Bank of Qingdao : CIRCULAR FOR 2021 FIRST EXTRAORDINARY GENERAL MEETING AND 2021 FIRST H SHARE CLASS MEETING

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular, you should consult your stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Bank of Qingdao Co., Ltd.*, you should at once hand this circular and the proxy form to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

This circular is for information purposes only and does not constitute an invitation or a solicitation of an offer to acquire, purchase or subscribe for securities or an invitation to enter into an agreement to do any such things, nor is it calculated to invite any offer to acquire, purchase or subscribe for any securities.

Bank of Qingdao Co., Ltd.*

ڡࢥვБٰ΅Ϟࠢʮ̡*

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

(H Shares Stock Code: 3866)

(Preference Shares Stock Code: 4611)

PROPOSAL FOR RIGHTS ISSUE

PLAN ON PUBLIC ISSUANCE OF SHARES BY WAY OF RIGHTS ISSUE

AUTHORIZATION TO THE BOARD TO DEAL WITH MATTERS

RELATED TO RIGHTS ISSUE

CHANGE IN REGISTERED CAPITAL AND THE CORRESPONDING AMENDMENTS TO

RELEVANT CLAUSES IN THE ARTICLES OF ASSOCIATION

UPON THE COMPLETION OF RIGHTS ISSUE FULFILLMENT OF ISSUE CONDITIONS OF RIGHTS ISSUE REPORT ON THE USE OF PREVIOUSLY RAISED FUNDS

REPORT ON THE FEASIBILITY OF USE OF PROCEEDS FROM RIGHTS ISSUE RISK REMINDER OF AND REMEDIAL MEASURES FOR THE DILUTION OF CURRENT RETURNS BY RIGHTS ISSUE TO ORIGINAL SHAREHOLDERS AND

COMMITMENTS BY RELEVANT ENTITIES

SHAREHOLDERS' RETURN PLAN FOR THE NEXT THREE YEARS (2021-2023)

AND

NOTICE OF 2021 FIRST EXTRAORDINARY GENERAL MEETING

NOTICE OF 2021 FIRST H SHARE CLASS MEETING

The letter from the Board is set out on pages 5 to 25 of this circular.

The Bank will hold the 2021 First EGM and Class Meetings at No. 6 Qinling Road, Laoshan District, Qingdao, Shandong Province, the PRC at 9:00 a.m. on Friday, 26 March 2021. The notices of the 2021 First EGM and the 2021 First H Share Class Meeting are set out on pages 89 to 92 and pages 93 to 96 respectively, of this circular.

If you intend to attend and/or vote at the 2021 First EGM and/or the 2021 First H Share Class Meeting, you are required to complete such proxy form in accordance with the instructions printed thereon and return it to the H Share Registrar (for H Shareholder(s)) or the Bank's PRC registered office and principal place of business (for A Shareholder(s)) not less than 24 hours before the designated time for convening the related meeting or any adjournment thereof. Completion and return of the proxy form shall not preclude you from attending and voting in person at the 2021 First EGM and/or the 2021 First H Share Class Meeting or at any adjournment thereof.

*Bank of Qingdao Co., Ltd. is not an authorized institution within the meaning of the Banking Ordinance (Chapter 155 of the Laws of Hong Kong), not subject to the supervision of the Hong Kong Monetary Authority, and not authorized to carry out banking and/or deposit-taking business in Hong Kong.

8 March 2021

I. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

II. MATTERS TO BE CONSIDERED AT THE EGM AND/OR THE H SHARE

CLASS MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

1. ProposalforRightsIssue ...................................... 6

2. Plan on Public Issuance of Shares by Way of Rights Issue . . . . . . . . . . . . 19

• 3. Authorization to the Board to Deal with Matters Related to the

  RightsIssue ................................................ 20

• 4. Change in Registered Capital and the Corresponding Amendments to

  Relevant Clauses in the Articles of Association Upon the Completion of

  RightsIssue ................................................ 22

5. Fulfillment of Issue Conditions of Rights Issue . . . . . . . . . . . . . . . . . . . . 23

6. Report on the Use of Previously Raised Funds . . . . . . . . . . . . . . . . . . . . . 23

7. Report on the Feasibility of Use of Proceeds from Rights Issue . . . . . . . . 23

8. Risk Reminder of and Remedial Measures for the Dilution of Current Returns by Rights Issue to Original Shareholders and Commitments by

Relevant Entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

9. Shareholders' Return Plan for the Next Three Years (2021-2023) . . . . . . . 24

III. RESPONSIBILITY STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

IV. THE EGM AND THE H SHARE CLASS MEETING . . . . . . . . . . . . . . . . . . . . 24

V. METHODS OF VOTING AT THE EGM AND THE H SHARE CLASS

MEETING ..................................................... 25

VI. RECOMMENDATIONS .......................................... 25

-i-

CONTENTS

APPENDIX IAPPENDIX IIAPPENDIX IIIAPPENDIX IVAPPENDIX VAPPENDIX VIPLAN ON PUBLIC ISSUANCE OF SHARES BY WAY

OF RIGHTS ISSUE ............................... 26

FULFILLMENT OF ISSUE CONDITIONS OF

RIGHTS ISSUE ................................. 61

REPORT ON THE USE OF PREVIOUSLY RAISED

FUNDS ......................................... 67

REPORT ON THE FEASIBILITY OF USE OF

PROCEEDS FROM RIGHTS ISSUE ................. 69

RISK REMINDER OF AND REMEDIAL MEASURES

FOR THE DILUTION OF CURRENT RETURNS BY RIGHTS ISSUE TO ORIGINAL SHAREHOLDERS AND

COMMITMENTS BY RELEVANT ENTITIES .......... 74

SHAREHOLDERS' RETURN PLAN FOR THE NEXT

THREE YEARS (2021-2023) ....................... 83

NOTICE OF 2021 FIRST EXTRAORDINARY GENERAL MEETING ........ 89

NOTICE OF 2021 FIRST H SHARE CLASS MEETING ................... 93

DEFINITIONS

In this circular, unless the context otherwise requires, the following expressions have the following meanings:

"2021 First EGM" or "EGM"

the 2021 first extraordinary general meeting of the Bank to be held at No. 6 Qinling Road, Laoshan District, Qingdao, Shandong Province, the PRC at 9:00 a.m. on Friday, 26 March 2021

"2021 First A Share Class

Meeting" or "A Share Class Meeting"

"2021 First H Share Class

Meeting"or "H Share Class Meeting"

the 2021 first A Share class meeting of the Bank to be held at No. 6 Qinling Road, Laoshan District, Qingdao, Shandong Province, the PRC on Friday, 26 March 2021, immediately after the conclusion of the 2021 First EGM the 2021 first H Share class meeting of the Bank to be held at No. 6 Qinling Road, Laoshan District, Qingdao, Shandong Province, the PRC on Friday, 26 March 2021, immediately after the conclusion of the 2021 First EGM and the 2021 First A Share Class Meeting

"A Rights Share(s)"

the new A Share(s) proposed to be placed and issued to Qualified A Shareholders pursuant to the A Share Rights Issue (less any A Shares not taken up by the A Shareholders)

"A Share Rights Issue Record

Date"

a date to be determined by the Board or its authorized person(s) by reference to which entitlements to the A Share Rights Issue are to be determined

"A Share Rights Issue"

the proposed issue of up to 823,996,506 A Rights Shares at the Rights Issue Price on the basis of up to three (3) A Rights Shares for every ten (10) existing A Shares held on the A Share Rights Issue Record Date

"A Shareholder(s)"

holder(s) of A Shares

"A Share(s)"

the Bank's ordinary share(s) of RMB1.00 each, which are listed on the Shenzhen Stock Exchange (stock code: 002948) and traded in RMB

"Articles of Association"

the Articles of Association of the Bank

"Bank"

Bank of Qingdao Co., Ltd. and its branches

"Board" or "Board of Directors"

the board of Directors of the Bank

In case of any discrepancy between the Chinese and English versions of this circular, the Chinese version shall prevail.

Bank of Qingdao Co., Ltd.*

ڡࢥვБٰ΅Ϟࠢʮ̡*

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

(H Shares Stock Code: 3866)

(Preference Shares Stock Code: 4611)

PROPOSAL FOR RIGHTS ISSUE

PLAN ON PUBLIC ISSUANCE OF SHARES BY WAY OF RIGHTS ISSUE

AUTHORIZATION TO THE BOARD TO DEAL WITH MATTERS

RELATED TO RIGHTS ISSUE

CHANGE IN REGISTERED CAPITAL AND THE CORRESPONDING AMENDMENTS TO

RELEVANT CLAUSES IN THE ARTICLES OF ASSOCIATION

UPON THE COMPLETION OF RIGHTS ISSUE FULFILLMENT OF ISSUE CONDITIONS OF RIGHTS ISSUE REPORT ON THE USE OF PREVIOUSLY RAISED FUNDS

REPORT ON THE FEASIBILITY OF USE OF PROCEEDS FROM RIGHTS ISSUE RISK REMINDER OF AND REMEDIAL MEASURES FOR THE DILUTION OF CURRENT RETURNS BY RIGHTS ISSUE TO ORIGINAL SHAREHOLDERS AND

COMMITMENTS BY RELEVANT ENTITIES

SHAREHOLDERS' RETURN PLAN FOR THE NEXT THREE YEARS (2021-2023)

AND

NOTICE OF 2021 FIRST EXTRAORDINARY GENERAL MEETING

NOTICE OF 2021 FIRST H SHARE CLASS MEETING

*Bank of Qingdao Co., Ltd. is not an authorized institution within the meaning of the Banking Ordinance (Chapter 155 of the Laws of Hong Kong), not subject to the supervision of the Hong Kong Monetary Authority, and not authorized to carry out banking and/or deposit-taking business in Hong Kong.

I. INTRODUCTION

Reference is made to the announcement of the Bank dated 26 February 2021. The Board of Directors invites you to attend the 2021 First EGM and the H Share Class Meeting to be held at No. 6 Qinling Road, Laoshan District, Qingdao, Shandong Province, the PRC, at 9:00 a.m. on Friday, 26 March 2021. This circular aims to provide further information on matters set out in the above announcement and the notices of the 2021 First EGM and the H Share Class Meeting.

Prior to the commencement of the H Share Rights Issue, the Bank will make a further announcement and issue the H Share Rights Issue Prospectus, which will contain all relevant details of Rights Issue, including the definitive basis on which the Rights Shares to be issued, the maximum number of Rights Shares to be issued, the Rights Issue Price, the period of closure of the register of members for the H Shares and the H Share Rights Issue Record Date, the trading arrangements for H Rights Shares, the arrangements for the excess H Rights Shares, the underwriting arrangements and the expected timetable of the Rights Issue.

As the proposal for Rights Issue is subject to, among others, the approval of the Shareholders, the proposal for Rights Issue may or may not materialize. The proposal for Rights Issue is conditional upon the fulfillment of the conditions set out in this circular.

If the conditions are not fulfilled, the Rights Issue will not proceed. Shareholders and investors are advised to exercise caution when dealing in the Shares.

II. MATTERS TO BE CONSIDERED AT THE EGM AND/OR THE H SHARE CLASS MEETING

1. Proposal for Rights Issue

In order to facilitate its stable and rapid development, further increase its operation strengths and enhance its core competitiveness and capability for sustainable development, the Bank proposes to issue A Rights Shares to Qualified A Shareholders and H Rights Shares to Qualified H Shareholders. The proposal for Rights Issue will include the following preliminary terms, but are subject to, among others, the implementation of the proposal for Rights Issue and the actual market conditions:

(1) Class and Par Value of the Shares to be Issued

The classes of the Shares to be issued under the Rights Issue are A Shares and H Shares with a par value of RMB1.00 per Share.

(2) Issuance Method

The issuance is conducted through rights issue of Shares to original Shareholders.

(3) Base, Proportion and Number of the Rights Issue

The A Share Rights Issue is proposed to be based on the total number of A Shares after the trading hours on the A Share Rights Issue Record Date, and the allotment will be made to all A Shareholders for Rights Issue on the basis of up to three (3) Shares for every ten (10) Shares. The H Share Rights Issue is proposed to be based on the total number of H Shares on the H Share Rights Issue Record Date, and the allotment will be made to all H Shareholders for Rights Issue on the basis of up to three (3) H Rights Shares for every ten (10) H Shares, with fractions of less than one (1) Rights Share to be dealt with according to the relevant requirements of the stock exchanges and securities registration and settlement institutions of the places where the securities are traded at. The subscription portion of both A Shares and H Shares are the same.

If, based on the Bank's total share capital of 4,509,690,000 Shares as at the Latest Practicable Date (including 2,746,655,020 A Shares and 1,763,034,980 H Shares), and assuming there is no change in the issued share capital of the Bank between the Latest Practicable Date and the Record Date, the number of Rights Shares is estimated to be not more than 1,352,907,000 Shares, among which, the number of A Rights Shares would not exceed 823,996,506 Shares and the number of H Rights Shares would not exceed 528,910,494 Shares. In the event that the total share capital of the Bank changes due to any bonus issue, capital conversion from capital reserve and other reasons before the Rights Issue, the number of Rights Shares will be adjusted accordingly based on the total share capital after the change.

The A Share Rights Issue will proceed on a best effort basis and the H Share Rights Issue will be fully underwritten pursuant to Rule 7.19(1) of the Hong Kong Listing Rules.

(4) Pricing Principle and Price for the Rights Shares

(I) Pricing Principle

• 1. The pricing shall take into account valuation indicators such as stock prices, P/E ratios and P/B ratios of the Bank in the secondary market as well as the development and Shareholders' interests of the Bank;

• 2. The pricing shall take into account the core tier-one capital requirement of the Bank for the next three years;

• 3. The pricing shall be in compliance with principles determined through negotiation between the Bank and the sponsor institution(s) (underwriter(s)).

(II) Rights Issue Price

The Rights Issue Price is determined by using market discount method based on the trading conditions of A Shares and H Shares in the market prior to the publication of the issuance announcement of A Share Rights Issue and a further announcement on the H Share Rights Issue before the commencement of the H Share Rights Issue. The final Rights Issue Price will be determined through the negotiation between those parties authorized by the Board and the sponsor institution(s) (underwriter(s)) with reference to the market conditions before the issuance. The Bank will also consider the discount range of comparable H Shares right issue transactions of the Chinese financial institutions when determine the Rights Issue Price. The Rights Issue Prices of A Shares and H Shares are the same after exchange rate adjustments.

(5) Target Subscribers for the Rights Issue

In the Rights Issue, the target A Share subscribers for the Rights Issue will be all A Shareholders of the Bank, who registered with the Shenzhen branch of China Clear after the trading hours on the A Share Rights Issue Record Date, and the target H Share subscribers for the Rights Issue will be all H Shareholders determined on the H Share Rights Issue Record Date. The Record Date of the Rights Issue will be otherwise determined after the approval of the proposal for Rights Issue by CSRC.

(6) Distribution Plan for Accumulated Undistributed Profits Prior to the Rights Issue

The accumulated undistributed profits of the Bank prior to the Rights Issue shall be shared by all Shareholders on a pro-rata basis of their shareholding after the completion of the Rights Issue.

(7) Time of Issuance

The Shares will be placed to all Shareholders at a suitable timing within the stipulated period, after the approval from the regulatory authorities and the stock exchanges for the Rights Issue is obtained.

(8) Method of Underwriting

A Share Rights Issue will proceed on a best effort basis, and H Share Rights Issue will be fully underwritten.

(9) Use of Proceeds Raised in relation to the Rights Issue

The proceeds raised from the Rights Issue will not exceed RMB5.0 billion (inclusive).

After deducting relevant issuance fees, the net proceeds raised from the Rights Issue will entirely be applied for the replenishment of the Bank's core tier-one capital, to enhance the Bank's capital adequacy ratio, support the sustainable and healthy development of the Bank's business in the future as well as strengthen the Bank's capital strength and competitiveness.

(10) Validity Period of the Resolution in relation to the Rights Issue

The effective period of the resolution on the Rights Issue shall be 12 months starting from the date on which the resolution is approved by the Bank's EGM and the Class Meetings.

(11) Listing of the Shares to be placed

The A Shares placed will be listed on the Shenzhen Stock Exchange according to the relevant requirements after the completion of A Share Rights Issue.

The H Shares placed will be listed on the Hong Kong Stock Exchange according to relevant requirements after completion of H Share Rights Issue.

The implementation of this resolution is subject to the approval by the Qingdao Supervision Bureau of the CBIRC, the approval by the CSRC and obtaining other necessary approvals involved in the Rights Issue.

Qualified H Shareholders

Subject to, among others, approval by the Shareholders at the relevant general meetings, the Bank will send the H Share Rights Issue Prospectus to the Qualified H Shareholders, including the PRC Southbound Trading Investors (and to the extent permitted by the relevant laws, to the Excluded Shareholders for information purposes only). To qualify for the H Share Rights Issue, a Shareholder must:

• (i) be registered as a H Shareholder of the Bank on the H Share Rights Issue Record

  Date; and

• (ii) not be an Excluded Shareholder.

Before the commencement of the H Share Rights Issue, the Bank will announce the date by which the H Shareholders must lodge any transfer documents in relation to the existing H Shares (together with the relevant H Share certificates) with the H Share Registrar, in order for the transferee to become a H Shareholder of the Bank on or before the H Share Rights Issue Record Date.

The PRC Southbound Trading Investors will not be excluded from participation in the H Share Rights Issue.

PRC Southbound Trading Investors

The Board has made the relevant enquiries and were advised that the PRC Southbound Trading Investors may participate in the H Share Rights Issue through China Clear. China Clear will provide nominee services for the PRC Southbound Trading Investors to (i) sell (in full or in part) their nil-paid H Rights Shares on the Hong Kong Stock Exchange under the Shanghai-Hong Kong Stock Connect and the Shenzhen-Hong Kong Stock Connect; and/or (ii) subscribe (in full or in part) for their pro-rata entitlement in respect of their Shares held on the H Share Rights Issue Record Date at the Rights Issue price under the H Share Rights Issue in accordance with the relevant laws and regulations. However, China Clear will not support applications by such PRC Southbound Trading Investors for excess H Rights Shares under the H Share Rights Issue through Shanghai-Hong Kong Stock Connect or Shenzhen-Hong Kong Stock Connect. In addition, according to the PRC legal adviser of the Bank, the PRC Southbound Trading Investors (or the relevant China Clear participants as the case may be) whose stock accounts in China Clear are credited with nil-paid H Rights Shares can only sell those nil-paid H Rights Shares on the Hong Kong Stock Exchange via China Clear under Shanghai-Hong Kong Stock Connect or Shenzhen-Hong Kong Stock Connect, and can neither purchase any nil-paid H Rights Shares nor transfer such nil-paid H Rights Shares to other PRC Southbound Trading Investors.

Save and except for the PRC Southbound Trading Investors and Qualified H Shareholders who have been exempted by or have obtained the necessary and appropriate approvals from the relevant PRC authorities in accordance with the applicable PRC laws and regulations, according to the PRC legal adviser of the Bank, other Shareholders in the PRC are not entitled to participate in the H Share Rights Issue.

H Share Rights Issue Record Date

The H Share Rights Issue Record Date and the trading arrangements for the nil-paid H Rights Shares will be determined by the Board and once so determined, a further announcement will be made by the Bank. The H Share Rights Issue is conditional upon the fulfillment of the conditions set out under the section headed "Conditions of the H Share Rights Issue" in this circular. The H Share Rights Issue Record Date will not precede the date of the EGM and Class Meetings, or the date on which all relevant PRC governmental and regulatory approvals in relation to the Rights Issue are granted to the Bank.

Trading of the H Rights Shares

Dealings in the H Rights Shares in both their nil-paid and fully-paid forms registered with the H Share Registrar will be subject to the payment of stamp duty in Hong Kong. A further announcement will be made by the Bank regarding the trading arrangements for the H Rights Shares (in nil-paid and fully-paid forms) after such arrangements have been finalized by the Board.

Status of the H Rights Shares

The H Rights Shares, when allotted and fully paid, will rank pari passu in all respects with the H Shares then in issue. Holders of fully-paid H Rights Shares will be entitled to receive all future dividends and distributions which are declared, made or paid after the date of allotment and issue of the H Rights Shares.

Rights of Overseas Shareholders

The H Share Rights Issue Prospectus will not be registered under the applicable securities legislation of any jurisdiction other than Hong Kong. The Bank will make enquiries regarding the feasibility of extending the H Share Rights Issue to the Overseas Shareholders. If, based on the advice received from the relevant legal advisers, the Board considers that it is necessary or expedient not to offer the H Rights Shares to certain Overseas Shareholders (who are Excluded Shareholders) on account either of the legal restrictions under the laws of the place of his/her/their registered address(es) or the requirements of the relevant regulatory body or stock exchange in that place, the H Share Rights Issue will not be made available to the Excluded Shareholders.

The Bank will send copies of the H Share Rights Issue Prospectus to the Excluded Shareholders for their information only, but the Bank will not send any provisional allotment letters or excess application forms to the Excluded Shareholders.

Application for Excess H Rights Shares

Qualified H Shareholders of the Bank (other than the PRC Southbound Trading Investors) may apply, by way of excess application, for any H Rights Shares to which unsold entitlements of the Excluded Shareholders relate and for any H Rights Shares provisionally allotted to the Qualified H Shareholders but not accepted.

Application for excess H Rights Shares may be made by completing the excess application form to be despatched to the Qualified H Shareholders together with the H Share Rights Issue Prospectus and lodging the same with a separate remittance for such excess H Rights Shares. The Board will allocate the excess H Rights Shares at its discretion on a fair and equitable basis but will give preference to topping-up odd lots to whole board lots. The remaining excess H Rights Shares (if preference will be given) or all excess H Rights Shares (if no preference will be given) will be allocated to Qualified H Shareholders (other than the PRC Southbound Trading Investors) who have applied for excess H Rights Shares on a pro-rata basis with reference to their number of excess H Rights Shares applied for.

Conditions of the H Share Rights Issue

It is expected that the H Share Rights Issue will be conditional upon the fulfillment of the following matters:

• (i) the approval of the Rights Issue by the Shareholders at the EGM;

• (ii) the approval of the Rights Issue at the H Share Class Meeting and the A Share Class Meeting, respectively;

• (iii) the approval of the Rights Issue by the CSRC and other relevant regulatory authorities;

• (iv) the Listing Committee of the Hong Kong Stock Exchange agreeing to grant the listing of, and permission to deal in, the H Rights Shares in their nil-paid and fully-paid forms on the Hong Kong Stock Exchange, either unconditionally or subject to such conditions which the Bank accepts and the satisfaction of such conditions (if any) by no later than the date of the delivery of the H Share Rights Issue Prospectus; and

• (v) the delivery to the Hong Kong Stock Exchange and filing and registration of all documents in relation to the H Share Rights Issue as required by laws to be filed to and registered with the Companies Registry in Hong Kong.

None of the above conditions for completion of the H Share Rights Issue may be waived by the Bank or has been satisfied as of the Latest Practicable Date. If the conditions are not fulfilled, the H Share Rights Issue will not proceed.

Conditions of the A Share Rights Issue

It is expected that the A Share Rights Issue will be conditional upon the fulfillment of the following matters:

(i) the approval of the Rights Issue by the Shareholders at the EGM;

• (ii) the approval of the Rights Issue at the A Share Class Meeting and the H Share Class Meeting, respectively;

• (iii) the approval of the Rights Issue by the CSRC and other relevant regulatory authorities; and

• (iv) the subscription of the A Rights Shares by the A Shareholders being at least 70% of the A Share Rights Issue.

None of the above conditions for completion of the A Share Rights Issue may be waived by the Bank or has been satisfied as of the Latest Practicable Date. If the conditions are not fulfilled, the A Share Rights Issue will not proceed.

The H Share Rights Issue and the A Share Rights Issue are not inter-conditional upon each other. If the conditions for completion of the A Share Rights Issue are not fulfilled, the H Share Rights Issue will proceed so long as the conditions for completion of the H Share Rights Issue are fulfilled and vice versa.

Underwriting

The Bank intends to proceed with the H Share Rights Issue on a fully underwritten basis by persons licensed or registered under the Securities and Futures Ordinance for Type 1 regulated activity who are not connected persons of the Bank in accordance with Rule 7.19(1)(a) of the Hong Kong Listing Rules and such underwriting will be conducted in accordance with the requirements of the Hong Kong Listing Rules. Details of the underwriting arrangement in relation to the Rights Issue will be provided to the Shareholders in a further announcement on the Rights Issue to be issued by the Bank in due course. The A Share Rights Issue will however proceed on a best effort basis as required under the applicable PRC laws and regulations. Under the applicable PRC laws and regulations and as classified by the CSRC, the A Share Rights Issue may only proceed if the subscription level of the A Rights Shares is at least 70% of the A Share Rights Issue. The rights to subscribe for the A Shares which are not taken up will lapse and no new A Shares will be issued or allotted pursuant to such rights.

As of the Latest Practicable Date, the Bank did not receive any undertaking from its substantial Shareholders undertaking to take up his/her/its entitlement in full or in part.

Theoretical Dilutive Effects

Taking into account the Rights Issue, the Bank confirms that, as at the Latest Practicable Date, the Rights Issue will not result in a theoretical dilution effect of 25% or more under Rule 7.27B of the Hong Kong Listing Rules.

Publication of Further Announcement in Relation to the H Share Rights Issue and Issuance of H Share Rights Issue Prospectus

Prior to the commencement of the H Share Rights Issue, the Bank will make a further announcement and issue the H Share Rights Issue Prospectus, which will contain all relevant details of the Rights Issue, including the definitive basis on which the Rights Shares are to be issued, the maximum number of the Rights Shares to be issued, the Rights Issue Price, the period of closure of the register of members for the H Shares and the Record Date, the trading arrangements for H Rights Shares, the arrangements for the excess H Rights Shares, the underwriting arrangements and the expected timetable of the Rights Issue.

Reasons for the Rights Issue and Use of Proceeds

Reasons for the Rights Issue of the Bank are as follows:

• (1) Regulatory Authorities Have Further Lifted the Requirements for Capital Supervision of Banks

  In recent years, the CBIRC has been continuously tightening the capital supervision of commercial banks. The Administrative Measures for the Capital of Commercial Banks (for Trial Implementation) (ਠุვБ༟͉၍ଣ፬ج(༊Б)') issued by the CBRC in 2012 imposed stricter and more prudent regulations on the qualification standards and measurement requirements of various types of capital, and further strengthened the capital regulatory requirements for commercial banks. Since 2016, the People's Bank of China has been implementing a "macro and discreet assessment system" to guide financial institutions of the banking industry to strengthen self-restrain and self-discipline management from seven aspects including capital and leverage, assets and liabilities, liquidity, pricing behavior, asset quality, cross-border financing risks and credit policy implementation. As the business continues to develop in the next few years, it is expected that the capital gap will restrict the development of the Bank to a certain degree. In addition, in recent years, domestic and foreign regulatory authorities have continuously enhanced the requirements for banks' capital supervision, and the capital requirements for banks will be further increased.

• (2) The Bank's Future Business Development Needs Capital Support

  In recent years, the Bank's asset scale has grown steadily and rapidly. It is expected that the business scale of the Bank will continue to maintain a steady growth trend in the next few years. The Bank is required to maintain sufficient capital to support the stable development of its business and asset scale. At the same time, the Bank is required to reserve a certain proportion of capital to mitigate risk on premise of constantly satisfying the minimum requirements of capital adequacy ratio of the regulatory authorities to further enhance the ability to resist risks and respond to the uncertainties of future macroeconomic development. In order to maintain the rapid development momentum, the Bank regards capital replenishment management planning as an important part of the overall development strategy, insists on matching capital management goals with strategic development goals, and matches asset scale growth with capital scale growth to ensure sustainable business development in the long term.

After deducting relevant issuance fees, the net proceeds raised from the Rights Issue will entirely be applied for the replenishment of the Bank's core tier-one capital, to enhance the Bank's capital adequacy ratio, support the sustainable and healthy development of the Bank's business in the future as well as strengthen the Bank's capital strength and competitiveness.

Shareholding Structure of the Bank

For illustrative purpose, the following tables set out the Bank's current shareholding structure and the shareholding structure that may exist upon the completion of the Rights Issue, assuming the Rights Issue is conducted on the basis of three (3) Rights Shares for every ten (10) existing Shares and no change in the issued share capital of the Bank between the Latest Practicable Date and the Record Date, and assuming:

(VI) No H Rights Shares are subscribed by any Qualified H Shareholders, and A Share

Rights Issue lapses as less than 70% of A Rights Shares are subscribed.

Table under the assumption of scenario (I) (Rights Shares are fully subscribed) (for illustrative purpose only):

Table under the assumption of scenario (II) (all H Rights Shares under the H Share Rights Issue are fully subscribed by all Qualified H Shareholders, and 70% of A Rights Shares under the A Share Rights Issue are subscribed) (for illustrative purpose only):

Table under the assumption of scenario (III) (H Rights Shares are fully subscribed by all Qualified H Shareholders, and A Share Rights Issue lapses as less than 70% of A Rights Shares are subscribed) (for illustrative purpose only):

Table under the assumption of scenario (IV) (no H Rights Shares are subscribed by any Qualified H Shareholders, and A Rights Shares are fully subscribed) (for illustrative purpose only):

Table under the assumption of scenario (V) (no H Rights Shares are subscribed by any Qualified H Shareholders, and 70% of A Rights Shares are subscribed) (for illustrative purpose only):

Table under the assumption of scenario (VI) (no H Rights Shares are subscribed by any Qualified H Shareholders, and A Share Rights Issue lapses as less than 70% of A Rights Shares are subscribed (for illustrative purpose only):

Notes:

• 1. As at the Latest Practicable Date, Haier Group Corporation ("Haier Group") had interests in 812,214,572 Shares of the Bank through the companies it controlled directly or indirectly.

• 2. As at the Latest Practicable Date, Qingdao Conson Industrial Co., Ltd. ("Qingdao Conson") held interests in 503,556,341 Shares of the Bank directly and Qingdao Guoxin Capital Investment Co., Ltd. (ڡࢥ਷ڦ༟͉ҳ༟Ϟࠢʮ̡ ) (" Guoxin Capital") held 500 Shares directly; Haitian (HK) Holdings Limited held 100,000,000 Shares of the Bank directly. Qingdao Conson is wholly-owned by Qingdao Guoxin Development (Group) Limited (ڡࢥ਷ڦ೯࢝(ණྠ )Ϟࠢப΂ʮ̡); Haitian (HK) Holdings Limited is wholly-owned by Qingdao Conson Financial Holdings Co., Ltd. ("Conson Financial Holdings"); Guoxin Capital is held as to 98% equity interests by Conson Financial Holdings and Conson Financial Holdings is held as to 90.27% equity interests by Qingdao Guoxin Development (Group) Limited (ڡࢥ਷ڦ೯࢝(ණྠ )Ϟࠢப΂ʮ̡).

• 3. AMTD Strategic Investment Limited and AMTD Investment Solutions Group Limited held 196,882,000 Shares and 28,151,531 Shares of the Bank respectively. AMTD Strategic Investment Limited and AMTD Investment Solutions Group Limited are controlled by AMTD Group Company Limited ("AMTD Group"). As Choi Chi Kin, Calvin, the Director of the Bank, held over 30% of the shares of AMTD Group, therefore, AMTD Strategic Investment Limited and AMTD Investment Solutions Group Limited both constitute the core connected persons of the Bank.

• 4. As at the Latest Practicable Date, the Directors held 1,380,375 A Shares in aggregate; and the Supervisors held 870,301 A Shares in aggregate; the senior management held 850,000 A Shares in aggregate.

• 5. The Shares held by Haier Group and its associates, Intesa Sanpaolo S.p.A, Qingdao Conson and its associates, AMTD Group and its associates and Directors, Supervisors and senior management of the Bank are not public shareholdings under the Hong Kong Listing Rules and/or the Shenzhen Listing Rules.

• 6. The Bank will engage more than one underwriter for the H Share Rights Issue and no underwriter will, on its own, hold 10% or more of the Bank's total issued share capital, thus no underwriter will become a connected person of the Bank after the H Share Rights Issue.

According to public information, as at the Latest Practicable Date, the Bank's public float percentage complies with the requirements under Rule 8.08 of the Hong Kong Listing Rules.

Upon the completion of the Rights Issue, the Bank's public float percentage will continue to comply with the requirements under Rule 8.08 of the Hong Kong Listing Rules.

To the best knowledge of the Bank, as at the Latest Practicable Date, the Rights Issue will not increase the market capitalization of the Bank by more than 50%, which will require minority Shareholders' approval under Rule 7.19A(1) of the Hong Kong Listing Rules.

The above resolution will be proposed, by way of special resolution, for approval at the EGM and the H Share Class Meeting.

2. Plan on Public Issuance of Shares by Way of Rights Issue

A special resolution regarding the approval of the Resolution in relation to the Plan of Bank of Qingdao Co., Ltd. on Public Issuance of Shares by Way of Rights Issue will be proposed at the EGM and the H Share Class Meeting. The full text of the Plan of the Bank on Public Issuance of Shares by Way of Rights Issue is set out in Appendix I to this circular.

Upon the proposal for Rights Issue has been approved by the 42nd meeting of the seventh session of the Board of the Bank, its implementation is still subject to consideration by the EGM and the Class Meetings and the reporting to the Qingdao Supervision Bureau of the CBIRC and the CSRC as well as obtaining other approvals regarding the Rights Issue, respectively.

3. Full Authorization to the Board to Deal with Matters Related to the Rights Issue

To successfully implement the Rights Issue of the Bank, it is proposed to the general meeting to authorize the Board and the Board to delegate the authority to the chairman, the president and the secretary to the Board to, individually or jointly, decide on and deal with, within the framework, principles and validity period as reviewed and approved at the general meeting, all matters relating to the Rights Issue, including but not limited to:

• 1. To formulate and implement a specific plan for the Rights Issue covering all aspects relating to the issue plan, including the conditions and time of the implementation of the Rights Issue, ratio and quantity of the Rights Issue, Rights Issue Price, starting and ending dates of the Rights Issue, and actual size of proceeds, pursuant to the resolutions at the general meeting and with reference to actual situation, to such extent as the laws, regulations and other regulatory documents would allow.

• 2. Pursuant to the laws, regulations, normative documents, opinions and requirements of relevant governmental and regulatory institutions, stock exchanges and securities registration and settlement institutions, to handle matters related to the Rights Issue, including but not limited to, compile, sign, supplement, amend, report, submit, execute and suspend reporting documents and other legal documents related to the Rights Issue; to handle information disclosure matters related to the Rights Issue in accordance with the regulatory requirements.

• 3. To open and manage a designated account for the proceeds from the Rights Issue for the storage of the proceeds from the Rights Issue; to handle the matters relating to the use of the proceeds from the Rights Issue, and make specific arrangements for the use of the proceeds from the Rights Issue within the scope of the resolution passed at the general meeting.

• 4. Upon the completion of the Rights Issue, to handle matters related to the share registration and listing of issuance shares under the Rights Issue with the securities registration and settlement institutions and the stock exchanges at the place where the securities are traded at.

• 5. To amend the relevant provisions in the Articles of Association regarding the registered capital and the total number of Shares, and to carry out capital verification, modification of the business registration of the Bank and relevant filings procedures according to the actual outcome of the Rights Issue.

• 6. To handle subsequent matters related to the Rights Issue in accordance with relevant domestic and foreign laws and regulations, including but not limited to repay any Shareholder who made subscription under the Rights Issue an amount equivalent to the issue price together with any deposit interest from the bank during the same period, in the event of a failed A Shares Rights Issue due to the expiry of best-efforts underwriting period of the Rights Issue, where A Shares subscribed by original Shareholders represent less than 70% of the A Shares under the A Share Rights Issue.

• 7. On the premise of compliance with the then applicable PRC laws and regulations, and in the event of any new provisions and requirements of the laws and regulations and the relevant regulatory authorities regarding policy on issuance of new shares by listed companies and any changes in the market conditions, except for the matters which shall be subject to re-voting at general meetings and not be authorized according to the requirements of the relevant laws and regulations and the Articles of Association, to make adjustments to the proposal for the Rights Issue according to the requirements of the relevant laws and regulations and the securities regulatory authorities (including the review and feedback opinions on the application for the Rights Issue), the market conditions and the actual needs of the Bank, and continue to handle the matters relating to the Rights Issue.

• 8. In the event of any new regulations and requirements of the relevant laws and regulations and the regulatory authorities regarding the remedy of current returns by refinancing, according to the then requirements of the relevant laws and regulations and the regulatory authorities, to further analyze, study and deliberate on the impacts of the Rights Issue on the current financial indicators and Shareholders' current returns, etc. of the Bank, formulate and amend the relevant remedial measures and policies, and handle, with full authority, other matters in this regard.

• 9. To the extent as permissible by the relevant laws and regulations, to take all necessary actions, decide on and handle all other matters relating to the Rights Issue.

• 10. This authorization is valid within 12 months after the review and approval of the same at the EGM and the Class Meetings. Prior to the expiry of such authorization, the Board would, based on the actual situation of the Rights Issue, propose to the general meeting and Class Meetings of the Bank to approve a new authorization. However, in case the Rights Issue completes prior to the expiry of the aforesaid period, the validity period of the authorization on matters related to the completion of the Rights Issue shall be extended to the date of completion of such matters.

The above resolution will be proposed by way of special resolution for approval at the EGM and the H Share Class Meeting, respectively.

4.

Change in Registered Capital and the Corresponding Amendments to Relevant Clauses in the Articles of Association Upon the Completion of Rights Issue

Upon the completion of the Rights Issue, the Bank shall correspondingly adjust itsregistered capital and the relevant clauses of the Articles of Association. For such regard, it is proposed to the general meeting to agree that, upon the completion of the Rights Issue, the Bank's registered capital shall be adjusted in accordance with the issuance results of the Rights Issue and the approval by the regulatory authorities of the banking industry in China. Based on the issuance results of the Rights Issue and the adjustment of the Bank's registered capital, the clause related to the registered capital (Article 5 of the Articles of Association) and the clause related to the total number of Shares and shareholding structure (Article 23 of the Articles of Association) in the Articles of Association shall be amended accordingly as follows:

NumberOriginal Clause

Amended Clause

1

Article 5 The registered capital of the Bank is Renminbi ("RMB") 4,509,690,000.

Article 5 The registered capital of the Bank is Renminbi ("RMB") [to be determined based on the Rights Issue proposal as reviewed and approved by relevant regulatory authorities and the results of Rights Issue].

2

Article 23 The total number of ordinary shares that the Bank can issue upon approval by the approval departments as authorized by the State Council is 4,509,690,000 shares.

The Bank's ordinary share capital structure is: 4,509,690,000 ordinary shares, among which 2,746,655,020 are A shares, representing 60.91% of the total shares issued by the Bank; and 1,763,034,980 are H shares, representing 39.09% of the total shares issued by the Bank.

The offshore preference shares of the Bank are 60,150,000 shares.

Article 23 The total number of ordinary shares that the Bank can issue upon approval by the approval departments as authorized by the State Council is [to be determined based on the Rights Issue proposal as reviewed and approved by relevant regulatory authorities and the results of Rights Issue] shares.

The Bank's ordinary share capital structure is: [●] ordinary shares, among which [●] are A shares, representing [●]% of the total shares issued by the Bank; and [● ] are H shares, representing [●]% of the total shares issued by the Bank.

The offshore preference shares of the Bank are 60,150,000 shares.

The above resolution will be proposed by way of special resolution for approval at the EGM and the H Share Class Meeting, respectively.

5. Fulfillment of Issue Conditions of Rights Issue

A special resolution regarding the approval of the Resolution in relation to the Fulfillment of Issue Conditions of Rights Issue of Bank of Qingdao Co., Ltd. will be proposed at the EGM and the H Share Class Meeting, details of which are set out in Appendix II to this circular.

6. Report on the Use of Previously Raised Funds

A special resolution regarding the approval of the Resolution in relation to the Report on the Use of Previously Raised Funds of Bank of Qingdao Co., Ltd. will be proposed at the EGM, the full text of the Report on the Use of Previously Raised Funds of the Bank is set out in Appendix III to this circular.

7. Report on the Feasibility of Use of Proceeds from Rights Issue

A special resolution regarding the approval of the Resolution in relation to the Report on the Feasibility of Use of Proceeds from Rights Issue of Bank of Qingdao Co., Ltd. will be proposed at the EGM and the H Share Class Meeting, the full text of the Report on the Feasibility of Use of Proceeds from Rights Issue of the Bank is set out in Appendix IV to this circular.

8. Risk Reminder of and Remedial Measures for the Dilution of Current Returns by

Rights Issue to Original Shareholders and Commitments by Relevant Entities

According to the requirements of laws, regulation and normative documents such as

Certain Opinions of the State Council on Further Promoting the Healthy Development of Capital Markets (਷ਕ৫ᗫ׵ආɓӉڮආ༟͉̹ఙ਄ੰ೯࢝ٙ߰ʍจԈ'), the Opinions of the General Office of the State Council on Further Strengthening the Protection of Lawful Rights and Interests of Medium and Small Investors in the Capital Markets (਷ਕ৫፬ʮᝂ ᗫ׵ආɓӉ̋੶༟͉̹ఙʕʃҳ༟٫ΥجᛆूڭᚐʈЪٙจԈ') and the Guiding Opinions on Matters Relating to the Dilution of Current Returns as a Result of Initial Public Offering, Refinancing and Major Asset Restructuring (ᗫ׵࠯೯ʿΎፄ༟eࠠɽ༟ପࠠଡ଼ᛅᑛуಂΫ జϞᗫԫධܸٙኬจԈ'), the Bank has formulated the Risk Reminder of and Remedial Measures for the Dilution of Current Returns by Rights Issue to Original Shareholders of Bank of Qingdao Co., Ltd. and Commitments by Relevant Entities.

A special resolution regarding the approval of the Resolution in relation to the Risk Reminder of and Remedial Measures for the Dilution of Current Returns by Rights Issue to Original Shareholders of Bank of Qingdao Co., Ltd. and Commitments by Relevant Entities will be proposed at the EGM and the H Share Class Meeting, details of which are set out in Appendix V to this circular.

9. Shareholders' Return Plan for the Next Three Years (2021-2023)

To further strengthen the awareness of rewarding Shareholders, improve profit distribution system, and provide Shareholders with continuous, stable and reasonable investment returns, the Bank has formulated the Shareholders' Return Plan for the Next Three Years (2021-2023) of Bank of Qingdao Co., Ltd. in accordance with the requirements of the Company Law of the People's Republic of China, the Securities Law of the People's Republic of China, the Notice of the China Securities Regulatory Commission on Matters Relevant to Further Implementing the Cash Dividend Distribution by Listed Companies (ʕ਷ᗇՎ္ຖ ၍ଣ։ࡰึᗫ׵ආɓӉໝྼɪ̹ʮ̡ତږʱߎϞᗫԫධٙஷٝ'), the Guideline No. 3 on

Supervision and Administration of Listed Companies - Cash Dividends of Listed Companies (ɪ̹ʮ္̡၍ܸˏୋ3໮-ɪ̹ʮ̡ତږʱߎ') and the Articles of Association and on the basis of fully considering the actual operation and future development needs of the Bank.

A special resolution regarding the approval of the Resolution in relation to the Shareholders' Return Plan for the Next Three Years (2021-2023) of Bank of Qingdao Co., Ltd. will be proposed at the EGM, and the full text of the Shareholders' Return Plan for the Next Three Years (2021-2023) is set out in Appendix VI to this circular.

III. RESPONSIBILITY STATEMENT

This circular, for which the Directors of the Bank collectively and individually accept full responsibility, includes particulars given in compliance with the Hong Kong Listing Rules for the purpose of giving information with regard to the Bank. The Directors, having made all reasonable enquiries, confirm that, to the best of their knowledge and belief, the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make this circular or any statement herein misleading.

IV. THE EGM AND THE H SHARE CLASS MEETING

The Bank intends to convene the 2021 First EGM and the 2021 First H Share Class Meeting at No. 6 Qinling Road, Laoshan District, Qingdao, Shandong Province, the PRC, at 9:00 a.m. on Friday, 26 March 2021 to consider and, if thought fit, to pass matters as set out in the notices of the 2021 First EGM and the 2021 First H Share Class Meeting. The notices of the 2021 First EGM and the 2021 First H Share Class Meeting are set out on pages 89 to 92 and pages 93 to 96 respectively, of this circular.

Completion and return of the form(s) of proxy(ies) will not preclude you from attending and voting in person at the 2021 First EGM and/or the 2021 First H Share Class Meeting or at any adjournment thereof.

Closure of Register of Members and Eligibility to Attend and Vote at the 2021 First EGM and the 2021 First H Share Class Meeting

The share register of members of the Bank will be closed from Tuesday, 23 March 2021 to Friday, 26 March 2021 (both days inclusive), during which period no Share transfer will be registered. In order to be eligible to attend and vote at the 2021 First EGM and/or the 2021 First H Share Class Meeting, H Shareholders of the Bank must lodge the Share transfer documents accompanied by the relevant Share certificates and other appropriate documents with the Bank's H Share Registrar, Computershare Hong Kong Investor Services Limited, at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen's Road East, Wanchai, Hong Kong no later than 4:30 p.m. on Monday, 22 March 2021. H Shareholders whose names appear in the H Share register of members of the Bank at the close of business on Tuesday, 23 March 2021, will be eligible to attend and vote at the 2021 First EGM and/or the 2021 First H Share Class Meeting.

V. METHODS OF VOTING AT THE EGM AND THE H SHARE CLASS MEETING

Pursuant to the requirements of Rule 13.39(4) of the Hong Kong Listing Rules, voting by the Shareholders at the 2021 First EGM and the H Share Class Meeting shall be taken by the way of poll.

To the best knowledge of the Bank, no Shareholders or their associates are deemed to have a material interest in any of the resolutions at the 2021 First EGM and the H Share Class Meeting, and therefore no Shareholders are required to abstain from voting on any resolutions.

Please be advised that pursuant to Article 60 of the Articles of Association, where a Shareholder pledges 50% or more of his/her/its equity interests in the Bank, the voting rights of such Shareholder at the 2021 First EGM and the H Share Class Meeting shall be subject to restrictions.

VI. RECOMMENDATIONS

The Board (including the independent non-executive Directors) considers that the resolutions to be proposed at the 2021 First EGM and the H Share Class Meeting are in the interests of the Bank and the Shareholders as a whole. Accordingly, the Board recommends the Shareholders to vote in favor of all resolutions to be proposed at the 2021 First EGM and the H Share Class Meeting.

By order of the Board Bank of Qingdao Co., Ltd.*

GUO Shaoquan

Chairman

Qingdao, Shandong Province, the PRC, 8 March 2021

*Bank of Qingdao Co., Ltd. is not an authorized institution within the meaning of the Banking Ordinance (Chapter 155 of the Laws of Hong Kong), not subject to the supervision of the Hong Kong Monetary Authority, and not authorized to carry out banking and/or deposit-taking business in Hong Kong.

PLAN ON PUBLIC ISSUANCE OF SHARES

BY WAY OF RIGHTS ISSUE

OF BANK OF QINGDAO CO., LTD.*

IMPORTANT NOTES:

• 1. Bank of Qingdao Co., Ltd. (hereinafter referred to as "Bank of Qingdao" or the "Bank") intends to carry out the public issuance of Shares by way of rights issue of Shares to the original Shareholders (hereinafter referred to as the "Rights Issue").

• 2. Upon completion of the Rights Issue, the number of share capital and net assets of the Bank will be increased to a certain extent. However, it takes a certain period to produce benefits after the investment of proceeds, and the Bank still mainly depends on its existing business to realize profits and Shareholders' return, so the Bank's indicators such as the earnings per Share and weighted average return on net assets will experience a certain decrease in short term i.e., the immediate returns will be susceptible to dilution after the Bank's Rights Issue and issuance of Shares. Please refer to the Risk Reminder of and Remedial Measures for the Dilution of Current Returns to Original Shareholders by Rights Issue of Bank of Qingdao Co., Ltd. and Commitments by Relevant Entities for details.

• 3. The plan represents the explanation on the Rights Issue made by the Board of the Bank and any statement to the contrary is untrue.

• 4. Matters set out in the plan do not indicate substantive judgments, acknowledgement or approval from the approval authorities in respect of relevant matters of the Rights Issue. Effectiveness and completion of relevant matters of the Rights Issue as set out in the plan are subject to approval or permission from relevant approval authorities.

I. STATEMENTS ON THE RIGHTS ISSUE BEING QUALIFIED UNDER

RELEVANT LAWS AND REGULATIONS IN RESPECT OF PUBLIC ISSUANCE BY WAY OF RIGHTS ISSUE

After conducting verification carefully on a case-by-case basis in comparison with relevant qualifications and conditions in respect of rights issue by A-share and H-share listed companies as set out in the laws, regulations and regulatory documents including the Company Law of the PRC, the Securities Law of the PRC, the Administrative Measures for Issuance of Securities by Listed Companies (ɪ̹ʮ̡ᗇՎ೯Б၍ଣ፬ج'), the Issuance Regulatory

Q&A - Regulations on Guiding and Regulating Financing Activities of Listed Companies

(Revised) (೯Б္၍ਪഈ-ᗫ׵ˏኬ஝ᇍɪ̹ʮ̡ፄ༟Бމ္ٙ၍ࠅӋ(ࡌࠈو)') and the

Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, the Board of the Bank confirms that the Bank has satisfied the conditions for Rights Issue.

II. SUMMARY OF THE RIGHTS ISSUE

(I) Types and par value of the Shares to be issued

The classes of the Shares to be issued under the Rights Issue are A Shares and H Shares with a par value of RMB1.00 per Share.

• (II) Issuance Method

  The issuance is conducted through rights issue of Shares to original Shareholders.

• (III) Base, Proportion and Number of the Rights Issue

  The A Share Rights Issue is proposed to be based on the total number of A Shares after the trading hours on the A Share Rights Issue Record Date, and the allotment will be made to all A Shareholders for Rights Issue on the basis of up to three (3) Rights Shares for every ten (10) Shares . The H Share Rights Issue is proposed to be based on the total number of H Shares on the H Share Rights Issue Record Date, and the allotment will be made to all H Shareholders for Rights Issue on the basis of up to three (3) Rights Shares for every ten (10) Shares, with fractions of less than one(1) Rights Share to be dealt with according to the relevant requirements of the stock exchanges and securities registration and settlement institutions of the places where the securities are traded at. The subscription portion of both A Shares and H Shares are the same.

  If, based on the Bank's total share capital of 4,509,690,000 Shares as at 31 December 2020, the number of Rights Shares is estimated to be not more than 1,352,907,000 Shares, among which, the number of A Rights Shares would not exceed 823,996,506 Shares and the number of H Rights Shares would not exceed 528,910,494 Shares. In the event that the total share capital of the Bank changes due to any bonus issue, capital conversion from capital reserve, capital increase and other reasons before the Rights Issue, the number of Rights Shares will be adjusted accordingly based on the total share capital after the change.

(IV) Pricing Principle and Price for the Rights Shares

1. Pricing Principle

• (1) The pricing shall take into account valuation indicators such as stock prices, P/E ratios and P/B ratios of the Bank in the secondary market as well as the development and Shareholders' interests of the Bank;

• (2) The pricing shall take into account the core tier-one capital requirement of the Bank for the next three years;

• (3) The pricing shall be in compliance with principles determined through negotiation between the Bank and the sponsor institution(s) (underwriter(s)).

2. Rights Issue Price

The Rights Issue Price is determined by using market discount method based on the trading conditions of A Shares and H Shares in the market prior to the publication of the issuance announcement. The final Rights Issue Price will be determined through the negotiation between those parties authorized by the Board under the authorization of the general meeting and the sponsor institution(s) (underwriter(s)) with reference to the market conditions before the issuance. The Rights Issue Prices of A Shares and H Shares are the same after exchange rate adjustments.

(V) Target Subscribers for the Rights Issue

In the Rights Issue, the target A Share subscribers for the Rights Issue will be all A Shareholders of the Bank, who registered with the Shenzhen branch of China Clear after the trading hours on the A Share Rights Issue Record Date, and the target H Share subscribers for the Rights Issue will be all H Shareholders determined on the H Share Rights Issue Record Date. The Record Date of the Rights Issue will be otherwise determined after the approval of the proposal for Rights Issue by CSRC.

(VI) Distribution Plan for Accumulated Undistributed Profits Prior to the Rights Issue

The accumulated undistributed profits of the Bank prior to the Rights Issue shall be shared by all Shareholders on a pro-rata basis of their shareholding after the completion of the Rights Issue.

(VII) Time of Issuance

The Shares will be placed to all Shareholders at a suitable timing within the stipulated period, after the approval from the regulatory authorities and the stock exchanges for the Rights Issue is obtained.

(VIII) Method of Underwriting

A Share Rights Issue will proceed on a best effort basis, and H Share Rights Issue will be fully underwritten.

(IX) Use of Proceeds Raised in relation to the Rights Issue

The proceeds raised from the Rights Issue will not exceed RMB5.0 billion (inclusive).

After deducting relevant issuance fees, the net proceeds raised from the Rights Issue will entirely be applied for the replenishment of the Bank's core tier-one capital, to enhance the Bank's capital adequacy ratio, support the sustainable and healthy development of the Bank's business in the future as well as strengthen the Bank's capital strength and competitiveness.

(X) Validity Period of the Resolution in relation to the Rights Issue

The effective period of the resolution on the Rights Issue shall be 12 months starting from the date on which the resolution is approved by the Bank's EGM, the A Share Class Meeting and the H Share Class Meeting.

(XI) Listing of the Shares to be placed

The A Shares placed will be listed on the Shenzhen Stock Exchange according to the relevant requirements after the completion of A Share Rights Issue.

The H Shares placed will be listed on the Hong Kong Stock Exchange according to relevant requirements after completion of H Share Rights Issue.

Upon the Rights Issue plan has been approved by the 42nd meeting of the seventh session of the Board of the Bank, its implementation is still subject to consideration by the general meeting, the A Share Class Meeting and the H Share Class Meeting of the Bank and the reporting to the Qingdao Supervision Bureau of the CBIRC and the CSRC as well as obtaining other approvals regarding the Rights Issue, respectively.

III. FINANCIAL AND ACCOUNTING INFORMATION AND MANAGEMENT'S DISCUSSION AND ANALYSIS

The financial statements of the Bank for the year 2017, 2018 and 2019 prepared in accordance with Accounting Standards for Business Enterprises have been audited by KPMG Huazhen LLP, which has issued audit report with standard unqualified opinions of audit report number ଭ৵۾ശࣈᄲοୋ1801065໮, ଭ৵۾ശࣈᄲοୋ1901409໮ and ଭ৵۾ശࣈᄲοୋ

2000948໮. The financial statements of the Bank for the third quarter of 2020 have not yet been audited.

The financial data as referred in this section for the year 2017, 2018 and 2019 are the data in the audited financial statements of the Bank prepared in accordance with Accounting Standards for Business Enterprises while the financial data as referred for January - September 2020 are the data in the unaudited financial statements for the third quarter of 2020 of the Bank.

If not specifically stated, the data in this section represents consolidated data of the Bank and the amounts mentioned are dominated in Renminbi.

(I) Consolidated Financial Statements for the Last Three Years and the Latest Period

1. Consolidated Balance Sheet

Unit: RMB'000

Item

Note: Pursuant to the Notice on Revision of the 2018 Illustrative Financial Statements for Financial

Enterprises (Caikuai [2018] No.36) (ᗫ׵ࡌࠈΙ೯2018ϋܓږፄΆุৌਕజڌࣸόٙஷٝ'(ৌึ [2018]36໮)), as at 30 September 2020, 31 December 2019 and 31 December 2018, the interests from financial instruments provided at effective interest method are reflected in the carrying value of the corresponding financial instruments, while the interests due to be received but not yet received as at the balance sheet date are shown in other assets.

Note: Pursuant to the Notice on Revision of the 2018 Illustrative Financial Statements for Financial

Enterprises (Caikuai [2018] No.36) (ᗫ׵ࡌࠈΙ೯2018ϋܓږፄΆุৌਕజڌࣸόٙஷٝ'(ৌึ [2018]36໮)), as at 30 September 2020, 31 December 2019 and 31 December 2018, the interests from financial instruments provided at effective interest method are reflected in the carrying value of the corresponding financial instruments, while the interests due to be paid but not yet paid as at the balance sheet date are shown in other liabilities.

2.

Consolidated Income Statement

Unit: RMB'000

• (VI) Other comprehensive income (net of tax)

  Other comprehensive income attributable to shareholders of the Bank (net of tax)

  • (1) Items that will not be reclassified to profit or loss 1. Remeasurement of defined benefit liability

  • (2) Items that may be reclassified subsequently to profit or loss

    • 1. Changes in fair value of debt investments at fair value through other comprehensive income

    • 2. Credit losses of debt investments at fair value through other comprehensive income

    • 3. Profit or loss from changes in fair value of available-for-sale financial assets

  Other comprehensive income attributable to non-controlling interests (net of tax)

• (VII) Total comprehensive income

  Total comprehensive income

attributable to shareholders

of the Bank

Total comprehensive

income attributable to

3.

Consolidated Cash Flow Statement

Unit: RMB'000

ItemJanuary- September 2020

2019

2018

2017

(I)Cash flows generated from operating activities

Net increase in deposits from customers

Net increase in deposits from banks and other financial institutions

Net increase in placements from banks and other financial institutions Net increase in financial assets sold under repurchase agreements Net increase in borrowings from central bank

Net decrease in deposits with central bank

Net decrease in financial assets held for trading Net decrease in financial assets held under resale agreements

Net decrease in deposits with banks and other financial institutions

Net decrease in placements with banks and other financial institutions Interest, fee and commission received

Cash received from other operating activities Sub-total of cash inflows from operating activities Net increase in loans and advances to customers Net increase in deposits with central bank

Net increase in deposits with banks and other financial institutions

57,748,081

• 37,115,060 15,592,066

-

4,784,097

4,510,600

2,726,981

13,568,936 3,421,879

1,179,371

-

• - 1,385,277

-

-

928,415

• - 3,284,200

-

200,000

2,800,000 10,749,128

1,061,906

10,655,490 7,637,358 6,601,584

706,388 94,433,427

1,157,525

60,265,707 41,955,247 31,201,948

• (36,968,772) (48,460,968)

18,479,022

-

-

1,330,560

-

2,946,548 10,194,795

206,409

-

- - - 139,828

-

• - 2,150,470

-

-

763,311 3,831,044

(30,127,157) (11,919,060)

(2,131,569)

-

- (2,433,202)

-

-

(200,000)

-

Net increase in placements with banks and other financial institutions Net increase in financial assets held under resale agreements

Net increase in long-term receivables

Net decrease in deposits from banks and other financial institutions Net decrease in placements from banks and other financial institutions

Net decrease in borrowings from central bank

Net decrease in financial assets sold under repurchase agreements Interest, fee and commission paid

Cash paid to and for employees

Taxes paid

Cash paid for other operating activities

Sub-total of cash outflows from operating activities Net cash flows generated from/(used in) operating activities

Cash flows generated from investing activities Proceeds from disposal and redemption of investments Cash received from investment gains and interest

Proceeds from disposal of fixed assets, intangible assets and other assets Sub-total of cash inflows from investing activities Cash paid for investments

Cash paid for purchase of fixed assets, intangible assets and other assets Sub-total of cash outflows from investing activities Net cash flows (used in)/

generated from investing activities

(III) Cash flows generated from financing activities

Proceeds from issuance of

other equity instrument

Proceeds from investments

of subsidiaries

Proceeds from issuance of

ordinary shares

Proceeds from debt securities

issued

Sub-total of cash inflows

from financing activities

Cash repayment of

borrowings

Cash repayment of interest

of borrowings

Cash paid for distribution of

dividends

Cash payment for other

financing activities

Sub-total of cash outflows

from financing activities

Net cash flows (used in)/

generated from financing

activities

• (IV) Effects of foreign exchange rates changes on cash and cash equivalents

• (V) Net increase/(decrease) in cash and cash equivalents

  Add: balance of cash and

  cash equivalents at the

  beginning of the

  period/year

• (VI) Balance of cash and cash equivalents at the end of the period/year

(II) Financial Statements of the Bank for the Last Three Years and the Latest Period

1.

Balance Sheet of the Bank

Unit: RMB'000

2.

Income Statement of the Bank

Unit: RMB'000

Other comprehensive income attributable to shareholders of the Bank (net of tax)

• (1) Items that will not be reclassified to profit or loss

  1. Remeasurement of defined benefit liability

• (2) Items that may be reclassified subsequently to profit or loss

  • 1. Changes in fair value of debt investments at fair value through other comprehensive income

  • 2. Credit losses of debt investments at fair value through other comprehensive income

  • 3. Profit or loss from changes in fair value of available-for-sale financial assets

(VII) Total comprehensive income

Total comprehensive income

attributable to shareholders

3.

Cash Flow Statement of the Parent Company

Unit: RMB'000

ItemJanuary- September 2020

2019

2018

2017

(I)Cash flows generated from operating activities

Net increase in deposits from customers

Net increase in deposits from banks and other financial institutions

Net increase in placements from banks and other financial institutions Net increase in financial assets sold under repurchase agreements Net increase in borrowings from central bank

Net decrease in deposits with central bank

Net decrease in financial assets held under resale agreements

Net decrease in financial assets held for trading

Net decrease in deposits with banks and other financial institutions

Net decrease in placements with banks and other financial institutions Interest, fee and commission received

Cash received from other operating activities Sub-total of cash inflows from operating activities Net increase in loans and advances to customers Net increase in deposits with central bank

Net increase in deposits with banks and other financial institutions

Net increase in placements with banks and other financial institutions

57,748,081

• 37,115,060 15,592,066

-

5,074,218

1,801,700

1,576,179

13,568,936 3,421,879

1,179,371

-

- 1,385,277

928,415

• - 3,284,200

-

-

-

200,000

3,000,000 10,134,795

861,906

10,020,812 7,158,067 6,411,983

469,609 91,073,415

1,025,818

58,438,641 39,793,787 30,839,293

• (36,968,772) (48,460,968)

(2,086,777)

-

-

-

2,946,548 10,194,795

206,409

-

• - 2,150,470

-

411,702 3,657,990

(30,127,157) (11,919,060)

- (2,433,202)

-

-

(200,000)

-

• - (3,495,258)

18,479,022

-

-

- - -

- 139,828

-

-

(168,013)