THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in China Development Bank Financial Leasing Co., Ltd. (國銀金融租賃股份有限公司), you should at once hand this circular, the proxy form and the reply slip to the purchaser or the transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or the 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.

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**國銀金融租賃股份有限公司[] CHINA DEVELOPMENT BANK FINANCIAL LEASING CO., LTD.[]**

(A joint stock limited company incorporated in the People’s Republic of China)

(Stock Code: 1606)

RENEWAL OF CONTINUING CONNECTED TRANSACTIONS FRAMEWORK AGREEMENTS ENTERED INTO WITH CHINA DEVELOPMENT BANK FOR 2022 TO 2024 AND THE PROPOSED ANNUAL CAPS AND

FINANCE LEASE TRANSACTIONS IN RELATION TO THE SALE-AND-LEASEBACK OF PRODUCTION FACILITIES WITH SIEN (QINGDAO)

Independent Financial Adviser to the Independent Board Committee and Independent Shareholders

The 2021 Second Extraordinary General Meeting will be held at 10:00 a.m. on Wednesday, 29 December 2021 at the Meeting Room, CDB Financial Center, No. 2003 Fuzhong Third Road, Futian District, Shenzhen, Guangdong Province, the PRC.

A proxy form for use at the 2021 Second Extraordinary General Meeting (the “ Proxy Form ”) is published on the website of the Hong Kong Stock Exchange (http://www.hkexnews.hk) and the website of the Company (http://www.cdb-leasing.com) on 12 November 2021. If you intend to appoint a proxy to attend such meeting, you are reminded to complete and return the corresponding Proxy Form in accordance with the instructions printed thereon as soon as possible but in any event not less than 24 hours (i.e. 10:00 a.m. on Tuesday, 28 December 2021) before the respective time fixed for holding such meeting or any adjournment thereof. Completion and return of the Proxy Form will not preclude you from attending such meeting and voting in person if you so wish. Shareholders who intend to attend such meeting in person or by proxy should complete and return the reply slip dispatched with this circular in accordance with the instructions printed thereon on or before Wednesday, 8 December 2021.

* CHINA DEVELOPMENT BANK FINANCIAL LEASING CO., LTD. is (a) not an authorized institution within the meaning of the Banking Ordinance; (b) not authorized to carry on banking/deposit-taking business in Hong Kong; and (c) not subject to the supervision of the Hong Kong Monetary Authority.

8 December 2021

CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Precautionary Measures for COVID-19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Letter from the Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Renewal of Continuing Connected Transactions Framework Agreements
Entered into with China Development Bank for 2022 to 2024
and the Proposed Annual Caps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Finance Lease Transactions in Relation to the Sale-and-leaseback of
Production Facilities with SiEn (QingDao) . . . . . . . . . . . . . . . . . . . . . . . . . .	26
The 2021 Second Extraordinary General Meeting . . . . . . . . . . . . . . . . . . . . . . .	30
Procedures for Voting at the 2021 Second Extraordinary General Meeting. . . . .	31
Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	31
Letter from the Independent Board Committee. . . . . . . . . . . . . . . . . . . . . . . . . . .	33
Letter from the Independent Financial Adviser . . . . . . . . . . . . . . . . . . . . . . . . . . .	35
Appendix I – Financial Information of the Group . . . . . . . . . . . . . . . . . .	I-1
Appendix II – General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	II-1

– i –

DEFINITIONS

Unless the context otherwise requires, the following expressions in this circular shall have the following meanings:

“2021 Second Extraordinary General Meeting”
the 2021 second extraordinary general meeting of the Company to be held at 10:00 a.m. on Wednesday, 29 December 2021 at the Meeting Room, CDB Financial Center, No. 2003 Fuzhong Third Road, Futian District, Shenzhen, Guangdong Province, the PRC
“Articles of Association”
the articles of association of the Company (as amended from time to time)
“associate(s)”
has the meaning ascribed to it under the Listing Rules
“Board”
the board of directors of the Company
“CDB”
China Development Bank, a joint stock company with limited liability established in the PRC in 1994 and converted into a company with limited liability in 2017, the Controlling Shareholder of the Company which holds 64.40% equity interest of the Company
“Company”, “our Company” or “the Company”
China Development Bank Financial Leasing Co., Ltd., a company incorporated in the PRC in 1984 and converted into a joint stock limited company on 28 September 2015, the H Shares of which are listed on the Stock Exchange with the stock code of 1606
“connected person(s)”
has the meaning ascribed to it under the Listing Rules
“connected transaction(s)”
has the meaning ascribed to it under the Listing Rules
“continuing connected transaction(s)”
has the meaning ascribed to it under the Listing Rules
“Controlling Shareholder”
has the meaning ascribed to it under the Listing Rules
“Debt Financing Instruments Investment Framework Agreement”
the debt financing instruments investment framework agreement entered into between the Company and CDB on 14 May 2019
“Deposit Service Framework Agreement”
the deposit service framework agreement entered into between the Company and CDB on 14 May 2019

– 1 –

DEFINITIONS

“Director(s)”
“Domestic Share(s)”
“Financing Service Framework Agreement”
“Group”
“H Share(s)”
“HK$”
“Hong Kong”
“Independent Board Committee”
“Independent Shareholder(s)”
director(s) of the Company

ordinary shares in the Company’s share capital, with a nominal value of RMB1.00 each, which are subscribed for and paid up in Renminbi

the financing service framework agreement entered into between the Company and CDB on 14 May 2019
the Company and its subsidiaries
overseas listed foreign share(s) in the share capital of the Company, with a nominal value of RMB1.00 each, which are listed on the Main Board of the Stock Exchange and traded in Hong Kong dollars
Hong Kong dollars, the lawful currency of Hong Kong
the Hong Kong Special Administrative Region of the PRC
the independent board committee under the Board, comprising all of the independent non-executive Directors, namely, Mr. Zheng Xueding, Mr. Xu Jin, and Mr. Zhang Xianchu. The committee was established to advise the Independent Shareholders in respect of the New Financing Service Framework Agreement, New Deposit Service Framework Agreement, New Debt Financing Instruments Investment Framework Agreement, and the respective proposed annual caps for the years 2022, 2023 and 2024 thereunder
Shareholder(s) who is/are not required to abstain from voting on New Financing Service Framework Agreement, New Deposit Service Framework Agreement and New Debt Financing Instruments Investment Framework Agreement, and the proposed annual caps for 2022, 2023 and 2024 thereunder

– 2 –

DEFINITIONS

“Independent Third Party(ies)”
“Latest Practicable Date”
“Leased Assets”
“Lessee” or “SiEn (QingDao)”
“Lessor”
“Listing Rules”
“Maxa Capital” or “Independent Financial Adviser”
“New Debt Financing Instruments Investment Framework Agreement”
“New Deposit Service Framework Agreement”
individuals or companies independent to, and do not have any connected relationship with any members of the Group, Directors, chief executive and substantial shareholders of the Company and its subsidiaries as well as their respective associates (as defined in the Listing Rules)
6 December 2021, being the latest practicable date prior to the printing of this circular for ascertaining certain information in the circular
production facilities of electronic products located in Shandong Province in the PRC
芯恩(青島)集成電路有限公司 (unofficial English translation being SiEn (QingDao) Integrated Circuits Co., Ltd.), a company incorporated in the PRC on 18 April 2018, whose ultimate beneficial owner is the People’s Government of Qingdao
the Company
the Rules Governing the Listing of Securities on the Stock Exchange
Maxa Capital Limited, a licensed corporation to carry out Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities under the SFO, which has been appointed as the independent financial adviser to advise the Independent Board Committee and Independent Shareholders in respect of the New Financing Service Framework Agreement, New Deposit Service Framework Agreement and New Debt Financing Instruments Investment Framework Agreement and the respective proposed annual caps for the years 2022, 2023 and 2024 thereunder
the new debt financing instruments investment framework agreement entered into between the Company and CDB on 12 November 2021 (after trading hours)
the new deposit service framework agreement entered into between the Company and CDB on 12 November 2021 (after trading hours)

– 3 –

DEFINITIONS

“New Finance Lease a series of finance lease agreements in respect of the Agreements” Leased Assets to be entered into between the Lessor and the Lessee in batches upon approval at the 2021 Second Extraordinary General Meeting of the Company
“New Financing Service the new financing service framework agreement entered Framework Agreement” into between the Company and CDB on 12 November 2021 (after trading hours)
“PBOC” the Central Bank of the People’s Republic of China
“PRC” or “China” the People’s Republic of China
“Prospectus” the prospectus dated 24 June 2016 issued by the Company in connection with the Hong Kong public offering
“RMB” Renminbi, the lawful currency of the PRC
“SFO” the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong), as amended, supplemented or otherwise modified from time to time
“Share(s)” ordinary share(s) with a nominal value of RMB1.00 each in the share capital of the Company, including H Share(s) and Domestic Share(s)
“Shareholder(s)” holders of the Share(s)
“Stock Exchange” The Stock Exchange of Hong Kong Limited
“subsidiaries” has the meaning ascribed to it under the Listing Rules
“Supervisor(s)” supervisor(s) of the Company
“USD” or “US dollar(s)” United States dollar(s), the lawful currency of the United States
“%” percent

– 4 –

PRECAUTIONARY MEASURES FOR COVID-19

Precautionary Measures for COVID-19

In order to implement the current requirements regarding the prevention and control on the outbreak of COVID-19, protect the health and safety of the Shareholders and the attendees of the 2021 Second Extraordinary General Meeting, and ensure the exercise of shareholder’s rights by the Shareholders, the Shareholders are recommended to vote at the 2021 Second Extraordinary General Meeting through filling in and submitting the Proxy Form, that is, the Shareholders may exercise their voting rights through indicating their voting intention in the Proxy Form for the 2021 Second Extraordinary General Meeting issued by the Company on 12 November 2021 and designating the chairman of the 2021 Second Extraordinary General Meeting as their proxy.

Strict COVID-19 prevention measures will be adopted at the venue of the 2021 Second Extraordinary General Meeting. The Company reminds the Shareholders and the persons concerned who attend the 2021 Second Extraordinary General Meeting in person to adopt proper personal protection measures, wear facial masks, and cooperate with temperature check, health information inquiry and authentication and other matters in compliance with relevant COVID-19 prevention and control requirements. Shareholders and persons concerned who come from mid-to-high-risk areas or relevant cities hit by COVID-19 are required to contact the relevant staff of the Company for conference affairs in advance on the latest COVID-19 prevention requirements.

If any Shareholders of H shares have the intention to attend the 2021 Second Extraordinary General Meeting in person or have any other questions about the 2021 Second Extraordinary General Meeting, please contact Computershare Hong Kong Investor Services Limited, the H share registrar of the Company via the following means:

Address: 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong Tel no.: 852-28628555 Fax no.: 852-28650990 E-mail address: [email protected]

– 5 –

LETTER FROM THE BOARD

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**國銀金融租賃股份有限公司[] CHINA DEVELOPMENT BANK FINANCIAL LEASING CO., LTD.[]** (A joint stock limited company incorporated in the People’s Republic of China)

(Stock Code: 1606)

Executive Directors: Registered Office: Ms. Ma Hong CDB Financial Center Mr. Peng Zhong No. 2003 Fuzhong Third Road Mr. Huang Min Futian District, Shenzhen Guangdong Province Non-executive Directors: PRC

Non-executive Directors: Mr. Li Yingbao Mr. Yang Guifang Mr. Wang Bangyi

Principal Place of Business in Hong Kong: 31/F, Tower Two, Times Square 1 Matheson Street Causeway Bay Hong Kong

Independent Non-executive Directors: Mr. Zheng Xueding Mr. Xu Jin Mr. Zhang Xianchu

8 December 2021

To the Shareholders

Dear Sir or Madam,

RENEWAL OF CONTINUING CONNECTED TRANSACTIONS FRAMEWORK AGREEMENTS ENTERED INTO WITH CHINA DEVELOPMENT BANK FOR 2022 TO 2024 AND THE PROPOSED ANNUAL CAPS AND FINANCE LEASE TRANSACTIONS IN RELATION TO THE SALE-AND-LEASEBACK OF PRODUCTION FACILITIES WITH SIEN (QINGDAO)

INTRODUCTION

Reference is made to the notice of the Company dated 12 November 2021.

The purpose of this circular is to provide you with information reasonably necessary to enable you to make an informed decision on whether to vote for or against the resolutions at the meeting.

At the 2021 Second Extraordinary General Meeting, ordinary resolutions will be proposed to (i) consider and approve the renewal of continuing connected transactions framework agreements entered into with CDB for 2022 to 2024 and the proposed annual caps; and (ii) consider and approve the finance lease transactions in relation to the sale-and-leaseback of production facilities with SiEn (QingDao).

– 6 –

LETTER FROM THE BOARD

RENEWAL OF CONTINUING CONNECTED TRANSACTIONS FRAMEWORK AGREEMENTS ENTERED INTO WITH CHINA DEVELOPMENT BANK FOR 2022 TO 2024 AND THE PROPOSED ANNUAL CAPS

An ordinary resolution will be proposed at the 2021 Second Extraordinary General Meeting to approve the renewal of continuing connected transactions framework agreements entered into with CDB for 2022 to 2024 and the proposed annual caps.

Reference is made to the announcement of the Company dated 12 November 2021, in relation to, among others, the entering into (i) the New Financing Service Framework Agreement; (ii) the New Deposit Service Framework Agreement; and (iii) the New Debt Financing Instruments Investment Framework Agreement by the Company and CDB, of which details are set out below:

1. New Financing Service Framework Agreement

(1) Background

Reference is made to the announcement of the Company dated 14 May 2019, in relation to, among others, the non-exempt continuing connected transactions contemplated under the Financing Service Framework Agreement entered into between the Company and CDB and the annual cap amounts thereunder. As disclosed in the said announcement, pursuant to the Financing Service Framework Agreement, CDB provided financing service to the Group, and the Group also provided its leased assets and/or balances in its account opened with CDB or bonds held by the Group, as collateral, and paid interest to CDB. Financing facilities provided by CDB were used to carry out leasing business, including but not limited to aircraft leasing, ship leasing and infrastructure leasing, in order to meet the funding requirements for the daily business operations of the Group.

As the Financing Service Framework Agreement and its respective annual caps will expire on 31 December 2021, and the Company will carry on the transactions under the aforesaid Financing Service Framework Agreement after 31 December 2021, the Company entered into the New Financing Service Framework Agreement with CDB on 12 November 2021 (after trading hours).

(2) New Financing Service Framework Agreement

Date: 12 November 2021 Parties: CDB The Company

– 7 –

LETTER FROM THE BOARD

Principal Terms:

Principal terms of the New Financing Service Framework Agreement are set out below:

The New Financing Service Framework Agreement is valid for three years from 1 January 2022 until expiration on 31 December 2024;
CDB shall provide financing service to the Group, and the Group shall also provide its leased assets and/or balances in its account opened with CDB or bonds held by the Group, as collateral, and shall pay interest to CDB; and
Financing facilities provided by CDB will be used to carry out leasing business, including but not limited to aircraft leasing, ship leasing and infrastructure leasing, in order to meet the funding requirements for the daily business operations of the Group.

Pricing Policies:

The interest rate on financing to be provided by CDB with collaterals will be determined based on arm’s length negotiations between CDB and the Group with reference to the prevailing market interest rate for similar financing service provided by CDB to Independent Third Parties based on the fair market rate and on normal commercial terms. For US dollar-denominated loans, the interest rate will apply the LIBOR at the time of financing plus/minus a certain number of basis points. For Renminbi-denominated loans, the interest rate will apply the Loan Prime Rate (“LPR”) announced by the PBOC plus/minus a certain number of basis points.

When determining the price, the Group will obtain the loan interest rates in the same period, fees and other principal terms from one or more large-scale state-owned banks which can provide same terms and same types with equivalent strength as CDB, and compare these offers with the corresponding terms provided by the CDB. If the rates, fees and terms of the CDB are better than those of large-scale state-owned banks, the Group will enter into a financing service agreement with CDB. If the terms and conditions provided by CDB are same as those of the large-scale state-owned banks, the Group will give priority to entering into a financing service agreement with CDB. If the Group is of the view that the terms and conditions provided by other large-scale state-owned banks are more favorable, the Group will enter into financing service agreements with other banks at its discretion.

– 8 –

LETTER FROM THE BOARD

(3) Historical Amounts

For the two years ended 31 December 2020 and the eight months ended 31 August 2021, the maximum daily balance of financing provided by CDB to the Group with collaterals were RMB3,830.28 million, RMB1,572.16 million and RMB428.54 million, respectively. The interests paid by the Group to CDB were RMB121.23 million, RMB24.14 million and RMB8.16 million, respectively.

(4) Annual Caps and Basis of Determination

Historical Annual Caps: the historical annual caps under the Financing Service Framework Agreement for the years ended/ending 31 December 2019, 2020 and 2021 are set out below:

	Historical annual caps for	Historical annual caps for	the year	the year
	ended/ending 31 December
	2019	2020		2021
		(RMB in millions)
Maximum daily balance of
financing provided by CDB to
the Group with collaterals	14,000.00	15,000.00	15,000.00
Interests paid by the Group to
CDB	494.00	758.00		784.00

Proposed Annual Caps: In respect of the New Financing Service Framework Agreement, the maximum daily balance of financing to be provided by CDB to the Group with collaterals and the maximum annual total amount of the interests to be paid by the Group to CDB for the years ending 31 December 2022, 2023 and 2024 shall not exceed the proposed annual caps as set out below:

	Proposed annual caps for the year	Proposed annual caps for the year	Proposed annual caps for the year
	ending 31 December
	2022	2023	2024
		(RMB in millions)
Maximum daily balance of
financing to be provided
by CDB to the Group
with collaterals	19,000.00	20,000.00	21,000.00
Interests to be paid by the Group
to CDB	425.60	635.00	742.50

– 9 –

LETTER FROM THE BOARD

Basis of Determination:

Maximum daily balance of financing to be provided by CDB to the Group with collaterals

The above proposed annual caps of the maximum daily balance of financing to be provided by CDB to the Group with collaterals are determined with reference to the following basis: (i) although the historical amounts were at a relatively low level, it is expected that the Group will still have greater financing needs in the next three years with an expansion in business scale; (ii) led by the “14th Five-Year Plan” of the State, the development of areas such as Guangdong-Hong Kong-Macau Greater Bay Area, Beijing-Tianjin-Hebei, and Yangtze River Economic Belt will promote the development of local infrastructure projects and key production and construction projects, the financing needs of which will bring the Group more business opportunities. It is expected that the Group’s leasing business, in particular the aircraft leasing business, ship leasing business and infrastructure leasing business, will achieve continuous stable growth in the next three years. Such business expansion will increase the Group’s medium and long-term demand for CDB financing; (iii) the Group’s international business is also expected to increase, and the foreign-currency financing demand under the Group’s international business will increase accordingly, and the Group’s maximum daily balance of financing from CDB, the major foreign-currency medium and long-term loan bank, is expected to increase significantly compared with the historical amounts; (iv) for the two years ended 31 December 2020 and the eight months ended 31 August 2021, the financing obtained by the Group from CDB with collaterals was mainly project loans denominated in US dollar. The Group will plan to commence cooperation in project loans denominated in Renminbi and bank factoring in the future in order to expand the Renminbi financing channel of the Group and reduce the dependence on interbank capitals; and (v) according to the business development plan and the stock financing repayment plan of the Group, the Group’s annual RMB financing demand (including turnover) for the three years ending 31 December 2024 is estimated to range from approximately RMB250 billion to RMB370 billion and the US dollar financing demand (including turnover) is estimated to range from approximately USD15 billion to USD22 billion. Specifically, it is estimated that approximately 4% to 6% will be from the financing of CDB with collaterals, and the other financing demands will be satisfied by bank loans, bonds issuance, bank acceptance bills and interbank lending.

In order to enhance operational stability and ease the pressure on liquidity, the Group needs to expand the proportion of medium and long-term financing. In terms of domestic financing, in addition to issuing bonds, medium and long-term financing demand, with limited sources, can be met mainly through project loans or factoring of CDB. For US dollar financing, medium and long-term funds can be obtained overseas through issuance of bonds and withdrawal of medium and long-term bank loans. Due to the limited medium and long-term US dollar financing types of normal commercial banks in China, CDB will be the major bank providing medium and long-term mortgage and pledged loans denominated in US dollar to the Group. Given the growing business needs of the Group, the financing support from CDB will provide an indispensable guarantee for the Company’s long-term stable development and its liquidity needs.

– 10 –

LETTER FROM THE BOARD

Interests to be paid by the Group to CDB

In respect of the US dollar financing service provided by CDB to the Group, the above proposed annual caps for the interests to be paid by the Group to CDB are determined with reference to the following basis: (i) for the two years ended 31 December 2020 and the eight months ended 31 August 2021, the terms of US dollar-denominated loans provided by CDB ranged from 1 to 15 years and mortgage and pledged loans are all for medium and long-term periods of over three years; and (ii) as mortgage and pledged loans are all for medium and long-term periods, according to the current lending rate of medium and long-term loans denominated in US dollar in the market, it is estimated that the average interest rate of medium and long-term loans denominated in US dollar will be 2.5%, 3.0% and 3.5% for 2022, 2023 and 2024, respectively.

According to the current market pricing of medium and long-term mortgage and pledged loans denominated in RMB, in respect of the Renminbi financing service provided by CDB to the Group, the above proposed annual caps for the interests to be paid by the Group to CDB are determined at 4%. For the financing service priced based on the LPR announced by the PBOC provided by Independent Third Party banks and CDB for the two years ended 31 December 2020 and the eight months ended 31 August 2021, the interests paid by the Group were determined with reference to the LPR announced by the PBOC plus/minus a certain number of basis points, which reflects the credit profile of the Group.

(5) Reasons for and Benefits of Entering into the New Financing Service Framework Agreement

CDB has been providing credit financing to the Group for the two years ended 31 December 2020 and as at the Latest Practicable Date, thus it has developed a deep understanding of the leasing industry as well as the Group’s capital needs and business model. Its financing products are able to meet the diversified financing needs of the leasing business of the Group. As the Group focuses on the leasing business of aircraft, infrastructure, ship, equipment manufacturing and other industries, the lease term is longer and it is necessary to maintain a certain proportion of medium and long-term financing to mitigate liquidity risks, and such leased assets are suitable for applying pledged loans from banks. CDB is the major bank in the Chinese financial market to provide medium and long-term mortgage and pledged loans denominated in RMB and foreign currencies. It has extensive industry experience in areas such as aviation, infrastructure and shipping, which is consistent with the scope of the core business of the Group. As such, CDB is able to provide financing products that meet the development characteristics of the leasing business of the Group.

Therefore, the strength of CDB in medium and long-term loans will greatly benefit the leasing business of the Group, and its provision of financing service is able to meet the medium and long-term loan needs of the Group’s business.

– 11 –

LETTER FROM THE BOARD

(6) Financial Effects of the New Financing Service Framework Agreement

As the Group will incur financing interest expenses under the New Financing Service Framework Agreement, the transactions under the New Financing Service Framework Agreement will reduce the Group’s profits and increase the Group’s assets and liabilities. The Company does not expect the above-mentioned transactions to have a material adverse impact on the Group’s cash flow position or its business operations. As such, the Directors are of the view that the above-mentioned transactions will not have a material impact on the profits, assets and liabilities of the Group.

(7) Listing Rules Implications

As of the Latest Practicable Date, CDB is a connected person of the Company under Chapter 14A of the Listing Rules as it holds 64.40% equity interest of the Company. Accordingly, the transactions under the New Financing Service Framework Agreement entered into between the Company and CDB constitute continuing connected transactions of the Company under the Listing Rules.

As the highest applicable percentage ratio for the annual caps of the New Financing Service Framework Agreement entered into between the Company and CDB calculated in accordance with the Listing Rules is more than 5%, the continuing connected transactions under the New Financing Service Framework Agreement are subject to the reporting, announcement and Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

2. New Deposit Service Framework Agreement

(1) Background

Reference is made to the announcement of the Company dated 14 May 2019 in relation to, among other things, the non-exempt continuing connected transactions and the annual cap amounts under the Deposit Service Framework Agreement entered into between the Company and CDB. As disclosed in the aforementioned announcement, pursuant to the Deposit Service Framework Agreement, CDB provided deposit service to the Group, including but not limited to demand deposits, term deposits and agreement deposits. In particular, the Group deposited cash balances into its bank accounts at CDB’s various branches, including: (a) cash generated from the Group’s daily business operations, including, among others, lease income and security deposits received from the leasing business of the Group; (b) funds raised from the Group’s issuance of bonds; and (c) funds from financing facilities provided by CDB to the Group. In turn, CDB paid interests to the Group for such deposits.

– 12 –

LETTER FROM THE BOARD

As the Deposit Service Framework Agreement and its respective annual caps will expire on 31 December 2021, and the Company will carry on the transactions under the aforesaid Deposit Service Framework Agreement after 31 December 2021, the Company entered into the New Deposit Service Framework Agreement with CDB on 12 November 2021 (after trading hours).

(2) New Deposit Service Framework Agreement

Date: 12 November 2021

Parties: CDB

The Company

Principal Terms:

The New Deposit Service Framework Agreement is valid for three years from 1 January 2022 until expiration on 31 December 2024;
CDB shall provide deposit service to the Group, including but not limited to demand deposits, term deposits and agreement deposits; and
The Group shall deposit cash balances into its bank accounts at CDB’s various branches, including: (a) cash generated from the Group’s daily business operations, including, among others, lease income and security deposits received from the leasing business of the Group; (b) funds raised from the Group’s bond issuance; and (c) funds from financing facilities provided by CDB to the Group. In turn, CDB shall pay interests to the Group for such deposits.

Pricing Policies:

(i) The deposit interest rate will be determined based on arm’s length negotiations between CDB and the Group with reference to the interest rates of the Group’s previous deposits placed with CDB, as well as the prevailing interest rate for deposit, which is also in line with the prevailing market interest rate for similar deposit service provided by CDB to Independent Third Parties based on the fair market rate and on normal commercial terms;
(ii) Subject to specific circumstances: (a) the interest rate for deposit in US dollars will be consistent with the prevailing market deposit rate; (b) the interest rate for demand deposit in Renminbi will be determined with reference to the benchmark interest rate for deposits as announced by the PBOC; and (c) the interest rate for Renminbi term deposit will be determined with reference to the benchmark interest rate for deposits with the same or similar terms as announced by the PBOC; and

– 13 –

LETTER FROM THE BOARD

(iii) As the New Deposit Service Framework Agreement is mainly to meet the needs of the Group’s day-to-day liquidity reserves, in respect of the Group’s deposits placed with CDB (including US dollar deposits and Renminbi deposits), the Group will compare the interest rates quoted by CDB and two or more Independent Third Party commercial banks on similar deposit services to ensure that the level of the interest rate for the interests to be paid by CDB to the Group is consistent with, or no less favorable to the Group than, the level of the interest rate for the interests to be paid by Independent Third Party commercial banks for their provision of deposit service to the Group, and not lower than the RMB benchmark interest rate for deposits of financial institutions (金融機構人民幣存款基準利率), as announced by the PBOC on its website (http://www.pbc.gov.cn/zhengcehuobisi/125207/125213/125440/ 125838/125888/2968982/index.html).

(3) Historical Amounts

For the two years ended 31 December 2020 and the eight months ended 31 August 2021, the historical amounts of the maximum daily balance of deposits placed by the Group with CDB were RMB4,424.55 million, RMB1,859.62 million and RMB1,887.27 million, respectively, and the interests paid by CDB to the Group were RMB1.40 million, RMB2.61 million and RMB5.91 million, respectively.

(4) Annual Caps and Basis of Determination

Historical Annual Caps: The historical annual caps under the Deposit Service Framework Agreement for the years ended/ending 31 December 2019, 2020 and 2021 are set out below:

	Historical annual caps for	Historical annual caps for	the
	year ended/ending 31 December
	2019	2020	2021
		(RMB in millions)
Maximum daily balance of
deposits placed by the Group
with CDB	5,000.00	5,000.00	5,000.00
Interests paid by CDB to the
Group	67.00	68.00	69.00

Proposed Annual Caps: In respect of the New Deposit Service Framework Agreement, the maximum daily balance of deposits to be placed by the Group with CDB and the interests to be paid by CDB to the Group for the years ending 31 December 2022, 2023 and 2024 shall not exceed the proposed annual caps as set out below:

	Proposed annual caps for the	Proposed annual caps for the	year ending
		31 December
	2022	2023	2024
		(RMB in millions)
Maximum daily balance of
deposits to be placed by the
Group with CDB	10,000.00	10,000.00	10,000.00
Interests to be paid by CDB to the
Group	110.00	117.50	125.00

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LETTER FROM THE BOARD

Basis of Determination:

Maximum daily balance of deposits to be placed by the Group with CDB

The above proposed annual caps of the maximum daily balance of deposits to be placed by the Group with CDB are determined with reference to the following basis: (i) although the historical amounts were at a low level, it is expected that the Group will still have a higher temporary deposit balance with CDB on such day in the next three years. For example, in November 2019, due to the temporary deposit of an aviation loan with CDB, the daily average maximum deposit reached RMB4.4 billion; (ii) the estimated maximum daily balance of financing to be provided by CDB to the Group, as the financing provided by CDB to the Group may also be temporarily deposited in the Group’s accounts at CDB, for which CDB pays short-term deposit interests to the Group; (iii) CDB acts as the lead underwriter regarding the Group’s issuance of domestic financial bonds and capital bonds. The fund raising account of the Group was opened in CDB. After each single issuance, the delivery of such raised funds would result in a temporary higher balance of CDB account on such day. It is expected that the Group will issue financial bonds of approximately RMB15 billion, RMB20 billion and RMB20 billion per annum for the three years ending 31 December 2024, and issue capital bonds of no more than RMB6 billion between 2022 and 2024. Such raised funds may be credited upon completion, resulting in a temporary higher balance of CDB account on such day; and (iv) the Group’s estimate of the above proposed annual caps is in line with its business development plan. It is expected that the Group’s leasing business will achieve significant growth in the next three years. Since the Group places part of its leasing income and security deposits and other funds received from the leasing business at CDB, the maximum daily balance of the Group’s deposits at CDB is expected to grow accordingly.

Interests to be paid by CDB to the Group

Taking into consideration that (i) the ratio of US dollar and Renminbidenominated deposits provided by CDB to the Group for the eight months ended 31 August 2021 was approximately 1:9; and (ii) the Group’s deposit needs for the three years ending 31 December 2024, including (a) cash generated from the Group’s day-to-day business operations, comprising rental income, deposits and other amounts received from the Group’s leasing business; (b) proceeds from bonds issued by the Group; and (c) financing facilities provided by CDB to the Group, and given it is expected that the Group and CDB will expand cooperation in terms of Renminbi-denominated leasing business and proceeds to be raised from onshore financial bonds and capital bonds will be denominated in Renminbi, it is estimated that the percentages of the Group’s US dollar and Renminbi-denominated deposits out of its total deposits placed at CDB for the three years ending 31 December 2024 will be 20% and 80%, respectively.

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LETTER FROM THE BOARD

In respect of the Renminbi deposit service provided by CDB to the Group, the above proposed annual caps for the interests to be paid by CDB to the Group are determined with reference to the following basis: (i) the interest rate of the Group’s Renminbi deposits placed with CDB for the two years ended 31 December 2020 and the eight months ended 31 August 2021, of which the average interest rate of Renminbi demand deposits was approximately 0.3% per annum, while the average interest rate of Renminbi term deposits was approximately 2.1% per annum; and (ii) the agreed deposit interest rate among domestic financial institutions. As of 31 August 2021, the average agreed deposit interest rate among domestic financial institutions was approximately 2.1% per annum. Accordingly, the Group expects that the average interest rate for the interests of the Renminbi deposits to be paid by CDB to the Group for the three years ending 31 December 2022, 2023 and 2024 will be approximately 2.50% per annum.

In respect of the US dollar deposit service provided by CDB to the Group, the above proposed annual caps for the interests to be paid by CDB to the Group are determined with reference to the following basis: (i) the highest annual interest rate of the Group’s US dollar deposits placed with CDB for the two years ended 31 December 2020 and the eight months ended 31 August 2021 was approximately 0.05%, and all such US dollar deposits were demand deposits. Among the Group’s US dollar deposit business in 2021, the highest annual interest rate for term deposit business was approximately 0.95%. In the future, the Group will develop US dollar term deposit business with CDB depending on its development needs; and (ii) it is the market consensus that it is currently in an interest rate hike cycle, and the Federal Reserve is expected to increase interest rates commencing from 2022 with expectations of rate hike prevailing from 2023 to 2024. It is expected that there will be two interest rate hikes each year with an annual increase of 0.5% (50bps). Based on the prevailing circumstances in the capital market, the Group estimated the average interest rate for the US dollar deposits to be paid by CDB to the Group will be approximately 1%, 1.75% and 2.5% for the three years ending 31 December 2022, 2023 and 2024.

(5) Reasons for and Benefits of Entering into the New Deposit Service Framework Agreement

CDB has been providing deposit service to the Group for the two years ended 31 December 2020 and as at the Latest Practicable Date, thus it has developed a deep understanding of the capital needs and business model of the Group. CDB’s deposit service is able to satisfy the liquidity management needs of the Group. On one hand, CDB has been providing financing service to the Group for the two years ended 31 December 2020 and as at the Latest Practicable Date as detailed under “1. New Financing Service Framework Agreement” of this section, and such financing funds provided by CDB to the Group are also temporarily deposited in the Group’s accounts maintained at CDB. On the other hand, when the Group issues domestic financial bonds or capital bonds, as CDB is the lead underwriter of the Group, the raised fund account of the Group is opened at CDB. After each single issuance, the raised funds will be temporarily deposited in the CDB account within one/two days upon completion for subsequent arrangement of the Group.

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LETTER FROM THE BOARD

(6) Financial Effects of the New Deposit Service Framework Agreement

As the Group will generate deposit interest income under the New Deposit Service Framework Agreement, the transactions under the New Deposit Service Framework Agreement will increase the Group’s profits and assets, but will not increase its liabilities. The Company does not expect the above-mentioned transactions to have a material adverse impact on the Group’s cash flow position or its business operations. As such, the Directors are of the view that the above-mentioned transactions will not result in a material impact on the profits, assets and liabilities of the Group.

(7) Listing Rules Implications

As of the Latest Practicable Date, CDB is a connected person of the Company under Chapter 14A of the Listing Rules as it holds 64.40% equity interest of the Company. Accordingly, the transactions under the New Deposit Service Framework Agreement entered into between the Company and CDB constitute continuing connected transactions of the Company under the Listing Rules.

As the highest applicable percentage ratio for the annual caps of the New Deposit Service Framework Agreement entered into between the Company and CDB calculated in accordance with the Listing Rules is more than 5%, the continuing connected transactions under the New Deposit Service Framework Agreement are subject to the reporting, announcement and Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

As the highest applicable percentage ratio for the proposed annual caps of the New Deposit Service Framework Agreement calculated in accordance with the Listing Rules is more than 25%, transactions under the New Deposit Service Framework Agreement constitute major transactions of the Company under Chapter 14 of the Listing Rules, and are subject to the announcement and shareholders’ approval requirements.

3. New Debt Financing Instruments Investment Framework Agreement

(1) Background

Reference is made to the announcement of the Company dated 14 May 2019 in relation to, among other things, non-exempt continuing connected transactions and the annual cap amounts under the Debt Financing Instruments Investment Framework Agreement entered into between the Company and CDB. As disclosed in the aforementioned announcement, pursuant to the Debt Financing Instruments Investment Framework Agreement, the Group invested in debt financing instruments issued by CDB and/or its associates. In turn, CDB and/or its associates paid bond interests to the Group.

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LETTER FROM THE BOARD

As the Debt Financing Instruments Investment Framework Agreement and its respective annual caps will expire on 31 December 2021, and the Company will carry on the aforesaid transactions under the Debt Financing Instruments Investment Framework Agreement after 31 December 2021, the Company entered into the New Debt Financing Instruments Investment Framework Agreement with CDB on 12 November 2021 (after trading hours).

(2) New Debt Financing Instruments Investment Framework Agreement

Date: 12 November 2021 Parties: CDB The Company

Principal Terms:

The New Debt Financing Instruments Investment Framework Agreement is valid for three years from 1 January 2022 until expiration on 31 December 2024; and
The Group shall invest in debt financing instruments to be issued by CDB and/or its associates. In turn, CDB and/or its associates shall pay bond interests to the Group.

Pricing Policies:

In respect of the debt financing instruments to be issued by CDB and/or its associates and to be purchased by the Group, the bond interest rate for the interests to be paid to the Group by CDB and/or its associates will be the coupon rate of bonds issued by CDB in the national bond market. The interest rate is determined based on the fair market rate and on normal commercial terms. It is also in line with market practice and applicable to all investors of such debt financing instruments, including Independent Third Party investors.

Prior to entering into the debt financing instruments investment agreement with CDB and/or its associates, the Group will check the usual coupon rate of issued bonds in the national bond market and the terms and conditions of two other comparable debt financing instruments, so as to make sure the terms and conditions provided by CDB on the whole is no less favorable than those provided by the Independent Third Parties on the premise that they have similar liquidity in the secondary market.

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LETTER FROM THE BOARD

(3) Historical Amounts

For the two years ended 31 December 2020 and the eight months ended 31 August 2021, the historical amounts of debt financing instruments purchased by the Group from CDB were RMB1,943.76 million, RMB1,221.05 million and RMB200.35 million, respectively; the bond interests paid by CDB to the Group were RMB26.09 million, RMB6.90 million and nil, respectively. CDB did not pay bond interests to the Group for the eight months ended 31 August 2021 as the Group disposed of the CDB bonds it held before relevant interest distribution.

(4) Annual Caps and Basis of Determination

Historical Annual Caps: The historical annual caps under the Debt Financing Instruments Investment Framework Agreement for the years ended/ending 31 December 2019, 2020 and 2021 are set out below:

	Historical annual caps for the year	Historical annual caps for the year	Historical annual caps for the year	Historical annual caps for the year
	ended/ending 31 December
	2019	2020		2021
		(RMB in millions)
Amount of debt financing
instruments issued by CDB
and/or its associates and
purchased by the Group	2,000.00	2,500.00	3,000.00
Bond interests paid by CDB
and/or its associates to the
Group	91.00	114.00		137.00

Proposed Annual caps : In respect of the New Debt Financing Instruments Investment Framework Agreement, the amount of the debt financing instruments to be issued by CDB and/or its associates and to be purchased by the Group and the maximum annual total amounts in respect of the bond interests payable by CDB and/or its associates to the Group for the years ending 31 December 2022, 2023 and 2024 shall not exceed the caps as set out below:

	Proposed annual caps for the	Proposed annual caps for the	year ending
		31 December
	2022	2023	2024
		(RMB in millions)
Amount of debt financing
instruments to be issued by
CDB and/or its associates and
to be purchased by the Group	3,500.00	4,000.00	4,500.00
Bond interests to be paid by
CDB and/or its associates
to the Group	122.08	139.52	156.96

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LETTER FROM THE BOARD

Basis of Determination:

Amount of debt financing instruments to be issued by CDB and/or its associates and to be purchased by the Group

According to the Administrative Measures on Financial Leasing Companies (《金融租賃公司管理辦法》), as a financial leasing company, the Group is allowed to invest in fixed-income financial products, including debt financing instruments up to 20% of net capital. Based on this, the Group plans to invest in the debt financing instruments in domestic open market within the above transaction amount limit, including the purchase of debt financing instruments to be issued by CDB and/or its associates. The Group implements a three-level liquidity reserve system to mitigate liquidity risks. Level I refers to cash equivalent reserves, which include demand deposits and short-term contracted deposits as well as short-term lending and reverse repurchase in the money market; Level II refers to overdraft bank accounts, which provide unconditional commitments from banks for working capital support within the credit lines upon request of the Group at predetermined interest rates; and Level III refers to high credit rating bonds. The bonds issued by CDB (“ CDB Bonds ”) are interest rate type bonds with zero risk weight, possessing the best and strongest liquidity. They are important tools for liquidity management in all financial institutions in China and the main underlying products of the Group’s fixed-income investment, which is a Level III liquidity reserve of the Group. The Group may obtain capital in a very short period of time by disposing of CDB Bonds in the inter-bank market in China and conducting pledge repurchase of CDB Bonds when liquidity management is needed. Apart from CDB Bonds, the Group will also invest in other fixed income products. Investing in the CDB Bonds and other fixed income products at the same time is in the interests of the Company and its Shareholders as a whole.

Bond interests to be paid by CDB and/or its associates to the Group

The estimated bond interests to be paid by CDB and/or its associates to the Group are determined with reference to the average yield to maturity for 10-year CDB bonds for the period from 1 January 2019 to 31 August 2021, i.e., approximately 3.4880%.

(5) Reasons for and Benefits of Entering into the New Debt Financing Instruments Investment Framework Agreement

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LETTER FROM THE BOARD

to be issued by CDB and/or its associates will be the Group’s principal investments in fixed-income financial products. CDB is the largest bond issuer in the domestic bond market. The debt financing instruments issued by CDB are among the main investment products in the interbank market with high ratings, leading market share and ample liquidity. The bonds issued by CDB are interest rate type bonds with zero risk weight, possessing the best and strongest liquidity. They are important tools for liquidity management in all financial institutions in China. The Group established a three-tier liquidity reserve system to mitigate liquidity risk, and held interest rate bonds such as CDB Bonds as liquidity tier-three reserves. With CDB Bonds as liquidity tier-three reserves, the Group may obtain capital in a very short period of time by disposing CDB Bonds in the inter-bank market in China and conducting pledge repurchase of CDB Bonds when liquidity management is needed. Therefore, the investment in the debt financing instruments to be issued by CDB and/or its associates is one of the Group’s liquidity management reserve tools.

(6) Financial Effects of the New Debt Financing Instruments Investment Framework Agreement

As the Group will generate bond interest income under the New Debt Financing Instruments Investment Framework Agreement, the transactions under the New Debt Financing Instruments Investment Framework Agreement will increase the Group’s profits and assets, but will not increase its liabilities. The Company does not expect the above-mentioned transactions to have a material adverse impact on the Group’s cash flow position or its business operations. As such, the Directors are of the view that the above-mentioned transactions will not result in a material impact on the profits, assets and liabilities of the Group.

(7) Listing Rules Implications

As of the Latest Practicable Date, CDB is a connected person of the Company under Chapter 14A of the Listing Rules as it holds 64.40% equity interest of the Company. Accordingly, the transactions under the New Debt Financing Instruments Investment Framework Agreement entered into between the Company and CDB constitute continuing connected transactions of the Company under the Listing Rules.

As the highest applicable percentage ratio for the annual caps of the New Debt Financing Instruments Investment Framework Agreement entered into between the Company and CDB calculated in accordance with the Listing Rules is more than 5%, the continuing connected transactions under the New Debt Financing Instruments Investment Framework Agreement are subject to the reporting, announcement and Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

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LETTER FROM THE BOARD

As the highest applicable percentage ratio for the proposed annual caps of the New Debt Financing Instruments Investment Framework Agreement calculated in accordance with the Listing Rules is more than 25%, the transactions under the New Debt Financing Instruments Investment Framework Agreement constitute major transactions of the Company under Chapter 14 of the Listing Rules and are subject to the announcement and shareholders’ approval requirements.

4. Internal Control Procedures and Corporate Governance Measures

(1) Independent Financial System

The Group has established an independent financial department, composed of independent financial staff and supervised by the Chief Financial Officer of the Company. The Group has adopted a sound and independent audit system and a comprehensive financial management system. The Group also maintains accounts at Independent Third Party banks. CDB does not share any bank account with the Group. The Group has independent tax registrations and has paid tax independently pursuant to relevant PRC laws and regulations. Please see “Relationship with CDB – Independence from CDB – Financial Independence” of the Prospectus for details of the independence of the Group from CDB.

(2) Risk Management Measures

The Group shall monitor the maximum daily balance of deposits to be placed by the Group with CDB, as well as that of the credit financing to be provided by CDB to the Group monthly, to ensure the applicable annual caps are not exceeded. The Group will check with CDB on deposits and loans balance of the Group monthly, thus enabling the Group to monitor the account of the Group and to ensure that the relevant annual caps will not exceed the annual caps under the New Deposit Service Framework Agreement and New Financing Service Framework Agreement. If the balance is close to the applicable maximum daily balance, in respect of deposits, the Group will consider transferring certain funds to the Group’s bank account opened with an independent commercial bank; in respect of loans, the Group will consider obtaining financing from Independent Third Party banks;
The Group shall closely monitor the financial position and operating conditions of CDB through its annual report, its website and information such as its bond issuances in the open market. If the Group considers that there are material adverse changes in the financial condition of CDB and/or any of its associates, the Group will take appropriate measures, including early withdrawal of deposits and suspension of further deposits, to protect the financial position of the Group;
The Group shall request from time to time at its own discretion to withdraw or terminate early all, or any part of, its deposits placed with CDB (except for security deposits for the financing provided by CDB to the Group) to ensure the liquidity and safety of its deposits at CDB; and

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LETTER FROM THE BOARD

The Legal Compliance Department of the Group collects the balance of purchasing bonds from related parties from the Treasury Department on monthly basis, and issues quota management requirements. The Treasury Department establishes a fixed income investment ledger for management and monitoring, confirms whether the limit exceeds before adding each transaction, and regularly reports the monitoring data to the Legal Compliance Department.

(3) Internal Control Measures

In order to ensure the terms under New Financing Service Framework Agreement, New Deposit Service Framework Agreement and New Debt Financing Instruments Investment Framework Agreement (the “ Framework Agreements ”) are fair and reasonable and are carried out under normal commercial terms, the Company has adopted the following internal control procedures:

The Company has adopted and implemented a management system on connected transactions. Under such system, the Related Party Transaction Control Committee under the Board is responsible for conducting reviews on compliance with relevant laws, regulations, our Company’s policies and the Listing Rules in respect of the non-exempt continuing connected transactions. In addition, the Related Party Transaction Control Committee under the Board, Legal Compliance Department and other relevant business departments of the Company are jointly responsible for evaluating the terms under Framework Agreements, in particular, the fairness of the pricing policies and annual caps under each agreement;
The independent non-executive Directors will review the Framework Agreements on an annual basis to ensure that the agreements have been entered into on normal commercial terms and on terms that are fair and reasonable and in accordance with the terms of such agreements. The auditor of our Company will also conduct an annual review on the pricing policies and annual caps of such agreements; and
In determining the actual prices for the services provided to the Company, CDB and/or its associates will quote to the Company in advance. As mentioned above, in order to ensure that the pricing policies under the Framework Agreements are fair and reasonable, the Related Party Transaction Control Committee under the Board and other relevant business departments of the Company shall review the proposed prices offered by CDB and/or its associates through the following review procedures:
if there are market prices available, they will compare the proposed price with the market prices to ensure that the proposed price is equivalent to or no less favorable to the Company than the price offered by Independent Third Parties providing similar services. The Company will make enquiries from two or more Independent Third Parties service providers for their prices and conduct internal assessments;

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LETTER FROM THE BOARD

if no market price is available, they will take into consideration several factors, such as regulatory requirements, actual needs of our Company, and the financial position and creditworthiness of the service provider, in determining whether the pricing is fair and reasonable; and
review the proposed price to ensure that it is consistent with the pricing terms under the Framework Agreements for the non-exempt continuing connected transactions, and that the terms offered by CDB and/or its associates to the Company are no less favorable to the Company than those offered to Independent Third Parties.

In determining the actual prices for the services provided by the Group to CDB and/or its associates, the Group shall consider factors such as regulatory requirements, the Group’s costs and its profit margin to determine whether the relevant pricing policies are fair and reasonable. In addition, as mentioned above, in order to ensure the fairness and reasonableness of the pricing policies under the relevant Framework Agreements for the non-exempt continuing connected transactions, the Related Party Transaction Control Committee under the Board and other relevant business departments of the Company shall follow the corresponding review procedures to evaluate the price of the Group and ensure that it is consistent with the pricing policies under the relevant agreements for the non-exempt continuing connected transactions, and that the terms offered by the Group to CDB and/or its associates are no less favorable to the Group than those offered to Independent Third Parties.

For the New Financing Service Framework Agreement, the Legal Compliance Department of the Group collects data from the Treasury Department and Financial and Accounting Department in respect of financing to CDB on a monthly basis. Largeamount capital transfers are subject to approval by the Legal Compliance Department in accordance with internal procedures. The Legal Compliance Department would issue a quota management requirement. The Treasury Department would conduct a comprehensive financial management and monitoring by establishing a financial ledger. Every new borrowing from CDB should be subject to review and approval, and be reported to the Related Party Transaction Control Committee under the Board for review. The Group can conduct the monitoring towards the approval section of a new financing capital and report the monitoring data to the Legal Compliance Department regularly.

For the New Deposit Service Framework Agreement, the Legal Compliance Department of the Group has issued a quota management requirement. The Financial and Accounting Department has compiled a financial ledger to monitor, so as to manage the quota and the situation of newly added business thoroughly, and it should report to the Legal Compliance Department regularly on the information monitored. Each department that may generate deposit business will consult the Legal Compliance Department before the transaction occurs, and the transaction can be conducted only if it does not exceed the quota, and the terms are in compliance with the New Deposit Service Framework Agreement.

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LETTER FROM THE BOARD

For the New Debt Financing Instruments Investment Framework Agreement, the Legal Compliance Department of the Group collects the balance of purchasing bonds from related parties from the Treasury Department on a monthly basis, and issues quota management requirements. The Treasury Department establishes a fixed income investment ledger for management and monitoring, confirms whether the quota is exceeded and whether the terms of the New Debt Financing Instruments Investment Framework Agreement are met before entering into each transaction, and regularly reports the monitoring data to the Legal Compliance Department.

5. Opinions of the Board

Mr. Li Yingbao, a non-executive Director, is deemed to be associated with New Financing Service Framework Agreement, New Deposit Service Framework Agreement, New Debt Financing Instruments Investment Framework Agreement and the transactions thereunder for holding office in CDB. Accordingly, Mr. Li has abstained from voting on the Board resolutions for approving those Framework Agreements and the proposed annual caps thereunder. Save as disclosed above, no other Director has any material interest in those Framework Agreements and no other Director shall abstain from voting on the Board resolutions for considering and approving those Framework Agreements and the proposed annual caps thereunder.

In consideration of the aforesaid pricing policies, bases of determination for proposed annual caps, reasons and benefits as well as internal control procedures, the Directors are of the view that the terms of the transactions contemplated under the New Financing Service Framework Agreement, New Deposit Service Framework Agreement, New Debt Financing Instruments Investment Framework Agreement and the proposed annual caps thereunder are entered into on normal commercial terms in the ordinary and usual course of business of the Company, are fair and reasonable, and in the interests of the Company and its Shareholders as a whole.

6. Independent Board Committee

The Independent Board Committee, comprising of all independent non-executive Directors, namely Mr. Zheng Xueding, Mr. Xu Jin and Mr. Zhang Xianchu, has been established to advise the Independent Shareholders in relation to the New Financing Service Framework Agreement, New Deposit Service Framework Agreement, New Debt Financing Instruments Investment Framework Agreement and the proposed annual caps for 2022, 2023 and 2024 thereunder. The Company has appointed Maxa Capital as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders regarding the same matter. The Independent Board Committee will provide its recommendation in this circular upon receiving the advice of Maxa Capital.

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LETTER FROM THE BOARD

7. Information of the Parties

(1) Information of the Company

The Company is established in the PRC in 1984 and converted into a joint stock limited company on 28 September 2015. The principal business of the Company includes providing comprehensive leasing services to high-quality customers in industries including aviation, infrastructure, shipping, inclusive finance, new energy and high-end equipment manufacturing.

(2) Information of CDB

CDB was established in 1994 and is a policy-oriented financial institution led by the State Council of the PRC. Its shareholders are the Ministry of Finance of the PRC, Central Huijin Investment Ltd. (中央匯金投資有限責任公司), Wutongshu Investment Platform Co., Ltd. (梧桐樹投資平台有限責任公司) and the National Council for Social Security Fund of the PRC (中國全國社會保障基金理事會), all of which are state-owned institutions or enterprises. CDB is a connected person and the sole Controlling Shareholder of the Company. It mainly serves the major medium- and long-term development strategies of the national economy by carrying out medium- and long-term credit, investment and other financial businesses.

FINANCE LEASE TRANSACTIONS IN RELATION TO THE SALE-ANDLEASEBACK OF PRODUCTION FACILITIES WITH SIEN (QINGDAO)

An ordinary resolution will be proposed at the 2021 Second Extraordinary General Meeting to approve the finance lease transactions in relation to the sale-and-leaseback of production facilities with SiEn (QingDao).

Reference is made to the announcement of the Company dated 23 November 2021 in relation to, among other things, the Company (as the Lessor) and the Lessee agreed on the principal terms of the New Finance Lease Agreements, the details of which are set out as follows:

1. New Finance Lease Agreements

On 23 November 2021 (after trading hours), the Company (as the Lessor) and the Lessee agreed on the principal terms of the New Finance Lease Agreements, pursuant to which (i) the Lessor purchased the Leased Assets from the Lessee in batches at a maximum consideration of RMB2,700,000,000, with the total consideration under the finance lease agreements subsequently entered into between the parties in batches not exceeding the maximum consideration of RMB2,700,000,000 under the New Finance Lease Agreements, and (ii) the Lessor agreed to lease the Leased Assets to the Lessee with a lease period of 120 months (the “ Current Transaction ”).

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LETTER FROM THE BOARD

Reference is made to the discloseable transaction announcements of the Company dated 26 September 2021 and 27 October 2021 in relation to two finance lease agreements entered into between the Company and the Lessee in respect of certain production facilities (collectively, the “ Previous Transactions ”).

Details of the New Finance Lease Agreements are summarised as follows:

(1) Date

The New Finance Lease Agreements will be signed on dates determined by the Company and the Lessee upon approval at the 2021 Second Extraordinary General Meeting. Upon entering into each batch of New Finance Lease Agreements, the Company will publish an update announcement.

(2) Parties

“ Lessor ” the Company

“ Lessee ”

SiEn (QingDao), a limited liability company located in Shandong Province, the PRC, which is mainly engaged in the businesses of manufacturing of electronic products, etc.

To the best of the Directors’ knowledge, information and belief after having made all reasonable enquiries, the Lessee and its ultimate beneficial owner are both independent third parties of the Company and its connected persons.

(3) Leased Assets

The Leased Assets are production facilities of electronic products located in Shandong Province, the PRC. The maximum total net book value of the Leased Assets amounts to approximately RMB2,935,439,457.34. The Lessee does not separately calculate the profits before and after tax of the Leased Assets.

(4) Lease Period

For each batch of New Finance Lease Agreements, the lease period shall be 120 months.

(5) Rent and Method of Payment

Pursuant to the New Finance Lease Agreements, the Lessor agreed to lease back the Leased Assets to the Lessee. The rent, including value-added taxes, is comprised of lease principal and lease interest. The lease principal is of the same amount as the transfer consideration, at a maximum total amount of RMB2,700,000,000, with the total lease principal under the finance lease agreements subsequently entered into between the

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LETTER FROM THE BOARD

parties in batches not exceeding the maximum lease principal of RMB2,700,000,000 under the New Finance Lease Agreements. The lease interest is calculated based on actual days, and the calculation method is: lease interest = outstanding lease principal balance × actual days of the lease period × annual lease interest rate ÷ 360. The maximum total amount of lease interest for the lease period is approximately RMB989,423,383.89. The rent is calculated and paid in RMB. For the first batch of agreements under the New Finance Lease Agreements, the rent is divided into 40 consecutive rent payment instalments. The payment date of the first instalment of rent is 30 March 2022, and 30 March, 30 June, 30 September and 30 December of every subsequent year will be the respective rent payment dates, with the payment of the last instalment of rent to be settled on 30 December 2031.

The terms of the New Finance Lease Agreements, including the transfer consideration for the Leased Assets, lease principal, lease interest and other expenses under the New Finance Lease Agreements were determined upon arm’s length negotiation between the Lessee and the Lessor with reference to the net book value of the Leased Assets after comparing the prices of the same category of finance lease products quoted by the Lessor and several peer financial leasing institutions in the market. The Directors are of the view that the lease interest under the New Finance Lease Agreements is consistent with the current market price and in the interests of the Company and its Shareholders as a whole.

(6) Leased Assets and Their Ownership

Pursuant to the New Finance Lease Agreements, the Lessee has agreed to transfer and/or change the registration of the Leased Assets to the Lessor during the lease period at a maximum total transfer consideration of RMB2,700,000,000, with the total transfer consideration under the finance lease agreements subsequently entered into between the parties in batches not exceeding the maximum transfer consideration of RMB2,700,000,000 under the New Finance Lease Agreements. The consideration will be paid by the Lessor’s self-owned funds and/or commercial loans. At the same time, the Lessor has agreed to lease back the Leased Assets to the Lessee. The Lessee is entitled to the possession, usage and benefits of such assets. Upon expiration of the lease period, the Lessee may purchase back the Leased Assets from the Lessor at a consideration of RMB100 in nominal value.

(7) Guarantee

青島海發國有資本投資運營集團有限公司 (unofficial English translation being Qingdao Haifa State-owned Capital Investment & Operation Group Co., Ltd.) and 青島西海岸新區海洋控股集團有限公司 (unofficial English translation being Qingdao West Coast New Area Ocean Holding Group Company Limited) provide third party joint liability guarantees for the project in proportions of 66.67% and 33.33%, respectively. In addition, Qingdao Haifa State-owned Capital Investment & Operation Group Co., Ltd. issues a liquidity support undertaking letter, undertaking to provide liquidity support to the Lessee in the event that project cash flow is insufficient.

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LETTER FROM THE BOARD

2. Reasons for and Benefits of Entering into the New Finance Lease Agreements

The New Finance Lease Agreements will be entered into by the Company during its ordinary and usual course of business. Entering into the New Finance Lease Agreements with the Lessee benefits the Company by increasing the income of its finance lease business and is consistent with the Company’s business development strategy.

The Directors are of the view that the terms (including the consideration) under the New Finance Lease Agreements are fair and reasonable and are in the interests of the Company and its Shareholders as a whole.

3. Financial Effects of the New Finance Lease Agreements

As the Group will generate interest income under the New Finance Lease Agreements, the transactions under the New Finance Lease Agreements will increase the Group’s profits and form new lease assets and corresponding liabilities. The Company does not expect the above-mentioned transactions to have a material adverse impact on the Group’s cash flow position or its business operations. As such, the Directors are of the view that the above-mentioned transactions would not result in a material impact on the profits, assets and liabilities of the Group.

4. Information of the Parties

(1) Information of the Company

(2) Information of the Lessee

The Lessee is a limited liability company incorporated in the PRC on 18 April 2018 and located in Shandong Province, the PRC, which is mainly engaged in the businesses of manufacturing of electronic products, etc. Its ultimate beneficial owner is the People’s Government of Qingdao.

(3) Information of the Guarantors

Qingdao Haifa State-owned Capital Investment & Operation Group Co., Ltd. is a company incorporated in the PRC with limited liability on 13 April 2012. Its principal business includes investment, construction and management of infrastructure

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LETTER FROM THE BOARD

construction, primary land consolidation and development, and industrial economy. Its ultimate beneficial owner is the State-owned Assets Supervision & Administration Commission of Qingdao Municipal Government.

Qingdao West Coast New Area Ocean Holding Group Company Limited is a company incorporated in the PRC with limited liability on 23 November 2018. Its principal business includes investment management, asset operation, fund management and technical services. Its ultimate beneficial owner is the State-owned Assets Administration Bureau of Qingdao West Coast New Area.

5. Implications under the Listing Rules

As the Lessee of the Current Transaction and the Previous Transactions is the same party, according to Rule 14.22 of the Listing Rules, the Current Transaction and the Previous Transactions shall be aggregated. As the highest applicable percentage ratio of the Current Transaction is lower than 25%, but is higher than 25% but lower than 100% upon aggregation with the Previous Transactions, the Current Transaction constitutes a major transaction of the Company and is subject to the announcement and shareholders’ approval requirements under Chapter 14 of the Listing Rules.

To the knowledge of Directors, having made all reasonable enquiries, no Shareholders shall abstain from voting at the 2021 Second Extraordinary General Meeting in respect of approving the New Finance Lease Agreements.

THE 2021 SECOND EXTRAORDINARY GENERAL MEETING

The Company will convene the 2021 Second Extraordinary General Meeting at 10:00 a.m. on 29 December 2021 at Meeting Room, CDB Financial Center, No. 2003 Fuzhong Third Road, Futian District, Shenzhen, Guangdong Province, the PRC. The notice of the meeting has been published on the website of the Stock Exchange (http://www.hkexnews.hk) and the website of the Company (http://www.cdb-leasing.com) on 12 November 2021.

In order to determine the list of Shareholders who are entitled to attend the 2021 Second Extraordinary General Meeting, the register of members of the Company will be closed from Monday, 29 November 2021 to Wednesday, 29 December 2021, both days inclusive, during which period no transfer of Shares will be effected. Holders of H Shares and domestic Shares whose names appear on the register of members of the Company on 29 December 2021 shall be entitled to attend and vote at the 2021 Second Extraordinary General Meeting. For unregistered holders of H Shares who intend to attend the 2021 Second Extraordinary General Meeting, all transfer documents accompanied by the relevant share certificates must be lodged with the Company’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 Friday, 26 November 2021.

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LETTER FROM THE BOARD

The Proxy Form for use at the 2021 Second Extraordinary General Meeting has also been published on the website of the Stock Exchange (http://www.hkexnews.hk) and the website of the Company (http://www.cdb-leasing.com). If you intend to appoint a proxy to attend such meeting, you are required to complete and return the Proxy Form in accordance with the instructions printed thereon as soon as possible but in any event not less than 24 hours before the time appointed for the holding of such meeting or any adjournment thereof. Completion and return of the Proxy Form will not preclude you from attending and voting in person at such meeting or any adjournment thereof. Holders of H Shares who intend to attend the 2021 Second Extraordinary General Meeting in person or by proxy should deposit the reply slip at the Company’s H share registrar, Computershare Hong Kong Investor Services Limited, at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong on or before 8 December 2021. The Proxy Form is intended to be used for the resolutions specified in the notice.

PROCEDURES FOR VOTING AT THE 2021 SECOND EXTRAORDINARY GENERAL MEETING

According to Rule 13.39(4) of the Listing Rules, the votes of Shareholders at the 2021 Second Extraordinary General Meeting will be taken by poll.

CDB, the Controlling Shareholder of the Company, and its associates, which hold 8,141,332,869 Shares of the Company in total, representing approximately 64.40% of the total issued Shares of the Company as at the Latest Practicable Date, have material interest in the New Financing Service Framework Agreement, New Deposit Service Framework Agreement, New Debt Financing Instruments Investment Framework Agreement and the transactions contemplated thereunder. Accordingly, CDB and its associates will abstain from voting on the relevant resolution at the 2021 Second Extraordinary General Meeting.

Save as disclosed above, to the best knowledge of the Directors, having made all reasonable enquiries, no other Shareholders or their associates are deemed to have a material interest in any of the resolutions at the 2021 Second Extraordinary General Meeting, and therefore no other Shareholders are required to abstain from voting on any resolutions at the 2021 Second Extraordinary General Meeting.

RECOMMENDATION

The Independent Board Committee, comprising of all of the independent non-executive Directors, namely Mr. Zheng Xueding, Mr. Xu Jin and Mr. Zhang Xianchu, has been established to advise the Independent Shareholders in relation to the New Financing Service Framework Agreement, New Deposit Service Framework Agreement, New Debt Financing Instruments Investment Framework Agreement and the proposed annual caps for 2022, 2023 and 2024 thereunder. The Company has appointed Maxa Capital as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders regarding the same matter.

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LETTER FROM THE BOARD

Your attention is drawn to the letter from the Independent Board Committee set out on pages 33 to 34 of this circular. The Independent Board Committee, having taken into account the advice of the Independent Financial Adviser, the text of which is set out on pages 35 to 55 of this circular, is of the view that the terms of the New Financing Service Framework Agreement, New Deposit Service Framework Agreement, New Debt Financing Instruments Investment Framework Agreement and the proposed annual caps for 2022, 2023 and 2024 thereunder have been entered into in the ordinary and usual course of business of the Company and on normal commercial terms, are fair and reasonable and in the interests of the Company and its Shareholders as a whole. The Independent Board Committee, as stated in its letter, recommends the Independent Shareholders to vote in favour of the resolution to approve the New Financing Service Framework Agreement, New Deposit Service Framework Agreement, New Debt Financing Instruments Investment Framework Agreement and the proposed annual caps for 2022, 2023 and 2024 thereunder.

The Directors (including the independent non-executive Directors having considered the advice of the Independent Financial Adviser) are of the view that all resolutions proposed at the 2021 Second Extraordinary General Meeting to be considered and approved by the Shareholders are in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors recommend that Shareholders vote in favor of the resolutions to be proposed at the 2021 Second Extraordinary General Meeting.

Your attention is also drawn to the additional information set out in the appendices to this circular.

By order of the Board CHINA DEVELOPMENT BANK FINANCIAL LEASING CO., LTD. LIU Yi

Joint Company Secretary

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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**國銀金融租賃股份有限公司[] CHINA DEVELOPMENT BANK FINANCIAL LEASING CO., LTD.[]**

(A joint stock limited company incorporated in the People’s Republic of China)

(Stock Code: 1606)

8 December 2021

To the Independent Shareholders

Dear Sir/Madam,

RENEWAL OF CONTINUING CONNECTED TRANSACTIONS FRAMEWORK AGREEMENTS ENTERED INTO WITH CHINA DEVELOPMENT BANK FOR 2022 TO 2024 AND THE PROPOSED ANNUAL CAPS

Reference is made to the circular of the Company dated 8 December 2021 to its Shareholders of which this letter forms part. Capitalized terms used in this letter have the same meanings as those defined in the circular unless specified otherwise.

As independent non-executive Directors, we have been appointed as the members of the Independent Board Committee, to advise Independent Shareholders on whether the renewal of the New Financing Service Framework Agreement, the New Deposit Service Framework Agreement and New Debt Financing Instruments Investment Framework Agreement for 2022 to 2024 and the proposed annual caps thereunder (details are set out in the Letter from the Board contained in the circular) are fair and reasonable. Maxa Capital has been appointed to advise the Independent Board Committee and Independent Shareholders on the renewal of continuing connected transactions framework agreements entered into with CDB for 2022 to 2024 and the proposed annual caps thereunder. We have reviewed the qualifications and experience of Maxa Capital and believe that it meets the requirements of independent financial adviser under the Listing Rules.

We request your attention to the Letter from the Board and the Letter from Maxa Capital to us, i.e., the Independent Board Committee, and Independent Shareholders in respect of its opinion on the renewal of continuing connected transactions framework agreements entered into with CDB for 2022 to 2024 and the proposed annual caps thereunder contained in this circular. Upon review of the terms and proposed annual caps of the New Financing Service Framework Agreement, the New Deposit Service Framework Agreement and New Debt Financing Instruments Investment Framework Agreement, and based on the independent professional analysis of Maxa Capital and its conclusion and opinion, we are of the view that the renewal of continuing connected transactions framework agreements entered into with CDB for 2022 to 2024 and the proposed annual caps thereunder are entered into on normal commercial terms in the ordinary and usual course of business of the Company, and are fair and reasonable and in the interests of the Company and all Shareholders as a whole.

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

In view of the above, we recommend Independent Shareholders voting for the ordinary resolution in respect of approving the renewal of continuing connected transactions framework agreements entered into with CDB for 2022 to 2024 and the proposed annual caps thereunder to be submitted to the 2021 Second Extraordinary General Meeting.

Yours faithfully,

Mr. Zheng Xueding Mr. Xu Jin Mr. Zhang Xianchu Independent Non-executive Independent Non-executive Independent Non-executive Director Director Director Independent Board Committee

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the letter of advice from Maxa Capital, the Independent Financial Adviser, to the Independent Board Committee and the Independent Shareholders, which has been prepared for the purpose of inclusion in this circular.

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Unit 1908, Harbour Center 25 Harbour Road Wan Chai Hong Kong

8 December 2021

To the Independent Board Committee and the Independent Shareholders

Dear Sirs,

RENEWAL OF CONTINUING CONNECTED TRANSACTIONS FRAMEWORK AGREEMENTS ENTERED INTO WITH CHINA DEVELOPMENT BANK FOR 2022 TO 2024 AND THE PROPOSED ANNUAL CAPS

INTRODUCTION

We refer to our appointment as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the New Financing Service Framework Agreement, the New Deposit Service Framework Agreement, the New Debt Financing Instruments Investment Framework Agreement (collectively known as the “ Non-exempt Framework Agreements ”) and their proposed annual caps for each of the three years ending 31 December 2024 (the “ Proposed Annual Caps ”), details of which are set out in the letter from the Board (the “ Letter from the Board ”) contained in the circular dated 8 December 2021 issued by the Company (the “ Circular ”) of which this letter forms part. Terms used in this letter shall have the same meanings as those defined in the Circular unless the context requires otherwise.

As at the Latest Practicable Date, CDB holds 64.40% equity interest of the Company and is a connected person of the Company under Chapter 14A of the Listing Rules. Accordingly, the transactions contemplated under the Non-exempt Framework Agreements constitute continuing connected transactions of the Company pursuant to Chapter 14A of the Listing Rules. As the highest applicable percentage ratios for the Proposed Annual Caps exceed 5%, the continuing connected transactions under the Non-exempt Framework Agreements are subject to, among other things, the approval by the Independent Shareholders. We, Maxa Capital, have been appointed by the Company to advise the Independent Board Committee and the Independent Shareholders in this regard.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

OUR INDEPENDENCE

As at the Latest Practicable Date, we did not have any relationship with or interest in the Company, its subsidiaries and any other parties that could reasonably be regarded as relevant to our independence. We are not associated with the Company, its subsidiaries, its associates, or their respective substantial shareholders or associates or any other parties to the Non-exempt Framework Agreements, and accordingly, are eligible to give independent advice and recommendations on the terms of the Non-exempt Framework Agreements and the Proposed Annual Caps. During the past two years immediately preceding the Latest Practicable Date, we have been appointed by the Company twice as the independent financial adviser, details of which are set out in the Company’s circular dated 3 June 2020 and announcement dated 13 May 2021. Apart from normal professional fees payable to us in connection with this appointment and previous appointments, no arrangement exists whereby we will receive any fees or benefits from the Company, its subsidiaries, its associates or their respective substantial shareholders or associates.

BASIS OF OUR OPINION

In formulating our advices and recommendations, we consider that we have reviewed sufficient and relevant information and documents and have taken reasonable steps as required under Rule 13.80 of the Listing Rules to reach an informed view and to provide a reasonable basis for our recommendation. We have relied on the statements, information, opinions and representations contained or referred to in the Circular and the information and representations as provided to us by the Directors and the Company, for which they are solely and wholly responsible, are true and accurate at the time when they were made and continue to be so as at the date of this letter. We have also assumed that all statements of belief, opinion, expectation, and intention made by the Directors in the Circular were reasonably made after due enquiry and careful consideration. Our opinion is based on the Directors’ representation and confirmation that no material facts have been omitted from the information provided and referred to in the Circular.

The Company confirmed that it has, at our request, provided us with all currently available information and documents which are available under present circumstances to enable us to reach an informed view and we have relied on the accuracy of the information contained in the Circular so as to provide a reasonable basis for our opinion. We have no reason to suspect that any material facts or information, which is known to the Company, have been omitted or withheld from the information supplied or opinions expressed in the Circular nor do doubt the truth and accuracy of the information and facts, or the reasonableness of the opinions expressed by the Company and the Directors which have been provided to us. We have not, however, conducted any independent verification on the information provided to us by the Directors, nor have we conducted any form of independent in-depth investigation into the business and affairs of the Company, CDB and each of their respective subsidiaries or associates.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

PRINCIPAL FACTORS AND REASONS CONSIDERED

1. Background

1.1 Information of the Group

The Company was established in the PRC in 1984 and converted into a joint stock limited company on 28 September 2015. It is a pioneer and leader in the leasing industry in the PRC, and is among the first batch of leasing companies established in the PRC. It is the first H-share listed financial leasing company in the PRC and the sole leasing business platform of CDB. The principal business of the Company includes providing comprehensive leasing services to high-quality customers in industries including aviation, infrastructure, shipping, inclusive finance, new energy and high-end equipment manufacturing. Its leasing assets and business partners reach throughout over 40 countries and regions around the globe. The Company enjoys relatively high international credit ratings, namely “A1” by Moody’s, “A” by Standard & Poor’s and “A+” by Fitch.

Set out below are the summarised financial information of the Group for the two years ended 31 December 2019 and 2020 (“ FY2019 ” and “ FY2020 ”, respectively) and six months ended 30 June 2020 and 2021 (“ 1H2020 ” and “ 1H2021 ”, respectively), as extracted from the 2020 annual report (“ 2020 AR ”) and 2021 interim report (“ 2021 IR ”) of the Company:

	For the year ended	For the year ended	For the six months	For the six months
	31 December		ended	30 June
	2020	2019	2021	2020
	RMB’000	RMB’000	RMB’000	RMB’000
	(audited)	(audited)	(unaudited)	(unaudited)
Revenue	17,719,895	16,524,152	9,715,865	8,799,651
Profit for the year/period	3,268,321	2,938,125	1,812,125	1,239,347
				As at
		As at 31 December		30 June
		2020	2019	2021
		(audited)	(audited)	(unaudited)
		RMB’000	RMB’000	RMB’000
Total assets	303,329,667		261,300,668	311,519,317
Cash and bank balances		34,992,986	21,528,292	26,723,653
Finance lease receivables	166,040,552		141,498,088	178,423,693
Total liabilities	276,700,352		235,631,426	283,760,199
Borrowings	210,382,017		174,135,636	196,321,280
Bonds payables		46,221,709	42,811,268	51,940,843
Total equity		26,629,315	25,669,242	27,759,118

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As disclosed in the 2020 AR, the revenue of the Group was approximately RMB17,719.9 million for FY2020, representing an increase of approximately RMB1,195.7 million or 7.2% as compared to approximately RMB16,524.2 million for FY2019, whereas the profit for the year attributable to owners of the Company was approximately RMB3,268.3 million for FY2020, representing an increase of approximately RMB330.2 million or 11.2% as compared to approximately RMB2,938.1 million for FY2019. Such increase in profit for the year attributable to owners of the Company was primarily attributable to (i) the increase in finance lease income and operating lease income, resulting from the increased investment and the total amount of leased assets; (ii) the decrease in interest expenses due primarily to the year-on-year decrease of financing cost ratio of RMB and USD; and was partially offset by the increase in net impairment losses.

As disclosed in the 2020 AR, the Group had total assets of approximately RMB303,329.7 million as at 31 December 2020, representing an increase of 16.1% as compared to that as at 31 December 2019, which was mainly attributable to (i) the increase in cash and bank balances from approximately RMB21,528.3 million as at 31 December 2019 to approximately RMB34,993.0 million as at 31 December 2020; and (ii) the increase in finance lease receivables from approximately RMB141,498.1 million as at 31 December 2019 to approximately RMB166,040.6 million as at 31 December 2020; and was partially offset by the decrease in assets held-for-sale from approximately RMB1,585.8 million as at 31 December 2019 to nil as at 31 December 2020. The Group had total liabilities of approximately RMB276,700.4 million as at 31 December 2020, representing an increase of 17.4% as compared to that as at 31 December 2019, which was primarily attributable to (i) the increase in borrowing from approximately RMB174,135.6 million as at 31 December 2019 to approximately RMB210,382.0 million as at 31 December 2020; and (ii) the increase in bonds payables from approximately RMB42,811.3 million as at 31 December 2019 to approximately RMB46,221.7 million as at 31 December 2020. The total equity of the Group amounted to approximately RMB26,629.3 million as at 31 December 2020, representing an increase of 3.7% as compared to that as at 31 December 2019.

As disclosed in the 2021 IR, the revenue of the Group was approximately RMB9,715.9 million for 1H2021, representing an increase of approximately RMB916.3 million or 10.4% as compared to approximately RMB8,799.6 million for 1H2020, whereas the profit for the period attributable to owners of the Company was approximately RMB1,812.1 million for 1H2021, representing an increase of approximately RMB572.8 million or 46.2% as compared to approximately RMB1,239.3 million for 1H2020. Such increase in profit for the year attributable to owners of the Company was primarily attributable to (i) the growth in total leased assets resulting from the increase in financing to lessees; (ii) the substantial year-on-year increase in revenue from ship operating lease business; (iii) the decline in the rate of financing cost of US dollars; and (iv) the lower net profit base for the same period of last year as a result of the impact of the pandemic and the year-on-year decrease in impairment losses this year as COVID-19 was under control in China.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As disclosed in the 2021 IR, the Group had total assets of approximately RMB311,519.3 million as at 30 June 2021, representing an increase of 2.7% as compared to that as at 31 December 2020, which was mainly attributable to continued increase in the balance of finance lease assets resulting from the sustained high pace of investment. The Group had total liabilities of approximately RMB283,760.2 million as at 30 June 2021, representing an increase of 2.6% as compared to that as at 31 December 2020, which was primarily due to growth in the scale of liabilities commensurate with that of assets. The total equity of the Group amounted to approximately RMB27,759.1 million as at 30 June 2021, representing an increase of 4.2% as compared to that as at 31 December 2020.

1.2 Information of CDB

CDB was established in 1994 and owned by the Ministry of Finance of the PRC, Central Huijin Investment Ltd. (中央匯金投資有限責任公司), Wutongshu Investment Platform Co., Ltd. (梧桐樹投資平台有限責任公司) and the National Council for Social Security Fund of the PRC (中國全社會保障基金理事會), all of which are state-owned institutions or enterprises. CDB is a connected person and the sole Controlling Shareholder of the Company. It mainly serves the major medium and long-term development strategies of the national economy by carrying out medium and long-term credit, investment and other financial businesses.

2. Principal terms of the Non-exempt Framework Agreements

On 12 November 2021, the Company and CDB entered into the Non-exempt Framework Agreements and proposed the Proposed Annual Caps, to renew the Financing Service Framework Agreement, the Deposit Service Framework Agreement and the Debt Financing Instruments Investment Framework Agreement entered into between the Company and CDB in 2019. The term of the Non-exempt Framework Agreement is three years, commencing on 1 January 2022. The terms and conditions of the Non-exempt Framework Agreements are substantially the same as those of the existing framework agreements. Both parties will enter into separate contracts which will set out the specific terms and conditions according to the principles provided in the Non-exempt Framework Agreements.

2.1 Transactions

Pursuant to the New Financing Service Framework Agreement, CDB shall provide financing service to the Group, and the Group in turn shall pay interest to CDB. The Group shall also provide its leased assets and/or balances in its account opened with CDB or bonds held by the Group, as collateral, and paid interest to CDB. Financing facilities provided by CDB will be used to carry out leasing business, including but not limited to aircraft leasing, ship leasing and infrastructure leasing, in order to meet the funding requirements for the daily business operations of the Group.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Pursuant to the New Deposit Service Framework Agreement, CDB shall provide deposit service to the Group, including but not limited to demand deposits, term deposits and agreement deposits. The Group shall deposit cash balances into its bank accounts at CDB’s various branches, including: (a) cash generated from the Group’s daily business operations, including, among others, lease income and security deposits received from the leasing business of the Group; (b) funds raised from the Group’s bond issuance; and (c) funds from financing facilities provided by CDB to the Group. In turn, CDB shall pay interests to the Group for such deposits.

Pursuant to the New Debt Financing Instruments Investment Framework Agreement, the Group shall invest in debt financing instruments to be issued by CDB and/or its associates. In turn, CDB and/or its associates shall pay bond interests to the Group.

2.2 Pricing policy

2.2.1 New Financing Service Framework Agreement

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

2.2.2 New Deposit Service Framework Agreement

(i) The deposit interest rate will be determined based on the fair market rate after arm’s length negotiations between CDB and the Group with reference to the interest rates of the Group’s previous deposits placed with CDB, as well as the prevailing interest rate for deposit, which is also in line with the prevailing market interest rate for similar deposit service provided by CDB to Independent Third Parties and on normal commercial terms;
(ii) Subject to specific circumstances: (a) the interest rate for deposit in US dollars will be consistent with the prevailing market deposit rate; (b) the interest rate for demand deposit in Renminbi will be determined with reference to the benchmark interest rate for deposits as announced by the PBOC; and (c) the interest rate for Renminbi term deposit will be determined with reference to the benchmark interest rate for deposits of deposits with the same or similar terms as announced by the PBOC; and
(iii) As the New Deposit Service Framework Agreement is mainly to meet the Group’s day-to-day liquidity reserves, in respect of the Group’s deposits placed with CDB (including US dollar deposits and Renminbi deposits), the Group will compare the interest rates quoted by CDB and two or more Independent Third Party commercial banks on similar deposit services to ensure that the level of the interest rate for the interests to be paid by CDB to the Group is consistent with, or no less favorable to the Group than, the level of the interest rate for the interests to be paid by Independent Third Party commercial banks for their provision of deposit service to the Group, and not lower than the RMB benchmark interest rate for deposits of financial institutions (金融機構人民幣存款基準利率) as announced by the PBOC on its website (http://www.pbc.gov.cn/zhengcehuobisi/125207/125213/125440/125838/125888 /2968982/index.html).

2.2.3 New Debt Financing Instruments Investment Framework Agreement

In respect of the debt financing instruments to be issued by CDB and/or its associates and to be purchased by the Group, the bond interest rate for the interests to be paid to the Group by CDB and/or its associates will be the coupon rate of bonds issued by CDB in the national bond market. The interest rate is based on the fair market rate and on the normal commercial terms. It is also in line with market practice and applicable to all investors of such debt financing instruments, including Independent Third Party investors.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

2.2.4 Assessment on the principal terms and the pricing policy

We have reviewed the Financing Service Framework Agreement, the Deposit Service Framework Agreement and the Debt Financing Instruments Investment Framework Agreement which are entered into by the Group and CDB and approved by the Shareholders on the annual general meeting dated 28 June 2019 and we noted that the principal terms of the Non-exempt Framework Agreements, including the pricing policy, are similar with those in the existing framework agreements.

We noted that the pricing policies under the Non-exempt Framework Agreements all involve mechanism to compare the terms offered by CDB and/or its associates and by Independent Third Parties. The Group will only enter into specific transactions with CDB and/or its associates under the Non-exempt Framework Agreements of the terms offered by CDB and/or its associates are no less favourable to the Group than those offered by Independent Third Parties.

In view of the above, we consider that the terms under the Non-exempt Framework Agreement are on normal commercial terms, fair and reasonable so far as the Independent Shareholders are concerned.

3. Reasons for and benefits of entering into the Non-exempt Framework Agreements

The specific reasons for and benefits of entering into the Non-exempt Framework Agreements are elaborated below.

3.1 New Financing Service Framework Agreement

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

3.2 New Deposit Service Framework Agreement

CDB has been providing deposit service to the Group for the two years ended 31 December 2020 and as at the Latest Practicable Date, thus it has developed a deep understanding of the capital needs and business model of the Group. CDB’s deposit service is able to satisfy the liquidity management needs of the Group. On one hand, CDB has been providing financing service to the Group for the two years ended 31 December 2020 and as at the Latest Practicable Date as detailed under “1. New Financing Service Framework Agreement” in the Circular, and such financing funds provided by CDB to the Group are also temporarily deposited in the Group’s accounts maintained at CDB. On the other hand, when the Group issues domestic financial bonds or capital bonds, as CDB is the lead underwriter of the Group, the raised fund account of the Group is opened at CDB. After each single issuance, the raised funds will be temporarily deposited in the CDB account within one/two days upon completion for subsequent arrangement of the Group.

3.3 New Debt Financing Instruments Investment Framework Agreement

The Group was approved by the PBOC to participate in the interbank bond market on 23 June 2015, based on which the Group is allowed to purchase debt financing instruments issued in the nationwide bond market. In addition, according to the Administrative Measures on Financial Leasing Companies issued by the China Banking Regulatory Commission, a financial leasing company is allowed to invest in fixed-income financial products, including debt financing instruments. The debt financing instruments to be issued by CDB and/or its associates will be the Group’s principal investments in fixed-income financial products. CDB is the largest bond issuer in the domestic bond market. The debt financing instruments issued by CDB are among the main investment products in the interbank market with high ratings, leading market share and ample liquidity. The bonds issued by CDB are interest rate type bonds with zero risk weight, possessing the best and strongest liquidity. They are important tools for liquidity management in all financial institutions in China. The Group established a three-tier liquidity reserve system to mitigate liquidity risk, and held interest rate bonds such as CDB Bonds as liquidity tier-three reserves. With CDB Bonds as liquidity tier-three reserves, the Group may obtain capital in a very short period of time by disposing CDB Bonds in the inter-bank market in China and conducting pledge repurchase of CDB Bonds when liquidity management is needed. Therefore, the investment in the debt financing instruments to be issued by CDB and/or its associates is one of the Group’s liquidity management reserve tools.

According to the prospectus of the Company and previous announcement dated 14 May 2019, the Group and CDB had entered into relevant framework agreements since the listing of the Company. Due to historical relationship between CDB and the Group, they have better understanding of each other’s business and can better ensure the standards of services and the quality of financing and investment products to meet the Group’s requirements. In general, the entering into the Non-exempt Framework Agreements would provide flexibility and right but not obligation for the Group to continue its existing arrangements with CDB and growth of the Groups’ business by leveraging the resources and advantages of CDB. We have reviewed the licenses of CDB and have been advised by the Company that to their best knowledge, up to the

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Latest Practicable Date, there is no record of non-compliance with relevant laws, rules and regulations of the PRC and Hong Kong on CDB. CDB obtained an A1 rating from Moody’s and an A+ rating from Standard & Poor in 2021, the same as the credit rating of China. Accordingly, we consider that the credit risks of CDB are not less controllable as compared to that to public licensed commercial banks. Taking into account the above and the no less favourable commercial benefits to the Group, we concur with the Company that entering into the Non-exempt Framework Agreements is in the interests of the Company and Shareholders as a whole and is conducted under the ordinary and usual course of business of the Group.

4. Proposed Annual Caps

In assessing the fairness and reasonableness of the Proposed Annual Caps, we have discussed with the Company about the basis and underlying assumptions used in the determination of the Proposed Annual Caps. The proposed annual caps represent the maximum amounts of transactions the Group would enter into with CDB, rather than the obligation of the Group to accept service from CDB or purchase the debt instrument issued by CDB and/or its associates at that amount. We have discussed and concur with the management of the Company that the Proposed Annual Caps will provide more flexibility to the Group and the Proposed Annual Caps are at the appropriate level after taken into account the historical transaction amounts and expected future growth.

4.1 Historical Amount, Existing and Proposed Annual Caps

The following table sets forth (i) the historical amounts for the two years ended 31 December 2020 and for the eight months ended 31 August 2021; (ii) the existing annual caps for each of the two years ended 31 December 2020 and for the year ending 31 December 2021; and (iii) the Proposed Annual Caps for each of the three years ending 31 December 2024.

		Existing	Annual Caps	for	the
		years ended/ending				Proposed	Annual Caps for the
RMB million			31 December			years ending 31 December
		2019	2020		2021	2022	2023	2024
New Financing Service	Framework Agreement
Maximum daily	Annual Caps	14,000.00	15,000.00	15,000.00		19,000.00	20,000.00	21,000.00
balanced of financing	Actual amounts	3,830.28	1,572.16	428.541
provided/to be	Utilisation rates	27.4%	10.5%	2.9%2
provided by CDB to
the Group with
collaterals

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

		Existing	Existing	Annual Caps	for the
			years ended/ending			Proposed	Annual Caps for the
RMB million				31 December		years ending 31 December
			2019	2020	2021	2022	2023	2024
Interests paid/to be	Annual Caps		494.00	758.00	784.00	425.60	635.00	742.50
paid by the Group	Actual amounts		121.23	24.14	8.161
to CDB	Utilisation rates		24.5%	3.2%	1.0%2
New Deposit Service Framework Agreement
Maximum daily balance	Annual Caps	5,000.00		5,000.00	5,000.00	10,000.00	10,000.00	10,000.00
of deposits placed/to	Actual amounts	4,424.55		1,859.62	1,887.271
be placed by the	Utilisation rates		88.5%	37.2%	37.7%2
Group with CDB
Interests paid/to be	Annual Caps		67.00	68.00	69.00	110.00	117.50	125.00
paid by the CDB to	Actual amounts		1.40	2.61	5.911
the Group	Utilisation rates		2.1%	3.8%	8.6%2
New Debt Financing Instruments Investment			Framework Agreement
Amount of debt	Annual Caps	2,000.00		2,500.00	3,000.00	3,500.00	4,000.00	4,500.00
financial instruments	Actual amounts	1,943.76		1,221.05	200.351
issued/to be issued	Utilisation rates		97.2%	48.8%	6.7%2
by CDB and/or its
associated and
purchased/to be
purchased by the
Group
Bond interests paid/to	Annual Caps		91.00	114.00	137.00	122.08	139.52	156.96
be paid by CDB	Actual amounts		26.09	6.90	N/A1
and/or its associates	Utilisation rates		28.7%	6.1%	0.0%2
to the Group

Historical amount for the eight months ended 31 August 2021.
The utilisation rates for the year ending 31 December 2021 are computed based on the actual amounts up to 31 August 2021.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

4.2 Basis of determination of the Proposed Annual Caps

4.2.1 2021 New Financing Service Framework Agreement

In determining the proposed annual caps in respect of the maximum daily balanced of financing provided by CDB to the Group with collaterals under the New Financing Service Framework Agreement, the Company has mainly considered:

(i) although the historical amounts were at a relatively low level, it is expected that the Group will still have greater financing needs in the next three years with an expansion in business scale;
(ii) led by the “14th Five-Year Plan” of the State, the development of areas such as Guangdong-Hong Kong-Macau Greater Bay Area, Beijing-Tianjin-Hebei, and Yangtze River Economic Belt will promote the development of local infrastructure projects and key production and construction projects, the financing needs of which will bring the Group more business opportunities. It is expected that the Group’s leasing business, in particular the aircraft leasing business, ship leasing business and infrastructure leasing business, will achieve continuous stable growth in the next three years. Such business expansion will increase the Group’s medium and long-term demand for CDB financing;
(iii) the Group’s international business is also expected to increase, and the foreign-currency financing demand under the Group’s international business will increase accordingly, and the Group’s maximum daily balance of financing from CDB, the major foreign-currency medium and long-term loan bank, is expected to increase significantly compared with the historical amounts;
(iv) for the two years ended 31 December 2020 and the eight months ended 31 August 2021, the financing obtained by the Group from CDB with collaterals was mainly project loans denominated in US dollar. The Group will plan to commence cooperation in project loans denominated in Renminbi and bank factoring in the future in order to expand the Renminbi financing channel of the Group and reduce the dependence on interbank capitals; and
(v) according to the business development plan and the stock financing repayment plan of the Group, the Group’s annual RMB financing demand (including turnover) for the three years ending 31 December 2024 is estimated to range from approximately RMB250 billion to RMB370 billion and the US dollar financing demand (including turnover) is estimated to range from approximately US$15 billion to US$22 billion, approximately 4% to 6% of which is estimated to be from the financing of CDB with collaterals, and the other financing demands will be satisfied by bank loans, bond issuance, bank acceptance bills and interbank lending.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In order to enhance operational stability and ease the pressure on liquidity, the Group needs to expand the proportion of medium and long-term financing. In terms of domestic financing, in addition to issuing bonds, medium and long-term financing demand, with limited sources, can be met mainly through project loans or factoring of CDB. For US dollar financing, medium and long-term funds can be obtained overseas through issuance of bonds and withdrawal of medium and long-term bank loans. Due to the limited medium and long-term US dollar financing types of normal commercial banks in China, CDB will be the major bank providing medium and long-term mortgage and pledged loans denominated in US dollar to the Group. Given the growing business needs of the Group, the financing support from CDB will provide an indispensable guarantee for the Group’s long-term stable development and its liquidity needs.

In determining the proposed annual caps for the interests to be paid by Group to CDB under the New Financing Service Framework Agreement, the Company has mainly considered:

(i) In respect of the US dollar financing service provided by CDB to the Group, the above proposed annual caps for the interests to be paid by the Group to CDB are determined with reference to the following basis: (a) for the two years ended 31 December 2020 and eight months ended 31 August 2021, the terms of US dollar-denominated loans provided by CDB ranged from 1 to 15 years and mortgage and pledged loans are all for medium and long-term periods of over three years; and (b) as mortgage and pledged loans are all for medium and long-term periods, according to the current lending rate of medium and long-term loans denominated in US dollar in the market, it is estimated that the average interest rate of medium and long-term loans denominated in US dollar will be 2.5%, 3.0% and 3.5% for 2022, 2023 and 2024, respectively;
(ii) in respect of the Renminbi financing service provided by CDB to the Group, according to the current market pricing of medium and long-term mortgage and pledged loans denominated in RMB, the above proposed annual caps for the interests to be paid by the Group to CDB are determined at 4%. For the financing service priced based on the LPR announced by the PBOC provided by Independent Third Party banks and CDB for the two years ended 31 December 2020 and the eight months ended 31 August 2021, the interests paid by the Group were determined with reference to the LPR announced by the PBOC plus/minus a certain number of basis points, which reflects the credit profile of the Group.

In assessing the fairness and reasonableness of the proposed annual caps for the maximum daily balanced of financing provided by CDB to the Group with collaterals and the interests to be paid by Group to CDB, we have reviewed the calculation model of the proposed annual caps and discussed with the Company in this regard. According to the 2020 AR and 2021 IR and noted the Group’s revenue increased by 7.2% from FY2019 to FY2020 and the Group’s total assets increased by 19.2% from 31 December 2019 to 30

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

June 2021. The expansion of the leasing business of the Group will lead to an enhancement of medium to long term financing demands from CDB. We noted the ratio of the Renminbi financing to the US dollar financing used in the calculation of the proposed annual caps is approximately 1:3, which is consistent with the historical ratio of 1:3 in 2021. We have also reviewed the historical proportion of the financing from CDB with collaterals to the Group’s annual financing demand and noted that the proportion of approximately 4%-6% used in the calculation of the proposed annual caps is within the historical range of 0.4%-6.15% from 2013 to 2020. We have also reviewed the internal report of the Company in respect of its financing demands from CDB and we noted the maximum amount of such demands in 2022 to 2024 are higher than the proposed annual caps, and hence we consider the proposed annual cap of RMB19 billion for 2022 in respect of the maximum daily balance of financing provided by CDB to the Group is fair and reasonable. The proposed annual caps for 2023 and 2024 represent year-on-year growth rates of approximately 5.3% and 5.0% respectively, which are lower than the year-on-year growth rate of the Group’s revenue in FY2020 of 7.2%.

In respect of the lending rates for financing, we understand from the Company that the latest effective lending rate of around 2.5%, is selected as a benchmark of lending rate of the medium and long-term loans denominated in US dollar and the estimated interest rate of medium and long-term mortgage and pledged loans denominated in Renminbi is determined at 4%. For the lending rate of US dollar financing, we have reviewed the relevant agreements entered by the Company and Independent Third Party banks dated 16 July 2021 and the related subsequent swap transaction agreement with an independent third party, and confirm the lending rate set in such agreements was 3-month Libor plus 110 basis points and the relevant swap arrangement to fixed the interest rate. We have also checked the 3-month Libor (https://fred.stlouisfed.org/series/USD3MTD156N) and the 5-year swap rate (https://fred.stlouisfed.org/series/ICERATES1100USD5Y) on Fred Economic Data and noted the 3-month Libor was around 0.14% and the 5-year swap rate was around 1.2% in early November 2021 and both rates are on an increasing trend. Based on 110 basis points, the latest 5-year swap rate of 1.2% and the above work done by us, we confirmed that the Company’s latest effective lending rate of US dollar was around 2.5%. As the contract was entered into with Independent Third Parties, we consider such actual lending rate reflects the recent market condition and in normal commercial terms. The Company assume that the U.S. Federal Reserve (“ Federal Reserve ”) will increase the interest rate twice per year. In September 2021, Federal Reserve released its economic projections (https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20210922.pdf). We noted in such projections, half of its policymakers expected one or more interest rate increases in 2022, and the median of federal funds rate projections will increase by 0.7% from 2022 to 2023 and 0.8% from 2023 to 2024, which is higher than the assumptions of 0.5% increase used in the calculation of the proposed annual caps. Therefore, we consider the average interest rates of medium and long-term loans dominated in US dollar for 2022 to 2024 used in the calculation of the proposed annual caps are in line with the current market condition and the market expectation on interest increase in the coming three years. For the lending rate of Renminbi financing, we have reviewed the historical LPR

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

and noted that the 1-year LPR was 3.85% and the over-5-year LPR was 4.65% as announced by the People’s Bank of China on 20 April 2020 and have not been changed since then. We have also reviewed the Renminbi financing agreement entered into by the Company and an independent commercial bank with the highest Renminbi lending rate during 2019 to 2021 and noted such lending rate was within the range of 1-year LPR and over-5-year LPR and above 4%. Considering the LPR is stable and 4% is not higher than the historical highest lending rate in the past three years, we consider the estimated interest rate of medium and long-term mortgage and pledged loans denominated in Renminbi used in the calculation of the proposed annual caps are in line with the market condition.

Based on the above, we consider the proposed annual caps in respect of the maximum daily balanced of financing provided by CDB to the Group with collaterals and the interest paid by the Group to CDB under the New Financing Service Framework Agreement are fair and reasonable.

4.2.2 New Deposit Framework Agreement

In determining the proposed annual caps for the maximum daily balance of deposits placed by the Group with CDB and the interest to be paid by the CDB to the Group under the New Deposit Service Framework Agreement, the Company has mainly considered:

(i) although the historical amounts were at a low level, it is expected that the Group will still have a higher temporary deposit balance with CDB on such day in the next three years. For example, in November 2019, due to the temporary deposit of an aviation loan with CDB, the daily average maximum deposit reached RMB4.4 billion;
(ii) the estimated maximum daily balance of financing to be provided by CDB to the Group, as the financing provided by CDB to the Group may also be temporarily deposited in the Group’s accounts at CDB, for which CDB pays short-term deposit interests to the Group;
(iii) CDB acts as the lead underwriter regarding the Group’s issuance of domestic financial bonds and capital bonds. The fund raising account of the Group was opened in CDB. After each single issuance, the delivery of such raised funds would result in a temporary higher balance of CDB account on such day. It is expected that the Group will issue financial bonds of approximately RMB15 billion, RMB20 billion and RMB20 billion per annum for the three years ending 31 December 2024, and issue capital bonds of no more than RMB6 billion between 2022 and 2024. Such raised funds may be credited upon completion, resulting in a temporary higher balance of CDB account on such day; and

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(iv) the Group’s estimate of the above proposed annual caps is in line with its business development plan. It is expected that the Group’s leasing business will achieve significant growth in the next three years.

In determining the proposed annual caps for the interests to be paid by CDB to the Group under the New Deposit Service Framework Agreement, the Company has mainly considered:

(i) the interest rate of the Group’s Renminbi deposits placed with CDB for the two years ended 31 December 2020 and the eight months ended 31 August 2021, of which the average interest rate of Renminbi demand deposits is approximately 0.3% per annum, while the average interest rate of Renminbi term deposits is approximately 2.1% per annum;
(ii) the agreed deposit interest rate among domestic financial institutions;
(iii) the highest annual interest rate of the Group’s US dollar deposits placed with CDB for the two years ended 31 December 2020 and the eight months ended 31 August 2021 was approximately 0.05%, and all such US dollar deposits were demand deposits. Among the Group’s US dollar deposit business in 2021, the highest annual interest rate for term deposit business was approximately 0.95%. In the future, the Group will develop other US dollar deposit business with CDB depending on its development needs; and
(iv) it is the market consensus that it is currently in an interest rate hike cycle, and the Federal Reserve is expected to increase interest rates commencing from 2022 with expectations of rate hike prevailing from 2023 to 2024. It is expected that there will be two interest rate hikes each year with an annual increase of 0.5% (50bps).

Taking into consideration that (i) the ratio of US dollar and Renminbi-denominated deposits provided by CDB to the Group for the eight months ended 31 August 2021 was approximately 1:9; and (ii) the Group’s deposit needs for the three years ending 31 December 2024, including (a) cash generated from the Group’s day-to-day business operations, comprising rental income, deposits and other amounts received from the Group’s leasing business; (b) proceeds from bonds issued by the Group; and (c) financing facilities provided by CDB to the Group, and given it is expected that the Group and CDB will expand cooperation in terms of Renminbi-denominated leasing business, and proceeds to be raised from onshore financial bonds and capital bonds will be denominated in Renminbi, it is estimated that the percentages of the Group’s US dollar and Renminbi-denominated deposits out of its total deposits placed at CDB for the three years ending 31 December 2024 will be 20% and 80%, respectively.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As of 31 August 2021, the average agreed deposit interest rate among domestic financial institutions was approximately 2.1% per annum. Accordingly, the Group expects that the average interest rate for the interests of the Renminbi deposits to be paid by CDB to the Group for the three years ending 31 December 2022, 2023 and 2024 will be approximately 2.50% per annum. Based on the prevailing circumstances in the capital market, the Group estimated the average interest rate for the interests of the US dollar deposits to be paid by CDB to the Group will be approximately 1%, 1.75% and 2.5% for the three years ending 31 December 2022, 2023 and 2024.

In assessing the fairness and reasonableness of the proposed annual caps for the maximum daily balance of deposits placed by the Group with CDB and the interests to be paid by CDB to the Group, we have reviewed the relevant historical amounts for FY2019 and FY2020 and for eight months ended 31 August 2021. The utilisation rates for the existing annual caps for the maximum daily balance of deposits placed by the Group with CDB are approximately 88.5%, 37.2% and 37.7% for the corresponding periods and the utilisation rates for the interests to be paid by CDB are 2.1%, 3.8% and 8.6% for the corresponding period.

According to the 2020 AR, the cash and bank balance of the Group increased by 62.5% from 31 December 2019 to 31 December 2020. We understood that the Company proposes to issue financial bonds and capital bonds between 2022 and 2024. We have obtained and reviewed the approval from the Shenzhen Banking and Insurance Regulatory Commission dated 6 September 2021 for the issue of financial bonds of no more than RMB15 billion by the Company. We also noted the special resolution to consider and approve the issuance of capital bonds with no fixed term for no more than RMB5.6 billion was approved on the 2020 annual general meeting of the Company dated 29 June 2021. As advised by the Company, after each single issuance, the raised funds will be temporarily deposited in the CDB account within one/two days upon completion for subsequent arrangement of the Group. Therefore, the proposed annual caps for 2022 to 2024 for the maximum daily balance of deposits placed by the Group with CDB are set to satisfy the cash inflow from the future business growth and the financing proceeds of the Group.

We have obtained and reviewed nine sets of transaction documents for the deposit services provided by CDB and two Independent Third Party banks to the Group in 2021 which were randomly selected by the Company as per our request. As the nine contracts consist of both Renminbi and US dollar deposits and cover demand deposits and time deposits, we believe such randomly selected samples are fair and representative samples of the historical deposit services offered by CDB and Independent Third Parties to the Group. We noted the average agreed Renminbi deposit interest rate was approximately 2.1% per annum and the highest US dollar deposit interest rate was approximately 0.95% per annum. As mentioned above, Federal Reserve released its economic projections in September 2021 and the median of federal funds rate projections will increase by 0.7% from 2022 to 2023 and 0.8% from 2023 to 2024. Therefore, we consider the interests rates used in the calculation of the proposed annual caps are fair and reasonable.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Based on the above, we concur with the Company that the proposed annual caps for maximum daily balance of deposits placed by the Group with CDB and the interest to be paid by the CDB to the Group are fair and reasonable.

4.2.3 New Debt Financing Instruments Investment Framework Agreement

According to the Administrative Measures on Financial Leasing Companies (《金融租賃公司管理辦法》), as a financial leasing company, the Group is allowed to invest in fixed-income financial products, including debt financing instruments up to 20% of net capital. Based on this, the Group plans to invest in the debt financing instruments in domestic open market within the above transaction amount limit, including purchase of debt financing instruments to be issued by CDB and/or its associates. The Group implements a three-level liquidity reserve system to mitigate liquidity risks. Level I refers to cash equivalent reserves, which include demand deposits and short-term contracted deposits as well as short-term lending and reverse repurchase in the money market; Level II refers to overdraft bank accounts, which provide unconditional commitments from banks for working capital support within the credit lines upon request of the Group at predetermined interest rates; and Level III refers to high credit rating bonds. The bonds issued by CDB (“ CDB Bonds ”) are interest rate type bonds with zero risk weight, possessing the best and strongest liquidity. They are important tools for liquidity management in all financial institutions in China and the main underlying products of the Group’s fixed-income investment, which is a Level III liquidity reserve of the Group. The Group may obtain capital in a very short period of time by disposing of CDB Bonds in the inter-bank market in China and conducting pledge repurchase of CDB Bonds when liquidity management is needed. Apart from the investment of CDB Bonds, the Group will also invest in other fixed income products. Investing in the CDB Bonds and other fixed income products at the same time is in the interests of the Company and its Shareholders as a whole.

In assessing the fairness and reasonableness of the proposed annual caps for amount of debt financing instruments to be issued by CDB and/or its associates and to be purchased by the Group and the bond interests to be paid by CDB and/or its associates to the Group, we have reviewed the relevant historical amounts for the two years ended 31 December 2020 and for the eight months ended 31 August 2021 and noted that (i) the utilisation rates for amount of debt financing instruments to be issued by CDB and/or its associates and to be purchased by the Group are approximately 97.2%, 48.8% and 6.7% for the corresponding periods; and (ii) the utilisation rates for the bond interests to be paid by CDB and/or its associates to the Group are approximately 28.7%, 6.1% and 0.0% for the corresponding periods. We have reviewed the net capital of the Group for the two years ended 31 December 2020 and nine months ended 30 September 2021, which are RMB29,252.33 million, RMB35,552.62 million and RMB37,947.34 million, respectively.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Based on the Group’s net capital as of 30 September 2021, the Group is allowed to invest in fixed-income financial products, including debt financing instruments up to RMB7,589.47 million, representing 20% of the Group’s net capital as of 30 September 2021. The proposed annual caps for 2023 and 2024 represent year-on-year growth rates of approximately 14.3% and 12.5% respectively, which are lower than the year-on-year growth rate of the Group’s net capital in FY2020 of 21.5%.

CDB obtained credit ratings of A1 from Moody’s and A+ from Standard & Poor’s in 2021 and therefore the default risk of CDB Bonds is relatively low. We have obtained and reviewed the yield to maturity for 10-year CDB bonds for the period from 1 January 2019 to 31 August 2021 from the database of Wind, and confirmed that the average yield for such bonds is approximately 3.4880%.

Considering (i) the utilisation rate of the annual caps for the deposits was high in FY2019; (ii) the implied growth rate of proposed annual caps is generally lower than the historical growth of the Group’s net capital; (iii) the proposed annual caps are lower than the amount which the Group is allowed to invest in fixed-income financial products; (iv) CDB has the same credit ratings as China; and (v) the estimated bond yield used in the estimation is in line with the average market rate of 10-year CDB bonds of 3.4880%, therefore, we concur with the Company that the proposed annual caps for amount of debt financing instruments to be issued by CDB and/or its associates and to be purchased by the Group and the bond interests to be paid by CDB and/or its associates to the Group are fair and reasonable.

5. Internal Control

The Company has formulated a series of internal control measures and procedures in order to ensure the pricing mechanism and the terms of the Non-exempt Framework Agreements are fair and reasonable and no less favourable to the Company than the terms available to or from Independent Third Parties, and in the interest of the Company and its Shareholders as a whole, details of which are included in the section headed “Internal Control Procedures And Corporate Governance Measures” in the Letter from the Board. We have reviewed such internal control measures and procedures of the Company, including the Company’s Measures for the Administration of Connected Transactions released in 2019 and the relevant internal reports to the Board in relation to the administration of connected transactions of the Company in 2019 and 2020. We are of the view that such internal control measures and procedures could ensure the terms of individual transactions for the Non-exempt Framework Agreements are in line with market practice.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In respect of financing services, we have obtained and reviewed the proposal approved by the Related Party Transaction Control Committee under the Board of the Company for all new financing service provided by CDB to the Group in 2020 and we understood from the Company that no new financing services provided by CDB to the Group in 2021. We noted in such proposal that the Company compared the interest rates offered by CDB and more than two Independent Third Party banks and the loan interest rates provided by CDB to the Group were no less favourable than loan interest rates offered by the Independent Third Party large-scale state-owned banks for the same terms in the same period as stated in the proposal.

In respect of deposit services, we understood that the Company would obtain and summarise the quotations from Independent Third Party banks and compare with the quotations from CDB before placing deposits with CDB. As mentioned above, we have obtained and reviewed four contracts for the deposit service provided by CDB to the Group and five contracts for the deposit service provided by two Independent Third Party banks to the Group in 2021 which were randomly selected by the Company as per our request. We have also obtained a list consisting of five large-scale state-owned banks which the Company considers comparable to CDB for the demand deposit service and reviewed the interest rates provided by such banks from their respective websites. Based on our review of the internal records of the Company in respect of the rates comparison for deposit services and our independent cross-check of interest rates provided by the relevant banks and benchmark interest rate announced by the PBOC, we noted that the interest rates of the deposit service provided by CDB to the Group are not less favourable than the interest rates of the deposit services provided by the Independent Third Party banks and also not lower than the benchmark interest rates for the same type of deposits announced by the PBOC for the same period.

In respect of debt financing instrument, we have obtained and reviewed nine trading records for the debt financing instruments provided by CDB in the open bond market. We noted the price of the debt financing instrument were determined based on the automatic trading system of the market and hence reflects the market price.

Pursuant to Rules 14A.55 and 14A.56 of the Listing Rules, the independent non-executive Directors and auditor of the Company will conduct annual review and issue confirmations regarding the continuing connected transactions of the Company each year. We have reviewed the 2019 AR and the 2020 AR, and noted that the independent non-executive Directors and the auditor of the Company have reviewed the continuing connected transactions under the Financing Service Framework Agreement, the Deposit Service Framework Agreement and the Debt Financing Instruments Investment Framework Agreement and provided the relevant confirmations. As confirmed with the Company, the Company will continue to comply with the relevant annual review requirement under the Listing Rules on an on-going basis.

Based on the above, we concur with the Company that the Group has effective internal policies in place to continue to monitor the continuing connected transactions under the Non-exempt Framework Agreements and the Proposed Annual Caps, therefore the interests of the Company and its Shareholders would be safeguarded.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

6. Recommendation

Having considered the above factors and reasons, we are of the opinion that (i) the continuing connected transactions under Non-exempt Framework Agreements are conducted in the ordinary and usual course of business of the Company and on normal commercial terms; and (ii) the terms of the Non-exempt Framework Agreements and the Proposed Annual Caps are fair and reasonable and in the interests of the Company and its Shareholders as a whole. Accordingly, we advise the Independent Board Committee to recommend and we also recommend the Independent Shareholders to vote in favour of the resolutions in relation to the Non-exempt Framework Agreements and the Proposed Annual Caps to be proposed at the 2021 Second Extraordinary General Meeting.

Yours faithfully, For and on behalf of Maxa Capital Limited Dian Deng Managing Director

Ms. Dian Deng is a licensed person registered with the Securities and Futures Commission of Hong Kong and a responsible officer of Maxa Capital to carry out type 6 (advising on corporate finance) regulated activities under the SFO and has over 13 years of experience in corporate finance industry.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. FINANCIAL INFORMATION OF THE GROUP FOR THE YEARS ENDED 31 DECEMBER 2018, 2019 AND 2020

The financial information of the Group for the three financial years ended 31 December 2018, 2019 and 2020 is disclosed on pages 133 to 256 of the 2018 annual report[1] , pages 130 to 248 of the 2019 annual report[2] and pages 161 to 260 of the 2020 annual report[3] of the Company, respectively, and the financial information of the Group for the six months ended 30 June 2021 is disclosed on pages 76 to 136 of the 2021 interim report[4] of the Company, all published on the websites of the Stock Exchange (http://www.hkexnews.hk) and the Company (http://www.cdb-leasing.com).

2. STATEMENT OF INDEBTEDNESS

As of 31 October 2021, being the latest practicable date for the purpose of determining the amount of indebtedness, the Group had outstanding interest-bearing balance of bank borrowings and long-term borrowings in the total amount of RMB271,432,689,462, of which RMB75,872,777,614 was guaranteed (comprising RMB14,064,399,587 that was secured, whether the security was provided by the Group or third parties, and RMB61,808,378,027 that was unsecured), and RMB195,559,911,848 was unguaranteed and unsecured.

As of 31 October 2021, the bank borrowings of the Group are secured by (a) in addition to other legal charges, certain of the aircrafts leased to airline companies and certain of the vessels leased to shipping companies under either finance leases or operating leases; (b) pledge of the shares in the special established vehicles owning certain aircrafts; (c) guarantees from certain members of the Group; and (d) pledge of deposits amounting to RMB4,180,635,834.

Save as aforesaid, and apart from intra-group liabilities, as of 31 October 2021, being the latest practicable date for determining indebtedness, the Company did not have any outstanding mortgages, charges, debentures, debt securities or other loan capital or bank overdrafts or loans or other similar indebtedness or finance lease commitments, liabilities under acceptances (other than normal trade bills) or acceptance credits or hire purchase commitments or guarantees or other material contingent liabilities.

Notes:

Please see link at: http://www1.hkexnews.hk/listedco/listconews/sehk/2019/0426/ltn201904262479.pdf

Please see link at: https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0427/2020042700361.pdf

Please see link at: https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0426/2021042600502.pdf
Please see link at: https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0923/2021092300743.pdf

– I-1 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

3. WORKING CAPITAL STATEMENT

The Directors are of the opinion that, after taking into account the presently available banking facilities and the internally generated resources of the Group, the Group has sufficient working capital for its requirements within the next 12 months from the date of this circular.

4. FINANCIAL AND TRADING PROSPECTS

Financial status

The major business segments of the Group include aircraft leasing, infrastructure leasing, shipping, inclusive finance and other leasing businesses.

For the year ended 31 December 2020, the total lease financing to lessees amounted to RMB104,398.0 million, among which the lease financing to lessees in aircraft leasing was RMB14,292.6 million, the lease financing to lessees in infrastructure leasing was RMB59,223.6 million, the lease financing to lessees in shipping was RMB8,200.8 million, the lease financing to lessees in inclusive finance was RMB17,958.8 million, and the lease financing to lessees in other business was RMB4,722.2 million, respectively.

As at 31 December 2020, total assets of the Group amounted to RMB303,329.7 million, representing an increase of 16.1% and RMB42,029.0 million as compared with that as at the end of 2019.

For the year ended 31 December 2020, total revenue of the Group amounted to RMB17,719.9 million, representing an increase of 7.2% and RMB1,195.8 million as compared with that of 2019.

For the year ended 31 December 2020, total expenses of the Group amounted to RMB14,745.1 million, representing an increase of 2.7% and RMB394.6 million as compared with that of 2019.

Prospects

Looking forward to the second half of 2021, as the global economy will continue to suffer from the impact of the COVID-19 pandemic, shrinking aggregated demand and decelerated supply recovery may drag on the pace of business reopening. China’s economic growth will regain momentum in general. In the second half of the year, it is expected that external demands will maintain the upward trend, driving further recovery of domestic consumption amid sound monetary policies and proactive fiscal policies. Overall, domestic liquidity is expected to remain reasonably abundant in the second half of 2021, with investment and consumption set to grow steadily leveraging on proactive fiscal support, contributing to gradually resuming normal business operations overall. The Group will balance the development relationship among scale, quality and efficiency, strengthen market analysis and judgment, track customer needs, seize business

– I-2 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

development opportunities, actively promote business innovation, and constantly enhance internal operation management. Meanwhile, it will continue to strengthen the risk and compliance management system, consolidate the business operation foundation, and pave the way for the Company’s development during the 14th Five-Year Plan period.

5. MATERIAL ADVERSE CHANGE

The Directors are not aware of any material adverse change in the financial or trading position of the Group since 31 December 2020, being the date on which the latest published audited accounts of the Company have been made up.

– I-3 –

GENERAL INFORMATION

APPENDIX II

1. RESPONSIBILITY STATEMENT

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

2. INTERESTS OF DIRECTORS, SUPERVISORS AND CHIEF EXECUTIVE

As at the Latest Practicable Date, none of the Directors, Supervisors or the chief executive of the Company had any interests or short positions in the Shares, underlying Shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which was required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which any such Directors, Supervisors, chief executives or their respective associates is deemed to have under such provisions of the SFO), or which was required to be entered in the register required to be kept by the Company pursuant to Section 352 of the SFO, or which was otherwise required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers set out in Appendix 10 to the Listing Rules.

3. SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contract with any member of the Group which is not expiring nor terminable by the Group within a year without payment of any compensation (other than statutory compensation).

4. COMPETING INTERESTS

As at the Latest Practicable Date, none of the Directors or, so far as is known to them, any of their respective associates was interested in any business (apart from the Group’s business) which competes or possibly competes either directly or indirectly with the Group’s business (as would be required to be disclosed under Rule 8.10 of the Listing Rules if each of them were a Controlling Shareholder).

– II-1 –

GENERAL INFORMATION

APPENDIX II

5. INTERESTS IN THE GROUP’S ASSETS OR CONTRACTS OR ARRANGEMENTS SIGNIFICANT TO THE GROUP

As at the Latest Practicable Date, none of the Directors had any direct or indirect interest in any assets which have been, since 31 December 2020 (being the date on which the latest published audited accounts of the Group were made up), acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group.

As at the Latest Practicable Date, none of the Directors was materially interested in any contract or arrangement, subsisting at the date of this circular, which is significant in relation to the business of the Group.

6. DISCLOSURE OF SUBSTANTIAL SHAREHOLDERS’ INTERESTS

As at the Latest Practicable Date, to the knowledge of the Directors, the following persons (not being Directors, Supervisors and the chief executive of the Company) had interests or short positions in the Shares or underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO and recorded in the register required to be kept by the Company under Section 336 of the SFO:

						Approximate
						shareholding
						percentage in the	Approximate
						relevant class of	percentage in the
		Capacity/			Long Position/	Shares of the	Company’s total
Name	Class of Shares	Nature of Interest		Number of Shares	Short position	Company	shareholdings
						(%)	(%)
Central Hujin Investment Ltd.	Domestic Shares	Interest of controlled		8,141,332,869	Long position	82.46	64.40
		corporation (1)
	H Shares	Interest of controlled		600,022,000	Long position	21.66	4.75
		corporation (5)
China Development Bank	Domestic Shares	Beneficial owner	(1)	8,141,332,869	Long position	82.46	64.40
Shengtang Development (Yangpu)	Domestic Shares	Interest of controlled		795,625,000	Long position	8.06	6.29
Co., Ltd.		corporation (2)
Hainan Traffic Administration	Domestic Shares	Interest of controlled		795,625,000	Long position	8.06	6.29
Holding Co., Ltd.		corporation (2)
HNA Group Company Limited	Domestic Shares	Beneficial owner	(2)	795,625,000	Long position	8.06	6.29
China Three Gorges Corporation	Domestic Shares	Beneficial owner		687,024,000	Long position	6.96	5.43
	H Shares	Interest of controlled		619,476,000	Long position	22.37	4.90
		corporation (3)
Three Gorges Capital Holdings Co.,	H Shares	Interest of controlled		619,476,000	Long position	22.37	4.90
Ltd.		corporation (3)

– II-2 –

GENERAL INFORMATION

APPENDIX II

						Approximate
						shareholding
						percentage in the	Approximate
						relevant class of	percentage in the
		Capacity/			Long Position/	Shares of the	Company’s total
Name	Class of Shares	Nature of Interest		Number of Shares	Short position	Company	shareholdings
						(%)	(%)
Hengjian International Investment	H Shares	Beneficial owner	(4)	523,310,000	Long position	18.89	4.14
Holding (Hong Kong) Limited
Guangdong Hengjian Investment	H Shares	Interest of controlled		523,310,000	Long position	18.89	4.14
Holding Co., Ltd.		corporation (4)
China Reinsurance (Group)	H Shares	Beneficial owner	(5)	600,022,000	Long position	21.66	4.75
Corporation
State-owned Assets Supervision and	H Shares	Interest of controlled		193,746,000	Long position	7.00	1.53
Administration Commission of the		corporation (6)
State Council
China State Shipbuilding Corporation	H Shares	Interest of controlled		193,746,000	Long position	7.00	1.53
		corporation (6)
CSSC International Holding	H Shares	Beneficial owner	(6)	193,746,000	Long position	7.00	1.53
Company Limited
CCCC International Holding Ltd.	H Shares	Beneficial owner		154,000,000	Long position	5.56	1.22
China Communications Construction	H Shares	Interest of controlled		154,000,000	Long position	5.56	1.22
Company		corporation
National Council for Social Security	H Shares	Beneficial owner		142,666,000	Long position	5.15	1.13
Fund
UBS Group AG	H Shares	Interest of controlled		142,882,000	Long position	5.16	1.13
		corporation (7)

Notes:

(1) Central Huijin Investment Ltd. holds 34.68% of the equity interests in China Development Bank. Hence, pursuant to the SFO, Central Huijin Investment Ltd. is deemed to be interested in the 8,141,332,869 Domestic Shares held by China Development Bank.
(2) Shengtang Development (Yangpu) Co., Ltd. holds 50% of the equity interests in Hainan Traffic Administration Holding Co., Ltd., which in turn holds 70% of the equity interests in HNA Group Company Limited. Hence, pursuant to the SFO, each of Shengtang Development (Yangpu) Co., Ltd. and Hainan Traffic Administration Holding Co., Ltd. is deemed to be interested in the 795,625,000 Domestic Shares held by HNA Group Company Limited.
(3) China Three Gorges Corporation holds 70.00% of the equity interests in Three Gorges Capital Holdings Co., Ltd., which in turn holds 619,476,000 H Shares of the Company through its wholly-owned subsidiary, Three Gorges Capital Holdings (HK) Co., Ltd. Hence, pursuant to the SFO, each of China Three Gorges Corporation and Three Gorges Capital Holdings Co., Ltd. is deemed to be interested in the 619,476,000 H Shares held by Three Gorges Capital Holdings (HK) Co., Ltd.
(4) Hengjian International Investment Holding (Hong Kong) Limited is wholly-owned by Guangdong Hengjian Investment Holding Co., Ltd. Hence, pursuant to the SFO, Guangdong Hengjian Investment Holding Co., Ltd. is deemed to be interested in the 523,310,000 H Shares held by Hengjian International Investment Holding (Hong Kong) Limited.

– II-3 –

GENERAL INFORMATION

APPENDIX II

(5) Central Huijin Investment Ltd. holds 71.56% of the equity interests in China Reinsurance (Group) Corporation. Hence, pursuant to the SFO, Central Huijin Investment Ltd. is deemed to be interested in the 600,022,000 H Shares held by China Reinsurance (Group) Corporation.
(6) CSSC International Holding Company Limited is a wholly-owned subsidiary of China State Shipbuilding Corporation. China State Shipbuilding Corporation is wholly-owned by State-owned Assets Supervision and Administration Commission of the State Council of the People’s Republic of China. Hence, pursuant to the SFO, each of China State Shipbuilding Corporation and State-owned Assets Supervision and Administration Commission of the State Council of the People’s Republic of China is deemed to be interested in the 193,746,000 H Shares held by CSSC International Holding Company Limited.
(7) UBS Group AG holds 100% of the equity interests in UBS Asset Management (Hong Kong) Ltd and UBS AG. Hence, pursuant to the SFO, UBS Group AG is deemed to be interested in the 142,666,000 and 216,000 H Shares held by UBS Asset Management (Hong Kong) Ltd and UBS AG, respectively. The beneficial owner of the aforementioned 142,666,000 H Shares is National Council for Social Security Fund.
(8) According to Section 336 of the SFO, shareholders of the Company are required to file disclosure of interest forms when certain criteria are fulfilled. When the shareholdings of the Shareholders in the Company change, it is not necessary for the Shareholders to notify the Company and the Hong Kong Stock Exchange unless certain criteria are fulfilled. Therefore, the latest shareholdings of the Shareholders in the Company may be different from the shareholdings filed with the Hong Kong Stock Exchange.

Save as disclosed above, as at the Latest Practicable Date, to the knowledge of the Directors, no other persons (not being Directors, Supervisors and the chief executive of the Company) had interests or short positions in the Shares or underlying Shares of the Company which would fall to be disclosed under the provisions of Divisions 2 and 3 of Part XV of the SFO or recorded in the register required to be kept under Section 336 of the SFO.

– II-4 –

GENERAL INFORMATION

APPENDIX II

7. DIRECTORS’ POSITIONS IN SUBSTANTIAL SHAREHOLDERS

As at the Latest Practicable Date, the following Directors were in the employment of those companies which had interests or short positions in the Shares or underlying Shares of the Company which are required to be notified to the Company pursuant to Divisions 2 and 3 of Part XV of the SFO:

Name

Position in the specific company

Mr. Li Yingbao

a senior expert of the Industry Department I in China Development Bank

Mr. Yang Guifang

a deputy director of the Asset and Finance Department of China Three Gorges Corporation, a supervisor of Yangtze Ecology and Environment Co., Ltd. (長江生態環保集團有限公司) which is a subsidiary of China Three Gorges Corporation, the financial controller of Yangtze Green Development Private Fund Management Co., Ltd. (長江綠色發展私募基金管理有限公司) which is a subsidiary of China Three Gorges Corporation, the chairman of the board of supervisors of Hubei Energy Group Co., Ltd. (湖北能源集團股份有限公司) which is an affiliate of China Three Gorges Corporation, and a director of China State-owned Enterprise Mixed Ownership Reform Fund Co., Ltd. (中國國有企業混合所有制改革基金有限公司) in which China Three Gorges Corporation holds shares

Mr. Wang Bangyi

the general manager of China Re Asset Management (Hong Kong) Company Limited, a subsidiary of China Reinsurance (Group) Corporation, and a non-executive director of Beijing Jingneng Clean Energy Co., Limited in which China Reinsurance (Group) Corporation holds shares

8. LITIGATION

As at the Latest Practicable Date, the Directors were not aware of any litigation or claim of material importance pending or threatening against any member of the Group.

– II-5 –

GENERAL INFORMATION

APPENDIX II

9. MATERIAL CONTRACTS

As at the Latest Practicable Date, no material contract (not being a contract entered into in the ordinary course of business) has been entered into by any member of the Group within the two years immediately preceding the issue of this circular.

10. EXPERT’S QUALIFICATION AND CONSENT

The following is the qualification of the expert who has given advice and recommendations which are contained in this circular:

Name

Qualification

Maxa Capital

a licensed corporation to carry out Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities under the SFO

Maxa Capital issued a letter dated 8 December 2021, for the purpose of incorporation in this circular in connection with its recommendation to the Independent Board Committee and the Independent Shareholders. As at the Latest Practicable Date, Maxa Capital has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter of recommendation and reference to its name in the form and context in which they appear.

11. EXPERT’S INTERESTS

As at the Latest Practicable Date, Maxa Capital:

(a) did not have any direct or indirect interest in any assets acquired or disposed of by or leased to, or were proposed to be acquired or disposed of by or leased to any member of the Group since 31 December 2020, being the date to which the latest published audited consolidated financial statements of the Group were made up; and
(b) did not have any shareholding in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

12. OTHER INFORMATION

(1) The company secretaries of the Company are Mr. Liu Yi and Mr. Lee Kwok Fai Kenneth (a member of the American Institute of Certified Public Accountants and Hong Kong Institute of Certified Public Accountants and a Chartered Financial Analyst).

– II-6 –

GENERAL INFORMATION

APPENDIX II

(2) The registered address of the Company is CDB Financial Center, No. 2003 Fuzhong Third Road, Futian District, Shenzhen, Guangdong Province, the PRC. The principal place of business of the Company in Hong Kong is located at 31/F, Tower Two, Times Square, 1 Matheson Street, Causeway Bay, Hong Kong.
(3) The H share registrar of the Company is Computershare Hong Kong Investor Services Limited, located at 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.
(4) The English text of this circular shall prevail over the Chinese text in the event of inconsistency.

13. DOCUMENTS ON DISPLAY

The following documents are available on the website of the Stock Exchange (http://www.hkexnews.hk) and the website of the Company (http://www.cdb-leasing.com) for 14 days from the date of this circular (inclusive):

(1) the New Financing Service Framework Agreement;
(2) the New Deposit Service Framework Agreement;
(3) the New Debt Financing Instruments Investment Framework Agreement;
(4) a memorandum of the New Finance Lease Agreements;
(5) the letter from the Independent Board Committee as set out on pages 33 to 34 of this circular;
(6) the letter from the Independent Financial Adviser as set out on pages 35 to 55 of this circular; and
(7) the written consent of Maxa Capital referred to in the paragraph headed “Expert’s Qualification and Consent” above.

– II-7 –

AI assistant

China Development Bank Financial Leasing Co., Ltd. — Proxy Solicitation & Information Statement 2021

50033_rns_2021-12-08_aa084159-e50f-47c8-9efa-994517b45c59.pdf

國銀金融租賃股份有限公司[] CHINA DEVELOPMENT BANK FINANCIAL LEASING CO., LTD.[]

FINANCE LEASE TRANSACTIONS IN RELATION TO THE SALE-AND-LEASEBACK OF PRODUCTION FACILITIES WITH SIEN (QINGDAO)

Independent Financial Adviser to the Independent Board Committee and Independent Shareholders

DEFINITIONS

DEFINITIONS

Precautionary Measures for COVID-19

國銀金融租賃股份有限公司[] CHINA DEVELOPMENT BANK FINANCIAL LEASING CO., LTD.[] (A joint stock limited company incorporated in the People’s Republic of China)

INTRODUCTION

RENEWAL OF CONTINUING CONNECTED TRANSACTIONS FRAMEWORK AGREEMENTS ENTERED INTO WITH CHINA DEVELOPMENT BANK FOR 2022 TO 2024 AND THE PROPOSED ANNUAL CAPS

1. New Financing Service Framework Agreement

(1) Background

(2) New Financing Service Framework Agreement

Principal Terms:

Pricing Policies:

(3) Historical Amounts

(4) Annual Caps and Basis of Determination

Basis of Determination:

Interests to be paid by the Group to CDB

(5) Reasons for and Benefits of Entering into the New Financing Service Framework Agreement

(6) Financial Effects of the New Financing Service Framework Agreement

(7) Listing Rules Implications

2. New Deposit Service Framework Agreement

(1) Background

(2) New Deposit Service Framework Agreement

Principal Terms:

Pricing Policies:

(3) Historical Amounts

(4) Annual Caps and Basis of Determination

Basis of Determination:

Maximum daily balance of deposits to be placed by the Group with CDB

Interests to be paid by CDB to the Group

(6) Financial Effects of the New Deposit Service Framework Agreement

(7) Listing Rules Implications

3. New Debt Financing Instruments Investment Framework Agreement

(1) Background

(2) New Debt Financing Instruments Investment Framework Agreement

Principal Terms:

Pricing Policies:

(3) Historical Amounts

(4) Annual Caps and Basis of Determination

Basis of Determination:

(5) Reasons for and Benefits of Entering into the New Debt Financing Instruments Investment Framework Agreement

LETTER FROM THE BOARD

(6) Financial Effects of the New Debt Financing Instruments Investment Framework Agreement

(7) Listing Rules Implications

4. Internal Control Procedures and Corporate Governance Measures

(1) Independent Financial System

(2) Risk Management Measures

(3) Internal Control Measures

5. Opinions of the Board

6. Independent Board Committee

7. Information of the Parties

(1) Information of the Company

(2) Information of CDB

FINANCE LEASE TRANSACTIONS IN RELATION TO THE SALE-ANDLEASEBACK OF PRODUCTION FACILITIES WITH SIEN (QINGDAO)

1. New Finance Lease Agreements

(1) Date

(2) Parties

(3) Leased Assets

(4) Lease Period

(5) Rent and Method of Payment

(6) Leased Assets and Their Ownership

(7) Guarantee

2. Reasons for and Benefits of Entering into the New Finance Lease Agreements

3. Financial Effects of the New Finance Lease Agreements

4. Information of the Parties

(1) Information of the Company

(2) Information of the Lessee

(3) Information of the Guarantors

5. Implications under the Listing Rules

THE 2021 SECOND EXTRAORDINARY GENERAL MEETING

LETTER FROM THE BOARD

PROCEDURES FOR VOTING AT THE 2021 SECOND EXTRAORDINARY GENERAL MEETING

RECOMMENDATION

LETTER FROM THE BOARD

By order of the Board CHINA DEVELOPMENT BANK FINANCIAL LEASING CO., LTD. LIU Yi

國銀金融租賃股份有限公司[] CHINA DEVELOPMENT BANK FINANCIAL LEASING CO., LTD.[]

China Development Bank Financial Leasing Co., Ltd. Proxy Solicitation & Information Statement 2021

**國銀金融租賃股份有限公司[] CHINA DEVELOPMENT BANK FINANCIAL LEASING CO., LTD.[]**

**國銀金融租賃股份有限公司[] CHINA DEVELOPMENT BANK FINANCIAL LEASING CO., LTD.[]** (A joint stock limited company incorporated in the People’s Republic of China)

**國銀金融租賃股份有限公司[] CHINA DEVELOPMENT BANK FINANCIAL LEASING CO., LTD.[]**