corporate governance - cebbank.com€¦ · corporate governance 038 c h i n a e v e r b r i g h t b...

CORPORATE GOVERNANCE

036 C H I N A E V E R B R I G H T B A N K

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ONPKS��



OVERVIEW

2003 witnessed CEB's obvious changes and rapid progress in corporate governance. Based on the existing

framework of corporate governance, pursuant to the regulator's requirements, CEB spared no efforts in

innovating relevant rules, quickened the steps in improving corporate governance, and safeguard the lawful

rights of all the shareholders as well as other stake-holders, which contributed to the Bank's stable operation

and healthy growth.

In 2003, CEB further improved its corporate governance starting from amplifying rules and regulations. At

the beginning of year 2003, in accordance with the regulations such as Guidelines on Corporate Governance

for Joint-Stock Commercial Banks, the Bank made substantial amendments to Articles of Association; in

second half of the year, the Bank formulated Rules of Procedures for Shareholders Meeting, Rules of

Procedures for Board of Directors, Rules of Procedures for Board of Supervisors, Work Rules for Special

Committees under the Board of Directors and Board of Supervisors. In the middle of the year, in light of the

opinions given by China Banking Regulatory Commission and the needs for business development, the

Bank further revised certain articles of the Bank's Articles of Association, Rules of Procedures as well as

work rules. The Bank has successively worked out a dozen of important rules and regulations including

Work Rules for CEB's Senior Management, Provisional Rules on Senior Management Reporting Major

Issues to the Board of Directors, Rules on the Board of Directors Authorizing Chairman to Exercise Partial

Rights during Adjournment, Rules for the Board of Directors to Make Authorization to President, Code of

Conduct for Supervisors, Procedures of Auditing for the Board of Supervisors, etc. With the formulation of

these rules and regulations, work behaviors, function definition and operating procedures for the Shareholder's

Meeting, the Board of Directors, the Board of Supervisors and the senior management have been further

standardized. As far as rules are concerned, a governance framework of three-in-one with the functional

bodies of decision-making, execution and supervision restricting each other has been established. In the

meantime, a corporate governance characterized by power separation, responsibilities distribution and check-

and-balance mechanism has also been basically set up.

In the past year, Board of Directors has strengthened its function of making decisions on major issues. Two

independent directors were appointed to the Board of Directors, and Nomination Committee, Remuneration

Committee, Risk Management Committee and Auditing and Related-party Transaction Committee have

been formally established. Each special committee has respectively examined such issues as Procedures of

Nominating Senior Management, Proposal to Increase the Number of Independent Directors, Standard of

Annual Compensation for Directors and Supervisors, Principles of Remuneration and Performance Appraisal

for Senior Management, rules on risk management and major related-party transactions. As a result, the role

played by the Board of Directors in making decisions reasonably has been significantly intensified. To

fulfill its responsibilities, the Board of Directors sometimes holds provisional meeting in between quarterly

C O R P O R A T E G O V E R N A N C E

A N N U A L R E P O R T 2 0 0 3 045

routine meetings when necessary, at which more than forty proposals were discussed successively.

The supervising function of the Board of Supervisors has been further strengthened. Two external supervisors

were nominated, Nomination Committee and Auditing Committee were set up so that the capability of the

Board of Supervisors in conducting inspection and supervision over financial activities was promoted. In

2003, a dozen of proposals were approved by the Board of Supervisors, the Auditing Committee carried out

special auditing over the management of the Bank's fixed assets, leading to an improvement in the Bank's

management of fixed assets. In addition to that, the Board of Supervisors along with other departments

concerned made a general inspection over the Bank's bill business.

Further progress has been made in information disclosure. Pursuant to the requirements of Provisional

Rues on Information Disclosure for Commercial Banks, more detailed information were disclosed in the

Bank's annual report. Two shareholders' meetings were convened in 2003 to report the inspection results for

2002 given by China Banking Regulatory Commission, and answering the questions raised by shareholders.

A Circular for the Board of Directors and Board of Supervisors was drafted and delivered to all the

shareholders, which enabled shareholders to be timely informed of the Bank's progress in corporate

governance and operation performance. In that way, information exchange and communication among the

shareholders, directors and supervisors have been enhanced.

SHAREHOLDERS' MEETINGS DURING THE REPORTING PERIOD

On 16 January 2003, the interim General Meeting of Shareholders was held in Beijing. Seventy nine shareholders

attended and exercised the right to vote at the meeting. The shareholders present represented 6073.2 million

shares of the Bank, accounting for 73.9% of the total stock shares, based on total 8216.89 million shares,

which was in compliance with the Company Law of China and the Article of Association of the Bank. The

meeting reviewed and approved the following proposals: 1. Article of Association of the Bank (revised version

2003); 2. Rules of Procedure for the General Meetings of Shareholders of CEB; 3. Rules of Procedure for the

Board of Directors of CEB; 4. Rules of Procedure for the Board of Supervisors of CEB; 5. Proposal to Appoint

Independent Directors and Appointment Procedure; 6. Proposal to Appoint External Supervisors and

Appointment Procedure.

On 11 July 2003, the seventh Shareholders' Meeting (Shareholders' Annual Meeting 2003) was held in Beijing.

Ninety seven shareholders attended and exercised the right to vote at the meeting. The shareholders present

represented 6641 million shares of the Bank, accounting for 80.82% of the total stock shares (based on a total

of 8216.89 million shares) of the Bank, which complied with the Company Law of China and the Article of

Association of the Bank. The following reports and proposals were reviewed and approved: 1. Work Report

by the Board of Directors for 2002; 2. Work Report of the Board of Supervisors for 2002; 3. CEB's Financial



Report for 2002 and Financial Projection for 2003; 4. CEB's Scheme of Profit Appropriation for 2002;

5. Proposal to Elect Directors of CEB's Third Board of Directors; 6. Proposal to Elect Supervisors of CEB's

Third Board of Supervisors; 7. Proposal to Authorize the Board of Directors to Revise Certain Articles of the

CEB's Articles of Association Pursuant to the Opinions of China Banking Regulatory Commission.

REPLACEMENT OF DIRECTORS AND SUPERVISORS DURING THE REPORTING PERIOD

On 7 March 2003, by voting via communication, the Shareholders meeting appointed Mr. Xia Bin and

Dr. Steven W.Hoagland independent directors of the Bank, and appointed Mr. Zhong Suhan the supervisor

of the Bank, taking the place of Mr. Liu Yingfu.

According to the Articles of Association, the Bank's directors and supervisors are elected every three

years. Election of the directors and supervisors was carried out in 2003. On 11 July 2003, Mr. Wang

Mingquan, Mr. Wang Chuan, Mr. Guo You, Mr. Wu Qing, Mrs. Jiang Bo, Mr. Shan Jianbao, Mr. Li

Guanglin, Mr. Chen Juemin, Mr. Jonghwa Lee, Mr. Ma Jianping, Mr. Dong Xiaoyun, Mr. Zhang Zhende,

Mr. Guo Ming, Mr.Xia Bin, Dr. Steven W Hoagland were formally elected directors of the Bank's Third

Board of Directors at the Seventh Shareholders' Conference. In addition, Mr. Chen Tielin, Mr. Wang Yugui,

Mr. Ye Xun, Mr. Li Zhaohui, Mr. Zheng Zhongan, Mr. Ren Xia and Ms. Bao Guoming were elected

supervisors of the Bank's Third Board of Supervisors. Mr. Yang Junchuan, Mr. Guo Qingwei, Mr. Chen Yu

and Mr. Wang Yanxin were elected supervisors from the staff members.

A N N U A L R E P O R T 2 0 0 3 047

STRUCTURE OF THE BOARD OF DIRECTORS AND MEETINGS INFORMATION

Structure of the Board of Directors

The Bank's Board of Directors consists of the following 15 members:

Name Gender Age Employment Position

Wang Mingquan Male 57 China Everbright Group Ltd Chairman & CEO

Wang Chuan Male 56 China Everbright Group Ltd, Vice Chairman, President

China Everbright Bank

Guo You Male 47 China Everbright Ltd. CEO

Wu Qing Male 51 China Everbright Bank Director, EVP

Jiang Bo Female 49 China Everbright Bank Director, EVP

Shan Jianbao Male 50 China Everbright Bank Director, EVP

Li Guanglin Male 40 Yuxi Hongta Tobacco Group Co. Ltd Chief Accountant

Chen Juemin Male 51 Zhejiang Southeast Electric Power Co. Ltd Deputy General Manager

Jonghwa Lee Male 51 Asian Development Bank Senior Investment Officer

Ma Jianping Male 49 Shanghai Aijian Trust & Investment Co. Ltd CEO

Guo Ming Male 47 Shanxi International Electric Power Group Co. Ltd Chairman & CEO

Dong Xiaoyun Male 49 Yunnan Tobacco Xingyun Investment Chairman & CEO

Holdings Co. Ltd

Zhang Zhende Male 54 Qingdao Guoxin Industrial Company Chairman

Xia Bin Male 53 Financial Research Institute of Director

State Council Development and Research Center Independent Director

Steven Hoagland Male 55 Independent Consultant Independent Director

Note: The Bank held interim Shareholders' meeting on Feb. 17, 2004 and approved to appoint Mr. Wu Minghua independent director of the Bank.

BANK DIRECTORS' REMUNERATION

Independent directors and management member directors get remuneration from the Bank. The Chairman

and other directors do not receive remuneration from the Bank. No Board Director holds shares of the Bank.

MEETINGS OF THE BOARD OF DIRECTORS AND THE SPECIAL COMMITTEES IN THEREPORTING PERIOD

On 16 January 2003, the Tenth Meeting of the Second Board of Directors was held in Beijing. Nine directors

were present at the meeting, four directors entrusted other directors to exercise the right to vote. The meeting

was legal and effective. The following reports and proposals were reviewed and approved: 1. Proposal to

Appoint Mr. Xia Bin and Dr. Steven Hoagland as CEB's Independent Directors; 2. Proposal to Appoint

Mr. Chen Yuansheng as Secretary of CEB's Board of Directors; 3. Report to the Board of Directors for

Examination of the Share Transfer by Some Shareholders and Verification of the Transferee's Qualification.

On 17 April 2003, the eleventh meeting of the second Board of Directors was held in Beijing. Nine directors



attended the meeting and four directors entrusted other directors to exercise voting right. The meeting was

legal and effective. Following reports and proposals were reviewed and approved at this meeting:

1 Report of CEB's Board of Directors for Year 2002;

2 Report on Business Operation and Management of CEB for Year 2002;

3 Financial Report for 2002 and Financial Projection for 2003;

4 Scheme of Profit Appropriation for Year 2002 to be submitted to the Shareholders' Meeting for approval;

5 Annual Report of CEB for Year 2002;

6 Proposal to Change the Number of Directors on the New Board of Directors;

7 Proposal on the Candidates for Directors on CEB's Third Board of Directors; and

8 Proposal to Inviting Lawyers to Witness the Shareholders' Meeting.

On 11 July 2003, the first meeting of the third Board of Directors was held in Beijing. Eleven directors

attended the meeting and three directors entrusted other directors to exercise voting right. The meeting was

legal and effective. The following reports and proposals were reviewed and approved at this meeting:

1 Proposal to Elect Mr. Wang Mingquan as Chairman and Elect Mr. Wang Chuan as Vice Chairman of

CEB's Third Board of Directors;

2 Proposal to Appoint Mr. Wu Qing and Mrs. Li Jie as Executive Vice President of CEB;

3 Proposal on the Establishment of Special Committees under the Board of Directors and the Name List of

the Proposed Members;

4 Proposal on Amendments to the Provisional Work Rules for Special Committees under the Board of

Directors;

5 Report on CEB's Business Operation of the First Half of 2003 and the Work Plan for the Second Half of

2003; and

6 Proposal on Share Transfers by Some Shareholders to be Submitted to the Board of Directors for Approval

and the Verification of the Transferees' Qualification.

At the first meeting of the Risk Management Committee under the Board of Directors held in Beijing on 24

July 2003, the committee members discussed the basic structure of the internal risk control of CEB, further

defined the duties of the committee, clarified the committee's work plan for the second half of the year and

reviewed the plan to establish its work team.

On 24 July 2003, the first meeting of the Audit and Related-Party Transactions Committee under the Board

of Directors was held in Beijing. At the meeting, the committee reviewed the requirements of CBRC, CEB's

Articles of Association and relevant regulation on the committee's functions and duties, adopted its annual

work plan and reviewed the matters of establishing its work team.

A N N U A L R E P O R T 2 0 0 3 049

On 31 July 2003, the first meeting of the Nomination Committee under the Board of Directors was held in

Beijing. At this meeting, the committee members reviewed the committee's functions and the work plan for

the second half of the year, in particular, discussed the membership and composition of both the Board of

Directors and Senior Management, and the issues on introducing new independent directors and establishment

of its work team.

On 20 August 2003, the first meeting of the Remuneration Committee under the Board of Directors was

held in Beijing. At the meeting, the committee further confirmed its functions, reviewed and proposed the

standard for the annual remuneration and transportation allowance for the directors and supervisors (including

independent directors and external supervisors as well). In addition, the committee mapped out its work

plan for the second half of the year.

On 14 October 2003, the second meeting of the Nomination Committee was convened in Shanghai. At the

meeting, the committee reviewed and spirit of the speech delivered by Mr. Tang Shuangning, Vice Chairman

of CBRC, at the Meeting of Supervision on Joint-stock Commercial Banks, analyzed the current composition

of the Board of Directors and worked out a proposal for optimizing the composition. Besides, the committee

approved the rules of procedure of the committee and the proposal on appointing one or two more independent

directors, which was to be submitted to the Board of Directors for approval.

On 15 October 2003, the second meeting of the third Board of Directors was held in Shanghai. Twelve

directors attended the meeting and three directors entrusted other directors to exercise voting right. The

meeting was legal and valid. The following reports and proposals were reviewed and approved at this

meeting:

(1) Proposal to Appoint More Independent Directors and Amend CEB's Articles of Association;

(2) Proposal to Reform the Organization Framework of CEB's Credit Risk Management; and

(3) Proposal on Share Transfer Transactions by Some Shareholders to be Submitted to the Board of Directors

for Approval and Verification of the Transferees' Qualification.

Moreover, the directors reviewed the Provisional Rules for the Senior Management to Report Major Issues

Concerning Business Operation and Management to the Board of Directors; Proposal for Board of Directors

to Authorize the Chairman to Exercise Partial Powers during Adjournment and Work Rules of CEB's Senior

Management. These proposals were all approved by the Board of Directors via telecom vote on 26 October

2003.

On 3 November 2003, the second meeting of the Audit and Related-Party Transactions Committee under

the Board of Directors was held in Kunming. The Committee discussed the issues on assessing the ceiling

of the credit line for China Everbright Group and its related parties, CEB continuously providing guarantee

on credit for China Everbright Group and the use of the dividend for year 2002 of China Everbright Group.

On 15 December 2003, the second meeting of the Remuneration Committee under the Board of Directors

was held in Beijing. The Committee reviewed and approved the Proposal on Adjustment of the Standard of



Transportation Allowance for Directors and Supervisors, proposed Opinions on Improving Senior

Management Members' Remuneration System, and discussed the issue raised by the senior management of

providing for bonus from the over fulfilled profits.

On 16 December 2003, the third meeting of the third Board of Directors was held in Beijing. Eleven directors

were present and four directors entrusted other directors to exercise voting right. The meeting was legal and

valid. At the meeting, the directors discussed and approved the Motion on Increasing the Volume of Bad

Loan Write-off for Year 2003, the Proposal to Grant RMB8.311 billion yuan as the Ceiling of Credit Line

for China Everbright Group and Its Related Parties and approved two proposals to raise capital adequacy

ratio by way of issuing subordinate debts and undertaking private placement in year 2004.

IMPLEMENTATION OF THE RESOLUTIONS OF SHAREHOLDERS' MEETING DURING THEREPORTING PERIOD

In the reporting period, according to the resolutions of the shareholders' meeting, the third Board of Directors

and the third Supervisory Board were founded, and the Chairman, Vice Chairman of the Board of Directors

and the Chairman of the Supervisory Board were elected respectively. CEB declared the qualification of

newly appointed directors and supervisors to CBRC in light of the relevant regulations.

In the second half of 2003, according to the resolutions of the shareholders' meeting with regard to the profit

distribution, the Board of Directors gave out dividends to all the shareholders (except those whose equities

were blocked or frozen) for RMB0.04 yuan per share. In addition, pursuant to the authorization of the

shareholders' meeting and relevant regulations of CBRC, the Board of Directors also made necessary

modifications to several terms of CEB's Articles of Association.

BUSINESS STRATEGIES AND OBJECTIVES FOR YEAR 2004 ADOPTED BY THE BOARDOF DIRECTORS

The core business strategies for year 2004 are: taking the operating results of year 2003 as the basis, aiming

at strengthening capability of sustainable development, conciliating the relationship between scale, quality

and efficiency, paying great attention to efficient development, adjusting structure of asset and liability and

NPL workout, endeavoring to decrease capital use and risk assets, improving capital adequacy level,

enhancing asset quality, raising overall profitability, realizing the goal of "double deduction" in both non-

performing assets and non-performing loans, insisting on the principles of "safety, liquidity and profitability",

and, keeping on enhancing shareholders' value and ROE ratio.

The main business goals for 2004 are: total corporate and savings deposits reach RMB395 billion yuan,

growing by 15% compared with the previous year; total outstanding loans reach RMB280 billion yuan,

increasing by 13%; total assets amount to RMB460 billion yuan, increasing by 17%; pre-taxation profits

reach RMB1 billion yuan, increasing by 23%; and shareholders' equity expected to reach RMB13.6 billion

yuan.

A N N U A L R E P O R T 2 0 0 3 051

COMPOSITION OF THE SUPERVISORY BOARD

Composition of the Supervisory Board

There are eleven supervisors in the Supervisory Board at present:

NAME GENDER AGE EMPLOYER POSITION

Chen Tielin Male 65 China Everbright Bank Chairman of the Supervisory Board

Wang Yugui Male 52 China Shipowners Mutual General Manager

Assurance Association

Ye Xun Male 42 General Tobacco Group Co. Ltd. CEO

Zheng Zhong'an Male 58 Beijing Zhongguancun Technology Executive Assistant to CEO;

Development (Holdings) Ltd. Executive Deputy Director of

the Financial Committee

Li Zhaohui Male 22 Shanxi Haixin Iron and Steel Co. Ltd. Chairman of the Board of Directors

Ren Xia Male 60 Used to work in Intemal Audit External supervisor

Department of the PBOC

Bao Guoming Female 52 Cadres Training Centre State Director

Audit Bureau External supervisor

YangJunchuan Male 38 Internal Auditing Department, CEB General Manager

GUO Qingwei Male 33 Special Loans Administration Division Chief

Department, CEB

Chen Yu Female 38 Planning and Treasury Department, General Manager

Beijing Branch, CEB

Wang Yanxin Female 52 Planning and Treasury Department, General Manager

Tianjin Branch, CEB

2. Remuneration of CEB's supervisors

Chairman of the Supervisory Board, the employee supervisors and external supervisors get remuneration

from CEB, other supervisors do not get remuneration from CEB. No supervisor holds shares of the Bank.

MEETINGS OF THE SUPERVISORY BOARD AND THE SPECIAL COMMITTEES

On 16 January 2003, the eighth meeting of the second Supervisory Board was held in Beijing. Eleven

supervisors were present and five entrusted other supervisors to exercise voting right. The supervisors

reviewed and approved Motion on Replacement of Supervisors of CEB; Work Rules of the Audit Committee

under the Supervisory Board of CEB (provisional) and Work Rules of the Nomination Committee under the

Supervisory Board of CEB (provisional) at the meeting.

On 18 April 2003, the ninth meeting of the second Supervisory Board was convened in Beijing. Ten

supervisors were present and six entrusted other supervisors to exercise voting right. The following reports

and proposals were reviewed and approved at this meeting: Financial Statement and Audit Report for year



2002; Work Report of the Supervisory Board for year 2002; Proposal to Change the Number of Supervisors

Nominated to the New Supervisory Board; Proposal to Appoint Mr. Ren Xia and Mrs. Bao Guoming as

External Supervisors of CEB; Proposal on the Name List of the Supervisor Candidates Nominated by

Shareholders to CEB's Third Supervisory Board; and Behavior Codes of CEB's Supervisors (provisional).

On 11 July 2003, the first meeting of the third Supervisory Board was convened in Beijing. Nine supervisors

were present. The meeting reviewed and approved the following proposals: Proposal to Elect Mr. Chen

Tielin as Chairman of CEB's Third Supervisory Board; Proposal to Establish Special Committees under the

Supervisory Board and the Name List of the Proposed Members; and Proposal on Amendments to the

Provisional Work Rules for Special Committees under the Supervisory Board.

On 1 August 2003, the first meeting of the Audit Committee under the third Supervisory Board was held in

Beijing. Five supervisors attended the meeting and reviewed and approved the Proposal on the Special

Audit of CEB's Fixed Assets.

On 15 October 2003, the second meeting of the third Supervisory Board was held in Shanghai. Seven

supervisors attended the meeting and four entrusted other supervisors to exercise voting right. The supervisors

reviewed the Proposal on Stipulating Operating Procedures for Auditing of CEB's Supervisory Board

(provisional), which was approved by the Supervisory Board via telecom vote.

On 28 November 2003, he second meeting of the Audit Committee under the third Supervisory Board was

held in Beijing. Five members present reviewed and approved the Report on Special Audit of CEB's Fixed

Assets Management.

On 16 December 2003, the third meeting of the third Supervisory Board was held in Beijing. Eight supervisors

attended the meeting and three entrusted other supervisors to exercise voting right. The meeting reviewed

and approved the Report on Special Audit of CEB's Fixed Assets Management.

During the reporting period, the Supervisory Board was present at all meetings of the Board of Directors.

A N N U A L R E P O R T 2 0 0 3 053

PROFILE OF THE SENIOR MANAGEMENT

Composition of Senior Management

Name Gender Age Years of working Position Scope of Responsibilitiesexperience

Wang Chuan Male 56 25 President Overall Management, Human

ResourcesDepartment; Party Affairs

Dept.

Wu Qing Male 51 27 Executive Vice Corporate Banking Dept.

President Information Technology Dept.

General Office

Jiang Bo Female 49 21 Executive Vice Special Loans Administration Dept.

President Internal Auditing Dept.

Inspection and Security Dept.

Li Ziqing Male 52 23 Executive Vice Fund Custody Dept. Treasury Dept.

President Research and Development Dept.

Shan Jianbao Male 50 24 Executive Vice Retail Banking Dept.

President International Business Dept.

Chief Representative Credit Control Dept.

of South Africa office Credit Approval Dept.

Li Jie Female 46 24 Executive Vice Planning and Finance Dept.

President Accounting and Settlement Dept.

Administration Dept.

Chen Yuansheng Male 50 7 Secretary to Information disclosure affairs

Boar of Directors Office to the Board of Directors

�identical to EVP) Office to the Supervisory Board

Bai Yuanqin Male 55 25 Chief Director of Labor Union

the Labor Union

Working Committee

(identical to EVP)

2. Remuneration to the Senior Management

The above listed senior management members received a tolal remuneration of RMB5,155,000yuan,

and the total remuneration of the Senior management members who had the top three amounts reached

RMB2,136,000yuan.


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CHANGES IN SHAREHOLDING STRUCTURE

By the end of 2003, the Bank has a total of 226 shareholders.

Changes happened to the shareholding structure are as follows.

1. Ningbo Daxie Shenzhou Garment Co. Ltd transferred 30 million shares it held to Zhejiang Feida Machine

and Electronic Group Ltd.. Shanghai Industrial Group Ltd. and Shanghai Industrial International Trade

(Group) Co. Ltd. transferred 135.52 million shares and 7.623 million shares they respectively held to

Shanghai Aijian Trust and Investment Co., Ltd. These share transfers were approved by the tenth meeting

of the second Board of Directors on January16, 2003.

2. Taiyuan Tangrun Industrial Co. Ltd. transferred 76002841 shares it held to Shanxi International Electric

Powers Group Ltd.. Daqing Hi-tech Development Zone Co. Ltd. transferred 16.94 million shares it held

to Daqing Hi-tech State-owned Asset Operation Co., Ltd. These share transfers were approved via

telecommunication voting by the second Board of Directors on April11, 2003.

3. Ningbo Daxie Shenzhou Development Zone Garment Co., Ltd. transferred 47 million shares it held to

Taiyuan Tangrun Industrial Co., Ltd. The share transfer was approved via telecommunication voting by

the second Board of Directors on May23, 2003.

4. Honghe Tobacco Factory transferred 57.1967 million shares it held to Yunnan Province Tobacco Honghe

County Co., Ltd.. Tibet Zhufeng Motorcycle Industrial Co., Ltd. transferred 28.6 million shares it held to

Fujian Seven Wolves Group Ltd. These share transfers were approved by the first meeting of the third

Board of Directors on July 11, 2003.

5. Beijing Xuanfang Investment Management Co., Ltd transferred 22 million shares it held to Beijing

Jinzheng Investment Co., Ltd. The share transfer was approved via telecommunication voting by the

third Board of Directors on September 24, 2003.

6. Shenzhen Hongbo Public Telephone Co, Ltd transferred 8801060 shares it held to Shenzhen Hongbo

Tele-communications Holdings Ltd.. Shanghai Huchang Special Steel Co., Ltd. transferred 8.47 million

shares it held to Shanghai Baosteel Corporation No. 5 Steel Co., Ltd.. These share transfers were approved

by the second meeting of the third Board of Directors on 15 October 2003.

China Technology Trade Co., Ltd transferred 35.574 million shares it held to Taiyuan Tangrun Industrial

Co., Ltd. The share transfer was approved by the third Board of Directors on November 26, 2003.


A N N U A L R E P O R T 2 0 0 3 059

PROFILE OF THE TOP TEN SHAREHOLDERS OF THE BANK

Shareholdings of the Top Ten Shareholders of the Bank are as follows:

SHARES HELD AT SHARES HELD PROPORTION NAME THE BEGINNING AT THE END TO TOTAL

OF 2003 OF 2003 SHARES

China Everbright Group LTD 1,985,053,848 1,985,053,848 24.16%

China Everbright Limited 1,757,581,229 1,757,581,229 21.39%

Yuxi Hongta Tobacco (Group) Co. Ltd 265,944,448 265,944,448 3.24%

Zhejiang Southeast Electric Power Co. Ltd 176,000,000 176,000,000 2.14%

Asian Development Ban 156,224,068 156,224,068 1.90%

Shanghai Aijian Trust & Investment Co. Ltd 143,143,000 143,143,000 1.74%

China Tobacco Corporation, Yunnan Province Branch 115,717,140 115,717,140 1.41%

Qingdao Guoxin Industrial Company 110,000,000 110,000,000 1.34%

Shanxi International Electric Power (Group) Co. Ltd 29,336,692 105,339,533 1.28%

China Ship Owners Mutual Assurance Association 91,014,000 91,014,000 1.11%

Note: Shanxi International Electric Power (Group) Co. Ltd formerly held 29,336,692 shares of the Bank. Upon the approval by Board of Directors via tele-communication voting on 11 April 2003, the said company purchased 76,002,841 shares of the Bank from Taiyuan Municipal Tangrun Industrial Co. Ltd, which made it become the 9th largest shareholder of the Bank with total shares of 105,339,533.

PROFILE OF THE SHAREHOLDERS HOLDING SHARES ABOVE 5%

There are two shareholders holding shares of the Bank above 5%, which are China Everbright Group Ltd

(hereinafter abbreviated as CEG) and China Everbright Limited respectively.

1. The biggest shareholder of the Bank - CEG was established in May 1983. As a leading conglomerate

managed by central government, CEG has been operating mainly in such business areas as banking,

securities, insurance and investment management with financial industry as its core business. Currently,

CEG is the major shareholder of the following financial institutions: China Everbright Bank, China

Everbright Securities Co. Ltd, and China Everbright & Sun Life Insurance Company, and CEG is also

the largest shareholder of Shenyin Wanguo Securities in mainland China. In addition, CEG owns three

publicly listed companies in Hong Kong: China Everbright Ltd, China Everbright Technology Co. Ltd

and China Everbright International Co. Ltd. By directly managing 60 enterprises by way of owning total

shares, controlling majority of the shares, or participating as minor shareholder, CEG is making best use

of markets resources both in mainland and Hong Kong to explore business potential.

2. The second largest shareholder of the Bank - China Everbright Limited (formerly known as Minghui

Development Co. Ltd), went public in Hong Kong Stock Exchange in 1973. After years of business

development, business re-adjustment and asset restructuring, China Everbright Limited has grown into a

financial holdings company. Nowadays, China Everbright Limited is focusing on financial business,

which includes banking, securities, futures trading, foreign exchange brokerage and insurance business.


OWNERSHIP RELATION AMONG THE TOP TEN SHAREHOLDERS

CEG is holding 55.47% of the shares of China Everbright Limited through China Everbright Holdings

(HK) Ltd. Although Yuxi Hongta Tobacco (Group) Co. Ltd is directly responsible for China Tobacco

Corporation Yunnan Province Branch, there is no equity relationship existing between them.

PROFILE OF COLLATERALIZED, ENTRUSTED AND FROZEN SHARES HELD BY TOP TENSHAREHOLDERS

Among the top ten shareholders, CEG and China Ship Owners Mutual Assurance Association have

respectively pledged all the Bank's shares they hold to certain enterprises and banks.

MAJOR RELATED-PARTY TRANSACTIONS

Loans

As at 31 December 2003, there were fifteen loan transactions to CEG, with the balance of loan at RMB2.164

billion yuan, for which CEG's share ownership was pledged, and classified as sub-standard according to

five-category loan classification.

As at 31 December 2003, there were four loan transactions to Qingdao Guoxin Industrial Company, with

the balance of loan at RMB311 million yuan, of which RMB116 million yuan was pledged by certificates of

deposit, the rest was credit loan, and classified as normal by five-category loan classification.

As at 31 December 2003, there were two loan transactions to General Tobacco Group Co. Ltd, with the

balance of loan at RMB100 million yuan, which was guaranteed by China Tobacco Corporation, Shandong

Province Branch, and classified as normal by five-category loan classification.

There was one loan to Shanxi Haixin Steel Group Co. Ltd with the balance of RMB70 million yuan, for

which share ownership was pledged, and classified as normal by five-category loan classification.

There was one loan to Shanghai Everbright Conference Center Co. Ltd with the balance of loan at RMB380

million yuan, for which land pledge was set, and classified as special mention by five-category loan

classification.

There was one loan to Shanghai Everbright Travel and Property Company with the balance of RMB3

million yuan, which was guaranteed by China Everbright Travel Corporation, and defined as loss by five-

category loan classification.

There was one loan to Guangzhou Shengye Real Estate Development Co. Ltd with the balance at RMB3.8

million yuan, which was guaranteed by CEG, and classified as doubtful by five-category loan classification.

There was one loan to Shunde Shuntong Group Co. Ltd with the balance at RMB5 million yuan, for which

share ownership was pledged, and classified as doubtful by five-category loan classification.

There was one loan to Everbright Timber (Shenzhen) Co. Ltd with the balance at RMB34.50 million yuan,

for which factory houses and land were pledged, and classified as special mention by five-category loan

classification.

The total balance of the above-mentioned related-party transactions was RMB3.071 billion yuan, which

accounted for 1.2% of the Bank's total loans, of which NPLs were RMB2.176 billion yuan, taking up 9.3%


A N N U A L R E P O R T 2 0 0 3 061

the Bank's total NPLs and 27.49% of the total related-party transactions.

Inter-financial institution lending

As at 31 December 2003, there were three lending transactions to China Everbright Securities Co. Ltd, with

balance at RMB816 million yuan, of which RMB316 million yuan was overdue, RMB500 million yuan was

normal.

As at 31 December 2003, there were three lending transactions to China Everbright Financial Co. Ltd, with

balance at USD151.5 million, at HKD162 million, and falling into normal classification.

The balance of the above-mentioned transactions totaled RMB2.242 billion yuan, which accounted for 47.91%

of the Bank's total inter-financial institution lending.

Due from other financial institutions

CEB placed with China Everbright Securities Co. Ltd two deposits of RMB76.52 million yuan, which has

already past due.

The total balance for above-mentioned deposits was RMB76.52 million yuan, which took up0.84% of the

Bank's total deposits from other banks.

Guarantee

The Bank provided three guarantees to CEG with the balance at RMB2.4 billion yuan, which accounted for

26.9% of the Bank's total guarantee amount.

LOANS TO SHAREHOLDERS THAT HAVE FALLEN INTO NON-PERFORMING STATUS

As at 31 December 2003, fifteen loans went to CEG, with the balance at RMB2.164 billion yuan, for all of

which share ownership was pledged, and classified as sub-standard by five-category loan classification.

The reason for the current situation is due to the historical problem left from before 2000. However, since

they are pledged with share ownership, there should be no final risk.

As at 31 December 2003, two loans went to Beijing Zhongguancun Technology Development Holdings Co.

Ltd, with the balance at RMB300 million yuan and classified as sub-standard by five-category loan

classification, of which RMB100 million yuan was pledged by Beijing Zhongguancun Securities Co. Ltd

using its share of ownership worth of RMB140 million yuan, of which RMB200 million yuan was guaranteed

by Beijing Zhongguancun Development and Construction Co. Ltd., of which RMB112 million yuan was

pledged by Beijing Zhongguancun Sihuan Medicine Development Co. Ltd on its stock share ownership.

The reasons causing the current situation are accumulated liabilities, unexpected low return on the investment

and poor liquidity.

As at 31 December 2003, two loans went to China Motorcycle Group Co. Ltd with the balance at RMB141.3

million yuan and classified as doubtful by five-category loan classification, of which RMB93 million yuan

was guaranteed by Jinan Qingqi Motorcycle Co. Ltd, of which RMB 48.3 million yuan was guaranteed by

Jinan Qingqi Suzuki Motorcycle Co. Ltd. The reason leading to the company's current situation is the

historical problem left over from the former China Investment Bank, which was inefficient in operation,

loose in management and losing market opportunities.

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