chinese Workers Mutual Insurance

Association Chongqing Office, under which the Bank issued "worker's preferential card" featuring in various financial functions including claiming of mutual aid money, salvage money and consolation money, depositing, withdrawing, transferring, financing, borrowing and living payment; centering on "inclusive finance, convenience/favor-for-people", the Bank kept providing "global free" service of wealth life card, and providing various convenient financial services covering free IC card upgrade of magnetic stripe card sharing same number, issue of financial IC card

16 2016 Annual Report supporting GMB algorithm and collection of living payments.

Scale of the Bank's personal consumption loan grew steadily, petty mortgage loan increased significantly and individual credit business structure was optimizing continuously. The Bank took the initiative to implement diversified housing credit policies, and support rigid demand and improving-type housing consumption demand.

The Bank also developed "petty mortgage loan (housing loan)" vigorously, and launch amount increased significantly, representing an increase of 8624% over the same period of last year. Relying on Internet technology, the Bank has achieved

"offline+online" solid handling of some retail loan products. The Bank has also developed "salary-based loan" product, put loans into practice and expanded inclusive finance population. Besides, the Bank launched telephone outbound marketing of asset business, and has further expanded marketing channel and mode of asset business.

II. Electronic banking

The Bank took the initiative to promote development of electronic channels toward intelligentization, mobilization and Internetiolization so that electronic channel marketing capability might reach a high. As of the end of the reporting period, the Bank had 316 ATMs in total with transaction amount of RMB 5.954 billion

(2,907,300 transactions), daily average ATM transactions amounted to 25.21 per

ATM, income from service charges amounted to RMB 3,705,000; mobile banking customers continued maintaining rapid growth and increased by 65,398, representing an increase of 67.05% over the beginning of the period, accumulative customers

17 2016 Annual Report amounted to 153,470; full year transactions reached 1,073,700, representing an increase of 46.92% over the same period of last year; transaction amount reached

RMB 15.044 billion, representing an increase of 78.61% over the same period of last year; personal e-banking customers amounted to 64,943 (including 19,037 new customers), transactions during the reporting period reached 359,400 and transaction amount RMB 14.844 billion. By realizing docking with Tecent's "WeChat wallet", such functions including WeChat lucky money, WeChat transfer, WeChat payment and WeChat withdrawal were all available; "Alipay" withdrawal was available and

"Alipay" accounts transfer or withdrawal to our bank card was available as well.

3.2.3 Small and micro enterprises banking

During the reporting period, the Bank's business involving small and micro enterprises maintained coordinated and steady development, and "three no-less-than" indicator for small and micro enterprise loan met the standard continuously. At the end of reporting period, the balance of loans to small and micro enterprises amounted to RMB 22,045 million, representing an increase of RMB 3,484 million or 18.77% over the same period of the previous year. The growth rate was higher than that of the total loans of the Bank; both customer population receiving loans to small and micro enterprises and loan application success rate were higher than that of the same period of the previous year. Small and micro loan balance accounted for 3.90% of citywide small and micro loan balance; 55.02% of industry-wide loans balance, 33.25 percentage points higher than level of citywide banks. Main operating conditions were as follows:

18 2016 Annual Report

I. Expand demand space, develop featured products

Besides, the Bank provided easy, rapid and ultimate financial service experience for small and micro enterprise customers only, elaborately forged "Three Gorges prosperity" financial business product system for small and micro enterprises, including "Zi Cai Tong", “Huo Ban Tong”, "Zeng Zhi Tong" and "e Rong Tong" core product systems, covering over 20 financial characteristic products of small and micro enterprises, provided customized products for customers and realized credit product sharing in various business lines of the Bank.

II. Build service platform, open diversified channel

By building integrated financial service platform covering community financial, supply chain finance, 1+1 home of small enterprise, entrepreneurial innovation and

Internet finance, the Bank has expanded group of customers, improved customer stickiness and liveness, managed to provide quicker, better, cheaper, controlled and practicable financial services for more and wider small and micro enterprise customer groups, and realized batch customer winning and precise marketing.

III. Focus on key fields, provide differentiated service

The Bank adhered to cooperation with small and micro enterprises, served construction of small and micro enterprises, individual business and "Three Rural

Issues" wholeheartedly. While focusing on demands of small and micro enterprises, the Bank provided speedy, efficient and quality financial services for small and micro enterprises engaging in scientific innovation, reservoir resettlement, re-employment

19 2016 Annual Report and women entrepreneurship based upon differentiated pricing mechanism for interest rate.

3.2.4 Fund operation business

During the reporting period, capital operation yield of the Bank grew steadily, risk management process was more complete and development performance was good.

As of the end of the reporting period, interbank assets amounted to RMB 115.5 billion, representing a year-on-year growth of 48.33%; interbank liabilities amounted to RMB

32.9 billion, representing a year-on-year growth of 50.22%; issued and established financial products amounted to 251, issuing scale amounted to RMB 33.611, representing a year-on-year growth of 158.51%. Main operating conditions were as follows:

I. Financial market business

During the reporting period, the Bank continued consolidating financial market business, accelerating realization of high-yield assets, strengthening interbank customer base and promoting product innovation. As of the end of the reporting period, total assets size of bonds reached RMB 30.3 billion, representing a year-on-year growth of 60.44%; business transaction volume in monetary market reached RMB 2,583.9 billion, representing a year-on-year growth of 76.77%; interbank investment balance reached RMB 42.4 billion, representing a year-on-year growth of 37.77%.

II. Bill business

During the reporting period, the Bank intensified cooperation with state-owned

20 2016 Annual Report commercial banks and national joint-stock bank, increased bill outright purchases/sells sharply and realized spread return. Full-year margin income of bill business reached RMB 269 million, representing a year-on-year growth of 12.55%; transaction volume reached RMB 509.4 billion, representing a year-on-year growth of

23.13%.

III. Financial service

During the reporting period, the Bank has introduced new financial products in more flexible product operation mode and issuing way. As a result, income level increased sharply. Financial service income amounted to RMB 673 million, representing an increase of 73.21% over 2015; balance of remaining financial products amounted to RMB 22.2 billion, representing an increase of 89% over 2015.

IV. Investment banking

The Bank has established Investment Banking Division and set transformation development goal of "large asset custody, large investment bank". 11 projects regarding the investment banking have been put into practice in the full year, total income reached RMB 120 million.

3.2.5 International business

During the reporting period, international settlement scale of the Bank reached

USD 828 million, including cross-border RMB business scale of RMB 871; on and off-balance sheet trade finance handled by the Bank reached USD 255 million, and foreign exchange sales and settlements on behalf of customers USD 396 million. As of the end of the reporting period, the Bank had 56 domestic and overseas agencies in

21 2016 Annual Report total.

3.2.6 Platform financing and information technology

During the reporting period, the Bank improved application system structure continuously, promoted transformation of scientific control and IT structure, kept optimizing scientific resource allocation, further improved operation guarantee and emergency handling capability. As a result, scientific support guarded business transformation and promoted sustainable development.

I. Continually enhance IT support, promote information system construction

During the reporting period, the Bank has approved 125 projects, implemented

58 projects and pushed out 32 systems to provide effective support for innovation and development of various branch operations. During the reporting period, the Bank has developed and pushed out deposit certificate systems, "loan borrowing" petty mortgage loan and management system for capital business in domestic currency, and spared no effort to promote data warehouse project construction and big data platform project construction.

II. Make efforts to establish ‘Three Gorges Pay’ Internet comprehensive financial service platform

Trial operation of ‘Three Gorges Pay’ has been started during the reporting period. The system concentrated on building of account payment-based, product marketing-centered and customer service risk control-secured six foundation platforms system; distributed Internet financial products including payment and

22 2016 Annual Report settlement, online financing, wealth management and life application; focused on customers, launched cross-border cooperation and built scenes, so as to establish a real-time interactive Internet finance ecosystem featuring in coexistence and mutual prosperity, and provide firm support for strategic transformation of the Bank.

III. Accelerate infrastructure construction, improve emergency management level

In addition, the Bank spared no effort to promote construction of "two places, three centers", accelerated construction progress of Xiyong Data Center; completed construction of application level disaster recovery of vital information systems including public database platform and data level disaster recovery of mobile banking system, further improved disaster recovery construction system; successfully passed acceptance of city-wide disaster recovery environment for 2nd generation payment system by Head Office of the People's Bank of China. The Bank has also completed real handover and failback drill for city-wide disaster recovery of systems including core system, host/backup switching drill of systems including mobile banking, and prevented various emergencies soundly.

IV. Plan IT structure upgrading, explore strategic transformation path

By centering on the overall development strategy of business operation and exploring IT strategic transformation path in new era and new circumstance, the

Bank positively planned IT framework upgrading, and has developed "13th Five-Year

Plan" information technology development strategic plan, thus accelerating

23 2016 Annual Report integration of IT strategy and business strategy, and intensifying guiding role of strategic plan. In addition to introducing new idea, new concept and new technology, the Bank has discussed key project construction scheme in new stage, intensified outsourcing risk management of information technology, perfected risk monitoring system of information technology, completed information security management system and improved scientific control level.

3.3 Core competence

The Bank has been constantly devoting to service of "scientific development, prospering the people in Chongqing" and construction of Chongqing municipal 5 functional areas, adhering to operation principle of "all for you", sticking to strategic location of medium business bank, retail bank, financing bank and reservoir bank, and has won extensive approval of the public.

24 2016 Annual Report

4. Management Discussion and Analysis

4.1 Operation overview

During the reporting period, the Bank earnestly implemented working conference deployment of Board of Directors and the Bank, adhered to robust development and compliance operation, put forth effort to explore transformation development, rooted for real economy, prevented financial risk effectively, fulfilled social responsibilities faithfully and has completed major target tasks of the Bank well.

4.1.1 Fulfillment of annual business objective

As of the end of the reporting period, total assets of the Bank amounted to RMB

181.504 billion, representing an increase of RMB 49.036 billion or 37.02% over the beginning of the period; deposit balance RMB 122.164 billion, representing an increase of RMB 28.586 billion or 30.55% over the last year; loan balance RMB

38.454 billion or 18.63% over the last year; profit RMB 2.605 billion; stored tax

RMB 999 million, representing an increase of RMB 209 million or 26.49%; NPLR

0.93% and was maintained within reasonable range; goal of full year zero case has been fulfilled; various supervisory indicators fully met prudential supervision standards; capital adequacy ratio amounted to 11.95%, provision coverage ratio

274.24%, provision to loan ratio 2.54%, return on assets 1.26%, return on capital

18.79%, cost-income ratio 29.26% and core liability dependence 60.57%.

25 2016 Annual Report

4.1.2 Effective improvement of management capability

2016 is "management improvement" subject year of the Bank. By adhering to problem-orientated principle, the Bank promoted effective improvement of management capability, risk prevention and control as well as service level by optimizing management system, enhancing product adaptability, launching all staff education and training, strengthening staff behavior management, rectifying leftover problems intensively , eliminating bad assets, improving work style and intensifying service management.

4.1.3 More specific strategic orientation

The Bank paid high attention to strategic management work and led operation and development in strategic-oriented principle. Implementation effect of last five-year plan was supervised and evaluated, and the third five-year (2016-2020) strategic development plan was developed under the systematic operation mechanism concerning strategic development, strategic promotion, strategic implementation and evaluation feedback. In addition, the Bank planned and established guiding concept and goal of future development, proposed the general proposition of "expanding market demand space, focusing on transformation development", clarified centering on one focus, grasped two points of strength, spared no effort to advance three strategies, carried out location of four banks in one, adhered to development orientation of five targets, consolidated and improved traditional banking operations, accelerated transformation development toward "large asset custody", retail bank and

Internet finance, so that the Bank can develop soundly and steadily in economy new

26 2016 Annual Report normal.

4.1.4 Robust development of various business

During the reporting period, in accordance with the business objective determined by the Board of Directors, the Bank planned thoroughly, took new measures, defined marketing orientation, adjusted asset-liability strategy timely, created and enriched products continuously, and followed the principle of "plan going ahead, policy supporting, timely supervision" to make concerted efforts up and down.

As a result, total assets exceeded RMB 180 billion, various operations developed robustly, market share of deposits and loans improved continuously.

4.1.5 Transformation basis laid by information technology and platform finance construction

The Bank paid high attention to transformation development of Internet finance, readjusted development plan of platform finance, co-located Platform Finance

Department with Information Technology Department, clarified development orientation of Internet finance transformation, and consolidated organizational guarantee and scientific support. Beside, the Bank pushed for foundation construction of Internet finance, the new Three Gorges Payment System went alive on December

23, 2016 and proceeded to trial operation, layout of payment settlement, online financing, wealth management and life service product lines emerged, marketing and brand construction had preliminary effects, internal management and risk control were optimized and controlled, all these have laid fundamental basis for

27 2016 Annual Report transformation of Internet finance.

4.1.6 Continuous improvement of channel service capability

The Bank accelerated construction of banking outlets in accordance with “3+1” branch construction plan. The Bank has completed construction of Jieshi, Erlang and

Huixing Sub-branch, and received approval for commencement; the Bank received approval from CBRC regarding relocation work of Wanzhou Sub-branch, and approval for preparing Qingyanggong Sub-branch based on original Wanzhou

Sub-branch Business Office. So far the Bank has 82 banking outlets and service coverage has been further expanded.

Moreover, the Bank optimized and upgraded the function of electronic channel, promoted super e-banking system, WeChat payment, WeChat account movement and e-banking consumption-based loan, realized outbound marketing of telephone banking, and comprehensively improved e-channel business function and service function. Meanwhile, it has also built 10 off-bank standalone outlets and off-bank self-help banks in Daping Paradise Walk, thus further expanding coverage of channel services.

4.1.7 Further strengthening of risk management

Aiming at "promoting business development and sticking to risk bottom line" and focusing on promoting risk preference transmission, the Bank continuously improved risk management methods, processes and tools, laid emphasis on risk system building, risk mechanism perfection and risk controlling capability

28 2016 Annual Report improvement, and has indeed improved risk management level.

By conscientiously implementing Comprehensive Risk Management Guideline for Banking Financial Institutions of China Banking Regulatory Commission, the

Bank found out where one has lagged behind, improved weak links and perfected comprehensive risk management. To provide guideline for business development and risk control, the Bank took the initiate to promote risk preference transmission and prepared risk preference statement. Additionally, the Bank perfected its risk evaluation system, completed gap analysis of six risks management, and performed pressure test to market risk, liquidity risk and credit risk. While implementing decisions made by Risk Management Committee of Board of Directors, the Bank intensified risk investigation in key risk fields covering credit risk, operation risk and liquidity risk, and adjusted business prevention measures and business operation strategy timely, so as to cope with changes in risk environment.

4.1.8 Goal fulfillment of zero internal control prevention case

The Bank paid high attention to internal control prevention case, conscientiously implemented job requirements about intensifying case prevention and sticking to risk bottom line proposed by China Banking Regulatory Commission and CBRC

Chongqing Office, optimized internal control systems including system construction, process management, system post-evaluation and operation authorization management, enhanced internal review comprehensively, improved system execution, intensified staff conduct management, reinforced case investigation and accountability, completed case prevention and security protection soundly, thus

29 2016 Annual Report providing powerful guarantee for steady development and compliance operation.

4.1.9 Improvement of human resource management level

The Bank innovated management methods and strengthened personnel base.

During the reporting period, the Bank has employed 219 talents through campus recruitment and social recruitment, and 13 middle-level cadres outside and inside the

Bank. As of the end of the reporting period, the Bank had 2,073 on-post employees.

Furthermore, the Bank established work shift mechanism for sub-branch managers and interim performance evaluation mechanism for middle-level cadres, improved performance capability, promoted business development; continued grasping work style construction, enhanced and improved investigation, promoted and fully implemented responsibility system for construction of honest administration, and guaranteed incorruptibility and self discipline of all cadres and employees.

The Bank intensified talent team construction, innovated talent promotion and stimulation mechanism, and created growth atmosphere of full learning and self-improving. During the reporting period, the Bank has organized and launched 95 phases of internal and external training, 15,858 man-times have received training.

4.2 Main business analysis

4.2.1 Main items of profit statement

During the reporting period, the Bank has created operating income of RMB

4.263 billion, net profit 1.985 billion, representing an increase of 20.03% and 56.52% over the same period of last year. Main items of the Bank's profit statement are as

30 2016 Annual Report

follows: (unit: ten thousand yuan) Year-on-year 2016 2015 growth/decrease (%) I. Operating revenue 426,346.42 355,191.66 20.03 Including: net interest income 382,567.82 318,828.61 19.99 Handling charges and commission 37,840.94 20,073.85 88.51 net income II. Operating expenditure 166,901.00 188,039.38 -11.24 Including: operation and administrative 124,752.50 113,311.64 10.10 expense III. Operating profits 259,445.42 167,152.28 55.22 IV. Total Profit 260,508.69 168,293.72 54.79 V. Net Profits 198,476.93 126,804.34 56.52

31 2016 Annual Report

4.2.2 Business income composition during reporting period

During the reporting period, business income of the Company mainly came from

interest income and investment income. Full-year business income amounted to RMB

8.098 billion, representing an increase of 18.37% over the same period of last year.

Business income composition and changes of the Company during the reporting

period are as follows: (unit: ten thousand yuan) Year-on-year Sum Proportion (%) growth/decrease (%) Deposits with banks and other financial institutions 11,573.30 1.43 -26.68 Cash and balances with central bank 24,150.72 2.98 18.43 Lending fund 912.64 0.11 502.32 Loans and advance payments 237,377.16 29.31 -1.60 Redemptory monetary capital for sale 29,451.31 3.64 -57.72 Financial assets are measured at fair value through current profit and loss 3,743.49 0.46 72.37 Available-for-sale financial assets 95,619.29 11.81 79.88 Held-to-maturity investment 45,251.31 5.59 61.22 Investments classified as receivables 312,090.09 38.54 47.30 Income from service charges 43,665.96 5.39 72.35 Other incomes 5937.66 0.73 -63.55 Amount 809,772.94 100 18.37

4.2.3 Net interest income

As the largest component of our operating income, our net interest income was

RMB 3.826 billion during the reporting period, representing a year-on-year growth of

32 2016 Annual Report

19.99%. Scale growth of interest-bearing assets was the main cause of growth of net

proceeds from interest. Net interest income composition and growth of the Company

during the reporting period are as follows:

(unit: ten thousand yuan) 2016 2015 Year-o n-year Propo Propo growth Sum Sum rtion rtion /decrea se (%) Interest income Cash and balances with central 24,150.72 3.18 20,392.69 3.17 18.43 bank Deposits with banks and other 11,573.30 1.52 15,784.11 2.46 -26.68 financial institutions Lending fund 912.64 0.12 151.52 0.02 502.31 Loans and advance payments 237,377.16 31.23 241,227.09 37.55 -1.60 Redemptory monetary capital for 29,451.31 3.87 69,662.98 10.84 -57.72 sale Financial assets are measured at fair value through current profit 3,743.49 0.49 2,171.75 0.34 72.37 and loss Available-for-sale financial assets 95,619.29 12.58 53,156.10 8.27 79.88 Held-to-maturity investment 45,251.31 5.95 28,067.33 4.37 61.22 Investments classified as 312,090.09 41.06 211,878.76 32.98 47.30 receivables Subtotal of income 760,169.32 100.00 642,492.32 100.00 18.32 Interest expenditure Borrowing from the central bank 2,482.22 0.66 1,734.40 0.54 43.12 Deposits from banks and other 30,708.22 8.13 20,275.60 6.26 51.45 financial institutions Loans from other banks and other 1,688.06 0.45 315.29 0.10 435.39 financial institutions Deposits from customers 258,960.78 68.58 218,303.00 67.45 18.62 Financial assets sold for 48,331.12 12.80 55,819.05 17.25 -13.41 repurchase Bonds payable 35,394.27 9.37 27,207.65 8.41 30.09

33 2016 Annual Report

2016 2015 Year-o n-year Propo Propo growth Sum Sum rtion rtion /decrea se (%) Rediscount 36.83 0.01 8.72 0.00 322.36 Subtotal of expenditure 377,601.50 100.00 323,663.71 100.00 16.66 Net interest income 382,567.82 318,828.61 19.99

4.2.4 Net income from service charges and commission

The Company continued promoting strategic transformation, further optimized

income structure and diversified income source. During the reporting period, net

income from service charges and commission amounted to RMB 378 million,

representing an year-on-year growth of 88.51%. Composition of net income from

service charges and commission during the reporting period is listed as follows:

(unit: ten thousand yuan)

2016 2015

Handling charges and commission income —agent service 9,664.31 505.16 —financial service 24,886.39 17,613.43 —letter of guarantee and commitment service 2,563.68 2,331.76 —settlement and liquidation services 4,697.89 4,271.22 —Others 1,853.70 614.66 Subtotal 43,665.96 25,336.24 Handling charges and commission fee 5,825.02 5,262.39 Handling charges and commission net income 37,840.94 20,073.85

4.2.5 Operation and administrative expense

During the reporting period, operation and administrative expense of the

Company was RMB 1.248 billion, representing a year-on-year growth of 10.10%;

cost-income ratio was 29.26%, still maintaining at low level. Composition of

34 2016 Annual Report

operation and administrative expense was as follows:

(unit: ten thousand yuan)

2016 2015

LABOR COST 82,722.60 76,477.32 Depreciation of fixed assets 4,404.77 4,170.41 Amortization of intangible 930.27 823.95 assets Taxes 566.77 1,158.79 Business operation and 36,128.09 30,681.17 administrative expenses Amount 124,752.50 113,311.64

4.3 Assets and liabilities analysis

4.3.1 Overview

As of the end of the reporting period, total assets of the Company amounted to

RMB 181.504 billion, representing an increase of RMB 49.036 billion or 37.02% over

the beginning of the period. Total liabilities amounted to RMB 169.241 billion,

representing an increase of RMB 45.634 billion or 36.92% over the beginning of the

period. Shareholders' equity reached RMB 12.263 billion, representing an increase of

RMB 3.402 billion or 38.39%, and business scale grew steadily and robustly. Major

assets and liabilities are as shown in the table below: (unit: ten thousand yuan) Increase or decrease 2016 2015 amplitude (%) Deposit with central bank 2,567,678.66 2,089,526.99 22.88 and cash Interbank and monetary 2,221,862.83 2,439,245.41 -8.91 market application Net loans and advance 3,747,774.86 3,152,657.12 18.88 payments

35 2016 Annual Report

Increase or decrease 2016 2015 amplitude (%) Bonds and other 9,326,796.26 5,347,065.47 74.43 investments Total of assets 18,150,364.06 13,246,802.48 37.02 Deposits from customers 12,216,387.22 9,357,768.97 30.55 -Corporate deposit 9,965,309.11 7,943,855.16 25.45 -Savings deposit 2,251,078.11 1,413,913.81 59.21 Interbank and monetary 3,287,630.01 2,190,126.01 50.11 market integration Bonds payable 1,162,810.23 528,415.49 120.06 Total liabilities 16,924,100.72 12,360,738.48 36.92 Total shareholders' 1,226,263.34 886,064.00 38.39 equity Total of liabilities and 18,150,364.06 13,246,802.48 37.02 shareholders' equity

4.3.2 Main asset items

I. Loan

As of the end of the reporting period, total loans of the Bank amounted to RMB

38.454 billion, representing an increase of 18.63% over the beginning of the period.

(I) Industry distribution of consolidation loan (including discount) on a

consolidated basis As of end of reporting period:

(unit: ten thousand yuan)

Industry Book balance Proportion (%)

Agriculture, forestry, animal 105,898.50 2.75 husbandry and fishery Mining industry 32,359.00 0.84 Manufacturing Sector 527,647.71 13.72 Electricity, gas & water production 28,918.35 0.75 and supply industry Building industry 380,006.67 9.88

36 2016 Annual Report

Transportation, warehousing and post 142,472.19 3.70 industry Information transmission, computer 22,853.71 0.59 service and software industry Wholesale and retail trade 345,542.25 8.99 Accommodation and catering industry 18,924.24 0.49 Financial industry 135,200.00 3.52 Real estate industry 466,688.51 12.14 Rental and commercial service 264,547.38 6.88 industry Scientific research, technical service 22,686.77 0.59 and geological survey industry Water conservancy, environment and 183,197.00 4.76 public facility management Resident service and other service 48,404.00 1.26 industries Education 40,580.00 1.06 Health, social security and social 13,130.00 0.34 welfare Culture, sports and recreational 7,375.00 0.19 industry Public management and social 485.10 0.01 organization Discount 152,991.11 3.98 Personal loan 905,534.68 23.55 Amount 3,845,442.17 100.00

(II) Guarantee type-based distribution of consolidation loan (including discount)

As of end of reporting period

(unit: ten thousand yuan)

Guarantee type Book balance Proportion (%)

Fiduciary loan 253,815.21 6.60 Guaranteed and 1,622,994.13 42.21 secured Loan Mortgage loan 1,693,880.25 44.05 Pledge loan 121,761.46 3.17 Discount 152,991.11 3.98 Amount 3,845,442.17 100.00

37 2016 Annual Report

(III) Top 10 loan customers of the Bank

(unit: ten thousand yuan)

Customer Ending balance Proportion (%)

Customer A 50,000.00 1.30 Customer B 50,000.00 1.30 Customer C 50,000.00 1.30 Customer D 43,500.00 1.13 Customer E 42,558.29 1.11 Customer F 42,491.82 1.10 Customer G 41,423.00 1.08 Customer H 41,340.00 1.07 Customer I 41,000.00 1.07 Customer J 40,000.00 1.04 Amount 442,313.11 11.50

II. Redemptory financial assets for sale

As of the end of the reporting period, balance of redemptory financial assets for sale amounted to RMB 15.289 billion, representing an decrease of 7.09% over the beginning of the period. See the form below:

(unit: ten thousand yuan)

2016 2015

Bond, as per issuer Government 188,096.97 142,265.77 Policy bank 745,237.42 717,632.64 Financial institution - - Enterprise - 35,158.33 Note 595,542.9 750,513.1 Loan - - Subtotal 1,528,877.28 1,645,569.83 Decrease: asset impairment - - Net value 1,528,877.28 1,645,569.83

38 2016 Annual Report

III. Available-for-sale financial assets

As of the end of the reporting period, balance of available-for-sale financial assets held by the Company amounted to RMB 27.95 billion, representing an increase of 114.69 over the beginning of the period. See the form below: (unit: ten thousand yuan)

2016 2015

Bond, as per issuer Government 1,988.55 - Policy bank 699,652.41 283,933.98 Financial 98,436.45 137,646.23 institution Enterprise 1,038,030.46 668,594.15 Equity instrument 956,913.00 211,702 Amount 2,795,020.86 1,301,876.36

IV. Held-to-maturity investment

During the reporting period, the Company expanded scale of held-to-maturity investments properly to obtain stable interest income. As of the end of the reporting period, balance of held-to-maturity investments amounted to RMB 12.437 billion, representing an increase of 53.07% over the beginning of the period. See the form below: (unit: ten thousand yuan)

2016 2015

Bond, as per issuer Government 544,380.27 210,273.48 Policy bank 506,160.38 458,192.74 Financial institution - - Enterprise 193,163.63 144,002.41 Amount 1,243,704.29 812,468.63

39 2016 Annual Report

4.3.3 Main liability items

I. Deposit

As of the end of the reporting period, deposit balance of the Bank amounted to

RMB 122.164 billion, representing an increase of 30.55% over the beginning of the period; including savings deposit of RMB 22.511 billion, representing an increase of

59.21% over the beginning of the period, accounting for 18.43% of whole deposit.

Details are as follows:

(unit: ten thousand yuan)

2016 2015

Current corporate deposit 4,037,979.05 3,719,641.87 Current savings deposit 461,963.30 383,638.24 Fixed corporate deposit 5,270,156.13 3,263,921.95 Fixed savings deposit 1,789,114.80 1,030,275.57 Margin deposit 657,173.93 960,291.34 Amount 12,216,387.22 9,357,768.97

II. Deposits from banks and other financial institutions

During the reporting period, the Bank paid attention to matching of interbank liability and kept optimizing structure of interbank business while maintaining steady growth of business scale. As of the end of the reporting period, balance of deposits from banks and other financial institutions amounted to RMB 14.620 billion, representing an increase of 65.42% over the beginning of the period. See the form below: 40 2016 Annual Report

(unit: ten thousand yuan)

2016 2015

Deposit from domestic banks 1,105,171.37 266,475.66 Deposit from domestic 356,826.78 617,353.65 non-bank financial institutions Amount 1,461,998.15 883,829.31

4.4 Financial instruments measured at fair value

4.4.1 Relevant internal control system regarding fair value measurement

The Bank has developed rules and regulations including Market Risk

Management Policy, Market Risk Management Method and Management Method for

Transaction Account and Bank Account Division of Chongqing Three Gorges Bank, so as to designate functional department to collect, sort and verify fair value data source and results, and carry out accounting treatment after verification.

4.4.2 Fair value calculation basis and policy

Fair value calculation of the Bank is in strict accordance with relevant rules in

Accounting Standards for Business Enterprises issued by Ministry of Finance.

The Bank measures fair value of relevant financial assets and financial liabilities at price in leading market; for those without leading market, at price in the most advantageous market, and by adopting applicable valuation technique at that time supported by sufficient available data and other information. The Bank classifies inputs used to measure fair value of the financial assets and financial liabilities into

41 2016 Annual Report three levels. Level 1: unadjusted quoted prices available in an active market for identical assets or liabilities; Level 2: inputs other than quoted prices included in

Level 1 that are observable for relevant assets or liabilities, either directly or indirectly; and Level 3: inputs not based on observable market data for relevant assets or liabilities. The Bank gives priority in use of Level 1 inputs and then Level 3 inputs.

The level of fair value measurements depends on minimum level of inputs of great significance to overall fair value measurement.

As for financial instruments tradable in an active market, quoted prices in the active market shall be used to determine the fair value thereof; as for those not tradable in an active market, valuation technique shall be used to determine the fair value thereof. Financial instruments classified as Level 2 by the Bank mainly include bond investment. Fair value of RMB bonds is recognized based upon valuation results provided by China Central Depository & Clearing Co., Ltd. All significant valuation parameters are defined by adopting valuation technique concerning observable market information.

42 2016 Annual Report

4.4.3 Items related to fair value measurement (unit: ten thousand yuan) Curre Accumulated Current loss nt change in Beginning and profit accrua Ending fair value amount from fair l asset amount included in value change impair equity ment Financial assets Trading financial 34,489.31 -1,176.86 - - 92,551.59 assets Available-for-sale 1,090,174.36 - -24,514.43 - 1,838,107.86 financial assets Derivative financial - - - - - assets Total financial 1,124,663.67 -1,176.86 -24,514.43 0.00 1,930,659.45 assets Financial liabilities Derivative financial - - - - - liabilities Others - - - - - Total financial - - - - - liabilities

43 2016 Annual Report

4.5 Equity investment

(unit: ten thousand yuan) Profit Change in Initial and loss owner's Ending Ending Name of held investm during equity Accountin shares held book object ent reporti during g subject (shares) value amount ng reporting period period Clearing Available-f Center for City or-sale 25.00 25.00 25.00 - - Commercial financial Banks assets Sichuan Available-f Oriental or-sale 5.00 5.00 - - - Pharmaceutical financial Co., Ltd. assets

44 2016 Annual Report

4.6 Generation information of branch

As of the end of the reporting period, the Bank has established 82 branches, including 1 branch, 81 sub-branches, name of specific branch is as follows:

Name of operating Address: agency Head Business No.99, Huichuanmen Road, Jiangbeicheng, Jiangbei District, 1 Office Chongqing Jiangbei 2 No.8, Yanghe East Road, Jiangbei District, Chongqing Sub-branch Yubei No.2, Hongjin Street, , Chongqing (1F, Chongqing 3 Sub-branch General Chamber of Commerce Mansion) Shapingba Zone E, Jinyang Yicheng International Style street, No.29, Fengtian 4 Sub-branch Road, , Chongqing Jiulongpo No.3, Xijiao 3rd Village, Yangjiaping, , 5 Sub-branch Chongqing Jiefangbei Tower B, Hejing Mansion, No.108, Minzu Road, , 6 Sub-branch Chongqing Nan'an Zone AB Skirt Building, Shanghai City Phase II, No.58, Nanping 7 Sub-branch West Road, Nan'an District, Chongqing Dadukou B1 F, Glory City Phase II, No.1011, Songqing Road, Dadukou 8 Sub-branch District, Chongqing North New Zone 9 No.33, 35, 81, 83, Qingfeng South Road, Yubei District, Chongqing Sub-branch Changshou 10 No.8, Taoyuan Avenue, , Chongqing Sub-branch Fuling 11 No.1, Tiyu South Road, , Chongqing Sub-branch Beibei No.173, 175, 177 (1F) and 163-1 (2F), Yunqing Road, Jialing Style 12 Sub-branch Pedestrian Street, South New Zone, , Chongqing Ba'nan No.12, 14, 15, 16 and 17, 1F, 5#, No.3, Longhai Avenue, Ba'nan 13 Sub-branch District, Chongqing Hi-tech No.19, 1F, No.137, Keyuan 2nd Road, Shiqiaopu, Jiulongpo 14 Sub-branch District, Chongqing

45 2016 Annual Report

Name of operating Address: agency Liangjiang No.1-09, 2-09, 3-09, (Tower B) Skirt Building Store, Hanguo 15 Sub-branch Center, No.85, Jinyu Avenue, , Chongqing Airport No.190-2, Shengli Road, Shuanglonghu Street, Yubei District, 16 Sub-branch Chongqing Jinjiang No.18 (Shangfeng Shangzuo), Honghu West Road, Yubei District, 17 Sub-branch Chongqing Fengcheng 18 No.1, Xiangyang Road, Chongqing Sub-branch Baguocheng No.11-2-1, 11-2-2, 11-2-3, 11-2-4, Chuangxin Avenue, Jiulongpo 19 Sub-branch District, Chongqing Xiyong 20 2#, Xiyong Micro-electronics Industrial Park, Chongqing Sub-branch Chenjiawan Wenxing Mansion, No.119, Yubei Road, Chenjiawan, Shapingba 21 Sub-branch District, Chongqing Daping 22 No.88, Changjiang 2rd Road, Yuzhong District, Chongqing Sub-branch Fulishe 5F, Tower A (No.5-E, 5-6, 5-7 and 5-8, Tower A), No.45, Nanping 23 Sub-branch East Road, Nanping Sub-district, Nan'an District, Chongqing Liangjiangmingj 24 No.76, Caishun Road, Caijia, Beibei District, Chongqing u Sub-branch Lijiatuo Shop 1-1-10, 11, No.169, Lijiatuo Center Street, Ba'nan District, 25 Sub-branch Chongqing Aoyuan 1F, 1#, No.116, Jintong Road, North District, Economic and 26 Sub-branch Technological Development Zone, Chongqing Tongnan No.96, Xingtong Avenue, Guilin Sub-district Office, Tongnan 27 Sub-branch District, Chongqing Yongchuan No.259, 261, 263, 265 and 229-20, -21, Renmin Avenue, 28 Sub-branch , Chongqing Bishan 1F-1, Dianjinyuan Bicheng Mansion, No.266, Jinjian Road, Bishan 29 Sub-branch District, Chongqing Jiangjin No.1-1, 2-1, E#, Riverside Garden, No.718-5, Dingshan Avenue, 30 Sub-branch Jijiang Sub-district, , Chongqing No.280, 282, 284, 286, and No.2-4, Skirt Building Unit, 1#, Dazu 31 Dongcheng Bus Station, No.268, Wuxing Avenue, Tangxiang Sub-branch Sub-district Office, , Chongqing

46 2016 Annual Report

Name of operating Address: agency Qijiang No.37, Jiulong Avenue, Wenlong Sub-district Development Zone, 32 Sub-branch , Chongqing Nanchuan No.1-1, 1-2, 2-1, C#, Bojin Niaochao, No.2, Nanyuan Road, 33 Sub-branch Xicheng Sub-district Office, , Chongqing Tongliang 1-2F, No.30, Heping Road, Bachuan Sub-district, Tongliang County, 34 Sub-branch Chongqing Baisha 1# ， Zone A, "Wishful World" Bayu Style Street, No.4, Binhu 35 Sub-branch Road, Baisha Town, Jiangjin District, Chongqing Rongchang 36 No.170-2, 3, 4, 5, Xiangyang Road, Rongchang County, Chongqing Sub-branch Hechuan 37 No.523, Nanjin Street, , Chongqing Sub-branch Wanzhou 38 No.3, Baiyan Road, , Chongqing Sub-branch Wangpai Road 39 No.409, Wangpai Road, Wanzhou District, Chongqing Sub-branch Longbao 40 No.133, Longdu Avenue, Wanzhou District, Chongqing Sub-branch Tiancheng 41 No.79, Fujia Street, Zhoujiaba, Wanzhou District, Chongqing Sub-branch Baiyan Road 42 No.216, Baiyan Road, Wanzhou District, Chongqing Sub-branch Jinshi 43 No.265, Baiyan Road, Wanzhou District, Chongqing Sub-branch Taibai Road 44 No.123, Taibai Road, Wanzhou District, Chongqing Sub-branch Xincheng Road 45 No.112, Xincheng Road, Wanzhou District, Chongqing Sub-branch Gaosuntang 46 No.84, Gaosuntang, Wanzhou District, Chongqing Sub-branch Dianbao Road 47 No.134, Dianbao Road, Wanzhou District, Chongqing Sub-branch Beishan 48 No.339, Beishan Avenue, Wanzhou District, Chongqing Sub-branch Wuqiao 49 No.189, Shanghai Avenue, Wuqiao, Wanzhou District, Chongqing Sub-branch

47 2016 Annual Report

Name of operating Address: agency Ground Floor, Logistics Service Center, Wanzhou District Jiangnan 50 Administrative Center, Jiangnan Avenue, Wanzhou District, Sub-branch Chongqing Yimin Square 51 No.775, 777, Jingyuan Road, Wanzhou District, Chongqing Sub-branch Liangping 29#, Minghao Business District, Liangshan Town, Liangping 52 Sub-branch County, Chongqing Kaizhou 53 No.1250, Kaizhou Avenue (East), , Chongqing Sub-branch Yunyang No.1132, Yunjiang Avenue, Shuangjiang Town, , 54 Sub-branch Chongqing Zhongxian No.1-6, Hongxing Stairway, Zhongzhou Town, , 55 Sub-branch Chongqing Wushan No.427, Guangdong Middle Road, Wuxia Town, Wushan County, 56 Sub-branch Chongqing Fengdu 57 No.180, Pingdu Avenue West Section, , Chongqing Sub-branch Fengjie 58 No.466, Kuizhou Road, Yong'an Town, , Chongqing Sub-branch Dianjiang 1, 2F, Jiuzhongliyuan, Fengshan West Road, Guixi Town, Dianjiang 59 Sub-branch County, Chongqing Wuxi No.184, Fengyi Road, Boyang Sub-district, , 60 Sub-branch Chongqing Chengkou 61 No.16, East Avenue, , Chongqing Sub-branch Qianjiang No.1248, Xinhua Avenue West Section, , 62 Sub-branch Chongqing Wulong 63 1, 2F, No.44, Furong West Road, , Chongqing Sub-branch Shizhu 1&2F, No.99, Wanshou Avenue, Nanbin Town, Shizhu County, 64 Sub-branch Chongqing Xiushan No.130, Yuxiu Avenue, Zhonghe Sub-district, Xiushan County, 65 Sub-branch Chongqing Youyang 1, 2F, 4#, Longtengshengshi Ecodistrict, Taohuayuan Avenue, 66 Sub-branch Youyang County, Chongqing 67 Pengshui 10#-1, -2, -3, 10# 2-1, 2-2, 2-3, No.58, Wenmiao Street, Hanjia

48 2016 Annual Report

Name of operating Address: agency Sub-branch Sub-district, Pengshui County, Chongqing Wansheng No.1-4, 1-5, 1-6, 2-1, 4#, No.21, Wansheng Avenue, Economic 68 Sub-branch Development Zone, Wansheng, Chongqing Huangyang 24# 1-5, 1-6, 1-7, No.58, Gongnong 4th Village, Xiejiawan, 69 Road Jiulongpo District, Chongqing Sub-branch Yuanyang 1F, 11#, No.1115, Jinkai Avenue, Economic Development Park, 70 Sub-branch New North Zone, Chongqing Ranjiaba Shop 1, 1F, 5#， Xingmao·Shengshibeichen, No.6, Bailing Road, 71 Sub-branch Longshan Sub-district, Yubei District, Chongqing Beibin Road 72 No.47, Jinyuan Road, Jiangbei District, Chongqing Sub-branch Yuzhong 73 No. 107, Minquan Road, Yuzhong District, Chongqing Sub-branch Longtousi No.62-96, Taishan Avenue East Section, New North Zone, 74 Sub-branch Chongqing No.51-2, -3, Yonghe Road, Yuzui Town, Jiangbei District, 75 Yufu Sub-branch Chongqing Shuangfu Economic No.572, Nanbei Avenue, Shuangfu Sub-district, Jiangjin District, 76 Development Chongqing Sub-branch Huilongwan No.94-1, -2, -3, Qinglong Road, Economic Development Zone, 77 Sub-branch Chongqing Chayuan No.89-27, 89-26-2-1, Tongjiang Avenue, Nan'an District, 78 Sub-branch Chongqing Jieshi No.519-21, 519-20, 519-1, 517, 521, Shimei Avenue, Jieshi Town, 79 Sub-branch Ba'nan District, Chongqing Erlang 80 No.99-1, -2, -3, - -1, Huoju Avenue, Jiulongpo District, Chongqing Sub-branch Huixing No.9-1, -2, -3, -4 (1F), No.9 house (2F), Shuanghu Road, Yubei 81 Sub-branch District, Chongqing Wanzhou Qingyang Palace 82 No.3, Baiyan Road, Wanzhou District, Chongqing Sub-branch (to be established)

49 2016 Annual Report

4.7 Quality of loan assets

4.7.1 Five-class classification of loans

As of the end of the reporting period, bad loan balance of the Bank amounted to

RMB 356 million, representing an increase of RMB 38 million; bad loan ratio

amounted to 0.93%, representing a decrease of 0.05 percentage point. Five-class

classification of loans of the Bank is as follows:

Unit: 10,000 yuan December 31, 2016 December 31, 2015 Current change Asset category Balance Proportion (%) Balance Proportion (%) （+, -） 3,634,415.2 3,064,874.0 Normal 94.51 94.55 569,541.22 9 7 Special-mentioned 175,412.82 4.56 144,824.09 4.47 30,588.73 Subordinated 29,182.53 0.76 24,500.56 0.76 4,681.97 Doubtful 6,357.23 0.17 6989.5 0.22 -632.27 Loss 74.29 0.00 308.46 0.01 -234.17 3,845,442.1 3,241,496.6 Amount 100.00 100.00 603,945.48 6 8

4.7.2 Restructured and overdue loans Unit: 10,000 yuan Current Beginning Ending Proportion change Cause of change balance balance (%) （+, -） (1) Intensified collection and urged borrowers to return loans to the Bank; (2) strengthened communication with bonding Overdue company, and urged it to perform 127,893.61 52,928.96 -74,964.65 1.38% loans vicarious liability; (3) intensified clearing and recovering of overdue loans; (4) adopted risk agency liquidation by outsourcing professional lawyer team to resolve

50 2016 Annual Report

Current Beginning Ending Proportion change Cause of change balance balance (%) （+, -） overdue loans in multiple channels. The Bank has made certain achievements in liquidating and disposing overdue loans. As macro economy continued to decline, some credit customers were faced with liquidity problem in terms of operation. In order to maintain stability of entity economy, the Bank did not force to clear and recover assets, but provide sufficient time and space for enterprises to resolve risks. In order to reduce customers' Restruct financing cost and improve service u-red 60,545.02 75,078.21 14,533.19 2.32% efficiency, and in accordance with loans Notice on Improving and Innovating Loan Service for Small and Micro Enterprises, Improving Financial Service Level of Small and Micro Enterprises, the Bank got through difficulties with enterprises in the mode of "borrowing to return debts, no refinancing bridge fund, no onlenting fund cost (zero cost), rapid approval".

4.7.3 Accrual and write-off of loan impairment reserve

I. Accrual basis and method of loan impairment reserve

The Bank recognizes objective evidence of impairment by performing individual evaluation to individually significant loans. If there is objective evidence proving the impairment, the Banks recognizes the difference between book value of the loans and

51 2016 Annual Report present value of expected future cash flow as impairment loss. In calculating present value of estimated future cash flow, estimated future cash flow has allowed for value of relevant guaranties rather than future credit loss not incurred yet; discount rate shall be original effective interest rate of the loan. Original effective interest rate refers to effective interest rate of the loan determined through calculation upon initial recognition. For floating rate loans, current effective interest rate as specified in contract shall be applied.

The Bank recognizes objective evidence of impairment by performing individual evaluation or combination evaluation to individually non-significant loans.

Combination evaluation shall be performed to individual loans subject to individual evaluation and for which no objective evidence of impairment is detected, whether significant or not, along with financial assets with similar credit risk features to determine impairment loss. Combination evaluation shall not be performed to loans subject to individual test and for which impairment loss is recognized.

Where loans are evaluated to be impaired, their book values shall be written down to the present value of estimated future cash flow. The written-down amount shall be recognized and accrued as loan impairment reserve.

52 2016 Annual Report

II. Changes in loan impairment reserve during the reporting period

During the reporting period, total impairment reserves accrued by the Bank reached RMB 232 million. Change in reserve is as follows: (unit: ten thousand yuan) Opening balance 88,839.55 Accrual in current period 23,206.65 Current write off - Current sale amount 14,112.68 Current return amount of assets price 266.21 rising Current written-off amount withdrawn - Current released discount interest on - impairment reserve Exchange rate changes and other - adjustment Ending balance 97,667.31 Note: above data is on a consolidated basis.

4.7.4 Measures against bad loan

I. Urge borrower to raise funds and repay loans in multiple ways;

II. Urge bonding company to perform vicarious liability timely;

III. Intensify court lawsuit and judicial guarantee.

53 2016 Annual Report

4.7.5 Major categories of interest-bearing assets, daily average size and average interest rate (unit: ten thousand yuan) Average interest Average size Interest income rate Loans and advance 3,750,443.46 237,377.16 6.33% payments Cash and balances with 1,508,195.16 24,150.72 1.60% central bank Inter-bank transactions 1,534,041.98 41,937.25 2.73% Bonds and other 7,561,544.02 456,704.18 6.04% investments Total of interest-bearing 14,354,224.62 760,169.32 5.30% assets

4.7.6 Major categories of liability with interest, daily average size and average interest rate (unit: ten thousand yuan) Interest Average interest Average size expenditure rate Customer's deposit 10,040,248.36 258,960.78 2.58% Inter-bank transactions 2,548,497.51 80,764.24 3.17% Bonds payable 615,004.71 35,394.27 5.76% Borrowing from the 73,811.48 2,482.22 3.36% central bank Total of liability with 13,277,562.05 377,601.50 2.84% interest

4.7.7 Ending financial bonds

I. Distribution of financial bonds held by the Bank by category

54 2016 Annual Report

As of the end of reporting period (unit: ten thousand yuan)

Bond category Amount (book amount)

Policy-based financial bond 1,218,000.00 Commercial bank financial bond - Others - Amount 1,218,000.00

II. Significant financial bonds held by the Bank As of the end of reporting period (unit: ten thousand yuan) Financial bond Annual interest rate Book value Maturity date category (%) 05GK23 10,000 3.60 2020/11/29 10NF09 23,000 3.50 2020/08/23 10NF03 10,000 3.65 2020/03/26 09GK09 3,000 4.25 2019/08/19 08NF18 5,000 3.75 2018/10/31 08GK16 5,000 4.93 2018/09/23 12GK31 10,000 3.9702 2019/07/9 12GK40 25,000 4.0741 2017/09/17 12GK41 7,000 4.1902 2019/09/17 12GK07 10,000 3.9400 20190/2/16 12GK20 15,000 4.1100 2017/04/23 12GK02 5,000 3.8300 2019/02/01 11GK08 10,000 4.62 2021/02/22 07GK25 15,000 5.07 2017/11/29 13GK31 20,000 4.17 2023/07/18 13JC21 5,000 4.70 2023/08/26 14GK10 30,000 5.6101 2021/04/08 13JC18 31,000 4.35 2020/08/13 13JC07 10,000 4.02 2020/04/24 13NF04 15,000 4.11 2020/03/26 12NF11 5,000 3.87 2019/6/28 13JC13 10,000 4.15 2023/06/21 12NF01 11,000 3.92 2019/02/28

55 2016 Annual Report

Financial bond Annual interest rate Book value Maturity date category (%) 14GK21 34,000 5.10 2021/08/07 14GK22 25,000 5.02 2024/08/21 14NF03 10,000 5.90 2021/01/20 14JC62 10,000 4.80 2021/09/23 15JC04 30,000 3.95 2022/01/26 15JC03 10,000 3.85 2020/01/16 15NF02 10,000 4.02 2020/01/16 15NF12 50,000 4.18 2022/05/04 15JC08 50,000 4.29 2025/04/07 15GK18 50,000 3.74 2025/09/10 15JC14 70,000 3.87 2025/09/14 16JC02 50,000 3.07 2021/02/22 16JC03 50,000 3.33 2026/02/22 16GK07 100,000 3.24 2023/02/25 16GK10 60,000 3.18 2026/04/05 16GK05 30,000 3.80 2036/01/25 16NF17 50,000 3.58 2026/04/22 16NF18 50,000 2.54 2023/04/22 16GK13 39,000 3.05 2026/08/24 16JC12 50,000 2.92 2021/11/01 16JC10 100000 3.18 2026/09/05 Amount 1218000

4.7.8 Accrual of interest receivable and bad-debt reserve for other accounts receivable

I. Interest receivable As of the end of reporting period (unit: ten thousand yuan) Not overdue Overdue but Depreciation and not Impaired Amount not impaired reserves impaired Interests 94,990.50 123.82 - 88.20 95,026.12 receivable

56 2016 Annual Report

II. Other accounts receivable As of the end of reporting period (unit: ten thousand yuan) Beginning balance Current change Ending balance Depreciation reserves for 26.85 993.47 1,020.32 other accounts receivable

4.7.9 Repayment asset

As of the end of the reporting period, original book value of debt-repaid assets reached RMB 385,500, impairment reserve RMB 231,300 and net book value RMB

154,200.

4.7.10 Overdue debt outstanding

None

4.7.11 Development of financial services, asset securitization and other business during reporting period

I. Development of financial services

The Bank has launched RMB 336.11 billion financial products in total, representing a year-on-year growth of 159.15%, including raised individual finance

RMB 14.61 billion, representing a year-on-year growth of 77.33%; individual institutional finance of RMB 19 billion, representing a year-on-year growth of

298.91%. As of the end of the reporting period, balance of the Bank's financial products reached RMB 22.160 billion, representing an increase of 89% over the beginning of the period; income from financial services reached RMB 673 million,

57 2016 Annual Report representing an increase of 73.21% over 2015.

The Bank also positively innovated financing business. Based upon current financing brand system, the Bank promoted series financial products including

"wealth value", enriched product category and expanded investment scope of financial funds; promoted "fund development driven by new power", intensified

Bank-enterprise and Bank-government cooperation, introduced market funds to jointly invest in quality projects, complemented each other's advantages, and improve income level of asset investment. In addition, the Bank intensified financial service management and constantly improved market competitiveness. The Bank ranked the

55th in terms of comprehensive financial capability and the 10th in terms of financing risk control capability among urban commercial banks in the 2016 the 4th quarter bank financial capability ranking report published by PY standard Financial Times, both ranks have been improved significantly.

II. Development of asset securitization

The Bank was awarded business qualification of handling credit assets securitization, and mobilized first phase of credit assets securitization business. As of the end of the reporting period, asset-Backed securities have not been issued for current credit asset securitization.

58 2016 Annual Report

4.7.12 Balance of off-balance sheet items may having significant impact on financial situation and operating results (unit: ten thousand yuan)

Off-balance sheet business item December 31, 2016 December 31, 2015

Credit commitment 1,326,569.03 1,619,186.72 Letter of credit 40,343.23 7,725.9 Letter of guarantee 45,134.25 16.73 Bank acceptance 1,221,091.55 1,581,444.09 Loan and other credit 20,000 30,000 commitment Operating lease commitment 53,709.73 55,644.14 Pledged assets 1,932,400.19 1,290,480.91 Capital expenditure commitment 59,027.92 83,818.78 Commitment to purchase 59,027.92 83,818.78 long-term assets Securities underwriting - - Short-term financing - - bonds and medium term note

4.8 Major risks and countermeasures

During the reporting period, aiming at "promoting business development and sticking to risk bottom line" and focusing on promoting risk preference transmission, the Bank continuously improved risk management methods, processes and tools, laid emphasis on risk system building, risk mechanism perfection and risk controlling capability improvement, and all supervision indicators have met the requirements of supervision, overall risk was controllable1.

1Management effects of various risks can be classified into controllable, basically controllable and uncontrollable level in order from the most effective to the least. 59 2016 Annual Report

4.8.1 Credit risk conditions and management countermeasures

During the reporting period, credit risk supervision core indicators meet supervision requirements, risk evaluation result is controllable.

I. Further perfect credit risk management system Firstly, the Bank established regulations and systems, improved credit risk management system; secondly, optimized process and developed risk management check-and-balance system; thirdly, detailed standards and unified risk management execution requirements.

II. Launch credit risk prevention steadily Firstly, the Bank intensified access review and improved refinement level of credit risk management; secondly, completed post loan management and improved credit risk alarm and response speed; thirdly, cleared, recovered and disposed non-performing assets at full stretch; fourthly, launched credit asset transfer vigorously and steadily; fifthly, developed litigation tracking management system; sixthly, intensified management of guarantee company all sidedly; seventhly, enhanced risk management of key fields.

III. Vigorously strengthen credit risk management basis Firstly, the Bank intensified system construction; secondly, normalized collateral management; thirdly, enhanced management of evaluation institute; fourthly, constantly improved evaluation quality of customer credit rating; fifthly, arranged and normalized credit archives management all sidedly; sixthly, constantly enhanced credit risk and credit extension business training in the Bank; seventhly, completed preparation of credit risk cases; eighthly, carried out credit risk pressure test.

60 2016 Annual Report

4.8.2 Market risk conditions and management countermeasures

During the reporting period, the two market risk type risk preference indicators, i.e., interest rate risk sensitivity and trading bond duration, were qualified, risk evaluation result is controllable.

I. In accordance with planned project and regulatory requirements regarding comprehensive risk management, the Bank further improved market risk management system.

II. The Bank attached importance to comprehensive analysis of asset earnings, liabilities cost and market interest rate fluctuation, and optimized asset and liability structure by adopting pricing system for internal capital transfer.

III. The Bank adjusted structure of credit asset term in a reasonable manner and avoided interest rate risk effectively.

IV. The Bank implemented intensive management of foreign exchange fund position and large-sum position forecast system, and reduced and prevented exchange rate risk by setting foreign exchange exposure and cut-loss limit.

V. The Bank intensified risk control of investment business market strictly by controlling total quantity, category fraction and term fraction of investment business.

VI. The Bank launched market pressure test regularly, managed interest rate risk of trading account and bank account effectively in such methods as sensitivity limit, risk value limit and scenario analysis, and managed to improve effectiveness of pressure test.

4.8.3 Operational risk conditions and management countermeasures

61 2016 Annual Report

During the reporting period, the Bank was free from any case or operation risk events leading to over RMB 1 million, risk evaluation result is controllable.

I. Further establish and perfect operational risk management system. I. The Bank modified and improved operational risk management systems including Operational Risk Management Methods of Chongqing Three Gorges Bank and Integral Management Methods for Illegal Behavior of Chongqing Three Gorges

Bank; secondly, the Bank arranged, integrated, cleared and modified current rules and regulations in the work idea of "abolishment, establishment and modification", and established post-evaluation mechanism for internal control system trends.

II. Intensify business process development, training, execution, examination and post-evaluation for vital operations, complicated operations and new operations including counter, credit and e-banking.

III. Deepen daily case checking The Bank formed high pressure control trend of "to sides horizontally, to bottom vertically" in which the head office organized specialized lines to clear and check daily cases, various sub-branches checked by themselves thoroughly, and Case Prevention Office of the head office combined supervision and inspection.

IV. Enhance staff conduct management. Firstly, the Bank launched theme activities of "year of deepening employee behavior management" in the whole

Bank; secondly, enhanced management and supervision of key posts and staff involved in important links, and intensified work shift among tellers, accounting

62 2016 Annual Report directors and major director of grassroot branch.

4.8.4 Liquidity risk conditions and management countermeasures

During the reporting period, the Bank had sufficient capital sources, abundant available funds, increased current asset reserves, higher mortgage financing capability and robust full year liquidity, and risk evaluation result is controllable.

I. The Bank continuously improved liquidity management system, and provided guidance for normalizing and launching various liquidity risk management work comprehensively and effectively.

II. Arranged liquidity risk management work comprehensively, launched 2015 annual liquidity risk review, and performed gap analysis to liquidity risk management status of the Bank.

III. Constantly promoted data construction of liquidity risk management information system to support enhancement of liquidity risk management.

IV. Analyzed trend regularly, evaluated liquidity risk conditions in quarters, summarized effects of liquidity risk management and deployed liquidity risk management work to be completed in the next stage, and improved control capability of liquidity risk.

V. Launched liquidity risk pressure test in quarters, and completed emergency disposal plan.

VI. Continued intensifying management of liquidity risk indicator, and focus on fulfillment of core liability dependence, to enable liquidity risk indicators of the Bank to meet prudential supervision requirements constantly and comprehensively.

63 2016 Annual Report

VII. Increased wholesale stable deposits, optimized structure of liability business comprehensively and improved proportion of wholesale long-term stable deposits.

4.8.5 Information technology risk conditions and management countermeasures

During the reporting period, the Bank was free from any risk event involving information technology having significant impact, risk evaluation result is controllable.

I. Intensify operation and management of major information system steadily. During the reporting period, major information systems, networks and infrastructures of the Bank operated steadily, the Bank was free from major failure or abnormality leading to long-term business interruption and affecting capital security.

II. Intensify business continuity management. Firstly, the Bank has audited operational effectiveness of business continuity management system comprehensively, and rectified and corrected detected deficiencies; secondly, the

Bank has carried out business continuity training in the whole bank to raise staff's awareness of business continuity management; thirdly, the Bank has launched business continuity management drills in various forms, and verified effectiveness of emergency resources and mechanisms.

III. Intensify information security management strictly. Firstly, the

Bank established Information Security Management Committee exclusively to establish and perfect information security management system of the Bank and

64 2016 Annual Report guaranteed its effective operation; secondly, developed and issued Basic Rules for

Customers' Financial Information Protection Work of Chongqing Three Gorges Bank, defined and detailed assigned responsibilities of the Bank's various units, made explicit provisions for security management of links including collection and storage, use and transfer, destruction of customers' financial information, thirdly, the Bank constantly performed security vulnerability scanning and penetration test to official

Internet website and e-banking information system, and repaired and perfected current security vulnerabilities.

4.8.6 Reputational risk conditions and management countermeasures

During the reporting period, the Bank was free from major petition events affecting the Bank's stability and reputation, or other petition visit events. Negative public opinions are controlled effectively, and risk evaluation result is controllable.

I. The Bank earnestly perfected public opinion information collection system, thoroughly arranged process of reputational risk prevention, treatment and cleanup.

II. Established and perfected ‘reputational risk treatment ledger’, guaranteed prompt and timely resolving of various problems, and avoided repeated emergence of similar negative public opinions.

III. Enhanced reputational risk monitoring practically, detected and disposed negative public opinions as soon as possible, and monitored daily public opinions seriously.

IV. Enhanced report to Municipal Party Committee, municipal government and relevant departments, positively intensified communication and coordination with

65 2016 Annual Report nation-wide and municipal medias, strived to build an "integrated" management work system for detection, reporting, coordination and removal of reputational risk.

V. Seriously checked reputational risk in the bank, and completed petition and routine stability maintenance practically.

4.9 Analysis of macro economy, finance and policy during the reporting period

With changes in economic environment at home and abroad during ‘the 13th

Five-year Plan’, new demands of entity economy were emerging constantly, the demands featured in diversification, differentiation and complication. In the opening year of ‘the 13th Five-year Plan’, China's economy developed steadily and promptly, while economic environment at home and abroad was still severe and complex.

Global economy was still under profound adjustment, its complexity, instability and uncertainty would be further highlighted. As for domestic economy, basis of steady economic operation, regional and industrial trends further fragmented, difficulties and risks could not be underestimated. Domestic economic operation was accompanied with several conspicuous contradictions and problems, especially imbalance between structural supply and demand of real economy, imbalance between finance and real economy as well as real estate and real economy.

In the external environment, banking industry was faced with sluggish earning growth and continuous NPL exposure. With further opening of the industry, continuous deepening of interest rate market-oriented reform and increasing

66 2016 Annual Report competitiveness of industrial competition, banking fragmentation progress would be accelerated.

In the future, the banking industry must take serving real economy as orientation, aim at robust development and compliance operation, define key fields and links of serving real economy, build new business development mode, find equilibrium point of business development, stay true to the mission, focus on main business, and improve quality and efficiency of serving real economy.

4.10 Future development prospect

4.10.1 Analysis of future business environment

Across the country as a whole, the Central Economic Working Conference made the major judgment in 2016 that China's economic development has proceeded to new normal, and defined the overall keynote of ‘seeking improvement in stability’ under the guidance of new development concept and focus of supply-side structural reform; in 2017, the NPC and CPPCC further defined estimated economic growth target for this year as nearly 6.5%. In view of regional development situation, Chongqing took the lead all over the country in economic development growth. Chongqing's economic development has many positive factors and advantages in this year. Estimated municipal economic growth target is defined as 10%. Execution of major strategies including the Belt and Road, Yangtze River Economic Belt, Pilot Free Trade Zone,

Sino-Singapore Interconnection and Interworking, and five functional zones strategy, and continuous release of preferential policies including China Western Development,

67 2016 Annual Report

Three Gorges subsequent project construction, both guided expectation, boosted confidence, and created favorable environment for development of economic and social development. These positive and favorable factors contribute to the Bank's development. In general, future operating environment may show 7 features as estimated by the Bank.

I. Financial system instability increases, banking regulation becomes increasingly strict Active vigilance shall be maintained as such risks are accelerating: domestic NPA risk, liquidity risk, bond default risk, shadow banking risk, real estate bubble risk, governmental bond risk and Internet financial risk. CBRC clearly proposed to intensify supervision on 2017 National Banking Supervision and

Management Working Meeting, hence banking supervision will be inevitably stricter.

II. Traditional profit model to be further oppressed Financial disintermediation is still going on, and the nation will further expand scale and proportion of direct financing, high yield asset operations will be more scarce.

Meanwhile, supply-side structural reform is thoroughly promoted, small and micro, private and outdated capacity are still high incidence area of credit risk, and bad debts will infringe the Bank's profit.

III. Monetary policies may be tightened in stability In accordance with requirements of the Central Economic Working Conference, monetary policy will transfer to being robust and neutral from being robust in 2017, PBOC will further focus on adjustment of monetary spigots, maintain proper monetary and credit policy, stabilize overall leverage ratio, and lay foundation for reducing overall leverage ratio

68 2016 Annual Report in the future; regard reducing overall leverage ratio as top priority, and support expansion of corporate equity financing scale by promoting asset securitization and supporting launching of debt-to-equity mode. People's Bank of China clearly pointed out to "further improve macro-prudential policy framework, guide financial institution in prudent operation" on the work conference held at the beginning of 2017. MPA appraisal will be put into practice, off-balance sheet financing is formally included in general credit, which has limited banking scale expansion.

IV. Comprehensive banking operation further accelerates. Bank, insurance, fund, securities, credit and financial lease amalgamate and collaborate with each other and are further deepened, the Bank will give full play to its advantages in funds and customers, and cooperate with other financial institutions for mutual benefit.

Meanwhile, it will accelerate comprehensive business layout and application for business licenses, and establish financial institutions including financial leasing companies and consumer finance companies. As a result, banking operation integration will be further boosted and accelerated.

V. Financial technology remodel bank state profoundly. Such financial technologies as Internet, cloud computing and big data jointly revitalize traditional banking, which will move to deep end in 2017. Banking competition in financial technology will be accelerated. The industry will accelerate exploration in distributing new financial technologies including big data, cloud technology, blockchain and artificial intelligence in various forms like self-building, acquisition, investment and strategic cooperation, and focus on forging new core competence.

69 2016 Annual Report

VI. New business modes develop constantly. Baixin Bank is officially approved to be prepared for building, direct banks launched in the form of independent legal person are developing speedily; investment-loan linkage is practiced speedily, pilot scope is expanded, People's Bank of China will further intensify support in key fields including ‘dual creations’, technology and strategic emerging industry; trading bank has become the trend, such operations as supply chain finance, trade finance, cash management, cross-border finance, payment settlement and Internet finance are further developing speedily.

VII. Private banks proceed to regular establishment. As of the end of the reporting period, China Banking Regulatory Commission has approved to prepare to build 17 private banks, 7 of which have been approved to open for business.

China Banking Regulatory Commission issued Guidance on Regulation of Private

Banks on January 5, 2017, indicating that private banks are established on a regular basis instead of on pilot basis.

4.10.2 Development measure

In 2017, operational development of the Bank will focus on following items:

I. Completion of "transformation development" subject year work

In accordance with requirements of ‘the 13th five-year plan’ strategic plan, especially in the new development stage, the Bank must accelerate bank transformation development, try to seek for sustainable survival and development space, and foster sustainable development capacity practically. Therefore, the Bank

70 2016 Annual Report takes this year as "transformation development" subject year. The Bank aims to promote construction of "transformation development" subject year by launching

‘good group, good business, good risk control, good management and rapid transformation’ activities.

II. Fully promote business development

Aiming at transformation development and based upon traditional business, the

Bank builds awareness of ‘innovation culture, merchant culture, compliance culture’, changes profit model, developed robustly, operates in compliance with the regulations, and promote sustainable growth of income and profit from intermediary services.

III. Complete risk control

The Bank will focus on risk management construction, and enhance risk management in key fields. In addition, the Bank will complete compliance case prevention and safety guard solidly, guarantee overall safety and compliance operation, and realize job objective of zero case. In accordance with delicacy management requirements, the Bank will develop management standard, enforce management strictly, intensify accountability management, improve management ability and executive force practicably.

IV. Further deepen reform, enhance developing force

In the principle of ‘professional marketing, integrated management’ and ‘clarity and efficiency’, the Bank will remodel organizational structure, improve operation efficiency and support the Bank's development strategy effectively. Moreover, the

Bank will accelerate reform of Business Unit, and enhance the Bank's developing

71 2016 Annual Report force. Furthermore, the Bank will promote process bank construction and improve management efficiency. In order to lead business developing, the Bank will deepen and reform performance motivation & restriction mechanism and improve delicacy management level.

V. Strengthen cadre and staff group construction earnestly

Strengthen construction of middle-level cadres group, and provide talent support for transformation development. The Bank will intensify staff training, complete teacher resources and repository for internal and exterior training, form more developed training system for supporting business and practicing strategy effectively.

The Bank will further perfect its management system for cadres and employees covering value creation, value evaluation and value allocation, and define assessment criterion for cadres and employees performance management. In addition, the Bank will intensify preparation control and improve labor productivity practically.

Moreover, the Bank will complete staff conduct management and improve talent group quality comprehensively.

VI. Accelerate IT construction, improve IT construction level

Furthermore, the Bank will build IT strategic thought, promote IT plan, IT structure, IT control and IT system construction, and focus on improvement of IT construction level. The Bank will accelerate construction of Xiyong Data Center and improve information technology management capability practically.

VII. Focus on forging core competitiveness, and grasp enterprise culture construction

72 2016 Annual Report

The Bank will complete enterprise culture rating and promotion, form core competitiveness recognized by all cadres and employees of the Bank, and establish development vision applicable to its operating management reality. In addition, the

Bank will realize harmonious unification between corporate development and staff development, form service strategy, and promote soft power for sustainable corporate development. Furthermore, the Bank will launch series celebration activities for the tenth anniversary, review brilliant history in last 10 years, inspire staff's spirit and enhance sense of honor, sense of pride and organizational cohesion.

4.10.3 2017 business plan

Allowing for current economic and financial situation, market development trend and the Bank's ‘13th five-year plan’ strategic development plan, the Bank will adhere to robust development, control risks strictly and realize sustainable development. Its operation development objectives in 2017 are as follows: assets, deposits and loans increase by 20%, profits by 13%, and various core supervision indicators meet the requirements of prudential supervision.

73 2016 Annual Report

5. Changes in Share Capital and Shareholdings of Shareholders

5.1 Changes in share capital during the reporting period

5.1.1 Total shares and structural changes during the reporting period Unit: 10,000 shares 2016 2015 Year 2014 2007

Total share capital 440,630 305,993 235,380 201,179

Financial Share 5,946 3,869 2,207 1,886 share proportion (%) 1.35 1.26 0.94 0.94

Share 434,388 301,878 232,926 199,082 Legal proportion (%) 98.58 98.66 98.96 98.96 persons State-owned shares 49,279 33,866 25,513 80,000 shares where proportion (%) 11.18 11.07 10.84 39.77

Non-instit Share 297 247 247 211 utional proportion (%) 0.07 0.08 0.11 0.11 shares

5.1.2 All previous changes in share in previous three years by the end of reporting period

Based upon reform and reorganization on December 27, 2007, total share capital of the Bank increased from 141,083,202 shares to 2,011,790,650 shares.

In 2014, the Bank converted capital reserve into share. By deliberating and approving Proposal for Converting Capital Reserve into Share of Chongqing Three

Gorges Bank Co., Ltd. on 2012 Annual Shareholders Meeting, the Bank agreed to convert 10 shares of capital reserve into 1.7 shares (less than 1 share shall be converted as 1 share after conversion) with 2,011,790,650 shares held by registered

74 2016 Annual Report shareholders on December 31, 2012 as the base, there were 342,004,411 converted shares in total. Total share capital of the Bank increased to 2,353,795,061 shares after conversion.

In 2015, the Bank allotted shares for shareholders. By deliberating and approving

Proposal for Supplementing Capital by Allotting Shares for Shareholders of

Chongqing Three Gorges Bank Co., Ltd. on 2015 1st Extraordinary Shareholders

Meeting, the Bank agreed to allot 3 shares for every 10 shares (less than 1 share shall be calculated as 1 share) with 2,353,795,061 shares held by registered shareholders on

December 31, 2014 as the base, there were 706,138,521 allotted shares in total. Total share capital of the Bank increased to 3,059,933,582 shares after allotting.

In 2016, the Bank gave bonus shares and allotted shares for shareholders.

By deliberating and approving Proposal for 2015 Annual Profit Distribution of

Chongqing Three Gorges Bank Co., Ltd. on 2015 annual Extraordinary Shareholders

Meeting, the Bank agreed to allot 2 shares for every 10 shares (rounded off) with

3,059,933,582 shares of total stock in 2015 as the base, and has issued 611,986,719 new bonus shares. Total share capital of the Bank increased to 3,671,920,301 shares after issuance of bonus share.

By deliberating and approving Proposal for Supplementing Capital by Shares

Allotment Scheme for Shareholders of Chongqing Three Gorges Bank Co., Ltd. on

2016 2nd Extraordinary Shareholders Meeting, the Bank agreed to allot 2 shares for every 10 shares (less than 1 share shall be calculated as 1 share) with 3,671,920,301 shares of share capital held by the Bank as the base, there were 734,384,084 new

75 2016 Annual Report

allotted shares. Total share capital of the Bank increased to 4,406,304,385 shares after

allotting.

5.2 shareholders during the reporting period

5.2.1 Total shareholders during the reporting period

As of the end of December 2016, there were 44 stockholders, including 42

institutional shareholders, 1 financial shareholder and 1 individual shareholder.

5.2.2 Share holding of top 10 shareholders before the end of reporting

period

Increase or Amount of Share decrease Nature of holding Name of shareholder proportion during shareholder shares % reporting (shares) period (shares) State-owned Chongqing International Trust Inc. 1,277,640,000 28.996% 212,940,000 joint stock Jiabao Holding Group Co., Ltd. Private 438,048,000 9.941% 133,848,000

China Sigma Co., Ltd. Private 273,780,000 6.213% 45,630,000 Chongqing Donghua Investment Private 219,024,000 4.971% 66,924,000 Co., Ltd. Chongqing Huide Investment Co., Private 219,024,000 4.971% 66,924,000 Ltd. Bank of Chongqing Co., Ltd. State-owned 219,024,000 4.971% 66,924,000 Chongqing State Development Equity Investment Management Private 210,380,310 4.775% 154,651,206 Co., Ltd. Chongqing Yongrui Equity Private 203,587,200 4.620% 203,587,200 Investment Co., Ltd. Shaoxing Far East Private 168,480,000 3.824% 168,480,000 Thermoelectricity Co., Ltd. China Sigma Investment Co., Ltd. Private 163,965,600 3.721% 50,100,600

76 2016 Annual Report

5.3 Pledge and freezing of shares held by shareholders holing over

(including) 5％ shares

As of the end of December 2016, 231 million shares held by Jiabao Holding

Group Co., Ltd. and 110 million shares held by China Sigma Investment Co., Ltd.

(both are shareholders of the Bank) are pledged.

5.3.1 Jiabao Holding Group Co., Ltd. pledged 231 million shares of the Bank with details as follows:

Pledge recipient Pledged shares Pledged term

Shanghai Branch of Xiamen International 70,700,000 2 years Bank Co., Ltd. Shanghai Branch of Xiamen International 81,300,000 2 years Bank Co., Ltd. Yantai Shengli Road Sub-branch of 34,000,000 2 years Hengfeng Bank Co., Ltd. Hangzhou Branch of Bank of Jiangsu Co., 45,000,000 1 year Ltd.

5.3.2 China Sigma Co., Ltd. pledged 110 million shares of the Bank with details as follows:

Pledge recipient Pledged shares Pledged term

Chongqing Branch of Xiamen International 110,000,000 2 years Bank Co., Ltd.

77 2016 Annual Report

5.4 Shareholders holding over 10% of the Bank's shares

Legal Date of Enterprise Registere represent establishmen Business scope name d capital ative t Money trust; chattel trust; real estate trust; negotiable securities trust; other property or property right trusts; engage in investment fund operation as initiator of investment fund or fund management company; manage operations including corporate assets reorganization, merger & acquisition and project financing, corporate finance, financial adviser; entrusted to manage securities underwriting operation approved by Chongqing relevant department of State of Council; RMB Weng International 1984.10.22 handle operations including brokerage, 12.8 Zhenjie Trust Inc. consultation, credit inquiry; custody and billion safety-deposit box operations; use inherent assets in the mode of deposits with banks, loans at call to other banks, loans, lease and investment; provide guarantee for others with inherent assets; engage in inter-bank borrowing; other operations approved by laws and regulations or China Banking Regulatory Commission. Above business scope covers RMB and foreign currency businesses.

As of the end of the reporting period, due to powerful development advantage, tight internal control and excellent business performance, the Bank is in the leading position among all banks nationwide (see details in 2016 Annual Report of Chongqing

International Trust Inc.).

78 2016 Annual Report

6. Directors, Supervisors, Senior Management Members and Staff

6.1 General information of directors, supervisors, senior management members

6.1.1 Directors

As of the end of the reporting period, the 1st session of Board of Directors of the

Bank consisted of 11 directors including Ding Shilu, Tong Haiyang, Weng Zhenjie,

Zhao Pinzhang, Tang Shisheng, Chen Zhong, Liu Qinqin, Sun Guojun, Wang

Xiaoyan, Huang Qingsheng and Sun Lu, all of them were qualified in director qualification approval of the Bank's supervision department. Claim Holds DOB Payroll at Name Gender Job title: Term of office share or Year the Bank or not not 2011.01-appointment Ding Shilu Male 1968 Chairman None Yes expires Tong 2010.01-appointment Male 1958 Director None Yes Haiyang expires Weng 2008.02-appointment Male 1962 Director None No Zhenjie expires Zhao Independent 2015.10-appointment Male 1956 None No Pinzhang director expires Tang Independent 2015.10-appointment Male 1956 None No Shisheng director expires Chen Independent 2015.10-appointment Male 1956 None No Zhong director expires 2015.10-appointment Liu Qinqin Male 1956 Director None No expires Sun 2010.07-appointment Male 1976 Director None No Guojun expires Wang 2008.02-appointment Male 1960 Director None No Xiaoyan expires

79 2016 Annual Report

Huang 2008.02-appointment Male 1954 Director None No Qingsheng expires 2008.02-appointment Sun Lu Male 1966 Director None No expires

During the reporting period, the Bank had 11 directors, 9 of them claimed allowance, total allowance claimed amounted to (pre-tax) RMB 1,308,000 and per capita allowance amounted to (pre-tax) RMB 145,300.

6.1.2 Supervisor

As of the end of the reporting period, 1st session of Board of Supervisors of the

Bank consisted of Zhang Juan, Xu Junhua, Wang Qi and Wang Xianjun, whose qualifications were all approved by relevant procedures. Claim Holds DOB Payroll at Name Gender Job title: Term of office share Year the Bank or or not not Zhang Chief Female 1966 2015.07-appointment expires No Yes Juan supervisor Xu Exterior Male 1964 2015.04-appointment expires No No Junhua supervisor Wang Male 1963 Supervisor 2007.12-appointment expires No Yes Qi Wang Male 1966 Supervisor 2007.12-appointment expires No Yes Xianjun

During the reporting period, the Bank had 4 supervisors, 1 of them claimed allowance, total allowance claimed amounted to (pre-tax) RMB 132,000 and per capita allowance amounted to (pre-tax) RMB 132,000.

6.1.3 1st session of senior management

As of the end of the reporting period, senior management members of the Bank consisted of Ding Shilu, Tong Haiyang, Zhang Juan, Fu Zaiying, Wang Liangping,

80 2016 Annual Report

Wang Zhijia, Wan Fujian, Xu Ling, Tian Hui, Zhou Zhiqiang and Yao Jianjun. Claim Holds DOB Payroll at Name Gender Job title: Be in charge of share Year the Bank or not or not Presided over work of Board of Directors and senior management, and took charge of Platform Finance Department, Information Chairman, Ding Shilu Male 1968 Technology Department, Risk No Yes President Management Department, Legal Compliance Department, Audit Department and Human Resource Department.

Tong Male 1958 Director Contact Listing Affairs Office No Yes Haiyang

Take charge of Office of Board of Supervisors, contact Zhang Chief Head Business Office, Risk Female 1966 No Yes Juan supervisor Management Department, Legal Compliance Department and Audit Department Secretary of Take charge of Discipline Discipline Fu Zaiying Female 1958 Inspection and Supervision No Yes Inspection Office Committee Take charge of Credit Wang Vice Management Department, Male 1963 No Yes Liangping President Planning and Finance Department Take charge of Office, Wang Vice Organizational Management Male 1957 No Yes Zhijian President Department, Security Department

81 2016 Annual Report

Claim Holds DOB Payroll at Name Gender Job title: Be in charge of share Year the Bank or not or not Take charge of Finance Headquarter, Retail Banking Wan Vice Headquarter, Small Business Male 1963 Yes Yes Fujian President Finance Headquarter and International Business Department Take charge of Fund Vice Operation Headquarter, Xu Ling Felame 1969 No Yes President Accounting and Settlement Department Assist in management of Technical Platform Finance Department Tian Hui Male 1965 No Yes Director and Information Technology Department Assist in management of Fund Zhou Business Male 1968 Operation Headquarter (since No Yes Zhiqiang Director July 2016) Yao Secretary of Male 1971 Contact Board office No Yes Jiangjun the Board Note: 1. Mr. Tong Haiyang resigned the post of Chairman of the Bank in October 2016; 2. Mr. Zhou Zhiqiang resumed duty from July 2016; 3. Mrs. Xu Ling resumed duty from November 2016;

During the reporting period, 11 senior management members of the Bank claimed emolument, total payroll claimed amounted to (pre-tax) RMB 21,462,200 and per capita payroll amounted to (pre-tax) RMB 1,951,100. In accordance with Robust

Payroll Regulatory Guideline of Commercial Banks and assessment method of risk liability management for the Bank's senior management, the Bank constantly followed the principle of matching performance payroll delayed payment with risk release.

Performance-related wage (RMB 6,096,900) payment of above 11 senior

82 2016 Annual Report management members was delayed at 40%-50% performance-related wage in 2016.

The Bank strictly evaluated, assessed and supervised major principle of Head

Office departments, branches and sub-branches as vital posts of the Bank's operation and development, and as personnel of great significance to risk. As of the end of the reporting period, 80 principals of Head Office departments as well as branches and sub-branches (primary sub-branch) of the Bank claimed emolument, total payroll claimed amounted to (pre-tax) RMB 62,782,900 and per capita payroll amounted to

(pre-tax) RMB 784,800. In accordance with Robust Payroll Regulatory Guideline of

Commercial Banks and Interim Administration Provisions for Delayed Payment,

Deduction and Repayment Demand of Performance-related Wage of Chongqing

Three Gorges Bank (YSXYF[2015] No.70), the Bank constantly followed the principle of matching performance payroll delayed payment with risk release.

Performance-related wage (RMB 20,881,400) payment of above 80 key positions in

Head Office departments, branches and sub-branches as well as personnel of great significance to risk was delayed at 20%-40% performance-related wage in 2016.

6.1.4 Main work experience of directors, supervisors, senior management members

Mr. Ding Shilu, Chairman, President & Member of Risk Management

Committee of Board of Directors Got EMBA of in 2006, economist.

Mr. Ding Shilu has served successively as Senior Staff Member of Planning

Office, Principal Staff Member of Monetary Credit Office of PBOC Chongqing

83 2016 Annual Report

Branch, Vice President of PBOC Chongqing Wanzhou Central Sub-branch, Deputy

Chief of Exchange Control Office and Cooperative Financial Institutions Supervision

Department of PBOC Chongqing Operation Office, Deputy Director of Chongqing

Rural Credit Cooperatives Association, Vice President of Chongqing Commercial

Bank, Vice General Manager of ICBC International Business Department (put on field practice), Vice President & Director of Bank of Chongqing Co., Ltd., etc.

Mr. Tong Haiyang, Director, Chairman of Strategic Development

Committee, Member of Risk Management Committee, Audit Committee and

Payroll Nomination Committee of Board of Directors. He graduated from

Correspondence College of Chongqing Municipal Party School as a economic management major, undergraduate, economist and professor level senior administration engineer.

Mr. Tong Haiyang has served successively as Cadre of Organization Department of Chongqing Nan'an District CPC Committee, Secretary of CPC Committee,

President of Township NPC Presidium & Mayor of Jiguanshi County (Town), Deputy

Director General, Director General of Nan'an District Financial Bureau, Deputy

District Head of People's Government of Chongqing, Nan'an District, Vice President of Chongqing Three Gorges Bank Co., Ltd., Director and Chairman of 1st session of

Board of Directors of Chongqing Three Gorges Bank Co., Ltd.

Mr. Weng Zhenjie, Director, Chairman of Risk Management Committee,

Member of Payroll Nomination Committee of Board of Directors Got MEng of

84 2016 Annual Report

PLA Nanjing Communication Engineering Institute in 1986, senior economist.

Mr. Weng Zhenjie has served successively as Director of Bank of Chongqing,

Director & Chairman of 1st session of Board of Directors of Chongqing Three Gorges

Bank Co., Ltd., as well as Director & Chairman of Southwest Securities. Currently he serves as Chairman, CEO of Chongqing International Trust Inc., Chairman of

YIMIN Asset Management Co., Ltd. and Director of GuoDu Securities Co., Ltd.

Mr. Zhao Pinzhang, Independent Director, Chairman of Audit Committee,

Member of Strategic Development Committee and Risk Management Committee of Board of Directors Got EMBA of Chongqing University in June 2006, senior economist.

Mr. Zhao Pinzhang has served successively as Section Chief of CCB Liaoyuan

Central Sub-branch, Vice President of Bank of Communications Liaoyuan

Sub-branch, General Manager of CPIC Liaoyuan Sub-office, Vice General Manager of Administration Department, Vice General Manager of Risk Management

Department (chair work), General Manager of Credit Extension Review Department,

Chief Credit Executive, President of Risk Management Committee and Chairman of

Asset Liability Administration Committee of CMBC Beijing Branch, President

Assistant, Vice President of CMBC Head Office, and Vice President of China

Minsheng Investment Co., Ltd. Currently he serves as Executive Director of China

Oceanwide Holdings Group, Independent Director of Haixia Bank of Fujian and

Independent Director of Bank of Dalian Co., Ltd.

85 2016 Annual Report

Mr. Tang Shisheng, Independent Director, Chairman of Payroll Nomination

Committee, Member of Strategic Development Committee and Risk

Management Committee of Board of Directors Got Ph.D in Applied Econometrics of Chinese Academy of Social Sciences in June 2004, senior economist.

Mr. Tang Shisheng has served successively as Vice General Manager of

International Business Department, CCB Hainan Branch, President of Hainan Yangpu

Sub-branch, Principal of Preparatory Group & Vice President of China International

Capital Corporation Limited, Vice President of China Cinda Trust Investment Co.,

Ltd., Vice President of China Galaxy Securities Co., Ltd., Chairman of Hongyuan

Securities Holding Co., Ltd., and Senior Vice President of Beijing Founder Group Co.,

Ltd. Currently he serves as Chairman of Hodojou Technology Co., Ltd., Chairman of

Zhongke Software Co., Ltd., and Independent Director of CITIC Bank (International),

Geo-Jade Petroleum Corporation and Wison Engineering Services Co. Ltd.

Mr. Chen Zhong, Independent Director, Chairman of Related Transactions

Committee. Got Ph.D in Finance of Guanghua School of Management of Peking

University in July 2000, researcher.

Mr. Chen Zhong has served successively as Director and Executive

Vice-chairman of China Enterprise Confederation, and Deputy Secretary General of

Chongqing Municipal People's Government (take a temporary post), expert receiving special government allowance from the State Council in 2001. Currently he serves as

Chairman of New China Fund Management Co., Ltd., and Independent Director of

LANXUM Technology, Fuling Mustard Co., Ltd., etc.

86 2016 Annual Report

Mr. Liu Qinqin, Director, Member of Audit Committee and Payroll

Nomination Committee of Board of Directors. Got MSc in Investment

Management of Chinese Academy of Social Sciences Postgraduate School in

November 1998, lecturer and editor.

Mr. Liu Qinqin has served successively as Intelligence Company, Command

Clerk, Administration Platoon Leader and Logistics Assistant of Force 36123,

Instructor of Institute of Military Economy, Journalist, Editor and Associate

Editor-in-Chief of Military Finance, Director of Financial Theory Teaching and

Research Section of Institute of Military Economy, Deputy Director of Financial

Settlement Center of General Logistics Department, and Chairman of Beijing

Zhongtian Shipping Investment Co., Ltd. Currently he serves as General Manager of

Chongqing Guoxin Holdings Co., Ltd.

Mr. Sun Guojun, Director, Member of Audit Committee of Board of

Directors. Got EMBA of Tsinghua University in July 2008, senior economist and accountant.

Mr. Sun Guojun has served successively as Deputy Chief of Shaoxing County

No.6 Construction Co., Ltd., Department Manager of Zhejiang Huaneng Light

Construction Engineering Co., Ltd., General Manager Assistant of Zhejiang Jinggong

Steel Structure Co., Ltd., General Manager of Shaoxing Wuzhou Building Erection

Engineering Co., Ltd., and General Manager & Chairman of Zhejiang Jinggong

Century Construction Engineering Co., Ltd. Currently he serves as President of

Zhejiang Jinggong Holdings Group, President of Jiabao Holdings Group Co., Ltd.,

87 2016 Annual Report and Chairman & President of Jinggong Energy Group.

Mr. Wang Xiaoyan, Director, Member of Payroll Nomination Committee of

Board of Directors. Got MEcons of PBOC Head Office Financial Institute in June

1987, senior economist.

Mr. Wang Xiaoyan has served successively as Chief Economist, General

Manager of Credit Department of China Scientific Finance Co., Ltd., and has been serving as Chairman, President of China Sigma Co., Ltd. since March 1993.

Mr. Huang Qingsheng, Director, Chairman of Audit Committee, Member of

Strategic Development Committee and Related Transactions Committee of

Board of Directors. MSc Economic Management of CASS Graduate School, senior economist.

Mr. Huang Qingsheng has served successively as Deputy Director of Chongqing

Credit Cooperatives Association, Director of Credit Department of Chongqing Urban

Credit Cooperative Bank, Director of Planning & Finance Department of Chongqing

Commercial Bank, General Manager of Credit Review Department, General Manager of Risk Management Department & Vice-chief Economist of Bank of Chongqing Co.,

Ltd. (Vice administrative level), he has retired already.

Mr. Sun Lu, Director, Chairman of Related Transactions Committee,

Member of Audit Committee of Board of Directors. Got MBA of Business

Administration Graduate School of Chongqing University in July 2003.

Mr. Sun Lu has served successively as Chairman of Chongqing Jinguan

88 2016 Annual Report

Information Industry Co., Ltd. Currently he serves as Chairman & President of

Chongqing Jinguan Technology (Group) Co., Ltd., and also Chairman of Chongqing

Jinguan Medicine Distribution Co., Ltd.

Mrs. Zhang Juan, Chief Supervisor, Member of Supervisory and

Nomination Committee of Board of Supervisors. Got EMBA of Chongqing

University in 2012, economist.

Mrs. Zhang Juan has served successively as Clerk, Accountant, Loan Officer and

Suboffice Deputy Director of ICBC Chongqing Branch, Vice President, President of

Chongqing Commercial Bank Holdings Co., Ltd. Renmin Road Sub-branch &

President of Zhongshan Road Sub-branch, President Assistant & General Manager of

Business Department of Chongqing Commercial Bank Holdings Co., Ltd., Vice

President & General Manager of Business Department of Bank of Chongqing Co.,

Ltd., and Vice President of Chongqing Three Gorges Bank Co., Ltd.

Mr. Wang Xianjun, Exterior Supervisor, Supervisor of Board of Supervisors,

Chairman of Supervisory and Nomination Committee of Board of Supervisors. Ph.D in Economics, senior economist.

Mr. Xu Junhua has served successively as Cadre of Industrial Credit Department of ABC Head Office, Deputy-director-general-level Cadre of Research Office of ABC

Head Office, General Manager and Office Director of Research and Consultation

Department, General Manager of Nanjing Subsidiary of Nanfang Securities Co., Ltd.,

General Manager, Institute Director, President Assistant and Vice President of

89 2016 Annual Report

Investment Banking Head Office, Chief Economist of China Credit Trust Co., Ltd., and President of National Modern Financial Holdings Co., Ltd. Currently he serves as

President of Hongru Financial Education Foundation.

Mr. Wang Qi, supervisor. Bachelor degree, economist.

Mr. Wang Qi has served successively as Chief of Credit Section of Bank of

China Yuzhong Sub-branch, Director of Railway Station Suboffice, Director of

Personal Finance Center, Director of Jiefangbei Suboffice, Director of Eling

Suboffice, Director of Jiaochangkou Suboffice; Vice General Manager, General

Manager of Trust Administration Department, General Manager of Compliance

Department of Chongqing International Trust Inc., Vice General Manager of Credit

Administration Department, Vice General Manager of Wanzhou Sub-branch

Administration Department, General Manager of Risk Management Department and

President Sub-branch of Chongqing Three Gorges Bank Co., Ltd. Currently he serves as Office Director of Board of Supervisors of Chongqing Three Gorges Bank Co.,

Ltd.

Mr. Wang Xianjun, Supervisor, Supervisor of Board of Supervisors, Member of

Supervisory and Nomination Committee of Board of Supervisors. Bachelor degree, senior economist

Mr. Wang Xianjun has served successively as teacher of Yun'an Middle School of Yunyang County, Loan Officer, Deputy Section Chief of Credit Section, Deputy

Director of Special Assets Department, and Vice General Manager of Legal Affairs

90 2016 Annual Report

Department of Gaosuntang Sub-branch of Wanzhou Commercial Bank, General

Manager Assistant of Legal Compliance Department of Chongqing Three Gorges

Bank Co., Ltd. Currently he serves as Vice General Manager of Risk Management

Department of Chongqing Three Gorges Bank Co., Ltd.

Mrs. Fu Zaiying, Secretary of Discipline Inspection Committee. He graduated from Correspondence College of Sichuan Provincial Municipal Party

School as a economic management major in 1996, college degree, economist and senior administration engineer.

Mrs. Fu Zaiying has served successively as Deputy Secretary of Youth League

Committee of Chengnan Township, Dazu County, Sichuan Province, Director of

Women’s Federation, Deputy Township Head and Township Head of Tianshan

Township, Dazu County, Sichuan, Head Officer of Publicity Department, Director of

Spiritual Civilization Office of Duzu County CPC Committee of Sichuan Province,

Deputy Party Secretary and District (Town) Chief of Youting District (Town), Dazu

County, Sichuan Province, President of Women’s Federation of Dazu County,

Sichuan Province (Chongqing City), Standing Committee Member and Secretary of

Discipline Inspection Committee of Dazu County CPC Committee, Chongqing,

Deputy Party Secretary and Secretary of Discipline Inspection Committee of Bishan

County CPC Committee of Chongqing, Standing Committee Member and Secretary of Discipline Inspection Committee of Beibei District CPC Committee of Chongqing.

Mr. Wang Liangping, Vice President & Financial Administrator. Got

91 2016 Annual Report

EMBA of School of Economics and Business Administration of Chongqing

University in 2010, senior accountant.

Mr. Wang Liangping has served successively as Accountant of PLA Unit 57318,

Registered Accountant and Certified Public Accountant of Beijing Hongda

Accounting Firm, Assistant of General Logistics Department and Financial

Department of PLA, Financial Director and General Manager of Finance Department of Chongqing International Trust Inc.

Mr. Wang Zhijian, Vice President. Got EMBA of Chongqing University in

2012, senior economist.

Mr. Wang Zhijian has served successively as Soldier, Platoon Leader, Political

Instructor and Company Secretary of Unit 88737 and 88660, Office Secretary and

Director, Chief of Deposit Section and Chief of Credit Section of ICBC Changshou

Sub-branch, President Assistant of PBOC Changshou Sub-branch, Deputy Director of

Labor Union Office of PBOC Chongqing Branch & General Manager of Tianfu Gold and Silver Jewellery Shop, Deputy Chief and Chief of Non-banking Section, National

Treasury Section, Internal Review Section and BOC Regulation Section of Operation

Administration Department of PBOC Chongqing Branch, Chief of BOC Regulation

Section of CBRC Chongqing Office, and Chief of Regulation Section of City

Commercial Bank.

Mr. Wan Fujian, Vice President. Got MEcons of Xiamen University in 1994, senior economist.

92 2016 Annual Report

Mr. Wan Fujian has served successively as Clerk of PBOC Wanxian Region

Central Sub-branch, Clerk of ICBC Wanxian Region Branch, President Assistant of

ICBC Yunyang County Sub-branch, Deputy Chief of Technology Reformation &

Credit Section of ICBC Wanxian Region Branch, Deputy Director and Director of

Planned Credit Department of ICBC Wanzhou Branch, President Assistant of ICBC

Chongqing Yuzhong Sub-branch, Vice President of ICBC Wanzhou Branch, General

Manager of Huaxi Securities Wanzhou Business Office, President of Wanzhou

Commercial Bank Co., Ltd., and General Manager of Chongqing Three Gorges Bank

Co., Ltd. Wanzhou Administration Office.

Mr. Xu Ling, Vice President. Got BA degree of Shanghai International Studies

University in 1991, translator.

Mrs. Xu Ling has served successively as Salesman, Business Manager, Deputy

Manager of International Finance Department, Deputy Manager of Capital Planning

Department, Vice General Manager of Financial Planning Department, Vice General

Manager of Capital Management Department (take the charge), General Manager of

Capital Management Department, General Manager of Compliance Management

Department, General Manager of Trust Management Department of Chongqing

International Trust Inc., and Chief Supervisor of Hefei Science & Technology

Technological Rural Commercial Bank Co., Ltd.

Mr. Tian Hui, Technical Director. Graduated from Northwest University as

BSc Economics & Management in 2000, economist.

93 2016 Annual Report

Mr. Tian Hui has served successively as Loan Officer of 1st Credit Section of

BOC Shaanxi Province Branch, Principal Staff Member and Principal of Credit

Section of BOC Xi'an City Sub-branch, President of BOC Lintong Sub-branch,

President of CMBC Xi'an Branch Chengnan Sub-branch, President Assistant of

CMBC Xi'an Branch, Principal of Preparatory Group of CMBC Taiyuan Branch,

High Commissioner of CMBC Xi'an Branch (Vice administrative level), and Principal of Preparatory Group of China Unionpay Inner Mongolia Branch.

Mr. Zhou Zhiqiang, Business Director. MBA of School of Economics and

Business Administration of Chongqing University, economist.

Mr. Zhou Zhiqiang has served successively as Employee of PBOC Ya'an Branch,

Employee of Capital Operation Department of Bank of Chongqing, General

Manager's Assistant of Finance and Accounting Department, Vice General Manager of Capital Department, General Manager of Capital Department, General Manager of

Financial Banks Administration Department, and Chief Inspector of Inter-bank Line

(take charge of overall work in financial inter-bank line).

Mr. Yao Jiangjun, Board Secretary & Office Director of Board of Directors.

Got BEc of Southwestern University of Finance and Economics in 1992, economist, guest professor of School of Management, of Political Science and Law.

Mr. Yao Jiangjun has served successively as Clerk and Senior Staff Member of

Chongqing Operation Management Department of People's Bank of China, Manager

94 2016 Annual Report of Office Secretary Department of Southwest Securities, General Manager of Risk

Management Department & Vice General Manager of General Management

Department of Chongqing International Trust Inc.

6.2 Change in directors, supervisors and senior management members during reporting period

During the reporting period, Mr. Tong Haiyang, former Chairman, resigned the post of Chairman of the Bank in October 2016; Mr. Wang Rongwu, former Business

Director, resigned in March 2016; Mr. Zhou Zhiqiang, new Business Director, resumed since July 2016; Mrs. Xu Ling, Vice President, resumed November 2016.

6.3 Staff conditions during the reporting period

As of the end of the reporting period, the Bank had 2,073 on-post employees, representing an increase of 65 employees or 3.24% over 2015. There are 882 men and

1,191 women among all on-post staff, accounting for 42.55% and 57.45%, respectively; 1,734 of them have bachelor degree or above, accounting for 83.65% of the total; average age of all on-post staff is 32.6 years old.

95 2016 Annual Report

7. Corporate governance

7.1 Organization chart

96 2016 Annual Report

7.2 Shareholders and Shareholder's General Meeting

During the reporting period, the Bank has held 2015 Annual Shareholder's

General Meeting and 2016 Extraordinary General Meeting (for three times).

Notification, convening, holding and voting procedures of the meetings conformed to

Company Law and Articles of Association of the Bank. 2015 Annual Shareholder's

General Meeting deliberated and approved major proposals including Work Report of

Board of Directors, Work Report of Board of Supervisors, 2015 Annual Report and

Summary and 2015 Annual Final Financial Report. The first 2016 Extraordinary

General Meeting deliberated and approved proposal for extending authorization period of "Three Rural Issues" special financial bonds; the second 2016 Extraordinary

General Meeting deliberated and approved proposals for applying for IPO domestic

(A-share) stock scheme and share allotment for shareholders; and the third 2016

Extraordinary General Meeting deliberated proposals for changing registered capital, optimizing asset structure and improving asset quality.

Solton & Partners has witnessed annual Shareholder's General Meeting and

Extraordinary Shareholders Meeting of the Bank on the spot, and issued legal opinion.

The convening of Shareholder's General Meeting by the Bank guaranteed shareholders' right to know, right to participate and right to vote concerning major issues of the Bank.

7.3 Directors, Board of Directors and special committee

7.3.1 Work of Board of Directors

97 2016 Annual Report

During the reporting period, all directors of the Bank have been working earnestly and responsibly, fulfilling their duties diligently, and exercising rights granted in Articles of Association of the Bank, treating all shareholders fairly, keeping up with operations business management of the Bank, ensuring that information disclosed is real, correct and complete, strictly abiding by national laws and regulations, noting not to prevent Board of Supervisors or supervisors from exercising authorities, and protecting interests of all parties involved. During the reporting period, all directors of the Bank have attended meetings and deliberated various proposals, played authority of making decisions, and maintained overall interests of all shareholders and the Company. During the reporting period, the Bank has held 6 regular meetings of Board of Directors, 8 extraordinary meetings, and has deliberated and approved 58 proposals including proposal for authorizing Bank President by

Board of Directors and proposal for initiating and developing targeted poverty alleviation charity trust plan, and listened to report on operational management and resumption of senior management on a regular basis.

7.3.2 Resumption of independent directors

I. Attendance of independent directors on Board Meeting and

Shareholder's General Meeting

During the reporting period, all independent directors of the Bank have performed diligently and attended board meetings, or entrusted other independent directors to attend and exercise the right to vote on behalf (if directors cannot attend in person). Attendance of independent directors during the reporting period is as

98 2016 Annual Report follows:

Required times of Independent Present under Attending attending Present in Absence director entrustment shareholders Board person (times) (times) Name (times) Meetings Meeting in the tear Zhao Pinzhang 6 5 1 0 2 Tang Shisheng 6 5 1 0 4 Chen Zhong 6 6 0 0 4

II. Objections raised by Independent Director regarding relevant issues

☐ Applicable ☑ N/A

7.3.3 Performance of special committees of Board of Directors

I. Performance of Strategic Development Committee

During the reporting period, the Strategic Development Committee has held 5 meetings, and has deliberated 6 proposals covering 2016 operation development plan,

2015 annual profit distribution of the Bank.

II. Performance of Related Transactions Committee

During the reporting period, the Related Transactions Committee has held 10 meetings, and has deliberated 18 proposals including issuing of "reservoir income creation No.116" financial plan involving major related transactions, issuing of

"reservoir income creation No.118" financial plan involving major related transactions and 2016 daily related transaction control matters.

99 2016 Annual Report

III. Performance of Risk Management Committee

During the reporting period, Risk Management Committee has held 4 meetings, and has deliberated 18 proposals covering 2015 work summary, 2016 work plan report and 2015 risk management work report of Risk Management Committee of

Board of Directors.

IV. Performance of Payroll Nomination Committee

During the reporting period, the Payroll Nomination Committee has held 3 meetings in total, deliberated 14 proposals including 2015 annual work summary and

2016 annual work plan of Payroll Nomination Committee of the 1st Board of

Directors, suggestions and opinions on determining 2015 annual payroll of senior management, and proposal for adjusting payroll structure.

V. Performance of Audit Committee

During the reporting period, the Audit Committee has held 6 meetings, and has deliberated 13 proposals covering 2015 internal audit work report and 2016 internal audit work plan.

7.4 About supervisors, Board of supervisors and special committee

7.4.1 Work of Board of Supervisors

I. Main work conditions

During the reporting period, the Board of Supervisors has held 6 meetings, and has deliberated 15 proposals covering various supervision and inspection schemes, supervision and inspection report, performance evaluation report for directors,

100 2016 Annual Report performance evaluation report for senior management and its members, nomination of supervisor candidate and qualification review of supervisor candidate. Supervisory and Nomination Committee has held 1 meeting and deliberated 6 proposals. In addition, supervisors also attended Shareholder's General Meeting for 12 man-times, and attended on-site meeting of Board of Directors as nonvoting delegates for 14 man-times.

(I) Performance supervision and evaluation

During the reporting period, Board of Supervisors has supervised and evaluated performance of directors and senior management members in 2015 based upon routine supervision as well as intensive supervision and inspection, and evaluated

Chairman, President and Financial Administrator individually.

In order to constantly improve and perfect level and effects of supervision and management work done by Board of Supervisors, the Board of Supervisors has proposed the supervision concept of "sizing up the situation, taking the initiative to adapt to new economic normal, insisting on risk-based principle, following the principle of being practical and realistic, integrating supervisory resources effectively, intensify process supervision constantly, and exploring multi-level supervisory mode positively". As a result, the Board of Supervisors has integrated supervision resources effectively, realized supervisory pre-displacement, improved supervision effects and application, and has achieved job sharing, information sharing, risk co-administration and rectification cooperating. Internal supervision and inspection mechanism was more complete. The Board of Supervisors not only detected problems and risks, but

101 2016 Annual Report also gave advice and suggestions positively, so as to prevent and eliminate risks effectively. As a result, the Board has significantly improved the supervision effects, supported and guaranteed healthy development of various operations and business activities in full.

Implement annual intensive supervision, expand supervision coverage. The

Board of Supervisors launched intensified supervision and inspection in 2015. The inspection covered financial activities, risk management, internal control, directors, and performance of senior management and senior management members. While fully affirming achievements, the Bank has pointed out weak links to be further intensified and improved during the inspection by improving refinement level of asset management and financial management, enhancing meeting management of Board of

Directors Special Committee, further enhancing system construction and deepening total risk management.

(II) Deep execution of special supervision

During the reporting period, the Board of Supervisors has organized and launched special examination in connection with real estates, binds, notes, related transactions and capital business based upon current economic situation, financial market risk conditions and the Bank's practical situation. Moreover, the Board of

Supervisors has proposed improvement suggestions and recommendations on improvement and execution of relevant business systems, normalization and management of business operation process, supervision, inspection and accountability.

102 2016 Annual Report

Based upon supervision, examination and holding of special business seminar, the Board of Supervisors kept up with business status timely, revealed risk hazards, proposed management requirements, issued prompt letter on relevant work to the

Board of Directors or senior management to remind them of problems to be noted, and supervised implementation of supervisory policies. As a result, it has promoted further improvement of the Bank's relevant management system and risk prevention capacity, and guaranteed robust operation of operating activities.

In improving and executing systems, the Board of Supervisors paid constant attention to the Bank's related transactions, gave supervisory opinions and suggestions timely, and maintained shareholders' legitimate interests.

The Board also organized and launched supervision and investigation activities.

In order to complete intensified supervision and inspection in 2015 in a better manner, and facilitate the head office's grasping and analysis of problems and deficiencies in operating management, take the initiative to adopt effective measures to cope with adverse effects on current economic downturn, and promote further improvement of the Bank's operating management level as well as healthy and stable development of various operations, the Board of Supervisors organized and launched supervision and investigation activities covering all departments, branches and sub-branches, and has formed Report on Summary of Opinions and Suggestions Proposed on Supervision

Management Research Forum, and collected 301 opinions or suggestions.

(III) Continuous follow-up, rectification and supervision

During the reporting period, the Board of Supervisors has been insisting on

103 2016 Annual Report problem-orientated basis, fully performing supervisory duty, keeping rectifying, supervising and evaluating constantly problems detected. The Board of Supervisors tracked and checked rectification of problems intensively supervised, checked and disclosed in 2015. The Board of Supervisors thought that, Board of Directors and senior management of the Bank has intensively supervised, checked and disclosed problems in 2015, adopted suggestions, taken effective measures timely and rectified problems carefully. After rectification, capital management level of the Bank has been improved, risk management system has been constantly perfected, internal control efficiency has been enhanced, financial delicacy management has been further improved, risk resistance capacity has been continuously intensified, and going concern has been guaranteed effectively.

Intensify self-construction of Board of Supervisors, improve performance capacity. During the reporting period, the Board of Supervisors has revised Rules of

Procedure of Board of Supervisors of Chongqing Three Gorges Bank; intensified training of performance capacity, and organized supervisors to attend training for 6 man-times successively during the reporting period, the training covered construction of Board of Supervisors, supervisors' performance capacity, financial theory and practice, financial audit, etc.; intensified inter-banking exchange, shared practices of the Board of Supervisors, learned advanced experience, improved self-quality by learning, and laid solid base for completing work in a better manner and improving supervision effects practically.

104 2016 Annual Report

II. Independent opinions on relevant issues

(I) Resumption of Board of Directors and senior management

During the reporting period, in accordance with Company Law, Law of

Commercial Banks, Guideline on Corporate Governance of Commercial Banks,

Articles of Association of the Bank, etc., the Board of Directors performed earnestly and fulfilled responsibilities diligently, took the initiative to implement national financial policies and guidelines as well as resolution made by Shareholder's General

Meeting; paid high attention to corporate governance and internal control management, accepted supervision by Board of Supervisors consciously; grasped national macro situation accurately, made important decisions and adjustment timely, and did substantial effective work in perfecting corporate governance, optimizing organizational structure, adjusting strategic plan, establishing comprehensive risk management system, promoting strategic transformation and boosting enterprise culture construction. As a result, the board has laid solid foundation for the Bank to deepen reformation and accelerate development. The Board of Directors made decisions based upon solid basis in accordance with decision-making procedures specified in Articles of Association of the Bank.

During the reporting period, the senior management earnestly implemented supervision requirements for the Bank proposed by regulatory authority and resolutions made by the Board of Directors and Board of Supervisors, overcame difficulties in complex and rigorous economic and financial situation, grasped opportunities, enhanced management, optimized structure and accelerated

105 2016 Annual Report transformation. As a result, operating management level was constantly improved, risk control capacity was improved effectively, operating performance grew steadily, all these have laid solid foundation for the Bank's continuous healthy development.

Directors and senior management were loyal and faithful, all fulfilled responsibilities diligently, no breach of laws, regulations and Articles of Association of the Bank, or behavior infringing the Bank's interest was detected.

(II) Operation by law

During the reporting period, the Bank launched operating activities by law, and made decisions in procedures as required by laws, regulations and Articles of

Association of the Bank.

(III) Financial report

Audited by accounting firm, 2016 annual financial report of the Bank has reflected the Bank's financial situation and operating results truly and fairly.

(IV) Acquisition and sale of assets

During the reporting period, no insider trading, no behavior infringing shareholders' equity or resulting in loss of assets was detected in asset acquisition and sale activities.

(V) Internal control

During the reporting period, the Bank continuously intensified and perfected internal control, and has detected no material weakness in internal control system of the Bank and its execution.

(VI) Fulfillment of social responsibility

106 2016 Annual Report

2016, the Bank adapted to new economic and financial normal, earnestly implemented national work spirit of targeted poverty alleviation and targeted poverty relieving, positively responded to work arrangement of targeted poverty alleviation and targeted poverty relieving by Chongqing Municipal Party Committee and

Municipal Government, enhanced financial services, vigorously devoted to charities, took the initiative to do financial poverty alleviation, highlighted "targeting", developed exclusive poverty alleviation products including "enriching loan" and

"anti-poverty loan", launched "Three Gorges sends love" poverty alleviation donation activity, and fulfilled social responsibilities favorably.

7.4.2 Objections raised by Board of Supervisors regarding relevant issues

☐ Applicable ☑ N/A

7.4.3 Work of exterior supervisor during the reporting period

I. Performance

Mr. Xu Junhua, Exterior Supervisor of the Bank, Supervisor of Board of

Supervisors, Chairman of Supervisory and Nomination Committee of Board of

Supervisors. During the period, Xu Junhua performed duties of Exterior Supervisor, completed relevant work of Board of Supervisors, attended important working conference on invitation or notification timely, and no exterior supervisor has never being absent from a meeting for no reason. Specific performance is as follows:

(I) Attendance of Board of Supervisors Meeting

107 2016 Annual Report

During the reporting period, Exterior Supervisor Xu Junhua has offended Board of Supervisors Meeting for 7 times, participated in deliberation of Proposal for

Electing Zhang Juan as Equity Supervisor, Proposal for Launching 2015 Annual

Special Examination of Board of Supervisors of Chongqing Three Gorges Bank,

Proposal for Electing Chief Supervisor of Board of Supervisors, Proposal for Electing

Chairman of Supervisory and Nomination Committee of Board of Supervisors,

Proposal for Launching 2015 Annual Special Examination of Board of Supervisors of

Chongqing Three Gorges Bank, and relevant proposals in connection with general election of Board of Supervisors.

(II) Attendance on Board Meeting and Shareholders' Meeting

During the reporting period, Xu Junhua has offended relevant meetings timely since he served as Exterior Supervisor of the Bank, and has never being absent from a meeting for no reason.

II. Performance efficiency

(1) Work completion

During the reporting period, in accordance with working arrangement of the

Board of Supervisors, Exterior Supervisor Xu Junhua has undertaken some tasks, participated in revision of rules of procedure of Board of Supervisors, and has made valuable suggestions for revision. In 2015 intensive supervision and inspection, Xu

Junhua took charge of inspecting the Bank's major issues, especially those affecting enterprise reform and development, evaluating corporate strategy execution, core competitiveness and sustainable development capability, and inspecting performance

108 2016 Annual Report of the Board of Directors, senior management and senior management members, evaluating overall performance effects of the Board of Directors and senior management as well as supervision and guidance of designated member's performance. In all work above, Supervisor Xu Junhua has offered advice and suggestions positively, completed various work tasks favorably, and played active role in achieving full-year job objective by the Board of Supervisors.

(II) Complete routine supervision

As an exterior director, Xu Junhua monitored decision-making process by attending relevant meetings, reading and reviewing documents, and listening to statement made by directors and senior management, expressed independent opinions, gave feasible opinions or suggestions on management of Board of Directors and

Board of Supervisors, the Bank's development strategy, risk management and NPA disposal in other ways from a professional standpoint, and has performed supervision duty of an exterior supervisor favorably. In the face of complex problems, Xu has exhibited strong sense of working responsibility and rich professional skills, made analysis and judgment, evaluated and guided relevant work and supervision matters objectively, and offered opinions or suggestions conducive to the Bank's management improvement and development promotion.

III. Performance evaluation

During the process of performance, Exterior Supervisor Xu Junhua has offended meetings of Board of Supervisors, Board of Directors and shareholder's meeting, positively participated in supervision and inspection organized by the Board of

109 2016 Annual Report

Supervisors, and completed various tasks assigned by the Board of Supervisors. In the full year, Xu could work for the Bank for over 15 workdays in accordance with relevant provisions and authorities endowed by Articles of Association of the Bank, hence he has performed duties of an exterior supervisor, the performed was rated as qualified.

7.5 Evaluation, motivation and restriction mechanism for senior management during the reporting period

During the reporting period, in strict accordance with payroll management guideline for senior management as well as motivation and restriction management system rules for senior management published by Chongqing State-owned Assets

Supervision and Administration Commission, in the evaluation principle of

"combining overall situation and shared administration, quantitative indicator first, qualitative indicator supplemented", the Bank determined annual performance evaluation indicator scientifically, established direct link between annual performance payroll and assessment results. In accordance with rules and requirements in connection with offering, business risk dilution and deferred payment of performance bonus for senior management, deferred payment proportion of President's annual performance payroll was determined to be 50%, for other senior management, 40%.

The Bank's Board of Directors and Board of Supervisors insisted on application of performance evaluation to directors, supervisors and business management each year, the evaluation covered the Bank's operating results, meeting attendance as well as

110 2016 Annual Report deliberation and decision making, business objective & task of departments, individual working performance, deficiency and problems, future improvement measures and methods of each supervisor, director and senior management. As a result, the two boards have developed performance evaluation report for directors, supervisors, exterior supervisors and senior management in each year, notified the report on meetings of Board of Directors and Board of Supervisors as well as annual shareholder's meetings organized by the Bank.

7.6 Outward information disclosure and transparency

In strict accordance with relevant regulations in connection with information disclosure issued by People's Bank of China and China Banking Regulatory

Commission, and the Bank's interim procedures for outward information disclosure management, the Bank did outward information disclosure well, adhered to the principle of "truth, reliability, accuracy, timeliness and completeness", and disclosed its annual report to the society in various channels.

The Bank took letters, calls and visits of shareholders seriously, and enhanced exchange and communication with shareholders by paying visit, making call and intensifying shareholder's information file construction, so as to ensure that all shareholders knew the Bank's operation and development information equally.

7.7 Independent operation

The Bank was an independent legal entity making its own management decisions and assuming sole responsibility for its profits or losses, had independent and

111 2016 Annual Report complete business and independent management capability.

7.8 Internal control construction

The Banks' Board of Directors takes charge of establishing and implementing fully effective internal control systems, ensuring that the senior management takes necessary internal control measures, supervising senior management's supervision and evaluation on adequacy and effectiveness of internal control system; the Board of

Supervisors takes charge of supervising improvement of internal control system and performance of internal control by the Board of Directors, senior management and senior management members; the senior management takes charge of executing decisions made by the Board of Directors, developing internal control policies, monitoring and evaluating adequacy and effectiveness of internal control system, and guaranteeing effective implementation of internal control policies. During the reporting period, in the principle of "full coverage, balance, prudentialness and match", and in accordance with Guideline on Internal Control of Commercial Banks issued by China Banking Regulatory Commission, the Bank continuously perfected and optimized, and built an internal control system covering various business processes, operation steps, all departments and all posts.

Promote construction of internal control mechanism. The Bank constantly gave priority to internal control, revised Basic Rules for Internal Control of Chongqing

Three Gorges Bank. During the reporting period, the Bank has developed and perfected 99 systems, and accomplished planned target; enhanced business process

112 2016 Annual Report management, promoted preparation of business flow chart; completed post-evaluation of internal control system, established dynamic post-evaluation of internal control system, and formed complete and effective internal control system. The Bank modified rules of procedure of Risk and Internal Control Committee. During the reporting period, the Bank has held 17 meetings, deliberated 89 proposals, and provided powerful guarantee for sustainable development of the Bank.

Implement internal control measures. During the reporting period, the Bank has launched 26 risk investigations, and prosecuted violators; carried out business continuity work and pressure test, and ensured that the Bank's risk management work was based on past experience, and was practicable; resolved credit risks by adopting multiple measures, strived to reduce credit pressure; executed active authorization management, and improved effectiveness of internal control management; intensified inspection and supervision of counter services, continued staff conduct control; improved liquidity risk management level; executed regular monitoring, established long-term risk control mechanism; intensified internal audit, launched 78 internal audit projects during the reporting period, and guarantee orderly proceeding of internal audit; made flexible use of violation integral tool; implemented collective punishment system involving direct superior, intensified punishment on violation; improved compliance awareness of internal control, and promoted compliance culture construction.

Enhance internal control supervision and evaluation. The Bank perfected the case prevention working mechanism of which grass-root branch "top leader" serves as

113 2016 Annual Report main principal of case prevention, and launched non-site and site inspection continuously; launched internal control evaluation and assessment in multiple dimensions; completed preliminary gap analysis in 5 steps including organizational structure, responsibilities, measures, guarantee and evaluation, intensified dynamic evaluation of internal control construction, boosted internal control management; set qualitative and quantitative proportion in a scientific manner, perfected internal control evaluation standard, and guaranteed evaluation adequacy and effectiveness.

During the reporting period, the Bank has not detected material weakness in internal control, and major error in information disclosure, the Bank's internal control was effective. The Bank will further promote internal control construction, promote continuous improvement of internal control system, and promote robust development and compliance management.

7.9 Awards during reporting period

Name of award Appraisal institution

Outstanding Contribution Award in Supporting Mass People.cn Entrepreneurship and Innovation Third prize of "Operation Quality Award for China Union Chongqing Operation Management Pay Card" Department of People's Bank of China Chongqing Operation Management "Market Standardization Prize" for bank card Department of People's Bank of China Outstanding Unit in the 4th Round of Safety Evaluation for Chongqing Municipal Public Security Banking Financial Institute Bureau, CBRC Chongqing Office Advanced Unit in Financial Services Among Banking CBRC Chongqing Office Financial Institutes and Small and Micro Business "Best Improvement Award" in 2015 Inter-banking Domestic National Inter-bank Lending Center Currency Market Advanced Unit in EAST System Data Delivery CBRC Chongqing Office

114 2016 Annual Report

Name of award Appraisal institution

2015 Top 50 Financial Products in Serving Small and Micro China Banking Association Enterprises 2015 Livehood Service Award in Social Responsibilities Chongqing Banking Association 2015 Special Contribution Award in Social Responsibilities Chongqing Banking Association 530th in Top 1000 Banks Worldwide UK Banker magazine Ranked 82nd in Top 100 Chinese Banks China Banking Association 4th Session of Chongqing Municipal Famous Branded Chongqing Municipal Enterprise Enterprises Federation Chongqing Municipal Enterprise Top 100 Chongqing Enterprises Federation Chongqing Municipal Enterprise Top 100 Chongqing Service Industry Enterprises Federation Chongqing Municipal Enterprise Top 50 Chongqing Profit-oriented Enterprises Federation Chongqing Local Finance Forum Top 10 Annual Growing Banks Office, Financial Times Office, China Local Finance Institute 2016 Top 10 Commercial Banks Supporting Middle and China Association of Small & Medium Small-sized Enterprises Commercial Enterprise Propaganda Department of Wanzhou District CPC Committee, Jiangnan New Zone, Yudong Economic-Technological Development Zone, Wanzhou District Commission of Economy and Information Contribution Award in 2015-2016 Wanzhou District Technology, Wanzhou District Enriching People and Developing Wanzhou Agriculture Committee, Wanzhou District SASAC, Wanzhou District Business Bureau, and Economic Development Bureau of Wanzhou Economic-Technological Development Zone Excellent Organization Unit of 2016 "Financial Knowledge to be Known by Thousands of Families" Propaganda Service CBRC Chongqing Office Month Activity Best Information Submitter of 2016 "Financial Knowledge to CBRC Chongqing Office be Known by Thousands of Families" Propaganda Service

115 2016 Annual Report

Name of award Appraisal institution

Month Activity Outstanding Contribution Award of 2016 Targeted Poverty People.cn Alleviation Gold Reputation Characteristic Bank Award of 2016 the 5th Modern Bankers China Small and Medium Bank Selection The 4th Prize in 2015 Annual Urban Commercial Bank Bankers Competitiveness Evaluation Chongqing Municipal Finance, Trade, The 2nd Prize in Staff Cooperation Safeguard Activity Light Industry and Textile Trade Union Committee China Finance Trade Union Chongqing Working Committee, "Excellent Organization Award" in 2016 Chongqing Chongqing Financial Working Financial System Service Skills Competition Committee of Communist Youth League, Chongqing Municipal Banking Association Taxation Bureau of Chongqing "Grade A Taxpayer Enterprise" in 2015 Taxpaying Credit Provincial Office, SAT; Chongqing Grade Evaluation Wanzhou District Local Tax Bureau

7.10 Performance of social responsibilities

During the reporting period, the Bank acted positively, fully supported real economy development, performed social responsibilities of local corporation bank favorably, and has received unanimous praise from all sectors of society. For the 9 years of restructured bank, the Bank has provided over RMB 400 billion for the society cumulatively, and achieved total profits of RMB 10.308 billion cumulatively and tax of RMB 4.413 billion.

7.10.1 Develop inclusive finance practically, practice social responsibilities 116 2016 Annual Report seriously

Spare no efforts to support targeted poverty alleviation. By responding to the

CPC's call to "win the tough battle of poverty alleviation", the Bank executed working requirements of Chongqing Municipal Party Committee and Chongqing Municipal

People's Government, launched targeted poverty alleviation, and has made some positive achievements. I. The Bank has developed a working mechanism serving targeted poverty alleviation, established leading group serving targeted poverty alleviation and targeted poverty relieving, and applied top leader responsibility system to target poverty alleviation; developed Work Program Serving Targeted Poverty

Alleviation and Targeted Poverty Relieving, defined guideline, and included targeted poverty alleviation service work in annual assessment; leaders of the head office frequently visited poverty-stricken districts and counties including Youyang, Wuxi,

Chengkou, Xiushan, Wanzhou, Fuling and Qianjiang, discussed with local governments over poverty alleviation initiatives, guided sub-branches in industrial poverty alleviation and pair assistance; studied initiatives including fund releasing, poverty alleviation donation and product innovation; closely integrated poverty alleviation with routine work for joint study, deployment and execution. II. The Bank fully supported poverty-stricken districts and counties in economic construction. By the end of the reporting period, the Bank's credit balance in 14+4 poverty-stricken districts and counties amounted to RMB 26.935 billion, representing an increase of

RMB 4.978 billion or 22.67% over the beginning the period, and the Bank has strongly supported backbone project construction and key poverty alleviation projects of poverty-stricken districts and counties. Official website of Chongqing Municipal

117 2016 Annual Report

Poverty Alleviation Development Office has made report on the event themed

Accuracy and Effectiveness of Measure-based Financial Poverty Alleviation

Enhancing by Chongqing Three Gorges Bank. III. The Bank promoted exclusive poverty alleviation products such as "enriching loan" and "anti-poverty loan",

"enriching loan" focusing on the fields of "three rural issues" as well as civilian products and trades has issued loans of RMB 1.171 billion, supported 798 small and micro customers; "anti-poverty loan" has issued RMB 16.28 million since it was launched in November 2016. Meanwhile, relying on the platform of "Three Gorges

Payment", the Bank has developed unsecured product "e commerce loan" for supporting rural E-commerce projects by cooperating with rural E-commerce platform of Xiushan Yunzhi Science and Trade Co., Ltd. IV. The Bank highlighted accuracy of poverty alleviation. During the reporting period, the Bank has issued loans of RMB 1.811 billion to local poverty alleviation projects and filed poverty-stricken households, including RMB 1.727 billion for poverty alleviation projects, benefiting 28,647 filed poverty-stricken households; issued petty loan of

RMB 84.377 million to 398 filed poverty-stricken households directly, 276 of them have been lifted out of poverty. V. The Bank positively launched construction of financial poverty alleviation leading banks and financial poverty alleviation exemplary bases, 29 of 54 financial exemplary bases have passed the acceptance, two were identified as "model household of financial poverty alleviation".

Support development of small and micro enterprises positively. The Bank has made certain progress in solving the difficulties of "difficult financing",

118 2016 Annual Report

"expensive financing" and "slow financing" confronted by small and micro enterprises by establishing and perfecting financial service organizational structure for small and micro enterprises, perfecting product system, improving approval efficiency, innovating risk management mode, adjusting credit structure and establishing financial service professional sub-branch for small and micro enterprises in batch. I.

The Bank has focused on forging of "Three Gorges Prosperity" product system, including "Zi Cai Tong", “Huo Ban Tong”, "Zeng Zhi Tong" and "e Rong Tong" core products series, covering over 20 micro-finance featured products. II. The Bank has established financial subdivisions for small and micro enterprises or marketing departments for small and micro enterprises in 39 district and county branch offices in

Chongqing, achieving full coverage of service sites for small and micro enterprises in branch offices. Meanwhile, the Bank has established 12 specialized institutions for small and micro enterprises, 10 specialized sub-branches for small and micro enterprises, 2 business development groups for small and micro enterprises, so as to provide small and micro-financing services of less than RMB 10 million. At the end of reporting period, the balance of loans to small and micro enterprises amounted to

RMB 22,045 million, accounting for 57% of the Bank's total loans, representing an increase of 18.77% over the same period of the previous year, higher than that of the total loans of the Bank as 18.62%; customer population receiving loans to small and micro enterprises reached 4,290 households, higher than 4,271 households in the same period of the previous year; and loan application success rate reached 99.68%, higher than that of the same period of the previous year as 99.65%. The loans to small and

119 2016 Annual Report micro enterprises continuously meet requirements of "three no less than" supervision index. Meanwhile, to serve small and micro enterprises effectively, the Bank has issued RMB 3 billion as financial liabilities to small enterprises.

Innovative service mode supports "three rural issues" development.

Centering on national pro-agricultural policy, the Bank continuously raised the awareness of positively serving "three rural issues", promoted "package loan", "rural guarantee", "Three Gorges quick loan" and other financial products for small and micro enterprises close to farmers' demands, "three rights mortgage" loan including collateral loan of forest property, collateral loan of rural land contracted management rights and collateral loan of rural residential houses, signed strategic cooperation agreement of "three rights mortgage" loans with some district and township governments, and selected the regions as pilot base of loan. Meanwhile, the Bank has built "three rural issues" financing platform jointly with such enterprises including

Municipal Agricultural Guarantee Company, Xingnong Guarantee Group and Three

Gorges Guarantee Group. As of the end of the reporting period, the Bank's agriculture-related loan balance reached RMB 7.831 billion, accounting for 19.55% of the Bank's loans.

Promote "global free Treasure Life Card", devote to universal preference

Since October 2012, the Bank has promoted free service of bank card, waived various charges including cross-bank withdrawal and transfer service charges via Unionpay

ATMs at home and abroad, annual fee, administrative expense for petty account, card fee, service charge for messenger, loss reporting fee, card replacement fee and deposit

120 2016 Annual Report certificate issue fee. For over 4 years, the Bank has reduced charges and surrendered profits of over RMB 50 million for urban and rural residents. Meanwhile, the Bank took the initiative to match livehood financial service demands, issued financial social security IC card in 2011, trial worker's preferential card for citywide trade union members in 2016, and created convenient payment and settlement environment for relevant fields; vigorously developed E-bank, got through "the last mile" of financial service, now the Bank's replacement rate of E-bank financial transactions amounted to

81.65%, and boosted construction of inclusive financial system.

Intensify consumer protection practically. The Bank has established

Consumer Protection Workgroup under Risk Management Committee of the Board of

Directors to coordinate, guide, supervise and promote the Bank's consumer protection work. In addition, it has established Consumer Protection Committee, Consumer

Protection Center Professional Institution, etc., and provided full-time staff for consumer protection, so as to put consumer protection into practice.

Vigorously launch and popularize financial knowledge publicity. The Bank vigorously launched financial knowledge propaganda and education activities such as

"Financial Knowledge Popularizing Month", "Financial Knowledge to be Known by

Thousands of Families" and "Financial Knowledge Goes Everywhere". Since 2016, the Bank has held over 300 public education propagandas, distributed over 45,000 pieces of pressbooks, and has promoted special publicity of relevant activities on such media as Chongqing Morning Post. The Bank was awarded "Excellent Organization

Award" and "Best Information Submitter" in "Financial Knowledge to be Known by

121 2016 Annual Report

Thousands of Families" propaganda due to its effective organization and outstanding performance.

7.10.2 Innovate scientific finance, boost innovation-driven development strategy

Taking scientific finance as breakthrough in differentiated development, the

Bank practiced Chongqing innovation-driven development strategy earnestly, and took the initiative to provide professional financial services for scientific enterprises by forging scientific featured sub-branch, building financing platform serving scientific middle and small-sized enterprises, and exploring establishment of

Scientific Business Unit, all these efforts have made certain achievements.

Explore and develop scientific finance service mode. As council member of

Chongqing Science & Technology Commission, the Bank has participated in venture exchange activities held by Chongqing Science & Technology Commission, dispatched employees to coastal city for study and exchange, took part in subject study in connection with scientific finance and preparation of Chongqing Municipal

Management Method for Mortgage Financing of Intellectual Property (trial). The

Bank took the lead to promote intellectual property pledge loan, adopted new mode of

"evaluation+insurance+pledge", and issued the first intellectual property pledge loan in 2012. In addition, the Bank developed Management Methods for Intellectual

Property Pledge Loan, which provided that any proprietary and transferable intellectual property granted or approved and registered by the state by law and can be pledged, the loan amount could be up to RMB 20 million, and loan term could be up to 3 years. Meanwhile, the Bank customized credit product portfolio for asset-light

122 2016 Annual Report scientific enterprises by means of receivables pledge financing, contract energy management as well as warranty, factoring and letter of credit for home of small enterprises, and established complete product system and financing mode. As of the end of the reporting period, the Bank has provided nearly financing balance of RMB

0.92 billion for scientific and technological enterprises in the city, including pledge loans balance of intellectual property of RMB 120 million.

Forge scientific and characteristic sub-branch positively. In order to improve specialization level of scientific financial service, the Bank established New North

Zone Sub-branch as professional scientific sub-branch, took charge of pilot execution for scientific financial innovative products in the whole bank including "intellectual property pledge financing", granted authorization of approving scientific financial loan of less than RMB 5 million independently, and provided efficient and rapid financial service green channel for scientific middle and small-sized enterprises. In

2012, the Bank issued the "evaluation+insurance" intellectual property pledge loan

RMB 10 million to Chongqing SWS Technology Co., Ltd. The Company is a national hi-tech technological enterprise specializing in blood purification equipment researching, manufacturing and technical service. Now it has become the largest and most advance blood purification company in China, and has launched listing activities.

7.10.3 Develop green finance positively, boost green finance transformation

The Bank followed the principle of "green loan", took the initiative to develop

123 2016 Annual Report green credit, positively supported "energy conservation and emission reduction" projects, gave priority to arrange loan making when credit line was limited, executed strict access and gradual withdrawal for "two high one left", and boosted green economic transformation. As of the end of the reporting period, balance of green credit amounted to RMB 2.336 billion, representing an increase of RMB 354 million or 17.86% over the beginning of the period. The Bank has invested RMB 1.327 billion in green agricultural development project, RMB 647 million in green forestry development project, RMB 128 million in resources recycling project, RMB 101 million in energy conservation and environment protection service project, RMB 66 million in garbage disposal and pollution control, RMB 51 million in renewable energy and clean energy project, and RMB 16 million in natural conservation, ecological restoration and disaster prevention project.

In serving subsequent planning and construction of the Three Gorges, the Bank took the initiative to launch credit extension business innovation, intensified credit support to "Yangtze River reforestation" and "Three Gorges subsequent construction", provided credit extension for Three Gorges subsequent construction project, and supported project construction covering reservoir and reservoir bank remediation, ecological barrier construction, revegetation construction in major basins, sewage treatment, geological disaster prevention, etc. As of the end of the reporting period, the Bank has provided over RMB 8 billion for "Three Gorges follow-up work" project cumulatively, including nearly RMB 1.268 billion for Yangtze River reforestation program in 14 reservoir districts and counties, and was highly spoken by governments

124 2016 Annual Report at all levels.

In accordance with "cutting excessive industrial capacity" requirement, the Bank took the initiative to reduce and gradually exit corporate credit extension for overcapacity industries including coal, steel, shipbuilding, cement and electrolytic aluminum. Meanwhile, during the process of "cutting overcapacity, reducing inventory, deleveraging", the Bank followed the approach of securing credit exposure to borrowers in certain industries while reducing credit exposure to others instead of universal application, continued supporting well-performing, commercioganic and competitive quality enterprises; for troubled entity enterprises sustaining temporary financial strain but having good market prospects, provided with ultimate risk control, the Bank relieved customers' capital turnover pressure by adjusting loan term, repayment method and guaranty style, so as to help pulling enterprises through.

7.10.4 Vigorously promote securitization and facilitation of financial settlement

The Bank put forth effort to build safe and convenient integrated payment and settlement system, and positively participated in construction of functional financial center in Chongqing.

Improve payment methods and channels, build integrated service system.

By getting through payment channels including 2nd-generation payment system,

Super-Internet-Bank, inclusive card, Unionpay, Alipay and TenPay, the Bank has provided various business acceptance channels for customers including branch counter, electronic channel and ATM, provided three additional transfer modes including real-time transfer, common transfer and next-day transfer, realized safe and

125 2016 Annual Report convenient payment and settlement services including 7×24 h remittance transfer, shopping payment in various online & offline modes, and has met customers' payment and resettlement demands in various application scenarios favorably. Based upon these initiatives, the Bank has built an integrated and stereo interactive ecological chain for payment and settlement, improved efficiency of social capital turnover, and met customers' efficient and convenient payment and settlement service demands.

Launch RMB settlement service positively, boost RMB internationalization.

The Bank positively grasped the opportunity of pilot free trade zone and

Sino-Singapore (Chongqing) demonstration project construction, propagandized cross-border RMB policy widely, encouraged export-oriented enterprises to use cross-border RMB for settlement, and promoted settlement growth of cross-border goods trade in RMB. The Bank seriously carried out PBOC's requirement for simplifying RMB business process, developed classified operation guideline for international business customer, revised management method and implementation details for cross-border RMB business, and promoted cross-border RMB business positively. During the reporting period, the Bank seriously carried out guiding ideology "extensive inflow, limited outflow", completed cross-border RMB resettlement volume of RMB 560 million, representing an increase of 29.55%, positive balance of RMB 424 million, and ranked the 5th in citywide banking industry.

Vigorously develop financial innovation, expand scope of payment and settlement service Make efforts to establish "Three Gorges Payment" Internet online

126 2016 Annual Report integrated payment and settlement platform for individuals and enterprises. The Bank intended to accomplish function of opening individual secondary-class bank account of the Bank on Internet by individual consumer by combining with manual review based upon new technologies such as OCR and face recognition. Customers, of the

Bank and other banks, holding card or not, WeChat users and Alipay users, could complete payment and settlement using "Three Gorges payment". Moreover, the Bank promoted cross-region, cross-industry and cross-medium resource integration, managed to provide all-round payment and resettlement service for customer group not covered by physical branches, enhanced financial settlement exposure, and boosted construction of functional financial center in Chongqing.

7.10.5 Support charities positively

The Bank took the initiative to respond to call of the Party Central Committee and Chongqing Municipal Party Committee, carried forward Chinese traditional virtue of unity and mutual aid, and supported charities substantially. I. The Bank continuously launched "Three Gorges sends love" donation activity, staff have donated RMB 340,200 in total during the reporting period. Meanwhile, in conjunction with poverty alleviation, the Bank has donated RMB 1,624,300 to 14+4 poverty-stricken districts and counties. For example, the Bank has donated RMB

700,000 to aid in construction of "Multi-use Building of Tushi County Yinling

Primary School in Youyang County". II. Give play to force of Youth League committee and young employees, pay attention to poverty-stricken children On June 1,

2016, the Bank organized young employees to "jointly celebrate Children's Day" with

127 2016 Annual Report stay-at-home children in Wanzhou District Xinxiang School", and brought school supplies, clothes and snacks to the children; took part in relief activity for children in impoverished mountainous area organized by Chongqing Municipal Youth League

Committee, comforted poverty-stricken children, and donated school supplies; and has donated RMB 118,800 for Chongqing Youth Development Foundation.

7.10.6 Insist on humanistic management principle, create harmonious labor relationship

The Bank adhered to people oriented principle, regarded staff as most valuable wealth of the Bank, protected staff's legitimate interest, managed to created favorable growth environment for staff, took the initiative to create harmonious labor relationship, and realized joint growth of staff and enterprise.

I. The Bank improved training system, encourage staff to participate in various accreditation examinations, on-the-job training and continuing education, and reimbursed certain training expense. During the reporting period, the Bank has organized 103 sessions of on-the-job training involving 16,024 man-times in total.

II. The Bank established and perfected human resources management system, introduced human resources management basic system, staff recruitment management method, labor contract management method, labor dispatching management method, payroll management method, overtime management method, leave request management method and attendance management method, and has provided powerful system support for building harmonious labor relationship. Besides, the Bank strictly executed relevant laws and regulations including Labor Law and Contract Law,

128 2016 Annual Report seriously implemented various rules and regulations including national man-hour system, paid social insurance and housing fund in full, provided safe, healthy and sanitary work conditions and living environment for staff, and guaranteed staff's legitimate interests practically.

III. The Bank established and perfected internal wage distribution and payment system as well as normal wage growth mechanism, established minimum wage, adhered to equal pay for equal work and "payment as per post, labor and performance", and the Bank has never reduced wage or delayed wage payment, and guaranteed staff's salary and other welfare as required by national policies. The Bank also gave full play to trade union, improved staff's sense of belonging and identity, and launched relieving and heart-warming activities for needy staff, so as to present warmth of a collective to staff practically. Moreover, the Bank cared staff's physical and psychological health, organized physical examination on a regular basis, managed comprehensive welfare insurance, took part in staff mutual aid guarantee activities, intensified medical security and solved staff's cares at home. The Bank enriched staff's recreational activities, organized various recreational and sports activities seriously, advocated green and healthy lifestyle, and has strongly enhanced staff's cohesion and fighting capacity in the bank.

129 2016 Annual Report

8. Significant Events

8.1 Delivery of 2015 profit distribution program

The Bank held 2015 Annual Shareholder's General Meeting on April 28, 2016 to deliberate Proposal on 2015 Annual Profit Distribution of Chongqing Three Gorges

Bank Co., Ltd. According to 2015 Annual Shareholder's General Meeting, As of

December 31, 2015, distributive profit of the Bank amounted to RMB

1,908,371,217.40. The Bank issued 2 bonus shares for every 10 shares (rounded) with

3,059,933,582 shares held by the end of 2015 as the base, and has issued

611,986,719.00 (yuan) bonus shares in total; issued RMB 1.30 yuan (tax-inclusive) bonus in cash for every 10 shares, and has issued RMB 397,791,365.66 yuan cash bonus in total. After issuing bonus share and cash bonus, undistributed profit RMB

898,593,132.74 of the Bank was carried forward to subsequent years for distribution.

8.2 2016 annual profit distribution scheme

According to 2016 Annual Auditor's Report, As of the end of the reporting period, after-tax profit of the Bank amounted to RMB 1,984,769,331.86. In order to ensure that operational development is endurable currently and sustainable in the future, and can create stable earnings for shareholders continuously while allowing for return on investment of shareholders, the Bank has developed the 2016 annual profit distribution scheme as follows.

I. Statutory surplus reserve RMB 198,476,933.18 was accrued in the proportion

130 2016 Annual Report of 10% with after-tax profit RMB 1,984,769,331.86 in 2016 as the base.

II. In accordance with Withdrawal Management Methods for Bad Debts

Reserves of Financial Enterprises, balance of generic risk reserve shall be no less than

1.5% of ending balance of risk assets in principle. Therefore, the Bank accrued generic risk reserve RMB 643,545,968.88 additionally in 2016.

III. Distributive profit of the Bank in 2016 reached RMB 1,142,746,429.80; undistributed profit at the beginning of 2016 reached RMB 1,908,371,217.40, 2015 annual shareholders' cash dividends distributed in 2016 reached RMB 397,791,365.66, issued bonus shares reached RMB 611,986,719.00. As of December 31, 2016, total distributive profits of the Bank amounted to RMB 2,041,339,562.54.

IV. 2016 annual profit distribution plan of the Bank was: to issue RMB 1

(including individual income tax) in cash for every 10 shares with 4,406,304,385 shares in total at the end of reporting period as the base, and issue cash bonus RMB

440,630,438.50 in total. Meanwhile, the Bank issued 1 bonus share (rounded) for 10 shares, and has issued bonus share RMB 440,630,448.00. After issuing of cash bonus and stock dividends, the Bank's undistributed profit RMB 1,160,078,676.04 was carried forward to subsequent years for distribution.

8.3 Major litigation and arbitration matters

As of the end of the reporting period, the Bank was free from pending major litigation and arbitration cases in which the Bank was the defendant and Res litigiosa was over RMB 10 million.

131 2016 Annual Report

8.4 Increase or decrease registered capital, division and merger matters

During the reporting period, the Bank has increased registered capital by presenting bonus share and allotting shares for shareholders successively. By the end of reporting period, registered capital of Chongqing Three Gorges Bank has increased from RMB 3,059,933,582 at the beginning of the period to RMB 4,406,304,385.

8.5 Assets acquisition and consolidation by merger

None

8.6 Related transaction matters

8.6.1 Related corporate loan

Name of related parties December 31, 2016 December 31, 2015

Chongqing Lvzhu Real Estate Development Co., Ltd. - 9907.53 Chongqing Jiulongpo District Zetong Petty Loan Co., 6000.00 7200.00 Ltd. Chongqing Jinguan Automobile Manufacture Co., Ltd. 6000.00 6000.00 Amount 12000.00 23107.53

8.6.2 Related enterprise financing and investment

During the reporting period, the Bank issued two sums of financial products to

Hefei Science & Technology Technological Rural Commercial Bank Co., Ltd., the balance amounted to RMB 1.112 billion; a sum of trust product to Chongqing

International Trust Inc., the balance amounted to RMB 158.37 million; the Bank purchased two sums of financial products from Chongqing International Trust Inc. the 132 2016 Annual Report balance amounted to RMB 718.72 million; received 4 sums of trust beneficiary right from Chongqing International Trust Holdings, the balance amounted to RMB 640 million; and received 1 sum of trust beneficiary right from Chongqing

Chongqing-Fuling Expressway Co., Ltd., the balance amounted to RMB 240.5 million.

8.6.3 Related corporate lending

As of the end of the reporting period, the Bank has lent RMB 1.1 billion form affiliated enterprise Chongqing International Trust Inc.

8.6.4 Related enterprise security and letter of guarantee

None

8.6.5 Issuance of bank acceptance by affiliated enterprise

Name of related parties December 31, 2016 December 31, 2015

Zhejiang Jinggong Energy Technology Co., Ltd. 2500.00 1848.38 Amount 2500.00 1848.38

8.7 Significant security conditions

None

8.8 During the reporting period, no director, supervisor or senior management member was punished by supervision department in 2016.

None

133 2016 Annual Report

9. Financial Report

See annex for details.

134 2016 Annual Report

10. Inspection Documents Catalog

10.1 Accounting statement bearing signature and stamp of legal representative and financial administrator

10.2 Original auditor's report bearing stamp of accounting firm, signature and stamp of certified public accountant

135 2016 Annual Report

Appendix

Audit Report

XYZH/2017CQA10159

All shareholders of Chongqing Three Gorges Bank Co., Ltd.:

We have audited the accompanying financial statements of Chongqing Three Gorges

Bank Co., Ltd. (hereinafter referred to as “Chongqing Three Gorges Bank”), which comprise the balance sheet on December 31, 2016, and 2016 income statements, cash flow statements, statement of change in stockholder equity and the notes to the financial statements.

I. Responsibility of Management

Preparation and fair presentation of financial statements is the responsibility of management of Chongqing Three Gorges Bank, and this responsibility includes: (1) preparation and fair presentation of these financial statements in accordance with the requirements of Accounting Standards for Business Enterprises; (2) designing, implementing and maintaining internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

II. Responsibility of the Certified Public Accountants

Our responsibility is to express an opinion on these financial statements based on our 136 2016 Annual Report

audit. We conducted our audit in accordance with PRC Independent Standards on Audit for

Certified Accountants Those standards require that we comply with ethical requirements of certified accountants, and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

Our audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimation made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

III. Audit Comments

In our opinion, the financial statements present fairly, in all material respects, the financial position of Chongqing Three Gorges Bank on December 31, 2016, and its financial performance and cash flows for the year 2016 in accordance with the requirements of Accounting Standards for Business Enterprises.

137 2016 Annual Report

ShineWing International Accounting PRC Certified Public Accountant

Firm (special general partnership)

PRC Certified Public Accountant

Beijing, China March 25, 2017

138 2016 Annual Report

Balance Sheet Compiled by: Chongqing Three Gorges Bank Co., Ltd. Unit: RMB Asset Notes December 31, 2016 December 31, 2015 Asset Cash and deposits with central bank VII. 1 25,676,786,609.79 20,895,269,938.31 Deposits with banks and other financial institutions VII. 2 5,288,233,482.27 5,436,755,786.18 Precious metal Lending fund VII. 3 1,641,622,000.00 2,500,000,000.00 Financial assets are measured at fair value through current VII. 4 925,515,900.00 344,893,070.00 profit and loss Derivative financial assets Redemptory monetary capital for sale VII. 5 15,288,772,833.22 16,455,698,322.26 Interests receivable VII. 6 950,261,244.80 662,775,800.78 Loans and advance payments VII. 7 37,477,748,560.21 31,526,571,218.76 Available-for-sale financial assets VII. 8 27,942,658,619.56 13,006,713,637.56 Held-to-maturity investment VII. 9 12,437,042,862.56 8,124,686,316.86 Investments classified as receivables VII. 10 51,962,745,219.21 31,994,361,684.67 Long-term equity investment Investment property Fixed assets VII. 11 398,969,131.61 430,188,603.74 Construction in process VII. 12 151,750,288.65 Intangible assets VII. 13 74,529,343.39 99,031,388.92 Goodwill Deferred income tax assets VII. 14 403,685,773.76 284,732,440.41 OTHER ASSETS VII. 15 883,318,735.80 706,346,596.54

Total of assets 181,503,640,604.83 132,468,024,804.99 Liabilities and shareholders' equity Notes December 31, 2016 December 31, 2015 2 Liabilities Borrowing from the central bank VII. 17 500,000,000.00 700,000,000.00 Deposits from banks and other financial institutions VII. 18 14,619,981,461.54 8,838,293,128.55 Loans from other banks and other financial institutions VII. 19 77,657,327.66 1,107,144,400.00 Financial liabilities measured at fair value and whose change is included in current profit and loss Derivative financial liabilities Financial assets sold for repurchase VII. 20 18,178,661,300.69 11,955,822,528.54 Deposits from customers VII. 21 122,163,872,186.83 93,577,689,747.23 Payroll payable VII. 22 316,034,584.81 231,936,302.38 Tax payable VII. 23 322,107,611.64 89,373,285.66 Interests payable VII. 24 847,264,596.34 679,801,346.12 Estimated liabilities Bonds payable VII. 25 11,628,102,295.19 5,284,154,929.27 Deferred income tax liabilities 38,797,192.50 118,416,143.16 Other liabilities VII. 26 548,528,655.27 1,024,753,028.83

Total of liabilities 169,241,007,212.47 123,607,384,839.74 Shareholders' equity: Capital Stock VII. 27 4,406,304,385.00 3,059,933,582.00 Minus: treasury stock Capital reserve VII. 28 2,969,026,526.26 1,500,258,358.26 Other comprehensive income VII. 29 -183,858,216.62 204,278,574.47 Including: translation reserve Surplus reserve VII. 30 710,089,201.99 511,612,268.81 Generic risk reserve VII. 31 2,319,731,933.19 1,676,185,964.31 Undistributed profits VII. 32 2,041,339,562.54 1,908,371,217.40 Total shareholders' equity attributable to parent company 12,262,633,392.36 8,860,639,965.25 Minority shareholders' equity Total shareholders' equity 12,262,633,392.36 8,860,639,965.25 Total of liabilities and shareholders' equity 181,503,640,604.83 132,468,024,804.99

Legal representative & President: Financial administrator:

139 2016 Annual Report

Income Statement Compiled by: Chongqing Three Gorges Bank Co., Ltd. Unit: RMB Notes Year 2016 Year 2015 I. Total operating revenue 4,263,464,202.44 3,551,916,567.26 Net interest income VII. 33 3,825,678,165.24 3,188,286,116.78 Interest income VII. 33 7,601,693,158.22 6,424,923,248.72 Interest expenditure VII. 33 3,776,014,992.98 3,236,637,131.94 Handling charges and commission net income VII. 34 378,409,396.82 200,738,505.23 Handling charges and commission income VII. 34 436,659,604.62 253,362,374.13 Handling charges and commission fee VII. 34 58,250,207.80 52,623,868.90 Investment income VII. 35 59,280,906.60 135,016,573.48 Including: income from investment on associate and joint venture Loss and profit from fair value change VII. 36 -11,768,570.00 14,523,494.00 Exchange gain VII. 37 10,624,827.50 12,099,133.84 Other business income VII. 38 1,239,476.28 1,252,743.93 II. Operating expenditure 1,669,010,004.11 1,880,393,798.03 Tax and surcharges VII. 39 166,939,556.32 280,875,551.28 Operation and administrative expense VII. 40 1,247,525,027.95 1,133,116,371.28 Loss from asset devaluation VII. 41 252,195,542.24 464,120,358.18 Other business cost VII. 38 2,349,877.60 2,281,517.29 III. Operating profits 2,594,454,198.33 1,671,522,769.23 Plus: non-business income VII. 42 16,879,984.37 13,940,460.12 Less: non-business expenditure VII. 42 6,247,266.22 2,525,991.33 IV. Total Profit 2,605,086,916.48 1,682,937,238.02 Less: income tax expense VII. 43 620,317,584.62 414,893,874.27 V. Net Profits 1,984,769,331.86 1,268,043,363.75 Net profits attributable to parent company's owners 1,984,769,331.86 1,268,043,363.75 Minority shareholders’ profit and loss VI. Earning per share (I) Basic earning per share 0.54 0.43 (II) Diluted earning per share 0.54 0.43 VII. Net amount of other comprehensive income after tax VII. 44 -388,136,791.09 179,510,979.81 Net amount of other comprehensive income after tax attributable to parent company -388,136,791.09 179,510,979.81 (I) Other comprehensive income that cannot be reclassified into profit and loss in future 1. Changes in net liabilities or net assets from re-measuring defined benefit plans 2. Share in other comprehensive income not reclassified into profit and loss in the invested organization in equity method 3. Others (II) Other comprehensive income that will be reclassified into profit and loss in future -388,136,791.09 179,510,979.81 1. Share in other comprehensive income reclassified into profit and loss in the invested organization by the equity method 2. Loss and profit from changes in fair value of available-for-sale financial assets -388,136,791.09 179,510,979.81 3. The held-to-maturity investment reclassified into loss and profit from available-for-sale financial assets 4. Effective part of the cash flow hedging gains and losses 5. Translation reserve of foreign currency financial statement 6. Others Net amount of other comprehensive income after tax attributable to minority shareholders VIII. Total comprehensive income 1,596,632,540.77 1,447,554,343.56 Comprehensive income attributable to parent company's owners 1,596,632,540.77 1,447,554,343.56 Comprehensive income attributable to minority shareholders

Legal representative & President: Financial administrator:

140 2016 Annual Report

Cashflow Statement Compiled by: Chongqing Three Gorges Bank Co., Ltd. Unit: RMB Notes Year 2016 Year 2015 I. Cash flow from operating activities: Net increase of client deposit and deposit in other banks 34,367,870,772.59 28,479,081,019.95 Net increase of borrowing from the central bank -200,000,000.00 -43,515,448.70 Net increase of loans from other financial institutions -1,029,487,072.34 1,055,132,900.00 Net increase in capital sold under repurchase agreements 6,222,838,772.15 -3,182，,35,082.37 Cash paid for interest, handling charge and commission 7,542,773,847.40 6,736,679,360.77 Cash received relating to other operating activities 117,850,906.52 14,662,081.65 Subtotal of cash inflows from operating activities 47,021,847,226.32 33,059,724,831.30 Net increase of client loans and advance payments 6,039,454,923.73 5,569,797,206.94 Net increase of deposits with the central bank and other banks 6,373,571,736.68 -260,659,460.59 Net increase in lending funds 500,000,000.00 Net increase in capital held under repurchase agreements -1,527,759,315.78 -8,359,324,089.85 Cash paid for interest, handling charge and commission 3,313,697,914.64 2,913,845,359.39 Paid to employees and pay cash for employees 743,127,687.17 720,816,322.28 All taxes and fees paid 998,984,875.77 789,776,793.80 Cash paid relating to other operating activities 356,823,990.56 303,607,901.29 Subtotal of cash outflows from operating activities 16,797,901,812.77 1,677,860,033.26 Net cash flow provided by operating activities VII. 46 30,223,945,413.55 31,381,864,798.04 II. Cash flow from financing activities: Cash received from disinvestment 95,494,330,202.93 46,954,329,115.00 Cash received from obtaining investment income 59,280,906.60 135,016,573.48 Net cash received from the disposal of fixed assets, intangible assets and other long term 17,527,451.34 961,555.07 assets Cash received relating to other investment activities Subtotal of cash inflows from investment activities 95,571,138,560.87 47,090,307,243.55 Cash paid for investment 135,948,519,330.50 65,225,959,110.47 Cash paid for purchase and construction of fixed assets, intangible assets and other long 377,799,455.08 454,634,439.59 term assets Net cash obtained from the payment by the subsidiaries and other business entities Cash paid relating to other investment activities Subtotal of cash outflows from investment activities 136,326,318,785.58 65,680,593,550.06 Net cash flow from investment activities -40,755,180,224.71 -18,590,286,306.51 III. Cash flow from financing activities: Cash received from absorbing investment 2,203,152,252.00 2,206,396,879.26 Including: Cash received by subsidiaries from absorbing investment Cash received from bond issue 8,797,953,330.00 1,395,439,709.72 Cash received relating to other financing activities Subtotal of cash inflows from financing activities 11,001,105,582.00 3,601,836,588.98 Cash paid for debt repayment 2,500,000,000.00 Cash paid for dividend and profit distribution or interest payment 717,900,565.99 554,716,867.04 Including: dividend and profit paid by subsidiaries to minority shareholders Cash paid relating to other financing activities 3,600,000.00 Subtotal of cash outflows from financing activities 3,217,900,565.99 558,316,867.04 Net cash flow from financing activities 7,783,205,016.01 3,043,519,721.94 IV. Effect of exchange rate fluctuation on cash and cash equivalent 9,908,252.78 6,055,195.88 V. Net increase in cash and cash equivalents -2,738,121,542.37 15,841,153,409.35 Plus: Balance of beginning cash and cash equivalents 30,960,767,552.79 15,119,614,143.44 VI. Balance of Closing Cash and Cash Equivalents VII. 45 28,222,646,010.42 30,960,767,552.79

Legal representative & President: Financial administrator:

141 2016 Annual Report

Statement of change in stockholder equity Compiled by: Chongqing Three Gorges Bank Co., Ltd. Amount (unit): RMB (ten thousand) yuan Year 2015 Other Total Minus: treasury Generic risk Undistributed Capital Stock Capital reserve comprehensive Surplus reserve shareholders' stock reserve profits income equity I. Ending balance of previous year 2,353,795,061.00 3,244,693.74 26,932,319.66 449,476,661.04 1,240,686,464.89 2,067,105,654.14 6,141,240,854.47 Plus: Change of accounting policies -2,164,725.00 -53,839,270.86 -56,003,995.86 Early error correction -64,668,728.61 -528,179,286.51 -592,848,015.12 II. Beginning balance of current year 2,353,795,061.00 3,244,693.74 24,767,594.66 384,807,932.43 1,240,686,464.89 1,485,087,096.77 5,492,388,843.49 III. Changes in amount of this year (decrease expressed 706,138,521.00 1,497,013,664.52 179,510,979.81 126,804,336.38 435,499,499.42 423,284,120.63 3,368,251,121.76 with "-") (I) Total comprehensive income 179,510,979.81 1,268,043,363.75 1,447,554,343.56 (II) Invested and decreased capital of owner 706,138,521.00 1,497,013,664.52 2,203,152,185.52 1. Capital invested by shareholder 706,138,521.00 1,497,013,664.52 2,203,152,185.52 2. Amount included in owner's equity by share payment 3. Others (III) Profit distribution 126,804,336.38 435,499,499.42 -844,759,243.12 -282,455,407.32 1. Withdrawal of surplus reserve 126,804,336.38 -126,804,336.38 2. Withdrawal of provision for general risk 435,499,499.42 -435,499,499.42 3. Distribution to shareholder -282,455,407.32 -282,455,407.32 4. Others (IV) Internal carry-over of owner's equity 1. Capital reserve transfer to share capital 2. Surplus reserve transfer to share capital 3. Supplement to loss of surplus reserve 4. Deficit coverage of provision for general risk 5. Others IV. Ending balance of the current year 3,059,933,582.00 1,500,258,358.26 204,278,574.47 511,612,268.81 1,676,185,964.31 1,908,371,217.40 8,860,639,965.25

Legal representative & President: Financial administrator:

142 2016 Annual Report

Statement of change in stockholder equity Compiled by: Chongqing Three Gorges Bank Co., Ltd. Amount (unit): RMB (ten thousand) yuan Year 2016 Other Total Minus: treasury Generic risk Undistributed Capital Stock Capital reserve comprehensive Surplus reserve shareholders' stock reserve profits income equity I. Ending balance of previous year 3,059,933,582.00 1,500,258,358.26 204,278,574.47 511,612,268.81 1,676,185,964.31 1,908,371,217.40 8,860,639,965.25 Plus: Change of accounting policies Early error correction II. Beginning balance of current year 3,059,933,582.00 1,500,258,358.26 204,278,574.47 511,612,268.81 1,676,185,964.31 1,908,371,217.40 8,860,639,965.25 III. Changes in amount of this year (decrease expressed 1,346,370,803.00 1,468,768,168.00 -388,136,791.09 198,476,933.18 643,545,968.88 132,968,345.14 3,401,993,427.11 with "-") (I) Total comprehensive income -388,136,791.09 1,984,769,331.86 1,596,632,540.77 (II) Invested and decreased capital of owner 734,384,084.00 1,468,768,168.00 2,203,152,252.00 1. Capital invested by shareholder 734,384,084.00 1,468,768,168.00 2,203,152,252.00 2. Amount included in owner's equity by share payment 3. Others (III) Profit distribution 198,476,933.18 643,545,968.88 -1,239,814,267.72 -397,791,365.66 1. Withdrawal of surplus reserve 198,476,933.18 -198,476,933.18 2. Withdrawal of provision for general risk 643,545,968.88 -643,545,968.88 3. Distribution to shareholder -397,791,365.66 -397,791,365.66 4. Others (IV) Internal carry-over of owner's equity 611,986,719.00 -611,986,719.00 1. Capital reserve transfer to share capital 2. Surplus reserve transfer to share capital 3. Supplement to loss of surplus reserve 4. Deficit coverage of provision for general risk 5. Others 611,986,719.00 611,986,719.00 IV. Ending balance of the current year 4,406,304,385.00 2,969,026,526.26 -183,858,216.62 710,089,201.99 2,319,731,933.19 2,041,339,562.54 12,262,633,392.36

Legal representative & President: Financial administrator:

143 2016 Annual Report

Chongqing Three Gorges Bank Co., Ltd. 2016 Notes to Financial Statements

I. Bank profile

Chongqing Three Gorges Bank Co., Ltd. (hereinafter referred to as "Three Gorges Bank" or “the Bank”) was established on February 16, 1998, it held No.B0205H250000001

Financial License issued by Chongqing Supervision Bureau of China Banking Regulatory

Commission, No.915001017116939742 Business License for Legal Person issued by

Chongqing Administration for Industry&Commerce Wanzhou District Branch Office; legal representative: Ding Shilu; Residence: No.3, Baiyan Road, Wanzhou District, Chongqing; registered capital: RMB 4,406,304,385.00. Main business scope of the Bank: absorption of public deposit, issue of short-term, medium-term and long-term loan; handling of domestic settlement; handling of bill discounting; issue of financial bond; issue, cashing and underwriting of government bond as agent; working on inter-bank borrowing; foreign exchange proceeds depositing, foreign exchange loan, international settlement, inter-bank foreign currency lending, foreign exchange bill acceptance and discounting, foreign exchange borrowing, foreign exchange guarantee, proprietary and agency foreign exchange trading (proprietary foreign exchange trading is limited to handling of spot exchange deals), credit standing investigation, consultation and attestation; offering for security; agency collection and payment as well as agency insurance business; provision of safe deposit box service; other business approved by banking regulatory authorities and national foreign currency authority (above scope is subject to laws and regulations; business required to be approved shall not be operated before being approved).

144 2016 Annual Report

Chongqing Three Gorges Bank Co., Ltd. grew out of Wanzhou Commercial Bank Co., Ltd., which was renamed as "Chongqing Three Gorges Bank Co., Ltd." upon approval by YJF

[2008] No.71 Document Reply on Renaming of Wanzhou Commercial Bank by CBRC issued by China Banking Regulatory Commission on February 4, 2008. Its share capital was RMB 2,011,790,650.00 during reorganization.

In April 2013, in accordance with resolution made on 2012 annual Shareholder's General

Meeting, the Bank converted 342,004,411.00 shares in total by converting 1.7 shares for every 10 shares based upon capital reserve, and revised registered capital to RMB

2,353,795,061.00,for which DAXIN Certified Public Accountants LLP (Special Ordinary

Partnership) (Chongqing Branch) issued DXYYZ [2014] No.00005 Capital Verification

Report.

In August 2015, in accordance with resolution made on extraordinary Shareholder's

General Meeting, the Bank increased 706,138,521.00 shares in total by allotting 3 shares for every 10 shares, and altered registered capital to be RMB 3,059,933,582.00. ShineWing

International Accounting Firm (Special Ordinary Partnership) (Chongqing Branch) has already issued No.XYZH/2015CQA10019 Capital Verification Report.

In April 2016, in accordance with resolution made on 2015 annual Shareholder's General

Meeting, the Bank increased undistributed profit-transferred-to share capital RMB

611,986,719.00 in total by issuing 2 shares for every 10 shares, and altered registered capital to be RMB 3,671,920,301.00. ShineWing International Accounting Firm (Special

Ordinary Partnership) (Chongqing Branch) has already issued XYZH/2016CQA10354

Capital Verification Report.

145 2016 Annual Report

In December 2016, in accordance with resolution made on 2016 2nd Extraordinary

Shareholder's General Meeting, the Bank increased 734,384,084.00 shares by allotting 2 shares for every 10 shares, and altered registered capital to be RMB 4,406,304,385.00.

ShineWing International Accounting Firm (Special Ordinary Partnership) (Chongqing

Branch) has already issued XYZH/2016CQA10402 Capital Verification Report.

As at December 31, 2016, the Bank operted 82 business institutions in Chongqing, including 1 branch in Wanzhou, 80 sub-branches being granted for opening, and 1 sub-branch being approved for preparation yet without opening grant .

II. Basis for preparation of financial statements

1. Preparation basis

The financial statements are prepared according to Accounting Standards for Business

Enterprises - Basic Standards, various specific accounting standards, Application Guide of

Accounting Standards for Business Enterprises, Explanation on Accounting Standards for

Business Enterprises and other provisions issued by the Ministry of Finance (hereinafter the "accounting standards for business enterprises").

2. Going concern

The financial statements are prepared on going concern.

The Bank prepares the financial statements based on going concern on a reasonable basis provided with recent continuous profitable operation and financial resource support.

III. Statement of compliance by the accounting

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standards for business enterprises

The financial statements conform to the requirements of Accounting Standards for

Business Enterprises, and present fairly, in all material respects, its financial position of the

Bank on December 31, 2016, and its operation results and cash flows for the year 2016.

IV. Important accounting policies and accounting estimation

1. Accounting period

The Bank adpots calendar year as its accounting year, i.e. from January 1 to December 31.

2. Operating cycle

Operating cycle of the Bank is 12 months.

3. Standard currency

The Standard currency of the Bank is RMB. RMB is the currency under the main economic environment where the Bank's operation is conducted, and the Bank uses RMB as its book-keeping currency. The currency adopted by the Bank in preparation of financial statements is RMB.

4. Accrual basis and pricing principle

The accounting of the Bank is based on the accrual system, except that financial assets/liabilities held for trading, financial assets/liabilities and available-for-sale financial assets at fair value whose variation are counted for profit and loss, other items are priced in light of historical cost or amortized cost. If any impairment incurs, provisions for corresponding impairment is made according to regulations.

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5. Cash and cash equivalents

Cash of the Bank refers to cash on hand and cash 9with central bank available for payment; cash equivalents refer to the short-term, low risk but highly liquid investments that are held by the Bank and readily convertible to known amounts of cash. Holding peirod for short-term bond is 3 months after acquisition.

6. Conversion of foreign currencies

Foreign currencies conversion are, upon initial recognition, translated into the standard currency at the spot rates on transactions dates.

At the balance sheet date, monetary assets/liabilities denominated in foreign currencies are converted into the functional currency .

The balance of exchange arising from the difference between the spot exchange rate at the balance sheet date and that upon initial recognition, or spot exchange rate at the previous balance sheet date are included in current profit and loss statement, except the following circumstances: (1) balance of exchange arising from hedging instruments that are used to avoid foreign exchange risks will be treated by the accounting treatment to hedging; (2) balance of exchange arising from changes in book balance other than the amortized cost of available-for-sale monetary items is recognized as other comprehensive income.

Foreign exchange gain or loss includes exchange difference earnings in connection to proprietary foreign exchange business, profit and loss on exchange in connection with the translation of foreign currency denominated monetary assets and liabilities, realized profit and loss arising from foreign exchange derivatives, and unrealized gains and losses on foreign exchange derivatives, and changes in fair value recognized in profit or loss.

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The foreign currency non-monetary items measured at fair value are translated at the spot exchange rate on the adoption date of fair value, the exchange difference is included in current profit and loss or other comprehensive income.

7. Financial assets

(1) Classification of financial assets

Upon initial recognition and as per investment purpose as well as economic nature, financial assets of the Bank are classified into: ① financial assets measured at fair value whose change is included in current profit and loss; ② held-to-maturity investment; ③ loan and accounts receivable, and ④ available-for-sale financial assets.

1 Financial assets measured at fair value through current profit and loss

Financial assets measured at fair value through current profit and loss include trading financial assets and financial assets assigned to be measured at fair value through current profit and loss upon initial recognition.

A financial asset is classified as held for trading if it is: a) acquired or incurred principally for the purpose of selling or repurchasing it in the near future; b) part of a portfolio of identifiable financial instruments that are managed collectively with evidence of a recent actual pattern of short-term arbitrage; or c) a derivative (except for a derivative that is a designated as effective hedging instrument, or a financial guarantee contract, or a derivative without quoted price in the prevailing market nor reliable mearsurement of fiar value.

Financial assets are designated at fair value through the profit or loss upon initial recognition if: a) such designation eliminates or significantly reduces a measurement or

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recognition inconsistency that would otherwise arise concerning relevant gain or loss due to different measurement basis; or b) the financial asset forms part of a group of financial assets, which is managed, evaluated and reported to key management by report of risk management or investment strategy ; or c) it incorporates one or more hybrid instrument of hybrid derivatives, unless the embedded derivative(s) does not significantly modify the cash flows that otherwise would be required by the contract; or it is clear that the embedded derivative(s) should not be separated from relevant hybrid instruments.

② Held-to-maturity investment

Held-to-maturity investments refer to financial assets with fixed or determinable payments and fixed maturity that the Bank has the intention and ability to hold to maturity, and not classified by the Bank As available-for-sale upon initial recognition whose variation in fair value are accounted in profit-loss statement; and non-derivative financial assets not classified as loans and accounts receivable.

If the Bank has sold or reclassified held-to-maturity investment before maturity ( with significant amount relative to the total held-to-maturity portfolio), the rest of such investment of the Bank shall be reclassified as available-for-sale financial assets and it shall not be classified as held-to-maturity investment in current accounting year and the subsequent two accounting years, unless: a) the date of sale or re-classification is close to the maturity date or redemption date of the said investment (e.g., within 3 months prior to maturity) and any change of the market interest rate will produce little impact on its fair value b) after almost all initial principal of the investment has been reimbursed as contractual timing or repaid ahead of schdule, the remaining part of the investment will be

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sold or re-classified; c) the sale or re-classification is caused by any independent event out of reporting entitiy’s control and estimation.

③ Loans and accounts receivable

Loans and account receivables refer to the non-derivative financial assets without quoted market price in open market but with fixed or determinable recovery amount; besides, the

Bank has no intention to sell promptly or in short term. These financial assets are measured at amortized cost (net of depreciation reserves) applying effective rates to them , and a gain or loss is included in current profit and loss when the financial asset or liability is derecognized, impaired and amortized.

④ Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets designated for sale upon initial recognition, and financial assets not classified into the three categories above.

(2) Initial recognition of financial assets

The Bank recognizes a financial asset as it becomes one party of financial instrument contract. The financial assets shall be measured at fair value upon initial recognition. For financial assets measured at fair value through current year profit and loss, relevant transaction costs are directly included in current profit and loss; for other types of financial assets, relevant transaction costs are included in initial recognition amount.

(3) Subsequent measurement of financial assets

① Financial assets measured at fair value through current profit and loss

Fair value is applied by the Bank to subsequent measurement of such financial assets, change in fair value is included in current profit and loss, and holding period return is

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included in interest income.

② Held-to-maturity investment

These financial assets are measured at amortized cost by the Bank applying effective interest rates; interest income calculated and verified in and a gain or loss is included in effective interest method is included in interest income, gain or loss, produced as the financial asset or liability is derecognized, impaired and amortized, is included in current profits and losses statement.

③ Loans and accounts receivable

These financial assets are measured at amortized cost by the Bank in effective interest method; interest income calculated and verified in and a gain or loss is included in effective interest method is included in interest income, gain or loss, produced as the financial asset or liability is derecognized, impaired and amortized, is included in current profits and losses statement.

④ Available-for-sale financial assets

The equity instrument investment without quotation in open market ,whose fair value cannot be reliably measured, and relating derivative financial assets or derivative financial liabilities whose settlement through its delivery shall be measured at costs during subsequent measurement; those with quotation on active market or those without quotation on active market but whose fair value can be reliably measured shall be measured at fair value, changes in fair value shall be included in other comprehensive income. Such financial assets are measured subsequently at fair value, and changes in fair value of financial assets are recognized as other comprehensive income, which will be transferred

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out and recorded through current profit and loss when such financial assets are derecognized, except that impairment losses and exchange difference of foreign currency monetary financial assets relating with the amortized cost are recognized through current profit and loss. Available-for-sale debt instrument investments are included in current interest income at interest calculated in effective interest method. Cash dividends in connection with available-for-sale equity instrument investments from the investee are included in current profit and loss statement as investment income.

(4) Recognition basis and measurement methods for transfer of financial assets

Where a financial asset satisfies any of the following conditions, it will be derecognized:

① where the contractual rights for collecting cash flows of the said financial asset are terminated; ② where right to collect cash flows has been transferred and nearly all of the risks and returns in connection with the ownership of the financial asset have been transfered to the a third party other than financial asset issuer; or where the financial asset has been transferred and the Bank has given up control over the financial asset, though it does not transfer or retain almost all of the risks and returns in connection with the ownership of the financial asset.

(5) Impairment of financial assets

At the balance sheet date, the Bank checks if there is exsiting evidence indicating impairment. Other financial assets measured at fair value through current profit and loss statement are exempt from impaiement testing. If there is edvidence in placing suggesting imairment, and the bank acknowlodges , impairment reserve are accrued.

Objective evidence that a financial asset is impaired is evidence that, arising from one or

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more events that occurred after the initial recognition of the asset, the estimated future cash flows of the financial asset, which can be reliably measured, have been affected. Objective evidence includes the following evidence: significant financial difficulty of the debtor, a breach of contract, failure in paying principal money and interest as agreed in contract or timely, probable bankruptcy or other financial restructuring, and recognized reduction and accountability of estimated future cash flow of financial assets indicated by observable data.

①Financial assets measured at amortized cost.

The Bank evaluates if existing evidence in place for impairment while reviwing individual loan with significant amount as well as single held-to-maturity investment. If there such evidence exists, the Bank recognizes the difference between book value of the financial asset and present value of expected future cash flow as impairment loss. In calculating present value of estimated future cash flow, estimated future cash flow has allowed for value of relevant guaranties rather than future credit loss not incurred yet; discount rate shall be original effective interest rate of the financial asset. Original effective interest rate refers to effective interest rate applied in initial recognition. For floating rate loans, receivables and held-to-maturity investments, current effective interest rate specified in contract shall be applied.

The Bank recognizes objective evidence of impairment by performing individual evaluation or combination evaluation to individually non-significant financial asset.

Combination evaluation shall be performed to individual financial asset subject to individual evaluation and for which no objective evidence of impairment is detected,

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whether significant or not, along with financial assets with similar credit risk features to determine impairment loss. Combination evaluation shall not be performed to financial assets subject to individual test and for which impairment loss is recognized.

In inspecting impairment of financial asset portfolio in the mode of combination assessment, estimation of future cash flow shall be determined by referring to historical loss empirical data of financial assets with similar credit risk features, including essential adjustment and revision of historical empirical data based upon current conditions.

Where financial assets are measured at amortized cost, their book values shall be written down to the present value of estimated future cash flow. The written-down amount shall be recognized as provision for asset impairment and included as current loss. If any evidence indicates the financial assets value has been recovered, and relating to events occurring after recognizing original impairment loss, the originally confirmed impairment loss shall be reverted, and included in the current profit and loss. The reversal shall not result in a book value that exceeds the amortized cost at the date the impairment is reversed had the impairment not been recognized.

In case that loans and receivables, or held-to-maturity investments cannot be recovered, the

Bank will write corresponding impairment reserves and charge off the financial asset after executing all necessary procedures and recognizing loss amount. Written-off but recovered amount of financial assets shall be included in current profit and loss against impairment reserve currently accrued.

②Available-for-sale financial assets

If there is existing evidence of impairment of available-for-sale financial assets,

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accumulated loss directly included in other comprehensive income shall be transferred out and included in current profit and loss. The amount of the cumulative loss that is recognized is the balance of initial acquisition cost deducted by (net of any principal repayment and amortization) current fair value and any impairment loss on that asset previously included in current profit and loss.

If, after an impairment has been recognized on an available-for-sale debt instrument investment, the fair value of the debt instrument increases in a subsequent accounting period and the increase can be objectively related to an event occurring after the impairment loss is recognized, the impairment loss is reversed through profit and loss.

For available-for-sale equity instruments, a significant or other-than-temporary decline in fair value below cost is considered to be objective evidence of impairment. A decline in fair value is deemed to be significant or other-than-temporary its fair value is over 20%

(including 20%) of its initial cost of investment or lower than its initial cost of investment for more than half year (including 6 months). If impairment occurs to the equity instrument investments, the impairment losses that have been recognized in the consolidated income statement shall not be reversed though profit or loss.

For available-for-sale financial assets measured at cost, accrued impairment losses shall not be reversed.

8. Financial liabilities

(1) Classification of financial liabilities

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Upon initial recognition, financial liabilities of the Bank are classified into financial liabilities measured at fair value through current profit and loss as well as other financial liabilities based upon economic nature.

1 Financial liabilities measured at fair value and whose change is included in

current profit and loss

Financial liabilities measured at fair value through current profit and loss include financial liabilities held for trading and financial liabilities designated to be measured at fair value through current profit and loss.

② Other financial liabilities

Other financial liabilities refer to financial liabilities other than those classified as financial liabilities measured at fair value through current profit and loss.

Financial statements presentation for other financial liabilities is done by the Bank as per nature of business, including central bank loans, interbank borrowing funds, customer's deposits and accrued interest payable.

(2) Initial recognition of financial liabilities

The Bank recognizes a financial liability as it becomes one party of financial instrument contract. The financial liability shall be measured at fair value upon initial recognition. For financial liabilities measured at fair value through current profit and loss, relevant transaction costs are directly included in current profit and loss; for other financial liabilities, relevant transaction costs are included in initial recognition amount.

(3) Subsequent measurement of financial liabilities

① Financial liabilities are measured at fair value through current profit and loss

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Fair value is applied by the Bank to subsequent measurement of such financial liabilities, and changes are included in current profit and loss, and interest calculated according to the

Contract is included in interest expenses.

② Other financial liabilities

Other financial liabilities are measured at amortized cost by the Bank, and interest calculated and verified in effective interest method is included in interest expenses, gain or loss, produced as the financial liability is derecognized or amortized, is included in current profit and loss.

(4) Derecognizing of financial liabilities

For obligation of a financial liability has fulfilled, released or expired, the financial liability shall be derecognized. In case that current financial liability is substituted with another financial liability based upon substantially completely different clauses under the same creditor , or current liability clauses are nearly all modified substantially, then the substitution or modification shall be handled as derecognition of original liability and recognition of new liability, the balance shall be included in current profit and loss.

9. Determination for fair value of financial assets and financial liabilities

The Bank measures fair value of relevant financial assets and financial liabilities at price in leading market; for those without leading market, at price in the most advantageous market, and by adopting applicable valuation technique at that time supported by sufficient available data and other information. The Bank classifies inputs used to measure fair value of the financial assets and financial liabilities into three levels. Level 1: unadjusted quoted prices available in an active market for identical assets or liabilities; Level 2: inputs other

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than quoted prices included in Level 1 that are observable for relevant assets or liabilities, either directly or indirectly; and Level 3: inputs not based on observable market data for relevant assets or liabilities. The Bank gives priority in use of Level 1 inputs and then

Level 3 inputs. The level of fair value measurements depends on minimum level of inputs of great significance to overall fair value measurement.

10. Redemptory assets for sale and assets sold for repurchase

In case that the Bank sells assets based upon agreement and promises to buy back at certain date in the future at fixed amount or sales amount + fixed return, and sold assets are recognized in balance sheet. Proceeds from sale of assets are presented as "financial assets sold for repurchase" in balance sheet.

In case that the Bank purchases assets based upon agreement and agrees to resale at certain date in the future at fixed amount or purchase amount + fixed return, and sold assets are not recognized in balance sheet. Funds paid to purchase assets are presented as

"redemptory financial assets for sale" in balance sheet.

11. Fixed assets

Fixed assets of the Bank refer to non-monetary tangible assets held for operation, having been used for over one year and of higher unit value, including: building, machinery, equipment, transportation facilities, etc.

A fixed asset shall be recognized only if the proble economic benefits associated with the asset flow into the Bank and its cost can be measured reliably. Subsequent costs incurred are capitalised in the the fixed assets if they meet above capitalisation conditions.

Meanwhile the book value of the replaced part is derecognized. Those failing to meet

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above recognition conditions are included in current profit and loss when they are incurred.

Fixed assets of the Bank shall be measured at historical cost, which includes acquisition price, relevant taxes and dues, transportation fees, handling charges, installation cost and service charge of professionals attributable to bringing the assets into necesssary condiation and locations for their intended use . Fixed assets are presented in net value of provision for impairment and depreciation charged

Depreciation of fixed assets shall be recognized based upon expected useful life in straight-line-method and included in current profit and loss statement. The estimated useful life, estimated net salvage ratio and yearly depreciation rate of various kinds of fixed assets are as follows:

Estimated service Estimated net Category Yearly depreciation life period residual value rate 1 House buildings 20 years, 35 years 5% 4.75%, 2.71% Machinery and 2 5 years 5% 19.00% equipment Transport 3 8 years 5% 11.875% Equipment 4 Other devices 5 years 5% 19.00%

The Bank reviews the depriciation treatment at the year end and adjustments are taken if necessary. The Bank does not accrue depreciation for the fixed assets that have been fully depreciated but are still in use and the land that is separately measured and exempt from depriciation charge.

In disposing fixed assets, the proceeds are net of taxes and the difference from book value are included in income statement.

12. Construction in process

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The cost of construction-in-process shall be measured based on actual cost, which includes various project costs and other relevant expenses incurred during the construction period.

Construction-in-process is converted into fixed asset, intangible asset or long-term deferred absorbtion when it satisfies the condition for intended use. .

13. Intangible assets

The intangible assets refer to the identifiable non-monetary assets without physical existence owned or controlled by the Bank. It mainly includes the right to use land and the right to use softwares.

Intangible assets shall be recognized if the proble economic benefits associated with the asset flow into the Bank and its cost can be measured reliably. They are measured at historical costs. The purchased intangible assets shall be regarded as the actual costs according to the acquisiton price and other costs; actual costs of the intangible assets invested by the investor should be recognized according to the value as agreed by the investment contract or agreement. Where the value as agreed by the contract or agreement is not fairly presented, such recognition should be done at the fair value. Intangible assets acquired during business merger and of which fair value can be reliably measured shall be recognized as intangible assets separately, and the actual cost shall be recognized at fair value.

The Bank determines the length of useful life upon the tenor during which the intangible assets bring economic beneifits. The useful life of land equates to authorised period for use by term of assignment ; whilst economic life of softwares and others are determined on the

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shorter of expectation, contructual length to use, or legal requirement. Intangible assets of which term of realizing economic interests is unforeseeable shall be deemed as intangible assets with uncertain service life. Intangible assets with limited service life shall be amortized with the straight-line-method.

The Bank will review the service life and amortization method of intangible assets with limited service life each year, and make adjustment accordingly if necessary; and review service life of intangible assets with uncertain service life each year. In case that any evidence indicates that service life is limited, accounting treatment shall be in accordance with policies regarding above intangible assets with limited service life.

14. Long-term unamortized expense

Long-term unamortized expenses of the Bank refer to various expenses which have been incurred with but with over 1 year to amortise, mainly including rents and improvement expense incurred on leased fixed asset under operating lease.

Amortization period of long-term unamortized expenses shall be determined based upon contract period or benefit period, whichever is shorter, and the expenses shall be unamortized in average. If the long-term unamortized expense items do not benefit the future accounting period, amortized value of the item which has not been amortized shall be transferred to current profit and loss.

15. Asset impairment

Except for financial assets and debt-repaid assets, asset impairment of the Bank is determined with following methods:

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The Bank runs impairment test on the balance sheet date for the recoverbale amout.

Impairment tests on goodwill arising from business acquisition and intangible assets with uncertain service life carried out annualy. Indicators for impairment include: (1) market price of the asset currently declines in a ranger sharper that estimated decline due to time lapse or normal use. (2) economic, technical or legal environment in which the Bank operates and asset market currently change or will change significantly in near future, thus having adverse effects on assets. (3) interest rate in the market or return on investment in other markets has improved in the period, leading to sharp decline of recoverable amount of asset. (4) there is an evidence proving that the asset has been obsolesced or its entity has been damaged. (5) the asset has been or will be left unused, terminated or is to be disposed in advance. (6) there is an evidence proving that economic performance of the asset has been fallen below or will fall below estimated level. (7) Other evidences showing impairment of the asset.

The recoverable amount shall be the higher one of the net proceeds from disposal and the present value of future cash flow of the assets. Recoverable amount of an asset are measured individually. If the recoverable amount of a single asset is difficult to be estimated, the recoverable amount shall depend on asset portfolio collectively.

If the recoverable amount is lower than its book value, book value of the asset is reduced to its recoverable amount. That reduction is included in current profit and loss account, and impairment provisions are accrued simultaneously.

Asset impaiment treatment is irrevocable once accrued.

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16. Debt-repaid assets

Debt-repaid assets shall be recognized at fair value upon initial recognition, different between fair value and principal, recognized interest and impairment reserve of relevant loans shall be included in current profit and loss. On the balance sheet day, the debt-repaid assets shall be measured according to book value or net realizable value, whichever is lower. In case that book value exceeds net realizable value, the difference shall be included in current profit and loss, and falling price reserves of debt-repaid assets shall be accrued simultaneously.

17. Payroll

Payroll includes the remuneration in various forms and other relevant expenses given to the employees for their services or labor relation termination.

Payroll of the Bank includes short-term remuneration, post-employment benefit, dismission welfare and other long-term employee's emolument.

Short-term payroll mainly includes: staff salaries, bonus, welfare expense of employee, medical insurance premiums, maternity insurance premium, endowment insurance premium, employment injury insurance, housing accumulation fund, labor union expenditure and education expenses, actual short-term payroll is recognized as liability, and included in "operation and administrative expense".

Post-employment welfare mainly includes: basic endowment insurance, unemployment insurance, corporation pension plan, supplementary retirement benefits paid to specific personnel, is classified as defined contribution plan and defined benefit plan based upon

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risks and obligations undertaken by the Bank. Defined contribution plan refers to post-employment welfare plan under which the Bank will not assume further payment obligations after contributing fixed expenses to independent funds.

Where the Bank terminates the labor relationship with its employees before the expiry of labor contract or the Bank puts forward the suggestions on compensating the employees for their voluntary acceptance of downsizing encouraged by the Bank; when the Bank has formally formulated the plan to relieve the labor relationship (or put forward the suggestion on voluntary acceptance of downsizing) and will have it implemented, and the

Bank is unable to unilaterally withdraw the plan on termination of labor relationship or the downsizing suggestions, the estimated liabilities incurred due to the compensation for the termination of labor relationship with the employees will be recognized and included in the current profit and loss.

The internal retirement plan of employees shall be carried out based on the principle same as the dismission welfare. The Bank will include the salary and social insurance premium paid for early retired personnel during the period from stopping providing service to the normal retirement date into the current loss and profit (dimission welfare) if estimated liability recognition conditions are met.

Other long-term payroll refers to staff risk reserve accrued by the Bank but not issued to employees.

18. Contingent liabilities

For outstanding obligations assumed by the Bank due to pending litigation, reorganization,

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loss contract, etc., and the fulfillment of such obligations is likely to cause outflow of economic interests, and the amount can be reliably measured, such obligations shall be recognized as estimated liabilities. For future operating loss, estimated liabilities shall not be recognized. The initial measurement of estimated liabilities shall be conducted based on the optimum estimated amount required to perform relevant current obligations. Consider the relevant risks of contingencies, uncertainty and currency time value. For time value of money of great influence, best estimate shall be determined by discounting relevant future cash outflow. The Bank reviews book value of estimated liabilities at the balance sheet date and judges book value to reflect current best estimate.

19. Recognition of income and expense

(1) Interest income and expense

Interest income and expense are calculated in effective interest rate method and included in current profit and loss.

The effective interest method refers to the method used to calculate the amortized cost, interest income or premium or interest expense in each phase according to effective interest rate of financial assets or financial liability. The effective interest rate is the future cash flow of financial assets or financial liabilities during the expected period of existence or appropriate shorter period, discounted as the interest rate used by the current book value of the financial assets or financial liabilities. In determining effective interest rate, the Bank shall predict future cash flow based on all contract clauses regarding financial assets or financial liabilities in spite of future credit loss.

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(2) Income from service charges and commission

Income from service charges and commission of the Bank are recognized provided that relevant services have been provided and charged amount can be reasonably estimated.

The service charges and commission charged by providing services during a certain period are recognized on accrual basis during service period; other service charges and commissions are recognized when relevant services have been provided or completed.

20. Government grant

Governmental subsidy refers to the monetary assets acquired from government without consideration or non-monetary assets, not including the capital invested by government as the owner. Governmental subsidy is recognized when attached conditions of governmental subsidy are met and such subsidy can be received. Governmental subsidy is divided into governmental subsidy related to assets and governmental subsidy related to income.

Government grants as monetary assets shall be measured at the amount received or receivable. Governmental subsidy as non-monetary assets shall be measured at fair value; and the governmental subsidy with unavailable fair value shall be measured in nominal amount. Governmental subsidy measured in nominal amount shall be included in current profit and loss.

Government subsidy relating to assets shall be recognized as deferred income and distributed on the average through current profit and loss during service life of relevant assets. As for government grants relating to earnings, those used for compensating relevant costs and losses incurred by the Bank during following periods shall be recognized as

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deferred income, and included in current profit and loss during recognition of relevant expenses; government grants used for compensating relevant costs and losses incurred by the Bank shall be included in current profit and loss directly.

For recognized government subsidy to be returned, those with relevant deferred income balance, account balance of relevant deferred income shall be written down, and excess portion shall be included in current profit and loss; those without relevant deferred income shall be included in current profit and loss.

21. Income tax

The income tax of the Bank shall include current income tax and deferred income tax.

Transactions or events directly recognized in owner's equity, or income tax involving events shall be included in other comprehensive income and owner's equity, other income taxes are included in current profit and loss as income tax expense or profit.

(1) Current income tax

Current income tax is the expected tax payable defined based on the taxable income for the period and applicable tax rate, taxable income refers to the amount defined after any adjustment is made to current pre-tax accounting profit.

(2) Deferred tax assets and deferred tax liabilities

At the balance sheet date, the Bank analyzes tax base of asset and liability items (including items that are not recognized as assets or liabilities but have a tax base that can be determined according to tax laws), and recognizes deferred tax assets and deferred tax liabilities at applicable tax rate during estimated return period of temporary difference

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based upon temporary differences arising from the difference between the book value of an asset or liability and its tax base.

The Bank may obtain the taxable income to deduct the deductible temporary difference and recognize the deferred income tax assets generated from deductible temporary difference and deductible loss carried forward in previous years. For recognized deferred tax asset, when it's estimated that probably sufficient taxable profits will not be available in future periods to allow the benefit of the deferred tax asset to be utilized, the book value of the deferred tax asset is reduced. Any such reduction in amount is reversed when it becomes probable that sufficient taxable profits will be available.

22. Leasing

(1) The Bank records operating lease business as lessee

The rental payment of operating lease shall be included in the relevant asset costs or current profit and loss in straight-line method during each period of the lease term. Initial direct costs shall be included in current profit and loss. Contingent rental shall be included in current profit and loss when incurred.

(2) The Bank records operating lease business as lessor

The rental income of operating lease shall be recognized as current profit and loss in straight-line method during each period of the lease term. Direct initial costs in larger amount are capitalized when incurred and included into current profit and loss on the same basis of rental income recognition in stages; other direct initial costs in smaller amount are included in current profit and loss when incurred. Contingent rental shall be included in

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current profit and loss when incurred.

23. Commission operations

As the Bank is engaging in activities including entrust loan and agent financial service as trustee or agent financial service, for assets from commissioning activities and liabilities to pay the assets to customers, if the Bank is verified not to receive return on assets, nor assume loss on corresponding assets, and relevant liability compensates obligation or guarantee obligation, the asset and liability are not included into balance sheet of the Bank.

24. Contingent liabilities

A contingent liability is a possible obligation that arises from past events and whose existence will only be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group. It can also be a present obligation arising from past events that is not recognized because it is not probable that an outflow of economic resources will be required or the amount of obligation cannot be measured reliably.

A contingent liability is not recognized in balance sheet, but disclosed in contingencies and commitment issues in notes. An item is recognized as expected liability if it may cause outflow of economic interests, and the amount can be reliably measured as circumstance changes.

25. Important accounting judgment and estimation

Preparing financial statements requires the management to make judgments and estimations, which will have effects on reported amount of incomes, expenses, assets and

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liabilities as well as disclosure of contingent liabilities at balance sheet date. However, results attributable to uncertainty of these estimations may lead to major adjustment of book value of assets or liabilities to be affected in the future.

(1) The management has made following judgments which have significant impact on amount recognized in financial statements in implementing accounting policies of the

Bank:

Classification of financial assets: the management shall make major judgments in respect of financial assets classification, different classifications will affect accounting method and the Bank's financial situation.

(2) Critical assumptions in connection with the future and other key sources of estimating uncertainty at the balance sheet date which may lead to major adjustment of book value of assets and liabilities in the next accounting year:

① Impairment of loans, receivables and held-to-maturity investments: except for recognized impaired loans, receivables and held-to-maturity investments which are subject to individual impairment loss evaluation, the Bank evaluates impairment loss status of financial asset combinations on a regular basis. In case that no present value of future cash flow of loans, receivables and held-to-maturity investments is found to be less than book value, they are subject to impairment test in financial asset combinations with similar credit risk features. The Bank determines whether it is necessary to accrue loan impairment reserve by judging if there is any impairment sign indicating estimated decrease in present value of future cash flow among financial assets combination. Such signs include

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deterioration in the Borrower's ability to repay loan in the financial asset combination, or any unfavorable change in economic environment in which the Borrower is in leading to breach of contract by the Borrower of the financial asset combination. The Bank estimates impairment of financial assets with impairment signs based upon historical experience in loss of financial asset combination with similar credit features. For methods and assumptions used to estimate occurrence time and incurred amount of future cash flow, the

Bank will evaluate them on a regular basis to reduce difference between actual loss and estimated loss of loan impairment.

② Impairment of available-for-sale financial assets: the Bank judges whether an available-for-sale financial asset is impaired in accordance with Accounting Standards for

Business Enterprises No. 22 - Recognition and Measurement of Financial Instruments.

Impairments depends on judgment made by the management to a large extent. When making such a judgment, the Bank shall evaluate extent to which fair value of the investment is lower than cost and corresponding duration, financial situation and short-term business prospect of the invested object, including industrial status, technological change, credit rating, default rate, loss coverage rate and counterparty's risk.

③ Fair value of financial instruments: for financial instruments without active trading market, its fair value is recognized by adopting valuation technologies. Valuation technologies adopted by the Bank include discount cash flow method. Application of valuation technique requires the Bank to evaluate such factors as credit risk (including two trading parties), market interest rate variability and relevance. In case of any change in assumption made in terms of above factors, fair value evaluation of financial instruments

172 2016 Annual Report

will be affected. For equity instrument investment cannot be reliably measured in the method, the fair value is measured in cost method in accordance with Accounting

Standards for Business Enterprises No. 22 - Recognition and Measurement of Financial

Instruments.

④ Income tax: the Bank shall make major judgment while accruing income tax expense.

Uncertainty exists in final tax treatment of some transactions and matters during normal operation activities. By combining current tax laws as well as policies applied by governmental authority to the Bank in previous years, the Bank performs tax estimation to implementation of tax laws and uncertainty matters. During actual operations, tax treatment of these matters is finally determined by tax collection department. In case of any difference between final verification results and initial amount recorded of these tax matters, the difference may have effect on income tax expense and deferred income tax during above verification.

V. Main accounting policies, accounting estimation change and significant early error correction

(I) Change of accounting policy

Ministry of Finance issued No. 8 Explanation on Accounting Standards for Business

Enterprises at the end of 2015. The Bank adopts and retroactively adjusts the above explanation on standards.

In 2015 and before, the Bank included all guaranteed finance products issued to

173 2016 Annual Report

"investments classified as receivables - issuance of financial products" for accounting, guaranteed finance fund received to "deposits with banks" or "deposits from customers" for accounting; and non-guaranteed finance products off balance sheet for accounting. Income from guaranteed and non-guaranteed financial products are recognized on accrual basis during duration of financial products based upon estimated investment yield minus estimated yield payable to investors, and are included in "income from service charges and commission - income from administrative expense of financial services". Interest or service charge receivable but unreceived yet As of the accounting period is included in account of income receivable.

In 2016, in accordance with newly enacted No. 8 Explanation on Accounting Standards for

Business Enterprises, the Bank properly classified financial assets held to issue guarantee finance products in the classification principle for financial assets or financial liabilities specified in Recognition and Measurement Standard of Financial Instruments based upon holding purpose or intention, presence of active market quote, cash flow features of financial instrument, etc. The Bank refunded guaranteed finance products issued by recognizing them as income from service charge and commission charges at balance on profit and loss statement, and recognized interest income and interest expense based upon asset and liability end, respectively; for non-guaranteed financial products, income from administrative expense of financing for customers was still included in income from service charge and commission charges for accounting. By applying retroactive adjustment approach to change in the accounting policy, the Bank decreases total assets at end of 2015 by RMB 22,899,059.41, increases total liabilities by RMB 32,145,266.72, decreases total

174 2016 Annual Report

owner's equity by RMB 55,044,326.13, decreases net profit in 2015 by RMB

13,828,455.27, increases after-tax net amount of other comprehensive income by RMB

14,788,125.00; decreases total assets at beginning of 2015 by RMB 25,024,631.40, increases total liabilities by RMB 30,979,364.46, and decreases total owner's equity by

RMB 56,003,995.86.

(II) Change of accounting estimation

There is no change of accounting estimation during the reporting period.

(III) Major prior-period adjustment matters

The Bank officially launched listing work and proceeded to counseling period in the 4th quarter of 2016, preparatory work was proceeding orderly. In order to guarantee normativity of IPO enrollment period accounting and consistency of accounting policies, improve financial information quality declared for IPO, the Bank sorted out various accounting methods and accounting policies, and standardized and adjusted preliminary comparative statements. Including major adjustment matters:

1. Income from business service charge and service fee are recognized by stages during service provision instead of being recognized in one time upon receiving, the Bank increases total assets at end of 2015 by RMB 22,495,052.98, increases total liabilities by

RMB 696,467,728.86, decreases total owner's equity by RMB 673,972,675.88, decreases net profit in 2015 by RMB 328,997,285.24; increases total assets at beginning of 2015 by

RMB 2,461,967.84, increases total liabilities by RMB 347,437,358.48, and decreases total owner's equity by RMB 344,975,390.64.

175 2016 Annual Report

2. After replacing sales tax with value-added tax, the Bank converts sales tax into value-added tax for income from financial commodity investment business undue. The

Bank decreases total liabilities at end of 2015 by RMB 159,031,583.50, decreases total owner's equity by RMB 159,031,583.50, decreases net profit in 2015 by RMB

69,124,773.29; decreases total liabilities at beginning of 2015 by RMB 89,906,810.21, and decreases total owner's equity by RMB 89,906,810.21.

3. For payroll of the last year but paid in the next year and included in business and administrative expense of the next year, the Bank makes inter-period adjustment to it, and adjusts and compares financial statements. The Bank decreases total liabilities at end of

2015 by RMB 139,115,884.74, decreases total owner's equity by RMB 139,115,884.74, increases net profit in 2015 by RMB 6,584,418.78; decreases total liabilities at beginning of 2015 by RMB 145,700,303.52, and decreases total owner's equity by RMB

145,700,303.52.

4. The Bank rearranges and details accounting estimation in connection with accrual of assets impairment reserve, records various assets impairment reserves at end of 2015 by

RMB 260,191,592.22 (including: record loan impairment reserve of RMB 76,164,630.70, investment impairment reserve reclassified as receivables of RMB 172,026,961.52 and impairment reserve of available-for-sale financial assets of RMB 12,000,000.00), decreases total assets at end of 2015 by RMB 260,191,592.22, decreases total owner's equity by

RMB 260,191,592.22, decreases net profit in 2015 by RMB 87,222,953.40; decreases total assets at beginning of 2015 by RMB 172,968,638.82, and decreases total owner's equity by

RMB 172,968,638.82.

176 2016 Annual Report

5. The Bank recalculates current income tax and deferred income tax based upon total profits adjusted in each year and temporary differences caused by financial assets adjustment, it increases total assets at end of 2015 by RMB 123,892,200.43, decreases total liabilities by RMB 148,744,363.91, increases total owner's equity by RMB 272,636,564.34, increases net profit in 2015 by RMB 118,733,561.76; increases total assets at beginning of

2015 by RMB 61,894,808.61, decreases total liabilities by RMB 92,008,193.97, and increases total owner's equity by RMB 153,903,002.58.

(IV) Adjusted and unadjusted data are compared as follows due to the effects of above (I) to (III).

Unit: 10,000 yuan December 31, 2015/ (January-December 2015) Adjustment amount Including: Affected items Before 1. change 2. After adjustment Amount of accountin adjustment accountin g errors g policies Total of assets 13,262,974.41 -16,171.92 -2,289.91 -13,882.02 13,246,802.48 Total of liabilities 12,273,958.32 86,780.16 3,214.53 83,565.64 12,360,738.48 Total of owner's equity 989,016.08 -102,952.09 -5,504.43 -97,447.65 886,064.00 Net Profit 166,350.04 -39,545.70 -1,382.85 -38,162.85 126,804.34 Net amount of other 16,472.29 1,478.81 1,478.81 17,951.10 comprehensive income after tax

Continued January 1, 2015 Adjustment amount Including: 1. Affected items Before 2. After change of adjustment Amount accounting adjustment accounting errors policies Total of assets 10,089,157.60 -9,358.79 -2,502.46 -6,856.32 10,079,798.82 Total of liabilities 9,475,033.52 55,526.42 3,097.94 52,428.48 9,530,559.93 Total of owner's equity 614,124.09 -64,885.20 -5,600.40 -59,284.80 549,238.88

177 2016 Annual Report

VI. Tax Main taxes and tax rate applicable to the Bank are presented as follows:

Categories of taxes Tax base CESS

Corporate income tax Taxable income 25% Business tax Taxable trading receipt (see note 1) 5% Value added tax Taxable trading receipt (see note 2) 6%, 3% (see note 2) City maintenance and Turnover tax actually paid 5%, 7% construction tax Educational surtax Turnover tax actually paid 3% Local educational surtax Turnover tax actually paid 2%

Note 1: Taxable operating income includes: income from loan interest, income from transfer of financial commodity, income from service charges and commission as well as other operating income, excluding income from transactions with financial institutions.

Note 2: On March 23, 2016, Notice on Comprehensively Promoting Pilot for Replacing

Business Tax with Value-added Tax (CS (2016) No. 36) published by State Administration of Taxation of Ministry of Finance, specified that: from May 1, 2016, comprehensively promote pilot for replacing business tax with value-added tax all over the whole country, include finance industry in the pilot scope and replace the business tax with value-added tax.

On April 29, 2016, Notice on Financing Policies of Comprehensively Promoting Pilot for

Replacing Business Tax with Value-added Tax (CS (2016) No. 46) published by State

Administration of Taxation of Ministry of Finance, specified that pledge-style redemptory monetary capital for sale, policy-based financial bonds held were free from VAT as income from interest of inter-bank transactions.

On June 30, 2016, Supplementary Notice on VAT Policies for Inter-bank Transactions of

Financial Institutions (2016 No.70) Document published by State Administration of 178 2016 Annual Report

Taxation of Ministry of Finance, clearly provided that: due to banks, loans from banks, payment for banks, buying out type redemptory financial commodity for sale, financial bonds held and NCD are VAT-free; capital transactions with PBOC including purchase of central bank bills, currency swap and monetary mutual depositing with central bank are

VAT-free; transactions with affiliated banks as interest income from financial interbanking transactions are VAT-free.

On December 21, 2016, Notice on Defining Value-added Tax for Finance, Real Estate

Development and Educational Support Services (CS [2016] No.140) published by State

Administration of Taxation of Ministry of Finance, specified that "guaranteed earnings, remuneration, fund possession cost and compensation" in Point 1, Item (V), Article I of

Notes to Sale of Services, Intangible Assets and Real Estates refers to investment earnings of which matured principal can be withdrawn in full as clearly promised in the contract.

Above non-guaranteed earnings obtained during holding period (including due date) of financial commodities are not interest or income in interest nature, hence are free from

VAT. Article 3 of CS [2016] No.140 Document provides that: VAT shall be paid for interests receivable but not received arising within 90 days after expiry date for interest in accordance with current provisions; VAT shall not be paid for interests receivable but not received arising beyond 90 days after expiry date for interest until interests have been received. Interests receivable but not received arising beyond 90 days after expiry date for interest are accounted off balance sheet instead, and VAT shall be paid temporarily.

Note 3: The Bank's new small and micro sub-branches shall pay VAT at 3% charge rate of small-sized taxpayer before the sub-branches have not registered as common VAT

179 2016 Annual Report

taxpayers.

VII. Notes to major items of financial statements

1. Cash and deposits with central bank December 31, 2016 December 31, 2015

Cash in hand 213,053,617.51 194,373,523.12 Statutory deposit reserves with central bank 17,200,801,292.05 12,149,916,555.37 Surplus deposit reserves with central bank 8,258,747,700.23 8,546,482,859.82 Other deposits with central bank 4,184,000.00 4,497,000.00 Amount 25,676,786,609.79 20,895,269,938.31

(1) Statutory deposit reserves with central bank refer to deposit reserves deposited with

PBOC by the Bank. These include RMB deposit reserves and foreign currency deposit reserves. These statutory deposit reserves are not available for daily operations, and shall not be drawn on without permission of PBOC.

(2) Surplus deposit reserves refer to surplus reserves deposited with the PBOC mainly for clearing.

(3) Other deposits with central bank primarily represent fiscal deposits deposited with

PBOC. Fiscal deposits are required by PBOC, including income from budget of the central government and deposits with provincial treasury managed by the Bank for other institutions. People's Bank of China does not pay interest for fiscal deposits deposited by domestic institutions.

180 2016 Annual Report

2. Deposits with banks and other financial institutions

December 31, 2016 December 31, 2015

Deposit with domestic banks 5,247,407,539.66 5,351,482,090.04 Deposit with banks abroad 40,825,942.61 85,273,696.14 Less: asset impairment Amount 5,288,233,482.27 5,436,755,786.18 3. Lending funds

December 31, 2016 December 31, 2015 loans to domestic banks 41,622,000.00 loans to other domestic financial institutions 1,600,000,000.00 2,500,000,000.00 LESS: asset impairment Amount 1,641,622,000.00 2,500,000,000.00 4. Financial assets measured at fair value through current profit and loss

December 31, 2016 December 31, 2015

Corporate bond 443,924,900.00 344,893,070.00 Negotiable certificate of deposit 481,591,000.00 Amount 925,515,900.00 344,893,070.00 5. Repurchased financial assets for sale

December 31, 2016 December 31, 2015

Classified as follows by pledged goods Commercial Acceptance Note 5,955,428,956.47 7,505,130,971.19 Bond 9,333,343,876.75 8,950,567,351.07 —Government bond 1,880,969,667.28 1,422,657,692.31 —Corporate bond 351,583,278.68 —Financial bond 7,452,374,209.47 7,176,326,380.08

Amount 15,288,772,833.22 16,455,698,322.26 Classified as follows by counterparty Banks 13,448,742,414.09 14,011,402,330.75 Other financial institutions 1,840,030,419.13 2,444,295,991.51

181 2016 Annual Report

December 31, 2016 December 31, 2015

Amount 15,288,772,833.22 16,455,698,322.26 6. Interests receivable

December 31, 2016 December 31, 2015

Interests receivable on bond 641,708,260.49 461,847,065.11 Interest receivable on loans and advances 132,656,612.48 89,428,485.28 Interest receivable on repurchased financial assets for sale 9,762,372.10 9,101,822.69 Interest receivable on deposits with banks 33,842,941.46 3,338,705.52 Interest receivable on loan to other banks 868,183.33 552,677.78 Investments income classified as interest receivables 123,274,913.59 94,074,012.50 Interest receivable on deposits with central bank 9,029,930.84 6,459,884.18 Less: asset impairment 881,969.49 2,026,852.28 Amount 950,261,244.80 662,775,800.78 7. Loans and advances

(1) Loans and advances are presented as follows by enterprise and individual:

December 31, 2016 December 31, 2015

Corporate loans and advances 29,399,074,867.59 23,613,627,656.68 Including: ordinary loan 27,829,802,379.29 21,465,510,012.50 Advances 39,361,369.51 114,223,983.11 Discount 1,529,911,118.79 2,033,893,661.07 Individual loans and advances 9,055,346,805.60 8,801,339,092.78 Total of loan and advance payment 38,454,421,673.19 32,414,966,749.46 Less: loan impairment reserves 976,673,112.98 888,395,530.70 Including: individual evaluation 132,999,030.60 144,533,428.43 Combination assessment 843,674,082.38 743,862,102.27 Net loans and advances 37,477,748,560.21 31,526,571,218.76

Including: total loans and advances issued to Company are presented as follows by industries:

December 31, Industry name December 31, 2016 2015

Agriculture, forestry, animal husbandry and fishery 1,058,985,000.00 1,089,741,517.21

182 2016 Annual Report

December 31, Industry name December 31, 2016 2015

Mining industry 323,590,000.00 161,000,000.00 Manufacturing Sector 5,276,477,143.20 4,555,067,784.04 Electricity, gas & water production and supply industry 289,183,528.62 243,471,763.97 Building industry 3,800,066,659.91 2,526,948,194.38 Transportation, warehousing and post industry 1,424,721,897.24 743,303,000.00 IT, computer service and software industry 228,537,073.84 232,490,000.00 Wholesale and retail trade 3,455,422,481.67 4,432,295,653.80 Hospitality 189,242,415.86 401,700,000.00 Financial industry 1,352,000,000.00 1,205,000,000.00 Real estate industry 4,666,885,086.29 2,518,178,374.21 Rental and commercial service industry 2,645,473,754.21 1,406,300,000.00 R&D, technical service and geological survey industry 226,867,708.00 165,327,708.00 Water conservancy, environment and public facility management 1,831,970,000.00 857,920,000.00 Resident service and other service industries 484,040,000.00 457,100,000.00 Education 405,800,000.00 73,950,000.00 Health, social security and social welfare 131,300,000.00 21,100,000.00 Culture, sports and recreational industry 73,750,000.00 173,450,000.00 Public management and social organization 4,850,999.96 315,390,000.00 Discount 1,529,911,118.79 2,033,893,661.07 Total corporate loans and advances 29,399,074,867.59 23,613,627,656.68

Classification of personal loans of the Bank is presented as follows:

December 31, 2016 December 31, 2015 Sum Ratio (%) Sum Ratio (%) 3,481,369,08 Self-Employed Business 2,366,471,724.50 26.13 39.55 9.48 3,993,048,52 Personal housing, second-hand housing and commercial housing 4,511,000,497.87 49.82 45.37 7.39 1,326,921,47 Consumption 2,177,874,583.23 24.05 15.08 5.91 8,801,339,09 Amount 9,055,346,805.60 100.00 100.00 2.78 Discounts are presented as follows by notes:

December 31, 2016 December 31, 2015

Bank acceptance 1,529,911,118.79 2,033,893,661.07 Trade acceptance Amount 1,529,911,118.79 2,033,893,661.07

(2) Total loans and advance payments issued by the Company are presented as follows by 183 2016 Annual Report

guarantee type:

December 31, 2016 December 31, 2015

Fiduciary loan 2,538,152,131.92 561,225,948.01 Guaranteed and secured Loan 16,229,941,325.59 13,823,056,306.13 Mortgage loan 16,938,802,507.07 15,084,446,126.92 Pledge loan 1,217,614,589.82 912,344,707.33 Discount 1,529,911,118.79 2,033,893,661.07 Total of loan and advance payment 38,454,421,673.19 32,414,966,749.46 (3) Guarantee type and overdue period distribution of overdue loans

December 31, 2016 Overdue for 360 Overdue for 1 to Overdue for 90 to Overdue for over 3 days to 3 years Amount 90 days(inclusive) 360 days(inclusive) years (inclusive) Fiduciary loan 430,066.86 313,379.09 743,445.95

Guaranteed and 192,198,758.05 141,333,540.54 78,419,197.35 742,918.69 412,694,414.63 secured Loan Mortgage loan 49,212,638.03 51,657,195.20 5,984,873.60 106,854,706.83 Pledge loan 8,997,073.84 8,997,073.84 Total 250,408,469.92 193,420,802.60 84,717,450.04 742,918.69 529,289,641.25

December 31, 2015 Overdue for 360 Overdue for 1 to Overdue for 90 to Overdue for over 3 days to 3 years Amount 90 days(inclusive) 360 days(inclusive) years (inclusive) Fiduciary loan 200,000.00 340,881.49 540,881.49

Guaranteed and 457,191,551.87 306,659,346.58 25,209,977.52 789,060,875.97 secured Loan Mortgage loan 215,555,377.01 247,803,688.19 451,605.55 386,999.00 464,197,669.75 Pledge loan 21,364,165.52 3,772,545.81 25,136,711.33 1,278,936,138.5 694,311,094.40 558,235,580.58 26,002,464.56 386,999.00 Total 4 (4) Loan loss reserves December 31, 2016 Single Item Combination Amount Opening balance 144,533,428.42 743,862,102.28 888,395,530.70 Accrual in this year 132,254,518.87 99,811,980.11 232,066,498.98 Write-off in this year Disposal in this year 141,126,819.59 141,126,819.59 Return caused by recovering original write-off loan and advance payment Return caused by appreciation of loan and advance payment 2,662,097.11 2,662,097.11

184 2016 Annual Report

December 31, 2016 Single Item Combination Amount Closing balance 132,999,030.59 843,674,082.39 976,673,112.98

December 31, 2015 Single Item Combination Amount Opening balance 32,610,072.48 543,077,896.34 575,687,968.82 Accrual in this year 178,428,758.05 200,784,205.94 379,212,963.99 Disposal in this year Sale in this year 65,819,440.58 65,819,440.58 Return caused by recovering original write-off loan and advance payment Return caused by appreciation of loan and advance payment 685,961.53 685,961.53 Ending balance 144,533,428.42 743,862,102.28 888,395,530.70

8. Available-for-sale financial assets

(1) Available-for-sale financial assets are presented as follows:

December 31, December 31, 2016 2015

Debt instrument 18,381,078,619.56 10,901,743,637.56 Amortized cost of debt instrument 18,626,222,908.39 10,629,372,204.95 Government Bonds 19,999,797.67 Corporate bond 10,417,794,826.58 6,540,105,847.49 Financial bond 7,205,209,693.40 2,707,602,842.06 Certificate of deposit with other financial instution 983,218,590.74 1,381,663,515.40 Accumulated amount of change in fair value included in other comprehensive income -245,144,288.83 272,371,432.61 Government Bonds -114,297.67 Corporate bond -37,490,257.02 145,835,632.89 Financial bond -208,685,643.40 131,736,981.46 Certificate of deposit with other financial instution 1,145,909.26 -5,201,181.74 Equity instrument 9,569,130,000.00 2,117,020,000.00 Finance products 5,517,280,000.00 1,326,880,000.00 Asset management plan 4,047,000,000.00 Trust products 4,550,000.00 789,840,000.00 Equity investment 300,000.00 300,000.00 Total of available-for-sale financial assets 27,950,208,619.56 13,018,763,637.56 Minus: assets impairment reserves 7,550,000.00 12,050,000.00

185 2016 Annual Report

December 31, December 31, 2016 2015

Net amount of available-for-sale financial assets 27,942,658,619.56 13,006,713,637.56

Note: No held-to-maturity investment of the Bank was reclassified into available-for-sale financial assets in 2016 and 2015. (2) Changes in impairment reserve of available-for-sale financial assets

Year 2016 Year 2015

Opening balance 12,050,000.00 4,550,000.00 Accrual in this year -4,500,000.00 7,500,000.00 Reversal in this year Closing balance 7,550,000.00 12,050,000.00 9. Held-to-maturity investment

December 31, 2016 December 31, 2015

Government bonds 5,443,802,669.10 2,102,734,765.79 Corporate bond 1,931,636,346.11 1,440,024,112.86 Financial bond 5,061,603,847.35 4,581,927,438.21 Total of held-to-maturity investment 12,437,042,862.56 8,124,686,316.86 10. Investments classified as receivables

(1) Investments classified as receivables are as follows:

December 31, 2016 December 31, 2015

Private Offering bond 6,639,976,572.98 300,000,000.00 Asset management plan 41,253,031,445.49 28,418,593,725.71 Trust products 4,717,284,135.74 2,965,299,676.86 Finance products 500,479,166.67 Target debt financing instrument 300,570,000.00 Total of investments classified as receivables 52,610,292,154.21 32,484,942,569.24 Minus: assets impairment reserves 647,546,935.00 490,580,884.57 Net investments classified as receivables 51,962,745,219.21 31,994,361,684.67

(2) Changes in impairment reserve of investments classified as receivables are as follows: 186 2016 Annual Report

December 31, 2016 Single Item Combination Amount Beginning balance 10,500,000.00 480,080,884.57 490,580,884.57 Accrual in this year 60,000,000.00 167,466,050.43 227,466,050.43 Sale in this year 70,500,000.00 70,500,000.00 Reversal in this year Ending balance 647,546,935.00 647,546,935.00

December 31, 2015 Single Item Combination Amount Beginning balance 349,108,650.00 349,108,650.00 Accrual in this year 10,500,000.00 130,972,234.57 141,472,234.57 Sale in this year Reversal in this year Ending balance 10,500,000.00 480,080,884.57 490,580,884.57 11. Fixed assets

(1) Net amount of fixed assets

December 31, 2016 Category Decrease of Year-beginning balance Increase of current year Year-end balance current year 26,257,903. 649,272,594.97 14,570,161.85 637,584,853.59 Original value of fixed assets 23 I ncluding: housing and building 431,953,958.89 894,773.02 844,700.00 432,004,031.91 19,129,278. 160,630,216.25 10,444,836.85 151,945,775.07 Machinery and equipment 03 Transport Equipment 7,246,709.54 265,435.00 6,981,274.54 6,018,490.2 49,441,710.29 3,230,551.98 46,653,772.07 Other devices 0 21,757,569. 208,848,214.82 44,047,739.44 231,138,384.60 Accumulated depreciation 66 Including: housing and building 101,361,433.52 13,974,877.31 596,689.08 114,739,621.75 15,453,742. 74,615,420.73 23,833,531.24 82,995,209.66 Machinery and equipment 31 Transport Equipment 4,815,023.44 592,965.89 34,147.10 5,373,842.23 5,672,991.1 28,056,337.13 5,646,365.00 28,029,710.96 Other devices 7 2,758,439.0 10,235,776.41 7,477,337.38 Depreciation reserves 3 Including: housing and building 7,493,508.53 90,018.85 7,403,489.68 2,660,157.6 2,660,157.68 Machinery and equipment 8 Transport Equipment Other devices 82,110.20 8,262.50 73,847.70

187 2016 Annual Report

December 31, 2016 Category Decrease of Year-beginning balance Increase of current year Year-end balance current year Net value of fixed assets 430,188,603.74 398,969,131.61 Including: housing and building 323,099,016.84 309,860,920.48 Machinery and equipment 83,354,637.84 68,950,565.41 Transport Equipment 2,431,686.10 1,607,432.31 Other devices 21,303,262.96 18,550,213.41 Depreciation amount of the Bank was RMB 44,047,739.44 in 2016.

(2) Fixed assets without completed warrant As of December 31, 2016, all buildings of the Bank have been registered with property ownership certificate. 12. Construction in progress

December 31, 2016 Fixed assets Year-beginnin Increase of Other reversed in Year-end balance g balance current year decrease the year Office Building of 36,871,660.9 36,871,660.97 Wanzhou Fortune Plaza 7 Building of Xiyong 114,878,627. Scientific and Technical 114,878,627.68 68 Information Center 151,750,288. Amount 151,750,288.65 65 Note 1: No capitalisation of interest expenses under construction in progress.

Note 2: Impairment reserve of construction in progress is not accrued since construction in progress is not impaired.

13. Intangible assets

December 31, 2016 Decrease of Year-beginning balance Increase of current year Year-end balance current year Initial intangible asset value 129,258,311.35 1,723,803.30 18,505,248.09 112,476,866.56 Including: land use right 38,566,897.86 117,000.00 17,364,248.09 21,319,649.77 Software and others 90,691,413.49 1,606,803.30 1,141,000.00 91,157,216.79 Accumulated amortization 30,226,922.43 9,302,676.25 1,582,075.51 37,947,523.17 Including: land use right 2,294,349.13 977,257.47 684,158.84 2,587,447.76 Software and others 27,932,573.30 8,325,418.78 897,916.67 35,360,075.41 Net value of intangible assets 99,031,388.92 74,529,343.39 Including: land use right 36,272,548.73 18,732,202.01

188 2016 Annual Report

December 31, 2016 Decrease of Year-beginning balance Increase of current year Year-end balance current year Software and others 62,758,840.19 55,797,141.38 Note: Impairment reserve is not accrued since there is explicit evidence indicating impairment of intangible assets at the end of the period. 14. Deferred tax assets and deferred tax liabilities (1) Deferred income tax assets not offset

December 31, 2016 Deductible temporary differences Deferred income tax assets

Loss provision for loans and advance payments 593,456,363.15 148,364,090.79 Bad-debt reserve for other accounts receivable 10,203,235.50 2,550,808.88 Bad-debt reserve for other interest receivable 881,969.49 220,492.37 Impairment reserve for debt-repaid assets 231,283.20 57,820.80 Payroll payable 102,251,682.49 25,562,920.62 Including: dismission welfare 950,000.00 237,500.00 Risk reserve 101,301,682.49 25,325,420.62 Fixed assets depreciation reserves 7,477,337.38 1,869,334.35 Available-for-sale financial assets impairment reserves 7,550,000.00 1,887,500.00 Changes in fair value of available-for-sale financial assets 245,144,288.83 61,286,072.21 Investment impairment reserve classified as receivables 647,546,935.00 161,886,733.74 Amount 1,614,743,095.04 403,685,773.76

December 31, 2015 Deductible temporary differences Deferred income tax assets

Loss provision for loans and advance payments 565,716,007.20 141,429,001.81 Bad-debt reserve for other accounts receivable 268,540.29 67,135.08 Bad-debt reserve for other interest receivable 2,026,852.28 506,713.07 Impairment reserve for debt-repaid assets 231,283.20 57,820.80 Payroll payable 57,820,417.64 14,455,104.41 Including: dismission welfare 895,659.89 223,914.97 Risk reserve 56,924,757.75 14,231,189.44 Fixed assets depreciation reserves 10,235,776.41 2,558,944.10 Available-for-sale financial assets impairment reserves 12,050,000.00 3,012,500.00 Investment impairment reserve classified as receivables 490,580,884.57 122,645,221.14 Amount 1,138,929,761.59 284,732,440.41

Note: On the balance sheet date when the Bank estimates that sufficient taxable income

189 2016 Annual Report

can be obtained to use the temporarily deductible difference in the future periods, hence it recognizes relevant deferred income tax assets.

(2) Deferred income tax liabilities not offset

Taxable Deferred December 31, 2016 temporary income tax differences liabilities Fair value change of financial assets measured at fair value through current profit 19,962,170.00 4,990,542.50 and loss Changes in fair value of available-for-sale financial assets Other temporary differences 135,226,600.00 33,806,650.00 Amount 155,188,770.00 38,797,192.50

Taxable Deferred December 31, 2015 temporary income tax differences liabilities Fair value change of financial assets measured at fair value through current profit 31,730,740.00 7,932,685.00 and loss Changes in fair value of available-for-sale financial assets 272,371,432.61 68,092,858.16 Other temporary differences 169,562,400.00 42,390,600.00 Amount 473,664,572.61 118,416,143.16 15. Other assets

(1) Itemized presentation

December 31, 2016 December 31, 2015

Other accounts receivable 16,469,999.45 10,739,890.57 Other current assets 16,051,153.46 22,495,052.98 Other non-current assets 762,424,150.33 576,970,070.22 Vicariously cashed securities 78.38 280.20 Unamortized expense 31,867,813.51 31,519,653.47 Long-term unamortized expense 55,351,351.87 63,467,460.30 Guaranteed deposits 1,000,000.00 1,000,000.00

Debt-repaid assets 154,188.80 154,188.80 Others Amount 883,318,735.80 706,346,596.54

190 2016 Annual Report

(2) Other accounts payable 1. Presented by nature:

December 31, 2016 December 31, 2015

Reimbursed legal service charge and legal cost 10,859,483.81 1,878,559.89 Housing and maintenance funds 6,739,964.45 6,702,369.13 Service charges receivable for non-guaranteed financial products 2,183,750.14 Guarantee deposits 1,975,231.31 2,351,258.05 Others 4,914,805.24 76,243.79 Total of other accounts receivable 26,673,234.95 11,008,430.86 Minus: assets impairment reserves 10,203,235.50 268,540.29 Including: individual evaluation 10,202,197.50 268,540.29 Combination assessment 1,038.00 Net amount of other accounts receivable 16,469,999.45 10,739,890.57

(3) Other current assets 1. Presented by nature:

December 31, 2016 December 31, 2015

Turnover tax prepayment and surtax 16,051,153.46 22,495,052.98 Amount 16,051,153.46 22,495,052.98

(4) Other non-current assets 1. Presented by nature:

December 31, 2016 December 31, 2015

House prepayment 736,085,818.00 542,057,933.41 Land for housing 34,912,136.81 Software, equipment and decoration prepayment 26,338,332.33 Amount 762,424,150.33 576,970,070.22

(5) Unamortized expense

December 31, 2015 Increase of current year Amortization in this year December 31, 2016

Rents 28,942,486.60 61,129,487.49 62,144,057.01 27,927,917.08 Others 2,577,166.87 10,289,053.13 8,926,323.57 3,939,896.43 Total 31,519,653.47 71,418,540.62 71,070,380.58 31,867,813.51

191 2016 Annual Report

(6) Long-term unamortized expense

December 31, 2015 Increase of current year Amortization in this year December 31, 2016

Decoration fee 63,467,460.30 18,158,369.17 26,274,477.60 55,351,351.87 Total 63,467,460.30 18,158,369.17 26,274,477.60 55,351,351.87

(7) Debt-repaid assets

December 31, 2016 December 31, 2015 December 31, 2014

Initial value of debt-repaid assets 385,472.00 385,472.00 385,472.00 Minus: assets impairment reserves 231,283.20 231,283.20 231,283.20 Net value of debt-repaid assets 154,188.80 154,188.80 154,188.80 16. Asset impairment reserve

Year 2016 Increase of Decrease of current period current period

Beginning balance Return Accrual in amount of Others Current sale Ending balance current period assets decrease amount price rising Impairment reserve for interest receivable 2,026,852.28 -1,144,882.79 881,969.49 Loan loss reserves 888,395,530.70 232,066,498.98 2,662,097.11 141,126,819.59 976,673,112.98 Available-for-sale financial assets impairment reserves 12,050,000.00 -4,500,000.00 7,550,000.00 Fixed assets depreciation reserves 10,235,776.41 2,758,439.03 7,477,337.38 Depreciation reserves for other accounts receivable 268,540.29 9,934,695.21 10,203,235.50 Investment impairment reserve classified as 490,580,884.57 227,466,050.43 70,500,000.00 647,546,935.00 Irmecpeaivirambleenst reserve for debt-repaid assets 231,283.20 231,283.20 Total 1,403,788,867.45 463,822,361.83 2,662,097.11 214,385,258.62 1,650,563,873.55 17. Borrowing from the central bank

December 31, 2016 December 31, 2015

Borrowing from the central bank 500,000,000.00 700,000,000.00 Rediscount Total 500,000,000.00 700,000,000.00

192 2016 Annual Report

18. Deposits from banks and other financial institutions

December 31, 2016 December 31, 2015

Deposit from domestic banks 11,051,713,656.31 2,664,756,619.69 Deposits from other domestic financial institutions 3,568,267,805.23 6,173,536,508.86 Total 14,619,981,461.54 8,838,293,128.55 19. Borrowing funds

December 31, 2016 December 31, 2015

Borrowing funds from domestic banks 2,836,203.85 1,058,442,400.00 Borrowing funds from offshore banks 74,821,123.81 48,702,000.00 Total 77,657,327.66 1,107,144,400.00 20. Financial assets sold for repurchase

December 31, 2016 December 31, 2015

Bond 11,553,922,265.00 6,483,613,667.26 —Government bond 1,352,400,000.00 500,000,000.00 —Corporate bond —Financial bond 10,201,522,265.00 5,983,613,667.26 Commercial bill 6,624,739,035.69 5,472,208,861.28 Total 18,178,661,300.69 11,955,822,528.54 21. Deposits from customers

December 31, 2016 December 31, 2015

Current deposit 42,745,656,147.07 34,441,926,628.65 Including: corporate customer 38,126,023,099.10 30,605,544,232.62 Individual customer 4,619,633,047.97 3,836,382,396.03 Time deposit (including notice deposit) 70,592,709,297.83 42,941,975,264.30 Including: corporate customer 52,701,561,259.10 32,639,219,544.04 Individual customer 17,891,148,038.73 10,302,755,720.26 Margin deposit 6,571,739,338.70 9,602,913,382.40 Public deposit 2,158,041,718.89 3,229,815,156.91 Other deposits 95,725,684.34 3,361,059,314.97

193 2016 Annual Report

December 31, 2016 December 31, 2015

Total 122,163,872,186.83 93,577,689,747.23

Margin deposit details are presented as follows:

December 31, 2016 December 31, 2015

Deposit for bank acceptance 5,512,493,873.55 8,631,259,335.09 Deposit for letter of guarantee 151,915,099.32 739,900.00 Guarantee deposit for Letter of credit 80,705,580.00 25,696,991.97 Deposit against guarantee 786,044,837.89 915,386,875.18 Deposit for Import trade finances 24,323,000.00 20,612,139.69 Others 16,256,947.94 9,218,140.47 Total 6,571,739,338.70 9,602,913,382.40 22. Payroll payable

(1) Classification

Increase of Decrease of December 31, 2015 December 31, 2016 current year current year

Short-term remuneration 174,115,884.74 702,782,589.77 663,115,572.19 213,782,902.32 Post-employment benefit --- 56,186,769.38 56,186,769.38 defined contribution plans Dismission welfare 895,659.89 222,918.07 168,577.96 950,000.00 Other long-term payrolls 56,924,757.75 68,033,692.38 23,656,767.64 101,301,682.49 Total 231,936,302.38 827,225,969.60 743,127,687.17 316,034,584.81

(2) Short-term payroll

Increase of Decrease of December 31, 2015 December 31, 2016 current year current year Wage, bonus, allowance and 174,115,884.74 579,137,051.17 539,470,033.59 213,782,902.32 subsidy Welfare expense of employee 39,196,318.20 39,196,318.20 Social insurance expense 31,118,714.29 31,118,714.29 I ncluding: Medical insurance 28,303,001.11 28,303,001.11 premiums Supplementary medical 1,406,303.72 1,406,303.72 insurance premiums Maternity insurance premium 1,409,409.46 1,409,409.46 Housing Pension 36,147,343.00 36,147,343.00 Labor union expenditure 9,035,847.51 9,035,847.51 Employee education expenses 3,583,342.87 3,583,342.87

194 2016 Annual Report

Increase of Decrease of December 31, 2015 December 31, 2016 current year current year

Other short-term remuneration 4,563,972.73 4,563,972.73

Total 174,115,884.74 702,782,589.77 663,115,572.19 213,782,902.32

(3) Post-employment benefit --- defined contribution plans

Increase of Decrease of December 31, 2015 December 31, 2016 current year current year Basic endowment 54,322,973.22 54,322,973.22 insurance premiums Unemployment 1,863,796.16 1,863,796.16 insurance expense Total 56,186,769.38 56,186,769.38

(4) Dismission welfare

Increase of Decrease of December 31, 2015 December 31, 2016 current year current year Welfare for 895,659.89 222,918.07 168,577.96 950,000.00 early retirees Total 895,659.89 222,918.07 168,577.96 950,000.00

(5) Other long-term payrolls

Increase of Decrease of December 31, 2015 December 31, 2016 current year current year

Risk reserve 56,924,757.75 68,033,692.38 23,656,767.64 101,301,682.49 Total 56,924,757.75 68,033,692.38 23,656,767.64 101,301,682.49

In accordance with Robust Payroll Regulatory Guideline of Commercial Banks (YJF[2010]

No.14), the Bank has developed Notice on Applying All-staff Risk Reserve Payment System

(YSXYF[2009]No.14) and revised draft Interim Provisions for Delay in Payment,

Deduction and Claiming Administration of Chongqing Three Gorges Bank

(YSXYF[2015]No.70), executed administration of delay in payment of risk reserve since

2008, and adopted deferred scroll payment by reserving certain performance-related pay in certain proportion.

195 2016 Annual Report

23. Tax payable

December 31, 2016 December 31, 2015

Business tax 44,274,636.62 Value added tax 148,673,882.69 City maintenance and construction tax 10,323,276.91 2,932,573.02 Educational expense and surtax 4,997,799.71 448,482.61 Local education surtax 3,176,062.25 881,368.97 Corporate income tax 139,972,010.62 29,630,478.44 Property tax 3,643,319.67 3,643,319.67 Individual income tax withheld and remitted 11,309,886.20 7,433,753.86

Other taxation payments withheld and remitted 11,373.59 128,672.47 Total 322,107,611.64 89,373,285.66 24. Interest payable

December 31, 2016 December 31, 2015

Interest on deposits from customers 543,467,576.33 450,289,772.23 Interest on borrowing from the central bank 489,194.44 716,527.78 Interest on deposit with banks 132,875,826.86 59,254,707.95 Interest on borrowing funds 36,864.15 1,213,524.77 Interest on financial assets sold for repurchase 9,833,635.09 7,824,924.48 Bond interests payable 160,044,356.13 159,205,698.64

Others 517,143.34 1,296,190.27 Amount 847,264,596.34 679,801,346.12 25. Bonds payable

December 31, 2016 December 31, 2015

12 subordinated bonds (note 1) 894,790,511.00 894,318,366.61 15 subordinated capital bonds (note 2) 895,570,269.60 896,284,804.28

14 bonds of Three Gorges Bank (note 3) 1,998,920,736.78 1,997,176,669.06 14 bonds of Three Gorges Bank 02 (note 4) 999,293,848.91 998,247,150.32 Negotiable certificate of deposit (note 5) 6,839,526,928.90 498,127,939.00 Amount 11,628,102,295.19 5,284,154,929.27

Details of bond issuance are presented as follows:

196 2016 Annual Report

Nominal Bond Abbreviation of bond Book value Issue date Issue amount interest rate period 10 6.80% 900,000,000.00 2012-12-28 900,000,000.00 12 subordinated bonds (note 1) years 15 subordinated capital bonds (note 10 4.99% 900,000,000.00 2015-12-24 900,000,000.00 2) years 3 14 bonds of Three Gorges Bank (note 6.70% 2,000,000,000.00 2014-2-28 2,000,000,000.00 3) years 3 14 bonds of Three Gorges Bank 02 6.60% 1,000,000,000.00 2014-4-28 1,000,000,000.00 (note 4) years Amount 4,800,000,000.00 4,800,000,000.00

Note 1: On December 28, 2012, the Bank issued RMB 0.9 billion of subordinated bond in total. Duration is 10 years. Once approved by regulatary body, the bond become redeemable on the final day of the fitfth year. Coupon face rate is 6.8%, with interest shall payable annualy.

Note 1: On December 24, 2015, the Bank issued RMB 0.9 billion of Tier Two capital debenture in total. Duration of the bond is 10 years. Once approved by regulatary body, the bond become redeemable on the final day of the fitfth year. Coupon fixed rate is 4.99%, interest shall be paid annualy. The bond is featured with write-down option as secondary capital tools. When triggered, the Bank writes down the principal amount in full without necessary authorisation from the bond holders, and becomes no longger liable to pay associated interst amount. According to CRBC regualtion, the debenture is a qualified secondary capital instrument.

Note 3: On February 28, 2014, the Bank issued RMB 2 billion of financial liability in total.

Maturity of the bond is 3 years. The Bank shall not redeem the bond in advance, the investor shall not sell the bond back and the bond is not guaranteed as well. Coupon fixed rate was 6.70%, interest should be paid once a year.

Note 4: On April 28, 2014, the Bank issued RMB 1 billion of financial bond in total. 197 2016 Annual Report

Duration of the bond is 3 years. The bond is unredeemable, and the bond is not guaranteed as well. Coupon fixed rate was 6.60%, interest should be paid annualy.

Note 5: Negotiable certificate of deposit (NCD) issued by the Bank. Term of NCD issued by the Bank ranges from 3 months to 1 year, and interest rate ranges from 3.0000% to

3.5501%.

26. Other liabilities

(1)presentation by single item

December 31, 2016 December 31, 2015

Other current liabilities 159,031,583.50 Dividends payable 18,596,745.05 29,047,569.36 Other accounts payable 159,512,617.40 73,386,025.64 Long-term accounts payable 9,621,133.00 15,763,885.00 Clearing funds 29,142,562.44 11,631,373.53 Deferred income 331,655,597.38 735,892,591.80 Amount 548,528,655.27 1,024,753,028.83 (2) Other current liabilities 1. Presented by nature:

December 31, 2016 December 31, 2015

Uncollected turnover tax and surtax 159,031,583.50 Amount 159,031,583.50

Note: Uncollected turnover tax and surtax refer to turnover tax and surtax to be paid in subsequent periods, for which relevant income has been recognized, but obligation to pay business tax has not become outstanding.

(3) Other accounts payable

1. Presented by nature:

198 2016 Annual Report

December 31, 2016 December 31, 2015

Housing fund payable 1,964,144.26 Equipment fund payable 11,325,955.33 8,311,554.58 Project fund payable 3,915,610.35 5,197,490.72 Rent payable 5,051,868.47 Deposit insurance premium payable 7,230,100.50 6,803,582.28 Public maintenance funds 1,206,530.73 1,144,093.89 Payables pending withdraw 6,591,559.19 4,081,068.38 Earnings from financial assets to be allocated 84,511,735.37 26,907,753.14 Funds collected or paid for another 24,438,148.23 5,936,576.28 Others 15,241,109.23 13,039,762.11 Total 159,512,617.40 73,386,025.64

(4) Deferred income 1. Presented by nature:

December 31, 2016 December 31, 2015

Handling charges and commission income 331,619,152.17 732,512,591.80 Including: service charges for entrusted loans 309,780,615.47 694,596,961.20 Sales service fee 7,411,040.15 14,904,197.08 Safe custody fee for trust plan 12,681,146.19 13,680,416.13 Service fee for credit enhancement 1,746,350.36 9,331,017.39 Others 36,445.21 3,380,000.00 Total 331,655,597.38 735,892,591.80 27. Share capital

December 31, 2016 Increase of current Decrease of current Year-beginning amount Ending balance year year Shares held by state 38,685,110.00 20,774,078.00 59,459,188.00 Shares held by domestic 3,018,775,092.00 1,519,134,444.00 194,032,395.00 4,343,877,141.00 institutional shareholders Shares held by domestic natural person 2,473,380.00 494,676.00 2,968,056.00 shareholders Amount 3,059,933,582.00 1,540,403,198.00 194,032,395.00 4,406,304,385.00

Note 1: Net increase in share capital in 2016 was RMB 1,346,370,803.00. Namely,

(1) In April 2016, in accordance with Proposal on 2015 Annual Profit Distribution passed

199 2016 Annual Report

on the 31st Meeting of the 1st Session of Board of Directors and 2015 annual Shareholder's

General Meeting, the Bank debited RMB 611,986,719.00 from the account of profit distribution onto share capital account. Before alternation, 3,059,933,582.00 shares as at

Dec. 31st are the opening reference. 611,986,719 shares (each worthy RMB 1.00) are incorporated to revise the share capital to RMB 3,671,920,301.00. The revised share capital was certified by ShineWing International Accounting Firm (Special Ordinary

Partnership) (Chongqing Branch) , with Capital Verification Report (Ref.

No.XYZH/2016CQA10354 ) issued on August 10, 2016.

(2) In December 2016, Based upon proposal on shares allotment for shareholders, resolution was made on the 32nd meeting of the 1st session of Board of Directors and resolution made on 2016 2nd Extraordinary Shareholders Meeting. The resolution reads that 3,671,920,301.00 shares is the foundation, 10 shares in exchange for every 2 shares

(less than 1 share shall be calculated as 1 share) . 3,671,920,301.00 shares in total as the base, there were 734,384,084.00 new allotted shares (face value as RMB 1 per share), share allotting price was RMB 3.00, and altered registered capital was RMB

4,406,304,385.00. Total allotment account as received reaches RMB 2,203,152,252.00, including RMB 734,384,084.00 included in share capital and RMB 1,468,768,168.00 included in capital reserve. ShineWing International Accounting Firm (Special Ordinary

Partnership) (Chongqing Branch) has already examined the items and issued

XYZH/2016CQA10402 Capital Verification Report.

Note 2: Others increase by RMB 194,032,395.00, and decreases by RMB 194,032,395.00, indicating occurrence of equity transfer. Transfer details:

200 2016 Annual Report

Amount of Name of transferor Name of transferee transferred share

1 Chongqing Haikang Industry Co., Ltd. 2,632,500.00 Chongqing Wanzhou District Finance Bureau 2 Shaoxing Far East Petrifaction Co., Ltd. 140,400,000.00 Shaoxing Far East Thermoelectricity Co., Ltd. Chongqing Zhuoyue Industrial Development Chongqing Shixiantaibai Liquor Co., Ltd. 2,376,563.00 3 Co., Ltd. Chongqing State Development Equity Shenzhen Warranty Assets Management Co., 1,000,000.00 4 Investment Management Co., Ltd. Ltd. Chongqing State Development Equity 1,000,000.00 Tongfang Holdings Co., Ltd. 5 Investment Management Co., Ltd. Shanghai Yinxin Industrial Development 6 Co., Ltd. (Xi'an Yinxin Credit Guarantee 19,656,000.00 Chongqing Yongrui Equity Investment Co., Ltd. Co., Ltd.) Chongqing Jiayu Construction (Group) 26,967,332.00 Chongqing JIAYU Emperor Hotel Co., Ltd. 7 Co., Ltd. Amount 194,032,395.00 28. Capital reserve

December 31, 2016 Year-beginning Increase of current Decrease of current Ending balance amount year year Capital stock premium 1,500,258,358.26 1,468,768,168.00 2,969,026,526.26 Amount 1,500,258,358.26 1,468,768,168.00 2,969,026,526.26

Note: See details of increase reasons in 2016 in Note VII. 27. share capital description.

29. Other Comprehensive Income December 31, 2016 Year-beginning Increase of Decrease of Ending balance amount current year current year I. Other comprehensive income that will be reclassified into profit and loss 204,278,574.47 388,136,791.09 -183,858,216.62 in future Including: changes in fair value of 204,278,574.47 388,136,791.09 -183,858,216.62 available-for-sale financial assets Amount 204,278,574.47 388,136,791.09 -183,858,216.62 30. Surplus reserve

December 31, 2016 Decrease of Year-beginning amount Increase of current year Ending balance current year Statutory surplus reserve 511,612,268.81 198,476,933.18 710,089,201.99 Discretionary surplus reserve Amount 511,612,268.81 198,476,933.18 710,089,201.99

201 2016 Annual Report

Note: In accordance with Company Law of the Peoples Republic of China, Articles of

Association of the Bank as well as resolution made by the Board of Directors, the Bank withdraws statutory surplus reserve at 10% of net profit after tax for statutory financial statements, and can no longer withdraw as statutory surplus reserve reaches over 50% of share capital cumulatively. Statutory surplus reserve can be used to cover the deficit upon approval, or increase share capital. Balance of statutory surplus reserve being converted into share capital shall be no less than 25% of converted share capital.

31. Provision for general risk December 31, 2016 Decrease of Year-beginning amount Increase of current year Ending balance current year generic risk reserve 1,676,185,964.31 643,545,968.88 2,319,731,933.19 Amount 1,676,185,964.31 643,545,968.88 2,319,731,933.19

Note: Based upon withdrawal of asset impairment reserve in accordance with Notice on

Issuing Accrual Management Method for Financial Enterprise Reserve (CJ [2012] No.20), the Bank establishes generic risk reserve to cover potential loss unrecognized in connection with risk assets. The generic risk reserve is treated as profit distribution, and is a constituent part of owner's equity, no less than 1.5% of risk assets balance in principle, can be fully funded in years, and the duration shall be no more than 5 years in principle. As of

December 31, 2016, accruing proportion of generic risk reserve is 1.50%. 32. Undistributed profits

December 31, 2016 December 31, 2015

Beginning balance 1,908,371,217.40 1,485,087,096.77 Plus: net profit in this period 1,984,769,331.86 1,268,043,363.75 Minus: withdrawal of statutory surplus 198,476,933.18 126,804,336.38 reserve Withdrawal of discretionary surplus reserve

202 2016 Annual Report

December 31, 2016 December 31, 2015

Withdrawal of statutory public welfare fund Withdrawal of provision for general risk 643,545,968.88 435,499,499.42 Distributed cash dividends 397,791,365.66 282,455,407.32 Transfer to paid-in capital 611,986,719.00 Ending balance 2,041,339,562.54 1,908,371,217.40

Note: By approving Proposal for 2015 Annual Profit Distribution of Chongqing Three

Gorges Bank Co., Ltd. on General Shareholders Meeting in April 2016, the Bank agreed to give 2 bonus shares for every 10 shares (rounded off) with 3,059,933,582.00 shares of total stock by the end of 2015 as the base, and issue bonus RMB 1.30 (tax-inclusive) in cash, give 611,986,719 new bonus shares in total, and issue cash bonus RMB 397,791,365.66. 33. Net interest income

Year 2016 Year 2015

Interest income 7,601,693,158.22 6,424,923,248.72 Including: deposits with banks and other financial institutions 115,732,995.23 157,841,056.60 Cash and balances with central bank 241,507,226.83 203,926,873.71 Lending fund 9,126,353.21 1,515,228.33 Loans and advance payments 2,373,771,642.87 2,412,270,900.76 Redemptory monetary capital for sale 294,513,145.57 696,629,832.96 Financial assets are measured at fair value through current profit and loss 37,434,923.39 21,717,486.73 Available-for-sale financial assets 956,192,868.85 531,561,008.66 Held-to-maturity investment 452,513,077.44 280,673,293.23 Investments classified as receivables 3,120,900,924.83 2,118,787,567.74 Interest expenditure 3,776,014,992.98 3,236,637,131.94 Including: deposits from banks and other financial institutions 307,082,245.89 202,755,953.90 Borrowing from the central bank 24,822,152.77 17,344,027.77 Loans from other banks and other financial institutions 16,880,570.16 3,152,934.08 Deposits from customers 2,589,607,788.00 2,183,029,959.69 Financial assets sold for repurchase 483,311,227.66 558,190,508.39 Bonds payable 353,942,693.41 272,076,543.49 Rediscount 368,315.09 87,204.62 Net interest income 3,825,678,165.24 3,188,286,116.78 203 2016 Annual Report

34. Net income from service charges and commission

Year 2016 Year 2015

Handling charges and commission income 436,659,604.62 253,362,374.13 Including: financial service 248,863,897.94 176,134,287.59 Agent service 96,643,098.74 5,051,637.42 Settlement and liquidation services 46,978,878.49 42,712,235.69 Letter of guarantee and commitment service 25,636,768.55 23,317,587.23 Others 18,536,960.90 6,146,626.20 Handling charges and commission fee 58,250,207.80 52,623,868.90 Including: service charges for settlement 51,793,076.66 47,550,986.36 Bank card service charge 3,899,196.32 3,472,314.16 Others 2,557,934.82 1,600,568.38 Handling charges and commission net income 378,409,396.82 200,738,505.23

The Bank's income from service charges of financial services refers to funds raised by issuing non-guaranteed financial products to investors in accordance with investment plan, the Bank manages the income in a reasonable manner and makes investment with financial assets. The Bank does not guarantee minimum earnings and promise to meet estimated yield rate, investment risks in connection with financial plan are assumed by investors on their own. The Bank charges financial administrative expense or earn income from price difference.

35. Investment income

Year 2016 Year 2015

Investment income from available-for-sale financial assets 52,365,010.80 132,985,518.61

Investment income from financial assets and liabilities measured at fair value 6,915,895.80 2,031,054.87 through current profit and loss Amount 59,280,906.60 135,016,573.48

204 2016 Annual Report

36. Loss and profit from fair value change

Year 2016 Year 2015

Loss and profit from changes in fair value of trading financial assets -11,768,570.00 14,523,494.00 Amount -11,768,570.00 14,523,494.00 37. Exchange gain

Year 2016 Year 2015

Profit and loss from foreign currency rate translation as well as settlement and sale 10,624,827.50 12,099,133.84 Amount 10,624,827.50 12,099,133.84 38. Income cost of other operations

(1) Other business income

Year 2016 Year 2015

Rental income 1,100,867.87 891,875.83 Others 138,608.41 360,868.10 Amount 1,239,476.28 1,252,743.93

(2) Other business cost

Year 2016 Year 2015

Mortgage registration fee 2,346,497.60 1,962,252.80 Others 3,380.00 319,264.49 Amount 2,349,877.60 2,281,517.29 39. Tax and surcharges

Year 2016 Year 2015

Business tax 123,996,698.30 255,897,328.98 Urban construction tax 23,818,188.62 17,368,196.97 Educational surtax 10,412,323.75 7,610,025.33 Others 8,712,345.65 Amount 166,939,556.32 280,875,551.28

205 2016 Annual Report

Note: Others in 2016 refer to house property tax, land use tax, vehicle and vessel use tax, stamp duty and local educational surcharges. In accordance with Notice on Issuing

Accounting Treatment Provisions for Value-added Taxes (CK [2016] No.22) published by

Ministry of Finance, the Bank will present house property tax, land use tax, vehicle and vessel use tax, stamp duty and local educational surcharges in this account instead of operation and administrative expense.

40. Operation and administrative expense

Year 2016 Year 2015

LABOR COST 827,225,969.60 764,773,195.67 Depreciation of fixed assets 44,047,739.44 41,704,112.93 Amortization of intangible assets 9,302,676.25 8,239,513.59 Taxes 5,667,718.82 11,587,884.03 Business operation and administrative expenses 361,280,923.84 306,811,665.06 Amount 1,247,525,027.95 1,133,116,371.28 41. Assets impairment loss

Year 2016 Year 2015

Loss provision for loans and advance payments 90,939,679.39 313,393,523.41 Bad-debt reserve for other accounts receivable 9,934,695.21 -170,385.25 Investment impairment reserve classified as receivables 156,966,050.43 141,472,234.57

Impairment reserve for interest receivable -1,144,882.79 1,924,985.45 Available-for-sale financial assets impairment reserves -4,500,000.00 7,500,000.00 Amount 252,195,542.24 464,120,358.18 42. Non-operating income/expenditure

(1) Non-operating income

Year 2016 Year 2015

Total of gain from intangible asset disposal 3,906,334.80 531,122.40 Including: gain from fixed asset disposal 3,001,312.22 531,122.40

206 2016 Annual Report

Year 2016 Year 2015

Gain from non-liquid asset disposal 905,022.58 Income from penalties 394,657.00 210,818.00 Government grant 12,276,771.80 12,840,529.00 Other incomes 302,220.77 357,990.72 Amount 16,879,984.37 13,940,460.12

Type and amount of government grants acquired by the Bank:

Year 2016 Year 2015

Agriculture-related loan incremental reward 2,260,000.00 4,964,940.00 Agriculture-related support subsidy 10,000.00 510,000.00 Unemployment post subsidy (note) 2,789,984.00 2,874,085.00 Industrial support fund 3,300,000.00 Reward for introducing financial institution 500,000.00 100,000.00 Special fund for financial industry development 703,400.00 Reward for annual assessment of financial institution 2,703,699.80 4,229,596.00 Others 9,688.00 161,908.00 Amount 12,276,771.80 12,840,529.00

Note: Unemployment post subsidy refers to post subsidy enjoyed by the Bank as it meets subsidy conditions of “participating unemployment insurance by law and paying unemployment insurance for the last year, no redundancy or redundancy rate is lower than

Chongqing urban registered unemployment rate in the last year” in accordance with YSRF

[2015] No.156 Notice on Relevant Affairs About Further Completing Post Stabilization of

Unemployment Insurance Issued by Chongqing Provincial Human Resources and Social

Security Department as well as Chongqing Municipal Finance Bureau.

(2) Non-business expenditure

Year 2016 Year 2015

Total of disposal loss on non-current assets 1,255,193.30 88,528.95 Including: disposal loss on fixed assets 1,012,109.97 88,528.95 Loss on intangible asset disposal 243,083.33

207 2016 Annual Report

Year 2016 Year 2015

Donations made 836,063.20 594,995.00 Loss from compensation and penalty 1,830,000.00 Loss from credit asset transfer 4,048,908.38 Others 107,101.34 12,467.38 Amount 6,247,266.22 2,525,991.33 43. Income tax expense

Year 2016 Year 2015

Current income tax expense 689,510,938.26 518,842,724.95 Deferred income tax expense -69,193,353.64 -103,948,850.68 Amount 620,317,584.62 414,893,874.27

Adjustment process of accounting profit and income tax expense:

Year 2016 Year 2015

Total profit 2,605,086,916.48 1,682,937,238.02 Income tax accrued at applicable tax rate 651,271,729.12 420,734,309.51 The effects of non-taxable income -33,887,014.72 -8,521,617.35 The effects of non-deductible costs, expenses, losses and others 2,932,870.22 2,681,182.11 Income tax expense 620,317,584.62 414,893,874.27 44. Net amount of other comprehensive income after tax

Year 2016 Year 2015

Net amount of other comprehensive income after tax attributable to -388,136,791.09 179,510,979.81 parent company (I) Other comprehensive income that cannot be reclassified into profit and loss in future 1. Changes in net liabilities or net assets from re-measuring defined benefit plans 2. Share in other comprehensive income not reclassified into profit and loss in the invested organization by the equity method 3. Others

(II) Other comprehensive income that will be reclassified into profit and -388,136,791.09 179,510,979.81 loss in future 1. Share in other comprehensive income reclassified into profit and loss in the invested organization by the equity method 2. Loss and profit from changes in fair value of available-for-sale -388,136,791.09 179,510,979.81 financial assets 208 2016 Annual Report

Year 2016 Year 2015

3. The held-to-maturity investment reclassified into loss and profit from available-for-sale financial assets 4. Effective part of the cash flow hedging gains and losses 5. Translation balance of foreign currency financial statements 6. Others Net amount of other comprehensive income after tax attributable to minority shareholders Amount -388,136,791.09 179,510,979.81

December 31, 2016 December 31, 2015

I. Cash 8,838,034,800.01 14,177,612,169.12 Including: cash on hand 213,053,617.51 194,373,523.12 Deposit with the central bank available for payment 8,258,747,700.23 8,546,482,859.82 Current deposits with banks 366,233,482.27 5,436,755,786.18 II. Cash equivalents 19,384,611,210.41 16,783,155,383.67 Including: deposits with banks and non-bank financial institutions with 3,599,000,000.00 original maturity with or within three months Lending funds with original maturity with or within three months 1,141,622,000.00 2,500,000,000.00 Redemptory securities for sale with or within three months 14,643,989,210.41 14,283,155,383.67 III. Balance of ending cash and cash equivalents 28,222,646,010.42 30,960,767,552.79 45. Cash and cash equivalents

46. Adjusting the net profits as the cash flow of operating activities

Year 2016 Year 2015

Net Profit 1,984,769,331.86 1,268,043,363.75 Plus: asset impairment provisions 252,195,542.24 464,120,358.18 Depreciation of fixed assets 44,047,739.44 42,017,127.42 Amortization of intangible assets 9,302,676.25 8,239,513.59 Amortization of long-term unamortized expense 26,274,477.60 20,322,394.89

Loss from disposal of fixed assets, intangible assets and other long term -2,651,141.50 -442,593.45 assets Loss on fair value change 11,768,570.00 -14,523,494.00 Loss on investments -59,280,906.60 -135,016,573.48 Decrease of deferred income tax assets -118,953,333.35 -105,720,224.18 Increase of deferred income tax liabilities -79,618,950.66 61,608,366.77 Decrease of loans and advance payments -6,039,454,923.73 -5,569,797,206.94 209 2016 Annual Report

Year 2016 Year 2015

Increase of deposits from customers 28,586,182,439.60 22,744,940,598.41

Increase in net liability from transactions with inter-bank and central -2,321,370,476.03 7,006,417,333.43 bank Decrease in redemptory financial assets for sale 1,527,759,315.78 8,359,324,089.85 Increase in financial assets sold for repurchase 6,222,838,772.15 -3,182,315,082.37 Decrease in operating receivables -302,764,776.11 -202,708,217.47 Increase in operating payables 138,866,615.98 347,733,696.03 Service charges and interest expenses on bond issuance 353,942,693.41 275,676,543.49 Effects of exchange rate movement -9,908,252.78 -6,055,195.88 Net cash flow provided by operating activities 30,223,945,413.55 31,381,864,798.04

VIII. Rights and interests in other entities

1. Equity of structural subject incorporated into consolidation scope

Structural subjects incorporated in the consolidation scope are mainly guaranteed financial products issued by the Bank. The Bank considers to control such structural subjects or not as financial product manager, and judges if the Bank as financial product manager shall be principal person in charge based upon such factors including decision-making scope of the

Bank as asset manager, power of financial product holder, remuneration obtained by providing management services and variable earnings risk exposure confronted. For guaranteed financial products provided by the Bank, though the Bank does not hold any equity thereof, it is obliged to assume loss in accordance with guarantee agreements for relevant financial products in case of any loss on the products, and include the products in the consolidation scope.

December 31, 2016 December 31, 2015

Issuance of guaranteed financial 9,052,370,000.00 2,859,000,000.00 products

210 2016 Annual Report

Interests enjoyed by investors of on-balance guaranteed financial products are presented in deposits from customers or deposits from banks and other financial institutions.

2. Equity of structural subject incorporated into consolidated financial statements

Structural subjects not incorporated in the consolidation scope managed by the Bank are mainly non-guaranteed financial products issued and managed by the Bank. These structural subjects mainly aim to manage assets of investors and charge sales expenses or administrative expense, and the Bank raises capital by issuing investment products to investors, then invests the raised financial capital in relevant financial markets or relevant financial products as agreed in product contract, and allocates investment income to investors as agreed in contract. The Bank regards variable return relevant to such structural subjects is not significant.

December 31, 2016 December 31, 2015

Issuance of non-guaranteed 13,107,469,000.00 8,865,583,000.00 financial products

In order to acquire earnings with capital in a better manner, structural subjects not incorporated in the consolidation scope invested by the Bank mainly includes financial products and asset management plans issued and managed by an independent third party.

The Bank has not provided liquidity support for such structural subjects.

3. Equity enjoyed in structural subject initiated by third party financial institution

To invest in structural subjects not incorporated in the consolidation scope issued and managed by other institutions, the Bank will recognize investment income, income from interest and income from service charges from the subjects. These structural subjects mainly include financial products, special asset management plan and credit plan. In nature,

211 2016 Annual Report

these structural subjects aim to manage assets of investors and earn administrative expense, and the Bank raises capital by issuing investment products to investors. The Bank has not provided liquidity support for such structural subjects.

On December 31, 2016, book value and maximum loss risk exposure of assets generated by interest of structural subject not incorporated in the consolidation scope were as follows: Avail able-f or-sal December 31, 2016 e Investments classified as receivables Amount finan cial assets 5,517,2 Investment and financial products 80,000. 5,517,280,000.00 00 4,047,0 Investment asset management 00,000. 41,253,031,445.49 45,300,031,445.49 plan 00 4,550,0 4,717,284,135.74 4,721,834,135.74 Investment trust products 00.00 9,568,8 Amount 30,000. 45,970,315,581.23 55,539,145,581.23 00

On December 31, 2015, book value and maximum loss risk exposure of assets generated by interest of structural subject not incorporated in the consolidation scope were as follows:

Available-for-sale December 31, 2015 Investments classified as receivables Amount financial assets

Investment and financial products 1,326,880,000.00 500,479,166.67 1,827,359,166.67

Investment asset management plan 28,418,593,725.71 28,418,593,725.71 Investment trust products 789,840,000.00 2,965,299,676.86 3,755,139,676.86 Amount 2,116,720,000.00 31,884,372,569.24 34,001,092,569.24

212 2016 Annual Report

IX. Contingencies

1. Contentious matter

As of December 31, 2016, the Bank has been involved in 3 pending lawsuits as defendant with total underlying amount of RMB 7,037,443.58, the Bank was less likely to compensate for the cases, hence no estimated liability shall be recognized.

2. Pledged assets

December 31, December 31, 2015 2016

Repurchase agreement: Financial bond — available-for-sale financial assets 2,551,930,350.00 Financial bond — held-to-maturity investments 1,472,926,343.73 1,021,727,035.60 Bond — redemptory financial assets for sale 8,000,000,000.00 5,506,271,359.56 Deposit of capital discounted —loans and advance payments 6,624,739,035.69 5,472,208,861.28 Commercial draft — redemptory financial assets for sale Borrowing from the central bank: Corporate bond — financial assets measured at fair value through current profit and loss Corporate bond — available-for-sale financial assets 20,369,338.90 Financial bond — available-for-sale financial assets 52,305,348.49 Financial bond — held-to-maturity investments 210,965,526.37 643,639,709.16 Corporate bond — held-to-maturity investments 79,964,415.97 Credit assets —loans and advance payments 463,440,692.00 108,323,050.00 Amount 19,324,001,947.79 12,904,809,118.96

X. Commitments and major off-balance sheet matters 1. Capital commitment

December 31, 2016 December 31, 2015

Commitment to purchase long-term assets 590,279,194.88 838,187,809.13 Amount 590,279,194.88 838,187,809.13

Note: Long-term assets purchased are mainly houses, software, equipment acquisition and decoration projects.

213 2016 Annual Report

2. Operating lease commitment

Irrevocable operating lease contract signed by the Bank outward is as follows:

December 31, 2016 December 31, 2015

Minimum lease payment of irrevocable operating lease: 1st year after balance sheet date (including 1 year) 73,562,691.00 64,734,739.54 2nd year after balance sheet date (including 2 years) 88,788,615.51 92,811,772.78 3rd year after balance sheet date (including 3 years) 74,224,044.42 81,145,164.60 Subsequent years 300,521,997.18 317,749,715.80 Amount 537,097,348.11 556,441,392.72 3. Off-balance sheet commitments

December 31, 2016

Margins and deposits Sum Ratio of margins (%) pledged amount

Bank acceptance 12,210,915,464.75 8,010,802,366.79 65.60% Letter of guarantee 451,342,499.32 151,342,499.32 33.53% Letter of credit 403,432,340.85 80,705,580.00 20.00% Other credit commitments 200,000,000.00 Amount 13,265,690,304.92 8,242,850,446.11 61.67%

December 31, 2015

Margins and deposits Sum Ratio of margins (%) pledged amount Bank acceptance 15,814,440,929.76 11,501,183,025.30 72.73% Letter of guarantee 167,300.00 167,300.00 100.00% Letter of credit 77,259,002.58 21,077,000.70 27.28% Other credit commitments 300,000,000.00 Amount 16,191,867,232.34 11,522,427,326.00 71.16%

Banker's acceptance refers to commercial bill issued by payee or payer (or acceptance applicant), applied by the acceptance applicant to the Bank, and of which commercial bill is accepted upon review by the Bank.

214 2016 Annual Report

Letter of guarantee refers to credit business provided by the Bank at request by applicant or consignor, the Bank promises by issuing letter of guarantee to perform liabilities or assume responsibilities as agreed in letter of guarantee when the applicant does not apply obligations agreed in contract or promised affairs.

Letter of credit refers to credit business in the form of written guarantee document carrying certain amount and requiring payment in designated place with required vouchers in certain period, the letter is issued to beneficiary by the Bank as required and instructed by the applicant.

Other credit promises mainly refer to credit enhance service provided by the Bank.

4. Commission services

(1) Entrusted loan

The Bank's commission loan services refer to loans funded by principals including organizations and individuals, and issued, monitored and assisted in recalling by the Bank on behalf of principals based upon prospective borrower and credit terms determined by principals. The Bank does not assume any credit risk for its commission loan services, and the services are not recognized in balance sheet. The Bank charges service charges on services provided.

Entrusted loans and entrusted capitals of the Bank are as shown below:

December 31, 2016 December 31, 2015

Entrusted loan 2,914,494,580.98 2,668,404,467.17 Entrusted funds 2,914,494,580.98 2,668,404,467.17

(2) Financial service

215 2016 Annual Report

The Bank's financial service mainly means the Bank sells financial products to enterprises or individuals to raise funds to invest in bonds, bill assets, trust loans, trust beneficiary right, etc. All risks in connection with financial products are assumed by investors. The

Bank charges service charges including financial administrative expense and trustee fee on the service.

Financial service of which risk is assumed by the Bank is presented on balance sheet, products purchased with financial funds are presented in corresponding assets.

Off-balance sheet financial service of the Bank are as shown below:

December 31, 2016 December 31, 2015

Finance products 13,107,469,000.00 8,865,583,000.00

XI. Related transactions

1. Relationship with related party

Association relationship is regarded to be present if one party can control or exert joint control over financial and operation decisions of another party or exert major influence on another party and two or more parties controlled, jointly controlled or significantly influenced by a party constitute related parties. Individuals or enterprise may become an related party.

2. Cooperative enterprise and associated enterprise

As of December 31, 2016, the Bank has no cooperative enterprise and associated enterprise.

216 2016 Annual Report

3. Other related parties

Other related parties of the Bank include key management (including directors, supervisors and senior management) and their closely related family members, enterprises can be controlled, jointly controlled or significantly affected by key management and their closely related family members, and main shareholders holding at least 5% shares of the Company.

On December 31, 2016, main shareholders holding at least 5% shares of the Company include:

Share Name of shareholder proportion Main business (%) Money trust: chattel trust: real estate trust: negotiable securities trust; other property or property right trusts: engage in investment fund operation as initiator of investment fund or fund management company: manage operations including corporate assets reorganization, merger & acquisition and project financing, corporate finance, financial adviser; entrusted to manage securities underwriting operation Chongqing International Trust Inc. 28.996 approved by relevant department of State of Council; handle operations including brokerage, consultation, credit inquiry; custody and safety-deposit box operations; use inherent assets in the mode of deposits with banks, loans at call to other banks, loans, lease and investment; provide guarantee for others with inherent assets; engage in inter-bank borrowing. Above business scope covers RMB and foreign currency businesses. Industrial investment; production, processing: chemical & blended fabric, cotton yarn products, deferential chemical Jiabao Holding Group Co., Ltd. 9.941 fiber; dyeing; distribution: chemical products, nonferrous metals. Development, production, marketing of high and new technology, new process, new product ; development, production, sale of chemical raw materials (except for hazardous articles), building materials, computer software and China Sigma Co., Ltd. 6.213 hardware, electrical and electronic equipment, wire communication equipment, machinery and home appliances: decoration engineering: general merchandise sales: project contracting, technology consultation and information consultation in above scope. List of other corporate related parties is as follows:

Social credit Name of organization Relationship to the Bank code Hefei Science & Technology Other enterprises controlled by identical key 91340100713 Technological Rural Commercial management 926874L Bank Co., Ltd.

217 2016 Annual Report

Social credit Name of organization Relationship to the Bank code Other enterprises controlled by identical key 91500000781 YIMIN Asset Management Co., Ltd. management 591914M Chongqing Information Industry Other enterprises controlled by identical key 91500000660 Investment Service Co., Ltd. management 8874442 Chongqing Chongqing-Fuling Other enterprises controlled by identical key 91500000753 Expressway Co., Ltd. management 07715XY Other enterprises controlled by identical key 91500000202 Chongqing Road & Bridge Co., Ltd. management 85694X0 Zhejiang Jinggong Energy Other enterprises controlled by identical key 91330108088 Technology Co., Ltd. management 8961461 Zhejiang Jinggong Construction Co., Other enterprises controlled by identical key 91330600733 Ltd. management 835734J Zhejiang Jiabao New Fiber Group Other enterprises controlled by identical key 91330600699 Co., Ltd management 5003150 Chongqing Lvzhu Real Estate Other enterprises controlled by identical key 91500101580 Development Co., Ltd. management 16035X3 Chongqing Jinguan Automobile Other enterprises controlled by identical key 91500227621 Manufacture Co., Ltd. management 9753458 Chongqing Jiulongpo District Zetong Other enterprises controlled by identical key 91500107091 Petty Loan Co., Ltd. management 239470K Chongqing Jinguan Science (Group) Other enterprises controlled by identical key 91500000202 Co., Ltd. management 895076G Other enterprises controlled by identical key 91500000668 China Sigma Investment Co., Ltd. management 934946C 4. Transactions with related party

Transactions between the Bank and related parties are in accordance with general commercial terms and normal service procedures, pricing principle is consistent transaction with independent third party. Proportion of the Bank's related transaction amount accounts for similar transactions amount is not significant.

(1) Interest income

Name of related parties Year 2016 Year 2015

1. Income from loan interest: Chongqing Lvzhu Real Estate Development Co., Ltd. 3,709,241.85 18,236,254.81 Zhejiang Jiabao New Fiber Group Co., Ltd 574,058.25 Chongqing Jiulongpo District Zetong Petty Loan Co., Ltd. 2,641,819.43 610,249.67 Chongqing Chongqing-Fuling Expressway Co., Ltd. 350,000.00 Chongqing Jinguan Automobile Manufacture Co., Ltd. 4,044,300.00 1,955,850.00

218 2016 Annual Report

Name of related parties Year 2016 Year 2015

Chongqing Guoxin International Holdings Co., Ltd. - deposit of 11,801,666.67 capital discounted (note) Total income loan interest 10,395,361.28 33,528,079.40 2. Income from loan interest of lending funds Chongqing International Trust Inc. 3,022,147.21 1,460,199.99 Total income from loan interest of lending funds 3,022,147.21 1,460,199.99 3. Interest income from redemptory financial assets for sale: Hefei Science & Technology Technological Rural Commercial Bank Co., Ltd. 238,191.78 Total of interest income from redemptory financial assets for sale 238,191.78 4. Interest income from available-for-sale financial assets: Chongqing International Trust Inc. --- trust products 22,160,274.24 22,882,334.03 Total of interest income from available-for-sale financial assets 22,160,274.24 22,882,334.03 5. Interest income from investments classified as receivables: Chongqing International Trust Inc. --- trust products 37,015,641.21 20,823,620.77 Total of interest income from investments classified as 37,015,641.21 20,823,620.77 receivables

Note: In the loan interest income: (deposit of capital discounted) of Chongqing Guoxin

International Holdings Co., Ltd. is RMB 600 billion commercial acceptance bill

transferred by the counterparty CMBC Shenzhen Branch as rediscount, Chongqing

Guoxin International Holdings Co., Ltd. serves as the drawer.

(2) Interest expenditure

Name of related parties Year 2016 Year 2015

1. Interest expenses on deposits from customers Chongqing Guoxin International Holdings Co., Ltd. 4,728,537.02 5,690,760.65 Chongqing Road & Bridge Co., Ltd. 1,380,623.82 6,328,172.13 Chongqing Chongqing-Fuling Expressway Co., Ltd. 1,559,238.29 1,340,116.11 Other related parties 174,758.48 1,603,898.72 Amount 7,843,157.61 14,962,947.61 2. Interest expenses on deposits with banks Chongqing International Trust Inc. 16,227,635.65 9,138,696.70 Hefei Science & Technology Technological Rural Commercial 3,728,219.18 21,600,000.00 Bank Co., Ltd. Total of interest expenses on deposits with banks 19,955,854.83 30,738,696.70

219 2016 Annual Report

(3) Handling charges and commission income

Name of related parties Income type Year 2016 Year 2015

Chongqing International Trust Inc. Carrying cost 999,269.94 999,269.94 Hefei Science & Technology Service charges for Technological Rural Commercial non-guaranteed financial 3,647,937.06 5,369,424.66 Bank Co., Ltd. products (note 1) Zhejiang Jiabao New Fiber Group Service charges for issuing 146,163.75 Co., Ltd import letter of credit Zhejiang Jinggong Energy Service charges for bank 16,805.47 9,241.89 Technology Co., Ltd. acceptance Chongqing Guoxin International Service charges for entrusted 100,000.00 Holdings Co., Ltd. loans (note 2) Total income from service charges 4,764,012.47 6,524,100.24 and commission

Note 1: Hefei Science & Technology Technological Rural Commercial Bank Co., Ltd. - service charges for non-guaranteed financial products refer to funds raised by non-guaranteed financial products issued by the Bank, the funds come from Hefei Science

& Technology Technological Rural Commercial Bank Co., Ltd.

Note 2: Chongqing Guoxin International Holdings Co., Ltd. - service charges for entrusted loans refer to those for loans entrusted by Kunming Fengtai Investment Co., Ltd. to issue to Chongqing Guoxin International Holdings Co., Ltd., principal of the entrusted loans was

RMB 1 billion, and the term was from January 25, 2016 to February 2, 2016. The Bank has collected RMB 100,000 service charges for agency services.

(4) Related lease payment

Name of related parties Year 2016 Year 2015

Chongqing International Trust Inc. 7,410,068.19 9,941,005.25 Amount 7,410,068.19 9,941,005.25

During March 2008 to May 2015, office location of the Bank's head office was No.107,

Minquan Road, Yuzhong District, the office occupancy leased belonged to Chongqing

International Trust Inc., covering a leased area of 5,607.29 m2; in June 2015, the Bank's

220 2016 Annual Report

head office moved to No.99, Huichuanmen Road, Jiangbeicheng, Jiangbei District,

Chongqing, the business occupancy was still used by Yuzhong Sub-branch, the leased area decreased to 1,521.80 m2, lease term was from June 2015 to May 2018, the rent was paid quarterly.

(5) Other related transactions

1) Instructions on withdrawing houses with joint land development and construction from

Zhejiang Jinggong Century Construction Co., Ltd. and Chongqing Lvzhu Real Estate

Development Co., Ltd., other enterprises controlled by identical key management

In November 2010, the 12th meeting of the 1st session of Board of Directors deliberated and approved Proposal for Applying Coalition Suggestion to Land Project in Wanzhou

Jiangnan New Zone, in accordance with relevant national construction rules and bid requirements for major investment projects, the Bank intended to apply joint construction to land project in Wanzhou Jiangnan New Zone. In June 2011, the Bank entrusted

Chongqing International Investment Consultation Group Co., Ltd. as bidding agency to complete public bidding in respect of "Wanzhou Binjiang Project of Chongqing Three

Gorges Bank" joint construction party, the supplier winning the bid was Zhejiang Jinggong

Century Construction Engineering Co., Ltd.

In August 2011, the Bank signed Joint Development Agreement of Wanzhou Binjiang

Project with Zhejiang Jinggong Century Construction Engineering Co., Ltd. (renamed as

Zhejiang Jinggong Construction Engineering Co., Ltd., hereinafter referred to as Zhejiang

Jinggong), the Bank owned land use right of a plot of commercial and financial land 221 2016 Annual Report

covering 22987m2 while Zhejiang Jinggong funded and constructed the project, both parties would allocate construction results after completion, the Bank has acquired 30% equity of total floor area of the project. On August 15, 2012, the Bank signed

Supplementary Agreement to Joint Development Agreement with Zhejiang Jinggong, the

Bank agreed Zhejiang Jinggong to entrust Chongqing Lvzhu Real Estate Development Co.,

Ltd. to undertake engineering affairs, which were to be performed by Zhejiang Jinggong as agreed in Joint Development Agreement of Wanzhou Binjiang Project. On January 23, 2014, the Bank handled land certificate division, and owned 30% of land parcel area, namely ownership of 6896.5 ㎡; Chongqing Lvzhu Real Estate Development Co., Ltd. owned 70% of land parcel area, namely ownership of 16090.5 ㎡ . Book value RMB 34,912,136.81 corresponding to the land withdrawn after land certificate division was included and presented in other non-current assets.

On at October 26, 2016, the Bank signed house delivery meeting minutes with Chongqing

Lvzhu Real Estate Development Co., Ltd., and withdrew houses in accordance with joint development agreement. In accordance with No. 7 Accounting Standards for Business

Enterprises - Exchange of Non-Monetary Assets, the Bank withdrew houses with 70% of land use right to take book value (book value of divided land use right) and relevant taxes payable as cost of house construction, RMB 36,871,660.97 was included in construction in progress. As of December 31, 2016, real estate right certificates were handled for built houses, the houses were being decorated and have not been put into use.

2) Instructions on purchasing Xiyong Scientific and Technical Information Center and business occupancy from Chongqing Information Industry Investment Service Co., Ltd.,

222 2016 Annual Report

other enterprise controlled by identical key management

In December 2011, the 40th Extraordinary Meeting of 1st Session of Board of Directors deliberated and approved Proposal on Investing in and Purchasing Scientific Information

Center and Office Business Occupancy at Head Office as Fixed Assets of Chongqing Three

Gorges Bank Co., Ltd. In April 2012, 2011 Annual Shareholder's General Meeting deliberated and approved Proposal on Investing in and Purchasing Scientific Information

Center and Office Business Occupancy at Head Office as Fixed Assets of Chongqing Three

Gorges Bank Co., Ltd.

On December 31, 2011, the Bank signed House Pre-order Agreement with Chongqing

Information Industry Investment Service Co., Ltd., both parties agreed that the Bank purchased 2# Building and local area of B1 floor in Xiyong Software Park Phase-II Project to build technical information center and business occupancy, floor area (excluding B1 floor) was nearly 21,604 m2 (subject to area carried on certificate), total house payment was RMB 116,230,000, and the Bank paid RMB 95 million as prepayment. On December

5, 2016, both parties signed Chongqing Housing Purchase and Sale Contract, total house payment was RMB 116,783,982.80.

As of December 31, 2016, the real estate right certificates were handled for built houses, the houses were being decorated and have not been put into use. The house payment has been paid in full and transferred in construction in progress for accounting.

2) Instructions on entrusting to purchase Jiazhou headquarters building customized by

Zhongyu Real Estate from Chongqing Guoxin International Holdings Co., Ltd., other

223 2016 Annual Report

enterprise controlled by identical key management

In December 2014, the 25th meeting of the 1st Board of Directors deliberated and approved Proposal on Investing in and Purchasing Scientific Information Center and

Office Building at Head Office of Chongqing Three Gorges Bank Co., Ltd. In April 2015,

2014 Annual Shareholder's General Meeting deliberated and approved Proposal on

Investing in and Purchasing Scientific Information Center and Office Building at Head

Office of Chongqing Three Gorges Bank Co., Ltd.

On December 31, 2014, the Bank signed cooperative intention agreement of house purchase with Chongqing Guoxin International Holdings Co., Ltd., both parties agreed to purchase nearly 50% of 4# Building in 4# Parcel of Zhongyu International Metropolis in

Jiazhou Business District, which was entrusted to be built-to-suit by Zhongyu Real Estate from Chongqing Guoxin International Holdings Co., Ltd. Floor area of the houses purchased was nearly 86479 m2, price per m2 was no more than RMB 13,000, and total purchase price was no more than RMB 1.125 billion.

On June 8, 2015, the Bank signed Entrusted Purchase Agreement of Custom-made Office

Building with Chongqing Guoxin International Holdings Co., Ltd., property area was

87,073 m2, the property was priced as per floor classification, total price was nearly RMB

1,132,439,720. The Bank entrusted Chongqing Guoxin International Holdings Co., Ltd. to handle payment of property cost and management of property project construction, including project functional demands, engineering quality, progress, organization and coordination and capital payment. As the project completed meets pre-sale and property certificate handling conditions of Zhongyu Real Estate, the Bank will sign housing 224 2016 Annual Report

purchase and sale contract with Zhongyu Real Estate additionally, and handle affairs in connection with housing property. Zhongyu Real Estate will issue house purchase invoice and handle housing-ownership certificate to the Bank within 90 workdays upon project completion delivery and filing.

As of December 31, 2016, the roof has been finished, comprehensive acceptance (filing) and delivery to the Bank are estimated to be completed before June 30, 2017. The Bank has already paid house payment RMB 736,085,818.00 for another to Chongqing Guoxin

International Holdings Co., Ltd., the payment was included in the account of other assets - other non-current assets.

(6) Related transactions with key management

Key management of the Bank includes directors, supervisors and senior management. The

Bank conducts normal banking transactions with key management during day-to-day business. The Bank did not conduct any significant transaction or individually significant transaction with key management. Payroll of key management accrued by the Bank in this year has no significant effect on 2016 annual financial statements of the Bank.

3. Outstanding amount of related-party transaction

(1) Loans and advance payments December 31, Name of related parties December 31, 2015 2016 Chongqing Lvzhu Real Estate Development Co., Ltd. 99,075,300.00 Chongqing Jiulongpo District Zetong Petty Loan Co., Ltd. 60,000,000.00 72,000,000.00 Chongqing Jinguan Automobile Manufacture Co., Ltd. 60,000,000.00 60,000,000.00 Amount 120,000,000.00 231,075,300.00 (2) Deposits from customers

225 2016 Annual Report

Name of related parties December 31, 2016 December 31, 2015

Chongqing Guoxin International Holdings Co., Ltd. 715,632,968.33 110,546,007.35 Chongqing Road & Bridge Co., Ltd. 1,000,347.36 1,273,387,815.86 Other related parties 77,188,035.72 134,066,354.55 Amount 793,821,351.41 1,518,000,177.76 (3) Lending funds

Name of related parties December 31, 2016 December 31, 2015

Chongqing International Trust Inc. 1,100,000,000.00 2,500,000,000.00 Amount 1,100,000,000.00 2,500,000,000.00

Note: On December 31, 2015, the Bank lent RMB 2,500,000,000.00 to Chongqing

International Trust Inc. by taking equal mount deposit of Chongqing International Trust Inc. with the Bank as pledge, and risk exposure was zero.

(4) Deposits with banks

Name of related parties December 31, 2016 December 31, 2015

Chongqing International Trust Inc. 1,974,338,447.03 4,742,411,741.82 Hefei Science & Technology Technological Rural Commercial Bank Co., Ltd. 300,000,000.00 Amount 1,974,338,447.03 5,042,411,741.82 (5) Available-for-sale financial assets

Investment Name of related parties December 31, 2016 December 31, 2015 type Trust Chongqing International Trust Inc. 4,550,000.00 330,840,000.00 products Amount 4,550,000.00 330,840,000.00 (6) Investments classified as receivables

Investment Name of related parties December 31, 2016 December 31, 2015 type Trust Chongqing International Trust Inc. 1,757,590,000.00 218,720,000.00 products Amount 1,757,590,000.00 218,720,000.00 (7) The Bank's financial products invested by related party

226 2016 Annual Report

Name of related parties December 31, 2016 December 31, 2015

Hefei Science & Technology Technological Rural Commercial 1,112,000,000.00 1,612,000,000.00 Bank Co., Ltd. Amount 1,112,000,000.00 1,612,000,000.00 Note: Hefei Science & Technology Technological Rural Commercial Bank Co., Ltd. invests in the non-guaranteed financial products issued by the Bank. (8) Issuing import letter of credit

Name of related parties December 31, 2016 December 31, 2015

Zhejiang Jiabao New Fiber Group Co., Ltd 10,292,000.00 Amount 10,292,000.00 (9) Banker's acceptance

Name of related parties December 31, 2016 December 31, 2015

Zhejiang Jinggong Energy Technology Co., Ltd. 25,000,000.00 18,483,773.78 Amount 25,000,000.00 18,483,773.78

XII. Financial risk management

The Bank's Financial risk management aims to optimize capital allocation and maximize shareholders' interest in acceptable scope of risk while meeting requirements proposed by regulation department, depositor and other shareholders for robust operation of the Bank.

The Bank analyzes, verifies, monitors and reports risk conditions by developing risk management policies, setting proper risk quota and control procedure and applying relevant information system. In addition, the Bank checks its risk management policies and relevant systems, so as to reflect recent changes in market, product and the industry.

Financial risks confronted by the Bank mainly include credit risk, market risks and liquidity risk. Market risks include exchange rate risk and interest rate risk.

227 2016 Annual Report

1. Credit risk

Credit risk refers to risk of bearing financial loss as customer or counterparty fails to perform obligations. Credit risk is one of the most significant risks confronted by business operation of the Bank.

Credit risk is the risk of breach of contract by counterparty or debt default. Credit risk increases when all counterparties are intensively distributed in a single industry or area.

This is because loan repayment capacity is finally affected as different counterparties may be affected by identical economic development since they are in the same area or industry.

When certain number of customers are engaging in the same operating activity, or in the same geographic position, or their performance capabilities will be affected by the same economic change as corresponding industry has similar economic characteristics.

Concentration degree of credit risk reflects the Bank's sensitivity to a specific industry or geological location.

The Bank has established a credit quality evaluation system, it defines credit line as per risk level of the borrower or counterparty, and decides required collateral value or guarantee level. Relevant risk evaluation processes include links of customer investigation, risk rating, credit line approval, loan review and post-loan monitoring. Risk evaluation will be completed on a regular basis to ensure that the Bank can monitor potential risks timely and adopt proper risk avoidance measures. In addition, the Bank provides guarantee for customers, and reduces risks by applying identical risk control procedures and policies.

(1) Regardless of available collaterals or other credit enhancement, typical amount of

228 2016 Annual Report

maximum credit risk exposure at the balance sheet date is presented as follows:

December 31, 2016 December 31, 2015

Credit risk exposure in connection with on-balance items is as follows: Cash and deposits at central bank 25,676,786,609.79 20,895,269,938.31 Deposits with banks and other financial institutions 5,288,233,482.27 5,436,755,786.18 Lending fund 1,641,622,000.00 2,500,000,000.00 Financial assets are measured at fair value through current 925,515,900.00 344,893,070.00 profit and loss Redemptory monetary capital for sale 15,288,772,833.22 16,455,698,322.26 Interests receivable 950,261,244.80 662,775,800.78 Loans and advance payments 37,477,748,560.21 31,526,571,218.76 Available-for-sale financial assets 27,942,658,619.56 13,006,713,637.56 Held-to-maturity investment 12,437,042,862.56 8,124,686,316.86 Investments classified as receivables 51,962,745,219.21 31,994,361,684.67 OTHER ASSETS 17,470,077.83 11,740,170.77 Sub-total of on-balance credit risk exposure 179,608,857,409.45 130,959,465,946.15 Credit risk exposure in connection with off-balance sheet items is as follows: Banker's acceptance, letter of guarantee and letter of credit 13,065,690,304.92 15,891,867,232.34 Other credit commitments 200,000,000.00 300,000,000.00 Sub-total of off-balance sheet credit risk exposure 13,265,690,304.92 16,191,867,232.34 Total of credit risk exposure 192,874,547,714.37 147,151,333,178.49 (2) Credit quality information of financial assets.

①Credit quality conditions of various assets with credit risks

Deposits with central bank, deposits with banks, lending funds, financial assets measured at fair value through current profit and loss, redemptory financial assets for sale and held-to-maturity investments are all neither overdue nor impaired.

Impairment and expiration of interest receivable, loans and advance payments, available-for-sale financial assets, investment classified as receivables and other financial assets are presented as follows:

229 2016 Annual Report

December 31, 2016:

Financial assets not Overdue but not Impaired Depreciation overdue and not impaired Amount financial assets reserves impaired financial assets Interests 949,904,971.01 1,238,243.28 881,969.49 950,261,244.80 receivable Loans and advance 37,921,438,776.53 176,842,364.50 356,140,532.16 976,673,112.98 37,477,748,560.21 payments Available-for-sa le financial 27,950,158,619.56 50,000.00 7,550,000.00 27,942,658,619.56 assets Investments classified as 52,610,292,154.21 647,546,935.00 51,962,745,219.21 receivables OTHER 16,813,829.52 34,600.00 10,824,883.81 10,203,235.50 17,470,077.83 ASSETS Subtotal 119,448,608,350.83 178,115,207.78 367,015,415.97 1,642,855,252.97 118,350,883,721.61

December 31, 2015:

Financial assets Overdue but not Impaired Depreciation not overdue and impaired financial Amount reserves not impaired financial assets assets Interests receivable 634,527,261.47 15,233,854.49 15,041,537.10 2,026,852.28 662,775,800.78 Loans and advance 31,134,715,385.30 962,266,165.10 317,985,199.06 888,395,530.70 31,526,571,218.76 payments Available-for-sale 13,018,713,637.56 50,000.00 12,050,000.00 13,006,713,637.56 financial assets Investments classified as 31,951,222,610.70 298,719,958.54 235,000,000.00 490,580,884.57 31,994,361,684.67 receivables OTHER ASSETS 10,130,151.17 1,036,841.00 841,718.89 268,540.29 11,740,170.77

Subtotal 76,749,309,046.20 1,277,256,819.13 568,918,455.05 1,393,321,807.84 77,202,162,512.54

② Credit risk of loans and advance payments a) Not overdue but not impaired

December 31, 2016 December 31, 2015 corporate loan Including: normal 27,560,499,071.95 22,302,003,597.69 Special-mentioned 1,584,265,106.15 553,166,954.15 Subtotal 29,144,764,178.10 22,855,170,551.84 Personal loan Including: normal 8,694,341,649.37 8,041,756,061.82 Special-mentioned 82,332,949.06 237,788,771.64 Subtotal 8,776,674,598.43 8,279,544,833.46 Amount 37,921,438,776.53 31,134,715,385.30

230 2016 Annual Report

December 31, 2016 December 31, 2015

Minus: loan impairment reserves 835,849,256.61 679,671,524.70 Net amount 37,085,589,519.92 30,455,043,860.60 b) Overdue but not impaired loans

December 31, 2016 December 31, 2015 up to 3 months 170,642,364.50 667,940,790.22 3 months to 6 months 1,500,000.00 196,743,418.45 6 months to 1 year 4,700,000.00 97,581,956.43 Amount 176,842,364.50 962,266,165.10 Minus: loan impairment reserves 7,824,825.77 64,190,577.57 Net amount 169,017,538.73 898,075,587.53 c) Impaired loans

December 31, 2016 December 31, 2015

Fiduciary loan 743,445.95 540,881.49 Guaranteed loan 285,972,653.58 158,332,025.47 Mortgage loan 69,424,432.63 152,600,757.87 Pledge loan 6,511,534.23 Amount 356,140,532.16 317,985,199.06 Minus: loan impairment reserves 132,999,030.60 144,533,428.43 Net amount 223,141,501.56 173,451,770.63 ③ Securities investment December 31, 2016 Financial assets are Available-for-sa Investments measured at fair value Held-to-maturity le financial classified as through current profit and investment assets receivables loss RMB bonds: Including: AAA- to 481,591,000.00 8,299,765,002.00 10,615,402,874.19 AAA+ AA- to AA+ 443,924,900.00 7,358,450,450.00 1,821,639,988.37 A- to A+ 1,687,632,667.56 Unrated 1,035,230,500.00 6,639,976,572.98 Finance products 5,517,280,000.00 Trust products 4,550,000.00 4,717,284,135.74 Asset management plan 4,047,000,000.00 41,253,031,445.49 Amount 925,515,900.00 27,949,908,619.56 12,437,042,862.56 52,610,292,154.21

231 2016 Annual Report

December 31, 2015 Financial assets are Available-for-sa Investments measured at fair value Held-to-maturity le financial classified as through current profit and investment assets receivables loss RMB bonds: Including: AAA- to 94,398,630.00 4,455,913,501.04 6,824,607,826.17 AAA+ AA- to AA+ 250,494,440.00 4,627,203,045.18 1,300,078,490.69 A- to A+ 901,795,891.34 Unrated 916,831,200.00 300,000,000.00 Finance products 1,326,880,000.00 500,479,166.67 Target debt financing 300,570,000.00 instrument Trust products 789,840,000.00 2,965,299,676.86 Asset management plan 28,418,593,725.71 Amount 344,893,070.00 13,018,463,637.56 8,124,686,316.86 32,484,942,569.24

2. Market risks (including exchange rate risk and interest rate risk)

The Bank assumes market risk of loss on the Bank's on-and off-balance sheet operations due to adverse change in market price (interest rate, exchange rate, creditors' investment).

As general market changes or specific changes have effects on interest rate and bank note transaction exposure cash, market risk may affects all financial products sensitive to market risk including loans, deposits, loans at call and bond investment.

(1) Exchange rate risk management

The Bank continuously improve risk management of its foreign exchange operations and enhance management capability by perfecting foreign exchange business operation, intensifying foreign exchange transaction authorization and approval system, and applying strict exposure cash management to foreign exchange transaction and loans at call quota in foreign currency. Potential currency mismatch is reduced to the maximum by arranging and applying sources of foreign currency funds in a reasonable manner.

232 2016 Annual Report

Closing risk exposure distribution of rate in foreign money is summarized as follows. Book value of assets and liabilities in original currency has been converted into amount in RMB.

As of 31 December 2016: Other USD converted currencies RMB Amount into RMB converted into RMB Assets: Cash and deposits with central 25,671,467,907.34 4,640,103.80 678,598.65 25,676,786,609.79 bank Deposits in other banks 5,243,559,373.88 42,405,479.42 2,268,628.97 5,288,233,482.27 Lending fund 1,600,000,000.00 41,622,000.00 1,641,622,000.00 Financial assets are measured at fair value through current 925,515,900.00 925,515,900.00 Rpreodfeitmapntdorlyossmonetary capital 15,288,772,833.22 15,288,772,833.22 for sale Interests receivable 946,438,520.09 636,164.32 3,186,560.39 950,261,244.80 Loans and advance payments 37,256,691,898.40 188,901,358.21 32,155,303.60 37,477,748,560.21 Available-for-sale financial 27,942,658,619.56 27,942,658,619.56 assets Held-to-maturity investment 12,437,042,862.56 12,437,042,862.56 Investments classified as 51,962,745,219.21 51,962,745,219.21 receivables OTHER ASSETS 17,470,077.83 17,470,077.83 Total of assets 179,292,363,212.09 278,205,105.75 38,289,091.61 179,608,857,409.45 Liabilities: Borrowing from the central 500,000,000.00 500,000,000.00 bank Deposits from banks and other 14,619,981,461.54 14,619,981,461.54 Lfinoancsiaflroinmstitoutthioenrsbanks and 45,506,076.25 32,151,251.41 77,657,327.66 other financial institutions Financial assets sold for 18,178,661,300.69 18,178,661,300.69 repurchase Deposits from customers 122,087,198,249.83 75,794,088.28 879,848.72 122,163,872,186.83 Interests payable 846,886,854.83 373,396.51 4,345.00 847,264,596.34 Bonds payable 11,628,102,295.19 11,628,102,295.19 Other liabilities 216,873,057.89 216,873,057.89 Total of liabilities 168,077,703,219.97 121,673,561.04 33,035,445.13 168,232,412,226.14 Net amount of asset-liability 11,214,659,992.12 156,531,544.71 5,253,646.48 11,376,445,183.31 exposure

233 2016 Annual Report

As of 31 December 2015: Other USD converted currencies RMB Amount into RMB converted into RMB Assets: Cash and deposits with central 20,894,399,043.54 550,865.08 320,029.69 20,895,269,938.31 bank Deposits in other banks 5,349,206,387.46 83,784,787.46 3,764,611.26 5,436,755,786.18 Lending fund 2,500,000,000.00 2,500,000,000.00 Financial assets are measured at fair value through current 344,893,070.00 344,893,070.00 profit and loss Redemptory monetary capital 16,455,698,322.26 16,455,698,322.26 for sale Interests receivable 661,790,035.09 985,765.69 662,775,800.78 Loans and advance payments 31,352,813,275.90 173,757,942.86 31,526,571,218.76 Available-for-sale financial 13,006,713,637.56 13,006,713,637.56 assets Held-to-maturity investment 8,124,686,316.86 8,124,686,316.86 Investments classified as 31,994,361,684.67 31,994,361,684.67 receivables OTHER ASSETS 11,740,170.77 11,740,170.77 Total of assets 130,696,301,944.11 259,079,361.09 4,084,640.95 130,959,465,946.15 Liabilities: Borrowing from the central 700,000,000.00 700,000,000.00 bank Deposits from banks and other 8,838,293,128.55 8,838,293,128.55 Lfinoancsiaflroinmstitoutthioenrsbanks and 1,000,000,000.00 107,144,400.00 1,107,144,400.00 other financial institutions Financial assets sold for 11,955,822,528.54 11,955,822,528.54 repurchase Deposits from customers 93,566,040,288.95 8,636,838.85 3,012,619.43 93,577,689,747.23 Interests payable 679,654,674.28 146,665.75 6.09 679,801,346.12 Bonds payable 5,284,154,929.27 5,284,154,929.27 Other liabilities 129,828,853.53 129,828,853.53 Total of liabilities 122,153,794,403.12 115,927,904.60 3,012,625.52 122,272,734,933.24

Net amount of asset-liability 8,542,507,540.99 143,151,456.49 1,072,015.43 8,686,731,012.91 exposure

234 2016 Annual Report

(2) Interest rate risk management

Interest rate risk refers to risk of financial situation being affected by adverse change in interest rate level. Interest rate risk of banking business is inherent risk of manage operations of the Bank, factors arising interest rate risk include time difference at contract expiry date, or reset interest rate of assets and liabilities. However, interest rate risk held for transaction purpose mainly comes from investment portfolio of capital business. The

Bank's interest rate risk is subject to unified control by the head office.

Repricing or maturity date (the earlier) of the Bank's financial assets and financial liabilities at each balance sheet date is as follows:

235 2016 Annual Report

December 31, 2016:

up to 3 months 3 months to 1 year 1 year to 5 years Over 5 years Overdue/non-accrual Sum

Asset items: Cash and deposits at central bank 25,459,548,992.28 217,237,617.51 25,676,786,609.79 Deposits in other banks 3,965,233,482.27 1,323,000,000.00 5,288,233,482.27 Lending fund 1,141,622,000.00 500,000,000.00 1,641,622,000.00 Financial assets are measured at fair 481,591,000.00 443,924,900.00 925,515,900.00 value through current profit and loss Redemptory monetary capital for 14,663,036,531.02 625,736,302.20 15,288,772,833.22 sale Interests receivable 950,261,244.80 950,261,244.80 Loans and advance payments 12,345,130,218.26 8,572,702,122.79 15,528,138,645.30 706,179,847.77 325,597,726.09 37,477,748,560.21 Available-for-sale financial assets 3,246,657,502.47 6,704,790,045.09 11,117,285,272.00 6,873,675,800.00 250,000.00 27,942,658,619.56 Held-to-maturity financial assets 69,998,300.85 919,626,953.12 6,406,822,692.10 5,040,594,916.49 12,437,042,862.56 Investments classified as receivables 5,684,075,365.34 16,331,718,932.08 28,272,451,661.01 1,674,499,260.78 51,962,745,219.21 OTHER ASSETS 16,470,077.83 1,000,000.00 17,470,077.83 Total of assets 66,591,772,470.32 35,459,165,355.28 61,768,623,170.41 14,294,949,825.04 1,494,346,588.40 179,608,857,409.45 Liability items Borrowing from the central bank 500,000,000.00 500,000,000.00 Deposits with banks 3,241,981,461.54 11,378,000,000.00 14,619,981,461.54 Loans from other banks and other 45,506,076.25 32,151,251.41 77,657,327.66 financial institutions Financial assets sold for repurchase 17,553,802,685.34 624,858,615.35 18,178,661,300.69 Deposits from customers 59,828,816,216.04 19,840,096,805.85 41,294,959,114.94 1,200,000,050.00 122,163,872,186.83

236 2016 Annual Report

up to 3 months 3 months to 1 year 1 year to 5 years Over 5 years Overdue/non-accrual Sum

Interests payable 847,264,596.34 847,264,596.34 Bonds payable 2,993,553,512.85 6,844,188,001.74 1,790,360,780.60 11,628,102,295.19 Other liabilities 209,705,016.89 2,680,403.00 4,487,638.00 216,873,057.89 Total of liabilities 83,873,364,968.91 39,221,975,077.35 41,299,446,752.94 2,990,360,830.60 847,264,596.34 168,232,412,226.14 Total of interest rate sensitivity gap -17,281,592,498.59 -3,762,809,722.07 20,469,176,417.47 11,304,588,994.44 647,081,992.06 11,376,445,183.31 December 31, 2015:

up to 3 months 3 months to 1 year 1 year to 5 years Over 5 years Overdue/non-accrual Sum

Asset items: Cash and deposits at central bank 20,696,399,415.19 198,870,523.12 20,895,269,938.31 Deposits in other banks 5,436,755,786.18 5,436,755,786.18 Lending fund 2,500,000,000.00 2,500,000,000.00 Financial assets are measured at fair 94,398,630.00 250,494,440.00 344,893,070.00 value through current profit and loss Redemptory monetary capital for 14,683,367,948.26 1,772,330,374.00 16,455,698,322.26 sale Interests receivable 662,775,800.78 662,775,800.78 Loans and advance payments 9,535,972,178.61 14,509,441,537.78 6,270,914,443.97 499,823,798.64 710,419,259.76 31,526,571,218.76 Available-for-sale financial assets 1,784,678,652.00 3,305,130,311.34 3,845,893,523.10 4,070,761,151.12 250,000.00 13,006,713,637.56 Held-to-maturity financial assets 364,738,039.01 4,518,835,131.31 3,241,113,146.54 8,124,686,316.86 Investments classified as receivables 1,573,496,176.89 13,353,966,356.84 17,066,899,150.94 31,994,361,684.67 OTHER ASSETS 10,740,170.77 1,000,000.00 11,740,170.77

237 2016 Annual Report

up to 3 months 3 months to 1 year 1 year to 5 years Over 5 years Overdue/non-accrual Sum

Total of assets 56,315,808,957.90 33,305,606,618.97 31,953,036,689.32 7,811,698,096.30 1,573,315,583.66 130,959,465,946.15 Liability items Borrowing from the central bank 700,000,000.00 700,000,000.00 Deposits with banks 6,501,293,128.55 2,087,000,000.00 250,000,000.00 8,838,293,128.55 Loans from other banks and other 1,107,144,400.00 1,107,144,400.00 financial institutions Financial assets sold for repurchase 11,955,822,528.54 11,955,822,528.54 Deposits from customers 54,797,595,641.37 15,060,619,291.23 21,395,474,814.63 2,324,000,000.00 93,577,689,747.23 Interests payable 679,801,346.12 679,801,346.12 Bonds payable 498,127,939.00 2,995,423,819.38 1,790,603,170.89 5,284,154,929.27 Other liabilities 114,551,784.53 4,167,612.00 11,109,457.00 129,828,853.53 Total of liabilities 74,974,535,421.99 17,851,786,903.23 24,652,008,091.01 4,114,603,170.89 679,801,346.12 122,272,734,933.24 Total of interest rate sensitivity gap -18,658,726,464.09 15,453,819,715.74 7,301,028,598.31 3,697,094,925.41 893,514,237.54 8,686,731,012.91 3. Liquidity risk management

Liquidity risk refers to risk of failing to meet customers' demands of withdrawing matured liability and new bank loans as well as reasonable financing, or failing to meet these demands at normal cost. The Bank manages liquidity risk and aims to: optimize structure of assets and liabilities; maintain steady deposit basis; predict cash flow and evaluate level of current assets; and keep efficient internal capital allocation mechanism, and guarantee liquidity of the Bank. Analysis results at maturity date of the Bank's balance sheet are as follows: December 31, 2016:

238 2016 Annual Report

Instant repayment up to 3 months 3 months to 1 year 1 year to 5 years Over 5 years Overdue/others Sum

Asset items: Cash and deposits at 8,471,801,317.74 17,204,985,292.05 25,676,786,609.79 central bank Deposits in other 366,232,471.46 3,617,051,855.56 1,365,527,569.44 5,348,811,896.46 banks Lending fund 1,148,487,369.96 518,750,000.00 1,667,237,369.96 Financial assets are measured at fair value through 541,295,000.00 494,390,000.00 1,035,685,000.00 current profit and loss Redemptory monetary capital for 14,677,253,202.61 632,700,000.00 15,309,953,202.61 sale Interests receivable 950,261,244.80 950,261,244.80 Loans and advance 273,704.48 5,860,679,940.92 16,945,383,242.99 35,033,210,739.26 6,007,815,325.79 2,066,754,535.17 65,914,117,488.61 payments Available-for-sale 3,427,258,852.78 7,564,639,586.11 13,613,857,444.44 7,879,128,000.00 250,000.00 32,485,133,883.33 financial assets Held-to-maturity 154,262,700.00 1,335,481,690.00 7,838,182,580.00 5,706,181,800.00 15,034,108,770.00 financial assets Investments classified as 6,250,119,227.66 18,608,919,276.66 32,529,325,377.10 1,960,800,000.00 59,349,163,881.42 receivables OTHER ASSETS 16,470,077.83 1,000,000.00 17,470,077.83 Total of assets 8,854,777,571.51 35,135,113,149.49 47,512,696,365.20 89,508,966,140.80 21,553,925,125.79 20,223,251,072.02 222,788,729,424.81 Liability items Borrowing from the 504,002,500.00 8,005,000.00 512,007,500.00 central bank 239 2016 Annual Report

Instant repayment up to 3 months 3 months to 1 year 1 year to 5 years Over 5 years Overdue/others Sum

Deposits with banks 2,233,611,461.54 1,017,641,098.22 11,825,237,741.67 15,076,490,301.43 Loans from other banks and other 45,750,020.67 32,190,421.68 77,940,442.35 financial institutions Financial assets sold 17,569,747,329.49 632,700,000.00 18,202,447,329.49 for repurchase Deposits from 50,044,006,415.47 10,066,801,592.83 20,653,516,693.65 48,272,185,938.95 2,836,274,614.89 131,872,785,255.79 customers Interests payable 847,264,596.34 847,264,596.34 Bonds payable 3,143,072,477.78 7,306,181,686.67 421,200,000.00 2,037,600,000.00 12,908,054,164.45 Other liabilities 209,705,016.89 2,680,403.00 4,487,638.00 216,873,057.89 Total of liabilities 52,487,322,893.90 31,845,692,921.99 40,958,316,681.67 48,701,390,938.95 4,873,874,614.89 847,264,596.34 179,713,862,647.74 Net liquidity -43,632,545,322.39 3,289,420,227.50 6,554,379,683.53 40,807,575,201.85 16,680,050,510.90 19,375,986,475.68 43,074,866,777.07 December 31, 2015:

Instant repayment up to 3 months 3 months to 1 year 1 year to 5 years Over 5 years Overdue/others Sum

Asset items: Cash and deposits at 8,741,135,607.74 12,154,134,330.57 20,895,269,938.31 central bank Deposits in other 5,436,755,786.18 5,436,755,786.18 banks Lending fund 2,501,289,477.78 2,501,289,477.78 Financial assets are measured at fair value through 98,474,000.00 15,695,000.00 277,085,000.00 391,254,000.00 current profit and loss 240 2016 Annual Report

Instant repayment up to 3 months 3 months to 1 year 1 year to 5 years Over 5 years Overdue/others Sum

Redemptory monetary capital for 14,707,059,921.46 1,797,338,889.14 16,504,398,810.60 sale Interests receivable 662,775,800.78 662,775,800.78 Loans and advance 4,196,595.97 6,670,091,791.60 26,276,723,812.38 26,483,589,628.10 4,642,056,183.61 1,077,579,057.82 65,154,237,069.48 payments Available-for-sale 1,464,031,947.22 4,348,320,736.94 5,182,146,650.00 4,107,732,100.00 250,000.00 15,102,481,434.16 financial assets Held-to-maturity 64,731,000.00 651,213,290.00 5,615,431,736.67 3,579,938,700.00 9,911,314,726.67 financial assets Investments classified as 2,583,858,500.68 14,203,189,569.38 20,272,004,313.94 37,059,052,384.00 receivables OTHER ASSETS 10,740,170.77 1,000,000.00 11,740,170.77 Total of assets 14,192,828,160.66 28,089,536,638.74 47,292,481,297.84 57,830,257,328.71 12,329,726,983.61 13,895,739,189.17 173,630,569,598.73 Liability items Borrowing from the 5,862,500.00 717,587,500.00 723,450,000.00 central bank Deposits with banks 5,195,748,250.49 1,428,278,905.56 2,198,667,486.11 270,512,500.00 9,093,207,142.16 Loans from other banks and other 1,108,684,376.45 1,108,684,376.45 financial institutions Financial assets sold 11,977,758,566.02 11,977,758,566.02 for repurchase Deposits from 40,772,586,178.12 13,327,125,431.97 15,680,391,292.54 26,948,714,054.04 6,726,793,501.53 997,663,588.81 104,453,274,047.01 customers Interests payable 679,801,346.12 679,801,346.12 Bonds payable 634,000,000.00 171,300,000.00 3,621,200,000.00 2,142,900,000.00 6,569,400,000.00 Other liabilities 114,551,784.53 4,167,612.00 11,109,457.00 129,828,853.53

241 2016 Annual Report

Instant repayment up to 3 months 3 months to 1 year 1 year to 5 years Over 5 years Overdue/others Sum

Total of liabilities 46,082,886,213.14 28,485,877,392.00 18,779,055,735.65 30,840,426,554.04 8,869,693,501.53 1,677,464,934.93 134,735,404,331.29 Net liquidity -31,890,058,052.48 -396,340,753.26 28,513,425,562.19 26,989,830,774.67 3,460,033,482.08 12,218,274,254.24 38,895,165,267.44

242 2016 Annual Report

XIII. Fair value

1. Financial assets and liabilities measured at fair value

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction among market participants at the measurement date.

Fair value measured and disclosed in the financial statements is recognized on this basis regardless of whether that price is observable or estimated using valuation technique.

Financial assets and financial liabilities measured at fair value are classified into three levels in terms of valuation:

Level 1: unadjusted quoted prices available in an active market for identical assets or liabilities.

Level 2: inputs other than quoted prices included in Level 1 that are observable for relevant assets or liabilities, either directly or indirectly.

Level 3: inputs not based on observable market data for relevant assets or liabilities.

Financial assets and financial liabilities measured at fair value were presented in three levels above on December 31, 2016:

243 2016 Annual Report

Valuation Open Valuation technique— market technique—obser unobservabl Continuous fair value measurement in 2016 Amount price (Level vable market e market 1) variable (Level 2) variable (Level 3) measured at fair value 925,515,900.00 925,515,900.00 through current profit and loss Available-for-sale financial assets 18,381,078,619.56 18,381,078,619.56 Total financial assets 19,306,594,519.56 19,306,594,519.56

Financial assets and financial liabilities measured at fair value were presented in three levels above on December 31, 2015: Valuation Open Valuation technique— market technique—obser unobservabl Continuous fair value measurement in 2015 Amount price (Level vable market e market 1) variable (Level 2) variable (Level 3) measured at fair value 344,893,070.00 344,893,070.00 through current profit and loss Available-for-sale financial assets 10,901,743,637.56 10,901,743,637.56 Total financial assets 11,246,636,707.56 11,246,636,707.56

In 2016 and 2015, the Bank has neither transferred fair value level of financial instruments from Level 1 and Level 2 to Level 3, nor between Level 1 and Level 2.

As for financial instruments tradable in an active market, quoted prices in the active market shall be used to determine the fair value thereof; as for those not tradable in an active market, valuation technique shall be used to determine the fair value thereof.

Financial instruments classified as Level 2 by the Bank mainly include bond investment. Fair value of RMB bonds is recognized based upon valuation results provided by China Central Depository & Clearing Co., Ltd. All significant valuation

244 2016 Annual Report parameters are defined by adopting valuation technique concerning observable market information.

2. Financial assets and liabilities not measured at fair value

Financial assets and liabilities not measured at fair value mainly include: cash and deposits with central bank, deposits with banks, lending funds, redemptory financial assets for sale, loans and advance payments, held-to-maturity investments, investments classified as receivables, borrowing from the central bank, deposits from banks and other financial institutions, borrowing funds, financial assets sold for repurchase, deposits from customers and bonds payable.

Book value and fair value of held-to-maturity investments and bonds payable are presented in the table below:

December 31, 2016 Item Book value Fair value Financial assets: Held-to-maturity investment 12,437,042,862.56 12,436,972,090.00 Financial liabilities: Bonds payable 11,628,102,295.19 11,596,837,210.00

December 31, 2015 Item Book value Fair value Financial assets: Held-to-maturity investment 8,124,686,316.86 8,355,730,706.00 Financial liabilities: Bonds payable 5,284,154,929.27 5,484,676,200.00

245 2016 Annual Report

XIV. Capital adequacy ratio

Capital adequacy ratio, Tier I capital adequacy ratio and core Tier I capital adequacy ratio calculated by the Bank in accordance with relevant rules of Capital Management

Method for Commercial Banks (trial) issued by CBRC are as follows: (unit: RMB ten thousand)

December 31, December 31, 2016 2015 Core tier I capital Paid-in capital 440,630.44 305,993.36 Capital reserve 296,902.65 150,025.84 Other comprehensive income -18,385.82 20,427.86 Surplus reserve 71,008.92 51,161.23 Generic risk reserve 231,973.19 167,618.60 Undistributed profits 204,133.96 190,837.12 Total of core tier I capital 1,226,263.34 886,064.01 Deduction items of core tier I capital Other intangible assets (except for land use right) 5,579.71 6,275.88 Net core tier I capital 1,220,683.63 879,788.13 Net amount of other tier I capitals Net tier I capital 1,220,683.63 879,788.13 Tier II capital Directly issued qualifying Tier 2 capital instruments and related premium 144,000.00 153,000.00 Directly issued qualifying provisions for over loan 62,053.26 57,041.03 Total of tier II capital 206,053.26 210,041.03 Deduction items of tier II capital Net tier II capital 206,053.26 210,041.03 Net capital 1,426,736.89 1,089,829.16 Risk weighted asset Credit risk weighted asset 10,244,970.76 7,213,425.01 Market risk weighted asset 1,036,083.24 776,271.42 Operational risk weighted asset 658,791.83 528,874.29 Total of risk weighted assets 11,939,845.83 8,518,570.72 Core tier I capital adequacy ratio % 10.22% 10.33%

246 2016 Annual Report

December 31, December 31, 2016 2015 Tier I capital adequacy ratio % 10.22% 10.33% Capital adequacy ratio % 11.95% 12.79%

XV. Approval of financial report The financial report has already been deliberated and approved by the Bank on the 36th meeting of 1st session of Board of Directors.

Chongqing Three Gorges Bank Co., Ltd.

Legal representative & President:

Financial administrator:

March 25, 2017 247