2006 Interim Report－A Share.pdf - 中国银行

Notes to the Condensed Financial Statements
For the six month period ended 30 June 2006
(Amount in millions of Renminbi, unless otherwise stated)
19. Surplus reserves, General reserve and regulatory reserve, Undistributed profits and
Reserve for fair value changes of available-for-sale securities
(1) Surplus reserves
Under relevant PRC Laws, the Bank is required to transfer 10% of its net profit, as determined under PRC GAAP, to a
non-distributable Statutory surplus reserve. Appropriation to the Statutory surplus reserve may be ceased when the
balance of such reserves has reached 50% of the share capital. Subject to the approval of the shareholders, Statutory
surplus reserve can be used for replenishing the accumulated loss or increasing the Bank's share capital. The Statutory
surplus reserve amount used to increase the share capital is limited to a level where the balance of statutory
surplus reserve after such capitalisationis not less than 25% of the share capital.
In addition, some overseas branches and subsidiaries are required to transfer certain percentage of its net profit to
the statutory surplus reserve as stipulated by local banking authorities.
The Board of Director on 29 August 2006 approved the Bank to appropriate RMB 1,964 million, or 10% of
its net profit of the six month period ended 30 June 2006.
(2) General reserve and regulatory reserve
Pursuant to Cai Jin [2005] No. 49 "Measures on General Provison for Bad and Doubtful Debts for Financial Institutions"
issued by MOF on 17 May 2005, banks and certain other financial institutions in the PRC, including the Bank,
are required to maintain an adequate allowance for impairment losses against their risk assets as defined. In addition
to the specific allowance for impairment losses, financial institutions are required to establish and maintain a general
reserve within Shareholders' equity, through the appropriation of income to address unidentified potential impairment
losses. According to Cai Jin [2005] No.49, the general reserve should not be less than 1% of the aggregate
amount of risk assets as defined by this policy. The Bank intends to achieve the required reserve level within 3 years.
The Regulatory reserve mainly refers to the reserve amount set aside by Bank of China (Hong Kong) Limited, subsidiary
of the Group, for general banking risks, including future losses or other unforeseeable risks.
The Board of Director on 29 August 2006 approved the Bank to appropriate RMB 4,291 million to the general reserve.
As at 30 June 2006, the amount set aside in the general reserve accounted for 0.25% of the Bank's risk assets.
(3) Undistributed profits
Pursuant to the 2005 profit distribution plan approved by the shareholder at a post-adjournment session of the
Annual General Meeting of the Year 2006, the Bank distributed a cash dividend of RMB1,375 million to its shareholders.
The Board of Directors does not propose to declare any dividend for the first half of 2006.
(4) Reserve for fair value changes of available-for-sale securities
Pursuant to Caikuaihan [2004] No. 61 "Response to Issues Concerning Accounting Treatment of Debt Securities" issued by
the MOF, available-for-sale securities are re-measured at fair value at the balance sheet date. Unrealised gains and losses
arising from changes in the fair value of available-for-sale securities are recognised in equity. When available-for-sale
securities are disposed of or impaired, the related accumulated fair value adjustments are transferred to the income statement.
As at 30 June 2006, the unrealised losses on available-for-sale securities fair value changes are arising from the increase in interest
rates of RMB and USD. Management has assessed the unrealizad losses position of these securities and is of the view that the
unrealised losses were caused by the increase in interest rates and were not due to deterioration of credit rating of the issuers.
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