Bank of China New Zealand Banking Group. First Disclosure Statement

Bank of China New Zealand Banking Group First Disclosure Statement for the year ended 31 December 2017

TABLE OF CONTENTS 1 GENERAL INFORMATION AND DEFINITIONS... 3 2 GENERAL MATTERS... 3 3 GUARANTEE ARRANGEMENTS... 4 4 DIRECTORATE... 4 5 CONFLICTS OF INTEREST... 7 6 INTERESTED PARTY TRANSACTIONS... 7 7 AUDITOR... 7 8 CONDITIONS OF REGISTRATION... 7 9 PENDING PROCEEDINGS OR ARBITRATION... 9 10 CREDIT RATINGS... 9 11 OTHER MATERIAL MATTERS... 10 12 HISTORICAL SUMMARY OF FINANCIAL STATEMENTS... 11 13 DIRECTORS' AND NEW ZEALAND CHIEF EXECUTIVE OFFICER S STATEMENTS... 12 FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2017... 13-2 -

Disclosure Statement for the year ended 31 December 2017 1 GENERAL INFORMATION AND DEFINITIONS This is the Disclosure Statement for the year ended 31 December 2017. Certain information contained in this Disclosure Statement is required by section 81 of the Reserve Bank of New Zealand Act 1989 ( Reserve Bank Act ) and the Registered Bank Disclosure Statements (Overseas Incorporated Registered Banks) Order 2014 (as amended) (the Order ). In this Disclosure Statement: The Overseas Bank and "BoC" mean Bank of China Limited; The Overseas Banking Group means the total worldwide business of BoC including its controlled entities; The Branch means the New Zealand Branch of the Overseas Bank; "BoC NZ" means Bank of China (New Zealand) Limited, the locally incorporated subsidiary of the Overseas Bank; The "NZ Banking Group" means the New Zealand operations of the Overseas Bank comprising the Branch and BoC NZ; "Board" means the board of directors of the Overseas Bank; "RMB" means Renminbi, being the official currency of the People's Republic of China; and Reserve Bank means the Reserve Bank of New Zealand. Words and phrases not defined in this Disclosure Statement, but defined by the Order, have the meaning given by the Order when used in this Disclosure Statement. All amounts referred to in this Disclosure Statement are in New Zealand dollars unless otherwise stated. The Disclosure Statement of the NZ Banking Group is available for download, free of charge, on BoC NZ s website (www.bankofchina.com/nz). A printed copy will also be made available, free of charge, upon request and will be dispatched by the end of the second working day after the day on which the request has been made. 2 GENERAL MATTERS 2.1 Registered Bank The Overseas Bank is incorporated in China and is subject to regulatory oversight by the China Banking Regulatory Commission (the CBRC ) and the Government of the People's Republic of China (China). The Overseas Bank s principal office and address for service is No. 1 Fuxingmen Nei Dajie, Beijing, 100818, People s Republic of China. The Branch s head office and principal place of business is Level 17, Tower 1, 205 Queen Street, Auckland 1010, New Zealand. A copy of the Overseas Banking Group s most recently published financial statements is available for download, free of charge, on the Overseas Bank s website (www.boc.cn). 2.2 Limits on material financial support by the Overseas Bank There are no regulations, legislation or other restrictions of a legally enforceable nature in China that may materially inhibit the legal ability of BoC to provide material financial support to the NZ Banking Group. 2.3 Subordination of claims of creditors There are no material legislative or regulatory restrictions in the Peoples Republic of China that, in a liquidation of the Overseas Bank, subordinate the claims of any class of unsecured creditors of the Branch on the assets of the Overseas Bank to those of any other class of unsecured creditors of the Overseas Bank. - 3 -

Disclosure Statement for the year ended 31 December 2017 2.4 Requirement to hold excess assets over deposit liabilities The Overseas Bank is not required by any statute to hold in New Zealand an excess of assets over deposit liabilities. 2.5 Requirement to maintain sufficient assets to cover ongoing obligation to pay deposit liabilities The Overseas Bank is not subject to any regulatory or legislative requirement in the Peoples Republic of China to maintain sufficient assets in China to cover an ongoing obligation to pay deposit liabilities in that country. However, the Administrative measures for the liquidity risk of commercial banks' revised in 2015 require the Overseas Banking Group to maintain certain liquid assets in order to cover an ongoing obligation to pay liabilities of the Overseas Banking Group. The requirement is based on the consolidated position of the Overseas Banking Group and any liquidity requirements of the NZ Banking Group will form part of the Overseas Banking Group s consolidated position. The liquidity of the Branch is therefore managed within the Overseas Banking Group and will be influenced by Group requirements. 3 GUARANTEE ARRANGEMENTS No material obligations of the Overseas Bank that relate to the Branch are guaranteed as at the date of signing this Disclosure Statement. 4 DIRECTORATE 4.1 Directors The Directors of the Overseas Bank (the Directors ) at the date when this Disclosure Statement was signed were: Name: Siqing Chen (Chairman of the Board) Non-executive: No Qualifications: MBA, Certified Public Accountant, Senior Economist Primary occupation: Chairman Name: Deqi Ren Non-executive: No Qualifications: Master, Senior Economist Primary occupation: Executive Director and Executive Vice President Name: Xiangdong Zhang Non-executive: Yes Qualifications: Master, Senior Economist, Qualified Lawyer Country of residence: China Independent Director: No External Directorships: Non-executive Director of BOC Hong Kong (Holdings) Limited, Chairman of the Board of Directors of BOC Aviation Limited, Chairman of the Board of Directors of BOCHK (Holdings) Country of residence: China Independent Director: No External Directorships: Non-executive Director of BOC Hong Kong (Holdings) Limited Country of residence: China Independent Director: No External Directorships: None Primary occupation: Director - 4 -

Disclosure Statement for the year ended 31 December 2017 Name: Jucai Li Non-executive: Yes Qualifications: Bachelor, Senior Economist Country of residence: China Independent Director: No External Directorships: None Primary occupation: Director Name: Lihong Xiao Non-executive: Yes Qualifications: Master Country of residence: China Independent Director: No External Directorships: None Primary occupation: Director Name: Xiaoya Wang Non-executive: Yes Qualifications: Doctorate Country of residence: China Independent Director: No External Directorships: None Primary occupation: Director Name: Jie Zhao Non-executive: Yes Qualifications: Doctorate Country of residence: China Independent Director: No External Directorships: None Primary occupation: Director Name: Nout Wellink Non-executive: Yes Qualifications: Doctorate Country of residence: Netherlands Independent Director: Yes External Directorships: None Primary occupation: Vice Chairman of Supervisory Board of PricewaterhouseCoopers Accountants N.V. Name: Zhengfei Lu Non-executive: Yes Qualifications: Doctorate Primary occupation: Distinguished professor of Cheung Kong Scholar of Guanghua School of Management, Peking University Name: Cheuk Yan Leung Non-executive: Yes Qualifications: Master Primary occupation: Director Country of residence: China Independent Director: Yes External Directorships: Independent Non-executive Director of Sinotrans Ltd., Independent Non-executive Director of Sino Biopharmaceutical Ltd., Independent Non-executive Director of China National Materials Co., Ltd., and Independent Supervisor of PICC Property and Casualty Co., Ltd. Country of residence: Hong Kong, China Independent Director: Yes External Directorships: Independent non-executive director of MMG Limited - 5 -

Disclosure Statement for the year ended 31 December 2017 Name: Changyun Wang Non-executive: Yes Qualifications: Doctorate Country of residence: China Independent Director: Yes External Directorships: None Primary occupation: Professor and doctoral supervisor in finance at Renmin University of China ( RUC ) Name: Angela Chao Non-executive: Yes Qualifications: Master Primary occupation: Director Country of residence: United States Independent Director: Yes External Directorships: Deputy Chairman of Foremost Group 4.2 Audit Committee The Overseas Bank has an Audit Committee. The members of the Audit Committee as at the date of this Disclosure Statement are: Zhengfei Lu, Independent Director (Chairman) Jucai Li, Non-executive Director Jie Zhao, Non-executive Director Nout Wellink, Independent Director Cheuk Yan Leung, Independent Director Changyun Wang, Independent Director Angela Chao, Independent Director 4.3 Chief Executive Officer of Bank of China Limited, Branch in New Zealand ( New Zealand Chief Executive Officer ) Name: Lei Wang Country of residence: New Zealand Primary occupation: Chief Executive Officer, BoC NZ Secondary occupation: None External directorships: None 4.4 Responsible person Each of the current Directors of the Board named above has authorised Mr. Lei Wang in writing to sign this Disclosure Statement on their behalf in accordance with section 82 of the Reserve Bank Act. 4.5 Address for communications All communications to the Directors of the Overseas Bank, the New Zealand Chief Executive Officer of the Branch or the Responsible Person may be sent to the head office of the Branch at Level 17, Tower 1, 205 Queen Street, Auckland 1010, New Zealand. - 6 -

Disclosure Statement for the year ended 31 December 2017 5 CONFLICTS OF INTEREST The Board is responsible for ensuring that actual and potential conflicts of interest between the Directors duty to the Overseas Bank and their personal, professional or business interests are avoided or dealt with. Accordingly, each Director must: (a) Disclose to the Board any actual or potential conflicts of interest that may exist or might reasonably be thought to exist as soon as the situation arises. (b) If required by the Board, take steps as are necessary and reasonable to resolve any conflict of interest within an appropriate period. The Board will determine whether or not the Director declaring a conflict should remain present when the Board discusses matters about which the conflict relates. 6 INTERESTED PARTY TRANSACTIONS There have been no transactions entered into by any Director, or the New Zealand Chief Executive Officer, or any immediate relative or close business associate of any Director or the New Zealand Chief Executive Officer, with the NZ Banking Group: (a) on terms other than on those which would, in the ordinary course of business of the NZ Banking Group, be given to any other person of like circumstances or means; or (b) which could otherwise be reasonably likely to materially influence the exercise of that Director s or the New Zealand Chief Executive Officer s duties. 7 AUDITOR The name of the NZ Banking Group's auditor whose audit or review statement is referred to in this Disclosure Statement is Ernst & Young. Ernst & Young's address is EY Building, 2 Takutai Square, Britomart, Auckland 1010, New Zealand. 8 CONDITIONS OF REGISTRATION Conditions of registration for Bank of China Limited in New Zealand These conditions of registration apply on and after 29 March 2018 as per RBNZ s letter. The registration of Bank of China Limited (the Registered Bank ) in New Zealand is subject to the following conditions: 1. That the banking group does not conduct any non-financial activities that in aggregate are material relative to its total activities. In this condition of registration, the meaning of material is based on generally accepted accounting practice. 2. That the banking group s insurance business is not greater than 1% of its total consolidated assets. For the purposes of this condition of registration, the banking group s insurance business is the sum of the following amounts for entities in the banking group: (a) (b) if the business of an entity predominantly consists of insurance business and the entity is not a subsidiary of another entity in the banking group whose business predominantly consists of insurance business, the amount of the insurance business to sum is the total consolidated assets of the group headed by the entity; and if the entity conducts insurance business and its business does not predominantly consist of - 7 -

Disclosure Statement for the year ended 31 December 2017 insurance business and the entity is not a subsidiary of another entity in the banking group whose business predominantly consists of insurance business, the amount of the insurance business to sum is the total liabilities relating to the entity s insurance business plus the equity retained by the entity to meet the solvency or financial soundness needs of its insurance business. In determining the total amount of the banking group s insurance business (a) (b) all amounts must relate to on-balance sheet items only, and must comply with generally accepted accounting practice; and if products or assets of which an insurance business is comprised also contain a non- insurance component, the whole of such products or assets must be considered part of the insurance business. For the purposes of this condition of registration, insurance business means the undertaking or assumption of liability as an insurer under a contract of insurance: insurer and contract of insurance have the same meaning as provided in sections 6 and 7 of the Insurance (Prudential Supervision) Act 2010. 3. That the business of the registered bank in New Zealand does not constitute a predominant proportion of the total business of the registered bank. 4. That no appointment to the position of the New Zealand Chief Executive Officer of the registered bank shall be made unless: (a) (b) the Reserve Bank has been supplied with a copy of the curriculum vitae of the proposed appointee; and the Reserve Bank has advised that it has no objection to that appointment. 5. That Bank of China Limited complies with the requirements imposed on it by the China Banking Regulatory Commission. 6. That, with reference to the following table, each capital adequacy ratio of Bank of China Limited must be equal to or greater than the applicable minimum requirement. Capital adequacy ratio Common Equity Tier 1 capital Tier 1 capital Total capital Minimum requirement 5.0 percent 6 percent 8 percent For the purposes of this condition of registration, the capital adequacy ratios (a) (b) must be calculated as a percentage of the registered bank s risk weighted assets; and are otherwise as administered by China Banking Regulatory Commission. 7. That liabilities of the registered bank in New Zealand, net of amounts due to related parties (including amounts due to a subsidiary or affiliate of the registered bank), do not exceed NZ$15 billion. 8. That the registered bank may only undertake wholesale business in New Zealand that is, business transacted with wholesale investors defined under the Financial Market Conduct Act 2013 (Clause 3(2), Schedule 1). 9. That any derivative contracts entered into by the registered bank in New Zealand may only be for the purposes of - 8 -

Disclosure Statement for the year ended 31 December 2017 hedging a customer s positions with the registered bank, or the registered bank s own risk positions. 10. That the New Zealand assets of the registered bank do not exceed the consolidated total assets of Bank of China (New Zealand) Limited and its subsidiaries. In these conditions of registration, banking group means the New Zealand business of the registered bank and its subsidiaries as required to be reported in group financial statements for the group s New Zealand business under section 461B(2) of the Financial Markets Conduct Act 2013. business of the registered bank in New Zealand means the New Zealand business of the registered bank as defined in the requirement for financial statements for New Zealand business in section 461B(1) of the Financial Markets Conduct Act 2013. generally accepted accounting practice has the same meaning as in section 8 of the Financial Reporting Act 2013. liabilities of the registered bank in New Zealand means the liabilities that the registered bank would be required to report in financial statements for its New Zealand business if section 461B(1) of the Financial Markets Conduct Act 2013 applied. 9 PENDING PROCEEDINGS OR ARBITRATION As at the date of this Disclosure Statement, there are no pending legal proceedings or arbitration concerning any member of the NZ Banking Group, or if publicly available, the Overseas Banking Group, whether in New Zealand or elsewhere, that may have a material adverse effect on the Overseas Bank or the NZ Banking Group. 10 CREDIT RATINGS 10.1 The Overseas Bank s credit ratings The Overseas Bank has the following credit ratings as at the date this Disclosure Statement was signed. Credit ratings Standard & Poor's Moody s Investor Service Fitch Ratings Long-term counterparty credit rating A A1 A Short-term counter party credit rating A-1 Prime-1 F1 Outlook Stable Stable Stable There have been no changes to the above credit ratings since the ratings were obtained. There are no qualifications to the rating for the Overseas Bank. On 2 March 2016, Moody's Investors Service changed the outlook on the Overseas Bank s credit rating to negative from stable. On 24 May 2017, Moody's Investors Service announced to affirm the A1 long-term deposit rating and revise its credit rating outlook from negative to stable. A credit rating is not a recommendation to buy, sell or hold securities of the Overseas Bank. Such ratings are subject to revision, qualification, suspension or withdrawal at any time by the assigning rating agency. Investors in the Overseas Bank s securities are cautioned to evaluate each rating independently of any other rating. - 9 -

Disclosure Statement for the year ended 31 December 2017 10.2 Description of credit rating scale The following is the description of the major rating category of each rating agency for the rating of long term senior unsecured obligations: Standard & Poor's Moody s Investors Service 10.2.1 The following grades display investment grade characteristics: Fitch Ratings Description of ratings 1 AAA Aaa AAA Ability to repay principal and interest is extremely strong. This is the highest investment category. AA Aa AA Very strong ability to repay principal and interest. A A A BBB Baa BBB 10.2.2 The following grades have predominantly speculative characteristics: BB Ba BB B B B CCC Caa CCC CC Ca CC to C Highest risk of default. Strong ability to repay principal and interest although susceptible to adverse changes in economic, business or financial conditions. Adequate ability to repay principal and interest. More vulnerable to adverse changes. Significant uncertainties exist which could affect the payment of principal and interest on a timely basis. Greater vulnerability and therefore greater likelihood of default. Likelihood of default considered high. Timely repayment of principal and interest is dependent on favorable financial conditions. SD to D C RD to D Obligation currently in default. ((1) This is a general description of the rating categories based on information published by Moody s Investors Service. Moody s Investors Service apply numeric modifiers 1, 2 and 3 to show relative standing within the major ratings categories with 1 indicating the higher end of that category and 3 indicating the lower end. Credit ratings by Standard & Poor s Ratings Services and Fitch Ratings may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories. 11 OTHER MATERIAL MATTERS There are no matters relating to the business or affairs of the NZ Banking Group which are not contained elsewhere in the Disclosure Statement and would, if disclosed, materially affect the decision of a person to subscribe for debt securities of which the Overseas Bank or any member of the NZ Banking Group is the issuer. - 10 -

Disclosure Statement for the year ended 31 December 2017 12 HISTORICAL SUMMARY OF FINANCIAL STATEMENTS 31 December 2017 31 December 2016 31 December 2015 31 December 2014 For the period ended All in 's Financial performance 12 months 12 months 12 months 7 months Interest income 28,498 11,992 3,505 441 Interest expense (16,687) (6,712) (496) - Net interest income 11,811 5,280 3,009 441 Other operating income/(expense) 9,778 3,443 (502) 159 Net operating Income 21,589 8,723 2,507 600 Operating expenses (12,513) (10,071) (9,057) (1,417) Provision for impairment losses (12,018) (501) (436) - Profit /(loss) before tax (2,942) (1,849) (6,986) (817) Income tax (expense)/credit 2,147 222 817 - Net profit/(loss) for the period (795) (1,627) (6,169) (817) Financial position As at All in 's 31 December 2017 31 December 2016 31 December 2015 31 December 2014 Total assets 1,665,539 514,534 208,356 68,143 Total individually impaired assets 33,028 - - - Total liabilities 1,451,640 459,840 152,035 5,653 Total head office account - - - - Total equity 213,899 54,694 56,321 62,490 The amounts disclosed in this historical summary of financial statements are for the periods ended and as at 2014, 2015, 2016 and 2017, as the NZ Banking Group has less than 5 consecutive full year accounting periods, and have been taken from the audited financial statements of the BoC NZ. - 11 -

Disclosure Statement for the year ended 31 December 2017 FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 December 2017 STATEMENT OF COMPREHENSIVE INCOME... 14 STATEMENT OF FINANCIAL POSITION... 15 STATEMENT OF CHANGES IN EQUITY... 16 STATEMENT OF CASH FLOWS... 17 1 ACCOUNTING POLICIES... 18 2 INTEREST INCOME... 26 3 INTEREST EXPENSE... 26 4 OTHER OPERATING INCOME / (EXPENSE)... 27 5 OPERATING EXPENSES... 27 6 PROVISION FOR IMPAIRMENT LOSSES... 28 7 INCOME TAX EXPENSE... 29 8 CASH AND LIQUID ASSETS... 29 9 RECEIVABLES DUE FROM OTHER FINANCIAL INSTITUTIONS... 30 10 FINANCIAL ASSETS HELD FOR TRADING AND DERIVATIVE FINANCIAL INSTRUMENTS... 31 11 AVAILABLE-FOR-SALE FINANCIAL ASSETS... 32 12 LOANS AND ADVANCES... 32 13 ASSET QUALITY... 32 14 PROPERTY AND EQUIPMENT... 35 15 OTHER ASSETS... 35 16 PAYABLES DUE TO OTHER FINANCIAL INSTITUTIONS... 36 17 CUSTOMER DEPOSITS... 36 18 DEBT SECURITIES ON ISSUE... 36 19 OTHER LIABILITIES... 37 20 CONTRIBUTED EQUITY AND HEAD OFFICE ACCOUNT... 37 21 RETAINED LOSSES... 38 22 ADDITIONAL INFORMATION ON STATEMENT OF FINANCIAL POSITION... 38 23 CONTINGENCIES AND COMMITMENTS... 38 24 OFFSETTING OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES... 39 25 FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES... 39 26 RELATED PARTY TRANSACTIONS... 42 27 KEY MANAGEMENT PERSONNEL... 43 28 CONCENTRATION OF CREDIT EXPOSURES... 43 29 CONCENTRATION OF FUNDING... 47 30 INSURANCE, SECURITISATION, FUNDS MANAGEMENT, OTHER FIDUCIARY ACTIVITIES AND THE MARKETING AND DISTRIBUTION OF INSURANCE PRODUCTS... 48 31 RISK MANAGEMENT... 49 32 CAPITAL ADEQUACY... 62 33 OTHER INFORMATION ON THE OVERSEAS BANKING GROUP... 65 34 EVENTS SUBSEQUENT TO THE REPORTING DATE... 65 INDEPENDENT AUDITOR S REPORT... 66-13 -

Disclosure Statement for the year ended 31 December 2017 STATEMENT OF COMPREHENSIVE INCOME For the year ended 31 December 2017 Note 31 December 2017 31 December 2016 Interest income 2 28,498 11,992 Interest expense 3 (16,687) (6,712) Net interest income 11,811 5,280 Other operating income/(expense) 4 9,778 3,443 Net Operating Income 21,589 8,723 Operating expenses 5 (12,513) (10,071) Provision for Impairment losses 6 (12,018) (501) Profit/(loss) before tax (2,942) (1,849) Income tax credit 7 2,147 222 Profit/(loss) after income tax (795) (1,627) Other comprehensive income, net of tax Items that will not be reclassified to profit or loss - - Items that may be reclassified to profit or loss: Net change in available-for sale revaluation reserve (net of tax) - - Net change in cash flow hedge reserve (net of tax) - - Total other comprehensive income for the period, net of tax - - Total comprehensive income/(loss) for the period (795) (1,627) The above statement of comprehensive income should be read in conjunction with the accompanying notes. - 14 -

Disclosure Statement for the year ended 31 December 2017 STATEMENT OF FINANCIAL POSITION As at 31 December 2017 Note 31 December 2017 31 December 2016 Assets Cash and liquid assets 8 238,861 86,105 Receivables due from other financial institutions 9-79,740 Financial assets held for trading 10 - - Derivative assets 10 577 10 Available-for-sale financial assets 11 - - Loans and advances 12,13 1,413,797 344,982 Property and equipment 14 588 814 Tax recoverable - - Deferred tax assets 4,715 1,039 Other assets 15 7,001 1,844 Total assets 1,665,539 514,534 Liabilities Payable due to other financial institutions 16 896,972 240,495 Derivative liabilities 10 490 7 Customer deposits 17 392,877 214,180 Debt securities on issue 18 149,656 - Current tax liabilities - - Deferred tax liabilities - - Other liabilities 19 11,645 5,158 Total liabilities 1,451,640 459,840 Head office account Branch capital 20 - - Retained profits - - Total head office account - - NZ Banking Group equity Contributed equity 20 223,307 63,307 Reserves - - Retained losses 21 (9,408) (8,613) Total NZ Banking Group equity 213,899 54,694 Total interest earning and discount bearing assets 22 1,665,717 511,735 Total interest and discount bearing liabilities 22 1,436,958 453,985 The above statement of financial position should be read in conjunction with the accompanying notes. - 15 -

Disclosure Statement for the year ended 31 December 2017 STATEMENT OF CHANGES IN EQUITY For the year ended 31 December 2017 () Note Branch Head Office Account Branch capital Retained profits Other members of the NZ Banking Group Contributed equity Reserves Retained losses Total equity Balance as at 1 January 2017 Capital injection from shareholders Total comprehensive income for the period Balance as at 31 December 2017 20 - - 63,307 - (8,613) 54,694 - - 160,000 - - 160,000 - (102) - - (693) (795) - (102) 223,307 - (9,306) 213,899 For the year ended 31 December 2016 () Note Branch Head Office Account Branch capital Retained profits Other members of the NZ Banking Group Contributed equity Reserves Retained losses Total equity Balance as at 1 January 2016 - - 63,307 - (6,986) 56,321 Capital injection from shareholders - - - - - - Total comprehensive loss for the period - - - - (1,627) (1,627) Balance as at 31 December 2016 - - 63,307 - (8,613) 54,694 The above statement of changes in equity should be read in conjunction with the accompanying notes. - 16 -

Disclosure Statement for the year ended 31 December 2017 STATEMENT OF CASH FLOWS For the year ended 31 December 2017 Cash flows from operating activities Note 31 December 2017 31 December 2016 Interest received 25,501 11,306 Interest paid (12,522) (5,420) Other operating income received 11,751 2,382 Operating expenses paid (14,050) (9,969) Income taxes paid - - Net cash flows from operating activities before changes in operating assets and liabilities Net changes in operating assets and liabilities: 10,680 (1,701) Net change in loans and advances (1,080,833) (200,768) Net change in financial assets held for trading - - Net change in derivative assets and liabilities - - Net change in customer deposits 178,694 179,359 Net change in payable due to other financial institutions Net change in receivables due from other financial institutions 654,620 126,832 79,673 (34,922) Net change in tax recoverable - - Net change in current tax liabilities - - Net change in other assets (57) 6 Net change in other liabilities 442 1,073 Net cash flow from operating activities (156,781) 69,879 Cash flow from investing activities Purchase of property and equipment (104) (32) Purchase of available-for-sale assets - - Net cash flow from investing activities (104) (32) Cash flow from financing activities Issuance of ordinary shares 160,000 - Issuance of debt securities 149,656 - Interest paid on debt securities (15) - Net cash flow from financing activities 309,641 - Net change in cash and cash equivalents 152,756 69,847 Cash and cash equivalents at beginning of the period 86,105 16,258 Cash and cash equivalents at end of the period 8 238,861 86,105 The above statement of cash flows should be read in conjunction with the accompanying notes. - 17 -

1 ACCOUNTING POLICIES 1.1 Reporting Entity The reporting entity for the purpose of this Disclosure Statement is Bank of China Limited, Auckland Branch (the Branch ). The reporting group is the NZ Banking Group which is an aggregation of the Branch and Bank of China (New Zealand) Limited ( BoC NZ ), a locally incorporated subsidiary of the Bank of China (the Overseas Bank ), whose principal activity is the provision of a range of banking products and services to business, retail, corporate and institutional customers. The financial statements are for the branch from date of establishment until 31 December 2017 and for BoC NZ from 1 January 2017 to 31 December 2017 and have been prepared in accordance with the requirements of the Financial Markets Conduct Act 2013 and the Registered Bank Disclosure Statements (Overseas Incorporated Registered Banks) Order 2014 (as amended) (the Order ). They were approved for issue by the Board of Directors of the Overseas Bank (the Board ) on 28 March 2018. 1.2 Basis of preparation These general purpose financial statements have been prepared in accordance with Generally Accepted Accounting Practice in New Zealand ( NZ GAAP ). The financial statements of the NZ Banking Group comply with New Zealand equivalents to International Financial Reporting Standards ( NZ IFRS ) and other applicable Financial Reporting Standards as appropriate for for-profit entities. The financial statements have been prepared on a historical cost basis, modified by the application of fair value measurements required or allowed by relevant accounting standards. These financial statements also comply with International Financial Reporting Standards. 1.3 Basis of aggregation The NZ Banking Group is an aggregation of the individual financial statements of the Branch and BoC NZ. As at 31 December 2017, the head office account and reserves of the Branch showed loss of $102,000. All transactions and balances between entities within the NZ Banking Group have been fully eliminated where they exist. 1.4 Accounting estimates and assumptions The preparation of these financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the NZ Banking Group s accounting policies. Although the NZ Banking Group has internal control systems in place to ensure that estimates can be reliably measured, actual amounts may differ from those estimates. The areas involving a higher degree of judgment or areas where assumptions are significant to the NZ Banking Group include following: - Fair value of financial assets (Note 1.4(d)) - Provision for Loan losses (Note 1.4 (e), Note 6) - Fair value of Derivative instruments (Note 1.4 (h)) - Loan origination costs (Note 1.4 (k)) - Deferred tax assets recovery (Note 1.4 (m)) - 18 -

1.5 Summary of significant accounting policies (a) Foreign currency Both the functional and presentation currency of the NZ Banking Group is in New Zealand Dollars. Transactions in foreign currencies are translated into the functional currency at the exchange rates prevailing at the date of the transaction. All monetary assets and liabilities denominated in foreign currencies are retranslated at the spot rates of exchange prevailing at the end of the reporting period. Impacts of changes in the spot rates are recorded in the statement of comprehensive income. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. The gain or loss arising on translation of nonmonetary items measured at fair value is treated in line with the recognition of gain or loss on change in fair value of the item (i.e., translation differences on items whose fair value gain or loss is recognised in other comprehensive income or profit or loss are also recognised in other comprehensive income or profit or loss, respectively). (b) Cash and cash equivalents For the purposes of the statement of cash flows, cash and cash equivalents comprise balances with an original maturity of less than three months, including non-restricted balances with the central bank, due from banks, placements with banks and other financial institutions, short-term bills and notes classified as financial assets held for trading and available-for-sale financial assets. (c) Fair value measurement Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption the transaction to sell the asset or transfer the liability takes place either: In the principal market for the asset or liability, or In the absence of a principal market, in the most advantageous market for the asset or liability The principal or the most advantageous market must be accessible by the NZ Banking Group. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The NZ Banking Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. (d) Financial assets Financial assets comprise items such as receivables due from other financial institutions, financial assets held for trading, available-for-sale financial assets, derivative financial instruments and loans and advances to customers. Financial assets are classified into the following categories: financial assets at fair value through profit or loss, available-for-sale financial assets, investments held to maturity and loans and receivables. - 19 -

Financial assets at fair value through profit or loss Financial assets in this category include financial assets held for trading. A financial asset is classified as held for trading if it is acquired principally for the purpose of selling or repurchasing in the near term, or forms part of a portfolio of financial instruments that are managed together and for which there is evidence of short term profit taking, or it is a derivative (not in a qualifying hedging relationship). Purchases and sales of financial assets classified at fair value through profit or loss are recognised at fair value on trade date, with transaction costs being recognised in profit or loss immediately. Subsequent changes in fair value are recorded in net gain or loss on financial assets at fair value through profit or loss in the profit or loss. Available-for-sale financial assets Available-for-sale financial assets comprise non-derivative financial assets that are designated as available for sale or are not categorised into any of the categories of: (i) fair value through profit or loss; or (ii) held to maturity; or (iii) loans and receivables. Available-for-sale financial assets are initially recognised at fair value plus transaction costs. Gains and losses arising from subsequent changes in fair value are included in other comprehensive income until the asset is derecognised or impaired, at which time the cumulative gain or loss is transferred to the profit or loss. Held-to-maturity investments Non-derivative financial assets with fixed payments and fixed maturity are classified as held to maturity when the NZ Banking Group has the positive intention and ability to hold to maturity. Held-to-maturity investments are subsequently measured at amortised cost. This cost is computed as the amount initially recognised minus principal repayments, plus or minus the cumulative amortisation using the effective interest rate method of any difference between the initially recognised amount and the maturity amount. This calculation includes all fees paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums and discounts. For investments carried at amortised cost, gains and losses are recognised in profit or loss when the investments are derecognised or impaired, as well as through the amortisation process. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments, that are not quoted in an active market and which are not classified as available for sale or at fair value through profit or loss. Loans and receivables are initially recognised at fair value including direct and incremental transaction costs and subsequently recorded at amortised cost, using the effective interest method, and adjusted for impairment losses. Gains and losses are recognised in the profit or loss when such assets are derecognised or impaired, as well as through the amortisation process. Under the effective interest method, fee income and costs directly related to the origination of the loan are deferred over the expected life of the asset or, where appropriate, a shorter period. Loans and receivables include receivables due from other financial institutions and loans and advances provided to customers. (e) Impairment of financial assets Assets carried at amortised cost The NZ Banking Group assesses at each reporting date whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial 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 flows of the financial asset or group of financial assets that can be reliably estimated. Objective evidence that a financial asset or - 20 -

group of assets is impaired includes observable data that comes to the attention of the NZ Banking Group about the following loss events: (1) significant financial difficulty of the issuer or obligor; (2) a breach of contract, such as a default or delinquency in interest or principal payments; (3) the NZ Banking Group granting to the borrower, for economic or legal reasons relating to the borrower s financial difficulty, a concession that the lender would not otherwise consider; (4) it becoming probable that the borrower will enter into bankruptcy or other financial reorganisation; (5) the disappearance of an active market for that financial asset because of financial difficulties; or (6) observable data indicating there is a measurable decrease in the estimated future cash flows from a group of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the group, including: (a) adverse changes in the payment status of borrowers in the group; or (b) national or local economic conditions that correlate with defaults on the assets in the group. The NZ Banking Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant. The NZ Banking Group then performs a collective assessment for all other financial assets that are not individually significant or for which impairment has not yet been identified. If the NZ Banking Group determines that no objective evidence of impairment exists for an individually assessed financial asset, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognised are not included in a collective assessment of impairment. If there is objective evidence that an impairment loss on loans and receivables or held-to-maturity investments has been incurred, the amount of the loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the statement of comprehensive income. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the NZ Banking Group may measure impairment on the basis of an instrument s fair value using an observable market price. The calculation of the present value of the estimated future cash flows of a collateralised financial asset reflects the cash flows that may result from foreclosure less costs for obtaining and selling the collateral, whether or not foreclosure is probable. For the purposes of a collective assessment of impairment, financial assets are grouped on the basis of similar and relevant credit risk characteristics. Those characteristics are relevant to the estimation of future cash flows for groups of such assets by being indicative of the debtors ability to pay all amounts due according to the contractual terms of the assets being evaluated. Future cash flows in a group of financial assets that are collectively evaluated for impairment are estimated on the basis of the contractual cash flows of the assets in the group and historical loss experience for assets with credit risk characteristics similar to those in the group. Historical loss experience is adjusted on the basis of current observable data to reflect the effects of current conditions that did not affect the period on which the historical loss experience is based and to remove the effects of conditions in the historical period that do not exist currently. - 21 -

Estimates of changes in future cash flows for groups of assets should reflect and be directionally consistent with changes in related observable data from period to period. The methodology and assumptions used for estimating future cash flows are reviewed regularly by the NZ Banking Group to reduce any differences between loss estimates and actual loss experience. When a loan is uncollectible, it is written off against the related allowances for loan impairments. Such loans are written off after all the necessary procedures have been completed and the amount of the loss has been determined. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor s credit rating), the previously recognised impairment loss is reversed by adjusting the allowance account. The amount of the reversal is recognised in the statement of comprehensive income. (f) Financial liabilities Financial liabilities comprise items such as payable due to other financial institutions, derivative financial instruments, customer deposits and debt securities on issue. Financial liabilities may be held at fair value through profit or loss or at amortised cost. Items held at fair value through profit or loss comprise both items held for trading and items specifically designated at fair value through profit or loss on initial recognition. A financial liability is classified as held for trading if it is incurred principally for the purpose of selling in the near term, or forms part of a portfolio of financial instruments that are managed together and for which there is evidence of short term profit taking, or it is a derivative (not in a qualifying hedge relationship). Financial liabilities held at fair value through profit or loss are initially recognised at fair value with transaction costs being recognised immediately in the profit or loss. Subsequently, they are measured at fair value and any gains and losses are recognised in the profit or loss as they arise. All other financial liabilities, including customer deposits, payable due to other financial institutions, debt securities on issue and amount due to related entities are measured at amortised cost using the effective interest method. Customer deposits and borrowing Customer deposits and borrowing include term deposits, call deposits, payable due to other financial institutions and due to related entities. They are brought to account at the value of the outstanding balance. Interest is taken to account as accrued. Debt securities on issue Debt securities on issue are discounted bills initially recognised at amortised cost including directly attributable transaction costs and subsequently measured at amortised cost. Interest and yield related fees are recognised on an effective interest basis. (g) Derecognition of financial assets and financial liabilities The NZ Banking Group derecognises financial assets when the rights to receive cash flows from the asset have expired or when the NZ Banking Group transfers its rights to receive cash flows from the asset together with substantially all the risks and rewards of the asset. The NZ Banking Group enters into certain transactions where it transfers financial assets recognised on the statement of financial position but retains either all or a majority of the risks and rewards of the transferred financial assets. If all or substantially all risks and rewards are retained, the transferred financial assets are not derecognised from the statement of financial position. A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expires. Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of comprehensive income. - 22 -

(h) Derivative financial instruments The NZ Banking Group is exposed to changes in interest rates and foreign exchange rates from its activities. The NZ Banking Group uses cross-currency swaps and interest-rate swaps as derivative financial instruments to hedge these risks. Derivative financial instruments are classified as trading. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value with changes in fair value recognised in the profit or loss. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative. The fair value of forward exchange contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profiles. The fair value of interest rate swap contracts is determined by reference to market values for similar instruments. The NZ Banking Group does not apply hedge accounting under NZ IAS 39 Financial Instruments: Recognition and Measurement. (i) Property and equipment Cost and valuation All classes of property and equipment are measured at cost less accumulated depreciation and any impairment in value. The cost of an item of property and equipment comprises purchase price, tax and any directly attributable costs of bringing it to its present working condition and location for its intended use. Any subsequent expenditures incurred are capitalised when future economic benefits associated with the item will flow to the NZ Banking Group and the cost of the item can be measured reliably. Other expenditures, such as repairs and maintenance, are recognised in the profit or loss in the period in which they are incurred. Depreciation Depreciation amount of an item of property, plant and equipment is calculated using the straight-line method to allocate the cost less any estimated residual value over its estimated useful life. Leasehold improvements Office furniture and equipment Computer equipment Motor vehicles lesser of 5 years or the remaining lease term 5 years 3 years 6 years Residual values and useful lives are reviewed and adjusted if appropriate at each balance date. Assets are periodically reviewed for impairment. Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately through the statement of comprehensive income to its recoverable amount. (j) Contributed equity Issued and paid up share capital is recognised at the fair value of the consideration received by the NZ Banking Group. Transaction costs (if any) arising on issue of ordinary shares are recognised in the value of share capital. (k) Revenue and expense recognition Income is recognised to the extent that it is probable the economic benefits will flow to the entity and the revenue can be reliably measured. Net interest income is reflected in the statement of comprehensive income using the effective interest method. Fees and direct costs related to loan origination, financing or restructuring and loan commitments are deferred and amortised to interest income over the life of the loan using the effective interest method. - 23 -