Significant Events. Formulation and Implementation of Profit Distribution Policy. Profit Distribution during the Reporting Period

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1 Significant Events Formulation and Implementation of Profit Distribution Policy In 2009, the Bank amended its Articles of Association to state that the Bank should maintain the continuity and stability of its profit distribution policy. The Board of Directors amended the dividend distribution policy in The Board of Directors agreed that the dividend would be distributed at 35% 45% of the Group s yearly net profits from 2010 to This resolution was duly disclosed. In 2013, the Bank amended the Articles of Association related to the cash dividend. This amendment clarified the Bank s profit distribution principles, policy and adjustment procedures, the consideration process of the profit distribution plan and other matters. The amendment stated that the Bank would adopt cash dividends as the priority form of profit distribution. Except under special circumstances, the Bank shall adopt cash as the form of dividend distribution where there is profit in that year and the accumulated undistributed profit is positive, and that the cash distribution of the dividend shall not be less than 10% of the profit after tax attributable to the shareholders of the Bank. The amendment also stated that the Bank would offer online voting to shareholders when considering amendments to its profit distribution policy and profit distribution plan. The 2013 Annual General Meeting of the Bank considered and approved the Shareholder Return Plan For 2014 to 2016 to specify the basic principles, shareholder return plan and decision-making and supervisory mechanisms regarding the formulation, implementation and amendment of the shareholder return of the Bank. The 2013 Annual General Meeting of the Bank considered and approved the proposal to amend the Articles of Association to specify the profit distribution policy of the Bank for shareholders holding preference shares. This amendment prescribed that, the shareholders of the Bank holding preference shares shall be entitled to profit distribution at the agreed dividend payout ratio, having priority over shareholders holding ordinary shares. The Bank shall pay dividends to shareholders holding preference shares in cash. The Bank is entitled to cancel dividend payment on preference shares and such cancellation shall not constitute an event of default. This amendment to the Articles of Association has been approved by CBRC. The procedure to formulate the aforementioned dividend distribution policy was compliant, transparent and complete. The criteria and ratio of the dividend distribution are explicit and clear. The independent directors fully expressed their opinions and the legitimate rights and interests of minority shareholders were fully respected and protected. The procedure was in line with the provisions of the Articles of Association and other rules and regulations. The Bank distributed dividends for 2013 in strict compliance with regulatory regulations, the Articles of Association, dividend distribution policy and the shareholders meeting resolutions on profit distribution. Profit Distribution during the Reporting Period The 2013 Annual General Meeting considered and approved the Bank s profit distribution plan as follows: appropriation to statutory surplus reserve of RMB billion; appropriation to general and regulatory reserves of RMB billion; no appropriation to the discretionary reserve; considering the Bank s business performance, financial position, and 56 Bank of China Limited 2014 Interim Report

2 the capital requirements for the future development of the Bank, RMB0.196 per share (before tax) was distributed as cash dividend to A-Share Holders and H-Share Holders whose names appear on the register of shareholders of the Bank as at the market close on 26 June 2014, amounting to approximately RMB billion (before tax) in total. The dividend distribution has been completed. The Bank did not distribute interim dividend for the ed 30 June 2014, nor did it propose any capitalisation of capital reserve into share capital during the reporting. During the reporting, there was no material issue attracting negative media interest. Significant Connected Transactions The Bank had no significant connected transactions during the reporting. For the details of the related party transactions as defined by the relevant accounting standards by the end of the reporting, please refer to Note III.29 of the Condensed Consolidated Interim Financial Information. Corporate Governance Major Contracts and Enforcement thereof For details of the corporate governance of the Bank, please refer to the section on Corporate Governance contained in this report. Purchase and Sale of Assets, and Merger and Acquisition During the reporting, the Bank undertook no material purchase or sale of assets, or merger or acquisition. Material Litigation, Arbitration and Issues of Media Interest The Bank was involved in certain litigation and arbitration cases in its regular course of business. In addition, because of the scope and scale of the Bank s international operations, the Bank is from time to time subject to a variety of claims made by plaintiffs under the laws of various jurisdictions in which the Bank operates, including those sensitive allegations such as anti-money laundering. After consulting legal professionals, the senior management holds that none of the litigation and arbitration cases will have a significant impact on the financial position or operating results of the Bank at the current stage. Material Custody, Sub-contracts and Leases During the reporting, the Bank did not take any significant custody of, sub-contract or lease any material business assets from other companies, or allow its material business assets to be subject to such arrangements that are required to be disclosed. Material Guarantee Business As approved by PBOC and CBRC, the Bank s guarantee business is an off-balance-sheet item in the ordinary course of its business. The Bank operates the guarantee business in a prudent manner and has formulated specific management measures, operational processes and approval procedures in accordance with the risks of guarantee business and carried out this business accordingly. During the reporting, save as disclosed above, the Bank did not enter into any material guarantee business that is required to be disclosed. Other Major Contracts During the reporting, the Bank had no other major contract that is required to be disclosed. Bank of China Limited 2014 Interim Report 57

3 Significant Events Undertakings Use of Raised Funds During the reporting, to the best of the Bank s knowledge, there was no breach of material undertakings by the Bank or its shareholders holding shares of more than 5% of the Bank. Disciplinary Action Imposed on the Bank, its Directors, Supervisors, Senior Management Members and Shareholders Holding Shares of More Than 5% of the Bank During the reporting, neither the Bank nor any of its directors, supervisors, senior management members or shareholders holding shares of more than 5% of the Bank were subject to investigation, administrative punishment or censure by CSRC or were publicly reprimanded by any stock exchange. No other regulatory administration has imposed any penalty on the Bank that had a material impact on the Bank s operation. Alert of and Explanations for Predicted Loss in Net Profit for the Period from the Beginning of the Year to the End of the Next Reporting Period or Substantial Change Compared with the Same Period of the Previous Year All proceeds raised from initial public offerings, the issuances of subordinated bonds and Convertible Bonds and the Rights Issue of A Shares and H Shares have been used to replenish the Bank s capital and increase the level of capital adequacy. No further funds was raised during the reporting of the Bank. Having obtained the approvals from CBRC and PBOC, the Bank issued tier-2 capital bonds in an amount of RMB30 billion on 8 August The funds raised from such issuance were used to replenish the Bank s tier-2 capital. For details, please refer to the related announcements or publications on the websites of SSE, HKEx and the Bank and the Notes to the Condensed Consolidated Interim Financial Information. Purchase, Sale or Redemption of the Bank s Shares As at 30 June 2014, the total number of the Bank s treasury shares was approximately million. Implementation of Stock Incentive Plan during the Reporting Period Not applicable. Misappropriation of Funds for Nonoperating Purposes by Controlling Shareholder and Other Related Parties During the reporting, there was no misappropriation of the Bank s funds by its controlling shareholder or other related parties for non-operating purposes. The Bank approved a long-term incentive policy, including the Management Stock Appreciation Rights Plan and the Employee Stock Ownership Plan, at the Board meeting and the Extraordinary Shareholders Meeting held in November To date, the Management Stock Appreciation Rights Plan and the Employee Stock Ownership Plan have not been implemented. 58 Bank of China Limited 2014 Interim Report

4 Shares in Other Listed Companies and Financial Enterprises Held by the Group Securities The securities held by the Bank and its subsidiaries during the regular course of business are as follows: No. Type of securities Securities code Company/securities name Initial cost Securities held Securities held end Carrying value at of the total securities at Gains/(losses) during the reporting 1 Stock GREE 702,764,850 8,675,887 23,344, ,477, % 13,926,107 2 Stock CYPC 597,969,231 88,056,023 95,629, ,610, % 231,689 3 Stock 3315 HK Goldpac Group Limited 186,239,837 90,229,397 90,229, ,262, % 29,365,879 4 Stock HASCO 579,316,709 56,158,916 57,719, ,556, % 74,611 5 Stock Kweichow Moutai Co., Ltd. 387,755,040 1,958,689 3,115, ,424, % 11,573,082 6 Stock VANKE-A 355,659,987 23,552,539 46,318, ,703, % 6,181,227 7 Convertible Bond Sinopec Corp. 294,893,792 3,076, ,262, % 888,052 8 Fund Fortune SG Fund Management Co., Ltd. 272,765,220 2,766, ,160, % 2,795,957 9 Stock Daqin Railway Co., Ltd. 289,413,873 21,060,568 40,760, ,950, % 10,337, Stock MA MASTERCARD INC. 55, , ,642, % (33,980,182) Other securities held at 4,980,852,199 5,492,770, % 586,789,069 Gains/(losses) of securities sold during the reporting (296,523,361) Total 8,647,630,738 9,815,821, % 331,659,885 Notes: 1 The table lists the top ten securities held by the Group in descending order according to their carrying value at. 2 securities listed in this table include stocks, warrants, convertible bonds and open-ended and close-ended funds, which are classified under financial assets at fair value through profit or loss. 3 Other securities held at refers to securities other than the top ten securities listed above held by the Group by the end of the reporting. 4 The units of measures are share for stocks, unit for funds and issue for convertible bonds. Bank of China Limited 2014 Interim Report 59

5 Significant Events Stocks of Other Listed Companies Held by the Group Stock code Securities name Initial cost Stocks held company Stocks held at company at Carrying value at Gains during the reporting Increase/ (decrease) of equity during the reporting Accounting classification 549 HK QIFENG FIBER 54,874,959 94,841, % 94,841, % 24,392,457 (2,710,273) Available for sale equity 2008 HK PHOENIX TV 309,384, ,000, % 412,000, % 941,891,328 22,893,192 Available for sale equity Total 364,259, ,283,785 20,182,919 Source of shares Joint-stock reform Joint-stock reform Notes: 1 The table lists stocks of listed companies in which the Group had a shareholding of 5% or above, which are classified as longterm equity s or available for sale equity securities. 2 Gains during the reporting refers to dividend income. Equity s in Unlisted Financial Companies Held by the Group Company name Initial cost Equity held company Equity held at company at Carrying value at Gains during the reporting Decrease of the equity during the reporting Accounting classification China Bond Insurance Co., Ltd. 997,101,706 14% 14% 1,024,576,104 49,450,366 (142,184,736) Available for sale equity JCC Financial Company Limited 95,186,844 13% 13% 259,479,266 17,173,539 in associates and joint ventures The Debt Management Company Limited Hunan Valin Iron & Steel Group Finance Co., Ltd. 13,177 1,660 11% 1,660 11% 13,177 Available for sale equity 57,136,456 10% 10% 94,632,506 4,269,352 in associates and joint ventures Total 1,149,438,183 1,378,701,053 70,893,257 (142,184,736) Source of shares Notes: 1 Financial companies include securities firms, commercial banks, insurance companies, futures companies, trust companies, among others. 2 The table lists equity s in unlisted financial companies in which the Group held a proportion of 5% or more of the total shares. 3 Carrying value is value after the reduction of impairment allowance. 4 Gains during the reporting refers to dividend income, income of associates and joint ventures. 60 Bank of China Limited 2014 Interim Report

6 The Audit Committee The Audit Committee of the Bank is composed of seven members, including Non-executive Directors Ms. SUN Zhijun, Mr. WANG Yong and Independent Directors Mr. CHOW Man Yiu, Paul, Mr. Jackson TAI, Mr. Nout WELLINK, Mr. LU Zhengfei and Mr. LEUNG Cheuk Yan. Independent Director Mr. LU Zhengfei serves as Chairman of the Audit Committee. Acting in line with the principle of independence, the Committee assists the Board of Directors in supervising the Group s financial report, internal control, and internal and external audit. The Audit Committee reviewed the interim results of the Bank. The Bank s external auditor conducted a review of the interim financial statements in accordance with International Standards on Review Engagements No The Audit Committee discussed matters relating to the accounting standards and practices adopted in the financial statements, internal control and financial reporting. Appointment or Termination of External Auditors The Bank has appointed Ernst & Young Hua Ming LLP as its domestic auditor and internal control auditor for the year Ernst & Young Hua Ming LLP offers auditing services on the Bank s financial statements prepared in accordance with CAS as well as internal control auditing. Ernst & Young was appointed as the international auditor for the year 2014 to provide auditing services on the Bank s financial statements prepared in accordance with IFRS. Directors and Supervisors Rights to Acquire Shares During the reporting, none of the Bank, its holding companies, or any of its subsidiaries or fellow subsidiaries was party to any arrangements that would enable the Bank s directors and supervisors, or their respective spouses or children below the age of 18, to benefit by acquiring shares in, or debentures of, the Bank or any other body corporate. Directors and Supervisors Interests in Shares, Underlying Shares and Debentures To the best knowledge of the Bank, as at 30 June 2014, none of the directors or supervisors of the Bank or their respective associates had any interests or short positions in the shares, underlying shares or debentures of the Bank or any of its associated corporations (within the meaning of Part XV of the SFO) as recorded in the register required to be kept by the Bank pursuant to Section 352 of the SFO or as otherwise notified to the Bank and the Hong Kong Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (the Model Code ) as set out in Appendix 10 to the Hong Kong Listing Rules. Securities Transactions by Directors and Supervisors Pursuant to domestic and overseas securities regulatory requirements, the Bank formulated, amended and implemented the Management Measures on Securities Transactions by Directors, Supervisors and Senior Management Personnel of Bank of China Limited (the Management Rules ) to govern securities transactions by the directors, supervisors and senior management members of the Bank. The terms of the Management Rules are more stringent than the mandatory standards set out in the Model Code. The Bank has made specific enquiries with all directors and supervisors, all of whom confirmed that they have complied with the standards set out in both the Management Rules and the Model Code throughout the reporting. Compliance with International Accounting Standard No. 34 The 2014 interim report of the Bank is in compliance with International Accounting Standard No.34 Interim Financial Reporting. Interim Report Shareholders may write to the Bank s H-Share Registrar, Computershare Hong Kong Investor Services Limited (Address: 17M, Hopewell Centre, 183 Queen s Road East, Wanchai, Hong Kong) to request the interim report prepared under IFRS or go to the Bank s office address for copies (Chinese version) prepared under CAS. The Chinese and/or English versions of this interim report are also available at the following websites: and Should there be any queries about how to obtain copies of this interim report or access the document on the Bank s website, please dial the Bank s H-Share Registrar at: (852) or the Bank s hotlines at (86) Bank of China Limited 2014 Interim Report 61