Bank of China and Temasek Holdings sign strategic investment agreement

31 August, 2005 Bank of China Limited ( Bank of China ) and Temasek Holdings (Private) Limited ("Temasek") jointly announced today that, following negotiations and discussions by the two entities, Temasek will, through its wholly-owned subsidiary Asia Financial Holdings ( AFH ), acquire a 10% interest in Bank of China for US$3.1 billion. Temasek has also undertaken to subscribe for additional US$500 million worth of shares during Bank of China s initial public offering. This transaction is pending government and other relevant regulatory approvals.

With this agreement, Bank of China has introduced another strategic investor following the signing of the strategic investment agreement with Royal Bank of Scotland on August 18, 2005.

Subject to mutual agreement, Temasek will assist Bank of China in improving corporate governance, including the right to nominate suitable candidates for election to Bank of China s board of directors. Other areas of collaboration and support are under discussions.

In addition to a strong focus on corporate governance, Temasek will facilitate linkages to other players in the Asian financial sector to support the development of Bank of China s talent pool and technology base. As major financial institutions in Asia, both entities also agreed to strengthen their cooperation and contribute to the financial sector modernization in Asia.

Bank of China said,

Temasek is a major investor in Asia, with a strong reputation and matured operating mechanism in the area of corporate governance. Bank of China is a banking group with nearly a hundred years of history, and has established a prudent business style and a broad customer network. The cooperation of these two strong financial institutions with complementary strengths will result in enhanced competitiveness.

The strategic investment by Temasek will support the deepening of the overall reform for Bank of China. The transaction will help Bank of China further strengthen its capital base, improve its shareholder structure and enhance its corporate governance.

Temasek said,

We are delighted that an agreement has been reached with Bank of China. This is our largest direct investment in China, and is also a long-term investment for us. It underlines our confidence in the long-term growth of China s economy. More importantly, this investment represents our belief that Bank of China has transformed itself into a strong financial institution with extensive networks in China and overseas. We share the bank s belief in its tremendous potential and are privileged to be an investor.