Fubon Bank (China) Co., Ltd

FUBON BANK (CHINA) CO., LTD.

Financial Statements and Auditor’s Report

For the year ended 31 December 2015

[Translation]


FINANCIAL STATEMENTS AND AUDITOR’S REPORT

FOR THE YEAR ENDED 31 DECEMBER 2015

CONTENTS PAGE(S)

AUDITOR’S REPORT 1 - 2

BALANCE SHEET 3 - 4

INCOME STATEMENT 5

CASH FLOW STATEMENT 6

STATEMENT OF CHANGES IN OWNERS’ EQUITY 7

NOTES TO THE FINANCIAL STATEMENTS 8 - 75

- 1 -

AUDITOR’S REPORT

De Shi Bao (Shen) Zi (16) No.P0981

[Translation]

TO THE BOARD OF DIRECTORS OF FUBON BANK (CHINA) CO., LTD. : We have audited the accompanying financial statements of Fubon Bank (China) Co., Ltd. (the “Bank”), which comprise the balance sheet as at 31 December 2015, the income statement, the statement of changes in owners’ equity, the cash flow statement for the year then ended, and the notes to the financial statements.

1. Management’s responsibility for the financial statements

Management of the Bank is responsible for the preparation and fair presentation of these

financial statements. This responsibility includes: (1) preparing the financial statements in

accordance with Accounting Standards for Business Enterprises to achieve fair presentation of

the financial statements; (2) designing, implementing and maintaining internal control that is

necessary to enable the financial statements that are free from material misstatement, whether

due to fraud or error. 2. Auditor’s responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We

conducted our audit in accordance with China Standards on Auditing. Those standards require

that we comply with the Code of Ethics for Chinese Certified Public Accountants and plan and

perform the audit to obtain reasonable assurance about whether the financial statements are free

from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and

disclosures in the financial statements. The procedures selected depend on the auditor’s

judgment, including the assessment of the risks of material misstatement of the financial

statements, whether due to fraud or error. In making those risk assessments, we consider the

internal control relevant to the preparation and fair presentation of the financial 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 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

financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a

basis for our audit opinion.

- 2 -

AUDITOR’S REPORT - continued

De Shi Bao (Shen) Zi (16) No.P0981

[Translation]

3. Opinion

In our opinion, the financial statements of the Bank present fairly, in all material respects, the

financial position of the Bank as of 31 December 2015, and the results of its operations and cash

flows for the year then ended in accordance with Accounting Standards for Business

Enterprises.

Deloitte Touche Tohmatsu Chinese Certified Public Accountant

Certified Public Accountants LLP Li Bing Wen

Shanghai, China Zhang Lun Qi

25 March 2016

The auditor’s report and the accompanying financial statements are English translations of the Chinese auditor’s report

and statutory financial statements prepared under accounting principles and practices generally accepted in the

People’s Republic of China. These financial statements are not intended to present the financial position and results of

operations in accordance with accounting principles and practices generally accepted in other countries and

jurisdictions. In case the English version does not conform to the Chinese version, the Chinese version prevails.


- 3 -

BALANCE SHEET

AT 31 DECEMBER 2015

NOTES 2015/12/31 2014/12/31

RMB RMB

ASSETS

Cash and balances with the Central Bank 7 7,810,457,420.24 7,281,521,107.60

Due from banks 8 1,271,121,748.15 834,799,412.52

Placement to banks 9 10,971,849,600.00 8,193,592,062.93

Financial assets at fair value through profit or loss 10 291,039,500.00 163,372,300.00

Derivative financial assets 11 213,592,519.42 60,605,522.90

Financial assets purchased under resale agreements 12 300,000,000.00 1,099,736,952.00

Interest receivable 13 358,062,228.53 377,592,346.24

Loans and advances to customers 14 29,969,200,467.14 30,383,866,872.75

Available-for-sale financial assets 15 11,062,477,348.00 5,881,047,540.00

Held-to-maturity investments 16 7,310,476,711.16 5,914,827,300.73

Receivable investments 17 2,521,464,932.89 -

Fixed assets 18 1,194,973,028.46 1,191,060,601.62

Construction in process 19 82,430,000.00 -

Intangible assets 20 28,329,860.63 20,598,307.96

Deferred tax assets 21 125,465,536.07 110,776,945.12

Other assets 22 135,764,402.56 90,717,368.91 ________________ ________________

TOTAL ASSETS 73,646,705,303.25 61,604,114,641.28 ________________ ________________ ________________ ________________

(Continued)


- 4 -

BALANCE SHEET - continued

AT 31 DECEMBER 2015

NOTES 2015/12/31 2014/12/31

RMB RMB

LIABILITIES

Due to banks and other financial institutions 23 6,482,433,137.06 3,378,808,378.14

Taking from banks 24 1,704,570,000.00 2,168,333,500.00

Derivative financial liabilities 11 177,311,660.04 85,177,546.54

Financial assets sold under repurchase agreements 25 8,745,100,000.00 6,825,500,000.00

Customer deposits 26 46,012,657,735.60 42,062,569,950.72

Employee benefits payable 27 64,238,810.00 56,139,507.00

Taxes payable 28 47,698,059.72 30,674,697.63

Interest payable 29 330,314,654.39 449,046,631.37

Debt securities issued 30 4,945,936,674.69 1,870,467,371.22

Other liabilities 31 257,109,352.43 130,746,030.62 ________________ _______________

TOTAL LIABILITIES 68,767,370,083.93 57,057,463,613.24 ________________ _______________

OWNERS’ EQUITY

Paid-in capital 32 2,100,000,000.00 2,100,000,000.00

Capital reserve 33 93,176,446.10 93,176,446.10

Other comprehensive income/(loss) 34 (7,538,508.74) 7,970,795.58

Surplus reserve 35 305,739,855.97 266,701,606.41

General risk reserve 36 943,277,650.15 775,020,149.28

Retained earnings 37 1,444,679,775.84 1,303,782,030.67 ________________ _______________

TOTAL OWNERS’ EQUITY 4,879,335,219.32 4,546,651,028.04 ________________ _______________

TOTAL LIABILITIES AND OWNERS’ EQUITY 73,646,705,303.25 61,604,114,641.28 ________________ _______________ ________________ _______________

The accompanying notes are part of the financial statements.

The financial statements on pages 3 to 75 were signed by the following:

Hong Peili Yueh Tso-Shun Wang Yan ____________________ _____________________ _____________________________

Chairman of the Board Chief Financial Officer Head of Accounting Department


- 5 -

INCOME STATEMENT


NOTES 2015 2014

RMB RMB

Operating income 1,178,902,935.14 1,064,503,201.91

Net interest income 38 306,574,705.07 578,605,917.37

Interest income 38 2,231,967,134.60 2,424,661,662.09

Interest expense 38 1,925,392,429.53 1,846,055,744.72 ______________ ______________

Net fee and commission income 39 111,950,384.19 133,504,955.91

Fee and commission income 39 127,951,207.99 137,790,973.48

Fee and commission expense 39 16,000,823.80 4,286,017.57 ______________ ______________

Investment income 40 874,336,469.78 419,272,258.81

Gains/ (losses) from changes in fair value 41 21,040,696.06 (4,191,806.03)

Foreign exchange losses (143,391,718.21) (70,198,723.36)

Other operating income 8,392,398.25 7,510,599.21 ______________ ______________

Operating expenses 682,579,613.60 531,447,006.63

Business tax and levies 42 83,459,689.37 95,057,632.47

Operating expenses 43 515,404,987.91 377,008,444.50

Impairment loss 44 83,714,936.32 59,380,929.66 ______________ ______________

Operating profit 496,323,321.54 533,056,195.28

Add: Non-operating income 45 164,486.43 230,370.99

Less: Non-operating expenses 46 3,144,444.85 1,314,050.00 ______________ ______________

PROFIT BEFORE TAX 493,343,363.12 531,972,516.27 ______________ ______________

Less: Income tax expenses 47 102,960,867.52 110,083,247.04 ______________ ______________

NET PROFIT 390,382,495.60 421,889,269.23 ______________ ______________ ______________ ______________

Other comprehensive income/(loss) (15,509,304.32) 62,424,626.60

Other comprehensive income/(loss) items

which will be reclassified subsequently to profit or loss (15,509,304.32) 62,424,626.60 ______________ ______________

Changes in fair value of available-for-sale financial assets 34 (15,509,304.32) 62,424,626.60 ______________ ______________

TOTAL COMPREHENSIVE INCOME 374,873,191.28 484,313,895.83 ______________ ______________ ______________ ______________



- 6 -

CASH FLOW STATEMENT


NOTES 2015 2014 RMB RMB Cash flow from operating activities

Interest, fee and commission received 2,381,275,373.04 2,408,443,317.92 Net decrease in balance with the Central Bank and due from banks 359,701,460.00 - Net decrease in loans and advances to customers 326,661,969.02 - Net increase in customer deposits and due to banks and other financial institutions 7,053,712,543.80 651,052,872.01 Net decrease in taking from banks 1,455,836,500.00 8,071,895,500.00 Other cash receipts relating to operating activities 639,879,651.75 7,915,032.72 ________________ ________________

Subtotal of cash inflows 12,217,067,497.61 11,139,306,722.65 ________________ ________________

Interest, fee and commission paid 1,932,929,806.84 1,767,950,983.46 Net increase in placement to banks 2,595,570,137.07 6,104,208,362.93 Net increase in loans and advances to customers - 187,234,836.88 Net increase in balance with the Central Bank and due from banks - 540,104,049.01 Cash payments to and on behalf of employees 261,761,667.17 218,451,344.00 Payments of taxes 178,916,017.64 184,364,253.14 Other cash payments relating to operating activities 493,913,495.06 717,960,417.81 ________________ ________________

Subtotal of cash outflows 5,463,091,123.78 9,720,274,247.23 ________________ ________________

Net cash flow from operating activities 6,753,976,373.83 1,419,032,475.42 ________________ ________________

Cash flow from investing activities Cash receipts from disposals of investments 24,462,169,920.00 3,434,885,280.00 Cash receipts from returns on investment 849,895,231.99 379,063,277.95 Net cash receipts from disposal of fixed assets, intangible assets and other long-term assets 43,917.00 - ________________ ________________


Cash payments to acquire investments 33,687,016,368.63 9,407,207,730.00 Cash payments to acquire fixed assets, intangible assets and other long-term assets 169,850,853.46 63,065,135.85 ________________ ________________

Subtotal of cash outflows 33,856,867,222.09 9,470,272,865.85 ________________ ________________

Net cash flows from investing activities (8,544,758,153.10) (5,656,324,307.90) ________________ ________________

Cash flow from financing activities Cash receipts from debt securities issuance 9,328,273,880.00 1,860,142,050.00 Cash receipts from capital contributions - 1,000,000,000.00 ________________ ________________


Cash repayments of borrowings 6,380,000,000.00 - Cash payments for distribution of dividends 42,189,000.00 - ________________ ________________

Subtotal of cash outflows 6,422,189,000.00 - ________________ ________________

Net cash flows from financing activities 2,906,084,880.00 2,860,142,050.00 ________________ ________________

Effect of foreign exchange rate changes on cash and cash equivalents 92,344,407.54 2,988,567.55 ________________ ________________

Net increase/(decrease) in cash and cash equivalents 1,207,647,508.27 (1,374,161,214.93) ________________ ________________

Add: Opening balance of cash and cash equivalents 48 2,920,838,825.78 4,295,000,040.71 Closing balance of cash and cash equivalents 48 4,128,486,334.05 2,920,838,825.78 ________________ ________________ ________________ ________________



- 7 -

STATEMENT OF CHANGERS IN OWNERS’ EQUITY FOR THE YEAR ENDED 31 DECEMBER 2015

2015

Other comprehensive Surplus General Retained

NOTES Paid-in capital Capital reserve income reserve Risk Reserve Earnings Total

RMB RMB RMB RMB RMB RMB RMB

I. Balance at 31 December 2014 and 1 January 2015 2,100,000,000.00 93,176,446.10 7,970,795.58 266,701,606.41 775,020,149.28 1,303,782,030.67 4,546,651,028.04

II. Current year movement - - (15,509,304.32) 39,038,249.56 168,257,500.87 140,897,745.17 332,684,191.28

(I) Comprehensive income - - (15,509,304.32) - - 390,382,495.60 374,873,191.28

1. Net profit - - - - - 390,382,495.60 390,382,495.60

2. Other comprehensive income - - (15,509,304.32) - - - (15,509,304.32)

(III) Profit distribution - - - 39,038,249.56 168,257,500.87 (249,484,750.43) (42,189,000.00)

1. Transfer to surplus reserve - - - 39,038,249.56 - (39,038,249.56) -

2. Transfer to general risk reserve - - - - 168,257,500.87 (168,257,500.87) -

3. Payment of cash dividends - - - - - (42,189,000.00) (42,189,000.00) ______________ _____________ ______________ ______________ ______________ _____________ _______________

III. Balance at 31 December 2015 2,100,000,000.00 93,176,446.10 (7,538,508.74) 305,739,855.97 943,277,650.15 1,444,679,775.84 4,879,335,219.32 ______________ _____________ ______________ ______________ ______________ _____________ _______________ ______________ _____________ ______________ ______________ ______________ _____________ _______________

2014

Other comprehensive Surplus General Retained

NOTES Paid-in capital Capital reserve income reserve Risk Reserve Earnings Total

RMB RMB RMB RMB RMB RMB RMB

I. Balance at 31 December 2013 and 1 January 2014 1,100,000,000.00 93,176,446.10 (54,453,831.02) 224,512,679.48 584,912,793.16 1,114,189,044.49 3,062,337,132.21

II. Current year movement 1,000,000,000.00 - 62,424,626.60 42,188,926.93 190,107,356.12 189,592,986.18 1,484,313,895.83

(I) Comprehensive income - - 62,424,626.60 - - 421,889,269.23 484,313,895.83

1. Net profit - - - - - 421,889,269.23 421,889,269.23

2. Other comprehensive income - - 62,424,626.60 - - - 62,424,626.60

(II) Owners’ contributions and

reduction in capital 1,000,000,000.00 - - - - - 1,000,000,000.00

1. Capital contribution from owners 1,000,000,000.00 - - - - - 1,000,000,000.00

(III) Profit distribution - - - 42,188,926.93 190,107,356.12 (232,296,283.05) -

1. Transfer to surplus reserve - - - 42,188,926.93 - (42,188,926.93) -

2. Transfer to general risk reserve - - - - 190,107,356.12 (190,107,356.12) - ______________ _____________ ______________ ______________ ______________ _____________ _______________

III. Balance at 31 December 2014 2,100,000,000.00 93,176,446.10 7,970,795.58 266,701,606.41 775,020,149.28 1,303,782,030.67 4,546,651,028.04 ______________ _____________ ______________ ______________ ______________ _____________ _______________ ______________ _____________ ______________ ______________ ______________ _____________ _______________



- 8 -

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 December 2015

1. GENERAL Fubon Bank (China) Co., Ltd (previously named First Sino Bank, the “Bank”) is a joint venture

bank in Shanghai Pudong District, the People’s Republic of China (the “PRC”) invested by

Shanghai Pudong Development Bank and Lotus Worldwide Ltd. in accordance with the

“Regulation Governing Foreign Financial Institutions in the People’s Republic of China” on 20

March 1997. Lotus Worldwide Ltd. transferred 5% shares to Wing Hang Bank in 2004. The Bank

mainly engages in a full scope of foreign currency services and RMB service to customers except

citizens in the territory of China.

According to the permission (Yinjianfa [2013] No.657) announced by China Banking Regulatory

Commission (the “CBRC”) on 19 December 2013, Lotus Worldwide Ltd. is approved to transfer

41% of the Bank shares to Taipei Fubon Commercial Bank Co., Ltd. and 25.11% to Fubon

Financial Holding Co., Ltd. ; Shanghai Pudong Development Bank is approved to transfer 10% of

the Bank shares to Taipei Fubon Commercial Bank Co., Ltd.; Wing Hang Bank is approved to

transfer 3.89% of the Bank shares to Fubon Financial Holding Co., Ltd.. The permission approved

the Bank to increase its paid-in capital by RMB1,000,000,000.00, in which RMB510,000,000.00

was funded by Taipei Fubon Commercial Bank Co., Ltd., RMB290,000,000.00 was appropriated

by Fubon Financial Holding Co., Ltd. and RMB200,000,000.00 was sponsored by Shanghai

Pudong Development Bank.

The permission launched by CBRC on 28 April 2014 (Yinjianfu [2014] No.266) approved the

Bank officially changed its name to Fubon Bank (China) Co., Ltd. The Bank obtained an updated

business license No. 310000400523055 on 29 July 2014.

Based on the relevant permission launched by CBRC from 1 January 2015 to the present day of

financial statements, the Bank officially establish the following sub-branches:

Approval Documents Approval Date

Shanghai Changning Sub-branch Hu Yinjianfu [2015] No.63 29 January 2015

Shanghai Pilot Free Trade Zone Issued financial license

Sub-branch N/A on 23 July 2015

Shanghai Ri Yue Guang

Sub-branch Hu Yinjianfu [2015] No.488 13 August 2015

Nanjing Branch Su Yinjianfu [2015] No.269 21 September 2015

Shanghai Bund Sub-branch Hu Yinjianfu [2015] No.723 22 December 2015

Shenzhen Qianhai Sub-branch Shen Yinjianfu [2015] No.384 24 December 2015

Suzhou Kunshan Sub-branch Su Yinjianfu [2016] No.6 4 January 2016

Beijing Branch Jing Yinjianfu [2015] Under preparatory

No.450 (Preparatory Approval) process


- 9 -

1. GENERAL - continued

The Bank has established Shenzhen Branch(including Shenzhen Bao’an Sub-branch and

Shenzhen Qianhai Sub-branch), Tianjin Branch(including Tianjing Binhai Sub-branch), Su Zhou

Branch(including Suzhou Kunshan Sub-branch), Nanjing Branch, Shanghai Hongqiao Sub-branch,

Shanghai Xuhui Sub-branch, Shanghai Jiading Sub-branch, Shanghai Songjiang Sub-branch,

Shanghai Minhang Sub-branch, Shanghai Xin Tian Di Sub-branch, Shanghai Jing An Sub-branch,

Shanghai Lu Jia Zui Sub-branch, Shanghai Changning Sub-branch, Shanghai Pilot Free Trade

Zone Sub-branch, Shanghai Ri Yue Guang Sub-branch, Shanghai Bund Sub-branch and Beijing

Branch (preparatory).

As of 31 December 2015, the registered capital of the Bank is RMB2,100 million. Details of

capital contribution of the investors are shown in Note 32. The registered address of the Bank is

1st, 18

th, 19

th and 20

th floor, Tower A, No. 1168 Century Avenue, Pudong New District, Shanghai.

2. BASIS OF PREPARATION OF FINANCIAL STATEMENTS

The Bank has adopted the Accounting Standards for Business Enterprises (hereinafter referred to

as “CASs”) issued by the Ministry of Finance (MoF).

3. STATEMENT OF COMPLIANCE WITH THE ACCOUNTING STANDARD FOR BUSINESS

ENTERPRISES

The financial statements of the Bank have been prepared in accordance with CASs, and present

truly and fairly the Bank’s financial position as of 31 December 2015 and the results of operations

and cash flows for the year of 2015.

4. SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES

The following significant accounting policies and accounting estimates are determined in

accordance with the CASs.

Accounting period The Bank has adopted the calendar year as its accounting period, i.e. from 1 January to 31

December.

Functional currency RMB is the currency of the primary economic environment in which the Bank operates. Therefore

the functional currency of the Bank is RMB. The reporting currency of the financial statements is

RMB.


- 10 -

4. SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued

Basis of accounting and principle of measurement

The Bank has adopted the accrual basis of accounting. Except for certain financial instruments

which are measured at fair value, the Bank has adopted the historical cost model as the

measurement basis. Where assets are impaired, provisions for asset impairment are made in

accordance with relevant requirements.

Under historical cost measurement, assets are measured by the cash or cash equivalents payment,

or by the fair value of the consideration given in exchange for them. Liabilities are recorded at the

amount of proceeds or assets received in exchange for the present obligation, or the amount

payable under contract for assuming the present obligation, or at the amount of cash or cash

equivalents expected to be paid to satisfy the liability in the normal course of business.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an

orderly transaction between market participants at the measurement date. Fair value for

measurement and/or disclosure purposes in the financial statements is determined on such a basis，regardless of whether that price is directly observable or estimated using another valuation

technique.

The fair value measurement is categorized into 3 levels based on the degree to which the inputs to

the fair value measurements are observable and the significance of the inputs to the fair value

measurement in its entirety, which are described as follows:

- Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities

that the Bank has the ability to access at the measurement date.

- Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable

for the asset or liability, either directly or indirectly.

- Level 3 inputs are unobservable inputs for the asset or liability.

Cash and cash equivalents

Cash comprises cash on hand and demand deposits. Cash equivalents are short-term, highly liquid

investments that are readily convertible to known amounts of cash and which are subject to an

insignificant risk of change in value.

Translation of transactions denominated in foreign currencies

On initial recognition, foreign currency transactions are translated by applying the spot exchange

rate at the dates of the transactions or an exchange rate that approximates the actual spot exchange

rate at the dates of the transactions, which is calculated at the average daily rate.

At the balance sheet date, monetary assets and liabilities denominated in foreign currencies are

translated into functional currency at the exchange rate of that date. Exchange differences arising

from the differences between the spot exchange rate prevailing at the balance sheet date and those

spot rates used on initial recognition or at the previous balance sheet date are recognized in profit

or loss for the current period.


- 11 -


Translation of transactions denominated in foreign currencies - continued

Non-monetary assets and liabilities denominated in foreign currency are carried at historical cost

using spot exchange rates at the dates of the transactions; non-monetary assets and liabilities

carried at fair value and denominated in foreign currency are translated using the spot exchange

rates at the date when the fair value was determined. Differences between the translated amount

and the original amount of functional currency are accounted for as changes in fair value

(including changes in foreign exchange rates) in profit or loss for the period or owner’s equity.

Financial instruments

When the Bank becomes a party to the contract of a financial instrument, related financial assets

or financial liabilities are recognized. Financial assets and financial liabilities are initially

recognized at fair value. For financial assets and financial liabilities classified as fair value

through profit and loss (“FVTPL”), related transaction costs are charged to the profit or loss for

the current period; for financial assets and financial liabilities classified as other categories,

related transaction costs are included in the initial recognition amounts.

The effective interest method

The effective interest method is a method of calculating the amortized cost of a financial asset or a

financial liability (or group of financial assets or financial liabilities) and of allocating the interest

income or interest expense over the relevant period, using the effective interest rate. The effective

interest rate is the rate that exactly discounts estimated future cash payments or receipts through

the expected life of the financial instrument or, when appropriate, a shorter period to the net

carrying amount of the financial asset or financial liability.

When calculating the effective interest rate, the Bank estimates the future cash flows considering

all contractual terms of financial assets and financial liabilities (without considering future credit

losses). The calculation includes all fees paid or received between the parties to the contract that

are an integral part of the effective interest rate, transaction costs, and all other premiums or

discounts.

Recognition and measurement of financial assets

On initial recognition, financial assets are classified into the following categories: financial assets

at fair value through profit or loss (FVTPL), held-to-maturity investments, loans and receivables

and available-for-sale (AFS) financial assets. For a financial asset trade in regular way, the Bank

recognizes and derecognizes the financial asset on trade date.


- 12 -


Recognition and measurement of financial assets - continued

(1) Financial assets at FVTPL

Financial assets are classified as at FVTPL where the financial asset is either held for trading or it

is designated as at FVTPL. The Bank’s FVTPL is held for trading purpose. A financial asset is classified as held for trading if: (1) it has been acquired principally for the

purpose of selling in the near future; or (2) it is part of a portfolio of identified financial

instruments that are managed together and for which there is evidence of a recent actual pattern of

short-term profit-taking; or (3) it is a derivative, except for a derivative that is a designated and

effective hedging instrument, or a financial guarantee contract, or a derivative that is linked to and

must be settled by delivery of an unquoted equity instrument (without a quoted price from an

active market) whose fair value cannot be reliably measured.

Financial assets at FVTPL are subsequently measure at fair value, with gains or losses arising

from changes in fair value as well as dividends and interest income related to such financial assets

recognized in profit or loss for the current period. (2) Held-to-maturity investments

Held-to-maturity investments are non-derivative financial assets with fixed or determinable

payments and fixed maturities that the Bank has the positive intention and ability to hold to

maturity.

Held-to-maturity investments are subsequently measured at amortized cost using the effective

interest method; gains or losses arising from de-recognition, impairment or amortization is

recognized in profit or loss for the current period. (3) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Financial assets divided into loans and receivables include balances with the Central Bank, due from banks, placement to banks, financial assets purchased under resale agreements, interest reveivables, loans and advances to customers, receivable investments and other receivables etc. Loans and receivables are subsequently measured at amortized cost using the effective interest

method. Gains or losses arising from de-recognition, impairment or amortization are recognized

in profit or loss for the current period.

(4) AFS financial assets AFS financial assets are those non-derivative financial assets that are designated as available-for-

sale or are not classified as (1) financial assets at FVTPL, (2) loans and receivables, and (3)

held-to-maturity investments. AFS financial assets are subsequently measured at fair value. Gains or losses arising from changes

in fair value (other than impairment losses and foreign exchange gains and losses resulted from

foreign currency monetary assets which are recognized in profit or loss for the current period) are

recognized directly in owners’ equity, and are reversed and recognized in profit or loss for the

period when such financial assets are derecognized.


- 13 -


Financial instruments - continued

Recognition and measurement of financial assets - continued

(4) AFS financial assets - continued

Interest received during the period in which the Bank holds the AFS financial assets and cash

dividends declared by the investee are recognized as investment income.

For investments in equity instruments that do not have a quoted market price in an active market

and whose fair value cannot be reliably measured they are measured at cost.

Impairment of financial assets

The Bank assesses the carrying amount of financial assets, other than those at FVTPL, at each

balance sheet date. If there is objective evidence that financial assets are impaired, the Bank

determines the amount of any impairment loss. The objective evidence that financial assets are

impaired is the evidence that happened actually, after initially recognized, which will have an

impact upon expected future cash flow of the financial asset, and the impact can be reliably

measured by the Bank.

Objective evidence that a financial asset is impaired includes evidence arising from the following

events:

(1) Significant financial difficulty of the issuer or obligor;

(2) A breach of contract by the borrower, such as a default or delinquency in interest or principal

payments;

(3) The lender, for economic or legal reasons relating to the borrower’s financial difficulty,

granting a concession to the borrower;

(4) It has become probable that the borrower will enter into bankruptcy or other financial

reorganization;

(5) The disappearance of an active market for a financial asset because of financial difficulties of

the issuer;

(6) Upon an overall assessment of a group of financial assets, observable data indicates that there

is a measurable decrease in the estimated future cash flows from the group of financial assets

since the initial recognition of those assets, although the decrease cannot yet be identified with

the individual financial assets in the a group. Such observable data includes:

- adverse changes in the payment status of borrowers in the group;

- adverse changes in national or local economic conditions of the borrowers that might affect

the repayment of the group of financial assets;

(7) Significant adverse changes in the technological, market, economic or legal environment in

which the issuer operates, indicating that the cost of the investment in the equity instrument

may not be recovered by the investor;

(8) A significant or prolonged decline in the fair value of an investment in an equity instrument

below its cost;

(9) Other objective evidence indicating an impairment of a financial asset.


- 14 -


Impairment of financial assets - continued

Impairment of financial assets carried at amortized cost

If financial assets carried at amortized cost are impaired, the carrying amount of the financial

asset shall be reduced to the present value of estimated future cash flows discounted at the

financial asset’s original effective interest rate (excluding future credit losses that have not been

incurred). The amount of reduction shall be recognized as an impairment loss in profit or loss. If,

after the recognition of impairment losses, the carrying amount of financial assets increases and

the increase can be related objectively to an event occurring after the impairment was recognized,

the previously recognized impairment losses are reversed through profit or loss to the extent that

the carrying amount of the financial assets at the date the impairment is reversed does not exceed

what the amortized cost would have been had the impairment not been recognized.

For a financial asset that is individually significant, the Bank assesses the asset individually for

impairment. For a financial asset that is not individually significant, the Bank assesses the asset

individually for impairment or includes the asset in a group of financial assets with similar credit

risk characteristics and collectively assesses them for impairment. For a financial asset that does

not need impairment after individual assessment (include individually significant and

non-significant financial asset), the Bank reassesses the asset collectively with a group of

financial assets with similar credit risk characteristics for impairment. The financial asset that has

impaired in individual assessment does not need to be included in collectively assessment for

impairment with a group of financial assets with similar credit risk characteristics.

Impairment of AFS financial assets

Where AFS financial assets are impaired, accumulated losses due to decreases in fair value

previously recognized directly in capital reserve are reversed and charged to profit or loss for the

current period. The reversed accumulated losses are the asset’s initial acquisition costs after

deducting amounts recovered and amortized, current fair value and impairment losses previously

recognized in profit or loss.

If, in a subsequent period, the carrying amount of financial assets increases and the increase can

be related objectively to an event occurring after the impairment was recognized, the previously

recognized impairment losses are reversed. The reversal of impairment losses of AFS equity

instruments is recognized as other comprehensive income and recorded in equity, and the

impairment losses of AFS debt instruments are recognized in profit or loss for the current period.


- 15 -


Transfer of financial assets

The Bank derecognizes a financial asset only when: (1) the contractual rights to receive the cash

flows from the financial asset expire; or (2) it transfers the financial asset and substantially all the

risks and rewards of ownership of the asset to the transferee; or (3) it transfers the financial asset,

neither transfers nor retains substantially all the risks and rewards of ownership but has not

retained control of the financial asset.

If the Bank neither transfers nor retains substantially all the risks and rewards of ownership and

continues to control the transferred assets, the Bank recognizes its retained interest according to

the extent of the enterprise’s continuing involvement in the asset and an associated liability for

amounts it may have to pay. The extent of the enterprise’s continuing involvement in the

transferred asset is the extent to which it is exposed to changes in the value of the transferred

asset.

For a transfer of a financial asset in its entirety that satisfies the de-recognition criteria, the

difference shall be recognized in profit or loss for the current period between the carrying amount

of the financial asset transferred and the sum of the consideration received from the transfer.

If a part of the transferred financial asset qualifies for de-recognition, the carrying amount of the

transferred financial asset is allocated between the part that continues to be recognized and the

part that is derecognized, based on the respective fair values of those parts. The difference

between (1) the carrying amount allocated to the part derecognized; and (2) the sum of the

consideration received for the part derecognized and any cumulative gain or loss allocated to the

part derecognized which has been previously recognized in other comprehensive income, is

recognized in profit or loss.

Classification, recognition and measurement of financial liabilities

Debt and equity instruments issued by the Bank are classified into financial liabilities or equity on

the basis of the substance of the contractual arrangements and definitions of financial liability and

equity instrument.

On initial recognition, financial liabilities are classified into financial liabilities at fair value

through profit or loss and other financial liabilities.

Financial liabilities at FVTPL

Financial liabilities are classified as at FVTPL where the financial liability is either held for

trading or it is designated as at FVTPL.

A financial liability is classified as held for trading if: (1) it has been acquired principally for the

purpose of selling in the near future; or (2) it is part of a portfolio of identified financial

instruments that are managed together and for which there is evidence of a recent actual pattern of

short-term profit-taking; or (3) it is a derivative, except for a derivative that is a designated and

effective hedging instrument, or a financial guarantee contract, or a derivative that is linked to and

must be settled by delivery of an unquoted equity instrument (without a quoted price from an

active market) whose fair value cannot be reliably measured.


- 16 -


Classification, recognition and measurement of financial liabilities - continued

A financial liability other than a financial liability held for trading may also be designated as at

FVTPL upon initial recognition if: (1) such designation eliminates or significantly reduces a

measurement or recognition inconsistency that would otherwise arise; or (2) the financial liability

forms part of a group of financial assets or financial liabilities or both, which is managed and its

performance is evaluated on a fair value basis, in accordance with the Bank’s documented risk

management or investment strategy, and information about the grouping is reported to key

management personnel internally on that basis.(3)the hybrid instrument that is embedded with

derivative instruments may be designated as at FVTPL in accordance with the principles set out in

CAS No.22 – Financial Instruments: Recognition and Measurement .

Financial liabilities at FVTPL are subsequently measured at fair value, with gains or losses arising

from changes in fair values as well as dividends and interest income related to such financial

liabilities recognized in profit or loss for the current period.

Other financial liabilities

Derivative financial liabilities linked to and which must be settled by delivery of an unquoted

equity instrument (without a quoted price in an active market) whose fair value cannot be

measured reliably is subsequently measured at cost. Other financial liabilities are subsequently

measured at amortized cost using the effective interest method; gains or losses arising from

de-recognition or amortizations are recognized in profit or loss for the current period.

Financial guarantee contracts and loan commitments

Financial guarantee contracts refer to the agreement of guarantor and creditor when the debtor

fails to perform his obligation, the guarantor shall perform the obligation or bear the liability of

the contract. Financial guarantee contracts that are not designated as financial liabilities at

FVTPL , or loan commitments to provide a loan at a below-market interest rate which are not

designated as financial liabilities at FVTPL are initially recognized at fair value less related trade

expenses, and are subsequently measured at the higher of the following two amounts: (1) the

amount determined in accordance with Accounting Standard for Business Enterprises No. 13 –

Contingencies; and (2) the amount initially recognized less cumulative amortization recognized in

accordance with the principles set out in Accounting Standard for Business Enterprises No. 14 –

Revenue.

De-recognition of financial liabilities An enterprise shall derecognize a financial liability (or part of it) only when the underlying

present obligation (or part of it) is discharged. An agreement between the Bank (a debtee) and a

debtor to replace the original financial liability with a new financial liability with substantially

different terms shall be accounted for as an extinguishment of the original financial liability and

the recognition of a new financial liability.

When the Bank derecognizes a financial liability or a part of it, the Bank shall recognize the

difference between the carrying amount of the financial liability (or part of the financial liability)

derecognized and the consideration paid (including any non-cash assets transferred or new

financial liabilities assumed) in profit or loss for the period.


- 17 -


Derivatives and embedded derivatives

Derivative instruments include Forward Foreign Exchange Contracts, Currency Swap Contracts,

Foreign Exchange Option Contracts, Interest Rate Swap Contracts, Interest Rate Option Contracts

and Commodity Option Contracts. Derivatives are initially recognized at fair value on the date

when related contracts are signed, and are subsequently measured at fair value. The changes in

fair value of derivatives are recognized in profit or loss for the period.

For hybrid instruments containing embedded derivatives, if they are not designated as financial

assets or financial liabilities at fair value through profit or loss, where the economic characteristics

and risks of the embedded derivative are not closely related to those of the host contract, and

where they are of the same condition as embedded derivatives and meet the definition of a

derivative on a stand-alone basis, the embedded derivative is accounted for as a stand-alone

derivative financial instrument separately from the host contract. If the embedded derivative

cannot be measured on a stand-alone basis at the time when acquired or at subsequent balance

sheet dates, the hybrid instrument is designated as financial assets or financial liabilities at fair

value through profit or loss as a whole.

Offsetting a financial asset and a financial liability

Financial assets and liabilities are offset and the net amount is reported in the balance sheet if, and

only if, the Bank has a currently enforceable legal right to set off the recognized amounts and

intends to settle on a net basis, or to realize an asset and settle the liability simultaneously. In all

other situations they are presented separately in the balance sheet and are not offset.

Asset transfer under redemptory agreement

Financial assets purchased under resale agreements

According to the agreement, the financial assets which will be resold at a certain future date are

not recognized in the balance sheet. The cost by purchasing these assets including interests is

stated as financial assets purchased under resale agreements. The margin between purchasing

price and reselling price at the duration of the agreement is recognized by the effective interest

method as interest income.

Financial assets sold under repurchase agreement

According to the agreement, the financial assets which will be bought back at a certain future date

are not derecognized in the balance sheet. The sales from such assets including the interest are

stated as financial assets sold under repurchase agreement in the balance sheet. The margin

between selling price and repurchase price at the duration of the agreement is recognized by the

effective interest method as interest expense.


- 18 -


Fixed assets and depreciation Fixed assets are tangible assets that are held for operational and administrative purposes and have

useful lives more than one accounting year. A fixed asset shall be recognized only when both of

the following conditions are satisfied: (1) it is probable that economic benefits associated with the

asset will flow to the Bank; and (2) the cost of the asset can be measured reliably. A fixed asset is

initially measured at cost and the effect of any expected costs of abandoning the asset at the end of

its use is considered.

Subsequent expenditure incurred on a fixed asset is included in the cost of the fixed asset, only if

it is probable that economic benefits associated with the asset will flow into the Bank and relevant

cost can be measured reliably. Meanwhile the carrying amount of the replaced part is

derecognized. Other subsequent expenditure that fails to meet the capitalization criteria is charged

to profit or loss when incurred. Depreciation is provided over their estimated useful lives from the month after they are brought to

working condition for the intended use, using the straight-line method. The useful lives, estimated

net residual values rates and annual depreciation rates of each class of fixed assets are as follows:

Classes Useful Life Residual value rates Depreciation rates

Buildings 40 years 10% 2.25%

Transportation vehicles 5 years 10% 18%

Office equipment 5 years 10% 18%

Fixed assets improvement 5 years 0% 20%

Estimated net residual value of a fixed asset is the estimated amount that the Bank would

currently obtain from disposal of the asset, after deducting the estimated costs of disposal, if the

asset were already of the age and in the condition expected at the end of its useful life.

The carrying amount of a fixed asset shall be derecognized when the asset is on disposal or when

no future economic benefits are expected to be generated from its use or disposal. When a fixed

asset is sold, transferred, retired or damaged, the Bank recognizes the amount of any proceeds on

disposal of the asset net of the carrying amount and related taxes in profit or loss for the current

period.

The Bank reviews the useful life and estimated net residual value of a fixed asset and the

depreciation method applied at least at each financial year-end. A change in the useful life or

estimated net residual value of a fixed asset or the depreciation method used is accounted for as a

change in an accounting estimate.

Construction in progress

Construction in progress is measured at its actual costs. The actual costs include various

construction expenditures during the construction period, and other relevant costs. Construction in

progress is not depreciated. Construction in progress is transferred to a fixed asset when it is ready

for intended use.


- 19 -


Intangible assets

Intangible asset of the Bank includes software and etc.

An intangible asset is initially measured at cost. An intangible asset with a finite useful life is

amortized using the straight-line method over its useful life when the asset is available for use. An

intangible asset with an indefinite useful life is not amortized.

For an intangible asset with a finite useful life, the Bank reviews the useful life and amortization

method at least at each financial year-end and makes changes if necessary.

Long-term prepayments

Long-term prepayments are various expenditures incurred but that should be allocated over the

current and future periods of more than one year. Long-term prepayments are evenly amortized

over expected beneficial period.

Impairment of non-financial assets

The Bank assesses at each balance sheet date whether there is any indication that fixed assets and

intangible assets with finite useful life and other assets may be impaired. If any indication that an

asset may be impaired occurred, the recoverable amount should be estimated. No matter whether

there are indications of potential impairment, the intangible assets with infinite useful life or these

hasn’t reached working conditions shall be subjected to impairment testing each year.

Recoverable amount is determined based on individual assets. If it is not possible to estimate the

recoverable amount of the individual asset, the Bank determines the recoverable amount of the

asset group to which the asset belongs to. The recoverable amount of an asset is the higher of its

fair value less costs of disposal and the present value of the future cash flows expected to be

derived from the asset.

If the recoverable amount of an asset is less than its carrying amount, the difference is recognized

as an impairment loss and charged to profit or loss for the current period.

Once an impairment loss is recognized, it is not reversed in a subsequent period.

Employee benefits

When an employee has rendered service to the Bank during an accounting period, the Bank shall

recognize the short-term employee benefits expected to be paid in exchange for that service as a

liability, and as an expense or the cost of an asset. For the employee welfare incurred, the Bank

shall recognize the actual amount of employee welfare as an expense or the cost of an asset when

it occurs. If the employee benefit is non-monetary, it shall be measured at fair value.


- 20 -


Employee benefits - continued

For social insurance including medical care, employment injury insurance, maternity insurance

and housing fund, as well as labor union cost and employee training expense, the Bank will

calculate the amount of employee benefit according to defined base and percentage and recognize

as a liability and an expense or the cost of an asset.

The Bank shall recognize the contribution payable to a defined contribution plan, in exchange for

the service rendered by an employee during an accounting period, as a liability and as an expense

or the cost of an asset.

The Bank shall recognize a liability and expense for termination benefits at the earlier of the

following dates:

- when the Bank can no longer withdraw the offer of those benefits; and

- when the Bank recognizes costs for a restructuring and involves the payment of termination

benefits.

General risk reserve

Pursuant to Caijin [2012] No. 20 “Regulations on creation provisions for Financial Institutions”

issued by MoF and the related regulations, the Bank provided 1.5% of risk assets balance as of the

balance sheet date as the general risk reserve. The provision of general risk reserve is considered

as the distribution of current profits and presented separately in the owners’ equity.

Interest income and expenses

Interest income and expenses are determined at amortized costs of relevant financial assets and

financial liabilities using the effective interest rate, and recognized in profit or loss for current

period. If the difference in amount between effective interest rate method and contract interest rate

method is small, contract interest method can be used.

Fees and commission income

Fees and commission income are recognized on an accrual basis when the related services are

delivered.

Government grants

Government grants are the transfer of monetary assets or non-monetary assets from the

government to the Bank at no consideration. Government grants are recognized when the Bank

complies with the conditions attaching to the grant and when the Bank is able to receive the grant.

If a government grant is in the form of a transfer of a monetary asset, the item is measured at the

amount received or receivable. If a government grant is in the form of a transfer of a

non-monetary asset, the item is measured at fair value. If fair value is not reliably determinable,

the item is measured at a nominal amount. A government grant measured at a nominal amount is

recognized immediately in profit or loss for the current period.


- 21 -


Government grants - continued

A government grant related to an asset is recognized as deferred income, and evenly amortized to

profit or loss over the useful life of the related asset.

For a government grant related to income, if the grant is a compensation for related expenses or

losses to be incurred in subsequent periods, the grant is recognized as deferred income, and

recognized in profit or loss over the periods in which the related costs are recognized; if the grant

is a compensation for related expenses or losses already incurred, the grant is recognized

immediately in profit or loss for the current period.

For the repayment of a government grant already recognized, if there is any related deferred

income, the repayment is offset against the carrying amount of the deferred income, and any

excess is recognized in profit or loss for the current period; if there is no related deferred income,

the repayment is recognized immediately in profit or loss for the current period.

Entrusted business

Entrusted business of the Bank mainly consists of entrusted loan. Entrusted loans are a form of

agency business in which the capital is provided by the client (trustor) and is loaned to the target

borrower for specified uses, in specified amounts, over specified maturity periods and at a

specified interest rate as instructed by the trustor through the Bank (the trustee), who grants,

monitors, uses as well as helps retrieve the loan on the trustor’s behalf. The loan risks will be

assumed by the trustor and the Bank charges only a service commission. The entrusted loan is

presented in off-balance sheet.

Income tax

Income tax expenses comprise current income taxes and deferred taxes.

(1) Current income tax

At the balance sheet date, the current income tax liabilities (or assets) for the current period or

previous periods are measured at the amount expected to be paid (or recovered) according to the

requirements of tax law.

(2) Deferred tax assets and deferred tax liabilities

Temporary differences arising from the difference between the carrying amount of an asset or

liability and its tax base, or the difference between the tax base and the carrying amount of those

items that are not recognized as assets or liabilities but have a tax base that can be determined

according to tax laws, are recognized as deferred tax assets and deferred tax liabilities using the

balance sheet liability method.

In general, deferred tax assets are recognized for all deductible temporary differences to the extent

that it is probable that taxable profits will be available against which the deductible temporary

differences can be utilized.


- 22 -

4. SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES - continued Income tax - continued

(2) Deferred tax assets and deferred tax liabilities - continued

The Bank recognizes a deferred tax asset for the carry forward of unused deductible losses and tax

credits to the extent that it is probable that future taxable profits will be available against which

the deductible losses and tax credits can be utilized.

At the balance sheet date, deferred tax assets and deferred tax liabilities are measured at the tax

rates that are expected to apply to the period when the asset is realized or the liability is settled,

according to the requirements of tax laws.

Current income taxes and deferred taxes are recognized in current year profit and loss, except for

the transactions related to the other comprehensive income or equity, which should be recognized

in the other comprehensive income or equity. At the balance sheet date, the Bank reviews the carrying amount of any deferred tax asset. If it is

probable that sufficient taxable profits will not be available in future periods to allow the benefit

of the deferred tax asset to be utilized, the carrying amount of the deferred tax asset is reduced.

Any such reduction in amount is reversed to the extent that it becomes probable that sufficient

taxable profits will be available.

(3) Tax asset and tax liability offset When the Bank has a legal right to offset the recognized amounts and intends to either settle on a

net basis, or realize the asset and settle the liability simultaneously, tax asset and tax liability of

current period are offset and the net amount is presented in the balance sheet.

When the Bank has a legal right to offset the recognized amounts, and the deferred tax assets and

the deferred tax liabilities relate to income taxes levied by the same taxation authority on either

the same taxable entity, or different taxable entities which intend to either settle current tax

liabilities and assets on a net basis, or to realize the assets and settle the liabilities simultaneously,

in each future period in which significant amounts of deferred tax liabilities or assets are expected

to be settled or recovered, are reported on a net basis.

Leases A finance lease is a lease that transfers in substance all the risks and rewards incidental to

ownership of an asset. Title may or may not eventually be transferred. An operating lease is a

lease other than a finance lease. Recording of operational lease by the bank as lessee Lease payments under an operating lease are recognized on a straight-line basis over the lease

term to the cost of the assets or to profit or loss for the period in which they are incurred. Initial

direct costs are charged to profit or loss for the current period. Contingent rents are charged to

profit or loss in the period when they are actually incurred.


- 23 -

5. THE CRITICAL JUDGMENTS THAT MADE IN THE PROCESS OF APPLYING THE

ACCOUNTING POLICY AND KEY ASSUMPTIONS AND UNCERTAINTIES IN

ACCOUNTING ESTIMATES In the application of the Bank’s accounting policies, which are described in Note 4, the Bank is

required to make judgments, estimates and assumptions about the carrying amounts of items in

the financial statements that cannot be measured accurately. These judgments, estimates and

assumptions are based on historical experience of the Bank’s management as well as other factors

that are considered to be relevant. Actual results may differ from these estimates.

The aforementioned judgments, estimates and assumptions are reviewed regularly on a going

concern basis. Revisions to accounting estimates are recognized in the period in which the

estimate is revised if the revision affects only that period, or in the period of the revision and

future periods if the revision affects both current and future periods. Key assumptions and uncertainties in accounting estimates As of the balance sheet date, the following are the key assumptions and uncertainties that the

Bank has made in the process of applying the accounting estimates and that have the most

significant effect on the amounts recognized in financial statements:

Impairment losses of loans and advances Except for the provision made before the month-end, the Bank makes assessment of impairment

provision on loan portfolios at the end of each month. For the loan portfolios that have not been

found decline in cash flow of single loan, the Bank makes judgment whether or not there is any

evidence showing the portfolio’s estimated future cash flow will decrease, so as to determine

whether or not any provision for impairment need to be made. The evidences showing that

impairment losses incur include observable evidence reflecting that the payment situation of a

borrower in the portfolio has adverse changes (e.g. the borrower does not repay according to

agreement), or there are disadvantaged changes in national or regional economic situation that

may lead to defaults of loans in the portfolio, and etc.

For loan portfolio assets with similar credit risk characteristics and objective impairment

evidences, the Bank adopts the historical loss experience of similar assets as the basis for

calculating the future cash flow of the loan portfolio. The Bank periodically reviews the methods

and assumptions used to estimate the amount and time of future cash flow, to reduce the

difference between the estimated loan impairment losses and the actual loan impairment losses.

Fair value of financial assets

For the financial instrument without active trading market, the Bank determines its fair value by

various valuation methods. The valuation methods that the Bank uses include Discounted Cash

Flow (DCF) model analysis, and etc. The Bank need to make estimates in such aspects as credit

risks of itself and counterparties, market volatility and relevance. The changes in the assumptions

about these relevant elements will have effects on the fair values of financial instruments.


- 24 -

5. THE CRITICAL JUDGMENTS THAT MADE IN THE PROCESS OF APPLYING THE

ACCOUNTING POLICY AND KEY ASSUMPTIONS AND UNCERTAINTIES IN

ACCOUNTING ESTIMATES - continued

Impairment of available-for-sale financial assets The Bank determined the AFS financial assets of impairment according to the CAS No.22. During

the process of management's judgement, the Bank assessed the extent and duration of which the

fair value is lower than the cost, as well as the financial position of the investee, short-term

business outlook, industry conditions, technology change, credit rating, default rates and

counterparty risk.

Held-to-maturity investments

Following the requirements in CAS No.22 - Recognition and Measurement of Financial

Instruments, the Bank classifies the non-derivative financial assets with a fixed or determinable

repayment amount and a fixed maturity date, and those the Bank has definitude intent and ability

to hold to maturity, as held-to-maturity investments. Such type of classification involves a large

amount of judgments. In the process of making judgments, the Bank will assess its intent and

ability to hold such type of bonds to maturity date. Except the special circumstances stipulated in

CAS No. 22 - Recognition and Measurement of Financial Instruments (e.g. sell bonds of

insignificant amount when approaching maturity), if the Bank cannot hold these bonds to maturity

date, all such type of bonds must be reclassified into available-for-sale financial assets.

Impairment of held-to-maturity investments and receiveable investments

The determination of whether a held-to-maturity financial asset or receiveable investments

classified as receivables is impaired requires significant judgement. Objective evidence that a

financial asset or group of assets is impaired includes a breach of contract, such as a default or

delinquency in interest or principal payments, etc. In making such judgement, the impact of

objective evidence for impairment on expected future cash flows of the investment is taken into

account. Income tax There are a number of transactions for which the final tax determination and calculation is

uncertain during the ordinary course of business operation. In particular, the deductibility of

certain items is subjected to government approval. Where the final tax outcome is different from

the amount that was initially recorded, such differences will impact the income tax and deferred

income tax provisions in the period during which such a determination is made.

Deferred tax assets and liabilities

Deferred tax assets and liabilities, are measured at the tax rates that are expected to apply to the

period when the assets are realized or the liabilities are settled, according to the requirements of

tax laws. Within the limit of sufficient available taxable profits against which the temporary

differences can be deductible, the Bank recognizes deferred tax assets against the deductible

temporary differences. This requires management judgment to estimate the time of taxable profits

and appropriate tax rate, combined with tax strategy, to determine the amount of deferred tax

assets and liabilities.


- 25 -

6. TAXATION

Income tax

The corporate income tax rate is 25%。

Business tax

The business tax rate is 5%.

The Bank is liable for paying levis of business tax according to local tax bureau’s request.

7. CASH AND BALANCES WITH THE CENTRAL BANK

2015/12/31 2014/12/31

RMB RMB

Cash 19,814,042.64 14,459,328.44

Deposit reserves 5,937,258,311.36 6,784,636,694.33

Other deposits with the Central Bank 1,853,385,066.24 482,425,084.83 ______________ ______________

Total 7,810,457,420.24 7,281,521,107.60 ______________ ______________ ______________ ______________

Deposit reserve is placed according to relevant regulations promulgated by the People’s Bank of

China (the “PBOC”). In accordance with “Notice on Raising Reserve Rate for Foreign Currency

Deposits Issued by the People’s Bank of China” [YinFa (2007) No.134], reserve rate for all foreign

currency deposits of financial institutions was adjusted to 5% effective 15 May 2007. Deposit reserve

for foreign currency business is deposited at 5% of the month-end balances of the relevant deposit and

reserves items. Deposit reserve for foreign currency business is non-interest bearing. In accordance

with regulations issued by PBOC, reserve rate for all RMB deposits of foreign banks was 15% on 31

December 2015 and 18% on 31 December 2014. Deposit reserve for RMB operation is deposited at

rate based on the RMB deposit balance from last one third of the current month.


- 26 -

8. DUE FROM BANKS

2015/12/31 2014/12/31

RMB RMB

Due from domestic banks 1,184,530,594.75 618,007,265.81

Due from oversea banks 86,591,153.40 216,792,146.71 ______________ ______________

Total 1,271,121,748.15 834,799,412.52 ______________ ______________ ______________ ______________

9. PLACEMENT TO BANKS

2015/12/31 2014/12/31

RMB RMB

Placement to domestic banks 10,971,849,600.00 8,193,592,062.93 ______________ ______________ ______________ ______________

10. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

2015/12/31 2014/12/31

RMB RMB

Financial institution bonds - 163,372,300.00

Negotiable certificate deposits 291,039,500.00 - _____________ _____________

Total 291,039,500.00 163,372,300.00 _____________ _____________ _____________ _____________

11. DERIVATIVE FINANCIAL ASSETS 2015/12/31 2014/12/31

Fair value Fair value Item Nominal amount Assets Liabilities Nominal amount Asset Liabilities

RMB RMB RMB RMB RMB RMB

Interest rate

derivatives

- Interest rate swaps 464,394,866.24 225,543.83 225,543.83 475,506,520.36 2,610,580.54 2,878,407.94 Money-derivative

instrument

- Foreign exchange

forward contract 1,636,382,742.80 19,982,381.33 8,578,946.89 6,840,431,076.89 43,622,416.05 36,669,282.54

- Foreign exchange swaps contract 48,020,465,692.72 181,580,040.50 157,403,696.00 11,294,302,683.73 8,607,368.20 40,349,751.08

- Foreign exchange

options contract 636,266,508.00 6,227,589.66 5,526,509.22 375,703,832.00 5,765,158.11 5,280,104.98

Equity-derivative

instrument

- Equity exchange swap contract 411,060,000.00 5,576,964.10 5,576,964.10 - - - _______________ _____________ _______________ _______________ _____________ ________________

Total 51,168,569,809.76 213,592,519.42 177,311,660.04 18,985,944,112.98 60,605,522.90 85,177,546.54 _______________ _____________ _______________ _______________ _____________ ________________ _______________ _____________ _______________ _______________ _____________ ________________


- 27 -

12. FINANCIAL ASSETS PURCHASED UNDER RESALE AGREEMENTS

2015/12/31 2014/12/31

RMB RMB

Bonds 300,000,000.00 600,000,000.00

Notes - 499,736,952.00 ______________ ______________

Total 300,000,000.00 1,099,736,952.00 ______________ ______________ ______________ ______________

13. INTEREST RECEIVABLE

(1) Movement in interest receivable is as follows: 2015/12/31 2014/12/31

RMB RMB

Opening balance 377,592,346.24 194,589,981.67

Addition during the year 2,231,967,134.60 2,424,661,662.09

Receipts during the year (2,253,903,720.25) (2,241,691,004.92)

Exchange differences 2,406,467.94 31,707.40 _______________ ______________

Closing balance 358,062,228.53 377,592,346.24 _______________ ______________ _______________ ______________

(2) The interest receivable categorized by nature is as follows:

2015/12/31 2014/12/31

RMB RMB

Loans and advances to customers 51,122,684.83 79,848,074.82

Due from banks and placement to banks 42,943,195.75 56,526,097.86

Available-for-sale financial assets

and held-to-maturity investments 263,978,841.11 241,160,694.11

Financial assets purchased under resale agreements 17,506.84 57,479.45 _____________ ____________

Total 358,062,228.53 377,592,346.24 _____________ ____________ _____________ ____________


- 28 -

14. LOANS AND ADVANCES TO CUSTOMERS

(1) The loans and advances categorized by individual and corporate are as follows:

2015/12/31 2014/12/31

RMB RMB

Personal loans and advances

- Housing mortgage 225,213,841.79 311,513,184.26

- Others 194,579,360.27 251,749,321.22 _______________ ______________

Subtotal 419,793,202.06 563,262,505.48 _______________ ______________

Corporate loans and advances

- Loans 23,075,254,562.10 19,788,522,221.20

- Bills discount 7,072,483,815.05 10,308,949,213.16

- Receivable and payable financing 121,198,188.36 331,963,740.76

- Negotiations 71,158,626.00 151,141,907.46

- Factoring 57,448,388.42 17,703,521.03

- Forfeiting 4,207,622.93 -

- L/C advanced payment 660,060.73 1,393,727.00 _______________ ______________

Subtotal 30,402,411,263.59 30,599,674,330.61 _______________ ______________

Total 30,822,204,465.65 31,162,936,836.09 _______________ ______________

Less: Loan loss provision 853,003,998.51 779,069,963.34

- Individual assessment 198,884,313.31 97,069,720.78

- Collective assessment 654,119,685.20 682,000,242.56 _______________ ______________

Net book value 29,969,200,467.14 30,383,866,872.75 _______________ ______________ _______________ ______________


- 29 -

14. LOANS AND ADVANCES TO CUSTOMERS - continued

(2) The loans and advances categorized by industry are as follows:

By industry 2015/12/31 Proportion 2014/12/31 Proportion

RMB (%) RMB (%)

Construction 5,650,459,279.73 18.33 1,686,339,550.62 5.41

Real estate 4,209,337,329.31 13.66 5,009,825,072.94 16.08

Water conservancy and

environment 3,972,790,595.68 12.89 7,296,721.60 0.02

Manufactory 3,034,221,241.09 9.84 5,134,102,229.55 16.47

Wholesale and retail 2,662,429,236.87 8.64 5,604,107,874.06 17.98

Leasing and commerce 2,187,238,914.63 7.10 1,872,825,610.88 6.01

Transportation 482,033,224.76 1.56 431,934,236.53 1.39

Information and computer 456,925,717.71 1.48 239,217,008.38 0.77

Personal loans 419,793,202.06 1.36 563,262,505.48 1.81

Electronic, power, gas and water 144,180,711.20 0.47 261,000,000.00 0.84

Hotel and catering 137,302,735.99 0.45 285,604,001.97 0.92

Research and technical services 114,400,000.00 0.37 143,388,000.00 0.46

Culture, sports and entertainment 87,599,657.24 0.28 83,409,287.24 0.27

Agriculture, livestock and fishery 40,000,000.00 0.13 34,007,290.00 0.11

Public service 33,293,200.00 0.11 38,293,200.00 0.12

Education 16,822,351.43 0.05 - -

Residents and other services 3,000,000.00 0.01 - -

Others 7,170,377,067.95 23.27 9,768,324,246.84 31.34 ________________ ______ _______________ ______

Total 30,822,204,465.65 100.00 31,162,936,836.09 100.00 ________________ ______ _______________ ______



- Collective assessment 654,119,685.20 682,000,242.56 ________________ _______________

Net book value 29,969,200,467.14 30,383,866,872.75 ________________ _______________ ________________ _______________

(3) The loans and advances categorized by regions are as follows:

By region 2015/12/31 Proportion 2014/12/31 Proportion

RMB (%) RMB (%)

East China 15,690,047,968.72 50.91 24,345,254,321.26 78.12

Southwest China 5,897,707,887.64 19.13 704,188,968.79 2.26

North China 3,058,696,411.61 9.92 1,689,472,875.10 5.42

South China 2,208,021,662.59 7.16 1,882,237,828.19 6.04

Other regions 3,547,937,333.03 11.52 1,978,520,337.29 6.35

Personal loans 419,793,202.06 1.36 563,262,505.46 1.81 _______________ ______ _______________ ______

Total 30,822,204,465.65 100.00 31,162,936,836.09 100.00 ________________ ______ _______________ ______



- Collective assessment 654,119,685.20 682,000,242.56 ________________ _______________

Net book value 29,969,200,467.14 30,383,866,872.75 ________________ _______________ ________________ _______________


- 30 -

14. LOANS AND ADVANCES TO CUSTOMERS - continued

(3) The loans and advances categorized by regions are as follows: - continued

Notes:

East China includes: Shandong Province, Jiangsu Province, Jiangxi Province, Zhejiang Province, Anhui

Province, Fujian Province and Shanghai;

Southwest China includes: Chongqing, Sichuan Province, Guizhou Province, Yunnan Province and

Tibet Autonomous Region.

North China includes: Beijing, Tianjin, Hebei Province, Shanxi Province and Inner Mongolia

Autonomous Region.

South China includes: Guangdong Province, Guangxi Zhuang Autonomous Region and Hainan

Province.

Other regions include provinces other than the above regions.

(4) The loans and advances categorized by contract agreement terms and guarantee pattern are as

follows:

2015/12/31 2014/12/31

Within a year 1year to 5 years Within a year 1year to 5 years

(including 1year) (including 5 years) Over 5 years Total (including 1year) (including 5 years) Over 5 years Total RMB RMB RMB RMB RMB RMB RMB RMB

Unsecured loans 17,136,099,466.36 1,389,767,274.36 - 18,525,866,740.72 15,617,430,841.45 875,290,545.53 - 16,492,721,386.98

Guaranteed loans 592,820,715.51 226,296,556.03 - 819,117,271.54 769,534,266.07 134,316,599.07 - 903,850,865.14

Collateral loans 7,021,580,299.63 4,030,293,312.91 425,346,840.85 11,477,220,453.39 7,875,119,971.94 5,225,987,259.23 665,257,352.80 13,766,364,583.97

- Mortgage loans 2,710,304,324.59 3,168,993,313.84 422,296,840.85 6,301,594,479.28 5,211,245,024.34 4,532,679,375.88 635,257,352.80 10,379,181,753.02

- Pledge loans 4,311,275,975.04 861,299,999.07 3,050,000.00 5,175,625,974.11 2,663,874,947.60 693,307,883.35 30,000,000.00 3,387,182,830.95 _______________ _______________ _______________ ________________ _______________ ______________ _______________ ________________

Total 24,750,500,481.50 5,646,357,143.30 425,346,840.85 30,822,204,465.65 24,262,085,079.46 6,235,594,403.83 665,257,352.80 31,162,936,836.09 _______________ _______________ _______________ ________________ _______________ ______________ _______________ ________________



- Collective assessment 654,119,685.20 682,000,242.56 ________________ ________________

Net book value 29,969,200,467.14 30,383,866,872.75 ________________ ________________ ________________ ________________

(5) Overdue loans are as follows:

2015/12/31 2014/12/31

Overdue 1- Over due 90 Overdue 360 Overdue 1 Overdue 90 Overdue 360

90 days -360 days 3 years Overdue more -90 days -360 days -3 years Overdue more

Item (including 90 days) (including 360days) (including 3years) than 3 years Total (including 90 days) (including 360 days) (including 3years) than 3 years Total

RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB

Unsecured loans - 64,385,840.80 61,230,632.74 - 125,616,473.54 41,881,849.67 38,047,484.83 24,621,166.32 - 104,550,500.82

Guaranteed loan - - - - - 48,150,000.00 - - - 48,150,000.00

Collateral loans 316,768,284.14 298,303,402.21 393,876,766.23 - 1,008,948,452.58 404,665,239.47 322,396,757.24 151,060,208.55 - 878,122,205.26 - Mortgage loans 316,768,284.14 298,303,402.21 389,953,266.23 - 1,005,024,952.58 401,665,239.47 318,473,257.24 151,060,208.55 - 871,198,705.26

- Pledge loans - - 3,923,500.00 - 3,923,500.00 3,000,000.00 3,923,500.00 - - 6,923,500.00 _______________ _______________ _______________ ______________ ________________ _______________ _______________ _______________ _______________ _______________

Total 316,768,284.14 362,689,243.01 455,107,398.97 - 1,134,564,926.12 494,697,089.14 360,444,242.07 175,681,374.87 - 1,030,822,706.08 _______________ _______________ _______________ ______________ ________________ _______________ _______________ _______________ _______________ _______________ _______________ _______________ _______________ ______________ ________________ _______________ _______________ _______________ _______________ _______________

(6) Loan loss provision:

2015

Individual Collective

assessment assessment Total

RMB RMB RMB

Opening balance 97,069,720.78 682,000,242.56 779,069,963.34

Accural/(reversal) for the year 113,484,057.68 (30,389,359.96) 83,094,697.72

Write off (11,669,465.15) (2,400,936.27) (14,070,401.42)

Exchange differences - 4,909,738.87 4,909,738.87 _____________ _____________ _____________

Closing balance 198,884,313.31 654,119,685.20 853,003,998.51 _____________ _____________ _____________ _____________ _____________ _____________


- 31 -

15. AVAILABLE-FOR-SALE FINANCIAL ASSETS

2015/12/31 2014/12/31

RMB RMB

Government bonds 1,014,101,050.00 69,313,790.00

Financial institutions bonds 4,925,065,908.00 4,103,102,390.00

Corporate bonds 709,941,730.00 684,730,850.00

Negotiable certificate deposits 4,313,368,660.00 1,023,900,510.00

Trust beneficial right (Note) 100,000,000.00 - ______________ ______________

Total 11,062,477,348.00 5,881,047,540.00 ______________ ______________ ______________ ______________

Note: Trust beneficial rights are purchased by the Bank and recognized as available-for-sale

financial assets at the beginning of investment, which is a trust plan operated by the

counterparty. According to the Bank’s liquidity management and operating demands, this

kind of trust beneficial rights may be sold.

16. HELD-TO-MATURITY INVESTMENTS 2015/12/31 2014/12/31

Nominal amount Fair value Nominal amount Fair value

RMB RMB RMB RMB

Government bonds 1,728,391,121.15 1,757,351,110.00 2,525,964,394.43 2,536,028,550.00

Financial institutions bonds 4,218,931,468.21 4,501,856,252.81 3,388,862,906.30 3,558,421,790.00

Corporate bonds 160,554,369.96 165,338,180.00 - -

Negotiable certificate deposits 1,202,599,751.84 1,172,920,220.00 - - ______________ ______________ ______________ ______________

Total 7,310,476,711.16 7,597,465,762.81 5,914,827,300.73 6,094,450,340.00 ______________ ______________ ______________ ______________ ______________ ______________ ______________ ______________

17. RECEIVABLE INVESTMENTS

2015/12/31 2014/12/31

RMB RMB

Trust and other beneficial rights principal (Note) 2,500,473,698.63 -

Interest receivable of trust

and other beneficial rights 20,991,234.26 - ______________ ______________

Total 2,521,464,932.89 - ______________ ______________ ______________ ______________

Note: Trust and other beneficial rights mainly are trust beneficial rights and wealth

management plans and etc. These products mainly invest trust loans or asset management

plans run by trust companies, securities companies or asset management companies as

entrusted fund administrators.


- 32 -

18. FIXED ASSETS

Transportation Office Fixed assets Buildings vehicles equipment improvement Total RMB RMB RMB RMB RMB Original cost

Opening 1,201,568,109.49 8,805,680.79 89,618,546.21 39,055,620.36 1,339,047,956.85 Additions - - 34,784,072.08 15,727,011.20 50,511,083.28

Decreases - - (7,414,441.80) - (7,414,441.80) _____________ ____________ _____________ ____________ _____________

Closing 1,201,568,109.49 8,805,680.79 116,988,176.49 54,782,631.56 1,382,144,598.33 _____________ ____________ _____________ ____________ _____________

Accumulated

depreciation

Opening 73,718,538.92 5,279,270.53 47,200,624.05 21,788,921.73 147,987,355.23 Charged in

the year 27,035,282.52 1,112,867.16 10,672,866.49 7,019,184.29 45,840,200.46

Decreases - - (6,655,985.82) - (6,655,985.82) _____________ ____________ _____________ ____________ _____________

Closing 100,753,821.44 6,392,137.69 51,217,504.72 28,808,106.02 187,171,569.87 _____________ ____________ _____________ ____________ _____________

Net book value

Opening 1,127,849,570.57 3,526,410.26 42,417,922.16 17,266,698.63 1,191,060,601.62 _____________ ____________ _____________ ____________ _____________ _____________ ____________ _____________ ____________ _____________

Closing 1,100,814,288.05 2,413,543.10 65,770,671.77 25,974,525.54 1,194,973,028.46 _____________ ____________ _____________ ____________ _____________ _____________ ____________ _____________ ____________ _____________

19. CONSTRUCTION IN PROCESS

2014/12/31 Additions Transfer to fixed assets 2015/12/31

RMB RMB RMB RMB

Office premises - 82,430,000.00 - 82,430,000.00 _____________ ____________ _____________ ____________ _____________ ____________ _____________ ____________

20. INTANGIBLE ASSETS

Software

RMB

Original cost

Opening 37,047,630.59

Additions 13,867,383.00 ____________

Closing 50,915,013.59 ____________

Accumulated amortization

Opening 16,449,322.63

Charged in the year 6,135,830.33 ____________

Closing 22,585,152.96 ____________

Net book value

Opening 20,598,307.96 ____________ ____________

Closing 28,329,860.63 ____________ ____________


- 33 -

21. DEFERRED TAX ASSETS

(1) Deferred tax assets are disclosed in gross as follows:

Deductible temporary differences Deferred tax assets

2015/12/31 2014/12/31 2015/12/31 2014/12/31

RMB RMB RMB RMB

Change in fair value of

available-for-sale financial assets 105,853,192.59 20,684,121.78 26,463,298.15 5,171,030.44

Change in fair value of

derivative financial assets - 12,693,149.50 - 3,173,287.38

Employee benefits payable 64,238,810.00 56,139,507.00 16,059,702.50 14,034,876.75

Allowances for impairment losses 435,063,457.85 385,444,075.83 108,765,864.46 96,361,018.97

Impairment allowance for

the continuing involvement assets 1,128,864.20 508,625.60 282,216.05 127,156.40 _____________ ____________ ____________ _____________

Total 606,284,324.64 475,469,479.71 151,571,081.16 118,867,369.94 _____________ ____________ ____________ _____________ _____________ ____________ ____________ _____________

Taxable temporary differences Deferred tax liabilities

2015/12/31 2014/12/31 2015/12/31 2014/12/31

RMB RMB RMB RMB

Changes in fair value of financial assets

at fair value through profit or loss 479,500.00 1,049,850.00 119,875.00 262,462.50

Changes in fair value of

available-for-sale financial assets 95,801,847.68 31,311,849.23 23,950,461.92 7,827,962.32

Changes in fair value of

derivative financial assests 8,140,832.69 - 2,035,208.17 - _____________ ____________ ____________ _____________

Total 104,422,180.37 32,361,699.23 26,105,545.09 8,090,424.82 _____________ ____________ ____________ _____________ _____________ ____________ ____________ _____________

(2) Deferred tax assets and liabilities are disclosed in net as follows:

2015/12/31 2014/12/31

RMB RMB

Deferred tax assets 151,571,081.16 118,867,369.94

Deferred tax liabilities 26,105,545.09 8,090,424.82 ______________ ______________

Net total 125,465,536.07 110,776,945.12 ______________ ______________ ______________ ______________

(3) According to the expectation regarding future operations, the Bank believes that sufficient

taxable income will be obtained in the future periods to deduct deductible temporary

difference, and thus recognize the relevant deferred tax assets.


- 34 -

22. OTHER ASSETS

2015/12/31 2014/12/31

RMB RMB

Other receivables (1) 56,969,524.98 28,423,658.36

Long-term prepayments (2) 29,061,181.78 11,939,776.15

Continuing involvement assets (3) 50,862,560.00 50,862,560.00 _____________ _____________

Total other assets 136,893,266.76 91,225,994.51 _____________ _____________

Less: Impairment allowance 1,128,864.20 508,625.60 _____________ _____________

Net value 135,764,402.56 90,717,368.91 _____________ _____________ _____________ _____________

(1) Other receivables

Categorized by aging

2015/12/31 2014/12/31

Allowance for Allowance for

Amount Proportion (%) bad debt Booking value Amount Proportion (%) bad debt Booking value

RMB RMB RMB RMB RMB RMB

Within 1 year 45,599,383.90 80.04 - 45,599,383.90 23,514,727.56 82.73 - 23,514,727.56

1~2 years 7,319,701.44 12.85 - 7,319,701.44 2,309,096.12 8.12 - 2,309,096.12

Over 2 years 4,050,439.64 7.11 - 4,050,439.64 2,599,834.68 9.15 - 2,599,834.68 ______________ ______ ____________ _____________ ______________ ______ ____________ _____________

56,969,524.98 100.00 - 56,969,524.98 28,423,658.36 100.00 - 28,423,658.36 ______________ ______ ____________ _____________ ______________ ______ ____________ _____________ ______________ ______ ____________ _____________ ______________ ______ ____________ _____________

Categorized by nature

2015/12/31 2014/12/31

RMB RMB

Security deposits 17,323,432.38 5,456,686.91

Prepayments 22,161,367.10 13,899,783.60

Receivables from customers 323,217.37 16,193.20

Deferred expenses 3,416,136.81 -

Receivables from spot foreign exchange transactions - 312,754.39

Others 13,745,371.32 8,738,240.26 _____________ _____________

Total 56,969,524.98 28,423,658.36 _____________ _____________ _____________ _____________


- 35 -

22. OTHER ASSETS - continued

(2) Long-term prepayment

Leasehold

Fee expenses Improvement Others Total

RMB RMB RMB RMB

Opening 8,725,220.00 3,057,879.19 156,676.96 11,939,776.15

Additions - 18,042,387.18 5,000,000.00 23,042,387.18

Amortization 2,908,406.64 2,480,898.16 531,676.75 5,920,981.55 _____________ ____________ _____________ ____________

Closing 5,816,813.36 18,619,368.21 4,625,000.21 29,061,181.78 _____________ ____________ _____________ ____________ _____________ ____________ _____________ ____________

(3) The Bank transferred credit assets and provided credit enhancement for the asset management

plan with the maximum risk exposure of RMB50,862,560.00, and recognized the continuing

involvement assets (Note 59). 23. DUE TO BANKS AND OTHER FINANCIAL INSTITUTIONS

2015/12/31 2014/12/31

RMB RMB

Due to banks

Due to domestic banks 5,981,427,892.02 1,631,404,200.02

Due to overseas banks 220,735,245.04 1,449,484,178.12 ______________ ______________

Sub-total 6,202,163,137.06 3,080,888,378.14 ______________ ______________

Due to other financial institutions

Due to other domestic financial institutions 280,270,000.00 297,920,000.00 ______________ ______________

Total 6,482,433,137.06 3,378,808,378.14 ______________ ______________ ______________ ______________

24. TAKING FROM BANKS

2015/12/31 2014/12/31

RMB RMB

Taking from domestic banks 795,466,000.00 835,243,500.00

Taking from overseas banks 909,104,000.00 1,333,090,000.00 ______________ ______________

Total 1,704,570,000.00 2,168,333,500.00 ______________ ______________ ______________ ______________


- 36 -

25. FINANCIAL ASSETS SOLD UNDER REPURCHASE AGREEMENTS

2015/12/31 2014/12/31

RMB RMB

Securities:

- Government Bonds 1,040,800,000.00 2,355,600,000.00

- Financial institution bonds 5,340,800,000.00 4,469,900,000.00

- Corporate bonds 220,000,000.00 -

- Notes 2,143,500,000.00 - ______________ ______________

Total 8,745,100,000.00 6,825,500,000.00 ______________ ______________ ______________ ______________

26. CUSTOMER DEPOSITS

2015/12/31 2014/12/31

RMB RMB

Current deposits

Corporate 10,216,814,917.21 8,570,426,593.96

Individual 1,748,497,212.55 924,278,657.31 _______________ ______________

Sub-total 11,965,312,129.76 9,494,705,251.27 _______________ ______________

Time deposits

Corporate 23,337,617,297.21 23,010,763,443.37

Individual 10,709,728,308.63 9,557,101,256.08 _______________ ______________

Sub-total 34,047,345,605.84 32,567,864,699.45 _______________ ______________

Total 46,012,657,735.60 42,062,569,950.72 _______________ ______________ _______________ ______________

27. EMPLOYEE BENEFITS PAYABLE

2014/12/31 Accrual Payment 2015/12/31

RMB RMB RMB RMB

Wages or salaries, bonus,

allowance and subsidies 56,139,507.00 200,733,016.33 192,633,713.33 64,238,810.00

Social security contributions - 9,207,921.96 9,207,921.96 -

- Medical insurance - 7,498,884.19 7,498,884.19 -

- Inductrial injury insurance - 370,046.88 370,046.88 -

- Maternity insurance - 704,592.73 704,592.73 -

- Other - 634,398.16 634,398.16 -

Housing funds - 8,190,815.38 8,190,815.38 -

Defined contribution plan - 21,068,687.51 21,068,687.51 -

- Pension insurance - 14,933,530.62 14,933,530.62 -

- Annuity - 5,147,237.00 5,147,237.00 -

- Unemployment insurance - 987,919.89 987,919.89 -

Termination benefits - 759,321.32 759,321.32 -

Employee welfare - 27,106,200.02 27,106,200.02 -

Labour union and

staff education cost - 2,795,007.65 2,795,007.65 - _____________ _____________ _____________ ____________

Total 56,139,507.00 269,860,970.17 261,761,667.17 64,238,810.00 _____________ _____________ _____________ ____________ _____________ _____________ _____________ ____________


- 37 -

28. TAXES PAYABLE 2015/12/31 2014/12/31

RMB RMB Corporate income tax 23,587,060.37 5,745,289.44

Business tax and levies 20,559,192.77 22,447,832.90

Others 3,551,806.58 2,481,575.29 ____________ ____________

Total 47,698,059.72 30,674,697.63 ____________ ____________ ____________ ____________

29. INTEREST PAYABLE

(1) Movement in interest payable is as follows: 2015/12/31 2014/12/31

RMB RMB Opening balance 449,046,631.37 366,655,852.54

Additions during the year 1,925,392,429.53 1,846,055,744.72

Payment during the year (2,045,981,328.72)(1,763,803,198.50)

Exchange differences 1,856,922.21 138,232.61 _____________ _____________

Closing balance 330,314,654.39 449,046,631.37 _____________ _____________ _____________ _____________

(2) The interest payable categorized by nature is as follows: 2015/12/31 2014/12/31

RMB RMB

Interest payable from

- Due to banks and other financial institutions

and taking from banks 34,252,465.63 49,021,304.94

- Customers deposits 283,293,939.51 385,973,357.74

- Financial assets purchased under resale agreements 12,768,249.25 14,051,968.69 _____________ ____________

Total 330,314,654.39 449,046,631.37 _____________ ____________ _____________ ____________

30. DEBT SECURITIES ISSUED

2015/12/31 2014/12/31

RMB RMB

Interbank negotiable certificate deposits 4,945,936,674.69 1,870,467,371.22 _______________ ______________ _______________ ______________


- 38 -

30. DEBT SECURITIES ISSUED - continued

Detailed information for debt securities issued as follows：

2015/12/31 2014/12/31

RMB RMB

Nominal of interbank negotiable certificate deposits 5,000,000,000.00 1,900,000,000.00 _______________ _______________

Less: unamortized issuing cost 54,063,325.31 29,532,628.78 _______________ _______________

Total 4,945,936,674.69 1,870,467,371.22 _______________ _______________ _______________ _______________

The Bank had 23 unexpired interbank negotiable certificate deposits on 31 December 2015

amounting to RMB 5 billion, which were all zero coupon bonds in one-month to one-year with

interest rate of 3.10% to 5.02%.

31. OTHER LIABILITIES 2015/12/31 2014/12/31

RMB RMB Notes payable 492,979.10 2,000,300.00

Due to customers 156,005,971.89 39,443,814.38

Finance lease payables 930,961.00 717,216.00

Spot foreign exchange transactions payables 7,737.92 -

Deferred income (Note) 15,560,500.00 28,528,500.00

Continuing involvement of liabilities 50,862,560.00 50,862,560.00

Others 33,248,642.52 9,193,640.24 _____________ _____________

Total 257,109,352.43 130,746,030.62 _____________ _____________ _____________ _____________

Note: Deferred income is the facility set up fee received and to be amortized over expected

beneficial period.

32. PAID-IN CAPITAL The register capital of the Bank is RMB 2,100,000,000.00, which has been already paid in full

amount.

2015/12/31

Currency Proportion (%) RMB

Taipei Fubon Commercial Bank Co., Ltd. RMB 51.00 1,071,000,000.00

Fubon Financial Holdings Co., Ltd. RMB 29.00 609,000,000.00

Shanghai Pudong Development Bank RMB 20.00 420,000,000.00 ________ ______________

Total RMB 100.00 2,100,000,000.00 ________ ______________ ________ ______________

The above capital contributed had been verified by Chinese Certified Public Accountants.


- 39 -

33. CAPITAL RESERVE 2015/12/31

&2014/12/31

RMB

Capital premium 93,176,446.10 ____________ ____________

34. OTHER COMPREHENSIVE INCOME/(LOSS)

(1) Other comprehensive income/(loss) items

2015 2014

RMB RMB

Other comprehensive income items which will

be reclassified subsequently to profit or loss

Gains or losses arising from changes

in fair value of AFS financial assets (20,679,072.43) 83,232,835.48

Less: Tax effect resulting from fair value

changes of AFS financial assets (5,169,768.11) 20,808,208.88 _______________ _____________

Total (15,509,304.32) 62,424,626.60 _______________ _____________ _______________ _____________

(2) Movement of other comprehensive income/(loss):

Changes in fair

value of

available-for-sale

finanicial assests

1 January 2014 (54,453,831.02)

Movement in 2014 62,424,626.60 ______________

31 December 2014 and 1 January 2015 7,970,795.58

Movement in 2015 (15,509,304.32) ______________

31 December 2015 (7,538,508.74) ______________ ______________

35. SURPLUS RESERVE

2015 2014

RMB RMB

Opening balance 266,701,606.41 224,512,679.48

Additions 39,038,249.56 42,188,926.93 _____________ ____________

Closing balance 305,739,855.97 266,701,606.41 _____________ ____________ _____________ ____________


- 40 -

36. GENERAL RISK RESERVE

2015 2014

RMB RMB Opening balance 775,020,149.28 584,912,793.16

Additions 168,257,500.87 190,107,356.12 _____________ ____________

Closing balance 943,277,650.15 775,020,149.28 _____________ ____________ _____________ ____________

37. RETAINED EARNINGS

2015 2014

RMB RMB Opening balance 1,303,782,030.67 1,114,189,044.49

Net profit for the year 390,382,495.60 421,889,269.23

Less: Transfer to surplus reserve (1) 39,038,249.56 42,188,926.93

Less: Transfer to general risk reserve (2) 168,257,500.87 190,107,356.12

Less: Cash dividends (3) 42,189,000.00 - ______________ ____________

Closing balance 1,444,679,775.84 1,303,782,030.67 ______________ ______________ ______________ ______________

(1) Transfer to surplus reserve

In 2015, the Bank appropriated 10% of net profit of this year RMB 39,038,249.56 to surplus

reserve.

(2) Transfer to general risk reserve

According to Caijin [2012] No. 20 issued by MoF, the general risk reserve should be provided

by 1.5% of the aggregate amount of risk assets as at the balance sheet date. Upon the approval

of the seventh session of the sixth conference of the Board meeting on 30 November 2012, the

Bank implemented above regulations since 2013 and provided an amount of RMB

168,257,500.87 for general risk reserve in the current year.

(3) Cash dividends

According to the 2014 annual profit distribution solution approved by the board of directors

on 10 April 2015, the Bank issued cash dividend of RMB 42,189,000.00 before 25 June 2015,

based on 10% of the net profit RMB 421,889,269.23 for the year 2014. As of 31 December

2015, the dividend payment has been completed.


- 41 -

38. NET INTEREST INCOME

2015 2014

RMB RMB Interest income

- Balances with the Central Bank 98,970,654.04 107,259,643.30

- Due from banks 42,530,086.09 69,101,065.83

- Placements to banks 541,155,332.86 121,333,799.15

- Financial assets purchased under resale agreements 3,793,842.23 139,721,105.96

- Loans and advance to customers 1,243,762,361.03 1,534,087,284.87

Including: Personal loans and advances 29,126,360.63 38,099,856.24

Corporate loans and advances 1,214,636,000.40 1,495,987,428.63

- Rediscount income of financial institutions 301,754,858.35 453,158,762.98 _______________ ______________

Subtotal 2,231,967,134.60 2,424,661,662.09 _______________ ______________

Interest expense

- Due to banks and other financial institutions 152,149,978.17 98,231,632.97

- Taking from banks 84,678,406.57 16,695,646.10

- Financial assets purchased under resale agreements 211,716,826.69 105,813,792.34

- Customer deposits 1,349,497,170.00 1,614,088,238.21

- Interest expense on issuing debt securities 127,234,816.53 10,325,321.22

- Rediscount interest expense from drafts 115,231.57 901,113.88 _______________ ______________

Subtotal 1,925,392,429.53 1,846,055,744.72 _______________ ______________

Net interest income 306,574,705.07 578,605,917.37 _______________ ______________ _______________ ______________

39. NET FEE AND COMMISSION INCOME

2015 2014

RMB RMB

Fee and commission income

- Settlement and clearing fees 6,420,728.20 6,926,059.53

- Agent business fees 7,997,729.83 5,627,803.93

- Guarantee fees 13,327,267.61 12,669,288.81

- Fees related to granting facilities 72,750,978.35 37,652,088.78

- Fees for setting loan facilities 19,939,500.00 52,470,496.00

- Others 7,515,004.00 22,445,236.43 _____________ _____________

Subtotal 127,951,207.99 137,790,973.48 _____________ _____________

Fee and commission expense

- Fee expenses 16,000,823.80 4,286,017.57 _____________ _____________

Subtotal 16,000,823.80 4,286,017.57 _____________ _____________

Net fee and commission income 111,950,384.19 133,504,955.91 _____________ _____________ _____________ _____________


- 42 -

40. INVESTMENT INCOME

2015 2014

RMB RMB

Investment income from financial assets

at fair value through profit or loss 15,804,016.54 13,556,790.62

Available-for-sale financial assets 528,307,267.44 179,827,712.39

Held-to-maturity investments 309,233,951.54 225,887,755.80

Receivable investments 20,991,234.26 - _____________ _____________

Total 874,336,469.78 419,272,258.81 _____________ _____________ _____________ _____________

41. GAINS/(LOSSES) FROM CHANGES IN FAIR VALUE

2015 2014

RMB RMB

Investment income from financial assets

at fair value through profit or loss (570,350.00) 1,049,850.00

Derivative financial instruments 21,611,046.06 (5,241,656.03) _____________ _____________

Total 21,040,696.06 (4,191,806.03) _____________ _____________ _____________ _____________

42. BUSINESS TAX AND LEVIES

2015 2014

RMB RMB

Operating tax 73,968,328.75 84,283,272.31

Urban maintenance and construction tax

and education surcharge 8,876,235.47 10,113,992.69

River administrative surcharges 615,125.15 660,367.47 _____________ _____________

Total 83,459,689.37 95,057,632.47 _____________ _____________ _____________ _____________


- 43 -

43. OPERATING EXPENSES

2015 2014

RMB RMB

Staff salary and welfare 269,860,970.17 224,040,263.16

Depreciation 45,840,200.46 40,190,249.04

Amortization of intangible assets 6,135,830.33 2,899,231.93

Operating lease rentals and utilities 38,224,352.74 17,595,406.15

Including: Amortization of rental 405,306.05 1,343,677.66

Decoration and maintenance 11,174,184.33 10,774,585.06

Including: Amortization of leasehold improvement 2,075,592.11 1,377,276.88

Entertainment 6,428,203.53 4,436,261.01

Including: Amortization of golf membership fee 531,676.75 156,677.52

Electrical equipment maintenance fee 5,506,492.85 3,016,167.67

Including：Amortization on network device maintenance - 21,840.00

Miscellaneous fees or expenses 18,114,611.44 14,978,795.25

Taxes 13,066,851.05 14,514,960.78

Travelling expenses 11,452,262.80 7,731,091.07

Administration fee for vehicle operating 5,297,836.70 3,678,787.22

Security expenses 3,462,640.48 3,035,724.87

Regulatory membership fee 2,872,726.05 1,820,834.62

Conference expense of the board of directors 2,240,603.12 1,982,030.13

Consulting expenses 395,713.46 880,090.67

Others 75,331,508.40 25,433,965.87 _____________ _____________

Total 515,404,987.91 377,008,444.50 _____________ _____________ _____________ _____________

44. IMPAIRMENT LOSS

2015 2014

RMB RMB

Impairment loss for loans 83,094,697.72 58,872,304.06

Impairment loss for continuing involvement assets 620,238.60 508,625.60 _____________ _____________

Total 83,714,936.32 59,380,929.66 _____________ _____________ _____________ _____________

45. NON-OPERATING INCOME 2015 2014

RMB RMB

Government grants 60,634.95 118,636.27

Penalty income 100,000.00 39,270.00

Others 3,851.48 72,464.72 ____________ ____________

Total 164,486.43 230,370.99 ____________ ____________ ____________ ____________


- 44 -

46. NON-OPERATING EXPENSES

2015 2014

RMB RMB

Donation - 1,300,000.00

Loss from disposal of fixed assets 714,538.98 -

Penalty 33.87 10,050.00

Sponsorship fee 2,429,872.00 -

Others - 4,000.00 ____________ ____________

Total 3,144,444.85 1,314,050.00 ____________ ____________ ____________ ____________

47. INCOME TAX EXPENSES

2015 2014

RMB RMB

Current year income tax expenses 112,480,925.21 91,698,545.77

Adjustment for last year tax filing (1,234.85) -

Deferred tax expenses (9,518,822.84) 18,384,701.27 _____________ _____________

Total 102,960,867.52 110,083,247.04 _____________ _____________ _____________ _____________

(1) Current year income tax expenses

The current year income tax expense is 25% of income which calculated by adjusting the

accounting profit before tax for the year in accordance with the relevant tax laws.

(2) Reconciliation of income tax expenses to accounting profits is as follows:

2015 2014

RMB RMB

Profits before tax 493,343,363.12 531,972,516.27

Income tax calculated at statutory tax rate

of current year 123,335,840.78 132,993,129.07

Add: Expenses not deductible for tax purposes 1,539,202.17 815,944.66

Less : Adjustment for last year tax filing 1,234.85 -

Less: Non-taxable proceeds 21,912,940.58 23,725,826.69 ____________ ____________

Total 102,960,867.52 110,083,247.04 ____________ ____________ ____________ ____________


- 45 -

48. CASH AND CASH EQUIVALENTS

2015 2014

RMB RMB

Cash and balances with the Central Bank 7,810,457,420.24 7,281,521,107.60

Less: deposit reserves 5,937,258,311.36 6,784,636,694.33

Original maturity within 3 months:

Due from banks 273,444,825.17 324,799,412.51

Placement to banks 1,681,842,400.00 1,499,155,000.00

Financial assets held under resale agreement 300,000,000.00 600,000,000.00 _______________ _____________

Total 4,128,486,334.05 2,920,838,825.78 _______________ _____________ _______________ _____________

49. SUPPLEMENTARY CASH FLOW STATEMENT

2015 2014

RMB RMB

Reconciliation of net profit to cash flows

from operating activities

Net profit 390,382,495.60 421,889,269.23

Add: Impairment loss 83,714,936.32 59,380,929.66

Depreciation of fixed assets 45,840,200.46 40,190,249.04

Amortization of intangible assets 6,135,830.33 2,899,231.93

Amortization of long-term prepayments 5,920,981.55 2,899,472.06

Loss on disposal of fixed assets, intangible

assets and other long-term assets 714,538.98 -

Investment income (874,336,469.78) (419,272,258.81)

(Gains)/losses from changes in fair value (21,040,696.06) 4,191,806.03

Decrease/(increase) in deferred tax assets (9,518,822.84) 18,384,701.27

Increase in operating receivables (1,412,061,607.73) (7,536,005,587.47)

Increase in operating payables 8,538,224,987.00 8,824,474,662.48 _______________ _______________

Net cash inflow from operating activities 6,753,976,373.83 1,419,032,475.42 _______________ _______________ _______________ _______________

Net changes in cash and cash equivalents

Closing balance of cash 19,814,042.64 14,459,328.44

Less: Opening balance of cash 14,459,328.44 12,484,882.12

Add: Closing balance of cash equivalents 4,108,672,291.41 2,906,379,497.34

Less: Opening balance of cash equivalents 2,906,379,497.34 4,282,515,158.59 _______________ _______________

Net decrease in cash and cash equivalents 1,207,647,508.27 (1,374,161,214.93) _______________ _______________ _______________ _______________


- 46 -

50. STRUCTURED ENTITIES

To better utilize the capital, the right of the unconsolidated structured entity owned by the Bank

mainly includes capital trust and asset management plans operated and managed by an

independent third party. The Bank receives interest revenues and investment gains through

holding this kind of structured entity. The Bank does not control the structured entity and does not

merge it therefore. The Bank did not give any financial support to the structured entity in 2015.

The following shows the information of the Bank’s unmerged structured entity by 2015/12/31.

2015/12/31

Available-for-sale Receivable Maximum risk Main type of

financial assets investments Book value exposure(1) benefits

RMB RMB RMB RMB

Trust 100,000,000.00 300,240,000.00 400,240,000.00 400,240,000.00 Investment gains

Wealth management - 2,221,224,932.89 2,221,224,932.89 2,221,224,932.89 Investment gains ________________________ ________________________ ________________________ _______________________

Total 100,000,000.00 2,521,464,932.89 2,621,464,932.89 2,621,464,932.89 ________________________ ________________________ ________________________ _______________________ ________________________ ________________________ ________________________ _______________________

(1) The maximum risk exposure of trust and wealth management is the amortized cost or fair

value recognized in balance sheet on the report day.

51. SEGMENT REPORTING According to the Bank’s internal organizational structure, regulatory requirements and internal

reporting system, the Bank’s businesses are divided into 5 segments, which are based on the

Bank’s internal organization. The Bank’s management can periodically evaluates operating results

of these segments reporting then determine resources allocation based on operating results

evaluation.

Information of segment reporting is disclosed based on the accounting policies and measurement

basis used when segments report provided to the management. This measurement basis should

also be consistent with the accounting policies and measurement used when preparing the

financial statements.


- 47 -

51. SEGMENT REPORTING - continued

Segment information: Unit: RMB

2015 Item Head Office Shenzhen Branch Tianjin Branch Suzhou Branch Nanjing Branch Elimination Total

Operating income 897,433,397.24 120,975,696.00 94,391,320.17 65,874,460.83 228,060.90 - 1,178,902,935.14

Net interest income 43,822,764.69 109,877,740.83 83,274,346.62 69,370,537.28 229,315.65 - 306,574,705.07

Including:

Net interest income

among segments (239,304,036.04) 132,776,071.10 42,331,724.81 63,976,129.37 220,110.76 - -

Net fee and

commission income 87,097,974.66 7,819,648.68 9,581,016.01 7,452,999.59 (1,254.75) - 111,950,384.19

Others 766,512,657.89 3,278,306.49 1,535,957.54 (10,949,076.04) - - 760,377,845.88 _______________ _______________ _______________ _______________ ____________ _______________ ________________

Operating expense 643,535,222.77 6,591,740.79 17,860,021.85 (1,992,732.87) 16,585,361.06 - 682,579,613.60 _______________ _______________ _______________ _______________ ____________ _______________ ________________

Operating profit 253,898,174.47 114,383,955.21 76,531,298.32 67,867,193.70 (16,357,300.16) - 496,323,321.54 _______________ _______________ _______________ _______________ ____________ _______________ ________________ _______________ _______________ _______________ _______________ ____________ _______________ ________________

Segment assets 68,919,917,784.13 6,343,233,920.97 3,268,434,017.57 4,222,425,482.60 251,150,014.04 (9,483,921,452.13) 73,521,239,767.18

Deferred tax assets 125,465,536.07 - - - - - 125,465,536.07 _______________ _______________ _______________ _______________ ____________ _______________ ________________

Total assets 69,045,383,320.20 6,343,233,920.97 3,268,434,017.57 4,222,425,482.60 251,150,014.04 (9,483,921,452.13) 73,646,705,303.25 _______________ _______________ _______________ _______________ ____________ _______________ ________________ _______________ _______________ _______________ _______________ ____________ _______________ ________________

Segment liabilities 64,166,048,100.88 6,243,233,920.97 3,168,434,017.57 4,122,425,482.60 231,150,014.04 (9,163,921,452.13) 68,767,370,083.93 _______________ _______________ _______________ _______________ ____________ _______________ ________________ _______________ _______________ _______________ _______________ ____________ _______________ ________________

Additional information:

Depreciation

and amortization 47,881,079.61 305,954.82 830,621.76 2,816,960.28 141,414.33 - 51,976,030.80

Long-term payments 5,274,044.82 221,914.13 305,003.50 - 120,019.10 - 5,920,981.55

Capital expenditure:

Expenditure on

purchasing fixed assets 48,157,693.28 38,070.00 18,000.00 64,000.00 2,233,320.00 - 50,511,083.28

Expenditure on purchasing

intangible assets 13,867,383.00 - - - - - 13,867,383.00

Additional construction

in process 82,430,000.00 - - - - - 82,430,000.00

2014

Item Head Office Shenzhen Branch Tianjin Branch Suzhou Branch Elimination Total

Operating income 746,487,366.26 96,698,897.68 119,318,663.44 101,998,274.53 - 1,064,503,201.91

Net interest income 301,259,555.47 81,082,063.66 104,787,609.70 91,476,688.54 - 578,605,917.37

Including:

Net interest income

among segments (103,832,217.39) 102,754,503.85 47,622,291.24 (46,544,577.70) - -

Net fee and

commission income 96,803,980.74 10,796,949.15 13,014,320.17 12,889,705.85 - 133,504,955.91

Others 348,423,830.05 4,819,884.87 1,516,733.57 (2,368,119.86) - 352,392,328.63 ________________ _______________ _______________ _______________ _______________ ________________

Operating expense 404,333,073.41 84,921,016.06 23,603,941.48 18,588,975.68 - 531,447,006.63 ________________ _______________ _______________ _______________ _______________ ________________

Operating profit 342,154,292.85 11,777,881.62 95,714,721.96 83,409,298.85 - 533,056,195.28 ________________ _______________ _______________ _______________ _______________ ________________ ________________ _______________ _______________ _______________ _______________ ________________

Segment assets 54,344,520,572.31 6,744,232,737.71 2,232,631,618.55 2,463,203,107.27 (4,291,250,339.68) 61,493,337,696.16

Deferred tax assets 110,776,945.12 - - - - 110,776,945.12 ________________ _______________ _______________ _______________ _______________ ________________

Total assets 54,455,297,517.43 6,744,232,737.71 2,232,631,618.55 2,463,203,107.27 (4,291,250,339.68) 61,604,114,641.28 ________________ _______________ _______________ _______________ _______________ ________________ ________________ _______________ _______________ _______________ _______________ ________________

Segment liabilities 49,908,646,489.39 6,644,232,737.71 2,132,631,618.55 2,363,203,107.27 (3,991,250,339.68) 57,057,463,613.24 ________________ _______________ _______________ _______________ _______________ ________________ ________________ _______________ _______________ _______________ _______________ ________________

Additional information: Depreciation

and amortization 38,653,665.77 381,581.44 1,165,548.66 2,888,685.10 - 43,089,480.97

Long-term payments 2,207,617.26 325,580.80 344,434.00 21,840.00 - 2,899,472.06

Capital expenditure

Expenditure on

purchasing fixed assets 35,951,229.81 298,069.28 73,800.00 238,586.00 - 36,561,685.09

Expenditure on purchasing

intangible assets 15,147,861.00 - - - - 15,147,861.00


- 48 -

51. SEGMENT REPORTING - continued (1) External revenue categorized by products or business

2015 2014

RMB RMB

Corporation banking 1,326,966,546.08 1,658,886,472.27

Private banking 29,126,360.63 38,099,856.24

Treasury and others 1,764,203,281.76 1,217,858,635.69 ______________ _____________

Total 3,120,296,188.47 2,914,844,964.20 ______________ _____________ ______________ _____________

(2) External revenue categorized by regions and non-current assets categorized by assets’

locations

2015 2014

RMB RMB

Domestic external revenue 3,083,162,708.25 2,883,421,347.06

Overseas external revenue 37,133,480.22 31,423,617.14 ______________ _____________

Total 3,120,296,188.47 2,914,844,964.20 ______________ _____________ ______________ _____________

The Bank’s non-current assets are all located in China.

External revenue in (1) and (2) is stated in gross amount, excluding non-operating income.

(3) Key client’s dependency

There’s no client from whom the revenue accounted for 10% or more of the Bank’s operating

income.

Inter-segment transfers are measured on the basis of actual transaction price or internal

settlement price according to the situation for such transfers. Segment revenue and segment

expense are determined on the basis of actual revenue and expense of the segment

respectively.


- 49 -

52. RELATED PARTIES RELATIONSHIP AND TRANSACTIONS

As of 31 December 2015, the related parties’ relationship and transactions listed below are based

on equity structure on 31 December 2015, as shown in Note 32.

(1) Related parties where a control relationship exists

Name Place of registration Principal business Register capital Share proportion

Taipei Fubon Commercial

Bank Co., Ltd. Tai Wan Investment holdings NT100,000,000,000 51.00% Fubon Financial Holding

Co., Ltd. Tai Wan Ultimate Controlling Party NT150,000,000,000 29.00%

(2) Related party relationship without control relationship

Name Relationship

Shanghai Pudong Development Bank Shareholder of the Bank

Xiamen Bank Co., Ltd. Great influence from insiders

Fubon Gehua (Beijing) Trading Co., Ltd. Great influence from insiders

Fubon Property & Casualty Insurance Co., Ltd. Great influence from insiders

LT & Partners Inc. Great influence from insiders

Shanghai Ruidong Hospital Great influence from insiders

He Yu investment consulting (Shanghai) Co., Ltd. Great influence from insiders

Wuxi Huanyu Enterprise Management Services Limited Great influence from insiders

Founder Fubon Financial Asset Management Co., Ltd Great influence from insiders

Cai Mingzhong, Cai Mingxing, Zhang Changbang,

Han Weiting, Hong Peili, Li Lin, Jiang Mingsheng,

Li Xiulun, Wu Hemao, Xu Wanmei, Zhan Wenyue Directors

The related parties of the Bank also includes key management personnel, their close family

members or entities which are subject to control, joint control or significant influence from key

management personnel’s close family members. Significant transactions between the Bank and the

related parties are disclosed separately while those others are disclosed together.

The Bank has business with related party in the course of daily business according to general

business articles.


- 50 -

52. RELATED PARTIES RELATIONSHIP AND TRANSACTIONS - continued

(3) As of balance sheet date, the significant transactions between the Bank and the above related

parties in the year are as follows:

Loans and advances to customers

2015/12/31 2014/12/31

RMB Proportion RMB Proportion

(%) (%)

Related individuals (Note) 2,677,381.43 0.01 2,720,094.01 0.01

Shanghai Ruidong Hospital 33,293,200.00 0.11 33,293,200.00 0.11

Shanghai Pudong

Development Bank - - 168,429,281.32 0.55 ______________ ______ _______________ _________

Total 35,970,581.43 0.12 204,442,575.33 0.67 ______________ ______ _______________ _________ ______________ ______ _______________ _________

Note: Related individuals include the directors of the Bank, key management personnel and

their close family members.

Due from banks

2015/12/31 2014/12/31


(%) (%)

Due from banks - current deposits

Shanghai Pudong

Development Bank 18,409,787.13 1.45 23,274,406.69 2.79

Taipei Fubon

Commercial Bank Co., Ltd. 2,231,175.97 0.18 862,353.51 0.10 ______________ ______ _______________ _________

Total 20,640,963.10 1.63 24,136,760.20 2.89 ______________ ______ _______________ _________ ______________ ______ _______________ _________

Due to banks and other financial institutions

2015/12/31 2014/12/31


(%) (%)

Due to banks -current deposits

Taipei Fubon

Commercial Bank Co., Ltd. 8,668,373.16 0.13 6,361,195.87 0.19

Due to banks -time deposits

Taipei Fubon

Commercial Bank Co., Ltd. 212,000,000.00 3.27 1,443,060,000.00 42.71

Shanghai Pudong

Development Bank 60,000,000.00 0.93 - - ______________ ______ _______________ _________

Total 280,668,373.16 4.33 1,449,421,195.87 42.90 ______________ ______ _______________ _________ ______________ ______ _______________ _________


- 51 -


(3) As of balance sheet date, the significant transactions between the Bank and the above related

parties in the year are as follows:- continued

Customer deposits

2015/12/31 2014/12/31


(%) (%)

Related Individuals 63,307,989.85 0.14 29,669,756.44 0.07

LT & Partners Inc. 39,250,704.49 0.09 36,770,328.88 0.09

Fubon Gehua (Beijing) Trading Co., Ltd. 4,089,705.90 0.01 22,791,210.35 0.05

He Yu Investment

Consulting (Shanghai) Co., Ltd. 889.25 0.00 1,647,592.69 0.00

Shanghai Ruidong Hospital 133,466.21 0.00 53,929.91 0.00

Wuxi Huanyu Enterprise

Management Services Limited 4,500,867.64 0.01 5,500,402.83 0.01 ______________ ______ _______________ _________

Total 111,283,623.34 0.25 96,433,221.10 0.22 ______________ ______ _______________ _________ ______________ ______ _______________ _________

Other Liabilities

2015/12/31 2014/12/31


(%) (%)

Beijing Founder Fubon

Asset Management Co., Ltd. (Note) 1,651,537.50 1.26 3,985,382.50 3.05 ______________ ______ _______________ _________ ______________ ______ _______________ _________

Note: Beijing Founder Fubon Asset Management Co., Ltd. paid consulting fee for

investment to the Bank amounted to RMB 4,667,200.00. The Bank amortized the fee

by straight-line method during the term of the contract. On 31 December 2015, the

amortized value was RMB 1,651,537.50.

(4) As of balance sheet date, the off-balance sheet balances between the Bank and the above

related parties are as follows:

Notional amount of forward foreign exchange contracts

2015/12/31 2014/12/31


(%) (%)

Shanghai Pudong Development Bank - - 91,556,900.00 1.34 ______________ ______ _______________ _________ ______________ ______ _______________ _________


- 52 -


(4) As of balance sheet date, the off-balance sheet balances between the Bank and the above

related parties are as follows: - continued

Notional amount of foreign exchange option contracts

2015/12/31 2014/12/31


(%) (%)

Taipei Fubon

Commercial Bank Co., Ltd. - - 220,284,000.00 58.63 ______________ ______ _______________ _________ ______________ ______ _______________ _________

Notional amount of interest rate swap contracts

2015/12/31 2014/12/31


(%) (%)

Taipei Fubon Commercial Bank Co., Ltd. 32,197,433.12 6.93 237,753,260.18 50.00 ______________ ______ _______________ _________ ______________ ______ _______________ _________

(5) As of balance sheet date, the income interest and income expenses between the Bank and the

above related parties are as follows:

Interest income -placement to banks

2015 2014

RMB RMB

Xiamen Bank Co., Ltd. 2,890.53 -

Taipei Fubon Commercial Bank Co., Ltd. 505.07 - ______________ _____________

Total 3,395.60 - ______________ _____________ ______________ _____________

Interest income -due from banks

2015 2014

RMB RMB

Shanghai Pudong Development Bank 8,842,489.65 6,696,454.58

Xiamen Bank Co., Ltd. - 17,555,472.22 ______________ _____________

Total 8,842,489.65 24,251,926.80 ______________ _____________ ______________ _____________


- 53 -


(5) As of balance sheet date, the income interest and income expenses between the Bank and the

above related parties are as follows: - continued

Interest income from loans and advances to customers

2015 2014

RMB RMB

Related individuals 117,753.46 125,238.81

Shanghai Ruidong Hospital 2,184,093.14 2,386,142.15

Fubon Gehua (Beijing) Trading Co., Ltd. - 1,918,284.36

Shanghai Pudong Development Bank 2,570,718.68 14,720,588.63 ______________ _____________

Total 4,872,565.28 19,150,253.95 ______________ _____________ ______________ _____________

Interest expense - taking from banks

2015 2014

RMB RMB

Shanghai Pudong Development Bank 3,633.34 30,714.01

Xiamen Bank Co., Ltd. - 46,402.42

Taipei Fubon Commercial Bank Co., Ltd. 676.44 - ______________ _____________

Total 4,309.78 77,116.43 ______________ _____________ ______________ _____________

Interest expense - due to banks

2015 2014

RMB RMB

Taipei Fubon Commercial Bank Co., Ltd. 60,138,024.08 39,654,163.54

Xiamen Bank Co., Ltd. - 277,777.78

Shanghai Pudong Development Bank 1,883,293.14 - ______________ _____________

Total 62,021,317.22 39,931,941.32 ______________ _____________ ______________ _____________

Interest expense - Customer deposits

2015 2014

RMB RMB

Related individuals 4,824,945.55 2,786,946.45

LT & Partners Inc. 255,082.96 341,206.58

Fubon Gehua (Beijing) Trading Co., Ltd. 93,424.70 16,449.54

HeYu Investment Consulting (Shanghai) Co., Ltd. 18,198.06 140,205.85

Shanghai Ruidong Hospital 555.59 381.50

Wuxi Huanyu Enterprise Management Services Limited 204,964.23 494,406.79

Fubon Property & Casualty Insurance Co., Ltd. - 0.43 ______________ _____________

Total 5,397,171.09 3,779,597.14 ______________ _____________ ______________ _____________


- 54 -


(6) As of balance sheet date, the other operating income between the Bank and the above related

parties are as follows:

Other operating income

2015 2014

RMB RMB

Beijing Founder Fubon Asset Management Co., Ltd. 2,333,845.00 5,432,307.50 ______________ _____________ ______________ _____________

(7) Credit assets transfer

On 14 December 2015, the Bank transferred credit assets to Beijing Founder Fubon

Chuangrong Financial Asset Management Co., Ltd. (hereinafter refer to “Fubon Chuangrong”),

which represents “Founder Fubon Asset Management - Fubon Bank (China) Co., Ltd. Asset

Management Plan No.3. The principal equaled to RMB310,119,304.45 and the interest

equaled to RMB 21,420,525.39 (RMB 331,539,829.84 in total). The transfer price equaled to

RMB 307,800,000.00. On 30 June 2014, the Bank transferred credit assets to Founder Fubon

Chuangrong, which represents “Founder Fubon Asset Management - Fubon Bank (China) Co.,

Ltd. Asset Management Plan No.1. The principal equaled to RMB 187,827,022.64 and the

interest equaled to RMB 16,669,825.23 (RMB 204,496,847.87 in total). The transfer price

equaled to RMB 150,350,000.00.

(8) Compensation of key management personnel

2015 2014


(%) (%)

Compensation of key

Management personnel 32,564,451.72 12.07 35,599,913.07 15.89 ______________ ______ _______________ _________ ______________ ______ _______________ _________

Key management personnel are those personnel who have the authority and responsibility for

planning, directing and controlling the activities of the Bank, including board of Director,

General Manager, Chief Executive Officer，Head of Internal Audit，Department Director,

Sub-branch General Manager and other persons who carry on the similar responsibilities.


- 55 -

53. OFF-BALANCE-SHEET CREDIT FACILITIES

2015/12/31 2014/12/31

RMB RMB

Bank acceptance bill 601,205,684.86 118,362,154.58

Amount from sight L/C 2,121,619.48 4,111,301.03

Amount from usance L/C 109,764,341.07 70,990,463.70

Sight L/C issued 1,467,588.22 17,530,851.93

Usance L/C issued 345,563,345.71 150,284,146.29

Letter of guarantee 54,267,128.18 112,404,370.57

Stand-by L/C 1,519,940,699.93 1,703,767,337.59 ______________ ______________

Total 2,634,330,407.45 2,177,450,625.69 ______________ ______________ ______________ ______________

54. ENTRUSTED DEPOSITS AND LOANS

2015/12/31 2014/12/31

RMB RMB

Entrusted deposits 6,452,550,392.00 10,309,604,027.23 _______________ ______________

Entrusted loans 6,452,550,392.00 10,309,604,027.23 _______________ ______________ _______________ ______________

55. CAPITAL MANAGEMENT

To ensure going concern as well as increase returns to shareholders, the Bank manages capital

through optimizing the structure of liabilities and shareholders' equity. The Bank calculates and

discloses Capital Adequacy Ratio in accordance with “The Rules on Capital Adequacy Ratios of

Commercial Banks” as amended by CBRC in June 2012. As requested, in the reporting period,

credit risk weighted assets are measured by the weighted method, market risk weighted assets are

measured by the standard method, and operation risk weighted assets are measured by basic

indicator approach. The Bank calculates leverage ratio in accordance with “Administrative

Measures for the Leverage Ratio of Commercial Banks” issued by CBRC in June 2015. 2015/12/31 2014/12/31

RMB'000 RMB'000

Net Core Tier 1 Capital 4,851,005 4,526,053

Net Tier 1 Capital 4,851,005 4,526,053

Net Capital 5,293,245 4,900,504

Risk-weighted assets 38,481,784 32,500,228

Core Tier 1 Capital Adequacy Ratio 12.61% 13.93%

Tier 1 Capital Adequacy Ratio 12.61% 13.93%

Capital Adequacy Ratio 13.76% 15.08%

Leverage Ratio 6.08% 6.59%


- 56 -

56. LEASE COMMITMENTS

At the balance sheet date, the Bank as a lessee has outstanding commitments in respect of

non-cancelable operating leases, which fall due as follows:

2015/12/31 2014/12/31

RMB’000 RMB’000 The minimum lease payments under

Non-cancelable operating leases:

Within one year 60,998 22,234

In the second year 58,724 16,820

In the third year 54,508 12,566

In the following year 121,660 19,708 _______ _______

Total 295,890 71,328 _______ _______ _______ _______

57. CAPITAL COMMITMENTS

Within 1 Year 1-5 Years Total

RMB RMB RMB The amount unpaid of the

contract as of 2015/12/31 12,369,196.44 1,195,553.28 13,564,749.72 _____________ ____________ _____________ _____________ ____________ _____________

The amount unpaid of the

contract as of 2014/12/31 17,643,592.80 8,490,155.73 26,133,748.53 _____________ ____________ _____________ _____________ ____________ _____________

58. COLLATERALS

Certain assets are pledged as collateral under repurchase agreements with other Banks and

financial institutions. For repurchase agreement conducted through PBOC platform, acceptors are

not entitled to sell or re-pledge the underlying assets.

2015/12/31 2014/12/31

Financial assets Financial assets

at fair value through Available-for-sale Held-to-maturity at fair value through Available-for-sale Held-to-maturity

profit or loss financial assets investments Total profit or loss financial assets investments Total

RMB RMB RMB RMB RMB RMB RMB RMB

Investment securities 98,317,900.00 5,205,712,240.00 3,679,280,418.78 8,983,310,558.78 152,714,700.00 1,838,866,590.00 4,840,892,053.60 6,832,473,343.60 _____________ ______________ ______________ ______________ _____________ ______________ ______________ _____________ _____________ ______________ ______________ ______________ _____________ ______________ ______________ _____________


- 57 -

59. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

(I) Overview of risk management

The Bank is exposed to various risks in its banking and financial business operations, especially

the diversity and complication of risk for application of financial instruments. The key risks faced

by the Bank are credit risk, liquidity risks, market risks and operation risks. Market risks include

foreign exchange risk and interest rate risk.

The Bank’s risk management objectives are to achieve proper balance between risks and yield,

minimize the adverse impacts of risks on the Bank’s operation performance, and maximize the

benefits of the Bank. Based on these risk management objectives, the Bank’s basic risk

management strategy is to identify and analyze the industry’s exposure to various risks, establish

appropriate bottom line for risk tolerance, implement risk management, and monitor these risks

according to the information provided by the system on a timely and effective manner eventually

control the risk within the limits. (II) Credit risk

(1) Credit risk management

Credit risk arises when the borrower or counterparty fails to meet the required obligations in

the agreement on due date because of the deterioration of the financial situation or other

situations.

The Bank’s credit risk is mainly arise from credit business (including: loans and advances to

customers, bills discount, negotiations, factoring , receivable and payable financing, sight L/C

issued, other facilities, etc.), derivatives and bond investment. The Bank has implemented the

defined lending procedures strictly, carrying out credit review before lending and obtaining

approval step by step. The Bank has also established policies related to daily loans and

post-lending management, classification, interest calculation, and loan provision write-off.

The Bank monitor and supervise the above mentioned credit risks. The Bank controls credit

risks through investigation of clients and counterparties creditability, financial reports and

operational conditions. The Bank classifies the loans strictly following the five-classification

standards issued by CBRC, assesses the clients’ credit standing according to the

five-classification standard, and then provides facilities, and clients are permitted to borrow

within the approved facilities.


- 58 -

59. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT - continued

(II) Credit risk - continued

Regardless of collaterals available risk mitigation measures, maximum credit risk exposure

information represents the worst situation of the credit risk exposure as of balance sheet date.

The financial assets value, indicative of the credit risk exposure class as of the balance sheet

date, is the balance of the carrying amount of the financial assets less the following two items:

(1) the amount offset pursuant to the requirement in the Accounting Standards for Business

Enterprises No. 37 - Financial instrument reporting; (2) the recognized impairment loss of the

financial assets.

(2) Maximum credit risk exposure information

Information on the maximum credit risk exposure of the Bank is as below:

2015/12/31 2014/12/31

RMB RMB Balance sheet items

Loans and advances to customers 29,969,200,467.14 30,383,866,872.75 Including:

Corporate loans and advances to customers 30,402,411,263.59 30,599,674,330.61

Personal loans and advances to customers 419,793,202.06 563,262,505.48

Impairment loss for loans (853,003,998.51) (779,069,963.34)

Inter-banks receivables 12,542,971,348.15 10,128,128,427.45 Including:

Due from banks 1,271,121,748.15 834,799,412.52

Placement to banks 10,971,849,600.00 8,193,592,062.93 Financial assets purchased

under resale agreements 300,000,000.00 1,099,736,952.00

Investment in financial assets 21,185,458,492.05 11,959,247,140.73 Including:

Financial assets at

fair value through profit or loss 291,039,500.00 163,372,300.00

Available-for-sale financial assets 11,062,477,348.00 5,881,047,540.00

Held-to-maturity investments 7,310,476,711.16 5,914,827,300.73

Receivable investments 2,521,464,932.89 -

Derivative financial assets 213,592,519.42 60,605,522.90

Interest receivable 358,062,228.53 377,592,346.24

Other financial assets (Note) 67,380,345.55 56,139,568.90

Including：

Total other financial assets 68,509,209.75 56,648,194.50

Impairment allowance for assets (1,128,864.20) (508,625.60) _______________ ______________

Balance sheet items total 64,336,665,400.84 52,965,579,878.97 _______________ ______________

Off-balance sheet items total 2,634,330,407.45 2,177,450,625.69 _______________ ______________

Total 66,970,995,808.29 55,143,030,504.66 _______________ ______________ _______________ ______________

Note: Other financial assets include refundable deposit, accounts receivable, receivables for

Spot foreign exchange trading and continuing involvement of assets and etc.


- 59 -

59. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT - continued (II) Credit risk - continued

(2) Maximum credit risk exposure information- continued

Besides credit loan, certain risk mitigation measures were taken by the Bank with respect to

guaranteed and pledged loans, off-sheet items, and derivative financial instruments, to

reduce credit risk exposure to an acceptable level:

①Guarantees and pledges

The Bank determines the ratio of collaterals to loan principal as follows:

Types of collateral and pledge the maximum ratio

Certificate of deposit 100%

Collateral property 80%

Collateral fixed assets 40%

The Bank usually demands guarantee for long-term financing from clients. In addition, in

order to minimize credit risk, the Bank will usually demand additional guarantee from

borrowers if the Bank discovers evidence of impairment in relevant loans or advances.

②Derivative financial assets

Derivative financial assets represent the positive change in fair value favorable to the Bank

caused by the derivative instruments contract undelivered. The amount of change accounts

for only a small percentage of the nominal amount of the derivative instrument contract.

The Bank manages credit risk exposure resulting from derivative financial assets by

controlling the match between delivery dates and integrating part of the credit limits of the

counterpart.

③Credit-related commitments

Credit risk of financial guarantee is the same as that of credit. However, credit risks of

guarantee and commercial letter of credit are lower compared with direct loan since the

relevant goods forwarded are usually pledged. Credit-related commitments are

incorporated into management of overall credit limit. The Bank demands relevant deposit

from the applicant to reduce credit risk exposure.


- 60 -



(3) Loans and advances issued and interbank receivables

Overdue and impairment

2015/12/31 2014/12/31

Loans and advance Interbank Loans and advance Interbank

to customers receivables to customers receivables

RMB RMB RMB RMB

Not yet overdue and

not yet impaired (i) 29,687,639,539.53 12,542,971,348.15 30,132,114,130.01 10,128,128,427.45

Overdue but not yet impaired (ii) 769,051,534.59 - 754,802,296.61 -

Impaired (iii) 365,513,391.53 - 276,020,409.47 - _______________ _______________ _______________ ______________

Total 30,822,204,465.65 12,542,971,348.15 31,162,936,836.09 10,128,128,427.45 _______________ _______________ _______________ ______________

Less: loan loss provision (853,003,998.51) - (779,069,963.34) - _______________ _______________ _______________ ______________

Net 29,969,200,467.14 12,542,971,348.15 30,383,866,872.75 10,128,128,427.45 _______________ _______________ _______________ ______________ _______________ _______________ _______________ ______________

(i) Not yet overdue and not yet impaired

2015/12/31

Normal Special mentioned Total

RMB RMB RMB

Loans 22,172,728,736.74 274,745,267.24 22,447,474,003.98

Trade finance 71,158,626.00 - 71,158,626.00

Bills discount 6,991,720,774.75 - 6,991,720,774.75

Other facilities 177,286,134.80 - 177,286,134.80 ________________ ______________ ________________

Loans and advances to customers total 29,412,894,272.29 274,745,267.24 29,687,639,539.53 ________________ ______________ ________________ ________________ ______________ ________________

Interbank receivables 12,542,971,348.15 - 12,542,971,348.15 ________________ ______________ ________________ ________________ ______________ ________________

2014/12/31

Normal Special mentioned Total

RMB RMB RMB

Loans 18,445,684,186.79 953,088,534.39 19,398,772,721.18

Trade finance 151,141,907.45 - 151,141,907.45

Bills discount 10,231,138,512.57 - 10,231,138,512.57

Other facilities 351,060,988.81 - 351,060,988.81 ________________ ______________ ________________

Loans and advances to customers total 29,179,025,595.62 953,088,534.39 30,132,114,130.01 ________________ ______________ ________________ ________________ ______________ ________________

Interbank receivables 10,128,128,427.45 - 10,128,128,427.45 ________________ ______________ ________________ ________________ ______________ ________________

(ii) Overdue but not yet impaired

2015/12/31 2014/12/31

Overdue 1 Overdue 90 Overdue 360 Overdue 1 Overdue 90 Overdue 360

to 90 days to 360 days to 3 years to 90 days to 360 days to 3 years

Items (including 90 days) (including 360 days) (including 3 years) Total (including 90 days) (including 360 days) (including 3 years) Total RMB RMB RMB RMB RMB RMB RMB RMB

Loans and advances

to customers 316,768,284.14 289,499,862.94 162,783,387.51 769,051,534.59 494,004,773.74 260,797,522.87 - 754,802,296.61 _____________ _____________ ____________ _____________ _____________ ____________ ____________ _____________ _____________ _____________ ____________ _____________ _____________ ____________ ____________ _____________


- 61 -



(3) Loans and advances issued and interbank receivables - continued

Overdue and impairment - continued

(iii) Impaired

2015/12/31 2014/12/31

Corporate loans Personal loans Inter-banks Corporate loans Personal loans Inter-banks

and advances and advances Total receivables and advances and advances Total receivables

RMB RMB RMB RMB RMB Equivalent RMB Equivalent RMB Equivalent RMB Equivalent

Individually identified impaired assets

Including：

Overdue 365,513,391.53 - 365,513,391.53 - 276,020,409.47 - 276,020,409.47 - _____________ ____________ _____________ ____________ _____________ ____________ ____________ ____________ _____________ ____________ _____________ ____________ _____________ ____________ ____________ ____________

Proportion of the individually

identified impaired assets 1.22% - 1.22% - 0.89% - 0.89% - _____________ ____________ _____________ ____________ _____________ ____________ ____________ ____________ _____________ ____________ _____________ ____________ _____________ ____________ ____________ ____________

Fair value of collateral 550,545,368.00 - 550,545,368.00 - 566,413,800.00 - 566,413,800.00 - _____________ ____________ _____________ ____________ _____________ ____________ ____________ ____________ _____________ ____________ _____________ ____________ _____________ ____________ ____________ ____________

(4) Investment in debt securities

2015/12/31 2014/12/31

RMB RMB

Not yet overdue and not yet impaired (i) 21,185,458,492.05 11,959,247,140.73 _________________ ________________

Less: provisions for impairment - - _________________ ________________

Net 21,185,458,492.05 11,959,247,140.73 _________________ ________________ _________________ ________________

(i) Not yet overdue and not yet impaired

2015/12/31 2014/12/31

RMB RMB

Financial assets at fair value through profit or loss 291,039,500.00 163,372,300.00

Available-for-sale financial assets 11,062,477,348.00 5,881,047,540.00

Held-to-maturity investments 7,310,476,711.16 5,914,827,300.73

Receivable investments 2,521,464,932.89 - ________________ _______________

Total 21,185,458,492.05 11,959,247,140.73 ________________ _______________ ________________ _______________

(5) Analysis on credit risk concentration of financial assets

The Bank manages credit risk concentration of loans and advances by regions. Please refer to

Note 14(3) for relevant analysis. The Bank manages credit risk concentration of loans and

advances by industries, please see Note 14(2) for relevant analysis.


- 62 -


(III) Liquidity risk

Liquidity refers to the assets that have quick cash conversion ability without any value impaired.

Liquidity risk is the risk that no sufficient funds will be available for debt repayment when it falls

due. Liquidity risk is mainly due to the structure and duration of assets and liabilities arising from

a mismatch. According to “Regulations of the People’s Republic of China on Administration of

Foreign-funded Banks” and related regulations, the Bank controls the liquidity ratio of no less

than 25%. At the same time, the Bank manages liquidity risk according to the maturity date of

assets and liabilities.

The following is the maturity analysis for assets and liabilities held by the Bank as of 31

December 2015:

(1) Non-derivative liquidity risk analysis

The following table presents the maturity analysis of the Bank for non-derivative financial

assets and liabilities by contractual maturity. And the financial assets and the liabilities are

presented in un-discounted cash flow according to the contracts: 2015/12/31

On demand/Overdue Within 1 month 1-3months 3-12months Over 1 year No maturity date Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Assets Cash and balances with

the Central Bank 1,873,199 - - - - 5,937,258 7,810,457

Due from banks 346,186 103,858 51,009 803,630 - - 1,304,683 Placement to banks - 1,454,604 372,433 4,819,714 4,989,783 - 11,636,534 Financial assets at fair value

through profit or loss - - 100,000 200,000 - - 300,000 Financial assets purchased

under repurchase agreements - 300,071 - - - - 300,071

Loans and advances to customers 1,134,565 8,595,698 6,505,601 11,040,874 4,507,986 - 31,784,724

Available-for-sale financial assets - 963,800 334,113 3,743,435 6,949,305 - 11,990,653 Held-to-maturity investment - 82,254 724,609 1,972,927 5,651,642 - 8,431,432

Receivable investments - 2,018,478 510,017 - - - 2,528,495 Other financial assets - 323 - 50,863 - 17,323 68,509 ____________ ___________ ____________ ______________ _____________ ____________ _____________

Total non-derivative financial

assets 3,353,950 13,519,086 8,597,782 22,631,443 22,098,716 5,954,581 76,155,558 ____________ ___________ ____________ ______________ _____________ ____________ _____________ ____________ ___________ ____________ ______________ _____________ ____________ _____________

Liabilities

Due to banks and other

financial institutions 17,565 3,221,728 1,546,088 1,753,513 - - 6,538,894 Taking from banks - 381,821 1,059,927 288,668 17,340 - 1,747,756

Financial assets sold under

repurchase agreements - 8,363,549 399,115 - - - 8,762,664 Customer deposits 12,099,682 9,698,616 6,722,157 15,415,165 3,011,934 - 46,947,554 Debt securities issued - 690,000 1,250,000 3,060,000 - - 5,000,000

Other financial liabilities 8 189,771 45 51,063 664 - 241,551 ____________ ___________ ____________ ______________ _____________ ____________ _____________


liabilities 12,117,255 22,545,485 10,977,332 20,568,409 3,029,938 - 69,238,419 ____________ ___________ ____________ ______________ _____________ ____________ _____________

Net (8,763,305) (9,026,399) (2,379,550) 2,063,034 19,068,778 5,954,581 6,917,139 ____________ ___________ ____________ ______________ _____________ ____________ _____________ ____________ ___________ ____________ ______________ _____________ ____________ _____________


- 63 -

59. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT- continued

(III) Liquidity risk - continued

(1) Non-derivative liquidity risk analysis - continued

2014/12/31 On demand/Overdue Within 1 month 1-3months 3-12months Over 1 year No maturity date Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Assets Cash and balances with

the Central Bank 496,884 - - - - 6,784,637 7,281,521

Due from banks 324,799 - 112,220 425,550 - - 862,569

Placement to banks - 1,643,489 370,791 3,194,363 3,674,954 - 8,883,597

Financial assets at fair value

through profit or loss - 575 - 7,035 180,071 - 187,681 Financial assets purchased

under repurchase agreements - 1,100,233 - - - - 1,100,233

Loans and advances to customers 1,102,721 8,624,554 10,026,068 6,941,677 4,531,731 - 31,226,751

Available-for-sale financial assets - 121,730 49,250 1,234,150 5,383,363 - 6,788,493

Held-to-maturity investment - 40,504 32,465 1,078,033 5,981,774 - 7,132,776

Other financial assets 313 16 - - 50,863 5,456 56,648 ____________ ___________ ____________ ______________ _____________ ____________ _____________


assets 1,924,717 11,531,101 10,590,794 12,880,808 19,802,756 6,790,093 63,520,269 ____________ ___________ ____________ ______________ _____________ ____________ _____________ ____________ ___________ ____________ ______________ _____________ ____________ _____________

Liabilities

Due to banks and other

financial institutions 6,424 226,933 646,946 2,615,460 - - 3,495,763

Taking from banks - 397,757 61,358 386,036 1,521,096 - 2,366,247 Financial assets sold under

repurchase agreements - 4,303,605 1,705,630 867,427 - - 6,876,662

Customer deposits 9,698,354 9,158,940 10,053,472 12,602,001 1,426,962 - 42,939,729

Debt securities issued - - 300,000 1,600,000 - - 1,900,000

Other financial liabilities - 50,599 50 169 51,400 - 102,218 ____________ ___________ ____________ ______________ _____________ ____________ _____________


liabilities 9,704,778 14,137,834 12,767,456 18,071,093 2,999,458 - 57,680,619 ____________ ___________ ____________ ______________ _____________ ____________ _____________

Net (7,780,061) (2,606,733) (2,176,662) (5,190,285) 16,803,298 6,790,093 5,839,650 ____________ ___________ ____________ ______________ _____________ ____________ _____________ ____________ ___________ ____________ ______________ _____________ ____________ _____________

Assets can be used to repay all liabilities and used to pay outstanding loan commitments

include cash and balances with central banks, due from banks and placements to banks, etc. In

the normal operations, most of due deposits are not withdrawn on the due date but still stay

with the Bank, and available-for-sale financial assets can also be disposed when needed to

obtain funds to repay due liabilities.


- 64 -



(2) Derivative liquidity risk analysis ①Derivative financial instruments liquidated at net value

The derivative instruments that the Bank liquidates at their net values include: currency

derivatives and interest rate derivatives. The following table analyzes undiscounted cash

flows of derivative financial instruments liquidated at net value by remaining period from

the balance sheet date to the due date stipulated by contracts：

2015/12/31

Item Within 1 month 1 month to 3 months 3 months to 1 year 1 year to 5 years Over 5 years Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Currency swap

- Cash inflow 10,133,240 8,140,527 12,078,850 - - 30,352,617 - Cash outflow (10,124,345) (8,125,457) (12,080,970) - - (30,330,772) Foreign exchange forward - Cash inflow 90,008 19,516 86,334 - - 195,858

- Cash outflow (89,618) (19,375) (85,646) - - (194,639) Interest rate swap - Cash inflow - 229 - - - 229

- Cash outflow (93) (134) - - - (227) _________ __________ _________ _________ _________ _________

Total 9,192 15,306 (1,432) - - 23,066 _________ __________ _________ _________ _________ _________ _________ __________ _________ _________ _________ _________

2014/12/31



Interest rate swap - Cash inflow 564 120 1,703 239 - 2,626

- Cash outflow (645) (120) (1,892) (239) - (2,896) _________ __________ _________ _________ _________ _________

Total (81) - (189) - - (270) _________ __________ _________ _________ _________ _________ _________ __________ _________ _________ _________ _________

②Derivative financial instruments liquidated at gross value

The derivative instruments that the Bank liquidates at their gross values are currency

derivatives and equity swap. The following table analyzes undiscounted cash flows of

derivative financial instruments liquidated at gross value by remaining period from the

balance sheet date to the due date stipulated by contracts：

2015/12/31



Currency swap - Cash inflow 3,678,609 2,348,977 11,726,830 - - 17,754,416

- Cash outflow (3,676,618) (2,343,993) (11,734,558) - - (17,755,169) Foreign exchange forward

- Cash inflow 347,054 324,547 775,023 - - 1,446,624

- Cash outflow (345,196) (323,010) (768,145) - - (1,436,351) Foreign exchange options

- Cash inflow 217,274 285,943 639,257 - - 1,142,474

- Cash outflow (215,765) (285,790) (639,464) - - (1,141,019)

Equity swap

-Cash inflow - - 16,442 - - 16,442

-Cash outflow - - (16,442) - - (16,442) _________ __________ _________ _________ _________ _________

Total 5,358 6,674 (1,057) - - 10,975 _________ __________ _________ _________ _________ _________ _________ __________ _________ _________ _________ _________


- 65 -



(2) Derivative liquidity risk analysis - continued

2014/12/31 Item Within 1 month 1 month to 3 months 3 months to 1 year 1 year to 5 years Over 5 years Total


Currency swap - Cash inflow 2,594,523 2,313,339 6,457,166 - - 11,365,028

- Cash outflow (2,626,016) (2,326,681) (6,452,550) - - (11,405,247) Foreign exchange forward

- Cash inflow 630,239 904,353 5,350,583 - - 6,885,175 - Cash outflow (629,734) (904,888) (5,343,962) - - (6,878,584) Foreign exchange options

- Cash inflow 21,569 198,341 154,599 - - 374,509

- Cash outflow (22,895) (187,084) (152,669) - - (362,648) _________ __________ _________ _________ _________ _________

Total (32,314) (2,620) 13,167 - - (21,767) _________ __________ _________ _________ _________ _________ _________ __________ _________ _________ _________ _________

(IV) Market risks

Market risks refer to the risks of losses in the Bank’s on-sheet and off-sheet transactions due to

adverse changes in market prices. The Bank’s market risks mainly include foreign exchange risk

and interest rate risk. Market risks lay in the Bank’s trading account and bank account.

As a specialized management department of the Bank’s treasury mid-office department, Market

Risk Department, set up by Risk Management Department, implements centralized management

on the Bank’s market risks. The Bank has established and well defined market risk limit

management system, specified and standardized the process and reporting system of market risk

management. The Internal Audit Department processes periodical audits on market risk

management.

Trading accounts reflect the trading financial assets and liabilities in the Bank’s treasury business,

including derivative financial instruments. The Bank implements limit management on market

risks of trading accounts. According to the analysis of position distributing, the Bank carries out

combined operation on trading accounts and also properly utilizes financial derivatives, etc. to

realize the management, control and hedging of market risks of trading accounts.

Banking accounts reflect the Bank’s financial assets and liabilities not held for trading. The major

risks that the Bank’s banking accounts face are interest rate risk and foreign exchange risk.

Sensitivity analysis is the Bank’s major means to assess and measure the market risks of trading

accounts and banking account. Sensitive analysis considers effects on relevant market risks when

it is assumed that only one single variable changes. As any risk variable seldom changes alone and

the relevance between variables will have significant effects on the final effect amount of changes

of one certain risk variable, the results of sensitivity analysis can only provide limited information

about market risks.

(1) Foreign exchange risk

The Bank is set up and operates in People’s Republic of China; the Bank mainly conducts

foreign business by USD, JPY and HKD. The Bank’s loans to customers are mainly in RMB

and USD.


- 66 -


(IV) Market risks - continued

(1) Foreign exchange risk - continued

The foreign exchange risk is mainly from the transaction risks arising from the Bank’s

proprietary trading and agency of foreign exchange transactions and structure risks arising

from maintaining certain foreign currency positions for overseas operation. Based on its own

risk appetite and operation level, with the support of various transaction systems and

management information systems, through limit set and control, the Bank enhances the

matching of assets and liabilities currency type structure, properly uses such methods as

financial derivatives to manage and control the exchange rate risks of the whole bank.

The following table presents the structure analysis of the Bank’s financial assets and financial

liabilities by currency:

2015/12/31

Items RMB USD JPY HKD Other currencies Total

RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000 Assets Cash and balances with the Central Bank 7,536,512 271,825 - 2,120 - 7,810,457 Due from banks 776,654 459,924 6,436 9,362 18,746 1,271,122 Placement to banks 8,790,000 2,181,850 - - - 10,971,850 Financial assets at fair value through profit or loss 291,040 - - - - 291,040 Derivative financial assets 157,811 55,226 - - 556 213,593 Financial assets purchased under resale agreements 300,000 - - - - 300,000 Interest receivable 344,797 12,219 1,001 3 42 358,062 Loans and advances to customers 28,446,860 1,400,349 113,142 2,181 6,668 29,969,200 Available-for-sale financial assets 10,997,541 64,936 - - - 11,062,477 Held-to-maturity investments 7,005,147 305,330 - - - 7,310,477 Receivable investments 2,521,465 - - - - 2,521,465 Other financial liabilities 67,380 - - - - 67,380 __________ ___________ __________ _________ __________ __________

Financial assets total 67,235,207 4,751,659 120,579 13,666 26,012 72,147,123 __________ ___________ __________ _________ __________ __________ __________ ___________ __________ _________ __________ __________

Liabilities Due to banks and other financial institutions 4,442,071 2,040,362 - - - 6,482,433 Taking from banks - 1,704,570 - - - 1,704,570 Derivative financial liabilities 19,166 157,514 - 582 50 177,312 Financial assets sold under repurchase agreements 8,745,100 - - - - 8,745,100 Customer deposits 39,912,943 5,976,488 34,573 11,141 77,513 46,012,658 Interest payable 306,295 23,855 - 3 162 330,315 Debt securities issued 4,945,937 - - - - 4,945,937 Other financial liabilities 168,074 73,198 180 3 94 241,549 __________ ___________ __________ _________ __________ __________

Financial liabilities total 58,539,586 9,975,987 34,753 11,729 77,819 68,639,874 __________ ___________ __________ _________ __________ __________ __________ ___________ __________ _________ __________ __________

Net position 8,695,621 (5,224,328) 85,826 1,937 (51,807) 3,507,249 __________ ___________ __________ _________ __________ __________ __________ ___________ __________ _________ __________ __________


- 67 -



(1) Foreign exchange risk - continued

2014/12/31

Items RMB USD JPY HKD Other currencies Total

RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000 Assets Cash and balances with the Central Bank 6,940,862 336,452 - 4,203 4 7,281,521 Due from banks 548,953 244,675 13,512 6,366 21,293 834,799 Placement to banks 6,459,091 1,734,501 - - 8,193,592 Financial assets at fair value through profit or loss 163,372 - - - - 163,372 Derivative financial assets 42,339 17,426 - 787 54 60,606 Financial assets purchased under resale agreements 1,099,737 - - - - 1,099,737 Interest receivable 338,283 37,859 21 1,429 - 377,592 Loans and advances to customers 26,964,540 3,324,028 12,305 82,779 215 30,383,867 Available-for-sale financial assets 5,881,048 - - - - 5,881,048 Held-to-maturity investments 5,914,827 - - - - 5,914,827 Other financial assets 56,140 - - - - 56,140 __________ ___________ __________ _________ __________ __________

Financial assets total 54,409,192 5,694,941 25,838 95,564 21,566 60,247,101 __________ ___________ __________ _________ __________ __________ __________ ___________ __________ _________ __________ __________

Liabilities Due to banks and financial institutions 2,543,547 835,261 - - - 3,378,808 Taking from banks 660,000 1,508,334 - - - 2,168,334 Derivative financial liabilities 31,829 51,502 38 912 897 85,178 Financial assets sold under repurchase agreements 6,825,500 - - - - 6,825,500 Customer deposits 35,345,170 6,546,142 33,172 46,598 91,488 42,062,570 Interest payable 418,715 30,087 3 17 225 449,047 Debt securities issued 1,870,467 - - - - 1,870,467 Other financial liabilities 70,963 30,017 767 3 468 102,218 __________ ___________ __________ _________ __________ __________

Financial liabilities total 47,766,191 9,001,343 33,980 47,530 93,078 56,942,122 __________ ___________ __________ _________ __________ __________ __________ ___________ __________ _________ __________ __________

Net position 6,643,001 (3,306,402) (8,142) 48,034 (71,512) 3,304,979 __________ ___________ __________ _________ __________ __________ __________ ___________ __________ _________ __________ __________

The following table illustrates the impact of a 5% appreciation and depreciation of the spot

exchange rate and forward exchange rate of RMB against all foreign currencies on net profit of

the Bank.

2015 2014

Net profit/(loss) Net profit/(loss)

RMB’000 RMB’000

Appreciate by 5% (11,658) 2,707

Depreciate by 5% 11,658 (2,707)


- 68 -



(2) Interest rate risk Interest rate risk is the impact of change in market interest rate on fair value of financial

assets and liabilities of the balance sheet and interest income and expenses of the income

statement for the period. The Bank performs timely analysis and forecast on the

macroeconomic situation. Based on the forecast, the Bank will adjust the relevant gap and

period between the interest bearing assets and interest bearing liabilities beforehand and

decrease the interest risk derived from the fluctuation of the interest rate. As of balance sheet date, the earlier of re-pricing day or maturity of the interest-bearing assets

and liabilities of the Bank are summarized as follows:

2015/12/31

Item Within 1 month 1-3 months 3 months-1year 1-5 years Over 5 years Non-interest-bearing Total

RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000

Assets

Cash and balances with

the Central Bank 7,521,999 - - - - 288,458 7,810,457

Due from banks 446,186 50,000 774,936 - - - 1,271,122

Placement to banks 1,454,566 6,739,327 2,755,457 22,500 - - 10,971,850 Financial assets at fair value

through profit or loss - 98,318 192,722 - - - 291,040

Derivative financial assets - - - - - 213,593 213,593

Financial assets purchased under

repurchase agreements 300,000 - - - - - 300,000

Interest receivable - - - - - 358,062 358,062

Loans and advances to customers 15,117,565 3,527,379 8,368,531 2,199,099 756,626 - 29,969,200

Available-for-sale financial assets 907,296 298,543 3,378,476 5,548,955 929,207 - 11,062,477

Held-to-maturity investments 49,957 697,698 1,773,946 3,054,021 1,734,855 - 7,310,477

Receivable investments 2,015,522 505,943 - - - - 2,521,465

Other financial assets - - - - - 67,380 67,380 _________ __________ _________ _________ _________ _________ _________

Financial assets total 27,813,091 11,917,208 17,244,068 10,824,575 3,420,688 927,493 72,147,123 _________ __________ _________ _________ _________ _________ _________ _________ __________ _________ _________ _________ _________ _________

Liabilities Due to banks and other

financial institutions 3,225,119 1,532,448 1,724,866 - - - 6,482,433

Taking from banks 379,876 1,051,963 272,731 - - - 1,704,570

Derivative financial liabilities - - - - - 177,312 177,312 Financial assets sold under

repurchase agreements 8,349,100 396,000 - - - - 8,745,100

Customer deposits 20,089,793 8,168,238 14,058,498 1,133,377 2,552,558 10,194 46,012,658

Interest payable - - - - - 330,315 330,315

Debt securities issued 688,611 1,242,650 3,014,676 - - - 4,945,937

Other financial liabilities - - - - - 241,549 241,549 _________ __________ _________ _________ _________ _________ _________

Financial liabilities total 32,732,499 12,391,299 19,070,771 1,133,377 2,552,558 759,370 68,639,874 _________ __________ _________ _________ _________ _________ _________ _________ __________ _________ _________ _________ _________ _________

Net position (4,919,408) (474,091) (1,826,703) 9,691,198 868,130 168,123 3,507,249 _________ __________ _________ _________ _________ _________ _________ _________ __________ _________ _________ _________ _________ _________


- 69 -



(2) Interest rate risk- continued

2014/12/31

Item Within 1 month 1-3 months 3 months-1year 1-5 years Over 5 years Non-interest-bearing Total

RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000

Assets

Cash and balances with

the Central Bank 6,929,944 - - - - 351,577 7,281,521

Due from banks 324,799 110,000 400,000 - - - 834,799

Placement to banks 1,637,965 361,190 3,050,000 3,144,437 - - 8,193,592 Financial assets at fair value

through profit or loss - - - 163,372 - - 163,372

Derivative financial assets - - - - - 60,606 60,606

Financial assets purchased under

repurchase agreements 1,099,737 - - - - - 1,099,737

Interest receivable - - - - - 377,592 377,592

Loans and advances to customers 16,822,874 6,599,503 4,876,846 1,522,499 562,145 - 30,383,867

Available-for-sale financial assets 98,817 29,639 1,044,859 4,190,439 517,294 - 5,881,048

Held-to-maturity investments - - 902,708 3,032,767 1,979,352 - 5,914,827

Other financial assets - - - - - 56,140 56,140 _________ __________ _________ _________ _________ _________ _________

Financial assets total 26,914,136 7,100,332 10,274,413 12,053,514 3,058,791 845,915 60,247,101 _________ __________ _________ _________ _________ _________ _________ _________ __________ _________ _________ _________ _________ _________

Liabilities Due to banks and other

financial institutions 232,827 641,082 2,504,899 - - - 3,378,808

Taking from banks 397,735 61,190 376,319 1,333,090 - - 2,168,334

Derivative financial liabilities - - - - - 85,178 85,178 Financial assets sold under

repurchase agreements 4,292,900 1,686,100 846,500 - - - 6,825,500

Customer deposits 17,924,670 10,609,105 12,125,180 832,299 503,189 68,127 42,062,570

Interest payable - - - - - 449,047 449,047

Debt securities issued - 297,347 1,573,120 - - - 1,870,467

Other financial liabilities - - - - - 102,218 102,218 _________ __________ _________ _________ _________ _________ _________

Financial liabilities total 22,848,132 13,294,824 17,426,018 2,165,389 503,189 704,570 56,942,122 _________ __________ _________ _________ _________ _________ _________ _________ __________ _________ _________ _________ _________ _________

Net position 4,066,004 (6,194,492) (7,151,605) 9,888,125 2,555,602 141,345 3,304,979 _________ __________ _________ _________ _________ _________ _________ _________ __________ _________ _________ _________ _________ _________

Interest rate sensitivity analysis

The following sensitivity analysis is based on the interest rates gap between the interest

bearing assets such as cash and balances with the Central Bank, due from banks and other

financial institutions, loans and other receivables and interest bearing liabilities such as

customer deposits, due to banks and other financial institutions and debt securities issued as

of the balance sheet date. The upward and downward floating within 50 basis points is used

by management and local supervisor in evaluating the possible changes in interest rates and

the corresponding interest rate risks.

The sensitivity analysis on interest rate risk is based on the following assumptions:

Changes in the market interest rate may influence the interest income or expense of the

variable interest rate financial instruments;

For fixed rate financial instruments measured at fair value, changes in the market interest

rate only influence their interest income or expense;

Changes in the fair value of derivative financial instruments and other financial assets and

liabilities are calculated at the market interest rate as at the balance sheet date, using the

method of discounted cash flow analysis.


- 70 -



(2) Interest rate risk- continued

The following table illustrates the impact of the increase or decrease of the yield rate of all

currencies by 50 basis points in parallel on the net profit and capital reserve of the Bank,

based on the structure of earning assets and interest-bearing liabilities on the balance sheet

date. 2015 2014

Other comprehensive Other comprehensive Interest Floating Net profit income Net profit income

RMB ’000 RMB ’000 RMB ’000 RMB ’000

Appreciate by 50 basis points (19,534) (21,389) (12,548) (11,589)

Depreciate by 50 basis points 19,534 21,469 12,548 11,773

The above impact on net profit includes the impact of change in net interest income.

The analysis of the impact of net interest is based on the standardization framework of weight

factors in the appendix of “Principles for the Management and Supervision of Interest Rate

Risk” (July 2004) issued by The Basel Committee on Banking Supervision. Such factors are

determined based on the assumption that the Bank can continue to obtain the net interest

income calculated with the changed interest rate after the re-pricing date.

The Bank believes the assumption does not represent the Bank’s policy on use of funds and

interest rate risk management. As a result, the above impact may be different from the real

situation.

(V) Transfer of financial assets

(1) Financial assets sold under repurchase agreements

Sales and repurchase agreements are transactions in which the Bank sells a security and

simultaneously agrees to repurchase it (or an asset that is substantially the same) at a fixed

price on a future date. Since the repurchase prices are fixed, the Bank is still exposed to

substantially all the credit risks and market risks and rewards of those securities sold. These

securities, which the Bank does not have the ability to use during the term of the

arrangements, are not derecognized from the financial statements but regarded as “collateral”

for the secured lending from these because the Bank retains substantially all the risks and

rewards of these securities. In addition, it recognizes a financial liability for cash received.


- 71 -


(V) Transfer of financial assets - continued

(1) Financial assets sold under repurchase agreements - continued

The following table provides a summary of carrying amounts related to transferred financial

assets that are not derecognized and associated liabilities:

2015/12/31 2014/12/31

Financial assets Available-for-sale Held-to-maturity Financial assets Available-for-sale Held-to-maturity

at fair value through financial assets investments at fair value through financial assets investments

profit or loss Total profit or loss Total

RMB RMB RMB RMB RMB RMB RMB RMB

Carrying amount of transferred

assets 98,317,900.00 5,205,712,240.00 3,679,280,418.78 8,983,310,558.78 152,714,700.00 1,838,866,590.00 4,840,892,053.60 6,832,473,343.60

Carrying amount

of associated

liabilities 97,000,000.00 5,038,000,000.00 3,610,100,000.00 8,745,100,000.00 150,000,000.00 1,809,600,000.00 4,865,900,000.00 6,825,500,000.00 _____________ ______________ ______________ ______________ _____________ ______________ ______________ _____________ _____________ ______________ ______________ ______________ _____________ ______________ ______________ _____________

(2) Continuing involvement assets

On 30 June 2014, the Bank transferred credit assets to Beijing Founder Fubon Chuangrong

Financial Asset Management Co., Ltd. (hereinafter refer to “Fubon Chuangrong”) with a gross

amount of RMB 187,827,022.64 (net carrying amount of RMB 138,317,074.31). As the asset

manager, Fubon Chuangrong originated “Founder Fubon Asset Management - Fubon Bank

(China) Co., Ltd. Asset Management Plan No.1”, of which specified the transferred credit

assets as the underlying investment. The Bank issued a “Commitment Letter for Beijing

Founder Fubon Chuangrong Financial Asset Management Co., Ltd.” to provide credit

enhancement for the asset management plan with the maximum risk exposure of RMB

24,800,000.00.

On 12 November 2014, the Bank transferred credit assets to Shenzhen Ping An UOB Huitong

Wealth Management Co., Ltd. (hereinafter refer to “Ping An UOB”) with a gross amount of

RMB 274,000,000.00(net carrying amount of RMB 267,150,000.00). As the asset manager,

Ping An UOB originated “Ping An UOB Huitong Baofeng Asset Management Plan No.1”.

Meanwhile, Fubon Chuangrong originated “Founder Fubon Asset Management - Fubon Bank

(China) Co., Ltd. Asset Management Plan No.2” mainly investing in “Ping An UOB Huitong

Baofeng Asset Management Plan No.1”, of which designated to be a transferee of the Bank’s

credit assets with maximum amount of RMB 260,650,000.00. As for other funds raised within

the asset management plan, asset managers will invest in financial products which are

premitted by the China Securities Regulatory Commission (the “CSRC”), including but are

not limited: (1) inter-bank bond market or exchange traded bonds, central bank bills, financial

bonds and unsecured bonds with relatively high ratings; and (2) inter-bank deposits, bills, etc.

on the inter-bank trade market. The Bank issued a “Liquidity Assistance Commitment for

Shenzhen Ping An UOB Huitong Wealth Management Co., Ltd.” in order to provide credit

enhancement for the asset management plan and with the maximum risk exposure of RMB

26,062,560.00.


- 72 -


(V) Transfer of financial assets - continued

(2) Continuing involvement of assets - continued

With respect to aforementioned transfers of financial assets, the Bank neither transferred, nor

retained substantially all of the risks and rewards of ownership, and retained control of those

assets, as a result, the Bank continued to recognise the asset to the extent of its continuing

involvement. Continuing involvement represents the extent to which the Bank continues to be

exposed to the changes in the value of the transferred asset. A corresponding asset and liability

was recognized with the amount of maximum risk exposure of RMB 50,862,560.00. The Bank

also charged impairment loss amounted to RMB 1,128,864.20.

60. FAIR VALUE OF FINANCIAL INSTRUMENTS When determining the fair value of financial instruments, the Bank considers the market price as

the best approximation of the fair value of the financial instruments for which there is an active

market. For financial instruments of which the market does not exist, the Bank adopts current

value or other valuation techniques to determine the fair value of these financial assets and

financial liabilities (refer to Note 4).

The fair values of financial assets and financial liabilities are determined as follows：

The fair values of financial assets and financial liabilities with standard terms and conditions

and traded on active markets are determined with reference to asking or bidding market

prices;

The fair values of other financial assets and financial liabilities (excluding derivative

instruments) are determined in accordance with generally accepted pricing models based on

discounted cash flow analysis or observable market prices;

The fair value of derivative instruments are measured at quoted prices. Where such prices are

not available, a discounted cash flow analysis is performed using the applicable yield curve

for the duration of the instruments for fair value of non-optional derivatives, and option

pricing models, such as binomial model, for fair value of optional derivatives.

(1) Financial assets and liabilities measured by fair value

Three levels of financial assets and liabilities measured at fair value are analyzed as follows:

2015/12/31

Item Level 1 Level 2 Level 3 Total

RMB RMB RMB RMB

Financial assets

at fair value through profit or loss - 291,039,500.00 - 291,039,500.00

Derivative financial assets - 213,592,519.42 - 213,592,519.42

Available-for-sale financial assets - 10,962,477,348.00 100,000,000.00 11,062,477,348.00 ________________ ________________ ________________ ________________

Financial assets total - 11,467,109,367.42 100,000,000.00 11,567,109,367.42 ________________ ________________ ________________ ________________ ________________ ________________ ________________ ________________

Derivative financial liabilities - 177,311,660.04 - 177,311,660.04 ________________ ________________ ________________ ________________

Financial liabilities total - 177,311,660.04 - 177,311,660.04 ________________ ________________ ________________ ________________ ________________ ________________ ________________ ________________


- 73 -

60. FAIR VALUE OF FINANCIAL INSTRUMENTS - continued

(1) Financial assets and liabilities measured by fair value - continued 2014/12/31

Item Level 1 Level 2 Level 3 Total

RMB RMB RMB RMB

Financial assets at fair value

through profit or loss - 163,372,300.00 - 163,372,300.00

Derivative financial assets - 60,605,522.90 - 60,605,522.90

Available-for-sale financial assets - 5,881,047,540.00 - 5,881,047,540.00 ________________ ________________ ________________ ________________

Financial assets total - 6,105,025,362.90 - 6,105,025,362.90 ________________ ________________ ________________ ________________ ________________ ________________ ________________ ________________

Derivative financial liabilities - 85,177,546.54 - 85,177,546.54 ________________ ________________ ________________ ________________

Financial liabilities total - 85,177,546.54 - 85,177,546.54 ________________ ________________ ________________ ________________ ________________ ________________ ________________ ________________

There were no transfers from Level 1 and 2 to Level 3, and no transfer between Level 1 and Level

2 in 2015 and 2014. The information of Level 3 fair value is as follows:

Fair value as of Fair value as of Item 2015/12/31 2014/12/31 Valuation method RMB RMB Available-for-sale

financial assets 100,000,000.00 - Discounted cash flow ________________ ________________ ________________ ________________

The main significant unobservable input of these available-for-sale financial assets, using the

discounted cash flow model to evaluate, is the effective interest rate 4.4%. The significant

unobservable inputs are inversely proportional to the fair value.

Adjustments to Level 3 fair value of financial assets and liabilities are as follows：

2014/12/31 Interest Income Buy-in Close 2015/12/31

RMB RMB RMB RMB RMB

Available-for-sale

financial assets - - 100,000,000.00 - 100,000,000.00 ___________ ____________ ____________ ___________ ____________ ___________ ____________ ____________ ___________ ____________

The amount of financial assets and liabilities measured by fair value counted into current year's

income and other comprehensive income is as follows:

2015 2014

RMB RMB

Current year’s income/(loss) 21,040,696.06 (4,191,806.03)

Other comprehensive income/(loss) (15,509,304.32) 62,424,626.60


- 74 -

60. FAIR VULE OF FINANCIAL INSTRUMENT - continued

(2) Financial assets and liabilities not measured by fair value

Management of the Bank considers that the book value of financial assets and liabilities measured

by amortized cost in financial statements is close to the fair value of assets and liabilities of the

same kind. For instance, cash and balances with the Central Bank, due from banks, placement to

banks, financial assets purchased under resale agreements, loans and advances, due to banks and

other financial institutions, taking from banks, financial assets sold under repurchase agreements,

customer deposits and debt securities issued are not included in the following statement.

The book value and fair value of financial assets, which are not measured by fair value, on

balance sheet day are as follows:

2015/12/31 2014/12/31

Book value Fair value Book value Fair value

RMB RMB RMB RMB

Held-to-maturity investments 7,310,476,711.16 7,597,465,762.81 5,914,827,300.73 6,094,450,340.00

Receivable investments 2,521,464,932.89 2,521,142,195.90 - - ______________ ______________ ______________ ______________

Total 9,831,941,644.05 10,118,607,958.71 5,914,827,300.73 6,094,450,340.00 ______________ ______________ ______________ ______________ ______________ ______________ ______________ ______________

Three levels of financial assets and liabilities not measured at fair value are analyzed as follows:

2015/12/31

Level 1 Level 2 Level 3 Total

RMB RMB RMB RMB

Held-to-maturity investments - 7,597,465,762.81 - 7,597,465,762.81

Receivable investments - - 2,521,142,195.90 2,521,142,195.90 ________________ ________________ ________________ ________________

Total - 7,597,465,762.81 2,521,142,195.90 10,118,607,958.71 ________________ ________________ ________________ ________________ ________________ ________________ ________________ ________________

2014/12/31

Level 1 Level 2 Level 3 Total

RMB RMB RMB RMB

Held-to-maturity investments - 5,914,827,300.73 - 5,914,827,300.73 ________________ ________________ ________________ ________________ ________________ ________________ ________________ ________________


- 75 -

60. FAIR VALUE OF FINANCIAL INSTRUMENT - continued

(2) Financial assets and liabilities not measured by fair value - continued

The information of Level 2 and Level 3 fair value is as follows:

Fair value on Fair value on Item 2015/12/31 2014/12/31 Valuation method Input RMB RMB Held-to-maturity investments 7,597,465,762.81 6,094,450,340.00 Discounted cash flow bond yield rate Receivable investment 2,521,142,195.90 - Discounted cash flow discount rate ________________ ________________ ________________ ________________

All of the above-mentioned assumptions and methods provide a consistent basis for the

calculation of the fair values of the Bank’s assets and liabilities. However, other institutions may

use different assumptions and methods. Therefore, the fair values disclosed by different financial

institutions may not be entirely comparable.

61. COMPARATIVE FIGURES Certain comparative figures have been reclassed to conform 2015’s presentation.

62. SUBSEQUENT EVENTS

In March 2016, the Fourth Session of the Twelfth National People's Congress approved the full

implementation of the VAT reform in the government work report. From 1 May 2016, the VAT

reform will be rolled out to cover construction, real estate, financial service and lifestyle service

sectors. Meanwhile, Ministry of Finance and State Administration of Taxation issued the Notice

on full roll-out plan of the VAT reform (Cai Shui [2016] No. 32). From 1 May 2016, the Bank will

be subject to VAT in lieu of business tax.

63. APPROVAL OF THE FINANCIAL STATEMENTS

The financial statements were approved by the Board of Directors of the Bank on 25 March 2016.

* * * END OF FINANCIAL STATEMENTS * * *