2011 annual report - cebbank.com · † on 18 january 2011, the award list of 2010 wisemoney...

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2011 ANNUAL REPORT

Address: No.25 Taipingqiao Ave, Everbright Center, Xicheng District, Beijing P. R. China.Tel: (010)63636363Fax: (010)63639066; 63639088Customer Service: 95595Postal Code: 100033

China Everbright Bank Co., Ltd.

Important Information

1. The Bank’s Board of Directors, Board of Supervisors and Directors, Supervisors and Senior Management hereby undertake that

this Report is free from false statement, misleading representation or material omission, and they should be held severally and jointly

for the truthfulness, accuracy and completeness of the contents herein.

2. The 28th meeting of the Fifth Board of Directors of the Bank was held in Beijing on 17 April 2012, at which the Bank’s Annual

Report 2011 and its summary were deliberated and passed. 14 out of 15 eligible directors attended the meeting when Independent

Director Wang Wei, authorised Independent Director James Parks Stent to exercise voting right on his behalf.

3. KPMG Huazhen audited the Bank’s fi nancial statement 2011 in accordance with the Standards on Auditing for Certifi ed Public

Accountants of People’s Republic of China and issued a standard unqualifi ed auditor’s report.

4. Tang Shuangning, the Bank’s Chairman, Guo You, President, Lu Hong, Executive Vice President in charge of fi nance and

Chen Yu, General Manager of Planning & Finance Department hereby make representation that they warrant the truthfulness and

completeness of the fi nancial statements in this report.

5. Hereinafter “the Bank”, “the Company”, “the Whole Bank” and “China Everbright Bank” refer to China Everbright Bank Co., Ltd,

and “the Group” refers to China Everbright Bank Co., Ltd. and its affi liated subsidiaries.

Board of Directors of China Everbright Bank Co., Ltd.

17 April 2012

The calligraphy printed on the cover “苟日新,日日新,又日新” written by Tang Shuangning means “If an innovation is needed, it

should be pursued continuously and daily.”

ContentsCompany Profi le 002

Honors and Awards 004

Message from the Chairman 006

Message from the President 008

Organizational Chart 010

Financial Highlights 012

Management Discussion and Analysis 017

Changes in Share Capital and Shareholders 064

Directors, Supervisors, Senior Management, Staff and Institutions 070

Corporate Governance 087

General Meeting of Shareholders 093

Report of the Board of Directors 095

Report of the Board of Supervisors 106

Signifi cant Events 108

Index to Information Disclosure during the Reporting Period 111

Written Confi rmation of the Bank’s Directors and Senior Management for Annual Report 2011 114

Auditors’ Report, Financial Statements andNotes to the Financial Statements of 2011 118

Address Book of Head Offi ce and Branches 246

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Company Profile

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(I) Basic information

Legal Chinese name: 中国光大银行股份有限公司 (Abbreviation: 中国光大银行、光大银行)Legal English name: CHINA EVERBRIGHT BANK CO., LTD

Legal Representative: Tang ShuangningBoard Secretary: Lu HongSecurities Affairs Representative: Li Jiayan

Registered address: BeijingBusiness address: China Everbright Center, No. 25 Taipingqiao Ave, Xicheng District, BeijingPostcode: 100033Website: www.cebbank.comE-mail: [email protected]

Contact Address: China Everbright Center, No. 25 Taipingqiao Ave, Xicheng District, BeijingTel: 010-63636363Fax: 010-63639066E-mail: [email protected] hotline: 010-63636388

Stock exchange for listing: Shanghai Stock ExchangeStock short name: Everbright BankStock code: 601818

Newspaper designated for information disclosure: China Securities Journal, Shanghai Securities News, Securities Times, Securities Daily

Website designated by China Securities Regulatory Commission for publication of annual reports: www.sse.com.cnPlace of storage of annual reports: Offi ce of the Board of Directors of the Bank

Other information:Initial registration date: June 18, 1992Initial registration place: BeijingDate of change of registration: March 9, 2011Place of change of registration: BeijingBusiness license registration number for enterprise legal person: 100000000011748Tax registration No.: 110102100011743Code of organization: 10001174-3Name of accounting fi rm employed: KPMG HuazhenBusiness address: 8/F, Offi ce Tower E2, Oriental Plaza, Beijing

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(II) Company profi le

Founded in August 1992, China Everbright Bank accomplished the shareholding system reform in January 1997, and successfully completed its initial public offering and went listed on the Shanghai Stock Exchange on August 18, 2010. As of the end of the reporting period, the Bank had total assets of RMB1,733,346 million. It has established a nationwide business network with its 689 branches and outlets in 72 economic hubs and cities of the 26 provinces, autonomous regions and municipalities of China. Everbright Shaoshan Village and Township Bank Co., Ltd. and Everbright Financial Leasing Co., Ltd., two subsidiaries of the Bank, reported good performance, demonstrating benefi t of the Bank’s comprehensive operation. Products such as Sunshine Wealth Management were further accepted by consumers, representing the advantages of its emerging business; The “Water Cellars for Mothers” public welfare project that the Bank implemented for years has manifested its commitment to corporate social responsibilities and thus was highly valued by the society. The Bank’s brand building efforts have won multiple honors. Over the years, along with the development of the Chinese economy and fi nancial industry, the Bank has made continuous innovations and forged ahead with determination, gaining good operational achievements while offering the society and customers quality fi nancial services. It has developed into a national joint-stock commercial bank of great social infl uence and a public company with healthy operation.

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Honors and Awards

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• On 6 January 2011, Sunshine Deposit Loan In-One Card (陽光存貸合一卡) won Product of the Year Award of Herald of China (“先驅中國”年度產品獎) in Herald of China Appraisal 2010 (“先驅中國”2010年度評選活動) hosted by International Herald Tribune of Xinhua News Agency. It also won awards from CAAC Journal, Zhizao • Decade — Looking for New Business Forces Affecting China (智造 • 十年 — 尋找影響中國的商業新勢力) forum, Business Times and Money Weekly respectively.

• On 7 January 2011, six branches of the Bank were selected as Top 100 Chinese Banking Industry Service Model 2011 (2011年度中國銀行業“百佳”文明規範服務示範單位評選活動) by China Banking Association.

• On 12 January 2011, the Bank won the Best Service Team Award of the Year (年度最佳服務團隊獎項) at “Golden Tripod Award” China High-end Private Wealth Management Awards Ceremony (“金鼎獎”中國高端私人理財頒獎典禮) hosted by National Business Daily.

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• On 18 January 2011, the award list of 2010 Wisemoney Financial Wealth Management Ranking (卓越2010年度金融理財排行榜) was published and the Bank won Excellent Service Innovation Bank Award (“卓越服務創新銀行”獎); Guo You, the President, won the Outstanding Banker Award (“卓越銀行家”獎); Sunshine Smart Current Deposit (陽光理財活期寶) won Excellent Financial Product Award (“卓越金融理財產品”獎); Sunshine Deposit Loan In-One Card (陽光存貸合一卡) won Excellent Bank Card Award (“卓越銀行卡”獎); Easy Loan with Shops (鋪易貸) (retail commercial property loan) won Excellent Personal Loan Product Award (“卓越個貸產品”獎); Sunshine Value Creation Plan (陽光創值計劃) won Excellent SME Financial Service Brand Award (“卓越中小企業金融服務品牌”獎).

• On 28 March 2011, the sunshine wealth management brand of the Bank was selected as the Best Wealth Management Service Brand (最佳理財服務品牌) in Financial Product Appraisal 2010 (2010年度理財產品評選) hosted by Money Weekly.

• In April 2011, the Photosynthetic Power Low-carbon Financial Service Package Marketing Case (光合動力低碳金融服務套餐營銷案例) of the Bank was selected as Top Ten Financial Products (corporate banking category) at the China Financial Marketing Awards Ceremony 2010 (2010中國金融營銷獎頒獎典禮) hosted by The Banker.

• On 22 June 2011, the Bank won the Best Charity Contribution Award (最佳公益慈善貢獻獎) at Chinese Banking Industry Social Responsibility Report Release, Evaluation and Honoring & The First Industry Social Responsibility Round Table Meeting 2010 (2010年度中國銀行業社會責任報告發布、評比表彰暨首届行業社會責任圓桌會議) held by China Banking Association in Beijing.

• On 26 June 2011, the Bank was selected as Chinese Voluntary Emissions Reduction Pioneer Enterprise 2010 (2010年度中國自願减排先鋒企業) in the list of Chinese Voluntary Emissions Reduction Enterprise (中國企業自願减排排行榜) — the fi rst enterprise ranking by voluntary greenhouse gas emission reduction — released by China Beijing Environment Exchange.

• On 31 August 2011, the Bank won the Best Wealth Management Institution Award 2010–2011 (2010–2011年度最佳財富管理機構獎), and the LOHAS Sunshine (陽光樂活), the Bank’s marketing campaign, won Financial Marketing Award 2010–2011 (2010–2011年度金融營銷獎) at the China Financial Marketing Summit Forum & The Fourth China Wealth Management Billboard 2011 (2011中國金融營銷高峰論壇暨第四届中國理財總評榜) by Money Talks and China Mainstream Media Wealth Management Alliance (中國主流媒體理財聯盟).

• On 24 September 2011, the Whole-process Operation Marketing Case of the Bank won Silver Award, and its E-banking Marketing Case won the Third Prize for fi nancial group in China Outstanding Marketing Award Finals 2010–2011 (2010–2011年度中國杰出營銷獎總决賽) hosted by The Economic Observer.

• On 24 September 2011, the Bank’s 95595 customer service center won multiple individual and group awards, such as Best Outstanding Administrator Award for Customer Service Center (客戶服務中心最佳杰出管理人獎) in Excellence Award Appraisal 2011 (2011年優秀獎評選) by Customer Service Center Development Alliance of China’s Financial Industry (中國金融業客服中心發展聯盟).

• On 27 September 2011, the business case of Everbright Sunshine Cash Management (光大陽光金管家) won the Excellence Award for China Best Brand Building Case (“中國最佳品牌建設案例”優秀獎) in the 7th China Best Brand Building Case Appraisal (中國最佳品牌建設案例評選) by 21st Century Business Herald and Interbrand, the world’s largest brand consulting group.

• On 19 October 2011, the Bank was selected as CCTV China Brand of the Year 2011 (2011 CCTV中國年度品牌) for its outstanding performance on brand building, business innovation, sunshine service and other aspects at CCTV China Brand Release 2011 (2011 CCTV中國年度品牌發布) held in Beijing, becoming the only selected fi nancial enterprise. This ceremony was initiated and guided by institutions including National Development and Reform Commission, Ministry of Commerce of the People’s Republic of China, State Administration for Industry & Commerce of the People’s Republic of China, General Administration of Quality Supervision, Inspection and Quarantine of the People’s Republic of China and China Consumers’ Association, hosted by CCTV, China Network Television, and organized by Brand • International channel of China Network Television.

• On 16 November 2011, the Bank won the Best Enterprise Annuity Service Award at the award presentation ceremony for Chinese CFOs’ Most Reliable Bank 2011 (2011年度中國CFO最信賴的銀行) by CFO magazine.

• On 18 November 2011, the Bank’s Online Banking won the Best Enterprise Online Banking Award (2011年度最佳企業網銀獎) at the ceremony for the 9th China Finance and Economics Ranking (第九届中國財經風雲榜) by Hexun.com, and also Best Customer Experience Award for Chinese Online Banking 2011 (2011年中國網上銀行最佳客戶體驗獎) at Annual Conference for Chinese Online Banking 2011 (2011中國電子銀行年會).

• On 28 November 2011, the Bank was selected as Top 10 Commercial Banks Supporting the Development of SMEs in China 2011 (2011年度全國支持中小企業發展十佳商業銀行”獎) at the 6th Annual Conference of Chinese SMEs (第六届中國中小企業家年會).

• On 3 December 2011, the Bank won the Brand Innovation Award 2011 (2011年品牌創新獎) at the 6th 21st Century Asian Financial Annual Conference and Competitiveness Ranking Report Release Ceremony of Asian Banks 2011 (第六届21世紀亞洲金融年會暨“2011年亞洲銀行競爭力排名研究報告”發布儀式) by 21st Century Business Herald.

• On 6 December 2011, the Bank was selected as the Most Respected Domestic Invested Bank in China 2011 (2011年中國最受尊敬中資銀行) and the Best Retail Bank in China 2011 (2011年中國最佳零售銀行); Sunshine Wealth Management was selected as the Best Bank Wealth Management Brand in China 2011 (2011年中國最佳銀行財富管理品牌) and also the Best Design and Innovation Team 2011 (2011年度最佳設計與創新團隊); Sunshine debit card was selected as Best Debit Card 2011 (2011年最佳借記卡) at China Retail Bank Summit 2011 (2011中國零售銀行峰會) and The 4th Most Respected Bank & Best Retail Bank Awards Ceremony (第四届中國最受尊敬銀行暨最佳零售銀行頒獎典禮) hosted by Money Weekly.

• On 9 December 2011, the Bank won both Most Innovative Bank (最具創新力銀行) and Social Responsibility Award of Banking Industry (銀行業社會責任獎) at Oriental Wealth Billboard 2011 (2011東方財富風雲榜) awards ceremony held in Beijing.

• On 17 December 2011, the sunshine series brand of the Bank was selected as Golden Infl uence Brand of the Year (年度金牌影響力品牌) at the awards ceremony of Golden Pixiu Award (金貔貅獎) for “NO1 Wealth Management” (理財我最牛) — The 2nd China Golden Wealth Management Top 10 (第二届中國金牌理財Top10總評榜) held in Beijing and jointly hosted by Financial Money and the Institute of Finance and Banking, the Chinese Academy of Social Sciences.

• On 19 December 2011, the Bank was selected as the Excellent Brand Building Bank (卓越品牌建設銀行) in the 4th China Excellent Bank Appraisal (第四届中國卓越銀行評選) by The Economic Observer.

• On 20 December 2011, the Bank was selected as Top 10 Institutions Offering SME Financial Services (中小企業金融服務十佳機構) and won the Best E-banking Award (最佳電子銀行獎) in Chinese Financial Institutions Gold Medal List “Golden Dragon Award” Appraisal (中國金融機構金牌榜“金龍獎”評選活動) by Financial Times and the Institute of Finance and Banking, the Chinese Academy of Social Sciences.

• On 29 December 2011, the Bank received the Certifi cate Bonds Underwriting Award of Excellence 2011 (2011年度憑證式國債承銷優秀獎) for its outstanding performance on bonds issuance at the Review and Award Presentation Ceremony of Bonds Issuance 2011 (2011年國債發行工作總結表彰大會) in Haikou by Ministry of Finance and the People’s Bank of China.

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“If an innovation is needed, it should be pursued continuously and daily.”

China Everbright Bank has always been committed to growth through innovation. In 2011, the Bank’s operation and management focused on exploring “model-based operation”, streamlining business structure and pursing meaningful development. The past year has witnessed the Bank’s efforts to pay off the society with following actions:

New high in business performance. In the face of complex domestic and international environment, the Bank implemented the strategy of “calmly observing, enhancing itself, maintaining initiative and actively responding”. Building on its successful A share listing, the Bank’s operating results recorded a new high, with its total assets amounting to RMB1,733,346 million and net profi t RMB18,085 million. Its non-performing loans (NPL) ratio dropped to 0.64% and its provision coverage ratio rose to 367.00%. The Bank accelerated the establishment of new branches and outlets, while its emerging business grew rapidly. In addition, its brand building efforts were paid off in many honors and awards.

New ideas of strategic management. Regarding strategy as the navigator for company’s development, the Bank made its own assessment of the environment and tried to keep pace with the time by reviewing and amending its medium and long term strategies. With “seeking more meaningful development” as its guiding spirit, the new strategy defi ned its vision of “becoming the most innovative bank in China”. By modifying its market positioning and emphasizing its innovative capabilities, the Bank worked hard to play a leading role in selected sections of the market, so as to achieve sustainable and balanced rapid growth.

New endeavors in capital market. To march into the international market, the Bank seized the opportunities to actively prepare its H share IPO in the Hong Kong market. It has carefully prepared public offering proposal, successfully conducted due diligence and obtained regulatory approvals, effectively organized non-deal road-

Message from the Chairman

Tang Shuangning

Chairman

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shows and intensively selected cornerstone investors. With all preparations done, the Bank is well positioned to proceed the offering when the capital market recovers and the time window arises. In order to support the H share IPO campaign and enhance shareholders’ confi dence, the Bank formulated its dividend policy for the next three years, putting in place a better mechanism for its shareholder return.

New premises for better image. In May 2011, the Head Offi ce of the Bank was moved into a new premise in the Financial Street area of Beijing. As the China Everbright Center, the new offi ce building, became a new landmark of the city, the corporate image, employee morale and the value of state-owned assets of the Bank were improved signifi cantly. The management and staff working at the Bank for 19 years would achieve greater success in a better working environment.

Looking forward, the Bank will continue to seize opportunities to actively enhance its management and coordinate its development in 2012 through concerted management, calm response, steady progress and meaningful development. The Bank is marching forward in achieving new strategic objectives, solving the diffi culty of tight liquidity, breaking the capital bottleneck, enhancing profi tability and promoting a prudential and healthy operating principle, in order to create sustainable value for its investors.

Chairman

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Message from the PresidentIn 2011, facing complex and volatile domestic and international economic and fi nancial environment, and pressures for commercial banks by changes in domestic macro-economic policies and industrial policies, the Bank implemented the strategy of “calmly observing, enhancing itself, maintaining initiative and actively responding”, and stroke a balance among the scale, speed, effi ciency and quality of its growth so as to achieve more meaningful development.

At the end of 2011, the Bank’s total assets amounted to RMB1,733,346 million, representing a year-on-year increase of 16.81%. Its total loans to customers increased by 14.22% to RMB890,365 million. Its customer deposits increased by 15.25% to RMB1,225,278 million. Its profi tability continued to improve signifi cantly with its net profi t reaching RMB18,085 million, up by 41.36% year-on-year. Its NPL balance and ratio both continued to decrease. As at the end of the year, its NPL ratio dropped to 0.64%, 0.11 percentage points lower than that of the beginning of the year. The provision coverage ratio rose to 367.00%, representing an increase of 53.62 percentage points as compared with the beginning of the year. In May, the Head Offi ce of the Bank was relocated to the China Everbright Center, which has successfully promoted the corporate image of the Bank. In November, the construction of Tianjin Back-offi ce Service Center of the Bank commenced. As the establishment of its branches and outlets maintained rapid growth, the Financial Market Center, a department of the Head Offi ce, was inaugurated in Shanghai. The Bank established 1 tier-1 branches, 10 tier-2 branches and 71 outlets last year, laying a solid foundation for the Bank’s future development and expansion. The Bank achieved remarkable progress in its brand building. It was awarded “2011 CCTV China Brand of the Year” and received more than 60 awards throughout the year, including “The Brand Innovation Award for 2011” and “Most Innovative Bank”.

Guo YouPresident

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Emerging businesses such as interbank, investment banking, custody, credit card, wealth management and e-banking gained momentum. The Bank’s infrastructure and management such as asset and liability management, risk control and technological operation safety program have been improved signifi cantly.

In 2012, guided by its strategic plan for development, the Bank will seek steady and stable progress by streamlining its business structure and enhancing its risk management. While dedicating itself to the innovation of service models to improve the service qualities, the Bank will take full advantage of information technology to support service innovation in an effort to improve its core competitiveness and develop itself into the most innovative bank in China. It will continue to promote model-based operation, expand its customer base and become a differentiated leading player in selected sections of the market so as to achieve “more meaningful development”.

President

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Organizational Chart

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Strategy CommitteeAudit Committee

Risk Management CommitteeNomination Committee

Remuneration CommitteeRelated Party Transaction Control Committee

Asset and Liability Management CommitteeCustomer Development Committee

Risk Management CommitteeInnovation Committee

Strategy of Science and Technology CommitteeSunshine Service Management Committee

Brand Management CommitteeCredit Approval Committee

Retail Development CommitteeLarge Expenditure Approval Committee

Tendering and Purchase Administration CommitteeNPA Administration Committee

Internal Control and Compliance Pre-warning CommitteeInstitutional Construction Steering Group

Short-term Financing Bond Underwriting CommitteeEnterprise Annuity Management Committee

Confi dentiality CommitteeContingency Steering Group

Beijing BranchTianjin Branch

Shijiazhuang BranchTaiyuan Branch

Shenyang BranchChangchun Branch

Dalian BranchHeilongjiang Branch

Shanghai BranchNanjing BranchSuzhou Branch

Hangzhou BranchNingbo BranchHefei Branch

Fuzhou BranchXiamen Branch

President

Shareholders Meeting

Board of Directors

Offi ce of the Board of Directors

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Central Offi cePlanning and Finance Dept.

Treasury Dept.Investment Banking Dept.

Credit Approval Dept.Risk Management Dept.

Legal and Compliance Dept.Trade Banking Dept.

Special Loan Administration Dept.Corporate Banking Dept.

SME Dept.Retail Banking Dept.

Financial Insitutitions Dept.Finance Market Center

Strategy Management Dept.Electronic Banking Dept.

Information Technology Dept.Operation Management Dept.

Internal Audit Dept.Inspection Offi ce

Human Resources Dept.Supervision and Security Dept.Investment and Custody Dept.

Credit Card CenterKey Infrastructure Construction Offi ce

Nanning BranchHaikou Branch

Chengdu BranchKunming Branch

Xi’an BranchWuxi Branch

Nanchang BranchHuhhot BranchUrumchi Branch

Hong Kong Representative Offi ce

Jinan BranchQingdao BranchYantai Branch

Zhengzhou BranchWuhan Branch

Changsha BranchGuangzhou BranchShenzhen BranchChongqing Branch

Everbright Shaoshan

Village and

Township Bank Co., Ltd.

Everbright Financial

Leasing Co., Ltd.

Board of Supervisors

Offi ce of the Board of Supervisors

Nomination Committee Supervisor Committee

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Financial Highlights

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(I) Key fi nancial data and indicators

Unit: RMB million

Items Amount

Operating profi t 24,147Total profi t 24,211Net profi t attributable to equity shareholders of the Bank 18,068Net profi t attributable to equity shareholders of the Bank, net of non-recurring profi ts and losses 18,023Net cash fl ows from operating activities 46,333

Net of non-recurring profi ts and losses items and amount

Unit: RMB million

Items Amount

Non-operating income 126Non-operating expenses 62Total non-recurring profi ts and losses items 64Impact of income tax of non-recurring profi ts and losses items 18After-tax impact of non-recurring profi ts and losses, net 46

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(II) Key accounting data and fi nancial indicators for the last three years

Items 2011 2010 2009

Operating results (RMB million)Operating income 46,072 35,532 24,259Total profi t 24,211 17,111 10,492Net profi t attributable to equity shareholders of the Bank 18,068 12,790 7,643Net profi t attributable to equity shareholders of the Bank, net of non-recurring profi ts and losses 18,023 12,696 7,671Net cash fl ows from operating activities 46,333 13,659 24,506

Calculations per share (RMB)Net asset per share attributable to shareholders of the Bank 2.38 2.01 1.44Basic earnings per share 0.45 0.36 0.26Diluted earnings per share 0.45 0.36 0.26Basic earnings per share after deducting non-recurring profi ts and losses 0.45 0.36 0.26Net cash fl ow per share from operating activities 1.15 0.38 0.82

Scale indicators (RMB million)Total assets 1,733,346 1,483,950 1,197,696 Balance of loans 890,365 779,518 648,969 — Normal loans 884,631 773,687 640,842 — Non-performing loans 5,734 5,831 8,127 Provisions for impairment losses on loans 21,043 18,273 15,765Total liabilities 1,637,196 1,402,487 1,149,575 Balance of deposits 1,225,278 1,063,180 807,703 — Corporate demand deposits 441,296 422,338 327,176 — Corporate time deposits 548,472 474,427 345,082 — Savings demand deposits 78,961 59,374 49,706 — Savings time deposits 156,549 107,041 85,739 Placements from banks and other fi nancial institutions 27,362 18,214 23,091Total equity 96,150 81,463 48,121

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(II) Key accounting data and fi nancial indicators for the last three years(Continued)

Items 2011 2010 2009

Profi tability indicators (%)Return on average total assets 1.12 0.95 0.75Return on average equity 20.44 20.99 19.43Fully diluted return on equity 18.83 15.72 15.89Net interest spread 2.30 2.06 1.87Net interest margin 2.49 2.17 1.97Cost-to-income ratio 31.95 35.44 39.3

Asset quality indicators (%)Non-performing loan ratio 0.64 0.75 1.25Provision coverage ratio 367.00 313.38 193.99Total loan reserve ratio 2.36 2.34 2.43Normal loan migration ratio 0.74 0.87 1.49Special mention loan migration ratio 2.47 1.26 6.91Substandard loan migration ratio 56.43 44.97 71.05Doubtful loan migration ratio 15.99 12.89 29.19

Note: 1. Loans from customers and total advances include fi xed-rate personal housing loan measured at designated fair value, and relevant asset quality indicators are stated accordingly; deposits include structural deposits measured at designated fair value.

2. Migration ratio is calculated in accordance with the relevant regulations of CBRC. Normal loan migration ratio = balance of normal loan at the beginning of the period carried forward as balance of latter four categories of loans at the end of the period/the portion of normal loan at the beginning of the period being loan at the end of the period × 100%; special mention loan migration ratio = balance of special mention loan at the beginning of the period carried forward as balance of non-performing loan/the portion of special mention loan at the beginning of the period being loan at the end of the period × 100%; substandard loan migration ratio = balance of substandard loan at the beginning of the period carried forward as balance of doubtful loan and loss loan at the end of the period/the portion of substandard loan being loan at the end of the period × 100%; doubtful loan migration ratio = balance of doubtful loan at the end of the period carried forward as loss loan at the end of the period/the portion of doubtful loan at the beginning of the period being loan × 100%.

(III) Supplemental fi nancial indicators

Unit: %

Items Standard valueDecember 31,

2011December 31,

2010December 31,

2009

Liquidity ratio Renminbi 25 37.67 45.63 35.15Foreign currency 60 70.94 95.81 42.81

Loan to deposit ratio Renminbi 75 72.28 71.15 77.19Currencies converted into Renminbi

75 71.67 71.63 78.15

Proportion of placements

Proportion of placements from banks

4 1.68 1.38 2.78

Proportion of placements with banks

8 6.57 2.19 0.94

Loan exposure to single largest customer 10 5.58 4.12 5.67Loan exposure to top ten customers 50 31.34 33.51 48.16

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(IV) Capital composition and changes during the last three years

Unit: RMB million

ItemsDecember 31,

2011December 31,

2010December 31,

2009

Net capital 119,890 103,312 70,512Incl: Core capital 90,771 77,638 47,709

Supplementary capital 31,922 28,477 25,606Deductions (2,803) (2,803) (2,803)

Risk weighted assets, net 1,129,147 932,933 676,284Market risk capital 381 356 213Capital adequacy ratio (%) 10.57 11.02 10.39Core capital adequacy ratio (%) 7.89 8.15 6.84

(V) Items measured at fair value

The Bank will adopt market quotation as fair value when reliable market quotation is available. Otherwise, it will adopt valuation techniques, such as comparison with other similar fi nancial assets, the discounted cash fl ows and option pricing, etc.. Parameters adopted comprise risk-free interest rates, benchmark interest rates, credit spreads and exchange rates. When using the discounted cash fl ow method, the management will try their utmost to estimate the cash fl ows accurately, while referring to similar fi nancial products for discount rates.

Items relating to fair value measurement

Unit: RMB million

ItemsJanuary 1,

2011

Gain/(loss)on changes of fair value for the year

Accumulated fair value changes included

in interests

Impairment provision

for the yearDecember 31,

2011

Financial assets held-for-trading 22,397 18 — — 22,727Positive fair value of derivatives 3,025 (763) — — 2,262Available-for-sale fi nancial assets 77,142 — (225) — 54,403Total fi nancial assets 102,564 (745) (225) — 79,392Total fi nancial liabilities 36,430 (297) — — 49,540

Note: There is no inevitable articulation among the items movements of balance sheet as set out above.

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(V) Items measured at fair value (Continued)

Foreign fi nancial assets and fi nancial liabilities held

Unit: RMB million

ItemsJanuary 1,

2011

Gain/(loss)on changes of fair value for the year

Accumulated fair value changes included

in interests

Impairment provision

for the yearDecember 31,

2011

Positive fair value of derivatives 1,294 (290) — — 1,004Loans and advances 22,069 — — (30) 23,577Available-for-sale fi nancial assets 923 — (33) — 770Held-to-maturity investments 1,019 — — — 842Total foreign fi nancial assets 25,305 (290) (33) (30) 26,193Total foreign fi nancial liabilities 40,174 53 — — 51,544

Note: There is no inevitable articulation among the items movements of balance sheet as set out above.

17

Management Discussion and Analysis

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(I) Review of Economic and Financial Environment

Amidst the complicity and diffi culty of the global economy in 2011, the world economic growth lost steam. With worsening European sovereign debt crisis, downgraded U.S. sovereign credit rating and sinking investors confi dence in the economic outlook, the economic growth of developed countries fell and that of developing countries slacked, resulting in the sluggish recovery of the global economy. The unemployment rate in Europe and the U.S. moved between 9 to 10%. The deteriorating debt crisis posed threats to the banking system. Standard & Poor’s lowered the long-term debt credit rating of the U.S. to “AA+”. The growth rate of emerging markets was 6.4%, decreased by 0.9 percentage points year-on-year.

In 2011, with its proactive fi scal policy and prudent monetary policy, China maintained its relatively fast economic growth, when its GDP grew by 9.2%. China’s total investment in fi xed assets expanded by 23.8% year-on-year, while its total retail sales of consumer goods rose by 17.1% and total import and export value up by 22.5%.

The People’s Bank of China, which was committed to keeping the keynote of “prudent policy”, enhanced its focus, fl exibility and foresight of the policy. Measures were taken during the year to address the infl ationary pressure by tightening liquidity so as to ensure stable economic development. At the end of the year, credit control was eased moderately to prevent the risk of economic downturn. RMB loans increased by RMB7.47 trillion in 2011, a decrease of RMB390.1 billion over 2010. M2 and M1 grew by 13.6% and 7.9% over 2010 respectively.

In addition to its stringent requirement of the loan-to-deposit ratio and capital adequacy ratio of the banking industry, the regulatory authority took actions to prevent the risks of Local Government Funding Vehicles (LGFVs) and continued to implement its real estate regulation policies. With the strict implementation of “Three Methods and One Guideline”, it strengthened risk control and compliance management. It was committed to a more balanced credit structure by enhancing fi nancial services for small enterprises and improving fi nancial services related to agriculture or villagers. It strengthened the regulation of service charges of commercial banks. Regulations and measures such as the Guidelines on Implementation of New Regulatory Standards in

the China Banking Industry and the Measures on Sales of Wealth Management Products of Commercial Bank were promulgated.

In 2011, the comprehensive strength and international status of Chinese banking industry were enhanced signifi cantly, with their total assets reaching RMB111.5 trillion as at the end of the year, up by 18.3% year-on-year. According to the UK magazine Banker’s World Banks ranking in July 2011, 15 Chinese banks were among the world’s top 25 fastest growing banks, while 3 Chinese banks were ranked among the fi rst 10 of the Top 1000 World Banks. China Everbright Bank was ranked 101st, representing a rise of 35 places over 2010.

18

Management Discussion and Analys is

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(II) Review of Main Work

1. Development strategic plan amended to enhance business strength

With “seeking more meaningful development” as its guiding spirit, the Bank’s amended development strategy and defi ned its vision of “becoming the most innovative bank in China”, emphasizing the forging of new competitiveness and strengths through innovation. In adjusting its market positioning, the Bank’s corporate banking business will increase the proportion of small and medium-sized enterprises while maintaining the focus on large- and medium-sized customers. Its retail banking business will focus on serving mid- and high-end customers and try to expand the high net worth customer base. On the basis of its existing development model, the Bank will enhance the application of information technology and the innovation of its service model. The Bank will continue to implement the model-based operation, which features customer centricity and will provide standardized services with clear procedures and batch processing capability. The bank will speed up the development of its SME as well as small- and micro-enterprise fi nancial service, so as to raise their proportions among all businesses of the bank. The bank will also strengthen its capability of providing electronic service and improve the functions of information service both for employees and customers, so as to become a leading provider of E-service in the industry.

2. Faster structural change for more balanced business growth

In 2011, the Bank adjusted its asset structure with the following actions. (1) It intensifi ed the management of LGFV loans by strictly controlling new loans, gradually reducing existing loans, adjusting risk weighted ratio, implementing list-based management, and timely taking preventive measures against potential loan risks. (2) It enhanced the development of SME lending business and trade fi nance business by allocating majority new credit resources to support SME business, strengthening guidance for SME sales and marketing and developing dynamic project reserve for SME business. (3) It focused on certain featured businesses. Economies of scale of its credit card business were materialized, while its emerging businesses such as wealth management, investment banking, custody, trade fi nancing, corporate annuity and cash management, maintained strong momentum and became important source of differentiation.

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3. Implementation of model-based operation to seek “meaningful development”

The Bank was committed to “meaningful development” by implementing model-based operation in 2011. With customer-centric approach, coordinated resources and improved effi ciency in providing a set of fi nancial solutions for customers, advantages of its model-based operation gradually demonstrated. Its corporate banking business explored new opportunities in industries such as energy, pharmacy, white wine, electronic appliance and ship-building, and launched new models like “Medical Insurance Model (醫保通)”, “Demand and Supply Model (供需通)” and “B2B Model (商商通)”. Its SME banking business developed specifi c model-based solutions for several types of SMEs, such as SME clusters engaged in the same industry, SMEs participating in supply chains, SMEs providing ancillaries or SMEs related to high technologies. Its trade banking business focused on factoring and commodity fi nancing products, making them model-based products with growing brand advantage and market infl uence. Its retail banking business, guided by the concept of “seeking customers with platforms based on solution models”, emphasized the expansion of major model-based operation projects, enhanced micro-fi nance business models such as business circle or supply chain fi nancing, wholesale trade fi nancing, retail outlets fi nancing and property maintenance fi nancing, and vigorously explored new business channels and new sectors.

4. Technological development for stronger R&D capabilities and better E-services

In 2011, in order to develop a long term safe and effective operation system, the Bank completed the restructuring of its IT organization and reinforced risk management, quality control and contingency response exercises, which ensured the Bank’s smooth operation and management with fewer cases of risk than that of 2010. In addition, the Bank improved its own research and development capability, particularly for the some key business sectors. The Bank took over the management of core system from outsourced partners and pushed forward the development of information technology system for major business lines such as E-banking, retail customer relationship management, IC card and the New Basel Accord. The Bank developed its mobile banking applications for iPhone and iPad, while promoted internet payment business and enhanced its cooperation with third party payment platforms on deposit custody or other banks, with 54 new services launched.

5. Internal control system building for comprehensive risk management

The Bank strengthened the foundation of risk management. By implementing the New Basel Accord, the Bank improved its comprehensive risk management framework covering corporate governance, decision-making process, limit management, risk measurement and information system, and facilitated the integration of risk management, capital management and asset and liabilities management. The Bank enhanced IT risk management system to prevent operational risk. Regarding compliance as a vital issue for the Bank, it reviewed the rules and regulation system for a stronger foundation of compliance management. The Bank pushed forward the implementation of basic internal control guidelines and improved the establishment of internal control system. The Bank strengthened the compliance guidance, early-warning and surveillance while focused on legal review. The Bank implemented a “four-in-one” internal supervision mechanism by combining the efforts of four departments of supervision, inspection, compliance and auditing to prevent and address potential risks. Anti-corruption culture was promoted among its employees by educating them to be responsible for work, be content with life and refrain from pursuing fame and interest.

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6. Sunshine Service recognized for better brand and market image

In order to improve its services, the Bank started its campaign of “Sunshine Service” in 2009. With third party questionnaires, mystery visitors and other measures to understand customer needs, the Bank continued to improve the procedure and quality of its services, which received recognition from the community and customers. In 2011, 6 outlets of the Bank were selected as the “Top 100 Chinese Banking Industry Service Models” in China. According to survey of the Customer Satisfaction of China Banking Industry by the Consumer Committee of China Association for Quality, the Bank ranked fi rst among 15 banks with 81.5 points, 2.7 points higher than the average, and it was the only bank with valuation result above 80 points.

In 2011, based on the concept of integration, standardization, professionalism and service, the Bank intensifi ed its brand building efforts and became a leading player in the industry. The Bank ranked second among joint stock banks in terms of brand value in the Blue Book of Brand 2010 (2010品牌藍皮書). It was selected as one of the Top 50 China Brands in the Best China Brands published by Interbrand, an international brand company. It was selected as CCTV China Brand 2011 (2011 CCTV中國年度品牌), being the only fi nancial institution on the list and received the “Brand Innovation Award 2011 (2011年品牌創新獎)” in the “Asian Bank Competitiveness Ranking 2011 (2011年亞洲銀行競爭力排名研究報告)”. It also received over 60 honors and awards including the “Most Innovative Bank (最具創新力銀行)”, “Social Responsibility Award of Banking Industry (銀行業社會責任獎)” and “Outstanding Charity Contribution Award (最佳公益慈善貢獻獎)”.

(III) Business Review

The Bank achieved outstanding results during the reporting period. Major business indices grew steadily and net interest margin increased signifi cantly. Fee and commission based business recorded a relatively fast growth thanks to strengthened structural adjustment. Its asset quality continued to improve and the profi tability enhanced apparently.

1. Steady growth of business scale with improved business structure

At the end of the reporting period, total assets of the Group were RMB1,733,346 million, representing an increase of RMB249,396 million as compared with the end of last year, up by 16.81%. Its total liabilities were RMB1,637,196 million, representing an increase of RMB234,709 million as compare with the end of last year, up by 16.74%. Total customer deposits were RMB1,225,278 million, increasing by RMB162,098 million as compare with the end of last year, up by 15.25%. Total amount of loans and advances to customers were RMB890,365 million, increasing by RMB110,847 million as compared with the end of last year, up by 14.22%. Deposit to loan ratio in domestic and foreign currency was 71.67%, which was well controlled within the statutory limit.

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2. Improved net interest margin, increased portion of fee and commission based business and stronger profitability

During the reporting period, the Group realized operating income of RMB46.072 billion, representing an increase of RMB10.54 billion as compared with last year, up by 29.66%. Operating expense incurred was RMB21.925 billion, representing an increase of RMB3.375 billion as compared with last year, up by 18.19%, which is lower than that of the operating revenue. Its pre-tax profi t was RMB24.211 billion, representing an increase of RMB7.1 billion year-on-year or up by 41.49%. Net profi t was RMB18.085 billion, increasing by RMB5.291 billion as compared with last year, up by 41.36%.

Net interest margin of the Group improved signifi cantly by 32 basis points as compared with last year. Income from fee and commission based business grew by 52.55% year-on-year and its proportion in operating income increased by 2.52 percentage points. Return on assets improved apparently thanks to better income structure. Average ROA was 1.12%, 0.17 percentage points higher than that of last year. Average ROE was 20.44%, decreasing slightly by 0.55 percentage point as compared with that of last year, which was primarily due to higher equity base upon its completion of A share listing last year.

3. Improved asset quality with decreased NPL balance and ratio

As at the end of the reporting period, the Group’s nonperforming loans were RMB5,734 million, decreasing by RMB97 million as compared with last year. Non-performing loan ratio was 0.64%, decreasing by 0.11 percentage points as compared with last year. Its provision coverage ratio was 367.00%, 53.62 percentage points higher than that of last year.

4. Stringent risk asset management to ensure capital adequacy

During the reporting period, in addition to fully support its business development, the Group imposed strict control over the growth of risk assets to ensure suffi cient capital adequacy ratio as prescribed by the laws and regulations. At the end of the reporting period, its capital adequacy ratio and core capital adequacy ratio were 10.57% and 7.89%, respectively, which fulfi lled the regulatory requirements.

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(IV) Income Statement Analysis

1. Principal Components of Income Statement

Unit: RMB million

Items 2011 2010Contribution

to profi t

Net interest income 39,440 30,423 9,017Net fee and commission income 6,973 4,709 2,264Other income (341) 400 (741)Operating and administrative expenses 14,720 12,591 (2,129)Business taxes and surcharges 3,448 2,431 (1,017)Impairment losses on assets 3,698 3,491 (207)Other expenses 59 37 (22)Net non-operating income and expenses 64 129 (65)Profi t before income tax 24,211 17,111Income tax 6,126 4,317 (1,809)Net profi t 18,085 12,794Net profi t attributable to equity shareholders of the Group 18,068 12,790

2. Operating income

During the reporting period, the Group generated operating income of RMB46,072 million, representing an increase of RMB10,540 million or 29.66% as compared with last year, mainly due to the growth of net interest income and net fee and commission income. During the reporting period, net fee and commission income accounted for 15.14%, representing an increase of 1.89 percentage points as compared with last year, Net interest income accounted for 85.60%, which was similar to that of last year. The proportion of other income decreased, mainly due to the decrease of investment income and fair value loss and profi t as compared with last year as a result of the changes of market interest rate.

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The following table sets out the comparison between the operating incomes of the Group in 2011 and 2010.

Unit: %

Items 2011 2010

Net interest income 85.60 85.63Net fee and commission income 15.14 13.25Other income (0.74) 1.12Total operating income 100.00 100.00

3. Net interest income

During the reporting period, the Group’s net interest income was RMB39,440 million, representing an increase of RMB9,017 million or 29.64% as compared with last year, mainly due to the expansion of business and growth of net interest margin.

The Group’s net interest spread and net interest margin were 2.30% and 2.49%, respectively, representing increases of 24 basis points and 32 basis points, respectively, as compared with last year, mainly due to the increase of high-yield products and small-and-medium sized customers resulting from the structure optimization, the increase of 43 basis points in inventory interest spread as compared with last year owing to strengthened interest rate control to increase revenue from loans, and the signifi cant improvement of profi tability by providing more loans to other banks for business development to improve turnover effi ciency and increase interest spread amid the rising market interest rate.

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The following table sets out the average balance, interest income/expense and average income ratio/cost ratio of the Group’s interest-earning assets and interest-bearing liabilities for 2011.

Unit: RMB million

2011 2010

ItemsAverage balance

Interest income/expense

Average yield/

cost (%)Average balance

Interest income/expense

Average yield/

cost (%)

Interest-earning assetsLoans and advances 849,126 50,918 6.00 734,238 36,941 5.03Debt securities investments 210,928 7,822 3.71 168,393 5,766 3.42Deposits with the central bank 209,141 3,106 1.49 146,337 2,107 1.44Placements and deposits with banks and other fi nancial institutions 312,605 16,038 5.13 345,792 9,144 2.64Total interest-earning assets 1,581,800 77,884 4.92 1,394,760 53,958 3.87Adjustment for interest expense of re-discounted bills — 198Interest income 77,884 54,156

Interest-bearing liabilitiesDeposits from customers 1,115,498 23,446 2.10 935,146 14,554 1.56Placements and deposits from banks and other fi nancial institutions 333,492 14,249 4.27 357,863 8,273 2.31Debt securities issued 16,000 753 4.71 18,540 859 4.63Total interest-bearing liabilities 1,464,990 38,448 2.62 1,311,549 23,686 1.81Adjustment for interest expense of re-discounted bills — 198Fair value change of structured deposits (4) (151)Interest expense 38,444 23,733Net interest income 39,440 30,423Net interest spread(1) 2.30 2.06Net interest margin(2) 2.49 2.17

Notes: (1) Net interest spread is the difference between average yield of total interest-earning assets and average cost of total interest-bearing liabilities.

(2) Net interest margin is net interest income divided by the average balance of total interest-earning assets. (3) Pursuant to the amended accounting treatment of re-discounted bills in 2011, interest income and expense were presented in

net value to keep consistency with the interest rate analysis and adjustment was no longer required. (4) To enhance the rationality of deposit costs, the calculation of the interest rate of deposits was adjusted that movements in the

fair value of structured deposit were written back to deposit costs, and the fi gure for last year was adjusted correspondingly.

25

2011 An

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The following table sets out the breakdown of changes in interest income and interest expenses due to changes in volume and interest rate in 2011.

Unit: RMB million

Due to Interest income or expenseItems Volume Interest rate

Loans and advances 6,889 7,088 13,977

Debt securities investments 1,577 479 2,056

Deposits with central bank 933 66 999

Placements and deposits with banks and other fi nancial institutions (1,703) 8,597 6,894

Interest-earning assets 9,209 14,717 23,926

Adjustment for interest expense of re-discounted bills (198)

Changes in interest income 23,728

Deposits from customers 3,791 5,101 8,892

Placements and deposits from banks and other fi nancial institutions (1,041) 7,017 5,976

Debt securities issued (120) 14 (106)

Interest-bearing liabilities 4,027 10,735 14,762

Adjustment for interest expense of re-discounted bills (198)

Fair value change of structured deposits 147

Changes in interest expense 14,711

Net interest income 9,017

4. Interest income

During the reporting period, the interest income of the Group was RMB77,884 million, representing an increase of RMB23,728 million or 43.81% as compared with last year.

(1) Interest income from loans

During the reporting period, the interest income from loans and advances of the Group was RMB50,918 million, representing an increase of RMB13,977 million or 37.84% as compared with last year. It was primarily attributable to the increase in loans and advances as compared with corresponding period last year along with the steady business development, and the signifi cant increase in the margin of discounted bills and general loans due to the increases of benchmark interest rates and market interest rates.

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The following table sets out the average balance, average margin and interest income of major types of loans and advances of the Group in 2011.

Unit: RMB million

2011 2010


Interest income

Average yield (%)

Average balance

Interest income

Average yield (%)

Corporate loans 618,144 36,991 5.98 531,756 27,065 5.09Retail loans 217,959 12,667 5.81 173,511 8,833 5.09Discounted bills 13,023 1,260 9.68 28,971 1,043 3.60Loans and advances 849,126 50,918 6.00 734,238 36,941 5.03

(2) Interest income from debt securities investment

During the reporting period, the interest income from debt securities investment of the Group was RMB7,822 million, representing an increase of RMB2,056 million or 35.66% as compared with last year.

(3) Interest income from placements and deposits with banks and other fi nancial institutions,

and fi nancial assets purchased under resale agreements

During the reporting period, the interest income from placements and deposits with banks and other fi nancial institutions, and fi nancial assets purchased under resale agreements of the Group was RMB16,038 million, representing an increase of RMB6,894 million or 75.39% as compared with last year.

5. Interest expense

During the reporting period, the interest expense of the Group was RMB38,444 million, representing an increase of RMB14,711 million or 61.99% as compared with last year. Interest expenses on deposits from customers accounted for the majority of the interest expenses of the Group.

(1) Interest expense on deposits from customers

During the reporting period, interest expense on deposits from customers was RMB23,446 million, representing an increase of RMB8,892 million or 61.10% as compared with last year. Such increase was mainly due to the increase of deposits from customers as compared with last year along with the steady business development, and the increases of proportion of time deposits and the cost for deposits as a result of the consecutive increases of benchmark interest rates.

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The following table sets out the average balance, interest expense and average cost for major types of deposits from customers of the Group in 2011.

Unit: RMB million

2011 2010


Interest expense

Average cost (%)

Average balance

Interest expense

Average cost (%)

Corporate deposits 926,754 19,820 2.14 788,285 12,390 1.57 Demand 392,606 2,985 0.76 360,439 2,293 0.64 Time 534,148 16,835 3.15 427,846 10,097 2.36Retail deposits 188,744 3,626 1.92 146,861 2,164 1.47 Demand 58,167 302 0.52 46,902 169 0.36 Time 130,577 3,324 2.55 99,959 1,995 2.00Total deposits from customers 1,115,498 23,446 2.10 935,146 14,554 1.56

Note: To enhance the rationality of deposit costs, the calculation of the interest rate of deposits was adjusted that movements in the fair value of structured deposit were written back to deposit costs, and the fi gure for last year was adjusted correspondingly.

(2) Interest expense on placements and deposits from banks and other fi nancial institutions,

and fi nancial assets sold under repurchase agreements

During the reporting period, the interest expense on placements and deposits from banks and other fi nancial institutions, and fi nancial assets sold under repurchase agreements of the Group was RMB14,249 million, an increase of RMB5,976 million or 72.23% as compared with last year.

(3) Interest expense on debt securities issued

During the reporting period, the interest expense on debt securities issued of the Group was RMB753 million, representing a decrease of RMB106 million or 12.34% compared with last year. It was primarily due to the issued debts of RMB5.55 billion expired last year, leading to a decrease of average debts during the reporting period over last year.

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6. Net fee and commission income

The following table sets out the major items of net fee and commission income of the Group in 2011:

Unit: RMB million

Items 2011 2010

Fee and commission income 7,381 5,081 Underwriting and advisory fees 1,443 997 Wealth management service fees 993 948 Bank card service fees 1,808 988 Agency service fees 857 532 Settlement and clearing fees 1,376 940 Acceptance and guarantee fees 649 486 Others 255 190Fee and commission expense 408 372Net fee and commission income 6,973 4,709

During the reporting period, the net fee and commission income of the Group was RMB6,973 million, representing an increase of RMB2,264 million or 48.08% as compared with last year. Such increase was primarily due to the signifi cant increases in bank card service fees, settlement and clearing fees, and underwriting and advisory fees, among which:

Income from bank card service increased by RMB820 million or 83.00% compared with last year, mainly due to increased income from credit card business;

Income from settlement and clearing increased by RMB436 million or 46.38% compared with last year, mainly due to expansion of our business scale and customer base, as well as continuous increase of income from international and domestic settlement fees;

Income from underwriting and advisory increased by RMB446 million or 44.73% compared with last year, mainly due to increased income from short term fi nancing bond and medium term note underwriting business, as well as fi nancial advisory fees.

29

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7. Other income

During the reporting period, other income of the Group was RMB-341 million, representing a decrease of RMB741 million as compared with last year. Such decrease was mainly due to the decrease of gain on investment and fair value, and the increase of losses on fair value of bonds with fi xed rate in the bond portfolio, and increase of interests payable on and decrease of fair value of structured deposit after the adjustment of asset structure by the Company to shorten the maturity of bond portfolio and control investment risk due to the decrease of price in bond market in 2011. Net gain on foreign exchange increased at a relatively rapid pace, mainly due to the increase of business volume and appreciation of Renminbi.

The following table sets out the major items of other income:

Unit: RMB million

Items 2011 2010

Net gain/(loss) on fair value changes (1,043) (466)Net gain/(loss) on investment (133) 447Net gain on foreign exchange 760 360Other operating income 75 59Total other income (341) 400

8. Operating and administrative expenses

During the reporting period, the operating and administrative expenses of the Group was RMB14,720 million, representing an increase of RMB2,129 million or 16.91% as compared with last year, which is signifi cantly lower than the growth of operating income. Cost to income ratio was 31.95%, a decrease of 3.49% as compared to last year.

Unit: RMB million

Items 2011 2010

Staff costs 8,599 7,417Premises and equipment expenses 2,245 1,798Others 3,876 3,376Total operating and administrative expenses 14,720 12,591

Staff costs accounted for the majority of the Group’s operating and administrative expenses, and was RMB8,599 million in 2011, an increase of RMB1,182 million or 15.94% as compared with last year. It was primarily due to the increased number of employees as a result of the increase in the number of the branches and outlets and the expansion of the business scale during the reporting period.

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9. Impairment losses on assets

During the reporting period, impairment losses on assets of the Group were RMB3,698 million, representing an increase of RMB207 million as compared with last year, which was mainly attributable to the impairment losses on loans and advances. The following table sets out the major items of the impairment losses on assets:

Unit: RMB million

Items 2011 2010

Impairment losses on loans and advances 3,420 3,254Impairment losses on hold-to-maturity investments 143 50Impairment losses on available-for-sale fi nancial assets — 9Others 135 178Total impairment losses on assets 3,698 3,491

10. Income tax

During the reporting period, the income tax of the Group was RMB6,126 million, representing an increase of RMB1,809 million or 41.90% as compared with last year, and the income tax increased along with the growth of profi ts before tax.

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(V) Financial Position Analysis

1. Assets

As at the end of the reporting period, the total assets of the Group was RMB1,733,346 million, an increase of RMB249,396 million or 16.81% as compared with that of the end of last year, primarily due to the increase in loans and advances, placements with banks and other fi nancial institutions and fi nancial assets purchased under resale agreements, and deposits with banks.

The following table sets out the composition of total assets of the Group as at the end of the reporting period:

Unit: RMB million

31 December 2011 31 December 2010

Items AmountPercentage

(%) AmountPercentage

(%)

Total loans and advances to customers 890,365 779,518Provision for impairment of loans and advances to customers (21,043) (18,273)Net loans and advances to customers 869,322 50.17 761,245 51.29Deposits with banks and other fi nancial institutions 105,263 6.07 53,275 3.59Cash and deposits with central bank 228,666 13.19 185,745 12.52Investment in securities and other fi nancial assets 162,936 9.40 189,766 12.79Placements with banks and other fi nancial institutions, and fi nancial assets purchased under resale agreements 288,687 16.65 193,870 13.06Interests receivable 6,100 0.35 4,139 0.28Fixed assets 10,810 0.62 10,141 0.68Intangible assets 530 0.03 392 0.03Goodwill 1,281 0.07 1,281 0.09Deferred tax assets 1,857 0.11 1,306 0.09Other assets 57,894 3.34 82,790 5.58Total assets 1,733,346 100.00 1,483,950 100.00

Note: Total loans and advances to customers include fi xed-rate housing loans measured at fair value.

(1) Loans and advances to customers

As at the end of the reporting period, the total loans and advances to customers of Group was RMB890,365 million, representing an increase of RMB110,847 million or 14.22% as compared with that of the end of last year. The percentage of net loans and advances to customers to the total assets was 50.17%, representing a decrease of 1.12 percentage points as compared with that of the end of previous year. Such decrease was primarily contributable to the impact of macro-control policy and the increase in percentage of placements with banks and other fi nancial institutions.

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Despite the decrease in percentage of net loans and advances to customers to the total assets as compared with that of the end of last year, the loan structure was optimized, the percentage of discounted bills decreased signifi cantly, and the percentages of retail loans and small-and-medium sized customers increased.

The following table sets out the major items of loans and advances to customers of the Group as at the end of the reporting period:

Unit: RMB million




(%)

Corporate loans 641,950 72.10 571,232 73.28Retail loans 233,994 26.28 194,497 24.95Discounted bills 14,421 1.62 13,789 1.77Total loans and advances to customers 890,365 100.00 779,518 100.00

Note: Total loans and advances to customers include fi xed-rate housing loans measured at fair value.

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

Unit: RMB million

2011

571,232

641,950

194,497

233,994

13,789

14,421

1.77%

1.62%

24.95%

73.28%

72.10%

26.28%

Corporate loans

Corporateloans

Retail loans

Retailloans

Discounted bills

Discountedloans

Major items of loans and advances to customers of the Group as at the end of the reporting period

2010

2010

2011

(2) Investment in securities and other fi nancial assets

As at the end of the reporting period, the investment in securities and other fi nancial assets of the Group was RMB162,936 million, representing a decrease of RMB26,830 million as compared with that at the end of last year, accounting for 9.40% in total assets, representing a decrease of 3.39 percentage points as compared with that at the end of last year. The decrease was mainly due to the adjustment of assets structure in anticipation of the increasing market interest rate to properly reduce available-for-sale fi nancial assets and hold-to-maturity investments to control investment risk.

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The following table sets out the major items of the Group’s investment in securities and other fi nancial assets as at the end of the reporting period:

Unit: RMB million




(%)

Financial assets held-for-trading 22,187 13.62 21,707 11.44Positive fair value of derivatives 2,262 1.39 3,025 1.59Available-for-sale fi nancial assets 54,403 33.39 77,142 40.65Held-to-maturity investments 83,985 51.54 87,793 46.27Long-term equity investments 99 0.06 99 0.06Total investment in securities and other fi nancial assets 162,936 100.00 189,766 100.00

Note: Financial assets held for trading exclude fi xed-rate housing loans measured at fair value.

(3) Top ten investment securities

Name of bondsNominal value

(RMB million)Annual interest

rate (%)Expiring

date

Provision for impairment

losses

Bond 1 4,000 5.29 18 November 2016 —

Bond 2 2,402 One-year deposit +72BP

27 April 2015 —

Bond 3 2,250 5.74 2 November 2016 —Bond 4 2,250 5.23 25 August 2012 —Bond 5 1,500 5.86 29 August 2016 —Bond 6 1,410 4.96 22 June 2012 —Bond 7 1,320 5-day average of

3-month SHIBOR+30BP

16 June 2016 —

Bond 8 1,300 3.14 17 September 2015 —Bond 9 1,230 4.98 20 May 2016 —Bond 10 1,160 4.23 5 November 2021 —

(4) Goodwill

As at the end of the reporting period, the cost of the Group’s goodwill was RMB6,019 million, and the provision for impairment losses on goodwill of the Group was RMB4,738 million and carrying value of goodwill was RMB1,281 million, which was the same as that at the end of last year.

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2. Liabilities

As at the end of the reporting period, the total liabilities of the Group was RMB1,637,196 million, representing an increase of RMB234,709 million or 16.74% as compared with that at the end of last year, primarily due to the growth in deposits from customers.

The following table sets out the composition of total liabilities of the Group as at the end of the reporting period:

Unit: RMB million




(%)

Deposits from customers 1,225,278 74.85 1,063,180 75.81Deposits from banks and other fi nancial institutions 270,627 16.53 197,214 14.06Placements from banks and other fi nancial institutions, and fi nancial assets sold under repurchase agreements 67,971 4.15 30,893 2.20Negative fair value of derivatives 3,062 0.19 2,960 0.21Accured staff costs 6,257 0.38 5,187 0.37Taxes payable 2,534 0.15 1,663 0.12Interests payable 12,625 0.77 8,536 0.61Provisions 17 0.00 43 0.00Subordinated debts issued 16,000 0.98 16,000 1.14Other liabilities 32,825 2.00 76,811 5.48Total liabilities 1,637,196 100.00 1,402,487 100.00

Note: Deposits from customers include structured deposits measured at fair value.

As at the end of the reporting period, the total deposits from customers of the Group was RMB1,225,278 million, representing an increase of RMB162,098 million or 15.25% as compared with that at the end of last year.

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The following table sets out the composition of deposits from customers of the Group as at the end of the reporting period:

Unit: RMB million




(%)

Corporate customers 989,768 80.78 896,765 84.35 Demand deposits 441,296 36.02 422,338 39.72 Time deposits 548,472 44.76 474,427 44.63Retail customers 235,510 19.22 166,415 15.65 Demand deposits 78,961 6.44 59,374 5.58 Time deposits 156,549 12.78 107,041 10.07Total deposits from customers 1,225,278 100.00 1,063,180 100.00

Note: Deposits from customers include structured deposits measured at fair value.

3. Equity

As at the end of the reporting period, the equity attributable to equity shareholders of the Bank was RMB96,035 million, representing an increase of RMB14,670 million as compared with the end of last year. Such increase was mainly due to the net profi t attributable to equity shareholders of the Bank of RMB18,068 million and the distribution of dividend for 2010 of RMB3,825 million.

The following table sets out the composition of shareholder’s equity of the Group as at the end of the reporting period:

Unit: RMB million

Items31 December

201131 December

2010

Share capital 40,435 40,435Capital reserve 20,328 19,901Surplus reserve 4,226 2,434General reserve 13,877 11,632Retained earnings/accumulated losses 17,169 6,963Total equity attributable to equity shareholders of the Bank 96,035 81,365Non-controlling interests 115 98Total equity 96,150 81,463

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4. Off-balance sheet items

The Group’s off-balance sheet items are mainly credit commitment, including loan and credit card commitments, acceptances, letters of guarantees, letters of credit and guarantees. As of the end of the reporting period, total credit commitments were RMB553,724 million, increasing by RMB102,732 million as compared with that at the end of last year, which was mainly due to an increase of RMB56,412 million of acceptances and an increase of RMB30,704 million of letters of credit.

The following table sets out the composition of credit commitment of the Group as at the end of the reporting period:

Unit: RMB million

Items31 December

201131 December

2010

Loan commitments 87,643 84,409Acceptances 318,730 262,318Letters of guarantees 59,280 46,898Letters of credit 86,910 56,206Guarantees 1,161 1,161Total 553,724 450,992

(VI) Cash Flow Analysis

Net cash infl ow generated by operating activities was RMB46,333 million. Cash infl ow was RMB357,819 million, increasing by RMB22,208 million from that of last year, which was mainly due to the increase in deposits and placements with banks and other fi nancial institutions as well as other fi nancial assets borrowed and sold under repurchase agreements, and the increase in interest and fee incomes. Cash outfl ow was RMB311,486 million, decreasing by RMB10,466 million as compared with that as at the end of last year, which was mainly due to a reduction in the increase of loans and advances to customers as well as the reduction in the increase of assets purchased under resale agreements.

Net cash infl ow generated by investing activities was RMB24,196 million. Cash infl ow was RMB424,786 million, increasing by RMB143,806 million as compared with that of last year, which was mainly due to a decrease in recovering investment. Cash outfl ow was RMB400,590 million, increasing by RMB67,457 million as compared with that in last year, which was mainly due to an increase in debt securities investments.

Net cash outfl ow generated by fi nancing activities was RMB4,410 million, which was mainly due to the distribution of cash dividends and the payments of interests of Subordinated debts issued.

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(VII) Analysis of loan quality

1. Distribution of loans by industry

Unit: RMB million

December 31, 2011 December 31, 2010

Items Amount Percentage (%) Amount Percentage (%)

Manufacturing 186,037 28.98 140,369 24.56Wholesale and retail 102,718 16.00 67,048 11.74Real estate 84,076 13.10 81,316 14.24Transportation, storage and postal services 67,427 10.50 65,122 11.40Leasing and commercial services 51,816 8.07 55,951 9.79Water, environment and public utilities management 42,222 6.58 67,235 11.77Production and supply of power, gas and water 30,293 4.72 29,625 5.19Mining 24,507 3.82 19,852 3.48Construction 22,067 3.44 13,213 2.31Public administration and social organization 11,512 1.79 14,849 2.60Others 19,275 3.00 16,652 2.92Total amount of corporate loans 641,950 100.00 571,232 100.00

2. Distribution of loan by regions

Unit: RMB million


Regions Amount Percentage (%) Amount Percentage (%)

Yangtze River Delta 222,276 24.98 209,058 26.84Pearl River Delta 126,963 14.27 112,268 14.41Bohai Rim 193,992 21.80 170,906 21.94Central 132,156 14.85 113,774 14.61Western 132,947 14.94 113,487 14.57Northeastern 56,124 6.31 46,312 5.95Head Offi ce 25,367 2.85 13,023 1.68Total amount of loans and advances to customers 889,825 100.00 778,828 100.00

Note: Total amount of loan and advance to customers does not include fi xed-rate housing loan measured at fair value.

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3. Types of loan guarantee and their proportions

Unit: RMB million



Unsecured loans 276,449 31.07 240,206 30.84Guaranteed loans 221,737 24.92 199,421 25.61Mortgage loans 311,600 35.02 277,293 35.60Pledge loans 80,039 8.99 61,908 7.95Total amount of loans and advances to customers 889,825 100.00 778,828 100.00

Note: Total amount of loans and advances to customers does not include fi xed-rate housing loan measured at fair value.

4. Top 10 loan customers

Name Industry

December 31, 2011

Loan amount (RMB million)

Proportion to total loan (%)

Proportion to net capital (%)

Borrower A Transportation, storage and postal services 6,695 0.75 5.59

Borrower B Real estate 5,000 0.56 4.17Borrower C Public administration and

social organization 3,970 0.45 3.31Borrower D Wholesale and retail 3,765 0.42 3.14Borrower E Leasing and commercial

services 3,485 0.39 2.91Borrower F Transportation, storage

and postal services 3,190 0.36 2.66Borrower G Leasing and commercial service 3,147 0.35 2.62Borrower H Transportation, storage

and postal services 3,000 0.34 2.50Borrower I Real estate 2,673 0.30 2.23Borrower J Real estate 2,650 0.30 2.21Total amount 37,575 4.22 31.34

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5. Five-category classification for loans

Unit: RMB million



Normal 874,566 98.29 759,968 97.58Special mentioned 9,532 1.07 13,031 1.67Substandard 1,229 0.14 484 0.06Doubtful 1,881 0.21 2,344 0.30Loss 2,617 0.29 3,001 0.39Total amount of loans and advances to customers 889,825 100.00 778,828 100.00

Note: Total amount of loans and advances to customers does not include fi xed-rate housing loan measured at fair value.

6. Loan migration ratio

For details, please see contents in “Summary of accounting data and business data (2) — Major accounting data and fi nancial indicators for the last three years”.

7. Restructured loans and overdue loans

Unit: RMB million

ItemsDecember 31,

2011December 31,

2010

Restructured loans and advances 213 288Less: Restructured loan and advances overdue more than 90 days 144 204Restructured loan and advances overdue not more than 90 days 69 84

8. Non-performing loans by business type

Unit: RMB million



Corporate loans 4,697 82.02 4,729 81.13Retail loans 980 17.11 1,100 18.87Discounted bills 50 0.87 — —Total amount of non-performing loans 5,727 100.00 5,829 100.00

Note: Total amount of non-performing loans does not include fi xed-rate housing loan measured at fair value.

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9. Distribution of non-performing loans by regions

Unit: RMB million

December 31, 2011

Regions Amount Percentage (%)

Yangtze River Delta 1,203 21.01Pearl River Delta 1,826 31.89Bohai Rim 724 12.64Central 897 15.66Western 389 6.79Northeastern 298 5.20Head Offi ce 390 6.81Total amount of non-performing loans 5,727 100.00


10. Distribution of non-performing loan by industries

Unit: RMB million

December 31, 2011

Items Amount Percentage (%)

Corporate loans 4,697 82.02Manufacturing 1,957 34.17Wholesale and retail 932 16.27Transportation, storage and postal services 630 11.00Real estate 417 7.28Leasing and commercial service 367 6.41Construction 123 2.15Production and supply of power, gas and water 98 1.71Information transmission, computing service and software 43 0.75Mining 37 0.65Public administration and social organization 32 0.56Others 61 1.07Personal loans 980 17.11Discounted bills 50 0.87Total amount of non-performing loans 5,727 100.00


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11. Repossessed assets and provision for impairment losses

Unit: RMB million

ItemsDecember 31,

2011December 31,

2010

Cost of repossessed assets 5.24 0.31Representing: Land, house and construction 0.31 0.31

Others 4.93 —Less: Provision for impairment — —Net value of repossessed assets 5.24 0.31

12. Provision and write-off of provision for loan impairment

The Bank’s impairment losses on assets include provision made for loans and advances to customers, placements with banks and other fi nancial institutions, debt securities investments, interests receivable and other assets.

The Bank conducts impairment tests on book value of assets on the balance sheet date, and provision for impairment losses will be made and credited to the profi t or loss of the current period when there is objective evidence showing the assets are impaired.

The following table indicates the changes in provision for impairment of the Group’s loans to customers:

Unit: RMB million

2011 2010

As at 1 January 18,273 15,765Charge for the year 3,891 4,332Release for the year (471) (1,078)Release due to the recovery of loans and advances written-off in previous years 151 141Unwinding of discount (note) (52) (66)Write-offs during the year (749) (821)As at 31 December 21,043 18,273

Note: It refers to cumulative interest income of impaired loan due to the subsequent increase of present value over time.

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13. Interest receivable and provision for bad debts

(1) Change of on-balance sheet interest receivable

Unit: RMB million

Items

Balance at the beginning

of the yearIncrease

in this yearDecrease

in this year

Balance at the end

of the year

On-balance sheet interest receivable 4,139 60,955 58,994 6,100

(2) Provision for bad debt for interest receivable

Unit: RMB million

ItemsDecember 31,

2011December 31,

2011 Increase

Balance of bad debt provision for interest receivable 39 28 11

14. Other receivables and provision for allowances of their bad debt

(1) Change of other receivables

Unit: RMB million

ItemsDecember 31,

2011December 31,

2011 Increase

Other receivables 864 1,111 (247)

(2) Provision for bad debt for other receivables

Unit: RMB million

ItemsDecember 31,

2011December 31,

2011 Increase

Balance of bad debt provision for other receivables 498 455 43

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15. Major measures of non-performing asset management

In 2011, the Bank continued to maintain a “double decrease” of the amount and ratio of non-performing loans for the seventh consecutive year. According to the standards of fi ve-category classifi cation, at the end of the period, non-performing loan amounted to RMB5,734 million, decreasing by RMB97 million as compared with that at the beginning of last year, while non-performing loan ratio was 0.64%, decreased by 0.11 percentage points as compared with that at the beginning of last year.

During the reporting period, the Bank strived to maintain secured operation by two directions. While minimizing the on-balance sheet non-performing items, the Bank also implemented comprehensive management on special mentioned loans to corporate customers and strengthened efforts in recovering off-balance sheet non-performing assets. By enhancing management on special mentioned loans to corporate customers, stricter approval procedures were adopted and potential risks were addressed promptly. Moreover, the Bank made efforts to improve recovery ratio of off-balance non-performing assets with bad debts written-off and accelerated collection schedule of non-performing personal loans.

The Bank wrote off bad debts in accordance with Measures for Bad Debts Management. The approval procedures of the headquarters for reporting on write-off items by branches were standardized. Write-offs were carried out in three batches during the year after being approved by the meeting of non-performing asset disposal committee upon passing the inspection of relevant teams and obtaining the confi rmation from relevant departments. During the reporting period, 302 bad debts, involving principal of RMB518 million, were written-off.

(VIII) Analysis of capital adequacy ratio

At the end of the reporting period, the Group’s capital adequacy ratio was 10.57% and core capital adequacy ratio was 7.89%, both of which complied with the regulatory requirements. Capital adequacy ratio and core capital adequacy ratio increased by 0.45 and 0.26 percentage points as compared with that at the end of last year, respectively. Such increases were mainly attributable to the increase of RMB196.2 billion in net weighted risk assets.

For the capital composition and changes during the last three years, please see “Summary of fi nancial data and business data (4) — Capital composition and changes during the last three years”.

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(IX) Segment performance

The Group divides its business into different segments by business lines and geographical areas for the purpose of management. Capital lending between different business and regional segments will be conducted at a transfer price of internal capital determined on the basis of market interest rate, and interest income and interest expense among segments will be recognized. The following table lists the operating performance of the Group’s various business and regional segments. For more detailed information, please refer to “the Notes to the Financial Statements — Segment Reporting”.

1. Performance by geography

Unit: RMB million

2011 2010

ItemsOperating

revenue Total profi tOperating

revenue Total profi t

Yangtze River Delta 10,003 5,548 8,482 4,292Pearl River Delta 6,071 2,778 4,638 2,053Bohai Rim 9,765 5,258 8,047 3,898Central 6,316 3,220 4,933 2,429Western 5,478 2,597 4,436 2,065Northeastern 2,997 1,241 2,295 1,014Head Offi ce 5,442 3,569 2,701 1,360Total 46,072 24,211 35,532 17,111

2. Performance by business type

Unit: RMB million

2011 2010

ItemsOperating

revenue Total profi tOperating

revenue Total profi t

Corporate banking business 32,001 17,326 25,401 13,531Retail banking business 12,078 5,181 8,199 1,805Treasury business 1,991 1,669 1,928 1,764Other business 2 35 2 10Total 46,072 24,211 35,532 17,111

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(X) Others

1. Changes of major financial indicators and their reasons

Unit: RMB million

ItemsDecember 31,

2011December 31,

2010Increase or

decrease (%) Major reason of change

Deposits with banks and other fi nancial institutions

105,263 53,275 97.58 Higher market interest rate, increase of placements with banks, increase in investments and increase in income from interest spread

Placements with banks and other fi nancial institutions

81,746 23,833 243.00 Higher market interest rate, increase in short-term capital investment and increase of revenue

Deferred tax assets 1,857 1,306 42.19 Higher market interest rate, increase in loss from change of fair value and increase in deferred tax assets recognized

Other assets 57,894 82,790 -30.07 Decrease of on-balance sheet wealth management assets held as agent

Financial liabilities held for trading

46,478 33,470 38.86 Increase in structured deposits

Taxes payable 2,534 1,663 52.38 Growth of income tax payable and taxable income subject to business tax

Interests payable 12,625 8,536 47.90 Increase of interest-bearing liabilities and increase of interest rate

Other liabilities 32,825 76,811 -57.27 Decrease of on-balance sheet wealth management capital held as agent

Surplus reserve 4,226 2,434 73.62 Dist r ibut ion of prof i ts and appropriation to surplus reserve

Retained earnings 17,169 6,963 146.57 Profi t growth

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Items 2011 2010Increase or

decrease (%) Major reason of change

Net interest income 39,440 30,423 29.64 Growth of interest-earning assets, structural optimization, improved bargaining power, increase of net interest margin and improved asset profi tability

Fee and commission net income

6,973 4,709 48.08 Increase in fee from intermediary business such as credit card, settlement and agency business

Investment gain/(loss) (133) 447 -129.75 Decrease of investment return due to adjustment of asset structure by shortening duration of bond portfolio, increasing holdings of short-term bonds and reducing mid-to long-term bonds to control investment risks amid the decreasing price of bond market in the fi rst half of 2011

Net gain/(loss) arising from changes in fair value

(1,043) (466) 123.82 Price decline in bond market leading to increased losses on fair value in fi xed-yield bonds, increase in interest payable for structured deposits, termination of certain interest rate swap contracts as well as transfer out of gains on changes in fair value

Business tax and surcharges

3,448 2,431 41.83 Increase of taxable income

Non-operating income 126 202 -37.62 Increase of income from pending uncollected fund

Income tax expense 6,126 4,317 41.90 Increase of taxable income

2. Overdue and outstanding debts

During the reporting period, the Group has not incurred any overdue and outstanding debts.

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(XI) Performance of Business Lines

1. Corporate Banking Business

(1) Corporate Deposits

With faster structural change emphasizing the expansion SME customer base and vigorous implementation of model-based operation, the Bank achieved coordinated development of its business scale, structure and profi tability. As at the end of the reporting period, the Bank’s corporate deposits amounted to RMB991.3 billion, representing an increase of RMB95.1 billion or 10.6% as compared with the previous year. Average daily balance of corporate deposits was RMB925.0 billion, representing an increase of RMB137.1 billion or 17.4% year-on-year. The proportion of SME loans to the total loan grew signifi cantly. The balance of the Bank’s trade fi nance exceeded RMB100.0 billion, up by 37.4%. The proportion of mid- to long-term loans recorded a cumulative decline of 8.4 percentage points as compared with last year. Proportion of loans to public administration, land reserve and real estate industries recorded a cumulative decline of 8.7 percentage points as compared with last year. Interest yield of corporate loans was 3.84%, 32 basis points higher than that of the end of last year.

(2) SME Business

Taking SME business as the direction for its strategic transformation, the Bank continued to improve institutions specializing in SME business for the establishment of a professional operation system. It promoted the rapid growth of SME customers by providing standardized platforms while it devoted more credit resources to SME customers, leading to more SME customers benefi ted and healthy asset quality. As at the end of the reporting period, the balance of SME loans of the Bank was RMB167.9 billion, representing an increase of RMB55.7 billion or up by 49.64% year-on-year. It accounted for 26.15% of the Bank’s total corporate loans, up by 6.36 percentage points than that of last year; It accounted for 18.86% of the total amount of loans and advances, up by 4.47 percentage points than that of last year. The number of SME credit customers increased by 37.03% as compared with last year while the number of SME customers using modelized operation products increased by 59.89%. NPL ratio of SME business was 1.5%, representing a decrease of 0.70 percentage point as compared with last year.

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(3) Inter-bank Business

The Bank emphasized a balanced development of effi ciency, scale and quality of development. By adjusting the pricing mechanism timely, maintaining effective cost control and ensuring liquidity suffi ciency, the Bank’s inter-bank business delivered higher profi t contribution. The Bank also strengthened the construction of inter-bank cooperation platform to support its cooperation with other banking institutions. At the end of the reporting period, the balance of inter-bank deposit, placement with banks and discounted notes were RMB270.6 billion, RMB105.3 billion and RMB14.4 billion, respectively. The Bank also actively developed businesses with non-banking fi nancial institutions. As at the end of the reporting period, the Bank entered into third party custody agreements with 71 security companies with the number of third party custody customers reaching 837,100. It reached business cooperation agreements with 20 insurance companies with the volume of insurance agency business reaching RMB2.572 billion. The Bank also developed business cooperation with more than 30 trust companies, fi nancial leasing companies and fi nance companies.

(4) Investment Banking Business

The Bank accelerated the structural adjustment and brand building of its investment banking business, and continuously enriched its portfolio of products, leading to the fast growing of income. It seized opportunities in the bond market and launched new products. It actively explored bonds underwriting business and successfully completed the issuance the fi rst batch of private instrument as a leading underwriter. As at the end of the reporting period, the Bank served as leading underwriter for non-fi nancial corporate debt fi nancing instruments of RMB150.2 billion in aggregate, representing an increase of 58.8% as compared with last year. The Bank ranked the fi fth among all banks and ranked the fi rst among joint stock banks in respect of lead underwriting. The Bank had participated in the underwriting of non-fi nancial corporate debt fi nancing instrument of RMB50.4 billion, representing an increase of 101.6% as compared to the previous year. The Bank also proactively developed its fi nancial advisory services including advisory services for mergers and acquisitions as well as structured fi nance. Fee and commission income of investment banking amounted to RMB682 million throughout the year, representing an increase of 41.5% as compared with last year.

(5) Custody Business

The Bank’s custody business aims to develop its strength under the brand of China Everbright by expanding business scale, enhancing effi ciency, promoting brand awareness and strengthening risk prevention. It steadily pushed forward the development of securities investment fund custody through marketing, product innovation, system establishment and risk control. Custody business of wealth management, equity investment plan for insurance fund, equity investment fund and structured securities investment trust was further developed so as to enrich its portfolio of products, optimize business structure and form differentiated advantages. As at the end of the reporting period, the custody assets totaled RMB348.6 billion, representing an increase of 59.0% as compared with last year. Custody fee income was RMB295 million, representing a 69.0% growth over last year.

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(6) Pension Business

The Bank’s pension business implemented the principle of seeking meaningful development, innovating business models and improving business income. It achieved remarkable results in key customer marketing, new product promotion, system development and customer service enhancement. After the marketing of “Sunshine Pleasant Choice Plan”, a fl exible welfare product, and “Enjoying Life Collective Employee Benefi t Trust Plan”, the Bank successfully launched “Happy Health Management Plan”, an additional medical insurance product, to provide enterprises with comprehensive remuneration and welfare management services as an extension of its pension products. As at the end of the reporting period, the Bank provided enterprise pension services for 4,439 companies in aggregate, increasing by 402 as compared with that of the end of last year, and managed 741,000 personal accounts, increasing by 112,000. Entrusted annuity fund amounted to RMB13.310 billion, increasing by RMB2.630 billion.

(7) Trade Banking Business

The Bank continued to improve its supply chain fi nance solutions so as to enhance the strength of its brand of “Sunshine Supply Chain”. By optimizing customer structure, improving entire income and creating marketing advantages with modelized solutions, the Bank’s trade banking business experienced faster growth. Trade banking businesses such as domestic letter of credit and factoring business delivered excellent performance and received positive market response. The balance of domestic LC fi nancing increased by 39% as compared with that of last year, while the balance of factoring business increased by 33%. The Bank also enhanced its electronic system development efforts with the launching of new factoring system and Renminbi cross-border settlement system and the upgrading of its international clearing system. The Bank further enhanced its business processing effi ciency while maintaining effective risk prevention.

2. Retail Banking

(1) Savings deposits

The Bank’s retail banking business adopted an action plan of “integrating customer base, emphasizing liability business, improving effi ciency and enhancing capability” so as to become a leading player in the industry. It made specifi c business targets for each outlets while explored cross-selling between corporate and retail banking businesses. Focusing on the development of modelized products which featured in batch processing, it encouraged more outlets to implement “Ten Approaches” for retail banking business, a summary of the best practice of some outlets, It emphasized the basic work of retail banking business and achieved considerable progress in introducing in batches, retaining and upgrading customers. As at the end of the reporting period, total deposits of the Bank’s retail customers amounted to RMB235.5 billion, increasing by RMB69.1 billion or 41.5% as compared with that of last year. Daily average balance amounted to RMB188.7 billion, representing an increase of RMB41.8 billion or 28.5% as compared with last year.

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(2) Personal Loans

The Bank developed its personal loan business by emphasizing risk control, streamlining business structure, enhancing revenue and expanding customer base and deposits. It adjusted the business structure, increased proportion of operating loans, streamlined loan approval procedure and applied automatic review and approval procedures. It enhanced innovation of salary loan products, strengthened internal risk management, increased small- and mircro-fi nacing business, contributing to the signifi cant increase in personal lending revenue. Total personal loans (exclusive of credit card loans) amounted to RMB91.9 billion. As at the end of the reporting period, personal loans amounted to RMB210.7 billion, representing an increase of RMB27.4 billion or 14.94% over last year. Total interest income amounted to RMB11.8 billion. Non-performing ratio of personal loans was 0.29%, representing a decrease of 0.18 percentage points over last year.

(3) Wealth Management

To cope with regulatory changes for wealth management business cooperation between banks and trust companies and the changes in market conditions, the Bank continued to transform its wealth management business into asset management business and enhanced the professional and specialized management of wealth management business. Product structure and development strategy were modifi ed while the focus was shifted from fi xed income wealth management products to asset management portfolio wealth management products. As at the end of the reporting period, total assets under wealth management reached RMB174.3 billion. Total transaction volume of wealth management products was RMB1,110 billion, with its income from fee and commission-based business reaching RMB1.007 billion. Balance and proportion of asset management to wealth management products increased signifi cantly.

The Bank stepped up its innovation efforts in wealth management business. With the high interest rate in the currency market in 2011, its wealth management and investment team used monetary market tools such as interbank deposits, increased its investment in tranches of equity and bond, and explored the investment in corporate receivables from innovative enterprises. It offered structured wealth management products such asset portfolio product, RMB-USD swap embedded products, and launched PE-based products with stable or aggressive growth. It developed a supporting system for wealth management product marketing in order to enhance the marketing and advisory capabilities of its sales team.

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(4) Private Banking

The Bank launched its private banking business in 2011 with the establishment of private banking centers in Beijing and Shanghai. Its private banking products covered SME fi nancing, offshore fi nancing and family wealth management. Its product design focused on investment product suppliers, comprehensive fi nancial solutions and unifi ed credit for legal persons and natural persons, in order to establish a comprehensive portfolio of private banking investment products including cash management products, fi xed income products, A share investment products, alternative investment products and overseas investment products to facilitate customers’ long-term asset portfolio.

(5) Banking Card Business

a. Debit Card

The Bank launched debit cards featuring “Fu Lu Shou Xi (福祿壽禧) or Fortune, Salary, Longevity, Happiness” and other co-branded cards such as Public Fund Card and Community Card to enlarge the portfolio of Sunshine debit cards. Its chip card issuance system was completed and passed the system test of PBOC. The Bank played an active role in the issuance of social insurance IC card and expanded the reserve of industrial application projects. It launched the promotion of payment with CEB debit card to increase the card using frequency. As at the end of the reporting period, a total 34.34 million debit cards were issued, representing an increase of 6.10 million cards as compared to the beginning of the year.

b. Credit Card

The Bank shifted its focus from the number of credit cards issued to profi tability. With its steadily growing market share, sharply improving profi tability, streamlined customer structure and lowered risk level, its credit card business demonstrated a balanced development between effi ciency, quality and scale. As at the end of reporting period, 2.53 million new credit cards were issued with the total number of credit cards issued reaching 11.12 million, up by 30% over last year. Its total transaction volume was RMB1.183 billion, up by 54% over last year. Balance of credit card overdraft was RMB25.3 billion, 95% over last year. Overdue rate for bills past due over 180 days was 0.94%, down by 0.28 percentage points over last year. The Bank recorded operating income amounted to RMB2.465 billion, representing an increase of 63% over last year; recorded profi t after provision amounted RMB785 million, representing an increase of 252% over last year. In 2011, the Credit Card Center of the Bank was the only banking institution approved by CBRC to obtain ISO27001 certifi cate for information security quality and ISO9001 certifi cate for quality control management.

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(6) Platform Construction

The Bank speeded up the development of customer information system. During the reporting period, Enterprise Customer Information Facility (“ECIF”) and Enterprise Customer Intelligence System (“ECIS”) were put into operation as scheduled. ECIF system, ECIS system and OCRM system for retail customers formed the customer management platform of the Bank. This platform integrated information of the Bank’s retail customers and connected the customer management of core business system and credit card system, which realized the consistent customer management for “the bigger concept of retail banking business”. It covered the whole process of management, analysis and application of customer information and enhanced the capacity and quality of customer relation management of the Bank.

3. Treasury Business

While maintaining suffi cient liquidity, the Bank closely followed the development of the fi nancial market and delivered excellent performance by enhancing its proprietary business, expanding its agency business and developing innovative treasury products. As at the end of the reporting period, RMB and foreign currency denominated assets reached RMB235.018 billion, representing 13.6% of the Bank’s total assets and an increase of 12.5% over last year. Value of liability portfolio was RMB152.055 billion, representing a decrease of 13.3% over last year. Net interest income amounted to RMB6.140 billion and net intermediary business revenue was RMB233 million. Repurchase transactions and interbank lending transactions in the money market increased by 24.8% and 32.4%, realizing a net interest income of RMB507 million. Total turnover of interbank bonds amounted to RMB1,051 billion, which was the largest among all domestic joint stock banks. Currency agent business was further consolidated by introducing high yield currency product “Bond Market Tool (債市通)”. The Bank adopted proactive measures to manage its foreign currency position and enhanced its foreign exchange sale and purchase business. The Bank obtained approval from the SAFE to be engaged in Renminbi and foreign exchange futures business in the interbank foreign exchange market and to provide this business to its customers.

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4. Agency Business

As at the end of reporting period, total service fees of the agency businesses (exclusive of custody business) of the Bank amounted to RMB505 million. Insurance agency service fees amounted to RMB156 million, representing 30.9% of the total service fee. Agency service fees from bank security and trust businesses totaled RMB174 million, representing 34.5% of the total service fees. Agency service fees for fund selling and gold businesses amounted to RMB68 million and RMB46 million respectively.

5. Electronic Banking Business

During the reporting period, the Bank strived to build a leading service brand and continued to develop its electronic banking business by implementing centralized management to realize integration and synergetic development of channels internally and seeking external cooperation to achieve win-win result. Six major transaction channels, namely online banking, mobile banking, telephone banking, self-service banking machines, SMS banking and portal sites were further consolidated and improved to cater for customers’ diversifi ed demands for fi nancial services. As at the end of the reporting period, the total number of electronic banking customers was 9.4596 million, representing an increase of 81.93% over last year. About 399 million transactions were done through electronic channels up by 64.36% with a value totaling RMB8.16 trillion, up 18.86% than that of 2010. Personal online banking customers grew by 61.66% while corporate online banking customers up by 36.95% over the last year. Mobile banking customers increased by 166.19% over last year. The establishment of Wuhan customer service centre led to a balanced workload between Beijing and Wuhan customer service centers. 961 self-service banks were set up, an increase of 142 over last year, and 6,264 self-service banking machines were installed, an increase of 678 machines over last year. Electronic bill settlement accounts increased by 95.99% over last year. The Bank’s online payment platform was the largest utility payment platform in the industry.

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(XII) Information technology

The Bank improved the management structure of information technology and streamlined its organizational structure. By strengthening IT risk management, quality control as well as data service and management, it delivered standard practice of project management, clearly defi ned procedures for IT application and maintenance service, and systematic IT risk management. It set the strategic direction for the Bank to conduct research and development of core technologies by itself, to support and drive innovations of business models and services with its enhanced research and development capability. With a series of operation security measures, the overall system stability was improved signifi cantly as demonstrated by the safe operation of system for 365 days. IT system, as a driving force, supported the Banks’ key business development, such as centralized retail customer data management, SME banking, electronic banking, intelligent IC cards and the new Basel Accord implementation. In 2011, its self-developed Market Risk Management System, Sunshine Cash Management platform, Graphic Teller System (GTS), local Disaster Recovery Management System and “Data Standard System” received the Best Banking Technology Development Award by the PBOC.

(XIII) Human resources management

The Bank’s human resources management was committed to its development strategy and operation objectives, by implementing a policy of “people coming fi rst, supporting the Bank’s development, focusing on system building and seeking steady progress”. It reformed its offi cer management by revising regulations, enhancing offi cer candidate cultivation and improving offi cer rotation. It enhanced its employee relationship management and reformed the hiring system. With a review of the Bank’s structure, it streamlined the human resource management of tier-2 branches and organizations at different levels, and explored the system of business divisions. It strengthened HR IT system, while it formulated the Bank’s vision of HR development and facilitated the career development planning of its staff. Performance assessment system was refi ned by setting up proper performance assessment indicators. It adopted a ranking system of tier-1 branches according to their performance and launched strategic assessment with performance scoring cards. It improved its comprehensive remuneration and welfare scheme to allocate and distribute remuneration scientifi cally. It defi ned the training and development goals, explored new training management models, formulated the Bank’s vision for training and continued the research and development of training programs.

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(XIV) Operations and results analysis of major wholly owned and non-wholly owned subsidiaries

1. Long term equity investment

For details, please see “Signifi cant Events (III) Holding of shares of other listed companies, (IV) Holding of shares of unlisted fi nancial enterprises”.

2. Operations of subsidiaries

Shaoshan Everbright Rural Bank Co., Ltd. was established in September 2009 with a registered capital of RMB50.00 million and its place of registration was Shaoshan, Hunan. In 2011, it stepped up to regulate its internal management and developed its own customer base. Its liability business developed rapidly and the asset quality was good. It achieved better operation performance than expected and established good public image in the community. As the end of the reporting period, it had deposit amounted to RMB355 million, representing a market share of 11.3% in the local market. Balance of loans amounted to RMB120 million. Total assets and net assets were RMB411 million and RMB54 million, respectively. Net profi t amounted to RMB3.308 million.

Everbright Financial Leasing Co., Ltd. was established in May 2010 with a registered capital of RMB800 million and its place of registration was Wuhan, Hubei. It insisted to develop with specialized operations focusing on equipment fi nancing and provided equipment fi nancial leasing services for customers. It provided support to China Everbright Bank in terms of market, industry and customer services and achieved outstanding results of operation. As at the end of the reporting period, its leasing assets were approximately RMB8 billion and net assets amounted to RMB990 million. Its net profi t was RMB160 million.

(XV) Risk Management

1. Pushing forward the Implementation of New Basel Accord

In November 2011, the Bank offi cially submitted to the regulatory authority its application for evaluation of its implementation of the new Basel Accord. The Bank was the fi rst joint stock commercial bank to offi cially submit the application, apart from the six designated banks for implementation of the new Basel Accord as required by the regulatory authority. This action represented the completion of the Bank’s major preparation and a new page for the implementation of the new Basel Accord.

In order to seek more meaningful development, the Bank combined the implementation of new Basel Accord with its daily operation and management. The Bank transformed its development model from scale expansion oriented to capital-based which focused on a good balance between risk and income. It emphasized building differentiated competitiveness for improved operation effi ciency and capital returns. It paved the way for lean management by applying risk quantitative techniques. It worked hard to set up the second pillar of the new Basel Accord for a risk appetite oriented framework of comprehensive risk management based on portfolio management and economic capital, while it pursued the combination of capital management and risk management through Internal Capital Adequacy Assessment Process (ICAAP) to live up to the core idea of “creating value through risk management”.

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2. Credit Risk Management

During the reporting period, the Bank continued to restructure its risk management system, update the risk management policy, improve asset structure and enhance credit risk management.

Facing the change in macro-economic and fi nancial environment, the Bank reviewed its credit policy and regional marketing guidelines, modifi ed its operation strategy and implemented proactive prudent risk management policy, which focused on real economy and prioritized the provision of credit for SMEs and micro enterprises. It improved the Bank’s credit structure through stress tests and limit management resulting in better credit portfolio management and lower systematic risks and credit concentration risk.

It implemented active post-credit extension management by improving the management system, operation process, collateral evaluation in an effort to make the post-credit extension management more targeted and effi cient and to improve its quality and effect.

3. Liquidity Risk Management

During the reporting period, the modifi er of the Chinese monetary policy was shifted from “prudent” to “properly tight”, as the Required Reserve Ratio (RRR) was raised several times and tightened the liquidity. However, the decrease of RRR at the end of 2011 represented a “turning point” of monetary policy. Therefore, the change in liquidity and policy “turning point” might trigger structural risks.

The Bank adhered to prudent and stable liquidity risk management policy and adopted fl exible, effective and visionary liquidity risk management strategy to cope with the increasing structural liquidity risk. Liquidity of the Bank during the year remained stable. The Board adopted the Liquidity Risk Management Policy and

Liquidity Contingency Management Measures, which outlined the liquidity risk management mechanism and strategy. Frequency of liquidity risk assessment by senior management was increased from once a month to once a week while its supervision focus shifted to regulated products to wealth management and inter-bank products. As the structural liquidity risk continued to increase, liquidity management guidelines were formulated to provide more specifi ed management measures of liquidity risk. With internal fund transfer pricing (FTP) determined and adjusted in a reasonable and fl exible manner, it delivered forward-looking liquidity guidance and unifi ed coordinated liquidity management to ensure stable and sound development of all business lines. With proper early adjustment of range limits and reserve limits, it coped with policy change and market challenges.

The Bank has established a liquidity risk management system which worked well with its scale, business nature and complexity and was able to identify, measure and monitor the liquidity risk of the Bank. Liquidity risk analysis instrument included (but not limited to) gap analysis, stress test, concentration calculation and scenario simulation. Liquidity risk limit system included liquidity ratio, liquidity gap ratio, surplus reserve ratio, liquidity range gap ratio, loan to deposit ratio, liquidity coverage ratio and net steady fi nance ratio.

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The Bank moved forward its asset and liability management system Bancware ALM Project II, making it more systematic, timely, effective, forward-looking and standardized, and thus enhancing the system support for liquidity risk management.

4. Market Risk Management

Market risk for the operations of the Bank mainly includes interest rate risk and exchange rate risk.

(1) Interest rate risk management

The fi rst three quarters of 2011 witnessed increasing infl ation prospect, and rising of interest rate as the main action of monetary policy. Since the fourth quarter 2011, due to the lowering of infl ation prospect and medium-to-long term market yield, there was expectations for the decrease of interest rate.

The Bank continued to adopt stable and prudent interest rate risk management policy and implement practical risk prevention measures to keep the overall interest rate risk exposure of the Bank within its risk tolerance and limit. The Board adopted the Policy regarding the Management of Bank Account Interest Rate Risk, which outlined the system and strategies of bank account interest rate risk management. Interest rates of loan products of the Bank were determined based on the principle of matching risk and returns within the permitted scope according to the interest rate policy of PBC; It continued its Internal Fund Transfer Pricing (FTP) mechanism, which prevented its branches from interest rate risks and set up a unifi ed and professional management of interest rate risk. Its timely modifi cation of FTP policy facilitated the adjustment of its asset and liability portfolio, which reduced or offset the negative impact of the government macro-economic control policies and market volatility, and improved its NIM performance. It also enhanced system analysis and scenario simulation of business structure, interest rate fl uctuation and product pricing, which provided reliable data support for business decision-making.

Base on its forecast of the market changes and business development of 2011, the Bank reviewed and established a limit system focusing on DV01, duration and repricing gap ratio. Results of its forecast analysis and stress tests were applied to the Bank’s daily management.

The Bank’s asset and liability management system Bancware ALM Project II was under progress. By focusing on the improvement of model checking and re-testing, economic capital calculation of banking book interest rate risk, fl uctuation and correlation analysis, stress test and dynamic simulations, the Bank’s asset and liability management system was optimized and upgraded, enhancing the effectiveness of system applications in interest rate risk management.

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(2) Exchange rate risk management

In 2011, the Bank reinforced the management of exchange rate risk by formulating the Measures for Exchange

Rate Risk Management of Bank Accounts to standardize the management of exchange rate risks of bank accounts. The Bank forecasted the fl uctuation range of exchange rates based on the trend of foreign exchange and exchange control of other countries. It regularly monitored exchange risk exposure and timely adjusted foreign exchange asset structure to enhance the portfolio of assets and liabilities in different currencies. It minimized exchange risk exposure as permitted by regulatory agencies, particularly strictly controlled the position of foreign exchange sales and purchase while it used derivatives such as currency swaps and futures to shift and hedge exchange rate risk. Therefore, it applied a unifi ed exchange rate risk management across the Bank.

5. Operational Risk Management

In the face of the complexity of the economy, the Bank continued to strengthen its daily operational risk management and improve related system while it enhanced its internal control system and prevent external fraud. Self-assessment of operational risk control, data collection of business losses and monitoring of key risk indicators were conducted from time to time while the operational risk reporting system was improved and supervision of operational risk was strengthened. Internal and external typical cases of operational risk were tracked in a timely manner followed by analysis and risk alert. The Bank promulgated the Administrative

Measures for Operational Risk Alert to improve the operational risk alert system. Rules of operational risk management by all business lines were formulated and monitoring and specifi c reforms were carried for key aspects of operational risk. Establishment of IT risk management was sped up. Consultation opinions of IT risk management were implemented upon review and adoption.

6. Compliance Risk Management

The Bank enhanced its compliance management system and implemented the Guidelines for Effective

Compliance Management in accordance with the advanced concepts of regulatory authorities and the compliance management of the Bank. Rules and regulations were set up based on the principles of strictness, practicality, simplicity and effectiveness. 1,299 rules and regulations were reviewed, including 156 amended and 152 abolished, therefore procedures were streamlined and rules were standardized. In order to reinforce and improve the internal control of the Bank, the “Four-in-One” internal control and supervision system was implemented. The Bank launched compliance education and promotion activities, such as compliance lecture featuring “appreciation of the Bank, dedication to work and legal compliance for sound development of the Bank”, and achieved signifi cant results. The Bank strengthened its anti-money laundering management with the formulation of the Administrative Measures for Reporting of Suspected Transactions of Terrorism Financing. It improved its contract management system and emphasized contract review and business dispute settlement which effectively prevented legal risks and provided legal support for business development of the Bank.

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7. Reputation Risk Management

In 2011, the Bank offi cially issued the Measures for the Evaluation of Reputation Risk Management, which established a complete set of monitoring, reporting and responding procedures of media reports related to the Bank and taking reputation risk as part of the Bank’s overall evaluation system. By putting quantitative assessment in place, the Bank’s reputation risk management has become more professional, systematic and standardized. It successfully launched reputation risk emergency practice. No material reputation risk which might affect the management and stable operation of the Bank took place during the year.

(XVI) Outlook of the Company

1. Economic, Financial and Industrial Outlook

2012 will witness the growing risk of global economic slowdown. The US economic growth will be sluggish due to cyclical effects and its structural tension. In Europe, the sovereign debt crisis will get worse and expand to more major countries. Emerging economies will be affected by the debt crisis in the Europe and United States and there will be growing uncertainty in the world economy. Coupled with the domestic economic structural problems, the economic growth of China in 2012 is expected to slow down while the real estate investment and export growth will further decrease.

In 2012, the second year of the “Twelfth Five Year Plan”, China will maintain the continuity and consistency of its macro-economic policies while make its actions more targeted, responsive and forward-looking. Regulatory authorities will focus on risk management and support the development of the real economy by strengthening the effectiveness of supervision and facilitating the reform and transformation of the banking industry. Counter-cyclical regulation will be adopted with moderate adjustment during economic downturns and the credit market might return to normal. The new regulatory standards will have material infl uence on the development of the banking industry.

2. Major Concerns and Coping Strategies

In 2012, the Bank should take the following factors into serious consideration for its operation:

(1) Challenges from the liberalization of interest rates

Liberalization of interest rates allows commercial banks to have higher fl exibility in business operations and market expansion, more active innovation of banking products and better resource allocation, while it also poses more challenges to their risk pricing and current profi tability models. It is imperative for the Bank to readjust the future business operation and development models.

(2) Industrial restructuring

According to the Twelfth Five Year plan, China will enhance industrial structure change while strategic emerging industries and modern service industries, including ten industries such as energy conservation, environmental protection, new information technology and biology, will become the new drivers for economic growth. More credit resources will be provided to the emerging industries and modern service industries while resources for heavy-polluting, energy-intensive and resources-dependent industries or industries excessive production capabilities than market demand will be reduced.

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(3) Risks of Local Government Funding Vehicles

Local Government Funding Vehicles (LGFV), which have limited funding channels and mainly rely on bank loans, mostly invest in urban utility construction and transportation projects, which have long investment cycles, low returns and limited solvency. With limited following-up bank loans and challenges for local debt issuance, it is diffi cult for local governments to get new funds to pay old debts. Therefore, LGFV risk will require high attention of the Bank in 2012.

(4) Risks of Dropping Property Prices

With the government’s series of control policies, the property market in China “cooled down”. Transactions decreased with price remaining stable in the fi rst half of 2011 while both transactions and price dropped in the second half of the year. It is estimated that the property price in 2012 will continue to drop due to the slowdown of economic growth, tight credit control and continued control policies.

(5) Implementation of New Regulatory Standards

In order to maintain scientifi c and prudent supervision, regulatory authorities plan to implement the Basel Accord III in 2012 which will put higher requirement on the capital management and liquidity risk management of commercial banks. The new regulatory standards will challenge the traditional development model of commercial banks which seek expansion with high capital consumption. Therefore, capabilities to support capital growth through organic development will become more important.

In order to cope with the abovementioned pressure and challenges, the Bank will take the following actions:

(1) Promoting model-based operation for “more meaningful development”

2012 will witness the furthering of model-based operation, the Bank will expand through service innovation to meet specifi c demands of various industries, regions and customers. Based on its modelized operation for “one circle, two chains and three clusters” (i.e. business circle, supply chain and industrial chain and cluster of enterprises of same industry, market for similar products and national industrial park”, the Bank will conduct research to identify core customers/industry focus and develop its risk mitigation scheme, product portfolio marketing strategies and risk management guidelines. It will implement business supporting measures on resource allocation, evaluation and incentive policies and team building. It will also improve its working guidance for key regions and pilot programs by branches.

(2) Enhancing innovation capabilities to explore new service models

The Bank will enhance its commitment to better service and innovation of service models with reasonable risk exposure. It will establish both “top-down” and “bottom-up” innovation systems to create its innovation culture. With concerted efforts, it will develop SME product series and explore new banking service models for the low-carbon fi nance, cultural and creative industry fi nance as well as health-care reform fi nance. The Bank will also drive its SME banking service innovation and promote small- and micro-fi nance business. It will enhance the

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cross-selling of corporate and retail businesses and organizational innovation for corporate banking marketing by combining its product marketing line and customer marketing line. It will apply the Comprehensive Effi ciency Valuation System and create its own shadowing profi t assessment system.

(3) Upgrading IT and E-banking capabilities for differentiated competitiveness

Guided by its strategic objectives and in order to maintain stable operation of application systems, the Bank will focus on the IT application in service, improve its IT research and development capability to facilitate the transformation and innovation of service models, brand building of E-banking business and expansion of key businesses. Through centralized management, E-banking development will pursue integration of business channels and coordinated development as well as seamless connection with physical branches and outlets. It will consolidate resources for its marketing and sales of its advantageous products through E-banking channels so as to attract more customers or turn traditional customers into E-banking customers. It will strengthen the operation and management of customer service centers to enhance customer experience. The Bank will consolidate its business foundation and expand its business scale for the brand building of its E-banking business as another signature product of the Bank within 3 to 5 years.

(4) Strengthening corporate governance and improving customer services

The Bank will conduct a careful study of economic and fi nancial development, make forward-looking analysis and develop its response plan to mitigate fi nancial risks in the complicated economic and fi nancial environment. Taking the opportunity of the Bank’s 20th anniversary, the Bank will commence the “Year of Brand Promotion” to enhance its brand competitiveness in the industry as brand is the driving force for the implementation of strategies and the supportive force for business development. The Bank will further strengthen its human resources management by selecting, managing, mentoring and utilizing proper people. It will push forward institutional construction and enhance quality control of branches or outlets. The bank will implement Sunshine Service Lean Management Project to streamline business procedures in addition to the provision of courteous services with standard quality.

3. Guidelines for Business Development in 2012

In 2012, the Bank will be guided by its strategic vision and strive to fulfi ll its commitment to investors and maximize the returns for shareholders. While emphasizing risk management, the Bank will continue to implement the principle of “managing capital adequacy, seeking relative leading position, ensuring regulatory compliance and pursuing steady growth”. More resources will be allocated to support restructuring, development of liability business, service innovations and expansion in key markets to for better business structure, improved revenue and sustainable and sound business growth.

064 Changes in Share Capital and Shareholders

070 Directors, Supervisors, Senior Management,

Staff and Institutions

087 Corporate Governance

093 General Meeting of Shareholders

095 Report of the Board of Directors

106 Report of the Board of Supervisors

108 Signifi cant Events

111 Index to Information Disclosure during

the Reporting Period

114 Written Confi rmation of the Bank’s Directors and

Senior Management for Annual Report 2011

64

Changes in Share Capital and Shareholders

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(I) Change in share capital

Unit: share, %

Before this change Increase or decrease in this change (+,-) After this change

NumberProportion

(%)New share

issuance Bonus shareCapitalization of

public reserve Others Sub-total NumberProportion

(%)

I. Shares subject to moratorium

1. Shares held by the State 20,263,581,808 50.11 -161,959,286 -161,959,286 20,101,622,522 49.71

2. Shares held by state-owned legal person 9,677,130,997 23.93 -4,800,853,519 -4,800,853,519 4,876,277,478 12.06

3. Shares held by other domestic investors 4,736,495,966 11.71 -4,496,495,966 -4,496,495,966 240,000,000 0.59

Including: Shares held by domestic non-state-owned legal person Shares held by domestic natural persons 4,736,495,966 11.71 -4,496,495,966 -4,496,495,966 240,000,000 0.59

4. Shares held by foreign investors 1,757,581,229 4.35 -1,757,581,229 -1,757,581,229

Including: Shares held by foreign legal persons Shares held by foreign natural persons 1,757,581,229 4.35 -1,757,581,229 -1,757,581,229

II. Shares not subject to moratorium

1. Renminbi ordinary shares 4,000,000,000 9.89 11,216,890,000 11,216,890,000 15,216,890,000 37.63

2. Domestically listed foreign shares

3. Overseas listed foreign shares

4. Others

III. Total shares 40,434,790,000 100 40,434,790,000 100

(II) Marketable time of Shares subject to moratorium

Unit: share

Date

Number of additional marketable shares

after the expiration of trading moratorium

Balance of shares subject to moratorium

Balance of shares not subject to moratorium

August 18, 2011 11,216,890,000 25,217,900,000 15,216,890,000November 5, 2012 3,717,900,000 21,500,000,000 18,934,790,000August 19, 2013 21,500,000,000 — 40,434,790,000

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(III) Table of changes in number of shares subject to moratorium

Unit: share

Name of shareholder

Number of shares subject to morator ium

at the beginn ing of the report ing per iod

Number of shares re leased f rom

morator ium dur ing the report ing per iod

Increase in number of

shares subject to morator ium

dur ing the report ing

per iod

Tota l number of shares subject to morator ium

at the end of the report ing per iod Reason for morator ium Date of re lease

Cent ra l Hu i j i n I nves tment L td . 19 ,558,335,853 0 0 19,558,335,853 Lock-up per iod o f 36 months f rom the l i s t i ng da te

2013/8/19

Ch ina Eve rb r igh t Group L im i ted 2,093,991,629 2,093,991,629 0 0 Lock-up per iod o f 12 months f rom the l i s t i ng da te

2011/8/18

Ch ina Eve rb r igh t L im i ted 1,757,581,229 1,757,581,229 0 0 Lock-up per iod o f 12 months f rom the l i s t i ng da te

2011/8/18

Ch ina Re insu rance (Group ) Ho ld ing Co. , L td .

1 ,466,875,189 0 0 1,466,875,189 Lock-up per iod o f 36 months f rom the l i s t i ng da te

2013/8/19

Ch ina Power F inance Co. , L td . 799,887,815 0 0 799,887,815 Lock-up per iod o f 36 months f rom the comp le t ion o f p rocedures w i th i ndus t r i a l and commerc ia l admin i s t ra t ions fo r i nves tment i n the Bank

2012/11/5

Shenergy (Group ) Co . , L td . 782,333,434 0 0 782,333,434 Lock-up per iod o f 36 months f rom the comp le t ion o f p rocedures w i th i ndus t r i a l and commerc ia l admin i s t ra t ions fo r i nves tment i n the Bank

2012/11/5

The Nat iona l Counc i l f o r Soc ia l Secur i t y Fund o f the PRC Note 1

474,788,958 0 0 474,788,958 Lock-up per iod o f 36 months f rom the l i s t i ng da te

2013/8/19

68,497,711 0 0 68,497,711 Lock-up per iod o f 36 months f rom the comp le t ion o f p rocedures w i th i ndus t r i a l and commerc ia l admin i s t ra t ions fo r i nves tment i n the Bank

2012/11/5

97,696,462 2 97,696,462 2 0 0 Lock-up pe r iod o f 12 months f rom the l i s t i ng da te

2011/8/18

Hongta Tobacco (Group ) Co . , L td . 549,896,819 549,896,819 0 0 Lock-up per iod o f 12 months f rom the l i s t i ng da te

2011/8/18

Aerospace Sc ience & Techno logy F inance Co. , L td .


2012/11/5

Baos tee l Group Corpora t ion 488,958,396 0 0 488,958,396 Lock-up per iod o f 36 months f rom the comp le t ion o f mod i f i ca t ion p rocedures w i th i ndus t r i a l and commerc ia l admin i s t ra t ions by the i nves ted company

2012/11/5

Ch ina Av ia t ion Sc ience and Techno logy Group Company


2012/11/5

Notes: 1. Among the shares held by The National Council for Social Security Fund of the PRC, 474,788,958 shares were state-owned shares transferred from Central Huijin Investment Ltd. and its subsidiary China Re-insurance (Group) Holding Co., Ltd. to The National Council for Social Security Fund of the PRC; 68,497,711 shares were state-owned shares transferred from fi ve companies, namely China Power Finance Co., Ltd, Shenergy (Group) Co., Ltd, Aerospace Science & Technology Finance Co., Ltd, Baosteel Group Corporation and China Aviation Science and Technology Group Company to The National Council for Social Security Fund of the PRC who acquired shares of the Bank in November 2009; 97,696,462 shares were state-owned shares transferred to The National Council for Social Security Fund of the PRC prior to issuance of A shares by the Bank from other state-owned shareholders who satisfi ed their transfer obligation otherwise. The National Council for Social Security Fund of the PRC Council carried on the lock-up obligation and lock-up undertaking of such state-owned shareholders from whom shares were transferred.

2. Because some shares of the Bank held by state-owned shareholders prior to issuance of A share have gone under pledge and legislative freezing, shares transferred by such shareholders to The National Council for Social Security Fund of the PRC are to be transferred upon release of pledge and legislative freezing.

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(IV) Securities issuance and listing

1. Securities issuance for recent three yearsIn 2010, the Bank issued 7 billion Renminbi ordinary shares (A share) in IPO at an offer price of RMB3.10 per share. The Bank’s shares were listed on Shanghai Stock Exchange on 18 August 2010. After this offering, the Bank’s total share capital was increased from 33.43479 billion shares to 40.43479 billion shares. In 2011, the Bank had issued no securities.

2. There were no movement in the Company’s total number of shares and structure as a result of bonus issue, capitalization of public reserve and placement of shares during the reporting period.

3. The Bank had no employee shares

(V) Shareholding of top 10 shareholders at the end of the reporting period

Unit: share, %

Total number of shareholders at the end of the reporting period (account) 256,401

Name of shareholderNature of

shareholderProportion of shareholding

Total number of shares held

Number of shares subject to moratorium held

Number of shares pledged

or frozenCentral Huijin Investment Ltd. State-owned shares 48.37 19,558,335,853 19,558,335,853 0China Everbright Group Limited State-owned legal

person shares 5.18 2,093,991,629 0 0China Everbright Limited Overseas legal

person shares 4.35 1,757,581,229 0 0China Reinsurance (Group) Holding Co., Ltd.

State-owned legal person shares 3.63 1,466,875,189 1,466,875,189 0

China Power Finance Co., Ltd. State-owned legal person shares 1.98 799,887,815 799,887,815 0

Shenergy (Group) Co., Ltd. State-owned legal person shares 1.93 782,333,434 782,333,434 0

The National Council for Social Security Fund of the PRC State-owned shares 1.59 640,983,131 543,286,669 0Hongta Tobacco (Group) Co., Ltd. State-owned legal

person shares 1.36 549,896,819 0 0Aerospace Science & Technology Finance Co., Ltd.

State-owned legal person shares 1.21 489,264,248 489,264,248 0

China Aviation Science and Technology Group Company

State-owned legal person shares 1.21 488,958,396 488,958,396 0

Baosteel Group Corporation State-owned legal person shares 1.21 488,958,396 488,958,396 0

Remarks on the relationship or concerted actions between the above shareholders: China Re-insurance (Group) Co., Ltd. is a subsidiary of Central Huijin Investment Ltd; China Everbright Limited is a subsidiary of China Everbright Holdings Company Limited; China Everbright Group Limited, China Everbright Holdings Company Limited and China Everbright Limited share the same chairman, and some senior management; Aerospace Science & Technology Finance Co., Ltd. is a subsidiary of China Aviation Science and Technology Group Company. Save for these, the Bank is not aware of any relationship, connected or concerted between the above shareholders.

Note: There is no change in the total number of shares held by top 10 shareholders during the reporting period.

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(VI) Shareholding of top 10 shareholders with shares not subject to trading moratorium at the end of the reporting period

Unit: Share

Name of shareholder

Number of shares not subject

to trading moratorium held Class of shares

China Everbright Group Limited 2,093,991,629 Renminbi ordinary shareChina Everbright Limited 1,757,581,229 Renminbi ordinary shareHongta Tobacco (Group) Co., Ltd. 549,896,819 Renminbi ordinary shareChina Export & Credit Insurance Corporation 209,877,486 Renminbi ordinary shareZhejiang Southeast Electric Power Company Limited 176,000,000 Renminbi ordinary shareQingdao Conson Industrial Corp. 172,172,847 Renminbi ordinary shareCNGC North Industries Group Finance Company Ltd. 161,290,000 Renminbi ordinary shareChina State Shipbuilding Corporation 161,290,000 Renminbi ordinary shareMinmetals Investment & Development Co. Ltd. 161,290,000 Renminbi ordinary shareCommercial Aircraft Corporation of China Ltd. 161,290,000 Renminbi ordinary shareChina Everbright Investment Management Corp. 161,290,000 Renminbi ordinary shareChina Datang Corporation 161,290,000 Renminbi ordinary shareGuangdong Provincial Communication Group Co., Ltd. 161,290,000 Renminbi ordinary shareAerospace Capital Holding Co. Ltd. 161,290,000 Renminbi ordinary shareRemarks on the relationship or concerted actions between the above shareholders: China Everbright Limited is a subsidiary of China Everbright Holdings Company Limited; China Everbright Group Limited, China Everbright Holdings Company Limited and China Everbright Limited share the same chairman, and some senior management; the Vice Chairman of China Everbright Group Limited is also the Chairman of China Everbright Investment Management Corp.. Save for these, the Bank is not aware of any relationship, connected or concerted between the above shareholders.

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Changes in Share Capi ta l and Shareholders

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(VII) Number of shares held by top 10 shareholders with shares subject to moratorium at the end of the reporting period and the trading moratorium

Unit: Share

Name of shareholders with shares subject to moratorium

Number of shares subject to moratorium held Marketable time

Number of additional marketable shares

Trading moratorium

Central Huijin Investment Ltd. 19,558,335,853 2013/8/19 19,558,335,853 Lock-up period for A shares

China Reinsurance (Group) Holding Co., Ltd. 1,466,875,189 2013/8/19 1,466,875,189 Lock-up period for A shares

China Power Finance Co., Ltd. 799,887,815 2012/11/5 799,887,815 Lock-up period for A shares

Shenergy (Group) Co., Ltd. 782,333,434 2012/11/5 782,333,434 Lock-up period for A shares

The National Council for Social Security Fund of the PRCNote

543,286,669 2013/8/19 474,788,958 Lock-up period for A shares

2012/11/5 68,497,711 Lock-up period for A shares

Aerospace Science & Technology Finance Co., Ltd.


Baosteel Group Corporation 488,958,396 2012/11/5 488,958,396 Lock-up period for A shares

China Aviation Science and Technology Group Company


Shanghai Chengtou Holding Co.,Ltd. 360,000,000 2012/11/5 360,000,000 Lock-up period for A shares

Guangdong Provincial Expressway Development Co., Ltd.


Note: The National Council for Social Security Fund of the PRC held in aggregate 640,983,131 shares of the Bank, of which 543,286,669 shares were subject to the lock-up period of A shares at the end of the reporting period.

(VIII) Profi le of major shareholders of the Bank

1. Central Huijin Investment Ltd.

Central Huijin Investment Ltd. (hereinafter referred to as “Huijin”) is a wholly state-owned investment company established on 16 December 2003 in accordance with the Company Law and with the approval of the State Council. It has a registered capital of approximately RMB828.209 billion and its legal representative is Lou Jiwei. Huijin is the subsidiary of China Investment Corporation and is mandated to make equity investment in major state-owned fi nancial enterprises in accordance with authorization by the State Council. It shall, to the extent to its capital contribution, exercise the rights and perform the obligations as an investor in major state-owned fi nancial enterprises, on behalf of the State in accordance with the applicable laws to achieve the goal of preserving and enhancing the value of state-owned fi nancial assets. Huijin does not conduct any other business or commercial activities, nor does it intervene in the day-to-day business operation of the major state-owned fi nancial enterprises in which it has a controlling equity interest.

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Besides investment in the Bank, Huijin also made investment in fi nancial institutions such as China Development Bank Limited, Industrial and Commercial Bank of China Limited, Agricultural Bank of China Limited, Bank of China Limited and China Construction Bank Corporation.

As at the end of the reporting period, Huijin held 19,558,335,853 shares of the Bank, accounting for 48.37% of the total share capital of the Bank.

2. China Everbright Group Limited

China Everbright Group Limited (hereinafter referred to as “Everbright Group”) is a company contributed and incorporated by Ministry of Finance on 12 November 1990 with the approval of the State Council. It has a registered capital of RMB20 million and its legal representative is Tang Shuangning. Everbright Group conducts investment in and management of companies engaged in banking, securities, insurance, fund management, trust investment and gold and silver transactions as well as investment in and management of non-fi nancial enterprises. At present, it has developed into a fi nancial conglomeration focusing on fi nancial businesses such as banking, securities, insurance and investment management. The principle enterprises in which Everbright Group has a participating or controlling equity interest include such fi nancial institutions as the Bank, Everbright Securities Co., Ltd., Sun Life Everbright Life Insurance Co., Ltd. etc.

As at the end of the reporting period, Everbright Group held 2,093,991,629 shares of the Bank, accounting for 5.18% of the total share capital of the Bank.

3. China Everbright Limited

China Everbright Limited was incorporated on 25 August 1972 (formerly known as Minghui Development Co., Ltd., was renamed to China Everbright Limited in 1997 after China Everbright Holdings Company Limited became its actual controlling shareholder in 1994) (hereinafter referred to as “Everbright Holding”), and is a company listed on The Hong Kong Stock Exchange (stock code: 0165.HK). Its Chairman of the board of directors is Tang Shuangning. Everbright Holding focuses on providing fi nancial services for clients, fully participating in direct investment, asset management, brokerage business, investment banking and industrial investment etc.

As at the end of the reporting period, Everbright Holding held 1,757,581,229 shares of the Bank, accounting for 4.35% of the total share capital of the Bank.

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(I) Fundamental profi le

Name Position Gender Age Term

Total remunerationreceived from the

Bank during thereporting period

(Pre-tax, RMBten thousand)

Whether receivingremunerationor allowance

from shareholdercompanies or otherconnected persons

Tang Shuangning Chairman, Secretary of Party Committee

Male 57 2007.07–2012.11 — Yes

Luo Zhefu Vice Chairman Male 58 2009.04–2012.11 — YesGuo You Executive Director, President,

Deputy Secretary of Party CommitteeMale 54 2004.08–2012.11 66.00 No

Wu Qing Executive Director,Executive Vice President,Deputy Secretary of Party Committee

Male 58 2003.01–2012.11 153.40 No

Yu Erniu Non-executive Director Male 62 2009.11–2012.11 — YesNarentuya Non-executive Director Female 56 2011.03–2012.11 — YesWu Gang Non-executive Director Male 53 2011.03–2012.11 — YesWang Shumin Non-executive Director Female 55 2012.02–2012.11 — YesWang Xia Non-executive Director Female 41 2007.12–2012.11 — YesWu Jian Non-executive Director Male 41 2007.12–2012.11 — YesChung Shui Ming Independent Director Male 60 2006.09–2012.11 20.00 NoJames Parks Stent (Shi Weiping)

Independent Director Male 66 2006.09–2012.11 20.00 No

Wang Wei Independent Director Male 53 2008.05–2012.11 20.00 NoCai Hongbin Independent Director Male 44 2009.11–2012.11 20.00 NoZhang Xinze Independent Director Male 65 2011.11–2012.11 1.67 NoMou Huijun Vice Chairman of Supervisory Board,

Employee SupervisorMale 55 2009.11–2012.11 153.34 No

Chen Shuang Equity Supervisor Male 44 2007.12–2012.11 — YesPang Jiying Equity Supervisor Male 59 2009.11–2012.11 — YesZhang Chuanju Equity Supervisor Female 54 2009.11–2012.11 — YesWu Junhao Equity Supervisor Male 46 2009.11–2012.11 — YesXia Bin External Supervisor Male 60 2006.09–2012.11 16.00 NoWang Huanbang External Supervisor Male 71 2005.11–2012.11 16.00 NoChen Yu Employee Supervisor Female 46 2003.07–2012.11 181.92 NoYang Bingbing Employee Supervisor Male 40 2006.09–2012.11 159.62 NoLi Wei Employee Supervisor Male 38 2006.09–2012.11 95.51 NoLin Li Executive Vice President,

Deputy Secretary of Party Committee, Secretary of Disciplinary Committee, Chief Auditor

Male 43 2008.12– 154.32 No

Li Ziqing Member of Party Committee Male 59 1998.04– 153.34 NoShan Jianbao Executive Vice President,

member of Party CommitteeMale 57 2000.01– 153.34 No

Li Jie Executive Vice President,member of Party Committee

Female 53 2003.01– 153.34 No

Zhang Huayu Executive Vice President,member of Party Committee

Male 53 2006.02– 153.38 No

Ma Teng Executive Vice President,member of Party Committee

Male 53 2010.12– 153.40 No

Liu Jun Executive Vice President,member of Party Committee

Male 39 2009.03– 154.32 No

Lu Hong Executive Vice President,Secretary to the Board,member of Party Committee

Male 48 2009.03– 154.32 No

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Notes: 1. According to rules of relevant authorities, the fi nal remuneration of Mr. Guo You is being confi rmed, and will be disclosed upon confi rmation.

2. Mr. Zhang Xinze was appointed as an Independent Director of the Bank in November 2011, whose remuneration shall be determined based upon his actual term of offi ce.

3. Ms. Wang Shumin performed her duty after obtaining the CBRC approval for the qualifi cation of Director in February 2012. 4. Except employee supervisors are elected by employee representative meeting of the Bank, the directors and supervisors of the

Bank are elected by shareholder meeting for a term of three years, and are eligible for re-election. 5. As at the end of the reporting period, none of the above directors, supervisors and senior management held any shares in the

Bank. 6. As at the end of the reporting period, the Bank had not implemented equity incentive plans, and none of the directors,

supervisors and senior management of the Bank held any shares option in the Bank or had been granted any restrictive shares.

(II) Decision making procedures for the remunerations of Directors, Supervisors and senior management

Remunerations of directors, Supervisors and Senior management are verifi ed and paid in accordance with relevant rules of relevant authorities as well as Articles of Association of the Bank. Remuneration package is submitted to the Remuneration Committee of the Board of Directors for review and approval before it is considered and approved by the Board of Directors and submitted to shareholders’ meeting for approval.

(III) Positions held by directors and supervisors in shareholders’ companies

Name

Name of shareholders’ company

in which he/she is employed Position Term

Tang Shuangning China Everbright Group Limited Chairman, Secretary

of Party Committee

June 2007 to the present

Luo Zhefu China Everbright Group Limited General manager,

Executive Director,

member of Party Committee

December 2008 to the present

Guo You China Everbright Group Limited Vice chairman,

member of Party Committee

Member of Party Committee:

February 2000 to the present

Vice chairman:

July 2004 to the present

Yu Erniu Central Huijin Investment Ltd. Dispatched Director November 2009 to the present

Narentuya Central Huijin Investment Ltd. Dispatched Director December 2010 to the present

Wu Gang Central Huijin Investment Ltd. Dispatched Director December 2010 to the present

Wang Shumin Central Huijin Investment Ltd. Dispatched Director December 2011 to the present

Wang Xia Central Huijin Investment Ltd. Dispatched Director,

Director of Everbright Equity

Management Department of

Comprehensive Department

December 2007 to the present

Wu Jian Central Huijin Investment Ltd. Dispatched Director December 2007 to the present

Chen Shuang China Everbright Limited Executive Director, Executive director: August 2004

to the present

Chief Executive Offi cer Chief Executive Offi cer:

August 2007 to the present

72

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Name

Name of shareholders’ company

in which he/she is employed Position Term

Pang Jiying China Re-insurance (Group) Co., Ltd. Vice Chairman,

Chairman of Worker Union

Vice Chairman: 2007 to the present

Chairman of Worker Union:

March 2008 to the present

Zhang Chuanju China Power Finance Co., Ltd. Deputy General Manager November 2005 to the present

Wu Junhao Shenergy (Group) Co., Ltd. Vice Manager of Financial

Management Department

April 2011 to the present

(IV) Composition of members of senior management

Name Gender Age

Yearsof work

experience Current position Scope of responsibility

Tang Shuangning Male 57 29 Chairman, Secretary of Party Committee Take charge of the overall monitoring, Supervising the Human Resources Department

Guo You Male 54 22 President, Deputy Secretary of Party Committee

Take charge of the day-to-day operation and management of the Bank

Wu Qing Male 58 34 Executive Vice President,Deputy Secretary of Party Committee

Supervising the Strategy Management Department, General Offi ce and Infrastructure Construction Offi ce

Lin Li Male 43 17 Executive Vice President,Deputy Secretary of Party Committee, Secretary of Disciplinary Committee,Chief Audit Offi cer

Supervising the Retail Banking Department, Credit Card Center, IPO Offi ce, the Audit Department, the Legal and Compliance Department, the Supervision and Security Department and the Department of Party Affairs (Inspection Offi ce)

Li Ziqing Male 59 30 Member of Party Committee Supervising the fi nancial lease companyShan Jianbao Male 57 31 Executive Vice President,

member of Party CommitteeSupervising the Information Technology Department and E-Banking Department

Li Jie Female 53 31 Executive Vice President,member of Party Committee

Supervising the Risk Management Department and the Credit Approval Department

Zhang Huayu Male 53 31 Executive Vice President,member of Party Committee

Supervising the Asset Preservation Department and Investment and Custody Department

Ma Teng Male 53 27 Executive Vice President,member of Party Committee

Supervising the Corporate Banking Department, Small and Medium Enterprises Department and Trade Banking Department

Liu Jun Male 39 18 Executive Vice President,member of Party Committee

Supervising the Treasury Department, Investment Banking Department, Financial Institutions Department and Financial Market Center. Serving as President of Shanghai Branch and Secretary of Part Committee

Lu Hong Male 48 18 Executive Vice President,Secretary to the Board of Directors, member of Party Committee

Supervising the Planning and Finance Department, Operation Management Department, Offi ce of the Board of Directors and Board of Supervisors

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(V) Resumes of the Directors, Supervisors and Senior Management

1. Directors

Mr. Tang ShuangningHe joined the Bank as Chairman of the Board of Directors in July 2007. Currently he is also Chairman of China Everbright Group, Chairman of China Everbright Limited, Chairman of China Everbright International Limited, member of the Board of Directors of Everbright Securities Co., Ltd., and member of the Board of Directors of Sun Life Everbright Life Insurance Co., Ltd.. He was Deputy General Manager of Shenyang Branch of China Construction Bank (CCB) and Deputy General Manager and General Manager of Shenyang Branch of People’s Bank of China (PBC). He served successively as Director-General of the Credit Management Department PBC, Director-General of the Currency, Gold and Silver Bureau PBC and Director-General of the First Banking Supervision Department PBC. From April 2003 to June 2007, he was Vice Chairman of China Banking Regulatory Commission (CBRC) and Vice President of the China Society for Finance and Banking. He is a graduate of Dongbei University of Finance and Economics and holds a Master degree in investments and economics and a certifi cate of senior economist. He is a member of the Eleventh National Committee of CPPCC and awarded “Special Government Allowance” from the State Council of China.

Mr. Luo ZhefuHe became Vice Chairman of the Board of Directors of the Bank in April 2009. Currently he is Executive Director and General Manager of China Everbright Group, Vice Chairman of the Board of Directors of Everbright Securities Co., Ltd. and member of the Board of Directors of Sun Life Everbright Life Insurance Co., Ltd.. He was Assistant Director-General of the Research Department of Agricultural Bank of China (ABC), Deputy Director-General of the Education Department ABC, Deputy Director-General of the Capital Planning Department ABC, General Manager of the Planning Department ABC, General Manager of Shenzhen Branch ABC, General Manager of Hong Kong Branch ABC and General Manager of Beijing Branch of ABC. From November 2000 to December 2008, he was Executive Vice President and Executive Director of China Construction Bank (CCB). He is a graduate of the commercial economics department of Jilin Finance and Trade College and holds a Master degree in commercial economics from the Chinese Academy of Social Sciences and a certifi cate of senior economist.

Mr. Guo YouHe became Executive Director and President of the Bank in August 2004. Currently he is Vice Chairman of the Board of Directors of China Everbright Group. From November 1994 to August 1998, he was Director of the Foreign Exchange Transaction Department of the Foreign Exchange Reserves Business Center of the State Administration of Foreign Exchange (SAFE), General Manager of China Investment Corporation (Singapore) of the State Administration of Foreign Exchange and Deputy Director-General of Foreign Financial Institutions Department of People’s Bank of China. He joined the Bank in 1998 and served successively as Executive Vice President and Vice Chairman of the Board of Directors of China Everbright Bank, Executive Director and Vice General Manager of China Everbright Group, and Chief Executive Offi cer of China Everbright Limited. He is a graduate of Heihe Normal College and the American Institute of Yellow River University. He holds a PhD degree in Finance of the Southwestern University of Finance and Economics and a certifi cate of senior economist.

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Mr. Wu QingHe joined the Bank as Executive Director and Executive Vice President in January 2003. He was Chairman of the Board of Supervisors of the Bank. From April 1984 to January 2003, he served successively as General Manager of Shanxi Branch of China Construction Bank (CCB), Deputy General Manager of Beijing Branch of CCB, General Manager of the Electronic Banking Department of CCB, General Manager of the Information Technology Department of CCB and General Manager of the Computing Center of CCB. He graduated from the Correspondence School of Renmin University of China and attended an MA program of commercial economics at the Chinese Academy of Social Sciences and the international fi nance course at the Peking University. He holds a certifi cate of senior economist.

Mr. Yu ErniuHe became a member of the Board of Directors of the Bank in November, 2009. He is also an Independent Director of the First-Trust Fund Management Co., Ltd. He served as staff, Deputy Director-General and Director-General of the Department of Personnel and Education of the Ministry of Finance. From 2004 to 2007, he served as a member of the Board of Directors of Bank of China (BOC); from 2007 to 2009, he was a member of the Board of Directors, Director of the Human Resource Department, Chief of the Organization Department of the Party Committee and Chairman of the Labor Union of China Investment Co., Ltd.. He is a graduate of economic management studies from the PLA Air Force Political College. He later graduated from Capital University of Economics and Businesses with a Master degree in economic laws.

Ms. Naren TuyaShe became a member of the Board of Directors of the Bank in December, 2010. She is now working in Central Huijin Investment Ltd.. From December 1983 to October 2010, she successively served as Deputy Section Chief of the Industrial Enterprises Section of the Department of Finance of Inner Mongolia, Section Chief of the Central Enterprises Section in the Department of Finance of Inner Mongolia on behalf of the Ministry of Finance (MOF), Deputy Inspection Commissioner and Inspection Commissioner MOF to Inner Mongolia. She graduated from the Department of Finance of Tianjin University of Finance and Economics and majored in Finance. She holds a certifi cate of senior accountant and is a non-practicing member of the Chinese Institute of Certifi ed Public Accountants.

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Mr. Wu GangHe became a member of the Board of Directors of the Bank since December 2010. He is now working in Central Huijin Investment Ltd.. From September 1994 to October 2010, he successively served as Deputy Section Chief in the Department of Foreign Exchange and Foreign Affairs of the Ministry of Finance (MOF), Deputy Section Chief and Section Chief of the Department of International Cooperation MOF, Section Chief and Deputy Director-General of the International Department MOF, Deputy Director-General and Inspector (director-general level) of the Department of Administration and Politics MOF. He was a Second Secretary of the Permanent Mission of China to the United Nations. He graduated from the Department of Foreign Language of Wuhan University and majored in English, and later obtained a Master degree in public administration from National University of Singapore.

Ms. Wang ShuminShe became a member of the Board of Directors of the Bank in February 2012. She is currently working in Central Huijin Investment Ltd. and is also a member of the Board of Directors of CITIC Construction & Investment Securities Co., Ltd.. She served as Section Chief in the Department of Treaty and Law of the Ministry of Finance (MOF), Deputy Director-General of the Policy and Regulation Department of the State Administration of Foreign Exchange (SAFE), Deputy Director-General of the Balance of Payments Department SAFE, Deputy Director-General and Inspector of the Supervision and Inspection Department SAFE. She was a member of the Board of Directors of China Construction Bank from 2004 to 2011. Currently, she is an arbitrator of China International Economic and Trade Arbitration Commission. She graduated from Zhongnan University of Economics and Law and majored in law. She holds a certifi cate of senior economist and is also a lawyer.

Ms. Wang XiaShe became a member of the Board of Directors of the Bank in December 2007. She is currently the chief for Everbright Equity in the General Offi ce of Central Huijin Investment Ltd. and is also a member of the Board of Director of Hongyuan Securities Co., Ltd. She was a staff in the Bank Card Department of Agricultural Bank of China (ABC) and Deputy (Acting) Chief of Overseas Business of the Fund Custody Department ABC. From August 2005 to December 2006, she was Deputy Director of the Corporate Offi ce of Central Huijin Investment Co., Ltd. She graduated from Shanxi University of Finance and Economics and majored in international trade. Later she obtained a Master degree from the Department of Trade and Economics of Renmin University of China and a PhD degree from the Finance Department of Southwestern University of Finance and Economics.

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Mr. Wu JianHe became a member of the Board of Directors of the Bank in December 2007. He is now working in Central Huijin Investment Ltd.. He was Deputy Director of Risk Warning Department, Director of Risk Measurement and Assistant General Manager of the Risk Management Department of China Construction Bank, General Manager of the Risk & Policy Management Department of Shanghai Pudong Development Bank and Director of the Basel II Implementation Offi ce. He is a graduate of the Postgraduate School of Chinese Academy of Social Sciences and holds a PhD degree in economics. Now he is a senior and postdoctoral researcher of the Financial Research Institute of People’s Bank of China.

Mr. Chung Shui MingHe became a member of the Board of Directors of the Bank in September 2006. He is now the Chairman of Shouhui Investment Co., Ltd.. He served as Chairman of the Board of Directors of City University of Hong Kong, Chief Executive of Shimao International Co., Ltd., Chairman of Hong Kong Housing Society, Vice Executive President of BOC International Holdings Co., Ltd., Chairman of the Board of Directors and Director General Manager of BOC International Asset Management Co., Ltd., member of the Managing Board of Kowloon-Canton Railway Corporation (KCR) and Chairman of the Property Development Committee of KCR, member of the Executive Council of the Government of Hong Kong Special Administrative Region of China, Vice Chairman of the Land Fund Advisory Committee of the Government of Hong Kong Special Administrative Region of China, Chief Executive of the Land Fund Trust. He was Chief Accountant, Executive Director and Deputy General Manager, Vice Chairman of Nanyang Commercial Bank Ltd. (NCB) in Hong Kong, senior audit manager of Price Waterhouse Coopers Accounting Firm. He is also an Independent Director in companies including China Unicom (Hong Kong) Ltd., China State Construction Engrg. Co. Ltd, Nine Dragons Paper Limited and Sinosteel Corporation. He is a graduate of Hong Kong University and holds a MBA degree of Chinese University of Hong Kong. He is a senior member of the Hong Kong Institute of Certifi ed Public Accountants. He was conferred Honorary Doctor of Social Science by City University of Hong Kong. He was awarded the title of the Justice of Peace and the Bauhinia Star by the Government of Hong Kong Special Administrative Region of China in 1998 and 2000 respectively. He is the member of the tenth and eleventh National Committee of CPPCC.

Mr. James Parks StentHe became a member of the Board of Directors of the Bank in September 2006. He is now a council member of Beijing Heritage Protection & Research Center. He was Independent Director of China Minsheng Banking Corp. Ltd, CEO of China Ecological Tourism Company, Advisor of International Water Resource Management Institute (IWMI), Director, senior Vice President, Executive Vice President and senior Executive Vice President of Bank of Asia Public Company Ltd, CEO of Rama Tower, Vice President of Crocker National Bank USA and Assistant Vice President of Citibank. He is a graduate of University of California, Berkeley and holds a Master degree in public affairs of Woodrow Wilson School of Public and International Affairs of Princeton University.

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Mr. Wang WeiHe became a member of the Board of Directors in May 2008. Now he is the Chairman of China M & A Group, Deacon of the Merger and Acquisition Union of All-China Federation of Industry and Commerce, Independent Director of China Sports Industry Group Co., Ltd. and Independent Director of LIFAN Industry (Group) Co., Ltd. He once worked in China Construction Bank, Bank of China, China Southern Securities Co., Ltd., US JP Morgen and World Bank. He graduated from the Investment Department of Dongbei University of Finance and Economics, later obtained the Master degree in international fi nance at the Postgraduate Department of the Head Offi ce of People’s Bank of China and got the Doctor degree in international fi nance in the Economics Department of the School of Arts and Sciences of Fordham University.

Mr. Cai HongbinHe became a member of the Board of Directors of the Bank in November 2009. Now he is the Dean and Professor at Guanghua Management College of Peking University, fellow of the Econometric Society, member of American Economics Society and special auditor of the State Auditing Administration. He is also an Independent Director of China Unicom. He was once an Associate Professor of the Economics Department of University of California, Los Angeles, and a Visiting Associate Professor of the Economics Department of Yale University. He was an Independent Director of Beijing Venusense Information Technology Co., Ltd. and Concord Medical Services Holdings Limited. He graduated from the Department of Mathmatics of Wuhan University and later obtained the Master degree in economics at Peking University and the Doctor degree in economics and another Master degree in statistics at Stanford University.

Mr. Zhang XinzeHe became a member of the Board of Directors of the Bank in November 2011. He is also Independent Director of Fujian Hongbo Printing Co., Ltd, Independent Director of Zhangjiagang Rural Commercial Bank Ltd and Director of Lubin Shuwei Management & Consulting (Beijing) Co., Ltd. He was a Non-Executive Director of Bank of China. From March 1987 to August 2004, he served successively as Chief of Price Survey, Chief of Economic Analysis, Deputy Director-General and Inspector of Survey and Statistics Department of People’s Bank of China (PBC), Inspector of Credit Information System Bureau PBC, Deputy Director General of Credit Information Center PBC. He graduated from Renmin University of China and majored in Finance. Mr. Zhang is also a research fellow.

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2. Supervisors

Mr. Mou HuijunHe became a member of the Board of Supervisors of the Bank in November 2009 (served as Chairman of the Board of Supervisors from September of 2010). Now he is the Deputy Director of the Working Committee of the Labor Union Committee of the Bank, and also the Chairman of the Board of Supervisor of Everbright Financial Leasing Co., Director of China Everbright Investment Management Corporation and Director of Shanghai Everbright Convention and Exhibition Centre Limited. He was once the Deputy General Manager of Yantai Branch of People’s Bank of China (PBC), Director for Administration and Director for Legistration in the Legal Affairs Department PBC, Director of the Legislation Division, Director for Administration in the Department of Supervisors of Central Financial Working Committee, member of the Board of Supervisors of China Everbright Group and the Board of Supervisors of China Citic Group assigned by the State Council, Deputy Director of the Offi ce of the Board of Supervisors and Director General of the Department of Financial Management of China Everbright Group. He graduated from Beijing College of Politics and Law and attended the on-the-job postgraduate course in the Party School of the Central Committee of C.P.C. in 2000.

Mr. Chen ShuangHe became a member of the Board of Supervisors in December 2007. Now he is Executive Director and Chief Executive of China Everbright Limited, Deputy Director General of the Legal Affairs Department of China Everbright Group and Director of the Legal Affairs Department of China Everbright Holdings Company Limited. He was once Deputy Chief of the Law and Regulation Division of the Corporate Offi ce, and Division Chief of Legal Affairs Department of Bank of Communications, and Deputy General Manager of China Everbright Limited. He graduated from East China University of Political Science and Law and obtained the Master degree in civil and commercial law and the certifi cate in law issued by the School of Professional and Continuing Education of Hong Kong University. He is a senior economist.

Mr. Pang JiyingHe became a member of the Board of Supervisors in November 2009. Now he is Vice Chairman of the Board of Directors and Chairman of the Labor Union of China Re-insurance (Group) Co., Ltd., Chairman of China Life Re-insurance Co., Ltd.. He was once Deputy Director of the State Administration of Foreign Exchange, Vice President and President of China Foreign Exchange Transaction Center, Deputy Director of the Legal Affairs Department of People’s Bank of China and Inspector of the Bureau of Financial Stability. He graduated from China University of Political Science and Law and later obtained the Doctor degree in Finance at Nankai University. He is a senior economist.

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Ms. Zhang ChuanjuShe became a member of the Board of Supervisors in November 2009. Now she is Deputy General Manager of CPFC. She was once Director and Section Chief of the Financial Division of the Shandong Electric Power Service Company, Manager of the Financial Department of Shandong Luneng Energy Co., Ltd., Associate Chief Accountant and Chief Accountant of Shandong Luneng Development Group Corporation and Chief Accountant of Zhongneng Power Industry Fuel Company. She graduated from Beijing College of Power Economics. She is a senior accountant.

Mr. Wu JunhaoHe became a member of the Board of Supervisors in November 2009. Now he is Manager of the Department of Financial Management of Shenergy Group Limited. He was once Executive Deputy General Manager of Shanghai New Resources Investment Consulting Company, Deputy General Manager of Shanghai Bailitong Investment Company, Deputy Director of Shanghai Shenergy Asset Management Co., Ltd., Deputy Director, Director and Senior Director of the Department of Asset Management and Deputy (Acting) Director of Financial Management Department of Shenergy (Group) Co., Ltd. He graduated from East China Normal University and later obtained the Master degree in enterprise management at East China Normal University.

Mr. Xia BinHe became a member of the Board of Supervisors in September 2006. Now he is Counselor of the State Council, Honorary Director of the Finance Institute of the Development Research Center under the State Council, Member of Monetary Policy Committee of People’s Bank of China and Executive Council Member of China Finance Society. He was once Director of the Regulatory Department for Nonbanking Financial Institutions of People’s Bank of China, Deputy Director of the Policy Research Department, Deputy Director of the Finance Institute, General Manager of Shenzhen Stock Exchange, Director of the Transaction Department and Director of the Information Department of China Securities Regulatory Commission and Independent Director of the Bank. He graduated from the Postgraduate Department of People’s Bank of China and obtained the Master degree in currency and fi nance. He is a senior expert on fi nance and economics in China.

80


CH

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EVER

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IGH

T B

ANK

Mr. Wang HuanbangHe became a member of the Board of Supervisors in November 2005. He is also Director of Shandong Denghai Seeds Co., Ltd. He was once Assistant General Manager of London Branch, General Manager of the Credit Department of the Head Offi ce, and General Manager of Sydney Branch (Australian region) of Bank of China, Chairman of BOC Finance (Australia), President of Shandong Branch of Bank of China and General Manager of The Guangdong Provincial Bank (Hong Kong). He graduated from Central University of Finance and Economics. He is a senior economist and has “special government allowance” issued by the State Council.

Ms. Chen YuShe became a member of the Board of Supervisors in July 2003. Now she is General Manager of the Planning and Finance Department of the Bank and also Director of China Everbright Financial Leasing Co., Ltd.. She was once Deputy Division Chief and Division Chief of the Finance and Accounting Department of the Head Offi ce, Assistant General Manager, General Manager of the Planning and Finance Department and Director Assistant of the Business Department of the Head Offi ce, Deputy General Manager of Beijing Branch, and Deputy (Acting) General Manager of the Planning and Finance Department of the Head Offi ce. She graduated from Capital University of Economics and Businesses.

Mr. Yang BingbingHe became a member of the Board of Supervisors of the Bank in September 2006. He is currently the Deputy General Manager of the IT Department of the Bank (Acting Head). He was once an employee of the Head Offi ce of Bank of China, Manager of the Business Department of the Administration of Hong Kong and Macau under BOC Group, Deputy Director of the Credit Management Division of the Risk Management Department of BOC (Hong Kong) Co., Ltd. (In charge of the work), Assistant General Manager and Deputy General Manager of the Risk Management Department of the Bank. He graduated from Jiangsu University and later obtained the MBA degree at Hong Kong Polytechnic University.

Mr. Li WeiHe became a member of the Board of Supervisors of the Bank in September 2006. Now he is the General Manager of the Planning and Finance Department of Shanghai Branch of the Bank. He was once an employee of China Investment Bank, Section Chief of the Planning and Finance Department and Deputy General Manager of Shanghai Branch of the Bank. He graduated from Shanghai University. He holds a certifi cate of economist.

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3. Senior management

Mr. Guo YouSeen as in resumes of the board of directors above.

Mr. Wu QingSeen as in resumes of the board of directors above.

Mr. Lin LiHe became Executive Vice President of the Bank in October 2010, Deputy Secretary of the Bank Party Committee and Secretary of Disciplinary Committee in December 2008, Chief Audit Offi cer of the Bank in September 2009 and Director of China UnionPay in February 2011. From March 2005 to December 2008, he served as member of the Board of Directors of China Everbright Group (CEG), Secretary of the Board of Directors of CEG, Director of the General Offi ce CEG, Director-General of the Offi ce for Restructuring Affairs, head of the Legal Affairs Department of CEG, Deputy Director and Director of the Offi ce of Executive Directors of China Everbright Holdings Company Limited, Chairman of the Board of Supervisors of China Everbright Investment Management Corp., Secretary of Party Committee and Chairman of the Board of Directors of Everbright Real Estate Co., member of the Board of Directors of Sun Life Everbright Life Insurance Co., Ltd. and member of the Board of Directors of Shanghai Everbright Exhibition Center. From July 1990 to September 1999, he worked in the State Raw Material Investment Company and China Development Bank (CDB). He graduated from Renmin University of China with a Bachelor degree in law. He holds a certifi cate of senior economist and is an academic advisor for EMBA nominees for fi nancial studies at Renmin University of China and a part-time professor with the Marketing Research Center of Renmin University of China. He is also a member of the tenth All-China Youth Federation and the second and the third Youth Federation of the Central Government Departments.

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BR

IGH

T B

ANK

Mr. Li ZiqingHe was Executive Vice President of the Bank from April 1998 to October 2010. He is the current Chairman of Everbright Financial Leasing Co., Ltd.. He served in the management offi ce of Bank of China (BOC) and the management offi ce of People’s Bank of China (PBC). From November 1985 to March 1998, he successively served as Deputy Chief of the General Offi ce, Director of the IT Department, Deputy-Director-General and Director-General of the Information Center of the State Administration of Foreign Exchange (SAFE). He graduated from world economic studies of the Economics Department of Peking University and holds a MBA degree of the School of Management of Huazhong University of Science and Technology. He has a certifi cate of senior economist.

Mr. Shan JianbaoHe became Executive Vice President of the Bank in January 2000. He was a member of the Board of Directors of the Bank and Chief Representative of the South Africa Representative Offi ce of the Bank. From October 1985 to December 1999, he served successively as Deputy Business Manager at the London Branch of Bank of China (BOC), Deputy Chief and Chief of the International Trade Settlement Division of Henan Branch of BOC, Assistant General Manager and Deputy General Manager of Henan Branch of BOC and General Manager of the Settlement Business Department of BOC. He attended an on-the-job postgraduate program of fi nancial studies at Hunan College of Finance and Economics. He has a certifi cate of senior economist.

Ms. Li JieShe became Executive Vice President of the Bank in August 2003. She was General Manager of the Planning and Finance Department of the Bank. From October 1988 to April 2001, she worked at different positions in the Bank of Communications China (BOCC), including Deputy Chief of the Planning Division of Jinan Branch of BOCC, Chief of the Finance and Accounting Division of Jinan Branch of BOCC, Deputy General Manager of Jinan Branch of BOCC, Deputy General Manager and General Manager of Zhuhai Branch of BOCC. She worked in Huaiyin Offi ce of Jinan Branch of Industrial and Commercial Bank of China (ICBC) and in Huaiyin Offi ce of Jinan Branch of People’s Insurance Company of China. From August 1983 to July 1986, she attended the fi nancial courses of the Open University of China. She is an accountant.

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Mr. Zhang HuayuHe became Executive Vice President of the Bank in March 2007. He was Assistant President of the Bank and Head of the Banking Department of the Head Offi ce. From November 1994 to February 2001, he worked at various positions of Bank of Communications China (BOCC), including division chief for credit management in the Credit Approval Department of Zhengzhou Branch of BOCC, Deputy General Manager and General Manager of Xi’an Branch of BOCC. He was Director of the General Offi ce of Shangqiu Region Branch of People’s Bank of China (PBOC) in Henan Province, General Manager of Xiayi County sub-branch of PBOC in Shangqiu region and Director of the Urban Credit Union in Shangqiu region. He is a graduate of Hunan College of Finance and Economics and holds a MBA degree of University of California, USA and a Master degree in Economic Management of University of International Business and Economics. He has a certifi cate of senior economist.

Mr. Ma TengHe has been Executive Vice President of the Bank since December 2010. From November 2009 to December 2010, he acted as General Manager of Financial Management Department of China Everbright Group Limited; from March to November 2009, acted as member of Party Committee of China Everbright Industrial (Group) Co., Ltd; from June 2005 to February 2009, acted as Deputy Secretary of Party Committee, Director and Chief Executive Offi cer of China Bohai Bank; from July 1984 to June 2005, served in Industrial and Commercial Bank of China, and worked as General Manager of Phony Card Center, General Manager of Bank Card Department, General Manager of Hebei Branch, General Manager of Wuhan Branch and Deputy Director of General Offi ce of the headquarters of Industrial and Commercial Bank of China. He graduated from Dongbei University of Finance and Economics, and later obtained a Doctor degree in political economics from Zhongnan University of Economics and Law. He is a senior economist.

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IGH

T B

ANK

Mr. Liu JunHe became Executive Vice President of the Bank in December 2010 and concurrently served as President of the Shanghai Branch, Director of Sun Life Everbright Life Insurance and Chairman of the Expert Committee on Derivatives under the National Association of Financial Market Institutional Investors. He joined the Bank in 1993 and successively served as foreign exchange trader in the International Business Department, Deputy Division Chief and Division Chief of the Financing Division and Correspondent Bank Division, and Assistant General Manager of the International Business Department. From December 2000 to September 2009, he was Chief Representative of the Hong Kong Representative Offi ce of the Bank, Deputy (Acting) General Manager and General Manager of the Treasury Department, and General Manager of the Investment Banking Department of the Bank. He became Assistant President of the Bank in September 2009. He is a graduate of Renmin University of China and holds a MBA degree of Northeastern State University in Oklahoma, USA and a PhD degree in business administration of Hong Kong Polytechnic University. He is also a member of the 11th Committee of All-China Youth Federation and a member of the 4th Committee of Youth Federation of the Central Government Departments. He is a member of the eleventh All-China Youth Federation and the fourth Youth Federation of the Central Government Departments, and holds a certifi cate of senior economist.

Mr. Lu HongHe became Executive Vice President of the Bank in December 2010. He joined the Bank in 1994 and served at various positions of the Bank, including Business Manager in the Securities Department, Division Chief in the Executive Offi ce for the Board of Directors, Assistant General Manager of the Planning and Treasury Department, General Manager of the Planning and Finance Department of Beijing Branch of the Bank, Deputy General Manager and General Manager of the Planning and Finance Department (the Finance and Accounting Department) of the Bank. He became Secretary of the Board of Directors of the Bank (Equivalent to the rank of Assistant President) in September 2009. He was an engineer in the Planning Institute of the Ministry of Railway and business manager in the Investment Banking Department of Huaxia Securities Co., Ltd. He is a graduate of Shanghai Railway Institute and holds a Master degree in railway engineering and a PhD degree in applied economics of Xi’an Jiaotong University. He has a certifi cate of senior economist.

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(VI) Changes of Directors, Supervisors and Senior Management staff during the reporting period

Mr. Jia Kang resigned as Independent Director of the Bank due to other commitments.

The Resolution Relating to Electing Mr. Zhang Xinze as Independent Director of the Fifth Session of Board Meeting was reviewed and passed at the 2011 Third Extraordinary General Meeting of the Bank convened on September 20, 2011. On November 28, 2011, Qualifi cation of Independent Director Mr. Zhang Xinze was approved by CBRC (Y.J.F.(2011) No. 533).

Ms. Feng Ailing resigned as Director of the Bank due to retirement.

The Resolution Regarding to Electing Ms. Wang Shumin as Director of the Fifth Session of Board Meeting of China Everbright Limited was reviewed and passed at the 2011 Fourth Extraordinary General Meeting of the Bank convened on December 20, 2011, whereby Ms. Wang Shumin was elected as Director of the Fifth Session of Board Meeting of the Bank. On February 21, 2012, Qualifi cation of Director Ms. Wang Shumin was approved by CBRC (Y.J.F.(2012) No. 76).

(VII) Employee status

As of the end of the reporting period, the Bank had 28,267 on-job employees and 258 retired employees; among those on-job employees, 20,190 employees hold bachelor degree or above, accounting for 71.43%. There were 283 administrative personnels, 24,198 business personnels and 3,786 support personnels.

(VIII) Institution status

In 2011, the Bank continuously strengthened its institution construction with one tier-1 branch in Urumqi and ten tier-2 branches in Handan, Xiangyang, Yangzhou, Ma An Shan, Longyan, Jiaxing, Langfang, Anshan, Jincheng and Zibo being opened, sub-branches in Shantou and Dandong being upgraded to tier-2 branches and 71 subbranches and outlets being opened. At the end of the reporting period, the Bank has established 689 branches and outlets in 72 economic central cities in 26 provinces, autonomous regions and municipalities across the country, including 34 tier-1 branches, 31 tier-2 branches and 624 outlets (including sub-branches in different cities, county sub-branches, sub-branches in same city and operating department of branches).

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Detailed status of the Bank’s employees and institutions is as follows:

Name of institutionNumber of institutions

Number of employees

Scale of assets(RMB million)

Headquarter 1 5,220 (note) 257,007Beijing Branch 55 2,183 257,877Tianjin Branch 26 762 58,850Shanghai Branch 48 1,519 143,506Chongqing Branch 17 606 44,225Shijiazhuang Branch 17 554 27,715Taiyuan Branch 19 739 37,971Huhhot Branch 4 205 9,088Dalian Branch 15 485 21,292Shenyang Branch 22 685 43,089Changchun Branch 16 514 25,829Heilongjiang Branch 30 760 28,551Nanjing Branch 20 803 62,723Suzhou Branch 16 634 42,672Wuxi Branch 3 168 12,087Hangzhou Branch 24 907 48,660Ningbo Branch 18 734 32,981Hefei Branch 20 638 31,295Fuzhou Branch 21 666 27,018Xiamen Branch 10 317 26,145Nanchang Branch 4 173 15,811Jinan Branch 16 468 25,211Qingdao Branch 18 593 27,802Yantai Branch 9 316 12,012Zhengzhou Branch 27 973 38,048Wuhan Branch 20 655 28,895Changsha Branch 26 731 34,502Guangzhou Branch 47 1,478 76,601Shenzhen Branch 36 1,025 66,986Nanning Branch 17 499 23,489Haikou Branch 14 432 21,205Chengdu Branch 17 619 44,167Kunming Branch 17 513 25,786Xi’an Branch 18 617 43,690Urumqi Branch 2 76 2,693Total 609 28,267 1,725,479

Note: Among the employees of the Head Quarter, there are 2,268 dispatched staff in the credit card center and 1,235 people working as 95595 customer service representatives.

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(I) Overview

The Bank consistently improved its corporate governance system in strict compliance with the laws and regulations including the Company Law, the Securities Law, and the Law on Commercial Banks, as well as the requirements of the Code of Corporate Governance for Listed Companies, the Guidance on Corporate

Governance of Joint Stock Commercial Banks, and the Guidelines on the Due Diligence Performance of

the Board of Joint Stock Commercial Banks. After years of corporate governance practice, the Bank has established complete corporate governance framework and system that meet the requirements by modern corporate system, and established an organizational structure which is comprised mainly of the General Meeting of Shareholders, the Board of Directors, the Board of Supervisors and the Senior Management, the management system and rules of procedure which guarantee the independence and effective check and balance of all institutions, and scientifi c and effi cient decision-making, incentive and restraint mechanisms. The General Meeting of Shareholders, the Board of Directors, the Board of Supervisors and all special committees have performed their duties effectively.

The Bank emphasized its compliant operation. During the reporting period, pursuant to the relevant laws, regulations and fi nancial measures of China, the Bank adopted various regulations including the Working Rules

for Secretary to the Board of Directors, Accountability System for Material Errors in Information Disclosure

of Annual Report, Regulations for Annual Report Preparation of the Audit Committee under the Board of

Directors, Administrative Measures for Proceeds from Fund-raising, Administrative Measures on External Equity

Investment, Provisional Measures for the Evaluation on Duty Performance of the Directors, to further strengthen the corporate governance system. In addition, in order to fulfi ll the requirements for the listing of H shares, the Articles of Association, Rules of Procedure for the General Meeting of Shareholders, Rules of Procedure for

the Board of Directors and the Rules of Procedure for the Board of Supervisors were amended pursuant to Mandatory Provisions for Articles of Association of Companies to be Listed Overseas and the Listing Rules of Hong Kong Stock Exchange. Such amendments have been reviewed and approved and will come to effect on the listing date of H shares.

(II) General Meeting of shareholders

Please refer to “General Meeting of Shareholders”.

(III) Directors and Board of Directors

In 2011, all directors participated in the decision-making process of the Bank’s strategic and operational plans, capital replenishment, risk management and internal control in strict compliance with the relevant laws and regulations and the Articles of Association and closely monitored the operation and management of the Bank. They performed their duties prudently and diligently, and conducted self-assessment and consciously accepted the supervision of the Board of Supervisors on duty performance according to the Measures on

Duty Performance Evaluation for Directors of Commercial Banks (Trial) of the CBRC as well as the Provisional

Measures for Evaluation on Duty Performance of the Directors.

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T B

ANK

All directors attended more than two thirds of the board meetings in person. They took an active role in the decision making of the Board of Directors by thoroughly studying the background information of proposals through reading the meeting documents and communicating before the meetings, and actively expressing opinions on various proposals at the board meeting. The independent directors provided independent and objective opinions on important issues such as the proposal of the listing of H Shares, the nomination, appointment and removal of directors, remuneration of senior management and profi t distribution plans pursuant to the Articles of Association to safeguard the interests of minority shareholders and performed their obligations of integrity and diligence. During the period when no Board meeting was held, some directors organized various research seminars at more than 10 of the Bank’s branches including Kunming, Hohhot, Fuzhou and Hangzhou branches to understand the business development and the implementation of strategies of the branches and provided constructive opinions and suggestions. They also attended meetings on corporate business, retail, risk, accounting and fi nancial issues, reviewed Management’s report on signifi cant operations, and monitored the restructuring and business transformation progress of the Bank. Since the listing of A Shares, all directors focused on studying the relevant laws and regulations and the global economic environment. They improved their performance of duties by attending special training courses organized by supervisory authorities.

During the reporting period, the Board of Directors held 16 meetings at which 67 proposals were reviewed and 15 reports were received and performed scientifi c decision making effectively. In 2011, the fi rst complete year of operation since the listing of A Shares of the Bank, in order to strengthen its organic growth, the Board of Directors reviewed and adjusted the development strategies, aiming to develop the Bank as the most innovative bank in the PRC. It also focused on capital replenishment. Preparation work for the listing of H Shares was completed and various channels for capital replenishment were developed. It promoted the implementation of the new Basel Accord by strengthening risk management and control measures to establish a sound and effective internal control system. The Board of Directors also strived to prevent inside transactions by improving the management of inside information and insiders.

In order to fulfi ll the requirements for the offering of H Shares, the Board of Directors changed the composition of the Audit Committee pursuant to Rules Governing the Listing of Securities on Hong Kong Stock Exchange, so that all members of the Audit Committee were non executive directors with a majority of independent directors. Upon the request of relevant authorities and the nomination of shareholders, the duties of an independent director and a director with shareholding were replaced. The two new directors previously served in the People’s Bank of China and the State Administration of Foreign Exchange for a long time and possessed suffi cient knowledge in monetary policies and supervisory regulations and rich experience in serving the board of directors of state-owned banks. The composition of the Board of Directors was further optimized with their joining.

The Board of Directors has set up the Strategy Committee, the Audit Committee, the Risk Management Committee, the Nomination Committee, the Remuneration Committee and the Related Party Transactions Control Committee. During the reporting period, the special committees held a total of 24 meetings, including 3 meetings of the Strategy Committee, 6 meetings of the Audit Committee, 6 meetings of the Risk Management Committee, 4 meetings of the Nomination Committee, 4 meetings of the Remuneration Committee and 1 meeting of the Related Party Transactions Control Committee. During such meetings, 35 proposals were

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reviewed and 32 reports were received. The special committees played their functions and fully studied and discussed various specifi c subjects according to the division of responsibilities to ensure the Board of Directors to make decisions in a scientifi c manner.

The Strategy Committee held a total of 3 meetings. The committee reviewed and adopted the Strategic

Management Measures to further improve the strategic management system of the Bank. It reviewed and adjusted the strategies of the Bank in a timely manner to leverage the advantages of the Bank. According to the strategic plan, the committee guided the Management to formulate organizational construction plan and fi nancial budget. The committee also established capital replenishment proposals including the offering of H Shares and issuance of subordinated debentures according to the business development of the Bank.

For information about the Audit Committee under the Board of Directors, please refer to “Report of the Board of Directors (IV)”.

The Risk Management Committee held a total of 4 onsite meetings and 2 meetings by circulation of written resolutions. The committee attached great emphasis on the establishment of a complete risk management system. It reviewed and adopted comprehensive risk management and capital management policies. The committee analyzed and evaluated the periodic risk management reports and particularly reviewed specialized risk management reports on property loans and loans granted to local government fi nancing vehicles. The committee imposed strict credit limit management on specifi c industries and monitored the risk of concentration risk and liquidity risk continuously. Proposals on the policies of credit allocation were reviewed according to the economic situation and changes in regulations. Moreover, the committee carried out measures to support the implementation of the New Basel Accord by launching credit approval procedures and reviewing the application report to be submitted to CBRC for the evaluation on the implementation of the New Basel Accord.

The Nomination Committee held a total of 4 meetings. In order to fulfi ll the requirements for the offering of H Shares, the committee made proposals regarding the change of composition of the Audit Committee so that all members of the Audit Committee were non-executive directors with a majority of independent directors. Also, it reviewed the qualifi cations and appointment terms of the two directorship candidates for approval by the Board of Directors.

For information about the Remuneration Committee under the Board of Directors, please refer to “Report of the Board of Directors (V)”.

For information about the Related Party Transactions Control Committee under the Board of Directors, please refer to “Report of the Board of Directors (VI)”.

(IV) Supervisors and the Board of Supervisors

The Board of Supervisors of the Bank consists of 10 supervisors, including 4 supervisors with shareholding, 2 external supervisors and 4 supervisors representing staff. The number of members and composition of the Board of Supervisors are in compliance with the relevant regulations and the Articles of Association.

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The Board of Supervisors has established a Nomination Committee and a Supervision Committee. Chairman of both committees are external supervisors who play an important role in performing the independent supervisory duties of the Board of Supervisors.

During the reporting period, the supervisors conscientiously and effectively performed their duties of supervision to secure the stable development of the Bank. A total of 8 meetings were held during the year, at which the Board of Supervisors reviewed and approved 14 proposals and received 5 reports. The Board of Supervisors completed the annual evaluation on duty performance of the Board of Directors, special committees under the Board of Directors, the Senior Management and the directors in 2011. The Board of Supervisors also strengthened the evaluation of the authenticity and compliance of regular reports, as well as the quality control of the audit work of external auditor.

The Board of Supervisors conducted in-depth research to facilitate the smooth operation of the Bank. In May and June 2011, the Board of Supervisors visited Chongqing, Chengdu, Hangzhou and Ningbo branches to conduct research on the development of small and medium enterprises and risk prevention in order to understand the development of small and medium enterprise business under the modelized operation. the Board of Supervisors made recommendations on the development of small and medium enterprises and risk prevention in terms of resource allocation, improvement of risk management and the positioning of small and medium enterprise business to the Board of Directors and Senior Management for decision-making purpose.

The Board of Supervisors is committed to improvement to enhance its due diligence. In 2011, the Board of Supervisors amended the Rules of Procedure of the Board of Supervisors and formulated and implemented the Provisional Measures for the Evaluation on Duty Performance of the Director. It arranged supervisors of other banks to pay a visit and participated in workshops and seminars held by the board of supervisors of state-owned banks so as to understand and study the successful experience in corporate governance of other banks. It also organized supervisors to attend various training held by regulatory authorities with an aim to enhance their capabilities to fulfi ll their duty.

(V) Senior management

The Bank’s senior management includes 1 President and 9 Vice Presidents, who are responsible for the Bank’s management, execution of strategies, policies, systems and procedures approved by the Board of Directors, and establishment of an organizational structure with defi ned authorization and responsibilities and clear reporting relationship.

During the reporting period, the senior management proactively conducted various operational management works and diligently executed operation plans and fi nancial budgets approved by the Board of Directors according to the strategic plans of the Bank. Thanks to the joint efforts of the staff, the Bank achieved the objective of development formulated at the beginning of the year and maintained stable business development with rapid profi t growth. As at the end of the reporting period, the Bank had total assets of RMB1,733.346 billion, representing an increase of 16.81% as compared with the previous year, and total loans of RMB890.365 billion, representing an increase of 14.22% as compared with the previous year. General deposits amounted to RMB1,225.278 billion, representing an increase of 15.25% as compared with last year, and net profi ts amounted to RMB18.085 billion, representing an increase of 41.36% as compared with last year.

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(VI) Information disclosure and investor relationship managementThe Bank strictly regulated its information disclosure in compliance with the Rules Governing the Listing of Securities on the Shanghai Stock Exchange and the System for Information Disclosure Management. Internal work procedures of information disclosure complied with the Measures for Management of Internal Report of Signifi cant Information and the Tentative Specifi cations for Disclosure Management of Interim Reports. The Bank conscientiously performed its information disclosure obligations by making effective disclosure in regular reports, interim reports and related management documents and voluntary information disclosure to further improve the transparency of the Bank. During the reporting period, the Bank released 4 regular reports and 39 interim announcements and actively issued the results announcements of 2011 annual report and interim report.

The Bank paid close attention to investor relationship management. During the reporting period, the Bank strengthened the communications with investors through various means such as results presentation and telecommunication in order to improve market expectations. The Bank continued to optimize the communication platforms with investors including the investor relationship website, investor hotline and mailbox to maintain timely and convenient contact with investors. It continued to monitor the news of domestic and overseas banks to timely grasp the trend of the capital market and concerns of institutional investors. It learned the experiences of other banks to further improve the management of investor relationship.

(VII) Performance of independent directors

1. Board Meeting Attendance by Independent Directors

NameNumber of

AttendanceAttendance

in PersonAttendance

by Proxy Absence Remarks

Chung Shui Ming 16 15 1 0James Parks Stent 16 16 0 0Wang Wei 16 15 1 0Cai Hongbin 16 15 1 0Zhang Xinze 1 1 0 0

2. Independent Directors’ objection to the related matters of the BankDuring the reporting period, independent directors lodged no objections to proposals of the Board of Directors and other proposals.

3. Performance of independent directorsThe Board of Directors has 5 independent directors, accounting for over one-third of the members of the Board. Chairman of the Related Party Transactions Control Committee, the Nomination Committee, and the Audit Committee are all independent directors. During the reporting period, independent directors expressed their independent opinions on all major issues, including remuneration of senior management members, appointment and dismissal of directors and profi t distribution plan according to the Articles of Association. In all special committees, the independent directors offered professional opinions on issues under discussion. During the period when the Board of Directors was not in session, certain independent directors also made comments and suggestions on reinforcement of strategic management, technology development and brand building, and quality improvement of board meetings, diligently fulfi lling the obligation of good faith and diligence, and playing an active role in the scientifi c decision-making process of the Board of Directors.

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(VIII) Business, personnel, asset, organization and fi nancial independence from substantial shareholders

Whether Independent Description

Independence in business Yes The Bank’s business is independent from the largest shareholder. It runs independently with structural integrity.

Independence in personnel Yes The Bank is independent in labour, personnel and salary management. Senior management members including the President, Vice Presidents and secretary to the Board of Directors receive remuneration from the Bank other than from entities of the largest shareholder.

Independence in asset Yes The Bank has independent operation premises and auxiliary facilities.

Independence in organization Yes The Bank has a sound organizational system. The Board of Directors, the Board of Supervisors and functional departments are independent from each other. There is no subordinate relationship with functional departments of the largest shareholder.

Independence in fi nance Yes The Bank has an independent fi nance department and has established independent accounting system and fi nancial management system.

(IX) There is no competition with other banks and Related Party Transactions due to partial change of ownership, industrial nature, national policies or acquisition and merger.

(X) Incentive and restriction mechanisms for senior management

During the reporting period, to further enhance performance evaluation of senior management members, motivate the active participation of senior management members and realize benefi ts for the shareholders and the Bank as a whole effectively, the Board of Directors amended the Measures for Performance Assessment

of Senior Management Members. The amendment further clarifi ed evaluation procedures and grading mechanisms, put equal emphasis on incentives and restrictions and adopted the assessment results as important basis for the determination of senior management members’ respective remunerations. In 2011, based on the performance of the Bank’s business and senior management members, the Remuneration Committee formed opinions on evaluation of senior management members for previous year and submitted to the Board of Directors for approval.

93

General Meeting of Shareholders

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The Bank convenes and holds the general meetings of shareholders in strict accordance with the Articles of Association and the Rules of Procedure for the General Meeting of Shareholders, ensuring that the decisions on major issues are legally made at the general meeting of shareholders and the legal rights of shareholders are effectively protected. During the reporting period, the Bank held fi ve general meetings of shareholders, at which twenty proposals were reviewed and approved as follows:

On 14 March 2011, the proposals on the issuance and listing of H Shares and the conversion into a joint stock limited company listed overseas were reviewed and adopted at the 1st Extraordinary General Meeting of 2011. The announcement regarding the proposals was published on China Securities Journal, Shanghai Securities News, Securities Times, Securities Daily and the website of Shanghai Stock Exchange on 15 March 2011.

On 15 April 2011, the proposal on the amendment of the Articles of Association was reviewed and adopted at the 2nd Extraordinary General Meeting of 2011. The announcement regarding the proposal was published on China Securities Journal, Shanghai Securities News, Securities Times, Securities Daily and the website of Shanghai Stock Exchange on 16 April 2011.

On 30 May 2011, the proposals on the Work Report of the Board of Directors, the Work Report of the Board of Supervisors, the report on fi nancial settlement and fi nancial budget, and the allocation of profi ts were reviewed and adopted at the Annual General Meeting of 2010. The announcement regarding the proposals was published on China Securities Journal, Shanghai Securities News, Securities Times, Securities Daily and the website of Shanghai Stock Exchange on 31 May 2011.

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On 20 September 2011, the proposals on the issuance plan and authorization of fi nancial bond, the election of independent directors and administrative measures on external equity investment were reviewed and adopted at the 3rd Extraordinary General Meeting of 2011. The announcement regarding the proposals was published on China Securities Journal, Shanghai Securities News, Securities Times, Securities Daily and the website of Shanghai Stock Exchange on 21 September 2011.

On 20 December 2011, the proposals on the issuance of subordinated bond, the amendment of Articles of Association and the election of directors were reviewed and adopted at the 4th Extraordinary General Meeting of 2011. The announcement regarding the proposals was published on China Securities Journal, Shanghai Securities News, Securities Times, Securities Daily and the website of Shanghai Stock Exchange on 21st December 2011.

Notifi cation, convention, holding and voting procedures of the above meetings complied with the provisions of the Company Law and the Articles of Association. The legal advisor appointed by the Board of Directors witnessed the above meetings and issued legal opinions.

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(I) Overview of development strategy

In 2011, the Bank reviewed its development strategies and aimed to become the most innovative bank in China. In respect of the market positioning, the Bank strived for consolidating the base of medium and large customers of its corporate business and increasing the proportion of small and medium enterprises customers gradually. The retail business of the Bank targeted at medium- and high-end markets and enlarged the group of wealthy customers. In order to achieve the balance between the development of scale, quality, effectiveness and business structure and enhance the comprehensive competitiveness and achieve sustainable growth, the Bank has been improving its innovation and innovating its services between 2010 and 2012.

(II) Board meetings and resolutions in the reporting period

In the reporting period, the Bank held 16 board meetings and the details of which were as follows:

1. On 25 January 2011, the Bank held the ninth meeting of the Fifth Board of Directors by means of written circular. All of 15 eligible directors were present at the meeting. The meeting reviewed and approved the following proposals: the Proposal on the Acquisition of Offi ce Building for Fuzhou Branch, the Proposal on

Reconsidering the Acquisition of Offi ce Building for Taiyuan Branch and the Proposal on Personnel Change of

Members of Certain Special Committees of the Fifth Board of Directors.

2. On 18 February 2011, the Bank held the tenth meeting of the Fifth Board of Directors in Beijing. 13 directors were present at the meeting and two directors entrusted his/her voting rights to others. The meeting reviewed the following proposals: the 2010 Work Report on the Board of Directors of China Everbright Bank,

the 2011 Financial Budget Report on China Everbright Bank, the Proposal on Determination of Risk Tolerance

in 2011 of China Everbright Bank, the Proposal on Establishment of Organization in 2011 of China Everbright

Bank, the Suggestions on Evaluation of Senior Management Members in 2010 of China Everbright Bank, the Administrative Measures on Retirement of Employees of China Everbright Bank, the Measures on Allocation of

Retirement Subsidies for Employees for China Everbright Bank, the Proposal on the Issuance and Listing of the

H Shares of the Bank, the Proposal on the Conversion into a Joint Stock Limited Company Listed Overseas and the Proposal on the Effective Period of the Proposal on the Issuance and Listing of H Shares for the

approval of the General Meeting of Shareholders.

3. On 7 March 2011, the Bank held the eleventh meeting of the Fifth Board of Directors by means of written circular. All of 15 eligible directors were present at the meeting. The meeting reviewed and approved the following proposal: the Proposal on Appointment of Intermediary for the Issuance and Listing of H Shares of

the Bank.

4. On 30 March 2011, the Bank held the twelfth meeting of the Fifth Board of Directors by means of written circular. All of 15 eligible directors were present at the meeting. The meeting reviewed and approved the following proposals: the Proposal on the Amendment of Articles of Association and the Proposal on Holding

the 2nd Extraordinary General Meeting of the Bank in 2011.

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5. On 8 April 2011, the Bank held the thirteenth meeting of the Fifth Board of Directors in Beijing. 14 directors were present at the meeting and one director entrusted his/her voting rights to others. The meeting reviewed and approved the following proposals: the 2010 Final Financial Account Report on China Everbright

Bank Company Limited, the Proposal on Profi t Distribution of 2010 of China Everbright Bank Company Limited, the Proposal on Distribution of Accumulated Profi t as at the Date of Completion of Initial Public Offering of H

Shares of China Everbright Bank Company Limited, the Proposal on Evaluation of KPMG’s Audit Work in 2010

and its Re-engagement in 2011, the 2010 Annual Report and its Extraction of China Everbright Bank Company

Limited, the Evaluation Report on the Internal Controls in 2010 of China Everbright Bank Company Limited, the Social Responsibility Report in 2010 of China Everbright Bank Company Limited, the Special Report on

the Deposit and Actual Use of the Proceeds from the Offering of A Shares in 2010 of China Everbright Bank

Company Limited, the Particular of the Use of Fund by Controlling Shareholders and other Related Parties

in 2010 of China Everbright Bank Company Limited, the Proposal on the Conferring of Relevant Duties of

the Board to Risk Management Committee under the Board and the Management for the Implementation of

New Basel Capital Accord, the 2010 Report on Performance Evaluation of Directors of China Everbright Bank

Company Limited, the Accountability System for the Material Errors of Information Disclosure in Annual Report

of China Everbright Bank Company Limited, the Work Rules for the Audit Committee on Annual Report of

China Everbright Bank Company Limited, the Work Rules of the Secretary of Board of China Everbright Bank

Company Limited, the Administrative Measures on Fund Raising of China Everbright Bank Company Limited and reported the Summary Report on the Audit of 2010 Annual Report of China Everbright Bank Company

Limited and the Report on Related Party Transactions in 2010 of China Everbright Bank Company Limited.

6. On 18 April 2011, the Bank held the fourteenth meeting of the Fifth Board of Directors by means of written circular. All of 15 eligible directors were present at the meeting. The meeting reviewed and approved the following proposal: the Proposal on Relocation of China Everbright Bank Company Limited.

7. On 29 April 2011, the Bank held the fi fteenth meeting of the Fifth Board of Directors by means of written circular. All of 15 eligible directors were present at the meeting. The meeting reviewed and approved the First

Quarter Report in 2011 of China Everbright Bank.

8. On 9 May 2011, the Bank held the sixteenth meeting of the Fifth Board of Directors by means of written circular. All of 15 eligible directors were present at the meeting. The meeting reviewed and approved the Proposal on Holding the General Meeting of Shareholders of the Bank in 2010.

9. On 19 May 2011, the Bank held the seventeenth meeting of the Fifth Board of Directors by means of written circular. All of 15 eligible directors were present at the meeting. The meeting reviewed and approved the following proposals: the Proposal on Amendment of Meeting Rules of General Meeting of Shareholders

and Meeting of the Board of Directors, the Proposal on Personnel Change of Members of Audit Committee

and Strategy Committee under the Fifth Board of Directors, the Proposal on Appointment of the Company

Secretary and Authorized Representative, the Proposal on Review of Distribution of Dividend for the Next

Three Years of China Everbright Bank Company Limited, the Work Rules of the Secretary of Board of China

Everbright Bank Company Limited (Revised in 2011) and the Administrative Measures on External Equity

Investment of China Everbright Bank Company Limited.

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10. On 20 June 2011, the Bank held the eighteenth meeting of the Fifth Board of Directors by means of written circular. All of 15 eligible directors were present at the meeting. The meeting reviewed and approved the following proposals: the Proposal on Confi rming and Approving the Issuance and Listing of H Shares of the

Bank, the Proposal on Electing Mr. Zhang Ze as an Independent Director of the Fifth Board of Directors, the Proposal on Personnel Change of Members of Certain Special Committees under the Fifth Board of Directors and the Proposal on Personnel Change of Members of Nomination Committee under the Fifth Board of

Directors.

11. On 21 July 2011, the Bank held the nineteenth meeting of the Fifth Board of Directors by means of written circular. All of 15 eligible directors were present at the meeting. The meeting reviewed and approved the following proposals: the Proposal on Acquisition of Offi ce Building for Dalian Branch and the Proposal on

Raising Donations for Xinhua, Hunan (Specifi ed County for Poverty Alleviation by China Everbright Group), and reported the Report on Rectifi cation of Supervision in 2010 to CRBC.

12. On 4 August 2011, the Bank held the twentieth meeting of the Fifth Board of Directors by means of written circular. All of 15 eligible directors were present at the meeting. The meeting reviewed and approved the following proposal: the 2011 Interim Report and its Extraction of China Everbright Bank.

13. On 15 August 2011, the Bank held the twenty-fi rst meeting of the Fifth Board of Directors by means of written circular. All of 15 eligible directors were present at the meeting. The meeting reviewed and approved the Proposal on the Equity Investment Plan of Everbright Huai’an Village and Township Bank Co., Ltd.

14. On 23 August 2011, the Bank held the twenty-second meeting of the Fifth Board of Directors in Beijing. 12 directors were present at the meeting and three directors entrusted his/her voting rights to others. The meeting reviewed and approved the following proposals: the Main Text of the Interim Report of 2011 of

China Everbright Bank Company Limited (H Shares), the Proposal on the Policy of the Comprehensive Risk

Management of China Everbright Bank Company Limited and the Policy of the Capital Management of China

Everbright Bank Company Limited, the Proposal on the Issue Plan and Authorization of Financial Bonds of

China Everbright Bank Company Limited, the Proposal on Renewal of Liability Insurances in the Year of 2011-

2012 for Directors, Supervisors and Senior Management of China Everbright Bank Company Limited, the Proposal on Holding the 3rd Extraordinary General Meeting of China Everbright Bank Company Limited in

2011, and reported the Report on the Management of Operation for the First Half of 2011 of China Everbright

Bank Company Limited, the Report on Granting of Authorization by the Board of Directors to President for

the First Half of 2011 of China Everbright Bank Company Limited, the Report on the Implementation of the

Resolutions of Board of Directors for the First Half of 2011 of China Everbright Bank Company Limited, the Report on the Brand Building of China Everbright Bank Company Limited and the Report on the Network

Layout and Service Quality of China Everbright Bank Company Limited.

15. On 28 October 2011, the Bank held the twenty-third meeting of the Fifth Board of Directors by means of written circular. All of 15 eligible directors were present at the meeting. The meeting reviewed and approved the following proposals: the Third Quarterly Report of China Everbright Bank in 2011, the Administrative

Measures on Strategic Management of China Everbright Bank (Trial), the Proposal on Submitting Formal

Application to CBRC for Evaluation on Implementation of New Basel Capital Accord and the Proposal on

Promotion of Small Enterprises Business of China Everbright Bank.

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16. On 1 December 2011, the Bank held the twenty-fourth meeting of the Fifth Board of Directors by means of written circular. 13 directors were present at the meeting and one director entrusted his/her voting rights to others and one director was absent from the meeting. The meeting reviewed and approved the following proposals: the Proposal on the Issuance of Subordinated Bonds for Supplementary Capital of China

Everbright Bank Company Limited, the Overall Strategies for 2010-2012 of China Everbright Bank Company

Limited (Revised in 2011), the Provisional Measures on the Performance Evaluation of Management of China

Everbright Bank (Revised in 2011), the Proposal on Electing Ms. Wang Shumin as the Candidate of Director

of the Fifth Board of Directors of China Everbright Bank Company Limited, the Proposal on Personnel Change

on the Members of Certain Special Committees under the Fifth Board of Directors of China Everbright Bank

Company Limited, the Proposal on Granting of Authorization by the Board of Directors to Senior Management

for Reviewing the Commencement of Major Projects and Amending the Report of Risk Evaluation, the Proposal

on Amendment of Certain Articles in Articles of Associations of China Everbright Bank Company Limited, the Proposal on Holding the Fourth Extraordinary General Meeting of China Everbright Bank Company Limited in

2011, and reported the Report on Operation Management for January to September 2011 of China Everbright

Bank Company Limited, the Report on Scientifi c Strategies of China Everbright Bank Company Limited and the Report on Schedule of Meetings of Board of Directors in 2012 of China Everbright Bank Company Limited.

(III) Execution of resolutions of the General Meetings of Shareholders by the Board of Directors

In accordance with the resolutions passed in the Annual General Meeting of Shareholders of 2010, the Board of Directors implemented 2011 Financial Budget and distributed dividends in accordance with the Proposal

on Profi t Distribution and re-engaged KPMG to undertake external audit work of the Bank. In accordance with the resolutions passed at the Extraordinary General Meetings of Shareholders, the Bank exerted its effort in preparing the offering of H Shares, supervised the Management to implement the plan of issuance of fi nancial bonds and subordinated bonds and timely reported the qualifi cation of newly appointed Directors to the CBRC. In addition, the Bank implemented the Administrative Measures on External Equity Investment and ensured the implementation of all resolutions passed at the General Meeting of Shareholders.

(IV) Summary of the Audit Committee on duty performance

In 2011, the Audit Committee of the Board of Directors held six meetings. At the meetings, the committee reviewed signifi cant issues, including 2010 Annual Report, 2011 First Quarter Report, Interim Report and Third Quarter Report, Work Rules for the Annual Report of Audit Committee, and the re-engagement of the accounting fi rm, and debriefed the work summary and plan of internal audit, 2010 Management Letter and report on rectifi cation. The committee paid attention to and discussed the implementation of internal controls, analysis of wealth management products of the Bank and special audit on the fi nancial leasing company. The committee also invited KPMG to make a special report on wealth management products of banks in China and the implementation of the latest polices, introduction of administrative guidelines of consolidated balance sheet, derivative fi nancial instruments and accounting treatments for hedging.

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On 7 April 2011, the Audit Committee held the eighth meeting, reviewed and approved the Work Rules for the

Annual Report of Audit Committee. In terms of compiling the annual report, guiding and supervising external audit authority’s work, and employing external audit authority, the Audit Committee performed the following duties in accordance with the requirements of Work Rules:

Responsible for annual audit. At the eleventh meeting of the Fifth Audit Committee held in November 2011, the Audit Committee debriefed report on fi nancial audit arrangements for 2011 by accountants responsible for the annual audit; at the twelfth meeting of the Fifth Audit Committee held in February 2012, the Audit Committee debriefed the report on progress with fi nancial audit by accountants responsible for the annual audit and communicated on signifi cant issues in audit. At the thirteenth meeting of the Fifth Audit Committee held in April 2012, the Audit Committee reviewed the Bank’s fi nancial statements, debriefed the summary on fi nancial audit work in 2011 by accountants responsible for the annual audit, held that the fi nancial statements truly, correctly and completely refl ected the Bank’s overall situation, and submitted resolutions to the Board of Directors for verifi cation.

Guide and supervise external audit authority’s work. In order to tackle the problems in the audit process, the Audit Committee demanded enhancement of services and urged the external audit authority to do a good job in all aspects.

Express opinions on employment of the external audit authority. The Audit Committee gave renewal or dismissal opinions based on evaluation opinions of the management on the external audit authority. Given that KPMG adhered to the professional norms of independence, objectivity and fairness, and well fi nished all tasks entrusted by the Bank, the committee suggests that the Bank continue to engage KPMG to audit the Bank’s fi nancial statements in 2012.

(V) Summary of the Remuneration Committee on duty performance

During the reporting period, the Remuneration Committee under the Board of Directors held four meetings.

In order to regulate the management of staff retirement of the Bank and maintain a harmony relationship with its employees, the committee reviewed and approved the Administrative Measures on Retirement

of Employees of China Everbright Bank and the Measures on the Distribution of Retirement Subsidies to

Employees of China Everbright Bank. The committee revised the Measures on the Performance Evaluation of

Senior Management of China Everbright Bank in order to improve the performance evaluation system for its senior management and further refi ne the related incentive and restraint mechanism.

In accordance with the Provisional Measures on Performance Evaluation of Directors of Commercial Banks

promulgated by CBRC, the committee reviewed the performance of Directors in the past year in the aspect of working time, duties and quality of work. The committee also carried out overall assessment of the diligence and loyalty of Directors, so as to enhance the performance and decision-making capability of Directors.

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The committee carried out evaluation on the performance of the senior management and debriefed the presentation of work from all senior management members. Through reviewing the performance of senior management and considering the operation and management of the Bank, the committee discussed, evaluated and made recommendations on the performance of senior management and submitted the results to the Board of Directors for its approval.

(VI) Operation of the Related Party Transactions Control Committee and execution of Related Party Transactions system

During the reporting period, the Bank duly implemented the Measures on Management of Related Party

Transactions and submitted special report to CBRC quarterly. The committee also formulated rules for the daily management of Related Party Transactions, in order to further enhance the implementation of the Measures.

In order to response to the changes on the legal regulatory environment upon the listing of H Shares and control the risks of Related Party Transactions, the Bank amended the Measures on Management of Related

Party Transactions in accordance with the requirements of Hong Kong Listing Rules and proposed the amendments to second meeting of the Fifth Related Party Transactions Control Committee for discussion. The committee proposed specifi c recommendations for the amendments and required the Management to enhance their daily management and supervised major departments and businesses with larger potential risks. The committee also refi ned the management system of Related Party Transactions in order to ensure the accuracy and completeness of statistics on Related Party Transactions. In addition, the committee also made recommendations in respect of Related Party Transactions reported by the Management.

(VII) Analysis of the Bank’s operating status

Please refer to the Management Discussion and Analysis for details.

(VIII) Internal control

1. Self-assessment report on internal control by the Bank

The Bank prepared and disclosed fi nancial reports strictly in accordance with China Accounting Standards and relevant requirements promulgated by CSRC and Shanghai Stock Exchange, established a relatively comprehensive internal control mechanism for fi nancial reporting supervising the Board of Directors, the Board of Supervisors and the Management based on the asset structure, operation models and business characteristics of the Bank in order to ensure the truthfulness, completeness and effectiveness of the fi nancial and accounting information. Firstly, the Bank established a general framework for fi nancial reporting. The Board of Directors of the Bank established the Audit Committee, which is responsible for auditing fi nancial information of the Bank and relevant disclosures and reviewing accounting standards, fi nancial position and fi nancial reporting procedures. The committee is also responsible for making recommendations in respect of appointment, reappointment and dismissal of accounting fi rm. The Board of Supervisors is responsible for supervising the Board of Directors and Senior Management to perform their duties in compliance with related requirements and reviewing the disclosure of fi nancial information and making recommendations in respect of its truthfulness, accuracy and completeness. The Board of Supervisors is also responsible

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for supervising the compliance and fairness of appointment, replacement or reappointment of accounting fi rm as well as the independency and effectiveness of their audit work. Senior Management is responsible for ensuring the compliance of fi nancial reporting requirements and implementing all fi nancial requirements strictly and reporting to the Board of Directors regularly. Compliance management department is responsible for coordinating, managing and supporting the management of fi nancial risk. Internal audit department is responsible for evaluating the fi nancial risk management system and supervising the implementation of compliance measures of fi nance department. Secondly, the Bank established a comprehensive internal control system, including corporate governance system based on the Article of Associations and Meeting Rules of the General Meeting of Shareholders, the Board of Directors and the Board of Supervisors. The Bank also formulated an operation system comprising 26 handbooks in respect of corporate business line management, Retail business line management, Treasury business line management, risk management, business supports, corporate governance and management and auditing. The system covered the management of front-line businesses, intermediate and back offi ces risk management as well as related supervision and evaluation. The Bank formulated an information disclosure control system based on the Administrative Measures for

Financial Report (Trial) and the Accountability System for the Material Errors of Information Disclosure in Annual

Report. The Bank provided regular or interim trainings for its employees to introduce the above systems to existing administrative departments, operating institutions and each business and operation process, so as to ensure effective resistance from various risks, including fi nancial reporting risk. The Accountability System for

Material Errors of Information Disclosure in Annual Report provided the scope of material errors of information disclosure in annual report and the manner of rectifi cations and accountability. During the reporting period, the Bank had no material error of information disclosure in its annual report. Thirdly, the Bank established a comprehensive information exchange system, pursuant to which the Bank separated the core business system which handled transaction accounts for customers and general accounting system which handled internal accounts and statements. At the end of each day, the core business system will check accounts automatically. If no error is detected, the independent back offi ce general account system will receive relevant data from the core business system, keep account information and integrate them into fi nancial statements of departments at all levels and the whole bank, so as to ensure the independence and effectiveness of information transmission. As at the end of the reporting period, no major defects were found in the Bank’s internal control during the self-assessment on its internal control. The Bank has carried out comprehensive rectifi cations in respect of other existing defects, which will not cause material effect on its asset security, the realization of its operating objectives, the accuracy and integrity of its fi nancial information and the effectiveness of risk management system, and will not deviate the Bank from its control objectives.

2. The Board of Directors’ opinions on the internal control report of the Bank and its statement on internal control responsibility

The Board of Directors of the Bank is responsible for establishing and maintaining internal control over fi nancial reporting.

Internal control over fi nancial reporting is established to ensure the truthfulness, integrity and reliability of the information in fi nancial reports, and resist risks of material error. Given the inherent limitations of internal control, the Bank can only make reasonable guarantee for the above objectives.

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The Bank’s Board of Directors has evaluated internal control over fi nancial reporting according to the Basic

Standard for Enterprise Internal Control, and found no signifi cant or major defects in design or execution of the internal control. Potential risks caused by common defects are all under control and will not cause great infl uence to quality of the Bank’s operational and managerial activities and realization of the fi nancial report objectives. The Board of Directors believe that as at 31 December, 2011 (base date), the Bank’s internal control over fi nancial reporting system was sound and effectively executed.

During self-assessment on internal control, the Bank found no major defects in internal control over non-fi nancial reporting. Issues which need to be improved have no substantial infl uence to the Bank’s overall operation and management. The Bank pays close attention to these issues and will take measures to achieve continuous improvement.

3. Working plan and implementation proposal for improving comprehensive internal control system

According to the basic standards and related guidelines for implementing internal control formulated by various regulatory authorities, including MOF, CSRC, CNAO, CBRC and CIRC, the Bank established a comprehensive internal control system with the assistance of Ernst & Young, its external consulting company, in September 2011, and carried out internal control across the Bank.

In this project, the Bank reviewed and streamlined its internal control of the whole company and the specifi c processes according to relevant requirements, such as Basic Standard for Enterprise Internal Control,

promulgated by fi ve governmental departments including MOF and based on fi ve majors factors of internal control. At the level of the whole enterprise, the Bank streamlined the internal control covering 16 fi elds, such as corporate governance structure, development strategies, corporate culture and human resources of the Bank. At the level of operating processes, the Bank streamlined 113 business processes covering 12 major business categories and approximately 400 products. The Bank identifi ed major risks and control measure in respect to each business process. After evaluating internal control over relevant fi elds and businesses, the Bank formulated corresponding rectifi cation proposals, and will check major rectifi cations in 2012.

The Bank drafted Manual for Internal Control and Manual for Evaluating Internal Control as the achievement of such project. In 2012, the Bank will fi nalize Manual for Internal Control and Manual for Evaluating Internal

Control. In addition, the Bank planned to promote the establishment and evaluation of internal control system across the Bank.

By establishing a sound internal control system and evaluating its implementation, the Bank will identify defects in internal control across the Bank. In addition, each relevant entity and department will rectify the identifi ed defects, on the basis of which, the Bank will issue 2012 Self-assessment Report on Internal Control.

(IX) Social responsibility report

The Bank actively promoted and fulfi lled the social responsibility as a corporate citizen, and devoted itself to joint development with the society. In 2011, the Bank conscientiously implemented the state’s macro-economic policies, granted more loans to under-developed regions, established branches in Xinjiang, and

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supported housing projects and the construction of affordable houses, including price-limited housing, low-cost housing, public rental housing, low-rent housing and shantytown redevelopment. The Bank also increased investments in “agriculture, rural areas and farmers related economies” and support agricultural development in rural areas through its commodity fi nancing business. It increased its fi nancing channels by assisting small and medium-sized enterprises, especially in industries of corn, paddy, cane sugar, cotton, soybean, peanut farming, chemical fertilizers and so on. The Bank introduced a series of products including “Sunshine Easy Loans (陽光融易貸)” and “Easy Settlement (結算易) ” for small enterprises to promote the concept of green credit, and formulated the Guidelines for Green Credit Policy of China Everbright Bank to reinforce the classifi ed management of industries with high pollution, high energy consumption and excess production capacity. Its key projects includes hydrogen power generation projects, projects of “encouraging large-scale power unit and discouraging small energy-ineffi cient power plants” projects, sewage treatment and solid waste power generation projects. The Bank was committed to developing low-carbon fi nancial services by introducing innovative products of “Guang He Dong Li (光合動力)” low-carbon fi nancial service package, and establishing three major low-carbon fi nancial models of energy management, clean development mechanism and green interest pledge. The Bank also made efforts to promote the electronization of fi nancial services, by which the Bank can reduce social comprehensive costs, such as customer visits and queuing in branches and carbon emission in addition to improving its business effi ciency, thus making contributions to building a energy-saving and environment-friendly society.

The Bank strived to provide quality and convenient services which satisfy various fi nancial needs, such as “Intelligent money deposit (智能存款)”, “withdrawal of card before money (先出卡後出鈔)” service of ATM and “V Payment (V繳費)” of Sina Weibo. As the quality of “Sunshine Service (陽光服務)” has improved, our fi nancial service capabilities has continued to increase. Six outlets were selected as Top 100 Chinese Banking Industry Service Model. The Bank was committed to social services and continued to support the “Water Cellar for Mothers (大地之愛•母親水窖)” project. As at the end of the reporting period, the Bank donated more than RMB15 million through various channels, repaired 3,193 water cellars and supported 43 small-scale intensive water supply projects, which benefi tted approximately 63,400 persons and helped to alleviate water shortage problem in drought areas of Western China. The Bank also promoted co-development of employees and the Bank by nurturing a caring culture, providing protection for the employees’ benefi ts, building a harmonious working atmosphere, furnishing opportunities for the employees and enriching the corporate culture.

Please refer to the Bank’s Corporate Social Responsibility Report for details.

(X) Use of funds raised in the reporting period

In 2010, the Bank issued RMB7 billion common shares (A Share) to the public and raised RMB21.323 billion. All proceeds were used to enrich the Bank’s capital pursuant to the approvals given by the CBRC and the People’s Bank of China, which increased the Bank’s capital adequacy ratio and laid solid foundation for the Bank’s development.

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(XI) Profi t distribution or capitalization of capital reserves

1. Preplan for profit distribution this year

(1) Appropriate 10% of the profi t after tax in 2011 amounting to RMB17,919,400,000, with the amount of RMB1,791,940,000, for the statutory surplus reserve fund;

(2) Appropriate RMB2,245,079,000 for the general reserve in 2011;

(3) A cash dividend distribution of RMB1.33 per 10 shares (before tax), with the aggregation amount of RMB5,377,827,100 to all existing shareholders.

After execution of the profi t distribution plan, the surplus undistributed profi ts of RMB8,504,553,900 in 2011 will be carried forward to the following year.

The Bank did not implement the plan for capitalization of capital reserves in 2011.

The drafted plan for profi t distribution must be approved by the Bank’s general meeting of shareholders in 2011.

2. Cash dividend of the Bank from 2008 to 2010

Unit: RMB million

Item 2010 2009 2008

Cash dividend 3,825 1,174 2,162Proportion to net profi t (%) 29.97 15.36 29.55

3. Cash dividend policy of the Bank

Pursuant to the laws and regulations, including the Company Law and Securities Law, and relevant requirements of securities regulatory authorities in the place of the Bank’s listing and the Articles of

Association, the Proposal on Review of Distribution of Dividend for the Next Three Years of China Everbright

Bank Company Limited was reviewed and passed in the 17th meeting of the Fifth Board of Directors of the Bank, pursuant to which the dividend distributed in 2011, 2012 and 2013 were or shall be within the range between 30% and 40% of the audited net profi t in the corresponding year (e.g. the lower of the net profi t determined in accordance with the China Accounting Standards and International Financial Reporting Standards). The specifi c amount and proportion of dividend distributed each year will be determined in accordance with the annual profi t distribution plan approved by the Board of Directors and the General Meeting of Shareholders.

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(XII) Establishment and execution of the insider information and insiders registration management system

To regulate insider information management, strengthen confi dentiality of insider information, maintain the principle of fairness in information disclosure and protect shareholders’ legal rights, the Bank formulated Insider

Information and Insiders Management System of China Everbright Bank Company Limited which regulates the scope and registration management system of insider information and insiders. The Bank fi led for insiders in compliance with the relevant requirements specifi es in the Management System. Insiders shall fi ll in the Insider

Registration Form (內幕信息知情人登記表) and report to the offi ce of the Board of Directors upon the date of obtaining insider information.

(XIII) Self-examination of transactions of the Bank’s shares by insiders and the accountability of insiders for the year

Upon self-examination, there is no transaction of the Bank’s shares by insiders using insider information before disclosure of signifi cant and sensitive information that affects the Bank’s share price.

(XIV) Regulatory measures and executive penalties imposed on the Bank and related personnel by regulatory departments due to the execution of the insiders registration management system or alleged involvement of any insider transaction

During the reporting period, there was not any ineffi cient execution of insiders registration management system or alleged involvement of insider transaction which cause regulatory departments to impose regulatory measures and executive penalties on the Bank or any related personnel.

(XV) Establishment of a sound system for management of external information users

During the reporting period, the Bank formulated and issued various systems, such as the System for

Information Disclosure Management of China Everbright Bank Company Limited and the Insider Information

and Insiders Management System of China Everbright Bank Company Limited, which clearly specify the requirements on external reporting and use of material information in order to strengthen the management of external information users and implement confi dentiality obligations effectively.

(XVI) Material environmental protection or other material social security issues

During the reporting period, there is no material environmental protection or other material social security issue in the Bank.

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(I) Meetings and resolutions of the Board of Supervisors in the reporting periodWithin the reporting period, the Bank convened eight meetings of the board of supervisors as follows:

1. On 18 February, 2011, the Bank’s Fifth Board of Supervisors convened the eighth meeting in Beijing, at which nine supervisors were present and one entrusted others to exercise the voting right. During the meeting, they deliberated and approved Work Report of the Board of Supervisors for 2010, Supervision and Evaluation on Duty Performance of the Board of Directors from the Board of Supervisors for 2010, Supervision and Evaluation on Duty Performance of the Special Committee of the Board of Directors from the Board of Supervisor for 2010 and Supervision and Evaluation on Duty Performance of the Senior Management from the Board of Supervisor for 2010, debriefed the report on work of Vice-chairman of the Board of Supervisors Mr. Mou Huijun, who acted as the Chairman of the Board of Supervisors, for 2010 and submitted the Investigation Report on the Source of Profi t.

2. On 8 April, 2011, the Bank’s Fifth Board of Supervisors convened the ninth meeting in Beijing, at which eight supervisors were present and two entrusted others to exercise the voting rights. During the meeting, they deliberated and approved Annual Report for 2010 and its summary and issued the audit opinion. They also deliberated and approved the Evaluation Report on the Internal Control for 2010, Specifi c Report on the Deposit and Application of the Proceeds from the Offering of A Shares and Supervision and Evaluation on Individual Duty Performance of the Directors from the Board of Supervisors for 2010.

3. On 29 April, 2011, the Bank’s Fifth Board of Supervisors convened the tenth meeting by circulation of written resolution, and they deliberated and approved the Report for the First Quarter of 2011 and issued the audit opinion.

4. On 18 May, 2011, the Bank’s Fifth Board of Supervisors convened the eleventh meeting by means of written circular, and they deliberated and approved the Rules of Procedures of the Board of Supervisors (2011 revision).

5. On 4 August, 2011, the Bank’s Fifth Board of Supervisors convened the twelfth meeting by means of written circular, and they deliberated and approved the Interim Report for 2011 and its summary and issued the audit opinion.

6. On 23 August, 2011, the Bank’s Fifth Board of Supervisors convened the thirteenth meeting in Beijing, at which eight supervisors were present and two entrusted others to exercise the voting rights. During the meeting, they deliberated and approved the Provisional Measures for the Evaluation on Duty Performance of the Directors, and submitted the Research Report regarding the Development and Risk Preventions of Small and Medium Enterprises.

7. On 28 October, 2011, the Bank’s Fifth Board of Supervisors convened the fourteenth meeting by means of written circular, and they deliberated and approved the Report for the Third Quarter of 2011 and issued the audit opinion.

8. On 1 December, 2011, the Bank’s Fifth Board of Supervisors convened the fi fteenth meeting in Beijing, at which nine supervisors were present and one entrusted others to exercise the voting right. During the meeting, they deliberated and approved the Proposals regarding the Adjustment of Duty Performance Evaluation Targets and Working Schedule for the Evaluation on Duty Performance for 2011, and submitted the Report on the Schedule for Meetings of the Board of Supervisors in 2012 and the Report on the Major Tasks of the Board of Supervisors in 2012.

Within the reporting period, the Supervision Committee of the Bank’s Fifth Board of Supervisors convened four meetings. During the meetings, they deliberated and approved the Supervision and Evaluation on Duty Performance of the Board of Directors from the Board of Supervisors for 2010, Supervision and Evaluation on Duty Performance of the Special Committee of the Board of Directors from the Board of Supervisor for 2010,

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Supervision and Evaluation on Duty Performance of the Senior Management from the Board of Supervisor for 2010, Annual Report for 2010 and its summary, Supervision and Evaluation on Individual Duty Performance of the Directors from the Board of Supervisors for 2010, Provisional Measures for the Evaluation on Duty Performance of the Directors and Proposals regarding the Adjustment of Duty Performance Evaluation Targets and Working Schedule for the Evaluation on Duty Performance for 2011.

(II) Independent Opinions of the Board of Supervisors on Matters Concerned

1. Lawful Operation of the BankDuring the reporting period, the Bank’s operating activities conformed to the Company Law, the Law on Commercial Banks and the Articles of Association, with legal and valid decision-making process. None of the directors or senior executives of the Bank were found in violation of laws, regulations and the Articles of Association or being prejudice to shareholders’ equity during the performance of their duties.

2. Authenticity of Financial ReportsWithin the reporting period, KPMG Huazhen audited the Bank’s annual fi nancial statement in accordance with the PRC Auditing Standards and issued a standard unqualifi ed auditor’s report. The fi nancial report refl ected the Bank’s fi nancial position and the results of operations in an authentic, objective and accurate manner.

3. Utilization of ProceedsThe Bank utilized proceeds from the most recent fund raising activity in conformity to promised purposes.

4. Asset Acquisition and Sales of the BankWithin the reporting period, the Bank was not found to damage shareholders’ equity or cause asset loss during asset acquisition or sales.

5. Fairness of Related-Party TransactionsWithin the reporting period, the Bank’s Related Party Transactions were found to be fair and reasonable, without damaging shareholders’ equity and the Bank’s interests.

6. Internal ControlWithin the reporting period, the Board of Supervisors reviewed and raised no objection to the Evaluation Report on the Internal Control for 2011.

7. Implementation of the Register and Management System for InsidersWithin the reporting period, the Bank had established a sound management system of insiders. The Board of Supervisors supervised its implementation, and considered that the management of insiders was carried out in a timely and effective manner and no insider transaction had been conducted by the Bank.

8. Implementation of Resolutions of the Shareholders’ MeetingWithin the reporting period, the Board of Supervisors raised no objection to all reports and proposals that the Board of Directors submitted to the shareholders’ meeting for deliberation. The Board of Supervisors supervised the implementation of resolutions of shareholders’ meeting and considered that the Bank faithfully implemented relevant resolutions of the shareholders’ meeting.

108

Significant Events

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(I) Major lawsuit and arbitration

Within the reporting period, no major lawsuit or arbitration took place in the Bank. Although routine lawsuits and arbitrations took place during normal business operation, these routine lawsuits and arbitrations had no signifi cant negative infl uence on its fi nancial position or the results of operations.

(II) Matters concerning bankruptcy and reorganization

Within the reporting period, no bankruptcy or reorganization took place in the Bank.

(III) Holding of shares of other listed companies

Unit: RMB

Securities CodeAbbreviation of

securitiesShareholding

proportion (%)Closing

book value

V Visa Inc 0.00003 1,219,840

(IV) Holding of shares of unlisted fi nancial enterprises

Unit: RMB1,000, 1,000 shares

Invested entityInvestment

amountNumber of

shares heldShareholding

proportion (%)Closing book

value

Profi t and loss during

the reporting period

Change in owner’s

equity during the reporting

periodAccounting

itemShare

source

China Unionpay Co., Ltd. 97,500 75,000 2.56 97,500 — — Long-term equity investment

Investment

Shaoshan Everbright Village and Township Banking Co., Ltd.

35,000 35,000 70 35,000 3,308 3,308 Long-term equity investment

Initial stock

Everbright Financial Leasing Co., Ltd. 720,000 720,000 90 720,000 162,414 162,414 Long-term equity investment

Initial stock

(V) Investment in securities

Within the reporting period, the Bank had no investment in securities.

(VI) Major asset acquisition, sales or disposal and enterprise merger

Within the reporting period, no major asset acquisition, sales or disposal and enterprise merger took place in the Bank.

(VII) Major Related Party Transaction

Pursuant to the Administrative Measures for the Related Party Transactions between the Commercial Banks

and Their Insiders or Shareholders promulgated by the CBRC, the Accounting Standards for Business Enterprises and the regulations of CBRC regarding the management of related-party transactions, the Bank formulated and implemented The Related Party Transaction Administration Measure and submitted specifi c reports to the CBRC on a quarterly basis. Within the reporting period, neither major related party transaction

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nor non-operating capital occupation by the controlling shareholder or other related parties took place in the Bank. All of related party transactions were conducted under the principles of good faith, integrity and fairness in accordance with commercial terms no less favourable than that in similar transactions with non-related parties. Data of the regular related party transactions is set out in the notes to the fi nancial statements.

(VIII) Funds with related party

Within the reporting period, there were no non-operating funds between the controlling shareholders and other related parties of the Bank, and KPMG Huazhen had issued a statement in this regard.

(IX) Major contracts and their execution

1. Major trusteeship, leasing and contracting matters

Within the reporting period, there was no trusteeship, leasing or contracting of assets of other companies entered into or subsisted by the Bank which required to be disclosed.

2. Major guarantees

Within the reporting period, the Bank consistently provided guarantee for RMB180.00 million payable interests of fi nancial bonds of China Everbright Group, and China Everbright Group provided counter guarantee with its 50 million shares of a large-size securities company. Except for the abovementioned matters and fi nancial guarantee operations within the business scope approved by CBRC, there was no other major guarantee that was required to be disclosed.

3. Trusted cash asset management

Within the reporting period, no major entrusted cash asset management that was required to be disclosed took place or subsisted by the Bank.

4. Other major contracts

Within the reporting period, all business contracts were normally executed and no major contract disputes took place in the Bank.

(X) Special statement and independent opinion of independent directors concerning the provision of external guarantee by the Bank

In accordance with relevant regulations and requirements of the Notice Concerning Some Issues on Regulating the Funds between Listed Companies and Associated Parties and Listed Companies’ Provision of Guarantee to Other Parties (ZJF [2003] No. 56) of CSRC, the Bank’s independent directors verifi ed guaranties provided by the Bank to other parties under the principle of fairness, impartiality and objectivity and issued special verifi cation opinion as follows:

110

Signi f icant Events

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It was verifi ed that the provision of external guarantee is one of the Bank’s routine operations upon approval of the People’s Bank of China and CBRC and within its business scope. By the end of 2011, the Bank consistently provided guarantee for RMB180.00 million payable interests of fi nancial bonds of China Everbright Group, and China Everbright Group provided counter guarantee with its 50 million shares of a large-size securities company. Except this, other guarantee operations of the Bank were RMB60.262 billion, an increase of 25.86% as compared with last year.

As the Bank attached high importance to the risk management of guarantee operations, it formulated specifi c business management measures and operating procedures, including on site and off site inspections, to facilitate risk monitoring and prevention on guarantee operations. Within the reporting period, such business operated normally and no violations took place in the Bank.

Zhong Ruiming, James Parks Stent, Wang Wei, Cai Hongbin, Zhang Xinze Independent Directors of China Everbright Bank Co., Ltd

(XI) Important commitments of the Bank and shareholders holding shares above 5% and their execution

Central Huijin Investment Ltd., a major shareholder of the Bank, has undertaken that it will not transfer or entrust others to manage the A shares of the Bank directly or indirectly held by it and the Bank shall not repurchased any of such A shares within 36 months after the Bank’s A shares were listed on the Shanghai Stock Exchange. The commitment has been performed and there was no breach of commitment during the reporting period.

(XII) Appointment and dismissal of accounting fi rm

In accordance with the resolutions approved at the shareholders’ meeting, the Bank engaged KPMG Huazhen as its accounting fi rm to perform audit work for 2011 and the audit fee paid to KPMG Huazhen for 2011 was RMB8.9 million.

(XIII) Inspection and administrative penalty by regulatory departments

Within the reporting period, the Bank and its directors, supervisors, senior executives, controlling shareholder and de facto controller were not subject to any inspection, administrative penalty or notice of criticism from CSRC or public condemnation from stock exchanges.

111

Index to Information Disclosure during the Reporting Period

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Announcement date

Announcement No. Announcement name

January 18, 2011 L 2011-001 Results Announcement for 2010 of China Everbright Bank

January 27, 2011 L 2011-002 Announcement of Resolutions of the 9th meeting of the Fifth Board of Directors of China Everbright Bank

February 21, 2011 L 2011-003 Announcement of Resolutions of the 10th meeting of the Fifth Board of Directors of China Everbright Bank

February 21, 2011 L 2011-004 Announcement of Resolutions of the 8th meeting of the Fifth Board of Directors of China Everbright Bank

February 25, 2011 L 2011-005 Notice of 2011 First Extraordinary Shareholders’ Meeting of China Everbright Bank

March 5, 2011 Document of shareholders’ meeting

Documents of 2011 First Extraordinary Shareholders’ Meeting of China Everbright Bank

March 15, 2011 L 2011-006 Announcement of Resolutions of 2011 1st Extraordinary Shareholders’ Meeting of China Everbright Bank

March 15, 2011 Document of shareholders’ meeting

*Legal Opinion Letter for 2011 First Extraordinary Shareholders’ Meeting of China Everbright Bank

March 31, 2011 L 2011-007 Announcement Concerning CBRC’s Approval of Qualifi cation of Directors of China Everbright Bank

March 31, 2011 L 2011-008 Announcement of Resolutions of the 12th meeting of the Fifth Board of Directors of China Everbright Bank

March 31, 2011 L 2011-009 Notice of 2011 Second Extraordinary Shareholders’ Meeting of China Everbright Bank

April 12, 2011 L 2011-010 Announcement of Resolutions of the 13th meeting of the Fifth Board of Directors of China Everbright Bank

April 12, 2011 L 2011-011 Announcement of Resolutions of the 9th meeting of the Fifth Board of Supervisors of China Everbright Bank

April 12, 2011 Regular report *Annual report of China Everbright Bank

April 12, 2011 Regular report Summary of Annual report of China Everbright Bank

April 12, 2011 Regular report *Special Statement of the Utilization of Capital by Controlling Shareholders and Other Related Parties of China Everbright Bank in 2010

April 12, 2011 Regular report *Special Statement of the Internal Control Evaluation Report for 2010 of China Everbright Bank

April 12, 2011 Regular report *Social Responsibility Report for 2010 of China Everbright Bank

April 12, 2011 Corporate governance

*Administrative Measures for Proceeds from Fund-raising


*Working Rules for Secretary to the Board of Directors of China Everbright Bank


*Regulations for Annual Report Preparation of the Auditing Committee under the Board of Directors of China Everbright Bank


*Accountability System for Material Errors in Information Disclosure of Annual Report of China Everbright Bank

112

Index to Informat ion Disc losure dur ing the Report ing Per iod

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Announcement date


April 16, 2011 L 2011-012 Announcement of Resolutions of 2011 Second Extraordinary Shareholders’ Meeting of China Everbright Bank

April 16, 2011 Document of shareholders’ meeting

*Legal Opinion Letter for 2011 Second Extraordinary Shareholders’ Meeting of China Everbright Bank

April 20, 2011 L 2011-013 Announcement of Resolutions of the 14th Meeting of the Fifth Board of Directors of China Everbright Bank

April 23, 2011 L 2011-014 Announcement Regarding the Approval by CBRC of the Issuance and Listing of H Shares by China Everbright Bank

April 30, 2011 Regular report Report for the First Quarter of China Everbright Bank

May 4, 2011 L 2011-015 Announcement Regarding the Acceptance of Application for the Administrative Permission by CSRC relating to the Issuance of H Shares by China Everbright Bank

May 10, 2011 L 2011-016 Announcement of Resolutions of the 16th Meeting of the Fifth Board of Directors and Notice of 2010 Annual General Meeting of China Everbright Bank

May 12, 2011 L 2011-017 Announcement on the Relocation of the Headquarters of China Everbright Bank

May 20, 2011 L 2011-018 Announcement of Resolutions of the 17th Meeting of the Fifth Board of Directors of China Everbright Bank

May 20, 2011 L 2011-019 Announcement of Resolutions of the 11th Meeting of the Fifth Board of Supervisors of China Everbright Bank

May 20, 2011 L 2011-020 Supplementary Notice of 2010 Annual General Meeting of China Everbright Bank

May 20, 2011 Document of shareholders’ meeting

*Documents of 2010 Annual General Meeting of China Everbright Bank

May 20, 2011 Corporate document

* Working Rules for Secretary to the Board of Directors of China Everbright Bank

May 31, 2011 L 2011-021 Announcement of Resolutions of 2010 Annual General Meeting of China Everbright Bank

May 31, 2011 Document of shareholders’ meeting

*Legal Opinion Letter for 2010 Annual General Meeting of China Everbright Bank

June 10, 2011 L 2011-022 Announcement Regarding Profi t Distribution of China Everbright Bank in 2010

June 11, 2011 L 2011-023 Announcement Regarding the Approval by CSRC of the Issuance of Overseas-listed Foreign Shares by China Everbright Bank

June 11, 2011 L 2011-024 Announcement Regarding CSRS Considering of the Issuance of Overseas-listed Foreign Shares by China Everbright Bank

June 14, 2011 L 2011-025 Announcement Regarding the Publication of Web Proof Information Pack of H Shares by China Everbright Bank

June 22, 2011 L 2011-026 Announcement of Resolutions of the 18th Meeting of the Fifth Board of Directors of China Everbright Bank

113

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Announcement date


July 9, 2011 L 2011-027 2011 Interim Results Announcement of China Everbright Bank

August 8, 2011 Regular report *Interim Report of China Everbright Bank

August 8, 2011 Regular report Summary of Interim Report of China Everbright Bank

August 15, 2011 L 2011-028 Notice on the Release of Restricted Shares (12-Month Lockup) from Listing and Circulation of China Everbright Bank

August 25, 2011 L 2011-029 Announcement of Resolutions of the 22th Meeting of the Fifth Board of Directors of China Everbright Bank

August 25, 2011 L 2011-030 Announcement of Resolutions of the 13th Meeting of the Fifth Board of Supervisors of China Everbright Bank

September 5, 2011 L 2011-031 Notice of 2011 Third Extraordinary Shareholders’ Meeting of China Everbright Bank

September 10, 2011 Document of shareholders’ meeting

*Documents of 2011 Third Extraordinary Shareholders’ Meeting of China Everbright Bank

September 21, 2011 L 2011-032 Announcement of Resolutions of 2011 Third Extraordinary Shareholders’ Meeting of China Everbright Bank

September 21, 2011 Document of shareholders’ meeting

*Legal Opinion Letter for 2011 Third Extraordinary Shareholders’ Meeting of China Everbright Bank

October 29, 2011 Regular report Report for the Third Quarter of China Everbright Bank

October 29, 2011 L 2011-033 Announcement of Resolutions of the 23th Meeting of the Fifth Board of Directors of China Everbright Bank

November 1, 2011 L 2011-034 Announcement on the Replacement of Sponsor Representative of China Everbright Bank

December 5, 2011 L 2011-035 Announcement of Resolutions of the 24th Meeting of the Fifth Board of Directors of China Everbright Bank

December 5, 2011 L 2011-036 Announcement of Resolutions of the 15th Meeting of the Fifth Board of Supervisors of China Everbright Bank

December 5, 2011 L 2011-037 Notice of 2011 Fourth Extraordinary Shareholders’ Meeting of China Everbright Bank

December 13, 2011 Document of shareholders’ meeting

*Documents of 2011 Fourth Extraordinary Shareholders’ Meeting of China Everbright Bank

December 16, 2011 L 2011-038 Announcement Regarding the Approval by CBRC of the Qualifi cation of Independent Directors of China Everbright Bank

December 21, 2011 L 2011-039 Announcement of Resolutions of 2011 Fourth Extraordinary Shareholders’ Meeting of China Everbright Bank

December 21, 2011 Document of shareholders’ meeting

*Legal Opinion Letter for 2011 Fourth Extraordinary Shareholders’ Meeting of China Everbright Bank

Note: 1. Information disclosed above is published in the Bank’s designated newspapers for information disclosure, website of Shanghai Stock Exchange and the Bank’s website (*represents those only published on websites but not published in newspapers).

2. Please input the Bank’s A stock code “601818” for inquiry in the column of listed company announcement in the website of Shanghai Stock Exchange, or in column of the Bank’s announcement under investor relations of the website of the Bank.

114

Written Confirmation of the Bank’s Directors and Senior Management for Annual Report 2011

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In accordance with relevant requirements set forth in the Securities Law of the People’s Republic of China and

Code for Company Information Disclosure Content and Format of Publicly Issued Securities No. 2 <Content

and Format of Annual Report> (revised edition in 2007), as directors and senior executives of China Everbright Bank Co., Ltd., after a comprehensive knowledge and verifi cation of Annual Report 2011 and its summary, we issued the following opinions:

1. The operation of the Company was in strict compliance with accounting standards for enterprises and relevant regulations, and Annual Report 2011 and its summary fairly refl ect the Bank’s fi nancial position and the results of operations during the reporting period.

2. We consider that information in the Bank’s Annual Report 2011 and its summary is authentic, accurate and intact, promise there is not any false record, misleading statements or material omission and bear joint and several liabilities for its authenticity, accuracy and integrity.

3. KPMG Huazhen has audited the annual fi nancial report for 2011 of the Company according to the Standards on Auditing for Certifi ed Public Accountants of People’s Republic of China, and issued a standard unqualifi ed report.

Signatures of Directors and senior executives:

Name Position Signature

Tang Shuangning Chairman, Secretary of the Party Committee of the Bank, Non-executive Director

Luo Zhefu Deputy Chairman, Non-Executive Director

Guo You Executive Director, President of the Bank, Deputy Secretary of the Party Committee of the Bank

Wu Qing Executive Director, Executive Vice President of the Bank, Deputy Secretary of the Party Committee of the Bank

Yu Erniu Non-Executive Director

Naren Tuya Non-Executive Director

Wu Gang Non-Executive Director

Wang Shumin Non-Executive Director

Wang Xia Non-Executive Director

Wu Jian Non-Executive Director

Chung Shuiming Independent Director

James Parks Stent Independent Director

Wang Wei Independent Director

Cai Hongbin Independent Director

Zhang Xinze Independent Director

115

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Name Position Signature

Lin Li Executive Vice President of the Bank, Deputy Secretary of the Party Committee of the Bank, Secretary of the Discipline Inspection Committee of the Bank, Chief Audit Offi cer

Li Ziqing Member of the Party Committee of the Bank

Shan Jianbao Executive Vice President of the Bank, Member of the Party Committee of the Bank

Li Jie Executive Vice President of the Bank, Member of the Party Committee of the Bank

Zhang Huayu Executive Vice President of the Bank, Member of the Party Committee of the Bank

Ma Teng Executive Vice President of the Bank, Member of the Party Committee of the Bank

Liu Jun Executive Vice President of the Bank, Member of the Party Committee of the Bank

Lu Hong Executive Vice President of the Bank, Secretary of the Board of Directors, Member of the Party Committee of the Bank

118 Auditor’s report

120 Financial Statements

131 Notes to the Financial Statements

118

Auditors’ Report

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All Shareholders of China Everbright Bank Company Limited:

We have audited the accompanying fi nancial statements of China Everbright Bank Company Limited (“the Bank”), which comprise the consolidated balance sheet and balance sheet as at 31 December 2011, the consolidated income statement and income statement, the consolidated cash fl ow statement and cash fl ow statement, the consolidated statement of changes in shareholders’ equity and statement of changes in shareholders’ equity for the year then ended, and notes to the fi nancial statements.

Management’s Responsibility for the Financial Statements

The Bank’s management is responsible for the preparation and fair presentation of these fi nancial statements. This responsibility includes: (1) preparing these fi nancial statements in accordance with Accounting Standards for Business Enterprises issued by the Ministry of Finance of the People’s Republic of China, and fairly presenting them; (2) designing, implementing and maintaining internal control which is necessary to enable that the fi nancial statements are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with China Standards on Auditing for Certifi ed Public Accountants. Those standards require that we comply with China Code of Ethics for Certifi ed Public Accountants, and plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity’s preparation and fair presentation of the fi nancial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the fi nancial statements.

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

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Opinion

In our opinion, the fi nancial statements present fairly, in all material respects, the consolidated fi nancial position and fi nancial position of the Bank as at 31 December 2011, and the consolidated fi nancial performance and fi nancial performance and the consolidated cash fl ows and cash fl ows of the Bank for the year then ended in accordance with the requirements of Accounting Standards for Business Enterprises issued by the Ministry of Finance of the People’s Republic of China.

KPMG Huazhen Certifi ed Public Accountants Registered in the People’s Republic of China

Jin Naiwen

Ai Peng

China Beijing

17 April 2012

120

as at 31 December 2011(Expressed in thousands of Renminbi, unless otherwise stated)

Balance Sheet

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The Group The Bank31 December 31 December 31 December 31 December

Note 2011 2010 2011 2010Assets Cash and deposits with the central bank 5 228,665,753 185,744,693 228,599,966 185,712,653 Deposits with banks and other fi nancial institutions 6 105,262,951 53,274,794 104,789,631 52,774,301 Placements with banks and other fi nancial institutions 7 81,745,623 23,833,093 81,745,623 23,833,093 Financial assets held for trading 8 22,726,633 22,397,117 22,726,633 22,397,117 Positive fair value of derivatives 9 2,261,793 3,025,040 2,261,793 3,025,040 Financial assets held under resale agreements 10 206,940,906 170,036,997 206,940,906 170,036,997 Interests receivable 11 6,099,912 4,138,628 6,060,969 4,120,946 Loans and advances to customers 12 868,782,232 760,555,236 868,665,536 760,463,156 Available-for-sale fi nancial assets 13 54,402,765 77,142,160 54,402,765 77,142,160 Held-to-maturity investments 14 83,984,501 87,792,736 83,984,501 87,792,736 Long-term equity investments 15 99,125 99,125 854,125 854,125 Fixed assets 16 10,810,273 10,141,462 10,795,317 10,137,761 Intangible assets 17 530,131 392,083 527,389 391,316 Goodwill 18 1,281,000 1,281,000 1,281,000 1,281,000 Deferred tax assets 19 1,856,708 1,306,243 1,844,930 1,306,243 Other assets 20 57,895,301 82,789,935 49,997,840 78,666,457Total assets 1,733,345,607 1,483,950,342 1,725,478,924 1,479,935,101Liabilities and equityLiabilities Deposits from banks and other fi nancial institutions 23 270,627,082 197,214,468 270,963,065 197,239,149 Placements from banks and other fi nancial institutions 24 27,361,979 18,213,913 20,961,979 14,983,913 Financial liabilities held for trading 25 46,477,971 33,469,549 46,477,971 33,469,549 Negative fair value of derivatives 9 3,062,487 2,960,426 3,062,487 2,960,426 Financial assets sold under repurchase agreements 26 40,608,969 12,678,724 40,608,969 12,678,724 Deposits from customers 27 1,178,800,329 1,029,710,611 1,178,445,037 1,029,527,478 Accrued staff costs 28 6,256,828 5,186,993 6,243,255 5,181,905 Taxes payable 29 2,534,113 1,662,984 2,512,030 1,651,154 Interests payable 30 12,625,216 8,536,092 12,551,680 8,528,517 Provisions 31 17,118 42,518 17,118 42,518 Subordinated debts issued 32 16,000,000 16,000,000 16,000,000 16,000,000 Other liabilities 33 32,823,882 76,811,362 31,777,302 76,334,946Total liabilities 1,637,195,974 1,402,487,640 1,629,620,893 1,398,598,279

The notes on pages 131 to 243 form part of these fi nancial statements.

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The Group The Bank31 December 31 December 31 December 31 December

Note 2011 2010 2011 2010Liabilities and equity (continued)equity Share capital 34 40,434,790 40,434,790 40,434,790 40,434,790 Capital reserve 35 20,328,167 19,901,227 20,328,167 19,901,227 Surplus reserve 36 4,225,626 2,433,686 4,225,626 2,433,686 General reserve 36 13,876,649 11,631,570 13,876,649 11,631,570 Retained earnings 37 17,168,932 6,963,194 16,992,799 6,935,549 Total equity attributable to equity shareholders of the Bank 96,034,164 81,364,467 95,858,031 81,336,822Non-controlling interests 115,469 98,235 — —Total equity 96,149,633 81,462,702 95,858,031 81,336,822

Total liabilities and equity 1,733,345,607 1,483,950,342 1,725,478,924 1,479,935,101

Approved and authorised for issue by the board of directors on 17 April 2012.

Tang Shuangning Guo YouChairman of the Board of Directors

President

Lu Hong Chen Yu China Everbright BankExecutive Vice President responsible for Accounting

General Manager of the Planning and Finance Department

Company Limited (Company Chop)


122

for the year ended 31 December 2011(Expressed in thousands of Renminbi, unless otherwise stated)

Income Statement

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The Group The Bank

Note 2011 2010 2011 2010

Operating income Interest income 77,884,593 54,155,529 77,337,148 54,100,380 Interest expense (38,444,357) (23,733,460) (38,182,293) (23,720,083)

Net interest income 38 39,440,236 30,422,069 39,154,855 30,380,297

Fee and commission income 7,381,076 5,080,893 7,277,793 5,029,900 Fee and commission expense (407,957) (372,365) (404,615) (371,716)

Net fee and commission income 39 6,973,119 4,708,528 6,873,178 4,658,184

Investment (loss)/income 40 (133,089) 446,689 (133,089) 446,689 Net loss on fair value changes 41 (1,042,576) (466,139) (1,042,576) (466,139) Foreign exchange gain 760,252 360,301 760,252 360,301 Other operating income 74,611 58,537 74,574 58,473

Total operating income 46,072,553 35,529,985 45,687,194 35,437,805

Operating expenses Business taxes and surcharges (3,448,134) (2,430,757) (3,429,337) (2,425,740) Operating and administrative expenses 42 (14,720,049) (12,590,347) (14,658,824) (12,565,694) Impairment losses on assets 43 (3,698,078) (3,491,397) (3,609,537) (3,462,921) Other operating expenses (59,118) (36,274) (59,118) (36,271)

Total operating expenses (21,925,379) (18,548,775) (21,756,816) (18,490,626)

Operating profi t 24,147,174 16,981,210 23,930,378 16,947,179

Add: Non-operating income 126,150 202,361 121,390 193,611 Less: Non-operating expenses (61,940) (73,005) (61,926) (73,003)

Profi t before tax 24,211,384 17,110,566 23,989,842 17,067,787 Less: Income tax 44 (6,126,262) (4,316,870) (6,070,442) (4,305,748)

Net profi t 18,085,122 12,793,696 17,919,400 12,762,039


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The Group The Bank

Note 2011 2010 2011 2010

Net profi t (continued) 18,085,122 12,793,696 17,919,400 12,762,039Net profi t attributable to: Equity shareholders of the Bank 18,067,888 12,790,228 17,919,400 12,762,039 Non-controlling interests 17,234 3,468 — —Basic and diluted earnings per share (in RMB) 0.45 0.36

Other comprehensive income/(expense) net of tax 45 426,940 (855,929) 426,940 (855,929)

Total comprehensive income 18,512,062 11,937,767 18,346,340 11,906,110

Total comprehensive income attributable to Equity shareholders of the Bank 18,494,828 11,934,299 18,346,340 11,906,110 Non-controlling interests 17,234 3,468 — —



President

Lu Hong Chen Yu China Everbright Bank Executive Vice President responsible for Accounting


Company Limited(Company Chop)


124


Cash Flow Statement

CH

INA

EVER

BR

IGH

T B

ANK

The Group The BankNote 2011 2010 2011 2010

Cash fl ows from operating activities Net increase in deposits from customers 162,100,268 255,551,374 161,928,108 255,400,566 Net increase in deposits from banks and other fi nancial institutions 73,412,614 — 73,723,916 — Net increase in placements from banks and other fi nancial institutions 9,148,066 — 5,978,066 — Net decrease in deposits with banks and other fi nancial institutions — 19,968,532 — 19,943,852 Interest, fee and commission received 84,044,324 58,999,928 83,414,857 58,911,402 Recoveries of loans written off in prior years 150,935 141,483 150,935 141,483 Net increase in fi nancial assets sold under repurchase agreements 28,050,088 — 28,050,088 — Net increase in operating activities 913,200 950,243 957,519 476,667 Sub-total of cash infl ows 357,819,495 335,611,560 354,203,489 334,873,970 Net increase in loans and advances to customers (112,185,842) (131,341,183) (112,158,545) (131,284,344) Net decrease in deposits from banks and other fi nancial institutions — (34,045,598) — (34,020,935) Net increase in deposits with the central banks (48,007,168) (53,561,214) (47,965,287) (53,543,424) Net increase in deposits with banks and other fi nancial institutions (11,757,361) — (11,732,682) — Net increase in placements with banks and other fi nancial institutions (27,463,451) (7,078,776) (27,463,451) (7,078,776) Net decrease in placements from banks and other fi nancial institutions — (4,876,593) — (8,106,593) Interest, fee and commission paid (34,147,134) (20,964,506) (33,947,688) (20,958,044) Cash paid to and on behalf of employees (7,537,634) (5,506,842) (7,503,471) (5,500,699) Payment for all types of taxes (9,506,143) (6,414,920) (9,428,767) (6,409,796) Net increase in fi nancial assets held under resale agreements (37,828,523) (49,277,434) (37,828,523) (49,277,434) Net decrease in fi nancial assets sold under repurchase agreements — (1,980,544) — (1,980,544) Payment for fi nancial leasing assets (3,809,900) (4,148,534) — — Other cash paid related to operating activities (19,243,002) (2,755,947) (19,796,828) (2,753,864) Sub-total of cash outfl ows (311,486,158) (321,952,091) (307,825,242) (320,914,453)

Net cash fl ows from operating activities 47(a) 46,333,337 13,659,469 46,378,247 13,959,517


125

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The Group The Bank

Note 2011 2010 2011 2010

Cash fl ows from investing activities Proceeds from disposal and redemption of investments 424,752,261 280,878,777 424,752,261 280,878,777 Cash received from return on investments 2,103 2,032 2,103 2,032 Net cash received from disposal of fi xed assets and other assets 31,443 99,377 30,973 99,377

Sub-total of cash infl ows 424,785,807 280,980,186 424,785,337 280,980,186

Cash paid for acquisition of investments (398,629,006) (330,894,111) (398,629,006) (330,894,111) Cash paid for acquisition of subsidiaries — — — (720,000) Cash paid for acquisition of fi xed assets, intangible assets and other assets (1,960,527) (2,238,536) (1,944,980) (2,235,006)

Sub-total of cash outfl ows (400,589,533) (333,132,647) (400,573,986) (333,849,117)

Net cash fl ows from/(used in) investing activities 24,196,274 (52,152,461) 24,211,351 (52,868,931)

Cash fl ows from fi nancing activities Cash received from investors — 21,323,475 — 21,323,475 Cash contributed by minority interests — 80,000 — —

Sub-total of cash outfl ows — 21,403,475 — 21,323,475

Cash paid for principal on subordinated debts issued — (5,550,000) — (5,550,000) Cash paid for interest on subordinated debts issued (735,900) (870,396) (735,900) (870,396) Cash paid for dividends, profi ts distribution or interest (3,674,431) (1,166,930) (3,674,431) (1,166,930)

Sub-total of cash infl ows (4,410,331) (7,587,326) (4,410,331) (7,587,326)

Net cash fl ows (used in)/from fi nancing activities (4,410,331) 13,816,149 (4,410,331) 13,736,149


126

for the year ended 31 December 2011(Expressed in thousands of Renminbi, unless otherwise stated)C

HIN

A EV

ERB

RIG

HT

BAN

K

Cash F low Statement

The Group The Bank

Note 2011 2010 2011 2010

Effect of foreign exchange rate changes on cash and cash equivalents (538,881) (146,574) (538,881) (146,574)

Net increase/(decrease) in cash and cash equivalents 47(b) 65,580,399 (24,823,417) 65,640,386 (25,319,839)Add: Cash and cash equivalents at the beginning of the year 91,064,923 115,888,340 90,528,770 115,848,609

Cash and cash equivalents at the end of the year 47(c) 156,645,322 91,064,923 156,169,156 90,528,770



President





127


Consolidated Statement of Changes in Equity

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Attributable to equity shareholders of the Bank Non-

controlling

interestsNote

Share

capital

Capital

reserve

Surplus

reserve

General

reserve

Retained

earnings Subtotal

Total

Equity

Balance at 1 January 2011 40,434,790 19,901,227 2,433,686 11,631,570 6,963,194 81,364,467 98,235 81,462,702

Changes in equity

for the year:

1. Net profi t for the year — — — — 18,067,888 18,067,888 17,234 18,085,122

2. Other comprehensive

income 45 — 426,940 — — — 426,940 — 426,940

Sub-total of 1&2 — 426,940 — — 18,067,888 18,494,828 17,234 18,512,062

3. Appropriation of profi ts

— Appropriation to

surplus reserve 36 — 1,791,940 — (1,791,940) — — —


general reserve 36 — — — 2,245,079 (2,245,079) — — —


shareholders 37 — — — — (3,825,131) (3,825,131) — (3,825,131)

Sub-total — — 1,791,940 2,245,079 (7,862,150) (3,825,131) — (3,825,131)

Balance at

31 December 2011 40,434,790 20,328,167 4,225,626 13,876,649 17,168,932 96,034,164 115,469 96,149,633


128


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ERB

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HT

BAN

K

Consol idated Statement of Changes in Equi ty

Attributable to equity shareholders of the Bank Non-

controlling

interestsNote

Share

capital

Capital

reserve

Surplus

reserve

General

reserve

Retained

earnings Subtotal Total Equity

Balance at 1 January 2010 33,434,790 6,433,681 1,157,482 5,485,180 1,595,560 48,106,693 14,767 48,121,460

Changes in equity for the year:

1. Net profi t for the year — — — — 12,790,228 12,790,228 3,468 12,793,696

2. Other comprehensive income 45 — (855,929) — — — (855,929) — (855,929)

Sub-total of 1&2 — (855,929) — — 12,790,228 11,934,299 3,468 11,937,767

3. Equity changes due to change

of share capital

— Contribution by owners 7,000,000 14,323,475 — — — 21,323,475 — 21,323,475

— Non-controlling interest — — — — — — 80,000 80,000

Sub-total 7,000,000 14,323,475 — — — 21,323,475 80,000 21,403,475

4. Appropriation of profi ts


surplus reserve 36 — — 1,276,204 — (1,276,204) — — —


general reserve 36 — — — 6,146,390 (6,146,390) — — —

Sub-total — — 1,276,204 6,146,390 (7,422,594) — — —

Balance at 31 December 2010 40,434,790 19,901,227 2,433,686 11,631,570 6,963,194 81,364,467 98,235 81,462,702


Tang Shuangning Guo YouChairman ofthe Board of Directors

President



Company Limited(Comapny Chop)


129


Statement of Changes in Shareholders’ Equity

2011 An

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NoteShare

capitalCapitalreserve

Surplus reserve

General reserve

Retained earnings

Totalequity

Balance at 1 January 2011 40,434,790 19,901,227 2,433,686 11,631,570 6,935,549 81,336,822

Changes in equity for the year:1. Net profi t for the year — — — — 17,919,400 17,919,4002. Other comprehensive income 45 — 426,940 — — — 426,940

Sub-total of 1&2 — 426,940 — — 17,919,400 18,346,340

3. Appropriation of profi ts— Appropriation to surplus reserve 36 — — 1,791,940 — (1,791,940) —— Appropriation to general reserve 36 — — — 2,245,079 (2,245,079) —— Appropriation to shareholders 37 — — — — (3,825,131) (3,825,131)

Sub-total — — 1,791,940 2,245,079 (7,862,150) (3,825,131)

Balance at 31 December 2011 40,434,790 20,328,167 4,225,626 13,876,649 16,992,799 95,858,031


130


HIN

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ERB

RIG

HT

BAN

K

Statement of Changes in Shareholders’ Equi ty

NoteShare

capitalCapitalreserve

Surplusreserve

Generalreserve

Retained earnings

Totalequity

Balance at 1 January 2010 33,434,790 6,433,681 1,157,482 5,485,180 1,596,104 48,107,237

Changes in equity for the year:1. Net profi t for the year — — — — 12,762,039 12,762,0392. Other comprehensive income 45 — (855,929) — — — (855,929)

Sub-total of 1&2 — (855,929) — — 12,762,039 11,906,110

3. Contribution by owners 7,000,000 14,323,475 — — — 21,323,475

4. Appropriation of profi ts— Appropriation to surplus reserve 36 — — 1,276,204 — (1,276,204) —— Appropriation to general reserve 36 — — — 6,146,390 (6,146,390) —

Sub-total — — 1,276,204 6,146,390 (7,422,594) —

Balance at 31 December 2010 40,434,790 19,901,227 2,433,686 11,631,570 6,935,549 81,336,822



President





131

(Expressed in thousands of Renminbi, unless otherwise stated)Notes to the Financial Statements

2011 An

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1 Bank statusChina Everbright Bank Company Limited (the “Bank”) commenced operation in Beijing, the People’s Republic of China (“the PRC”) on 18 August 1992. The bank listed in Shanghai Stock Exchange in August 2010.

The principal activities of the Bank and subsidiaries (Note 15(a)) (collectively the “Group”) are the provision of corporate and retail deposits, loans and advances, settlement, treasury business and other fi nancial services as approved by the China Banking Regulatory Commission (“the CBRC”). The Bank mainly operated in mainland China, which, for the purpose of this report, excludes the Hong Kong Special Administration Region of the PRC (“Hong Kong”), the Macau Special Administration Region of the PRC and Taiwan.

The Bank has branches in 26 provinces, autonomous regions and municipalities in mainland China as at 31 December 2011. In addition, the Bank has a representative offi ce in Hong Kong.

2 Basis of preparationThese fi nancial statements have been translated into English from the Group’s fi nancial statements in Chinese.

(1) Statement of compliance

The fi nancial statements have been prepared in accordance with the “Accounting Standards for Business Enterprises — Basic Standard” issued by the Ministry of Finance of the PRC (the “MOF”) on 15 February 2006, as well as 38 additional specifi c accounting standards, the Application Guide and Interpretations of Accounting Standards, and other relevant regulations (collectively know as the “PRC GAAP”) (the “PRC Accounting Standard Financial Statements”). These fi nancial statements present truly and completely the consolidated fi nancial position and fi nancial position, the consolidated results of operations and results of operations and the consolidated cash fl ows and cash fl ows of the Bank.

The fi nancial statements have been prepared in accordance with the disclosure requirements of “Compilation Rules for Information Disclosure for Companies Offering Securities to the Public No. 15 — General Provisions for Financial Reports” (2010 revised edition).

(2) Accounting period

The accounting year of the Group is from 1 January to 31 December.

(3) Measurement basis

The measurement basis used in the preparation of the fi nancial statements is historical cost except for the fi nancial assets and fi nancial liabilities which are measured at fair value as stated in Note 3(4).

(4) Functional currency and presentation currency

The fi nancial statements are presented in RMB, which is the Group’s presentation currency.

132

(Expressed in thousands of Renminbi, unless otherwise stated)

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Notes to the F inancia l Statements

3 Signifi cant accounting policies and accounting estimates

(1) Basis of consolidation

The consolidated fi nancial statements comprise the Bank and its subsidiaries. Control exists when the Bank has the power to govern the fi nancial and operating policies of an entity so as to obtain benefi ts from its operating activities. The fi nancial statements of subsidiaries are included in the consolidated fi nancial statements from the date that control commences until the date that control ceases.

Non-controlling interests is presented separately in the consolidated balance sheet within equity as well as in the consolidated statements of comprehensive income within net profi t and total comprehensive income. Where losses attributable to the non-controlling interests of a subsidiary exceed the non-controlling interests in the equity of the subsidiary, the excess, and any further losses attributable to the non-controlling interests are allocated against the equity attributable to the Group. Intra-group balances and transactions, and any unrealised profi t or loss arising from intra-group transactions, are eliminated in preparing the consolidated fi nancial statements.

(2) Translation of foreign currencies

When the Group receives capital in foreign currencies from investors, the capital is translated to RMB at the spot exchange rate on the date of the receipt. Other foreign currency transactions are, on initial recognition, translated to RMB at the spot exchange rates or the rates that approximate the spot exchange rates at the dates of the transactions.

A spot exchange rate is quoted by the PBOC, the State Administration of Foreign Exchanges or a cross rate determined based on quoted exchange rates. A rate that approximates the spot exchange rate is determined by a systematic and rational method, normally the average exchange rate of the current period.

Monetary items denominated in foreign currencies are translated to RMB at the spot exchange rate at the balance sheet date. The resulting exchange differences are recognised in the income statement. Non-monetary items denominated in foreign currencies that are measured at historical cost are translated to RMB using the foreign exchange rate at the transaction date. Non-monetary items denominated in foreign currencies that are measured at fair value are translated using the foreign exchange rate at the date the fair value is determined; the exchange differences are recognised in the income statement, except for the exchange differences arising from the translation of non-monetary available-for-sale fi nancial assets which are recognised in capital reserve.

(3) Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, non-restricted balance with central banks, short-term deposits and placements with banks and other fi nancial institutions, and highly liquid short-term investments which are readily convertible into known amounts of cash and are subject to an insignifi cant risk of change in value.

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3 Signifi cant accounting policies and accounting estimates (continued)

(4) Financial instruments

(i) Recognition and measurement of fi nancial assets and liabilities

A fi nancial asset or fi nancial liability is recognised in the balance sheet when the Group becomes a party to the contractual provisions of a fi nancial instrument.

The Group classifi es fi nancial assets and liabilities into different categories at initial recognition based on the purpose of acquiring assets or assuming liabilities: fi nancial assets and fi nancial liabilities at fair value through profi t or loss, loans and receivables, held-to-maturity investments, available-for-sale fi nancial assets and other fi nancial liabilities.

Financial assets and fi nancial liabilities are measured initially at fair value. For fi nancial assets and fi nancial liabilities at fair value through profi t or loss, any directly attributable transaction costs are charged to profi t or loss; for other categories of fi nancial assets and fi nancial liabilities, any attributable transaction costs are included in their initial costs.

Financial assets and fi nancial liabilities are categorised as follows:

• Financial assets and fi nancial liabilities at fair value through profi t or loss (including fi nancial assets or fi nancial liabilities held for trading).

A fi nancial asset or fi nancial liability is classifi ed as at fair value through profi t or loss if it is acquired or incurred principally for the purpose of selling or repurchasing it in the near term a fi nancial instrument managed in a pattern of short-term profi t taking, a derivative, or if it is designated at fair value through profi t or loss.

Financial assets and fi nancial liabilities are designated at fair value through profi t or loss upon initial recognition when:

— the fi nancial assets or fi nancial liabilities are managed, evaluated and reported internally on a fair value basis;

— the designation eliminates or signifi cantly reduces the discrepancies in the recognition or measurement of relevant gains or losses arising from the different basis of measurement of the fi nancial assets or fi nancial liabilities;

— the fi nancial assets or fi nancial liabilities contains an embedded derivative that signifi cantly modifi es the cash fl ows that would otherwise be required under the contract; or

— the separation of the embedded derivatives from the fi nancial instrument is prohibited.

Subsequent to initial recognition, fi nancial assets and fi nancial liabilities at fair value through profi t or loss are measured at fair value, without any deduction for transactions costs that may occur on sale, and changes therein are recognised in the income statement.

134


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(4) Financial instruments (continued)

(i) Recognition and measurement of fi nancial assets and liabilities (continued)

• Held-to-maturity investments

Held-to-maturity investments are non-derivative fi nancial assets with fi xed or determinable payments and fi xed maturity that the Group has the positive intention and ability to hold to maturity, other than

— those that the Group, upon initial recognition, designates as at fair value through profi t or loss or as available-for-sale; and

— those that meet the defi nition of loans and receivables.

Subsequent to initial recognition, held-to-maturity investments are stated at amortised cost using the effective interest method.

• Loans and receivables

Loans and receivables are non-derivative fi nancial assets held by the Group with fi xed or determinable recoverable amounts that are not quoted on an active market, other than

— those that the Group intends to sell immediately or in the near-term, which will be classifi ed as held for trading;

— those that the Group, upon initial recognition, designates as at fair value through profi t or loss or as available-for-sale; or

— those where the Group may not recover substantially all of its initial investment, other than because of credit deterioration, which will be classifi ed as available-for-sale.

Loans and receivables mainly comprise loans and advances to customers, deposits and placements with banks and other fi nancial institutions and fi nancial assets held under resale agreements. Subsequent to initial recognition, loans and receivables are stated at amortised cost using the effective interest method.

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(i) Recognition and measurement of fi nancial assets and liabilities (continued)

• Available-for-sale fi nancial assets

Available-for-sale fi nancial assets include non-derivative fi nancial assets that are designated upon initial recognition as available-for-sale and other fi nancial assets which do not fall into any of the above categories.

Subsequent to initial recognition, available-for-sale fi nancial assets are measured at fair value, without any deduction for transaction costs that may occur on sale and changes therein, except for impairment losses and foreign exchange gains and losses from monetary fi nancial assets, are recognised directly in equity. When an investment is derecognised, the cumulative gain or loss in equity is removed from equity and recognised in the income statement.

• Other fi nancial liabilities

Financial liabilities other than the fi nancial liabilities at fair value through profi t or loss are classifi ed as other fi nancial liabilities.

Subsequent to initial recognition, other fi nancial liabilities are measured at amortised cost using the effective interest method.

(ii) Impairment of fi nancial assets

The carrying amounts of fi nancial assets other than those at fair value through profi t or loss are reviewed by the Group at the balance sheet date to determine whether there is objective evidence of impairment. If any such evidence exists, impairment loss is provided. Objective evidence of impairment in the fi nancial asset represents events that occur after the initial recognition of the fi nancial assets and have impact on the estimated future cash fl ows of the asset, which can be estimated reliably.

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(ii) Impairment of fi nancial assets (continued)

The objective evidence of impairment of fi nancial assets, including but not limited to:

(a) the issuer or debtor of serious fi nancial diffi culties;

(b) a breach of contract, such as default or delinquency of payment on interest or principal;

(c) the debtor is likely to bankruptcy or other fi nancial reorganization;

(d) The major fi nancial diffi culties on issuer, the fi nancial assets can’t be trade on an active market;

(e) the issuer of equity instruments in which the technology business, market, economic or legal environment in signifi cant adverse changes, the investment in the equity instrument may not be able to recover the investment cost; and

(f) the serious or prolonged decline of the fair value on investment in equity instruments.

• Loans and receivables

The Group uses two methods of assessing impairment losses: those assessed individually and those assessed on a collective basis.

Individual assessment

Loans and receivables, which are considered individually signifi cant and those with unique credit characteristics, are assessed individually for impairment. If there is objective evidence of impairment on loans and receivables, the amount of loss is measured as the excess of its carrying amount over the present value of the estimated future cash fl ows (exclusive of future credit losses that have not been incurred) discounted at the original effective interest rate. The impairment losses are recognised in the income statement.

It may not be possible to identify a single, discrete event that caused the impairment but it may be possible to identify impairment through the combined effect of several events.

Cash fl ows relating to short-term loans and receivables are not discounted when assessing its impairment loss if the difference between the estimated future cash fl ow and its present value is immaterial.

The calculation of the present value of the estimated future cash fl ows of a collateralised loan or receivable refl ects the cash fl ows that may result from foreclosure less costs for obtaining and selling the collateral.

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• Loans and receivables (continued)

Collective assessment

Loans and receivables which are assessed collectively for impairment include individually assessed loans and receivables with no objective evidence of impairment on an individual basis, and homogeneous groups of loans and receivables which are not considered individually signifi cant and not assessed individually. Loans and receivables are grouped for similar credit risk characteristics for the purpose of collective assessment. The objective evidence of impairment mainly includes that, though it is unable to identify the decrease of cash fl ow of each individual asset, after collective assessment based on observable data, there is observable data indicating that there is a measurable decrease in the estimated future cash fl ow from a group of fi nancial assets since the initial recognition of those assets.

Homogeneous groups of loans not considered individually signifi cant

For homogeneous groups of loans that are not considered individually signifi cant, the Group adopts a fl ow rate methodology to assess impairment losses on a collective basis. This methodology utilises a statistical analysis of historical trends of probability of default and amount of consequential loss, as well as an adjustment of observable data that refl ects the current economic conditions and judgement based on management’s historical experience.

Individually assessed loans with no objective evidence of impairment on an individual

basis

Loans which are individually signifi cant and therefore have been individually assessed but for which no objective evidence of impairment can be identifi ed, either due to the absence of any loss events or due to an inability to measure reliably the impact of loss events on future cash fl ows, are grouped together in portfolios of similar credit risk characteristics for the purpose of assessing a collective impairment loss. This assessment covers those loans and advances that were impaired at the balance sheet date but which will not be individually identifi ed as such until some time in the future.

138


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The collective impairment loss is assessed after taking into account:

— historical loss experience in portfolios of similar risk characteristics;

— the emergence period between a loss occurring and that loss being identifi ed; and

— the current economic and credit environments and the judgement on inherent loss based on management’s historical experience.

The emergence period between a loss occurring and its identifi cation is determined by management based on the historical experience of the markets where the Group operates.

As soon as information is available that specifi cally identifi es objective evidence of impairment on individual assets in a portfolio, those assets are removed from the portfolio of fi nancial 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.

The Group periodically reviews and assesses the impaired loans and receivables periodically for any subsequent changes to the estimated recoverable amounts and the resulted changes in the provision for impairment losses.

If, in a subsequent period the amount of an impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment loss was recognised, the impairment loss is reversed through profi t or loss. The reversal shall not result in a carrying amount of the fi nancial asset that exceeds the amortised cost at the date of the reversal had the impairment not been recognised.

When the Group determines that a loan has no reasonable prospect of recovery after the Group has completed all the necessary legal or other claim proceedings, the loan is written off against its provision for impairment losses upon necessary approval. If in a subsequent period the loan written off is recovered, the amount recovered is recognised in the income statement through impairment losses.

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Rescheduled loans are loans that have been restructured due to deterioration in the borrower’s fi nancial position to the extent that the borrower is unable to repay according to the original terms and where the Group has made concessions that it would not otherwise consider under normal circumstances. Rescheduled loans are assessed individually and classifi ed as impaired loans and advances upon restructuring. Rescheduled loans are subject to ongoing monitoring. Once a rescheduled loan meets specifi c conditions, it is no longer be considered as impaired.

• Held-to-maturity investments

The impairment loss is calculated based on the excess of its carrying amount over the present value of the estimated future cash fl ows (exclusive of future credit losses that have not been incurred) discounted at the original effective interest rate. All impairment losses are recognised in the income statement.

If, in a subsequent period the amount of an impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment loss was recognised, the impairment loss is reversed through profi t or loss. The reversal shall not result in a carrying amount of the fi nancial asset that exceeds the amortised cost at the date of the reversal had the impairment not been recognised.

• Available-for-sale fi nancial assets

When an available-for-sale fi nancial asset is impaired, the cumulative loss arising from decline in fair value that has been recognised directly in equity is reclassifi ed in the income statement even though the fi nancial asset has not been derecognised.

The amount of the cumulative loss that is removed from equity and recognised in the income statement is the difference between the acquisition cost net of any principal repayment and amortisation and current fair value, less any impairment loss on that fi nancial asset previously recognised in the income statement.

140


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• Available-for-sale fi nancial assets (continued)

If, after an impairment loss has been recognised on available-for-sale debt instruments, the fair value of the assets increases in a subsequent period and the increase can be objectively related to an event occurring after the impairment loss was recognised, the impairment loss is reversed through profi t or loss. An impairment loss recognised for an investment in an equity instrument classifi ed as available-for-sale is not reversed through profi t or loss but recognised directly in equity.

For equity investments that the Group do not have control, jointly control or signifi cant infl uence and are not quoted on an active market, of which fair value cannot be reliably measured, the amount of any impairment loss is measured as the difference between the carrying amount of the equity investments and the present value of estimated future cash fl ows discounted at the current market rate of return for a similar fi nancial asset. Such impairment loss is not reversed.

(iii) Fair value measurement principles

If there is an active market for a fi nancial asset or fi nancial liability, the quoted price in the active market without adjusting for transaction costs that may be incurred upon future disposal or settlement is used to establish the fair value of the fi nancial asset or fi nancial liability. For a fi nancial asset held or a fi nancial liability to be assumed, the quoted price is the current bid price and, for a fi nancial asset to be acquired or a fi nancial liability assumed, it is the current asking price. The quoted prices from an active market are prices that are readily and regularly available from an exchange, broker, industry group and pricing service agency and represent actual and regularly occurring market transactions on an arm’s length basis.

If no active market exists for a fi nancial instrument, a valuation technique is used to establish the fair value. Valuation techniques include using recent arm’s length market transactions between knowledgeable, willing parties; reference to the current fair value of another instrument that is substantially the same; discounted cash fl ow analysis and option pricing models. Where discounted cash fl ow technique is used, future cash fl ows are estimated based on management’s best estimates and the discount rate used is the prevailing market rate applicable for instrument with similar terms and conditions at the balance sheet date. Where other pricing models are used, inputs are based on market data at the balance sheet date.

In estimating the fair value of a fi nancial asset and fi nancial liability, the Group considers all factors including, but not limited to, risk-free interest rate, credit risk, foreign exchange rate and market volatility, that are likely to affect the fair value of the fi nancial asset and fi nancial liability.

The Group obtains market data from the same market where the fi nancial instrument was originated or purchased.

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(iv) Derecognition of fi nancial assets and fi nancial liabilities

Financial assets

Financial assets (or a part of fi nancial assets or a part of a group of fi nancial assets) are derecognised when the fi nancial assets meet one of the following conditions:

— the contractual rights to the cash fl ows from the fi nancial asset expire; or

— the Group transfers substantially all the risks and rewards of ownership of the fi nancial assets or, where substantially all the risks and rewards of ownership of a fi nancial asset are neither retained nor transferred, the control over that asset is relinquished.

Where substantially all the risks and rewards of ownership of a fi nancial asset are neither retained nor transferred and the control over that asset is retained, the Group continues to recognise the asset to the extent of its continuing involvement and its relevant liability.

Financial liabilities

The fi nancial liability (or part of it) is derecognised only when the underlying present obligation (or part of it) specifi ed in the contracts is discharged, cancelled or expired. An agreement between the Group and an existing lender to replace the original fi nancial liability with a new fi nancial liability with substantially different terms, or a substantial modifi cation of the terms of an existing fi nancial liability is accounted for as an extinguishment of the original fi nancial liability and recognition of a new fi nancial liability. The difference between the carrying amount of the derecognised fi nancial liability and the consideration paid is recognised in the income statement.

(v) Offsetting

Financial assets and fi nancial liabilities are offset and the net amount is reported in the balance sheet when the Group has a legally enforceable right to set off the recognised amounts and the transactions are intended to be settled on a net basis, or by realising the asset and settling the liability simultaneously.

142


CH

INA

EVER

BR

IGH

T B

ANK



(5) Financial assets held under resale and repurchase agreements

Financial assets purchased under agreements to resell are reported not as purchases of the assets, but as receivables and are carried in the balance sheet at amortised cost.

Financial assets sold subject to a simultaneous agreement to repurchase these assets are retained in the balance sheet and measured in accordance with their original measurement principles. The proceeds from the sale are reported as liabilities and are carried at amortised cost.

Interest earned on reverse repurchase agreements and interest incurred on repurchase agreements are recognised as interest income and interest expense respectively, over the life of each agreement using the effective interest method.

(6) Long-term equity investments

(a) Investment in subsidiaries

In the Group’s consolidated fi nancial statements, investments in subsidiaries are accounted for in accordance with the principles described in Note 3(1).

In the Bank’s fi nancial statements, investments in subsidiaries are accounted for using the cost method. An investment in a subsidiary acquired other than through a business combination is initially recognised at actual payment cost if the Bank acquires the investment by cash. The investment is stated at cost less impairment losses (Note 3(13)) in the balance sheet. Except for declared but not yet distributed cash dividends or profi ts distribution that have been included in the price or consideration paid in obtaining the investments, the Group recognises its share of the cash dividends or profi t distribution declared by the investee as investment income.

(b) Other long term equity investments

Where the Group does not control, jointly control or exercise signifi cant infl uence over an investee enterprise, and there is no quotation in an active market and the fair value of the investee enterprise cannot be measured reliably, the investment is accounted for using the cost method whereby it is stated at the initial investment cost. Long-term equity investments are accounted for in the balance sheet at cost less provision for impairment losses (Note 3(4) (ii)). Except for declared but not yet distributed cash dividends or profi ts distribution that have been included in the price or consideration paid in obtaining the investments, the Group recognises its share of the cash dividends or profi t distribution declared by the investee as investment income. Upon the disposal or transfer of equity investments, the difference between the proceeds received and the net carrying value after providing for impairment losses is recognised in the income statement.

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(7) Investment property

Investment property is a property held either to earn rental income or for capital appreciation or for both. Investment property is accounted for using the cost model and stated in the balance sheet at cost less accumulated depreciation and impairment loss (Note 3(13)). Investment property is depreciated using the straight-line method over its estimated useful life after taking into account its estimated residual value.

Estimateduseful life

Estimated rateof residual value Depreciation rate

Premises 30–35 years 3% 2.8%–3.2%

(8) Fixed assets and construction in progress

Fixed assets are assets held by the Group for operation and administration purposes with useful lives over one year.

Fixed assets are stated in the balance sheet at cost or revalued amount on restructuring day less accumulated depreciation and impairment losses (Note 3(13)). Construction in progress is stated in the balance sheet at cost less impairment losses (Note 3(13)).

The cost of a purchased fi xed asset comprises the purchase price, related taxes, and any expenditure directly attributable to bringing the asset into working condition for its intended use.

All direct and indirect costs that are related to the construction of fi xed assets and incurred before the assets are ready for their intended use are capitalised as the cost of construction in progress. Construction in progress is transferred to fi xed assets when the item being constructed is ready for its intended use. No depreciation is provided against construction in progress.

Where the individual component parts of an item of fi xed assets have different useful lives or provide benefi ts to the Group in different patterns thus necessitating use of different depreciation rates or methods, they are recognised as a separate fi xed asset.

The subsequent costs including the cost of replacing part of an item of fi xed assets are recognised in the carrying amount of the item if the recognition criteria are satisfi ed, and the carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing of fi xed assets are recognised in the income statement as incurred.

Gains or losses arising from the retirement or disposal of an item of fi xed asset are determined as the difference between the net disposal proceeds and the carrying amount of the item and are recognised in the income statement on the date of retirement or disposal.

144


CH

INA

EVER

BR

IGH

T B

ANK



(8) Fixed assets and construction in progress (continued)

Fixed assets are depreciated using the straight-line method over their estimated useful lives, after taking into account its estimated residual values. The estimated useful lives, residual values and depreciation rates of each class of fi xed assets are as follows:

Asset categoryEstimateduseful life

Estimated rateof residual value Depreciation rate

Premises 30–35 years 3% 2.8%–3.2%Electronic equipment 3–5 years 3%–5% 19.0%–32.3%Others 5–10 years 3%–5% 9.5%–19.4%

Useful lives, residual values and depreciation methods are reviewed at least each year-end.

(9) Leases

A lease is classifi ed as either a fi nance lease or an operating lease. A fi nance lease is a lease that transfers substantially all the risks and rewards incidental to ownership of a leased asset to the lessee, irrespective of whether the legal title to the asset is eventually transferred or not. An operating lease is a lease other than a fi nance lease.

(a) Assets acquired under operating leases

Rental payments under operating leases are recognised as costs or expenses on a straight-line basis over the lease term. Contingent rental payments are recognised as expenses in the accounting period in which they are incurred.

(b) Assets leased-out under fi nancial leases

The Group recognises the sum of the minimum lease receipts determined at the inception of a lease and the initial direct costs as fi nance lease receivable, and recognises unguaranteed residual value at the same time. The difference between the sum of the minimum lease receipts, the initial direct costs and the unguaranteed residual value, and the aggregate of their present values is recognised as unearned fi nance income.

Unearned fi nance income is allocated to each accounting period during the lease term using the effective interest method. At the balance sheet date, fi nance lease receivables, net of unearned fi nance income, are presented as fi nance lease receivables in the balance sheet.

The Group makes provision for impairment losses of fi nance lease receivables (see Note 3(4)(ii)).

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(9) Leases (continued)

(b) Assets acquired under fi nancial leases (continued)

The unguaranteed residual values are reviewed at least at each year-end. Any excess of the carrying amount of the unguaranteed residual values over their estimated recoverable amounts is recognised as impairment loss. If there is an indication that there has been a change in the factors used to determine the provision for impairment and as a result the estimated recoverable amount of the unguaranteed residual values is greater than its carrying amount, the impairment loss recognised in prior years is reversed. Reversals of impairment losses are recognised in the income statement.

(10) Intangible assets

The intangible assets of the Group have fi nite useful lives. The intangible assets are stated at cost or revalued amount on restructuring day less accumulated amortisation and impairment losses (Note 3(13)). The cost of intangible assets less residual value and impairment loss is amortised on the straight-line method over its estimated useful life.

The respective amortisation periods for such intangible assets are as follows:

Asset category Estimated useful lives

Land use rights 30–50 yearsComputer software 5 yearsOthers 5–10 years

(11) Goodwill

Goodwill represents the excess of cost of acquisition over the Group’s interest in the fair value of the identifi able net assets of the acquiree under the business combination involving entities not under common control. Goodwill is not amortised and is stated at cost less accumulated impairment losses (Note 3(13)). On disposal of the related cash-generating unit (“CGU”) or group of CGUs, any attributable amount of purchased goodwill is written off and included in the calculation of the profi t or loss on disposal.

(12) Repossessed assets

Repossessed assets are the physical assets or property rights obtained by the Group from debtors, warrantors or third parties following the enforcement of its creditor’s rights. The initial cost of repossessed assets is measured at the lower of the net carrying amount of loans and advances and the fair value of the assets less costs to sell on the acquisition date. Repossessed assets are not depreciated or amortised. The impairment losses of initial measurement and subsequent revaluation are charged to the income statement.

146


CH

INA

EVER

BR

IGH

T B

ANK



(13) Provision for impairment losses on non-financial assets

The carrying amounts of the following assets are reviewed at each balance sheet date based on the internal and external sources of information to determine whether there is any indication of impairment:

— fi xed assets;

— construction in progress;

— intangible assets;

— goodwill;

— investment property measured using a cost model; and

— long term equity investment in subsidiaries.

If any indication exists that an asset may be impaired, the recoverable amount of the asset is estimated. In addition, the Group estimates the recoverable amounts of goodwill at no later than each year-end, irrespective of whether there is any indication of impairment or not. Goodwill is allocated to the CGU, or group of CGUs, that is expected to benefi t from the synergies of the combination for the purpose of impairment testing.

A CGU is the smallest identifi able group of assets that generates cash infl ows that are largely independent of the cash infl ows from other assets or asset groups. A CGU is composed of assets directly relating to cash-generation. Identifi cation of a CGU is based on whether major cash infl ows generated by the asset group are largely independent of the cash infl ows from other assets or asset groups. In identifying an asset group, the Group also considers how management monitors the Group’s operations and how management makes decisions about continuing or disposing of the Group’s assets.

The recoverable amount of an asset or CGU or group of CGUs (hereinafter called “asset”) is the higher of its fair value less costs to sell and its present value of expected future cash fl ows. If there is any indication that an asset may be impaired, the recoverable amount is estimated for the individual asset; if it is not possible to estimate the recoverable amount of the individual asset, the Group determines the recoverable amount of the asset group to which the assets belongs.

An asset’s fair value less costs to sell is the amount determined by the price of a sale agreement in an arm’s length transaction, less the costs that are directly attributable to the disposal of the asset. The present value of expected future cash fl ows of an asset is determined by discounting the future cash fl ows, estimated to be derived from continuing use of the asset and from its ultimate disposal, to their present value using a pre-tax discount rate that refl ects expected future cash fl ows, the useful life and the discount rate specifi c to the asset.

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(13) Provision for impairment losses on non-financial assets (continued)

An impairment loss is recognised if the carrying amount of an asset exceeds its recoverable amount. Impairment losses are recognised in the income statement. A provision for impairment loss of the asset is recognised accordingly. Impairment losses related to an asset group or a set of asset groups fi rst reduce the carrying amount of any goodwill allocated to the asset group or set of asset groups, and then reduce the carrying amount of the other assets in the asset group or set of asset groups on a pro rata basis. However, the carrying amount of an impaired asset will not be reduced below the highest of its individual fair value less costs to sell (if determinable), the present value of expected future cash fl ows (if determinable) and zero.

Once an impairment loss is recognised, it is not reversed in subsequent periods.

(14) Employee benefits

Employee benefi ts are all forms of considerations given and other related expenditures incurred in exchange for services rendered by employees. Except for termination benefi ts, employee benefi ts are recognised as a liability in the period in which the associated services are rendered by employees, with a corresponding increase in cost of relevant assets or expenses in the current period.

(i) Retirement benefi ts

Social pension schemes

Pursuant to the relevant laws and regulations of the PRC, the Group has the social pension schemes for the employees arranged by local government labour and social security authorities. The Group makes contributions to the retirement schemes at the applicable rates based on the amounts stipulated by the government organisations. The contributions are charged to the income statement on an accrual basis. When employees retire, the local government labour and social security authorities are responsible for the payment of the basic retirement benefi ts to the retired employees.

Enterprise annuity plan

The Group provides enterprise annuity plan to the eligible employees. The Group makes annuity contributions in proportion to its employee’s gross wages, which are expensed in income statement when contributions are made.

148


CH

INA

EVER

BR

IGH

T B

ANK



(14) Employee benefits (continued)

(i) Retirement benefi ts (continued)

Supplementary retirement benefi ts

The Group provides supplementary retirement benefi ts to the eligible employees in addition to statutory insurance schemes, mainly including retirement benefi ts and supplementary medical insurance (“supplementary retirement benefi ts”). The Group’s obligations in respect of supplementary retirement benefi ts are calculated by estimating the present value of the total amount of future benefi ts that the Group is committed to pay to the employees after their retirement using actuarial method and recorded as employee benefi ts payable. The supplementary retirement benefi ts are recognised in the income statement over the servicing period of employees. Any actuarial gains or losses are recognised in the income statements.

Except for the above mentioned, the Group has no signifi cant responsibilities to pay any other retirement benefi ts to retired employees.

(ii) Housing fund and other social insurances

In addition to the retirement benefi ts, the Group has joined defi ned social security contributions schemes for employees pursuant to the relevant laws and regulations of the PRC, these including a housing fund, basic medical insurance, unemployment insurance, injury insurance and maternity insurance. The Group makes monthly contributions to the housing fund and other social insurances mentioned above at the applicable rates based on the amounts stipulated by the relevant government organisations. The contributions are charged to the income statement on an accrual basis.

(15) Income tax

Current tax and deferred tax are recognised in the income statement except to the extent that they relate to items that are recognised directly in equity, in which case they are recognised in equity.

Current tax is the expected tax payable calculated at the applicable tax rate on taxable income for the year, and any adjustment to tax payable in respect of previous years.

At the balance sheet date, current tax assets and liabilities are offset if the taxable entity has a legally enforceable right to set off them and the entity intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

Deferred tax assets and liabilities arise from deductible and taxable temporary differences, being the differences between the carrying amounts of assets and liabilities for fi nancial reporting purposes and their tax bases, which include the deductible losses and tax credits carried forward to subsequent periods. Deferred tax assets are recognised to the extent that it is probable that future taxable profi ts will be available against which deductible temporary differences can be used.

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(15) Income tax (continued)

Deferred tax is not recognised for the temporary differences arising from the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting profi t nor taxable profi t (or tax loss). Deferred tax is not recognised for taxable temporary differences arising from the initial recognition of goodwill.

At the balance sheet date, the amount of deferred tax recognised is measured based on the expected manner of realisation or settlement of the carrying amount of the assets and liabilities, using tax rates that are expected to be applied in the period when the asset is realised or the liability is settled in accordance with tax laws.

The carrying amount of a deferred tax asset is reviewed at each balance sheet date. The carrying amount of a deferred tax asset is reduced to the extent that it is no longer probable that suffi cient taxable profi ts will be available to allow the benefi t of the deferred tax asset to be utilised. Any such reduction is reversed to the extent that it becomes probable that suffi cient taxable profi ts will be available.

At the balance sheet date, deferred tax assets and liabilities are offset if all the following conditions are met:

— the taxable entity has a legally enforceable right to set off current tax assets against current tax liabilities, and

— they relate to income taxes levied by the same tax authority on either the same taxable entity; or different taxable entities which either to intend to settle the current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which signifi cant amounts of deferred tax liabilities or assets are expected to be settled or recovered.

(16) Financial guarantees, provisions and contingent liabilities

(i) Financial guarantees

Financial guarantees are contracts that require the issuer (the “guarantor”) to make specifi ed payments to reimburse the benefi ciary of the guarantee (“holder”) for a loss that the holder incurs because a specifi ed debtor fails to make payment when due in accordance with the terms of a debt instrument. The fair value of the guarantee (being the guarantee fees received) is initially recognised as deferred income in other liabilities. The deferred income is amortised in the income statement over the term of the guarantee as income from fi nancial guarantees issued. Provisions are recognised in the balance sheet as stated in Note 3(16)(ii) if and when it becomes probable that the holder of the guarantee will call upon the Group under the guarantee, and the amount of that claim on the Group is expected to exceed the carrying amount of the deferred income.

150


CH

INA

EVER

BR

IGH

T B

ANK



(16) Financial guarantees, provisions and contingent liabilities (continued)

(ii) Other provisions and contingent liabilities

A provision is recognised for an obligation related to a contingency if the Group has a present obligation that can be estimated reliably, and it is probable that an outfl ow of economic benefi ts will be required to settle the obligation. A provision is initially measured at the best estimate of the expenditure required to settle the related present obligation. Factors pertaining to a contingency such as the risks, uncertainties and time value of money are taken into account as a whole in reaching the best estimate. Where the effect of time value of money is material, provisions are determined by discounting the expected future cash fl ows.

For a possible obligation resulting from a past transaction or event, whose existence will only be confi rmed by the occurrence or non-occurrence of uncertain future events or a present obligation resulting from a past transaction or event, where it is not probable that the settlement of the above obligation will cause an outfl ow of economic benefi ts, or the amount of the outfl ow can not be estimated reliably, the possible or present obligation is disclosed as a contingent liability.

(17) Fiduciary activities

The Group acts in a fi duciary activity as a manager, a custodian, or an agent for customers. Assets held by the Group and the related undertakings to return such assets to customers are recorded as off-balance sheet items as the risks and rewards of the assets reside with customers.

The Group enters into entrusted loan agreements with customers, whereby the customers provide funding (“entrusted funds”) to the Group, and the Group grants loans to third parties (“entrusted loans”) under the instruction of the customers. As the Group does not assume the risks and rewards of the entrusted loans and the corresponding entrusted funds, the entrusted loans and funds are recorded as off-balance sheet items at their principal amount. No provision for impairment loss is made for entrusted loans.

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(18) Income recognition

Income is the gross infl ow of economic benefi t in the periods arising in the course of the Group’s ordinary activities when the infl ows result in increase in shareholder’s equity, other than increase relating to contributions from shareholders. Income is recognised in the income statement when it is probable that the economic benefi ts will fl ow to the Group, the income and costs can be measured reliably and the following respective conditions are met:

(i) Interest income

Interest income for fi nancial assets is recognised in the income statement as it is incurred, based on the time for alienation of right to use capital and effective interest rates. Interest income includes the amortisation of any discount or premium or differences between the initial carrying amount of an interest-bearing asset and its amount at maturity calculated using the effective interest rate.

The effective interest method is a method of calculating the amortised cost of a fi nancial asset and of allocating the interest income over the relevant periods. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the fi nancial instrument or, when appropriate, a shorter period to the net carrying amount of the fi nancial asset. When calculating the effective interest rate, the Group estimates cash fl ows considering all contractual terms of the fi nancial instrument (for example, prepayment, call and similar options) but does not consider future credit losses. The calculation includes all fees and points paid or received between parties to the contract, transaction costs and all other premiums or discounts that are an integral part of the effective interest rate.

Interest on the impaired assets is recognised using the rate of interest used to discount future cash fl ows (“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.

Origination or commitment fees received by the Group which result in the creation or acquisition of a fi nancial asset are deferred and recognised as an adjustment to the effective interest rate. If the commitment expires without making a loan, the fee is recognised as fee and commission income upon its expiry.

152


CH

INA

EVER

BR

IGH

T B

ANK



(18) Income recognition (continued)

(iii) Other income

Other income is recognised on an accrual basis.

(19) Expenses recognition

(i) Interest expenses

Interest expenses from fi nancial liabilities are accrued on a time proportion basis with reference to the amortised cost and the applicable effective interest rate.

(ii) Other expenses

Other expenses are recognised on an accrual basis.

(20) Dividends

Dividends or distributions of profi ts proposed in the profi t appropriation plan which will be authorised and declared after the balance sheet date, are not recognised as a liability at the balance sheet date but disclosed separately in the notes to the fi nancial statements.

(21) Related parties

If a Group has the power to control, jointly control or exercise signifi cant infl uence over another party, or vice versa, or where the Group and one or more parties are subject to common control, joint control, or signifi cant infl uence from another party, they are considered to be related parties. Related parties may be individuals or enterprises. Enterprises with which the Group is under common control only from the State and that have no other related party relationships are not regarded as related parties of the Group. Related parties of the Group and the Bank include, but are not limited to:

(a) the Bank’s parent;

(b) the Bank’s subsidiaries;

(c) enterprises that are controlled by the Bank’s parent;

(d) investors that have joint control or exercise signifi cant infl uence over the Group;

(e) enterprises or individuals if a party has control or joint control over both the enterprises or individuals and the Group;

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(21) Related parties (continued)

(f) joint ventures of the Group, including subsidiaries of joint ventures;

(g) associates of the Group;

(h) principal individual investors and close family members of such individuals;

(i) key management personnel of the Group and close family members of such individuals;

(j) key management personnel of the Bank’s parent;

(k) close family members of key management personnel of the Bank’s parent; and

(l) other enterprises that are controlled or jointly controlled by principal individual investors, key management personnel of the Group, and close family members of such individuals.

In addition to above related parties in accordance with the requirements of China Accounting Standards for Business Enterprises, the following enterprises or individuals (include but are not limited) are related parties of the Group in accordance with “Regulations on Information Disclosure of Listed Companies” issued by the CSRC.

(m) enterprises or individuals holds more than 5% shares of the Bank or persons acting companies;

(n) individuals and close family members of such individuals directly or indirectly holds more than 5% of the Bank, supervisors of listed companies and their close family members;

(o) in the past 12 months under the relevant agreement or arrangement in the next 12 months, there are enterprises in one of circumstances of (a), (c) and (m); and

(p) in the past 12 months under the relevant agreement or arrangement in the next 12 months, there are individuals in one of circumstances of (i), (j) and (n); and

(q) by the (i), (j), (n) and (p) directly or indirectly controlled, or serve as directors, senior management, enterprises outside the Bank and its subsidiaries.

154


CH

INA

EVER

BR

IGH

T B

ANK



(22) Segment reporting

Reportable segments are identifi ed based on operating segments which are determined based on the structure of the Group’s internal organisation, management requirements and internal reporting system, whose operating results are regularly reviewed by the Group’s management to make decisions about resource to be allocated to the segment and assess its performance. Any segment which do not comply with the reporting of segment by division of quantities are reported at consolidation level.

(23) Significant accounting estimates and judgements

The preparation of fi nancial statements requires management to make estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.

(i) Impairment losses on loans and advances, available-for-sale-fi nancial assets and

held-to-maturity investments

The Group reviews portfolios of loans and advances, available-for-sale fi nancial assets and held-to-maturity investments periodically to assess whether any impairment losses exist and the amount of impairment losses if there is any indication of impairment. Objective evidence for impairment includes observable data indicating that there is a measurable decrease in the estimated future cash fl ows for loans and advances, available-for-sale fi nancial assets and held-to-maturity investments. It also includes observable data indicating adverse changes in the repayment status of the debtors, or change in national or local economic conditions that causes the default in payment.

The impairment loss for loans, advances, and held-to-maturity investments that is individually assessed for impairment is the net decrease in the estimated discounted future cash fl ow of the assets. When the fi nancial assets are collectively assessed for impairment, the estimate is based on historical loss experience for assets with credit risk characteristics similar to the fi nancial assets. Historical loss experience is adjusted on the basis of the relevant observable data that refl ect current economic conditions and the judgement based on management’s historical experience. Management reviews the methodology and assumptions used in estimating future cash fl ows regularly to reduce any difference between loss estimates and actual loss.

The objective evidence of impairment for available-for-sale investments includes signifi cant or continual decline in fair value of investment. When deciding whether there is signifi cant or continual decline in fair value, the Group will consider the historical fl uctuation records of market and debtors’ credit condition, fi nancial position and performance of related industry.

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(23) Significant accounting estimates and judgements (continued)

(ii) Fair value of fi nancial instruments

There are no quoted prices from an active market for a number of fi nancial instruments. The fair values for these fi nancial instruments are established by using valuation techniques. These techniques include using recent arm’s length market transactions by referring to the current fair value of similar instruments, discounted cash fl ow analysis, and option pricing models. The Group has established a work fl ow to ensure that the valuation techniques are constructed by qualifi ed personnel and are validated and reviewed by independent personnel. Valuation techniques are certifi ed and calibrated before implementation to ensure the valuation result refl ects the actual market conditions. Valuation models established by the Group make maximum use of market input and rely as little as possible on the Group’s specifi c data. However, it should be noted that some input, such as credit and counterparty risk, and risk correlations require management’s estimates. The Group reviews the above estimations and assumptions periodically and makes adjustment if necessary.

(iii) The classifi cation of the held-to-maturity investments

Non-derivative fi nancial assets with fi xed or determinable payments and fi xed maturity are classifi ed as held-to-maturity investments, if the Group has the intention and ability to hold them until maturity. In evaluating whether requirements to classify a fi nancial asset as held-to-maturity are met, management makes signifi cant judgements. Failure in correctly assessing the Group’s intention and ability to hold specifi c investments until maturity may result in reclassifi cation of the whole portfolio as available-for-sale.

(iv) Income taxes

Determining income tax provisions involves judgement on the future tax treatment of certain transactions. The Group carefully evaluates the tax implications of transactions and tax provisions are set up accordingly. The tax treatment of such transactions is reconsidered periodically to take into account all changes in tax legislations. Deferred tax assets are recognised for tax losses not yet used and temporary deductible differences. As those deferred tax assets can only be recognised to the extent that it is probable that future taxable profi ts will be available against which the unused tax credits can be utilised, management’s judgement is required to assess the probability of future taxable profi ts. Management’s assessment is constantly reviewed and additional deferred tax assets are recognised if it becomes probable that future taxable profi ts will allow the deferred tax assets to be recovered.

156


CH

INA

EVER

BR

IGH

T B

ANK



(23) Significant accounting estimates and judgements (continued)

(v) Impairment of non-fi nancial assets

Non-fi nancial assets are reviewed regularly to determine whether the carrying amount exceeds the recoverable amount of the assets. If any such indication exists, impairment loss is provided.

Since a market price of the asset (the asset group) cannot be obtained reliably, the fair value of the asset cannot be estimated reliably. In assessing the present value of future cash fl ows, signifi cant judgements are exercised over the asset’s selling price, related operating expenses and discounting rate to calculate the present value. All relevant materials which can be obtained are used for estimation of the recoverable amount, including the estimation of the selling price and related operating expenses based on reasonable and supportable assumption.

(vi) Depreciation and amortisation

Investment properties, fi xed assets and intangible assets are depreciated and amortised using the straight-line method over their estimated useful lives after taking into account residual values. The estimated useful lives are regularly reviewed to determine the depreciation and amortisation costs charged in each reporting period. The estimated useful lives are determined based on historical experiences of similar assets and the estimated technical changes. If there is an indication that there has been a change in the factors used to determine the depreciation or amortisation, the amount of depreciation or amortisation will be revised.

4 Taxes

The Group’s main applicable taxes and tax rates are as follows:

(a) Business tax

Business tax is charged at 5% on taxable income.

(b) City construction tax

City construction tax is calculated as 1%–7% of business tax.

(c) Education surcharge

Education surcharge is calculated as 3% of business tax.

(d) Income tax

The income tax is calculated on taxable income. The statutory income tax rate is 25%.

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5 Cash and deposits with the central bank

The Group The Bank

Note31 December

201131 December

201031 December

201131 December

2010

Cash on hand 5,092,114 3,887,988 5,089,268 3,886,046

Deposits with the central bank— Statutory deposit reserves 5(a) 193,750,553 146,676,427 193,687,612 146,655,367— Surplus deposit reserves 5(b) 25,981,348 32,271,582 25,981,348 32,262,544— Fiscal deposits 3,841,738 2,908,696 3,841,738 2,908,696

Sub-total 223,573,639 181,856,705 223,510,698 181,826,607

Total 228,665,753 185,744,693 228,599,966 185,712,653

(a) The Group places statutory deposit reserves with the PBOC in accordance with relevant regulations. As at the balance sheet dates, the statutory deposit reserve ratios to the bank were as follows:

31 December2011

31 December2010

Reserve ratio for RMB deposits 19.0% 17.0%Reserve ratio for foreign currency deposits 5.0% 5.0%

The statutory deposit reserves are not available for the Group’s daily business treasury operation. The reserve ratios for RMB deposits of the Group’s subsidiaries in mainland China are in accordance with the regulations from PBOC.

(b) The surplus deposit reserves are maintained with the PBOC for the purpose of clearing.

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6 Deposits with banks and other fi nancial institutions

Analyzed by type and location of counterparty

The Group The Bank

Note31 December

201131 December

201031 December

201131 December

2010

Deposits in mainland China— Banks 99,709,512 50,426,453 99,236,192 49,925,960— Other fi nancial institutions 135,956 95,821 135,956 95,821

Sub-total 99,845,468 50,522,274 99,372,148 50,021,781

Deposits outside mainland China— Banks 5,432,583 2,776,206 5,432,583 2,776,206

Sub-total 5,432,583 2,776,206 5,432,583 2,776,206

Total 105,278,051 53,298,480 104,804,731 52,797,987Less: Provision for impairment losses 21 (15,100) (23,686) (15,100) (23,686)

Net balances 105,262,951 53,274,794 104,789,631 52,774,301

As at the balance sheet dates, part of the deposits with banks and other fi nancial institutions mentioned above was pledged for the swap and secured transactions, see Note 22(a).

7 Placements with banks and other fi nancial institutions

The Group and the Bank

31 December

Note 2011 2010

Placements in mainland China— Banks 64,815,478 14,143,057— Other fi nancial institutions 16,701,890 9,166,192

Sub-total 81,517,368 23,309,249

Placements outside mainland China— Banks 229,255 528,259

Sub-total 229,255 528,259

Total 81,746,623 23,837,508Less: Provision for impairment losses 21 (1,000) (4,415)

Net balances 81,745,623 23,833,093

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8 Financial assets held for trading


31 December

Note 2011 2010

Debt securities held for trading 8(a) 22,169,817 21,728,092Financial assets designated at fair value through profi t or loss 8(b) 556,816 669,025

Total 22,726,633 22,397,117

(a) Debt securities held for trading


31 December

Note 2011 2010

Issued by the following government or institutions:In mainland China— Government 30,000 —— The PBOC 19,372 381,059— Policy banks 69,352 4— Banks and other fi nancial institutions 149,258 162— Other institutions (i) 21,901,835 21,346,867

Total (ii) 22,169,817 21,728,092

Unlisted 22,169,817 21,728,092

Total 22,169,817 21,728,092

Note:

(i) As at the balance sheet dates, debt securities issued by other institutions in mainland China mainly represented debt

securities issued by state-owned enterprises and joint-stock enterprises in mainland China.

(ii) No other investments were subject to material restrictions on the realisation.

(b) Financial assets designated at fair value through profi t or loss represented fi xed interest rate personal mortgage loans. The Group used interest rate swap to manage the corresponding interest rate risk. As at 31 December 2011, the contractual amount of these mortgage loans was RMB540 million (31 December 2010: RMB690 million). The changes in fair value during the year and the accumulated changes attributable to the variance in credit risk were immaterial.

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9 Derivatives


31 December 2011

Notionalamount

Fair value

Assets Liabilities

Interest rate derivative instruments:— Interest rate swap 132,463,060 1,603,843 (2,080,274)Currency derivative instruments:— Forward 48,876,081 270,204 (297,125)— Foreign exchange swap 76,316,718 383,466 (682,360)Credit derivative instruments:— Credit default swap 400,000 4,280 (2,728)

Total 258,055,859 2,261,793 (3,062,487)

31 December 2010

Notionalamount

Fair value

Assets Liabilities

Interest rate derivative instruments:— Interest rate swap 84,907,901 2,277,019 (2,212,737)— Bond option 65,903 — (110)Currency derivative instruments:— Forward 21,907,327 97,131 (72,286)— Foreign exchange swap 73,639,898 646,417 (671,663)Credit derivative instruments:— Credit default swap 600,000 4,473 (3,630)

Total 181,121,029 3,025,040 (2,960,426)

The notional amounts of derivatives only represent the unsettled transaction volume as at balance sheet dates, they do not represent the amounts at risk.

10 Financial assets held under resale agreements

(a) Analysed by type and location of counterparty


31 December

2011 2010

In mainland China— Banks 181,098,001 149,177,065— Other fi nancial institutions 25,813,436 20,829,104— Other enterprises 29,469 30,828

Total 206,940,906 170,036,997

Net balances 206,940,906 170,036,997

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10 Financial assets held under resale agreements (continued)

(b) Analysed by type of securities held


31 December

2011 2010

Bonds— Government bonds 18,380,520 7,909,500— Bills issued by the PBOC 1,578,200 3,658,860— Other debt securities 53,687,216 27,014,194— Others 29,469 30,828

Sub-total 73,675,405 38,613,382Bank acceptances 132,665,501 130,923,615Credit assets 600,000 500,000

Total 206,940,906 170,036,997

Net balances 206,940,906 170,036,997

11 Interests receivable

The Group The Bank

Note31 December

201131 December

201031 December

201131 December

2010

Interests receivable from loans and advances to customers 2,298,775 1,502,467 2,298,775 1,502,290Interests receivable from investments 2,671,285 2,406,803 2,671,285 2,406,803Interests receivable from deposits and placements with banks and other fi nancial institutions 1,021,217 174,947 1,021,217 174,947Other interests receivable 147,743 81,940 108,800 64,435

Total 6,139,020 4,166,157 6,100,077 4,148,475Less: Provision for impairment losses 21 (39,108) (27,529) (39,108) (27,529)

Net balances 6,099,912 4,138,628 6,060,969 4,120,946

As at 31 December 2011, RMB4 million (2010: RMB4 million) of interests receivable overdue by one year mainly represents receivable from others, the Group has provided full provision for impairment losses.

Except for mentioned in Note 48, there are no interests receivable from shareholders holding 5% or more voting rights of the Bank.

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12 Loans and advances to customers

(a) Analysed by nature

The Group The Bank

Note31 December

201131 December

201031 December

201131 December

2010

Corporate loans and advances 641,950,052 571,232,271 641,863,052 571,169,721

Personal loans and advances— Residential and commercial mortgage loans 130,214,864 118,279,562 130,190,142 118,260,892— Micro-enterprise equipment loans 49,684,902 43,722,219 49,684,902 43,722,219— Credit cards 25,345,588 12,999,756 25,345,588 12,999,756— Others 28,208,452 18,805,276 28,199,869 18,793,486

Sub-total 233,453,806 193,806,813 233,420,501 193,776,353

Discounted bills 14,421,147 13,789,336 14,421,147 13,789,336

Gross loans and advances to customers 889,825,005 778,828,420 889,704,700 778,735,410

Less: Provision for impairment losses — Individually assessed (3,822,865) (4,292,756) (3,822,865) (4,292,756) — Collectively assessed (17,219,908) (13,980,428) (17,216,299) (13,979,498)

Total provision for impairment losses 21 (21,042,773) (18,273,184) (21,039,164) (18,272,254)

Net loans and advances to customers 868,782,232 760,555,236 868,665,536 760,463,156

As at the balance sheet dates, part of the above loans and advances to customers was pledged for repurchase agreements, see Note 22(a).

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12 Loans and advances to customers (continued)

(b) Analysed by economic sector

The Group The Bank

Note31 December

201131 December

201031 December

201131 December

2010

Manufacturing 186,037,429 140,368,659 186,032,429 140,368,659Wholesale and retail 102,717,778 67,047,766 102,717,778 67,047,766Real estate 84,076,311 81,315,748 84,076,311 81,315,748Transportation, storage and postal services 67,427,171 65,121,805 67,427,171 65,121,805Leasing and commercial services 51,815,530 55,951,378 51,810,530 55,936,378Water, environment and public utilities management 42,222,466 67,234,744 42,212,466 67,229,744Production and supply of power, gas and water 30,292,693 29,624,665 30,292,693 29,624,665Mining 24,506,608 19,852,466 24,506,608 19,852,466Others 52,854,066 44,715,040 52,787,066 44,672,490

Sub-total of corporate loans and advances 641,950,052 571,232,271 641,863,052 571,169,721Personal loans and advances 233,453,806 193,806,813 233,420,501 193,776,353Discounted bills 14,421,147 13,789,336 14,421,147 13,789,336


Less: Provision for impairment losses — Individually assessed (3,822,865) (4,292,756) (3,822,865) (4,292,756) — Collectively assessed (17,219,908) (13,980,428) (17,216,299) (13,979,498)



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(c) Analysed by type of collateral

The Group The Bank

Note31 December

201131 December

201031 December

201131 December

2010

Unsecured loans 276,449,369 240,206,427 276,445,849 240,191,607Guaranteed loans 221,736,526 199,420,986 221,706,477 199,420,586Secured loans— By tangible assets other than monetary assets 311,600,664 277,292,820 311,514,458 277,220,730— By monetary assets 80,038,446 61,908,187 80,037,916 61,902,487


Less Provision for impairment losses — Individually assessed (3,822,865) (4,292,756) (3,822,865) (4,292,756) — Collectively assessed (17,219,908) (13,980,428) (17,216,299) (13,979,498)



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(d) Overdue loans analysed by overdue period


31 December 2011

Overdue withinthree months

(inclusive)

Overduemore than

three monthsto one year

(inclusive)

Overduemore than

one yearto three years

(inclusive)

Overduemore than

three years Total

Unsecured loans 1,003,818 419,047 22,735 79,316 1,524,916Guaranteed loans 1,262,394 62,889 373,492 1,347,256 3,046,031Secured loans— By tangible assets other than monetary assets 2,908,877 228,608 301,873 1,378,418 4,817,776— By monetary assets 133,568 5,150 3,474 619,308 761,500

Total 5,308,657 715,694 701,574 3,424,298 10,150,223


31 December 2010

Overdue withinthree months

(inclusive)

Overduemore than

three monthsto one year

(inclusive)

Overduemore than

one yearto three years

(inclusive)

Overduemore than

three years Total

Unsecured loans 345,018 246,267 47,819 85,023 724,127Guaranteed loans 341,578 22,808 1,143,450 1,117,410 2,625,246Secured loans— By tangible assets other than monetary assets 3,650,562 234,131 529,480 1,440,836 5,855,009— By monetary assets 11,821 1,009 244,402 475,070 732,302

Total 4,348,979 504,215 1,965,151 3,118,339 9,936,684

Overdue loans represent loans, of which the whole or part of the principal or interest were overdue for one day or more.

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(e) Loans and advances and provision for impairment losses

The Group

31 December 2011

(Note (i)) (Note (ii)) Grossimpaired

loans andadvances

as apercentage

of grossloans andadvances

Loans andadvancesfor whichprovision

arecollectively

assessed

Impaired loansand advances

for whichprovision

arecollectively

assessed

for whichprovision

areindividually

assessed Total

Gross loans and advances to customers 884,097,884 980,156 4,746,965 889,825,005 0.64%Less: Provision for impairment losses (16,508,520) (711,388) (3,822,865) (21,042,773)

Net loans and advances to customers 867,589,364 268,768 924,100 868,782,232

The Group

31 December 2010

(Note (i)) (Note (ii)) Grossimpaired

loans andadvances asa percentage


Loans andadvancesfor whichprovision

arecollectively

assessed


for whichprovision

arecollectively

assessed

for whichprovision

areindividually

assessed Total

Gross loans and advances to customers 772,999,114 1,099,889 4,729,417 778,828,420 0.75%Less: Provision for impairment losses (13,228,657) (751,771) (4,292,756) (18,273,184)

Net loans and advances to customers 759,770,457 348,118 436,661 760,555,236

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(e) Loans and advances and provision for impairment losses (continued)

The Bank31 December 2011

(Note (i))Loans andadvancesfor whichprovision

arecollectively

assessed

(Note (ii)) Grossimpaired

loans andadvances

as apercentage



for whichprovision

arecollectively

assessed

for whichprovision

areindividually

assessed TotalGross loans and advances to customers 883,977,579 980,156 4,746,965 889,704,700 0.64%Less: Provision for impairment losses (16,504,911) (711,388) (3,822,865) (21,039,164)Net loans and advances to customers 867,472,668 268,768 924,100 868,665,536

The Bank31 December 2010

(Note (i))Loans andadvancesfor whichprovision

arecollectively

assessed

(Note (ii)) Grossimpaired

loans andadvances

as apercentage



for whichprovision

arecollectively

assessed

for whichprovision

areindividually

assessed TotalGross loans and advances to customers 772,906,104 1,099,889 4,729,417 778,735,410 0.75%Less: Provision for impairment losses (13,227,727) (751,771) (4,292,756) (18,272,254)Net loans and advances to customers 759,678,377 348,118 436,661 760,463,156

Note:(i) Loans and advances collectively assessed for impairment bear relatively insignifi cant impairment losses as a proportion

of the total portfolio. These loans and advances include those which are graded normal or special-mention.

(ii) Impaired loans and advances include those for which objective evidence of impairment has been identifi ed and assessed using the following methods:

— Individually (including corporate loans and advances which are graded substandard, doubtful or loss); or

— Collectively, representing portfolios of homogeneous loans (including personal loans and advances which are graded substandard, doubtful or loss).

(iii) The defi nitions of the loan classifi cations, stated in Notes (i) and (ii) above, are set out in Note 50(a).

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(f) Movements of provision for impairment losses

The Group

31 December 2011

Provisionfor loans

and advanceswhich are

collectivelyassessed

Provision for impaired loansand advances

Total

which arecollectively

assessed

which areindividually

assessed

(Note 21)As at 1 January (13,228,657) (751,771) (4,292,756) (18,273,184)Charge for the year (3,279,863) (230,856) (379,880) (3,890,599)Release for the year — — 470,786 470,786Recoveries — (88,112) (62,823) (150,935)Unwinding of discount — — 52,077 52,077Write-offs — 359,351 389,731 749,082

As at 31 December (16,508,520) (711,388) (3,822,865) (21,042,773)

The Group

31 December 2010

Provisionfor loans




Total


assessed


assessed

(Note 21)As at 1 January (9,186,174) (1,136,663) (5,442,096) (15,764,933)Charge for the year (4,042,483) (159,750) (130,375) (4,332,608)Release for the year — — 1,079,069 1,079,069Recoveries — (74,040) (67,443) (141,483)Unwinding of discount — — 65,419 65,419Write-offs — 618,682 202,670 821,352

As at 31 December (13,228,657) (751,771) (4,292,756) (18,273,184)

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(f) Movements of provision for impairment losses (continued)

The Bank

31 December 2011

Provisionfor loans




Total


assessed


assessed

(Note 21)As at 1 January (13,227,727) (751,771) (4,292,756) (18,272,254)Charge for the year (3,277,184) (230,856) (379,880) (3,887,920)Release for the year — — 470,786 470,786Recoveries — (88,112) (62,823) (150,935)Unwinding of discount — — 52,077 52,077Write-offs — 359,351 389,731 749,082

As at 31 December (16,504,911) (711,388) (3,822,865) (21,039,164)

The Bank

31 December 2010

Provisionfor loans




Total


assessed


assessed

(Note 21)As at 1 January (9,185,964) (1,136,663) (5,442,096) (15,764,723)Charge for the year (4,041,763) (159,750) (130,375) (4,331,888)Release for the year — — 1,079,069 1,079,069Recoveries — (74,040) (67,443) (141,483)Unwinding of discount — — 65,419 65,419Write-offs — 618,682 202,670 821,352

As at 31 December (13,227,727) (751,771) (4,292,756) (18,272,254)

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(g) Rescheduled loans and advances to customers


31 December

2011 2010

Rescheduled loans and advances to customers 212,566 288,393

(h) Fair value of collaterals

The fair value of collateral was estimated by the Group based on the latest available external valuations adjusted by taking into account the current realisation experience as well as the market situation. The above collateral includes land, buildings and equipment, equity investments etc.

As at 31 December 2011, the loans and advances of the Group and the Bank for which the provision for impairment losses were individually assessed amounted to RMB4,747 million (31 December 2010: RMB4,729 million). The covered portion of these loans and advances were RMB337 million (31 December 2010: RMB231 million). The fair value of collateral held against these loans and advances amounted to RMB404 million (31 December 2010: RMB231 million).

As at 31 December 2011, the gross amount of loans and advances of the Group and the Bank, which were overdue but not impaired and were subject to individual assessment, was RMB807 million (31 December 2010: RMB395 million). The covered portion of these loans and advances were RMB105 million (31 December 2010: RMB91 million). The fair value of collateral held against these loans and advances amounted to RMB265 million (31 December 2010: RMB225 million).

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13 Available-for-sale fi nancial assets

All available-for-sale fi nancial assets are debt investments which were stated at fair value and issued by the following governments and institutions:


31 December

Note 2011 2010

In mainland China— Government 8,286,530 8,231,694— The PBOC — 30,353,955— Policy banks 2,050,275 1,341,835— Banks and other fi nancial institutions 8,084,926 4,907,066— Other institutions 13(a) 35,255,508 31,432,179

Sub-total 53,677,239 76,266,729

Outside mainland China— Government — 72,740— Banks and other fi nancial institutions 608,230 568,831— Other institutions 117,296 233,860

Sub-total 725,526 875,431

Total 13(b)/(c) 54,402,765 77,142,160

Listed 665,985 813,285

Unlisted 53,736,780 76,328,875

Total 54,402,765 77,142,160

Note:

(a) Debt securities issued by other institutions mainly represent debt securities issued by state-owned enterprises and joint-stock companies.

(b) As at the balance sheet dates, part of the available-for-sale fi nancial assets was pledged for repurchase agreements and time deposits (see Note 22(a)). No other investments were subject to material restrictions on the realisation.

(c) As at 31 December 2011, the above available-for-sale fi nancial assets include the bonds of RMB3,153 million purchased in relation to the issuance of wealth management products (31 December 2010: RMB4,595 million). The proceeds collected by the Group from issuing such wealth management products are included in other liabilities (see Note 33(a)).

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14 Held-to-maturity investments

Analysed by type and location of issuer:


31 December

Note 2011 2010

In mainland China— Government 31,964,528 36,966,227— Policy banks 2,410,896 2,549,481— Banks and other fi nancial institutions 27,713,429 34,347,887— Other institutions 14(a) 21,898,730 13,646,255

Sub-total 14(b) 83,987,583 87,509,850

Outside mainland China— Banks and other fi nancial institutions 254,901 329,515— Other institutions — 68,392

Sub-total 254,901 397,907

Total 14(c) 84,242,484 87,907,757Less: Provision for impairment losses 21 (257,983) (115,021)

Net balances 83,984,501 87,792,736

Listed 464,906 490,468Unlisted 83,519,595 87,302,268

Net balances 83,984,501 87,792,736

Fair value 84,362,980 87,254,724

Note:

(a) Debt securities issued by other institutions mainly represented debt securities issued by state-owned enterprises and joint-stock companies.

(b) As at 31 December 2011, the above held-to-maturity debt investments include the bonds of RMB1,058 million purchased in relation to the issuance of wealth management products (31 December 2010: 759 million). The proceeds collected by the Group from issuing such wealth management products are included in other liabilities (see Note 33(a)).

(c) As at the balance sheet dates, part of the held-to-maturity investments was pledged under repurchase agreements, time deposits, swap (see Note 22(a)). No other investments were subject to material restrictions on the realisation.

(d) The Group disposed of the held-to-maturity debt investments with a notional amount of RMB502 million prior to their maturity dates during the year 2011 (2010: RMB2,228 million), which account for 0.57% (2010: 2.54%) of the portfolio before the disposal.

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15 Long-term equity investments

The Group The Bank

Note31 December

201131 December

201031 December

201131 December

2010Investment in subsidiaries 15(a) — — 755,000 755,000Other long term equity investments 15(b) 100,225 100,225 100,225 100,225Total 100,225 100,225 855,225 855,225Less: Provision for impairment losses 21 (1,100) (1,100) (1,100) (1,100)Carrying amounts 99,125 99,125 854,125 854,125

(a) Investment in subsidiaries

31 DecemberNote 2011 2010

Shaoshan Everbright Village Bank Co., Ltd. 35,000 35,000Everbright Financial Leasing Co., Ltd. 720,000 720,000Total 755,000 755,000

Note:

Full nameRegistrationplace

Registeredcapital

Share-holdingpercentage

Businessscope

Businessnature

Legal representative

Million of RMBShaoshan Everbright Village Bank Co., Ltd. (“Shaoshan Everbright”)

Shaoshan Hunan

50 70% Corporateand retail

bankingservices

Limited Corporation

Luo Fangke

Everbright Financial Leasing Co., Ltd (“Everbright Financial Leasing”)

Wuhan Hubei

800 90% Leasingservices

LimitedCorporation

Li Ziqing

(b) Other long term equity investmentsThe Group and the Bank


Cost As at 1 January 100,225 125,980 Decreases — (25,755) As at 31 December 100,225 100,225Provision for impairment losses 21 (1,100) (1,100)Carrying amounts 99,125 99,125

The above long-term equity investments mainly represent unlisted equity interests.

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16 Fixed assets

The Group

Premises

Investment

properties

Construction

in progress

Electronic

equipment Others Total

Cost

As at 1 January 2011 5,242,534 439,489 4,032,349 2,597,621 1,067,157 13,379,150

Additions 68,553 — 516,994 541,190 382,456 1,509,193

Transfers in/(out) of

construction in

progress 3,102,958 — (3,598,022) 158,171 336,893 —


investment properties 4,194 (4,194) — — — —

Disposals — — — (152,966) (23,387) (176,353)

As at 31 December 2011 8,418,239 435,295 951,321 3,144,016 1,763,119 14,711,990

Accumulated depreciation

As at 1 January 2011 (1,064,341) (106,771) — (1,537,635) (369,684) (3,078,431)

Charge for the year (214,372) (12,655) — (411,000) (169,921) (807,948)

Transfers (in)/out of

investment properties (3,267) 3,267 — — — —

Disposals — — — 129,174 14,745 143,919

As at 31 December 2011 (1,281,980) (116,159) — (1,819,461) (524,860) (3,742,460)


As at 1 January 2011 (134,891) (24,366) — — — (159,257)

Transfers (in)/out

for the year — — — — — —

As at 31 December 2011 (134,891) (24,366) — — — (159,257)

Net book value

As at 31 December 2011 7,001,368 294,770 951,321 1,324,555 1,238,259 10,810,273

The carrying amount of temporarily idle fi xed assets is as follows:

CostAccumulateddepreciation

Provision forimpairment

CarryingAmount

As at 31 December 2011 203,518 (73,857) (38,259) 91,402

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16 Fixed assets (continued)

The Group

Premises

Investment

properties

Construction

in progress

Electronic


Cost

As at 1 January 2010 5,244,003 339,085 2,947,971 2,285,097 806,870 11,623,026

Additions 113,375 — 1,097,260 476,704 320,766 2,008,105


construction in

progress 3,619 — (3,734) 115 — —



Transfers out to others — — (9,148) — — (9,148)

Disposals (18,059) — — (164,295) (60,479) (242,833)

As at 31 December 2010 5,242,534 439,489 4,032,349 2,597,621 1,067,157 13,379,150


As at 1 January 2010 (929,311) (86,294) — (1,312,611) (308,310) (2,636,526)




Disposals 9,687 — — 100,492 59,873 170,052

As at 31 December 2010 (1,064,341) (106,771) — (1,537,635) (369,684) (3,078,431)


As at 1 January 2010 (134,466) (24,791) — — — (159,257)

Transfers (in)/out

for the year (425) 425 — — — —

As at 31 December 2010 (134,891) (24,366) — — — (159,257)

Net book value

As at 31 December 2010 4,043,302 308,352 4,032,349 1,059,986 697,473 10,141,462




CarryingAmount

As at 31 December 2010 143,318 (39,202) (36,070) 68,046

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The Bank

Premises

Investment

properties

Construction

in progress

Electronic


Cost

As at 1 January 2011 5,242,534 439,489 4,032,349 2,593,177 1,067,157 13,374,706

Additions 56,553 — 516,994 540,780 382,456 1,496,783


construction in

progress 3,102,958 — (3,598,022) 158,171 336,893 —



Disposals — — — (152,966) (23,387) (176,353)

As at 31 December 2011 8,406,239 435,295 951,321 3,139,162 1,763,119 14,695,136


As at 1 January 2011 (1,064,341) (106,771) — (1,536,892) (369,684) (3,077,688)




Disposals — — — 129,174 14,745 143,919

As at 31 December 2011 (1,281,948) (116,159) — (1,817,595) (524,860) (3,740,562)


As at 1 January 2011 (134,891) (24,366) — — — (159,257)

Transfers (in)/out

for the year — — — — — —

As at 31 December 2011 (134,891) (24,366) — — — (159,257)

Net book value

As at 31 December 2011 6,989,400 294,770 951,321 1,321,567 1,238,259 10,795,317




CarryingAmount

As at 31 December 2011 203,518 (73,857) (38,259) 91,402

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The Bank

PremisesInvestmentproperties

Constructionin progress

Electronicequipment Others Total

Cost As at 1 January 2010 5,244,003 339,085 2,947,971 2,283,694 806,870 11,621,623 Additions 113,375 — 1,097,260 473,663 320,766 2,005,064 Transfers in/(out) of construction in progress 3,619 — (3,734) 115 — — Transfers in/(out) of investment properties (100,404) 100,404 — — — — Transfers out to others — — (9,148) — — (9,148) Disposals (18,059) — — (164,295) (60,479) (242,833)

As at 31 December 2010 5,242,534 439,489 4,032,349 2,593,177 1,067,157 13,374,706

Accumulated depreciation As at 1 January 2010 (929,311) (86,294) — (1,312,553) (308,310) (2,636,468) Charge for the year (153,121) (12,073) — (324,831) (121,247) (611,272) Transfers (in)/out of investment properties 8,404 (8,404) — — — — Disposals 9,687 — — 100,492 59,873 170,052

As at 31 December 2010 (1,064,341) (106,771) — (1,536,892) (369,684) (3,077,688)

Provision for impairment As at 1 January 2010 (134,466) (24,791) — — — (159,257) Transfers (in)/out for the year (425) 425 — — — —

As at 31 December 2010 (134,891) (24,366) — — — (159,257)

Net book value As at 31 December 2010 4,043,302 308,352 4,032,349 1,056,285 697,473 10,137,761




CarryingAmount

As at 31 December 2010 143,318 (39,202) (36,070) 68,046

As at 31 December 2011, the construction in progress mainly included the offi ce buildings of RMB766 million (31 December 2010: RMB3,410 million) under decoration and were not yet ready for use, of which accounts for 48.85% (31 December 2010: 76.10%) of the budget of RMB1,568 million (31 December 2010: RMB4,481 million) fully contributed by the Group.

As at 31 December 2011, title deeds were not yet fi nalised for the premises with a carrying amount of RMB84 million (31 December 2010: RMB90 million). Management of the Group expected that there would be no signifi cant cost in obtaining the title deeds.

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17 Intangible assets

The Group

Landuse right Software Others Total

Cost As at 1 January 2011 185,579 661,950 23,872 871,401 Additions 7,557 196,646 33,610 237,813 Decreases — (1,639) — (1,639)

As at 31 December 2011 193,136 856,957 57,482 1,107,575

Accumulated amortisation As at 1 January 2011 (60,266) (400,196) (18,856) (479,318) Charge for the year (5,421) (90,619) (2,273) (98,313) Decreases — 187 — 187

As at 31 December 2011 (65,687) (490,628) (21,129) (577,444)

Carrying amounts As at 31 December 2011 127,449 366,329 36,353 530,131

The Group


Cost As at 1 January 2010 159,336 571,221 23,693 754,250 Additions 26,243 92,610 179 119,032 Decreases — (1,881) — (1,881)

As at 31 December 2010 185,579 661,950 23,872 871,401

Accumulated amortisation As at 1 January 2010 (55,427) (310,914) (16,803) (383,144) Charge for the year (4,839) (91,069) (2,053) (97,961) Decreases — 1,787 — 1,787

As at 31 December 2010 (60,266) (400,196) (18,856) (479,318)


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17 Intangible assets (continued)

The Bank


Cost As at 1 January 2011 185,579 661,215 23,725 870,519 Additions 7,557 196,646 31,398 235,601 Decreases — (1,374) — (1,374)

As at 31 December 2011 193,136 856,487 55,123 1,104,746

Accumulated amortisation As at 1 January 2011 (60,266) (400,081) (18,856) (479,203) Charge for the year (5,421) (90,619) (2,186) (98,226) Decreases — 72 — 72

As at 31 December 2011 (65,687) (490,628) (21,042) (577,357)


The Bank


Cost As at 1 January 2010 159,336 570,786 23,693 753,815 Additions 26,243 92,310 32 118,585 Decreases — (1,881) — (1,881)

As at 31 December 2010 185,579 661,215 23,725 870,519

Accumulated amortisation As at 1 January 2010 (55,427) (310,914) (16,803) (383,144) Charge for the year (4,839) (90,954) (2,053) (97,846) Decreases — 1,787 — 1,787

As at 31 December 2010 (60,266) (400,081) (18,856) (479,203)


18 Goodwill


31 December

2011 2010

Cost 6,019,000 6,019,000Less: Provision for impairment losses (4,738,000) (4,738,000)

Net book value 1,281,000 1,281,000

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18 Goodwill (continued)

As approved by the PBOC, the Bank and China Development Bank (“CDB”) jointly signed an “Agreement between China Development Bank and China Everbright Bank for the transfer of assets, liabilities and banking premises of China Investment Bank” (the “Agreement”) on 18 March 1999. According to the Agreement, CDB transferred the assets, liabilities, equity and 137 outlets of 29 branches of the former China Investment Bank (“CIB”) to the Bank. The Agreement became effective on 18 March 1999. The Bank assessed the transferred assets and liabilities at fair value, and recognised the excess of the purchase cost over the sum of the fair value of the net assets transferred and deferred tax assets as goodwill.

The goodwill is tested for impairment annually. The Bank makes provision for impairment if necessary. The Bank calculates the recoverable amount of the CGU using cash fl ow projections based on fi nancial forecasts approved by management covering a fi ve-year period. The discount rate used refl ects specifi c risks relating to the relevant segments.

Based on the result of the impairment testing, no impairment losses on goodwill were recognised for the Relevant Periods.

19 Deferred tax assets and liabilities

(a) Analysed by nature

The Group


Deductible/(taxable)

temporarydifferences

Deferredtax assets/

(liabilities)



Deferredtax assets/

(liabilities)

Deferred tax assets 7,426,833 1,856,708 5,224,971 1,306,243Deferred tax liabilities — — — —

Net balances 7,426,833 1,856,708 5,224,971 1,306,243

The Bank




Deferredtax assets/

(liabilities)



Deferredtax assets/

(liabilities)

Deferred tax assets 7,379,721 1,844,930 5,224,971 1,306,243Deferred tax liabilities — — — —

Net balances 7,379,721 1,844,930 5,224,971 1,306,243

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19 Deferred tax assets and liabilities (continued)

(b) Movements of deferred tax

The Group


lossesStaff cost

payable

Net (gains)/losses from

fair valuechanges

of fi nancialinstruments

Net balanceof deferredtax assets/

(liabilities)Note(i) Note(ii)

1 January 2011 486,473 690,251 129,519 1,306,243Recognised in income statement 174,456 257,679 260,644 692,779Recognised in equity — — (142,314) (142,314)

31 December 2011 660,929 947,930 247,849 1,856,708

The Bank


lossesStaff cost

payable


fair valuechanges


Net balanceof deferredtax assets/ (liabilities)

Note(i) Note(ii)

1 January 2011 486,473 690,251 129,519 1,306,243Recognised in income statement 166,071 254,286 260,644 681,001Recognised in equity — — (142,314) (142,314)

31 December 2011 652,544 944,537 247,849 1,844,930



lossesStaff cost

payable


fair valuechanges


Net balanceof deferredtax assets/

(liabilities)Note(i) Note(ii)

1 January 2010 584,306 263,805 (272,327) 575,784Recognised in income statement (97,833) 426,446 116,535 445,148Recognised in equity — — 285,311 285,311

31 December 2010 486,473 690,251 129,519 1,306,243

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19 Deferred tax assets and liabilities (continued)

(b) Movements of deferred tax (continued)Note:

(i) The Group made provision for impairment losses on assets in accordance with CAS. The provision for impairment

losses were determined based on the expected recoverable amount of the relevant assets at the balance sheet date.

However, the amounts deductible for tax purposes are calculated at 1% of the gross carrying amount of qualifying

assets at the balance sheet date, together with write-offs which fulfi ll specifi c criteria as set out in the PRC tax rules and

are approved by the tax authorities.

(ii) Net gains or losses on fair value changes of fi nancial instruments are subject to tax when realised.

(iii) Unrecognised deferred tax assets

As at 31 December 2011, the Group has not recognised deferred tax assets of RMB2,018 million (31 December 2010:

RMB1,867 million) for provision of impairment losses amounting to RMB8,073 million (31 December 2010: RMB7,467

million). This was mainly because it was uncertain whether the losses from write-offs of the impaired assets could be

approved by the relevant tax authorities in the foreseeable future.

20 Other assets

The Group The Bank

Note31 December

201131 December

201031 December

201131 December

2010

Assets held for wealth management products 20(a) 48,248,345 76,794,241 48,248,345 76,794,241Finance lease receivables 7,893,931 4,120,778 — —Long-term deferred expense 20(b) 970,366 826,756 968,900 825,371Fixed assets purchase prepayment 20(c) 409,705 389,393 409,705 389,393Other receivables 20(d) 365,468 656,208 363,404 654,893Repossessed assets 20(e) 5,238 311 5,238 311Precious metal 2,248 2,248 2,248 2,248

Total 57,895,301 82,789,935 49,997,840 78,666,457

(a) Assets held for wealth management products

The assets held for wealth management products represent the trust investments purchased by the Group, acting as an agent for wealth management investors, and using the funds collected from investors. The credit risk, interest risk, liquidity risk and investment risk of the underlying trust investments are assumed by the investors who purchase the wealth management products.

The Group has certain risk exposures in respect of those wealth management products for which the amounts and maturities do not exactly match the underlying trust funds. Accordingly, the Group accounts for such wealth management assets under other assets and the corresponding trust funds as other liabilities (see Note 33(a)).

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20 Other assets (continued)

(b) Long-term deferred expenses

The Group The Bank

31 December2011

31 December2010

31 December2011

31 December2010

Leasehold improvements 705,881 547,876 705,881 547,876Prepaid rental expenses 214,235 234,935 214,235 234,935Others 50,250 43,945 48,784 42,560

Total 970,366 826,756 968,900 825,371

(c) Prepayment for purchase of fi xed assets mainly consists of prepayment for purchase of offi ce buildings and electronic equipments; no signifi cant prepayment was aging over than 1 year.

(d) Other receivables

The provision for other receivables above exclude collections from shareholders holding 5% or more voting rights of the Bank.

As at 31 December 2011, the book value of other receivables from the top fi ve clients are RMB132 million (As at 31 December 2010: RMB99 million), or 36.00% of the total other receivables. (As at 31 December 2010: 15.04%).

(e) Repossessed assets

The repossessed assets of the Group and the Bank are land and premises, etc.

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21 Provision for impairment losses

Movements of provision for impairment losses are set out as follows:

The Group

Note

As at

1 January

2011

Charge

for the year

Transfer

(in)/out

Written-back

or recoveries

Write-off

and others

As at

31 December

2011

Items

Deposits with banks and

other fi nancial institutions 6 (23,686) — — 8,586 — (15,100)

Placements with banks and

other fi nancial institutions 7 (4,415) — — 4,780 (1,365) (1,000)

Interests receivable 11 (27,529) (11,579) — — — (39,108)

Loans and advances to customers 12 (18,273,184) (3,890,599) — 470,786 650,224 (21,042,773)

Available-for-sale fi nancial assets 13 (8,845) — — — — (8,845)

Held-to-maturity investments 14 (115,021) (142,962) — (257,983)

Long-term equity investments 15 (1,100) — — — — (1,100)

Fixed assets 16 (159,257) — — — — (159,257)

Goodwill 18 (4,738,000) — — — — (4,738,000)

Other assets 20 (655,935) (149,684) — 12,594 8,172 (784,853)

Total (24,006,972) (4,194,824) — 496,746 657,031 (27,048,019)

Note

As at

1 January

2010

Charge

for the year

Transfer

(in)/out

Written-back

or recoveries

Write-off

and others

As at

31 December

2010

Items


other fi nancial institutions 6 (15,100) (8,586) — — — (23,686)


other fi nancial institutions 7 (1,000) (2,834) — — (581) (4,415)


Loans and advances to customers 12 (15,764,933) (4,332,608) — 1,079,069 745,288 (18,273,184)

Available-for-sale fi nancial assets 13 — (8,845) — — — (8,845)

Held-to-maturity investments 14 (126,308) (50,154) 59,313 — 2,128 (115,021)

Long-term equity investments 15 (26,855) — — — 25,755 (1,100)

Fixed assets 16 (159,257) — — — — (159,257)

Goodwill 18 (4,738,000) — — — — (4,738,000)

Other assets 20 (462,587) (155,362) (59,313) 11,651 9,676 (655,935)

Total (21,297,841) (4,582,117) — 1,090,720 782,266 (24,006,972)

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21 Provision for impairment losses (continued)

The Bank

Note

As at

1 January

2011

Charge

for the year

Transfer

(in)/out

Written-back

or recoveries

Write-off

and others

As at

31 December

2011

Items


other fi nancial institutions 6 (23,686) — — 8,586 — (15,100)


other fi nancial institutions 7 (4,415) — — 4,780 (1,365) (1,000)


Loans and advances to customers 12 (18,272,254) (3,887,920) — 470,786 650,224 (21,039,164)

Available-for-sale fi nancial assets 13 (8,845) — — — — (8,845)

Held-to-maturity investments 14 (115,021) (142,962) — — — (257,983)

Long-term equity investments 15 (1,100) — — — — (1,100)

Fixed assets 16 (159,257) — — — — (159,257)

Goodwill 18 (4,738,000) — — — — (4,738,000)

Other assets 20 (628,179) (57,880) — 6,652 8,168 (671,239)

Total (23,978,286) (4,100,341) — 490,804 657,027 (26,930,796)

Note

As at

1 January

2010

Charge

for the year

Transfer

(in)/out

Written-back

or recoveries

Write-off

and others

As at

31 December

2010

Items


other fi nancial institutions 6 (15,100) (8,586) — — — (23,686)


other fi nancial institutions 7 (1,000) (2,834) — — (581) (4,415)


Loans and advances to customers 12 (15,764,723) (4,331,888) — 1,079,069 745,288 (18,272,254)

Available-for-sale fi nancial assets 13 — (8,845) — — — (8,845)

Held-to-maturity investments 14 (126,308) (50,154) 59,313 — 2,128 (115,021)

Long-term equity investments 15 (26,855) — — — 25,755 (1,100)

Fixed assets 16 (159,257) — — — — (159,257)

Goodwill 18 (4,738,000) — — — — (4,738,000)

Other assets 20 (462,587) (127,606) (59,313) 11,651 9,676 (628,179)

Total (21,297,631) (4,553,641) — 1,090,720 782,266 (23,978,286)

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22 Pledged assets

(a) Assets pledged as collateral

The following assets of the Group are pledged as collateral for repurchase agreements, time deposits or swaps:


31 December

Note 2011 2010

For repurchase agreements:— Discounted bills 12(a) 17,785,266 4,835,021— Available-for-sale fi nancial assets 13(b) 4,648,221 5,434,164— Held-to-maturity investments 14(c) 18,203,318 2,383,990

Sub-total 40,636,805 12,653,175

For time deposits:— Held-to-maturity investments 14(c) 16,534,580 16,251,525— Available-for-sale fi nancial assets 13(b) 2,950,680 2,274,876

Sub-total 19,485,260 18,526,401

For swap transactions:— Deposits with banks and other fi nancial institutions 6 308,628 622,451— Held-to-maturity investments 14(b) 94,426 99,482

Sub-total (i) 403,054 721,933

Total (ii) 60,525,119 31,901,509

(b) Received pledged assets

The Group conducts resale agreements under the usual and customary terms of placements, and holds collaterals for these transactions. As at the end of each of the Relevant Periods, the Group did not hold any resale agreement that collaterals were permitted to sell or repledge in the absence of the counterparty’s default on the agreements.

Note:

(i) As at the balance sheet dates, the assets pledged as collateral for repurchase agreements, time deposits and swaps

are presented at the carrying amounts of respective assets.

(ii) As at the balance sheet dates, the remaining guarantee period for most of the above collaterals is less than 12 months.

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23 Deposits from banks and other fi nancial institutions

The Group The Bank

31 December2011

31 December2010

31 December2011

31 December2010

Deposits in mainland China— Banks 216,937,041 140,749,612 217,273,024 140,774,293— Other fi nancial institutions 49,938,194 56,464,197 49,938,194 56,464,197

Subtotal 266,875,235 197,213,809 267,211,218 197,238,490

Deposits outside mainland China— Banks 3,751,847 659 3,751,847 659

Subtotal 3,751,847 659 3,751,847 659

Total 270,627,082 197,214,468 270,963,065 197,239,149

24 Placements from banks and other fi nancial institutions

Analysed by type and location of counterparty

The Group The Bank

31 December2011

31 December2010

31 December2011

31 December2010

Placements in mainland China— Banks 22,353,195 12,590,976 15,953,195 9,360,976

Subtotal 22,353,195 12,590,976 15,953,195 9,360,976

Placements outside mainland China— Banks 5,008,784 5,622,937 5,008,784 5,622,937

Subtotal 5,008,784 5,622,937 5,008,784 5,622,937

Total 27,361,979 18,213,913 20,961,979 14,983,913

25 Financial liabilities held for trading


31 December

2011 2010

Structured deposits from corporations 4,016,989 14,131,704Structured deposits from individuals 42,460,982 19,337,845

Total 46,477,971 33,469,549

The Bank’s fi nancial liabilities held for trading are all structured deposits designed at fair value through profi t or loss.

The carrying amount of the structured deposits measured at fair value as at 31 December 2011 is RMB422 million (31 December 2010: RMB227 million) higher than the contractual amount that the Group needs to pay to the holders of the structured deposits upon maturity.

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26 Financial assets sold under repurchase agreements

(a) Analysed by type and location of counterparty


31 December

2011 2010

In mainland China— Banks 38,747,265 7,903,098— Other fi nancial institutions 1,673,001 4,774,923— Other enterprises 188,703 703

Total 40,608,969 12,678,724

(b) Analysed by collateral


31 December

2011 2010

Bank acceptances 17,785,266 4,835,021PBOC bills 1,960,000 5,460,000Debt securities 20,863,703 2,383,703

Total 40,608,969 12,678,724

27 Deposits from customers

The Group The Bank

31 December2011

31 December2010

31 December2011

31 December2010

Demand deposits— Corporate customers 398,986,233 384,456,306 398,732,616 384,378,224— Individual customers 78,710,997 59,206,223 78,686,160 59,185,174

Sub-total 477,697,230 443,662,529 477,418,776 443,563,398

Time deposits— Corporate customers 409,417,169 356,369,940 409,386,970 356,313,186— Individual customers 114,062,462 87,503,038 114,015,823 87,475,790

Sub-total 523,479,631 443,872,978 523,402,793 443,788,976

Pledged deposits— Acceptances 139,927,011 118,187,292 139,927,011 118,187,292— Letters of credit 18,854,432 9,480,604 18,854,432 9,480,604— Letters of guarantees 8,881,909 7,387,208 8,881,909 7,387,208— Others 7,779,902 5,596,137 7,779,902 5,596,137

Sub-total 175,443,254 140,651,241 175,443,254 140,651,241

Inward and outward remittances 2,180,214 1,523,863 2,180,214 1,523,863

Total 1,178,800,329 1,029,710,611 1,178,445,037 1,029,527,478

189

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28 Accrued staff costs

The Group

Note

As at1 January

2011 Accruals Decreases

As at31 December

2011

Salary and bonus payable 4,489,781 6,816,209 (5,909,691) 5,396,299Staff welfare payable 969 161,954 (161,954) 969Pension payable 28(a) 24,246 596,330 (538,104) 82,472Housing fund payable 9,637 286,940 (283,498) 13,079Union running costs and employee education costs payable 272,454 303,466 (215,453) 360,467Supplementary retirement benefi ts payable 28(b) 274,630 60,104 (16,605) 318,129Others 115,276 374,465 (404,328) 85,413

Total 5,186,993 8,599,468 (7,529,633) 6,256,828

Note

As at1 January


As at31 December

2010

Salary and bonus payable 2,334,829 6,059,772 (3,904,820) 4,489,781Staff welfare payable 9,743 123,281 (132,055) 969Pension payable 28(a) 23,209 480,261 (479,224) 24,246Housing fund payable 13,719 221,789 (225,871) 9,637Union running costs and employee education costs payable 187,346 270,669 (185,561) 272,454Supplementary retirement benefi ts payable 28(b) 720,008 6,899 (452,277) 274,630Others 131,448 253,982 (270,154) 115,276

Total 3,420,302 7,416,653 (5,649,962) 5,186,993

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28 Accrued staff costs (continued)

The Bank

Note

As at1 January


As at31 December

2011

Salary and bonus payable 4,484,694 6,780,603 (5,882,571) 5,382,726Staff welfare payable 969 159,609 (159,609) 969Pension payable 28(a) 24,246 594,612 (536,386) 82,472Housing fund payable 9,637 286,181 (282,739) 13,079Union running costs and employee education costs payable 272,454 301,975 (213,962) 360,467Supplementary retirement benefi ts payable 28(b) 274,630 60,104 (16,605) 318,129Others 115,275 373,226 (403,088) 85,413

Total 5,181,905 8,556,310 (7,494,960) 6,243,255

Note

As at1 January


As at31 December

2010

Salary and bonus payable 2,334,829 6,050,463 (3,900,598) 4,484,694Staff welfare payable 9,743 123,017 (131,791) 969Pension payable 28(a) 23,209 479,809 (478,772) 24,246Housing fund payable 13,719 221,520 (225,602) 9,637Union running costs and employee education costs payable 187,346 270,342 (185,234) 272,454Supplementary retirement benefi ts payable 28(b) 720,008 6,899 (452,277) 274,630Others 131,448 253,371 (269,544) 115,275

Total 3,420,302 7,405,421 (5,643,818) 5,181,905

(a) Pension scheme and annuity plan

Pursuant to the relevant laws and regulations in the PRC, the Group has joined a defi ned contribution scheme for the employees arranged by local government labour and social security organisations. The Group makes contributions to the retirement scheme at the applicable rates based on the amounts stipulated by the relevant government organisations.

The Group provides enterprise an annuity plan to the eligible employees. The Group makes annuity contributions in proportion to its employees’ gross wages in prior year, which are expensed in income statement when the contributions are made.

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28 Accrued staff costs (continued)

(b) Supplementary retirement benefits (“SRB”)

The Group pays SRB for eligible employees. The amount represents the present value of the total estimated amount of future benefi ts that the Group is committed to pay for the eligible employees at the balance sheet dates. The Group’s obligations in respect of the SRB as at the balance sheet dates were reviewed using projected unit credit method by qualifi ed staff of an external independent actuary.

Except for note (a) and note (b) mentioned above, the Group has no signifi cant responsibilities to pay any other retirement benefi ts to retired employees. There’s no overdue balance of employee benefi ts payable as at the balance sheet dates.

29 Taxes payable

The Group The Bank

31 December2011

31 December2010

31 December2011

31 December 2010

Business tax and surcharges payable 1,152,812 795,423 1,150,902 793,534Income tax payable 1,265,876 751,796 1,246,678 742,683Others 115,425 115,765 114,450 114,937

Total 2,534,113 1,662,984 2,512,030 1,651,154

30 Interests payable

The Group The Bank

31 December2011

31 December2010

31 December2011

31 December2010

Deposits from customers 10,483,288 7,295,207 10,481,981 7,294,507Subordinated debts issued 380,237 363,251 380,237 363,251Others 1,761,691 877,634 1,689,462 870,759

Total 12,625,216 8,536,092 12,551,680 8,528,517

Except for mentioned in Note 48, there are no interests payable to shareholders holding 5% or more voting rights of the Bank.

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31 Provisions

Provisions mainly represent accruals of litigation losses estimated by the Group based on the status of litigation cases and the probability of losses reasonably.


31 December2011 2010

Balance as at 1 January 42,518 60,424Accrued during the year 203 4,094Paid during the year (303) (14,133)Reversed during the year (25,300) (7,867)

Balance as at 31 December 17,118 42,518

32 Subordinated debts issued

Pursuant to the approvals of the PBOC and the CBRC, the carrying amounts of the subordinated debts issued by the Group and the Bank are set out as following:


Subordinated fi xed rate debts maturing in April 2018 32(a) 3,500,000 3,500,000Subordinated fl oating rate debts maturing in April 2018 32(b) 2,500,000 2,500,000Subordinated fi xed rate debts maturing in June 2018 32(c) 2,000,000 2,000,000Subordinated fi xed rate debts maturing in December 2018 32(d) 5,000,000 5,000,000Subordinated fi xed rate debts maturing in March 2019 32(e) 3,000,000 3,000,000

Total 16,000,000 16,000,000

(a) Fixed rate subordinated debts of RMB3.5 billion with a term of ten years was issued on 25 April 2008. The coupon rate for the fi rst fi ve years is 5.85%. The Group has an option to redeem the debts on 28 April 2013 at the nominal amount. If the debts are not redeemed by the Group, the coupon rate will increase to 8.85% for the next fi ve years.

(b) Floating rate subordinated debts of RMB2.5 billion with a term of ten years was issued on 25 April 2008. The subordinated debts bear interest at a fl oating rate based on the PBOC’s one-year fi xed deposits rate plus an interest margin of 1.66%. The Group has an option to redeem the debts on 28 April 2013 at the nominal amount. If the debts are not redeemed by the Group, the interest margin will increase to 4.66% for the next fi ve years.

(c) Fixed rate subordinated debts of RMB2 billion with a term of ten years was issued on 27 June 2008. The coupon rate for the fi rst fi ve years is 5.92%. The Group has an option to redeem the debts on 30 June 2013 at the nominal amount. If the debts are not redeemed by the Group, the coupon rate will increase to 8.92% for the next fi ve years.

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32 Subordinated debts issued (continued)

(d) Fixed rate subordinated debts of RMB5 billion with a term of ten years was issued on 15 December 2008. The coupon rate for the fi rst fi ve years is 4.05%. The Group has an option to redeem the debts on 17 December 2013 at the nominal amount. If the debts are not redeemed by the Group, the coupon rate will increase to 7.05% for the next fi ve years.

(e) Fixed rate subordinated debts of RMB3 billion with a term of ten years was issued on 13 March 2009. The coupon rate for the fi rst fi ve years is 3.75%. The Group has an option to redeem the debts on 17 March 2014 at the nominal amount. If the debts are not redeemed by the Group, the coupon rate will increase to 6.75% for the next fi ve years.

(f) As at 31 December 2011, the fair value of the total subordinated debts issued amounts to RMB15,742 million (31 December 2010: RMB15,889 million).

33 Other liabilities

The Group The Bank

Note31 December

201131 December

201031 December

201131 December

2010

Wealth management fund 33(a) 29,535,817 73,935,037 29,535,817 73,935,037Finance lease payable 947,663 435,320 — —Payment and collection clearance accounts 539,943 969,915 539,943 969,915Dormant accounts 342,512 340,385 342,512 340,385Payables for the World Bank on-lending loans 259,974 376,713 259,974 376,713Dividend payable 178,025 27,325 178,025 27,325Advances received in respect of sale of repossessed assets 37,222 88,981 37,222 88,981Others 982,726 637,686 883,809 596,590

Total 32,823,882 76,811,362 31,777,302 76,334,946

(a) Wealth management fund

As the amounts or maturities of the underlying trust investments do not match with those of the wealth management products entirely, these trust investments whose maturities do not matched those of underlying wealth management products are presented as other assets in the fi nancial statements and the corresponding wealth management funds are recorded in other liabilities (Notes 13(b), 14(c) and 20(a)).

Besides the presentation Notes 48, there are no liabilities of shareholders holding 5% or more voting rights of the Bank.

As at 31 December 2011, there are no large amounts aging more than 1 year in above liabilities.

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34 Share capital

The Bank’s shareholding structure as at the balance sheet dates are as follows:


Note Amount Percentage Amount Percentage

Huijin and its affi liates 34(a) 21,025,211 52.00% 21,025,211 52.00%China Everbright (Group) 2,093,992 5.18% 2,093,992 5.18%China Everbright Limited (“Everbright Limited”) 1,757,581 4.35% 1,757,581 4.35%National Council for Social Security Fund 640,983 1.59% 640,983 1.59%Other shareholders 34(b) 14,917,023 36.88% 14,917,023 36.88%

Total 40,434,790 100.00% 40,434,790 100.00%

(a) As at 31 December 2011, Hujin holds an 48.37% equity interests in the Bank directly, and holds a 3.63% equity interests in the Bank indirectly through China Reinsurance (Group) Corporation.

(b) As at December 2011, each of other shareholders holds less than 5% of the total shares issued.

35 Capital reserve


31 December

2011 2010

Fair value change of available for sale fi nancial assets (224,884) (651,824)Share premium 20,553,051 20,553,051

Total 20,328,167 19,901,227

36 Surplus reserve and general reserve

(a) Surplus reserve

The surplus reserve as at balance sheet dates represented statutory surplus reserve fund. The Bank is required to appropriate 10% of its net profi t, after making good prior year’s accumulated loss, to statutory surplus reserve fund until the reserve fund balance reaches 50% of its registered capital.

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36 Surplus reserve and general reserve (continued)

(b) General reserve

Pursuant to relevant regulations issued by the MOF, the Bank is required to set aside a general reserve through appropriations of profi t after tax according to a certain provision ratio of the ending balance of gross risk-bearing assets to cover potential losses against their assets. In principle, the general reserve balance should not be lower than 1% of the ending balance of gross risk-bearing assets.

37 Appropriation of profi ts

(a) In accordance with the resolution of the Bank’s Fifth board of directors at its twenty-eight meeting on 17 April 2012, the shareholders approved the following profi t appropriations for the period from 1 January 2011 to 31 December 2011:

— Appropriate 10% of the profi t after tax, with the amount of RMB1,792 million, for the statutory reserve fund;

— Appropriate RMB2,245 million of the general reserve;

— A cash dividend distribution of RMB1.330 per 10 shares (before tax), with the aggregation amount of RMB5,378 million, to all existing shareholders.

The profi t appropriation resolution mentioned above is yet to be passed by the Bank’s shareholders’ meeting.

RMB14.62 million of the subsidiaries’ surplus reserve is attributed to the parent company in this year. (2010: RMB2.71 million)

(b) In accordance with the resolution of 2010 Annual General Meeting on 30 May 2011, the board approved the following profi t appropriations for the year ended 31 December 2010:

— Appropriate 10% of the profi t after tax, with the amount of RMB1,276 million, for the statutory surplus reserve fund;

— Appropriate RMB6,146 million for the general reserve;

— A cash dividend distribution of RMB0.946 per ten shares (before tax), with the aggregate amount of RMB3,825 million, to all existing shareholders.

196


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38 Net interest income

The Group The Bank

Note31 December

201131 December

201031 December

201131 December

2010Interest income arising from:Deposits with the central bank 3,106,037 2,106,884 3,105,446 2,106,700Deposits with banks and other fi nancial institutions 3,029,568 1,399,768 2,994,317 1,397,474Placements with banks and other fi nancial institutions 1,742,188 586,503 1,742,188 586,503Loans and advances to customers 38(a)— Corporate loans and advances 36,992,266 27,065,605 36,480,663 27,012,934— Personal loans and advances 12,666,631 8,832,830 12,666,631 8,832,830— Discounted bills 912,976 575,635 912,976 575,635Financial assets held under resale agreements 11,266,645 7,157,062 11,266,645 7,157,062Investments in debt securities 7,821,589 5,765,646 7,821,589 5,765,646Re-discounted bills 346,693 665,596 346,693 665,596Sub-total 38(b) 77,884,593 54,155,529 77,337,148 54,100,380Interest expenses arising from:Deposits from banks and other fi nancial institutions 11,593,347 6,701,810 11,621,013 6,704,394Placements from banks and other fi nancial institutions 1,455,289 310,943 1,168,664 296,123Deposits from customers— Corporate customers 19,919,357 12,317,166 19,917,461 12,316,426— Individual customers 3,522,780 2,086,052 3,521,571 2,085,651Financial assets sold under repurchase agreements 1,200,698 1,259,848 1,200,698 1,259,848Subordinated debts issued 752,886 859,244 752,886 859,244Re-discounted bills — 198,397 — 198,397Sub-total 38(c) 38,444,357 23,733,460 38,182,293 23,720,083

Net interest income 39,440,236 30,422,069 39,154,855 30,380,297

(a) The interest income arising from impaired fi nancial assets for the year ended 31 December, 2011 amounted to RMB52 million (2010: RMB70 million).

(b) The interest income from fi nancial assets presented at effective interest rate for the year ended 31 December, 2011 amounted to RMB77,848 million (2010: RMB53,867 million).

(c) The interest expenses from fi nancial liabilities presented at effective interest rate for the year ended 31 December, 2011 amounted to RMB37,373 million (2010: RMB23,459 million).

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39 Net fee and commission income

The Group The Bank

31 December2011

31 December2010

31 December2011

31 December2010

Fee and commission incomeBank card service fees 1,807,653 987,768 1,807,653 987,768Underwriting and advisory fees 1,442,657 997,358 1,442,395 997,358Settlement and clearing fees 1,376,223 939,507 1,376,216 939,503Wealth management service fees 992,824 948,466 992,824 948,466Acceptance and guarantee fees 649,088 486,309 649,088 486,309Agency services fees 505,337 338,625 505,337 338,625Custody and other fi duciary business fees 352,556 192,824 352,556 192,824Others 254,738 190,036 151,724 139,047

Sub-total 7,381,076 5,080,893 7,277,793 5,029,900

Fee and commission expenseBank card transaction fees 285,312 252,538 285,312 252,538Settlement and clearing fees 50,797 46,498 50,407 46,490Others 71,848 73,329 68,896 72,688

Sub-total 407,957 372,365 404,615 371,716

Net fee and commission income 6,973,119 4,708,528 6,873,178 4,658,184

40 Investment income

The Group The Bank

31 December2011

31 December2010

31 December2011

31 December 2010

Net (losses)/gains on disposal of fi nancial assets held for trading (20,498) 118,804 (20,498) 118,804Net (losses)/gains on disposal of available-for-sale fi nancial assets (127,173) 347,955 (127,173) 347,955Net gains/(losses) on disposal of held-to-maturity investments 12,479 (22,102) 12,479 (22,102)Income from long-term equity investments 2,103 2,032 2,103 2,032

Total (133,089) 446,689 (133,089) 446,689

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41 Net (loss)/gain on fair value changes


31 December

2011 2010

Trading fi nancial instruments (19,875) (5,383)Financial instruments designated at fair value through profi t or loss (157,393) (176,537)Derivatives (865,308) (284,219)

Total (1,042,576) (466,139)

42 Operating and administrative expenses

The Group The Bank

31 December2011

31 December2010

31 December 2011

31 December2010

Staff costs— Salaries and bonuses 6,816,209 6,059,772 6,780,603 6,050,463— Staff welfares 161,954 123,281 159,609 123,017— Pension and annuity 596,330 480,261 594,612 479,809— Housing allowances 286,940 221,789 286,181 221,520— Supplementary retirement benefi ts 60,104 6,899 60,104 6,899— Others 677,931 524,651 675,201 523,713

Sub-total 8,599,468 7,416,653 8,556,310 7,405,421

Premises and equipment expenses— Depreciation of fi xed assets 795,293 611,957 794,138 611,272— Amortisation of intangible assets 98,313 97,961 98,226 97,846— Amortisation of long-term assets 211,115 166,778 210,591 166,288— Rental and property management expenses 1,139,945 921,184 1,137,951 920,833

Sub-total 2,244,666 1,797,880 2,240,906 1,796,239

Others 3,875,915 3,375,814 3,861,608 3,364,034

Total 14,720,049 12,590,347 14,658,824 12,565,694

199

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43 Impairment losses on assetsThe Group The Bank

31 December2011

31 December2010

31 December2011

31 December2010

Loans and advances to customers 3,419,813 3,253,539 3,417,134 3,252,819Held-to-maturity investments 142,962 50,154 142,962 50,154Available-for-sale fi nancial assets — 8,845 — 8,845Others 135,303 178,859 49,441 151,103Total 3,698,078 3,491,397 3,609,537 3,462,921

44 Income tax

(a) Income tax for the year represent:The Group The Bank

Note31 December

201131 December

201031 December

201131 December

2010Current tax 6,690,808 4,757,748 6,623,210 4,746,626Deferred tax 19(b) (692,779) (445,148) (681,001) (445,148)Adjustment for prior years 128,233 4,270 128,233 4,270Total 6,126,262 4,316,870 6,070,442 4,305,748

(b) Reconciliation between income tax and accounting profits are as follows:The Group The Bank

31 December2011

31 December2010

31 December2011

31 December2010

Profi ts before tax 24,211,384 17,110,566 23,989,842 17,067,787Statutory tax rate 25% 25% 25% 25%Expected income at statutory tax rate 6,052,846 4,277,642 5,997,461 4,266,947Non-deductible expenses— Staff costs 27,217 29,804 27,217 29,804— impairment losses 156,250 148,016 156,250 148,016— Others 123,048 120,706 122,613 120,279

306,515 298,526 306,080 298,099Non-taxable income— Interest income from the PRC government bonds (361,332) (263,568) (361,332) (263,568)

Sub-total 5,998,029 4,312,600 5,942,209 4,301,478Adjustment for prior years 128,233 4,270 128,233 4,270Income tax 6,126,262 4,316,870 6,070,442 4,305,748

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45 Other comprehensive income


31 December

2011 2010

Available-for-sale fi nancial assets Gain/(Loss) on fair value changes of 178,670 (981,963) Impact of tax expense (44,668) 245,491 Net amount recognized in profi t or loss transferred from other comprehensive income 292,938 (119,457)

Total comprehensive income 426,940 (855,929)

46 Capital adequacy ratio

The Group’s capital management includes capital adequacy ratio management, capital fi nancing management and economic capital management, of which the primary focus is on capital adequacy ratio management. The Group calculates the capital adequacy ratio in accordance with the guidelines issued by the CBRC. The capital of the Group is divided into core capital and supplementary capital.

For commercial banks, supplementary capital shall not exceed 100% of core capital, while long-term subordinated debts and bonds included in supplementary capital should not exceed 50% of the core capital. In addition, commercial banks are required to provide market risk capital when total position of trading accounts exceeds 10% of the on- and off-balance sheet total assets or RMB8.5 billion. The Group is in full compliance with all relevant regulatory requirements.

Capital adequacy ratio management is the key in capital management. The capital adequacy ratio refl ects the soundness of the Group’s operations and risk management capabilities. The main objective in capital adequacy ratio management is to set an optimal capital adequacy ratio that meets the regulatory requirements by benchmarking against the capital adequacy ratio level of leading global banks with reference to its own business environment and conditions.

The Group considers its strategic development plans, business expansion plans and risk variables when conducting scenario analysis and stress testing and executing other measures to forecast, plan and manage its capital adequacy ratio.

Capital allocation

The Group determines the allocation of its capital to businesses or activities with the objective of maximising the return on risk-adjusted capital. The Group’s policies in respect of capital management and allocation are reviewed regularly by the board of directors.

The amount of capital allocated to each business or activity is primarily determined based on regulatory requirements, however, in certain cases, regulatory requirements may not accurately address the varying degree of risks associated with different activities. In such cases, capital may be adjusted to an appropriate level to refl ect the risk profi les. The Planning and Finance Department is responsible for the entire capital allocation process.

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46 Capital adequacy ratio (continued)

Capital allocation (continued)

The Group’s capital adequacy ratio and core capital adequacy ratio as at the balance sheet dates, which were calculated in accordance with the Regulation Governing Capital Adequacy of Commercial Banks issued by the CBRC, are as follows:

31 December

Note 2011 2010

Core capital adequacy ratio 7.89% 8.15%

Capital adequacy ratio 10.57% 11.02%

Core capital— Share capital 40,434,790 40,434,790— Capital reserve 20,328,167 19,901,227— Surplus reserve and general reserve 18,102,275 14,065,256— Retained earnings (a) 11,791,104 3,138,062— Non-controlling interests 115,469 98,235

90,771,805 77,637,570

Supplementary capital— General provision for doubtful debts 15,922,136 12,477,413— Long term subordinated debts 16,000,000 16,000,000

31,922,136 28,477,413

Total capital base before deductions 122,693,941 106,114,983

Deductions— Goodwill 1,281,000 1,281,000— Unconsolidated equity investments 1,624 1,624— Others 1,520,000 1,520,000

Total capital base after deductions 119,891,317 103,312,359

Risk weighted assets (b) 1,133,905,567 937,387,159

(a) Dividends proposed to be declared by the Bank have been deducted in calculating the net capital and net core capital.

(b) The balances of risk-weighted assets include an amount equal to 12.5 times the Group’s market risk capital.

202


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47 Supplement to cash fl ow statement

(a) Reconciliation of net profit to cash flows from operating activitiesThe Group The Bank2011 2010 2011 2010

Net profi t 18,085,122 12,793,696 17,919,400 12,762,039Add: Provision for impairment losses for loans 3,698,078 3,491,397 3,609,537 3,462,921 (Reversal)/provision for Depreciation of fi xed assets and amortisation of intangible assets and long-term deferred expenses 1,117,376 876,696 1,115,611 875,406 Net losses on disposal of fi xed assets 3,268 3,679 3,268 3,679 Net losses on fair value changes 1,042,576 466,139 1,042,576 466,139 Investment income 133,089 (446,689) 133,089 (446,689) Interest expense on subordinated debts issued 752,886 859,244 752,886 859,244 Increase in deferred tax assets, net (692,779) (445,148) (681,001) (445,148) Increase in operating receivables (212,082,740) (262,747,153) (208,107,857) (258,529,807) Increase in operating payables 234,276,461 258,807,608 230,590,738 254,951,733Net cash fl ows from operating activities 46,333,337 13,659,469 46,378,247 13,959,517

(b) Net increase/(decrease) in cash and cash equivalentsThe Group The Bank2011 2010 2011 2010

Cash at the end of the year 156,645,322 91,064,923 156,169,156 90,528,770Less: Cash at the beginning of the year 91,064,923 115,888,340 90,528,770 115,848,609Net increase/(decrease) in cash and cash equivalents 65,580,399 (24,823,417) 65,640,386 (25,319,839)

(c) Cash and cash equivalentsThe Group The Bank

31 December2011

31 December2010

31 December2011

31 December2010

Cash on hand 5,092,114 3,887,988 5,089,268 3,886,046Deposits with the central bank 25,981,348 32,271,582 25,981,348 32,262,544Deposits with banks and other fi nancial institutions 81,420,871 41,198,662 80,947,551 40,673,489Placements with banks and other fi nancial institutions 44,150,989 13,706,691 44,150,989 13,706,691Total of cash and cash equivalents 156,645,322 91,064,923 156,169,156 90,528,770

203

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48 Related party relationships and transactions

(a) China Investment Corporation

Approved by the State Council of the PRC, China Investment Corporation (“CIC”) was established on 29 September 2007 with a registered capital of USD200 billion. Huijin is a wholly owned subsidiary of CIC and exercises its rights and obligations as an investor on behalf of CIC.

(b) Huijin and its affiliates

Huijin was incorporated as a wholly state-owned investment company on 16 December 2003. It was registered in Beijing with a registered capital of RMB552,117 million and its organisation registration number is 71093296-1. Apart from equity investments as authorised by the State Council of the PRC, it does not engage in any other commercial operations.

The Group’s transactions with Huijin and its affi liates mainly include deposit taking, purchase and sale of debt securities, money market transactions and inter-bank clearing. These transactions are priced based on market prices and conducted under normal commercial terms.

The Group has issued subordinated debts with a nominal value of RMB16,000 million in 2008 and 2009. These are bearer bonds and tradable in the secondary market. Accordingly, the Group has no information in respect of the amount of the debts held by these banks and other fi nancial institutions as at the balance sheet dates.

The Group’s material transactions and balances with Hujin and its affi liates in the normal course of business are summarised as follows:

2011 2010

Interest income 1,965,409 405,616Interest expense (3,952,296) (2,416,963)

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48 Related party relationships and transactions (continued)

(b) Huijin and its affiliates (continued)

The Group’s balances with Huijin and its affi liates are summarised as follows:

31 December

2011 2010

Deposits with banks and other fi nancial institutions 23,557,014 15,426,421Placements with banks and other fi nancial institutions 13,993,677 6,380,380Financial assets held for trading 448,751 162Financial assets held under resale agreements 1,702,100 1,600,004Interests receivable 579,675 496,123Loans and advances to customers 1,801,290 332,000Available-for-sale fi nancial assets 8,740,559 5,042,997Held-to-maturity investments 24,198,196 31,420,652Deposits from banks and other fi nancial institutions 56,714,420 64,026,132Placements from banks and other fi nancial institutions 7,498,037 1,132,674Financial liabilities held for trading — 5,270,000Financial assets sold under repurchase agreements 19,432,000 1,490,000Deposits from customers 11,499,096 11,645,348Interests payable 1,274,634 620,995Other liabilities — 178Guarantees received 200,203 2,264,000

(c) China Everbright Group Company

The organisation registration number of China Everbright Group Company is 10206389-7. The transactions and balances with China Everbright (Group) and its affi liates are summarised in Note 48(d)(ii).

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(d) Transactions between the Group and other related parties

(i) Related parties information

Other related parties having transactions with the Group include:

Related party Relationship with the GroupChina Everbright (Group)’s affi liated companies— China Everbright Group Co., Ltd Common chairman in the Boards of Directors

with China Everbright (Group)— China Everbright Limited Shareholder, subsidiary of China Everbright

Holdings— Everbright Securities Co., Ltd (“Everbright Securities”)

Subsidiary of China Everbright Group Company

— Everbright Pramerica Fund Management Co. Ltd.


— Everbright Futures Co. Ltd. Subsidiary of China Everbright Group Company— Dacheng Fund Management Co. Ltd. Subsidiary of China Everbright Group Company— Shanghai Everbright Convention and Exhibition Centre Limited(*)


— China Everbright Investment Management Corporation (*)


— Everbright International Hotel and Property Management Company Limited (*)


— Everbright Real Estate Company Limited (*) Subsidiary of China Everbright Group Company— China Everbright International Trust and Investment Company Limited (*)


— China Everbright Travel, Inc (*) Subsidiary of China Everbright Group Company— Everbright Jinkong Capital Management Company Limited


— Sun Life Everbright Life Insurance Co. Ltd. Subsidiary of China Everbright Group CompanyOther related parties— Glorious Sun Enterprises Ltd. Chung ShuiMing, Independent director— China State Construction Engineering Corporation Ltd.

Chung ShuiMing, Independent director

— Sinosteel Co., Ltd. Chung ShuiMing, Independent director— China M&A Group Wang Wei, Chairman of the Board— China Sports Industry Group Co., Ltd. Wang Wei, Independent director— First-Trust Fund Management Co., Ltd. Yu Erniu, Independent director— Shanghai Chengtou Holding Co., Ltd. Wang Wei, Independent director— Rural Commercial Bank of ZHANGJIAGANG

Zhang Xinze, Independent director

— China UnionPay Co., Ltd. Lin Li, Director— State Development & Investment Corp. Chung ShuiMing, Independent director— Air China Limited Jia Kang, Independent director— UFIDA Government Affairs Software Co., Ltd.

Jia Kang, Director

* These companies were transferred to China Everbright Industrial (Group) Company Limited on 30 November 2007 and the transfer of equity interests was still in progress as at 31 December 2011 except for Shanghai Everbright Convention and Exhibition Centre Limited.

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(d) Transactions between the Group and other related parties (continued)

(ii) Related party transactions and balances

The Group’s material transactions and balances as at the balance sheet dates with China Everbright (Group) and the above related parties are summarised as follows:

China Everbright

(Group)

China Everbright

Limited

Affi liates of China

Everbright (Group) Others Total

Transactions with related parties for the year ended 31 December 2011:Interest income — 1,078 69 104,340 105,487Interest expense (8,818) (3,446) (281,429) (5,448) (299,141)Operating and administrative expense (590) (72) (5,180) (4,962) (10,804)Balances with related parties as at 31 December 2011:Financial assets held under resale agreements — — 198,100 — 198,100Loans and advances to customers — 14,841 — 10,000 24,841Interests receivable — 30 — 3,119 3,149Available-for-sale fi nancial assets — — — 1,422,529 1,422,529

— 14,871 198,100 1,435,648 1,648,619

Deposits from banks and other fi nancial instituitions — — 3,053,413 4,218 3,057,631Financial liabilities held for trading — — 5,432 — 5,432Deposits from customers 113,091 17,712 1,612,456 933,095 2,676,354Interests payable 730 6 27,567 7,142 35,445

113,821 17,718 4,698,868 944,455 5,774,862

Signifi cant off-balance sheet items with related parties as at 31 December 2011:Guarantee granted (Note) 179,928 — — — 179,928

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(d) Transactions between the Group and other related parties (continued)

(ii) Related party transactions and balances (continued)

China Everbright

(Group)

China Everbright

Limited

Affi liates of China

Everbright (Group) Others Total

Transactions with related parties for the year ended 31 December 2010:Interest income — 8,280 48 28,526 36,854Interest expense (377) (2,749) (284,547) (1,398) (289,071)Operating and administrative expense (619) (57) (77,075) (1,078) (78,829)Balances with related parties as at 31 December 2010:Loans and advances to customers — 150,000 — — 150,000Interests receivable — — — 4,417 4,417Available-for-sale fi nancial assets — — — 1,478,419 1,478,419

— 150,000 — 1,482,836 1,632,836

Deposits from banks and other fi nancial institutions — — 8,592,233 1,238 8,593,471Deposits from customers 32,567 142,965 1,166,305 79,134 1,420,971Interests payable 4 38 5,693 1 5,736

32,571 143,003 9,764,231 80,373 10,020,178

Signifi cant off-balance sheet items with related parties as at 31 December 2010:Guarantee granted (Note) 179,928 — — — 179,928

Note: As at 31 December 2011, the Bank’s guarantee obligation for the interest of RMB180 million due to one of the

state-owned commercial bank has not been waived for China Everbright Group Company.

(e) Transactions between the Group and the Group’s key management personnel:

31 December2011

31 December2010

Remuneration of key management personnel 12,784 11,683

The above remuneration of key management personnel for the year ended 31 December 2011 is yet subject to approval by relevant departments. The expected under-accrual amount is not signifi cant to the Group and the Bank’s fi nancial statements.

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(f) The Group’s percentage of main related party transactions:

2011 The Bank

Amount % Amount %

Interest income 2,070,896 2.66% 442,470 0.82%

Interest expense (4,251,437) 11.06% (2,706,034) 11.40%Operating and administrative expense (49,393) 0.34% (78,829) 0.63%

Signifi cant balance sheet items

with related parties:

Deposits with banks and other fi nancial institutions 23,557,014 22.38% 15,426,421 28.96%Placements with banks and other fi nancial institutions 13,993,677 17.12% 6,380,380 26.77%

Financial assets held for trading 448,751 1.97% 162 0.0007%Financial assets held under resale agreements 1,900,200 0.92% 1,600,004 0.94%

Interests receivable 582,823 9.55% 500,540 12.09%Loans and advances to customers 1,826,130 0.21% 482,000 0.06%Available-for-sale fi nancial assets 10,163,088 18.68% 6,521,416 8.45%

Held-to-maturity investments 24,198,196 28.81% 31,420,652 35.79%Deposits from banks and other fi nancial institutions 59,772,052 22.09% 72,619,603 36.82%Placements from banks and other fi nancial institutions 7,498,037 27.40% 1,132,674 6.22%Financial liabilities held for trading 5,432 0.01% 5,270,000 15.75%Financial assets sold under repurchase agreements 19,432,000 47.85% 1,490,000 11.75%

Deposits from customers 14,175,450 1.20% 13,066,319 1.27%

Interests payable 1,310,078 10.38% 626,731 7.34%

Other liabilities — — 178 0.0002%

Signifi cant off-balance sheet

items with related parties:

Guarantees received 200,203 0.04% 2,264,000 0.41%Guarantees granted 179,928 15.50% 179,928 15.50%

The above transactions with the Group and other related parties were conducted under normal commercial terms or relevant agreements.

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49 Segment reporting

The Group manages its business by business lines and geographical areas. Consistent with the way in which information is reported internally to the Group’s most senior executive management for the purposes of resource allocation and performance assessment, the Group defi nes reporting segments based on the following operating segments:

Corporate banking

This segment represents the provision of a range of fi nancial products and services to corporations, government agencies and fi nancial institutions. These products and services include corporate loans and advances, trade fi nancing and deposit taking activities, agency services, corporate wealth management services, consulting and advisory services, remittance and settlement services, custody services, and guarantee services.

Retail banking

This segment represents the provision of a range of fi nancial products and services to retail customers. The products and services include personal loans and deposit taking activities, bank card business, personal wealth management services, remittance services, and securities agency services.

Treasury business

This segment covers the Group’s treasury operations. The treasury business enters into inter-bank money market transactions, repurchases transactions, and investments. It also trades in debt securities, derivatives and foreign currency trading for its own accounts. The treasury segment also covers customer-driven derivatives and foreign currency trading, as well as management of the Group’s overall liquidity position, including the issuance of subordinated debts.

Others

These represent equity investments and related income.

Measurement of segment assets and liabilities and of segment income, expenses and results is based on the Group’s accounting policies.

Internal charges and transfer prices are determined with reference to market rates and have been refl ected in the performance of each segment. Interest income and expense earned from third parties are referred to as “external net interest income/expense”. Net interest income and expense arising from internal charges and transfer pricing adjustments are referred to as “internal net interest income/expense”.

Segment income, expenses, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Segment income, expenses, assets, and liabilities are determined before intra-group balances and intra-group transactions are eliminated as part of the consolidation process. Segment capital expenditure is the total cost incurred during the Relevant Periods to acquire fi xed assets, intangible assets and other long-term assets.

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49 Segment reporting (continued)

(a) Segment results, assets and liabilities

The Group

2011

Corporate banking

Retailbanking

Treasurybusiness Others Total

Operating income External net interest income 19,069,355 9,373,636 10,997,245 — 39,440,236 Internal net interest income/ (expense) 9,094,510 (628,994) (8,465,516) — —

Net interest income 28,163,865 8,744,642 2,531,729 — 39,440,236 Net fee and commission income 3,603,903 3,267,216 102,000 — 6,973,119 Investment income — — (135,192) 2,103 (133,089) Net gain on fair value changes — — (1,042,576) — (1,042,576) Net foreign exchange gain 194,782 30,176 535,294 — 760,252 Other operating income 38,059 36,366 186 — 74,611

Operating income 32,000,609 12,078,400 1,991,441 2,103 46,072,553

Operating expenses Business taxes and surcharges (2,402,262) (945,752) (100,120) — (3,448,134) Operating and administrative expenses (8,997,914) (5,643,527) (78,608) — (14,720,049) Impairment losses on assets (3,251,810) (303,306) (142,962) — (3,698,078) Other operating expenses (54,199) (4,852) (67) — (59,118)

Total operating expenses (14,706,185) (6,897,437) (321,757) — (21,925,379)

Operating profi t 17,294,424 5,180,963 1,669,684 2,103 24,147,174 Add: Non-operating income 58,809 38 — 67,303 126,150 Less: Non-operating expenses (27,477) (73) — (34,390) (61,940)

Profi t before tax 17,325,756 5,180,928 1,669,684 35,016 24,211,384

Segment assets 1,107,552,189 283,471,912 339,084,673 99,125 1,730,207,899

Segment liabilities 1,320,753,012 257,990,800 58,274,137 — 1,637,017,949

Other segment information: — Depreciation and amortisation (672,634) (441,515) (3,227) — (1,117,376)

— Capital expenditure 1,250,059 827,999 4,927 — 2,082,985

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(a) Segment results, assets and liabilities (continued)

The Group

2010

Corporate banking

Retailbanking

Treasurybusiness Others Total

Operating income External net interest income 16,110,240 6,687,681 7,624,148 — 30,422,069 Internal net interest income/ (expense) 6,558,869 (678,127) (5,880,742) — —

Net interest income 22,669,109 6,009,554 1,743,406 — 30,422,069 Net fee and commission income 2,565,802 2,128,653 14,073 — 4,708,528 Investment income — — 444,657 2,032 446,689 Net gain on fair value changes — — (466,139) — (466,139) Net foreign exchange gain 134,256 34,207 191,838 — 360,301 Other operating income 31,454 27,020 63 — 58,537

Operating income 25,400,621 8,199,434 1,927,898 2,032 35,529,985

Operating expenses Business taxes and surcharges (1,716,464) (642,943) (71,350) — (2,430,757) Operating and administrative expenses (7,662,416) (4,894,563) (33,368) — (12,590,347) Impairment losses on assets (2,575,831) (856,567) (58,999) — (3,491,397) Other operating expenses (36,274) — — — (36,274)

Total operating expenses (11,990,985) (6,394,073) (163,717) — (18,548,775)

Operating profi t 13,409,636 1,805,361 1,764,181 2,032 16,981,210 Add: Non-operating income 151,545 2 — 50,814 202,361 Less: Non-operating expenses (30,018) (70) — (42,917) (73,005)

Profi t before tax 13,531,163 1,805,293 1,764,181 9,929 17,110,566

Segment assets 958,447,370 257,877,965 264,938,639 99,125 1,481,363,099

Segment liabilities 1,153,340,082 212,213,551 36,906,682 — 1,402,460,315

Other segment information: — Depreciation and amortisation (533,655) (340,718) (2,323) — (876,696)

— Capital expenditure 1,482,433 946,476 6,452 — 2,435,361

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(a) Segment results, assets and liabilities (continued)

Reconciliation between segment assets, liabilities and total assets and total liabilities:

31 December

Note 2011 2010

Segment assets 18 1,730,207,899 1,481,363,099Goodwill 19 1,281,000 1,281,000Deferred tax assets 1,856,708 1,306,243

Total assets 1,733,345,607 1,483,950,342

Segment liabilities 1,637,017,949 1,402,460,315Dividend payable 33 178,025 27,325

Total liabilities 1,637,195,974 1,402,487,640

(b) Geographical informationThe Group operates principally in Mainland China with branches located in 26 provinces, autonomous regions and municipalities directly under the central government, and subsidiaries located in Wuhan city of Hubei Province and Shao Shan city of Hunan Province.

Non-current assets include fi xed assets, and use rights and intangible assets. In presenting of geographical information, non-current assets are allocated based on geographical location of the underlying assets. Operating income is allocated based on the locations of the branches which generate income.

Geographical areas, as defi ned for management reporting purposes, are as follows:

— “Yangtze River Delta” refers to the following areas serviced by branches of the Bank: Shanghai, Nanjing, Hangzhou, Suzhou, Ningbo and Wuxi;

— “Pearl River Delta” refers to the following areas serviced by branches of the Bank: Guangzhou, Shenzhen, Fuzhou, Xiamen and Haikou;

— “Bohai Rim” refers to the following areas serviced by branches of the Bank: Beijing, Tianjin, Shijiazhuang, Jinan, Qingdao and Yantai;

— “Central” refers to the following areas serviced by subsidiaries and branches of the Bank: Everbright Financial Leasing, Shaoshan Everbright, Zhengzhou, Taiyuan, Changsha, Wuhan, Hefei and Nanchang;

— “Western” refers to the following areas serviced by branches of the Bank: Xi’an, Chengdu, Chongqing, Kunming, Nanning and Huhehaote;

— “North eastern” refers to the following areas serviced by branches of the Bank: Heilongjiang, Changchun, Shenyang and Dalian; and

— “Head Offi ce” refers to the headquarter of the Group.

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(b) Geographical information (continued)

Operating Income

Yangtze

River Delta Bohai Rim Head Offi ce Central

Pearl

River Delta Western

North

eastern Total

2011 10,003,074 9,764,947 5,441,732 6,316,605 6,070,861 5,478,301 2,997,033 46,072,553

2010 8,481,262 8,046,510 2,700,739 4,933,442 4,637,096 4,435,919 2,295,017 35,529,985

Non-current Asset

Yangtze

River Delta Bohai Rim Head Offi ce Central

Pearl

River Delta Western

North

eastern Total

2011.12.31 3,241,514 852,421 4,128,781 856,025 968,519 514,189 778,955 11,340,404

2010.12.31 3,228,503 849,219 3,555,666 697,403 879,545 527,422 795,787 10,533,545

50 Risk Management

The Group has exposure to the following risks from its use of fi nancial instruments: credit risk, market risk, liquidity risk and operational risk.

This note presents information about the Group’s exposure to each of the above risks and their sources, the Group’s objectives, policies and procedures for measuring and managing these risks.

The Group’s risk management policies were established to identify and analyse the risks to which the Group is exposed, to set appropriate risk limits, and to design relevant internal control policies and systems for monitoring risks and adhering to risk limits. Risk management policies and relevant internal control systems are reviewed regularly to refl ect changes in market conditions and the Group’s activities. The Internal Audit Department of the Group undertakes both regular and ad hoc reviews of the compliance of internal control implementation with risk management policies.

(a) Credit risk

Credit risk represents the potential loss that may arise from the failure of a debtor or counterparty to meet its contractual obligation or commitment to the Group. It arises primarily from credit and bond investment portfolios and guarantees granted.

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50 Risk Management (continued)

(a) Credit risk (continued)

Credit business

The board of directors is responsible for setting the Group’s risk management strategy and the overall risk tolerance level. The Board also monitors the Group’s risk management process and regularly assesses the Group’s risk position and risk management strategies. The Board gives advice on internal controls relating to risk management. The responsible department for credit risk management includes Risk Management Department, Credit Approval Department, Special Assets Resolution Department and Legal and Compliance Department, and the Group dispatch Credit Offi cer to Retail Banking Department of Head Offi ce, the business line of medium-sized and small enterprises and the fi rst-level branches. The Risk Management Department is responsible for implementing the Group’s overall risk management system. Besides risk monitoring and control, the Risk Management Department is also responsible for formulating risk management policies. To ensure the independence of credit approval, the Credit Approval Department is independent from customer relationship and product management departments. Front offi ce departments such as the Corporate Banking Department and the Retail Banking Department carry out credit businesses according to the Group’s risk management policies and procedures.

The Group continuously improves the internal control mechanism and strengthens the whole management of the credit business. The Group has established comprehensive assessment and inquiry mechanisms, assigning the credit management accountability to the relevant departments and individuals.

For corporate and institutional businesses, the Group has established industry-specifi c limits for credit approval. It has put in place continuous monitoring mechanism, with regular reporting of credit exposures to the board. The Group’s credit risk management covers key operational phases, including pre-lending evaluations, credit approval, and post-lending monitoring. With respect to pre-lending evaluations, the Group assesses customer credit ratings and performs integrated analysis on the risk and return of the loan. In the credit approval phase, all credit applications are approved by designated credit offi cers. During the post-lending monitoring, the Group continually monitors outstanding loans and other credit related businesses. Any adverse events that may signifi cantly affect a borrower’s repayment ability are reported immediately, and actions are taken to mitigate the risks. The Group has further enhanced the parallel operating mechanism. Customer relationship managers and risk managers work independently to manage the key risk points throughout the process of credit business.

For personal credit operation business, credit assessment of applicants is used as the basis for loan approval. In the credit assessment, customer relationship managers are required to assess the income level, credit history, and repayment ability of the applicant. The customer relationship managers then forward the application and their recommendations to the loan-approval departments for further approval. The Group monitors borrowers’ repayment ability, the status of collateral and any changes to their value during the post-lending phase. Once a loan becomes overdue, the Group starts the recovery process according to standardised loan recovery procedures.

The Group adopts a loan risk classifi cation approach to manage its loan portfolio risk. Loans are generally classifi ed as normal, special mention, substandard, doubtful and loss according to their levels of risk. Substandard, doubtful and loss loans are considered to be impaired loans and advances. They are classifi ed as such when one or more events demonstrate that there is objective evidence of a loss event. The impairment loss is assessed collectively or individually as appropriate.

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Credit business (continued)

The core defi nitions of the fi ve 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 currently able to service their loans and interest, although repayment may be adversely affected by specifi c factors.

Substandard: Borrowers’ abilities to service their loans is in question and they cannot rely entirely on normal business revenues to repay principal and interest. Losses may ensue even when collateral or guarantees are invoked.

Doubtful: Borrowers cannot repay principal and interest in full and signifi cant losses will need to be recognised even when collateral or guarantees are invoked.

Loss: Principal and interest of loans cannot be recovered or only a small portion of them can be recovered after taking all possible measures or resorting to all necessary legal procedures.

Treasury Business

The Group sets credit limits for treasury operations based on the credit risk inherent in the products, counterparties and geographical areas. Credit risk exposure is closely monitored on a systematic real-time basis, and credit risk limits are reviewed and updated regularly.

(i) Maximum credit risk exposure

The maximum exposure to credit risk is represented by the net carrying amount of each type of fi nancial assets as at the balance sheet date, including derivative fi nancial instruments. The maximum exposure to credit risk in respect of these fi nancial guarantees as at the balance sheet date is disclosed in Notes 54(a).

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Treasury Business (continued)

(ii) Financial assets analysed by credit quality are summarised as follows:

The Group

31 December 2011

Loans and advances

Deposits/placements with banks and other

fi nancial institutions

Financial assets held

under resale agreements Investments (*) Others (**)

Impaired Individually assessed Gross amount 4,746,965 16,100 — 528 471,098 Provision for impairment losses (3,822,865) (16,100) — (528) (460,495)

Sub-total 924,100 — — — 10,603

Collectively assessed Gross amount 980,156 — — — 93,507 Provision for impairment losses (711,388) — — — (39,957)

Sub-total 268,768 — — — 53,550

Overdue but not impaired Gross amount — Less than 3 months (inclusive) 4,716,949 — — — —

Gross amount 4,716,949 — — — — Provision for impairment losses (280,343) — — — —

Sub-total 4,436,606 — — — —

Neither overdue nor impaired Gross amount 879,380,935 187,008,574 206,940,906 161,380,199 65,540,198 Provision for impairment losses (16,228,177) — — (266,300) (325,197)

Sub-total 863,152,758 187,008,574 206,940,906 161,113,899 65,215,001

Total 868,782,232 187,008,574 206,940,906 161,113,899 65,279,154

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Treasury Business (continued)

(ii) Financial assets analysed by credit quality are summarised as follows: (continued)

The Group

31 December 2010

Loans and advances

Deposits/placements with banks and other

fi nancial institutions

Financial assets held

under resale agreements Investments (*) Others (**)

Impaired Individually assessed Gross amount 4,729,417 16,100 — 528 473,599 Provision for impairment losses (4,292,756) (16,100) — (528) (412,121)

Sub-total 436,661 — — — 61,478

Collectively assessed Gross amount 1,099,889 — — — 97,576 Provision for impairment losses (751,771) — — — (46,811)

Sub-total 348,118 — — — 50,765

Overdue but not impaired Gross amount — Less than 3 months (inclusive) 4,284,440 — — — —

Gross amount 4,284,440 — — — — Provision for impairment losses (229,733) — — — —

Sub-total 4,054,707 — — — —

Neither overdue nor impaired Gross amount 768,714,674 77,119,888 170,036,997 187,455,350 89,236,577 Provision for impairment losses (12,998,924) (12,001) — (123,337) (224,532)

Sub-total 755,715,750 77,107,887 170,036,997 187,332,013 89,012,045

Total 760,555,236 77,107,887 170,036,997 187,332,013 89,124,288

* Investments comprise fi nancial assets held for trading, available-for-sale fi nancial assets and held-to-maturity

investments.

** Others comprise positive fair value of derivatives, interest receivable, assets from wealth management business

recorded in other assets, and other receivables.

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(b) Market riskMarket risk is the risk of loss, in respect of the Group’s activities, arising from adverse movements in market rates including interest rates, foreign exchange rates, commodity prices, stock prices and other prices.

The board of directors is ultimately responsible for monitoring the Group’s market risk to ensure that the Group has effectively identifi ed, measured and monitored all types of market risk. The Risk Management Committee monitors the market risk management process within the scope authorized by the board of directors, which includes review and approval of market risk management strategies, policies, procedures. The Group is primarily exposed to market risk in its treasury business. The Treasury Department is responsible for the Group’s investments and proprietary trading business. The Planning and Financial Department is responsible for monitoring and managing the interest rate risk and foreign exchange risk on the daily basis. The Market Risk Management Division in the Treasury Department is responsible for formulating the market risk management policies and procedures, as well as identifying, measuring and monitoring the Group’s market risk.

The Group classifi ed the transactions as the banking book transactions and trading book transactions. The identifi cation, measurement, monitoring and controls over the relevant market risks are based on the nature and characteristics of these books. The trading book transactions consist of the Group’s investments which are acquired or incurred primarily for the purpose of selling in the near term, or for the purpose of short-term profi t taking. The banking book transactions represent non-trading businesses. Sensitivity analysis, scenario analysis and foreign currency gap analysis are the major tools employed by the Group to measure and monitor the market risk in its trading book transactions. Sensitivity gap analysis, stress testing and effective duration analysis are the major tools used by the Group to measure and monitor the market risk of its non-trading businesses.

Sensitivity analysis is a technique which assesses the sensitivity of the Group’s overall risk profi le and its risk profi le for each period with reference to the interest rate risks for different maturities.

Scenario analysis is a multi-factor analysis method which assesses the impact of multiple factors interacting simultaneously, taking into consideration of the probabilities of various scenarios.

Foreign currency gap analysis is a technique which estimates the impact of foreign exchange rate movements on the Group’s current profi t or loss. The foreign currency gap mainly arises from the currency mismatch in the Group’s on/off-balance sheet items.

Sensitivity gap analysis is a technique which estimates the impact of interest rate movements on the Group’s current profi t or loss. It is used to work out the gap between future cash infl ows and outfl ows by categorising each of the Group’s interest-bearing assets and interest-taking liabilities into different periods based on repricing dates.

The results of stress testing are assessed against a set of forward-looking scenarios using stress moves in market variables. The results are used to estimate the impact on profi t or loss.

Effective duration analysis is a technique which estimates the impact of interest rate movements by giving a weight to each period’s exposure according to its sensitivity, calculating the weighted exposure, and summarising all periods’ weighted exposures to estimate the non-linear impact of a change in interest rates on the Group’s economic value.

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(b) Market risk (continued)

Interest rate risk

The Group is primarily exposed to interest rate risk arising from repricing risk in its commercial banking business and the risk of treasury position.

Repricing risk

Repricing risk, which is also known as “maturity mismatch risk”, is the most common form of interest rate risk. It is caused by the differences in timing between the maturities (related to fi xed interest instruments) or repricing (related to fl oating interest instruments) of assets, liabilities and off-balance sheet items. The mismatch of repricing timing causes the Group’s income or its inherent economic value to vary with the movement in interest rates.

The Planning and Financial Department is responsible for measuring, monitoring and managing interest rate risk. The Group regularly performs assessment on the interest rate repricing gap between the assets and liabilities that are sensitive to changes in interest rates and sensitivity analysis on the net interest income or its inherent economic value as a result of changes in interest rates. The primary objective of interest rate risk management is to minimize potential adverse effects on its net interest income or its inherent economic value caused by interest rate volatility.

Trading interest rate risk

Trading interest rate risk mainly arises from the treasury’s investment portfolios. Interest rate risk is monitored using the effective duration analysis method. The Group employs other supplementary methods to measure its interest rate sensitivity, which is expressed as changes in the investment portfolios’ fair value given a 100 basis points (1%) movement in the interest rates.

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(i) The following tables indicate the effective interest rates for the year and the assets and liabilities as at the balance sheet date by the expected next repricing dates (or by maturity date, depending on which is earlier):

The Group

31 December 2011

Effective

interest rate

(Note (1))

Total

Non-interest

bearing

Less than

three months

Between

three months

and one year

Between

one year

and fi ve years

More than

fi ve years

Assets

Cash and deposits with the central bank 1.49% 228,665,753 11,221,483 217,444,270 — — —

Deposits with banks and other fi nancial

institutions 4.92% 105,262,951 290,025 95,769,846 6,683,080 2,520,000 —

Placements with banks and other fi nancial

institutions 4.01% 81,745,623 — 55,519,827 26,225,796 — —

Financial assets held under resale

agreements 5.43% 206,940,906 — 156,951,336 49,960,101 29,469 —

Loans and advances to customers

(Note (2)) 6.00% 868,782,232 — 619,341,094 229,240,859 15,291,931 4,908,348

Investments (Note (3)) 3.71% 161,213,024 275,454 10,351,900 41,235,338 72,027,425 37,322,907

Others — 80,735,118 22,331,049 12,705,367 12,202,525 33,496,177 —

Total assets 4.92% 1,733,345,607 34,118,011 1,168,083,640 365,547,699 123,365,002 42,231,255

Liabilities

Deposits from banks and other fi nancial

institutions 4.52% 270,627,082 — 240,348,798 30,278,284 — —

Placements from banks and other fi nancial

institutions 3.03% 27,361,979 21,870 8,083,099 19,257,010 — —

Financial assets sold under repurchase

agreements 4.15% 40,608,969 3,703 40,605,266 — — —

Deposits from customers

(including structured deposits) 2.10% 1,225,278,300 4,944,371 927,015,426 201,782,314 86,237,189 5,299,000

Subordinated debts issued 4.71% 16,000,000 — — 2,500,000 13,500,000 —

Others — 57,319,644 24,726,388 29,241,948 3,351,308 — —

Total liabilities 2.62% 1,637,195,974 29,696,332 1,245,294,537 257,168,916 99,737,189 5,299,000

Asset-liability gap 2.30% 96,149,633 4,421,679 (77,210,897) 108,378,783 23,627,813 36,932,255

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(i) The following tables indicate the effective interest rates for the year and the assets and liabilities as at the balance sheet date by the expected next repricing dates (or by maturity date, depending on which is earlier): (continued)

The Group

31 December 2010

Effective

interest rate

(Note (1))

Total

Non-interest

bearing

Less than

three months

Between

three months

and one year

Between

one year

and fi ve years

More than

fi ve years

Assets

Cash and deposits with the central bank 1.44% 185,744,693 8,102,527 177,642,166 — — —

Deposits with banks and other fi nancial

institutions 2.28% 53,274,794 117,714 46,380,949 6,776,131 — —

Placements with banks and other fi nancial

institutions 2.06% 23,833,093 — 17,368,167 6,464,926 — —

Financial assets held under resale

agreements 2.80% 170,036,997 — 149,566,917 20,439,252 30,828 —

Loans and advances to customers

(Note (2)) 5.03% 760,555,236 — 532,312,892 198,724,741 24,497,244 5,020,359

Investments (Note (3)) 3.42% 187,431,138 334,160 8,989,013 78,516,711 58,003,327 41,587,927

Others — 103,074,391 19,134,332 3,632,954 7,860,165 72,446,940 —

Total assets 3.87% 1,483,950,342 27,688,733 935,893,058 318,781,926 154,978,339 46,608,286

Liabilities

Deposits from banks and other fi nancial

institutions 2.36% 197,214,468 — 158,429,917 38,784,551 — —

Placements from banks and other fi nancial

institutions 1.56% 18,213,913 22,604 5,952,498 12,238,811 — —

Financial assets sold under repurchase

agreements 2.34% 12,678,724 3,703 12,675,021 — — —


(including structured deposits) 1.54% 1,063,180,160 4,356,002 755,770,332 231,376,958 67,820,868 3,856,000

Subordinated debts issued 4.63% 16,000,000 — — 2,500,000 13,500,000 —

Others — 95,200,375 18,304,911 72,318,518 3,768,031 808,915 —

Total liabilities 1.79% 1,402,487,640 22,687,220 1,005,146,286 288,668,351 82,129,783 3,856,000

Asset-liability gap 2.08% 81,462,702 5,001,513 (69,253,228) 30,113,575 72,848,556 42,752,286

Note:

(1) Effective interest rate represents the ratio of interest income/expense to average interest bearing assets/liabilities.

(2) For loans and advances to customers, the category “Less than three months” includes overdue amounts (net of

provision for impairment losses) of RMB5,440 million as at 31 December 2011 (31 December 2010: RMB4,735

million). Overdue amounts represent loans for which the principal or interest is overdue one day or more.

(3) Investments include fi nancial assets held for trading, available-for-sale fi nancial assets and held-to-maturity

investments.

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(ii) Interest rate sensitivity analysis

The Group uses the sensitivity analysis to measure the impact of changes in interest rates on the Group’s net profi t or loss and equity. As at 31 December 2011, assuming other variables remain unchanged, the increase in estimated interest rate of one hundred basis points will cause the Group’s net profi t to decrease by RMB1,224 million (31 December 2010: RMB1,166 million) and equity to decrease by RMB2,286 million (31 December 2010: RMB2,240 million); a decrease in estimated interest rate of one hundred basis points will cause the Group’s net profi t to increase by RMB1,227 million (31 December 2010: RMB1,150 million) and equity to increase by RMB2,344 million (31 December 2010: RMB2,264 million).

The sensitivity analysis above is based on a static interest rate risk profi le of the Group’s assets and liabilities. This analysis measures only the impact of changes in interest rates within one year, showing how annualised net profi t or loss and equity would have been affected by repricing of the Group’s assets and liabilities within the one-year period. The sensitivity analysis is based on the following assumptions:

— Interest rate movements at the balance sheet date apply to all derivative and non-derivative fi nancial instruments of the Group;

— At the balance sheet date, an interest rate movement of one hundred basis points is based on the assumption of interest rates movement over the next 12 months;

— There is a parallel shift in the yield curve with the changes in interest rates;

— There are no other changes to the assets and liabilities portfolio;

— Other variables (including exchange rates) remain unchanged; and

— The analysis does not take into account the effect of risk management measures taken by the management.

Due to the adoption of the aforementioned assumptions, the actual changes in the Group’s net profi t or loss and equity caused by an increase or decrease in interest rates might vary from the estimated results of this sensitivity analysis.

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Foreign currency risk

The Group’s foreign currency exposure mainly arises from the foreign currency portfolio within the treasury’s proprietary investments, and other foreign currency exposures. The Group manages foreign currency risk by spot and forward foreign exchange transactions, swap transactions and matching its foreign currency denominated assets with corresponding liabilities in the same currencies.

The foreign exchange exposures at 31 December are as follows:

The Group

31 December 2011

RMB USD Others Total

AssetsCash and deposits with the central bank 225,781,022 2,377,086 507,645 228,665,753Deposits with banks and other fi nancial institutions 97,925,522 4,390,667 2,946,762 105,262,951Placements with banks and other fi nancial institutions 74,413,626 3,209,940 4,122,057 81,745,623Financial assets held under resale agreements 206,911,437 — 29,469 206,940,906Loans and advances to customers 845,205,124 23,244,914 332,194 868,782,232Investments (Note (i)) 159,599,756 1,490,962 122,306 161,213,024Other assets 77,229,432 2,260,838 1,244,848 80,735,118

Total assets 1,687,065,919 36,974,407 9,305,281 1,733,345,607

LiabilitiesDeposits from banks and other fi nancial institutions 261,461,699 8,578,669 586,714 270,627,082Placements from banks and other fi nancial institutions 19,796,268 7,174,743 390,968 27,361,979Financial assets sold under repurchase agreements 40,608,969 — — 40,608,969Deposits from customers (including structured deposits) 1,192,666,792 25,807,956 6,803,552 1,225,278,300Subordinated debts issued 16,000,000 — — 16,000,000Other liabilities 53,061,742 2,243,449 2,014,453 57,319,644

Total liabilities 1,583,595,470 43,804,817 9,795,687 1,637,195,974

Net position 103,470,449 (6,830,410) (490,406) 96,149,633

Off-balance sheet credit commitments 520,592,910 30,089,288 3,041,799 553,723,997

Derivative fi nancial instruments (Note (ii)) (9,544,108) 8,548,077 635,977 (360,054)

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Foreign currency risk (continued)

The Group

31 December 2010

RMB USD Others Total

AssetsCash and deposits with the central bank 183,957,820 1,382,917 403,956 185,744,693Deposits with banks and other fi nancial institutions 48,976,234 2,329,949 1,968,611 53,274,794Placements with banks and other fi nancial institutions 19,246,694 3,591,713 994,686 23,833,093Financial assets held under resale agreements 170,006,169 — 30,828 170,036,997Loans and advances to customers 738,486,550 21,780,721 287,965 760,555,236Investments (Note (i)) 185,489,313 1,809,792 132,033 187,431,138Other assets 101,562,552 248,660 1,263,179 103,074,391

Total assets 1,447,725,332 31,143,752 5,081,258 1,483,950,342

LiabilitiesDeposits from banks and other fi nancial institutions 191,653,185 5,269,142 292,141 197,214,468Placements from banks and other fi nancial institutions 10,996,268 7,044,928 172,717 18,213,913Financial assets sold under repurchase agreements 12,678,724 — — 12,678,724Deposits from customers (including structured deposits) 1,038,146,966 18,972,681 6,060,513 1,063,180,160Subordinated debts issued 16,000,000 — — 16,000,000Other liabilities 89,422,591 2,912,098 2,865,686 95,200,375

Total liabilities 1,358,897,734 34,198,849 9,391,057 1,402,487,640

Net position 88,827,598 (3,055,097) (4,309,799) 81,462,702

Off-balance sheet credit commitments 423,755,969 24,220,184 3,015,686 450,991,839

Derivative fi nancial instruments (Note (ii)) (8,954,582) 4,814,432 4,074,736 (65,414)

Note:

(i) Investments include fi nancial assets held for trading, available-for-sale fi nancial assets, held-to-maturity investments and

long-term equity investments.

(ii) Derivative fi nancial instruments refl ect the net notional amounts of derivatives.

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Foreign currency risk (continued)

The Group uses sensitivity analysis to measure the potential effect of changes in the exchange rates on the Group’s net profi t or loss and equity. As at 31 December 2011, assuming other variables remain unchanged, an appreciation of one hundred basis points of the US dollar against the RMB would increase both the Group’s net profi t and equity by RMB2 million (31 December 2010: increase by RMB2 million); a depreciation of one hundred basis points of the US dollar against the RMB would decrease both the Group’s net profi t and equity by RMB2 million (31 December 2010: decrease by RMB2 million).

The sensitivity analysis mentioned above is based on a static foreign exchange exposure profi le of assets and liabilities and certain simplifi ed assumptions as set out below:

— The foreign exchange sensitivity is the gain and loss recognised as a result of one hundred basis points fl uctuation in the foreign currency exchange rates against RMB on the reporting date;

— The fl uctuation of exchange rates by one hundred basis points is based on the assumption of exchange rates movement over the next 12 months;

— The exchange rates against RMB for the US dollars and HK dollars change in the same direction simultaneously. Due to the immaterial proportion of the Group’s total assets and liabilities denominated in currencies other than US dollars and HK dollars, other foreign currencies are converted into US dollars through sensitivity analysis;

— The foreign exchange exposures calculated includes spot and forward foreign exchange exposures and swaps;

— Other variables (including interest rates) remain unchanged; and

— The analysis does not take into account the effect of risk management measures taken by the Group.

Due to the assumptions adopted, actual changes in the Group’s net profi t or loss and equity resulting from the increase or decrease in foreign exchange rates may differ from the results of this sensitivity analysis.

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(c) Liquidity risk

Liquidity risk is the risk that a commercial bank is unable to obtain funds on a timely basis or obtain funds at a reasonable cost to sustain its asset business or meet repayment obligations. This risk exists even if a bank’s solvency remains strong. In accordance with liquidity policies, the Group monitors the future cash fl ows and maintains an appropriate level of highly liquid assets.

The Asset and Liability Management Committee (“ALMC”) is responsible for managing the Group’s overall liquidity risk. The ALMC, chaired by the President of the Bank, is responsible for the formulation of the liquidity policies in accordance with regulatory requirements and prudential principles. Such policies include:

— Maintaining liquidity at a stable and suffi cient level; establishing integrated liquidity risk management system; ensuring the meeting on a timely basis of liquidity requirements and the payment of assets, liabilities, and off-balance sheet business, whether under a normal operating environment or a state of stress; balancing the effectiveness and security of funds in an effi cient manner; and

— Making timely and reasonable adjustments to capital structure and scale in response to market changes and business developments, pursuing profi t maximization and cost minimization to a modest extent while ensuring appropriate liquidity; achieving the integration of the security, liquidity, and effectiveness of the Bank’s funds.

The Planning and Finance Department is responsible for executing these policies. It’s also responsible for monitoring medium- and long-term working capital on a regular basis, and for formulating liquidity management strategies. The Treasury Department is responsible for monitoring working capital on a daily basis and ensuring the liquidity of working capital meets management requirements based on the liquidity strategies outlined above. Signifi cant disbursement or portfolio changes must be reported to the ALMC on a timely basis.

A substantial portion of the Group’s assets are funded by deposits from customers. These deposits from customers, which have been growing in recent years, are widely diversifi ed in terms of type and duration and represent a stable source of funds.

The Group principally uses liquidity gap analysis to measure liquidity risk. Scenario analysis and stress testing are also adopted to assess the impact of liquidity risk.

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(c) Liquidity risk (continued)

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:

The Group

31 December 2011

Indefi nite

Repayable

on demand

Within

one month

Between

one month and

three months

Between

three months

and one year

Between

one year

and fi ve years

More than

fi ve years Total

Asset

Cash and deposits with

the central bank 197,592,291 31,073,462 — — — — — 228,665,753

Deposit with banks and

other fi nancial institutions — 15,020,806 37,980,140 43,058,925 6,683,080 2,520,000 — 105,262,951


other fi nancial institutions — — 37,982,956 12,421,870 31,340,797 — — 81,745,623

Financial assets held under

resale agreements — — 98,593,399 58,357,937 49,960,101 29,469 — 206,940,906

Loans and advances to

customers 2,855,707 26,736,959 51,033,482 83,704,733 326,782,148 225,117,217 152,551,986 868,782,232

Investments (*) 99,125 — 936 3,098,498 33,983,369 82,828,616 41,202,480 161,213,024

Others 15,455,964 1,141,536 918,018 6,023,256 17,447,158 38,804,509 944,677 80,735,118

Total assets 216,003,087 73,972,763 226,508,931 206,665,219 466,196,653 349,299,811 194,699,143 1,733,345,607

Liabilities

Deposits from banks and


Placements from banks and

other fi nancial institutions — 21,870 2,757,017 4,976,082 19,457,010 150,000 — 27,361,979

Financial assets sold

under repurchase agreements — 3,703 32,459,135 8,146,131 — — — 40,608,969


(including structured deposits) — 520,257,443 180,056,780 153,833,503 221,990,008 143,201,496 5,939,070 1,225,278,300

Subordinated debts issued — — — — — 16,000,000 — 16,000,000

Others — 3,791,315 24,648,130 16,381,154 7,824,917 3,070,955 1,603,173 57,319,644

Total liabilities — 572,295,098 361,452,786 242,933,177 285,550,219 167,422,451 7,542,243 1,637,195,974

Long/(Short) position 216,003,087 (498,322,335) (134,943,855) (36,267,958) 180,646,434 181,877,360 187,156,900 96,149,633

Notional amount of

derivative fi nancial instruments — — 48,475,050 37,159,288 98,978,839 68,566,778 4,875,904 258,055,859

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The Group

31 December 2010

Indefi nite

Repayable

on demand

Within

one month

Between

one month and

three months

Between

three months

and one year

Between

one year

and fi ve years

More than

fi ve years Total

Asset

Cash and deposits with the

central bank 149,585,123 36,159,570 — — — — — 185,744,693

Deposit with banks and

other fi nancial institutions — 14,428,662 30,146,132 7,000,000 1,700,000 — — 53,274,794


other fi nancial institutions — — 13,951,306 3,416,861 6,246,416 218,510 — 23,833,093

Financial assets held under

resale agreements — — 106,926,009 42,640,908 20,439,252 30,828 — 170,036,997

Loans and advances to

customers 2,368,909 14,752,642 34,449,684 62,871,572 247,958,603 252,426,270 145,727,556 760,555,236

Investments (*) 99,125 — 1,638,505 4,114,102 69,037,770 68,625,625 43,916,011 187,431,138

Others 12,643,860 2,113,472 352,953 2,270,638 8,448,226 72,873,000 4,372,242 103,074,391

Total assets 164,697,017 67,454,346 187,464,589 122,314,081 353,830,267 394,174,233 194,015,809 1,483,950,342

Liabilities




other fi nancial institutions — 22,604 2,052,507 3,899,991 12,238,811 — — 18,213,913


under repurchase agreements — 3,703 12,121,103 553,918 — — — 12,678,724


(including structured deposits) — 482,263,338 131,161,470 106,570,350 232,526,808 104,302,194 6,356,000 1,063,180,160

Subordinated debts issued — — — — — 16,000,000 — 16,000,000

Others — 3,257,310 49,896,067 28,734,094 8,565,456 3,153,836 1,593,612 95,200,375

Total liabilities — 549,448,264 232,075,584 186,442,524 292,115,626 134,456,030 7,949,612 1,402,487,640

Long/(Short) position 164,697,017 (481,993,918) (44,610,995) (64,128,443) 61,714,641 259,718,203 186,066,197 81,462,702

Notional amount of

derivative fi nancial instruments — — 32,440,821 22,332,567 46,868,156 74,234,200 5,245,285 181,121,029

* Investments include fi nancial assets held for trading, available-for-sale fi nancial assets, held-to-maturity investments and

long-term equity investments.

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The following tables provide an analysis of the contractual undiscounted cash fl ow of the non-derivative fi nancial liabilities at the balance sheet date:

The Group

31 December 2011

Carrying amount

Contractual

undiscounted

cash fl ow

Repayable

on demand

Within

one month

Between

one month and

three months

Between

three months

and one year

Between

one year

and fi ve years

More than

fi ve years

Non-derivative fi nancial

liabilities


other fi nancial institutions 270,627,082 274,835,789 48,271,474 122,638,210 60,929,314 37,923,768 5,073,023 —


other fi nancial institutions 27,361,979 27,905,939 21,870 2,794,742 5,046,969 19,879,269 163,089 —


under repurchase agreements 40,608,969 40,824,568 3,703 32,487,764 8,333,101 — — —


(including structured deposits) 1,225,278,300 1,255,827,563 520,323,664 180,227,197 154,774,662 226,121,246 166,701,085 7,679,709

Subordinated debts issued 16,000,000 17,634,300 — — 112,500 648,400 16,873,400 —

Other fi nancial liabilities 41,631,941 42,086,340 3,383,326 21,199,669 13,743,071 3,481,378 — 278,896

Total non-derivative

fi nancial liabilities 1,621,508,271 1,659,114,499 572,004,037 359,347,582 242,939,617 288,054,061 188,810,597 7,958,605

The Group

31 December 2010

Carrying

amount

Contractual

undiscounted

cash fl ow

Repayable

on demand

Within

one month

Between

one month and

three months

Between

three months

and one year

Between

one year

and fi ve years

More than

fi ve years

Non-derivative fi nancial

liabilities


other fi nancial institutions 197,214,468 199,859,447 63,928,226 37,100,597 47,413,278 39,860,461 11,556,885 —


other fi nancial institutions 18,213,913 18,441,341 28,185 2,059,034 3,918,321 12,435,801 — —


under repurchase agreements 12,678,724 12,695,862 3,703 12,135,313 556,846 — — —


(including structured deposits) 1,063,180,160 1,086,253,094 482,315,867 132,445,719 108,029,945 241,095,708 115,754,601 6,611,254

Subordinated debts issued 16,000,000 18,326,173 — — — 737,891 17,588,282 —

Other fi nancial liabilities 83,703,856 85,619,993 3,136,023 50,091,557 27,643,222 3,904,361 844,830 —

Total non-derivative

fi nancial liabilities 1,390,991,121 1,421,195,910 549,412,004 233,832,220 187,561,612 298,034,222 145,744,598 6,611,254

The analysis of the non-derivative fi nancial liabilities by contractual undiscounted cash fl ow might diverge from actual results.

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50 Risk management (continued)

(d) Operational risk

Operational risk refers to the risk of losses associated with internal processes defi ciencies, personnel mistakes and information systems failures, or impact from other external events.

The Group establishes a framework of policies and procedures to identify, assess, control, manage and report operational risk. The framework covers all business functions ranging from corporate banking, retail banking, trading, corporate fi nance, settlement, intermediary business, asset management and all supporting functions, including human resource management, fi nancial management, legal affairs, anti-money laundering and administration management. The key elements of the framework are listed as below:

— A multi-level operational risk management framework with segregation of duties between front and back offi ces under the leadership of senior management;

— A series of operational risk management policies covering all businesses on the basis of core basic operational risk management policy;

— A set of standard operational procedures covering all products and services, which is practicable, traceable and can be re-performed, investigated and remedied;

— A series of operational risk management tools, including Risk Control Self-Assessment (RCSA), Key Risk Index (KRI), Loss Event Collection and IT system monitoring;

— An operational risk management culture, the core values of the culture is that effective risk management could create value. It is supported with a team of operational risk management professionals across all branches, businesses and functions;

— An emergency plan and a business continuity system designed to deal with emergent and adverse circumstances, including public relation issues, natural disasters, IT system errors, bank runs, robberies, etc;

— An evaluation system on the operational risk management as well as an inquiry and disciplinary system on the non-compliance issues; and

— An independent risk assessment framework based on the internal audit and the compliance review.

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51 Fair value

(a) Methods and assumptions for measurement of fair value

The Group adopts the following methods and assumptions when evaluating fair values:

(i) Debts securities and equity investments

The fair value of debt securities and equity investments that are traded in an active market are based on their quoted market prices in an active market at the balance sheet date. The fair values of unlisted equity investments are estimated using the applicable price/earning ratios of comparable listed companies, after adjustment for the specifi c circumstances of the issuers.

(ii) Receivables and other non-derivative fi nancial assets

Fair values are estimated as the present value of the future cash fl ows, discounted at the market interest rates at the balance sheet date.

(iii) Subordinated debts issued and other non-derivative fi nancial liabilities

Fair values of subordinated debts issued are based on their quoted market prices at the balance sheet date, or the present value of estimated future cash fl ows. The fair values of other non-derivative fi nancial liabilities are valued at the present value of estimated future cash fl ows. The discount rates are based on the market interest rates at the balance sheet date.

(iv) Derivative fi nancial instruments

The fair value of foreign currency forward and swap contract is determined by the difference between the present value of the forward price and the contractual price at the balance sheet date or is based on quoted market prices. The fair values of interest rate swaps are estimated as the present value of estimated future cash fl ows. The yield curve is based on the optimised price between the broker’s quoted price and Reuters’ quoted price.

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51 Fair value (continued)

(b) Fair value measurement

(i) Financial assets

The Group’s fi nancial assets mainly consist of cash and deposits with the central bank, receivables with banks and other fi nancial institutions, loans and advances to customers, and investments.

Deposits with the central bank and receivables with banks and other fi nancial institutions are mostly priced at market interest rates and due within one year. Accordingly, the carrying amounts approximate the fair values.

Loans and advances to customers are mostly priced at fl oating rates close to the PBOC rates. Accordingly, the carrying amounts approximate the fair values.

Available-for-sale investments and held for trading investments are stated at fair value. The carrying amount and fair value of held-to-maturity investments are disclosed in Note 14.

(ii) Financial liabilities

The Group’s fi nancial liabilities mainly include payables to banks and other fi nancial institutions, fi nancial liabilities held for trading, deposits from customers and subordinated debts issued.

Financial liabilities held for trading are stated at fair value in the balance sheet. The carrying amount and fair value of subordinated debts issued are disclosed in Note 32. The carrying amounts of other fi nancial liabilities approximate their fair values.

(c) Fair value hierarchy

The following table presents the carrying value of fi nancial instruments measured at fair value as at 31 December 2011 across the three levels of the fair value hierarchy. The level in the fair value hierarchy within which the fair value measurement is categorized is determined on the basis of the lowest level input that is signifi cant to the fair value measurement in its entirety. The levels are defi ned as follows:

Level One: quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level Two: inputs other than quoted prices that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices);

Level Three: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

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(c) Fair value hierarchy (continued)

If there is a reliable market quote for fi nancial instruments, the fair value of fi nancial instruments is based on quoted market prices. If a reliable quoted market price is not available, the fair value of the fi nancial instruments is estimated using valuation techniques. Valuation techniques applied include reference to the fair value of another instrument that is substantially the same, discounted cash fl ow analysis and option pricing models. The inputs used in valuation techniques include risk-free and benchmark interest rates, credit spreads and foreign exchange rates. Where discounted cash fl ow analysis is used, estimated cash fl ows are based on management’s best estimates and the discount rate used is reference to another instrument that is substantially the same.


31 December 2011

Level 1 Level 2 Level 3 Total

AssetsFinancial assets at fair value through

profi t or loss

Held for trading — debt instruments — 22,169,817 — 22,169,817Financial assets designated at fair value through profi t or loss — — 556,816 556,816Positive fair value of derivatives

— foreign currency derivatives — 653,670 — 653,670 — interest rate derivatives — 648,845 954,998 1,603,843 — credit risk derivatives — — 4,280 4,280Available-for-sale fi nancial assets

— debt instruments — 54,343,224 59,541 54,402,765

Total — 77,815,556 1,575,635 79,391,191

LiabilitiesFinancial liabilities at fair value

through profi t or loss

Financial liabilities designated at fair value through profi t or loss — — 46,477,971 46,477,971Negative fair value of derivatives

— foreign currency derivatives — 979,485 — 979,485 — interest rate derivatives — 820,650 1,259,624 2,080,274 — credit risk derivatives — — 2,728 2,728

Total — 1,800,135 47,740,323 49,540,458

During the year ended 31 December 2011, there were no signifi cant transfers between instruments in Level 1 and Level 2.

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31 December 2010

Level 1 Level 2 Level 3 Total

AssetsFinancial assets at fair value


Held for trading — debt instruments — 21,728,092 — 21,728,092Financial assets designated at fair value through profi t or loss — — 669,025 669,025Positive fair value of derivatives

— foreign currency derivatives — 743,548 — 743,548 — interest rate derivatives — 1,095,290 1,181,729 2,277,019 — credit risk derivatives — — 4,473 4,473Available-for-sale fi nancial assets

— debt instruments 72,740 77,007,273 62,147 77,142,160

Total 72,740 100,574,203 1,917,374 102,564,317

LiabilitiesFinancial liabilities at fair value


Financial liabilities designated at fair value through profi t or loss — — 33,469,549 33,469,549Negative fair value of derivatives

— foreign currency derivatives — 743,949 — 743,949 — interest rate derivatives — 503,080 1,709,767 2,212,847 — credit risk derivatives — — 3,630 3,630

Total — 1,247,029 35,182,946 36,429,975

During the years, there were no signifi cant transfers between instruments in Level 1 and Level 2.

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The movement during the year ended 31 December 2011 in the balance of Level 3 fair value measurements is as follows:


Financial assets

Designated

at fair Value

through

Profi t or loss

Positive

fair value of

derivatives

Available-

for-sale

Financial

Assets Total

Financial

liabilities

Designated

at fair Value

through

Profi t or loss

Negative

fair value of

derivatives Total

1 January 2011 669,025 1,186,202 62,147 1,917,374 (33,469,549) (1,713,397) (35,182,946)

Total gains or losses:

In profi t or loss for the current period 37,774 (227,190) (2,964) (192,380) (195,167) 451,654 256,487

In other comprehensive income — — 358 358 — — —

Purchases 2,153 9,329 — 11,482 (45,640,404) (4,138) (45,644,542)

Settlements (152,136) (9,063) — (161,199) 32,827,149 3,529 32,830,678

31 December 2011 556,816 959,278 59,541 1,575,635 (46,477,971) (1,262,352) (47,740,323)

Total gains or losses for the period included

in profi t or loss for assets and liabilities

held at the end of the reporting period 35,693 (225,910) (2,964) (193,181) (450,626) 450,030 (596)

The movement during the year ended 31 December 2010 in the balance of Level 3 fair value measurements is as follows:


Financial

assets

Designated

at fair Value

through

Profi t or loss

Positive

fair value of

derivatives

Available-

for-sale

Financial

Assets Total

Financial

liabilities

Designated

at fair Value

through

Profi t or loss

Negative

fair value of

derivatives Total

1 January 2010 1,051,293 1,179,507 67,039 2,297,839 (8,059,225) (1,611,964) (9,671,189)

Total gains or losses:

In profi t or loss for the current period (19,430) 24,781 (2,365) 2,986 (157,569) (119,592) (277,161)

In other comprehensive income — — (2,527) (2,527) — — —

Additions 2,686 — — 2,686 (33,240,736) — (33,240,736)

Settlements (365,524) (18,086) — (383,610) 7,987,981 18,159 8,006,140

31 December 2010 669,025 1,186,202 62,147 1,917,374 (33,469,549) (1,713,397) (35,182,946)

Total gains or losses for the period included

in profi t or loss for assets and liabilities

held at the end of the reporting period (19,508) 24,824 (2,365) 2,951 (227,248) (119,635) (346,883)

During the years, there were no signifi cant transfers into or out of Level 3.

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52 Financial assets and fi nancial liabilities at fair value & foreign currency fi nancial assets and liabilities

(a) Financial assets and financial liabilities at fair value


1 January 2011

Total gains or losses

on fair value changes

Cumulative fair value changes in equity

Accrued or reversed

Provisions for impairment

losses31 December

2011(Note 1)

Financial AssetsFinancial assets held for trading 22,397,117 17,899 — — 22,726,633Positive fair value of derivatives 3,025,040 (763,247) — — 2,261,793Available-for-sale fi nancial assets 77,142,160 — (224,884) — 54,402,765

Total fi nancial assets 102,564,317 (745,348) (224,884) — 79,391,191

Total fi nancial liabilities 36,429,975 (297,228) — — 49,540,458


1 January 2010




Accrued or reversed


losses31 December

2010(Note 1)

Financial AssetsFinancial assets held for trading 10,401,474 (24,814) — — 22,397,117Positive fair value of derivatives 2,584,579 440,461 — — 3,025,040Available-for-sale fi nancial assets 54,617,799 — (651,824) (8,845) 77,142,160

Total fi nancial assets 67,603,852 415,647 (651,824) (8,845) 102,564,317

Total fi nancial liabilities 10,294,971 (881,786) — — 36,429,975

Note 1: Cumulative fair value change into equity has deducted deferred tax.

Note 2: There is no inevitable articulation during the items movements of balance sheet.

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52 Financial assets and fi nancial liabilities at fair value & foreign currency fi nancial assets and liabilities (continued)

(b) Foreign currency financial assets and liabilities


1 January 2011




Accrued or reversed


losses31 December

2011(Note 1)

Positive fair value of derivatives 1,293,899 (289,996) — — 1,003,903Loans and advances to customers 22,068,686 — — (29,601) 23,577,108Available-for-sale fi nancial assets 921,564 — (32,640) — 769,584Held-to-maturity investments 1,018,636 — — (93) 842,187

Total foreign currency assets 25,302,785 (289,996) (32,640) (29,694) 26,192,782

Total foreign currency liabilities 40,174,434 52,790 — — 51,543,946


1 January 2010




Accrued or reversed


losses31 December

2010(Note 1)

Positive fair value of derivatives 1,208,162 85,737 — — 1,293,899Loans and advances to customers 22,877,071 — — (11,614) 22,068,686Available-for-sale fi nancial assets 1,364,959 — 2,966 — 921,564Held-to-maturity investments 1,301,346 — — (6,736) 1,018,636

Total foreign currency assets 26,751,538 85,737 2,966 (18,350) 25,302,785

Total foreign currency liabilities 36,149,275 (725,774) — — 40,174,434

Note 1: Cumulative fair value change into equity has deducted deferred tax.

Note 2: There is no inevitable articulation during the items movements of balance sheet.

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53 Entrusted lending business

The Group provides entrusted lending business services to government agencies, corporations and individuals. All entrusted loans are funded by entrusted funds from these entities or individuals. The Group does not take any 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. The entrusted assets are not the assets of the Group and are not recognised in the balance sheet. Surplus funding is accounted for as deposits from customers.


31 December

2011 2010

Entrusted loans 37,112,018 39,239,105

Entrusted funds 37,112,018 39,239,105

54 Commitments and contingent liabilities

(a) Credit commitments

The Group’s credit commitments take the form of approved loans with signed contracts, credit card limits, bank acceptances, letters of credit and fi nancial guarantees.

The contractual amounts of loans and credit card commitments represent the amounts should the contracts be fully drawn upon. The Group provides fi nancial guarantees and letters of credit to guarantee the performance of customers to third parties. Acceptances comprise of 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.


31 December

2011 2010

Loan commitments— Original contractual maturity within one year 13,708,829 19,114,844— Original contractual maturity more than one year (inclusive) 30,507,618 33,912,759Credit card commitments 43,425,818 31,381,046

Sub-total 87,642,265 84,408,649

Acceptances 318,730,026 262,317,740Letters of guarantees 59,280,603 46,898,374Letters of credit 86,910,175 56,206,148Guarantees 1,160,928 1,160,928

Total 553,723,997 450,991,839

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54 Commitments and contingent liabilities (continued)

(a) Credit commitments (continued)

The Group may be exposed to credit risk in all the above credit businesses. Group Management periodically assesses the credit risk and makes provision for any probable losses. As the facilities may expire without being drawn upon, the total of the contractual amounts shown above is not representative of expected future cash outfl ows.

(b) Credit risk weighted amount


31 December

2011 2010

Credit risk weighted amount of contingent liabilities and commitments 245,994,378 189,343,598

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.

(c) Operating lease commitments

As at the balance sheet dates, the Group’s future minimum lease payments under non-cancellable operating leases for properties are as follows:

The Group The Bank

31 December2011

31 December2010

31 December2011

31 December2010

Within one year (inclusive) 1,038,948 664,309 1,034,681 664,199After one year but within two years (inclusive) 974,191 617,242 969,925 617,142After two years but within three years (inclusive) 878,046 538,562 878,046 538,462After three years but Within fi ve years (inclusive) 1,542,277 967,777 1,542,277 967,577After fi ve years 1,788,025 1,716,543 1,788,025 1,716,243

Total 6,221,487 4,504,433 6,212,954 4,503,623

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(d) Capital commitments

As at the balance sheet dates, the Group’s and Bank’s authorised capital commitments are as follows:

31 December

2011 2010

Contracted for— Purchase of property and equipment 142,978 469,671Approved but not contracted for— Purchase of property and equipment 779,334 139,277

Total 922,312 608,948

(e) Underwriting and redemption commitments

The Group and the Bank has unexpired commitments for underwriting bonds as follows:

31 December

2011 2010

Underwriting commitments 3,990,000 1,200,000

As an underwriting agent of the PRC government bonds, the Group has the responsibility to buy back those bonds it previously sold should the holders decide to make an early redemption of the bonds held. The redemption price for a bond at any time before its maturity date is based on the coupon value plus any interest unpaid and accrued up to the redemption date. Accrued interest payable to the bond holders is calculated in accordance with the relevant MOF and PBOC rules. The redemption price may be different from the fair value of similar fi nancial instruments traded at the redemption date.

The redemption commitments 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

2011 2010

Redemption commitments 11,195,951 13,379,840

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(f) Outstanding litigations and disputes

As at 31 December 2011, the Group was the defendant in certain pending litigation and disputes with gross claims of RMB329 million (31 December 2010: RMB432 million). Provisions (Note 31) have been made for the estimated losses of such litigation based upon the opinions of the Group’s internal and external legal counsels. The Group considers that the provisions made are reasonable and adequate.

55 Subsequent events

(a) Appropriation of profits

In accordance with the resolution of the twenty-eight meeting of the fi fth board of Directors on 17 April, 2012, the Bank proposed the profi t appropriation as disclosed in Note 37.

(b) Issuance of financial bonds and subordinated bonds

Pursuant to the approval of CBRC on issuance of Subordinated Bonds by China Everbright Bank (Yin Jian Fu [2012] No. 79), the bank was approved to issue subordinated bonds, with the amount of no more than RMB6.7 billion. All proceeds raised will be included in the supplementary capital of the Bank in accordance with Measures for the Management of Capital Adequacy Ratios of Commercial Banks.

The issuance is yet to be approved by the PBOC.

Pursuant to the approval of the CBRC on Issuance of Financial Bonds of China Everbright Bank (Yin Jian Fu [2012] No. 70) and the Decision of Approval of Administrative License of PBOC (Yin Shi Chang Xu Zhun Yu Zi [2012] No. 18), the Bank has publicly issued fi nancial bonds with the amount of RMB30 billion on March 2012. All proceeds raised will be deployed as loans to micro-enterprises.

242

(Expressed in thousands of Renminbi, unless otherwise stated)Supplementary Information of Financial Statements

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1 Non-recurring profi ts and losses

According to “Compilation Rules for Information Disclosure for Companies Offering Securities to the Public No. 1 — Non-recurring profi ts and losses”, the Group’s non-recurring profi ts and losses are as follows:

Note 2011 2010

Net non-recurring profi ts and lossesLosses on disposal of non-current assets (3,268) (3,679)Sporadic tax refund, relief 12,731 12,004Government grants 19,236 14,621Other items meet the defi nition of non-recurring profi ts and losses — Net gain of cleaning up dormant accounts 25,562 107,049 — Net gain of cleaning up suspense accounts 5,095 48,230 — Expenditure of risk agency (25,519) (30,018) — Provisions reversed 25,000 — — Other net gains/(losses) 5,373 (18,851)

Net non-recurring profi ts and losses 64,210 129,356Effect of the net non-recurring profi ts and losses on tax (Note) (18,545) (35,103)

Total 45,665 94,253

Of which:Net profi t attributable to equity shareholders of the Bank 45,203 93,485Net profi t attributable to non-controlling interests of the Bank 462 768

Note: Part of the net losses on disposal of fi xed assets and repossessed assets, damages, liquidated damages and penalties and

non-charitable donations expenditure including in the other net losses were not deductible for tax purposes.

2 Differences between the fi nancial statements prepared under PRC GAAP and those prepared in accordance with IRFSs

There were no differences between the net profi t under PRC GAAP and IFRSs for the year 2011. There were no differences between the equity as 31 December 2011 under PRC GAAP and IFRSs.

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3 Earnings per share

The Group’s earnings per share were calculated according to “Compilation Rules for Information Disclosure for Companies Offering Securities to the Public No. 9 — Return on equity and Earnings per share” (2010 revised edition) as follows:

2011 2010

Weighted average number of ordinary shares (thousand) 40,434,790 35,693,123Inclusive of non-recurring profi ts and losses— Net profi t attributable to ordinary shareholders of the Bank 18,067,888 12,790,228— Basic and diluted EPS attributable to ordinary shareholders of the Bank (RMB) 0.45 0.36Net of non-recurring profi ts and losses— Net profi t attributable to ordinary shareholders of the Bank 18,022,685 12,695,975— Basic and diluted EPS attributable to ordinary shareholders of the Bank (RMB) 0.45 0.36

Due to no potentially diluted shares at the end of the year 2011, the Bank’s basic and diluted EPS had no difference.

4 Return on equity

The Group’s return on equity was calculated according to “Compilation Rules for Information Disclosure for Companies Offering Securities to the Public No. 9 — Return on equity and Earnings per share” (2010 revised edition) as follows:

2011 2010

Net assets attributable to ordinary shareholders of the Bank 96,034,164 81,364,467Weighted net assets attributable to ordinary shareholders of the Bank 88,380,555 60,949,062Inclusive of non-recurring profi ts and losses— Net profi t attributable to ordinary shareholders of the Bank 18,067,888 12,790,228— Weighted average return on equity 20.44% 20.99%Net of non-recurring profi ts and losses— Net profi t attributable to ordinary shareholders of the Bank 18,022,685 12,695,975— Weighted average return on equity 20.39% 20.83%

246 Address Book of Head Offi ce and Branches

246

Address Book of Head Office and Branches

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Name Address P.C. Tel. Fax

Head offi ce Everbright Center, No. 25, Taipingqiao Avenue,

Xicheng District, Beijing

100033 010-63636363 010-63639066

Beijing Branch No. 1, Xuanwumen Neidajie, Xicheng District, Beijing 100031 010-66567699 010-66567411

Tianjin Branch Annex Building of Zhonglian Building, No. 83,

Qufu Ave., Heping District, Tianjin City

300041 022-23308501 022-23300229

Shanghai Branch China Everbright Bank Building, No. 1118,

Shiji Ave., Pudong New District, Shanghai City

200120 021-63606360 021-23050088

Chongqing Branch No. 168, Minzu Road, Yuzhong District, Chongqing City 400010 023-63792773 023-63792764

Shijiazhuang

Branch

Oriental New World Plaza, No. 118,

Zhongshan Donglu, Qiaodong District,

Shijiazhuang City

050000 0311-88628882 0311-88628883

Taiyuan Branch No. 21, Fuxi Street, Xinghualing District, Taiyuan City 030002 0351-3533633 0351-3533655

Huhhot Branch No. 78, Xinhua Dongjie, Huhhot,

Inner Mongolia Autonomous Region

010020 0471-5666125 0471-4955800

Dalian Branch Hongfu Building, No. 45, Shanghai Road,

Zhongshan District, Dalian City

116001 0411-82650538 0411-82646647

Shenyang Branch No. 156, Hepingbei Street, Heping District,

Shenyang City

110003 024-83255555 024-23283218

Changchun

Branch

No. 2677, Jiefang Road, Chaoyang District,

Changchun City

130061 0431-8400080 0431-88400121

Heilongjiang

Branch

No. 278, Dongdazhi Street, Nangang District,

Harbin City

150001 0451-53618775 0451-53618775

Nanjing Branch No. 120, Hanzhong Road, Gulou District, Nanjing City 210029 025-84787610 025-84712699

Suzhou Branch China Everbright Bank Building, No. 1288,

Sanxiang Road, Jinlv District, Suzhou City

215004 0512-68662988 0512-68668766

Wuxi Branch No. 1, Renmin Zhonglu, Wuxi City 214023 0510-81802528 0510-81802535

Hangzhou Branch Zheshang Times Building, No. 1, Miduqiao Road,

Gongshu District, Hangzhou City

310006 0571-87895358 0571-87895367

Ningbo Branch No. 1 Building, Hengfu Plaza, No. 828, Fuming Road,

Jiangdong District, Ningbo City

315040 0574-87300888 0574-87317230

Hefei Branch No. 200, Changjiang Xilu, Hefei City 230001 0551-5101888 0551-5101726

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Name Address P.C. Tel. Fax

Fuzhou Branch No. 148, Beihuan Zhonglu, Gulou District, Fuzhou City 350003 0591-87837378 0591-87835838

Xiamen Branch 1–4F, China Everbright Bank Building, No. 81,

Hubin Nanlu, Siming District, Ximan City

361004 0592-2221666 0592-2237788

Nanchang Branch No. 399, Guangchang Nanlu, Nanchang City 330006 0791-6662030 0791-6665448

Jinan Branch No. 85, Jingqi Road, Shizhong District, Jinan City 250001 0531-86155965 0531-86155800

Qingdao Branch No. 69, Hongkong Xilu, Shinan District, Qingdao City 266071 0532-83893801 0532-83893800

Yantai Branch No. 111, Nandajie, Zhifu District, Yantai City 264000 0535-6658506 0535-6261796

Zhengzhou Branch No. 18, Nongye Road, Jinshui District, Zhengzhou City 450008 0371-65766000 0371-65766000

Wuhan Branch No. 143–144, Yanjiang Ave., Jiangan District,

Wuhan City

430014 027-82796303 027-82801976

Changsha Branch No. 218, Renmin Zhonglu, Yuhua District,

Changsha City

410011 0731-5363800 0731-5523677

Guangzhou Branch 21F, China Everbright Bank Building, No. 685,

Tianhe Beilu, Tianhe District, Guangzhou City

510635 020-38730066 020-38730049

Shenzhen Branch No. 18, Zizhu Qidao, Zhuzilin Silu, Futian District,

Shenzhen City

518040 0755-83053388 0755-83242955

Nanning Branch Oriental Mahatton Plaza, No. 52-1, Jinhu Road,

Qingxiu District, Nanning City

530021 0771-5568106 0771-5568100

Haikou Branch Ground Floor, World Trade Center D/E, Shimao Donglu,

Jinmao District, Haikou City

570125 0898-68539999 0898-68520711

Chengdu Branch No. 79, Dacisi Road, Jinjiang District, Chengdu City 610017 028-86665566 028-86720299

Kunming Branch No. 28, Renmin Zhonglu, Wuhua District, Kunming City 650021 0871-3111068 0871-3111078

Xi’an Branch No. 33, Hongguang Street, Lianhu District, Xi’an City 710002 029-87236013 023-87236010

Urumqi Branch No. 165, Nanhu Donglu, Urumqi City 830063 0991-6765678 0991-6765678

Hong Kong

Representative

Offi ce

Room E, 40/F., Far East Finance Center, No. 16,

Harcourt Road, Hong Kong

00852-25289918 00852-25289218

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2011 ANNUAL REPORT

Address: Everbright Center, No.25 Taipingqiao Ave, Xicheng District, Beijing P. R. China.Tel: 010-63636363Fax: 010-63639066Postal Code: 100033Website: www.cebbank.com

China Everbright Bank Co., Ltd.