CITIC IPO-final o_p.fh11 4/10/07 8:08 PM 頁 1

C M Y CM MY CY CMY K

合成的 IMPORTANT: If you are in any doubt about any of the contents of this prospectus, you should obtain CO S342(2A) independent professional advice.

China CITIC Corporation Limited App 1A 1 (a joint stock limited company incorporated in the People's Republic of with limited liability) GLOBAL OFFERING

Number of OÅer Shares in the Global OÅering : 4,885,479,000 H Shares (subject to the Over-allotment Option)

Number of OÅer Shares : 244,274,000 H Shares (subject to adjustment) App 1A 15(2)(a) Number of International OÅer Shares : 4,641,205,000 H Shares (subject to adjustment and the Over- CO 3rd Sch(1)2 allotment Option) CO 3rd Sch(1)9 Maximum oÅer price : HK$5.86 per (payable in full on application, plus brokerage of 1%, SFC transaction levy of 0.004%, and Hong Kong App 1A 15(2)(c) Stock Exchange trading fee of 0.005% and subject to refund) Nominal value : RMB 1.00 each Stock code : 998 App 1A 15(2)(c) CO 3rd Sch(1)2 Joint Global Coordinators and Joint Bookrunners China International Capital Corporation Limited CITIC Securities Co., Ltd. Citigroup Global Markets Asia Limited The Hongkong and Shanghai Banking Corporation Limited Lehman Brothers Asia Limited (in alphabetical order)

Joint Sponsors and Joint Lead Managers China International Capital Corporation (Hong Kong) Limited CITIC Securities Corporate Finance (HK) Limited Citigroup Global Markets Asia Limited The Hongkong and Shanghai Banking Corporation Limited Lehman Brothers Asia Limited (in alphabetical order)

The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited, take no responsibility for the contents of this LR 11.20 prospectus, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this prospectus. A copy of this prospectus, having attached thereto the documents speciÑed in the section headed ""Documents Delivered to the Registrar of CO S342C Companies and Available for Inspection'' in Appendix X, has been registered by the Registrar of Companies in Hong Kong as required by Section 342C of the Hong Kong Companies Ordinance. The Securities and Futures Commission of Hong Kong, and the Registrar of Companies in Hong Kong take no responsibility for the contents of this prospectus or any other document referred to above. The OÅer Price is expected to be Ñxed by an agreement between the Joint Global Coordinators (on behalf of the Underwriters), and us on the CK IE Note 9 Price Determination Date, which is expected to be on or before April 20, 2007 and, in any event, not later than April 25, 2007. The OÅer Price will be not more than HK$5.86 and is currently expected to be not less than HK$5.06. The Joint Global Coordinators, on behalf of the Underwriters, may, with our consent, reduce the number of OÅer Shares and/or the indicative oÅer price range below that stated in this prospectus at any time prior to the morning of the last day for lodging applications under the Hong Kong Public OÅering. For further information, see the section headed ""Structure of the Global OÅering.'' We are incorporated, and substantially all of our businesses are located, in the PRC. Potential investors should be aware of the diÅerences in the CK IE Note 8 legal, economic, and Ñnancial systems between the mainland of the PRC and Hong Kong, and that there are diÅerent risk factors relating to LR 19A.42(63) investment in companies incorporated in the PRC. Potential investors should also be aware that the regulatory framework in the PRC is diÅerent from the regulatory framework in Hong Kong, and should take into consideration the diÅerent market nature of our H Shares. Such diÅerences and risk factors are set forth in the sections headed ""Risk Factors'', and Appendix VII Ì ""Summary of Principal Legal and Regulatory Provisions'' and Appendix VIII Ì ""Summary of Articles of Association.''

April 16, 2007 CO S342 EXPECTED TIMETABLE(1)

Latest time to lodge white and yellow Application Forms ÏÏÏÏÏÏ 12:00 noon on Thursday, April 19, 2007 Latest time to complete electronic applications under the White Form eIPO service through the designated website at www.eipo.com.hk(2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 12:00 noon on Thursday, April 19, 2007 Latest time to give electronic application instructions to HKSCC(3) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 12:00 noon on Thursday, April 19, 2007 (4) Application lists open ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11:45 a.m. on Thursday, April 19, 2007 CO 3rd Sch(1)(8) Application lists close ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 12:00 noon on Thursday, April 19, 2007 App 1A 15(2)(f) Expected price determination date ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Friday, April 20, 2007 Announcement of the OÅer Price for H Shares under the Global OÅering and the oÅer price for A Shares under the A Share OÅering expected to be published in South China Morning Post (in English) and Hong Kong Economic Times (in Chinese)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Monday, April 23, 2007 Announcement of ¬ the level of applications in the Hong Kong Public OÅering; ¬ the indication of level of interest in the International CK 1E Note 13 OÅering; ¬ the results of applications in the Hong Kong Public OÅering (with successful applicants' identiÑcation document numbers, where appropriate); and ¬ the basis of allotment of the Hong Kong OÅer Shares to be published in South China Morning Post (in English), and Hong Kong Economic Times (in Chinese), on or before Thursday, April 26, 2007 App 1A 15(2)(k) Dispatch of H Share certiÑcates in respect of wholly or partially App 1A 15(2)(g) successful applications(5) on or beforeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Thursday, April 26, 2007 Dispatch of refund cheques in respect of wholly or partially unsuccessful applications on or beforeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Thursday, April 26, 2007 Dealings in H Shares on the expected to commence on ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Friday, April 27, 2007 App 1A 22

(1) All times refer to Hong Kong local time. (2) You will not be permitted to submit your application through the designated website at www.eipo.com.hk after 11:30 a.m. on the last day for submitting applications. If you have already submitted your application and obtained an application reference number from the designated website prior to 11:30 a.m., you will be permitted to continue the application process (by completing payment of application monies) until 12:00 noon on the last day for submitting applications, when the application lists close. (3) Applicants who apply for Hong Kong OÅer Shares by giving electronic application instructions to HKSCC should refer to the section headed ""How to Apply for Hong Kong OÅer Shares Ì 6. Applying by giving electronic application instructions to HKSCC.'' (4) If there is a tropical cyclone warning signal number 8 or above, or a ""black'' rainstorm warning in force in Hong Kong at any time between 9:00 am and 12:00 noon on Thursday, April 19, 2007, the application lists will not open on that day. See ""How to Apply for Hong Kong OÅer Shares Ì 7. When may applications be made Ì (e) EÅects of bad weather conditions on the opening of the application lists.'' (5) H Share certiÑcates will only become valid certiÑcates of title if the Hong Kong Public OÅering has become unconditional and neither the Hong Kong Underwriting Agreement nor the International Underwriting Agreement has been terminated in accordance with its terms, which will be at 8:00 a.m. on Friday, April 27, 2007. Investors who trade H Shares on the basis of publicly available allocation details prior to the receipt of H Share certiÑcates or prior to the H Share certiÑcates becoming valid certiÑcates of title do so entirely at their own risk. For details of the structure of the Global OÅering, including its conditions, see ""Structure of the Global OÅering.''

i CONTENTS

This prospectus is issued by China CITIC Bank Corporation Limited solely in connection with the Hong Kong Public OÅering and the Hong Kong OÅer Shares and does not constitute an oÅer to sell or a solicitation of an oÅer to buy any security other than the Hong Kong OÅer Shares oÅered by this prospectus pursuant to the Hong Kong Public OÅering. This prospectus may not be used for the purpose of, and does not constitute, an oÅer or invitation in any other jurisdiction or in any other circumstances. No action has been taken to permit a public oÅering of the OÅer Shares in any jurisdiction other than Hong Kong and Japan and no action has been taken to permit the distribution of this prospectus in any jurisdiction other than Hong Kong. The distribution of this prospectus and the oÅering and sale of the OÅer Shares in other jurisdictions are subject to restrictions and may not be made except as permitted under the applicable securities laws of such jurisdictions pursuant to registration with or authorization by the relevant securities regulatory authorities or an exemption therefrom. You should rely only on the information contained in this prospectus and the Application Forms to make your investment decision. We have not authorized anyone to provide you with information that is diÅerent from what is contained in this prospectus. Any information or representation not made in this prospectus must not be relied on by you as having been authorized by us, the Joint Global Coordinators, the Joint Sponsors, the Joint Lead Managers, the Underwriters, the Ñnancial advisors, their respective directors or any other person involved in the Global OÅering.

Page Expected Timetable ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ i Contents ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ ii Summary ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1 DeÑnitions and Conventions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 17 Forward-looking StatementsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 25 Risk Factors ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 26 Information about this Prospectus and the Global OÅering ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 43 Parties Involved in the Global OÅeringÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 46 Corporate InformationÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 51 Banking Industry in the PRCÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 52 Regulation and Supervision ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 66 Our Restructuring and Operational Reforms ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 91 Our Strategic Investor and Other Investors ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 97 BusinessÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 106 Overview ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 106 Our Competitive Strengths ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 106 Our Strategy ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 109 Our Principal Business Activities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 112 Product Pricing ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 124 Distribution Network ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 124 Information TechnologyÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 126 Financial ManagementÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 128 CompetitionÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 128 Employees ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 129 Intellectual PropertyÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 129 PropertiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 129 Legal and Administrative Proceedings ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 132

ii CONTENTS

Page Risk Management ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 135 Our Relationship with CITIC Group and Connected Transactions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 156 Management ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 164 Substantial ShareholdersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 181 Share Capital ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 183 Assets and LiabilitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 190 AssetsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 190 Liabilities and Sources of FundsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 216 Financial Information ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 220 Trends AÅecting Our Results of Operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 220 Results of Operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 222 Liquidity ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 238 Quantitative and Qualitative Analysis of Market RiskÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 239 Capital Resources ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 243 Returns AnalysisÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 244 OÅ-Balance Sheet Commitments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 245 Capital Expenditures ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 245 SigniÑcant Accounting PoliciesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 245 Recent Accounting Pronouncements ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 248 Indebtedness ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 249 Property ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 249 Rules 13.11 to 13.19 of the Hong Kong Listing Rules ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 250 ProÑt Forecast for the Year Ending December 31, 2007ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 250 Dividend PolicyÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 251 Unaudited Pro Forma Adjusted Consolidated Net Tangible AssetsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 252 No Material Adverse Change ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 253 Working Capital ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 253 Future Plans and Use of Proceeds ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 254 Underwriting ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 255 Structure of the Global OÅering ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 261 A Share OÅering ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 266 How to Apply for Hong Kong OÅer Shares ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 268 Further Terms and Conditions of the Hong Kong Public OÅeringÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 281 Appendices Appendix I Ì Accountants' Report ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ I-1 Appendix II Ì Unaudited Supplementary Financial Information ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ II-1 Appendix III Ì Unaudited Pro Forma Financial InformationÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ III-1 Appendix IV Ì ProÑt Forecast ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ IV-1 Appendix V Ì Property Valuation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ V-1 Appendix VI Ì Taxation and Foreign Exchange ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ VI-1 Appendix VII Ì Summary of Principal Legal and Regulatory Provisions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ VII-1 Appendix VIII Ì Summary of Articles of Association ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ VIII-1 Appendix IX Ì Statutory and General Information ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ IX-1 Appendix X Ì Documents Delivered to the Registrar of Companies and Available for InspectionÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ X-1

iii SUMMARY

This summary aims to give you an overview of the information contained in this prospectus. As this is a summary, it does not contain all the information that may be important to you. You should read this prospectus in its entirety before you decide to invest in the H Shares. Certain operating and Ñnancial data contained in this prospectus, including market share and industry data, were derived from data prepared in accordance with PRC GAAP or other applicable local GAAP, which may diÅer from IFRS in certain signiÑcant respects. There are risks associated with any investment. Some of the particular risks in investing in the H Shares are set out in the section headed ""Risk Factors.'' You should read that section carefully before you decide whether to invest in the H Shares.

OVERVIEW App 1A 28(1)(a) CO 3rd Sch(1)1 We are a competitive and fast growing national commercial bank in China and were the seventh largest PRC commercial bank in terms of total assets.(1) As of December 31, 2006, our total assets were RMB 706,723 million. In 2006, we were ranked the 134th largest bank in the world in terms of total assets as of December 31, 2005 by the British magazine ""''. We were ranked fourth in terms of overall competitiveness among PRC commercial for the year 2005 by ""The Chinese Banker'' magazine.

We have enjoyed rapid growth, enhanced proÑtability and improved asset quality in recent years. From December 31, 2004 to December 31, 2006, the compound annual growth rate, or CAGR, for each of our total assets, total loans, total deposits and net proÑt was 19.4%, 22.9%, 19.2% and 26.1%, respectively. Our non- performing loan ratio decreased from 6.3% as of December 31, 2004 to 2.5% as of December 31, 2006, reÖecting, among other things, our enhanced risk management function and increases in the amount of loans written oÅ.

We believe that we have strong full-service capabilities to oÅer a comprehensive range of products and services to customers nationwide. As part of our strategy, we have focused on developing corporate customers in ""high quality industries and high quality enterprises'' and ""mainstream markets and mainstream customers'' and high- and medium-end retail customers. As a result, we have established an extensive and high quality customer base. Geographically, we have focused on the economically more developed eastern coastal regions of China and have established a strategically located branch network and, we believe, an eÇcient distribution channel.

We have received numerous awards in recent years in recognition of our superior business performance and strong management capabilities. According to the ""China Top 100 Banks'' list published by ""The Chinese Banker'' in 2006, our net proÑt growth rate in 2005 ranked second among all PRC banks. We received the 2005 ""VISA Bank Card Comprehensive Innovation Award'' from VISA International. In 2006, our personal banking initiatives received the ""Excellence in Personal Banking Strategy and Execution Award'' from the 2006 Asian Banker Excellence in Retail Financial Services Award Programme. In the same year, we were named the ""best domestic provider'' of foreign exchange services in China by the ""Asiamoney'' magazine. In 2005 and 2006, our president, Dr. Chen Xiaoxian, received the ""China's Top Ten Finance Figures of the Year Award'' from ""The Chinese Banker'' magazine. We also received the ""Top Ten Growth Financial Institutions Award'' at the 2006 China International Finance Forum.

(1) Our ranking in terms of total assets was based on relevant data as of December 31, 2005 because the relevant data of certain PRC commercial banks as of December 31, 2006 were not available as of the Lastest Practical Date.

1 SUMMARY

OUR COMPETITIVE STRENGTHS We believe the following key strengths provide us with a solid foundation from which we can quickly adapt to the changing market environment and continue to compete successfully in China's banking industry:

A competitive and fast-growing national commercial bank in China We were one of the largest Other National Commercial Banks in PRC in terms of total assets as of December 31, 2006. Our business has experienced rapid growth in recent years. According to data published by the PBOC, the CAGR for each of our total loans and total deposits from December 31, 2004 to December 31, 2006 were higher than the average CAGR of all PRC banks listed in Hong Kong or China. Our proÑtability increased in line with the growth in our net proÑt. Our average pre-tax return on assets (excluding management fee paid to CITIC Group) was 1.09% in 2005, which ranked us Ñrst among Other National Commercial Banks listed in Hong Kong or China. Our average pre-tax return on assets (excluding management fee paid to CITIC Group) increased to 1.19% in 2006. In 2005, our pre-tax proÑt per employee (excluding management fee paid to CITIC Group) was approximately RMB 520,000, which ranked us Ñrst among all PRC banks listed in Hong Kong or China. Our pre-tax proÑt per employee (excluding management fee paid to CITIC Group) increased to approximately RMB 620,000 in 2006.

Strong capabilities in providing banking services to an established corporate customer base We believe we have established leading market positions in many corporate banking areas among the Other National Commercial Banks. Our corporate loans and deposits outstanding as of December 31, 2006 both ranked second among all Other National Commercial Banks according to the PBOC. In 2006, our international trade settlement volume also ranked second among all Other National Commercial Banks. We were named the ""best domestic provider'' of foreign exchange services in China by the ""Asiamoney'' magazine in 2006. As of December 31, 2006, we were the fourth largest short-term bond underwriter among all PRC banks and the second largest among Other National Commercial Banks in terms of transaction volume. We have an established corporate customer base, with more than half of China's Fortune 500 companies as our customers. We were among the Ñrst Other National Commercial Banks qualiÑed to provide Ñnancial services to the Ministry of Finance and State Administration of Taxation. Through a competitive bidding process, we became a provider of non-tax revenue collection services to 29 of the 43 central government departments that have launched such services.

A personal banking business with strong and continuous growth Our personal banking business has experienced rapid growth in recent years, which we believe was in part attributable to our ""three dimensions and four promotions'' marketing initiatives, which we believe to be highly innovative and eÅective. From 2004 to 2006, our operating income from personal banking, personal loans and personal deposits increased at a CAGR of 43.0%, 23.5% and 48.9%, respectively. As of December 31, 2006, our personal deposits outstanding were RMB 105.9 billion. According to the PBOC, we became the third Other National Commercial Bank to reach RMB 100 billion in personal deposits outstanding. Deposits from aÉuent customers (with deposit balance of RMB 500,000 or more) represented more than 40% of our total personal deposits as of December 31, 2006. Furthermore, our credit card center began to issue credit cards in December 2003 and became proÑtable in December 2006, and we believe we were among the PRC banks which reached proÑtability in the least time. Our credit card active ratio was 74% as of December 31, 2006. We received the ""Excellence in Personal Banking Strategy and Execution Award'' from the 2006 Asian Banker Excellence in Retail Financial Services Award Programme.

A distinctive integrated Ñnancial services platform of CITIC Group Our controlling shareholder, CITIC Group, is one of China's leading state-owned multinational conglomerates focusing on Ñnancial services. Other aÇliates of CITIC Group include Ñnance companies engaged in a wide range of Ñnancial services, including securities, trusts, fund management, insurance and

2 SUMMARY futures. In particular, each of CITIC Securities and CITIC Trust and Investment is one of the largest Ñrms among their respective PRC peers. We believe CITIC Group's distinctive integrated Ñnancial service platform will enhance our capabilities to oÅer our customers a full range of Ñnancial services and products and further increase our competitiveness in the medium- and high-end markets.

A tradition of innovation on Ñnancial services and products We have continuously focused on developing innovative Ñnancial services and products to adapt to the evolving market environment and meet the changing needs of our customers. Our innovative corporate banking services and products include Ñnance and tax services under the trademark "" '' (Yin Cai Tong), logistic Ñnancing products under the trademark "" '' (Yin Mao Tong), online tax and fee payment services under the trademark "" '' (WTO E-line), export tax refund account custody Ñnance services and export tax refund backed loans. We believe we have established leading market positions for these services and products through our product innovation. With respect to personal banking services and products, we believe we were the Ñrst PRC bank to oÅer international travel Ñnancial services. We also provide innovative high value-added account management services under the trademark "" '' (CITIC Smart). We have also launched a number of innovative credit card products, such as the CITIC Southern-Fund Co-branded Card ( ) and the CITIC Golf Card ( ). Our credit cards and debit cards have received numerous domestic and international awards.

An eÇcient distribution network We have strategically located our branch outlets in some of the most economically developed eastern coastal regions of China, including the Bohai Rim region, the Yangtze River Delta region and the Pearl River Delta and West Strait region. In 2006, 73.6% of our operating income was derived from these regions. We believe our strategically located branch network has contributed to our high network eÇciency. As of December 31, 2005, our average total assets, average loans and average deposits per branch outlet were RMB 1.43 billion, RMB 890 million and RMB 1.28 billion, respectively, which were signiÑcantly higher than RMB 1.09 billion, RMB 685 million and RMB 937 million, respectively, for the average of all PRC banks listed in Hong Kong or China. Our average total assets, average loans and average deposits per branch outlet further increased to RMB 1.58 billion, RMB 1.04 billion and RMB 1.39 billion, respectively, as of December 31, 2006.

Prudent risk management and improving asset quality We seek to establish an independent, comprehensive and dedicated risk management system with a vertical reporting line and our asset quality has continuously improved in recent years. Our eÅorts have focused on the following aspects of risk management: Culture and strategy. We seek to develop a risk management culture focusing on maximizing risk- adjusted returns. To this end, we have implemented a risk management strategy focusing on ""high quality industries and high quality enterprises'' and ""mainstream markets and mainstream customers''. Organizational structure. We have improved the structure of our risk management function in an eÅort to establish an independent risk management system. We believe that we are among the Ñrst PRC banks to centrally appoint risk managers of all branches, and among the Ñrst PRC banks to limit the credit approval powers of our president and general managers of our branches. Technology. We have continued to enhance our risk management technology in recent years in line with international best practices, by developing and upgrading our corporate credit rating system with assistance from McKinsey & Co. and Moody's KMV. Over the years we have signiÑcantly improved our asset quality. Our non-performing loans before write- oÅ, non-performing loan ratio and loans classiÑed as special mention as a percentage of total loans have

3 SUMMARY decreased continuously since December 31, 2004. Our non-performing loan ratio decreased to 2.5% as of December 31, 2006 from 6.3% as of December 31, 2004. Our loans classiÑed as special mention as a percentage of our total loans decreased to 2.4% as of December 31, 2006 from 5.6% as of December 31, 2004.

An experienced management team with a proven track record

Our management team has an average of over 20 years of relevant experience in China's Ñnancial services industry and has a proven track record in asset management and business development.

Our chairman, Mr. Kong Dan, is also the chairman of CITIC Group and was formerly the vice chairman and president of China Everbright Group Limited. He has extensive experience in the Ñnancial sector and in the management of multinational conglomerates.

Our vice chairman, Mr. Chang Zhenming, is also the vice chairman and president of CITIC Group, and was formerly the vice chairman and president of . He has extensive experience in the Ñnancial and banking sectors and in the operation of the capital markets. Under the leadership of Mr. Chang, China Construction Bank was successfully listed on the Hong Kong Stock Exchange.

Our president, Dr. Chen Xiaoxian, had worked at the PBOC for many years and was the executive vice president and a director of before joining us. He has extensive banking experience and is a renowned expert and academic in China on bank operation and management. Dr. Chen received the ""China's Top Ten Finance Figures of the Year Award'' from ""The Chinese Banker'' magazine for two consecutive years in 2005 and 2006.

Strategic cooperation with BBVA

We have established a strategic cooperation relationship with Banco Bilbao Vizcaya Argentaria, S.A., or BBVA, a leading Ñnancial institution in Spain and Latin America. We believe our strategic cooperation with BBVA will enhance our operational and management skills and our ability to improve shareholder value, as well as our international exposure.

OUR STRATEGY

Our objective is to increase the value of our bank through balanced growth in terms of proÑtability, asset quality and asset size, and at the same time continue our focus on risk-adjusted returns. To this end, we intend to adopt management philosophies based on international best practices of the leading international and Chinese banks. Our speciÑc objectives include:

¬ establishing a business model focused on economic capital and risk-adjusted returns;

¬ promoting a balanced growth in our business between corporate banking and personal banking;

¬ optimizing customer base mix of large and SME customers taking into account regional characteristics;

¬ achieving a balanced mix in our sources of income between interest income and non-interest income;

¬ developing diversiÑed and integrated Ñnancial products;

¬ enhancing management capabilities with advanced technology; and

¬ enhancing our ability to achieve higher risk-adjusted returns with a view to becoming a modern bank competitive with the leading international and Chinese banks.

4 SUMMARY

With a view to achieving the above objectives, we intend to focus our eÅorts in the following areas:

Reinforce and further our strengths in corporate banking We follow a corporate banking customer strategy focused on ""high quality industries and high quality enterprises'' and ""mainstream markets and mainstream customers.'' Our corporate banking strategy consists of three speciÑc strategies. Enhance our management structure and selectively expand into targeted products and regions. We summarize this strategy as ""one-two-three-four'':

¬ ""One'': establishing ourselves in speciÑc regions as ""a'' primary bank in corporate banking among Other National Commercial Banks;

¬ ""Two'': strengthening the ""two''-tier corporate banking management comprising the head oÇce and branch oÇces;

¬ ""Three'': following a ""three''-tier integrated marketing system comprising the head oÇce, branch oÇces, and sub-branches.

¬ ""Four'': actively promoting ""four'' speciÑc product areas: corporate asset management business, investment banking, industry Ñnance, and SME business. Continue to expand our international business. We intend to continue to develop high quality customers, products and teams of employees. Our goal in expanding our international business is to become the most competitive, obtain the largest market share and establish the best known brand among the Other National Commercial Banks. Reinforce our leading market position in treasury operations. We seek to reinforce and strengthen our market leading position by enhancing our treasury operations business processes, developing new products and services, and building a high quality team of employees.

Accelerate the expansion of our personal banking business We intend to continue to reÑne our personal banking services with our own characteristics and with a focus on increasing the proÑt from personal banking business as a percentage of our total net proÑt. Continue to follow our ""three dimensions and four promotions'' personal banking initiative. We seek to expand our personal banking business by continuing to follow our ""three dimensions and four promotions'' initiative. By focusing on the ""three dimensions'' of our personal banking businesses, we mean customers, products, and core competency. By ""four promotions'', we mean strengthening our eÅorts to realize synergies between corporate and personal banking businesses, promoting product innovation, developing high quality professionals, and encouraging participation of all personnel. Focus on three aspects of developing our personal banking business. We intend to focus on three aspects: strengthen our customer base, enhance our customer service capabilities and enhance our wallet share, in an eÅort to meet the demands of customers of diÅerent market segments with diÅerentiated products. Develop a personal banking system with our own characteristics. First, we intend to focus on customers with a high demand for banking products and services by providing them with personalized services through a professional team of relationship managers. Second, we intend to reduce costs by increasing the use of electronic distribution channels as opposed to traditional distribution channels. Third, as our targeted personal banking customer segments are mass aÉuent and aÉuent customers, we intend to create a portfolio of products and services speciÑcally tailored to these customers. Focus on expanding in three areas with high growth potential. In an eÅort to enhance the proÑtability of our personal banking business, we intend to focus on three types of businesses with high proÑt and high growth

5 SUMMARY potential, namely, personal wealth management business, personal consumption loan business and credit card business.

Continue to capitalize on the ""CITIC'' brand name and the integrated Ñnancial platform of CITIC Group We intend to strengthen our cooperation with the other Ñnancial subsidiaries of CITIC Group in product development and marketing, provide a greater diversity of products, reÑne our Ñnancial services capability, and increase our cross-selling eÅorts, with a view to providing customers with enhanced integrated Ñnancial products and service solutions.

Increase non-interest income as a proportion of our total income We intend to signiÑcantly increase the proportion of non-interest income as a percentage of our total operating income and to achieve a more stable income structure by launching more competitive products and services in the areas of our card business, personal wealth management business, corporate asset management business, international settlement business, treasury business on behalf of customers and investment banking business.

Expand and enhance distribution channels We intend to continue expanding our network of branch outlets based on our business development needs, selectively focusing on regions which are economically developed, with higher growth potential and greater regional coverage. In addition, we plan to expand and enhance our electronic banking (including internet banking and telephone banking), automated service machines and self-service banking centers, so as to be able to oÅer more services through electronic channels and provide customers with more convenient and prompt services while reducing costs.

Enhance our information technology system We believe that we operate on an advanced information technology platform. We aim to further strengthen the integration of our business and management systems by enhancing our foundation technology platform, which we believe will make us among the Ñrst PRC banks to build an integrated information technology platform to support various aspects of our banking operations. We expect that, by integrating business operations, customer relationship management, management decision analysis and risk control, our information technology platform will allow us (i) more eÅectively to manage the services we provide to our high-end customers; (ii) to provide these customers with comprehensive and tailored services; (iii) to perform accounting analyses by business, product and department; and (iv) to determine, examine and conduct audits of the results and proÑtability of the relevant businesses, products, and various departments of our bank. We intend to further increase resources allocated to technology to strengthen the position of our information technology in the domestic banking sector.

Further strengthen our risk management and internal controls We plan to establish an independent, comprehensive and dedicated risk management system with a vertical reporting line by adopting the following speciÑc measures:

¬ Continue to cultivate a corporate culture that focuses on maximizing risk-adjusted returns;

¬ Establish credit, market and operational risk management units dedicated to managing each of these risks, appoint a risk management head to each line of business, establish independent and dedicated loan approval centers, appoint a chief audit oÇcer, and establish regional audit oÇces; and

¬ Continue to enhance risk management technology. We intend to enhance our ability to manage risks associated with transactions and loan portfolios, and formulate policies and strategies and seek to become among the Ñrst PRC banks to fully comply with the standards of Basel II.

6 SUMMARY

In an eÅort to enhance the eÇciency and soundness of our business operations, we intend to create an internal control system with standards that are high among PRC banks and consistent with practices of international banks. To this end, we intend to actively promote standardization and use of technology in terms of the technique, methodology, means and procedures of internal control, in accordance with regulatory requirements and international standards on internal control. Our enhanced corporate governance structure and internal control functions enable us to strengthen the compliance level of our overall monitoring system and internal policies and procedures, thereby reducing operational risks.

Continue to align management practices with international best practices We intend to further enhance our corporate governance structure based on international best practices by adopting a series of advanced management methods and tools and promoting a series of reforms in our organizational structure, with a view to centralizing decision-making processes and enhancing management skillset. We also intend to gradually transition to managing our bank based on business segments. In addition, we intend to manage our assets and liabilities by applying more quantitative measures and on a more timely basis by enhancing our asset and liability management system and funds transfer pricing mechanism, and by further enhancing the allocation of our Ñnancial resources. Furthermore, we cultivate a performance-based culture and intend to establish a more reÑned hierarchy of ranks and positions, strengthen our ability to counsel our employees on career development issues. We designed our strategies based on an analysis of our current business operations, assets size and industry trends, taking into consideration our speciÑc circumstances, with the view to becoming a leading commercial bank in China. We will leverage our competitive strengths to proactively develop new business products and services, create and identify new source of proÑts, increase our proÑtability, strengthen our risk management function and therefore enhance our overall competitiveness and management eÇciency.

OUR RESTRUCTURING AND OPERATIONAL REFORMS In 2006, we undertook the following corporate restructuring and operational reform measures in an eÅort to enhance our competitiveness:

¬ In April 2006, CIFH entered into an agreement with CITIC Group to purchase a 19.9% interest in our bank based on our net assets as of December 31, 2005. In the second and fourth quarters of 2006, CITIC Group made capital contributions of RMB 5.0 billion and RMB 2.4 billion, respectively, to us. As a result of these capital contributions, the interest in us held by CITIC Group and CIFH were 84.83% and 15.17%, respectively. CIFH, together with CITIC Group as promoters, established our bank as a joint stock limited company with its 15.17% interest in us as its capital contribution. In November 2006, CIFH entered into an agreement with CITIC Group to establish our bank as a joint stock limited company as joint promoters. We were established as a joint stock limited company on December 31, 2006 under the name of China CITIC Bank Corporation Limited.

¬ With a view to maintaining the growth of our business and further aligning our bank with international best practices, we have taken a series of restructuring measures in the areas of corporate governance, business operation, risk management, internal controls, Ñnancial management, information technology and human resources management. We believe these measures have enhanced our competitiveness and management capabilities.

7 SUMMARY

OUR SHAREHOLDING AND GROUP STRUCTURE

The following chart sets forth our shareholding and group structure upon completion of the Global OÅering and the A Share OÅering, assuming that the Over-allotment Option is not exercised and BBVA and CIFH exercise their anti-dilution right and top-up right, respectively.(1)(2)

CITIC Group Banco Bilbao The National Council for Vizcaya Argentaria Social Security Fund S.A. (“BBVA”) (“SSF”)

55.44%(3) 14.58%

CIFH Other public H Share Other public A Share holders holders

63.71% 15.17% 4.83% 1.28%(4) 9.00%(4) 6.01%

China CITIC Bank Corporation Limited

95.00% China Investment and Domestic Branches(5) Finance Limited (Overseas controlled subsidiary)

(1) Upon completion of the Global OÅering and the A Share OÅering, the shares held by CITIC Group will be A Shares and the shares held by CIFH, BBVA and SSF will be H Shares. (2) For information regarding our shareholding and group structure immediately following completion of the Global OÅering without giving eÅect to the A Share OÅering, see ""Substantial Shareholders'' and ""Share Capital.'' (3) Including 55.41% direct shareholding and 0.03% indirect shareholding of CITIC Group in CIFH. (4) SSF's 1.28% shareholding in our bank does not include the shares to be purchased by SSF as a cornerstone investor, which will be 73,260,000 shares assuming an oÅer price of HK$5.46 per share, being the mid-point of the proposed price range set out in this prospectus. See ""Our Strategic Investor and Other Investors Ì Cornerstone Investors.'' When such purchase completes, the shareholding of SSF in our bank will increase to 1.47% and the shareholding in our bank of other H share public shareholders will be reduced to 8.81%. (5) Consists of 25 tier one branches, 16 tier two branches and 405 sub-branch outlets as of December 31, 2006.

SUMMARY FINANCIAL INFORMATION

Basis of Presentation of Our Financial Information LR 11.07

In the Accountants' Report in Appendix I to this prospectus, we present audited consolidated Ñnancial statements for each of the years ended December 31, 2004, 2005 and 2006. Our consolidated Ñnancial statements have been prepared in accordance with IFRS. We also publish our Ñnancial statements in the PRC in accordance with PRC GAAP.

8 SUMMARY

Summary Financial Data The following tables set forth a summary of our consolidated Ñnancial statements for the periods and as of the dates indicated. This summary is derived from, and should be read in conjunction with, (i) our audited consolidated Ñnancial statements included in the Accountants' Report in Appendix I and (ii) our unaudited supplementary Ñnancial information included in Appendix II, to this prospectus.

Summary Consolidated Income Statement Data

For the year ended December 31, 2004 2005 2006 (in millions of RMB, except per share data) Interest income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 17,795 22,511 29,490 Interest expenseÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (7,412) (9,851) (13,017) Net interest income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10,383 12,660 16,473 Net non-interest incomeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 763 995 1,454 Operating income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11,146 13,655 17,927 General and administrative expenses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (5,451) (7,104) (9,259) Provisions for impairment losses chargeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1,634) (1,098) (1,666) ProÑt before tax ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,061 5,453 7,002 Income taxÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1,633) (2,369) (3,144) Net proÑt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,428 3,084 3,858 Attributable to: Equity holder(s) of the Bank ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,427 3,083 3,858 Minority interests ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1 1 Ì Net proÑt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,428 3,084 3,858

ProÑt appropriations(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,258 271 3,000 Earning per share attributable to equity holder(s) of the Bank - Basic and diluted () ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.08 0.10 0.12

(1) Under MOF regulations, CITIC Group, as our sole shareholder during these periods, may appropriate any proÑt accumulated from the eÅective date of our restructuring, or December 31, 2005, to the date of our incorporation as a joint stock limited company, or December 31, 2006. We distributed RMB 3,000 million in dividends to CITIC Group in 2006. In addition, in accordance with our board resolution on March 8, 2007 and the extraordinary general meeting of shareholders held on the same day, we distributed RMB 726 million dividend in cash to CITIC Group from the retained earnings as of December 31, 2006.

Summary Consolidated Balance Sheet Data

As of December 31, 2004 2005 2006 (in millions of RMB) Assets(1) Cash and balances with central banks ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 54,253 84,453 90,620 Amounts due from banks and other Ñnancial institutions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 20,899 31,352 43,250 Loans and advances to customers ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 291,921 358,030 453,381 Investments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 110,903 104,416 104,424 Others(2)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 17,469 16,351 15,048 Total assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 495,445 594,602 706,723

9 SUMMARY

As of December 31, 2004 2005 2006 (in millions of RMB) Liabilities Amounts due to central banksÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 300 240 201 Amounts due to banks and other Ñnancial institutionsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 38,190 28,021 36,166 Deposits from customers ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 435,020 530,573 618,412 Subordinated debt issued ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,000 6,000 12,000 Others(3)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,172 6,543 8,250 Total liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 484,682 571,377 675,029 Equity Share capital ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 31,113 Owner's capital ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 17,790 26,661 Ì ReserveÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (7,031) (3,441) 576 Minority interests ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4 5 5 Total equityÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10,763 23,225 31,694 Total equity and liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 495,445 594,602 706,723

(1) Assets (except available-for-sale securities and debt securities at fair value through proÑt or loss in the ""investments'' category) are stated net of the related allowance for impairment losses. (2) Consists of property and equipment, deferred tax assets and certain other assets. (3) Consists of current tax liabilities, deferred tax liabilities and certain other liabilities and provisions.

Selected Financial Ratios As of or for the year ended December 31, 2004 2005 2006 (in percentages) ProÑtability indicators Return on average assets (ROAA)(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.54% 0.57% 0.59% Return on average equity (ROAE)(2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 30.04 18.15 14.05 Net interest spread(3) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2.37 2.38 2.53 Net interest margin(4)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2.42 2.45 2.62 Net non-interest income to operating income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6.85 7.29 8.11 Cost-to-income ratio(5) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 48.91 52.02 51.65 Adjusted cost-to-income ratio(6) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 39.11 41.11 39.67 Capital adequacy indicators Core capital adequacy ratio(7) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3.33 5.72 6.57 Capital adequacy ratio(7) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6.05 8.11 9.41 Total equity to total assets(8) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2.17 3.91 4.48 Asset quality indicators Non-performing loan ratio(9) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6.28 4.14 2.50 Allowance to non-performing loans(10) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 77.58 79.88 84.62 Allowance to total loans(11) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4.87 3.30 2.11

(1) Calculated by dividing net proÑt (including proÑt attributable to minority interests) by the average of total assets as of the beginning and end of the period. See ""Financial Information Ì Returns Analysis''. (2) Calculated by dividing net proÑt attributable to equity holders of our bank by average equity excluding minority interests. Average equity excluding minority interests is calculated as the average of total equity excluding minority interests as of the beginning and end of the period. See ""Financial Information Ì Returns Analysis''. (3) Calculated as the diÅerence between the average yield on average interest-earning assets and the average cost on average interest- bearing liabilities. (4) Calculated by dividing net interest income by average interest-earning assets. (5) Calculated by dividing total general and administrative expenses by total operating income.

10 SUMMARY

(6) Calculated by dividing (i) total general and administrative expenses excluding any management fee to CITIC Group and business tax and surcharges, by (ii) total operating income. (7) Represents the consolidated ratios as of period end calculated in accordance with the CBRC guidelines and based on PRC GAAP Ñnancial data. We received signiÑcant contributions to equity from 2004 to 2006. See ""Financial Information Ì Capital Resources''. Our capital adequacy ratio and core capital adequacy ratio as of December 31, 2004 were lower than the minimum requirements of 8% and 4%, respectively. However, no sanctions were imposed on us for our failure to meet such requirements. See, however, ""Risk Factors Ì Risks Relating to our Business Ì We face risks relating to the PRC banking regulatory requirements and guidelines''. (8) Calculated by dividing total equity by total assets. (9) Calculated by dividing non-performing loans and advances to customers by total loans and advances to customers before allowance for impairment losses. For a discussion on the impact of loan write-oÅs on our non-performing loan ratio, see ""Assets and Liabilities Ì Assets Ì Asset Quality of Our Loan Portfolio Ì Changes in the Asset Quality of Our Loan Portfolio''. (10) Calculated by dividing the allowance for impairment losses on total loans and advances to customers by total non-performing loans and advances to customers. (11) Calculated by dividing the allowance for impairment losses on total loans and advances to customers by total loans and advances to customers.

PROFIT FORECAST All statistics set forth in the table below do not give eÅect to the A Share OÅering and are based on the assumptions that (i) the Global OÅering is completed and (ii) the Over-allotment Option is not exercised.

Forecast consolidated net proÑt attributable to shareholders(1)ÏÏÏÏÏÏÏÏ not less than RMB 5.7 billion Forecast earnings per shareÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (a) pro forma fully diluted(2)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ RMB 0.16 (HK$0.16) (b) weighted average(3) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ RMB 0.17 (HK$0.17)

(1) The bases and assumptions on which the proÑt forecast has been prepared are set out in Appendix IV. (2) The calculation of the forecast earnings per share on a pro forma fully diluted basis is based on the forecast consolidated net proÑt attributable to our shareholders for the year ending December 31, 2007 assuming that we had been listed since January 1, 2007 and a total of 35,998,590,400 shares were issued and outstanding during the entire year. This calculation assumes that the 4,885,479,000 H Shares to be issued pursuant to the Global OÅering were issued on January 1, 2007 (assuming the Over-allotment Option is not exercised). The forecast consolidated net proÑt attributable to shareholders for the year ending December 31, 2007 is based on the audited consolidated Ñnancial statements for the year ended December 31, 2006 and a forecast of the consolidated results for the twelve months ending December 31, 2007. (3) The calculation of the forecast earnings per share on a weighted average basis is based on the forecast consolidated net proÑt attributable to shareholders for the year ending December 31, 2007 and a weighted average number of 34,445,945,019 shares issued and outstanding during the year. This calculation assumes that the 4,885,479,000 H Shares to be issued in the Global OÅering were issued on April 27, 2007 (assuming the Over-allotment Option is not exercised). All statistics set forth in the table below are based on the assumption that (i) the Global OÅering and the A Share OÅering are both completed and (ii) the Over-allotment Option is not exercised.

Forecast consolidated net proÑt attributable to shareholders(1)ÏÏÏÏÏÏÏÏ not less than RMB 5.7 billion Forecast earnings per share (a) pro forma fully diluted(2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ RMB 0.15 (HK$0.15) (b) weighted average(3)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ RMB 0.16 (HK$0.16)

(1) The bases and assumptions on which the proÑt forecast has been prepared are set out in Appendix IV. (2) The calculation of the forecast earnings per share on a pro forma fully diluted basis is based on the forecast consolidated net proÑt attributable to our shareholders for the year ending December 31, 2007 assuming that we had been listed since January 1, 2007 and a total of 38,300,523,054 shares were issued and outstanding during the entire year. This calculation assumes that the 4,885,479,000 H Shares to be issued pursuant to the Global OÅering and 2,301,932,654 A Shares to be issued in the A Share OÅering were issued on January 1, 2007 (assuming the Over-allotment Option is not exercised). The forecast consolidated net proÑt attributable to shareholders for the year ending December 31, 2007 is based on the audited consolidated Ñnancial statements for the year ended December 31, 2006 and a forecast of the consolidated results for the twelve months ending December 31, 2007. (3) The calculation of the forecast earnings per share on a weighted average basis is based on the forecast consolidated net proÑt attributable to shareholders for the year ending December 31, 2007 and a weighted average number of 36,016,304,556 shares issued and outstanding during the year. This calculation assumes that the 4,885,479,000 H Shares to be issued in the Global OÅering and

11 SUMMARY

2,301,932,654 A Shares to be issued in the A Share OÅering were issued on April 27, 2007 (assuming the Over-allotment Option is not exercised).

GLOBAL OFFERING The Global OÅering by us consists of:

¬ the oÅer by us of initially 244,274,000 H Shares, or Hong Kong OÅer Shares, for subscription by the App 1A 15(2)(a) public in Hong Kong, referred to in this prospectus as the Hong Kong Public OÅering; and

¬ the oÅer by us of initially 4,641,205,000 H Shares in the International OÅering, referred to in this App 1A 15(2)(b) prospectus as the International OÅering, consisting of the oÅering of our H Shares (i) in the United States to qualiÑed institutional buyers in reliance on Rule 144A under the U.S. Securities Act of 1933, as amended, or the U.S. Securities Act, and (ii) outside the United States in reliance on Regulation S under the U.S. Securities Act. The International OÅering includes a placement to our strategic investor and certain other investors and a public oÅering without listing in Japan. At any time from the date we sign the International Underwriting Agreement until 30 days after the last day for the lodging of applications in the Hong Kong Public OÅering, the Joint Global Coordinators, as representatives of the International OÅering Underwriters, have an option to require our company to allot and issue up to an additional 732,821,000 H Shares from us, representing 15% of the initial number of OÅer Shares to be oÅered in the Global OÅering (which number includes the H Shares to be issued to BBVA and CIFH pursuant to their exercise of the anti-dilution right and top-up right, respectively, in the event that the whole or part of the Over-allotment Option is exercised), at the oÅer price to, among other things, cover over-allocations in the International OÅering, if any. The aggregate number of OÅer Shares in the Global OÅering consists of the Hong Kong OÅer Shares to be oÅered in the Hong Kong Public OÅering, the International OÅer Shares to be oÅered in the International OÅering and the additional H Shares to be issued to BBVA and CIFH pursuant to the exercise of the anti- dilution right and top-up right, respectively, as described in ""Our Strategic Investor and Other Investors''.

A SHARE OFFERING Concurrently with the Global OÅering, we are undertaking a public oÅering of our A Shares in the PRC, which oÅering is referred to in this prospectus as the A Share OÅering. Our A Share OÅering comprises an oÅering of initially 2,301,932,654 A Shares for subscription. Assuming an oÅer price of RMB 5.40 per A Share, being the mid-point of the price range of the A Share OÅering, we estimate that the net proceeds to us from the A Share OÅering will be approximately RMB 12,082 million (HK$12,216 million). Neither our Global OÅering nor our A Share OÅering is conditional upon the other. See ""A Share OÅering''.

OFFER STATISTICS Based on the 11,595,699,381 H Shares expected to be issued and outstanding following the completion of the Global OÅering (assuming that the Over-allotment Option is not exercised), the market capitalization of our H Shares would be HK$58,674,238,868, based on an oÅer price of HK$5.06 per H Share, or HK$67,950,798,373, based on an oÅer price of HK$5.86 per H Share. The statistics in the following table do not give eÅect to the A Share OÅering and are based on the assumptions that (i) the Global OÅering is completed, (ii) 4,885,479,000 H Shares are newly issued in the

12 SUMMARY

Global OÅering, (iii) the Over-allotment Option is not exercised, and (iv) 35,998,590,400 shares are issued and outstanding following the completion of the Global OÅering:

Based on an oÅer Based on an oÅer price of HK$5.06 price of HK$5.86 per H Share per H Share Prospective price/earnings multiple (a) pro forma fully diluted(1)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 31.6 times 36.6 times (b) weighted average(2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 30.2 times 35.0 times Unaudited pro forma adjusted consolidated net tangible assets per App 1A 21 share(3) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ HK$1.55 HK$1.66

(1) The calculation of the prospective price/earnings multiple on a pro forma basis is based on the forecast earnings per share for the year ending December 31, 2007 on a pro forma basis at the respective oÅer prices of HK$5.06 per H Share and HK$5.86 per H Share. (2) The calculation of the prospective price/earnings multiple on a weighted average basis is based on the forecast earnings per share for the year ending December 31, 2007 on a weighted average basis at the respective oÅer prices of HK$5.06 per H Share and HK$5.86 per H Share. (3) The unaudited pro forma adjusted consolidated net tangible assets per share is calculated after making the adjustments referred to in Appendix III.

If the Over-allotment Option is exercised in full, the unaudited pro forma adjusted consolidated net App 1A 15(3)(c) tangible assets per H Share will be approximately HK$1.62 (based on an oÅer price of HK$5.06 per H Share) or approximately HK$1.74 (based on an oÅer price of HK$5.86 per H Share), while the forecast earnings per H Share on a pro forma basis and on a weighted average basis will be approximately HK$0.16 per H Share and HK$0.16 per H Share, respectively.

All statistics in the following table are based on the assumption that (i) both the Global OÅering and the A Share OÅering are completed and (ii) 4,885,479,000 H Shares are newly issued in the Global OÅering, (iii) 2,301,932,654 A Shares are newly issued in the A Share OÅering, (iv) the Over-allotment Option is not exercised and BBVA and CIFH exercise their anti-dilution right and top-up right, respectively, (v) the A Shares are sold at RMB 5.40 per share, being the mid-point of our price range announced for the A Share OÅering, and (vi) 39,033,344,054 shares are issued and outstanding following the completion of the Global OÅering and the A Share OÅering.

Based on an oÅer Based on an oÅer price of HK$5.06 price of HK$5.86 per H share per H share Prospective price/earnings multiple (a) pro forma fully diluted(1)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 33.6 times 38.9 times (b) weighted average(2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 31.6 times 36.6 times Unaudited pro forma adjusted consolidated net tangible asset value per share(3) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ HK$1.75 HK$1.90

(1) The calculation of the prospective price/earnings multiple on a pro forma basis is based on the forecast earnings per share for the year ending December 31, 2007 on a pro forma basis at the respective oÅer prices of HK$5.06 per H Share and HK$5.86 per H Share.

(2) The calculation of the prospective price/earnings multiple on a weighted average basis is based on the forecast earnings per share for the year ending December 31, 2007 on a weighted average basis at the respective oÅer prices of HK$5.06 per H Share and HK$5.86 per H Share.

(3) The unaudited pro forma adjusted consolidated net tangible asset value per share is calculated after making the adjustments referred to in Appendix III.

If the Over-allotment Option is exercised in full, the unaudited pro forma adjusted consolidated net tangible assets per H Share will be approximately HK$1.81 (based on oÅer prices of HK$5.06 per H Share and RMB 5.00 per A Share) or approximately HK$1.97 (based on oÅer prices of HK$5.86 per H Share and

13 SUMMARY

RMB 5.80 per A Share), while the forecast earnings per H Share on a pro forma basis and on a weighted average basis will be approximately HK$0.15 per H share and HK$0.16 per H Share, respectively.

USE OF PROCEEDS App 1A 15(3)(c) We estimate that the net proceeds of the Global OÅering (after deduction of underwriting fees and estimated expenses payable in relation to the Global OÅering, assuming an oÅer price of HK$5.46 (RMB 5.40) per H Share, which is the mid-point of the proposed oÅer price range of HK$5.06 (RMB 5.00) to HK$5.86 (RMB 5.80) per H Share) to be approximately HK$25,723 million (RMB 25,443 million) if the Over-allotment Option is not exercised or HK$29,612 million (RMB 29,289 million) if the Over-allotment Option is exercised in full. We currently intend to use the net proceeds from the Global OÅering to strengthen our capital base and to support our business growth as set forth in ""Business Ì Our Strategy''.

RISK FACTORS There are certain risks and considerations relating to an investment in our shares. These can be categorized into (i) risks relating to our loan portfolio, (ii) risks relating to our business, (iii) risks relating to the banking industry in China, (iv) risks relating to the PRC, and (v) risks relating to the Global OÅering. These risk factors and considerations are further described in ""Risk Factors'' and are summarized below.

Risks Relating to Our Loan Portfolio

¬ If we are unable to eÅectively maintain the quality of our loan portfolio, our Ñnancial condition and results of operations may be materially and adversely aÅected;

¬ Actual losses on our loan portfolio may exceed our allowance for impairment losses in the future;

¬ We face concentration risks on our credit exposure to certain customers;

¬ We face concentration risks on our credit exposure to certain industry sectors;

¬ We may be unable to realize the full value of the collateral pledged or guarantees granted to secure our loans;

¬ Future amendments to IAS 39 and interpretive guidance on its application may require us to change our loan provisioning practice; and

¬ A signiÑcant portion of our loans have maturities of one year or less or may be prepaid without incurring any penalty. A failure to renew such loans or prepayment on a substantial portion of our loans may reduce our interest income signiÑcantly.

Risks Relating to Our Business

¬ We cannot assure you that our risk management and internal control policies and procedures can adequately control or protect us against credit and other risks;

¬ We may encounter diÇculties in eÅectively implementing centralized management and supervision of our branches, as well as consistent application of our policies throughout the bank, and we cannot assure you that it is always possible to detect and prevent fraud or other misconduct committed by our employees or third parties;

¬ We are subject to liquidity risk;

¬ Our business is highly dependent on the proper functioning and improvement of our information technology infrastructure;

¬ We are subject to credit risk with respect to certain oÅ-balance sheet commitments and guarantees;

¬ We are subject to risks associated with our derivative transactions;

14 SUMMARY

¬ We cannot assure you that we will be able to successfully maintain our growth or otherwise obtain suÇcient resources to support such growth;

¬ Our expanding range of products and services exposes us to new risks;

¬ We face risks relating to the PRC banking regulatory requirements and guidelines;

¬ We do not possess the relevant land use rights or building ownership certiÑcates for some of the properties we own, and some of our lessors may not possess the relevant title certiÑcates or have consent from the owners to sublet some of the properties occupied by us; and

¬ Our principal shareholder is able to exercise signiÑcant inÖuence over us.

Risks Relating to the Banking Industry in China

¬ Our loan classiÑcation guidelines are diÅerent from those applicable to banks in certain other countries and regions;

¬ We are subject to Öuctuations in interest rates and other market risks, which may be beyond our control;

¬ Competition in the banking industry in China is increasing;

¬ The rate of growth of China's banking industry may not be sustainable;

¬ China's banking regulatory environment is continually evolving and may change;

¬ We face risks relating to the inspections and examinations by PRC and overseas regulatory authorities;

¬ The eÅectiveness of our credit risk management is aÅected by the quality and scope of information available in the PRC;

¬ Certain PRC regulations limit our ability to diversify our investments, and as a result, a decrease in the value of a particular type of investment may have a material adverse eÅect on our Ñnancial condition and results of operations;

¬ We may not be able to detect money laundering and other illegal or improper activities, which could expose us to additional liability and harm our business;

¬ Some of our customers and the countries in which they are located may be subject to U.S. sanctions;

¬ We cannot assure you of the accuracy or comparability of facts, forecasts and statistics contained in this prospectus on China, its economy or its banking industry;

¬ Any acquisition of 5% or more of our total outstanding shares will require the CBRC's prior approval; and

¬ Our reputation may be adversely aÅected from negative media coverage of China's banking industry.

Risks Relating to the PRC

¬ China's economic, political and social conditions, as well as government policies, could aÅect our business;

¬ Interpretation of PRC laws and regulations may involve uncertainty;

¬ You may experience diÇculties in eÅecting service of legal process and enforcing judgments against us and our management;

¬ Holders of H Shares may be subject to PRC taxation;

¬ The ability of our shareholders to pledge their shares is limited by applicable PRC legal and regulatory requirements;

15 SUMMARY

¬ Payment of dividends is subject to restrictions under PRC law; and

¬ We are subject to PRC Government controls on currency conversion and future movements in exchange rates.

Risks Relating to the Global OÅering

¬ Future sales or perceived sales of substantial amounts of our H Shares, A Shares or other securities relating to our H Shares or A Shares in the public market, including any future oÅerings, could have a material adverse eÅect on the prevailing market price of our H Shares and our ability to raise capital in the future, and may result in dilution of our shareholdings;

¬ An active trading market for our H Shares may not develop, and their trading prices may Öuctuate signiÑcantly;

¬ Because the initial public oÅering price of the H Shares is higher than the net tangible asset value per share, you will incur immediate dilution;

¬ There will be a Ñve business day time gap between pricing and trading of our H Shares oÅered in the Global OÅering;

¬ Dividends we declared in the past may not be indicative of our dividend policy in the future;

¬ We are conducting a concurrent A Share oÅering; the characteristics of the A Share and H Share markets are diÅerent; and

¬ We strongly caution you not to place any reliance on any information contained in press articles or other media regarding our Global OÅering or the A Share OÅering or information released by us in connection with the A Share OÅering.

DIVIDEND POLICY

Our board of directors decides whether to pay any dividend and in what amount based on our results of operations, cash Öow, Ñnancial condition, capital adequacy ratios, future prospects, statutory and regulatory restrictions on the payment of dividends by us and other factors that our board of directors deems relevant. Under the PRC Company Law and our articles of association, all of our shareholders have equal rights to dividends and distributions.

Under PRC law, dividends may be paid only out of distributable proÑts. Distributable proÑts means our net proÑt as determined under PRC GAAP or IFRS, whichever is lower, less any accumulated losses and appropriations to the statutory surplus reserve and general reserve which we are required to make. Any distributable proÑts that are not distributed in a given year are retained and available for distribution in subsequent years.

In 2006, we distributed dividends in the amount of RMB 3,000 million in cash to CITIC Group. In addition, in accordance with our board resolution on March 8, 2007 and the extraordinary general meeting of shareholders held on the same day, we distributed RMB 726 million dividend in cash to CITIC Group from the retained earnings as of December 31, 2006.

16 DEFINITIONS AND CONVENTIONS

In this prospectus, under the context otherwise requires, the following words and expressions have the following meanings.

""A Share OÅering'' the proposed oÅering of not more than 2,301,932,654 A Shares by our bank to the public in the PRC

""A Shares'' domestic shares of our bank, with a nominal value of RMB 1.00 each, which are to be listed on the and traded in RMB

""ABC'' Agricultural ( )

""ATM'' automatic teller machine

""Anti-Money Laundering Law'' the Anti-Money Laundering Law (! %), as enacted by the Standing Committee of the 10th National People's Congress on October 31, 2006 and eÅective on January 1, 2007

""Anti-Money Laundering the Anti-Money Laundering Regulation for Financial Institutions Regulation'' (! %), as enacted by the PBOC on November 14, 2006 and eÅective on January 1, 2007

""Application Form(s)'' white application form(s), yellow application form(s) and green application form(s) or, where the context requires, any of them

""Articles of Association'' Articles of Association of our bank, as approved by the CBRC on March 15, 2007

""Authoritative Interpretive the International Financial Reporting Interpretations Committee and Bodies'' other relevant accounting standards interpretive bodies

""Big Four'' ABC, BOC, CCB and ICBC

""BOC'' Bank of China Limited ( ) and its predecessors

""Bohai Rim Zone'' for purpose of this prospectus, Municipality, Tianjing Municipality, Hebei Province, Shandong Province and City of Dalian

""CBRC'' China Banking Regulatory Commission ( )

""CCASS'' the Central Clearing and Settlement System established and operated by HKSCC

""CCASS Broker Participant'' a person admitted to participate in CCASS as a broker participant

""CCASS Custodian a person admitted to participate in CCASS as a custodian participant Participant''

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

""CCASS Participant'' a CCASS Broker Participant or a CCASS Custodian Participant or a CCASS Investor Participant

17 DEFINITIONS AND CONVENTIONS

""CCB'' China Construction Bank Corporation ( ) and its predecessors

""CDM'' cash deposit machine

""Central Region'' for purpose of this prospectus, Hubei Province, Henan Province, Hunan Province and Anhui Province

""CEPA'' The Mainland and Hong Kong Closer Economic Partnership Arrangement and The Mainland and Macau Closer Economic Partnership Arrangement

""CIFH'' CITIC International Financial Holdings Limited ( ), a company whose shares are listed on the Hong Kong Stock Exchange and a substantial shareholder of our bank

""CIRC'' China Insurance Regulatory Commission ( )

""CITIC Funds'' CITIC Fund Management Co., Ltd. ( )

""CITIC Futures'' CITIC Futures Brokerage Co., Ltd. ( )

""CITIC Prudential Funds'' CITIC Prudential Fund Management Co., Ltd. ( )

""CITIC Prudential Life'' CITIC Prudential Life Insurance Co., Ltd. ( )

""CITIC Securities'' CITIC Securities Co., Ltd. ( )

""CITIC Trust and Investment'' CITIC Trust and Investment Co., Ltd. ( )

""CKWB'' CITIC Ka Wah Bank Limited, a wholly owned subsidiary of CIFH

""Core Indicators the Regulations on Core Regulatory Ratios with respect to Risk (Provisional)'' Supervision for the PRC Commercial Banks (Provisional) (! %), as promulgated by the CBRC, eÅective on January 1, 2006

""CRS'' customer recycle system, which combines the functions of ATM and CDM

""CSRC'' China Securities Regulatory Commission ( )

""G7'' Group of Seven, comprises Canada, France, Germany, Italy, Japan, the and the United States

""GDP'' gross domestic product (all references to GDP growth rates are real as opposed to nominal rates of GDP growth)

""Global OÅering'' the Hong Kong Public OÅering and the International OÅering

18 DEFINITIONS AND CONVENTIONS

""Guidelines on Loan Loss the Guidelines Regarding the Loan Loss Provisions of Banks Provisions'' (! %), as promulgated by the PBOC on April 2, 2002 and effective on January 1, 2002

""H Shares'' ordinary shares of our bank, with a nominal value of RMB 1.00 each, which are to be listed on the Hong Kong Stock Exchange and traded in Hong Kong dollars

""HK$'' or ""Hong Kong Hong Kong dollars, the lawful currency of Hong Kong dollars''

""HKSCC'' Hong Kong Securities Clearing Company Limited

""HKSCC Nominees'' HKSCC Nominees Limited

""Hong Kong'' the Hong Kong Special Administrative Region of the PRC

""Hong Kong Banking the Banking Ordinance (Chapter 155 of the Laws of Hong Kong), as Ordinance'' amended, supplemented or otherwise modiÑed from time to time

""Hong Kong Companies the Companies Ordinance (Chapter 32 of the Laws of Hong Kong), Ordinance'' as amended, supplemented or otherwise modiÑed from time to time

""Hong Kong Listing Rules'' the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited

""Hong Kong Monetary Hong Kong Monetary Authority ( ) Authority'' or ""HKMA'' ""Hong Kong OÅer Shares'' the 244,274,000 OÅer Shares initially being oÅered for subscription in the Hong Kong Public OÅering (subject to adjustment as described in ""Structure of the Global OÅering'')

""Hong Kong Public OÅering'' the oÅer for subscription of the Hong Kong OÅer Shares in Hong Kong on and subject to the terms and conditions described in this prospectus and the Application Forms

""Hong Kong Stock Exchange'' The Stock Exchange of Hong Kong Limited ( )

""Hong Kong Underwriters'' the Underwriters listed in ""Hong Kong Underwriters'' under ""Underwriting''

""Hong Kong Underwriting the underwriting agreement dated on or about April 13, 2007 relating Agreement'' to the Hong Kong Public OÅering entered into among us, the Joint Global Coordinators and the Hong Kong Underwriters

""IAS 39'' International Accounting Standard 39 ""Financial Instruments: Recognition and Measurement'' and its interpretations by the IASB

""IASB'' the International Accounting Standards Board

""ICBC'' Industrial and Commercial Bank of China Limited ( ) and its predecessors

19 DEFINITIONS AND CONVENTIONS

""IFRS'' International Financial Reporting Standards promulgated by the IASB, which include International Accounting Standards (""IAS'') and their interpretations

""Internal Control Guidelines'' the Internal Control Guidelines for Commercial Banks (! %), as enacted by the PBOC on September 18, 2002 and eÅective on the same date

""International OÅer Shares'' the 4,641,205,000 OÅer Shares initially being oÅered for subscription in the International OÅering (subject to adjustment as described in ""Structure of the Global OÅering'')

""International OÅering'' the oÅer of the International OÅer Shares outside the United States and the PRC (including to institutional and professional investors in Hong Kong (other than to retail investors in Hong Kong) and a public oÅering without listing to investors, including retail investors, in Japan), and in the United States to QIBs as deÑned in Rule 144A

""International OÅering the group of underwriters led by China International Capital Underwriters'' Corporation Limited, CITIC Securities Corporate Finance (HK) Limited, Citigroup Global Markets Limited, The Hongkong and Shanghai Banking Corporation Limited and Lehman Brothers International (Europe) (in alphabetical order) that is expected to enter into International Underwriting Agreement to underwrite the International OÅering

""International Underwriting the international underwriting agreement relating to the International Agreement'' OÅering, expected to be entered into among us and the Joint Global Coordinators as the representatives of the International OÅering Underwriters on or about April 20, 2007

""Joint Bookrunners'' China International Capital Corporation Limited, CITIC Securities Co., Ltd., Citigroup Global Markets Asia Limited, The Hongkong and Shanghai Banking Corporation Limited and Lehman Brothers Asia Limited (in alphabetical order)

""Joint Global Coordinators'' China International Capital Corporation Limited, CITIC Securities Co., Ltd., Citigroup Global Markets Asia Limited, The Hongkong and Shanghai Banking Corporation Limited and Lehman Brothers Asia Limited (in alphabetical order)

""Joint Lead Managers'' China International Capital Corporation (Hong Kong) Limited, CITIC Securities Corporate Finance (HK) Limited, Citigroup Global Markets Asia Limited, The Hongkong and Shanghai Banking Corporation Limited and Lehman Brothers Asia Limited (in alphabetical order)

""Joint Sponsors'' China International Capital Corporation (Hong Kong) Limited, CITIC Securities Corporate Finance (HK) Limited, Citigroup Global Markets Asia Limited, The Hongkong and Shanghai Banking Corporation Limited and Lehman Brothers Asia Limited (in alphabetical order)

20 DEFINITIONS AND CONVENTIONS

""Latest Practicable Date'' April 5, 2007, being the latest practicable date for the purpose of ascertaining certain information contained in this prospectus

""LIBOR'' London Inter-Bank OÅered Rate

""Listing Date'' the date, expected to be on or about April 27, 2007, on which our H Shares are Ñrst listed and from which dealings therein are permitted to take place on the Hong Kong Stock Exchange

""Loan ClassiÑcation the Guiding Principles on the ClassiÑcation of Loan Risk Principles'' Management (! %) as promulgated by the PBOC on December 24, 2001 and eÅective on January 1, 2002

""Mandatory Provisions'' the Mandatory Provisions for Articles of Association of Companies to be Listed Overseas (! %), for inclusion in the articles of association of companies incorporated in the PRC to be listed overseas, which were promulgated by the PRC Securities Commission and the State Restructuring Commission on August 27, 1994, as amended and supplemented from time to time

""Ministry of Finance'' or the PRC Ministry of Finance ( ) ""MOF'' ""NAO'' National Audit OÇce of the PRC ( )

""Northeastern Region'' for purpose of this prospectus, Liaoning Province (except city of Dalian)

""NPC'' or ""National People's the PRC National People's Congress ( Congress'' )

""OÅer Price'' the Ñnal Hong Kong dollar price per H Share (exclusive of brokerage, SFC transaction levy and Hong Kong Stock Exchange trading fee) at which Hong Kong OÅer Shares are to be subscribed, to be determined in the manner described in the section headed ""Structure of the Global OÅering''

""OÅer Shares'' the H Shares oÅered in the Global OÅering, including the H Shares to be issued to BBVA and CIFH pursuant to their exercise of the anti-dilution right and top-up right, respectively, and any H Shares to be issued by us pursuant to the exercise of the Over-allotment Option

""Other National Commercial for the purpose of this prospectus, China's national commercial banks Banks'' excluding the Big Four commercial banks and China Postal Savings Bank, namely , China Merchants Bank, China CITIC Bank, Shanghai Pudong Development Bank, , , Guangdong Development Bank, , , Shenzhen Development Bank, Evergrowing Bank, and

""our bank'', ""our company'', China CITIC Bank Corporation Limited ( ) the ""Company'', ""we'' and or its predecessors and, except where the context otherwise requires, ""us'' all of our subsidiaries of

21 DEFINITIONS AND CONVENTIONS

""Over-allotment Option'' the option to be granted by us, exercisable by the Joint Global Coordinators (on behalf of the International OÅering Underwriters) at any time from the date of signing of the International Underwriting Agreement until 30 days after the last day for the lodging of applications in the Hong Kong Public OÅering, to require us to issue and sell up to an aggregate of 732,821,000 additional H Shares as described in the section headed ""Structure of the Global OÅering''

""PBOC'' the People's Bank of China, the of the PRC

""Pearl River Delta and West for purpose of this prospectus, Guangdong Province and Fujian Strait'' Province

""PRC'', ""China'' or ""Chinese the People's Republic of China, excluding, for purposes of this Mainland'' prospectus only, Hong Kong, Macau and Taiwan

""PRC Banking Regulatory the PRC Banking Regulatory Law (! Law'' %), as enacted by the Standing Committee of the Eleventh NPC on December 27, 2003 and eÅective on February 1, 2004

""PRC Commercial Banking the Commercial Banking Law of the PRC (! Law'' %), as enacted by the Standing Committee of the Eighth NPC on May 10, 1995 and eÅective on July 1, 1995, as revised as of December 27, 2003

""PRC Company Law'' the Company Law of the PRC (! %), as enacted by the Standing Committee of the Eighth NPC on December 29, 1993 and eÅective on July 1, 1994, as revised as of December 25, 1999, August 28, 2004 and October 27, 2005

""PRC GAAP'' Accounting Standards for Business Enterprises and Accounting Regulations for Financial Enterprises

""PRC Government'' the central government of the PRC including all governmental subdivisions (including provincial, municipal and other regional or local government entities) and instrumentalities thereof or, where the context requires, any of them

""PRC PBOC Law'' the Law of the People's Bank of China (! %), as enacted by the Eighth NPC on March 18, 1995 and eÅective on the same date, as revised as of December 27, 2003

""PRC Securities Law'' the Securities Law of the PRC (! %), as enacted by the Ninth NPC on December 29, 1998 and eÅective on July 1, 1999, as revised as of August 28, 2004 and October 27, 2005

""Price Determination date'' the date, expected to be on or around April 20, 2007 but, in any event, not later than April 25, 2007 on which the OÅer Price will be Ñxed

""Promoters'' or ""Promoter'' the promoters of our company, which consist of CITIC Group and CIFH

22 DEFINITIONS AND CONVENTIONS

""QIBs'' qualiÑed institutional buyers as deÑned in Rule 144A under the U.S. Securities Act

""Regulation S'' Regulation S under the U.S. Securities Act

""Regulatory Capital'' both core capital and supplementary capital, less certain deductions

""Related Party Transactions the Administrative Measures on Transactions with Insiders Measures'' and Shareholders of Commercial Banks (! %), as promulgated by the CBRC on April 2, 2004 and eÅective on May 1, 2004

""RMB'' or ""Renminbi'' Renminbi, the lawful currency of the PRC

""Rule 144A'' Rule 144A under the U.S. Securities Act

""SAIC'' State Administration for Industry and Commerce ( )

""Securities and Futures (Stock the rules governing listings and listed companies under the Securities Market Listing) Rules'' and Futures Ordinance, as promulgated by the SFC on April 1, 2003 and eÅective on the same date

""SFC'' Securities and Futures Commission of Hong Kong ( )

""SFO'' the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong), as amended, supplemented or otherwise modiÑed from time to time

""Special Regulations on the Special Regulations on the Overseas OÅering and Listing of Overseas OÅering'' Shares by Joint Stock Limited Companies (! %) issued by the State Council of the PRC on August 4, 1994, as amended, supplemented or otherwise modiÑed from time to time

""SSF'' National Council for Social Security Fund ( )

""Stabilizing Manager'' Citigroup Global Markets Asia Limited

""State Administration of the PRC State Administration of Foreign Exchange ( Foreign Exchange'' or ) ""SAFE''

""State Council'' the PRC State Council ( )

""Underwriters'' the Hong Kong Underwriters and the International OÅering Underwriters

""Underwriting Agreements'' the Hong Kong Underwriting Agreement and the International Underwriting Agreement

""United States'' The United States of America

""U.S. Securities Act'' The United States Securities Act of 1933, as amended

23 DEFINITIONS AND CONVENTIONS

""US$'' or ""U.S. dollars'' United States dollars, the lawful currency of the United States

""Western Region'' for purpose of this prospectus, Sichuan Province, Chongqing Municipality, Shanxi Province and Yunnan Province

""White Form eIPO'' applying for Hong Kong OÅer Shares to be issued in your own name by submitting applications online through the designated website at www.eipo.com.hk

""WTO'' World Trade Organization

""Yangtze River Delta'' for purpose of this prospectus, Shanghai Municipality, Jiangsu Province and Zhejiang Province We deÑne the geographical regions of China to which we refer for purposes of describing our branch outlet network and presenting certain results of operations and Ñnancial condition as follows:

Geographical region Tier one branches ""Yangtze River Delta''ÏÏÏÏÏÏÏÏÏ ‚ Shanghai Municipality ‚ City of Nanjing ‚ City of Hangzhou ‚ City of Ningbo ‚ City of Suzhou ""Pearl River Delta and West ‚ City of Guangzhou ‚ City of Shenzhen Strait''ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ ‚ City of Fuzhou ‚ City of Dongguan ‚ City of Xiamen ""Bohai Rim Zone'' ÏÏÏÏÏÏÏÏÏÏÏÏ ‚ Beijing Municipality ‚ Tianjin Municipality ‚ City of Shijiazhuang ‚ City of Jinan ‚ City of Qingdao ‚ City of Dalian ""Central'' ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ ‚ City of Wuhan ‚ City of Zhengzhou ‚ City of Changsha ‚ City of Hefei ""Western'' ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ ‚ City of Chengdu ‚ Chongqing Municipality ‚ City of Xi'an ‚ City of Kunming ""Northeastern'' ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ ‚ City of Shenyang For an explanation of the term ""tier one branches,'' see ""Business Ì Distribution Network.''

24 FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements that are, by their nature, subject to signiÑcant risks and uncertainties. These forward-looking statements include, without limitation, statements relating to:

¬ future developments in the banking industry in China;

¬ our business co-operations and relationship with our strategic investor;

¬ our capital expenditure plans, particularly plans relating to the upgrading of our information technology infrastructure;

¬ our existing risk management framework and our ability to improve such system;

¬ the industry regulatory environment as well as the industry outlook in general;

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

¬ our business strategy and plan of operation;

¬ our estimated Ñnancial information regarding our business; and

¬ our dividend policy. In some cases, we use words such as ""would,'' ""could,'' ""predict,'' ""continue,'' ""believe,'' ""seek,'' ""intend,'' ""anticipate,'' ""estimate,'' ""project,'' ""plan,'' ""potential,'' ""will,'' ""may,'' ""should'' and ""expect'' and similar expressions to identify forward-looking statements. All statements other than statements of historical facts included in this prospectus, including statements regarding our future Ñnancial position, strategy, projected costs and plans and objectives of management for future operations, are forward-looking statements. Although we believe that the expectations reÖected in those forward-looking statements are reasonable, we can give no assurance that those expectations will prove to have been correct, and you are cautioned not to place undue reliance on such statements. Important factors that could cause actual events to diÅer materially from our expectations are disclosed under ""Risk Factors'' and elsewhere in this prospectus, including in conjunction with the forward-looking statements included in this prospectus. We undertake no obligation to publicly update or revise any forward-looking statements contained in this prospectus, whether as a result of new information, future events or otherwise, except as required by law and the Hong Kong Listing Rules. All forward-looking statements contained in this prospectus are qualiÑed by reference to this cautionary statement.

25 RISK FACTORS

You should carefully consider, in addition to the other information contained in this prospectus, including the risks and uncertainties described below, carefully before making an investment decision. You should pay particular attention to the fact that we are a PRC company and are governed by a legal and regulatory environment that in some respect diÅers from that which prevails in other countries. Our business, Ñnancial condition or results of operations could be aÅected materially and adversely by any of these risks. The trading price of our H Shares could decline due to any of these risks, and you may lose all or part of your investment. For more information concerning the PRC and certain related matters discussed below, see ""Regulation and Supervision''.

RISKS RELATING TO OUR LOAN PORTFOLIO LR 19A.42(64)(e) If we are unable to eÅectively maintain the quality of our loan portfolio, our Ñnancial condition and results of operations may be materially and adversely aÅected. Our results of operations are negatively impacted by our non-performing loans, and the sustainability of our growth depends largely on our ability to eÅectively manage our credit risk and maintain the quality of our loan portfolio (including related party loans). We have undertaken various initiatives to improve our credit risk management system. See ""Risk Management Ì Overview.'' As of December 31, 2006, 2005 and 2004, our non-performing loans were RMB 11.6 billion, RMB 15.3 billion and RMB 19.3 billion, respectively. For additional information on our asset quality, see ""Assets and Liabilities Ì Assets Ì Asset Quality of Our Loan Portfolio.'' However, we cannot assure you that our credit risk management system is free from deÑciency. Failure of our credit risk system to perform eÅectively may result in an increase in the level of our non- performing loans and adversely aÅect the quality of our loan portfolio (including related party loans). In addition, the quality of our loan portfolio may also deteriorate due to various other reasons, including factors beyond our control. If such deterioration were to occur, it would materially and adversely aÅect our Ñnancial condition and results of operations.

Actual losses on our loan portfolio may exceed our allowance for impairment losses in the future. As of December 31, 2006, our allowance for impairment losses on loans was RMB 9,786 million, the ratio of our allowance for impairment losses to total loans to customers was 2.1%, and the ratio of our allowance for impairment losses to non-performing loans was 84.6%. The amount of the allowance is based on our current assessment of various factors aÅecting the quality of our loan portfolio and our expectation of changes to these factors that may aÅect the quality of our loan portfolio in the future. These factors include, among other things, (i) the Ñnancial condition, repayment ability and repayment intention of our borrowers; (ii) the realizable value of any collateral and the ability of the guarantor to perform its obligations; and (iii) general factors relating to China, such as its economy, interest rates, exchange rates, legal and regulatory environment and government economic policies, including its recent policies regarding the property development industry. Although we have made provisions based on what we believe to be a prudent assessment of these factors and expectation of changes to these factors, due to uncertainties of future developments and the fact that many of these factors are partially or entirely beyond our control, we cannot assure you that our assessment of and expectations concerning these factors will not diÅer from actual developments, or that the quality of our loan portfolio will not deteriorate. The occurrence of any of the foregoing may result in our allowance for impairment losses being inadequate to cover our actual losses and we may need to make additional provisions for impairment losses, which may materially and adversely aÅect our net proÑt and Ñnancial condition.

We face concentration risks on our credit exposure to certain customers. As of December 31, 2006, loans to our ten largest single borrowers totaled RMB 21,134 million, which represented 4.6% of our total loans. As of the same date, loans to our ten largest group borrowers totaled RMB 22,407 million, which represented 4.8% of our total loans. We are a subsidiary of the CITIC Group and extend related party loans in the ordinary course of our business. If any of the loans to our such single or group

26 RISK FACTORS borrower (including CITIC Group and its subsidiaries and other related parties) deteriorate, our asset quality will be adversely aÅected. In addition, our allowance for impairment losses may not be adequate to cover our actual losses and we may need to make additional provisions for impairment losses, which may materially and adversely aÅect our Ñnancial condition.

We face concentration risks on our credit exposure to certain industry sectors.

As of December 31, 2006, our loans to the (i) manufacturing (which includes, among others, steel, automobile, mechanical manufacturing and electronics industries); (ii) wholesale and retail; (iii) production and supply of electric power, gas and water industries; and (iv) transportation, storage and post service represented 29.4%, 9.1%, 10.3% and 9.7%, respectively, of our total corporate loan portfolio. If any of the industries in which we face concentration risks experiences a signiÑcant downturn, whether as a result of macroeconomic policy measures, general economic downturn or otherwise, our asset quality may be adversely aÅected. Recent macroeconomic policy measures that have materially aÅected some of these industries include those aimed at moderating ""over-heating'' in the real estate market, which have aÅected the growth in prices and the volume of sales in this industry, and recent reforms of the electricity tariÅ setting mechanism in the power generation industry, which may limit the proÑtability of power producers. In addition, our allowance for impairment losses may not be adequate to cover our actual losses, and we may need to make additional provisions for impairment losses, which may materially and adversely aÅect our net proÑt.

We may be unable to realize the full value of the collateral pledged or guarantees granted to secure our loans.

As of December 31, 2006, 31.5% of our loans were secured by collateral, which consist of real estate and other Ñnancial and non-Ñnancial assets located in the PRC. Any signiÑcant decline in the value of the collateral securing our loans, whether as a result of macroeconomic policy measures, general economic downturn or otherwise, may result in a reduction in the amount we can recover from any collateral realization if borrowers default and an increase in our impairment losses. Moreover, in certain circumstances, our rights to the collateral securing our loans may have lower priority than certain other rights. For example, according to the new Bankruptcy Law of the PRC promulgated on August 27, 2006, which will become eÅective on June 1, 2007, claims for the amount that a company in bankruptcy owed to its employees prior to August 27, 2006, including salaries, beneÑts and other fees and expenses, if not adequately provided for in accordance with liquidation proceedings, will have priority to our rights to the collateral. In addition, the procedures for liquidating or otherwise realizing the value of collateral of borrowers in China may be protracted or ultimately unsuccessful, and the enforcement process in China may be diÇcult for legal and practical reasons. As a result, it is often diÇcult and time-consuming for banks to take control of or liquidate the collateral securing non-performing loans. For the foregoing reasons, we may be unable to realize the expected value on collateral in a timely manner or at all.

A material portion of our loans is backed by guarantees provided by third parties. As of December 31, 2006, 34.1% of our loans (excluding discounted bills) were guaranteed. A signiÑcant deterioration in the Ñnancial condition of the guarantors may signiÑcantly decrease the amounts we may recover from them upon any default. Moreover, we are subject to the risk of guarantees being deemed invalid by a court if a guarantor fails to satisfy the requirements of the PRC laws under certain circumstances. For instance, under the PRC Guarantee Law, no branches of an enterprise legal person may act as guarantors without appropriate written authorization from the legal person.

If we fail to realize the full value on all or a signiÑcant portion of the collateral securing our loans or of guarantees on a timely basis, our overall asset quality and Ñnancial condition may be adversely aÅected as a result.

27 RISK FACTORS

Future amendments to IAS 39 and interpretive guidance on its application may require us to change our loan provisioning practice.

Our allowance for impairment losses on loans and advances are determined in accordance with IAS 39 which became eÅective on January 1, 2005, on the recognition and measurement of Ñnancial instruments. The Authoritative Interpretative Bodies have been asked by their constituents to consider providing interpretive guidance relating to the application of IAS 39. The IASB may issue amendments to IAS 39 and the Authoritative Interpretive Bodies may issue authoritative interpretive guidance relating to IAS 39. Future amendments and interpretive guidance relating to IAS 39 may require us to change our current loan- provisioning practice and may signiÑcantly increase our allowance for impairment losses on loans and advances and may adversely aÅect our Ñnancial condition and results of operations.

A signiÑcant portion of our loans have maturities of one year or less or may be prepaid without incurring any penalty. A failure to renew such loans or prepayment on a substantial portion of our loans may reduce our interest income signiÑcantly.

A substantial majority of our loans are due within one year. As of December 31, 2006, loans to customers due within one year totaled RMB 292,386 million, representing 63.1% of our total loans. Moreover, the terms of our loans typically permit prepayment without penalty if certain conditions are satisÑed. If our customers decide to borrow from our competitors or if alternative, more attractive Ñnancing methods emerge, these customers may prepay or not renew their loans upon maturity. For example, in May 2005, the PBOC promulgated regulations allowing qualiÑed corporations to issue domestic short-term Ñnancing bonds, and the domestic commercial paper market has grown rapidly since then. See ""Banking Industry in the PRC Ì Industry Trends Ì Rapid Growth of Direct Corporate Financing.'' As compared with bank loans, domestic short-term Ñnancing bonds has recently borne lower interest rates. If a substantial number of our customers which are qualiÑed under the applicable regulations choose to issue domestic short-term Ñnancing bonds to fund their short-term capital needs, we may need to seek alternative use of funds. If such alternative use of funds generates lower yields, our business, Ñnancial condition and results of operations may be adversely aÅected.

RISKS RELATING TO OUR BUSINESS App 1A 34(1)(b) LR 19A.42(64)(e) We cannot assure you that our risk management and internal control policies and procedures can adequately control or protect us against credit and other risks.

We have in the past suÅered from credit-quality problems, lapses in credit approval and control processes, internal control deÑciencies and operational problems as a result of weaknesses in our risk management and internal controls. The deÑciencies in our current system and practices may also adversely aÅect our ability to timely and accurately record, process, summarize and report Ñnancial and other data. We have signiÑcantly modiÑed and enhanced our risk management policies and procedures in recent years in an eÅort to improve our risk management capabilities and enhance our internal controls, including our internal audit function. See ""Risk Management Ì Overview.'' However, as these policies and procedures are relatively new, we will require additional time to fully measure the impact of, and evaluate compliance with, these policies and procedures. Moreover, our staff will require time to adapt to these policies and procedures, and we cannot assure you that our staff will be able to consistently follow or correctly apply these policies and procedures.

Our risk management capabilities are limited by the information, tools or technologies available to us. Furthermore, our ability to control market risk and liquidity risk is constrained by the current PRC laws and regulations that restrict the types of Ñnancial instruments and investments we may hold. See ""Regulation and Supervision Ì PRC Regulation and Supervision Ì Regulation of Principal Commercial Banking Activities''. If we are unable to eÅectively implement the enhanced risk management and internal control policies and procedures, or if we do not achieve our intended results of such policies and procedures in a timely manner, our asset quality, results of operations and Ñnancial condition may be materially and adversely aÅected.

28 RISK FACTORS

We may encounter diÇculties in eÅectively implementing centralized management and supervision of our branches, as well as consistent application of our policies throughout the bank; and we cannot assure you that it is always possible to detect and prevent fraud or other misconduct committed by our employees or third parties. As of December 31, 2006, we had 446 branches and outlets throughout the PRC. Although we have continuously sought to enhance management and supervision of branches, we cannot assure you that we can always timely detect or prevent operational or management problems at our branches. In addition, due to limitations of our current information technology system, which is in the process of being upgraded, we are not always able to timely detect or eÅectively prevent operational or management problems at these branches. There have been some cases involving fraud or other misconduct by employees or third parties against us in recent years. Although we are increasing our eÅorts to detect and prevent employee and outside parties' misconduct and fraud, it may not always be possible to detect or deter such activities, and the precautions we take to detect and deter these activities may not be eÅective in all cases. The occurrence of such activities could subject us to Ñnancial losses and sanctions imposed by governmental authorities, which may seriously harm our reputation. Types of misconduct by our employees in the past have included, among other things: fraud, theft, misappropriation of customers' funds, misappropriation of bank funds and improper guarantees. See ""Risk Management Ì Operational Risk Management Ì Reporting and Monitoring of Non-compliance.'' Types of misconduct by third parties against us have included, among other things, fraud, theft and robbery. In addition, our employees may commit errors that could subject us to Ñnancial claims as well as regulatory actions. We cannot assure you that employee or third party misconduct, whether involving past acts that have gone undetected or future acts, will not have a material adverse eÅect on our business, results of operations and Ñnancial condition.

We are subject to liquidity risk. As of December 31, 2006, our assets and liabilities with maturities of one year or less or overdue/ repayable on demand totaled RMB 441,287 million and RMB 616,376 million, respectively. Accordingly, we had, and expect to continue to have, a signiÑcant mismatch between the maturities of our funding and the maturities of our assets. Customer deposits historically have been the main source of our funding and the main component of our liabilities. As of December 31, 2006, customer deposits with maturities of one year or less or payable on demand totaled RMB 572,861 million, or 92.9% of our total liabilities with maturities of one year or less or repayable on demand. In our experience, in part due to the lack of alternative investment products in China, our short-term customer deposits have generally not been withdrawn upon maturity and have thus represented a stable source of funding. However, we cannot assure you that this will continue to be the case, particularly as more alternative investment products become available. If a substantial portion of our depositors withdraw their demand deposits or do not roll over their time deposits upon maturity, we may need to seek alternative sources of funding to meet our funding requirements. The availability of alternative sources of funding may be adversely aÅected by factors beyond our control, such as deterioration of market conditions and disruptions of the Ñnancial markets. For the foregoing reasons, if we fail to meet our liquidity requirements through customer deposits and other sources of funding, or if our sources of funding become more expensive, our liquidity position, results of operations and Ñnancial condition may be materially and adversely aÅected.

Our business is highly dependent on the proper functioning and improvement of our information technology infrastructure. We are highly dependent on our information technology infrastructure to deliver services to our customers, manage risks, implement our internal control systems and manage and monitor our business operations. We have backup data for our key data processing systems and communication networks and have established a catastrophe backup center to ensure the continuous operation of our businesses in the event of catastrophes or a failure of our primary systems. However, we do not backup all systems on a real-time basis

29 RISK FACTORS and the eÅectiveness of our backup system may be materially aÅected by whether we can successfully implement complex procedures and the availability of Ñnancial and human resources. As a result, we cannot assure you that our business activities will not be disrupted if there is a partial or complete failure of any of our primary information technology systems or communication networks. In addition, misappropriation of data by our employees and security breach caused by unauthorized access to our systems, or intentional malfunctions or loss or corruption of data, software, hardware or other computer equipment, could have a material adverse eÅect on our business, results of operations and Ñnancial condition. Our current information technology systems do not cover all our business activities. As a result, we have to manually consolidate and process data in some of our business activities, which increases the risk of inaccuracies and limits our ability to make data available in a timely manner, and may have adverse impact on the management of our businesses. In addition, our information system has limitations in automatically processing and consolidating group borrower exposure across products, across related companies and across lending oÇces as well as measuring risks for oÅ-balance sheet arrangements, including measuring concentration risks relating to such arrangements. These limitations on detecting customer concentration risk may aÅect our ability to monitor our group borrower concentration risk. Our ability to upgrade our information technology systems on a timely and cost-eÅective basis is critical to maintain our competitiveness. We are making and intend to continue to make investments to improve or upgrade our information technology systems. Any failure to successfully upgrade, or any disruption in, our information technology infrastructure could materially and adversely aÅect our business, Ñnancial condition, results of operations and prospects.

We are subject to credit risk with respect to certain oÅ-balance sheet commitments and guarantees. In the normal course of our business, we make commitments and guarantees which are not reÖected as liabilities on our balance sheet, including providing Ñnancial guarantees and letters of credit to guarantee the performance of our customers to third parties, and providing bank acceptances. See ""Financial Information Ì OÅ-Balance Sheet Commitments.'' We are subject to credit risk on our commitments and guarantees because certain of our commitments and guarantees may need to be fulÑlled as a result of non-performance by our customers. If we are not able to obtain repayment from our customers in respect of these commitments and guarantees, our results of operations and Ñnancials may be materially and adversely aÅected.

We are subject to risks associated with our derivative transactions. We enter into swap, option and other derivative transactions primarily for hedging purposes and, to a lesser extent, on behalf of our customers. We are subject to market and operational risks associated with these transactions. With respect to derivative transactions on behalf of our customers, we are also exposed to the risk of our customers' failure to consummate transactions with us. In addition, the market practice and documentation for derivative transactions currently are not well developed in the PRC, and the PRC courts have limited experience in dealing with issues related to derivative transactions, which may further increase the risks associated with these transactions. In addition, our ability to adequately monitor, analyze and evaluate these derivative transactions is subject to the development of our information technology systems. Any signiÑcant losses we incur as a result of the derivative transactions we enter into may materially and adversely aÅect our Ñnancial condition and results of operations.

We cannot assure you that we will be able to successfully maintain our growth or otherwise obtain suÇcient resources to support such growth. Our rapid growth in recent years has placed signiÑcant demands on our managerial, operational and capital resources. The expansion of our business activities also exposes us to a number of risks and challenges, including limited or no experience in certain new business activities; recruiting, training and retaining personnel with the proper experience and knowledge to handle new and existing business activities and adequately staÅ our back oÇce and support functions; and enhancing and expanding our risk management

30 RISK FACTORS information technology systems to eÅectively manage the risks associated with these new business activities, products and services. Moreover, the measures that we are taking to expand our business activities and manage the risks associated with new business activities are relatively new and additional time will be required for our employees to implement and adjust to changes resulting from these new measures. In addition, these new measures may not have the desired eÅects on our corporate structure, corporate governance or other aspects of our operations. We cannot assure you that we will continue to grow at our current rate. In addition, we may not be able to achieve the intended results in these new business activities in all cases. To the extent that we are not able to manage our growth successfully or otherwise obtain suÇcient resources to support such growth, our business, Ñnancial condition, results of operations and prospects may be adversely aÅected.

Our expanding range of products and services exposes us to new risks.

We have experienced rapid expansion in recent years and intend to continue to expand the range of our products and services. Expansion of our business activities exposes us to a number of risks and challenges, including the following:

¬ we may have limited or no experience in certain new business activities and may not compete eÅectively in these areas;

¬ there is no guarantee that our new business activities will meet our expectations of proÑtability;

¬ we will need to hire or retrain capable personnel, to conduct new business activities; and

¬ we must continually enhance the capability of our risk management and upgrade our information technology systems to support a broader range of activities.

If we are not able to achieve the intended results in new business areas due to any of the above or other factors, our business, results of operations and Ñnancial condition may be materially and adversely aÅected. In addition, if we fail to promptly identify and expand into new areas of business to meet the increasing demand for certain products and services, we may fail to maintain our market share or lose some of our existing customers to our competitors.

We face risks relating to the PRC banking regulatory requirements and guidelines.

We are subject to certain requirements and guidelines set by the PRC banking regulatory authorities, including capital adequacy requirements, operational requirements and restrictions on equity ownership in non-banking entities.

We are required by the CBRC to maintain a minimum core capital adequacy ratio of 4.0% and capital adequacy ratio of 8.0%. In recent years, our controlling shareholder, CITIC Group, has provided signiÑcant Ñnancial support to us to enhance our capital adequacy and enable us to meet capital adequacy requirements. We received from CITIC Group RMB 7.4 billion, RMB 8.6 billion and RMB 2.5 billion, as contribution to equity, in 2006, 2005 and 2004, respectively. In 2006 and 2004, we issued subordinated bonds and debt, respectively, each with an aggregate value of RMB 6.0 billion, that qualify as supplementary capital. As of December 31, 2006, our core capital adequacy ratio was 6.57% and our capital adequacy ratio was 9.41%. In addition to our proceeds from the Global OÅering, we may be required to raise additional core or supplementary capital in the future in order to maintain our capital adequacy ratios above the minimum levels required under the CBRC regulations. We cannot assure you that CITIC Group will continue to provide additional Ñnancial support to us after the Global OÅering.

In addition, our ability to obtain additional capital may be restricted by a number of factors, including:

¬ our future Ñnancial condition, results of operations and cash Öows;

¬ any necessary government regulatory approvals;

¬ our credit rating;

31 RISK FACTORS

¬ general market conditions for capital-raising activities by commercial banks and other Ñnancial institutions; and

¬ economic, political and other conditions both within and outside the PRC. If we require additional capital in the future, we cannot guarantee that we will be able to obtain this capital on favorable terms, in a timely manner or at all. Furthermore, the CBRC may increase the minimum capital adequacy requirements or change the method of calculating capital adequacy. Accordingly, although we currently meet the applicable capital adequacy requirements, we may face diÇculties in meeting these requirements in the future. If we fail to meet the capital adequacy requirements, the CBRC may take certain actions against us, including restricting our asset growth, suspending all but our low-risk activities and imposing restrictions on the payment of dividends. Any of these actions could materially and adversely aÅect our reputation, results of operations and Ñnancial condition. In addition, we are required or recommended to satisfy certain liquidity and operational ratio requirements and guidelines issued by regulatory authorities. During the three years ended December 31, 2006, we were on occasion unable to meet certain of these operational requirements and guidelines. See ""Regulation and Supervision Ì PRC Regulation and Supervision Ì Operating Requirements Ì Operational and Risk Management Ratios.'' As a PRC commercial bank, we are also restricted from holding equity interests in non-banking entities in the PRC. In the past we held certain equity interests in non-banking entities in the PRC. We had subsequently disposed of such holdings in June 2006. We have not been subject to sanctions as a result of our failure to meet capital adequacy and operational requirements and equity ownership restrictions. However, we cannot assure you that we will be able to meet these requirements and guidelines at all times in the future, or that no sanction will be imposed on us in the future if we fail to do so. Possible sanctions may include Ñnes, forfeiture of illegal gains, or in the most serious cases, revocation or imposition of restrictions on approvals on speciÑc products or services we provide, or suspension of our business or revocation of our business license. If sanctions are imposed on us for the breaches of these or other requirements and guidelines, our reputation, business, results of operations and Ñnancial condition may be materially and adversely aÅected.

We do not possess the relevant land use rights certiÑcates or building ownership certiÑcates for some of the properties we own, and some of our lessors may not possess the relevant title certiÑcates or have consent from the owners to sublet some of the properties occupied by us. As of January 31, 2007, we leased approximately 754 properties with an aggregate lease area of approximately 405,403.46 square meters, primarily as business premises for our branch outlets, representing approximately 38.2% of the total area we occupy. Of those properties we leased as of that date, we failed to register the relevant lease agreements with the authorities with respect to 543 properties with an aggregate gross Öoor area of 263,741.45 square meters. With respect to 318 of the lease properties with an aggregate lease area of approximately 144,711.5 square meters, the lessors were not able to provide the title certiÑcates or documents evidencing the authorization or consent of the owners of such properties. See ""Business Ì Properties Ì Leased Properties.'' As a result, third parties may be able to challenge the validity of our leases. In addition, we cannot assure you that we will be able to renew our leases on terms acceptable to us upon their expiration. If any of our leases were terminated as a result of challenges by third parties or expiration, we may be forced to relocate these aÅected branch outlets and, if we fail to Ñnd suitable replacement sites on terms acceptable to us for a signiÑcant number of these aÅected branch outlets, our operations may be disrupted. As of January 31, 2007, we occupied 248 properties with an aggregate gross Öoor area of approximately 655,289.99 square meters in China, including 50 properties with an aggregate gross Öoor area of approximately 61,798.73 square meters for which we do not have the relevant granted land use rights certiÑcates or building ownership certiÑcates or both. See ""Business Ì Properties Ì Owned Properties.'' We are in the process of applying for the relevant granted land use rights and building ownership certiÑcates that we do not yet hold. However, we may not be able to obtain certiÑcates for all of the 50 properties due to various title defects or for

32 RISK FACTORS other reasons. We cannot assure you that our ownership rights will not be adversely aÅected in respect of any parcels of land or buildings for which we were unable to obtain the relevant certiÑcates, and as a result, we may be subject to lawsuits or other actions taken against us and we may, in most serious cases, be forced to move our premises.

Our principal shareholder is able to exercise signiÑcant inÖuence over us. CITIC Group wholly owned our bank prior to our establishment as a joint stock limited company on December 31, 2006. Immediately following the completion of the Global OÅering and the A Share OÅering (assuming that the Over-allotment Option is not exercised and BBVA and CIFH exercise their anti-dilution right and top-up right, respectively), CITIC Group will directly own approximately 63.71% of our outstanding shares. Accordingly, CITIC Group will be able to exercise signiÑcant inÖuence over our bank, including, among other things:

¬ the timing and amount of the distribution of dividend;

¬ the issuance of new securities;

¬ the election of our directors and supervisors;

¬ our business strategies and policies;

¬ any plans relating to transactions aÅecting our bank, including mergers and acquisitions; and

¬ amendments to our articles of association. At times, the interests of CITIC Group may not be consistent with the interests of our other shareholders. For example, it is possible that CITIC Group may take actions relating to our business or dividend policy that are not in the best interests of our other shareholders.

RISKS RELATING TO THE BANKING INDUSTRY IN CHINA Our loan classiÑcation guidelines are diÅerent from those applicable to banks in certain other countries and regions. We classify our loans using a Ñve-category loan classiÑcation system, which complies with the CBRC's Loan ClassiÑcation Principles. Our loan classiÑcations are diÅerent in certain respects from those of banks in certain other countries and regions. For a detailed description of the loan classiÑcation in the PRC, see ""Regulation and Supervision Ì PRC Regulation and Supervision Ì Loan ClassiÑcation, Allowances and Write-oÅs.'' As a result, our classiÑcation of loans and advances under the Loan ClassiÑcation Principles may diÅer from that which would be reported if we were located in other jurisdictions. In addition, PRC commercial banks, including us, may have limited experience in implementing the Loan ClassiÑcation Principles since the Loan ClassiÑcation Principles did not come into eÅect until 2002.

We are subject to Öuctuations in interest rates and other market risks, which may be beyond our control. As with most commercial banks, our results of operations depend to a great extent on our net interest income. In 2006, our net interest income represented 91.9% of our operating income. Interest rates in China historically were highly regulated and have been gradually liberalized in recent years. Currently, RMB- denominated loans are subject to minimum rates based on the PBOC benchmark rates, but generally are not subject to maximum rates. RMB-denominated deposits are subject to the PBOC benchmark rates as maximum rates but generally are not subject to minimum rates. Since January 1, 2004, the PBOC adjusted the overall benchmark rates for RMB-denominated loans and deposits in October 2004, the benchmark mortgage rates in March 2005, the benchmark rates for short-term loans and medium- and long-term loans in April 2006, and the overall benchmark rates for RMB-denominated loans and deposits in August 2006. In addition, increasing competition in the banking industry and further liberalization of the interest rate regime may result in more volatility in interest rates. Changes in market interest rates could aÅect the interest rates charged on our interest-earning assets diÅerently from the interest rates paid on our interest-bearing liabilities.

33 RISK FACTORS

Any adjustments to benchmark rates or changes in market interest rates may result in an increase in interest expense relative to interest income, leading to a reduction in our net interest income. In response to the recent liberalization of interest rates, we have sought to expand our non-interest-based banking business. However, we cannot assure you that we will be able to adjust the composition of our assets and liabilities portfolios and our product pricing to enable us to eÅectively respond to the further liberalization of interest rates. We also undertake trading and investment activities involving forwards, options and other Ñnancial instruments both in China and abroad. Our income from these activities is subject to volatility, caused by, among other things, changes in interest rates and foreign currency exchange rates. For example, increases in interest rates generally have an adverse eÅect on the value of our Ñxed income securities portfolio. Furthermore, as the derivatives market has yet to fully develop in China, there is limited availability of risk management tools to enable us to reduce market risks.

Competition in the banking industry in China is increasing. The banking industry in China is becoming increasingly competitive. See ""Banking Industry in the PRC Ì Current Competitive Landscape.'' We currently compete principally with the Big Four commercial banks and other domestic commercial banks. In addition, we expect competition from foreign-invested banks to increase in the future, as regulatory restrictions on their geographical presence, customer base and operating licenses in China have been removed in December 2006 as part of China's commitments in its accession to WTO. Competition may also increase as a result of the CEPA which China entered into with Hong Kong and Macau. CEPA allows smaller Hong Kong and Macau banks to operate in the PRC. See ""Banking Industry in the PRC Ì Industry Trends Ì Participation of Foreign Banks in China.'' Many of these banks compete with us for substantially the same loan, deposit and fee customers and some of them have greater Ñnancial, managerial and technical resources than we do. Increased competition from other banks may result in a decrease in the average yield and an increase in the average cost, thus reducing our net interest income, as well as a decrease in the fees we charge for our fee- and commission-based products and services, resulting in lower net proÑt. Moreover, the PRC Government has, in recent years, implemented a series of measures designed to further liberalize the banking industry, including those relating to interest rates and fee- and commission- based products and services, which are changing the basis on which we compete with other banks for customers. The increased competitive pressure may adversely aÅect our business and prospects, the eÅectiveness of our strategies, our results of operations and Ñnancial condition by potentially:

¬ reducing our market share in our principal products and services;

¬ reducing the growth of our loan or deposit portfolios and other products and services;

¬ reducing our interest income, increasing our interest expense, and decreasing non-interest income as a percentage of operating income;

¬ reducing our fee and commission income;

¬ increasing our non-interest expenses, such as sales and marketing expenses;

¬ decreasing the quality of our assets; and

¬ increasing competition for recruitment of qualiÑed managers and employees.

The rate of growth of China's banking industry may not be sustainable. We expect the banking industry in China to expand as a result of anticipated growth in China's economy, increases in household income, further social welfare reforms, demographic changes and the opening of China's banking industry to foreign participants. However, it is not clear how certain trends and events, such as the pace of China's economic growth, China's commitment to WTO accession, the development of the domestic capital and insurance markets and the ongoing reform of the social welfare system will aÅect China's banking industry. In addition, China's banking industry has historically been burdened with a high level of

34 RISK FACTORS non-performing loans, which need to be disposed of by the PRC Government's measures (including capital injections and adjustments of write-oÅ policies), or the PRC banks themselves in the process of further development. Consequently, we cannot assure you that the rate of growth of China's banking industry will be sustainable.

China's banking regulatory environment is continually evolving and may change.

Our business could be directly aÅected by changes in PRC banking regulatory policies, laws and regulations, such as those aÅecting the extent to which we can engage in speciÑc businesses, impose additional costs as well as changes in other governmental policies. The CBRC, upon its establishment in 2003, became the primary banking industry regulator and assumed the majority of the bank regulatory functions from the PBOC. Since its establishment, the CBRC has promulgated numerous bank regulations and guidelines. There may be uncertainties regarding the interpretation and applications of these regulations and guidelines. Our failure to comply with applicable rules may result in Ñnes, forfeiture of illegal gains or, in most serious cases, suspension of our business or revocation of our business licenses. We cannot assure you that the laws and regulations governing the banking sector will not change in the future or that any such changes will not materially and adversely aÅect our business, results of operations and Ñnancial condition, nor can we assure you that we will be able to adapt to all such changes on a timely basis.

We face risks relating to the inspections and examinations by PRC and overseas regulatory authorities. LR 19A.42(64)(a)

We are subject to periodic or other inspections and examinations by PRC regulatory authorities, including the MOF, the PBOC, the CBRC, the tax authorities, the SAIC and the SAFE, as well as by overseas regulatory authorities for our overseas operations, relating to compliance with the relevant laws, regulations and guidelines. Some of these inspections and examinations have resulted in Ñnes and penalties for cases of non-compliance at our bank. See ""Business Ì Legal and Administrative Proceedings Ì Administrative Proceedings.'' These Ñnes and penalties have not, individually or in the aggregate, had a material and adverse eÅect on our business, results of operations or Ñnancial condition. We cannot assure you, however, that future examinations by PRC regulatory authorities would not result in Ñnes and penalties that could materially and adversely aÅect our reputation, business, results of operations and Ñnancial condition.

The NAO from time to time performs audits of certain state-controlled companies in China and publishes its audit results. CITIC Group, our controlling shareholder, and its subsidiaries, including us, were mostly recently audited by the NAO in 1999. We cannot predict the timing or the outcome of our next NAO audit. If, as a result of any such audit, material irregularities or other instances of non-compliance were found to have been committed by us, we may be subject to Ñnes and other administrative penalties, which may result in a material adverse eÅect on our reputation, business and prospects, as well as a decline in our H share price.

The eÅectiveness of our credit risk management is aÅected by the quality and scope of information available in the PRC.

The Ñrst nationwide personal credit information database commenced operation in January 2006. In addition, the PBOC launched a nationwide credit information database for corporate borrowers in the second half of 2006. Due to the limited history of these databases, and the limitations in the availability of information and the developing information infrastructure in the PRC, these nationwide credit information databases are generally under-developed. Without such information and until a uniÑed nationwide credit database on corporate and retail borrowers is fully implemented, we will also rely on other publicly available resources and our internal resources. We have recently increased our eÅorts in gathering credit information of our borrowers. However, due to the limitations of the information infrastructure in the PRC, we cannot assure you that our assessment of the credit risks associated with a particular customer is based on complete, accurate or reliable information. As a result, our ability to eÅectively manage our credit risk may be materially and adversely aÅected.

35 RISK FACTORS

Certain PRC regulations limit our ability to diversify our investments, and as a result, a decrease in the value of a particular type of investment may have a material adverse eÅect on our Ñnancial condition and results of operations. As a result of current PRC regulatory restrictions, substantially all of our RMB-denominated investment assets are concentrated in a limited number of investments permitted for PRC commercial banks, such as PRC Government bonds, bonds issued by PRC policy banks, bonds and subordinated notes issued by PRC commercial banks, PBOC bills and short-term Ñnancing bonds issued by qualiÑed domestic corporations. These restrictions on our ability to diversify our investment portfolio limit our ability to seek returns on our investments which are comparable with those of banks in other countries or to manage our liquidity in the same manner as banks in other countries. In addition, we are exposed to a certain level of risk as a result of the concentration of our RMB-denominated investments assets. For example, any deterioration of the Ñnancial condition of commercial banks in China would increase the risks associated with holding their bonds and subordinated notes. A decrease in the value of any of these types of investments could have a material adverse eÅect on our Ñnancial condition and results of operations.

We may not be able to detect money laundering and other illegal or improper activities, which could expose us to additional liability and harm our business. We are required to comply with applicable anti-money laundering, anti-terrorism laws and other regulations in the PRC. These laws and regulations require us, among other things, to adopt and enforce ""know your customer'' policies and procedures and to report suspicious and large transactions to the applicable regulatory authorities in diÅerent jurisdictions. We are in the process of implementing improvements to our anti-money laundering and anti-terrorism system. However, it is not clear when we will be able to fully implement such improvements and whether such improvements will be eÅective. While we have adopted policies and procedures aimed at detecting and preventing the use of our banking network for money laundering activities and by terrorists and terrorist-related organizations and individuals generally, such policies and procedures have in some cases only been recently adopted and may not completely eliminate instances where our bank may be used by other parties to engage in money laundering and other illegal and improper activities that may occur at our bank. To the extent we may fail to fully comply with applicable laws and regulations, the relevant government agencies to whom we report in the various jurisdictions have the power and authority to impose Ñnes and other penalties on us, and we have been subject to such Ñnes in the past. In addition, our business and reputation could suÅer if customers use our bank for money laundering or illegal or improper purposes.

Some of our customers and the countries in which they are located may be subject to U.S. sanctions. The United States currently imposes economic sanctions, which are administered by the U.S. Treasury Department's OÇce of Foreign Assets Control, or OFAC, and which apply only to U.S. persons and foreign subsidiaries of U.S. persons, with the objective of denying certain countries, including Iran, North Korea, Syria and Sudan, the ability to support international terrorism and, additionally in the case of Iran, North Korea and Syria, to pursue weapons of mass destruction and missile programs. While we engage in trade settlement and other services in U.S. dollars and other currencies with customers and in countries subject to the OFAC sanctions, we do not believe that these sanctions are applicable to any of our activities with these customers or in these countries. Nevertheless, we, like a number of non-U.S. banks, could be exposed to signiÑcant risk if it were determined that business relationships resulted in prohibited transactions with countries and entities that are the subject of U.S. sanctions. In addition, if a bank is determined to have violated such laws, it could face substantial penalties or other liabilities, and such determination could have a material adverse eÅect on its U.S. operations, its ability to conduct further business in the United States or involving U.S. persons, and its reputation. At this time, we cannot predict whether additional information may be sought, whether there will be inquiries or investigations by any of our regulators or other authorities, or whether any action may be taken by any of our regulators or other authorities as a result of these relationships.

36 RISK FACTORS

We cannot assure you of the accuracy or comparability of facts, forecasts and statistics contained in this prospectus on China, its economy or its banking industry. Facts, forecasts and statistics in this prospectus relating to China, China's economy and the Chinese and global banking industries, including our market share information, are derived from various oÇcial publications and publications of various government agencies and instrumentalities. However, we cannot guarantee the quality and reliability of such publications. In addition, these facts, forecasts and statistics have not been independently veriÑed by us and therefore we make no representation as to the accuracy of such facts, forecasts and statistics, which may not be consistent with other information compiled within or outside the PRC and may not be complete or up to date. We have taken reasonable care in reproducing or extracting the information from such sources. However, because of possible Öawed or ineÅective methodologies underlying the published information or discrepancies between the published information and market practice and other problems, these facts, forecasts and other statistics may be inaccurate or may not be comparable from period to period or to facts, forecasts or statistics produced for other economies, and you should not unduly rely upon them.

Any acquisition of 5% or more of our total outstanding shares will require the CBRC's prior approval. LR 19A.42(64)(a) Under the current ownership restrictions imposed on investments in commercial banks in the PRC, any natural or legal person intending to acquire 5% or more of the total equity interest of a commercial bank is required to obtain the prior approval of the CBRC. See ""Regulation and Supervision Ì PRC Regulation and Supervision Ì Restrictions on Equity Investments in Banks and Shareholders.'' As a result, if one of your investment goals is to acquire a substantial equity interest in us, your goal may not be achieved unless you are able to obtain the prior approval of the CBRC.

Our reputation may be adversely aÅected from negative media coverage of China's banking industry. China's banking industry continues to be covered extensively and critically by various media, including with respect to incidents of fraud and issues relating to loan quality, capital adequacy, solvency and internal controls and management. Negative coverage, whether or not accurate and whether or not related to us, may have a material and adverse eÅect on our reputation and, consequently, may undermine depositor and investor conÑdence, resulting in liquidity shortages and declines in the price of our H Shares. Our business, Ñnancial condition, results of operations and prospects and the value of our investment may also be materially and adversely aÅected as a result.

RISKS RELATING TO THE PRC

China's economic, political and social conditions, as well as government policies, could aÅect our LR 19A.42(64)(b) business. Substantially all of our business, assets and operations are located in China. Accordingly, our results of operations, Ñnancial condition and business prospects are, to a signiÑcant degree, subject to the economic, political and legal developments in China. China's economy diÅers from the economies of more developed countries in many respects, including the level of government interference, foreign exchange controls and allocation of resources. China's economy has historically been a planned economy. A substantial portion of productive assets in China is still owned by the PRC Government. The PRC Government also exercises signiÑcant control over China's economic growth through measures such as the allocation of resources, setting and providing preferential treatment to particular industries or companies. In recent years, the PRC Government has implemented economic reform measures emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets and the establishment of sound corporate governance in business enterprises. Such economic reform measures may be adjusted or modiÑed or applied inconsistently from industry to industry, or across diÅerent regions of the country. As a result, we may not beneÑt from all such measures.

37 RISK FACTORS

The PRC Government has the power to implement macroeconomic policies aÅecting China's economy. The PRC Government has implemented various policies in an eÅort to control the growth rate of certain industries and limit inÖation. For example, beginning in the second half of 2003, the government implemented a series of macroeconomic policies, which included raising the benchmark interest rates, increasing the PBOC statutory deposit reserve ratio and imposing commercial bank lending guidelines that had the eÅect of restricting loans to certain industries. Certain of these macroeconomic policies may materially and adversely aÅect our asset quality, results of operations and Ñnancial condition. China has been one of the world's fastest growing economies as measured by gross domestic product, or GDP, in recent years. However, China may not be able to sustain such a growth rate. In addition, any future calamities, including, among others, natural disasters and outbreak of contagious diseases, may cause a decrease in the level of economic activity and adversely aÅect economic growth in the PRC, Asia and elsewhere in the world. If China's economy experiences a signiÑcant downturn for any of the foregoing reasons, our Ñnancial condition and results of operations, as well as our future prospects, would be materially and adversely aÅected.

Interpretation of PRC laws and regulations may involve uncertainty. LR 19A.42(64)(d) We are organized under the laws of the PRC. The Chinese legal system is based on written statutes. Since the late 1970s, the PRC has promulgated laws and regulations dealing with such economic matters as the issuance and trading of securities, shareholders' interests, foreign investment, corporate organization and governance, commerce, taxation and trade. However, many of these laws and regulations are relatively new and continue to evolve, are subject to diÅerent interpretations, and may be inconsistently enforced. In addition, there is only a limited volume of published court decisions, which in any event may be cited for reference but are not binding on subsequent cases and have limited precedential value. These uncertainties relating to the interpretation of PRC laws and regulations can aÅect the legal remedies that are available to you and can adversely aÅect your legal protections.

Our articles of association provide that disputes between holders of our H Shares and us, our directors, LR 19A.42(64)(f) supervisors and oÇcers and the holders of our domestic shares, arising out of our articles of association or the PRC Company Law and related regulations, concerning the aÅairs of our company including the transfer of our shares, are to be resolved through arbitration by arbitration organizations in Hong Kong or China, rather than by a court of law. Awards that are made by Chinese arbitral authorities recognized under the Hong Kong Arbitration Ordinance can be enforced in Hong Kong. Hong Kong arbitral awards are also enforceable in China, subject to the satisfaction of certain PRC legal requirements. However, to our knowledge, no action has been brought in China by any holder of H Shares issued by a Chinese company to enforce an arbitral award. As a result, we are uncertain whether any action brought in China to enforce an arbitral award made in favor of holders of H Shares would succeed. Although PRC laws, regulations and rules applicable to companies listed overseas do not distinguish between minority and controlling shareholders in terms of their rights and protections, we cannot guarantee that you will have the same protection aÅorded to a minority shareholder by companies incorporated under the laws of the United States, certain member states of the European Union or Hong Kong.

You may experience diÇculties in eÅecting service of legal process and enforcing judgments against us and our management. We are a company incorporated under the laws of the PRC and substantially all of our business, assets and operations are located in China. In addition, a majority of our directors, supervisors and executive oÇcers reside in China and substantially all of their assets are located in China. As a result, it may not be possible to eÅect service of process within the United States or elsewhere outside China upon us or such directors, supervisors or executive oÇcers, including with respect to matters arising under U.S. federal securities laws or applicable state securities laws. Moreover, China does not have treaties providing for the reciprocal recognition and enforcement of judgments of courts with the United States, the United Kingdom, Japan or many other countries. In addition, Hong Kong has no arrangement with the United States for reciprocal

38 RISK FACTORS enforcement of judgments. As a result, recognition and enforcement in China or Hong Kong of judgments of a court in the United States and any of the other jurisdictions mentioned above in relation to any matter may be diÇcult or impossible.

Although we will be subject to the Hong Kong Listing Rules and the Hong Kong Codes on Takeovers and Mergers and Share Repurchases upon the listing of our H Shares on the Hong Kong Stock Exchange, the holders of H Shares will not be able to bring actions on the basis of violations of the Hong Kong Listing Rules and must rely on the Hong Kong Stock Exchange to enforce its rules. The Hong Kong Listing Rules and Hong Kong Codes on Takeovers and Mergers and Share Repurchases do not have the force of law in Hong Kong.

Holders of H Shares may be subject to PRC taxation. LR 19A.42(64)(a) & (d)

Under the PRC's current tax laws, regulations and codes, dividends paid by us to holders of H Shares outside China are currently exempt from PRC income tax. In addition, gains realized by individuals or enterprises upon the sale or other disposition of H Shares are currently exempt from PRC income tax. If the exemptions are withdrawn in the future, holders of H Shares may be subject to withholding taxes on dividends, which are currently imposed at the rate of 20%, or income tax on capital gains from the sale of equity interests, which may currently be imposed upon individuals at the rate of 20%. See ""Appendix VI Ì Taxation and Foreign Exchange Ì Taxation Ì PRC.''

The ability of our shareholders to pledge their shares is limited by applicable PRC legal and regulatory LR 19A.42(64)(a) requirements.

Under the PRC Company Law, we may not accept our shares as collateral to secure any of our loans. In addition, any shareholder who owns 5% or more of our shares must give prior notice to our board of directors if it wishes to pledge its shares to any other lenders as collateral. See ""Regulation and Supervision Ì PRC Regulation and Supervision Ì Restrictions on Equity Investments in Banks and Shareholders.'' As a result of the foregoing, you may be unable to pledge your shares in our bank as collateral unless you comply with applicable PRC legal and regulatory requirements.

Payment of dividends is subject to restrictions under PRC law. LR 19A.42(64)(a)

Under PRC law, dividends may be paid only out of distributable proÑts. Distributable proÑts are our net proÑt as determined under PRC GAAP or IFRS, whichever is lower, less any recovery of accumulated losses and appropriations to statutory and other reserves that we are required to make. As a result, we may not have suÇcient or any distributable proÑts to enable us to make dividend distributions to our shareholders in the future, including in respect of periods which our Ñnancial statements indicate that our operations have been proÑtable. Any distributable proÑts that are not distributed in a given year are retained and available for distribution in subsequent years.

In addition, the CBRC has the discretionary authority to prohibit any bank that has a capital adequacy ratio below 8% or a core capital adequacy ratio below 4%, or has violated certain other PRC banking regulations, from paying dividends and other forms of distributions. See ""Regulation and Supervision Ì PRC Regulation and Supervision Ì Regulations Regarding Capital Adequacy Ì CBRC Supervision of Capital Adequacy'' and ""Ì Principal Regulators Ì The CBRC.''

We are subject to PRC Government controls on currency conversion and future movements in exchange LR 19A.42(64)(c) rates.

We receive substantially all of our revenues in Renminbi, which currently is not a freely convertible LR 19A.42(61) currency. A portion of these revenues must be converted into other currencies to meet our foreign currency obligations. For example, we need to obtain foreign currency to make payments on declared dividends, if any, on our H Shares.

39 RISK FACTORS

Capital account transactions in foreign currencies are subject to signiÑcant exchange controls and LR 19A.42(61) generally require the approval of PRC Government authorities, including the SAFE. Under China's existing foreign exchange regulations, following the completion of the Global OÅering, by complying with certain procedural requirements, we will be able to pay dividends in foreign currencies without prior approval from the SAFE. However, in the future, the PRC Government may, at its discretion, take measures to restrict access to foreign currencies for current account transactions under certain circumstances. In this case, we may not be able to pay dividends in foreign currencies to our shareholders. The value of the Renminbi against the U.S. dollar and other currencies Öuctuates and is aÅected by, among other things, changes in China's and international political and economic conditions. Since 1994, the conversion of Renminbi into foreign currencies, including Hong Kong and U.S. dollars, has been based on rates set by the PBOC, which are set daily based on the previous business day's interbank foreign exchange market rates and current exchange rates on the world Ñnancial markets. From 1994 to July 20, 2005, the oÇcial exchange rate for the conversion of Renminbi to U.S. dollars was generally stable. On July 21, 2005, the PRC Government introduced a managed Öoating exchange rate system to allow the value of the Renminbi to Öuctuate within a regulated band based on market supply and demand and by reference to a basket of currencies. On the same day, the value of the Renminbi appreciated by approximately 2% against the U.S. dollar. Since then and up to December 31, 2006 the Renminbi has appreciated by approximately 5.7% against the U.S. dollar. Any appreciation of the Renminbi against the U.S. dollar or any other foreign currencies may result in the decrease in the value of our foreign currency-denominated assets. Conversely, any devaluation of the Renminbi may adversely aÅect the value of, and any dividends payable on, our H Shares in foreign currency terms. As of December 31, 2006, 8.8% of our assets and 9.1% of our liabilities were denominated in foreign currencies. Proceeds of the Global OÅering will also be denominated in foreign currencies. We are also required to obtain the approval of the SAFE before converting signiÑcant sums of foreign currencies into Renminbi. All these factors could materially and adversely aÅect our Ñnancial condition, results of operations and compliance with capital adequacy ratios and operational ratios.

RISKS RELATING TO THE GLOBAL OFFERING Future sales or perceived sales of substantial amounts of our H Shares, A Shares or other securities relating to our H Shares or A Shares in the public market, including any future oÅerings, could have a material adverse eÅect on the prevailing market price of our H Shares and our ability to raise capital in the future, and may result in dilution of our shareholdings. The market price of our H Shares could decline as a result of future sales of substantial amounts of our H Shares, A Shares or other securities relating to our H Shares or A Shares in the public market or the issuance of new H Shares, A Shares or other securities relating to our H Shares or A Shares, or the perception that such sales or issuances may occur. Future sales, or perceived sales, of substantial amounts of our H Shares, A Shares or other securities relating to our H Shares or A Shares, could also materially and adversely aÅect our ability to raise capital in the future at a time and at a price which we deem appropriate. In addition, our shareholders may experience dilution in their holdings to the extent we issue additional securities in future oÅerings. The shares owned by our strategic investor, BBVA, which will be converted to H Shares upon completion of the Global OÅering, are subject to transfer restrictions. Future sales of H Shares by BBVA after the expiry of or in breach of such transfer restrictions will result in an increase in the number of H Shares available on the market and may aÅect the market price of our H Shares. In addition, in accordance with relevant PRC regulations regarding disposal of state-owned shares, CITIC Group will transfer to National Council for Social Security Fund, or SSF, 488,547,900 H Shares of our total issued share capital, respectively, immediately following completion of the Global OÅering (or 561,830,000 H Shares in aggregate representing 1.44% of our total issued share capital assuming the Over- allotment Option is exercised in full). SSF has not entered into any undertaking restricting its disposal or resale of these H Shares, and as a result, may resell or otherwise dispose of these H Shares at any time after the Global OÅering.

40 RISK FACTORS

An active trading market for our H Shares may not develop, and their trading prices may Öuctuate signiÑcantly. Prior to the Global OÅering and the A Share OÅering, no public market for our shares has existed. We cannot assure you that a liquid public market for our H Shares will develop or be sustained after the Global OÅering. In addition, the oÅer price of our H Shares is expected to be Ñxed by agreement among the Joint Global Coordinators (on behalf of the Underwriters) and our bank, and may not be indicative of the market price of our H Shares following the completion of the Global OÅering. If an active public market for our H Shares does not develop after the Global OÅering, the market price and liquidity of our H Shares may be adversely aÅected.

Because the initial public oÅering price of the H Shares is higher than the net tangible asset value per share, you will incur immediate dilution. The initial public oÅering price of our H Shares is higher than the net tangible asset value per share of the outstanding shares issued to our existing shareholders. Therefore, purchasers of our H Shares in the Global OÅering will experience an immediate dilution in net tangible asset value of HK$3.63 per H Share (assuming an oÅer price of HK$5.46 per share for our H Shares and RMB 5.40 per share for our A Shares, which is the mid-point of our indicative oÅer price ranges of the Global OÅering and the A Share OÅering, respectively, and assuming that the Over-allotment Option is not exercised), and our existing shareholders will receive an increase in the pro forma adjusted consolidated net tangible asset value per share of their shares. In addition, holders of our H Shares may experience a signiÑcant dilution of their interest if we obtain additional capital in the future.

There will be a Ñve business day time gap between pricing and trading of our H Shares oÅered in the Global OÅering. The initial price to the public of our H Shares sold in the Global OÅering will be determined on the Price Determination Date. However, our H Shares will not commence trading on the Hong Kong Stock Exchange until they are delivered, which is expected to be Ñve Hong Kong business days after the Price Determination Date. As a result, investors may not be able to sell or otherwise deal in our H Shares during that period. Accordingly, holders of our H Shares are subject to the risk that the trading prices of our H Shares could fall before trading begins as a result of adverse market conditions or other adverse developments that could occur between the time of sale and the time trading begins.

Dividends we declared in the past may not be indicative of our dividend policy in the future. The dividends we distributed in respect of the year ended December 31, 2006 represented all of our distributable proÑts for 2006. A declaration of dividends is proposed by our board and the amount of any dividends will depend on various factors, including, without limitation, our results of operations, Ñnancial condition, future prospects and other factors which our board may determine are important. For further details of our dividend policy, see ""Financial Information Ì Dividend Policy.'' We cannot guarantee if and when we will pay dividends in the future.

We are conducting a concurrent A Share OÅering; the characteristics of the A share and H share markets are diÅerent. We intend to conduct the A Share OÅering in the PRC concurrently with the Global OÅering and list such shares on the Shanghai Stock Exchange. It is anticipated that we will oÅer 2,301,932,654 A Shares in the A Share OÅering, representing in the aggregate approximately 6.01% of our total outstanding shares immediately following the completion of both the A Share OÅering and the Global OÅering, assuming that the Over-allotment Option is not exercised and BBVA and CIFH exercise their anti-dilution right and top-up right, respectively. Our Global OÅering and our A Share OÅering are two separate and independent oÅerings, and neither oÅering is conditional upon the other. If for any reason we do not proceed with the A Share OÅering as proposed, or if the number of our A Shares oÅered in the A Share OÅering is reduced or the

41 RISK FACTORS actual issue price for our A Shares is not within the estimated price range of our A Share OÅering, the Global OÅering may nevertheless proceed as described in this prospectus. Due to diÅerences in the timetables and market practices for the Global OÅering and the A Share OÅering, you will not be notiÑed of the Ñnal issue price or Ñnal size of our A Share OÅering, and we cannot assure you that you will be notiÑed of any delay or termination of the A Share OÅering prior to the last time for lodging applications under the Hong Kong Public OÅering.

Following the Global OÅering and the A Share OÅering, our H Shares will be traded on the Hong Kong Stock Exchange and our A Shares will be traded on the Shanghai Stock Exchange. Under the current laws and regulations, our H Shares and A Shares are neither interchangeable nor fungible, and there is no trading or settlement between the H share and the A share markets. The H share and A share markets have diÅerent trading characteristics and investor bases, including diÅerent levels of retail and institutional participation. As a result of these diÅerences, the trading prices of our H Shares and A Shares may not be the same. Fluctuations in our A share price may adversely aÅect our H share price.

We strongly caution you not to place any reliance on any information contained in press articles or other media regarding our Global OÅering or the A Share OÅering or information released by us in connection with the A Share OÅering.

There may have been prior to the publication of this prospectus, and there may be subsequent to the date of this prospectus but prior to the completion of the Global OÅering, press and media coverage regarding us, the Global OÅering and the A Share OÅering. Such press and other media coverage may include references to certain events or information disclosed by us in China as part of the A Share OÅering, including information relating to us and the A Share OÅering. The prospectus and other information announced by us in connection with the A Share OÅering are based on regulatory requirements and market practices in China, which are diÅerent from those applicable to the Global OÅering. You should rely solely upon the information contained in this prospectus, the Application Forms and any formal announcements made by us in Hong Kong in making your investment decision regarding our H Shares. We do not accept any responsibility for the accuracy or completeness of any information reported by the press or other media, nor the fairness or appropriateness of any forecasts, views or opinions expressed by the press or other media regarding our H Shares or A Shares, the Global OÅering or the A Share OÅering, or us. We make no representation as to the appropriateness, accuracy, completeness or reliability of any such information or publication. Accordingly, prospective investors should not rely on any such information, reports or publications in making their decisions whether to invest in our H Shares or in the Global OÅering.

We are also required, in connection with our A Share OÅering, to make certain formal announcements in China relating to us and the A Share OÅering, including the publication of our A Share prospectus. This information is released in connection with our A Share OÅering pursuant to PRC regulatory requirements that are not applicable to the Global OÅering. Certain announcements in relation to our A Share OÅering will be published on the website of the Hong Kong Stock Exchange. However, such information and the prospectus for the A Share OÅering do not and will not form part of this prospectus. Prospective investors in H Shares are reminded that, in making their decisions as to whether to purchase our H Shares, they should rely only on the Ñnancial, operational and other information included in this prospectus and the Application Forms. By applying to purchase our H Shares in the Global OÅering, you will be deemed to have agreed that you will not rely on any information other than that contained in this prospectus and the Application Forms.

42 INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING

DIRECTORS' RESPONSIBILITY FOR THE CONTENTS OF THIS PROSPECTUS App 1A 2 LR 11.12 This prospectus contains particulars given in compliance with the Hong Kong Companies Ordinance, the LR 19.08(1) Securities and Futures (Stock Market Listing) Rules of Hong Kong and the Hong Kong Listing Rules for the purpose of giving information to the public with regard to us. Our directors collectively and individually accept full responsibility for the accuracy of the information contained in this prospectus and conÑrm, having made all reasonable enquiries, that, to the best of their knowledge and belief, there are no other facts the omission of which would make any statement in this prospectus misleading.

APPROVAL OF THE CBRC AND THE CSRC The CBRC and the CSRC gave their written approval on March 15, 2007 and March 21, 2007, respectively, for the Global OÅering and the application to list the H Shares on the Hong Kong Stock Exchange. In granting such approval, neither the CBRC nor the CSRC accepts any responsibility for our Ñnancial soundness, nor for the accuracy of any of the statements made or opinions expressed in this prospectus or in the Application Forms.

UNDERWRITING The listing of our H Shares on the Hong Kong Stock Exchange is sponsored by the Joint Sponsors. The Global OÅering is managed by the Joint Global Coordinators. Pursuant to the Hong Kong Underwriting Agreement, the Hong Kong Public OÅering is underwritten by the Hong Kong Underwriters. The International Underwriting Agreement is expected to be entered into on or about April 20, 2007, subject to agreement on the OÅer Price between us and the Joint Global Coordinators (on behalf of the Underwriters). If, for any reason, the OÅer Price is not agreed among our company and the Joint Global Coordinators (on behalf of the Underwriters), the Global OÅering will not proceed. Further details about the Underwriters and the underwriting arrangements are contained in the section headed ""Underwriting''.

RESTRICTIONS ON THE USE OF THIS PROSPECTUS No action has been taken to permit a public oÅering of the OÅer Shares, other than in Hong Kong and Japan or the distribution of this prospectus in any jurisdiction other than Hong Kong. Accordingly, this prospectus may not be used for the purpose of, and does not constitute, an oÅer or invitation in any jurisdiction or in any circumstances in which such an oÅer or invitation is not authorized or to any person to whom it is unlawful to make such an oÅer or invitation. The distribution of this prospectus and the oÅering and sales of the OÅer Shares in other jurisdictions are subject to restrictions and may not be made except as permitted under the applicable securities laws of such jurisdictions pursuant to registration with or authorization by the relevant securities regulatory authorities or an exemption therefrom. In particular, the OÅer Shares have not been oÅered and sold, and will not be oÅered or sold, directly or indirectly, in the PRC.

APPLICATION FOR LISTING ON THE HONG KONG STOCK EXCHANGE

We have applied to the Listing Committee of the Hong Kong Stock Exchange for the listing of, and App 1A 14(1) permission to deal in, our H Shares, including (i) H Shares in the Global OÅering (including the H Shares to be issued to BBVA and CIFH pursuant to the exercise of their anti-dilution right and top-up right, respectively); (ii) any additional H Shares which may be issued pursuant to the exercise of the Over- allotment Option; (iii) any H Shares, converted from state-owned shares, which are to be held by CITIC Group and SSF; (iv) H Shares, converted from unlisted foreign shares held by CIFH and BBVA; and (v) any H Shares which CITIC Group may convert from the A Shares it holds after the Ñrst anniversary of the listing. Shares held by CITIC Group may be converted to H Shares subject to satisfying certain requirements. The state-owned shares held by CITIC Group would be converted into A Shares upon the listing of our A Shares on the Shanghai Stock Exchange and such number of A Shares held by CITIC Group representing 10% of our total outstanding shares could be converted into H Shares after the Ñrst anniversary of the listing of our shares. Upon further approval by the CSRC, the rest of the A Shares held by CITIC Group could also be

43 INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING converted into H Shares. See ""Share Capital Ì State-owned Shares Held by CITIC Group'' for further information.

Save that an application has been made for the listing of our A Shares on the Shanghai Stock Exchange App 1A 11 as disclosed in the section headed ""A Share OÅering'' in this prospectus, no part of our share or loan capital is listed on or dealt in on any other stock exchange and no such listing or permission to deal is being or proposed to be sought in the near future.

PERMISSION TO LIST PURSUANT TO RULE 8.05(3) AND WAIVER UNDER RULE 8.05A OF THE HONG KONG LISTING RULES

While we are able to satisfy the requirements relating to proÑts and ownership continuity and control under Rule 8.05(1) of the Hong Kong Listing Rules, we have applied for and received a waiver relating to management continuity from the Hong Kong Stock Exchange pursuant to Rule 8.05A of the Hong Kong Listing Rules on the grounds that our directors and management have suÇcient and satisfactory experience of at least three years in our line of business and industry and that there was management continuity for the most recent audited Ñnancial year. As a waiver pursuant to Rule 8.05A is only available if listing is sought pursuant to Rule 8.05(3) of the Hong Kong Listing Rules, we have been permitted to list on the main board of the Hong Kong Stock Exchange on the basis that we satisfy the market capitalization/revenue test in Rule 8.05(3) of the Hong Kong Listing Rules which requires, in addition to satisfying the aforementioned management continuity criterion: (a) a trading record of not less than three Ñnancial years; (b) ownership continuity and control for the year ended December 31, 2006; (c) a market capitalization of at least HK$4 billion at the time of the listing of our H Shares on the Hong Kong Stock Exchange; (d) revenue of at least HK$500 million during the year ended December 31, 2006; and (e) a minimum of 1,000 shareholders at the time of the listing of our H Shares on the Hong Kong Stock Exchange.

PROFESSIONAL TAX ADVICE RECOMMENDED

If you are in any doubt about the taxation implications of subscribing for, purchasing, holding or dealing in the H Shares, you should consult your professional advices.

It is emphasized that none of us, the Joint Global Coordinators, the Joint Bookrunners, the Joint Sponsors, the Joint Lead Managers, the Underwriters, their respective directors, nor any other person involved in the Global OÅering accepts responsibility for any tax eÅects on, or liabilities of, any person resulting from the subscription for, purchase, holding or disposal of the H Shares.

H SHARE REGISTER AND STAMP DUTY

All of the H Shares issued pursuant to applications made in the Hong Kong Public OÅering will be registered on our H Share register to be maintained in Hong Kong. Our principal register of members will be maintained by us at Block C, Fuhua Mansion, 8 Chaoyangmen Beidajie, Dongcheng District, Beijing, China, our registered address in the PRC.

Dealings in the H Shares registered on our H Share register will be subject to Hong Kong stamp duty. See Appendix VI Ì ""Taxation and Foreign Exchange''.

DIVIDEND PAYABLE TO HOLDERS OF H SHARES

Unless we determine otherwise, dividends will be paid to our shareholders, as recorded in our H Share register, by ordinary post at the shareholders' risk to the registered address of each shareholder.

OVER-ALLOTMENT AND STABILIZATION

Details of the arrangements relating to the Over-allotment Option and stabilization are set forth in the section headed ""Underwriting''.

44 INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING

PROCEDURES FOR APPLICATION FOR HONG KONG OFFER SHARES

The application procedure for the Hong Kong OÅer Shares is set forth in the section headed ""How to Apply for Hong Kong OÅer Shares'' and on the relevant Application Forms.

REGISTRATION OF SUBSCRIPTION, PURCHASE AND TRANSFER OF H SHARES LR 19A.42(62)

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

¬ agrees with us and each of our shareholders, and we agree with each shareholder, to observe and comply with the PRC Company Law, the Special Regulations on Overseas OÅering and our Articles of Association;

¬ agrees with us, each of our shareholders, directors, supervisors, managers and oÇcers, and we acting for ourselves and for each of our directors, supervisors, managers and oÇcers agrees with each of our shareholders to refer all diÅerences and claims arising from our Articles of Association or any rights or obligations conferred or imposed by the PRC Company Law or other relevant laws and administrative regulations concerning our aÅairs to arbitration in accordance with our Articles of Association, and any reference to arbitration shall be deemed to authorize the arbitration tribunal to conduct hearings in open session and to publish its award. Such arbitration shall be Ñnal and conclusive. See Appendix VII Ì ""Summary of Principal Legal and Regulatory Provisions'';

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

¬ authorizes us to enter into a contract on his behalf with each of our directors and oÇcers whereby such directors and oÇcers undertake to observe and comply with their obligations to our shareholders as stipulated in our Articles of Association.

STRUCTURE OF THE GLOBAL OFFERING

Details of the structure of the Global OÅering, including conditions, are set forth in the section headed ""Structure of the Global OÅering.''

EXCHANGE RATE CONVERSION

Solely for your convenience, the prospectus contains translations of certain Renminbi amounts into Hong Kong dollars, of Renminbi amounts into US dollars and of Hong Kong dollars into US dollars at speciÑed rates. You should not construe these translations as representations that the Renminbi amounts could actually be converted into any Hong Kong dollar or US dollar amounts (as the case may be) at the rates indicated or at all. Unless we indicate otherwise, the translations of Renminbi into Hong Kong dollars, of Renminbi into US dollars and of Hong Kong dollars in to US dollars have been made at the rates of RMB 0.9891 to HK$1.00, the PBOC Rate prevailing on April 11, 2007, and RMB 7.7317 to US$1.00 and HK$7.8129 to US$1.00, the noon buying rates in New York City for cable transfers as certiÑed for customs purposes by the Federal Reserve Bank of New York on April 11, 2007, respectively. Any discrepancies in any table between totals and sums of amounts listed therein are due to rounding. Further information on exchange rates is set forth in Appendix VI Ì ""Taxation and Foreign Exchange''.

45 PARTIES INVOLVED IN THE GLOBAL OFFERING

Name Address Nationality

DIRECTORS App 1A 41(1) Mr. KONG Dan Room 15-3-401, Wanquan Xin Xin Jiayuan, Chinese CO 3rd Sch(1)6 Haidian District, Beijing, China Mr. CHANG Zhenming Room 11-706, Beijie, Guandongdian, Chaoyang Chinese District, Beijing, China Mr. WANG Chuan Room 6-1-504, Qianmenxi Street, Xuanwu District, Chinese Beijing, China Dr. CHEN Xiaoxian Room 601, Door 3, West Building No. 4, No. 61 Chinese Fuxing Road, Haidian District, Beijing, China Mr. DOU Jianzhong Room 3215, 32/F., Convention Plaza Apartments, Chinese 1 Harbour Road, Wanchai, Hong Kong Mr. WU Beiying Room 1403, Yabao Apartment, Dayabao Hutong Chinese No. 8, Dongcheng District, Beijing, China Ms. CHAN Hui Dor Lam Doreen House No. 27, Shatin Knoll, 83 Ma Ling Path, Chinese Kau Tou Shan, Shatin, New Territories, Hong Kong Mr. JU Weimin No. 1408, Block 1, Liuyingnanli, Chaoyang District, Chinese Beijing, China Mr. ZHANG Jijing Apartment 2-501, Building No. 2, 78 Beiyuan Lu, Chinese Chaoyang District, Beijing, China Mr. Joseπ Ignacio Paseo de la Castellana 81, 28046 Madrid, Spain Spanish GOIRIGOLZARRI Independent Non-executive Directors Dr. BAI Chong-En Room 2-7-101, Heqingyuan, Tsinghua University, Chinese Haidian District, Beijing, China Dr. John Dexter LANGLOIS House C2, Horizon Lodge, No. 33, Horizon Drive, American Hong Kong Dr. AI Hongde No. 217 Jianshan Street, Dalian, China Chinese Dr. XIE Rong Room 1501, No. 12, Lane 1650, Jinxiu Road, Chinese Shanghai, China Mr. WANG Xiangfei Flat F, 2/F, Block 4, Pokfulam Gardens, Chinese 180 Pokfulam Road, Hong Kong

46 PARTIES INVOLVED IN THE GLOBAL OFFERING

Name Address Nationality

SUPERVISORS Ms. LIU Chongming Room 4-202, Block 8, Fengrongyuan, Pi Cai Chinese Hutong, Xicheng District, Beijing, China Mr. WANG Shuanlin 20 Toutiao, Jinxiu, Beijing, China Chinese Mr. LI Qianxin Room 6501, 15 Baochan Hutong, Xicheng District, Chinese Beijing, China Mr. GUO Ketong Room 43-5-202, Zuojingzhuang, Chaoyang District, Chinese Beijing, China Mr. LIN Zhengyue Room 1-201, Hongqixincun, Xuanwu District, Chinese Nanjing, China Mr. DENG Yuewen No. 9 Dongmuxiyuan, Fengtai District, Beijing, Chinese China Mr. LI Gang Room 1608, Shuangcheng Apartment, No. 9 Chinese Dongmuxiyuan, Fengtai District, Beijing, China Dr. ZHUANG Yumin Room 101, Block 18, Qicaihuayuan, Xianghuangqi, Chinese Haidian District, Beijing, China

Name Address PARTIES INVOLVED Joint Global Coordinators and Joint China International Capital Corporation Limited App 1A 3 th Bookrunners 28 Floor, China World Tower 2 App 1A 15(2)(h) No. 1, Jianguomenwai Avenue Beijing, PRC

CITIC Securities Co., Ltd. 5th Floor, Capital Mansion 6 Xinyuan Nanlu Beijing, PRC

Citigroup Global Markets Asia Limited 50/F, Citibank Tower, Citibank Plaza 3 Garden Road Central, Hong Kong

The Hongkong and Shanghai Banking Corporation Limited Level 15, 1 Queen's Road Central Hong Kong

Lehman Brothers Asia Limited 26/F, Two International Finance Centre 8 Finance Street, Central Hong Kong

47 PARTIES INVOLVED IN THE GLOBAL OFFERING

Name Address Joint Sponsors and Joint Lead China International Capital Corporation (Hong Managers of the Hong Kong Public Kong) Limited OÅering Suite 2307, 23rd Floor One International Finance Centre 1 Harbour View Street Central, Hong Kong

CITIC Securities Corporate Finance (HK) Limited 26/F, CITIC Tower 1 Tim Mei Avenue Central, Hong Kong

Citigroup Global Markets Asia Limited 50/F, Citibank Tower, Citibank Plaza 3 Garden Road Central, Hong Kong

The Hongkong and Shanghai Banking Corporation Limited Level 15, 1 Queen's Road Central Hong Kong

Lehman Brothers Asia Limited 26/F, Two International Finance Centre 8 Finance Street, Central Hong Kong

Joint Lead Managers of the China International Capital Corporation Limited International OÅering 28th Floor, China World Tower 2 No. 1, Jianguomenwai Avenue Beijing, China

CITIC Securities Corporate Finance (HK) Limited 26/F, CITIC Tower 1 Tim Mei Avenue Central, Hong Kong

Citigroup Global Markets Limited Citigroup Centre, 33 Canada Square Canary Wharf London E14 5LB United Kingdom

The Hongkong and Shanghai Banking Corporation Limited Level 15, 1 Queen's Road Central Hong Kong

48 PARTIES INVOLVED IN THE GLOBAL OFFERING

Name Address Lehman Brothers International (Europe) 25 Bank Street, London E14 5LE United Kingdom

Financial advisors to our company China International Capital Corporation Limited 28th Floor, China World Tower 2 No. 1, Jianguomenwai Avenue Beijing, PRC

Merrill Lynch Far East Limited 17th Floor, ICBC Tower 3 Garden Road Central, Hong Kong

Legal advisors to our company As to Hong Kong and United States law App 1A 3 Skadden, Arps, Slate, Meagher & Flom 42nd Floor, Edinburgh Tower The Landmark 15 Queen's Road Central Hong Kong

As to PRC law App 1A 3 King & Wood 40th Floor, OÇce Tower A Beijing Fortune Plaza 7 Dongsanhuan Zhonglu Chaoyang District Beijing 100020 China

Legal advisors to the Underwriters As to Hong Kong and United States law App 1A 3 FreshÑelds Bruckhaus Deringer 11th Öoor Two Exchange Square Central Hong Kong

As to PRC Law App 1A 3 Commerce & Finance Law OÇces 6/F, NCI Tower A12 Jian Guo Men Wai Avenue Beijing 100022 China

Reporting accountants KPMG App 1A 4 CertiÑed Public Accountants CO 3rd Sch(1)18 8/F Prince's Building CO 3rd Sch 43 10 Chater Road Central, Hong Kong

49 PARTIES INVOLVED IN THE GLOBAL OFFERING

Name Address

Property valuers Sallmanns (Far East) Limited CO 3rd Sch 46 22/F, Siu On Centre 188 Lockhart Road Wanchai, Hong Kong

Receiving bankers The Hongkong and Shanghai Banking App 1A 3 Corporation Limited App 1A 15(2)(f) 1 Queen's Road Central Hong Kong

Bank of China (Hong Kong) Limited 1 Garden Road Hong Kong

Bank of Communications Co., Ltd. Hong Kong Branch 20 Pedder Street Central, Hong Kong

CITIC Ka Wah Bank Limited 18th Floor, Somerset House, Taikoo Place 979 King's Road, Quarry Bay Hong Kong

Industrial and Commercial Bank of China (Asia) Limited 34/F, ICBC Tower 3 Garden Road Central, Hong Kong

50 CORPORATE INFORMATION

Registered oÇce Block C App 1A 43 Fuhua Mansion CO 3rd Sch(1)28 8 Chaoyangmen Beidajie Dongcheng District Beijing, China(1)

Principal place of business in Hong Kong Room 2106, 21/F App 1A 6 Tower Two, Lippo Centre 89 Queensway Hong Kong

Joint company secretaries Mr. LUO Yan App 1A 42 Ms. KAM Mei Ha, Wendy ACS, ACIS

QualiÑed accountant Mr. LU Wei, MPA, CPA App 1A 42

Authorized representatives Dr. CHEN Xiaoxian App 1A 3 Room 601, Door 3 West Building No. 4 No. 61 Fuxing Road Haidian District Beijing, China

Mr. LUO Yan Wanke Xishan Tingyuan 14-2 Haidian District Beijing, China

H Share registrar and transfer oÇce Computershare Hong Kong Investor Services App 1A 3 Limited Shops 1712-1716, 17th Floor, Hopewell Centre 183 Queen's Road East Wanchai, Hong Kong

Compliance advisors China International Capital Corporation (Hong App 1A 43 Kong) Limited Suite 2307, 23rd Floor One International Finance Centre 1 Harbour View Street Central, Hong Kong

Citigroup Global Markets Asia Limited 50/F, Citibank Tower, Citibank Plaza 3 Garden Road Central, Hong Kong

(1) Pursuant to resolutions passed by our shareholders on March 8, 2006, we propose to, inter alia, change the address of our registered oÇce from Block C, Fuhua Mansion, 8 Chaoyangmen Beidajie, Dongcheng District, Beijing, China to Jingcheng Mansion, 6 Xinyuan Nanlu, Chaoyang District, Beijing, China. Amendments to the Articles of Association in light of the above proposals were submitted by us to the CBRC, pending approval by the CBRC.

51 BANKING INDUSTRY IN THE PRC

This section contains certain information which is derived from oÇcial sources and other banks' published annual reports. While we have exercised reasonable care in compiling and reproducing such information, it has not been independently veriÑed by us or any of our aÇliates or advisors, nor by any of the Underwriters or any of their aÇliates or advisors. This information may not be consistent with other information compiled within or outside the PRC. In addition, certain Ñnancial data contained in this section, including those relating to us, have been determined in accordance with PRC GAAP, and diÅer from Ñnancial data of our bank presented elsewhere in this prospectus.

OVERVIEW China has experienced significant economic growth over the past two decades largely as a result of the PRC Government's extensive economic reforms. In the beginning, these reforms were focused on transforming China from a centrally planned economy to a more market-based economy. More recently, particularly following China's accession to the WTO in 2001, the economic reforms have also focused on, among other things, enhancing the competitiveness of Chinese enterprises. As a result of these reforms, China's GDP grew at a CAGR of 14.9% between 2002 and 2006, according to the National Bureau of Statistics of China, and, as of December 31, 2006, China was the fourth largest economy in the world, with a GDP of RMB 20.9 trillion. During the same period, China's total import and export volume increased at a CAGR of 29.8%. The following table sets forth China's GDP and total import and export volume from 2002 to 2006. Compound Annual As of and for the year ended December 31, Growth Rate 2002 2003 2004 2005 2006 (2002-2006) GDP (RMB billions)(1)ÏÏÏÏÏÏÏÏÏÏÏÏ 12,033.3 13,582.3 15,987.8 18,232.1 20,940.7 14.9% GDP per capita (in RMB) ÏÏÏÏÏÏÏÏÏ 8,214.0 9,111.0 10,561.0 13,943.6 15,930.8 18.0 Total import and export (US$ billions) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 620.8 851.0 1,154.4 1,422.2 1,760.7 29.8

Source: PBOC, National Bureau of Statistics of China. (1) National Bureau of Statistics of China (NBS) adjusted the GDP for 2004 and revised the annual historical GDP data of certain years from 1993 to 2003 based on China's economic census data published in 2004. GDP is calculated based on current price.

As an important component of the country's overall economic system, China's banking industry has experienced rapid growth which is in line with the economic development of China. Banks have historically been, and will continue to be, the principal provider of capital for enterprises and the primary choice for domestic savings. According to the information published by PBOC, bank loans accounted for 71.1% of total Ñnancing in 2006 with the remaining 28.9% raised through bond and equity issuances.

Total RMB-denominated loans and RMB-denominated deposits of China's banking industry have increased at a CAGR of 14.5% and 18.4%, respectively, from December 31, 2002 to December 31, 2006. The following table sets forth total RMB-denominated loans, total RMB-denominated deposits, and the respective CAGR of banking institutions in China as of the dates indicated. Compound Annual As of December 31, Growth Rate 2002 2003 2004 2005 2006 (2002-2006) (in billions of RMB) Total RMB-denominated loans(1)ÏÏÏÏ 13,129.4 15,899.6 17,819.8 19,469.0 22,528.5 14.5% Total RMB-denominated deposits(1) 17,091.7 20,805.6 24,142.4 28,717.0 33,543.4 18.4

Source: PBOC. (1) Consists, as applicable, of the deposits or loans of the PBOC, the Big Four commercial banks, the Other National Commercial Banks, city commercial banks, policy banks, rural commercial banks, foreign-invested banks, urban credit cooperatives, rural credit cooperatives, Ñnance companies, trust and investment companies, Ñnancial leasing companies and the postal savings bureau.

52 BANKING INDUSTRY IN THE PRC

In line with the rising income levels in China in recent years, China's banking industry has experienced increasing demand for personal banking products and services, including both personal loan products such as residential mortgages and fee- and commission-based products and services such as credit cards. From December 31, 2002 to December 31, 2006, total personal loans and total residential mortgage loans in China increased at a CAGR of 22.5% and 24.6%, respectively, according to data released by the National Bureau of Statistics of China. Total bank cards outstanding increased from 380 million as of December 31, 2001 to 1,175 million as of December 31, 2006, according to China UnionPay.

The PRC's eastern coastal areas, which consist of the Bohai Rim Zone, the Yangtze River Delta and the Pearl River Delta, have historically been a focus of the PRC Government's economic development policies and account for a relatively higher percentage of the GDP of the PRC. According to the China Statistical Abstract 2006, the eastern coastal areas accounted for 55.0% of the total GDP of the PRC in 2005, with a combined GDP of RMB 10,811 billion. Residents in these areas tend to be more aÉuent than those in the rest of the country as evidenced by a higher GDP per capita of RMB 28,919 in 2005, compared to the national average of RMB 13,744. In addition, between 2001 and 2005, the eastern coastal areas experienced faster growth than other parts of the nation, with combined GDP growing at an annual average rate of 18.0%, compared to the national average of 13.6%.

With the faster growth in income levels and corporate activities in the eastern coastal areas, the banking industry in these areas is also more developed compared to other parts of the PRC. According to the Almanac of China's Finance and Banking 2006, total loans in these areas grew at an annual average rate of 18.8% between 2001 and 2005 compared with the national average of 14.7% during the same period. Deposits and loans of banking institutions in these areas accounted for 60.9% and 59.8%, respectively, of total deposits and loans in the PRC in 2005.

HISTORY AND DEVELOPMENT OF CHINA'S BANKING SECTOR

Between 1949 and the 1970s, China's banking industry functioned as part of the centrally planned economy and the PBOC was China's central bank as well as the primary commercial bank engaging in deposit-taking and lending activities. Since the late 1970s, as part of the economic reform, the banking industry underwent signiÑcant changes as some of the PBOC's commercial banking functions were separated from its central bank function. The Big Four commercial banks assumed the role of state-owned specialized banks, while the PBOC focused on acting as China's central bank and as the principal regulator and supervisor of China's banking system.

In the late 1980s, new commercial banks and non-bank Ñnancial institutions were established. Some of these commercial banks, known as the Other National Commercial Banks, were permitted to oÅer nationwide commercial banking services, while others were permitted to operate only in local markets.

Since the mid-1990s, the PRC Government has taken a series of measures to reform the commercial banking sector, including the establishment of three policy banks in 1994 to substantially undertake the policy lending functions of the Big Four commercial banks. In 1995, the PRC Commercial Banking Law and the PRC People's Bank of China Law were enacted to deÑne more clearly the permitted scope of business of commercial banks and the functions and powers of the PBOC as the central bank and banking regulator of China. In 2003, the CBRC was established to become the primary banking industry regulator and assumed the majority of the regulatory functions of the PBOC.

53 BANKING INDUSTRY IN THE PRC

China's banking industry has been historically burdened with large portfolios of non-performing loans. Since the late 1990s, the PRC Government has taken numerous initiatives to improve the asset quality and strengthen the capital base of the Big Four commercial banks, including the following:

¬ In 1998, the MOF issued special government bonds and contributed RMB 270.0 billion to the Big Four as equity to improve their capital adequacy.

¬ In 1999, the PRC Government established four asset management companies to acquire and manage non-performing loans of the Big Four commercial banks.

¬ In 1999 and 2000, the Big Four commercial banks transferred a signiÑcant amount of non- performing loans to the asset management companies.

¬ In 2003, the PRC Government, through China SAFE Investments Limited, previously known as Central Huijin Investment Co., Ltd. (""Huijin''), contributed US$22.5 billion as equity to each of Bank of China and China Construction Bank, and in 2005, Huijin contributed US$15 billion as equity to Industrial and Commercial Bank of China.

Apart from the Big Four commercial banks, in 2004, MOF and Huijin also contributed in aggregate RMB 8 billion as equity to Bank of Communications. Bank of Communications afterwards also transferred approximately RMB 53 billion of non-performing loans to an asset management company. As a result of the aforementioned eÅorts, the asset quality of China's biggest commercial banks improved signiÑcantly.

Many Other National Commercial Banks have relied on their own resources to improve their asset quality and lowered their non-performing loan ratios. With the exception of Bank of Communications and China Everbright Bank, the other Other National Commercial Banks have not received government assistance and improved their asset quality by taking measures such as strengthening credit risk management and writing-oÅ or transferring non-performing loans. Furthermore, in recent years, several PRC commercial banks have listed their shares in the domestic or overseas markets to strengthen capital base and have adopted international best management practices, which in turn helped improve their respective asset quality. See ""Ì Industry Trends Ì Listing of China's Commercial Banks.''

CURRENT COMPETITIVE LANDSCAPE

China's banking institutions are divided broadly into seven categories, namely, the Big Four commercial banks, the Other National Commercial Banks, city commercial banks, rural credit cooperatives, urban credit cooperatives, foreign-invested banks and other Ñnancial institutions. China Postal Savings Bank, whose predecessor is the postal savings bureau, was established on March 21, 2007. Due to its very recent establishment and lack of public data, information relating to this bank is not included in this prospectus. The following table sets forth, as of December 31, 2005, certain information relating to the assets, deposits and loans of each category. As of December 31, 2005 Total Assets Total Loans(3) Total Deposits Number of Total Market Total Market Total Market Institutions Amount Share Amount Share Amount Share (in billions of RMB, except number of institutions and percentages) Big Four Commercial Banks ÏÏÏÏÏÏÏÏ 4 20,552.9 54.1% 10,812.5 51.7% 17,479.2 58.9% Other National Commercial Banks ÏÏÏ 13 5,881.9 15.5 3,559.0 17.0 5,036.5 17.0 City Commercial Banks ÏÏÏÏÏÏÏÏÏÏÏÏ 113 2,027.0 5.3 1,011.3 4.8 1,674.5 5.6 Rural Credit Cooperatives(1) ÏÏÏÏÏÏÏÏ 27,171 3,175.4 8.4 1,855.2 8.9 2,764.5 9.3 Urban Credit CooperativesÏÏÏÏÏÏÏÏÏÏ 599 205.0 0.5 111.6 0.5 181.3 0.6 Foreign-Invested BanksÏÏÏÏÏÏÏÏÏÏÏÏÏ 254 635.3 1.7 318.4 1.5 98.0 0.3 Other(2)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 153 5,480.2 14.5 3,241.2 15.6 2,441.7 8.3 Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 28,307 37,957.7 100.0% 20,909.1 100.0% 29,675.8 100.0%

54 BANKING INDUSTRY IN THE PRC

Sources: PBOC, CBRC, annual reports and prospectuses of relevant banks. All data based on PRC GAAP except for Industrial and Commercial Bank of China, Bank of China and China Construction Bank, Bank of Communications, China Merchants Bank, China CITIC Bank, Shanghai Pudong Development Bank, China Minsheng Bank, Industrial Bank, Huaxia Bank and Shenzhen Development Bank, the Ñnancial data of which were prepared in accordance with IFRS.

(1) Consists of rural cooperative banks, rural commercial banks and rural credit cooperatives.

(2) Consists of policy banks, Ñnance companies, trust and investment companies, Ñnancial leasing companies, auto Ñnancing companies and the postal savings bureau. Amounts of total assets, loans and deposits include only those of policy banks, Ñnance companies and the postal savings bureau.

(3) Amounts shown are before allowances for impairment losses.

The table below sets forth our market shares in Renminbi and foreign currency deposits-taking and lending markets for the year ended December 31, 2004, 2005 and 2006. As of December 31, 2004 2005 2006 Deposits in RMB ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1.63% 1.61% 1.68% Lending in RMBÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1.58 1.74 1.94 Deposits in foreign currency ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3.44 5.18 4.47 Lending in foreign currencyÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1.17 1.52 1.31

Sources: Calculated based on relevant data provided by the PBOC.

Big Four Commercial Banks

The Big Four commercial banks play a major role in China's banking market and, since their establishment, have been the principal source of Ñnancing in China, particularly for state-owned enterprises. Although historically being state-owned enterprises, certain members of the Big Four commercial banks have undergone restructuring and become joint stock commercial banks. China Construction Bank is currently listed on the Hong Kong Stock Exchange, and Bank of China and Industrial and Commercial Bank of China are listed on both the Hong Kong Stock Exchange and the Shanghai Stock Exchange. As of December 31, 2005, total assets and total loans of the Big Four commercial banks represented 54.1% and 51.7% of total assets and total loans of banking institutions in China, respectively.

The following table sets forth, at December 31, 2005, the number of branches, total assets, deposits and loans of each of the Big Four commercial banks. As of December 31, 2005 Approximate Total Assets Total Loans Total Deposits Number of % of % of % of Branches Amount Total Amount Total Amount Total (in billions of RMB, except percentages and number of branches) Industrial and Commercial Bank of China(1)(2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 18,764 6,456.1 31.4% 3,289.6 30.4% 5,736.9 32.8% Agricultural Bank of China ÏÏÏÏ 28,234 4,771.0 23.2 2,829.3 26.2 4,036.9 23.1 Bank of China(1)(2) ÏÏÏÏÏÏÏÏÏÏÏ 11,018 4,740.0 23.1 2,235.3 20.7 3,699.5 21.2 China Construction Bank(1) ÏÏÏÏ 13,977 4,585.7 22.3 2,458.4 22.7 4,006.0 21.9 Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 71,993 20,552.9 100.0% 10,812.5 100.0% 17,479.2 100.0%

Sources: Banks' annual reports and prospectuses. Except for Agricultural Bank of China, all numbers are based on IFRS. (1) Listed on the Hong Kong Stock Exchange. (2) Listed on the Shanghai Stock Exchange.

55 BANKING INDUSTRY IN THE PRC

Other National Commercial Banks As of the date of this prospectus, there were 13 Other National Commercial Banks in China. These Other National Commercial Banks are licensed to engage in commercial banking activities nationwide, and their equity ownership is distributed among the PRC Government, state-owned enterprises and other investors. Established mostly in the late 1980's and early 1990's, the Other National Commercial Banks have gradually increased their collective market share while the market share of the Big Four commercial banks has gradually decreased. Total assets of the Other National Commercial Banks represented 16.3% of total assets of banking institutions in China as of December 31, 2006, compared to 13.0% as of December 31, 2002. The following table sets forth, as of December 31, 2005, the number of branches, total assets, deposits and loans of the Other National Commercial Banks. As of December 31, 2005 (5) (5) (5) Number of Total Assets Loans Deposits Branches Amount Ranking Amount Ranking Amount Ranking (in billions of RMB, except number of branches) Bank of Communications(1) 2,607 1,423.4 1 771.4 1 1,220.8 1 China Merchants Bank(1)(2) 456 734.6 2 472.2 2 634.4 2 China CITIC BankÏÏÏÏÏÏÏÏ 416 594.6 3 370.3 5 530.6 3 Shanghai Pudong Development Bank(2) ÏÏÏÏ 350 573.5 4 377.4 4 504.5 4 China Minsheng Bank(2) ÏÏÏ 240 557.4 5 386.4 3 488.8 5 China Everbright BankÏÏÏÏÏ 382 530.1 6 303.8 6 450.0 6 Industrial Bank(2) ÏÏÏÏÏÏÏÏÏ 328 474.8 7 242.6 7 355.2 7 Huaxia Bank(2) ÏÏÏÏÏÏÏÏÏÏÏ 266 356.5 8 233.7 8 312.1 8 Guangdong Development Bank ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 500 355.8 9 207.5 9 302.8 9 Shenzhen Development Bank(3) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 238 222.4 10 156.1 10 200.8 10 Evergrowing Bank ÏÏÏÏÏÏÏÏÏ 76 37.0 11 24.6 11 24.3 11 China Zheshang Bank ÏÏÏÏÏ 6 21.8 12 13.0 12 12.2 12 China Bohai Bank(4) ÏÏÏÏÏÏÏ 1 n.a. 13 n.a. 13 n.a. 13 TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,866 5,881.9 3,559.0 5,036.5

Sources: Banks' annual reports and websites, Almanac of China's Finance and Banking 2006. Data related to our bank are derived from audited consolidated Ñnancial statements included in the Accountants' Report in Appendix I prepared in accordance with IFRS. (1) Listed on the Hong Kong Stock Exchange. (2) Listed on the Shanghai Stock Exchange. (3) Listed on the Shenzhen Stock Exchange. (4) China Bohai Bank started operation in February 2006. (5) Except for Guangdong Development Bank, Evergrowing Bank and China Zheshang Bank, all numbers are based on IFRS.

City Commercial Banks City commercial banks are permitted to engage in commercial banking activities, generally within speciÑc geographic areas. As of December 31, 2005, total assets and total loans of city commercial banks represented 5.3% and 4.8% of total assets and total loans of banking institutions in China, respectively.

Rural and Urban Credit Cooperatives Rural and urban credit cooperatives provide a limited range of banking products and services, including personal deposit-taking, lending and settlement services, to small enterprises and local residents in rural and urban areas, respectively. Due to the rapid growth of other banking institutions in the urban areas, in particular the establishment of city commercial banks, total assets of urban credit cooperatives as a percentage of the

56 BANKING INDUSTRY IN THE PRC total assets of banking institutions in China have declined in recent years. As of December 31, 2005, total assets of rural credit cooperatives (including rural commercial banks and rural cooperative banks) and urban credit cooperatives represented 8.4% and 0.5%, respectively, of total assets of banking institutions in China.

Foreign-Invested Banks

Foreign-invested banks include foreign bank branches, wholly foreign-owned banks and joint venture banks. Similar to the other types of banking institutions in China, foreign-invested banks are subject to supervision and regulation by the CBRC. See ""Regulation and Supervision Ì PRC Regulation and Supervision Ì Regulation of Foreign-invested Banks Operating in China.'' Pursuant to its WTO accession commitments, China has progressively opened RMB-denominated banking activities to foreign-invested banks, and eÅective from December 11, 2006, all restrictions on the geographic presence, customer base and operational licenses of foreign-invested banks were lifted. See ""Ì Industry Trends Ì Participation of Foreign Banks in China.'' As of December 31, 2005, there were 254 foreign-invested banks in China, their total assets and total loans represented 1.7% and 1.5% of total assets and total loans of banking institutions in China.

Other Banking Institutions

Other banking institutions include policy banks (i.e., banks established by the PRC Government to focus on policy lending, such as the , the China Export and Import Bank and the Agriculture Development Bank of China), the postal savings bureau, trust and investment companies, Ñnance companies, Ñnancial leasing companies and automobile Ñnance companies. As of December 31, 2005, other Ñnancial institutions (which, for this purpose, includes only policy banks, Ñnance companies and the postal savings bureau) represented 14.5% of total assets and 15.6% of total loans in China.

INDUSTRY TRENDS

Increasing Role of Other National Commercial Banks in China's Banking Industry

While the Big Four commercial banks have dominated the banking industry in China, their market share has declined over the past few years. The collective market share of the Other National Commercial Banks, however, has increased from 13.0% in 2002 to 16.3% in 2006 in terms of total assets. The Other National Commercial Banks generally focus on more developed regions and have gained market share by providing innovative products and high-quality customer services. As compared with the Big Four commercial banks, we believe they are more adaptive to changing market conditions and more responsive to customer's special needs, and as compared with most other regional banking institutions, they enjoy certain competitive advantages such as a national distribution network, larger capital base, access to more resources, more diverse product and service oÅerings and advanced information technology infrastructure.

The following table sets forth the respective market share based on total assets of each category of China's banking institutions as of the dates indicated.

As of December 31, 2002 2003 2004 2005 2006 Big Four Commercial Banks ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 58.7% 57.4% 54.0% 54.1% 51.3% Other National Commercial BanksÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13.0 14.3 14.9 15.5 16.3 City Commercial Banks ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5.0 5.4 5.4 5.3 5.9 Foreign-Invested Banks ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1.2 1.2 1.6 1.7 n.a. Urban Credit Cooperatives ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.5 0.5 0.6 0.5 n.a. Rural Credit Cooperatives ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9.6 9.8 9.7 8.4 n.a. OthersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 12.0 11.3 13.9 14.5 n.a. Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 100.0% 100.0% 100.0% 100.0% 100.0%

Source: CBRC, PBOC, annual reports and prospectuses of relevant banks.

57 BANKING INDUSTRY IN THE PRC

Other National Commercial Banks have relatively better asset quality compared to the Big Four commercial banks due to their relatively smaller exposure to policy lending and less legacy non-performing loans resulting from their shorter operating history. Compared to the city commercial banks and rural credit cooperatives, asset quality of Other National Commercial Banks is generally higher due to their lower geographic concentration. The non-performing loan ratios of the Other National Commercial Banks have historically been lower than other categories of banking institutions in the PRC. The following table sets forth the collective non-performing loan ratios of the Big Four commercial banks and the Other National Commercial Banks as of the dates indicated.

As of December 31, 2004 2005 2006 Big Four Commercial Banks ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 15.57% 10.49% 9.22% Other National Commercial BanksÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4.94 4.22 2.81

Sources: CBRC.

Enhanced Regulation and Supervision

In recent years, the CBRC and other PRC regulatory authorities have promulgated numerous rules and regulations in an eÅort to enhance supervision and promote orderly market competition in the banking industry, including:

¬ Enhancing corporate governance. The CBRC has encouraged banks to establish a corporate governance structure that includes a board of directors with independent directors, audit, compensation and other board committees, and a board of supervisors. In addition, banks have been instructed to create an independent internal audit function that is supported by clearly deÑned policies and procedures;

¬ Enhancing risk management. The CBRC has promulgated a series of risk management guidelines and undertaken measures to more closely monitor and enforce the adoption and implementation of the Ñve-category loan classiÑcation system by commercial banks, risk rating system, due diligence requirements during the credit extension process, as well as enhanced management of market and operational risks in addition to credit risks;

¬ Enhancing supervision over capital adequacy. In March 2004, the CBRC implemented a set of new and more stringent capital adequacy guidelines which were based on the 1988 Basel Capital Accord, or Basel I, and took into consideration Basel II. Under these guidelines, all banks in China are required to comply with the new capital adequacy requirements by January 1, 2007;

¬ Establishing a general provision requirement for risk-bearing assets. Starting from July 2005, commercial banks in China are required by the MOF to set aside a regulatory general reserve, generally not less than 1% of the year-end balance of their risk-bearing assets, to cover any possible unidentiÑed impairment. A grace period of a maximum of Ñve years is provided to meet this requirement;

¬ Raising the statutory reserve requirement. In July 2006, August 2006, November 2006, January 2007, February 2007 and April 2007, the PBOC increased the requirement for statutory deposit reserve six times by 0.5%, to 10.5% from 7.5%. The statutory deposit reserve requirement was increased by 1.0% in September 2003 and 0.5% in April 2004;

¬ Promulgating the Internal Control Guidelines. The CBRC has required commercial banks to adopt a three-tiered structure to conduct eÅective management and supervision, as well as to improve credit approval procedures; and

¬ Enhancing supervision over information disclosure. The CBRC has required commercial banks to enhance disclosure in their annual report.

58 BANKING INDUSTRY IN THE PRC

See ""Regulation and Supervision Ì PRC Regulation and Supervision'' for more information regarding PRC regulations aÅecting the banking institutions. PRC regulatory authorities are expected to continue to promulgate new rules and regulations in an eÅort to enhance risk management capabilities of China's commercial banks and to ensure the healthy development of China's banking industry.

Improvement of Asset Quality and Enhancement of Capital Base

China's banking sector has been historically burdened with large portfolios of non-performing loans. Since the late 1990s, the PRC Government has taken various measures to improve the asset quality and strengthen the capital base of the Big Four commercial banks and Bank of Communications. See ""Ì History and Development of China's Banking Sector.'' With the exception of Bank of Communications and China Everbright Bank, the other Other National Commercial Banks have not received government assistance and have relied on their own resources to manage their non-performing loan ratios. In an eÅort to improve and standardize non-performing loan disclosure by banks and allow regulators to better monitor bank asset quality in accordance with international practices, a Ñve-category classiÑcation system was formally implemented in 2002. In addition, pursuant to PRC Government directives and regulatory requirements, the PRC commercial banks have adopted various measures designed to enhance their risk management capabilities and improve their asset quality.

The following table sets forth certain information regarding the non-performing loans of China's banking industry, the Big Four commercial banks and Other National Commercial Banks as of the date indicated:

As of December 31, 2006 Amount % Total Loans (RMB in billions) Non-performing loans by category of the banking industry in China Substandard ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 267.5 1.51% Doubtful ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 518.9 2.93 Loss ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 468.5 2.65 1,254.9 7.09% Non-performing loans by types of banks: Big Four Commercial BanksÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,053.5 9.22% Other National Commercial Banks(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 116.8 2.81

Source: CBRC.

(1) Includes Bank of Communications, China CITIC Bank, China Everbright Bank, Huaxia Bank, China Minsheng Bank, Guangdong Development Bank, Shenzhen Development Bank, China Merchants Bank, Industrial Bank, Shanghai Pudong Development Bank and Evergrowing Bank.

Listing of China's Commercial Banks

To accelerate the development of China's banking industry, China's commercial banks are increasingly looking to list their shares on domestic and overseas markets to enhance capitalization, increase internationalization and improve management capabilities. In June 2005, Bank of Communications, the largest national commercial bank after the Big Four commercial banks, became the Ñrst Chinese bank to conduct an initial public oÅering on the Hong Kong Stock Exchange. China Construction Bank was the Ñrst Big Four commercial bank to list on the Hong Kong Stock Exchange in October 2005. Bank of China, China Merchants Bank and Industrial and Commercial Bank of China also completed their initial public oÅerings on the Hong Kong Stock Exchange in June 2006, September 2006 and October 2006, respectively. In addition, major international commercial banks and Ñnancial institutions made substantial investments in, and entered into certain commercial cooperation agreements with, Bank of Communications, China Construction Bank, Bank of China and Industrial and Commercial Bank of China prior to their respective initial public oÅerings.

59 BANKING INDUSTRY IN THE PRC

The following table sets forth certain proÑtability indicators for each of China's listed commercial banks calculated based on IFRS.

Actual Ranking 2003-2005 2004 2005 2003-2005 2004 2005 Net Income Pre Tax Pre Tax Net Income Pre Tax Pre Tax CAGR ROAA ROAA CAGR ROAA ROAA Industrial and Commercial Bank of China(1)(2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 29.7% 1.13% 1.09% 8 Ì Ì Bank of China(1)(2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ -3.9 0.90 1.19 10 Ì Ì China Construction Bank(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 44.6 1.37 1.30 3 Ì Ì Bank of Communications(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 45.3 0.75 1.00 2 5 2 China Merchants Bank(1)(2)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 30.2 0.96 0.98 7 1 3 China Minsheng Bank(2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 42.0 0.70 0.86 5 6 5 Huaxia Bank(2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 43.6 0.60 0.66 4 7 7 Shanghai Pudong Development Bank(2)ÏÏÏÏÏ 27.3 0.75 0.84 9 4 6 Shenzhen Development Bank(3) ÏÏÏÏÏÏÏÏÏÏÏ -16.9 0.30 0.27 11 8 8 Industrial Bank(2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 35.5 0.91 0.93 6 2 4 China CITIC Bank(4)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 47.3% 0.91% 1.00% 1 3 1 Average excluding China CITIC Bank ÏÏÏÏÏ 27.7% 0.84% 0.91%

Source: Banks' annual reports and prospectuses. All numbers are calculated based on IFRS. (1) Listed on the Hong Kong Stock Exchange. (2) Listed on the Shanghai Stock Exchange. (3) Listed on the Shenzhen Stock Exchange. (4) 2004 and 2005 Pre-tax ROAA would be 0.98% and 1.09%, respectively, if excluding the management fee paid to CITIC Group.

Bank Lending Remains the Most Important Source of Financing The Chinese economy has historically relied on bank loans as the primary source of Ñnancing. Despite the development of domestic capital markets since the late 1980s and the commercial paper market since 2005, commercial banks remain the principal provider of Ñnancing to businesses in China. The following table sets forth the relative proportion of bonds issued, equity raised and bank loans in China between 2002 and 2006:

2002 2003 2004 2005 2006 Bonds ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1.6% 1.2% 1.5% 10.0% 10.7% EquityÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4.7 4.6 7.2 9.2 18.2 Bank Loans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 93.7 94.2 91.3 80.8 71.1 Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 100.0% 100.0% 100.0% 100.0% 100.0%

Source: China Statistical Abstract 2006, SDC, www.chinabond.com.cn., PBOC.

60 BANKING INDUSTRY IN THE PRC

Increasing Demand for Foreign Exchange Products and Services According to the National Bureau of Statistics of China, from 2002 to 2006, the foreign trade volume of China almost tripled, with a total volume of approximately US$1,760.7 billion as of the end of 2006, representing a CAGR of 29.8%. The following table sets forth the imports and exports growth of China from 2002 to 2006:

Year on Year on Year Year Growth Growth Year Export Import Total Export Import (in billions of US$, except percentages) 2002 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 325.6 295.2 620.8 22.3% 21.2% 2003 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 438.2 412.8 851.0 34.6 39.8 2004 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 593.6 560.8 1,154.4 35.5 35.9 2005 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 761.9 660.3 1,422.2 28.4 17.7 2006 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 969.1 791.6 1,760.7 27.2 19.9

Source: PBOC. From 2002 to 2006, actual foreign direct investment into China has grown at CAGR of 7.1% to US$69.4 billion in 2006. The table below sets forth actual foreign direct investment between 2002 and 2006:

Compound Annual For the year ended December 31, Growth Rate 2002 2003 2004 2005 2006 (2002-2006) (in billions of US$, except percentages) Foreign direct investment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 52.7 53.5 60.6 60.3 69.4 7.1%

Source: PBOC Quarterly Reports. The growing foreign trade in China, the steady inÖow of foreign investment into China and the PRC Government's policy to encourage Chinese companies to conduct business overseas are expected to create greater future demand for foreign exchange products and services, such as foreign exchange loans, international trade settlement and trade Ñnance. Currently the Big Four commercial banks and three of the Other National Commercial Banks, including our bank, are licensed to conduct foreign exchange forward sale and purchase business. According to the PBOC, the reform of the RMB exchange rate regime in July 2005 has created greater demand for exchange rate risk hedging services. As China continues to deregulate the derivatives market and further reform the exchange rate regime, we expect the demand for foreign exchange derivative products in China will continue to grow.

Interest Rate Deregulation Historically, interest rates on deposits and loans were set by and subject to restrictions established by the PBOC. In recent years, as part of the overall reform of the banking system, the PBOC has implemented a series of initiatives designed to gradually liberalize interest rates and move towards a more market-based interest rate regime. See ""Regulation and Supervision Ì PRC Regulation and Supervision Ì Pricing of Products and Services Ì Interest Rates for Loans and Deposits.'' We expect the on-going interest rate liberalization to facilitate the ability of banks to develop and market innovative products and services and adopt risk-based pricing.

Further Expansion of Fee-based Business Historically, banks in China were restricted in their ability to charge fees for services. Since 2001, the PRC Government has promulgated regulations permitting banks to charge for fee- and commission-based products and services. Currently, certain services are still subject to government guidance prices, including

61 BANKING INDUSTRY IN THE PRC basic RMB settlement services speciÑed by the CBRC and the NDRC. Fees for other products and services are determined by banks based on market conditions. See ""Regulation and Supervision Ì PRC Regulation and Supervision Ì Pricing of Products and Services.'' The ratio of non-interest income to total income of the PRC banks was less than 10% in 2005, substantially lower than the ratio in more mature markets. This ratio is expected to increase as domestic banks continue to expand products and services oÅerings in response to demands for increasingly sophisticated Ñnancial products and services by corporate and retail customers.

Increasing Demand for Personal Banking Products and Services

We believe that rising income levels in China will continue to foster demand for personal banking products, including both personal loan products and fee- and commission-based products and services. The following table sets forth key personal income data for China and their respective CAGRs for the periods indicated.

Compound Annual Growth For the year ended December 31, Rate (2002- 2002 2003 2004 2005 2006 2006) (in RMB, except percentages) GDP per capitaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,214.0 9,111.0 10,561.0 13,943.6 15,930.8 18.0% Annual disposable income of urban households per capita ÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,703.0 8,472.7 9,421.6 10,493.0 11,759.0 11.2 Annual net income of rural households per capitaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,713.0 2,929.5 3,234.2 3,255.0 3,587.0 7.2

Sources: National Bureau of Statistics of China, PBOC.

Personal Loans

Personal loans totaled RMB 2.4 trillion as of December 31, 2006, representing 10.7% of total loans in China and 14.6% of China's GDP, according to the National Bureau of Statistics of China. From December 31, 2002 to December 31, 2006, total personal loans in China increased at a CAGR of 22.5%. Comparing to the market share of personal loans in Japan and United States, we believe that the personal loans business in China will continue to demonstrate high growth potential.

For the year ended December 31, 2006 Personal Loans as a Percentage of Total Domestic Loans Total GDP China ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10.7% 14.6% Japan ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 28.3 22.5 United StatesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 53.7 29.3

Sources: CEIC, Federal Deposit Insurance Corporation and National Bureau of Statistics of China.

Residential mortgage loans generally account for the majority of personal loans. The growth of residential mortgage loans has been fostered by increasing private home ownership in China as a result of the PRC Government's housing reform programs that began in the 1980s. Total residential mortgage loans have grown from RMB 825.8 billion as of December 31, 2002 to approximately RMB 2.0 trillion as of December 31, 2006, according to the National Bureau of Statistics of China. The PRC Government introduced in April 2006 and implemented in June 2006 several monetary policies and other regulatory measures to control the over heating of real estate and certain other industries. Such measures include increasing the minimum down payment requirement from 20% to 30% of the total purchase price of the mortgaged residential property. See

62 BANKING INDUSTRY IN THE PRC

""Regulation and Supervision Ì PRC Regulation and Supervision Ì Regulation of Principle Commercial Banking Activities Ì Lending.''

Bank Cards The bank card business has been growing rapidly in China. Total bank cards outstanding increased from 380 million as of December 31, 2001 to 1,175 million as of December 31, 2006, according to China UnionPay. The growth has also been accompanied by an expansion of the electronic banking terminal network. Debit cards have been the primary type of bank card in the PRC. According to China UnionPay, as of December 31, 2006, there were approximately 1,119 million debit cards issued in China, representing a 21.6% growth from December 31, 2005. In addition, to compete for retail customers, China's commercial banks are continually improving the convenience and scope of services provided through debit cards. For example, some banks enable their customers to conduct various online transactions with their debit cards in addition to enabling them to conduct ordinary transactions such as withdrawals and deposits at automated service machines and payment for store purchases. Credit card usage in China is very low as compared to the developed economies. According to China UnionPay, as of December 31, 2006, there were a total of approximately 56 million credit cards issued in China, of which a substantial majority were either quasi-credit cards (which require cash deposit balance as a condition for an interest-bearing credit line) or RMB-only credit cards that can only be used in China. According to China UnionPay, as of December 31, 2005, the total number of dual-currency credit cards issued by VISA International Service Association, or VISA International and MasterCard International Inc., or MasterCard International in China that can be used overseas was only approximately 10 million. In addition to the short history of credit card business in China, the low penetration rate of credit cards in China is also due to numerous other factors, including strict regulation on licensing, relatively few points-of-sale, the short period of the use of a nationwide consumer credit information system and the traditional cash-oriented consumption culture. However, as merchants increasingly accept credit cards and consumers in China become more accustomed to using credit cards, demand for credit cards is expected to grow rapidly. The increasing number of licenses granted to banks to engage in the credit card business and the development of China UnionPay are expected to contribute to the growth of China's credit card industry. In addition, the increases in per capita disposable income and average household income are expected to drive the demand for credit cards.

Wealth Management Services The number of relatively aÉuent individuals in China is expected to grow as a result of China's rapidly growing economy. According to Asia-PaciÑc Wealth Report 2006 published by Capgemini and Merrill Lynch, China had approximately 320,000 high net worth individuals in 2005, which are deÑned as individuals holding US$1 million or more Ñnancial assets. These high net worth individuals possessed US$1,590 billion Ñnancial assets in aggregate in 2005. According to a report published by Boston Consulting Group in December 2005, the number of high net worth individuals in China was estimated to grow at an annual rate of approximately 13% in the next several years. We believe these relatively aÉuent individuals should increasingly require comprehensive and personalized wealth management advice in addition to traditional banking products and services. To meet such demand, many commercial banks in China have in recent years launched wealth management services, which generally entail the provision of one-on-one wealth management advisory services and other value added services. As such services are usually provided only to customers with relatively large aggregate asset balances, they have become an important marketing platform for commercial banks to attract relatively aÉuent customers and to cross sell other Ñnancial products and services.

Rapid Growth of Inter-bank Market Since its establishment in the mid-1990s, the inter-bank market in China has grown signiÑcantly. The PRC inter-bank market currently consists of a number of segments, including inter-bank borrowings, discounted bills, bonds, foreign exchange, futures and gold. In addition, in recent years, there have been signiÑcant developments in new Ñnancial tools and derivative products in the PRC inter-bank market, which

63 BANKING INDUSTRY IN THE PRC include, among others, non-recourse repurchase of bonds, bond forwards, interest rate swaps, foreign exchange forwards, foreign exchange swaps and commercial paper. According to the PBOC, the total amount of inter-bank borrowings increased from RMB 197.8 billion in 1998 to RMB 1.3 trillion in 2005, representing a CAGR of 30.9%. The total amount of bonds repurchased on a non-recourse basis increased from RMB 1.4 trillion in 1998 to RMB 18.2 trillion in 2005, representing a CAGR of 44.3%. The total amount of foreign exchange traded in the inter-bank market of China increased from US$40.8 billion in 1994 to US$209.0 billion in 2004, representing a CAGR of 17.7%.

Development of a National Credit Information System In past years, the PRC Government has begun to develop a nationwide credit information system in order to enable PRC commercial banks to make better-informed credit decisions. In 1997, the PBOC began to develop a bank loan registration system to collect credit information on corporate borrowers. As of November 30, 2005, the system had collected data on approximately 4.5 million corporate loan borrowers, and the outstanding RMB-denominated loans recorded in the system amounted to RMB 17.4 trillion, representing approximately 90.0% of the total outstanding loans of Ñnancial institutions in China. By the end of 2005, the PBOC had upgraded this system into a consolidated nationwide corporate credit database, and introduced it in selected regions on a trial basis. It is expected that, starting from the second half of 2006, all PRC commercial banks and certain qualiÑed rural credit cooperatives will implement this system. In addition, in September 2003, the PBOC established the Credit Information System Bureau, or CISB, to focus on developing nationwide credit information systems. The CISB started to develop a personal credit information system to collect information on personal credit data in 2004. As of December 31, 2005, the outstanding personal loans recorded in this system amounted to RMB 2.2 trillion, representing 97.5% of the total outstanding personal loans in China. After implementing this system on a trial basis in selected PRC commercial banks and rural credit cooperatives, the CISB oÇcially launched the system on a nationwide basis in January 2006.

Participation of Foreign Banks in China Historically, operations of foreign banks in China were subject to signiÑcant restrictions. Upon China's accession to the WTO in December 2001, all geographic and customer restrictions on foreign currency- denominated business conducted by foreign-invested banks were gradually lifted. Pursuant to China's WTO commitments, foreign-invested banks were gradually allowed to participate in RMB banking activities in more cities before December 2006, and eÅective from December 2006, all restrictions on geographic presence, customer base and operational licenses were removed. See ""Regulation and Supervision Ì PRC Regulation and Supervision Ì Regulations of Foreign-invested Banks Operating in China.'' Furthermore, we expect more commercial banks from Hong Kong and Macau to enter into the banking market in China. China and Hong Kong signed the Closer Economic Partnership Arrangement, or Hong Kong CEPA, in June 2003. Hong Kong CEPA has further eased restrictions on the activities of Hong Kong banks in China, permitting them to enter the mainland Ñnancial sector and conduct Renminbi banking activities earlier than other non-PRC banks under China's WTO commitments. For example, under such CEPA, commercial banks incorporated in Hong Kong with US$6 billion or more in total assets are qualiÑed to apply for the establishment of branches in the PRC. In October 2003, China and Macau signed a Macau CEPA with similar arrangements. By comparison, under the PBOC and CBRC regulations, commercial banks incorporated in other jurisdictions must have US$20 billion or more in total assets to be qualiÑed to apply for the establishment of branches in China. Recently, a series of initiatives designed to further open China's banking industry to foreign participation have been implemented by the PRC Government. The key features of these initiatives include:

¬ allowing foreign banks to establish banking Ñnancial institutions as independent legal entities in China;

¬ allowing foreign participation in the automobile Ñnance sector;

¬ lowering capital requirements for the establishment of branches in China by foreign banks;

64 BANKING INDUSTRY IN THE PRC

¬ streamlining the procedures for foreign Ñnancial institutions to enter the Chinese market;

¬ increasing the maximum percentage of ownership interests in domestic Ñnancial institutions that may be held by foreign investors; and

¬ encouraging qualiÑed overseas strategic investors to participate in the restructuring and reform of China's banking industry.

As a result, there has been an increase in investments by foreign investors in Chinese commercial banks which have helped strengthen the capital base of Chinese commercial banks in the past few years. In addition, foreign investors are generally also expected to provide assistance in corporate governance, risk management and various business areas thereby enhancing the overall competitiveness of the Chinese commercial banks. In return, foreign investors generally expect to develop and expand cooperation with these banks in areas of anticipated potential growth, such as credit card, wealth management and treasury services. As more banks in China take initiatives to improve their competitiveness in the face of increasing competition from their domestic and foreign peers and as more foreign investors take the opportunity to participate in the rapidly growing banking sector, we expect foreign investments in banks in China to continue to grow.

Rapid Growth of Direct Corporate Financing

In May 2005, the PBOC promulgated regulations allowing qualiÑed companies to issue domestic commercial paper in the inter-bank market. Following such regulatory change, the domestic commercial paper market has grown signiÑcantly. According to China Government Securities Depository Trust & Clearing Co. Ltd., from May 2005 to December 2005, approximately 60 corporations in China issued commercial paper, with a total transaction volume of RMB 149.1 billion, of which RMB 91.2 billion, or 61.2%, was sold in the fourth quarter of 2005. As compared with bank loans, commercial paper currently represents a cheaper source of Ñnancing. Direct Ñnancing channels (such as the issuance of commercial paper) are expected to become an increasingly important source of short-term Ñnancing for companies, thereby reducing their dependence on commercial banks for short-term loans. Commercial banks in China are permitted to earn fee-based income from underwriting commercial paper.

65 REGULATION AND SUPERVISION

PRC REGULATION AND SUPERVISION

The banking industry is heavily regulated in China, with the CBRC and the PBOC acting as the principle LR 19A.42(57) regulatory authorities. The CBRC is responsible for supervising and regulating banking institutions, and the PBOC, as the central bank of China, is responsible for formulating and implementing monetary policies. The applicable laws and regulations governing activities in China's banking industry consist principally of the PRC PBOC Law, the PRC Commercial Banking Law and the PRC Banking Regulation and Supervision Law, and the rules and regulations promulgated thereunder.

Principal Regulators Prior to April 2003, the PBOC acted as both China's central bank and the principal supervisor and regulator of the banking industry in China. In April 2003, the CBRC was established to become the primary banking industry regulator and assumed majority of the bank regulatory functions from the PBOC. The PBOC retained its role as the central bank.

The CBRC Functions and Powers The CBRC is the primary supervisory authority responsible for the regulation of banking institutions operating in China, including commercial banks, urban credit cooperatives, rural credit cooperatives, other deposit-taking Ñnancial institutions and policy banks, and certain non-banking Ñnancial institutions under its authority such as asset management companies, trust and investment companies, Ñnance companies, Ñnancial leasing companies, as well as branches and representative oÇces established by foreign Ñnancial institutions in China. According to the PRC Banking Supervision and Regulation Law enacted in December 2003, the main responsibilities of the CBRC include:

¬ setting and promulgating rules and regulations governing banking institutions and their business activities;

¬ regulating the establishment, change, dissolution and business scope of banking institutions, as well as granting banking licenses for commercial banks and their branches;

¬ regulating the business activities of banking institutions, including the products and services they oÅer;

¬ setting qualiÑcation requirements for, and approving or overseeing the nomination of, directors and senior management personnel of banking institutions;

¬ setting guidelines and standards for internal controls, risk exposure and corporate governance of, and disclosure requirements for, banking institutions;

¬ conducting on-site inspection and oÅ-site surveillance of the business activities of banking institutions;

¬ monitoring the Ñnancial condition of banking institutions, including establishing standards or requirements for capital adequacy, asset quality and other Ñnancial metrics; and

¬ imposing corrective and punitive measures for violations of applicable banking regulations.

Examination and Supervision The CBRC, through its head oÇce in Beijing and oÇces in each province, provincial-level municipality and autonomous region, monitors the operations of commercial banks and their branches through on-site inspections and oÅ-site surveillance. On-site inspections generally include visiting the banks' premises, interviewing bank employees and, for signiÑcant issues relating to banks' operations or risk management, senior management and directors, as well as reviewing documents and materials maintained by the banks. The CBRC also conducts oÅ-site surveillance by reviewing Ñnancial and other reports regularly submitted by the

66 REGULATION AND SUPERVISION banks. If a banking institution is not in compliance with a regulation, the CBRC has the power to issue corrective and punitive measures, including imposition of Ñnes, suspension of certain business activities, restrictions on distributions of dividends and other income and asset transfers, closure of the institution and other penalties.

The PBOC As the central bank of the PRC, the PBOC is responsible for formulating and implementing monetary policies and maintaining the stability of the Ñnancial markets. According to the PRC PBOC Law, the PBOC is empowered to:

¬ formulate and implement monetary policies by establishing benchmark interest rates, setting the deposit reserve ratios for commercial banks, extending loans to commercial banks, accepting discounted bills and conducting open market operations;

¬ issue PRC treasury bills and other government bonds to Ñnancial institutions, as the agent of the MOF;

¬ regulate the inter-bank lending market and inter-bank bond market;

¬ set foreign exchange rate policies and manage China's foreign exchange reserves and gold reserves;

¬ manage the state treasury;

¬ maintain the normal operation of payment and settlement systems;

¬ regulate and examine foreign exchange activities; and

¬ establish anti-money laundering guidelines and monitor fund transfers to ensure that such transfers are in compliance with anti-money laundering regulations.

Other Regulatory Authorities In addition to the CBRC and the PBOC, commercial banks in the PRC are also subject to the supervision and regulation by other regulatory authorities including, among others, the SAFE, the CSRC and the CIRC. For example, in conducting our foreign exchange business, we are subject to the regulation of the SAFE; in conducting our funds custodian business, we are subject to the regulation of the CSRC; and in conducting our bancassurance business, we are subject to the regulation of the CIRC.

Licensing Requirements Basic Requirements The Commercial Banking Law and the CBRC Measures for the Implementation of Administrative Licensing Regarding Domestic-funded Commercial Banks as eÅective on February 1, 2006, deÑne the business scope of commercial banks and establishes licensing standards and other requirements. The establishment of a commercial bank requires the CBRC's approval and issuance of an operating license. In general, the CBRC will not approve an application for establishing a commercial bank unless certain conditions are satisÑed, among others:

¬ the articles of association of the proposed commercial bank comply with relevant requirements of the Commercial Banking Law and the PRC Company Law;

¬ the registered capital of the proposed bank meets the minimum requirement under the Commercial Banking Law. The minimum registered capital for a national commercial bank, city commercial bank and rural commercial bank is RMB 1 billion, RMB 100 million and RMB 50 million, respectively;

¬ the directors and senior management of the proposed bank must possess the requisite qualiÑcations;

67 REGULATION AND SUPERVISION

¬ the organizational structure and management system must be properly established; and

¬ the business premises, safety and preventive measures and other operational facilities must comply with relevant requirements.

SigniÑcant Changes Banks are required to obtain the CBRC's approval if they undergo any signiÑcant change, including, among others:

¬ change of name;

¬ change in the bank's registered capital;

¬ change of the location of the head oÇce or a branch;

¬ change in the bank's business scope;

¬ any purchase of an equity interest in the bank that results in the purchaser becoming a holder of 5% or more of the bank's shares or any change in equity interests of shareholders holding 5% or more of the bank's total capital or shares;

¬ amendment to the articles of association;

¬ merger or separation; and

¬ dissolution and liquidation.

Establishment of Branches Domestic Branches A commercial bank must apply to the CBRC or its local oÇces for approval and issuance of an operating license to establish a branch. A branch must have suÇcient operating funds commensurate with its scale and must meet other operating requirements. The sum of the operating funds provided to all branches of a bank may not exceed 60% of the total capital of the bank.

Overseas Branches The establishment of overseas branches by PRC commercial banks is subject to the CBRC's approval in addition to complying with all applicable regulations in the relevant foreign jurisdiction. The applicant bank is required to meet the following conditions: (1) its capital adequacy ratio shall not be lower than 8%; (2) the balance of its equity investments shall generally not exceed 50% of its net assets; (3) it shall have maintained a favorable balance in the most recent three accounting years; (4) the balance of its year-end assets in the preceding year prior to the application shall be RMB 100 billion or more; (5) it shall have lawful and suÇcient sources of foreign exchange funds; (6) it shall have a good corporate governance structure and a sound and eÅective internal control system; (7) its main prudent supervisory indices shall meet the supervisory requirements; and (8) other prudent conditions as prescribed by the CBRC.

68 REGULATION AND SUPERVISION

Scope of Business Under the PRC Commercial Banking Law, commercial banks in China are permitted to engage in any or all of the following activities:

¬ taking deposits from the public;

¬ making short-term, medium-term and long-term loans;

¬ eÅecting domestic and overseas payment settlements;

¬ accepting and discounting instruments;

¬ issuing bonds;

¬ acting as agents to issue, honor and underwrite government bonds;

¬ trading government bonds and bonds from Ñnancial institutions;

¬ engaging in inter-bank lending;

¬ trading foreign exchange as principal or as agent;

¬ engaging in bank card business;

¬ providing letters of credit and guarantee services;

¬ collecting and making payment as agents and acting as insurance agents as an ancillary business;

¬ providing safe deposit box service; and

¬ other businesses approved by the CBRC. Commercial banks in China are required to stipulate their scope of business in their articles of association and submit their articles of association to the CBRC for its approval.

Regulation of Principal Commercial Banking Activities Lending PRC banking regulations require that commercial banks take into consideration government macroeconomic policies when making lending decisions. Accordingly, commercial banks are encouraged to restrict their lending to borrowers in restricted industries in compliance with relevant government policies. For example, in an eÅort to slow the growth of real estate market in China, the State Council approved the Opinion of Adjusting the Structure of Housing Supply and Stabilizing Housing Prices. Among other measures, eÅective on June 1, 2006, the opinion increased the minimum requirement for a down payment from 20% to 30% of the purchase price of a mortgaged residential property (other than for apartments with a gross Öoor area of 90 square meters or less used as the borrower's own residence, for which the minimum down payment remains 20%). This increase in the minimum down payment requirement is expected to reduce the level of residential mortgage lending. In addition, commercial banks may not extend credit in connection with or for the purpose of the business involving products and activities that are expressly prohibited by the PRC Government, or in violation of relevant laws and regulations by using the extended credit for the investment in equity interests, stocks, futures and derivative products. In order to control credit risks associated with credit operations, commercial banks are required to, among others: (i) establish a strict and centralized system for credit risk management; (ii) set out standard operating procedures at each stage of credit operations, including conducting due diligence investigations before extending credit, monitoring the borrowers ability to repay the loan and preparing written credit assessment on a regular basis; and (iii) arrange competent personnel. The CBRC has issued several guidelines and measures to control market risk associated with related party loans. See ""Ì Corporate Governance and Risk Control Ì Transaction with Related Parties.''

69 REGULATION AND SUPERVISION

As part of the eÅort to control the credit risk of China's commercial banks, the CBRC issued regulations governing loans and credit granted to certain speciÑc industries and customers. For example,

¬ Under the Guidelines on Business Risk Management of Credit Extension to Group Companies by Commercial Banks, eÅective on October 23, 2003, commercial banks are required to treat aÇliated companies of the same group as a single group customer and establish a single consolidated credit limit for such group. Moreover, commercial banks shall take measures to diversify risks if the total credit granted to a group customer accounts for more than 15% of the bank's regulatory capital.

¬ Under the Guidelines on Risk Management of Commercial Banks' Real Estate Loans, banks are prohibited from making loans to real estate developers unless they have funded a minimum of 35% of the total investment of the real estate development project in the form of equity.

¬ Under the Automobile Loan Measures, eÅective on October 1, 2004, commercial banks are prohibited from making loans for automobiles that are for personal use, commercial automobiles and second-hand automobiles exceeding 80%, 70% and 50%, respectively, of the purchase price of such automobiles.

Foreign Exchange Business Commercial banks are required to obtain approvals from CBRC and SAFE in order to conduct foreign exchange business. As of December 31, 2006, our head oÇce and each of our branch outlets providing settlement for and sale of foreign exchange services have obtained the required approvals, Ñlings or certiÑcates to conduct such business from the relevant foreign exchange regulatory authorities. Under PRC's anti-money- laundering laws and regulations, PRC Ñnancial institutions are required to report to the Anti-Money Laundering Monitoring and Analyzing Center on a timely basis the transactions involving large amounts of Renminbi and foreign exchange transactions and suspicious transactions. Under the Notice on Further Improving the Administration of Foreign Exchange Income and Settlement in Trade that was issued on September 29, 2006 and became eÅective on November 1, 2006, banks must conduct a stringent review of the foreign exchange settlement by those enterprises identiÑed as ""special mention enterprise'' by the SAFE, and strengthen the examination of foreign currency inÖow related to trade business in strict compliance with the aforementioned and other relevant regulations on foreign exchange controls.

Personal Wealth Management Under the Provisional Measures on Personal Wealth Management Business of Commercial Banks that became eÅective on November 1, 2005, commercial banks must apply for approval from or report to the CBRC before they can provide certain personal wealth management services. Commercial banks are also subject to certain restrictions in the oÅering of products under personal wealth management plans. In addition, under the Guidelines on Risk Management Regarding Personal Wealth Management Business that took eÅect on November 1, 2005, commercial banks are required to both establish relevant systems for analyzing, auditing and reporting of personal wealth management business and to report major risk management issues to relevant authorities. Furthermore, the Provisional Measures for Overseas Wealth Management by Commercial Banks that took eÅect on April 17, 2006 allow commercial banks to conduct overseas wealth management business subject to the approval from the CBRC.

Securities and Asset Management Businesses Commercial banks in China are generally prohibited from trading and underwriting equity securities. Commercial banks in China are permitted to:

¬ underwrite and deal in PRC Government bonds and bonds issued by Ñnancial institutions, starting from May 2005, underwrite and deal in short-term commercial papers issued by qualiÑed non- Ñnancial institutions in the inter-bank bond market, and starting from December 2005, deal in qualiÑed corporate bonds in the inter-bank bond market;

70 REGULATION AND SUPERVISION

¬ act as agents in transactions involving securities, including bonds issued by the government, corporate entities and Ñnancial institutions;

¬ provide asset management advisory services to institutional and individual investors;

¬ act as Ñnancial advisors in connection with large infrastructure projects, mergers and acquisitions, and bankruptcy reorganizations; and

¬ act as custodian for investments funds, including securities investment funds and corporate annuity funds.

Under the Trial Administrative Measures on Fund Management Companies Owned by Commercial Banks, the Big Four commercial banks and the Other National Commercial Banks are permitted to establish or acquire fund management companies, upon approval by the CBRC and the CSRC. Commercial banks are required to implement detailed measures to segregate risks associated with the securities market and the banking sector, which include, among others, separating client information between commercial banks and their fund management companies, preventing commercial banks' employees from holding concurrent positions in the fund management companies established by such commercial banks and prohibiting commercial banks from acting as custodians for the funds managed by their fund management companies.

Under the Administrative Measures on QualiÑcations for Securities Investment Fund Custodianship eÅective in January 2005, a commercial bank is permitted to apply for the qualiÑcation to engage in fund custodian business of securities investment funds, if, among other requirements, such commercial bank has net assets at the year-end totaling not less than RMB 2 billion for each of the last three Ñscal years and its capital adequacy ratio meets the relevant regulatory requirement. The fund custodian must ensure the separation of its custodian business from its other businesses and the independence of its fund assets. The CSRC and the CBRC are jointly responsible for examining and approving the qualiÑcations and supervising the activities of fund custodians. In addition, the senior manager to be appointed for a commercial bank's fund custody department must meet certain qualiÑcations and be approved by the CSRC.

Securitization of Credit Assets of Financial Institutions

The Measures for the Pilot Supervision and Administration of the Securitization of Credit Assets of Financial Institutions was promulgated by the CBRC on November 7, 2005 and became eÅective on December 1, 2005. These measures shall apply to those structural Ñnancing activities carried out in the PRC where a banking Ñnancial institution, as the promoter institution, entrusts the credit assets to a trustee institution, and the trustee institution issues beneÑcial securities to investment institutions in the form of asset- backed securities and pays the yields from asset-backed securities by the cash generated from the aforesaid assets. The term ""promoter institutions for the securitization of credit assets'' refers to the Ñnancial institutions that transfer the credit assets by establishing special purpose trusts. A banking Ñnancial institution, as the promoter institution, is required to meet speciÑc conditions and obtain the approval by the CBRC.

Insurance

Commercial banks in China are not permitted to underwrite insurance policies, but are permitted to act as agents to sell insurance products through their distribution networks. Commercial banks providing insurance agency services are required to comply with any applicable rules issued by the China Insurance Regulatory Commission, the regulator for China's insurance industry. Pursuant to the Interim Measures on the Administration of Ancillary Agency Insurance Business promulgated by the CIRC on August 4, 2000, commercial banks are required to obtain licenses from the CIRC before conducting agency insurance business. In accordance with the Notice Regarding Standardization of Agency Insurance Business Conducted by Banks issued by the CIRC and the CBRC on June 15, 2006, such licenses are required for all tier one branches of commercial banks conducting such business. As of December 31, 2006, all of our tier one branches providing insurance agency services have obtained the required licenses to provide such services from the relevant insurance regulatory authorities.

71 REGULATION AND SUPERVISION

Proprietary Investments In general, commercial banks in China are prohibited from making domestic investments other than in debt instruments issued by the government and Ñnancial institutions, commercial paper and corporate bonds issued by qualiÑed non-Ñnancial institutions, and certain derivative products. Unless approved by the PRC Government, commercial banks are prohibited in China from engaging in trust investment business, securities operations, investing in real estate other than for their own use, and making equity investments in non-banking Ñnancial institutions and entities.

Derivatives Under the Tentative Administrative Measures on Trading of Derivatives by Financial Institutions, commercial banks in China seeking to conduct a derivatives business must obtain prior approval from the CBRC by meeting relevant qualiÑcation requirements, which include, among others, the establishment of a sound risk management system that monitors risk on a real-time basis; a sound internal control system; and an eÅective processing system for derivatives transactions. In addition, the bank must have a competent professional team to conduct the derivatives business. Banks conducting derivatives business are required to strictly implement trading and exposure authorization limits and stop loss limits. They are also required to comply with detailed requirements relating to corporate governance and internal controls, including approval procedures for new products, as well as risk supervision and assessment.

Electronic Banking In January 2006, the CBRC issued the Administrative Measures on Electronic Banking Business and the Guidelines on Electronic Banking Security Evaluation in an eÅort to enhance risk management and security standards in this fast-growing sector. All banking institutions applying to establish an e-banking business are required to have sound internal control and risk management system and should not have any major incidents relating to their primary information management and operations processing systems in the year prior to application. In addition, all banking institutions conducting e-banking business must adopt security measures to protect highly conÑdential data and the security of transaction information and prevent the unauthorized use of e-banking accounts.

Pricing of Products and Services Interest Rates for Loans and Deposits Interest rates for RMB-denominated loans and deposits were historically set by the PBOC. In recent years, the PBOC has been gradually liberalizing its regulation of interest rates, allowing banks to set interest rates within permitted bands around the benchmark rates set by the PBOC.

72 REGULATION AND SUPERVISION

The following table sets forth the applicable benchmark interest rates in eÅect for the periods indicated. PBOC benchmark interest rates for RMB-denominated loans and deposits From From From From From 06/10/99 to 02/21/02 to 10/29/04 to 04/28/06 to 08/19/06 to Since 02/20/02 10/28/04 04/27/06 08/18/06 03/17/07 03/18/07 (% per annum) Loans Short-term loans: Less than six monthsÏÏÏÏÏÏ 5.58% 5.04% 5.22% 5.40% 5.58% 5.67% Six months to one year ÏÏÏÏ 5.85 5.31 5.58 5.85 6.12 6.39 Medium- and long-term loans: One to three years ÏÏÏÏÏÏÏÏ 5.94% 5.49% 5.76% 6.03% 6.30% 6.57% Three to Ñve years ÏÏÏÏÏÏÏÏ 6.03 5.58 5.85 6.12 6.48 6.75 More than Ñve years ÏÏÏÏÏÏ 6.21 5.76 6.12 6.39 6.84 7.11 Residential mortgage loans: Five years or less ÏÏÏÏÏÏÏÏÏ 5.31% 4.77% 4.95%(1) 6.12% 6.48% 6.75% More than Ñve years ÏÏÏÏÏÏ 5.58 5.04 5.31(1) 6.39 6.84 7.11 Deposits Demand deposits ÏÏÏÏÏÏÏÏÏÏÏ 0.99% 0.72% 0.72% 0.72% 0.72% 0.72% Time deposits: Three months ÏÏÏÏÏÏÏÏÏÏÏÏ 1.98% 1.71% 1.71% 1.71% 1.80% 1.98% Six months ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2.16 1.89 2.07 2.07 2.25 2.43 One year ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2.25 1.98 2.25 2.25 2.52 2.79 Two years ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2.43 2.25 2.70 2.70 3.06 3.33 Three years ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2.70 2.52 3.24 3.24 3.69 3.96 Five years ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2.88 2.79 3.60 3.60 4.14 4.41

(1) EÅective March 17, 2005, the PBOC benchmark mortgage rates are the same as the PBOC benchmark rates for loans with the same terms.

As the PRC Government further liberalizes the interest rate regime, banks have been given more discretion in determining the interest rates that may be charged on RMB-denominated loans and the interest rates that may be oÅered on RMB-denominated deposits. The following table sets forth the permitted interest rate bands for RMB-denominated loans and deposits at the dates indicated.

Loans Deposits Between Between Between Between 09/01/99 and 01/01/04 and Since 09/01/99 and 01/01/04 and Since 12/31/03(1) 10/28/04(2) 10/29/04(3) 12/31/03 10/28/04 10/29/04

Maximum interest Up to 130% of the Up to 170% of the No cap (up to PBOC benchmark PBOC benchmark PBOC benchmark ratesÏÏÏÏÏÏÏÏÏÏÏ PBOC benchmark PBOC benchmark 230% of the PBOC rate except for rate except for rate except for rate for SMEs (up rate (up to 200% benchmark rate for negotiated deposits negotiated deposits negotiated deposits to 150% for rural for rural credit rural and urban credit cooperatives) cooperatives) credit cooperatives) and up to 110% for large enterprises Minimum interest Not lower than Not lower than Not lower than PBOC benchmark PBOC benchmark No minimum ratesÏÏÏÏÏÏÏÏÏÏÏ 90% of the PBOC 90% of the PBOC 90% of the PBOC rate except for rate except for benchmark rate benchmark rate benchmark rate negotiated deposits negotiated deposits

(1) Interest rates for residential mortgage loans, public assistance loans, policy loans and certain other loans speciÑed by the State Council may not exceed the PBOC benchmark rate.

(2) Interest rates for residential mortgage loans, public assistance loans and certain other loans speciÑed by the State Council may not exceed the PBOC benchmark rate. Interest rates for automobile loans may not be lower than 10% of the PBOC benchmark rate or higher than 70% of the PBOC benchmark rate.

73 REGULATION AND SUPERVISION

(3) From March 17, 2005 to August 18, 2006, interest rates for residential mortgage loans were adjusted to the same level of interest rate as most other types of loans. Since August 19, 2006, the minimum interest rates for the residential mortgage loans have been changed to 85% of the relevant PBOC benchmark rate. Prior to January 1, 2004, all RMB-denominated loans (except mortgage loans and certain speciÑc types of loans) with a maturity of one year or less were required to have Ñxed interest rates within a speciÑc range based on the applicable PBOC benchmark rates, and all RMB-denominated loans (except mortgage loans and certain speciÑc types of loans) with a maturity longer than one year were required to have interest rates adjusted following each change of the applicable PBOC benchmark rates. When the applicable PBOC benchmark rates changed, the interest rates for all such adjustable loans were generally adjusted on the next anniversary of the loan origination date following the date of change. On January 1, 2004, the PBOC expanded the range within which banks were allowed to set their interest rates based on the PBOC benchmark rates for the above mentioned loans. In addition, RMB-denominated loans with a maturity longer than one year were allowed to bear either Ñxed interest rates or adjustable interest rates that adjust on a monthly, quarterly or annual basis following each adjustment of the PBOC benchmark rates. On October 29, 2004, the PBOC further liberalized interest rate regulation by removing the upper limit for RMB-denominated loans (except mortgage loans and certain speciÑc types of loans), allowing banks to determine their interest rates for such loans so long as they are not lower than 90% of the relevant PBOC benchmark rates. As for mortgage loans, prior to March 17, 2005, the PBOC Ñxed the interest rates on residential mortgage loans and entrusted provident housing fund mortgage loans at a level lower than the benchmark rates of other loans with corresponding terms. Following each change by the PBOC of the interest rates for mortgage loans, banks were required to make the corresponding adjustment of their interest rates for such outstanding mortgage loans on January 1 of the year following the date of change. Since March 17, 2005, interest rates for residential mortgage loans have then same readjustment mechanism as other commercial loans. Since August 19, 2006, the minimum interest rates for residential mortgage loans have been changed to 85% of the relevant PBOC benchmark rate. Regulation on entrusted provident housing fund loans, however, remains the same. As for automobile and other loans to individuals, prior to October 28, 2004, interest rates for such loans were permitted to range from 10% lower than PBOC benchmark rate to 70% higher than the PBOC benchmark rate. Since October 29, 2004, interest rate for such loans are subject to a minimum equal to 90% of the PBOC benchmark rate and no maximum interest rate is imposed on such loans. Starting from October 29, 2004, commercial banks in China are permitted to set their own interest rates on Renminbi deposits so long as such interest rates are not higher than the relevant PBOC benchmark rates. However, these restrictions do not apply to interest rates on negotiated deposits, which are deposits by PRC insurance companies in amounts of RMB 30 million or more or deposits by the SSF in amounts of RMB 500 million or more, both with a term longer than Ñve years, or deposits by China Post in amounts of RMB 30 million or more with a term longer than three years. The PBOC generally does not regulate interest rates for foreign currency-denominated loans and generally does not regulate foreign currency-denominated deposits other than U.S. dollar-, Hong Kong dollar-, Japanese yen- or Euro-denominated deposits of less than US$3 million (or the equivalent) with a maturity of one year or less, the interest rates on which may not exceed the PBOC maximum interest rates for small amount foreign currency-denominated deposits. Commercial banks are generally allowed to set interest rates for discounted bills based on the PBOC rediscount rates. The PBOC rediscount rate was 2.16% from June 10, 1999 to September 10, 2001, 2.97% from September 11, 2001 to March 24, 2004, and has been 3.24% since March 25, 2004.

Pricing for Non-interest Income Products and Services Under the Tentative Administrative Measures on Pricing of Commercial Banking Services eÅective in October 2003, the services which are subject to government pricing guidelines include basic Renminbi

74 REGULATION AND SUPERVISION settlement services, such as bank drafts, bank acceptance drafts, promissory notes, checks, remittances, entrusted collection, and other services speciÑed by the CBRC and the NDRC. Fees for other products and services are determined by banks based on market conditions. Banks are also required to report to the CBRC at least Ñfteen business days prior to the implementation of new fee schedules and to publish such fee schedules in their relevant business premises at least ten business days prior to their implementation.

Operating Requirements

Statutory Deposit Reserve and Surplus Deposit Reserve

Commercial banks are required to maintain a percentage of their total deposits with the PBOC to ensure they have suÇcient liquidity for customer withdrawals.

After April 16, 2007, most commercial banks are required to maintain a reserve ratio of 10.5% of total outstanding Renminbi deposits calculated under the PBOC regulations. Those banks which fail to meet certain PBOC standards are required to maintain a reserve ratio of 11.0%. The minimum statutory deposit reserve ratio was increased from 7.0% to 7.5% in April 2004, to 8.0% in July 2006, to 8.5% in August 2006, to 9.0% in November 2006, to 9.5% in January 2007, to 10.0% in February 2007, and to 10.5% in April 2007. In addition, domestic and foreign invested commercial banks must maintain surplus deposit reserves with the PBOC, which are deposits exceeding the statutory deposit reserve. Surplus deposit reserves are used in part for settlement purposes. Since a reform of the deposit reserve system in 1998, the PBOC has actively monitored the levels of surplus deposit reserves maintained by commercial banks in an eÅort to ensure that the banks have suÇcient funds to meet their settlement obligations.

Prior to January 15, 2005, domestic commercial banks licensed to conduct foreign exchange activities were required to maintain a reserve ratio equal to 2% of their monthly average foreign currency deposits during the preceding quarter. Foreign-invested banks were required to maintain a reserve ratio equal to 5% of total deposits with terms of less than three months and 3% for deposits with terms of three months or more. From January 15, 2005 to September 14, 2006, both domestic banks and foreign-invested banks are required to maintain 3% of their total foreign currency-denominated deposits at the end of the previous month, which was increased to 4% beginning September 15, 2006.

The PBOC pays interest on deposit reserves maintained by the commercial banks. Since February 21, 2002, the interest rate for Renminbi statutory deposit reserves has been 1.89%. The PBOC has lowered the interest rates it pays on banks' surplus deposit reserves twice since February 21, 2002: from 1.89% to 1.62% on December 21, 2003, and from 1.62% to 0.99% on March 17, 2005. The PBOC does not pay interest on foreign currency deposit reserves maintained by the commercial banks.

75 REGULATION AND SUPERVISION

Operational and Risk Management Ratios

Before the Core Indicators (Provisional) took eÅect in January 2006, commercial banks were required to calculate liquidity and other operational ratios in accordance with the PRC Commercial Banking Law and the Examination Measures and Supervision Indicators Relating to the Administration of Assets and Liabilities Ratios of Commercial Banks (the ""Examination Measures'') issued by the PBOC in 1996. The following table sets forth, as of the dates indicated, the required liquidity and other operational ratios for commercial banks in the PRC, as well as our ratios as reported to the PBOC and the CBRC, which were calculated in accordance with the formula promulgated by the PBOC in 1996 and based on our balance sheet data prepared in accordance with the then applicable PRC GAAP.

As of December 31, Requirement 2004 2005 (in percentages) Liquidity ratios Renminbi current assets to Renminbi current liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ն25.0% 61.28% 60.69% Foreign currency current assets to foreign currency current liabilities ÏÏÏ Ն60.0 74.52 68.00 Loan-to-deposit ratios Renminbi loans to Renminbi deposits ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Յ75.0 71.86 66.43 Foreign currency loans to foreign currency depositsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Յ85.0 35.90 37.77 Borrower concentration ratios Total outstanding loans to one single borrower to regulatory capital(1) ÏÏ Յ10.0 13.59 8.49 Total loans to top ten borrowers to regulatory capital(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Յ50.0 66.94 46.41 Inter-bank ratios Total RMB inter-bank borrowings from other banks and Ñnancial institutions to total RMB deposits ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Յ4.0 0.00 0.00 Total RMB inter-bank lending to other banks and Ñnancial institutions to total RMB deposits ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Յ8.0 0.14 0.08 Reserve ratios RMB reserve deposits with the PBOC plus RMB cash to RMB deposits ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ն5.0 12.90 11.28 Foreign currency deposits with other Ñnancial institutions plus cash in foreign currencies to total foreign currency depositsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ն5.0 3.27 4.50

(1) Our regulatory capital as of December 31, 2004 and 2005 was calculated in accordance with CBRC guidelines. See ""Regulation and Supervision Ì PRC Regulation and Supervision Ì Regulations Regarding Capital Adequacy Ì Capital Adequacy Guidelines'' and ""Financial Information Ì Capital Resources Ì Capital Adequacy.''

As of December 31, 2005, we were not in compliance with the required ratio of foreign currency deposits with other Ñnancial institutions plus cash in foreign currencies to total foreign currency deposits. The Examination Measures was superseded by the Core Indicators (Provisional) on January 1, 2006 and this ratio is no longer required by the CBRC under the Core Indicators (Provisional). However, we have not been subject to any regulatory actions or penalties due to the non-compliance with this ratio.

The Core Indicators (Provisional), which became eÅective on January 1, 2006, amended certain liquidity and operating ratios required under the Examination Measures and introduced certain new ratios. The Core Indicators (Provisional) are currently implemented on a trial basis in 2006, and the CBRC has encouraged commercial banks to submit suggestions for amending the Core Indicators (Provisional) to the CBRC. Accordingly, to date, the Core Indicators (Provisional) have not been strictly enforced.

As of December 31, 2006, we were not in compliance with the core liabilities ratio under the Core Indicators (Provisional). We have been advised by our PRC legal counsel, King & Wood, that neither the Core Indicators (Provisional) nor other applicable laws and regulations impose any administrative penalties for the non-compliance with this ratio, and the likelihood of any regulatory actions or penalties imposed against us due to the non-compliance with this ratio is remote. We intend to comply with the core liabilities

76 REGULATION AND SUPERVISION ratio under the Core Indicators (Provisional) as soon as commercially reasonable. However, we take into account various commercial factors, such as cost of capital, in adjusting our liabilities structure. The following table sets forth the required ratios as provided in the Core Indicators (Provisional) and our ratios as of December 31, 2006. Although the CBRC has not requested commercial banks to submit these ratios, it has required commercial banks to submit certain data that are used to calculate some of these ratios.

As of Risk Level Primary Indicators Secondary Indicators Requirement December 31, 2006 Risk Level Liquidity risk ÏÏÏÏÏÏ Liquidity ratio(1) Ն25% Renminbi 38.66% Foreign currency 99.98% Core liabilities ratio(2) Ն60% 56.17% Liquidity gap ratio(3) Ն(10%) 10.00% Credit risk ÏÏÏÏÏÏÏÏ Non-performing asset ratio(4) Յ4% 2.45% Non-performing loan(5) ratio Յ5% 2.50% Credit concentration to a single group customer(6) Յ15% 6.9% Loan concentration to a single customer(7) Յ10% 6.7% Overall credit exposure to connected parties(8) Յ50% 10.12% Market risk ÏÏÏÏÏÏÏ Cumulative foreign currency exposure ratio(9) Յ20% 6.19% Risk Cushion ProÑtability ÏÏÏÏÏÏÏ Cost to income ratio(10) Յ45% 43.85% Return on assets(11) Ն0.6% 0.61% Return on capital(12) Ն11% 13.07% Allowance adequacy Allowance adequacy ratio for asset impairment(13) Ն100% 160.84% Allowance adequacy ratio for loan impairment(14) Ն100% 148.21% Capital adequacyÏÏÏ Capital adequacy ratio(15) Ն8% 9.41% Core capital adequacy ratio(16) Ն4% 6.57%

(1) Calculated as follows: Liquidity ratio • Current assets/Current liabilities. Current assets include cash, gold, surplus deposit reserve, net inter-bank money market placement with maturities within one month, interest receivable and other receivables due within one month, qualiÑed loans with maturities within one month, investment in debt securities with maturities within one month, debt securities that can be liquidated in the international secondary market any time and other liquidatable assets with maturities within one month (excluding the non-performing portion of such assets). Current liabilities include demand deposits (excluding policy deposits), time deposits with remaining maturities within one month (excluding policy deposits), net inter-bank money market taking due within one month, issued debt securities with maturities within one month, interest payable and other payables due within one month, borrowings from the PBOC due within one month and other liabilities due within one month. (2) Calculated as follows: Core liabilities ratio • Amount of core liabilities/Amount of total liabilities. Core liabilities refer to the combined amount of time deposit with remaining maturities of three months or longer, issued debt securities and idle demand deposits. Total liabilities refer to total liabilities on the Assets and Liabilities table prepared under the Accounting Principles of Financial Enterprises. As of December 31, 2006, our core liabilities ratio was 56.17%, which was lower than the required core liabilities ratio of 60%. (3) Calculated as follows: Liquidity gap ratio • Liquidity gap/Amount of on- or oÅ-balance sheet assets with maturities within 90 days. Liquidity gap refers to the amount of on- or oÅ-balance sheet assets with maturities within 90 days subtracted by the amount of on- or oÅ-balance sheet liabilities within 90 days. (4) Calculated as follows: Non-performing asset ratio • Non-performing assets/Assets subject to credit risk. Non-performing assets include non-performing loans and other assets categorized as non-performing. Such non-loan assets subject to credit risk are categorized in accordance with relevant CBRC regulations. (5) Calculated as follows: Non-performing loan ratio • Non-performing loans/Total loans. Non-performing loans refer to loans in the substandard, doubtful and loss categories according to the PBOC and CBRC's Ñve-category loan classiÑcation system.

77 REGULATION AND SUPERVISION

(6) Calculated as follows: Credit concentration to a single group customer • Total credit granted to the largest group customer/Regulatory capital. Largest group customer refers to the group customer granted with the highest credit limit at the end of the period. (7) Calculated as follows: Loan concentration to a single customer • Total loans to the largest customer/Regulatory capital. Largest customer refers to the customer with the highest total loans outstanding at the end of the period. (8) Calculated as follows: Overall exposure to related parties • Total granted credit limit to all related parties/Regulatory capital. Related parties include related individuals, legal persons or other entities. Related parties refer to parties deÑned in the Related Party Transactions Measures. Total granted credit limit to all related parties refers to total credit limit granted to such parties subtracted by cash deposit guarantees and collateral in the form of bank deposits and PRC Government bonds. (9) Calculated as follows: Cumulative foreign currency exposure ratio • Cumulative foreign currency exposure/Regulatory capital. Cumulative foreign currency exposure refers to exchange rate sensitive foreign currency assets subtracted by exchange rate sensitive foreign currency liabilities. (10) Calculated as follows: Cost to income ratio • Operating expenses/Operating income. The main text of the Core Indicators (Provisional) sets forth the required ratio as Յ 45%, but the appendix of the Core Indicators (Provisional) sets forth the ratio as Յ35%. (11) Calculated as follows: Return on assets • Net proÑt/Average balance of total assets for the period. (12) Calculated as follows: Return on capital • Net proÑt/Average balance of shareholders' equity for the period. (13) Calculated as follows: Allowance adequacy ratio for asset impairment • Actual amount of allowance for assets subject to credit risk/Required amount of allowance for assets under credit risk. (14) Calculated as follows: Allowance adequacy ratio loan impairment • Actual amount of allowance for loans/Required amount of allowance for loans. (15) See ""Ì Regulations Regarding Capital Adequacy.'' (16) See ""Ì Regulations Regarding Capital Adequacy.'' The Core Indicators (Provisional) deÑned certain other ratios without providing the speciÑc ratio requirement, including ratios relating to interest rate risk sensitivity, operational risk and loan migration. The CBRC may provide the requirement for those ratios in the future.

Regulations Regarding Capital Adequacy Capital Adequacy Guidelines PRC commercial banks are subject to a minimum capital adequacy ratio of 8% and a minimum core capital adequacy ratio of 4%. Prior to March 1, 2004, a commercial bank's capital adequacy ratios were calculated as follows:

Regulatory capital Capital adequacy ratio • £ 100% On- and oÅ-balance sheet risk weighted assets Core capital Core capital adequacy ratio • £ 100% On- and oÅ-balance sheet risk weighted assets In the preceding formula, core capital included paid-in capital, capital reserves, surplus reserves and retained earnings. Regulatory capital included both core capital and supplementary capital, less certain deductions (including equity investments in other banks and enterprises, and investments in real estate not for the bank's own use). Supplementary capital included the general allowance for loan losses, bad debt and investment risk, and long-term bonds with a minimum original maturity of Ñve years. DiÅerent risk weightings were assigned to cash, obligations of the PRC central government and the PBOC, loans to enterprises and individuals, inter- bank loans and other assets, as well as for oÅ-balance sheet items. In March 2004, the CBRC implemented new, more stringent capital adequacy guidelines applicable to all commercial banks in China. The new guidelines, the Administrative Measures on Capital Adequacy Ratios of Commercial Banks, provide for a phase-in period whereby all domestic banks must meet minimum capital adequacy ratios by January 1, 2007. Banks not immediately in compliance with the new guidelines must formulate and implement a capital replenishment plan under the supervision of the CBRC.

78 REGULATION AND SUPERVISION

While the new guidelines left the existing requirements of an 8% capital adequacy ratio and a 4% core capital adequacy ratio unchanged, they amended the risk weighting for a variety of assets and required deductions from core capital for certain kinds of assets. In addition, the new guidelines required commercial banks to make adequate allowances for various impairment losses, including for loans, before calculating their capital adequacy ratios. The capital adequacy ratio and core capital adequacy ratio are calculated in accordance with the PRC GAAP as follows:

Capital ¿ Deductions from capital Capital Adequacy Ratio • £ 100% Risk-weighted assets ° (12.5 £ capital charge for market risk) Core capital ¿ Deductions from core capital Core Capital Adequacy Ratio • £ 100% Risk-weighted assets ° (12.5 £ capital charge for market risk)

Components of Capital Total capital consists of core capital and supplementary capital. Supplementary capital may not exceed core capital. Core capital includes the following items:

¬ paid-in capital or ordinary shares;

¬ capital reserves;

¬ surplus reserves;

¬ retained earnings; and

¬ minority interests. Supplementary capital includes the following:

¬ up to 70% of the revaluation reserve;

¬ the general allowances for impairment losses under the CBRC's requirements (see ""Ì Loan ClassiÑcation, Allowances and Write-oÅs Ì Loan ClassiÑcation'' and ""Ì Loan Allowances'');

¬ preference shares;

¬ qualifying bonds convertible into common shares; and

¬ qualifying subordinated debt with a maturity exceeding Ñve years, but not exceeding 50% of core capital. Deductions from total capital consist of the following:

¬ goodwill;

¬ equity investments in non-consolidated Ñnancial institutions; and

¬ capital investments in real estate not used for the bank's own operations or equity investments in non-banking institutions or enterprises. Deductions from core capital consist of the following:

¬ goodwill;

¬ 50% of equity investments in non-consolidated Ñnancial institutions; and

¬ 50% of capital investments in real estate not used for the bank's own operations or equity investments in non-banking institutions or enterprises.

79 REGULATION AND SUPERVISION

Risk-weighted Assets The guidelines provide for the calculation of risk-weighted assets net of any allowance for impairment losses by multiplying on-balance sheet items by their corresponding risk weighting, after taking into account risk mitigating factors. OÅ-balance sheet items, including foreign exchange contracts, interest rate contracts and other derivative contracts, are Ñrst converted to balance sheet credit-equivalent amounts by multiplying the nominal principal amount by a credit conversion factor. In addition, loans secured by certain types of pledges or guarantees are allocated the risk weighting of the pledges or guarantors. Partially pledged or guaranteed loans receive such lower risk-weighting only on the portion of the loan that is pledged or guaranteed. The following table sets forth risk weightings for diÅerent assets.

Risk Weighting Assets

0% ÏÏÏÏÏÏÏÏÏÏ ¬ Cash in vault ¬ Gold ¬ Claims on PRC incorporated commercial banks with an original maturity of four months or less ¬ Claims on the PRC central government or deposits at the PBOC ¬ Claims on the PBOC ¬ Claims on PRC policy banks ¬ Bonds issued by PRC Ñnancial asset management companies for the purpose of acquiring non-performing loans from state-owned banks ¬ Claims on non-PRC central governments or central banks in countries or regions where the sovereign or region is rated AA¿ or above(1) ¬ Claims on multilateral development banks 20% ÏÏÏÏÏÏÏÏÏ ¬ Claims on PRC incorporated commercial banks with an original maturity of more than four months ¬ Claims on non-PRC commercial banks and securities companies incorporated in other countries or regions where the sovereign or region is rated AA¿ or above(1) 50% ÏÏÏÏÏÏÏÏÏ ¬ Residential mortgages ¬ Claims on PRC public-sector entities invested by the central government ¬ Claims on non-PRC public-sector entities invested by governments of countries or regions where the sovereign or region is rated AA¿ or above(1) 100% ÏÏÏÏÏÏÏÏ ¬ All other assets

(1) These ratings refer to credit ratings of Standard & Poor's or equivalent rating agencies.

Market Risk Capital Since the Ñrst quarter of 2005, domestic banks with trading books greater than the lower of 10% of on-and oÅ-balance sheet assets in aggregate and RMB 8.5 billion are required to take into consideration market risk arising from trading activities when determining capital adequacy. Market risk capital refers to the capital reserve that a bank is required to maintain for the market risks related to its assets. Market risk refers to the risk of losses in on and oÅ-balance sheet positions arising from movements in market prices and includes risks related to interest-rate sensitive Ñnancial instruments and securities under trading accounts, and the foreign exchange risk and commodity risk of commercial banks.

Issuance of Fixed-term Subordinated Debt and Subordinated Bonds Since November 2003, PRC commercial banks have been permitted to issue Ñxed-term subordinated debt for which the repayment of principal and interest is subordinated to the bank's other liabilities but is senior to the bank's equity capital. A PRC commercial bank may include such Ñxed-term subordinated debt in the bank's supplementary capital. To qualify for inclusion in the bank's supplementary capital, the subordinated debt must have a minimum term of Ñve years and the proceeds must not be used to oÅset a bank's operating losses. Subordinated debt can be issued only through private placements to certain legal

80 REGULATION AND SUPERVISION person institutions. Moreover, Fixed-term subordinated debt cannot be issued to other commercial banks. The issuance of subordinated debt by a PRC commercial bank is subject to the approval of the CBRC. Since June 2004, PRC commercial banks have been permitted to issue bonds that are subordinated to the bank's other liabilities but are senior to the bank's equity capital. A PRC commercial bank may, upon approval by the CBRC, include such subordinated bonds in the bank's supplementary capital. Subordinated bonds can be issued either in a public oÅering in the inter-bank bond market or in a private placement. A PRC commercial bank may not hold an aggregate amount of subordinated bonds issued by other banks in excess of 20% of its core capital. The issuance of subordinated bonds by a commercial bank is subject to the approval of the CBRC. The PBOC regulates the issuance and trading of subordinated bonds in the inter-bank bond market. Since December 2005, eligible commercial banks may issue hybrid capital bonds in the inter-bank market and include them in their supplementary capital. The introduction of hybrid capital bonds provided a new channel for banks in China to replenish their supplementary capital and improve their capital adequacy ratio.

CBRC Supervision of Capital Adequacy The CBRC reviews and evaluates banks' capital adequacy through both on-site examination and oÅ-site surveillance. Commercial banks are required to report to the regulators their unconsolidated capital adequacy ratios on a quarterly basis and their consolidated capital adequacy ratios on a semi-annual basis. Commercial banks are classiÑed into three categories based on their capital adequacy as follows.

Capital adequacy Core capital Category ratio adequacy ratio Adequately capitalized banks ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ no less than 8% and no less than 4% Undercapitalized banks ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ less than 8% or less than 4% SigniÑcantly undercapitalized banksÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ less than 4% or less than 2% The actions the CBRC takes to enforce the capital adequacy requirements may vary based on the classiÑcation of a commercial bank. The CBRC may issue a supervisory notice letter to undercapitalized banks which includes corrective actions and a plan for implementing such actions. These actions may include among others:

¬ requiring the bank to submit and implement an acceptable capital restoration plan within two months after receiving the supervisory notice letter;

¬ restricting asset growth or reducing risk assets;

¬ restricting the purchase of Ñxed assets;

¬ restricting dividends and other forms of distributions;

¬ suspending all businesses except low-risk activities; and

¬ suspending the establishment of new branches, restricting the launch of new services or suspending the bank's entire business operations (except for low-risk activities). SigniÑcantly undercapitalized banks may be required to take additional actions including the removal of senior management, transfer of control, restructuring of operations, or closure in accordance with relevant laws and regulations.

Basel Accords The Basel Capital Accord, or Basel I, was introduced by the Basel Committee on Banking Supervision, or the Basel Committee, in 1988. Basel I is a capital measurement system for banks that provides for the implementation of a credit risk measurement framework with a minimum capital standard of 8%. Since 1999, the Basel Committee has issued certain proposals for the New Basel Accord, known as Basel II, to replace

81 REGULATION AND SUPERVISION

Basel I. Basel II retains the key elements of Basel I, including the general requirement for banks to hold total capital equivalent to at least 8% of their risk-weighted assets, but seeks to improve the capital framework in various key aspects, including (i) making recommendations relating to capital requirements and credit risk measurement to improve the capital framework's sensitivity to credit risks, (ii) introducing supervision and review standards for banks to conduct internal assessments of their overall risks and (iii) enhancing the degree of transparency in banks' public reporting. Basel II is expected to be made available in its entirety at the end of 2007. The CBRC has advised that the Regulation Governing Capital Adequacy of Commercial Banks issued in March 2004 was based on Basel I while taking into consideration certain aspects of Basel II.

Loan ClassiÑcation, Allowances and Write-oÅs Loan ClassiÑcation Banks in China are currently required to classify loans under a Ñve-category classiÑcation system based on the estimated likelihood of repayment of principal and interest. Prior to the adoption of the Ñve-category classiÑcation currently in eÅect, loans were generally classiÑed into four categories Ì pass, overdue, non- performing and loss Ì primarily based on the status of repayment and whether the borrower had become bankrupt. The Ñve-category classiÑcation was initially promulgated by the PBOC in 1999 on a pilot basis and in 2002 all banks were oÇcially required to adopt it under the Loan ClassiÑcation Principles. The primary factors for evaluating the likelihood of repayment include the borrower's cash Öow, Ñnancial condition, and credit history. The table below sets forth the Ñve classiÑcation categories and their corresponding deÑnitions.

ClassiÑcation DeÑnition(1) NormalÏÏÏÏÏÏÏ Borrowers can honor the terms of their loans. There is no reason to doubt their ability to repay principal and interest in full on a timely basis. Special mention Borrowers are able to service their loans currently, although repayment may be adversely aÅected by speciÑc factors. SubstandardÏÏÏ Borrowers' abilities to service their loans are in question as they cannot rely entirely on normal business revenues to repay principal and interest. Losses may ensue even when collateral or guarantees are invoked. DoubtfulÏÏÏÏÏÏ Borrowers cannot repay principal and interest in full and signiÑcant losses will need to be recognized even when collateral or guarantees are invoked. Loss ÏÏÏÏÏÏÏÏÏ Only a small portion or no principal and interest can be recovered after taking all possible measures and exhausting all legal remedies.

(1) Banks may implement more detailed guidelines consistent with these deÑnitions. See ""Assets and Liabilities Ì Assets Ì Asset Quality of Our Loan Portfolio Ì Distribution of Loans by Loan ClassiÑcation'' for a description of the guidelines we have implemented.

Loan Allowances Under the Guidelines on Loan Loss Provisions, banks in China are required to make provisions based on a reasonable estimate of the probability of loss on a prudent and timely basis. According to the Loan ClassiÑcation Principles, a loan classiÑed as substandard, doubtful or loss is considered to be non-performing. Allowances for impairment losses consist of general allowances, speciÑc allowances and special allowances. Banks are required to make provisions for impairment losses on a quarterly basis, and to have a general allowance of not less than 1% of the total loans outstanding as of December 31 of any year. The guidance on speciÑc allowances is as follows: for special mention loans, 2%; for substandard loans, 25%; for doubtful loans, 50%; and for loss loans, 100%. SpeciÑc allowances for substandard loans and doubtful loans may be maintained at levels ranging within 20% of the guidance level. Commercial banks may make special provisions on a quarterly basis in accordance with special risk factors (including risks in association with certain industries and countries), general loss rates and historical experience. The allowance for impairment losses derived pursuant to the Guidelines on Loan Loss Provisions, however, is not used for our Ñnancial reporting

82 REGULATION AND SUPERVISION purposes. The allowance for impairment losses disclosed in the prospectus is calculated in accordance with IAS 39.

Allowance and Regulatory General Reserve for Impairment Losses Pursuant to the Measures on Allowances for Risk-bearing Assets and a subsequent notice issued by the MOF, Ñnancial institutions in the PRC are required to maintain adequate allowance for impairment losses against their assets. In addition, Ñnancial institutions are also required to set up a regulatory general reserve to cover potential impairment losses that are not yet identiÑed. Financial institutions are required to assess the risk proÑle of their assets in determining the regulatory general reserve level, which in principle is not less than 1% of the aggregate amount of each Ñnancial institution's risk-bearing assets before allowance for impairment losses as at the balance sheet date. Financial institutions are not allowed to make proÑt distribution to shareholders until adequate allowance for impairment losses and regulatory general reserve have been made. If a Ñnancial institution cannot meet the requirement of maintaining the adequate regulatory general reserve as stipulated in the MOF regulations eÅective on July 1, 2005, it will be required to take necessary steps to ensure that such requirement can be met in approximately three years, but not more than Ñve years, from July 1, 2005. As of December 31, 2006, we did not have any general reserve. With a view to meeting this requirement by July 1, 2010, we plan to appropriate 40% to 45% of our net proÑt as general reserve in 2007, and 25% to 35% of our net proÑt as general reserve in 2008 and 2009. See ""Financial Information Ì Dividend Policy.''

CBRC Supervision of Loan ClassiÑcation and Allowances Commercial banks are required to formulate detailed internal procedures that clearly deÑne the responsibilities of each relevant department with respect to loan classiÑcation, approval, review and related matters. In addition, beginning in 2002, commercial banks have been required to submit quarterly and annual reports to the regulators on the classiÑcation of their loan portfolios and their allowances for loan losses. Based on its review of these reports, the CBRC may require commercial banks to explain signiÑcant changes in loan classiÑcation and loan loss allowance levels, or may carry out further inspections. In 2003, the CBRC published a circular that reiterated the implementation of the PBOC's Loan ClassiÑcation Principles and provided additional guidance on loan classiÑcation criteria. The CBRC supervises and examines commercial banks' implementation of relevant PBOC and CBRC guidelines.

Loan Write-oÅs Under the regulations issued by the PBOC and the MOF, PRC banks are required to establish a strict review and approval process to write oÅ loan losses. In order to be written oÅ, a loan needs to meet the standards set by the MOF. Losses realized upon writing oÅ loans are deductible for tax purposes, but such deduction is subject to the review and approval of the tax authorities.

Corporate Governance and Risk Control Corporate Governance In accordance with the PRC Company Law, the Commercial Banking Law and other relevant regulations, joint stock commercial banks are required to appoint at least two independent directors (or three independent directors if the registered capital of the bank exceeds RMB 1 billion), and the board of directors of such banks is required to establish a related party transactions committee, risk management committee and audit committee. Banks with registered capital exceeding RMB 1 billion are also required to establish a nomination committee, remuneration committee and strategy committee of the board of directors. They are also required to establish a supervisory board with at least two external supervisors. Moreover, the Corporate Governance Guidelines for Joint Stock Commercial Banks and the Guidelines for Independent Directors and External Supervisors stipulate that joint stock commercial banks may adopt appropriate measures to improve their corporate governance. For instance, joint stock commercial banks are

83 REGULATION AND SUPERVISION required to establish an organizational structure under which management and supervisory powers and responsibilities are separated among the shareholders, the Board of Directors, the Board of Supervisors and the senior management. At least one-quarter but no more than one-third of the board of directors should be comprised of senior management. Our senior management accounts for less than one-quarter of our board of directors. Therefore, we are not in compliance with the corporate governance requirement. We have been advised by our PRC legal counsel, King & Wood, that the CBRC has not imposed Ñnes on us for such non- compliance but may require us to take remedial actions to rectify such non-compliance. The board of directors should establish special committees to regulate auditing matters and related party transactions, risk management, remuneration and nomination. A board of supervisors should also be established to oversee and supervise the board of directors, senior management and other oÇcers, to examine and supervise the bank's Ñnancial activities, to audit and monitor the bank's business decisions, risk management and internal controls, and to provide guidance to the bank's internal auditing department. In addition, the CBRC issued the Diligence Guidelines for Board of Directors of Joint Stock Commercial Banks (Provisional) on September 12, 2005. The guidelines set forth responsibilities for the Board of Directors, rules and procedures for board meetings, requirements for establishing special board committees, and the supervision on the performance of board's responsibilities.

Internal Controls Under the Internal Control Guidelines for Commercial Banks issued by the PBOC, commercial banks are required to establish internal controls to ensure eÅective risk management for their business activities. Commercial banks are also required to establish a risk management department which formulates and implements risk management policies and procedures. In addition, banks are required to establish an internal audit department that can independently supervise and evaluate all aspects of the banks' operations. Internal controls should be regularly evaluated and, if necessary, improved. Since February 2005, the CBRC has been conducting periodical evaluations of the internal controls of commercial banks and has been taking regulatory action based on the results of its evaluations. Since its inception, the CBRC has published a number of risk management guidelines and rules in an eÅort to improve risk management in China's commercial banks. The CBRC's guidelines and rules contain speciÑc requirements for controlling various types of risk, including market risk, operational risk, and credit risk relating to real estate loans, loans to group borrowers and derivatives transactions. Commercial banks are required to identify, monitor, control and prevent risks and to enhance their internal controls, all in accordance with the CBRC's guidelines. On June 27, 2006, the CBRC issued the Internal Audit Guidelines for Financial Institutions in the Banking Industry, which became eÅective on July 1, 2006. Pursuant to the guidelines, banks are required to establish an audit committee of the board of directors with at least three members, a majority of which must be non-executive directors. Banks are also required to have an internal audit department with employees that meet certain qualiÑcations, the number of which should be in principle 1% of the total number of employees of the bank. The guidelines set forth the required scope of the internal audit. It requires banks to perform risk evaluation of each business unit at least once per year, and conduct internal audit of each business unit at least once every two years.

Disclosure Requirements Under the Tentative Measures on Information Disclosure of Commercial Banks issued in May 2002, commercial banks with total assets of RMB 1.0 billion or more or deposits of RMB 500 million or more are required to publish Ñnancial statements audited by qualiÑed accounting Ñrms in their annual reports. In addition, they are required to disclose information relating to the bank's risk management, corporate governance, ten largest shareholders, related party transactions and other signiÑcant information relating to the bank during the relevant Ñscal year. The Ñnancial statements shall include, among others, the capital adequacy ratios, liquidity ratios and loss provisions. The annual reports are required to be published within four months after the end of each Ñscal year.

84 REGULATION AND SUPERVISION

Transactions with Related Parties In accordance with the Administrative Measures on Connected Transactions between Commercial Banks and Insiders and Shareholders, related parties include, among others, (i) shareholders holding or controlling 5% or more of the bank's outstanding shares or voting rights; (ii) legal persons or other organizations under direct or indirect common control with the bank; (iii) such legal persons' or organizations' individual controlling shareholders, directors and key oÇcers; (iv) directors, senior management, loan oÇcers and their respective close relatives, and organizations in which the above persons have investments or serve as executive oÇcers; and (v) other individuals, legal persons or other organizations that have direct, indirect or joint control over the commercial banks or that may exert signiÑcant inÖuence over them. Transactions with related parties include, among other transactions, credit extensions, asset transfers, and the provision of services, and if required, such transactions should be reported to the CBRC and published in their annual reports. Commercial banks are required to adopt appropriate policies and procedures to manage related party transactions and to establish a related party transaction examination committee of the board of directors to supervise the implementation of, and compliance with, such policies and procedures and to examine proposed related party transactions. Transactions with related parties are subject to certain limitations. For example, when the amount of any single related party transaction represents more than 1% of the bank's regulatory capital, or any single related party transaction will cause the total outstanding value of transactions with that related party to represent more than 5% of the bank's regulatory capital, the transaction must be examined by the related party transaction control committee of the commercial bank and submitted to the board of directors for approval. It must also be reported to the supervisory board of the bank and the CBRC within ten business days after such board approval. In addition, commercial banks may not grant unsecured loans to related parties or extend credit secured by the bank's own equity. They may not provide security for the Ñnancing activities of related parties, unless such related parties provide adequate counter-security in the form of deposit certiÑcates or treasury bonds. The credit facilities granted to a single related party may not exceed 10% of the commercial bank's regulatory capital. The credit facilities granted to all aÇliates of a related party may not exceed 15% of the bank's regulatory capital. The aggregate amount of credit facilities granted to all related parties may not exceed 50% of the bank's regulatory capital. We were in compliance with these related party credit concentration limits in the periods presented in this prospectus. Commercial banks must submit to the CBRC, on a quarterly basis, status reports regarding their related party transactions, and disclose matters relating to related parties and related party transactions in their Ñnancial statements. Furthermore, the board of directors is required to report annually at the shareholders' meetings related party transactions and the implementation of mechanisms for monitoring and approving related party transactions. The CBRC has the power to request the rectiÑcation of transactions that violate the Related Party Transactions Measures and impose sanctions on the bank and/or the related parties.

Compliance Risk Management On October 25, 2006, the CBRC promulgated the Guidelines on Compliance Risk Management of Commercial Banks to strengthen the compliance risk management of PRC commercial banks. These Guidelines address, among other things, (i) responsibilities of the board of directors, board of supervisors and senior management in compliance risk management; (ii) responsibilities of the compliance department; and (iii) supervision of a bank's compliance risk management by regulatory authorities. Under the Guidelines, commercial banks are required to establish compliance risk management system compatible with their scope of business, organization structure, and business scale. Such system must cover, among other things:

¬ compliance policies;

¬ the organizational structure and resources of the compliance department;

¬ plans to ensure compliance;

85 REGULATION AND SUPERVISION

¬ risk management;

¬ a set of procedures for the identiÑcation and management of compliance risk; and

¬ a system for compliance training and education. We have established the required compliance risk management policies and procedures and are in compliance with the Guidelines.

Operational Risk Management In March 2005, the CBRC issued the Circular on Strengthening Control of Operational Risk to further strengthen PRC commercial banks' ability to identify operational risk and the risk management and control of such risk. Under this circular, PRC commercial banks are required to establish internal policies and procedures speciÑcally for the management and control of operational risk. A bank's internal audit department and business operation departments are required to conduct independent and ad hoc reviews and examinations of the bank's business operations from time to time. For business areas involving a greater degree of operational risk, ongoing reviews and examinations are required. Moreover, a PRC commercial bank's head oÇce is required to assess, from time to time, the implementation of and compliance with its internal policies and procedures on operational risk. In addition, the circular sets forth detailed requirements for PRC commercial banks to follow, which include, among other things, establishing a system under which branch oÇcers in charge of business operations are required to rotate on a regular basis; establishing a system to encourage full compliance with applicable regulations and internal rules and policies by all employees; improving the timely reconciliation of the account statements between commercial banks and their customers and those between operational departments and accounting departments within a bank; segregating persons in charge of account-keeping and persons in charge of account reconciliation; and establishing a system for the control and management of specimen signatures and banking transaction documents.

Market Risk Management In December 2004, the CBRC promulgated the Guidelines on Market Risk Management of Commercial Banks to strengthen the market risk management of PRC commercial banks. These guidelines address, among other things, (1) the responsibilities of the board of directors and senior management of a bank in the supervision of market risk management, (2) policies and procedures for market risk management, (3) the detection, quantiÑcation, monitoring and control of market risk, and (4) responsibilities for internal controls and conducting external audits. Under these guidelines, commercial banks are required to establish formal written policies and procedures to manage market risk. These policies and procedures must cover, among other things:

¬ permitted business activities, such as the trading of and investment in certain Ñnancial instruments;

¬ the level of market risk acceptable to the bank;

¬ the organizational structure for market risk management;

¬ a set of procedures for the detection, quantiÑcation, monitoring and control of market risk; and

¬ an information system for market risk management.

Information System Risk Management The CBRC issued the Guidelines for Information System Risk Management in Banking Institutions on November 1, 2006, with the view to eÅectively preventing risks from the operation of information system for business transactions, operation management and internal controls. The guidelines provide for, among other things, (1) scope of responsibilities of relevant agencies, (2) overall risk controls, (3) research and

86 REGULATION AND SUPERVISION development risk controls, (4) operational maintenance risk controls, (5) outsourcing risk controls, and (6) information system risk audits. Pursuant to the guidelines, banking institutions shall diligently apply the following requirements in connection with management of their information system:

¬ complying with PRC laws, regulations and technical speciÑcations relating to information system management, and implementing regulatory requirements of CBRC;

¬ putting in place eÅective information security and internal control systems, designing and ensuring implementation of post-speciÑc functions in connection with information system risk management;

¬ conducting examination, review and analysis of risks inherent in information systems bank-wide, and promptly reporting the results to their governing committee, as well as CBRC and the local oÇce of CBRC;

¬ promptly reporting to CBRC and its local oÇce any material incidence or emergency occurred relating to its information systems, and make quick response according to the contingency plans;

¬ submitting annual reports on information system risk management to CBRC and its local oÇce upon review by the board of directors or other governing body;

¬ conducting audit of their information systems in a satisfactory manner;

¬ assisting CBRC and its local oÇce in supervising and examining risks prevention measures for information system, and making rectiÑcations according to regulatory comments; and

¬ providing trainings for relevant personnel on the operations, technology and security in respect of information system. The Guidelines became eÅective as of November 1, 2006 and we are in compliance with the Guidelines.

Risk Rating System We have been subject to evaluation by the CBRC based on a provisional risk rating system since February 2004. Under this system, capital adequacy, asset quality, management quality, proÑtability, liquidity and exposure to market risk of joint stock commercial banks are evaluated and scored by the CBRC on a continuous basis. Each bank is classiÑed into one of Ñve risk rating categories. The CBRC determines its supervision activities, including the frequency and scope of its on-site inspections, with respect to that bank based on its risk rating category. The risk rating also constitutes a basis for the CBRC's evaluation of the bank's applications for new business licenses and the qualiÑcations of its senior management. These risk ratings are not publicly available.

Restrictions on Equity Investments in Banks and Shareholders Any natural or legal person intending to acquire 5% or more of the total equity interest of a commercial bank is required to obtain prior approval from the CBRC. If any existing shareholder of a commercial bank increases its shareholding in excess of the 5% threshold without obtaining the CBRC's prior approval, that shareholder will be subject to CBRC sanctions, which include, among others, rescission of the acquisition and disgorgement of proÑts, if any. Furthermore, the bank and the relevant shareholder may also be subject to Ñnes imposed by the CBRC for not obtaining the prior approval from the CBRC. Under the Administrative Measures on Equity Investments of Overseas Financial Institutions in Domestic Financial Institutions, certain foreign Ñnancial institutions may make equity investments in PRC commercial banks, subject to the CBRC's approval. However, no single foreign Ñnancial institution may own more than 20% of the equity of such banks. Foreign Ñnancial institutions which the CBRC deems as related parties are counted as one Ñnancial institution when calculating such entities' equity interest in PRC commercial banks. In addition, if foreign investment in the aggregate exceeds 25% of the total equity interest in a non-listed PRC commercial bank, such bank will be regulated as a foreign-invested bank. A listed

87 REGULATION AND SUPERVISION domestic commercial bank will continue to be regulated as a domestic bank even if foreign investment in the aggregate exceeds 25% of its total equity interest. Under the PRC Company Law and relevant rules and regulations, a joint stock commercial bank may not accept its own shares as collateral. Moreover, there are legal limitations on the ability of shareholders of a joint stock commercial bank to pledge to any other party their shares in the bank. According to the Corporate Governance Guidelines, (i) any shareholder of a joint stock commercial bank must give prior notice to the board of directors of the bank if it wishes to pledge its shares as collateral, and (ii) if the outstanding amount of the bank's loans to a shareholder exceeds the audited value of such shareholder's equity in the bank for the immediate preceding year, and such shareholder does not pledge any government bonds or bank deposit certiÑcates as collateral, the shareholder may not pledge its shares. Under our articles of association, which have been approved by the CBRC, this restriction applies only to those shareholders that hold 5% or more of our shares. We have been advised by our PRC legal counsel, King & Wood, that this provision of our articles of association is legal and valid under PRC law.

Anti-Money Laundering Law and Regulation According to the PRC's Anti-Money Laundering Law, the PRC commercial banks should establish a sound internal anti-money laundering control system, and the principal executives of the commercial bank should be responsible for the eÅective implementation of the internal anti-money laundering control system. The commercial bank should, according to the requirement, establish a customer identiÑcation system, a customer identify data and transaction record preserve system, and a large dealings and suspicious transaction report system. Whenever necessary, according to the applicable legal proceeding, the commercial bank should cooperate with the government authorities in respect of the anti-money laundering and restraining the assets. The competent department of anti-money laundering under the State Council is responsible for the supervision and management of the anti-money laundering. The Anti-Money Laundering Law became eÅective on January 1, 2007. Under Anti-Money Laundering Regulation, the PBOC is the primary department of the State Council responsible for supervising and regulating anti-money laundering of Ñnancial institutions. Financial institutions must establish a sound anti-money laundering internal control system, set up an independent department or designate a relevant department to anti-money laundering matters, formulate internal operating and control procedures for anti-money laundering, and oÅer anti-money laundering trainings to the relevant employees to enhance their anti-money laundering capabilities. The principals of Ñnancial institutions must be responsible for the eÅective implementation of the anti-money laundering internal control system. Financial institutions are required to establish and implement a customer identiÑcation system in accordance with relevant regulations, properly preserve the customers identity information, as well as the relevant transaction materials, such as the data, business certiÑcates, account books, and report to the Anti-Money Laundering Monitoring and Analyzing Center on a timely basis the transactions involving large amounts of Renminbi and foreign exchange transactions and suspicious transactions. Financial institutions are also required to promptly submit a written report to local branches of the PBOC upon the detection of any suspicious transaction involving criminal oÅences in the course of performing their anti-money laundering obligations. Such requirements became eÅective on January 1, 2007. We have established an anti-money laundering system pursuant to the relevant anti-money laundering laws and regulations, and designated the accounting department to be responsible for its implementation. Our anti-money laundering system includes, among others, the following measures: (1) Individual clients should produce his or her identiÑcation card (or, if by way of agency, identiÑcation card of the agent as well as the principal) before opening savings account or conducting settlement businesses, and the name and number shown on the identiÑcation card are required to be examined and recorded. (2) Corporate clients should produce valid evidence as required under anti-money laundering regulations before opening accounts, making deposits and conducting settlement businesses, which are required to be examined and recorded;

88 REGULATION AND SUPERVISION

(3) A reporting system has been established to monitor, compile and report transactions involving large amount and suspicious transactions; (4) Ongoing anti-money laundering trainings should be conducted to enable our employees to understand relevant anti-money laundering laws and regulations, and improve their abilities to identify suspicious transactions; and (5) A system of keeping account information and transaction records has been established pursuant to the relevant anti-money laundering laws and regulations. During the period from 2004 to 2006, we failed to report certain transactions to the relevant regulatory authorities in a timely manner pursuant to the applicable anti-money laundering regulations. As a result, we were subject to warnings and Ñnes by the PBOC with the aggregate amount of approximately RMB 217,000. We have paid the Ñnes in full amount, and taken necessary steps to correct the violations and continuously strengthen our supervision on anti-money laundering, including enhancing our information technology system. We believe we have established the required policies and procedures to ensure compliance with the anti- money laundering laws and regulations.

Regulations of Foreign-invested Banks Operating in China The PRC Administrative Regulations on Foreign-invested Banks (the ""Regulations'') were adopted by the Standing Committee of the State Council on November 8, 2006 and became eÅective on December 11, 2006. In accordance with China's WTO commitments, the Regulations specify the establishment, registration and business scope of wholly foreign-owned banks, Sino-foreign joint venture banks and branches of foreign banks operating in China. The minimum registered capital of wholly foreign-owned banks and Sino-foreign joint venture banks may not be less than RMB 1 billion or equivalent foreign currencies which are freely exchangeable. The sole or controlling foreign shareholder who intends to establish a wholly foreign-owned bank or a Sino-foreign joint venture bank must have year-end total assets no less than US$10 billion for the year prior to making application for establishment of the wholly foreign-owned bank or the Sino-foreign joint venture bank. In addition, the branches of foreign banks in China are required to have a minimum working capital of RMB 200 million or equivalent foreign currencies which are freely exchangeable, and their ratios of current assets to current liabilities may not be lower than 25%. The foreign bank who intends to establish a branch must have year-end total assets no less than US$20 billion for the year prior to making application for the establishment of the branch. In accordance with the new Regulations, wholly foreign-owned banks and Sino-foreign joint venture banks may take deposits from the public, act as insurance agent, engage in inter-bank lending, make loans, and provide credit cards and other products. In addition, the new regulations permit branches of foreign banks in China to take time deposits of no less than RMB 1 million. The Regulations eliminated previous restrictions on foreign-invested banks that only allow them to provide Renminbi-denominated banking services in 25 cities.

HONG KONG FINANCIAL DISCLOSURE REQUIREMENTS Pursuant to Rule 4.10 of the Hong Kong Listing Rules, the Ñnancial information to be disclosed in our Accountants' Report must be in accordance with best practice, which is at least that required to be disclosed in respect of speciÑc matters in the accounts of a company under the Hong Kong Companies Ordinance, IFRS and guidelines issued by the Hong Kong Monetary Authority, or HKMA, namely ""Financial Disclosure by Locally Incorporated Authorised Institutions'' and ""New Hong Kong Accounting Standards: Impact on Interim Financial Disclosure,'' or the Guidelines. Pursuant to FD1-2.2.2 of the Financial Disclosure by Locally Incorporated Authorised Institutions issued by the Hong Kong Monetary Authority (the ""Guidelines''), a separate disclosure is required in relation to movements in the allowance for loan impairment losses for individually assessed and for collectively assessed loans. We were able to provide such information in respect of the year ended December 31, 2006 but not the years ended December 31, 2005 and 2004. We believe such information is immaterial to potential investors.

89 REGULATION AND SUPERVISION

Pursuant to FD1-2.2.2 of the Guidelines, a separate disclosure is required in relation to the amount of new provisions charged to the income statement and the amount of provisions released back to the income statement in the movement of allowance for loan impairment losses. We are currently unable to provide such disclosure as such information is currently not available. We believe that such disclosure is immaterial to potential investors under the Global OÅering. However, we are endeavouring to collect the relevant information so that we will be in a position to provide such required disclosure under the Guidelines by December 2008.

90 OUR RESTRUCTURING AND OPERATIONAL REFORMS

OUR HISTORY We are a commercial bank established on April 20, 1987 under the name of CITIC Industrial Bank through restructuring of the banking department of CITIC Group and are the largest subsidiary of CITIC Group. The banking department of CITIC Group was formed in April 1985 with the approval from the State Council and the PBOC with the view to further developing a wide range of banking businesses including, among other things, overseas Ñnancings, foreign currency transactions, lending, international settlements, lease Ñnancings and deposit-takings. On April 20, 1987, CITIC Industrial Bank was oÇcially established with approval from the State Council and the PBOC. It was headquartered in Beijing and had a registered capital of RMB 800 million. CITIC Industrial Bank is among the Ñrst national commercial banks established after PRC Government's implementation of reform and opening-up policies. It conducted licensed RMB and foreign-currency banking businesses as well as other relevant Ñnancial operations. On August 2, 2005, we changed our name from CITIC Industrial Bank to China CITIC Bank, which reÖected our commitment in transforming to a bank that focuses on both personal banking and corporate banking businesses. We were established as a joint stock limited company on December 31, 2006 under the name of China CITIC Bank Corporation Limited. Our assets exceeded RMB 100 billion in 1996. We were ranked 291st in terms of tier one capital among global banks by the British magazine ""The Banker'' in 2002, and Ñrst in terms of average return on capital among PRC banks by the same magazine in 2003. From 2004 to 2005, our ranking in terms of tier one capital by the British magazine ""The Banker'' improved to top 200 from 202nd among global banks, and our ranking in terms of total assets by the same magazine improved to 134th in 2006 from 152nd in 2005. We were the seventh largest commercial bank in China in terms of total assets.(1) As of December 31, 2006, we had 446 branch outlets throughout the country. We currently provide a comprehensive range of commercial banking products and services to our customers. Through our history, we have successfully adapted to the major changes in China's banking industry, as well as implemented a series of major corporate restructuring and operational reforms.

CORPORATE RESTRUCTURING In April 2006, CIFH, the Ñnancial Öagship of CITIC Group outside China and the holding company of CKWB, entered into an agreement with CITIC Group to purchase a 19.9% interest in our bank based on our net assets as of December 31, 2005 for a consideration of approximately HK$5,300.8 million, representing a purchase price per share of HK$1.12 or a discount of 79.49% compared to the mid-point of the indicative oÅer price range in the Global OÅering. The purchase price was equal to 1.153 times the audited net book value of our bank for the year ended December 31, 2005 as calculated under IFRS. In the second and fourth quarters of 2006, CITIC Group made contributions to equity of RMB 5.0 billion and RMB 2.4 billion, respectively. As a result of these contributions to equity, the interests in us held by CITIC Group and CIFH are 84.83% and 15.17%, respectively. In November 2006, CIFH entered into an agreement with CITIC Group to establish our bank as a joint stock limited company as joint promoters. We were established as a joint stock limited company on December 31, 2006 under the name of China CITIC Bank Corporation Limited. CIFH also entered into a top-up agreement with us and CITIC Group on November 22, 2006, pursuant to which CIFH agreed to subscribe for certain H Shares in us. For more information about the top-up agreement, see ""Our Relationship with CITIC Group and Connected Transactions Ì Our Relationship with Our Promoters Ì CIFH Top-Up''. With our restructuring into a joint stock limited company, we have restructured our board of directors and board of supervisors. Our board of directors is accountable to the general meeting of shareholders and responsible for, among other things, approving our strategic and operational plans, appointing senior

(1) Based on relevant data as of December 31, 2005 because the relevant data of certain PRC commercial banks as of December 31, 2006 were not available as of the Latest Practical Date.

91 OUR RESTRUCTURING AND OPERATIONAL REFORMS management and establishing our organizational structure. In addition, several committees have been established to perform speciÑc functions within the board of directors, including strategy development committee, audit and related party transaction control committee, risk management committee and nomination and compensation committee. Our board of supervisors is a supervisory body accountable to the general meeting of shareholders, and is responsible for supervising our board of directors and senior management, inspecting Ñnancial activities and examining our operational decisions including those related to risk management. For more information about our corporate governance, see ""Management.''

STRATEGIC INVESTOR On November 22, 2006, we, CITIC Group and BBVA entered into a series of agreements, pursuant to which BBVA agreed to make a signiÑcant investment in us and enter into a strategic cooperation relationship with us. Pursuant to the share and option purchase agreement, BBVA purchased from CITIC Group such number of our ordinary shares representing 4.83% of our outstanding shares immediately after the closing on March 1, 2007 for the U.S. dollar equivalent of RMB 4,885 million, which, based on the agreed reference rate, equals US$629 million. CITIC Group also agreed to sell to BBVA after the Ñrst anniversary of the Global OÅering 52,892,289 shares, representing 0.17% of our outstanding shares prior to the Global OÅering, at an aggregate purchase price of RMB 172 million. In addition, BBVA was also granted a call option to purchase such number of our ordinary shares representing 4.9% of our outstanding shares immediately after the call option closing, or as shall result in the aggregate shareholding percentage of BBVA to be increased to 9.9% of our outstanding shares immediately after the call option closing, whichever is greater. See ""Our Strategic Investor and Other Investors.''

92 OUR RESTRUCTURING AND OPERATIONAL REFORMS

OUR SHAREHOLDING AND GROUP STRUCTURE App 1A 28(2)

The following chart sets forth our shareholding and group structure upon completion of the Global OÅering and the A Share OÅering, assuming that the Over-allotment Option is not exercised and BBVA and CIFH exercise their anti-dilution right and top-up right, respectively.(1)(2)

CITIC Group Banco Bilbao The National Council for Vizcaya Argentaria Social Security Fund S.A. (“BBVA”) (“SSF”)

55.44%(3) 14.58%

CIFH Other public H Share Other public A Share holders holders

63.71% 15.17% 4.83% 1.28%(4) 9.00%(4) 6.01%

China CITIC Bank Corporation Limited

95.00% China Investment and Domestic Branches(5) Finance Limited (Overseas controlled subsidiary)

(1) Upon completion of the Global OÅering and the A Share OÅering, the shares held by CITIC Group will be A Shares and the shares held by CIFH, BBVA and SSF will be H Shares.

(2) For information regarding our shareholding and group structure immediately following completion of the Global OÅering without giving eÅect to the A Share OÅering, see ""Substantial Shareholders'' and ""Share Capital.''

(3) Including 55.41% direct shareholding and 0.03% indirect shareholding of CITIC Group in CIFH.

(4) SSF's 1.28% shareholding in our bank does not include the shares to be purchased by SSF as a cornerstone investor, which will be 73,260,000 shares assuming an oÅer price of HK$5.46 per share, being the mid-point of the proposed price range set out in this prospectus. See ""Our Strategic Investor and Other Investors Ì Cornerstone Investors.'' When such purchase completes, the shareholding of SSF in our bank will increase to 1.47% and the shareholding in our bank of other H Share public shareholders will be reduced to 8.81%.

(5) Consists of 25 tier one branches, 16 tier two branches and 405 sub-branch outlets as of December 31, 2006.

93 OUR RESTRUCTURING AND OPERATIONAL REFORMS

FINANCIAL RESTRUCTURING

We have implemented the following key Ñnancial restructuring measures since 2003.

¬ In 2004, 2005 and 2006, we received contributions to equity of RMB 2.5 billion, RMB 8.6 billion and RMB 7.4 billion, respectively, from CITIC Group.

¬ In 2004 and 2006, we issued subordinated debt and bonds, respectively, each with an aggregate value of RMB 6.0 billion. Our subordinated debt was issued in 2004 to ten institutional investors, including insurance companies and investment companies. Our subordinated bonds were issued in 2006 through open market bidding to institutional investors such as commercial banks, insurance companies and policy banks.

¬ In June 2006, we transferred shareholding investments with net book value of RMB 10 million to CITIC Asset Management Company Limited, a wholly-owned subsidiary of CITIC Group, with no material gain or loss resulting from such transfers. The transferred investments included (i) investments with net book value of RMB 6.33 million which were sold to CITIC Asset Management Company Limited through a public auction for a cash consideration of RMB 6.35 million, and (ii) investments with net book value of RMB 4.14 million which were sold to CITIC Asset Management Company Limited for a cash consideration of RMB 4.14 million in accordance with an agreement signed between us and CITIC Asset Management Company Limited.

¬ In June 2006, we sold certain performing and non-performing related party loans. We sold performing related party loans to CITIC Group with an aggregate outstanding principal of RMB 2,000 million to another domestic commercial bank for the same amount in cash on June 30, 2006. These loans were included in loans and advances to customers before they were derecognized from our balance sheet as of the date of sale. We disposed of non-performing related party loans to CITIC Group with an aggregate outstanding principal of RMB 1,142 million and a net book value of RMB 417 million on June 26, 2006. The non-performing related party loans were sold in a public auction to the CITIC Group at their net book value for cash. They were included in loans and advances to customers before they were derecognized from our balance sheet as of the date of sale. See also ""Assets and Liabilities Ì Assets''.

¬ Pursuant to an agreement we entered into with CITIC Group on December 13, 2006, CITIC Group is entitled to receive the recoverable amounts, including outstanding interest receivables, in our loans written off prior to our establishment as a joint stock limited company, which primarily consisted of loans written off in 2006, 2005 and 2004, with an aggregate principal amount of approximately RMB 10.5 billion for nil consideration. The written-off loans were extended during the period when CITIC Group was our sole shareholder and it was intended that, by way of this agreement between CITIC Group and us, the economic interests to be recovered of the written-off loans would be transferred back to CITIC Group as part of our financial restructuring. We entered into a supplemental agreement with CITIC Group in respect of the December 13, 2006 agreement on March 26, 2007. By virtue of the supplemental agreement, provisions under the December 13, 2006 agreement relating to: (i) our obligation to recover the loans on behalf of CITIC Group; and (ii) the fee arrangements in relation to the management and recovery of the loans were superseded. We will assist CITIC Group by holding the assets on their behalf in accordance with the legal requirements of the PRC in consideration for fees to be paid by CITIC Group. We will enter into a separate agreement with CITIC Group in the event we agree to take actions to recover the written-off loans on CITIC Group's behalf. Our PRC legal adviser, King & Wood, has confirmed that the above agreements are legal and valid under PRC laws.

OUR OPERATIONAL REFORMS

In recent years, we have taken a number of initiatives to further enhance operational and management capabilities, continue our healthy and rapid expansion, and to bring us more in line with international best

94 OUR RESTRUCTURING AND OPERATIONAL REFORMS practices. The key initiatives include those in the areas of business and operations, risk management, internal controls, Ñnancial management, human resources management and information technology.

Business and Operations We have undertaken a number of initiatives in various business lines with a view to continuing our business expansion and enhancing our competitiveness, which include the following:

¬ Corporate banking. We have implemented a strategy focusing on ""high quality industries and high quality enterprises'' and ""mainstream markets and mainstream customers''. We have also sought to develop new products and services, focusing on investment banking and other new business areas;

¬ Personal banking. We have implemented the ""Three Dimensions, Four Promotions'' strategy with a view to continuing the rapid expansion of our personal loans, deposits and non-interest-based business. We have also established a more advanced credit card management and operating platform, which contributed to the signiÑcant increases in the transaction volume of our credit cards and the number of our credit cards issued, as well as the development of a distinctive series of credit card brands; and

¬ Treasury operations. Capitalizing on our leading market position and services, we were one of the Ñrst banks to become qualiÑed for numerous new business areas, which further enhanced our overall competitiveness. For more information relating to our development and strategy, see ""Business''.

Risk Management and Internal Controls We seek to foster a corporate culture focusing on maximizing risk-adjusted returns. To this end, we seek to establish an independent, comprehensive and dedicated risk management system with a vertical reporting line. Our recent initiatives include the following:

¬ introducing the positions of product managers and establishing disbursement centers;

¬ establishing the position of the chief risk oÇcer and centralizing the appointment of branch risk managers;

¬ centralizing the management of disbursement centers and post-disbursement activities at our risk management departments, strengthening the independence of risk management function, and imposing Ñrst-in-line responsibilities;

¬ developing a more advanced credit rating system with Moody's KMV, based on the requirements of Basel II;

¬ establishing subcommittees under the head-oÇce risk management committee responsible for setting guidelines for and monitoring credit, market and operational risks, respectively; and

¬ continually enhancing internal audit functions in order to establish a more independent, uniform and standardized internal audit system. For more information on our risk management and internal controls initiatives, see ""Risk Management''.

Financial Management Our Ñnancial management consists of asset and liability management, capital management, resource allocation and funds transfer pricing. Our recent initiatives include the following:

¬ further enhancing our asset and liability structure by focusing on interest rate pricing and risk weighting of our products;

95 OUR RESTRUCTURING AND OPERATIONAL REFORMS

¬ introducing the indicators of economic value added and return on risk adjusted capital, which form an integral part of the performance and compensation assessment at the branch level, as part of an eÅort to increase capital eÇciency and increase focus on cost of capital at our branches;

¬ controlling cost and promoting eÇcient use of capital as part of an eÅort to enhance resource allocation; and

¬ implementing Ñnancial management system in December 2005, which enables us to centrally manage budget planning, capital expenditures and other Ñnancial data. Such system provides a platform for a more accurate intersegment fund transfer mechanism.

For more information on our Ñnancial management, see ""Business Ì Financial Management''.

Human Resources Management

We have implemented or are in the process of implementing a number of initiatives to enhance our human resources management, including the following:

¬ establishing an evaluation mechanism based on operating performances for all senior management at the head oÇce, branch and the sub-branch levels;

¬ designing a long-term stock option incentive program for senior management; and

¬ providing comprehensive training through our bank-wide training platform to improve the skill set of our employees;

For more information about our human resources management, see ""Business - Employees''.

Information Technology

We have implemented or are in the process of implementing a number of key projects to improve our information technology systems, including the following:

¬ implementing and updating our various core information technology systems, including general business and operations, treasury transactions, international business, electronic banking systems;

¬ further enhancing management information system to support operational and managerial decision- making processes;

¬ implementing and upgrading credit management system;

¬ establishing and improving a disaster recovery center.

For more information about our information management system, see ""Business - Information Technology''.

96 OUR STRATEGIC INVESTOR AND OTHER INVESTORS

Overview In connection with the enhancement of our overall competitiveness and shareholder value and our ongoing eÅorts to establish strategic cooperation with leading international Ñnancial institutions, we have entered into strategic investment arrangements with Banco Bilbao Vizcaya Argentaria, S.A., or BBVA. We believe these arrangements will be long-term and mutually beneÑcial to both banks. BBVA is a multinational Ñnancial services company engaging mainly in retail banking, asset management, private banking, and wholesale banking operations worldwide. Registered in Bilbao, Spain, BBVA is a leading Ñnancial institution in Spain and Latin America, with additional presence in the United States, Europe and Asia. The shares of BBVA are listed on the Madrid Stock Exchange as well as the stock exchanges in Frankfurt, London, Luxembourg, Mexico City, Milan, New York, Paris and Zurich. As of December 31, 2005, BBVA had over 94,000 employees and 7,410 branches. BBVA ranked 410th on Fortune's 2006 Global 500 based on its revenues in 2005. In addition, according to the ranking of top 1000 world banks by the British magazine ""The Banker'' in June 2006, BBVA ranked 19th in the world in terms of capitalization as of June 16th 2006 and 38th in terms of total assets as of December 31, 2005. ReÖecting its strong presence in all major business areas and its sound management system, BBVA is among the most proÑtable major Ñnancial institutions in Europe, with a return-on-equity of 37.6% in 2006 and a non- performing loan ratio of 0.83% as of December 31, 2006. As part of the strategic cooperation arrangements, on November 22, 2006, CITIC Group entered into a share and option purchase agreement with BBVA pursuant to which BBVA agreed to purchase a number of our shares and was granted a call option to purchase additional shares in us. Concurrently, CITIC Group, BBVA and we also entered into an investor rights agreement, which set forth certain rights and obligations of BBVA as our strategic investor. In addition, also concurrently, we entered into a strategic cooperation agreement with BBVA, which set forth the strategic cooperation arrangements between BBVA and us. In addition, on November 22, 2006, BBVA entered into a subscription agreement with CIFH and a share purchase agreement with CITIC Group, pursuant to which BBVA agreed to subscribe from CIFH and purchase from CITIC Group a number of shares in CIFH. On the same date, BBVA entered into a cooperation memorandum of understanding with CIFH, which set forth the strategic cooperation arrangements between BBVA and CIFH/CKWB.

BBVA's Investment in Our Shares Purchase of Our Shares Under the share and option purchase agreement between CITIC Group and BBVA, BBVA purchased such number of our shares representing 4.83% of our outstanding shares immediately after the closing of such purchase on March 1, 2007 (the ""Initial Closing''), for the U.S. dollar equivalent of RMB 4,885 million which, based on the agreed reference rate, equals US$ 629 million. If the OÅer Price is higher than the purchase price per share, BBVA agreed to pay the diÅerence between the OÅer Price and the purchase price per share, up to the U.S. dollar equivalent of RMB 248 million. Pursuant to the investor rights agreement among CITIC Group, BBVA and us, all of our shares held by BBVA will be converted into overseas listed shares as part of the Global OÅering. CITIC Group also agreed to sell to BBVA 52,892,289 shares after the Ñrst anniversary of the Global OÅering, representing 0.17% of our outstanding shares immediately prior to the Global OÅering, at an aggregate purchase price of RMB 172 million. If the OÅer Price is higher than RMB 3.42 per share, BBVA agreed to pay the diÅerence between the OÅer Price and RMB 3.42, up to the U.S. dollar equivalent of RMB 8.7 million. In addition, the purchase price shall be adjusted higher to include the cost of fund accruing from the Initial Closing to the completion date of the share purchase at the interest rate per annum of the one-year U.S. dollar LIBOR as of the Initial Closing. The proposed purchase and sale of such 52,892,289 shares have not been approved by the relevant PRC authorities. CITIC Group and us intend to seek approvals from the relevant PRC authorities prior to the proposed purchase and sale if such approvals are required. In addition, the delivery of these shares shall not take eÅect prior to the date that we comply with the public Öoat

97 OUR STRATEGIC INVESTOR AND OTHER INVESTORS requirements as then requested by Hong Kong Stock Exchange without taking into account of the shareholding of BBVA in us. See ""Ì Investor's Shareholding Limitation and Right of First OÅer.''

The Call Option BBVA was granted a call option to purchase from CITIC Group such number of shares, or option shares, representing 4.9% of our outstanding shares immediately after the relevant call option closing, or as shall result in the aggregate shareholding percentage of BBVA to be increased to 9.9% of our outstanding shares immediately after the relevant call option closing, whichever is greater. BBVA may nominate a third party other than those of our competitors set forth in the investor rights agreement, or the nominated investor, to purchase or subscribe the option shares if BBVA is prohibited by applicable laws from holding the option shares. The option shares will be H Shares if our shares are listed on the Hong Kong Stock Exchange, A Shares if our shares are listed only on a stock exchange in the PRC, or legal person shares if our shares are unlisted. The proposed purchase and sale of the call option shares have not been approved by the relevant PRC authorities. CITIC Group and us intend to seek approvals from the relevant PRC authorities prior to the exercise of the call option if such approvals are required. In addition, the delivery of the call option shares shall not take eÅect prior to the date that we comply with the public Öoat requirements as then requested by Hong Kong Stock Exchange without taking into account of the shareholding of BBVA in us. See ""Ì Investor's Shareholding Limitation and Right of First OÅer.'' The call option may be exercised in whole but not in part, and one time only by BBVA. If the Global OÅering takes place within 12 months after the Initial Closing, the call option may be exercised from the date following the Ñrst anniversary of the Global OÅering until the date falling on the third anniversary of the Global OÅering. The exercise price of the call option will be determined as follows:

¬ If the call option is exercised between the date following the Ñrst anniversary of the Global OÅering and the date that is two years after the Global OÅering, the exercise price per share will be 110% of the OÅer Price.

¬ If the call option is exercised between the date following the second anniversary of the Global OÅering and the date that is three years after the Global OÅering, the exercise price per share will be 125% of the OÅer Price. If the Global OÅering does not take place within 12 months after the Initial Closing, the call option may be exercised at any time on and from the date following the second anniversary of the Global OÅering until the date falling on the fourth anniversary of the Global OÅering. Such period will be extended for a period equal to the overlapping portion of the lock-up period of CITIC Group during which CITIC Group is not permitted to transfer the option shares following the Global OÅering under the rules and regulations of the relevant stock exchange). The exercise price then will be the fair value per share, which will be the average of the value as determined by the independent experts appointed by BBVA and CITIC Group.

Rights and Obligations of BBVA Under the investor rights agreement entered into among CITIC Group, BBVA and us, BBVA's rights and obligations as our strategic investor include the following:

Corporate Governance Except in limited circumstances, including dilution of BBVA's equity interest in us due to any exercise of Over-allotment Option in the Global OÅering or the A Share OÅering, for so long as BBVA, its aÇliates and the nominated investor hold no less than 4.83% of our outstanding shares, BBVA will have the right to nominate one nominee to our board and CITIC Group and we have agreed to take all corporate actions to cause the nominee to be elected, subject to our organizational documents, the applicable laws and regulatory and stock exchange requirements. Under the PRC Company Law and our Articles of Association, the election of any of our directors is required to be approved by a majority of our shareholders present at the relevant shareholders' meeting. Our directors are not contractually obligated to elect the director nominated by BBVA

98 OUR STRATEGIC INVESTOR AND OTHER INVESTORS to our board of directors. If elected, the director nominated by BBVA will be appointed to one or two of the following board committees: the strategy development committee, the audit and related party transactions control committee, the risk management committee and the nomination and compensation committee. Such director will have rights to attend meetings of any other board committees as an observer. Prior to the election of the BBVA-nominated director, BBVA may appoint an observer to attend the meetings of our board of directors and the meetings of our board committees. In addition, BBVA may nominate an alternate director to the BBVA-nominated director, or if such alternate director is not permitted under applicable laws, one particular person to act as the proxy of the BBVA-nominated director during any one-year period and attend the meetings of the board of directors and the four board committees mentioned above as an observer. The foregoing board nomination right and committee representation and attendance rights granted to BBVA and the obligations of CITIC Group and us to elect the director nominated by BBVA to our board of directors under the investor rights agreement will lapse upon our listing on the main board of Hong Kong Stock Exchange. All of our directors are required to comply with the PRC Company Law, Hong Kong Listing Rule 3.08 and our Articles of Association and act in our best interests.

Transfer Restrictions BBVA's shares purchased at the Initial Closing and any shares purchased pursuant to the call option generally may not be transferred until the third anniversary of the purchase of such shares, and additional shares issued to BBVA pursuant to its anti-dilution right (as described below) may not be transferred until the Ñrst anniversary of such issuance. After such date, CITIC Group has a right of Ñrst oÅer if BBVA intends to sell its shares in us. If CITIC Group does not accept the oÅer, BBVA may transfer such shares to any third party other than those of our competitors set forth in the investor rights agreement.

Investor's Shareholding Limitation and Right of First OÅer BBVA agreed that it would not acquire any additional equity securities in us prior to the earliest of (i) twelve months after the Global OÅering, (ii) the exercise of the call option, or (iii) the expiration of the call option exercise period. Notwithstanding the foregoing, except in limited circumstances, if CITIC Group or any of its aÇliates (other than CIFH and us) intends to sell its shares in us, BBVA may purchase such shares under a right of Ñrst oÅer. If BBVA does not accept the oÅer, CITIC Group or its aÇliate may transfer its shares to any third party other than those competitors of BBVA set forth in the investor rights agreement. BBVA also agrees that it will not purchase our equity securities if, among other things, such purchase would disqualify us to be listed on the relevant eligible stock exchange or as a Chinese-invested commercial bank, or if such purchase would cause BBVA's equity interest in us to exceed equity interest held by CITIC Group and its aÇliates. CITIC Group has agreed with BBVA that, unless agreed upon otherwise, on or prior to the date falling 15 months after the Global OÅering, CITIC Group should take all actions, such as converting the A Shares held by it into H Shares and transferring such H Shares to third parties, to procure that we comply with the public Öoat requirements as then required by Hong Kong Stock Exchange without taking into account the shareholding of BBVA in us. BBVA agrees that it will not acquire any of our shares which will result in its shareholding in us to exceed 4.83% until we have complied with the public Öoat requirements without taking into account of the shareholding of BBVA in us, provided that the delivery of the 52,892,289 shares or the call option shares from CITIC Group to BBVA pursuant to the share and option purchase agreement shall not take eÅect prior to the date that we comply with the foregoing public Öoat requirements without taking into account of the shareholding of BBVA in us.

Exclusivity BBVA agreed that, other than any passive investment of less than 3% of the total outstanding shares of a publicly traded company in the ordinary course of investment business, BBVA and its aÇliates would not, without CITIC Group's prior written consent, voluntarily acquire or oÅer to acquire shares or securities

99 OUR STRATEGIC INVESTOR AND OTHER INVESTORS convertible into shares of a bank (other than us) that is (i) a Chinese-invested commercial bank, or (ii) a wholly-foreign owned commercial bank incorporated in the PRC, a Sino-foreign joint venture commercial bank incorporated in the PRC, or a PRC branch of a bank incorporated outside the PRC, which is permitted to conduct RMB-denominated banking services in the PRC (each entity in (i) and (ii) a PRC bank for the purpose of this section). If BBVA or its aÇliates intends to enter a merger or acquisition, which upon completion will result in BBVA or its aÇliate directly or indirectly holding 5% or more equity interests in any PRC Bank, BBVA is required to seek written waivers from CITIC Group.

If we or our aÇliates intend to enter a merger or acquisition, which upon completion will result in BBVA or its aÇliate directly or indirectly holding less than 5% equity interests in us, we are required to seek written waivers from BBVA. In addition, we agreed not to issue or dispose any of our shares to acquire shares of those competitors of BBVA set forth in the investor rights agreement, except where such a competitor of BBVA has acquired less than 3% of the total number of our outstanding shares in a passive equity investment in the ordinary course of investment business.

In carrying out our obligations in relation to the exclusivity rights under the investor rights agreement, our directors are not required to take any actions which are inconsistent with their Ñduciary duties under applicable laws and the Hong Kong Listing Rules.

Anti-dilution Right

Except in limited circumstances, if we issue additional ordinary shares or securities convertible into or exchangeable into additional shares in a public oÅering or otherwise, BBVA has a right to purchase such additional shares to maintain its percentage of ownership interest in our shares until and including the Global OÅering and the concurrent A Share OÅering. We also intend to grant BBVA anti-dilution right with respect to shares issuable under the Over-allotment Option. If the Over-allotment Option is exercised, BBVA would have the right to subscribe for additional H Shares to be issued under the Over-allotment Option. If the A Share OÅering does not proceed concurrently with the Global OÅering, BBVA's anti-dilution right will terminate immediately after the Global OÅering.

Rule 10.04 of the Hong Kong Listing Rules provides that an existing shareholder may only subscribe for or purchase any securities for which listing is sought if such securities are not oÅered to them on a preferential basis and no preferential treatment is given to them in the allocation of the securities, and the minimum prescribed percentage of public shareholders required by Rule 8.08(1) of the Hong Kong Listing Rules is achieved. We understand that BBVA intends to exercise its anti-dilution right with respect to the Global OÅering, the Over-allotment Option and the A Share OÅering and we have applied for and received a waiver pursuant to Rule 10.04 of the Hong Kong Listing Rules relating to BBVA's anti-dilution right. Pursuant to its anti-dilution right, BBVA is expected to purchase (i) 347,152,000 H Shares in the proposed concurrent Global OÅering and A Share OÅering (assuming that the Over-allotment Option is not exercised and CIFH exercises top-up right to maintain its shareholding at 15.17%) or (ii) 382,548,000 H Shares in the proposed concurrent Global OÅering and A Share OÅering (assuming that the Over-allotment Option is exercised in full and CIFH exercises its top-up right to top-up its shareholding to 15%). Shares issued pursuant to BBVA's exercise of its anti-dilution right may not be transferred until the Ñrst anniversary of the issuance of such shares. See ""Ì Transfer Restrictions.''

Information Rights

Except in limited circumstances, including dilution of BBVA's equity interest in us due to any exercise of Over-allotment Option in the Global OÅering or the A Share OÅering, for so long as BBVA, its aÇliates and the nominated investor hold at least 4.83% of our total outstanding shares, we agreed to furnish to BBVA (i) our annual audited consolidated Ñnancial statements, (ii) our consolidated balance sheet, income statement and statement of proÑt distribution and appropriation after the end of each half-year period, (iii) our quarterly management information, (iv) documents delivered to all shareholders, (v) annual operating budget or business plan, and (vi) any other information that BBVA may reasonably require to prepare Ñnancial and management reports and making any Ñlings. Such information rights granted to BBVA

100 OUR STRATEGIC INVESTOR AND OTHER INVESTORS under the investor rights agreement will lapse upon our listing on the main board of Hong Kong Stock Exchange.

Protection of Investor's Interest Except in limited circumstances, including dilution of BBVA's equity interest in us due to any exercise of Over-allotment Option in the Global OÅering or the A Share OÅering, for so long as BBVA, its aÇliates and the nominated investor hold at least 4.83% of our total outstanding shares and subject to applicable PRC laws and regulatory and stock exchange requirements, we agreed to consult with BBVA prior to taking any corporate action in respect of the following matters:

¬ the transfer of the whole or substantially the whole of our share capital to another company;

¬ any form of reorganization, including merger with another company;

¬ the sale or disposal of any material assets or properties or the cessation of material operations;

¬ any change to our Articles of Association that may materially and adversely aÅect the rights of BBVA;

¬ any public oÅering;

¬ any issue of our ordinary shares, or any options, warrants or other rights to acquire, or securities convertible into or exchangeable for, our ordinary shares;

¬ any removal of any director appointed following nomination by BBVA; and

¬ our dividend policy and payment or declaration of any dividend.

Strategic Cooperation Under the strategic cooperation agreement between BBVA and us, we agreed to, among others, the following rights and obligations.

Cooperation Committee The strategic cooperation will be carried out under the guidance and supervision of a cooperation committee. The cooperation committee will consist of six members, three appointed by each of BBVA and our bank. The chairman of the cooperation committee will be appointed by us and the vice-chairman will be appointed by BBVA. The cooperation committee may establish speciÑc working subcommittees with equal representation from each party. Each member of the cooperation committee will have one vote and decisions will take eÅect by majority vote and the aÇrmative vote of at least one member appointed by each party. The responsibilities of the cooperation committee include, among other things, determining the objectives of the strategic cooperation and identifying the steps to be taken in respect of the strategic cooperation. The cooperation committee has not been established as of the date of this prospectus.

Exclusivity

Establishment of Branches BBVA agreed not to establish any presence other than representative oÇces in the PRC without our consent except in limited circumstances. We agreed not to establish any presence other than representative oÇce in Spain.

Exclusivity in Key Business Cooperation Areas BBVA agreed not to engage in, within the PRC, any business (except for limited existing businesses set forth in the strategic cooperation agreement) in certain ""key business cooperation areas'' and ""core businesses'' set forth in the strategic cooperation agreement on its own or with any third party, except in cooperation with us.

101 OUR STRATEGIC INVESTOR AND OTHER INVESTORS

We agreed to grant BBVA a right of Ñrst oÅer on ""core businesses'' in respect of which we propose to cooperate with a foreign bank within the PRC. The forms of cooperation in ""core business'' areas include joint ventures, business cooperation units, cross-selling and agency business. If we propose to enter into a joint venture or business cooperation unit with a non-PRC commercial bank on a ""core business'', we agreed to Ñrst oÅer such opportunity to BBVA in writing, and such oÅer will remain open for an agreed period of time. The ""core businesses'' will initially be synonymous with the ""key business cooperation areas'', starting with the areas of retail banking, treasury business, risk management and information technology as set forth in the strategic cooperation agreement. The cooperation committee makes the determination on whether certain businesses are excluded from the deÑnition of ""core business'' and thus not subject to the right of Ñrst oÅer. After the cooperation committee determines the Ñrst batch of ""core business'', all business that is not a ""core business'' shall not be subject to the right of Ñrst oÅer. Once BBVA and we enter into cooperation agreements with respect to all the business areas in the Ñrst batch of ""core business'', BBVA's right of Ñrst oÅer will cease to be of any eÅect. Furthermore, if the cooperation committee fails to identify the Ñrst batch of core businesses within a certain period after the Initial Closing, BBVA's right of Ñrst oÅer will cease to be of any eÅect. Such period will end on the later of (i) the date 18-months after the Initial Closing and (ii) the date one month after the date that we comply with the public Öoat requirements as then requested by Hong Kong Stock Exchange without taking into account of the shareholding of BBVA in us. The exclusivity right of BBVA does not prohibit us from developing ""core business'' on our own or with domestic partners. In addition, we agreed not to engage within the PRC any cooperation with a foreign bank in a key business cooperation area without giving due consideration to BBVA in good faith. We and BBVA also agreed that credit card business would not be a key business cooperation area and that we would be free to carry on such business by ourselves. However, if we propose to cooperate with a foreign bank within the PRC in the credit card business, BBVA will have a right of Ñrst oÅer with respect to such credit card business for a certain period following the Initial Closing. Such period will end on the later of (i) the date 18-months after the Initial Closing and (ii) the date one month after the date that we comply with the public Öoat requirements as then requested by Hong Kong Stock Exchange without taking into account of the shareholding of BBVA in us. Our exclusivity arrangements with BBVA are subject to the Ñduciary duties of our directors under PRC Company Law, Hong Kong Listing Rule 3.08 and our Articles of Association.

Exclusivity in Non-Key Business Cooperation Areas With respect to any business area other than the key business cooperation areas, BBVA agreed that, except activities in relation to (i) certain passive equity investments of less than 3% of the outstanding shares of a public company whose principal business is Ñnancial business or (ii) private equity investments in a company whose principal business is not Ñnancial business, it will not to engage in, within the PRC, any business except in cooperation with us and with a third party with the prior written approval of the cooperation committee. We agreed not to engage in, within the PRC, any cooperation with any non-PRC commercial bank without giving due consideration to BBVA in good faith.

Exclusivity in BBVA's Territories In territories where BBVA has branches or subsidiaries, we agreed not to engage in any cooperation with any other bank without giving due consideration to BBVA in good faith.

Training and Expert Assistance For the three-year period after the Initial Closing, BBVA agreed to send Ñve experts per day on average to us in China to provide expert consulting assistance, and provide business training outside of China to ten employees of us per day on average. BBVA agreed to bear expenses, up to 41,000,000 per year, related to business training of our employees.

Technology Transfer We and BBVA will agree and execute agreements relating to the transfer to us of technology over which BBVA has proprietary intellectual property and technology developed by BBVA.

102 OUR STRATEGIC INVESTOR AND OTHER INVESTORS

Status of Strategic Cooperation As at the Latest Practicable Date, we have not implemented any actual business cooperation with BBVA, including the establishment of joint ventures or business units.

BBVA's Investment in CIFH Our promoter CIFH is the Ñnancial Öagship of CITIC outside Mainland China. It is an investment holding company with interests in commercial banking as well as other non-bank Ñnancial services. Its main operating business is CKWB. CKWB is a Hong Kong incorporated and licensed bank which provides a range of banking services and Ñnancial solutions to both corporations and individuals, focusing on retail banking, wholesale banking and treasury services. CITIC Group is also the controlling shareholder of CIFH. As part of CIFH's strategic vision to expand its regional capabilities, on November 22, 2006, CIFH entered into a subscription agreement with BBVA, under which BBVA, as a strategic investor, has agreed to subscribe for 668,574,374 shares of CIFH at a price of HK$5.83 each. On the same date, CITIC Group and BBVA entered into a share purchase agreement, under which CITIC Group agreed to sell to BBVA 167,143,593 shares of CIFH at a price of HK$5.83 each. On November 22, 2006, CIFH also entered into a non-legally binding cooperation memorandum of understanding with BBVA conÑrming the intention of the parties to pursue discussions in relation to business cooperation and proposed merger or acquisition by CIFH and/or CKWB of BBVA's existing wholesale banking business in Asia and an increase by BBVA of its shareholding interest in CIFH and/or a subscription for CKWB shares. Any future agreement or business arrangement will be subject to the requirements of the Hong Kong Listing Rules and other applicable laws and regulations. Both the subscription agreement and the share purchase agreement were completed on 1 March 2007 and, as at the Latest Practicable Date, BBVA held an interest of approximately 14.58% in CIFH. With eÅect from the completion of the subscription agreement, two directors nominated by BBVA were appointed as non-executive directors. BBVA is not a controlling shareholding shareholder of CIFH, and has no control over its management and operation through its two non-executive directors appointed to the board of CIFH. Even taking into account of BBVA's direct shareholding in us, BBVA is not able to assert any substantial inÖuence over our management and operation through its shareholding in CIFH.

Cornerstone Investors The Cornerstone Placing As part of the International OÅering, we and the Joint Global Coordinators have agreed to enter into placing agreements with the following investors, or the Cornerstone Investors, for the subscription by the Cornerstone Investors at the OÅer Price for such number of shares that may be purchased with an aggregate of approximately HK$1,600 million, or the Cornerstone Placing. Assuming an oÅer price of HK$5.46 per share, being the mid-point of the price range set out in this prospectus, the total number of H Shares subscribed by the Cornerstone Investor would be 293,040,000, which represents (i) 0.77% of the shares outstanding immediately following the completion of the Global OÅering and the A Share OÅering assuming that the Over-allotment Option is not exercised, (ii) without giving eÅect to the A Share OÅering, 0.81% of the shares outstanding immediately following the completion of the Global OÅering, assuming that the Over- allotment Option is not exercised, or (iii) 5.10% of the total shares oÅered in the Global OÅering and the A Share OÅering excluding the H Shares to be issued to BBVA and CIFH pursuant to the exercise of their anti-dilution right and top-up right, respectively.

Mizuho Corporate Bank, Ltd Mizuho Corporate Bank, Ltd. has agreed to subscribe for such number of H Shares (rounded down to the nearest whole board lot of 1,000 shares) which may be purchased for approximately HK$400 million at the OÅer Price. Assuming an oÅer price of HK$5.46 per share, being the mid-point of the price range set out in this prospectus, the total number of H Shares that the Mizuho Corporate Bank, Ltd. would subscribe for would be 73,260,000, which is (i) 0.19% of the shares outstanding immediately following the completion of the Global OÅering and the A Share OÅering, assuming that the Over-allotment Option is not exercised, (ii) without giving eÅect to the A Share OÅering, 0.20% of the shares outstanding immediately following the

103 OUR STRATEGIC INVESTOR AND OTHER INVESTORS completion of the Global OÅering, assuming that the Over-allotment Option is not exercised, or (iii) 1.27% of the total shares oÅered in the Global OÅering and the A Share OÅering excluding the H Shares to be issued to BBVA and CIFH pursuant to the exercise of their anti-dilution right and top-up right, respectively. Mizuho Corporate Bank, Ltd. is the wholesale banking arm of Mizuho Financial Group, a Ñnancial conglomerate, the ultimate holding company of which is Mizuho Financial Group, Inc. (""MFG''). MFG is listed on both the Tokyo Stock Exchange and the New York Stock Exchange with a market capitalisation of US$77.5 billion as of April 4, 2007. Mizuho Financial Group was formed in 2000 by combining the strengths of its predecessors, The Dai-Ichi Kangyo Bank, Limited, The Fuji Bank, Limited and The Industrial Bank of Japan, Limited. Mizuho Financial Group has a large customer base and far reaching connections through its various business entities throughout Japan.

National Council For Social Security Fund The National Council For Social Security Fund (the ""SSF'') has agreed to subscribe for such number of H Shares (rounded down to the nearest whole board lot of 1,000 shares) which may be purchased for approximately HK$400 million at the OÅer Price, through UBS AG in its capacity as the discretionary manager of the Hong Kong Equity Portfolio of SSF. Assuming an oÅer price of HK$5.46 per share, being the mid-point of the price range set out in this prospectus, the total number of H Shares that the SSF would subscribe for would be 73,260,000, which is (i) 0.19% of the shares outstanding immediately following the completion of the Global OÅering and the A Share OÅering, assuming that the Over-allotment Option is not exercised, (ii) without giving eÅect to the A Share OÅering, 0.20% of the shares outstanding immediately following the completion of the Global OÅering, assuming that the Over-allotment Option is not exercised, or (iii) 1.27% of the total shares oÅered in the Global OÅering and the A Share OÅering excluding the H Shares to be issued to BBVA and CIFH pursuant to the exercise of their anti-dilution right and top-up right, respectively. The National Social Security Fund is a fund set up by the PRC Government to provide social security for the nation's aging population and to support the nation's economic development and social stability. It is funded by government appropriations and proceeds form disposals of state-owned shares and other capital raising activities approved by the State Council and its own investment returns. The SSF manages and operates the National Social Security Fund.

PICC Property and Casualty Company Limited PICC Property and Casualty Company Limited (""PICC P&C'') has agreed to subscribe for such number of H Shares (rounded down to the nearest whole board lot of 1,000 shares) which may be purchased for approximately HK$400 million at the OÅer Price. Assuming an oÅer price of HK$5.46 per share, being the mid-point of the price range set out in this prospectus, the total number of H Shares that PICC P&C would subscribe for would be 73,260,000, which is (i) 0.19% of the shares outstanding immediately following the completion of the Global OÅering and the A Share OÅering, assuming that the Over-allotment Option is not exercised, (ii) without giving eÅect to the A Share OÅering, 0.20% of the shares outstanding immediately following the completion of the Global OÅering, assuming that the Over-allotment Option is not exercised, or (iii) 1.27% of the total shares oÅered in the Global OÅering and the A Share OÅering excluding the H Shares to be issued to BBVA and CIFH pursuant to the exercise of their anti-dilution right and top-up right, respectively. PICC P&C is a leading and one of the largest property and casualty insurance companies in China. Its predecessor, the People's Insurance Company of China, or PICC, was established in 1949 and has been regarded as one of the most long-standing and recognized insurance brands in China. PICC P&C provides a wide range of non-life insurance products. Its major product lines are motor vehicle insurance, commercial property insurance, homeowners insurance, cargo insurance, liability insurance, accidental insurance and credit and guarantee insurance, as well as reinsurance products relating to the above mentioned product lines. PICC P&C also conducts investment and assets management operations as permitted by PRC laws and regulations. PICC P&C was successfully listed on the Hong Kong Stock Exchange on November 6, 2003, and is the Ñrst Chinese Ñnancial institution whose shares are listed on an overseas exchange.

104 OUR STRATEGIC INVESTOR AND OTHER INVESTORS

China Life Insurance (Group) Company and China Life Insurance Company Limited

China Life Insurance (Group) Company (""China Life Group'') has agreed to subscribe for such number of H Shares (rounded down to the nearest whole board lot of 1,000 Shares) which may be purchased for approximately HK$200 million at the OÅer Price. Assuming an oÅer price of HK$5.46 per share, being the mid-point of the price range set out in this prospectus, the total number of H Shares that China Life Group would subscribe for would be 36,630,000, which is (i) 0.10% of the shares outstanding immediately following the completion of the Global OÅering and the A Share OÅering, assuming that the Over-allotment Option is not exercised, (ii) without giving eÅect to the A Share OÅering, 0.10% of the shares outstanding immediately following the completion of the Global OÅering, assuming that the Over-allotment Option is not exercised, or (iii) 0.64% of the total shares oÅered in the Global OÅering and the A Share OÅering excluding the H Shares to be issued to BBVA and CIFH pursuant to the exercise of their anti-dilution right and top-up right, respectively.

China Life Group, headquartered in Beijing, is a large state-owned Ñnancial and insurance enterprise. The subsidiaries of China Life Group include China Life Insurance Company Limited (a company listed on the Hong Kong Stock Exchange and the New York Stock Exchange), China Life Insurance Asset Management Company Limited and China Life Insurance (Overseas) Company Limited. China Life Group and its subsidiaries constitute one of the largest commercial insurance groups in Mainland China. China Life Group has been a Global Fortune 500 company since 2003. Apart from strengthening and developing life insurance and related asset management business through its subsidiaries, China Life Group focuses on capital management and new business development.

China Life Insurance Company Limited (""China Life Insurance'') has agreed to subscribe for such number of H Shares (rounded down to the nearest whole board lot of 1,000 shares) which may be purchased for approximately HK$200 million at the OÅer Price. Assuming an oÅer price of HK$5.46 per share, being the mid-point of the price range set out in this prospectus, the total number of H Shares that China Life Insurance would subscribe for would be 36,630,000, which is (i) 0.10% of the shares outstanding immediately following the completion of the Global OÅering and the A Share OÅering, assuming that the Over-allotment Option is not exercised, (ii) without giving eÅect to the A Share OÅering, 0.10% of the shares outstanding immediately following the completion of the Global OÅering, assuming that the Over-allotment Option is not exercised, or (iii) 0.64% of the total shares oÅered in the Global OÅering and the A Share OÅering excluding the H Shares to be issued to BBVA and CIFH pursuant to the exercise of their anti-dilution right and top-up right, respectively.

China Life Insurance is a company incorporated on June 30, 2003 in the People's Republic of China. The Company was successfully listed on the New York Stock Exchange and the Hong Kong Stock Exchange in December 2003, and successfully listed on the Shanghai Stock Exchange in January 2007. China Life Insurance is one of the largest life insurance companies in China. China Life Insurance has an extensive distribution network in China, comprising exclusive agents, direct sales representatives, and dedicated and non-dedicated agencies. China Life Insurance's products and services include individual life insurance, group life insurance, accident and health insurance. China Life Insurance is a leading provider of annuity products and life insurance for both individuals and groups, and a leading provider of accident and health insurance. China Life Insurance also provides both individual and group accident and short-term health insurance policies. Through its controlling shareholding in China Life Insurance Assets Management Co., Ltd., China Life Insurance is one of the largest insurance asset management companies, and one of the largest institutional investors in China.

Restrictions on Disposal by the Cornerstone Investors

Each of the Cornerstone Investors would agree that without the prior written consent of us and all the Joint Global Coordinators, it will not whether directly or indirectly, at any time during the period of twelve months following the Listing Date, or the Lock-up Period, dispose of any of the H Shares subscribed pursuant to the Cornerstone Placing. After the Lock-up Period, the Cornerstone Investors have further agreed to inform us in writing prior to the disposal of any of their H Shares subscribed pursuant to the Cornerstone Placing.

105 BUSINESS

OVERVIEW App 1A 28(1)(a) We are a competitive and fast growing national commercial bank in China and were the seventh largest CO 3rd Sch(1)(1) PRC commercial bank in terms of total assets.(1) As of December 31, 2006, our total assets were RMB 706,723 million. In 2006, we were ranked the 134th largest bank in the world in terms of total assets as of December 31, 2005 by the British magazine ""The Banker''. We were ranked fourth in terms of overall competitiveness among PRC commercial banks for the year 2005 by ""The Chinese Banker'' magazine. We have enjoyed rapid growth, enhanced proÑtability and improved asset quality in recent years. From December 31, 2004 to December 31, 2006, the compound annual growth rate, or CAGR, for each of our total assets, total loans, total deposits and net proÑt was 19.4%, 22.9%, 19.2% and 26.1%, respectively. Our non- performing loan ratio decreased from 6.3% as of December 31, 2004 to 2.5% as of December 31, 2006, reÖecting, among other things, our enhanced risk management function and increases in the amount of loans written oÅ. We believe that we have strong full-service capabilities to oÅer a comprehensive range of products and services to customers nationwide. As part of our strategy, we have focused on developing corporate customers in ""high quality industries and high quality enterprises'' and ""mainstream markets and mainstream customers'' and high- and medium-end retail customers. As a result, we have established an extensive and high quality customer base. Geographically, we have focused on the economically more developed eastern coastal regions of China and have established a strategically located branch network and, we believe, eÇcient distribution channel. We have received numerous awards in recent years in recognition of our superior business performance and strong management capabilities. According to the ""China Top 100 Banks'' list published by ""The Chinese Banker'' in 2006, our net proÑt growth rate in 2005 ranked second and our total assets as of December 31, 2005 ranked seventh among all PRC banks. We received the 2005 ""VISA Bank Card Comprehensive Innovation Award'' from VISA International. In 2006, our personal banking initiatives received the ""Excellence in Personal Banking Strategy and Execution Award'' from the 2006 Asian Banker Excellence in Retail Financial Services Award Programme. In the same year, we were named the ""best domestic provider'' of foreign exchange services in China by the ""Asiamoney'' magazine. In 2005 and 2006, our president, Dr. Chen Xiaoxian, received the ""China's Top Ten Finance Figures of the Year Award'' from ""The Chinese Banker'' magazine. We also received the ""Top Ten Growth Financial Institutions Award'' at the 2006 China International Finance Forum.

OUR COMPETITIVE STRENGTHS We believe the following key strengths provide us with a solid foundation from which we can quickly adapt to the changing market environment and continue to compete successfully in China's banking industry:

A competitive and fast-growing national commercial bank in China We were one of the largest Other National Commercial Banks in PRC in terms of total assets as of December 31, 2006. Our business has experienced rapid growth in recent years. According to data published by the PBOC, the CAGR for each of our total loans and total deposits from December 31, 2004 to December 31, 2006 were higher than the average CAGR of all PRC banks listed in Hong Kong or China. Our proÑtability increased in line with the growth in our net proÑt. Our average pre-tax return on assets (excluding management fee paid to CITIC Group) was 1.09% in 2005, which ranked us Ñrst among Other National Commercial Banks listed in Hong Kong or China. Our average pre-tax return on assets (excluding management fee paid to CITIC Group) increased to 1.19% in 2006. In 2005, our pre-tax proÑt per employee (excluding management fee paid to CITIC Group) was approximately RMB 520,000, which ranked us Ñrst among all PRC banks listed in Hong Kong or China. Our pre-tax proÑt per employee (excluding management fee paid to CITIC Group) increased to approximately RMB 620,000 in 2006.

(1) Our ranking in terms of total assets was based on relevant data as of December 31, 2005 because the relevant data of certain PRC commercial banks as of December 31, 2006 were not available as of the Latest Practical Date.

106 BUSINESS

Strong capabilities in providing banking services to an established corporate customer base We believe we have established leading market positions in many corporate banking areas among the Other National Commercial Banks. Our corporate loans and deposits outstanding as of December 31, 2006 both ranked second among all Other National Commercial Banks according to the PBOC. In 2006, our international trade settlement volume also ranked second among all Other National Commercial Banks. We were named the ""best domestic provider'' of foreign exchange services in China by the ""Asiamoney'' magazine in 2006. As of December 31, 2006, we were the fourth largest short-term bond underwriter among all PRC banks and the second largest among Other National Commercial Banks in terms of transaction volume. We have an established corporate customer base, with more than half of China's Fortune 500 companies as our customers. We were among the Ñrst Other National Commercial Banks qualiÑed to provide Ñnancial services to the Ministry of Finance and State Administration of Taxation. Through a competitive bidding process, we became a provider of non-tax revenue collection services to 29 of the 43 central government departments that have launched such services.

A personal banking business with strong and continuous growth Our personal banking business has experienced rapid growth in recent years, which we believe was in part attributable to our ""three dimensions and four promotions'' marketing initiatives, which we believe to be highly innovative and eÅective. From 2004 to 2006, our operating income from personal banking, personal loans and personal deposits increased at a CAGR of 43.0%, 23.5% and 48.9%, respectively. As of December 31, 2006, our personal deposits outstanding were RMB 105.9 billion. According to the PBOC, we became the third Other National Commercial Bank to reach RMB 100 billion in personal deposits outstanding. Deposits from aÉuent customers (with deposit balance of RMB 500,000 or more) represented more than 40% of our total personal deposits as of December 31, 2006. Furthermore, our credit card center began to issue credit cards in December 2003 and became proÑtable in December 2006, and we believe we were among the PRC banks which reached proÑtability in the least time. Our credit card active ratio was 74% as of December 31, 2006. We received the ""Excellence in Personal Banking Strategy and Execution Award'' from the 2006 Asian Banker Excellence in Retail Financial Services Award Programme.

A distinctive integrated Ñnancial services platform of CITIC Group Our controlling shareholder, CITIC Group, is one of China's leading state-owned multinational conglomerates focusing on Ñnancial services. Other aÇliates of CITIC Group include Ñnance companies engaged in a wide range of Ñnancial services, including securities, trusts, fund management, insurance and futures. In particular, each of CITIC Securities and CITIC Trust and Investment is one of the largest Ñrms among their respective PRC peers. We believe CITIC Group's distinctive integrated Ñnancial service platform will enhance our capabilities to oÅer our customers a full range of Ñnancial services and products and further increase our competitiveness in the medium- and high-end markets.

A tradition of innovation on Ñnancial services and products We have continuously focused on developing innovative Ñnancial services and products to adapt to the evolving market environment and meet the changing needs of our customers. Our innovative corporate banking services and products include Ñnance and tax services under the trademark "" '' (Yin Cai Tong), logistic Ñnancing products under the trademark "" '' (Yin Mao Tong), online tax and fee payment services under the trademark "" '' (WTO E-line), export tax refund account custody Ñnance services and export tax refund backed loans. We believe we have established leading market positions for these services and products through our product innovation. With respect to personal banking services and products, we believe we were the Ñrst PRC bank to oÅer international travel Ñnancial services. We also provide innovative high value-added account management services under the trademark "" '' (CITIC Smart). We have also launched a number of innovative credit card products, such as the CITIC Southern-Fund Co-branded Card ( ) and the CITIC Golf

107 BUSINESS

Card ( ). Our credit cards and debit cards have received numerous domestic and international awards.

An eÇcient distribution network We have strategically located our branch outlets in some of the most economically developed eastern coastal regions of China, including the Bohai Rim region, the Yangtze River Delta region and the Pearl River Delta and West Strait region. In 2006, 73.6% of our operating income was derived from these regions. We believe our strategically located branch network has contributed to our high network eÇciency. As of December 31, 2005, our average total assets, average loans and average deposits per branch outlet were RMB 1.43 billion, RMB 890 million and RMB 1.28 billion, respectively, which were signiÑcantly higher than RMB 1.09 billion, RMB 685 million and RMB 937 million, respectively, for the average of all PRC banks listed in Hong Kong or China. Our average total assets, average loans and average deposits per branch outlet further increased to RMB 1.58 billion, RMB 1.04 billion and RMB 1.39 billion, respectively, as of December 31, 2006.

Prudent risk management and improving asset quality We seek to establish an independent, comprehensive and dedicated risk management system with a vertical reporting line and our asset quality has continuously improved in recent years. Our eÅorts have focused on the following aspects of risk management: Culture and strategy. We seek to develop a risk management culture focusing on maximizing risk- adjusted returns. To this end, we have implemented a risk management strategy focusing on ""high quality industries and high quality enterprises'' and ""mainstream markets and mainstream customers''. Organizational structure. We have improved the structure of our risk management function in an eÅort to establish an independent risk management system. We believe that we are among the Ñrst PRC banks to centrally appoint risk managers of all branches, and among the Ñrst PRC banks to limit the credit approval powers of our president and general managers of our branches. Technology. We have continued to enhance our risk management technology in recent years in line with international best practices, by developing and upgrading our corporate credit rating system with assistance from McKinsey & Co. and Moody's KMV. Over the years we have signiÑcantly improved our asset quality. Our non-performing loans before write- oÅ, non-performing loan ratio and loans classiÑed as special mention as a percentage of total loans have decreased continuously since December 31, 2004. Our non-performing loan ratio decreased to 2.5% as of December 31, 2006 from 6.3% as of December 31, 2004. Our loans classiÑed as special mention as a percentage of our total loans decreased to 2.4% as of December 31, 2006 from 5.6% as of December 31, 2004.

An experienced management team with a proven track record Our management team has an average of over 20 years of relevant experience in China's Ñnancial services industry and has a proven track record in asset management and business development. Our chairman, Mr. Kong Dan, is also the chairman of CITIC Group and was formerly the vice chairman and president of China Everbright Group Limited. He has extensive experience in the Ñnancial sector and in the management of multinational conglomerates. Our vice chairman, Mr. Chang Zhenming, is also the vice chairman and president of CITIC Group, and was formerly the vice chairman and president of China Construction Bank. He has extensive experience in the Ñnancial and banking sectors and in the operation of the capital markets. Under the leadership of Mr. Chang, China Construction Bank was successfully listed on the Hong Kong Stock Exchange. Our president, Dr. Chen Xiaoxian, had worked at the PBOC for many years and was the executive vice president and a director of China Merchants Bank before joining us. He has extensive banking experience and

108 BUSINESS is a renowned expert and academic in China on bank operation and management. Dr. Chen received the ""China's Top Ten Finance Figures of the Year Award'' from ""The Chinese Banker'' magazine for two consecutive years in 2005 and 2006.

Strategic cooperation with BBVA We have established a strategic cooperation relationship with Banco Bilbao Vizcaya Argentaria, S.A., or BBVA, a leading Ñnancial institution in Spain and Latin America. We believe our strategic cooperation with BBVA will enhance our operational and management skills and our ability to improve shareholder value, as well as our international exposure.

OUR STRATEGY App 1A 34(1)(a) Our objective is to increase the value of our bank through balanced growth in terms of proÑtability, asset quality and asset size, and at the same time continue our focus on risk-adjusted returns. To this end, we intend to adopt management philosophies based on international best practices of the leading international and Chinese banks. Our speciÑc objectives include:

¬ establishing a business model focused on economic capital and risk-adjusted returns;

¬ promoting a balanced growth in our business between corporate banking and personal banking;

¬ optimizing customer base mix of large and SME customers taking into account regional characteristics;

¬ achieving a balanced mix in our sources of income between interest income and non-interest income;

¬ developing diversiÑed and integrated Ñnancial products;

¬ enhancing management capabilities with advanced technology; and

¬ enhancing our ability to achieve higher risk-adjusted returns with a view to becoming a modern bank competitive with the leading international and Chinese banks. With a view to achieving the above objectives, we intend to focus our eÅorts in the following areas:

Reinforce and further our strengths in corporate banking We follow a corporate banking customer strategy focused on ""high quality industries and high quality enterprises'' and ""mainstream markets and mainstream customers.'' Our corporate banking strategy consists of three speciÑc strategies. Enhance our management structure and selectively expand into targeted products and regions. We summarize this strategy as ""one-two-three-four'':

¬ ""One'': establishing ourselves in speciÑc regions as ""a'' primary bank in corporate banking among Other National Commercial Banks;

¬ ""Two'': strengthening the ""two''-tier corporate banking management comprising the head oÇce and branch oÇces;

¬ ""Three'': following a ""three''-tier integrated marketing system comprising the head oÇce, branch oÇces, and sub-branches.

¬ ""Four'': actively promoting ""four'' speciÑc product areas: corporate asset management business, investment banking, industry Ñnance, and SME business. Continue to expand our international business. We intend to continue to develop high quality customers, products and teams of employees. Our goal in expanding our international business is to become the most competitive, obtain the largest market share and establish the best known brand among the Other National Commercial Banks.

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Reinforce our leading market position in treasury operations. We seek to reinforce and strengthen our market leading position by enhancing our treasury operations business processes, developing new products and services, and building a high quality team of employees.

Accelerate the expansion of our personal banking business We intend to continue to reÑne our personal banking services with our own characteristics and with a focus on increasing the proÑt from personal banking business as a percentage of our total net proÑt. Continue to follow our ""three dimensions and four promotions'' personal banking initiative. We seek to expand our personal banking business by continuing to follow our ""three dimensions and four promotions'' initiative. By focusing on the ""three dimensions'' of our personal banking businesses, we mean customers, products, and core competency. By ""four promotions'', we mean strengthening our eÅorts to realize synergies between corporate and personal banking businesses, promoting product innovation, developing high quality professionals, and encouraging participation of all personnel. Focus on three aspects of developing our personal banking business. We intend to focus on three aspects: strengthen our customer base, enhance our customer service capabilities and enhance our wallet share, in an eÅort to meet the demands of customers of diÅerent market segments with diÅerentiated products. Develop a personal banking system with our own characteristics. First, we intend to focus on customers with a high demand for banking products and services by providing them with personalized services through a professional team of relationship managers. Second, we intend to reduce costs by increasing the use of electronic distribution channels as opposed to traditional distribution channels. Third, as our targeted personal banking customer segments are mass aÉuent and aÉuent customers, we intend to create a portfolio of products and services speciÑcally tailored to these customers. Focus on expanding in three areas with high growth potential. In an eÅort to enhance the proÑtability of our personal banking business, we intend to focus on three types of businesses with high proÑt and high growth potential, namely, personal wealth management business, personal consumption loan business and credit card business.

Continue to capitalize on the ""CITIC'' brand name and the integrated Ñnancial platform of CITIC Group We intend to strengthen our cooperation with the other Ñnancial subsidiaries of CITIC Group in product development and marketing, provide a greater diversity of products, reÑne our Ñnancial services capability, and increase our cross-selling eÅorts, with a view to providing customers with enhanced integrated Ñnancial products and service solutions.

Increase non-interest income as a proportion of our total income We intend to signiÑcantly increase the proportion of non-interest income as a percentage of our total operating income and to achieve a more stable income structure by launching more competitive products and services in the areas of our card business, personal wealth management business, corporate asset management business, international settlement business, treasury business on behalf of customers and investment banking business.

Expand and enhance distribution channels We intend to continue expanding our network of branch outlets based on our business development needs, selectively focusing on regions which are economically developed, with higher growth potential and greater regional coverage. In addition, we plan to expand and enhance our electronic banking (including internet banking and telephone banking), automated service machines and self-service banking centers, so as to be able to oÅer more services through electronic channels and provide customers with more convenient and prompt services while reducing costs.

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Enhance our information technology system We believe that we operate on an advanced information technology platform. We aim to further strengthen the integration of our business and management systems by enhancing our foundation technology platform, which we believe will make us among the Ñrst PRC banks to build an integrated information technology platform to support various aspects of our banking operations. We expect that, by integrating business operations, customer relationship management, management decision analysis and risk control, our information technology platform will allow us (i) more eÅectively to manage the services we provide to our high-end customers; (ii) to provide these customers with comprehensive and tailored services; (iii) to perform accounting analyses by business, product and department; and (iv) to determine, examine and conduct audits of the results and proÑtability of the relevant businesses, products, and various departments of our bank. We intend to further increase resources allocated to technology to strengthen the position of our information technology in the domestic banking sector.

Further strengthen our risk management and internal controls We plan to establish an independent, comprehensive and dedicated risk management system with a vertical reporting line by adopting the following speciÑc measures:

¬ Continue to cultivate a corporate culture that focuses on maximizing risk-adjusted returns;

¬ Establish credit, market and operational risk management units dedicated to managing each of these risks, appoint a risk management head to each line of business, establish independent and dedicated loan approval centers, appoint a chief audit oÇcer, and establish regional audit oÇces; and

¬ Continue to enhance risk management technology. We intend to enhance our ability to manage risks associated with transactions and loan portfolios, and formulate policies and strategies and seek to become among the Ñrst PRC banks to fully comply with the standards of Basel II. In an eÅort to enhance the eÇciency and soundness of our business operations, we intend to create an internal control system with standards that are high among PRC banks and consistent with practices of international banks. To this end, we intend to actively promote standardization and use of technology in terms of the technique, methodology, means and procedures of internal control, in accordance with regulatory requirements and international standards on internal control. Our enhanced corporate governance structure and internal control functions enables us to strengthen the compliance level of our overall monitoring system and internal policies and procedures, thereby reducing operational risks.

Continue to align management practices with international best practices We intend to further enhance our corporate governance structure based on international best practices by adopting a series of advanced management methods and tools and promoting a series of reforms in our organizational structure, with a view to centralizing decision-making processes and enhancing management skillset. We also intend to gradually transit to managing our bank based on business segments. In addition, we intend to manage our assets and liabilities by applying more quantitative measures and on a more timely basis by enhancing our asset and liability management system and funds transfer pricing mechanism, and by further enhancing the allocation of our Ñnancial resources. Furthermore, we cultivate a performance-based culture and intend to establish a more reÑned hierarchy of ranks and positions, strengthen our ability to counsel our employees on career development issues. We designed our strategies based on an analysis of our current business operations, asset size and industry trends, taking into consideration our speciÑc circumstances, with the view to becoming a leading commercial bank in China. We will leverage our competitive strengths to proactively develop new business products and services, create and identify new source of proÑts, increase our proÑtability, strengthen our risk management function and therefore enhance our overall competitiveness and management eÇciency.

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OUR PRINCIPAL BUSINESS ACTIVITIES Our principal business segments are corporate banking, personal banking and treasury operations. The following table sets forth the operating income by business segment for the periods indicated.

For the year ended December 31, 2004 2005 2006 % of % of % of Amount total Amount total Amount total (in millions of RMB, except percentages) Corporate bankingÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9,039 81.1% 11,009 80.6% 14,242 79.4% Personal banking ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,167 10.5 1,699 12.4 2,386 13.3 Treasury operationsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,018 9.1 1,260 9.2 1,767 9.9 Others and unallocatedÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (78) (0.7) (313) (2.2) (468) (2.6) Total operating incomeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11,146 100.0% 13,655 100.0% 17,927 100.0%

CORPORATE BANKING We have traditionally focused on corporate banking business and oÅer a broad range of loans, deposits and non-interest income products and services to our corporate customers, which include state-owned enterprises, private enterprises, foreign-invested enterprises, government agencies and Ñnancial institutions. As of December 31, 2006, we had RMB 369,156 million of corporate loans, representing 79.7% of our total loans, and RMB 45,636 million of discounted bills outstanding, representing 9.9% of our total loans. As of the same date, we had RMB 512,551 million of corporate deposits, representing 82.9% of our total deposits. For the year ended December 31, 2006, non-interest income from our corporate banking segment were RMB 938 million, representing 64.5% of our total non-interest income.

Products and Services Corporate Loans and Advances Corporate loans have historically been the largest component of our loan portfolio. Our corporate loans outstanding totaled RMB 369,156 million as of December 31, 2006, which increased from RMB 282,275 million as of December 31, 2005 and RMB 256,422 million as of December 31, 2004, representing a CAGR of 20.0%. Based on maturity, our corporate loans and advances may be classiÑed into short-term loans and medium- and long-term loans. The following table sets forth, as of the dates indicated, our corporate loans by maturity.

As of December 31, 2004 2005 2006 % of % of % of Amount total Amount total Amount total (in millions of RMB, except percentages) Short-term loans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 162,005 63.2% 182,606 64.7% 228,245 61.8% Medium- and long-term loansÏÏÏÏÏÏÏÏÏÏÏ 94,417 36.8 99,669 35.3 140,911 38.2 Total corporate loans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 256,422 100.0% 282,275 100.0% 369,156 100.0%

Short-term loans Short-term loans have maturities of no more than one year. As of December 31, 2006, our short-term corporate loans totaled RMB 228,245 million, representing 61.8% of our total corporate loans. Our short-term loans primarily consist of short-term working capital loans, international trade Ñnance and logistics Ñnance. For RMB-denominated short-term loans, we negotiate with customers an interest rate that is permitted by relevant laws and regulations. For foreign currency-denominated short-term loans, we charge an interest at

112 BUSINESS either a Ñxed or Öoating rate, depending on prevailing conditions of world Ñnancial markets, our cost of capital and the creditworthiness of customers. Working Capital Loans. We provide short-term working capital loans primarily to meet our customers' working capital requirements.

International Trade Finance. We provide a comprehensive range of international trade Ñnance App 1A 34(1)(c) products, primarily consisting of export and import bill purchasing, packaged loans, forfaiting and international factoring. We consistently focus on product innovation and seek to meet customer demand by introducing various new products. For example, in response to the market condition that enterprises may experience temporary liquidity problems caused by delays in export tax refunds, we introduced the Ñrst export tax refund account custody Ñnancing service in China, which was well received by the market. In order to provide short- term Ñnancing to exporting enterprises as well as assist them in managing risks related to account receivables, we designed and introduced post-insurance export bill purchasing in cooperation with China Export and Credit Insurance Corporation, or Sinosure. In 2006, the transaction volume of our post-insurance export bill purchasing ranked third among all PRC commercial banks and Ñrst among the Other National Commercial Banks. In addition, we were the third PRC bank to oÅer international factoring services to customers. We recently received the 2006 Factoring Chain International ""Global Export Factoring Service Quality Improvement Award,'' which we believe is the Ñrst such award received by a PRC Ñnancial institution. In 2006, the transaction volume of our international trade Ñnance business reached US$8.4 billion, representing a CAGR of 28% from 2004 to 2006. Logistics Ñnance. We provide integrated banking services to our targeted customers, and extend such services to their customers and suppliers. We provide various forms of short-term Ñnancing to manufacturers and distributors under our ""Yin Mao Tong'' ( ) brand, particularly in the automobile and steel industries. We provide short-term Ñnancing to distributors to purchase inventory from their manufacturers in the form of bank acceptance bills and enter into arrangements with the manufacturers to increase likelihood of repayment. Such arrangements make us an integral part of the business and Ñnancial links between the manufacturer and distributor, thus enhancing the stability of our relationships with customers. The manufacturer may elect to discount the bank acceptance bills with us and upon rediscounting such bills are converted into the manufacturer's short-term loan obligations with us. In 2006, we issued a cumulative total of RMB 34.6 billion and RMB 29.1 billion, respectively, in bank acceptance bills to automobile dealerships and steel distributors. We also generally require the distributor to make a deposit with us totaling more than 10% of the transaction value, which provides us with additional source of low cost funding. In 2006, we attracted a daily average deposit of RMB 12.0 billion and RMB 10.4 billion, respectively, from automobile dealerships and steel distributors through such arrangements. We received the ""Best Logistics Financing Award 2006'' from the Chinese Logistics Association in 2006.

Medium- and long-term loans Medium-term loans have maturities of longer than one year but no more than Ñve years, and long-term loans have maturities of more than Ñve years. As of December 31, 2006, our medium- and long-term loans totaled RMB 140,911 million, representing 38.2% of our total corporate loans. Our medium- and long-term loans primarily consist of Ñxed-asset loans. Based on the use of loan proceeds, our Ñxed-asset loans may be classiÑed into infrastructure development loans, technology improvement loans and technology development loans. Other medium- and long-term loans include medium-term working capital loans, syndicated loans and export credit loans. Consistent with our focus on asset quality and diversiÑcation, we lend to corporate borrowers in a wide range of industry sectors.

Discounted Bills Bill discounting is a type of credit service in which we purchase the outstanding commercial bills from the payee or bearer at a certain discount. There are two types of discounted bills: bank acceptance bills and commercial acceptance bills. We generally purchase bank acceptance bills and commercial acceptance bills that have a remaining maturity of less than six months. We provide this facility to our customers as a source of

113 BUSINESS short-term Ñnancing. The interest rate we charge for discounted bills varies according to the creditworthiness of the customers. As of December 31, 2006, we had RMB 45,636 million in discounted bills outstanding. As of that date, bank acceptance bills and commercial acceptance bills represented 86.7% and 13.3%, respectively, of our total discounted bills outstanding. Historically, we have experienced lower risks associated with bank acceptance bills than commercial acceptance bills. We had no non-performing discounted bills from December 31, 2004 to December 31, 2006.

Corporate Deposits Corporate deposits have been historically the largest component of our customer deposits. Our corporate deposits outstanding increased to RMB 512,551 million as of December 31, 2006, from RMB 459,321 million as of December 31, 2005, and RMB 387,246 million as of December 31, 2004, representing a CAGR of 15.0%. We oÅer two principal deposit products, demand deposits and time deposits to our corporate customers in Renminbi and major foreign currencies. As of December 31, 2006, our demand deposits and time deposits from corporate customers totaled RMB 260,971 million and RMB 251,580 million, respectively, representing 50.9% and 49.1% of our corporate deposits. As of the same date, our foreign currency-denominated corporate deposits totaled RMB 43,687 million, representing 8.5% of our corporate deposits. As of December 31, 2006, we had RMB 43,687 million in foreign currency-denominated deposits outstanding from corporate customers, which ranked us Ñfth among all PRC banks and Ñrst among the Other National Commercial Banks, according to the PBOC. Demand deposits accrue interest that is paid quarterly, and account holders may withdraw their funds at any time. Time deposits require that the customer maintain a deposit for a Ñxed term, during which interest accrues at a Ñxed rate. Account holders of time deposits may withdraw funds prior to maturity with interest payments calculated based on the demand deposit interest rate. We oÅer time deposit products with maturities of up to Ñve years. For foreign currency-denominated deposits equivalent to US$3.0 million or more, interest rates are freely negotiated with our customers. In addition, historically we oÅer to the postal savings bureau and insurance companies negotiated time deposit products with terms of more than three years, which generally have interest rates higher than regular time deposits. However, beginning in the second half of 2004, we have reduced the outstanding amounts of negotiated deposits we hold with a view to lower our cost of funding.

Non-interest Income Products and Services Our non-interest income products and services for corporate customers primarily consist of settlement services, guarantee services, short-term commercial papers underwriting, Ñnancial advisory, Ñnancial services to government agencies, custody services, entrusted loans, syndicated loan arranging and cash management services. In 2006, 2005 and 2004, net non-interest income from corporate banking segment totaled RMB 938 million, RMB 586 million and RMB 416 million, respectively, representing a CAGR of 50.2% from 2004 to 2006.

Settlement Services We oÅer a wide range of domestic and international settlement products and services. In 2006, our income from corporate settlement services increased by 28.0% to RMB 210 million, from RMB 164 million in 2005, and RMB 132 million in 2004, representing a CAGR of 26.1% from 2004 to 2006. In 2006, our income from corporate settlement services represented 22.4% of our total corporate non-interest income. Domestic settlement products and services. Our domestic settlement products and services primarily include promissory notes, checks, consignment collection and remittance. In addition, we provide integrated products and services. For example, we provide Ñnancial services to businesses in all links of the logistic chain under our ""Yin Mao Tong'' ( ) brand, which, through closed three-party arrangements, greatly simpliÑed Ñnancing procedures and provides a solution to the working capital need and Ñnancing diÇculties faced by small and medium enterprises. We also provide online tax and fee payment services under the ""WTO E-line'' ( ) brand in cooperation with China Customs and China E-Port. Through this eÇcient

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""one-stop'' customs report service, our customers may pay their export and import taxes and fees and other charges resulting from export and import regulations and services through the internet. International settlement products and services. Our international settlement products and services primarily consist of international letters of credit, international remittance, export and import collection and letters of guarantee. For the year ended December 31, 2006, the transaction volume of our international settlement services was US$67.8 billion, ranking us second among the Other National Commercial Banks. The transaction volume of our international settlement services in 2006 increased by 45.8% to US$67.8 billion from US$46.5 billion in 2005 and US$33.5 billion in 2004, representing a CAGR of 42.3% from 2004 to 2006.

Guarantee Services We oÅer our corporate customers bank guarantees primarily in the form of letter of guarantees and standby letters of credit. We receive a fee for providing guarantees. In 2006, our income from guarantee services increased to RMB 215 million from RMB 162 million in 2005 and RMB 129 million in 2004, representing a CAGR of 29.1% from 2004 to 2006. In 2006, our income from guarantee services represented 22.9% of our total corporate non-interest income.

Short-term Commercial Papers Underwriting We are among the Ñrst PRC banks to underwrite short-term commercial papers. The issuance of debt securities has been historically restricted as a form of Ñnancing in the PRC. Since the PRC Government permitted the underwriting of short-term commercial papers in May 2005, we have actively sought to develop our capabilities in this product area. Since the inception of this business in May 2005 to December 31, 2006, we had successfully underwritten short-term commercial papers for 18 corporate enterprises with a total transaction value of RMB 38.3 billion, which ranked us fourth among the PRC banks based on transaction value. In 2006, non-interest income from underwriting short-term commercial papers totaled RMB 83 million, representing 8.8% of our total corporate net non-interest income. In 2005, our non-interest income from underwriting short-term commercial papers was RMB 57 million. We believe we were the Ñrst PRC bank to underwrite U.S. dollar-denominated bonds for a PRC company in the U.S. since the establishment of the PRC, with a US$250 million debt oÅering for China CITIC Group in 1993. We also underwrote CITIC Group's Ñrst issuance of commercial paper in Japan in 1994, which we believe was the Ñrst such issuance since the foundation of the PRC.

Financial Advisory We provide Ñnancial advisory services, including those to companies conducting restructurings and mergers and acquisitions. In providing these services, we mainly target high quality, large-scale enterprise groups. We charge a Ñxed fee for general Ñnancial advisory services and charge a fee based on a percentage of the transaction amount for services related to project Ñnancing and merger and acquisition transactions. In 2006, our income from Ñnancial advisory services totaled RMB 45 million, increasing from RMB 18 million from 2005. We were among the Ñrst PRC banks to provide Ñnancial advisory services related to asset securitization. In 2006, we were the Ñnancial advisor to the largest special asset administration program listed on Shenzhen Stock Exchange.

Financial Services to Government Agencies We oÅer Ñnancial services to China's Ministry of Finance, such as deposit-taking and non-tax revenue collection, on behalf of governmental departments and agencies. Through a competitive bidding process, we became one of four banks in China qualiÑed to provide non-tax revenue collection services. As of December 31, 2006, we were the service provider to 29 of the 43 central government departments that have launched this type of service. Our branch oÇces also provide similar services to local governments. In June 2006, we became one of two PRC banks qualiÑed as fund custodian banks on behalf of State Administration of Taxation. We are authorized to provide to all tax administration government agencies at the county level

115 BUSINESS and above deposit and settlement services in connection with funds under custody of such agencies. We believe that we attract large amount of low cost deposits through oÅering such services.

Custody Services In 2004, we became qualiÑed to provide securities investment fund custody services. Our custody services primarily include securities investment fund custody, assets custody for customers of securities Ñrms and trust companies and corporate annuities custody. One of the stock investment funds under our custody was the largest new fund of its type in 2005. In an eÅort to provide professional wealth management services and build and expand our customer base, we focus on product development and innovation and improving the management policies and procedures of the business management and risk management of our custody services. As of December 31, 2006 and 2005, we had approximately RMB 12.32 billion and RMB 6.97 billion, respectively, of assets under custody.

Others We also provide entrusted loan, syndicated loan arranging and cash management services to our corporate customers. An entrusted loan is a lending arrangement where a lending entity deposits funds in our bank and requests our bank to on-lend the funds to a designated company according to the lending entity's speciÑc conditions as to loan purpose, amount, term and interest rate. We do not assume the borrower's credit risk. As of December 31, 2006, 2005 and 2004, the total amount of entrusted loan disbursements was RMB 21.99 billion, RMB 14.85 billion and RMB 10.15 billion, respectively. Syndicated loans are loans oÅered and negotiated by multiple banks or other Ñnancial institutions to a single borrower under the same loan arrangement. Other than ordinary interest income, banks will have other incomes based on their roles in providing the syndicated loans, such as administrative fees, agent fees, management fees and commission fees. Many of the syndicated loans in which we participated were well received by the market and we acted as the leading administrative agent for China's Ñrst export credit syndicated loan. We provide cash management services to large corporate customers to assist them in managing their cash Öow. Our cash management services to corporate customers include mainly the online banking system and group customer corporate account management system.

Customer Base and Marketing Customer Base We have a well-established corporate customer base in some of the most economically developed regions in China such as the Bohai Rim region, the Yangtze River Delta region, the Pearl River Delta and West Strait region. As of December 31, 2006, we had 196,980 corporate deposit customers, of which 82.8% were located in these three regions. As of the same date, we had 11,666 corporate loan customers, of which 80.5% were located in these three regions. Our customers include many of Chinese leading companies. For example, in 2005, 253, or 50.6%, of China Fortune 500 Corporations were our customers. In addition, we have well- established cooperational relationships with China's various government departments and, through a competitive bidding process, became one of the few PRC banks qualiÑed to provide tax revenue custody services. We provide treasury deposit services to the MOF and non-tax revenue collection services to 29 of the 43 central government departments that have launched this type of service. We are also a custodian bank for the State Administration of Taxation. In 2005, in an eÅort to enhance our overall asset quality, we developed a customer identifying strategy of targeting ""high quality industries and high quality enterprises'' and ""mainstream markets and mainstream customers'', which are customers we believe to have superior credit proÑles. We provide detailed guidance on

116 BUSINESS identifying and marketing our products and services to these customers in our annual credit policy, which also sets out certain high-risk industries and markets in which to reduce our exposure.

In addition, we select certain strategic customers among our ""high quality industries and high quality enterprises'' and ""mainstream markets and mainstream customers.'' For these current and potential strategic customers, we oÅer a full range of tailored services through dedicated service teams formed personnel from relevant departments. We consider strategic customers to be those corporate customers with superior reputation, development potential and creditworthiness. In particular, these include enterprises that enjoy relative monopoly positions, national conglomerates, leading enterprises in key industries, enterprises that enjoy regional dominance, China-based enterprises invested by leading multinational enterprises, government agencies and social organizations that have substantial impact on our assets, liabilities and non-interest income business, and other customers that have substantial overall impact on our business. We selected 165 bankwide strategic customers and 1,497 regional strategic customers in 2006. As of December 31, 2006, the corporate loans to our strategic customers represented just under 40% of our total corporate loans, and deposits from such customers represented just under 33% of our total corporate deposits.

Marketing

We use a three-tier (head oÇce, branch and sub-branch) management and marketing model. Our head oÇce is in charge of formulating our overall business development plans and strategies and developing our bank-wide marketing initiatives and guidelines. Our branches and sub-branches are responsible for implementing plans and strategies formulated by the head oÇce and conducting direct marketing activities. Our head oÇce actively seeks to establish business relationships directly with the head oÇces of our strategic customers in an eÅort to enhance the eÅectiveness of our marketing eÅorts. Furthermore, in an eÅort to enhance our abilities to develop and maintain more high-quality corporate customers, we have established an internet banking system for corporate customers, a group customer cash management system and an investment banking platform.

Currently, our marketing eÅorts are primarily carried out by over 3,000 corporate customer relationship managers. We are increasingly shifting to a product- and brand-focused marketing approach, which we believe will enable us to provide better products and services with greater consistency through our bank. We have introduced various brands, including "" '' (Yin Cai Tong), "" '' (Yin Mao Tong) and "" '' (WTO E-line), and strengthened our leading positions in our target industries and customers. In addition, in an eÅort to provide the better customer services, we have placed great emphasis on teamwork and cross- department initiatives in marketing activities. Our product support department works closely with customer relationship managers to design service plans, conduct marketing visits and manage customer relationships. Furthermore, capitalizing our relationship with CITIC Group, we increased our cross-selling eÅorts between us and other Ñnancial service subsidiaries of CITIC Group and expanded our corporate banking business, including investing banking.

PERSONAL BANKING

The principal components of our personal banking business consist of personal loans, personal deposits, bank card business, personal wealth management and international travel Ñnancial services. As a result of our eÅorts to develop our personal banking business and the implementation of our personal banking development strategy and marketing initiatives such as ""three dimensions and four promotions,'' our personal banking business has experienced signiÑcant growth in recent years. As of December 31, 2006, we had RMB 48,375 million in personal loans outstanding, representing 10.4% of our total loans, and RMB 105,861 million in personal deposits, representing 17.1% of our total deposits. In 2006, net non-interest income from our personal banking segment totaled RMB 187 million, representing 12.9% of our total net non-interest income.

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We have built our personal banking business on a record of innovation. For example:

¬ In May 1992, we believe we were the Ñrst bank in China to install foreign currency ATMs;

¬ In March 1994, we established a partnership with American Express and believe we were the Ñrst bank in China to oÅer speedy remittance services through MoneyGram;

¬ In 2001, we believe we were the Ñrst bank in China to introduce international travel Ñnancial services; and

¬ In 2006, our innovative marketing initiative, which we refer to as ""four promotions'', received the ""Excellence in Personal Banking Initiative and Execution Award'' from the 2006 Asian Banker Excellence in Retail Financial Services Award Programme.

Products and Services Personal Loans Our personal loans have experienced signiÑcant growth in recent years. As of December 31, 2006, our personal loans outstanding totaled RMB 48,375 million, which increased from RMB 37,834 million as of December 31, 2005 and RMB 31,730 million as of December 31, 2004, representing a CAGR of 23.5%.

We oÅer four types of personal loans to our customers under the "" '' (CITIC Happy Family) brand: residential mortgage loans, individual commercial loans, personal consumption loans and education loans.

Residential Mortgage Loans We provide various residential mortgage loan products in response to customer needs, both for the purchase of newly-built and second-hand residential properties. The market demand for residential mortgage loans has been increasing rapidly in recent years. Residential mortgage loans have generally been a product with relatively low non-performing loan ratios. Accordingly, we have sought to increase residential mortgage loans as a percentage of our total personal loans. Residential mortgage loans represented 75.4%, 69.3% and 56.2% of our total personal loans as of December 31, 2006, 2005 and 2004, respectively. As of December 31, 2006, residential mortgage loans outstanding totaled RMB 36,470 million, which increased from RMB 26,246 million in 2005, and RMB 17,838 million in 2004, representing a CAGR of 43.0%. We received the ""2006 Annual Distinguished Personal Housing Loan Provider in China'' award from Hexun.com.

Individual Commercial Loans Individual commercial loans primarily consist of individual commercial mortgage loans and individual business loans. We oÅer individual commercial mortgage loans for the purchase of commercial properties by individuals. We generally grant these commercial mortgage loans up to 60% of the value of the property and the loan term normally does not exceed 10 years. We have recently restricted our lending policy on individual commercial loans because we have experienced relatively high non-performing loan ratios in these products. Individual commercial loans as a percentage of our total personal loans decreased to 12.1% as of December 31, 2006 from 23.2% as of December 31, 2004.

Personal Consumption Loans Our personal consumption loans are used for purposes such as home improvement and purchases of durable goods. As of December 31, 2006, we had RMB 3,951 million of personal consumption loans outstanding, representing 8.2% of our total personal loans. We oÅer automobile loans for personal use, which are secured by the purchased automobile or residential properties. We generally grant loans up to 50% of the purchase price of the automobile if secured by the purchase automobile, and up to 60% if secured by residential properties. Our target customers for personal automobile loans are those preferred customers whom we consider to have sound credit. As of December 31,

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2006, we had RMB 354 million of personal automobile loans outstanding, decreasing from RMB 1,474 million as of December 31, 2004.

Education Loans We provide education loans for students who plan to study abroad. Risks associated with education loans are generally lower because the vast majority of such loans are secured by cash deposits with us. As of December 31, 2006, we had RMB 457 million of education loans outstanding, which increased from RMB 105 million as of December 31, 2004, representing a CAGR of 108.6%.

Personal Deposits We oÅer several deposit products, including demand deposits, time deposits and call deposits, to our personal banking customers in Renminbi and other major foreign currencies. Demand deposits bear interest at a rate set by the PBOC and account holders may withdraw funds at any time. Time deposits require that the customer maintain a deposit for a Ñxed term, during which interest accrues at a Ñxed rate. Account holders may withdraw funds from time deposits prior to maturity with interest payment calculated based on the demand deposit interest rate. Currently, we oÅer time deposit products with maturities of up to Ñve years. Our call deposit products bear higher interest rates than demand deposits and permit withdrawals upon either a one-day or a seven-day prior notice. In particular, we oÅer a featured personal wealth management product under the trademark "" '' (CITIC Smart). This product is designed for our deposit customers to have more Öexibility and earn more interest on their deposits by optimizing their deposit portfolios based on their needs and eÇciently allocating their deposits among various time and demand deposits. We have sought to increase personal deposits as a percentage of our total deposits as personal deposits represent a stable source of funding. In coordination with the head oÇce, each branch has carried out deposit marketing activities, supported by performance assessment programs. In addition, we have increased our cross-selling eÅorts between our corporate banking and personal banking businesses. In particular, we have sought to attract deposits from employees of corporate customers for which we provide payroll services. As a result of our eÅorts, personal deposits outstanding totaled RMB 105,861 million as of December 31, 2006, which increased from RMB 71,252 million as of December 31, 2005, and RMB 47,774 billion as of December 31, 2004, representing a CAGR of 48.9%.

Non-interest Income Products and Services We oÅer our personal banking customers a wide range of non-interest income products and services such as bank cards, personal wealth management and international travel Ñnancial services. Net non-interest income from our personal banking business totaled RMB 187 million in 2006, which increased from RMB 116 million in 2005 and RMB 78 million in 2004, representing a CAGR of 54.8%.

Bank Cards We oÅer a variety of debit card and credit card products to our customers. We began oÅering RMB debit cards to our customers in 1999, RMB credit cards and dual-currency credit cards in 2003, and dual-currency debit cards in 2005. Both types of bank cards have experienced signiÑcant growth since 2003. In 2006, fees from our bank card business totaled RMB 199 million, which increased from RMB 86 million in 2005 and RMB 58 million in 2004, representing a CAGR of 85.2%. We received the 2005 ""VISA Bank Card Comprehensive Innovation Award'' from VISA International. We are a member of China UnionPay, a bank card network organization headquartered in China. Our bank cards are accepted through the China UnionPay network in China and 23 other countries or regions as well as Citigroup's global ATM network. As of December 31, 2006, members of China UnionPay consisted of 189 banks and non-bank Ñnancial institutions. As of December 31, 2006, approximately 579,000 merchants and 903,000 point-of-sale, or POS, terminals were connected to the China UnionPay network. We are also a

119 BUSINESS member of VISA International and MasterCard International. VISA and MasterCard cards issued by us can be used worldwide through VISA and MasterCard networks, respectively.

Debit Cards A debit card is directly linked to the cardholder's bank account, and accordingly, the cardholder cannot withdraw amounts in excess of the deposits held in their respective bank accounts. As of December 31, 2006, approximately 10.2 million debit cards issued by us were outstanding. We began, in November 2005, to oÅer RMB- and U.S. dollar-denominated dual-currency debit cards which can be used on POS terminals and ATMs through the China UnionPay network and the VISA network. We received the ""Product Innovation Award for Standard Debit Card'' in 2005 and the ""Best Product Design Award for Standard Debit Card'' in 2006 from China UnionPay.

Credit Cards As credit cards become an increasingly accepted payment alternative in China, we expect our credit card business to continue to experience signiÑcant growth. We centrally manage our credit card business through our credit card center in Shenzhen established in December 2002. The personal banking departments in our tier one branches manage our credit card operations locally. Currently credit cards are marketed through our regional direct-sales credit card centers located in 25 cities, as well as through our tier one branches and indirect marketing channels (particularly through co-brand partnerships and 9 agencies that have 74 locations and employ approximately 1,400 marketing and promoting agents). In December 2005, our credit card customer service center became the Ñrst in China to receive ISO9001:2000 International CertiÑcation for quality management systems in credit cards. In addition, our credit card business has received a number of domestic and international awards, including ""Excellence in Product Design Award'' from VISA International in 2003, ""Excellence in Product Design Award'' and ""Best Platinum Card Award'' from MasterCard International in 2004. In November 2005, our credit cards received the ""2005 World Finance Laboratory Annual Award Ì 2005 Top Ten China Bank Cards Award'' by the World Finance Laboratory and Wswire.com. Our ""Magic'' cards received the ""Most Valuable Female Credit Card Product Award'' in March 2006. Our credit cards also were ranked second and received the ""2006 China Credit Cards Best Customer Experience Award'' at the Ñrst annual ""China Credit Card Watch and Evaluation Conference'' organized by Hexun.com. We oÅer both single-currency credit cards and dual-currency credit cards. Our primary credit card product is our RMB- and U.S. Dollar-denominated dual-currency credit card, which we began issuing in 2003. We also issue RMB- and Hong Kong dollar-denominated dual-currency credit cards. Our dual-currency credit cards are accepted in China through our own network and China UnionPay network, and overseas through VISA, MasterCard and China UnionPay networks. In addition, we oÅer cards that target diÅerent market segments. We oÅer co-branded cards in conjunction with, among others, airlines and fund management companies. We target our golf credit cards at high-end customers, ""Magic'' cards at female customers and ""I-Card'' at college students. The number of our credit cards issued has increased at a rapid rate in recent years. As of December 31, 2006, we had issued approximately 2.28 million credit cards (including 1.01 million issued in 2006), which increased from approximately 1,270,000 as of December 31, 2005 and approximately 310,000 as of December 31, 2004. According to VISA International, based on the number of cards issued, dual-currency VISA credit cards issued by us ranked third among all banks in China as of December 31, 2005. For the year ended December 31, 2006, the total volume of our credit card transactions was RMB 7.6 billion. In 2005, 4.9 million transactions were conducted using our credit cards, with a total transaction volume of RMB 2.9 billion. Credit card fee income primarily consists of commissions from merchants, interest charges, cash advance fees and annual fees.

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Personal Wealth Management Services We have a strategic focus on personal wealth management services. We provide Ñnancial advisory services and comprehensive Ñnancial management services. We classify our personal wealth management customers into ordinary customers and VIP customers.

As of December 31, 2006, we had 38,526 VIP customers. As of the same date, we had 34 dedicated VIP service centers, 246 VIP service oÇces, 446 VIP service counters and 946 experienced VIP service managers that provide personal wealth management services. We also have an advisory team consisting of Ñve outside experts from the securities, fund management, insurance, trust and commodity futures industries and our own expert in foreign exchange business. In 2005, four of our wealth management products were ranked among the top ten wealth management products in China by Hexun.com. In 2006, we received the ""Annual Wealth Management Product with Best Investment Value'' award from Hexun.com.

We provide one-on-one wealth management services to our VIP customers through our VIP service managers. Our VIP customers enjoy discounts and other value-added services provided by our partners, including airports, golf clubs, restaurants, shopping centers and Ñtness clubs. We also provide quality of life services, such as medical and legal services, to our VIP customers. We also plan to oÅer private banking services to customers with daily average assets under our management of RMB 5 million or more.

International Travel Financial Services We believe we were the Ñrst commercial banks in China to have oÅered international travel Ñnancial services. In 1999, we became the exclusive agent providing visa-related agency services collection for the United States Embassy in Beijing. We currently oÅer secure, fast and convenient one-stop international travel Ñnancial services to Ñve categories of people (Chinese students, tourists, business travelers and emigrants, and nationals of other countries traveling to China). We also act as an agent in providing visa-related agency services for the embassies of Germany, Japan, Italy, Singapore and South Africa. In addition, we oÅer letters of guarantee and student loans in connection with studying abroad, foreign exchange services for personal use, travelers' checks and other products and services related to international travel.

In 2005, we consolidated our international travel Ñnancial services under the ""CITIC International Travel'' ( ) brand, for which we received the second prize of the ""2005-2006 China Excellence in Marketing Awards'' jointly sponsored by ""The Economic Observer'' and Hong Kong Management Association. This brand also received the ""2006 China's Best Brand Building Case Award'' jointly awarded by the ""21st Century Economics Report'' and international consulting Ñrm Interbrand in September 2006. In 2006, we provided agency services in approximately 505,554 visa-related transactions.

Others We also provide other personal banking services such as fund transfer between banking accounts and securities accounts, fund investment, insurance, personal foreign exchange trading, payroll services, utility payment service and safe-deposit box services.

Customer Base and Marketing

Customer Base We have an extensive base of personal banking customers. As of December 31, 2006, we had approximately 10.6 million personal banking customers, approximately 77.1% of which were located in the Bohai Rim region, the Yangtze River Delta region, the Pearl River Delta and West Strait region. We classify our personal banking customers into three segments: mass market customers, mass aÉuent customers and VIP customers. Although we market our products to customers of all segments, we focus our marketing eÅorts on mass aÉuent and VIP customers. We deÑne mass aÉuent customers as those who have assets of RMB 50,000 to RMB 500,000 under our management and we deÑne VIP customers as those who have assets of no less than RMB 500,000 under our management. As of December 31, 2006, we had 38,526 VIP customers.

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Marketing Our head oÇce formulates general marketing initiatives and sets marketing guidelines for our bank-wide personal banking products, which are implemented by our branches. Our head oÇce also centrally manages our marketing eÅorts to maintain the bank-wide consistency and improve the eÅectiveness of our marketing initiatives. In 2006, we increased our eÅorts in personal banking brand building and marketing, and through cooperating with agencies and media organizations we enhanced brand recognition of our personal banking products and services in the market. In recognition of our marketing initiatives, we received the ""Excellence in marketing'' award from Hexun.com in January 2007. We also received the ""2006 Annual Distinguished Banking Service Provider in China'' from Hexun.com. In addition, some of our brands, including ""CITIC International Travel'' ( ) and ""Magic'' credit cards, have received various awards. We believe the further promotion of these brands will beneÑt the expansion of our personal banking business. We have adopted a ""three dimensions and four promotions'' initiative to expand our personal banking business. ""three dimensions'' refer to the measures we have taken to improve our personal banking business from three perspectives:

¬ developed diversiÑed products and services that meet the needs of diÅerent customer segments;

¬ developed a comprehensive personal banking business structure and product lines that include liabilities, assets and non-interest income products and services; and

¬ built core competency in terms of information technology systems, products and personnel. ""Four promotions'' refer to four aspects of our strategy to acquire new customers, cross-sell products to existing customers and increase business volume from existing customers:

¬ Realizing synergies between corporate and personal banking businesses. We promote our personal banking business by enhancing the cooperation between our corporate and personal banking businesses and promoting cross selling between the segments. In 2005, we increased our eÅorts in developing payroll services, corporate cards and wealth management services for senior managers. Our branch oÇces also adopted marketing measures such as customer classiÑcation and assigning potential customers to speciÑc customer relationship managers. As a result of the enhanced cooperation between our corporate and personal banking businesses, transaction value of our payroll services totaled RMB 35,836 million in 2006, which signiÑcantly contributed to the growth in our deposits.

¬ Product innovation. With a view to expanding our customer base and promoting the growth of our personal banking business, we have continuously introduced new products that meet market demand through product innovation. In 2006, we sold 31 RMB-denominated personal wealth management products with a total value of RMB 17,414 million; and 70 foreign currency-denominated products in 20 series with a total value of US$1.5 billion. We also acted as distribution agent for seven mutual funds, with a total transaction value of RMB 838 million. We believe our innovative products satisÑed customer needs and supported the expansion of our business.

¬ High quality professionals. We also stimulate the growth of our personal banking services through improving the professional skills of our personnel. In 2005, we built a high quality personal wealth management service team revolving around our VIP wealth management system. This team of managers contributed signiÑcantly to the growth of our personal banking business. In 2006, the daily average balance of assets under management was approximately RMB 55.1 million per manager.

¬ Participation of all personnel. We have adopted eÅective measures to motivate all personnel to participate in marketing initiatives. Personal banking business became a bank-wide focus in 2005 as a result of our eÅective internal education and organization and our measures to motivate all our personnel to participate in marketing eÅorts. In June 2006, our ""four promotions'' initiative received the ""Excellence in Retail Banking Initiative and Execution Award'' from the 2006 Asian Banker Excellence in Retail Financial Services (RFS) Awards Programme.

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TREASURY OPERATIONS

Our treasury operations primarily consist of money market activities, investment portfolio management, foreign exchange operations and treasury transactions on behalf of our customers. In 2006, operating income from our treasury operations totaled RMB 1,767 million, representing 9.9% of our total operating income.

Money Market Activities

We generally use money market tools to manage our liquidity. Our money market activities primarily consist of (i) short-term borrowings from and loans to other domestic and foreign banks and non-bank Ñnancial institutions; and (ii) to a lesser extent, repurchase transactions. As of December 31, 2006, we were a net lender in the inter-bank money market and in purchases of securities under reverse repurchase agreements, with a net receivable of RMB 29,435 million.

Investment Portfolio Management

Our investment portfolio primarily consists of government or high-rating debt securities and derivatives. Our RMB-denominated investment securities primarily include bonds issued by the PRC Government and PRC policy banks, bills issued by the PBOC and bonds issued by PRC commercial banks. Our foreign currency-denominated investment securities primarily include foreign currency-denominated bonds issued by foreign governments, government agencies, Ñnancial institutions, corporations and international organizations. We also invest in mortgage-backed securities and asset-backed securities. Our foreign currency-denominated securities generally have a Moody's credit rating of A or above. In addition, we enter into Ñnancial derivative transactions, including swap and option contracts to hedge our market risk exposure. According to International Financial Reporting Standards, we classify our investment portfolio into (i) held-to-maturity, (ii) available-for-sale, and (iii) debt securities at fair value through proÑt or loss (primarily consisting of debt securities held for trading purposes).

We manage our investment portfolio according to the investment guidelines established by the market risk committee, which we review and update on an annual basis. These guidelines set forth the requirements regarding the portfolio size, durations, industry and country concentration and credit rating of issuers of securities in our investment portfolio. We generally employ a top-down and bottom-up approach in managing our investment portfolio, pursuant to which we determine the asset allocation of the investment portfolio. Our asset allocation decisions are based on our assessment of the macroeconomic conditions of relevant countries and growth prospects of relevant industries, as well as our investment plan upon an assessment of our current positions. We analyze the market risk of our investment portfolio on a regular basis and adjust our investment strategy according to investment environment and market condition changes. See ""Risk Management Ì Market Risk Management.''

Foreign Exchange Operations

We are a leading foreign exchange bank among the PRC banks. We conduct spot and forward foreign exchange trading, and enter into foreign currency swap and option transactions. In 2005, we became licensed as a market maker for both G7 currencies and U.S. dollar-to-RMB transactions and one of the only three PRC banks to hold licenses for both. We ranked third among all market makers in China in terms of transaction volume for spot foreign exchange transactions for the Ñrst Ñve months of 2006. According to ""Asiamoney'' magazine, we were voted by Ñnancial institutions as the best domestic provider of foreign exchange services in China.

Treasury Transactions on Behalf of Customers

We primarily provide treasury and capital market services to customers through our treasury operations. Our products and services include currency risk management, interest rate risk management, investment management and Ñnancing intermediary services.

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PRODUCT PRICING Loans The interest rates we charge on RMB-denominated loans are currently subject to the minimum rates based on the PBOC benchmark rates. When determining our pricing, we take into consideration factors including, among others, the borrower's Ñnancial condition, nature and value of collateral, term of the loan, intended use of the loan and prevailing market conditions. We also consider cost of providing the loan, credit risk and general market competition when pricing our products and services. Relevant departments in our head oÇce establish internal general benchmark interest rates, based on which various business departments may determine their industry or geographic benchmark rates according to the characteristics of their businesses. Our branches may set prices within the ranges of these internal benchmark rates established by our head oÇce. We generally charge higher interest rates on loans to small and medium enterprises, or SMEs, than loans to large companies because of the potentially higher credit risk of SMEs. As interest rates on loans are increasing liberalized, we expect to rely more on our ability to accurately calculate our expected risk-adjusted return on capital and further diÅerentiate our loan prices based on our internal analysis. Foreign currency- denominated loans are not subject to the PBOC benchmarks and we may freely negotiate interest rates with borrowers.

Deposits The interest rates on RMB-denominated deposits may not be higher than relevant PBOC benchmark rates. Interest rates on RMB-denominated demand deposits and regular time deposits with us are generally the same as the relevant PBOC benchmark rates. However, we are permitted to provide time deposits with negotiated interest rates, or negotiated time deposits, under certain circumstances. The PBOC has liberalized interest rates on deposits between Ñnancial institutions, and we determine such rates based primarily on our assets and liabilities management policies and the market interest rate. In addition, for foreign currency- denominated (other than U.S. dollar, Euro, Japanese Yen and Hong Kong dollar) deposits equivalent to US$3.0 million or more, interest rates are freely negotiated with our customers. Interest rates on deposits between Ñnancial institutions and from foreign nationals are also freely negotiated with our customers.

Non-interest Based Products and Services With respect to non-interest based products and services, those that are subject to government guidance prices include basic RMB settlement services speciÑed by the CBRC and the NDRC. Fees for other products and services are determined by banks based on market conditions. See ""Banking Industry in the PRC Ì Industry Trends Ì Further Expansion of Fee-based Business'' and ""Regulation and Supervision Ì PRC Regulation and Supervision Ì Pricing of Products and Services.''

DISTRIBUTION NETWORK We deliver our products and services through a variety of distribution channels. We have branch outlets in substantially all major cities in China. In addition, we are increasingly promoting the use of alternative electronic banking channels, such as internet banking and telephone banking. We believe that our network of branch outlets and electronic banking channels enable us to eÇciently provide our customers with banking services.

Branch Outlets As of December 31, 2006, in addition to our head oÇce and its branch outlet, our network of 446 branch outlets in China consisted of 25 tier one branches, 16 tier two branches, and 405 sub-branch outlets. Our 25 tier one branches report directly to our head oÇce and are generally located in provincial capitals and other economic centers. Our tier two branches report to tier one branches and sub-branches report to tier one branches located in the same region.

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The following table sets forth, as of the dates indicated, the number of branch outlets in the PRC by geographical region. For a description of our geographical regions, see ""DeÑnitions and Conventions.''

As of December 31, 2006 Branch outlets % of total Yantze River Delta ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 161 36% Bohai RimÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 102 23 Pearl River Delta and West Strait ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 48 11 CentralÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 45 10 Western ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 42 9 Northeastern ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 48 11 Total branch outlets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 446 100%

We have maintained a shareholding interest in China Investment and Finance Limited, or CIFL, our subsidiary in Hong Kong since 1997. CIFL's scope of business includes capital markets investment, lending, advisory services, investment banking and direct investments. CIFL's investment banking business mainly provides services to the Hong Kong branches or oÇces of our domestic customers. Such services mainly include participating in or arranging syndicate loans. CIFL does not have the license to conduct underwriting business as of the date of this prospectus. As of December 31, 2006, CIFL has issued 250,000 shares with par value of HK$100 for each share. We hold 95% of CIFL's shares and the remaining 5% is held by CKWB. As of December 31, 2006, the total assets, net assets and net proÑt of CIFL were RMB 583 million, RMB 90 million and RMB 10 million, respectively. CIFL conÑrms that its money lending activities are consistent with the terms of its Money Lenders Licence which is valid for a period of 12 months from January 8, 2007. It is not aware of any non-compliance with the terms of such licence. As of December 31, 2006, we have no other principal subsidiaries.

Automatic Service Machines and Self-Service Banking Centers In an eÅort to provide additional convenient services to customers, reduce operating costs and improve proÑtability at the branches, we are expanding our self-service banking centers and automatic service machines (including ATMs, CDMs and CRSs) connected to the China UnionPay network. As of December 31, 2006, we had approximately 456 self-service banking centers and 1,645 automatic service machines, representing increases of 35.3% and 22.5%, respectively, from December 31, 2005.

Electronic Banking We provide a number of electronic banking services that allow our customers to access their accounts and conduct transactions over the internet or telephone. We are promoting the increased use of our electronic banking services by expanding our product oÅerings and enhancing the functionality of these services.

Internet Banking Focusing on a customer-oriented service approach, we oÅer a wide variety of corporate and personal internet banking services. Our corporate internet banking services mainly include account inquiry, internal transfer, remittance, account management, notice and message-taking. Our personal internet banking services mainly include ""my account,'' ""my investment,'' ""my international travel Ñnancial services,'' ""my household Ñnance,'' electronic business, customer service and security management. We intend to gradually build the internet banking system into an integrated platform providing Ñnancial transaction, account management, customer relationship management and information posting (including advertising) services. We have implemented various measures to increase internet banking security including the introduction of requirements for certiÑcation by authoritative and reliable third parties in 2000. In recognition of our eÅorts, our internet banking platform was the Ñrst in China to receive certiÑcation from China Financial CertiÑcation Authority for internet security in 2000.

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Telephone Banking Our telephone banking platform is centrally managed and provides services primarily to personal banking customers. We provide a full range of high quality telephone banking services through our nationwide hotline 24 hours a day, seven days a week. In addition, we analyze customer information and classify customers with a view to provide customized services such as VIP airport services, roadside emergency assistance and golf booking services.

Call Center Our call center provides services to customers through an automated voice system and customer service representatives. Through this automated system, customers can access account information, pay bills, purchase and sell mutual fund shares, transfer funds between banking accounts and securities accounts, purchase and sell foreign exchange and complete various general account management functions. Our representatives provide services mainly through telephone, fax, electronic mail, the internet and short mobile message. Our call center also serves as our customer relations management center by providing product inquiry services, accepting and handling customer complaints and providing other services.

Credit Card Customer Service Center To serve the needs of our credit card customers, we established a credit card customer service center in 2003. As of December 31, 2006, this center had approximately 237 customer service representatives providing services 24 hours a day, seven days a week. In order to provide high quality services to meet the diÅerent kinds of customer needs in the shortest time, our credit card customer service center is divided into six segments, namely, telephone intake department, dedicated platinum line, customer service and support department, marketing department, quality control and training department, and business development department. Since establishment, our credit card customer service center has received a variety of recognitions and awards. For example, in 2006, this center became the Ñrst in China to receive ISO9001:2000 International CertiÑcation for quality management. In addition, this center received the ""2006 Best Call Center Award'' and Mr. Huang Zhiming of this center received the ""2006 Best Call Center Manager Award'' during International Contact Center & CRM Expo 2006 Ì ICC China 2006.

INFORMATION TECHNOLOGY Our information technology systems provide critical support to many aspects of our business operations, including customer services, transaction processing, risk management and Ñnancial management. As of December 31, 2006, we had 416 employees with information-technology related responsibilities. The information technology department at our head oÇce is responsible for formulating information technology strategies and plans, establishing uniÑed technological standards and management policies and providing technological support to the information technology departments of our branch outlets. All of our business systems are interconnected through our internal network, which our head oÇce utilizes to collect data and reports. We currently have 20 servers located in our head oÇce and 19 tier one branches, which store and process banking data generated in their respective areas. In order to reduce risks associated with system failures, in addition to adopting measures to backup data for our key systems and communication networks on a real time basis, we established a catastrophe backup center in June 2006. Our information systems primarily consist of a general business and operation system, a treasury transaction system, an international business system, an electronic banking system, a credit management system and a management information system.

¬ The general business and operation system processes deposit, loan, payment settlement and bank card transactions, and provides clearing and accounting functions. It also includes a post-transaction monitoring system. We are in the process of consolidating our general business and operation system and expect to complete the consolidation by the end of June 2007.

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¬ The treasury transaction system supports treasury transactions and investment portfolio management of our treasury and capital markets department. It primarily includes a transaction information processing module, a risk management module and a settlement and accounting module.

¬ The international business system, which primarily consists of an international settlement module, an international trade Ñnance module and a statistical analysis module. We have recently successfully completed the implementation of the SWIFT data processing system throughout the bank by the end of 2006. We will complete the implementation of a bankwide centralized international business system in the Ñrst quarter of 2007.

¬ The electronic banking system, which consists primarily of internet banking and telephone banking platforms, provides corporate and personal banking customers services such as account information inquiry, electronic payment, investment, wealth management and group account management. We began upgrading our internet banking and telephone banking platforms in May 2006 and expect to complete the upgrade by the Ñrst quarter of 2007. Upon completion, the integrated system will provide services to corporate banking, personal banking and credit card customers.

¬ The credit management system consists of a corporate credit management system and a personal credit management system. It provides critical support to our credit extension and risk management functions, including credit investigation, credit approval, credit disbursement and post-disbursement management. We have recently implemented a new consolidated corporate credit management system on a pilot basis in November 2006. The implementation of a bankwide consolidated personal credit management is expected to be completed simultaneously with the implementation of our bankwide consolidated general business and operation system by June 2007.

¬ The management information system provides critical support to our business operations and management decision-making. It primarily consists of a Ñnancial and human resource management system, an assets and liabilities management system, a VIP wealth management system, a performance evaluation system and an oÇce automation system. Ì The Ñnancial and human resource management system is based on SAP software packages. The Ñnancial management platform centrally manages the accounting of expenses and capital expenditures and the budget planning. The human resource platform electronically manages bank-wide personnel Ñles, organizational structure, and compensation calculation and payments. Both platforms are centrally managed at our head oÇce. Ì Our assets and liabilities management system performs assets and liabilities ratio analysis, liquidity risk analysis, interest rate and exchange rate risk analysis, yield curve calculation, FTP calculation and net interest income and proÑtability analysis. Ì The VIP wealth management system is the platform based on which our personal banking customer relationship managers provide services to our VIP customers and conduct marketing and sales activities. It consists of six modules, namely, basic operations management, customer management, customer relationship marketing, wealth management, information service and performance evaluation. Ì The bank-wide key performance indicator system has been developed for the purposes of evaluating the performance of customer relationship managers. It can be customized by branch oÇces to meet the diÅerent performance evaluation needs of each branch. Currently, eight of our branch oÇces utilize this performance evaluation system. Ì The oÇce automation system performs functions such as electronic document transfer, public information announcement and electronic mail management. Most of our paper-based document processing has migrated to this system. We fully understand the importance of sophisticated information technology infrastructure and systems to the eÅective management and successful development of our businesses and have increased our investment in information technology infrastructure and applications. We are currently implementing a range of

127 BUSINESS information technology projects, with a focus on electronic banking, risk management and management accounting systems.

FINANCIAL MANAGEMENT Our Ñnancial management consists of asset and liability management, capital management, resource allocation and transfer pricing management. In recent years, we have been continuously optimizing our Ñnancial management procedures, indicators and system in order to enhance the eÇcacy of our resources, management skills and proÑtability. We seek to continuously enhance our asset and liability structure by focusing on interest rate pricing and risk weighting of our products. To this end, we actively manage a series of operational ratios on a daily basis, such as the daily loan-to-deposit ratio, the ratio of medium- and long-term loans to medium- and long-term deposits, the percentage of banks' acceptance drafts, surplus deposit reserve ratio and the ratio of foreign currency loans to foreign currency deposits. Our objective in our asset and liability management is to increase returns while maintaining an acceptable level of risk and liquidity position. Capital management is also a key component of our Ñnancial management. In an eÅort to increase capital eÇciency and increase focus on cost of capital at our branches, we introduced indicators of economic value added and return on risk capital, which form an integral part of the performance and compensation assessment at the branch level. In managing resource allocation, we have sought to control cost and capital outÖow. As a result of our eÅorts, our adjusted cost-to-income ratio (excluding management fee to CITIC Group and business tax and surcharges) were 39.7%, 41.1% and 39.1% in 2006, 2005 and 2004, respectively. Our Ñnancial management system, which we implemented in January 2006, enables us to centrally manage expenses, capital expenditures and budget planning.

COMPETITION We face competition in all of our principal areas of business from commercial banks and other Ñnancial institutions in China. We compete principally with the Big Four commercial banks and the Other National Commercial Banks. We are also facing increased competition from a number of additional sources, including city commercial banks and foreign-invested banks operating in China. In addition, we compete for customer funds with other Ñnancial service institutions, including the China Postal Savings Bureau, credit cooperatives, securities Ñrms and life insurance companies. See ""Banking Industry in China Ì Current Competitive Landscape'' and ""Risk Factors Ì Risks relating to the banking industry in China Ì Competition in the banking industry in China is increasing.'' We believe that the principal competitive factors in the banking industry include the types of products and services oÅered, the size and location of branches, quality of service, brand recognition, and product pricing.

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EMPLOYEES

As of December 31, 2006, 2005 and 2004, we had 12,575, 11,548 and 10,113 employees, respectively. The App 1A 28(7) following table sets forth the total number of employees by function as of December 31, 2006.

As of December 31, 2006 Number of % of employees total Corporate banking ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,520 28% Personal bankingÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,306 26 Treasury operationsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 129 1 Finance and accounting ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,767 22 Risk management, internal audit, legal and compliance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,138 9 Information technology ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 416 3 Management ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 937 7 Others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 362 3 Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 12,575 100%

We believe that employees are the most important asset of our bank. As of December 31, 2006, 94% of our full-time employees have received associate bachelor degrees or above, and 69% have more than Ñve years of industry experience.

We have established a key performance indicator system that links bonuses mainly with employee performance and capabilities. Our employee compensations, training and promotion opportunities are also primarily based on performance. In addition, we are in the process of developing a long-term management stock option incentive program based on the performance of our bank. We oÅer competitive compensation, training and career development opportunities to our employees through our performance evaluation system. We also provide beneÑts to our employees, consisting of Ñrstly, beneÑts in accordance with PRC laws and regulation on social insurance, basic retirement beneÑts, basic health insurance, unemployment beneÑts, work- related injury insurance, maternity insurance and housing fund; and secondly, corporate beneÑts provided by our bank including retirement plan, supplementary health insurance, housing allowance and transportation allowance.

We believe high quality employees are critical to the successful implementation of our business strategies and strive to continuously improve the professional capabilities of our employees by providing comprehensive training programs through our bankwide training platform.

INTELLECTUAL PROPERTY App 1A 28(4)

On March 14, 2007, we entered into a trademark license agreement with CITIC Group, pursuant to which we were granted a non-exclusive, two-year license to use certain trademarks of CITIC Group for nil consideration. On April 3, 2007, CITIC Group gave an undertaking to us to extend the term of the above license for nil consideration for so long as CITIC Group remains our controlling shareholder. See ""Our Relationship with CITIC Group and Connected Transactions Ì Connected Transactions Ì Exempt continuing connected transactions Ì 5. Trademark licenses''. We have registered seven trademarks, including "" '' (CITIC Smart), "" '' (Tie Xin Bao), "" '' (CITIC Happy Family) and "" '' (Le Jia Jia) and a number of our applications for trademarks are pending.

PROPERTIES

Our head oÇce is located at Block C, Fuhua Mansion, 8 Chaoyangmen Beidajie, Dongcheng District, Beijing, China. As of January 31, 2007, we operated our business through 1,002 properties with a total gross Öoor area of approximately 1,060,693.45 square meters in the PRC for our oÇces, branch network, self-service banking centers and other places of operation.

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Owned Properties As of January 31, 2007, we owned 248 properties, including our head oÇce in Beijing, which are mainly used as oÇces and branches that support our business activities and operations throughout China. The aggregate gross Öoor area of our owned properties is approximately 655,289.99 square meters. In particular, we have obtained the relevant building ownership certiÑcates and administrative allocated land use rights certiÑcates in respect of 7 properties with an aggregate gross Öoor area of approximately 2,351.03 square meters. We have been advised by King & Wood, our PRC legal counsel, that we are entitled to occupy and use the above properties, but our abilities to lease, mortgage, transfer and dispose of the properties are restricted unless we obtain the land use rights certiÑcate by settling the payment of transfer premium and other related fees for land use rights. We have obtained the building ownership certiÑcates, but not the land use right certiÑcates, in respect of 19 properties with an aggregate gross Öoor area of 26,053.96 square meters. We have not yet obtained the land use right certiÑcates and building ownership certiÑcates in respect of 24 properties with an aggregate gross Öoor area 33,393.74 square meters. We have been advised by King & Wood, our PRC legal counsel, that there are various impediments for us to obtain the relevant land use right certiÑcates and building ownership certiÑcates in respect of the above 50 properties with an aggregate gross Öoor area of approximately 61,798.73 square meters. These legal impediments related to, among others, (i) receiving approval of the relevant government authorities and payment of transfer premium and other related fees for land use rights; (ii) obtaining cooperation from real estate developer in performing the required procedures to obtain land use rights; and (iii) division of land use rights among diÅerent parties. These properties can be, if necessary, replaced by other comparable alternative premises for the relevant uses without any material adverse eÅect to our business operations.

Properties Contracted to Acquire As of January 31, 2007, we have contracted to acquire 5 properties with an estimated total gross Öoor area of approximately 22,159.17 square meters. As of January 31, 2007, as the properties above are under construction, no commercial value has been attributed to any of these properties in our property valuation report.

Property Titles Upon completion of our restructuring, we succeeded to the above lands and buildings (including 5 properties which we contracted to acquire) from China CITIC Bank. As of January 31, 2007, we had obtained the relevant land use right certiÑcates and building ownership certiÑcates in respect of more than 90% of these lands and buildings (including properties which we contracted to acquire) with an aggregate gross Öoor area of approximately 593,491.26 square meters. We are in the process of applying for certain of the remaining lands and buildings to be registered in our name. In addition, in relation to those properties for which we do not hold the relevant land use right or building ownership certiÑcates, or are subject to legal defects in title as described in ""Ì Owned Properties'' and ""Ì Properties Contracted to Acquire,'' we are in the process of applying for the relevant land use right certiÑcates and building ownership certiÑcates and have taken steps to rectify such title defects. With respect to owned properties with defective title due to the default of the relevant real estate developers, we will work with these developers to procure them to perform the required procedures to perfect titles. With respect to those owned properties with defective title due to the delay in government approvals, we will continue to cooperate with the relevant government authorities to expedite the issue of title certiÑcates. We currently expect to receive title certiÑcates or otherwise cure title defects for these properties within two years. We have been advised by King & Wood, our PRC legal counsel, that the absence of such title certiÑcates and the existence of such title defects will not have a material adverse eÅect on our business, Ñnancial condition and results of operations, as the relevant properties represent an insigniÑcant portion of the total value of our properties. See, however, ""Risk Factors Ì Risks Relating to Our Business Ì We do not possess the relevant land use rights certiÑcates or building ownership certiÑcates for some of the properties we own, and some of our lessors may not possess the relevant title certiÑcates or have consent from the owners to sublet some of the properties occupied by us.''

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Leased Properties

As of January 31, 2007, we leased 754 properties in China. The aggregate lease area of the leased properties is approximately 405,403.46 square meters. Of those properties we leased as of that date, we failed to register the relevant lease agreements with the authorities with respect to 543 properties with an aggregate gross Öoor area of 263,741.45 square meters. We have been advised by our PRC legal counsel, King & Wood, that the penalties for such failures to register varies properties at diÅerent locations according to local regulations, if imposed, will not result in any material and adverse eÅect on our business, Ñnancial condition or results of operation. With respect to 318 of the lease properties with an aggregate lease area of approximately 144,711.5 square meters, the lessors were not able to provide the title certiÑcates or documents evidencing the authorization or consent of the owners of such properties. We are of the view that most of these leased properties occupied by us can, if necessary, be replaced by other comparable alternative premises without any material adverse eÅect on our operations. For a description of risks relating to our properties, see ""Risk Factors Ì Risks Relating to Our Business Ì We do not possess the relevant land use rights certiÑcates or building ownership certiÑcates for some of the properties we own, and some of our lessors may not possess the relevant title certiÑcates or have consent from the owners to sublet some of the properties occupied by us.''

Waiver from Certain Valuation Report Requirements

According to the valuation report set out in Appendix V to this prospectus, we owned 248 properties with an aggregate gross Öoor area of approximately 655,289.99 square meters in the PRC and oÇce premises with an aggregate gross Öoor area of approximately 291.8 square meters in Hong Kong. We also contracted to acquire Ñve properties with an aggregate Öoor area of approximately 22,159.17 square meters in the PRC. In addition, we leased 754 properties with an aggregate lease area of approximately 405,403.46 square meters in China. Owing to the substantial number of properties involved, we have applied to the SFC for an exemption and the Hong Kong Stock Exchange for a waiver from strict compliance with certain of the valuation report requirements contained in paragraph 34(2) of the Third Schedule to the Hong Kong Companies Ordinance and Rules 5.01, 5.06 and 19A.27(4) and paragraph 3(a) of Practice Note 16 of the Hong Kong Listing Rules, respectively, on the grounds that (i) it would be unduly burdensome to include a fully compliant valuation report in this prospectus and the inclusion of such detailed information would be irrelevant to potential investors in a commercial bank; and (ii) it would be unduly burdensome to prepare an English translation of the report, as substantially all of the properties are located in the PRC and consequently the underlying valuation and title information is in Chinese.

The exemption has been granted by the SFC under section 342A(1) of the Hong Kong Companies Ordinance, subject to the following conditions:

(i) a valuation report in the Chinese language complying with all the requirements of paragraph 34 of the Third Schedule to the Companies Ordinance will be made available for inspection in accordance with Appendix X Ì ""Documents Delivered to the Registrar of Companies and Available for Inspection'';

(ii) the valuer's letter and the valuer's certiÑcate containing a summary valuation of all the Group's property interests be included in this prospectus in the form set out in Appendix V to this prospectus; and

(iii) this prospectus shall set out particulars of this exemption.

The waiver has been granted by the Hong Kong Stock Exchange from Rules 5.01, 5.06 and 19A.27(4) and paragraph 3(a) of Practice Note 16 of the Hong Kong Listing Rules, subject to the following conditions:

(i) a full valuation report in Chinese complying with all the requirements under the Listing Rules and paragraph 34 of Part II of the Third Schedule to the Companies Ordinance will be made available for inspection in accordance with Appendix X Ì ""Documents Delivered to the Registrar of Companies and Available for Inspection'';

131 BUSINESS

(ii) a summary valuation of all property interests of us and our subsidiaries, as set out in Appendix V to this prospectus, has been included in this prospectus; and (iii) we obtain a CertiÑcate of Exemption from the SFC in relation to compliance with relevant requirements under the Companies Ordinance. We are of the view that the exemption from the SFC and the waiver from the Hong Kong Stock Exchange would not prejudice the interests of the investing public on the grounds mentioned above.

LEGAL AND ADMINISTRATIVE PROCEEDINGS App 1A 40 Legal Proceedings We are involved in a number of legal proceedings in the ordinary course of our business, which primarily consists of proceedings we brought against borrowers for recovery of non-performing loans. We are currently not a party to any legal or administrative proceedings, and no proceedings or arbitration are known by any of us or our subsidiaries to be contemplated by governmental authorities or third parties against us, which, if adversely determined, would have a material adverse eÅect on our Ñnancial condition or results of operations. As of December 31, 2006, the aggregate amount of the pending legal proceedings involving claims against us as the defendant or third-party defendant, the amount in dispute of each of which exceeds RMB 30 million, was approximately RMB 217.6 million. We believe none of the pending legal or arbitration administrative proceedings, either individually or in aggregate, would have a material adverse eÅect on our business, Ñnancial condition or results of operations if adversely determined against us.

Administrative Proceedings Administrative Penalties We are subject to inspections and examinations by PRC regulatory authorities, including the PBOC, the CBRC, the MOF, the SAIC, and the SAFE and their respective local oÇces. Certain regulatory inspections and examinations have resulted in our being subject to penalties, including Ñnes and warnings. From January 1, 2004 to December 31, 2006, we were subject to 37 Ñnes (except for those related to delinquencies in tax payment) totaling approximately RMB 4.04 million. Among others, the PBOC and its local oÇces imposed 20 penalties on us with a total amount of approximately RMB 2.18 million for our violation of the applicable anti-money laundering regulations, delinquencies in reporting suspicious transactions and irregular account administration. The CBRC and its local oÇces imposed six penalties on us with a total amount of approximately RMB 1.13 million for our missing of a branch's Ñnancial business operation permit and credit extension in violation of the applicable laws and regulations, primarily including the General Rules on Loans (96), Interim Measures for the Administration of the Acceptance, Discount and Rediscount of Commercial Drafts, and Notice of the People's Bank of China on Strengthening the Administration of the Acceptance, Discount and Rediscount of Commercial Drafts (Yin Fa ®2001© No. 236). In addition, from January 1, 2004 to December 31, 2006, penalties were imposed on us, including delinquency charges and Ñnes, by the tax administration for delinquencies in tax payment in an aggregate amount of approximately RMB 2.20 million. We have paid all the Ñnes in full and taken the steps suggested by the regulatory authorities to remedy the deÑciencies described above. None of these Ñndings have resulted in any material adverse eÅect on our Ñnancial condition or results of operations.

Findings of CBRC Examinations The CBRC conducts routine or ad hoc on-site and oÅ-site examinations on our bank. These examinations have generally found that our risk management and internal controls have been continuously improved. However these examinations have revealed certain non-compliance incidents in our business activities and certain weaknesses in our internal controls, including incidents of credit extensions in excess of authorization limits or in violation of applicable procedures, accounting irregularities, non-compliance in certain treasury

132 BUSINESS operations, inadequacies in our internal audit function and weakness in our information technology systems. Following these examinations, the CBRC issued certain recommendations requiring us to take measures to prevent and remedy the incidents of non-compliance and improve our internal controls and risk management.

To the extent any of the CBRC's Ñndings suggested any material deÑciencies in our internal controls, we have taken the necessary steps to correct them. Furthermore, we have reported the status of our implementation of these remedial measures to the CBRC following its inspections. The CBRC indicated in its opinion letters of follow-up inspections that we have corrected the problems identiÑed in its earlier inspections through the implementation of our remedial measures. None of these Ñndings have resulted in any material adverse eÅect on our Ñnancial condition or results of operations. Our staÅ involved in these non-compliance incidents were front oÇce personnel at branch level.

We have undertaken a number of measures designed to prevent future violations of laws or regulations and to correct the deÑciencies identiÑed by the relevant PRC regulatory authorities. Our eÅorts to reduce these deÑciencies and non-compliance include, among other initiatives, the identiÑcation of, and imposition of penalties on, the personnel who were responsible for these incidents, the reinforcement of implementation of rectiÑcation measures, the increase in frequencies and scales of internal on-site and oÅ-site inspections, the initiation of compliance training program for all levels of employees and management personnel, the introduction of more rigorous internal control policies and procedures, the development of more advanced information technology systems, and the implementation of organizational reforms designed to enhance internal controls and prevent further non-compliance. However, we cannot assure you that these measures have been fully or eÅectively implemented. See ""Risk Factors Ì Risks Relating to Our Business Ì We cannot assure you that our risk management and internal control policies and procedures can adequately control or protect us against credit and other risks''.

None of our directors, supervisors or members of senior management have been involved in any of the legal or administrative proceedings or incidents of misconduct or non-compliance described above.

Special Events

Incidents of criminal oÅenses occur from time to time at our bank. We report these incidents immediately to the law enforcement authorities for investigation. Among those investigated, since January 1, 2003, we experienced only one incident involving an amount of at least RMB30 million (which is described below) that may implicate potential internal control weaknesses at one of our sub-branches. However, we do not believe that these potential internal control weaknesses implicated any material deÑciency in our internal controls. Except for the incidents disclosed in this prospectus, we are not aware of any other fraud or misconduct that would, individually or in aggregate, have a material and adverse eÅect on our Ñnancial condition or results of operations.

An Incident Involving Our CertiÑcate of Deposit Business

On May 11, 2006, the Pudong sub-branch outlet of our Shanghai branch discovered that the deposits of RMB 40 million of one of our corporate customers were illegally transferred, and the customer's certiÑcate of deposits was forged. The Shanghai branch immediately reported the incident to our head oÇce and the relevant law enforcement authorities. Based on the investigation, it is suspected that an external group and an employee with our Pudong branch conspired to forge the customer's certiÑcate of deposits and stamps, and transfer the funds from the customer's account to the accounts controlled by the group. Criminal proceedings have been brought against those suspects. None of our directors, supervisors or members of senior management have been involved in this incident. As of December 31, 2006, no claims have been brought against us by the customer. With assistance from law enforcement authorities, we have recovered RMB 13.6 million from the suspects. We expect to recover more from the suspects and other sources, including our insurance policy. As of December 31, 2006, we have made a provision of RMB 20 million for this incident. Our directors believe such provision is adequate. We believe the incident will not result in any material and adverse eÅect on our business, Ñnancial condition or results of operations.

133 BUSINESS

In response to this incident, we have imposed severe penalties on the responsible personnel and turned over the suspected criminal to the relevant law enforcement authorities. We have also set up a special working group to fully cooperate with the relevant law enforcement authorities in their investigations. To prevent the reoccurrence of such incidents, we have conducted large-scale internal on-site inspections of circumstances surrounding the opening and closing of bank accounts as well as large fund transfer and withdrawals by our corporate customers, and taken necessary steps to correct the operational deÑciencies revealed by the inspections.

Other Incidents Other incidents include, among others, misappropriation and embezzlement of customers' and bank's funds, as well as forgery of bank documentation. We have dealt strictly with the perpetrators in accordance with our internal control procedures and adopted tailored corrective measures as necessary to address any operational or internal control-related weaknesses evidenced by these cases. None of our directors, supervisors or members of our senior management were involved in these incidents. We believe that the Ñnancial losses and other negative factors resulting from these irregular incidents have not had, either individually or in aggregate, any material adverse eÅect on our business, Ñnancial condition and results of operations. Nevertheless, we will continue to strengthen our internal controls and risk management function with the goal of successfully detecting and preventing such irregular incidents from recurring in the future. Our recent initiatives to reduce the occurrence of irregular incidents and strengthen our internal controls include, among others, the initiation of compliance training program for all levels of employees and management personnel, the increase in frequency and scale of internal on-site and oÅ-site examinations, the reinforcement of implementation of rectiÑcation measures, and the introduction of more rigorous and comprehensive internal control policies and procedures. See, however, ""Risk Factors Ì Risks Relating To Our Business Ì We cannot assure you that our risk management and internal control policies and procedures can adequately control or protect us against credit and other risks,'' and ""Ì We may encounter diÇculties in eÅectively implementing centralized management and supervision of our branches, as well as consistent application of our policies throughout the bank, and we cannot assure you that it is always possible to detect and prevent fraud or other misconduct committed by our employees or third parties.''

134 RISK MANAGEMENT

OVERVIEW We seek to establish an independent, comprehensive and dedicated risk management system with a vertical reporting line and develop a risk management culture with an emphasis on maximizing risk-adjusted returns. To this end, we implemented a risk management strategy focusing on ""high quality industries and high quality enterprises'' and ""mainstream markets and mainstream customers'' and seek to proactively manage credit, liquidity, market and operational risks at all levels and aspects of our operations. We have undertaken the following initiatives in an eÅort to establish a prudent risk management system:

¬ In 1999, we revamped corporate credit extension procedures and centralized the credit approval of a majority of our corporate loans at our head oÇce and established the positions of trained personnel that are dedicated to the administration and recovery of non-performing loans. We also developed a corporate credit rating system with assistance from McKinsey & Co and implemented such system throughout our bank.

¬ In 2003, we centralized the appointment of the heads of credit assessment units of our branches at our head oÇce, established the positions of product managers who have knowledge and experience in identifying credit risk and strengthened our credit investigation process, and established disbursement centers to reduce operational risks during the loan disbursement process.

¬ In 2004, we established the position of chief risk oÇcer and were the Ñrst PRC commercial bank which centralized the appointment of risk managers at all branches, who oversee risk management at their branches and report directly to the chief risk oÇcer.

¬ Between late 2004 and early 2005, in an eÅort to strengthen our control over the entire credit extension process and enhance the independence of our risk management function, we revamped the credit extension procedures to the eÅect that (i) our risk management department began to centrally manage the functions of our disbursement centers and post-disbursement loan management processes in addition to the credit approval function, (ii) we began to require all credit extensions to be approved by the relevant credit approval committee and limit the credit approval power of our president and branch general managers to veto power only, (iii) we established the position of dedicated credit approval oÇcers, and (iv) we began to impose Ñrst-in-line responsibility on the credit investigation team, consisting of a relationship manager and a product manager, in credit extension and post disbursement loan management processes.

¬ Since 2005, in an eÅort to meet Basel II requirements, we have been developing a new corporate credit rating system with the assistance from Moody's KMV. We believe this system, which consists of 21 default probability scoring models based on customer type and one general default probability econometric model, is a leading corporate credit rating system among those used by PRC commercial banks in terms of industry segmentation and default probability measurement. This system would enable us to quantify the probability of default and loss given default and is expected to meet the requirements of internal rating based approach in three years. During the same period, we also developed a corporate credit management system in an eÅort to further computerize, and provide more control and information sharing for, the credit extension process. We have implemented this system on a pilot basis as of the date of this prospectus.

¬ In 2006, (i) in an eÅort to proactively manage our credit risk, we implemented a strategy focusing on ""high quality industries and high quality enterprises'' and ""mainstream markets and mainstream customers'' and adjusted the structure of our loan portfolio by industry, product and customer, (ii) in an eÅort to strengthen the management of our credit, market and operational risks, we established subcommittees under our head-oÇce risk management committee dedicated to managing each of credit, market and operational risks, (iii) in an eÅort to enhance our decision-making abilities in credit extension process, we assembled a team of in-house and outside experts to strengthen our credit extension policies for target industries, and (iv) we began to promote on a bank-wide basis the concept of risk-adjusted returns and assess the performance of our tier one branches by calculating and allocating economic capital based on regulatory capital.

135 RISK MANAGEMENT

The asset quality of our loan portfolio has improved in recently years. We believe the implementation of the above initiatives as part of our continuous eÅort to enhance our risk management function over recent years has contributed to the improvement in our asset quality. For details on the changes in our asset quality, see ""Assets and Liabilities Ì Assets Ì Asset Quality of Our Loan Portfolio''. See, however, ""Risk Factors Ì Risks Relating to Our Business Ì We cannot assure you that our risk management and internal control policies and procedures can adequately control or protect us against credit and other risks.''

RISK MANAGEMENT CULTURE We seek to cultivate a corporate culture that focuses on maximizing risk-adjusted returns and develop a management philosophy consisting of three components: prudence, compliance and reputation. We believe such corporate culture will contribute to a work environment that fosters a prudent risk management and a higher level of employee awareness of risk management issues. Key aspects of the risk management culture we seek to cultivate include:

¬ A culture of striving for prudent growth. We have introduced a performance assessment program based on the concept of economic capital to increase awareness of capital constraint and risk management in general. We endeavour to educate our employees to avoid ""blind pursuit'' of higher growth rate and larger portfolio size, but strive to achieve a balanced growth among proÑt, asset quality and portfolio size.

¬ A culture of compliance. We seek to foster a culture of compliance with laws, regulatory regulations, and our internal policies and procedures in all aspects of our business operations by continuously improving our rules and regulations and strengthening our accountability system.

¬ A culture that values our reputation. With a view to fostering a corporate culture that values our reputation and adds value to our bank, we seek to promote the long-term interests of our shareholders, society and our employees, instead of focusing on short-term proÑts.

136 RISK MANAGEMENT

RISK MANAGEMENT REPORTING LINE STRUCTURE The chart below illustrates the primary reporting line structure of our risk management function.

Board of Directors

Risk Management Committee Board Level

Audit and Related Party Transaction Control Committee

President Credit Risk Subcommittee Risk Management Committee Market Risk Subcommittee Internal Audit Committee Operational Risk Subcommittee

Vice President or Chief Risk Officer Assistant President

Credit Risk Internal Audit Office of the Risk Management Head Office Department

Head Office Level Market Risk Budget and Finance Department Business Departments Liquidity Risk Budget and Finance Department

Operational Risk Legal Risk Legal and Special Asset Resolution Department Accounting Risk Accounting Department IT System Risk IT Department

Branch General Manager

Branch Vice General Manager or Risk Manager Assistant Manager Branch Level Credit Risk Internal Audit Office Risk Management of the Branch Department

Operational Risk

Legal Risk Legal and Special Asset Business Resolution Department(1) Departments Accounting Risk Accounting Department IT System Risk IT Department

(1) Some of our branches do not have a legal and special asset resolution department. For such branches, we have trained personnel who specialize in the administration and recovery of non-performing assets at the branch risk management department.

137 RISK MANAGEMENT

Board Level Risk Management Committee The risk management committee of the board of directors is composed of Ñve members, including two independent directors. It reports to the board of directors and its primary responsibilities include, among other things, the following:

¬ supervising and evaluating the state of aÅairs in the management of various types of risk, including credit, market and operational risks, by our senior management;

¬ reviewing the procedures and performance of the internal audit department;

¬ performing periodic risk assessment; and

¬ proposing suggestions to improve our risk management and internal controls.

Audit and Related Party Transaction Control Committee The audit and related party transaction control committee is composed of six members, including Ñve independent directors, one of them serves as chairman of the committee. The audit and related party transaction control committee reports to the board of directors and is mainly responsible for, among other things, the following:

¬ recommending the hiring or Ñring of the external auditor;

¬ reviewing our internal audit policies and procedures and supervising their implementation;

¬ facilitating the communication between the internal and external auditors;

¬ reviewing our Ñnancial information and disclosure;

¬ reviewing our internal control policies;

¬ identifying our related parties and disclosing such parties to our board of supervisors, board of directors and other relevant personnel;

¬ preliminarily reviewing the related party transactions required to be approved by the board of directors, and submitting its reviews to the board of directors; and

¬ reviewing or Ñling the related party transactions within the authorization limit of the board of directors.

Head OÇce Level Risk Management Committee The risk management committee at our head oÇce is responsible for making decisions on signiÑcant risk management issues of our bank, including setting and approving risk management policies and procedures and monitoring their implementation, and supervising the risk management committees and risk managers at our branches. The committee also makes certain signiÑcant operating decisions such as approving loan write-oÅs. Our risk management committee consists of members from our senior management, risk management department, business departments and other relevant departments, with the president of our bank as chairman and our chief risk oÇcer as vice chairman. In April 2006, in an eÅort to increase eÇciency, we established three subcommittees under the risk management committee to focus on credit risk, market risk and operational risk, respectively. As a result, a signiÑcant portion of the committee's powers and responsibilities have been delegated to each of the subcommittees. The subcommittees will bring to the attention of the risk management committee on the risk management issues which exceed the authorized limit of the subcommittees.

138 RISK MANAGEMENT

The credit risk subcommittee, chaired by our chief risk oÇcer, is responsible for formulating credit policies and credit risk management procedures of the bank. The credit approval committee under the credit risk subcommittee is generally responsible for approving credit applications for loans (other than low risk loans) of RMB 100 million or more. The credit risk subcommittee is only responsible for approving (i) loans of RMB 1.5 billion or more to any single borrower; (ii) loans of RMB 2.0 billion or more to any group borrower; (iii) credit lines to our ten largest borrowers; and (iv) other applications for credit extensions submitted by the credit approval committee. The market risk subcommittee, chaired by a senior vice president or assistant president of our bank, is responsible for determining the overall level of market risk exposure of our bank, and making preliminary determination on allocation of capital, organizational structure of market risk management, and other signiÑcant market risk policies and procedures. The operational risk subcommittee, chaired by a senior vice president or assistant president, is responsible for determining the strategy and the overall policies and procedures for operational risk management of the bank, enhancing the corporate governance structure for operational risk management and implementing operational risk policies and procedures. The day-to-day functions of the risk management committee and its three subcommittees are supported by various departments at our bank. Our risk management department, which is responsible for developing and implementing the overall risk management policies and procedures of our bank, also supports the day-to- day functions of the risk management committee and the credit risk subcommittee. Our budget and Ñnance department and treasury and capital markets department support the market risk subcommittee. Our accounting department, legal and special asset resolution department and information technology department support the operational risk subcommittee.

Chief Risk OÇcer We established the position of the chief risk oÇcer in 2004 with a view to strengthening the independence of our risk management function. The chief risk oÇcer is responsible for overseeing the risk management of our bank. SpeciÑcally, the chief risk oÇcer oversees our risk management department and has the authority to nominate members of the credit approval committee. The chief risk oÇcer concurrently serves as the vice chairman of the risk management committee at the head-oÇce level and chairman of the credit risk subcommittee and the credit approval committee at the head-oÇce level, and has veto power over all credit applications submitted to the credit risk subcommittee and the head-oÇce level credit approval committee. In addition, the chief risk oÇcer supervises the performance of each of our risk management functions. The chief risk oÇcer reports to our head-oÇce risk management committee and the president of our bank, and is directly responsible for supervising our branch risk managers.

Branch Level Risk Management Committee The risk management committee at our tier one branches is responsible for implementing risk management strategies, policies and procedures set by our head oÇce and setting speciÑc rules and regulations for the relevant branches. Each branch-level risk management committee consists of members from the branch management, risk management department, business departments and other relevant departments, and includes the branch general manager and risk manager. The risk management committee at our tier one branches reports directly to our head-oÇce risk management committee.

Risk Managers The risk manager is responsible for overseeing risk management at that branch. The risk manager is also responsible for implementing risk management policies and procedures, and overseeing the personnel and other signiÑcant decisions relating to risk management at that branch. In addition, the risk manager serves as the vice chairman of the risk management committee and the chairman of the credit approval committee of

139 RISK MANAGEMENT the relevant branch. The risk manager is appointed by our head oÇce and reports directly to the chief risk oÇcer and secondly to the branch general manager. The performance assessment and compensation of risk managers are determined by our head oÇce.

CREDIT RISK MANAGEMENT Credit risk is the risk that a borrower or counterparty fails to meet its obligations in accordance with agreed terms. We are exposed to credit risk primarily through our loan portfolio, investment portfolio, guarantees and commitments, and other on- and oÅ-balance sheet credit exposures. In managing our exposure to credit risk, we have adopted standardized credit extension policies and procedures throughout our bank, which are regularly reviewed and updated by the risk management department in conjunction with other relevant departments. The overall credit policy adopted by our head oÇce provides guidance on extending credit based on industry, customer type and product type, and is reviewed and updated annually by our risk management department. Each tier one branch may adopt more speciÑc regulations based on the head oÇce policy. The credit extension process for both corporate loans and personal loans revolve around our core principle that the risk management function is to be separate from front-oÇce activities. The process can be broadly divided into three stages: (i) credit origination and analysis, (ii) credit approval, and (iii) fund disbursement and post-disbursement management.

Credit Risk Management for Corporate Loans We impose various risk control mechanisms during the credit extension process for our corporate loans:

¬ Product manager, who is experienced with identifying risks associated with credit products, works with the relationship manager in the credit investigation process and the post-disbursement management;

¬ Risk manager, who reports directly to the chief risk oÇcer, has veto powers over the credit approval decisions; dedicated credit approval oÇcers, who are devoted to approving credit applications on a full-time basis, form a majority of a credit approval committee; and credit review staÅ are responsible for conducting compliance reviews and risk analysis;

¬ Disbursement centers, which are separate from front oÇces, are responsible for ensuring all disbursement conditions are met, thereby reducing operational risks;

¬ A dedicated credit management unit under the risk management department in each branch is responsible for centrally managing post-disbursed loans; and

¬ A legal and special asset resolution department for the management of non-performing assets.

Credit Origination and Analysis The initial step in the credit extension process consists of screening by our relationship managers, who either interview credit applicants which approach us or by proactively solicit creditworthy prospective customers. Upon completion of this screening, a product manager, who is experienced with identifying risks associated with credit products, becomes the responsible person of the credit investigation team and takes the lead in carrying out credit investigation which forms an integral part of the credit extension process. The credit investigation team, consisting of a relationship manager and a product manager, conducts a preliminary due diligence on the applicant. The preliminary due diligence generally consists of Ñeld investigations to evaluate the borrower's management skills, creditworthiness, operating results, Ñnancial condition, use of proceeds, potential source of repayment, collaterals and guarantees, and industry risks. Our credit investigation team then assists the prospective customer in preparing an application package, which consists of a formal credit application with applicable supporting documents, which generally include the borrower's organizational documents, audited Ñnancial statements for the most recent two years, material

140 RISK MANAGEMENT contracts, valuation reports, and relevant documents of the guarantor, where applicable. In addition, our credit investigation team will input the information obtained from the application package into our internal credit rating system for a credit rating, if applicable. We have focused on improving our ability to identify group borrowers in an eÅort to reduce loan concentration risk. Historically, our information technology system had diÇculties in accurately identifying group borrowers with very complicated or non-standard legal structures, which has limited our ability to deÑne the scope of group borrowers. See also ""Risk Factors Ì Risks Relating to Our Business Ì Our business is highly dependent on the proper functioning and improvement of our information technology infrastructure''. We are in the process of implementing, on a bankwide basis, a corporate credit management system. Upon full implementation, we believe that this system signiÑcantly enhances our ability to, among others, identify related party loans, manage information on group borrowers, and conduct more eÅective on-going credit monitoring for group borrowers. See ""Ì Credit Risk Management Technology''. Based on the application package and the credit rating, the credit investigation team will prepare a due diligence report containing an assessment of the borrower's credit risk, major areas of risk, ability to make repayment, and a proposal for credit extension. The credit investigation team then submits the due diligence report, the application package and the credit rating to the credit assessment unit under the risk management department for review by credit review staÅ and dedicated credit approval oÇcers. From 2003 to 2004, the credit assessment managers of our branches were appointed by our head oÇce. Since 2004, these positions have been nominated by the branch risk managers, who are centrally appointed by our head oÇce, and appointed by the branch. Generally, at least one dedicated credit approval oÇcer will conduct the review, and produce a brief report assessing borrower's Ñnancial condition and cash Öow, ability to make repayment, guarantor's creditworthiness, an analysis of potential risks and ways to reduce risks, and a recommendation on whether to extend the credit. We conduct valuation of underlying collateral in connection with credit applications for secured loans. Generally, we retain independent appraisers to evaluate collaterals for loans other than residential mortgage loans and new automobile loans. For loans classiÑed as ""normal'', we review the collateral internally on a quarterly basis. For loans in other categories, we conduct such review on a monthly basis. If the collateral becomes the subject of a legal dispute or signiÑcant changes occur which may adversely aÅect the value of the collateral, we immediately re-appraise the value of the collateral and seek additional collateral if necessary. Collateralized loans are subject to loan-to-value ratio limits based on the type of collateral, as follows:

Type of Collateral Maximum Loan-to-Value Ratio Real Properties Land use rights ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 50% Urban real estate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 60% Movable assets Manufacturing equipmentÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 40% Automobiles and ships ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 40% Other permitted collaterals ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 40% Monetary assets Cash deposits with us, government bonds, banker's acceptance, and cashier's check ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 100%(1) Legal person shares of public companies ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 60% (based on net asset value)

(1) Value of collateral cannot be less than the sum of principal and total interest. For foreign currency denominated monetary assets, the ratio will be adjusted based on the volatility of the exchange rate. For loans guaranteed by third-parties, the guarantor's Ñnancial condition, credit history and ability to meet its obligations are evaluated according to the same procedures and criteria used for the primary obligor.

141 RISK MANAGEMENT

Credit Approval

All credit extensions are required to be approved by the relevant credit approval committee, including extension of loans to related parties and extension of terms of existing loans that are not in default. Decisions on courses of actions taken on non-performing loans are made under the same procedures as those adopted by the credit approval committee meetings. See ""Ì Disbursement and Post-disbursement Management Ì Administration of Non-Performing Assets.'' For each loan, the credit approval committee at each level has certain credit authorization limit and is required to conduct its meeting in accordance with our detailed procedures.

Credit Authorization Limits

Each branch is subject to a speciÑc credit authorization limit on the maximum total credit line it may commit to any single borrower or, to the extent identiÑable and practical, any group borrower. Each credit application is required to be approved at a credit approval committee meeting that has the required credit authorization limits. If the proposed credit line exceeds such committee's authorization limit, the credit application is required to be submitted directly to the committee with the required authority.

Our head oÇce sets and reviews credit authorization limits of our tier one branches based on a score system, which considers, among other things, management ability, the quality and size of the branch's loan portfolio and local credit culture. Credit authorization limits are reviewed at least once every year. Tier one branches may also delegate credit authorization limits to tier two branches if approved by the head oÇce. In general, sub-branches are not authorized to approve credit extensions.

Credit Approval Committee Meeting Procedures

Credit approval committee meetings are held at our head oÇce, tier one branches and selected tier two branches. The following table sets forth the participants with voting power and the number of votes required to approve a credit application at each level.

Credit Number of Votes Level authorization limit participants Participants required Veto power Head OÇce Level Credit risk subcommittee ÏÏÏÏ Over 10 or more ‚ Chief risk 2/3 of Chief risk RMB 1.5 billion oÇcer, as participants oÇcer to single chairman; with voting borrower; ‚ Head-oÇce risk power over management RMB 2.0 billion consultant, as to group vice-chairman; borrower ‚ Head of risk management department, as vice-chairman; ‚ Heads of relevant business departments; ‚ Heads of relevant units of risk management department; an ‚ At least two dedicated credit approval oÇcers

142 RISK MANAGEMENT

Credit Number of Votes Level authorization limit participants Participants required Veto power

Credit approval committee under the credit risk subcommittee ÏÏÏÏÏÏÏÏÏÏÏÏ Loans with 7 to 9 ‚ Chief risk 2/3 of Chief risk general to high oÇcer, as participants oÇcer; risks with an chairman; with voting Two vice amount over ‚ Head of risk power chairman RMB 100 million management voting department; together ‚ Heads of relevant units of the risk management department or dedicated credit approval oÇcer(s); and ‚ One member of relevant business departments Credit approval committee meeting held under risk management department ÏÏÏ Loans with 5 or more ‚ Head of risk 2/3 of Head of risk general to high management participants management risk with an department of with voting department; amount of the head oÇce, power chief risk RMB 100 million as chairman; oÇcer(1) or less; low-risk ‚ Head of credit loans whose assessment unit, amount exceeds as vice the authorization chairman; limits of the ‚ Dedicated credit relevant branches approval oÇcer(s) from the head oÇce; and ‚ At least one member of the legal and special asset resolution department Branch Level Credit approval committee ÏÏÏ Loans with 5 or more ‚ Risk manager; 2/3 of Risk manager general risk with ‚ Head of credit participants an amount of assessment unit; with voting RMB 30 million ‚ Two or more power to 100 million; dedicated credit low-risk loans approval with an amount oÇcers; and of ‚ One or two RMB 100 million members of to 300 million relevant business departments.

(1) Chief risk oÇcer does not participate in credit approval meetings, but has veto power.

143 RISK MANAGEMENT

Members from the risk management function account for a majority of the participants at meetings of credit approval committee while no more than two members from business departments participate such meetings. Other participants at meetings of credit approval committee include primarily dedicated credit approval oÇcers. In order to maintain the independence of our dedicated credit approval oÇcers, the primary responsibilities of such oÇcers are limited to reviewing credit applications and participating in credit approval committee meetings. These oÇcers are required to possess experience and qualiÑcations set by our head oÇce. The president of our bank and our branch general managers may attend credit approval committee meetings, but have no voting power. They may only exercise veto rights on credit applications approved by credit approval committee. At each credit approval meeting, the dedicated credit approval oÇcer Ñrst presents a brief report on the application Ñle and his credit recommendation. This is followed by a discussion among the participants of the meeting. A conÑdential ballot is taken at the end of the meeting, the results of which may not be disclosed without special permission.

Disbursement and Post-Disbursement Management Funds Disbursement We established disbursement centers in 2003 to reduce operational risks during the disbursement process. After a credit application is approved, funds are disbursed centrally through a disbursement center in each tier one and tier two branch where loans were originated. The disbursement center does not disburse funds unless the disbursement conditions are satisÑed.

On-going Credit Monitoring Credit monitoring is an integral part of our credit risk management, and our risk management department performs a critical role in loan monitoring. We have created the credit management unit under the risk management department dedicated to supervising the credit investigation team in post-disbursement management and carrying out periodical examinations of the status of certain loans classiÑed as ""normal'' and ""special mention''. The credit investigation team is responsible for on-going monitoring of loans to detect any signs of potential delinquency at an early stage and to facilitate prompt remedial action. We focus on factors that might adversely aÅect the borrower's ability to make repayment, including (i) the borrower's overall credit risk proÑle, including levels of the borrower's accounts receivable and inventory, changes in operating cash Öow, and capital outÖows not in the ordinary course of business; (ii) use of proceeds of the loan; and (iii) the status of any security interests. The credit investigation team gathers information on the status of our corporate loans through both on- site visits and oÅ-site investigations. On-site visits consist of interviews with the senior management of the borrower, inspections of operating facilities, reviewing management accounts and inspecting inventory. On-site visits are carried out by both the relationship manager and product manager that originate the loan. In addition, the risk management department also conducts on-site visits to the borrowers of signiÑcant loans with signs of delinquency. OÅ-site investigations generally consist of gathering publicly available information as well as information from the PBOC nationwide credit information system. The credit investigation team and the credit management unit are required to analyze the Ñnancial condition and repayment ability of the borrower, and provide a speciÑcally formulated plan of repayment and collection if the loan is due for the upcoming quarter, such plan including collection of the loan, extension of term, roll-over and restructuring for each loan. The plan is then tested against the actual results of repayment and collection. In addition, the risk managers lead the eÅorts in the post-disbursement management of (i) loans of our cross-region group borrowers, (ii) loans of key borrowers speciÑed by the head oÇce, (iii) loans of our ten largest borrowers, (iv) loans for which early warnings have been issued and which may be degraded to ""special mention'' within three months, and (v) loans that are classiÑed as ""special mention'' and with an outstanding amount of RMB 30 million or more. We conduct post-disbursement examinations of

144 RISK MANAGEMENT borrowers at intervals determined based on the classiÑcation of the loan. For loans classiÑed as ""normal,'' we conduct such examinations every three months; for loans classiÑed as ""special mention,'' we conduct monthly examinations. Non-performing loans are transferred to the legal and special asset resolution department for administration.

Through our on-site visits and oÅ-site investigations, if we become aware of an event which could signiÑcantly and adversely aÅect a borrower's ability to make payment, such event is required to be reported immediately as one of two types of early warning, general warning or the special warning, based on risk level. Events reported as special warning include signiÑcant deterioration of Ñnancial condition and material property dispute. Once identiÑed, all early warnings are required to be reported to the risk management department, and in the case of an early warning that is required to be handled on an urgent basis, to the relevant branch manager as well. The risk management department is required to conduct an immediate review of the credit quality and repayment ability of the borrower concerned and monitor or work with the front oÇce departments to take appropriate preventive measures, which may include adjusting the credit line or suspending draw-downs, acceleration of due dates, loan collection, requesting additional security interests or third-party guarantees, as applicable. We generally prohibit the granting of additional credit to a borrower until early warnings are removed. Borrowers in the category of special warning are placed in a ""watchlist''. We are required to adopt measures to extricate from all credit business relationships with the borrower placed in a ""watchlist'' and are prohibited from granting new credit facilities to such borrowers.

Loan ClassiÑcation

Our credit investigation team preliminarily classiÑes loans based on the information gathered in our loan- monitoring process. Loan classiÑcation reviews are generally conducted on a monthly basis. If a loan is the subject of an early warning, that loan undergoes a classiÑcation review immediately. The branch-level risk management department reviews, analyzes and approves the preliminary classiÑcation of each loan. Final results of loan classiÑcation are determined by the head oÇce and audited by an external auditor at least once a year. Generally, the head-oÇce risk management department conducts an oÅ-site classiÑcation review of all loans once every six months. As part of the oÅ-site classiÑcation review, we require each branch-level risk management departments to submit the basis for classiÑcation of all loans under that branch in an eÅort to maintain consistency in our classiÑcation standards. In addition, the head-oÇce risk management department conducts an on-site investigation at least once a year which focuses on procedural compliance in the branch's classiÑcation and on-going monitoring processes. Results of on-site and oÅ-site classiÑcation reviews form an integral part of our assessment of a branch's asset quality.

Administration of Non-Performing Assets

Our legal and special asset resolution department administers our non-performing assets and certain other special assets, such as foreclosed assets. For further information on the classiÑcation of our loans, see ""Assets and Liabilities Ì Assets Ì Asset Quality of Our Loan Portfolio Ì Distribution of Loans by Loan ClassiÑcation.'' The legal and special asset resolution department seeks to maximize recovery of our non- performing assets in a cost-eÅective manner. We have established a separate legal and special asset resolution department at our head oÇce and a majority of our tier one branches. Some of our branches do not have a legal and special asset resolution department. Such branches generally have higher asset quality than the average of our asset quality. For branches without a legal and special asset resolution department, we have trained personnel, who are specialized in the administration and recovery of non-performing assets, to take such duties at the branch risk management department.

Non-performing assets are transferred to our legal and special asset resolution department for administration and recovery in accordance with the recovery procedures. A collection oÇcer formulates a proposal for recovery, which will then be submitted to credit approval committee for approval. The recovery proposal is then subject to approval by the general manager of the relevant branch, and reviewed by the legal and special asset resolution department of our head oÇce before being approved by the credit approval committee under the credit risk subcommittee. The head-oÇce legal and special asset resolution department

145 RISK MANAGEMENT will supervise the branch-level legal and special asset resolution department on the implementation of the Ñnal decision on recovery. Recovery methods generally include the following: (i) collection notice; (ii) restructuring; (iii) realization on collateral or guarantees; and (iv) collection through litigation or arbitration proceedings. Collection notice. We notify non-performing borrowers and guarantors, if applicable, of payment default by telephone or in writing. We may also deliver the notice in person. If we are not able to collect the non- performing loan within a reasonable time after the collection notice has been given, we may choose to restructure the loan or commence litigation or arbitration collection proceedings. Restructuring of non-performing loans. Restructurings of non-performing loans (i.e., loans classiÑed as substandard or lower) generally involve negotiated amendments to the original loan documentation, including, among others, extending the maturity of the loan, requiring additional collateral or guarantees, or waiving overdue interest. In restructuring non-performing loans, we may also agree to substitute a new borrower or guarantor for the original borrower or guarantor, as the case may be. Once we determine to waive any overdue interest, or to extend a new loan for purposes of collecting interest or enhancing our security interest, the non-performing loan may not be upgraded into a higher loan classiÑcation category until after an observation period of six months. If the restructured principal and interest payments are repaid throughout the observation period, we will review the loan's classiÑcation when the observation period ends and upgrade the loan if appropriate. If the borrower subsequently becomes delinquent in paying the restructured principal or interest, we will downgrade the loan. Interest accrues in the same way on restructured loans during the observation period as on other loans. We prohibit the extension of a new loan if the proceeds will be used to pay interest on an existing loan with our bank. In recent years, we have increasingly limited the granting of loan restructurings as we have increasingly sought recovery through other methods. Collecting on collateral or guarantees. If we are not able to obtain repayment of the loan from the borrower, and if the borrower has ceased operations or its Ñnancial condition has deteriorated, we may choose to collect the collateral securing the loan or make a demand for payment under the guarantee, as applicable. We obtain an independent valuation on any collateral we collect. Generally, we will sell or realize any collateral through public auctions or negotiated sales to maximize recovery to the fullest extent possible. Collection through litigation or arbitration proceedings. We typically commence litigation or arbitration proceedings against the borrower if the borrower does not exhibit the intent to repay. The court judgment or arbitration ruling may take the form of an order to the borrower to make repayment or a declaration that the borrower is bankrupt. Upon obtaining a court judgment or an arbitration ruling, we will: (1) accept the payments from the borrower and/or guarantor; (2) foreclose on the properties (including collateral, if any) of the borrower and/or guarantor; or (3) work with the borrower and/or guarantor to restructure the non- performing loan under the court's supervision, as applicable. We write oÅ a loan classiÑed as loss once we have exhausted all means of collection and recovery and the circumstances surrounding the borrower meet the standards for write-oÅs established by the MOF and the State Administration of Taxation. Loan write-oÅs must be approved by the relevant tier one branch or the head oÇce depending on the amount of the write-oÅ. Generally, loans to be written oÅ are selected by our branch-level legal and special asset resolution department, which, together with the accounting department and the compliance department of the branch, prepare reports on such loans. These reports are subject to approval by the head oÇce-level risk management committee. Even after we have written oÅ a loan, we generally continue to pursue our recovery eÅorts on such loan. We monitor the status of loans written oÅ and, based on our analysis, focus our recovery eÅorts on the loans which we believe are more recoverable. Our legal and special asset resolution department is responsible for recovering loans written-oÅ.

146 RISK MANAGEMENT

Credit Risk Management for Personal Loans We classify personal loans into those for commercial purposes and those for consumption purposes. Personal loans for commercial use primarily consist of individual commercial property mortgage loans, commercial automobile loans and individual commercial loans. Personal loans for consumption purposes primarily consist of residential mortgage loans, automobile loans, education loans and other consumption loans. The credit origination and approval process for personal loans for commercial purposes is substantially the same as those for corporate loans. The description below applies only to personal loans for consumption purposes. The following branches are authorized to approve personal loans for consumption purposes: (i) our tier one branches, (ii) tier two branches and (iii) sub-branches not located in the same city as the tier one branch to which they report. Our sub-branches located in the same city as the branch to which they report may only approve low-risk loans, which are generally loans collateralized with cash deposits at our bank.

Credit Origination and Analysis Our personal loan relationship managers initiate the credit extension process by interviewing credit applicants and reviewing forms completed by the applicants. We assess applicants based on, among other things, their income, credit history, ability to repay the loan and the value of and likelihood of realizing the collateral securing the loan. If the applicant passes the preliminary screening conducted by our personal loan relationship managers, he or she will draft and Ñle a formal credit application together with supporting documents, such as identiÑcation documents, employment letters and proof of income. Based on such evaluations and the applicant's credit request, the relationship manager formulates a credit recommendation and submits the application package for approval.

Credit Approval Personal loans are generally required to be evaluated and approved by two dedicated credit approval oÇcers in the branch-level risk management department. The application packages are generally evaluated by our dedicated credit approval oÇcers, within their authorization limits approved by the head oÇce, based on the credit risk of the applicants and the value of and the likelihood of realizing the collateral securing the loans. In addition to the information included in the application packages, where further conÑrmation is required, our dedicated credit approval oÇcers also make telephone inquiries, conduct Ñeld investigations and consider information from other sources. Our analysis of the credit risk associated with personal loans primarily focuses on the borrower's ability to make repayment, as determined by (i) the ratio of the borrower's monthly repayment obligations to monthly income and (ii) the ratio of the borrower's monthly household repayment obligations to monthly household income. Our collateralized personal loans are primarily residential mortgages. For mortgage loans on the purchase of new residential properties, the value of the collateral is generally determined based on the purchase price of the residential property. For mortgage loans on the purchase of second-hand residential properties, we conduct appraisals both internally and through third parties for each loan, and apply the lower of the appraised value as the value of the collateral. We primarily rely on information provided by the applicant and obtained through our investigation as the basis for extending personal credit. If the applicant's credit proÑle is recorded in PBOC's credit information system, we will also consider credit information from such system.

Disbursement and Post-Disbursement Management In monitoring personal loans, we focus on the borrower's repayment status and changes in the value and status of the collateral securing a loan. Within 15 days after disbursement of a loan, the relationship manager is required to conduct a review on the use of proceeds of the loan and monitor the credit status of the borrower through PBOC's credit information system. Three days before a loan is due, our personal credit management system automatically examines the borrower's account with us designated for loan repayment to conÑrm that the borrower has suÇcient balance in his account for the loan repayment. If the balance is insuÇcient for the repayment, we send a short mobile message to the borrower (to the extent he provided us his mobile phone number) reminding him of his upcoming repayment obligation on the day immediately following the

147 RISK MANAGEMENT automatic account examination. Within one month after any outstanding loan becomes overdue, the call center contacts the borrower for loan repayment by short mobile messages or telephone, or, under certain circumstances, may delegate the collection responsibilities to the relevant branch. For any loan that is overdue for more than 30 days, our collection personnel at the relevant branch meets the borrower, issues a collection letter to the borrower and, if applicable, his guarantor, and seeks to identify the reason for default. Our personal loans are classiÑed primarily based on the number of days the loan is overdue. We review the risk proÑle of our ten customers with the largest personal loans outstanding on a quarterly basis. Our legal and special asset resolution department formulates comprehensive plans to assess and administer our non- performing assets and such plans are implemented by our personal banking department.

Credit Risk Management for Credit Cards Through a centralized credit management system, our credit card center in Shenzhen manages the credit risks of our credit card business. Our credit card risk management team, primarily consisting of personnel from the credit management department of our head-oÇce and our credit card center, is responsible for formulating credit card risk management policies and monitoring credit risks. We have also adopted standardized credit card approval procedures and criteria. We use a credit assessment system that combines credit scoring and a manual examination and approval process to analyze income proÑle and credit risks of a potential cardholder. In an eÅort to reduce the risk of fraud and intentional default, we have established an information sharing mechanism and regularly upgrade our credit-score model. We constantly monitor credit use of cardholders through our credit authorization system and the predictive risk management system. We also monitor individual card usage for fraudulent and other suspicious transactions through a real-time risk monitoring system. We collect overdue credit card balances primarily through telephone, third-party agents and legal proceedings.

Credit Risk Management for Treasury Operations Our treasury operations are exposed to credit risk through our investment activities and inter-bank lending activities. Our RMB-denominated investment portfolio primarily consists of debt securities issued by the PRC Government and other domestic issuers. Our foreign currency-denominated investment portfolio primarily consists of investment-grade bonds. We establish credit limits on a counterparty and geographical region basis and review them annually.

Credit Risk Management Technology In recent years, we have focused on bringing us more in line with international best practices and enhancing our risk management technology. In 1999, in cooperation with McKinsey & Co., we developed a corporate credit rating system, which has been implemented throughout the bank. In 2005, we formed a dedicated team responsible for research and development of risk management technologies and tools in accordance with the requirements of Basel II. In addition to developing a new corporate credit rating system with assistance from Moody's KMV, this team has independently developed a number of core technologies, including a credit rating consistency adjustment method used in the development stage of credit rating models. Since 2005, with assistance from Moody's KMV, we have been developing a new corporate credit rating system in accordance with the internal rating method requirements of Basel II, which consists of a customer rating module and a liability rating module. This system includes 21 default probability scoring models based on customer type, and a general default probability econometric model that can be used for all industries. We believe this system is a leading corporate credit rating system among those used by PRC commercial banks in term of industry segmentation and default probability measurement. All of our non-Ñnancial institution corporate banking customers, or approximately 90% of our customers, are rated by this system. In addition, this system includes a module for loss given measurement targeted at unsecured loans, guaranteed loans and secured loans, which we expect to complete in three years and upon completion will satisfy internal rating

148 RISK MANAGEMENT method requirements of Basel II. This new corporate credit rating system provides eÇcient technological support to risk cost measurement, loan pricing and approval, asset portfolio management, risk-adjusted performance evaluation, the measurement and allocation of credit exposure, and the capital measurement and allocation of regulatory and risk capital. As of the date of this prospectus, this system has been implemented on a pilot basis. From 2005 to November 2006, we developed a corporate credit management system to further computerize our credit extension process. This customer-oriented credit management computer system centrally manages credit to corporate borrower throughout the bank and it is an information technology platform that facilitates corporate banking business information sharing, process control and eÇcient operations. This system consists of eight modules, namely, customer information management, credit investigation, credit extension review and approval, fund disbursement, post-disbursement management and Ñve-category loan classiÑcation, rating system interface, statistics and inquiry, and system maintenance modules. We started implementing this system throughout the bank on a pilot basis in November 2006. We are also in the process of upgrading our personal credit rating system for our credit card customers and personal loan customers. We expect to complete the establishment of a quantiÑed risk measurement technology system that satisÑes the internal rating method requirements of Basel II within three to Ñve years.

LIQUIDITY RISK MANAGEMENT Liquidity risk is the risk of the inability to meet payment obligations in full that arises from the mismatch between asset and liability cash Öows. We are exposed to liquidity risk primarily in the repayment of deposits and the funding of our lending, and trading and investment activities. Our objective in liquidity management is to comply with regulatory liquidity guidelines and to be able to meet all our payment obligations and fund our investment and lending opportunities on a timely basis. Our head oÇce centrally manages our bank-wide liquidity risk, while each of our branches is responsible for managing liquidity risks that arise at that branch. Our head-oÇce budget and Ñnance department is responsible for the liquidity management of our RMB-denominated assets, while our treasury and capital markets department is responsible for the liquidity management of our foreign-currency-denominated assets. Our head oÇce sets, on an annual basis, our bank-wide liquidity management targets, which are adjusted periodically based on market changes. Such liquidity management targets include liquidity ratios, inter-bank lending and borrowing ratios and loan-to-deposit ratios. See ""Regulation and Supervision Ì PRC Regulation and Supervision Ì Operating Requirements''. With a view to achieving such targets, our head oÇce seeks to identify, measure and monitor liquidity risks by applying, among others, maturity gap analyses, managing branch liquidity risks through tools such as interest rate leverage, and generating reports periodically or from time to time. Our head oÇce manages liquidity positions at our branches by setting liquidity management targets for the branches. The internal fund transfer between the head oÇce and branches is facilitated by our internal fund transfer system platform and accomplished through an electronic transaction system. Funds are transferred based on our funds transfer pricing mechanism, through which a branch may receive additional liquidity from our head oÇce when liquidity requirements arise, and transfer funds to our head oÇce in cases of excess liquidity. Based on our liquidity risk management requirements, we determine maturity proÑle of our liquidity asset portfolio and formulate plans for the use of funding. Our head oÇce manages our liquidity risk by appropriately planning our liquidity position or meeting potential liquidity requirements through accessing inter-bank market. We encourage diversiÑcation of liquid assets. We have signiÑcant holdings in liquid assets such as deposits with the PBOC, PBOC bills, short-term debt issued by the PRC Government, Ñnancial bonds and discounted bank acceptances. Such liquid assets may be used to make payments directly or liquidated in the market to meet potential liquidity requirements. In addition, if further liquidity requirements arise, we may borrow from market or enter into repurchase transactions or currency swaps to acquire liquid assets. In an eÅort to ensure that we can eÅectively manage liquidity risks under various adverse conditions, we conduct stress testing from time to time to analyze liquidity risk. If we detect signs of an urgent liquidity shortage, we implement contingency plans which are developed for events of a liquidity emergency.

149 RISK MANAGEMENT

See also ""Risk Factors Ì Risks Relating to Our Business Ì We are subject to liquidity risk.''

MARKET RISK MANAGEMENT Market risk is the risk of loss in on- and oÅ-balance sheet positions arising from movements in market prices. Such movements may arise from movements in observable market variables such as interest rates, exchange rates, equity prices and commodity prices. We are exposed to market risk primarily through the assets and liabilities on our balance sheet, as well as our oÅ-balance sheet commitments. The principal objective of our market risk management is to manage potential market losses within acceptable levels and enhance earnings stability through independent identiÑcation, assessment and monitoring of the market risks inherent to our day-to-day businesses. In measuring and monitoring market risk, we primarily employ sensitivity analysis, foreign currency exposure analysis, gap analysis, scenario analysis, stress testing and value- at-risk analysis. In managing market risk, we apply strict authorization limits, which are determined based on factors such as our bank's overall ability to bear market risk, product type and our business strategy. Historically, RMB-denominated interest rates and exchange rates were controlled and set by the PRC Government and we were not exposed to signiÑcant market risk. See ""Regulation and Supervision Ì PRC Regulation and Supervision Ì Pricing of Products and Services.'' As the government gradually liberalizes interest rates and exchange rates and the Ñnancial services sector becomes more competitive, market risk management becomes an increasingly important part of our overall risk management. Our market risk subcommittee is responsible for formulating market risk management policies and procedures, approving new products, and approving risk exposure limits. Our budget and Ñnance department is responsible for the day-to-day tasks of managing market risk, including formulating procedures to identify, assess, measure and control market risks. Our treasury and capital markets department is responsible for managing RMB and foreign currency denominated investment portfolio, conducting proprietary trading and transactions on behalf of customers, implementing market risk management policies and procedures, and ensuring that risk levels are within those set by the market risk subcommittee.

Interest Rate Risk Management Interest rate risk is the exposure of a bank's Ñnancial condition to adverse movements in interest rates. The primary source of interest rate risk for us is mismatches in the repricing periods of our on- and oÅ- balance sheet assets and liabilities. Maturity or repricing date mismatches may cause net interest income to be aÅected by changes in the prevailing level of interest rates. We are exposed to interest rate risk through our day-to-day lending and deposit-taking activities as well as treasury operations. We manage the interest rate risk exposure of our RMB-denominated assets and liabilities on our balance sheet primarily through adjusting the interest rate and maturity proÑle. We seek to reduce mismatches in repricing periods by adjusting the repricing frequency and setting the pricing structure of corporate deposits. We perform duration analysis on debt instruments in our investment portfolio to assess the potential price volatility of a bond by measuring its sensitivity to interest rate Öuctuations. We set limits on the duration of interest rate sensitive instruments based on our duration analysis. To measure exposures to potential interest rate changes in our investment portfolio, we use interest rate sensitivity analysis, stress testing and scenario analysis. Our treasury operations enter into derivatives contracts, such as swaps, forwards and options, to hedge our interest rate risk exposures on our foreign currency-denominated assets and liabilities on our balance sheet and on the investment portfolios. We generally do not use interest rate hedging instruments to hedge our interest rate risk on RMB-denominated debt instruments, as hedging instruments are not well developed in the domestic market.

Exchange Rate Risk Management Exchange rate risk primarily results from mismatches in the currency denomination of our on- and oÅ- balance sheet assets and liabilities and mismatches in our currency position resulting from foreign currency transactions.

150 RISK MANAGEMENT

All currency positions at our branch level are closed through back-to-back settlement, with exposure managed centrally at the head-oÇce treasury and capital markets department. Our treasury and capital markets department seeks to control our exposures within limits set by the market risk subcommittee by closing positions in the markets or entering into derivative transactions for hedging purposes. Commencing at the end of 2004, in response to the increasing pressure on the Renminbi to appreciate, we have increased our focus on foreign exchange risk management. In this regard, we have implemented the following initiatives:

¬ launched treasury transactions systems at our head oÇce and our branches. Each branch is required to timely settles its foreign currency positions with our head oÇce, which centrally manages all remaining bank-wide currency exposure;

¬ established a price transmission mechanism which transmits the foreign currencies from the head oÇce to the branches and from the branches to the sub-branches in a highly eÇcient manner so as to conduct eÅective foreign exchange management;

¬ maintained the bank-wide foreign currency exposure at a level below the limits set by the market risk subcommittee; and

¬ achieved real-time monitoring of foreign currency positions at our head oÇce and branches.

Market Risk Management Information Technology We began using the PANORAMA system from Sungard in 2002, and were one of the Ñrst commercial banks in China to use professional system to manage market risk. PANORAMA is a computerized transaction processing system integrating the functions of trading platform, risk management and account management. In 2005, we began using the YieldBook pricing analysis system, which is designed to analyze the relatively sophisticated structural products. YieldBook also assists our traders in analyzing collateral debt and other complex structured products. We began the development of an assets and liabilities management, or ALM system in September 2005 and completed its implementation on a pilot basis in June 2006. We believe the ALM system enables us to manage our liquidity, interest rate, exchange rate and other risks more eÇciently through data analyses.

OPERATIONAL RISK MANAGEMENT Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events, including information technology system failures and natural disasters. Our operational risk subcommittee under the risk management committee is primarily responsible for monitoring and managing bank-wide operational risk and formulating operational risk management polices. It conducts reviews and evaluations of the operational risks on a regular basis. The accounting department works in cooperation with the internal audit department, the legal and special asset resolution department and other relevant departments to evaluate the overall eÅectiveness of our bank-wide operational risk prevention and control system. Our operating units both at our head oÇce and at our branches are responsible for self-assessing their operational risk and implementing our operational risk management policies and procedures. Our risk management department, in addition to assessing operational risk during the credit extension process, regularly conducts reviews to evaluate compliance by various departments with our policies and procedures. We consider our legal risk part of our operational risk. Legal risk is the risk that unenforceable contracts or adverse judgments may disrupt or otherwise negatively aÅect our operations or Ñnancial condition as well as the risk of legal and regulatory sanctions, Ñnancial losses or damages to reputation that we may suÅer as a result of our failure to comply with all applicable laws, regulations, international practices, local trade standards and codes of conduct. Our legal and special asset resolution department is responsible for proactively identifying, assessing, preventing, managing and resolving legal risk. By establishing and maintaining appropriate policies and procedures and oversight measures our legal and special asset resolution department enhances our ability to conduct business in compliance with the requirements of relevant laws and regulations.

151 RISK MANAGEMENT

Management of Operational Risk We focus on enhancing our internal controls and training our employees to implement our policies and procedures, particularly those that have been recently promulgated. Since the mid-1990s, we have formulated and implemented standardized policies and procedures for many of our principal business activities at various branch levels. The procedures we have implemented include:

¬ conducting large-scale general and speciÑc on-site inspections as well as regular oÅ-site inspections in order to identify deÑciencies in operational procedures and monitor our employees' operational compliance;

¬ establishing disbursement centers with a view to ensuring disbursement conditions are satisÑed;

¬ establishing discounted bills centers dedicated to conducting discounted bills transactions at branches with large transaction volumes. We are in the process of establishing these centers at all branches;

¬ establishing post-incident monitoring center at branches to conduct independent review and examination of original transaction records and to identify and rectify potential operational mistakes or fraud, with a view to improving the accuracy of our accounting information; and

¬ establishing account reconciliation center at branches to check and conÑrm our records against our customers' records. We are launching a computerized reconciliation system designed to prevent internal or external frauds more eÅectively and provide enhanced security for our bank and our customers. We have enhanced our authorization management, including formulating speciÑc written rules regarding authorization scopes and procedures, and conducted reviews to ensure the proper implementation of such rules. In order to establish checks and balances in our operating processes, we delineated responsibilities among our departments and separating positions with potential conÖicts of interest. We implemented a centralized appointment and rotation system for key positions, under which our head oÇce appoints tier one branch accounting managers and tier one branches appoint sub-branch accounting managers who rotate regularly. We have strengthened our anti-money laundering monitoring eÅorts by assigning a department with anti- money laundering function, analyzing data generated by our information technology systems, and implementing relevant policies and procedures in accordance with the PBOC guidelines. Other initiatives we have adopted to manage operational risk include the following:

¬ providing trainings for employees, such as job orientations for new employees and ongoing operational compliance trainings, and regularly examining employees at our head oÇce and branches on such trainings;

¬ strengthening employee management and codifying the disciplinary measures for employee misconduct;

¬ formulating network and security plans by the head oÇce and applying such plans throughout the bank;

¬ enhancing the security of our information systems by requiring identity veriÑcation for access to all information systems and maintaining daily log-in records;

¬ establishing and continuously improving project and operation management systems;

¬ conducting drills on a regular basis to ensure the eÅectiveness of our procedures, system backup mechanisms and disaster response plans; and

¬ reviewing the implementation of our policies and procedures through system security checks and special information system audits.

152 RISK MANAGEMENT

Reporting and Monitoring of Non-compliance

We have established internal reporting procedures and disciplinary measures for any employee misconduct that aÅects our business. Under our internal reporting system, statistical data relating to incidents of employee misconduct at branches are required to be reported to our head oÇce periodically, and cases of misconduct are required to be reported within 24 hours of their discovery. In addition, we are required to report to the CBRC signiÑcant cases of misconduct involving an amount of more than RMB 1 million.

During the period between the beginning of 2006 and the date of this prospectus in 2007, there was one reported incident of criminal oÅense involving a total amount of RMB 40 million. In 2005, there were no reported incident of criminal oÅenses. In 2004, there were Ñve reported incidents of criminal oÅenses involving a total amount of RMB 56.4 million. These incidents of criminal oÅenses include, among other things, fraud, theft and misappropriation of customer's funds. Some of these incidents implicated potential internal controls weakness at certain of our branches. However, these incidents have not, individually or in the aggregate, had a material adverse eÅect on our business, Ñnancial condition or results of operations. We have imposed severe penalties on these employees, including termination of employment. For risks relating to the misconduct by our employees, see ""Risk Factors Ì Risks Relating to Our Business Ì We cannot assure you that our risk management and internal control policies and procedures can adequately control or protect us against credit and other risks.''

MANAGEMENT OF OTHER RISKS

Other risks that we are exposed to include reputation risk and strategic risk. Reputation risk is the risk that negative publicity regarding our business practices, whether or not genuine, will cause a potential decline in the customer base or lead to costly litigation or revenue erosion. The general oÇce department at our head oÇce is in charge of the public relations at our bank to protect our reputation and monitor events that may damage our reputation. Strategic risk generally refers to the risks that may induce some current or future negative impacts on the earnings, capital, reputation or market position of our bank because of poor strategic decisions, improper implementation of strategies and lack of response to the market. The planning and development department is in charge of our strategy to ensure that we develop in the right direction taking into account the changes within and outside our bank.

INTERNAL CONTROL SYSTEM

We have been continuously enhancing our internal control functions and corporate governance structure in a view to creating an internal control system with standards consistent with practices of international banks.

Our internal control management structure has three levels: decision-making level, implementation level and supervision and evaluation level.

¬ Decision-making level. Our board of directors is responsible for determining internal control strategic target and policies, approving internal control procedures for various business activities, and assessing the overall integrity and eÅectiveness of our internal control system.

¬ Implementation level. Our senior management at head-oÇce level is responsible for implementing internal control strategies and policies adopted by the board, establishing internal control reporting structure promulgating procedures to identify, measure and manage various risks, and taking necessary steps to rectify internal control weaknesses through the president meeting.

The special committees under the president meeting, including the risk management committee, the development and assets and liabilities committee, the information technology committee and the auditing committee are responsible for risk management and internal controls within their respective scope of duty. The various business departments at head-oÇce level are responsible for implementing internal control policies and procedures in their respective scope of business, conducting internal control

153 RISK MANAGEMENT

examinations of the corresponding business departments at branch level and rectifying internal control weaknesses, and reporting the results to the senior management.

Our management at branch level is responsible for establishing and enhancing internal control procedures at the respective branch, and formulating detailed implementation procedures of internal control system.

¬ Supervision and evaluation level. Our board of supervisors and the internal audit committee are responsible for overseeing and evaluating the integrity and eÅectiveness of our internal control systems. The internal audit department is responsible for carrying out internal audits over various business activities, conducting independent evaluations on the adequacy and eÅectiveness of our internal control system and reporting the results to the senior management and the internal audit committee.

We have established a comprehensive internal control system covering business and procedures in line with the requirements under the Internal Control Guidelines for Commercial Banks, including internal controls over credit extension, treasury operation, accounting and front oÇce operation, budget and Ñnance, non-interest income business, information technology system and anti-money laundering.

INTERNAL AUDIT

We recognize the importance of the internal audit function at our bank. Our internal audit department examines and independently evaluates our risk management policies and procedures and internal controls with a view to protecting the value of our assets. As of December 31, 2006, we had 173 employees in the internal audit department.

The reporting structure of our internal audit function may be characterized as a ""dual reporting'' structure. Our internal audit personnel report to both the internal audit department of the next higher level and to the relevant branch general manager. The branch general managers are responsible for compensation reviews and performance assessments of our internal audit personnel. In addition, the branch general managers also make nominations for key internal audit positions, which are subject to reviews and vetoes by the internal audit department of the head oÇce. Our internal audit department reports directly to our president.

In 2005, in an eÅort to improve the quality and eÇciency of our internal audit department, we reorganized the department into three units, consisting of the general management unit, the on-site audit unit and the oÅ-site audit unit. The general management unit is responsible for formulating annual internal audit plans; formulating internal audit policies and procedures, supervising the implementation of internal audit plan, and communicating with external regulatory agencies. The on-site audit unit is responsible for conducting general and speciÑc on-site inspections, as well as assessing internal control risks of our bank. The oÅ-site audit unit is responsible for implementing oÅ-site inspections and identifying, tracking, monitoring and evaluating risks associated with various business lines.

Starting at the end of 2004, we began to implement a series of measures to strengthen the role of the internal audit function. In 2005, we established an internal audit committee, on which our president is serving as chairman. The internal audit committee is responsible for reviewing internal audit plans, policies and procedures and reviewing, supervising and evaluating the performance of our internal audit functions.

We adopted an internal audit manual which standardizes procedures for all internal audit-related activities and deÑnes the roles and responsibilities of internal audit personnel. We began a large scale on-site inspection campaign in 2005, which consisted of comprehensive examinations of all of our branches in an eÅort to identify deÑciencies related to internal controls. In formulating internal audit plans for our branches, we take into consideration of the diÅerence among our branches in management skills and business development level.

154 RISK MANAGEMENT

We endeavor to improve our internal audit function with a view to establishing a more independent, uniÑed and standard internal audit system. To this end, we intend to adopt the following measures:

¬ establishing a new reporting structure based on the newly created corporate governance structure that includes the board of directors;

¬ establishing the position of chief audit oÇcer and regional audit oÇces which report to our head oÇce with an view to increasing the independency of our internal audit function;

¬ increasing eÇciency of our audits by determining the frequency and priority of our audits at each of our operations based on an assessment of the risk level at that operations;

¬ enhancing eÅorts in developing and using computerized audit tools, strengthening the distance audit work, increasing the eÇciency and quality of audit; and

¬ increasing internal audit training, and establishing a performance review system to improve our internal audit quality and eÇciency.

155 OUR RELATIONSHIP WITH CITIC GROUP AND CONNECTED TRANSACTIONS

OUR RELATIONSHIP WITH OUR PROMOTERS

CITIC Group is our promoter and our controlling shareholder. It also wholly owns our predecessor China CITIC Bank.

Established in 1979, CITIC Group is one of China's leading multinational conglomerates with investments in Ñnancial services, information technology, energy, heavy industry and other industries. CITIC Group currently has operations in Hong Kong, the United States, Canada and Australia.

CITIC Group places great emphasis on developing the Ñnancial services business. In addition to our bank, CITIC Group also holds interests in CITIC Securities, CITIC Trust and Investment, CITIC Funds, CITIC Prudential Funds, CITIC Prudential Life, CITIC Futures, which respectively engage in securities, trust, fund management, insurance, futures and other Ñnancial services business. In particular, CITIC Securities and CITIC Trust and Investment are among the largest companies in their respective Ñelds within the PRC.

CITIC Group is not directly involved in any competing commercial banking business. Other than its investments in commercial banking sector in us, CITIC Group is also the controlling shareholder of CIFH. CITIC Group (excluding CIFH) does not hold the requisite licence to conduct commercial banking business within the PRC, except for the licence currently held by the Company. We do not hold the requisite licences to conduct the businesses in which CITIC Group holds interests, including securities, trust, fund management, insurance, futures and other Ñnancial services businesses.

Upon listing of our H Shares on the Hong Kong Stock Exchange, we will be able to operate our business independently of CITIC Group, in its capacity as our controlling shareholder, and its associates because (i) we have not paid and will not pay CITIC Group management fee after January 1, 2007; (ii) we have settled all outstanding inter-company balances with CITIC Group and its associates other than those entered into in ordinary course of business; (iii) we do not anticipate to receive further capital contributions from CITIC Group other than for the purpose of maintaining CITIC Group's current ownership percentage after we become listed on the Hong Kong Stock Exchange; (iv) we do not intend to enter into substantial cooperation with CITIC Group in interest-income products and services, which is currently the largest component of our revenue and net proÑt; (v) we do not rely on CITIC Group or its associates for their deposits and loans to Ñnance our operations or the supply of or access to customers; (vi) apart from the continuation of certain directorships in CITIC Group and/or its associates (excluding us) held by our directors, we have a separate management team; and (vii) we will have Ñve independent directors prior to the listing, which meets the requirements of the recommended best practices as set forth in the Code on Corporate Governance Practices of the Hong Kong Listing Rules.

Our promoter CIFH is listed on the Main Board of the Hong Kong Stock Exchange with the stock code of 183. As of the Latest Practicable Date, CITIC Group directly and indirectly holds approximately 55.44% of CIFH's issued share capital.

CIFH is the Ñnancial Öagship of CITIC Group outside Chinese Mainland. It is an investment holding company with interests in commercial banking as well as other non-bank Ñnancial services. Its main operating business is CKWB. CKWB is a Hong Kong incorporated and licensed bank which provides a range of banking services and Ñnancial solutions to both corporations and individuals, focusing on retail banking, wholesale banking and treasury services.

CKWB's banking businesses in the PRC consists of:

¬ China International Finance Company Limited (Shenzhen) (""CIFC'') Ì CIFC is a wholly-owned subsidiary of CKWB. It has been approved by CBRC to oÅer Renminbi services, based on which CIFC and CKWB are able to oÅer Renminbi services to their corporate clients as well as to individual clients who are non-PRC citizens. CIFC and CKWB have been able to oÅer such services in the Chinese Mainland from the time China eliminated restrictions on such services at the end of 2006. At present, CIFC is in the course of applying for a bank licence in the PRC.

156 OUR RELATIONSHIP WITH CITIC GROUP AND CONNECTED TRANSACTIONS

¬ Shanghai branch Ì CKWB opened its branch in Shanghai in December 2004. The Shanghai branch is considering the possibility to apply for a Renminbi licence.

¬ Beijing branch Ì CKWB received regulatory permission to upgrade its Beijing representative oÇce to branch status in October 2006. Its Beijing branch has since commenced banking business activities. As at December 31, 2006, CKWB's audited consolidated total assets and net asset value were HK$89,671,917,000 and HK$7,282,339,000, respectively. CITIC Group currently does not have any intentions to inject any other businesses currently operated by CITIC Group, CIFH or CKWB into our bank in the near future.

CIFH Top-Up On April 13, 2006, CIFH entered into a sale and purchase agreement with CITIC Group pursuant to which CIFH agreed to purchase from CITIC Group approximately 19.9% of the entire equity interests of China CITIC Bank, the predecessor of our bank. In the second and fourth quarters of 2006, CITIC Group made capital contributions of RMB 5.0 billion and RMB 2.4 billion, respectively, to us. As a result, the interest in us purchased by CIFH was reduced to approximately 15.17%, represented by 4,718,909,200 foreign legal person shares. CITIC Group has undertaken to CIFH that if China CITIC Bank or its successor, our bank, decides to increase its capital prior to an investment by a strategic investor and/or the listing of our bank, such capital injection shall be the responsibility of CITIC Group and any such capital injection shall not result in the value of CIFH's equity interest in our bank falling below a lower equity value to that accorded to CIFH on the completion date of the above sale and purchase agreement and that CIFH's interest will not be less than 15%. To ensure that CIFH's interest in our bank will not be less than 15%, CIFH entered into a top-up agreement with China CITIC Bank and CITIC Group on November 22, 2006, pursuant to which CIFH agreed to subscribe for certain H Shares in China CITIC Bank or its successor, our bank, such that upon the completion of the Global OÅering, A Share OÅering and the exercise of the Over-allotment Option, if applicable, CIFH shall hold no less than 15% of the entire equity interests in our bank (represented by 5,855,002,200 H Shares in our bank), subject to a maximum cap amount. The consideration for such H Shares will be satisÑed by cash and will be calculated by multiplying the OÅer Price by the relevant number of H Shares provided that the total consideration (calculated on the basis that the top-up is not aggregated with the CIFH's equity interest acquired pursuant to the sale and purchase agreement of April 13, 2006) shall not result in any of CIFH's percentage ratios under Rule 14.07 of the Hong Kong Listing Rules in respect of the top-up to exceed 25%. The top-up is subject to certain conditions, including without limitation, the relevant stock exchanges and shareholders granting approval in respect of the listing of our bank and the top- up. CIFH's right to top up will terminate upon the later of the listing of our bank or, if applicable, the exercise of the Over-allotment Option. Rule 10.04 of the Hong Kong Listing Rules provides that an existing shareholder may only subscribe for or purchase any securities for which listing is sought if such securities are not oÅered to them on a preferential basis and no preferential treatment is given to them in the allocation of the securities, and the minimum prescribed percentage of public shareholders required by Rule 8.08(1) of the Hong Kong Listing Rules is achieved. CIFH intends to exercise its top-up right to maintain its shareholding at 15.17% before the exercise of the Over-allotment Option and top-up its shareholding to 15% if the Over-allotment Option is exercised in full. We have applied for and received a waiver pursuant to Rule 10.04 of the Hong Kong Listing Rules relating to CIFH's top-up right. Pursuant to its top-up right, CIFH is expected to purchase (i) 1,091,280,000 H Shares in the proposed concurrent Global OÅering and A Share OÅering (assuming that the Over- allotment Option is not exercised and BBVA exercises its anti-dilution right in full) or (ii) 1,136,093,000 H Shares in the proposed concurrent Global OÅering and A Share OÅering (assuming that the Over- allotment Option and BBVA's anti-dilution right are exercised in full). Shares issued pursuant to CIFH's exercise of its top-up right are subject to certain transfer restrictions. See ""Underwriting Ì Underwriting

157 OUR RELATIONSHIP WITH CITIC GROUP AND CONNECTED TRANSACTIONS

Arrangements and Expenses Ì Hong Kong Public OÅering Ì Undertakings to the Hong Kong Stock Exchange pursuant to the Hong Kong Listing Rules.''

In addition, CITIC Group and us have undertaken to CIFH that after the stabilizing period, in the event that we decide to increase our issued share capital, CITIC Group and us have a commercial intention to support CIFH to acquire more equity interest to ensure that, under all circumstances, the shareholding of CIFH in us will not be less than 15%. CITIC Group, CIFH and China CITIC Bank agree that such acquisition of equity interest by CIFH shall comply with the relevant consents, requirements of law and relevant governmental rules in all circumstances and the subscription price should be the lowest price as allowed under the relevant consents, requirements of law and governmental rules. Should the undertaking given by us and CITIC Group be in breach of any consents or governmental rules or cause us to be unable to satisfy the requirements of the Hong Kong Stock Exchange, the rights and obligations of the parties pursuant to this undertaking will cease to have any eÅect. In the event that CIFH's acquisition of any additional interest in us is required to be made from us or CITIC Group, it will constitute a connected transaction of CIFH (and, in the case of CIFH acquiring additional interest from us, a connected transaction of us at the same time) and CIFH (and, in the case of CIFH acquiring additional interest from us, our bank) will comply with the relevant requirements of the Hong Kong Listing Rules as appropriate.

It is CIFH's intention to hold its shares in our bank as at the end of the stabilizing period (inclusive) for a period of six months after the date on which dealings in the H Shares commence on the Hong Kong Stock Exchange.

Non-competition arrangement

While both our bank and CKWB are commercial banks, our bank's business operations are mainly in the Chinese Mainland, and CKWB's business operations are mainly in Hong Kong. The target customers of the Chinese Mainland operations of CKWB and CIFC are mainly Hong Kong customers. CKWB and CIFC conÑrm that they do not intend to compete with our bank in the Chinese Mainland by establishing new branches or commercial banking networks in the Chinese Mainland. We do not intend to compete with CKWB and CIFC in Hong Kong by establishing new branches or commercial banking networks in Hong Kong. As such, we believe that at present there exists no substantive competition between our bank, on one hand, and CKWB and CIFC, on the other hand.

After CIFH's investment in our bank, CITIC Group, CIFH and our bank intends to cooperate and leverage on each party's resources, to pursue each party's strategic goals and business growth and to avoid future potential competition among the parties. Accordingly, CITIC Group, CIFH and our bank negotiated and entered into a non-competition agreement on March 13, 2007.

Under this non-competition agreement:

1. CITIC Group, as the controlling shareholder of our bank and CIFH, will neither directly engage in competing commercial banking business, nor control other commercial banking entities in the Chinese Mainland. CITIC Group will not participate in the daily operation of our bank or CIFH. CITIC Group will treat the development of our bank and that of CIFH on a fair and equitable basis, and will support our bank's cooperation with CIFH at diÅerent levels.

2. Our bank's business operations are mainly in the Chinese Mainland, and CIFH's business operations are mainly in Hong Kong.

3. Our bank and CIFH will avoid direct competition with each other. Our bank and CIFH will cooperate in corporate, international, retail, lending, asset management, Renminbi business and other products and services. Our bank and CIFH will fully utilize our respective capabilities in the Chinese Mainland and outside China to jointly develop and maintain our capability to provide top-tier cross- border banking services. Details of our cooperation will be subject to further negotiations between our bank and CIFH.

158 OUR RELATIONSHIP WITH CITIC GROUP AND CONNECTED TRANSACTIONS

4. We conÑrm that we do not intend to compete with CIFH in Hong Kong by establishing new branches or commercial banking networks in Hong Kong. We further conÑrm that we will continue our current business in Hong Kong, including the business activities carried out by our Hong Kong subsidiary, China Investment and Finance Limited. We will engage in new businesses in Hong Kong only after we conduct non-binding negotiations with CIFH.

5. CIFH conÑrms that neither itself nor CKWB intends to compete with our bank in the Chinese Mainland by establishing new branches or commercial banking networks in the Chinese Mainland. CIFH further conÑrms that CKWB will continue its current business in the Chinese Mainland. CIFH agrees and will procure CKWB not to establish additional branches in the Chinese Mainland.

6. Under the coordination of CITIC Group, we and CIFH will consider further business integration to avoid competition based on future business development conditions and needs.

7. In order to eÅectively avoid competition and strengthen cooperation, subject to the applicable laws and regulations and the requirements of regulatory bodies, CITIC Group, our bank and CIFH agree to respectively adopt eÅective corporate governance mechanisms and to regularly review each party's scope of business, to strengthen continuous cooperation among the parties, to avoid potential competition or activities which may cause market disruption, waste of resources (including monetary and any other resources), loss of opportunity or ruin of reputation, and to ensure that each party fulÑls its obligations and enjoys its rights under the agreement.

8. CITIC Group, our bank and CIFH will endeavor to establish eÅective mechanisms to avoid future competition.

In relation to the avoidance of competition between us and CIFH, we intend to establish a dedicated committee reporting directly to our board of directors, such committee will be staÅed with a majority of our independent non-executive directors. The committee will be responsible for monitoring on a regular basis CIFH's business activities and development in the Chinese Mainland (including without limitation, monitoring any advertising or marketing activities by CIFH in relation to new business developments, assessing whether CIFH has taken or is planning to take any actions which do not comply with its undertaking pursuant to the above non-competition agreement; and obtaining relevant information from the our senior management). The committee will report to our board of directors, in particular, our independent non- executive directors. If our independent non-executive directors are not satisÑed with the report, the committee will be required to follow-up on or adjust its investigations and monitoring activities and will submit a supplemental report to our board of directors with the additional Ñndings. Our independent non-executive directors will have the discretion to engage and consult Ñnancial or legal advisers if required. The Company is of the view that the reports made by independent directors to our board of directors will signiÑcantly increase the information available to the Company and will provide the required transparency for the enforcement of options, pre-emptive rights and rights of Ñrst refusal. We will disclose in our annual report details of the decisions made by our independent non-executive directors in relation to the enforcement of non-competition undertakings made by CITIC Group and CIFH, including without limitation, the exercise or non-exercise of options, pre-emptive rights and rights of Ñrst refusal. In addition, each of CITIC Group and CIFH will make a declaration in our annual report as to their respective compliance with the above non-competition undertakings.

CONNECTED TRANSACTIONS

Upon the listing of our H Shares on the Hong Kong Stock Exchange, transactions between us and our connected persons (as deÑned under the Hong Kong Listing Rules) will constitute connected transactions for us under Chapter 14A of the Hong Kong Listing Rules. The deÑnition of connected persons under Chapter 14A of the Hong Kong Listing Rules is diÅerent from the deÑnition of related parties under International Accounting Standard 24, ""Related Party Disclosures'', and its interpretations by the IASB. Accordingly, connected transactions set out in this section, which are described and disclosed in accordance with Chapter 14A of the Hong Kong Listing Rules, diÅer from the related party transactions set out in

159 OUR RELATIONSHIP WITH CITIC GROUP AND CONNECTED TRANSACTIONS

Note 37 of Section V to Appendix I Ì ""Accountants' Report''. We set out below details of our connected transactions.

Exempt continuing connected transactions

1. Commercial Banking Services and Products Provided by Us to Connected Persons in our Ordinary and Usual Course of Business

We provide commercial banking services and products to our customers in the ordinary and usual course of our business. Such services and products include taking of deposits (including demand deposits, time deposits and call deposits) and the provision of long-term loans, short-term loans, consumption loans and mortgage loans, as well as other credit facilities, by our bank.

1.1 Deposits

Customers who place deposits with our company may include our promoters, directors, supervisors and chief executive oÇcers and those of our subsidiaries, each ex-director of our company and our subsidiaries who was a director within 12 months preceding the date of listing of our H Shares and their respective associates, each of whom will be a connected person under Chapter 14A of the Hong Kong Listing Rules upon the listing of our H Shares. We expect that our connected persons may continue to place deposits with our company following the Global OÅering, which will constitute continuing connected transactions for us under Chapter 14A of the Hong Kong Listing Rules.

The placing of deposits by our connected persons with us in the ordinary and usual course of our business and on normal commercial terms that are comparable or no more favorable than those oÅered to independent third parties will be exempt continuing connected transactions under Rule 14A.65(4) of the Hong Kong Listing Rules (as no security over the assets of our bank will be granted in respect of any such deposits), that is Ñnancial assistance provided by a connected person in the form of deposits placed with a listed issuer for the beneÑt of a listed issuer on normal commercial terms (or better to the listed issuer) where no security over the assets of the listed issuer is granted in respect of the Ñnancial assistance, and thus will be exempt from the reporting, announcement and independent shareholders' approval requirements contemplated under Rules 14A.35 and 14A.45 to 14A.48 of the Hong Kong Listing Rules.

1.2 Loans and Credit Facilities

We extend loans and credit facilities, including credit cards, loans, entrusted loans, guarantee services, security for third party loans and discount bills to our customers in the ordinary and usual course of our business and on normal commercial terms with reference to prevailing market rates. Customers who utilize our company's loans and credit facilities include our promoters, directors, supervisors and chief executive oÇcers and those of our subsidiaries, each ex-director of our company and our subsidiaries who was a director within 12 months preceding the date of listing of our H Shares and their respective associates, each of whom is a connected person under Chapter 14A of the Hong Kong Listing Rules. We expect that we will continue to provide loans and credit facilities to our connected persons following the Global OÅering, which will constitute continuing connected transactions for us under Chapter 14A of the Hong Kong Listing Rules.

The provision of loans and credit facilities by us to our connected persons in the ordinary and usual course of our business and on normal commercial terms that are comparable or no more favorable than those oÅered to independent third parties will be exempt continuing connected transactions under Rule 14A.65(1) of the Hong Kong Listing Rules, that is Ñnancial assistance provided by a listed issuer in its ordinary and usual course of business for the beneÑt of a connected person on normal commercial terms, and thus will be exempt from all reporting, announcement and independent shareholders' approval requirements contemplated under Rules 14A.35 and 14A.45 to 14A.48 of the Hong Kong Listing Rules.

160 OUR RELATIONSHIP WITH CITIC GROUP AND CONNECTED TRANSACTIONS

2. Agency Services Provided by Us to CITIC Funds

Based on the Open-end Securities Investment Fund Sales Agency Agreement (the ""Framework Agreement'') entered into between CITIC Funds and us in June 2006, and the agreements supplemental to the Framework Agreement with respect to speciÑc fund products, we have been entrusted by CITIC Funds to provide certain agency services in relation to sale of its fund products. The agency services include fund account-related services, fund trading-related services, fund settlement services, consultancy, advisory and notiÑcation services to investors, safekeeping of all documentation in relation to the agency business (including all original receipts, accounting receipts, transaction records and material contracts), training of sales staÅ as well as marketing matters such as fund publicity and marketing.

Our directors conÑrm that the service fees under the aforesaid sales agency agreements are based on market rate and the continuing connected transactions under the above agreements are on normal commercial terms.

Based on the above sales agency agreements, we estimate that the service fees under the above sales agency agreements for each of 2007, 2008 and 2009 will be less than 0.1% of the applicable percentage ratios. The continuing connected transaction under the above sales agency agreements is expected to fall within the de minimis threshold under Rule 14A.33(3) of the Hong Kong Listing Rules and therefore is exempt from the reporting, announcement and independent shareholders' approval requirements contemplated under the Hong Kong Listing Rules.

3. Fund-related Services Provided by Us to CITIC Prudential Funds

Based on an agreement entered into between CITIC Prudential Funds and us on March 23, 2006, we have been entrusted by CITIC Prudential Funds to process fund subscription, purchase, redemption, conversion, interest distribution and other fund-related services.

Our directors conÑrm that the service fees under the aforesaid agreement are based on market rate and the continuing connected transactions under the above agreement are on normal commercial terms.

Based on the above agreement, we estimate that the services fees under the above agreement for each of 2007, 2008 and 2009 will be less than 0.1% of the applicable percentage ratios.

The continuing connected transaction under the above agreement is expected to fall within the de minimis threshold under Rule 14A.33(3) of the Hong Kong Listing Rules and therefore is exempt from the reporting, announcement and independent shareholders' approval requirements contemplated under the Hong Kong Listing Rules.

4. Cooperation with CITIC Prudential Life

Based on an agreement entered into between CITIC Prudential Life and us on August 19, 2003, we have agreed to cooperate with CITIC Prudential Life to sell its insurance products and provide the relevant settlement services.

Our directors conÑrm that the service fees under the aforesaid agreement are based on market rate and the continuing connected transactions under the above agreement are on normal commercial terms.

Based on the above agreement, we estimate that the service fees under the above agreement for each of 2007, 2008 and 2009 will be less than 0.1% of the applicable percentage ratios.

The continuing connected transaction under the above agreement is expected to fall within the de minimis threshold under Rule 14A.33(3) of the Hong Kong Listing Rules and therefore is exempt from the reporting, announcement and independent shareholders' approval requirements contemplated under the Hong Kong Listing Rules.

161 OUR RELATIONSHIP WITH CITIC GROUP AND CONNECTED TRANSACTIONS

5. Trademark licenses On March 14, 2007, we entered into a trademark license agreement with CITIC Group, pursuant to which we were granted a non-exclusive, two-year license to use CITIC Group's "" '', ""CITIC'', "" '' "" '' and "" '' trademarks, all of which are registered in class 36, for nil consideration. On April 3, 2007, CITIC Group gave an undertaking to us to extend the term of the above license for so long as CITIC Group remains our controlling shareholder for nil consideration. The continuing connected transaction under the above license agreement will fall within the de minimis threshold under Rule 14A.33(3) of the Hong Kong Listing Rules and therefore is exempt from the reporting, announcement and independent shareholders' approval requirements contemplated under the Hong Kong Listing Rules.

6. Transfer of economic beneÑts of the written-oÅ loans from us to CITIC Group Based on the agreement entered into between CITIC Group and us on December 13, 2006, the economic beneÑts of the loans written-oÅ in 2006, 2005 and 2004, with an aggregate principal amount of approximately RMB 10.5 billion, were transferred from us to CITIC Group for nil consideration. The written-oÅ loans were extended during the period when CITIC Group was our sole shareholder and it was intended that, by way of the December 13, 2006 agreement between CITIC Group and us, the economic interests to be recovered of the written-oÅ loans would be transferred back to CITIC Group as part of our Ñnancial restructuring. After the transfer, we remain as the passive holder of such loans. We entered into a supplemental agreement with CITIC Group in respect of the December 13, 2006 agreement on March 26, 2007. By virtue of the supplemental agreement, provisions under the December 13, 2006 agreement relating to: (i) the our obligation to recover the loans on behalf of CITIC Group; and (ii) the fee arrangements in relation to the management and recovery of the loans were superseded. We will assist CITIC Group by holding the assets on their behalf in accordance with the legal requirements of the PRC in consideration for fees to be paid by CITIC Group. Based on the above agreements, we estimate that the fees to be received from CITIC Group for each of 2007, 2008 and 2009 will be less than 0.1% of the applicable percentage ratios. The continuing connected transaction under the above agreements is expected to fall within the de minimis threshold under Rule 14A.33(3) of the Hong Kong Listing Rules and therefore is exempt from the reporting, announcement and independent shareholders' approval requirements contemplated under the Hong Kong Listing Rules. We will enter into a separate agreement with CITIC Group in the event we agree to take actions to recover the written-oÅ loans on CITIC Group's behalf. Depending on the applicable percentage ratios under such arrangement (if subsequently entered into), we will comply with the relevant requirements under Chapter 14A of the Listing Rules.

162 OUR RELATIONSHIP WITH CITIC GROUP AND CONNECTED TRANSACTIONS

7. Leases We entered into the following lease agreements with certain connected persons, being CITIC Group and its associates, pursuant to which we agreed to lease to or from our connected persons the following commercial premises: 7.1 Properties leased to us by our connected persons

Lease term expiry Lessor Location date Rent per annum CITIC Group #B101, Basement, #101-104, 1st June 28, 2007 RMB 2,881,972 Floor, 201, High Tower, Jingcheng Mansion ( ), 6 Xinyuan Nanlu, Chaoyang District, Beijing, PRC CITIC Building Property Management Co., Ltd. Floor 1, Suite 1-02 and UG16#, December 31, 2008 RMB 4,002,147 Tower A, CITIC Building ( ) ( ), No. 19 Jianguomenwai Avenue, Chaoyang District, Beijing, PRC UG 15#, Tower A, CITIC Building September 30, 2021 RMB 390,569 ( ), No. 19 Jianguomenwai Avenue, Chaoyang District, Beijing, PRC Century Square Corporation Limited Suites 121-123, 215A, Floor 48-50, June 28, 2009 RMB 16,800,000 CITIC Square, Guangzhou, PRC ( ) Wuhan Cable Broadcasting Television Network Floor 1, No. 229 Hong Kong Road, October 31, 2007 RMB 56,160 Co., Ltd. Jianghan District, Wuhan, PRC ( ) China Municipal Engineering Zhongnan Design Floor 1, No. 1779 Jiefang Avenue, June 10, 2009 RMB 24,000 Institute Jiang'an District, Wuhan, PRC ( ) 7.2 Properties leased by us to our connected persons Lease term expiry Lessee Location date Rent per annum CITIC Securities Company Limited Floor 6-8, No. 29 Renmin Road, December 31, 2009 approximately Zhongshan District, Dalian, PRC RMB 610,000 ( ) Floor 1 and 3, Section B, CITIC July 20, 2007 approximately Building, No. 747 Jianshe Avenue, RMB 600,000 Wuhan, PRC CITIC Futures Brokerage Co., Ltd. Floor 9, No. 29 Renmin Road, December 31, 2009 RMB 63,000 Zhongshan District, Dalian, PRC ( ) CITIC Prudential Life Insurance Co., Ltd., Jiangsu Floor 2, No. 48 Haiyu Beilu, September 9, 2007 RMB 142,437 Branch* Changshu City, Suzhou, PRC ( )

* For identiÑcation purpose only As conÑrmed by our property valuer and our PRC legal advisors, the continuing connected transactions under the above lease agreements are fair and on normal commercial terms. Based on the above lease agreements, we estimate that the applicable percentage ratios for the continuing connected transactions under the above lease agreements calculated in aggregate on an annual basis for each of 2007, 2008 and 2009 will be less than 0.1%. Accordingly, it is expected that the continuing connected transactions under the above lease agreements will fall within the de minimis threshold under Rule 14A.33(3) of the Hong Kong Listing Rules and therefore will be exempt from the reporting, announcement and independent shareholders' approval requirements contemplated under the Hong Kong Listing Rules.

163 MANAGEMENT

GENERAL Our board of directors currently consists of 15 directors, of whom Ñve are independent non-executive directors. Except for independent non-executive directors who are each limited to a maximum term of three years, our directors are elected at shareholders' general meetings for a term of three years, which is renewable upon re-election and re-appointment. The functions and authorities of our board of directors include, but not limited to:

¬ convening shareholders' general meetings and reporting on its performance to shareholders at such meetings;

¬ executing the resolutions of the shareholders' general meetings;

¬ determining our development strategies, business plans and investment proposals;

¬ formulating our proposed annual budgets and Ñnal accounts;

¬ formulating our proÑt distribution plans and plans for recovery of losses;

¬ determining proposals for material investment, material asset disposal and other signiÑcant matters in accordance with our articles of association and within the scope authorized in our shareholders' general meetings;

¬ formulating proposals for increases in or reductions of our registered share capital, and proposals for merger, separation, dissolution, liquidation or change of the nature of our company;

¬ formulating proposals for issuance of bonds or other marketable securities and listing plans;

¬ formulating proposals for repurchase of our shares;

¬ formulating proposals for any amendment to our articles of association;

¬ appointing or dismissing our president and secretary of the board, and deciding on matters relating to their emoluments and on the imposition of any disciplinary measures;

¬ appointing or dismissing our vice presidents, assistant presidents and other executive oÇcers based on the nomination of our president, and deciding on matters relating to their emoluments and on the imposition of any disciplinary measures;

¬ deciding on the establishment of our fundamental management system and structure;

¬ deciding on our codes of ethics to provide for behavior standards for management at various levels and business personnel, expressly requiring our employees at various levels to report on potential conÖict of interests in a timely manner, specifying the disciplinary measures and establishing the corresponding responding mechanisms;

¬ deciding on the establishment and cancellation of domestic tier one branch and overseas branch;

¬ deciding on policies and procedures on our disclosure of information;

¬ deciding on our information reporting system to require senior management to report on our operating matters on a regular basis;

¬ proposing the appointment or dismissal of our reporting accountant;

¬ formulating procedures on management of related party transactions; reviewing and approving or authorizing the audit and related party transactions control committee to approve related party transactions (except for the related party transactions that should be approved by the shareholders' general meetings in accordance with the applicable laws); reporting on related party transactions and the implementation status of the relevant procedures to the shareholders' general meetings;

¬ reviewing and approving proposals submitted by each board committee;

164 MANAGEMENT

¬ reviewing working reports of our president and other executive oÇcers; monitoring and ensuring the eÅective discharge of managerial responsibilities in accordance with the applicable regulatory requirements;

¬ reviewing and approving the terms of reference of each board committee; and

¬ exercising any other authorities conferred by shareholders' general meetings or prescribed by the applicable laws, regulations or our articles of association. Pursuant to the PRC Company Law and the Articles of Association, a director shall abstain from voting if he or she has material interest in the proposed resolution of the board of directors. The board of directors will submit the relevant resolution for consideration at our shareholders' meeting if the number of non- interested directors attending the meeting of the board of directors is less than three, or if the quorum cannot be met due to abstention of interested directors. Where a director holds concurrent directorship positions in the Company and one or more of CITIC Group, CIFH or CKWB, if the board of directors of the Company considers any resolution concerning the Company and one or more of CITIC Group, CIFH or CKWB, that overlapping director shall refrain from voting on the particular resolution. Such circumstances would arise when, for example, the board of directors of the Company considers entering into connected transactions (including agreements for the provision of services) with CITIC Group and CIFH, or when the board of directors of the Company considers strategic development plans vis-a-visfi one or more of CITIC Group, CIFH or CKWB speciÑcally. Our board of supervisors currently consists of eight members. Except for the employee representative supervisors elected by employees, our supervisors are elected at shareholders' general meetings for a term of three years, which is renewable upon re-election and re-appointment. The functions and authorities of the board of supervisors include, but not limited to:

¬ overseeing the conduct of our directors and executive oÇcers in carrying out their duties and the performance of their responsibilities;

¬ inquiring our directors and executive oÇcers;

¬ demanding that a director, chairman of the board of directors, president and other executive oÇcers to rectify his/her conduct when such conduct is prejudicial to the interests of our company;

¬ proposing to dismiss our directors and executive oÇcers who have violated the applicable laws and regulations, our articles of association and the resolutions of our shareholders' general meetings, or bring actions against them according to the applicable laws;

¬ carrying out audit on any resigning directors or executive oÇcers when necessary;

¬ examining and monitoring our Ñnancial activities;

¬ reviewing the Ñnancial information and regular reports such as the Ñnancial reports, business reports and plans for the distribution of proÑts to be submitted by our board of directors to the shareholders' general meetings and if there is any doubt, appointing certiÑed public accountants and practicing auditors to re-examine the company's Ñnancial information;

¬ carrying out audit on our operational decision-making, risk management and internal control when necessary, and directing the work of our internal audit department;

¬ submitting proposals at the shareholders' general meetings;

¬ proposing to convene a shareholders' extraordinary general meeting, and, if our board of directors fails to call such meetings as required by their responsibilities, convening and presiding at the shareholders' extraordinary general meeting;

¬ proposing to convene an extraordinary meeting of the board;

165 MANAGEMENT

¬ opining on each item regarding credit assets quality, assets and liabilities ratio, risk controls and other matters contained in the report to be submitted to the banking regulatory authorities of the State Council on a regular basis pursuant to the applicable regulations within Ñve working days after receiving the said report from the senior management; and

¬ exercising the other authorities prescribed by law, administrative regulations or rules or our articles of association, and authorities conferred at the shareholders' general meetings. According to the relevant PRC laws and regulations, the mandatory retirement age for our management staÅ is generally 60 years old for men and 55 years old for women.

166 MANAGEMENT Department Board’s Office Board’s Administrative Board of Supervisors and Security Department Supervision Committee Committee Internal Audit transactions control Audit and Related Party Department Planning and Development Technology Department Information Committee Strategy Development Strategy Human Resources Department Credit Risk Market Risk Market Subcommittee Subcommittee Subcommittee Operational Risk Shareholder’s Accounting Department General Meeting Nomination and Compensation Committee Finance Budget and Department Committee Committee Risk Management Risk Management Audit Department Risk Department Management Board of Directors Senior Management Legal and Legal Resolution Department Special Asset Committee Committee Committee Sales and Marketing Information Technology Development and Assets and Development Board’s Office Board’s and Liabilities Management Center Credit Card Treasury Operations Department Banking Department International Banking Personal Department Banking Corporate Department Office Branches, and Other Companies Subsidiaries Shareholding The following chart illustrates our current organizational structure.

167 MANAGEMENT

DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT CO 3rd Sch(1)6 The following table sets forth information regarding our directors, supervisors and senior management. App 1A 41(1) The business address of our directors, supervisors and executive oÇcers is China CITIC Bank, Block C, CO 3rd Sch(1)44 Fuhua Mansion, 8 Chaoyangmen Beidajie, Dongcheng District, Beijing, China.(1) Our directors, supervisors and members of senior management all meet the qualiÑcation requirements for their respective positions.(1) Certain members of our management hold concurrent management roles in one or more of CITIC Group, CIFH, CKWB and China Investment and Finance Limited. They include Mr. KONG Dan, Mr. CHANG Zhenming, Mr. WANG Chuan, Dr. CHEN Xiaoxian, Mr. DOU Jianzhong, Ms. CHAN Hui Dor Lam, Doreen, Mr. JU Weimin, Mr. ZHANG Jijing, Mr. LIN Zhengyue, Dr. OUYANG Qian and Mr. CAO Guoqiang; details of their concurrent management positions are disclosed in their respective biographies under this section. Except as disclosed in this section, there are no other members of our senior management who hold any overlapping positions in us, CITIC Group, CIFH, CKWB or China Investment and Finance Limited. Name Age Position Directors:(2) Mr. KONG DanÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 59 Chairman and Non-executive Director Mr. CHANG Zhenming ÏÏÏÏÏÏÏÏÏÏÏÏ 50 Vice Chairman and Non-executive Director Mr. WANG Chuan ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 58 Non-executive Director Dr. CHEN Xiaoxian ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 52 Executive Director Mr. DOU Jianzhong ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 52 Non-executive Director Mr. WU BeiyingÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 56 Executive Director Ms. CHAN Hui Dor Lam Doreen ÏÏÏ 53 Non-executive Director Mr. JU Weimin ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 43 Non-executive Director Mr. ZHANG Jijing ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 51 Non-executive Director Mr. Joseπ Ignacio GOIRIGOLZARRI 53 Non-executive Director Dr. BAI Chong-En ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 43 Independent Non-executive Director Dr. John Dexter LANGLOIS ÏÏÏÏÏÏÏ 64 Independent Non-executive Director Dr. AI Hongde ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 52 Independent Non-executive Director Dr. XIE RongÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 54 Independent Non-executive Director Mr. WANG XiangfeiÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 55 Independent Non-executive Director Secretary to the Board of Directors: Mr. LUO Yan ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 38 Secretary to the Board of Directors Supervisors: Ms. LIU Chongming ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 60 Supervisor Mr. WANG Shuanlin ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 57 External Supervisor Mr. LI QianxinÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 60 Supervisor Mr. GUO KetongÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 52 Supervisor Mr. LIN Zhengyue ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 43 Supervisor Mr. DENG Yuewen ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 43 Supervisor Mr. LI GangÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 38 Supervisor Dr. ZHUANG YuminÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 44 External Supervisor

(1) Pursuant to resolutions passed by our shareholders on March 8, 2006, we propose to, inter alia, change the address of our registered oÇce from Block C, Fuhua Mansion, 8 Chaoyangmen Beidajie, Dongcheng District, Beijing, China to Jingcheng Mansion, 6 Xinyuan Nanlu, Chaoyang District, Beijing, China. Amendments to the articles of association in light of the above proposals were submitted by us to the CBRC, pending approval by the CBRC. (2) The CBRC has approved the qualiÑcations of our chairman, vice chairman, executive directors and one of our non-executive directors. The qualiÑcations of our other directors are subject to the approval of the CBRC.

168 MANAGEMENT

Name Age Position Senior Management: Dr. CHEN Xiaoxian ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 52 President Mr. WU BeiyingÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 56 Executive Vice President Dr. OUYANG Qian ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 51 Vice President Dr. ZHAO Xiaofan ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 43 Vice President and General Manager of Beijing Branch Mr. WANG Lianfu ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 52 Secretary to the Committee for Discipline Inspection and Director of Human Resources (Vice President level) ( ) Mr. SU Guoxin ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 40 Vice President Mr. CAO TongÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 38 Vice President Mr. CAO Guoqiang ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 42 Assistant President and General Manager of Budget and Finance Department Mr. ZHANG QiangÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 44 Assistant President Mr. LUO Yan 38 Secretary to the Board of Directors and Joint Company Secretary Mr. LU Wei 35 QualiÑed Accountant Joint Company Secretaries: Mr. LUO Yan ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 38 Joint Company Secretary Ms. KAM Mei Ha, WendyÏÏÏÏÏÏÏÏÏÏ 39 Joint Company Secretary QualiÑed Accountant: Mr. LU Wei ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 35 QualiÑed Accountant

Directors Mr. KONG Dan, 59, serves as chairman and a non-executive director. Mr. Kong joined our board in December 2005. Mr. Kong is also chairman of CITIC Group, CIFH, CITIC Hong Kong Group, CITIC Shenzhen Group and CITIC United Asia Investments Limited, and a non-executive director of CKWB. Mr. Kong was vice chairman and president of CITIC Group from July 2000 to July 2006 and chairman of CKWB from November 2002 to October 2006. Prior to joining CITIC Group, Mr. Kong worked at China Everbright Group Limited, another Ñnancial holding company in China, from October 1984 to June 2000, holding senior management positions including executive director and vice president, and vice chairman and president. Mr. Kong worked at the OÇce of State Councilor and Director of National Economic Commission from 1982 to 1984. Mr. Kong is a senior economist. He graduated from the graduate school of Chinese Academy of Social Science in 1981 with a master's degree in economics. Mr. CHANG Zhenming, 50, serves as vice chairman and a non-executive director. Mr. Chang is also a vice chairman and a director of CIFH and a non-executive director of CKWB. He has served as vice chairman and president of CITIC Group and non-executive director of CITIC PaciÑc Limited since August 2006, and chairman of CITIC International Assets Management Limited since October 2006. Mr. Chang was vice chairman and president of CCB from September 2004 to July 2006, an executive director and vice president of CITIC Group from August 1995 to July 2004, assistant president of CITIC Group from January 1994 to August 1995, vice president of our Bank from September 1993 to January 1994, and assistant president of our Bank from October 1992 to September 1993. Mr. Chang joined our bank in October 1992 and rejoined us in December 2006 after he left CCB in the same year. Mr. Chang is a senior economist. He graduated from Beijing Second Foreign Language College with a bachelor's degree in Japanese in 1983, and received his master's degree in business administration from New York College of Insurance in 1992. Mr. WANG Chuan, 58, serves as a non-executive director. Mr. Wang joined our board in December 2005. Mr. Wang is also vice chairman of CITIC Group and an executive director and president of CITIC Holdings Company Limited, or CITIC Holdings. Prior to joining CITIC Group, Mr. Wang was vice chairman of China Everbright Group Limited and vice chairman and president of China Everbright Bank Company Limited from October 2001 to July 2004. He also worked at ABC for more than 20 years and held multiple

169 MANAGEMENT positions including vice president of head oÇce, general manager of Jilin Branch, general manager of the credit department, and deputy manager of the research department and the human resources department at our head oÇce. Mr. Wang is a senior economist and graduated from Renmin University of China with an associate's degree.

Dr. CHEN Xiaoxian, 52, serves as an executive director and president. Dr. Chen joined our bank in November 2004. He also serves as an executive director and vice president of CITIC Group and a non- executive director of CIFH and CKWB. Dr. Chen is a mentor of doctoral student and visiting professor of Dongbei University of Finance and Economics, as well as visiting professor of Renmin University of China. Dr. Chen was a director and executive vice president of China Merchants Bank from March 2000 to October 2004, general manager of Beijing branch of China Merchants Bank from October 1994 to March 2000, and deputy general manager of Beijing branch of PBOC from September 1982 to October 1994. He is a senior economist. Dr. Chen has 24 years of banking experience in China. Dr. Chen graduated from Renmin University of China in 1982 with a bachelor's degree in Ñnance. He received his master's degree in Ñnance from Xinan University of Finance and Economics and his Ph. D. in Ñnance from Dongbei University of Finance and Economics. In 2005 and 2006, Dr. Chen received the ""China's Top Ten Finance Figures of the Year Award'' from ""The Chinese Banker'' magazine. He also received the ""Top Ten New Leaders in Finance of the Year Award'' from the China International Finance Forum in 2006.

Mr. DOU Jianzhong, 52, serves as a non-executive director since December 2006. Mr. Dou is also an executive director and vice president of CITIC Group, a director and chief executive oÇcer of CIFH, chairman of CKWB, a director of CITIC International Assets Management Limited and a director of China Investment and Finance Limited. He joined CITIC Group in 1980 and joined our bank in April 1987, and served as our vice president from 1987 to 1994 and president from 1994 to 2004. Mr. Dou graduated from University of International Business and Economics in 1979 and received his master's degree in economics from Liaoning University in 1998. Mr. Dou is a senior economist. Mr. Dou has extensive experience in the Ñnancial industry.

Mr. WU Beiying, 56, serves as an executive director and executive vice president. Mr. Wu joined our bank in August 1987 and has worked at our bank since then. He was our vice president from July 1995 to December 2001, and served concurrently as general manager of our Beijing Branch from July 1996 to September 1999, and general manager of our Guangzhou branch from September 1999. Mr. Wu served as our assistant president from December 1993 to July 1995. He is a senior economist. Mr. Wu graduated from Central College of Finance and Economics with a master's degree in money and banking.

Ms. CHAN Hui Dor Lam Doreen , 53, serves as a non-executive director. Ms. Chan joined our board in December 2006. Ms. Chan joined CIFH as executive vice president in 1998, and was appointed as a director of CIFH in May 2001. Since 2002, she has served as managing director and alternate chief executive oÇcer of CIFH, a director and chief executive oÇcer of CKWB, and chairman of HKCB Finance Limited. Ms. Chan is experienced in the areas of credit and risk management, human resources and strategic development. Ms. Chan is also a member of the Banking Advisory Committee, Advisory Board and Investment Committee of Export Credit Insurance Corporation, General Committee of the Federation of Hong Kong Industries, and a council member of Hong Kong Baptist University and a member of its Finance Committee. Prior to joining CIFH, she was in charge of the retail banking department of Standard Chartered Bank (Hong Kong) Limited. Ms. Chan has over 30 years of extensive experience in the banking industry.

Mr. JU Weimin, 43, serves as a non-executive director. Mr. Ju joined our board in February 2007. He also serves as a director and chief Ñnancial oÇcer of CITIC Group, a non-executive director of CIFH and CKWB, and chairman of the board of CITIC Trust and Investment. Mr. Ju joined CITIC Group in March 1995. He served at multiple positions including vice director and director of the Ñnancial aÅairs department, chief accountant, chief Ñnancial oÇcer and director. Prior to joining CITIC Group, Mr. Ju was managing director of Shortridge Co., Ltd., manager of Ñnancial aÅairs of Zhongxing Iron & Steel Co., Ltd. and a project manager of China International Economic Consultants Co., Ltd.. He graduated from Renmin University of China in September 1987 and received his master's degree in accounting.

170 MANAGEMENT

Mr. ZHANG Jijing,(1) 51, serves as a non-executive director. Mr. Zhang joined our board in February 2007. He also serves as a director, assistant president and head of the strategy and planning department of CITIC Group and a director of CITIC Resources Holdings Limited and CITIC Securities. Mr. Zhang served as a director, head of the strategy and planning department and head of the integrated planning department of CITIC Group as well as general manager of CITIC Australia Pty. Ltd. from September 2002 to September 2005, a director of CITIC Group and general manager and deputy general manager of CITIC Australia Pty. Ltd. from October 1986 to September 2002, and deputy manager of the mineral resources division of the overseas investment department of CITIC Group from December 1984 to October 1986. Mr. Zhang served as a non-executive director of Yaohan International Holdings Limited (in liquidation) from February 14, 1996 to November 22, 1997 and from February 24, 1998 to November 20, 1998 when CITIC Australia Pty. Ltd. had a 7.25% shareholding interest in Yaohan International Holdings Limited. Mr. Zhang also served as a non- executive director of PaciÑc Asia International Pty Limited (de-registered) from June 30, 1995 to September 17, 1999 when CITIC Australia Pty. Ltd. had 50% shareholding interest in PaciÑc Asia International Pty Limited. Mr. Zhang is a senior economist. He graduated from Graduate University of Chinese Academy of Social Sciences in December 1984 and received his master's degree in quantitative and technical economics. Mr. Joseπ Ignacio GOIRIGOLZARRI, 53, serves as a non-executive director. Mr. Goirigolzarri joined our board in February 2007. He has been the president and chief operating oÇcer of BBVA since December 2001, director of BBVA Bancomer Servicios, S.A. since 2001, director of Grupo Financiero BBVA Bancomer since 2001, director of BBVA Bancomer, S.A. since 2001 and president of the Spain USA Counsel Foundation since 2005. He served as vice president of Telefonicaπ S.A. from April 2000 to April 2003 and vice president of Repsol YPF S.A. from 2002 to 2003. Mr. Goirigolzarri served as general manager of BBVA Group from April 2001 to December 2001 and was in charge of all retail businesses of BBVA Group, including retail banking in Spain and Latin America, pensions, private banking and internet banking. He was a director of BBVA Mexico from 2000 to April 2001, and was appointed the president and chief operating oÇcer of BBVA Group in December 2001. Mr. Goirigolzarri had served as a member of the BBVA executive committee and head of all the Latin-American businesses since BBV merged with Argentaria in 1999. He served as a member of the BBV executive committee and general manager of BBV from 1993 to 1998, and was in charge of retail banking and responsible for BBV America at the time of BBV's expansion into Latin America. Mr. Goirigolzarri joined the strategic planning department of Banco De Bilbao in 1978, and served as a member of BBV Holding (a company that led to the merger between BB and BV). He graduated from University of Deusto, Spain and received his bachelor's degree in economics. Dr. BAI Chong-En, 43, serves as an independent non-executive director and joined our board in December 2006. Dr. Bai is dean of the School of Economics and Management of Tsinghua University. He has been MansÑeld Freeman Chair Professor of Economics and a mentor of doctoral student at the School of Economics and Management of Tsinghua University since 2004. Dr. Bai was an assistant professor and associate professor at the School of Economics & Finance of University of Hong Kong from 1999 to 2004. He also taught as chair professor at the School of Economics and Management of Tsinghua University from 2002 to 2004. Dr. Bai taught at Boston College in U.S. from 1992 to 1999. Dr. Bai studied at the Department of Mathematics in University of California, San Diego and the Department of Economics in Harvard University, and obtained a Ph.D. in mathematics and a Ph.D. in economics, respectively, from 1985 to 1993. He studied mathematics and obtained his bachelor's degree from University of Sciences and Technology of China, and then studied at the Institute of Applied Mathematics, Chinese Academy of Sciences, from 1979 to 1985. Dr. Bai is an expert in research in the Ñeld of institutional economics, development and transition economics, corporate governance, Ñnance and industry economics. He has published many articles in nationwide and worldwide recognized academic journals and other publications. Dr. Bai obtained the National Science Fund

(1) The liquidation proceedings in relation to Yaohan International Holdings Limited (in liquidation) and PaciÑc Asia International Pty Limited (de-registered) do not or would not have any signiÑcant impact on us or Mr. Zhang's qualiÑcation to serve as our director. In addition, we are of the view that Mr. Zhang is suitable to act as our director and that the liquidation proceedings would not have any signiÑcant impact on the performance of Mr. Zhang in his role as our director.

171 MANAGEMENT for Distinguished Young Scholars in 2006 and was rewarded Cheung Kong Scholarship in 2007 by the Ministry of Education of PRC. Dr. Bai currently holds many social positions, including member on the editorial board of Journal of Comparative Economics, Economic Review of the World Bank and China Economic Review, joint editors-in-chief of Journal of Economics of Tsinghua University, non-resident senior research fellow at the Brookings Institution, member of the IPD Taskforce on Corporate Governance at Columbia University, research fellow at the William Davidson Institute at University of Michigan, and consultant for the World Bank.

Dr. John Dexter LANGLOIS, 64, serves as an independent non-executive director. Dr. Langlois joined our board in December 2006. He has also been managing director of Countrywide Capital Markets Asia (HK) Limited since March 2006. Dr. Langlois served as a director of from 2000 to 2003, a director of Nanjing City Commercial Bank from 2003 to 2004, and a non-executive chairman and a director of Shenzhen Development Bank from January 2005 to May 2005 and from May 2005 to June 2006, respectively. He was president of Morgan Stanley Properties, China, from September 2002 to August 2005. Dr. Langlois taught as professor at the Department of East Asia Studies in Princeton University from 1999 to 2001. From 1982 to 1999, he held multiple positions at JP Morgan, including assistant vice president and vice president in the international Ñnance management department in New York, deputy director of the JP Morgan Guaranty Trust, Japan Branch, managing director of the investment banking department and head of the properties division in Japan, managing director of the investment banking department and head of the properties division in London, managing director of the investment banking department and head of the Chinese businesses division in Hong Kong, and managing director of the investment banking department and head of the Asian clients division in New York, and chief representative of Beijing OÇce. Dr. Langlois served as associate professor and chairman of the History Department at Bowdoin College in Brunswick in Maine, U.S., from 1973 to 1982. He obtained his Ph.D in East Asia Studies from Princeton University in 1974, MBA from New York University in 1986, master's degree in literature from Harvard University in 1966, and bachelor's degree from Princeton University in 1964.

Dr. AI Hongde, 52, serves as an independent non-executive director. Dr. Ai joined our board in February 2007. He serves as president of Dongbei University of Finance and Economics. Dr. Ai served as vice president of Dongbei University of Finance and Economics from January 1, 1999 to May 2005, vice director of Dalian High-tech Park from March to December 1998, vice secretary general of Dalian municipal government from December 1997 to February 1998, assistant president of Dongbei University of Finance and Economics from July 1996 to November 1997, and vice dean of the Ñnance department of Dongbei University of Finance and Economics from January 1993 to June 1996. Dr. Ai is a professor and mentor of doctoral student. He has been awarded the special government allowances by the State Council since 2000. Dr. Ai graduated from Dongbei University of Finance and Economics in April 1993 and received his doctor's degree in money and banking. Dr. Ai is an expert in research in the Ñeld of currency policy and theory, Ñnancial institution management, international Ñnance, Ñnancial market, regional Ñnance and credit system. He has published eight monographs well-received by academic circle, and more than one hundred articles in nationwide and worldwide recognized academic journals. He has also led and completed sixteen research projects funded by national or provincial government. Dr. Ai's academic opinions and policy proposals have been adopted and implemented by the PBOC, the State Council, the Standing Committee of the National People's Congress, Liaoning provincial government and Dalian Municipal government. Dr. Ai holds many social positions, including member of the standing committee of China Society for Finance and Banking, member of the academic committee of China Society for Finance and Banking, member of the academic committee of China Society for International Finance, vice chairman of Liaoning Society for Price and vice chairman of Liaoning Society for International Economic Law. In addition, Dr. Ai served as an independent director of Liaoning Trust and Investment Co., Ltd. Dr. Ai is currently an independent director of Dalian Shengya Tourism Holding Co., Ltd. and Liaoning Chengda Co., Ltd.

Dr. XIE Rong, 54, serves as an independent non-executive director. Dr. Xie joined our board in February 2007. He serves as the vice president of Shanghai National Accounting Institute. Dr. Xie served as a partner of KPMG from December 1997 to October 2002, and vice dean of the accounting department, a mentor of doctoral student, a professor, an associated professor and a lecturer of Shanghai University of Finance and

172 MANAGEMENT

Economics from December 1985 to December 1997. Dr. Xie was a senior visiting scholar at Warwick University, UK for one year. He was also a part-time certiÑed public accountant at Dahua Accounting Firm and PricewaterhouseCoopers. Dr. Xie graduated from Shanghai University of Finance and Economics and received his doctor's degree in economics in December 1992. Dr. Xie is an expert in research in the Ñeld of accounting, auditing and internal controls of Ñnancial enterprises. He has published more than ten monographs well-received by academic circle and many articles in nationwide and worldwide recognized academic journals. He has also led or participated in a number of research projects funded by the PRC Government, the Ministry of Finance and the institutes of certiÑed public accountants. Dr. Xie holds many social positions, including member of the accounting master's degree education and guidance subcommittee of the Degree Committee of Chinese Government, member of China Audit Society, member of the standing committee of the education division of China Accounting Society, vice chairman of Shanghai Institute for Cost Research. He also serves as an independent director of Shanghai Automotive Co., Ltd., China Shipping Development Co., Ltd., China Eastern Airlines Co., Ltd., Shanghai Industrial Pharmaceutical Investment Co., Ltd. and Bright Dairy & Food Co., Ltd.

Mr. WANG Xiangfei, 55, serves as an independent non-executive director. Mr. Wang joined our board in December 2006. He was a director & assistant general manager of China Everbright Holdings Co. Ltd. (""China Everbright'') and held multiple senior management positions in various listed companies owned by China Everbright, including executive director of China Everbright Technology Ltd. and Hong Kong Construction (Holdings) Ltd., executive director and chief executive oÇcer of China Everbright International Ltd. and director of China Everbright Investment Management Company Ltd. He previously held senior management positions in various companies which engage in banking and related Ñnancial services business, including vice general manger of China Everbright International Trust & Investment Co. from 1995 to 1996 and executive director of China Everbright Limited from June 1996 to December 1998, independent non-executive director of Shenzhen Rural Commercial Bank Company Limited from October 2005 to present, vice chief Ñnancial oÇcer of SONANGOL International Limited from February 2005 to present and Ñnancial advisor of China SONANGOL International Holding Limited from September 2004 to present. In addition, Mr. Wang has served as an independent non-executive director of two H and A share companies, Tianjin Capital Environmental Protection Company Limited (since April 2002) and Chongqing Iron & Steel Company Ltd. (since July 2002). Mr. Wang has served as an independent non-executive director of SEEC Media Group Ltd. since June 2003, and was an independent non-executive director of Plus Holdings Ltd. from September 2004 to the end of 2006. Mr. Wang has also served as a director of China Beiya ESCOM International Ltd. since August 2003. Mr. Wang taught as an associate professor for Ñnance at the Department of Finance in Renmin University of China. He obtained his bachelor's degree in economics from Renmin University of China in 1982. Mr. Wang has also been qualiÑed as a senior accountant.

Supervisors

Ms. LIU Chongming, 60, serves as a supervisor. Ms. Liu was chief auditor of CITIC Group and vice chairman of CITIC Holdings from March 2003 to December 2006. Prior to joining CITIC Group, Ms. Liu served as secretary to the party committee and general manager of Tianjin branch of the PBOC from January 1999 to March 2003, and director of the audit bureau of the headquarter of the PBOC and head of the Ñrst section of the regulatory department of the PBOC from May 1996 to December 1998. She was deputy general manager, general manager and secretary to the party committee of Hubei branch of the PBOC from 1985 to 1996. During the period, she was also an adjunct professor of Huazhong University of Science and Technology, Wuhan University and Zhongnan University of Finance and Economics. Ms. Liu has been qualiÑed as senior economist since 1985. She graduated from Hubei University (currently named as Zhongnan University of Finance and Economics) in 1969.

Mr. WANG Shuanlin, 57, serves as an external supervisor. Mr. Wang has served as a full-time supervisor of the supervisory committee of CITIC Group since January 2003. Before that, Mr. Wang held multiple positions in Ñnance industry. He was vice president of China Government Bond Depository and Clearance Limited from October 1996 to October 2003, a director and vice president of China Securities Trading System Limited from January 1993 to October 1996, and section head of the audit department and oÇce manager of

173 MANAGEMENT head oÇce of the PBOC from September 1982 to January 1993. Mr. Wang is a senior economist. He graduated from Renmin University of China in 1982 with a bachelor's degree in Ñnance. Mr. LI Qianxin, 60, serves as a supervisor. Mr. Li is also manager of the audit department of CITIC Group, a supervisor and member of the audit committee of CITIC Holdings, chairman of the supervisory committee of CITIC East (Group) Limited, chairman of the supervisory committee of CITIC Assets Management Limited, and a supervisor of CITIC Network Technology Limited. Mr. Li was deputy manager of the audit department of CITIC Group from April 1996 to 1997, and vice president, assistant manager and section head of CITIC Industrial Limited from 1984 to 1996. Mr. Li is a senior economist. He graduated from Beihang University in 1969 with a bachelor's degree. Mr. GUO Ketong, 52, serves as a supervisor. Mr. Guo is also manager of the human resources department of CITIC Group. He has served as a director of CITIC Australia Pty. Ltd. since November 2003, and a director of CITIC Real Estate Company since October 1999. Mr. Guo was deputy manager, assistant manager, section head, and vice section head of the human resources department of CITIC Group from 1986 to March 2003. Mr. Guo is an economist. He graduated from Renmin University of China in 1985 with an associate's degree. Mr. LIN Zhengyue, 43, serves as a supervisor. Mr. Lin also serves as director of China Investment and Finance Limited. He has been deputy general manager of the audit department of our head oÇce since March 2006. He was assistant general manager of the audit department of our head oÇce from June 2005 to March 2006 and vice manager of the audit department of our Nanjing Branch from March 2004 to June 2005. Prior to joining our company, Mr. Lin worked at Nanjing branch of ICBC from August 1983 to February 2004. Mr. Lin has 23 years of banking experience in China. He received his bachelor's degree in Ñnance from China Central Radio and TV University. Mr. DENG Yuewen, 43, serves as a supervisor. Mr. Deng has also been in charge of the risk management department of our Beijing branch since October 2005. He was deputy general manager of the risk management department of our Beijing branch from February 2004 to October 2005. Prior to that position, he worked at the credit department of our head oÇce, the personal banking department of our Beijing branch, and the credit department of our Shenzhen branch from April 1996 to February 2004. Mr. Deng has worked at our bank since April 1996. He is an engineer. Mr. Deng graduated from Wuhan Technology Institute in 1984 with a bachelor's degree, and received his master's degree in money and banking from PBOC Finance Research Institute in 1996. Mr. LI Gang, 38, serves as a supervisor. Mr. Li has served as assistant general manager of the budget and Ñnance department and general manager of assets and liabilities management department of our company since June 2006. Mr. Li was head of the treasury management section of the budget and Ñnance department of our company, general manager of the budget and Ñnance department of our Beijing Branch, and deputy general manager of the budget and Ñnance department of our company from June 2000 to June 2006. He also served as assistant manager and deputy manager of the Ñnance department of CITIC Daxie Development Limited, and vice section head and section head of the treasury section of the Finance and Taxation Bureau from June 1994 to June 2000. Mr. Li graduated from China Finance Institute in 1992. Dr. ZHUANG Yumin, 44, has served as a supervisor since March 26, 2007. Dr. Zhuang currently is the head, a professor and mentor of doctoral students at the monetary Ñnance department of the Finance School, Renmin University of China. Before that she has worked at the Ñnance department as a deputy head of the Ñnance study unit and head of Ñnance department since 1995. During October 2000 and June 2001, Dr. Zhuang was on a training programme at the Economic School of the University of Montenegro and the Economic School of the University of Belgrade in former Yugoslavia, sponsored by China Scholarship Council. From 1984 to 1995, Dr. Zhuang was the deputy head of a study unit of the Ñscal department of Renmin University of China. During that period, Dr. Zhuang was sent by PRC Government to a training programme at Moscow Fiscal College in the former Soviet Union. Dr. Zhuang did her undergraduation at Renmin University of China from 1980 to 1984. Dr. Zhuang got her master's degree of economics and Ph.D. in economics at Renmin University of China during her service there. Dr. Zhuang concurrently serves as a member of the standing committee of the CPPCC at Haidian District in Beijing, a member of the standing

174 MANAGEMENT committee of the Beijing Non-CPC Senior Intellectuals Association, vice president of the Beijing Women Professors Association, and president of Women Professors Association of Renmin University of China.

Senior Management App 1A 41(5)

Dr. CHEN Xiaoxian, 52, serves as an executive director and president. Please refer to the biography under the paragraph "" Ì Directors.''

Mr. WU Beiying, 56, serves an executive director and executive vice president. Please refer to the biography under the paragraph "" Ì Directors.''

Dr. OUYANG Qian, 51, serves as vice president. Dr. Ouyang also serves as director of China Investment and Finance Limited. Dr. Ouyang was our assistant president from April 1994 to July 1995. He has worked at our bank since July 1988. Dr. Ouyang is a senior economist. He received his Ph.D. degree in aeronautical engineering in 1988 from University of Manchester in the United Kingdom.

Dr. ZHAO Xiaofan, 43, serves as vice president. He is also general manager of our Beijing branch since April 2006. Dr. Zhao was our assistant president from August 1998 to December 2001. He has worked at our company since July 1986. Dr. Zhao is a senior accountant. He graduated from Renmin University of China in 1986 with a bachelor's degree in Ñnancial accounting, and received his master's degree in international Ñnance from Liaoning University and Ph.D. from the Graduate School of Peking University.

Mr. WANG Lianfu, 52, serves as secretary to the committee for discipline inspection and the director of human resources (vice president level) ( ). Mr. Wang served as general manager of the human resources department of our bank from January 2005 to March 2006. He was our assistant president from June 1995 to February 1999. Mr. Wang has worked at our bank since May 1987. Prior to joining our company, he worked at the human resources department of CITIC Group from December 1984 to May 1987. Mr. Wang is a senior economist. He received his master's degree in money and banking from Dongbei University of Finance and Economics.

Mr. SU Guoxin, 40, serves as vice president. He also served as deputy manger of the general oÇce and the party committee oÇce of CITIC Group. Mr. Su was an assistant manager of the general oÇce of CITIC Group from January 2003 to December 2004, secretary to chairman of the board of directors of CITIC Group from June 1997 to January 2003; and a translator of the public relations section of the general oÇce of CITIC Group from October 1993 to June 1997. Prior to joining CITIC Group, he worked as a translator at the translation oÇce of the Ministry of Foreign AÅairs. Mr. Su graduated from Beijing Foreign Studies University, and received his master's degree in translation from United Nations Institute for Translation Training.

Mr. CAO Tong, 38, serves as vice president. Mr. Cao was our assistant president from December 2004 to December 2006 and concurrently served as general manager of the personal banking department of our company from January 2005 to March 2006. Prior to joining our bank, Mr. Cao worked at China Merchants Bank, and served as deputy manager of the planning and treasury department, manager of the business department, assistant general manager and deputy general manager of Beijing branch, general manager of the personal banking department of head oÇce, and deputy director and acting head of Shenzhen administrative department. He also worked at the planning department of Beijing branch of the PBOC from July 1990 to January 1994. Mr. Cao has 16 years of banking experience in China. He is a senior economist and graduated from Renmin University of China in 1990 with a bachelor's degree in Ñnance. He received his master's degree in Ñnance from the same university.

Mr. CAO Guoqiang, 42, serves as assistant president and general manager of the budget and Ñnance department. Mr. Cao is also a director of China Investment and Finance Limited. Mr. Cao served as general manager of the budget and Ñnance department of our bank from April 2005 to April 2006. Prior to joining our bank, Mr. Cao was deputy general manager and general manager of the planning and treasury department of head oÇce of China Merchants Bank from November 1998 to April 2005, general manager of the planning and treasury department of Shenzhen administrative department of China Merchants Bank from January

175 MANAGEMENT

1996 to November 1998, director, deputy manager and acting head of China Merchants Bank Pawn Company and a director of Shenzhen Shibida International Investment Co. Ltd. from October 1993 to January 1996, and assistant general manager of the planning and treasury department of head oÇce of China Merchants Bank from December 1992 to October 1993. He also served as a senior staÅ member and vice section head of the planning and treasury department of Shaanxi branch of the PBOC from July 1988 to June 1992. Mr. Cao has 18 years of banking experience in China. Mr. Cao is a senior economist. He graduated from Hunan College of Finance and Economics in 1985 with a bachelor's degree in money and banking, and received his master's degree in money and banking in 1988 from Shaanxi College of Finance and Economics.

Mr. ZHANG Qiang, 44, serves as assistant president. He was deputy general manager, executive deputy general manager and general manager of our Beijing branch from January 2000 to April 2006. He also served as deputy general manager and general manager of the credit department of our head oÇce, deputy general manager and general manager of our Jinan branch and Qingdao branch from September 1990 to March 2000. Mr. Zhang has worked at our company since September 1990. Mr. Zhang is a senior economist. He graduated from Zhongnan University of Economics and Law with a bachelor's degree in planning and statistics, and received his master's degree in Ñnance from Liaoning University.

Mr. LUO Yan, 38, serves as deputy director of our oÇce of general aÅairs and secretary to the board of directors. Mr. Luo joined our company in October 2004. He served as an assistant director and acting head of our oÇce of general aÅairs from June 2005 to March 2006, and the assistant to the general manager of our administrative department and secretary to our president from October 2004 to June 2005. Prior to joining our bank, Mr. Luo worked at China Merchants Bank from March 1996 to October 2004, and Bank of Communications, Yangzhou Branch from July 1990 to March 1996. Mr. Luo is an economist. He graduated from Inner-Mongolia Finance and Economics College majoring in industrial accounting.

Mr. LU Wei, 35, serves as general manager of our Capital Mansion Sub-branch, China and qualiÑed accountant. Mr. Lu is a certiÑed practising accountant of CPA Australia. He obtained the membership in 2004 by passing examinations in respect of Ñve main subjects within two and a half years. Mr. Lu has served as general manager of our Capital Mansion Sub-branch, China since July 2004 and is employed by us on a full- time basis. From January 2002 to July 2004, he held the position of general manager of our Xidan Sub-branch, China. From April 2001 to December 2001, he was a bank oÇcer of the corporate banking department, HSBC, Jersey, United Kingdom. Mr. Lu graduated from Renmin University of China with a bachelor's degree in accounting in 1994. He also obtained a master's degree in professional accounting from Deakin University in Australia.

Secretary to the Board of Directors

Mr. LUO Yan, 38, serves as deputy director of our oÇce of general aÅairs, secretary to the board of directors and our joint company secretary. Please refer to the biography under the paragraph ""Ì Senior Management.''

Joint Company Secretaries

Mr. LUO Yan, 38, serves as deputy director of our oÇce of general aÅairs, secretary to the board of directors and our joint company secretary. Please refer to the biography under the paragraph ""Ì Senior Management.''

Ms. KAM Mei Ha, Wendy, 39, has served as joint company secretary since February 2007 and she also serves as senior manager of the corporate services division of Tricor Services Limited (""Tricor''). Prior to joining Tricor, Ms. Kam served as manager of the company secretarial department of Tengis Limited and Ernst & Young. Ms. Kam has more than 15 years of experience in company secretarial industry, and provided services to clients ranging from private companies to public companies listed on the main board of the Hong Kong Stock Exchange (including H share companies). Ms. Kam is an associate member of The Institute of Chartered Secretaries and Administrators and The Hong Kong Institute of Chartered Secretaries. She graduated from the City Polytechnic of Hong Kong (currently the City University of Hong Kong).

176 MANAGEMENT

Contracts between Directors, Supervisors, Senior Management and Us

We have not entered into any material business contracts with any of our directors, supervisors or senior management.

Rule 8.17 and Rule 19A.16 Requirements

According to Rule 8.17 of the Hong Kong Listing Rules, the secretary of the company must be a person who is ordinarily resident in Hong Kong, who has the requisite knowledge and experience to discharge the functions of secretary of the listed company and who:

(a) is an Ordinary Member of The Hong Kong Institute of Chartered Secretaries, a solicitor or barrister as deÑned in the Legal Practitioners Ordinance or a professional accountant; or

(b) is an individual who, by virtue of his academic or professional qualiÑcations or relevant experience, is, in the opinion of the Hong Kong Stock Exchange, capable of discharging the functions of a company secretary of an issuer.

Rule 19A.16 of the Hong Kong Listing Rules, however, provides that the secretary of a PRC issuer need not be ordinarily resident in Hong Kong, provided such person can meet the other requirements of Rule 8.17.

As Mr. Luo does not possess the requisite experience and qualiÑcations as required under Rule 8.17(2) of the Hong Kong Listing Rules, he does not meet all the requirements under Rule 8.17.

In view of the above, the company has appointed Ms. Kam, who meets the requirements under Rule 8.17 of the Hong Kong Listing Rules, as a joint company secretary to assist Mr. Luo to enable him to acquire the ""relevant experience'' under Rule 8.17(3) of the Hong Kong Listing Rules. Both of them will jointly discharge the duties and responsibilities with reference to their past experience and education background and their respective working environment.

Further, Ms. Kam, as a joint company secretary, will work closely with, and provide assistance to, Mr. Luo in the discharge of his duties as joint company secretary. Ms. Kam is familiar with and, as a resident in Hong Kong, has easy access to the governing bodies such as the Hong Kong Stock Exchange, the SFC as well as the Hong Kong Companies Registry. In the opinion of the company and the Joint Sponsors, Ms. Kam is a suitably qualiÑed person to accompany and render assistance to Mr. Luo so as to enable Mr. Luo to acquire the ""relevant experience'' as is normally required of him as a company secretary under Rule 8.17(3) of the Hong Kong Listing Rules.

Ms. Kam has been engaged as our joint company secretary for a period of three years from the Listing Date. Given Mr. Luo's qualiÑcation and past experience, it is anticipated that Mr. Luo will gain experience with the assistance of Ms. Kam. Upon expiry of the three-year period, a further evaluation of the qualiÑcation and experience of Mr. Luo and the need for on-going assistance would be made. It is expected that the Company and Mr. Luo would then endeavour to demonstrate to the satisfaction of the Hong Kong Stock Exchange that Mr. Luo, having had the beneÑt of Ms. Kam's assistance, would by then have acquired the ""relevant experience'' within the meaning of Rule 8.17(3) of the Hong Kong Listing Rules.

We have applied to the Hong Kong Stock Exchange for, and have been granted, a waiver from strict compliance with the requirements of Rule 8.17 and Rule 19A.16 of the Hong Kong Listing Rules. Upon the expiration of the three-year period, we will re-evaluate the qualiÑcations and experience of Mr. Luo to determine whether the requirements as stipulated in Rule 8.17 can be satisÑed.

QualiÑed Accountant

Mr. LU Wei, 35, serves as general manager of our Capital Mansion Sub-branch, China and qualiÑed accountant. Please refer to his biography under the paragraph ""Ì Senior Management''.

177 MANAGEMENT

Compliance Advisers We will appoint China International Capital Corporation Limited and Citigroup Global Markets Asia Limited as our compliance advisers, or the Compliance Advisers, upon listing in compliance with Rule 3A.19 of the Listing Rules. We expect to enter into a compliance advisers' agreement with the Compliance Advisers, the material terms of which we expect to be as follows: (a) we will appoint the Compliance Advisers as our compliance advisers for the purpose of Rule 3A.19 of the Listing Rules for a period commencing on the date of listing our H Shares on the Stock Exchange and ending on the date on which we comply with Rule 13.46 of the Listing Rules in respect of our Ñnancial results for the Ñnancial year ending 31 December 2006, or until the agreement is terminated, whichever is earlier; (b) the Compliance Advisers shall provide us with services, including guidance and advice as to compliance with the requirements under the Listing Rules and applicable laws, rules, codes and guidelines, and to act as one of our principal channels of communication with the Stock Exchange; (c) we will agree to indemnify the Compliance Advisers for certain actions against and losses incurred by the Compliance Advisers arising out of or in connection with the performance by the Compliance Advisers of their duties under the agreement, or any breach or alleged breach by us of the provisions of the agreement; and (d) we may terminate the appointment of a Compliance Adviser only if the Compliance Advisers' work is of an unacceptable standard or if there is a material dispute (which cannot be resolved within 30 days) over fees payable to the Compliance Advisers as permitted by Rule 3A.26 of the Listing Rules. Each of the Compliance Advisers will have the right to resign or terminate its appointment if we breach the agreement or by service of three months' notice to us.

BOARD COMMITTEES Our board of directors delegates certain responsibilities to various committees. In accordance with the relevant PRC laws and regulations and the corporate governance practices prescribed in the Listing Rules, we have formed four board committees, including strategy development committee, audit and related party transactions control committee, risk management committee, and nomination and compensation committee.

Strategy Development Committee Our strategy development committee consists of six directors, namely Mr. Chang Zhenming, Mr. Wang Chuan, Dr. Chen Xiaoxian, Mr. Dou Jianzhong, Mr. Zhang Jijing and Mr. Joseπ Ignacio Goirigolzarri. Mr. Chang Zhenmin currently serves as the chairperson of our strategy development committee. The primary duty of the committee is to develop and evaluate our operational target and long term development strategy, business and organizational development plan, major investment and Ñnancing projects and other major matters that aÅect our development. As authorized by the Board, the committee supervises and inspects the execution of the annual operation and investment plan, and makes recommendations to the Board.

Audit and Related Party Transactions Control Committee Our audit and related party transactions control committee consists of six directors, namely Dr. Ai Hongde, Mr. Ju Weimin, Dr. Xie Rong, Dr. Bai Chong-En, Mr. Wang Xiangfei and Dr. John Dexter Langlois. Dr. Ai Hongde currently serves as the chairperson of our audit and related party transactions control committee. The primary duty of the committee is to supervise our internal control, Ñnancial information and internal audit matters, and to identify our related parties and review and Ñle for record our related party transactions. We identify our related parties pursuant to our internal management manual, Measures on Management of CITIC Bank Related Party Transactions, which is formulated pursuant to the relevant regulations promulgated by the PBOC in respect of related party transactions.

178 MANAGEMENT

The committee meets at least four times a year. The committee complies with the code provisions set out in Appendix 14 of the Listing Rules in respect of the audit committee.

Risk Management Committee

Our risk management committee consists of Ñve directors, namely Dr. Chen Xiaoxian, Mr. Ju Weimin, Mr. Wu Beiying, Dr. Ai Hongde and Dr. Bai Chong-En. Dr. Chen Xiaoxian currently serves as the chairperson of our risk management committee. The primary duty of the committee is to review and formulate our risk management strategy, risk management policy, risk management methods and internal control procedures. The committee also supervises and evaluates the risk management activities carried out by the relevant senior management members and our risk management departments.

Nomination and Compensation Committee

Our nomination and compensation committee consists of Ñve directors, namely Mr. Wang Xiangfei, Mr. Ju Weimin, Dr. Ai Hongde, Dr. Xie Rong and Dr. Bai Chong-En. Mr. Wang Xiangfei currently serves as the chairperson of our nomination and compensation committee. The primary duty of the committee is to formulate the nomination procedure and standard for candidates for directors and senior management members, to conduct preliminary review of the qualiÑcations and other credentials of the candidates for directors and senior management members, to formulate, review and supervise the implementation of the compensation plan for directors, supervisors and senior management members, and to evaluate the performance of the directors and the senior management members.

The committee meets at least four times a year. The committee complies with the code provisions set out in Appendix 14 of the Listing Rules in respect of the nomination committee and the remuneration committee.

COMPENSATION OF DIRECTORS, SUPERVISORS AND OFFICERS

Our executive directors, employee supervisors and oÇcers receive compensation in the form of salaries, App 1A 33(4)(a) discretionary bonuses and housing allowance. In addition, as required by PRC regulations, we participate in various deÑned contributions pension schemes organized by the provincial or municipal governments for our employees. Our independent non-executive directors and external non-employee supervisors receive fees based on their responsibilities.

Our board of directors and board of supervisors were set up on December 28, 2005. During the period App 1A 33(2)(f) from December 28 to December 31, 2005, no emoluments were paid to any director or supervisor. The App 1A 33(3)(a) aggregate fees and compensation paid to our directors and supervisors in 2006 were approximately RMB 4 million. In addition, aggregate contributions paid to pension scheme for our directors and supervisors were approximately RMB 467.8 thousand in that period. The aggregate fees and compensation paid to the Ñve individuals with highest emoluments in 2004, 2005 and 2006 were approximately RMB 7 million, RMB 11 million and RMB 7 million(1), respectively.

(1) For the Ñve individuals with the highest emoluments for the year ended December 31, 2006, the aggregate of the emoluments in respect of one individual was included in the aggregate fees and compensation paid to our directors and supervisors in 2006.

179 MANAGEMENT

WAIVER FROM STRICT COMPLIANCE WITH RULE 8.12 OF THE HONG KONG LISTING RULES According to Rule 8.12 of the Hong Kong Listing Rules, an issuer must have a suÇcient management presence in Hong Kong with at least two of the issuer's executive directors ordinarily resident in Hong Kong. We conduct substantially all of our operations in the PRC, and we do not and, for the foreseeable future, will not have a suÇcient management presence in Hong Kong. Most of our directors reside in the PRC. We will have certain internal arrangements to maintain eÅective communication with the Hong Kong Stock Exchange, including (i) appointing Dr. Chen Xiaoxian and Mr. Luo Yan, both of whom are ordinarily resident in Beijing, China, as our authorized representatives to act as our principal channel of communication with the Hong Kong Stock Exchange; and (ii) retaining the joint compliance advisors to act as our principal channel of communication with the Stock Exchange pursuant to Rule 19A.06(4) of the Hong Kong Listing Rules. Accordingly, we have obtained from the Hong Kong Stock Exchange a waiver from strict compliance with Rule 8.12 of the Hong Kong Listing Rules which requires us to have a suÇcient management presence in Hong Kong.

180 SUBSTANTIAL SHAREHOLDERS

This section presents certain information regarding the shareholding percentage of our shareholders following the completion of the Global OÅering and, where relevant, the A Share OÅering.

Substantial Shareholders App 1A 27A At the Latest Practicable Date, our share capital is RMB 31,113,111,400 comprising CO 3rd Sch(1)28 31,113,111,400 shares. The interests of our shareholders in our issued share capital are as follows: LR 19A 27(54)(7)

Approximate percentage of issued share Name Number of shares capital (%) CITIC Group ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 24,891,438,919 80.00% CIFH ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,718,909,200 15.17 BBVA ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,502,763,281 4.83 TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 31,113,111,400 100.00% App 1A 15(1)

Immediately following completion of the Global OÅering and the A Share OÅering, assuming that the Over-allotment Option is not exercised and BBVA and CIFH exercise their anti-dilution right and top-up right, respectively, our share capital will be RMB 38,300,523,054, comprising 11,595,699,381 H Shares and 26,704,823,673 A Shares, representing 30.28% and 69.72%, respectively, of our share capital. Particulars of the shareholdings are as follows:

Approximate percentage of issued share Name Number of shares capital (%) CITIC Group ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 24,402,891,019 63.71% CIFH ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,810,189,200 15.17 BBVA ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,849,915,281 4.83 SSF(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 488,547,900 1.28 Other H Share public shareholders(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,447,047,000 9.00 Other A Share public shareholders ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,301,932,654 6.01 TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 38,300,523,054 100.00%

(1) SSF's stated 1.28% shareholding in our bank does not include the shares to be purchased by SSF as a cornerstone investor, which will be 73,260,000 shares assuming an oÅer price of HK$5.46 per share, being the mid-point of the proposed price range set out in this prospectus. See ""Our Strategic Investor and Other Investors Ì Cornerstone Investors.'' When such purchase completes, the shareholding of SSF in our bank will increase to 1.47% and the shareholding in our bank of other H Share public shareholders will be reduced to 8.81%.

181 SUBSTANTIAL SHAREHOLDERS

Immediately following the completion of the Global OÅering and the A Share OÅering, assuming exercise of the Over-allotment Option and the exercise by BBVA and CIFH of their anti-dilution right and top-up right, respectively, our share capital will be RMB 39,033,344,054, comprising 12,401,802,481 H Shares and 26,631,541,573 A Shares, representing 31.77% and 68.23%, respectively, of our share capital. Particulars of the shareholdings are as follows:

Approximate percentage of issued share Name Number of shares capital (%) CITIC Group ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 24,329,608,919 62.33% CIFH ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,855,002,200 15.00 BBVA ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,885,311,281 4.83 SSF(1)(2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 561,830,000 1.44 Other H Share public shareholders(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,099,659,000 10.50 Other A Share public shareholders ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,301,932,654 5.90 TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 39,033,344,054 100.00%

(1) SSF's stated 1.44% shareholding in our bank does not include the shares to be purchased by SSF as a cornerstone investor, which will be 73,260,000 shares assuming an oÅer price of HK$5.46 per share, being the mid-point of the proposed price range set out in this prospectus. See ""Our Strategic Investor and Other Investors Ì Cornerstone Investors.'' When such purchase completes, the shareholding of SSF in our bank will increase to 1.63% and the shareholding in our bank of other H Share public shareholders will be reduced to 10.32%. (2) In accordance with relevant PRC regulations regarding disposal of state-owned shares, our state-owned shareholder, CITIC Group, is required to transfer to the SSF, in proportion to its holding in our bank, such number of shares in aggregate equivalent to 10% of the number of the OÅer Shares. Please see ""Transfer of State-owned Shares'' for further details. In addition, SSF has agreed to subscribe, as a cornerstone investor, for such number of H Shares (rounded down to the nearest whole board lot of 1,000 shares) which may be subscribed with approximately HK$400 million. See ""Our Strategic Investor and Other Investors Ì Cornerstone Investors.'' Immediately following the completion of the Global OÅering, assuming no exercise of the Over- allotment Option for the Global OÅering and without giving eÅect to the A Share OÅering, and the exercise by BBVA and CIFH of their anti-dilution right and top-up right, respectively, our share capital will be RMB 35,998,590,400, comprising 24,402,891,019 A Shares held by CITIC Group and 11,595,699,381 H Shares, representing 67.79% and 32.21%, respectively, of our share capital. Particulars of the shareholdings are as follows:

Approximate percentage of issued share Name Number of shares capital (%) CITIC Group ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 24,402,891,019 67.79% CIFH ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,810,189,200 16.14 BBVA ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,849,915,281 5.14 SSF(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 488,547,900 1.36 Other H Share public shareholders(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,447,047,000 9.57 Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 35,998,590,400 100.00%

(1) SSF's stated 1.36% shareholding in our bank does not include the shares to be purchased by SSF as a cornerstone investor, which will be 73,260,000 shares assuming an oÅer price of HK$5.46 per share, being the mid-point of the proposed price range set out in this prospectus. See ""Our Strategic Investor and Other Investors Ì Cornerstone Investors.'' When such purchase completes, the shareholding of SSF in our bank will increase to 1.56% and the shareholding in our bank of other H Share public shareholders will be reduced to 9.37%.

182 SHARE CAPITAL

This section presents certain information regarding our share capital following the completion of the Global OÅering and, where relevant, the A Share OÅering.

Before the Global OÅering App 1A 23(1) LR 19A 42(55)(1), As at the Latest Practicable Date, our share capital is RMB 31,113,111,400 (which comprised 31,113,111,400 shares). Our shareholders have the following interests in our issued share capital: (3)&(4)

Approximate percentage of total Number issued share Name of shareholder Type of share of shares capital (%) CITIC GroupÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ state-owned shares 24,891,438,919 80.00% CIFH ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ foreign legal 4,718,909,200 15.17 person shares BBVA ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ foreign legal 1,502,763,281 4.83 person shares Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 31,113,111,400 100.00% App 1A 15(1)

Upon Completion of the Global OÅering and A Share OÅering Immediately upon the completion of the Global OÅering and the A Share OÅering (assuming that the Over-allotment Option is not exercised and BBVA and CIFH exercise their anti-dilution right and top-up right, respectively), our share capital will be RMB 38,300,523,054 (including 11,595,699,381 H Shares and 26,704,823,673 A Shares, which constitute 30.28% and 69.72% of our share capital, respectively). The relevant share interests will be as follows:

Approximate percentage of total Number issued share Name of shareholder Type of share of shares capital (%) CITIC Group(4) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ A Shares(1)(2)(3) 24,402,891,019 63.71% CIFH(2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ H Shares 5,810,189,200 15.17 BBVA(2)(4) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ H Shares 1,849,915,281 4.83 SSF(3)(5)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ H Shares 488,547,900 1.28 Other H Share public shareholders(5)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ H Shares 3,447,047,000 9.00 Other A Share public shareholdersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ A Shares 2,301,932,654 6.01 Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 38,300,523,054 100.00% App 1A 15(1)

(1) Upon completion of the A Share OÅering and the Global OÅering, all the shares held by CITIC Group will be registered as A Shares, which can be converted into H Shares upon obtaining the CSRC's approval. In addition, CSRC granted its approval to CITIC Group to convert not more than 10% of our total outstanding shares into H Shares one year from the listing of our H Shares on the Hong Kong Stock Exchange and, depending on market circumstances, CITIC Group may transfer such shareholding interest to strategic investors and institutional investors. Please see ""Ì Stated-owned Shares held by CITIC Group'' for more details. (2) CIFH and BBVA have the right to subscribe for additional H Shares at the OÅer Price. Please see ""Our Strategic Investor and Other Investors Ì Rights and Obligations of BBVA Ì Anti-dilution Right'' and ""Our Relationship with CITIC Group and Connected Transactions Ì Our Relationship with Our Promoters Ì CIFH Top-Up'' for further details. (3) In accordance with relevant PRC regulations regarding disposal of state-owned shares, our state-owned shareholder, CITIC Group, is required to transfer to the SSF, in proportion to its holding in our bank, such number of shares in aggregate equivalent to 10% of the number of the OÅer Shares. Please see ""Ì Transfer of State-owned Shares'' for more details. (4) CITIC Group agreed to sell to BBVA 52,892,289 shares after the Ñrst anniversary of the Global OÅering, representing 0.17% of our outstanding shares immediately prior to the Global OÅering. BBVA was also granted a call option to purchase from CITIC Group such number of shares representing 4.9% of our outstanding shares immediately after the relevant call option closing, or as shall result in the aggregate shareholding percentage of BBVA to be increased to 9.9% of our outstanding shares immediately after the

183 SHARE CAPITAL

relevant call option closing, whichever is greater. The option is exercisable one year after the date on which dealings in our H Shares commence on the Hong Kong Stock Exchange.

(5) SSF's stated 1.28% shareholding in our bank does not include the shares to be purchased by SSF as a cornerstone investor, which will be 73,260,000 shares assuming an oÅer price of HK$5.46 per share, being the mid-point of the proposed price range set out in this prospectus. See ""Our Strategic Investor and Other Investors Ì Cornerstone Investors.'' When such purchase completes, the shareholding of SSF in our bank will increase to 1.47% and the shareholding in our bank of other H Share public shareholders will be reduced to 8.81%.

Immediately upon the completion of the Global OÅering and the A Share OÅering (assuming the Over- allotment Option is exercised in full and BBVA and CIFH exercise their anti-dilution right and top-up right, respectively), our share capital shall be RMB 39,033,344,054 (including 12,401,802,481 H Shares and 26,631,541,573 A Shares, which constitute 31.77% and 68.23% of our share capital, respectively). The relevant share interests will be as follows:

Approximate percentage of total issued share Name of shareholder Type of share Number of shares capital (%) CITIC Group(4) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ A Shares(1)-(3) 24,329,608,919 62.33% CIFH(2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ H Shares 5,855,002,200 15.00 BBVA(2)(4) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ H Shares 1,885,311,281 4.83 SSF(3)(5)(6) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ H Shares 561,830,000 1.44 Other H Share public shareholders(5) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ H Shares 4,099,659,000 10.50 Other A Share public shareholders ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ A Shares 2,301,932,654 5.90 Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 39,033,344,054 100.00%

(1) Upon completion of the A Share OÅering and the Global OÅering, all the shares held by CITIC Group will be registered as A Shares, which can be converted into H Shares upon obtaining the CSRC's approval. In addition, CSRC granted its approval to CITIC Group to convert not more than 10% of our total outstanding shares into H Shares one year from the listing of our H Shares on the Hong Kong Stock Exchange and, depending on market circumstances, CITIC Group may transfer such shareholding interest to strategic investors and institutional investors. Please see ""Ì Stated-owned Shares held by CITIC Group'' for more details.

(2) CIFH and BBVA have the right to subscribe for additional H Shares at the OÅer Price. Please see ""Our Strategic Investor and Other Investors Ì Rights and Obligations of BBVA Ì Anti-dilution Right'' and ""Our Relationship with CITIC Group and Connected Transactions Ì Our Relationship with Our Promoters Ì CIFH Top-Up'' for further details.

(3) In accordance with relevant PRC regulations regarding disposal of state-owned shares, our state-owned shareholder, CITIC Group, is required to transfer to the SSF, in proportion to its holding in our bank, such number of shares in aggregate equivalent to 10% of the number of the OÅer Shares. Please see ""Ì Transfer of State-owned Shares'' for more details.

(4) CITIC Group agreed to sell to BBVA 52,892,289 shares after the Ñrst anniversary of the Global OÅering, representing 0.17% of our outstanding shares immediately prior to the Global OÅering. BBVA was also granted a call option to purchase from CITIC Group such number of shares representing 4.9% of our outstanding shares immediately after the relevant call option closing, or as shall result in the aggregate shareholding percentage of BBVA to be increased to 9.9% of our outstanding shares immediately after the relevant call option closing, whichever is greater. The option is exercisable one year after the date on which dealings in our H Shares commence on the Hong Kong Stock Exchange.

(5) SSF's stated 1.44% shareholding in our bank does not include the shares to be purchased by SSF as a cornerstone investor, which will be 73,260,000 shares assuming an oÅer price of HK$5.46 per share, being the mid-point of the proposed price range set out in this prospectus. See ""Our Strategic Investor and Other Investors Ì Cornerstone Investors.'' When such purchase completes, the shareholding of SSF in our bank will increase to 1.63% and the shareholding in our bank of other H Share public shareholders will be reduced to 10.32%.

(6) In accordance with relevant PRC regulations regarding disposal of state-owned shares, our state-owned shareholder, CITIC Group, is required to transfer to the SSF, in proportion to its holding in our bank, such number of shares in aggregate equivalent to 10% of the number of the OÅer Shares. Please see ""Transfer of State-owned Shares'' for further details. In addition, SSF has agreed to subscribe, as a cornerstone investor, for such number of H Shares (rounded down to the nearest whole board lot of 1,000 shares) which may be subscribed with approximately HK$400 million. See ""Our Strategic Investor and Other Investors Ì Cornerstone Investors.''

184 SHARE CAPITAL

Upon Completion of the Global OÅering (excluding A Share OÅering) Immediately upon the completion of the Global OÅering (assuming the Over-allotment Option is not exercised and excluding the A Share OÅering, and BBVA and CIFH exercise their anti-dilution right and top- up right, respectively), our share capital shall be RMB 35,998,590,400 (including 11,595,699,381 H Shares and 24,402,891,019 state-owned shares, which constitute 32.21% and 67.79% of our share capital, respectively). The relevant share interests will be as follows: Approximate percentage of total issued share Name of shareholder Type of share Number of shares capital (%) CITIC Group(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ state-owned shares 24,402,891,019 67.79% CIFH(2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ H Shares 5,810,189,200 16.14 BBVA(1)(2)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ H Shares 1,849,915,281 5.14 SSF(3)(4) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ H Shares 488,547,900 1.36 Other H Share public shareholders(4) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ H Shares 3,447,047,000 9.57 TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 35,998,590,400 100.00%

Notes:

(1) CITIC Group agreed to sell to BBVA 52,892,289 shares after the Ñrst anniversary of the Global OÅering, representing 0.17% of our outstanding shares immediately prior to the Global OÅering. BBVA was also granted a call option to purchase from CITIC Group such number of shares representing 4.9% of our outstanding shares immediately after the relevant call option closing, or as shall result in the aggregate shareholding percentage of BBVA to be increased to 9.9% of our outstanding shares immediately after the relevant call option closing, whichever is greater. The option is exercisable one year after the date on which dealings in our H Shares commence on the Hong Kong Stock Exchange. (2) CIFH and BBVA have the right to subscribe for additional H Shares at the OÅer Price. Please see ""Our Strategic Investor and Other Investors Ì Rights and Obligations of BBVA Ì Anti-dilution Right'' and ""Our Relationship with CITIC Group and Connected Transactions Ì Our Relationship with Our Promoters Ì CIFH Top-Up'' for further details. (3) In accordance with relevant PRC regulations regarding disposal of state-owned shares, our state-owned shareholder, CITIC Group, is required to transfer to the SSF, in proportion to its holding in our bank, such number of shares in aggregate equivalent to 10% of the number of the OÅer Shares. Please see ""Ì Transfer of State-owned Shares'' for more details. (4) SSF's stated 1.36% shareholding in our bank does not include the shares to be purchased by SSF as a cornerstone investor, which will be 73,260,000 shares assuming an oÅer price of HK$5.46 per share, being the mid-point of the proposed price range set out in this prospectus. See ""Our Strategic Investor and Other Investors Ì Cornerstone Investors.'' When such purchase completes, the shareholding of SSF in our bank will increase to 1.56% and the shareholding in our bank of other H Share public shareholders will be reduced to 9.37%.

RANKING

The H Shares and A Shares in issue upon completion of the Global OÅering and the A Share OÅering App 1A 25(1) will be ordinary shares in our share capital. However, apart from the PRC qualiÑed domestic institutional investors, H Shares generally cannot be subscribed for by or traded between legal or natural persons of the PRC. A Shares, on the other hand, can only be subscribed for by and traded between (i) legal or natural persons of the PRC; (ii) qualiÑed foreign institutional investors; or (iii) qualiÑed foreign strategic investors, and must be traded in Renminbi. All dividends in respect of the H Shares are to be paid by us in Hong Kong dollars whereas all dividends in respect of A Shares are to be paid by us in Renminbi. In addition, A Shares and H Shares are regarded as diÅerent classes of shares under the relevant terms of our Articles of Association. The diÅerences between the two classes of shares are set out in our Articles of Association in details. Further, any change or abrogation of the rights of class shareholders should be approved by way of a special resolution of the general meeting of shareholders and by a separate meeting of shareholders convened by the aÅected class shareholders. However, the procedures for approval by separate class shareholders shall not apply (i) where we issue, upon approval by a special resolution of our shareholders in a general meeting,

185 SHARE CAPITAL either separately or concurrently every twelve months, not more than 20% of each of the existing issued A Shares and H Shares; (ii) where our plan to issue A Shares and H Shares on establishment is implemented within Ñfteen months from the date of approval by the securities regulatory authorities of the State Council; or (iii) to the conversion by our promoters of their shares to domestic public shares or foreign shares which will be listed and dealt in a stock exchange outside of the PRC upon receiving the approval of the CSRC or the authorized securities approval authorities of the State Council. A Shares and H Shares will however rank pari passu with each other in all other respects and, in particular, will rank equally for all dividends or distributions declared, paid or made after the date of this prospectus. A Shares and H Shares are generally neither interchangeable nor fungible, and the market prices of our A Shares and H Shares may be diÅerent after the Global OÅering and A Share OÅering.

STATE-OWNED SHARES HELD BY CITIC GROUP Upon completion of our Global OÅering and the A Share OÅering, all the shares held by CITIC Group will be registered as A Shares. These shares will be deposited with the China Securities Depository and Clearing Corporation Limited and are expected to be approved for listing on the Shanghai Stock Exchange. The state-owned shares held by CITIC Group would be converted into A Shares upon the listing of our A Shares on the Shanghai Stock Exchange and such number of A Shares held by CITIC Group representing 10% of our total outstanding shares could be converted into H Shares after the Ñrst anniversary of the listing of our shares. Upon further approval by the CSRC, the rest of the A Shares held by CITIC Group could also be converted into H Shares. CITIC Group undertakes that, within 36 months from the date on which our A Shares are listed on the Shanghai Stock Exchange, it will not transfer or entrust any other person to hold its direct or indirect interests in our A Shares, nor will it permit us to repurchase its A Shares. However, where CITIC Group obtains approval from the CSRC to convert its A Shares to H Shares, the portion of A Shares which are converted into H Shares will not be subject to the 36-month lock-up restriction. Under the PRC Company Law, CITIC Group is prohibited from transferring our shares within one year from the date of the Ñrst listing of our shares on a stock exchange. Upon the Hong Kong Stock Exchange granting us approval for the listing of our H Shares as part of the Global OÅering, all the shares held by CITIC Group will be approved for listing on the Hong Kong Stock Exchange and could, subject to completion of certain procedural requirements, be listed on the Hong Kong Stock Exchange. The relevant procedural requirements are the withdrawal of such shares from the China Securities Depository and Clearing Corporation Limited and re-registering such shares on our H share register maintained in Hong Kong, on the condition that (i) our H share registrar lodges with the Hong Kong Stock Exchange a letter conÑrming the proper entry of the relevant shares on the H share register, and the due dispatch of share certiÑcates; and (ii) the admission of the shares to trade in Hong Kong will comply with the Hong Kong Listing Rules and the General Rules of CCASS and CCASS Operational Procedures in force from time to time. Until such shares are re-registered on our H share register, such shares would not be listed as H Shares, and holders thereof will not be entitled to attend and vote at meetings of H Shares shareholders in respect of such shares. After completion of our Global OÅering, no further approval from the Hong Kong Stock Exchange or of our shareholders (including our H Shares shareholders) would be required for the listing of such shares as H Shares on the Hong Kong Stock Exchange. However, prior to the shares held by CITIC Group becoming listed on the Hong Kong Stock Exchange as H Shares, CITIC Group must obtain the approval of the CSRC. Subject to CITIC Group maintaining a controlling shareholding interest in us, the CSRC has granted approval to CITIC Group to convert not more than 10% of its shareholding interest in us to H Shares one year from the listing of our shares on the Hong Kong Stock Exchange and, depending on market circumstances, transfer such shareholding interest to strategic investors and institutional investors. To eÅect the withdrawal of their shares that are deposited with the China Securities Depository and Clearing Corporation Limited and re-register such shares on our H share register, CITIC Group shall issue to us a removal request on a prescribed form in respect of a speciÑed number of shares attaching the relevant documents of title. Subject to our being satisÑed with the authenticity of the document, and with the approval

186 SHARE CAPITAL of our board of directors, we would then issue a notice to our H share registrar with instructions that, with eÅect from a speciÑed date, our H share registrar is to issue the relevant holders with H Share certiÑcates for such speciÑed number of shares. The relevant holders' shareholding interest deposited with the China Securities Depository and Clearing Corporation Limited would then be correspondingly reduced. In addition, we will comply with the Hong Kong Listing Rules in respect of the issuance of an announcement to inform shareholders and the public of such fact not less than three days prior to the proposed speciÑed date. We will also comply with the Shanghai Stock Exchange Securities Listing Rules in respect of the issuance of announcements to shareholders and the public.

Upon completion of the Global OÅering and the A Share OÅering and the deposit of the shares held by CITIC Group with the China Securities Depository and Clearing Corporation Limited, CITIC Group will be subject to the following regulatory transfer restrictions:

¬ Under the PRC Company Law, shares which have been in issue before we publicly issue shares are prevented from being transferred within one year from the date of listing on a stock exchange.

¬ Under the Hong Kong Listing Rules, CITIC Group, as our controlling shareholder, together with CIFH, as a subsidiary of CITIC Group, are prevented from, amongst others (i) disposing of or agreeing to dispose any of our shares in respect of which they are shown by this prospectus to be the beneÑcial owners for a period of six months from the date of listing on the Hong Kong Stock Exchange and (ii) during a period of six months thereafter, disposing of or agreeing to dispose of any of our shares in respect of which they are shown by this prospectus to be the beneÑcial owners if, immediately after such disposition, CITIC Group would, whether individually or collectively with CIFH, cease to be our controlling shareholder.

¬ Under the Shanghai Stock Exchange Securities Listing Rules, all the A Shares held by CITIC Group are subject to a 36-month lock-up restriction from the date of listing on the Shanghai Stock Exchange.

Upon any re-registration of the shares of CITIC Group on our H share register, CITIC Group will remain subject to the above transfer restrictions under the PRC Company Law and Hong Kong Listing Rules to the extent that such restrictions have not expired. However, the 36-month lock-up restriction under the Shanghai Stock Exchange Securities Listing Rules will not apply, when the shares held by CITIC Group are converted into H Shares.

TRANSFER OF SHARES ISSUED TO CIFH AND BBVA

Upon completion of the Global OÅering and the A Share OÅering, CIFH will be subject to the following regulatory transfer restrictions:

¬ Under the PRC Company Law, shares which have been in issue before we publicly issue shares are prevented from being transferred within one year from the date of listing on a stock exchange.

¬ Under the Hong Kong Listing Rules, CIFH (as a subsidiary of CITIC Group) together with CITIC Group, as our controlling shareholder, are prevented from, amongst others (i) disposing of or agreeing to dispose any of our shares for a period of six months from the date of listing on the Hong Kong Stock Exchange and (ii) during a period of six months thereafter, disposing of or agreeing to dispose of any of our shares if, immediately after such disposition, CITIC Group would, whether individually or collectively with CIFH, cease to be our controlling shareholder.

Upon completion of the Global OÅering and the A Share OÅering, shares held by BBVA which have been in issue before we publicly issue shares are, pursuant to the requirements under the PRC Company Law, prevented from being transferred within one year from the date of listing on a stock exchange. In addition, BBVA has agreed not to transfer its shares in us for certain periods of time. See ""Our Strategic Investor and Other Investors Ì Rights and Obligations of BBVA Ì Transfer Restrictions''.

187 SHARE CAPITAL

TRANSFER OF SHARES ISSUED PRIOR TO THE GLOBAL OFFERING AND THE A SHARE OFFERING

The PRC Company Law provides that in relation to the public oÅering of a company, the shares issued by a company prior to the public oÅering of shares shall not be transferred within a period of one year from the date on which the publicly oÅered shares commence trading on any stock exchange. Accordingly, shares issued by us prior to the Global OÅering and the A Share OÅering shall generally be subject to this statutory restriction and shall not be transferred within a period of one year from the listing date of the OÅer Shares. However, the shares to be transferred by CITIC Group to the SSF in accordance with relevant PRC regulations regarding disposal of state-owned shares (see ""Transfer of State-owned Shares'' below) are not subject to such statutory restrictions on transfer.

TRANSFER OF STATE-OWNED SHARES

In accordance with relevant PRC regulations regarding disposal of state-owned shares, our state-owned shareholder, CITIC Group, is required to transfer to the SSF, in proportion to its holding in our bank, such number of shares in aggregate equivalent to 10% of the number of the OÅer Shares (488,547,900 shares before the exercise of the Over-allotment Option for the Global OÅering, and an additional 73,282,100 shares upon the exercise in full of the Over-allotment Option for the Global OÅering). At the time of the listing of our H Shares on the Hong Kong Stock Exchange, all the shares in our bank held by the SSF will be converted into H Shares on a one-for-one basis. These H Shares will not be part of the Global OÅering. Our bank will not receive any proceeds from the transfer by our state-owned shareholder to the SSF or any subsequent disposal of such H Shares by the SSF.

The transfer of state-owned shares by our state-owned shareholder to the SSF was approved by the MOF on March 6, 2007. The conversion of those shares into H Shares was approved by the CSRC on March 21, 2007. We have been advised that the transfer and the conversion, and the holding of H Shares by the SSF following such transfer and conversion, have been approved by the relevant PRC authorities and are legal under PRC law.

The SSF is set up by the PRC Government to provide social security for the aged population as well as to promote national economic development and social stability. The fund comprises capital invested by the MOF, capital invested from the transfer of state-owned shares as well as capital raised from other sources as approved by the State Council and their investment return. The fund is run by the SSF.

The H Shares to be held by the SSF upon completion of the Global OÅering will not be subject to any lock-up arrangements.

CONVERSION OF UNLISTED FOREIGN SHARES

Unlisted foreign shares held by CIFH and BBVA before the Global OÅering and the A Share OÅering will be converted to H Shares upon the completion of the Global OÅering on a one-for-one basis and will be listed for trading on the Hong Kong Stock Exchange.

PUBLIC FLOAT REQUIREMENTS

Rule 8.08(1)(a) and (b) of the Hong Kong Listing Rules require there to be an open market in the securities for which listing is sought and for a suÇcient public Öoat of an issuer's listed securities to be maintained. This normally means that (i) at least 25% of the issuer's total issued share capital must at all times be held by the public; and (ii) where an issuer has more than one class of securities apart from the class of securities for which listing is sought, the total securities of the issuer held by the public (on all regulated market(s) including the Hong Kong Stock Exchange) at the time of listing must be at least 25% of the issuer's total issued share capital. However, the class of securities for which listing is sought must not be less than 15% of the issuer's total issued share capital and must have an expected market capitalization at the time of listing of not less than HK$50 million.

188 SHARE CAPITAL

We have applied to the Hong Kong Stock Exchange to request the Hong Kong Stock Exchange to exercise, and the Hong Kong Stock Exchange has conÑrmed that it will exercise, its discretion under Rule 8.08(1)(d) of the Hong Kong Listing Rules to accept a lower public Öoat percentage of our company of the higher of: (a) 15.11%, or (b) such percentage of H Shares and A Shares held by the public immediately after completion of the Global OÅering and the A Share OÅering (where applicable) (which may include any Shares as increased upon the exercise of the Over-allotment Option under the Global OÅering (where applicable)). The above discretion is subject to the conditions that: (i) the H Shares held by the public will not be less than 15% of our total share capital; and (ii) full compliance with the disclosure requirements under Rule 8.08(1)(d) of the Hong Kong Listing Rules. CITIC Group has agreed with BBVA that, unless agreed upon otherwise, on or prior to the date falling 15 months after the Global OÅering, CITIC Group should take all actions, such as converting the A Shares held by it into H Shares and transferring such H Shares to third parties, to procure that we comply with the public Öoat requirements as then requested by Hong Kong Stock Exchange without taking into account of the shareholding of BBVA in us. BBVA agrees that it will not acquire any of our shares which will result in its shareholding in us to exceed 4.83% until we have complied with the public Öoat requirements without taking into account of the shareholding of BBVA in us, provided that the delivery of the 52,892,289 shares or the call option shares from CITIC Group to BBVA pursuant to the share and option purchase agreement shall not take eÅect prior to the date that we comply with the foregoing public Öoat requirements without taking into account of the shareholding of BBVA in us. We will make appropriate disclosure of the lower prescribed percentage of public Öoat and conÑrm suÇciency of public Öoat in successive annual reports after listing.

189 ASSETS AND LIABILITIES

The following discussion and analysis should be read in conjunction with our consolidated Ñnancial LR 11.07 statements included in the Accountants' Report in Appendix I, the unaudited supplementary Ñnancial information in Appendix II and the selected Ñnancial data, in each case together with the accompanying notes, included elsewhere in this prospectus. The consolidated Ñnancial statements have been prepared in accordance with IFRS.

ASSETS Our total assets increased by 18.9% to RMB 706,723 million as of December 31, 2006 compared to RMB 594,602 million as of December 31, 2005, which increased by 20.0% compared to RMB 495,445 million as of December 31, 2004. The growth from December 31, 2004 to December 31, 2006 was primarily due to the growth in loans and advances to customers and investments. The following table sets forth, as of the dates indicated, the components of our total assets.

As of December 31, 2004 2005 2006 % of % of % of Amount total Amount total Amount total (in millions of RMB, except percentages) Loans and advances to customers, total ÏÏÏÏÏÏÏ 306,879 Ì 370,260 Ì 463,167 Ì Allowance for impairmentÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (14,958) Ì (12,230) Ì (9,786) Ì Loans and advances to customers, netÏÏÏÏÏÏÏÏÏ 291,921 58.9% 358,030 60.2% 453,381 64.2% InvestmentsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 110,903 22.4 104,416 17.6 104,424 14.8 Cash and balances with central bank ÏÏÏÏÏÏÏÏÏ 54,253 11.0 84,453 14.2 90,620 12.8 Amounts due from banks and other Ñnancial institutions, net(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 20,899 4.2 31,352 5.3 43,250 6.1 Other assets(2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 17,469 3.5 16,351 2.7 15,048 2.1 Total assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 495,445 100.0% 594,602 100.0% 706,723 100.0%

(1) Net of allowances for impairment losses in the amounts of RMB 305 million, RMB 342 million and RMB 469 million as of December 31, 2006, 2005 and 2004, respectively. (2) Consists of property and equipment, deferred tax assets, interest receivables, repossessed assets, positive fair value of derivatives, land use rights, intangible assets and others. Since 2001, CITIC Group has taken a number of measures to strengthen our capital adequacy. In 2006, 2005 and 2004, we received capital contributions of RMB 7.4 billion, RMB 8.6 billion and RMB 2.5 billion, respectively, from CITIC Group. In addition, in 2004 and 2006, we issued subordinated debt and bonds, respectively, each with an aggregate face value of RMB 6.0 billion. As of December 31, 2006, our capital adequacy and core capital adequacy ratios were 9.41% and 6.57%, respectively. In June 2006, we sold related party loans with an aggregate outstanding principal amount of RMB 3,142 million, including (i) performing related party loans lent to CITIC Group, a corporate customer in the Ñnancing industry, with an aggregate outstanding principal amount of RMB 2,000 million to a third party for the same amount in cash; and (ii) through public auction, non-performing related party loans lent to certain subsidiaries of CITIC Group with an aggregate outstanding principal amount of RMB 1,142 million or of RMB 417 million at net book value. These non-performing related party loans were sold at net book value for cash. For a distribution of the non-performing related party loans sold, see ""Ì Asset Quality of Our Loan Portfolio Ì Distribution of Financial Restructuring-related Non-performing Loans''. Approximately RMB 12.1 million of impairment provisions were released and no gain or loss was realized as a result of such sales. In 2006, we collected non-performing related party loans with an aggregate outstanding amount of RMB 22 million. As a result of the foregoing, our total related party loans outstanding decreased to RMB 2,273 million as of December 31, 2006 from RMB 5,574 million as of December 31, 2005. Our total non-performing related party loans decreased to nil as of December 31, 2006 from RMB 1,164 million as of

190 ASSETS AND LIABILITIES

December 31, 2005, and our non-performing related party loan ratio decreased to nil as of December 31, 2006 from 20.9% as of December 31, 2005.

Loans and Advances to Customers The category of loans and advances to customers represents the largest component of our total assets. Our loans and advances to customers, net of the allowance for impairment losses, represented 64.2%, 60.2% and 58.9% of our total assets as of December 31, 2006, 2005 and 2004, respectively. Our total loans and advances to customers increased by 25.1% to RMB 463,167 million as of December 31, 2006 compared to RMB 370,260 million as of December 31, 2005, which increased by 20.7% compared to RMB 306,879 million as of December 31, 2004. The following discussion is based on our total loans and advances to customers, before taking into account the related allowance for impairment losses, rather than our net loans and advances to customers. Our loans and advances to customers are reported net of the allowance for impairment losses on our consolidated balance sheet.

Distribution of Loans by Product Type For a description of the products we oÅer, see ""Business Ì Our Principal Business Activities''. The following table sets forth, as of the dates indicated, our loans to customers by product type.

As of December 31, 2004 2005 2006 % of % of % of Amount total Amount total Amount total (in millions of RMB, except percentages) Corporate loans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 256,422 83.6% 282,275 76.3% 369,156 79.7% Discounted bills ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 18,727 6.1 50,151 13.5 45,636 9.9 Personal loansÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 31,730 10.3 37,834 10.2 48,375 10.4 Total loans and advances to customers ÏÏÏÏÏÏ 306,879 100.0% 370,260 100.0% 463,167 100.0%

Corporate loans have been historically the largest component of our total loans. Personal loans continued to increase from December 31, 2004 to December 31, 2006 as a result of our eÅorts to expand our personal banking business.

Corporate Loans Corporate loans represented 79.7%, 76.3%, and 83.6% of our total loans to customers as of December 31, 2006, 2005 and 2004, respectively. The following table sets forth, as of the dates indicated, our corporate loans by maturity and product type.

As of December 31, 2004 2005 2006 % of % of % of Amount total Amount total Amount total (in millions of RMB, except percentages) Short-term loans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 162,005 63.2% 182,606 64.7% 228,245 61.8% Medium- and long-term loans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 94,417 36.8 99,669 35.3 140,911 38.2 Total corporate loans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 256,422 100.0% 282,275 100.0% 369,156 100.0%

Our corporate loans increased by 30.8% to RMB 369,156 million as of December 31, 2006 from RMB 282,275 million as of December 31, 2005, as we began to extend new loans to targeted customers which we developed in our targeted industries. Our corporate loans increased by 10.1% to RMB 282,275 million as of December 31, 2005 from RMB 256,422 million as of December 31, 2004. We believe that the growth rate

191 ASSETS AND LIABILITIES from 2005 to 2006 was higher compared to the growth rate from 2004 to 2005 because (i) in 2006, we increased our lending to certain industries supported by PRC Government policies, such as transportation, storage and post service, and production and supply of electric power, gas and water, (ii) in 2005, in accordance with PRC Government's macroeconomic policies, we refrained from extending new corporate loans to industries which we believe have high risk of defaulting or production over-capacity, and (iii) in 2005 we actively increased position in discounted bills, which generally has a lower asset risk weighting than corporate loans.

Discounted Bills The following table sets forth, as of the dates indicated, our discounted bills by product type. As of December 31, 2004 2005 2006 % of % of % of Amount total Amount total Amount total (in millions of RMB, except percentages) Bank acceptance bills ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13,266 70.8% 43,775 87.3% 39,554 86.7% Commercial acceptance bills ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,461 29.2 6,376 12.7 6,082 13.3 Total discounted billsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 18,727 100.0% 50,151 100.0% 45,636 100.0%

Discounted bills are an important component of our total loan portfolio as well as an important instrument to manage our liquidity. Discounted bills decreased by 9.0% to RMB 45,636 million as of December 31, 2006 from RMB 50,151 million as of December 31, 2005 reÖected our increased position in higher-yielding asset categories, such as corporate loans and personal loans. Discounted bills increased by 167.8% to RMB 50,151 million as of December 31, 2005 from RMB 18,727 million as of December 31, 2004, reÖecting, among others, our eÅorts to actively increase our position in discounted bills as the money market interest rate decreased in 2005. Generally, bank acceptance bills have lower non-performing loan ratios than commercial acceptance bills. Accordingly, we have sought to increase bank acceptance bills as a percentage of total discounted bills outstanding. As a result, we increased bank acceptance bills as a percentage of total discounted bills from 70.8% as of December 31, 2004 to 87.3% as of December 31, 2005 and 86.7% as of December 31, 2006.

Personal Loans The following table sets forth, as of the dates indicated, our personal loans by product type. As of December 31, 2004 2005 2006 % of % of % of Amount total Amount total Amount total (in millions of RMB, except percentages) Residential mortgage loans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 17,838 56.2% 26,246 69.3% 36,470 75.4% Individual commercial loans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,372 23.2 6,162 16.3 5,863 12.1 Personal consumption loans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,733 14.9 3,971 10.5 3,951 8.2 Credit card advances ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 208 0.7 447 1.2 1,280 2.7 Education loans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 105 0.3 150 0.4 457 0.9 Personal automobile loansÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,474 4.7 858 2.3 354 0.7 Total personal loansÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 31,730 100.0% 37,834 100.0% 48,375 100.0%

Personal loans increased by 27.9% to RMB 48,375 million as of December 31, 2006 from RMB 37,834 million as of December 31, 2005, which increased by 19.2% from RMB 31,730 million as of December 31, 2004, reÖecting, among others, our increasing focus on expanding our personal banking business.

192 ASSETS AND LIABILITIES

We seek to improve the composition of our personal loan portfolio while expanding our personal loan business. Our residential mortgage loans, which has historically had a relatively low non-performing loan ratio, increased by 39.0% to RMB 36,470 million as of December 31, 2006 from RMB 26,246 million as of December 31, 2005, which increased by 47.1% from RMB 17,838 million as of December 31, 2004. The increase reÖected, among others, an increase in market demand and our increasing eÅorts to expand our residential mortgage loans business. Our credit card advances, as a percentage of our total personal loans, increased from December 31, 2004 through December 31, 2006, primarily reÖecting our increased eÅorts to expand our credit card business. Each of individual commercial loans, personal consumption loans and personal automobile loans, as a percentage of our total personal loans, was lower as of December 31, 2006 compared to as of December 31, 2004, reÖecting, among others, our eÅorts to restrict our lending policies on these loans which generally have higher risks.

Distribution of Corporate Loans by Industry We classify our corporate loan portfolio based on the industry classiÑcations of the National Bureau of Statistics of China. The following table sets forth, as of the dates indicated, the distribution of our corporate loans by industry classiÑcation.

As of December 31, 2004 2005 2006 % of % of % of Amount total Amount total Amount total (in millions of RMB, except percentages) Manufacturing Iron and steel ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,935 3.5% 11,890 4.2% 16,636 4.5% Telecommunications equipment, software and other electronic equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,873 2.3 6,826 2.4 9,007 2.4 Transportation equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,733 2.6 7,095 2.5 8,666 2.4 Textile ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,207 2.0 6,267 2.2 7,866 2.1 Others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 44,499 17.4 49,459 17.6 66,364 18.0 Subtotal ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 71,247 27.8% 81,537 28.9% 108,539 29.4% Production and supply of electric power, gas and water ÏÏÏÏ 23,825 9.3% 26,559 9.4% 38,022 10.3% Transportation, storage and post service ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 22,459 8.8 23,633 8.4 35,933 9.7 Wholesale and retail ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 26,023 10.1 29,902 10.5 33,468 9.1 Real estate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 27,640 10.8 22,957 8.1 28,796 7.8 Water, environment and public utility management ÏÏÏÏÏÏÏ 18,109 7.1 20,811 7.4 26,915 7.3 Rent and business services ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 14,538 5.7 18,566 6.6 29,375 8.0 Construction ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13,980 5.5 15,963 5.7 23,364 6.3 FinancingÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,376 2.9 9,188 3.3 3,107 0.8 Public management and social organizations ÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,748 2.2 7,858 2.8 10,468 2.8 Others(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 25,477 9.8 25,301 8.9 31,169 8.5 Total corporate loans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 256,422 100.0% 282,275 100.0% 369,156 100.0%

(1) Primarily consists of farming, forestry, husbandry and Ñshing, mining, hotels and restaurants, residential services, education, health care, social security and social welfare, culture, sports and entertainment, telecommunications, and international organizations. Also includes loans extended by our Hong Kong operations. The aggregate amount of loans to borrowers in our Ñve largest industries in terms of aggregate loan exposure represented 66.5%, 65.3% and 66.8% of our total corporate loans as of December 31, 2006, 2005 and 2004, respectively. In an eÅort to further enhance our overall asset quality, we focused on enhancing the mix of our loan portfolio in 2004 and began to develop our credit policy focusing on ""high quality industries and high quality enterprises'' and ""mainstream markets and mainstream customers'' in 2005. Our loans to the production and supply of electric power, gas and water industry, which we have historically experienced a lower non-performing loan ratio than average, as a percentage of total corporate loans, increased to 10.3% as of December 31, 2006 from 9.4% as of December 31, 2005, which increased from 9.3% as of December 31, 2004. On the other hand, consistent with our credit policy, we restricted our lending to the real estate industry.

193 ASSETS AND LIABILITIES

Loans to the real estate industry, as a percentage of our total corporate loans, decreased from 10.8% as of December 31, 2004 to 8.1% as of December 31, 2005 and 7.8% as of December 31, 2006. For our historical non-performing loan data by industry, see ""Ì Asset Quality of Our Loan Portfolio Ì Distribution of Corporate Non-performing Loans by Industry''.

Distribution of Corporate Loans by Legal Form of Borrowers The following table sets forth, as of the dates indicated, the distribution of our corporate loans by legal form of the borrowers.

As of December 31, 2004 2005 2006 % of % of % of Amount total Amount total Amount total Joint-stock enterprises ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 119,369 46.6% 130,157 46.1% 166,490 45.1% State-owned enterprises(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 84,252 32.8 100,738 35.7 131,954 35.7 Foreign invested enterprises ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 27,171 10.6 27,040 9.6 39,048 10.6 Private enterprises ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11,662 4.5 13,636 4.8 18,162 4.9 Collectively-controlled enterprises ÏÏÏÏÏÏÏÏÏÏÏÏ 6,386 2.5 4,480 1.6 5,721 1.6 Others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,582 3.0 6,224 2.2 7,781 2.1 Total corporate loans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 256,422 100.0% 282,275 100.0% 369,156 100.0%

(1) Including RMB 5,565 million, RMB 3,566 million and RMB 1,933 million of non-performing loans as of December 31, 2004, 2005 and 2006, respectively.

Distribution of Loans by Geographical Region We classify loans geographically based on the location of the branch that originated the loan. There is generally a high correlation between the location of the borrower and the location of the branch that originated the loan, except in the case of our head oÇce, which originates or manages loans to certain key borrowers in all geographical regions of China. The following table sets forth, as of the dates indicated, the distribution of our loan portfolio by geographical region. For deÑnitions of our geographical regions, see ""DeÑnitions and Conventions.''

As of December 31, 2004 2005 2006 % of % of % of Amount total Amount total Amount total (in millions of RMB, except percentages) Yangtze River Delta ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 91,672 29.9% 120,026 32.4% 146,784 31.7% Bohai Rim(1)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 100,195 32.6 115,706 31.2 138,310 29.9 Pearl River Delta and West StraitÏÏÏÏÏÏÏÏÏÏÏÏ 49,491 16.1 52,885 14.3 68,230 14.7 Central ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 27,477 9.0 36,255 9.8 46,704 10.1 WesternÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 27,943 9.1 32,029 8.7 43,820 9.5 NortheasternÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9,880 3.2 13,207 3.6 19,141 4.1 Hong Kong ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 221 0.1 152 0.0 178 0.0 Total loans to customers ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 306,879 100.0% 370,260 100.0% 463,167 100.0%

(1) Includes the head oÇce.

We have historically focused on the most economically developed regions along China's eastern coastal regions, such as the Yangtze River Delta, the Bohai Rim region and the Pearl River Delta. As of December 31, 2006, 2005 and 2004, the aggregate amount of loans originated in these three regions as a percentage of our total loans and advances to customers were 76.3%, 77.9% and 78.6%, respectively.

194 ASSETS AND LIABILITIES

Distribution of Corporate Loans by Size The following table sets forth, as of December 31, 2006, the distribution of the outstanding amounts of our corporate loans by size.

As of December 31, 2006 % of Amount total (in millions of RMB, except percentages) RMB 10 million or lessÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 23,871 6.5% Over RMB 10 million to RMB 50 million ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 100,367 27.2 Over RMB 50 million to RMB 100 million ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 44,301 12.0 Over RMB 100 million ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 200,617 54.3 Total corporate loans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 369,156 100.0%

Distribution of Loans by Collateral The following table sets forth, as of the dates indicated, the distribution of our loan portfolio by the type of collateral. If a loan is secured by more than one form of security interest, we allocate the loan to the form of collateral considered to have lower risk. We generally consider monetary assets to have lower risk than other tangible assets, which in turn have lower risk than guarantees.

As of December 31, 2004 2005 2006 % of % of % of Amount subtotal Amount subtotal Amount subtotal (in millions of RMB, except percentages) Corporate loans Loans secured by monetary assets ÏÏÏÏÏÏÏÏÏ 33,302 13.0% 35,211 12.5% 35,264 9.6% Loans secured by tangible assets, other than monetary assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 37,446 14.6 43,480 15.4 64,452 17.4 Guaranteed loans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 103,255 40.3 111,792 39.6 141,318 38.3 Unsecured loansÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 82,419 32.1 91,792 32.5 128,122 34.7 SubtotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 256,422 100.0% 282,275 100.0% 369,156 100.0% Personal loans Loans secured by monetary assets ÏÏÏÏÏÏÏÏÏ 1,398 4.4% 1,452 3.9% 2,033 4.2% Loans secured by tangible assets, other than monetary assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 27,195 85.7 34,365 90.8 44,050 91.0 Guaranteed loans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,916 9.2 1,556 4.1 1,003 2.1 Unsecured loansÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 221 0.7 461 1.2 1,289 2.7 SubtotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 31,730 100.0% 37,834 100.0% 48,375 100.0% Discounted billsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 18,727 100.0% 50,151 100.0% 45,636 100.0% Total loans to customers ÏÏÏÏÏÏÏÏÏÏÏÏÏ 306,879 370,260 463,167

Loans secured by tangible assets or guarantees and discounted bills represented in aggregate 72.1%, 75.1% and 73.1% of our total loan portfolio as of December 31, 2006, 2005 and 2004, respectively. Guaranteed loans are generally not secured by any assets of the guarantors. Accordingly, we have increasingly required our borrowers to secure loans with tangible assets. As a result, guaranteed loans excluding discounted bills as a percentage of total loans excluding discounted bills decreased to 34.1% as of December 31, 2006 from 36.8% as of December 31, 2004. As part of our ""high quality industries and high quality enterprises'' and ""mainstream markets and mainstream customers'' strategy, we generally extend unsecured loans only to customers which we believe

195 ASSETS AND LIABILITIES have superior credit proÑles. We identify these customers and industries in our credit policy, which is updated annually. Applications from these customers undergo the same credit approval procedures as those of other applicants. As a reÖection of our improved ability in identifying these customers, the non-performing loan ratio of our unsecured loans outstanding as of December 31, 2006 was 1.6%, compared to 2.5% for our overall portfolio as of that date.

Borrower Concentration

In accordance with applicable PRC banking laws and regulations, we are subject to a lending limit of 10% of our regulatory capital to any single borrower. We deÑne a single borrower as a distinct legal entity. Accordingly, a borrower may be an aÇliate of another one. The following table sets forth, as of December 31, 2006, the loans to our ten largest single borrowers, all of which were classiÑed as ""normal'' according to our Ñve-category classiÑcation as of that date.

As of December 31, 2006 % of % of total regulatory Industry Amount loans capital(1) (in millions of RMB, except percentages) Borrower AÏÏÏÏÏÏÏÏÏÏÏÏÏ Telecommunications 3,000 0.7% 6.7% Borrower B ÏÏÏÏÏÏÏÏÏÏÏÏÏ Transportation, storage and post service 2,425 0.5 5.5 Borrower CÏÏÏÏÏÏÏÏÏÏÏÏÏ Production and supply of electric power, gas and water 2,360 0.5 5.3 Borrower DÏÏÏÏÏÏÏÏÏÏÏÏÏ Production and supply of electric power, gas and water 2,300 0.5 5.2 Borrower E ÏÏÏÏÏÏÏÏÏÏÏÏÏ Construction 2,068 0.5 4.6 Borrower F ÏÏÏÏÏÏÏÏÏÏÏÏÏ Transportation, storage and post service 2,000 0.4 4.5 Borrower GÏÏÏÏÏÏÏÏÏÏÏÏÏ Transportation, storage and post service 1,871 0.4 4.2 Borrower H ÏÏÏÏÏÏÏÏÏÏÏÏ Rent and business service 1,850 0.4 4.2 Borrower I ÏÏÏÏÏÏÏÏÏÏÏÏÏ Transportation, storage and post service 1,760 0.4 4.0 Borrower J ÏÏÏÏÏÏÏÏÏÏÏÏÏ Production and supply of electric power, gas and water 1,500 0.3 3.4 Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 21,134 4.6% 47.6%

(1) Represents loan amounts as a percentage of our regulatory capital, calculated in accordance with statutory requirements under PRC GAAP. For a calculation of our regulatory capital as of December 31, 2006, see ""Financial Information Ì Capital Resources Ì Capital Adequacy.''

The applicable PRC banking guidelines recommend commercial banks to limit loans to any group borrower to no more than 15% of their regulatory capital. Our credit risk management policies and procedures are consistent with these guidelines. In addition, we have implemented policies and procedures with a view to identifying group borrower applicants in our credit extension process. See ""Risk Management Ì Credit Risk Management Ì Credit Risk Management for Corporate Loans Ì Credit Origination and Analysis''. See, however, ""Risk Factors Ì Risks Relating to Our Business Ì Our business is highly dependent on the proper functioning and improvement of our information technology infrastructure''. Loans to our ten largest group borrowers accounted for an aggregate of 50.5% of our regulatory capital as of December 31, 2006, and loans to our largest group borrower accounted for 6.9% of our regulatory capital as of that date. As of December 31, 2006, our loans to CITIC Group, our controlling shareholder, totaled RMB 2,273 million, representing 0.5% of our total loans.

196 ASSETS AND LIABILITIES

The following table sets forth, as of December 31, 2006, the loans to our ten largest group borrowers, all of which were performing loans as of that date.

As of December 31, 2006 % of % of total regulatory Industry Amount loans capital(1) (in millions of RMB, except percentages) Borrower A ÏÏÏÏÏÏÏÏÏÏÏ Telecommunications 3,055 0.7% 6.9% Borrower B ÏÏÏÏÏÏÏÏÏÏÏ Transportation, storage and post service 3,045 0.7 6.9 Borrower C ÏÏÏÏÏÏÏÏÏÏÏ Transportation, storage and post service 2,425 0.5 5.5 Borrower D ÏÏÏÏÏÏÏÏÏÏÏ Production and supply of electric power, gas and water 2,360 0.5 5.3 Borrower E ÏÏÏÏÏÏÏÏÏÏÏ Production and supply of electric power, gas and water 2,300 0.5 5.1 Borrower FÏÏÏÏÏÏÏÏÏÏÏÏ Financing 2,273 0.5 5.1 Borrower G ÏÏÏÏÏÏÏÏÏÏÏ Transportation, storage and post service 2,000 0.4 4.5 Borrower H ÏÏÏÏÏÏÏÏÏÏÏ Production and supply of electric power, gas and water 1,800 0.4 4.1 Borrower I ÏÏÏÏÏÏÏÏÏÏÏÏ Manufacturing 1,649 0.3 3.7 Borrower J ÏÏÏÏÏÏÏÏÏÏÏÏ Production and supply of electric power, gas and water 1,500 0.3 3.4 TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 22,407 4.8% 50.5%

(1) Represents loan amounts as a percentage of our regulatory capital, calculated in accordance with statutory requirements under PRC GAAP. For a calculation of our regulatory capital as of December 31, 2006, see ""Financial Information Ì Capital Resources Ì Capital Adequacy.'' All of the loans to our ten largest single borrowers and ten largest group borrowers as of December 31, 2006 were performing loans. Consistent with our accounting policies, we made provisions for these loans on a collective assessment basis. See ""Financial Information Ì SigniÑcant Accounting Policies Ì Allowance for Impairment Losses on Loans and Advances''.

Maturity ProÑle of Loan Portfolio The following table sets forth, as of December 31, 2006, our loan products by remaining maturity.

As of December 31, 2006 Due less than Due between one Due more than Overdue and one year to Ñve years Ñve years others(1) Total (in millions of RMB) Corporate loansÏÏÏÏÏÏÏÏÏÏÏ 237,727 84,932 34,983 11,514 369,156 Discounted bills ÏÏÏÏÏÏÏÏÏÏ 45,636 Ì Ì Ì 45,636 Personal loans ÏÏÏÏÏÏÏÏÏÏÏÏ 9,023 11,939 25,187 2,226 48,375 Total loans to customers 292,386 96,871 60,170 13,740 463,167

(1) Includes loans on which the whole or part of the principals is overdue, or interest is overdue for more than 90 days but for which principal was not yet due. As of December 31, 2006, 63.1% of our total loans to customers were short-term loans, or those due in less than one year. Short-term corporate loans, which primarily consist of working capital loans, represent a majority of our corporate loan portfolio. All of our discounted bills are short-term and are due within six months. A majority of our personal loans had a term of one year or more, primarily because the largest component of our personal loans consisted of mortgage loans, which are generally longer term loans.

Loan Interest Rate ProÑle Interest rates have historically been highly regulated in China and are becoming more market based. Since January 1, 2004, under applicable PRC Government regulations, banks have been allowed to negotiate interest rates on newly-extended RMB-denominated loans with a maturity longer than one year, which may

197 ASSETS AND LIABILITIES bear either Ñxed interest rate or Öoating interest rates that may be adjusted on a monthly, quarterly or annual basis. A majority of our RMB-denominated loans with a maturity of one year or less bear Ñxed interest rates and a majority of our RMB-denominated loans with a maturity of more than one years bear Öoating interest rates. Since March 17, 2005, the PBOC discontinued preferential rates for mortgage loans, and banks have been allowed to negotiate interest rates on RMB-denominated residential mortgage loans above minimum rates. Since that date, we have negotiated the procedures and frequencies for the adjustment of interest rates on all newly-extended mortgage loans.

Asset Quality of Our Loan Portfolio We measure and monitor the asset quality of our loan portfolio through our loan classiÑcation system. We classify our loans using a Ñve-category loan classiÑcation system based on the CBRC guidelines. See ""Regulation and Supervision Ì PRC Regulation and Supervision Ì Loan ClassiÑcation, Allowances and Write-oÅs Ì Loan ClassiÑcation'' and ""Ì Loan Allowances''. The loan classiÑcation information presented in this section is presented as if we had classiÑed our loans on a consistent basis as of December 31, 2004, 2005 and 2006.

Loan ClassiÑcation Criteria We started to assess impairment and making provisions for loans using the impairment concept under IAS 39 since 2005. Information relating to impairment and provisions is provided as if we had conducted such assessment on a consistent basis for the three years ended December 31, 2006. We apply a series of criteria based on CBRC guidelines to determine the classiÑcation of our loan portfolio. These criteria are designed to assess the likelihood of timely and full repayment by the borrower. Our loan classiÑcation criteria focus on a number of factors, including: (i) the borrower's ability to repay the loan; (ii) the borrower's repayment history; (iii) the borrower's willingness to repay; (iv) collaterals and guarantees of the loan; (v) legal remedies available in case of default; and (vi) length of time by which payment of principal and interest on loans are overdue. We classify our loans into the following Ñve categories: normal, special mention, substandard, doubtful and loss, each of which we explain below: Normal. Loans should be classiÑed as normal if:

¬ the borrower is operating normally and we are not aware of any factor that may adversely aÅect the borrower's ability to repay principal and interest in full on a timely basis;

¬ we have full conÑdence in the borrower's timely payment;

¬ there is no reason for us to suspect either principal or interest will not be repaid in full on a timely basis; or

¬ they are current or overdue for 90 days or less, and are low-risk loans which were extended in accordance with our credit risk management policies and procedures. Special mention. Loans should be classiÑed as special mention if:

¬ the principal or interest is current or overdue for 30 days or less, and there are early warning signs which could adversely aÅect the borrower's repayment ability but are not serious enough to aÅect the timely payment of the loan;

¬ the principal or interest is overdue for more than 31 days but less than 90 days; or

¬ they are overdue for more than 91 days but less than 180 days, and are low-risk loans which were extended in accordance with our credit risk management policies and procedures. Substandard. We classify loans as substandard if the borrower's abilities to service the loans are clearly in question as the borrower cannot rely entirely on normal business revenues to repay principal and interest on

198 ASSETS AND LIABILITIES a timely basis. These loans generally have losses (with a loan loss ratio of 30% or less) that may ensue even when collateral or guarantees are invoked. In general, loans should be classiÑed as substandard if:

¬ the borrower obtained the loan by forging loan documents;

¬ the credit extension was in violation of relevant government regulations;

¬ the principal or interest is current or overdue for 90 days or less, and there exist certain conditions which could materially aÅect the borrower's repayment ability, including, among others, that (i) the borrower's business operations or management experienced signiÑcant problem which could adversely aÅect the timely repayment of the loan, (ii) the borrower is involved in litigations the outcome of which may result in our losses, and (iii) the borrower is unable to obtain Ñnancing from alternative sources;

¬ the principal or interest is overdue for more than 91 days but less than 180 days, and there exist general characteristics of substandard loans; or

¬ the principal or interest is overdue for more than 180 days.

Doubtful. We classify loans as doubtful if the borrower cannot repay principal and interest in full and we will have to recognize signiÑcant losses (with a loan loss ratio of 31% to 95%) even when collateral or guarantees are invoked. In general, loans should be classiÑed as doubtful if:

¬ the borrower's business operations or projects under construction are suspended;

¬ the borrower has greater amounts of liabilities than assets; or

¬ for secured loans, those which we will incur a loan loss ratio of 31% to 95% even when collateral or guarantees are invoked.

Loss. Loans are classiÑed as loss if only a small portion or no (less than 5%) principal and interest can be recovered after taking all possible measures and exhausting all legal remedies. In general, loans are classiÑed as loss if one or more of the following conditions, among others, exist:

¬ the borrower has become the subject of bankruptcy proceedings;

¬ the borrower is unable to repay the loan and only a small portion of or no principal and interest can be recovered after taking all possible measures and exhausting all legal remedies;

¬ the borrower committed fraud and is investigated by the authorities, and we are unable to recover the principal and interest after taking all possible measures;

¬ the borrower experienced signiÑcant losses caused by accidents or natural disasters and such losses were not fully covered by insurance;

¬ the borrower's business operations are suspended and this results in the loss of the full amount or a substantial portion of the loan; or

¬ the loan is approved for write-oÅ.

For more information regarding the classiÑcation of restructured non-performing loans, see ""Risk Management Ì Credit Risk Management Ì Credit Risk Management for Corporate Loans Ì Disbursement and Post-Disbursement Management Ì Administration of Non-Performing Assets.''

199 ASSETS AND LIABILITIES

Distribution of Loans by Loan ClassiÑcation The following tables set forth, as of the dates indicated, the distribution of our loan portfolio by loan classiÑcation category. Under our Ñve-category loan classiÑcation system, we consider loans classiÑed as substandard, doubtful and loss as non-performing loans.

As of December 31, 2004 2005 2006 % of % of % of Amount total Amount total Amount total (in millions of RMB, except percentages) Normal ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 270,433 88.1% 339,708 91.8% 440,352 95.1% Special mention ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 17,166 5.6 15,241 4.1 11,250 2.4 Substandard ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,557 1.2 2,685 0.7 1,981 0.4 Doubtful ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9,316 3.0 8,781 2.4 7,404 1.6 Loss ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,407 2.1 3,845 1.0 2,180 0.5 Total loans to customers ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 306,879 100.0% 370,260 100.0% 463,167 100.0% Performing loans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 287,599 93.7% 354,949 95.9% 451,602 97.5% Non-performing loansÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 19,280 6.3% 15,311 4.1% 11,565 2.5%

As of December 31, 2004 2005 2006 % of % of % of Amount total Amount total Amount total (in millions of RMB, except percentages) Corporate loans Normal ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 221,001 86.2% 252,915 89.6% 347,389 94.1% Special mention ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 16,532 6.4 14,442 5.1 10,616 2.9 Substandard ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,441 1.4 2,629 0.9 1,895 0.5 Doubtful ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9,043 3.5 8,455 3.0 7,092 1.9 Loss ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,405 2.5 3,834 1.4 2,164 0.6 SubtotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 256,422 100.0% 282,275 100.0% 369,156 100.0% Non-performing loan ratio(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7.4% 5.3% 3.0% Discounted bills Normal ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 18,533 99.0% 50,078 99.9% 45,581 99.9% Special mention ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 194 1.0 73 0.1 55 0.1 Substandard ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 0.0 Ì 0.0 Ì 0.0 Doubtful ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 0.0 Ì 0.0 Ì 0.0 Loss ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 0.0 Ì 0.0 Ì 0.0 SubtotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 18,727 100.0% 50,151 100.0% 45,636 100.0% Non-performing loan ratio(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.0% 0.0% 0.0%

200 ASSETS AND LIABILITIES

As of December 31, 2004 2005 2006 % of % of % of Amount total Amount total Amount total (in millions of RMB, except percentages) Personal loans Normal ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 30,899 97.4% 36,715 97.0% 47,382 97.9% Special mention ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 440 1.4 726 2.0 579 1.2 Substandard ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 116 0.3 56 0.1 86 0.2 Doubtful ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 273 0.9 326 0.9 312 0.7 Loss ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2 0.0 11 0.0 16 0.0 SubtotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 31,730 100.0% 37,834 100.0% 48,375 100.0% Non-performing loan ratio(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1.2% 1.0% 0.9% Total loans to customers ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 306,879 100.0% 370,260 100.0% 463,167 100.0% Non-performing loan ratio(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6.3% 4.1% 2.5%

(1) Calculated by dividing non-performing loans in each category by total loans in that category.

Changes in the Asset Quality of Our Loan Portfolio

The following table sets forth, as of the dates indicated, the changes in the outstanding amounts of non- performing loans.

For the year ended December 31, 2004 2005 2006 (in millions of RMB) Beginning of periodÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 23,205 19,280 15,311 Net New NPLs(1)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 477 (362) 52 Write-oÅsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (3,035) (3,519) (3,685) Others(2)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1,367) (88) (113) End of periodÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 19,280 15,311 11,565 NPL ratio ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6.3% 4.1% 2.5%

(1) Consists of (i) NPL downgrades during the period less (ii) NPL upgrades and (iii) NPL recoveries during the period.

(2) Consists of (i) transfer out, which consist of the transfer of non-performing loan assets to repossessed assets, (ii) transfer to Ñxed assets and (iii) gains or losses from revaluation of foreign currency-denominated non-performing loans.

Our non-performing loans and non-performing loan ratio decreased to RMB 11,565 million and 2.5%, respectively, as of December 31, 2006, from RMB 19,280 million and 6.3%, respectively, as of December 31, 2004, primarily due to a decrease in net non-performing loans and increases in loan write-oÅs. Excluding the impact of our loan write-oÅs, our non-performing loan ratios as of December 31, 2006, 2005 and 2004 were 3.3%, 5.0% and 7.2% respectively. The net new non-performing loans in 2006 and 2005 decreased compared to those in 2004, reÖecting, among others, (i) our continuing eÅorts to strengthen our credit extension policies and procedures, (ii) our increased eÅorts in recovering existing non-performing loans, and (iii) the continuing favorable economic environment. The increase in loan write-oÅs reÖected, among others, the strengthened implementation of our policies to write oÅ loans that meet write-oÅ requirements.

201 ASSETS AND LIABILITIES

Distribution of Non-performing Loans by Product Type The following table sets forth, as of the dates indicated, our non-performing loans by product type.

As of December 31, 2004 2005 2006 % of NPL % of NPL % of NPL Amount total ratio(1) Amount total ratio(1) Amount total ratio(1) (in millions of RMB, except percentages) Corporate loans Short-term loansÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 14,150 73.4% 8.73% 11,259 73.5% 6.17% 9,220 79.7% 4.04% Medium and long term loans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,739 24.6 5.02 3,659 23.9 3.67 1,931 16.7 1.37 Total corporate loans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 18,889 98.0% 7.37% 14,918 97.4% 5.28% 11,151 96.4% 3.02% Discounted bills ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 0.0% 0.00% Ì 0.0% 0.00% Ì Ì 0.00% Personal loans Residential mortgage loans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 141 0.7% 0.79% 86 0.6% 0.33% 97 0.8% 0.27% Individual commercial loans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 185 1.0 2.51 230 1.5 3.73 222 1.9 3.79 Personal consumption loans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 34 0.2 0.72 39 0.3 0.98 44 0.4 1.11 Personal automobile loans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 22 0.1 1.49 23 0.1 2.68 27 0.3 7.63 Credit card advances ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9 0.0 4.33 15 0.1 3.36 24 0.2 1.87 Education loans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 0.0 0.00 Ì Ì Ì Ì Ì Ì Subtotal ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 391 2.0% 1.23% 393 2.6% 1.04% 414 3.6% 0.85% Total non-performing loans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 19,280 100.0% 6.28% 15,311 100.0% 4.14% 11,565 100.0% 2.50%

Distribution of Corporate Non-performing Loans by Industry The following table sets forth, as of the dates indicated, the distribution of our non-performing corporate loans by industry.

As of December 31, 2004 2005 2006 % of NPL % of NPL % of NPL Amount total ratio(1) Amount total ratio(1) Amount total ratio(1) (in millions of RMB, except percentages) Manufacturing Iron and steel ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 169 0.9% 1.89% 120 0.8% 1.01% 6 0.1% 0.04% Telecommunications equipment, software and other electronic equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 376 2.0 6.40 465 3.1 6.81 505 4.5 5.61 Transportation equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 258 1.4 3.83 454 3.0 6.40 318 2.9 3.67 Textile ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 548 2.9 10.52 618 4.1 9.86 547 4.9 6.95 Others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,723 19.7 8.37 3,384 22.8 6.84 3,404 30.5 5.13 Subtotal ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,074 26.9% 7.12% 5,041 33.8% 6.18% 4,780 42.9% 4.40% Production and supply of electric power, gas and water 78 0.5% 0.33% 110 0.7% 0.41% 16 0.1% 0.04% Transportation, storage and post service ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 625 3.3 2.78 523 3.5 2.21 156 1.4 0.43 Wholesale and retailÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,327 22.9 16.63 2,956 19.8 9.89 2,383 21.4 7.12 Real estate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,025 16.0 10.94 2,274 15.2 9.91 1,330 11.9 4.62 Water, environment and public utility managementÏÏÏÏÏ 44 0.2 0.24 24 0.2 0.12 18 0.2 0.07 Rent and business services ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,384 7.3 9.52 1,203 8.1 6.48 829 7.4 2.82 Construction ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 130 0.7 0.93 129 0.9 0.81 48 0.4 0.21 FinancingÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 915 4.8 12.41 355 2.4 3.86 240 2.2 7.72 Public management and social organizations ÏÏÏÏÏÏÏÏÏÏ 112 0.6 1.95 106 0.7 1.35 102 0.9 0.97 Others(2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,175 16.8 12.46 2,197 14.7 8.68 1,249 11.2 4.01 Total non-performing loans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 18,889 100.0% 7.37% 14,918 100.0% 5.28% 11,151 100.0% 3.02%

(1) Calculated by dividing non-performing loans in each category by total loans in that category. (2) Primarily consists of farming, forestry, husbandry and Ñshing, mining, hotels and restaurants, residential services, education, health care, social security and social welfare, culture, sports and entertainment, telecommunications, and international organizations. Also includes loans extended by our Hong Kong operations.

202 ASSETS AND LIABILITIES

As of December 31, 2006, 2005 and 2004, the industries in which we had a relatively high concentration of non-performing loans or higher non-performing loan ratios than the overall loan portfolio include manufacturing, wholesale and retail, real estate, rent and business service and Ñnancing. ReÖecting our eÅorts to improve our overall asset quality, the non-performing loan ratios of manufacturing, wholesale and retail, and rent and business services decreased signiÑcantly during this period. In addition, we have restricted our lending policy to the real estate industry, contributing to a continuing decrease in total non-performing loans and non- performing loan ratio in the real estate industry as well as a decrease in real estate loans as a percentage of our total corporate loans. The non-performing loan ratio in Ñnancing as of December 31, 2006 increased compared to December 31, 2005 primarily attributable to a decrease in the amount of total loans outstanding in this industry. See ""Ì Loans and Advances to Customers Ì Distribution of Corporate Loans by Industry''.

Historically, we have experienced higher non-performing loan ratios in real estate and textile industries. The non-performing loan ratios of the textile industry have been aÅected by the deteriorating quality of loans to a limited number of larger borrowers in this category, which in turn reÖected the weak performance of the overall textile industry in China. The higher non-performing loan ratios of the real estate industry reÖected the higher credit risk of the overall real estate industry in China, which has been subject to PRC Government's macro-economic measures in recent years.

Distribution of Non-performing Loans by Geographical Region

The following table sets forth, as of the dates indicated, the distribution of our non-performing loans by geographical region. For a description of our geographical regions, see ""DeÑnitions and Conventions.''

As of December 31, 2004 2005 2006 % of NPL % of NPL % of NPL Amount total ratio(1) Amount total ratio(1) Amount total ratio(1) (in millions of RMB, except percentages) Yangtze River Delta ÏÏÏÏÏÏÏÏÏÏÏ 1,491 7.7% 1.63% 925 6.0% 0.77% 756 6.5% 0.52% Bohai Rim(2)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,237 42.7 8.22 6,029 39.4 5.21 5,091 44.0 3.68 Pearl River Delta and West Strait 8,196 42.5 16.56 6,467 42.3 12.23 3,977 34.4 5.83 CentralÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 419 2.2 1.52 754 4.9 2.08 816 7.1 1.75 Western ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 593 3.1 2.12 660 4.3 2.06 497 4.3 1.13 Northeastern ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 344 1.8 3.48 476 3.1 3.60 428 3.7 2.24 Hong Kong ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì Ì Ì Ì Ì Ì Ì Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 19,280 100.0% 6.28% 15,311 100.0% 4.14% 11,565 100.0% 2.50%

(1) Calculated by dividing non-performing loans in each category by total loans in that category.

(2) Includes the head oÇce.

We have historically experienced a higher non-performing loan ratio in the Pearl River Delta and West Strait region. The relatively higher non-performing loan ratio in the Pearl River Delta and West Strait region was primarily attributable to a relatively higher non-performing loan ratio at our Shenzhen branch, which in turn was attributable to non-performing loans extended in the 1990s. We believe that the high non-performing loan ratio of our Shenzhen branch during the 1990s reÖected, among other things, a combination of the rapid economic growth coupled with the poor credit environment in this region, as well as the weaker credit risk management of our Shenzhen branch. As a reÖection of our eÅorts in improving our credit risk management in this region, the non-performing loan ratio of loans originated in this region decreased signiÑcantly from December 31, 2004 to December 31, 2006. Furthermore, in part reÖecting our eÅorts to improve our overall asset quality, loans originated in the Yangtze River Delta region, where we have experienced relatively low non-performing loan ratio, increased as a percentage of our total loan portfolio from December 31, 2004 to December 31, 2006. For our historical loan balance data by region, see ""Ì Loans and Advances to Customers Ì Distribution of Loans by Geographical Region''.

203 ASSETS AND LIABILITIES

Ten Largest Non-performing Borrowers The following table sets forth, as of December 31, 2006, our borrowers with the ten largest non-performing loan balances outstanding.

As of December 31, 2006 % of total % of non-performing regulatory Industry Amount ClassiÑcation loans capital (in millions of RMB, except percentages) Borrower A ÏÏÏÏÏÏÏÏÏÏ Wholesale and retail 341 Loss 2.9% 0.8% Borrower BÏÏÏÏÏÏÏÏÏÏÏ Manufacturing 307 Doubtful 2.7 0.7 Borrower CÏÏÏÏÏÏÏÏÏÏÏ Rent and business services 267 Doubtful 2.3 0.6 Borrower D ÏÏÏÏÏÏÏÏÏÏ Manufacturing 246 Doubtful 2.1 0.6 Borrower EÏÏÏÏÏÏÏÏÏÏÏ Financing 232 Doubtful 2.0 0.5 Borrower FÏÏÏÏÏÏÏÏÏÏÏ Manufacturing 200 Doubtful 1.7 0.4 Borrower G ÏÏÏÏÏÏÏÏÏÏ Manufacturing 184 Doubtful 1.6 0.4 Borrower H ÏÏÏÏÏÏÏÏÏÏ Manufacturing 165 Substandard 1.4 0.4 Borrower I ÏÏÏÏÏÏÏÏÏÏÏ Culture, sports and 157 Doubtful 1.4 0.4 entertainment Borrower J ÏÏÏÏÏÏÏÏÏÏÏ Real estate 150 Doubtful 1.3 0.3 Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,249 19.4% 5.1%

Loan Aging Schedule The following table sets forth, as of the dates indicated, our loan aging schedule for our loans and advances to customers.

As of December 31, 2004 2005 2006 % of % of % of Amount total Amount total Amount total (in millions of RMB, except percentages) Current loans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 286,875 93.5% 352,988 95.3% 449,427 97.0% Loans past due for(1): 1 to 90 days ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,085 0.7 2,988 0.8 2,311 0.5 91 days to 180 days ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,414 0.4 1,283 0.4 735 0.2 181 days or more ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 16,505 5.4 13,001 3.5 10,694 2.3 SubtotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 20,004 6.5% 17,272 4.7% 13,740 3.0% Total loans to customers ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 306,879 100.0% 370,260 100.0% 463,167 100.0% Loans overdue for 91 days or more ÏÏÏÏÏÏÏÏÏÏÏÏÏ 17,919 5.8% 14,284 3.9% 11,429 2.5%

(1) For loans and advances to customers, overdue amount represents loans of which the whole or part of the principals was overdue, or interest was overdue for more than 90 days but for which principal was not yet due.

204 ASSETS AND LIABILITIES

Distribution of Financial Restructuring-related Non-performing Loans The following table sets forth the distribution of the non-performing loans we sold as part of our Ñnancial restructuring. See ""Our Restructuring and Operational Reforms Ì Financial Restructuring''.

Loans past due for Between one and Between three More than Industry Less than one year three years and Ñve years Ñve years Total (in millions of RMB) Transportation, storage and post service ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì 346 346 Real estate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 30 Ì Ì 224 254 Hotels and restaurants ÏÏÏÏÏÏÏÏÏÏÏ Ì 245 Ì Ì 245 Rent and business services ÏÏÏÏÏÏÏ 135 Ì Ì 4 139 Manufacturing ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì 90 90 Wholesale and retailÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 23 7 37 67 Farming, forestry, husbandry and Ñshing ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1 Ì Ì Ì 1 Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 166 268 7 701 1,142

All of the Ñnancial restructuring-related loans sold were corporate loans.

Allowance for Impairment Losses on Loans and Advances to Customers

In 2005, we began to assess our loans for impairment, determine a level of allowance for impairment losses, and recognize any related provisions made in a year, using the concept of impairment under IAS 39. See ""Financial Information Ì SigniÑcant Accounting Policies Ì Allowance for Impairment Losses on Loans and Advances.'' For purposes of our consolidated Ñnancial statements and this prospectus, the allowance for impairment losses is presented as if we had assessed our loans for impairment on a consistent basis for the years ended December 31, 2006, 2005 and 2004.

The allowance for impairment losses of these loans is measured as the diÅerence between the carrying amount of the loans and the present value of the estimated future cash Öows discounted at the eÅective interest rates of the loans. The total allowance consists of individual impairment allowance and collective impairment allowance. This accounting principle is consistent under both IAS 39 and 2006 PRC GAAP No. 22 ""Recognition and Measurement of Financial Investments''. Accordingly, allowance for impairment losses on loans and advances to customers accrued under IAS 39 is the same as the amount accrued under 2006 PRC GAAP.

Individual and Collective Assessment on Loans

In this prospectus, we use the terms ""non-performing loans'' and ""impaired loans and advances'' synonymously. We use two methods of assessing impairment losses: on an individual basis and on a collective basis. Individually assessed loans and advances are those considered individually signiÑcant. Collectively assessed loans and advances are those homogeneous groups of loans that are considered either individually insigniÑcant or not considered impaired after assessment on an individual basis. We assess our non-performing corporate loans and discounted bills on an individual basis. We assess our (i) performing corporate loans and discounted bills (of which no impairment is identiÑed on an individual basis); and (ii) all personal loans, on a collective basis. The following table sets forth, as of the dates indicated, our non-performing loans assessed on an individual basis, representing non-performing corporate loans and discounted bills, and our non-performing

205 ASSETS AND LIABILITIES loans assessed on a collective basis, representing non-performing personal loans. For details on individual and collective assessment of our loans, see ""Financial Information Ì SigniÑcant Accounting Policies''.

As of December 31, 2004 2005 2006 % of % of % of Amount total Amount total Amount total (in millions of RMB, except percentages) Individually assessed ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 18,889 98.0% 14,918 97.4% 11,151 96.4% Collectively assessed ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 391 2.0 393 2.6 414 3.6 Total non-performing loansÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 19,280 100.0% 15,311 100.0% 11,565 100.0%

Distribution of Allowance for Impairment Losses by Loan ClassiÑcation The following table sets forth, as of the dates indicated, the allocation of our allowance for impairment losses by loan classiÑcation category.

As of December 31, 2004 2005 2006 % of Allowance % of Allowance % of Allowance Amount total to loans(1) Amount total to loans(1) Amount total to loans(1) (in millions of RMB, except percentages) Performing loans ÏÏÏÏÏÏÏÏÏÏ 2,260 15.1% 0.79% 2,383 19.5% 0.67% 2,663 27.2% 0.59% Substandard ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 699 4.7 19.65 495 4.1 18.44 472 4.8 23.83 Doubtful ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,592 37.4 60.03 5,507 45.0 62.71 4,471 45.7 60.39 Loss ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,407 42.8 100.00 3,845 31.4 100.00 2,180 22.3 100.00 Total allowance ÏÏÏÏÏÏÏÏÏ 14,958 100.0% 4.87% 12,230 100.0% 3.30% 9,786 100.0% 2.11%

(1) Calculated by dividing the amount of the allowance for impairment losses on loans in each category by the total amount of loans in that category.

206 ASSETS AND LIABILITIES

The following table sets forth, as of the dates indicated, the allocation of our allowance for impairment losses by product type and by loan classiÑcation category. As of December 31, 2004 2005 2006 % of Allowance % of Allowance % of Allowance Amount total to loans(1) Amount total to loans(1) Amount total to loans(1) (in millions of RMB, except percentages) Corporate loans Performing loansÏÏÏÏÏÏ 2,087 13.9% 0.88% 2,187 17.9% 0.82% 2,540 25.9% 0.71% SubstandardÏÏÏÏÏÏÏÏÏÏ 637 4.3 18.51 469 3.9 17.84 433 4.4 22.85 DoubtfulÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,443 36.4 60.19 5,319 43.5 62.91 4,262 43.6 60.10 Loss ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,405 42.8 100.00 3,834 31.3 100.00 2,164 22.1 100.00 Subtotal ÏÏÏÏÏÏÏÏÏÏÏ 14,572 97.4% 5.68% 11,809 96.6% 4.18% 9,399 96.0% 2.55% Discounted bills Performing loansÏÏÏÏÏÏ 41 0.3% 0.22% 41 0.3% 0.08% 39 0.4% 0.09% SubstandardÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì Ì Ì Ì Ì Ì Ì DoubtfulÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì Ì Ì Ì Ì Ì Ì Loss ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì Ì Ì Ì Ì Ì Ì Subtotal ÏÏÏÏÏÏÏÏÏÏÏ 41 0.3% 0.22% 41 0.3% 0.08% 39 0.4% 0.09% Personal loans Performing loansÏÏÏÏÏÏ 132 0.9% 0.42% 155 1.3% 0.41% 84 0.9% 0.18% SubstandardÏÏÏÏÏÏÏÏÏÏ 62 0.4 53.45 26 0.2 46.43 39 0.4 45.35 DoubtfulÏÏÏÏÏÏÏÏÏÏÏÏÏ 149 1.0 54.58 188 1.5 57.67 209 2.1 66.99 Loss ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2 0.0 100.00 11 0.1 100.00 16 0.2 100.00 Subtotal ÏÏÏÏÏÏÏÏÏÏÏ 345 2.3% 1.09% 380 3.1% 1.00% 348 3.6% 0.72% Total allowance ÏÏÏÏ 14,958 100.0% 4.87% 12,230 100.0% 3.30% 9,786 100.0% 2.11%

(1) Calculated by dividing the amount of the allowance for impairment losses on loans in each category by the total amount of loans in that category.

Distribution of Allowance for Impairment Losses for Individually-assessed Impaired Corporate Loans by Legal Form of Borrowers The following table sets forth, as of the dates indicated, the distribution of allowance for impairment losses for individually-assessed impaired corporate loans by legal form of borrowers.

As of December 31, 2004 2005 2006 % of % of % of Amount total Amount total Amount total (in millions of RMB, except percentages) Joint-stock enterprises ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,707 37.7% 3,976 41.3% 3,378 49.2% State-owned enterprisesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,994 32.0 2,747 28.5 1,485 21.7 Foreign invested enterprises ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,302 18.5 2,013 20.9 1,385 20.2 Private enterprises ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 405 3.2 277 2.9 330 4.8 Collectively-controlled enterprises ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 879 7.0 365 3.8 185 2.7 Others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 198 1.6 244 2.6 96 1.4 Total allowance for impaired corporate loans ÏÏÏÏ 12,485 100.0% 9,622 100.0% 6,859 100.0%

207 ASSETS AND LIABILITIES

Changes to the Allowance for Impairment Losses The following table sets forth, for the periods indicated, the changes to the allowance for impairment losses on loans and advances to customers. Amount (in millions of RMB) As of December 31, 2003 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 16,774 Charge for the year(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,589 Unwinding of discount(2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (307) Transfers out(3) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (73) Write-oÅs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (3,035) Recoveries of loans and advances previously written oÅ ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10 As of December 31, 2004 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 14,958 Charge for the year(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,055 Unwinding of discount(2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (275) Transfers out(3) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (6) Write-oÅs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (3,519) Recoveries of loans and advances previously written oÅ ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 17 As of December 31, 2005 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 12,230 Charge for the year(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,535 Unwinding of discount(2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (210) Transfers out(3) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (207) Write-oÅs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (3,685) Recoveries of loans and advances previously written oÅ ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 123 As of December 31, 2006 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9,786

(1) Represents the amount of the net allowance for impairment losses recognized in our consolidated income statement. (2) Represents the amount of increase in the present value of a loan after impairment that is due to the passage of time, which we recognize as interest income. (3) Consists of releases from the allowance for impairment losses resulting from the transfer of loan assets to repossessed assets. The following table sets forth, for the periods indicated, our charge for the period by product type. For the year ended December 31, 2004 2005 2006 (in millions of RMB) Corporate loans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,561 1,019 1,557 Discounted billsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (53) Ì (2) Personal loans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 81 36 (20) Total charge for the period ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,589 1,055 1,535

208 ASSETS AND LIABILITIES

The following table sets forth, for the periods indicated, the components of the net provision for impairment losses on our corporate loans. For the year ended December 31, 2004 2005 2006 (in millions of RMB) Net provision (write-back) for non-performing corporate loans(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,127 919 1,203 Provision for performing corporate loans(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 434 100 354 Charge for the period(2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,561 1,019 1,557

(1) Represents additions to the allowance for such loans net of releases from the allowance.

(2) Represents the net provision for impairment losses on corporate loans.

Our allowance for impairment losses decreased to RMB 9,786 million as of December 31, 2006 from RMB 12,230 million as of December 31, 2005, which decreased from RMB 14,958 million as of December 31, 2004. The most signiÑcant item aÅecting the change in our allowance for impairment losses in 2006, 2005 and 2004 was the reduction of the allowance resulting from loan write-oÅs in these periods.

Charge for 2006 increased by RMB 480 million to RMB 1,535 million from RMB 1,055 million in 2005 primarily due to an increase in the charge for our corporate loans. Charge for corporate loans increased from 2005 to 2006 due to a combination of an increase of RMB 284 million in net provision for non-performing corporate loans and an increase of RMB 254 million in charge for performing corporate loans. The increase in net provision for non-performing corporate loans from 2005 to 2006 reÖected increasing diÇculties in recovering existing non-performing loans. The increase in provision for performing corporate loans was primarily due to an increase in newly extended corporate loans in 2006 compared to 2005.

Charge in 2005 decreased by RMB 534 million to RMB 1,055 million from RMB 1,589 million in 2004 primarily due to a decrease in the charge on our corporate loans. Charge for corporate loans decreased from 2004 to 2005 due to a combination of a decrease in provision for performing corporate loans and a decrease in net provision for non-performing corporate loans during the same period. Provision for performing corporate loans decreased from 2004 to 2005 primarily due to the decrease in the amount of performing corporate loans extended during the same period. Net provision for non-performing corporate loans decreased from 2004 to 2005 primarily due to the increase in write-backs as a result of loan recoveries from 2004 to 2005.

The coverage ratios of our total allowance for impairment losses to total non-performing loans and to total loans to customers were 84.6% and 2.1%, respectively, as of December 31, 2006, compared to 79.9% and 3.3%, respectively, as of December 31, 2005 and 77.6% and 4.9%, respectively, as of December 31, 2004.

209 ASSETS AND LIABILITIES

Distribution of Allowance for Impairment Losses by Product Type The following table sets forth, as of the dates indicated, the allowance for impairment losses on loans by product type.

As of December 31, 2004 2005 2006 Allowance Allowance Allowance % of to % of to % of to Amount total NPLs(1) Amount total NPLs(1) Amount total NPLs(1) (in millions of RMB, except percentages) Corporate loans Short-term loansÏÏÏÏÏÏÏÏÏÏÏÏÏ 11,128 74.4% 78.64% 8,635 70.6% 76.69% 7,298 74.6% 79.15% Medium- and long-term loans 3,444 23.0 72.67 3,174 26.0 86.75 2,101 21.4 108.80 Total corporate loans ÏÏÏÏÏÏ 14,572 97.4% 77.15% 11,809 96.6% 79.16% 9,399 96.0% 84.29% Discounted bills ÏÏÏÏÏÏÏÏÏÏÏÏÏ 41 0.3% Ì 41 0.3% Ì 39 0.4% Ì Personal loans Residential mortgage loans ÏÏÏÏ 97 0.6% 68.79% 81 0.7% 94.19% 59 0.6% 60.82% Individual commercial loans ÏÏÏ 204 1.4 110.27 243 2.0 105.65 211 2.2 95.05 Personal consumption loans ÏÏÏ 21 0.1 61.76 25 0.2 64.10 45 0.5 102.27 Personal automobile loansÏÏÏÏÏ 12 0.1 54.55 13 0.1 56.52 4 0.0 14.81 Credit card advances ÏÏÏÏÏÏÏÏÏ 11 0.1 122.22 18 0.1 120.00 24 0.2 100.00 Education loans ÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì Ì Ì Ì 5 0.1 0.00 SubtotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 345 2.3% 88.24% 380 3.1% 96.69% 348 3.6% 84.06% Total allowance ÏÏÏÏÏÏÏÏÏÏÏ 14,958 100.0% 77.58% 12,230 100.0% 79.88% 9,786 100.0% 84.62%

(1) Calculated by dividing the amount of the allowance for impairment losses on loans in each category by the amount of non- performing loans in that category. The following table sets forth, as of the dates indicated, the distribution by product type of our allowance for impairment losses on loans that were collectively assessed for impairment. See ""Ì Allowance for Impairment Losses on Loans and Advances to Customers Ì Individual and Collective Assessment on Loans''.

As of December 31, 2004 2005 2006 % of % of % of Amount total Amount total Amount total (in millions of RMB, except percentages) Corporate loans Short-term loansÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,186 48.0% 1,320 50.6% 1,491 50.9% Medium- and long-term loans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 901 36.4 867 33.2 1,049 35.9 Total corporate loans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,087 84.4% 2,187 83.8% 2,540 86.8% Discounted bills ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 41 1.7% 41 1.6% 39 1.3% Personal loans Residential mortgage loans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 97 3.9 81 3.1 59 2.0 Individual commercial loans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 204 8.3 243 9.3 211 7.2 Personal consumption loans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 21 0.8 25 1.0 45 1.6 Personal automobile loans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 12 0.5 13 0.5 4 0.1 Credit card advances ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11 0.4 18 0.7 24 0.8 Education loans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì Ì 5 0.2 Subtotal ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 345 13.9% 380 14.6% 348 11.9% Total allowance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,473 100.0% 2,608 100.0% 2,927 100.0%

210 ASSETS AND LIABILITIES

Distribution of Allowance for Impairment Losses for Corporate Loans by Industry The following table sets forth, as of the dates indicated, the allowance for impairment losses for our corporate loans by industry.

As of December 31, 2004 2005 2006 Allowance Allowance Allowance % of to % of to % of to Amount total NPLs(1) Amount total NPLs(1) Amount total NPLs(1) (in millions of RMB, except percentages) Manufacturing Iron and steel ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 71 0.5% 42.01% 98 0.8% 81.66% 111 1.2% 1,850.00% Telecommunications equipment, software and other electronic equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 239 1.7 63.56 297 2.5 63.87 390 4.2 77.23 Transportation equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 217 1.5 84.10 267 2.3 58.81 216 2.3 67.92 Textile ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 385 2.6 70.26 424 3.6 68.60 362 3.8 66.18 Others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,019 20.7 81.09 2,710 23.0 80.08 2,359 25.1 69.30 SubtotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,931 27.0% 77.47% 3,796 32.2% 75.30% 3,438 36.6% 71.92% Production and supply of electric power, gas and water ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 254 1.7% 325.64% 217 1.8% 197.27% 278 3.0% 1,737.50% Transportation, storage and post service ÏÏÏÏÏÏÏÏÏÏ 621 4.3 99.36 545 4.6 104.21 343 3.6 219.87 Wholesale and RetailÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,532 24.2 81.63 2,221 18.8 75.14 1,795 19.1 75.33 Real estate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,866 12.8 61.69 1,594 13.5 70.10 926 9.9 69.62 Water, environment and public utility management 198 1.4 450.00 213 1.8 887.50 232 2.4 1,288.89 Rent and business services ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,188 8.2 85.84 1,119 9.5 93.02 831 8.8 100.24 Construction ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 222 1.5 170.77 143 1.2 110.85 178 1.9 370.83 FinancingÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 525 3.6 57.38 333 2.8 93.80 104 1.1 43.33 Public management and social organizations ÏÏÏÏÏÏ 127 0.9 113.39 144 1.2 135.85 112 1.2 109.80 Others(2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,108 14.4 66.39 1,484 12.6 67.55 1,162 12.4 93.03 Total allowance for corporate loans ÏÏÏÏÏÏÏÏÏÏÏÏ 14,572 100.0% 77.15% 11,809 100.0% 79.16% 9,399 100.0% 84.29%

(1) Calculated by dividing the amount of the allowance for impairment losses on loans in each category by the amount of non- performing loans in that category. (2) Primarily consists of farming, forestry, husbandry and Ñshing, mining, hotels and restaurants, residential services, education, health care, social security and social welfare, culture, sports and entertainment, telecommunications, and international organizations. Also includes loans extended by our Hong Kong operations. As a result of the higher non-performing loan ratios that we experienced in real estate and textile industries, we have extended less unsecured loans in these industries, and have requested security of greater value from borrowers. As we are expecting higher than average recovery value from security, our allowance to non-performing loan ratios in these two industries have been lower than average. See ""Ì Loans and Advances to Customers Ì Distribution of Corporate Non-performing Loans by Industry''.

211 ASSETS AND LIABILITIES

The following table sets forth, as of the dates indicated, the distribution by industry of our allowance for impairment losses on corporate loans that were collectively assessed for impairment. See ""Ì Allowance for Impairment Losses on Loans and Advances to Customers Ì Individual and Collective Assessment on Loans''.

As of December 31, 2004 2005 2006 % of % of % of Amount total Amount total Amount total (in millions of RMB, except percentages) Manufacturing Iron and steel ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 59 2.8% 73 3.3% 107 4.2% Telecommunications equipment, software and other electronic equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 46 2.2 61 2.8 63 2.5 Transportation equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 73 3.5 82 3.8 67 2.6 Textile ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 36 1.7 46 2.1 47 1.9 Others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 323 15.5 362 16.5 427 16.8 Subtotal ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 537 25.7% 624 28.5% 711 28.0% Production and supply of electric power, gas and water ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 179 8.6% 211 9.7% 271 10.7% Transportation, storage and post service ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 162 7.8 170 7.8 240 9.4 Wholesale and retailÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 168 8.0 197 9.0 216 8.5 Real estate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 277 13.3 197 9.0 206 8.1 Water, environment and public utility managementÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 191 9.1 206 9.4 229 9.0 Rent and business services ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 107 5.1 113 5.2 187 7.4 Construction ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 129 6.2 102 4.7 153 6.0 FinancingÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 78 3.7 91 4.2 38 1.5 Public management and social organizations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 36 1.7 47 2.2 66 2.6 Others(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 223 10.8 229 10.3 223 8.8 Total allowance for corporate loans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,087 100.0% 2,187 100.0% 2,540 100.0%

(1) Primarily consists of farming, forestry, husbandry and Ñshing, mining, hotels and restaurants, residential services, education, health care, social security and social welfare, culture, sports and entertainment, telecommunications, and international organizations. Also includes loans extended by our Hong Kong operations.

Distribution of Allowance for Impairment Losses by Geographical Region The following table sets forth, as of the dates indicated, the allocation of our allowance for impairment losses by geographical region.

As of December 31, 2004 2005 2006 Allowance Allowance Allowance % of to % of to % of to Amount total NPLs(1) Amount total NPLs(1) Amount total NPLs(1) (in millions of RMB, except percentages) Yangtze River Delta ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,865 12.5% 125.08% 1,132 9.3% 122.38% 1,120 11.4% 148.15% Bohai Rim(2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,817 38.8 70.62 4,739 38.8 78.60 3,882 39.7 76.25 Pearl River Delta and West Strait ÏÏÏÏ 6,244 41.8 76.18 5,121 41.8 79.19 3,257 33.3 81.90 Central ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 446 3.0 106.44 637 5.2 84.48 768 7.8 94.12 Western ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 378 2.5 63.74 420 3.4 63.64 467 4.8 93.96 Northeastern ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 207 1.4 60.17 180 1.5 37.82 291 3.0 67.99 Hong Kong ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1 0.0 0.00 1 0.0 0.00 1 0.0 0.00 Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 14,958 100.0% 77.58% 12,230 100.0% 79.88% 9,786 100.0% 84.62%

(1) Calculated by dividing the amount of the allowance for impairment losses on loans in each region by the amount of non-performing loans in that region. (2) Includes the head oÇce.

212 ASSETS AND LIABILITIES

The following table sets forth, as of the dates indicated, the distribution by geographic region of our allowance for impairment losses on loans that were collectively assessed for impairment. See ""Ì Allowance for Impairment Losses on Loans and Advances to Customers Ì Individual and Collective Assessment on Loans''.

As of December 31, 2004 2005 2006 % of % of % of Amount total Amount total Amount total (in millions of RMB, except percentages) Yangtze River Delta ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 784 31.7% 754 28.9% 863 29.5% Bohai Rim(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 818 33.1 908 34.8 967 33.0 Pearl River Delta and West Strait ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 378 15.3 402 15.4 451 15.4 Central ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 206 8.3 254 9.8 272 9.3 Western ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 212 8.6 221 8.5 267 9.1 Northeastern ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 74 3.0 68 2.6 106 3.7 Hong KongÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1 0.0 1 0.0 1 0.0 Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,473 100.0% 2,608 100.0% 2,927 100.0%

(1) Includes the head oÇce.

Investments Our investment portfolio consists of listed and unlisted Renminbi- and foreign currency-denominated securities. The following table sets forth our investment securities by currency as of the dates indicated.

As of December 31, 2004 2005 2006 % of % of % of Amount total Amount total Amount total (in millions of RMB, except percentages) RMB-denominated securities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 75,752 68.3% 69,327 66.4% 72,569 69.5% Foreign currency-denominated securities US dollarÏÏÏÏÏÏÏÏ 24,052 21.7 28,266 27.1 26,321 25.2 Other currencies ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11,099 10.0 6,823 6.5 5,534 5.3 Subtotal ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 35,151 31.7 35,089 33.6 31,855 30.5 Total investment securities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 110,903 100.0% 104,416 100.0% 104,424 100.0%

Investments represented 14.8%, 17.6% and 22.4% of our total assets as of December 31, 2006, 2005 and 2004, respectively. We classify our investment portfolio into (i) held-to-maturity, (ii) available-for-sale, and (iii) debt securities at fair value through proÑt or loss (primarily consisting of debt securities held for trading purposes), primarily based on our intentions with respect to these securities. The following table sets forth, as of the dates indicated, the components of our investment portfolio.

As of December 31, 2004 2005 2006 % of % of % of Amount total Amount total Amount total (in millions of RMB, except percentages) Held-to-maturity debt securitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 61,370 55.4% 67,727 64.9% 68,196 65.3% Available-for-sale debt securities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 40,411 36.4 31,564 30.2 31,166 29.9 Debt securities at fair value through proÑt or loss ÏÏÏÏÏÏÏÏÏ 8,784 7.9 4,813 4.6 4,725 4.5 Total debt securitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 110,565 99.7% 104,104 99.7% 104,087 99.7% Available-for-sale equity securitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 338 0.3% 312 0.3% 337 0.3% Total investment securities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 110,903 100.0% 104,416 100.0% 104,424 100.0%

213 ASSETS AND LIABILITIES

Debt securities As of December 31, 2004 2005 2006 % of % of % of Amount total Amount total Amount total (in millions of RMB, except percentages) Government ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 32,629 29.5% 26,162 25.1% 23,106 22.2% PBOC ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 34,055 30.8 27,417 26.4 23,721 22.8 Policy banks ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 17,987 16.3 18,660 17.9 24,917 23.9 Banks and other Ñnancial institutions ÏÏÏÏÏÏÏÏÏ 11,223 10.2 15,428 14.8 15,650 15.1 Public sector entities outside mainland China ÏÏ 10,305 9.3 9,172 8.8 8,988 8.6 Corporate entitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,366 3.9 7,265 7.0 7,705 7.4 Total debt instrumentsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 110,565 100.0% 104,104 100.0% 104,087 100.0%

As of December 31, 2004 2005 2006 % of % of % of Amount total Amount total Amount total (in millions of RMB, except percentages) PRCÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 77,561 70.1% 71,616 68.8% 74,760 71.8% Outside PRC ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 33,004 29.9 32,488 31.2 29,327 28.2 Total debt instrumentsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 110,565 100.0% 104,104 100.0% 104,087 100.0%

Maturity ProÑle of Investment Portfolio The following table sets forth, as of December 31, 2006, our debt investments by remaining maturity. As of December 31, 2006 Due Due Due less between between Due more than 3 to 1 to than 3 months 12 months 5 years 5 years Total (in millions of RMB) Governments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,613 6,120 12,070 3,066 23,869 PBOCÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,913 17,867 939 0 23,719 Policy banks ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,169 5,254 9,914 4,824 24,161 Banks and other Ñnancial institutionsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,191 695 6,133 6,475 15,494 Foreign public sector entitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0 234 2,599 6,155 8,988 Legal person entity ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,302 5,134 720 700 7,856 Total debt instruments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 15,188 35,304 32,375 21,220 104,087

Carrying Value and Market Value All investment securities classiÑed as available-for-sale and debt securities at fair value through proÑt or loss are stated at market value. The following table sets forth, as of the dates indicated, the carrying value and the market value or fair value of the held-to-maturity securities in our investment portfolio.

As of December 31, 2004 2005 2006 Carrying Market/fair Carrying Market/fair Carrying Market/fair value value value value value value (in millions of RMB) Held-to-maturity securities ÏÏÏÏÏÏÏÏ 61,370 61,272 67,727 68,068 68,196 68,453

214 ASSETS AND LIABILITIES

Equity Securities As of December 31, 2006, our available for sale equity securities consisted of (i) RMB 267 million in equity securities held by China Investment and Finance Limited our subsidiary in which we hold a 95% interest; and (ii) RMB 70 million in equity securities of China UnionPay.

Investment Concentration The following table sets forth, as of December 31, 2006, our ten largest holdings of investment securities.

As of December 31, 2006 % of total % of total Carrying investment shareholders' Market/fair Issuer value portfolio equity(1) value (in millions of RMB, except percentages) Investment A ÏÏÏÏÏÏÏÏÏÏÏÏ PBOC 4,465 4.3% 14.1% 4,465 Investment B ÏÏÏÏÏÏÏÏÏÏÏÏ US Government 3,287 3.2 10.4 3,274 Investment C ÏÏÏÏÏÏÏÏÏÏÏÏ PBOC 2,923 2.8 9.2 2,923 Investment D ÏÏÏÏÏÏÏÏÏÏÏÏ MOF 2,439 2.3 7.7 2,439 Investment E ÏÏÏÏÏÏÏÏÏÏÏÏ PBOC 1,991 1.9 6.3 1,991 Investment F ÏÏÏÏÏÏÏÏÏÏÏÏ FNMA 1,786 1.7 5.6 1,787 Investment G ÏÏÏÏÏÏÏÏÏÏÏÏ China Development Bank(2) 1,597 1.5 5.0 1,597 Investment HÏÏÏÏÏÏÏÏÏÏÏÏ China Development Bank(2) 1,475 1.4 4.7 1,475 Investment IÏÏÏÏÏÏÏÏÏÏÏÏÏ PBOC 1,304 1.3 4.1 1,304 Investment J ÏÏÏÏÏÏÏÏÏÏÏÏ MOF 1,270 1.2 4.0 1,270 Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 22,537 21.6% 71.1% 22,525

(1) For a calculation of our total shareholders' equity, see ""Financial Information Ì Capital Resources Ì Shareholders' Equity.'' (2) A policy bank wholly owned by the PRC Government.

Other Components of Our Assets In addition to loans and advances to customers and investment securities, other components of our assets primarily include (i) cash and balances with central bank, (ii) amounts due from banks and other Ñnancial institutions and (iii) other assets, such as property and equipment, deferred tax assets and certain receivables. Cash and balances with central bank primarily consist of cash, statutory deposit reserves, surplus deposit reserves and balances under reverse repurchase agreements with the PBOC. Statutory deposit reserves represent the minimum level of cash deposits that we are required to maintain at the PBOC. The minimum level is determined as a percentage of our deposits from customers (as deÑned by the PBOC). Surplus deposit reserves are deposits with the PBOC, in excess of statutory deposit reserves, part of which we maintain for settlement purposes. See ""Regulation and Supervision Ì PRC Regulation and Supervision Ì Operating Requirements Ì Statutory Deposit Reserve and Surplus Deposit Reserve.'' The amount of cash and balances with central bank increased by 7.3% to RMB 90,620 million as of December 31, 2006 from RMB 84,453 million as of December 31, 2005, which increased by 55.7% from RMB 54,253 million as of December 31, 2004. Amounts due from banks and other Ñnancial institutions primarily consist of inter-bank placements and balances under reverse repurchase agreements. Amounts due from banks and other Ñnancial institutions, net of allowance for impairment losses, increased by 37.9% to RMB 43,250 million as of December 31, 2006 from RMB 31,352 million as of December 31, 2005, which increased by 50.0% from RMB 20,899 million as of December 31, 2004. Other assets include, among other things, property and equipment, deferred tax assets, and certain receivables. The amount of other assets decreased by 8.0% to RMB 15,048 million as of December 31, 2006 from RMB 16,351 million as of December 31, 2005, which decreased by 6.4% from RMB 17,469 million as of December 31, 2004.

215 ASSETS AND LIABILITIES

LIABILITIES AND SOURCES OF FUNDS The following table sets forth, as of the dates indicated, the components of our total liabilities.

As of December 31, 2004 2005 2006 % of % of % of Amount total Amount total Amount total (in millions of RMB, except percentages) Deposits from customersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 435,020 89.8% 530,573 92.9% 618,412 91.6% Amounts due to banks and other Ñnancial institutionsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 38,190 7.9 28,021 4.9 36,166 5.4 Subordinated debt/bonds issuedÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,000 1.2 6,000 1.0 12,000 1.8 Other liabilities(1)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,472 1.1 6,783 1.2 8,451 1.2 Total liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 484,682 100.0% 571,377 100.0% 675,029 100.0%

(1) Consists of amounts due to central banks, current tax liabilities, deferred tax liabilities, and other liabilities and provisions. As of December 31, 2006, our total liabilities amounted to RMB 675,029 million, which increased by 18.1% from RMB 571,377 million as of December 31, 2005, which increased by 17.9% from RMB 484,682 million as of December 31, 2004. Deposits from customers have historically been the largest component of our total liabilities, representing 91.6%, 92.9% and 89.8% of total liabilities as of December 31, 2006, 2005 and 2004, respectively. Amounts due to banks and other Ñnancial institutions, as a percentage of total liabilities, decreased to 5.4% as of December 31, 2006 from 7.9% as of December 31, 2004. The deposits from CITIC Group and its subsidiaries as a percentage to our total deposits were 0.8%, 1.2% and 0.9% as of December 31, 2006, 2005 and 2004, respectively. The amounts due to CITIC Group and its subsidiaries as a percentage of our total amounts due to banks and other Ñnancial institutions were 30.3%, 3.7% and 6.0% as of December 31, 2006, 2005 and 2004, respectively. The signiÑcant increase in the percentage of amounts due to CITIC Group and its subsidiaries as a percentage of the total amounts due to banks and other Ñnancial institutions from 2005 to 2006 was due to a signiÑcant increase in deposits due to one of CITIC Group's subsidiary, a non-bank Ñnancial institution, during the same period.

Deposits from Customers We provide demand and time deposit products to corporate and retail customers. The following table sets forth, as of the dates indicated, the deposits from customers by product type and customer type.

As of December 31, 2004 2005 2006 % of % of % of Amount total Amount total Amount total (in millions of RMB, except percentages) Corporate deposits DemandÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 179,106 41.2% 232,933 43.9% 260,971 42.2% Time ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 208,140 47.8 226,388 42.7 251,580 40.7 Negotiated ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 51,350 11.8 48,180 9.1 46,080 7.5 Non-negotiatedÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 156,790 36.0 178,208 33.6 205,500 33.2 Subtotal ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 387,246 89.0% 459,321 86.6% 512,551 82.9% Personal deposits DemandÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,811 1.6% 10,110 1.9% 26,053 4.2% Time ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 40,963 9.4 61,142 11.5 79,808 12.9 Subtotal ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 47,774 11.0% 71,252 13.4% 105,861 17.1% Total deposits from customersÏÏÏÏÏÏÏÏÏÏÏ 435,020 100.0% 530,573 100.0% 618,412 100.0%

216 ASSETS AND LIABILITIES

Our total deposits from customers increased by 16.6% to RMB 618,412 million as of December 31, 2006 from RMB 530,573 million as of December 31, 2005, which increased by 22.0% from RMB 435,020 million as of December 31, 2004. Personal deposits, as a percentage of our total deposits, increased to 17.1% as of December 31, 2006 from 11.0% as of December 31, 2004, reÖecting our eÅorts to expand our personal banking business and in line with the general growth in the level of personal wealth in China. In addition, our corporate negotiated deposits decreased by RMB 5,270 million to RMB 46,080 million as of December 31, 2006 from RMB 51,350 million as of December 31, 2004, primarily due to our eÅorts to reduce our corporate negotiated deposits since 2005, which had a higher average cost than overall corporate deposits. We did not accept new negotiated deposits in 2005 and 2006.

Distribution of Deposits by Currency

The following table sets forth, as of the dates indicated, the deposits from customers by currency. As of December 31, 2004 2005 2006 % of % of % of Amount total Amount total Amount total (in millions of RMB, except percentages) RMB-denominated Corporate deposits ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 351,053 80.7% 402,499 75.9% 468,864 75.8% Personal deposits ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 40,463 9.3 60,569 11.4 93,242 15.1 Subtotal ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 391,516 90.0% 463,068 87.3% 562,106 90.9% Foreign currency-denominated Corporate deposits ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 36,193 8.3% 56,822 10.7% 43,687 7.1% Personal deposits ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,311 1.7 10,683 2.0 12,619 2.0 Subtotal ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 43,504 10.0% 67,505 12.7% 56,306 9.1% Total deposits from customersÏÏÏÏÏÏÏÏÏÏÏÏÏ 435,020 100.0% 530,573 100.0% 618,412 100.0%

Our RMB-denominated deposits increased by 21.4% to RMB 562,106 million as of December 31, 2006 from RMB 463,068 million as of December 31, 2005, which increased by 18.3% from RMB 391,516 million as of December 31, 2004. Our foreign currency-denominated deposits decreased by 16.6% to RMB 56,306 million as of December 31, 2006 from RMB 67,505 million as of December 31, 2005, which increased by 55.2% from RMB 43,504 million as of December 31, 2004. In particular, our foreign currency- denominated personal deposits increased by 46.1% to RMB 10,683 million as of December 31, 2005 from RMB 7,311 million as of December 31, 2004. A majority of our foreign currency-denominated deposits are denominated in U.S. dollars.

217 ASSETS AND LIABILITIES

Distribution of Deposits by Geographical Region We classify deposits geographically based on the location of the branch taking the deposit. There is generally a high correlation between the location of the depositor and the location of the branch taking the deposit. The following table sets forth, as of the dates indicated, the distribution of our deposits from customers by geographical region. As of December 31, 2004 2005 2006 % of % of % of Amount total Amount total Amount total (in millions of RMB, except percentages) Bohai Rim(1)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 168,285 38.6% 208,142 39.3% 218,259 35.3% Yangtze River Delta ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 127,269 29.2 146,579 27.6 179,751 29.1 Pearl River Delta and West StraitÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 59,003 13.6 72,855 13.7 89,082 14.4 Central ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 32,420 7.5 47,214 8.9 59,844 9.7 WesternÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 34,250 7.9 39,204 7.4 48,181 7.8 NortheasternÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13,793 3.2 16,579 3.1 23,295 3.7 Total deposits from customers ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 435,020 100.0% 530,573 100.0% 618,412 100.0%

(1) Includes the head oÇce.

Distribution of Deposits by Remaining Maturity The following table sets forth, as of December 31, 2006, the distribution of our deposits from customers by remaining maturity.

As of December 31, 2006 Overdue/repayable Due less than Due between 3 to Due between 1 to Due more than on demand 3 months 12 months 5 years 5 years Undated Total % of % of % of % of % of % of % of total total total total total total total Amount deposits Amount deposits Amount deposits Amount deposits Amount deposits Amount deposits Amount deposits (in millions of RMB, except percentages) Corporate deposits ÏÏÏ 266,806 43.1% 118,226 19.1% 88,117 14.2% 35,785 5.8% 3,617 0.6% Ì Ì 512,551 82.8% Personal depositsÏÏÏÏÏ 26,278 4.3 41,901 6.8 31,533 5.1 6,092 1.0 57 0.0 Ì Ì 105,861 17.2 Total deposits from customersÏÏÏÏÏÏÏ 293,084 47.4% 160,127 25.9% 119,650 19.3% 41,877 6.8% 3,674 0.6% Ì Ì 618,412 100.0%

Subordinated Debt/Bonds In accordance with approvals of the CBRC and the PBOC, we issued a series of subordinated debt in 2004 and a series of subordinated bonds in 2006, each with an aggregate face value of RMB 6.0 billion. The 2004 series of subordinate debt consisted of four tranches maturing from June 2010 to September 2010, with three tranches bearing an interest rate of the PBOC one-year Ñxed deposit rate plus an interest margin of 2.72% and the remaining tranche bearing an interest rate of the PBOC one-year Ñx deposit rate plus an interest margin of 2.60%. The 2006 series of subordinated bonds consisted of two tranches. One tranche, with a face value of RMB 2.0 billion, matures in June 2021, and bears an interest rate of 4.12%. We have an option to redeem this tranche on June 22, 2016. If we do not exercise such option, the interest rate will increase to 7.12% commencing in June 2016. The other tranche, with a face value of RMB 4.0 billion, matures in June 2016, and bears an interest rate of 3.75%. We have an option to redeem this tranche on June 22, 2011. If we do not exercise such option, the interest rate will increase to 6.75% commencing in June 2011.

218 ASSETS AND LIABILITIES

Other Liabilities In addition to customer deposits and subordinated debt/bonds issued, our total liabilities include amounts due to banks and other Ñnancial institutions, amounts due to central banks, current tax liabilities, deferred tax liabilities and other liabilities and provisions. As of December 31, 2006, 2005 and 2004, the aggregate amounts of our liabilities other than deposits from customers, subordinated debt and subordinated bonds were RMB 44,617 million, RMB 34,804 million and RMB 43,662 million, respectively, representing 6.6%, 6.1% and 9.0%, respectively, of our total liabilities as of such dates.

219 FINANCIAL INFORMATION

You should read the discussion and analysis set forth in this section in conjunction with Appendix I LR 11.07 ""Accountants' Report'', which has been prepared in accordance with IFRS, Appendix II ""Unaudited CO 3rd Sch(1)3 Supplementary Financial Information'' and Appendix III ""Unaudited Pro Forma Financial Information'', in each case together with the accompanying notes. For further details on presentation of our Ñnancial information, see ""Summary Ì Summary Financial Information Ì Basis of Presentation of Our Financial Information''. Capital adequacy ratios discussed in this section are calculated in accordance with applicable CBRC guidelines and based on PRC GAAP Financial information. The capital adequacy ratios discussed in this section are not part of the Accountants' Report and have not been audited. The following discussion and analysis contain forward-looking statements that involve risks and uncertainties. Our actual results may diÅer from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth in ""Forward-looking Statements'' and ""Risk Factors''.

OVERVIEW (1) We were the seventh largest commercial bank in China in terms of total assets . For the year ended App 1A 28(1)(a) December 31, 2006, our operating income was RMB 17,927 million. As of December 31, 2006, we had RMB App 1A 34(1)(a) 706,723 million in total assets. We provide a comprehensive range of commercial banking products and services. Our operating income primarily consists of net interest income and net fee and commission income. Our net interest income is primarily derived from loan products oÅered by our corporate and personal banking segments, with additional net interest income from our investments and our treasury operations. Our net fee and commission income is primarily derived from fee- and commission-based products, such as settlement services, guarantee services, short-term commercial papers underwriting and credit cards.

TRENDS AFFECTING OUR RESULTS OF OPERATIONS China's Economic Condition Our results of operations and Ñnancial condition are signiÑcantly aÅected by China's economic conditions and the economic measures undertaken by the PRC Government. China has experienced rapid economic growth over the past two decades largely as a result of the PRC Government's extensive economic reforms, which have focused on transforming China's centrally planned economy to a more market-based economy. The growth of China's overall economy has led to increased corporate activities. As banks have historically been, and will continue to be, a signiÑcant source of capital for companies in China, the growth in corporate activities has contributed to growth in corporate banking businesses at PRC banks. China's economic growth has also led to signiÑcant increases in personal wealth. Increased levels of personal wealth, coupled with China's relatively high savings rate, have led to a rapid growth in China's personal banking industry. The PRC Government has from time to time implemented a series of macroeconomic policies, including raising the benchmark interest rates, increasing the PBOC statutory deposit reserve ratio applicable to banks and imposing commercial bank lending guidelines that had the eÅect of restricting loan extension to certain industries and otherwise aÅecting the growth of PRC banks.

Competition in China's Banking Sector China's banking industry has become increasingly competitive. We face competition from other PRC commercial banks, including the Big Four commercial banks, other national and local commercial banks, and foreign-invested Ñnancial institutions. Many of these commercial banks, including the Big Four commercial banks, compete with us in substantially the same markets for loan, deposit and non-interest

(1) Based on relevant data as of December 31, 2005 because the relevant data of certain PRC commercial banks as of December 31, 2006 were not available as of the Latest Practical Date.

220 FINANCIAL INFORMATION income products and services customers. In addition, as a result of PRC's entry into the WTO, many foreign banks have opened branches in the PRC or invested in PRC commercial banks, and we expect their reach in China to continue to expand. Moreover, the Closer Economic Partnership Agreement between Mainland China and Hong Kong has enabled smaller Hong Kong banks to establish their presence in the PRC. While the presence of foreign and Hong Kong banks in the PRC is still limited, their continuing expansion in China will result in increasing competition in China's banking market.

Interest Rate Environment Historically, interest rates on deposits and loans were set by, and subject to restrictions established by, the PBOC. In recent years, as part of the overall reform of the banking system, the PBOC has implemented a series of initiatives designed to gradually liberalize interest rates and move towards a market-based interest rate regime. Currently, interest rates on RMB-denominated loans are subject to minimums based on the PBOC benchmark rates, but generally are not subject to maximum rates. Interest rates on RMB-denominated deposits are subject to maximums set by the PBOC, but generally are not subject to minimum rates. Adjustments to benchmark rates have signiÑcantly aÅected the average rates of our loans and deposits, which in turn have had an impact on our net interest income. The PBOC adjusted the overall benchmark rates for RMB-denominated loans and deposits in October 2004. The PBOC also discontinued preferential rates for mortgage loans in March 2005, and adjusted the benchmark rates for loans in April 2006 and benchmark rates for loans and deposits in August 2006 and March 2007. In addition, in March 2005, the PBOC removed restrictions on interest rate on inter-bank deposits, symbolizing the liberalization of interest rate on inter-bank deposits. As the PRC Government continues its policy of liberalization of interest rates, we expect market competition to play an increasingly important role.

Exchange Rate Environment As of December 31, 2006, 8.8% of our total assets and 9.1% of our total liabilities were denominated in foreign currencies. As a result, Öuctuations of the value of these foreign currencies against the Renminbi could materially aÅect our Ñnancial condition and results of operations. The value of the Renminbi is subject to changes in the PRC's political and economic conditions. Since 1994, the conversion of Renminbi into foreign currencies, including Hong Kong and U.S. dollars, has been based on rates set by the PBOC. On July 21, 2005, the PRC Government introduced a managed Öoating exchange rate system to allow the value of the Renminbi to Öuctuate within a regulated band based on market supply and demand and by reference to a basket of currencies. On the same day, the value of the Renminbi appreciated by 2% against the U.S. dollar. Since then and up to December 31, 2006, the Renminbi has appreciated by approximately 5.7% against the U.S. dollar.

221 FINANCIAL INFORMATION

RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, our condensed results of operations.

For the year ended December 31, 2004 2005 2006 (in millions of RMB, except per share data) Interest income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 17,795 22,511 29,490 Interest expenseÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (7,412) (9,851) (13,017) Net interest income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10,383 12,660 16,473 Net non-interest incomeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 763 995 1,454 Operating income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11,146 13,655 17,927 General and administrative expenses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (5,451) (7,104) (9,259) Provisions for impairment losses chargeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1,634) (1,098) (1,666) ProÑt before tax ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,061 5,453 7,002 Income taxÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1,633) (2,369) (3,144) Net proÑt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,428 3,084 3,858 Attributable to: Equity holder(s) of the Bank ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,427 3,083 3,858 Minority interests ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1 1 Ì Net proÑt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,428 3,084 3,858

ProÑt appropriations(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,258 271 3,000 Earning per share attributable to equity holder(s) of the Bank - Basic and diluted (Renminbi) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.08 0.10 0.12

(1) Under MOF regulations, CITIC Group, as our sole shareholder during these periods, may appropriate any proÑt accumulated from the eÅective date of our restructuring, or December 31, 2005, to the date of our incorporation as a joint stock limited company, or December 31, 2006. We distributed RMB 3,000 million in dividends to CITIC Group in 2006. In addition, in accordance with our board resolution on March 8, 2007 and the extraordinary general meeting of shareholders held on the same day, we distributed RMB 726 million dividend in cash to CITIC Group from the retained earnings as of December 31, 2006. Our net proÑt increased to RMB 3,858 million in 2006, from RMB 3,084 million in 2005 and RMB 2,428 million in 2004, representing a CAGR of 26.1% from 2004 to 2006. Our proÑt before tax increased at a CAGR of 31.3% to RMB 7,002 million in 2006 from RMB 5,453 million in 2005, which in turn increased from RMB 4,061 million in 2004. Our proÑt before tax increased from 2004 to 2006 primarily because:

¬ our net interest income increased at a CAGR of 26.0% from 2004 to 2006, primarily as a result of an increase in our interest-earning assets; and

¬ our net non-interest income increased at a CAGR of 38.0% from 2004 to 2006, primarily due to (i) an increase in net fee and commission income at a CAGR of 54.5%; and (ii) an increase in net gains arising from foreign currency dealings at a CAGR of 48.9%.

Net Interest Income Net interest income historically has been the largest component of our operating income, representing 91.9%, 92.7% and 93.2% of our operating income for the years ended December 31, 2006, 2005 and 2004, respectively.

222 FINANCIAL INFORMATION

The following table sets forth, for the periods indicated, our interest income, interest expense and net interest income.

For the year ended December 31, 2004 2005 2006 (in millions of RMB) Interest income Loans and advances to customers (including rediscounted bills) ÏÏÏÏÏÏÏÏÏÏÏ 14,225 18,182 24,334 Less: Rediscounted billsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (379) (383) (1,046) Loans and advances to customers(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13,846 17,799 23,288 Investments in debt securities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,963 3,009 3,477 Balances with central bank ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 853 713 964 Amounts due from banks and other Ñnancial institutions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 754 607 715 Sub-total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 17,416 22,128 28,444 Interest expense Deposits from customers ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (6,181) (8,512) (10,790) Amounts due to banks and other Ñnancial institutions (including rediscounted bills)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1,065) (1,029) (1,791) Less: Rediscounted billsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 379 383 1,046 Amounts due to banks and other Ñnancial institutions(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (686) (646) (745) OthersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (166) (310) (436) Sub-total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (7,033) (9,468) (11,971) Net interest income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10,383 12,660 16,473

(1) On our audited consolidated balance sheet, balances of (i) loans and advances to customers and (ii) amounts due to banks and other Ñnancial institutions exclude rediscounted bills. To present our balance sheet and our income statement on a consistent basis, on our summary income statement of net interest income in the table above and elsewhere in this section, we present these two categories in amounts net of interest income and interest expense relating to rediscounted bills. Our net interest income increased by 30.1% to RMB 16,473 million in 2006 compared to RMB 12,660 million in 2005, which increased by 21.9% compared to RMB 10,383 million in 2004.

223 FINANCIAL INFORMATION

Our net interest income is aÅected by the diÅerence between the yields on our interest-earning assets and the costs of our interest-bearing liabilities, as well as the average balances of these assets and liabilities. The table below sets forth, for the periods indicated, the average balances of our assets and liabilities, the related interest income or expense and average rates.

For the year ended December 31, 2004 2005 2006 Average Average Average Average Average Average balance Interest rate balance Interest rate balance Interest rate (in millions of RMB, except percentages) Assets Loans and advances to customers ÏÏÏÏÏÏÏÏÏÏÏ 285,491 13,846 4.85% 343,937 17,799 5.18% 437,124 23,288 5.33% Investment in debt securities ÏÏÏÏÏÏÏÏÏÏÏÏ 61,571 1,963 3.19 98,715 3,009 3.05 103,329 3,477 3.37 Balances with central bankÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 47,471 853 1.80 46,651 713 1.53 62,446 964 1.54 Amounts due from banks and other Ñnancial institutions ÏÏÏÏÏÏÏÏÏÏ 34,318 754 2.20 27,757 607 2.19 26,165 715 2.73 Total interest-earning assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 428,851 17,416 4.06 517,060 22,128 4.28 629,064 28,444 4.52 Provisions ÏÏÏÏÏÏÏÏÏÏÏÏÏ (17,330) Ì Ì (14,849) Ì Ì (10,390) Ì Ì Non-interest-earning assets(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏ 17,836 Ì Ì 17,993 Ì Ì 26,820 Ì Ì Total assetsÏÏÏÏÏÏÏÏÏÏÏÏ 429,357 Ì Ì 520,204 Ì Ì 645,494 Ì Ì Liabilities Deposits from customers 372,184 6,181 1.66% 457,427 8,512 1.86% 551,871 10,790 1.96% Amounts due to banks and other Ñnancial institutions ÏÏÏÏÏÏÏÏÏÏ 39,897 686 1.72 34,461 646 1.87 38,898 745 1.91 Others(2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,678 166 4.51 6,279 310 4.94 9,330 436 4.67 Total interest-bearing liabilities ÏÏÏÏÏÏÏÏÏÏÏÏ 415,759 7,033 1.69% 498,167 9,468 1.90% 600,099 11,971 1.99% Non-interest-bearing liabilities(3) ÏÏÏÏÏÏÏÏÏÏ 5,760 Ì Ì 6,776 Ì Ì 5,820 Ì Ì Total liabilities ÏÏÏÏÏÏÏÏÏ 421,519 Ì Ì 504,943 Ì Ì 605,919 Ì Ì Net interest incomeÏÏÏÏÏ Ì 10,383 Ì Ì 12,660 Ì Ì 16,473 Ì Net interest spread(4) ÏÏÏ Ì Ì 2.37% Ì Ì 2.38% Ì Ì 2.53% Net interest margin(5) ÏÏÏ Ì Ì 2.42 Ì Ì 2.45 Ì Ì 2.62

(1) Includes cash, available-for-sale equity investments, property and equipment, deferred tax assets and other assets. (2) Consists of amounts due to central bank and subordinated debt and bonds issued. (3) Consists of current and deferred tax liabilities and other liabilities and provisions. (4) Calculated as the diÅerence between the average yield on total interest-earning assets and the average cost on total interest-bearing liabilities. (5) Calculated by dividing net interest income by the average balance of total interest-earning assets.

224 FINANCIAL INFORMATION

The following table sets forth, for the periods indicated, the allocation of changes in our interest income and interest expense due to changes in volume and changes in rate. Changes in volume are measured by changes in the average balances and changes in rate are measured by changes in the average rates. Changes in our interest income and interest expense caused by changes in both volume and rate have been allocated to changes in the rate.

For the year ended December 31, 2005 vs. 2004 2006 vs. 2005 Increase/(decrease)Net Increase/(decrease) Net due toincrease/ due to increase/ Volume Rate (decrease) Volume Rate (decrease) (in millions of RMB) Assets Loans and advances to customers ÏÏÏÏÏÏÏÏÏÏ 2,833 1,120 3,953 4,827 662 5,489 Investment in debt securities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,184 (138) 1,046 141 327 468 Balances with central bankÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (15) (125) (140) 241 10 251 Amounts due from banks and other Ñnancial institutions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (143) (4) (147) (35) 143 108 Change in interest income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,859 853 4,712 5,174 1,142 6,316 Liabilities Deposits from customersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,415 916 2,331 1,757 521 2,278 Amounts due to banks and other Ñnancial institutions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (93) 53 (40) 83 16 99 Others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 117 27 144 151 (25) 126 Change in interest expense ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,439 996 2,435 1,991 512 2,503 Changes in net interest income ÏÏÏÏÏÏÏÏÏÏÏÏ 2,420 (143) 2,277 3,183 630 3,813

Interest Income Interest income increased by 28.5% to RMB 28,444 million in 2006 compared to RMB 22,128 million in 2005, primarily due to a 21.7% increase in the average balance of interest-earning assets, particularly in loans and advances to customers, coupled with an increase in the average yield to 4.52% from 4.28%. Interest income increased by 27.1% to RMB 22,128 million in 2005 compared to RMB 17,416 million in 2004, primarily due to a 20.6% increase the average balance of interest-earning assets, particularly in loans to customers and investment in debt securities, coupled with an increase in the average yield to 4.28% from 4.06%.

Interest Income from Loans and Advances to Customers Interest income from loans to customers has been the largest component of our interest income, representing 81.9%, 80.4% and 79.5% of our total interest income for the years ended December 31, 2006, 2005 and 2004, respectively.

225 FINANCIAL INFORMATION

The following table sets forth, for the periods indicated, the average balance, interest income and average yield for each component of our loans to customers.

For the year ended December 31, 2004 2005 2006 Average Interest Average Average Interest Average Average Interest Average balance income yield balance income yield balance income yield (in millions of RMB, except percentages) Corporate loans ÏÏÏÏÏÏÏÏÏÏÏÏ 231,077 11,449 4.95% 270,077 14,482 5.36% 340,606 19,320 5.67% Discounted bills ÏÏÏÏÏÏÏÏÏÏÏÏ 30,096 1,109 3.68 38,663 1,345 3.48 54,750 1,571 2.87 Personal loans ÏÏÏÏÏÏÏÏÏÏÏÏÏ 24,318 1,288 5.30 35,197 1,972 5.60 41,768 2,397 5.74 Total loans to customersÏÏÏ 285,491 13,846 4.85% 343,937 17,799 5.18% 437,124 23,288 5.33%

Interest income from loans to customers increased by 30.8% to RMB 23,288 million in 2006 compared to RMB 17,799 million in 2005, due to primarily an increase in the average balance, and, to a lesser extent, an increase in the average yield on loans to 5.33% from 5.18%. Interest income from loans to customers increased by 28.5% to RMB 17,799 million in 2005 compared to RMB 13,846 million in 2004, due to primarily an increase in the average balance, and, to a lesser extent, an increase in the average yield to 5.18% from 4.85%. The largest component of our interest income from loans has been interest income from corporate loans, representing 83.0%, 81.4% and 82.7% of our total interest income from loans to customers in 2006, 2005, and 2004, respectively. 2006 Compared to 2005. Interest income from corporate loans increased by 33.4% to RMB 19,320 million in 2006 compared to RMB 14,482 million in 2005 due to a combination of an increase in the average balance and an increase in the average yield to 5.67% from 5.36%. The average balance of corporate loans increased by 26.1% in 2006 compared to 2005, reÖecting, among other reasons, the continued growth in China's corporate activities and increasing demand for capital. The average yield on corporate loans increased, reÖecting, among others, (i) increases in the PBOC benchmark rates on customer loans in April and August 2006; and (ii) an increase in the average yield of foreign currency-denominated loans, reÖecting the continued increase in LIBOR, which in turn reÖected continuous interest rate increases by the United States Federal Reserve Bank. In addition, we believe the increase in the average yield on corporate loans was also attributable to the further implementation of our product pricing policies. Interest income from discounted bills increased by 16.8% to RMB 1,571 million in 2006 compared to RMB 1,345 million in 2005, reÖecting an increase of 41.6% in the average balance, which was partially oÅset by a decrease in the average yield to 2.87% from 3.48%. We experienced a higher growth rate in the average balance of discounted bills from the second half of 2005 through the Ñrst half of 2006, reÖecting, among other, our increased focus on and increased market demand for discounted bills following a reduction of the interest rate on surplus deposit reserves in March 2005. We had subsequently restricted the issuance of discounted bills in the second half of 2006 as we increased our position in higher-yielding asset categories, such as corporate loans and personal loans. We believe that the decrease in the average yield reÖected, among other reasons, general interest rate declines on discounted bills as a result of greater liquidity in the market. Interest income from personal loans increased by 21.6% to RMB 2,397 million in 2006 compared to RMB 1,972 million in 2005, primarily due to a combination of a 18.7% increase in the average balance, and an increase in the average yield to 5.74% from 5.60%. The increase in the average balance of personal loans reÖected a continuing increase in the average balance of residential mortgage loans, which was partially oÅset by decreases in individual commercial loans and automobile loans. In recent years, we have sought to expand residential mortgage loans and restrict lending on individual commercial loans, personal consumption loans and automobile loans. The increase in the average yield on personal loans reÖected the discontinuation of preferential rates for mortgage loans in March 2005 and increases in the PBOC benchmark rates in April and August 2006. 2005 Compared to 2004. Interest income from corporate loans increased by 26.5% to RMB 14,482 million in 2005 compared to RMB 11,449 million in 2004 due to a combination of an increase in

226 FINANCIAL INFORMATION the average balance and an increase in the average yield to 5.36% from 4.95%. The average balance of corporate loans increased by 16.9% in 2005 compared to 2004, reÖecting, among other reasons, the continued growth in China's corporate activities and increasing demand for funding. The increase in the average yield on corporate loans was aÅected by (i) an increase in the PBOC benchmark rates in October 2004; and (ii) an increase in the average yield of foreign currency denominated loans, reÖecting continuous increase in the LIBOR, which in turn reÖects continuous interest rate increases by the United States Federal Reserve Bank. In addition, we believe the increase in the average yield was also attributable to the further implementation of our product pricing polices in 2005. Interest income from discounted bills increased by 21.3% to RMB 1,345 million in 2005 compared to RMB 1,109 million in 2004, reÖecting an increase of 28.5% in the average balance, which was partially oÅset by a decrease in the average yield to 3.48% from 3.68%. The average balance increased, reÖecting, among other reasons, our increased focus on expanding bank acceptance bills, which generally bear lower risks than commercial acceptance bills. We believe that the decrease in the average yield was due to, among other reasons, greater liquidity in the market following a reduction by the PBOC of the interest rate on surplus deposit reserves from 1.62% to 0.99% in March 2005. Interest income from personal loans increased by 53.1% to RMB 1,972 million in 2005 compared to RMB 1,288 million in 2004 due to a combination of a 44.7% increase in the average balance and an increase in the average yield to 5.60% from 5.30%. The average balance of personal loans increased primarily due to a continuing increase in the average balance of mortgage loans, which was partially oÅset by decreases in individual commercial loans, personal consumption loans and automobile loans. The average yield on personal loans was aÅected by an increase in the PBOC benchmark rates in October 2004, coupled with the discontinuation of preferential PBOC benchmark mortgage rates in March 2005.

Interest Income from Debt Investments Interest income from debt investments represented 12.2%, 13.6% and 11.3% of our interest income in 2006, 2005 and 2004, respectively. Interest income from debt investments increased by 15.6% to RMB 3,477 million in 2006 compared to RMB 3,009 million in 2005, due to an increase in the average yield to 3.37% from 3.05%, coupled with a 4.7% increase in the average balance. The average yield increased, reÖecting, among other reasons, an increase in the average yield of foreign currency-denominated debt investments following continuous interest rate increases by the United States Federal Reserve Bank; which was partially oÅset by a decrease in the average yield of RMB-denominated debt investments. The increase in average balance of debt investments was primarily attributable to an increase in the average balance of RMB-denominated debt investments. Interest income from debt investments increased by 53.3% to RMB 3,009 million in 2005 compared to RMB 1,963 million in 2004, primarily due to an increase of 60.3% in the average balance of debt investments to RMB 98,715 million in 2005 from RMB 61,571 million in 2004, which was partially oÅset by a decrease in the average yield to 3.05% from 3.19%. The increase in the average balance of debt investments from 2004 through 2005 was attributable to, among other reasons, an increase in investment in debt securities in the fourth quarter of 2004. The average yield on debt investments decreased from 2004 through 2005 reÖected, among other reasons, the maturity in 2004 and 2005 of those PRC Government bonds in our investment portfolio that had higher yields than the remaining portfolio. The decrease in average yield on debt investments was partially oÅset by an increase in the average yield of foreign currency-denominated investments following interest rate increases in the United States since June 2004.

Interest Income from Balances with Central Bank Our interest-earning balances with central bank primarily consist of statutory deposit reserve funds and surplus deposit reserve funds deposited at the PBOC. Statutory deposit reserve funds represent the minimum level of cash deposits, calculated as a percentage of total deposits from customers (as deÑned by the PBOC) that we are required to maintain at the PBOC. Surplus deposit reserves are deposits with the PBOC in excess of statutory deposit reserves, part of which we maintain for settlement purposes. The PBOC increased the

227 FINANCIAL INFORMATION minimum deposit ratio from 6.5% to 7.0% in September 2003, from 7.0% to 7.5% in April 2004, from 7.5% to 8.0% in July 2006, from 8.0% to 8.5% in August 2006 and from 8.5% to 9.0% in November 2006.

Interest income from balances with central bank increased by 35.2% to RMB 964 million in 2006 compared to RMB 713 million in 2005, primarily due to a 33.9% increase in the average balance. The increase in the average balance reÖected (i) the increases in minimum deposit ratio in 2006 and (ii) an increase in the balance of statutory deposit reserves in line with an increase in deposits from customers.

Interest income from balances with central bank decreased by 16.4% to RMB 713 million in 2005 compared to RMB 853 million in 2004 primarily due to a decrease in the average yield to 1.53% from 1.80%, and secondarily due to a decrease of 1.7% in the average balance. The decrease in the average yield reÖected a reduction by the PBOC of the interest rate on surplus deposit reserves from 1.62% to 0.99% in March 2005. The decrease in the average balance reÖected, among other reasons, reduction in the level of our surplus deposit reserves as part of our eÅort to enhance our liquidity management following the reduction of the interest rate on surplus deposit reserves in March 2005, and an increase in our position in higher-yielding discounted bills.

Interest Income from Amounts Due from Banks and Other Financial Institutions

Interest income from amounts due from banks and other Ñnancial institutions primarily consists of interest income on inter-bank deposits, balances under reverse repurchase agreements and money market placements.

Interest income from amounts due from banks and other Ñnancial institutions increased to RMB 715 million in 2006 compared to RMB 607 million in 2005, primarily due to an increase in the average yield to 2.73% from 2.19%, which was partially oÅset by a 5.7% decrease in the average balance. The average yield increased primarily due to (i) an increase in the average yield of foreign currency denominated assets, reÖecting continuous interest rate increases by the United States Federal Reserve Bank; and (ii) an increase in the average yield of RMB-denominated assets, reÖecting an increase in market interest rates on RMB- denominated assets. The decrease in the average balance reÖected our increased position in higher-yielding asset categories, such as corporate loans and personal loans.

Interest income from amounts due from banks and other Ñnancial institutions decreased by 19.5% to RMB 607 million in 2005 compared to RMB 754 million in 2004, primarily due to a decrease of 19.1% in the average balance. The decrease in the average balance reÖected, among others, decreased demand for funds by other Ñnancial institutions attributable to increased liquidity in the market.

Interest Expense

Interest expense increased by 26.4% to RMB 11,971 million in 2006 compared to RMB 9,468 million in 2005, primarily due to an increase in the average balance of interest-bearing liabilities, particularly deposits from customers, coupled with an increase in the average cost of interest-bearing liabilities to 1.99% from 1.90%.

Interest expense increased by 34.6% to RMB 9,468 million in 2005 compared to RMB 7,033 million in 2004, primarily due to a 19.8% increase in the average balance of interest-bearing liabilities, particularly deposits from customers, coupled with an increase in the average cost of interest-bearing liabilities to 1.90% from 1.69%.

Interest Expense on Deposits from Customers

Deposits from customers historically have been our primary source of funding. Interest expense on deposits from customers represented 90.1%, 89.9% and 87.9% of our total interest expense in 2006, 2005 and 2004, respectively.

228 FINANCIAL INFORMATION

The following table sets forth, for the periods indicated, the average balance, interest expense and average cost for corporate and personal deposits by product type. For the year ended December 31, 2004 2005 2006 Average Interest Average Average Interest Average Average Interest Average balance expense cost balance expense cost balance expense cost (in millions of RMB, except percentages) Corporate deposits Time ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 177,074 4,172 2.36% 220,949 5,512 2.49% 252,889 6,854 2.71% DemandÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 158,015 1,369 0.87 173,592 1,657 0.95 214,347 2,116 0.99 Subtotal ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 335,089 5,541 1.65% 394,541 7,169 1.82% 467,236 8,970 1.92% Personal deposits Time ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 30,903 599 1.94% 55,262 1,289 2.33% 72,299 1,727 2.39% DemandÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,192 41 0.66 7,624 54 0.71 12,336 93 0.75 Subtotal ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 37,095 640 1.73% 62,886 1,343 2.14% 84,635 1,820 2.15% Total deposits from customers 372,184 6,181 1.66% 457,427 8,512 1.86% 551,871 10,790 1.96%

Interest expense on deposits from customers increased by 26.8% to RMB 10,790 million in 2006 compared to RMB 8,512 million in 2005 primarily due to an increase of 20.6% in the average balance. Interest expense on deposits from customers increased by 37.7% to RMB 8,512 million in 2005 compared to RMB 6,181 million in 2004 primarily due to (i) an increase of 22.9% in the average balance, and (ii) an increase in the average cost to 1.86% from 1.66%. 2006 compared to 2005. Interest expense on corporate deposits increased by 25.1% to RMB 8,970 million in 2006 compared to RMB 7,169 million in 2005 primarily due to an increase in the interest expense on corporate time deposits. Interest expense on corporate time deposits increased primarily due to a 14.5% increase in the average balance, coupled with an increase in the average cost to 2.71% from 2.49%. Interest expense on corporate demand deposits increased by 27.7% primarily due to a 23.5% increase in the average balance, coupled with an increase in the average cost to 0.99% from 0.95%. The average cost on corporate time deposits increased, reÖecting, among others, (i) an increase in the PBOC benchmark rates in August 2006, and (ii) an increase in the average cost of foreign currency denominated deposits following continuous interest rate increases by the United States Federal Reserve Bank, which were partially oÅset by a decrease of daily average negotiated deposits, which historically had a higher average cost than other deposits, as a percentage of our daily average corporate deposits to 10.2% in 2006 from 12.6% in 2005. The average cost on corporate demand deposits increased, reÖecting, among others, an increase in the average cost of foreign currency denominated deposits following continuous interest rate increases by the United States Federal Reserve Bank. Interest expense on personal deposits increased by 35.5% to RMB 1,820 million in 2006 compared to RMB 1,343 million in 2005 primarily due to a 34.6% increase in the average balance. The average cost of personal deposits increased slightly to 2.15% from 2.14%, reÖecting, among others, an increase in personal demand deposits, which had lower average cost than RMB-denominated deposits, as a percentage of our total deposits. 2005 Compared to 2004. Interest expense on corporate deposits increased by 29.4% to RMB 7,169 million in 2005 compared to RMB 5,541 million in 2004 primarily due to an increase in the interest expense on corporate time deposits. Interest expense on corporate time deposits increased primarily due to a 24.8% increase in the average balance, coupled with an increase in the average cost to 2.49% from 2.36%. Interest expense on corporate demand deposits increased by 21.0% to RMB 1,657 million in 2005 compared to RMB 1,369 million in 2004 primarily due to an 9.9% increase in the average balance, coupled with an increase in the average cost to 0.95% from 0.87%. The average cost on corporate time and demand deposits increased, reÖecting, among others, (i) an increase in the PBOC benchmark rates in October 2004; and (ii) an increase in corporate time deposits, which carry a higher average cost than corporate demand

229 FINANCIAL INFORMATION deposits, as a percentage of corporate deposits to 56.0% from 52.8%. In 2005, we sought to reduce our negotiated deposits, which had a higher average cost than overall corporate deposits, in an eÅort to optimize the mix of our deposits base. The increase in corporate time deposits was partially oÅset by a decrease in average balance of negotiated deposits as a percentage of average balance of corporate deposits to 12.6% in 2005 from 14.5% in 2004. Interest expense on personal deposits increased by 109.8% to RMB 1,343 million in 2005 compared to RMB 640 million in 2004 primarily due to an increase in the interest expense on personal time deposits. Interest expense on personal time deposits increased primarily due to an increase in the average balance, coupled with an increase in the average cost to 2.33% from 1.94%. The average cost on personal time deposits increased, reÖecting, among others, (i) the average balance of personal time deposits increased at a higher rate compared to personal demand deposits following the PBOC benchmark rate increase in October 2004, as such rate increase contributed to a higher increase in the average cost of our personal time deposits than that of our personal demand deposits and (ii) an increase in foreign currency-denominated deposits, which had higher average cost than RMB-denominated deposits, as a percentage of our total deposits.

Amounts Due to Banks and Other Financial Institutions; Subordinated Debt/Bonds The largest component of amounts due to banks and other Ñnancial institutions consists of deposits from banks and non-bank Ñnancial institutions, such as securities Ñrms and insurance companies in China. Interest expense on amounts due to banks and other Ñnancial institutions increased by 15.3% to RMB 745 million in 2006 compared to RMB 646 million in 2005, primarily due to a 12.9% increase in the average balance, coupled with an increase in the average cost to 1.91% from 1.87%. The increase in the average balance reÖected, among others, the increase in the deposits by securities Ñrms partially attributable to increased securities market activities. The average cost increased primarily due to an increase in the average cost of our foreign currency-denominated inter-bank deposits resulting from interest rate increases in the United States, which was partially oÅset by a decrease in the average cost on our RMB-denominated inter- bank deposits. In addition, we incurred RMB 0.12 billion in interest expense from RMB 6.0 billion in subordinated bonds issued in June 2006. Interest expense on amounts due to banks and other Ñnancial institutions decreased by 5.8% to RMB 646 million in 2005 compared to RMB 686 million in 2004 primarily due to a decrease of 13.6% in the average balance, which was partially oÅset by an increase in the average cost to 1.87% from 1.72%. The average balance decreased primarily due to our eÅorts to increase our position in lower-cost sources of funding and reduce our position in the product. The average cost increased primarily due to an increase in the average cost of our foreign currency-denominated inter-bank deposits reÖecting interest rate increases in the United States, which was partially oÅset by a decrease in the average cost on our RMB-denominated inter-bank deposits.

Net Interest Margin and Net Interest Spread Net interest margin is the ratio of net interest income to the average balance of interest-earning assets. In 2006 compared to 2005, our net interest income and the average balance of our interest-earning assets increased by 30.1% and 21.7%, respectively. As a result, our net interest margin increased to 2.62% from 2.45%. In 2005 compared to 2004, our net interest income and average balance of our interest-earning assets increased by 21.9% and 20.6%, respectively. As a result, our net interest margin increased to 2.45% in 2005 from 2.42% in 2004. Net interest spread is the diÅerence between the average yield on interest-earning assets and the average cost on interest-bearing liabilities. Our net interest spread increased to 2.53% in 2006 compared to 2.38% in 2005, primarily because the average yield on our interest-earning assets increased at a higher rate than the average cost on our interest-bearing liabilities.

230 FINANCIAL INFORMATION

Our net interest spread increased to 2.38% in 2005 compared to 2.37% in 2004, primarily because the average yield on our interest-earning assets increased at a higher rate than the average cost on our interest- bearing liabilities.

Net Non-interest Income Net non-interest income represented 8.1%, 7.3% and 6.8% of our operating income in 2006, 2005 and 2004, respectively. The following table sets forth, for the periods indicated, the principal components of our net non-interest income.

For the year ended December 31, 2004 2005 2006 (in millions of RMB) Net fee and commission income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 318 418 759 Net gain arising from foreign currency dealingsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 227 266 503 Net gain/(loss) from trading securitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 34 109 (49) Net gain/(loss) arising from investment securities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11 (24) 45 Other operating incomeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 173 226 196 Total net non-interest incomeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 763 995 1,454

Our net non-interest income increased by 46.1% to RMB 1,454 million in 2006 compared to RMB 995 million in 2005, primarily as a result of increases in net fee and commission income and net gain arising from foreign currency dealings. Our net non-interest income increased by 30.4% to RMB 995 million in 2005 compared to RMB 763 million in 2004 due to increases in all components of non-interest income except for net (loss)/gain arising from investment securities.

Net Fee and Commission Income The following table sets forth, for the periods indicated, the principal components of our net fee and commission income.

For the year ended December 31, 2004 2005 2006 (in millions of RMB) Fee and commission income Settlement feesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 133 166 214 Guarantee fees ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 129 162 215 Agency fee for underwriting bonds and commission fee from bondsÏÏÏÏÏÏÏÏÏÏÏÏÏ 37 113 132 Bank card fees ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 58 86 199 Commission for underwriting investment funds and agency fee for insurance services and other agency fees ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 24 24 54 Commission for consulting service and wealth management services ÏÏÏÏÏÏÏÏÏÏÏÏ 13 17 61 Others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 55 40 90 SubtotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 449 608 965 Fee and commission expense ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (131) (190) (206) Net fee and commission income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 318 418 759

Our net fee and commission income increased by 81.6% to RMB 759 million in 2006 compared to RMB 418 million in 2005, which increased by 31.4% compared to RMB 318 million in 2004. Settlement fees primarily consist of international settlement fees, which represented 90.7% and 88.0% of total settlement fees in 2006 and in 2005, respectively. International settlement fees increased by 32.9% to RMB 194 million in 2006 from RMB 146 million in 2005, which increased by 29.2% from RMB 113 million in

231 FINANCIAL INFORMATION

2004. The increase in international settlement fees from 2004 through 2006 reÖected an increased volume of international settlements. We believe the increase in the volume of our international settlement services reÖected (i) increased level of China's international trade activities and (ii) our continued eÅorts to capitalize on our strength in international business. We provide guarantee services to our corporate customers and receive a fee for this service. Guarantee fees increased by 32.7% to RMB 215 million in 2006 from RMB 162 million in 2005, which increased by 25.6% from RMB 129 million in 2004. The increase in guarantee fees from 2004 through 2006 reÖected an increased business volume, which we believe was partially attributable to increased market demand for such services. Agency fee for underwriting bonds and commission fee from bonds consist of fees and commissions for underwriting and distributing bonds issued by the PRC Government, enterprises and other Ñnancial institutions, and since 2005, underwriting commission for underwriting corporate short-term commercial papers. The increase in agency fee for underwriting bonds and commission fee from bonds of 16.8% to RMB 132 million in 2006 from RMB 113 million in 2005, was primarily attributable to RMB 83 million in underwriting commission from underwriting short-term commercial papers in 2006. We Ñrst began underwriting short-term commercial papers during the second half of 2005. The increase in agency fee for underwriting bonds and commission fee from bonds of 205.4% to RMB 113 million in 2005 from RMB 37 million in 2004 was primarily attributable to RMB 57 million in commission for underwriting short-term commercial papers in 2005. Bank card fees primarily consist of commissions from merchants, fees charged to customers of other banks for the use of our ATMs, annual fees and others. Bank card fees increased by 131.4% to RMB 199 million in 2006 from RMB 86 million in 2005, which increased by 48.3% from RMB 58 million in 2004. The increase in bank card fees from 2004 through 2006 was primarily due to increases in fees associated with use of credit cards. Fees associated with the use of credit cards increased signiÑcantly from 2004 through 2006. Expansion of our credit card business is a key component of our strategy. As a result of our eÅorts, our bank card transaction volume increased due to an increased number of credit cards issued and an increasing level of usage of credit cards. Commission for underwriting investment funds and agency fee for insurance services primarily consist of (i) commission for underwriting interests in open-ended investment funds, and (ii) various agency fee income, including insurance services, custody services and international travel services. Commission for distributing investment funds and agency fee for insurance services increased by 125.0% to RMB 54 million in 2006 from RMB 24 million in 2005, reÖecting, among others, an increase of RMB 16 million in fees for providing custody services. Commission for distributing investment funds and agency fee for insurance services remained at RMB 24 million in 2005 and 2004, reÖecting an increase of RMB 4 million in fees from international travel services, partially oÅset by a decrease of RMB 4 million in commissions for selling interests in open-ended investment funds. We provide Ñnancial advisory services and personal wealth management services and receive commissions for such products and services. Commission for consulting services and wealth management services increased by 258.8% to RMB 61 million in 2006 from RMB 17 million in 2005, which increased by 30.8% from RMB 13 million in 2004. The increase in commission for consulting services and wealth management services from 2005 to 2006 reÖected, among others, an increase of RMB 16 million in commission for providing wealth management services and an increase of RMB 28 million in commission for providing Ñnancial advisory services, which we believe were partially attributable to our increased eÅorts to expand Ñnancial advisory services and personal wealth management services. Of the remaining components, the largest component primarily consists of fees and commissions collected for (i) various other retail banking services, including safe deposit box and proof of funds services, and (ii) entrusted loans. Our fee and commission expense increased by 8.4% to RMB 206 million in 2006 from RMB 190 million in 2005, reÖecting, among others, increased business volume of our bank card business, which was partially

232 FINANCIAL INFORMATION oÅset by a decrease of RMB 17 million in expenses for foreign exchange transactions which reÖected lower fee rates charged by the PRC Government on settlement for foreign exchange transactions. Our fee and commission expense increased by 45.0% to RMB 190 million in 2005 from RMB 131 million 2004, primarily due to (i) increased business volume of our bank card business; and (ii) increased fees payable to China Foreign Exchange Trade System due to higher foreign exchange transaction volume.

Net Gains Arising from Foreign Currency Dealings

Net gains arising from foreign currency dealings primarily consist of (i) net realized gains or losses in foreign exchange transactions; and (ii) gains or losses from revaluation of foreign currency-denominated assets. Net gains arising from foreign currency dealings increased by 89.1% to RMB 503 million in 2006 from RMB 266 million in 2005, which increased by 17.2% from RMB 227 million in 2004. The increase in net gains from 2004 through 2006 reÖected the continued increase in the volume of our foreign exchange transactions, which was partially oÅset by a loss in revaluation of U.S. dollar denominated assets, reÖecting, among others, the appreciation of the Renminbi against the U.S. dollar in 2005. The growth rate in net gains arising from foreign currency dealings increased in 2006 compared to 2005 reÖected, among others, that we became licensed as market maker for foreign exchange-to-Renminbi spot transactions in 2005.

Net Gains Arising from Trading Securities

Net gains arising from trading securities primarily consist of (i) realized gains or losses on our debt securities held for trading purposes; (ii) revaluation gains or losses on debt securities held for trading purposes and derivatives and (iii) realized gains or losses on our derivatives. We had RMB 49 million in net loss arising from trading securities in 2006 compared to RMB 109 million in net gain in 2005, primarily due to (i) an increase in losses on derivative transactions entered into for hedging purposes (we do not apply hedge accounting on our hedging activities), and (ii) a decrease in trading volume, reÖecting general market declines in prices of debt securities, which in turn was attributable to increased market interest rates. Net gains from trading securities increased by 220.6% to RMB 109 million in 2005 from RMB 34 million in 2004 primarily due to (i) gains on trading of a portion of short-term commercial papers that we underwrote and elected to retain for trading purposes in 2005; and (ii) gains on revaluation of our RMB-denominated debt securities.

Net Gains and Losses Arising from Investment Securities

Net gains and losses arising from investment securities primarily represent net realized gains and losses from the disposal of available-for-sale securities and revaluation gains or losses of available-for-sale securities transferred from equity to proÑt and loss for disposal. We had RMB 45 million in net gain arising from investment securities in 2006 compared to RMB 24 million in net loss in 2005, primarily due to gains incurred on disposals of certain securities in 2006 and losses incurred on disposals of certain securities in 2005.

We had RMB 24 million in net loss arising from investment securities in 2005 compared to a net gain of RMB 11 million in 2004 primarily due to losses resulted from disposal of part of our U.S. dollar-denominated Ñxed-rate debt securities in our eÅorts to adjust the structure of our foreign currency-denominated asset portfolio.

Other Operating Income

Other operating income primarily consists of remittance fees, net gain and loss on disposal of assets and recoveries on non-credit assets previously written oÅ. Other operating income decreased by 13.3% to RMB 196 million in 2006 from RMB 226 million in 2005, primarily due to (i) a decrease of RMB 14 million in net gain on disposal of Ñxed assets, and (ii) a decrease of RMB 6 million in recoveries of non-credit assets. Other income increased by 30.6% to RMB 226 million in 2005 from RMB 173 million in 2004, primarily due to changes in recoveries on non-credit assets previously written oÅ from 2004 through 2005. Recoveries on non-credit assets previously written oÅ were RMB 19 million in 2006, RMB 25 million in 2005 and nil in 2004.

233 FINANCIAL INFORMATION

General and Administrative Expenses

The following table sets forth, for the periods indicated, the principal components of our general and administrative expenses.

For the year ended December 31, 2004 2005 2006 % of % of % of Amount Subtotal Amount Subtotal Amount Subtotal (in millions of RMB except percentages) StaÅ costs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,581 36.3% 2,086 37.2% 2,914 41.0% Other general and administrative expenses ÏÏÏÏÏÏÏ 1,580 36.2 2,125 37.8 2,602 36.6 Property, equipment and amortization expenseÏÏÏÏ 1,198 27.5 1,402 25.0 1,595 22.4 Subtotal ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,359 100.0% 5,613 100.0% 7,111 100.0% Business tax and surcharges ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 792 991 1,398 Management fee to CITIC Group ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 300 500 750 Total general and administrative expensesÏÏÏÏÏÏ 5,451 7,104 9,259 Cost-to-income ratioÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 48.9% 52.0% 51.6% Adjusted cost-to-income ratio (excluding management fee to CITIC Group and business tax and surcharges) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 39.1% 41.1% 39.7%

Our general and administrative expenses increased by 30.3% to RMB 9,259 million in 2006 compared to RMB 7,104 million in 2005, which increased by 30.3% compared to RMB 5,451 million in 2004. The increase from 2004 through 2006 was primarily due to increases in staÅ costs and other general and administrative expenses as well as all other components of general and administrative expenses.

In recent years, we have increased our focus to control cost and improve our cost structure. To that end, we have:

¬ increased focus on the management of capital expenditure and other expenses;

¬ made disposals of certain idle land and buildings; and

¬ implemented procurement procedures based on competitive bidding.

As a result of our eÅorts, our property, equipment and amortization expense, as a percentage of business management expenses, decreased to 22.4% in 2006, 25.0% in 2005 from 27.5% in 2004. Our adjusted cost-to- income ratio (excluding management fee to CITIC Group and business tax and surcharges) were 39.7%, 41.1% and 39.1% in 2006, 2005 and 2004, respectively.

StaÅ Costs

StaÅ costs represented 41.0%, 37.2% and 36.3% of our business management expenses in 2006, 2005 and 2004, respectively.

234 FINANCIAL INFORMATION

The following table sets forth, for the periods indicated, the components of our staÅ costs.

For the year ended December 31, 2004 2005 2006 (in millions of RMB) Salaries, bonuses and staÅ welfare expenses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,215 1,661 2,349 Contributions to deÑned contribution retirement schemes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 107 125 169 Housing fundÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 63 67 94 Supplementary retirement beneÑts ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9 Ì 6 Others(1)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 187 233 296 Total staÅ costs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,581 2,086 2,914

(1) Primarily consists of staÅ education fees, union fees, contribution to provident housing fund, supplemental retirement insurance and supplemental medical insurance for retirees. StaÅ costs increased by 39.7% to RMB 2,914 million in 2006 from RMB 2,086 million in 2005, which increased by 31.9% from RMB 1,581 million in 2004. StaÅ costs increased from 2004 through 2006 due to a combination of an increase in salaries, bonuses and staÅ welfare expenses per employee and an increase in the number of employees. We have implemented a performance-based compensation structure, which ties employees' compensation to the performance of our bank. Based on such structure, and in line with the improvements in our bank's Ñnancial results, our salaries, bonuses and staÅ welfare expenses per employee, as calculated based on period-end amounts, have increased in recent years. The remaining components of staÅ costs consist primarily of contributions to deÑned retirement schemes and other employee beneÑt expenses which increased in line with employee compensation levels and the rate of mandatory contributions.

Other General and Administrative Expenses Other general and administrative expenses primarily consist of advertising expenses, oÇce and travel expenses, entertainment expenses, meeting-related expenses, communication expenses, mailing and shipping expenses, professional and legal fees, annual supervision fees and certain other expenses. Other general and administrative expenses increased by 22.4% to RMB 2,602 million in 2006 from RMB 2,125 million in 2005, which increased by 34.5% from RMB 1,580 million in 2004. Other general and administrative expenses increased from 2004 through 2006, generally consistent with the expansion of our business. In addition, since 2004, we have been required to pay an annual supervision fee to the CBRC, which totaled RMB 140 million in 2006, RMB 117 million in 2005 and RMB 91 million in 2004.

Property, Equipment and Amortization Expense Property, equipment and amortization expense increased by 13.8% to RMB 1,595 million in 2006 from RMB 1,402 million in 2005, primarily due to increases in rent and property management expenses and electronic equipment operating expenses. Property, equipment and amortization expense increased by 17.0% to RMB 1,402 million in 2005 compared to RMB 1,198 million in 2004, primarily due to increases in depreciation, electronic equipment operating expenses and rent and property management expenses. The increases in electronic equipment operating expenses and rent and property management expenses from 2004 through 2006 reÖected, among others, the expansion of branch outlets during this period. Depreciation increased by 12.6% to RMB 617 million in 2005 from RMB 548 million in 2004 primarily due to (i) revaluation surplus on bank premises; (ii) the recognition of depreciation expenses on certain repossessed assets we retained for self-use beginning the end of 2004; and (iii) increased purchases of automated service machines and other personal banking related equipments.

Business Tax and Surcharges Business tax is levied primarily on interest income from loans and advances to customers and on fee and commission income. The business tax rate was 5% on such income in 2006, 2005 and 2004. In addition,

235 FINANCIAL INFORMATION educational surcharges and city construction tax are charged at rates equivalent to 3% and 7% of business tax paid, respectively. Business tax and surcharges increased by 41.1% in 2006 compared to 2005 and 25.1% in 2005 compared to 2004 due to an increase in taxable income.

Management Fee to CITIC Group We paid an annual management fee for management services to CITIC Group, our parent, which totaled RMB 750 million in 2006, RMB 500 million in 2005 and RMB 300 million in 2004. We have not paid and will not pay management fee to CITIC Group after January 1, 2007.

Impairment Losses Impairment losses charge consists primarily of provisions for impairment losses on loans and provisions for other assets. Provisions for impairment losses increased to RMB 1,666 million in 2006 from RMB 1,098 million in 2005, which decreased from RMB 1,634 million in 2004. The following table sets forth, for the periods indicated, the principal components of our impairment losses charge.

For the year ended December 31, 2004 2005 2006 (in millions of RMB) Loans and advances to customers ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,589 1,055 1,535 Bad and doubtful debt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 16 46 60 Investments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 61 1 (4) Amount due from banks and other Ñnancial institutions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (17) (6) (3) OthersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (15) 2 78 Total provisions for impairment losses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,634 1,098 1,666

The largest component of our provisions for impairment losses consists of provisions for impairment losses on loans and advances to customers. Provisions for impairment losses on loans and advances to customers increased to RMB 1,535 million in 2006 from RMB 1,055 million 2005, which decreased by 33.6% from RMB 1,589 million in 2004. For details on changes in our provisions for loan loss, including provisions for impairment losses, see ""Assets and Liabilities Ì Assets Ì Asset Quality of Our Loan Portfolio Ì Distribution of Allowance for Impairment Losses for Individually-assessed Impaired Corporate Loans by Legal Form of Borrowers Ì Changes to the Allowance for Impairment Losses.'' Provisions for impairment losses on bad and doubtful debt reÖect provisions on our receivables. Provisions for impairment losses on bad and doubtful debt increased to RMB 60 million in 2006 from RMB 46 million in 2005, which increased from RMB 16 million in 2004. The increase from 2004 through 2006 reÖected an increase in legal fees reserve, for which we have made provisions in an eÅort to seek greater recoveries through legal proceedings. Provisions for impairment losses on investments primarily reÖect provisions on our investments. Provisions for impairment losses on investments totaled RMB ¿4 million in 2006, RMB 1 million in 2005, and RMB 61 million in 2004. The decrease in provisions for impairment losses from 2005 to 2006 was primarily attributable to recoveries on non-performing assets. The RMB 61 million in provisions for impairment losses on investments in 2004 was primarily attributable to a provision made in connection with a debt investment made in 2000. Provisions for impairment losses on amounts due from banks and other Ñnancial institutions totaled RMB ¿3 million in 2006, RMB ¿6 million in 2005 and RMB ¿17 million in 2004, primarily attributable to recoveries on non-performing assets. Charge and releases for impairment losses in the ""others'' category primarily reÖect provisions on repossessed assets. We had a RMB 78 million in such charges in 2006 primarily due to charges on repossessed

236 FINANCIAL INFORMATION assets. We had RMB 2 million in impairment losses charge in 2005, compared to RMB ¿15 million in 2004 primarily due to recoveries on non-performing assets.

Income Tax Expense

Our income tax expense is the sum of (i) expected income tax charged at the statutory tax rate of 33%, (ii) taxes arising from certain non-deductible expenses, and (iii) tax credit of certain non-taxable income. The following table sets forth, for the periods indicated, the principal components of our income tax expenses. For the year ended December 31, 2004 2005 2006 (in millions of RMB) ProÑt before tax ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,061 5,453 7,002 Expected PRC income tax charged at statutory tax rate of 33%(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,340 1,799 2,311 Tax impact on non-deductible expenses: Ì StaÅ costs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 343 485 654 Ì Others(2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 193 293 375 536 778 1,029 Tax impact on non-taxable income: Ì Interest income from PRC Government bonds ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (230) (189) (168) Ì Others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (13) (19) (28) (243) (208) (196) Income taxÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,633 2,369 3,144

(1) The provision for our PRC income tax of the Group is calculated based on the statutory tax rate of 33% in accordance with the relevant PRC income tax rules and regulations.

(2) The amounts primarily represent management fee to CITIC Group, entertainment expenses, depreciation and amortization charges exceeding the deductible amount, which are not tax deductible.

Our income tax expense increased by 32.7% to RMB 3,144 million in 2006 from RMB 2,369 million in 2005. This increase was primarily due to an increase in expected income tax resulting from increased proÑt before tax.

Our income tax expense increased by 45.1% to RMB 2,369 million in 2005 from RMB 1,633 million in 2004. This increase was primarily due to (i) an increase in expected income tax resulting from increased proÑt before tax; (ii) an increase in taxes on our non-deductible expenses, such as part of staÅ costs and certain other expenses, particularly management fee to CITIC Group; and (iii) a decrease in tax credit of non-taxable income, particularly interest income from PRC Government bonds.

Our eÅective tax rate in 2006, 2005 and 2004 was 44.9%, 43.4% and 40.2%, respectively. We have not been granted or applied for any preferential taxation rates in 2006, 2005 and 2004.

Net ProÑt

Our net proÑt increased by 25.1% to RMB 3,858 million in 2006 from RMB 3,084 million in 2005, which increased by 27.0% from RMB 2,428 million in 2004.

SUMMARY SEGMENT OPERATING RESULTS

Historically we manage our business primarily along geographical lines based on our branch structure. Since 2002, we have begun to assess the performance of our bank along business segments. See ""Business Ì Our Principal Business Activities.''

237 FINANCIAL INFORMATION

Summary Business Segment Information Our principal business segments are corporate banking, personal banking and treasury operations. The Ñnancial results of our business segments for the years ended December 31, 2006, 2005 and 2004 in this subsection are presented as if we had managed our business in such segments throughout these periods. For a description of products and services included in these segments, see ""Business Ì Our Principal Business Activities.'' We use an intersegment fund transfer mechanism as a tool to assess the performance of our business segments. These funds are borrowed and lent between our business segments at transfer prices taking into account market rate. Intersegment interest expense and interest income recognized through the fund transfer mechanism are eliminated in our consolidated results of operations. On the other hand, the intersegment net interest income of each segment accounts for both the interest income generated from funds lent to other segments and the interest expense paid on funds borrowed from other segments. The following table sets forth, for the period indicated, our operating income for each of our principal business segments.

For the year ended December 31, 2004 2005 2006 % of % of % of Amount total Amount total Amount total (in millions of RMB, except percentages) Corporate banking ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9,039 81.1% 11,009 80.7% 14,242 79.4% Personal banking ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,167 10.5 1,699 12.4 2,386 13.3 Treasury operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,018 9.1 1,260 9.2 1,767 9.9 Others and unallocated ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (78) (0.7) (313) (2.3) (468) (2.6) Total operating income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11,146 100.0% 13,655 100.0% 17,927 100.0%

Summary Geographical Segment Information In presenting information on the basis of geographical segments, operating income is allocated based on the location of the branch that generated the revenue. The following table sets forth, for the periods indicated, the operating income attributable to each of these geographical regions.

For the year ended December 31, 2004 2005 2006 % of % of % of Amount total Amount total Amount total (in millions of RMB, except percentages) Yangtze River Delta ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,612 32.5% 4,430 32.5% 5,639 31.5% Pearl River Delta and West StraitÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,451 13.0 1,807 13.2 2,463 13.7 Bohai Rim ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,728 33.4 4,211 30.9 5,095 28.4 Central ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 743 6.7 1,175 8.6 1,657 9.2 WesternÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 886 7.9 1,079 7.9 1,555 8.7 NortheasternÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 308 2.8 387 2.8 514 2.9 Head OÇce ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 404 3.6 561 4.1 918 5.1 Hong Kong ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 14 0.1 5 0.0 86 0.5 Total operating income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11,146 100.0% 13,655 100.0% 17,927 100.0%

LIQUIDITY

We fund our loan and investment portfolios principally through our customer deposits. Although a App 1A 32(5)(a)&(b) majority of deposits from customers have been short-term deposits, deposits from customers have been, and we believe will continue to be, a stable source of our funding. Customer deposits with remaining maturities of

238 FINANCIAL INFORMATION less than one year represented 92.6%, 89.8% and 86.4% of total deposits from customers in 2006, 2005 and 2004, respectively. For additional information about our short-term liabilities and sources of funds, see ""Assets and Liabilities Ì Liabilities and Sources of Funds.'' We manage liquidity risks in an eÅort to comply with regulatory liquidity guidelines and to ensure that we are able, even under adverse conditions, to meet all our payment obligations and fund our investment and lending opportunities on a timely basis. We identify, measure and monitor liquidity risk primarily through maturity gap analyses, which are prepared and presented to our management on a daily basis. In addition, in an eÅort to ensure that we can eÅectively manage liquidity risk under various adverse conditions and increase risk tolerance levels we conduct stress testing from time to time to analyze liquidity risk. The following table sets forth, as of December 31, 2006, the remaining maturities of our assets and liabilities.

As of December 31, 2006 Overdue/ Between More Repayable Less than 3 months Between 1 than on demand 3 months and 1 year and 5 years 5 years Undated Total (in millions of RMB) Assets Loans and advances to customers, net ÏÏÏÏÏ 6,838 93,821 196,638 96,238 59,846 Ì 453,381 Investments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 434 14,754 35,304 32,375 21,220 337 104,424 Cash and balances with central bank ÏÏÏÏÏÏ 32,727 15,970 Ì Ì Ì 41,923 90,620 Amounts due from banks and other Ñnancial institutions, netÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10,060 29,563 2,935 692 Ì Ì 43,250 Other assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 382 1,042 819 520 209 12,076 15,048 Total assetsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 50,441 155,150 235,696 129,825 81,275 54,336 706,723 Liabilities Deposits from customersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 293,084 160,127 119,650 41,877 3,674 Ì 618,412 Amounts due to central bank ÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 28 173 Ì Ì Ì 201 Amounts due to banks and other Ñnancial institutions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 27,160 6,761 1,378 211 656 Ì 36,166 Subordinated debt/bonds issued ÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì 6,000 6,000 Ì 12,000 Other liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 205 6,673 1,137 33 48 154 8,250 Total liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 320,449 173,589 122,338 48,121 10,378 154 675,029 Long/(short) position ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (270,008) (18,439) 113,358 81,704 70,897 54,182 31,694

QUANTITATIVE AND QUALITATIVE ANALYSIS OF MARKET RISK Market risk is the risk of Ñnancial loss arising from changes in the value of a Ñnancial instrument as a result of changes in interest rates, foreign currency exchange rates, equity prices and commodity prices and other market changes that aÅect market risk-sensitive instruments.

Interest Rate Risk Interest rate risk is the exposure of a bank's Ñnancial condition to adverse movements in interest rates. Our primary source of interest rate risk is the mismatch between the repricing periods of our assets and liabilities. Repricing periods mismatch may cause net interest income to be aÅected by changes in the prevailing level of interest rates. We are exposed to interest rate risk through our day-to-day lending and deposit-taking activities as well as treasury operations. We manage the interest rate risk exposure of our assets and liabilities on our balance sheet primarily through adjusting the interest rate and maturity proÑle. For more information about our speciÑc measures to manage the interest rate risk exposure, see ""Risk Management Ì Market Risk Management Ì Interest Rate Risk Management''.

239 FINANCIAL INFORMATION

Maturity Gap Analysis The following table sets forth, as of December 31, 2006, the results of our gap analysis based on the earlier of (i) the next expected repricing dates and (ii) the Ñnal maturity dates for our assets and liabilities.

As of December 31, 2006 Between 3 months Between More Interest- Non-interest Less than and 1 and than bearing earning/ 3 months 1 year 5 years 5 years total bearing Total (in millions of RMB) Assets Loans and advances to customers, net(1) ÏÏÏÏÏÏÏÏÏÏÏ 223,558 225,435 3,557 831 453,381 Ì 453,381 Investments in debt securitiesÏÏ 28,778 51,797 12,685 10,827 104,087 337 104,424 Cash and balances with central bank ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 88,031 Ì Ì Ì 88,031 2,589 90,620 Amounts due from banks and other Ñnancial institutions ÏÏÏ 39,622 2,935 693 Ì 43,250 Ì 43,250 Others(2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì Ì Ì 15,048 15,048 Total assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 379,989 280,167 16,935 11,658 688,749 17,974 706,723 Liabilities Deposits from customers ÏÏÏÏÏÏ 489,467 107,450 14,021 3,284 614,222 4,190 618,412 Amounts due to banks and other Ñnancial institutions ÏÏÏ 33,921 1,378 211 656 36,166 Ì 36,166 Amounts due to central bank ÏÏ 28 173 Ì Ì 201 Ì 201 Subordinated debt/bonds issued 6,000 Ì Ì 6,000 12,000 Ì 12,000 Others(3) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì Ì Ì 8,250 8,250 Total liabilities ÏÏÏÏÏÏÏÏÏÏÏÏ 529,416 109,001 14,232 9,940 662,589 12,440 675,029 Re-pricing gap ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (149,427) 171,166 2,703 1,718 26,160 5,534 31,694 Cumulative pricing gap ÏÏÏÏÏÏÏ (149,427) 21,739 24,442 26,160 26,160 31,694

(1) Includes RMB 6,838 million of overdue net loans. Overdue net loans are net loans on which either principal is overdue or interest is overdue by more than 90 days, but on which there has been no prepayment of principal. (2) Includes available-for-sale equity investments, property and equipment, deferred tax assets and other assets. (3) Consists of current and deferred tax liabilities and other liabilities and provisions.

Sensitivity Analysis We use sensitivity analysis to measure the potential eÅect of changes in interest rates on our net interest income. The following table sets forth, as of December 31, 2006, the results of our interest rate sensitivity analysis based on our assets and liabilities at the same date.

As of December 31, 2006 Change in interest rates (in basis points) (100)(1) 100(1) Changes in annualized net interest income (in millions of RMB) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 211 (211)

(1) Interest rates for certain products are below 1%. This is for reference only.

240 FINANCIAL INFORMATION

Based on our assets and liabilities as of December 31, 2006, if interest rates increase (or decrease) by 100 basis points, our net interest income for the year following December 31, 2006 would immediately decrease (or increase) by RMB 211 million.

This sensitivity analysis, which is based on a static interest rate risk proÑle of assets and liabilities, is used for risk management purposes only. The analysis measures only the impact of changes in the interest rates within a year, as reÖected by the repricing of our assets and liabilities within a year, on our annualized interest income, and is based on the following assumptions: (i) all assets and liabilities that reprice or are due within three months and in more than three months but within one year, as shown in the table under ""Ì Maturity Gap Analysis'', reprice or are due at the beginning of the respective periods (i.e., all the assets and liabilities that reprice or are due within three months reprice or are due immediately, and all the assets and liabilities that reprice or are due in more than three months but within one year reprice or are due in three months), (ii) there is a parallel shift in the yield curve and in interest rates, and (iii) there are no other changes to the portfolio. Actual changes in our net interest income resulting from increases or decreases in interest rates may diÅer from the results of this sensitivity analysis.

Exchange Rate Risk

Exchange rate risk primarily results from mismatches in the currency denomination of assets and liabilities. All currency positions at our branch level are closed through back-to-back settlement, with exposure managed centrally at our head-oÇce treasury and capital markets department. Our treasury and capital markets department seeks to control our exposures within limits set by the market risk subcommittee by closing positions in the markets or entering into derivative transactions for hedging purposes. For more information about our exchange rate risk management see ""Risk Management Ì Market Risk Management Ì Exchange Rate Risk Management''.

The following table sets forth, as of December 31, 2006, our assets and liabilities by currency.

As of December 31, 2006 RMB USD Others Total (in millions of RMB equivalent) Assets Loans and advances to customers, net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 436,418 15,638 1,325 453,381 InvestmentsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 72,569 26,321 5,534 104,424 Cash and balance with central bank ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 87,300 2,938 382 90,620 Amounts due from banks and other Ñnancial institutions, net ÏÏÏÏÏ 34,741 6,733 1,776 43,250 Others(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13,763 977 308 15,048 Total assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 644,791 52,607 9,325 706,723 Liabilities Deposits from customersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 562,106 48,903 7,403 618,412 Amounts due to banks and other Ñnancial Institutions ÏÏÏÏÏÏÏÏÏÏÏ 31,332 3,506 1,328 36,166 Amounts due to central bank ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 201 Ì Ì 201 Subordinated debt/bonds issuedÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 12,000 Ì Ì 12,000 Others(2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,862 166 222 8,250 Total liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 613,501 52,575 8,953 675,029 Net position ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 31,290 32 372 31,694 OÅ-balance sheet credit commitments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 165,687 23,010 6,875 195,572 Notional amount of hedging currency options ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,307 1,645 (800) 4,152

(1) Includes available-for-sale equity investments, property and equipment, deferred tax assets and other assets.

(2) Consists of current and deferred tax liabilities and other liabilities and provisions.

241 FINANCIAL INFORMATION

CASH FLOWS App 1A 32(5)(a)&(b) The following table sets forth, for the periods indicated, our cash Öows. For more information, see Section IV of the Accountants' Report in Appendix I to this prospectus.

For the year ended December 31, 2004 2005 2006 (in millions of RMB equivalent) Net cash Öows from operating activities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 30,256 (7,650) (7,574) Net cash Öows from investing activities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (26,450) 4,331 (19,162) Net cash Öows from Ñnancing activitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,486 8,315 10,102 Net increase/(decrease) in cash and cash equivalentsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 12,292 4,996 (16,634) EÅect of exchange rate changes on cash and cash equivalents ÏÏÏÏÏÏÏÏÏÏÏÏ 422 (1,201) (469)

Cash Flows from Operating Activities Our cash inÖows from operating activities are primarily attributable to our customer deposits and interest income received. The net increase in the balance of our customer deposits in 2006, 2005 and 2004 was RMB 87,839 million, RMB 95,553 million and RMB 89,664 million, respectively. The interest income received in 2006, 2005 and 2004 was RMB 29,135 million, RMB 19,565 million and RMB 15,646 million, respectively. Our cash outÖows from operating activities are primarily attributable to our loan disbursements and interest payments. The net increase in the total balance of our loans in 2006, 2005 and 2004 was RMB 96,886 million, RMB 67,164 million and RMB 52,971 million, respectively. The interest paid (excluding interest expense on subordinated debt/bonds issued) in 2006, 2005 and 2004 was RMB 12,009 million, RMB 9,141 million and RMB 6,863 million, respectively.

Cash Flows from Investing Activities Our cash inÖows from our investing activities are primarily attributable to proceeds from disposal and redemption of our investments. Proceeds from disposal and redemption of investments in 2006, 2005 and 2004 was RMB 211,648 million, RMB 212,481 million and RMB 97,221 million, respectively. The increase in proceeds from disposal and redemption of investments in 2005 compared to 2004 primarily reÖected increased amount of short-term commercial papers disposed of in 2005. Our cash outÖows from investing activities are primarily attributable to payments on acquisition of our investments. Payments on acquisition of investments in 2006, 2005 and 2004 was RMB 230,133 million, RMB 207,956 million and RMB 123,666, respectively. The increase in payments on acquisition of investments in 2005 compared to 2004 primarily reÖected increased amount of short-term investments acquired in 2005.

Cash Flows from Financing Activities Our cash inÖows from Ñnancing activities are primarily attributable to (i) proceeds from capital injections, and (ii) in 2006 and in 2004, proceeds from issuances of subordinated debt/bonds. In 2006, 2005 and 2004, we received RMB 7,400 million, RMB 8,600 million and RMB 2,500 million, respectively, in capital injections from CITIC Group. We issued a series of subordinated debt and a series of subordinated bonds in 2004 and 2006, respectively, with an aggregate principal amount of RMB 6,000 million each. Our cash outÖows from Ñnancing activities are primarily attributable to interest paid on subordinated debt/bonds issued by us, and in 2006, dividends paid to CITIC Group. In 2006, 2005 and 2004, interest paid on subordinated debt/bonds issued totaled RMB 298 million, RMB 285 million and RMB 14 million, respectively. In 2006, we paid RMB 3,000 million in dividends to the CITIC Group. Under MOF regulations, CITIC Group, as our sole shareholder, may appropriate any proÑt accumulated from the eÅective date of our restructuring, or December 31, 2005, to the date of our incorporation, or December 31, 2006.

242 FINANCIAL INFORMATION

CAPITAL RESOURCES Shareholders' Equity Our total equity increased to RMB 31,694 million as of December 31, 2006 from RMB 23,225 million as of December 31, 2005, which increased from RMB 10,763 million as of December 31, 2004. From January 1, 2004 to December 31, 2006, our total equity increased signiÑcantly as a result of additional contributions to equity by CITIC Group, our parent, and increased net proÑts during this period. In 2006, 2005 and 2004, we received RMB 7,400 million, RMB 8,600 million and RMB 2,500 million, respectively, cash contribution to equity. The following table sets forth the changes in our total equity for the period indicated.

Shareholders' Minority equity interest Total equity (in millions of RMB) As of January 1, 2004 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,399 3 5,402 Net proÑt for 2004 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,427 1 2,428 Net change in fair value of available-for-sale investments ÏÏÏÏÏÏÏÏÏÏ (174) Ì (174) Realized on disposal of available-for-sale investments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (2) Ì (2) Revaluation gain of properties held for own useÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 609 Ì 609 Capital injection and capitalization of earningsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,500 Ì 2,500 As of December 31, 2004 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10,759 4 10,763 Net proÑt for 2005 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,083 1 3,084 Net change in fair value of available-for-sale investments ÏÏÏÏÏÏÏÏÏÏ 138 Ì 138 Realized on disposal of available-for-sale investments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 52 Ì 52 Revaluation gain of properties held for own useÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 588 Ì 588 Capital injection and capitalization of earningsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,600 Ì 8,600 As of December 31, 2005 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 23,220 5 23,225 Net proÑt for 2006 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,858 Ì 3,858 Net change in fair value of available-for-sale investments (14) Ì (14) Revaluation gain of properties held for own useÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 123 Ì 123 Capital injection and capitalization of earningsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,400 Ì 7,400 Appropriation of accrued welfare to capital reserve ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 102 Ì 102 ProÑt distribution ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (3,000) Ì (3,000) As of December 31, 2006 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 31,689 5 31,694

Capital Adequacy We are subject to capital adequacy requirements promulgated by the CBRC, which require commercial banks in China to maintain a minimum core capital adequacy ratio of 4% and a minimum capital adequacy ratio of 8%. In March 2004, the CBRC introduced new guidelines which amended the method by which capital adequacy ratios are calculated. See ""Regulation and Supervision Ì PRC Regulation and Supervision Ì Regulations Regarding Capital Adequacy.'' Our core capital, supplementary capital and risk- weighted assets are calculated based on PRC GAAP.

243 FINANCIAL INFORMATION

The following table sets forth, as of the dates indicated, certain information relating to our capital adequacy.

As of December 31, 2005 2006 (in millions of RMB, except percentages) Core capital: Paid up ordinary share capital ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 26,661 31,113 Reserves ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (5,321) (7) Total core capital ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 21,340 31,106 Supplementary capital: General provisions for doubtful debt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,961 2,663 Term subordinated debt/bonds(1)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,000 10,800 Total supplementary capital ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,961 13,463 Total capital base before deductions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 30,301 44,569 Deductions: Unconsolidated equity investments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 142 158 Total capital base after deductions(2)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 30,159 44,411 Risk-weighted assets(3) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 372,000 471,957 Core capital adequacy ratio ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5.72% 6.57% Capital adequacy ratioÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8.11% 9.41%

(1) Represents the RMB 6.0 billion of subordinated debt we issued in 2004 and RMB 6.0 billion of subordinated bonds we issued in 2006. (2) Also referred to in this prospectus as ""regulatory capital.'' (3) For details on the calculation of risk-weighted assets, see ""Regulation and Supervision Ì PRC Regulation and Supervision Ì Regulations Regarding Capital Adequacy Ì Capital Adequacy Guidelines Ì Risk-weighted Assets.''

Our capital adequacy ratio was 6.05% as of December 31, 2004, and our core capital adequacy ratio was 3.33% as of the same date, as reported to the relevant PRC banking regulatory authority. Our capital adequacy ratios as of December 31, 2004 reported to the CBRC were based on our Ñnancial information prepared in accordance with the Accounting Regulations for Financial Enterprises jointly issued by the MOF and the PBOC in 1993. Therefore, such ratios may not be comparable to the capital adequacy ratios as of December 31, 2006 and 2005. Although our capital adequacy ratio as of December 31, 2004 was below the minimum requirement of 8%, no sanctions were imposed on us for our failure to meet this requirement. See ""Risk Factors Ì Risks Relating to Our Business Ì We face risks relating to the PRC banking regulatory requirements and guidelines.''

RETURNS ANALYSIS

The following table sets forth our return on average assets, or ROAA, and return on average equity, or ROAE, for the period indicated.

For the year ended December 31, 2004 2005 2006 (in percentages) Return on average assets (ROAA)(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.54% 0.57% 0.59% Return on average equity (ROAE)(2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 30.04% 18.15% 14.05%

(1) Calculated by dividing net proÑt (including proÑt attributable to minority interests) by the average of total assets as of the beginning and end of the period.

244 FINANCIAL INFORMATION

(2) Calculated by dividing net proÑt attributable to equity holders of our bank by average equity excluding minority interests. Average equity excluding minority interests is calculated as the average of total equity excluding minority interests as of the beginning and end of the period. During the period from 2004 to 2006, our ROAA increased, reÖecting an improved deployment of our assets. During the same period, our ROAE decreased, reÖecting a higher rate of increase in our total equity than in the increase in our net proÑt. Our increase in our total equity was signiÑcantly attributable to additional contributions to equity by CITIC Group, our parent, during this period. See "" Ì Capital Resources Ì Shareholders' Equity''.

OFF-BALANCE SHEET COMMITMENTS Our oÅ-balance sheet commitments consist primarily of loan commitments, guarantees, letters of credit and acceptances. Loan commitments are our commitments to extend credit. We issue guarantees and letters of credit to guarantee the performance of our customers to third parties. Acceptances comprise undertakings by us to pay bills of exchange issued by our customers. The following table sets forth the contractual amounts of our oÅ-balance sheet commitments as of the dates indicated.

As of December 31, 2004 2005 2006 (in millions of RMB) Credit commitments: Loan commitments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,483 2,526 5,694 Guarantees and letters of credit ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 32,194 36,947 49,466 AcceptancesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 94,836 105,783 132,000 Credit card commitments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,232 4,836 8,412 Subtotal ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 130,745 150,092 195,572

Capital commitments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 38 10 105 Operating lease commitments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,330 1,538 1,779 Underwriting obligations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 310 550 950 Redemption obligations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13,302 14,662 15,590 Total oÅ-balance sheet commitmentsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 145,725 166,852 213,996

CAPITAL EXPENDITURES Our capital expenditure in 2006, 2005 and 2004 was RMB 761 million, RMB 645 million and RMB 314 million, respectively. The increase in our capital expenditures from 2004 through 2006 was primarily due to our increased eÅorts to expand our distribution network, including branch outlets, automated service machines and self-service banking centers and establish or improve our information systems.

SIGNIFICANT ACCOUNTING POLICIES We have identiÑed certain accounting policies that are signiÑcant to the preparation of our Ñnancial statements. These signiÑcant accounting policies, which are important for the understanding of our Ñnancial condition and results of operations, are set forth in detail in Section V of the Accountants' Report in Appendix I to this prospectus. These accounting policies usually involve subjective assumptions and estimates, and complex judgements relating to accounting items such as asset values and impairment losses. In each case, the determination of these items requires management judgment based on information and Ñnancial data that may change in future periods. We set out below the accounting policies used in the preparation of our Ñnancial statements that we believe involve the most signiÑcant estimates and judgments.

Allowance for Impairment Losses on Loans and Advances The impairment allowance of loans and receivables is measured as the diÅerence between the respective asset's carrying amount and the present value of estimated future cash Öows discounted at the asset's original

245 FINANCIAL INFORMATION eÅective interest rate. Receivables with a short duration are not discounted if the eÅect of discounting is immaterial. The total allowance for credit losses consists of two components: individual impairment allowances and collective impairment allowances. We Ñrst assess whether objective evidence of impairment exists individually for Ñnancial assets that are individually signiÑcant and collectively for Ñnancial assets that are not individually signiÑcant. If we determines that no objective evidence of impairment exists for an individually assessed Ñnancial asset, it includes the asset in a group of Ñnancial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognised are not included in a collective assessment of impairment. Impairment losses are recognised in the income statement.

Individual impairment allowances All loans and advances in the corporate lending portfolios are considered individually signiÑcant and assessed individually for impairment. Individually impaired loans and advances are graded at a minimum at substandard. Loans and advances which are assessed individually for impairment are evaluated in the light of objective evidence of loss events, for example:

¬ SigniÑcant Ñnancial diÇculty of the borrower

¬ A breach of contract, such as default or delinquency in interest payments or principal repayments

¬ For economic or legal reasons relating to the borrower's Ñnancial diÇculty, granting to the borrower a concession that we would not otherwise consider

¬ It becoming probable that the borrower will enter bankruptcy or other Ñnancial reorganisation It may not be possible to identify a single, discrete event that caused the impairment but it may be possible to identify impairment through the combined eÅect of several events. The individual impairment allowance is based upon management's best estimate of the present value of the cash Öows which are expected to be received discounted at the original eÅective interest rate. In estimating these cash Öows, management makes judgments about the borrower's Ñnancial situation and the net realisable value of any underlying collateral or guarantees in favour of us. Each impaired asset is assessed on its merits.

Collective impairment allowances Loans and receivables, which include the following, are assessed for impairment losses on a collective basis:

¬ All homogeneous groups of loans (representing all the personal loan portfolios) which are all considered not individually signiÑcant

¬ Individually assessed loans with no objective evidence of impairment on an individual basis The collective impairment loss is assessed after taking into account:

¬ Historical loss experience in portfolios of similar credit risk characteristics;

¬ The emergence period between a loss occurring and that loss being identiÑed;

¬ The current economic and credit environments and whether in management's experience these indicate that the actual level of inherent losses is likely to be greater or less than that suggested by historical experience; and

246 FINANCIAL INFORMATION

¬ Observable data indicating that there is a measurable decrease in the estimated future cash Öows from a group of assets such as adverse changes in the payment status of borrowers in the group, or economic conditions that correlate with defaults in the group. The emergence period between a loss occurring and its identiÑcation is determined by management based on the historical experience of the environments in which we operates. Impairment losses recognised on a collective basis represent an interim step pending the identiÑcation of impairment losses on individual assets (which are subject to individual assessment) in the pool of Ñnancial assets that are collectively assessed for impairment. As soon as information is available that speciÑcally identiÑes objective evidence of impairment on individual assets in a pool, those assets are removed from the pool of Ñnancial assets. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognised are not included in a collective assessment for impairment.

Valuation of Investments We classify investments on our balance sheet into (i) receivables, (ii) held-to-maturity assets, (iii) assets at fair value through proÑt or loss and (iv) available-for-sale assets

¬ Receivables are non-derivative Ñnancial assets with Ñxed or determinable payments that are not quoted on an active market, other than those that we intends to sell immediately or in the near term, and those that are designated as available for sale upon initial recognition, or those where we may not recover substantially all of its initial investment, other than because of credit determination, which will be classiÑed as available-for-sale;

¬ held-to-maturity assets are non-derivative Ñnancial assets with Ñxed or determinable payments and Ñxed maturity that we has the positive intent and ability to hold to maturity, other than those that meet the deÑnition of receivables, or that we designated as at fair value through proÑt or loss or as available-for-sale;

¬ Ñnancial assets at fair value through proÑt or loss include trading assets of those Ñnancial assets held principally for the purpose of short term proÑt taking and Ñnancial assets that are designated by us upon recognition as at fair value through proÑt or loss; and

¬ available-for-sale assets are non-derivative Ñnancial assets that are designated as available for sale or are not classiÑed as Ñnancial assets at fair value through proÑt or loss, receivables or held-to- maturity assets. Subsequent to initial recognition, Ñnancial assets are measured at fair value, without any deduction for transaction costs that may occur on sale or other disposal except for receivables, held-to-maturity Ñnancial assets not designated at fair value through proÑt or loss, which are measured at amortised cost using the eÅective interest rate method. Financial assets that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are stated at cost. Gains and losses from changes in the fair value of Ñnancial instruments at fair value through proÑt or loss are included in the income statement when they arise. Gains and losses arising from a change in the fair value of available-for-sale assets are recognised directly in equity, except for impairment losses and foreign exchange gains and losses, until the Ñnancial asset is derecognised at which time the cumulative gains or losses previously recognised in equity will be recognised in the income statement. For Ñnancial assets and carried at amortised cost, a gain or loss is recognised in the income statement when the Ñnancial asset is derecognised or impaired, and through the amortisation process. The fair value of Ñnancial assets is based on their quoted market price in an active market at the valuation date without any deduction for transaction costs. A quoted market price is from an active market where price information is readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency, and that price information represents actual and regularly occurring market transactions

247 FINANCIAL INFORMATION on an arm's length basis. If a quoted market price is not available, the fair value of the Ñnancial assets is established using valuation techniques. In estimating the fair value of a Ñnancial asset, we consider all factors, including but not limited to, interest rate, credit risk, foreign currency exchange price and market volatility, that are likely to aÅect the fair value of the Ñnancial asset. We obtain market data in the same market where the Ñnancial instrument was originated or purchased.

Derivative Ñnancial instruments We use derivative Ñnancial instruments to hedge our exposure to market risks arising from our investment activities. In accordance with our treasury policy, our derivative Ñnancial instruments are principally undertaken in response to customers' needs or for our own asset and liability management purposes. However, derivatives that do not qualify for hedge accounting are accounted for as Ñnancial assets and Ñnancial liabilities at fair value through proÑt or loss. Derivative Ñnancial instruments are recognised at fair value. The gain or loss on re-measurement to fair value is recognised immediately in the income statement. However, where derivatives qualify for hedge accounting, recognition of any resultant gain or loss depends on the nature of the item being hedged.

Valuation of Property and Equipment Property and equipment are stated at cost upon initial recognition. Subsequent to initial recognition, we adopt a revaluation policy to carry all classes of property at revaluation, being their fair value at the date of the revaluation, less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Equipment is stated at cost less accumulated depreciation and impairment losses. Increases in the carrying amount arising on revaluation of each property are credited to revaluation reserves in owner's equity. Decreases that oÅset previous increases of the same asset are charged against revaluation reserves; all other decreases are charged to the income statement.

Income Tax Income tax in the income statement comprises of both current tax and movements in deferred tax balances. Income tax is recognized in the income statement except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred tax is provided using the balance sheet liability method, for temporary diÅerences between the carrying amounts of assets and liabilities for Ñnancial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantially enacted at the balance sheet date. Deferred tax assets also arise from unused tax losses and unused tax credits. A deferred tax asset is recognized only to the extent that it is probable that future taxable proÑts will be available against which the asset can be utilized. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax beneÑt will be realized.

RECENT ACCOUNTING PRONOUNCEMENTS In preparing our consolidated Ñnancial statements, we have adopted all IFRS in issue which are relevant to us for the years ended 31 December 2003, 2004 and 2005, except for IFRS 7 Financial Instruments: Disclosures (""IFRS 7'') and the amendment to IAS 1 Presentation of Financial Statements: Capital

248 FINANCIAL INFORMATION

Disclosures (""IAS 1 Amendment'') both of which were issued in August 2005 and are eÅective for the period beginning 1 January 2007.

IFRS 7 requires more detailed qualitative and quantitative disclosure primarily on fair value information and risk management. We have assessed the impact of IFRS 7 and concluded that IFRS 7 would only aÅect the level of details in the disclosure of the Ñnancial statements, and would not have Ñnancial impact nor result in a change in our accounting policies.

We have concluded that the disclosures required by IAS 1 Amendment on how we manage our capital and comply with external capital requirements would not have Ñnancial impact nor result in a change in our accounting policies.

INDEBTEDNESS

As of February 28, 2007, the latest practicable date, our indebtedness includes subordinated debt and App 1A 32(1), bonds issued in 2004 and 2006 with an aggregate principal amount of RMB 12,000 million. See ""Assets and (2), (3) & (4) Liabilities Ì Liabilities and Sources of Funds Ì Subordinated Debt/Bonds''. In addition, as of February 28, 2007, we had contingent liabilities relating to guarantees and letter of credits amounting to RMB 49,868 million and had liabilities amounting to RMB 16,630 million that were secured by our assets that arose from our ordinary course of business.

In addition, as of February 28, 2007, we had amounts due to central bank, banks and other Ñnancial CO 3rd Sch (1)23, institutions (including the above secured liabilities), deposits from customers, credit commitments, 24 & 25 acceptances, other commitments and contingencies, including outstanding litigation, that arose from our ordinary course of business.

Except as otherwise disclosed in this prospectus, as of February 28, 2007, we did not have any outstanding mortgages, charges, debentures or other loan capital (issued or agreed to be issued), bank overdrafts, loans, liabilities under acceptance or other similar indebtedness, hire purchase and Ñnance lease commitments or any guarantees or other material contingent liabilities.

Our directors have conÑrmed that there has not been any material change in the indebtedness or contingent liabilities of our bank since February 28, 2007.

PROPERTY

Particulars of our property interests are set out in Appendix V to this prospectus. Sallmanns(Far East) Limited has valued our property interests as at January 31, 2007. A summary of values and valuation certiÑcates issued by Sallmanns(Far East) Limited are included in Appendix V to this prospectus.

249 FINANCIAL INFORMATION

The table below sets forth the reconciliation of aggregate amounts of land and buildings from our audited consolidated Ñnancial statements as of December 31, 2006 to the unaudited net book value of our property interests as of January 31, 2007: January 31, 2007 (except indicated otherwise) (RMB in thousands) Net book value of property interests per audited accounts ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,253,427 Add: Land use right ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 191,088 Property purchase prepayment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 187,772 Adjusted net book value of property interests as at 31 December 2006 ÏÏÏÏÏÏÏÏ 7,632,287 Movements for the month ended 31 January 2007ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (17,597) Additions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,719 Depreciation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (21,316) Disposals ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0 Net book value as at 31 January 2007ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,614,690 Valuation surplus as at 31 January 2007 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 146,578 Valuation as at 31 January 2007 per Appendix V Valuation Report ÏÏÏÏÏÏÏÏÏÏÏ 7,761,268

RULES 13.11 TO 13.19 OF THE HONG KONG LISTING RULES We conÑrm that there are no circumstances which will trigger disclosure requirements under Rule 13.11 to Rule 13.19 of the Hong Kong Listing Rules.

PROFIT FORECAST FOR THE YEAR ENDING DECEMBER 31, 2007 LR 11.07 All statistics set forth in the table below do not give eÅect to the A Share OÅering and are based on the assumptions that (i) the Global OÅering is completed and (ii) the Over-allotment Option is not exercised.

Forecast consolidated net proÑt attributable to shareholders(1)ÏÏÏÏÏÏÏÏ not less than RMB 5.7 billion Forecast earnings per shareÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (a) pro forma fully diluted(2)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ RMB 0.16 (HK$0.16) (b) weighted average(3) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ RMB 0.17 (HK$0.17)

(1) The bases and assumptions on which the proÑt forecast has been prepared are set out in Appendix IV to this prospectus. (2) The calculation of the forecast earnings per share on a pro forma fully diluted basis is based on the forecast consolidated net proÑt attributable to our shareholders for the year ending December 31, 2007 assuming that we had been listed since January 1, 2007 and a total of 35,998,590,400 shares were issued and outstanding during the entire year. This calculation assumes that the 4,885,479,000 H Shares to be issued pursuant to the Global OÅering were issued on January 1, 2007 (assuming the Over-allotment Option is not exercised). The forecast consolidated net proÑt attributable to shareholders for the year ending December 31, 2007 is based on the audited consolidated Ñnancial statements for the year ended December 31, 2006 and a forecast of the consolidated results for the twelve months ending December 31, 2007. (3) The calculation of the forecast earnings per share on a weighted average basis is based on the forecast consolidated net proÑt attributable to shareholders for the year ending December 31, 2007 and a weighted average number of 34,445,945,019 shares issued and outstanding during the year. This calculation assumes that the 4,885,479,000 H Shares to be issued in the Global OÅering were issued on April 27, 2007 (assuming the Over-allotment Option is not exercised).

All statistics set forth in the table below are based on the assumption that (i) the Global OÅering and the A Share OÅering are both completed and (ii) the Over-allotment Option is not exercised.

Forecast consolidated proÑt attributable to shareholders(1) ÏÏÏÏÏÏÏÏÏÏÏ not less than RMB 5.7 billion Forecast earnings per share (a) pro forma fully diluted(2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ RMB 0.15 (HK$0.15) (b) weighted average(3)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ RMB 0.16 (HK$0.16)

250 FINANCIAL INFORMATION

(1) The bases and assumptions on which the proÑt forecast has been prepared are set out in Appendix IV to this prospectus. (2) The calculation of the forecast earnings per share on a pro forma fully diluted basis is based on the forecast consolidated net proÑt attributable to our shareholders for the year ending December 31, 2007 assuming that we had been listed since January 1, 2007 and a total of 38,300,523,054 shares were issued and outstanding during the entire year. This calculation assumes that the 4,885,479,000 H Shares to be issued pursuant to the Global OÅering and 2,301,932,654 A Shares to be issued in the A Share OÅering were issued on January 1, 2007 (assuming the Over-allotment Option is not exercised). The forecast consolidated net proÑt attributable to shareholders for the year ending December 31, 2007 is based on the audited consolidated Ñnancial statements for the year ended December 31, 2006 and a forecast of the consolidated results for the twelve months ending December 31, 2007. (3) The calculation of the forecast earnings per share on a weighted average basis is based on the forecast consolidated net proÑt attributable to shareholders for the year ending December 31, 2007 and a weighted average number of 36,016,304,556 shares issued and outstanding during the year. This calculation assumes that the 4,885,479,000 H Shares to be issued in the Global OÅering and 2,301,932,654 A Shares to be issued in the A Share OÅering were issued on April 27, 2007 (assuming the Over-allotment Option is not exercised).

DIVIDEND POLICY Our board of directors decides whether to pay any dividend and in what amount based on our results of operations, cash Öow, Ñnancial condition, capital adequacy ratios, future prospects, statutory and regulatory restrictions on the payment of dividends by us and other factors that our board of directors deems relevant. Under the PRC Company Law and our articles of association, all of our shareholders have equal rights to dividends and distributions. We will pay dividends out of our net proÑt only after we have made good our accumulated losses, if any, and have made the following appropriations:

¬ appropriations to the statutory surplus reserve equivalent to 10% of our net proÑt available for appropriation, as determined under PRC GAAP; no further appropriations to the statutory surplus reserve are required once this reserve reaches an amount equal to 50% of our registered capital; and

¬ appropriations to a discretionary surplus reserve as approved by the shareholders in an annual general meeting. In addition, according to recent MOF regulations, in principle, we are required to maintain a general reserve not less than 1% of our assets on which we bear risk prior to making a proÑt distribution. This general reserve will constitute part of our reserves. Financial institutions that did not meet this general reserve requirement as of July 1, 2005 are required to take necessary steps to meet this requirement in approximately three years, but not later than Ñve years, from July 1, 2005. At an extraordinary general meeting of shareholders on March 8, 2007, our shareholders approved our dividend policies. To comply with the MOF's guideline by July 1, 2010, we will appropriate 40% to 45% of our net proÑt as general reserve in 2007, and 25% to 35% of our net proÑt as general reserve in 2008 and 2009. See note 26(f) in Section V of the Accountants' Report in Appendix I to this prospectus. Under PRC law, dividends may be paid only out of distributable proÑts. Distributable proÑts means our net proÑt as determined under PRC GAAP or IFRS, whichever is lower, less any accumulated losses and appropriations to the statutory surplus reserve and general reserve which we are required to make. Any distributable proÑts that are not distributed in a given year are retained and available for distribution in subsequent years. However, ordinarily we will not pay any dividends in a year in which we do not have any distributable proÑts in respect of that year. The payment of any dividend by us must also be approved at a general meeting of shareholders. Holders of our H Shares will be entitled to receive dividends in proportion to their shareholdings. The CBRC has the discretionary authority to prohibit any bank that has a capital adequacy ratio below 8% or a core capital adequacy ratio below 4%, or has violated certain other PRC banking regulations, from paying dividends and other forms of distributions. See ""Regulation and Supervision Ì PRC Regulation and Supervision Ì Regulations Regarding Capital Adequacy Ì CBRC Supervision of Capital Adequacy'' and ""Ì Principal Regulators Ì The CBRC.'' As of December 31, 2006, we had a capital adequacy ratio of 9.41% and a core capital adequacy ratio of 6.57%.

In 2006, we distributed RMB 3,000 million in dividends to CITIC Group. In addition, in accordance with App 1A 21 our board resolution on March 8, 2007 and the extraordinary general meeting of shareholders held on the same

251 FINANCIAL INFORMATION day, we distributed RMB 726 million dividend in cash to CITIC Group from the retained earnings as of December 31, 2006.

UNAUDITED PRO FORMA ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS

The following statement of unaudited pro forma adjusted consolidated net tangible assets of us is prepared based on our audited consolidated net tangible assets as at December 31, 2006, as shown in the Accountants' Report, the text of which is set out in Appendix I to this prospectus, adjusted as described below. Our statement of unaudited pro forma adjusted consolidated net tangible assets has been prepared for illustrative purposes only and, as a result, may not give a true picture of our Ñnancial position.

Our statement of unaudited pro forma adjusted consolidated net tangible assets has been prepared to show the eÅect on our audited consolidated net tangible assets as at December 31, 2006 as if the Global OÅering had occurred on December 31, 2006 and without giving eÅect to the A Share OÅering.

Audited Unaudited pro consolidated net Unaudited pro forma adjusted tangible assets as Estimated net forma adjusted consolidated net at December 31 proceeds from the consolidated net tangible assets 2006(1) Global OÅering(2) tangible assets(3) value per share(4) RMB million RMB million RMB million RMB HK$(5) Based on the oÅer price of HK$5.06 per OÅer Share(6) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 31,632 23,564 55,196 1.53 1.55 Based on the oÅer price of HK$5.86 per OÅer Share(6) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 31,632 27,321 58,953 1.64 1.66

(1) The consolidated net tangible assets attributable to our shareholders as of December 31, 2006 is compiled based on the Accountants' Report set out in Appendix I to the prospectus, which is based on the audited consolidated net assets attributable to our shareholders as of December 31, 2006 of RMB 31,689 million with an adjustment for intangible assets of RMB 57 million as of December 31, 2006. (2) The estimated net proceeds from the Global OÅering are based on the oÅer price of HK$5.06, or RMB 5.00, per H Share to HK$5.86, or RMB 5.80, per H Share and the assumption that there are 4,885,479,000 newly issued H Shares in the Global OÅering, after deduction of the underwriting fees and other related expenses payable by us and takes no account of any shares which may be issued upon the exercise of the Over-allotment Option. (3) The unaudited pro forma adjusted consolidated net tangible assets do not take into account the eÅect of the net proÑt for the period from and including January 1, 2007 to the date immediately preceding the date of the Global OÅering. (4) The unaudited pro forma adjusted consolidated net tangible assets value per share is arrived at after the adjustments referred to in note 1 above and on the basis that 35,998,590,400 shares are issued and outstanding following the completion of the Global OÅering and that the Over-allotment Option is not exercised. If the Over-allotment Option is exercised in full, these per share values will increase. Had eÅect been given to the A Share OÅering in this calculation, our unaudited pro forma adjusted consolidated net tangible assets per share would have been HK$1.75 or RMB 1.73 based on the oÅer prices of HK$5.06 per H Share and RMB 5.00 per A Share and HK$1.90 or RMB 1.88 based on the oÅer prices of HK$5.86 per H Share and RMB 5.80 per A Share. This calculation is based on the assumption that there were 2,301,932,654 newly issued A Shares in the A Share OÅering and the resulting net proceeds (after deduction of the estimated underwriting fees and other related expenses payable by us) of RMB 11,187 million (based on the oÅer price of RMB 5.00 per A Share) and RMB 12,977 million (based on the oÅer price of RMB 5.80 per A Share) from the A Share OÅering. (5) The translation of Renminbi into Hong Kong dollars has been made at the rate of RMB 0.9891 to HK$1.00, the exchange rate set by the PBOC prevailing on April 11, 2007. No representation is made that the Hong Kong dollar amounts have been, could have been or could be converted to Renminbi, or vice versa, at that rate, or at any other rate or at all. (6) A dividend of RMB 726 million from our retained earnings as at December 31, 2006 was declared at our extraordinary shareholders' general meeting on March 8, 2007 which was paid to CITIC Group. Had eÅect been given to the above A Share OÅering as well as the dividend declaration in the above calculation, the unaudited pro forma adjusted consolidated net tangible asset value per share would have been reduced to HK$1.73 or RMB 1.71 based on the oÅer price of HK$5.06 per H Share and RMB 5.00 per A Share and HK$1.88 or RMB 1.86 based on the oÅer price of HK$5.86 per H Share and RMB 5.80 per A Share.

Details of the valuation of our properties as of January 31, 2007 are set forth in Appendix V to this prospectus. The unaudited net book value of properties as of January 31, 2007 was not substantially diÅerent from the valuation of our properties as included in Appendix V to this prospectus.

252 FINANCIAL INFORMATION

NO MATERIAL ADVERSE CHANGE

Our directors conÑrm that, other than our special dividend approved by our shareholders as disclosed in App 1A 38 ""Ì Dividend Policy,'' there has been no material adverse change in our Ñnancial or trading position since December 31, 2006.

WORKING CAPITAL

Rule 8.21A(1) and Paragraph 36 of Part A of Appendix 1A of the Hong Kong Listing Rules require this App 1A 36 prospectus to include a statement by our directors that, in their opinion, the working capital available to our bank is suÇcient or, if not, how it is proposed to provide the additional working capital our directors consider to be necessary. We are of the view that the traditional concept of ""working capital'' does not apply to banking businesses such as ours. We are regulated in the PRC by, among others, the PBOC and the CBRC. These regulatory authorities impose minimum capital adequacy and liquidity requirements on commercial banks operating in the PRC. Rule 8.21A(2) of the Hong Kong Listing Rules provides that such a working capital statement will not be required to be made by an issuer whose business is entirely or substantially that of the provision of Ñnancial services, provided that the Hong Kong Stock Exchange is satisÑed that the inclusion of such a statement would not provide signiÑcant information for investors and that the issuer's solvency and capital adequacy are subject to prudential supervision by another regulatory body. In view of the above, pursuant to Rule 8.21A(2) of the Hong Kong Listing Rules, we are not required to include a working capital statement from our directors in this prospectus.

253 FUTURE PLANS AND USE OF PROCEEDS

FUTURE PLANS AND PROSPECTS See ""Business Ì Our Strategy'', ""Business Ì Our Principal Business Activities Ì Corporate Banking'', ""Business Ì Our Principal Business Activities Ì Personal Banking'' and ""Business Ì Our Principal Business Activities Ì Treasury Operations'' for a detailed description of our future plans.

USE OF PROCEEDS App 1A 48 We estimate that the net proceeds of the Global OÅering (after deduction of underwriting fees and estimated expenses payable in relation to the Global OÅering, assuming an oÅer price of HK$5.46 (RMB 5.40) per H Share, which is the mid-point of the proposed oÅer price range of HK$5.06 (RMB 5.00) to HK$5.86 (RMB 5.80) per H Share) to be approximately HK$25,723 million (RMB 25,443 million) if the Over-allotment Option is not exercised or HK$29,612 million (RMB 29,289 million) if the Over-allotment Option is exercised in full. We currently intend to use the net proceeds from the Global OÅering to strengthen our capital base to support the growth of our business. See ""A Share OÅering Ì Use of Proceeds of A Share OÅering'' for a description of the use of proceeds of the A Share OÅering.

254 FURTHER TERMS AND CONDITIONS OF THE HONG KONG PUBLIC OFFERING

1. GENERAL

(a) If you apply for Hong Kong OÅer Shares in the Hong Kong Public OÅering, you will be agreeing with the Company and the Joint Lead Managers (for themselves and on behalf of the Hong Kong Underwriters) as set out below.

(b) If you give electronic application instructions to HKSCC via CCASS to cause HKSCC Nominees to apply for Hong Kong OÅer Shares on your behalf, you will have authorized HKSCC Nominees to apply on the terms and conditions set out below, as supplemented and amended by the terms and conditions applicable to the relevant application method.

(c) If you give electronic application instructions to the eIPO Service Provider through the designated website at www.eipo.com.hk, you will have authorized the designated eIPO Service Provider to apply on the terms and conditions set out below, as supplemented and amended by the terms and conditions applicable to the White Form eIPO service.

(d) In this section, references to ""you,'' ""applicants,'' ""joint applicants'' and other like references shall, if the context so permits, include references to both nominees and principals on whose behalf HKSCC Nominees or the eIPO Service Provider is applying for Hong Kong OÅer Shares, and references to the making of an application shall, if the context so permits, include references to making applications electronically by giving instructions to HKSCC or by submitting an application to the designated eIPO Service Provider through the designated website for the White Form eIPO service.

(e) Applicants should read this prospectus carefully, including the terms and conditions set out herein and in the Application Forms or imposed by HKSCC and/or the eIPO Service Provider prior to making any application for Hong Kong OÅer Shares.

2. OFFER TO PURCHASE THE HONG KONG OFFER SHARES

(a) You oÅer to purchase from us at the oÅer price the number of the Hong Kong OÅer Shares indicated in your Application Form (or any smaller number in respect of which your application is accepted) on the terms and conditions set out in this prospectus and the relevant Application Form.

(b) For applicants using Application Forms, a refund cheque in respect of the surplus application monies (if any) representing the Hong Kong OÅer Shares applied for but not allocated to you and representing the diÅerence (if any) between the Ñnal OÅer Price and the maximum OÅer Price (including the brokerage, SFC transaction levy and the Hong Kong Stock Exchange trading fee attributable thereto), is expected to be sent to you at your own risk to the address stated on your Application Form on or before Thursday, April 26, 2007.

Details of the procedure for refunds relating to each of the Hong Kong Public OÅering methods are contained below in the sections headed ""Ì 7. If your application for the Hong Kong OÅer Shares is successful (in whole or in part),'' ""Ì 8. Refund of application monies'' and ""Ì 10. Additional information for applicants applying by giving electronic application instructions to HKSCC''.

(c) Any application may be rejected in whole or in part.

(d) Applicants under the Hong Kong Public OÅering should note that in no circumstances (save for those provided under section 40 of the Hong Kong Companies Ordinance) can applications be withdrawn once submitted. For the avoidance of doubt, our company and all other parties involved in the preparation of this prospectus acknowledge that each CCASS Participant who gives, or causes to give, electronic application instructions to HKSCC via CCASS is a person who may be entitled to compensation under section 40 of the Hong Kong Companies Ordinance.

281 FURTHER TERMS AND CONDITIONS OF THE HONG KONG PUBLIC OFFERING

3. ACCEPTANCE OF YOUR OFFER (a) The Hong Kong OÅer Shares will be allocated after the application lists close. We expect to announce the Ñnal number of Hong Kong OÅer Shares, the level of applications under the Hong Kong Public OÅering and the basis of allocations of the Hong Kong OÅer Shares in the South China Morning Post (in English) and the Hong Kong Economic Times (in Chinese) on Thursday, April 26, 2007. (b) The results of allocations of the Hong Kong OÅer Shares under the Hong Kong Public OÅering, including the Hong Kong identity card numbers, passport numbers or Hong Kong business registration numbers (where applicable) of successful applicants and the number of Hong Kong OÅer Shares successfully applied for, will be made available on Thursday, April 26, 2007 in the manner described in the section headed ""How To Apply For Hong Kong OÅer Shares Ì 10. Results of Allocations.'' (c) We may accept your oÅer to purchase (if your application is received, valid, processed and not rejected) by announcing the basis of allocations and/or making available the results of allocations publicly. (d) If we accept your oÅer to purchase (in whole or in part), there will be a binding contract under which you will be required to purchase the Hong Kong OÅer Shares in respect of which your oÅer has been accepted if the conditions of the Global OÅering are satisÑed or the Global OÅering is not otherwise terminated. Further details are contained in the section headed ""Structure of the Global OÅering.'' (e) You will not be entitled to exercise any remedy of rescission for innocent misrepresentation at any time after acceptance of your application. This does not aÅect any other right you may have.

4. EFFECT OF MAKING ANY APPLICATION (a) By completing and submitting any Application Form you:

¬ instruct and authorize our company and/or the Joint Global Coordinators (or their respective agents or nominees) to execute any transfer forms, contract notes or other documents on your behalf and to do on your behalf all other things necessary to eÅect the registration of any Hong Kong OÅer Shares allocated to you in your name(s) or HKSCC Nominees, as the case may be, as required by our articles of association and otherwise to give eÅect to the arrangements described in this prospectus and the relevant Application Form;

¬ undertake to sign all documents and to do all things necessary to enable you or HKSCC Nominees, as the case may be, to be registered as the holder of the Hong Kong OÅer Shares allocated to you, and as required by our articles of association;

¬ represent, warrant and undertake that the H Shares have not been and will not be registered under the U.S. Securities Act and you are outside the United States when completing the Application Form and are not a United States person (as deÑned in Regulation S under the U.S. Securities Act);

¬ conÑrm that you have received and/or read a copy of this prospectus and have only relied on the information and representations contained in this prospectus in making your application, and will not rely on any other information or representation save as set out in any supplement to this prospectus;

¬ conÑrm that you understand entirely that our registered share capital comprises A Shares and H Shares and that holders of H Shares shall have the same right as holders of A Shares save as to certain rights which holders of H Shares are entitled;

¬ agree (without prejudice to any other rights which you may have) that once your application has been accepted, you may not rescind it because of an innocent misrepresentation;

282 FURTHER TERMS AND CONDITIONS OF THE HONG KONG PUBLIC OFFERING

¬ (if the application is made for your own beneÑt) warrant that the application is the only application which will be made for your beneÑt on a white or yellow Application Form or by giving electronic application instructions to HKSCC via CCASS or to the designated eIPO Service Provider via White Form eIPO service;

¬ (if the application is made by an agent on your behalf) warrant that you have validly and irrevocably conferred on your agent all necessary power and authority to make the application;

¬ (if you are an agent for another person) warrant that the application is the only application which will be made for the beneÑt of that other person on a white or yellow Application Form or by giving electronic application instructions to HKSCC via CCASS or to the designated eIPO Service Provider via White Form eIPO service, and that you are duly authorized to sign the Application Form or to give electronic application instruction as that other person's agent;

¬ undertake and conÑrm that you (if the application is made for your beneÑt) or the person(s) for whose beneÑt you have made the application have not applied for or taken up or indicated an interest in or received or been placed or allocated (including conditionally and/or provisionally) and will not apply for or take up or indicate any interest in any OÅer Shares in the International OÅering, nor otherwise participate in the International OÅering;

¬ warrant the truth and accuracy of the information contained in your application;

¬ agree that your application, any acceptance of it and the resulting contract will be governed by and construed in accordance with the laws of Hong Kong;

¬ undertake and agree to accept the H Shares applied for, or any lesser number allocated to you under the application;

¬ authorize our company to place your name(s) or HKSCC Nominees, as the case may be, on our register of members as the holder(s) of any Hong Kong OÅer Shares allocated to you, and our company and/or our agents to send any H Share certiÑcate(s) (where applicable) and/or any refund cheque (where applicable) to you or (in case of joint applicants) the Ñrst-named applicant in the Application Form by ordinary post at your own risk to the address stated on your Application Form (except if you have applied for 1,000,000 Hong Kong OÅer Shares or more and have indicated in your Application Form your wish to collect your refund cheque and H Share certiÑcates (where applicable) in person);

¬ understand that these declarations and representations will be relied upon by our company and the Joint Global Coordinators and the Joint Lead Managers in deciding whether or not to allocate any Hong Kong OÅer Shares in response to your application;

¬ if the laws of any place outside Hong Kong are applicable to your application, you agree and warrant that you have complied with all such laws and none of our company, the Joint Global Coordinators, the Joint Sponsors, the Joint Bookrunners, the Joint Lead Managers and the Underwriters, nor any of their respective oÇcers or advisors will infringe any laws outside Hong Kong as a result of the acceptance of your oÅer to purchase, or any actions arising from your rights and obligations under the terms and conditions contained in this prospectus;

¬ agree with our company and each shareholder of our company, and our company agrees with each of our shareholders, to observe and comply with the PRC Company Law, the Special Regulations and our Articles of Association;

¬ agree with our company, and each shareholder, director, supervisor, manager and oÇcer of our company, and our company acting for itself and for each director, supervisor, manager and oÇcer agrees with each shareholder of our company to refer all diÅerences and claims arising from our articles of association or any rights or obligations conferred or imposed by the PRC Company Law or other relevant laws and administrative regulations concerning our aÅairs to arbitration in accordance with our articles of association, and any reference to arbitration shall

283 FURTHER TERMS AND CONDITIONS OF THE HONG KONG PUBLIC OFFERING

be deemed to authorize the arbitration tribunal to conduct hearings in open session and to publish its award, which shall be Ñnal and conclusive;

¬ agree with our company and each shareholder of our company that the H Shares in our company are freely transferable by the holder thereof; and

¬ authorize our company to enter into a contract on your behalf with each of our directors, supervisors and oÇcers whereby each such director, supervisor and oÇcer undertakes to observe and comply with his obligations to shareholders as stipulated in our articles of association;

¬ agree that our company, the Joint Sponsors, the Joint Global Coordinators, the Joint Bookrunners, the Joint Lead Managers, the Underwriters and any of their respective directors, oÇcers, employees, agents or advisors and any other parties involved in the Global OÅering are liable only for and that you have only relied upon, the information and representations contained in this prospectus and any supplement to this prospectus;

¬ acknowledge and agree that you have not relied upon the information contained in the information packs or announcements relating to our A Share OÅering made available on the website of Hong Kong Exchanges and Clearing Limited, and that our company, the Joint Sponsors, the Joint Global Coordinators, the Joint Bookrunners, the Joint Lead Managers, the Underwriters and any of their respective directors, oÇcers, employees, agents or advisors do not make any express or implied representation or warranty as to the accuracy or completeness of such information and expressly disclaim any and all liability in relation to such information, or any omission from or inaccuracies or errors in such information;

¬ agree to disclose to our company, our registrar, the receiving bankers, the Joint Global Coordinators, the Joint Lead Managers and their respective advisors and agents any personal data or other information which they require about you or the person(s) for whose beneÑt you have made the application.

(b) If you apply for the Hong Kong OÅer Shares using a yellow Application Form, in addition to the conÑrmations and agreements referred to in (a) above, you (and if you are joint applicants, each of you jointly and severally) agree that:

¬ any Hong Kong OÅer Shares allocated to you shall be registered in the name of HKSCC Nominees and deposited directly into CCASS operated by HKSCC for credit to your CCASS Investor Participant stock account or the stock account of your designated CCASS Participant in accordance with your election on the Application Form;

¬ each of HKSCC and HKSCC Nominees reserves the right (1) not to accept any or part of such allotted Hong Kong OÅer Shares issued in the name of HKSCC Nominees or not to accept such allotted Hong Kong OÅer Shares for deposit into CCASS; (2) to cause such allotted Hong Kong OÅer Shares to be withdrawn from CCASS and transferred into your name (or, if you are a joint applicant, to the Ñrst-named applicant) at your own risk and costs; and (3) to cause such allotted Hong Kong OÅer Shares to be issued in your name (or, if you are a joint applicant, to the Ñrst-named applicant) and in such a case, to post the H Share certiÑcates for such allotted Hong Kong OÅer Shares at your own risk to the address on your Application Form by ordinary post or to make available the same for your collection;

¬ each of HKSCC and HKSCC Nominees may adjust the number of allotted Hong Kong OÅer Shares issued in the name of HKSCC Nominees;

¬ neither HKSCC nor HKSCC Nominees shall have any liability for the information and representations not so contained in this prospectus and the Application Form;

¬ neither HKSCC nor HKSCC Nominees shall be liable to you in any way.

284 FURTHER TERMS AND CONDITIONS OF THE HONG KONG PUBLIC OFFERING

(c) In addition, by giving electronic application instructions to HKSCC or instructing your broker or custodian who is a CCASS Broker Participant or a CCASS Custodian Participant to give such instructions to HKSCC, you (and if you are joint applicants, each of you jointly and severally) are deemed to have done the following things. Neither HKSCC nor HKSCC Nominees shall be liable to our company or any other person in respect of the things mentioned below:

¬ instructed and authorized HKSCC to cause HKSCC Nominees (acting as nominee for the relevant CCASS Participants) to apply for the Hong Kong OÅer Shares on your behalf;

¬ instructed and authorized HKSCC to arrange payment of the maximum oÅer price, brokerage, SFC transaction levy and Hong Kong Stock Exchange trading fee by debiting your designated bank account and, in the case of a wholly or partially unsuccessful application and/or the oÅer price is less than the oÅer price per H share initially paid on application, refund of the application monies, in each case including brokerage, SFC transaction levy and Hong Kong Stock Exchange trading fee, by crediting your designated bank account;

¬ (where a white Application Form is signed by HKSCC Nominees on behalf of persons who have given electronic application instructions to apply for the Hong Kong OÅer Shares) in addition to the conÑrmations and agreements set out in paragraph (a), above, instructed and authorized HKSCC to cause HKSCC Nominees to do on your behalf all the things which it has stated to do on your behalf in the white Application Form, and the following: Ì agree that the Hong Kong OÅer Shares to be allocated shall be issued in the name of HKSCC Nominees and deposited directly into CCASS for the credit of the stock account of the CCASS Participant who has inputted electronic application instructions on your behalf or your CCASS Investor Participant stock account; Ì undertake and agree to accept the Hong Kong OÅer Shares in respect of which you have given electronic application instructions or any lesser number; Ì (if the electronic application instructions are given for your own beneÑt) declare that only one set of electronic application instructions has been given for your beneÑt; Ì (if you are an agent for another person) declare that you have only given one set of electronic application instructions for the beneÑt of that other person and that you are duly authorized to give those instructions as that other person's agent; Ì understand that the above declaration will be relied upon by our company, the directors and the Joint Global Coordinators in deciding whether or not to make any allotment of Hong Kong OÅer Shares in respect of the electronic application instructions given by you and that you may be prosecuted if you make a false declaration; Ì authorize our company to place the name of HKSCC Nominees on the register of members of our company as the holder of the Hong Kong OÅer Shares allotted in respect of your electronic application instructions and to send H Share certiÑcate(s) and/or refund monies in accordance with the arrangements separately agreed between our company and HKSCC; Ì conÑrm that you have read the terms and conditions and application procedures set out in this prospectus and agree to be bound by them; Ì conÑrm that you have only relied on the information and representations in this prospectus in giving your electronic application instructions or instructing your broker or custodian to give electronic application instructions on your behalf; Ì agree (without prejudice to any other rights which that person may have) that once the application of HKSCC Nominees has been accepted, the application cannot be rescinded for innocent misrepresentation;

285 FURTHER TERMS AND CONDITIONS OF THE HONG KONG PUBLIC OFFERING

Ì agree that any application made by HKSCC Nominees on behalf of you pursuant to the electronic application instructions given by you is irrevocable before May 15, 2007, such agreement to take eÅect as a collateral contract with our company and to become binding when you give the instructions and such collateral contract to be in consideration of our company agreeing that we will not oÅer any Hong Kong OÅer Shares to any person before May 15, 2007, except by means of one of the procedures referred to in this prospectus. However, HKSCC Nominees may revoke the application before May 15, 2007 if a person responsible for this prospectus under Section 40 of the Hong Kong Companies Ordinance gives a public notice under that section which excludes or limits the responsibility of that person for this prospectus;

Ì agree that once the application of HKSCC Nominees is accepted, neither that application nor your electronic application instructions can be revoked, and that acceptance of that application will be evidenced by the announcement of the results of the Hong Kong Public OÅering published by our company;

Ì agree to the arrangements, undertakings and warranties speciÑed in the participant agreement between you and HKSCC, read with the General Rules of CCASS and the CCASS Operational Procedures, in respect of the giving of electronic application instructions relating to Hong Kong OÅer Shares;

Ì agree with our company, for itself and for the beneÑt of each of the shareholders of our company (and so that our company will be deemed by its acceptance in whole or in part of the application by HKSCC Nominees to have agreed, for itself and on behalf of each of the shareholders of our company, with each CCASS Participant giving electronic application instructions) to observe and comply with the PRC Company Law, the Special Regulations and our articles of association; and

Ì agree with our company, for itself and for the beneÑt of each of the shareholders of our company and each director, supervisor, manager and other oÇcer (and so that our company will be deemed by its acceptance in whole or in part of this application to have agreed, for itself and on behalf of each of the shareholders of our company and each director, supervisor, manager and other oÇcer, with each CCASS Participant giving electronic application instructions):

(i) to refer all diÅerences and claims arising from our articles of association or any rights or obligations conferred or imposed by the PRC Company Law or other relevant laws and administrative regulations concerning its aÅairs to arbitration in accordance with our articles of association; and

(ii) that any reference to arbitration shall be deemed to authorize the arbitration tribunal to conduct hearings in open session and to publish its award, which arbitration shall be Ñnal and conclusive.

(d) Our company, the Joint Global Coordinators, the Joint Sponsors, the Joint Bookrunners, the Joint Lead Managers, the Underwriters, the eIPO Service Provider and their respective directors and any other parties involved in the Global OÅering are entitled to rely on any warranty, representation or declaration made by you in your application.

(e) All the warranties, representations, declarations and obligations expressed to be made, given or assumed by or imposed on the joint applicants shall be deemed to have been made, given or assumed by or imposed on the applicants jointly and severally.

286 FURTHER TERMS AND CONDITIONS OF THE HONG KONG PUBLIC OFFERING

5. MULTIPLE APPLICATIONS (a) It will be a term and condition of all applications that by completing and delivering an Application Form or giving electronic application instructions, you:

¬ (if the application is made for your own beneÑt) warrant that this is the only application which will be made for your beneÑt on a white or yellow Application Form or by giving electronic application instructions to HKSCC or to the designated eIPO Service Provider through the White Form eIPO service;

¬ (if you are an agent for another person) warrant that reasonable enquiries have been made of that other person that this is the only application which will be made for the beneÑt of that other person on a white or yellow Application Form or by giving electronic application instructions to HKSCC or to the designated eIPO Service Provider through the White Form eIPO service, and that you are duly authorized to sign the Application Form as that other person's agent. (b) Except where you are a nominee and provide the information required to be provided in your application, all of your applications will be rejected as multiple applications if you, or you and your joint applicant(s) together:

¬ make more than one application (whether individually or jointly) on a white or yellow Application Form or by giving electronic application instructions to HKSCC or to the designated eIPO Service Provider through the White Form eIPO service;

¬ both apply (whether individually or jointly) on one white Application Form and one yellow Application Form or on one white or yellow Application Form and give electronic application instructions to HKSCC or to the designated eIPO Service Provider through the White Form eIPO service;

¬ apply on one white or yellow Application Form (whether individually or jointly) or by giving electronic application instructions to HKSCC or to the designated eIPO Service Provider through the White Form eIPO, for more than 50% of the H Shares initially being oÅered for public subscription under the Hong Kong Public OÅering (that is, 122,137,000 H Shares), as more particularly described in the section entitled ""Structure of the Global OÅering Ì The Hong Kong Public OÅering;'' or

¬ have applied for or taken up, or indicated an interest for, or have been or will be placed (including conditionally and/or provisionally) OÅer Shares under the International OÅering. (c) All of your applications will also be rejected as multiple applications if more than one application is made for your beneÑt (including the part of the application made by HKSCC Nominees acting on electronic application instructions). If an application is made by an unlisted company and

¬ the only business of that company is dealing in securities; and

¬ you exercise statutory control over that company, then the application will be treated as being for your beneÑt. Unlisted company means a company with no equity securities listed on the Hong Kong Stock Exchange. Statutory control means you: Ì control the composition of the board of directors of our company; or Ì control more than half of the voting power of our company; or Ì hold more than half of the issued share capital of our company (not counting any part of it which carries no right to participate beyond a speciÑed amount in a distribution of either proÑts or capital).

287 FURTHER TERMS AND CONDITIONS OF THE HONG KONG PUBLIC OFFERING

6. CIRCUMSTANCES IN WHICH YOU WILL NOT BE ALLOTTED HONG KONG OFFER SHARES

You should note the following situations in which Hong Kong OÅer Shares will not be allotted to you or your application is liable to be rejected:

(a) If your application is revoked:

By completing and submitting an Application Form you agree that your application or the application made by HKSCC Nominees on your behalf cannot be revoked on or before May 15, 2007. This agreement will take eÅect as a collateral contract with our company, and will become binding when you lodge your Application Form or submit your electronic application instructions to HKSCC or to the designated eIPO Service Provider. This collateral contract will be in consideration of our company agreeing that we will not oÅer any Hong Kong OÅer Shares to any person on or before May 15, 2007 except by means of one of the procedures referred to in this prospectus.

Your application or the application made by HKSCC Nominees on your behalf may be revoked on or before May 15, 2007 if a person responsible for this prospectus under section 40 of the Hong Kong Companies Ordinance gives a public notice under that section which excludes or limits the responsibility of that person for this prospectus.

If any supplement to this prospectus is issued, applicant(s) who have already submitted an application may or may not (depending on the information contained in the supplement) be notiÑed that they can withdraw their applications. If applicant(s) have not been so notiÑed, or if applicant(s) have been notiÑed but have not withdrawn their applications in accordance with the procedure to be notiÑed, all applications that have been submitted remain valid and may be accepted. Subject to the above, an application once made is irrevocable and applicants shall be deemed to have applied on the basis of this prospectus as supplemented.

If your application or the application made by HKSCC Nominees on your behalf has been accepted, it cannot be revoked. For this purpose, acceptance of applications which are not rejected will be constituted by notiÑcation in the press of the results of allocation, and where such basis of allocation is subject to certain conditions or provides for allocation by ballot, such acceptance will be subject to the satisfaction of such conditions or results of the ballot respectively.

(b) If our company, the Joint Global Coordinators or the eIPO Service Provider (where applicable) or their respective agents exercise their discretion to reject your application:

We and the Joint Global Coordinators (as agent for our company) and the eIPO Service Provider, or their respective agents and nominees, have full discretion to reject or accept any application, or to accept only part of any application, without having to give any reasons for any rejection or acceptance.

(c) If the allotment of Hong Kong OÅer Shares is void:

The allotment of Hong Kong OÅer Shares to you or to HKSCC Nominees (if you give electronic application instructions or apply by a yellow Application Form) will be void if the Listing Committee of the Hong Kong Stock Exchange does not grant permission to list the H Shares either:

¬ within three weeks from the closing of the application lists; or

¬ within a longer period of up to six weeks if the Listing Committee of the Hong Kong Stock Exchange notiÑes our company of that longer period within three weeks of the closing date of the application lists.

288 FURTHER TERMS AND CONDITIONS OF THE HONG KONG PUBLIC OFFERING

(d) In the following circumstances:

¬ you make multiple applications or suspected multiple applications;

¬ you or the person for whose beneÑt you apply have applied for or taken up, or indicated an interest for, or have been or will be placed or allocated (including conditionally and/or provisionally) OÅer Shares in the International OÅering. By Ñlling in any of the Application Forms or giving electronic instructions to HKSCC or to the designated eIPO Service Provider through the White Form eIPO service, you agree not to apply for OÅer Shares in the International OÅering. Reasonable steps will be taken to identify and reject applications in the Hong Kong Public OÅering from investors who have received OÅer shares in the International OÅering, and to identify and reject indications of interest in the International OÅering from investors who have received Hong Kong OÅer Shares in the Hong Kong Public OÅering;

¬ you apply for more than 50% of the Hong Kong OÅer Shares initially being oÅered under the Hong Kong Public OÅering (that is, 122,137,000 H Shares);

¬ your payment is not made correctly or you pay by cheque or banker's cashier order and the cheque or banker's cashier order is dishonored upon its Ñrst presentation;

¬ your Application Form is not completed correctly and in accordance with the instructions;

¬ your electronic application instructions through the White Form eIPO service are not completed in accordance with the instructions, terms and conditions set out in the designated website at www.eipo.com.hk;

¬ either of the Hong Kong Underwriting Agreement or the International Underwriting Agreement does not become unconditional; or

¬ either of the Hong Kong Underwriting Agreement or the International Underwriting Agreement is terminated in accordance with their respective terms.

7. IF YOUR APPLICATION FOR HONG KONG OFFER SHARES IS SUCCESSFUL App 1A 15(2)(g) (IN WHOLE OR IN PART) No temporary document of title will be issued in respect of the H Shares. No receipt will be issued for sums paid on application. You will receive one share certiÑcate for all of the Hong Kong OÅer Shares issued to you under the Hong Kong Public OÅering (except pursuant to applications made on yellow Application Forms or by electronic application instructions to HKSCC via CCASS, in which case share certiÑcates will be deposited in CCASS). H Share certiÑcates will only become valid certiÑcates of title at 8:00 a.m. on Friday, April 27, 2007 provided that the Hong Kong Public OÅering has become unconditional in all respects and the right of termination described in the section entitled ""Underwriting Ì Underwriting Arrangements and Expenses Ì Hong Kong Public OÅering Ì Hong Kong Underwriting Agreement Ì Grounds for Termination'' has not been exercised.

(a) If you apply using a white Application Form: If you apply for 1,000,000 Hong Kong OÅer Shares or more on a white Application Form and have indicated your intention in your Application Form to collect your H Share certiÑcate(s) and/or refund cheque (where applicable) from Computershare Hong Kong Investor Services Limited and have provided all information required by your Application Form, you may collect it/them in person from Computershare Hong Kong Investor Services Limited at Rooms 1712-1716, 17th Floor, Hopewell Centre, 183 Queen's Road East, Wanchai, Hong Kong from 9:00 a.m. to 1:00 p.m. on Thursday, April 26, 2007 or such other date as

289 FURTHER TERMS AND CONDITIONS OF THE HONG KONG PUBLIC OFFERING notiÑed by our company in the newspapers as the date of despatch/collection of H Share certiÑcates/refund cheques. If you are an individual who opts for personal collection, you must not authorize any other person to make collection on your behalf. If you are a corporate applicant which opts for personal collection, you must attend by your authorized representative bearing a letter of authorization from your corporation stamped with your corporation's chop. Both individuals and authorized representatives (if applicable) must produce, at the time of collection, evidence of identity acceptable to Computershare Hong Kong Investor Services Limited. If you do not collect your refund cheque(s) and/or H Share certiÑcate(s) personally within the time speciÑed for collection, they will be sent to the address as speciÑed in your Application Form promptly thereafter by ordinary post and at your own risk. If you apply for less than 1,000,000 Hong Kong OÅer Shares or if you apply for 1,000,000 Hong Kong OÅer Shares or more but have not indicated on your Application Form that you will collect your refund cheque(s) and/or H Share certiÑcate(s) (where applicable) in person, your refund cheque(s) and/or H Share certiÑcate(s) (where applicable) will be sent to the address on your Application Form on Thursday, April 26, 2007, by ordinary post and at your own risk.

(b) If you apply using a yellow Application Form: App 1A 15(2)(g) If you apply for Hong Kong OÅer Shares using a yellow Application Form and your application is wholly or partially successful, your H Share certiÑcate(s) will be issued in the name of HKSCC Nominees and deposited into CCASS for credit to your CCASS Investor Participant stock account or the stock account of your designated CCASS Participant as instructed by you in your Application Form at the close of business on Thursday, April 26, 2007, or in the event of a contingency, on any other date as shall be determined by HKSCC or HKSCC Nominees. If you are applying through a designated CCASS Participant (other than a CCASS Investor Participant) on a yellow Application Form for Hong Kong OÅer Shares credited to the stock account of your designated CCASS Participant (other than a CCASS Investor Participant), you can check the number of Hong Kong OÅer Shares allocated to you with that CCASS Participant. If you are applying as a CCASS Investor Participant, our company expects to publish the results of CCASS Investor Participants' applications together with the results of the Hong Kong Public OÅering in the newspapers on Thursday, April 26, 2007 in the manner described in ""How To Apply For Hong Kong OÅer Shares Ì 10. Results of Allocations''. You should check the announcement published by our company and report any discrepancies to HKSCC before 5:00 p.m. on Thursday, April 26, 2007 or such other date as shall be determined by HKSCC or HKSCC Nominees. Immediately after the credit of the Hong Kong OÅer Shares to your stock account, you can check your new account balance via the CCASS Phone System and the CCASS Internet System (under the procedures contained in HKSCC's ""An Operating Guide for Investor Participants'' in eÅect from time to time). HKSCC will also make available to you an activity statement showing the number of Hong Kong OÅer Shares credited to your stock account. If you apply for 1,000,000 Hong Kong OÅer Shares or more and you have elected on your yellow Application Form to collect your refund cheque (where applicable) in person, please follow the same procedure, as those for white Application Form applicants as described above. If you have applied for 1,000,000 Hong Kong OÅer Shares or above and have not indicated on your Application Form that you will collect your refund cheque (if any) in person, or if you have applied for less than 1,000,000 Hong Kong OÅer Shares, your refund cheque (if any) will be sent to the address on your Application Form on the date of despatch, which is expected to be on Thursday, April 26, 2007, by ordinary post and at your own risk.

(c) If you apply through White Form eIPO: If you apply for 1,000,000 Hong Kong OÅer Shares or more through the White Form eIPO service by submitting an electronic application to the designated elPO Service Provider through the designated website at www.eipo.com.hk and your application is wholly or partially successful, you may collect your H Share

290 FURTHER TERMS AND CONDITIONS OF THE HONG KONG PUBLIC OFFERING certiÑcate(s) and/or refund cheque(s) (where applicable) in person from Computershare Hong Kong Investor Services Limited at Shops 1712-1716, 17th Floor, Hopewell Center, 183 Queen's Road East, Wanchai, Hong Kong, from 9:00 a.m. to 1:00 p.m. on Thursday, April 26, 2007, or such other date as notiÑed by our company in the newspapers as the date of dispatch/collection of H Share certiÑcates/refund cheques.

If you do not collect your H Share certiÑcate(s) and/or refund cheque(s) personally within the time speciÑed for collection, they will be sent to the address speciÑed in your application instructions to the designated eIPO Service Provider promptly thereafter by ordinary post and at your own risk.

If you apply for less than 1,000,000 Hong Kong OÅer Shares, your H Share certiÑcate(s) and/or refund cheque(s) (where applicable) will be sent to the address speciÑed in your application instructions to the designated eIPO Service Provider through the designated website at www.eipo.com.hk on Thursday, April 26, 2007 by ordinary post and at your own risk.

Please also note the additional information relating to refund of application monies overpaid, application money underpaid or applications rejected by the designated eIPO Service Provider set out in ""Ì 9. Additional Information for Applicants Applying Through White Form eIPO.''

8. REFUND OF APPLICATION MONIES

Your application monies, or the appropriate portion thereof, together with the related brokerage of 1%, SFC transaction levy of 0.004% and Hong Kong Stock Exchange trading fee of 0.005%, will be refunded if:

¬ your application is rejected, not accepted or accepted in part only or if you do not receive any Hong Kong OÅer Shares for any of the reasons set out above in the section headed ""Ì 6. Circumstances in which you will not be allotted Hong Kong OÅer Shares;

¬ the OÅer Price as Ñnally determined is less than the oÅer price of HK$5.86 per H Share (excluding brokerage, SFC transaction levy and Hong Kong Stock Exchange trading fee thereon) initially paid on application;

¬ the conditions of the Hong Kong Public OÅering are not fulÑlled in accordance with the section headed ""Structure of the Global OÅering Ì Conditions of the Hong Kong Public OÅering'';

¬ any application is revoked or any allotment pursuant thereto has become void.

No interest will be paid thereon. All interest accrued on such monies prior to the date of refund will be retained for our beneÑt.

In a contingency situation involving a substantial over-subscription, at the discretion of our company and the Joint Global Coordinators, cheques for applications for certain small denominations of Hong Kong OÅer Shares (apart from successful and reserved applications) may not be cleared.

Refund of your application monies (if any) will be made on Thursday, April 26, 2007 in accordance with the various arrangements as described above. All refunds will be made by a cheque crossed ""Account Payee Only'' made out to you, or if you are joint applicants, to the Ñrst-named applicant. Part of your Hong Kong identity card number or passport number, or, if you are joint applicants, part of the Hong Kong identity card number or passport number of the Ñrst-named applicant, provided by you may be printed on your refund cheque, if any. Such data would also be transferred to a third party for refund purposes. Your banker may require veriÑcation of your Hong Kong identity card number or passport number before encashment of your refund cheque. Inaccurate completion of your Hong Kong identity card number or passport number may lead to delay in encashment of or may invalidate your refund cheque. It is intended that special eÅorts will be made to avoid any undue delay in refunding application monies where appropriate.

291 FURTHER TERMS AND CONDITIONS OF THE HONG KONG PUBLIC OFFERING

9. ADDITIONAL INFORMATION FOR APPLICANTS APPLYING THROUGH WHITE FORM eIPO For the purposes of allocating Hong Kong OÅer Shares, each applicant giving electronic application instructions through the White Form eIPO service to the elPO Service Provider through the designated website at www.eipo.com.hk will be treated as an applicant. If your payment of application monies is insuÇcient, or in excess of the required amount, having regard to the number of OÅer Shares for which you have applied, or if your application is otherwise rejected by the designated eIPO Service Provider, the designated elPO Service Provider may adopt alternative arrangements for the refund of monies to you. Please refer to the additional information provided by the designated eIPO Service Provider on the designated website at www.eipo.com.hk. Otherwise, any monies payable to you due to a refund for any of the reasons set out in ""Ì 8. Refund of Application Monies'' shall be made pursuant to the arrangements described in ""Ì 7. If your application for Hong Kong OÅer Shares is successful (in whole or in part) Ì (c) If you apply through White Form eIPO.''

10. ADDITIONAL INFORMATION FOR APPLICANTS APPLYING BY GIVING ELECTRONIC APPLICATION INSTRUCTIONS TO HKSCC (a) Allocation of Hong Kong OÅer Shares For the purposes of allocating Hong Kong OÅer Shares, HKSCC Nominees will not be treated as an applicant. Instead, each CCASS Participant who gives electronic application instructions or each person for whose beneÑt each such instructions is given will be treated as an applicant.

(b) Deposit of H Share CertiÑcates into CCASS and Refund of Application Monies

¬ No temporary document of title will be issued. No receipt will be issued for sums on paid application.

¬ If your application is wholly or partially successful, your share certiÑcate(s) will be issued in the name of HKSCC Nominees and deposited into CCASS for the credit of the stock account of the CCASS Participant which you have instructed to give electronic application instructions on your behalf or your CCASS Investor Participant stock account at the close of business on Thursday, April 26, 2007, or, in the event of a contingency, on any other date as shall be determined by HKSCC or HKSCC Nominees Limited.

¬ Our company expects to publish the application results of CCASS Participants (and where the CCASS Participant is a broker or custodian, our company will include information relating to the relevant beneÑcial owner), your Hong Kong identity card/passport number or other identiÑcation code (Hong Kong business registration number for corporations) and the basis of allotment of the Hong Kong Public OÅering in the newspapers on Thursday, April 26, 2007 in the manner described in ""How to Apply for Hong Kong OÅer Shares Ì 10. Results of Allocations''. You should check the announcement published by our company and report any discrepancies to HKSCC before 5:00 p.m. on Thursday, April 26, 2007 or such other date as shall be determined by HKSCC or HKSCC Nominees.

¬ If you have instructed your broker or custodian to give electronic application instructions on your behalf, you can also check the number of Hong Kong OÅer Shares allotted to you and the amount of refund monies (if any) payable to you with that broker or custodian.

¬ If you have applied as a CCASS Investor Participant, you can also check the number of Hong Kong OÅer Shares allotted to you and the amount of refund monies (if any) payable to you via the CCASS Phone System and the CCASS Internet System (under the procedures contained in HKSCC's ""An Operating Guide for Investor Participants'' in eÅect from time to time) on Thursday, April 26, 2007. HKSCC will also make available to you an activity statement showing

292 FURTHER TERMS AND CONDITIONS OF THE HONG KONG PUBLIC OFFERING

the number of Hong Kong OÅer Shares credited to your CCASS Investor Participant stock account and the amount of refund monies (if any) credited to your designated bank account.

¬ Refund of your application monies (if any) in respect of wholly and partially unsuccessful applications and/or diÅerence between the OÅer Price and the oÅer price per H Share initially paid on application, in each case including brokerage of 1%, SFC transaction levy of 0.004% and Hong Kong Stock Exchange trading fee of 0.005%, will be credited to your designated bank account or the designated bank account of your broker or custodian on Thursday, April 26, 2007. No interest will be paid thereon.

11. PERSONAL DATA The main provisions of the Personal Data (Privacy) Ordinance (Chapter 486 of the Laws of Hong Kong) (the ""Ordinance'') came into eÅect in Hong Kong on December 20, 1996. This Personal Information Collection Statement informs the applicant for and holder of our H Shares of the policies and practices of our company and our share registrars in relation to personal data and the Ordinance.

(a) Reasons for the collection of your personal data From time to time it is necessary for applicants for securities or registered holders of securities to supply their latest correct personal data to our company and our H Share registrar when applying for securities or transferring securities into or out of their names or in procuring the services of the registrars. Failure to supply the requested data may result in your application for securities being rejected or in delay or inability of our company or the H Share registrar to eÅect transfers or otherwise render their services. It may also prevent or delay registration or transfer of the Hong Kong OÅer Shares which you have successfully applied for and/or the despatch of H Share CertiÑcate(s), and/or the despatch or encashment of refund cheque(s) to which you are entitled. It is important that holders of securities inform us and our H Share registrar immediately of any inaccuracies in the personal data supplied.

(b) Purposes The personal data of the applicants and the holders of securities may be used, held and/or stored (by whatever means) for the following purposes:

¬ processing of your application and refund cheque, where applicable, and veriÑcation of compliance with the terms and application procedures set out in the Application Forms and this prospectus and announcing results of allocations of the Hong Kong OÅer Shares;

¬ enabling compliance with all applicable laws and regulations in Hong Kong and elsewhere;

¬ registering new issues or transfers into or out of the name of holders of securities including, where applicable, in the name of HKSCC Nominees;

¬ maintaining or updating the registrars of holders of securities of our company;

¬ conducting or assisting in the conduct of signature veriÑcations, any other veriÑcation or exchange of information;

¬ establishing beneÑt entitlements of holders of securities of our company, such as dividends, rights issues and bonus issues;

¬ distributing communications from our company and our subsidiaries;

¬ compiling statistical information and shareholder proÑles;

¬ making disclosures as required by laws, rules or regulations;

¬ disclosing relevant information to facilitate claims on entitlements; and

293 FURTHER TERMS AND CONDITIONS OF THE HONG KONG PUBLIC OFFERING

¬ any other incidental or associated purposes relating to the above and/or to enable our company and our H Share registrar to discharge our obligations to holders of securities and/or regulators and/or other purpose to which the holders of securities may from time to time agree.

(c) Transfer of personal data Personal data held by our company and our H Share registrar relating to the applicants and the holders of securities will be kept conÑdential but our company and our H Share registrar, to the extent necessary for achieving the above purposes or any of them, may make such enquiries as they consider necessary to conÑrm the accuracy of the personal data and in particular, they may disclose, obtain, transfer (whether within or outside Hong Kong) the personal data of the applicants and the holders of securities to, from or with any and all of the following persons and entities:

¬ our company or our respective appointed agents such as Ñnancial advisors and receiving bankers;

¬ HKSCC and HKSCC Nominees, who will use the personal data for the purposes of operating CCASS (in cases where the applicants have requested for the Hong Kong OÅer Shares to be deposited into CCASS);

¬ any agents, contractors or third party service providers who oÅer administrative, telecommunications, computer, payment or other services to our company and/or our H share registrar in connection with the operation of their business;

¬ the Hong Kong Stock Exchange, the SFC and any other statutory, regulatory or governmental bodies; and

¬ any other persons or institutions with which the holders of securities have or propose to have dealings, such as their bankers, solicitors, accountants or stockbrokers. By signing an Application Form or by giving electronic application instructions to HKSCC, you agree to all of the above.

(d) Access to and correction of personal data The Ordinance provides the holders of securities with rights to ascertain whether our company or our H Share registrar holds their personal data, to obtain a copy of that data, and to correct any data that is inaccurate. In accordance with the Ordinance, our company and our H Share registrar have the right to charge a reasonable fee for the processing of any data access request. All requests for access to data or correction of data or for information regarding policies and practices and kinds of data held should be addressed to us, at our registered address disclosed in the ""Corporate Information'' section in this prospectus or as notiÑed from time to time in accordance with applicable law, for the attention of the company secretary, or our H Share registrar for the attention of the privacy compliance oÇcer.

294 UNDERWRITING

HONG KONG UNDERWRITERS App 1A 15(2)(h)

Joint Lead Managers China International Capital Corporation (Hong Kong) Limited CITIC Securities Corporate Finance (HK) Limited Citigroup Global Markets Asia Limited The Hongkong and Shanghai Banking Corporation Limited Lehman Brothers Asia Limited Co-Lead Managers BOCI Asia Limited CCB International Capital Limited China Everbright Securities (HK) Limited ICEA Securities Limited Oriental Patron Asia Limited Co-Managers China Merchants Securities (HK) Co., Limited DBS Asia Capital Limited First Shanghai Securities Limited Goldbond Securities Limited Guotai Junan Securities (Hong Kong) Limited Sun Hung Kai International Limited Taifook Securities Company Limited VC Brokerage Limited

UNDERWRITING ARRANGEMENTS AND EXPENSES

Hong Kong Public OÅering

Hong Kong Underwriting Agreement

Pursuant to the Hong Kong Public OÅering, we are oÅering the Hong Kong OÅer Shares for subscription CK 1E Note 11 on, and subject to, the terms and conditions of this prospectus and the Application Forms. Subject to the Listing Committee of the Hong Kong Stock Exchange granting listing of, and permission to deal in, the H Shares to be oÅered pursuant to the Global OÅering as mentioned herein and to certain other conditions set out in the Hong Kong Underwriting Agreement, the Hong Kong Underwriters have agreed severally and not jointly to subscribe or procure subscribers for the Hong Kong OÅer Shares which are being oÅered but are not taken up under the Hong Kong Public OÅering on the terms and conditions of this prospectus, the Application Forms and the Hong Kong Underwriting Agreement.

Grounds for Termination App 1A 15(2)(i)

The obligations of the Hong Kong Underwriters to subscribe or procure subscribers for the Hong Kong OÅer Shares under the Hong Kong Underwriting Agreement are subject to termination, if, at any time prior to 8:00 a.m. on the day that trading in the H Shares commences on the Hong Kong Stock Exchange:

(a) there develops, occurs, exists or comes into force:

(i) any new law or regulation or any change in existing law or regulation, or any change in the interpretation or application thereof by any court or other competent authority in or aÅecting Hong Kong, China, the United States, United Kingdom or Japan (each a ""Relevant Jurisdiction''); or (ii) any change or development involving a prospective change or development, or any event or series of events resulting in or representing a change or development, or prospective change or development, in local, national, regional or international Ñnancial, political, military,

255 UNDERWRITING

industrial, economic, currency market, Ñscal or regulatory or market conditions (including, without limitation, conditions in stock and bond markets, money and foreign exchange markets and inter-bank markets, a change in the system under which the value of the Hong Kong currency is linked to that of the currency of the United States or a devaluation of the Hong Kong dollars or an appreciation of the Renminbi against any foreign currencies) in or aÅecting any Relevant Jurisdiction; or

(iii) any event or series of events in the nature of force majeure (including, without limitation, acts of government, strikes, lock-outs, Ñre, explosion, Öooding, civil commotion, acts of war, acts of terrorism (whether or not responsibility has been claimed), acts of God, accident or interruption or delay in transportation) in or aÅecting any Relevant Jurisdiction; or

(iv) any local, national, regional or international outbreak or escalation of hostilities (whether or not war is or has been declared) or other state of emergency or calamity or crisis in or aÅecting any Relevant Jurisdiction; or

(v) (A) any suspension or limitation on trading in shares or securities generally on the Hong Kong Stock Exchange, the New York Stock Exchange, the Nasdaq Global Market, the London Stock Exchange, the Shanghai Stock Exchange or the Tokyo Stock Exchange or (B) a general moratorium on commercial banking activities in New York, London, Hong Kong, Japan or China declared by the relevant authorities, or a material disruption in commercial banking activities or foreign exchange trading or securities settlement or clearance services in or aÅecting any Relevant Jurisdiction; or

(vi) any (A) material change or prospective material change in exchange controls, currency exchange rates or foreign investment regulations, or (B) any change or prospective change in taxation in any Relevant Jurisdiction adversely aÅecting an investment in the H Shares; or

(vii) any material litigation or claim being threatened or instigated against our company or any of our subsidiaries, and which, in any such case and in the sole opinion of the Joint Global Coordinators (for themselves and on behalf of the other Hong Kong Underwriters),

(A) is or will be materially adverse to, or materially and prejudicially aÅect, the business or Ñnancial or trading position or prospects of our company and our subsidiaries as a whole; or

(B) has or will have a material adverse eÅect on the success of the Global OÅering and/or make it impracticable, for any material part of the Hong Kong Underwriting Agreement, the Hong Kong Public OÅering or the Global OÅering to be performed or implemented as envisaged; or

(C) makes or will make it impracticable to proceed with the Hong Kong Public OÅering and/or the Global OÅering or the delivery of the OÅer Shares on the terms and in the manner contemplated by this prospectus; or

(b) there has come to the notice of the Joint Global Coordinators or any of the Hong Kong Underwriters after the date of the Hong Kong Underwriting Agreement:

(i) that any statement contained in this prospectus, the Application Forms, the formal notice and any announcements in the agreed form issued by our company in connection with the Hong Kong Public OÅering (including any supplement or amendment thereto) was or has become untrue, incorrect or misleading in any material respect; or

(ii) any matter has arisen or has been discovered which would, had it arisen immediately before the date of this prospectus, not having been disclosed in this prospectus, constitutes an omission therefrom; or

256 UNDERWRITING

(iii) any of the warranties given by our company in the Hong Kong Underwriting Agreement is (or would when repeated be) untrue or misleading in any material respect; or (iv) any event, act or omission which gives or is likely to give rise to any liability of our company pursuant to the indemnities given by our company under the Hong Kong Underwriting Agreement which liability has a material adverse eÅect on the business or Ñnancial or trading position of our company and our subsidiary, as a whole; or (v) any material breach of any of the obligations of our company under the Hong Kong Underwriting Agreement; or (vi) any material adverse change or prospective material adverse change in the business, properties, results of operations, in the Ñnancial or trading position or prospects of our company and our subsidiaries, as a whole, then the Joint Global Coordinators may (for themselves and on behalf of the other Hong Kong Underwriters), in their sole discretion and upon giving notice in writing to our company, terminate the Hong Kong Underwriting Agreement with immediate eÅect.

Undertakings to the Hong Kong Stock Exchange pursuant to the Hong Kong Listing Rules By Us We have undertaken to the Hong Kong Stock Exchange that no further shares or securities convertible into our equity securities (whether or not a class already listed) may be issued by us or form the subject of any agreement to such an issue by us within six months from the date on which our H Shares Ñrst commence dealing on the Hong Kong Stock Exchange (whether or not such issue of shares or our securities will be completed within six months from the commencement of dealing), except: (a) in certain circumstances prescribed by Rule 10.08 of the Hong Kong Listing Rules; or (b) pursuant to our proposed A Share OÅering. See the section headed ""A Share OÅering''.

By CITIC Group and CIFH Each of CITIC Group and CIFH has undertaken to the Hong Kong Stock Exchange that, except to facilitate the exercise of the Over-allotment Option granted to the International OÅering Underwriters, it shall not and shall procure that the relevant registered holder shall not: (a) in the period commencing on the date by reference to which disclosure of its shareholding is made in this prospectus and ending on the date which is six months from the date on which dealings in our H Shares commence on the Hong Kong Stock Exchange (the ""First Six-month Period''), dispose of or enter into any agreement to dispose of or otherwise create any options, rights, interests or encumbrances in respect of, any of those shares or securities of the Company in respect of which it is shown by this prospectus to be the beneÑcial owner; or (b) in the period of six months commencing on the date on which the First Six-month Period expires, dispose of, nor enter into any agreement to dispose of or otherwise create any options, rights, interests or encumbrances in respect of, any of the shares or securities referred to in (a) above if, immediately following such disposal or upon the exercise or enforcement of such options, CITIC Group and CIFH collectively would cease to be our controlling shareholder. Each of CITIC Group and CIFH has also undertaken to the Hong Kong Stock Exchange and us that, within the period commencing on the date by reference to which disclosure of its shareholding is made in this prospectus and ending on the date which is 12 months from the date on which dealings in our H Shares commence on the Hong Kong Stock Exchange, it will: (a) when it pledges or charges any of shares or of other share capital beneÑcially owned by it in favor of an authorized institution (as deÑned in the Banking Ordinance (Chapter 155 of the Laws of

257 UNDERWRITING

Hong Kong)) for a bona Ñde commercial loan, immediately inform us of such pledge or charge together with the number of such shares or other securities so pledged or charged; and (b) when it receives any indications, either verbal or written, from any pledge or chargee of any of shares or of other securities pledged or charged that such shares or securities will be disposed of, immediately inform us of any such indication. We will inform the Hong Kong Stock Exchange as soon as we have been informed of the above matters (if any) by CITIC Group or CIFH and disclose such matters by way of a press notice which is published in the newspapers as soon as possible after being so informed by CITIC Group or CIFH.

Undertakings to the Underwriters By Us We have, pursuant to the Hong Kong Underwriting Agreement, undertaken to each of the Joint Global Coordinators, the Joint Bookrunners, the Joint Sponsors, the Joint Lead Managers and the Hong Kong Underwriters that, except for the issue of H Shares by our company pursuant to the Global OÅering (including pursuant to the Over-allotment Option) or for the issue of A Shares by our company pursuant to the A Share OÅering, at any time after the date of the Hong Kong Underwriting Agreement up to and including the date falling six months after the date on which dealings in the H Shares commence on the Hong Kong Stock Exchange, we will not without the Joint Global Coordinators' prior written consent and unless in compliance with the Hong Kong Listing Rules: (a) oÅer, pledge, charge, allot, issue, sell, contract to allot, issue or sell, sell any option or contract to purchase, purchase any option or contract to sell, grant or agree to grant any option, right or warrant to purchase or subscribe for, lend or otherwise transfer or dispose of, either directly or indirectly, or repurchase, any of our share capital or any securities convertible into or exercisable or exchangeable for or that represent the right to receive such share capital; or (b) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of our share capital, whether any of such transactions described in (a) or (b) above is to be settled by delivery of our share capital or such other securities, in cash or otherwise. In the event of a disposal as described in (a) or (b) above of any shares or any interest therein or any of our securities after the date falling six months after the date on which dealings in the H Shares commence on the Hong Kong Stock Exchange, we will take all reasonable steps to ensure that such an issue or disposal will not create a disorderly or false market for our shares.

Indemnity We have agreed to indemnify the Hong Kong Underwriters for certain losses which they may suÅer, including losses arising from their performance of their obligations under the Hong Kong Underwriting Agreement and any breach by us of the Hong Kong Underwriting Agreement.

Commission and Expenses CO 3rd Sch(1)7 The Hong Kong Underwriters will receive a gross underwriting commission of 2.5% of the oÅer price payable for the Hong Kong OÅer Shares initially oÅered under the Hong Kong Public OÅering, out of which they will pay any sub-underwriting commissions. For unsubscribed Hong Kong OÅer Shares reallocated to the International OÅering, we will pay an underwriting commission at the rate applicable to the International OÅering and such commission will be paid to the Joint Global Coordinators and the relevant Underwriters (but not the Hong Kong Underwriters).

The aggregate commissions and fees, together with listing fees, SFC transaction levy, the Hong Kong CO 3rd Sch(1)15 Stock Exchange trading fee, legal and other professional fees, and printing and other expenses relating to the App 1A 20(2) Global OÅering are estimated to amount to approximately HK$951 million (assuming an oÅer price of

258 UNDERWRITING

HK$5.46, which is the mid-point of our indicative oÅer price range, and assuming the Over-allotment Option is not exercised) in total.

Hong Kong Underwriters' Interest in Our Company Save for its obligations under the Hong Kong Underwriting Agreement and save as disclosed in this prospectus, none of the Hong Kong Underwriters has any shareholding interests in our company or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in our company.

The International OÅering In connection with the International OÅering, it is expected that we will, on or about April 20, 2007, shortly after determination of the OÅer Price, enter into the International Underwriting Agreement with the Joint Global Coordinators and the International OÅering Underwriters. Under the International Underwriting Agreement, the International OÅering Underwriters to be named therein would severally agree to subscribe or procure subscribers for the International OÅer Shares initially being oÅered in the International OÅering.

RESTRICTIONS ON THE OFFER SHARES No action has been taken to permit a public oÅering of the OÅer Shares, other than in Hong Kong and Japan, or the distribution of this prospectus in any jurisdiction other than Hong Kong. Accordingly, this prospectus may not be used for the purpose of, and does not constitute, an oÅer or invitation in any jurisdiction or in any circumstances in which such an oÅer or invitation is not authorized or to any person to whom it is unlawful to make such an oÅer or invitation. In particular, the OÅer Shares have not been oÅered or sold, and will not be oÅered or sold, directly or indirectly, in the PRC.

STABILIZATION AND OVER-ALLOTMENT PN18(4.3), CK 1E Note 4 Stabilization is a practice used by underwriters in some markets to facilitate the distribution of securities. To stabilize, the underwriters may bid for, or purchase, the securities in the secondary market, during a App 1A 15(3)(b) speciÑed period of time, to retard and, if possible, prevent, any decline in the market price of the securities below the oÅer price. In Hong Kong and certain other jurisdictions, the price at which stabilization is eÅected is not permitted to exceed the oÅer price. In connection with the Global OÅering, Citigroup Global Markets Asia Limited, as stabilizing manager (the ""Stabilizing Manager''), or any person acting for it, on behalf of the Underwriters, may over-allocate or eÅect short sales or any other stabilizing transactions with a view to stabilizing or maintaining the market price of our H Shares at a level higher than that which might otherwise prevail in the open market. Short sales involve the sale by the Stabilizing Manager of a greater number of H Shares than the Underwriters are required to purchase in the Global OÅering. ""Covered'' short sales are sales made in an amount not greater than the Over-allotment Option. The Stabilizing Manager may close out any covered short position by either exercising the Over- allotment Option to purchase additional H Shares or purchasing H Shares in the open market. In determining the source of the H Shares to close out the covered short position, the Stabilizing Manager will consider, among other things, the price of H Shares in the open market as compared to the price at which they may purchase additional H Shares pursuant to the Over-allotment Option. Stabilizing transactions consist of certain bids or purchases made for the purpose of preventing or retarding a decline in the market price of the H Shares while the Global OÅering is in progress. Any market purchases of our H Shares may be eÅected on any stock exchange, including the Hong Kong Stock Exchange, any over-the-counter market or otherwise, provided that they are made in compliance with all applicable laws and regulatory requirements. However, there is no obligation on the Stabilizing Manager or any person acting for it to conduct any such stabilizing activity, which if commenced, will be done at the absolute discretion of the Stabilizing Manager and may be

259 UNDERWRITING discontinued at any time. Any such stabilizing activity is required to be brought to an end within 30 days of the last day for the lodging of applications under the Hong Kong Public OÅering. The number of our H Shares that may be over-allocated will not exceed the number of our H Shares that may be sold under the Over- allotment Option namely 732,821,000 H Shares, which is approximately 15% of the number of OÅer Shares initially available under the Global OÅering less any H Shares which may be issued to BBVA and CIFH pursuant to their exercise of the anti-dilution right and top-up right, respectively, in the event that the whole or part of the Over-allotment Option is exercised. In Hong Kong, stabilizing activities must be carried out in accordance with the Securities and Futures Price Stabilizing Rules. Stabilizing action permitted pursuant to the Securities and Futures Price Stabilizing Rules includes (i) over-allocation for the purpose of preventing or minimizing any reduction in the market price, (ii) selling or agreeing to sell our H Shares so as to establish a short position in them for the purpose of preventing or minimizing any reduction in the market price, (iii) subscribing, or agreeing to subscribe, for our H Shares pursuant to the Over-allotment Option in order to close out any position established under (i) or (ii) above, (iv) purchasing, or agreeing to purchase, our H Shares for the sole purpose of preventing or minimizing any reduction in the market price, (v) selling our H Shares to liquidate a long position held as a result of those purchases and (vi) oÅering or attempting to do anything described in (ii), (iii), (iv) or (v). Stabilizing actions by the Stabilizing Manager, or any person acting for it, will be entered into in accordance with the laws, rules and regulations in place in Hong Kong on stabilization. As a result of eÅecting transactions to stabilize or maintain the market price of our H Shares, the Stabilizing Manager, or any person acting for it, may maintain a long position in our H Shares. The size of the long position, and the period for which the Stabilizing Manager, or any person acting for it, will maintain the long position is at the discretion of the Stabilizing Manager and is uncertain. In the event that the Stabilizing Manager liquidates this long position by making sales in the open market, this may lead to a decline in the market price of our H Shares. Stabilizing action by the Stabilizing Manager, or any person acting for it, is not permitted to support the price of our H Shares for longer than the stabilizing period, which begins on the day on which trading of our H Shares commences on the Hong Kong Stock Exchange and ends on the thirtieth day after the last day for the lodging of applications under the Hong Kong Public OÅering. The stabilizing period is expected to end on May 18, 2007. As a result, demand for our H Shares, and their market price, may fall after the end of the stabilizing period. These activities by the Stabilizing Manager may stabilize, maintain or otherwise aÅect the market price of the H Shares. As a result, the price of the H Shares may be higher than the price that otherwise might exist in the open market. Any stabilizing action taken by the Stabilizing Manager, or any person acting for it, may not necessarily result in the market price of our H Shares staying at or above the oÅer price either during or after the stabilizing period. Bids for or market purchases of our H Shares by the Stabilizing Manager, or any person acting for it, may be made at a price at or below the oÅer price and therefore at or below the price paid for our H Shares by purchasers. A public announcement in compliance with the Securities and Futures (Price Stabilizing) Rules will be made within seven days of the expiration of the stabilizing period.

260 STRUCTURE OF THE GLOBAL OFFERING

PRICING AND ALLOCATION App 1A 15(2)(c) OÅer Price Range

The OÅer Price will be not more than HK$5.86 per OÅer Share and is expected to be not less than CK 1E Note 9 HK$5.06 per OÅer Share, unless otherwise announced not later than the morning of the last day for lodging applications under the Hong Kong Public OÅering, as explained below. Prospective investors should be aware that the oÅer price to be determined on the price determination date may be, but is not expected to be, lower than the indicative oÅer price range stated in this prospectus.

Price Payable on Application Applicants for Hong Kong OÅer Shares under the Hong Kong Public OÅering are required to pay, on application, the maximum oÅer price of HK$5.86 for each Hong Kong OÅer Share (plus brokerage, SFC transaction levy and the Hong Kong Stock Exchange trading fee). If the OÅer Price is less than HK$5.86, appropriate refund payments (including brokerage, SFC transaction levy and the Hong Kong Stock Exchange trading fee attributable to the surplus application monies) will be made to successful applicants. See the section headed ""Further Terms and Conditions of the Hong Kong Public OÅering Ì 8. Refund of Application Monies.''

Determining the OÅer Price The International OÅering Underwriters are soliciting from prospective investors indications of interest in acquiring our H Shares in the International OÅering. Prospective investors will be required to specify the number of our H Shares under the International OÅering they would be prepared to acquire either at diÅerent prices or at a particular price. This process, known as ""book-building,'' is expected to continue up to, and to cease on or around April 20, 2007. The oÅer price is expected to be Ñxed by agreement between the Joint Global Coordinators (on behalf of the Underwriters) and us, on the Price Determination Date, when market demand for the OÅer Shares will be determined. The Price Determination Date is expected to be on or around April 20, 2007 and in any event, no later than April 25, 2007.

If, for any reason, we and the Joint Global Coordinators (on behalf of the Underwriters) are unable to CK 1E Note 10 reach agreement on the oÅer price on or before April 25, 2007, the Global OÅering will not proceed.

Reduction in OÅer Price Range and/or Number of OÅer Shares CK 1E Note 12 If, based on the level of interest expressed by prospective institutional, professional and other investors during the book-building process, the Joint Global Coordinators (on behalf of the Underwriters and with our consent) consider it appropriate, the indicative oÅer price range and/or the number of OÅer Shares may be reduced below that stated in this prospectus at any time prior to the morning of the last day for lodging applications under the Hong Kong Public OÅering. In such a case, we will, as soon as practicable following the decision to make any such reduction, and in any event not later than the morning of the last day for lodging applications under the Hong Kong Public OÅering, cause to be published in the South China Morning Post (in English) and Hong Kong Economic Times (in Chinese) notice of the reduction in the indicative oÅer price range and/or number of OÅer Shares. Such notice will also include conÑrmation or revision, as appropriate, of the oÅering statistics as currently set out in the section headed ""Summary'' and any other Ñnancial information which may change as a result of such reduction. The oÅer price, if agreed upon, will be Ñxed within such revised oÅer price range. Before submitting applications for Hong Kong OÅer Shares, applicants should have regard to the possibility that any announcement of a reduction in the indicative oÅer price range and/or number of OÅer Shares may not be made until the day which is the last day for lodging applications under the Hong Kong Public OÅering. Applicants under the Hong Kong Public OÅering should note that in no circumstances can applications be withdrawn once submitted, even if the indicative oÅer price range and/or number of OÅer Shares is so reduced.

261 STRUCTURE OF THE GLOBAL OFFERING

Allocation The H Shares to be oÅered in the Hong Kong Public OÅering and the International OÅering may, in certain circumstances, be reallocated as between these oÅerings at the discretion of the Joint Global Coordinators. Allocation of our H Shares pursuant to the International OÅering will be determined by the Joint Global Coordinators and will be based on a number of factors including the level and timing of demand, total size of the relevant investor's invested assets or equity assets in the relevant sector and whether or not it is expected that the relevant investor is likely to buy further, and/or hold or sell H Shares after the listing of our H Shares on the Hong Kong Stock Exchange. Such allocation may be made to professional, institutional, corporate and (in the case of the public oÅer without listing in Japan) retail investors and is intended to result in a distribution of our H Shares on a basis which would lead to the establishment of a stable shareholder base to the beneÑt of our company and our shareholders as a whole. Allocation of H Shares to investors under the Hong Kong Public OÅering will be based solely on the level of valid applications received under the Hong Kong Public OÅering. The basis of allocation may vary, depending on the number of Hong Kong OÅer Shares validly applied for by applicants. The allocation of Hong Kong OÅer Shares could, where appropriate, consist of balloting, which would mean that some applicants may receive a higher allocation than others who have applied for the same number of Hong Kong OÅer Shares, and those applicants who are not successful in the ballot may not receive any Hong Kong OÅer Shares.

Announcement of OÅer Prices and Basis of Allotment

The OÅer Price for H Shares under the Global OÅering and the oÅer price for A Shares under the PN18(4.4) A Share OÅering are expected to be announced on Monday, April 23, 2007 in the South China Morning Post (in English) and the Hong Kong Economic Times (in Chinese). The level of applications in the Hong Kong Public OÅering, the level of indications of interest in the International OÅering, and the basis of allotment of the Hong Kong OÅer Shares are expected to be announced on Thursday, April 26, 2007 in the South China Morning Post (in English) and the Hong Kong Economic Times (in Chinese).

CONDITIONS OF THE HONG KONG PUBLIC OFFERING Acceptance of all applications for the OÅer Shares pursuant to the Hong Kong Public OÅering will be conditional on:

¬ the Listing Committee of the Hong Kong Stock Exchange granting listing of, and permission to deal in, the H Shares to be issued pursuant to the Global OÅering (including the additional H Shares which may be made available pursuant to the exercise of the Over-allotment Option and the H Shares to be issued to BBVA and CIFH pursuant to the exercise of their anti-dilution right and top-up right, respectively);

¬ the OÅer Price having been duly agreed between us and the Joint Global Coordinators (on behalf of the Underwriters);

¬ the execution and delivery of the International Underwriting Agreement on or around the Price Determination Date; and

¬ the obligations of the Underwriters under each of the Hong Kong Underwriting Agreement and the International Underwriting Agreement having become unconditional and not having been terminated in accordance with the terms of the respective agreements, in each case on or before the dates and times speciÑed in such underwriting agreements (unless and to the extent such conditions are waived on or before such dates and times) and in any event not later than May 15, 2007, being the date which is 30 days after the date of this prospectus. The consummation of each of the Hong Kong Public OÅering and the International OÅering is conditional upon, among other things, the other becoming unconditional and not having been terminated in

262 STRUCTURE OF THE GLOBAL OFFERING accordance with its terms. Neither the Hong Kong Public OÅering nor the International OÅering are conditional upon the A Share OÅering becoming unconditional and not having been terminated in accordance with its terms. For more information on our A Share OÅering, see the section headed ""A Share OÅering''. If the above conditions are not fulÑlled or waived, prior to the dates and times speciÑed, the Global OÅering will lapse and the Hong Kong Stock Exchange will be notiÑed immediately. Notice of the lapse of the Hong Kong Public OÅering will be caused to be published by us in the South China Morning Post (in English) and the Hong Kong Economic Times (in Chinese) on the next day following such lapse. In such eventuality, all application monies will be returned, without interest, on the terms set out in the section headed ""Further Terms and Conditions of the Hong Kong Public OÅering Ì 8. Refund of application monies.'' In the meantime, the application monies will be held in separate bank account(s) with the receiving bankers or other bank(s) in Hong Kong licensed under the Hong Kong Banking Ordinance. H Share certiÑcates for the OÅer Shares are expected to be issued on Thursday, April 26, 2007 but will only become valid certiÑcates of title at 8:00 a.m. on Friday, April 27, 2007, provided that (i) the Global OÅering has become unconditional in all respects and (ii) the right of termination as described in the section headed ""Underwriting Ì Underwriting Arrangements and Expenses Ì Hong Kong Public OÅering Ì Grounds for termination'' has not been exercised.

THE HONG KONG PUBLIC OFFERING App 1A 15(2)(a), We are initially oÅering 244,274,000 OÅer Shares at the OÅer Price, representing approximately 5% of CK 1E Note 5 the 4,885,479,000 OÅer Shares initially available under the Global OÅering, for subscription by the public in Hong Kong. The total number of Hong Kong OÅer Shares available under the Hong Kong Public OÅering will initially be divided into two pools for allocation purposes as follows:

¬ Pool A: The OÅer Shares in Pool A will be allocated on an equitable basis to applicants who have PN18(3.1) applied for OÅer Shares with a total subscription amount (excluding brokerage, SFC transaction levy and the Hong Kong Stock Exchange trading fee) of HK$5,000,000 or less; and

¬ Pool B: The OÅer Shares in Pool B will be allocated on an equitable basis to applicants who have applied for OÅer Shares with a total subscription amount (excluding brokerage, SFC transaction levy and the Hong Kong Stock Exchange trading fee) of more than HK$5,000,000 and up to the value of Pool B.

Applicants should be aware that applications in Pool A and Pool B are likely to receive diÅerent PN18(4.5) allocation ratios. If Hong Kong OÅer Shares in one pool (but not both pools) are undersubscribed, the surplus Hong Kong OÅer Shares will be transferred to the other pool to satisfy demand in that other pool and be allocated accordingly.

Applicants can only receive an allocation of Hong Kong OÅer Shares from either Pool A or Pool B but PN18(4.6) not from both pools. Multiple or suspected multiple applications and any application for more than 122,137,000 Hong Kong OÅer Shares will be rejected. Paragraph 4.2 of Practice Note 18 of the Hong Kong Listing Rules requires a clawback mechanism to be put in place which would have the eÅect of increasing the number of Hong Kong OÅer Shares to certain percentages of the total number of OÅer Shares oÅered in the Global OÅering if certain prescribed total demand levels are reached. An application has been made for, and the Hong Kong Stock Exchange has granted, a waiver from strict compliance with paragraph 4.2 of Practice Note 18 of the Hong Kong Listing Rules such that, in the event of over-applications, the Joint Global Coordinators, after consultation with us, shall apply a clawback mechanism following the closing of the application lists on the following basis:

¬ if the number of OÅer Shares validly applied for under the Hong Kong Public OÅering represents 15 times or more but less than 50 times the number of OÅer Shares initially available for subscription under the Hong Kong Public OÅering, then shares will be reallocated to the Hong Kong Public OÅering from the International OÅering, so that the total number of OÅer Shares available

263 STRUCTURE OF THE GLOBAL OFFERING

under the Hong Kong Public OÅering will be 366,412,000 OÅer Shares, representing approximately 7.5% of the OÅer Shares initially available under the Global OÅering;

¬ if the number of OÅer Shares validly applied for under the Hong Kong Public OÅering represents 50 times or more but less than 100 times the number of OÅer Shares initially available for subscription under the Hong Kong Public OÅering, then the number of shares to be reallocated to the Hong Kong Public OÅering from the International OÅering will be increased so that the total number of OÅer Shares available under the Hong Kong Public OÅering will be 488,548,000 OÅer Shares, representing approximately 10% of the OÅer Shares initially available under the Global OÅering; and

¬ if the number of OÅer Shares validly applied for under the Hong Kong Public OÅering represents 100 times or more the number of OÅer Shares initially available for subscription under the Hong Kong Public OÅering, then the number of shares to be reallocated to the Hong Kong Public OÅering from the International OÅering will be increased, so that the total number of OÅer Shares available under the Hong Kong Public OÅering will be 977,096,000 OÅer Shares, representing approximately 20% of the OÅer Shares initially available under the Global OÅering. If the Hong Kong Public OÅering is not fully subscribed, the Joint Global Coordinators have the authority to reallocate all or any unsubscribed Hong Kong OÅer Shares to the International OÅering.

Each applicant under the Hong Kong Public OÅering will be required to give an undertaking and CK 1E Note 7 conÑrmation in the Application Form submitted by him or her that he or she and any person(s) for whose beneÑt he or she is making the application have not indicated an interest for or taken up and will not indicate an interest for or take up any OÅer Shares in the International OÅering, and such applicant's application will be rejected if the said undertaking and/or conÑrmation is breached and/or untrue. Our company, our directors and the Hong Kong Underwriters will take reasonable steps to identify and reject applications under the Hong Kong Public OÅering from investors who have received H Shares in the International OÅering, and to identify and reject indications of interest in the International OÅering from investors who have received H Shares in the Hong Kong Public OÅering. The Joint Global Coordinators (on behalf of the Underwriters) may require any investor who has been oÅered H Shares under the International OÅering, and who has made an application under the Hong Kong Public OÅering to provide suÇcient information to the Joint Global Coordinators so as to allow them to identify the relevant applications under the Hong Kong Public OÅering and to ensure that it is excluded from any application for H Shares under the Hong Kong Public OÅering. References in this prospectus to applications, Application Forms, application monies or to the procedure for application relate solely to the Hong Kong Public OÅering.

THE INTERNATIONAL OFFERING App 1A 15(2)(b) The International OÅering will consist of initially 4,641,205,000 H Shares, to be oÅered by us (a) in the United States to qualiÑed institutional buyers (as such term is deÑned in Rule 144A under the U.S. Securities Act), and (b) outside of the United States in reliance on Regulation S under the U.S. Securities Act, including to professional and institutional investors in Hong Kong, and pursuant to a public oÅering without listing in Japan.

We expect to grant to the International OÅering Underwriters the Over-allotment Option, exercisable by App 1A 15(3)(c) the Joint Global Coordinators on behalf of the International OÅering Underwriters at any time from the date App 1A 15(3)(d) we sign the International Underwriting Agreement until 30 days after the last day for the lodging of applications under the Hong Kong Public OÅering, to require our company to allot and issue up to an additional 732,821,000 H Shares, representing in aggregate approximately 15% of the OÅer Shares initially available under the Global OÅering (which number includes the H Shares to be issued to BBVA and CIFH pursuant to their exercise of the anti-dilution right and top-up right, respectively, in the event that the whole or part of the Over-allotment Option is exercised). These shares will be issued or sold at the same price per share

264 STRUCTURE OF THE GLOBAL OFFERING under the International OÅering to, among other things, cover over-allocations in the International OÅering, if any.

H SHARES WILL BE ELIGIBLE FOR CCASS

All necessary arrangements have been made enabling the H Shares to be admitted into the Central App 1A 14(2) Clearing and Settlement System, or CCASS, established and operated by HKSCC. If the Hong Kong Stock Exchange grants the listing of, and permission to deal in, the H Shares and our company complies with the stock admission requirements of HKSCC, the H Shares will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with eÅect from the date of commencement of dealings in the H Shares on the Hong Kong Stock Exchange or any other date HKSCC chooses. Settlement of transactions between participants of the Hong Kong Stock Exchange is required to take place in CCASS on the second business day after any trading day. All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in eÅect from time to time.

DEALING ARRANGEMENTS

Assuming that the Hong Kong Public OÅering becomes unconditional at or before 8:00 a.m. in Hong App 1A 22 Kong on Friday, April 27, 2007, it is expected that dealings in our H Shares on the Hong Kong Stock Exchange will commence at 9:30 a.m. on Friday, April 27, 2007. Our H Shares will be traded in board lots of 1,000 H Shares each.

265 A SHARE OFFERING

Concurrently with the Global OÅering, we are oÅering A Shares in the PRC by means of an A share LR 19A.42(54)(1) prospectus. The A share prospectus, which is issued in the Chinese language only, is prepared pursuant to the regulatory requirements of the PRC. However, you should rely only on the information contained in this prospectus and the related Application Forms to make your investment decision in purchasing or trading in our H Shares.

Our Proposed A Share OÅering Concurrently with the Global OÅering, we are undertaking a public oÅering of our A Shares in the PRC.

The A Share OÅering comprises an oÅering of initially 2,301,932,654 A Shares for subscription, LR 19A.42(54)(6) representing 6.01% of our total outstanding shares following the completion of the Global OÅering and the A Share OÅering, assuming that the Over-allotment Option is not exercised and BBVA and CIFH exercise their anti-dilution right and top-up right, respectively. The information set forth in this prospectus related to our A Share OÅering, including, but not limited to, the net proceeds of the A Share OÅering and our net tangible assets, share capital and substantial shareholders after the completion of the A Share OÅering, has been prepared based on the assumption that our A Share OÅering will comprise an oÅering of initially 2,301,932,654 A Shares for subscription. Our A Shares will be listed and traded on the Shanghai Stock Exchange and may only be held by legal or natural persons or other entities in the PRC, qualiÑed foreign institutional investors or foreign strategic investors, subject to applicable PRC laws and regulations. Our A Shares and H Shares will rank pari passu with each other in all material respects other than the exceptions described in ""Share Capital.'' Dividends on our A Shares will be paid in Renminbi. Our H Shares and A Shares will not be fungible. However, certain of our A Shares held by CITIC Group may be converted to H Shares. See ""Share Capital.''

Pricing of A Share OÅering The oÅer price for A Shares in the A Share OÅering is expected to be not more than RMB 5.80 per share and not less than RMB 5.00 per share. It is intended that the oÅer price for our A Shares in the A Share OÅering will be equivalent to the oÅer price for our H Shares in the Global OÅering, as adjusted for the exchange rate diÅerence between Hong Kong dollar and Renminbi. We expect to publish an announcement in Hong Kong following the determination of the oÅer prices for the Global OÅering and the A Share OÅering.

OÅerings Not Inter-conditional LR 19A.42(54)(3) Neither our Global OÅering nor our A Share OÅering is conditional upon the other.

We cannot assure you that we will be able to complete our A Share OÅering as proposed. If domestic LR 19A.42(54)(4) market conditions within the PRC are such that it is not advisable or practicable for our A Share OÅering to proceed concurrently with the Global OÅering, our A Share OÅering may take place following the completion of the Global OÅering, and the size and other details in respect of the A Share OÅering set out above may be subject to change. We have applied for and the Hong Kong Stock Exchange has indicated that it will grant a waiver from strict compliance with Rule 10.08 of the Hong Kong Listing Rules, such that we may undertake the A Share OÅering within six months after the completion of the Global OÅering. The issue of A Shares in such circumstances has been approved by our shareholders and a separate class vote by holders of our H Shares is not required. The issue of A Shares in such circumstances will comply with Rule 19A.38 of the Hong Kong Listing Rules.

Use of Proceeds of A Share OÅering After deducting the underwriting commission and our estimated oÅering expenses, we estimate that the net proceeds to us from the A Share OÅering will be RMB 12,082 million (HK$12,216 million) at the oÅer price of RMB 5.40 (HK$5.46), being the mid-point of the price range of the A Share OÅering.

266 A SHARE OFFERING

We expect to use the net proceeds from the A Share OÅering to strengthen our capital base to support the ongoing growth of our business as set forth in ""BusinessÌOur Strategy.'' If we are not able to raise some or all of the net proceeds of the A Share OÅering, we do not expect this to have any material adverse eÅect on our capital base.

Application for Listing of A Shares LR 19A.42(54)(2) Application is expected to be made for the listing and trading of our A Shares on the Shanghai Stock Exchange. Trading of our A Shares is expected to commence on the Shanghai Stock Exchange on or about Friday, April 27, 2007 at 9:30 a.m.

Key Events in the A Share OÅering LR 19A.42(54)(2) The key events in the A Share OÅering are as follows: Price consultation and marketing to institutional investors ÏÏÏÏÏÏÏÏÏÏÏÏÏ April 4, 2007 - April 11, 2007 Book building period for A share institutional investorsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ April 16, 2007 - April 19, 2007 Public subscription period for A share investors through the trading system of the Shanghai Stock Exchange ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ April 19, 2007 Announcement of the oÅer price for the A Share OÅeringÏÏÏÏÏÏÏÏÏÏÏÏÏ April 23, 2007 Expected listing date of A Shares on the Shanghai Stock ExchangeÏÏÏÏÏ April 27, 2007 In connection with our A Share OÅering, we are required to make certain announcements in the PRC in accordance with applicable PRC laws and regulations. Such announcements in relation to our A Share OÅering will be published on the website of the Hong Kong Stock Exchange. However, such information and the prospectus for the A Share OÅering do not and will not form part of this prospectus. You should rely solely on the information contained in this prospectus and the related Application Forms in Hong Kong in making your investment decision regarding our H Shares. See ""Risk FactorsÌ Risks Relating to the Global OÅeringÌ We strongly caution you not to place any reliance on any information contained in press articles or other media regarding our Global OÅering or A Share OÅering or information released by us in connection with the A Share OÅering.''

Publication of Quarterly Results Upon listing of our A Shares on the Shanghai Stock Exchange, we will be required to publish quarterly results of operations in the PRC prepared in accordance with PRC GAAP. We will simultaneously disclose these quarterly results prepared under PRC GAAP in Hong Kong in accordance with Rule 13.09(2) of the Hong Kong Listing Rules.

267 HOW TO APPLY FOR HONG KONG OFFER SHARES

1. WHO CAN APPLY FOR THE HONG KONG OFFER SHARES You can apply for Hong Kong OÅer Shares if you or any person(s) for whose beneÑt you are applying, are an individual, and:

¬ are 18 years of age or older;

¬ have a Hong Kong address;

¬ are outside the United States; and

¬ are not a legal or natural person of the PRC (except qualiÑed domestic institutional investors). If you wish to apply for Hong Kong OÅer Shares online through the designated website at www.eipo.com.hk, referred to herein as the ""White Form eIPO'' service, in addition to the above you must also:

¬ have a valid Hong Kong identity card number; and

¬ be willing to provide a valid e-mail address and a contact telephone number. You may only apply by means of the White Form eIPO service if you are an individual applicant. Corporations or joint applicants may not apply by means of White Form eIPO. If the applicant is a Ñrm, the application must be in the names of the individual members, not the Ñrm's name. If the applicant is a body corporate, the Application Form must be signed by a duly authorized oÇcer, who must state his or her representative capacity. If an application is made by a person duly authorized under a valid power of attorney, the Joint Global Coordinators (or their respective agents or nominees) may accept it at their discretion, and subject to any conditions they think Ñt, including production of evidence of the authority of the attorney. The number of joint applicants may not exceed four. We and the Joint Global Coordinators, in their capacity as our agent, will have full discretion to reject or accept any application, in full or in part, without assigning any reason. The Hong Kong OÅer Shares are not available to existing beneÑcial owners of shares in our company, our directors, supervisors or chief executive or their respective associates or any other connected persons (as deÑned in the Hong Kong Listing Rules) of our company or persons who will become our connected persons immediately upon completion of the Global OÅering. You may apply for H Shares under the Hong Kong Public OÅering or indicate an interest for H Shares under the International OÅering, but may not do both.

2. METHODS OF APPLYING FOR THE HONG KONG OFFER SHARES There are four ways to make an application for the Hong Kong OÅer Shares:

¬ You may apply for the Hong Kong OÅer Shares by using a white Application Form. Use a white Application Form if you want the H Shares issued in your own name;

¬ Instead of using a white Application Form, you may apply for the Hong Kong OÅer Shares by means of White Form eIPO by submitting applications online through the designated website at www.eipo.com.hk. Use White Form eIPO if you want the Shares issued in your own name;

¬ You may apply for the Hong Kong OÅer Shares by using a yellow Application Form. Use a yellow Application Form if you want the H Shares issued in the name of HKSCC Nominees and deposited directly into CCASS for credit to your CCASS Investor Participant stock account or your designated CCASS Participant's stock account; or

¬ Instead of using a yellow Application Form, you may give electronic application instructions to HKSCC to cause HKSCC Nominees to apply for the Hong Kong OÅer Shares on your behalf.

268 HOW TO APPLY FOR HONG KONG OFFER SHARES

3. WHERE TO COLLECT THE PROSPECTUS AND APPLICATION FORMS You can collect a white Application Form and a prospectus from: Any of the following addresses of the Hong Kong Underwriters:

China International Capital Corporation Suite 2307, 23rd Floor (Hong Kong) Limited One International Finance Centre 1 Harbour View Street Central, Hong Kong

CITIC Securities Corporate Finance (HK) 26/F, CITIC Tower Limited 1 Tim Mei Avenue Central, Hong Kong

Citigroup Global Markets Asia Limited 50/F, Citibank Tower, Citibank Plaza 3 Garden Road Central, Hong Kong

The Hongkong and Shanghai Banking Level 15, 1 Queen's Road Central Corporation Limited Hong Kong

Lehman Brothers Asia Limited 26/F, Two International Finance Centre 8 Finance Street, Central Hong Kong

BOCI Asia Limited 26/F., Bank of , 1 Garden Road, Hong Kong

CCB International Capital Limited Suites 2815-21, 28th Floor, Two PaciÑc Place, 88 Queensway, Admiralty, Hong Kong

China Everbright Securities (HK) Limited 36th Floor, Far East Finance Centre, 16 Harcourt Road, Hong Kong

ICEA Securities Limited 26/F., ICBC Tower, 3 Garden Road, Central, Hong Kong

Oriental Patron Asia Limited 27th Floor, Two Exchange Square, 8 Connaught Place, Central, Hong Kong

China Merchants Securities (HK) Co., Limited 48/F., One Exchange Square, 8 Connaught Place, Central, Hong Kong

DBS Asia Capital Limited 22/F The Center, 99 Queen's Road Central, Hong Kong

First Shanghai Securities Limited 19/F., Wing On House, 71 Des Voeux Road, Central, Hong Kong

269 HOW TO APPLY FOR HONG KONG OFFER SHARES

Goldbond Securities Limited 3901B, 39/F, Lippo Centre, Tower One, 89 Queensway, Hong Kong

Guotai Junan Securities (Hong Kong) Limited 27th Floor, Low Block, Grand Millennium Plaza, 181 Queen's Road Central, Hong Kong

Sun Hung Kai International Limited Level 12, One PaciÑc Place, 88 Queensway, Hong Kong

Taifook Securities Company Limited 25/F New World Tower, 16-18 Queen's Road Central, Hong Kong

VC Brokerage Limited 28/F., The Centrium, 60 Wyndham Street, Central, Hong Kong

or any of the following branches of The Hongkong and Shanghai Banking Corporation Limited:

Hong Kong Island: Hong Kong OÇce 1 Queen's Road Central Aberdeen Centre Branch Shop 2, G/F, Site I, Aberdeen Centre, Aberdeen Cityplaza Branch Unit 065, Cityplaza I, Taikoo Shing Des Voeux Road Central Branch China Insurance Group Bldg, 141 Des Voeux Road Central Hay Wah Building Branch G/F, Hay Wah Bldg, 71-85B Hennessy Road, Wanchai Causeway Bay Branch 1/F, Causeway Bay Plaza 2, 463-483 Lockhart Road Des Voeux Road West Branch Western Centre, 40-50 Des Voeux Road West

Kowloon: Mong Kok Branch 673 Nathan Road, Mong Kok Kwun Tong Branch No. 1, Yue Man Square, Kwun Tong Tsim Sha Tsui Branch 82-84 Nathan Road, Tsim Sha Tsui Whampoa Garden Branch Shop No. G6 & 6A, G/F, Site 4, Whampoa Garden Amoy Plaza Branch Shops G193-200 & 203, G/F, Amoy Plaza Phase II, 77 Ngau Tau Kok Road

New Territories: Citylink Plaza Branch Shops 38-46, Citylink Plaza, Shatin Station Circuit, Sha Tin Tuen Mun Town Plaza Branch Shop 1, UG/F, Shopping Arcade Phase II, Tuen Mun Town Plaza, Tuen Mun Tai Po Branch 54-62 Kwong Fuk Road, Tai Po

270 HOW TO APPLY FOR HONG KONG OFFER SHARES

or any of the following branches of Bank of China (Hong Kong) Limited:

Hong Kong Island: Bank of China Tower Branch 3/F, 1 Garden Road Central District (Wing On House) Branch 71 Des Voeux Road Central Causeway Bay Branch 18 Percival Street, Causeway Bay North Point Branch Roca Centre, 464 King's Road, North Point Quarry Bay Branch Parkvale, 1060 King's Road, Quarry Bay Aberdeen Branch 25 Wu Pak Street, Aberdeen Wan Tsui Road Branch 4 Lin Shing Road, Chai Wan

Kowloon: To Kwa Wan Branch 80N To Kwa Wan Road, To Kwa Wan Humphrey's Avenue Branch 4-4A Humphrey's Avenue, Tsim Sha Tsui Shanghai Street (Mong Kok) Branch 611-617 Shanghai Street, Mong Kok Hoi Yuen Road Branch 55 Hoi Yuen Road, Kwun Tong Yau Ma Tei Branch 471 Nathan Road, Yau Ma Tei

New Territories: Castle Peak Road (Tsuen Wan) Wealth 167 Castle Peak Road, Tsuen Wan Management Centre Lucky Plaza Branch Lucky Plaza, Wang Pok Street, Shatin Castle Peak Road (Yuen Long) Branch 162 Castle Peak Road, Yuen Long

271 HOW TO APPLY FOR HONG KONG OFFER SHARES

or any of the following branches and/or sub-branches of Bank of Communications Co., Ltd. Hong Kong Branch

Hong Kong Island: Hong Kong Branch 20 Pedder Street, Central Central District Sub-Branch G/F., 123-125A Des Voeux Road, Central North Point Sub-Branch 442-448 King's Road, North Point Wanchai Sub-Branch 32-34 Johnston Road, Wanchai

Kowloon: Cheung Sha Wan Plaza Sub-Branch Unit G04, Cheung Sha Wan Plaza, 833 Cheung Sha Wan Road Hunghom Sub-Branch 1-3A Tak Man Street, Whampoa Estate, Hunghom Ngau Tau Kok Sub-Branch Shop G1, G/F., Phase I, Amoy Plaza, 77 Ngau Tau Kok Road Wong Tai Sin Sub-Branch Shops 127-129, 1/F Lung Cheung Mall, 136 Lung Cheung Road, Wong Tai Sin

New Territories: Tseung Kwan O Sub-Branch Shops 253-255, Metro City Shopping Arcade, Phase I, Tseung Kwan O Tsuen Wan Sub-Branch Shop G10-11, PaciÑc Commercial Plaza, Bo Shek Mansion, 328 Sha Tsui Road Fanling Sub-Branch No. 84A-84B, G/F., Flora Plaza, Fanling Sheung Shui Sub-Branch Shops 1010-1014, G/F., Sheung Shui Centre Shopping Arcade, Sheung Shui Ma On Shan Sub-Branch Shop 3038A, Level 3, Sunshine Plaza, Ma On Shan

272 HOW TO APPLY FOR HONG KONG OFFER SHARES

or any of the following branches of CITIC Ka Wah Bank Limited

Hong Kong Island: Main Branch 232 Des Voeux Road Central Lippo Centre Branch Lippo Centre, 89 Queensway North Point Branch Shop B3, G/F, Hang Ying House, 318-328 King's Road

Kowloon: Homantin Branch 84 A-C, Waterloo Road Tsim Sha Tsui Branch Shop No. 3-5, G/F, Mass Resources Development Building, 12-16 Humphreys Avenue, Tsim Sha Tsui Kowloon Bay Branch Shop 7, G/F, Chevalier Commercial Centre, 8 Wang Hoi Road, Kowloon Bay Kowloon City Branch Shop 2A, G/F, Genius Court, 18 Fuk Lo Tsun Road, Kowloon City Shamshuipo Branch G/F, 210-214 Yu Chau Street, Kowloon

New Territories: Shatin Centre Branch Shop 52C, Level 3, Shatin Centre, 2-16 Wang Pok Street, Shatin Tsuen Wan Branch Shop C on G/F & 1/F, Shui Sang Building, 13- 19 Chung On Street, Tsuen Wan or any of the following branches of Industrial and Commercial Bank of China (Asia) Limited:

Hong Kong Island: Queen's Road Central Branch 122-126 Queen's Road Central Sheung Wan Branch Shop F, G/F, Kai Tak Commercial Building, 317- 319 Des Voeux Road Central, Sheung Wan West Point Branch 242-244 Queen's Road West, Sai Ying Pun Wanchai Branch 117-123 Hennessy Road, Wanchai Causeway Bay Branch Shop A, G/F, Jardine Center, 50 Jardine's Bazaar, Causeway Bay

Kowloon: Tsim Sha Tsui East Branch Shop B, G/F, Railway Plaza, 39 Chatham Road South, Tsim Sha Tsui Kwun Tong Branch G/F, Lemmi Centre, 50 Hoi Yuen Road, Kwun Tong Mongkok Branch G/F., Belgian Bank Building, 721-725 Nathan Road, Mongkok

New Territories: Sha Tsui Road Branch Shop 4, G/F. Chung On Building, 297-313 Sha Tsui Road, Tsuen Wan Kwai Fong Branch C63A-C66, 2/F, Kwai Chung Plaza, Kwai Fong

273 HOW TO APPLY FOR HONG KONG OFFER SHARES

Prospectuses and Application Forms will be available for collection at the above places during the following times:

Monday, April 16, 2007 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9:00 a.m. - 4:30 p.m. Tuesday, April 17, 2007 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9:00 a.m. - 4:30 p.m. Wednesday, April 18, 2007ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9:00 a.m. - 4:30 p.m. Thursday, April 19, 2007 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9:00 a.m. - 12:00 noon You can collect a yellow Application Form and a prospectus during normal business hours from 9:00 a.m. on Monday, April 16, 2007 until 12:00 noon on Thursday, April 19, 2007, from:

¬ the Depository Counter of HKSCC at 2nd Floor, Vicwood Plaza, 199 Des Voeux Road Central, Hong Kong. Your stockbroker may also have Application Forms and this prospectus available.

4. HOW TO APPLY USING A WHITE OR YELLOW APPLICATION FORM (a) Obtain an Application Form as described in the section headed ""Ì 3. Where to Collect the Prospectus and Application Forms''. (b) Complete the Application Form in English using blue or black ink, and sign it. There are detailed instructions on each Application Form. You should read these instructions carefully. If you do not follow the instructions, your application may be rejected and returned by ordinary post together with the accompanying cheque(s) or banker's cashier order(s) to you (or the Ñrst-named applicant in the case of joint applicants) at your own risk at the address stated in the Application Form.

(c) Each Application Form must be accompanied by payment, in the form of either one cheque or one App 1A 15(2)(d) banker's cashier order. You should read the detailed instructions set out on the Application Form carefully, as an application is liable to be rejected if the cheque or banker's cashier order does not meet the requirements set out on the Application Form. (d) Lodge the Application Form in one of the collection boxes by the time and at one of the locations as described in the section headed ""Ì 7. When May Applications be Made Ì (a) Applications on White or Yellow Application Forms'' below. In order for an application made on a yellow Application Form to be valid: (i) If the application is made through a designated CCASS Participant (other than a CCASS Investor Participant): (A) the designated CCASS Participant or its authorized signatories must sign in the appropriate box; and (B) the designated CCASS Participant must endorse the form with its company chop (bearing its company name) and insert its participant I.D. in the appropriate box. (ii) If the application is made by an individual CCASS Investor Participant: (A) the Application Form must contain the CCASS Investor Participant's name and Hong Kong Identity Card Number; and (B) the CCASS Investor Participant must insert its participant I.D. and sign in the appropriate box in the Application Form. (iii) If the application is made by a joint individual CCASS Investor Participant: (A) the Application Form must contain all joint CCASS Investor Participants' names and the Hong Kong Identity Card Number of all joint CCASS Investor Participants; and

274 HOW TO APPLY FOR HONG KONG OFFER SHARES

(B) the participant I.D. must be inserted and the authorized signatory(ies) of the CCASS Investor Participant's stock account must sign in the appropriate box in the Application Form. (iv) If the application is made by a corporate CCASS Investor Participant: (A) the Application Form must contain the CCASS Investor Participant's name and Hong Kong Business Registration number; and (B) the participant I.D. and company chop (bearing its company name) endorsed by its authorized signatory(ies) must be inserted in the appropriate box in the Application Form. Signature(s), number of signatories and form of chop, where appropriate, on each yellow Application Form should match the records kept by HKSCC. Incorrect or incomplete details of the CCASS Participant or the omission or inadequacy of authorized signatory(ies) (if applicable), participant I.D. or other similar matters may render the application invalid.

5. HOW TO APPLY THROUGH WHITE FORM eIPO (a) If you are an individual and meet the criteria set out in ""Ì Who can apply for the Hong Kong OÅer Shares'', you may apply through White Form eIPO by submitting an application through the designated website at www.eipo.com.hk. If you apply through White Form eIPO, the Shares will be issued in your own name. (b) Detailed instructions for application through the White Form eIPO service are set out on the designated website at www.eipo.com.hk. You should read these instructions carefully. If you do not follow the instructions, your application may be rejected by the designated eIPO Service Provider and may not be submitted to our company. (c) In addition to the terms and conditions set out in this Prospectus, the designated eIPO Service Provider may impose additional terms and conditions upon you for the use of the White Form eIPO service. Such terms and conditions are set out on the designated website at www.eipo.com.hk. You will be required to read, understand and agree to such terms and conditions in full prior to making any application. (d) By submitting an application to the designated eIPO Service Provider through the White Form eIPO service, you are deemed to have authorized the designated eIPO Service Provider to transfer the details of your application to our company and our registrars. (e) You may submit an application through the White Form eIPO service in respect of a minimum of 1,000 Hong Kong OÅer Shares. Each electronic application instruction in respect of more than 1,000 Hong Kong OÅer Shares must be in one of the numbers set out in the table in the Application Forms, or as otherwise speciÑed on the designated website at www.eipo.com.hk. (f) You should give electronic application instructions through White Form eIPO at the times set out in the section headed ""Ì When may applications be made Ì (b) White Form eIPO''. (g) You should make payment for your application made by White Form eIPO service in accordance with the methods and instructions set out in the designated website at www.eipo.com.hk. If you do not make complete payment of the application monies (including any related fees) on or before 12:00 noon on Thursday, April 19, 2007, or such later time as described under the section headed ""Ì When May Applications be Made Ì (e) EÅects of Bad Weather Conditions on the Opening of the Appilication Lists,'' the designated eIPO Service Provider will reject your application and your application monies will be returned to you in the manner described in the designated website at www.eipo.com.hk. (h) Warning: The application for Hong Kong OÅer Shares through the White Form eIPO service is only a facility provided by the designated eIPO Service Provider to public investors. Our company, our directors, the Joint Global Coordinators, the Joint Bookrunners, the Joint Sponsors, the Joint

275 HOW TO APPLY FOR HONG KONG OFFER SHARES

Lead Managers and the Underwriters take no responsibility for such applications, and provide no assurance that applications through the White Form eIPO service will be submitted to our company or that you will be allotted any Hong Kong OÅer Shares. Please note that Internet services may have capacity limitations and/or be subject to service interruptions from time to time. To ensure that you can submit your applications through the White Form eIPO service, you are advised not to wait until the last day for submitting applications in the Hong Kong Public OÅering to submit your electronic application instructions. In the event that you have problems connecting to the designated website for the White Form eIPO service, you should submit a white Application Form. However, once you have submitted electronic application instructions and completed payment in full using the application reference number provided to you on the designated website, you will be deemed to have made an actual application and should not submit a white Application Form. See "" Ì 8. How many applications may be made''.

6. APPLYING BY GIVING ELECTRONIC APPLICATION INSTRUCTIONS TO HKSCC (a) General CCASS Participants may give electronic application instructions to HKSCC to apply for the Hong Kong OÅer Shares and to arrange payment of the monies due on application and payment of refunds. This will be in accordance with their participant agreements with HKSCC and the General Rules of CCASS and the CCASS Operational Procedures. If you are a CCASS Investor Participant, you may give electronic application instructions through the CCASS Phone System by calling 2979 7888 or through the CCASS Internet System (https://ip.ccass.com) (using the procedures contained in HKSCC's ""An Operating Guide for Investor Participants'' in eÅect from time to time). HKSCC can also input electronic application instructions for you if you go to: Hong Kong Securities Clearing Company Limited Customer Service Centre 2/F Vicwood Plaza 199 Des Voeux Road Central Hong Kong and complete an input request form. If you are not a CCASS Investor Participant, you may instruct your broker or custodian who is a CCASS Broker Participant or a CCASS Custodian Participant to give electronic application instructions via CCASS terminals to apply for the Hong Kong OÅer Shares on your behalf. You are deemed to have authorized HKSCC and/or HKSCC Nominees to transfer the details of your application, whether submitted by you or through your broker or custodian, to our company and our registrars.

(b) Minimum Subscription Amount and Permitted Multiples You may give electronic application instructions in respect of a minimum of 1,000 Hong Kong OÅer Shares. Each electronic application instruction in respect of more than 1,000 Hong Kong OÅer Shares must be in one of the numbers set out in the table in the Application Forms.

(c) Warning The subscription for the Hong Kong OÅer Shares by giving electronic application instructions to HKSCC is only a facility provided to CCASS Participants. Our company, the directors, the Joint Global Coordinators, the Joint Sponsors, the Joint Bookrunners, the Joint Lead Managers and the Underwriters take no responsibility for the application and provide no assurance that any CCASS Participant will be allotted any Hong Kong OÅer Shares.

276 HOW TO APPLY FOR HONG KONG OFFER SHARES

To ensure that CCASS Investor Participants can give their electronic application instructions to HKSCC through the CCASS Phone System or the CCASS Internet System, CCASS Investor Participants are advised not to wait until the last minute to input their electronic application instructions. In the event that CCASS Investor Participants have problems connecting to the CCASS Phone System or the CCASS Internet System to submit their electronic application instructions, they should either: (i) submit a white or yellow Application Form; or (ii) go to HKSCC's Customer Service Centre to complete an input request form for electronic application instructions before 12:00 noon on Thursday, April 19, 2007, or such later time as described under the section headed ""EÅect of bad weather conditions on the opening of the application lists'' in the section headed ""Ì 7. When May Applications be Made''.

7. WHEN MAY APPLICATIONS BE MADE

(a) Applications on White or Yellow Application Forms App 1A 15(2)(f) Your completed white or yellow Application Form, together with payment attached, should be deposited in the special collection boxes provided at any of the branches of the receiving banks listed under the section headed ""Ì 3. Where to Collect the Prospectus and Application Forms'' at the following times:

Monday, April 16, 2007 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9:00 a.m. - 4:30 p.m. Tuesday, April 17, 2007 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9:00 a.m. - 4:30 p.m. Wednesday, April 18, 2007ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9:00 a.m. - 4:30 p.m. Thursday, April 19, 2007 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9:00 a.m. - 12:00 noon Completed white or yellow Application Forms, together with payment attached, must be lodged by 12:00 noon on Thursday, April 19, 2007, or, if the application lists are not open on that day, then by the time and date stated in the section headed ""Ì (e) EÅects of bad weather conditions on the opening of the application lists''.

(b) White Form eIPO You may submit your application to the designated eIPO Service Provider through the designated website at www.eipo.com.hk from 9:00 a.m. on Monday, April 16, 2007 until 11:30 a.m. on Thursday, 19 April, 2007 or such later time as described under the section headed ""Ì (e) EÅects of Bad Weather Conditions on the Opening of the Application Lists'' (24 hours daily, except on the last application day). The latest time for completing full payment of application monies in respect of such applications will be 12:00 noon on Thursday, April 19, 2007, the last application day, or, if the application lists are not open on that day, then by the time and date stated in the section headed ""Ì (e) EÅects of Bad Weather Conditions on the Opening of the Application Lists''. You will not be permitted to submit your application to the designated eIPO Service Provider through the designated website at www.eipo.com.hkafter 11:30 a.m. on the last day for submitting applications. If you have already submitted your application and obtained an application reference number from the website prior to 11:30 a.m., you will be permitted to continue the application process (by completing payment of application monies) until 12:00 noon on the last day for submitting applications, when the application lists close.

(c) Electronic Application Instructions to HKSCC via CCASS CCASS Broker/Custodian Participants should input electronic application instructions at the following times on the following dates:

Monday, April 16, 2007 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9:00 a.m. - 8:30 p.m.(1) Tuesday, April 17, 2007 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8:00 a.m. - 8:30 p.m.(1) Wednesday, April 18, 2007ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8:00 a.m. - 8:30 p.m.(1) Thursday, April 19, 2007 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8:00 a.m.(1) - 12:00 noon

277 HOW TO APPLY FOR HONG KONG OFFER SHARES

(1) These times are subject to change as HKSCC may determine from time to time with prior notiÑcation to CCASS Broker/ Custodian Participants. CCASS Investor Participants can input electronic application instructions from 9:00 a.m. on Monday, April 16, 2007 until 12:00 noon on Thursday, April 19, 2007 (24 hours daily, except the last application day). The latest time for inputting electronic application instructions will be 12:00 noon on Thursday, April 19, 2007, the last application day, or if the application lists are not open on that day, by the time and date stated in the section headed ""Ì (e) EÅects of bad weather conditions on the opening of the application lists''.

(d) Application Lists The application lists will be open from 11:45 a.m. to 12:00 noon on Thursday, April 19, 2007, except as provided in the section headed ""Ì (e) EÅects of bad weather conditions on the opening of the application lists''. Applicants should note that cheques or banker's cashier orders will not be presented for payment before the closing of the application lists but may be presented at any time thereafter.

(e) EÅects of Bad Weather Conditions on the Opening of the Application Lists The application lists will not open if there is:

¬ a tropical cyclone warning signal number 8 or above, or

¬ a ""black'' rainstorm warning signal in force in Hong Kong at any time between 9:00 a.m. and 12:00 noon on Thursday, April 19, 2007. Instead they will open between 11:45 a.m. and 12:00 noon on the next business day which does not have either of those warnings in force in Hong Kong at any time between 9:00 a.m. and 12:00 noon. For this purpose, ""Business Day'' means a day that is not a Saturday, Sunday or a public holiday in Hong Kong.

8. HOW MANY APPLICATIONS MAY BE MADE Multiple applications or suspect multiple applications are liable to be rejected. You may make more than one application for the Hong Kong OÅer Shares if and only if you are a nominee, in which case you may make an application as a nominee by (i) giving electronic application instructions to HKSCC (if you are a CCASS Participant) and; (ii) lodging more than one Application Form in your own name if each application is made on behalf of diÅerent beneÑcial owners. In the box on the Application Form marked ""For nominees'' you must include:

¬ an account number; or

¬ some other identiÑcation code for each beneÑcial owner. If you do not include this information, the application will be treated as being made for your beneÑt.

Otherwise, multiple applications are not allowed. If you apply by means of White Form eIPO, once you complete payment in respect of any electronic application instruction given by you or for your beneÑt to the designated eIPO Service Provider to make an application for Hong Kong OÅer Shares, an actual application shall be deemed to have been made. For the avoidance of doubt, giving an electronic application instruction under White Form eIPO more than once and obtaining diÅerent application reference numbers without eÅecting full payment in respect of a particular reference number will not constitute an actual application. If you are suspected of submitting more than one application through the White Form eIPO service by giving electronic application instructions through the designated website at www.eipo.com.hk and completing

278 HOW TO APPLY FOR HONG KONG OFFER SHARES payment in respect of such electronic application instructions, or of submitting one application through the White Form eIPO service and one or more applications by any other means, all of your applications are liable to be rejected.

If you have made an application by giving electronic application instructions to HKSCC and you are suspected of having made multiple applications or if more than one application is made for your beneÑt, the number of Hong Kong OÅer Shares applied for by HKSCC Nominees will be automatically reduced by the number of Hong Kong OÅer Shares in respect of which you have given such instructions and/or in respect of which such instructions have been given for your beneÑt. Any electronic application instructions to make an application for the Hong Kong OÅer Shares given by you or for your beneÑt to HKSCC shall be deemed to be an actual application. No application for any other number of Hong Kong OÅer Shares will be considered and any such application is liable to be rejected.

For further information, please see ""Further Terms and Conditions of the Hong Kong Public OÅering Ì 5. Multiple Applications.''

9. HOW MUCH ARE THE HONG KONG OFFER SHARES

The maximum oÅer price is HK$5.86 per H Share. You must also pay brokerage of 1%, SFC transaction levy of 0.004% and the Hong Kong Stock Exchange trading fee of 0.005%. This means that for every board lot of 1,000 H Shares you will pay approximately HK$5,919.12. The Application Forms have tables showing the exact amount payable for multiples of H Shares up to 122,137,000 H Shares.

If the OÅer Price as Ñnally determined is less than HK$5.86 per H Share, appropriate refund payments (including brokerage, SFC transaction levy and the Hong Kong Stock Exchange trading fee attributable to the surplus application monies) will be made to successful applicants, without interest. Details of the procedure for refund are set out below in the section headed "" Ì 11. Dispatch/Collection of H Share CertiÑcates and Refunds of Application Monies.''

If your application is successful, brokerage is paid to participants of the Hong Kong Stock Exchange (or the Hong Kong Stock Exchange, as the case may be), the Hong Kong Stock Exchange trading fee is paid to the Hong Kong Stock Exchange, and the SFC transaction levy is paid to the SFC.

10. RESULTS OF ALLOCATIONS App 1A 15(2)(k)

Results of allocations in the Hong Kong Public OÅering, including the Hong Kong identity card numbers, passport numbers or Hong Kong business registration numbers of successful applicants (where supplied) and the number of Hong Kong OÅer Shares successfully applied for under white and yellow Application Forms, by White Form eIPO and by giving electronic application instructions to HKSCC via CCASS, will be made available at the times and dates and in the manner speciÑed below:

¬ Results of allocations will be available from our Hong Kong Public OÅering allocation results telephone enquiry line. Applicants may Ñnd out whether or not their applications have been successful and the number of Hong Kong OÅer Shares allocated to them, if any, by calling 2862 8669 between 9:00 a.m. and 10:00 p.m from Thursday, April 26, 2007 to Sunday, April 29, 2007;

¬ Results of allocations will be available from our Hong Kong Public OÅering website at www.iporesults.com.hk on a 24-hour basis from 8:00 a.m. on Thursday, April 26, 2007 to 12:00 midnight on Wednesday, May 2, 2007. The user will be required to key in the Hong Kong identity card/passport/Hong Kong business registration number provided in his/her/its Application Form to search for his/her/its own allocation result;

¬ Special allocation results booklets setting out the results of allocations will be available for inspection during opening hours of individual branches and sub-branches from Thursday, April 26, 2007 to Saturday, April 28, 2007 at all the receiving bank branches and sub-branches at the addresses set out in the section headed "" Ì 3. Where to Collect the Prospectus and Application Forms''.

279 HOW TO APPLY FOR HONG KONG OFFER SHARES

11 DISPATCH/COLLECTION OF H SHARE CERTIFICATES AND REFUNDS OF APPLICATION MONIES Refund cheques for surplus application monies (if any) under white or yellow Application Forms and H Share certiÑcates for successful applicants under white Application Forms and White Form eIPO are expected to be posted and/or available for collection (as the case may be) on or around Thursday, April 26, 2007. H Share certiÑcates will only become valid certiÑcates of title at 8:00 a.m. on Friday, April 27, 2007 provided that the Hong Kong Public OÅering has become unconditional in all respects and the right of termination described in the section entitled ""Underwriting Ì Underwriting Arrangements and Expenses Ì Hong Kong Public OÅering Ì Hong Kong Underwriting Agreement Ì Grounds for Termination'' has not been exercised. For further information on arrangements for the dispatch/collection of H Share certiÑcates and refunds of application monies, please refer to the section headed ""Further Terms and Conditions of the Hong Kong Public OÅering Ì 7. If your application for Hong Kong OÅer Shares is successful (in whole or in part)'' and "" Ì 8. Refund of Application Monies.''

12. DEFINITIONS In this section and the section headed ""Further Terms and Conditions of the Hong Kong Public OÅering,'' the following terms have the meanings set out below: ""CCASS Broker Participant'' a person admitted to participate in CCASS as a broker participant ""CCASS Custodian Participant'' a person admitted to participate in CCASS as a custodian participant ""CCASS Investor Participant'' a person admitted to participate in CCASS as an investor participant, who may be an individual or joint individuals or a corporation ""CCASS Participant'' a CCASS Broker Participant, a CCASS Custodian Participant or a CCASS Investor Participant ""eIPO Service Provider'' Bank of China (Hong Kong) Limited ""White Form eIPO'' applying for Hong Kong OÅer Shares to be issued in your own name by submitting applications online through the designated website of the eIPO Service Provider, www.eipo.com.hk ""HKSCC Nominees'' HKSCC Nominees Limited

280 APPENDIX I ACCOUNTANTS' REPORT

The following is the text of a report, prepared for the purpose of incorporation in this prospectus, received from the Company's independent reporting accountants, KPMG, CertiÑed Public Accountants, Hong Kong. As described in ""Appendix X Ì Documents Delivered to the Registrar of Companies and Available for Inspection'', a copy of the Accountants' Report is available for inspection.

8th Floor Prince's Building 10 Chater Road Central Hong Kong

The Board of Directors China CITIC Bank Corporation Limited April 16, 2007 China International Capital Corporation (Hong Kong) Limited CITIC Securities Corporate Finance (HK) Limited Citigroup Global Markets Asia Limited The Hongkong and Shanghai Banking Corporation Limited Lehman Brothers Asia Limited

Dear Sirs, Introduction We set out below our report on the Ñnancial information relating to China CITIC Bank Corporation Limited (the ""Bank''), and its subsidiaries (collectively the ""Group''), in Sections I to V, including the consolidated balance sheets of the Group as at 31 December 2004, 2005 and 2006, balance sheets of the Bank as at 31 December 2004, 2005 and 2006, and the related consolidated income statements, consolidated statements of changes in equity and consolidated statements of cash Öows of the Group for each of the years ended 31 December 2004, 2005 and 2006 (the ""Relevant Periods'') and the summary of signiÑcant accounting policies and other explanatory notes thereto (collectively the ""Financial Information''), for inclusion in the Prospectus (the ""Prospectus'') of the Bank dated April 16, 2007. The Bank was incorporated in the People's Republic of China (the ""PRC'' or ""Mainland China'', which excludes for the purpose of this report, the Hong Kong Special Administrative Region of the PRC, or Hong Kong, the Macau Special Administrative Region of the PRC, or Macau, and Taiwan) on 31 December 2006 as a joint stock company with limited liability pursuant to the restructuring (the ""Restructuring'') of China CITIC Bank (""CNCB'') as described in Section V Note 1(a). The registered oÇce of the Bank is located at Block C, Fuhua Mansion, 8 Chaoyangmen Beidajie, Dongcheng District, Beijing, China. The Bank succeeded all businesses of CNCB and related operations, together with the relevant assets and liabilities as at 31 December 2006. As a state-owned Ñnancial institution, CNCB prepared its Ñnancial statements for the year ended 31 December 2004 in accordance with the Accounting Standards for Business Enterprises, the Accounting Regulations for Financial Enterprises (jointly issued by the Ministry of Finance of the PRC (the ""MOF'') and the People's Bank of China (the ""PBOC'') in 1993) and other relevant regulations issued by the MOF, and prepared its Ñnancial statements for the year ended 31 December 2005 in accordance with the Accounting Standards for Business Enterprises, the Accounting Regulations for Financial Enterprises (issued by the MOF in 2001) and other regulations issued by the MOF. These accounting regulations are collectively named as ""Previous PRC GAAP'' for the purpose of this report. The statutory Ñnancial statements of CNCB for the years ended 31 December 2004 and 2005 were audited by Shine Wing CertiÑed Public Accountants, a Ñrm of professional accountants registered in the PRC. The Group prepared its Ñnancial statements for the year ended 31 December 2006 in accordance with the Accounting Standards for Business Enterprises (issued by the MOF in 2006) and other regulations issued by the MOF (collectively ""2006 PRC GAAP''). KPMG Huazhen have acted as the statutory auditors of the

I-1 APPENDIX I ACCOUNTANTS' REPORT

Bank for its Ñnancial statements prepared in accordance with 2006 PRC GAAP for the year ended 31 December 2006.

The Group also prepared a set of its consolidated Ñnancial statements in accordance with International Financial Reporting Standards (""IFRS'') and its interpretations promulgated by the International Accounting Standards Board (""IASB'') for the years ended 31 December 2004, 2005 and 2006.

China Investment and Finance Limited (""CIFL'') is a principal subsidiary of the Bank during the Relevant Periods. Deloitte Touche Tohmatsu were the statutory auditors of CIFL for the years ended 31 December 2004 and 2005. KPMG have acted as the statutory auditors of CIFL for the year ended 31 December 2006.

No Ñnancial statements of the Group have been audited subsequent to 31 December 2006.

Basis of preparation

The Financial Information has been prepared by the Directors of the Bank in accordance with IFRS and its interpretations promulgated by the IASB based on the audited Ñnancial statements of the Bank and its subsidiaries. Adjustments have been made, for the purpose of this report, to restate the statutory Ñnancial statements of the Bank and its subsidiaries in accordance with the basis set out in section V to conform with IFRS and the disclosure requirements of the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited.

Responsibility

The Directors of the Bank are responsible for preparing the Financial Information which gives a true and fair view. In preparing the Financial Information which gives a true and fair view it is fundamental that appropriate accounting policies are selected and applied consistently, that judgments and estimates are made which are prudent and reasonable and that reasons for any signiÑcant departure from applicable accounting standards are stated.

It is our responsibility to form an independent opinion, based on our audit, on the Financial Information.

Basis of opinion

As a basis for forming an opinion on the Financial Information of the Group, for the purpose of this report, we have carried out appropriate audit procedures in respect of the Financial Information for the Relevant Periods in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of CertiÑed Public Accountants (the ""HKICPA'') and have carried out such procedures as we considered necessary in accordance with the Auditing Guideline ""Prospectuses and the Reporting Accountant'' issued by the HKICPA. We have not audited any Ñnancial statements of the Group in respect of any period subsequent to 31 December 2006.

An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the Financial Information. It also includes an assessment of the signiÑcant estimates and judgments made by the Directors in the preparation of the Financial Information, and of whether the accounting policies are appropriate to the Group's circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with suÇcient evidence to give reasonable assurance as to whether the Financial Information is free from material misstatement. In forming our opinion, we also evaluated the overall adequacy of the presentation of the Financial Information. We believe that our audit provides a reasonable basis for our opinion.

I-2 APPENDIX I ACCOUNTANTS' REPORT

Opinion In our opinion, for the purpose of this report, all adjustments considered necessary have been made and the Financial Information gives a true and fair view of the state of aÅairs of the Group as at 31 December 2004, 2005 and 2006, of its consolidated results and consolidated cash Öows for each of the three years ended 31 December 2004, 2005 and 2006 and the state of the aÅairs of the Bank as at 31 December 2004, 2005 and 2006, and have been properly prepared in accordance with IFRS.

I-3 APPENDIX I ACCOUNTANTS' REPORT

I Consolidated income statements (Expressed in millions of Renminbi unless otherwise stated) CO 3rd Sch(1)(32) Years ended 31 December Note 2004 2005 2006 Interest incomeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 17,795 22,511 29,490 Interest expense ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (7,412) (9,851) (13,017) Net interest income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3 10,383 12,660 16,473 Fee and commission income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4 449 608 965 Fee and commission expense ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (131) (190) (206) Net fee and commission income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 318 418 759 Dividend incomeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1 1 1 Net proÑt/(loss) on disposal of Ñxed assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11 12 (2) Net gain/(loss) from trading securitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5 34 109 (49) Net gain /(loss) from investment securities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6 11 (24) 45 Net gain arising from foreign currency dealingÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 227 266 503 Other operating income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 161 213 197 Operating incomeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11,146 13,655 17,927 General and administrative expenses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7 (5,451) (7,104) (9,259) Impairment losses charge ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8 (1,634) (1,098) (1,666) ProÑt before taxation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,061 5,453 7,002 Income tax ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 12 (1,633) (2,369) (3,144) Net proÑt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,428 3,084 3,858 Attributable to: Equity holder(s) of the Bank ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,427 3,083 3,858 Minority interests ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1 1 Ì Net proÑt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,428 3,084 3,858 ProÑt appropriationsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,258 271 3,000 Earning per share attributable to equity holder(s) of the Bank Ì Basic and diluted (Renminbi)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13 0.08 0.10 0.12

I-4 APPENDIX I ACCOUNTANTS' REPORT

II Consolidated balance sheets (Expressed in millions of Renminbi unless otherwise stated) CO 3rd Sch(1)(32) 31 December Note 2004 2005 2006 Assets Cash and balances with central bankÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 14 54,253 84,453 90,620 Amounts due from banks and other Ñnancial institutions ÏÏÏÏÏÏÏÏÏ 15 20,899 31,352 43,250 Loans and advances to customers ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 16 291,921 358,030 453,381 InvestmentsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 17 110,903 104,416 104,424 Property and equipmentÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 18 8,090 8,614 8,745 Deferred tax assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 19 5,424 4,082 2,210 Other assetsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 20 3,955 3,655 4,093 Total assetsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 495,445 594,602 706,723 Liabilities Amounts due to central bank ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 300 240 201 Amounts due to banks and other Ñnancial institutions ÏÏÏÏÏÏÏÏÏÏÏ 21 38,190 28,021 36,166 Deposits from customers ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 22 435,020 530,573 618,412 Current tax liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,052 1,132 1,230 Deferred tax liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 19 Ì 71 141 Other liabilities and provisions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 23 4,120 5,340 6,879 Subordinated debts/bonds issued ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 25 6,000 6,000 12,000 Total liabilitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 484,682 571,377 675,029 Equity Share capital ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 26 Ì Ì 31,113 Reserves ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 26 (7,031) (3,441) 576 Owner's capital ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 26 17,790 26,661 Ì Minority interests ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4 5 5 Total equity ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10,763 23,225 31,694 Total equity and liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 495,445 594,602 706,723

I-5 APPENDIX I ACCOUNTANTS' REPORT

II Balance sheets of the Bank (Expressed in millions of Renminbi unless otherwise stated) CO 3rd Sch(1)(32) 31 December Note 2004 2005 2006 Assets Cash and balances with central bankÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 54,248 84,452 90,620 Amounts due from banks and other Ñnancial institutions ÏÏÏÏÏÏÏÏ 21,439 31,813 43,718 Loans and advances to customers ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 291,810 357,985 453,204 InvestmentsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 110,421 103,933 104,060 Investments in subsidiaries ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1(c) 33 33 33 Property and equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,066 8,589 8,717 Deferred tax assetsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,424 4,082 2,210 Other assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,946 3,647 4,089 Total assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 495,387 594,534 706,651 Liabilities Amounts due to central bank ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 300 240 201 Amounts due to banks and other Ñnancial institutions ÏÏÏÏÏÏÏÏÏÏ 38,190 28,021 36,166 Deposits from customers ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 435,020 530,573 618,416 Current tax liabilitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,052 1,132 1,230 Deferred tax liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 71 140 Other liabilities and provisions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,113 5,332 6,870 Subordinated debts/bonds issued ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,000 6,000 12,000 Total liabilitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 484,675 571,369 675,023 Equity Share capitalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 31,113 Reserves ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (7,078) (3,496) 515 Owner's capitalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 17,790 26,661 Ì Total equity ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10,712 23,165 31,628 Total equity and liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 495,387 594,534 706,651

I-6 APPENDIX I ACCOUNTANTS' REPORT

III Consolidated statement of changes in equity (Expressed in millions of Renminbi unless otherwise stated) Investment Properties Share Owner's Capital revaluation revaluation Retained Minority Total Note capital capital reserve reserve reserve earnings interests equity As at 1 January 2004 ÏÏÏÏÏÏÏÏÏÏ Ì 14,032 Ì 167 1,594 (10,394) 3 5,402 Capital injection and capitalisation of earnings ÏÏÏÏÏ 26(a) Ì 3,758 Ì Ì Ì (1,258) Ì 2,500 Net proÑt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì Ì Ì 2,427 1 2,428 Net change in fair value of available-for-sale investments Ì Ì Ì (174) Ì Ì Ì (174) Realised on disposal of available- for-sale investmentsÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì (2) Ì Ì Ì (2) Revaluation gain of bank premises ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì Ì 609 Ì Ì 609 Transfer of revaluation gain realised through disposal ÏÏÏÏÏ Ì Ì Ì Ì (10) 10 Ì Ì As at 31 December 2004 ÏÏÏÏÏÏÏ Ì 17,790 Ì (9) 2,193 (9,215) 4 10,763 Capital injection and capitalisation of earnings ÏÏÏÏÏ 26(a) Ì 8,871 Ì Ì Ì (271) Ì 8,600 Net proÑt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì Ì Ì 3,083 1 3,084 Net change in fair value of available-for-sale investments Ì Ì Ì 138 Ì Ì Ì 138 Realised on disposal of available- for-sale investmentsÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì 52 Ì Ì Ì 52 Revaluation gain of bank premises ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì Ì 588 Ì Ì 588 Transfer of revaluation gain realised through disposal ÏÏÏÏÏ Ì Ì Ì Ì (9) 9 Ì Ì As at 31 December 2005 ÏÏÏÏÏÏÏ Ì 26,661 Ì 181 2,772 (6,394) 5 23,225 Capital injection ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 26(a) Ì 7,400 Ì Ì Ì Ì Ì 7,400 Net proÑt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì Ì Ì 3,858 Ì 3,858 Net change in fair value of available-for-sale investments Ì Ì Ì (14) Ì Ì Ì (14) Revaluation gain of bank premises ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì Ì 123 Ì Ì 123 Transfer of revaluation gain realised through disposal ÏÏÏÏÏ Ì Ì Ì Ì (21) 21 Ì Ì Transfer of welfare payable to capital reserve ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 26(e) Ì Ì 102 Ì Ì Ì Ì 102 ProÑt appropriation ÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì Ì Ì (3,000) Ì (3,000) Shares issued upon incorporation and elimination of owner's capital, reserves and accumulated losses as at 31 December 2005 ÏÏÏÏÏÏÏÏÏÏ 26(e) 31,113 (34,061) (493) (181) (2,772) 6,394 Ì Ì As at 31 December 2006 ÏÏÏÏÏÏÏ 31,113 Ì (391) (14) 102 879 5 31,694

I-7 APPENDIX I ACCOUNTANTS' REPORT

IV Consolidated cash Öow statement (Expressed in millions of Renminbi unless otherwise stated) Years ended 31 December Note 2004 2005 2006 Operating activities ProÑt before taxation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,061 5,453 7,002 Adjustments for: Ì Revaluation gain on investments and derivativesÏÏÏÏÏÏÏÏÏÏ (5) (83) (78) Ì Net gain on disposal of Ñxed assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (11) (12) 2 Ì Unrealised foreign exchange gain ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1) (119) 49 Ì Impairment losses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,634 1,098 1,666 Ì Depreciation and amortisationÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 579 681 708 Ì Interest expense on subordinated debts/bonds issuedÏÏÏÏÏÏ 136 298 427 6,393 7,316 9,776 Changes in operating assets and liabilities: Increase in balances with central bank ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (5,774) (32,797) (897) Decrease/(increase) in amounts due from banks and other Ñnancial institutions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,883 (5,979) (15,668) Increase in loans and advances to customers ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (52,971) (67,164) (96,886) (Increase)/decrease in other operating assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (9,235) 5,065 (901) Decrease in amounts due to central bank ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (3,621) (60) (39) Increase/(decrease) in amounts due to banks and other Ñnancial institutions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 590 (10,169) 8,145 Increase in deposits from customers ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 89,664 95,553 87,839 Income tax paid ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (902) (964) (1,102) Increase in other operating liabilitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 229 1,549 2,159 Net cash Öows from operating activitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 30,256 (7,650) (7,574)

I-8 APPENDIX I ACCOUNTANTS' REPORT

Years ended 31 December Note 2004 2005 2006 Investing activities Proceeds from disposal and redemption of investmentsÏÏÏÏÏÏÏÏ 97,221 212,481 211,648 Proceeds from disposal of property and equipment, land use rights, and other assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 385 476 63 Payments on acquisition of investmentsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (123,666) (207,956) (230,133) Payments on acquisition of property and equipment, and land use rightsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (390) (670) (740) Net cash used in investing activities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (26,450) 4,331 (19,162) Financing activities Proceeds from capital injectionÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,500 8,600 7,400 Interest paid on subordinated debts/bonds issued ÏÏÏÏÏÏÏÏÏÏÏÏ (14) (285) (298) Proceeds from subordinated debts/bonds issuedÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,000 Ì 6,000 ProÑt paid to CITIC Group ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì (3,000) Net cash from Ñnancing activities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,486 8,315 10,102 Net increase/(decrease) in cash and cash equivalents ÏÏÏÏÏÏÏÏ 12,292 4,996 (16,634) Cash and cash equivalents as at 1 January ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 53,621 66,335 70,130 EÅect of exchange rate changes on cash and cash equivalents 422 (1,201) (469) Cash and cash equivalents as at 31 DecemberÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 28 66,335 70,130 53,027 Cash Öows from operating activities include: Interest received ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 15,646 19,565 29,135 Interest paid, excluding interest expense on subordinated debts/bonds issued ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (6,863) (9,141) (12,009)

I-9 APPENDIX I ACCOUNTANTS' REPORT

V Notes to the Financial Information (Expressed in millions of Renminbi unless otherwise stated) 1 Background and principal activities

(a) Organisation and Restructuring

The Bank is a joint stock company with limited liability incorporated in the PRC on 31 December 2006 App 1A 29(1) with issued share capital of RMB 31,113 million as part of the Restructuring of CNCB.

The Bank obtained Ñnancial business licence No. B10611000H0001 issued by the China Banking CO 3rd Sch(1)(28) Regulatory Commission (the ""CBRC'') on 26 December 2006 and business licence No. 1000001000600 CO 3rd Sch(1)(29) issued by the State Administration for Industry and Commerce on 31 December 2006.

CNCB (previously known as ""CITIC Industrial Bank'') was a state-owned Ñnancial institution established on 7 April 1987 with the approval of the State Council. CNCB was wholly owned by CITIC Group Company (or ""CITIC Group''), which was previously known as China International Trust and Investment Corporation. The name CITIC Industrial Bank was changed to China CITIC Bank on 2 August 2005.

With approval from the State Council, CNCB received the following approval documents regarding the Restructuring:

a) ""The approval in connection with China CITIC Bank's restructuring'' (Yin Jian Fu ®2006© No. 317) issued by the CBRC;

b) ""The approval in connection with China CITIC Bank's plan on state-owned shares restructuring'' (Cai Jin ®2006© No. 121) issued by the MOF; and

c) ""The approval in connection with transferring part of CITIC Group's share of equity in China CITIC Bank'' (Cai Jin Han ®2006© No. 257) issued by the MOF.

Under these approval documents, CNCB was restructured into the Bank upon completion of the following activities:

(i) CITIC Group sold a 19.9% interest in CNCB to CITIC International Financial Holdings Limited (""CIFH'') on 29 December 2006, a CITIC Group subsidiary.

(ii) CITIC Group and CIFH as joint promoters established the Bank as a joint stock company in accordance with ""The agreement between promoters in connection with the establishment of China CITIC Bank Corporation Limited'' and the Articles of Association of the Bank. It is agreed that CITIC Group is entitled to the proÑt and loss made by CNCB between 31 December 2005 and the date of the Bank's incorporation.

Upon the incorporation of the Bank on 31 December 2006, CITIC Group contributed its 80.1% interest in CNCB as at 31 December 2005, cash injection of RMB 5,000 million and RMB 2,400 million on 30 June and 30 November 2006 respectively in exchange for 84.8% share capital of the Bank. CIFH contributed its 19.9% interest in CNCB as at 31 December 2005 in exchange for 15.2% share capital of the Bank. Upon completion of the above capital contributions, the share capital of the Bank is RMB 31,113 million, of which CITIC Group and CIFH owns 84.8% and 15.2%, respectively.

The Bank succeeded all businesses of CNCB and related operations, together with the relevant assets and liabilities as at 31 December 2006.

Shine Wing CertiÑed Public Accountants veriÑed the RMB 31,113 million capital contribution to the joint stock company and issued a capital veriÑcation report (XYZH/2006A3039-2) on 14 December 2006.

I-10 APPENDIX I ACCOUNTANTS' REPORT

(b) Principal activities App 1A 29(2) The principal activities of the Bank and its subsidiaries are the provision of corporate and personal banking services, conducting treasury business and corresponding banking business, and the provision of asset management, entrusted lending and custodian services. As at 31 December 2006, the Bank had established branches and sub-branches in 18 provinces and municipalities directly under the central government in the PRC.

(c) Details of its subsidiaries The results and aÅairs of its subsidiaries have been consolidated into the Financial Information of the Group. The particulars of the Bank's principal subsidiary as at 31 December 2006 are set out below

%of Place of Particulars of the ownership incorporation issued and paid up directly held Name of the company and operation capital by the Bank Principal Activities CIFLÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Hong Kong 250,000 shares of 95% Money lending HK $100 each

2 SigniÑcant accounting policies (a) Statement of compliance The Financial Information has been prepared in accordance with IFRS and its interpretations promulgated by the IASB, and the disclosure requirements of the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited. A summary of the signiÑcant accounting policies adopted and consistently applied by the Group in the preparation of the Financial Information is set out below. All IFRS in issue which are relevant to the Group have been applied, except for IFRS 7 Financial Instruments: Disclosures (""IFRS 7''), the amendment to IAS 1 Presentation of Financial Statements: Capital Disclosures (""IAS 1 Amendment'') and IFRS 8 Operating Segments (""IFRS 8''). IFRS 7 and IAS 1 Amendment were issued in August 2005 and are eÅective for annual accounting periods beginning on or after 1 January 2007. IFRS 8 was issued in November 2006 and is eÅective for annual accounting periods beginning on or after 1 January 2009. IFRS 7 requires more detailed qualitative and quantitative disclosures primarily on fair value information and risk management. The Group has assessed the impact of IFRS 7 and concluded that IFRS 7 would only aÅect the level of details in the disclosure of the Ñnancial statements, and would not have Ñnancial impact nor result in a change in the Group's accounting policies. The Group has concluded that the disclosures required by IAS 1 Amendment on how the Group manages its capital and complies with external capital requirements would not have any Ñnancial impact nor result in a change in the Group's accounting policies. IFRS 8 requires operating segments to be identiÑed, and their amounts disclosed in the Ñnancial statements, on the same basis as internally reported for the purpose of making decisions on the allocation of an entity's resources. The Group has assessed the impact of IFRS 8 and concluded that its adoption would have no signiÑcant impact on the Group's Ñnancial statements.

(b) Basis of preparation of the Financial Information The Financial Information is presented in Renminbi (""RMB''), which is the Group's functional and presentation currency, rounded to the nearest million. The Financial Information is prepared using the historical cost basis, except for the following assets and liabilities which are stated at their fair value: Ñnancial assets and Ñnancial liabilities at fair value through proÑt or loss and available-for-sale assets, except those for which a reliable measure of fair value is not available; and property.

I-11 APPENDIX I ACCOUNTANTS' REPORT

The preparation of the Financial Information in conformity with IFRS requires management to make judgments, estimates and assumptions that aÅect the application of policies and the reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and other factors that are believed to be reasonable under the circumstances. The results of such estimates and assumptions form the basis of judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may diÅer from these estimates.

The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the year in which the estimate is revised if the revision aÅects only that year, or in the year of the revision and future years if the revision aÅects both current and future years.

Judgments made by management in the application of IFRS that have signiÑcant eÅect on the Financial CO 3rd Sch(1)(42) Information and estimates with a signiÑcant risk of material adjustment in the subsequent period are discussed in Note 36.

(c) Basis of consolidation

The consolidated Financial Information includes the Financial Information of the Bank and its subsidiaries. Subsidiaries are those enterprises controlled by the Bank. Control exists when the Bank has the power, directly or indirectly, to govern the Ñnancial and operational policies of an enterprise so as to obtain beneÑts from its activities. The results and aÅairs of subsidiaries are included in the consolidated Financial Information from the date that control commences until the date that control ceases.

Investments in controlled subsidiaries are consolidated into the consolidated Financial Information from the date that control commences until the date that control ceases.

Intra-group balances and transactions and any unrealised proÑts arising from intra-group transactions are eliminated in full in preparing the consolidated Financial Information. Unrealised losses resulting from intra- group transactions are eliminated in the same way as unrealised gains but only to the extent that there is no evidence of impairment.

Minority interests at the balance sheet date, being the portion of the net assets of subsidiary attributable to equity interests that are not owned by the Bank, whether directly or indirectly through subsidiary, are presented in the consolidated balance sheet and consolidated statement of changes in equity within equity, separately from equity attributable to the equity owner of the Bank. Minority interests in the results of the Group are presented on the face of the consolidated income statement as an allocation of the net proÑt or loss for the year between minority interests and the equity owner of the Bank.

Where losses applicable to the minority exceed the minority's interest in the equity of a subsidiary, the excess, and any further losses applicable to the minority, are charged against the Group's interest except to the extent that the minority has a binding obligation to, and is able to, make additional investment to cover the losses. If the subsidiary subsequently reports proÑts, the Group's interest is allocated all such proÑts until the minority's share of losses previously absorbed to the Group has been recovered.

In the Bank's balance sheet, investments in subsidiaries are stated at cost less allowances for impairment losses.

(d) Foreign currency translations Transactions in foreign currencies are translated into Renminbi at the foreign exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the foreign exchange rates ruling at that date. Non-monetary assets and liabilities that are measured at historical cost in a foreign currency are translated using the foreign exchange rates at the date of the transaction. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated using the foreign exchange rates at the date the fair value is determined. When the gain or loss on a non-monetary item is recognised directly in equity, any exchange component of that gain or loss is recognised

I-12 APPENDIX I ACCOUNTANTS' REPORT directly in equity, all other foreign exchange diÅerences arising on settlement and translation of monetary and non-monetary assets and liabilities are recognised in the income statement. The assets and liabilities of the subsidiaries are translated into Renminbi at the foreign exchange rates ruling at the balance sheet date. The revenue, expenses and cash Öows of the subsidiaries are translated into Renminbi at rates approximating the foreign exchange rates ruling at the date of the transaction. Foreign exchange diÅerences arising on translation are recognised directly in equity.

(e) Financial instruments (i) Recognition and measurement All Ñnancial assets and Ñnancial liabilities are recognised in the balance sheet, when and only when, the Group or the Bank, as appropriate, becomes a party to the contractual provisions of the instrument. Financial assets are derecognised on the date when the contractual rights to the cash Öows expire or substantially all the risks and rewards of ownership are transferred. Financial liabilities are derecognised on the date when the obligations speciÑed in the contracts are discharged, cancelled or expired. At initial recognition, all Ñnancial assets and Ñnancial liabilities are measured at fair value plus, in the case of a Ñnancial asset or Ñnancial liability not at fair value through proÑt or loss, transaction costs that are directly attributable to the acquisition or issue of the Ñnancial asset or Ñnancial liability unless the fair value of that instrument is evidenced by comparison with other observable current market transactions in the same instrument (i.e. without modiÑcation or repackaging) or based on a valuation technique whose variables include observable market data. Transaction costs for Ñnancial assets and Ñnancial liabilities at fair value through proÑt or loss are expensed immediately. Financial assets and Ñnancial liabilities are categorised as follows: Ì loans and receivables are non-derivative Ñnancial assets with Ñxed or determinable payments that are not quoted on an active market, other than those that the Group intends to sell immediately or in the near term, and those that are designated as available for sale upon initial recognition, or those where the Group may not recover substantially all of its initial investment, other than because of credit determination, which will be classiÑed as available-for-sale; Ì held-to-maturity assets are non-derivative Ñnancial assets with Ñxed or determinable payments and Ñxed maturity that the Group has the positive intent and ability to hold to maturity, other than those that meet the deÑnition of loans and receivables, or that the Group designated as at fair value through proÑt or loss or as available-for-sale; Ì Ñnancial assets and Ñnancial liabilities at fair value through proÑt or loss include trading assets and liabilities of those Ñnancial assets and Ñnancial liabilities held principally for the purpose of short term proÑt taking and Ñnancial assets and Ñnancial liabilities that are designated by the Group upon recognition as at fair value through proÑt or loss. All derivatives not qualiÑed for hedging purposes are included in this category and are carried as assets when their fair value is positive and as liabilities when their fair value is negative; and Ì available-for-sale assets are non-derivative Ñnancial assets that are designated as available for sale or are not classiÑed as Ñnancial assets at fair value through proÑt or loss, loans and receivables or held- to-maturity assets. Subsequent to initial recognition, Ñnancial assets and Ñnancial liabilities are measured at fair value, without any deduction for transaction costs that may occur on sale or other disposal except for loans and receivables, held-to-maturity Ñnancial assets and Ñnancial liabilities not designated at fair value through proÑt or loss, which are measured at amortised cost using the eÅective interest rate method. Financial assets and Ñnancial liabilities that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are stated at cost.

I-13 APPENDIX I ACCOUNTANTS' REPORT

Gains and losses from changes in the fair value of Ñnancial instruments at fair value through proÑt or loss are included in the income statement when they arise. Gains and losses arising from a change in the fair value of available-for-sale assets are recognised directly in equity, except for impairment losses and foreign exchange gains and losses, until the Ñnancial asset is derecognised at which time the cumulative gains or losses previously recognised in equity will be recognised in the income statement. For Ñnancial assets and Ñnancial liabilities carried at amortised cost, a gain or loss is recognised in the income statement when the Ñnancial asset or Ñnancial liability is derecognised or impaired, and through the amortisation process.

(ii) Impairment Financial assets are assessed at each balance sheet date to determine whether there is any objective evidence that a Ñnancial asset or a group of Ñnancial assets is impaired. A Ñnancial asset or a group of Ñnancial assets is impaired and impairment losses are incurred if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset and that event (or events) has an impact on the estimated future cash Öows of the Ñnancial asset or group of Ñnancial assets that can be reliably estimated. The carrying amount of assets is reduced through the use of an allowance for impairment losses and a corresponding provision for impairment losses is recognised in the income statement. Losses expected as a result of future events, no matter how likely, are not recognised because the necessary loss event has not yet occurred.

Ì Loans and receivables The impairment allowance of loans and receivables are measured as the diÅerence between the asset's carrying amount and the present value of estimated future cash Öows discounted at the asset's original eÅective interest rate. Receivables with a short duration are not discounted if the eÅect of discounting is immaterial. The total allowance for credit losses consists of two components: individual impairment allowances and collective impairment allowances. The Group Ñrst assesses whether objective evidence of impairment exists individually for Ñnancial assets that are individually signiÑcant and collectively for Ñnancial assets that are not individually signiÑcant. If the Group determines that no objective evidence of impairment exists for an individually assessed Ñnancial asset, it includes the asset in a group of Ñnancial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognised are not included in a collective assessment of impairment. Impairment losses are recognised in the income statement.

(ii-1) Individual impairment allowances All loans and advances in the corporate lending portfolios are considered individually signiÑcant and assessed individually for impairment. Individually impaired loans and advances are graded at a minimum at substandard (see Note 34(a) for the deÑnitions of the loan classiÑcation). Loans and advances which are assessed individually for impairment are evaluated in the light of objective evidence of loss events, for example: Ì SigniÑcant Ñnancial diÇculty of the borrower Ì A breach of contract, such as default or delinquency in interest payments or principal repayments Ì For economic or legal reasons relating to the borrower's Ñnancial diÇculty, granting to the borrower a concession that the Group would not otherwise consider Ì It becoming probable that the borrower will enter bankruptcy or other Ñnancial reorganisation

I-14 APPENDIX I ACCOUNTANTS' REPORT

It may not be possible to identify a single, discrete event that caused the impairment but it may be possible to identify impairment through the combined eÅect of several events. The individual impairment allowance is based upon management's best estimate of the present value of the cash Öows which are expected to be received discounted at the original eÅective interest rate. In estimating these cash Öows, management makes judgments about the borrower's Ñnancial situation and the net realisable value of any underlying collateral or guarantees in favour of the Group. Each impaired asset is assessed on its merits.

(ii-2) Collective impairment allowances Loans and advances, which include the following, are assessed for impairment losses on a collective basis: Ì All homogeneous groups of loans (representing all the retail loan portfolios) which are all considered not individually signiÑcant Ì Individually assessed loans with no objective evidence of impairment on an individual basis The collective impairment loss is assessed after taking into account: Ì Historical loss experience in portfolios of similar risk characteristics; Ì The emergence period between a loss occurring and that loss being identiÑed; and Ì The current economic and credit environments and whether in management's experience these indicate that the actual level of inherent losses is likely to be greater or less than that suggested by historical experience. The emergence period between a loss occurring and its identiÑcation is determined by management based on the historical experience of the markets where the Group operates. Impairment losses recognised on a collective basis represent an interim step pending the identiÑcation of impairment losses on individual assets (which are subject to individual assessment) in the pool of Ñnancial assets that are collectively assessed for impairment. As soon as information is available that speciÑcally identiÑes objective evidence of impairment on individual assets in a pool, those assets are removed from the pool of Ñnancial assets. Any subsequent changes to the amounts and timing of the expected future cash Öows compared to the prior estimates that can be linked objectively to an event occurring after the write-down, will result in a change in the impairment allowances on loans and receivables and be charged or credited to the income statement. When the borrower or the guarantor fails to repay the loan principal and interest, and repossessed assets are received by the Group for recovery of the impaired loans, the carrying value of the impaired loans is adjusted, if necessary, to the estimated fair value of the repossessed assets through impairment allowances. The adjusted carrying value of the impaired loans is transferred to repossessed assets, net of impairment allowances. When there is no reasonable prospect of recovery for the loan and the related interest receivables, the loan and the interest receivables as well as impairment allowances are written oÅ.

Ì Held-to-maturity assets For held-to-maturity Ñnancial assets, the impairment loss is measured as the diÅerence between the asset's carrying amount and the present value of estimated future cash Öows discounted at the Ñnancial asset's original eÅective interest rate. (i.e. the eÅective interest rate computed at initial recognition of these assets). Impairment losses are recognised in the income statement. Held-to-maturity assets with a short duration are not discounted if the eÅect of discounting is immaterial. If in a subsequent period the amount of an impairment loss decreases and the decrease can be linked objectively to an event occurring after the impairment loss was recognised, the impairment loss is reversed

I-15 APPENDIX I ACCOUNTANTS' REPORT through the income statement. A reversal of impairment losses is limited to the asset's carrying amount that would have been determined had no impairment loss been recognised in prior years.

Ì Available-for-sale assets When a decline in the fair value of an available-for-sale asset has been recognised directly in equity and there is objective evidence that the asset is impaired, the cumulative loss that had been recognised directly in equity is removed from equity and recognised in the income statement even though the Ñnancial asset has not been derecognised. The amount of the cumulative loss that is removed from equity and recognised in the income statement is the diÅerence between the acquisition cost (net of any principal repayment and amortisation) and current fair value, less any impairment loss on that Ñnancial asset previously recognised in the income statement. For an available-for-sale asset that is not carried at fair value because its fair value cannot be reliably measured, such as an unquoted equity instrument, the amount of any impairment loss is measured as the diÅerence between the carrying amount of the Ñnancial asset and the present value of estimated future cash Öows discounted at the current market rate of return for a similar Ñnancial asset. If, in a subsequent period, the fair value of a debt instrument classiÑed as available-for-sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in the income statement, the impairment loss is reversed, with the amount of the reversal being recognised in the income statement. Impairment losses recognised in the income statement for an investment in an equity instrument classiÑed as available-for-sale are not reversed through the income statement. Any increase in the fair value of such assets is recognised directly in equity.

(iii) Fair value measurement The fair value of Ñnancial assets is based on their quoted market price in an active market at the valuation date without any deduction for transaction costs. A quoted market price is from an active market where price information is readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency, and that price information represents actual and regularly occurring market transactions on an arm's length basis. If a quoted market price is not available, the fair value of the Ñnancial assets is established using valuation techniques. Valuation techniques applied include recent arm's length market transactions between knowledgeable and willing parties referenced to the fair value of another instrument that is substantially the same, discounted cash Öow analysis and option pricing models. Periodically the Group calibrates the valuation techniques and tests them for validity. In estimating the fair value of a Ñnancial asset and Ñnancial liability, the Group considers all factors, including but not limited to, interest rate, credit risk, foreign currency exchange price and market volatility, that are likely to aÅect the fair value of the Ñnancial asset and Ñnancial liability. The Group obtains market data in the same market where the Ñnancial instrument was originated or purchased.

(iv) Derivative Ñnancial instruments The Group's derivative Ñnancial instruments are principally undertaken in response to customers' needs or for the Group's own asset and liability management purposes. The Group also uses derivative Ñnancial instruments to hedge its exposure to market risks arising from its investment activities. Derivatives that do not qualify for hedge accounting are accounted for as Ñnancial assets and Ñnancial liabilities at fair value through proÑt or loss. Derivative Ñnancial instruments are recognised at fair value. The gain or loss on re-measurement to fair value is recognised immediately in the income statement. However, where derivatives qualify for hedge accounting, recognition of any resultant gain or loss depends on the nature of the item being hedged.

I-16 APPENDIX I ACCOUNTANTS' REPORT

(f) Repurchase and resale agreements Assets purchased subject to commitments to resell them at future dates are not recognised. The amounts paid are accounted for as balances with central bank, amounts due from banks and other Ñnancial institutions or loans and advances to customers depending on the identity of the counterparty. Assets sold under repurchase agreements continue to be recognised in the balance sheet and are measured in accordance with the accounting policy for these assets. The proceeds from the sale of the assets are reported as amounts due to central bank, banks or other Ñnancial institutions depending on the identity of the counterparty. The diÅerence between the purchase and resale consideration or the sale and repurchase consideration is amortised over the period of the transaction and is included in interest income or expense, as appropriate.

(g) Property and equipment (i) Cost or revaluation Property and equipment are stated at cost upon initial recognition. Subsequent to initial recognition, the Group adopts a revaluation policy to carry all classes of property at revaluation, being their fair value at the date of the revaluation, less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Equipment is stated at cost less accumulated depreciation and impairment losses. Increases in the carrying amount arising on revaluation of each property are credited to revaluation reserves. Decreases that oÅset previous increases of the same asset are charged against revaluation reserves; all other decreases are charged to the income statement. Construction in progress represents property under construction and is stated at cost less impairment losses. Capitalisation of these costs ceases and the construction in progress is transferred to an appropriate class of property and equipment when the asset is substantially ready for its intended use. Where an item of property and equipment comprises major components having diÅerent useful lives, they are accounted for as separate items of property and equipment.

(ii) Subsequent costs The Group recognises in the carrying amount of an item of property and equipment the cost of replacing part of such an item when that cost is incurred if it is probable that the future economic beneÑts embodied with the item will Öow to the Group and the cost of the item can be measured reliably. All other costs are recognised in the income statement as an expense when incurred.

(iii) Depreciation Depreciation is calculated to write oÅ the cost or revalued value, less residual value if applicable, of property and equipment and is charged to the income statement on a straight-line basis over the estimated useful lives of each part of an item of property and equipment. The estimated useful lives are as follows:

Estimated useful lives Bank premises ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 30 Ó 35 years Computer equipmentÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3 Ó 5 years Others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5 Ó 10 years No depreciation is provided in respect of construction in progress. The residual value and useful lives of assets are reviewed, and adjusted if appropriate, as of each balance sheet date.

I-17 APPENDIX I ACCOUNTANTS' REPORT

(iv) Impairment The carrying amount of property and equipment is reviewed periodically in order to assess whether the recoverable amount has declined below the carrying amount. When such a decline has occurred, the carrying amount is reduced to the recoverable amount. The amount of the reduction is recognised in the income statement except for property where it is carried at valuation and the impairment loss does not exceed the revaluation surplus for the same asset, in which case it is treated as a revaluation decrease. The recoverable amount is the greater of the net selling price and value in use. If in a subsequent period the amount of impairment loss decreases and the decrease can be linked objectively to an event occurring after the write-down, the write-down or allowances are reversed through the income statement. A reversal of impairment losses is limited to the asset's carrying amount that would have been determined had no impairment loss been recognised in the income statement in prior years.

(v) Disposal and retirement Gains or losses arising from the disposal or retirement of property and equipment are determined as the diÅerence between the net disposal proceeds and the carrying amount of the asset and are recognised in the income statement on the date of disposal or retirement. In respect of the disposal or retirement of property, any revaluation reserve balance remaining attributable to the relevant asset is transferred to retained earnings and is shown as a movement in reserves.

(h) Land use rights Land use rights are stated at cost less amortisation. Land use rights are amortised on a straight-line basis over the respective periods of grant.

(i) Repossessed assets Repossessed assets are initially recognised at the carrying value of the loan principal and interest receivable, net of respective allowances for impairment losses, upon the seizure of these assets in lieu of the rights on the loans and advances and interest receivable. An impairment loss is recognised in the income statement whenever the carrying amount of such an asset exceeds its recoverable amount.

(j) Fiduciary activities The Group acts in a Ñduciary capacity as a custodian, trustee or an agent for customers. Assets held by the Group and the related undertakings to return such assets to customers are excluded from the balance sheet as the risks and rewards of the assets reside with the customers. Entrusted lending is one of the principal Ñduciary activities of the Group. The Group enters into entrusted loan agreements with a number of customers, whereby the customers provide funding (the ""entrusted funds'') to the Group, and the Group grants loans to third parties (the ""entrusted loans'') at the instruction of the customers. As the Group does not assume the risks and rewards of the entrusted loans and the corresponding entrusted funds, entrusted loans and funds are recorded as oÅ-balance sheet items at their principal amounts and no impairment assessments are made for these entrusted loans.

(k) Provisions and contingent liabilities A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outÖow of economic beneÑts will be required to settle the obligation. If the eÅect of the time value of money is material, provisions are determined by discounting the expected future cash Öows at a pre-tax rate that reÖects current market assessments of the time value of money and, where appropriate, the risks speciÑc to the liability. Where it is not probable that an outÖow of economic beneÑts will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outÖow of

I-18 APPENDIX I ACCOUNTANTS' REPORT economic beneÑts is remote. Possible obligations, whose existence will only be conÑrmed by the occurrence or non-occurrence of one or more future events, are also disclosed as contingent liabilities unless the probability of outÖow of economic beneÑts is remote.

(l) Employee beneÑts (i) Employment beneÑts Salaries and bonuses, housing beneÑts and costs for social security beneÑts are accrued in the year in which the services are rendered by employees of the Group. Where payment or settlement is deferred and the eÅect would be material, these amounts are stated at their present values.

(ii) Post employment beneÑts Post employment beneÑts of the Group mainly include retirement beneÑts and supplementary retirement beneÑts.

Obligations for contributions to deÑned contribution retirement schemes are recognised as an expense in App 1A 33(4)(a) the income statement as incurred for current employees.

The Group's obligations in respect of supplementary retirement beneÑts are calculated by estimating the App 1A 33(4)(b) amount of future beneÑts that the Group is committed to pay to the employee after their retirement using actuarial techniques. Such beneÑts are discounted to determine their present values. The discount rate is the yield on PRC government bonds at the balance sheet date, the maturity dates of which approximate to the terms of the Group's obligations. In calculating the Group's obligations, any actuarial gains and losses are recognised in the income statement immediately in the same Ñnancial year.

(m) Income recognition

Provided it is probable that the economic beneÑts will Öow to the Group and the revenue and costs, if App 1A 33(1) applicable, can be measured reliably, revenue is recognised in the income statement as follows:

(i) Interest income Interest income for all interest-bearing assets is recognised in the income statement using the eÅective interest method or an applicable Öoating rate. Interest income includes the amortisation of any discount or premium or other diÅerences between the initial carrying amount of an interest bearing instrument and its amount at maturity calculated on an eÅective interest rate basis. The eÅective interest method is a method of calculating the amortised cost of a Ñnancial asset and of allocating the interest income over the relevant period. The eÅective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the Ñnancial instrument or, when appropriate, a shorter period to the net carrying amount of the Ñnancial asset. When calculating the eÅective interest rate, the Group estimates cash Öows by considering all contractual terms of the Ñnancial instrument but does not consider future credit losses. The calculation includes all fees and points paid or received between parties to the contract that are an integral part of the eÅective interest rate, transaction costs and all other premiums or discounts. The accrual of interest income of a loan where principal or interest of which is overdue over 90 days based on the original terms of the claim is discontinued. Instead, interest will continue to be recognised on the impaired Ñnancial assets using the rate of interest used to discount future cash Öows (""unwinding of discount'') for the purpose of measuring the related impairment loss.

(ii) Fee and commission income Fee and commission income is recognised in the income statement when the corresponding service is provided.

I-19 APPENDIX I ACCOUNTANTS' REPORT

Origination or commitment fees received by the Group which result in the creation or acquisition of a Ñnancial asset are deferred and recognised as an adjustment to the eÅective interest rate. If the commitment expires without the Group making a loan, the fee is recognised as revenue on expiry.

(iii) Dividend Dividend is recognised in the income statement on the date when the Group's right to receive payment is established.

(n) OÅsetting Financial assets and Ñnancial liabilities are oÅset and the net amount is reported in the balance sheet when, and only when, the Group has a legally enforceable right to set oÅ the recognised amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

(o) Cash and cash equivalents For the purposes of the consolidated cash Öow statement, cash and cash equivalents comprise cash, non- restricted balances with central bank, banks and other Ñnancial institutions, and short-term highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insigniÑcant risk of changes in value.

(p) Operating lease payments Payments made under operating leases are recognised in the income statement on a straight-line basis over the terms of the leases.

(q) Income tax Income tax in the income statement comprises current tax and movements in deferred tax balances. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred tax is provided using the balance sheet liability method, for temporary diÅerences between the carrying amounts of assets and liabilities for Ñnancial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantially enacted at the balance sheet date. Deferred tax assets also arise from unused tax losses and unused tax credits. A deferred tax asset is recognised only to the extent that it is probable that future taxable proÑts will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax beneÑt will be realised.

(r) ProÑt appropriations ProÑt appropriations are recognised as a liability in the year in which they are approved and declared.

(s) Related parties Parties are considered to be related to the Group if the Group has the ability, directly or indirectly, to control the party, exercise signiÑcant inÖuence or joint control over the party in making Ñnancial and operating decisions, or vice versa, or where the Group and the party are subject to common control, common joint control or common signiÑcant inÖuence. Related parties may be individuals and other entities.

I-20 APPENDIX I ACCOUNTANTS' REPORT

(t) Segment reporting A segment is a distinguishable component of the Group that is engaged either in providing products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are diÅerent from those of other segments.

3 Net interest income

Years ended 31 December 2004 2005 2006 Interest income arises from: Balances with central bank ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 853 713 964 Amounts due from banks and other Ñnancial institutions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 754 607 715 Loans and advances to customers (note (i)) Ì corporate loans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11,449 14,482 19,320 Ì personal loans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,288 1,972 2,397 Ì discounted billsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,488 1,728 2,617 Investments in debt securities (note (ii)) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,963 3,009 3,477 17,795 22,511 29,490 Interest expense arises from: Balance due to central bank ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (30) (12) (9) Amounts due to banks and other Ñnancial institutions Ì rediscounted bills ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (379) (383) (1,046) Ì othersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (686) (646) (745) Deposits from customers ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (6,181) (8,512) (10,790) Subordinated debts/bonds issued ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (136) (298) (427) (7,412) (9,851) (13,017) Net interest income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10,383 12,660 16,473

Notes:

(i) Interest income arising from loans and advances to customers includes interest income accrued on individually assessed impaired loans and advances to customers of RMB 248 million for the year ended 31 December 2006 (2005: RMB 306 million, 2004: RMB 350 million), which includes interest income on the unwinding of discount of allowances for loan impairment losses of RMB 210 million for the year end 31 December 2006 (2005 : RMB 275 million, 2004: RMB 307 million) (Note 16(b)). (ii) Interest income from investments in debt securities is mainly derived from unlisted investments.

4 Fee and commission income

Years ended 31 December 2004 2005 2006 Guarantee fees ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 129 162 215 Settlement fees ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 133 166 214 Bank card feesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 58 86 199 Agency fee for underwriting bonds and commission fee from bonds ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 37 113 132 Commission for consulting services and wealth management services ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13 17 61 Commission for underwriting investment funds, agency fee for insurance services and other agency fees ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 24 24 54 Others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 55 40 90 Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 449 608 965

I-21 APPENDIX I ACCOUNTANTS' REPORT

5 Net gain/(loss) from trading securities Years ended 31 December 2004 2005 2006 Net (loss)/gain on debt securities tradingÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (17) 66 16 Revaluation gain of investments and derivatives ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5 83 78 OthersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 46 (40) (143) TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 34 109 (49)

6 Net gain/(loss) from investment securities Years ended 31 December 2004 2005 2006 Net gain on disposalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8 53 45 Net revaluation gain/(loss) transferred from equity on disposalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3 (77) Ì Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11 (24) 45

Net gain/(loss) on disposal primarily relates to available-for-sale securities.

7 General and administrative expenses

Years ended 31 December 2004 2005 2006 StaÅ costs Ì salaries, bonuses and staÅ welfare expenses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,215 1,661 2,349 Ì contributions to deÑned contribution retirement schemes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 107 125 169 App 1A 33(4)(c) Ì housing fund ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 63 67 94 Ì supplementary retirement beneÑts ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9 Ì 6 Ì othersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 187 233 296 1,581 2,086 2,914 Property and equipment expense Ì depreciationÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 548 617 621 Ì rent and property management expensesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 345 376 497 Ì electronic equipment operating expensesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 95 141 156 Ì maintenance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 83 92 100 Ì othersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 96 112 134 1,167 1,338 1,508 Business tax and surcharges (note (i)) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 792 991 1,398 Management fee to CITIC Group ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 300 500 750 Amortisation expense ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 31 64 87 Other general and administrative expenses (note (ii)) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,580 2,125 2,602 5,451 7,104 9,259

Notes: (i) Business tax of 5% is levied primarily on interest income from loans and advances to customers, and fee and commission income. The surcharges, which include education surcharges and city construction tax, are charged at 3% and 7% of business tax paid respectively. (ii) The amount includes auditors' remuneration of RMB 10 million for the year ended 31 December 2006 (2005: RMB 2 million, 2004: RMB 1 million).

I-22 APPENDIX I ACCOUNTANTS' REPORT

8 Impairment losses charge Years ended 31 December 2004 2005 2006 Impairment losses charge/(release) on Ì loans and advances to customers ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,589 1,055 1,535 Ì bad and doubtful debts ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 16 46 60 Ì investments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 61 1 (4) Ì amount due from banks and other Ñnancial institutions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (17) (6) (3) Ì othersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (15) 2 78 1,634 1,098 1,666

9 Directors' and supervisors' emoluments

The Board of Directors and the Board of Supervisors of the Bank were set up on 28 December 2005 and App 1A 33(2) no director or supervisor was appointed by the Bank prior to this date. During the period from 28 December (a), (c) & (d) 2005 to 31 December 2005, no emoluments were paid or payable to any director or supervisor. The aggregate emolument of Directors' and Supervisors' during the year ended 31 December 2006 are as follows:

Year ended 31 December, 2006 Salaries, other emolumentsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1 Discretionary bonus ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3 Contributions to deÑned contribution retirement schemes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 4

The number of the directors and supervisors whose emoluments fell within the following bands is set out below: Year ended 31 December, 2006 RMB 0 Ì RMB 1,000,000 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2 RMB 2,500,000 Ì RMB 3,000,000 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1 3

The Directors and Supervisors of the Bank did not receive any inducements, or compensation for loss of oÇce, or waive any emoluments during the Relevant Periods.

10 Individuals with highest emoluments

The aggregate emoluments of the Ñve individuals with the highest emoluments for the years ended App 1A 33(3)(a), 31 December 2004, 2005 and 2006 are as follows: (b) & (c)

Years ended 31 December 2004 2005 2006 Salaries and other emoluments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1 1 1 Discretionary bonus ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5 9 5 Contributions to deÑned contribution retirement schemesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1 1 1 7117

I-23 APPENDIX I ACCOUNTANTS' REPORT

The number of the Ñve highest paid individuals whose emoluments fell within the following bands is set out below: Years ended 31 December 2004 2005 2006 RMB 1,000,001 Ì RMB 1,500,000 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4 Ì Ì RMB 1,500,001 Ì RMB 2,000,000 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1 4 4 RMB 2,500,001 Ì RMB 3,000,000 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 1 Ì Of the Ñve individuals with the highest emoluments for the year ended 31 December 2006, the aggregate of the emoluments in respect of one individual whose emoluments is disclosed in Note 9 above.

11 Loans to directors, supervisors and oÇcers Loans to the Directors, Supervisor and OÇcers (and their aÇliates) of the Bank as deÑned under section 161B of the Hong Kong Companies Ordinance during the years ended 31 December 2004, 2005 and 2006 are as follows: 31 December 2004 2005 2006 Aggregate amount of relevant loans outstanding at year end ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1 1 10

Years ended 31 December 2004 2005 2006 Maximum aggregate amount of relevant loans outstanding during the year ÏÏÏÏÏÏÏÏÏÏ 1 1 12

12 Income tax (a) Recognised in the income statement Years ended 31 December 2004 2005 2006 Current tax Ì Mainland China ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,041 1,044 1,199 Ì Hong Kong ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì Deferred tax (Note 19(b)) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 592 1,325 1,945 Income taxÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,633 2,369 3,144

(b) Reconciliation of proÑt before tax to income tax

Years ended 31 December 2004 2005 2006 ProÑt before tax ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,061 5,453 7,002 Expected PRC income tax charged at statutory tax rate of 33% (note (i)) ÏÏÏÏÏÏ 1,340 1,799 2,311 Tax impact on non-deductible expenses Ì StaÅ costs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 343 485 654 Ì Others (note (ii)) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 193 293 375 536 778 1,029 Tax impact on non-taxable income Ì Interest income from PRC government bonds ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (230) (189) (168) Ì Others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (13) (19) (28) (243) (208) (196) Income taxÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,633 2,369 3,144

I-24 APPENDIX I ACCOUNTANTS' REPORT

Notes: (i) The provision for PRC income tax of the Group is calculated based on the statutory tax rate of 33% in accordance with the relevant PRC income tax rules and regulations except for the Group's subsidiaries outside Mainland China which are subject to the income tax rate of 17.5%. (ii) The amounts primarily represent management fee to CITIC Group, entertainment expenses, depreciation and amortisation charges exceeding the deductible amount, which are not tax deductible.

13 Earnings per share The calculation of basic and diluted earnings per share amounts is based on the following: Years ended 31 December 2004 2005 2006 Earnings: Consolidated proÑt for the year attributable to equity holders of the Bank ÏÏ 2,427 3,083 3,858 Shares: Weighted average number of shares in issue or deemed to be in issue (million) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 31,113 31,113 31,113 Earnings per share (RMB) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.08 0.10 0.12

On 31 December 2006, with the approval of the State Council, CNCB was restructured and incorporated as a joint-stock limited company with a registered capital of RMB 31,113 million divided into 31,113 million shares with a par value of RMB 1 each. Basic and diluted earnings per share amounts for each of the years ended 31 December 2004, 2005 and 2006 have been computed as if the 31,113 million shares had been in issue since 1 January 2004. There was no diÅerence between the basic and diluted earnings per share as there were no dilutive events for the years ended 31 December 2004, 2005 and 2006.

14 Cash and balances with central bank 31 December 2004 2005 2006 Cash ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,459 1,678 2,589 Balances with central bank Ì Statutory deposit reserve funds (note (i)) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 23,717 29,282 41,246 Ì Surplus deposit reserve funds (note (ii)) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 28,595 25,779 30,138 Ì Fiscal deposits reserve fundsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 482 274 677 Ì Balances under resale agreement with the PBOC ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 27,440 15,970 52,794 82,775 88,031 Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 54,253 84,453 90,620

Notes: (i) Statutory deposit reserve funds placed with the PBOC were calculated at 7% of eligible RMB customer deposits of the Bank prior to 25 April 2004. This ratio was increased to 7.5% on 25 April 2004, to 8% on 5 July 2006, to 8.5% on 15 August 2006 and further to 9% on 15 November 2006. The Bank was also required to deposit an amount equivalent to 2% of its foreign currency deposits from customers as statutory deposit reserve funds prior to 15 January 2005. This ratio was increased to 3% on 15 January 2005 and further to 4% on 15 September 2006. The statutory deposit reserve funds are not available for the Group's daily business. (ii) The surplus deposit reserve funds were maintained with the PBOC for the purposes of clearing.

I-25 APPENDIX I ACCOUNTANTS' REPORT

15 Amounts due from banks and other Ñnancial institutions

(a) Analysed by nature 31 December 2004 2005 2006 Deposits Ì BanksÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9,766 16,968 8,894 Ì Other Ñnancial institutions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 612 803 381 10,378 17,771 9,275 Money market placements Ì BanksÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,339 688 4,843 Ì Other Ñnancial institutions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 734 416 596 4,073 1,104 5,439 Balances under resale agreements (note) Ì BanksÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,220 8,991 19,422 Ì Other Ñnancial institutions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,697 3,828 9,419 6,917 12,819 28,841 Gross balancesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 21,368 31,694 43,555 Less: Allowances for impairment losses (Note 15(e)) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (469) (342) (305) Net balances ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 20,899 31,352 43,250

Note:

Assets purchased under resale agreements are bank acceptance bills, loans and advances to customers, bonds issued by the PRC Government, bonds issued by policy banks and other debt securities of equivalent amounts.

(b) Analysed by original maturity 31 December 2004 2005 2006 Balances maturing Ì less than one monthÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 16,066 27,191 24,958 Ì between one month and one yearÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,032 3,483 17,471 Ì more than one year ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,270 1,020 1,126 Gross balancesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 21,368 31,694 43,555

(c) Analysed by geographical location

31 December 2004 2005 2006 Balances with Ì banks in Mainland China ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 12,880 20,291 27,214 Ì other Ñnancial institutions in Mainland China (note)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,043 5,047 10,396 15,923 25,338 37,610 Balances with banks outside Mainland China ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,445 6,356 5,945 Gross balancesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 21,368 31,694 43,555

Note:

Other Ñnancial institutions in Mainland China represent Ñnance companies, investment trust companies and leasing companies which are registered with and under the supervision of the CBRC, and securities companies and investment fund companies registered with and under the supervision of the China Securities Regulatory Commission.

I-26 APPENDIX I ACCOUNTANTS' REPORT

(d) Analysed by legal form of counterparty 31 December 2004 2005 2006 Balances with Ì PRC policy banks ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 2 1,793 Ì PRC state-owned banks and other Ñnancial institutions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9,147 16,734 13,026 Ì PRC joint-stock banks and other Ñnancial institutions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,190 8,602 22,871 Ì Foreign-invested banks and other Ñnancial institutions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,031 6,356 5,865 Gross balancesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 21,368 31,694 43,555 Less: Allowances for impairment losses on balances with Ì PRC state-owned banks and other Ñnancial institutions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (144) (144) (144) Ì PRC joint-stock banks and other Ñnancial institutions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (325) (198) (161) Total allowances for impairment losses ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (469) (342) (305) Net balances ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 20,899 31,352 43,250

(e) Movements of allowances for impairment losses

Years ended 31 December 2004 2005 2006 As at 1 January ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (513) (469) (342) Charge for the year ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì (3) Reversal for the year ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 17 6 6 Write-oÅs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 27 121 34 As at 31 December ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (469) (342) (305)

(f) Impaired amounts due from banks and other Ñnancial institutions and allowances 31 December 2004 2005 2006 Gross impaired amounts due from banks and other Ñnancial institutions ÏÏÏÏÏÏÏÏÏÏ 604 419 357 Impairment allowances against gross impaired amounts due from banks and other Ñnancial institutions (note)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (469) (342) (305) Net total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 135 77 52 Gross impaired amounts due from banks and other Ñnancial institutions as a percentage of total amounts due from banks and other Ñnancial institutions ÏÏÏÏÏ 2.83% 1.32% 0.82%

Note: The allowances for impairment losses for amounts due from banks and other Ñnancial institutions are individually assessed.

I-27 APPENDIX I ACCOUNTANTS' REPORT

16 Loans and advances to customers

(a) Analysed by nature 31 December 2004 2005 2006 Corporate loans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 256,422 282,275 369,156 Personal loans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 31,730 37,834 48,375 Discounted billsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 18,727 50,151 45,636 Gross loans and advances to customers ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 306,879 370,260 463,167 Less: Ì Individual impairment allowances ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (12,485) (9,622) (6,859) Ì Collective impairment allowances ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (2,473) (2,608) (2,927) Less: Impairment allowances (Note 16(b)) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (14,958) (12,230) (9,786) Net loans and advances to customersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 291,921 358,030 453,381

(b) Movements of allowances for impairment losses Years ended 31 December 2006 Collectively Individually 2004 2005 Total assessed assessed As at 1 January ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (16,774) (14,958) (12,230) (2,608) (9,622) Charge for the yearÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1,589) (1,055) (1,535) (331) (1,204) Unwinding of discount ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 307 275 210 Ì 210 Transfers out ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 73 6 207 Ì 207 Write-oÅs ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,035 3,519 3,685 12 3,673 Recoveries of loans and advances previously written oÅÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (10) (17) (123) Ì (123) As at 31 December ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (14,958) (12,230) (9,786) (2,927) (6,859)

(c) Loans and advances to customers and allowances 31 December 2004 (note (i)) Gross Loans and(note (ii)) Impaired loans impaired advancesand advances loans and for which for which for which advances allowances allowances allowances as a % of are are are gross total collectively collectively individually loans and assessed assessed assessed Total advances Gross loans and advances to Ì Ñnancial institutions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,461 Ì 915 7,376 12.41% Ì non-Ñnancial institutionsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 281,138 391 17,974 299,503 6.13 287,599 391 18,889 306,879 6.28% Less: Impairment allowances against loans and advances to Ì Ñnancial institutions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (78) Ì (447) (525) Ì non-Ñnancial institutionsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (2,182) (213) (12,038) (14,433) (2,260) (213) (12,485) (14,958) Net loans and advances to Ì Ñnancial institutions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,383 Ì 468 6,851 Ì non-Ñnancial institutionsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 278,956 178 5,936 285,070 285,339 178 6,404 291,921

I-28 APPENDIX I ACCOUNTANTS' REPORT

31 December 2005 (note (i)) Gross Loans and(note (ii)) Impaired loans impaired advancesand advances loans and for which for which for which advances allowances allowances allowances as a % of are are are gross total collectively collectively individually loans and assessed assessed assessed Total advances Gross loans and advances to Ì Ñnancial institutions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,833 Ì 355 9,188 3.86% Ì non-Ñnancial institutionsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 346,116 393 14,563 361,072 4.14 354,949 393 14,918 370,260 4.14% Less: Impairment allowances against loans and advances to Ì Ñnancial institutions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (91) Ì (242) (333) Ì non-Ñnancial institutionsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (2,292) (225) (9,380) (11,897) (2,383) (225) (9,622) (12,230) Net loans and advances to Ì Ñnancial institutions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,742 Ì 113 8,855 Ì non-Ñnancial institutionsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 343,824 168 5,183 349,175 352,566 168 5,296 358,030

31 December 2006 (note (i)) Gross Loans and(note (ii)) Impaired loans impaired advancesand advances loans and for which for which for which advances allowances allowances allowances as a % of are are are gross total collectively collectively individually loans and assessed assessed assessed Total advances Gross loans and advances to Ì Ñnancial institutions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,867 Ì 240 3,107 7.72% Ì non-Ñnancial institutionsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 448,735 414 10,911 460,060 2.46 451,602 414 11,151 463,167 2.50% Less: Impairment allowances against loans and advances to Ì Ñnancial institutions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (38) Ì (66) (104) Ì non-Ñnancial institutionsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (2,625) (264) (6,793) (9,682) (2,663) (264) (6,859) (9,786) Net loans and advances to Ì Ñnancial institutions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,829 Ì 174 3,003 Ì non-Ñnancial institutionsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 446,110 150 4,118 450,378 448,939 150 4,292 453,381

Notes:

(i) Loans and advances assessed on a collective basis for impairment bear relatively insigniÑcant impairment losses as a proportion of the total portfolio. These loans and advances include those which are graded normal or special-mention. (ii) Impaired loans and advances to customers include loans and advances for which objective evidence of impairment exists and which have been assessed as bearing signiÑcant impairment losses. These loans and advances include loans and advances for which objective evidence of impairment has been identiÑed: Ì individually (representing corporate loans and advances which are graded substandard, doubtful or loss); or Ì collectively; that is the portfolios of homogeneous loans and advances (representing personal loans and advances which are graded substandard, doubtful or loss). (iii) The deÑnitions of the loan classiÑcation as stated above are described in Note 34(a).

I-29 APPENDIX I ACCOUNTANTS' REPORT

(iv) The distribution of allowance for impairment losses for individually-assessed impaired corporate loans by legal form of borrowers is as follows: 31 December 2004 2005 2006 Joint-stock enterprises ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,707 3,976 3,378 State-owned enterprises ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,994 2,747 1,485 Foreign invested enterprisesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,302 2,013 1,385 Private enterprisesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 405 277 330 Collectively-controlled enterprises ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 879 365 185 Others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 198 244 96 Total allowance for impaired corporate loans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 12,485 9,622 6,859

(d) Analysed by legal form of borrowers 31 December note 2004 2005 2006 Corporate loans to Ì Joint-stock enterprisesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 119,369 130,157 166,490 Ì State-owned enterprises ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (i) 84,252 100,738 131,954 Ì Foreign invested enterprises ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 27,171 27,040 39,048 Ì Private enterprises ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11,662 13,636 18,162 Ì Collectively-controlled enterprises ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,386 4,480 5,721 Ì OthersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,582 6,224 7,781 Subtotal ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 256,422 282,275 369,156 Personal loans Ì Home mortgage loansÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 17,838 26,246 36,470 Ì Credit card advancesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 208 447 1,280 Ì OthersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13,684 11,141 10,625 Subtotal ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 31,730 37,834 48,375 Discounted bills ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 18,727 50,151 45,636 Gross loans and advances to customers ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 306,879 370,260 463,167 Less: Impairment allowances ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (14,958) (12,230) (9,786) Net loans and advances to customers ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 291,921 358,030 453,381

Note: (i) Included in the impaired loans and advances to customers of the Group as disclosed in Note 16(c) are amounts of RMB 5,565 million, RMB 3,566 million and RMB 1,933 million as at December 31, 2004, 2005 and 2006 respectively, relating to loans and advances to state-owned enterprises.

17 Investments

31 December Note 2004 2005 2006 Held-to-maturity debt securitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (a) 61,370 67,727 68,196 Available-for-sale Ì debt securities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (b) 40,411 31,564 31,166 Ì equity investmentsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (c) 338 312 337 40,749 31,876 31,503 Debt securities at fair value through proÑt or loss ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (d) 8,784 4,813 4,725 Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 110,903 104,416 104,424

I-30 APPENDIX I ACCOUNTANTS' REPORT

(a) Held-to-maturity debt securities 31 December 2004 2005 2006 Issued by: Government Ì of Mainland ChinaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 18,022 17,545 17,673 Ì outside Mainland China ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 467 2,905 2,813 PBOCÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 23,883 17,569 17,638 Policy banks Ì in Mainland ChinaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11,199 13,816 13,824 Ì outside Mainland China ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 262 274 439 Banks and other Ñnancial institutions Ì in Mainland ChinaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,268 917 991 Ì outside Mainland China ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,925 5,137 6,439 Public sector entities outside Mainland China ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 852 6,759 6,663 Corporate entities Ì in Mainland ChinaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,028 961 581 Ì outside Mainland China ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,464 1,844 1,135 Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 61,370 67,727 68,196 Listed in Hong Kong ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 83 80 156 Listed outside Hong Kong ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,639 5,386 6,572 Unlisted ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 57,648 62,261 61,468 Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 61,370 67,727 68,196 Market value of listed securities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,763 5,425 6,641

(b) Available-for-sale debt securities 31 December 2004 2005 2006 At fair value and issued by: Government Ì of Mainland ChinaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,284 2,844 2,029 Ì outside Mainland China ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,645 1,936 539 PBOCÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,892 8,259 4,032 Policy banks Ì in Mainland ChinaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,887 3,057 8,559 Ì outside Mainland China ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 224 113 331 Banks and other Ñnancial institutions Ì in Mainland ChinaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 199 Ì 99 Ì outside Mainland China ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,285 8,765 7,539 Public sector entities outside Mainland China ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9,453 2,413 2,325 Corporate entities Ì in Mainland ChinaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 2,690 5,159 Ì outside Mainland China ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,542 1,487 554 Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 40,411 31,564 31,166 Listed in Hong Kong ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 363 352 558 Listed outside Hong Kong ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 18,257 7,040 6,549 Unlisted ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 21,791 24,172 24,059 Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 40,411 31,564 31,166

I-31 APPENDIX I ACCOUNTANTS' REPORT

(c) Available-for-sale equity investments 31 December 2004 2005 2006 At fair value and issued by: Banks and other Ñnancial institutions Ì in Mainland ChinaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 56 56 70 Ì outside Mainland China ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 220 220 267 Corporate entities Ì in Mainland ChinaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 38 36 Ì Ì outside Mainland China ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 24 Ì Ì TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 338 312 337

All of the above equity investments are unlisted.

(d) Debt securities at fair value through proÑt or loss 31 December 2004 2005 2006 At fair value and issued by: Government Ì of Mainland ChinaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,128 932 52 Ì outside Mainland China ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 83 Ì Ì PBOCÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,280 1,589 2,051 Policy banks in Mainland China ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,415 1,400 1,764 Banks and other Ñnancial institutions Ì in Mainland ChinaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 35 37 32 Ì outside Mainland China ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 511 572 550 Corporate entities Ì in Mainland ChinaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 41 Ì 276 Ì outside Mainland China ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 291 283 Ì Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,784 4,813 4,725 Listed outside Hong Kong ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 77 118 154 Unlisted ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,707 4,695 4,571 Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,784 4,813 4,725

All of the above securities are held for trading purposes.

I-32 APPENDIX I ACCOUNTANTS' REPORT

18 Property and equipment Bank premises Construction Computer (Note 18(a)) in progress equipment Others Total Cost or valuation: As at 1 January 2004 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,429 228 1,321 1,137 8,115 Additions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,021 57 68 120 1,266 Disposals ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (56) (2) (46) (89) (193) TransfersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 63 (70) 3 4 Ì Surplus on revaluation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 609 Ì Ì Ì 609 Elimination of accumulated depreciation on revaluation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (171) Ì Ì Ì (171) As at 31 December 2004 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,895 213 1,346 1,172 9,626 As at 1 January 2005 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,895 213 1,346 1,172 9,626 Additions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 30 121 361 97 609 Disposals ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (37) (1) (18) (136) (192) TransfersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 102 (264) 150 12 Ì Surplus on revaluation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 588 Ì Ì Ì 588 Elimination of accumulated depreciation on revaluation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (223) Ì Ì Ì (223) As at 31 December 2005 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,355 69 1,839 1,145 10,408 As at 1 January 2006 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,355 69 1,839 1,145 10,408 Additions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 66 190 242 228 726 Disposals ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (96) (16) (74) (165) (351) TransfersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2 (6) 4 Ì Ì Surplus on revaluation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 123 Ì Ì Ì 123 Elimination of accumulated depreciation on revaluation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (197) Ì Ì Ì (197) As at 31 December 2006 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,253 237 2,011 1,208 10,709 Accumulated depreciation and impairment losses: As at 1 January 2004 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì (658) (631) (1,289) Depreciation chargesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (172) Ì (214) (162) (548) Disposals ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1 Ì 42 87 130 Elimination on revaluation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 171 Ì Ì Ì 171 As at 31 December 2004 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì (830) (706) (1,536) As at 1 January 2005 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì (830) (706) (1,536) Depreciation chargesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (224) Ì (283) (110) (617) Disposals ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1 Ì Ì 135 136 Elimination on revaluation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 223 Ì Ì Ì 223 As at 31 December 2005 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì (1,113) (681) (1,794) As at 1 January 2006 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì (1,113) (681) (1,794) Depreciation chargesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (236) Ì (243) (142) (621) Disposals ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 39 Ì 72 143 254 Elimination on revaluation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 197 Ì Ì Ì 197 As at 31 December 2006 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì (1,284) (680) (1,964) Net carrying value: As at 31 December 2004 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,895 213 516 466 8,090 As at 31 December 2005 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,355 69 726 464 8,614 As at 31 December 2006 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,253 237 727 528 8,745

Note:

As at 31 December 2006, the net book value of the Group's bank premises for which the registration procedures for ownership had not been completed was approximately RMB 669 million. The Group anticipates that there would be no signiÑcant issues and costs in completing such procedures.

I-33 APPENDIX I ACCOUNTANTS' REPORT

(a) Analysed by remaining term of leases The net carrying value of bank premises at the balance sheet date is analysed by the remaining terms of the leases as follows: 31 December 2004 2005 2006 Long term leases (over 50 years), held in Hong Kong ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 24 24 27 Medium term leases (10-50 years), held in the PRC ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,871 7,331 7,226 Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,895 7,355 7,253

(b) Valuation The bank premises of the Group were revalued at 31 December of each year at their open market value by reference to recent market transactions in comparable properties. The valuations were carried out by an independent Ñrm of valuer, China Enterprise Appraisals Co., Ltd. The revaluation surpluses have been transferred to the properties revaluation reserve of the Group. Had these bank premises been carried at cost less accumulated depreciation, the carrying amounts would have been RMB 4,832 million as at 31 December 2006 (2005: RMB 4,926 million, 2004: RMB 4,980 million).

19 Deferred tax assets/(liabilities) (a) Analysed by nature 31 December 2004 2005 2006 Deferred tax assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,424 4,082 2,210 Deferred tax liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì (71) (141) Net balance ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,424 4,011 2,069

I-34 APPENDIX I ACCOUNTANTS' REPORT

(b) The components of deferred tax assets/ (liabilities) recognised in the balance sheet and the movements during the years are as follows:

Impairment Total loss on loans deferred and advances Impairment loss on tax assets/ to customers repossessed assets Fair value Others (liabilities) note (i) As at 1 January 2004 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,698 491 (61) 797 5,925 Recognised in income statementÏÏÏÏÏÏÏÏ (466) 19 12 (157) (592) Recognised in equity ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 91 Ì 91 As at 31 December 2004 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,232 510 42 640 5,424 As at 1 January 2005 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,232 510 42 640 5,424 Recognised in income statementÏÏÏÏÏÏÏÏ (854) (23) (14) (434) (1,325) Recognised in equity ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì (88) Ì (88) As at 31 December 2005 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,378 487 (60) 206 4,011 As at 1 January 2006 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,378 487 (60) 206 4,011 Recognised in income statementÏÏÏÏÏÏÏÏ (1,646) (122) (51) (126) (1,945) Recognised in equity ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 3 Ì 3 As at 31 December 2006 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,732 365 (108) 80 2,069

Notes: (i) Unrealised gains or losses arising from fair value adjustments for securities and derivatives are subject to tax when realised. CO 3rd Sch(1)(42) (ii) The Group did not have signiÑcant unrecognised deferred tax arising at the balance sheet date.

20 Other assets 31 December 2004 2005 2006 Interest receivable Ì debt securitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 900 888 986 Ì loans and advances to customers ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 675 736 982 Ì othersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 12 26 28 1,587 1,650 1,996 Repossessed assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,020 826 599 Positive fair value of derivatives (Note 33)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 301 211 452 Land use rights ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 212 195 191 Intangible assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 21 40 57 OthersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 814 733 798 Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,955 3,655 4,093

I-35 APPENDIX I ACCOUNTANTS' REPORT

21 Amounts due to banks and other Ñnancial institutions (a) Analysed by nature 31 December 2004 2005 2006 Deposits Ì BanksÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 15,173 12,984 5,359 Ì Other Ñnancial institutions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 14,488 13,009 25,962 29,661 25,993 31,321 Balances under repurchase agreements (note) Ì BanksÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,607 1,227 1,538 Ì Other Ñnancial institutions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 744 53 165 6,351 1,280 1,703 Money market takings Ì BanksÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 42 40 2,486 Ì Other Ñnancial institutions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,136 708 656 2,178 748 3,142 Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 38,190 28,021 36,166

Note: Assets pledged under repurchase agreements are bank acceptance bills, loans and advances to customers, and debt securities.

(b) Analysed by geographical location 31 December 2004 2005 2006 Balances payable on demand Ì Banks in Mainland China ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11,251 8,784 3,760 Ì Other Ñnancial institutions in Mainland China ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,724 7,906 23,755 19,975 16,690 27,515 Ì Banks outside Mainland ChinaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 2 Ì Term deposits Ì Banks in Mainland China ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9,571 5,465 4,455 Ì Other Ñnancial institutions in Mainland China ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,644 5,864 3,028 18,215 11,329 7,483 Ì Banks outside Mainland ChinaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 1,168 Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 38,190 28,021 36,166

(c) Analysed by legal form of counterparty 31 December 2004 2005 2006 Balances with Ì PRC policy banks ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 799 304 12 Ì PRC state-owned banks and other Ñnancial institutions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,078 1,053 109 Ì PRC joint-stock banks and other Ñnancial institutions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 35,313 26,662 34,876 Ì Foreign-invested banks and other Ñnancial institutions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 2 1,169 Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 38,190 28,021 36,166

I-36 APPENDIX I ACCOUNTANTS' REPORT

22 Deposits from customers

(a) Analysed by nature 31 December 2004 2005 2006 Demand deposits Ì Corporate customers ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 179,106 232,933 260,971 Ì Personal customersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,811 10,110 26,053 185,917 243,043 287,024 Time deposits (note(i)) Ì Corporate customers ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 208,140 226,388 251,580 Ì Personal customersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 40,963 61,142 79,808 249,103 287,530 331,388 Total (note(ii)) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 435,020 530,573 618,412

Notes:

(i) The time deposits include notice deposits.

(ii) Deposits from customers include structured deposits, which are designated at fair value through proÑt or loss. The change in the fair value of these structured deposits is mainly attributable to changes in benchmark interest rates. The carrying amount of structured deposits as at 31 December 2006 was RMB 13,559 million (2005: RMB 12,656 million, 2004: RMB 7,032 million).

(b) Analysed by geographical segments 31 December 2004 2005 2006 Bohai Rim ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 167,713 207,676 217,380 Yangtze River DeltaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 127,269 146,579 179,751 Pearl River Delta and West Strait ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 59,003 72,855 89,082 Central ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 32,420 47,214 59,844 Western ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 34,250 39,204 48,181 Northeastern ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13,793 16,579 23,295 Head OÇce ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 572 466 879 Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 435,020 530,573 618,412

See Note 32(b) for the deÑnitions of geographical segments.

I-37 APPENDIX I ACCOUNTANTS' REPORT

23 Other liabilities and provisions 31 December 2004 2005 2006 Interest payable Ì deposits from customers ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,861 2,303 2,885 Ì othersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 182 165 293 2,043 2,468 3,178 Salaries and welfare payables (Note 23(a)) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 576 1,064 1,289 Supplementary retirement beneÑt obligations (Note 24(b))ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 44 42 48 Settlement accounts ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 177 346 307 Business and other tax payables ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 270 318 476 Negative fair value of derivatives (Note 33)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 314 314 576 Government bond redemption payable ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 87 143 70 Dormant accountsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 16 70 33 Payment and collection clearance accountÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 39 57 86 Short positions in securities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 111 Ì 79 OthersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 443 518 737 Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,120 5,340 6,879

(a) Salaries and welfare payables Included under salaries and welfare payables, the Group has the following payables to deÑned contribution retirement schemes at the balance sheet date: 31 December 2004 2005 2006 As at 31 DecemberÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 17 18 8

24 Retirement beneÑts (a) DeÑned contribution retirement schemes App 1A 33(4)(a) In accordance with the labour regulations of the PRC, the Group participates in deÑned contribution retirement schemes organised by the municipal and provincial governments for its employees in Mainland China. The Group is required to make contributions to the government administered retirement schemes at certain rates of the salaries, bonuses and certain allowances of its employees.

In addition to the above retirement schemes, the Group has established a supplementary deÑned App 1A 33(4)(b) contribution plan for its qualiÑed employees. The plan is administered by CITIC Group. The Group contributes an equivalent of 3% of qualiÑed employees' salaries and bonuses to the plan each year, which amounting to RMB 32 million for the year ended 31 December 2006 (2005: RMB 25 million, 2004: RMB 21 million). The Group is also required to make contributions to Mandatory Provident Fund Scheme for employees working in Hong Kong at the rate set up by the local laws and regulations. The Group's total contributions during the relevant periods are disclosed in Note 7. The Group has no other material obligations for the payment of its employees' retirement and other post retirement beneÑts other than the contributions described above and in Note 24(b) below.

(b) Supplementary retirement beneÑt obligations

The Group pays supplementary retirement beneÑts for all of its qualiÑed retired employees in Mainland App 1A 33(4)(a) China. These beneÑts cover both employees currently employed and those retired. The amounts recognised in the balance sheets represent the present value of the unfunded obligations.

I-38 APPENDIX I ACCOUNTANTS' REPORT

The Group's obligations in respect of the supplementary retirement beneÑts at the balance sheet date App 1A 33(4)(e)(i) were reviewed by an independent actuary company, Mercer Human Resources Consulting, using the projected unit credit actuarial cost method. Mercer Human Resources Consulting employs professional actuaries, who are members of Society of Actuaries of the United States of America.

Net liabilities recognised in the balance sheet represent: 31 December 2004 2005 2006 Present value of the obligationsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 44 42 48

Movements in the net liabilities recognised in the balance sheet are as follows: Years ended 31 December 2004 2005 2006 As at 1 JanuaryÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 36 44 42 Payments madeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1) (1) (1) Net expense/(income) recognised in the income statement ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9 (1) 7 As at 31 DecemberÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 44 42 48

Net expense/(income) recognised as staÅ cost/(other income) in the income statement comprises: Years ended 31 December 2004 2005 2006 Current service cost ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1 1 1 Interest cost on obligations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1 1 1 Actuarial loss/(gain) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7 (3) 5 Net expense/(income)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9 (1) 7

Principal actuarial assumptions at the balance sheet date are as follows: 31 December 2004 2005 2006 Discount rate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3.00% 3.50% 3.50%

1995-2006 2007 2008-2010 2011-2015 Since 2016 Earnings inÖation rate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 16.00% 14.00% 12.00% 9.00% 6.50%

I-39 APPENDIX I ACCOUNTANTS' REPORT

25 Subordinated debts/bonds issued

During the relevant periods, the Group issued the following subordinated debts/bonds upon the approval of the PBOC and the CBRC. The carrying value of the Group's subordinated debts/bonds at the balance sheet date represents: 31 December note 2004 2005 2006 Subordinated Öoating rate debts maturing Ì in June 2010 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (i) 4,778 4,778 4,778 Ì in July 2010 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (i) 602 602 602 Ì in September 2010 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (i) 300 300 300 Ì in June 2010 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (ii) 320 320 320 Subordinated Ñxed rate bonds maturing Ì in June 2016 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (iii) Ì Ì 4,000 Ì in June 2021 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (iv) Ì Ì 2,000 Total nominal value ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,000 6,000 12,000

Notes:

(i) The interest rate per annum on the subordinated Öoating rate debts is the PBOC one-year Ñxed deposit rate plus an interest margin of 2.72%.

(ii) The interest rate per annum on the subordinated Öoating rate debts is the PBOC one-year Ñxed deposit rate plus an interest margin of 2.60%.

(iii) The interest rate per annum on the subordinated Ñxed rate bonds is 3.75%. The Group has an option to redeem the debts on 22 June 2011. If they are not redeemed early, the interest rate of the debts will increase in June 2011 to 6.75% per annum for the next Ñve years.

(iv) The interest rate per annum on the subordinated Ñxed rate bonds is 4.12%. The Group has an option to redeem the debts on 22 June 2016. If they are not redeemed early, the interest rate of the debts will increase in June 2016 to 7.12% per annum for the next Ñve years.

26 Equity

(a) Capital

Movements of the owner's capital of CNCB Years ended 31 December 2004 2005 2006 (i) (ii) (iii) As at 1 JanuaryÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 14,032 17,790 26,661 Capitalisation of retained earnings ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,258 271 Ì Capital contribution ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,500 8,600 7,400 Transfer of reserves and accumulated losses as at 31 December 2005 to share capitalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì (34,061) As at 31 DecemberÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 17,790 26,661 Ì

Movement of the share capital of the Bank 2006 (iii) As at 1 JanuaryÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Shares issued upon incorporation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 31,113 As at 31 DecemberÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 31,113

I-40 APPENDIX I ACCOUNTANTS' REPORT

The movements in the owner's capital of CNCB and the share capital of the Bank during the relevant periods are as follows: (i) In December 2004, CNCB transferred RMB 1,258 million from retained earnings to owner's capital following a notice from CITIC Group. In addition, CITIC Group made a capital contribution of RMB 2,200 million and USD 36 million (equivalent to RMB 300 million) in cash to CNCB. Shine Wing CertiÑed Public Accountants veriÑed the capital contributions and issued a capital veriÑcation report (XYZH/A305032) on 6 January 2005. The owner's capital of CNCB was RMB 17,790 million as at 31 December 2004. (ii) In December 2005, CNCB transferred RMB 271 million from retained earnings to owner's capital following a notice from CITIC Group. In addition, CITIC Group made a capital contribution of RMB 8,600 million in cash to CNCB. Shine Wing CertiÑed Public Accountants veriÑed the capital contributions and issued a capital veriÑcation report (XYZH/2005A3012-10) on 11 January 2006. The owner's capital of CNCB was RMB 26,661 million as at 31 December 2005. (iii) In June 2006, CITIC Group made a capital contribution of RMB 5,000 million in cash to CNCB. Shine Wing CertiÑed Public Accountants veriÑed the capital contributions made by CITIC Group and issued a capital veriÑcation report (XYZH/2005A3069-1) on 30 June 2006. In November 2006, CITIC Group made a capital contribution of RMB 2,400 million in cash to CNCB. (iv) On 31 December 2006, CITIC Group and CIFH established the Bank as joint promoters upon completion of the Restructuring as stated in Note 1 (a). Following the Restructuring, the Bank was incorporated with a registered and paid up capital of RMB 31,113 million divided into 31,113 million shares with a par value of RMB 1 each. The Bank issued 26,394 million shares to CITIC Group in exchange for its interest in CNCB and cash contributions of RMB 7,400 million. The Bank issued 4,719 million shares to CIFH in exchange for its interest in CNCB. Shine Wing CertiÑed Public Accountants veriÑed the capital contributions made by CITIC Group and CIFH and issued a capital veriÑcation report (XYZH/2006A3039-2) on 14 December 2006.

(b) Surplus reserves Surplus reserves consist of statutory surplus reserve, discretionary surplus reserve and statutory public welfare fund.

(i) Statutory surplus reserve and discretionary surplus reserve The Bank is required to appropriate 10% of its net proÑt, as determined under PRC GAAP, to a statutory surplus reserve until the reserve balance reaches 50% of the registered capital. After making appropriation to a statutory surplus reserve, the Bank may also appropriate its net proÑt to the discretionary surplus reserve upon approval by board of directors. Subject to the approval of board of directors, statutory surplus and discretionary surplus reserves may be used to make good prior year losses, if any, and may be converted into capital, provided that the balance of statutory surplus reserve after such capitalisation is not less than 25% of the registered capital. The fund is non-distributable other than in liquidation.

(ii) Statutory public welfare fund Prior to 1 January 2006, the Bank was required to appropriate 5% of its net proÑt, as determined under Previous PRC GAAP, to the statutory public welfare fund. In accordance with The Company Law of the PRC, which was issued on 27 October 2005 and eÅective from 1 January 2006, the Bank is no longer required to make further appropriation to the statutory public welfare fund.

I-41 APPENDIX I ACCOUNTANTS' REPORT

This fund can only be used to purchase capital items for the collective beneÑt of the Bank's employees such as the construction of dormitories, canteens and other staÅ welfare facilities. The fund is non-distributable other than in liquidation.

The Group adopted the Accounting Regulations for Financial Enterprises (issued by the MOF in 2001) CO 3rd Sch(1)(42) for the year ended 31 December 2005 and made retrospective adjustments resulting in a negative balance of the retained earnings as at 31 December 2005. As a result, the surplus reserves previously made have been used to partially set oÅ the negative balance of the retained earnings and have been adjusted to nil.

(c) Investment revaluation reserve Investment revaluation reserve has been accounted for in accordance with the accounting policies adopted for the measurement of available-for-sale investments at fair value.

(d) Properties revaluation reserve Properties revaluation reserve has been made in accordance with the accounting policies adopted for the Group's bank premises.

(e) Capital reserve In accordance with the notice ""Accounting Treatment on Salary Payables for Enterprise Restructuring'' (Cai Ban Qi ®2006© No. 23) issued by MOF on 17 March 2006, RMB 102 million of accrued welfare payable was transferred to the capital reserve. Pursuant to the Restructuring, the owner's capital, reserves and accumulated losses of CNCB, as determined under PRC GAAP, were converted into the Bank's issued share capital upon its incorporation as described in Note 1(a) and 26(a) to the Financial Information. Further, in order to have the same amount of share capital under both IFRS and PRC GAAP, RMB 391 million was transferred from newly created capital reserve to share capital under IFRS.

(f) Appropriation to general reserve Pursuant to Cai Jin ®2005© No. 49 and Cai Jing ®2005© No. 90 issued by the MOF on 17 May 2005 and 5 September 2005 respectively (collectively named as the ""MOF Notices''), which are eÅective on 1 July 2005, banks and certain other Ñnancial institutions in the PRC, including the Bank, should set up a general reserve calculated as a percentage of the total risk assets at the balance sheet date, through a transfer from retained earnings, to cover potential losses that are not yet incurred. The general reserve forms part of the equity of the Ñnancial institution. Financial institutions are not allowed to make proÑt distributions to shareholders until adequate general reserve has been made. If a Ñnancial institution cannot meet the requirement of maintaining adequate general reserve as stipulated in the MOF Notices as at 1 July 2005, the Ñnancial institution is required to take necessary steps to ensure that such requirement can be met in approximately 3 years but not more than 5 years, from 1 July 2005. The Bank has not made any general reserve as at 31 December 2006.

27 ProÑt appropriations The Bank appropriated proÑts of RMB 1,258 million and RMB 271 million from retained earnings to capital for the years ended 31 December 2004 and 2005 respectively. The Bank appropriated proÑts of RMB 3,000 million in cash to CITIC Group for the year ended 31 December 2006. As stated in Note 1(a) (ii), CITIC Group is entitled to the proÑt and loss made by CNCB between 31 December 2005 and the date of the Bank's incorporation in accordance with relevant PRC rules and regulations. Accordingly, CITIC Group is entitled to RMB 726 million of the RMB 879 million retained earnings of the Group as at 31 December 2006. The board resolution after the balance sheet date in respect of the distribution of RMB 726 million is disclosed in Note 39(c).

I-42 APPENDIX I ACCOUNTANTS' REPORT

28 Notes to consolidated cash Öow statement

Cash and cash equivalents

Years ended 31 December 2004 2005 2006 Cash ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,459 1,678 2,589 Surplus deposit reserve funds ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 28,595 25,779 30,138 Amounts due from banks and other Ñnancial institutions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 20,899 31,352 43,250 Less: Ì amounts due over three months when acquired ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1,318) (1,522) (1,171) Ì balances under resale agreementsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (6,917) (12,819) (28,841) 12,664 17,011 13,238 Investment securities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 23,617 25,662 7,062 Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 66,335 70,130 53,027

29 Commitments and contingent liabilities (a) Credit commitments

At any given time the Group has outstanding commitments to extend credit. These commitments take the form of approved loans and credit card limits.

The Group provides Ñnancial guarantees and letters of credit to guarantee the performance of customers to third parties.

Acceptances comprise undertakings by the Group to pay bills of exchange drawn on customers. The Group expects most acceptances to be settled simultaneously with the reimbursement from the customers.

The contractual amounts of commitments and contingent liabilities are set out in the following table by category. The amounts reÖected in the table for commitments assume that amounts are fully advanced. The amount reÖected in the table for guarantees and letters of credit represents the maximum potential loss that would be recognised at the balance sheet date if counterparties failed completely to perform as contracted.

31 December 2004 2005 2006 Contractual amount Loan commitments Ì with an original maturity of under one year ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 25 86 147 Ì with an original maturity of one year or over ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,458 2,440 5,547 1,483 2,526 5,694 Guarantees and letters of credit ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 32,194 36,947 49,466 AcceptancesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 94,836 105,783 132,000 Credit card commitments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,232 4,836 8,412 130,745 150,092 195,572

These commitments and contingent liabilities have oÅ-balance sheet credit risk. Before the commitments are fulÑlled or expire, management assess and make allowances, which are recorded in other liabilities, for any probable losses accordingly. As the facilities may expire without being drawn upon, the total of the contractual amounts is not representative of expected future cash outÖows.

31 December 2004 2005 2006 Credit risk weighted amount of contingent liabilities and commitments ÏÏÏÏÏÏ 47,787 50,037 70,976

I-43 APPENDIX I ACCOUNTANTS' REPORT

The credit risk weighted amount refers to the amount as computed in accordance with the rules set out by the CBRC and depends on the status of the counterparty and the maturity characteristics. The risk weights used range from 0% to 100% of contingent liabilities and commitments. The credit risk weighted amounts stated above have taken into account the eÅects of bilateral netting arrangements. There are no relevant standards prescribed by IFRS in calculating the above credit risk weighted amounts.

(b) Capital commitments The Group had the following authorised capital commitments at the balance sheet date:

31 December 2004 2005 2006 Purchase of property and equipment Ì Contracted for ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 38 10 105

(c) Operating lease commitments The Group leases certain properties under operating leases, which typically run for an initial period of one to Ñve years and may include an option to renew the lease when all terms are renegotiated. At the balance sheet date, the Group's future minimum lease payments under non-cancellable operating leases for premises were as follows:

31 December 2004 2005 2006 Within one yearÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 248 298 366 After one year but within Ñve years ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 675 781 917 After Ñve years ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 407 459 496 Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,330 1,538 1,779

(d) Outstanding litigations and disputes As at 31 December 2006, the Group was the defendant in certain pending litigations with gross claims of RMB 144 million (2005: RMB 229 million, 2004: RMB 296 million). The provision made by the Group for these litigations based upon the opinions of the Group's internal and external legal counsel are as follows:

31 December 2004 2005 2006 Provision for litigationsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 20

(e) Underwriting obligations At the balance sheet date, the unexpired underwriting commitments of PRC bonds were as follows:

31 December 2004 2005 2006 Underwriting obligations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 310 550 950

(f) Redemption obligations As an underwriting agent of PRC government bonds, the Group has the responsibility to buy back those bonds sold by it should the holders decide to early redeem the bonds held. The redemption price for the bonds at any time before their maturity date is based on the coupon value plus any interest unpaid and accrued up to the redemption date. Accrued interest payables to the bond holders are calculated in accordance with relevant

I-44 APPENDIX I ACCOUNTANTS' REPORT rules of the MOF and the PBOC. The redemption price may be diÅerent from the fair value of similar instruments traded at the redemption date.

The redemption obligations below represent the nominal value of government bonds underwritten and sold by the Group, but not yet matured at the balance sheet date:

31 December 2004 2005 2006 Redemption obligations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13,302 14,662 15,590

The Group expects the amount of redemption before the maturity date of these government bonds through the Group will not be material.

(g) Provision against commitments and contingent liabilities

The Group has assessed and has made provision for any probable outÖow of economic beneÑts in relation to the above commitments and contingent liabilities at the balance sheet date in accordance with its accounting policies.

30 Assets pledged as security

The following assets have been pledged as security for bills rediscounting transactions, assets and securities sold under repurchase agreements. The related secured liabilities are recorded as amounts due to central bank, or banks and other Ñnancial institutions of approximately similar carrying value at the balance sheet date.

31 December 2004 2005 2006 Debt securitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,043 865 1,168 Discounted billsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,223 75 41 Loans and advances to customers ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,308 415 535 Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,574 1,355 1,744

31 Entrusted lending business

The Group provides entrusted lending business services to corporations and individuals. All entrusted loans are made under the instruction or at the direction of these entities or individuals and are funded by entrusted funds from them.

For entrusted assets and liabilities and entrusted provident housing fund mortgage business, the Group generally does not take on credit risk in relation to these transactions. The Group acts as an agent to hold and manage these assets and liabilities at the direction of the entrustor and receives fee income for the services provided.

Trust assets are not assets of the Group and are not recognised in the balance sheet. Surplus funding is accounted for as deposits from customers. Income received and receivable for providing these services is included in the income statement as fee income.

At the balance sheet date, the entrusted assets and liabilities were as follows:

31 December 2004 2005 2006 Entrusted loans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10,145 14,849 21,986 Entrusted funds ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10,145 14,849 21,986

I-45 APPENDIX I ACCOUNTANTS' REPORT

32 Segment reporting

Segment information is presented in respect of the Group's business and geographical segments. Business segment information has been chosen as the primary reporting format as it is more relevant to the Group's internal Ñnancial reporting.

(a) Business segments

The Group comprises the following main business segments:

Corporate banking

This segment represents the provision of a range of Ñnancial products and services to corporations, government agencies and Ñnancial institutions. The products and services include corporate loans, trade Ñnancing, deposit taking activities, agency services, remittance and settlement services and guarantee services.

Personal banking

This segment represents the provision of a range of Ñnancial products and services to individual customers. The products and services comprise personal loans, deposit services and securities agency services.

Treasury business

This segment covers the Group's treasury operations. The treasury enters into inter-bank money market transactions and repurchase transactions, and invests in debt instruments. It also trades in debt instruments, derivatives and foreign currency for its own account. The treasury carries out customer driven transactions on derivatives and foreign currency trading. Its function also includes the management of the Group's overall liquidity position, including the issuance of subordinated debts/bonds.

Others and unallocated

These represent equity investments and head oÇce assets, liabilities, income and expenses that are not App 1A 33(1) directly attributable to a segment or cannot be allocated on a reasonable basis.

Year ended 31 December 2004 Corporate Personal Treasury Others and Banking Banking Business unallocated Total External net interest income/(expense) ÏÏÏÏÏÏÏÏÏÏÏ 7,580 829 1,996 (22) 10,383 Internal net interest income/(expense)ÏÏÏÏÏÏÏÏÏÏÏÏ 1,043 260 (1,163) (140) Ì Net interest income/(expense) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,623 1,089 833 (162) 10,383 Net fee and commission income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 222 70 19 7 318 Dividend income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 1 Ì 1 Net gain arising from disposal of Ñxed assetsÏÏÏÏÏÏÏ Ì Ì Ì 11 11 Net gain arising from trading securities ÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 34 Ì 34 Net gain arising from investment securities ÏÏÏÏÏÏÏÏ Ì Ì 11 Ì 11 Net gain/(loss) arising from foreign currencies dealingÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 111 Ì 120 (4) 227 Other income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 83 8 Ì 70 161 Operating income/(expense) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9,039 1,167 1,018 (78) 11,146 General and administrative expenses Ì depreciation and amortisation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (322) (140) (30) (87) (579) Ì others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (2,941) (869) (259) (803) (4,872) Impairment losses charge ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1,553) (37) (28) (16) (1,634) ProÑt/(loss) before tax ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,223 121 701 (984) 4,061 Capital expenditureÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 167 75 15 57 314

I-46 APPENDIX I ACCOUNTANTS' REPORT

31 December 2004 Segment assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 288,292 36,214 161,652 9,287 495,445 Segment liabilitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 391,723 48,189 42,646 2,124 484,682 OÅ-balance sheet credit commitmentsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 128,513 2,232 Ì Ì 130,745

Year ended 31 December 2005 Corporate Personal Treasury Others and Banking Banking Business unallocated Total External net interest income/(expense) ÏÏÏÏÏÏÏÏÏÏÏ 9,113 840 2,717 (10) 12,660 Internal net interest income/(expense)ÏÏÏÏÏÏÏÏÏÏÏÏ 1,310 743 (1,783) (270) Ì Net interest income/(expense) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10,423 1,583 934 (280) 12,660 Net fee and commission income/(expense)ÏÏÏÏÏÏÏÏ 309 102 57 (50) 418 Dividend income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 1 Ì 1 Net gain arising from disposal of Ñxed assetsÏÏÏÏÏÏÏ Ì Ì Ì 12 12 Net gain arising from trading securities ÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 109 Ì 109 Net loss arising from investment securitiesÏÏÏÏÏÏÏÏÏ Ì Ì (24) Ì (24) Net gain/(loss) arising from foreign currencies dealingÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 172 Ì 183 (89) 266 Other income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 105 14 Ì 94 213 Operating income/(expense) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11,009 1,699 1,260 (313) 13,655 General and administrative expenses Ì depreciation and amortisation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (355) (240) (33) (53) (681) Ì others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (3,720) (1,422) (367) (914) (6,423) Impairment losses (charge)/release ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1,022) (33) 2 (45) (1,098) ProÑt/(loss) before tax ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,912 4 862 (1,325) 5,453 Capital expenditureÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 316 238 30 61 645

31 December 2005 Segment assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 352,336 44,611 190,234 7,421 594,602 Segment liabilitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 462,199 71,949 34,337 2,892 571,377 OÅ-balance sheet credit commitmentsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 145,256 4,836 Ì Ì 150,092

I-47 APPENDIX I ACCOUNTANTS' REPORT

Year ended 31 December 2006 Corporate Personal Treasury Others and Banking Banking Business unallocated Total External net interest income/(expense) ÏÏÏÏÏÏÏÏÏÏÏ 12,323 911 3,316 (77) 16,473 Internal net interest income/(expense)ÏÏÏÏÏÏÏÏÏÏÏÏ 981 1,288 (1,851) (418) Ì Net interest income/(expense) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13,304 2,199 1,465 (495) 16,473 Net fee and commission income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 516 187 82 (26) 759 Dividend income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 1 Ì 1 Net loss arising from disposal of Ñxed assets ÏÏÏÏÏÏÏ Ì Ì Ì (2) (2) Net loss arising from trading securitiesÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì (49) Ì (49) Net gain arising from investment securities ÏÏÏÏÏÏÏÏ Ì Ì 45 Ì 45 Net gain/(loss) arising from foreign currencies dealingÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 330 Ì 223 (50) 503 Other income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 92 Ì Ì 105 197 Operating income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 14,242 2,386 1,767 (468) 17,927 General and administrative expenses Ì depreciation and amortisation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (367) (273) (34) (34) (708) Ì others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (4,910) (2,042) (476) (1,123) (8,551) Impairment losses charge ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1,638) 20 7 (55) (1,666) ProÑt/(loss) before tax ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,327 91 1,264 (1,680) 7,002 Capital expenditureÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 411 292 27 31 761

31 December 2006 Segment assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 462,757 58,695 179,180 6,091 706,723 Segment liabilitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 515,135 106,826 48,706 4,362 675,029 OÅ-balance sheet credit commitmentsÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 187,160 8,412 Ì Ì 195,572

(b) Geographical segments The Group operates principally in Mainland China with branches and sub-branches located in 18 provinces, autonomous regions and municipalities directly under the central government. The Bank's principal subsidiary, CIFL, is registered and operating in Hong Kong. In presenting information by geographical segment, operating income is allocated based on the location of the branches that generated the revenue. Segment assets and capital expenditure are allocated based on the geographical location of the underlying assets. Geographical segments, as deÑned for management reporting purposes, are as follows: Ì ""Yangtze River Delta'' refers to the following areas where tier-1 branches of the Group are located: Shanghai, Nanjing, Suzhou, Hangzhou and Ningbo; Ì ""Pearl River Delta and West Strait'' refers to the following areas where tier-1 branches of the Group are located: Guangzhou, Shenzhen, Dongguan, Fuzhou and Xiamen; Ì ""Bohai Rim'' refers to the following areas where tier-1 branches of the Group are located: Beijing, Tianjin, Dalian, Qingdao, Shijiazhuang and Jinan; Ì ""Central'' region refers to the following areas where tier-1 branches of the Group are located: Hefei, Zhengzhou, Wuhan and Changsha; Ì ""Western'' region refers to the following areas where tier-1 branches of the Group are located: Chengdu, Chongqing, Xi'an and Kunming; Ì ""Northeastern'' region refers to the following areas where tier-1 branch of the Group is located: Shenyang;

I-48 APPENDIX I ACCOUNTANTS' REPORT

Ì ""Head OÇce'' refers to the headquarter of the Group which is located at Beijing; and Ì ""Hong Kong'' region refers to the Hong Kong Special Administrative Region where the subsidiaries of the Bank are located.

Year ended 31 December 2004 Pearl River Yangtze Delta and River Delta West Strait Bohai Rim Central Western Northeastern Head OÇce Hong Kong Elimination Total

External net interest income ÏÏÏÏÏÏÏÏÏÏÏ 2,998 1,028 2,509 578 777 244 2,218 31 Ì 10,383 Internal net interest income/(expense) ÏÏ 380 356 909 127 80 41 (1,873) (20) Ì Ì Net interest incomeÏÏÏ 3,378 1,384 3,418 705 857 285 345 11 Ì 10,383 Net fee and commission income/(expense) ÏÏ 100 24 138 22 20 15 (1) Ì Ì 318 Dividend income ÏÏÏÏÏ Ì Ì Ì Ì Ì Ì 1 Ì Ì 1 Net gain/(loss) arising from disposal of Ñxed assets ÏÏÏÏÏÏÏÏ 4 (3) (3) Ì Ì 4 9 Ì Ì 11 Net (loss)/gain arising from trading securitiesÏÏÏÏÏÏÏÏÏÏ Ì Ì (1) Ì Ì Ì 35 Ì Ì 34 Net gain arising from investment securities Ì Ì Ì Ì Ì Ì 11 Ì Ì 11 Net gain/(loss) arising from foreign currencies dealing ÏÏ 68 32 125 9 4 2 (13) Ì Ì 227 Other income ÏÏÏÏÏÏ 62 14 51 7 5 2 17 3 Ì 161 Operating income ÏÏÏÏ 3,612 1,451 3,728 743 886 308 404 14 Ì 11,146 General and administrative expenses Ì depreciation and amortisation ÏÏÏÏÏÏÏ (171) (53) (154) (30) (44) (14) (113) Ì Ì (579) Ì others ÏÏÏÏÏÏÏÏÏÏÏÏ (1,443) (658) (1,198) (283) (319) (112) (850) (9) Ì (4,872) Impairment losses (charge)/release ÏÏÏ (230) (428) (570) (135) (192) (82) 3 Ì Ì (1,634) ProÑt/(loss) before taxÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,768 312 1,806 295 331 100 (556) 5 Ì 4,061 Capital expenditureÏÏÏ 15 7 24 8 7 2 251 Ì Ì 314

31 December 2004

Segment assetsÏÏÏÏÏÏÏ 134,756 72,707 184,773 35,288 38,713 14,125 242,617 767 (228,301) 495,445 Segment liabilities ÏÏÏÏ 135,908 80,770 189,462 35,354 38,595 14,224 217,985 685 (228,301) 484,682 OÅ-balance sheet credit commitments 46,108 7,683 44,129 13,897 9,906 6,790 2,232 Ì Ì 130,745

I-49 APPENDIX I ACCOUNTANTS' REPORT

Year ended 31 December 2005 Pearl River Yangtze Delta and River Delta West Strait Bohai Rim Central Western Northeastern Head OÇce Hong Kong Elimination Total

External net interest income ÏÏÏÏÏÏÏÏÏÏÏ 3,681 2,011 2,225 972 841 290 2,618 22 Ì 12,660 Internal net interest income/(expense) ÏÏ 436 (272) 1,530 129 206 77 (2,086) (20) Ì Ì Net interest incomeÏÏÏ 4,117 1,739 3,755 1,101 1,047 367 532 2 Ì 12,660 Net fee and commission income 142 18 170 37 21 14 16 Ì Ì 418 Dividend income ÏÏÏÏÏ 1 Ì Ì Ì Ì Ì Ì Ì Ì 1 Net gain arising from disposal of Ñxed assetsÏÏÏÏÏÏÏÏÏÏÏÏÏ 9 Ì Ì 1 Ì 1 1 Ì Ì 12 Net gain/(loss) arising from trading securitiesÏÏÏÏÏÏÏÏÏÏ 1 1 1 Ì Ì Ì 106 Ì Ì 109 Net gain/(loss) arising from investment securitiesÏÏÏÏÏÏÏÏÏÏ 5 1 1 1 1 Ì (33) Ì Ì (24) Net gain/(loss) arising from foreign currencies dealing ÏÏ 90 34 219 19 8 3 (107) Ì Ì 266 Other income ÏÏÏÏÏÏ 65 14 65 16 2 2 46 3 Ì 213 Operating income ÏÏÏÏ 4,430 1,807 4,211 1,175 1,079 387 561 5 Ì 13,655 General and administrative expenses Ì depreciation and amortisation ÏÏÏÏÏÏÏ (134) (47) (143) (39) (36) (9) (273) Ì Ì (681) Ì others ÏÏÏÏÏÏÏÏÏÏÏÏ (1,844) (854) (1,493) (497) (450) (139) (1,139) (7) Ì (6,423) Impairment losses release/(charge) ÏÏÏ 25 (155) (576) (281) (81) (28) (2) Ì Ì (1,098) ProÑt/(loss) before taxÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,477 751 1,999 358 512 211 (853) (2) Ì 5,453 Capital expenditureÏÏÏ 203 121 157 30 30 11 93 Ì Ì 645

31 December 2005

Segment assetsÏÏÏÏÏÏÏ 165,024 83,440 232,848 52,229 46,004 17,797 314,697 693 (318,130) 594,602 Segment liabilities ÏÏÏÏ 164,419 88,901 235,735 52,240 45,770 17,803 284,036 603 (318,130) 571,377 OÅ-balance sheet credit commitments 56,987 13,546 43,773 15,277 9,774 5,899 4,836 Ì Ì 150,092

I-50 APPENDIX I ACCOUNTANTS' REPORT

Year ended 31 December 2006 Pearl River Yangtze Delta and River Delta West Strait Bohai Rim Central Western Northeastern Head OÇce Hong Kong Elimination Total

External net interest income ÏÏÏÏÏÏÏÏÏÏÏ 5,010 1,763 2,806 1,420 1,565 507 3,369 33 Ì 16,473 Internal net interest income/(expense) ÏÏ 212 564 1,778 125 (65) (17) (2,564) (33) Ì Ì Net interest incomeÏÏÏ 5,222 2,327 4,584 1,545 1,500 490 805 Ì Ì 16,473 Net fee and commission income 200 61 238 71 40 16 133 Ì Ì 759 Dividend income ÏÏÏÏÏ 1 Ì Ì Ì Ì Ì Ì Ì Ì 1 Net gain/(loss) arising from disposal of Ñxed assets ÏÏÏÏÏÏÏÏ (2) 1 Ì (1) Ì Ì Ì Ì Ì (2) Net gain arising from trading securities ÏÏÏ 15 3 4 1 Ì Ì (72) Ì Ì (49) Net gain arising from investment securities 7 Ì 3 Ì Ì Ì 19 16 Ì 45 Net gain arising from foreign currencies dealing ÏÏÏÏÏÏÏÏÏÏÏ 125 51 223 30 9 6 59 Ì Ì 503 Other income/(expense) ÏÏ 71 20 43 11 6 2 (26) 70 Ì 197 Operating income ÏÏÏÏ 5,639 2,463 5,095 1,657 1,555 514 918 86 Ì 17,927 General and administrative expenses Ì depreciation and amortisation ÏÏÏÏÏÏÏ (181) (58) (142) (41) (41) (17) (228) Ì Ì (708) Ì others ÏÏÏÏÏÏÏÏÏÏÏÏ (2,333) (1,142) (1,788) (670) (603) (226) (1,752) (37) Ì (8,551) Impairment losses charge ÏÏÏÏÏÏÏÏÏÏÏÏ (88) (78) (819) (285) (232) (119) (45) Ì Ì (1,666) ProÑt/(loss) before taxÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,037 1,185 2,346 661 679 152 (1,107) 49 Ì 7,002 Capital expenditureÏÏÏ 269 77 118 43 131 18 96 9 Ì 761

31 December 2006

Segment assetsÏÏÏÏÏÏÏ 203,715 104,489 261,135 68,851 59,631 32,561 264,594 1,107 (289,360) 706,723 Segment liabilities ÏÏÏÏ 200,377 108,868 262,736 68,438 58,904 31,953 232,103 1,010 (289,360) 675,029 OÅ-balance sheet credit commitments 64,557 20,318 54,203 26,801 14,593 6,688 8,412 Ì Ì 195,572

I-51 APPENDIX I ACCOUNTANTS' REPORT

33 Derivatives Derivatives include forward, swap and option transactions undertaken by the Group in the foreign exchange and interest rate markets. The Group, through the operations of its branch network, acts as an intermediary between a wide range of customers for structuring deals to produce risk management products to suit individual customer needs. These positions are actively managed through entering back to back deals with external parties to ensure the Group's net exposures are within acceptable risk levels. The Group also uses derivatives (principally foreign exchange options and swaps, and interest rate swaps) in the management of its own asset and liability portfolios and structural positions. The following tables provide an analysis of the notional amounts of derivatives of the Group by relevant maturity groupings based on the remaining periods to settlement and the corresponding fair values at the balance sheet date. The notional amounts of the derivatives indicate the volume of transactions outstanding at the balance sheet date; they do not represent amounts at risk.

Year ended 31 December 2004 Notional amounts with remaining life of Fair values Less than Between Between one More three three months year and Ñve than Ñve months and one year years years Total Assets Liabilities Interest rate derivatives Interest rate swaps ÏÏÏÏÏÏÏÏ 9,802 3,235 3,208 745 16,990 30 (122) Cross-currency swaps ÏÏÏÏÏÏ 215 1,168 724 Ì 2,107 21 (14) Forward rate agreement ÏÏÏÏ 16,426 26,150 Ì Ì 42,576 31 (33) Interest rate capsÏÏÏÏÏÏÏÏÏÏ Ì 331 Ì 331 662 6 Ì Interest rate options ÏÏÏÏÏÏÏ 414 Ì Ì Ì 414 6 (3) 26,857 30,884 3,932 1,076 62,749 94 (172) Currency derivatives Spot ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 352 Ì Ì Ì 352 Ì Ì ForwardsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,748 925 383 204 9,260 111 (112) Foreign exchange swaps ÏÏÏÏ 6,278 39 Ì Ì 6,317 71 (11) Currency options ÏÏÏÏÏÏÏÏÏÏ 603 102 Ì Ì 705 17 (17) 14,981 1,066 383 204 16,634 199 (140) Credit derivatives Credit default swap ÏÏÏÏÏÏÏÏ Ì Ì 414 Ì 414 3 (2) Asset swap ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 41 Ì 41 5 Ì Ì Ì 455 Ì 455 8 (2) TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 301 (314) (Note 20) (Note 23)

I-52 APPENDIX I ACCOUNTANTS' REPORT

Year ended 31 December 2005 Notional amounts with remaining life of Fair values Less than Between Between one More three three months year and Ñve than Ñve months and one year years years Total Assets Liabilities Interest rate derivatives Interest rate swaps ÏÏÏÏÏÏÏÏ 10,456 8,107 6,280 3,418 28,261 75 (209) Cross-currency swaps ÏÏÏÏÏÏ 6 104 84 Ì 194 3 (3) Forward rate agreement ÏÏÏÏ 1,073 23,628 Ì Ì 24,701 4 (2) Interest rate options ÏÏÏÏÏÏÏ 242 81 Ì Ì 323 Ì (5) 11,777 31,920 6,364 3,418 53,479 82 (219) Currency derivatives Spot ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 507 Ì Ì Ì 507 Ì Ì ForwardsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,218 10,142 595 126 12,081 84 (66) Foreign exchange swaps ÏÏÏÏ 19,237 707 Ì Ì 19,944 37 (24) Currency options ÏÏÏÏÏÏÏÏÏÏ 272 1,103 Ì Ì 1,375 5 (5) 21,234 11,952 595 126 33,907 126 (95) Credit derivatives Credit default swap ÏÏÏÏÏÏÏÏ Ì 162 242 323 727 2 Ì Asset swap ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 40 Ì Ì 40 1 Ì Ì 202 242 323 767 3 Ì TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 211 (314) (Note 20) (Note 23)

Year ended 31 December 2006 Notional amounts with remaining life of Fair values Less than Between Between one More three three months year and Ñve than Ñve months and one year years years Total Assets Liabilities Interest rate derivatives Interest rate swaps ÏÏÏÏÏÏÏÏÏÏÏÏÏ 17,098 11,870 17,495 3,192 49,655 163 (278) Cross-currency swaps ÏÏÏÏÏÏÏÏÏÏÏ 825 625 60 1,282 2,792 58 (58) Forward rate agreementÏÏÏÏÏÏÏÏÏ 586 31,972 8,349 Ì 40,907 14 (2) Interest rate options ÏÏÏÏÏÏÏÏÏÏÏÏ 94 Ì Ì Ì 94 Ì (1) Interest rate caps and Öoors ÏÏÏÏÏ Ì 938 593 Ì 1,531 15 Ì 18,603 45,405 26,497 4,474 94,979 250 (339) Currency derivatives Spot ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 12,564 Ì Ì Ì 12,564 5 (7) Forwards ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,580 4,911 1,653 60 15,204 128 (118) Foreign exchange swapsÏÏÏÏÏÏÏÏÏ 12,221 6,245 574 Ì 19,040 52 (98) Currency optionsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,480 625 Ì Ì 6,105 15 (13) 38,845 11,781 2,227 60 52,913 200 (236) Credit derivatives Credit default swap ÏÏÏÏÏÏÏÏÏÏÏÏ Ì 160 80 320 560 2 (1) Ì 160 80 320 560 2 (1) Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 452 (576)

I-53 APPENDIX I ACCOUNTANTS' REPORT

The replacement costs and credit risk weighted amounts in respect of these derivatives are as follows. These amounts have taken into account the eÅects of bilateral netting arrangements.

Replacement costs

31 December 2004 2005 2006 Interest rate derivatives ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 94 82 250 Currency derivatives ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 199 126 200 Credit derivatives ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8 3 2 301 211 452

Replacement cost represents the cost of replacing all contracts which have a positive value when marked to market. Replacement cost is a close approximation of the credit risk for these derivative contracts as at the balance sheet date.

Credit risk weighted amounts

31 December 2004 2005 2006 Interest rate derivatives ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 28 64 180 Currency derivatives ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 100 116 325 Credit derivatives ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 99 97 96 227 277 601

The credit risk weighted amount has been computed in accordance with the rules set by the CBRC, and depends on the status of the counterparty and the maturity characteristics of the instrument.

34 Financial risk management This section presents information about the Group's exposure to and its management and control of risks, in particular the primary risks associated with its use of Ñnancial instruments: Ì Credit risk: the loss resulting from customer or counterparty default and arising on credit exposure in all forms, including settlement risk. Ì Market risk: the exposure to market variables such as interest rates, exchange rates and equity markets. Ì Liquidity risk: where Group is unable to meet its payment obligations when due, or that it is unable, on an ongoing basis, to borrow funds in the market on an unsecured, or even secured basis at an acceptable price to fund actual or proposed commitments. Ì Operational risk: the risk arising from matters such as non-adherence to systems and procedures or from fraud resulting in Ñnancial or reputation loss. The Group has established policies and procedures to identify and analyse these risks, to set appropriate risk limits and controls, and to constantly monitor the risks and limits by means of reliable and up-to-date management information systems. The Group regularly modiÑes and enhances its risk management policies and systems to reÖect changes in markets, products and best practice risk management processes. Internal auditors also perform regular audits to ensure compliance with policies and procedures.

(a) Credit risk This category includes credit and counterparty risks from loans and advances, issuer risks from the securities business, counterparty risks from trading activities, and country risks. The Group identiÑes and

I-54 APPENDIX I ACCOUNTANTS' REPORT manages this risk through its target market deÑnitions, credit approval process, post-disbursement monitoring and remedial management procedures. In addition to underwriting standards, the principal means of managing credit risk is the credit approval process. The Group has policies and procedures to evaluate the potential credit risk of a particular counterparty or transaction and to approve the transaction. The Group undertakes ongoing credit analysis and monitoring at several levels. The policies are designed to promote early detection of counterparty, industry or product exposures that require special monitoring. The Risk Management Committee monitors overall portfolio risk as well as individual problem loans, both actual and potential, on a regular basis. In respect of the loan portfolio, the Group adopts a risk-based loan classiÑcation methodology and classiÑes loans into Ñve categories: normal, special-mention, substandard, doubtful and loss, in accordance with the guidelines issued by the PBOC and the CBRC. The core deÑnitions of the Ñve categories of loans and advances are set out below:

Normal Borrowers can honour the terms of their loans. There is no reason to doubt their ability to repay principal and interest in full on a timely basis. Special mention Borrowers are able to service their loans currently, although repayment may be adversely aÅected by speciÑc factors. Substandard Borrowers' abilities to service their loans are in question as they cannot rely entirely on normal business revenues to repay principal and interest. Losses may ensue even when collateral or guarantees are invoked. Doubtful Borrowers cannot repay principal and interest in full and signiÑcant losses will need to be recognised even when collateral or guarantees are invoked. Loss Only a small portion or no principal and interest can be recovered after taking all possible measures and exhausting all legal remedies. The Group applies a series of criteria in determining the classiÑcation of loans. The loan classiÑcation criteria focuses on a number of factors, including (i) the borrower's ability to repay the loan; (ii) the borrower's repayment history; (iii) the borrower's willingness to repay; (iv) the net realisable value of any collateral; and (v) the prospect for the support from any Ñnancially responsible guarantor. The Bank also takes into account the length of time for which payments of principal and interest on a loan are overdue. In general, unsecured loans with principal or interest overdue for more than 90 days and secured loans with principal or interest overdue for more than 180 days are classiÑed at substandard or below. The Group's retail credit policy and approval process are designed for the fact that there are high volumes of relatively homogeneous, small value transactions in each retail loan category. Because of the nature of retail banking, the credit policies are based primarily on statistical analyses of risks with respect to diÅerent products and types of customers. The Group monitors its own and industry experience to determine and periodically revise product terms and desired customer proÑles. The risks involved in credit-related commitments and contingencies are essentially the same as the credit risk involved in extending loan facilities to customers. These transactions are, therefore, subject to the same credit application, portfolio maintenance and collateral requirements as for customers applying for loans. Concentration of credit risk exists when changes in geographic, economic or industry factors similarly aÅect the Group's counterparties whose aggregate credit exposure is material in relation to the Group's total exposures. The Group's portfolio of Ñnancial instruments is diversiÑed along industry, geographic and product sectors.

I-55 APPENDIX I ACCOUNTANTS' REPORT

(i) Loans and advances to customers analysed by economic sector concentrations at the balance sheet date:

31 December 2004 2005 2006 %%% Corporate loans Ì Manufacturing ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 71,247 23.2 81,537 22.0 108,539 23.4 Ì Production and supply of electric power, gas and water ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 23,825 7.8 26,559 7.2 38,022 8.2 Ì Transportation, storage and post service ÏÏÏÏÏÏÏ 22,459 7.3 23,633 6.4 35,933 7.7 Ì Wholesale and retail ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 26,023 8.5 29,902 8.1 33,468 7.2 Ì Rent and business services ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 14,538 4.7 18,566 5.0 29,375 6.4 Ì Real estate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 27,640 9.0 22,957 6.2 28,796 6.2 Ì Water, environment and public utility management ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 18,109 5.9 20,811 5.6 26,915 5.8 Ì Construction ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13,980 4.6 15,963 4.3 23,364 5.1 Ì Public management and social organizations ÏÏÏ 5,748 1.9 7,858 2.1 10,468 2.3 Ì Financing ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,376 2.4 9,188 2.5 3,107 0.7 Ì Other customersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 25,477 8.3 25,301 6.8 31,169 6.7 Subtotal ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 256,422 83.6 282,275 76.2 369,156 79.7 Personal loans ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 31,730 10.3 37,834 10.2 48,375 10.4 Discounted billsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 18,727 6.1 50,151 13.6 45,636 9.9 Gross loans and advances to customers ÏÏÏÏÏÏÏÏÏÏ 306,879 100.0 370,260 100.0 463,167 100.0 Less: Impairment allowancesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (14,958) (12,230) (9,786) Net loans and advances to customersÏÏÏÏÏÏÏÏÏÏÏÏ 291,921 358,030 453,381

(ii) Loans and advances to customers analysed by geographical sector risk concentrations at the balance sheet date:

31 December 2004 2005 2006 %%% Yangtze River DeltaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 91,672 29.9 120,026 32.4 146,784 31.7 Pearl River Delta and West Strait ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 49,491 16.1 52,885 14.3 68,230 14.7 Bohai Rim (including Head OÇce)ÏÏÏÏÏÏÏÏÏÏÏÏÏ 100,195 32.6 115,706 31.2 138,310 29.9 Central ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 27,477 9.0 36,255 9.8 46,704 10.1 Western ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 27,943 9.1 32,029 8.7 43,820 9.5 Northeastern ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9,880 3.2 13,207 3.6 19,141 4.1 Hong Kong ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 221 0.1 152 Ì 178 Ì Gross loans and advances to customers ÏÏÏÏÏÏÏÏÏÏ 306,879 100.0 370,260 100.0 463,167 100.0 Less: Impairment allowancesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (14,958) (12,230) (9,786) Net loans and advances to customersÏÏÏÏÏÏÏÏÏÏÏÏ 291,921 358,030 453,381

See Note 32(b) for the deÑnitions of geographical segments.

(b) Market risk Market risk arises on all market risk sensitive Ñnancial instruments, including securities, foreign exchange contracts, equity and derivative instruments, as well as from balance sheet or structural positions. Market risk arises from adverse movement in market rates including interest rates, foreign exchange rates and stock prices etc. as well as their volatility. Market risk would arise from both the Group's trading and non-trading business. The objective of market risk management is to avoid excessive exposure of earnings and equity to loss and to reduce the Group's exposure to the volatility inherent in Ñnancial instruments.

I-56 APPENDIX I ACCOUNTANTS' REPORT

The Financial Planning Department is responsible for formulating the Group's market risk management policies, and managing its overall market risk exposures. The Financial Planning Department sets the trigger and limit on the interest rates and foreign exchange rates of the Group, articulates periodical reviews and decide on future business strategy with respect to interest rates and foreign exchange rates. The Financial Planning Department has delegated the responsibility for ongoing trading book market risk to the Treasury Department. The Treasury Department manages the Group's RMB and foreign currency investment portfolios, conducts proprietary and customer-driven trades, implements market risk management policies and rules and performs daily identiÑcation, measurement, assessment and control of risks. The use of derivatives for proprietary trading and their sale to customers as risk management products is an integral part of the Group's business activities. These instruments are also used to manage the Group's own exposures to market risk as part of its asset and liability management process. The principal derivative instruments used by the Group are interest and foreign exchange rate related contracts, which are primarily over-the-counter derivatives. Sensitivity analysis and foreign currency exposure analysis are the key methods used by the Group to measure and monitor the market risk of its trading business with Value-at-Risk (""VaR'') as a supplementary method. Gap analysis is the key method used by the Group to monitor the market risk of its non-trading business. The Group applies a wide range of sensitivity analyses to assess the potential impact on the Group's earnings as a result of a set of forward-looking movements in market prices and the result is regularly reviewed. Foreign currency exposure analysis is a method to measure the eÅect on the Group's net earnings by foreign exchange rate changes. The Group calculates individual foreign currency exposure for both net spot and net forward positions. All the individual foreign currency exposures are then aggregated to form an overall exposure. Foreign currency exposure limits are set for individual currencies as well as the overall level. The Group also distinguishes between trading and non-trading foreign currency exposures. VaR is a technique that estimates the potential losses that could occur on risk positions as a result of movements in market rates and prices over a speciÑed time horizon and to a given level of conÑdence. The Group's Treasury Department calculates interest rate VaR using historical movement in market rates and prices, at 99% conÑdence level, with a 10-day holding period on its foreign currency denominated investments. Gap analysis is a technique to project future cash Öows in order to quantify the diÅerences, for a range of future dates, between assets and liabilities. Currently, the Group is upgrading its present market risk management information system to monitor its overall market risk through new Assets and Liability Management (ALM) and Fund Transfer Pricing (FTP) systems. The Group does not actively trade in Ñnancial instruments and, in the opinion of the directors, the market risk related to trading activities to which the Group is exposed is not material. Accordingly, no quantitative market risk disclosures have been prepared.

(c) Interest rate risk The Group's interest rate exposures mainly comprise those originating in its commercial banking structural interest rate exposure, and trading positions. The Financial Planning Department is responsible for overall interest rate risk management. The structural interest rate risk primarily results from the timing diÅerences in the repricing of interest- bearing assets, liabilities and commitments. The Financial Planning Department manages the structural interest rate risk primarily through gap analysis and interest rate sensitivity analysis. The majority of interest rate risk from the Group's trading positions arises from the Treasury's investment portfolios. Sensitivity related limits such as Price Value of a Basis Point (PVBP) and duration, as well as stop

I-57 APPENDIX I ACCOUNTANTS' REPORT loss limits and concentration limit, are the main tools adopted by the Financial Planning Department to manage trading interest rate risk. Interest rate risk limits are determined by the Market Risk Committee, which is comprised of senior management. The Financial Planning Department monitors interest rate risk and reports to the Market Risk Committee on both a regular and ad hoc basis as the need arises. The following tables indicate the eÅective interest rates for the year and the expected next repricing dates (or maturity dates whichever are earlier) for the assets and liabilities at the balance sheet date.

31 December 2004 Between Between More EÅective Non-interest Less than three months one and than Ñve interest rate Total bearing three months and one year Ñve years years (note (i)) Assets Cash and balances with central bank ÏÏ 1.80% 54,253 1,459 52,794 Ì Ì Ì Amounts due from banks and other Ñnancial institutionsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2.20% 20,899 Ì 18,296 1,333 1,270 Ì Loans and advances to customers (note (ii)) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4.85% 291,921 Ì 134,079 155,869 1,973 Ì Investments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3.19% 110,903 Ì 44,721 31,224 21,913 13,045 Others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 17,469 17,469 Ì Ì Ì Ì Total assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 495,445 18,928 249,890 188,426 25,156 13,045 Liabilities Amounts due to central bank ÏÏÏÏÏÏÏÏÏ 3.20% 300 Ì 300 Ì Ì Ì Amounts due to banks and other Ñnancial institutionsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1.72% 38,190 Ì 30,998 5,091 1,312 789 Deposits from customersÏÏÏÏÏÏÏÏÏÏÏÏÏ 1.66% 435,020 5,182 336,007 75,541 12,815 5,475 Subordinated debts/bonds issuedÏÏÏÏÏÏ 4.96% 6,000 Ì 6,000 Ì Ì Ì Others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 5,172 5,172 Ì Ì Ì Ì Total liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 484,682 10,354 373,305 80,632 14,127 6,264 Asset-liability gap ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10,763 8,574 (123,415) 107,794 11,029 6,781

I-58 APPENDIX I ACCOUNTANTS' REPORT

31 December 2005 Between Between More EÅective Non-interest Less than three months one and than Ñve interest rate Total bearing three months and one year Ñve years years (note (i)) Assets Cash and balances with central bank ÏÏÏ 1.53% 84,453 1,677 82,776 Ì Ì Ì Amounts due from banks and other Ñnancial institutions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2.19% 31,352 Ì 27,084 3,248 1,020 Ì Loans and advances to customers (note (ii)) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5.18% 358,030 Ì 158,629 197,656 1,745 Ì Investments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3.05% 104,416 Ì 50,201 17,864 23,060 13,291 Others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 16,351 16,351 Ì Ì Ì Ì Total assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 594,602 18,028 318,690 218,768 25,825 13,291 Liabilities Amounts due to central bankÏÏÏÏÏÏÏÏÏÏ 4.33% 240 Ì 240 Ì Ì Ì Amounts due to banks and other Ñnancial institutions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1.87% 28,021 Ì 22,515 692 2,810 2,004 Deposits from customers ÏÏÏÏÏÏÏÏÏÏÏÏÏ 1.86% 530,573 18,929 416,860 78,392 11,916 4,476 Subordinated debts/bonds issuedÏÏÏÏÏÏÏ 4.96% 6,000 Ì 6,000 Ì Ì Ì Others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 6,543 6,543 Ì Ì Ì Ì Total liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 571,377 25,472 445,615 79,084 14,726 6,480 Asset-liability gap ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 23,225 (7,444) (126,925) 139,684 11,099 6,811

31 December 2006 Between Between More EÅective Non-interest Less than three months one and than Ñve interest rate Total bearing three months and one year Ñve years years (note (i)) Assets Cash and balances with central bank ÏÏ 1.54% 90,620 2,589 88,031 Ì Ì Ì Amounts due from banks and other Ñnancial institutionsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2.73% 43,250 Ì 39,622 2,935 693 Ì Loans and advances to customers (note (ii)) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5.33% 453,381 Ì 223,558 225,435 3,557 831 Investments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3.37% 104,424 337 28,778 51,797 12,685 10,827 Others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 15,048 15,048 Ì Ì Ì Ì Total assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 706,723 17,974 379,989 280,167 16,935 11,658 Liabilities Amounts due to central bank ÏÏÏÏÏÏÏÏÏ 5.10% 201 Ì 28 173 Ì Ì Amounts due to banks and other Ñnancial institutionsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1.91% 36,166 Ì 33,921 1,378 211 656 Deposits from customersÏÏÏÏÏÏÏÏÏÏÏÏÏ 1.96% 618,412 4,190 489,467 107,450 14,021 3,284 Subordinated debts/bonds issuedÏÏÏÏÏÏ 4.66% 12,000 Ì 6,000 Ì Ì 6,000 Others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 8,250 8,250 Ì Ì Ì Ì Total liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 675,029 12,440 529,416 109,001 14,232 9,940 Asset-liability gap ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 31,694 5,534 (149,427) 171,166 2,703 1,718

Notes:

(i) EÅective interest rate represents the ratio of interest income/expense to average interest bearing assets/liabilities.

(ii) For loans and advances to customers, the above ""Less than three months'' category includes overdue amounts (net of allowances for impairment losses) of RMB 6,838 million as at 31 December 2006 (2005: RMB 7,718 million, 2004: RMB 7,724 million). Overdue amounts represent loans, of which the whole or part of the principals was overdue, or interest was overdue for more than 90 days but for which principal was not yet due.

I-59 APPENDIX I ACCOUNTANTS' REPORT

(d) Currency risk The Group's foreign currency positions arise from foreign exchange dealing, commercial bank operations and foreign currency capital related structural exposures. The foreign currency exposures arising in branch daily operations are aggregated to Treasury Department through back to back transactions. The Treasury Department manages the currency risk within the limits approved by the Financial Planning Department by closing the exposure positions through external market transactions. The Group manages other currency risk by spot and forward foreign exchange transactions and matching its foreign currency denominated assets with corresponding liabilities in the same currencies. The exposures at the balance sheet date were as follows:

31 December 2004 RMB USD Others Total Assets Cash and balances with central bank ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 52,052 1,954 247 54,253 Amounts due from banks and other Ñnancial institutions ÏÏÏÏÏÏÏÏ 14,564 3,261 3,074 20,899 Loans and advances to customers ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 279,503 10,533 1,885 291,921 InvestmentsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 75,752 24,052 11,099 110,903 Others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 15,912 1,310 247 17,469 Total assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 437,783 41,110 16,552 495,445 Liabilities Amounts due to central bank ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 300ÌÌ300 Amounts due to banks and other Ñnancial institutions ÏÏÏÏÏÏÏÏÏÏ 30,272 2,845 5,073 38,190 Deposits from customersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 391,516 26,759 16,745 435,020 Subordinated debts/bonds issued ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,000 Ì Ì 6,000 Others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,445 2,692 35 5,172 Total liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 430,533 32,296 21,853 484,682 Net on-balance sheet position ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,250 8,814 (5,301) 10,763 Credit commitments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 114,192 12,994 3,559 130,745 Derivatives (note) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì (3,328) 3,371 43

31 December 2005 RMB USD Others Total Assets Cash and balances with central bank ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 81,554 2,485 414 84,453 Amounts due from banks and other Ñnancial institutions ÏÏÏÏÏÏÏÏ 14,394 6,129 10,829 31,352 Loans and advances to customers ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 339,589 17,045 1,396 358,030 InvestmentsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 69,327 28,266 6,823 104,416 Others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 14,405 1,848 98 16,351 Total assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 519,269 55,773 19,560 594,602 Liabilities Amounts due to central bank ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 240ÌÌ240 Amounts due to banks and other Ñnancial institutions ÏÏÏÏÏÏÏÏÏÏ 23,756 2,237 2,028 28,021 Deposits from customersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 463,068 43,958 23,547 530,573 Subordinated debts/bonds issued ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,000 Ì Ì 6,000 Others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,523 Ì 20 6,543 Total liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 499,587 46,195 25,595 571,377 Net on-balance sheet position ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 19,682 9,578 (6,035) 23,225 Credit commitments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 129,258 16,456 4,378 150,092 Derivatives (note) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 699 (6,304) 5,707 102

I-60 APPENDIX I ACCOUNTANTS' REPORT

31 December 2006 RMB USD Others Total Assets Cash and balances with central bank ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 87,300 2,938 382 90,620 Amounts due from banks and other Ñnancial institutionsÏÏÏÏÏÏÏÏÏ 34,741 6,733 1,776 43,250 Loans and advances to customers ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 436,418 15,638 1,325 453,381 InvestmentsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 72,569 26,321 5,534 104,424 Others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13,763 977 308 15,048 Total assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 644,791 52,607 9,325 706,723 Liabilities Amounts due to central bank ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 201 Ì Ì 201 Amounts due to banks and other Ñnancial institutions ÏÏÏÏÏÏÏÏÏÏÏ 31,332 3,506 1,328 36,166 Deposits from customersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 562,106 48,903 7,403 618,412 Subordinated debts/bonds issuedÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 12,000 Ì Ì 12,000 Others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,862 166 222 8,250 Total liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 613,501 52,575 8,953 675,029 Net on-balance sheet position ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 31,290 32 372 31,694 Credit commitments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 165,687 23,010 6,875 195,572 Derivatives (note) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,307 1,645 (800) 4,152

Note:

The derivatives represent the net notional amount of currency derivatives, including undelivered foreign exchange spot, foreign exchange forward, foreign exchange swap and currency option.

(e) Liquidity risk

The purpose of liquidity management is to ensure suÇcient cash Öows for the Group to meet all Ñnancial commitment and to capitalise on opportunities for business expansion. This includes the Group's ability to meet deposit withdrawals either on demand or at contractual maturity, to repay borrowings in full amounts as they mature, or to meet other obligations for payments, to comply with the statutory liquidity ratio, and to make new loans and investments as opportunities arise.

Liquidity is managed on a daily basis according to the Group's liquidity objectives by the Treasury under the direction of the Asset and Liability Committee. It is responsible for ensuring that the Group has adequate liquidity for RMB and foreign currency operations.

The Group manages liquidity risk by holding liquid assets (e.g. deposits at PBOC, other short term funds and securities) of appropriate quality and quantity to ensure that short term funding requirements are covered within prudent limits. Adequate standby facilities are maintained to provide strategic liquidity to meet unexpected and material demand for payments in the ordinary course of business.

The Group regularly stress tests its liquidity position.

In terms of measuring liquidity risk, the Group principally uses liquidity gap analysis. DiÅerent scenarios are applied to assess the impact on liquidity for proprietary trading and client businesses.

I-61 APPENDIX I ACCOUNTANTS' REPORT

The following tables provide an analysis of assets and liabilities of the Group into relevant maturity groupings based on the remaining periods to repayment at the balance sheet date.

31 December 2004 Overdue/ Between Between More repayable Less than three months one and Ñve than Ñve on demand three months and one year years years Undated Total Assets Cash and balances with central bank (note (i)) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 30,054 Ì Ì Ì Ì 24,199 54,253 Amounts due from banks and other Ñnancial institutions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10,245 8,050 1,334 1,270 Ì Ì 20,899 Loans and advances to customers (note (ii)) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,921 57,247 130,006 56,573 40,174 Ì 291,921 Investments (note (iii)) Ì Held-to-maturity debt securities ÏÏÏÏÏÏ Ì 8,282 23,391 16,550 13,147 Ì 61,370 Ì Available-for-sale investments ÏÏÏÏÏÏÏÏ Ì 23,381 4,871 7,728 4,769 Ì 40,749 Ì Debt securities at fair value through proÑt or loss ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 2,380 3,179 3,225 Ì 8,784 Others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 259 819 1,136 136 47 15,072 17,469 Total assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 48,479 97,779 163,118 85,436 61,362 39,271 495,445 Liabilities Amounts due to central bank ÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 300 Ì Ì Ì 300 Amounts due to banks and other Ñnancial institutionsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 25,333 5,665 5,091 1,312 789 Ì 38,190 Deposits from customers ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 202,603 97,117 75,989 53,045 6,266 Ì 435,020 Subordinated debts/bonds issued ÏÏÏÏÏÏÏÏ Ì Ì Ì Ì 6,000 Ì 6,000 Others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 125 3,422 486 16 44 1,079 5,172 Total liabilitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 228,061 106,204 81,866 54,373 13,099 1,079 484,682 Long/(short) positionÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (179,582) (8,425) 81,252 31,063 48,263 38,192 10,763

I-62 APPENDIX I ACCOUNTANTS' REPORT

31 December 2005 Overdue/ Between Between More repayable Less than three months one and Ñve than Ñve on demand three months and one year years years Undated Total Assets Cash and balances with central bank (note (i)) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 27,457 27,440 Ì Ì Ì 29,556 84,453 Amounts due from banks and other Ñnancial institutions ÏÏÏÏÏÏ 17,152 9,932 3,248 1,020 Ì Ì 31,352 Loans and advances to customers (note (ii)) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,147 68,142 172,168 61,230 48,343 Ì 358,030 Investments (note (iii)) Ì Held-to-maturity debt securities Ì 16,655 9,323 26,362 15,387 Ì 67,727 Ì Available-for-sale investments ÏÏ Ì 12,906 4,155 7,487 7,328 Ì 31,876 Ì Debt securities at fair value through proÑt or loss ÏÏÏÏÏÏÏÏÏÏ Ì 2,470 863 1,090 390 Ì 4,813 Others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 264 790 1,063 120 37 14,077 16,351 Total assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 53,020 138,335 190,820 97,309 71,485 43,633 594,602 Liabilities Amounts due to central bank ÏÏÏÏÏ Ì Ì 240 Ì Ì Ì 240 Amounts due to banks and other Ñnancial institutions ÏÏÏÏÏÏÏÏÏÏÏ 20,230 2,285 692 2,810 2,004 Ì 28,021 Deposits from customers ÏÏÏÏÏÏÏÏÏ 288,516 107,268 80,730 50,507 3,552 Ì 530,573 Subordinated debts/bonds issued ÏÏ Ì Ì Ì 6,000 Ì Ì 6,000 Others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 277 4,548 376 70 42 1,230 6,543 Total liabilitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 309,023 114,101 82,038 59,387 5,598 1,230 571,377 Long/(short) positionÏÏÏÏÏÏÏÏÏÏÏ (256,003) 24,234 108,782 37,922 65,887 42,403 23,225

I-63 APPENDIX I ACCOUNTANTS' REPORT

31 December 2006 Overdue/ Between Between More repayable Less than three months one and Ñve than Ñve on demand three months and one year years years Undated Total Assets Cash and balances with central bank (note (i)) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 32,727 15,970 Ì Ì Ì 41,923 90,620 Amounts due from banks and other Ñnancial institutions ÏÏÏÏÏÏ 10,060 29,563 2,935 692 Ì Ì 43,250 Loans and advances to customers (note (ii)) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,838 93,821 196,638 96,238 59,846 Ì 453,381 Investments (note (iii)) Ì Held-to-maturity debt securities Ì 10,105 20,333 24,021 13,737 Ì 68,196 Ì Available-for-sale investments ÏÏ 434 4,579 11,443 7,416 7,294 337 31,503 Ì Debt securities at fair value through proÑt or loss ÏÏÏÏÏÏÏÏÏÏ Ì 70 3,528 938 189 Ì 4,725 Others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 382 1,042 819 520 209 12,076 15,048 Total assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 50,441 155,150 235,696 129,825 81,275 54,336 706,723 Liabilities Amounts due to central bank ÏÏÏÏÏ Ì 28 173 Ì Ì Ì 201 Amounts due to banks and other Ñnancial institutions ÏÏÏÏÏÏÏÏÏÏÏ 27,160 6,761 1,378 211 656 Ì 36,166 Deposits from customers ÏÏÏÏÏÏÏÏÏ 293,084 160,127 119,650 41,877 3,674 Ì 618,412 Subordinated debts/bonds issued ÏÏ Ì Ì Ì 6,000 6,000 Ì 12,000 Others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 205 6,673 1,137 33 48 154 8,250 Total liabilitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 320,449 173,589 122,338 48,121 10,378 154 675,029 Long/(short) positionÏÏÏÏÏÏÏÏÏÏÏ (270,008) (18,439) 113,358 81,704 70,897 54,182 31,694

Notes:

(i) For cash and balances with central bank, undated amount represents statutory deposit reserve funds and Ñscal balances maintained with the PBOC. (ii) For loans and advances to customers, overdue amount included in the above ""overdue/repayable on demand'' category represents loans of which the whole or part of the principals was overdue, or interest was overdue for more than 90 days but for which principal was not yet due. The overdue amount is stated net of appropriate allowances for impairment losses. (iii) For debt securities held for trading purposes, the remaining term to maturities does not represent the Group's intention to hold them to Ñnal maturity.

(f) Operational risk Operational risk includes the risk of direct or indirect loss due to an event or action causing failure of technology, processes, infrastructure and personnel, and other risks having an operational impact. The Group manages this risk through a control-based environment by establishing a framework of policies and procedures in order to identify, assess, control, manage and report risks. The framework covers all business functions ranging from Ñnance, credit, accounting, settlement, savings, treasury, intermediary business, computer applications and management, special assets resolution and legal aÅairs. This has allowed the Group to identify and address comprehensively the operational risk inherent in all key products, activities, processes and systems. Key controls include: Ì authorisation limits for various business activities to branches and functions are delegated after consideration of their respective business scope, risk management capabilities and credit approval procedures. Such authorities are revised on a timely basis to reÖect changes in market conditions and business development and risk management needs; Ì the use of the single legal responsibility framework and strict disciplinary measures in order to ensure accountability;

I-64 APPENDIX I ACCOUNTANTS' REPORT

Ì systems and procedures to identify, control and report on the major risks: credit, market, liquidity and operational; Ì promotion of a risk management culture throughout the organisation by building a team of risk management professionals, providing formal training and having an appraisal system in place, to raise the overall risk awareness among the Group's employees; Ì from December 2002 onwards, the Accounting Department was appointed to be responsible for overseeing that cash management and account management are in compliance with the relevant regulations, and for improving training on anti-money laundering to ensure our staÅ are well- equipped with the necessary knowledge and basic skills; Ì the review and approval by senior management of comprehensive Ñnancial and operating plans which are prepared by branches; Ì the assessment of individual branches' Ñnancial performance against the comprehensive Ñnancial and operating plan; and Ì the maintenance of contingent facilities (including backup systems and disaster recovery schemes) to support all major operations, especially back oÇce operations, in the event of an unforeseen interruption. Insurance cover is arranged to mitigate potential losses associated with certain operational events. In addition to the above, the Bank's Internal Audit Department, which directly reports to the Internal Audit Committee, examines and independently evaluates its risk management policies and procedures and internal controls. The Internal Audit Committee is under the direct supervision of the Executive Management Committee led by the President of the Bank. The Internal Audit Committee determines the frequency and priority of audits of the Bank's diÅerent operating units and branches based on their assessment of the level of risk of those units and branches.

35 Fair value (a) Financial assets The Group's Ñnancial assets mainly include cash, amounts due from central bank, banks and other Ñnancial institutions, loans and advances to customers, and investments.

Amounts due from central bank, banks and other Ñnancial institutions Amounts due from central bank, banks and other Ñnancial institutions are mainly priced at market interest rates and mature within one year. Accordingly, the carrying values approximate the fair values.

Loans and advances to customers Loans and advances to customers are mostly priced at Öoating rates close to the PBOC rates. Accordingly, their carrying values approximate the fair values.

Investments Available-for-sale investments and trading debt securities are stated at fair value in the balance sheet. The following table summarises the carrying values and the fair values of held-to-maturity debt securities which are not presented on the balance sheet at their fair values. Carrying values Fair values 31 December 31 December 2004 2005 2006 2004 2005 2006 Held-to-maturity debt securities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 61,370 67,727 68,196 61,272 68,068 68,453

I-65 APPENDIX I ACCOUNTANTS' REPORT

(b) Financial liabilities

The Group's Ñnancial liabilities mainly include amounts due to banks and other Ñnancial institutions, deposits from customers and subordinated debts/bonds issued. The carrying values of Ñnancial liabilities approximated their fair values at the balance sheet date.

36 SigniÑcant accounting estimates and judgments

In determining the carrying amounts of some assets and liabilities, the Group makes assumptions of the CO 3rd Sch(1)(42) eÅects of uncertain future events on those assets and liabilities at the balance sheet date. These estimates involve assumptions about such items as risk adjustment to cash Öows or discount rates used, future changes in salaries and future changes in prices aÅecting other costs. The Group's estimates and assumptions are based on historical experience and expectations of future events and are reviewed periodically. In addition to assumptions and estimations of future events, judgments are also made during the process of applying the Group's accounting policies.

(a) Impairment losses on loans and advances

Loan portfolios are assessed periodically to assess whether impairment losses exist and if they exist, the amounts of impairment losses. Objective evidence for impairment includes observable data indicating that there is a measurable decrease in the estimated future cash Öows identiÑed with an individual loan. It also includes observable data indicating adverse changes in the repayment status of borrowers in the loan portfolio or national or local or economic conditions that correlate with defaults on the loans in the portfolio. The impairment loss for a loan that is individually evaluated for impairment is the decrease in the estimated future cash Öow of that loan.

When loans and advances are collectively evaluated for impairment, the estimate is based on historical loss experience for assets with credit risk characteristics similar to the loans and advances. Historical loss experience is adjusted on the basis of the relevant observable data that reÖect current economic conditions. Management review the methodology and assumptions used in estimating future cash Öows regularly to reduce any diÅerence between loss estimates and actual loss experience.

(b) Impairment of available-for-sale equity investments

For available-for-sale equity investments, a signiÑcant or prolonged decline in fair value below cost is considered to be objective evidence of impairment. Judgment is required when determining whether a decline in fair value has been signiÑcant or prolonged. In making this judgment, the historical data on market volatility as well as in the share price of the speciÑc equity investment are taken into account. The Group also takes into account other factors, such as industry and sector performance and Ñnancial information regarding the investee.

(c) Fair value of Ñnancial instruments

The fair values for those Ñnancial instruments, where no quoted prices from an active market exist, are established by using valuation techniques. These techniques include using recent arm's length market transactions, reference to the current fair value of similar instruments and discounted cash Öow analysis and option pricing models. The Group has established a process to ensure that valuation techniques are constructed by qualiÑed personnel and are validated and reviewed by personnel independent of the area that constructed the valuation techniques. Valuation techniques are certiÑed before being implemented for valuation and are calibrated to ensure that outputs reÖect actual market conditions. Valuation models established by the Group make the maximum use of market inputs and rely as little as possible on Group- speciÑc data. However, it should be noted that some inputs, such as credit and counterparty risk, and risk correlations, require management estimates. Management estimates and assumptions are reviewed periodically and are adjusted if necessary.

I-66 APPENDIX I ACCOUNTANTS' REPORT

(d) Held-to-maturity investments

Non-derivative Ñnancial assets with Ñxed or determinable payments and Ñxed maturity are classiÑed as held-to-maturity investments if the Group has the intention and ability to hold them until maturity. In evaluating whether the requirements to classify a Ñnancial asset as held-to-maturity are met, management make signiÑcant judgments. Failure in correctly assessing the Group's intention and ability to hold speciÑc investments until maturity may result in reclassiÑcation of the whole portfolio as available-for-sale.

(e) Income taxes

Determining income tax provisions involves judgment on the future tax treatment of certain transactions. The Group carefully evaluates tax implications of transactions and tax provisions are set up accordingly. The tax treatment of such transactions is reconsidered periodically to take into account all changes in tax legislations.

Deferred tax assets are recognised for tax losses not yet used and temporary deductible diÅerences. As those deferred tax assets can only be recognised to the extent that it is probable that future taxable proÑt will be available against which the unused tax credits can be utilised. Management's judgment is required to assess the probability of future taxable proÑts. Management's assessment is constantly reviewed and additional deferred tax assets are recognised if it becomes probable that future taxable proÑts will allow the deferred tax asset to be recovered.

37 Related parties

CITIC Group, the majority shareholder of the Bank, is a state-owned company established in the PRC in 1979. CITIC Group's core businesses include operations in the Ñnancial, industrial and service industries in the PRC and internationally. The Group's related party transactions are those transactions between the Group and CITIC Group and its subsidiaries, which include CIFH the other shareholder of the Bank.

(a) Related party transactions

During the relevant periods, the Group entered into transactions with related parties in the ordinary course of its banking business including lending, investment, deposit and oÅ-balance sheet transactions. The banking transactions were priced at the relevant market rates prevailing at the time of each transaction. Interest rates on loans and deposits are required to be set in accordance with the benchmark rates set by the PBOC.

Transactions during relevant periods and the corresponding balances outstanding at the balance sheet date are as follows: For the year ended 31 December 2004 Fellow subsidiaries Ultimate CIFH and its holding company subsidiaries Others Subsidiaries (note(i)) Interest income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 171 1 138 19 Interest expense ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (92) Ì (49) Ì Management fee to CITIC Group ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (300) Ì Ì Ì Other service fees ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì (15) (10) Ì Loan impairment losses release ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 15 Ì

I-67 APPENDIX I ACCOUNTANTS' REPORT

For the year ended 31 December 2005 Fellow subsidiaries Ultimate CIFH and its holding company subsidiaries Others Subsidiaries (note(i)) Interest income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 176 2 112 20 Interest expense ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (50) Ì (49) Ì Management fee to CITIC Group ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (500) Ì Ì Ì Other service fees ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì (4) (11) Ì Loan impairment losses release ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 89 Ì

For the year ended 31 December 2006 Fellow subsidiaries Ultimate CIFH and its holding company subsidiaries Others Subsidiaries (note(i)) Interest income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 119 4 105 33 Fee and commission income and other income ÏÏÏÏ Ì Ì 10 Ì Interest expense ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (68) Ì (148) Ì Management fee to CITIC Group ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (750) Ì Ì Ì Other service fees ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì (82) (21)

31 December 2004 Fellow subsidiaries Ultimate CIFH and its holding company subsidiaries Others Subsidiaries (note(i)) Gross loans and advances to customers ÏÏÏÏÏÏÏÏÏÏ 2,680 10 3,689 110 Less: Impairment allowances ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì (814) Ì Net loans and advances to customers ÏÏÏÏÏÏÏÏÏÏÏÏ 2,680 10 2,875 110 Gross amounts due from banks and other Ñnancial institutions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 43 129 541 Less: Impairment allowances ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì (50) Ì Net amounts due from banks and other Ñnancial institutions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 43 79 541 Investments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,110 66 Ì 33 Deposits from customersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,513 1 1,492 16 Amounts due to banks and other Ñnancial institutions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 2,287 Ì Others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 38 2 178 3 OÅ-balance sheet transactions Guarantees and letters of creditÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 527 Ì 234 Ì Acceptances ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 16 Ì Guarantees for loans to third parties ÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 176 Ì

I-68 APPENDIX I ACCOUNTANTS' REPORT

31 December 2005 Fellow subsidiaries Ultimate CIFH and its holding company subsidiaries Others Subsidiaries (note (i)) Gross loans and advances to customers ÏÏÏÏÏÏÏÏÏÏ 2,620 Ì 2,848 106 Less: Impairment allowances ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì (725) Ì Net loans and advances to customers ÏÏÏÏÏÏÏÏÏÏÏÏ 2,620 Ì 2,123 106 Gross amounts due from banks and other Ñnancial institutions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 320 98 463 Less: Impairment allowances ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì (50) Ì Net amounts due from banks and other Ñnancial institutions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 320 48 463 Investments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 908 65 Ì 33 Deposits from customersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,428 1 3,692 25 Amounts due to banks and other Ñnancial institutions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 1,039 Ì Others ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 37 2 59 Ì OÅ-balance sheet transactions Guarantees and letters of creditÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 604 Ì 171 Ì Acceptances ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì Ì Guarantees for loans to third parties ÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 210 Ì

31 December 2006 Fellow subsidiaries Ultimate CIFH and its holding company subsidiaries Others Subsidiaries (note (i)) Gross loans and advances to customersÏÏÏÏÏÏÏÏÏÏ 540 Ì 1,733 Ì Less: Impairment allowances ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì Ì Net loans and advances to customers ÏÏÏÏÏÏÏÏÏÏÏ 540 Ì 1,733 Ì Gross amounts due from banks and other Ñnancial institutions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 70 127 472 Less: Impairment allowances ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì (50) Ì Net amounts due from banks and other Ñnancial institutions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 70 77 472 Investments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 324 Ì Ì 33 Other assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4 Ì 7 4 Deposits from customersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,089 1 2,121 4 Amounts due to banks and other Ñnancial institutions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 10,963 Ì Other liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 11 Ì 14 Ì OÅ-balance sheet transactions Guarantees and letters of credit ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 372 Ì 11 Ì Acceptances ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 1 Ì Guarantees for loans to third parties ÏÏÏÏÏÏÏÏÏÏÏÏ Ì 120 101 Ì

Notes:

(i) The related party transactions between the Bank and the subsidiaries are eliminated on consolidation.

(ii) The Bank sold performing related party loans with an aggregate outstanding principal of RMB 2,000 million to another domestic commercial bank for the same amount in cash on 30 June 2006. These loans were included in loans and advances to customers before they were derecognized from the balance sheet of the Bank from the date of sale.

(iii) The Bank disposed of impaired loans due from related parties with an aggregate outstanding principal of RMB 1,142 million and a net book value of RMB 417 million in cash on 26 June 2006. The loans were sold in a public auction to the CITIC Group at their

I-69 APPENDIX I ACCOUNTANTS' REPORT

net book value. These loans were included in loans and advances to customers before they were derecognized from the balance sheet of the Bank from the date of sale. (iv) In June 2006, the Bank transferred equity investments with net book value of RMB 10 million to CITIC Asset Management Company limited (""CAM''), a fellow subsidiary of the Bank. Included in the amount transferred, investments with net book value of RMB 6 million were sold to CAM through a public auction for a cash consideration of RMB 6 million; investments with net book value of RMB 4 million were sold to CAM for a cash consideration of RMB 4 million in accordance with an agreement signed between the Bank and CAM.

(b) Key management personnel and their close family members and related companies Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly, including Directors, Supervisors and Executive OÇcers. The Group enters into banking transactions with key management personnel and their close family members and those companies controlled or signiÑcantly inÖuenced by them in the normal course of business. In the opinion of the Directors, other than the total amounts of loans to directors, supervisors and oÇcers as disclosed in Note 11, there are no material transactions and balances between the Group and these individuals or those companies controlled or signiÑcantly inÖuenced by them.

The aggregate of the compensations in respect of Directors and Supervisors is disclosed in Note 9. The App 1A 33(2)(a), Executive OÇcers' compensations during the years are as follows: (b), (c) & (d) Years ended 31 December 2004 2005 2006 Salaries and other emoluments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2 2 1 Discretionary bonusesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7 11 9 Contributions to deÑned contribution retirement schemesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1 1 1 10 14 11

(c) Contributions to deÑned contribution retirement schemes

The Group participates in deÑned contribution retirement schemes organised by municipal and provincial App 1A 33(4)(a) governments for its employees in Mainland China. The Group has also established a supplementary deÑned contribution plan for its qualiÑed employees. The plan is administered by CITIC Group. The Group is also required to make contributions to the Mandatory Provident Fund Scheme for its employees in Hong Kong at the rate set up by the local laws and regulations. The details of the Group's deÑned contribution retirement schemes are described in Notes 23(a) and 24(a).

(d) Transactions with other state-owned entities in the PRC The Group operates in an economic regime currently predominated by entities directly or indirectly owned by the PRC Government through its government authorities, agencies, aÇliations and other organizations (""state-owned entities''). Transactions with other state-owned entities include but are not limited to the following: Ì lending and deposit taking; Ì taking and placing of inter-bank balances; Ì entrusted lending and other custody services; Ì insurance and securities agency, and other intermediary services;

I-70 APPENDIX I ACCOUNTANTS' REPORT

Ì sale, purchase, underwriting and redemption of bonds issued by other state-owned entities; Ì purchase, sale and leases of property and other assets; and Ì rendering and receiving of utilities and other services. These transactions are conducted in the ordinary course of the Group's banking business on terms similar to those that would have been entered into with non-state-owned entities. The Group has also established its pricing strategy and approval processes for major products and services, such as loans, deposits and commission income. The pricing strategy and approval processes do not depend on whether the customers are state-owned entities or not. Having due regard to the substance of the relationships, the Directors are of opinion that none of these transactions are material related party transactions that require separate disclosure.

38 Possible impact of amendments, new standards and interpretations issued but not yet eÅective for the accounting period ended 31 December 2006 Up to the date of issue of this Accountants' Report, the IASB has issued the following amendments, new standards and interpretations which are not yet eÅective for the accounting period ending 31 December 2006 and which have not been adopted in the Financial Information:

EÅective for accounting periods beginning on or after IFRS 7 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Financial Instruments: Disclosures 1 January 2007 Amendment to IAS 1 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Presentation of Financial Statements: 1 January 2007 Capital Disclosures IFRS 8 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Operating Segments 1 January 2009 The Group has assessed the impact of these amendments, new standards and new interpretations and concluded that they would only aÅect the level of details in the disclosure of the Financial Information, and would not have Ñnancial impact nor result in a change in the Group's accounting policies.

39 Events after the Balance Sheet Date (a) Strategic investors With the approval from the CBRC dated 28 February 2007 (Yin Jian Fu ®2007© No. 85) and the agreement signed between CITIC Group and Banco Bilbao Vizcaya Argentaria, S.A. (""BBVA'') regarding BBVA's investment in the Bank, CITIC Group sold 1,502,763,281 shares of the Bank to BBVA on 1 March 2007. After the transaction, the ownership of the share capital of the Bank is as follows: Shareholder's name Shares owned Percentage of ownership CITIC GroupÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 24,891,438,919 80.00% CIFH ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,718,909,200 15.17 BBVA ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,502,763,281 4.83 Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 31,113,111,400 100.00%

(b) New income tax law On 16 March 2007, the Fifth Session of the Tenth National People's Congress passed the uniÑed enterprise income tax law. Pursuant to the uniÑed income tax law, the income tax rate that is applicable to the Bank in the Mainland China will be reduced from 33% to 25% eÅective from 1 January 2008. The Group did not adopt the reduced income tax rate when preparing its Ñnancial statements for the year ended 31 December 2006 as the above change in income tax law constitutes a non-adjusting post balance sheet event. The Group is in the process of collecting information to assess the impact on the Ñnancial statements position as a result of the above changes in the enterprise income tax law.

I-71 APPENDIX I ACCOUNTANTS' REPORT

(c) ProÑt distribution As stated in Note 1(a)(ii), in accordance with the relevant PRC rules and regulations, CITIC Group is entitled to the net proÑt made by CNCB between 31 December 2005 and the date of the Bank's incorporation. In accordance with the board resolution on 8 March 2007 and the extraordinary general meeting of shareholders held on the same day, the Bank distributed RMB 726 million from the retained earnings as at 31 December 2006 in cash to CITIC Group.

Yours faithfully,

KPMG CertiÑed Public Accountants Hong Kong, China

I-72 APPENDIX II UNAUDITED SUPPLEMENTARY FINANCIAL INFORMATION

(Expressed in millions of Renminbi unless otherwise stated)

The information set out below does not form part of the audited Ñnancial information, and is included herein for information purposes only.

(a) SigniÑcant diÅerences between the Ñnancial information prepared under International Financial Reporting Standards (""IFRS'') and the Ñnancial statements prepared in accordance with the relevant accounting rules and regulations in the PRC

China CITIC Bank Corporation Limited (the ""Bank'') and its subsidiaries (the ""Group'') prepared a set of Ñnancial statements for the years ended 31 December 2004, 2005 and 2006 for the purpose of application to the China Securities Regulatory Commission for its A Share OÅering (""A Share Ñnancial statements''). The A Share Ñnancial statements have been prepared by the Directors of the Bank in accordance with the Accounting Regulations for Business Enterprises issued by the MOF on 15 February 2006 (""2006 PRC GAAP'').

An analysis of the diÅerences between the Ñnancial information prepared under IFRS and the A Share Ñnancial statements are set out below: Years ended 31 December note 2004 2005 2006 Net proÑt attributable to equity owner(s) of the Bank under IFRS ÏÏÏ 2,427 3,083 3,858 Adjustments for depreciation and disposal of Ñxed assets at revalued amountÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (i) 23 65 (50) Adjustments for other assets revaluation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (ii) Ì Ì (82) Net proÑt attributable to equity owner(s) of the Bank shown in the A Share Ñnancial statements ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,450 3,148 3,726

Years ended 31 December note 2004 2005 2006 Owner(s)'s equity attributable to equity owner(s) of the Bank under IFRSÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10,759 23,220 31,689 Adjustments for Ñxed assets revaluation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (i) (2,043) 266 66 Adjustments for other assets revaluation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (ii) Ì 125 70 Adjustments for welfare payable ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (iii) Ì 102 Ì Owner(s)'s equity attributable to equity owner(s) of the Bank shown in the A Share Ñnancial statements ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,716 23,713 31,825

Notes:

(i) Adjustments for Ñxed assets revaluation

In the A Share Ñnancial statements, property and equipment is stated at historical cost less accumulated depreciation and impairment losses before 31 December 2005. As required by the relevant PRC rules and regulations with respect to the restructuring of China CITIC Bank (CNCB) (the ""Restructuring''), the property and equipment of the Bank as at 31 December 2005 were revalued by China Enterprise Appraisal Company Limited (""CEA'') on a depreciated replacement cost or a comparable market basis as appropriate. The revalued amount was adopted for the property and equipment as deemed cost from the date of revaluation and thereafter. The depreciation is calculated to write oÅ the deemed cost over the estimated useful life.

In the Ñnancial information prepared under IFRS, the property of the Bank is stated in the balance sheet at its revalued amount, being the fair value at the date of the revaluation less any subsequent accumulated depreciation and impairment losses. Increases in the carrying amount arising on the revaluation of each property are credited to revaluation reserves in owner's equity. Decreases that oÅset previous increases of the same asset are charged against revaluation reserves; all other decreases are charged to the income statement. These revaluations are performed on a regular basis.

As the depreciation expense of equipment in A share Ñnancial statements is calculated on deemed cost after revaluation, it is diÅerent from that under IFRS, which is calculated on historical cost.

II-1 APPENDIX II UNAUDITED SUPPLEMENTARY FINANCIAL INFORMATION

(ii) Adjustments for other assets revaluation

In the A Share Ñnancial statements, CEA revalued assets of the Bank (including equity investment, repossessed assets and intangible assets) pursuant to the relevant PRC rules and regulations with respect to the Restructuring, with the revaluation surplus being recognised in the capital reserve.

In the Ñnancial information prepared under IFRS, such assets are carried at cost less impairment allowances and the revaluation surplus was not recorded accordingly.

(iii) Adjustments for welfare payable

In accordance with the notice ""Accounting Treatment on Salary Payables for Enterprise Restructuring'' (Cai Ban Qi ®2006© No. 23) issued by the MOF on 17 March 2006, RMB 102 million of accrued but unpaid welfare has been appropriated to the capital reserve.

(b) Liquidity ratios

31 December 2004 2005 2006 RMB current assets to RMB current liabilitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 61.28% 60.69% 38.66% Foreign currency current assets to foreign currency current liabilities ÏÏÏÏÏÏÏÏÏÏÏ 74.52% 68.00% 99.98%

The above liquidity ratios have been calculated in accordance with the accounting regulations and liquidity ratio formula in eÅect at that date.

The liquidity ratios as at 31 December 2004 and 2005 were calculated in accordance with the formula promulgated by the People's Bank of China (the ""PBOC'') in 1996 and other relevant regulations. The liquidity ratios as at 31 December 2006 were calculated with reference to the revised formula issued by the China Banking Regulatory Commission (""CBRC'') in 2006, and thus were not comparable to those ratios as at 31 December 2004 and 2005.

The Ñnancial statements used in calculating the ratio as at 31 December 2004 were prepared in accordance with the Accounting Standards for Business Enterprises, the Accounting Regulations for Financial Enterprises (jointly issued by the Ministry of Finance of the PRC (the ""MOF'') and the People's Bank of China (the ""PBOC'') in 1993) and other relevant regulations issued by the MOF (collectively ""Previous PRC GAAP''). The Ñnancials statements used in calculating the ratios as at 31 December 2005 and 2006 were prepared in accordance with the Accounting Standards for Business Enterprises, the Accounting Regulations for Financial Enterprises (issued by the MOF in 2001) and other regulations issued by the MOF (collectively named as ""PRC GAAP'').

(c) Capital adequacy ratio

The capital adequacy ratio is prepared on a solo basis in accordance with the guideline ""Regulation Governing Capital Adequacy of Commercial Banks'' (Order ®2004© No. 2) eÅective on 1 March 2004, which may have diÅerences with the relevant requirements in Hong Kong Special Administrative Region of the PRC or other countries.

The capital adequacy ratios as at 31 December 2004 reported to the CBRC are not presented. The Group is of the opinion that they are of no value to the equity owner, given that the capital adequacy ratios are calculated based on the quantitative Ñnancial information of the Bank in accordance with the Accounting Regulations for Financial Enterprises jointly issued by the MOF and PBOC in 1993.

II-2 APPENDIX II UNAUDITED SUPPLEMENTARY FINANCIAL INFORMATION

The capital adequacy ratios and the related components of the Bank as at 31 December 2005 and 2006 calculated based on the Ñnancial statements prepared in accordance with PRC GAAP, were as follows:

31 December 31 December 2005 2006 Core capital adequacy ratioÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5.72% 6.57% Capital adequacy ratio ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8.11% 9.41% Components of capital base Core capital: Ì Paid up capitalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 26,661 31,113 Ì Reserves ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (5,321) (7) 21,340 31,106 Supplementary capital: Ì General provision for loans and advancesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,961 2,663 Ì Subordinated debts/bonds ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,000 10,800 Total supplementary capital ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,961 13,463 Total capital base before deductions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 30,301 44,569 Deductions: Ì Unconsolidated equity investments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 142 158 Total capital base after deductionsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 30,159 44,411 Risk weighted assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 372,000 471,957

(d) Currency concentrations

31 December 2004 US Dollars HK Dollars Others Total Spot assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 41,110 1,616 14,936 57,662 Spot liabilitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (32,296) (5,399) (16,454) (54,149) Forward purchases ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,955 2,522 7,633 18,110 Forward sales ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (10,004) (1,634) (6,510) (18,148) Net option position ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 26 Ì (26) Ì Net long/(short) position ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,791 (2,895) (421) 3,475

31 December 2005 US Dollars HK Dollars Others Total Spot assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 55,773 10,343 9,217 75,333 Spot liabilitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (46,195) (14,139) (11,456) (71,790) Forward purchases ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13,026 7,949 6,557 27,532 Forward sales ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (19,599) (4,487) (4,171) (28,257) Net option position ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 61 Ì (61) Ì Net long/(short) position ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,066 (334) 86 2,818

31 December 2006 US Dollars HK Dollars Others Total Spot assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 52,607 1,499 7,826 61,932 Spot liabilitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (52,575) (2,922) (6,031) (61,528) Forward purchases ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 24,760 1,469 7,485 33,714 Forward sales ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (23,136) (174) (9,584) (32,894) Net option position ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 21 4 Ì 25 Net long/(short) position ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,677 (124) (304) 1,249

II-3 APPENDIX II UNAUDITED SUPPLEMENTARY FINANCIAL INFORMATION

(e) Cross-border claims The Group is principally engaged in business operations within Mainland China, and regards all claims on third parties outside Mainland China as cross-border claims. For the purpose of these unaudited supplementary Ñnancial information, Mainland China excludes Hong Kong, the Macau Special Administrative Region of the PRC and Taiwan. Cross-border claims include loans and advances, balances and placements with banks and other Ñnancial institutions, holding of trade bills and certiÑcates of deposit and investment securities. Cross-border claims have been disclosed by diÅerent country or geographical areas. A country or geographical areas is reported where it constitutes 10% or more of the aggregate amount of cross-border claims, after taking into account any risk transfers. Risk transfers are only made if the claims are guaranteed by a party in a country which is diÅerent from that of the counterparty or if the claims are on an overseas branch of a bank whose head oÇce is located in another country.

31 December 2004 Banks and other Ñnancial Public sector institutions entities Others Total Asia PaciÑc excluding Mainland ChinaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,772 250 961 4,983 Ì of which attributed to Hong KongÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,547 250 311 2,108 Europe ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,610 117 9,686 13,413 North and South America ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,977 10,197 2,363 19,537 14,359 10,564 13,010 37,933

31 December 2005 Banks and other Ñnancial Public sector institutions entities Others Total Asia PaciÑc excluding Mainland ChinaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,701 531 1,140 5,372 Ì of which attributed to Hong KongÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,317 482 164 1,963 Europe ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,492 49 1,006 7,547 North and South America ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10,548 9,083 6,687 26,318 20,741 9,663 8,833 39,237

31 December 2006 Banks and other Ñnancial Public sector institutions entities Others Total Asia PaciÑc excluding Mainland ChinaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,948 Ì 646 5,594 Ì of which attributed to Hong KongÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,911 Ì 251 2,162 Europe ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,555 51 57 5,663 North and South America ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10,491 12,289 1,479 24,259 20,994 12,340 2,182 35,516

II-4 APPENDIX II UNAUDITED SUPPLEMENTARY FINANCIAL INFORMATION

(f) Overdue loans and advances to customers by geographical segments

31 December 2004 Loans and advances Gross loans and overdue over Impaired advances 3 months Loans Yangtze River Delta ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 91,672 1,376 1,491 Bohai RimÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 100,195 7,217 8,237 Pearl River Delta and West Strait ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 49,491 8,072 8,196 CentralÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 27,477 408 419 Western ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 27,943 597 593 Northeastern ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 9,880 249 344 Hong Kong ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 221 Ì Ì TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 306,879 17,919 19,280

31 December 2005 Loans and advances Gross loans and overdue over Impaired advances 3 months Loans Yangtze River Delta ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 120,026 683 925 Bohai RimÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 115,706 6,059 6,029 Pearl River Delta and West Strait ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 52,885 6,086 6,467 CentralÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 36,255 651 754 Western ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 32,029 602 660 Northeastern ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13,207 203 476 Hong Kong ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 152 Ì Ì TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 370,260 14,284 15,311

31 December 2006 Loans and advances Gross loans and overdue over Impaired advances 3 months Loans Yangtze River Delta ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 146,784 746 756 Bohai RimÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 138,310 5,119 5,091 Pearl River Delta and West Strait ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 68,230 4,013 3,977 CentralÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 46,704 764 816 Western ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 43,820 500 497 Northeastern ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 19,141 287 428 Hong Kong ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 178 Ì Ì TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 463,167 11,429 11,565

Impaired loans and advances to customers include loans and advances for which objective evidence of impairment exists and which have been assessed as bearing signiÑcant impairment losses. These loans and advances include loans and advances for which objective evidence of impairment has been identiÑed: Ì individually (including corporate loans and advances which are graded substandard, doubtful or loss); or Ì collectively: that is portfolios of homogeneous loans and advances (including retail loans and advances which are graded substandard, doubtful or loss).

II-5 APPENDIX II UNAUDITED SUPPLEMENTARY FINANCIAL INFORMATION

(g) Gross amount of overdue amounts due from banks and other Ñnancial institutions and overdue loans and advances to customers (i) Gross overdue amounts due from banks and other Ñnancial institutions

31 December 2004 2005 2006 Gross amounts due from banks and other Ñnancial institutions which have been overdue ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 604 419 357 As a percentage of total gross amounts due from banks and other Ñnancial institutions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2.83% 1.32% 0.82%

Note:

All overdue amounts have been overdue over 12 months.

(ii) Gross amounts of overdue loans and advances to customers 31 December 2004 2005 2006 Gross loans and advances to customers which have been overdue with respect to either principal or interest for periods of: Ì between 3 and 6 months ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,414 1,283 735 Ì between 6 and 12 months ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,565 1,149 1,943 Ì over 12 months ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 14,940 11,852 8,751 Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 17,919 14,284 11,429 As a percentage of total gross loans and advances to customers: Ì between 3 and 6 months ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.46% 0.35% 0.16% Ì between 6 and 12 months ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.51 0.31 0.42 Ì over 12 months ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4.87 3.20 1.89 Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5.84% 3.86% 2.47%

The overdue loans represent loans of which the whole or part of the principal was overdue, or interest was overdue. The deÑnitions of overdue loans with various repayment terms are set out below:

Ì Loans with a speciÑc repayment date are classiÑed as overdue when the principal or interest is overdue and remains unpaid at year end.

Ì Where one or more instalments of a loan repayable by regular instalments are overdue and remain unpaid at year end, the entire loan balance is considered overdue.

Ì Loans repayable on demand are classiÑed as overdue when a demand for repayment has been served on the borrower but repayment has not been made in accordance with the demand notice. If loans and advances repayable on demand are continuously outside the approved limit that was advised to the borrower, they are also considered as overdue.

(h) Rescheduled amounts due from banks and other Ñnancial institutions and rescheduled loans and advances to customers (i) Rescheduled amounts due from banks and other Ñnancial institutions

The Group does not have any rescheduled amounts due from banks and other Ñnancial institutions for the years ended 31 December 2004, 2005 and 2006

II-6 APPENDIX II UNAUDITED SUPPLEMENTARY FINANCIAL INFORMATION

(ii) Rescheduled loans and advances to customers

31 December 2004 2005 2006 % of total % of total % of total loans and loans and loans and advances advances advances Rescheduled loans and advances ÏÏÏÏÏÏÏÏÏÏÏÏ 9,148 2.98% 6,619 1.79% 4,583 0.99% Less: Ì rescheduled loans and advances but overdue more than 90 days ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,040 1.32 3,249 0.88 2,158 0.47 Rescheduled loans and advances overdue less than 90 days ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,108 1.66% 3,370 0.91% 2,425 0.52%

Rescheduled loans and advances are those loans and advances which have been restructured or renegotiated because of a deterioration in the Ñnancial position of the borrower, or of the inability of the borrower to meet the original repayment schedule and for which the revised repayment terms are a concession that the Group would not otherwise consider. Rescheduled loans and advances are required to be graded at a minimum of substandard (see Note 34(a) of Appendix I for the core deÑnitions of the loan classiÑcation) and subject to an observation period of six months, until when no upgrade to a higher loan classiÑcation is considered.

II-7 APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION

The information set forth in this appendix does not form part of the Accountants' Report prepared by the Group's independent reporting accountants, KPMG, CertiÑed Public Accountants, Hong Kong, as set forth in Appendix I to this prospectus, and is included herein for illustrative purpose only.

The unaudited pro forma Ñnancial information should be read in conjunction with the section headed ""Financial Information'' in this prospectus and the Accountants' Report set forth in Appendix I to this prospectus.

(A) UNAUDITED PRO FORMA ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS

The following statement of unaudited pro forma adjusted consolidated net tangible assets of the Group is prepared based on the audited consolidated net tangible assets of the Group as at December 31, 2006, as shown in the Accountants' Report, the text of which is set out in Appendix I to this prospectus, adjusted as described below.

The statement of unaudited pro forma adjusted consolidated net tangible assets has been prepared to show the eÅect on the audited consolidated net tangible assets of the Group as at December 31, 2006 as if the Global OÅering had occurred on December 31, 2006.

The statement of unaudited pro forma adjusted consolidated net tangible assets of the Group has been prepared for illustrative purposes only and, as a result, may not give a true picture of the Ñnancial position of the Group. Unaudited pro forma Unaudited pro Audited consolidated adjusted forma adjusted net tangible assets Estimated net consolidated consolidated net as at December 31 proceeds from the net tangible tangible asset 2006(1) Global OÅering(2) assets(3) value per share(4) RMB million RMB million RMB RMB HK$(5) million Based on the oÅer price of HK$5.06 per OÅer Share(6)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 31,632 23,564 55,196 1.53 1.55 Based on the oÅer price of HK$5.86 per OÅer Share(6)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 31,632 27,321 58,953 1.64 1.66

Notes:

(1) The consolidated net tangible assets attributable to our shareholders as of December 31, 2006 is compiled based on the Accountants' Report set out in Appendix I to the prospectus, which is based on the audited consolidated net assets attributable to our shareholders as of December 31, 2006 of RMB 31,689 million with an adjustment for intangible assets of RMB 57 million as of December 31, 2006. (2) The estimated net proceeds from the Global OÅering are based on the oÅer price of HK$5.06, or RMB 5.00, per H share to HK$5.86, or RMB 5.80, per H Share and the assumption that there are 4,885,479,000 newly issued H Shares in the Global OÅering, after deduction of the underwriting fees and other related expenses payable by us and takes no account of any shares which may be issued upon the exercise of the over-allotment option. (3) The unaudited pro forma adjusted consolidated net tangible assets do not take into account the eÅect of the net proÑt for the period from and including January 1, 2007 to the date immediately preceding the date of the Global OÅering. (4) The unaudited pro forma adjusted consolidated net tangible assets value per share is arrived at after the adjustments referred to in note 1 above and on the basis that 35,998,590,400 shares are issued and outstanding following the completion of the Global OÅering and that the over-allotment option is not exercised. If the over-allotment option is exercised in full, these per share values will increase. Had eÅect been given to the A Share OÅering in this calculation, our unaudited pro forma adjusted consolidated net tangible assets per share would have been HK$1.75 or RMB 1.73 based on the oÅer prices of HK$5.06 per H Share and RMB 5.00 per A Share and HK$1.90 or RMB 1.88 based on the oÅer prices of HK$5.86 per H Share and RMB 5.80 per A Share. This calculation is based on the assumption that there were 2,301,932,654 newly issued A Shares in the A Share OÅering and the resulting net proceeds (after deduction of the estimated underwriting fees and other related expenses payable by us) of RMB 11,187 million (based on the oÅer price of RMB 5.00 per A Share) and RMB 12,977 million (based on the oÅer price of RMB 5.80 per A Share) from the A Share OÅering.

III-1 APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION

(5) The translation of Renminbi into Hong Kong dollars has been made at the rate of RMB 0.9891 to HK$1.00, the exchange rate set by the PBOC prevailing on April 11, 2007. No representation is made that the Hong Kong dollar amounts have been, could have been or could be converted to Renminbi, or vice versa, at that rate, or at any other rate or at all. (6) A dividend of RMB 726 million from our retained earnings as at December 31, 2006 was declared at our extraordinary shareholders' general meeting on March 8, 2007 which was paid to CITIC Group. Had eÅect been given to the above A Share OÅering as well as the dividend declaration in the above calculation, the unaudited pro forma adjusted consolidated net tangible asset value per share would have been reduced to HK$1.73 or RMB 1.71 based on the oÅer price of HK$5.06 per H Share and RMB 5.00 per A Share and HK$1.88 or RMB 1.86 based on the oÅer price of HK$5.86 per H Share and RMB 5.80 per A Share.

(B) UNAUDITED PRO FORMA FULLY DILUTED FORECAST EARNINGS PER SHARE The following unaudited pro forma fully diluted forecast earnings per share for the year ending December 31, 2007 has been prepared on the basis set out in the notes below for the purpose of illustrating the eÅect of the Global OÅering, as if it had taken place on January 1, 2007. The unaudited pro forma fully diluted forecast earnings per share has been prepared for illustrative purposes only and, because of its nature, it may not give a true picture of the Ñnancial results of the Group following the Global OÅering. All statistics in the table are based on the assumption that the over-allotment option is not exercised. Forecast for the year ending 31 December 2007 Forecast consolidated net profit attributable to shareholders(1) not less than RMB 5.7 billion Unaudited Pro forma forecast earnings per share Ì fully diluted(2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ RMB 0.16 (HK$0.16)

Notes: (1) The forecast consolidated proÑt attributable to shareholders of the Bank for the year ending December 31, 2007 is extracted from the proÑt forecast as set out in the subsection headed ""ProÑt Forecast for the Year Ending December 31, 2007'' under the section headed ""Financial Information''. The bases and assumptions on which the above proÑt forecast for the year ending December 31, 2007 has been prepared are summarised in ""Appendix IV Ì ProÑt Forecast''. (2) The calculation of the forecast earnings per share on a pro forma fully diluted basis is based on the forecast consolidated net proÑt attributable to our shareholders for the year ending December 31, 2007 assuming that we had been listed on the Stock Exchange since January 1, 2007; resulting in a total of 35,998,590,400 shares were issued and outstanding during the entire year. This calculation assumes that the over-allotment option will not be exercised. Had eÅect been given to the A Share OÅering in this calculation, the unaudited pro forma forecast earnings per share would have been RMB 0.15 (HK$0.15) based on the assumption that the 2,301,932,654 shares newly issued in the A Share OÅering had been issued on January 1, 2007.

III-2 APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION

(C) COMFORT LETTER ON UNAUDITED PRO FORMA FINANCIAL INFORMATION RELATING TO THE ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS AND FULLY DILUTED FORECAST EARNINGS PER SHARE

The following is the text of a report received from the independent reporting accountants, KPMG, CertiÑed Public Accountants, Hong Kong, prepared for the purpose of incorporation in this prospectus, in respect of the Group's unaudited pro forma Ñnancial information relating to the adjusted consolidated net tangible assets and fully diluted forecast earnings per share.

8th Floor App 1A 35 & 37 Prince's Building 10 Chater Road Central Hong Kong

The Directors China CITIC Bank Corporation Limited April 16, 2007 China International Capital Corporation (Hong Kong) Limited CITIC Securities Corporate Finance (HK) Limited Citigroup Global Markets Asia Limited The Hongkong and Shanghai Banking Corporation Limited Lehman Brothers Asia Limited

Dear Sirs,

We report on the unaudited pro forma statement of adjusted consolidated net tangible assets and the fully diluted forecast earnings per share (the ""Unaudited Pro Forma Financial Information'') as set out in Parts A and B of Appendix III to the prospectus dated April 16, 2007 (the ""Prospectus'') in connection with the Global OÅering of China CITIC Bank Corporation Limited (the ""Bank''), which have been prepared by the Directors of the Bank solely for illustrative purposes to provide information about how the Global OÅering might have aÅected the Ñnancial information presented. The basis of preparation of the Unaudited Pro Forma Financial Information is set out in Parts A and B of Appendix III to the Prospectus.

RESPONSIBILITIES

It is the responsibility solely of the Directors of the Bank to prepare the Unaudited Pro Forma Financial Information in accordance with Paragraph 4.29 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the ""Hong Kong Listing Rules'') and with reference to Accounting Guideline 7 ""Preparation of Pro Forma Financial Information for inclusion in Investment Circulars'' issued by the Hong Kong Institute of CertiÑed Public Accountants (""HKICPA'').

It is our responsibility to form an opinion, as required by Paragraph 4.29 of the Hong Kong Listing Rules, on the Unaudited Pro Forma Financial Information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any Ñnancial information used in the compilation of the Unaudited Pro Forma Financial Information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

BASIS OF OPINION

We conducted our work in accordance with the Hong Kong Standards on Investment Circular Reporting Engagements (""HKSIR'') 300 ""Accountants' reports on Pro Forma Financial Information in Investment Circulars'' issued by the HKICPA. Our work consisted primarily of comparing the unadjusted Ñnancial information with the source documents, considering the evidence supporting the adjustments and discussing

III-3 APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION the Unaudited Pro Forma Financial Information with the Directors of the Bank. The engagement did not involve independent examination of any of the underlying Ñnancial information. Our work did not constitute an audit or review made in accordance with Hong Kong Standards on Auditing or Hong Kong Standards on Review Engagements issued by the HKICPA, and accordingly, we do not express any such audit or review assurance on the Unaudited Pro Forma Financial Information. We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with suÇcient evidence to give reasonable assurance that the Unaudited Pro Forma Financial Information has been properly complied by the Directors of the Bank on the basis stated, that such basis is consistent with the accounting policies of the Group and that the adjustments are appropriate for the purposes of the unaudited Pro Forma Financial Information as disclosed pursuant to Paragraph 4.29(1) of the Listing Rules. The Unaudited Pro Forma Financial Information is for illustrative purposes only, based on the judgements and assumptions of the Directors of the Bank, and because of its hypothetical nature, it does not provide any assurance or indication that any event will take place in the future and may not be indicative of:

¬ the Ñnancial position of the Group as at December 31, 2006 or any future date; or

¬ the earnings per share of the Group for the year ending December 31, 2007 or for any future periods. We make no comments regarding the reasonableness of the amount of net proceeds from the Global OÅering, the application of those net proceeds, or whether such use will actually take place as described under ""Use of proceeds'' in the section headed ""Future plans and use of proceeds'' in the Prospectus.

OPINION In our opinion: Ì (a) the Unaudited Pro Forma Financial Information has been properly compiled by the Directors of the Bank on the basis stated; (b) such basis is consistent with the accounting policies adopted by the Group; and (c) the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial Information as disclosed pursuant to Paragraph 4.29(1) of the Hong Kong Listing Rules.

Yours faithfully, KPMG CertiÑed Public Accountants Hong Kong, China

III-4 APPENDIX IV PROFIT FORECAST App 1A 34(2) LR 11.17 & 11.18 The forecast consolidated net proÑt attributable to shareholders of our bank for the year ending December 31, 2007 is set out in the section headed ""Financial Information Ì ProÑt Forecast for the Year Ending December 31, 2007''.

(A) BASES AND ASSUMPTIONS

Our Directors have prepared the forecast consolidated net proÑt attributable to shareholders of our bank for the year ending December 31, 2007 on the basis of the audited consolidated results of the Group for year ended December 31, 2006 and a forecast of the consolidated results of the Group for the twelve months ending December 31, 2007. The forecast has been prepared on a basis consistent in all material respects with the accounting policies currently adopted by our Group as set out in the Accountants' Report dated April 16, 2007, the text of which is set out in Appendix I to this prospectus, and on the following principal bases and assumptions:

(a) There will be no material changes in the existing political, legal, Ñscal, market or economic conditions in the PRC, Hong Kong, or any other country or territory in which we currently operate or which are otherwise material to our business.

(b) There will be no changes in the legislation, regulations or rules in the PRC, Hong Kong or any other country or territory in which we operate or with which we have arrangements or agreements, which would materially adversely aÅect our business.

(c) There will be no material changes in inÖation rates, interest rates and foreign exchanges rates from those currently prevailing.

(d) There will be no material change in the bases or applicable rates of income tax, business tax, surcharges and other government levies in the PRC, Hong Kong or any other country or territory in which we operate, except as otherwise mentioned.

(e) There will be no tariÅ reduction that would have a material adverse impact on the Group's business and operating activities.

(f) There will be no material change in the real estate market in the PRC, Hong Kong or any other country or territory in which we hold real estate as Ñxed assets or collateral for loans, which would materially adversely aÅect the market price.

(g) There will be no war, military incident or natural disaster that would have a material impact on the Group's business and operating activities.

(h) The Group's operations will not be adversely aÅected by occurrences such as labour shortages and disputes, or any other factors outside the control of its management. In addition, the Group will be able to recruit enough employees to meet its operating requirement during the forecast period.

(i) The PRC Government will continue to adopt a moderate macroeconomic policy similar to that of 2006, in order to maintain steady economic development. The annual GDP growth rate is expected to be consistent with that of 2006.

IV-1 APPENDIX IV PROFIT FORECAST

(B) LETTER FROM THE REPORTING ACCOUNTANTS

Set out below is the text of a letter from the reporting accountants, KPMG, CertiÑed Public Accountants, Hong Kong, China, for the purpose of incorporation in this prospectus in connection with the Group's proÑt forecast for the year ending December 31, 2007.

8th Floor App 1A 35 & 37 Prince's Building 10 Chater Road Central Hong Kong

CO 3rd Sch(1)31 April 16, 2007 CO 3rd Sch(1)43 The Directors China CITIC Bank Corporation Limited

China International Capital Corporation (Hong Kong) Limited CITIC Securities Corporate Finance (HK) Limited Citigroup Global Markets Asia Limited The Hongkong and Shanghai Banking Corporation Limited Lehman Brothers Asia Limited

Dear Sirs,

We have reviewed the accounting policies and calculations adopted in arriving at the forecast consolidated net proÑt attributable to shareholders of China CITIC Bank Corporation Limited (the ""Bank'') for the year ending December 31, 2007 (the ""Forecast'') as set out in the section headed ""Financial Information Ì ProÑt forecast for the year ending December 31, 2007'' in the prospectus dated April 16, 2007 issued by the Bank (the ""Prospectus''). The Directors of the Bank are solely responsible for the preparation of the Forecast.

The Forecast has been prepared by the Directors based on the audited consolidated results of the Bank and its subsidiaries (hereinafter collectively referred to as the ""Group'') for the year ended December 31, 2006 and a forecast of the consolidated results of the Group for the twelve months ending December 31, 2007.

In our opinion, so far as the accounting policies and calculations are concerned, the Forecast has been properly compiled on the bases and assumptions made by the Directors as set out in Part A of Appendix IV to the Prospectus, and is presented on a basis consistent in all material respects with the accounting policies currently adopted by the Group as set out in our Accountants' Report dated April 16, 2007, the text of which is set out in Appendix I to the Prospectus.

Yours faithfully, KPMG CertiÑed Public Accountants Hong Kong, China

IV-2 APPENDIX IV PROFIT FORECAST

(C) LETTER FROM THE JOINT SPONSORS April 16, 2007 The Directors China CITIC Bank Corporation Limited Dear Sirs, We refer to the forecast consolidated net proÑt attributable to shareholders of China CITIC Bank Corporation Limited (the ""Bank'') and its subsidiaries (the ""Group'') for the year ending December 31, 2006 (the ""Forecast'') as set out in the section headed ""Financial Information Ì ProÑt forecast for the Ñnancial year ending December 31, 2007'' in the prospectus of the Bank dated April 16, 2007 (the ""Prospectus''). We have discussed with you the bases and assumptions made by the Directors of the Bank as set out in Section (A) of Appendix IV to the Prospectus upon which the Forecast has been made. We have also considered the letter dated April 16, 2007 addressed to yourselves and ourselves from KPMG regarding the accounting policies and calculations upon which the Forecast has been made. On the basis of the information comprising the Forecast and on the basis of the accounting policies and calculations adopted by you and reviewed by KPMG, we are of the opinion that the Forecast, for which you as Directors of the Bank are solely responsible, has been made after due and careful enquiry.

Yours faithfully,

For and on behalf of China International Capital Corporation (Hong Kong) Limited HUANG Guobin Managing Director For and on behalf of CITIC Securities Corporate Finance (HK) Limited Janet YEE Director For and on behalf of Citigroup Global Markets Asia Limited Raymond LEE Managing Director For and on behalf of The Hongkong and Shanghai Banking Corporation Limited Ivan SO Director For and on behalf of Lehman Brothers Asia Limited Erik TUNG Managing Director

IV-3 APPENDIX V PROPERTY VALUATION

The following is the text of a letter, summary of values and valuation certiÑcates, prepared for the App 1A 39 purpose of incorporation in this prospectus received from Sallmanns (Far East) Limited, an independent CO 3rd Sch(1)34 valuer, in connection with its valuation as at January 31, 2007 of the property interests of the Group. As described in section ""Documents Available for Inspection'' in Appendix X, a copy of the full valuation report will be made available for public inspection.

April 16, 2007 App 1A 9(3) The Board of Directors China CITIC Bank Corporation Limited Block C Fuhua Mansion 8 Chaoyangmen Beidajie Dongcheng District Beijing, China Dear Sirs, In accordance with your instructions to value the properties in which China CITIC Bank Corporation Limited (the ""Company'') and its subsidiaries (hereinafter together referred to as the ""Group'') have interests, we conÑrm that we have carried out inspections, made relevant enquiries and searches and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the capital values of the property interests as at 31 January 2007 (the ""date of valuation''). I.F.5.06(8) & 5.07 We have categorized the property interests held by the Company in the PRC into 16 sub-groups according to their locations. The property interests of each sub-group are located in a province, an autonomous region or a directly administered municipality in the PRC. Our valuations of the property interests represent the market value which we would deÑne as intended to mean ""the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm's-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently, and without compulsion''. We have valued the property interests in Groups I, II and III by the direct comparison approach assuming sale of the property interests in their existing state with the beneÑt of immediate vacant possession and by making reference to comparable sale transactions as available in the relevant market. We have attributed no commercial value to the property interests in Group IV which are rented by the Group, due either to the short-term nature of the leases or the prohibition against assignment or sub-letting or otherwise due to the lack of substantial proÑt rents. As at the date of valuation, the Group held 248 properties with an aggregate gross Öoor area of approximately 655,289.99 sq.m. in the PRC, of which 157 properties are commercial properties, 56 properties are residential properties and 35 properties are ancillary properties. Among them, 198 properties with an aggregate gross Öoor area of approximately 593,491.26 sq.m. are situated on granted land, 7 properties with an aggregate gross Öoor area of approximately 2,351.03 sq.m. are situated on administrative allocated land and

V-1 APPENDIX V PROPERTY VALUATION the rest of the held properties with an aggregate gross Öoor area of approximately 59,447.7 sq.m. are situated on the land without any land use rights certiÑcates. The Group also owned a property in Hong Kong with a gross Öoor area of approximately 291.8 sq.m.

In addition to the above properties, the Group has entered into Sale and Purchase Agreements with various real estate developers in respect of acquiring 5 commercial properties with an aggregate gross Öoor area of approximately 22,159.17 sq.m. Owing to the fact that some of them are still under construction and not all the required payments have been fully paid as at the date of valuation, the properties have not been assigned to the Group and thus the titles of the properties are not vested in the Group. Therefore we have not attributed any commercial value to these properties.

As at the date of valuation, the Group rented 754 properties in the PRC with an aggregate gross Öoor area of approximately 405,403.46 sq.m. from various independent third parties and connected parties.

For the 157 commercial properties held by the Group in the PRC, the Group has obtained relevant valid Land Use Rights CertiÑcates (""LURCs''), Building Ownership CertiÑcates (""BOCs'') or Real Estate Title CertiÑcates (""RETCs'') for 138 of them representing a total gross Öoor area of approximately 572,203.95 sq.m., according to the opinion given by the Company's PRC legal advisers, which are legally owned by the Group and can be legally occupied, used, transferred, leased, mortgaged or otherwise disposed of by the Group within the valid terms stipulated in the LURCs. For the remaining 19 commercial properties with a total gross Öoor area of approximately 53,283.67 sq.m., the Group has not obtained all the valid title certiÑcates.

For the 56 residential properties and 35 properties for ancillary uses held by the Group in the PRC, the Group has obtained relevant valid LURCs and BOCs or RETCs for 60 of them representing a total gross Öoor area of approximately 21,287.31 sq.m., according to the opinion given by the Company's PRC legal advisers, which are legally owned by the Group and can be legally occupied, used, transferred, leased, mortgaged or otherwise disposed of by the Group within the valid terms stipulated in the LURCs. For the remaining 31 properties representing a total gross Öoor area of approximately 8,515.06 sq.m., the Group has not obtained all the valid title certiÑcates.

Among the aforesaid 50 properties held by the Group without all the valid title certiÑcates in the PRC, the Group has obtained the LURCs by way of administrative allocation and BOCs in respect of 7 properties with a total gross Öoor area of approximately 2,351.03 sq.m for residential or ancillary use. According to the Company's PRC legal opinion, there is no material risk for the Group to use the 7 properties before obtaining the land use rights certiÑcates by granting. After obtaining the granted land use rights certiÑcates, the Group will be entitled to occupy, use, transfer, lease, mortgage and otherwise dispose of the 7 properties within the valid terms stipulated in the LURCs. For the remaining 43 properties held by the Group without all the valid title certiÑcates in the PRC, as conÑrmed by the Group, it is able to Ñnd substitute properties to maintain its operation if moving out from these properties without LURCs and/or BOCs. The removal and defects of titles shall not have any material adverse eÅect on the whole operation and Ñnancial conditions and bring material litigation risk to the Group.

Among the 754 leased properties in the PRC, according to the opinion given by the Company's PRC legal advisers, the lessors of 436 properties representing a total gross Öoor area of approximately 260,691.96 sq.m. have provided either the BOCs, RETCs or property owner's consent to sublease such properties and the lease agreements are legal and valid. For the remaining 318 leased properties representing a total gross Öoor area of approximately 144,711.50 sq.m., the Group has not been provided with the relevant BOCs, RETCs or property owner's consent to sublease. The lessors of 218 properties with a total Öoor area of approximately 95,684.67 sq.m. have provided the conÑrmation letters which undertake to compensate for all the loss of the Group arising from any title defects of the properties.

Our valuations have been made on the assumption that the seller sells the property interests in the market without the beneÑt of a deferred term contract, leaseback, joint venture, management agreement or any similar arrangement, which could serve to aÅect the values of the property interests.

V-2 APPENDIX V PROPERTY VALUATION

No allowance has been made in our report for any charges, mortgages or amounts owing on any of the property interests valued nor for any expenses or taxation which may be incurred in eÅecting a sale. Unless otherwise stated, it is assumed that the property interests are free from encumbrances, restrictions and outgoings of an onerous nature, which could aÅect their values. In valuing the property interest of the Group in Hong Kong held under the Government Lease expiring before 30 June 1997, we have taken account of the stipulations contained in Annex III of the Joint Declaration of the Government of the United Kingdom and the Government of the People's Republic of China on the question of Hong Kong and the New Territories Leases (Extension) Ordinance 1988 that such lease has been extended without premium until 30 June 2047 and that a rent of three per cent of the then rateable value is charged per annum from the date of extension. In valuing the property interests, we have complied with all the requirements contained in Chapter 5 and Practice Note 12 to the Rules Governing the Listing of Securities issued by The Stock Exchange of Hong Kong Limited except for those in respect of which a waiver has been applied and granted in respect of Rule 5.01, Rule 5.06, Rule 19A.27(4) and Paragraph 3(a) of Practice Note 16 of the Hong Kong Listing Rules governing the Listing of Securities on the Stock Exchange of Hong Kong Limited; the RICS Appraisal I.F.5.05 & 5.06(9) and Valuation Standards (5th Edition May 2003) published by the Royal Institution of Chartered Surveyors and the HKIS Valuation Standards on Properties (1st Edition January 2005) published by the Hong Kong Institute of Surveyors. As the Company is in compliance with paragraph 3(b) of Practice Note 16 to the Rules Governing the Listing of Securities issued by The Stock Exchange of Hong Kong Limited, the Company has obtained a waiver to exclude the full details of the individual leased properties from the valuation certiÑcates in our valuation report in this prospectus. A summary of all these interests in land and buildings covered by this exemption is included in the Summary of Values and the CertiÑcate for Leased Properties. We have relied to a very considerable extent on the information given by the Group and have accepted advice given to us on such matters as tenure, planning approvals, statutory notices, easements, particulars of occupancy, lettings, and all other relevant matters. We have been, in some instances, provided by the Group with extracts of the title documents relating to the properties in the PRC and have caused search to be made at the Hong Kong Land Registry in respect of Hong Kong property. Where possible, we have searched the original documents to verify the existing titles to the property interests in the PRC and any material encumbrances that might be attached to the properties or any lease amendments which may not appear on the copies handed to us. We have relied considerably on the advice given by the Company's PRC legal advisers Ì King and Wood, concerning the validity of the Group's titles to the property interests in the PRC. We have not carried out detailed site measurements to verify the correctness of the site areas in respect of the properties but have assumed that the site areas shown on the documents and oÇcial site plans handed to us are correct. All documents and contracts have been used as reference only and all dimensions, measurements and areas are approximations. No on-site measurement has been taken. We have inspected the exterior and, where possible, the interior of the properties. However, no structural survey has been made, but in the course of our inspection, we did not note any serious defects. We are not, however, able to report whether the properties are free of rot, infestation or any other structural defects. No tests were carried out on any of the services. We have had no reason to doubt the truth and accuracy of the information provided to us by the Group. We have also sought conÑrmation from the Group that no material factors have been omitted from the information supplied. We consider that we have been provided with suÇcient information to reach an informed view, and we have no reason to suspect that any material information has been withheld.

Unless otherwise stated, all monetary Ñgures stated in this report are in Renminbi (RMB). In valuing PN12 14 property interest in Group II, we have adopted exchange rate of HK$1 to RMB 0.9962, which was prevailing as at the date of valuation.

V-3 APPENDIX V PROPERTY VALUATION

Our valuations are summarized below and the valuation certiÑcates are attached.

Yours faithfully, for and on behalf of Sallmanns (Far East) Limited Paul L. Brown I.F.5.06(7) B.Sc. FRICS FHKIS I.F.5.05(7) & 8.31 Director

Note: Paul L. Brown is a Chartered Surveyor who has 24 years' experience in the valuation of properties in I.F.5.06(7) the PRC and 27 years of property valuation experience in Hong Kong, the United Kingdom and the I.F.5.05(7), 8.31 & 8.32 Asia-PaciÑc region.

V-4 APPENDIX V PROPERTY VALUATION

SUMMARY OF VALUES GROUP I Ì PROPERTY INTERESTS HELD AND OCCUPIED BY THE GROUP IN THE PRC

Capital value in existing state No. Property as at 31 January 2007 I.F.5.06(8) RMB 1. Various properties located in Beijing, the PRC 666,507,000 2. Various properties located in Shandong Province, the PRC 1,454,095,000 3. Various properties located in Liaoning Province, the PRC 472,385,000 4. Various properties located in Zhejiang Province, the PRC 841,552,000 5. Various properties located in Shanghai, the PRC 1,355,102,000 6. Various properties located in Guangdong Province, the PRC 341,858,000 7. Various properties located in Jiangsu Province, the PRC 1,213,320,000 8. Various properties located in Chongqing, the PRC 37,485,000 9. Various properties located in Chengdu, Sichuan Province, the PRC 4,171,000 10. Various properties located in Kunming, Yunnan Province, the PRC 90,589,000 11. Various properties located in Fuzhou, Fujian Province, the PRC 50,113,000 12. 2 residential units located in Hefei, Anhui Province, the PRC 2,177,000 13. Various properties located in Tianjin, the PRC 38,259,000 14. Various properties located in Wuhan, Hubei Province, the PRC 196,252,000 15. Various properties located in Zhengzhou, Henan Province, the PRC 55,910,000 16. A property located in Xi'an, Shaanxi Province, the PRC No commercial value Sub-total: 6,819,775,000

GROUP II Ì PROPERTY INTEREST OWNED AND OCCUPIED BY THE GROUP IN HONG KONG

Capital value Capital value in existing state attributable to the Group No. Property as at 31 January 2007 as at 31 January 2007 I.F.5.06(8) RMB RMB 17. Unit 2106 on 21st Floor, Tower Two, Lippo Centre, No. 89 Queensway, Hong Kong 26,300,000 24,985,000 Sub-total: 24,985,000

GROUP III Ì PROPERTY INTERESTS CONTRACTED TO BE ACQUIRED BY THE GROUP IN THE PRC

Capital value in existing state No. Property as at 31 January 2007 I.F.5.06(8) RMB 18. Various properties located in the PRC No commercial value Sub-total: Nil

V-5 APPENDIX V PROPERTY VALUATION

GROUP IV Ì PROPERTY INTERESTS RENTED AND OCCUPIED BY THE GROUP IN THE PRC

Capital value in existing state No. Property as at 31 January 2007 I.F.5.06(8) RMB 19. 754 leased properties located in the PRC No commercial value Sub-total: Nil

Capital value attributable to the Group as at 31 January 2007 RMB Grand-total: 6,844,760,000

V-6 APPENDIX V PROPERTY VALUATION

VALUATION CERTIFICATE GROUP I Ì PROPERTY INTERESTS HELD AND OCCUPIED BY THE GROUP IN THE PRC

Capital value Particulars of in existing state Property Description and tenure occupancy as at 31 January 2007 I.F.5.06(8) RMB 1. Various The properties comprise The properties are 666,507,000 I.F.5.06(1) properties 6 commercial units and 6 residential currently occupied located in units mainly completed between 1991 by the Group for Beijing and 2004. commercial and The PRC residential The properties have a total gross Öoor purposes. area of approximately 48,667.36 sq.m. and the approximate gross Öoor areas of the properties for each use are shown as follows:

Use Gross Floor Area (sq.m.) Commercial 46,543.18 Residential 2,124.18 Total 48,667.36

Notes:

1. According to 3 BOCs and 3 LURCs, 3 items of the properties representing a total gross Öoor area of approximately 33,553.33 sq.m. have obtained both the BOCs and LURCs. According to the opinion given by the Company's PRC legal advisers, the Group has legally obtained the building ownership rights and land use rights for the 3 items of the properties. The Group is entitled to occupy, use, transfer, lease, mortgage and otherwise dispose of the properties within the valid terms stipulated in the LURCs.

2. According to 8 BOCs, 5 items of the properties representing a total gross Öoor area of approximately 3,831.08 sq.m. have only obtained the BOCs but not the relevant LURCs. According to the opinion given by the Company's PRC legal advisers, there is no material risk for the Group to use the properties unless the properties would be auctioned or otherwise disposed of due to the defects of land titles. Before obtaining the relevant LURCs, the Group is not entitled to freely transfer, mortgage and dispose of the properties.

3. For the remaining 4 items of the properties with a total gross Öoor area of approximately 11,282.95 sq.m., we have not been provided with the LURCs and BOCs. According to the opinion given by the Company's PRC legal advisers, due to lack of the relevant LURCs and BOCs, the Company's PRC legal advisers cannot ascertain whether the Group has obtained the legal rights of the properties.

4. According to the opinion given by the Company's PRC legal advisers, as conÑrmed by the Group, it is able to Ñnd substitute properties to maintain its operation if moving out from these properties without LURCs and/or BOCs. The removal and defects of titles shall not have any material adverse eÅect on the whole operation and Ñnancial conditions and bring material litigation risk to the Group.

5. According to the opinion given by the Company's PRC legal advisers, the BOCs and LURCs mentioned in aforesaid notes 1 and 2 are registered under the name of ""China CITIC Bank'', which is the former name of the Company. There is no material legal impediment for the Company to change the title registration.

6. In the valuation of the properties, we have attributed no commercial value to the 9 buildings and units with a total gross Öoor area of approximately 15,114.03 sq.m. (as mentioned in notes 2 and 3) which have not obtained valid title certiÑcates. However, for reference purposes, we are of the opinion that the capital value of these properties as at the date of valuation would be RMB 265,313,000 assuming all relevant proper title certiÑcates have been obtained and these properties could be freely transferred.

V-7 APPENDIX V PROPERTY VALUATION

VALUATION CERTIFICATE

Capital value in existing state Property Description and tenure Particulars of occupancy as at 31 January 2007 I.F.5.06(8) RMB 2. Various The properties comprise The properties are 1,454,095,000 I.F.5.06(1) properties 18 commercial buildings and units, currently occupied by located in 7 residential units and 4 ancillary the Group for Shandong buildings and units mainly commercial, residential Province completed between 1991 and 2001. and ancillary purposes The PRC except for portions of The properties have a total gross the properties with a Öoor area of approximately total lease area of 192,292.74 sq.m. and the approximately approximate gross Öoor areas of 16,858.67 sq.m. which the properties for each use are are subject to shown as follows: 49 tenancy agreements as stated in note 6.

Use Gross Floor Area (sq.m.) Commercial 186,370.53 Residential 1,187.31 Ancillary 4,734.90 Total 192,292.74

Notes:

1. According to 18 BOCs and 18 LURCs and/or RETCs, 20 items of the properties representing a total gross Öoor area of approximately 179,545.27 sq.m. have obtained both the BOCs and LURCs and/or RETCs. According to the opinion given by the Company's PRC legal advisers, the Group has legally obtained the building ownership rights and land use rights for the 20 items of the properties. The Group is entitled to occupy, use, transfer, lease, mortgage and otherwise dispose of the properties within the valid terms stipulated in the LURCs and/or RETCs.

2. According to a BOC and an administrative allocated LURC, 1 item of the properties representing a gross Öoor area of approximately 107.47 sq.m. has obtained both the BOC and administrative allocated LURC. According to the opinion given by the Company's PRC legal advisers, there is no material risk for the Group to use the property before obtaining the land use rights certiÑcate by granting. After obtaining the granted LURC for the item of the properties, the Group will be entitled to occupy, use, transfer, lease, mortgage and otherwise dispose of the property within the valid term stipulated in the LURCs.

3. According to 3 BOCs, 2 items of the properties representing a total gross Öoor area of approximately 3,649.21 sq.m. have only obtained the BOCs but not the relevant LURCs. According to the opinion given by the Company's PRC legal advisers, there is no material risk for the Group to use the properties unless the properties would be auctioned or otherwise disposed of due to the defects of land titles. Before obtaining the relevant LURCs, the Group is not entitled to freely transfer, mortgage and dispose of the properties.

4. For the remaining 6 items of the properties with a total gross Öoor area of approximately 8,990.79 sq.m., we have not been provided with the LURCs and BOCs and/or RETCs. According to the opinion given by the Company's PRC legal advisers, due to lack of the relevant LURCs and BOCs and/or RETCs, the PRC legal advisers cannot ascertain whether the Group has obtained the legal rights of the properties.

5. According to the opinion given by the Company's PRC legal advisers, as conÑrmed by the Group, it is able to Ñnd substitute properties to maintain its operation if moving out from these properties without LURCs and/or BOCs. The removal and defects of titles shall not have any material adverse eÅect on the whole operation and Ñnancial conditions and bring material litigation risk to the Group.

6. According to 49 tenancy agreements entered into between the Company and various independent third parties (the ""Lessees''), 7 items of the properties with a total lease area of approximately 16,858.67 sq.m. are leased to the Lessees with a total annual rent of RMB 15,083,351 for various terms with the latest expiry date on 28 February 2018.

V-8 APPENDIX V PROPERTY VALUATION

7. According to the opinion given by the Company's PRC legal advisers, the BOCs, RETCs and LURCs mentioned in aforesaid notes 1, 2 and 3 are registered under the name of ""China CITIC Bank'', which is the former name of the Company. There is no material legal impediment for the Company to change the title registration. 8. In the valuation of the properties, we have attributed no commercial value to the 9 buildings and units with a total gross Öoor area of approximately 12,747.47 sq.m. (as mentioned in notes 2, 3 and 4) which have not obtained valid title certiÑcates. However, for reference purposes, we are of the opinion that the capital value of these properties as at the date of valuation would be RMB 67,293,000 assuming all relevant proper title certiÑcates have been obtained and these properties could be freely transferred.

V-9 APPENDIX V PROPERTY VALUATION

VALUATION CERTIFICATE

Capital value in existing state Property Description and tenure Particulars of occupancy as at 31 January 2007 I.F.5.06(8) RMB 3. Various The properties comprise The properties are 472,385,000 I.F.5.06(1) properties 19 commercial buildings and units, currently occupied by located in a residential unit and 12 ancillary the Group for Liaoning buildings and units mainly commercial, residential Province completed between 1905 and 2005. and ancillary purposes The PRC except for portions of The properties have a total gross the properties with a Öoor area of approximately total lease area of 55,588.18 sq.m. and the approximately approximate gross Öoor areas of 1,221 sq.m. which are the properties for each use are subject to 3 tenancy shown as follows: agreements as stated in notes 3 and 4.

Use Gross Floor Area (sq.m.) Commercial 53,763.15 Residential 199.22 Ancillary 1,625.81 Total 55,588.18

Notes:

1. According to 29 BOCs and 23 LURCs, 29 items of the properties representing a total gross Öoor area of approximately 51,221.49 sq.m. have obtained both the BOCs and LURCs. According to the opinion given by the Company's PRC legal advisers, the Group has legally obtained the building ownership rights and land use rights for the 29 items of the properties. The Group is entitled to occupy, use, transfer, lease, mortgage and otherwise dispose of the properties within the valid terms stipulated in the LURCs.

2. According to 4 BOCs, 3 items of the properties representing a total gross Öoor area of approximately 4,366.69 sq.m. have only obtained the BOCs but not the relevant LURCs. According to the opinion given by the Company's PRC legal advisers, there is no legal impediment for the Group to use the properties unless the properties would be auctioned or otherwise disposed of due to the defects of land titles. Before obtaining the relevant LURCs, the Group is not entitled to freely transfer, mortgage and dispose of the properties. As conÑrmed by the Group, it is able to Ñnd substitute properties to maintain its operation if moving out from these properties without LURCs. The removal and defects of titles shall not have any material adverse eÅect on the whole operation and Ñnancial conditions and bring material litigation risk to the Group.

3. According to a tenancy agreement entered into between the Company and an independent third party (the ""Lessee''), 1 item of the properties with a lease area of approximately 240 sq.m. is leased to the Lessee with an annual rent of RMB 40,000 with the expiring date on 10 August 2007.

4. According to 2 tenancy agreements entered into between the Company and various connected parties (the ""Lessees''), 2 items of the properties with a total lease area of approximately 981 sq.m. are leased to the Lessees with a total annual rent of RMB 673,000 for various terms with the latest expiry date on 31 December 2009.

5. According to the opinion given by the Company's PRC legal advisers, the BOCs and LURCs mentioned in aforesaid notes 1 and 2 are registered under the name of ""China CITIC Bank'', which is the former name of the Company. There is no material legal impediment for the Company to change the title registration.

6. In the valuation of the properties, we have attributed no commercial value to the 3 buildings and units with a total gross Öoor area of approximately 4,366.69 sq.m.(as mentioned in note 2) which have not obtained valid title certiÑcates. However, for reference purposes, we are of the opinion that the capital value of these properties as at the date of valuation would be RMB 44,553,000 assuming all relevant proper title certiÑcates have been obtained and the properties could be freely transferred.

V-10 APPENDIX V PROPERTY VALUATION

VALUATION CERTIFICATE Capital value in existing state Property Description and tenure Particulars of occupancy as at 31 January 2007 I.F.5.06(8) RMB 4. Various The properties comprise The properties are 841,552,000 I.F.5.06(1) properties 17 commercial buildings and units, currently occupied by located in 3 residential units and 7 ancillary the Group for Zhejiang buildings and units mainly completed commercial, residential Province between 1988 and 2002. and ancillary purposes The PRC except for portions of The properties have a total gross Öoor the properties with a area of approximately 62,283.16 sq.m. total lease area of and the approximate gross Öoor areas approximately of the properties for each use are 12,496.31 sq.m. which shown as follows: are subject to 11 tenancy agreements as stated in note 5. Use Gross Floor Area (sq.m.) Commercial 58,900.16 Residential 1,208.21 Ancillary 2,174.79 Total 62,283.16

Notes:

1. According to 28 BOCs and 29 LURCs, 23 items of the properties representing a total gross Öoor area of approximately 58,718.53 sq.m. have obtained both the BOCs and LURCs. According to the opinion given by the Company's PRC legal advisers, the Group has legally obtained the building ownership rights and land use rights for the 23 items of the properties. The Group is entitled to occupy, use, transfer, lease, mortgage and otherwise dispose of the properties within the valid terms stipulated in the LURCs.

2. According to 12 BOCs, 2 items of the properties representing a total gross Öoor area of approximately 3,403.09 sq.m. have only obtained the BOCs but not the relevant LURCs. According to the opinion given by the Company's PRC legal advisers, there is no legal impediment for the Group to use the properties unless the properties would be auctioned or otherwise disposed of due to the defects of land titles. Before obtaining the relevant LURCs, the Group is not entitled to freely transfer, mortgage and dispose of the properties.

3. For the remaining 2 residential and ancillary items of the properties with a total gross Öoor area of approximately 161.54 sq.m., we have not been provided with the LURCs and BOCs. According to the opinion given by the Company's PRC legal advisers, due to lack of the relevant LURCs and BOCs, the PRC legal advisers cannot ascertain whether the Group has obtained the legal rights of the properties.

4. According to the opinion given by the Company's PRC legal advisers, as conÑrmed by the Group, it is able to Ñnd substitute properties to maintain its operation if moving out from these properties without LURCs and/or BOCs. The removal and defects of titles shall not have any material adverse eÅect on the whole operation and Ñnancial conditions and bring material litigation risk to the Group.

5. According to 11 tenancy agreements entered into between the Company and various independent third parties (the ""Lessees''), 8 items of the properties with a total lease area of approximately 12,496.31 sq.m. are leased to the Lessees with an annual rent of RMB 3,810,800 for various terms with the latest expiry date on 31 December 2007.

6. According to the opinion given by the Company's PRC legal advisers, the BOCs and LURCs mentioned in aforesaid notes 1 and 2 are registered under the name of ""China CITIC Bank'', which is the former name of the Company. There is no material legal impediment for the Company to change the title registration.

7. In the valuation of the properties, we have attributed no commercial value to the 4 buildings and units with a total gross Öoor area of approximately 3,564.63 sq.m. (as mentioned in notes 2 and 3) which have not obtained valid title certiÑcates. However, for reference purposes, we are of the opinion that the capital value of these properties as at the date of valuation would be RMB 27,253,000 assuming all relevant proper title certiÑcates have been obtained and the properties could be freely transferred.

V-11 APPENDIX V PROPERTY VALUATION

VALUATION CERTIFICATE

Capital value in existing state Property Description and tenure Particulars of occupancy as at 31 January 2007 I.F.5.06(8) RMB 5. Various The properties comprise 12 The properties are 1,355,102,000 I.F.5.06(1) properties commercial buildings and units currently occupied by located in and 3 ancillary buildings and units the Group for Shanghai mainly completed between 1984 commercial and The PRC and 2002. ancillary purposes except for a portion of The properties have a total gross the properties with a Öoor area of approximately lease area of 92,718.77 sq.m. and the approximately 771.29 approximate gross Öoor areas of sq.m. which is subject the properties for each use are to a tenancy agreement shown as follows: as stated in note 3.

Use Gross Floor Area (sq.m.) Commercial 91,750.02 Ancillary 968.75 Total 92,718.77

Notes: 1. According to 10 RETCs, 15 items of the properties representing a total gross Öoor area of approximately 92,718.77 sq.m. have obtained RETCs. According to the opinion given by the Company's PRC legal advisers, the Group has legally obtained the properties rights for the 15 items of the properties. The Group is entitled to occupy, use, transfer, lease, mortgage and otherwise dispose of the properties within the valid terms stipulated in the RETCs. 2. According to the opinion given by the Company's PRC legal advisers, the RETCs mentioned in aforesaid note 1 are registered under the name of ""China CITIC Bank'', which is the former name of the Company. There is no material legal impediment for the Company to change the title registration. 3. According to a tenancy agreement entered into between the Company and an independent third party (the ""Lessee''), 1 item of the properties with a lease area of approximately 771.29 sq.m. is leased to the Lessee for a term commencing from 1 August 2005 and expiring on 31 December 2007 at an annual of RMB 590,868.

V-12 APPENDIX V PROPERTY VALUATION

VALUATION CERTIFICATE

Capital value in existing state Property Description and tenure Particulars of occupancy as at 31 January 2007 I.F.5.06(8) RMB 6. Various The properties comprise 24 The properties are 341,858,000 I.F.5.06(1) properties commercial buildings and units, 18 currently occupied by located in residential units and an ancillary the Group for Guangdong building mainly completed between commercial, residential Province 1984 and 2005. and ancillary purposes The PRC except for portions of The properties have a total gross the properties with a Öoor area of approximately total lease area of 30,159.14 sq.m. and the approximate approximately gross Öoor areas of the properties for 2,133.04 sq.m. which each use are shown as follows: are subject to 3 tenancy agreements as stated in note 5.

Use Gross Floor Area (sq.m.) Commercial 23,486.06 Residential 2,321.04 Ancillary 4,352.04 Total 30,159.14

Notes:

1. According to 42 RETCs, 38 items of the properties representing a total gross Öoor area of approximately 23,265.03 sq.m. have obtained RETCs. According to the opinion given by the Company's PRC legal advisers, the Group has legally obtained the properties rights for the 38 items of the properties. The Group is entitled to occupy, use, transfer, lease, mortgage and otherwise dispose of the properties within the valid terms stipulated in the RETCs.

2. According to a BOC, 1 item of the properties representing a gross Öoor area of approximately 1,600 sq.m. has only obtained the BOC but not the relevant LURC. According to the opinion given by the Company's PRC legal advisers, there is no legal impediment for the Group to use this property unless this property would be auctioned or otherwise disposed of due to the defects of land title. Before obtaining the relevant LURC, the Group is not entitled to freely transfer, mortgage and dispose of the property.

3. For the remaining 4 items of the properties with a total gross Öoor area of approximately 5,294.11 sq.m., we have not been provided with the LURCs and BOCs and/or RETCs. According to the opinion given by the Company's PRC legal advisers, due to lack of the relevant LURCs and BOCs and/or RETCs, the PRC legal advisers cannot ascertain whether the Group has obtained the legal rights of the properties.

4. According to the opinion given by the Company's PRC legal advisers, as conÑrmed by the Group, it is able to Ñnd substitute properties to maintain its operation if moving out from these properties without LURCs and/or BOCs. The removal and defects of titles shall not have any material adverse eÅect on the whole operation and Ñnancial conditions and bring material litigation risk to the Group.

5. According to 3 tenancy agreements entered into between the Group and various independent third parties (the ""Lessees''), 3 items of the properties with a total lease area of approximately 2,133.04 sq.m. are leased to the Lessees with a total annual rent of RMB 1,109,817.60 for various terms with the latest expiry date on 1 June 2010.

6. According to the opinion given by the Company's PRC legal advisers, the BOCs and LURCs mentioned in aforesaid notes 1 and 2 are registered under the name of ""China CITIC Bank'', which is the former name of the Company. There is no material legal impediment for the Company to change the title registration.

7. In the valuation of the properties, we have attributed no commercial value to the 5 buildings and units with a total gross Öoor area of approximately 6,894.11 sq.m. (as mentioned in notes 2 and 3) which have not obtained valid title certiÑcates. However, for reference purposes, we are of the opinion that the capital value of these properties as at the date of valuation would be RMB79,576,000 assuming all relevant proper title certiÑcates have been obtained and the properties could be freely transferred.

V-13 APPENDIX V PROPERTY VALUATION

VALUATION CERTIFICATE

Capital value in existing state Property Description and tenure Particulars of occupancy as at 31 January 2007 I.F.5.06(8) RMB 7. Various The properties comprise The properties are 1,213,320,000 I.F.5.06(1) properties 38 commercial buildings and units, currently occupied by the located in 12 residential units and 4 ancillary Group for commercial, Jiangsu buildings and units mainly residential and ancillary Province completed between 1984 and 2006. purposes except for The PRC portions of the properties The properties have a total gross with a total lease area of Öoor area of approximately approximately 117,207.95 sq.m. and the 19,483.12 sq.m. which are approximate gross Öoor areas of the subject to 19 tenancy properties for each use are shown agreements as stated in as follows: notes 6 and 7.

Use Gross Floor Area (sq.m.) Commercial 113,378.25 Residential 1,952.94 Ancillary 1,876.76 Total 117,207.95

Notes:

1. According to 42 BOCs and 47 LURCs, 45 items of the properties representing a total gross Öoor area of approximately 114,620.46 sq.m. have obtained both the BOCs and LURCs. According to the opinion given by the Company's PRC legal advisers, the Group has legally obtained the building ownership rights and land use rights for the 45 items of the properties. The Group is entitled to occupy, use, transfer, lease, mortgage and otherwise dispose of the properties within the valid terms stipulated in the LURCs.

2. According to 5 BOCs and 16 administrative allocated LURCs, 5 items of the properties representing a total gross Öoor area of approximately 1,000.41 sq.m. have obtained both the BOCs and administrative allocated LURCs. According to the opinion given by the Company's PRC legal advisers, there is no legal impediment for the Group to use the property before obtaining the land use rights certiÑcates by granting. After obtaining the granted LURCs for the 5 items of the properties, the Group will be entitled to occupy, use, transfer, lease, mortgage and otherwise dispose of the property within the valid terms stipulated in the LURCs.

3. According to a BOC, 1 item of the properties representing a gross Öoor area of approximately 583.05 sq.m. has only obtained the BOC but not the relevant LURC. According to the opinion given by the Company's PRC legal advisers, there is no legal impediment for the Group to use this property unless this property would be auctioned or otherwise disposed of due to the defects of land title. Before obtaining the relevant LURC, the Group is not entitled to freely transfer, mortgage and dispose of the property.

4. For the remaining 3 items of the properties with a total gross Öoor area of approximately 1,004.03 sq.m., we have not been provided with the LURCs and BOCs. According to the opinion given by the Company's PRC legal advisers, due to lack of the relevant LURCs and BOCs, the PRC legal advisers cannot ascertain whether the Group has obtained the legal rights of the properties.

5. According to the opinion given by the Company's PRC legal advisers, as conÑrmed by the Group, it is able to Ñnd substitute properties to maintain its operation if moving out from these properties without LURCs and/or BOCs. The removal and defects of titles shall not have any material adverse eÅect on the whole operation and Ñnancial conditions and bring material litigation risk to the Group.

6. According to 18 tenancy agreements entered into between the Company and various independent third parties (the ""Lessees''), 8 items of the properties with a total lease area of approximately 19,243.12 sq.m. are leased to the Lessees with a total annual rent of RMB 7,957,048 for various terms with the latest expiry date on 31 December 2011.

7. According to a tenancy agreement entered into between the Company and a connected party (the ""Lessee''), 1 item of the properties with a lease area of approximately 240 sq.m. is leased to the Lessee with an annual rent of RMB 142,437 with the expiry date on 9 September 2007.

V-14 APPENDIX V PROPERTY VALUATION

8. According to the opinion given by the Company's PRC legal advisers, the BOCs and LURCs mentioned in aforesaid notes 1, 2 and 3 are registered under the name of ""China CITIC Bank'', which is the former name of the Company. There is no material legal impediment for the Company to change the title registration. 9. In the valuation the properties, we have attributed no commercial value to the 9 buildings and units with a total gross Öoor area of approximately 2,587.49 sq.m. (as mentioned in notes 2, 3 and 4) which have not obtained valid title certiÑcates. However, for reference purposes, we are of the opinion that the capital value of these properties as at the date of valuation would be RMB 19,892,000 assuming all relevant proper title certiÑcates have been obtained and these properties could be freely transferred.

V-15 APPENDIX V PROPERTY VALUATION

VALUATION CERTIFICATE

Capital value in existing state Property Description and tenure Particulars of occupancy as at 31 January 2007 I.F.5.06(8) RMB 8. Various The properties comprise The properties are 37,485,000 I.F.5.06(1) properties 9 commercial buildings and units, currently occupied by located in a residential unit and an ancillary the Group for Chongqing unit mainly completed between 1993 commercial, residential The PRC and 2000. and ancillary purposes. The properties have a total gross Öoor area of approximately 4,674.28 sq.m. and the approximate gross Öoor areas of the properties for each use are shown as follows:

Use Gross Floor Area (sq.m.) Commercial 4,229.16 Residential 180.64 Ancillary 264.48 Total 4,674.28

Notes: 1. According to 7 BOCs and 6 LURCs, 10 items of the properties representing a total gross Öoor area of approximately 4,409.8 sq.m. have obtained both the BOCs and LURCs. According to the opinion given by the Company's PRC legal advisers, the Group has legally obtained the building ownership rights and land use rights for the 10 items of the properties. The Group is entitled to occupy, use, transfer, lease, mortgage and otherwise dispose of the properties within the valid terms stipulated in the LURCs. 2. For the remaining an ancillary item of the properties with a gross Öoor area of approximately 264.48 sq.m., we have not been provided with the LURC and BOC. According to the opinion given by the Company's PRC legal advisers, due to lack of the relevant LURC and BOC, the PRC legal advisers cannot ascertain whether the Group has obtained the legal rights of the property. As conÑrmed by the Group, it is able to Ñnd substitute property to maintain its operation if moving out from this property without LURC and BOC. The removal and defects of titles shall not have any material adverse eÅect on the whole operation and Ñnancial conditions and bring material litigation risk to the Group. 3. According to the opinion given by the Company's PRC legal advisers, the BOCs and LURCs mentioned in aforesaid note 1 are registered under the name of ""China CITIC Bank'', which is the former name of the Company. There is no material legal impediment for the Company to change the title registration. 4. In the valuation of the properties, we have attributed no commercial value to the ancillary unit with a gross Öoor area of approximately 264.48 sq.m. which has not obtained valid title certiÑcates. However, for reference purposes, we are of the opinion that the capital value of this property as at the date of valuation would be RMB 12,695,000 assuming all relevant proper title certiÑcates have been obtained and the property could be freely transferred.

V-16 APPENDIX V PROPERTY VALUATION

VALUATION CERTIFICATE

Capital value in existing state Property Description and tenure Particulars of occupancy as at 31 January 2007 I.F.5.06(8) RMB 9. Various The properties comprise 2 The properties are 4,171,000 I.F.5.06(1) properties commercial units and 2 residential currently occupied by located in units mainly completed between the Group for Chengdu 1995 and 2000. commercial and Sichuan residential purposes. Province The properties have a total gross The PRC Öoor area of approximately 5,571.73 sq.m. and the approximate gross Öoor areas of the properties for each use are shown as follows:

Use Gross Floor Area (sq.m.) Commercial 4,605.14 Residential 966.59 Total 5,571.73

Notes: 1. According to 2 BOCs and 2 LURCs, 2 items of the properties representing a total gross Öoor area of approximately 966.59 sq.m. have obtained both the BOCs and LURCs. According to the opinion given by the Company's PRC legal advisers, the Group has legally obtained the building ownership rights and land use rights for the 2 items of the properties. The Group is entitled to occupy, use, transfer, lease, mortgage and otherwise dispose of the properties within the valid terms stipulated in the LURCs. 2. For the remaining 2 commercial items of the properties with a total gross Öoor area of approximately 4,605.14 sq.m., we have not been provided with the LURCs and BOCs. According to the opinion given by the Company's PRC legal advisers, due to lack of the relevant LURCs and BOCs, the PRC legal advisers cannot ascertain whether the Group has obtained the legal rights of the properties. As conÑrmed by the Group, it is able to Ñnd substitute properties to maintain its operation if moving out from these properties without LURCs and BOCs. The removal and defects of titles shall not have any material adverse eÅect on the whole operation and Ñnancial conditions and bring material litigation risk to the Group. 3. According to the opinion given by the Company's PRC legal advisers, the BOCs and LURCs mentioned in aforesaid note 1 are registered under the name of ""China CITIC Bank'', which is the former name of the Company. There is no material legal impediment for the Company to change the title registration. 4. In the valuation of the properties, we have attributed no commercial value to the 2 commercial units with a total gross Öoor area of approximately 4,605.14 sq.m. which have not obtained valid title certiÑcates. However, for reference purposes, we are of the opinion that the capital value of these properties as at the date of valuation would be RMB 55,634,000 assuming all relevant proper title certiÑcates have been obtained and these properties could be freely transferred.

V-17 APPENDIX V PROPERTY VALUATION

VALUATION CERTIFICATE

Capital value in existing state Property Description and tenure Particulars of occupancy as at 31 January 2007 I.F.5.06(8) RMB 10. Various The properties comprise a The properties are 90,589,000 I.F.5.06(1) properties commercial unit and 2 ancillary currently occupied by located in units mainly completed between the Group for Kunming 2002 and 2004. commercial and Yunnan ancillary purposes. Province The properties have a total gross The PRC Öoor area of approximately 6,837.3 sq.m. and the approximate gross Öoor areas of the properties for each use are shown as follows:

Use Gross Floor Area (sq.m.) Commercial 6,198.98 Ancillary 638.32 Total 6,837.30

Notes: 1. According to 8 BOCs and 36 LURCs, 2 items of the properties representing a total gross Öoor area of approximately 6,566.77 sq.m. has obtained both the BOCs and LURCs. According to the opinion given by the Company's PRC legal advisers, the Group has legally obtained the building ownership rights and land use rights for the 2 items of the properties. The Group is entitled to occupy, use, transfer, lease, mortgage and otherwise dispose of the properties within the valid term stipulated in the LURCs. 2. According to a BOC, 1 item of the properties representing a gross Öoor area of approximately 270.53 sq.m. has only obtained the BOC but not the relevant LURC. According to the opinion given by the Company's PRC legal advisers, there is no legal impediment for the Group to use this property unless this property would be auctioned or otherwise disposed of due to the defect of land title. Before obtaining the relevant LURC, the Group is not entitled to freely transfer, mortgage and dispose of the property. As conÑrmed by the Group, it is able to Ñnd substitute property to maintain its operation if moving out from this property without LURC. The removal and defect of title shall not have any material adverse eÅect on the whole operation and Ñnancial conditions and bring material litigation risk to the Group. 3. According to the opinion given by the Company's PRC legal advisers, the BOCs and LURCs mentioned in aforesaid notes 1 and 2 are registered under the name of ""China CITIC Bank'', which is the former name of the Company. There is no material legal impediment for the Company to change the title registration. 4. In the valuation of the properties, we have attributed no commercial value to the ancillary unit with a gross Öoor area of approximately 270.53 sq.m. which has not obtained valid title certiÑcate. However, for reference purposes, we are of the opinion that the capital value of this property as at the date of valuation would be RMB 3,463,000 assuming the relevant proper title certiÑcate has been obtained and this property could be freely transferred.

V-18 APPENDIX V PROPERTY VALUATION

VALUATION CERTIFICATE

Capital value Particulars of in existing state Property Description and tenure occupancy as at 31 January 2007 I.F.5.06(8) RMB I.F.5.06(1) 11. Various The properties comprise The properties are 50,113,000 properties 3 commercial units and a residential currently occupied located in unit mainly completed between 1994 by the Group for Fuzhou and 2003. commercial and Fujian residential The properties have a total gross Öoor Province purposes. area of approximately 2,643.7 sq.m. The PRC and the approximate gross Öoor areas of the properties for each use are shown as follows:

Use Gross Floor Area (sq.m.) Commercial 2,553.31 Residential 90.39 Total 2,643.70

Notes: 1. According to 4 BOCs and 4 LURCs, 4 items of the properties representing a total gross Öoor area of approximately 2,643.7 sq.m. have obtained both the BOCs and LURCs. According to the opinion given by the Company's PRC legal advisers, the Group has legally obtained the building ownership rights and land use rights for the 4 items of the properties. The Group is entitled to occupy, use, transfer, lease, mortgage and otherwise dispose of the property within the valid terms stipulated in the LURCs. 2. According to the opinion given by the Company's PRC legal advisers, the BOCs and LURCs mentioned in aforesaid note 1 are registered under the name of ""China CITIC Bank'', which is the former name of the Company. There is no material legal impediment for the Company to change the title registration.

V-19 APPENDIX V PROPERTY VALUATION

VALUATION CERTIFICATE

Capital value Particulars of in existing state Property Description and tenure occupancy as at 31 January 2007 I.F.5.06(8) RMB 12. 2 residential The property comprises 2 The property is 2,177,000 I.F.5.06(1) units located residential units completed in currently occupied by in Hefei 1997. the Group for Anhui residential purpose. The property has a total gross Öoor Province area of approximately 537.65 sq.m. The PRC

Notes: 1. According to 2 BOCs and 2 LURCs, 2 items of the property representing a total gross Öoor area of approximately 537.65 sq.m. have obtained both the BOCs and LURCs. According to the opinion given by the Company's PRC legal advisers, the Group has legally obtained the building ownership rights and land use rights for the 2 items of the property. The Group is entitled to occupy, use, transfer, lease, mortgage and otherwise dispose of the property within the valid terms stipulated in the LURCs. 2. According to the opinion given by the Company's PRC legal advisers, the BOCs and LURCs mentioned in aforesaid note 1 are registered under the name of ""China CITIC Bank'', which is the former name of the Company. There is no material legal impediment for the Company to change the title registration.

V-20 APPENDIX V PROPERTY VALUATION

VALUATION CERTIFICATE

Capital value in existing state Property Description and tenure Particulars of occupancy as at 31 January 2007 I.F.5.06(8) RMB 13. Various The properties comprise The properties are 38,259,000 I.F.5.06(1) properties 4 commercial units and currently occupied by located in 2 residential units mainly the Group for Tianjin completed between 1998 and 2004. commercial and The PRC residential purposes. The properties have a total gross Öoor area of approximately 5,989.32 sq.m. and the approximate gross Öoor areas of the properties for each use are shown as follows:

Use Gross Floor Area (sq.m.) Commercial 4,559.92 Residential 1,429.40 Total 5,989.32

Notes:

1. According to 2 BOCs and 2 LURCs, 2 items of the properties representing a total gross Öoor area of approximately 2,518.71 sq.m. have obtained both the BOCs and LURCs. According to the opinion given by the Company's PRC legal advisers, the Group has legally obtained the building ownership rights and land use rights for the 2 items of the properties. The Group is entitled to occupy, use, transfer, lease, mortgage and otherwise dispose of the properties within the valid terms stipulated in the LURCs.

2. According to 6 BOCs and 6 administrative allocated LURCs, 1 item of the properties representing a gross Öoor area of approximately 1,243.15 sq.m. has obtained both the BOCs and administrative allocated LURCs. According to the opinion given by the Company's PRC legal advisers, there is no legal impediment for the Group to use the item of the properties before obtaining the land use rights certiÑcates by granting. After obtaining the granted LURCs for the item of the properties, the Group will be entitled to occupy, use, transfer, lease, mortgage and otherwise dispose of the property within the valid term stipulated in the Land Use Rights CertiÑcate.

3. According to 2 BOCs, 2 items of the properties representing a total gross Öoor area of approximately 1,478.52 sq.m. have only obtained the BOCs but not the relevant LURCs. According to the opinion given by the Company's PRC legal advisers, there is no legal impediment for the Group to use the properties unless the properties would be auctioned or otherwise disposed of due to the defects of land titles. Before obtaining the relevant LURCs, the Group is not entitled to freely transfer, mortgage and dispose of the properties.

4. For the remaining a commercial item of the properties with a gross Öoor area of approximately 748.94 sq.m., we have not been provided with the LURC and BOC. According to the opinion given by the Company's PRC legal advisers, due to lack of the relevant LURC and BOC, the PRC legal advisers cannot ascertain whether the Group has obtained the legal rights of the property.

5. According to the opinion given by the Company's PRC legal advisers, as conÑrmed by the Group, it is able to Ñnd substitute properties to maintain its operation if moving out from these properties without LURCs and/or BOCs. The removal and defects of titles shall not have any material adverse eÅect on the whole operation and Ñnancial conditions and bring material litigation risk to the Group.

6. According to the opinion given by the Company's PRC legal advisers, the BOCs and LURCs mentioned in aforesaid notes 1, 2 and 3 are registered under the name of ""China CITIC Bank'', which is the former name of the Company. There is no material legal impediment for the Company to change the title registration.

7. In the valuation of the properties, we have attributed no commercial value to the 4 units with a total gross Öoor area of approximately 3,470.61 sq.m. (as mentioned in notes 2, 3 and 4) which have not obtained valid title certiÑcates. However, for reference purposes, we are of the opinion that the capital value of these properties as at the date of valuation would be RMB 31,244,000 assuming all relevant proper title certiÑcates have been obtained and these properties could be freely transferred.

V-21 APPENDIX V PROPERTY VALUATION

VALUATION CERTIFICATE

Capital value in existing state Property Description and tenure Particulars of occupancy as at 31 January 2007 I.F.5.06(8) RMB

14. Various The properties comprise The properties are 196,252,000 I.F.5.06(1) properties a commercial building and an currently occupied by the located in ancillary building mainly Group for commercial Wuhan completed in 2001. and ancillary purposes, Hubei except for a portion of Province The properties have a total gross the commercial building The PRC Öoor area of approximately with a lease area of 16,127.97 sq.m. and the approximately approximate gross Öoor areas of 4,527.68 sq.m. which is the property for each use are subject to 7 tenancy shown as follows: agreements as stated in notes 2 and 3. Use Gross Floor Area (sq.m.) Commercial 15,488.20 Ancillary 639.77 Total 16,127.97

Notes: 1. According to a BOC and a LURC, 2 items of the properties representing a total gross Öoor area of approximately 16,127.97 sq.m. have obtained both the BOC and LURC. According to the opinion given by the Company's PRC legal advisers, the Group has legally obtained the building ownership rights and land use rights for the 2 items of the properties. The Group is entitled to occupy, use, transfer, lease, mortgage and otherwise dispose of the property within the valid terms stipulated in the LURCs. 2. According to 6 tenancy agreements entered into between the Group and various independent third parties (the ""Lessees''), 1 item of the properties with a gross Öoor area of approximately 3,327.68 sq.m. is leased to the Lessees with a total annual rent of RMB 2,176,330.32 for various terms with the latest expiry date on 31 January 2008. 3. According to a tenancy agreement entered into between the Group and a connected party (the ""Lessee''), 1 item of the properties with a lease area of approximately 1,200 sq.m. is leased to the Lessee with an annual rent of RMB 600,000 with an expiry date on 20 July 2007. 4. According to the opinion given by the Company's PRC legal advisers, the BOCs and LURCs mentioned in aforesaid note 1 are registered under the name of ""China CITIC Bank'', which is the former name of the Company. There is no material legal impediment for the Company to change the title registration.

V-22 APPENDIX V PROPERTY VALUATION

VALUATION CERTIFICATE

Capital value in existing state Property Description and tenure Particulars of occupancy as at 31 January 2007 I.F.5.06(8) RMB

15. Various The properties comprise The properties are 55,910,000 I.F.5.06(1) properties 2 commercial units and currently occupied by located in a residential unit mainly completed the Group for Zhengzhou between 1998 and 2002. commercial and Henan residential purposes. Province The properties have a total gross The PRC Öoor area of approximately 7,448.13 sq.m. and the approximate gross Öoor areas of the properties for each use are shown as follows:

Use Gross Floor Area (sq.m.) Commercial 7,118.95 Residential 329.18 Total 7,448.13

Notes: 1. According to a BOC and a LURC, 1 item of the properties representing a gross Öoor area of approximately 6,077.19 sq.m. has obtained both the BOC and LURC. According to the opinion given by the Company's PRC legal advisers, the Group has legally obtained the building ownership rights and land use rights for the item of the properties. The Group is entitled to occupy, use, transfer, lease, mortgage and otherwise dispose of the property within the valid term stipulated in the LURC. 2. According to 2 BOCs, 1 item of the properties representing a gross Öoor area of approximately 329.18 sq.m. has only obtained the BOCs but not the relevant LURCs. According to the opinion given by the Company's PRC legal advisers, there is no legal impediment for the Group to use this property unless this property would be auctioned or otherwise disposed of due to the defects of land title. Before obtaining the relevant LURCs, the Group is not entitled to freely transfer, mortgage and dispose of the property. 3. For the remaining 1 item of the properties with a gross Öoor area of approximately 1,041.76 sq.m., we have not been provided with the LURC and BOC. According to the opinion given by the Company's PRC legal advisers, due to lack of the relevant building LURC and BOC, the PRC legal advisers cannot ascertain whether the Group has obtained the legal rights of the property. 4. According to the opinion given by the Company's PRC legal advisers, as conÑrmed by the Group, it is able to Ñnd substitute properties to maintain its operation if moving out from these properties without LURCs and/or BOCs. The removal and defects of titles shall not have any material adverse eÅect on the whole operation and Ñnancial conditions and bring material litigation risk to the Group. 5. According to the opinion given by the Company's PRC legal advisers, the BOCs and LURCs mentioned in aforesaid notes 1 and 2 are registered under the name of ""China CITIC Bank'', which is the former name of the Company. There is no material legal impediment for the Company to change the title registration. 6. In the valuation of the properties, we have attributed no commercial value to the 2 units with a total gross Öoor area of approximately 1,370.94 sq.m. (as mentioned in notes 2 and 3) which have not obtained valid title certiÑcates. However, for reference purposes, we are of the opinion that the capital value of these properties as at the date of valuation would be RMB 13,867,000 assuming all relevant proper title certiÑcates have been obtained and these properties could be freely transferred.

V-23 APPENDIX V PROPERTY VALUATION

VALUATION CERTIFICATE

Capital value Particulars of in existing state I.F.5.06(8) Property Description and tenure occupancy as at 31 January 2007 RMB 16. A property The property comprises The property is No commercial value I.F.5.06(1) located in 7 commercial units on various Öoors currently occupied Xi'an of a 29-storey commercial building by the Company Shaanxi completed in about 2001. for commercial Province purpose. The property has a total gross Öoor The PRC area of approximately 6,542.61 sq.m.

Notes: 1. According to 7 BOCs, the property representing a total gross Öoor area of approximately 6,542.61 sq.m. has only obtained the BOCs but not the relevant LURCs. According to the opinion given by the Company's PRC legal advisers, there is no legal impediment for the Group to use the property unless the property would be auctioned or otherwise disposed of due to the defects of land title. Before obtaining the relevant LURCs, the Group is not entitled to freely transfer, mortgage and dispose of the property. As conÑrmed by the Group, it is able to Ñnd substitute property to maintain its operation if moving out from this property without LURCs. The removal and defects of titles shall not have any material adverse eÅect on the whole operation and Ñnancial conditions and bring material litigation risk to the Group. 2. According to the opinion given by the Company's PRC legal advisers, the BOCs mentioned in aforesaid note 1 are registered under the name of ""China CITIC Bank'', which is the former name of the Company. There is no material legal impediment for the Company to change the title registration. 3. In the valuation of the property, we have attributed no commercial value to the property which have not obtained valid title certiÑcates. However, for reference purposes, we are of the opinion that the capital value of the property as at the date of valuation would be RMB 64,118,000 assuming all relevant proper title certiÑcates have been obtained and the property could be freely transferred.

V-24 APPENDIX V PROPERTY VALUATION

VALUATION CERTIFICATE GROUP II Ì PROPERTY INTEREST OWNED AND OCCUPIED BY THE GROUP IN HONG KONG

Capital value in Particulars of existing state I.F.5.06(8) Property Description and tenure occupancy as at 31 January 2007 RMB 17. Unit 2106 on The property comprises an oÇce unit The property is 26,300,000 I.F.5.06(1) 21st Floor, on the 21st Öoor of a 40-storey rented to an intra- 95% interest Tower Two, commercial building erected over 2 group subsidiary attributable to the Lippo Centre, level of basement completed in about for a term of Group: 24,985,000 No. 89 1988. a year Queensway, commencing from The property has a gross Öoor area of Hong Kong 1 January 2007 approximately 3,141 sq.ft.(saleable and expiring on 196/1000th area of approximately 2,290 sq.ft.) 31 December of The property is held under 2007 at an annual 1289/102750th Conditions of Sale No. UB11720 for rent of equal and a term of 75 years commencing from HK$1,000,000 in undivided 15 February 1984 renewable for a which Dragonland shares of and further term of 75 years. International in Inland Lot Development No. 8615 Limited is the Landlord while China Investment and Finance Limited is the Tenant. The property is currently occupied by the Group for oÇce purpose.

Notes: 1. The registered owner of the property is Dragonland International Development Limited, a wholly owned subsidiary of China Investment and Finance Limited, which is a 95% subsidiary of the Company, vide Memorial No. UB6708808 dated 15 July 1996. 2. The property is subject to a Deed of Mutual Covenant vide Memorial No. UB3824584 dated 31 August 1988. 3. The property is subject to a Supplemental Deed of Mutual Covenant vide Memorial No. UB4877936 dated 27 June 1991. 4. The property is subject to a Sub-Deed of Mutual Covenant vide Memorial No. UB5857419 dated 18 November 1993.

V-25 APPENDIX V PROPERTY VALUATION

VALUATION CERTIFICATE GROUP III Ì PROPERTY INTERESTS CONTRACTED TO BE ACQUIRED BY THE GROUP IN THE PRC

Capital value Particulars of in existing state I.F.5.06(8) Property Description and tenure occupancy as at 31 January 2007 RMB 18. Various The properties comprise The properties are No commercial value I.F.5.06(1) properties 5 commercial units under currently under located in construction as at the date of construction. The PRC valuation. The properties are scheduled to be completed in 2007. The planned gross Öoor area of the building upon completion will be approximately 22,159.17 sq.m.

Notes: 1. According to 5 Commodity Property Sales and Purchase Agreements (the ""Sales Agreements'') entered into between the Company and various real estate developers, the Company has purchased 5 commercial units with a total gross Öoor area of approximately 22,159.17 sq.m. at a total consideration of approximately RMB 229,175,952. 2. As at the date of valuation, the properties have not been assigned to the Company and thus the titles of the properties have not been vested in the Company. Therefore we have attributed no commercial value to these properties. For reference purposes, we are of the opinion that the capital value of the properties as at the date of valuation would be RMB 231,607,000, on the condition that the properties are completed, the relevant title certiÑcates have been obtained by the Company and the Company is entitled to freely transfer, lease, mortgage or otherwise dispose of the properties. 3. As informed by the Company, a sum of approximately RMB 191,490,914 has been paid by the Company to purchase the properties. 4. According to the opinion given by the Company's PRC legal advisers, there is no material impediment for the Group to obtain the ownership rights of the properties after the parties of the Sales Agreements have performed relevant obligation according to the Sales Agreements.

V-26 APPENDIX V PROPERTY VALUATION

VALUATION CERTIFICATE GROUP IV Ì PROPERTY INTERESTS RENTED AND OCCUPIED BY THE GROUP IN THE PRC

Capital value Particulars of in existing state I.F.5.06(8) Property Description and tenure occupancy as at 31 January 2007 RMB 19. 754 leased The properties comprise The properties No commercial value I.F.5.06(1) properties 723 commercial buildings and units, are currently located in 31 residential and other ancillary occupied by the The PRC buildings and units in various cities in Group for the PRC completed between 1906 and commercial, 2006. residential and ancillary The properties have an aggregate lease purposes. area of approximately 405,403.46 sq.m. Details of the lease areas of the properties are summarized as follows:

Use Lease Area (sq.m.) Commercial 399,800.24 Residential and Ancillary 5,603.22 Total 405,403.46

Notes: According to the opinion provided by the Company's PRC legal advisers: 1. The Group has leased 754 properties with a total lease area of approximately 405,403.46 sq.m. in the PRC. 2. For 436 properties out of the 754 leased properties with a total lease area of approximately 260,691.96 sq.m., the respective lessors have provided to the Group with the relevant LURCs, BOCs, RETCs or property owner's consent to sublease such properties and the lease agreements are legal and valid. 3. For the remaining 318 properties with a total lease area of approximately 144,711.5 sq.m., the Group has not been provided with the relevant valid title certiÑcates or property owner's consent to sublease. Among them, the lessors of 218 properties with a total lease area of approximately 95,684.67 sq.m. have provided to the Group with conÑrmation letters which undertake to compensate for all the loss of the Group arising from any defects titles of the properties. The lessors of 100 properties with a total lease area of approximately 49,026.83 sq.m. have not provided to the Group with such conÑrmation letters. The lessors have no right to lease the properties without the building ownership rights of the properties or properties owner's consent to sublease. There may be the risk that the Group could not occupy the properties legally in case of any dissent from any third parties. However, the Group has the right to claim any loss from the lessors based on the tenancy agreements. The defect of titles shall not have material adverse eÅect on the operation and bring material litigation risk of the Group. 4. Among the 754 properties leased by the Group, 6 properties with a total lease area of approximately 10,296.48 sq.m. are leased by the Group from various connected parties. 5. According to the opinion of the Company's PRC Legal Advisers, among the 754 properties leased by the Group, there are lease registrations for 211 properties with a total lease area of approximately 141,662.01 sq.m. The lack of lease registration would not aÅect the validity of relevant lease agreements. However, the Group may be penalized due to without lease registrations. The Group has conÑrmed that the possible penalty shall not have any adverse material eÅect on the whole operation and Ñnancial conditions of the Group. In addition, the Group has also conÑrmed that it is able to Ñnd substitute properties to maintain its operation and moving out to legal operation premises shall not have any material adverse eÅect on the whole operation and Ñnancial conditions of the Group.

V-27 APPENDIX VI TAXATION AND FOREIGN EXCHANGE

Taxation LR 19A.42(60) The taxation of income and capital gains of holders of H Shares is subject to the laws and practices of China and of jurisdictions in which holders of H Shares are resident or otherwise subject to tax. The following summary of certain relevant taxation provisions is based on current law and practice, is subject to change and does not constitute legal or tax advice. The discussion does not deal with all possible tax consequences relating to an investment in the H Shares. Accordingly, you should consult your own tax adviser regarding the tax consequences of an investment in the H Shares. The discussion is based upon laws and relevant interpretations in eÅect as of the date of this prospectus, all of which are subject to change.

PRC The following is a summary of certain Chinese tax provisions relating to the ownership and disposition of H Shares purchased in connection with the Global OÅering and held by the investors as capital assets. This summary does not purport to address all material tax consequences of the ownership of H Shares, and does not take into account the speciÑc circumstances of any particular investors. This summary is based on the tax laws of China as in eÅect on the date of this prospectus, all of which are subject to change (or changes in interpretation), possibly with retroactive eÅect. This discussion does not address any aspects of Chinese taxation other than income taxation, capital taxation, stamp taxation and estate taxation. Prospective investors are urged to consult their tax advisors regarding Chinese, Hong Kong and other tax consequences of owning and disposing of H Shares.

Taxation of dividends Individual investors. According to the Provisional Regulations of China Concerning Questions of Taxation on Enterprises Experimenting with the Share System, or the Provisional Regulations, and the Individual Income Tax Law of China, as amended on October 31, 1993, August 30, 1999 and October 27, 2005 and eÅective on January 1, 2006, dividends paid by Chinese companies are ordinarily subject to a Chinese withholding tax levied at a Öat rate of 20%. For a foreign individual who is not a resident of China, the receipt of dividends from a company in China is normally subject to a withholding tax of 20% unless reduced by an applicable tax treaty. However, the Chinese Administration of Taxation, or the SAT, the Chinese central government tax authority which succeeded the State Tax Bureau, issued, on July 21, 1993, a Notice of the Chinese Administration of Taxation Concerning the Taxation of Gains on Transfer and Dividends from Share (Equities) Received by Foreign Investment Enterprises, Foreign Enterprises and Foreign Individuals, or the Tax Notice, which states that dividends paid by a Chinese company to individuals with respect to shares listed on an overseas stock exchange, or overseas shares, such as H Shares, are not subject, to Chinese withholding tax. The relevant tax authority has not collected withholding tax on dividend payments on overseas shares, including H Shares. The Amendments to the Individual Income Tax Law of China, or the Amendments, were promulgated on October 31, 1993 and became eÅective on January 1, 1994. The Amendments state that they shall supersede the provisions of any contradictory prior administrative regulations concerning individual income tax. Under the requirements of the Amendments and the amended Individual Income Tax Law, foreign individuals are subject to withholding tax on dividends paid by a Chinese company at a rate of 20% unless speciÑcally exempted by the tax authority of the State Council. However, in a letter dated July 26, 1994 to the former State Commission for Restructuring the Economic System, the former State Council Securities Commission and the China Securities Regulatory Commission, the SAT reiterated the temporary tax exemption stated in the Tax Notice for dividends received from a Chinese company listed overseas. In the event that this letter is withdrawn, a 20% tax may be withheld on dividends in accordance with the Provisional Regulations, the Amendments and the Individual Income Tax Law. The withholding tax may be reduced under an applicable double taxation treaty. To date, the relevant tax authorities have not collected withholding tax from dividend payments on the shares exempted under the Tax Notice. Enterprises. According to the Income Tax Law of China Concerning Foreign Investment Enterprises and Foreign Enterprises (Repealed on 1 January 2008) and the Enterprise Income Tax Law of the People's

VI-1 APPENDIX VI TAXATION AND FOREIGN EXCHANGE

Republic of China (Promulgated on 16 March 2007, eÅective as of 1 January 2008), dividends paid by Chinese companies to enterprises are ordinarily subject to a Chinese withholding tax levied at a Öat rate of 20%. However, according to the Tax Notice, a foreign enterprise with no permanent establishment in China receiving dividends paid with respect to a Chinese company's Overseas Shares will temporarily not be subject to the 20% withholding tax. If the withholding tax becomes applicable in the future, the rate could be reduced under an applicable double-taxation treaty.

Tax treaties. Investors who do not reside in China and reside in countries that have entered into treaties for the avoidance of double-taxation with China may be entitled to a reduction of the withholding tax imposed on the payment of dividends to investors of the Company who do not reside in China. China currently has treaties for the avoidance of double-taxation with a number of other countries, which include Australia, Canada, France, Germany, Japan, Malaysia, the Netherlands, Singapore, the United Kingdom and the United States.

Taxation of capital gains

The Tax Notice provides that gains realized by enterprises that are holders of Overseas Shares would, temporarily, not be subject to capital gains taxes. With respect to individual holders of H Shares, the Provisions for Implementation of Individual Income Tax Law of China, or the Provisions, issued on January 28, 1994, stipulated that gains realized on the sale of equity shares would be subject to income tax at a rate of 20% on the gains, and empowered the Ministry of Finance to draft detailed tax rules on the mechanism for collecting such tax. However, no income tax on gains realized on the sale of equity shares has been collected. Gains on the sale of shares by individuals were temporarily exempted from individual income tax pursuant to notices issued by the SAT dated February 9, 1996 and March 30, 1998. In the event this temporary exemption is withdrawn or ceases to be eÅective, individual holders of H Shares may be subject to capital gains tax at the rate of 20% unless such tax is reduced or eliminated by an applicable double taxation treaty.

On November 18, 2000, the State Council issued a notice entitled ""State Council Notice on the Income Tax Reduction for Interest and Other Income that Foreign Enterprises Derive in China,'' or the Tax Reduction Notice. Under the Tax Reduction Notice, beginning January 1, 2001, enterprise income tax at a reduced 10% rate will apply to interest, rental, license fees and other income obtained in China by foreign enterprises without agencies or establishment in China, or by foreign enterprises without any substantive relationship with their agency or establishment in China. Therefore, if the exemption as described in the preceding paragraph does not apply or is not renewed, and the Tax Reduction Notice is found not to apply, a foreign enterprise shareholder may be subject to a 20% tax on capital gains, unless reduced by an applicable double-taxation treaty.

Additional Chinese tax considerations

Chinese stamp duty. Chinese stamp duty imposed on the transfer of shares of Chinese publicly traded companies under the Provisional Regulations should not apply to the acquisition and disposal by non-Chinese investors of H Shares outside of China by virtue of the Provisional Regulations of China Concerning Stamp Duty, which became eÅective on October 1, 1988 and which provide that Chinese stamp duty is imposed only on documents executed or received within China that are legally binding in China and are protected under Chinese law.

Estate tax. No liability for estate tax under Chinese law will arise from non-Chinese nationals holding H Shares.

Hong Kong

Tax on dividends

Under current practice, no tax is payable in Hong Kong in respect of dividends paid by us.

VI-2 APPENDIX VI TAXATION AND FOREIGN EXCHANGE

Tax on gains from sale No tax is imposed in Hong Kong in respect of capital gains. However, trading gains from the sale of property by persons carrying on a trade, profession or business in Hong Kong where the gains are derived from or arise in Hong Kong from the trade, profession or business will be chargeable to Hong Kong proÑts tax, which is currently imposed at the rate of 17.5% on corporations and at a maximum rate of 16% on individuals. Certain categories of taxpayers are likely to be regarded as deriving trading gains rather than capital gains (for example, Ñnancial institutions, insurance companies and securities dealers) unless these taxpayers could prove that the investment securities are held for long-term investment purpose. Trading gains from sales of H Shares eÅected on the Stock Exchange will be considered to be derived from or arise in Hong Kong. Liability for Hong Kong proÑts tax would thus arise in respect of trading gains from sales of H Shares eÅected on the Stock Exchange realized by persons carrying on a business of trading or dealing in securities in Hong Kong.

Stamp duty Hong Kong stamp duty, currently charged at the ad valorem rate of 0.1% on the higher of the consideration for or the market value of the H Shares, will be payable by the purchaser on every purchase and by the seller on every sale of H Shares (in other words, a total of 0.2% is currently payable on a typical sale and purchase transaction involving H Shares). In addition, a Ñxed duty of HK$5.00 is currently payable on any instrument of transfer of H Shares. Where one of the parties is resident outside Hong Kong and does not pay the ad valorem duty due by it, the duty not paid will be assessed on the instrument of transfer (if any) and will be payable by the transferee. If stamp duty is not paid on or before the due date, a penalty of up to ten times the duty payable may be imposed.

FOREIGN EXCHANGE CONTROLS App 1A 31 The lawful currency of the PRC is the Renminbi, which is subject to foreign exchange controls and is not freely convertible into foreign exchange. The SAFE, under the authority of the PBOC, is empowered with the functions of administering all matters relating to foreign exchange, including the enforcement of foreign exchange control regulations. In 1994, the conditional convertibility of Renminbi in current account items was implemented and the oÇcial Renminbi exchange rate and the market rate for Renminbi was uniÑed. On January 29, 1996, the State Council promulgated new Regulations of the People's Republic of China for the Control of Foreign Exchange (""Control of Foreign Exchange Regulations'') which became eÅective from April 1, 1996. The Control of Foreign Exchange Regulations classify all international payments and transfers into current account items and capital account items. Current account items are not subject to SAFE approval while capital account items are. The Control of Foreign Exchange Regulations were subsequently amended on January 14, 1997, to aÇrmatively state that the State shall not restrict international current account payments and transfers. On June 20, 1996, the PBOC promulgated the Regulations for Administration of Settlement, Sale and Payment of Foreign Exchange (the ""Settlement Regulations'') which became eÅective on July 1, 1996. The Settlement Regulations abolish the remaining restrictions on convertibility of foreign exchange in respect of current account items while retaining the existing restrictions on foreign exchange transactions in respect of capital account items. On January 1, 1994, the former dual exchange rate system for Renminbi was abolished and replaced by a controlled Öoating exchange rate system, which was determined by demand and supply. The PBOC set and published daily the Renminbi-US dollar base exchange rate. This exchange rate was determined with reference to the transaction price for Renminbi-US dollar in the inter-bank foreign exchange market on the previous day. The PBOC also, with reference to exchange rates in the international foreign exchange market, announced the exchange rates of Renminbi against other major currencies. In foreign exchange transactions, designated foreign exchange banks could, within a speciÑed range, freely determine the applicable exchange rate in accordance with the exchange rate announced by the PBOC.

VI-3 APPENDIX VI TAXATION AND FOREIGN EXCHANGE

The PBOC recently announced that, beginning from July 21, 2005, China will implement a regulated and managed Öoating exchange rate system based on market supply and demand and by reference to a basket of currencies. The Renminbi exchange rate is no longer pegged to the US dollar. The PBOC will announce the closing price of a foreign currency such as the US dollar traded against the Renminbi in the inter-bank foreign exchange market after the closing of the market on each working day, setting the central parity for trading of the Renminbi on the following working day. All foreign exchange income (except such amount of foreign exchange income which is permitted to be retained and deposited into foreign exchange accounts at the designated foreign exchange banks) generated from current account transactions of Chinese enterprises (including foreign-invested enterprises) should be sold to designated foreign exchange banks. Foreign exchange income from loans issued by organizations outside the territory or from the issuance of bonds and shares (for example foreign exchange income received by us from the sale of shares overseas) is not required to be sold to designated foreign exchange banks, but may be deposited into foreign exchange accounts at the designated foreign exchange banks. Chinese enterprises (including foreign-invested enterprises) which require foreign exchange for transactions relating to current account items, may, without the approval of SAFE, eÅect payment from their foreign exchange accounts at the designated foreign exchange banks, on the strength of valid receipts and proof. Foreign-invested enterprises which need foreign exchange for the distribution of proÑts to their shareholders, and Chinese enterprises which in accordance with regulations are required to pay dividends to shareholders in foreign exchange (like us), may on the strength of board resolutions on the distribution of proÑts, eÅect payment from their foreign exchange accounts or convert and pay at the designated foreign exchange banks. Convertibility of foreign exchange in respect of capital account items, including direct investments and capital contributions, is still subject to restrictions, and prior approval from SAFE must be obtained. Dividends to holders of H Shares are declared in Renminbi but must be paid in Hong Kong dollars.

VI-4 APPENDIX VII SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

This appendix sets out summaries of certain aspects of PRC laws and regulations, which are LR 19.08(3) relevant to our operations and business. Laws and regulations relating to taxation in the PRC are LR 19.10(3) discussed separately in Appendix VI of this prospectus. This appendix also contains a summary of LR 19A.27(3) LR 19A.42(57) certain Hong Kong legal and regulatory provisions, including summaries of certain material diÅerences between PRC and Hong Kong company law, certain requirements of the Hong Kong Listing Rules and additional provisions required by the Hong Kong Stock Exchange for inclusion in the articles of association of PRC issuers.

THE PRC COMPANY LAW Set out below is a summary of the major provisions of the PRC Company Law, the Special Regulations of the State Council on Overseas OÅering and Listing of Shares by Joint Stock Limited Companies, or the Special Regulations, and the Mandatory Provisions for Companies Listing Overseas, or the Mandatory Provisions. References to a ""company'' are to a joint stock limited company established under the PRC Company Law with overseas listed foreign invested shares.

General A ""joint stock limited company'' is a corporate legal person established under the PRC Company Law, whose registered capital is divided into shares of equal par value. The liability of its shareholders is limited to the extent of the shares they subscribe for, and the liability of the company is limited to the full amount of all the assets it owns.

Establishment A company may be established by promotion or public subscription. Companies established by promotion are companies the entire registered capital of which is subscribed for by the promoters. Where companies are incorporated by public subscription, the promoters shall subscribe for a portion of their shares to be issued and the remainder of their shares shall be oÅered to the public. A company may be established by a minimum of 2 and a maximum of 200 promoters, but at least half of the promoters must have a domicile in the territory of the PRC. According to the Special Regulations, state- owned enterprises or enterprises with the majority of their assets owned by the PRC Government can be restructured in accordance with the relevant regulations to become joint stock limited companies which may issue shares to overseas investors. While the registered capital of a company established by promotion is the amount of its total share capital as subscribed for by all the promoters and registered with the company registration authority, the registered capital of a company incorporated by public subscription is the amount of its total paid in capital as registered with the company registration authority. The minimum registered capital of a company is RMB 5 million.

Share Capital The shareholders may make capital contributions in cash, in hind, or intellectual property right, land use right or other non-cash properties which could be appraised in cash based on their appraised value and be legally transferred. The amount of investment made in cash by all the shareholders may not be less than 30% of the registered capital of the company. If a capital contribution is made other than in cash, a valuation and veriÑcation of the property contributed must be carried out and such amount converted into shares. A company may issue registered or bearer share certiÑcates. However, shares issued to promoters and PRC legal persons shall be in the form of registered share certiÑcates. The Special Regulations and the

VII-1 APPENDIX VII SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

Mandatory Provisions provide that shares issued to foreign investors and listed overseas be issued in registered form and shall be denominated in Renminbi and subscribed for in foreign currency.

The Special Regulations and the Mandatory Provisions provide that shares issued to foreign investors and investors from the territories of Hong Kong, Macau and Taiwan and listed overseas are known as overseas listed foreign invested shares, and those shares issued to investors within the PRC other than the territories speciÑed above are known as domestic invested shares.

A company may oÅer its shares to the public overseas with approval of the securities administration department of the State Council. Under the Special Regulations, upon approval of the CSRC, a company may agree, in the underwriting agreement in respect of an issue of overseas listed foreign invested shares, to retain not more than 15% of the aggregate number of overseas listed foreign invested shares proposed to be issued after accounting for the number of underwritten shares.

The share oÅering price may be equal to or greater than, but may not be less than, the par value of the company's shares.

Increase in Capital

Under the PRC Company Law, an increase in the capital of a company by means of an issue of new shares must be approved by the shareholders in a shareholders' general meeting. And under the PRC Securities Law, the company must meet the following conditions:

¬ has a sound and well-functioned organization;

¬ the company is able to make proÑt consecutively and is in good Ñnancial and accounting conditions;

¬ there has been no false reporting in the company's Ñnancial and accounting documents and no material violation of law during the last three years; and

¬ any other conditions prescribed by securities regulatory authorities approved by State Council.

Public oÅers of new shares require for the approval by the securities regulatory department of the State Council after the shareholders have passed a resolution to issue new shares at the shareholder's general meeting.

Reduction of Share Capital

Subject to the minimum registered capital requirements, a company may reduce its share capital in accordance with the following procedures prescribed by the PRC Company Law:

¬ the company shall prepare a balance sheet and a list of its assets;

¬ the reduction of registered capital must be approved by shareholders at a shareholders' general meeting;

¬ the company shall inform its creditors of the capital reduction within 10 days and publish a public announcement of the reduction in a newspaper within 30 days after the resolution approving the reduction has been passed;

¬ the creditors of the company may within the statutory time limit require the Company to repay its debts or provide guarantees for the debts; and

¬ the company must apply to the relevant administration bureau for industry and commence for registration of the reduction in registered capital.

VII-2 APPENDIX VII SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

Repurchase of shares

A company may not purchase its own shares except in any of the following circumstances:

(1) to reduce the registered capital of the company;

(2) to merge with another company (companies) that hold(s) its shares;

(3) to reward the staÅ and workers of the company with shares; or

(4) a shareholder requests the company to purchase the shares held by him since he objects to a resolution of the shareholders' general meeting on the merger or division of the company.

The Mandatory Provisions provide that upon obtaining approvals in accordance with the articles of association of the company and from the relevant supervisory authorities, the company may repurchase its issued shares for the foregoing purposes by way of making a general oÅer to the shareholders of the company, purchase on the stock exchange or by an oÅ-market agreement.

Under PRC Company Law, where a company purchases its own shares for reasons speciÑed in Items (1) to (3) of the preceding paragraph, a resolution of the shareholders' general meeting shall be made. Shares purchased by the company pursuant to the preceding paragraph shall be cancelled within 10 days of the date of purchase if the circumstances fall under Item (1), or transferred or cancelled within six months if the circumstances fall under Item (2) or (4).

A company's own shares purchased by the company pursuant to Item (3) shall not exceed 5% of the total issued shares of the company. The funds used for the purchase shall be taken from the after-tax proÑts of the company, and the shares purchased shall be transferred to the staÅ and workers within one year.

Transfer of shares

Shares may be transferred in accordance with relevant laws and regulations.

A shareholder may only eÅect a transfer of its shares on a stock exchange established in accordance with law. Registered shares may be transferred after the shareholders endorse the share certiÑcates or in any other manner speciÑed by applicable laws and regulations. Bearer shares are transferred by delivery of the certiÑcates to the transferee.

Shares issued to promoters may not be transferred within one year after the establishment of the company. Shares issued before public oÅering may not be transferred within one year after the listing and trading of shares on stock exchange. The directors, supervisors and senior management must declare to the company the shares hold by them and the changes thereof. During their term in oÇce, the shares transferred by any of them each year shall not exceed 25% of the total shares they hold. Any shares that are held by the aforesaid persons shall not be transferred within one year from the day when the shares are listed and traded on a stock exchange. After any of the aforesaid persons leaves his or her post, he or she shall not transfer any shares held by him or her within half a year.

There is no restriction under the PRC Company Law on the percentage of shareholding by a single shareholder in a company.

Transfers of shares shall not be entered in the register of shareholders within 20 days before the date of a shareholders' meeting or within Ñve days before the record date for determining distribution of dividends.

Shareholders

Shareholders have the rights and obligations as set forth in the articles of association of the company. The articles of association of a company are binding on each shareholder.

VII-3 APPENDIX VII SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

Under the PRC Company Law, the rights of a shareholder include:

¬ to attend shareholders' general meetings in person or by proxy, and to vote in accordance with the number of shares held;

¬ to transfer his or her shares at a legally established stock exchange in accordance with the PRC Company Law and the articles of association of the company;

¬ to inspect the company's articles of association, minutes of shareholders' general meetings and Ñnancial and accounting reports and to make proposals or enquiries in respect of the company's operations;

¬ if the procedures for convening a shareholders' general meeting or a board meeting, or the voting mechanism, violate any law, administrative regulation or the articles of association of the company, or if a resolution violates the articles of association of the company, the shareholders may, within 60 days from the day when the resolution is made, request the People's Court to revoke it. If a resolution to be adopted at a shareholders' general meeting or by the board of directors violates any law or administrative regulation or infringes the lawful rights and interests of shareholders, to initiate legal proceedings in the People's Court to stop the passing of such resolution;

¬ to receive dividends and distributable beneÑts in other forms in proportion to his or her shareholding;

¬ to obtain surplus assets of the company upon its termination in proportion to his or her shareholding; and

¬ any other shareholders' rights speciÑed in the company's articles of association. The obligations of a shareholder include the obligation to abide by the company's articles of association, to pay subscription monies in respect of shares subscribed for, to be liable for the company's debts and liabilities to the extent of the amount of subscription monies agreed to be paid in respect of the shares taken up by him and any other shareholders' obligation speciÑed in the company's articles of association.

Shareholders' General Meetings The shareholders' general meeting is the body of authority of the company, which exercises its powers in accordance with the PRC Company Law. The shareholders' general meeting exercises the following powers:

¬ to decide on the company's business policies and investment plans;

¬ to elect and replace the directors who are not representatives of employees and decide on matters relating to the remuneration of directors;

¬ to elect and replace the supervisors who are not representatives of employees and decide on matters relating to the remuneration of supervisors;

¬ to examine and approve reports of the board of directors and the supervisory committee;

¬ to examine and approve the company's proposed annual Ñnancial budget and Ñnal accounts;

¬ to examine and approve the company's proÑt distribution plans and plans for recovery of losses;

¬ to decide on any increase or reduction of the company's registered capital;

¬ to decide on the issue of bonds by the company;

¬ to decide on issues such as merger, division, change of the corporate form, dissolution and liquidation of the company and other matters; and

¬ to amend the company's articles of association.

VII-4 APPENDIX VII SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

The shareholders' general meeting shall be held once a year. An extraordinary shareholders' general meeting shall be held within two months after the occurrence of any of the following circumstances:

¬ the number of directors is less than the number provided for in the PRC Company Law or less than two-thirds of the number speciÑed in the company's articles of association;

¬ the accumulated losses of the company reach one-third of the company's total paid in share capital;

¬ shareholders individually or collectively holding 10% or more of the Company's issued and outstanding shares request the convening of an extraordinary shareholders' general meeting;

¬ the board of directors deems necessary;

¬ the supervisory committee so requests; or

¬ under any other circumstances as speciÑed in the articles of association of the company.

Shareholders' general meetings shall be convened by the board of directors, and presided over by the chairman of the board of directors. If the chairman of the board is unable to or does not perform his duty, the meeting shall be presided over by the vice-chairman of the board. If the vice-chairman of the board is unable to or does not perform his duty, the meeting shall be presided over by a director designated jointly by more than half of the directors.

If the board of directors is unable to or does not perform the duty of convening the shareholders' general meeting, the meeting shall be convened and presided over by the supervisory board in a timely manner. If the supervisory board does not convene and presides over the meeting, the shareholders that have held in aggregate 10% or more of the shares of the company for 90 or more consecutive days may themselves convene and preside over the meeting.

Notice of the meeting shall be given to all shareholders 20 days before the meeting under the PRC Company Law and 45 days under the Special Regulations and the Mandatory Provisions, stating the matters to be considered at the meeting. Under the Special Regulations and the Mandatory Provisions, shareholders wishing to attend are required to give to the company written conÑrmation of their attendance 20 days prior to the meeting. Under the Mandatory Provisions, at a shareholders' general meeting of a company, shareholders individually or collectively holding 5% or more of the voting rights in the company are entitled to propose to the company in writing new resolutions to be considered at that meeting, which if within the powers of a shareholders' general meeting, are required to be added to the agenda of that meeting.

Notice of an extraordinary general meeting of shareholders shall be given no less than 15 days prior to the meeting. If the company has bearer shares in issue, it shall make a public announcement 30 days prior to the meeting specifying its time, venue and agenda. Shareholders individually or collectively holding 3% or more of the total shares of the company are entitled to submit written temporary proposals to the board of directors for consideration at the shareholders' general meeting 10 days prior to its convention. The board of directors shall notify the other shareholders of such proposal within two days upon its receipt and submit such proposal to the shareholders' general meeting for discussion. The matters set forth in the temporary proposal shall be within the scope of authorities of the shareholders' general meeting, and also be speciÑc for resolution. No resolution shall be made at shareholders' general meeting for any matter unspeciÑed by way of notice mentioned in the two paragraphs above. A holder of bearer shares may attend a shareholders' general meeting only after he deposits his shares with the Company Ñve days prior to the convention of such shareholders' general meeting until the close of such shareholders' general meeting. Shareholders present at a shareholders' general meeting have one vote for each share they hold.

VII-5 APPENDIX VII SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

Resolutions proposed at the shareholders' general meeting must be adopted by more than half of the voting rights held by shareholders present in person (including those represented by proxies) at the meeting, with the exception of matters relating to merger, division, dissolution or change of corporate form of a company or increase or reduction of the register capital, or amendments to the articles of association, which must be adopted by more than two-thirds of the voting rights held by shareholders present, including those represented by proxies at the meeting.

According to the Mandatory Provisions, the increase or reduction of share capital, the issue of bonds or debentures, separation, merger, dissolution, liquidation, and amendments to the articles of association, must be approved through special resolutions by more than two-thirds of the voting rights held by shareholders present at the shareholders' general meeting.

A shareholder may appoint a proxy to attend a shareholders' general meeting on his or her behalf by a power of attorney stating the scope of the exercise of the voting rights.

There is no speciÑc provision in the PRC Company Law regarding the number of shareholders LR 19A.42 constituting a quorum in a shareholders' meeting. However, the Special Regulations and the Mandatory (65)(a) Provisions provide that a shareholders' general meeting may be held when written replies to the notice of that meeting from shareholders holding shares representing 50% of the voting rights in the company have been received 20 days before the proposed date. If that 50% level is not achieved, the company shall within Ñve days of the last day for receiving written replies notify shareholders by public announcement of the matters to be considered at the meeting and the date and place of the meeting and the shareholders' general meeting may be held thereafter.

The Mandatory Provisions require class shareholders' meetings to be held in the event of a variation or abolition of the rights of class shareholders. Holders of domestic invested shares and holder of overseas listed foreign invested shares are deemed to be diÅerent classes of shareholders for this purpose.

Directors

A company shall have a board of directors, which shall consist of 5 to 19 members. Under the PRC Company Law, each term of oÇce of a director shall not exceed three years. A director may serve consecutive terms if re-elected.

A meeting of the board of directors shall be convened at least twice a year. A notice of the meeting shall be given to all directors 10 days before the meeting. The board of directors may provide for a diÅerent method of giving notice and notice period for convening an extraordinary meeting of the board of directors.

Under the PRC Company Law, the board of directors exercises the following powers:

¬ to convene the shareholders' general meetings and report on its work to the shareholders' general meetings;

¬ to implement the resolutions passed by the general meetings of shareholders;

¬ to decide on the company's business plans and investment proposals;

¬ to formulate the company's proposed annual budget and Ñnal accounts;

¬ to formulate the company's proÑt distribution plans and plans for recovering losses;

¬ to formulate proposals for the increase or reduction of the company's registered capital and the issuance of corporate bonds;

¬ to prepare plans for the merger, division, change of corporate form or dissolution of the company;

¬ to decide on the company's internal management structure;

VII-6 APPENDIX VII SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

¬ to appoint or dismiss the company's general manager and, on the general manager's recommendation, to appoint or dismiss the deputy general manager and Ñnancial oÇcers of the company and to decide on their remunerations; and

¬ to formulate the company's basic management system.

In addition, the Mandatory Provisions provide that the board is also responsible for formulating the proposals to amend the articles of association of a company.

Meetings of the board of directors shall be held only if more than half of the directors are present. Resolutions of the board of directors require the approval of more than half of all directors.

If a director is unable to attend a board meeting, he may appoint another director by a written power of attorney specifying the scope of the authorization to attend the meeting on his behalf.

If a resolution of the board of directors violates the law, administrative regulations, the company's articles of association or resolutions of shareholders' general meetings as a result of which the company sustains serious losses, the directors participating in the resolution are liable to compensate the company. However, if it can be proven that a director expressly opposed the resolution, and that such opposition was recorded in the minutes of the meeting, such director may be relieved from that liability.

Under the PRC Company Law, the following persons may not serve as a director of a company:

¬ persons without civil capacity or with restricted civil capacity;

¬ persons who have committed the oÅence of corruption, bribery, taking of property, misappropriation of property or destruction of the social economic order, and have been sentenced to criminal punishment, where less than Ñve years have elapsed since the date of completion of the sentence; or persons who have been deprived of their political rights due to criminal oÅence, where less than Ñve years have elapsed since the completion of this deprivation;

¬ persons who are former directors, factory managers or managers of a company or enterprise which has become bankrupt and been liquidated and who are personally liable for the bankruptcy of such company or enterprise, where less than three years have elapsed since the date of the completion of the bankruptcy and liquidation of the company or enterprise;

¬ persons who were legal representatives of a company or enterprise which had its business license revoked or is ordered to wind up due to violation of the law and who are personally liable, where less than three years have elapsed since the date of the revocation of the business license; or

¬ persons who have a relatively large amount of debts due and outstanding.

Other circumstances under which a person is disqualiÑed from acting as a director of a company are set out in the Mandatory Provisions which have been incorporated in the articles of association, a summary of which is set out in Appendix VIII to this prospectus.

The board of directors shall appoint a chairman, who is elected with the approval of more than half of the directors.

Supervisors

A company shall have a board of supervisors composed of not less than three members. Each term of oÇce of a supervisor is three years and he or she may serve consecutive terms if re-elected.

The board of supervisors is made up of representatives of the shareholders and an appropriate proportion of representatives of the company's staÅ and workers. Directors and senior management shall not act concurrently as supervisors.

VII-7 APPENDIX VII SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

The board of supervisors exercises the following powers:

¬ to examine the company's Ñnancial aÅairs;

¬ to supervise the directors and senior oÇcers in their performance of their duties and to propose to remove the directors or senior oÇcers whose acts are in violation of laws, regulations, the articles of association, or resolutions of shareholders' general meeting;

¬ to require the directors or senior oÇcers to rectify any action which adversely aÅects the company's interests;

¬ to request the convening of extraordinary shareholders' general meetings;

¬ to give proposals to the shareholders' general meeting;

¬ to institute proceedings against the directors and senior oÇcers whose acts are in violation of laws, regulations or the articles of association; and

¬ other powers speciÑed in the company's articles of association. The circumstances under which a person is disqualiÑed from being a director of a company as described above also apply to supervisors of a company.

Managers and senior management A company shall have a manager who shall be appointed or removed by the board of directors. The manager is accountable to the board of directors and may exercise the following powers:

¬ supervise the production, business and administration of the company and arrange for the implementation of resolutions of the board of directors;

¬ arrange for the implementation of the company's annual business and investment plans;

¬ formulate plans for the establishment of the company's internal management structure;

¬ formulate the basic administration system of the company;

¬ formulate the company's internal rules;

¬ recommend the appointment and dismissal of deputy managers and any Ñnancial controller and appoint or dismiss other administration oÇcers (other than those required to be appointed or dismissed by the board of directors);

¬ attend board meetings; and

¬ other powers conferred by the board of directors or the company's articles of association. The Special Regulations provide that the senior management of a company includes the Ñnancial controller, the secretary of the board of directors and other executives as speciÑed in the articles of association of the company. The circumstances under which a person is disqualiÑed from being a director of a company described above also apply to managers and other senior management of the company. The articles of association of a company shall have binding eÅect on the shareholders, directors, supervisors, managers and other senior management of the company. Such persons shall be entitled to exercise their rights, apply for arbitration and issue legal proceedings according to the articles of association of the company. The provisions of the Mandatory Provisions regarding the senior management of a company have been incorporated in the articles of association (a summary of which is set out in Appendix VIII to this prospectus).

VII-8 APPENDIX VII SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

Duties of Directors, Supervisors, Managers and OÇcers

Directors, supervisors, managers and senior management of a company are required under the PRC Company Law to comply with the relevant laws, regulations and the company's articles of association, carry out their duties honestly and protect the interests of the company. Directors, supervisors, managers and senior management of a company are also under a duty of conÑdentiality to the company and are prohibited from divulging the secret information of the company save as permitted by the relevant laws and regulations or by the shareholders.

A director, supervisor, manager or senior oÇcer who contravenes any law, regulation or the company's articles of association in the performance of his duties which results in any loss to the company shall be personally liable to the company.

The Special Regulations and the Mandatory Provisions provide that directors, supervisors, managers and senior management of a company owe Ñduciary duties to the company and are required to perform their duties faithfully and to protect the interests of the company and not to make use of their positions in the company for their own beneÑt. The Mandatory Provisions (which have been incorporated into our articles of association, a summary of which is set out in Appendix VIII to this prospectus) further elaborates such duties.

Financial Reporting

A company must at the end of each Ñnancial year prepare a Ñnancial report which shall be audited by an accounting Ñrm in accordance with law.

A company shall deposit its Ñnancial statements at the company for the inspection by the shareholders at least 20 days before the convening of an annual general meeting of shareholders. A company established by way of public subscription must publish its Ñnancial statements.

Appointment and Retirement of Auditors

The Special Regulations require a company to employ independent PRC qualiÑed accountants to audit the company's annual report and review and check other Ñnancial reports.

The auditors are to be appointed for a term commencing from the close of an annual general meeting and ending at the close of the following annual general meeting.

If a company removes or ceases to engage the auditors, it is required by the Special Regulations to give prior notice to the auditors and the auditors are entitled to make representations at a shareholders' general meeting. The appointment, removal or engagement of auditors shall be decided by the shareholders at shareholders' general meetings and shall be Ñled with the CSRC for record.

Distribution of ProÑts

The Special Regulations provide that dividends and other distributions to be paid to holders of overseas listed foreign invested shares shall be declared and calculated in Renminbi and paid in foreign currency. Under the Mandatory Provisions, the payment of foreign currency to shareholders shall be made through a receiving agent.

Amendment to Articles of Association

Any amendments to the company's articles of association must be made in accordance with the procedures set forth in the company's articles of association. Any amendment to the Articles and Association will only be eÅective upon necessary approval by the relevant regulatory authorities.

VII-9 APPENDIX VII SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

Termination and Liquidation A company may apply for the declaration of insolvency by reason of its inability to pay debts as they fall due. After the People's Court has made a declaration of the company's insolvency, the shareholders, the relevant authorities and the relevant professionals shall form a liquidation committee to conduct the liquidation of the company. Under the PRC Company Law, a company shall be dissolved in any of the following events:

¬ the term of its operation stipulated in the company's articles of association has expired or events of dissolution speciÑed in the company's articles of association have occurred;

¬ a resolution is passed at a shareholders' general meeting to dissolve the company; or

¬ the company needs be dissolved due to its merger or separation.

¬ its business licence has been revoked, or it is ordered to close down or is banned according to law; or

¬ the company experiences certain serious diÇculty in the operations or management and the interests of its shareholders will suÅer heavy losses if it continues to exist and such diÇculty cannot be resolved by any other means. The People's Court may dissolve the company according to law upon the requests of the shareholders holding more than 10% of its voting rights. When a company is to be dissolved pursuant to Item (1), (2), (4) or (5), it shall establish a liquidation committee and commence liquidation within 15 days of the date of occurrence of the grounds for dissolution. If no liquidation committee is established within the time limit, creditors may request the people's court to designate relevant persons to form a liquidation committee. The people's court shall accept such request and timely organize a liquidation committee to carry out liquidation. Following a creditor notiÑcation process, the liquidation committee shall be responsible for dealing with the company's assets and settling claims. If the liquidation committee becomes aware that the company does not have suÇcient assets to meet its liabilities, it must immediately apply to the People's Court for a declaration of bankruptcy. Following such declaration, the liquidation committee shall hand over all matters relating to the liquidation to the People's Court. Upon completion of the liquidation, the liquidation committee shall submit a liquidation report to the shareholders' general meeting or the relevant competent authority for veriÑcation. Thereafter, the liquidation committee shall submit the report to the company registration authority to cancel the company's registration and issue a public notice of the termination of the company's business.

Overseas Listing The shares of a company shall only be listed overseas after obtaining approval from the securities regulatory authority of the State Council and the listing must be arranged in accordance with procedures speciÑed by the State Council. According to the Special Regulations, a company's plan to issue overseas listed foreign invested shares and domestic invested shares which has been approved by the Securities Commission may be implemented by the board of directors of the company by way of separate issues, within 15 months after approval is obtained from the CSRC.

Loss of share certiÑcates A shareholder may apply, in accordance with the relevant provisions set out in the PRC Civil Procedure Law, to a People's Court in the event that registered share certiÑcates are either stolen or lost, for a declaration that such certiÑcates are revoked. Upon such a declaration, the shareholder may apply to the company for the issuance of replacement certiÑcates.

VII-10 APPENDIX VII SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

The Mandatory Provisions provide for a separate procedure regarding the loss of H Share certiÑcates (which has been incorporated in our articles of association).

Suspension and termination of listing The trading of shares of a company on a stock exchange may be suspended if so decided by the securities administration department of the State Council under one of the following circumstances:

¬ the total share capital or shareholding distribution no longer comply with the necessary requirements for a listed company;

¬ the company failed to publish its Ñnancial statements in accordance with the applicable requirements or there is false information in the company's Ñnancial report;

¬ the company has committed a major breach of the law;

¬ the company incurred losses in each of the preceding three years; or

¬ any other events provided by listing rules of a stock exchange. The securities administration department of the State Council may also terminate the listing of a company's shares in the event that the company resolves to dissolve itself or is lawfully ordered by the its competent authority to close down, or the company is declared bankrupt.

Merger and Separation The merger or separation of a company must be approved by resolution of an aÇrmative vote of shareholders representing two-thirds or more of the voting shares at the general meeting. Companies may merge through a merger by absorption or through the establishment of a new corporation. In the case of merger by absorption, the company which is absorbed shall be dissolved. In the case of merger by forming a new corporation, both companies will be dissolved. The companies should within 10 days of the resolution of the merger notify their respective creditors and issue a public notice to the creditors in newspapers within 30 days of the resolution to merge. Those creditors may request the company to repay any outstanding debts or provide guarantees within 30 days after receiving a written notice, or within 45 days after the public notice if they had not received a written notice. Companies unable to repay such debts or provide guarantees will not be allowed to merge. The new amalgamated entity or the newly established entity shall be responsible for the debts and obligations of the companies merged. When a company separates into two companies, their respective assets must be separated and separate Ñnancial accounts must be drawn up. When a company's shareholders approve the separation of the company, the company should notify all its creditors within 10 days of such resolution being passed and issue a public notice in newspapers within 30 days. A creditor may within 30 days after receiving a written notice or, a creditor who has not received such notice may within 45 days after the public notice request that the company repay any outstanding debts or provide an appropriate guarantee.

SECURITIES LAW AND SUPERVISION The PRC has promulgated a number of regulations in relation to the issue and trading of securities and the disclosure of information. The CSRC is the securities regulator in the PRC and is responsible for formulating securities policies, drafting securities regulations, supervising securities markets, market intermediaries and participants, regulating public oÅers of securities by PRC companies in the PRC or overseas, and regulating the trading of securities.

VII-11 APPENDIX VII SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

The Provisional Regulations Concerning the Issue and Trading of Shares (promulgated in 1993) deal with the application and approval procedures for public oÅerings of equity securities, trading in equity securities, the acquisition of listed companies, deposit, settlement, and transfer of listed equity securities, the disclosure of information with respect to a listed company, enforcement and penalties and dispute settlement. The Provisional Measures Prohibiting Fraudulent Conduct relating to Securities (promulgated in 1993) prohibit the use of insider information in connection with the issue of or trading in securities; the use of funds or information or the abuse of power in creating a false or disorderly market or inÖuencing the market price of securities or inducing investors to make investment decisions without knowledge of actual circumstances; and the making of any statement in connection with the issue of and trading in securities which is false or materially misleading and in respect of which there is any material omission. The Regulations of the State Council Concerning the Domestic Listed Foreign Shares of Joint Stock Limited Companies (promulgated in 1995) regulates the issue, subscription and trading of domestic listed foreign shares, declaration of dividends and other distributions and disclosure of information of joint stock limited companies having domestic listed foreign shares. The Securities Law of the PRC (eÅective 1999 and amended respectively in August 28, 2004 and October 27, 2005) was the Ñrst national securities law in the PRC and is the fundamental law comprehensively regulating the issue and trading in the PRC of shares, corporate bonds and other securities designated by the State Council. On March 29, 1999, the State Economic and Trade Commission and the CSRC promulgated the Opinion on the Further Promotion of the Standardized Operation and In-Depth Reform of Companies Listed Overseas, or the Opinion, which is aimed at regulating the internal operation and management of the PRC companies listed overseas. We will be subject to the Opinion upon our H Shares being listed on the Hong Kong Stock Exchange. The Opinion regulates, amongst others, the appointments and functions of external directors and independent directors on the board of directors and the appointment and functions of external supervisors on the supervisory committee. On July 14, 1999, the CSRC promulgated the Notice on Issues regarding the Overseas Listing by Enterprises which sets out the requirements to be satisÑed by Chinese enterprises seeking overseas main board listing, and matters including the approval procedure and the submission of documents.

THE ARBITRATION LAW LR 19A.42 (65)(e) The Arbitration Law of the PRC, or the Arbitration Law, which was promulgated in 1994, governs arbitration in the PRC, and is applicable to, among other matters, trade disputes involving foreign parties where the parties have entered into a written agreement to refer the matter to arbitration before an arbitration committee constituted in accordance with the Arbitration Law. Where the parties have by agreement provided arbitration as a method for dispute resolution, the parties are not permitted to institute legal proceedings in a People's Court except when the arbitration agreement is void. The Hong Kong Listing Rules and the Mandatory Provisions require an arbitration clause to be included in the articles of association of a company listed in Hong Kong and in the case of the Hong Kong Listing Rules, also in a contract between the company and each director and supervisor, to the eÅect that whenever any dispute or claim arises from any rights or obligations provided in the articles of association, the PRC Company Law and other relevant laws and administrative regulations concerning the aÅairs of a company between (i) a holder of overseas listed foreign shares and the company; (ii) a holder of overseas listed foreign shares and a director, supervisor, or senior management; or (iii) a holder of overseas listed foreign shares and a holder of domestic shares, unless otherwise speciÑed in the articles of association, such parties shall submit that dispute or claim to arbitration before either the China International Economic and Trade Arbitration Commission, or CIETAC, or the Hong Kong International Arbitration Centre, or HKIAC, for arbitration. If the party seeking arbitration elects to arbitrate the dispute or claim at the HKIAC, then either party may apply to have such arbitration conducted in Shenzhen according to the securities arbitration rules of the

VII-12 APPENDIX VII SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

HKIAC. CIETAC is an economic and trade aÅairs arbitration organ in the PRC. Pursuant to the CIETAC Arbitration Rules, CIETAC's jurisdiction covers disputes relating to the Hong Kong Special Administrative Region. CIETAC is located in Beijing with branches in Shenzhen and Shanghai. Under the Arbitration Law, an arbitral award is Ñnal and binding on the parties and if a party fails to comply with an award, the other party may apply to the People's Court for enforcement. A People's Court may refuse to enforce an arbitral award made by an arbitration body if there are certain violations of the normal rules concerning the arbitration procedures or the composition of the arbitration panel or if the award exceeds the scope of the arbitration agreement or is outside the jurisdiction of the arbitration commission. A party seeking to enforce an arbitral award of a PRC arbitration organ against a party who or whose property is not in the territory of the PRC may apply to a foreign court with jurisdiction over the case for enforcement. Similarly, an arbitral award made by a foreign arbitration body may be recognized and enforced by the PRC courts in accordance with the principles of reciprocity or any international treaty concluded or accede to by the PRC. The PRC has acceded to the New York Convention on the enforcement of arbitral awards. The New York Convention provides that all arbitral awards made by a state which is a party to the New York Convention shall be recognized and enforced by other parties to the New York Convention subject to their right to refuse enforcement under certain circumstances including where the enforcement of the arbitral award is against the public policy of the state to which the application for enforcement is made. Following the resumption of sovereignty over Hong Kong by the PRC on July 1, 1997, the New York Convention no longer applies to the enforcement of Hong Kong arbitration awards in other parts of the PRC. From February 2000, the Memorandum of Understanding on the Agreement for Reciprocal Enforcement of Arbitral Awards between Hong Kong and China provides that PRC arbitral awards will be able to be enforced in Hong Kong and Hong Kong arbitration awards will also be enforceable in China. This new arrangement has been approved by the Hong Kong legislative council and the Supreme People's Court of the PRC and became eÅective on February 1, 2000.

HONG KONG LAWS AND REGULATIONS Company Law The Hong Kong law applicable to a company having share capital incorporated in Hong Kong is based on the Companies Ordinance and is supplemented by the common law. We, being a joint stock limited company established in the PRC seeking a listing, are governed by the PRC Company Law and all other rules and regulations promulgated pursuant to the PRC Company Law applicable to a joint stock limited company established in the PRC issuing overseas listed foreign shares to be listed on the Hong Kong Stock Exchange. Set out below is a summary of the material diÅerences between the Hong Kong company law applicable to a company incorporated in Hong Kong and the PRC Company Law applicable to a joint stock limited company established and existing under the PRC Company Law. This summary is, however, not intended to be an exhaustive comparison.

Corporate existence Under Hong Kong company law, a company having share capital is incorporated by the Registrar of Companies in Hong Kong issuing a certiÑcate of incorporation and upon its incorporation, a company will acquire an independent corporate existence. A company may be incorporated as a public company or a private company. The articles of association of a private company incorporated in Hong Kong are required by the Companies Ordinance to contain certain pre-emptive provisions. A public company does not contain such pre- emptive provisions in its articles of association. Under the PRC Company Law, a company may be incorporated by either promotion or public subscription. A company established by public subscription will only acquire its corporate existence after it has completed its initial share oÅering to the public and such a company may only issue further shares after a year has elapsed since its last share oÅer. Under the PRC Company Law, the monetary contribution by all the

VII-13 APPENDIX VII SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS shareholders must not be less than 30% of the registered capital. There is no such restriction on a Hong Kong company under Hong Kong law.

Share capital

Under Hong Kong law, the authorized share capital of a Hong Kong company is the amount of share capital which the company is authorized to issue and a company is not bound to issue the entire amount of its authorized share capital. For a Hong Kong company, the authorized share capital may be larger than the issued share capital. Hence, the directors of a Hong Kong company may, with the prior approval of the shareholders, if required, cause the company to issue new shares. The PRC Company Law does not recognize the concept of authorized share capital. Our registered capital of a joint stock limited company is the amount of the issued share capital. Any increase in our registered capital must be approved by the shareholders at a shareholders' general meeting and by the relevant PRC governmental and regulatory authorities.

Restrictions on shareholding and transfer of shares

Under PRC law, the domestic shares in the share capital of a joint stock limited company which are denominated and subscribed for in Renminbi may only be subscribed or traded by the State, PRC legal or natural persons qualiÑed foreign institutional investors, or eligible foreign strategic investors. The overseas listed foreign shares issued by a joint stock limited company which are denominated in Renminbi and subscribed for in a currency other than Renminbi may only be subscribed and traded by investors from Hong Kong, the Macau Special Administrative Region of the PRC and Taiwan or any country and territory outside the PRC or qualiÑed securities management institutions of the PRC. Under the PRC Company Law, shares in a joint stock limited company held by its promoters cannot be transferred within one year after the date of establishment of the company. Shares in issue prior to the company's public oÅering cannot be transferred within one year from the day when the shares are listed and traded on the stock exchange. Shares in a joint stock limited company held by its directors, supervisors and senior managers and transferred each year during their term of the oÇce shall not exceed 25% of the total shares they held in the company. Moreover, the shares they held in the company cannot be transferred within one year from the listing date of the shares, or within six months after such personnel leave the post. There are no such restrictions on shareholdings and transfers of shares under Hong Kong law.

Financial assistance for acquisition of shares

The PRC Company Law does not contain any provision prohibiting or restricting a joint stock limited company or its subsidiaries from providing Ñnancial assistance for the purpose of an acquisition of its own or its holding company's shares. The Mandatory Provisions contain certain restrictions on a company and its subsidiaries providing such Ñnancial assistance similar to those under Hong Kong company law.

Variation of class rights

Under Hong Kong company law, if the share capital of a company is divided into diÅerent classes of shares, special rights attaching to any class of shares may only be varied if approved by a speciÑed proportion of the holders of the relevant class. The PRC Company Law does not contain any speciÑc provision relating to variation of class rights. Under the Mandatory Provisions, class rights may not be varied or abrogated unless approved by a special resolution of shareholders in general meeting and by two-thirds or more of the votes cast by shareholders of the aÅected class present in person or by proxy at a separate class meeting. For the purpose of a variation of class rights, domestic shares and foreign shares are treated as separate classes of shares except in the case of (i) an issue of shares by the joint stock limited company in any 12 month period either LR 19A.42(65)(b) separately or concurrently following the approval by a special resolution of shareholders in general meeting not exceeding 20% of each of the issued domestic shares and foreign shares existing as at the date of such special resolution; and (ii) an issue of domestic shares and foreign shares in accordance with the plan of the company LR 19A.42(65)(c) approved by the securities authority and which are completed within 15 months following the establishment of

VII-14 APPENDIX VII SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS the company. The Mandatory Provisions contain detailed provisions relating to circumstances which are deemed to constitute a variation of class rights.

Directors The PRC Company Law, unlike Hong Kong company law, does not contain any requirements relating to the declaration of interests in material contracts except for related-party transactions, restrictions on directors' authority in making major dispositions, restrictions on companies providing certain beneÑts such as loans to directors and guarantees in respect of directors' liability and prohibition against compensation for loss of oÇce without shareholders' approval. The Mandatory Provisions, however, contain requirements and restrictions in relation to the foregoing matters similar to those applicable under Hong Kong law.

Board of supervisors Under the PRC Company Law, the board of directors of a joint stock limited company is subject to the supervision of a board of supervisors. There is no mandatory requirement for the establishment of a board of supervisors for a company incorporated in Hong Kong. The Mandatory Provisions provide that each supervisor owes a duty, in the exercise of his powers, to act in good faith and honestly in what he considers to be in the best interests of the company and to exercise the care, diligence and skill that a reasonably prudent person would exercise under comparable circumstances.

Derivative action by minority shareholders LR 19A.42(65)(d) Hong Kong law permits minority shareholders to start a derivative action on behalf of all shareholders against directors who have been guilty of a breach of their Ñduciary duties to the company, if they control a majority of votes at a general meeting thereby eÅectively preventing a company from suing the directors in breach of their duties in its own name. The PRC Company Law gives shareholders of a joint stock limited company who, individually or jointly, hold more than 1% of the shares in the company for more than 180 days consecutively the right to request the board of supervisors in writing to initiate proceedings in the people's court in the event that the directors and senior managers violate their Ñduciary obligations to a company. In the event that the supervisor violates its Ñduciary obligation to a company, the above said shareholders may request the board of directors in writing to initiate proceedings in the people's court. If the board of supervisors or the board of directors refuses to initiate such proceedings, or has not initiated proceedings within 30 days upon receipt of the request in writing from the shareholders, or if under urgent situations, the failure to initiate a proceeding immediately may cause irremediable damages to the company, the above said shareholders shall, for the beneÑt of the company, have the right to initiate proceedings directly in the court in their own name. The Mandatory Provisions further provide remedies to the company against directors, supervisors and oÇcers in breach of their duties to the company. In addition, every director and supervisor of a joint stock limited company applying for a listing of its foreign shares on the Hong Kong Stock Exchange is required to give an undertaking in favor of the company to comply with the company's articles of association. This allows minority shareholders to act against directors and supervisors in default.

Protection of minorities LR 19A.42(65)(f) Under Hong Kong law, a shareholder who complains that the aÅairs of a company incorporated in Hong Kong are conducted in a manner unfairly prejudicial to his interests may petition to court to either wind up the company or make an appropriate order regulating the aÅairs of the company. In addition, on the application of a speciÑed number of members, the Financial Secretary may appoint inspectors who are given extensive statutory powers to investigate the aÅairs of a company incorporated in Hong Kong. The PRC law does not contain similar safeguards. The Mandatory Provisions, however, contain provisions to the eÅect that a controlling shareholder may not exercise its voting rights in a manner prejudicial to the interests of the shareholders generally or of some part of the shareholders of a company to relieve a director or supervisor of his duty to act honestly in the best interests of the company or to approve the expropriation by a director or supervisor of the company's assets or the individual rights of other shareholders.

VII-15 APPENDIX VII SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

Notice of shareholders' meetings Under the PRC Company Law, notice of a shareholders' general meeting must be given not less than 20 days while notice of a shareholders' extraordinary meeting must be given not less than 15 days before the meeting. Under the Special Regulations and the Mandatory Provisions, 45 days' written notice must be given to all shareholders and shareholders who wish to attend the meeting must reply in writing 20 days before the date of the meeting. For a company incorporated in Hong Kong, the minimum notice periods of a general meeting convened for passing an ordinary resolution and a special resolution are 14 days and 21 days, respectively; and the notice period for an annual general meeting is 21 days.

Quorum for shareholders' meetings Under Hong Kong law, the quorum for a general meeting is provided for in the articles of association of the company, which shall not in any event be less than two members. The PRC Company Law does not specify any quorum requirement for shareholders' general meeting but the Special Regulations and the Mandatory Provisions provide that a company's general meeting can be convened when replies to the notice of that meeting have been received from shareholders whose shares represent 50% of the voting rights in the company at least 20 days before the proposed date of the meeting. If that 50% level is not achieved, the company shall within Ñve days notify shareholders by public announcement and the shareholders' general meeting may be held thereafter.

Voting Under Hong Kong law, an ordinary resolution is passed by a simple majority of votes cast by members present in person or by proxy at a general meeting and a special resolution is passed by a majority of not less than three-fourths of votes cast by members present in person or by proxy at a general meeting. Under the PRC Company Law, the passing of any resolution requires one half or more of the votes cast by shareholders present in person or by proxy at a shareholders' general meeting except in cases of proposed amendment to the articles of association, merger, separation, dissolution or change of corporate form of a joint stock limited company which requires two-thirds or more of votes cast by shareholders present in person or by proxy at a shareholders' general meeting.

Financial disclosure A joint stock limited company is required under the PRC Company Law to make available at its oÇce for inspection by shareholders its annual balance sheet, proÑt and loss account, changes in Ñnancial position and other relevant annexures 20 days before the annual general meeting of shareholders. In addition, a company established by the public subscription method under the PRC Company Law must publish its Ñnancial statements. The annual balance sheet has to be veriÑed by registered accountants. The Companies Ordinance requires a company to send to every shareholder a copy of its balance sheet, auditors' report and directors' report which are to be laid before the company in its annual general meeting not less than 21 days before such meeting. A joint stock limited company is required under the PRC law to prepare its Ñnancial statements in accordance with the PRC accounting standards. The Mandatory Provisions require that the company must, in addition to preparing accounts according to the PRC standards, have its accounts prepared and audited in accordance with International Financial Reporting Standards or Hong Kong accounting standards and its Ñnancial statements must also contain a statement of the Ñnancial eÅect of the material diÅerences (if any) from the Ñnancial statements prepared in accordance with the PRC accounting standards. The Special Regulations require that there shall not be any inconsistency between the information disclosed within and outside the PRC and that, to the extent that there are diÅerences in the information disclosed in accordance with the relevant PRC and overseas laws, regulations and requirements of the relevant stock exchanges, such diÅerences shall also be disclosed simultaneously.

VII-16 APPENDIX VII SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

Information on directors and shareholders Under the PRC Company Law, the public and the shareholders of a joint stock limited company have access to information on its articles of associations, shareholders' general meeting minutes and Ñnancial reports. Under the Mandatory Provisions, shareholders have the right to inspect and copy (at reasonable charges) certain information about shareholders and directors similar to that available under Hong Kong law to shareholders of a company incorporated in Hong Kong.

Receiving agent Under both the PRC and Hong Kong law, dividends once declared become debts payable to shareholders. The limitation period for debt recovery action under Hong Kong law is six years while that under the PRC law is two years. The Mandatory Provisions require the appointment of a trust company registered under the Hong Kong Trustee Ordinance (Chapter 29 of the Laws of Hong Kong) as receiving agent to receive on behalf of holders of foreign shares dividends declared and all other monies owed by a joint stock limited company in respect of such foreign shares.

Corporate reorganization Corporate reorganisation involving a company incorporated in Hong Kong may be eÅected in a number of ways, such as a transfer of the whole or part of the business or property of the company in the course of being wound up voluntarily to another company pursuant to section 237 of the Companies Ordinance or a compromise or arrangement between the company and its creditors or between the company and its members pursuant to section 166 of the Companies Ordinance which requires the sanction of the court. Under the PRC law, the merger or separation of a joint stock limited company has to be approved by shareholders in general meeting and by the relevant governmental authorities.

Arbitration of disputes In Hong Kong, disputes between shareholders and a company incorporated in Hong Kong or its directors may be resolved through the courts. The Mandatory Provisions provide that such disputes should be submitted to arbitration at either the HKIAC or the CIETAC, at the claimant's discretion.

Mandatory transfers Under the PRC Company Law, a joint stock limited company is required to make transfers equivalent to certain prescribed percentages of its after tax proÑt to the statutory common reserve. There are no such requirements under Hong Kong law.

Securities Arbitration Rules The Articles of Association provide that certain claims arising from the Articles of Association or the PRC Company Law shall be arbitrated at either the CIETAC or the HKIAC in accordance with their respective rules. The Securities Arbitration Rules of the HKIAC contain provisions allowing an arbitral tribunal to conduct a hearing in Shenzhen for cases involving the aÅairs of companies incorporated in the PRC and listed on the Hong Kong Stock Exchange so that PRC parties and witnesses may attend. Where any party applies for a hearing to take place in Shenzhen, the tribunal shall, where satisÑed that such application is based on bona Ñde grounds, order the hearing to take place in Shenzhen conditional upon all parties including witnesses and the arbitrators being permitted to enter Shenzhen for the purpose of the hearing. Where a party (other than a PRC party) or any of its witnesses or any arbitrator is not permitted to enter Shenzhen, then the tribunal shall order that the hearing be conducted in any practicable manner, including the use of electronic media. For the purpose of the Securities Arbitration Rules, a PRC party means a party domiciled in the PRC other than the territories of Hong Kong Special Administration Region, the Macau Special Administrative Region of the PRC and Taiwan.

VII-17 APPENDIX VII SUMMARY OF PRINCIPAL LEGAL AND REGULATORY PROVISIONS

PRC LEGAL MATTERS King & Wood PRC Lawyers, our legal advisor on PRC law, has delivered to us a legal opinion dated March 16, 2007 conÑrming that it has reviewed the summaries of PRC laws and regulations as contained in this Appendix and that, in its opinion, such summaries are correct summaries relevant to PRC laws and regulations. This legal opinion is available for inspection as referred to in the Section headed ""Documents Delivered to the Registrar of Companies and Available for Inspection'' in Appendix X to this prospectus. Any person wishing to have detailed advice on PRC law and the laws of any jurisdiction is recommended to seek independent legal advice.

VII-18 APPENDIX VIII SUMMARY OF ARTICLES OF ASSOCIATION

Set out below is a summary of the principal provisions of our Articles of Association, the principal LR 19.08(3) objective of which is to provide investors with an overview of the Articles of Association. As the LR 19.10(2) information contained below is in summary form, it does not contain all the information that may LR 19A.27(2) be important to potential investors. Copies of the full English and Chinese texts of the Articles of Association are available for inspection as mentioned in Appendix X ""Documents Delivered to the Registrar of Companies and Available for Inspection''.

The Articles of Association were adopted by the general meeting of shareholders on February 2, 2007 (Friday), and shall enter into force on the day on which our bank's overseas-listed foreign shares become tradable on Stock Exchange upon the approval by the CBRC on March 15, 2007 (Thursday). On March 8 and March 26, 2007, we made a few changes to the Articles of Association(1). Up to the Latest Practicable Date, these amendments have not been approved by the CBRC. The Articles of Association comply with the Mandatory Provisions, except for certain provisions, which are diÅerent from the Mandatory Provisions but in compliance with the laws or regulations that supersede the Mandatory Provisions in terms of legislative superiority, or were amended based on the actual situations of our bank with necessary approvals from the relevant regulatory authorities. We have been advised by our PRC legal counsel, King & Wood, that those exceptions do not violate the applicable PRC laws and regulations.

Power of directors and other senior oÇcers to allot and issue shares There is no provision in the Articles of Association empowering the directors to allot and issue shares.

Proposals to increase capital of our bank must be submitted for approval by the shareholders' meeting. App 1A 7(6) Any such increase is subject to prior approval of relevant regulatory authorities of the PRC.

Power to dispose of Ñxed assets of our bank Without the prior approval of the general shareholders' meeting, the board of directors may not dispose or agree to dispose the Ñxed assets where the sum of the expected value of the consideration for the proposed disposal and the value of the consideration for disposed Ñxed assets in the four months period immediately preceding the proposed disposal exceeds 33% of the value of the Ñxed assets shown in the last balance sheet presented at the general shareholders' meeting. A disposal of Ñxed assets in this context shall include the assignment of certain interest in assets other than by way of providing security interest by using Ñxed assets as collaterals. The validity of transactions whereby our bank disposes of Ñxed assets shall not be aÅected by the breach of the above paragraph hereof.

Emoluments, compensation or payments for loss of oÇce App 1A 7(2) CO 3rd Sch(1)5 Our bank shall execute a written contract with each director and supervisor of our bank concerning his/her emoluments. Such a contract shall be approved by the shareholders' meeting before it is entered into. The above-mentioned emoluments shall include:

¬ emoluments in respect of his/her service as a director, supervisor or senior management personnel of our bank;

(1) Pursuant to resolutions passed by our shareholders on March 8, 2006, we propose to, inter alia, change the address of our registered oÇce from Block C, Fuhua Mansion, 8 Chaoyangmen Beidajie, Dongcheng District, Beijing, China to Jingcheng Mansion, 6 Xinyuan Nanlu, Chaoyang District, Beijing, China. Pursuant to resolutions passed by our shareholders on March 26, 2007, we propose to, inter alia, increase the number of our supervisors. Amendments to the Articles of Association in light of the above proposals were submitted by us to the CBRC, pending approval by the CBRC.

VIII-1 APPENDIX VIII SUMMARY OF ARTICLES OF ASSOCIATION

¬ emoluments in respect of his/her service as a director, supervisor or senior management personnel of a subsidiary of our bank;

¬ emoluments otherwise in connection with the provision of management or other services to our bank or any subsidiary thereof; and

¬ funds as compensation for his/her loss of oÇce or retirement to the aforementioned directors and supervisors. A director or supervisor may not sue our bank for his/her beneÑts due to him/her on the basis of the above-mentioned matters, except under a contract as mentioned above. The contract concerning the emoluments between our bank and each director or supervisor of our bank should provide that in the event of a takeover of our bank, a director or supervisor of our bank shall, subject to prior approval of the shareholders' general meeting, have the right to receive the compensation or other funds obtainable for loss of oÇce or retirement. For the purposes of this paragraph, the term ""a takeover of our bank "" shall refer to any of the following circumstances:

¬ anyone makes a tender oÅer to all the shareholders; or

¬ anyone makes a tender oÅer so that the oÅeror becomes a controlling shareholder as deÑned in the Articles of Association. If the relevant director or supervisor has failed to comply with this Article of Association, any fund received by him/her shall belong to those persons that have sold their shares as a result of their acceptance of the above-mentioned oÅer, and the expenses incurred in distribution of such fund on a pro rata basis shall be borne by the relevant director or supervisor and may not be paid out of such fund.

Loans to Directors, Supervisors, the President and other senior oÇcers Our bank may provide loans, loan guarantee to its related parties, provided such provisions of loans and loan guarantees are preconditioned on ordinary commercial terms; our bank shall not provide loans to its related parties on terms and conditions more favorable than the similar types of loans provided to other borrowers. The related parties stated above shall mean:

¬ the directors, supervisors, management personnel, credit/borrowing status of our bank and their respective lineal relatives;

¬ companies, enterprises and other economic entities in which the above mentioned persons invest in or hold senior management positions.

Financial assistance for the acquisition of our shares Our bank or its subsidiaries shall not at any time provide any financial assistance in any form to purchasers or prospective purchasers of the shares in our bank for their purchase or proposed purchase of the shares in our bank. Such purchasers of our bank's shares referred to above shall include persons that directly or indirectly undertake obligations for the purpose of purchasing shares in our bank. Our bank or its subsidiaries shall not at any time provide any financial assistance in any form to the above obligators in order to reduce or discharge their obligations. However, the acts listed below are not prohibited:

¬ where our bank provides the relevant financial assistance truthfully for the beneÑt of our bank and the main purpose of the financial assistance is not to purchase shares in our bank, or the financial assistance is an incidental part of an overall plan of our bank;

VIII-2 APPENDIX VIII SUMMARY OF ARTICLES OF ASSOCIATION

¬ lawful distribution of our bank's property in the form of dividends;

¬ distribution of dividends in the form of shares;

¬ reduction of registered capital, buy-back of shares, shareholding structure adjustment, etc., in accordance with the Articles of Association of our bank;

¬ provision of a loan by our bank within its scope of business and in the ordinary course of its business (provided that the same does not lead to a reduction in the net assets of our bank or that if the same constitutes a reduction, the financial assistance is paid out of our bank's distributable proÑts); and

¬ the provision of funds by our bank for an employee shareholding plan (provided that the same does not lead to a reduction in the net assets of our bank or that if the same constitutes a reduction, the financial assistance is paid out of our bank's distributable proÑts).

For these purposes:

¬ ""financial assistance'' shall include but not limited to: Ì gift; Ì guarantee (including the undertaking of liability or provisions of property by the guarantor in order to secure the performance of the obligation by the obligator), indemnity (not including, however, indemnity arising from our bank's own fault) and release or waiver of rights; Ì provision of a loan or conclusion of a contract under which the obligations of our bank are to be fulÑlled prior to the obligation of performance by the other party to the contract, or a change in the party to such loan or contract as well as the assignment of rights under such loan or contract; and Ì financial assistance in any other form when our bank is insolvent or has no net assets or when such assistance would lead to a major reduction in our bank's net assets.

¬ ""undertake obligations'' shall include the undertaking of an obligation by the obligator by concluding a contract or making an arrangement (whether or not such contract or arrangement is enforceable and whether or not such obligation is undertaken by the obligator individually or jointly with any other person) or by changing its financial position in any other way.

Disclosure of contractual interests with us App 1A 7(1) In cases where a director of our bank, a supervisor, the president and other senior management personnel has directly or indirectly vested a material interest in any contract, transaction or arrangement concluded or planned by our bank (except his/her engagement contract with our bank), he/she shall disclose the nature and extent of his/her interest to the board of directors at the earliest opportunity, whether or not the matter is normally subject to the approval of the board of directors. Unless the interested director, supervisor, president or other senior management personnel of our bank has disclosed such interest to the board of directors as required under the preceding paragraph hereof and the matter has been approved by the board of directors at a meeting in which he/she was not counted in the quorum and was abstained from voting, our bank shall have the right to revoke the contract, transaction or arrangement, except the other party is a bona Ñde party acting without knowledge of the breach of obligation by the director, supervisor, president or other senior management personnel concerned. If a director, a supervisor, president or other senior management personnel of our bank gives a written notice to the board of directors before the conclusion of the contract, transaction or arrangement is Ñrst considered by our bank, stating that due to the contents of the notice, he/she has an interest in the contract, transaction or arrangement that may subsequently be made by our bank, such director, supervisor, president or other senior management personnel shall be deemed for the purposes of the above paragraphs hereof to have declared his/her interest, insofar as attributable to the scope stated in the notice.

VIII-3 APPENDIX VIII SUMMARY OF ARTICLES OF ASSOCIATION

Remuneration App 1A 7(2) CO 3rd Sch(1)5 The remuneration of Directors shall be approved by shareholders at the shareholders' general meeting, as referred to under the section headed ""Ì Emoluments, compensation or payments for loss of oÇce'' above.

Retirement, appointment and removal

Our bank shall establish a board of directors. The Board shall be composed of 15 directors, of which at least one-third shall be independent directors. The Board shall have one chairman and one vice chairman.

Directors shall be elected or replaced by the shareholders' meeting and serve a term of oÇce of three years. A director may serve consecutive terms if re-elected upon the expiration of his/her term. The shareholders' meeting may remove any directors by ordinary resolution (but without prejudice to any claims for damages under any contracts) prior to the expiration of the term of such directors.

Directors are not required to hold shares of our bank. App 1A 7(5) CO 3rd Sch(1)5 None of the following persons may serve as a director, supervisor, president or other senior management personnel of our bank:

¬ persons without capacity or with limited capacity for civil acts;

¬ persons who have been sentenced for crimes for corruption, bribery, encroachment or embezzlement of property or disruption of the social or economic order where Ñve years have not lapsed following the serving of the sentence, or persons who were deprived of their political rights for committing a crime where Ñve years have not lapsed following the serving of the sentence;

¬ directors, or factory directors or managers who bear personal liability for the bankruptcy or liquidation of their companies or enterprises due to mismanagement where three years have not lapsed of following the date of completion of such bankruptcy or liquidation;

¬ the legal representatives of companies or enterprises that had their business licenses revoked for breaking the law, where such representatives bear individual liability therefor and three years have not lapsed following the date of revocation of such business licenses;

¬ persons with relatively heavy individual debts that have not been settled upon maturity;

¬ persons whose cases have been established for investigation by the judicial authorities as a result of violation of the criminal law, and have not been closed;

¬ persons who may not act as leaders of enterprises by virtue of laws and administrative regulations;

¬ non-natural persons;

¬ persons convicted of violating relevant securities laws and regulations by the securities regulatory authority of the State Council, and such conviction involves a Ñnding that he or she has acted fraudulently or dishonestly, where less than Ñve years have elapsed since the date of conviction;

¬ persons who are currently banned from the market by the securities regulatory authority of the State Council and have not been released yet; and

¬ other matters stipulated by laws, administration regulations and rules.

¬ Persons who hold positions other than director in our controlling shareholder or de facto controlling person of our bank may not serve as senior management of our bank.

The validity of an act of a director, president or other senior management personnel of our bank on behalf of our bank towards a bona Ñde third party shall not be aÅected by any irregularity in his/her current position, election or qualiÑcations.

VIII-4 APPENDIX VIII SUMMARY OF ARTICLES OF ASSOCIATION

Shareholders holding individually or jointly at least 3% of our shares entitled to vote shall have the right to nominate candidates for election to the board (except for independent directorship) at a shareholders' meeting by submission of a written proposal. A director shall attend personally at least two thirds of the board meetings each year. The director shall be deemed to be incapable of fulÑlling his or her duty if he or she fails to attend the board meeting either personally or by entrusting other directors to attend on his or her behalf twice consecutively, or fails to personally attend at least two thirds of the board meetings within one year, and the board of directors shall propose to the shareholders' meeting to remove such director.

There is no provision in the Articles of Association regarding retirement or non-retirement of directors App 1A 7(4) under an age limit. In addition to those prevented from holding the position of a director of our bank, the following persons shall also be prohibited from holding the position of an independent director:

¬ persons holding a position in our bank or entities in which our bank controls majority shares or is the de facto controller (excluding the position of independent director);

¬ persons who directly or indirectly hold 1% or more of all the voting shares of our bank, or hold a position in entities that directly or indirectly hold 1% or more of all the voting shares of our bank;

¬ persons who met the aforesaid circumstances in the previous three years before assuming their oÇce (excluding the position of independent directors);

¬ persons who hold a position in enterprises owing overdue loans to our bank;

¬ persons who hold a position in entities that have business connection or interests with our bank in areas of law, accounting, audit and management consultation, etc.;

¬ other persons who may be controlled or materially inÖuenced through various ways by our bank;

¬ the close relatives of the above persons (the term ""close relatives'' refers to spouses, parents, children, grandparents, siblings, mothers- or fathers-in-law, daughters- or sons-in-law, siblings' spouses and spouses' siblings);

¬ oÇcers of the state authorities; and

¬ other persons speciÑed or determined by the banking regulatory authority of the State Council, the securities regulatory authorities of the place of listing and other regulatory authorities. The term of oÇce of independent directors shall be 3 years. An independent director may continue to serve as the director of our bank, but he/she cannot continue to serve as an independent director upon the expiration of his/her term. If an independent director fails to attend the board meeting personally for three times consecutively, the board of directors shall propose to the shareholders' meeting to replace such independent director. Independent directors shall be elected through methods set forth below:

¬ Our bank's board of directors, board of supervisors and shareholders who severally or jointly hold no less than 1% of the voting shares in our bank may nominate candidates for independent director. The independent directors shall be decided through election by shareholders' meeting;

¬ After the independent directors are elected at the shareholders' general meeting, the nomination of the independent directors shall be submitted to the banking supervision and regulation authorities of the state council for the review of the qualiÑcation of serving independent directors.

Duties In addition to obligations imposed by laws, administrative regulations or listing rules of the stock exchange(s) on which shares of our bank are listed, our bank's directors, supervisors, president and other

VIII-5 APPENDIX VIII SUMMARY OF ARTICLES OF ASSOCIATION senior management personnel shall have the following obligations to each shareholder in the exercise of the functions and powers granted to them by our bank:

¬ not to cause our bank to act beyond the scope of business stipulated in its business license;

¬ to act honestly in the best interests of our bank;

¬ not to deprive our bank of its property in any way, including (but not limited to) any opportunities that are favorable to our bank; and

¬ not to deprive any shareholders of their individual rights or interests, including (but not limited to) rights to distributions and voting rights, unless pursuant to a restructuring plan of our bank submitted to and adopted by the shareholders' general meeting in accordance with the Articles of Association.

Our bank's directors, supervisors, president and other senior management personnel shall have an obligation, in the exercise of their rights or discharge of their obligations, to perform their acts with due care, diligence and skills as a reasonable and prudent person should do under similar circumstances.

Our bank's directors, supervisors, president and other senior management personnel must, in the exercise of their duties, abide by the principle of loyalty and shall not place themselves in a position where there is a conÖict between their personal interests and their duties. This principle shall include (but not limited to) the fulÑllment of the following obligations:

¬ to act honestly in the best interests of our bank;

¬ to exercise powers within the scope of their functions and powers and not to act beyond such powers;

¬ to personally exercise the discretion invested to him/her, not to allow himself/herself to be manipulated by another person and, not to delegate the exercise of his/her discretion to another party unless permitted by laws and administrative regulations or with the consent of the shareholders' general meeting that has been informed;

¬ to be impartial to shareholders of the same category and fair to shareholders of diÅerent categories;

¬ not to conclude a contract or enter into a transaction or arrangement with our bank except as otherwise provided in the Articles of Association or with the consent of the shareholders' general meeting that has been informed;

¬ not to use our bank's property for his/her own beneÑt in any way without the consent of the shareholders' general meeting that has been informed;

¬ not to use his/her functions and powers as a means to accept bribes or other forms of illegal income, and not to illegally appropriate our bank's property in any way, including (but not limited to) any opportunities that are favorable to our bank;

¬ not to accept commissions in connection with our bank's transactions without the consent of the shareholders' general meeting that has been informed;

¬ to abide by the Articles of Association, perform his/her duties faithfully, protect the interests of our bank and not to seek personal gain with his position, functions and powers in our bank;

¬ not to compete with our bank in any way without the consent of the shareholders' general meeting that has been informed;

¬ not to embezzle our bank's funds or lend them to others in violation of applicable regulations, not to deposit our bank's assets in accounts opened in his/her own or in another's name, not to illegally use

VIII-6 APPENDIX VIII SUMMARY OF ARTICLES OF ASSOCIATION

our bank's assets to provide security interest for the debts of our bank shareholders or other individuals; and

¬ not to disclose conÑdential information relating to our bank that was acquired by him/her during his/her term of oÇce without the consent of the shareholders' general meeting that has been informed, and not to use such information except for the interests of our bank; however, such information may be disclosed to the court or other government authorities if:

¬ required by law;

¬ required in the public interest; or

¬ required in the own interest of such director, supervisor, president or other senior management personnel.

A director, a supervisor, the president or other senior management personnel of our bank may not procure the following persons or organizations (""Connected Persons'') to do what such director, supervisor, president or other senior management personnel may not do:

¬ the spouse or minor children of such director, supervisor, president or other senior management personnel of our bank;

¬ the trustee of a director, supervisor, president or other senior management personnel of our bank or of any person referred in the aforesaid item hereof;

¬ the partner of a director, supervisor, president or other senior management personnel of our bank or of any person referred in aforesaid two items hereof;

¬ a company over which a director, supervisor, president or other senior management personnel of our bank, individually or jointly with any person referred to in aforesaid three items hereof or any other director, supervisor, president or other senior management personnel of our bank, has actual control; and

¬ a director, a supervisor, the president or other senior management personnel of the company being controlled as referred to in aforesaid item hereof.

The Ñduciary duty of our bank's directors, supervisors, president and other senior management personnel do not necessarily cease with the termination of their term of oÇce. Their conÑdentiality obligation in relation to our bank's trade secrets shall remain upon termination of their term of oÇce. The term for continuance of other obligations shall be decided upon in accordance with the principle of fairness, depending on the time lapse between the termination and the occurrence of the matter as well as the circumstances and conditions under which the relationship with our bank terminates.

If a director, a supervisor, the president or other senior management personnel of our bank breaches his/her obligations to our bank, our bank shall, in addition to any rights and remedies provided by laws and administrative regulations, have a right to:

¬ require the relevant director, supervisor, president or other senior management personnel to compensate for the losses sustained by our bank as a consequence of his/her dereliction of duty;

¬ rescind any contract or transaction concluded by our bank with the relevant director, supervisor, president or other senior management personnel and contracts or with a third party (where such third party is aware or should be aware that the director, supervisor, president or other senior management personnel representing our bank was in breach of his/her obligations to our bank);

¬ require the relevant director, supervisor, president or other senior management personnel to surrender the gains derived from the breach of his/her obligations;

VIII-7 APPENDIX VIII SUMMARY OF ARTICLES OF ASSOCIATION

¬ recover any funds received by the relevant director, supervisor, president or other senior management personnel that should have been received by our bank, including (but not limited to) commissions; and

¬ require the relevant director, supervisor, president or other senior management personnel to return the interest earned or possibly earned on the funds that should have been given to our bank. A director, a supervisor, president or other senior management personnel of our bank may be relieved from liability for a speciÑc breach of obligations by the shareholders' general meeting which has been fully informed, except the circumstances as speciÑed in the Articles of Association.

Borrowing powers App 1A 7(3) CO 3rd Sch(1)22 The Articles of Association do not speciÑcally provide for the manner in which borrowing powers may be exercised nor do they contain any speciÑc provision in respect of the manner in which such borrowing powers may be amended, except for:

¬ provisions which authorize directors to formulate proposals for the issuance of debentures and other securities by our bank; and

¬ provisions which provide that the issuance of debentures and other securities shall be approved by the shareholders' meeting by a special resolution.

Amendments to constitutional documents Our bank may amend the Articles of Association in accordance with laws, administrative regulations and the provisions of the Articles of Association. Our bank shall amend the Articles of Association if any of the following circumstances occurs:

¬ if any terms contained in the Articles of Association becomes inconsistent with the provisions of the amended laws and administrative regulations after the PRC Company Law, PRC Commercial Banking Law or other relevant laws and regulations are amended;

¬ if certain changes of our bank occur resulting in the inconsistence with certain terms speciÑed in the Articles of Association; or

¬ if the shareholders' meeting adopts a resolution to amend the Articles of Association. An amendment to the Articles of Association passed by the resolution of shareholders' meeting, shall subject to review of the banking supervision and regulation authorities of the State Council where it so requires. Where an amendment in the Articles of Association shall be subject to registration, our bank shall register the amendment according to law.

Variation of rights of existing shareholders of diÅerent classes App 1A 25(3) CO 3rd Sch(1)20 Shareholders who hold diÅerent categories of shares in our bank shall be shareholders of diÅerent categories. Shareholders of diÅerent categories shall enjoy rights and assume obligations in accordance with laws, administrative regulations and the Articles of Association. In addition to shareholders of other categories of shares, shareholders of domestic-listed shares classes and foreign-listed shall be deemed as shareholders of diÅerent classes of shares. Upon the approval of the securities regulatory institution of the State Council, domestic shares of our bank may be totally or partially transferred or converted to foreign shares and become publicly tradable on overseas stock exchange. The listing of such shares in overseas stock exchange shall be in compliance with relevant regulations, rules and requirements eÅective at the place of listing. The listing of such shares in overseas stock exchange does not need approval from shareholders of diÅerent categories.

VIII-8 APPENDIX VIII SUMMARY OF ARTICLES OF ASSOCIATION

Any proposal by us to change or abrogate the rights of shareholders of diÅerent categories, shall be approved by the shareholders' meeting by a special resolution and by a separate shareholders' meeting convened by the aÅected shareholders of diÅerent categories in accordance with the Articles of Association. The rights of shareholders of a certain category shall be deemed to have been changed or abrogated in the following conditions:

¬ an increase or decrease in the number of shares of such category or an increase or decease in the number of shares of a category having voting rights, distribution rights or other privileges equal or superior to those of the shares of such category;

¬ a change of all or part of the shares of such category into shares of another category, a change of all or part of the shares of another category into shares of such category or the grant of the right to such change;

¬ a removal or reduction of rights to accrued dividends or cumulative dividends attached to shares of such category;

¬ a reduction or removal of a dividend preference or property distribution preference during liquidation of our bank, attached to shares of such category;

¬ an addition, removal or reduction of share conversion rights, options, voting rights, transfer rights, preemptive rights to rights issues or rights to acquire securities of our bank attached to shares of such category;

¬ a removal or reduction of rights to receive amounts payable by our bank in a particular currency attached to shares of such category;

¬ a creation of a new category of shares with voting rights, distribution rights or other privileges equal or superior to those of the shares of that category;

¬ an imposition of restrictions or additional restrictions on the transfer or ownership of shares of such category;

¬ an issuance of rights to subscribe for, or convert into, shares of such category or other categories;

¬ an increase in the rights and privileges of shares of other categories;

¬ restructuring of our bank causes shareholders of diÅerent categories to bear liability to diÅerent extents during the restructuring; or

¬ an amendment or cancellation of ""special voting procedures for shareholders of diÅerent categories'' as contained in the Articles of Association. Interested shareholders(as deÑned below) shall not have the right to vote at meetings of shareholders of diÅerent categories. Resolutions of a meeting of shareholders of diÅerent categories may be passed only by way of poll by two- thirds or more of the voting rights of that category represented at the meeting who are entitled to vote at meetings of shareholders of diÅerent categories. When our bank is to convene a meeting of shareholders of diÅerent categories, it shall issue a written notice 45 days prior to the meeting informing all the registered shareholders of that category of the matters to be examined at the meeting as well as the date and place of the meeting. Shareholders that intend to attend the meeting shall, within 20 days prior to the day of the meeting, deliver a written reply to our bank on meeting attendance. The notice of a meeting of shareholders of diÅerent categories needs to be delivered only to the shareholders entitled to vote thereat. The procedures according to which a meeting of shareholders of diÅerent categories is held shall, to the extent possible, be identical to the procedures according to which a shareholders' meeting is held. Provisions of

VIII-9 APPENDIX VIII SUMMARY OF ARTICLES OF ASSOCIATION the Articles of Association relevant to procedures for the holding of a shareholders' meeting shall be applicable to meetings of shareholders of diÅerent categories. The special voting procedures for shareholders of diÅerent categories shall not apply in the following circumstances:

¬ where, as approved by way of a special resolution of the shareholders' meeting, our bank issues, either separately or concurrently, domestic investment shares and foreign investment shares listed outside the PRC every 12 months, and the number of the domestic investment shares and foreign investment shares listed outside the PRC intended to be issued does not exceed 20% of the issued and outstanding shares of the respective categories; or

¬ where the plan for, issuance of domestic investment shares and foreign investment shares listed outside the PRC upon our incorporation is completed within 15 months since being approved by the securities regulatory authorities of the State Council;

¬ the shares of our bank held by founding shareholder(s) are transferred or converted to foreign investment shares upon the approval of the State Council or its authorized approving authorities and publicly tradable on overseas stock exchange. For the purposes of the provisions of the rights of shareholders of diÅerent categories, the ""interested shareholders'' shall have the following meanings:

¬ if our bank has made a buy-back oÅer to all shareholders in the same proportion or has bought back its own shares through open transactions on a stock exchange in accordance with the Articles of Association, the controlling shareholders as deÑned in the Articles shall be ""interested shareholders'';

¬ if our bank has bought back its own shares by an agreement outside a stock exchange in accordance with the Articles of Association, shareholders of share in relation to such agreement shall be ""interested shareholders''; or

¬ under a restructuring proposal of our bank, shareholders who will bear liability in a proportion smaller than that of the liability borne by other shareholders of the same category, or shareholders who have an interest in a restructuring proposal of our bank that is diÅerent from the interest in such restructuring proposal of other shareholders of the same category shall be ""interested shareholders''.

Resolutions-majority required Resolutions of shareholders' meeting are divided into ordinary resolutions and special resolutions. Ordinary resolutions made by shareholders' meeting shall be adopted by more than half of voting shares represented by the shareholders attending the shareholders' meeting (including their proxies). Special resolutions made by shareholders' meeting shall be adopted by two-thirds(2/3) or more of voting shares represented by the shareholders attending the shareholders' meeting (including their proxies).

Voting rights (generally, on a poll and right to demand a poll) App 1A 25(1) App 1A 25(2) Shareholders (including their proxies) exercise voting rights according to the voting shares they hold, and each share shall have one voting right. But the shares of our bank held by our bank shall not carry voting right.

Votes of the shareholders' meeting shall be taken by raising hands for resolutions, unless requested by the App 1A 13A listing rules of the place where our banks' shares are listed or the following persons require voting by poll before or after any vote by raising hands for resolutions:

¬ the chairman of the meeting;

¬ at least two shareholders with voting rights or their proxies; or

VIII-10 APPENDIX VIII SUMMARY OF ARTICLES OF ASSOCIATION

¬ one or several shareholders (including proxies) holding jointly or separately 10% or more of the shares carrying the right to vote at the meeting.

Unless somebody proposes voting by ballot, the chairman of the meeting shall declare whether the proposal has been adopted according to the results of the vote by raising hands, and shall record the same in the minutes of the meeting, which shall serve as the Ñnal evidence without having to state the number or proportion of the votes for or against resolution adopted at the meeting.

The demand for a vote by ballot may be withdrawn by the person who made it.

If the matter demanded to be voted by ballot is the election of the chairman or the adjournment of the meeting, a ballot shall be taken immediately. If a ballot is demanded for any other matters, such ballot shall be taken at the time decided upon by the chairman and the meeting may proceed with the discussion of other matters; the result of the ballot shall still be regarded as a resolution passed at that meeting.

When a ballot is held, shareholders (including proxies) having the right to two or more votes need not use all of their voting rights in the same way.

When the number of votes for and against a resolution is equal, regardless whether the vote is taken by raising hands or by ballot, the chairman of the meeting shall be entitled to one additional vote.

Requirements for annual shareholders' meeting

Annual shareholders' meeting shall be held once a year within six months after the end of the last Ñscal year and shall be convened and presided over by the chairman of the Board.

Accounts and audit

Our bank shall formulate its accounting system in compliance with laws, administrative regulations and relevant stipulations in the general accepted accounting principles of China formulated by the Financial regulatory authorities and the regulations promulgated by the CBRC.

The board of directors of our bank shall submit to the shareholders at each shareholders' annual meeting such Financial reports as relevant laws, administrative regulations and normative documents promulgated by the local government and the authorities-in-charge require our bank to prepare.

The Financial reports of our bank shall be made available for inspection by shareholders 20 days prior to an annual shareholders' meeting. Each shareholder of our bank shall have the right to obtain a copy of the Financial reports.

The Financial statements of our bank shall be prepared not only in accordance with the PRC generally accepted accounting principles, laws and regulations but also in accordance with IFRS or the accounting standards of the place(s) outside the PRC where shares of our bank are listed. If there are major diÅerences in the Financial statements prepared in accordance with these two sets of accounting principles, such diÅerences shall be stated in the notes appended to such Financial statements. For purposes of our bank's distribution of after-tax proÑts in a given Ñscal year, the smaller amount of after-tax proÑts shown in the above-mentioned two kinds of Financial statements shall govern.

Interim results or Financial information published or disclosed by our bank shall be prepared in accordance with PRC GAAP, laws and regulations as well as IFRS or the accounting standards of the place(s) outside the PRC where shares of our bank are listed.

Notice of meetings and business to be conducted thereat

There are two types of shareholders' meetings: the annual shareholders' meetings and the extraordinary shareholders' meetings.

VIII-11 APPENDIX VIII SUMMARY OF ARTICLES OF ASSOCIATION

The extraordinary shareholders' meeting shall be convened within two (2) months upon the occurrence of any of the following events:

¬ the number of directors is less than the number stipulated by PRC Company Law or less than two- thirds of the number required by the Articles of Association;

¬ the outstanding balance of our bank's loss that had not been made-up reaches one-third of our bank's total paid-in share capital;

¬ shareholders holding severally or jointly ten percent (10%) or more of our bank's voting rights presents a written request to convene an extraordinary shareholders' meeting;

¬ the board of directors deems it as necessary or the board of supervisors proposes that the meeting be convened;

¬ half or more of independent directors propose that the meeting be convened;

¬ half of external supervisors propose that the meeting be convened; if there are only two external supervisors, unanimous consent of all external supervisors is required for making such proposal;

¬ Other situations, as stipulated in laws, administrative regulations, rules and the Articles. Any shareholders who hold, severally or jointly with others, 3% or more voting shares of our bank shall have the right to propose and submit in writing to the persons who convene shareholders' meeting special proposals 10 days prior to the convening of shareholders' meeting. The convening persons shall issue a supplementary notice with the contents of the special proposals within 2 days of receipt of such proposals and include in the agenda for the meeting the matters in the proposals that fall within the scope of duties of the shareholders' meeting. When our bank is to convene a shareholders' meeting, it shall issue a written notice 45 days prior to the meeting, informing all the registered shareholders of the matters to be examined at the meeting as well as the date and place of the meeting. Shareholders who intend to attend the shareholders' meeting shall, within 20 days prior to the meeting, deliver a written reply to our bank on the meeting attendance. The notice of a shareholders' meeting shall be delivered to the shareholders (whether or not entitled to vote on the shareholders' meeting) by courier or per-paid mail to the recipient's address shown in the register of shareholders. For shareholders of domestic-listed shares, the notice of a shareholders' meeting may also be given by public announcement. The public announcement referred to in the preceding paragraph shall be published in one or more newspapers or periodicals designated by the securities regulatory authorities of the State Council during the period between 45 and 50 days before the meeting is held. Once the announcement is made, all shareholders of domestic-listed shares shall be deemed to have received the notice of the relevant shareholders' meeting. A meeting and the resolutions adopted to thereof shall not be invalidated as a result of accidental omission to give notice of the meeting to, or the failure of receiving such notice by, a person entitled to receive such notice. The notice of a shareholders' meeting shall meet the following requirements:

¬ it shall be made in writing;

¬ it shall specify the place, date and time of the meeting;

¬ it shall state the date on which equity of shareholders entitled to attend shareholders' meeting is registered;

¬ it shall describe the matters to be discussed at the meeting;

¬ it shall provide necessary information and explanations to the shareholders so as to enable them fully understand the matters to be discussed and make decisions accordingly. This Principle shall apply (but not limited to) when our bank proposes a merger, buy-back of shares, reorganization of share

VIII-12 APPENDIX VIII SUMMARY OF ARTICLES OF ASSOCIATION

capital or other restructuring, it shall provide the speciÑc conditions and contracts (if any) of the transaction under discussions and earnestly explain the cause and result of the transaction;

¬ it shall disclose the nature and extent of conÖict of interests, if any, of any director, supervisor, president or other senior management personnel in any matter to be discussed; and provide an explanation of the diÅerences, if any, between the way in which the matter to be discussed would aÅect such director, supervisor, president or other senior management personnel in his/her capacity as shareholders and the way in which such matter would aÅect other shareholders of the same category;

¬ it shall contain the full text of any special resolutions proposed to be adopted at the meeting;

¬ it shall contain a conspicuous statement that shareholders entitled to attend and vote have the right to entrust one or more proxies to attend and vote on their behalf and that such proxy need not be a shareholder;

¬ it shall state the time and place for the delivery of the meeting's proxy's forms; and

¬ the name and telephone number of the permanent contact person for the meeting. Based on the written replies received 20 days prior to a shareholders' meeting, our bank shall calculate the number of voting shares represented by the shareholders intending to attend the meeting. If the number of voting shares represented by the shareholders intending to attend the meeting is half or more of the total number of our bank's voting shares, our bank may convene the shareholders' meeting. If not, our bank shall within Ñve days inform the shareholders once again of the matters to be examined at the meeting as well as the date and place of the meeting in the form of a public announcement. Upon notiÑcation by public announcement, our bank may convene the shareholders' meeting. Unless under unusual circumstances such as any crisis, without the prior approval of the shareholders' meeting or those authorized by the shareholders' meeting, our bank may not conclude any contract with any person other than a director, supervisor, president or other senior management personnel of our bank for the delegation of the whole business management or part of the important business management of our bank to such person. Resolutions on the following items shall be adopted in the form of ordinary resolutions by a shareholders' meeting:

¬ working report of the board of directors and the board of supervisors;

¬ plans made by the board of directors on proÑt distribution and loss make-up;

¬ business strategies and proposals for signiÑcant investments of our bank;

¬ nomination and removal of members of the board of directors and the board of supervisors (except for the employee representative supervisors), and their remunerations and methods of payment;

¬ annual report of our bank;

¬ annual budget, Ñnal accounts, balance sheet, proÑt statement and other financial statements of our bank;

¬ engagement or dismissal of accounting Ñrms and determination of their remuneration or the means to determine their remuneration; and

¬ items other than those stipulated by laws, administrative regulations or the Articles of Association to be adopted by special resolutions. The following items shall be adopted in the form of special resolutions:

¬ increase or reduction of our bank's registered capital or issuance of any category of shares, warrants of share subscription or other similar securities;

VIII-13 APPENDIX VIII SUMMARY OF ARTICLES OF ASSOCIATION

¬ issuance of bonds;

¬ purchase or sale of material assets or provision of security interest with an amount of more than 30% of our bank's audited total assets value for the most recent period;

¬ division, merger, dissolution, liquidation or change of organizational form of our bank;

¬ amendment to the Articles of Association;

¬ share option incentive plans;

¬ repurchase of shares of our bank; and

¬ other matters stipulated by the Articles of Association and decided in ordinary resolutions adopted by the shareholders' meeting as having signiÑcant impact on our bank and requiring adoption by way of special resolutions.

Transfer of shares App 1A 7(8) Unless otherwise provided by laws and administrative regulations or required by the securities regulatory authorities in the places where the shares are listed, our bank's shares may be transferred free of any encumbrances, provided that any transfer resulting in the change of shareholders who hold 5% or more of all of our shares is subject to the approval of the banking regulatory authority of the State Council. For all fully-paid H Shares listed on the Stock Exchange, if the conditions stipulated in the Articles of Association are not met, the board of directors may refuse to accept any transfer instrument without stating any reasons. Any changes to or correction of any parts of the register of shareholders shall be conducted in accordance with the laws of the place where such parts of the register of shareholders are kept. No changes resulting from share transfers may be made to the register of shareholders within 30 days prior to a shareholders' general meeting or 5 days prior to the record date set by our bank for the purpose of distribution of dividends.

Power of our bank to purchase our own shares App 1A 7(9) If permitted under applicable laws, administrative regulations and the listing rules of the place of listing, after being approved under the procedures stipulated by the Articles of Association and obtaining approvals from CBRC and other relevant regulatory authorities, our bank may repurchase shares of our bank in the following circumstances:

¬ to cancel the shares for the purpose of reducing the registered capital of our bank;

¬ to merge with other companies holding the shares of our bank;

¬ to give the shares to employees as awards;

¬ to be requested to repurchase the shares held by the shareholders who object to the resolutions adopted at the shareholders' meeting concerning consolidation and division of our bank; or

¬ other circumstances where laws and administrative regulations so permit. The repurchase of our bank's shares, upon the approval by relevant State authorities, may be conducted in any of the following manners:

¬ making a buy-back oÅer pro rata to all shareholders;

¬ buy-back through open transactions in a stock exchange;

¬ buy-back through contractual arrangements outside a stock exchange; or

¬ other means approved by laws, administrative regulations and authorities authorized by the State Council.

VIII-14 APPENDIX VIII SUMMARY OF ARTICLES OF ASSOCIATION

When our bank is to buy back shares through contractual arrangements outside a stock exchange, prior approval shall be obtained from the shareholders' general meeting in accordance with the procedures provided in the Articles of Association. Upon prior approval of the shareholders' general meeting obtained in the same manner, our bank may rescind or change contracts concluded in the manner set forth above or waive any of its rights under such contracts.

¬ for the purposes of the above paragraph, contracts for the buy-back of shares shall include (but not limited to) agreements whereby buy-back obligations are undertaken and buy-back rights are acquired.

¬ our bank may not assign contracts for the buy-back of its own shares or any of its rights thereunder.

¬ our bank shall apply to the State Administration for Industry and Commerce for the change of the registered capital registration in the event that the repurchased shares are cancelled due to the repurchase thereof.

¬ the amount of our bank's registered capital shall be reduced by the total par value of the shares so cancelled.

¬ unless our bank has already entered the liquidation stage, it must comply with the following provisions in buying back its issued and outstanding shares:

¬ where our bank buys back shares at their par value, the amount thereof shall be deducted from the book balance of distributable proÑt and from the proceeds of a new share issuance made to buy back the old shares;

¬ where our bank buy backs shares at a price higher than their par value, the portion corresponding to their par value shall be deducted from the book balance of distributable proÑt and from the proceeds of a new share issuance made to buy back the old shares; and the portion in excess of the par value shall be handled according to the following methods: where the shares bought back were issued at their par value, the amount shall be deducted from the book balance of distributable proÑt; where the shares bought back were issued at a price higher than their par value, the amount shall be deducted from the book balance of distributable proÑt and from the proceeds of a new share issuance made to buy back the old shares; however, the amount deducted from the proceeds of the new share issuance may not exceed the total premium obtained at the time of issuance of the old shares nor may it exceed the amount in our bank's capital reserve funds account (including the premiums from the new share issuance) at the time of buy-back;

¬ the amount paid by our bank for the purposes set forth below shall be paid out of our bank's distributable proÑts: acquisition of the right to buy back its own shares; modiÑcation of any contract for buy-back of its own shares; release from any of its obligations under any buy-back contracts.

¬ after the par value of the cancelled shares has been deducted from the registered capital of our bank in accordance with relevant regulations, that portion of the amount deducted from the distributable proÑt and used to buy back shares at the par value shall be included in our bank's capital reserve account.

Power for our subsidiaries to own shares in our bank There are no provisions in the Articles of Association restricting the ownership of shares in us by any of our subsidiaries.

VIII-15 APPENDIX VIII SUMMARY OF ARTICLES OF ASSOCIATION

Dividends and other methods of proÑts distribution Our bank may distribute the dividends in the form of cash or stock. Our bank shall appoint recipient agents for shareholders of foreign investment shares listed outside the PRC to collect on behalf of the relevant shareholders the dividends distributed and other funds payable in respect of foreign investment shares listed outside the PRC. The recipient agents appointed by our bank for shareholders of foreign investment shares listed in Hong Kong shall be a company which is registered as a trust company under the Trustee Ordinance of Hong Kong.

After complying with relevant PRC laws, administrative regulations and rules, our bank may expropriate App 1A 7(7) dividends no one claimed for, but such right of expropriation shall only be exercised upon the expiration of the applicable statutory limitation.

Proxies Any shareholders entitled to attend and vote at a shareholders' meeting shall have the right to appoint one or more persons (who need not be shareholders) as his/her proxies to attend and vote on his/her behalf. Such proxy may exercise the following rights according to his/her entrustment by the shareholder:

¬ the shareholder's right to speak at the shareholders' meeting;

¬ the right to demand a ballot by himself/herself or in conjunction with others; and

¬ the right to vote by hand or by ballot, except that if a shareholder has appointed more than one proxy, the proxies may only exercise the voting rights by ballot. Shareholders shall entrust the proxy in writing, and the proxy shall be signed by the entrusting party or the agent authorized by the shareholders in writing. If the entrusting party is a legal person, the instrument shall be sealed with the legal person's stamp or signed by its director or formally authorized agent. Legal person shareholders shall be represented by its legal representative or proxy entrusted by its legal representative to attend the meeting. Legal representative attending the meeting shall present his/her identiÑcation card and eÅective proof to his/her qualiÑcation as a legal representative. When a proxy is entrusted to attend the meeting, he/she shall present his/her identiÑcation card and written proxy or authorization letter issued by the legal representative of the legal person shareholder. The proxy letter issued by a shareholder to entrust proxy to attend shareholders' meeting shall contain the following contents:

¬ Name of the proxy;

¬ Proxy's voting right;

¬ Instructions on each item to be discussed on the agenda of shareholders' meeting, stating whether the shareholder agrees to, object to or abstain from voting the resolution respectively;

¬ The issuing date of proxy letter and its eÅective period; and

¬ Signature or seal of the entrusting party; if the entrusting party is a domestic legal person, the proxy letter shall be sealed by it. Any form issued by the board of directors of our bank to the shareholders for the appointment of proxies shall give the shareholders free choice to instruct their proxies to cast an aÇrmative, negative or absentation vote and enable the shareholders to give separate instructions on each matter to be voted during discussions at the meeting. The proxy letter shall specify that in the absence of instructions from the shareholder, the proxy may vote as he/she thinks Ñt. Where the entrusting party has died, lost capacity for acts, revocated the proxy or the signed instrument of appointment prior to the voting, or the relevant shares have been transferred prior to the voting, a vote given

VIII-16 APPENDIX VIII SUMMARY OF ARTICLES OF ASSOCIATION in accordance with the terms of proxy letter shall remain valid as long as our bank did not receive a written notice of the event before the commencement of the relevant meeting.

Calls on shares and forfeiture of shares There are no provisions in our Articles of Association relating to the making of calls on shares and forfeiture of shares. Subject to certain conditions, our bank has right to sell the H Shares held by a shareholder, with whom we are unable to get into contact for a prescribed period of time.

Rights of shareholders (including inspection of register) LR 11.07 Shareholders of ordinary shares of our bank shall enjoy rights as follows:

¬ collect dividends and other kinds of interests distributed based on the number of shares held by them;

¬ request for convention of, convene, preside over, attend or entrust a proxy to attend shareholders' meetings in accordance with the applicable laws and the Articles of Association;

¬ exercise voting rights based on the number of shares held by them;

¬ supervise the business operation of our bank, and make suggestions and enquiries accordingly;

¬ transfer, donate or pledge or otherwise dispose shares held by the shareholders in compliance with laws, administrative regulations, relevant requirements of securities regulatory authorities in the places where the shares are listed and the Articles of Association;

¬ obtain relevant information in accordance with the Articles of Association, including: Ì obtaining the Articles of Association after paying relevant cost; Ì inspecting the following documents after paying reasonable costs: 1. minutes of shareholders' meetings; 2. resolutions of board of directors' meetings and board of supervisors' meetings; 3. personal materials of director, supervisor, president and other senior management of our bank; 4. status of share capital and counterfoil of bonds of our bank; 5. all parts of the register of shareholders; 6. reports of the aggregate par value, number of shares, and highest and lowest prices of each category of shares bought back by our bank since the last Ñscal year as well as all the expenses paid by our bank therefor; and 7. Ñnancial report.

¬ participate in the distribution of our bank's remaining assets based on the number of shares held by the shareholders when our bank is terminated or liquidated; and

¬ request our banks to purchase its shares if objects to the resolutions adopted by the shareholders' meeting on merger or separation;

¬ other rights permitted by laws, administrative regulations and the Articles of Association. CO 3rd Sch(1)20 LR 19A.42(56) Quorum for meetings and separate category meetings Based on the written replies received 20 days prior to a shareholders' meeting, our bank shall calculate the number of voting shares represented by the shareholders intending to attend the meeting. If the number of voting shares represented by the shareholders intending to attend the meeting is more than half of the total

VIII-17 APPENDIX VIII SUMMARY OF ARTICLES OF ASSOCIATION number of our bank's voting shares, our bank may convene the shareholders' meeting. If not, our bank shall within Ñve days inform the shareholders once again of the matters to be examined at the meeting as well as the date and place of the meeting in the form of a public announcement. Upon notiÑcation by public announcement, our bank may convene the shareholders' meeting. Relevant public announcement shall be published in newspaper in compliance with relevant provisions. If the number of shares carrying the right to vote at the meeting represented by the shareholders intending to attend the meeting is more than half of the total number of shares of that category carrying the right to vote at the meeting, our bank may hold the meeting of shareholders of diÅerent categories. If not, our bank shall within Ñve days inform the shareholders once again of the matters to be examined at the meeting and the date and place of the meeting in the form of a public announcement. Upon notiÑcation by public announcement, our bank may hold the meeting of shareholders of diÅerent categories. Relevant public announcement shall be published in newspapers in compliance with relevant provisions.

Rights of minority shareholders in relation to fraud or oppression In addition to obligations imposed by laws, administrative regulations or the listing rules of the stock exchange(s) on which the shares of our bank are listed, while exercising voting rights, the controlling shareholders shall not make such decisions to the detriment of all or part of the shareholders' interests as below:

¬ relieving a director or supervisor of the responsibility to act honestly in the best interest of our bank;

¬ approving a director or a supervisor (for his/her own or other person's beneÑt) to deprive our bank of its property in any form, including (but not limited to) any opportunities that are favourable to our bank; or

¬ approving a director or a supervisor (for his/her own or other person's beneÑt) to deprive other shareholders of their rights or interests, including (but not limited to) rights to distributions and voting rights, unless pursuant to a restructuring of our bank submitted to and adopted by the shareholders' meeting in accordance with the Articles of Association. The term ""controlling shareholder(s) '' in the Articles of Association shall refer to the person(s) satisfying any of the following conditions:

¬ acting alone or in concert with others, has the power to elect half or more number of the directors;

¬ acting alone or in concert with others, has the power to exercise or control the exercise of 30% or more of our bank's voting rights;

¬ acting alone or in concert with others, hold 30% or more of shares of our bank; or

¬ acting alone or in concert with others, can obtain actual control of our bank in any other manner.

Procedures on liquidation Should any of the following circumstances occur, our bank shall be dissolved and liquidated pursuant to law:

¬ if the shareholders' meeting resolves to dissolve our bank;

¬ if a dissolution is necessary as a result of the merger or division of our bank;

¬ if our bank is declared bankruptcy pursuant to law because it is unable to pay oÅ matured debts;

¬ if no other solutions can be pursued when our bank has serious diÇculties in its operation and management, and its continued existence will cause great loss to the shareholders' interests; or

¬ if our bank's business licence is lawfully suspended, and our bank is lawfully declared to be closed or revoked.

VIII-18 APPENDIX VIII SUMMARY OF ARTICLES OF ASSOCIATION

If the board of directors decides that our bank should be liquidated (except the liquidation as a result of our bank's declaration of bankruptcy), the notice of the general shareholders' meeting convened for such purpose shall include a statement to the eÅect that the board of directors has made full investigation into the position of our bank and that the board holds the opinion that our bank can pay its debts in full within 12 months after the announcement of liquidation. Dissolution and liquidation of our bank shall be in compliance with the relevant provisions stipulated under the PRC Company Law and the PRC Commercial Banking Law. The functions and powers of the board of directors shall terminate immediately after the general shareholders' meeting has adopted a resolution to carry out liquidation. Our bank shall not engage in any new business activities during the period of liquidation. The liquidation committee shall follow the instructions from the general shareholders' meeting, and report to the general shareholders' meeting at least once a year on the committee's income and expenditure, the business of our bank and the progress of the liquidation. It shall make a Ñnal report to the general shareholders' meeting when the liquidation is completed.

Other provisions material to our bank or our shareholders General provisions Our bank is a joint stock limited company having perpetual existence. From the date on which the Articles of Association came into eÅect, the Articles of Association constitute a legally binding public document regulating our organization and activities, and the rights and obligations between us and each shareholder and among the shareholders themselves. Our bank may invest in other limited liability enterprises and joint stock enterprises in accordance with law and shall be held responsible for the invested enterprises within the limitation of the amount of our bank's capital contribution or shares subscription. In light of the demands of operation and business development and based on relevant laws and administrative regulations, after obtaining separate resolutions of the shareholders' meeting and the approval of CBRC, our bank may increase its capital through the following ways:

¬ oÅering new shares to non-speciÑc investors;

¬ oÅering new shares to the public;

¬ placing new shares to existing shareholders;

¬ distributing new shares to existing shareholders;

¬ transferring capital reserve funds;

¬ other methods permitted by competent supervisory authorities or by laws and administrative regulations.

Our bank's increase of its capital by issuing new shares shall be handled in accordance with the App 1A 7(6) procedures provided for in relevant State laws and administrative regulations after having been approved in accordance with the Articles of Association. Our bank may reduce its registered capital in accordance with the provisions of the Articles of Association. The reduction of registered capital shall follow the procedures set forth in the PRC Company Law, the PRC Commercial Banking Law and other laws, administrative regulations and provisions of the Articles of Association. When our bank is to reduce its registered capital, it must prepare a balance sheet and an inventory of assets.

VIII-19 APPENDIX VIII SUMMARY OF ARTICLES OF ASSOCIATION

Our bank shall notify its creditors within 10 days of adopting the resolution to reduce its registered capital and shall publish a public announcement of the resolution in newspapers within 30 days. Creditors shall, within 30 days since receiving a written notice or within 45 days since the date of the public announcement for those who have not received a written notice, be entitled to require our bank to pay oÅ its debts in full or to provide a corresponding guarantee for repayment.

The reduced registered capital of our bank may not be less than the statutory minimum.

Shareholders of ordinary shares of our bank shall undertake the following obligations:

¬ abide by laws, administrative regulations and the Articles of Association;

¬ contribute share capital according to the number of shares subscribed by them and the methods of capital contribution;

¬ shareholders who have received loans from our bank shall repay the loans due immediately and shall repay those undue ahead of schedule when our bank is likely to suÅer liquidity diÇculties;

¬ unless otherwise stipulated by laws and administrative regulations, shareholders shall not withdraw their share capital;

¬ shareholders shall support the reasonable measures suggested by the board of directors to raise the ratio when the capital adequacy ratio of our bank is lower than the legal standard;

¬ not to use his shareholder's rights inappropriately to harm the interests of our bank or of other shareholders, or to misuse the independent legal person status of our bank and limited liability status of a shareholder to harm the interests of creditor of our bank;

¬ where any of the shareholders of our bank causes any loss to our bank or to other shareholders by using the shareholder's rights inappropriately, it shall be liable for compensation; and

¬ where any of the shareholders of our bank evades the payment of its debts by misusing the independent legal person status of our bank and the limited liability status of a shareholder, and it seriously harm the interest of any creditor of our bank, it shall bear joint and several liability for such debts of our bank.

¬ other obligations imposed by laws, administrative regulations and the Articles of Association.

Other than the conditions agreed by the subscribers of shares at the time of subscription, shareholders shall not be liable to subscribe for any additional share capitals subsequently.

Secretary of Board

¬ The Board has a secretary and the board secretary is a senior management personnel of our bank.

¬ the major duties of the board secretary shall be:

¬ to ensure that our bank keeps complete organizational documents and records;

¬ to ensure that our bank prepares and submits according to law the documents and reports required by relevant authorities;

¬ to keep the list of shareholders and ensure that our bank's register of shareholders is properly established;

¬ to exercise other powers conferred by the board of directors and other powers as may be required or provided for under laws of the places within or outside of PRC where our shares are listed.

VIII-20 APPENDIX VIII SUMMARY OF ARTICLES OF ASSOCIATION

Board of Supervisors Our bank shall have a board of supervisors. The board of supervisors shall be composed of seven supervisors, one of whom shall be elected as the chairman of the board of supervisors. The chairman of the board of supervisors shall be elected and replaced by two-thirds or more of all the supervisors. The term of oÇce of each supervisor shall be 3 years. A supervisor may serve consecutive terms if reelected upon the expiration of his/her term. Directors, president and other senior management personnel may not serve as supervisors concurrently. The board of supervisors is the supervisory authority of our bank, and shall be responsible to the shareholders' meeting and perform the following duties:

¬ to examine and supervise the financial activities of our bank;

¬ to supervise the performance of duties by the directors and senior management personnel of our bank, and dismissal of the directors and senior management personnel who violate laws, administrative regulations, the Articles of Association or resolutions of the general shareholders' meeting and to bring legal proceedings against the said persons in accordance with laws;

¬ to require the directors, the president, and other senior management personnel to correct any act that is harmful to our bank' interests;

¬ to audit the directors and senior management personnel who intend to leave their posts, if necessary;

¬ to audit the business decision-making, risk management and internal control of our bank if necessary;

¬ to verify financial information such as financial reports, business reports, proÑt distribution plans, etc. that the board of directors intents to submit to the shareholders' meeting and, if in doubt, to be able to appoint, in the name of our bank, a certiÑed accountant or practicing auditor to assist in reviewing such information;

¬ to query the directors, the chairman of the board of directors, and senior management personnel;

¬ to propose to hold an extraordinary shareholders' meeting, and to convene and preside over a shareholders' meeting when the board of directors fails to perform its duty of convening and presiding over such meeting under the PRC Company Law;

¬ to make proposals to the shareholders' meetings;

¬ to opine on each items regarding credit asset quality, assets and liabilities ratio, risk management and other matters in the reports that the senior management proposes to submit to the banking regulatory authority of the State Council on a regular basis pursuant to relevant regulations within 5 working days after receiving such reports;

¬ to propose the convening of special meeting of directors, and

¬ other duties provided for in laws, administrative regulations and the Articles of Association or authorized by the shareholders' meetings. A supervisor can attend the board meetings as a non-voting attendee and shall have the right to express its opinions. The board of supervisors may appoint a supervisor to attend the meetings of senior management as a non-voting attendee when it deems necessary.

President of our bank The president of our bank shall be accountable to the Board and shall have the right to exercise the following powers:

¬ in charge of daily administration, business operation and accounting management, and report to the board of directors;

VIII-21 APPENDIX VIII SUMMARY OF ARTICLES OF ASSOCIATION

¬ organize the implementation of resolutions of the board of directors;

¬ formulate and organize the implementation of middle- and long-term development plans, and annual operation and investment plans;

¬ formulate the draft of the basic administrative system, internal management framework and important sub-entities establishment structure of our bank and report to the board of directors for approval;

¬ propose to the board of directors for the appointment or dismissal of Vice President, Assistant President; appoint or dismiss president or vice president of a branch as well as other senior management not appointed by the board of directors;

¬ appoint or dismiss oÇcers of all internal departments and branches;

¬ formulate remuneration plans of our senior management and determine remuneration plans of other employees; decide on or authorize to decide on appointment and dismissal of employees;

¬ propose the convening of special meeting of board of directors;

¬ authorize senior management personnel, oÇcers in-charge of internal departments and branches to conduct business activities under the authorization of the board of directors;

¬ determine signiÑcant investment and assets purchase and disposal with an amount less than RMB 200 million in each transaction;

¬ exercise the special authority at his disposal in relation to our bank's aÅairs in accordance with laws and our bank's interests upon the occurrence of signiÑcant contingency situations or other urgent circumstances, and report to the board of directors, the board of supervisors and the banking regulatory authority of the State Council; and

¬ other powers authorized by laws, administrative regulations and rules, and other relevant provisions and by shareholders' general meetings and the board of directors. The president and the management team shall abide by laws, administrative regulations and the Articles of Association and perform his duties faithfully, honestly and diligently.

Board The Board shall exercise the following functions and powers:

¬ convening shareholders' general meetings and reporting on its performance to shareholders at such meetings;

¬ executing the resolutions of the shareholders' general meetings;

¬ determining our development strategies, business plans and investment proposals;

¬ formulating our proposed annual budgets and Ñnal accounts;

¬ formulating our proÑt distribution plans and plans for recovery of losses;

¬ determining proposals for material investment, material asset disposal and other signiÑcant matters in accordance with our articles of association and within the scope authorized in our shareholders' general meetings;

¬ formulating proposals for increases in or reductions of our registered share capital, and proposals for merger, separation, dissolution, liquidation or change of the nature of our company;

¬ formulating proposals for issuance of bonds or other marketable securities and listing plans;

¬ formulating proposals for repurchase of our shares;

¬ formulating proposals for any amendment to our articles of association;

VIII-22 APPENDIX VIII SUMMARY OF ARTICLES OF ASSOCIATION

¬ appointing or dismissing our president and secretary of the board, and deciding on matters relating to their emoluments and on the imposition of any disciplinary measures;

¬ appointing or dismissing our vice presidents, assistant presidents and other executive oÇcers based on the nomination of our president, and deciding on matters relating to their emoluments and on the imposition of any disciplinary measures;

¬ deciding on the establishment of our fundamental management system and structure;

¬ deciding on the establishment and cancellation of domestic tier one branch and overseas branch;

¬ deciding on policies and procedures on our disclosure of information;

¬ deciding on our information reporting system that requires the senior management personnel to report on operation matters of our bank to it on a regular basis;

¬ proposing the appointment or dismissal of our reporting accountant;

¬ formulating procedures on management of related party transactions; reviewing and approving or authorizing the audit and related party transactions control committee to approve related party transactions (except for the related party transactions that should be approved by the shareholders' general meetings in accordance with the applicable laws); reporting on related party transactions and the relevant procedures to the shareholders' general meetings;

¬ reviewing and approving proposals submitted by each board committee;

¬ reviewing working reports of our president and other executive oÇcers; monitoring and ensuring the eÅective discharge of managerial responsibilities;

¬ reviewing and approving the terms of reference of each board committee; and

¬ exercising any other authorities conferred by shareholders' general meetings or prescribed by the applicable laws, regulations or our articles of association. Regular meetings of the board of directors shall be held at least four times a year. Meetings of the board of directors shall be convened by the chairman of the board. Meeting notice shall be served in writing 10 days before the meeting is held to all the directors and supervisors. The chairman of the board shall convene and preside a special board meeting within 5 working days under one of the following circumstances:

¬ shareholders representing one tenth or more voting rights propose;

¬ the chairman of the board considers necessary;

¬ one third or more of the directors propose jointly;

¬ half or more of the independent directors propose;

¬ the board of supervisors proposes; or

¬ the president of our bank proposes on urgent situation. Meetings of the Board may be held only if more than half of the directors (including proxies) attend. Resolutions of the Board shall be adopted by the aÇrmative votes of more than half of all the directors. Each director shall have one vote. The special committees set up under the board of directors include without limitation: Strategy Development Committee, Risk Management Committee, Nomination and Remuneration Committee, and Audit and Related Party Transaction Control Committee.

VIII-23 APPENDIX VIII SUMMARY OF ARTICLES OF ASSOCIATION

Appointment of an accounting Ñrm Our bank shall engage an independent accounting Ñrm that complies with relevant State regulations to audit the annual Financial reports, Financial statements and other Financial reports of our bank. The term of engagement of an accounting Ñrm engaged by our bank shall be between the end of the annual shareholders' meeting of our bank and the end of the next annual shareholders' meeting. The general shareholders' meeting may, by means of an ordinary resolution, dismiss any accounting Ñrm prior to the expiration of its term of engagement, notwithstanding any provisions in the engagement contract between the accounting Ñrm and our bank, without prejudice to such accounting Ñrm's right, if any, to claim damages from our bank in respect of such dismissal. The engagement, dismissal or refusal of the renewal of the engagement of an accounting Ñrm shall be decided upon by the shareholders' general meeting and reported to the securities regulatory authorities of the State Council. The remuneration or method of remuneration of an accounting Ñrm shall be decided upon by the shareholders' general meeting. The payment scheme to an accounting Ñrm appointed by the board of directors shall be determined by the board of directors.

Loans to Shareholders Our bank shall not provide more preferential conditions to its shareholders who hold 5 percent or more of our voting shares than other borrowers who apply for the same type of loans. When our bank is having liquidity diÇculty as prescribed by valid laws and administrative regulations and relevant provisions concerning settlement risks of commercial bank by the CBRC, shareholders who have borrowed from our bank shall immediately repay the loans that are due, and the loans that are not yet due should also be repaid in advance. Shareholders who hold 5 percent or more voting shares of our bank and owe overdue loans to our bank shall be restricted from exercising voting right during the loan overdue period and the shares they hold shall not be included in the total voting shares of the shareholders who attend the shareholders' meeting. Our bank shall have the right to withhold the dividends of such shareholders as the repayment of their overdue loans. Any assets to be distributed to such shareholders in our bank's liquidation process shall also be used in priority for the repayment of our bank's outstanding loans. Shareholders who hold 5 percent or more voting shares of our bank shall not pledge our bank's shares if the outstanding balance of the loans they borrowed from our bank exceeds the audited net book value of the shares held by them in the previous year, and they have not provided other security interest with bank deposit receipts or treasury bonds.

Major Investment and Disposal of Assets The scope of authorization to the board of directors regarding decision power on investment, assets purchase and assets disposal shall be determined by the shareholders' meeting. The board of directors shall establish stringent review and approval procedures and policies in respect of its exercise of the aforesaid authorization, and such procedures and policies shall be submitted to the shareholders' meeting for its approval.

Dispute resolution LR 19A.42 (65)(e) If any disputes or claims related to our bank's business based on the rights or obligations provided in the Articles of Association, the PRC Company Law and other relevant laws or administrative regulations arise between the shareholders of foreign investment shares listed outside the PRC and our bank, between the shareholders of foreign investment shares listed outside the PRC and the directors, supervisors and other senior management personnel of our bank or between the shareholders of foreign investment shares listed

VIII-24 APPENDIX VIII SUMMARY OF ARTICLES OF ASSOCIATION outside the PRC and other shareholders, the parties concerned may submit such dispute or claim for arbitration. A dispute or claim submitted for arbitration may be arbitrated, at the option of the arbitration applicant, by either the China International Economic and Trade Arbitration Commission in accordance with its arbitration rules or the Hong Kong International Arbitration Centre in accordance with its securities arbitration rules. After the arbitration applicant has submitted the dispute or claim for arbitration, the other party must carry out arbitration in the arbitration institution selected by the applicant. If the arbitration applicant opts for arbitration by the Hong Kong International Arbitration Centre, either party may request arbitration to be conducted in Shenzhen in accordance with the securities arbitration rules of the Hong Kong International Arbitration Centre. Unless otherwise provided by laws or administrative regulations, the laws of the PRC shall apply to the settlement by means of arbitration of disputes or claims referred in the above paragraph. When such disputes or claims as described above are submitted for arbitration, such disputes or claims they shall be submitted in their entirety, and all persons that have a cause of action due to the same events or whose participation is necessary for the settlement of such disputes or claims, and if such persons being our bank shareholders, directors, supervisors, the president or other senior management personnel of our bank, shall abide by the arbitration result. Disputes concerning the deÑnition of shareholders and the register of shareholders shall not be required to be settled by means of arbitration. The award of the arbitration institution shall be Ñnal and binding upon each party.

VIII-25 APPENDIX IX STATUTORY AND GENERAL INFORMATION

1. FURTHER INFORMATION ABOUT US

A. Incorporation App 1A 5

We were incorporated under the PRC laws as a joint stock limited company on December 31, 2006. Our App 1A 6 principal place of business in Hong Kong is at Room 2106, 21/F, Tower Two, Lippo Centre, 89 Queensway, Hong Kong and have been registered as an oversea company under Part XI of the Hong Kong Companies Ordinance. Ms. KAM Mei Ha, Wendy of Flat G, 18/F, Hoi Wai Mansion, Riviera Gardens, Tsuen Wan, New Territories, Hong Kong have been appointed as our agent for the acceptance of service of legal process notices in Hong Kong.

B. Changes in share capital

(a) Our bank

At the time of the establishment as a joint stock limited company, our registered capital was RMB 31,113,111,400, divided into 31,113,111,400 shares of RMB 1.00 each, all of which were fully paid up or credited as fully paid up and were held by our promoters as follows:

Approximate percentage of shareholding in the registered capital of Name of promoter Number and Type of shares our Company

CITIC GroupÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 26,394,202,200 state-owned shares 84.83% App 1A 8(1) CIFH ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,718,909,200 foreign legal person shares 15.17% App 1A 8(2)

The following changes in the share capital of the Company have taken place since the date of its incorporation up to the date of this prospectus:

¬ on March 1, 2007, CITIC Group transferred 1,502,763,281 shares to BBVA for a consideration of US$629 million, pursuant to the share and option purchase agreement between CITIC Group and BBVA dated November 22, 2006, as amended.

Immediately after the Global OÅering and the A Share OÅering, our registered capital will be RMB 38,300,523,054, made up of 11,595,699,381 H Shares and 26,704,823,673 A Shares (assuming that the Over-allotment Option is not exercised).

Save as disclosed in this prospectus, there has been no alteration in our registered capital since our establishment.

(b) Our subsidiary

Our principal subsidiary is referred to in the Accountants' report, the text of which is set out in Appendix I to this prospectus.

There has been no alteration in the registered capital of our principal subsidiary within the two years App 1A 26(1) preceding the date of this prospectus.

IX-1 APPENDIX IX STATUTORY AND GENERAL INFORMATION

C. Resolutions of our Shareholders(1)

Resolutions were passed by our shareholders on February 2, 2007, pursuant to which, among other matters, our shareholders:

(i) approved our listing plan which included, among other things:

¬ simultaneous A and H shares listings on the Shanghai Stock Exchange and the Hong Kong Stock Exchange respectively through an initial public oÅering of A shares and H shares, respectively;

¬ the oÅer of 2,302,000,000 A Shares pursuant to the A Share OÅering and the oÅer of 3,453,000,000 H Shares pursuant to the Global OÅering (excluding any exercise by BBVA and CIFH of their anti-dilution right and top-up right, respectively) which constitute 6% and not less than 9% of our total issued share capital, respectively;

¬ the inclusion of an Over-allotment Option in the Global OÅering;

¬ maintaining CIFH's shareholding interest in us at a level of not less than 15% of our total issued share capital at the time of listing;

¬ maintaining BBVA's shareholding interest in us at a level of not less than 4.83% of our total issued share capital at the time of listing;

¬ as a part of the A Share OÅering, oÅering of A shares in the PRC to qualiÑed individuals and institutional investors; and

¬ as a part of the Global OÅering, oÅering of H Shares in the United States to QIBs and outside of the United States in reliance on Regulation S, oÅering of H Shares to the public and professional and institutional investors in Hong Kong and conducting a public oÅering without listing in Japan;

(ii) authorized the board to amend, perfect and implement our listing plan as approved by our shareholders and senior management, including among other matters, drafting, amending, signing and submitting applications, relevant reports or materials relating to the proposed concurrent listing of A Shares and H Shares to the relevant authorities and to deal with approval, registration, Ñling, veriÑcation or other formalities;

(iii) authorized the board to authorize any one of our executive directors or his authorized representative to implement matters speciÑed in paragraph (ii) above; and

(iv) approved amendments to our Articles of Association to comply with the requirements of applicable laws and regulations of the PRC and Hong Kong and authorized our board to further amend our Articles of Association in accordance with any comments made by the relevant regulatory authorities in the PRC and Hong Kong.

(1) Pursuant to resolutions passed by our shareholders on March 8, 2006, we propose to, inter alia, change the address of our registered oÇce from Block C, Fuhua Mansion, 8 Chaoyangmen Beidajie, Dongcheng District, Beijing, China to Jingcheng Mansion, 6 Xinyuan Nanlu, Chaoyang District, Beijing, China. Pursuant to resolutions passed by our shareholders on March 26, 2007, we propose to, inter alia, increase the number of our supervisors. Amendments to the Articles of Association in light of the above proposals were submitted by us to the CBRC, pending approval by the CBRC.

IX-2 APPENDIX IX STATUTORY AND GENERAL INFORMATION

2. FURTHER INFORMATION ABOUT OUR BUSINESS

A. Summary of material contracts App 1A 52 CO 3rd Sch(1)17 We have entered into the following contracts (not being contracts entered into in the ordinary course of business) within the two years preceding the date of this prospectus which are or may be material: (a) a non-competition agreement dated March 13, 2007 entered into among us, CITIC Group and CIFH; (b) a loan transfer agreement dated June 30, 2006 between us and China Everbright Bank pursuant to which rights with respect to loans outstanding under loan agreements for the aggregate amount of RMB 2,000,000,000 in principal were transferred to China Everbright Bank in consideration of RMB 2,000,000,000; (c) an investor rights agreement dated November 22, 2006 among us, CITIC Group and BBVA in relation to certain investor rights of BBVA, including shareholders' rights relating to board matters, transfer restrictions and minority protection, in consideration of covenants contained therein. This agreement was amended by way of an Amendment No. 1 dated as of January 31, 2007 and an Amendment No. 2 dated as of March 27, 2007 made among the same parties; (d) a strategic cooperation agreement dated November 22, 2006 between us and BBVA in relation to certain business cooperation between BBVA and us. See ""Our Strategic Investor and Other Investors'' for details; (e) a trademark licence agreement dated March 14, 2007 between CITIC Group and us pursuant to which CITIC Group licensed certain trademarks to us on a non-exclusive basis for a term of two years for nil consideration. This agreement is supplemented by a letter of undertaking dated April 3, 2007 by CITIC Group to us pursuant to which the term of the licence in the above agreement is extended to so long as CITIC Group remains as our controlling shareholder; (f) Hong Kong Underwriting Agreement; (g) a placing agreement dated April 6, 2007 entered into by and among Mizuho Corporate Bank, Ltd., China International Capital Corporation Limited, CITIC Securities Co., Ltd., Citigroup Global Markets Asia Limited, The Hongkong and Shanghai Banking Corporation Limited, Lehman Brothers Asia Limited and us in relation to the placement and allocation of our H Shares for the purchase price of HK$400 million; (h) a placing agreement dated April 6, 2007 entered into by and among China Life Insurance Company Limited, China International Capital Corporation Limited, CITIC Securities Co., Ltd., Citigroup Global Markets Asia Limited, The Hongkong and Shanghai Banking Corporation Limited, Lehman Brothers Asia Limited and us in relation to the placement and allocation of our H Shares for the purchase price of HK$200 million; (i) a placing agreement dated April 6, 2007 entered into by and among China Life Group Insurance Group Company, China International Capital Corporation Limited, CITIC Securities Co., Ltd., Citigroup Global Markets Asia Limited, The Hongkong and Shanghai Banking Corporation Limited, Lehman Brothers Asia Limited and us in relation to the placement and allocation of our H Shares for the purchase price of HK$200 million; (j) a placing agreement dated April 9, 2007 entered into by and among UBS AG (in its capacity as the discretionary manager of the Hong Kong Equity Portfolio of the National Council For Social Security Fund), China International Capital Corporation Limited, CITIC Securities Co., Ltd., Citigroup Global Markets Asia Limited, The Hongkong and Shanghai Banking Corporation Limited, Lehman Brothers Asia Limited and us in relation to the placement and allocation of our H Shares for the purchase price of HK$400 million;

IX-3 APPENDIX IX STATUTORY AND GENERAL INFORMATION

(k) a placing agreement dated April 9, 2007 entered into by and among PICC Property and Casualty Company Limited, China International Capital Corporation Limited, CITIC Securities Co., Ltd., Citigroup Global Markets Asia Limited, The Hongkong and Shanghai Banking Corporation Limited, Lehman Brothers Asia Limited and us in relation to the placement and allocation of our H Shares for the purchase price of HK$400 million; and

(l) a letter agreement dated April 9, 2007 entered into by and among the National Council of Social Security Fund, China International Capital Corporation Limited, CITIC Securities Co., Ltd., Citigroup Global Markets Asia Limited, The Hongkong and Shanghai Banking Corporation Limited and Lehman Brothers Asia Limited and us in relation to the purchase of our H Shares through UBS AG as the discretionary manager of the National Council of Social Security Fund.

B. Intellectual property App 1A 28(4)

(a) As at the Latest Practicable Date, we were the registered owner of the following material trademarks:

Class Place of Registration Name (Note) registration Registration Date Expiry Date Number

ÏÏÏÏÏ 36 PRC December 21, 2001 December 20, 2011 1687725

35 PRC February 28, 2005 February 27, 2015 3574408

36 PRC August 21, 2005 August 20, 2015 3574407

ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 36 PRC February 21, 2006 February 20, 2016 3763460

ÏÏÏÏÏÏ 36 PRC March 21, 2006 March 20, 2016 3753278

ÏÏÏÏÏÏÏÏÏÏÏÏÏ 36 PRC February 21, 2006 February 20, 2016 3763459

ÏÏÏÏÏ 36 PRC August 28, 2006 August 27, 2016 3753277

Note:

Class 35 Ì Advertising; business management; business administration; oÇce functions. This class mainly includes services provided by individuals or entities which are intended: (1) to provide assistance in connection with the operation and management of business enterprises; (2) to provide assistance in connection with business activities or the management of business functions of industrial and commercial enterprises, as well as services provided by advertising departments in respect of various products or services with the aim of advertising and promotion to the public through various communication means.

Class 36 Ì Insurance, Financial AÅairs, Monetary AÅairs, Real Estate AÅairs. This class includes monetary and Ñnancial services provided by Ñnancial and monetary businesses as well as various insurance policy-related services, in particular, it includes: (i) services relating to Ñnancial and monetary businesses; (ii) services provided by real estate administrators in relation to properties, such as leasing, valuation or funding services; and (iii) insurance-related services, including services provided by insurance agents or brokers and services provided to the insured and the insurer.

IX-4 APPENDIX IX STATUTORY AND GENERAL INFORMATION

(b) As at the Latest Practicable Date, we were the registered proprietor of the following material domain names:

Domain Name Jucisdiction Date of registration citicib.com.cn ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PRC September 22, 1998 citicbank.com ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ North America January 28, 2005 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PRC November 12, 2004 citicb.cnÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PRC August 19, 2005 citicb.net.cnÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PRC August 19, 2005 ctbc.cnÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PRC August 19, 2005 citicb.net.cnÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PRC August 19, 2005 citicb.com ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PRC August 19, 2005 ctbc.com.cnÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PRC August 19, 2005 ctbc.net.cnÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PRC August 19, 2005 citicb.com.cnÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PRC August 19, 2005 chinaciticbank.com.cn ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PRC June 3, 2005 chinaciticbank.cn ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PRC June 3, 2005 chinaciticbank.net.cn ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PRC June 3, 2005 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PRC June 3, 2005 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PRC June 3, 2005 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PRC June 3, 2005 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PRC June 3, 2005 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PRC June 3, 2005 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PRC June 3, 2005 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PRC June 3, 2005 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PRC June 3, 2005 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PRC June 3, 2005 citicib.net.cn ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PRC June 3, 2005 chinaciticbank.comÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PRC June 3, 2005 chinaciticbank.netÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PRC June 3, 2005 citic-bank.com ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PRC June 3, 2005 citic-bank.net.cn ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PRC June 3, 2005 citic-bank.cn ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PRC June 3, 2005 citic-bank.com.cn ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PRC June 3, 2005 citic-bank.net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PRC June 3, 2005 citicbank.net.cnÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PRC June 3, 2005 citicbank.com.cnÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PRC June 3, 2005 citicbank.net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PRC June 3, 2005 citicbank.cnÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PRC June 3, 2005 citiccard.com (registered in the name of our Shenzhen branch only) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ PRC March 12, 2003

C. Our Depositors

Our Ñve largest depositors accounted for less than 30% of the total balance of the deposits as at App 1A 28(1) December 31, 2006. (b)(vii)

3. FURTHER INFORMATION ABOUT OUR DIRECTORS, SUPERVISORS AND SUBSTANTIAL SHAREHOLDERS

A. Particulars of Directors' and Supervisors' Service Contracts App 1A 46(1)

Each of our directors and supervisors has entered into a service contract with us for a term of three years beginning on the respective dates of the director's and supervisor's appointment and ending on the date of the third annual general meeting following his or her appointment. Our directors and supervisors are subject to rotation under our Articles of Association. The service contracts of our directors and supervisors are subject to termination in accordance with their respective terms. Pursuant to our Articles of Association, the remuneration of our directors and supervisors is determined by our shareholders in general meeting.

IX-5 APPENDIX IX STATUTORY AND GENERAL INFORMATION

The contracts do not provide for compensation to our directors and supervisors in the event of early App 1A 33(2)(f) termination of the contract or any bonus, commission or proÑt sharing arrangements. Save as disclosed above, none of our directors or supervisors has entered or proposes to enter into a service contract with us other than contracts expiring or determinable by us within one year without the payment of compensation (other than statutory compensation). As of the date of this prospectus, none of our directors has provided personal guarantees in favour of lenders in connection with banking facilities granted to our Company.

B. Directors' and Supervisors' remuneration

The aggregate remuneration and beneÑts in kind granted to the directors and supervisors for the year App 1A 46(2) ended December 31, 2006 amounted to approximately RMB 4 million. See Note 9 under Section V of the App 1A 33(2) Accountants' Report in Appendix I to this prospectus for details. (b)

The aggregate remuneration payable to, and beneÑts in kind receivable by, our existing directors and App 1A 46(3) supervisors for the year ending December 31, 2007 will be determined with reference to the amounts granted in 2006 and the performance of our bank and other relevant factors. The aggregate remuneration payable to, and beneÑts in kind receivable by, our new directors and supervisors for the year ending December 31, 2007 will be determined based on the performance of our bank and other relevant factors. All such determinations will be made subject to our corporate governance requirements and relevant laws and regulations.

C. Directors' and Supervisors' Interests and Short Positions in the Share Capital and Debenture of Our App 1A 45(1) Company and its Associated Corporations (a),(b)&(c) Immediately following the completion of the Global OÅering, as far as the directors are aware, the App 1A 45(1A) following directors will have interests or short positions in our H Shares, underlying shares or debentures, or (a)&(b) those of any of our associated corporations (within the meaning of Part XV of the SFO) which will have to be App 1A 41(4) notiÑed to us and to the Hong Kong Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they are taken or deemed to have under such provisions of the SFO), or which will be required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein or which will be required to be notiÑed to us and the Hong Kong Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers contained in the Hong Kong Listing Rules, in each case upon the listing of our H Shares on the Hong Kong Stock Exchange:

Approximate percentage of the associated Name of associated corporation's company in which Class/Number of shares issued share Director's Name shares are held interested capital KONG Dan ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ CIFH 1,600,000 ordinary shares 0.03% of HK$1.00 each(1) DOU JianzhongÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ CIFH 400,000 ordinary shares 0.01% of HK$1.00 each(2) CHAN Hui Dor Lam Doreen ÏÏÏÏÏÏÏÏÏÏÏÏÏ CIFH 600,000 ordinary shares 0.01% of HK$1.00 each(3) CHAN Hui Dor Lam Doreen ÏÏÏÏÏÏÏÏÏÏÏÏÏ CIFH 2,674,689 ordinary shares 0.05% of HK$1.00 each

Notes:

(1) Share options granted by CIFH to Kong Dan on November 17, 2003 to subscribe for 400,000 ordinary shares of HK$1.00 each of CIFH at an exercise price of HK$3.540 each during an exercise period from November 17, 2005 to November 16, 2013; on April 6, 2004 to subscribe for 400,000 ordinary shares of HK$1.00 each of CIFH at an exercise price of HK$3.775 each during an exercise period from April 6, 2006 to April 5, 2014; on June 13, 2005 to subscribe for 400,000 ordinary shares of HK$1.00 each of CIFH at an exercise price of HK$2.925 each during an exercise period from June 13, 2007 to June 12, 2015; and on May 18, 2006 to

IX-6 APPENDIX IX STATUTORY AND GENERAL INFORMATION

subscribe for 400,000 ordinary shares of HK$1.00 each of CIFH at an exercise price of HK$4.275 each during an exercise period from May 18, 2008 to May 17, 2016. As at the Latest Practicable Date, the share options had not been exercised.

(2) Share option granted by CIFH to Dou Jianzhong on May 18, 2006 to subscribe for 400,000 ordinary shares of HK$1.00 each of CIFH at an exercise price of HK$4.275 each during an exercise period from May 18, 2008 to May 17, 2016. As at the Latest Practicable Date, the share option had not been exercised. (3) Share options granted by CIFH to Chan Hui Dor Lam Doreen on June 13, 2005 to subscribe for 300,000 ordinary shares of HK$1.00 each of CIFH at an exercise price of HK$2.925 each during an exercise period from June 13, 2007 to June 12, 2015 and on May 18, 2006 to subscribe for 300,000 ordinary shares of HK$1.00 each of CIFH at an exercise price of HK$4.275 each during an exercise period from May 18, 2008 to May 17, 2016. As at the Latest Practicable Date, the share options had not been exercised.

For the above purpose, the relevant provisions of the SFO will be interpreted as if they also apply to our supervisors. As far as the directors are aware, no supervisor or director will have any disclosable interests or short positions in our H Shares immediately following the completion of the Global OÅering.

D. Substantial Shareholders App 1A 45(2) CO 3rd Sch(1) So far as our directors are aware, immediately following the completion of the Global OÅering and 30 A Share OÅering and taking no account of any H Shares or A Shares which may be taken up under the Global OÅering and A Share OÅering or which may be issued pursuant to the exercise of the Over-allotment Option, but assuming the exercise by BBVA and CIFH of their anti-dilution right and top-up right, respectively, the following persons (not being our directors and supervisors) will have an interest or short position in the shares of our company which would fall to be disclosed to us and the Hong Kong Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who is, directly or indirectly to be interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of our bank or any of our subsidiaries:

Long Position

Number of H Shares Approximate percentage of in which the interested party shareholding in has or is deemed to have the registered capital of Name of interested party Capacity interest in our company CITIC Group(1)(2) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ BeneÑcial interest 24,402,891,019 63.71%(4) CIFH(3) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ BeneÑcial interest 5,810,189,200 15.17% BBVA(1)(2)(3) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ BeneÑcial interest 1,849,915,281 4.83%(4)

(1) CITIC Group agreed to sell to BBVA 52,892,289 shares after the Ñrst anniversary of the Global OÅering, representing 0.17% of our outstanding number shares immediately prior to the Global OÅering. (2) In addition to the agreement to sell described in note (1) above, CITIC Group also granted BBVA a call option to purchase from CITIC Group such number of shares representing 4.9% of our outstanding shares immediately after the relevant call option closing, or as shall result in the aggregate shareholding percentage of BBVA to be increased to 9.9% of our outstanding shares immediately after the relevant call option closing, whichever is greater. The option is exercisable one year after the date on which dealings in our H Shares commence on the Hong Kong Stock Exchange. (3) CIFH and BBVA have the right to subscribe for additional H Shares at the OÅer Price. Please see ""Our Strategic and Other Investors Ì Rights and Obligations of BBVA Ì Anti-dilution Right'' and ""Our Relationship with CITIC Group and Connected Transactions Ì Our Relationship with Our Promoters Ì CIFH Top-Up'' for further details. (4) This shareholding percentage does not take into account events described in notes (1) and (2) above.

IX-7 APPENDIX IX STATUTORY AND GENERAL INFORMATION

Short Position

Number of H Shares Approximate percentage of in which the interested party shareholding in has or is deemed to have the registered capital of Name of interested party Capacity interest in our company

(1) CITIC Group ÏÏÏÏÏÏÏÏÏÏÏÏ BeneÑcial interest 52,892,289 See Note (1) (2) CITIC Group ÏÏÏÏÏÏÏÏÏÏÏÏ BeneÑcial interest The greater of (i) such See Note (2) number of shares representing 4.9% of our outstanding shares immediately after the relevant call option closing, or (ii) such number of shares which shall result in the aggregate shareholding percentage of BBVA being increased to 9.9% of our outstanding shares immediately after the relevant call option closing.

(1) CITIC Group has agreed to sell to BBVA 52,892,289 shares after the Ñrst anniversary of the Global OÅering, representing 0.17% of our outstanding number shares immediately prior to the Global OÅering. (2) In addition to the agreement to sell described in note (1) above, CITIC Group also granted BBVA a call option to purchase from CITIC Group such number of shares representing 4.9% of our outstanding shares immediately after the relevant call option closing, or as shall result in the aggregate shareholding percentage of BBVA to be increased to 9.9% of our outstanding shares immediately after the relevant call option closing, whichever is greater. The option is exercisable one year after the date on which dealings in our H Shares commence on the Hong Kong Stock Exchange.

4. OTHER INFORMATION

A. Estate Duty App 1A 10 Our directors have been advised that no material liability for estate duty under PRC law is likely to fall upon us, on the basis that there is no estate duty under the PRC law.

B. Litigation App 1A 40 Save as disclosed in the section headed ""Business Ì Legal and Administrative Proceedings'' of this prospectus, and, so far as our directors are aware, no member of the Group is involved in any material litigation, arbitration or administrative proceedings that could, individually or in the aggregate, have a material adverse eÅect on our Ñnancial condition. So far as our directors are aware, no material litigation, arbitration or administrative proceedings are pending or threatened.

C. Sponsors

The listing of our H Shares on the Hong Kong Stock Exchange is sponsored by China International App 1A 14(1) Capital Corporation (Hong Kong) Limited, CITIC Securities Corporate Finance (HK) Limited, Citigroup Global Markets Asia Limited, The Hongkong and Shanghai Banking Corporation Limited and Lehman Brothers Asia Limited. Each of China International Capital Corporation (Hong Kong) Limited, Citigroup Global Markets Asia Limited, The Hongkong and Shanghai Banking Corporation Limited and Lehman Brothers Asia Limited has declared pursuant to Rule 3A.08 of the Hong Kong Listing Rules that it is independent pursuant to Rule 3A.07 of the Hong Kong Listing Rules. CITIC Group holds an interest of approximately 28% in CITIC Securities Co. Ltd. and CITIC Securities Co. Ltd. indirectly holds approximately 88% shareholding in CITIC Securities Corporate

IX-8 APPENDIX IX STATUTORY AND GENERAL INFORMATION

Finance (HK) Limited. Accordingly, CITIC Securities Corporate Finance (HK) Limited is not considered independent pursuant to Rule 3A.07 of the Hong Kong Listing Rules.

D. Promoters The promoters of our Company are CITIC Group and CIFH. Save as disclosed in the prospectus, within the two years immediately preceding the date of this prospectus, no cash, security or beneÑt has been paid, allotted or given, or is proposed to be paid, allotted or given to the promoters named above in connection with the Global OÅering or the related transactions described in this prospectus.

E. Preliminary expenses App 1A 20(1) Our estimated preliminary expenses are approximately RMB 4.4 million which are payable by our company. As at the Latest Practicable Date, most of such expenses have been paid by us.

F. QualiÑcation and consents of experts App 1A 9(1) App 1A 9(3) The qualiÑcations of the experts who have given opinions in this prospectus are as follows:

Name of expert QualiÑcation of expert China International Capital Corporation (Hong Kong) LimitedÏÏÏÏÏÏÏ Deemed licensed under the SFO for type 1 (dealing in securities), type 4 (advising on securities), type 6 (advising on corporate Ñnance) and type 9 (asset management) as deÑned under the SFO CITIC Securities Corporate Finance (HK) Limited ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Licensed under the SFO for type 1 (dealing in securities) and type 6 (advising on corporate Ñnance) as deÑned under the SFO Citigroup Global Markets Asia Limited ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Licensed under the SFO for type 1 (dealing in securities), type 4 (advising on securities) and type 6 (advising on corporate Ñnance) as deÑned under the SFO The Hongkong and Shanghai Banking Corporation Limited ÏÏÏÏÏÏÏÏÏÏ A registered institution to conduct type 1 (dealing in securities), type 4 (advising on securities) and type 6 (advising on corporate Ñnance) regulated activities under the SFO and is also a licensed bank under the Banking Ordinance

IX-9 APPENDIX IX STATUTORY AND GENERAL INFORMATION

Name of expert QualiÑcation of expert Lehman Brothers Asia Limited ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Licensed under the SFO for type 1 (dealing in securities), type 2 (dealing in future contracts), type 4 (advising on securities) and type 6 (advising on corporate Ñnance) as deÑned under the SFO KPMG ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ CertiÑed Public Accountants King & WoodÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Registered law Ñrm in the PRC Sallmanns (Far East) LimitedÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Chartered Surveyors and Valuers

Each of the Joint Sponsors, KPMG, King & Wood and Sallmanns (Far East) Limited has given and has App 1A 9(2) not withdrawn their respective written consents to the issue of this prospectus with the inclusion of their reports and/or letters and/or valuation certiÑcates and/or the references to their names included herein in the CO S342B form and context in which they are respectively included.

G. Financial Advisors to the Company App 1A 38

China International Capital Corporation Limited, being the Company's Ñnancial advisor, advises generally on the reorganization and management structure of the company, assisting the Company in communicating with relevant regulatory authorities in obtaining their approvals for the reorganization and the Global OÅering, in identifying the parties involved in the Global OÅering, and in introducing strategic investors and obtaining relevant approvals.

China International Capital Corporation Limited and Merrill Lynch Far East Limited are appointed to act as advisors to our company in relation to the strategic investment process.

The Joint Sponsors have not relied on the work of the Ñnancial advisors in respect of the Global OÅering.

H. No Material Adverse Change

Save as disclosed in this prospectus, the directors believe that there has been no material adverse change in our group's Ñnancial or trading position since December 31, 2006.

I. Binding EÅect

This prospectus shall have the eÅect, if an application is made in pursuance hereof, of rendering all persons concerned bound by all the provisions (other than the penal provisions) of sections 44A and 44B of the Hong Kong Companies Ordinance so far as applicable.

J. Miscellaneous

Save as disclosed in this prospectus, as at the Latest Practicable Date:

(a) none of our directors, supervisors nor any of the parties listed in paragraph 4E of this Appendix is App 1A 13 interested in our promotion, or in any assets which have, within the two years immediately CO 3rd Sch(1)19 preceding the issue of this prospectus, been acquired or disposed of by or leased to us, or are proposed to be acquired or disposed of by or leased to any member of our Company and its subsidiaries;

(b) none of our directors, supervisors nor any of the parties listed in paragraph 4E of this Appendix is App 1A 47(1)(a) materially interested in any contract or arrangement subsisting at the date of this prospectus which &(b) is signiÑcant in relation to our business; App 1A 47(2)

IX-10 APPENDIX IX STATUTORY AND GENERAL INFORMATION

(c) save in connection with the Hong Kong Underwriting Agreement and the International Underwriting App 1A 47(1)(a) Agreement, none of the parties listed in paragraph 4E of this Appendix: &(b)

(i) is interested legally or beneÑcially in any of our shares or any shares in any of our subsidiaries; App 1A 9(1) or

(ii) has any right (whether legally enforceable or not) to subscribe for or to nominate persons to App 1A 9(1) subscribe for our securities;

(d) no amount or securities or beneÑt has been paid or allotted or given within the two years preceding App 1A 13 the date of this prospectus to any of our promoters nor is any such securities or amount or beneÑt CO 3rd Sch(1)16 intended to be paid or allotted or given;

(e) none of our directors or their respective associates has any interest in our top Ñve borrowers or our App 1A 47(2) top Ñve depositors;

(f) no authorized debentures of our Company and its subsidiaries have been issued; CO 3rd Sch(1) 25

(g) there is no arrangement under which any director has waived or agreed to waive future App 1A 33(2)(g) emoluments, nor has there been any waiver of emoluments during the current Ñnancial year; (h) save as those in the ordinary and usual course of our commercial banking business, there are no outstanding loans or guarantees granted or provided by any subsidiaries of our company to, or for the beneÑt of, any of our directors;

(i) no director has or has had any interest in any transaction which is or was unusual in its nature or App 1A 47(2) conditions or is or was signiÑcant to the business of our Company and its subsidiaries and which was eÅected by any subsidiaries of our Company in the current or immediately preceding Ñnancial year of our Company or which was eÅected during an earlier Ñnancial year and remains in any respect outstanding or unperformed;

(j) within the two years preceding the date of this prospectus, we have not issued nor agreed to issue App 1A 17 any share or loan capital fully or partly paid either for cash or for a consideration other than cash; App 1A 26(1)&(2)

(k) no share or loan capital of our company is under option or is agreed conditionally or unconditionally CO 3rd Sch(1)11 to be put under option; App 1A 27

(l) we have not issued nor agreed to issue any founder shares, management shares or deferred shares; App 1A 24

(m) none of the equity and debt securities of our company is listed or dealt with in any other stock CO 3rd Sch(1) 4 exchange nor is any listing or permission to deal being or proposed to be sought; App 1A 11

(n) we have no outstanding convertible debt securities; App 1A 32(1)

(o) our Company does not intend to apply for the status of a sino-foreign investment joint stock limited LR 19A.42(59) company and does not expect to be subject to the PRC Sino-foreign Joint Venture Law;

(p) within the two years immediately preceding the date of this prospectus, no commissions, discounts, CO 3rd Sch(1)14 brokerages or other special items have been granted or paid to any director, proposed director, promoter, any of the parties listed in paragraph 4E of this Appendix nor any other person in connection with the issue or sale of any share or loan capital of our Company or any of our subsidiaries;

(q) there are no arrangements in existence under which future dividends are to be waived or agreed to App 1A 12 be waived;

(r) there have been no interruptions in our business which may have or have had a signiÑcant eÅect on App 1A 28(6) our Ñnancial position in the last 12 months; and

(s) there are no restrictions aÅecting the remittance of proÑts or repatriation of capital by us into Hong App 1A 31 Kong from outside Hong Kong.

IX-11 APPENDIX IX STATUTORY AND GENERAL INFORMATION

K. Exemptions from Hong Kong Companies Ordinance Provisions and Parallel Rules under the Hong Kong Listing Rules

Property Valuation Report

According to the valuation report set out in Appendix V to this prospectus, as of January 31, 2007, we owned 248 properties or units with an aggregate gross Öoor area of approximately 655,289.99 square meters in the PRC and oÇce premises with an aggregate gross Öoor area of approximately 291.8 sq.m. in Hong Kong. As of January 31, 2007, we also contracted to acquire Ñve properties with an aggregate Öoor area of approximately 22,159.17 sq.m. in the PRC. In addition, as of January 31, 2007, we leased approximately 754 properties with an aggregate lease area of approximately 405,403.46 square meters in the PRC. Owing to the substantial number of properties involved, we have applied to the SFC for an exemption and the Hong Kong Stock Exchange for a waiver from strict compliance with certain of the valuation report requirements contained in paragraph 34(2) of the Third Schedule to the Hong Kong Companies Ordinance and Rules 5.01, 5.06 and 19A.27(4) and paragraph 3(a) of Practice Note 16 of the Hong Kong Listing Rules, respectively, on the grounds that:

(a) it would be unduly burdensome to include a fully compliant valuation report in this prospectus and the inclusion of such detailed information would be irrelevant to potential investors in a commercial bank; and

(b) it would be unduly burdensome to prepare an English translation of the report, as substantially all of the properties are located in the PRC and consequently the underlying valuation and title information is in Chinese.

The exemption has been granted by the SFC under section 342A(1) of the Hong Kong Companies Ordinance, subject to the following conditions:

(i) a valuation report in the Chinese language complying with all the requirements of paragraph 34 of the Third Schedule to the Companies Ordinance will be made available for inspection in accordance with Appendix X Ì ""Documents Delivered to the Registrar of Companies and Available for Inspection'';

(ii) the valuer's letter and the valuer's certiÑcate containing a summary valuation of all the Group's property interests be included in this prospectus in the form set out in Appendix V to this prospectus; and

(iii) this prospectus shall set out particulars of this exemption.

The waiver has been granted by the Hong Kong Stock Exchange from Rules 5.01, 5.06 and 19A.27(4) and paragraph 3(a) of Practice Note 16 of the Hong Kong Listing Rules, subject to the following conditions:

(i) a full valuation report in Chinese complying with all the requirements under the Listing Rules and paragraph 34 of Part II of the Third Schedule to the Companies Ordinance will be made available for inspection in accordance with Appendix X Ì ""Documents Delivered to the Registrar of Companies and Available for Inspection'';

(ii) a summary valuation of all property interests of us and our subsidiaries, as set out in Appendix V to this prospectus, has been included in this prospectus; and

(iii) we obtain a CertiÑcate of Exemption from the SFC in relation to compliance with relevant requirements under the Companies Ordinance.

We are of the view that the exemption from the SFC and the waiver from the Hong Kong Stock Exchange would not prejudice the interests of the investing public on the grounds mentioned above.

IX-12 APPENDIX IX STATUTORY AND GENERAL INFORMATION

L. Bilingual Prospectus The English language and Chinese language versions of this prospectus are being published separately, in reliance upon the exemption provided under section 4 of the Companies Ordinance (Exemption of Companies and Prospectuses from Compliance with Provisions) Notice (Chapter 32L of the Laws of Hong Kong).

IX-13 APPENDIX X DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES AND AVAILABLE FOR INSPECTION

DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES CO S342C LR 19.10(6) The documents attached to the copy of this prospectus and delivered to the Registrar of Companies in LR 19A.27(4) Hong Kong for registration were copies of the application forms, the statement of adjustments relating to the Accountants' Report prepared by KPMG, the written consents referred to in the section headed ""4. Other Information Ì F. QualiÑcation and Consents of Experts'' of Appendix IX to this prospectus and copies of the material contracts referred to in the section headed ""2. Further Information About Our Business Ì A. Summary of Material Contracts'' of Appendix IX to this prospectus.

DOCUMENTS AVAILABLE FOR INSPECTION App 1A 53(1)-(5) Copies of the following documents will be available for inspection at the oÇces of Skadden, Arps, Slate, Meagher & Flom at 42/F, Edinburgh Tower, the Landmark, 15 Queen's Road Central, Hong Kong, during normal business hours up to and including Wednesday, May 2, 2007:

(a) our Articles of Association in Chinese (together with a certiÑed English translation thereof);

(b) the Accountants' Report prepared by KPMG, the text of which is set out in Appendix I, together with the statement of adjustments;

(c) the letter relating to unaudited pro forma Ñnancial information, the text of which is set out in Appendix III;

(d) the letters relating to the proÑt forecast, the texts of which are set out in Appendix IV;

(e) the letter dated April 13, 2007, summary of values and valuation certiÑcate relating to the property interests of our Group prepared by Sallmanns (Far East) Limited, the texts of which are set out in Appendix V, and the full valuation report (in the Chinese language only) of Sallmanns (Far East) Limited referred to in Appendix X;

(f) service contracts between the directors, supervisors and us referred to in Appendix IX;

(g) the material contracts referred to in Appendix IX;

(h) the written consents referred to in Appendix IX;

(i) the PRC legal opinion issued by King & Wood, PRC Lawyers, our legal advisors on PRC law, dated March 16, 2007, as described in Appendix VII and;

(j) copies of the following PRC laws, together with unoÇcial English translations thereof:

(i) the PRC Company Law, the Special Regulations, the Mandatory Provisions;

(ii) the PRC Banking Regulatory Law;

(iii) the PRC Commercial Banking Law;

(iv) the PRC People's Bank of China Law;

(v) the Regulations of the State Council Concerning the Domestic Listed Shares of Joint Stock Limited Companies (December 25, 1995);

(vi) the Securities Law of the PRC amended and re-promulgated by the Standing Committee of the NPC on October 27, 2005;

(vii) the Opinion on the Further Promotion of the Regular Operation and In-Depth Reform of Companies Listed Overseas issued by the State Economic and Trade Commission and the CSRC on March 29, 1999;

X-1 APPENDIX X DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES AND AVAILABLE FOR INSPECTION

(viii) the Arbitration Law of the PRC promulgated by the Standing Committee of the NPC on August 31, 1994; (ix) the Civil Procedure Law of the PRC adopted at the fourth meeting of the seventh NPC, promulgated by the president of the PRC on April 9, 1991; and (x) the Provisional Measures Prohibiting Fraudulent Conduct Relating to Securities promulgated by the Securities Committee on September 2, 1993.

X-2 CITIC IPO-final o_p.fh11 4/10/07 1:57 PM 頁 2

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