Shanghai Pudong Development Bank Co.,Ltd Annual Report

Transcription

1 Shanghai Pudong Development Bank Co.,Ltd Annual Report

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3 2011 Annual Report 02

4 Annual Report Introduction to Shanghai Pudong Development Bank Co., Ltd. The Shanghai Pudong Development Bank Co., Ltd. (SPDBank), headquartered in Shanghai, is a joint-stock bank that was founded on August 28, 1992, beginning operations on January and making its initial public offering on the Shanghai Stock Exchange on November 10, 1999 (stock code ). It currently has RMB billion in registered capital. Its outstanding achievements and trustworthy reputation have made it one of the most respected and well-known companies in China's stock market. Grounded in a business philosophy of sticking to integrity and striving for excellence, SPDBank actively explores financial innovation. The scale of its assets continues to grow, and its operating strength continues to increase. By the end of 2011, its overall assets had reached RMB trillion, RMB trillion in loans in foreign and domestic currency, RMB trillion in total deposits, amounting to a profi t of RMB billion after tax. It has established 37 branches and 741 business outlets in 29 provinces, municipalities and autonomous regions and 115 cities in mainland China, and an overseas branch in Hong Kong. It has 31,231 employees, forming the essential business structure of a national commercial bank. Following its IPO, it has continued to rank among Asia Weekly's Top 100 Chinese Publicly Listed Companies. In 2011, SPDBank ranked the 64th based on Tier I capital in the British magazine Banker's Global Top 1000 World Banks List, up from 108 (the previous year). The company ranked the 63rd in terms of total assets, or 7th among Chinese domestic banks, an indication of good overall competitiveness and growth momentum. During the same year, the company ranked the 72nd among 500 publicly listed Chinese fi rms in the Fortune Magazine, and received the most favored company award in Stockstar's Battle for Shanghai in September Finally, in November 2011, it received the Shanghai Stock Exchange's annual award for best of directors. Alongside its deep and committed fi nancial services, it also strives toward corporate social responsibility, aiming to establish itself as a fi rst class corporate citizen. In September 2011, SPDBank received a grade of A in RepuTex's sustainability evaluation of publicly listed companies in Mainland China and Hong Kong. In November, it got an AA rating for CSR reporting among A-share listed companies with a positive rating outlook, ranking 5th among listed banks. The same year, it received a Social Responsibility in Banking award from SPDBank strives for fi nancial innovation, responding positively to new changes and trends. Guided by a philosophy of New thinking, dedicated service it works to establish itself as a competitive, modern fi nancial services company.

5 2011 Annual Report 04 Ji Xiaohui Chairman of the Board

6 Annual Report Message from Chairman of the Board 2011 marks the launch of our company's new five year strategic plan. In the face of complex changes in global fi nance, the continuing European debt crisis and slowing growth domestically, the company will maintain strategic command, strengthening client services, lay the foundations for sound management, drive innovation and development, thereby achieving coordinated development of the bank in terms of scale, quality, efficiency and structure. Here I represent the board in thanking the investors, clients and others who have supported the bank, and extend our sincere thanks to all of our employees, who have worked hard for the company's development. Through adhering to its client-focused, innovation-driven, transformational development guiding principle, the company made great achievements, addressing multiple challenges, including the uncertainty of its external environment, gaining firm grasp of the pace of credit investments, steadily driving forward our transformational development, accelerating fi nancial innovation, improving comprehensive management and increasing sustainable development capacity. By the end of 2011, the company had RMB trillion in overall assets, an increase of 22.51%; RMB trillion in total loans, an increase of 16.13%; RMB trillion in total deposits in foreign and domestic currency, an increase of 12.84%, and a profi t of 27.3 billion after tax, an increase of 42.48%. At the same time, non-performing loans dropped, according to a fi ve-tier classifi cation, falling to 0.44% at the end of the year, and the coverage for the reserve fund for non-performing loans reached 499.6%. In the November 2011 Moodys evaluation, the company rose from the speculation grade to the investment grade, a confirmation of the company's accelerated transformative development and integrated strengths. In response to intense market competition, and in order to reach our goal of being a competitive, modern fi nancial services company, by building on more traditional banking activities, SPD has crossed boundaries and markets, improving its capacity in integrated banking services. One example is the solidifi cation of its partnership with China Mobile, including signed MOUs between China Mobile and 35 of our local branches; the second is the successful launch of the Hong Kong branch and its smooth operation over the past six months; third is the increase in village and township and other forms of banking, within which 13 village and township banks have grown rapidly, with total assets at RMB12.1 billion, an increase of 115% and representing a profi t of RMB193 million before tax; fourth is the smooth progress on the establishment of a fi nancial leasing company and SPD Silicon valley bank following approval of their establishment marks the company's transition from a small and medium-sized bank to a medium and large-sized bank, from a more specialized bank to a comprehensive one. With customers remaining our center of focus, we strive to innovate, cross boundaries in our operations and, ultimately, march faster towards the establishment of a competitive, modern fi nancial services company. All this is taking us into a new stage of development! Chairman of the Board, Shanghai Pudong Development Bank Co., Ltd.

7 Contents 9 12 Brief Introduction to the Company Summary of Key Financial and Performance Indicators 17 Summary of Banking Business Performance Share Capital Changes and Shareholders' Status Overview of the Company's Directors, Supervisors & Senior Management Corporate Governance Structure Important Notice 1. The Board of Directors of the company, the Board of Supervisors and Directors, Supervisors and Senior Management guarantee that the information presented in this report is free from any false record, misleading statement or material omission, and accept, individually and collectively, liability for its truthfulness, accuracy and completeness. 2. This report was reviewed at the 25th Meeting of the 4th Board of Directors held in Shanghai on March 14, Director of the company Sha Yuejia and Zhu Min were unable to attend the meeting due to offi cial duties. However, they in writing entrusted Director Chen Xin to vote on their behalf. All the other board members attended the meeting in person and executed their voting rights.

8 General Shareholders' Meeting Board Meeting Report Report by the Supervisory Board Important Issues Financial Report 90 Referential Documents 3. The domestic and overseas fi nancial statements of the Company for the year have been audited by PricewaterhouseCoopers Zhong Tian CPAs Co., Ltd. in accordance with PRC generally accepted accounting principles (GAAP) and international accounting standards (IAS), and have obtained standard auditor's report without any reserved opinions. 4. None of the funds of the company has been used by its controlling shareholder and its related legal entities for non-operating purposes. 5. The company has made no guarantee to any third party illegally. 6. Mr. JI Xiaohui Chairman of the Board of Directors, President of the bank, Mr. Liu Xinyi, Chief Financial Offi cer of the company and Mr. Fu Neng, Financial Controller of the company guarantee the completeness and truthfulness of the information disclosed in the fi nancial report.

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10 2011 Annual Report 09 Brief Introduction to the Company 1. Basic Information SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. SPD Bank Mr. JI Xiaohui (2) Secretary of the Broad Mr. SHEN Si No. 12, Zhongshan Dong Yi Road, Shanghai, China (3) Representatives for Securities Affairs Mr. YANG Guoping, Ms. WU Rong No. 12, Zhongshan Dong Yi Road, Shanghai, China extention to the board offi ce No. 12, Zhongshan Dong Yi Road, Shanghai, China No. 12, Zhongshan Dong Yi Road, Shanghai, China China Securities Daily, Shanghai Securities News, Securities Times com.cn General Offi ce of the Board, SPDB (4) Stock Type Place of Stock Listing: Stock Abbreviation Stock Code Stock Abbreviation before change A share Shanghai Stock Exchange Pu Fa Bank (5) Other Relevant Information October 19th, 1992 No. 500 Pudong Nan Road, Pudong New Area, Shanghai, China November 25th, 2011 No. 12, Zhongshan Dong Yi Road, Shanghai, China Guo Shui Hui Zi: X Di Shui Hui Zi: X X B0015H

11 Annual Report Brief Introduction to the Company (6) Engaged Accounting Firm PricewaterhouseCoopers Zhong Tian CPAs Co., Ltd. 11th Floor, PricewaterhouseCoopers Center, No. 202 Hubin Road, Shanghai, China China Securities Depository and Clearing Corporation Limited Shanghai Branch The report is prepared in both Chinese and English. Should there exist any inconsistency between the two versions, the Chinese version shall prevail. 2. Company Profi le As approved by People's Bank of China and the Chinese Banking Regulatory Commission, the company is engaged in the following principal operating activities: absorbing deposits from the public, issuing short-term, mid-term and long-term loans, providing settlement, discounting commercial papers, issuing fi nancial bonds, working as agent for issuing, discounting and underwriting government bonds, dealing with government bonds, inter-bank lending and borrowing, providing L/C services and guarantee services, working as agent for payment and insurance services, providing deposit boxes, dealing in foreign currency deposits, loans, remittance, exchange, international settlement, inter-bank lending and borrowing in foreign currency, accepting and discounting commercial papers in foreign currency, dealing in purchase and sale of foreign currency, providing guarantee in foreign currency, (working as agent) buying and selling foreign currency securities (except stocks), dealing in foreign currency trading either on the company's account or for clients, investigating the credit standing, consultancy and witness, off-shore banking, custody services for securities funds, custody services for national social pension funds, other services approved by the People's Bank of China and CBRC.

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13 Annual Report of Key Financial and Performance Indicators Summary of Key Financial and Performance Indicators 1. Key Profit Indicators for the Year Domestic Audit Unit: RMB '000 Yuan International Audit Net Profit 35,756,727 Total Profit 35,839,287 Net Profit Belonging to the Shareholders 27,285,981 Net Profit Belonging to the Shareholders Excluding Extraordinary Items 27,051,004 Total Assets 2,684,693,689 Total Liabilities 2,535,150,909 Net Cash Flow from Operating Activities 198,655, Variance Between Domestic and International Accounting Standards There is no difference in the net profit, total assets and total liabilities in the reporting period between the company's domestic financial report prepared in accordance with the Accounting Standards for Enterprises and its international financial report prepared in accordance with International Financial Reporting Standards. 3. Extraordinary Items Unit: RMB '000 Yuan Extraordinary Items Gains/losses as Result from Disposal of Non-current Assets -22, , ,896 Collection of Written-off Loans that Haven't Paid Taxes 230,743 36,219 3,131 Net Gains/losses of Non-operation Activities 105,308 23,232-10,246 Change in Income Taxes of Extraordinary Items -78,326-61,268-30,195 Sub-total 234, ,805 90,586 3-year Key Financial and Performance Indicator Comparison 80,000,000 70,000,000 60,000,000 50,000,000 40,000,000 30,000,000 20,000,000 10,000, ,917,672 49,855,851 36,823, Principal Operating Income 40,000,000 35,000,000 30,000,000 25,000,000 20,000,000 15,000,000 10,000,000 5,000, ,756,727 25,072,052 17,178, Principal Operating Profit 30,000,000 27,285,981 25,000,000 19,177,209 20,000,000 15,000,000 13,216,581 10,000,000 5,000, Net Profit Belonging to Shareholders

14 2011 Annual Report 13 Summary of Key Financial and Performance Indicators 4. 3-year Key Financial and Performance Indicator Comparison Unit: RMB '000 Yuan Key Accounting Data 2011 Domestic Audit 2011 Int'l Audit 2010 Domestic Audit y-o-y +/-( ) 2009 Domestic Audit Principal Operating Income 67,917,672 49,855, ,823,932 Principal Operating Profit 35,756,727 25,072, ,178,374 Total Profit 35,839,287 25,280, ,296,025 Net Profit Belonging to Shareholders 27,285,981 19,177, ,216,581 Net Profit Excl. Extraordinary Items Belongingto Shareholders Net Cash Flow from Operating Activities 27,051,004 18,993, ,125, ,655,778-5,507, ,481,890 Total Assets 2,684,693,689 2,191,410, ,622,717,960 Total Liabilities 2,535,150,909 2,068,130, ,554,630,515 Shareholders' Equity 148,891, ,996, ,953,026 Total Equity (in thousands) 18,653,471 14,348, ,830,046 Key Accounting Indicators 2011 Domestic Audit 2011 Int'lAudit 2010 Domestic Audit y-o-y +/- ( ) 2009 Domestic Audit EPS (Yuan) Diluted EPS (Yuan) EPS Excl. Extraordinary Items(Yuan) Weighted Average ROE (%) pps ROE (Weighted and Excl. Extraordinary items) (%) Net Cash Flow Per Share from Operating Activities (Yuan) pps Domestic Audit 2011 Int'l Audit 2010 Domestic Audit y-o-y +/- ( ) 2009 Domestic Audit Net Book Value Per Share That Belongs to Shareholders (Yuan) Note: (1) In accordance with the provisions of the China Securities Regulatory Commission Public Company's Disclosure Rules Compilation No. 9 - Calculation and Disclosure of Return on Net assets and Earnings" (revised in 2010), the EPS, EPS Excl. Extraordinary Items and Diluted EPS of the reporting period were recalculated using the adjusted number of shares because in the profit allocation for 2010, three gift shares were given for every 10 shares. Accordingly, the EPS for the previous year was calculated based on the weighted average number of outstanding common shares, 15,544,559,512 shares, that of 2009, on 13,776,755,431 shares. (2) Extraordinary Items Gains and Losses were calculated based on the definition outlined in the China Securities Regulatory Commission Announcement No. 43 in Public Company's Information Disclosure Explanatory Notice No. 1 Extraordinary Items Gains and Losses" (3) Net Cash Flow Per Share from Operating Activities and Net Book Value Per Share That Belongs to Shareholders were calculated based on a total of 18,653,471,415 (diluted) shares at the end of the period. (4) The YoY growth of EPS was lower than that of Net Profi t because we implemented a non-public offering of shares to expand our equity last October. (5) Net assets per share at the end of the reporting period was lower YoY because of the capital expansion in the 2010 profit distribution where 3 gift shares were given for every 10 shares.

15 Annual Report Summary of Key Financial and Performance Indicators Supplementary Financial Ratio Financial Ratio( ) Y-o-y +/- (%) 2009 Average Returns on Assets pps 0.90 Fully-diluted ROE pps Fully-diluted ROE Excl. Extraordinary Items pps Spread pps 2.10 Net Interest Margin pps 2.19 Cost/Income Ratio pps Cash Dividend Ratio pps Net Interest Income to Total pps Non Interest Income to Total pps 8.92 Net Income of Fee and commission to Total pps 5.99 NPL Ratio pps 0.80 Provision / NPL Ratio pps Provision/ Total Loan Ratio pps 1.98 Note: (1) Spread = the difference between average return ratio of total interest bearing asset and average cost ratio of total interest bearing liability. (2) Net Interest Income ratio = net interest income/ outstanding average balance of total interest bearing liability. (3) Cost/Income Ratio = business and management cost/ operation income. 5. Changes of the Shareholders' Equity and Reasons 1) Financial Statements Audited by Domestic Auditors Unit: RMB '000 Yuan Item Share Capital Capital Reserve Surplus Reserve Common Preparation Undistributed Profit Total Equity Belonging to Parent Company Shareholders Beginning Amount 14,348,824 58,639,173 15,249,813 9,500,000 25,258, ,996,336 Increasing 4,304, ,808 6,555,931 9,200,000 27,285,981 48,260,367 Decreasing - -9, ,356,389-22,365,468 Ending Amount 18,653,471 59,543,902 21,805,744 18,700,000 30,188, ,891,235 Main reason: The net benefi t during this period increased insignifi cantly and the total share and capital surplus increased.

16 2011 Annual Report 15 Summary of Key Financial and Performance Indicators 2). Financial Statements Audited by International Auditors Unit: RMB '000 Yuan Item Share Capital Capital Reserve Surplus Reserve Common Preparation Revaluation Reserve Undistributed Profit Total Equity Belonging to Parent Company shareholders Beginning Amount 14,348,824 60,573,266 15,249,813 9,500,000-1,934,093 25,258, ,996,336 Increasing 4,304,647-6,555,931 9,200, ,808 27,285,981 48,260,367 Decreasing - -9, ,356,389-22,365,468 Ending Amount 18,653,471 60,564,187 21,805,744 18,700,000-1,020,285 30,188, ,891,235 Main reason: The net benefi t during this period increased insignifi cantly and the total share and capital surplus increased. 6. Changes in credit rating in the reporting period Rating agency Moody's bank financial strength D long-term bank deposit(forex) Baa3 long-term bank deposit(rmb) Baa3 short-term bank deposit(forex) Prime-3 short-term bank deposit(rmb) Prime-3 bank financial strength D long-term bank deposit(forex) Ba1 short-term bank deposit(forex) Non-Prime Note: Previously, Moody's unsolicited credit rating for SPBD's long-term and short-term deposit was Ba1/NP, or non-investment grade; in September 2011 the company formally invited Moody's for credit rating. The upgraded rating not only reflects the company's restructuring development and capital strength enhancement, but also refl ects the positive move of engaging China Mobile in strategic cooperation. According to Moody's rating requirement: whether a rating is solicited or unsolicited doesn't affect its independent and objective risk assessment.

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18 2011 Annual Report 17 Summary of Banking Summary Business of Banking Business Performance 1. 3-year Financial Indicator Comparison Unit: RMB '000 Yuan Item Data for this Reporting period Total Assets 2,684,693,689 2,191,410,774 1,622,717,960 Total Liabilities 2,535,150,909 2,068,130,924 1,554,630,515 Total Deposits 1,851,055,121 1,640,459,532 1,295,342,342 Incl: Corporate Demand Deposit 582,969, ,228, ,106,254 Corporate Time Deposit 647,712, ,012, ,268,506 Demand Deposit 86,572,289 83,035,127 62,140,148 Time Deposit 236,345, ,086, ,596,942 Total Loan 1,331,436,044 1,146,489, ,854,750 Incl: Normal Loan 1,325,608,926 1,140,609, ,394,697 NPL 5,827,118 5,879,884 7,460,053 Inter-bank Borrowing 66,970,025 14,415,145 3,774,450 Loan Loss Reserves 29,112,094 22,376,311 18,346,725 Note: (1) Total loan includes short-term deposits, short-term savings deposits, short-term cash margin, remittance outstanding and temporary deposits, long-term deposits, long-term savings deposits, long-term cash margin, outward remittances and treasury time deposits; (2) Total loan includes short-term loans, import and export financing, discounting, long-term loans, overdue loans, idle loans and doubtful loans, overdrafts and advances, factoring business. (3) According to the People's Bank of China notice on matters related to the fi nancial statistical system for Chinese domestic fi nancial institutions in 2011"(Yin Fa [2011] 7), outward remittance will be classifi ed as deposits from 2011 onwards, data for previous years should be adjusted accordingly. Unit: RMB '000 Yuan Item Data for this reporting period Net Share Capital 199, ,846 97,580 Incl: Tier I Share Capital 146, ,675 65,902 Tier II Share Capital 56,153 34,876 33,112 Decrease 2,394 1,705 1,434 Net Core Capital 144, ,823 65,184 Net risk-weighted Assets 1,560,180 1,278, ,705 3-year Financial Indicator Comparison 2,000,000,000 1,800,000,000 1,600,000,000 1,400,000,000 1,200,000,000 1,000,000, ,000, ,000, ,000, ,000, ,295,342, ,851,055,121 1,640,459, ,400,000,000 1,200,000,000 1,000,000, ,000, ,000, ,000, ,000, ,331,436,044 8,000,000 7,460,053 1,146,489,301 7,000, ,854,750 6,000,000 5,879,884 5,827,118 5,000,000 4,000,000 3,000,000 2,000,000 1,000, Total deposits Total loans NPLS

19 Annual Report Summary of Banking Business Performance 2. 3-year Key Performance Indicator Comparison Item Standard Year-end average Year-end average Year-end Average Returns on Total Assets % Capital Adequacy Ratio % Tier I Capital Adequacy Ratio % NPL Ratio % Liquidity Ratio % RMB Liquidity Ratio % FX Loans to Deposits % RMB Loans to Deposits % FX Inter-bank Lending and Borrowing Ratio % Borrowing Inter-bank Lending and Borrowing Ratio % Lending Single Largest Customer Lending to Total Loans % Top 10 Customers' Loans to Total Provision Coverage Ratio Notes: (1) The indicators of Capital Adequacy Ratio, Tier I Capital Adequacy Ratio, Liquidity Ratio, Loans to Deposits, Inter-banking Lending and Borrowing Ratio, Single Largest Customer Lending to Total Loans, Top 10 Customers' Loans to Total in the above table have been calculated according to the data reported to the regulatory agencies. (2) NPL ratio is calculated according to the 5-category classification of loans. NPL ratio = (Substandard loans + Suspicious loans + Loan losses) / total loans. (3) Provision coverage ratio = outstanding balance of loan loss reserves / the outstanding balance of NPLs. Loan Retrieval Ratio: Item(%) Year-end Average Year-end Average Year-end Average Retrieval Ratio of Normal Loan Retrieval Ratio of Specially mentioned Loan Retrieval Ratio of Sub-standard Retrieval Ratio of Doubtful Loan year Key Performance Indicator Comparison Capital Adequacy Ratio % Tier I Capital Adequacy Ratio %

20 2011 Annual Report 19 Summary of Banking Business Performance 3. Level-to-level Administration and Branches Geographical Distribution The company is a one-layer legal entity and has one head-office and multiple branches. Under the principle of economic benefi ts and segmentation, to develop a national footprint, SPDB has set up branches/outlets in big and medium-sized cities as well as key cities in the coastal region, and Northern, Central and Western China. By the end of the reporting period, the company had 741 banking outlets all over China. Following is an overview of the branch network: No. Name Address Staff Assets (RMB'000) Subordinated 1 Head-office No. 12, Zhongshan Dong Yi Road, Shanghai ,505, Shanghai Branch No. 588, Pudong Nan Road, Shanghai ,828, Hangzhou Branch No. 129, Yanan Road, Hangzhou ,080, Ningbo Branch No. 21, Jiangxia Street, Ningbo ,100, Nanjing Branch No. 90, Zhongshan Dong Road, Nanjing ,446, Beijing Branch No. 18, Taipingqiao Street, Xicheng District, Beijing ,154, Wenzhou Branch Floors 1-3, Gaolian Building, Chezhan Street, Wenzhou ,171, Suzhou Branch No. 1478, Renmin Road, Suzhou ,357, Chongqing Branch No. 78, Xingguang Street, Hitech Park, Beibu New District, Chongqing ,535, Guangzhou Branch No. 12, Zhujiangxi Road, Tianhe District, Guangzhou ,076, Shenzhen Branch International Commerce Centre, Fuhua Road No.3, Shenzhen ,714, Kunming Branch No. 156, Dongfeng Xi Road, Kunming ,141, Wuhu Branch No. 39-2, Wenhua Road, Wuhu ,511, Tianjin Branch Suite D, 9 Binshui Avenue, Hexi District, Tianjin ,437, Zhengzhou Branch No. 299, Jinshui Road, Zhengzhou ,479, Dalian Branch No. 3 Zhongshan Square, Zhongshan District, Dalian ,065, Jinan Branch No. 139, Heihu Spring Xi Road,Ji'nan ,309, Chengdu Branch No. 6, South Section No.1 Ring Road, Chengdu ,871, Xi'an Branch No. 29, Bei Da Jie, Xi'an ,071, Shenyang Branch No. 326, Fengtian Street, Shenyang ,511, Wuhan Branch No. 218, Xinhua Road, Jianghan District, Wuhan ,430, Qingdao Branch No. 53, Hong Kong Xi Road, Qingdao ,035, Taiyuan Branch No. 333, Yingze Street, Taiyuan ,105, Changsha Branch No. 478, Furongzhong Road, Changsha ,186, Harbin Branch No. 226, Hongqi Street, Harbin ,122, Nanchang Branch No. 15, Yongshu Road, Nanchang ,384, Nanning Branch No. 22, Jinpu Road, Nanning ,260, Urumchi Branch No.87, Minzhu Road, Urumchi ,337, Changchun Branch No. 3518, Renmin Street, Changchun ,177,142 8

21 Annual Report Summary of Banking Business Performance No. Name Address Staff Assets (RMB'000) Subordinated 30 Hohhot Branch No. 28, Dahue Xi Street, Hohhot ,866, Hefei Branch No. 3, Changjiang Xi Road, Hefei ,610, Lanzhou Branch No. 101, Guangchang road(south) ,022, Shijiazhuang Branch No.35 Ziqiang road, Shijiazhuang ,327, Fuzhou Branch No. 222, Hudong Road, Fuzhou ,759, Guiyang Branch No.20,Yan'an Zhong Road, Guiyang ,476, Xiamen Branch No. 666, Xiahe Road, Xiamen 100 9,647, Hong Kong Branch 15th Floor, Bank of America Building, No. 12 Harcourt Road, Central, Hong Kong 55 5,392, Xining Branch 1-7 Yanan Building, No. 1, Weibogang, Xining 9-0 Operating Agencies Directly Under the Head Office ,576, Adjustment -457,373,451 Total ,675,715, Notes: 1. Xining Branch got its license from CBRB Qinghai on 28 Dec, 2011; 2. The total number of staff, total assets and subordinated outlets were calculating excluding township/village banks.

22 2011 Annual Report 21 Summary of Banking Business Performance 4. Assets Quality During the Reporting Period 1) 5-category Classification of Loans Unit: RMB '000 Yuan 5-category Classification of Loans Amount Percentage( ) Y-o-y +/- ( ) Normal 1,315,186, Specially Mentioned 10,422, Sub-standard 2,227, Doubtful 1,923, Loss 1,676, Total 1,331,436, Classification Opening Balance Ending Balance Percentage( ) Restructured Loans 103,920 83, Loans Overdue 5,797,174 6,790, ) Classification based on Products Unit: RMB '000 Yuan As of Dec. 31, 2011 As of Dec. 31, 2010 Total Loan Total NPL NPL to Total( ) Total Loan Total NPL NPL to Total( ) Corporate Loan 1,046,136,632 4,968, ,732,175 5,115, Bill Discount 23,994, ,888, Retail Loan 261,304, , ,868, , Total 1,331,436,044 5,827, ,146,489,301 5,879,

23 Annual Report Summary of Banking Business Performance 3) Classification based on Industry Unit: RMB '000 Yuan As of Dec. 31, 2011 As of Dec. 31, 2010 Loan Outstanding to Total Loan( ) NPL ( ) Loan Outstanding to Total Loan( ) NPL ( ) Agriculture, forestry, farming and fishery 8,012, ,653, Mining 32,493, ,491, Manufacturing 301,013, ,344, Electricity, gas and water Supply 50,809, ,688, Construction 69,554, ,872, Geological survey, irrigation 96,352, ,944, Transportation, warehouse and postal service 92,241, ,620, Wholesale and Retail, Catering 154,511, ,587, Real Estate 115,118, ,295, Social Services 81,128, ,617, Sanitation, Social welfare 4,873, ,665, Education, Culture, Broadcasting 18,764, ,300, Scientific Research and Comprehensive Technological Services 3,566, ,613, Other 17,696, ,038, Transfer Discount 11,204, ,789, Bank's Acceptance Bill Discount 11,833, ,937, Commercial Acceptance Bill Discount 956, ,161, Note: Note discount is now taken from corporate loan and treated separately, and adjustment has been made accordingly for the bank loan distribution data by the end of ) On the management of loans granted to the investment and fund-raising arms of various local governments Within this reporting period, in response to CBRC's requirement, the company carried out full-round inspections and risk evaluation of loans granted to the investment and fund-raising arms of various local governments and took relevant risk alleviation measures such as requiring additional materials, improving procedures, increasing collaterals, adjusting credit line and taking back loans. At the same time, the company further improved credit line approval process to strictly regulate review and approval authority, and further classifi ed loans to local government fi nancing platform according to the source of cash fl ow coverage and loan classifi cation, and corresponding developed risk prevention measures for different borrowers.

24 2011 Annual Report 23 Summary of Banking Business Performance SPDB strengthened the management of loans to the financing platform: First, it created a loan name list management system and centralized credit approval authority. Second, it strictly controlled incremental loans and actively digested outstanding loan. In accordance with regulatory requirement to safeguard on-going ones, curb re-building ones and ban new ones, it strictly controlled new lending to the platform and achieved the overall target of "reducing old loans and controlling new loans. Third, it required all branches to decide the terms of loans granted to the investment and fundraising arms of local governments in a more reasonable way, taking into consideration the fi scal income and cash fl ow of the borrower and change the repayment method from lump-sum borrowing and lump sum repayment to installment repayment, modifi ed the loan contracts accordingly, signed gap pay-up agreements, improved collateral and pledge systems. Fourth, it continued to strengthen the monitoring of the accuracy of the risk classifi cation of such loans, so as to accurately classify loan with big potential risks and prevent those risks from occurring. Fifth, it strengthened on-site inspections and scrutiny of such loans and conducted on-site checks on the transformation schemes and the accuracy of loan classifi cation to objectively and promptly refl ect the true nature of risks. Current, customers of such loans as a whole are in good conditions, with no major potential risks identifi ed. 5) Period-end NPL and measures taken According to the 5-category loan classifi cation method, by the end of the reporting period, the NPL accounted for 0.44% of the company's total loans, down by 7 bps on a year-on-year basis. The Company has taken the following measures to manage NPLs, fi rstly, to achieve a stable and effi cient loan growth according to the requirement of the national macro-economic control measures. Secondly, by formulating all kinds of credit policies, to make portfolio management requirements on industries, regions, customers and products policies so as to accomplish the effective adjustment of the credit structure. Thirdly, by making full use of the customers risk monitoring and reporting system and strict after-loan inspection system, to identify, control and diffuse potential risks as early as possible. Fourthly, by increasingly enhance the capability of defusing the NPL efficiently, to make active effort to get rid of NPL by various means. Fifthly, by making asset preservation more front-loaded, to enhance early intervention for loans with big potential risks; Sixthly, to further develop asset preservation system and its basic management, to continuously strengthen research on risk control and diffusion for new business areas. 5. An overview of Provisions for NPLs Domestic audit (PRC GAAP) Unit: RMB'000 Yuan International audit (IAS) Loan Provisions as of Jan. 1, ,376,311 22,376,311 Loan Provisions Charged during the Reporting Period 7,159,118 7,159,118 Loan Provisions Written-off during the Reporting Period -508, ,707 Reversal due to Recovery of the Written off Loan and Advance 230, ,743 Converted Back to Loan Provisions for Loan Interests Impaired -145, ,371 Loan Provisions as of Dec. 31, ,112,094 29,112,094 Notes on the withdrawal of loan depreciation preserves: the par value of the balance sheet is evaluated. In case there is evidence that any loan has depreciated and the event will exert incalculatable impact on the future cash fl ow, the par value shall be decreased to the estimated future cash fl ow. The present value of the estimated future cash fl ow shall be determined according to the actual interest rate of the fi nancial assets and the value of the collateral shall be taken into consideration. Once the depreciation value is determined, if there is evidence that the value of the fi nancial asset has been restored, the original depreciated value shall be converted into losses and gains for the current reporting period.

25 Annual Report Summary of Banking Business Performance 6. An Overview of Interests Receivable Unit: RMB'000 Yuan Item As of Jan. 1, 2011 Increase Decrease As of Dec. 31, 2010 Interests Receivable for Balance Sheet Items 6,492,715 99,682,521-95,104,162 11,071,074 Interests Receivable for Off-balance Sheet items 1,724, , ,587 1,824,951 Note: during this reporting period, the company's interest bearing assets and interest income increased considerably, with some growth in interest receivable for balance sheet items. 7. Operating Income Unit: RMB'000 Yuan Item Amount Percentage( ) Y-o-y +/-( ) Loans 76,953, Inter-bank Lending and borrowing 2,378, Placement with the Central Bank and Other Banks 10,614, Bonds Investment 9,456, Financial Assets Sold for Repurchase 21,722, Fees and Commissions 7,204, Other items -143, Total 128,186, Note: During this reporting period, loan income made up the bulk of total operating income, accounting for 60.02%, or a 39.31% YoY increase thanks to increased loan size and growing spread. The company adopted dynamic asset allocation strategy and fl exible adjustment of investment structure, with a rapid growth of interbank business and big increase of revenue from it. Income from other items declined during the reporting period mainly because of changes in the fair value of derivative fi nancial instruments caused by fl uctuations in market interest rates. 8. An Overview of the Company's Lending Businesses 1) Lending Analyses by Industry (Top 10 industries/sectors) Unit: RMB'000 Yuan As of Dec. 31, 2011 As of Jan. 1, 2011 Industry Outstanding Balance Percentage( ) Outstanding Balance Percentage( ) Manufacturing 301,013, ,344, Wholesale, Retail, Catering 154,511, ,587, Real Estate 115,118, ,295, Geological Survey, Irrigation 96,352, ,944, Transportation, Warehouse and Postal Service 92,241, ,620, Social Service 81,128, ,617, Construction 69,554, ,872, Electricity, gas and water Supply 50,809, ,688, Mining 32,493, ,491, Education, Culture, Broadcasting 18,764, ,300,

26 2011 Annual Report 25 Summary of Banking Business Performance 2) Lending Analyses by Region Unit: RMB'000 Yuan Region As of Dec. 31, 2011 As of Jan. 1, 2011 Outstanding Balance Percentage( ) Outstanding Balance Percentage( ) Shanghai 173,384, ,930, Beijing 66,064, ,556, Sichuang 53,700, ,931, Tianjin 47,046, ,968, Shandong 63,021, ,494, Guangdong 81,448, ,686, Jiangsu 146,616, ,454, Henan 69,194, ,806, Zhejiang 211,264, ,167, Liaoning 77,438, ,555, Other 342,256, ,935, Top 10 Borrowers by Industry/Sector Borrower by Region Manufacturing 22.6% Wholesale, Retail, Catering 11.6% Real Estate 8.65% Geological Survey, Irrigation 7.24% Transportation, Warehouse and Postal Service 6.93% Social Service 6.09% Construction 5.22% Electricity, gas and water Supply 3.82% Mining 2.44% Education, Culture, Broadcasting 1.41% Shanghai 13.02% Beijing 4.96% Sichuan 4.03% Tianjin 3.53% Shandong 4.73% Guangdong 6.12% Jiangsu 11.01% Henan 5.20% Zhejiang 15.87% Liaoning 5.82% Other 25.71% 3) Top 10 Borrowers Unit: RMB'000 Yuan Name of Borrower Outstanding Balance of Loans % in Total Loans Customer A 5,295, Customer B 5,000, Customer C 4,009, Customer D 3,580, Customer E 3,500, Customer F 2,500, Customer G 2,406, Customer H 2,250, Customer I 2,231, Customer J 2,191, Total 32,963,

27 Annual Report Summary of Banking Business Performance 4) Method of Guarantee: Unit: RMB'000 Yuan Method of Guarantee Outstanding Balance of Loan % in Total Loans Clean Loan 282,388, Secured Loan 400,149, Collateral Loan 522,317, Pledged Loan 126,580, Total 1,331,436, ) Credit Granting Business Risk Management for Group Clients: According to the Group client credit granting management method, the company has adhered to the principle of unified credit, total control, solid credit, risk precaution, hierarchical management: Firstly, to complete the Group client management system construction, further standardize the credit granting management regulations, clarify the Group clients' identification, affirmation, credit approval and post-loan management requirements, enhancing its customer identifi cation and management capabilities. Secondly, the company has put in place Group Credit Approval and Management systems, providing effective technology support for centralized credit management. Thirdly, the company is actively implementing the lead-branch-and-assisting-branch rule, the three-check system and the risk precaution system. Fourthly, the company strengthened Group clients' entry control and established the credit granting amount approval system in order to prevent and control the credit granting business risk for Group clients. 9. Debt Assets Unit: RMB'000 Yuan Type As of Dec. 31, 2011 As of Jan. 1, 2011 Amount Impairment Reserve charged Amount Impairment Reserve charged Real Estate 907, , , ,119 Shares Owned by Legal Entity 67,110 41,249 35,383 18,149 Other ,303 13,303 Total 974, , , , An Overview of the Company's Deposit Structure and Loan Structure 1) Major Deposit Structure Unit: RMB'000 Yuan Type Average Outstanding Balance Average Interest Rate (%) Current Deposit by Corporate Client 557,881, Fixed Deposit by Corporate Client 633,691, Current Deposit by Individual Client 71,757, Fixed Deposit by Individual Client 211,738, ) Major Loan Structure Unit: RMB'000 Yuan Type Average Outstanding Balance Average Interest Rate (%) Short-term Loan 707,506, Medium and Long-term Loan 650,687,

28 2011 Annual Report 27 Summary of Banking Business Performance 11. Financial Bonds Held by the Company Type Unit: RMB'000 Yuan Amount Sellable Financial Assets 35,203,914 Investment Classified as Loans and Receivables 4,675,956 Held to Maturity Investment 44,713,807 In particular, major fi nancial bonds held by the company include: Type of Bond Par Value APR Unit: RMB'000 Yuan Maturity Date Provision for Impairment China Import & Export Bank 2010 No. 6 Financial Bonds 2,750,000 1-year deposit rate+0.25% State Development Bank 2007 No. 16 Financial Bonds 2,720, % State Development Bank 2007 No. 28 Financial Bonds 2,220,000 1-year deposit rate +0.61% State Development Bank 2010 No. 22 Financial Bonds 2,080,000 1-year deposit rate +0.45% Agriculture Bank of China 2009 No. 3 Financial Bonds 2,000, % Derivatives Held by the Company Unit: RMB'000 Yuan Fair Value Type Contract/Nominal Value Assets Liabilities Interest Rate Swap 39,453,623 42,971 1,068,997 FX Futures 46,044, , ,030 Currency Swap 55,961, , ,356 Precious Metal Futures 3,712,055-12,646 Total - 548,787 1,515, Entrusted Wealth Management, Asset securitization, Agent and Custody Business 1) Entrusted wealth management During the reporting period, the company issued a total of 844 individual special fi nancial products and structured fi nancial products, with the total sale of billion yuan billion yuan worth of wealth management products were sold to 3500 corporate customers. 2) Asset securitization At the end of this reporting period, the company's fi rst credit securitization project was successfully completed. The Puyuan Phase 1 created million yuan in stable and risk-free loan service income. 3) Agent Business At the end of the reporting period, agency sales of wholesale funds and aggregate securities account products was up 294% YoY; agency sales of wholesale insurance was up 563% YoY; agency sales of aggregate trust plans was 4.2 times that of the previous year; agency wholesale transaction volume of precious metal for 2011 was billion

29 Annual Report Summary of Banking Business Performance yuan, up 237% YoY; agency sales of retail funds and aggregate securities account products increased 68% YoY; agency sales retail insurance was up 60% YoY; agency sales of retail aggregate trust plans increased 266% YoY; agency retail transaction volume of precious metal increased 36 fold YoY. 4). Custody Business By the end the reporting period, the total custody scale amounted to billion yuan with a fee income of 330 million yuan, up by 35% and 60% respectively comparing with the numbers at the end of Major Off-balance Sheet Items Unit: RMB'000 Yuan Item As of Dec. 31, 2011 As of Jan. 1, 2011 Credit Commitment 685,625, ,548,545 Incl.: Banker's Acceptance Bills 370,981, ,660,235 L/G issued 47,854,363 39,465,175 L/C issued 198,422,064 46,317,238 Acceptance Bills under L/C 25,615,734 11,668,317 Unused Credit Line of Credit cards 42,752,585 28,437,580 Lease and Rental Commitment 5,817,070 4,506,880 Capital Investment Commitment 414, ,153 Description: Unused credit line of credit cards is the line after deduction of the sleeping unused credit line. The above off-balance sheet items may exert certain impacts on the company's fi nancial strength and results, which depends on the occurrence or non-occurrence of certain events in the future. Under certain conditions, based on relevant principles, such potential liabilities may convert to real liabilities of the company. 14. The Various Risks and Relevant Risk Management As one dealing with currency and credit, the company mainly had to confront the following risks during its operation: credit risk, liquidity risk, market risk (including interest rate risk and foreign exchange rate risk), operation risk (including settlement risk, technology risk, system risk etc.), legal risk and strategy risk, country specific risk, etc. 1) Credit Risk On policy formulation, the company has formulated and promulgated the annual business risk preference strategy and annual credit policy, setting portfolio management requirements on industry, region, customer and product policies to ensure orderly development of business. While maintaining the overall stability of asset quality, the company slightly increased risk tolerance for innovative new business, to improve business structure and achieve transformation. The company established risk preference and credit policy execution reporting system to monitor and report on the execution of relevant policies and make adjustment if things went wrong. On the credit granting management, the company continued to optimize credit review & approval process, standardize approval criteria to ensure approval quality. By setting up industry and product approval standards, unifying and improving credit approval template, the company continued to develop standardization for credit approval management, promote the establishment of interbank credit management system. In the credit assessment process, the company opened green-path for green corporations to enhance effi ciency. For enterprises with high pollution, high resource consumption or overcapacity, the company adopted more strict control on overall credit limit. As per regulatory requirements, it also strictly controlled new loans to local government fi nancing platforms, increased the ratio of medium and long-term loan while controlling that of real estate sector, so as to enhance structural adjustment from the source.

30 2011 Annual Report 29 Summary of Banking Business Performance On the risk precaution, the company set up risk identifi cation, reporting, disposal, early warning processes, improved customer risk precaution system, established risk precaution rapid response mechanisms and strict after-loan inspection system, to identify, control and diffuse risks as early as possible. On-site inspection and checks were put in place for key risk areas such as loans to local government financing platforms, real estate loans, medium and longterm loans, and for the implementation of new rules for loans, individual mortgage loans, funding fl ow of loans, and the accuracy of 5-category classifi cation. It also enhanced the risk management reporting system and its coverage. It established a dynamic stress testing working mechanism and conducted on-going stress test for real-estate and local government loans, so as to enhance the guiding role of the results to the practical work. In terms of special assets management, the company made intensifi ed efforts to diffuse, collect and reduce the stock NPLs and new NPLs. As to large non-performing assets, it set up full responsibility mechanism including the program formulation, the implementation of security measures and dynamic asset tracking and feedback. The company established risk diffusion early intervention mechanism for special mention loans and improved NPL collection work and got positive results. The clearance and assessment of written off loans have been strengthened, the supervision of the implementation of the daily deposit account and case management measures also achieved good results. It further strengthened asset protection system and its basic management, promoted risk control system module upgrading and go-live, and continued to strengthen research on new business risk management and alleviation. 2) Liquidity Risk During the reporting period, the company maintained a reason level of asset liability liquidity, but due to policy infl uence, the market liquidity fl uctuated quite a lot. The company targeted at the cash fl ow management, managing the bank's liquidity by capital budgets, cumulative cash fl ow gap and other tools. Actively paying attention to the macro monetary policy changes, it grasped the control rhythm of the credit and monetary policy. It promptly adjusted the direction, size and structure of the cash fl ow gap by combining assets liabilities structure with the overall funds balance, to actively prevent liquidity risk. The business operation was generally stable with reasonable level of liquidity. By the end of 2011, the liquidity ratio for RMB stood at 42.80%, up by 2.52 pps on a year-on-year base and the liquidity ratio of FX stood at 68.07%, up by pps YoY. The RMB deposit-loan ratio was 71.48%, up by 1.72 pps YoY; the foreign currency loan ratio was 74.86%, down by 3.31 pps. The ratio of RMB long-term loans was 50.30%, down by 5.36 pps YoY; the ratio of foreign currency long-term loans was 17.97%, down by 2.01 pps. The company's excess reserve ratio in the PBoC was around 3.21%. 3) Market Risk Market risk refers to the risks of loss for the bank's balance sheet and off balance sheet business due to adverse changes in market prices (interest rates, exchange rates, stock prices and commodity prices). The market risks facing the company mainly exist in the company's trading accounts and bank accounts, including interest rate risk and exchange rate risks. During the reporting period, the company faced complex market conditions with increased diffi culty and requirements for market risk management. In 2011, in the fi rst quarter and third quarter, market liquidity was fi rst tight then loose, with highly fl uctuated money market rates. The inter-bank Treasury yield curve was steep and moving downward; the cumulative appreciation of RMB against the U.S. dollar throughout the year was 5.11%; exchange rate volatility increased and overseas market had alternating expectation for RMB appreciation or depreciation; precious metals and commodity prices were very volatile throughout the year. In the report period, the company closely tracked the market risk exposure and market trends, strengthened dynamic monitoring and risk anticipation; promoted centralized management of market risks for its overseas branches and

31 Annual Report Summary of Banking Business Performance outlets within the consolidated balance sheet; continued to improve the market risk identification, measurement, monitoring and reporting system; enhanced research and review to ensure the smooth operation for new asset-type products and business; included the counterparty credit risks that may be caused by the market risk in the routine monitoring system to ensure an overall control of market risks and a strong support for business innovation and transformation. The company's New Basel Capital Accord was in orderly implementation, and the internal market risk model successfully went live, with the New Basel Capital Accord compliance pre-assessment application submitted to the regulator. Separate monitoring of market risks was conducted for the trading account portfolio and non-trading account portfolio. The trading account portfolio includes derivative financial instruments such as exchange rates, interest rates, and bonds held for trading; and all off-balance-sheet assets not included in the trading accounts but recorded in the bank accounts. The company has established market risk management system, and continuously improved its market risk management and market risk identification, measurement, monitoring and controlling capabilities. The company managed the market risks for trading accounts mainly through daily value at risk measurement, back testing, stress testing, sensitivity analysis, quota management and so on; it used a combination of interest rate swaps, forwards and other fi nancial derivatives instruments to achieve the transfer and hedging of market risks, so as to effectively control the market risks for the whole bank; through sensitivity analysis, quota management and the use of foreign currency derivatives for risk hedging and other control measures, the company kept exchange rate risks within an acceptable range. The company has established policy framework to support its internal market risk model; improved the counterparty credit risk monitoring and measurement system to achieve off-balance sheet risk exposure measurement for particular risks and derivative products. It conducted quota management for all types of exposure, sensitivity, including stop-loss limit, strengthened risk management for innovative business, promptly followed up innovative businesses such as bond transactions and market making, Shanghai Clearing House business, and RMB foreign exchange options, strengthening policy guidance, carrying out risk assessments, and actively support innovative funding products. Value at Risk ("VaR") model is an important tool for measuring and monitoring market risk. Value at Risk is a way to predict the maximum possible position losses due to adverse changes in market interest rates or stock prices or other risk factors in a given time interval and confi dence level. With the confi dence level set at 99% (i.e., the statistical probability of losses in excess of the risk value is 1%), the historical simulation method was used to calculate Value at Risk. The value at risk measurement uses the actual 10-day holding period VaR, with the observation period of 1 year (250 trading days). VaR in this reporting period 2011(unit: 10,000 yuan) VaR (10-day holding) Year-end yearly average max min Interest Rate Risk Exchange Rate Risk Overall VaR VaR for each risk factor refers to the maximum potential loss due to fl uctuations of this risk factor under a certain holding period and confidence level. Since there will be some risk diversification effect between the various risk factors, total VaR at any given point does not equal to the sum of all VaR for each risk factor.

32 2011 Annual Report 31 Summary of Banking Business Performance 4) Operational Risk The company is actively engaged in the construction of operational risk management mechanism. Based on risk management needs and advanced international experience, it developed systematic and comprehensive operational risk management policies, clarifying the overall systematic framework for operational risk management, operational mechanism, quantitative assessment methods, reporting procedures and early warning mechanisms. For areas with high frequency of operational risks, it conducted timely research and analysis on the business forms, causes of those risks and proposed specifi c measures and released prompt risk hints. It carried out frontier research and exploration of operational risk management, established and implemented the operational risk identifi cation assessment and monitoring reporting system. The company set specifi c loss event collection requirements and key risk indicators, strengthened the monitoring of operational risk loss events and key risk indicators, promoted the New Basel Capital Accord operational risk standards, promptly turned consultation results into internal measures, promoted the implementation of operational risk management tools such as regulatory capital measurement, business continuity, stress testing and operational risk reporting. The small front offi ce, large back offi ce basic operation mode has been basically completed, and the operation centralization system and internal operation control system have gone live with increasing operational risk management ability. By drawing on good international experience of internal management for commercial banks, sorting out operations and management procedures, identifying and assessing various types of risks, the company has established a systematic, transparent, documented internal control system. By constantly updating the internal control system documentation and expanding the documentation coverage, it ensured the effectiveness, suitability and integrity of the whole internal control system in the bank, to achieve continuous improvement to the internal control system, and lay a foundation for the establishment of a long-term improvement mechanism for the internal control system. The development of the internal control self-assessment work enforced the implementation rectifi cation mechanism. 5) Other Risks On compliance risk: The company continued to promote the compliance management mechanism, implement the regulatory policies, and optimize management processes in a bid to further enhance compliance risk management's support for business development. The company actively implemented regulatory requirements, improved the management tools to enhance the effi ciency of the compliance management. Overall, compliance risk management was in good shape, with no signifi cant loss or major illegal cases. On legal risk: The company has established an overall legal risk management framework and has basically established an internal legal operational platform and process control so as to effectively control legal risks in various business areas. It also promoted standardization of legal work processes, formulated basic rules on legal risk management, making legal work more orderly and standardized. On information technology risk: Overall, the information system was secure and stable, with information technology risk in a controllable range. The security scheme and control measures were in good condition. The core system and online banking system were upgraded and expanded, with signifi cantly improved overall performance which provides strong IT system support to the company's strategic development for the next fi ve years. On strategic risk: Under the strategic vision of building a modern financial services firm with core competitive advantages, given the changes to internal and external environment during the "12th Five-Year" period, the company established a "customer-centric, innovation-driven, restructuring development new fi ve-year development strategy. As per the "strategy - planning - budget - evaluation" strategic management model, SPDB enhanced the commanding role of strategies in the development of the company. Through strategic planning, promoting strategy implementation and execution evaluation, improving strategic management mechanism, it had good response to systemic risks due to the complex and changing environment. The overall strategic risk was controllable.

33 Annual Report Summary of Banking Business Performance On Reputation risk: The company has put the reputation risk within the overall risk management framework and established a sound reputation risk management mechanism, focusing on developing media relations, monitoring public opinions and branding. The awareness, methods and capability of guarding against and confronting reputation risk continued to improve, with reputational risk under good control. During the reporting period, no event causing signifi cant risk of reputation loss occurred in the company. Country specific risk: Country specific risk management system was initially established with the formulation of "Country specifi c risk management policies", "Country specifi c risk management approach. Country risk reporting platform Phase One was completed, with the initial establishment of country risk identification, measurement, monitoring and control methods and procedures. 15. Completeness, Reasonability and Effectiveness of the Company's Internal Control System During the reporting period, as per Basic Rules on Corporate Internal Control, the company identified and consolidated its main business activities and management activities by focusing on the fi ve factors of internal control -- internal environment, risk assessment, information and communication, internal oversight and control measures. It also matched current rules and regulations with internal control factors, achieving a convergence of the two. On top of that, the company further improved the internal control system in terms of completeness and rationality, optimized the internal control measures, and strengthened execution of the internal control system, to ensure that business processes and risks are within a controlled range. The company implemented internal control self-evaluation, which found no signifi cant defi ciencies in internal control design and implementation. Business and risks were under control. Still enforcement of control measures for credit and commercial bill business need to be further strengthened. The above-mentioned problems didn't constitute serious impact or potential negative impact on the company's internal control objectives, but the company still attached great importance to them and took measures to strengthen implementation. Board of Directors believes that in the reporting period, the company's internal control system is basically sound and improving, with effective implementation. Based on internal and external environmental changes and business development needs, SPDB will continue to improve its internal control management, enhancing its effectiveness and make it more standardized. 16. Company's Innovation, New Types of Products and Derivative Financial Services SPDB continued to promote product innovation and channel integration, achieved breakthroughs in direct equity fund business, and conducted pilot project for investment and loan linkage business. Settlement volume for its innovative cross-border RMB services increased nearly 10 fold. It took the lead in offering green fi nance', which was successfully marketed to Baosteel Group and other important clients. It successfully completed the fi rst credit asset securitization project, piloted self-repaying trade finance, innovative online finance, and built a supply chain electronic platform. "Easy loans", "purchasing loans" and other products were launched for SMEs. Innovative "HQ to HQ Cooperation" model was launched for retail loan business. New consumer loan products were developed leveraging on bank cards. The company increased channel integration and innovation efforts, improved online banking and mobile banking, added bank and enterprise direct connection and other services to promote funding precipitation. It also enhanced the performance of online banking service, added real-time exchange settlement and sales and online wealth management functions, accelerated the development of "air bank" full-service support, personalized care service model, in a bid to build an all-weather electronic trading platform. Moreover, it promoted product innovation, expanded the agency business for precious metals, RMB interest rate swaps, foreign central bank agency RMB bond trading, benefi ciary transfer of investment trust, and other funding business.

34 2011 Annual Report 33 Summary of Banking Business Performance 17. Changes in Interest Rate, Foreign Exchange Rate, Taxation Rate and Whether Such New Policies Exert Important Impact on Commercial Bank Business Operation and Profi tability In the fi rst half of 2011, the central bank hiked RMB deposit RRR for 6 consecutive times, so RRR for large fi nancial institutions reached 21.5%, that of small and medium-sized fi nancial institutions reached 19.5%. The increasing RRR raised higher requirements for commercial banks' liquidity management. With tight monetary policy, money supply growth continued to decline. With tightening liquidity, easing infl ation and slowing economic growth, there was timely and appropriate fine-tuning' for monetary policy since the fourth quarter of last year. On December 5, 2011, the PBoC lowered RRR by 0.5 percentage points, alleviating liquidity management pressure to some extent. In addition, on February 9, April 6 and July 7, the central bank raised the benchmark deposit and lending rates for financial institutions, raising the one-year benchmark deposit and lending interest rates to 3.50% and 6.56% respectively. Given the overall tight monetary policy, the bargaining power of commercial bank improved, and credit tilted more toward higher yielding SMEs, which increased the profi tability of commercial banks. In 2011, the RMB exchange rate formation mechanism reform deepened, with a 4.86% annual appreciation of RMB against USD. RMB appreciated faster against USD in 2011 than The two-way fl oating of RMB exchange rate became more prominent, with significantly enhanced exchange rate flexibility. With narrowing trade surplus and changing expectation for the Chinese economy, RMB's appreciation momentum diminished for the fi rst time since the exchange rate reform started. Given the increased market risk due to exchange rate fl uctuations, the company further improved the capital market risk management mechanism, established a supporting policy system for market risk internal models, and constantly improved market risk monitoring, measurement and control system in a bid to effectively control market risks. On April 27, 2011, the China Banking Regulatory Commission Guidance on Implementing New Regulatory Standards for China's Banking Sector (Yin Jian Fa [2010] No. 44) was officially released. Drawing on Basel III, it set rules on regulatory tools such as capital requirements, leverage ratio, provision ratio and liquidity. Detailed rules were subsequently released. CBRC openly solicited the public views on the Commercial Bank Leverage Administrative Rules, Capital Adequacy Ratio Administrative Rules, and Commercial Bank Liquidity Risk Administrative Rules. Implementation of the new regulatory standards exerted some pressure on commercial banks' capital management and asset liability management. However, thanks to a reasonable transition period, the business operations and profi tability of commercial banks were not be much affected. To ease the financing diffi culty of SMEs, the relevant departments under the State Council introduced a new micro enterprise support policies in October 2011 to improve the business environment for small and micro enterprises and to create a better policy environment for commercial banks' business transition. This will encourage commercial banks to step up support for small and micro-enterprises, shifting from simple credit service to integrated fi nancial services. It will speed up the development of SME business franchise mechanism, regulate fi nancial services for small and micro enterprises, and develop high end retail customers on top of small and micro enterprises, thus promoting the strategic transformation of commercial banks.

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36 2011 Annual Report 35 Share Capital Changes Share Capital and Changes Shareholders' and Shareholders Status 1. Share Capital Change 1) Share Transfer Unit: Share Current Before Change (+,-) Gift Current After Total Shares ( ) shares (June 7) Total Shares ( ) 1 State-owned 2 Legal entity held 3 Other domestic legal entities 2,869,764, ,929,450 3,730,694, Incl: domestic legal entities 2,869,764, ,929,450 3,730,694, Domestic natural persons 4 Foreign stock-holders Incl: Foreign legal entities Foreign natural persons 1 RMB common shares 11,479,059, ,443,717,800 14,922,777, Domestically-listed foreign companies 3 Oversea-listed foreign companies 4 Other Total shares 14,348,824, ,304,647,250 18,653,471, New Share Issuance 1) An overview of New Issuance during the Past Three Years The non-public offering of stocks in 2009: China Securities Regulatory Commission Approval Document [2009] No. 950 approved the offering of the company's non-public A-shares on September 18th, 2009, with the actual issue price of yuan / share, placing 904,159,132 shares, the actual net proceeds RMB 14,826,659, yuan after the deduction of issuance fee etc.. The non-public offering of stocks in 2010: China Securities Regulatory Commission Approval Document [2010] No approved the offering of the company's non-public A-shares on September 26th, 2010, with the actual issue price of yuan / share, placing 2,869,764,833 shares, the actual net proceeds of RMB 39,199,464, yuan after the deduction of issuance fee etc.. 2) Shares Owned by Staff There are no staff-owned shares during the reporting period.

37 Annual Report Share Capital Changes and Shareholders Status 3. Shareholders 1) The Shareholders Number and Share Holdings Status Total number of shareholders at the end of this reporting period 437,294 Total number of shareholders at the end of the month before the release of this annual report 430,414 Top 10 Shareholders Shareholder name Increase or decrease Total shares held % of the total Number of lockedup shares held Shares pledged or frozen China Mobile Group Guangdong Co., Ltd. +860,929,450 3,730,694, ,730,694,283 - Shanghai International Group, Ltd. +728,657,058 3,157,513, Shanghai International Trust Co., Ltd. +225,213, ,923, CITIBANK OVERSEAS INVESTMENT CORPORATION Shanghai Guoxin Investment & Development Corp, Ltd +116,807, ,164, ,023, ,101, Xingya Group Co.,Ltd +20,675, ,694, ,672,309 China Life Insurance Company Limited Par Lifepar 005L FH002 Shanghai +87,290, ,543, Brilliance Group, Ltd +43,865, ,083, Bank of Communications E Fund 50 Index Securities Investment Fund +35,916, ,134, Youngor Group Co,.Ltd. +41,350, ,186, ,140,000 Note: During the report period, the company implemented the 2010 profi t distribution plan of 3 bonus shares for every 10 shares An Overview of the Top 10 Shareholders of Non-lock-up Shares Shareholder name Shanghai International Group, Ltd. Shanghai International Trust Co.,Ltd. CITIBANK OVERSEAS INVESTMENT CORPORATION Shanghai Guoxin Investment & Development Corp, Ltd Xingya Group Co.,Ltd China Life Insurance Company Limited Par Lifepar 005L FH002 Shanghai Brilliance Group, Ltd Bank of Communications E Fund 50 Index Securities Investment Fund Youngor Group Co,.Ltd. China Tobacco & Cigarette Group Jiangsu Branch (Jiangsu Provincial Tobacco & Cigarette Corp.) Notes on the affiliation between the shareholders mentioned above and the possibility of taking joint actions Non-locked-up shares held Share Type 3,157,513,917 RMB common share 975,923,794 RMB common shares 506,164,207 RMB common shares 377,101,999 RMB common shares 200,694,074 RMB common shares 190,543,024 RMB common shares 190,083,517 RMB common shares 182,134,902 RMB common shares 179,186,859 RMB common shares 160,880,407 RMB common shares Shanghai International Group is the holding company of Shanghai International Investment & Trust Corp. and Shanghai Guoxin Investment & Development Corp.

38 2011 Annual Report 37 Share Capital Changes and Shareholders Status Holder of restricted shares and the restrictions Shareholder Name No. of restricted shares Tradable by Restrictions China Mobile Group Guangdong Co., 3,730,694, private placement, not tradable within five years 2) Information on the No. 1 Shareholder (1) There is no change to the No. 1 shareholder of the company during the reporting period. (2) A diagram to illustrate the equity and control relationship between the company and the No. 1 shareholder The company's No. 1 shareholder is Shanghai International Group, founded on April 20, With a registered capital of RMB billion yuan, Shanghai International Group has a registered address at No. 511, Weihai Road, Shanghai. The legal representative is Mr. Ji Xiaohui. It's a limited liability company (100% owned by the state). Its business operation scope is: fi nancial and non-fi nancial investment, capital operation and assets management, fi nancial research and consultancy, etc. The equity relation between the company and its largest shareholder and its affi liated companies may be illustrated as following: Shanghai State-owned Assets Supervision and Administration Commission 100% stake Shanghai International Group 100% stake 66.33% stake 100% stake Shanghai State-owned Assets Management Co., Ltd 100% stake Shanghai International Trust Co., Ltd. Shanghai International Group Asset Management Limited Shanghai Guoxin Investment & Development % stake 5.232% stake 0.138% stake 2.022% stake SPD Bank 100% stake 3) Corporate Shareholders Who Hold More Than Ten Percentage By the End of This Reporting Period China Mobile Group Guangdong Co., Ltd. Currently holds 3,730,694,283 company shares, representing 20% of total share capital. Registered capital: RMB 559,484 million, Registered Address: Guangzhou. The legal representative: Xu Long. Company Type: Limited Liability Company. Business scope: mobile communications business in Guangdong province (including voice, data, multimedia, etc.); IP telephone and Internet access services; mobile communications, IP telephone and the Internet network design, investment and construction; mobile communication, IP Facilities such as telephone and internet installation, construction and maintenance; systems integration, roaming settlement, technology development, technical services and equipment sales that are related to mobile communications, IP telephone and Internet services, selling and renting of mobile telephone terminal equipment, IP Telephone equipment, Internet equipment and spare parts, and after-sales services.

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40 2011 Annual Report 39 Overview of of the Company s Company's Directors, Directors, Supervisors & Senior Supervisors Management & Senior Management 1. Basic Information Compensation Paid by the Company (Unit: RMB 0,000 Yuan, before Tax) Whether Got Payroll from other companies Date Title Name Sex of Birth Tenure shares held Chairman of the Board Ji Xiaohui Male present 1,500,000 Vice Chairman, Fu Jianhua Male ,500,000 President (Note) Vice Chairman Chen Xin Male present 1,500,000 Director Yang Dehong Male present Yes Director Pang Weidong Male present Yes Director Sha Yuejia Male present - - Yes Director Zhu Min Female present - - Yes Director Stephen Bird Male present Yes Director Ma Xinsheng Male present Yes Director Wei Pengcheng Male present Yes Director Wang Guanchang Male present - Yes Director & Corporate Secretary Shen Si Male present 1,999,992 Independent Director Sun Zheng Male present 200,000 Independent Director Liu Tinghuan Male present 200,000 Independent Director Chen Xuebin Male present 200,000 Independent Director Xu Qiang Male present - Independent Director Zhao Jiusu Male present - 200,000 - Independent Director Zhang Weiying Male present - 200,000 - Independent Director Guowei Male present - 200,000 - Chairman of the Supervisory Board Liu Haibin Male present 1,500,000 Supervisor Zhang Linde Male present Yes Supervisor Zhang Baohua Male present Yes Supervisor Li Qingfeng Male present Yes External Supervisor Hu Zuliu Male present 200,000 External Supervisor Xia Dawei Male present 200,000 Supervisor Feng Shurong Male present 1,500,000 Supervisor Yang Shaohong Male present 1,900,000 Supervisor Li Wanjun Male present 1,900,000 EVP Shang Hongbo Male present 1,999,992 EVP&CFO Liu Xinyi Male present 1,999,992 EVP Jiang Mingsheng Male present 1,999,992 EVP Ji Guangheng Male present 1,999,992

41 Annual Report Overview of the Company s Directors, Supervisors & Senior Management Compensation Paid by the Company (Unit: RMB 0,000 Yuan, before Tax) Whether Got Payroll from other companies Date Title Name Sex of Birth Tenure shares held EVP Mu Shi Male present 1,999,992 EVP Xu Haiyan Female present 1,999,992 Note: 1. The remuneration packages for directors, supervisors and senior management on the company payroll are being confi rmed by the regulators, with remaining parts to be disclosed after confi rmation. 2. Mr. FU Jianhua, will no longer serve as Vice Chairman and President of SPDB starting from January 11, 2012 due to reasons of his age; Mr. JI Xiaohui, Chairman of SPDB will take over as the President of the Company. Main Working Experience of Active Directors, Supervisors and Senior Management: (1)Directors JI Xiaohui, male, born in 1955, MBA with senior economist title. Once worked as General Manager and CPC Committee Secretary of ICBC Shanghai Pudong Branch; Deputy GM of ICBC Shanghai Branch and Deputy CPC Committee Secretary; GM and CPC Committee Secretary of ICBC Shanghai Branch; Deputy Director General of Shanghai Municipal Government, Deputy CPC Committee Secretary of Shanghai Financial Committee, Director General Of Shanghai Financial Service Office. Currently, Chairman of the board of directors, CPC Committee Secretary of Shanghai Pudong Development Bank and Chairman of the board of directors, CPC Committee Secretary of Shanghai International Group. Mr. JI is also a member of the 10th and 11th National Committee of CPPCC and candidate member of 9th Communist Party of China's Shanghai Committee. FU Jianhua, male, born in 1951, master's degree with a senior economist professional title. Once worked as Deputy GM of China Construction Bank Jiangxi Branch, Director General of the General Office, CCB Shanghai Branch; Deputy GM of CCB Shanghai Branch, GM of Credit Management, CCB Head-office, CPC Party Committee Secretary, President, Vice Chairman and Chairman of Bank of Shanghai. Currently, Mr. FU works as the Vice Chairman, President and Deputy CPC Committee Secretary of SPDB. He retired in January CHEN Xin, male, born in 1955, master's degree with a senior economic professional title. Once worked as Deputy GM of ICBC Shanghai Branch Jing'an Sub-branch, GM of SPDB Credit Department, Board Member and EVP of SPDB; Chairman, CPC Party Committee Secretary and President of Bank of Shanghai. Currently, Deputy Chairman of Shanghai International Group, Deputy Chairman and Deputy CPC Party Committee Secretary of SPDB. YANG Dehong, male, born in 1966, master's degree with a professional title of economist. Once worked as GM of Investment Banking Dept., Shanghai International Trust & Investment Co., GM of Shanghai Investment Consultancy Co., GM of SIG Assets Operations Corp., Director General of the Administrative Offi ce, Board Offi ce and IT Center of SIG, Deputy GM of Shanghai International Trust & Investment Co., Assistant GM of SIG. Currently, he works as Deputy GM of Shanghai International Group and GM of Shanghai Aijiang Corporation. PAN Weidong, male, born in October 1966, master's degree with a professional title of senior economist. Once worked as Deputy GM of BD Dept. Ningbo Securities, GM of Treasury Dept. SPDB Ningbo Branch, GM of SPDB Ningbo Beilun Sub-branch, Deputy GM of SDPB Ningbo Branch, GM of Product Innovation & Development Dept., SPDB Head-offi ce, GM of SDPB Kunming Branch. From June 2005 to March 2008, worked as Director General of Finantial Institutions Dept., Shanghai Financial Service Offi ce. Currently, he works as Assistant GM of Shanghai International Group, CPC Party Committee Secretary and Chairman of Shanghai International Trust & Investment Co., Ltd.

42 2011 Annual Report 41 Overview of the Company s Directors, Supervisors & Senior Management SHA Yuejia, male, born in March 1958, PhD, professor level senior engineer. Once worked as Director of Department four of Beijing Construction Section of Beijing Telecommunications Administration. President of Beijing Telecommunications Planning Design Institute, Deputy Secretary of Beijing Telecommunications Administration, Deputy GM and Party Committee member of Beijing Mobile Communications Company, Director, GM and Party secretary of Beijing Mobile Communication Co., Ltd. He currently works as vice president /deputy GM and Party members of China Mobile Communications Corporation, executive director and vice GM of China Mobile Limited. ZHU Min, female, born in October 1964, Ph.D.,senior accountant., She once worked as GM of Finance Department of China Telecom (Hong Kong) Limited, GM of China Mobile (Hong Kong) Group Co., Ltd., Minister and Director of the centre capital allocation of Finance Department of China Mobile Communications Corporation. She works currently as GM of China Mobile Communications Corporation, Deputy Chief Financial Offi cer of China Mobile Ltd., and General Manager of the Finance Department. Stephen Bird, Male, British, MBA, born in Once worked as President of Operation Dept of GE; Principal of Operation and IT Dept of Citi Asia; Principal of Operation and IT Dept of Citi Latin America; CEO for Credit Card and Consumer Banking of Citi Japan; CEO for Citi North Asia, President of Global Consumer Banking and credit card business for Citi Asia Pacifi c.he currently is CEO of Citi Asia Pacifi c as well as member of the management committee. MA Xinsheng, male, born in March 1954, master's degree with a professional title of senior economist. Once worked as CPC Party Committee and GM of Shanghai Converter Plant, Deputy GM of Electronics, CPC Party Committee Secretary and GM of Shanghai Electronics & Machinery Trading Building, Deputy CPC Party Committee Secretary and Deputy Chairman and President of Electronics & Machinery Group, Deputy CPC Party Committee Secretary of Shanghai State-owned Assets Commission. Currently he works as CPC Party Committee Secretary and Chairman of Brilliance Group. WEI Pengcheng, male, born in 1953, a postgraduate with a senior economist's title. Once worked as the General Manager of Xuzhou Cigarettes Plant, Director of Xuzhou Cigarette Bureau, Deputy General Manager, Party Committee member and Party Secretary of Xuzhou of Jiangsu Cigarette Bureau, Deputy Director of Jiangsu Cigarette Bureau. At present, he is the Director of Jiangsu Cigarette Bureau, General Manager and Party Secretary. WANG Guanchang, male, born in 1949, bachelor's degree with a professional title of senior economist. Once worked as Director General of the Postal Transportation Bureau of Shanghai, Assistant Director General of Shanghai Postal Management Bureau and Director General and CPC Party Committee Secretary of Shanghai Posatl Service Bureau, CPC Party Committee and GM of Shanghai Postal Service Corp. He currently serves as the Chairman of Shanghai Post Express Logistics Co., Ltd. He is also a member of the Shanghai Municipal People's Congress Standing Committee, and the Army Reserve Divisions Party Standing Committee. He is also a member of the 10 th Committee of the People's Congress of China, a Delegate of 8th and 9th CPC Party Committee and 12 th and 13th Committee of the People's Congress of Shanghai. SHEN Si, male, born in 1953, master's degree, EMBA, senior economist. Once worked as deputy director general and section chief of Investigation and Statistics Bureau in People's Bank of China Zhejiang Branch, deputy manager of Investigation and Statistics Bureau in People's Bank of China Head Office, deputy president and commissary of Party Committee Hangzhou branch SPDB, Corporate Secretary and Director of the Board Offi ce of SPDB. He's currently Board Member and Corporate Secretary of SPDB. SUN Zheng, male, born in 1957, PhD, Professor, tutor of doctorate degree candidate, CPA, ASCPA. Once worked as Vice Dean, Dean and Assistant President of Shanghai Finance and Economics University. He is currently Vice President of Shanghai Finance and Economics University, Vice President of China Accounting Academy, committeeman of China Accounting Rule Committee under Ministry of Finance, member of Committee of Experts for listing company in Shanghai Stock Exchange, member of Financial Budget Management Committee of Shanghai state owned assets as well as independent Chairman of Shanghai Wangye Corporation.

43 Annual Report Overview of the Company s Directors, Supervisors & Senior Management LIU Tinghuan, male, born in 1942, bachelor's degree with a professional title of researcher. Once worked as GM and CPC Party Committee Secretary of PBOC Dalian Branch, Deputy GM, GM and CPC Party Committee Secretary of ICBC, Deputy CPC Party Committee Secretary and EVP of PBOC, Chairman of China Union Pay Co., Ltd., He is now retired. He was a committee member of 10th National Political Consultative Conference, Vice Dean of economic committee, candidate committee member of 15th CPC committee. CHEN Xuebin, male, born in 1953, doctorate degree and professor and tutor of doctorate degree candidates. Once worked as Director General of Financial Research Center, Shanghai University of Finance and Economics, Deputy Chancellor of Financial Research Institute, Fudan University. Currently, he works as Acting Deputy Chancellor of Financial Research Center, Fudan University. He is also a member of the Chinese Financial Institution and a member of the China International Financial Institution. XU Qiang, male, born in 1951, master's degree with a professional title of researcher. Once worked as Deputy Section Director and Deputy Director General of Research Center, Director General of Legal System Construction Offi ce, Shanghai Municipal Government. Currently, he works as Director General of Shanghai Arbitration Committee. ZHAO Jiusu, male, born in November, 1954, doctor of law from Duke University, USA. Once worked as a lawyer in Coudert, USA, partner in Clifford Chance, UK. He is currently partner in Jones Day Shanghai Representative Offi ce. ZHANG Weiying, male, born in October 1959, Han, began to work in December 1984, joined the CPC in 1981, graduated from Oxford University, Ph.D. in Economics, Professor, worked as Associate researcher in State System Restructuring Commission China Economic System Reform Research, Director of the Institute of Business Administration, Peking University, Associate Dean and Dean of Guanghua Management School of Peking University. Currently works as the Assistant President of Peking University. GUO Wei, male, born in February 1963, Han. Began to work in 1988, joined the CPC in 1984, Master Degree in China Technology University, Senior Engineer, once worked as Director, Senior Vice President of Lenovo Group, CEO of Digital China (China) Co., Ltd.won the Ten Outstanding Young Persons in 2002, won the China Young Entrepreneur Management Innovation Award. In 2005, currently works as CEO of Digital China (China) Ltd. (2)Supervisors LIU Haibin, male, born in 1952, master's degree, MBA. Once worked as journalist of Anhui Daily, dean of national audit press no.2 editing department, the special commissioner of the State Audit Bureau to Nanjing, the special commissioner to Shanghai from the State Audit Bureau etc. Currently, he works as the Chairman of the Supervisory Board of SPDB, party construction supervisor of SPDB and a board member of Shanghai International Group. ZHANG Linde, male, born in 1950, MBA. Once worked as Deputy GM of Shanghai Guomai Telecommunications Corp., GM and deputy secretary of Shanghai Photo Image Data Corp., Director General of Administrative Offi ce, Shanghai Postal Management Bureau, GM of Shanghai Information Industry Co., Ltd, Deputy Director General, Shanghai Postal Management Bureau. Currently, he works as Deputy GM of Shanghai Telecommunications Corp. ZHANG Baohua, male, born in 1951, master's degree & MBA. Once worked as Director General, Administrative Offi ce of New Asia Group, GM of New Asia (Rotterdam), Deputy GM and Vice Chairman of Shanghai New Asia Co., Ltd. Currently, he works as Assistant GM of Jinjiang International (Group) Co., Ltd and Chairman of the Financial Division. LI Qingfeng, male, born in 1971, Master degree. Worked as GM of Hang Futures Brokerage Co., Ltd. Chief economist, Deputy GM and deputy secretary of Party branch Shanghai Jiulian Group. Currently works as GM, secretary of Party branch of Shanghai Jiulian Group, President of Hang Futures Brokerage Co., Ltd., and Research Committee member of the Shanghai Futures Exchange

44 2011 Annual Report 43 Overview of the Company s Directors, Supervisors & Senior Management Fred Hu, male, born in 1963, doctor's degree. Once worked as an advisor for World Bank, an offi cial in IMF, Chief Economist and Managing Director of Research Department in Genever-Davost World Economy Forum, Managing Director of Goldman & Sachs (Asia) Co., Ltd., He is now President of Primavera Capital Group, Professor in Tsinghua University, committee member of Hong Kong government strategy committee and counselor of Hong Kong CSRC. XIA Dawei, male, born in 1953, professor, tutor for doctoral degree. Once worked as Section Chief, Assistant President and Executive Vice President in Shanghai Finance and Economics University. He is currently President of Shanghai National Accounting Institute, commissary of expert committee for listing company in Shanghai Stock Exchange, Chairman of Chinese Industry Research and Development Promotion Committee, director of industrial expert committee in Shanghai Economics Institute. Obtained the State Department experts special allowance, the academic leader of Century Arts Department of Ministry, and academic leader of Century Arts Department of Education. FENG Shurong, male, born in 1952, college graduate, senior economist. Once worked as senior secretary of Shanghai Municipal Agency, deputy director of Trade Bureau of Pudong New Area, general secretary and party secretary of Economic and Finance Committee of Chinese Communist Party Shanghai Committee Agency, member of discipline committee of Chinese Communist Party Shanghai Committee. He is currently the Deputy Party Secretary of SPDB, secretary of Party discipline committee of SPDB and president of labor union of SPDB. YANG Shaohong, male, born in 1950, master's graduate, senior economist. Once worked as Section Chief of People's Bank of China Zhejiang Branch, Team Leader of Department of Discipline Inspection in Zhejiang Financial Community, Supervisor of Supervisory Agency, vice-president of People's Bank of China Zhejiang Branch, GM and Secretary of Party Committee of SPDB Hangzhou Branch. He now works as Lead of the No. 1 Inspection Team of SPDB Headquarters. LI Wanjun, male, born in 1951, master's degree with a professional title of senior economist. Once worked with PBOC Yichuan Sub-branch, then, PBOC Henan Provincial Branch as Deputy Section Chief, Section Chief and then, Assisant President and Vice President. Currently, he works as GM and CPC Party Committee Secretary of SPDB Zhengzhou Branch. (3)Other Senior Management SHANG Hongbo, male, born in 1959, master's degree, EMBA. Once worked as Deputy Director of Administrative Offi ce, Executive Deputy Director of Treasury Department and Deputy President in People's Bank of China Ningbo Branch, General Manager and CPC Party Committee Secretary of Shanghai Pudong Development Bank Ningbo Branch, Board Member of SPDB. He's currently Executive Vice President of SPDB. Liu Xinyi, male, born in 1965, master's degree with a senior economist title. Once worked as Deputy GM of SPDB Airport Sub-branch, Deputy GM of SPDB Shanghai Branch and member of the CPC Party Committee. From Oct. 2002, worked in Shanghai Financial Service Office as Director of Financial Institutions Department, Assistant Director General of the Financial Offi ce. Currently, Mr. LIU is Executive Vice President and CFO of SPDB. JIANG Mingsheng, male, born in 1960, bachelor's degree. Once worked as Deputy GM of China Merchants Bank Guangzhou Branch, GM of Corporate Banking, CMB Head-office, CPC Party Committee Secretary and Deputy GM of CMB Shanghai Branch, and later on, GM of CMB Shanghai Branch. Currently, Mr. JIANG works as Executive Vice President of SPDB, GM and CPC Party Committee Secretary of SPDB Shanghai Branch.

45 Annual Report Overview of the Company s Directors, Supervisors & Senior Management JI Guangheng, male, born in 1968, master's degree with senior economist title. Once worked as Chairman of the board of directors and GM of Shanghai Yingong Real-estate Development Corporation, Vice section chief of housing credit department market developing section and vice president secretary of ICBC Head-office, Director of general offi ce and Party offi ce, committee member of CPP committee and vice president of ICBC Beijing Branch and President of ICBC Chang'an sub-branch. He now works as EVP of SPDB and GM and CPC Party Committee Secretary of SPDB Beijing Branch. MU Shi, Male, born in 1961, master's degree with senior economist title. Once worked as Vice dean of Financial and Economic Committee of Tianjin People's Congress and assistant to President of Tianjin Trust Co., President, Vice President and CPC Party Committee Secretary of SPDB Tianjin Branch and CCO of Risk Management Department of SPDB Head Offi ce. He currently is Vice President of SPDB. XU Haiyan, Female, born in 1960, EMBA with senior economist title. Once worked as China Investment Bank Ningbo Branch Construction Principal and Chief of Planning Offi ce of CCB Ningbo Branch, Vice President of SPDB Ningbo branch, GM of Finance Department and Investment Bank of SPDB Head Offi ce. She is currently vice president of SPDB. 2. Posts Held in Shareholder Companies Name Shareholder Company Post Held JI Xiaohui Shanghai International Group, Ltd Chairman, CPC Party Committee Secretary CHEN Xin Shanghai International Group, Ltd Vice Chairman YANG Dehong Shanghai International Group, Ltd Deputy GM PANG Weidong Shanghai International Group, Ltd Chairman, CPC Party Committee Secretary Stephen Bird Citi Group CEO, Citi Group Asia Pacific MA Xinsheng Brilliance Group, Ltd Chairman, CPC Party Committee Secretary WEI Pengcheng China Tobacco & Cigarette Group Jiangsu Branch GM & CPC Party Committee Secretary WANG Guanchang Shanghai Postal Service Co. GM & CPC Party Committee Secretary ZHANG Linde Shanghai Telecommunications Co. Deputy GM ZHANG Baohua Jinjiang International Group Assistant GM & Chairman of Financial Division LI Qingfeng Shanghai Long-Alliance Group Co., Ltd. GM 3. Compensation Package for Directors, Supervisors and Senior Management 1). Decision-making procedure to decide the compensation package of directors, supervisors and senior management: For directors, supervisors and senior management members on the payroll of the company, their compensation package shall be reported to the Compensation & Performance Assessment Committee under the Board for check and approval and once approved, shall be submitted to the board meeting for approval. 2). Principles to decide the compensation package for directors, supervisors and senior management: The compensation package policy of the company applies to all staff. The actual compensation package is reported to the Compensation & Performance Assessment Committee under the Board. The compensation package for directors, supervisors and senior management is also decided according to the above procedure.

46 2011 Annual Report 45 Overview of the Company s Directors, Supervisors & Senior Management 4. Change in directors, supervisors, senior management Mr. FU Jianhua, will no longer serve as Vice Chairman and President of SPDB starting from January 11, 2012 due to reasons of his age; Mr. JI Xiaohui, Chairman of SPDB will take over as the President of the Company. 5. An Overview of the Company's Staff Total Population of Current staff Structure of the Staff Total Population of Resigned staff Paid by the Company 291 Management Staff 287 Business Staff Technology Staff 619 College Diploma or Graduate from Secondary School 6606 Bachelor's Degree Master's degree and above 3684 Note: the total number of current staff does not include those at township or village banks.

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48 2011 Annual Report 47 Corporate Governance Corporate Governance Structure 1. Corporate Governance During the reporting period, the company further improved the corporate governance structure, drew on mature international experience on corporate governance, to build and form a reasonable share structure. By clarifying each main border's responsibilities, it achieved the interest maximization & equalization to all stakeholders. Protecting the interests of depositors, winning return for shareholders, creating value for the society, it will be built into a modern fi nancial services enterprise with strong core competitiveness, adequate capital, strict internal control, safe operations, and good benefi ts. During the reporting period, according to the requirements under the regulatory supervision, the company timely made and amended relevant regulations to perfect governance structure system. The Board considered and adopted the Interim Administration Measures for Consolidated Statements Internal Control Standards Implementation Plan and Evaluation Project, Internal Capital Adequacy Assessment Management Approach and revised the Directors Duty Evaluation System, etc. 1) Shareholders and General Meeting of Shareholders The company was able to strictly follow the stipulations of Articles of Association, and Rules of Procedures for Shareholders' Meeting and convene shareholders' meetings accordingly. In 2011, the company has convened one general shareholders' meetings and passed 6 resolutions so as to ensure all shareholders the right to know, to participate and to vote and were given equal and fair treatment and that all shareholders may fully exert their rights. 2) Directors and Board of Directors At present, the board of directors is made up of 19 members, among whom 4 are senior executives from the company, 8 are representatives from shareholders, 7 are independent directors. All independent directors are experts or professionals in finance, legal service or strategy management. During the reporting period, the company convened 10 board sessions and passed 47 resolutions. Under the board, there are 6 committees, namely, the Strategy Committee, the Nomination Committee, the Risk Control & Related Transaction Committee, the Compensation & Performance Assessment Committee, the Audit Committee and the Capital & Operation Management Committee, all with clear roles and responsibilities and good effi ciency. During the reporting period, the committees in total convened 13 sessions and passed 34 resolutions. All board members are able to fulfi ll their duties conscientiously, professionally and efficiently. They effectively exercise Board's decision making power, assume ultimate responsibility for commercial bank's capital adequacy ratio and operation management, helping the Company build a good corporate culture that values integrity, protecting the legal rights of shareholders and the interest of depositors and other stakeholders, and ensuring that SPDB abides by relevant laws, rules and regulations. SPDB's Board of Directors won the 2011 Board of the Year Award in the listed company's annual corporate governance contest organized by the Shanghai Stock Exchange. 3) Supervisors and the Supervisory Board The 4th supervisory board was made up of 9 supervisors, among whom 2 are external and 3 are staff representatives. Under the supervisory board, there is a Nomination Committee. The supervisors supervised on the compliance, risk, internal regulation construction and authenticity of business operations. During the reporting period, the supervisory board convened 10 sessions and passed 48 resolutions. Being responsible for shareholders, the supervisors fulfi lled their duties seriously and supervised on the compliance and performance of the company's fi nancial accounting practice and the directors, the president and other senior management.

49 Annual Report Corporate Governance Structure 4) Senior Management Among the senior management of the bank, there are one President, 6 Executive Vice Presidents, 1 Corporate Secretary and 1 CFO. Under the board of directors, senior management implemented the scientific concept of development, actively coped with financial crisis, improved management capabilities, seized the significant development opportunity brought by sustain economic growth national strategy and Two Centers construction in Shanghai, strived to broaden business and client base, speeded up innovation and strategic transformation, reinforced risk management and internal control work. As a result, the asset effect and investment returns were improved; the quality of the asset withstood the initial trials of economic fluctuations and won recognition of international credit rating agencies. The Company's market competitiveness, society influence and corporation solidarity had been strengthened, contributing to its sustained, stable and healthy development. Under the senior management, there are asset and liability management committee, marketing improvement committee, risk management committee and information construction committee and so forth. 5) Information Disclosure and Transparency The company has been able to strictly comply with the relevant laws, regulations, Articles of Association, and the information disclosure regulations and the company has disclosed the relevant information truthfully, accurately, completely and in a timely manner, and has ensured equal access to information for all shareholders. During this reporting period, the company had issued 28 provisionary notices and 4 regular reports, while focusing on enhancing the quality of information disclosure, ensuring the completeness, adequacy and timeliness of information disclosure, improving corporate transparency, drawing on format and content requirements for disclosure of overseas listed companies to enrich the contents of the regular reports. SPDB also strengthens management of inside information, ensures the legal compliance of information disclosure, and creates conditions for investors to fully understand the company operations and to prevent insider trading.

50 2011 Annual Report 49 Corporate Governance Structure 2. Duty Performance of the Directors 1) Attendance of the Board meetings Name Indepen -dent Director or Not Supposed Attendance (Total times this year) Personal Attend -ance (Times ) Attendance by Communication Methods (Times) Attendance by authorized deputy (Times) Absen -ce (Times) Absen -ce Twice in a Row JI Xiaohui No Fu Jianhua No Chen Xin No Yang Dehong No Pan Weidong No Sha Yuejia No Zhu Min No Stephen Bird No Ma Xinsheng No Wei Pengcheng No Wang Guanchang No Shen Si No Sun Zheng Yes Liu Tinghuan Yes Chen Xuebin Yes Xu Qiang Yes Zhao Jiusu Yes Zhang Weiying Yes Guo Wei Yes The Number of Board meetings Held During the Year 10 Of which: on-site Meetings 3 Communication meetings held 7 On-site meetings with the communication - 2) Independent Directors' Objection to Motions Submitted by the Company During the reporting period, the independent directors had not submitted any objection to any motion submitted by the board meeting or non-board meeting. 3) The Completeness of Independent Directors' Work System and their performance There are 7 independent directors in 4th board of directors, making up 1/3 of board members and satisfying the rules that independent directors participating should be more than 1/3 of the total population of board. The independent directors take charge of board risk management and related party transaction control committee, nomination committee, salary and assessment committee, audit committee. All independent directors are experts or professionals in accounting, finance and legal service with international reputation. In 2011, the independent directors strived to advance the interest of the whole SPDB and its small and medium-sized shareholders with integrity and meticulousness, playing an active role in the effective and objective decision making of the Board.

51 Annual Report Corporate Governance Structure 3. Independence from the Controlling Shareholder in Terms of Business, Personnel, Assets, Organization and Finance The company doesn't have any controlling shareholder. The largest shareholder, Shanghai International Group Co., Ltd., together with its controlling subsidiaries Shanghai International Trust Co., Ltd., Shanghai Guoxin Investment Development Co., Ltd, Shanghai International Group Asset Management Limited holds a combined total of % shares. The company is independent from the largest shareholder in the assets, personnel, fi nancial, institutional and operational aspects. Major decisions are to be made and implemented independently by the company. No large shareholder would take the company funds in any form or require the company to provide guarantee for others. Independent or not Description Influence on SPDB Improvement In terms of business Yes the company's businesses are independent from those of its No. 1 shareholder. - - the company is independent in terms of personnel management, human resources and In terms of personnel Yes compensation. The President, the EVPs, the Corporate Secretary, the CFO and other senior management are all on the payroll of the company, and not on the payroll of the No. 1 shareholder. - - In terms of assets Yes the company has its own business offices and infrastructure. - - the company has set up a complete set of organization and the board of directors, the In terms of organization Yes supervisory board and the various functions of the company work on their own. There is no affiliation between them and the functions of the No. 1 shareholder. - - the company has its own financial control In terms of financial control Yes department and has set up a complete and independent set of accounting system and financial control system There is no intra-industry competition and related party transactions for SPDB due to partial restructuring, industry characteristics, national policies or mergers and acquisitions 5. Performance Evaluation of Senior Management and Incentive Mechanism To further improve the corporate governance structure, promote the establishment of a sound incentive and restrictive mechanism linked to shareholder value, to effectively mobilize the initiative and creativity of senior management, continuously enhance the company's efficiency, scale and quality, ensure the development of strategic objectives, the Board of Directors passed the Senior Management Interim Evaluation and Duty Performance Examination Approach. The general principles: First, as per the scientific development concept, to encourage the banks to enhance

52 2011 Annual Report 51 Corporate Governance Structure strategic management, innovation, capital conservation and environmental protection, and continue to enhance the core competitiveness and sustainable development; Second, according to the stakeholders interests balancing principles and sustainable development requirements, to evaluate senior management's performance in a compliant way; Third, to do comprehensive assessment in terms of bank effi ciency, size, quality, at the same time according to different business requirements and management features, to realistically Implement the scientifi c classifi cation assessment; comprehensive assessment and categorized evaluation should be made in both quantitative and qualitative ways, with quantitative assessment as the main method. Four, in accordance with the requirements of unity of interests, powers and responsibilities, to strengthen performance evaluation for senior management with both rewards and punishments, both incentives and constraints, and the evaluation result will be used as an important basis for senior management's remuneration, appointment and dismissal. 6. Company's Social Responsibility Report As the first commercial bank to release Corporate Social Responsibility Reports in China's banking sector, during this reporting period, the company further clarifi ed the philosophy, objectives, standards and scope of CSR in the new era. SPDB is committed to integrate both commercial value and social value into strategy, processes and business models, regard major social and environmental issues as part of its missions, sees itself as an organic part of society. It is committed to growing with various stakeholders and contributing to the whole society's harmony and common development. In 2011, the company enhanced financial services for SMEs, effectively contributing to their growth and development. At the same time, SME loans grew faster than other corporate loans, thus providing strong support for the bank's efficiency enhancement and structure optimization. The company also stepped up green financial services and became the fi rst bank to launch a series of innovative products such as building energy effi ciency fi nancing, international carbon (CDM) factoring, contract energy management and factoring fi nancing. It not only provided a strong support to China's low-carbon economic development but also expanded the blue ocean for green bank credit sector. The social contribution in this reporting period: Time(Year) Social contribution per share (based on the weighted average number of shares) 4.21 yuan 5.95 yuan Note: 1. social contribution per share = earnings per share + (the amount of paid tax + staff remuneration + Interest payment + total expense on public welfare) / total share capital. Since 3 shares were given as gift for every 10 shares in the 2010 profi t distribution, the social contribution per share in 2012 was calculated based on the adjusted number of shares. 7. Internal Control Self-assessment Report and Audit Agency Verification Opinion by Company Disclosure Board To further enhance the preparation of regular reports and disclosure management, the company made the "Regular report preparation and information disclosure management rules" to clarify the responsibilities of relevant departments in the preparation of regular reports and to ensure the accuracy, authenticity and integrity of the disclosed information. According to the company's Information disclosure management rules, in case of major errors in the disclosed information (including annual reports, semi-annual reports, quarterly reports and other temporary announcements), the departments and personnel directly responsible for that will be criticized, warned, demoted or even dismissed, and will be subject to damages and if necessary legal liability. The company's directors, supervisors and senior management is responsible for the authenticity, accuracy, completeness and timeliness of the disclosed information unless there is suffi cient evidence showing he/she has fulfi lled its due diligence obligations. The chairman, president, chief financial officer bear the primary responsibility for the authenticity, accuracy, completeness and timeliness of the disclosed information in the company's fi nancial statements; the company would record and document the

53 Annual Report Corporate Governance Structure fulfi llment of relevant bodies' information disclosure duties and in accordance with the latest regulatory requirements and practical experience, continue to strengthen and implement the accountability system for signifi cant errors of disclosure in the annual reports, so as to ensure the disclosure quality of annual reports. During the reporting period, there was no signifi cant disclosure error in the company. 8. Internal Control Self-assessment Report and Audit Agency Verifi cation Opinion The Company has set up an internal control system. The Audit Department, Risk Management Department and Compliance Department have been set up for internal control monitoring and review purposes. The Audit Department is to deliver internal control review report to the Board on a regular basis. The Self-assessment Report: Board of Directors is responsible for establishing and maintaining fi nancial report related internal control system. Its objective is to ensure that the information in fi nancial reports is true and complete and reliable, and to prevent the risk of material misstatement. Due to the inherent limitations of internal control, the above objectives can only be reasonably guaranteed. In accordance with the Corporate Internal Control Basic Rules, the Board of Directors has evaluated the internal control of fi nancial reporting and deemed it effective on December 31, 2011 (benchmark date). No significant non-financial reporting related internal control deficiencies were found in the internal control selfevaluation process, but there are room for improvement for certain products and business operations. (1) Problems and improvements identified in the internal control design: the consumer credit business process design needs further optimization of loan issuance and funding supervision, better implementation of payment management requirements, better compliance management and follow-up monitoring measures for funding usage, and enhanced design of regulatory process management. In view of this, the company systematically revised and improved its consumer credit business regulatory framework, developed supporting rules for consumer credit products in the field of individual housing, private commercial buildings, individual consumption, personal overseas study, and personal automobile consumption. At the same time, it optimized the risk review, warning and monitoring for consumer credit business, and developed entry management and post-loan management rules, with detailed regulations on entry management, basic requirements, procedures, post-loan management and risk monitoring. It set a clear framework for consumer credit products, increasing its effi ciency while maintaining effective control. (2) Problems and improvements identified in the internal control execution: risk management and control for commercial bill business, and the enforcement of the new regulations for loans still need to be strengthened. The company took measures to improve the execution of internal control, including: First, to step up risk management efforts, strictly implement business review and approval requirements, strengthen reviewing the trading background authenticity of commercial bills with a strict ban on commercial bill business without real underlying trade. Second, to strengthen the review of the loan issuance and payment management under the principle of loan based on actual payment'. The authenticity and rationality of the borrower's payment will be checked and analyzed, thus shifting from "nominal review" to "substantive review" in a bid to prevent loans from being diverted. Third, continue to improve the internal control system and strengthen the enforcement of internal control measures to guard against the risks arising from operational risk events, and ensure the implementation of the internal control system. Fourth, to further improve the internal assessment mechanism, increase accountability management, expand compliance training and publicity coverage, strengthen behavior management of managers and staff, continue to improve the compliance and sound operation awareness.

54 2011 Annual Report 53 Corporate Governance Structure 2) Verification Opinion of Auditor All shareholders of Shanghai Pudong Development Bank Co., Ltd: We have audited the effectiveness of the internal control for the fi nancial report of Shanghai Pudong Development Bank Co., Ltd. (hereinafter referred to as the "Company") dated December 31, 2011 in accordance with the relevant requirements of the Internal Control Audit Guidelines and the Certifi ed Public Accountant Practice Guidelines. (1) the company's responsibility of internal control: according to the Internal Control Basic Rules, Internal Control Application Guidelines and Internal Control Evaluation Guidelines, the establishment of a sound and effective internal control system and evaluation of its effectiveness are the responsibility of the Company's Board of Directors. (2) The Auditor's Responsibility: Our responsibility is, on top of the audit, to express an audit opinion on the effectiveness of internal control for fi nancial reporting, and disclosed major non-fi nancial reporting internal control defi ciencies identifi ed. (3) the inherent limitations of internal control: due to internal control's inherent limitations, it's sometimes impossible to prevent or detect misstatements. In addition, changes in circumstances may render internal control inappropriate, or lower degree of compliance to control policies and procedures. Using the internal control audit results to predict the future effectiveness of internal control contains some risk. (4) the fi nancial reporting internal control audit opinion: We believe that your company maintained effective fi nancial reporting internal control in all material aspects in accordance with the Internal Control Basic Rules and other relevant provisions on December 31, PricewaterhouseCoopers Zhong Tian CPAs Co., Ltd. Certifi ed Public Accountants: Hu Liang, Zhou Zhang

55

56 2011 Annual Report 55 General Shareholders' General Shareholders Meeting 1. General Shareholders' Meeting On April 28th, 2011, the company held the 2010 Annual General Shareholders Meeting. 171 shareholders or their proxies casted their vote, which represented 7,979,553,469 shares, or % of total shares. The meeting adopted on-the-spot open ballot. It reviewed and approved the 2010 Directors Annual Report, 2010 Supervisory Committee Annual Report, 2010 Company Financial Statements and 2011 Annual Financial Budget Report 2010 Profit Distribution Plan, the company's motion on the reappointment of Certified Public Accountants, Motion to Issue Subordinated Bonds etc, and formed resolutions. The meeting resolutions were disclosed in Shanghai Securities News, China Securities News and Securities Times on April 29, 2011.

57

58 2011 Annual Report 57 Board Meeting Board Meeting Report 1. Management Discussion and Analysis 1) An overview of the Company's Business Operation The reporting period is the first year of the company's new five-year strategic development. Facing a complex economic and fi nancial environment, the company conscientiously implemented the regulatory requirements from national macro-control policies and regulatory authorities and actively supported the country's overall economic development. With customer-focused, innovation-driven and restructuring development' as the overarching principle, SPDB maintained a steady pace of credit issuance, steadily pushed forward restructuring development, accelerated innovation, improved management and the capacity for sustainable development, and achieved good operating results. During the reporting period, the company's yearly operating revenue was RMB billion, up by RMB billion or 36.23% YoY. The company's before-tax profi t reached RMB billion, up by RMB billion, or 41.76% YoY. Shareholders' before-tax profi t reached to RMB billion, up by RMB billion, or 42.28% YoY. During the reporting period, the company steadily expanded the scale of deposits and loans, net interest margin increased gradually, intermediate business income increased YoY. Efficient cost control was the main drivers of earnings growth. With increased earnings, the company's ROA is 1.12%, 0.11 pps higher than the previous year. As the company complemented the private placement of capital on October 10, the return on equity had been diluted. The fully diluted ROE was 18.33%, up by 2.74 pps YoY. During the reporting period, the company continued to cut costs, with the cost to income ratio at 28.79%, 4.27 pps lower than 2010's 33.06%. By the end of the reporting period, the company's total assets stood at RMB billion, up by RMB billion or 22.51%.The outstanding balance of general loans (both RMB and foreign exchange) stood at RMB billion, up by RMB billion or 16.13%. The total debt stood at RMB billion, among which, the outstanding balance of general deposits (both RMB and foreign exchange) stood at RMB billion, up by RMB billion or 12.84%. The outstanding balance of deposit stood in the middle and upper range among joint-stock commercial banks. The ratio of deposit and loans for RMB and foreign exchange is 71.48% and 74.86% respectively, strictly within regulatory range. During the reporting period, the company's credit business maintained steady growth with quite good assets quality. Asset preservation work proceeded smoothly, with a reduction in the outstanding balance of NPL and NPL ratio. As of Dec. 31, 2011, the NPL loans of the company (based on the 5-category classifi cation of loans) stood at RMB billion, down by RMB 53 million and the NPL ratio was 0.44%, down by 0.07 pps YoY. The provision coverage ratio of NPL reached %, up by pps YoY. The company led the Chinese banking industry both in terms of NPL ratio and provision coverage of NPL. By the year-end of 2011, the company's shareholders' equity was RMB billion, 21.05% higher YoY. Weighted risk assets totaled RMB billion, up by RMB billion or 22.05%. Since weighted risk assets rose faster than core net capital, the CAR ratio decreased from 9.37% to 9.20%. In October 2011, the company successfully issued 18.4 billion yuan of subordinated debt, effectively adding to supplementary capital. Its Tier I CAR increased from 12.02% in 2010 to 12.70%. New progress was made in its internationalized and integrated management of the Group as a whole. First, the Hong Kong Branch was off to a good start. Within six months, the branch's operation became increasingly smooth, with total assets of billion yuan, issued loans of billion yuan, a total deposit of billion yuan. It was actively expanding its customer base (including mainland companies doing business in Hong Kong and Hong Kong local companies). More than 20 mainland institutions started cooperation with the Hong Kong Branch, with coordinated assets at billion yuan and initial cross-border synergy. Second, Management of rural banks

59 Annual Report Board Meeting Report and other investment institutions was strengthened. As of the end of 2011, the 13 rural banks saw huge business growth, total assets reaching 12.1 billion yuan, a 115% increase YoY; the pre-tax book profi t was 193 million yuan, an increase of 1,768 %. Third, the fi nancial leasing company and the Shanghai Pudong Development Silicon Valley Bank initiated by the company have been approved. The preparatory work is progressing smoothly. The company maintained its excellent reputation at home and abroad. In February, the company was ranked by Brand Finance (released by British Banker Magazine) at No. 92 among the Global Top 500 Financial Brands, or 18th among banks in Asia. In June, SPDB made The Bank Global 100 Bank List by core capital for the fi rst time, ranking No. 64, 44 spots higher than the previous year, or 7th among Chinese banks. In July, it was named by Forbes magazine as a Global 2000 company, ranking No. 224, or 16th among Chinese companies and 7th among Chinese banks on the list. The company won the 2011 Board of the Year Award from the Shanghai Stock Exchange in its listed company's annual corporate governance initiative. SPDB was also voted by hexun.com as 2010 Top Ten Brand Bank, the Best List Company in CSR for 2010; it was voted by Money Weekly as the Main Board Listed Company with the Best Board of Directors in It also won the Best CSR Report Award for 2010 from the China Banking Association. 2) An Overview of the Company's Financial Statement and Operating Income A. Increase in principal operating income, principal operating profit, net profit, cash and cash equivalent: Unit: RMB '000 Yuan Item As at Dec. 31, 2011 As at Dec. 31, 2010 Up or down (%) Principal operating income 67,917,672 49,855, Principal operating profit 35,756,727 25,072, Net profit belonging to shareholders 27,285,981 19,177, Increase in cash and cash Equivalent 145,031,549 33,473, Main Reasons for the Changes: (1) The increase in principal operating income was mainly due to the increase in assets scale, loan interest income, commission and fee income. (2) The increase in principal operating profi t was mainly due to the growth in principal operating income, and cost control. (3) The increase in net profi t was mainly due to the continued year-on-year growth in principal operating profi t. (4) The increase in cash and cash equivalent was mainly due to the signifi cant increase in asset allocation in other banks, who saw a big growth in deposits and loans with maturity shorter than 3 months. B. Principle operating income The company registered an operating income of RMB billion, up by 36.23% YoY%, mainly due to the growth in assets scale, loan interest income, income reconstructing and rapid rise in commission and fees. Among which, loan interest income accounts for 90.46%, down by 0.21 pps from 2010, commission and fee income accounts for 9.89%, up by 1.77 pps YoY. Unit: RMB '000 Yuan Loan interest income 61,441,562 45,203,510 Commission and fee income 6,715,726 4,048,546 Other income -239, ,795 Operating income 67,917,672 49,855,851

60 2011 Annual Report 59 Board Meeting Report Operating income by region: Operating income Shanghai Operating profit Shanghai Beijing Beijing Sichuan Sichuan Tianjin Tianjin Shandong Shandong Guangdong Guangdong Jiangsu Jiangsu Henan Henan Zhejiang Zhejiang Liaoning Liaoning Other regions Other regions Operating income by region: Unit: RMB '000 Yuan Region Operating income Operating profit Shanghai 10,831,878 2,708,450 Beijing 3,224,894 1,609,492 Sichuan 2,351,837 1,485,130 Tianjin 2,802,989 1,807,385 Shandong 2,772,088 1,551,215 Guangdong 4,708,967 2,571,040 Jiangsu 6,377,231 3,576,842 Henan 3,626,818 2,136,982 Zhejiang 9,903,178 5,581,792 Liaoning 3,553,954 1,951,853 Other regions 17,763,838 10,776,546 Total 67,917,672 35,756,727 C. Shareholders' Equity By the end of the reporting period, the listed company shareholder's equity stood at RMB billion, up by billion or 21.05% YoY. The company supplied the bank capital on time and the Capital Supplement Condition was improved. Through its own net profi t accumulation, the company's capital adequacy was improved.

61 Annual Report Board Meeting Report Unit: RMB '000 Yuan % Shareholder's equity 18,653,471 14,348, Capital Reserve 59,543,902 58,639, Surplus Reserve 21,805,744 15,249, General Risk Provision 18,700,000 9,500, Undivided Profit 30,188,118 25,258, Parent Company's Shareholders Total Equity 148,891, ,996, Minority Shareholder's Equity 651, , Shareholder's Total Equity 149,542, ,279, D. Internal Control for Items Related with Fair Value For financial instruments that can be traded on active markets, the company uses the active market quote to determine its fair value. For fi nancial instruments for which no active markets exist, the company uses valuation model or third party quote to determine the fair value. Valuation technique includes reference to prices used in recent market trading by the voluntary institutions who are familiar with the instruments, reference to the current fair value or cash fl ow discount for other fi nancial instruments with the same substance. The valuation technique will use market parameters as much as possible. However, for lack of market parameters, estimations have to be made in terms of credit spread of counterparty, market volatility and correlation, etc. These assumptions will have an impact on the fair value of fi nancial instruments. Items related to fair value Unit: RMB '000 Yuan Item Fair value change in the reporting period Accumulated fair value change in equity Loss provision in the reporting period Financial assets 1. Financial assets calculated by fair value and whose change is included in equity(derivative financial asset not included) - 5, ,866, Derivative financial asset 1,033, , , Financial asset available for sale 104,142, ,360, ,929,131 Subtotal of financial assets 105,175, ,290-1,360, ,344,759 Financial liabilities Derivative financial liabilities 1,172, , ,515,029 Subtotal of financial liabilities 1,172, , ,515,029 Note: there is no absolute articulation relation in this table

62 2011 Annual Report 61 Board Meeting Report Foreign Financial assets and liabilities held by the company Item fair value change in the reporting period Accumulated fair value change in equity Unit: RMB '000 Yuan Loss provision in the reporting period Cash, deposits in central bank and other banks 2. Placements with banks and financial assets purchased under resale agreements 15,723, ,413,267 12,179, ,692, Derivative financial asset 507, , , Loans and advances 38,043, ,297 50,280, Available for sale financial assets 268,804-14,610-1,229, Held to maturity investments 328, ,444 Subtotal of financial assets 67,050, ,903 14, ,297 83,043, Deposits with banks and other financial institutions 7,650, ,046,397 2.Borrowed funds 3,345, ,985, Derivative financial liabilities 684, , ,491, Deposits 49,656, ,592,380 Subtotal of financial liabilities 61,335, , ,115,754 Note: there is no absolute articulation relation in this table 3) Performance of Various Business Lines A. Corporate Finance Business: In 2011, the company strengthened fi nancial innovation with the enforcement of the basic business by grasping the opportunities, advanced fi nancial institution business transformation, promoted the rapid and coordinated development of various businesses. Putting customer first, it offered comprehensive fi nancial service such as fi nancing, wealth management, investment banking, cash management, electronic banking, asset custody, etc. At the end of 2011, the company had over 740,000 corporate clients, up by 120,000 YoY. The company's customer base continues to expand, with improved client structure, steady improvement in business profi tability, and continuous optimization of business and revenue structure. Corporate deposit/loan business: by the end of 2011, total corporate deposits stood at RMB billion, up by billion or 12.01% YoY. Total corporate loans were RMB billion, up by RMB billion or 15.24%. Corporate NPL ratio was 0.47%, down by 0.09% from the beginning of Small & Medium Enterprises business: In this reporting period, the total credit line for small and medium-sized enterprises (as per regulatory caliber) was billion yuan to a total of 35,692 credit customers, with BS loans totaling billion: or an increase of 31.46%, 28.87% and 13.55% YoY respectively. Investment Banking Business: A total of 61.4 billion yuan of corporate debt financing instruments were underwritten in the year, up 16% YoY; syndicated loan balance by the end of the year stood at 84.4 billion yuan, an increase of 22% YoY, ranking high among joint-stock banks billion yuan in M&A loans were issued. SPDB also

63 Annual Report Board Meeting Report actively developed Green Finance. By the end of 2011, the company's energy saving and environmental protection class loans totaled 25.5 billion yuan, an increase of 18% compared to the beginning of the year. Trade settlement business: The accumulated International Settlements (BIS) volume was $ billion, an increase of 35% over the same period in 2010; factoring business volume was billion yuan, up 124% YoY. Asset custody business: By the end of the reporting period, the size of the asset custody business was billion yuan, an increase of 35% YoY; the yearly custody fee income was 330 million yuan, up 60% YoY. Pay settlement business: a new integrated depository system with third-party securities depository, trading market depository and provision depository functions was launched, with annual depository fee income of 180 million yuan. The new Yinguantong System was successfully developed and launched. By the end of the reporting period, it had acquired 1,930 contract customers. Pension business: by the end of the reporting period, there were 302,300 individual accounts for enterprise annuity, with actual annuity balance of billion yuan. It launched company mandate and trust benefi t products, providing benefi t plan management services for more than 80 enterprises. B. Personal Financing Service: Under the principle of customer-centric and market-oriented, the company accelerated business restructuring, enhanced system development, implemented customer segmentation and category-specifi c management, and improve the product system. It also focused on channel development, optimized business processes, improved service effi ciency and brand infl uence, enhanced overall marketing capability and market competitiveness, and continued to maintain a rapid development of personal fi nancial services, with main operation indicators ranking high among joint-stock banks. By the end of the reporting period, the number of individual customers increased by million from that at the beginning of the year, with high-quality individual customers exceeding 1.5 million. Individual deposits: Stressing the basic role of savings deposits for individual fi nancial business, it continued to improve the growth mode of savings deposits and promote the rapid growth of savings deposits, with individual deposit-taking business hitting new highs. By the end of 2011, the new individual deposits were billion yuan, or an increase of 16.95%, individual deposit balance reaching billion yuan. Individual loans: mortgage loans continued a good momentum, and business loans made new breakthrough. In late 2011, the company's individual loan balance was billion yuan, up by billion yuan, or 19.94%. Its share increased by 0.63 percentage points YoY. With growth in scale and effi ciency, individual loans saw a decline in NPL ratio, at 0.33% at the end of 2011, down 0.02 percentage points YoY. Personal fi nancial Services: Focusing on customer needs, the company continued to enrich basic product line and made many breakthroughs in wealth management business via product innovation. It launched innovative fi nancial products such as Tiantianying Phase One, Zhouzhouxiangying Phase one. During the year, it independently developed 844 fi nancial products, introduced 200 fund and securities aggregate account products and 74 insurance products while further strengthening the one-to-many' fund accounts, aggregate capital trust scheme and other high-end customer products to enhance customer satisfaction. The sales of wealth management products increased 146% YoY. Electronic banking: It continued to improve the "Six in One" channel system and channel service functions. The TV banking business was offi cially launched in Shanghai. Also launched were a new mobile banking client software and new functions on ATMs (for example, using cards from other banks to repay SPDB's credit card; making deposits without a bank card). The shift to no-contact IC card reader on ATMs was completed, making SPDB the fi rst bank to use no-contact IC card readers on all ATMs. With increasing BD ability, the online banking had 3,249,800

64 2011 Annual Report 63 Board Meeting Report active customers, with 204,800 mobile banking customers. It also had 5,183 self-service machines in 3,069 selfservice outlets. The service capabilities electronic banking were further enhanced, which accounted for 78% of total transaction. Bank card business: Giving full play to the bank card's value as personal fi nancial services platform, it enhanced payment and settlement services, cross-industry value-added services innovation and bundled marketing efforts, and launched PBOC2.0 Financial IC cards, further enriching co-branded cards and theme cards. By the end of the reporting period, million Orient Card and Easy Financial Management were issued, with 2,944,200 new cards for the year. Card deposits amounted to billion yuan, accounting for 62% of the total individual deposits, with an average card deposit of 8068 yuan, up 5 % YoY. Card consumption amounted to billion yuan, up 55% YoY. Credit card business: It accelerated product innovation and function integration, improved service quality and expanded brand infl uence. The credit card issuance, consumption and overdraft increased steadily, with signifi cantly improved profitability. Based on customer demand, it introduced a variety of theme cards, feature cards and cobranded cards to enrich the product line and improve customer service. Working with Citibank, it issued 1.49 million new co-branded credit cards this year, making the cumulative number over 6.11 million by the end of the reporting period; POS consumption exceeded 53.5 billion yuan, with billion in operating income, up 45% YoY, among which interest income was , credit card middle income (including fees, etc.) was million yuan. C. Asset Business: By the end of 2010, capital assets of the whole bank reached RMB trillion, accounting for 49.8% of total assets, up by 2.9 pps YoY, among which, bond investment stood at RMB billion, up 86.1% YoY. And the funds for short-term investment amounted to RMB billion. Interest income was billion yuan, up 85.2% YoY; non-interest income was 438 million yuan, up by 302 million yuan or 291% YoY. In 2011 SPDB issued a total of billion yuan worth of financial products, and the accumulated volume of proxy and proprietary foreign exchange transaction was USD billion. D. Network Expansion: In the reporting period, the company enhances network expansion and innovation-driven development, and opened Xiamen Branch and Hong Kong Branch and 86 new business outlets. So in total the company had 37 branches and 741 outlets in 159 cities across China. At the same time, it continued to boost outlets' effi ciency and explore their potential in a bid to improve outlets' comprehensive service functions. It released Guidance on Accelerating the Development City Sub-branches to regulate the management capacity and improve services and effi ciency across all outlets. In addition, the Shanghai Pudong Development Silicon Valley Bank and the fi nancial leasing company have been approved by the CBRC, laying the foundation for integrated fi nancial business. E. Operations Support and Information Technology: Continuing to promote service integration and encourage branches to use window resources to carry out passive sales. It fully implemented the next-generation outlet network platform, with a go-live rate of 87%; it orderly developed the second-generation payment systems, supporting branches to offer unique local business. Shifting from manual to system monitoring of risks, the comprehensive reconciliation rate by account balance was 99.5%; in the reporting period, the head office's core system and 18 branches' front-end system were successfully upgraded, completing a new generation of information systems architecture blueprint and implementation road map. The second phase of the temporary disaster recovery 119 Project was successfully concluded, ranking high among joint-stock banks in terms of disaster recovery. The availability of critical systems all reached 99.9%, the medium-term planning goals.

65 Annual Report Board Meeting Report 2. Long-term investment made by the company Unit: RMB '000 Yuan Investment amount in the reporting period 1,856,861 Increase or decrease of investment amount in the reporting period 420,387 Percentage of investment amount change in the reporting period Investee Major operating activities Equity held (%) Notes Unit: RMB '000 Yuan Shanghai United International Investment Co. Investment Cost-based accounting method China Union Pay Bank card settlement Cost-based accounting method First Sino Bank Banking business 30 Equity-based accounting method AXA SPDB Investment Mangers Fund investment 51 Equity-based accounting method LAI SHANG Bank Banking business 18 Cost-based accounting method By Dec 31, 2011, outstanding balance of long-term investment was RMB billion, up by RMB billion YoY, mainly from investment in LaiShang Bank and the increased investment return under equity-based method Unit: RMB '000 Yuan Investment on cooperative enterprise 18,502 39,036 Investment on affiliated enterprise 710, ,818 Other long-term equity investment 1,127, ,620 Total 1,856,861 1,436,474 Notes: Cooperative enterprise includes AXA SPDB Investment Mangers Affiliated enterprise includes: First Sino Bank. Other long-term equity investment includes: Shanghai United International Investment Co., China Union Pay, LAI SHANG Bank 3. Utilization of Funds Raised On Sep. 23, 1999, the company issued 400 million common shares in the capital market at an offer price of RMB 10 yuan and raised a total of RMB billion capital. On Jan. 8, 2003, the company issued another 300 million new shares at an offer price of RMB 8.45 yuan and raised a total of RMB billion capital. On Nov. 16, 2006, the company issued another 439,882,697 new shares at an offer price of RMB yuan and raised a total of RMB 5.91 billion capital. On Sep. 21, 2009, the company issued privately 904,159,132 shares at an offer price of RMB yuan and raised a total of RMB billion capital. On October 14, 2010, the company issued 2,869,764,833 nonpublic shares at a price of yuan/share and raised total of RMB billion after deducting the issuing cost. The raised funds have been approved by the Chinese Banking Regulatory Commission and the People's Bank of China; all were used to replenish the company's asset capital and improve the company's capital adequacy ratio, signifi cantly enhancing shareholders' equity and the anti-risk ability, paving the way for the company's development. By strictly following usage plans for raised funds, the company effectively used them and achieved remarkable results.

66 2011 Annual Report 65 Board Meeting Report 4. Changes to the company's accounting policies and accounting estimates, significant accounting errors During the reporting period, there were no changes to the company's accounting policies and accounting estimates, or any signifi cant accounting error 5. Analyses of the Financial Strength and Performance 1) Key Performance Indicator Change and Reasons Item As of Dec. 31, 2011 As of Dec. 31, % Main Reasons Unit: RMB '000 Yuan Total assets 2,684,693,689 2,191,410, Loan issuance and increase in relevant banks Equity investment 1,856,861 1,436, Increased investment in LaiShang Bank Fixed assets 8,137,072 7,433, Increase in investment in fixed assets Total liabilities 2,535,150,909 2,068,130, Increase in deposit and liabilities of relevant banks Investment return 194,415 22, Growth in investment return from precious metals Shareholders' equity 148,891, ,996, Accumulation of operating profits 2) Changes over 30% and Reasons Unit: RMB '000 Yuan Item End of 2011 End of % Reasons for change Placement in other banks 267,876,482 69,539, Increase allocation in banking sector assets Capital lent out 111,415,298 31,253, Increase capital lent out to domestic banks Precious Metal 683,246 2,090 32,591.2 Increased investment in gold Derivative financial assets 548,787 1,033, Changes in fair value of derivative financial assets Interest receivable 11,071,074 6,492, Rise in interest bearing assets and interest rate hikes Available-for-sale financial assets 147,929, ,142, Increase in position of central bank bills Divided into loans and receivables, investment 8,759,536 3,707, Increase in renminbi financial bonds position Construction in progress 457,178 85, Building new offices, increased investment in ongoing projects Other assets 4,833,068 8,129, Some guaranteed financial products reaching maturity Deposits with banks and other financial institutions 440,908, ,818, Increase in relevant banks' liabilities

67 Annual Report Board Meeting Report Item End of 2011 End of % Reasons for change Capital borrowed 66,970,025 14,415, Increase in capital borrowed from domestic banks Sell under agreement to repurchase financial assets 86,019,569 16,963, Increase in this type of asset Tax payable 6,509,666 4,178, Increase in operating profit and income tax Interest payable 20,278,588 11,753, Increase in interest bearing liabilities and rate hikes Bonds payable 32,600,000 16,800, billion in subordinated debt was released Share capital 18,653,471 14,348, Dividend payment and increase in share capital Surplus reserve 21,805,744 15,249, Implementation of the profit distribution plan, increase in surplus reserve General risk provisions 18,700,000 9,500, Implementation of the profit distribution plan, increase in general risk reserve Item Jan-Dec, 2011 Jan-Dec, % Reasons for change Net interest income 61,441,562 45,203, Increase in deposit and lending and investment business; higher spread Fee and commission income 6,715,726 4,048, Improved income mix, increase in fee and commission income Investment Income 194,415 22, Better return from precious metal investment Losses due to fair value changes -859,837-87, Changes in fair value of derivative instrument due to market interest rate fluctuation Exchange gains 242, , Big rise in RMB exchange rate, lower FX return Other operating income 182, , Increase in rental and other income Business tax and surcharges 4,898,888 3,395, Increase in income, tax and surcharges Impairment of assets 7,499,975 4,587, Increase in total loans Other business costs 208, , Decrease in other business costs Non-operating income 157, , Reduction in income from disposal of non-current assets Non-operating expense 74,796 38, Increase in losses from disposal of non-current assets Income tax 8,484,175 6,102, Increased profits Net profit attributable to shareholders of the parent companies 27,285,981 19,177, Steady growth in deposits and loans, higher spread and commission and fee income, effective cost control

68 2011 Annual Report 67 Board Meeting Report 7. No major asset loss due to joint liability from offering external guarantee 8. Prospects of Future Development 1) the development trend of the banking sector and market competition landscape and their impact on the company At present, China's economy is moving in the expected direction of macro control, with increasing efforts for economic structural adjustment, accelerating change of the mode of development, which created favorable conditions for the restructuring and development of commercial banks. The central government's economic work conference and the national fi nancial work conference in 2012 set the tone of maintaining stability while achieving progress. Focus will be on boosting domestic demand and developing the real economy. This will encourage banks to put more resources inconsumption-oriented, service-oriented and innovation-based sectors, to increase efforts to support small and medium-sized enterprises, services and high-tech industries, and to optimize the basic structure of fi nancial services. Social financing structure will be further optimized, development of direct financing, especially the bond market will accelerate, and commercial banks are facing more pressure of fi nancial disintermediation. This will encourage commercial banks to step up innovation efforts, dig deeper into customer needs, and foster new business growth spot. Meanwhile, the pace of interest rate marketisation and internationalization of the RMB is accelerating; exchange rate is getting more fl exible. These pose challenges for commercial banks in the traditional profi t model and risk management model. Commercial banks need to take the initiative to deal with it by optimizing customer structure and income structure, vigorously develop low capital consumption business, reduce dependence on spread income, strengthen overall risk management, and enhance overall ability to resist risks, in order to protect the stability of the bank's sustainable growth. 2) Future Development Opportunities and Challenges that the Top Management Concerns In 2012 with increased efforts to adjust economy development model, commercial banks will have an important opportunity for restructuring and development. First, the country's strategic focus will be to boost domestic demand and develop the real economy and promote the continuous optimization of the basic structure of fi nancial services. Second, the state is stepping up efforts to support small and medium enterprises and rural fi nance, which helps commercial banks to foster new business growth engines. Third, household income is growing, income distribution structure is improving and consumption is making signifi cantly more contribution toward economic growth. All these create more favorable conditions for commercial banks to accelerate the development of retail business. Fourth, the proactive fi scal policy, structural tax cuts, reduction in the cost of doing business, regulation for local government fi nancing behavior help commercial banks to support economic development. Fifth, accelerated upgrading industry structure, new fi nancial needs expanded the blue ocean for commercial banks. Sixth, accelerated fi nancial industry reform encouraged innovation from various types of fi nancial institutions, bringing fi nancial institutions and fi nancial business to a new stage. At the same time, complex and volatile economic and fi nancial situation brought severe challenges for commercial banks. First, the transformative capacity of commercial banks faces a new test. With increasing downward pressure on economic growth, the shift to market-based interest rate keeps accelerating; banks' business model is facing rising pressure for change and transition. Second, it's getting hard for commercial banks to maintain a momentum of rapid development. With continued implementation of prudent monetary policy, the scale of credit will continue to be controlled, declining interest rates will repress enhancement of capital asset class gains, posing pressure for bank business development and revenue increase. Third, superposition of many types of risk leads to new challenges for risk management, especially potential risks associated with continued regulation for real estate, government

69 Annual Report Board Meeting Report financing platform clean-up, slowdown of foreign trade, etc. It means big risk control pressure for commercial banks. Fourth, there is also pressure for sophisticated management capabilities. With complex and volatile external environment and sustained economic structure adjustment and transformation, it's hard for commercial banks to grasp the directions for credit issuance, with new challenges for refi ned management and allocation of resources in specific segments 3) Business Development strategy for the New Year The guiding principle in 2012: fully implement the spirit of the Central Economic Work Conference and the national fi nancial work conference, carry out the general requirements of the Bank Conference on Strategic Management, take the new fi ve-year plan strategy as guideline, adhering to scientifi c development mode, keep steady growth, increase debt management capacity, and effectively strengthen market position; improve strategy execution, put customer fi rst, strengthen innovation, speed up restructuring and development, optimize business structure, enhance revenue; improve processes and effi ciency, have more robust, prudent and effective risk management in a bid to maintain and expand the good momentum of comprehensive, coordinated and sustainable development. 4) Business Goals for the New Year Total assets reach 3.04 trillion yuan, or up by nearly 14 percent YoY; Total loan balance reaches 1.49 trillion yuan, up by 12.5%; Total deposit balance reaches 2.08 trillion yuan, an increase of 13%; After-tax profi t growth of more than 17%, faster than that of total assets; Non-performing loan ratio (according to fi ve category method) can be controlled at 1 % or less by the end of the year. 5) New Measures in the New Year In 2012, the company will continue to implement the fi ve-year development strategic planning and customer-centric strategy by paying more attention to the co-ordination, execution improvement, and strive to achieve a coordinated development of the size, structure, effectiveness and quality. The main measures are as follows: Enhance client management, promote the steady growth of the main business and income. First, deepen customer system development, strengthen customer base, expand the size of various customer segments, build a unifi ed customer view, and deepen classifi ed management of customer segmentation. Second, effectively broaden the sources of liabilities, enhance the fi nancial strength of the bank, adhere to the development of basic deposit, attract more and more stable liabilities via customer management and product management, and take timely and proper active liabilities while controlling its share in total liabilities. Third, effectively serve the real economy, strengthen sophisticated allocation of credit resources, implement the "combining support with constraint" principle, support key ongoing construction projects, screen customers in traditional sectors, actively support emerging industries, accelerate the development of business transformation, and focus on improving revenue. Strengthen the effectiveness of innovation, and continue to enhance customer service capabilities. First, to accelerate the pace of product innovation, enhance the scope and contribution of intermediary business, continue to enhance innovation for emerging business areas, turn existing innovations to greater economic benefi ts, conduct pilot projects for key innovative business, and institutionalize innovation and its promotion. Second, to strengthen channels and business model innovation, improve service effi ciency, unify electronic channel customer view, improve bank card payment and settlement system, speed up the cooperation project with China Mobile, strengthen online banking sales and service capabilities, and promote the "credit factory" business model.

70 2011 Annual Report 69 Board Meeting Report Adhere to the bottom line of risk management, strengthen internal compliance management. First, guard against risks in key areas, enhance the forward-looking nature of risk management, focus on systemic problems in key regions, industries, and varieties, and guard against credit risk, compliance risk and reputation risk. Second, to broaden the scope of risk management, strengthen comprehensive risk management, conduct consolidated risk management, expand non-credit business management, and strengthen the management of emerging areas such as information technology and country specifi c risk. Third, to optimize risk management models, promote the implementation of the new Capital Accord, change the implementation of the new Basel Capital Accord from projectdriven to management-driven. Fourth, continue to strengthen the compliance internal control and audit management and pay close attention to case prevention and control. Improve overall operating system and basic management. First, optimize institutional mechanisms, match rights and responsibilities, build customer sharing system, integrating various types of processes, improve the effi ciency of bank operations and customer service, and strengthen strategic coordination with various investment institutions. Second, to enhance operational effi ciency, promote outlet transformation, enhance outlet passive sales capability, strive to play up the advantage of centralized operation. Third, to speed up the development of key systems, optimize marketing data analysis applications, strengthen information technology management, promote the construction of a new generation information systems and enhance the level of information support. Fourth, to strengthen the management of assets and liabilities, strive to grasp the rhythm of development, improve financial management system and internal pricing, follow regulatory policy adjustment and make good capital planning and supplement. Fifth, to deepen human resources management, strengthen personnel training, improve allocation of human resources to meet development needs. 6) Risk Factors that may impact on the company's future development strategies and business objectives First of all, the uncertainty of volatile economic fundamentals has some infl uence on the company's operation. The overall world economic situation is grim, with stagnant growth in developed economies. Emerging markets are in a period of adjustment, and the overall infl ationary pressure is still high. European debt crisis continued to spread, which accelerated the fl ow of risk-averse funds and intensifi ed international fi nancial market turmoil. Although the overall domestic economy remained stable, there was downward pressure on economic growth. With high prices and potential risks in the economy, some industries and enterprises facing funding pressure. Risks and spillover in some key sectors pose pressure on banks' operation. Second, changes in regulatory policy also have some impact. In accordance with the general idea of achieving progress while maintaining stability, the state continues to implement proactive fi scal policy and prudent monetary policy with increased focus, fl exibility and forward-lookingness. Monetary policy will be fi ne tuned in a timely manner depending on economic growth. And in accordance with the principle of "combining support with constraint", it focuses on fi nancial support for the real economy, and guides and promotes credit structure optimization. Countercyclical macro-prudential framework was further improved with strengthened prevention of systematic, regional risks and risks in key areas. Adjustments and changes of the policy environment will have an important impact on banking business activities. Peer competition also poses pressure on the company. Financial sector reform is expected to accelerate, social financing structure will continue to optimize, direct financing, and especially the bond market will accelerate its development. The nation will constantly promote the interest rate marketization and the internationalization of the RMB, increasing the disintermediation pressure for commercial banks and posing greater challenges for the traditional profitability mode and risk management and control model. At the same time, domestic banks are accelerating the pace of strategic transformation with a focus on customer, and have introduced new competitive initiatives. Some banks have formed distinguished mode of service and market brands, forming initial comparative

71 Annual Report Board Meeting Report advantage in specifi c areas. Pattern of development in the fi nancial industry and changes in competition within the industry will impact bank operation. 9. The Daily Work of the Board 1) The Board Meeting and the Resolutions A. On January 31, 2011, the 14 session of the 4th Board of Directors was held by way of correspondence voting. It adopted the following resolutions: "Motion on organization setting in 2011", "Motion on granting credit to First Sino Bank, "Motion on interim rules for consolidated BS administration". The relevant resolutions of the meeting were disclosed in the China Securities Journal, Shanghai Securities News and Securities Times on February 1, 2011 B. On March 28, 2011, the Fifteenth Session of the Fourth Board was held in Shanghai which voted on and adopted the following documents: "the Board of Directors annual report in 2010," 2010 annual operating report, Independent directors annual work report in 2010, "2010 annual report and its summary, 2010 annual fi nancial statements and 2011 fi nancial budget report, Motion on the company's 2010 profi t distribution, Director performance evaluation report in 2010, Appraisal and remuneration of senior management in 2010, "Annual internal control evaluation report in 2010, 2010 CSR Report", 2010 affi liated transactions motion, Motion on engaging new accounting fi rm, Motion on redemption of subordinated bonds in 2006", Motion on the issuance of subordinated bonds, "Director performance evaluation rules (2011 Amendment)", "Internal control implementation program and evaluation, Internal Capital Adequacy assessment Procedures", " Motion on 2010 business risk appetite policy implementation and 2011 risk appetite business strategy, Country specifi c risk management policies, Board of Directors report on the placement and usage of raised funds in 2010, Motion on convening a general meeting of shareholders". Resolutions of the meeting were published in the China Securities Journal, Shanghai Securities News, and Securities Times on March 30, C. On April 28, 2011, the Sixteenth Meeting of the 4th Board of Directors was held by way of correspondence vote, and adopted SPDB 2011 First Quarter Report. Resolutions of the meeting were published in the China Securities Journal, Shanghai Securities News and Securities Times on April 28, D. On May 25, 2011, the 17 th Meeting of the 4th Board of Directors was held by way of correspondence vote and adopted the following resolutions: " Shanghai Pudong Development Village Bank Development Plan", "Motion on new investment in Shanghai Pudong Development Village Bank. Resolutions of the meeting were published in the China Securities Journal, Shanghai Securities News and Securities Times on May 26, E. On July 15, 2011, the 18 th Meeting of the 4th Board of Directors was held by way of correspondence vote and adopted the following resolutions: "Motion on the establishment of Investment Management Dept., Company strategic planning and management rules". Resolutions of the meeting were published in the China Securities Journal, Shanghai Securities News and Securities Times on July 19, F. On July 29, 2011, the 19 th Meeting of the 4th Board of Directors was held by way of correspondence vote and adopted the following resolutions: Motion on adding two indicators in the 2011 budget report, Motion on outsourcing risk management policies. Resolutions of the meeting were published in the China Securities Journal, Shanghai Securities News and Securities Times on July 30, G. On August 12, 2011, the 20th meeting of the 4th Board of Directors was held in Changsha and adopted the following resolutions: "2011 semi-annual report and its summary, strategic development plan", Motion on write-off of credit asset loss", Motion on write-off of credit card loss. Resolutions of the meeting were published in the China Securities Journal, Shanghai Securities News and Securities Times on August 16, 2011.

72 2011 Annual Report 71 Board Meeting Report H. On August 30, 2011, the 21 st Meeting of the 4th Board of Directors was held by way of correspondence vote and adopted the following resolutions: Motion on supplementary regulations on mid-long-term loan repayment and repayment period, Motion on the revision of the 2011 business risk appetite strategies' for market risk regulatory capital limits. Resolutions of the meeting were published in the China Securities Journal, Shanghai Securities News and Securities Times on August 31, I. On October 28, 2011, the 22 nd Meeting of the 4th Board of Directors was held by way of correspondence vote. 19 directors participated and voted and adopted the following resolutions: "2011 third quarter report", Fair value of fi nancial instruments valuation policies and Motion on outsourcing scope and relevant arrangements. Resolutions of the meeting were published in the China Securities Journal, Shanghai Securities News and Securities Times on October 29, J. On 25 November 10, 2011, the 23 rd Meeting of the 4 th Board of Directors was held in Nanjing, and unanimously adopted the following resolutions: " Motion on pre-assessment application of the implementation of the new Capital Accord", "Motion on the implementation of new-generation information system construction project, Motion on regional adjustment of village bank, Motion on extending the validity of the resolution on issuance of financial bonds, Motion on senior management compensation in 2010, Motion on write-off of the second batch credit asset loss in 2011, Motion on write-off of the second batch credit card loss in Resolutions of the meeting were published in the China Securities Journal, Shanghai Securities News and Securities Times on November 29, ) Board of Directors' implementation of the resolutions of the shareholders' meeting The company's 2010 profi t distribution plan was adopted by the 2010 Annual General Meeting, namely 1.60 yuan in dividend distribution (including tax) for every 10 common shares and 3 bonus shares for every 10 shares. Share registration date was June 2, 2011, ex-dividend date was June 3, 2011, bonus shares listing date was June 7, 2011, and cash dividend payment date was on 2011 June 13. Notice was published in the China Securities News, Shanghai Securities News and Securities Times on May 30, The distribution plan has been implemented. 3) Summary report of Board Audit Committee performance During the reporting period, the Board of Directors Audit Committee held four meetings to review 17 motions such as the 2010 business report, Notes to 2010 fi nancial report, 2010 annual report and its summary, 2010 profi t distribution plan, 2010 annual financial statements, 2011 annual financial budget report, Board self-assessment report on internal control in 2010, Motion to engage an accounting fi rm. Board of Directors Audit Committee reviewed the fi nancial statements prepared by the company before the arrival of the CPAs and believed that the fi nancial statements shall be submitted to the CPAs for audit. After CPA auditors arrived, the Audit Committee worked with the accounting fi rm to determine the timeline of this year's fi nancial report audit work. During the audit process, the Audit Committee maintained continuous communication with auditors on relevant issues, and urged the auditors to deliver the audit report within the timeline while ensuring the quality of audit work. After CPA auditors issued preliminary audit opinions, the Audit Committee once again reviewed the company's fi nancial statements and thought it truly, accurately and completely refl ected the company's overall situation and formed a written opinion.

73 Annual Report Board Meeting Report 4) Board Remuneration and Appraisal Committee Summary Report During the reporting period, the Board Remuneration and Appraisal Committee held two meetings to review the Motion on senior management performance and remuneration in 2010, 2010 remuneration distribution implementation, and Directors performance of their duties and evaluation system. Remuneration and Appraisal Committee carefully studied and reviewed the company's remuneration management system and the assessment criteria, remuneration policies and programs for directors (salaried directors) and senior management, and oversaw the implementation of the remuneration package. Remuneration and Appraisal Committee believes that in 2011, as per relevant laws, regulations and terms of reference set in the articles of association, under the direction and mandate of the Board, the company's management actively fulfi lled their duties with integrity and diligence, comprehensively promoting the company's operation and management. Adhering to scientific development outlook, promoting performance, innovation and transformation, focusing on compliance and institution-building, they completed the 2011 business objectives and plans issued by the Board of Directors, further enhanced corporate value and shareholder value. The Board Remuneration and Appraisal Committee expressed satisfaction with the senior management's performance in ) Insiders and External Information User Management The company has made the Insider Information Management System and External Information User System as per the China Securities Regulatory Commission Insiders Registration and Management System Rules, which clearly stipulated that reporting and disclosure procedures must be followed and relevant laws and regulations must be obeyed if documents sent to shareholders and other external information users contain undisclosed material information. Before statutory disclosure of information is publicly disclosed, any department or individual shall not leak it out in any form. The directors, supervisors, senior management and other insiders shall strive to minimize the number of people privy to the material information before its disclosure. They must not leak out insider information, nor engage in insider trading or help others manipulate the prices of securities and derivatives. The company had effective insider registration and administration based on fl ow of insider information. During the reporting period, through self-examination and the special inspection from the CSRB Shanghai, insider information holders didn't use insider information to trade shares of the company before sensitive material information affecting the company's stock price was disclosed. The company will continue to meet regulatory requirements and draw on practical experience to standardize and strengthen the management for insider information holder and external information transmission, and further improve management system. 10. Distribution of Profi ts Profit Distribution Plan As per the company's audited Annual Report 2010, the company made a total profi t of RMB billion in With the un-distributed profi t of RMB billion as at the beginning of 2011 and minus the distributed profi t RMB billion for 2010, the total distributable profi t amounted to RMB billion. In accordance with the Ministry of Finance's fi nancial enterprises NPL provision management rules, fi nancial institutions engaged in deposit and loan business should make provision for general risk reserve at a certain percentage of net profi t after tax. Therefore, the company shall charge general risk provisions of RMB 0.35 billion, with the sum of general risk provision totaling RMB billion, no less than 1% of the risk-weighted assets.

74 2011 Annual Report 73 Board Meeting Report So the company puts forward the following proposal for profi t distribution for 2011 (1) To charge 10% out of the profi t as regulatory surplus reserve, totaling RMB billion; (2) To charge 20% out of the profi t as discretionary surplus reserve, involving a total amount of RMB billion; (3) To charge a total amount of RMB billion as general risk reserve; (4) To distribute 3 yuan for each 10 shares for common share holders with a distribution base of 18,653,471,415 total shares by the end of The total dividend distribution amounted to RMB billion. After the execution of the above profit distribution plan, the non-distributed profit will stand at RMB billion and shall be brought forward to the next year. 2. Dividends in the Previous Three Years: Year The amount of cash dividends (including tax) Number of gift shares for every 10 shares Actual cash dividend (including tax) Net profit for that year Unit: RMB '000 Yuan Cash dividend ratio (%) ,302,109 12,516, ,324,507 13,218, ,295,811 19,175, The company's cash dividend policy formulation and implementation Articles of association Article 245 provides that "The Bank may distribute profits in the form of cash or stock dividends. The profi t distribution policy of SPDB should maintain a certain degree of continuity and stability. The cumulative cash dividends in the last 3 years should not be less than 30 per cent of the average annual distributable profi ts in the last three years ". As per the last three years' ( ) profi t distribution plans prepared by the Board of Directors and reviewed and approved by the shareholders' meeting, the cumulative distribution of the profi ts in the form of cash dividends accounted for 32.43% of the average annual distributable profits realized in the last three years, in line with the Articles of Association requirements. 11. The work plan and implementation program to establish a sound internal control system To establish a sound internal control system, based on external regulatory requirements and realities of the company, SPDB carried out the internal control standard implementation and evaluation project during the reporting period, which set up a project leadership team and working groups responsible for the overall advancement of work. It hired an external advisory fi rm to assist in developing internal control and self-evaluation; it also hires external auditors to audit the effectiveness of its internal control for the financial statements.

75 Annual Report Board Meeting Report Based on the principle of risk-orientation, the company focused on the internal environment, risk assessment, control activities, information and communication and internal oversight in a bid to refi ne critical business processes, establish and improve the internal control system and protect the integrity of the internal control activities. Drawing on industry-leading practice, taking full account of the credit risk faced, market risk, operational risk, compliance risk, legal risk facing the banking sector, in line with banking industry practice, and giving full consideration to the company's products and operational characteristics, the bank positioned existing rules and regulations, clarified relevant rules and regulations for specific operation and management activities, effectively reduced overlapping, repetition, contradiction, dispersion, omissions and conflicts between different rules. At the same time, taking full account of the management situation, focusing on process efficiency and internal control effectiveness, the company reviewed major business processes, identifi ed key risk points, integrated corresponding control measures, clarified the distribution of main risk points in the various management activities and business processes. In addition, the company implemented the 2011 annual self-evaluation, clarifying evaluation criteria and methods to identify internal control weaknesses. The company found no signifi cant internal control defi ciencies in the internal control self-evaluation process, and only general internal control defi ciencies that may result in manageable risks, with no substantial impact on the company's financial targets. The company has taken measures to address these defi ciencies. In 2012 it will further improve the system of internal control, continue with internal control selfassessment, promote process optimization, and consider the establishment of internal control management system via IT development to achieve a gradual transition from "people control" to "system control". So internal control concepts and methods will be implemented with improved effi ciency and effectiveness of internal control. 12. Investor Relations Management During the reporting period, the company's management paid close attention to market trends, engaged in active communication with investors and analysts, especially after the release of regular reports via various channels and with good results. In 2011 the company held one large institutional investor conference which was attended by more than 40 domestic and foreign institutional investors to discuss the company's strategy, fi nancial, operational and other conditions. The feedback was very good. Throughout the year more than 80 domestic and foreign investors visited the company; including 4 delegation visits of institutional investors; it also participated in 5 strategic conferences organized by domestic and foreign institutions. The company is also actively creating conditions for more communication with investors, for example via telephone, Internet, etc.

76

77 Annual Report Report by the by Supervisory the Supervisory Board Board 1. Meetings of the Supervisory Board 1). On 30January, 2011, the company held the twelfth meeting of the Fourth Board of Supervisors by way of correspondence voting, considered and unanimously adopted: Motion on institution planning in 2011, Motion on granting credit to First Sino Bank, Motion on interim administration rules for consolidated balance sheet. The resolutions of the meeting were published in the Shanghai Securities News, China Securities Journal and Securities Times on February 1, ). On March 28, 2011, the thirteenth meeting of the fourth Board of Supervisors was held in Shanghai. It considered and unanimously adopted: "2010 annual report on the work of the Board of Supervisors 2010 directors, supervisors and senior management's performance report, "Motion on changing the name of Nomination Committee to Nomination and Evaluation Committee under the Board of Supervisors", Director performance evaluation implementation detailed rules", "2010 annual operating report, 2010 annual report and its summary, 2010 annual fi nancial statements and 2011 annual fi nancial budget report, Motion on the 2010 profi t distribution, Motion on senior executives' performance appraisal and remuneration, "Motion on 2010 annual internal control evaluation report, 2010 Corporate Social Responsibility Report, 2010 annual report of the related party transactions", "Motion on engaging a new accounting fi rm, "Motion on redemption of 2006 subordinated bonds, Motion on the issuance of subordinated bonds, Internal control practices implementation and evaluation work program, " Internal capital adequacy assessment management rules", "2010 business risk appetite strategy implementation and motion on the 2011 business risk appetite policy, Country specifi c risk management policies, Motion on the placement and usage of raised funds in Resolutions of the meeting were published in the Shanghai Securities News, China Securities Journal and Securities Times on March 30, ). On April 28, 2011, the company held the fourteenth meeting of the Fourth Board of Supervisors by way of correspondence voting, considered and unanimously adopted: the company's 2011 Q1 report, "2010 director performance evaluation report, "2010 supervisor performance evaluation report. Resolutions of the meeting were published in the Shanghai Securities News, China Securities Journal and Securities Times on April 28, ). On May 25, 2011, the company held the Fifteenth Meeting of the Fourth Board of Supervisors by way of correspondence voting, considered and unanimously adopted: SPD village bank development plan", "Motion on additional investment in SPD village bank". Resolutions of the meeting were published in the Shanghai Securities News, China Securities Journal and Securities Times on May 26, ). On 15 July, 2011, the company held the Sixteenth Meeting of the fourth Board of Supervisors by way of correspondence voting. Nine supervisors or their authorized representatives attended the meeting, considered and unanimously adopted: Motion on the establishment of an Investment Management Dept., Strategic planning and management rules". Resolutions of the meeting were published in the Shanghai Securities News, China Securities Journal and Securities Times on July 19, ). On 29 July 2011, the company held the Seventeenth Meeting of the Fourth Board of Supervisors by way of correspondence voting, considered and unanimously adopted: "Motion on adding two indicators into the 2011 budget report", Motion on outsourcing risk management policies. Resolutions of the meeting were published in the Shanghai Securities News, China Securities Journal and Securities Times on July 30, ). On 12 Aug 2011, the 18th Meeting of the Fourth Board of Supervisors was held in Changsha; the meeting considered and unanimously adopted: "2011 semi-annual report and its summary," strategic development plan", Motion on write-off of credit asset loss, "Motion on write-off of credit card loss". Resolutions of the meeting were published in the Shanghai Securities News, China Securities Journal and Securities Times on August 16, ). On 30 August 2011, the company held the 19 th Meeting of the Fourth Board of Supervisors by way of correspondence voting. Nine supervisors or their authorized representatives attended the meeting, considered and unanimously adopted: Motion on supplementary rules on medium-and long-term loan repayment and repayment period, Motion on market risk regulatory capital limits relating to the revised 2011 business risk appetite policy".

78 2011 Annual Report 77 Report by the Supervisory Board Resolutions of the meeting were published in the Shanghai Securities News, China Securities Journal and Securities Times on August 31, ). On 28 October 2011, the 20th meeting of the Fourth Board of Supervisors was held by way of correspondence voting. It considered and unanimously adopted: 2011 Q3 Report, "Financial instruments fair value valuation policy, "Motion on outsourcing scope and arrangement. Resolutions of the meeting were published in the Shanghai Securities News, China Securities Journal and Securities Times on October 29, ). On 25 November 2011, the twentieth Meeting of the fourth Board of Supervisors on was held in Nanjing, which considered and unanimously adopted: Motion on application for pre-assessment of implementation of the new Capital Accord", "Motion on the implementation of a new generation of information system construction project, "Motion on the adjustment of rural bank zoning, Motion on extending the validity of the financial bond issuance resolution, Motion on 2010 senior management compensation", Motion of write-off of the second batch of credit asset loss in 2011, Motion of write-off of the second batch of credit card loss in Resolutions of the meeting were published in the Shanghai Securities News, China Securities Journal and Securities Times on November 29, Independent opinions from the Supervisory Board 1). The company's operation in compliance with the law: During the reporting period the company operated in compliance with the law and standardized management. Its operating results were objective and real, the depth and breadth of internal control management was greatly enhanced. With legitimate company decision-making procedures, the directors and other senior management were cautious, conscientious and diligent in the business and management process. Not acts were found that harmed the interests of the shareholders. 2). Authenticity of fi nancial reports: After careful review of the 2011 fi nancial conditions and the audit reports issued by the accounting fi rm, it believed that: during the reporting period the company's fi nancial statements gave a true, objective and accurately account of the company's fi nancial position and operating results. 3). Usage of the raised funds: the fi nds raised via listing were used to increase the company's share capital and the scale of bank assets as approved by the People's Bank of China, and China Banking Regulatory Commission. Raise funds were used in strict accordance with the prospectus. Strictly following the funds usage plan, the company made rational use of the funds raised. 4). Acquisition and sale of assets: During the reporting period, there was no acquisition, disposals, or merger of assets. 5). Related party transactions: the company's related party transactions were fair and reasonable, and were not done at the expense of the shareholders' rights and interests. 6). Internal control system: Board of Supervisors had reviewed the Company's internal control self-evaluation report, the Board self-evaluation report without objection, and held that the company had developed a complete, rational and effective internal control system. 7). Audit report: PricewaterhouseCoopers issued a standard unqualifi ed audit report. 8). Implementation of the resolutions of the shareholders' meeting: Members of the Supervisory Committee attended the Board Meetings and the shareholders' meetings and had no objection to the reports and motions presented at those meetings. Board of Supervisors monitored the implementation of the resolutions of the shareholders' meeting and believed that the Board of Directors earnestly fulfi lled relevant resolutions of the shareholders' meeting. 9). independent opinion on the gap between company profit and its forecast: there is no big difference between realized profi t and profi t prediction.

79

80 2011 Annual Report 79 Important Important Issues 1. Issuance of subordinated bonds Approved by the China Banking Regulatory Commission and the People's Bank of China, on October 11, 2011, SPDB successfully issued RMB 18.4 billion of subordinated bonds in the national inter-bank bond market. It's a 15- year fi xed-rate bond, with a coupon rate of 6.15% and conditional issuer redemption rights by the end of the 10 th year. The funds raised via the subordinated bonds will be used to supplement the company's capital in accordance with applicable laws and regulatory approvals. 2. Cooperation with strategic investors During the reporting period, the cooperation between SPDB and its strategic investor China Mobile entered a substantive stage, with a focus on promoting branch to branch cooperation and agreement signing between 35 SPDB branches and the local China Mobile companies. The debit and credit co-branded cards will be offi cially launched in two batches in 18 branches in early September, with a total of issuance of cards. China Mobile Group's total corporate deposit balance at SPDB was about 18 billion yuan. With bank and enterprise direct linkage', 1 + N supply chain fi nancing' services, the two sides intended to achieve equipment interoperability in 197 business offi ces and 116 outlets, jointly organized 72 VIP lectures, began initial customer sharing, issued a total of 11 exclusive wealth management products totaling nearly $ 700 million yuan. 3. Standardized implementation of Basel Accord Substantial progress was made in the implementation of the New Basel Capital Accord by the end of the reporting period since it was launched in 2007: First, the company comprehensively promoted the implementation of the new Capital Accord. Under the fi rst pillar, credit, market, operating risk measurement and supporting systems were basically completed, with corresponding development of the second pillar. Second, regarding compliance standards, in accordance with the CBRC capital measurement method implementation application and approval requirements, in December 2011, SPDB submitted to the CBRC the New Basel Capital Accord implementation pre-assessment application and started the application process to implement the new Capital Accord. Third, the New Basel Capital Accord was widely implemented; tools like corporate rating, rating of fi nancial institutions, retail scorecard, measurement system of risk-weighted assets, market risk management systems, operating risk management were put into use across the bank, effectively enhancing risk identifi cation, measurement, monitoring and control capabilities, reinforcing the basis of a comprehensive risk management. 4. Major litigation and arbitration By the end of the reporting period, there were 285 pending litigations where SPDB was the plaintiff, with a total value of billion yuan, and 20 pending litigations where SPDB was the defendant, with a total value of 151 million yuan. 5. Bankruptcy and restructuring-related matters The Company had no bankruptcy and restructuring matters. 6. Analysis of other significant events, their impact and solutions 1). Securities investment:in 2011, the company made no security investment. 2). Holding of shares of non-listed fi nancial enterprises

81 Annual Report Important Issues Unit: '000 yuan-'000 shares Name Initial investment amount Number of shares held % of total shares P-L for the reporting period Equity change Accounting item Share source China Union pay Co., Ltd 104,200 90, ,520 - Long-term investment First Sino Bank 710, ,000-9,079 Long-term investment AXA SPDB Fund Managers 18, ,534 - Long-term investment Laishang Bank 738, ,600 - Long-term investment investment investment investment investment Total 1,571, , Note: Profi t-loss for the reporting period refers to the impact of the investment on the parent company's net profi ts. 7. Major purchase, sales or disposal of assets or M&A During the reporting period, the company didn't conduct any major acquisition, sale or disposal of assets or M&A deals. 8. Independent opinions by independent directors on external guarantee Pursuant to relevant regulations of No. 56 [2003] Document by CSRC, we reviewed the company's external guarantees in a fair, equitable and objective manner. We hold, by the end of 2011, the external guarantee conducted by the company was approved by PBOC and CBRC and was one of the company's normal businesses. Articles of Association set clear rules on its examination and approval authorization, and internal management also made specific measures, operation procedures and review-approval procedures. External guarantee conducted by the company is off-balance-sheet business. Off-balance-sheet liabilities are as follows: Unit: RMB '000 Yuan Item Balance as of Balance as of Banker's acceptance bills 370,981, ,660,235 Acceptance bills under Letter of credit 25,615,734 11,668,317 Letter of guarantee issued 47,854,363 39,465,175 Letter of credit issued 198,422,064 46,317,238 Unused credit line of credit card 42,752,585 28,437,580 The company has no special guarantee for related parties. During the reporting period, the company strictly complied with relevant regulations of CSRC (No.56 [2003] Document), and had no illegal guarantee. 9. Transactions with Related Parties According to the relevant stipulations of CBRC's Rules on Commercial Banks' Related Transactions with Insiders and Shareholders, the company formulated SPDB's Rules on the Management of Related Transactions. Pursuant to such rules, the company doesn't have any related parties that have a controlling stake in the company.

82 2011 Annual Report 81 Important Issues During the reporting period, the transactions conducted by the company with related parties were mainly loans to shareholders and related parties. All such loans were granted according to the relevant regulatory requirements and SPDB's loan issuance standards and approval process. The principal and interest on those loans were repaid normally, exerting no negative impact on the company's businesses or profi t. 1. Related parties 1) Legal entity shareholders who directly, indirectly, or jointly hold or control 5% stake-voting rights or above in the company. To be more specifi c, they are Shanghai International Group (16.927%) and Shanghai International Trust and Investment Corp (5.232%) and China Mobile Group Guangdong Limited (20%). 2) Any legal entity or organization for which SPDB's board member, supervisor, senior management or their close relatives directly or indirectly or jointly controls or may exert major impact on. To be more specifi c, they include China Mobile Communications Corporation, China Mobile Ltd., Shanghai AJ Co., Ltd., Brilliance Group Co., Ltd., Shanghai Brilliance Group Co., Ltd., Brilliance (Hong Kong) Limited, China National Tobacco Corporation, Jiangsu Province, Shanghai Post company, Digital China Holdings Limited. 3) Any fi nancial enterprise that the company has invested in and may exert major impact on. To be more specifi c, they include First Sino Bank, AXA SPDB Fund Managers and SPD Rural Banks sponsored by the company. Related parties that have no controlling stake in the company and transactions with them: 1) transactions with related parties that have no controlling stake in the company Name Interest income Interest income for 2010 Unit: RMB '000 Yuan Interest expense for 2011 Interest expense for 2010 Shanghai International Group - 9, First Sino Bank , Brilliance Group Co., 3,943 8, Shanghai Brilliance Group Co., Ltd 3,364 4, AXA SPDB Fund Managers Shanghai International Trust and Investment ,289 China Mobile Group ,717 8,801 Among which: China Mobile Group Guangdong ,986 4,741

83 Annual Report Important Issues 2) loans-lending balance of related parties that have no controlling stake in the company Unit: RMB '000 Yuan Name Brilliance Group Co., 60, ,000 Shanghai Brilliance Group Co., Ltd - 100,000 First Sino Bank 94,514 - Note: loans and lending mentioned above is granted according to loan and lending rate regulated by PBOC. 3) Placement balance of related parties that have no controlling stake in the company Unit: RMB '000 Yuan Name First Sino Bank 129,702 14,580 AXA SPDB Fund Managers 27,931 40,862 Shanghai International Trust and Investment Corp 19,252 62,540 China Mobile Group 17,319,224 1,998,790 Among which: China Mobile Group Guangdong Limited. 1,447, ,738 4) Outstanding guarantees and banker's acceptance bills with related parties that have no controlling stake in the company Unit: RMB '000 Yuan Name Brilliance Group Co.,( Guarantee) 408, ,500 China Mobile Group(banker's acceptance bill) - 20, Related natural person It mainly refers to natural persons such as the company's directors, supervisors, senior management personnel in the head offi ce and branch, or those who can participate in decision making regarding credit and asset transfer. By the end of the reporting period, the company had not received related party transaction declaration from related natural persons. 10. Major contracts and their implementation 1) Major trusteeship, contract and lease issues: there were no major trusteeship, contract or lease issues during the reporting period. 2) Major guarantees: apart from the fi nancial guarantee business which falls within the Company's business scope as approved by the People's Bank of China within the reporting period, the Company had no other major guarantee issues requiring disclosure.

84 2011 Annual Report 83 Important Issues 3) Assets management entrusted to other parties: during the reporting period, the Company had not entrusted any party to manage any of its assets. 4) Other major contracts (including guarantees) and their implementation: the Company's various business contracts were implemented normally during the reporting period, and no disputes over any major contracts occurred. 11. The Company or any shareholder with more than 5% stake made disclosure of commitments in the designated newspapers or websites. Shareholder China Mobile Group Guangdong Company Limited (abbre."guangdong Mobile", holding 20% of the total share capital) made a commitment that its subscription of non-public offering of shares in October 2010 had a lock-up period of 36 months. According to the qualifi cation requirements by China Banking Regulatory Commission related to the major shareholder of Bank supervision, Guangdong Mobile's parent holding company of China Mobile Limited announced at the Hong Kong Stock Exchange on August 31, 2010 its commitment to the China Banking Regulatory Commission: from the date of the delivery of this non-public offering of shares, they will not sell or transfer those shares within 5 years (to the extent permitted by applicable laws and regulations, transfers between affi liates of Guangdong Mobile will not be subject to this restriction); transfer of shares after 5 years and the eligibility of the transferee to become a shareholder of SPDB should be approved by the regulators in accordance with relevant laws and regulations. 12. Appointment and Dismissal of Accounting Firms In accordance with the resolution of 2010 Annual General Meeting of Shareholders, the company hired PricewaterhouseCoopers as the company's 2011 annual auditor. The company's 2011 financial reports prepared as per PRC GAAP and IFRS were audited by PricewaterhouseCoopers Zhong Tian CPAs Limited. The audit fees was 5.6 million (including audit for the interim fi nancial report and annual fi nancial report). 13. Regulatory inspection and administrative penalty None of the Company's directors, supervisors, senior management, shareholders and actual controllers was investigated or criticized by or received administrative penalties from China Securities Regulatory Commission, or publicly condemned by the Stock Exchanges during the reporting period. 14. Write-off of loan loss in the reporting period In the reporting period, according to the Shanghai Pudong Development Bank credit asset loss write-off management rules", a total of 509 million yuan in loan loss was written off as approved by the Board of Directors. According to the principle of keeping the right and the case after the write-off, the company continues to maintain the external right of recourse so as to reduce the losses to a minimum.

85 Annual Report Important Issues 15. Honors and awards won by the company Awarded by hexun.com China Banking Association 2010 China Banking Sector CSR Evaluation Shanghai Child Health Foundation Eastmoney.com; 2011 Eastmoney List China banking sector excellent call center contest Shanghai Municipal Government, "2010 Annual Financial Innovation Awards Ceremony "Banker" magazine 2010 China Financial Marketing Award Ceremony Trade Finance magazine, Asian Banker magazine, 2011 awards program the 13th China listed companies Taurus Award, organized by the China Securities Journal China Banking Association 2010 syndicated loan business appraisal 2011 Chinese commercial bank's competitiveness evaluation published by the "Banker" magazine 21st Century Business Review, sponsored by 21st Century Business Herald "2011 most trusted bank by China's CFOs sponsored by Chief Financial Officer magazine award ceremony for top ten commercial banks supporting Chinese SMEs 2011 listed company's corporate governance special award by the Shanghai Stock Exchange annual al Awards Eastmoney.com 2011 Eastmoney List China Financial Certification Center Chinese electronic banking annual party International Business Daily - the 2011 trade and financial development seminars organizing committee 21st Century Economic Report, Competitiveness ranking of Asian banks in 2011 And information networks Name of the award 2010 Listed Company with the best CSR Annual Best CSR Award Care for Child Health Social Welfare Award 2011 CSR Award for Bank Best service award SPDB credit card service center, Best innovation award SPDB service center 2010 Shanghai financial innovation second prize Yinyuanbao cooperation model 2010 Shanghai financial innovation nomination award green finance comprehensive service solution SME credit cultivation marketing case study won top ten financial product award, best international business bank award Best green finance bank Chinese bank with the best outlet development, Best e-banking-mobile bank, best risk and analysis system 2010 syndicated loan best performance award'. best development award 1.Top 100 Chinese listed company Taurus award 2. Taurus evergreen company award 2010 best risk management bank 2011 best commercial model innovation award for the 21 century Most respected bank, best retail bank, best wealth management brand, most convenient credit card Top ten commercial banks supporting SMEs 2011 Best Board Award SPD Chuangfu top 10 most satisfactory e-finance brand, 2011 best cash management brand Best e-bank award outstanding contribution in cross-border RMB settlement in 2011

86 2011 Annual Report 85 Important Issues Awarded by BrandFinance by Banker magazine The Banker magazine 2011 listed company's corporate governance special award by the Shanghai Stock Exchange annual al Awards Money Weekly "Forbes" magazine "Fortune" magazine China Banking Association Securities Times Securities Star battle for Shanghai listing company ranking Securities Times - 12th financial IT innovation and excellent Chinese Financial website contest Name of the award 2011 top 100 banks with good customer service No. 92 among global 500 brands, 18th among Asia banks, with brand value at USD billion. By core capital, ranking 64th globally, up by 44 spots, 7th among Chinese banks 2011 Board of the Year Award 2010 best Board for mainboard listed companies No. 234 among Global 2000, 16th among Chinese companies on the list, 7th among banks No. 72 among top 500 listed companies in China in 2011 No.9 in competitiveness among Asian banks, seventh among Chinese banks, "Best Risk Management Bank in Asia" most valuable Chinese mainboard-listed companies 2010 most liked institution 2011 best financial innovation bank

87 Annual Report Important Issues 16. Information Disclosure Index Company information disclosure was published in China Securities Journal, Shanghai Securities News and Securities Times" To go to the website or make inquiry, please go to: Item Release date Company's 2010 annual results briefi ng Announcement of the resolutions by correspondence voting of the12th meeting of the fourth board of supervisors Annoucement of the resolutions by correspondence voting of the 14th meeting of the 4th Board of Directors CSR report Internal control review report Annoucement of the resolutions of the 15th meeting of the 4th Board Annual report and its summary Annoucement of the resolutions of the 13th meeting of the 4th board of supervisors Funding transfer between the company and related parties and external guarantees Notice on convening 2010 annual general meeting Resolutions of the 16th meeting of the 4th Board Resolutions of the 14th meeting of the 4th board of supervisors Q1 Report Resolutions of the 2010 annual general meeting Annoucement on obtaining a bank license for Hong Kong regulators Resolutions of the 17th meeting of the 4th Board Resolutions of the 15th meeting of the 4th board of directors profi t distribution announcement Resolutions by correspondence voting of the 16th meeting of the 4th board of supervisors Resolutions by correspondence voting of the 18th meeting of the 4th board Resolutions by correspondence voting of the 17th meeting of the 4th board of supervisors Resolutions by correspondence voting of the 19th meeting of the 4th board Resolutions of the 20th meeting of the 4th board Resolutions of the 18th meeting of the 4th board of supervisors semi-annual report and its summary Resolutions by correspondence voting of the 21st meeting of the 4th board Resolutions by correspondence voting of the 19th meeting of the 4th board of supervisors Announcement on obtaining approval to issue subordinated bonds Announcement on completion of subordinated bond issuance Announcement on obtaining approval to set up a fi nancial leasing company Announcement on obtaining approval to set up SPD silicon valley bank Resolutions by correspondence voting of the 22nd meeting of the 4th board of supervisors Resolutions by correspondence voting of the 22nd meeting of the 4th board Q3 report Resolutions of the 21st meeting of the 4th board of supervisors Resolutions of the 23rd meeting of the 4th board

88

89 Annual Report Financial Report Report 1. Audited Report (Attachment) 2. Financial Report (attachment) 3. Major Accounting Policies, Accounting Estimations and Accounting Mistakes: 1) Accounting year: starting from Jan. 1, 2011 and ending on Dec 31, ) Book-keeping Currency: RMB 3) There is neither major change in the accounting principle nor material accounting mistakes or the rectifi cation of such mistake during the reporting period. 4. Consolidated Financial Reports During this reporting period, with approval from the regulatory authorities, the company sponsored Pingyang SPD Rural Bank and Xinchang SPD Rural Bank in Zhejiang Province. The company invested RMB 51 million in each of the two rural banks, accounting for 51% of its stake. Pingyang SPD Rural Bank and Xinchang SPD Rural Bank shall be brought into the consolidated accounting of the company. 5. Additional information ROE and EPS calculated according to CSRC's Rules on Information Disclosure for Publicly Listed Companies: Profits ROE (%) EPS yuan Fully diluted Weighted average Basic EPS Fully diluted Net profit belonging to the common shareholders Net profit excl. extraordinary items belonging to the common shareholders

90

91 Annual Report Reference Documents Documents 1. Financial statements endorsed with the signatures and seals of the Company's legal representative and fi nance controller. 2. The original Annual Report endorsed with the signature of the Company's Chairman of the Board. 3. The texts and original copies of all documents and announcements released in China Securities Journal Shanghai Securities News and Securities Times by the Company within the reporting period. 4. Articles of Association of the Shanghai Pudong Development Bank Co., Ltd Annual Internal Control Evaluation Report, 2011 CSR Report Chairman of the Board: JI Xiaohui The Board of Shanghai Pudong Development Bank Co., Ltd. March 14th, 2012

92 2011 Annual Report 91 Reference Documents Written Affi rmation of the Board Members and Top Management on the 2011 Annual Report Pursuant to Security Law and related regulations of Public Issuing Company's Disclosure Content and Format Guideline No. 2 (Annual Report Content and Format)(revised version 2007), the board members and senior management have obtained a comprehensive understanding of the company and examined the 2011 annual report and its abstract, thus provide the following opinion: 1) The company operates strictly according to accounting principles; the 2011 Annual Report truthfully refl ects the company's fi nancial position and management. 2) All the data in the report are verifi ed under the principle of prudence, objectivity, authenticity and completeness. We believe that the information presented in this 2011 Annual Report is free from any false record, misleading statement or material omission, and is in compliance with the regulatory requirements of CSRC and actual operation of the Bank. 3) The financial statements of the Company for the 2010 were audited by PricewaterhouseCoopers Zhong Tian CPAs Co., Ltd. in accordance with PRC generally accepted accounting principles (GAAP) and international accounting standards (IAS), and have obtained standard auditor's report without any reserved opinions Signatures of directors and senior executives: Ji Xiaohui signature Fu Jianhua signature Chen Xin signature Yang Dehong signature Pan Weidong signature Sha Yuejia signature Zhu Min signature Stephen Bird signature Ma Xinsheng signature Wei Pengcheng signature Wang Guanchang signature Shen Si signature Sun Zheng signature Liu Tinghuan signature Chen Xuebin signature Xu Qiang signature Zhao Jiusu signature Zhang Weiying signature Guo Wei signature Shang Hongbo signature Liu Xinyi signature Jiang Mingsheng signature Ji Guangheng signature Mu Shi signature Xu Haiyan signature

93

94 2011 Annual Report 93 (English translation for reference only) AUDITOR S REPORT PwC ZT Shen Zi (2012) No TO THE SHARHOLDERS OF SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD.: We have audited the accompanying consolidated financial statements of Shanghai Pudong Development Bank Co.,Ltd.( the Bank ) and its subsidiaries (collectively the Group ), which comprise the Bank s and consolidated balance sheets as at 31 December 2011, income statements, cash fl ow statements and statements of changes in equity for the year then ended, and the notes to the fi nancial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these fi nancial statements. This responsibility includes: (1) preparing and fairly presenting the financial statements in accordance with China Accounting Standards for Business Enterprises; (2) designing, implementing and maintaining internal control relevant to the preparation and fair presentation of the fi nancial statements that are free from material misstatement, whether due to fraud or error. Auditor s responsibility Our responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with the China Auditing Standards issued by the Chinese Institute of Certifi ed Public Accountants. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the fi nancial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the fi nancial statements. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the accompanying fi nancial statements present fairly, in all material respects, the fi nancial positions of the Bank and the Group as of 31 December 2011, and their fi nancial performances and cash fl ows for the year then ended in accordance with the requirements of China Accounting Standards for Business Enterprises. PricewaterhouseCoopers Zhong Tian CPAs Limited Company Shanghai, the People s Republic of China 14, March 2012

95 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK CONSOLIDATED AND BANK S BALANCE SHEETS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated.) Note Group 31 December 31 December Bank 31 December 31 December Cash and balances with central bank ,957, ,248, ,310, ,610,145 Due from other banks and financial institutions ,876,482 69,539, ,562,818 69,230,713 Interbank placements ,415,298 31,253, ,405,298 31,253,465 Precious metals 683,246 2, ,246 2,090 Financial assets held for trading 5.4 5,866,841-5,866,841 - Derivative financial assets ,787 1,033, ,787 1,033,349 Financial assets purchased under resale agreements ,509, ,932, ,509, ,932,144 Interests receivable ,071,074 6,492,715 11,063,132 6,489,785 Loans and advances to customers 5.8 1,302,323,950 1,124,112,990 1,295,763,717 1,121,019,539 Available-for-sale financial assets ("AFS") ,929, ,142, ,929, ,142,632 Investment securities - held-to-maturity ("HTM") ,535, ,556, ,535, ,556,636 Investment securities - loans and receivables ,759,536 3,707,122 8,759,536 3,707,122 Long-term equity investments ,856,861 1,436,474 2,484,961 1,753,474 Fixed assets ,137,072 7,433,139 8,115,898 7,417,962 Constructions in progress 457,178 85, ,178 85,525 Intangible assets , , , ,254 Long-term deferred charges ,205,938 1,126,725 1,169,904 1,100,111 Deferred income tax assets ,269,859 3,772,723 4,268,466 3,772,723

96 2011 Annual Report 95 SHANGHAI PUDONG DEVELOPMENT BANK CONSOLIDATED AND BANK S BALANCE SHEETS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated.) Note 31 December 2011 Group 31 December 2010 Bank 31 December December 2010 Due to central bank 50,000 50, Due to other banks and financial institutions ,908, ,818, ,114, ,309,909 Interbank borrowings ,970,025 14,415,145 66,970,025 14,415,145 Derivative financial liabilities 5.5 1,515,029 1,172,083 1,515,029 1,172,083 Financial assets sold under repurchase agreements ,019,569 16,963,471 85,954,448 16,912,471 Due to customers ,851,055,121 1,640,459,532 1,840,832,529 1,635,623,369 Employee benefits payable ,853,628 6,856,610 6,817,140 6,836,227 Income tax payable ,509,666 4,178,533 6,492,059 4,176,738 Interests payable ,278,588 11,753,812 20,245,022 11,745,295 Dividends payable 12,139 12,139 12,139 12,139 Debts issued ,600,000 16,800,000 32,600,000 16,800,000 Other liabilities ,378,875 17,650,780 22,349,318 17,637,914 Total liabilities 2,535,150,909 2,068,130,924 2,526,902,660 2,064,641,290 Share capital ,653,471 14,348,824 18,653,471 14,348,824 Capital surplus ,543,902 58,639,173 59,543,154 58,638,425 Surplus reserves ,805,744 15,249,813 21,805,744 15,249,813 General risk reserves ,700,000 9,500,000 18,700,000 9,500,000 Retained earnings ,188,118 25,258,526 30,110,492 25,258,928 Equity attributable to the Bank's shareholders 148,891, ,996, ,812, ,995,990 Minority interests , , The accompanying notes form an integral part of these fi nancial statements. These fi nancial statements were approved for issue by the Board of Directors on 14 March 2012 and signed on its behalf by: Ji Xiaohui Fu Jianhua Liu Xinyi Fu Neng Chairman of Board President Chief Financial Officer Head of finance and accounting department

97 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK CONSOLIDATED AND BANK S INCOME STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated.) Note Group Bank Interest income 121,221,237 72,966, ,061,677 72,822,042 Interest expense (59,779,675) (27,763,422) (58,989,027) (27,728,908) Net interest income ,441,562 45,203,510 61,072,650 45,093,134 Fee and commission income 7,204,809 4,461,471 7,181,091 4,452,700 Fee and commission expense (489,083) (412,925) (486,789) (412,855) Net fee and commission income ,715,726 4,048,546 6,694,302 4,039,845 Investment income ,415 22, ,415 22,212 Including: Income from joint ventures and associates 72,466 75,666 72,466 75,666 Loss from fair value change 5.37 (859,837) (87,630) (859,837) (87,630) Foreign exchange gain 242, , , ,420 Other operating income 182, , , ,164 Business tax and surcharges 5.38 (4,898,888) (3,395,394) (4,883,630) (3,390,815) Business and administrative expenses 5.39 (19,553,583) (16,480,121) (19,399,409) (16,398,362) Impairment charges 5.40 (7,499,975) (4,587,419) (7,430,299) (4,559,216) Other operating expense (208,499) (320,865) (208,494) (320,853) Add: non-operating income 157, , , ,841 Less: non-operating expenses (74,797) (38,975) (67,364) (38,644) Less: income tax expense 5.41 (8,484,175) (6,102,319) (8,438,160) (6,096,421) Net profit attributable to: -Shareholders of the Bank 27,285,981 19,177,209 -Minority interests 69,131 1,378 27,355,112 19,178,587 Basic and diluted earnings per share for profit attributable to the shareholders of the Bank(in RMB) Total comprehensive income attribute to: -Shareholders of the Bank 28,190,710 17,167,603 -Minority interest 69,131 1,378 28,259,841 17,168,981 The accompanying notes form an integral part of these consolidated fi nancial statements.

98 2011 Annual Report 97 SHANGHAI PUDONG DEVELOPMENT BANK CONSOLIDATED AND BANK S CASH FLOW STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated.) Group Bank Year ended 31 December Year ended 31 December Net increase of due to customers and due to banks 313,685, ,220, ,014, ,731,334 Net increase of amounts due to central bank - 2, Net decrease of amounts due from central bank, due from other banks and financial institutions - 12,047,969-12,040,735 Net increase of amounts due to and placements from other banks and financial institutions 143,674, ,670,544 - Cash received from interests 116,873,622 75,785, ,709,687 75,099,593 Cash received from fee and commission income 6,997,736 4,461,471 6,974,018 4,452,699 Cash received relating to other operating activities 9,659,027 6,533,366 9,597,047 6,520,984 Net increase of loans and advances to customers (185,455,450) (217,921,452) (181,909,606) (215,272,904) Net decrease of amounts due to central bank (48,000) Net increase of amounts due from central bank, due from other banks and financial institutions (118,816,718) - (117,777,163) - Net decrease of amounts due to and placements from other banks and financial institutions - (312,356,596) - (312,407,596) Net increase of financial assets held for trading (5,861,569) - (5,861,569) - Interest paid (50,546,000) (24,112,217) (49,780,400) (23,543,528) Cash paid for fee and commission (489,083) (412,925) (486,789) (412,855) Cash paid to and for staff (12,181,022) (10,470,125) (12,126,189) (10,449,587) Cash paid for business tax and surcharges (11,850,867) (8,357,678) (11,804,012) (8,348,302) Cash paid relating to other operating activities (7,033,603) (5,927,179) (6,959,584) (5,871,540)

99 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK CONSOLIDATED AND BANK S CASH FLOW STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated.) Note Group Year ended 31 December Bank Year ended 31 December Cash received from investment withdrawal 233,593, ,297, ,593, ,917,500 Cash received from investment income 49,510 48,726 49,510 48,726 Cash received from relating to other investing activities 70,671 35,579 70,663 33,830 Cash paid for investment (296,387,027) (469,083,544) (296,698,127) (469,236,544) Cash paid to purchase fixed assets, intangible assets and other long-term assets (2,682,867) (1,578,543) (2,650,759) (1,566,077) Cash received from investors 298,900 39,346,464-39,199,464 Including: Cash received from minority shareholders 298, , Cash received from debts issued 18,400,000-18,400,000 - Cash paid for mature debts (2,600,000) (2,000,000) (2,600,000) (2,000,000) Cash paid for dividends and interest of bond issued (3,004,712) (2,085,914) (3,004,712) (2,085,914) Add: Cash and cash equivalents at the beginning of the period ,595, ,122, ,804, ,002,708 Cash and cash equivalents at the end of the period ,627, ,595, ,862, ,804,726 The accompanying notes form an integral part of these fi nancial statements.

100 2011 Annual Report 99 SHANGHAI PUDONG DEVELOPMENT BANK CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated.) Equity attributable to the Bank s shareholders Share capital Capital surplus Surplus reserves General risk reserves Retained earnings Subtotal Minority interest Total Note Net profit ,285,981 27,285,981 69,131 27,355,112 Other comprehensive income - 904, , ,729 Capital injection Issue of new shares , ,900 Increase of minority interests from newly setup subsidiaries ,000 98,000 Profit appropriation Surplus reserves - - 6,555,931 - (6,555,931) General risk reserves ,200,000 (9,200,000) Dividends (2,295,811) (2,295,811) - (2,295,811) Internal transfer of shareholders'equity Stock dividend 4,304, (4,304,647) - - -

101 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated.) Equity attributable to the Bank s shareholders Share capital Capital surplus Surplus reserves General risk reserves Retained earnings Subtotal Minority interest Total Note Net profit ,177,209 19,177,209 1,378 19,178,587 Other comprehensive income - (2,009,606) (2,009,606) - (2,009,606) Capital injection Issue of new shares 2,869,765 36,329, ,199,465-39,199,465 Increase of minority nterests from newly setup subsidiaries , ,000 Profit appropriation Surplus reserves - - 4,561,237 - (4,561,237) General risk reserves ,600,000 (2,600,000) Dividends (1,324,507) (1,324,507) - (1,324,507) Internal transfer of shareholders' equity Stock dividend 2,649, (2,649,013) Others ,465 The accompanying notes form an integral part of these fi nancial statements.

102 2011 Annual Report 101 SHANGHAI PUDONG DEVELOPMENT BANK BANK S STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated.) Share capital Capital surplus Surplus reserves General risk reserves Retained earnings Note Total equity Net profit ,207,953 27,207,953 Other comprehensive income - 904, ,729 Profit appropriation Surplus reserves - - 6,555,931 - (6,555,931) - General risk reserves ,200,000 (9,200,000) - Dividends (2,295,811) (2,295,811) Internal transfer of shareholders' equity Stock dividend 4,304, (4,304,647) -

103 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK BANK S STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated.) Share capital Capital surplus Surplus reserves General risk reserves Retained earnings Note Total equity Net profit ,175,675 19,175,675 Other comprehensive income - (2,009,606) (2,009,606) Issues of new shares 2,869,765 36,329, ,199,465 Profit appropriation Surplus reserves - - 4,561,237 - (4,561,237) - General risk reserves ,600,000 (2,600,000) - Dividend (1,324,507) (1,324,507) Internal transfer of shareholders' equity Stock dividend 2,649, (2,649,013) - The accompanying notes form an integral part of these fi nancial statements.

104 2011 Annual Report 103 SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) 1 GENERAL INFORMATION Shanghai Pudong Development Bank Co., Ltd. ( the Bank or Pufa Bank ) is a joint-stock commercial bank registered in Shanghai on 28 August 1992 with the approval from the People s Bank of China ( PBOC ) via YinFu [1992] No.350. The Bank obtained business licence from Shanghai Municipal Administration of Industry and Commerce ( SMAIC ) in on October 1992 and commenced business on 9 January On 10 November 1999, the Bank was listed and traded in Shanghai Stock Exchange. The business license number of the Bank is , and the licence number for conducting fi nancial services is B H0001. As at 31 December 2011, the Bank s share capital was RMB billion, including an amount of RMB billion shares which were restricted for trading. The Bank and its subsidiaries (collectively the Group ) are all engaged in financial industry. Their scopes of business are commercial banking services approved by PBOC and the China Banking Regulatory Commission ( CBRC ). The main scopes of business include drawing public deposits; granting loans of short-term, mid-term and long-term; performing settlements; discounting bills and notes; issuing fi nancial debentures; issuing, underwriting and cashing securities on behalf of governmental authorities; trading of governmental bonds and debentures; interbank loans and deposits; providing services relating to letters of credit and letters of guarantee; factoring and assignment of receivables and payables; providing safe deposit services; accepting deposit in foreign currencies; granting loans in foreign currencies; remittance of foreign currencies; exchange of foreign currencies; international settlements; interbank placements and deposits in foreign currencies; accepting and discounting of bills and notes expressed in foreign currencies; lending in foreign currencies; guarantees in foreign currencies; purchase and sale of foreign currencies; purchase and sale of marketable securities expressed in foreign currencies (excluding stocks), either for itself or on behalf of clients; purchase and sale of foreign currencies, either for itself or on behalf of clients; credit investigation, consultancy and testimonial services; offshore banking and other services as approved by PBOC. The fi nancial statements were authorized for issue by Board of Directors on 14 March SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES 2.1 Basis of presentation and statement of compliance The financial statements have been prepared in accordance with the China Accounting Standards for Business Enterprises (including basic standards, specifi c standards, implementation guidance and other relevant provisions) promulgated by Ministry of Finance of the People s Republic of China on 15 February 2006 and fi nancial statement disclosure requirments of public issued company by China Securities Regulatory Commission. The fi nancial statements present fairly, in all material respects, the fi nancial positions of the Bank and the Group as of 31 December 2011, and its fi nancial performances and cash fl ows for the year then ended in accordance with the requirements of Accounting Standards for Business Enterprises. 2.2 Accounting year The accounting year of the Group is from 1 January to 31 December of each calendar year. 2.3 Functional currency The Group s subsidiaries and branches in Mainland China use Renminbi ( RMB ) as function currency. Hong Kong branch uses Hong Kong dollar ( HKD ) as its function currency and translates the amount into RMB when preparing the fi nancial statements. The fi nancial statements have been prepared in RMB.

105 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) 2.4 Business Combinations Business combination under common control The consideration paid and the assets and liabilities acquired by the acquirer shall be measured at their carrying amounts. The difference between the carrying amounts of assets and liabilities acquired and the consideration paid shall be recorded in capital surplus. If capital surplus is not suffi cient to be deducted, any excess shall be adjusted against retained earnings. Transaction expenses for business combination are recorded in profit or loss for the current period. Transaction cost of issuing equity securities or debt securities for business combination should be recorded as initial recognition cost of the securities. Business combination not under common control The consideration paid and the identifiable net assets acquired by the acquired shall be measured at their fair values on the acquisition date. Goodwill is initially measured at cost being the excess of the aggregate fair value of the consideration paid and the acquirer s interest in the fair value of the acquiree s net identifi able assets. If the fair value of consideration is lower than the fair value of the net assets acquired, the difference is, after reassessment, recognized in profi t or loss for the current period. Transaction expenses for business combination should be recorded into the profit or loss for the current period. Transaction cost of issuing equity securities or debt securities for business combination should be recorded as initial recognition cost of the securities. 2.5 Consolidated financial statements The scope of consolidation of the consolidated fi nancial statements is determined based on control, and includes the fi nancial statements of the Bank and its subsidiaries. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. All signifi cant inter-company transactions, balances, income and expenses on transactions between group companies are eliminated. Subsidiaries equities and profi ts which are not attributable to the Bank are respectively presented as Minority interests in the consolidated fi nancial statements. Where the amount of losses of a subsidiary attributable to the minority shareholders exceeds their shares in the opening balance of shareholder s equity, the excess shall be allocated against minority interests. With respect to subsidiaries acquired through business combinations involving entities not under common control, the fi nancial performances and cash fl ows of the acquiree shall be consolidated into the fi nancial statements, from the day that the Bank obtains control, and till the Bank loses the control of it. While preparing the consolidated fi nancial statements, the acquirer should adjust the subsidiary s fi nancial statements, on the basis of the fair values of the identifi able assets, liabilities and contingent liabilities recognized on the acquisition date. With respect to subsidiaries acquired through business combinations involving entities under common control, the financial performances and cash flows of the acquiree should be consolidated into the financial statements from the beginning of the period when the acquisition occurs. While preparing the comparative financial statements, adjustments are made to related items in the financial statements for the prior period as if the reporting entity established through acquisition had been existed since the ultimate controller began to excise control. 2.6 Foreign currency transactions Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions.

106 2011 Annual Report 105 SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) Foreign currency monetary items are translated using the exchange rate at year end. Except for monetary securities classified as available-for-sale, translation differences are recognized in profit or loss for the reporting period. Changes in the fair value of monetary securities denominated in foreign currency classifi ed as available for sale are analyzed between translation differences resulting from changes in the amortized cost of the security and other changes in the carrying amount of the security. Translation differences related to changes in amortized cost are recognized in profi t or loss, and other changes in carrying amount are recognized in other capital surplus in capital surplus. Non-monetary foreign currency items measured at historical cost are translated at the spot exchange rates prevailing on the transaction dates, and the amount denominated in the functional currency should not be changed. Nonmonetary foreign currency items measured at fair value should be translated at the spot exchange rates prevailing at the date of valuation. Translation differences should be recognized in other capital surplus in equity for availablefor-sale fi nancial assets and in gain/loss from fair value change in profi t and loss of current period for fi nancial assets and liabilities at fair value through profi t or loss. 2.7 Cash and cash equivalents Cash and cash equivalents are cash, deposit available to pay at any time and investments with short maturity, high liquidity, easily change to certain amount of cash and low risk in valuation variation. Cash and cash equivalents include cash, non-statutory reserve deposits in central banks and due from and placements with other banks and fi nancial institutions within three months since acquisition date. 2.8 Precious metals Precious metals held by the Group are gold traded in domestic markets. They are initially recognized at cost and subsequently measured at fair value at the balance sheet date. Gains or losses arising from fair value variances are recognized in profi t and loss. 2.9 Financial instruments Recognition and derecognition The Group recognises a fi nancial asset or a fi nancial liability when the Group becomes a party to the contractual provision of fi nancial instrument. A fi nancial asset is derecognized when one of the following conditions is satisfi ed: (i) The rights to receive cash fl ows from the fi nancial asset expire; or (ii) The fi nancial asset has been transferred and Group has transferred substantially all the risks and rewards of the asset; or (iii) The Group has neither transferred nor retained substantially all the risks and rewards of ownership of the financial asset, but it has relinquished transferred control of the asset. Once fi nancial assets are derecognized, the difference between book value and the sum of considerations received and the accumulated change of fair value recorded in equity before should be recognized in profi t or loss. If the obligation relating to a fi nancial liability has been discharged or cancelled or has expired, the fi nancial liability is derecognised. If the existing fi nancial liability is replaced by the same creditor with another fi nancial liability that has terms with an almost completely different nature, or if almost all the terms of the existing liability are substantially revised, such replacement or revision is accounted for as derecognition of the original liability and recognition of a

107 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) new liability, and the difference is recognised in profi t or loss of current period. All fi nancial assets in regular way trades are initially recognised and derecognised on the trade date. Regular way trades means purchasing or selling of fi nancial assets that require delivery of assets within the time frame generally established by regulation or convention in the market place. Trade date is the date that the Group promises to purchase or sale the fi nancial assets. Classifi cation and measurement of fi nancial assets Financial assets are, on initial recognition, classified into the following categories: financial assets at fair value through profi t or loss, held-to-maturity investments, loans and receivables, available-for-sale fi nancial assets. The Group determines the classification of the financial assets on initial recognition. When financial assets are recognised initially, they are measured at fair value. In the case of fi nancial assets at fair value through profi t or loss, relevant transaction costs are directly charged to the profit and loss of the current period; transaction costs relating to financial assets of other categories are included in the amounts initially recognised. Financial assets at fair value through profi t or loss Financial assets at fair value through profit or loss include financial assets held for trading and financial assets designated at fair value through profi t or loss upon initial recognition. A fi nancial asset held for trading is the fi nancial asset that meets one of the following conditions: 1) the fi nancial asset is acquired for the purpose of selling in a short term; 2) the fi nancial asset is a part of a portfolio of identifi able fi nancial instruments that are collectively managed, and there is objective evidence indicating that the enterprise recently manages this portfolio for the purpose of short-term profi ts; 3) the fi nancial asset is a derivative fi nancial instrument except for a derivative that is a fi nancial guarantee contract or a designated and effective hedging instrument or linked with investments in equity instruments that do not have a quoted market price in an active market, and whose fair value cannot be reliably measured. These fi nancial assets are subsequently measured at fair value. Changes of fair value are recognised in gain/loss from changes of fair value in profi t or loss of current period. Dividend received and interest accrued during the assets hold period and gains or loss arising from disposal are recognised in profi t and loss of current period. During this year, the Group does not have fi nancial assets designated at fair value through profi t or loss upon initial recognition. Held-to-maturity investments Held-to-maturity securities are non-derivative financial assets with fixed or determinable payments and fixed maturities that management has both the positive intention and the ability to hold to maturity. Held-to-maturity investments shall be measured at amortised cost using the effective interest method. Except for specific situations such as disposal of insignificant amount of held-to-maturity investments at a date suffi ciently close to maturity date, if the Group fails to hold such investments through their maturities or reclassifi es a portion of held-to-maturity investments into available-for-sale prior to their maturities, the Group shall reclassify the entire held-to-maturity portfolio into available-for-sale investments at fair value and the Group is further prohibited to designate any investments as held-to-maturity during the following two fi scal years. Loan and receivables Loans and receivables are non-derivative fi nancial assets with fi xed or determinable payments that are not quoted in an active market. When the Group provides funds or services directly to customers and does not intend to sell the receivables, the Group classifi es such fi nancial assets as loans and receivables. Subsequently, such assets are measured at amortised cost using effective interest method.

108 2011 Annual Report 107 SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) Available-for-sale fi nancial assets Available-for-sale financial assets are those non-derivative financial assets that are designated as available for sale or are not classifi ed as (a) loans and receivables, (b) held-to-maturity investments or (c) fi nancial assets at fair value through profi t or loss. After initial recognition, available-for-sale fi nancial assets are measured at fair value. For available-for-sale debt instruments, premium or discount is amortised using effective interest method and recognised as interest income or expense. A gain or loss arising from a change in the fair value of an available-for-sale fi nancial asset is recognised in a separate component of capital surplus, except for impairment losses and foreign exchange gains and losses resulted from monetary fi nancial assets, until the fi nancial asset is derecognised or determined to be impaired, at which time the cumulative gain or loss previously recognised in capital surplus shall be removed and recognised in the income statement. Interests and dividend relating to an available-for-sale fi nancial asset are recognised in the income statement for the period they relate to. Classifi cation and measurement of fi nancial liabilities The fi nancial liabilities of the Group are, upon initial recognition, classifi ed as fi nancial liabilities at fair value through profi t or loss and other fi nancial liabilities. The Group determines the classifi cation of fi nancial liabilities on initial recognition. For fi nancial liabilities at fair value through profi t or loss, transaction costs are directly recognised in the income statement of the current period, and transaction costs relating to other fi nancial liabilities are included in the initially recognised amount. Financial liabilities at fair value through profi t or loss Financial liabilities at fair value through profi t or loss include fi nancial liabilities held for trading and fi nancial liabilities designated at fair value through profit or loss upon initial recognition. A financial liability held for trading is the fi nancial liability that meets one of the following conditions: 1) the fi nancial liability is acquired for the purpose of repurchasing in a short term; 2) the fi nancial liability is a part of a portfolio of identifi able fi nancial instruments that are collectively managed, and there is objective evidence indicating that the enterprise recently manages this portfolio for the purpose of short-term profi ts; 3) the fi nancial liability is a derivative fi nancial instrument except for a derivative that is a fi nancial guarantee contract or a designated and effective hedging instrument or linked with investments in equity instruments that do not have a quoted market price in an active market, and whose fair value cannot be reliably measured. Such kind of fi nancial liabilities are measured at fair value subsequently. All realized or unrealized gains or losses on these fi nancial liabilities are recognised in the income statement of the current period. During this year, the Group doesn t have fi nancial liabilities designated at fair value through profi t or loss upon initial recognition. Other fi nancial liabilities After initial recognition, such fi nancial liabilities shall be measured at amortised costs using effective interest rate method. Fair value of fi nancial instruments Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm s length transaction. The fair values of quoted investments in active markets are based on current bid prices. The fair value of a financial instrument for which the market is not active is determined by using a valuation technique. Valuation techniques include using recent arm s length market transactions between knowledgeable, willing parties, if available, reference to the current fair value of another instrument that is substantially the same, discounted cash fl ow analysis and option pricing models. When a valuation technique is used to establish the fair

109 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) value of a fi nancial instrument, use market data as much as possible and avoid use of data that is particularly related to the Group. Impairment of fi nancial assets Except for financial assets at fair value through profit or loss, the Group assesses at each balance sheet date whether there is objective evidence that a fi nancial asset or group of fi nancial assets is impaired. A fi nancial asset or a group of fi nancial assets is impaired and impairment losses are incurred if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a loss event ) and that loss event (or events) has an impact on the estimated future cash fl ows of the fi nancial asset or group of financial assets that can be reliably estimated. The major criteria that the Group uses to determine that there is objective evidence of an impairment loss include: Overdue of principle or interest; Signifi cant fi nancial diffi culty of the obligor (i.e.: deterioration of equity ratios, net income ratio); A breach of contract; Start bankruptcy procedure; The borrower market competition status deteriorated, etc. Financial assets carried at amortised cost If objective evidence shows that the fi nancial assets carried at amortised cost are impaired, the carrying amount of the fi nancial asset shall be reduced to the present value of the estimated future cash fl ows (excluding future credit losses that have not been incurred). The amount of reduction is recognised as an impairment loss in the income statement. Present value of estimated future cash flows is discounted at the financial asset s original effective interest rate and includes the value of any related collateral. If a fi nancial asset has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate. If a financial asset is individually significant, the Group assesses the asset individually for impairment, and recognises the amount of impairment in the income statement if there is objective evidence of impairment. For a fi nancial asset that is not individually significant, the Group includes the asset in a group of fi nancial assets with similar credit risk characteristics and collectively assess them for impairment. For fi nancial assets that are not impaired upon individual tests (including financial assets that are individually significant or insignificant), impairment tests should be conducted on them again by including them in the group of fi nancial assets. Assets for which an impairment loss is individually recognised will not be included in a collective assessment of impairment. When a fi nancial asset is uncollectible, it is written off against the related allowance on impairment losses. Such fi nancial assets are written off after all the necessary procedures have been completed and the amount of the loss has been determined. If, subsequent to the recognition of an impairment loss on a financial asset carried at amortised cost, there is objective evidence of a recovery in value of the fi nancial asset which can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed and recognised in the income statement. Available-for-sale fi nancial assets When there is objective evidence that the asset is impaired, the cumulative loss from declines in fair value that had been recognised directly in revaluation reserve of equity are transferred out, then recognised in the income

110 2011 Annual Report 109 SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) statement. The amount of the cumulative loss that is transferred out and recognised in the income statement equals to the difference between its initial cost (net of any principal repayment and amortization) and current fair value, less any impairment loss on that fi nancial asset previously recognised in the income statement. If, in a subsequent period, the fair value of a debt instrument classified as available for sale increases and the increase can be related objectively to an event occurring after the impairment was recognised in the income statement, the previously recognised impairment loss shall be reversed with the amount of the reversal recognised in the income statement. Impairment losses recognised in the income statement for an equity instrument investment shall be reversed through other comprehensive income rather than profi t or loss. Offsetting fi nancial instruments Financial assets and fi nancial liabilities are presented separately in the statement of fi nancial position, and they shall not be offset against each other; except for the followings: (i) The Group has the legal right to offset the amount, and the legal right is enforceable; (ii) The Group has the intention to settle on a net basis or realize the asset and settle the liability simultaneously Assets purchased under resale agreements ( Reverse repos ) and assets sold under repurchase agreements ( Repos ) Reverse repo refers to the agreement under which the Group purchases an asset with an obligation to resell it to the same counterparty at a pre-determined price at a specifi ed date. Reverse repo are recorded at the actual amount paid and presented in assets purchased under resale agreements. Repo refers to the agreement under which the Group sells an asset with an obligation to repurchase it from the same counterparty at a pre-determined price at a specifi ed date. Repos are recorded at the actual amounts received and presented in assets sold under repurchase agreements. The difference between resale and repurchase price is treated as interest income or expense and recognized in the agreement period with effective interest method Derivative financial instruments Derivative financial instruments are initially recognised at fair value on the date at which a derivative contract is sighed and are subsequently re-measured at fair value. Any gains or losses arising from changes in fair value on derivatives are taken to gain/loss from changes of fair value in profi t or loss. Certain derivatives embedded in other financial instrument, they together become compound derivative financial instruments. When the related compound derivative financial instruments are not financial assets or liabilities designated as fair value through profi t or loss, those derivatives embedded in other fi nancial instruments should be treated as separated derivatives, when: (i) their risks and economic characteristics are not closely related to those of the host contract; (ii) the separate fi nancial instrument is a derivative itself. While certain derivative transactions are intended to provide effective economic hedges of specifi c interest rate and foreign exchange risks, they do not qualify for hedge accounting under the specifi c rules of Accounting Standards for Business Enterprises 24 and are therefore treated as derivatives held for trading, with changes in fair value reported as trading income. The Group has no derivative positions that are accounted for as hedges during this reporting period.

111 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) 2.12 Long-term equity investments Long-term equity investments include investments in subsidiaries, joint ventures, associates and equity investment with no control, jointly control or exercise significant infl uence over investee enterprise, which do not have a quoted market price in an active market and whose fair value cannot be reliably measured. Subsidiaries refer to the enterprises can be controlled by the Bank, joint ventures refer to the investee enterprise under Group s joint control, and associates refer to the Group has signifi cant infl uence on the investee enterprise. The Group adopt the cost method to the subsidiaries, present the cost amount in Bank s fi nancial statement, and adjust amount according to equity method in the consolidated financial statement. The Group adopt the equity method to the associates and joint ventures, and adopt the cost method to the equity investment with no control, jointly control or exercise signifi cant infl uence over investee enterprise, which do not have a quoted market price in an active market and whose fair value cannot be reliably measured Initial recognition Long-term equity investments through business combinations: With respect to long-term equity investments acquired through business combinations involving entities under common control, the initial investment cost shall be recognized at their carrying amounts at the combination date as recorded by the party being absorbed. With respect to long-term equity investments acquired through business combinations involving entities not under common control, the initial investment cost shall be recognized at the cost of business combination. Long-term equity investments without through business combinations: With respect to long-term equity investments acquired through cash paid, the initial investment cost shall be recognized at the amount paid. With respect to longterm investments acquired through equity securities issued, the initial investment cost shall be recognized at the fair value of the equity securities Subsequent measurement When the cost method is adopted, the investment income is recognised in the income statement of the period to the extent that the Group s share of the profit or cash dividend declared to be distributed by the investee enterprise (except for the dividend included in the initial cost). When the equity method is adopted, where the initial investment cost of a long-term equity investment exceeds the investing enterprise s interest in the fair values of the investee s identifi able net assets at the acquisition date, the difference is accounted for as an initial cost. Where the initial investment cost is less than the investing enterprise s interest in the fair values of the investee s identifiable net assets at the acquisition date, the difference shall be charged to the income statement for the current period, and the cost of the long-term equity investment shall be adjusted accordingly. With respect to long-term equity investments adopted equity method, the Group recognises its share of postacquisition result in the investee enterprise for the current period as gain or loss on investment in the current period. However, the share of net loss is only recognised to the extent that the book value of the investment is reduced to zero, except to the extent that the Group has incurred obligations to assume additional losses which should be recognised as estimated debts. The Group shall adjust the carrying amount of the long-term equity investment based on pro-rata basis of shareholding for other changes in owner s equity of the investee enterprise (other than net profits or losses), and include in capital reserve. The book value of the investment is reduced to the extent of the Group s share of the profi t or cash dividend declared to be distributed by the investee enterprise. Unrealized income arising from related party transactions between the Group and investing entity, which is allocated to the Group based on pro-

112 2011 Annual Report 111 SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) rata basis of shareholding, is cancelled out and investment income is recognized on the same basis. Loss arising from related party transactions between the Group and investing entity, which is related to asset impairment, is cancelled out and such unrealized loss is not cancelled out Defi nition of control, jointly control or signifi cant infl uence Control is the power to decide the financial and operating policy of the investee company, and benefit from the operation of the investee. Potential voting rights in current period like convertible bonds, executable warrants should be considered when decide whether can be treated as control. Joint control is the contractually agreed sharing of control over an economic activity, and exists only when the strategic financial and operating decisions relating to the activity require the unanimous consent of the parties sharing control. Signifi cant infl uence is the power to participate in the fi nancial and operating policy decision process but does not control or jointly control those policy decisions Impairment of long-term equity investment With respect to the subsidiaries, associates and joint venture investments, when the recoverable amount is lower than its carrying amount, book value should be reduced to the recoverable amount (Note 2.18). With respect to equity investment with no control, jointly control or exercise significant influence over investee enterprise, which do not have a quoted market price in an active market and whose fair value cannot be reliably measured, when the recoverable amount is lower than its carrying amount, book value should be reduced to the present value of future cash flow using market yield of similar financial assets. The difference between carrying amount and present value recorded into impairment loss. Once the impairment loss is recognised, it cannot be recovered in subsequent periods Fixed assets Recognition and initial measurement Fixed assets include buildings, constructions, motor vehicles, mainframe computers, computers, electrical equipments and offi ce equipments, etc. Fixed assets shall be recognised only when the economic benefi ts associated with the asset will fl ow to the Group and the cost of the asset can be measured reliably. Subsequent expenditure incurred for fi xed assets that meet the recognition criteria shall be included in the cost of the asset, and carrying amount of the component of the asset that is replaced shall be derecognised. Otherwise, such expenditure shall be recognised in the income statement in the period in which it is incurred. Fixed assets are initially measured at cost, comprising purchase price, relevant taxes and any directly attributable expenditure for bringing the asset to working condition for its intended use, such as delivery and handling costs, installation costs and other surcharge Depreciation Depreciation is calculated on the straight-line method to write down the cost of such assets to their residual values over their estimated useful lives. For the impaired property, plant and equipment, the annual depreciation amount should be calculated on the basis of carrying amount less impairment and estimated useful life. The estimated useful lives, residual values and annual depreciation rates are as follows:

113 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) Category Estimated useful life Estimated residual value Annual depreciation rate Buildings and constructions 30 years 3-5% % Vehicles 5 years 3-5% % Mainframe computers 5 years 3-5% % Computers 3-5 years 3-5% % Electronic equipments 5 years 3-5% % Office equipments 5 years 3-5% % Residual values, useful lives and depreciation method are reviewed, and adjusted if appropriate, at each period end. When the recoverable amount is lower than its carrying amount, it should be reduced to the recoverable amount (Note 2.18) Constructions in progress Construction in progress is stated at cost. Cost comprises equipment cost, cost of construction, installation and other direct costs. Items classifi ed as construction in progress are transferred to other categories of property, plant and equipment when such assets are ready for their intended use, and the depreciation charge commences from the following month after such assets are transferred to fi xed assets. When the recoverable amount is lower than its carrying amount, it should be reduced to the recoverable amount (Note 2.18) Intangible assets Intangible assets mainly include land use right and software. (1) Intangible assets are initially recorded at the actual cost on acquisition. (2) The amortization method and estimated useful lives are as follows: A: The amortization charge commences from the month the land use right are bought in, and the amortization is calculated on the straight-line method to write down the cost of such assets to their residual values over their statutory use right length. B: The amortization charge commences from the month the software are bought in, and the amortization is calculated on the straight-line method to write down the cost of such assets to their residual values over their estimated useful lives. (3) The cost of a fi nite useful life intangible asset is amortised using the straight-line method during the estimated useful life. For an intangible asset with a fi nite useful life, the Group reviews the useful life and amortisation method at least at the end of each year end and adjusts it if necessary. (4) When the recoverable amount is lower than its carrying amount, book value should be reduced to the recoverable amount (Note 2.18) Long-term deferred charges Long-term deferred assets are the expenditures which need to be amortised over 1. (1) Operating leases are amortised on a straight-line basis over the lease term. (2) Leasehold improvements are amortised on a straight-line basis over estimated useful lives.

114 2011 Annual Report 113 SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) 2.17 Foreclosed assets When the Group s obligor use foreclosed asset to compensate the principal and interest of loan, foreclosed asset was initially recognised and measured at fair value and acquisition cost, then it was subsequently measured at lower of carrying amount or recoverable amount. Each balance sheet date, the Group will assess if a foreclosed asset has been impaired individually. If recoverable amount of foreclosed asset is lower than carrying amount, the difference should be charged into current period income statement. The difference that consideration received on disposal less related expenses with carrying amount was charged to non-operating income/expense. Provision which has been made for foreclosed asset should be reversed once disposed Impairment of Long-term assets Assets such as fixed assets, construction in progress, intangible assets with limited useful lives and long-term equity investments in subsidiaries, joint ventures and affi liates, are undertaking impairment tests based on the impairment indicators on the balance sheet date. If the impairment test shows that the recoverable amount of such assets will fall below carrying value, the difference will be charged into current period income statement. The recoverable amount is the higher, of the fair value of the asset less related disposal cost and present value of expected future cash infl ows of such asset. Asset impairment is measured and recognized on each individual asset. If it is diffi cult to estimate the recoverable amount of each individual asset, then cash generating unit (CGU) in which such individual assets belongs to will be used to estimate the recoverable amount of CGU. A CGU is a minimum asset portfolio that can independently generate cash inflow. Once the impairment loss is recognised, it cannot be recovered in subsequent periods Debts issued Debt issued is initially measured at fair value less directly transaction cost, then subsequently measured at amortised cost, using the effective interest rate method Provision Except for provision arising from business combination, provisions are recognised when: (i) The Group has a present legal or constructive obligation as a result of past events; (ii) It is probable that an outfl ow of resources will be required to settle the obligation; and (iii) The amount has been reliably estimated. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The Group will review the carrying amount at each balance sheet date. If there are evidences showing that the carrying amount cannot refl ect the present best estimates, the carrying amount should be adjusted accordingly Fiduciary activities Where the Group acts in a fi duciary capacity such as nominee, trustee or agent, for example, entrusted loan and fund fiduciary, assets arising thereon together with related undertakings to return such assets to customers are

115 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) excluded from the fi nancial statements of the Group Financial guarantee contract Financial guarantee contract refers to an agreement made by a guarantor and an obligee that the guarantor shall perform the obligation according to the contract, when the obligor fails to perform his obligations as agreed. Financial guarantee contract is initially measured at fair value. Financial guarantee contracts which are not measured at fair value through profi t or loss, are subsequently measured at higher of, the best estimation of obligation that needs to be settled at balance sheet date and the difference between the amount of initial recognition less accumulated amortization based on revenue recognition principle, upon initial recognition Revenue and expense recognition Interest income and interest expense Interest income and expense are recognised in profi ts and losses of the current period on an accrual basis using the effective interest rate method. Effective interest rate method is a method used to calculate amortized cost and interest income or expense of fi nancial assets or fi nancial liabilities (include a set of fi nancial assets or fi nancial liabilities) by effective interest rate. The effective interest rate is the interest rate at which the estimated cash fl ows of fi nancial assets in the expected duration should be discounted to the present value. The computation of interest income takes consideration of contractual terms of the fi nancial assets as well as expenses and transaction costs comprising the effective interest rate, but excluding future credit losses Fee and commission income Commission income is recognised when the services have been rendered and the proceeds can be reasonably estimated Employee benefits Employee benefi ts are all forms of consideration given and other relevant expenditures incurred by the Group in exchange for service rendered by employees. In the accounting period in which an employee has rendered service to the Group, the Group will recognise the employee benefi ts payable as a liability. The Group have security plan set up by government agent including pension and medical insurance, housing accumulation fund and other social security plan according to regulations. According to the relevant regulations and contracts, insurance and housing fund should be paid to the social security agencies or insurance company according to a certain proportion of the total salary and no more than the limit, the spending should be included in the current profi ts and losses. In addition to social basic pension insurance, the staff can also volunteer to join the supplementary pension plans set up by the Bank. The Bank pays according to a certain proportion of the total amount of the employee salary to the supplementary pension plans and records it into the profi ts and losses of the current period. Except for the social security described above, the Group has no other major employee benefi ts promises Income taxes Income tax comprises current and deferred tax. Income tax is recognised as income or an expense and include in the income statement for the current period, except to the extent that the tax arises from a business combination or if

116 2011 Annual Report 115 SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) it relates to a transaction or event which is recognised directly in equity. Current tax is the amount of income taxes payable in respect of the taxable profi t for the current period. Taxable profi t (tax loss) is the profi t (loss) for current period, determined in accordance with rules established by the taxation authorities. At the balance sheet date, current income tax liabilities (or assets) for the current and prior periods are measured at the amount expected to be paid to (or recovered from) the tax authorities according to the requirements of the tax laws. The deferred tax assets and deferred tax liabilities are recognized according to the differences (temporary differences) between the tax bases of assets and liabilities and their book values at the balance sheet date. A deferred tax asset is recognized if it can be offset with the amount of taxable loss in future years according to the tax law. No deferred tax liabilities should be recognised for the temporary differences raised from initial recognition of goodwill. The temporary differences from initial recognition of assets or liabilities which are not arise from a business combination, and neither affects the accounting profits nor affects the taxable income, should not be recognized as deferred tax assets and deferred tax liabilities. At the balance sheet date, deferred tax assets and liabilities are measured at the tax rates that are expected to be applied to the period when the asset is realized or the liability is settled, according to the requirements of tax laws. The amount of deferred tax assets is limited to the amount that is probably can be used to offset deductible temporary differences and deductible loss. In respect of taxable temporary differences associated with investments in subsidiaries, associates and joint ventures, deferred tax liabilities are recognised unless that the Group can control the timing of the reversal of temporary differences and it is probable that the temporary difference will not reverse in the foreseeable future. In respect of deductible temporary differences associated with investments in subsidiaries, associates and joint ventures, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will be reversed in the foreseeable future and taxable profi t will be available against which the temporary differences can be utilized. The deferred tax assets and deferred tax liabilities should be stated as net amount when satisfy the following conditions at the same time: (i) The deferred tax assets and deferred tax liabilities are related to the same tax collection taxed by the same administration within the Group; (ii) The tax subject in the Group has legal right to net off the current income tax assets and current income tax liabilities Leases A fi nance lease is a lease that transfers in substance all the risks and rewards incident to ownership of an asset. An operating lease is a lease other than a fi nance lease. Lease payments under an operating lease are recognised by a lessee on a straight-line basis over the lease term, and either included in the cost of another related asset or charged to the income statement for the current period Segment reporting The Group identifi es operating segment on the basis of internal organization structure, management requirement and internal report system, and forms the segment report and discloses the segment information based on operating

117 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) segment. Operating segment represents the segment satisfying the following conditions at the same time: (i) The segment produces income and expenses in daily activities; (ii) The Group s management regularly evaluates the performance of the segment, and decides to allocate resources to the segment; (iii) The Group can obtain financial position, operation performance, cash flow and other relevant accounting information of the segment Critical accounting estimates and judgments in applying accounting policies The Group makes estimates and assumptions based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Areas susceptible to significant changes in estimates and judgments, which affect the carrying value of assets and liabilities of next accounting period, are set out below. It is possible that actual results may require material adjustments to the estimates referred below Allowance for impairment losses on loans and advances The Group reviews its loan portfolios to assess impairment regularly. In determining whether an impairment loss should be recorded in the income statement, the Group makes judgments as to whether there is any observable evidence indicating that there is a measurable decrease in the estimated future cash fl ows from a portfolio of loans before the decrease can be identifi ed with an individual loan in that portfolio. This evidence may include observable data indicating that there has been an adverse change in the payment status of borrowers (e.g. payment delinquency or default), or national or local economic conditions that correlate with defaults on assets. Management makes estimation based on historical loss experience for assets with credit risk characteristics and objective evidence of impairment similar to those in the portfolio when scheduling its future cash fl ows Fair value of fi nancial instruments The fair values of financial instruments that are not quoted in active markets are determined by using valuation technique. Valuation technique includes using recent arm s length market transactions between knowledgeable, willing parties, if available, reference to the current fair value of another instrument that is substantially the same, discounted cash fl ow analysis and option pricing models. The Group uses market information in maximum extent. However, if market information is not available, management might estimate the credit risk, market fl uctuations and relevance of the Group and its counterpart. Changes in assumptions about these factors could affect reported fair value of fi nancial instruments.

118 2011 Annual Report 117 SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) Income taxes Significant estimates are required in determining the provision for income tax. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. In particular, the deductibility of certain items is subject to tax authority s approval. Where the fi nal tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made Held-to-maturity investments Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity date that the Group has the positive intention and ability to hold to maturity. This classification requires signifi cant judgment. In making this judgment, the Group evaluates its intention and ability to hold such investments to maturity. If the Group fails to keep these investments to maturity, it will be required to reclassify the entire class as available-for-sale. 3 TAXATION The applicable taxes/surcharges categories and tax/surcharge rate for the Group are the followings: Taxes/surcharges Tax/surcharge base Tax and surcharge rate Business tax (the Bank) Operating income 5% Business tax (the subsidiaries) Operating income 3% City maintenance and construction tax Business tax 7% Educational surcharge Business tax 3% Corporate income tax Taxable income 25% 4 CONSOLIDATION SCOPE OF CONSOLIDATED REPORT 4.1 The Bank s significant subsidiary is showed as follows

119 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) Name of subsidiaries Mianzhu Pufa Rural Bank Co., Ltd. Liyang Pufa Rural Bank Co., Ltd. Gongyi Pufa Rural Bank Co., Ltd. Fengxian Pufa Rural Bank Co., Ltd. Zixing Pufa Rural Bank Co., Ltd. Banan Pufa Rural Bank Co., Ltd. Zouping Pufa Rural Bank Co., Ltd. Zezhou Pufa Rural Bank Co., Ltd. Ganjingzi Pufa Rural Bank Co., Ltd. Hancheng Pufa Rural Bank Co., Ltd. Jiangyin Pufa Rural Bank Co., Ltd. Pingyang Pufa Rural Bank Co., Ltd. Xinchang Pufa Rural Bank Co., Ltd. Registration address Mianzhu, Sichuan Liyang, Jiangsu Gongyi, Henan Fengxian, Shanghai Zixing, Hunan Banan, Chongqing Zouping, Shandong Jincheng, Shanxi Ganjingzi, Liaoning Hancheng, Shaanxi Jiangyin, Jiangsu Pingyang, Zhejiang Xinchang, Zhejiang Registered capital (RMB'0000) Amount of investment (RMB'0000) Direct Equity % Voting % Minority interest (RMB'0000) Minority interest in profit or loss for offset against the amount of minority shareholders (RMB'0000) Enterprise type 5,000 2,750 55% 55% 3,355 - Limited liability company 23,000 11,730 51% 51% 12,237 - Shares limited liability company 5,000 2,550 51% 51% 3,883 - Shares limited liability company 5,000 3,450 69% 69% 2,005 - Shares limited liability company 15,800 8,058 51% 51% 8,890 - Shares limited liability company 5,000 2,550 51% 51% 3,157 - Shares limited liability company 17,200 8,772 51% 51% 8,852 - Shares limited liability company 5,000 2,550 51% 51% 3,062 - Shares limited liability company 5,000 2,550 51% 51% 2, Shares limited liability company 5,000 2,550 51% 51% 2, Shares limited liability company 10,000 5,100 51% 51% 5,000 - Shares limited liability company 10,000 5,100 51% 51% 4,907 - Shares limited liability company 10,000 5,100 51% 51% 5,115 - Shares limited liability company 62,810 65, The legal representative Organization code Bing, Wang Guoyuan,Wu Wanjun, Lii Jianqiang, Huang Rongjun, Li Xiaozhong, Wang Guangxin, Gen X Jian, Li Xinhao, Wang Zhihui, Yang Yongming, Ji Mingming, Zhong Zhengrong, Zhao

120 2011 Annual Report 119 SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) All subsidiaries are acquired through initial establishment, and included in the consolidated fi nancial statements. All subsidiaries are commercial banks, whose operation scopes are the following: drawing public deposits; granting loans of short-term, mid-term and long-term nature; performing settlements; discounting bills and notes; performing interbank loans and deposits; bank card business; issuing, underwriting and cashing securities on behalf of governmental authorities; factoring and assignment of receivables and payables and other services as approved by PBOC. 4.2 Subsidiaries newly consolidated by the Group in the current year Net assets as at 31 December 2011 Net gain for the current year Pingyang Pufa Rural Bank Co., Ltd. 100, Xinchang Pufa Rural Bank Co., Ltd. 104,367 4,367 5 NOTES TO THE FINANCIAL STATEMENTS 5.1 Cash and balances with central bank Group Bank Cash 5,648,021 4,924,527 5,603,272 4,897,736 Mandatory reserve deposits 307,862, ,013, ,666, ,857,154 Balances with central bank other than mandatory reserve deposits 52,978,762 68,156,410 52,572,730 67,701,248 Fiscal deposit in central bank 468, , , ,007 Total 366,957, ,248, ,310, ,610,145 The Group is required to place reserve deposits with the PBOC, which is forbidden to be used in the Group s ordinary business. The reserve rate for deposits denominated in RMB of the Bank is 19% at 31 December 2011 (31 December 2010: 16.5%). The reserve rate for deposits denominated in foreign currencies of the Group is 5% at 31 December 2011 (31 December 2010: 5%). 5.2 Due from other banks and financial institutions Group Bank Due from domestic banks 257,163,843 66,190, ,850,179 65,881,867 Due from overseas banks 10,712,639 3,348,846 10,712,639 3,348,846 Total 267,876,482 69,539, ,562,818 69,230,713

121 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) 5.3 Interbank placements Group Bank Placements with domestic banks 104,746,813 26,527, ,736,813 26,527,931 Placements with overseas banks 5,734,485 2,486,534 5,734,485 2,486,534 Placements with domestic other financial institutions 934,000 2,239, ,000 2,239,000 Total 111,415,298 31,253, ,405,298 31,253, Financial assets held for trading Group and Bank RMB corporate bonds 3,347,336 - RMB bonds issued by policy banks 1,799,974 - RMB treasury bonds 371,410 - PBOC bills 348,121 - Total 5,866,841 - There is no restriction in the Group s fi nancial assets held for trading to be turned into cash. 5.5 Derivative financial instruments Group and Bank Fair Values Notional Amount Assets Liabilities Derivative financial instruments held for trading: Currency swap contracts 55,961, ,635 (301,356) Foreign-exchange forward contracts 46,044, ,181 (132,030) Interest-rate swap contracts 39,453,623 42,971 (1,068,997) Precious-metal forward contracts 3,712,055 - (12,646) Total 548,787 (1,515,029) Group and Bank Fair Values Notional Amount Assets Liabilities Derivative financial instruments held for trading: Currency swap contracts 40,670, ,209 (308,888) Foreign-exchange forward contracts 18,826, ,025 (141,208) Interest-rate swap contracts 27,801, ,524 (721,987) Precious-metal forward contracts 936,520 5,591 - Total 1,033,349 (1,172,083)

122 2011 Annual Report 121 SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) Notional amount of derivative fi nancial instruments just represents the amount of underlying asset or reference index upon which changes in the value of derivatives are measured. It doesn t represent the future cash fl ow or the current fair value, and therefore could not refl ect the credit risk and market risk faced by the Group. With the fl uctuating price of foreign exchange rates, interest rates, and the stock or futures fair value of derivatives may bring advantage (recognized as assets) or disadvantage (recognized as liabilities) impact to the Group, and the influence could fl uctuate largely in different period. 5.6 Financial assets purchased under resale agreements Group and Bank Bills under resale agreements 271,599, ,336,426 Bonds under resale agreements 9,910,200 37,445,718 Loans under resale agreements - 150,000 Total 281,509, ,932, Interests receivable Group Increase Decrease Interests receivable on bonds 3,919,567 16,887,413 (16,224,448) 4,582,532 Interests receivable on loans 2,495,548 74,527,941 (73,311,636) 3,711,853 Interests receivable on due from/placement with other banks and financial institutions 62,403 7,669,050 (5,027,071) 2,704,382 Interests receivable on financial assets under resale agreements 14, ,311 (449,534) 41,363 Others ,806 (91,473) 30,944 Total 6,492,715 99,682,521 (95,104,162) 11,071,074 Bank Increase Decrease Interests receivable on bonds 3,919,567 16,887,413 (16,224,448) 4,582,532 Interests receivable on loans 2,494,358 74,203,705 (72,993,578) 3,704,485 Interests receivable on due from/placement with other banks and financial institutions 60,663 7,633,207 (4,990,062) 2,703,808 Interests receivable on financial assets under resale agreements 14, ,311 (449,534) 41,363 Others ,806 (91,473) 30,944 Total 6,489,785 99,322,442 (94,749,095) 11,063,132

123 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) 5.8 Loans and advances to customers Group Bank Corporate loans Normal loans 1,023,791, ,143,950 1,019,334, ,992,785 Trade finance 22,345,625 9,588,225 22,345,625 9,588,225 Discount bills 23,994,515 21,888,569 23,244,759 21,562,245 Individual loans Real estate mortgage 225,690, ,290, ,071, ,120,786 Credit card and overdraw 11,826,372 7,766,546 11,826,372 7,766,546 Others 23,788,145 18,811,129 22,940,778 18,332,270 Total loans and advances to customers 1,331,436,044 1,146,489,301 1,324,763,756 1,143,362,857 Individual impairment allowances (2,222,442) (2,783,597) (2,222,442) (2,779,677) Collective impairment allowances (26,889,652) (19,592,714) (26,777,597) (19,563,641) Total impairment allowances (29,112,094) (22,376,311) (29,000,039) (22,343,318) Loans and advances to customers,net 1,302,323,950 1,124,112,990 1,295,763,717 1,121,019, Loans and advances to customers listed by way of impairment assessment Group Collectively assessed nonimpaired loans Collectively assessed Impairment loans Individually assessed Subtotal Total As at 31 December 2011 Corporate loans 1,065,163,009 1,600,918 3,367,220 4,968,138 1,070,131,147 Individual loans 260,445, , , ,304,897 Impairment allowances (25,309,972) (1,579,680) (2,222,442) (3,802,122) (29,112,094) Net 1,300,298, ,218 1,144,778 2,024,996 1,302,323,950 As at 31 December 2010 Corporate loans 923,504,898 1,225,635 3,890,211 5,115, ,620,744 Individual loans 217,104, , , ,868,557 Impairment allowances (18,530,259) (1,062,455) (2,783,597) (3,846,052) (22,376,311) Net 1,122,079, ,218 1,106,614 2,033,832 1,124,112,990

124 2011 Annual Report 123 SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) Bank Collectively assessed nonimpaired loans Collectively assessed Impairment loans Individually assessed Subtotal Total As at 31 December 2011 Corporate loans 1,059,957,166 1,600,918 3,367,220 4,968,138 1,064,925,304 Individual loans 258,979, , , ,838,452 Impairment allowances (25,197,917) (1,579,680) (2,222,442) (3,802,122) (29,000,039) Net 1,293,738, ,218 1,144,778 2,024,996 1,295,763,717 As at 31 December 2010 Corporate loans 921,027,609 1,225,635 3,890,011 5,115, ,143,255 Individual loans 216,455, , , ,219,602 Impairment allowances (18,501,186) (1,062,455) (2,779,677) (3,842,132) (22,343,318) Net 1,118,981, ,218 1,110,334 2,037,552 1,121,019, Loans and advances to customers listed by industry Group 31 December December 2010 Amount (%) Amount (%) Corporate loans Manufacturing 301,013, ,344, Wholesale and retail, catering 154,511, ,587, Real estate 115,118, ,295, Geological survey, irrigation 96,352, ,944, Transportation, warehouse and postal service 92,241, ,620, Social services 81,128, ,617, Construction 69,554, ,872, Electricity, gas and water supply 50,809, ,688, Mining 32,493, ,491, Education, culture, broadcasting 18,764, ,300, Agriculture, forestry, farming and fishery 8,012, ,653, Sanitation, sport and social welfare 4,873, ,665, Scientific research and comprehensive technological services 3,566, ,613, Others 17,696, ,038, ,046,136, ,732, Bank acceptance bills discount 11,833, ,937, Re-discount 11,204, ,789, Commercial acceptance bills discount 956, ,161, ,994, ,888, Individual loans 261,304, ,868, Total 1,331,436, ,146,489,

125 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) Bank 31 December December 2010 Amount (%) Amount (%) Corporate loans Manufacturing 298,746, ,163, Wholesale and retail, catering 153,977, ,369, Real estate 115,118, ,290, Geological survey, irrigation 96,337, ,916, Transportation, warehouse and postal service 92,192, ,567, Social services 81,031, ,565, Construction 69,373, ,769, Electricity, gas and water supply 50,709, ,634, Mining 32,408, ,412, Education, culture, broadcasting 18,633, ,203, Agriculture, forestry, farming and fishery 7,590, ,405, Sanitation, sport and social welfare 4,747, ,629, Scientific research and comprehensive technological services 3,528, ,613, Others 17,285, ,038, ,041,680, ,581, Bank acceptance bills discount 11,123, ,774, Re-discount 11,164, ,658, Commercial acceptance bills discount 956, ,129, ,244, ,562, Individual loans 259,838, ,219, Total 1,324,763, ,143,362,

126 2011 Annual Report 125 SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) Loans and advances to customers listed by geography Group 31 December December 2010 Amount (%) Amount (%) Shanghai 173,384, ,930, Beijing 66,064, ,556, Sichuan Province 53,700, ,931, Tianjin 47,046, ,968, Shandong Province 63,021, ,494, Guangdong Province 81,448, ,686, Jiangsu Province 146,616, ,454, Henan Province 69,194, ,806, Zhejiang Province 211,264, ,167, Liaoning Province 77,438, ,555, Other districts 342,256, ,935, Total 1,331,436, ,146,489, Bank 31 December December 2010 Amount (%) Amount (%) Shanghai 172,796, ,527, Beijing 66,064, ,556, Sichuan Province 53,414, ,729, Tianjin 47,046, ,968, Shandong Province 62,291, ,185, Guangdong Province 81,448, ,686, Jiangsu Province 145,344, ,700, Henan Province 68,297, ,219, Zhejiang Province 210,325, ,167, Liaoning Province 77,238, ,555, Other districts 340,495, ,064, Total 1,324,763, ,143,362, Loans and advances to customers listed by guarantee Group Bank 31 December December December December 2010 Collateral loans 522,317, ,988, ,934, ,440,967 Secured loans 400,149, ,123, ,426, ,254,125 Clean loans 282,388, ,571, ,391, ,235,291 Pledged loans 126,580, ,806, ,011, ,432,474 Total 1,331,436,044 1,146,489,301 1,324,763,756 1,143,362,857

127 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) Loans and advances to customers past due 31 December 2011 Group and Bank Past due up to 90 days (90 days included) Past due 90 days to1 year (1 year included) Past due 1 year to 3 years (3 years included) Past due over 3 years Total Collateral loans 667, ,890 1,061, ,150 3,068,153 Secured loans 399, , , ,335 2,431,189 Clean loans 695,453 53, ,242 23, ,320 Pledged loans 33,210 97,170 14, , ,394 Total 1,796,103 1,128,662 2,171,121 1,694,170 6,790, December 2010 Group Past due up to 90 days (90 days included) Past due 90 days to1 year (1 year included) Past due 1 year to 3 years (3 years included) Past due over 3 years Total Collateral loans 111, ,773 1,176, ,710 2,382,212 Secured loans 19, ,377 1,209, ,696 2,460,135 Clean loans 410,977 21, ,525 10, ,780 Pledged loans 8, , , ,047 Total 550,336 1,078,268 2,650,346 1,518,224 5,797, December 2010 Bank Past due up to 90 days (90 days included) Past due 90 days to1 year (1 year included) Past due 1 year to 3 years (3 years included) Past due over 3 years Total Collateral loans 111, ,773 1,176, ,710 2,382,012 Secured loans 19, ,377 1,209, ,696 2,460,135 Clean loans 410,977 21, ,525 10, ,780 Pledged loans 8, , , ,047 Total 550,136 1,078,268 2,650,346 1,518,224 5,796, Allowance on impairment losses for loans and advances to customers Group Individually Collectively Individually Collectively assessed assessed Total assessed assessed Total Balance at beginning of the year 2,783,597 19,592,714 22,376,311 2,967,528 15,379,197 18,346,725 Accrual/reversal of impairment allowances for loans(note 5.40) (380,426) 7,539,544 7,159, ,655 4,391,746 4,533,401 Loans written off (186,180) (322,527) (508,707) (309,603) (110,125) (419,728) Recovery after written off 95, , , , ,663 Unwind of discount on allowances (90,118) (55,253) (145,371) (150,691) (69,059) (219,750) Balance at end of the year 2,222,442 26,889,652 29,112,094 2,783,597 19,592,714 22,376,311

128 2011 Annual Report 127 SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) Bank Individually assessed Collectively assessed Total Individually assessed Collectively assessed Total Balance at beginning of the year 2,779,677 19,563,641 22,343,318 2,963,608 15,378,327 18,341,935 Accrual/reversal of impairment allowances for loans(note 5.40) (376,506) 7,465,948 7,089, ,655 4,363,543 4,505,198 Loans written off (186,180) (322,527) (508,707) (309,603) (110,125) (419,728) Recovery after written off 95, , , , ,663 Unwind of discount on allowances (90,118) (55,253) (145,371) (150,691) (69,059) (219,750) Balance at end of the year 2,222,442 26,777,597 29,000,039 2,779,677 19,563,641 22,343, Available-for-sale financial assets Group and Bank 31 December December 2010 RMB corporate bonds 46,599,867 33,904,631 PBOC bills 43,148,040 18,234,584 RMB bonds issued by policy banks 34,217,723 27,758,425 RMB treasury bonds 12,795,495 14,932,112 Local government bonds 8,952,175 7,379,789 Foreign currency treasury bonds 1,020, ,985 RMB bonds issued by financial institutions 986,191 1,656,587 Other foreign currency bonds 209,289 97,519 Total 147,929, ,142, Investment securities-held-to-maturity Group and Bank 31 December December 2010 RMB treasury bonds 70,531,903 48,522,336 RMB bonds issued by policy banks 42,848,894 38,822,617 Local government bonds 26,493,856 15,170,043 RMB corporate bonds 16,392,908 10,526,109 RMB bonds issued by financial institutions 1,864,913 5,059,312 Foreign currency corporate bonds 314, ,512 PBOC bills 88,535 25,127,707 Total 158,535, ,556,636

129 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) 5.11 Investment securities-loans and receivables Group and Bank 31 December December 2010 Bonds RMB bonds issued by financial institutions 4,675,956 1,660,478 RMB treasury bonds 1,685,111 2,046,644 RMB corporate bonds 429,819 - PBOC bills 965,242-7,756,128 3,707,122 Entrusted product 1,003,408 - Total 8,759,536 3,707, Long-term equity investments Group Bank Joint ventures 18,502 39,036 18,502 39,036 Associates No open quotation 710, , , ,818 Subsidiaries (Note4.1) , ,000 Others 1,127, ,620 1,127, ,620 Total 1,856,861 1,436,474 2,484,961 1,753,474 The Group does not have signifi cant restrictions in long-term equity investments realization. The ability of funds transfer from subsidiaries to the Bank is not restricted. General information of the Bank s subsidiaries refers to Note Equity method Group and Bank Movement Investment cost Increase/ decrease in investment cost Net profit Cash adjusted by dividend equity method declared Other equity movement Exchange rate adjustment Share proportion Voting proportion First Sino Bank Associates 363, ,818-93,000 - (9,079) (3,000) 710,739 30% 30% AXA SPDB Investment Joint Managers Co., Ltd. ventures 102,000 39,036 - (20,534) ,502 51% 51% According to the articles of association of AXA SPDB Investment Managers Co., Ltd., when 2/3 of the voting rights held by the shareholders' representatives passed then the special resolution can be passed, the special resolution including company s strategic plan, investment plan using owner s capital, annual fi nancial budget plan and fi nal fi nancial statement plan authorized to the board of directors, the profi t distribution plan and loss compensation plans,

130 2011 Annual Report 129 SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) equity transfer and articles of association s revision. Thus the Group holds AXA SPDB Investment Managers Co., Ltd. 51% of the voting shares, but the Group together with the other shareholders control the company Cost method Group and Bank Increase Share proportion Voting proportion Cash dividend declared Shenlian Investment Co., Ltd. 285, , % 16.50% 25,390 China Unionpay Co., Ltd. 104, , % 3.72% 2,520 Laishang Bank 378, , , % 18.00% 21, , ,000 1,127,620 49, Main fi nancial information of associates and joint ventures Joint ventures Name Business nature Place of incorporation Legal representative Operation scope Registered capital AXA SPDB Investment Managers Co.,Ltd. Fund Shanghai Jiang Mingsheng Securities investment funding, sales of fund, asset management and other business approved by CSRC. RMB 200,000,000 Assets as at 31 December 2011 ('000) Liabilities as at 31 December 2011 ('000) Net assets as at 31 December 2011 ('000) 2011 operating income ('000) 2011 net loss ('000) Relationship Organization code 50,816 14,452 36,364 21,644 (40,279) Common control Associates Name Business nature Place of incorporation Legal representative Operation scope Registered capital Drawing public deposits; granting loans of shortterm, mid-term and long-term nature; discounting bills and notes; buying government securities, financial securities, buying foreign currency First Sino Bank Joint venture bank Shanghai Liu Xinyi securities other than shares; providing letters of credit and guarantee, handling domestic and foreign settlements; trading foreign currencies, agency insurance, engaging in placement and bank card business; providing safe deposit box services; providing credit rating and consulting services; other business approved by CBRC. RMB 1,100,000,000

131 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) Assets as at 31 December 2011 ('000) Liabilities as at 31 December 2011 ('000) Net assets as at 31 December 2011 ('000) 2011 operating income ('000) 2011 net loss ('000) Relationship Organization code 40,572,729 38,112,791 2,459, , ,224 Significant influence Note: The ability of the transfer of funds from invested enterprises to the Group is not restricted Fixed assets Group 31 December 2010 Additions Disposals 31 December 2011 Cost 11,314,501 1,666,704 (492,768) 12,488,437 Land and buildings 7,405, ,196 (51,873) 8,003,761 Vehicles 312,257 62,246 (22,960) 351,543 Electronic computers and other equipments 3,596, ,262 (417,935) 4,133,133 Accumulated depreciation 3,881, ,761 (412,758) 4,351,365 Land and buildings 1,585, ,606 (14,170) 1,841,668 Vehicles 186,388 39,769 (22,228) 203,929 Electronic computers and other equipments 2,109, ,386 (376,360) 2,305,768 Net book value 7,433,139 8,137,072 Land and buildings 5,820,206 6,162,093 Vehicles 125, ,614 Electronic computers and other equipments 1,487,064 1,827,365 The depreciation accrued during this year of the Group is RMB 882,761,000. Buildings and constructions, with the cost of 348,196 thousand RMB and net book value of 323,122 thousand RMB as at 31 December 2011 (31 December 2010: cost 391,844 thousand RMB, net book value 374,918 thousand RMB), which are in use while the property right registration certifi cate of them are in progress Bank 31 December 2010 Additions Disposals 31 December 2011 Cost 11,296,356 1,655,187 (492,768) 12,458,775 Land and buildings 7,405, ,196 (51,873) 8,003,761 Vehicles 307,957 58,036 (22,960) 343,033 Electronic computers and other equipments 3,582, ,955 (417,935) 4,111,981 Accumulated depreciation 3,878, ,242 (412,759) 4,342,877 Land and buildings 1,585, ,606 (14,170) 1,841,668 Vehicles 186,022 38,530 (22,225) 202,327 Electronic computers and other equipments 2,107, ,106 (376,364) 2,298,882 Net book value 7,417,962 8,115,898 Land and buildings 5,820,206 6,162,093 Vehicles 121, ,706 Electronic computers and other equipments 1,475,821 1,813,099 The depreciation accrued during this year of the Group is RMB 877,242,000.

132 2011 Annual Report 131 SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) 5.14 Intangible assets Group 31 December 2010 Increase Decrease 31 December 2011 Cost 858, ,731 (8,620) 1,001,723 Land use right 198,654 24, ,700 Software 478, ,206 (8,620) 597,038 Others 181, ,985 Accumulated amortisation 453,329 99,980 (8,620) 544,689 Land use right 10,823 5,773-16,596 Software 333,334 89,207 (8,620) 413,921 Others 109,172 5, ,172 Net book value 405, ,034 Land use right 187, ,104 Software 145, ,117 Others 72,334 67,813 The amortization accrued during this year of the Group is RMB 99,990,000. Bank 31 December 2010 Increase Decrease 31 December 2011 Cost 858, ,694 (8,620) 1,001,653 Land use right 198,654 24, ,700 Software 478, ,169 (8,620) 596,968 Others 181, ,985 Accumulated amortisation 453,325 99,976 (8,620) 544,681 Land use right 10,823 5,773-16,596 Software 333,330 89,203 (8,620) 413,913 Others 109,172 5, ,172 Net book value 405, ,972 Land use right 187, ,104 Software 145, ,055 Others 72,334 67,813 The amortization accrued during this year of the Bank is RMB 99,976, Long-term deferred charges Group 31 December 2010 Increase Decrease 31 December 2011 Leasehold improvements 968, ,874 (364,584) 1,077,358 Leasing expense 153,221 20,035 (49,075) 124,181 Others 5,436 3,652 (4,689) 4,399 Total 1,126, ,561 (418,348) 1,205,938 The amortization accrued during this year of the Group is RMB 409,616,000.

133 Annual Report Board Meeting Report Bank 31 December 2010 Increase Decrease 31 December 2011 Leasehold improvements 941, ,049 (356,012) 1,046,933 Leasing fee 152,779 13,038 (46,654) 119,163 Others 5,436 2,921 (4,549) 3,808 Total 1,100, ,008 (407,215) 1,169,904 The amortization accrued during this year of the Bank is RMB 398,483, Deferred tax assets The Group's movement in deferred tax assets is as follows: 2011 Balance at beginning of the year 3,772,723 Deferred tax credited to profit or loss (note 5.41) 798,937 Deferred tax charged to equity (301,801) Balance at end of the year 4,269, December December 2010 Deductible temporary differences Deferred tax assets Deductible temporary differences Deferred tax assets Impairment allowances for loans and other assets 14,169,546 3,542,387 9,969,522 2,492,381 Amortisation for long-term assets 22,620 5,655 19,917 4,979 Salaries payable 525, ,379 2,564, ,063 Fair value changes for available-for-sale financial assets 1,371, ,896 2,578, ,697 Fair value changes for precious metals 37,601 9, Fair value changes for derivative financial instruments 966, , Non-offset deferred tax assets 17,093,110 4,273,278 15,132,479 3,783,120 Taxable temporary differences Deferred tax liabilities Taxable temporary differences Deferred tax liabilities Fair value changes for financial assets hold for trading (13,676) (3,419) - - Fair value changes for derivative financial instruments - - (41,586) (10,397) Non-offset deferred tax liabilities (13,676) (3,419) (41,586) (10,397) Net deferred tax assets after offset 17,079,434 4,269,859 15,090,893 3,772,723

134 2011 Annual Report 133 Board Meeting Report The amount the Group offsets deferred tax assets and liabilities is 3,419 thousand as at 31 December 2011.( 31 December 2010: 10,397 thousand) The Group s movement in deferred tax assets is as follows: Balance at beginning of the year 3,772,723 Deferred tax credited to profit or loss (note 5.41) 797,544 Deferred tax charged to equity (301,801) Balance at end of the year 4,268, Deductible temporary differences Deferred tax assets Deductible temporary differences Deferred tax assets Impairment allowances for loans and other assets 14,169,546 3,542,387 9,969,522 2,492,381 Amortisation for long-term assets 22,620 5,655 19,917 4,979 Salaries payable 519, ,986 2,564, ,063 Fair value changes for available-for-sale financial assets 1,371, ,896 2,578, ,697 Fair value changes for precious metals 37,601 9, Fair value changes for derivative financial instruments 966, , Non-offset deferred tax assets 17,087,538 4,271,885 15,132,479 3,783,120 Taxable temporary differences Deferred tax liabilities Taxable temporary differences Deferred tax liabilities Fair value changes for financial assets hold for trading (13,676) (3,419) - - Fair value changes for derivative financial instruments - - (41,586) (10,397) Non-offset deferred tax liabilities (13,676) (3,419) (41,586) (10,397) Net deferred tax assets after offset 17,073,862 4,268,466 15,090,893 3,772,723 The amount the Group offsets deferred tax assets and liabilities is 3,419 thousand as at 31 December 2011.( 31 December 2010: 10,397 thousand)

135 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) 5.17 Other assets Group Bank 31 December 31 December Settlement and clearing accounts 1,646, ,455 1,646, ,410 Deposit for gold trading guaranty 900, , , ,589 Prepaid for constructions 1,163,743 1,141,782 1,163,743 1,139,398 Wealth management products (Note 1) - 2,100,000-2,100,000 Foreclosed assets (Note 2) 309, , , ,507 Sub-prime asset-based security - 153, ,414 Continuing involved assets - 153, ,414 Trading finance receivables - 1,945,775-1,945,775 Other receivable (Note 3) 812,556 1,259, ,787 1,257,104 Total 4,833,068 8,129,289 4,824,299 8,124,611 Note 1 Wealth management products The Group records cash received from issuing wealth management products which the Group guarantees the safety of principal and related assets obtained from the investment of these cash in the fi nancial statements. The Group records received cash as other liabilities, and assets obtained according to its nature. If assets obtained are investments in trust products, they are recorded as other assets. Note 2: Foreclosed assets Group and Bank 31 December December 2010 Original value Provision Net value Original value Provision Net value Real estate 907,259 (623,438) 283, ,392 (539,119) 311,273 Equity share 67,110 (41,249) 25,861 35,383 (18,149) 17,234 Others ,303 (13,303) - Total 974,369 (664,687) 309, ,078 (570,571) 328,507 The foreclosed assets will be disposed once conditions are met after balance sheet date.

136 2011 Annual Report 135 SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) Note 3: Other receivable Group Bank 31 December 31 December Within 1 year 848,930 1,274, ,161 1,272,230 1 to 2 years 429, , , ,084 2 to 3 years 143, , , ,032 Over 3 years 245,650 64, ,650 64,498 1,667,912 1,931,093 1,659,143 1,928,844 Less: Impairment (855,356) (671,740) (855,356) (671,740) Net 812,556 1,259, ,787 1,257, Impairment provision of assets Group 31 December 2010 Addition Reclass Written off Others 31 December 2011 Provision for loans and advances 22,376,311 7,159,118 - (508,707) 85,372 29,112,094 Bad debt for other assets 671, ,636 (11,710) (9,310) - 855,356 Provision for foreclosed assets 570,571 82,927 11,710 (521) - 664,687 Provision for interests receivable 44,301 53, ,595 Total 23,662,923 7,499,975 - (518,538) 85,372 30,729,732 Bank 31 December 2010 Addition Reclass Written off Others 31 December 2011 Provision for loans and advances 22,343,318 7,089,442 - (508,707) 75,986 29,000,039 Bad debt for other assets 671, ,636 (11,710) (9,310) - 855,356 Provision for oreclosed assets 570,571 82,927 11,710 (521) - 664,687 Provision for interests receivable 44,301 53, ,595 Total 23,629,930 7,430,299 - (518,538) 75,986 30,617,677

137 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) 5.19 Due to other banks and financial institutions Group Bank 31 December 31 December Due to domestic banks 328,062, ,312, ,270, ,834,329 Due to other domestic financial institutions 109,074,407 50,326, ,073,417 50,295,508 Due to overseas banks 2,275, ,072 2,275, ,072 Due to other overseas financial institutions 1,495,044-1,495,044 - Total 440,908, ,818, ,114, ,309, Interbank borrowings Group and Bank 31 December Placements from domestic banks 66,970,025 14,118,450 Placements from overseas banks - 296,695 Total 66,970,025 14,415, Financial assets sold under repurchase agreements Group Bank 31 December 31 December Bills sold under repurchase agreements 9,997,894 2,136,846 9,932,773 2,085,846 Bonds sold under repurchase agreements 76,021,675 14,826,625 76,021,675 14,826,625 Total 86,019,569 16,963,471 85,954,448 16,912, Due to customers Group Bank 31 December 31 December Current deposits -Corporate 582,969, ,228, ,201, ,676,119 -Individual 86,572,289 83,035,127 85,829,141 82,657,535 Time deposits -Corporate 647,712, ,012, ,307, ,923,436 -Individual 236,345, ,086, ,523, ,714,631 Pledged deposits 264,050, ,860, ,603, ,418,033 Treasury deposits 30,780,000 10,000,000 30,780,000 10,000,000 Other deposits 2,625,136 3,236,118 2,586,756 3,233,615 Total 1,851,055,121 1,640,459,532 1,840,832,529 1,635,623,369

138 2011 Annual Report 137 SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) 5.23 Employee benefits payable Group 31 December 2010 Addition Payment 31 December 2011 Salaries and bonuses 6,786,820 9,814,685 (9,939,391) 6,662,114 Welfare funds - 233,739 (233,739) - Social insurance 45,380 1,194,758 (1,172,782) 67,356 Housing funds 20, ,530 (469,665) 13,769 Labor union funds and staff education funds 3, ,328 (365,445) 110,389 Total 6,856,610 12,178,040 (12,181,022) 6,853,628 Bank 31 December 2010 Addition Payment 31 December 2011 Salaries and bonuses 6,766,437 9,750,349 (9,891,160) 6,625,626 Welfare funds - 233,739 (233,739) - Social insurance 45,380 1,191,495 (1,169,519) 67,356 Housing funds 20, ,649 (467,784) 13,769 Labor union funds and staff education funds 3, ,870 (363,987) 110,389 Total 6,836,227 12,107,102 (12,126,189) 6,817,140 According to the requirements of the authorities and the relevant regulations of the Bank, the deferred payment part of the employee benefi ts payable will be paid within three years Taxes payable Group Bank 31 December 31 December Business tax 1,463,853 1,052,625 1,458,911 1,051,128 City maintenance and construction tax 94,610 67,693 94,305 67,601 Corporate income tax 4,038,632 2,780,138 4,026,908 2,780,157 Education surcharge 49,796 36,697 49,628 36,644 Withholding personal income tax 836, , , ,617 Others 25,843 31,614 25,781 31,591 Total 6,509,666 4,178,533 6,492,059 4,176,738

139 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) 5.25 Interests payable Group Bank 31 December 31 December Interests payable for customer deposits 15,261,116 10,356,439 15,229,818 10,347,777 Interests payable for due to/ placements from other banks and financial institutions 4,314,886 1,301,147 4,314,519 1,301,818 Interests payable for debts issued 256,497 57, ,497 57,893 Interests payable for financial assets sold under repurchase agreements 412,964 26, ,964 26,230 Others 33,125 12,103 31,224 11,577 Total 20,278,588 11,753,812 20,245,022 11,745, Debts issued Group and Bank 31 December December SPDB subordinated bond (note 1) - 2,600, SPDB subordinated bond (note 2) 6,000,000 6,000, SPDB subordinated bond (note 3) 8,200,000 8,200, SPDB subordinated bond (note 4) 18,400,000 - Total 32,600,000 16,800,000 Accrued interests payable of debts issued: Interests movement 31 December 2010 Accrued interests payable Interests payment 31 December subordinated bond 49,418 48,082 (97,500) - 07 subordinated bond 3, ,500 (287,500) 3, subordinated bond 5, ,900 (323,900) 5, subordinated bond - 248, ,022 Total 57, ,504 (708,900) 256,497 Note 1: On 15 June 2006, the Bank issued subordinated debts of RMB2.6 billion in the interbank bonds market. The tenor of the debts is 10 years and the Bank has an option to early redeem part of or all the debts at the end of the fifth year at par. The Bank redeemed all the subordinated debts on 30 June Note 2: On 28 December 2007, the Bank issued RMB6 billion subordinated debts via public market, including RMB1 billion fixed rate subordinated debts and RMB5 billion floating rate subordinated debts. Fixed rate subordinated debts have a tenor of ten years and the Bank has an option to early redeem part of or all the bonds at the end of the fifth year at par. The fixed rate is 6.0% during the first 5 years, and the rate change to 9% for the next 5 years. Floating rate subordinated debts have a tenor of ten years and the Bank has an option to early redeem part of or all the bonds at the end of the fifth year at par. The coupon rate is basic rate plus basic spread. Basic rate equals to one-year lump sum time deposit rate issued by PBOC on the date of interest calculation. The basic spread rate during the first 5 years is 1.8% and the rate will change to 4.8% in the next 5 years.

140 2011 Annual Report 139 SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) Note 3: On 26 December 2008, the Bank issued RMB8.2 billion subordinated debts in the interbank bonds market. The subordinated debts have a tenor of ten years and the Bank has an option to early redeem part of or all the bonds at the end of the fifth year at par. The rate of the subordinated debts in the first 5 years is 3.95%, and the rate will change to 6.95% in the next 5 years. Note 4: On 11 October 2011, the Bank issued RMB18.4 billion subordinated debts in the interbank bonds market. The subordinated debts have a tenor of fifteen years and the Bank has an option to early redeem part of or all the bonds at the end of the tenth year at par. The coupon rate is 6.15% Other liabilities Group Bank 31 December 31 December Wealth management products (Note 5.17) 15,713,540 6,752,100 15,713,540 6,752,100 Settlement and clearing accounts 4,649,723 2,585,500 4,649,723 2,585,130 Re-credit funds 456, , , ,293 Deferred revenue 207,074 3,720, ,074 3,720,808 Fiscal account suspense 118, , , ,141 Dormant account balance 102, , , ,762 Prepaid expense 26,006 67,231 26,006 67,231 Promissory notes (Note 1) - 1,631,426-1,631,426 Continuing involved liabilities - 153, ,414 Others 1,104,225 1,558,105 1,074,668 1,545,609 Total 22,378,875 17,650,780 22,349,318 17,637,914 Note 1: The promissory notes are reclassifi ed to due to customers in order to meet the requirement change from CBRC in 2011.

141 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) 5.28 Share capital 2011 Opening balance Percentage Share dividend Increase issues Share transferred from restricted in trading to non-restricted in trading Closing balance Percentage Shares with trading restrictions - Shares with trading restrictions Shares owned by State-owned legal persons Other domestic-owned shares 2,869, % 860, ,730, % Including: Shares owned by domestic legal persons Shares owned by domestic natural persons - Shares owned by Foreign investments 2,869, % 860, ,730, % Including: Shares owned by foreign legal persons Shares owned by foreign natural persons Total shares with trading restrictions Shares without trading restrictions - Ordinary shares quoted in RMB ,869, % 860, ,730, % 11,479, % 3,443, ,922, % - Domestic listed foreign shares Overseas listed foreign shares Others Total shares without trading restrictions 11,479, % 3,443, ,922, % Total shares 14,348, % 4,304, ,653, % Pursuant to the resolution passed on the 2010 annual general meeting of shareholders, a dividend consisting of three shares per 10 shares was proposed with the number of total shares being 14,348,824,000. After the appropriation, the total number of shares summed up to 18,653,471,000. The capital has been verifi ed by Ernst & Young Hua Ming CPAs with the issuance of report of Ernst & Young Hua Ming (2011) Yan Zi _B01.

142 2011 Annual Report 141 SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) 2010 Opening balance Percentage Share dividend Increase issues Share transferred from restricted in trading to non-restricted in trading Closing balance Percentage Shares with trading restrictions - Shares with trading restrictions Shares owned by State-owned legal persons 211, % 63,374 - (274,621) Other domestic-owned shares 692, % 207,874 2,869,765 (900,786) 2,869, % Including: Shares owned by domestic legal persons Shares owned by domestic natural persons - Shares owned by Foreign investments 601, % 180,358 2,869,765 (781,550) 2,869, % 91, % 27,516 - (119,236) - - Including: Shares owned by foreign legal persons Shares owned by foreign natural persons Total shares with trading restrictions , % 271,248 2,869,765 (1,175,407) 2,869, % Shares without trading restrictions - Ordinary shares quoted in RMB 7,925, % 2,377,765-1,175,407 11,479, % - Domestic listed foreign shares Overseas listed foreign shares Others Total shares without trading restrictions 7,925, % 2,377,765-1,175,407 11,479, % Total shares 8,830, % 2,649,013 2,869,765-14,348, %

143 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) 5.29 Capital surplus Group 31 December 2010 Increase Decrease 31 December 2011 Excess of contributed capital 60,568, ,568,141 Other capital surplus (1,928,968) 913,808 (9,079) (1,024,239) Changes of invested companies' equity under equity method (17,194) - (9,079) (26,273) Changes of fair value of available-for-sale financial assets (1,934,093) 913,808 - (1,020,285) Others 22, ,319 Total 58,639, ,808 (9,079) 59,543,902 Group 31 December 2009 Increase Decrease 31 December 2010 Excess of contributed capital 24,238,441 36,329,700-60,568,141 Other capital surplus 79,890 34,659 (2,043,517) (1,928,968) Changes of invested companies' equity under equity method (9,501) - (7,693) (17,194) Changes of fair value of available-for-sale financial assets 67,820 33,911 (2,035,824) (1,934,093) Others 21, ,319 Total 24,318,331 36,364,359 (2,043,517) 58,639,173 Bank 31 December 2010 Increase Decrease 31 December 2011 Excess of contributed capital 60,568, ,568,141 Other capital surplus (1,929,716) 913,808 (9,079) (1,024,987) Changes of invested companies' equity under equity method (17,194) - (9,079) (26,273) Changes of fair value of available-for-sale financial assets (1,934,093) 913,808 - (1,020,285) Others 21, ,571 Total 58,638, ,808 (9,079) 59,543,154

144 2011 Annual Report 143 SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) Bank 31 December 2009 Increase Decrease 31 December 2010 Excess of contributed capital 24,238,441 36,329,700-60,568,141 Other capital surplus 79,890 33,911 (2,043,517) (1,929,716) Changes of invested companies' equity under equity method (9,501) - (7,693) (17,194) Changes of fair value of available-for-sale financial assets 67,820 33,911 (2,035,824) (1,934,093) Others 21, ,571 Total 24,318,331 36,363,611 (2,043,517) 58,638, Surplus reserves The Group and the Bank 31 December 2010 Increase 31 December 2011 Statutory surplus reserve 7,350,244 2,720,795 10,071,039 Discretionary surplus reserve 7,899,569 3,835,136 11,734,705 Total 15,249,813 6,555,931 21,805, December 2009 Increase 31 December 2010 Statutory surplus reserve 5,432,677 1,917,567 7,350,244 Discretionary surplus reserve 5,255,899 2,643,670 7,899,569 Total 10,688,576 4,561,237 15,249,813 Pursuant to related regulations, the Bank shall make for statutory surplus reserve amounting to 10% of net profi t until accumulated statutory surplus reserve reaches 50% of share capital. After appropriation is made to the statutory surplus reserve, the Bank can appropriate the discretionary surplus reserve General risk reserve Group and Bank 31 December 2010 Increase 31 December 2011 General risk reserve 9,500,000 9,200,000 18,700, December 2009 Increase 31 December 2010 General risk reserve 6,900,000 2,600,000 9,500,000 Pursuant to Circulars No.49 and No.90 issued by MOF in 2005 (the MOF Circulars ), effective from 17 May, 2005 and 5 September 2005 respectively, banks and certain other financial institutions in the PRC, are required to maintain adequate allowances for impairment losses against their risk assets. In addition, a general risk reserve should be established through the appropriation of retained earnings. This general reserve should form part of the shareholders equity of fi nancial institutions. As a guiding principle, the balance of general risk reserve should not be less than 1% of the aggregate amount of all risk assets.

145 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) 5.32 Retained earnings Group Amount Percentage Amount Percentage Opening balance of retained earnings 25,258,526 17,216,074 Plus: Net profit attributed to the Bank' s shareholders 27,285,981 19,177,209 Less: Appropriations to statutory surplus reserve (2,720,795) 10.00% (1,917,567) 10.00% Appropriations to discretionary surplus reserve (3,835,136) 20.00% (2,643,670) 20.00% Appropriations to general risk reserve (9,200,000) (2,600,000) Dividends on ordinary shares (2,295,811) (1,324,507) Dividends transferred to share capital (4,304,647) (2,649,013) Closing balance of retained earnings 30,188,118 25,258,526 As at 31 December 2011, retained earnings of the Group include 1.14 million of subsidiaries' statutory reserve attributed to parent company (31 December 2010: 0), of which the amount accrued in 2011 is 1.14 million (2010:0). Bank Amount Percentage Amount Percentage Opening balance of retained earnings 25,258,928 17,218,010 Plus: Net profit attributed to the Bank' s shareholders 27,207,953 19,175,675 Less: Appropriations to statutory surplus reserve (2,720,795) 10.00% (1,917,567) 10.00% Appropriations to discretionary surplus reserve (3,835,136) 20.00% (2,643,670) 20.00% Appropriations to general risk reserve (9,200,000) (2,600,000) Dividends on ordinary shares (2,295,811) (1,324,507) Dividends transferred to share capital (4,304,647) (2,649,013) Closing balance of retained earnings 30,110,492 25,258,928 Pursuant to the resolution of 2010 annual general meeting of shareholders on 28 April 2011, besides made 10% of statutory reserve from net profit, the Bank made 20% of discretionary surplus reserve from net profit of RMB 3,835,136 thousands, made general risk reserve of RMB 9.2 billion, and distributes 3 shares and cash dividend of RMB 1.6 (before tax) for each 10 shares to all shareholders. The total distributed dividend amounted to RMB 4,304,647 thousands. Besides made 10% of statutory reserve from net profi t for 2011, the resolution on 2011 board of directors meeting on 14 March 2012 proposes that the Bank made 20% of discretionary surplus reserve from net profi t of RMB 5,441,590 thousands, made general risk reserve of RMB 4.35 billion, and distributed cash dividend of RMB 3 (before tax) for each 10 shares to all shareholders. The total distributed dividend amounted to RMB 5,596,041 thousands. Above resolution is pending for approval of shareholders meeting Minority interest Minority interest of the Group is as follows:

146 2011 Annual Report 145 SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) Mianzhu SPD Rural Bank Co., Ltd. 33,552 27,681 Liyang SPD Rural Bank Co., Ltd. 122,369 26,315 Gongyi SPD Rural Bank Co., Ltd. 38,835 26,327 Fengxian SPD Rural Bank Co., Ltd. 20,049 15,821 Zixing SPD Rural Bank Co., Ltd. 88,899 26,262 Banan Chongqing SPD Rural Bank Co., Ltd. 31,571 26,206 Zouping SPD Rural Bank Co., Ltd. 88,518 22,070 Zezhou SPD Rural Bank Co., Ltd. 30,623 22,483 Ganjingzi Dalian SPD Rural Bank Co., Ltd. 24,018 21,992 Hancheng SPD Rural Bank Co., Ltd. 22,903 22,870 Jiangyin SPD Rural Bank Co., Ltd. 49,996 45,487 Pingyang SPD Rural Bank Co., Ltd. 49,073 - Xinchang SPD Rural Bank Co., Ltd. 51,139 - Total 651, ,514

147 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) 5.34 Net interest income Group Bank Interest income Due from banks and other financial institutions 5,697,253 1,753,191 5,658,999 1,742,758 Balance with central banks 4,917,049 3,337,599 4,904,355 3,333,096 Interbank placements 2,378, ,618 2,374, ,618 Loans and advances to customers Corporate loans 60,817,590 44,501,672 60,567,030 44,435,152 Individual loans 13,710,351 9,139,058 13,636,675 9,118,991 Discounted bills 2,425,263 1,598,809 2,170,067 1,561,982 Financial assets purchased under resale agreements 21,722,485 5,359,799 21,197,428 5,353,259 Bond investments 9,540,866 6,914,112 9,540,866 6,914,112 Others 12,108 1,074 12,108 1,074 Subtotal 121,221,237 72,966, ,061,677 72,822,042 Included: interest income from impaired financial assets 145, , , ,750 Interest expense Due to and placements from banks and other financial institutions (20,632,562) (6,318,362) (20,463,578) (6,314,020) Due to central banks (7,355) (1,350) (5,760) (1,210) Due to customers (33,712,828) (20,446,898) (33,615,640) (20,421,433) Financial assets sold under repurchase agreements (4,519,426) (241,230) (3,996,545) (236,663) Debts issued (907,504) (755,582) (907,504) (755,582) Subtotal (59,779,675) (27,763,422) (58,989,027) (27,728,908) Net interest income 61,441,562 45,203,510 61,072,650 45,093,134

148 2011 Annual Report 147 SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) 5.35 Net fee and commission income Group Bank Fee and commission income Settlement and clearing fees 1,042, ,634 1,037, ,717 Agency commissions 1,107, ,935 1,096, ,910 Credit commitment fees 2,071, ,139 2,064, ,796 Bank card fees 960, , , ,273 Consulting and advisory fees 1,150,740 1,280,731 1,150,740 1,273,273 Others 871, , , ,731 Subtotal 7,204,809 4,461,471 7,181,091 4,452,700 (489,083) (412,925) (486,789) (412,855) 6,715,726 4,048,546 6,694,302 4,039, Investment income Group and Bank Income from equity investments under cost method 49,510 48,726 Income from equity investments under equity method 72,466 75,666 Income/(loss) from bond trading Financial assets held for trading (19,326) - Available-for-sale financial assets (65,140) (96,404) Gain/(loss) on gold trading 154,868 (5,776) Other investment income 2,037 - Total 194,415 22,212 There were no major restrictions on remitting from investments income in Income from fair value change Group and Bank Precious metals (37,601) 359 Financial assets held for trading 5,272 - Financial liabilities at fair value through profit or loss - 9,681 Financial derivatives (827,508) (97,670) Total (859,837) (87,630)

149 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) 5.38 Business tax and surcharges Group Bank Business tax 4,365,870 3,070,926 4,352,007 3,066,763 City maintenance and construction tax 303, , , ,908 Education surcharge 229, , , ,144 Total 4,898,888 3,395,394 4,883,630 3,390, Business and administrative expenses Group Bank Salaries and bonuses 9,814,685 8,441,619 9,750,349 8,433,426 Welfare funds 233, , , ,098 Social insurance 1,194, ,429 1,191, ,001 Housing funds 462, , , ,288 Labor union funds and staff education funds 472, , , ,264 Lease fee 1,266,959 1,029,407 1,255,676 1,020,240 Depreciation and amortization 1,392,357 1,250,009 1,375,701 1,241,364 Electronic equipment operation and maintenance fee 434, , , ,213 Taxes 144, , , ,929 Other business expenses 4,136,448 3,618,088 4,084,027 3,594,539 Total 19,553,583 16,480,121 19,399,409 16,398, Impairment loss Group Bank Provision for loans and advances 7,159,118 4,533,401 7,089,442 4,505,198 Provision for other receivables 204,636 3, ,636 3,961 Provision for financial assets available-for-sale - (4,629) - (4,629) Provision for foreclosed assets 82,927 11,146 82,927 11,146 Provision for interests receivable 53,294 44,301 53,294 44,301 Others - (761) - (761) Total 7,499,975 4,587,419 7,430,299 4,559,216

150 2011 Annual Report 149 SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) 5.41 Income tax expense Group Bank Current year income tax expense 9,283,112 6,099,232 9,235,704 6,093,334 Deferred tax (income)/expense (798,937) 3,087 (797,544) 3,087 Total 8,484,175 6,102,319 8,438,160 6,096,421 The major reconciliation items between the Group s theoretical income tax expense and actual amount are as follows: Group Bank Profit before tax 35,839,287 25,280,906 35,646,113 25,272,096 Tax calculated at a tax rate of 25% 8,959,822 6,320,226 8,911,528 6,318,024 Difference from tax clearance in prior years (14,403) (56,730) (14,403) (56,730) Tax effect of expenses that are not deductible for tax 325, , , ,648 Tax effect arising from income not subject to tax (787,433) (572,447) (782,912) (518,521) Unrecognized tax loss from subsidiaries 227 4, Income tax expense 8,484,175 6,102,319 8,438,160 6,096, Earnings per share Basic earnings per share(eps) amount is calculated by dividing consolidated net profi t attributable to shareholders of the Bank by the weighted average number of ordinary shares outstanding during the year. There are no potential diluted ordinary shares in the Bank, so the basic EPS equals to the diluted figure Note 1 Net profit 27,285,981 19,177,209 Weighted average number of outstanding ordinary shares (thousand) 18,653,471 15,544,559 Basic and diluted EPS (RMB) Note 1: The Bank distributed share dividend in June 2011, and therefore the earnings per share for 2010 has been restated accordingly Other comprehensive income Group and bank Unrealized gain or loss of available-for-sale financial assets 1,218,411 (2,669,061) Minus: Income tax effect on available-for-sale financial assets (304,603) 667,148 Subtotal 913,808 (2,001,913) 2.Changes of the invested company' s equity under equity method (9,079) (7,693) Total 904,729 (2,009,606)

151 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) 5.44 Cash and cash equivalents Group Bank 31 December 31 December Cash 5,648,021 4,924,527 5,603,272 4,897,736 Non- statutory reserve deposits in central banks 52,978,762 68,156,410 52,572,730 67,701,248 The original maturity less than three months: - Due from other banks and financial institutions 233,182,821 65,500, ,869,158 65,191,277 - Placement with other banks and financial institutions 20,817,624 29,014,465 20,817,624 29,014,465 Total 312,627, ,595, ,862, ,804, Cash flows from operating activities (supplementary information) Reconciliation of net profi t to cash fl ows from operating activities: Group Bank Net profit 27,355,112 19,178,587 27,207,953 19,175,675 Add:Impairment loss 7,499,975 4,587,419 7,430,299 4,559,216 Depreciation of fixed assets 882, , , ,867 Amortization of intangible assets 99,980 80,891 99,976 78,416 Amortization of long-term deferred assets 409, , , ,842 Gains and losses on disposal of long-term assets 13,290 (17,260) 13,297 (17,260) Gains and losses on change of fair value 859,837 87, ,837 87,630 Interest payable for debts issued 907, , , ,582 Investment income (56,836) (27,988) (56,836) (27,988) Increase in deferred tax (assets)/liabilities (798,937) 3,087 (797,544) 3,087 Increase in operating receivables (294,488,331) (537,452,314) (289,897,307) (533,401,720) Increase in operating payables 455,971, ,135, ,217, ,123,686 Net cash flows from operating activities 198,655,778 (5,507,004) 198,260,187 (5,508,967) Material investing and fi nancing activities that do not involve cash receipts and payments do not exist in the Group in (2010: 0). Movement of cash and cash equivalents Group Bank Cash and cash equivalents at the closing of the period 312,627, ,595, ,862, ,804,726 Minus: Cash and cash equivalents at the beginning of the period (167,595,679) (134,122,415) (166,804,726) (134,002,708) Net increase of Cash and cash equivalents 145,031,549 33,473, ,058,058 32,802,018

152 2011 Annual Report 151 SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) 6 SEGMENT REPORTING Management reviews the performance of the Group based on the branches and subsidiaries in different economic region. The branches mainly provide service for the local customers and a few clients in other region, so business division are distinguished based on the location of the assets. The operating segments principle business is providing customers with various commercial banking services and investment business, including accepting public deposits and granting commercial loans, discounting bills, trade fi nancing, lending and borrowing in interbank money market and securities investment, etc. Shanghai segment in this segment report includes head offi ce, offshore department and Shanghai branch Shanghai Beijing Sichuan Province Shandong Guangdong Tianjin Province Province Jiangsu Province Henan Province Zhejiang Province Liaoning Province Other districts of PRC Inter branch offset Operating Income 10,831,878 3,224,894 2,351,837 2,802,989 2,772,088 4,708,967 6,377,231 3,626,818 9,903,178 3,553,954 17,763,838-67,917,672 Interest income 135,637,813 10,960,132 6,935,752 10,408,086 7,286,810 16,840,001 26,014,504 9,571,556 31,936,827 11,777,927 62,707,406 (208,855,577) 121,221,237 including External interest income Internal interest income 25,432,185 4,341,680 3,741,250 6,914,981 4,139,651 8,474,303 7,974,811 4,771,847 13,339,000 7,522,252 34,569, ,221, ,205,628 6,618,452 3,194,502 3,493,105 3,147,159 8,365,698 18,039,693 4,799,709 18,597,827 4,255,675 28,138,129 (208,855,577) - Interest expense (125,583,163) (8,022,353) (4,864,604) (7,809,523) (4,877,034) (12,776,668) (20,121,185) (6,241,621) (23,129,132) (8,524,916) (46,685,053) 208,855,577 (59,779,675) including (15,626,494) (3,081,775) (2,001,180) (2,296,507) (1,501,185) (5,071,341) (3,048,762) (2,150,012) (5,275,713) (3,310,250) (16,416,456) - (59,779,675) External Interest expense Internal (109,956,669) (4,940,578) (2,863,424) (5,513,016) (3,375,849) (7,705,327) (17,072,423) (4,091,609) (17,853,419) (5,214,666) (30,268,597) 208,855,577 - interest income Net fee and commission income Investment income Gain/loss from fair value change Foreign exchange gain Other operating income 1,468, , , , , , , , , ,387 1,663,311-6,715, , ,415 (862,319) ,482 - (859,837) (128,955) 26,034 3,484 22,956 28,116 26,133 52,423 9, ,401 30,864 61, , ,640 31, ,116 1,764 2,357 6,571 1,124 16,782 1,692 14, ,810 Total

153 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) 2011 Shanghai Beijing Sichuan Province Tianjin Shandong Province Guangdong Province Jiangsu Province Henan Province Zhejiang Province Liaoning Province Other districts of PRC Inter branch offset Total Operating Expense (8,123,428) (1,615,402) (866,707) (995,604) (1,220,873) (2,137,927) (2,800,389) (1,489,836) (4,321,386) (1,602,101) (6,987,292) - (32,160,945) Business tax and surcharges (644,176) (222,062) (237,033) (168,546) (236,053) (293,606) (503,562) (244,800) (840,740) (275,843) (1,232,467) - (4,898,888) Business and (6,256,472) (1,020,088) (389,616) (532,787) (647,284) (1,276,350) (1,498,203) (778,388) (2,191,436) (890,756) (4,072,203) - (19,553,583) administrative expenses Impairment charges (1,045,110) (371,293) (238,471) (294,271) (335,812) (563,872) (798,050) (464,290) (1,288,351) (421,839) (1,678,616) - (7,499,975) Other operating expense (177,670) (1,959) (1,587) - (1,724) (4,099) (574) (2,358) (859) (13,663) (4,006) - (208,499) Operating profit 2,708,450 1,609,492 1,485,130 1,807,385 1,551,215 2,571,040 3,576,842 2,136,982 5,581,792 1,951,853 10,776,546-35,756,727 Add: 31,106 8,914 4,779 2,309 6,517 6,715 9,639 3,509 6,989 5,264 71, ,357 non-operating income Less: (22,747) (2,804) (2) (3,211) (1,613) (3,924) (7,015) (3,285) (11,535) (2,690) (15,971) - (74,797) non-operating expenses Profit before income tax 2,716,809 1,615,602 1,489,907 1,806,483 1,556,119 2,573,831 3,579,466 2,137,206 5,577,246 1,954,427 10,832,191-35,839, December 2011 Shanghai Beijing Sichuan Province Tianjin Shandong Province Guangdong Province Jiangsu Province Henan Province Zhejiang Province Liaoning Province Other districts of PRC Total Loans and 161,330,675 65,234,643 52,716,899 46,288,179 61,360,320 80,029, ,190,658 67,036, ,531,772 76,102, ,502,508 1,302,323,950 advances to customers Total Assets 597,827, ,225,662 84,876, ,867,953 88,376, ,466, ,877, ,515, ,443, ,250, ,966,773 2,684,693,689 Due to customers 361,223, ,536,628 76,102,207 65,093,236 74,646, ,278, ,958, ,694, ,338,290 96,836, ,347,594 1,851,055,121 Total liabilities 486,582, ,385,942 83,269, ,842,605 86,742, ,605, ,998, ,246, ,662, ,144, ,670,809 2,535,150,909 Total Equity 111,244,939 1,839,720 1,606,550 2,025,348 1,634,065 2,861,550 3,878,830 2,268,622 5,781,614 2,105,578 14,295, ,542,780

154 2011 Annual Report 153 SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) 2010 Shanghai Beijing Sichuan Province Tianjin Shandong Province Guangdong Province Jiangsu Province Henan Province Zhejiang Province Liaoning Province Other districts of PRC Inter branch offset Total Operating Income 9,739,329 2,343,262 1,795,288 1,927,304 1,802,571 3,167,541 4,900,097 2,794,546 7,634,031 2,512,551 11,239,331-49,855,851 Interest income 89,935,198 7,636,469 4,111,347 5,509,548 4,583,314 9,558,422 17,989,051 6,307,106 22,595,745 6,855,149 31,734,864 (133,849,281) 72,966,932 including 17,324,498 2,590,886 2,081,349 3,351,696 2,634,126 3,700,601 5,786,607 3,223,466 9,918,769 3,863,615 18,491,319-72,966,932 External interest income Internal interest income 72,610,700 5,045,583 2,029,998 2,157,852 1,949,188 5,857,821 12,202,444 3,083,640 12,676,976 2,991,534 13,243,545 (133,849,281) - Interest expense (81,487,767) (5,484,229) (2,488,434) (3,762,335) (2,972,706) (6,747,675) (13,395,772) (3,722,402) (15,659,499) (4,564,364) (21,327,520) 133,849,281 (27,763,422) including (5,139,967) (2,055,604) (614,063) (1,104,123) (1,071,828) (2,685,030) (2,041,645) (1,096,808) (4,121,352) (1,654,161) (6,178,841) - (27,763,422) External Interest expense Internal interest income (76,347,800) (3,428,625) (1,874,371) (2,658,212) (1,900,878) (4,062,645) (11,354,127) (2,625,594) (11,538,147) (2,910,203) (15,148,679) 133,849,281 - Net fee and 1,281, , , , , , , , , , ,944-4,048,546 commission income Investment income 22, ,212 Gain/loss from fair value change (87,630) (87,630) Foreign exchange gain (10,262) 46,666 5,727 37,067 31,737 34,963 72,723 12, ,002 56,229 86, ,420 Other operating income 85,965 3, ,503 1,582 2,480 6, ,443 3,001 7, ,793

155 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) 2010 Shanghai Beijing Sichuan Province Tianjin Shandong Province Guangdong Province Jiangsu Province Henan Province Zhejiang Province Liaoning Province Other districts of PRC Inter branch offset Total Operating Expense (6,957,285) (1,345,036) (816,273) (701,911) (867,662) (1,569,162) (2,317,516) (1,065,859) (2,941,800) (1,135,063) (5,066,232) - (24,783,799) Business tax and surcharges (472,500) (161,269) (138,754) (121,418) (155,736) (197,046) (364,432) (174,295) (621,600) (199,956) (788,388) - (3,395,394) Business and (5,483,985) (948,883) (535,921) (364,654) (512,870) (1,020,192) (1,423,538) (591,910) (1,610,271) (678,226) (3,309,671) - (16,480,121) administrative expenses Impairment charges (691,222) (234,513) (141,500) (215,834) (197,188) (348,295) (529,487) (299,654) (709,352) (255,031) (965,343) - (4,587,419) Other operating expense (309,578) (371) (98) (5) (1,868) (3,629) (59) - (577) (1,850) (2,830) - (320,865) Operating profit 2,782, , ,015 1,225, ,909 1,598,379 2,582,581 1,728,687 4,692,231 1,377,488 6,173,099-25,072,052 Add: non-operating income 61,194 7,234 1,510 1,519 13,254 4,578 19,332 1,048 9,964 3, , ,829 Less: (14,351) (566) (406) (1,527) (744) (638) (2,830) (1,289) (9,474) (664) (6,486) - (38,975) non-operating expenses Profit before income tax 2,828,887 1,004, ,119 1,225, ,419 1,602,319 2,599,083 1,728,446 4,692,721 1,380,743 6,290,890-25,280, December 2011 Shanghai Beijing Sichuan Province Tianjin Shandong Province Guangdong Province Jiangsu Province Henan Province Zhejiang Province Liaoning Province Other districts of PRC Total Loans and 146,254,823 57,753,818 45,133,135 40,217,441 51,479,813 68,924, ,814,861 61,202, ,455,408 69,183, ,693,673 1,124,112,990 advances to customers Total Assets 568,010, ,460,019 67,226,710 99,961,641 68,388, ,956, ,440, ,009, ,409, ,313, ,233,474 2,191,410,774 Due to customers 309,089, ,890,295 64,915,130 64,188,398 63,501, ,419, ,343,719 98,716, ,308,156 93,988, ,098,569 1,640,459,532 Total liabilities 468,839, ,232,012 65,982,578 98,654,845 67,450, ,055, ,387, ,252, ,645, ,832, ,797,953 2,068,130,924 Total Equity 99,171,362 1,228,007 1,244,132 1,306, ,575 1,900,623 3,053,104 1,757,577 4,764,029 1,481,124 6,435, ,279,850

156 2011 Annual Report CONTINGENCIES AND COMMITMENTS 7.1 Credit commitment SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) Item 31 December December 2010 Bank acceptance 370,981, ,660,235 Acceptance under letter of credit 25,615,734 11,668,317 Guarantee issued 47,854,363 39,465,175 Letters of credit issued 198,422,064 46,317,238 Un-utilised credit card limit 42,752,585 28,437,580 Total 685,625, ,548, Commitment of certificate bond The Group is entrusted by State Bureau of Finance to issue certifi cate bond. Bondholders are eligible to claim cash in exchange for their bonds at any time before the maturity date and the Group is obliged to fulfill bondholder's claims. As at 31 December 2011, the Group has total obligation of RMB 2,713,032 thousands to fulfi ll cash claims of the certifi cate bonds. (31 December 2010: RMB 3,265,495 thousands) 7.3 Operating leases commitment According to the lease contract signed with the lessor, the minimum payable amount of operating leases commitment by the Group is the following: 31 December December 2010 Within 1 year 1,151, ,021 1 to 5 years 3,248,764 2,538,741 Over 5 years 1,417,149 1,023,118 Total 5,817,070 4,506, Capital commitment As at 31 December 2011, the major capital commitments of the Group which had been approved but not paid amounted to RMB 414,912 thousand (31 December 2010: RMB 200,153 thousand). 7.5 Fulfill of earlier commitment The Group has fulfilled the earlier commitments such as capital expenditure commitment and operating lease commitment as at 31 December Pending litigation As at 31 December 2011, the number of litigations the Group was charged as defendant and hadn t adjudicated yet was 20, and the amount involved was about RMB 151 million. The possibility of expected compensation was low, so the Group didn t recognize any provision (December 31, 2010: no provision recognized).

157 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) 7.7 Equity investment commitment As at 31 December, 2011, the Group has signed contract with Silicon Valley Bank, about investing RMB 500 million to Pudong Development Silicon Valley Bank Co., LTD., which was under construction. The Group accounts for 50% of the registered capital of the company. (As at 31 December 2010: none). 8 CUSTODY BUSINESS The Group provide safe-keeping, trust and entrusted loan business. The assets arose from these kinds of custody business weren t recorded in the financial statement. As at 31 December 2011, the balance of entrusted loan business was RMB billion. (As at 31 December 2010: RMB billion). 9 RELATED PARTIES 9.1 Related parties relationship If a party has the ability to control the other party or signifi cant impact on the other party's fi nancial and business decisions, or a party and other party under same control or common control, they shall be deemed as related parties. Individual or enterprise could all be related parties. 9.2 Subsidiary companies For information of subsidiaries, please refer to Note 4 Scope of consolidated fi nancial statements. 9.3 Associates and joint ventures For information of associates and joint ventures, please refer to Note 5.12 Long-term equity investments. 9.4 Others The other related parties of the Group include the key management personal (including directors, supervisors and senior management) and their close family members, companies controlled, common controlled or signifi cant infl uenced by key management personal and their close family members, principle shareholder who holds above 5% shares of the Bank. As at 31 December, 2011, the principle shareholders who hold above 5% shares of the Bank include: Ownership Main Business China Mobile Group Guangdong Company Limited % Mobil Communication Shanghai International Group Co., Ltd % Financial Service Shanghai International Trust Investment Company 5.232% Trust Business 9.5 Transaction between related parties The major transactions between the Group and related parties are loans and deposits. They are performed under the similar commercial terms as third parties. The amount of transaction with related parties is immaterial.

158 2011 Annual Report 157 SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) Loan to related parties 31 December December 2010 Company significantly influenced by key management personal Bailian Group Co., Ltd. 60, ,000 Shanghai Bailian Group Co., Ltd ,000 Total 60, , Interest income 7,307 22, Due from related parties 31 December December 2010 First Sino Bank 129,702 14,580 AXA SPDB Investment Managers Co., Ltd. 27,931 40,862 Shanghai International Trust Investment Company 19,252 62,540 Total 176, , Interest expense 2,992 2, Deposit from related parties 31 December December 2010 China mobile Ltd. 17,319,224 1,998,790 Including: China Mobile Group Guangdong Company Limited 1,447, , Interest expense of deposit from related parties 222,717 8, Guarantee to related parties Bailian Group Co., Ltd. 408, ,500 As at December 31, 2011, the Group provided 2 guarantees for Bailian Group, and these guarantees will be matured in 2012 and 2013 respectively Bank acceptance to related parties 31 December December 2010 China mobile Ltd. - 20,000

159 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) Lending to related parties 31 December December 2010 First Sino Bank 94, Interest income Derivative transactions with related parties 31 December 2011 Fair Value Notional amount Asset Liability First Sino Bank Currency Swap Contracts 1,446,700 - (11,909) Forward Exchange Contract 332,761 2,661 (246) Total 2,661 (12,155) 31 December 2010 Notional amount Fair Value Asset Liability First Sino Bank Currency Swap Contracts 147, (1,810) Forward Exchange Contract 319,008 1,035 (2,001) Total 1,833 (3,811) Commission income from related parties China mobile Ltd AXA SPDB Investment Managers Co., Ltd. 2,870 2,400 First Sino Bank Total 3,168 3, Operation expenses to related parties China mobile Ltd. 47,175 28, Compensation of key management personal According to the regulations of the relevant authorities, the 2011 annual compensation of Bank s directors, supervisors and other senior management persons is pending for approval. The Bank will formally implement and disclose it once it s approved. The accrued compensation of key management personal does not have signifi cant impact on the fi nancial statements of (The approved annual compensation of Bank s directors, supervisors and other senior management in 2010 is RMB 36,382 thousands.)

160 2011 Annual Report FINANCIAL RISK MANAGEMENT SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) The Group exposes to a variety of financial risks. The Group analyses, evaluates, accepts and manages some degree of risks or risk portfolios. Managing risk is core to the financial institution, and the inherent risks are an inevitable consequence of business operation. The Group s aim is therefore to achieve an appropriate balance between risk and return and minimize potential adverse effects on the Group s financial performance. The Group designs risk management policies to identify and analyze these risks, set appropriate risk limits and control procedures, and monitor the risks and limits through information systems. The Group mainly exposes to fi nancial risks such as credit risk, market risk and liquidity risk. Market risk includes currency risk and interest rate risk. The board of directors of the Bank decides the Group s risk preference, then senior management of the Bank design risk management policy and procedures in the areas such as credit risk, market risk and liquidity risk accordingly. After the policies and procedures being approved by the board of directors, they will be followed by related departments of the Bank Credit risk Credit risk represents the potential loss that may arise from the failure of a debtor to meet its obligation or commitment to the Bank. Credit risk is greater when counterparties are concentrated in one industry or geographic region, because a group of otherwise unrelated counterparties could be adversely affected in their ability to repay their obligations due to economic developments affecting their common industry or region. The Group has established relevant mechanism, and set limit of individual borrower s tolerable credit risk. The Group regularly monitors and reviews above credit risk limit. The Group conducts credit evaluation before granting facilities to individual customer, and regularly examines the credit limit. The means of credit risk management include obtaining collateral and guarantee. For credit commitments, the Group generally requires for guarantee deposits to mitigate credit risk Credit risk measurement Loans and credit risk measurement The Group uses a five-grade classification system to manage the quality of its loan portfolio. Such classification system is based on the Guidance on Credit Risk Classification (the Guidance ) issued by CBRC. Under the Group s own system and CBRC guidance, the Group classifi es its credit assets and off-balance sheet credit exposures into fi ve categories, which are namely pass, special mention, substandard, doubtful and loss. The last three categories are also classifi ed as non-performing assets. The core defi nition of the credit asset classifi cation is as follows:

161 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) Rating Pass Special Mention Substandard Doubtful Loss Description of the rating The borrower is able to fulfill the contractual obligations, and there is no uncertainty that principal and interest can be paid on time. The borrower is able to make current due payments, but there exist some potential factors that may have negative impact on the borrower s future payments. The borrower's repayment ability has been impaired and its normal income cannot repay the loan principles and interest in full. Losses may be incurred to the Bank, even with the execution of guarantee. The borrower cannot repay the principal and the interest in full. Significant losses will be incurred even with the execution of guarantees. After taking into consideration all possible recovery actions and necessary legal proceedings, the principal and interest are unable to be collected, or only a very small portion of principal and interest can be collected. Bonds and other bills The Bank manages the risk of bonds and other bills through controlling the scale, setting the access by issuer and rating and post management. For foreign currency securities, only those with rating (by Standard & Poor or equivalent agencies) equivalent to or higher than BBB can be invested. Investments in RMB debt securities are limited to those bonds with credit rating equivalent to or above AA- assigned by rating agencies recognised by PBOC. Due from and placements with banks and other fi nancial institutions Head office reviews and monitors the credit risk of individual financial institutions on regularly basis. Limits are placed for each individual bank or non-banking fi nancial institution which has business relationship with the Bank Risk limit management and mitigation policies The Bank manages and controls concentrations of credit risk wherever they are identifi ed in particular, to individual counterparty and group, and to industry and region. The Bank manages the credit risk by setting limit on one borrower, or groups of borrowers, and to geographical and industry segments. Such risks are monitored on a revolving basis and subject to an annual or more frequent review, when considered necessary. Exposure to credit risk is also managed through regular analysis of the ability of borrowers and potential borrowers to meet interest and capital repayment obligations and by changing these lending limits where appropriate. Some other specifi c control and mitigation measures are outlined below: Collateral The Bank employs a range of policies and practices to mitigate credit risk. The most traditional of these is taking of guarantee, including collateral, guarantee deposit and guarantor. The Bank implements guidelines on the acceptability of specifi c classes of collateral. The principal collateral for loans and advances are: Housing, land use right; Commercial assets, including premises, inventory and account receivables

162 2011 Annual Report 161 SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) Financial instruments such as debt securities and stocks. Value of collateral is usually required to be assessed by professional valuer designated by the Group. When there is a sign indicating that the value of collateral impaired, the Group will review whether the collateral can cover the credit risk again. To mitigate the credit risk, the Group set limit on the loan-to-value ratio for difference types of collateral. The principal collateral types for corporate loans and retail loans are as follows: Collateral Time deposit 95%-100% PRC treasury bonds 90%-100% PRC financial institution bonds 90% Rights to collect fees 70% Rights to operate 60% Commercial building and factory 60% House 70% Land use rights 60% Maximum loan-to-value ratio For loans guaranteed by third parties, the Group will evaluate the fi nancial condition, credit history and ability to meet obligations of the guarantor on regular basis. Guarantee of fi nancial assets other than loans and advances is determined by the nature of the instruments. Debt securities, treasury and other eligible bills are generally unsecured, with the exception of asset-backed securities and similar instruments, which are secured by portfolios of fi nancial instruments. Derivative instruments The Group maintains strict credit limits on derivative transactions with counterparties. The Group mitigates credit risk associated with derivative instruments by requiring margin deposits from counterparties. Credit commitments The primary purpose of these instruments is to ensure that funds are available to a customer as required. Guarantees, acceptances and letters of credit, which represent irrevocable commitment that the Group will make payments in event that a customer cannot meet its obligations to third parties, carry the same credit risk as loans. In some cases, such as those situations where the amount of credit commitment exceeds the original credit limit, margin deposits are required to mitigate the credit risks. The Group s potential amount of credit risk is equivalent to the total amount of credit commitments.

163 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) Maximum exposure to credit risk without considering collateral or other credit enhancements Credit risk exposures relating to balance sheet items: Balance with central bank 361,309, ,324,233 Due from other banks and financial institutions 267,876,482 69,539,713 Interbank placements 111,415,298 31,253,465 Financial assets held for trading 5,866,841 - Derivative financial assets 548,787 1,033,349 Financial assets purchased under resale agreements 281,509, ,932,144 Interest receivable 11,071,074 6,492,715 Loans and advances to customers 1,302,323,950 1,124,112,990 Available-for-sale financial assets 147,929, ,142,632 Investment securities-held-to-maturity 158,535, ,556,636 Investment securities-loans and receivables 8,759,536 3,707,122 Other financial assets 2,458,761 6,455,411 Subtotal 2,659,604,173 2,170,550,410 Credit risk exposures relating to off-balance sheet items: Letter of credit 198,422,064 46,317,238 Acceptance under letter of credit 25,615,734 11,668,317 Guarantee issued 47,854,363 39,465,175 Acceptance 370,981, ,660,235 Un-utilised balances of credit card 42,752,585 28,437,580 Subtotal 685,625, ,548,545 Total 3,345,230,042 2,608,098,955 Table above represents the credit risk exposure to the Group, without taking account of any collateral held or other credit enhancements attached. For on-balance-sheet assets, the exposures set out above are based on carrying amounts as reported in the balance sheet Due from and placements with banks and other financial institutions and financial assets purchased under resale agreements Due from and placements with banks and other fi nancial institutions and fi nancial assets purchased under resale agreements are neither past due nor impaired. The credit risk can be evaluated referencing to counterpart s nature. Due from and placements with banks and financial institutions Domestic commercial bank 361,910,656 92,718,798 Overseas commercial bank 16,447,124 5,835,380 Domestic other financial institutions 934,000 2,239, ,291, ,793,178 Suffi cient acceptance bills and bonds have been pledged for fi nancial assets purchased under resale agreements, thus they were not exposed to signifi cant credit risk.

164 2011 Annual Report 163 SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) Loans and advances Neither past due nor impaired 1,322,814,002 1,139,007,668 Past due but not impaired 2,794,924 1,601,749 Impaired 5,827,118 5,879,884 Gross 1,331,436,044 1,146,489,301 Less: provision (29,112,094) (22,376,311) Net 1,302,323,950 1,124,112,990 Neither past due nor impaired The Group classifi es credit assets according to related regulations, including those promulgated by CBRC. Please refer to Note for more information. Loans and advances neither past due nor impaired are classified as following: Corporate loans Individual loans Total Pass 1,056,776, ,260,891 1,315,037,871 Special mention 7,642, ,959 7,776,131 1,064,419, ,394,850 1,322,814, Pass 918,482, ,596,435 1,134,079,222 Special mention 4,853,677 74,769 4,928, ,336, ,671,204 1,139,007,668 Past due but not impaired Past due up to 30 days Past due days Past due days Past due over 90 days Total Corporate loans 375, ,622 26, , ,857 Individual loans 1,565, , ,332 28,950 2,051,067 1,941, , , ,418 2,794, Past due up to 30 days Past due days Past due days Past due over 90 days Total Corporate loans 15, , , ,463 Individual loans 1,055, , ,089 7,751 1,433,286 1,070, , , ,130 1,601,749 The Group concludes these past due loans can be compensated through the operation of borrower, the payment of guarantor or disposal of collateral, so they are not recognized as impaired.

165 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) Impaired 31 December December 2010 Corporate loans 4,968,138 5,115,846 Individual loans 858, ,038 5,827,118 5,879,884 Fair value of collateral was estimated by management based on the latest available external valuations and adjusted by taking into account the current experience and market situation. Valuation of the collateral will be considered when assessing the impairment of loans and advances. Loans and advances renegotiated Renegotiated loans represent the loans whose original contract repayment terms have been modified as a result of the deterioration of borrowers fi nancial conditions or inability to repay the loans according to contractual terms. At 31 December 2011, net value of the renegotiated loans held by the Group amounted to RMB 83,785 thousands (31 December 2010: RMB 103,920 thousands) Investment securities The tables below analyze the Group s investment securities by external rating agencies, including S&P or equivalent agencies recognised by the PBOC. Foreign currency securities Availablefor-sale financial assets Investment securitiesheld-to-maturity Total AAA 1,214, ,444 1,528,776 Not rated 15,308-15,308 1,229, ,444 1,544,084 AAA 247, , ,286 Not rated 21,030-21, , , ,316 RMB securities Financial assets held for trading Availablefor-sale financial assets Investment securitiesheld-to -maturity Investment securities- loans and receivables Total Mid and long term: AAA 483,520 36,944,513 14,050, ,862 51,808,683 AA-to AA+ 19,852 5,799,774 1,804,316 99,957 7,723,899 A-to A - - 1,620-1,620 Short-term:

166 2011 Annual Report 165 SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) RMB securities Financial assets held for trading Availablefor-sale financial assets Investment securitiesheld-to -maturity Investment securities- loans and receivables Total A-1 2,843,964 4,841,770 2,401,097-10,086,831 Not rated: Treasury bonds 371,410 12,795,495 70,531,903 1,685,111 85,383,919 PBOC bills 348,121 43,148,040 88, ,242 44,549,938 Bonds issued by policy banks Bonds issued by financial institutions 1,799,974 34,217,723 42,848,894-78,866, ,675,956 4,675,956 Local government bonds - 8,952,176 26,493,856-35,446,032 Entrusted product (Note1) ,003,408 1,003,408 5,866, ,699, ,221,009 8,759, ,546,877 Note 1: It represents beneficial right of the entrusted product, which invests in entrusted loans, acquired by the Group. RMB securities Financial assets held for trading Availablefor-sale financial assets Investment securitiesheld-to -maturity Investment securitiesloans and receivables Total 31 December 2010 Mid and long term: AAA - 29,120,242 12,035,686-41,155,928 AA-to AA+ - 2,742,545 3,489,528-6,232,073 A-to A ,752-89,752 Short-term: A-1-3,441, ,441,896 Not rated: Treasury bonds - 14,932,112 45,473,000 2,046,644 62,451,756 PBOC bills central bank - 18,234,584 25,127,708-43,362,292 Bonds issued by policy banks - 28,022,660 41,842,408-69,865,068 Bonds issued by financial institutions ,660,478 1,660,478 Local government bonds - 7,379,789 15,170,042-22,549, ,873, ,228,124 3,707, ,809,074

167 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) 10.2 Market risk Market risk is the risk of loss arising from movements in observable market variables such as interest rates, exchange rates and equity markets. The Group exposes to market risk in both trading account and bank account items, includes interest rate risk and currency risk. Market risk management department formulates universal policies and procedures under a consolidated framework and supervises the implementation of such policies and procedures. Treasury department is in charge of Head Office s investment portfolios management, trading of treasury business and executing the relevant policies of market risk. Audit department audits independently on whether market risk management system works reliably and effectively regularly. The Group measured market risk with consideration of the established benchmarks and management ability, main methods include stress tests, analysis on valuation at risk, gap analysis and sensitivity analysis. The market risk of new products and businesses should be recognised before its commencement in compliance with relevant policies Currency risk The Group was established and operates in PRC, and conducts the majority of its businesses in RMB, with foreign transactions mainly in US dollar. The table below summarizes the Group s exposure to foreign exchange rate risk, assets and liabilities categorized by original currency having been measured in RMB. 31 December 2011 RMB USD HKD Others Total Into RMB Into RMB Into RMB Into RMB Cash and balances with central bank 364,398,438 2,175, , , ,957,099 Due from other banks and financial institutions 246,021,876 18,300,332 1,567,605 1,986, ,876,482 Interbank placements 104,722,937 5,112,888-1,579, ,415,298 Financial assets held for trading 5,866, ,866,841 Derivative financial assets 435,477 25,658 10,282 77, ,787 Financial assets purchased under resale agreements 281,509, ,509,782 Interests receivable 10,575, ,992 7,364 21,694 11,071,074 Loans and advances to customers 1,252,043,480 47,262,266 2,200, ,592 1,302,323,950 Available-for-sale financial assets 146,699, , , ,929,131 Investment securities - held-to-maturity 158,221, , ,535,453 Investment securities loans and receivables 8,759, ,759,536 Other financial assets 2,458, ,458,761 Due to central bank 50, ,000 Due to other banks and financial institutions 435,861,872 3,434, , , ,908,269 Interbank borrowings 58,984,745 6,365,480 1,619,800-66,970,025 Derivative financial liabilities 23,332 1,459,336-32,361 1,515,029

168 2011 Annual Report 167 SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) 31 December 2011 RMB USD HKD Others Total Into RMB Into RMB Into RMB Into RMB Financial assets sold under repurchase agreements 86,019, ,019,569 Due to customers 1,792,462,741 49,564,078 3,324,097 5,704,205 1,851,055,121 Interests payable 20,125, ,522 9,297 14,167 20,278,588 Debts issued 32,600, ,600,000 Other financial liabilities 21,041, ,041, December 2010 RMB USD HKD Others Total Into RMB Into RMB Into RMB Into RMB Cash 4,579, ,098 52, ,794 4,924,527 Balances with central bank, due from banks and other financial institutions Interbank placements and financial assets purchased under resale agreements 342,485,420 11,230,800 2,709,886 1,437, ,863, ,006,144 10,411, ,497 1,452, ,185,609 Derivative financial assets 526, , ,724 1,033,349 Loans and advances to customers 1,086,069,803 36,266, , ,318 1,124,112,990 Available-for-sale financial assets 103,873, , ,142,632 Investment securities - held-to-maturity 143,228, , ,556,636 Investment securities loans and receivables 3,707, ,707,122 Other financial assets 6,455, ,455,411 Due to central bank 50, ,000 Due to other banks and financial institutions 330,168,598 6,064, , , ,818,819 Interbank borrowings 11,070,000 2,967, ,695 80,973 14,415,145 Derivative financial liabilities 487, , ,204 1,172,083 Financial assets sold under repurchase agreements 16,963, ,963,471 Due to customers 1,590,803,410 39,347,013 5,298,336 5,010,773 1,640,459,532 Debts issued 16,800, ,800,000 Other financial liabilities 12,304, ,304,636

169 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) The Group measured the possible effect on net profi t which caused by foreign exchange rate fl uctuation through the sensitivity analysis. The table below shows the result of sensitivity analysis on the balance sheet date. Net Profit Increase/(decrease) Exchange rate fluctuation % Exchange rate fluctuation % -1% 1% -1% 1% USD against RMB (102,003) 102,003 (172,572) 172,572 Other currencies against RMB 22,081 (22,081) 925 (925) The sensitivity analysis was based on all assets and liabilities, characteristics of static currency risk structure. The hypothesis is shown as below: (1) exchange rate sensitivity represents the exchange gain or loss caused by the 1% fl uctuation in absolute value of relevant currency exchange rates (middle) on the balance sheet date; (2) different currency rates fl uctuation was simultaneous and in the same direction; (3) foreign currency position contains spot exchange position and forward exchange position. Based on the above-mentioned hypothesis, the actual exchange gain or loss may differ from the sensitivity analysis result Interest rate risk Interest rate risk refers to adverse movements in interest rates, resulting in potential losses to the Group, including interest rate risk of bank book and trading book. Since interest rates for most assets and liabilities are controlled by PBOC benchmark interest rate, the Group s interest rate risk mainly results from re-pricing risk of bank book. The Group has established a relatively perfect system of internal transfer pricing, through which, the Group s interest rate risk of bank book is managed in a centralized way. The Group measured and monitored interest rate risk with the main methods such as value-at-risk analysis and sensitivity analysis. The table below summarizes the Group s exposures to interest rate risks. The table presents the Group s assets and liabilities at carrying amounts, categorized by the earlier of contractual re-pricing or maturity dates. <1 month 1-3 months 3 months- 1 years years >5 years non-interestbearing Cash and balances with central bank 361,309, ,648, ,957,099 Due from other banks and financial institutions 214,423,156 45,631,500 7,073, ,000-48, ,876,482 Interbank placements 20,418,362 44,505,475 46,491, ,415,298 Financial assets held for trading 189,919 1,404,058 2,914, , ,237-5,866,841 Derivative financial assets , ,787 Financial assets purchased under resale agreements 55,497, ,256,828 75,755, ,509,782 Interests receivable ,071,074 11,071,074 Loans and advances to customers 383,301, ,235, ,504,190 28,422,092 21,861,103-1,302,323,950 Available-for-sale financial assets 4,556,851 14,294,591 37,699,551 71,019,599 20,358, ,929,131 Investment securities - held-to-maturity 2,207,857 11,700,705 32,483,501 79,227,255 32,916, ,535,453 Total

170 2011 Annual Report 169 SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) Investment securities loans and receivables ,238 2,694,020 1,295,288 4,286,037-8,759,536 Other financial assets ,458,761 2,458,761 <1 month 1-3 months 3 months-1 years years >5 years non-interestbearing Due to central bank , ,000 Due to other banks and financial institutions 156,420, ,692, ,792, , ,908,269 Interbank borrowings 63,000,870 2,429,161 1,539, ,970,025 Derivative financial liabilities ,515,029 1,515,029 Financial assets sold under repurchase agreements 65,336,720 6,273,035 14,409, ,019,569 Due to customers 1,012,856, ,297, ,363, ,950,632 2,000,000 2,586,757 1,851,055,121 Interests payable ,278,588 20,278,588 Debts issued - - 6,000,000 8,200,000 18,400,000-32,600,000 Other financial liabilities 8,900,790 4,994,750 1,818, ,328,030 21,041,570 Total <1 month 1-3 months 3 months-1 years 1-5 years >5 years non-interestbearing Total Cash and balances with central bank 288,324, ,924, ,248,760 Due from and placements with banks and other financial institutions 84,784,785 14,455,633 1,543, , ,793,178 Derivative financial assets ,033,349 1,033,349 Financial assets purchased under resale agreements 158,405,476 76,125, ,401, ,932,144 Loans and advances to customers 293,932, ,904, ,177,847 26,906,039 13,192,169-1,124,112,990 Available-for-sale financial assets 3,127,806 8,083,215 13,613,565 59,340,586 19,977, ,142,632 Investment securities held-to-maturity Investment securities loans and receivables 4,818,255 18,436,364 41,114,655 58,607,250 20,580, ,556, , ,340 1,456,838 1,660,478-3,707,122 Other financial assets - 500,000 1,600, ,355,411 6,455,411

171 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) <1 month 1-3 months 3 months-1 years 1-5 years >5 years non-interestbearing Total Due to central bank , ,000 Due to and placements from banks and other financial institutions 117,701,913 92,557, ,094,517 21,880, ,233,964 Derivative financial liabilities ,172,083 1,172,083 Financial assets sold under repurchase agreements 4,911,600 5,565,585 6,486, ,963,471 Due to customers 945,828, ,835, ,877, ,662,789 1,477,661 3,778,045 1,640,459,532 Debts issued - - 7,600,000 9,200, ,800,000 Other financial liabilities ,304,636 12,304,636 The Group measured the possible effect on net profi t and equity which caused by interest rate fl uctuation through the sensitivity analysis. The table below shows the results of the sensitivity analysis on the balance sheet date. Interest rate fluctuation (Basis points) 31 December December Net profit increases/(decreases) (2,359,825) 2,359,825 (2,000,703) 2,000,703 Revaluation reserve in equity increases/(decreases) 2,384,413 (2,315,606) 2,413,926 (2,279,952) The sensitivity analysis was performed on the basis of static characteristics of the interest risk of the assets and liabilities. In the relevant analysis, the fl uctuation was only measured during one year, which refl ected the effect on the annualized interest income given re-pricing the assets and liabilities. The hypothesis was shown as below: (1) Except for current deposit, all assets and liabilities re-priced or matured at the middle of the period for maturity within 3 months and 3-12 months; (2) The interest rates of current deposit and statutory deposit reserve in central bank remain the same; (3) The yield curve moved in parallel with interest rate; (4) There were no other changes for the portfolio of assets and liabilities. Due to the hypothesis mentioned above, the actual interest income may be different from the sensitivity analysis results. Based on the assumption of the parallel movement of the yield curve with interest rate change, the sensitivity

172 2011 Annual Report 171 SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) analysis of the equity is derived by revaluating the ending balance of the available-for-sale financial assets as a result of certain percentage of interest rate changes Liquidity risk Liquidity risk is the risk that the Group will not meet liabilities as they fall due, and it results from amount and maturity mismatches of assets and liabilities. The liquidity risk management system of the Group includes planning beforeevent, managing during-event, and adjusting after-event and emergency plan. In accordance with the Group s situation, according to the regulatory index systems, the series of the daily liquidity system was designed to monitor the implement of the relevant ratio limits, manage the index system s grading, and adjust the different levels in different ways. The table below presents the cash fl ows payable by the Group under non-derivative fi nancial assets and liabilities by remaining contractual maturities at the balance sheet date. The amounts disclosed in the table are the contractual undiscounted cash fl ows Non-derivative fi nancial assets and liabilities cash fl ow Overdue Repayable on demand Due within 3 months Due within 3 and 12 months Due between 1 and 5 years Due after 5 years Total Cash and balances with central bank Due from banks and other financial institutions - 366,957, ,957,099-16,370, ,736,576 7,324, , ,161,656 Interbank placements ,957,111 46,995, ,952,256 Financial assets held for trading Financial assets under resale agreements Loans and advances to customers Available-for-sale financial assets Investment securitiesheld-to-maturity Investment securitiesloans and receivables ,491 3,092,403 2,281, ,127 6,718, ,725,324 77,800, ,526,116 6,216,914 10,993, ,861, ,540, ,700, ,046,233 1,635,359, ,521,641 37,609,506 91,760,628 31,942, ,834, ,269,085 33,778, ,764,371 41,366, ,179, ,089 3,210,377 2,477,591 5,483,378 11,467,435 Other financial assets - 2,458, ,458,761

173 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) Overdue Repayable on demand Due within 3 months Due within 3 and 12 months Due between 1 and 5 years Due after 5 years Total Due to central bank , ,000 Due to banks and other financial institutions - 42,958, ,607, ,875, ,441,402 Interbank borrowings ,583,679 1,568, ,151,909 Financial assets sold under repurchase agreements ,873,106 14,605, ,478,268 Due to customers - 742,793, ,036, ,406, ,040,895 2,088,128 1,900,365,546 Debts issued ,780,500 13,050,300 24,058,000 44,888,800 Other financial liabilities - 5,328,030 13,895,540 1,818, ,041, Overdue Repayable on demand Due within 3 months Due within 3 and 12 months Due between 1 and 5 years Due after 5 years Total Cash and balances with central bank - 293,248, ,248,760 Due from and placements with banks and other financial institutions Financial assets purchased under resale agreements Loans and advances to customers 9,000 6,929,698 89,569,459 4,285, ,793, ,530, ,401, ,932,144 1,203, ,816, ,019, ,770, ,302,987 1,124,112,990 Available-for-sale financial assets - - 3,357,393 8,447,466 65,286,438 27,051, ,142,632 Investment securitiesheld-to-maturities Investment securitiesloans and receivables ,927,052 36,296,912 67,578,154 23,754, ,556, , ,340 1,456,838 1,660,478 3,707,122 Other financial assets - 4,355, ,000 1,600, ,455,411

174 2011 Annual Report 173 SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) Overdue Repayable on demand Due within 3 months Due within 3 and 12 months Due between 1 and 5 years Due after 5 years Total Due to central bank , ,000 Due to and placements from banks and other financial institutions Financial assets sold under repurchase agreements - 73,547, ,185, ,734,951 23,866,767 2,899, ,233, ,477,185 6,486, ,963,471 Due to customers - 743,784, ,153, ,518, ,341,999 9,661,416 1,640,459,532 Debts issued ,600,000 14,200,000-16,800,000 Other financial liabilities - 12,304, ,304, Derivatives cash fl ow Derivatives settled on a net basis The Group s derivatives that will be settled on a net basis include interest rate swaps and precious metal derivatives. The table below analyses the Group derivative fi nancial instruments that will be settled on a net basis into relevant maturity groupings based on the remaining period at the balance sheet to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash fl ows. Within 1 month 1-3 months 3-12 months 1-5 years Above 5 years Total Interest rate swaps (159,849) 957 (148,118) (1,236,746) 10,883 (1,532,873) Precious metals derivatives (12,657) (12,657) Total (172,506) 957 (148,118) (1,236,746) 10,883 (1,545,530) Interest rate swaps (409) - - (130,560) (48,851) (179,820) Precious metals derivatives 5, ,598 Total 5, (130,560) (48,851) (174,222) Derivatives settled on a gross basis The Group s derivatives that will be settled on a gross basis are foreign exchange derivatives include currency forward and currency swaps. The table below analyses the Group s derivative financial instruments that will be settled on a gross basis into relevant maturity groupings based on the remaining period at the balance sheet to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash fl ows.

175 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) Within 1 month 1-3 months 3-12 months 1-5 years Above 5 years Total Foreign exchange derivatives -Outflow (45,450,075) (22,374,629) (32,698,422) (1,417,807) - (101,940,933) -Inflow 45,455,964 22,439,566 32,693,856 1,416, ,005,937 Foreign exchange derivatives -Outflow (18,123,939) (11,117,011) (29,917,589) (314,179) - (59,472,718) -Inflow 18,108,758 11,107,463 29,965, ,555-59,496, Off-balance sheet items No later than 1 year 1-5 years Over 5 years Total Acceptance 370,981, ,981,123 Acceptance under letter of credit 25,615, ,615,734 Guarantee issued 26,774,625 20,761, ,024 47,854,363 Letter of credit 196,828,146 1,593, ,422,064 Un-utilised balances of credit cards 42,752, ,752,585 Total 662,952,213 22,355, , ,625, Fair Value of financial instruments Financial instruments not measured at fair value The fi nancial assets and fi nancial liabilities not measured at fair value in the fi nancial statement include: balances with central banks, due from and placements with banks and other fi nancial institutions, fi nancial assets purchased under resale agreements, loans and advances to customers, investment securities- held-to-maturity, investment securities-loans and receivables, due to and placements from banks and other fi nancial institutions, fi nancial assets sold under repurchase agreements, due to customers, interest payable and debts issued. The table below summarizes the carrying amount and fair value of investment securities classified as held-to-maturity and loans and receivable, debts issued of the Group as at balance sheet date. Carrying amount Fair value Carrying amount Fair value Financial assets: Investment securities -held-to-maturity 158,535, ,088, ,556, ,602,082 Investment securities - loans and receivables 8,759,536 8,872,568 3,707,122 3,717,046 Financial liabilities: Debts issued 32,600,000 32,630,030 16,800,000 16,342,990

176 2011 Annual Report 175 SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) Investment securities classifi ed as held-to-maturity and loans and receivables Fair value of investment securities-held-to-maturity is based on quoted market price. If market information is not available, the fair values of investments securities classified as held-to-maturity and loans and receivables are calculated using discounted cash flow model, and if it is applicable, fair value can be estimated based on the financial instruments price of similar credit risk, maturity and yield rate. Debts issued Fair value of debts is based on market price. If market information is not available, the fair value of debts is calculated using a discounted cash fl ow model which is based on a current yield curve appropriate for the remaining term to maturity. Other than the fi nancial instruments above, the fair value of fi nancial assets and fi nancial liabilities is calculated with discounted cash fl ow model, and the carrying amount is not signifi cantly different with the fair value Fair value hierarchy The Group measures fair values using the following fair value hierarchy that refl ects the signifi cance of the inputs used in making the measurements: Level 1 Quoted prices in active markets for identical assets or liabilities. This level includes listed equity securities and debts instruments. Level 2 Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices). This level includes the majority of the OTC derivative contracts and RMB debt instruments traded in interbank market. The sources of input parameters like LIBOR yield curve or counterparty credit risk are Bloomberg and China Bond. Level 3 Inputs for the asset or liability that are not based on observable market data (unobservable inputs). This level includes equity investments and debt instruments with signifi cant unobservable inputs. Level 1 Level 2 Level 3 Total Financial assets held for trading - 5,866,841-5,866,841 Available-for-sale financial assets - 147,929, ,929,131 Derivative financial Assets - 548, ,787 Derivative financial Liabilities - 1,515,029-1,515,029 Available-for-sale financial assets - 104,142, ,142,632 Derivative financial Assets - 1,033,349-1,033,349 Derivative financial Liabilities - 1,172,083-1,172,083

177 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) No fi nancial instruments are classifi ed as level 1 or level 3 in the Group Capital management The Bank takes sufficient measures of capital management, fully in accordance with the requirements of the authorities, to cover the inherent risks in its business. The primary objectives of the Bank s capital management are to ensure that the Bank not only complies with imposed regulatory capital requirements, but also maintains healthy ratios to maximize shareholders value. Given the change of the economic environment and risk characteristics, the Bank will actively adjust the capital structure. Generally, the measures of adjusting the capital structure contain the change of the allocation of dividend, capital issue and issuance of subordinate bonds. There is no material change from the previous year with respect to the objectives and measures of the Bank s capital management. The Bank calculated the capital adequacy ratio and core capital adequacy ratio in accordance with the Capital Adequacy Ratio of Commercial Banks Management Policy and the calculation methods agreed by the regulatory authorities. The core capital included the capital, capital reserve, surplus reserve and retained earnings. The affi liated capital included general reserve and long-term subordinated debts. Pursuant to relevant regulations, the deducted items mainly include the capital investment in unconsolidated fi nancial institution Total capital base before deductions 202,157, ,551,760 Including: Core capital 146,005, ,676,000 Supplementary capital 56,152,760 34,875,760 Deductions: Unconsolidated investments and others (2,393,590) (1,705,420) Total capital net 199,764, ,846,340 Core capital net 144,808, ,823,290 On balance sheet risk-weighted assets 1,328,919,126 1,127,395,810 Off balance sheet risk-weighted assets 231,260, ,964,930 Market risk capital adjustment 13,127,875 1,027,500 1,573,307,893 1,279,388,240 Capital adequacy ratio 12.70% 12.02% Core capital adequacy ratio 9.20% 9.37%

178 2011 Annual Report 177 SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) 10.6 Financial assets and financial liabilities measured at fair value Income/(loss) from fair value change Accumulated fair value change recorded in equity Impairment Financial assets Financial assets held for trading - 5, ,866,841 Derivative financial assets 1,033,349 (484,562) ,787 Available-for-sale financial assets 104,142,632 - (1,360,380) - 147,929, ,175,981 (479,290) (1,360,380) - 154,344,759 Financial liabilities Derivative financial liabilities 1,172,083 (342,946) - - 1,515,029 1,172,083 (342,946) - - 1,515,029 The data in this table didn t always have articulation Financial assets and financial liabilities in foreign currencies Income/(loss) from fair value change Accumulated fair value change recorded in equity Impairment Financial assets Cash and balances with central bank, due from other banks and financial institutions Interbank placements and financial assets under resale agreements 15,723, ,413,267 12,179, ,692,361 Derivative financial assets 507,213 (393,903) ,310 Loans and advances to customers 38,043, (166,297) 50,280,470 Available-for-sale financial assets 268,804-14,610-1,229,640 Investment securities held-to-maturity 328, ,444 67,050,301 (393,903) 14,610 (166,297) 83,043,492 Financial liabilities Due to other banks and financial institutions 7,650, ,046,397 Interbank borrowings 3,345, ,985,280 Derivative financial liabilities 684,172 (807,525) - - 1,491,697 Due to customers 49,656, ,592,380 61,335,660 (807,525) ,115,754 The data in this table didn t always have articulation.

179 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK NOTES TO THE FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) 11 ASSETS PLEDGED These assets of the Group are pledged as collateral under repurchase agreements and treasury deposits Discount bills and rediscount bills 10,076,043 2,136,846 Available-for-sale financial assets 45,845,734 12,788,425 Investment securities-held-to-maturities 69,572,056 15,518,220 Total 125,493,833 30,443, EVENTS AFTER THE BALANCE SHEET DATE Approved by CBRC and PBOC, the Bank issued RMB 30 billion bonds in the interbank bonds market during 24 February 2012 to 28 February The bonds have a tenor of fi ve years and the coupon rate is 4.2%. It will be used to increase source of fund, optimize maturity structure of liabilities, and support loans to medium-sized and small enterprises. [English translation for reference only. Should there be any inconsistency between the Chinese and English versions, the Chinese version shall prevail.]

180 2011 Annual Report 179 SHANGHAI PUDONG DEVELOPMENT BANK SUPPLEMENTARY TO THE CONSOLIDATED FINANCIAL STATEMENTS (All amounts expressed in thousands of RMB unless otherwise stated.) 1 RETURN ON EQUITY AND EARNINGS PER SHARE 2011 Weighted average return on equity Earnings per share (RMB: Yuan) Basic Diluted Net profit attributable to the Bank s ordinary shareholders Net profit attributable to the Bank s ordinary shareholders after deducting non-recurring profit or loss 20.07% % Weighted average return on equity Earnings per share (Note1) Basic Diluted Net profit attributable to the Bank s ordinary shareholders Net profit attributable to the Bank s ordinary shareholders after deducting non-recurring profit or loss 23.27% % Note1: The Bank distributed stock dividend in June The amount of earnings per share is calculated based on the adjusted number of shares. The Bank has no dilutive potential ordinary share. 2 NET PROFIT AFTER DEDUCTING THE MINORITY PROFIT OR LOSS Item Net profit attributable to the Bank s ordinary shareholders 27,285,981 19,177,209 Plus/(less): Non-recurring profit or loss items Profit or loss arising from the disposal of non-current assets 22,748 (185,622) Loans recovery after written off previous year (230,743) (36,219) Other non-operating expense/income (105,308) (23,232) Effect of the non-recurring profit or loss on income tax 78,326 61,268 (234,977) (183,805) Net profit attributable to the Bank s ordinary shareholders after deducting the non-recurring profit or loss 27,051,004 18,993,404 The Group recognizes non-recurring profi t or loss items, according to the Explanatory Notice No.1 for information disclosure of listed company non-recurring profit or loss (CSRC Accounting, No.43, [2008]). The Group doesn t recognize normal operating income/loss from fair value change of fi nancial assets and liabilities held for trading and investment income from disposal of such assets as well as Investment securities available-for-sale as non-recurring profi t or loss items.

181

182 2011 Annual Report 181 (English translation for reference only) INDEPENDENT AUDITOR S REPORT 2012/SH-003/MHL/AZWU TO THE SHAREHOLDERS OF SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD.: We have audited the financial statements of Shanghai Pudong Development Bank Co., Ltd. ( the Bank ) and its subsidiaries (collectively the Group ) set out on pages 3 to 99, which comprise the consolidated and bank s statements of financial positions as at 31 December 2011, and the consolidated and bank s statements of comprehensive income, the consolidated and bank s statements of changes in equity, the consolidated and bank s statements of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these fi nancial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. 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 International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the fi nancial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the fi nancial statements. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the fi nancial statements present fairly, in all material respects, the fi nancial positions of the Bank and the Group as of 31 December 2011, and of their fi nancial performances and cash fl ows for the year then ended in accordance with International Financial Reporting Standards. PricewaterhouseCoopers Zhong Tian CPAs Limited Company Shanghai, the People s Republic of China 14 March, 2012

183 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK CONSOLIDATED AND BANK S STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated.) Group Bank Note Interest income ,221,237 72,966, ,061,677 72,822,042 Interest expense 5.1 (59,779,675) (27,763,422) (58,989,027) (27,728,908) 61,441,562 45,203,510 61,072,650 45,093,134 Fee and commission income 5.2 7,204,809 4,461,471 7,181,091 4,452,700 Fee and commission expense 5.2 (489,083) (412,925) (486,789) (412,855) 6,715,726 4,048,546 6,694,302 4,039,845 Dividend income 49,510 48,726 49,510 48,726 Net trading income 5.3 (722,258) (93,406) (722,258) (93,406) Net losses on disposal of investment securities (65,140) (96,404) (65,140) (96,404) Other operating income , , , ,425 Employee benefit expenses 5.5 (12,178,040) (10,124,286) (12,107,102) (10,085,077) Operating expenses 5.6 (6,331,019) (5,517,485) (6,254,440) (5,481,685) Depreciation expenses for property and equipment (1,327,820) (1,198,190) (1,313,725) (1,191,097) Business tax and surcharges 5.7 (4,898,888) (3,395,394) (4,883,630) (3,390,815) Impairment charges 5.8 (7,499,975) (4,587,419) (7,430,299) (4,559,216) Share of profits of associates 93,000 93,529 93,000 93,529 Share of profits of joint ventures (20,534) (17,863) (20,534) (17,863) 35,839,287 25,280,906 35,646,113 25,272,096 Income tax expense 5.9 (8,484,175) (6,102,319) (8,438,160) (6,096,421) 27,355,112 19,178,587 27,207,953 19,175,675 - Shareholders of the Bank 27,285,981 19,177,209 - Non-controlling interests 69,131 1,378 Basic and diluted earnings per share for profit attributable to the shareholders of the Bank (in RMB) 27,355,112 19,178,

184 2011 Annual Report 183 SHANGHAI PUDONG DEVELOPMENT BANK CONSOLIDATED AND BANK S STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated.) Group Bank Note Other comprehensive loss on joint ventures for the year, net of tax (9,079) (7,693) (9,079) (7,693) Unrealized net gains or loss on available-for-sale financial assets 913,808 (2,001,913) 913,808 (2,001,913) 904,729 (2,009,606) 904,729 (2,009,606) 28,259,841 17,168,981 28,112,682 17,166,069 - Shareholders of the Bank 28,190,710 17,167,603 - Non-controlling interests 69,131 1,378 28,259,841 17,168,981 The notes presented on pages 11 to 99 form an integral part of these fi nancial statements.

185 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK CONSOLIDATED AND BANK S STATEMENTS OF FINANCIAL POSITION AS AT 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) Group Bank 31 December 31 December 31 December 31 December Note Cash and balances with central bank ,957, ,248, ,310, ,610,145 Due from and placements with banks and other financial institutions ,291, ,793, ,968, ,484,178 Precious metals 683,246 2, ,246 2,090 Financial assets held for trading ,866,841-5,866,841 - Derivative financial assets ,787 1,033, ,787 1,033,349 Financial assets purchased under resale agreements ,509, ,932, ,509, ,932,144 Loans and advances to customers ,302,323,950 1,124,112,990 1,295,763,717 1,121,019,539 Available-for-sale financial assets ( AFS ) ,056, ,910, ,056, ,910,252 Investment securities - held-to-maturity ( HTM ) ,535, ,556, ,535, ,556,636 Investment securities - loans and receivables ,759,536 3,707,122 8,759,536 3,707,122 Investments in associates , , , ,818 Investments in joint ventures ,502 39,036 18,502 39,036 Investments in subsidiaries , ,000 Property, plant and equipment ,397,547 8,546,325 9,345,886 8,504,947 Constructions in progress 457,178 85, ,178 85,525 Deferred income tax assets ,269,859 3,772,723 4,268,466 3,772,723 Other assets ,306,639 15,040,826 16,284,319 15,032,776

186 2011 Annual Report 185 SHANGHAI PUDONG DEVELOPMENT BANK CONSOLIDATED AND BANK S STATEMENTS OF FINANCIAL POSITION (CONTINUED) AS AT 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) Group Bank 31 December 31 December 31 December 31 December Note Due to central banks 50,000 50, Due to and placements from banks and other financial institutions ,878, ,233, ,084, ,725,054 Derivative financial liabilities ,515,029 1,172,083 1,515,029 1,172,083 Consolidated statement of changes in equity Financial assets sold under repurchase agreements ,019,569 16,963,471 85,954,448 16,912,471 Due to customers ,851,055,121 1,640,459,532 1,840,832,529 1,635,623,369 Income tax payable 4,038,632 2,780,138 4,026,908 2,780,157 Debts issued ,600,000 16,800,000 32,600,000 16,800,000 Other liabilities ,994,264 37,671,736 CONSOLIDATED 51,888,770AND 37,628,156 BANK S STATEMENTS 2,535,150,909 2,068,130,924 2,526,902,660 2,064,641,290 OF FINANCIAL POSITION (CONTINUED) Share capital ,653,471 14,348,824 18,653,471 14,348,824 Capital surplus ,564,187 60,573,266 60,563,439 60,572,518 Surplus reserves ,805,744 15,249,813 21,805,744 15,249,813 General risk reserves ,700,000 9,500,000 18,700,000 9,500,000 Revaluation reserve (1,020,285) (1,934,093) (1,020,285) (1,934,093) Retained earnings ,188,118 25,258,526 30,110,492 25,258,928 Equity attributable to the Bank' s shareholders 148,891, ,996, ,812, ,995,990 Non-controlling interests , , ,542, ,279, ,812, ,995,990 2,684,693,689 2,191,410,774 2,675,715,521 2,187,637,280 These consolidated fi nancial statements were approved for issue by the Board of Directors on 14 March 2012 and signed on its behalf by: Ji Xiaohui Fu Jianhua Liu Xinyi Fu Neng Chairman of Board President Chief Financial Officer Head of finance and accounting department The notes presented on pages 11 to 99 form an integral part of these fi nancial statements.

187 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) Equity attributable to the Bank s shareholders Share capital Capital surplus Surplus reserves General risk provision Revaluation reserve Retained earnings Subtotal Non-controlling interests Total Note 5.30 Note 5.31 Note 5.32 Note 5.33 Note 5.34 Note ,348,824 60,573,266 15,249,813 9,500,000 (1,934,093) 25,258, ,996, , ,279,850 Net profit ,285,981 27,285,981 69,131 27,355,112 Other comprehensive income - (9,079) , , ,729 Total comprehensive income - (9,079) ,808 27,285,981 28,190,710 69,131 28,259,841 Issue of new shares , ,900 Increase of non-controlling ,000 98,000 interests from new setup subsidiaries Provide surplus reserves and general risk reserve - - 6,555,931 9,200,000 - (15,755,931) Dividends 4,304, (6,600,458) (2,295,811) - (2,295,811) 18,653,471 60,564,187 21,805,744 18,700,000 (1,020,285) 30,188, ,891, , ,542,780 8,830,046 24,250,511 10,688,576 6,900,000 67,820 17,216,074 67,953, ,419 68,087,446 Net profit ,177,209 19,177,209 1,378 19,178,587 Other comprehensive income - (7,693) - - (2,001,913) - (2,009,606) - (2,009,606) Total comprehensive income - (7,693) - - (2,001,913) 19,177,209 17,167,603 1,378 17,168,981 Issue of new shares 2,869,765 36,329, ,199,465-39,199,465 Increase of non-controlling , ,000 interests from new setup subsidiaries Provide surplus reserves and general risk reserve - - 4,561,237 2,600,000 - (7,161,237) Dividends 2,649, (3,973,520) (1,324,507) - (1,324,507) Others ,465 14,348,824 60,573,266 15,249,813 9,500,000 (1,934,093) 25,258, ,996, , ,279,850

188 2011 Annual Report 187 SHANGHAI PUDONG DEVELOPMENT BANK CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) Share capital Capital surplus Surplus reserves General risk reserve Revaluation reserve Retained earnings Total Note 5.30 Note 5.31 Note 5.32 Note 5.33 Note ,348,824 60,572,518 15,249,813 9,500,000 (1,934,093) 25,258, ,995,990 Net profit ,207,953 27,207,953 Other comprehensive income - (9,079) , ,729 Total comprehensive income - (9,079) ,808 27,207,953 28,112,682 Provide surplus reserves and general risk reserve - - 6,555,931 9,200,000 - (15,755,931) - Dividends 4,304, (6,600,458) (2,295,811) 18,653,471 60,563,439 21,805,744 18,700,000 (1,020,285) 30,110, ,812,861 8,830,046 24,250,511 10,688,576 6,900,000 67,820 17,218,010 67,954,963 Net profit ,175,675 19,175,675 Other comprehensive income - (7,693) - - (2,001,913) - (2,009,606) Total comprehensive income - (7,693) - - (2,001,913) 19,175,675 17,166,069 Issues of new shares 2,869,765 36,329, ,199,465 Provide surplus reserves and general risk reserve - - 4,561,237 2,600,000 - (7,161,237) - Dividends 2,649, (3,973,520) (1,324,507) 14,348,824 60,572,518 15,249,813 9,500,000 (1,934,093) 25,258, ,995,990 The notes presented on pages 11 to 99 form an integral part of these fi nancial statements.

189 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK CONSOLIDATED AND BANK S STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) Group Year ended 31 December Bank Year ended 31 December Profit before taxation: 35,839,287 25,280,906 35,646,113 25,272,096 Adjusted by: Depreciation and amortization 1,338,593 1,209,391 1,324,498 1,197,853 Impairment of loans and advances to customers 7,159,118 4,533,401 7,089,442 4,505,198 Impairment of other assets 340,857 54, ,857 54,018 Interest expense 59,779,675 27,763,422 58,989,027 27,728,908 Interest income (121,221,237) (72,966,932) (120,061,677) (72,822,042) Gains and losses on disposal of property, plant and equipment 13,290 (17,260) 13,297 (17,260) Dividends income (49,510) (48,726) (49,510) (48,726) Share of profits of associates (93,000) (93,529) (93,000) (93,529) Share of profits of joint ventures 20,534 17,863 20,534 17,863 Unrealized losses on derivative financial instruments 827,508 97, ,508 97,670 Losses arising from disposal of investment securities 65,140 96,404 65,140 96,404 Exchange losses from investing and financing activities 3, ,264 3, ,263 Net (increase) /decrease in operating assets: Statutory reserve deposits in central banks (88,162,494) (74,472,374) (87,122,939) (74,479,608) Due from and placements with other banks and financial institutions (119,012,899) 86,699,111 (119,002,898) 86,699,111 Financial assets held for trading (5,866,841) - (5,866,841) - Financial assets purchased under resale agreements 110,422,362 (338,874,647) 110,422,362 (338,874,647) Precious metals (681,156) 211,122 (681,156) 211,122 Loans and advances to customers (184,946,743) (216,120,690) (181,400,899) (213,471,058) Other assets (1,265,813) (2,290,607) (1,251,543) (2,269,991) Net increase/(decrease) in operating liabilities: Due to central banks - 2,000 - (48,000) Due to and placements from other banks and financial institutions 155,644, ,522, ,359, ,902,148 Financial assets sold under repurchase agreements 69,056,098 15,698,589 69,041,977 15,647,589 Due to customers 210,595, ,339, ,209, ,469,882 Financial liabilities at fair value through profit or loss - (237,326) - (237,326) Other liabilities 10,547,086 8,946,099 10,497,479 8,905,512 Cash generated from /(used in) operating activities 140,352,774 (48,534,480) 140,319,853 (48,440,550) Interest received 116,873,622 72,172, ,709,687 71,758,253 Interest paid (50,546,000) (23,826,483) (49,780,400) (23,529,194) Payment of income tax (8,024,618) (5,046,540) (7,988,953) (5,040,623) Net cash generated from /(used in) operating activities 198,655,778 (5,235,163) 198,260,187 (5,252,114)

190 2011 Annual Report 189 SHANGHAI PUDONG DEVELOPMENT BANK CONSOLIDATED AND BANK S STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) Group Year ended 31 December Bank Year ended 31 December Dividends received 49,510 48,726 49,510 48,726 Disposal of property and equipment 70,671 66,917 70,663 65,166 Purchase of property and equipment (2,263,002) (1,796,196) (2,238,622) (1,768,740) Purchase of other long-term assets (419,865) (85,525) (412,137) (85,525) Payment for equity investments (360,000) (51,000) (671,100) (204,000) Purchase of investment securities (296,027,027) (469,032,545) (296,027,027) (469,032,545) Redemption of investment securities 233,593, ,297, ,593, ,917,500 Net cash (used in)/ generated from investing activities (65,356,565) 3,447,877 (65,635,565) 2,940,582 Cash received from issues of new shares 298,900 39,346,464-39,199,464 Cash received from issued debts 18,400,000-18,400,000 - Payment of mature debts (2,600,000) (2,000,000) (2,600,000) (2,000,000) Interest paid on issued debts (708,900) (755,626) (708,900) (755,626) Dividends paid to shareholders (2,295,812) (1,330,288) (2,295,812) (1,330,288) Net cash generated from financing activities 13,094,188 35,260,550 12,795,288 35,113,550 (1,361,852) - (1,361,852) - 145,031,549 33,473, ,058,058 32,802,018 Cash and cash equivalents at the beginning of the year 167,595, ,122, ,804, ,002,708 Cash and cash equivalents at the end of the year 312,627, ,595, ,862, ,804,726 Cash 5,648,021 4,924,527 5,603,272 4,897,736 Non-statutory reserve deposits in central banks 52,978,762 68,156,410 52,572,730 67,701,248 Due from other banks and financial institutions within 3 months Placements with other banks and financial institutions within 3 months 233,182,821 65,500, ,869,158 65,191,277 20,817,624 29,014,465 20,817,624 29,014, ,627, ,595, ,862, ,804,726 The notes presented on pages 11 to 99 form an integral part of these fi nancial statements.

191 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) 1 GENERAL INFORMATION Shanghai Pudong Development Bank Co., Ltd. ( the Bank or Pufa Bank ) is a joint-stock commercial bank registered in Shanghai on 28 August 1992 with the approval from the People s Bank of China ( PBOC ) via YinFu [1992] No.350. The Bank obtained business licence from Shanghai Municipal Administration of Industry and Commerce ( SMAIC ) in on October 1992 and commenced business on 9 January On 10 November 1999, the Bank was listed and traded in Shanghai Stock Exchange. The business license number of the Bank is , and the licence number for conducting fi nancial services is B H0001. As at 31 December 2011, the Bank s share capital was RMB billion, including an amount of RMB billion shares which were restricted for trading. The Bank and its subsidiaries (collectively the Group ) are all engaged in financial industry. Their scopes of business are commercial banking services approved by PBOC and the China Banking Regulatory Commission ( CBRC ). The main scopes of business include drawing public deposits; granting loans of short-term, mid-term and long-term; performing settlements; discounting bills and notes; issuing fi nancial debentures; issuing, underwriting and cashing securities on behalf of governmental authorities; trading of governmental bonds and debentures; interbank loans and deposits; providing services relating to letters of credit and letters of guarantee; factoring and assignment of receivables and payables; providing safe deposit services; accepting deposit in foreign currencies; granting loans in foreign currencies; remittance of foreign currencies; exchange of foreign currencies; international settlements; interbank placements and deposits in foreign currencies; accepting and discounting of bills and notes expressed in foreign currencies; lending in foreign currencies; guarantees in foreign currencies; purchase and sale of foreign currencies; purchase and sale of marketable securities expressed in foreign currencies (excluding stocks), either for itself or on behalf of clients; purchase and sale of foreign currencies, either for itself or on behalf of clients; credit investigation, consultancy and testimonial services; offshore banking and other services as approved by PBOC. The fi nancial statements were authorized for issue by Board of Directors on 14 March PRINCIPAL ACCOUNTING POLICIES The principal accounting policies adopted in the preparation of the fi nancial statements are set out below. These policies have been consistently applied to the periods presented unless otherwise stated. 2.1 Basis of presentation The fi nancial statements have been prepared in accordance with the International Financial Reporting Standards ( IFRS ) and under the going concern hypothesis. The fi nancial statements have been prepared on a historical cost basis except for available-for-sale fi nancial assets, fi nancial assets and fi nancial liabilities at fair value through profi t or loss that have been measured at fair value. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying these accounting policies. The areas where assumptions and estimates are signifi cant to the fi nancial statements are disclosed in Note 3. (i) There is no material impact to the Group s fi nancial performance and fi nancial position as a result of standards, amendments and interpretations which became effective for fi nancial years beginning on 1 January 2011.

192 2011 Annual Report PRINCIPAL ACCOUNTING POLICIES (CONTINUED) 2.1 Basis of presentation (Continued) SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) (ii) The Group has not chosen to early adopt the following standards, amendments and interpretations that were issued but not yet effective: IFRS 9, Financial instruments (effective on 1 January 2015) and its amendments address the classification, measurement and recognition of fi nancial assets and fi nancial liabilities. It replaces the parts of IAS 39 that relate to the classification and measurement of financial instruments. IFRS 9 requires financial assets to be classified into two measurement categories: those measured as at fair value and those measured at amortised cost. The determination is made at initial recognition. The classifi cation depends on the entity's business model for managing its fi nancial instruments and the contractual cash fl ow characteristics of the instrument. For fi nancial liabilities, the standard retains most of the IAS 39 requirements. The main change is that, in cases where the fair value option is taken for fi nancial liabilities, the part of a fair value change due to an entity s own credit risk is recorded in other comprehensive income rather than the income statement, unless this creates an accounting mismatch. IFRS 10 Consolidated fi nancial statements (effective on 1 January 2013) builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated fi nancial statements of the Group. The standard provides additional guidance to assist in the determination of control where this is diffi cult to assess. IFRS 13 Fair value measurement (effective on 1 January 2013) aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRS. The requirements do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards within IFRS. The Group is evaluating the impact of application of IFRS 9, IFRS 10 and IFRS 13. Except for standards mentioned above, the adoption of other standards, amendments and interpretations is not expected to have material effect on the Group s financial statements. 2.2 Business Combinations Business combination under common control The consideration paid and the assets and liabilities acquired by the acquirer shall be measured at their carrying amounts. The difference between the carrying amounts of assets and liabilities acquired and the consideration paid shall be recorded in capital surplus. If capital surplus is not suffi cient to be deducted, any excess shall be adjusted against retained earnings. Transaction expenses for business combination are recorded in profit or loss for the current period. Transaction cost of issuing equity securities or debt securities for business combination should be recorded as initial recognition cost of the securities. The consideration paid and the identifiable net assets acquired by the acquired shall be measured at their fair values on the acquisition date. Goodwill is initially measured at cost being the excess of the aggregate fair value of the consideration paid and the acquirer s interest in the fair value of the acquiree s net identifi able assets. If the fair value of consideration is lower than the fair value of the net assets acquired, the difference is, after reassessment, recognised in profi t or loss for the current period. Transaction expenses for business combination should be recorded into the profit or loss for the current period. Transaction cost of issuing equity securities or debt securities for business combination should be recorded as initial recognition cost of the securities.

193 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) 2.3 Consolidated financial statements The scope of consolidation of the consolidated fi nancial statements is determined based on control, and includes the fi nancial statements of the Bank and its subsidiaries. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. All signifi cant inter-company transactions, balances, income and expenses on transactions between group companies are eliminated. Subsidiaries equities and profi ts which are not attributable to the Bank are respectively presented as non-controlling interests in the consolidated fi nancial statements. Where the amount of losses of a subsidiary attributable to the non-controlling shareholders exceeds their shares in the opening balance of shareholder s equity, the excess shall be allocated against non-controlling interests. With respect to subsidiaries acquired through business combinations involving entities not under common control, the fi nancial performances and cash fl ows of the acquiree shall be consolidated into the fi nancial statements, from the day that the Bank obtains control, and till the Bank loses the control of it. While preparing the consolidated fi nancial statements, the acquirer should adjust the subsidiary s fi nancial statements, on the basis of the fair values of the identifi able assets, liabilities and contingent liabilities recognized on the acquisition date. With respect to subsidiaries acquired through business combinations involving entities under common control, the financial performances and cash flows of the acquiree should be consolidated into the financial statements from the beginning of the period when the acquisition occurs. While preparing the comparative financial statements, adjustments are made to related items in the financial statements for the prior period as if the reporting entity established through acquisition had been existed since the ultimate controller began to excise control. 2.4 Foreign currency transactions The Group s operating entities in Mainland China all use Renminbi ( RMB ) as functional currency. Hong Kong branch of the Bank uses Hong Kong dollar ( HKD ) as its functional currency and translates into RMB when preparing the fi nancial statements. The consolidated fi nancial statements are presented in RMB. Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign currency monetary items are translated using the exchange rate at year end. Except for monetary securities classified as available-for-sale, translation differences are recognised in profit or loss for the reporting period. Changes in the fair value of monetary securities denominated in foreign currency classifi ed as available for sale are analysed between translation differences resulting from changes in the amortised cost of the security and other changes in the carrying amount of the security. Translation differences related to changes in amortised cost are recognised in profi t or loss, and other changes in carrying amount are recognised in other comprehensive income. Non-monetary foreign currency items measured at historical cost are translated at the spot exchange rates prevailing on the transaction dates, and the amount denominated in the functional currency should not be changed. Nonmonetary foreign currency items measured at fair value should be translated at the spot exchange rates prevailing at the date of valuation. Translation differences should be recognized in revaluation reserve in equity for availablefor-sale fi nancial assets and in profi t and loss of current period for fi nancial assets and liabilities at fair value through profi t or loss.

194 2011 Annual Report Cash and cash equivalents SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) Cash and cash equivalents are cash, deposit available to pay at any time and investments with short maturity, high liquidity, easily change to certain amount of cash and low risk in valuation variation. Cash and cash equivalents include cash, non-statutory reserve deposits in central banks and due from and placements with other banks and fi nancial institutions within three months since acquisition date. 2.6 Precious metals Precious metals held by the Group are gold traded in domestic markets. They are initially recognized at cost and subsequently measured at fair value at the balance sheet date. Gains or losses arising from fair value variances are recognized in profi t and loss. 2.7 Financial instruments Recognition and derecognition The Group recognises a fi nancial asset or a fi nancial liability when the Group becomes a party to the contractual provision of fi nancial instrument. A fi nancial asset is derecognized when one of the following conditions is satisfi ed: (i) The rights to receive cash fl ows from the fi nancial asset expire; or (ii) The fi nancial asset has been transferred and Group has transferred substantially all the risks and rewards of the asset; or (iii) The Group has neither transferred nor retained substantially all the risks and rewards of ownership of the financial asset, but it has relinquished transferred control of the asset. Once fi nancial assets are derecognized, the difference between book value and the sum of considerations received and the accumulated change of fair value recorded in equity before should be recognized in profi t or loss. If the obligation relating to a fi nancial liability has been discharged or cancelled or has expired, the fi nancial liability is derecognised. If the existing fi nancial liability is replaced by the same creditor with another fi nancial liability that has terms with an almost completely different nature, or if almost all the terms of the existing liability are substantially revised, such replacement or revision is accounted for as derecognition of the original liability and recognition of a new liability, and the difference is recognised in profi t or loss of current period. All fi nancial assets in regular way trades are initially recognised and derecognised on the trade date. Regular way trades means purchasing or selling of fi nancial assets that require delivery of assets within the time frame generally established by regulation or convention in the market place. Trade date is the date that the Group promises to purchase or sale the fi nancial assets. Classifi cation and measurement of fi nancial assets Financial assets are, on initial recognition, classified into the following categories: financial assets at fair value through profi t or loss, held-to-maturity investments, loans and receivables, available-for-sale fi nancial assets. The Group determines the classification of the financial assets on initial recognition. When financial assets are recognised initially, they are measured at fair value. In the case of fi nancial assets at fair value through profi t or loss, relevant transaction costs are directly charged to the profit and loss of the current period; transaction costs relating to financial assets of other categories are included in the amounts initially recognised.

195 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) Financial assets at fair value through profi t or loss Financial assets at fair value through profit or loss include financial assets held for trading and financial assets designated at fair value through profi t or loss upon initial recognition. A fi nancial asset held for trading is the fi nancial asset that meets one of the following conditions: 1) the fi nancial asset is acquired for the purpose of selling in a short term; 2) the fi nancial asset is a part of a portfolio of identifi able fi nancial instruments that are collectively managed, and there is objective evidence indicating that the enterprise recently manages this portfolio for the purpose of short-term profi ts; 3) the fi nancial asset is a derivative fi nancial instrument except for a derivative that is a fi nancial guarantee contract or a designated and effective hedging instrument or linked with investments in equity instruments that do not have a quoted market price in an active market, and whose fair value cannot be reliably measured. These fi nancial assets are subsequently measured at fair value. Changes of fair value are recognised in profi t or loss of current period. Dividend received and interest accrued during the assets hold period and gains or loss arising from disposal are recognised in profit and loss of current period. During this year, the Group does not have fi nancial assets designated at fair value through profi t or loss upon initial recognition. Classifi cation and measurement of fi nancial assets (continued) Held-to-maturity investments Held-to-maturity securities are non-derivative financial assets with fixed or determinable payments and fixed maturities that management has both the positive intention and the ability to hold to maturity. Held-to-maturity investments shall be measured at amortised cost using the effective interest method. Except for specific situations such as disposal of insignificant amount of held-to-maturity investments at a date suffi ciently close to maturity date, if the Group fails to hold such investments through their maturities or reclassifi es a portion of held-to-maturity investments into available-for-sale prior to their maturities, the Group shall reclassify the entire held-to-maturity portfolio into available-for-sale investments at fair value and the Group is further prohibited to designate any investments as held-to-maturity during the following two fi scal years. Loan and receivables Loans and receivables are non-derivative fi nancial assets with fi xed or determinable payments that are not quoted in an active market. When the Group provides funds or services directly to customers and does not intend to sell the receivables, the Group classifi es such fi nancial assets as loans and receivables. Subsequently, such assets are measured at amortised cost using effective interest method. Available-for-sale fi nancial assets Available-for-sale financial assets are those non-derivative financial assets that are designated as available for sale or are not classifi ed as (a) loans and receivables, (b) held-to-maturity investments or (c) fi nancial assets at fair value through profi t or loss. After initial recognition, available-for-sale fi nancial assets are measured at fair value. For available-for-sale debt instruments, premium or discount is amortised using effective interest method and recognised as interest income or expense. A gain or loss arising from a change in the fair value of an available-for-sale fi nancial asset is recognised in a separate component of capital reserve, except for impairment losses and foreign exchange gains and losses resulted from monetary fi nancial assets, until the fi nancial asset is derecognised or determined to be impaired, at which time the cumulative gain or loss previously recognised in equity shall be removed from equity and recognised in the income statement. Interests and dividend relating to an available-for-sale fi nancial asset are recognised in the income statement for the period they relate to.

196 2011 Annual Report 195 SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) Equity instrument without quote price in an active market and whose fair value cannot be reliably measured, along with fi nancial instruments embedded and settled in such equity instrument, are measured at historical cost. Classifi cation and measurement of fi nancial liabilities The fi nancial liabilities of the Group are, upon initial recognition, classifi ed as fi nancial liabilities at fair value through profi t or loss and other fi nancial liabilities. The Group determines the classifi cation of fi nancial liabilities on initial recognition. For fi nancial liabilities at fair value through profi t or loss, transaction costs are directly recognised in the income statement of the current period, and transaction costs relating to other fi nancial liabilities are included in the initially recognised amount. Financial liabilities at fair value through profi t or loss Financial liabilities at fair value through profi t or loss include fi nancial liabilities held for trading and fi nancial liabilities designated at fair value through profit or loss upon initial recognition. A financial liability held for trading is the fi nancial liability that meets one of the following conditions: 1) the fi nancial liability is acquired for the purpose of repurchasing in a short term; 2) the fi nancial liability is a part of a portfolio of identifi able fi nancial instruments that are collectively managed, and there is objective evidence indicating that the enterprise recently manages this portfolio for the purpose of short-term profi ts; 3) the fi nancial liability is a derivative fi nancial instrument except for a derivative that is a fi nancial guarantee contract or a designated and effective hedging instrument or linked with investments in equity instruments that do not have a quoted market price in an active market, and whose fair value cannot be reliably measured. Such kind of fi nancial liabilities are measured at fair value subsequently. All realised or unrealised gains or losses on these fi nancial liabilities are recognised in the income statement of the current period. During this year, the Group doesn't have fi nancial liabilities designated at fair value through profi t or loss upon initial recognition. Other fi nancial liabilities After initial recognition, such fi nancial liabilities shall be measured at amortised costs using effective interest rate method. Fair value of fi nancial instruments Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction. The fair values of quoted investments in active markets are based on current bid prices. The fair value of a financial instrument for which the market is not active is determined by using a valuation technique. Valuation techniques include using recent arm's length market transactions between knowledgeable, willing parties, if available, reference to the current fair value of another instrument that is substantially the same, discounted cash fl ow analysis and option pricing models. When a valuation technique is used to establish the fair value of a fi nancial instrument, use market data as much as possible and avoid use of data that is particularly related to the Group. Impairment of fi nancial assets Except for financial assets at fair value through profit or loss, the Group assesses at each balance sheet date whether there is objective evidence that a fi nancial asset or group of fi nancial assets is impaired. A fi nancial asset or a group of fi nancial assets is impaired and impairment losses are incurred if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a loss event ) and that loss event (or events) has an impact on the estimated future cash fl ows of the fi nancial asset or group of financial assets that can be reliably estimated. The major criteria that the Group uses to determine that there is objective evidence of an impairment loss include:

197 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) Overdue of principle or interest; Signifi cant fi nancial diffi culty of the obligor (i.e.: deterioration of equity ratios, net income ratio); A breach of contract; Start bankruptcy procedure; The borrower market competition status deteriorated, etc. Financial assets carried at amortised cost If objective evidence shows that the fi nancial assets carried at amortised cost are impaired, the carrying amount of the fi nancial asset shall be reduced to the present value of the estimated future cash fl ows (excluding future credit losses that have not been incurred). The amount of reduction is recognised as an impairment loss in the income statement. Present value of estimated future cash flows is discounted at the financial asset s original effective interest rate and includes the value of any related collateral. If a fi nancial asset has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate. If a financial asset is individually significant, the Group assesses the asset individually for impairment, and recognises the amount of impairment in the income statement if there is objective evidence of impairment. For a fi nancial asset that is not individually significant, the Group includes the asset in a group of fi nancial assets with similar credit risk characteristics and collectively assess them for impairment. For fi nancial assets that are not impaired upon individual tests (including financial assets that are individually significant or insignificant), impairment tests should be conducted on them again by including them in the group of fi nancial assets. Assets for which an impairment loss is individually recognised will not be included in a collective assessment of impairment. When a fi nancial asset is uncollectible, it is written off against the related allowance on impairment losses. Such fi nancial assets are written off after all the necessary procedures have been completed and the amount of the loss has been determined. If, subsequent to the recognition of an impairment loss on a financial asset carried at amortised cost, there is objective evidence of a recovery in value of the fi nancial asset which can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed and recognised in the income statement. Available-for-sale fi nancial assets When there is objective evidence that the asset is impaired, the cumulative loss from declines in fair value that had been recognised directly in revaluation reserve of equity are transferred out, then recognised in the income statement. The amount of the cumulative loss that is transferred out and recognised in the income statement equals to the difference between its initial cost (net of any principal repayment and amortization) and current fair value, less any impairment loss on that fi nancial asset previously recognised in the income statement. If, in a subsequent period, the fair value of a debt instrument classified as available for sale increases and the increase can be related objectively to an event occurring after the impairment was recognised in the income statement, the previously recognised impairment loss shall be reversed with the amount of the reversal recognised in the income statement. Impairment losses recognised in the income statement for an equity instrument investment shall be reversed through other comprehensive income rather than profi t or loss.

198 2011 Annual Report 197 Offsetting fi nancial instruments SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) Financial assets and fi nancial liabilities are presented separately in the statement of fi nancial position, and they shall not be offset against each other; except for the followings: (i) The Group has the legal right to offset the amount, and the legal right is enforceable; (ii) The Group has the intention to settle on a net basis or realise the asset and settle the liability simultaneously. 2.8 Assets purchased under resale agreements ( Reverse repos ) and assets sold under repurchase agreements ( Repos ) Reverse repo refers to the agreement under which the Group purchases an asset with an obligation to resell it to the same counterparty at a pre-determined price at a specifi ed date. Reverse repo are recorded at the actual amount paid and presented in assets purchased under resale agreements. Repo refers to the agreement under which the Group sells an asset with an obligation to repurchase it from the same counterparty at a pre-determined price at a specifi ed date. Repos are recorded at the actual amounts received and presented in assets sold under repurchase agreements. The difference between resale and repurchase price is treated as interest income or expense and recognized in the agreement period with effective interest method. 2.9 Derivative financial instruments Derivative financial instruments are initially recognised at fair value on the date at which a derivative contract is sighed and are subsequently re-measured at fair value. Any gains or losses arising from changes in fair value on derivatives are taken to profi t or loss. Certain derivatives embedded in other financial instrument, they together become compound derivative financial instruments. When the related compound derivative financial instruments are not financial assets or liabilities designated as fair value through profi t or loss, those derivatives embedded in other fi nancial instruments should be treated as separated derivatives, when: (i) their risks and economic characteristics are not closely related to those of the host contract; (ii) the separate fi nancial instrument is a derivative itself. While certain derivative transactions are intended to provide effective economic hedges of specifi c interest rate and foreign exchange risks, they do not qualify for hedge accounting under the specifi c rules of IAS 39 and are therefore treated as derivatives held for trading, with changes in fair value reported as trading income. The Group has no derivative positions that are accounted for as hedges during this reporting period Investment in associates and joint ventures Associates refer to the Group has signifi cant infl uence on the investee enterprise, and joint ventures refer to the investee enterprise under Group s joint control. Joint control is the contractually agreed sharing of control over an economic activity, and exists only when the strategic fi nancial and operating decisions relating to the activity require the unanimous consent of the parties sharing control. Signifi cant infl uence is the power to participate in the fi nancial and operating policy decision process but does not control or jointly control those policy decisions.

199 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) For investment in associates and joint ventures, where the initial investment cost exceeds the interests in the fair values of the investee s identifi able net assets at the acquisition date, the difference is accounted for as initial cost. Where the initial investment cost is less than the interests in the fair values of the investee s identifi able net assets at the acquisition date, the difference shall be charged to the income statement for the current period, and the cost of investment shall be adjusted accordingly. The Group measures investment in associates and joint ventures at equity method. The Group's share of postacquisition profit or loss is recognised in the income statement, and its share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income with a corresponding adjustment to the carrying amount of the investment. When the Group's share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate. Carrying amount of investment in associates and joint ventures is reduced to the extent of the Group s share of the profi t or cash dividend declared to be distributed by the investee enterprise. Unrealized gain or loss other than assets impairment, from transactions between the Group and the investee enterprise, which is allocated to the Group based on pro-rata basis of shareholding, should be eliminated. On disposal of investment in associates and joint ventures, the difference between the proceeds and carrying amount shall be recognised in the income statement for the current period, and those that recorded in shareholder s equity shall be recognised in profi t or loss on a pro-rata basis. For investment in associates and joint ventures, when the recoverable amount is lower than its carrying amount, it should be reduced to the recoverable amount (Note 2.14) Property, plant and equipment Recognition and initial measurement Property, plant and equipment include buildings, constructions, motor vehicles, mainframe computers, computers, electrical equipments, offi ce equipments, software and leasehold improvement, etc. Property, plant and equipment shall be recognised only when the economic benefi ts associated with the asset will fl ow to the Group and the cost of the asset can be measured reliably. Subsequent expenditure incurred for property, plant and equipment that meet the recognition criteria shall be included in the cost of the asset, and carrying amount of the component of the asset that is replaced shall be derecognised. Otherwise, such expenditure shall be recognised in the income statement in the period in which it is incurred. Property, plant and equipment are initially measured at cost, comprising purchase price, relevant taxes and any directly attributable expenditure for bringing the asset to working condition for its intended use, such as delivery and handling costs, installation costs and other surcharge. Depreciation Depreciation is calculated on the straight-line method to write down the cost of such assets to their residual values over their estimated useful lives. For the impaired property, plant and equipment, the annual depreciation amount should be calculated on the basis of carrying amount less impairment and estimated useful life. The estimated useful lives, residual values and annual depreciation rates are as follows:

200 2011 Annual Report 199 SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) Category Estimated useful life Estimated residual value Annual depreciation rate Buildings and constructions 30 years 3-5% % Vehicles 5 years 3-5% % Mainframe computers 5 years 3-5% % Computers 3-5 years 3-5% % Electronic equipments 5 years 3-5% % Office equipments 5 years 3-5% % Software 5 years 0% 20% Expenditures incurred on major repairment and improvement of the rented fixed assets 5 years 0% 20% Residual values, useful lives and depreciation method are reviewed, and adjusted if appropriate, at each period end. When the recoverable amount is lower than its carrying amount, it should be reduced to the recoverable amount (Note 2.14) Constructions in progress Construction in progress is stated at cost. Cost comprises equipment cost, cost of construction, installation and other direct costs. Items classifi ed as construction in progress are transferred to other categories of property, plant and equipment when such assets are ready for their intended use, and the depreciation charge commences from the following month after such assets are transferred to property, plant and equipment. When the recoverable amount is lower than its carrying amount, it should be reduced to the recoverable amount (Note 2.14) Foreclosed asset When the Group s obligor use foreclosed asset to compensate the principal and interest of loan, foreclosed asset was initially recognised and measured at fair value and acquisition cost, then it was subsequently measured at lower of carrying amount or recoverable amount. Each balance sheet date, the Group will assess if a foreclosed asset has been impaired individually. If recoverable amount of foreclosed asset is lower than carrying amount, the difference should be charged into current period income statement. The difference that consideration received on disposal less related expenses with carrying amount was charged to current period income statement. Provision which has been made for foreclosed asset should be reversed once disposed Impairment of long term assets Assets such as property, plant and equipment, construction in progress, intangible assets with limited useful lives and investments in subsidiaries, joint ventures and affi liates, are undertaking impairment tests based on the impairment indicators on the balance sheet date. If the impairment test shows that the recoverable amount of such assets will fall below carrying value, the difference will be charged into current period income statement. The recoverable amount is the higher, of the fair value of the asset less related disposal cost and present value of expected future cash infl ows of such asset. Asset impairment is measured and recognized on each individual asset. If it is diffi cult to estimate the recoverable amount of each individual asset, then cash generating unit (CGU) in which such individual assets belongs to will be used to estimate the recoverable amount of CGU. A CGU is a minimum asset portfolio that can independently generate cash infl ow.

201 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) 2.15 Debts issued Debt issued is initially measured at fair value less directly transaction cost, then subsequently measured at amortised cost, using the effective interest rate method Provision Except for provision arising from business combination, provisions are recognised when: (i) The Group has a present legal or constructive obligation as a result of past events; (ii) It is probable that an outfl ow of resources will be required to settle the obligation; and (iii) The amount has been reliably estimated. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The Group will review the carrying amount at each balance sheet date. If there are evidences showing that the carrying amount cannot refl ect the present best estimates, the carrying amount should be adjusted accordingly Fiduciary activities Where the Group acts in a fi duciary capacity such as nominee, trustee or agent, for example, entrusted loan and fund fiduciary, assets arising thereon together with related undertakings to return such assets to customers are excluded from the fi nancial statements of the Group Financial guarantee contract Financial guarantee contract refers to an agreement made by a guarantor and an obligee that the guarantor shall perform the obligation according to the contract, when the obligor fails to perform his obligations as agreed. Financial guarantee contract is initially measured at fair value. Financial guarantee contracts which are not measured at fair value through profi t or loss, are subsequently measured at higher of, the best estimation of obligation that needs to be settled at balance sheet date and the difference between the amount of initial recognition less accumulated amortization based on revenue recognition principle, upon initial recognition Revenue and expense recognition Interest income and interest expense Interest income and expense are recognised in profi ts and losses of the current period on an accrual basis using the effective interest rate method. Effective interest rate method is a method used to calculate amortized cost and interest income or expense of fi nancial assets or fi nancial liabilities (include a set of fi nancial assets or fi nancial liabilities) by effective interest rate. The effective interest rate is the interest rate at which the estimated cash fl ows of fi nancial assets in the expected duration should be discounted to the present value. The computation of interest income takes consideration of contractual terms of the fi nancial assets as well as expenses and transaction costs comprising the effective interest rate, but excluding future credit losses. Fee and commission income Commission income is recognised when the services have been rendered and the proceeds can be reasonably estimated.

202 2011 Annual Report Employee benefits SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) Employee benefi ts are all forms of consideration given and other relevant expenditures incurred by the Group in exchange for service rendered by employees. In the accounting period in which an employee has rendered service to the Group, the Group will recognise the employee benefi ts payable as a liability. The Group have security plan set up by government agent including pension and medical insurance, housing accumulation fund and other social security plan according to regulations. According to the relevant regulations and contracts, insurance and housing fund should be paid to the social security agencies or insurance company according to a certain proportion of the total salary and no more than the limit, the spending should be included in the current profi ts and losses. In addition to social basic pension insurance, the staff can also volunteer to join the supplementary pension plans set up by the Bank. The Bank pays according to a certain proportion of the total amount of the employee salary to the supplementary pension plans and records it into the profi ts and losses of the current period. Except for the social security described above, the Group has no other major employee benefi ts promises Income taxes Income tax comprises current and deferred tax. Income tax is recognised as income or an expense and include in the income statement for the current period, except to the extent that the tax arises from a business combination or if it relates to a transaction or event which is recognised directly in equity. Current tax is the amount of income taxes payable in respect of the taxable profi t for the current period. Taxable profi t (tax loss) is the profi t (loss) for current period, determined in accordance with rules established by the taxation authorities. At the balance sheet date, current income tax liabilities (or assets) for the current and prior periods are measured at the amount expected to be paid to (or recovered from) the tax authorities according to the requirements of the tax laws. The deferred tax assets and deferred tax liabilities are recognized according to the differences (temporary differences) between the tax bases of assets and liabilities and their book values at the balance sheet date. A deferred tax asset is recognized if it can be offset with the amount of taxable loss in future years according to the tax law. No deferred tax liabilities should be recognised for the temporary differences raised from initial recognition of goodwill. The temporary differences from initial recognition of assets or liabilities which are not arise from a business combination, and neither affects the accounting profits nor affects the taxable income, should not be recognized as deferred tax assets and deferred tax liabilities. At the balance sheet date, deferred tax assets and liabilities are measured at the tax rates that are expected to be applied to the period when the asset is realized or the liability is settled, according to the requirements of tax laws. The amount of deferred tax assets is limited to the amount that is probably can be used to offset deductible temporary differences and deductible loss. In respect of taxable temporary differences associated with investments in subsidiaries, associates and joint ventures, deferred tax liabilities are recognised unless that the Group can control the timing of the reversal of temporary differences and it is probable that the temporary difference will not reverse in the foreseeable future. In respect of deductible temporary differences associated with investments in subsidiaries, associates and joint ventures, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will be reversed in the foreseeable future and taxable profi t will be available against which the temporary differences can be utilized.

203 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) The deferred tax assets and deferred tax liabilities should be stated as net amount when satisfy the following conditions at the same time: (i)the deferred tax assets and deferred tax liabilities are related to the same tax collection taxed by the same administration within the Group; (ii)the tax subject in the Group has legal right to net off the current income tax assets and current income tax liabilities Leases A fi nance lease is a lease that transfers in substance all the risks and rewards incident to ownership of an asset. An operating lease is a lease other than a finance lease. Lease payments under an operating lease are recognised by a lessee on a straight-line basis over the lease term, and either included in the cost of another related asset or charged to the income statement for the current period Segment reporting The Group identifi es operating segment on the basis of internal organization structure, management requirement and internal report system, and forms the segment report and discloses the segment information based on operating segment. Operating segment represents the segment satisfying the following conditions at the same time: (i) The segment produces income and expenses in daily activities; (ii) The Group s management regularly evaluates the performance of the segment, and decides to allocate resources to the segment; (iii) The Group can obtain financial position, operation performance, cash flow and other relevant accounting information of the segment. 3 Critical accounting estimates and judgements The Group makes estimates and assumptions based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Areas susceptible to significant changes in estimates and judgments, which affect the carrying value of assets and liabilities of next accounting period, are set out below. It is possible that actual results may require material adjustments to the estimates referred below. 3.1 Allowance for impairment losses on loans and advances The Group reviews its loan portfolios to assess impairment regularly. In determining whether an impairment loss should be recorded in the income statement, the Group makes judgments as to whether there is any observable evidence indicating that there is a measurable decrease in the estimated future cash fl ows from a portfolio of loans before the decrease can be identifi ed with an individual loan in that portfolio. This evidence may include observable data indicating that there has been an adverse change in the payment status of borrowers (e.g. payment delinquency or default), or national or local economic conditions that correlate with defaults on assets. Management makes estimation based on historical loss experience for assets with credit risk characteristics and objective evidence of impairment similar to those in the portfolio when scheduling its future cash fl ows.

204 2011 Annual Report Fair value of financial instruments SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) The fair values of financial instruments that are not quoted in active markets are determined by using valuation technique. Valuation technique includes using recent arm's length market transactions between knowledgeable, willing parties, if available, reference to the current fair value of another instrument that is substantially the same, discounted cash fl ow analysis and option pricing models. The Group uses market information in maximum extent. However, if market information is not available, management might estimate the credit risk, market fl uctuations and relevance of the Group and its counterpart. Changes in assumptions about these factors could affect reported fair value of fi nancial instruments. 3.3 Income taxes Significant estimates are required in determining the provision for income tax. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. In particular, the deductibility of certain items is subject to tax authority s approval. Where the fi nal tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. 3.4 Held-to-maturity investments Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity date that the Group has the positive intention and ability to hold to maturity. This classification requires signifi cant judgment. In making this judgment, the Group evaluates its intention and ability to hold such investments to maturity. If the Group fails to keep these investments to maturity, it will be required to reclassify the entire class as available-for-sale.

205 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) 4 SCOPE OF CONSOLIDATED fi nancial statements 4.1 The Bank s significant subsidiary is showed as follows Name of subsidiaries Registration address Registered capital (RMB'0000) Amount of investment (RMB 0000) Direct Equity % Voting % Noncontrolling interest (RMB'0000) Enterprise type The legal representative Organization code Mianzhu Pufa Rural Bank Co., Ltd. Mianzhu, Sichuan 5,000 2,750 55% 55% 3,355 Limited liability company Bing, Wang Liyang Pufa Rural Bank Co., Ltd. Liyang, Jiangsu 23,000 11,730 51% 51% 12,237 Shares limited liability company Guoyuan,Wu Gongyi Pufa Rural Bank Co., Ltd. Gongyi, Henan 5,000 2,550 51% 51% 3,883 Shares limited liability company Wanjun, Lii Fengxian Pufa Rural Bank Co., Ltd. Fengxian, Shanghai 5,000 3,450 69% 69% 2,005 Shares limited liability company Jianqiang, Huang Zixing Pufa Rural Bank Co., Ltd. Zixing, Hunan 15,800 8,058 51% 51% 8,890 Shares limited liability company Rongjun, Li Banan Pufa Rural Bank Co., Ltd. Banan, Chongqing 5,000 2,550 51% 51% 3,157 Shares limited liability company Xiaozhong, Wang Zouping Pufa Rural Bank Co., Ltd. Zouping, Shandong 17,200 8,772 51% 51% 8,852 Shares limited liability company Guangxin, Gen X Zezhou Pufa Rural Bank Co., Ltd. Jincheng, Shanxi 5,000 2,550 51% 51% 3,062 Shares limited liability company Jian, Li Ganjingzi Pufa Rural Bank Co., Ltd. Ganjingzi, Liaoning 5,000 2,550 51% 51% 2,402 Shares limited liability company Xinhao, Wang Hancheng Pufa Rural Bank Co., Ltd. Hancheng, Shaanxi 5,000 2,550 51% 51% 2,290 Shares limited liability company Zhihui, Yang Jiangyin Pufa Rural Bank Co., Ltd. Jiangyin, Jiangsu 10,000 5,100 51% 51% 5,000 Shares limited liability company Yongming, Ji Pingyang Pufa Rural Bank Co., Ltd. Pingyang, Zhejiang 10,000 5,100 51% 51% 4,907 Shares limited liability company Mingming, Zhong Xinchang Pufa Rural Bank Co., Ltd. Xinchang, Zhejiang 10,000 5,100 51% 51% 5,115 Shares limited liability company Zhengrong, Zhao ,810 65,155

206 2011 Annual Report 205 SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) All subsidiaries are acquired through initial establishment, and included in the consolidated fi nancial statements. All subsidiaries are commercial banks, whose operation scopes are the following: drawing public deposits; granting loans of short-term, mid-term and long-term nature; performing settlements; discounting bills and notes; performing interbank loans and deposits; bank card business; issuing, underwriting and cashing securities on behalf of governmental authorities; factoring and assignment of receivables and payables and other services as approved by PBOC. 4.2 New subsidiaries in current year Net assets as at 31 December 2011 Net gain for 2011 Pingyang Pufa Rural Bank Co., Ltd. 100, Xinchang Pufa Rural Bank Co., Ltd. 104,367 4,367 5 NOTES TO THE FINANCIAL STATEMENTS 5.1 Net interest income Group Year ended 31 December Bank Year ended 31 December Balance with central banks 4,917,049 3,337,599 4,904,355 3,333,096 Due from and placements with banks and other financial institutions 8,075,525 2,114,809 8,033,148 2,104,376 Loans and advances to customers Corporate loans 60,817,590 44,501,672 60,567,030 44,435,152 Individual loans 13,710,351 9,139,058 13,636,675 9,118,991 Discounted bills 2,425,263 1,598,809 2,170,067 1,561,982 Financial assets purchased under resale agreements 21,722,485 5,359,799 21,197,428 5,353,259 Bond investments 9,540,866 6,914,112 9,540,866 6,914,112 Others 12,108 1,074 12,108 1,074 Subtotal 121,221,237 72,966, ,061,677 72,822,042 Included: interest income from impaired financial assets 145, , , ,750 Due to and placements from banks and other financial institutions (20,632,562) (6,318,362) (20,463,578) (6,314,020) Due to central banks (7,355) (1,350) (5,760) (1,210) Due to customers (33,712,828) (20,446,898) (33,615,640) (20,421,433) Financial assets sold under repurchase agreements (4,519,426) (241,230) (3,996,545) (236,663) Debts issued (907,504) (755,582) (907,504) (755,582) Subtotal (59,779,675) (27,763,422) (58,989,027) (27,728,908) 61,441,562 45,203,510 61,072,650 45,093,134

207 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) 5 NOTES TO THE FINANCIAL STATEMENTS (Continued) 5.2 Net fee and commission income Group Bank Year ended 31 December Year ended 31 December Settlement and clearing fees 1,042, ,634 1,037, ,717 Agency commissions 1,107, ,935 1,096, ,910 Credit commitment fees 2,071, ,139 2,064, ,796 Bank card fees 960, , , ,273 Consulting and advisory fees 1,150,740 1,280,731 1,150,740 1,273,273 Others 871, , , ,731 Subtotal 7,204,809 4,461,471 7,181,091 4,452,700 (489,083) (412,925) (486,789) (412,855) 6,715,726 4,048,546 6,694,302 4,039, Net trading income Group and Bank Year ended 31 December Precious metals 117,267 (5,417) Trading securities (14,054) 9,681 Derivative financial instruments (825,471) (97,670) Total (722,258) (93,406) 5.4 Other operating income Group Bank Year ended 31 December Year ended 31 December Net gains on foreign exchange 242, , , ,420 Rental income 72,823 77,687 72,823 77,687 Net gains on disposal of foreclosed assets 4, ,363 4, ,363 Others 263, , , ,955 Total 583, , , ,425

208 2011 Annual Report NOTES TO THE FINANCIAL STATEMENTS (Continued) 5.5 Employee benefit expenses SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) Group Bank Year ended 31 December Year ended 31 December Salaries and bonuses 9,814,685 8,441,619 9,750,349 8,433,426 Welfare funds 233, , , ,098 Social insurance 1,194, ,429 1,191, ,001 Housing funds 462, , , ,288 Labour union funds and staff education funds 472, , , ,264 Total 12,178,040 10,124, ,107,102 10,085, Operating expenses Group Bank Year ended 31 December Year ended 31 December Rental expenses 1,266,959 1,029,407 1,255,676 1,020,240 Advertising expenses 1,256,734 1,134,569 1,256,734 1,134,569 General and administrative expenses 476, , , ,177 Cost of electronic equipment 434, , , ,213 Cost of estate management 156, , , ,218 Cost of currency transportation 129, , , ,446 Cost of vehicles and vessels use 127,287 96, ,287 96,034 Others 2,482,277 2,320,481 2,419,095 2,294,788 Total 6,331,019 5,517,485 6,254,440 5,481, Business tax and surcharges Group Bank Year ended 31 December Year ended 31 December Business tax 4,365,870 3,070,926 4,352,007 3,066,763 Urban maintenance and construction tax 303, , , ,908 Extra charges for education 229, , , ,144 Total 4,898,888 3,395,394 4,883,630 3,390,815

209 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) 5 NOTES TO THE FINANCIAL STATEMENTS (Continued) 5.8 Impairment charges Group Bank Year ended 31 December Year ended 31 December Loans and advances to customers 7,159,118 4,533,401 7,089,442 4,505,198 Other receivables 204,636 3, ,636 3,961 Available-for-sale financial assets - (4,629) - (4,629) Foreclosed assets 82,927 11,146 82,927 11,146 Interest receivable 53,294 44,301 53,294 44,301 Others - (761) - (761) Total 7,499,975 4,587,419 7,430,299 4,559, Income tax expense Group Bank Year ended 31 December Year ended 31 December Current income tax 9,283,112 6,099,232 9,235,704 6,093,334 Deferred tax (income)/expenses (798,937) 3,087 (797,544) 3,087 Total 8,484,175 6,102,319 8,438,160 6,096,421 Reconciliations between the Group s theoretical income tax expense and actual amount are as follows: Group Bank Year ended 31 December Year ended 31 December Profit before tax 35,839,287 25,280,906 35,646,113 25,272,096 Tax calculated at a tax rate of 25% 8,959,822 6,320,226 8,911,528 6,318,024 Differences of prior year tax clearance (14,403) (56,730) (14,403) (56,730) Tax effect of expenses that are not deductible for tax purposes 325, , , ,648 Tax effect arising from income not subject to tax (787,433) (572,447) (782,912) (518,521) Unrecognized tax loss from subsidiaries 227 4, Income tax expense 8,484,175 6,102,319 8,438,160 6,096, Earnings per share Basic earnings per share(eps) amount is calculated by dividing consolidated net profi t attributable to shareholders of the Bank by the weighted average number of ordinary shares outstanding during the year. There are no potential diluted ordinary shares in the Bank, so the basic EPS equals to the diluted fi gure.

210 2011 Annual Report 209 SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) Year ended 31 December Note 1 Net profit 27,285,981 19,177,209 Weighted average number of outstanding ordinary shares (thousand) 18,653,471 15,544,559 Basic and diluted EPS (RMB) Note 1: The Bank distributed share dividend in June 2011, and therefore the earnings per share for 2010 has been restated accordingly Cash and balances with central banks Group Bank Cash 5,648,021 4,924,527 5,603,272 4,897,736 Mandatory reserve deposits 307,862, ,013, ,666, ,857,154 Balances with central banks other than mandatory reserve deposits 52,978,762 68,156,410 52,572,730 67,701,248 Fiscal deposit in central banks 468, , , ,007 Total 366,957, ,248, ,310, ,610,145 The Group is required to place reserve deposits with the PBOC, which is forbidden to be used in the Group s ordinary business. The reserve rate for deposits denominated in RMB of the Bank is 19% at 31 December 2011 (31 December 2010: 16.5 %). The reserve rate for deposits denominated in foreign currencies of the Group is 5% at 31 December 2011 (31 December 2010: 5%) Due from and placements with other banks and financial institutions Group Bank Due from domestic banks 257,163,843 66,190, ,850,179 65,881,867 Due from overseas banks 10,712,639 3,348,846 10,712,639 3,348,846 Placements with domestic banks 104,746,813 26,527, ,736,813 26,527,931 Placements with overseas banks 5,734,485 2,486,534 5,734,485 2,486,534 Placements with domestic other financial institutions 934,000 2,239, ,000 2,239,000 Total 379,291, ,793, ,968, ,484, Financial assets held for trading Group and Bank RMB corporate bonds 3,347,336 - RMB bonds issued by policy banks 1,799,974 - RMB treasury bonds 371,410 - PBOC bills 348,121 - Total 5,866,841 -

211 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) There is no restriction in the Group s fi nancial assets held for trading to be turned into cash Derivative financial instruments Group and Bank Fair values Notional Amount Assets Liabilities Derivative financial instruments held for trading: Currency swap contracts 55,961, ,635 (301,356) Foreign-exchange forward contracts 46,044, ,181 (132,030) Interest-rate swap contracts 39,453,623 42,971 (1,068,997) Precious-metal forward contracts 3,712,055 - (12,646) Total 548,787 (1,515,029) Group and Bank Fair values Notional Amount Assets Liabilities Derivative financial instruments held for trading: Currency swap contracts 40,670, ,209 (308,888) Foreign-exchange forward contracts 18,826, ,025 (141,208) Interest-rate swap contracts 27,801, ,524 (721,987) Precious-metal forward contracts 936,520 5,591 - Total 1,033,349 (1,172,083) Notional amount of derivative fi nancial instruments just represents the amount of underlying asset or reference index upon which changes in the value of derivatives are measured. It doesn t represent the future cash fl ow or the current fair value, and therefore could not refl ect the credit risk and market risk faced by the Group. With the fl uctuating price of foreign exchange rates, interest rates, and the stock or futures fair value of derivatives may bring advantage (recognized as assets) or disadvantage (recognized as liabilities) impact to the Group, and the influence could fl uctuate largely in different period Financial assets purchased under resale agreements Group and Bank Bills under resale agreements 271,599, ,336,426 Bonds under resale agreements 9,910,200 37,445,718 Loans under resale agreements - 150,000 Total 281,509, ,932,144

212 2011 Annual Report Loans and advances to customers SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) Group Bank Corporate loans Normal loans 1,023,791, ,143,950 1,019,334, ,992,785 Trade finance 22,345,625 9,588,225 22,345,625 9,588,225 Discount bills 23,994,515 21,888,569 23,244,759 21,562,245 Individual loans Real estate mortgage 225,690, ,290, ,071, ,120,786 Credit card and overdraw 11,826,372 7,766,546 11,826,372 7,766,546 Others 23,788,145 18,811,129 22,940,778 18,332,270 1,331,436,044 1,146,489,301 1,324,763,756 1,143,362,857 Individual impairment allowances (2,222,442) (2,783,597) (2,222,442) (2,779,677) Collective impairment allowances (26,889,652) (19,592,714) (26,777,597) (19,563,641) Total impairment allowances (29,112,094) (22,376,311) (29,000,039) (22,343,318) 1,302,323,950 1,124,112,990 1,295,763,717 1,121,019, Loans and advances to customers listed by way of impairment assessment Group Collectively assessed nonimpaired loans Collectively assessed Impairment loans Individually assessed Subtotal As at 31 December 2011 Corporate loans 1,065,163,009 1,600,918 3,367,220 4,968,138 1,070,131,147 Individual loans 260,445, , , ,304,897 Impairment allowances (25,309,972) (1,579,680) (2,222,442) (3,802,122) (29,112,094) Net 1,300,298, ,218 1,144,778 2,024,996 1,302,323,950 As at 31 December 2010 Corporate loans 923,504,898 1,225,635 3,890,211 5,115, ,620,744 Individual loans 217,104, , , ,868,557 Impairment allowances (18,530,259) (1,062,455) (2,783,597) (3,846,052) (22,376,311) Net 1,122,079, ,218 1,106,614 2,033,832 1,124,112,990 Total

213 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) Bank Collectively assessed nonimpaired loans Collectively assessed Impaired loans Individually assessed Subtotal As at 31 December 2011 Corporate loans 1,059,957,166 1,600,918 3,367,220 4,968,138 1,064,925,304 Individual loans 258,979, , , ,838,452 Impairment allowances (25,197,917) (1,579,680) (2,222,442) (3,802,122) (29,000,039) Net 1,293,738, ,218 1,144,778 2,024,996 1,295,763,717 As at 31 December 2010 Corporate loans 921,027,609 1,225,635 3,890,011 5,115, ,143,255 Individual loans 216,455, , , ,219,602 Impairment allowances (18,501,186) (1,062,455) (2,779,677) (3,842,132) (22,343,318) Net 1,118,981, ,218 1,110,334 2,037,552 1,121,019, Loans and advances to customers listed by industry Group 31 December December 2010 Amount (%) Amount (%) Corporate loans Manufacturing 301,013, ,344, Wholesale and retail, catering 154,511, ,587, Real estate 115,118, ,295, Geological survey, irrigation 96,352, ,944, Transportation, warehouse and postal service 92,241, ,620, Social services 81,128, ,617, Construction 69,554, ,872, Electricity, gas and water supply 50,809, ,688, Mining 32,493, ,491, Education, culture, broadcasting 18,764, ,300, Agriculture, forestry, farming and fishery 8,012, ,653, Sanitation, sport and social welfare 4,873, ,665, Scientific research and comprehensive technological services 3,566, ,613, Others 17,696, ,038, ,046,136, ,732, Bank acceptance bills discount 11,833, ,937, Re-discount 11,204, ,789, Commercial acceptance bills discount 956, ,161, ,994, ,888, ,304, ,868, ,331,436, ,146,489, Total

214 2011 Annual Report 213 SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) Bank 31 December December 2010 Amount (%) Amount (%) Corporate loans Manufacturing 298,746, ,163, Wholesale and retail, catering 153,977, ,369, Real estate 115,118, ,290, Geological survey, irrigation 96,337, ,916, Transportation, warehouse and postal service 92,192, ,567, Social services 81,031, ,565, Construction 69,373, ,769, Electricity, gas and water supply 50,709, ,634, Mining 32,408, ,412, Education, culture, broadcasting 18,633, ,203, Agriculture, forestry, farming and fishery 7,590, ,405, Sanitation, sport and social welfare 4,747, ,629, Scientific research and comprehensive technological services 3,528, ,613, Others 17,285, ,038, ,041,680, ,581, Bank acceptance bills discount 11,123, ,774, Re-discount 11,164, ,658, Commercial acceptance bills discount 956, ,129, ,244, ,562, ,838, ,219, ,324,763, ,143,362, Loans and advances to customers listed by geography Group 31 December December 2010 Amount (%) Amount (%) Shanghai 173,384, ,930, Beijing 66,064, ,556, Sichuan Province 53,700, ,931, Tianjin 47,046, ,968, Shandong Province 63,021, ,494, Guangdong Province 81,448, ,686, Jiangsu Province 146,616, ,454, Henan Province 69,194, ,806, Zhejiang Province 211,264, ,167, Liaoning Province 77,438, ,555, Other districts 342,256, ,935, Total 1,331,436, ,146,489,

215 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) Bank 31 December December 2010 Amount (%) Amount (%) Shanghai 172,796, ,527, Beijing 66,064, ,556, Sichuan Province 53,414, ,729, Tianjin 47,046, ,968, Shandong Province 62,291, ,185, Guangdong Province 81,448, ,686, Jiangsu Province 145,344, ,700, Henan Province 68,297, ,219, Zhejiang Province 210,325, ,167, Liaoning Province 77,238, ,555, Other districts 340,495, ,064, Total 1,324,763, ,143,362, Loans and advances to customers listed by guarantee Group Bank 31 December December December December 2010 Collateral loans 522,317, ,988, ,934, ,440,967 Secured loans 400,149, ,123, ,426, ,254,125 Clean loans 282,388, ,571, ,391, ,235,291 Pledged loans 126,580, ,806, ,011, ,432,474 Total 1,331,436,044 1,146,489,301 1,324,763,756 1,143,362, Loans and advances to customers past due Group and Bank 31 December 2011 Past due up to Past due 90 days Past due 1 year 90 days -1 year -3 years Past due over (90 days included) (1 year included) (3 years included) 3 years Total Collateral loans 667, ,890 1,061, ,150 3,068,153 Secured loans 399, , , ,335 2,431,189 Clean loans 695,453 53, ,242 23, ,320 Pledged loans 33,210 97,170 14, , ,394 Total 1,796,103 1,128,662 2,171,121 1,694,170 6,790,056

216 2011 Annual Report 215 SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) Group 31 December 2010 Past due up to Past due 90 days Past due 1 year Past due over 90 days -1 year -3 years 3 years (90 days included) (1 year included) (3 years included) Total Collateral loans 111, ,773 1,176, ,710 2,382,212 Secured loans 19, ,377 1,209, ,696 2,460,135 Clean loans 410,977 21, ,525 10, ,780 Pledged loans 8, , , ,047 Total 550,336 1,078,268 2,650,346 1,518,224 5,797, Loans and advances to customers past due (Continued) Bank 31 December 2010 Past due up to Past due 90 days Past due 1 year Past due over 90 days -1 year -3 years 3 years (90 days included) (1 year included) (3 years included) Total Collateral loans 111, ,773 1,176, ,710 2,382,012 Secured loans 19, ,377 1,209, ,696 2,460,135 Clean loans 410,977 21, ,525 10, ,780 Pledged loans 8, , , ,047 Total 550,136 1,078,268 2,650,346 1,518,224 5,796, Allowance on impairment losses for loans and advances to customers Group Individually assessed Collectively assessed Total Individually assessed Collectively assessed Total Balance at beginning of the year 2,783,597 19,592,714 22,376,311 2,967,528 15,379,197 18,346,725 Accrual/reversal of impairment allowances for loans(note 5.8) (380,426) 7,539,544 7,159, ,655 4,391,746 4,533,401 Loans written off (186,180) (322,527) (508,707) (309,603) (110,125) (419,728) Recovery after written off 95, , , , ,663 Unwind of discount on allowances (90,118) (55,253) (145,371) (150,691) (69,059) (219,750) Balance at end of the year 2,222,442 26,889,652 29,112,094 2,783,597 19,592,714 22,376,311

217 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) Bank Individually assessed Collectively assessed Total Individually assessed Collectively assessed Total Balance at beginning of the year 2,779,677 19,563,641 22,343,318 2,963,608 15,378,327 18,341,935 Accrual/reversal of impairment allowances for loans(note 5.8) (376,506) 7,465,948 7,089, ,655 4,363,543 4,505,198 Loans written off (186,180) (322,527) (508,707) (309,603) (110,125) (419,728) Recovery after written off 95, , , , ,663 Unwind of discount on allowances (90,118) (55,253) (145,371) (150,691) (69,059) (219,750) Balance at end of the year 2,222,442 26,777,597 29,000,039 2,779,677 19,563,641 22,343, Available-for-sale financial assets Group and Bank 31 December December 2010 Bonds(at fair value) RMB corporate bonds 46,599,867 33,904,631 PBOC bills 43,148,040 18,234,584 RMB bonds issued by policy banks 34,217,723 27,758,425 RMB treasury bonds 12,795,495 14,932,112 Local government bonds 8,952,175 7,379,789 Foreign currency treasury bonds 1,020, ,985 RMB bonds issued by financial institutions 986,191 1,656,587 Other foreign currency bonds 209,289 97, ,929, ,142,632 Equity securities (at cost) 1,127, ,620 Total 149,056, ,910, Investment securities-held-to-maturity Group and Bank 31 December December 2010 RMB treasury bonds 70,531,903 48,522,336 RMB bonds issued by policy banks 42,848,894 38,822,617 Local government bonds 26,493,856 15,170,043 RMB corporate bonds 16,392,908 10,526,109 RMB bonds issued by financial institutions 1,864,913 5,059,312 Foreign currency corporate bonds 314, ,512 PBOC bills 88,535 25,127,707 Total 158,535, ,556,636

218 2011 Annual Report Investment securities-loans and receivables SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) Group and Bank 31 December December 2010 Bonds RMB bonds issued by financial institutions 4,675,956 1,660,478 RMB treasury bonds 1,685,111 2,046,644 RMB corporate bonds 429,819 - PBOC bills 965,242-7,756,128 3,707,122 Entrusted product 1,003,408 - Total 8,759,536 3,707, Investments in associates Group Movement Cost 31/12/2010 Net profit adjusted by equity method Other equity movement Exchange rate adjustment 31/12/2011 Share proportion Voting proportion First Sino Bank 363, ,818 93,000 (9,079) (3,000) 710,739 30% 30% Name Business nature Place of incorporation Legal representative Operation scope Registered capital Drawing public deposits; granting loans of short-term, mid-term and long-term nature; discounting bills and notes; buying government securities, financial securities, buying foreign currency securities other than shares; providing First Sino Bank Joint venture bank Shanghai Liu Xinyi letters of credit and guarantee, handling domestic and foreign settlements; trading foreign currencies, agency insurance, engaging in placement and bank card business; providing safe deposit box services; providing credit rating and consulting services; other business approved by CBRC. RMB 1,100,000,000 Assets as at 31 December 2011 ( 000) Liabilities as at 31 December 2011 ( 000) Net assets as at 31 December 2011 ( 000) 2011 operating income ( 000) 2011 net profit ( 000) Relationship Organization code 40,572,729 38,112,791 2,459, , ,224 Significant influence

219 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) 5.21 Investments in joint ventures Group Movement Cost 31/12/2010 Net profit adjusted by equity method 31/12/2011 Share proportion Voting proportion AXA SPDB Investment Managers Co., Ltd. 102,000 39,036 (20,534) 18,502 51% 51% Name Business nature Place of incorporation Legal representative Operation scope Registered capital AXA SPDB Investment Managers Co., Ltd. Fund Shanghai Jiang Mingsheng Securities investment funding, sales of fund, asset management and other business approved by CSRC. RMB 200,000,000 Assets as at 31 December 2011 ( 000) Liabilities as at 31 December 2011 ( 000) Net assets as at 31 December 2011 ( 000) 2011 operating income ( 000) 2011 net loss ( 000) Relationship Organization code 50,816 14,452 36,364 21,644 (40,279) Common Control According to the articles of association of AXA SPDB Investment Managers Co., Ltd., when 2/3 of the voting rights held by the shareholders' representatives passed then the special resolution can be passed, the special resolution including company s strategic plan, investment plan using owner s capital, annual fi nancial budget plan and fi nal fi nancial statement plan authorized to the board of directors, the profi t distribution plan and loss compensation plans, equity transfer and articles of association s revision. Thus the Group holds AXA SPDB Investment Managers Co., Ltd. 51% of the voting shares, but the Group together with the other shareholders control the company Property, plant and equipment Group 31 December 2010 Additions Disposals 31 December ,466,999 2,263,001 (510,120) 16,219,880 Land and buildings 7,405, ,196 (51,873) 8,003,761 Vehicles 312,257 62,246 (22,960) 351,543 Soft wares 478, ,206 (8,620) 597,038 Electronic computers and other equipments 3,596, ,262 (417,935) 4,133,133 Property improvement 2,674, ,091 (8,732) 3,134,405 5,920,674 1,327,820 (426,161) 6,822,333 Land and buildings 1,585, ,606 (14,170) 1,841,668 Vehicles 186,388 39,769 (22,228) 203,929 Soft wares 333,334 89,207 (8,620) 413,921 Electronic computers and other equipments 2,109, ,386 (376,360) 2,305,768 Property improvement 1,705, ,852 (4,783) 2,057,047

220 2011 Annual Report 219 SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) Group 31 December 2010 Additions Disposals 31 December ,546,325 9,397,547 Land and buildings 5,820,206 6,162,093 Transportations 125, ,614 Vehicles 145, ,117 Electronic computers and other equipments 1,487,064 1,827,365 Property improvement 968,068 1,077,358 The depreciation accrued during this year of the Group is RMB 1,327,820, Property, plant and equipment (Continued) Bank 31 December 2010 Additions Disposals 31 December ,417,457 2,238,622 (510,120) 16,145,959 Land and buildings 7,405, ,196 (51,873) 8,003,761 Vehicles 307,957 58,036 (22,960) 343,033 Soft wares 478, ,169 (8,620) 596,968 Electronic computers and other equipments 3,582, ,955 (417,935) 4,111,981 Property improvement 2,642, ,266 (8,732) 3,090,216 5,912,510 1,313,725 (426,162) 6,800,073 Land and buildings 1,585, ,606 (14,170) 1,841,668 Vehicles 186,022 38,530 (22,225) 202,327 Soft wares 333,330 89,203 (8,620) 413,913 Electronic computers and other equipments 2,107, ,106 (376,364) 2,298,882 Property improvement 1,700, ,280 (4,783) 2,043,283 8,504,947 9,345,886 Land and buildings 5,820,206 6,162,093 Vehicles 121, ,706 Soft wares 145, ,055 Electronic computers and other equipments 1,475,821 1,813,099 Property improvement 941,896 1,046,933 The depreciation accrued during this year of the Bank is RMB 1,313,725,000.

221 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) 5.23 Deferred tax assets The Group s movement in deferred tax assets is as follows: 2011 Balance at beginning of the year 3,772,723 Deferred tax credited to profit or loss (note 5.9) 798,937 Deferred tax charged to equity (301,801) Balance at end of the year 4,269, December December 2010 Deductible temporary differences Deferred tax assets Deductible temporary differences Deferred tax assets Impairment allowances for loans and other assets 14,169,546 3,542,387 9,969,522 2,492,381 Amortisation for long-term assets 22,620 5,655 19,917 4,979 Salaries payable 525, ,379 2,564, ,063 Fair value changes for available-for-sale financial assets 1,371, ,896 2,578, ,697 Fair value changes for precious metals 37,601 9, Fair value changes for derivative financial instruments 966, , Non-offset deferred tax assets 17,093,110 4,273,278 15,132,479 3,783,120 Taxable temporary differences Deferred tax liabilities Taxable temporary differences Deferred tax liabilities Fair value changes for financial assets hold for trading (13,676) (3,419) - - Fair value changes for derivative financial instruments - - (41,586) (10,397) Non-offset deferred tax liabilities (13,676) (3,419) (41,586) (10,397) Net deferred tax assets after offset 17,079,434 4,269,859 15,090,893 3,772, Deferred tax assets (Continued) The Bank s movement in deferred tax assets is as follows: 2011 Balance at beginning of the year 3,772,723 Deferred tax credited to profit or loss (note 5.9) 797,544 Deferred tax charged to equity (301,801) Balance at end of the year 4,268,466

222 2011 Annual Report 221 SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) 31 December December 2010 Deductible temporary differences Deferred tax assets Deductible temporary differences Deferred tax assets Impairment allowances for loans and other assets 14,169,546 3,542,387 9,969,522 2,492,381 Amortisation for long-term assets 22,620 5,655 19,917 4,979 Salaries payable 519, ,986 2,564, ,063 Fair value changes for available-for-sale financial assets 1,371, ,896 2,578, ,697 Fair value changes for precious metals 37,601 9, Fair value changes for derivative financial instruments 966, , Non-offset deferred tax assets 17,087,538 4,271,885 15,132,479 3,783,120 Taxable temporary differences Deferred tax liabilities Taxable temporary differences Deferred tax liabilities Fair value changes for financial assets hold for trading (13,676) (3,419) - - Fair value changes for derivative financial instruments - - (41,586) (10,397) Non-offset deferred tax liabilities (13,676) (3,419) (41,586) (10,397) Net deferred tax assets after offset 17,073,862 4,268,466 15,090,893 3,772, Other assets Group Bank 31 December 31 December Settlement and clearing accounts 1,646, ,455 1,646, ,410 Deposit for gold trading guaranty 900, , , ,589 Prepaid for constructions 1,163,743 1,141,782 1,163,743 1,139,398 Wealth management products (Note 1) - 2,100,000-2,100,000 Foreclosed assets (Note 2) 309, , , ,507 Prepaid rental expenses for land 206, , , ,831 Interest receivables 11,071,074 6,492,715 11,063,132 6,489,785 Sub-prime asset-based security - 153, ,414 Continuing involved assets - 153, ,414 Trading finance receivables - 1,945,775-1,945,775 Other receivable (Note 3) 812,556 1,259, ,787 1,257,104 Other long-term assets 196, , , ,549 Total 16,306,639 15,040,826 16,284,319 15,032,776 Note 1: Wealth management products The Group records cash received from issuing wealth management products which the Group guarantees the safety of principal and related assets obtained from the investment of these cash in the financial statements. The Group records received cash as other liabilities, and assets obtained according to its nature. If assets obtained are investments in trust products, they are recorded as other assets. Note 2: Foreclosed assets

223 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) Group and Bank 31 December December 2010 Original value Provision Net value Original value Provision Net value Real estate 907,259 (623,438) 283, ,392 (539,119) 311,273 Equity share 67,110 (41,249) 25,861 35,383 (18,149) 17,234 Others ,303 (13,303) - Total 974,369 (664,687) 309, ,078 (570,571) 328,507 The foreclosed assets will be disposed once conditions are met after balance sheet date Other assets (Continued) Note 3 Other receivable Group Bank As at 31 December As at 31 December Within 1 year 848,930 1,274, ,161 1,272,230 1 to 2 years 429, , , ,084 2 to 3 years 143, , , ,032 Over 3 years 245,650 64, ,650 64,498 1,667,912 1,931,093 1,659,143 1,928,844 Less: Impairment (855,356) (671,740) (855,356) (671,740) Net 812,556 1,259, ,787 1,257, Due to and placements from other banks and financial institutions Group Bank 31 December 31 December Due to domestic banks 328,062, ,312, ,270, ,834,329 Due to other domestic financial institutions 109,074,407 50,326, ,073,417 50,295,508 Due to overseas banks 2,275, ,072 2,275, ,072 Due to other overseas financial institutions 1,495,044-1,495,044 - Placements from domestic banks 66,970,025 14,118,450 66,970,025 14,118,450 Placements from overseas banks - 296, ,695 Total 507,878, ,233, ,084, ,725,054

224 2011 Annual Report Financial assets sold under repurchase agreements SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) Group Bank 31 December 31 December Bills sold under repurchase agreements 9,997,894 2,136,846 9,932,773 2,085,846 Bonds sold under repurchase agreements 76,021,675 14,826,625 76,021,675 14,826,625 Total 86,019,569 16,963,471 85,954,448 16,912, Due to customers Group Bank 31 December 31 December Current deposits -Corporate 582,969, ,228, ,201, ,676,119 -Individual 86,572,289 83,035,127 85,829,141 82,657,535 Time deposits -Corporate 647,712, ,012, ,307, ,923,436 -Individual 236,345, ,086, ,523, ,714,631 Pledged deposits 264,050, ,860, ,603, ,418,033 Treasury deposits 30,780,000 10,000,000 30,780,000 10,000,000 Other deposits 2,625,136 3,236,118 2,586,756 3,233,615 Total 1,851,055,121 1,640,459,532 1,840,832,529 1,635,623, Debts issued Group and Bank 31 December SPDB subordinated bond(note 1) - 2,600, SPDB subordinated bond (note 2) 6,000,000 6,000, SPDB subordinated bond (note 3) 8,200,000 8,200, SPDB subordinated bond (note 4) 18,400,000 - Total 32,600,000 16,800,000 Note 1: On 15 June 2006, the Bank issued subordinated debts of RMB2.6 billion in the interbank bonds market. The tenor of the debts is 10 years and the Bank has an option to early redeem part of or all the debts at the end of the fi fth year at par. The Bank redeemed all the subordinated debts on 30 June Note 2: On 28 December 2007, the Bank issued RMB6 billion subordinated debts via public market, including RMB1 billion fixed rate subordinated debts and RMB5 billion fl oating rate subordinated debts. Fixed rate subordinated debts have a tenor of ten years and the Bank has an option to early redeem part of or all the bonds at the end of the fi fth year at par. The fi xed rate is 6.0% during the fi rst 5 years, and the rate change to 9% for the next 5 years. Floating rate subordinated debts have a tenor of ten years and the Bank has an option to early redeem part of or all the bonds at the end of the fi fth year at par. The coupon rate is basic rate plus basic spread. Basic rate equals to one-year lump sum time deposit rate issued by PBOC on the date of interest calculation. The basic spread rate during the first 5 years is 1.8% and the rate will change to 4.8% in the next 5 years. Note 3: On 26 December 2008, the Bank issued RMB8.2 billion subordinated debts in the interbank bonds market. The subordinated debts have a tenor of ten years and the Bank has an option to early redeem part of or all the bonds at the end of the fi fth year at par. The rate of the subordinated debts in the fi rst 5 years is 3.95%, and the rate will change to 6.95% in the next 5 years. Note 4: On 11 October 2011, the Bank issued RMB18.4 billion subordinated debts in the interbank bonds market. The subordinated debts have a tenor of fi fteen years and the Bank has an option to early redeem part of or all the bonds at the end of the tenth year at par. The coupon rate is 6.15%.

225 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) 5.29 Other liabilities Group Bank 31 December 31 December Interest payable 20,278,588 11,753,812 20,245,022 11,745,295 Staff benefits payable 6,853,628 6,856,610 6,817,140 6,836,227 Wealth management products (Note 5.24) 15,713,540 6,752,100 15,713,540 6,752,100 Settlement and clearing accounts 4,649,723 2,585,500 4,649,723 2,585,130 Business and other tax payable 1,634,102 1,188,629 1,628,625 1,186,965 Withholding individual income tax 836, , , ,616 Re-credit funds 456, , , ,293 Deferred revenue 207,074 3,720, ,074 3,720,808 Fiscal account suspense 118, , , ,141 Dormant account balance 102, , , ,762 Prepaid expense 26,006 67,231 26,006 67,231 Promissory notes (Note 1) - 1,631,426-1,631,426 Continuing involved liabilities - 153, ,414 Others 1,116,364 1,570,244 1,086,807 1,557,748 Total 51,994,264 37,671,736 51,888,770 37,628,156 Note 1: The promissory notes are reclassified to due to customers in order to meet the requirement change from CBRC in Share capital The share capital of the Bank are all issued and paid in full ordinary shares, par value is RMB1 per share Opening balance Percentage Share dividend Increase issues Share transferred from restricted in trading to nonrestricted in trading Closing balance Percentage Shares with trading restrictions - Shares with trading restrictions - Shares owned by State-owned legal persons - Other domestic-owned shares ,869, % 860, ,730, % Including: Shares owned by domestic legal persons Shares owned by domestic natural persons 2,869, % 860, ,730, %

226 2011 Annual Report 225 SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) Shares owned by Foreign investments Opening balance Percentage Share dividend Increase issues Share transferred from restricted in trading to nonrestricted in trading Closing balance Percentage Including: Shares owned by foreign legal persons Shares owned by foreign natural persons Total shares with trading restrictions Shares without trading restrictions - Ordinary shares quoted in RMB - Domestic listed foreign shares - Overseas listed foreign shares ,869, % 860, ,730, % 11,479, % 3,443, ,922, % Others Total shares without trading restrictions 11,479, % 3,443, ,922, % Total shares 14,348, % 4,304, ,653, % Pursuant to the resolution passed on the 2010 annual general meeting of shareholders, a dividend consisting of three shares per 10 shares was proposed with the number of total shares being 14,348,824,000. After the appropriation, the total number of shares summed up to 18,653,471,000. The capital has been verifi ed by Ernst & Young Hua Ming CPAs with the issuance of report of Ernst & Young Hua Ming (2011) Yan Zi _B01.

227 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) 2010 Opening balance Percentage Share dividend Increase issues Share transferred from restricted in trading to non-restricted in trading Closing balance Percentage Shares with trading restrictions - Shares with trading restrictions - Shares owned by State-owned legal persons - Other domestic-owned shares , % 63,374 - (274,621) , % 207,874 2,869,765 (900,786) 2,869, % Including: Shared owned by domestic legal persons Shared owned by domestic natural person - Shares owned by Foreign investments 601, % 180,358 2,869,765 (781,550) 2,869, % 91, % 27,516 - (119,236) - - Including: Shares owned by foreign legal persons Shares owned by foreign natural persons Total shares with trading restrictions Shares without trading restrictions - Ordinary shares quoted in RMB - Domestic listed foreign shares - Overseas listed foreign shares , % 271,248 2,869,765 (1,175,407) 2,869, % 7,925, % 2,377,765-1,175,407 11,479, % Others Total shares without trading restrictions 7,925, % 2,377,765-1,175,407 11,479, % Total shares 8,830, % 2,649,013 2,869,765-14,348, %

228 2011 Annual Report Capital surplus SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) The Group 31 December 2010 Increase Decrease 31 December 2011 Excess of contributed capital 60,568, ,568,141 Other capital surplus Changes of invested companies equity (17,194) - (9,079) (26,273) Others 22, ,319 Total 60,573,266 - (9,079) 60,564, December 2009 Increase Decrease 31 December 2010 Excess of contributed capital 24,238,441 36,329,700-60,568,141 Other capital surplus Changes of invested companies equity (9,501) - (7,693) (17,194) Others 21, ,319 Total 24,250,511 36,330,448 (7,693) 60,573,266 The Bank 31 December 2010 Increase Decrease 31 December 2011 Excess of contributed capital 60,568, ,568,141 Other capital surplus Changes of invested companies equity (17,194) - (9,079) (26,273) Others 21, ,571 Total 60,572,518 - (9,079) 60,563, December 2009 Increase Decrease 31 December 2010 Excess of contributed capital 24,238,441 36,329,700-60,568,141 Other capital surplus Changes of the invested company s equity under the equity method (9,501) - (7,693) (17,194) Others 21, ,571 Total 24,250,511 36,329,700 (7,693) 60,572,518

229 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) 5.32 Surplus reserves The Group and the Bank 31 December 2010 Increase 31 December 2011 Statutory surplus reserve 7,350,244 2,720,795 10,071,039 Discretionary surplus reserve 7,899,569 3,835,136 11,734,705 Total 15,249,813 6,555,931 21,805, December 2009 Increase 31 December 2010 Statutory surplus reserve 5,432,677 1,917,567 7,350,244 Discretionary surplus reserve 5,255,899 2,643,670 7,899,569 Total 10,688,576 4,561,237 15,249,813 Pursuant to related regulations, the Bank shall make for statutory surplus reserve amounting to 10% of net profi t until accumulated statutory surplus reserve reaches 50% of share capital. After appropriation is made to the statutory surplus reserve, the Bank can appropriate the discretionary surplus reserve General risk reserve The Group and the Bank 31 December 2010 Increase 31 December 2011 General risk reserve 9,500,000 9,200,000 18,700, December 2009 Increase 31 December 2010 General risk reserve 6,900,000 2,600,000 9,500,000 Pursuant to Circulars No.49 and No.90 issued by MOF in 2005 (the MOF Circulars ), effective from 17 May, 2005 and 5 September 2005 respectively, banks and certain other financial institutions in the PRC, are required to maintain adequate allowances for impairment losses against their risk assets. In addition, a general risk reserve should be established through the appropriation of retained earnings. This general reserve should form part of the shareholders equity of fi nancial institutions. As a guiding principle, the balance of general risk reserve should not be less than 1% of the aggregate amount of all risk assets.

230 2011 Annual Report Retained earnings SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) The Group Amount Percentage Amount Percentage Opening balance of retained earnings 25,258,526 17,216,074 Plus: Net profit attributed to the Bank' s shareholders 27,285,981 19,177,209 Less: Appropriations to statutory surplus reserve Appropriations to discretionary surplus reserve Appropriations to general risk reserve (2,720,795) 10.00% (1,917,567) 10.00% (3,835,136) 20.00% (2,643,670) 20.00% (9,200,000) (2,600,000) Dividends on ordinary shares (2,295,811) (1,324,507) Dividends transferred to share capital (4,304,647) (2,649,013) Closing balance of retained earnings 30,188,118 25,258,526 As at 31 December 2011, retained earnings of the Group include 1.14 million of subsidiaries' statutory reserve attributed to parent company (31 December 2010: 0), of which the amount accrued in 2011 is 1.14m (2010:0) The Bank Amount Percentage Amount Percentage Opening balance of retained earnings 25,258,928 17,218,010 Plus: Net profit 27,207,953 19,175,675 Less: Appropriations to statutory surplus reserve Appropriations to discretionary surplus reserve Appropriations to general risk reserve (2,720,795) 10.00% (1,917,567) 10.00% (3,835,136) 20.00% (2,643,670) 20.00% (9,200,000) (2,600,000) Dividends on ordinary shares (2,295,811) (1,324,507) Dividends transferred to share capital (4,304,647) (2,649,013) Closing balance of retained earnings 30,110,492 25,258,928 Pursuant to the resolution of 2010 annual general meeting of shareholders on 28 April 2011, besides made 10% of statutory reserve from net profit, the Bank made 20% of discretionary surplus reserve from net profit of RMB 3,835,136 thousands, made general risk reserve of RMB 9.2 billion, and distributes 3 shares and cash dividend of RMB 1.6 (before tax) for each 10 shares to all shareholders. The total distributed dividend amounted to RMB 4,304,647 thousands.

231 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) Besides made 10% of statutory reserve from net profi t for 2011, the resolution on 2011 board of directors meeting on 14 March 2012 proposes that the Bank made 20% of discretionary surplus reserve from net profi t of RMB 5,441,590 thousands, made general risk reserve of RMB 4.35 billion, and distributed cash dividend of RMB 3 (before tax) for each 10 shares to all shareholders. The total distributed dividend amounted to RMB 5,596,041 thousands. Above resolution is pending for approval of shareholders meeting Non-controlling interest Non-controlling interest of the Group is as follows: 31 December December 2010 Mianzhu SPD Rural Bank Co., Ltd. 33,552 27,681 Liyang SPD Rural Bank Co., Ltd. 122,369 26,315 Gongyi SPD Rural Bank Co., Ltd. 38,835 26,327 Fengxian SPD Rural Bank Co., Ltd. 20,049 15,821 Zixing SPD Rural Bank Co., Ltd. 88,899 26,262 Banan Chongqing SPD Rural Bank Co., Ltd. 31,571 26,206 Zouping SPD Rural Bank Co., Ltd. 88,518 22,070 Zezhou SPD Rural Bank Co., Ltd. 30,623 22,483 Ganjingzi Dalian SPD Rural Bank Co., Ltd. 24,018 21,992 Hancheng SPD Rural Bank Co., Ltd. 22,903 22,870 Jiangyin SPD Rural Bank Co., Ltd. 49,996 45,487 Pingyang SPD Rural Bank Co., Ltd. 49,073 - Xinchang SPD Rural Bank Co., Ltd. 51,139 - Total 651, ,514

232 2011 Annual Report 231 SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) 6 SEGMENT REPORTING Management reviews the performance of the Group based on the branches and subsidiaries in different economic region. The branches mainly provide service for the local customers and a few clients in other region, so business division are distinguished based on the location of the assets. The operating segments principle business is providing customers with various commercial banking services and investment business, including accepting public deposits and granting commercial loans, discounting bills, trade financing, lending and borrowing in interbank money market and securities investment, etc. Shanghai segment in this segment report includes head offi ce, offshore department and Shanghai branch Shanghai Beijing Sichuan Province Tianjin Shandong Province Guangdong Province Jiangsu Province Henan Province Zhejiang Province Liaoning Province Other districts of PRC Inter branch offset Total Interest income 135,637,813 10,960,132 6,935,752 10,408,086 7,286,810 16,840,001 26,014,504 9,571,556 31,936,827 11,777,927 62,707,406 (208,855,577) 121,221,237 Including: 25,432,185 4,341,680 3,741,250 6,914,981 4,139,651 8,474,303 7,974,811 4,771,847 13,339,000 7,522,252 34,569, ,221,237 External interest income Internal interest income 110,205,628 6,618,452 3,194,502 3,493,105 3,147,159 8,365,698 18,039,693 4,799,709 18,597,827 4,255,675 28,138,129 (208,855,577) - Interest expense (125,583,163) (8,022,353) (4,864,604) (7,809,523) (4,877,034) (12,776,668) (20,121,185) (6,241,621) (23,129,132) (8,524,916) (46,685,053) 208,855,577 (59,779,675) Including: (15,626,494) (3,081,775) (2,001,180) (2,296,507) (1,501,185) (5,071,341) (3,048,762) (2,150,012) (5,275,713) (3,310,250) (16,416,456) - (59,779,675) External interest expense Internal interest expense (109,956,669) (4,940,578) (2,863,424) (5,513,016) (3,375,849) (7,705,327) (17,072,423) (4,091,609) (17,853,419) (5,214,666) (30,268,597) 208,855,577 - Net interest income 10,054,650 2,937,779 2,071,148 2,598,563 2,409,776 4,063,333 5,893,319 3,329,935 8,807,695 3,253,011 16,022,353-61,441,562 Net fee and commission income 1,468, , , , , , , , , ,387 1,663,311-6,715,726 Dividend income 49, ,510 Net trading income (719,771) (2,487) - (722,258) Net losses on disposal of investment securities (65,140) (65,140) Other operating income 7,791 66,280 8,540 26,381 36,397 35,205 68,633 13, ,172 37, , ,163

233 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) 6 SEGMENT REPORTING (Continued) 2011 Shanghai Beijing Sichuan Province Tianjin Shandong Province Guangdong Province Jiangsu Province Henan Province Zhejiang Province Liaoning Province Other districts of PRC Inter branch offset Total Staff expenses (4,272,153) (484,450) (268,393) (352,596) (363,401) (742,149) (880,460) (468,451) (1,433,646) (537,522) (2,374,819) - (12,178,040) Operating expenses (1,769,363) (471,865) (96,635) (147,606) (243,732) (456,471) (524,674) (263,283) (622,950) (309,741) (1,424,699) - (6,331,019) Depreciation expenses for property and equipment (420,347) (68,536) (26,177) (35,796) (43,488) (85,753) (100,658) (52,297) (147,234) (59,846) (287,688) - (1,327,820) Business tax and surcharges (644,176) (222,062) (237,033) (168,546) (236,053) (293,606) (503,562) (244,800) (840,740) (275,843) (1,232,467) - (4,898,888) Impairment charges (1,045,110) (371,293) (238,471) (294,271) (335,812) (563,872) (798,050) (464,290) (1,288,351) (421,839) (1,678,616) - (7,499,975) Share of profits of associates 93, ,000 Share of profits of joint ventures (20,534) (20,534) Profit before tax 2,716,809 1,615,602 1,489,907 1,806,483 1,556,119 2,573,831 3,579,466 2,137,206 5,577,246 1,954,427 10,832,191-35,839, December 2011 Shanghai Beijing Sichuan Province Tianjin Shandong Province Guangdong Province Jiangsu Province Henan Province Zhejiang Province Liaoning Province Other districts of PRC Total Loans and advances to customers 161,330,675 65,234,643 52,716,899 46,288,179 61,360,320 80,029, ,190,658 67,036, ,531,772 76,102, ,502,508 1,302,323,950 Total Assets 597,827, ,225,662 84,876, ,867,953 88,376, ,466, ,877, ,515, ,443, ,250, ,966,773 2,684,693,689 Due to customers 361,223, ,536,628 76,102,207 65,093,236 74,646, ,278, ,958, ,694, ,338,290 96,836, ,347,594 1,851,055,121 Total liabilities 486,582, ,385,942 83,269, ,842,605 86,742, ,605, ,998, ,246, ,662, ,144, ,670,809 2,535,150,909 Total Equity 111,244,939 1,839,720 1,606,550 2,025,348 1,634,065 2,861,550 3,878,830 2,268,622 5,781,614 2,105,578 14,295, ,542,780

234 2011 Annual Report 233 SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) 2010 Shanghai Beijing Sichuan Province Tianjin Shandong Province Guangdong Province Jiangsu Province Henan Province Zhejiang Province Liaoning Province Other districts of PRC Inter branch offset Total Interest income 89,935,198 7,636,469 4,111,347 5,509,548 4,583,314 9,558,422 17,989,051 6,307,106 22,595,745 6,855,149 31,734,864 (133,849,281) 72,966,932 Including: 17,324,498 2,590,886 2,081,349 3,351,696 2,634,126 3,700,601 5,786,607 3,223,466 9,918,769 3,863,615 18,491,319-72,966,932 External interest income Internal interest income 72,610,700 5,045,583 2,029,998 2,157,852 1,949,188 5,857,821 12,202,444 3,083,640 12,676,976 2,991,534 13,243,545 (133,849,281) - Interest expense (81,487,767) (5,484,229) (2,488,434) (3,762,335) (2,972,706) (6,747,675) (13,395,772) (3,722,402) (15,659,499) (4,564,364) (21,327,520) 133,849,281 (27,763,422) Including: (5,139,967) (2,055,604) (614,063) (1,104,123) (1,071,828) (2,685,030) (2,041,645) (1,096,808) (4,121,352) (1,654,161) (6,178,841) - (27,763,422) External interest expense Internal interest expense (76,347,800) (3,428,625) (1,874,371) (2,658,212) (1,900,878) (4,062,645) (11,354,127) (2,625,594) (11,538,147) (2,910,203) (15,148,679) 133,849,281 - Net interest income 8,447,431 2,152,240 1,622,913 1,747,213 1,610,608 2,810,747 4,593,279 2,584,704 6,936,246 2,290,785 10,407,344-45,203,510 Net fee and commission income 1,281, , , , , , , , , , ,944-4,048,546 Dividend income 48, ,726 Net trading income (93,406) (93,406) Net losses on disposal of investment securities (96,404) (96,404) Other operating income 136,897 57,340 7,489 40,089 46,573 42,021 98,205 14, ,409 63, , ,042

235 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) 2010 Shanghai Beijing Sichuan Province Tianjin Shandong Province Guangdong Province Jiangsu Province Henan Province Zhejiang Province Liaoning Province Other districts of PRC Inter branch offset Total Staff expenses (3,574,812) (401,333) (222,345) (292,101) (301,052) (614,819) (729,400) (388,079) (1,187,675) (445,299) (1,967,371) - (10,124,286) Operating expenses (1,836,748) (479,907) (275,346) (47,730) (177,362) (335,906) (594,141) (162,340) (316,265) (186,422) (1,105,318) - (5,517,485) Depreciation expenses (396,354) (68,580) (38,734) (26,355) (37,068) (73,734) (102,886) (42,780) (116,382) (49,019) (246,298) - (1,198,190) for property and equipment Business tax and surcharges (472,500) (161,269) (138,754) (121,418) (155,736) (197,046) (364,432) (174,295) (621,600) (199,956) (788,388) - (3,395,394) Impairment charges (691,222) (234,513) (141,500) (215,834) (197,188) (348,295) (529,487) (299,654) (709,352) (255,031) (965,343) - (4,587,419) Share of profits of associates 93, ,529 Share of profits of joint ventures (17,863) (17,863) Profit before tax 2,828,887 1,004, ,119 1,225, ,419 1,602,319 2,599,083 1,728,446 4,692,721 1,380,743 6,290,890-25,280, December 2010 Shanghai Beijing Sichuan Province Tianjin Shandong Province Guangdong Province Jiangsu Province Henan Province Zhejiang Province Liaoning Province Other districts of PRC Total Loans and advances to customers 146,254,823 57,753,818 45,133,135 40,217,441 51,479,813 68,924, ,814,861 61,202, ,455,408 69,183, ,693,673 1,124,112,990 Total Assets 568,010, ,460,019 67,226,710 99,961,641 68,388, ,956, ,440, ,009, ,409, ,313, ,233,474 2,191,410,774 Due to customers 309,089, ,890,295 64,915,130 64,188,398 63,501, ,419, ,343,719 98,716, ,308,156 93,988, ,098,569 1,640,459,532 Total liabilities 468,839, ,232,012 65,982,578 98,654,845 67,450, ,055, ,387, ,252, ,645, ,832, ,797,953 2,068,130,924 Total Equity 99,171,362 1,228,007 1,244,132 1,306, ,575 1,900,623 3,053,104 1,757,577 4,764,029 1,481,124 6,435, ,279,850

236 2011 Annual Report CONTINGENCIES AND COMMITMENTS 7.1 Credit commitment SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) Item 31 December December 2010 Bank acceptance 370,981, ,660,235 Acceptance under letter of credit 25,615,734 11,668,317 Guarantee issued 47,854,363 39,465,175 Letters of credit issued 198,422,064 46,317,238 Un-utilised credit card limit 42,752,585 28,437,580 Total 685,625, ,548, Commitment of certificate bond The Group is entrusted by State Bureau of Finance to issue certifi cate bond. Bondholders are eligible to claim cash in exchange for their bonds at any time before the maturity date and the Group is obliged to fulfil bondholder's claims. As at 31 December 2011, the Group has total obligation of RMB 2,713,032 thousands to fulfi l cash claims of the certifi cate bonds. (31 December 2010: RMB 3,265, 495 thousands) 7.3 Operating leases commitment According to the lease contract signed with the lessor, the minimum payable amount of operating leases commitment by the Group is the following: 31 December December 2010 Within 1 year 1,151, ,021 1 to 5 years 3,248,764 2,538,741 Over 5 years 1,417,149 1,023,118 Total 5,817,070 4,506, Capital commitment As at 31 December 2011, the major capital commitments of the Group which had been approved but not paid amounted to RMB 414,912 thousand (31 December 2010: RMB 200,153 thousand). 7.5 Fulfil of earlier commitment The Group has fulfilled the earlier commitments such as capital expenditure commitment and operating lease commitment as at 31 December Pending litigation As at 31 December 2011, the number of litigations the Group was charged as defendant and hadn t adjudicated yet was 20, and the amount involved was about RMB 151 million. The possibility of expected compensation was low, so the Group didn t recognize any provision (December 31, 2010: no provision recognized). 7.7 Equity investment commitment As at 31 December, 2011, the Group has signed contract with Silicon Valley Bank, about investing RMB 500 million to Pudong Development Silicon Valley Bank Co., LTD, which was under construction. The Group accounts for 50% of the registered capital of the company. (As at 31 December 2010: none).

237 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) 8 CUSTODY BUSINESS The Group provide safe-keeping, trust and entrusted loan business. The assets arose from these kinds of custody business weren t recorded in the financial statement. As at 31 December 2011, the balance of entrusted loan business was RMB billion. (As at 31 December 2010: RMB billion). 9 RELATED PARTIES 9.1 Related parties relationship If a party has the ability to control the other party or signifi cant impact on the other party's fi nancial and business decisions, or a party and other party under same control or common control, they shall be deemed as related parties. Individual or enterprise could all be related parties. 9.2 Subsidiary companies For information of subsidiaries, please refer to Note 4 Scope of consolidated financial statements. 9.3 Associates and joint ventures For information of associates and joint ventures, please refer to Note 5.20 Investments in associates and Note 5.21 Investments in joint ventures. 9.4 Others The other related parties of the Group include the key management personal (including directors, supervisors and senior management) and their close family members, companies controlled, common controlled or signifi cant infl uenced by key management personal and their close family members, principle shareholder who holds above 5% shares of the Bank. As at 31 December, 2011, the principle shareholders who hold above 5% shares of the Bank include: Ownership Main Business China Mobile Group Guangdong Company Limited 20.00% Mobil Communication Shanghai International Group Co., Ltd % Financial Service Shanghai International Trust Investment Company 5.232% Trust Business 9.5 Transaction between related parties The major transactions between the Group and related parties are loans and deposits. They are performed under the similar commercial terms as third parties. The amount of transaction with related parties is immaterial. Loan to related parties 31 December December 2010 Company significantly influenced by key management personal Bailian Group Co., Ltd. 60, ,000 Shanghai Bailian Group Co., Ltd ,000 Total 60, , Interest income 7,307 22,549

238 2011 Annual Report 237 Due from related parties SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) 31 December December 2010 First Sino Bank 129,702 14,580 AXA SPDB Investment Managers Co., Ltd. 27,931 40,862 Shanghai International Trust Investment Company 19,252 62,540 Total 176, , Interest expense 2,992 2,449 Deposit from related parties 31 December December 2010 China mobile Ltd. 17,319,224 1,998,790 Including: China Mobile Group Guangdong Company Limited 1,447, , Interest expense of deposit from related parties 222,717 8,801 Guarantee to related parties 31 December December 2010 Bailian Group Co., Ltd. 408, ,500 As at December 31, 2011, the Group provided 2 guarantees for Bailian Group, and these guarantees will be matured in 2012 and 2013 respectively. Bank acceptance to related parties 31 December December 2010 China mobile Ltd. - 20,000 Lending to related parties 31 December December 2010 First Sino Bank 94, Interest income

239 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) Derivative transactions with related parties 31 December 2011 Fair Value Notional amount Asset Liability First Sino Bank Currency Swap Contracts 1,446,700 - (11,909) Forward Exchange Contract 332,761 2,661 (246) 2,661 (12,155) 31 December 2010 Fair Value Notional amount Asset Liability First Sino Bank Currency Swap Contracts 147, (1,810) Forward Exchange Contract 319,008 1,035 (2,001) 1,833 (3,811) 9.5 Transaction between related parties (Continued) Commission income from related parties China mobile Ltd AXA SPDB Investment Managers Co., Ltd. 2,870 2,400 First Sino Bank Total 3,168 3,420 Operation expenses to related parties China mobile Ltd. 47,175 28,236 Compensation of key management personal According to the regulations of the relevant authorities, the 2011 annual compensation of Bank s directors, supervisors and other senior management persons is pending for approval. The Bank will formally implement and disclose it once it s approved. The accrued compensation of key management personal does not have signifi cant impact on the fi nancial statements of (The approved annual compensation of Bank s directors, supervisors and other senior management in 2010 is RMB 36,382 thousands.) 10 FINANCIAL RISK MANAGEMENT The Group exposes to a variety of financial risks. The Group analyses, evaluates, accepts and manages some degree of risks or risk portfolios. Managing risk is core to the financial institution, and the inherent risks are an inevitable consequence of business operation. The Group s aim is therefore to achieve an appropriate balance between risk and return and minimise potential adverse effects on the Group s fi nancial performance.

240 2011 Annual Report 239 SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) The Group designs risk management policies to identify and analyse these risks, set appropriate risk limits and control procedures, and monitor the risks and limits through information systems. The Group mainly exposes to fi nancial risks such as credit risk, market risk and liquidity risk. Market risk includes currency risk and interest rate risk. The board of directors of the Bank decides the Group's risk preference, then senior management of the Bank design risk management policy and procedures in the areas such as as credit risk, market risk and liquidity risk accordingly. After the policies and procedures being approved by the board of directors, they will be followed by related departments of the Bank Credit risk Credit risk represents the potential loss that may arise from the failure of a debtor to meet its obligation or commitment to the Bank. Credit risk is greater when counterparties are concentrated in one industry or geographic region, because a group of otherwise unrelated counterparties could be adversely affected in their ability to repay their obligations due to economic developments affecting their common industry or region. The Group has established relevant mechanism, and set limit of individual borrower s tolerable credit risk. The Group regularly monitors and reviews above credit risk limit. The Group conducts credit evaluation before granting facilities to individual customer, and regularly examines the credit limit. The means of credit risk management include obtaining collateral and guarantee. For credit commitments, the Group generally requires for guarantee deposits to mitigate credit risk Credit risk measurement Loans and credit risk measurement The Group uses a five-grade classification system to manage the quality of its loan portfolio. Such classification system is based on the Guidance on Credit Risk Classification (the Guidance ) issued by CBRC. Under the Group s own system and CBRC guidance, the Group classifi es its credit assets and off-balance sheet credit exposures into fi ve categories, which are namely pass, special mention, substandard, doubtful and loss. The last three categories are also classifi ed as non-performing assets. The core defi nition of the credit asset classifi cation is as follows: Rating Pass Special Mention Substandard Doubtful Loss Description of the rating The borrower is able to fulfil the contractual obligations, and there is no uncertainty that principal and interest can be paid on time. The borrower is able to make current due payments, but there exist some potential factors that may have negative impact on the borrower s future payments. The borrower's repayment ability has been impaired and its normal income cannot repay the loan principles and interest in full. Losses may be incurred to the Bank, even with the execution of guarantee. The borrower cannot repay the principal and the interest in full. Significant losses will be incurred even with the execution of guarantees. After taking into consideration all possible recovery actions and necessary legal proceedings, the principal and interest are unable to be collected, or only a very small portion of principal and interest can be collected.

241 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) Bonds and other bills The Bank manages the risk of bonds and other bills through controlling the scale, setting the access by issuer and rating and post management. For foreign currency securities, only those with rating (by Standard & Poor or equivalent agencies) equivalent to or higher than BBB can be invested. Investments in RMB debt securities are limited to those bonds with credit rating equivalent to or above AA- assigned by rating agencies recognised by PBOC. Due from and placements with banks and other fi nancial institutions Head office reviews and monitors the credit risk of individual financial institutions on regularly basis. Limits are placed for each individual bank or non-banking fi nancial institution which has business relationship with the Bank Risk limit management and mitigation policies The Bank manages and controls concentrations of credit risk wherever they are identifi ed in particular, to individual counterparty and group, and to industry and region. The Bank manages the credit risk by setting limit on one borrower, or groups of borrowers, and to geographical and industry segments. Such risks are monitored on a revolving basis and subject to an annual or more frequent review, when considered necessary. Exposure to credit risk is also managed through regular analysis of the ability of borrowers and potential borrowers to meet interest and capital repayment obligations and by changing these lending limits where appropriate. Some other specifi c control and mitigation measures are outlined below: Collateral The Bank employs a range of policies and practices to mitigate credit risk. The most traditional of these is taking of guarantee, including collateral, guarantee deposit and guarantor. The Bank implements guidelines on the acceptability of specifi c classes of collateral. The principal collateral for loans and advances are: Housing, land use right; Commercial assets, including premises, inventory and account receivables Financial instruments such as debt securities and stocks. Value of collateral is usually required to be assessed by professional valuer designated by the Group. When there is a sign indicating that the value of collateral impaired, the Group will review whether the collateral can cover the credit risk again. To mitigate the credit risk, the Group set limit on the loan-to-value ratio for difference types of collateral. The principal collateral types for corporate loans and retail loans are as follows: Collateral (Continued) Collateral Maximum loan-to-value ratio Time deposit 95%-100% PRC treasury bonds 90%-100% PRC financial institution bonds 90% Rights to collect fees 70% Rights to operate 60% Commercial building and factory 60% House 70% Land use rights 60%

242 2011 Annual Report 241 SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) For loans guaranteed by third parties, the Group will evaluate the fi nancial condition, credit history and ability to meet obligations of the guarantor on regular basis. Guarantee of fi nancial assets other than loans and advances is determined by the nature of the instruments. Debt securities, treasury and other eligible bills are generally unsecured, with the exception of asset-backed securities and similar instruments, which are secured by portfolios of fi nancial instruments. Derivative instruments The Group maintains strict credit limits on derivative transactions with counterparties. The Group mitigates credit risk associated with derivative instruments by requiring margin deposits from counterparties. Credit commitments The primary purpose of these instruments is to ensure that funds are available to a customer as required. Guarantees, acceptances and letters of credit, which represent irrevocable commitment that the Group will make payments in event that a customer cannot meet its obligations to third parties, carry the same credit risk as loans. In some cases, such as those situations where the amount of credit commitment exceeds the original credit limit, margin deposits are required to mitigate the credit risks. The Group's potential amount of credit risk is equivalent to the total amount of credit commitments Maximum exposure to credit risk without considering collateral or other credit enhancements Credit risk exposures relating to balance sheet items: Balance with central bank 361,309, ,324,233 Due from and placements with banks and other financial institutions 379,291, ,793,178 Financial assets held for trading 5,866,841 - Derivative financial assets 548,787 1,033,349 Financial assets purchased under repurchase agreements 281,509, ,932,144 Loans and advances to customers 1,302,323,950 1,124,112,990 Available-for-sale financial assets 147,929, ,142,632 Investment securities held-to-maturity 158,535, ,556,636 Investment securities loans and receivables 8,759,536 3,707,122 Other financial assets 13,529,835 12,948,126 Subtotal 2,659,604,173 2,170,550,410 Credit risk exposures relating to off-balance sheet items: Letter of credit 198,422,064 46,317,238 Acceptance under letter of credit 25,615,734 11,668,317 Guarantee issued 47,854,363 39,465,175 Acceptance 370,981, ,660,235 Un-utilised balances of credit card 42,752,585 28,437,580 Subtotal 685,625, ,548,545 Total 3,345,230,042 2,608,098,955

243 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) Table above represents the credit risk exposure to the Group, without taking account of any collateral held or other credit enhancements attached. For on-balance-sheet assets, the exposures set out above are based on carrying amounts as reported in the balance sheet Due from and placements with banks and other fi nancial institutions and fi nancial assets purchased under resale agreements Due from and placements with banks and other fi nancial institutions and fi nancial assets purchased under resale agreements are neither past due nor impaired. The credit risk can be evaluated referencing to counterpart s nature. Due from and placements with banks and financial institutions Domestic commercial bank 361,910,656 92,718,798 Overseas commercial bank 16,447,124 5,835,380 Domestic other financial institutions 934,000 2,239, ,291, ,793,178 Sufficient acceptance bills and bonds have been pledged for financial assets purchased under resale agreements, thus they were not exposed to signifi cant credit risk Loans and advances Neither past due nor impaired 1,322,814,002 1,139,007,668 Past due but not impaired 2,794,924 1,601,749 Impaired 5,827,118 5,879,884 Gross 1,331,436,044 1,146,489,301 Less: provision (29,112,094) (22,376,311) Net 1,302,323,950 1,124,112,990 Neither past due nor impaired The Group classifi es credit assets according to related regulations, including those promulgated by CBRC. Please refer to Note for more information. Loans and advances neither past due nor impaired are classified as following: Neither past due nor impaired (Continued) Corporate loans Individual loans Total Pass 1,056,776, ,260,891 1,315,037,871 Special mention 7,642, ,959 7,776,131 1,064,419, ,394,850 1,322,814, Pass 918,482, ,596,435 1,134,079,222 Special mention 4,853,677 74,769 4,928, ,336, ,671,204 1,139,007,668

244 2011 Annual Report 243 Past due but not impaired Past due up to 30 days SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) Past due days 31 December 2011 Past due days Past due over 90 days Total Corporate loans 375, ,622 26, , ,857 Individual loans 1,565, , ,332 28,950 2,051,067 1,941, , , ,418 2,794, December 2010 Past due up to 30 days Past due days Past due days Past due over 90 days Total Corporate loans 15, , , ,463 Individual loans 1,055, , ,089 7,751 1,433,286 1,070, , , ,130 1,601,749 The Group concludes these past due loans can be compensated through the operation of borrower, the payment of guarantor or disposal of collateral, so they are not recognized as impaired. Impaired 31 December December 2010 Corporate loans 4,968,138 5,115,846 Individual loans 858, ,038 5,827,118 5,879,884 Fair value of collateral was estimated by management based on the latest available external valuations and adjusted by taking into account the current experience and market situation. Valuation of the collateral will be considered when assessing the impairment of loans and advances. Loans and advances renegotiated Renegotiated loans represent the loans whose original contract repayment terms have been modifi ed as a result of the deterioration of borrowers fi nancial conditions or inability to repay the loans according to contractual terms. At 31 December 2011, net value of the renegotiated loans held by the Group amounted to RMB 83,785 thousands (31 December 2010: RMB 103,920 thousands) Investment securities The tables below analyse the Group s investment securities by external rating agencies, including S&P or equivalent agencies recognised by the PBOC. Foreign alrrenay securities Availablefor-sale financial assets Investment securitiesheld-to-maturity Total 31 December 2011 AAA 1,214, ,444 1,528,776 Not rated 15,308-15,308 1,229, ,444 1,544, December 2010 AAA 247, , ,286 Not rated 21,030-21, , , ,316

245 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) Investment securities RMB securities Financial assets held for trading Availablefor-sale financial assets Investment securitiesheld-to -maturity Investment securities- loans and receivables Total 31 December 2011 Mid and long term: AAA 483,520 36,944,513 14,050, ,862 51,808,683 AA-to AA+ 19,852 5,799,774 1,804,316 99,957 7,723,899 A-to A - - 1,620-1,620 Short-term: A-1 2,843,964 4,841,770 2,401,097-10,086,831 Not rated: Treasury bonds 371,410 12,795,495 70,531,903 1,685,111 85,383,919 PBOC bills 348,121 43,148,040 88, ,242 44,549,938 Bonds issued by policy banks 1,799,974 34,217,723 42,848,894-78,866,591 Bonds issued by financial institutions ,675,956 4,675,956 Local government bonds - 8,952,176 26,493,856-35,446,032 Entrusted product (Note1) ,003,408 1,003,408 5,866, ,699, ,221,009 8,759, ,546,877 Note 1: It represents benefi cial right of the entrusted product, which invests in entrusted loans, acquired by the Group Investment securities (Continued) Financial assets Availablefor-sale Investment securities- Investment securitiesheld financial for held-to loans and RMB securities trading assets -maturity receivables Total 31 December 2010 Mid and long term: AAA - 29,120,242 12,035,686-41,155,928 AA-to AA+ - 2,742,545 3,489,528-6,232,073 A-to A ,752-89,752 Short-term: A-1-3,441, ,441,896 Not rated: Treasury bonds - 14,932,112 45,473,000 2,046,644 62,451,756 PBOC bills central bank - 18,234,584 25,127,708-43,362,292 Bonds issued by policy banks - 28,022,660 41,842,408-69,865,068 Bonds issued by financial institutions ,660,478 1,660,478 Local government bonds - 7,379,789 15,170,042-22,549, ,873, ,228,124 3,707, ,809,074

246 2011 Annual Report Market risk SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) Market risk is the risk of loss arising from movements in observable market variables such as interest rates, exchange rates and equity markets. The Group exposes to market risk in both trading account and bank account items, includes interest rate risk and currency risk. Market risk management department formulates universal policies and procedures under a consolidated framework and supervises the implementation of such policies and procedures. Treasury department is in charge of Head Office s investment portfolios management, trading of treasury business and executing the relevant policies of market risk. Audit department audits independently on whether market risk management system works reliably and effectively regularly. The Group measured market risk with consideration of the established benchmarks and management ability, main methods include stress tests, analysis on valuation at risk, gap analysis and sensitivity analysis. The market risk of new products and businesses should be recognised before its commencement in compliance with relevant policies Currency risk The Group was established and operates in PRC, and conducts the majority of its businesses in RMB, with foreign transactions mainly in US dollar. The table below summarizes the Group s exposure to foreign exchange rate risk, assets and liabilities categorized by original currency having been measured in RMB. 31 December 2011 RMB USD HKD Others Total Into RMB Into RMB Into RMB Into RMB Cash and balances with central bank Due from and placements with banks and financial institutions Financial assets held for trading 364,398,438 2,175, , , ,957, ,744,813 23,413,220 1,567,605 3,566, ,291,780 5,866, ,866,841 Derivative financial assets 435,477 25,658 10,282 77, ,787 Financial assets purchased under resale agreements Loans and advances to customers Available-for-sale financial assets Investment securitiesheld-to-maturities Investment securitiesloans and receivables 281,509, ,509,782 1,252,043,480 47,262,266 2,200, ,592 1,302,323, ,827, , , ,056, ,221, , ,535,453 8,759, ,759,536 Other financial assets 13,033, ,992 7,364 21,694 13,529,835 2,582,840,272 73,956,871 4,920,576 4,662,095 2,666,379,814 Due to central banks 50, ,000

247 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) 31 December 2011 RMB USD HKD Others Total Into RMB Into RMB Into RMB Into RMB Due to and placements from banks and financial institutions 494,846,617 9,800,017 2,467, , ,878,294 Derivative financial liabilities 23,332 1,459,336-32,361 1,515,029 Financial assets sold under repurchase agreements 86,019, ,019,569 Due to customers 1,792,462,741 49,564,078 3,324,097 5,704,205 1,851,055,121 Debts issued 32,600, ,600,000 Other financial liabilities 41,167, ,522 9,297 14,167 41,320,158 2,447,169,431 60,952,953 5,800,463 6,515,324 2,520,438, ,670,841 13,003,918 (879,887) (1,853,229) 145,941, December 2010 RMB USD HKD Others Total Into RMB Into RMB Into RMB Into RMB Cash 4,579, ,098 52, ,794 4,924,527 Balances with central bank, due from and placements with banks and other financial institutions, financial assets purchased under resale agreements Derivative financial assets Loans and advances to customers 753,491,564 21,642,792 3,024,383 2,890, ,049, , , ,724 1,033,349 1,086,069,803 36,266, , ,318 1,124,112,990 Available-for-sale financial assets 104,641, , ,910,252 Investment securitiesheld-to-maturities Investment securitiesloans and receivables 143,228, , ,556,636 3,707, ,707,122 Other financial assets 6,455, ,455,411 2,102,699,541 58,993,157 4,056,492 4,000,652 2,169,749,842 Due to central bank 50, ,000 Due to and placements from banks and other financial institutions 341,238,598 9,032,010 1,256, , ,233,964 Derivative financial liabilities 487, , ,204 1,172,083

248 2011 Annual Report 247 SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) 31 December 2010 RMB USD HKD Others Total Into RMB Into RMB Into RMB Into RMB Financial assets sold under repurchase agreements 16,963, ,963,471 Due to customers 1,590,803,410 39,347,013 5,298,336 5,010,773 1,640,459,532 Debts issued 16,800, ,800,000 Other financial liabilities 12,304, ,304,636 1,978,648,026 48,826,991 6,555,333 5,953,336 2,039,983, ,051,515 10,166,166 (2,498,841) (1,952,684) 129,766,156 The Group measured the possible effect on net profi t which caused by foreign exchange rate fl uctuation through the sensitivity analysis. The table below shows the result of sensitivity analysis on the balance sheet date. Net Profit Increase/(decrease) Exchange rate fluctuation % Exchange rate fluctuation % -1% 1% -1% 1% USD against RMB (102,003) 102,003 (172,572) 172,572 Other currencies against RMB 22,081 (22,081) 925 (925) The sensitivity analysis was based on all assets and liabilities, characteristics of static currency risk structure. The hypothesis is shown as below: (1) exchange rate sensitivity represents the exchange gain or loss caused by the 1% fl uctuation in absolute value of relevant currency exchange rates (middle) on the balance sheet date; (2) different currency rates fl uctuation was simultaneous and in the same direction; (3) foreign currency position contains spot exchange position and forward exchange position. Based on the above-mentioned hypothesis, the actual exchange gain or loss may differ from the sensitivity analysis result Interest rate risk Interest rate risk refers to adverse movements in interest rates, resulting in potential losses to the Group, including interest rate risk of bank book and trading book. Since interest rates for most assets and liabilities are controlled by PBOC benchmark interest rate, the Group's interest rate risk mainly results from re-pricing risk of bank book. The Group has established a relatively perfect system of internal transfer pricing, through which, the Group's interest rate risk of bank book is managed in a centralised way. The Group measured and monitored interest rate risk with the main methods such as value-at-risk analysis and sensitivity analysis. The table below summarises the Group s exposures to interest rate risks. The table presents the Group s assets and liabilities at carrying amounts, categorized by the earlier of contractual re-pricing or maturity dates.

249 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) Cash and balances with central bank Due from and placements with banks and other financial institutions Financial assets held for trading Derivative financial assets Financial assets under resale agreements Loans and advances to customers Available-for-sale financial assets Investment securitiesheld-to-maturities Investment securitiesloans and receivables <1 month 1-3 months months-1 years 1-5 years >5 years Total 361,309, ,648, ,957, ,841,518 90,136,975 53,564, ,000-48, ,291, ,919 1,404,058 2,914, , ,237-5,866, , ,787 55,497, ,256,828 75,755, ,509, ,301, ,235, ,504,190 28,422,092 21,861,103-1,302,323,950 4,556,851 14,294,591 37,699,551 71,019,599 20,358,539 1,127, ,056,751 2,207,857 11,700,705 32,483,501 79,227,255 32,916, ,535, ,238 2,694,020 1,295,288 4,286,037-8,759,536 Other financial assets ,529,835 13,529,835 1,041,904, ,511, ,616, ,506,966 79,937,051 20,902,859 2,666,379, months-1 years 1-5 years >5 years noninterestbearing non-interestbearing <1 month 1-3 months Total Due to central bank , ,000 Due to and placements from 219,421, ,121, ,332, , ,878,294 banks and other financial institutions Derivative financial liabilities ,515,029 1,515,029 Financial assets sold under 65,336,720 6,273,035 14,409, ,019,569 repurchase agreements Due to customers 1,012,856, ,297, ,363, ,950,632 2,000,000 2,586,757 1,851,055,121 Debts issued - - 6,000,000 8,200,000 18,400,000-32,600,000 Other financial liabilities 8,900,790 4,994,750 1,818, ,606,618 41,320,158 1,306,515, ,687, ,973, ,150,632 20,400,000 29,711,490 2,520,438,171 (264,610,829) 141,824, ,643,393 15,356,334 59,537,051 (8,808,631) 145,941,643

250 2011 Annual Report 249 Cash and balances with central bank Due from and placements with banks and other financial institutions SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) <1 month 1-3 months months-1 years 1-5 years >5 years 288,324, ,924, ,248,760 84,784,785 14,455,633 1,543, , ,793,178 Derivative financial assets ,033,349 1,033,349 Financial assets purchased 158,405,476 76,125, ,401, ,932,144 under resale agreements Loans and advances to customers Available-for-sale financial assets Investment securitiesheld-to-maturities Investment securitiesloans and receivables 293,932, ,904, ,177,847 26,906,039 13,192,169-1,124,112,990 3,127,806 8,083,215 13,613,565 59,340,586 19,977, ,620 Total 104,910,252 4,818,255 18,436,364 41,114,655 58,607,250 20,580, ,556, , ,340 1,456,838 1,660,478-3,707,122 Other financial assets - 500,000 1,600, ,355,411 6,455, ,393, ,618, ,927, ,310,713 55,410,219 11,089,907 2,169,749, months-1 years 1-5 years >5 years non-interestbearing non-interestbearing <1 month 1-3 months Total Due to central bank , ,000 Due to and placements from 117,701,913 92,557, ,094,517 21,880, ,233,964 banks and other financial institutions Derivative financial liabilities ,172,083 1,172,083 Financial assets sold under 4,911,600 5,565,585 6,486, ,963,471 repurchase agreements Due to customers 945,828, ,835, ,877, ,662,789 1,477,661 3,778,045 1,640,459,532 Debts issued - - 7,600,000 9,200, ,800,000 Other financial liabilities ,304,636 12,304,636 1,068,442, ,957, ,107, ,742,789 1,477,661 17,255,297 2,039,983,686 (235,048,680) 98,660, ,819,457 (66,432,076) 53,932,558 (6,165,390) 129,766,156

251 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) The Group measured the possible effect on net profi t and equity which caused by interest rate fl uctuation through the sensitivity analysis. The table below shows the results of the sensitivity analysis on the balance sheet date. Interest rate fluctuation (Basis points) Net profit increases/(decreases) (2,359,825) 2,359,825 (2,000,703) 2,000,703 Revaluation reserve in equity increases/(decreases) 2,384,413 (2,315,606) 2,413,926 (2,279,952) The sensitivity analysis was performed on the basis of static characteristics of the interest risk of the assets and liabilities. In the relevant analysis, the fl uctuation was only measured during one year, which refl ected the effect on the annualized interest income given re-pricing the assets and liabilities. The hypothesis was shown as below: Except for current deposit, all assets and liabilities re-priced or matured at the middle of the period for maturity within 3 months and 3-12 months; The interest rates of current deposit and statutory deposit reserve in central bank remain the same; The yield curve moved in parallel with interest rate; There were no other changes for the portfolio of assets and liabilities. Due to the hypothesis mentioned above, the actual interest income may be different from the sensitivity analysis results. Based on the assumption of the parallel movement of the yield curve with interest rate change, the sensitivity analysis of the equity is derived by revaluating the ending balance of the available-for-sale financial assets as a result of certain percentage of interest rate changes Liquidity risk Liquidity risk is the risk that the Group will not meet liabilities as they fall due, and it results from amount and maturity mismatches of assets and liabilities. The liquidity risk management system of the Group includes planning beforeevent, managing during-event, and adjusting after-event and emergency plan. In accordance with the Group s situation, according to the regulatory index systems, the series of the daily liquidity system was designed to monitor the implement of the relevant ratio limits, manage the index system s grading, and adjust the different levels in different ways. The table below presents the cash fl ows payable by the Group under non-derivative fi nancial assets and liabilities by remaining contractual maturities at the balance sheet date. The amounts disclosed in the table are the contractual undiscounted cash fl ows.

252 2011 Annual Report 251 Non-derivative fi nancial assets and liabilities cash fl ow Cash and balances with central bank Due from and placements with banks and other financial institutions Financial assets held for trading Financial assets under resale agreements Loans and advances to customers Available-for-sale financial assets Investment securitiesheld-to-maturities Investment securitiesloans and receivables Overdue SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) Repayable on demand Due within 3 months Due within 3 and 12 months Due between 1 and 5 years Due after 5 years Total - 366,957, ,957,099-16,370, ,693,687 54,319, , ,113, ,491 3,092,403 2,281, ,127 6,718, ,725,324 77,800, ,526,116 6,216,914 10,993, ,861, ,540, ,700, ,046,233 1,635,359, ,521,641 37,609,506 91,760,628 33,070, ,961, ,269,085 33,778, ,764,371 41,366, ,179, ,089 3,210,377 2,477,591 5,483,378 11,467,435 Other financial assets - 2,458, ,458,761 6,216, ,779, ,869, ,352, ,714, ,808,777 3,043,742,575 Repayable on demand Due within 3 months Due within 3 and 12 months Due between 1 and 5 years Due after 5 years Total Overdue Due to central bank , ,000 Due to and placements from banks - 42,958, ,191, ,444, ,593,311 and other financial institutions Financial assets sold under repurchase agreements ,873,106 14,605, ,478,268 Due to customers - 742,793, ,036, ,406, ,040,895 2,088,128 1,900,365,546 Debts issued ,780,500 13,050,300 24,058,000 44,888,800 Other financial liabilities - 5,328,030 13,895,540 1,818, ,041, ,079, ,996, ,104, ,091,195 26,146,128 2,571,417,495 6,216,914 (394,299,386) (195,126,879) 229,248, ,623, ,662, ,325,080

253 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) Cash and balances with central bank Due from and placements with banks and other financial institutions Financial assets purchased under resale agreements Loans and advances to customers Available-for-sale financial assets Investment securitiesheld-to-maturities Investment securitiesloans and receivables Overdue Repayable on demand Due within 3 months Due within 3 and 12 months Due between 1 and 5 years Due after 5 years Total - 293,248, ,248,760 9,000 6,929,698 89,569,459 4,285, ,793, ,530, ,401, ,932,144 1,203, ,816, ,019, ,770, ,302,987 1,124,112, ,357,393 8,447,466 65,286,438 27,818, ,910, ,927,052 36,296,912 67,578,154 23,754, ,556, , ,340 1,456,838 1,660,478 3,707,122 Other financial assets - 4,355, ,000 1,600, ,455,411 1,212, ,533, ,814, ,526, ,092, ,536,938 2,168,716,493 Repayable on demand Due within 3 months Due within 3 and 12 months Due between 1 and 5 years Due after 5 years Total Overdue Due to central bank , ,000 Due to and placements from - 73,547, ,185, ,734,951 23,866,767 2,899, ,233,964 banks and other financial institutions Financial assets sold under repurchase agreements ,477,185 6,486, ,963,471 Due to customers - 743,784, ,153, ,518, ,341,999 9,661,416 1,640,459,532 Debts issued ,600,000 14,200,000-16,800,000 Other financial liabilities - 12,304, ,304, ,636, ,815, ,389, ,408,766 12,560,478 2,038,811,603 1,212,632 (525,102,844) 146,998,613 10,136, ,683, ,976, ,904,890

254 2011 Annual Report 253 Derivatives cash fl ow SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) Derivatives settled on a net basis The Group s derivatives that will be settled on a net basis include interest rate swaps and precious metal derivatives. The table below analyses the Group derivative fi nancial instruments that will be settled on a net basis into relevant maturity groupings based on the remaining period at the balance sheet to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash fl ows. Within 1 month 1-3 months 3-12 months 1-5 years Above 5 years Interest rate swaps (159,849) 957 (148,118) (1,236,746) 10,883 (1,532,873) Precious metals derivatives (12,657) (12,657) Total (172,506) 957 (148,118) (1,236,746) 10,883 (1,545,530) Interest rate swaps (409) - - (130,560) (48,851) (179,820) Precious metal derivatives 5, ,598 Total 5, (130,560) (48,851) (174,222) Total Derivatives cash fl ow Derivatives settled on a gross basis The Group s derivatives that will be settled on a gross basis are foreign exchange derivatives include currency forward and currency swaps. The table below analyses the Group s derivative financial instruments that will be settled on a gross basis into relevant maturity groupings based on the remaining period at the balance sheet to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash fl ows. Within 1 month 1-3months 3-12 months 1-5 years Above 5 years Foreign exchange derivatives -Outflow (45,450,075) (22,374,629) (32,698,422) (1,417,807) - (101,940,933) -Inflow 45,455,964 22,439,566 32,693,856 1,416, ,005, Foreign exchange derivatives -Outflow (18,123,939) (11,117,011) (29,917,589) (314,179) - (59,472,718) -Inflow 18,108,758 11,107,463 29,965, ,555-59,496,258 Total

255 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) Off-balance sheet items No later than 1 year 1-5 years Over 5 years Total Acceptance 370,981, ,981,123 Acceptance under letter of credit 25,615, ,615,734 Guarantee issued 26,774,625 20,761, ,024 47,854,363 Letter of credit 196,828,146 1,593, ,422,064 Un-utilised balances of credit cards 42,752, ,752,585 Total 662,952,213 22,355, , ,625, Fair Value of financial instruments Financial instruments not measured at fair value The fi nancial assets and fi nancial liabilities not measured at fair value in the fi nancial statement include: balances with central banks, due from and placements with banks and other fi nancial institutions, fi nancial assets purchased under resale agreements, loans and advances to customers, investment securities- held-to-maturity, investment securities-loans and receivables, due to and placements from banks and other fi nancial institutions, fi nancial assets sold under repurchase agreements, due to customers, interest payable and debts issued. The table below summarizes the carrying amount and fair value of investment securities classified as held-to-maturity and loans and receivable, debts issued of the Group as at balance sheet date Carrying amount Fair value Carrying amount Fair value Financial assets: Investment securities - held-to-maturity 158,535, ,088, ,556, ,602,082 Investment securities - loans and receivables 8,759,536 8,872,568 3,707,122 3,717,046 Financial liabilities: Debts issued 32,600,000 32,630,030 16,800,000 16,342,990 Investment securities classifi ed as held-to-maturity and loans and receivables Fair value of investment securities-held-to-maturity is based on quoted market price. If market information is not available, the fair values of investments securities classified as held-to-maturity and loans and receivables are calculated using discounted cash flow model, and if it is applicable, fair value can be estimated based on the financial instruments price of similar credit risk, maturity and yield rate. Debts issued Fair value of debts is based on market price. If market information is not available, the fair value of debts is calculated using a discounted cash fl ow model which is based on a current yield curve appropriate for the remaining term to maturity. Other than the fi nancial instruments above, the fair value of fi nancial assets and fi nancial liabilities is calculated with discounted cash fl ow model, and the carrying amount is not signifi cantly different with the fair value.

256 2011 Annual Report Fair value hierarchy SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) The Group measures fair values using the following fair value hierarchy that refl ects the signifi cance of the inputs used in making the measurements: Level 1 Quoted prices in active markets for identical assets or liabilities. This level includes listed equity securities and debts instruments. Level 2 Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices). This level includes the majority of the OTC derivative contracts and RMB debt instruments traded in interbank market. The sources of input parameters like LIBOR yield curve or counterparty credit risk are Bloomberg and China Bond. Level 3 Inputs for the asset or liability that are not based on observable market data (unobservable inputs). This level includes equity investments and debt instruments with signifi cant unobservable inputs. Level 1 Level 2 Level 3 Total Financial assets held for trading - 5,866,841-5,866,841 Available-for-sale financial assets - 147,929, ,929,131 Derivative financial Assets - 548, , ,344, ,344,759 Derivative financial Liabilities - 1,515,029-1,515,029-1,515,029-1,515, Available-for-sale financial assets - 104,142, ,142,632 Derivative financial assets - 1,033,349-1,033, ,175, ,175,981 Derivative financial liabilities - 1,172,083-1,172,083-1,172,083-1,172,083 No fi nancial instruments are classifi ed as level 1 or level 3 in the Group Capital management The Bank takes sufficient measures of capital management, fully in accordance with the requirements of the authorities, to cover the inherent risks in its business. The primary objectives of the Bank s capital management are to ensure that the Bank not only complies with imposed regulatory capital requirements, but also maintains healthy ratios to maximize shareholders value. Given the change of the economic environment and risk characteristics, the Bank will actively adjust the capital structure. Generally, the measures of adjusting the capital structure contain the change of the allocation of dividend, capital issue and issuance of subordinate bonds. There is no material change from the previous year with respect to the objectives and measures of the Bank s capital management. The Bank calculated the capital adequacy ratio and core capital adequacy ratio in accordance with the Capital Adequacy Ratio of Commercial Banks Management Policy and the calculation methods agreed by the regulatory authorities.

257 Annual Report SHANGHAI PUDONG DEVELOPMENT BANK CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 (All amounts expressed in thousands of RMB unless otherwise stated) The core capital included the capital, capital reserve, surplus reserve and retained earnings. The affi liated capital included general reserve and long-term subordinated debts. Pursuant to relevant regulations, the deducted items mainly include the capital investment in unconsolidated fi nancial institution Total capital base before deductions 202,157, ,551,760 Including: Core capital 146,005, ,676,000 Supplementary capital 56,152,760 34,875,760 Deductions: Unconsolidated investments and others (2,393,590) (1,705,420) Total capital net 199,764, ,846,340 Core capital net 144,808, ,823,290 On balance sheet risk-weighted assets 1,328,919,126 1,127,395,810 Off balance sheet risk-weighted assets 231,260, ,964,930 Market risk capital adjustment 13,127,875 1,027,500 1,573,307,893 1,279,388,240 Capital adequacy ratio 12.70% 12.02% Core capital adequacy ratio 9.20% 9.37% 11 ASSETS PLEDGED These assets of the Group are pledged as collateral under repurchase agreements and treasury deposits Discount bills and rediscount bills 10,076,043 2,136,846 Available-for-sale financial assets 45,845,734 12,788,425 Investment securities-held-to-maturities 69,572,056 15,518,220 Total 125,493,833 30,443, EVENTS AFTER THE BALANCE SHEET DATE Approved by CBRC and PBOC, the Bank issued RMB 30 billion bonds in the interbank bonds market during 24 February 2012 to 28 February The bonds have a tenor of fi ve years and the coupon rate is 4.2%. It will be used to increase source of fund, optimize maturity structure of liabilities, and support loans to medium-sized and small enterprises.

258

259 ADD: NO.12 ZHONGSHAN DONG YI ROAD, SHANGHAI CHINA ZIP CODE: TEL: FAX: WEBSITE: