Bank of China Proposes to Issue Convertible Bonds for Capital Replenishment

The Board of Directors (the Board ) of Bank of China Limited (the Bank of China or the Bank ) resolved, at its board meeting on 22 January, the resolutions in relation to the general mandate to issue new shares and proposed to issue no more than RMB 40 billion A share convertible corporate bonds (the Convertible Bonds ) under such general mandate. The proposals will be subject to shareholders approval at the 2010 first Extraordinary General Meeting to be held on 19 March 2010.

Since 2009, confronted with complex market condition, Bank of China has adhered to the central bank s proactive fiscal policy and moderately loose monetary policy to promote growth, stimulate domestic demand, adjust structure and its loan assets have seen unparalleled rapid growth. As at the end of September 2009, Bank of China s capital adequacy ratio ( CAR ) was 11.63% and the core CAR was 9.37%.

Bank of China s capital replenishment plan at the appropriate point in time ensures a sufficient capital base for successful implementation of its long-term strategies and fulfillment of tightening regulatory requirements, which lays a solid foundation to support the Bank s business development and to further consolidate its leading position among peers. The plan also helps Bank of China to improve its overall competitiveness and to maintain steady profit growth and maximization of shareholders value.

Bank of China has been actively seeking innovative financing methods under the current framework of relevant capital regulations to expand its capital replenishment channels and to improve the capital management mechanism. At the 2009 first Extraordinary General Meeting dated 23 March 2009, Bank of China approved the resolution to issue no more than RMB 120 billion subordinated bonds to replenish the supplementary capital, of which RMB 40 billion had been issued up to date.

After due and careful consideration of various factors including regulatory requirements, market demand, financing cost and efficiency, Bank of China proposed to issue no more than RMB 40 billion Convertible Bonds. The proceeds raised from the issuance of the Convertible Bonds, net of relevant expenses, will be applied to replenish the capital base and working capital so as to increase the CAR and further improve the Bank s capital quality.

Background information

The Convertible Bonds refer to corporate bonds that are issued in accordance with relevant laws, and can be converted into A shares within a specific period of time. The maturity of such Convertible Bonds ranges from the minimum of 1 year to the maximum of 6 years. The conversion of the Convertible Bonds will be allowed from the trading day following the expiry of no less than six months after the date of issuance of the Convertible Bonds.

The term of the conversion period will be determined by the issuer with reference to its financial position and the maturity of the Convertible Bonds. The holders of the Convertible Bonds have the discretion (not) to exercise the conversion rights, and will become the shareholders on the next date after the date of conversion.

Listed companies are allowed to issue convertible bonds upon approvals from the shareholders and relevant security regulatory securities of the state council.