bank of china limited - boc · bowne of hong kong 05/24/2006 06:09 no marks next pcn: 002.00.00.00...

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CONFIDENTIAL

BANK OF CHINA LIMITED(A joint stock company incorporated in the People's Republic of China with limited liability)

Global Offeringof 25,568,590,000 Offer Shares

The Offer Shares are being offered by Bank of China Limited (the ""bank'' or ""we''): (i) outside the UnitedStates through BOCI Asia Limited, Goldman Sachs (Asia) L.L.C. and UBS AG acting through its businessgroup, UBS Investment Bank, (in alphabetical order) and other purchasers named on page W-39 of thisOffering Circular (collectively, the ""International Purchasers'') in accordance with Regulation S(""Regulation S'') under the U.S. Securities Act of 1933, as amended (the ""Securities Act''), and (ii) withinthe United States by certain of the International Purchasers through their respective selling agents to qualifiedinstitutional buyers as defined in Rule 144A under the Securities Act (""Rule 144A''). This International Offering(as defined on page W-11 of this Offering Circular) is part of a Global Offering (as defined on page W-11 ofthis Offering Circular) in which the bank is concurrently offering Offer Shares in Hong Kong through the HongKong Public Offering (as defined on page W-11 of this Offering Circular).

The offer price per Offer Share is HK$2.95. The offer price excludes a brokerage fee, a trading feeimposed by The Stock Exchange of Hong Kong Limited (the ""Hong Kong Stock Exchange''), and atransaction levy imposed by the Securities and Futures Commission of Hong Kong (the ""SFC''), whichtogether amount to 1.01% of the offer price, and which shall be payable by investors. Prior to the GlobalOffering, there has been no public trading market for H Shares. Application has been made for the listing of,and permission to deal in, the Offer Shares on the Hong Kong Stock Exchange.

See ""Risk Factors'' on page W-21 herein and in the Hong Kong Prospectus incorporated herein to read aboutfactors you should consider before making an investment in the Offer Shares.

The bank has granted the International Purchasers an option to require the bank to issue up to3,835,288,000 additional Offer Shares at the Offer Price. See ""Plan of Distribution''.

The Offer Shares have not been registered under the Securities Act and are being offered and sold inthe United States only to qualified institutional buyers as defined in Rule 144A under the Securities Act.Prospective purchasers that are qualified institutional buyers are hereby notified that the seller of the OfferShares may be relying on the exemption from the provisions of Section 5 of the Securities Act provided byRule 144A. The Offer Shares offered hereby are not transferrable except in accordance with the restrictionsdescribed under ""Transfer Restrictions''.

A copy of the final version of the Hong Kong Prospectus, together with the written consents specified inthe paragraphs headed ""Independent Accountants'' and ""Experts'', has been registered by the Registrar ofCompanies in Hong Kong as required by Section 342C of the Companies Ordinance (Chapter 32 of the Lawsof Hong Kong). The SFC and the Registrar of Companies in Hong Kong take no responsibility as to thecontents of this Offering Circular. The Hong Kong Stock Exchange and Hong Kong Securities ClearingCompany Limited take no responsibility for the contents of this Offering Circular, make no representation as toits accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arisingfrom or in reliance upon the whole or any part of the contents of this Offering Circular.

The International Purchasers are severally purchasing or procuring on behalf of the bank purchasers for theOffer Shares being offered. The International Purchasers expect to deliver the Offer Shares through the facilities ofthe Central Clearing and Settlement System in Hong Kong against payment on or about June 1, 2006.

Joint Global Coordinators and Joint Bookrunners(in alphabetical order)

Offering Circular dated May 24, 2006.

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This Offering Circular incorporates the prospectus for the public offering of the Offer Shares inHong Kong (the ""Hong Kong Prospectus''), save for certain sections and modifications. This OfferingCircular should be read in conjunction with the Hong Kong Prospectus, which is included in thisOffering Circular, and is qualified in its entirely by the more detailed information and financialinformation contained in the Hong Kong Prospectus. Terms used but not defined herein shall have themeanings given to them in the Hong Kong Prospectus incorporated herein.

IMPORTANT

If you are in any doubt about this Offering Circular, you should consult your stockbroker, bankmanager, solicitor, professional accountant or other professional adviser.

This Offering Circular is confidential. You are authorized to use this Offering Circular solely for thepurpose of considering the purchase of the Offer Shares, in the form of H Shares, of Bank of ChinaLimited ( ) offered pursuant to this Offering Circular. The bank and the othersources identified herein have provided the information contained in the Offering Circular. TheInternational Purchasers make no representation or warranty, express or implied, as to the accuracy orcompleteness of such information, and nothing contained in this Offering Circular is, or shall be reliedupon as, a promise or representation by the International Purchasers. You may not reproduce ordistribute this Offering Circular, in whole or in part, and you may not disclose any of the contents ofthis Offering Circular or use any information herein for any purpose other than considering aninvestment in the Offer Shares offered hereby. You hereby agree to the foregoing by acceptingdelivery of this Offering Circular.

The Offer Shares have not been and will not be registered under the Securities Act for offeror sale as part of their distribution and, subject to certain exceptions, may not be offered or soldin the United States or to U.S. persons. The H Shares are not transferable except in accordancewith the restrictions described herein. See ""Transfer Restrictions'' and ""Plan of Distribution''.

No person has been authorized to give any information or to make any representations otherthan those contained in this Offering Circular and, if given or made, such information orrepresentations must not be relied upon as having been authorized. This Offering Circular doesnot constitute an offer to sell or a solicitation of any offer to buy any securities other than thesecurities to which it relates or an offer to sell or a solicitation of an offer to buy such securitiesby any person in any circumstances in which such offer or solicitation is unlawful. Neither thedelivery of this Offering Circular nor any sale made hereunder shall, under any circumstances,create any implication that there has been no change in our affairs since the date hereof or thatthe information contained herein is correct as of any time subsequent to the date.

THE SECURITIES OFFERED HEREBY HAVE NOT BEEN RECOMMENDED BY ANY UNITEDSTATES FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY.FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY ORDETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THECONTRARY IS A CRIMINAL OFFENSE.

The distribution of this Offering Circular and the offering and sale of the Offer Shares incertain jurisdictions may be restricted by law. The bank and the International Purchasers requirepersons into whose possession this Offering Circular comes to inform themselves about and toobserve any such restrictions. For a further description of certain restrictions on the offering andsale of the Offer Shares, see ""Transfer Restrictions'' and ""Plan of Distribution''. This Offering

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Circular does not constitute an offer of, or an invitation to purchase, any of the Offer Shares inany jurisdiction in which such offer or invitation would be unlawful. Each prospective purchaserof the Offer Shares must comply with all applicable laws and regulations in force in anyjurisdiction in which it purchases, offers or sells the Offer Shares or possesses or distributes thisOffering Circular and must obtain any consents, approvals or permissions required for thepurchase, offer or sale by it of the Offer Shares under the laws and regulations in force in anyjurisdiction to which it is subject or in which it makes such purchases, offers or sales, and neitherwe nor the International Purchasers shall have any responsibility therefor.

THE INTERNATIONAL OFFERING IS BEING MADE ON THE BASIS OF THIS OFFERINGCIRCULAR ONLY. ANY DECISION TO PURCHASE H SHARES IN THE INTERNATIONAL OFFERINGMUST BE BASED ON THE INFORMATION CONTAINED HEREIN.

In this Offering Circular, references to ""US$'' and ""U.S. dollars'' are to United States dollarsand references to ""HK$'' are to Hong Kong dollars; and all references to ""RMB'' or ""Renminbi'' areto Renminbi, the official currency of the People's Republic of China (the ""PRC'').

Unless otherwise stated in this Offering Circular, Renminbi amounts have been translated intoU.S. dollars at the rate of RMB8.0702 to US$1.00 and Hong Kong dollars have been translated intoU.S. dollars at the rate of HK$7.7533 to US$1.00, which were the noon buying rates in New York Cityfor cable transfers as certified for customs purposes by the Federal Reserve Bank of New York onDecember 30, 2005.

On May 23, 2006, the noon buying rate in New York City for cable transfers in Renminbi ascertified for customs purposes by the Federal Reserve Bank of New York was RMB8.0235 toUS$1.00. On May 23, 2006, the noon buying rate in New York City for cable transfers in Hong Kongdollars as certified for customs purposes by the Federal Reserve Bank of New York wasHK$7.7553 to US$1.00.

No representation is made that the U.S. dollar amounts have been, could have been or could beconverted to Renminbi, or vice versa, or that the Hong Kong dollar amounts have been, could havebeen or could be converted to U.S. dollars, or vice versa, at that rate or at any other rate or at all.

Any discrepancies in any table or elsewhere in this Offering Circular between totals and sums ofamounts listed herein are due to rounding.

Unless otherwise specified, statements contained in this Offering Circular assume theInternational Purchasers' Over-Allotment Option is not exercised. See ""Plan of Distribution''.

IN CONNECTION WITH THIS GLOBAL OFFERING, GOLDMAN SACHS (ASIA) L.L.C. OR ITSAFFILIATES (THE ""STABILIZING MANAGER''), OR ANY PERSON ACTING FOR THESTABILIZING MANAGER, ON BEHALF OF THE INTERNATIONAL PURCHASERS AND THE HONGKONG UNDERWRITERS, MAY OVER-ALLOCATE OR EFFECT TRANSACTIONS WITH A VIEW TOSUPPORTING THE MARKET PRICE OF THE OFFER SHARES AT A LEVEL HIGHER THAN THATWHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET FOR A LIMITED PERIOD OF TIMEAFTER THE DATE ON WHICH DEALINGS IN THE OFFER SHARES COMMENCE ON THE HONGKONG STOCK EXCHANGE. HOWEVER, THERE IS NO OBLIGATION ON THE STABILIZINGMANAGER OR ITS AGENT TO CONDUCT SUCH STABILIZING ACTIVITIES. SUCHTRANSACTIONS MAY BE EFFECTED ON THE HONG KONG STOCK EXCHANGE OR OTHERWISESUBJECT TO COMPLIANCE WITH APPLICABLE LEGAL AND REGULATORY REQUIREMENTS.SUCH STABILIZATION, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME, AND MUST BEBROUGHT TO AN END AFTER A LIMITED PERIOD. SEE ""PLAN OF DISTRIBUTION''.

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NOTICE TO NEW HAMPSHIRE RESIDENTS ONLY

NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR ALICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISEDSTATUTES WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY ISEFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRECONSTITUTES A FINDING BY THE SECRETARY OF STATE OF NEW HAMPSHIRE THAT ANYDOCUMENT FILED UNDER CHAPTER 421-B IS TRUE, COMPLETE AND NOT MISLEADING.NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLEFOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSEDIN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVENAPPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE, ORCAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANYREPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.

AVAILABLE INFORMATION

If at any time the bank is neither subject to the reporting requirements of Section 13 or 15(d) ofthe U.S. Securities Exchange Act of 1934, as amended (the ""Exchange Act''), nor exempt fromsuch reporting requirements pursuant to Rule 12g3-2(b) thereunder, it will furnish, upon request, toany owner of the Offer Shares purchased pursuant to Rule 144A or any prospective purchaserdesignated by any such owner, the information required to be delivered pursuant toRule 144A(d)(4) under the Securities Act.

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TABLE OF CONTENTS

Page Page

Enforceability of Civil Liabilities ÏÏÏÏÏÏÏ W-5 Our Strategic and Other Investors ÏÏÏÏ 102

Forward-Looking Statements ÏÏÏÏÏÏÏÏÏ W-6 Business ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 120

Summary ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ W-9 Risk Management ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 167

The Global OfferingÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ W-11 Relationship with Our Promoter andConnected Transactions ÏÏÏÏÏÏÏÏÏÏÏ 197DividendsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ W-14

Summary Historical Consolidated Directors, Supervisors, SeniorFinancial and Operating Information W-15 Management and Employees ÏÏÏÏÏÏÏ 200

Use of Proceeds ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ W-19 Substantial ShareholdersÏÏÏÏÏÏÏÏÏÏÏÏÏ 213

Capitalization ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ W-20 Share Capital ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 215Risk Factors ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ W-21

Description of Our Assets andProfit Forecast ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ W-22 Liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 220

The Hong Kong Stock Exchange ÏÏÏÏÏ W-23 Financial InformationÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 260

Taxation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ W-26 Future Plans and Use of Proceedsfrom the Global Offering ÏÏÏÏÏÏÏÏÏÏÏ 316Summary of Certain Differences

between IFRS and US GAAP ÏÏÏÏÏÏÏ W-32 Underwriting ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 317Transfer Restrictions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ W-35

Structure of the Global Offering ÏÏÏÏÏÏ 323Deemed Representations from

A Share Offering ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 329Investors ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ W-37

AppendicesPlan of Distribution ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ W-39

Appendix I Ì Accountants' ReportÏÏÏÏ I-1Validity of Securities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ W-45

Independent Accountants ÏÏÏÏÏÏÏÏÏÏÏÏ W-45 Appendix II Ì UnauditedSupplementary Financial Information II-1ExpertsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ W-45

Appendix III Ì Unaudited Pro FormaHong Kong Prospectus Financial InformationÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ III-1Expected Timetable ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ i Appendix IV Ì Profit ForecastÏÏÏÏÏÏÏÏ IV-1ContentsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ ii

Appendix V Ì Property ValuationSummary ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1 ReportÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ V-1

Definitions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 14 Appendix VI Ì Taxation and ForeignExchangeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ VI-1Forward-Looking Statements ÏÏÏÏÏÏÏÏÏ 26

Appendix VII Ì Summary of PrincipalRisk Factors ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 27Legal and Regulatory ProvisionsÏÏÏÏ VII-1

Information About this Prospectus andthe Global Offering ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 47 Appendix VIII Ì Summary of Articles

of AssociationÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ VIII-1Parties Involved in the Global Offering 52

Appendix IX Ì Statutory and GeneralCorporate Information ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 58Information ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ IX-1

Industry Overview ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 59Appendix X Ì Documents Delivered to

Supervision and Regulation ÏÏÏÏÏÏÏÏÏÏ 73 the Registrar of Companies andOur Restructuring ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 96 Available for Inspection ÏÏÏÏÏÏÏÏÏÏÏÏ X-1

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ENFORCEABILITY OF CIVIL LIABILITIES

The bank is a joint stock company incorporated in and under the laws of the PRC with limitedliability. Most of the bank's directors, supervisors and officers and the experts named herein resideoutside the United States (principally in the PRC and Hong Kong). All or a substantial portion of theassets of the bank and of such persons are or may be located outside the United States. As a result,it may not be possible for investors to effect service of process within the United States upon thebank or such persons, or to enforce against the bank or such persons judgments obtained in UnitedStates courts, including judgments predicated upon the civil liability provisions of the Federalsecurities laws of the United States. The bank has been advised by its Hong Kong counsel,Freshfields Bruckhaus Deringer, that there is doubt as to the enforceability in Hong Kong in originalactions or in actions for enforcement of judgments of United States courts, of civil liabilitiespredicated solely upon the Federal securities laws of the United States courts or the securities lawsof any State or territory within the United States. The bank has also been advised by its PRCcounsel, Jun He Law Offices, that there is doubt as to the enforceability in the PRC, in originalactions or in actions for enforcement of judgments of United States courts, of civil liabilitiespredicated solely upon the Federal securities laws of the United States.

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FORWARD-LOOKING STATEMENTS

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

‚ our business strategies and our various initiatives to implement these strategies;

‚ the future competitive environment in the PRC banking industry;

‚ our dividend policy;

‚ our business cooperation and relationship with our strategic investors;

‚ our capital expenditure plans, particularly plans relating to the upgrading of our informationtechnology infrastructure;

‚ our development plans for our existing and new products;

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

‚ the regulatory environment as well as the general industry outlook for the PRC bankingindustry; and

‚ future developments in the PRC banking industry.

The words ""anticipate'', ""believe'', ""could'', ""estimate'', ""predict'', ""potential'', ""continue'',""expect'', ""intend'', ""may'', ""plan'', ""seek'', ""will'', ""would'', ""should'' and the negative of theseterms and other similar expressions identify a number of these forward-looking statements. Someof these forward-looking statements relate to future events or our future financial, business or otherperformance and development and are subject to a number of uncertainties that may cause actualresults to differ materially. We have highlighted these uncertainties in the ""Risk Factors'' section onpage W-21 of this Offering Circular and in the Hong Kong Prospectus, including but not limited to:

‚ general economic, market and business conditions in the PRC, including the sustainability ofhigh economic growth rates in the PRC;

‚ any changes to the laws, rules and regulations of the central and local governments in thePRC and the rules, regulations and policies of the CBRC, the PBOC and other relevantgovernment authorities relating to all aspects of our business;

‚ macroeconomic policies of the PRC Government;

‚ changes or volatility in interest rates, inflation rates, foreign exchange rates, equity prices,commodity prices or other rates or prices;

‚ the effects of intensifying competition in the PRC banking industry on the demand for andprice of our products and services, including potentially from foreign banks as a result of thePRC's entry into the WTO;

‚ our ability to identify, measure, monitor and control risks in our business, including our abilityto improve our overall risk profile and risk management practices; and

‚ our ability to successfully implement our business strategy.

‚ the risk factors discussed in this Offering Circular as well as other factors beyond our control.

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Subject to the requirements of applicable laws, rules and regulations, we do not have anyobligation to update or otherwise revise the forward-looking statements in this Offering Circular,whether as a result of new information, future events or otherwise. As a result of these and otherrisks, uncertainties and assumptions, the forward-looking events and circumstances discussed inthis Offering Circular might not occur in the way we expect, or at all. Accordingly, you should notplace undue reliance on any forward-looking information. All forward-looking statements containedin this Offering Circular are qualified by reference to the cautionary statements set out in thissection.

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SUMMARY

The following summary highlights information contained in, and is qualified in its entirety by, themore detailed information (including financial information and the notes thereto) appearing elsewherein this Offering Circular. Since the following is a summary, it does not contain all of the information thatyou should consider before investing in the Offer Shares. You should read the entire Offering Circular,including the Hong Kong Prospectus, before you decide to invest in the Offer Shares. For a discussionof certain matters that should be considered by prospective investors, see ""Risk Factors'' beginningon page W-21 and in the Hong Kong Prospectus.

Overview

We are one of the four largest commercial banks in the PRC in terms of total assets with themost extensive international branch network among PRC commercial banks. According to theBanker magazine, we were the 32nd largest bank in the world based on total assets as ofDecember 31, 2004. Our core business is commercial banking, which primarily consists of corporatebanking, personal banking and treasury operations and accounted for 92.7% of our operating profitin 2005. We also conduct investment banking and insurance activities through our subsidiaries. Thecombination of our commercial banking, investment banking and insurance businesses has createda universal banking platform that allows us to provide integrated services to our customers.

We are headquartered in Beijing with operations in the Chinese Mainland, Hong Kong andMacau and other overseas regions. Our operating profit was RMB37,416 million, RMB37,122 millionand RMB53,636 million in 2003, 2004 and 2005, respectively, of which RMB13,203 million,RMB17,786 million and RMB29,676 million, respectively, was derived from our domestic operations.As of December 31, 2005, our total assets were RMB4,740,048 million, of which 76.4% were derivedfrom our domestic operations before inter-company balance elimination.

We had one of the most extensive domestic distribution networks, with over 11,000 branchesand outlets, 580 self-service centers and 11,600 automated service machines throughout the PRCas of December 31, 2005. We also have an extensive international network. As of December 31,2005, our international network comprised over 600 overseas branches, subsidiaries andrepresentative offices covering 27 countries and regions, and we had correspondent bankingrelationships with over 1,400 foreign banks. In addition, we offer electronic-banking services suchas telephone banking and Internet banking. As of December 31, 2004, we had the highest totalassets, customer deposits and outstanding loans and advances per branch among the Big Fouraccording to data released by the Big Four.

We are also a leading commercial bank in Hong Kong and Macau. Our Hong Kong and Macauoperations together accounted for 19.8% of our total assets before inter-company balanceelimination as of December 31, 2005 and 41.1% of our operating profit in 2005. Our subsidiary,BOCHK, was the second largest commercial bank in Hong Kong in terms of total assets as ofDecember 31, 2005. BOCHK's direct holding company, BOCHK Holdings, is listed on the Hong KongStock Exchange. Our Macau branch was the largest commercial bank in Macau in terms of totalassets as of June 30, 2005 based on data published by the Macau government.

BOCHK and our Macau branch are each one of the few banks authorized to issue bank notes intheir respective jurisdictions.

Our Strengths

Our principal strengths include:

‚ well-recognized brand name;

‚ largest and rationally distributed overseas network complementing an extensive domesticnetwork;

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‚ solid customer base and strong presence in attractive customer segments;

‚ universal banking platform;

‚ leader in non-interest income and foreign exchange businesses with strong productinnovation capabilities; and

‚ experienced senior management team with proven track record.

For a more detailed discussion of our principal strengths, see the section headed ""Business ÌOur Strengths'' in the Hong Kong Prospectus.

Our Strategy

We strive to become the premier bank in the PRC by pursuing sustainable profitability andquality-driven growth. We intend to become the financial services provider of choice in the PRC forlarge corporations and affluent retail customers, as well as a leading international financial servicescompany. We intend to achieve our objectives by focusing on the following strategies:

‚ strengthen corporate governance, risk management and financial management;

‚ focus on attractive customer groups;

‚ seek further diversification by enhancing our product offerings and strengthening ouruniversal banking platform;

‚ focus on domestic strategic regions and further develop our international franchise to supportcross-border businesses;

‚ implement infrastructure reform to streamline processes and increase efficiency;

‚ train and develop our employees to enhance our competitive advantage; and

‚ cooperate with our strategic investors to create synergies.

For a more detailed discussion of our strategy, see the section headed ""Business Ì OurStrategy'' in the Hong Kong Prospectus.

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THE GLOBAL OFFERING

Global OfferingÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ The Hong Kong Public Offering and the International Offeringof an aggregate of 25,568,590,000 Offer Shares.

International Offering ÏÏÏÏÏÏÏÏÏÏÏ The offering of 24,290,160,000 Offer Shares (i) within theUnited States to qualified institutional buyers as defined inRule 144A and (ii) outside the United States in reliance onRegulation S by the International Purchasers or theirrespective selling agents.

Hong Kong Public OfferingÏÏÏÏÏÏ The offering of initially 1,278,430,000 Offer Shares forsubscription in Hong Kong on and subject to the terms andconditions described in the Hong Kong Prospectus and theapplication forms relating thereto.

Clawback and Reallocation ÏÏÏÏÏÏÏ The allocation of the Offer Shares between the Hong KongPublic Offering and the International Offering is subject toadjustment. If the number of Offer Shares validly applied forunder the Hong Kong Public Offering represents (i) 15 timesor more but less than 50 times, (ii) 50 times or more but lessthan 100 times or (iii) 100 times or more than the number ofthe Offer Shares initially available for subscription under theHong Kong Public Offering, then there will be a reallocationof the Offer Shares to the Hong Kong Public Offering so thatthe total number of Offer Shares available for subscriptionunder the Hong Kong Public Offering will be(i) 1,917,645,000 H Shares, representing approximately7.5%, (ii) 2,556,859,000 H Shares, representingapproximately 10%, or (iii) 5,113,718,000 H Shares,representing approximately 20% of the Offer Shares initiallyavailable under the Global Offering, respectively. In any suchcase, the number of Offer Shares allocated to theInternational Offering will be correspondingly reduced. If theHong Kong Public Offering is not fully subscribed, the JointGlobal Coordinators have the authority to reallocate all orany unsubscribed Offer Shares in the Hong Kong PublicOffering to the International Offering. See the section headed""Structure of the Global Offering'' in the Hong KongProspectus.

Over-Allotment Option ÏÏÏÏÏÏÏÏÏÏÏÏ The option granted by the bank to the InternationalPurchasers pursuant to the International PurchaseAgreement, exercisable by the Joint Global Coordinators onbehalf of the International Purchasers for up to 30 days fromthe last day for the lodging of applications under the HongKong Public Offering, to require the bank to issue up to anaggregate of 3,835,288,000 additional Offer Shares. See thesection headed ""Plan of Distribution'' in this OfferingCircular.

Offer Price per Offer Share in theInternational Offering ÏÏÏÏÏÏÏÏÏÏÏÏÏ HK$2.95 per Offer Share, payable in Hong Kong dollars. In

addition to the Offer Price, investors will be required to payan aggregate amount equal to 1.01% of the Offer Price,which consists of brokerage of 1%, a transaction levy of

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0.005% imposed by the SFC, and a trading fee of 0.005%imposed by the Hong Kong Stock Exchange.

Voting Rights ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Generally, the holders of the H Shares will have one vote perH Share. Please see Appendix VIII Ì ""Summary of Articlesof Association'' in the Hong Kong Prospectus.

Dividend Policy ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ See the section headed ""Financial Information Ì DividendPolicy'' in the Hong Kong Prospectus.

Use of Proceeds ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ We estimate that we will receive net proceeds from theGlobal Offering of approximately HK$72,923 million(US$9,403 million, based on the exchange rate ofHK$7.7553 to US$1.00, which is the May 23, 2006 FederalReserve noon buying rate in New York City), after deductingthe underwriting fees and estimated expenses payable by usin the Global Offering and assuming the Over-AllotmentOption is not exercised. We intend to use these net proceedsto strengthen our capital base to support ongoing growth ofour business. See the section headed ""Future Plans and Useof Proceeds from the Global Offering'' in the Hong KongProspectus.

Shares Outstanding After theGlobal OfferingÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 243,510,368,009 Shares (including the 25,568,590,000 Offer

Shares offered in the Global Offering, which will representapproximately 10.5% of the bank's issued Shares)immediately following the completion of the Global Offering,assuming the Over-Allotment Option is not exercised.

Clearing and Settlement ÏÏÏÏÏÏÏÏÏÏ Subject to the granting of listing of, and permission to deal in,H Shares on the Hong Kong Stock Exchange as well ascompliance with the stock admission requirements of theHong Kong Securities Clearing Company Limited(""HKSCC''), H Shares will be accepted as eligible securitiesby HKSCC for deposit, clearance and settlement in CCASSin Hong Kong with effect from the date of commencement ofdealings in H Shares on the Hong Kong Stock Exchange orany other date as shall be determined by HKSCC. Settlementof transactions between participants of the Hong Kong StockExchange on any trading day is required to take place inCCASS on the second business day thereafter. A board lot is1,000 H Shares. The International Purchasers expect todeliver the Offer Shares through CCASS in Hong Kongagainst payment in Hong Kong dollars in Hong Kong on orabout May 30, 2006.

Trading MarketsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Prior to the Global Offering, there has been no tradingmarket for H Shares. An application has been made and anapproval in principle has been granted for the listing of, andpermission to deal in, H Shares on the Hong Kong StockExchange. Trading in H Shares on the Hong Kong StockExchange is expected to commence on or about June 1,2006.

W-12


Stock code for the H Shares onthe Hong Kong Stock ExchangeÏÏÏ 3988

Lock-up Arrangements ÏÏÏÏÏÏÏÏÏÏÏ We have agreed with each of the International Purchasersthat, during the period beginning from the date of theInternational Purchase Agreement and continuing to andincluding the date six months after the date on whichdealings in the Offer Shares commence on the Hong KongStock Exchange, not to offer, sell, contract to sell, pledge,grant any option to purchase, make any short sale, hedge orotherwise dispose of, any securities of the bank that aresubstantially similar to the Offer Shares, including but notlimited to any options or warrants to purchase, or anysecurities that are convertible into or exchangeable orexercisable for, or that represent the right to receive, anyOffer Shares or any such substantially similar securities(other than pursuant to employee stock option plans existingon the date of the International Purchase Agreement);provided, however, that the foregoing restrictions shall notapply (i) to the extent that any of the foregoing transactionsis entered into by the bank or any of the bank's subsidiariesacting in the ordinary and usual course of its business asagent or nominee on behalf of a third party client or customeror (ii) pursuant to a public offering of domestic shares in thePRC.

Five-day Gap between Pricing andTrading of the Offer SharesÏÏÏÏÏÏÏ The Offer Shares will not commence trading on the Hong

Kong Stock Exchange until the closing date of theInternational Offering, which is expected to be five businessdays after the date of the pricing of the Offer Shares.Purchasers of the Offer Shares will not be able to sell orotherwise deal in the Offer Shares prior to thecommencement of trading on the Hong Kong StockExchange.

Investment ConsiderationsÏÏÏÏÏÏÏÏ For a discussion of certain factors that should be consideredin evaluating an investment in the Offer Shares, see ""RiskFactors'' beginning on page W-21 herein and in the HongKong Prospectus.

W-13


DIVIDENDS

We may pay dividends out of our distributable profits in accordance with applicablerequirements of the PRC Company Law and our Articles of Association. Further details are set out inthe section headed ""Financial Information Ì Dividend Policy'' in the Hong Kong Prospectus.

The payment of any dividends by us must be approved by our shareholders in a shareholdersmeeting, generally based on a recommendation from the Board of Directors. See the section headed""Financial Information Ì Dividend Policy'' in the Hong Kong Prospectus.

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SUMMARY HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING INFORMATION

Summary Historical Consolidated Financial Information

You should read the summary consolidated financial information set forth below in conjunctionwith our consolidated financial statements included in Appendix I Ì ""Accountants' Report'' to theHong Kong Prospectus, which are prepared in accordance with International Financial ReportingStandards (""IFRS''), and the section headed ""Financial Information'' in the Hong Kong Prospectus.The summary consolidated results for the years ended December 31, 2003, 2004 and 2005, and thesummary balance sheet information as of December 31, 2003, 2004 and 2005, set forth below arederived from the Accountants' Report set forth in Appendix I to the Hong Kong Prospectus. Thebasis of presentation is set forth in note III.1 to our consolidated financial statements set forth in theAccountants' Report.

We have prepared our consolidated financial statements in accordance with IFRS. IFRS differsin many material respects from generally accepted accounting principles in the United States(""US GAAP''). For a discussion of certain differences between IFRS and US GAAP that areapplicable to us, see ""Summary of Certain Differences between IFRS and US GAAP.''

For the year ended December 31,

2003 2004 2005

(in millions of RMB,unless otherwise stated)

Summary Historical Consolidated Income Statement DataInterest incomeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 116,967 132,353 167,948Interest expense ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (40,370) (43,918) (66,940)

Net interest income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 76,597 88,435 101,008Net fee and commission income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,353 8,557 9,247Net trading income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,303 8,882 4,283Net gains/(losses) on investment securities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,094 337 (582)Other operating income ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,849 9,602 11,150Net gains on sale of shares in a subsidiary ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 7,400 Ì ÌImpairment losses on loans and advancesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (18,100) (23,812) (11,486)Other operating expensesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (46,080) (54,879) (59,984)

Operating profit ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 37,416 37,122 53,636Share of results of associates ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (69) 141 175

Profit before income taxÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 37,347 37,263 53,811Income tax expense ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (3,162) (10,198) (22,253)

Profit for the year ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 34,185 27,065 31,558

Attributable to:Equity holders of our bank ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 31,015 22,301 25,921Minority interest ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,170 4,764 5,637

34,185 27,065 31,558

Earnings per share for profit attributable to the equity holders ofour bank during the year (Renminbi per ordinary share)Ì basic and diluted ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.17 0.12 0.14

W-15


As of December 31,

2003 2004 2005

(in millions of RMB)

Summary Historical Consolidated Balance Sheet DataAssetsCash and due from banksÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 30,333 35,779 41,082Balances with central banksÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 267,159 284,348 316,941Placements with banks and other financial institutions ÏÏÏÏÏÏÏÏ 428,915 340,192 332,099Government certificates of indebtedness for bank notes

issued ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 34,789 38,440 35,586Precious metals ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 28,596 26,105 26,974Trading assets and other financial instruments at fair value

through profit or loss ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 115,144 92,124 111,782Derivative financial instruments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13,162 16,076 16,808Loans and advances to customers, netÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,921,861 2,072,919 2,152,112Investment securities

Available-for-saleÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 421,471 357,587 602,221Held-to-maturity ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 215,175 457,994 607,459Loans and receivables ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 352,315 413,941 361,851

Investment in associates ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,355 1,227 5,061Property and equipment ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 66,614 65,012 62,417Investment property ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,837 6,288 8,511Deferred income tax assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 14,111 21,614 20,504Other assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 56,443 35,575 38,640

Total assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,973,280 4,265,221 4,740,048

LiabilitiesDue to banks ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 95,181 111,788 134,217Due to central banks ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 76,815 66,738 30,055Bank notes in circulation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 34,836 38,570 35,731Certificates of deposits and placements from banks and other

financial institutionsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 157,243 141,087 212,626Derivative financial instruments and liabilities at fair value

through profit or loss ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 50,977 93,760 91,174Due to customers ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,033,364 3,338,448 3,699,464Bonds issued ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,823 26,253 60,179Special purpose borrowingsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 77,229 69,549 52,164Current tax liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4,949 19,588 23,459Retirement benefit obligations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,669 4,274 7,052Deferred income tax liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,951 2,399 2,136Other liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 211,397 124,860 136,272

Total liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,751,434 4,037,314 4,484,529

W-16


As of December 31,

2003 2004 2005

(in millions of RMB)

Summary Historical Consolidated Balance Sheet Data(Continued)

EquityCapital and reserves attributable to equity holders of our bankShare capitalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 186,390 186,390 209,427Capital reserveÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 32,976 (10,432) (5,954)Statutory reservesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 3,140 5,987General and regulatory reservesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 419 5,109(Accumulated losses)/undistributed profits ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (28,241) 16,547 10,188Reserve for fair value changes of available-for-sale securities 4,078 2,730 1,899Currency translation differences ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,617 1,961 (237)

Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 196,820 200,755 226,419Minority interest ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 25,026 27,152 29,100

Total equityÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 221,846 227,907 255,519

Total equity and liabilities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3,973,280 4,265,221 4,740,048

As of or for theyear ended December 31,

2003 2004 2005

Selected Financial RatiosProfitability ratios:

Return on total assets(1)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.86% 0.63% 0.67%Return on average total assets(2)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0.94% 0.66% 0.70%Return on equity(3) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 15.76% 11.11% 11.45%Return on average equity(4) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 15.76%(5) 11.22% 12.14%Net interest spread(6)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2.08% 2.14% 2.21%Net interest margin(7)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2.16% 2.24% 2.33%Non-interest income to operating income(8) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 24.61% 23.64% 19.26%Operating expenses to operating income(8) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 45.36% 47.39% 47.95%Operating expenses to operating income

(excluding business and other taxes)(8) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 41.45% 43.08% 43.41%Asset and credit quality ratios:

Identified impaired loans to gross loans(9)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 16.58% 5.51% 4.90%Total allowance for impairment losses to identified impaired

loansÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 66.73% 63.16% 75.92%Total allowance for impairment losses to gross loans(9) ÏÏÏÏÏÏÏÏ 11.06% 3.48% 3.72%

Other RatiosCore capital adequacy ratio(10) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ N/A 8.48% 8.08%Capital adequacy ratio(10) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ N/A 10.04% 10.42%Total equity to total assets(11) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5.58% 5.34% 5.39%

(1) Represents the profit for the year (including profit attributable to minority interest) as a percentage of the year endbalance of total assets.

(2) Represents the profit for the year (including profit attributable to minority interest) as a percentage of the averagebalance of total assets as of the beginning and end of the year.

(3) Represents the profit attributable to equity holders of our bank as a percentage of the year end balance of total equityexcluding minority interest.

(4) Represents the profit attributable to equity holders of our bank as a percentage of the average balance of total equityexcluding minority interest as of the beginning and end of the year.

W-17


(5) The amount for 2003 was calculated using total equity excluding minority interest as of December 31, 2003, as totalequity excluding minority interest as of January 1, 2003 was less than zero.

(6) Calculated as the difference between the average yield on average interest-earning assets and the average cost onaverage interest-bearing liabilities.

(7) Calculated by dividing net interest income by average interest-earning assets.

(8) Operating income consists of net interest income, net fee and commission income, net trading income, net gains(losses) on investment securities, other operating income and net gains on sale of shares in a subsidiary.

(9) Gross loans represent the total amount of loans and advances to customers before allowance for impairment losses.

(10) Represents the consolidated ratios as of year end calculated in accordance with the CBRC guidelines and based onPRC GAAP financial data.

(11) Represents the year end balance of total equity as a percentage of the balance of total assets as of the year end date.

W-18


USE OF PROCEEDS

We estimate that we will receive net proceeds from the Global Offering of approximatelyHK$72,923 million (US$9,403 million, based on the exchange rate of HK$7.7553 to US$1.00, whichis the May 23, 2006 Federal Reserve noon buying rate in New York City), after deducting theunderwriting fees and estimated expenses payable by us in the Global Offering, assuming the Over-Allotment Option is not exercised. We intend to use these net proceeds to strengthen our capitalbase to support the ongoing growth of our business.

W-19


CAPITALIZATION

The following table sets forth our actual consolidated debt and capitalization under IFRS as ofDecember 31, 2005, and as adjusted to give effect to (i) the issue of the Offer Shares in this GlobalOffering (assuming no exercise of the Over-Allotment Option) and (ii) the receipt of the estimatednet proceeds to us from the Global Offering, which we currently expect to be approximatelyHK$72,923 million (US$9,403 million, based on the exchange rate of HK$7.7553 to US$1.00, whichis the May 23, 2006 Federal Reserve noon buying rate in New York City), after deducting theunderwriting fees and estimated expenses payable by us in the Offering, using the Offer Price ofHK$2.95 per Offer Share (assuming no exercise of the Over-Allotment Option).

The as adjusted information below is illustrative only and does not take into account anychanges in our net tangible assets after December 31, 2005 other than to give effect to the sale ofour Offer Shares in this Global Offering, assuming no exercise of the Over-Allotment Option, asdescribed above. The Renminbi amounts in the following table have been translated into U.S. dollarsbased on the exchange rate of RMB8.0235 to US$1.00, which is the May 23, 2006 Federal Reservenoon buying rate in New York City.

You should read this table in conjunction with ""Financial Information'' and our audited financialstatements included in Appendix I Ì ""Accountants' Report'' in the Hong Kong Prospectus.

As of December 31, 2005

Actual As adjusted

RMB US$ RMB US$(in millions)

Debt(1)

Bonds issuedÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 60,179 7,500 60,179 7,500

Special purpose borrowings ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 52,164 6,501 52,164 6,501

Total debt ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 112,343 14,001 112,343 14,001

Equity

Share capital ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 209,427 26,102 234,996 29,288

Capital reserve ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (5,954) (743) 43,921 5,474

Statutory reserves ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,987 746 5,987 746

General and regulatory reserves ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,109 637 5,109 637

Undistributed profits ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10,188 1,270 10,188 1,270

Reserve for fair value changes of available-for-sale securities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,899 237 1,899 237

Currency translation differencesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (237) (30) (237) (30)

226,419 28,219 301,863 37,622

Minority interest ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 29,100 3,627 29,100 3,627

Total equity ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 255,519 31,846 330,963 41,249

Total capitalization ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 367,862 45,847 443,306 55,250

(1) In addition, as of December 31, 2005, we had borrowings from central banks, deposits and money market deposits fromcustomers and other banks, certificates of deposits, securities sold under repurchase agreements, credit commitments,acceptances, issued letters of guarantee and letters of credit, other commitments and contingencies, includingoutstanding litigation that arise from our ordinary course of business.

Except as disclosed in this Offering Circular, there have been no material adverse changes inour capitalization since December 31, 2005.

W-20


RISK FACTORS

The Global Offering involves certain risks associated with investing in the bank and the OfferShares. For a discussion of additional risks that should be considered by prospective investors beforeinvesting in the bank and the Offer Shares, see the section headed ""Risk Factors'' in the Hong KongProspectus.

Holders of H Shares located in the United States may not be able to participate in rightsofferings and may experience dilution of their holdings.

We may, from time to time, distribute rights to our shareholders, including rights to acquiresecurities. We cannot offer or sell securities in the United States unless we register those securitiesunder the Securities Act or an exemption from the registration requirements of the Securities Act isavailable. We cannot assure you that we will be able to establish an exemption from registrationunder the Securities Act, and we are under no obligation to file a registration statement with respectto these rights or underlying securities or to endeavor to have a registration statement declaredeffective. Accordingly, holders of H Shares located in the United States may be unable to participatein rights offerings and may experience dilution of their holdings as a result.

Accounting and corporate disclosure standards for public companies listed in Hong Kongdiffer from those applicable to public companies in the United States or elsewhere.

The financial information as presented and included in the Accountants' Report set forth inAppendix I to the Hong Kong Prospectus and our other financial information which appearselsewhere in this Offering Circular were prepared in accordance with IFRS, which differs in certainsignificant respects from accounting principles generally accepted in certain other countries,including the United States. Certain differences between IFRS and US GAAP are discussed in""Summary of Certain Differences Between IFRS and US GAAP''. However, we have made noattempt to quantify the impact of those differences. Had our financial statements and the otherfinancial information been prepared in accordance with US GAAP, our results of operations andfinancial position could be materially different. Potential investors should consult their ownprofessional advisors for an understanding of the differences between IFRS and US GAAP, and howthose differences might affect the financial information herein. In addition, there may be less publiclyavailable information about public companies listed in Hong Kong than is regularly made available bypublic companies in the United States or elsewhere.

In addition, the profit forecast for the year ending December 31, 2006 set out in the sectionheaded ""Financial Information Ì Profit Forecast'' in the Hong Kong Prospectus has been preparedin accordance with IFRS and differences in the profit forecast between IFRS and US GAAP have notbeen identified or quantified. Accordingly, potential investors who are not familiar with IFRS shouldnot place undue reliance on the profit forecast.

W-21


PROFIT FORECAST

In accordance with customary practice in Hong Kong public offerings, a profit forecast has beenprepared in accordance with IFRS for inclusion in the Hong Kong Prospectus. The forecast of ourprofit attributable to our equity holders for the year ending December 31, 2006 is set out in thesection headed ""Financial Information Ì Profit Forecast'' in the Hong Kong Prospectus. The profitforecast has been prepared based on our audited consolidated financial results for the year endedDecember 31, 2005 and a forecast of our consolidated results for the 12 months endingDecember 31, 2006. The profit forecast is presented in accordance with IFRS, consistent in allmaterial respects with the accounting policies presently adopted by us as set out in Appendix I Ì""Accountants' Report'' in the Hong Kong Prospectus. The Directors are currently not aware of anyextraordinary items which have arisen or are likely to arise in respect of the year endingDecember 31, 2006. The principal bases of presentation and assumptions of the profit forecast areset forth in Appendix IV Ì ""Profit Forecast'' in the Hong Kong Prospectus.

The prospective financial information included in this Offering Circular was prepared by thebank's management for use in the Hong Kong Public Offering in accordance with local marketpractice in Hong Kong. Such information is the responsibility of the bank's management.PricewaterhouseCoopers, Certified Public Accountants, Hong Kong, independent accountants,has neither examined nor compiled this prospective financial information for the purpose of itsinclusion in an offering document to U.S. and international investors, and accordingly,PricewaterhouseCoopers, Certified Public Accountants, Hong Kong, does not provide any form ofassurance with respect thereto for the purpose of this Offering Circular. The Accountants' Reportset forth in Appendix I to the Hong Kong Prospectus relates only to our historical financialstatements. It does not extend to the prospective financial information and should not be read todo so. We did not prepare this prospective financial information with a view towards compliancewith published guidelines of the U.S. Securities and Exchange Commission (the ""Commission'')and the American Institute of Certified Public Accountants (the ""AICPA''), for the preparationand presentation of prospective financial information. Accordingly, this information does notinclude disclosures of all information required by the AICPA guideline on prospective financialinformation.

This prospective financial information has been prepared in accordance with IFRS, whichdiffers in certain respects from US GAAP. The section headed ""Summary of Certain DifferencesBetween IFRS and US GAAP'' discusses certain differences between IFRS and US GAAP,although we have made no attempt to identify or quantify the impact of those differences. Weexpect that certain of these differences could have a significant impact on our current and futureresults were they prepared in accordance with US GAAP. Furthermore, this prospectiveinformation necessarily is based upon a number of assumptions and estimates that, whilepresented with numerical specificity and considered reasonable by us, are inherently subject tosignificant business, economic and competitive uncertainties and contingencies, many of whichare beyond our control, and upon assumptions with respect to future business decisions whichare subject to change. Accordingly, we cannot provide any assurance that these results will berealized. The profit forecast presented in the Hong Kong Prospectus may vary materially fromactual results. We make no representation that these results will be achieved. You should notplace undue reliance on this information.

We do not intend to furnish any updated or revised profit forecast.

The profit forecast contained in the Hong Kong Prospectus should be reviewed in conjunctionwith the description of the business, the historical financial information and the other informationcontained in this Offering Circular and in the Hong Kong Prospectus, including the information setforth in the section headed ""Risk Factors'' in this Offering Circular and in the Hong KongProspectus.

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THE HONG KONG STOCK EXCHANGE

The Hong Kong Stock Exchange, which commenced trading on April 2, 1986, was formed uponthe unification of the four stock exchanges then existing in Hong Kong and, as of April 30, 2006,listed the shares of 943 companies on the main board with a total market capitalization ofapproximately HK$9,670,012 million (US$1,247,212 million). During the month ended April 30,2006, the average trading volume in value for the main board per trading day on the Hong KongStock Exchange was approximately HK$37,695 million (US$4,862 million). On March 3, 1999, theFinancial Secretary of Hong Kong announced in his budget speech a comprehensive reform of thesecurities and futures markets in Hong Kong, which included the demutualization and merger of thefive recognized and approved market operators in Hong Kong, namely the Hong Kong StockExchange, Hong Kong Futures Exchange Limited, HKSCC, The SEHK Options Clearing HouseLimited and HKFE Clearing Corporation Limited under a single holding company (which wassubsequently incorporated under the name of Hong Kong Exchanges and Clearing Limited(""HKEx'')). The merger became effective on March 6, 2000.

As a result of the merger, the former shareholders of the Hong Kong Stock Exchange and HongKong Futures Exchange Limited (together, the ""Exchanges'') effectively exchanged theirownership rights in the Exchanges for economic interests in HKEx and the conventional right toreceive dividends, while retaining their existing rights to trade on the Exchanges. At the same time,certain of the regulatory functions performed by the Exchanges were passed over to the SFC.

Shares in the HKEx were listed on the Hong Kong Stock Exchange on June 27, 2000. As a listedcompany on its own stock market, HKEx is regulated by the SFC to avoid any conflict of interest andto ensure a level playing field between HKEx and other listed companies which are subject to theHong Kong Listing Rules. Regulation by the SFC is imposed through two sets of provisions. First,the Hong Kong Listing Rules have been amended to incorporate a new chapter (Chapter 38)relating specifically to the listing of HKEx and which sets out the requirements that must be satisfiedfor the securities of HKEx to be listed on the Hong Kong Stock Exchange. Secondly, a Memorandumof Understanding, dated June 19, 2000 (which was subsequently replaced and superseded byanother Memorandum of Understanding dated August 22, 2001), has been entered into betweenthe SFC, HKEx and the Hong Kong Stock Exchange which sets out the way the parties to it willrelate to each other in relation to:

‚ HKEx's and other applicants' and issuers' compliance with the Hong Kong Listing Rules;

‚ the enforcement by the Hong Kong Stock Exchange of its rules in relation to HKEx'ssecurities and those of other applicants and issuers;

‚ the SFC's supervision and regulation of HKEx as a listed issuer and, where a conflict ofinterest arises, other applicants and issuers;

‚ conflicts of interest which may arise between the interests of HKEx as a listed company andcompanies of which it is the controller, and the interests of the proper performance ofregulatory functions by such companies; and

‚ market integrity.

Trading on the Hong Kong Stock Exchange takes place on each business day with continuoustrading being divided into morning and afternoon sessions. Trading is order-based using acomputer-assisted trading system that conveys bid and ask prices for securities. Trades are theneffected on a matched trade basis directly between buyers and sellers. All securities are traded inboard lots. For most companies a board lot is 1,000 shares or 2,000 shares; odd lots are tradedseparately, usually at a small discount to the board lot prices. Settlement of trades on the HongKong Stock Exchange is required to take place on the second trading day after the day the tradetakes place. All trades on the Hong Kong Stock Exchange are generally required to be settledbetween broker participants through CCASS, the central clearing and settlement system, operated

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by HKSCC. CCASS is the central depositary of share certificates and provides a computerizedbook-entry settlement of share transactions between its participants, which includes all brokerparticipants of the Hong Kong Stock Exchange. Share certificates kept at CCASS are electronicallyrecorded in the stock accounts of its participants. CCASS also facilitates money settlement betweenparticipants. It is also possible for settlement to take place outside CCASS (except in relation totrades between broker participants of the Hong Kong Stock Exchange). In such a case, sharecertificates, together with signed instruments of transfer, must be delivered on the second businessday following the transaction and will typically be delivered against payment by check or bankcashier orders. There are no market-makers in the Hong Kong Stock Exchange except in the marketfor exchange-traded options, but exchange dealers may act as dual capacity broker-dealers. Shortselling of securities at or through the Hong Kong Stock Exchange is currently proscribed except inrespect of a limited group of securities.

The SFC charges a transaction levy of 0.005% and an investor compensation levy of 0.002%(which has been waived pending further notice) of the consideration of each transaction and theHong Kong Stock Exchange charges a trading fee of 0.005% of the consideration of eachtransaction, payable by both seller and buyer. In addition, member brokers charge brokeragecommissions to either a buyer or a seller which are freely negotiated between such brokers andtheir clients. Additional administrative fees are also payable for trades settled through CCASS.Member brokers are required to make a contract note in respect of each transaction in securities.The contract note is required to be stamped with ad valorem stamp duty and to be delivered to theclient not later than the end of the second trading day following the transaction.

The SFC, an independent, non-government statutory body outside the civil service that providesa general regulatory framework of the securities and futures industries, was established by theHong Kong government in 1989. The SFC administers certain elements of Hong Kong securities law,including the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) whichregulates, among other things, activities in the securities market, requirements and conduct ofintermediaries, investor compensation, market misconduct and disclosure of interests.

The Hong Kong Stock Exchange promulgates its own rules governing share trading anddisclosure of information to shareholders and investors. Companies listed on the Hong Kong StockExchange are required to comply with the provisions of the Hong Kong Listing Rules, which providefor, among other things, the issuance of interim and audited annual accounts to shareholders andthe making of prompt public disclosure of material transactions and developments. In addition, theHong Kong Codes on Takeovers and Mergers and Share Repurchases, which have been issued bythe SFC but do not have the force of law, provide guidelines for the fair treatment of shareholdersand preservation of an impartial trading market in connection with takeovers and mergers of publiccompanies in Hong Kong and guidelines for share repurchases by such companies. Part XV of theSecurities and Futures Ordinance also contains provisions which require certain persons interested(or deemed to be interested) in shares, underlying shares and short positions in listed companies inHong Kong to disclose their interest in those shares in certain circumstances. Disclosure of theDirectors' interest in the bank is set out in Appendix IX Ì ""Statutory and General Information ÌFurther Information about our Directors and Supervisors'' in the Hong Kong Prospectus.

The Hong Kong Stock Exchange imposes a requirement on us to keep the Hong Kong StockExchange, the Shareholders and other holders of our listed securities informed as soon asreasonably practicable of any information relating to us, including information on any major newdevelopments which are not public knowledge, which (1) is necessary to enable them and thepublic to appraise our position, (2) is necessary to avoid the establishment of a false market in oursecurities, or (3) might be reasonably expected materially to affect market activity in and the priceof our securities.

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There are also requirements under the Hong Kong Listing Rules for us to obtain priorShareholder's approval and/or to disclose to Shareholders details of certain acquisitions ordisposal of assets and connected transactions.

The Hang Seng Index is a capitalization-weighted index of 33 stocks listed on the Hong KongStock Exchange. The highest and lowest closing levels of the Hang Seng Index for the five yearsfrom 2001 to 2005 were as follows:

Highest LowestYear closing level closing level

2001 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 16,163.99 8,934.20





The highest and lowest closing levels of the Hang Seng Index for the four months endedApril 30, 2006 were 16,944.34 (on April 20, 2006) and 14,944.77 (on January 3, 2006), respectively.

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TAXATION

Hong Kong Taxation

This section addresses the taxation of income and capital gains of holders of H Shares underthe laws and practices of Hong Kong. The following summary of the tax position in Hong Kong isbased on current law and practice, is subject to changes therein and does not constitute legal or taxadvice to you. This summary provides a general outline of the material tax considerations that maybe relevant to a decision to purchase, own or dispose of H Shares and does not deal with allpossible Hong Kong tax consequences applicable to all categories of investors. Accordingly, eachprospective investor, particularly those subject to special tax rules, such as banks, securitiesdealers, insurance companies and tax-exempt entities, should consult its own tax adviser regardingthe Hong Kong or other tax consequences of an investment in the H Shares.

Tax Treaties

There is no relevant tax treaty in effect between Hong Kong and the United States.

Tax on Dividends

Under current practice of the Hong Kong Inland Revenue Department, no tax is payable in HongKong in respect of dividends with respect to the H Shares, either by withholding or otherwise, unlesssuch dividends are attributable to a trade, profession or business carried on in Hong Kong.

Tax on Gains from Sale

No tax is imposed in Hong Kong in respect of capital gains. However, trading gains from thesale of property by persons carrying on a trade, profession or business in Hong Kong where thetrading gains are derived from or arise in Hong Kong will be chargeable to Hong Kong profits tax,which is currently imposed at the rate of 17.5% on corporations and at a maximum rate of 16% onindividuals. Certain categories of taxpayers whose business consists of buying and selling sharesare likely to be regarded as deriving trading gains rather than capital gains (e.g., financialinstitutions, insurance companies and securities dealers) unless these taxpayers could prove thatthe investment securities are held for long term investment purposes.

Trading gains from sales of H Shares effected on the Hong Kong Stock Exchange will beconsidered to be derived from or arise in Hong Kong. Liability for Hong Kong profits tax would thusarise in respect of trading gains from sales of H Shares effected on the Hong Kong Stock Exchangerealized by persons carrying on a business of trading or dealing in securities in Hong Kong.

Stamp Duty

Hong Kong stamp duty, currently charged at the ad valorem rate of 0.1% on the higher of theconsideration for or the value of the H Shares, will be payable by the purchaser on every purchaseand by the seller on every sale of H Shares (i.e., a total of 0.2% is currently payable on a typical saleand purchase transaction involving H Shares). In addition, a fixed duty of HK$5 is currently payableon any instrument of transfer of H Shares. If one of the parties to the sale is a non-resident of HongKong and does not pay the required stamp duty, the duty not paid will be assessed on theinstrument of transfer (if any) and the transferee will be liable for payment of such duty.

Estate Duty

The Revenue (Abolition of Estate Duty) Ordinance 2005 came into effect on February 11, 2006in Hong Kong. No Hong Kong estate duty is payable and no estate duty clearance papers areneeded for an application for a grant of representation in respect of holders of H Shares, whosedeaths occur on or after February 11, 2006.

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United States Federal Income Taxation

United States Internal Revenue Service Circular 230 Notice: To ensure compliance with InternalRevenue Service Circular 230, prospective investors are hereby notified that: (a) any discussion ofU.S. Federal tax issues contained or referred to in this Offering Circular or any document referred toherein is not intended or written to be used, and cannot be used by prospective investors for thepurpose of avoiding penalties that may be imposed on them under the United States Internal RevenueCode; (b) such discussion is written for use in connection with the promotion or marketing of thetransactions or matters addressed herein; and (c) prospective investors should seek advice based ontheir particular circumstances from an independent tax advisor.

This section describes the material United States Federal income tax consequences of owningH Shares. It applies to you only if you acquire your H Shares in this offering and you hold yourH Shares as capital assets for tax purposes. This section does not apply to you if you are a memberof a special class of holders subject to special rules, including:

‚ a dealer in securities;

‚ a trader in securities that elects to use a mark-to-market method of accounting for securitiesholdings;

‚ a tax-exempt organization;

‚ a life insurance company;

‚ a person liable for alternative minimum tax;

‚ a person that actually or constructively owns 10% or more of our voting shares;

‚ a person that holds H Shares as part of a straddle or a hedging or conversion transaction; or

‚ a U.S. holder (as defined below) whose functional currency is not the U.S. dollar.

This section is based on the Internal Revenue Code of 1986, as amended, its legislative history,existing and proposed United States Treasury regulations, published rulings and court decisions, allas currently in effect, as well as on the Agreement Between the Government of the United States ofAmerica and the Government of the People's Republic of China for the Avoidance of DoubleTaxation and the Prevention of Tax Evasion with Respect to Taxes on Income (the ""Treaty'').These laws are subject to change, possibly on a retroactive basis.

You are a U.S. holder if you are a beneficial owner of H Shares and you are for United StatesFederal income tax purposes:

‚ a citizen or resident of the United States;

‚ a domestic corporation;

‚ an estate whose income is subject to United States Federal income tax regardless of itssource; or

‚ a trust if a United States court can exercise primary supervision over the trust'sadministration and one or more United States persons are authorized to control allsubstantial decisions of the trust.

A ""non-U.S. holder'' is a beneficial owner of H Shares that is not a United States person forUnited States Federal income tax purposes.

If a partnership holds H Shares, the United States Federal income tax treatment of a partner inthe partnership will depend on the status of the partner and the activities of the partnership. If youare a partner in a partnership that holds H Shares, you should consult your own tax advisorregarding the United States Federal income tax consequences of owning and disposing of H Sharesin your particular circumstances.

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You should consult your own tax advisor regarding the United States Federal, state and local andother tax consequences of owning and disposing of H Shares in your particular circumstances.

This discussion addresses only United States Federal income taxation.

Taxation of Dividends

U.S. Holders. Under the United States Federal income tax laws, and subject to the passiveforeign investment company, or PFIC, rules discussed below, if you are a U.S. holder, the grossamount of any dividend we pay out of our current or accumulated earnings and profits (asdetermined for United States Federal income tax purposes) is subject to United States Federalincome taxation. If you are a noncorporate U.S. holder, dividends paid to you in 2006 and in taxableyears beginning before January 1, 2011 that constitute qualified dividend income will be taxable toyou at a maximum tax rate of 15% provided that you hold the H Shares for more than 60 days duringthe 121-day period beginning 60 days before the ex-dividend date and meet other holding periodrequirements. Dividends we pay with respect to the H Shares generally will be qualified dividendincome.

The dividend is taxable to you when you receive the dividend, actually or constructively. Thedividend will not be eligible for the dividends-received deduction generally allowed to United Statescorporations in respect of dividends received from other United States corporations. The amount ofthe dividend distribution that you must include in your income as a U.S. holder will be the U.S. dollarvalue of the Hong Kong dollar payments made, determined at the spot Hong Kong dollar/U.S. dollarrate on the date the dividend distribution is includible in your income, regardless of whether thepayment is in fact converted into U.S. dollars. Generally, any gain or loss resulting from currencyexchange fluctuations during the period from the date you include the dividend payment in income tothe date you convert the payment into U.S. dollars will be treated as ordinary income or loss and willnot be eligible for the special tax rate applicable to qualified dividend income. The gain or lossgenerally will be income or loss from sources within the United States for foreign tax credit limitationpurposes. Distributions in excess of current and accumulated earnings and profits, as determinedfor United States Federal income tax purposes, will be treated as a non-taxable return of capital tothe extent of your basis in the H Shares and thereafter as capital gain.

Dividends will be income from sources outside the United States, but dividends paid in taxableyears beginning before January 1, 2007 generally will be ""passive'' or ""financial services'' income,and dividends paid in taxable years beginning after December 31, 2006 will, depending on yourcircumstances, be ""passive'' or ""general'' income which, in either case, is treated separately fromother types of income for purposes of computing the foreign tax credit allowable to you.

Non-U.S. Holders. If you are a non-U.S. holder, dividends paid to you in respect of H Shareswill not be subject to United States Federal income tax unless the dividends are ""effectivelyconnected'' with your conduct of a trade or business within the United States, and the dividends areattributable to a permanent establishment that you maintain in the United States if that is required byan applicable income tax treaty as a condition for subjecting you to United States taxation on a netincome basis. In such cases you generally will be taxed in the same manner as a U.S. holder. If youare a corporate non-U.S. holder, ""effectively connected'' dividends may, under certaincircumstances, be subject to an additional ""branch profits tax'' at a 30% rate or at a lower rate if youare eligible for the benefits of an income tax treaty that provides for a lower rate.

Taxation of Capital Gains

U.S. Holders. Subject to the PFIC rules discussed below, if you are a U.S. holder and you sellor otherwise dispose of your H Shares, you will recognize capital gain or loss for United StatesFederal income tax purposes equal to the difference between the U.S. dollar value of the amountthat you realize and your tax basis, determined in U.S. dollars, in your H Shares. Capital gain of anoncorporate U.S. holder that is recognized before January 1, 2011 is generally taxed at a maximumrate of 15% where the holder has a holding period greater than one year. The gain or loss will

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generally be income or loss from sources within the United States for foreign tax credit limitationpurposes.

Non-U.S. Holders. If you are a non-U.S. holder, you will not be subject to United States Federalincome tax on gain recognized on the sale or other disposition of your H Shares unless:

‚ the gain is ""effectively connected'' with your conduct of a trade or business in the UnitedStates, and the gain is attributable to a permanent establishment that you maintain in theUnited States if that is required by an applicable income tax treaty as a condition forsubjecting you to United States taxation on a net income basis, or

‚ you are an individual, you are present in the United States for 183 or more days in the taxableyear of the sale and certain other conditions exist.

If you are a corporate non-U.S. holder, ""effectively connected'' gains that you recognize mayalso, under certain circumstances, be subject to an additional ""branch profits tax'' at a 30% rate orat a lower rate if you are eligible for the benefits of an income tax treaty that provides for a lowerrate.

Passive Foreign Investment Company Rules

We believe that the H shares should not be treated as stock of a PFIC for United States Federalincome tax purposes, but this conclusion is a factual determination that is made annually and thusmay be subject to change.

In general, if you are a U.S. holder, we will be a PFIC with respect to you if for any taxable yearin which you held the H Shares:

‚ at least 75% of our gross income for the taxable year is passive income; or

‚ at least 50% of the value, determined on the basis of a quarterly average, of our assets isattributable to assets that produce or are held for the production of passive income.

Passive income generally includes dividends, interest, royalties, rents (other than certain rentsand royalties derived in the active conduct of a trade or business), annuities and gains from assetsthat produce passive income. If a foreign corporation owns at least 25% by value of the stock ofanother corporation, the foreign corporation is treated for purposes of the PFIC tests as owning itsproportionate share of the assets of the other corporation, and as receiving directly its proportionateshare of the other corporation's income.

If we are treated as a PFIC, and you are a U.S. holder that did not make a mark-to-marketelection, as described below, you will be subject to special rules with respect to:

‚ any gain you realize on the sale or other disposition of your H Shares; and

‚ any excess distribution that we make to you (generally, any distributions to you during asingle taxable year that are greater than 125% of the average annual distributions received byyou in respect of H Shares during the three preceding taxable years or, if shorter, yourholding period for the H Shares).

Under these rules:

‚ the gain or excess distribution will be allocated ratably over your holding period for theH Shares;

‚ the amount allocated to the taxable year in which you realized the gain or excess distributionwill be taxed as ordinary income;

‚ the amount allocated to each prior year, with certain exceptions, will be taxed at the highesttax rate in effect for that year; and

‚ the interest charge generally applicable to underpayments of tax will be imposed in respect ofthe tax attributable to each such year.

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